<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
DATE OF REPORT: (DATE OF EARLIEST EVENT REPORTED): DECEMBER 30, 1997
NAB ASSET CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS 0-19391 76-0332956
(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
2 Ada, Suite 100
Irvine, California 92618
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
714/790-8000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On December 30, 1997, Construction Portfolio Services, Inc. ("CPF"), a
newly organized 86% owned subsidiary of the Company acquired approximately
$55,000,000 in primarily single family construction loans to residential
builders. The loans were acquired from Pacific Southwest Bank in Dallas, Texas
for a purchase price equal to the outstanding principal amount of the loans plus
$250,000. The purchase price was determined by negotiation between the parties.
The sources of funds for the purchase price were (1) approximately $9,000,000 in
cash from CPF, and (2) $46,000,000 in borrowings under a $75,000,000 line of
credit from Bank United, Houston, Texas.
CPF was capitalized with approximately $11,000,000 of which $9,500,000
was borrowed under a promissory note from Consumer Portfolio Services, Inc., a
38% shareholder of the Company. CPF's primary business is lending to
homebuilders for the construction of single family residences.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits
The exhibits set forth on the Index to Exhibits on page three are
incorporated herein by reference.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NAB ASSET CORPORATION
Dated January 14, 1998 By:/s/Alan Ferree
Alan Ferree, Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
<C> <S>
2.1 Asset Sale and Purchase Agreement between Pacific Southwest Bank and
Construction Portfolio Funding, Inc., dated December 23, 1997.
10.18 Loan and Security Agreement between Construction Portfolio Services,
Inc., a Texas Corporation and Bank United, a federal savings bank, dated
as of December 30, 1997.
</TABLE>
<PAGE>
EXHIBIT 2.1
ASSET SALE AND PURCHASE AGREEMENT
Between
PACIFIC SOUTHWEST BANK
AND
CONSTRUCTION PORTFOLIO FUNDING, INC.
December 23, 1997
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TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1
DEFINITIONS....................................................... 1
1.1 Definitions................................................. 1
-----------
ARTICLE 2
ASSETS AND LIABILITIES............................................ 2
2.1 Sale of Assets.............................................. 2
--------------
2.2 Assumption of Liabilities................................... 3
-------------------------
2.3 Assets and Liabilities...................................... 4
----------------------
2.4 Consents; Documentation..................................... 4
----------------------
ARTICLE 3
PURCHASE PRICE.................................................... 4
3.1 Purchase Price.............................................. 4
--------------
3.2 Preliminary Closing Statement............................... 5
-----------------------------
3.3 Adjustment.................................................. 5
----------
3.4 Allocation of Purchase Price................................ 5
-----------------------------
3.5 Sales and Transfer Taxes.................................... 6
------------------------
ARTICLE 4
EMPLOYEE ISSUES................................................... 6
4.1 Employee Considerations...................................... 6
-----------------------
ARTICLE 5
REPRESENTATIONS AND WARRANTIES.................................... 9
5.1 Seller's Representations..................................... 9
------------------------
5.2 Purchaser's Representations.................................. 12
---------------------------
ARTICLE 6
CLOSING........................................................... 13
6.1 Closing...................................................... 13
-------
6.2 Conditions Relating to Purchaser............................. 13
--------------------------------
6.3 Conditions Relating to Seller................................ 13
-----------------------------
6.4 Seller's Deliveries at Closing............................... 14
------------------------------
6.5 Purchaser's Deliveries at Closing............................ 15
---------------------------------
6.6 Notice to Loan Applicants and Borrowers...................... 15
---------------------------------------
6.7 Further Cooperation.......................................... 15
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</TABLE>
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<TABLE>
<S> <C>
6.8 Access to Information........................................ 15
---------------------
6.9 Further Assurances........................................... 16
------------------
ARTICLE 7
POST-CLOSING AGREEMENTS............................................ 16
7.1 Loan Transfer Documents...................................... 16
-----------------------
7.2 Noncompetition............................................... 16
--------------
7.3 Retained Loans............................................... 16
--------------
7.4 Seller's Nondisclosure....................................... 17
----------------------
7.5 Data Processing.............................................. 17
---------------
7.6 Collections on Loans after Closing Date...................... 17
---------------------------------------
ARTICLE 8
INDEMNIFICATION.................................................... 17
8.1 Seller's Indemnification..................................... 17
------------------------
8.2 Purchaser's Indemnification.................................. 18
---------------------------
8.3 Notice....................................................... 18
------
ARTICLE 9
DEFAULT............................................................ 18
9.1 Default by Seller............................................ 18
-----------------
9.2 Default by Purchaser......................................... 18
--------------------
ARTICLE 10
TERMINATION........................................................ 19
10.1 Termination.................................................. 19
-----------
10.2 Further Obligations.......................................... 19
-------------------
ARTICLE 11
GENERAL............................................................ 19
11.1 Applicable Law............................................... 19
--------------
11.2 Severability................................................. 19
------------
11.3 Survival..................................................... 20
--------
11.4 Non-Waiver................................................... 20
----------
11.5 Amendment.................................................... 20
---------
11.6 Notices...................................................... 20
-------
11.7 Third Party Beneficiaries.................................... 20
-------------------------
11.8 Time of Essence.............................................. 20
---------------
11.9 Headings..................................................... 21
--------
11.10 Counterparts................................................. 21
------------
11.11 Entire Agreement............................................. 21
----------------
11.12 Binding...................................................... 21
-------
11.13 Attorneys' Fees.............................................. 21
---------------
</TABLE>
ii
<PAGE>
ASSET SALE AND PURCHASE AGREEMENT
THIS ASSET SALE AND PURCHASE AGREEMENT ("Agreement") is entered into this
the 23rd day of December, 1997 (the "Effective Date") by and between PACIFIC
SOUTHWEST BANK ("Seller") and CONSTRUCTION PORTFOLIO FUNDING, INC., a Texas
corporation ("Purchaser").
W I T N E S S E T H:
--------------------
WHEREAS, Seller is engaged in the single family residential construction
lending business through its construction loan department located at 4144 North
Central Expressway, Suite 800, Dallas, Texas, and through a loan originator
residing in Grand Junction, Colorado (the "Department"); and
WHEREAS, Purchaser wishes to purchase certain of the assets pertaining to
Seller's single family residential construction lending business and the
Department and assume certain of the liabilities of such business and the
Department and Seller is willing to sell and close the same upon the terms and
subject to the conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises, the mutual covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and confessed, the parties hereto
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used herein the following terms shall have the
-----------
respective meanings set forth below:
"Affiliate" means, with respect to any person or entity, any other
---------
person or entity directly or indirectly controlling, controlled by or under
common control with such person or entity.
"Loan Documents" means, collectively, all loan agreements, mortgages,
--------------
deeds of trust, security agreements, purchase contracts, financing statements,
insurance policies and other agreements, documents, instruments or certificates
evidencing, securing or pertaining to the Loans.
"Software License" means the license for the Software Program
----------------
substantially in the form of Exhibit 1.1 attached hereto and made a part hereof
for all purposes.
"Software Program" means the computer software program described in
----------------
the Software License.
<PAGE>
ARTICLE 2
ASSETS AND LIABILITIES
2.1 Sale of Assets. Upon the terms and subject to the conditions and
--------------
provisions of this Agreement, Seller agrees to sell and assign to Purchaser and
Purchaser agrees to purchase from Seller the following assets of Seller
(collectively the "Assets"):
(a) Loan Applications. All right, title and interest of Seller, at
-----------------
the Closing Date (as defined in Section 6.1 hereunder), with respect to single
family residential construction loan applications in process at the Department
(the "Loan Applications"), subject to review and inventory by Purchaser,
evidencing no material change at the Closing Date from the close of Purchaser's
due diligence.
(b) Construction Loans. All right, title and interest of Seller, at
------------------
the Closing Date, in and to the single family residential construction loans
and participation interests therein described in Exhibit 2.1(b) attached hereto
and made a part hereof for all purposes, together with any and all such loans
made under the Loan Commitments (collectively, the "Loans").
(c) Furniture, Fixtures and Equipment. All right, title and interest
---------------------------------
of Seller, at the Closing Date, in and to those items of Furniture Fixtures and
Equipment utilized in the operation of the Department and described in Exhibit
2.1(c) attached hereto and made a part hereof for all purposes (the "FF&E"),
subject to review and inventory by Purchaser.
(d) Prepaid Items. All right, title and interest of Seller, at the
-------------
Closing Date, in and to any prepaid items described in Exhibit 2.1(d) attached
hereto and made a part hereof for all purposes (the "Prepaid Items").
(e) Loan Commitments. All right, title and interest of Seller, at the
----------------
Closing Date, in and to those commitments for Loans and described in Exhibit
2.1(e) attached hereto and made a part hereof for all purposes (the "Loan
Commitments"), subject to review and approval by Purchaser evidencing no
material change at the Closing Date from the close of Purchaser's due diligence.
(f) Assumed Contracts. All right, title and interest of Seller, at
-----------------
the Closing Date, in and to any contracts assumed by Purchaser and associated
with the Department or the Assets, described in Exhibit 2.1(f) attached hereto
and made a part hereof for all purposes (the "Assumed Contracts"), subject to
review and approval by Purchaser evidencing no material change at the Closing
Date from the close of Purchaser's due diligence.
(h) Equipment Lease Agreements. All right, title and interest of
--------------------------
Seller, at the Closing Date, in and to those lease agreements for FF&E utilized
in the operation of the Department and described on Exhibit 2.1(h) attached
hereto and made a part hereof for all purposes (the "Equipment Leases") subject
to review and approval by Purchaser.
2
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(i) Software License. All rights, title and interest of Seller in and
----------------
to the Software License.
(j) Loan Documents and Records. All of the Loan Documents, and all
--------------------------
other records, files, books and papers (or copies thereof) relating to the
Assets and the Assumed Liabilities, to the extent necessary for Purchaser's
ownership and operation of such Assets and Assumed Liabilities or for
Purchaser's exercise of rights or discharge of obligations with respect to such
Assets or Assumed Liabilities (the "Records").
2.2 Assumption of Liabilities. Upon the terms and subject to the
-------------------------
conditions and provisions of this Agreement, Purchaser agrees to assume from
Seller, from and after the close of business on the Closing Date, the following
liabilities of Seller that accrue after the close of business on the Closing
Date (the "Assumed Liabilities"):
(a) Loan Applications. All obligations of Seller pursuant to the Loan
-----------------
Applications.
(b) Loan Commitments. All obligations of Seller pursuant to the Loan
----------------
Commitments identified on Exhibit 2.1(e).
(c) Loans. All obligations of Seller pursuant to the Loans
-----
identified on Exhibit 2.1(b).
(d) Assumed Contracts. All obligations of Seller pursuant to the
-----------------
Assumed Contracts identified on Exhibit 2.1(f).
(e) Equipment Lease Agreements. All obligations of Seller pursuant to
--------------------------
the Equipment Leases identified on Exhibit 2.1(h).
(f) Software License. All obligations of Seller pursuant to the
----------------
Software License.
(g) Amberton Lease. Purchaser agrees to enter into a sublease
--------------
agreement with Seller, effective as of the close of business on the Closing
Date, whereby Purchaser will lease approximately 5518 rentable square feet at
Seller's Administrative Office (the "Sublease Space"), located at 4144 North
Central Expressway, Dallas, Texas (the "Sublease Agreement"). The Sublease
Agreement shall be coterminous with the Office Lease Agreement between Seller
and Carter-Crowley Properties, Inc.("Landlord"), and any amendments or
modifications thereto (the "Master Lease"). The Sublease Space may be separated,
at Seller's option and expense, from Seller's other facilities and operations.
The Sublease Agreement shall provide for an annual rental rate per square foot
equal to Seller's annual rental rate in accordance with the Master Lease, on
3746 net rentable square feet through December 31, 1998 and on 5518 net rentable
square feet thereafter. The Sublease Agreement shall provide for an adjustment
to the net rentable square feet within thirty (30) days after
3
<PAGE>
closing, to allow Purchaser and Seller to determine actual net rentable square
feet after any modifications to the Sublease Space.
2.3 Assets and Liabilities. This agreement is for the sale and purchase
----------------------
only with respect to the Assets and Assumed Liabilities identified in Article 2
hereof and does not provide for the sale or purchase of any cash, accounts
receivable, purchases for Seller's portfolio, temporary participation purchases
or permanent residential mortgage loans, or provide for the sale, transfer or
conveyance of any other property of Seller not identified herein. Purchaser
shall not be construed nor deemed to have assumed any liabilities, debts, or
obligations whatsoever of Seller, except for those liabilities or debts which
are expressly identified herein as being assumed by Purchaser.
2.4 Consents; Documentation. Seller and Purchaser acknowledge that
-----------------------
certain of the Equipment Leases and Assumed Contracts, and the Software License,
require the consent or approval of a third-party landlord, lessor or other
person or entity to authorize Seller to transfer Seller's rights and obligations
associated with such Equipment Lease or Assumed Contract, or the Software
License. Seller and Purchaser agree that in the event Seller is unable to obtain
any required third-party consent or approval, Seller and Purchaser will
negotiate a mutually acceptable alternative with respect to such Assumed
Contract or the Software Lease; provided, however, that if the necessary written
consents with respect to any of the Equipment Leases are not received by the
close of business on December 26, 1997, Purchaser shall not be obligated to
purchase or assume any such Equipment Lease, and at the option of Purchaser to
be exercised by the delivery of written notice to Seller prior to the Closing
Date, such Equipment Lease shall be deemed excluded from the definitions of
Assets and of Assumed Liabilities. Seller, at Seller's expense, shall obtain
documentation evidencing any required consents or approvals of a third-party,
and evidencing the transfers of the Assets and the Assumed Liabilities, in
accordance with the terms of this Agreement.
ARTICLE 3
PURCHASE PRICE
3.1 Purchase Price. The Purchase Price shall be equal to the sum of
--------------
the following:
(a) the depreciated book value of the FF&E at the close of
business on the Closing Date;
(b) the cash value of any Prepaid Items at the close of
business on the Closing Date;
(c) The net outstanding principal balance of the Loans and
the accrued and unpaid interest thereon; and
(d) a "Purchase Premium" of Two Hundred Fifty Thousand
Dollars ($250,000.00).
4
<PAGE>
3.2 Preliminary Closing Statement. On or prior to the Closing Date,
-----------------------------
Seller shall present Purchaser with a "Preliminary Closing Statement," using
figures computed as of the close of business on December 29, 1997, and the
parties will use the amounts reflected on the Preliminary Closing Statement to
determine all amounts to be transferred to or from each other at the Closing. At
the Closing, Purchaser shall transfer to Seller cash in the amount equal to the
difference between (a) the sum of (i) the depreciated book value of the FF&E,
plus (ii) the cash value of any Prepaid Items, plus (iii) the net outstanding
principal balance of the Loans and the accrued and unpaid interest thereon, plus
(iv) the Purchase Premium, and (b) any accrued but unpaid liabilities of Seller
assumed by Purchaser, plus or minus prorations calculated in accordance with
Section 3.3(b).
3.3 Adjustment. The assignments, transfers, acceptances and assumptions
----------
of the Assets and the Assumed Liabilities and the payment of the amounts due in
respect thereof in accordance with Section 3.1 shall be final and without
recourse unless otherwise provided in this Agreement and not subject to any
claim for reimbursement, repayment, rescission or avoidance; provided however,
that:
(a) Within forty-five (45) days after the Closing Date, ("Settlement
Date"), Seller shall deliver a "Final Closing Statement" to Purchaser. The
Final Closing Statement shall become final and binding on Purchaser and Seller
ten (10) business days after its delivery to Purchaser, unless Purchaser gives
written notice to Seller of its disagreement with respect to any item included
in such statement. Seller and Purchaser shall use reasonable efforts to resolve
any disagreement. When the Final Closing Statement becomes final and binding, as
agreed between Seller and Purchaser, Seller shall pay Purchaser, or Purchaser
shall pay Seller, as appropriate, the difference between the amount paid at the
Closing and the amount calculated in accordance with Section 3.2 based on the
figures on the Final Closing Statement, plus interest accrued from the Closing
Date to the date such payment is made at the Federal Funds Rate.
(b) The origination and commitment fees with respect to those Loan
Commitments described on Exhibit 3.3(b) attached hereto and made a part hereof
for all purposes, wages and salaries of the Employees, personal property rent,
estimated additional personal property rent, security deposits, maintenance
contract payments, personal property taxes, and other similar expenses related
to the Assets or Assumed Liabilities, shall be prorated between the parties as
of the Closing Date. Notwithstanding Seller's normal practices and procedures,
to the extent that Seller has paid expenses that are expenses allocable to
Purchaser pursuant to this Section 3.3(b), such expenses shall appear as
"Prepaid Items" on the Preliminary Closing Statement or, if not allocable as of
the date the Preliminary Closing Statement is calculated, on the Final Closing
Statement. Notwithstanding Seller's normal practices and procedures, to the
extent that expenses have been incurred but not paid by Seller on or prior to
the Closing Date, they shall appear as an Accrued Expense on the Preliminary
Closing Statement or, if not incurred as of the date the Preliminary Closing
Statement is calculated, on the Final Closing Statement.
3.4 Allocation of Purchase Price. The parties agree as follows
----------------------------
notwithstanding anything to the contrary in Article 3: (i) the total Purchase
Price for the Assets being purchased under this
5
<PAGE>
Agreement is as stated in Section 3.1; (ii) the Purchase Price shall be
allocated among the Assets for tax purposes in accordance with the fair market
value of each of the Assets as of the close of business on the Closing Date,
such fair market value to be determined by Purchaser in accordance with any
reasonable valuation method selected by Purchaser; (iii) promptly after
allocation of the Purchase Price in accordance with the proceeding clause,
Purchaser shall notify Seller of such allocation; and (iv) the parties shall be
bound by such allocation for tax purposes, shall file all applicable tax returns
and other required tax related schedules and documents in accordance with such
allocation, and shall not adopt or otherwise assert tax positions inconsistent
therewith; provided, however, that nothing contained in this Agreement shall
require either party or its affiliates to violate any law, statute or
regulation.
3.5 Sales and Transfer Taxes. Seller shall be responsible for preparing
------------------------
and filing any sales, use, and transfer tax returns or filings (or the portion
of any such return or filing relating to the transaction described in this
Agreement) and paying any such tax that might be shown to be due that may be
imposed upon Seller or Purchaser with respect to the transaction described in
this Agreement. Seller shall promptly furnish to Purchaser all tax certificates,
statements, representations (with respect to Purchaser's entitlement to
occasional sale exemptions or other similar exemptions) and documents reasonably
required by Purchaser which must or may be furnished by Seller and will
otherwise cooperate in good faith with Purchaser to enable Purchaser to obtain
all available reductions in or exemptions from any sales, use or transfer taxes
imposed in connection with the sale described in this Agreement.
ARTICLE 4
EMPLOYEE ISSUES
4.1 Employee Considerations
-----------------------
(a) Purchaser shall offer employment, through written offer letter, to
become effective as of the Closing Date, to all current employees of the
Department whose names appear on a list attached hereto as Exhibit 4.1(a) and
incorporated herein for all purposes (the "Employees"). To the extent
consistent with Purchaser's existing compensation structure for comparable
positions and comparable officer titles and its current policies regarding
officer titles, all Employees shall be offered employment at base wages and
salaries no less favorable than the wages and salaries currently being paid by
Seller to such Employees and in positions with comparable responsibilities and
officer titles, and, unless agreed upon by such Employee before the Closing
Date, within a reasonable geographic proximity to such Employees' current work
location. As a condition of acceptance of employment with Purchaser, each
Employee will be required to resign their employment with Seller, effective as
of the close of business on the Closing Date, and Purchaser shall make this
requirement a condition of employment in Purchaser's offer letter to Employees.
(b) All Employees who accept employment with Purchaser as of the
Closing Date shall be eligible to participate in the employee benefit plans and
other fringe benefits of Purchaser on the same basis as such plans and benefits
are offered to employees of Purchaser with
6
<PAGE>
comparable positions with Purchaser. Purchaser shall credit such Employees for
their length of service with Seller or its Affiliates for all purposes under
each employee benefit and fringe benefit plan to be provided by Purchaser to
such Employees, to the same extent such service was recognized under a similar
plan of Seller, based on information provided by Seller. Such service, however,
need only be counted for purposes of vesting, eligibility and the rate of
prospective benefit accrual under any pension benefit plan where such rate
increases with service. For purposes of this Section 4.1, "employee benefit
plans and other fringe benefits" includes, without limitation, pension and
profit sharing plans, retirement and post retirement welfare benefits, health
insurance benefits (medical, dental and vision), disability, life and accident
insurance, sickness benefits, vacation, employee loans and banking privileges.
(c) If Purchaser offers a salary continuation or similar program for
employees unable to work for medical reasons, the Employees who accept
employment with Purchaser shall be credited under any program of Purchaser with
at least the number of sickness benefit days accrued under Seller's program at
the Closing Date. Seller shall be responsible for payment of any sickness
benefit days utilized by Employee before or on the Closing Date.
(d) Seller agrees to remain responsible for the payment of all
benefits accrued under the terms of Seller's 401(k) Savings Plan with respect to
any Employee. Purchaser shall not at any time assume any liability for the
benefits of any active or any terminated, vested or retired participants in
Seller's 401(k) Savings Plan.
(e) Seller shall be responsible for payments for accrued vacation not
taken by an Employee prior to the Closing Date, which payments shall be made
within thirty (30) days following the Closing Date, and for timely payment as
required by law of all wages, salaries, bonuses, if any, and other compensation
with respect to service completed on or prior to the Closing Date. Employees'
accrued vacation days or fractions thereof earned but unused while employed by
Seller will be transferred to Purchaser and Purchaser shall give such Employee
credit after the Closing Date for the same number of vacation days or fractions
thereof he or she has accrued with Seller as of the Closing Date. For the
purposes of Section 4.1(e), personal choice days or fractions thereof will be
treated as vacation days. The amount equal to the net cash value of each such
Employee's accrued vacation before payroll deductions will be treated as an
accrued expense on the closing statement. In the calendar year in which the
Closing Date occurs, Employees shall be eligible to earn at least the annual
vacation amount Employees were eligible to earn under Seller's vacation policy.
In subsequent calendar years, Employees will be eligible to earn vacation
according to the schedule specified in Purchaser's policy.
(f) Seller shall retain the responsibility for payment of all medical,
dental, vision, health and disability claims incurred by any Employee prior to
the Closing Date, and Purchaser shall not assume any liability with respect to
such claims. Purchaser agrees that any preexisting condition clause in any of
Purchaser's health or disability insurance coverage shall not be applicable to
Employees who accept employment with Purchaser, and their eligible dependents,
provided such Employee and such eligible dependent is enrolled in Seller's plans
on the Closing Date and such
7
<PAGE>
employee and/or eligible dependent has satisfied any preexisting condition
exclusion period under Seller's plans. On or after the Closing Date, all
medical, dental, vision, health and disability claims incurred by Employees in
Purchaser's employ shall be determined under Purchaser's benefit plans.
(g) Seller shall be responsible for providing any Employee whose
"qualifying event," within the meaning of Section 4980B(f) of the IRC, occurs on
or prior to the Closing Date (and such Employee's "qualified beneficiaries"
within the meaning of Section 4980B(f) of the IRC) with the continuation of
group health coverage required by Section 4980B(f) of the IRC ("Continuation
Coverage") under the terms of the health plan maintained by Seller. Purchaser
shall be responsible for Continuation Coverage of any Employee in Purchaser's
employ (and each Employee's qualified beneficiaries) whose qualifying event
occurs after the Closing Date to the extent required by law.
(h) Seller agrees that it shall retain, consistent with its normal
employment practices, all liability and obligation, if any (including, without
limitation, the liability and obligation of all wages, salary, vacation pay and
unemployment, medical, dental, vision, health and disability benefits), for
those former employees of the Department who retired or terminated employment
prior to the Closing Date or who otherwise do not become employees of Purchaser.
(i) Effective as of the Closing Date, Purchaser shall assume
liability for severance pay and similar obligations payable to any Employee who
accepts employment with Purchaser and who is terminated by Purchaser on or after
the Closing Date. Such payment shall be made pursuant to Purchaser's normal
severance policy and Purchaser shall compute severance pay by giving Employees
full credit for all years of service that would have been recognized under
Seller's severance policy. Seller shall provide Purchaser a copy of Seller's
severance policy.
(j) Seller shall retain the responsibility for payment of all short
term disability benefits, sick pay or salary continuation for all Employees
prior to the Closing Date, and Purchaser shall not assume responsibility for
such benefits. On and after the Closing Date, Purchaser will be responsible for
payment of all short term disability benefits, sick pay or salary continuation
for all Employees in Purchaser's employ.
(k) Purchaser shall be responsible for advising Employees of the
details of any offers and terms of employment, and answering any questions
relating thereto, but Seller shall be allowed to review and approve any
communication that refers to any of Seller's benefits or policies prior to its
distribution; provided, however, that this paragraph shall not be construed to
require Purchaser and Seller to act jointly at any time.
(l) Seller will pay no later than thirty (30) days following the
Closing Date all accrued compensation due and owing to any Employee under any
incentive plan of Seller's earned prior to or on the Closing Date.
(m) Purchaser is not hereby, and at no time hereafter will be,
adopting, accepting,
8
<PAGE>
or assuming any employee benefit plan or collective bargaining agreement of
Seller relating to any of its employees or any other agreement, trust, plan,
fund or other arrangement of Seller that provides for employee benefits or
perquisites (collectively, "Employment Arrangements"), and Purchaser shall have
no liability or obligation whatsoever under any such Employment Arrangements to
Seller or to any employees of Seller, whether or not any of such employees
become employees of Purchaser. Except as provided in this Section 4.1, Purchaser
is not obligated to replace any of the Employment Arrangements for any of the
employees of Seller who become employees of Purchaser.
(n) Except as may be otherwise provided in this Section 4.1, Purchaser
shall not be obligated to make any contribution to any plan or program on behalf
of any employees of Seller, or to otherwise provide any compensation or benefits
to any of such employees, with respect to any period prior to the Closing. It
is further provided that in no way shall Purchaser be liable for claims of any
employees of the Department which any of them have against Seller, and Seller
agrees to indemnify Purchaser and hold Purchaser harmless from and against any
such claims.
(o) The obligations of Purchaser hereunder are conditioned upon the
receipt by Purchaser prior to the Closing Date of approval of such by
obligations by the provider of Purchaser's employee benefits.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 Seller's Representations. In order to induce Purchaser to enter into
------------------------
this Agreement, Seller does hereby represent and warrant to Purchaser as of the
date hereof as follows:
(a) Organization in Good Standing. Seller is a federal savings bank
-----------------------------
duly organized, validly existing and in good standing under the laws of the
United States and possesses all requisite power and authority to own and lease
its property and to carry on its business as it is now conducted.
(b) Authority and Capacity. Seller has all requisite authority,
----------------------
corporate power and capacity to enter into this Agreement and the other
documents, instruments and agreements required to be executed by Seller in
connection herewith, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. Seller shall
continuously maintain all components of this written agreement as official
records of Seller or any successor thereto. This Agreement is a valid and
binding obligation of Seller, enforceable in accordance with its terms, except
that the enforceability hereof may be subject to bankruptcy, insolvency,
reorganization, moratorium and similar other laws now or hereafter in effect
relating creditors' rights generally and that the remedy of specific performance
and injunctive relief and other forms equitable relief may be subject to
equitable defenses and the discretion of the court before which any proceedings
therefor may be brought.
9
<PAGE>
(c) Defaults. Subject to the receipt of all prior approvals and
--------
consents necessary to effect the sale hereunder, the execution, delivery and
performance of this Agreement by Seller does not and the consummation of the
transactions contemplated hereby will not (a) violate any material provision of
any law, rule or regulation or any judgment, order, writ, injunction or decree
of any court or governmental authority or agency applicable to Seller or the
Assets, (b) conflict with any of the terms of (i) Seller's Articles of
Incorporation or Bylaws, or (ii) any other governing instrument relating to the
conduct of Seller's business, or (c) result in a breach of or give rise to any
right of termination, cancellation or acceleration under any other agreement to
which Seller is a party or by which it is bound with respect to the Assets.
(d) Permits, Licenses and Certificates. Seller has all requisite
----------------------------------
corporate and other authority and has all permits, licenses, approvals,
certificates and authorizations required by any governmental authority or which
are necessary or appropriate for the conduct of its business.
(e) No Accrued Liabilities. Except for any closing and termination
----------------------
fees as may be imposed in connection with the transactions contemplated by this
Agreement and which are to be paid by Seller, there are no accrued liabilities
of Seller with respect to the Assets, and Seller does not know of any events
that could result in any such accrued liabilities arising against Purchaser.
(f) Conduct of Business. Since October 31, 1997, the business of the
-------------------
Department has been conducted in its ordinary course as theretofore conducted
and in accordance with prudent business practices.
(g) Material Adverse Changes. As of the Closing Date there have been
------------------------
no material adverse changes from the date of this Agreement in the Assets or any
part thereof or the Department.
(h) Broker's Fees. Seller warrants and represents to Purchaser that
-------------
it has not engaged any broker or finder in connection with the transactions
herein contemplated and that there are no brokerage or finder's fees payable to
any person with respect to such transaction.
(i) General Conduct of Business. Prior to the Closing Date, Seller
---------------------------
warrants and represents that it will conduct its business in the ordinary course
as theretofore conducted in accordance with prudent business practices,
consistent with practices previously utilized by Seller. Seller will not make
any material changes in the operations of the Department or any changes in the
compensation of employees of the Department, without the prior written consent
of Purchaser.
(j) Access and Confidentiality. Prior to the Closing Date, Seller
--------------------------
shall give Purchaser and its representatives, including without limitation,
counsel and accountants, reasonable access during normal business hours and upon
reasonable notice to all of the Department's and the Loan Applications, Loans,
Loan Commitments, Assumed Contracts, Loan Documents, Records and other Assets.
Whether or not the transactions contemplated by this Agreement are consummated,
Purchaser, Seller and their respective representatives and Affiliates shall
treat all information regarding this Agreement or the transactions contemplated
hereby and all information obtained in connection herewith which is not
otherwise in the public domain, as confidential.
10
<PAGE>
(k) No Material Misrepresentations. Seller warrants and represents
------------------------------
to Purchaser that no warranty or representation by Seller nor any information
furnished or to be furnished by or on behalf of Seller to Purchaser contains or
will contain any untrue statement of a material fact or omit or fail to state
any material fact necessary to prevent the fact stated from being materially
misleading.
(l) Title to Assets. Title to the Assets is lawfully vested in
---------------
Seller, free and clear of any liens, claims, encumbrances and rights of others
whatsoever, except the lien for ad valorem taxes not yet due and payable, and
except, as to the Loan Applications, for the obligations, if any under the Loan
Commitments. Delivery to Purchaser of the instruments of ownership and transfer
contemplated by this Agreement will vest good and marketable title to the Assets
in Purchaser, free and clear of all liens, claims, encumbrances, and rights of
others whatsoever, except for the lien of ad valorem taxes not yet due and
payable and except, as to the Loan Applications, for the obligations, if any,
under the Loan Commitments.
(m) Enforceability; No Defaults. To the best knowledge of Seller,
---------------------------
the Loan Commitments, the Loans, the Loan Documents, the Assumed Contracts, the
Software License, and the Equipment Leases are enforceable in accordance with
their terms, no party to any such agreement is in breach of or in default under
any such agreement, and no event has occurred and no condition exists which
(with or without the giving of notice or the passage of time or both) would
constitute a breach of default by any party to any such agreement.
(n) Loans. To the best knowledge of Seller, the Records with respect
-----
to the Loans fairly reflect in all material respects (subject to normal
adjustments) the payment history and present balance as to each such Loan and,
except as reflected in such Records, none of the borrowers on such Loans has
notified Seller of any offset or defense to his obligation under said Loans. To
the best knowledge of Seller, the Loans have been made in accordance with
Seller's regular established credit guidelines and procedures. The Loan
Documents are genuine, legally valid and binding obligations of the borrower and
any guarantor and have been duly executed by a borrower of legal capacity and
all insertions in any Loan Document were correctly made. The Loan Documents were
in compliance with all applicable law upon origination and are complete in all
material respects with regard to origination and servicing activity.
(o) Loan Disbursements. All Loans were made or consummated in
------------------
accordance with applicable laws and regulations, a violation of which would have
a material adverse effect on the value of such Loan.
(p) Unpaid Balances. The amount of the unpaid balance for each Loan
---------------
is correct as set forth on its respective exhibit, and there are no defenses,
setoffs or counterclaims against payment under any of such Loans which would
have a material adverse effect on the value of such Loan.
(q) Security Interests. The security interest granted by the
------------------
borrower in the collateral for each Loan is a valid, binding and enforceable
first priority lien on the collateral with the exception of (a) liens for real
estate taxes and special assessments not yet due and payable, (b)
11
<PAGE>
covenants, conditions and restrictions, rights-of-way, easements and other
matters of public record as of the date of recording of such security interest
which are acceptable to single family residential construction lending
institutions generally or specifically reflected in the appraisal made in
connection with the origination of the related Loan, and (c) other matters to
which like properties are commonly subject and do not, individually or in the
aggregate, materially interfere with the benefits or security to be provided by
such security agreement. Neither the collateral nor any party to any related
security agreement has been released, with the exception of partial releases,
releases required by divorce decrees, releases required by assumptions and other
releases effected in accordance with the documents relating to such Loan.
(r) Taxes. All payroll, withholding, property, excise, sales, use
-----
and transfer taxes imposed by the United States or by any state, municipality,
subdivision or instrumentality of the United States or by any other taxing
authority relating to the Department that are due and payable by Seller prior to
the Closing Date have been paid in full, or will be so paid prior to the
Closing.
With respect to each representation, warranty or obligation hereunder
made upon the basis of the lack of a "material" or "materially adverse" effect,
claim, cost, liability, obligation, detriment or expense, the parties hereto
agree that for the purposes of this Agreement any liability with respect to such
representations, warranties or obligations (whether individually or collectively
or whether arising out of one or more) shall not be considered "material" or
"materially adverse" unless such liability (whether accrued, absolute, continent
or otherwise) in the aggregate exceeds $5,000 (it being specifically intended,
by way of example and not of limitation, that any party or parties obligated
with respect thereto shall be fully liable and responsible for all claims,
causes of action, obligations, detriments, costs, expenses and liabilities in
excess of such aggregate amount). All else notwithstanding, the above
definition of "material" or "materially adverse" is for the sole purpose of the
interpretation of such terms as they may relate to the rights and duties of the
parties hereunder.
5.2 Purchaser's Representations. In order to induce Seller to enter into
---------------------------
this Agreement, Purchaser does hereby represent and warrant to Seller as of the
date hereof as follows:
(a) Organization and Good Standing. Purchaser is a corporation, duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Texas and possesses all requisite power and authority to own and lease its
property and to carry on its business as it is now conducted.
(b) Authority and Capacity. Purchaser has all requisite authority,
----------------------
corporate power, and capacity to enter into this Agreement and the other
documents, instruments and agreements required to be executed by Seller in
connection herewith, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby, including the
assumption of the liabilities associated with the Assumed Liabilities and the
purchase of the Assets. This Agreement is a valid and binding obligation of
Purchaser, enforceable in accordance with its terms, except that the
enforceability hereof may be subject to bankruptcy, insolvency, reorganization,
moratorium and similar other laws now or hereafter in effect relating to
creditors' rights generally and that the remedy of specific performance and
injunctive relief and other forms of equitable relief may be subject to
equitable defenses and the discretion of the court before
12
<PAGE>
which any proceedings therefor may be brought.
(c) Licenses. Purchaser has, or on the Closing Date will have all
--------
requisite licenses or approvals as may be necessary to consummate the
transactions contemplated in this Agreement.
13
<PAGE>
(d) No Material Misrepresentations. Purchaser warrants and
------------------------------
represents to Seller that no warranty or representation by Purchaser nor any
information furnished or to be furnished by or on behalf of Purchaser to Seller
contains or will contain any untrue statement of a material fact or omit or fail
to state any material fact necessary to prevent the fact stated from being
materially misleading.
(e) Broker's Fees. Purchaser warrants and represents to Seller that
-------------
it has not engaged any broker or finder in connection with the transactions
herein contemplated and that there are no brokerage or finder's fees payable to
any person with respect to such transaction.
ARTICLE 6
CLOSING
6.1 Closing. Closing shall take place at the offices of Seller, at 4144
-------
North Central Expressway, 8th Floor, Dallas, Texas 75204, at 10:00 am on
December 30, 1997, or at such other time and place as may be mutually agreed
upon by Seller and Purchaser (the "Closing Date"). Closing shall be deemed
effective as of the close of business on the Closing Date.
6.2 Conditions Relating to Purchaser. Purchaser's obligation to effect
--------------------------------
the transactions contemplated by this Agreement is subject to the fulfilment
prior to or at the Closing Date of each of the following conditions, any one or
more of which may be waived by the Purchaser in whole or in part:
(a) Representations and Warranties. All representations and
------------------------------
warranties made by Seller in this Agreement shall be true and correct in all
material respects as of the Closing Date.
(b) Performance of Obligations. Seller shall have performed all of
--------------------------
its obligations under this Agreement which are performable prior to the Closing
Date.
(c) Consents. Seller shall have obtained any and all consents or
--------
authorizations required in order to convey to Purchaser the Assets, or any part
thereof.
(d) Material Adverse Change. There shall have occurred or be in
-----------------------
existence no event, occurrence or state of facts from the Effective Date, which
Purchaser determines in its discretion to constitute a material adverse change,
with respect to the Assets (or any part thereof).
(e) Documentation. The form and substance of all instruments of
-------------
transfer and assumption and other documents required to be delivered pursuant to
this Agreement shall be reasonably acceptable in all respects to Purchaser.
6.3 Conditions Relating to Seller. Seller's obligation to effect the
-----------------------------
transactions contemplated by this Agreement is subject to the fulfilment prior
to or at the Closing Date of each of the following conditions, any one or more
of which may be waived by the Seller in whole or in part:
(a) Representations and Warranties. All representations and
------------------------------
warranties made
14
<PAGE>
by Purchaser in this Agreement shall be true and correct in all material
respects as of the Closing Date.
(b) Performance of Obligations. Purchaser shall have performed all
--------------------------
of its obligations under this Agreement which are performable prior to the
Closing Date.
(c) Consents. Purchaser shall have obtained any and all consents or
--------
authorizations required in order to assume the liabilities and accept the
Assets, or any part thereof.
(d) Material Adverse Change. There shall have occurred or be in
-----------------------
existence no event, occurrence or state of facts from the Effective Date, which
Seller determines in its discretion to constitute a material adverse change,
with respect to Purchaser, which might affect the ability of Purchaser to
fulfill its obligations under this Agreement.
(e) Documentation. The form and substance of all instruments of
-------------
transfer and assumption and other documents required to be delivered pursuant to
this Agreement shall be reasonably acceptable in all respects to Seller.
(f) Grand Junction Sublease. Seller shall have received an executed
-----------------------
letter agreement between Seller and Mortgage Portfolio Services, Inc.
terminating the Commercial Sublease Agreement dated as of August 29, 1997
associated with Seller's Grand Junction, Colorado office.
6.4 Seller's Deliveries at Closing. At the Closing, Seller shall deliver
------------------------------
to Purchaser the following:
(a) Satisfaction of Conditions Precedent. Such documentation as
------------------------------------
Purchaser or Purchaser's counsel may require in order to satisfy Purchaser that
all of the conditions to Purchaser's obligation to purchase contained in Section
6.2 have been satisfied.
(b) Assignment of Loan Applications. A general warranty assignment
-------------------------------
of Seller's right, title and interest in, to and under the Loan Applications and
the assumption by Purchaser of Seller's obligations and liabilities under the
Loan Applications.
(c) Loan Commitments. A general warranty assignment of Seller's
----------------
right, title and interest in, to and under the Loan Commitments and the
assumption of Seller's obligations and liabilities under the Loan Commitments.
(d) Loans. A general warranty assignment of notes, liens and other
-----
collateral covering the Loans, together with the original promissory notes
evidencing the Loans, endorsed as follows: "Pay to the Order of Construction
Portfolio Funding, Inc., without recourse," and Purchaser shall not be obligated
to purchase any Loan for which Seller does not deliver to Purchaser the original
promissory note.
(e) Bill of Sale. A general warranty bill of sale conveying to
------------
Purchaser the FF&E, the Prepaid Items, Records and any other Assets that are
personal property.
15
<PAGE>
(f) Leases and Contracts. One or more general warranty assignments
--------------------
of all of Seller's right, title and interest in the Equipment Leases and Assumed
Contracts.
(g) Sublease Agreement. An executed Sublease Agreement consistent
------------------
with Section 2.2(g).
(h) Software License. A general warranty assignment of all of
----------------
Seller's right, title and interest in, to and under the Software License.
(i) Possession. Physical possession of the Assets, including,
----------
without limitation, the original Loan Documents and Records.
(j) Servicing Agreement. An executed counterpart of the Servicing
-------------------
Agreement described in Section 7.3 hereof.
At Closing, Seller and Purchaser shall take such other action as may
be reasonably required by Purchaser in order to effectuate the transaction
contemplated in this Agreement.
6.5 Purchaser's Deliveries at Closing. At the Closing, Purchaser shall
---------------------------------
deliver to Seller the following:
(a) One or more assumption agreements pursuant to which Purchaser
agrees to assume and discharge all of the Assumed Liabilities.
(b) An executed counterpart of the Servicing Agreement described in
Section 7.3 hereof.
(c) An executed counterpart of the Sublease Agreement consistent with
Section 2.2(g).
(d) Such other documents, as may be reasonably required by Seller, in
connection with the transactions contemplated by this Agreement.
6.6 Notice to Loan Applicants and Borrowers. Seller shall, at its own
----------------------------------------
expense, in accordance with applicable law, notify the applicants associated
with each Loan Application and the borrowers associated with each Loan and Loan
Commitment, in a form mutually acceptable to Seller and Purchaser, of the
transactions contemplated herein.
6.7 Further Cooperation. From time to time Seller shall furnish Purchaser
-------------------
such information and file such reports supplementary to the information
contained in the documents, exhibits and schedules delivered pursuant hereto as
Purchaser may reasonably request.
6.8 Access to Information. Seller will afford to Purchaser or its agents
---------------------
reasonable access, during normal business hours, to all of the accounting
records of Seller, and will cooperate in Purchaser's examination thereof. In
connection with any audit or other examination by any taxing authority, or any
judicial or administrative proceeding relating to the Assets transferred to
Purchaser
16
<PAGE>
or liabilities assumed by Purchaser as contemplated by this Agreement, Seller
and Purchaser agree to provide each other such assistance as may be reasonably
requested. The books or records directly related to the Assets and Assumed
Liabilities which are retained by one party shall be open for inspection by the
other party and its authorized agents and representatives for a period of one
(1) year during normal business hours after the Closing Date and the other party
may, at its own expense, make copies of and excerpts from such books and records
as it may deem desirable.
6.9 Further Assurances. Seller and Purchaser shall use their respective
------------------
best efforts to accomplish by the Closing Date all of the conditions to their or
the other party's obligations hereunder within their control. At any time and
from time to time after the Closing, upon the request of the other, each party
shall do or cause to be done, execute, acknowledge and deliver all such further
acts, deeds, assignments, transfers, conveyances, powers of attorney and
assurances as may be necessary or desirable to vest in Purchaser the Assets
intended to be sold, transferred and assigned, and to evidence Purchaser's
assumption of the Assumed Liabilities pursuant to the provisions of this
Agreement.
ARTICLE 7
POST-CLOSING AGREEMENTS
7.1 Loan Transfer Documents. Within thirty (30) days after the Closing
-----------------------
Date, Seller shall execute and record or file such UCC-3 assignments and
transfers of lien and other specific assignments of the Loan Documents as
Purchaser may reasonably request. Seller shall make available personnel with
authority to bind Seller who shall execute and deliver all such documents as may
be reasonably required to effectuate the transfer of liens and other specific
assignments and other items as may be contemplated by this Agreement. Seller
shall pay the costs and expenses incurred by Seller in connection with the
preparation and recordation and filing of such UCC-3 assignments and such
transfers of liens, and all recording fees and taxes in connection therewith.
Individual transfers of liens shall be on such forms as Purchaser reasonably may
request. Seller agrees that nothing contained in the individual transfers of
liens shall be deemed to limit any representations, warranties and covenants
which are expressly set forth in this Agreement or in any other transfer
document.
7.2 Noncompetition. For a period of two (2) years from the Closing Date,
--------------
Seller agrees that it will not actively solicit single family residential
construction loans within the states of Nevada, Colorado, Arizona, Tennessee, or
California (the "Noncompete Area"). If any court of competent jurisdiction
should determine that any term or terms of this covenant are too broad in terms
of time, geographic area, lines of commerce, or otherwise, such court shall
modify and revise any such term or terms so that they comply with applicable
law. In the event of a change of control of Seller, being defined as (i) a
transfer of more then fifty-one percent (51%) of the issued and outstanding
capital stock of Seller to any third party who is not an Affiliate of Seller, or
(ii) the sale or transfer of substantially all the assets of Seller to any third
party who is not an Affiliate of Seller, then this Section 7.2 shall terminate.
7.3 Retained Loans. Seller and Purchaser agree and acknowledge that
--------------
Seller will retain the single family residential construction loans originated
and closed on or before the Closing Date by Seller and listed on Exhibit 7.3
attached hereto and incorporated herein for all purposes
17
<PAGE>
("Retained Loans"). Purchaser agrees to service Retained Loans on behalf of
Seller pursuant to a Servicing Agreement to be delivered by Purchaser at
Closing, containing such terms and conditions as are mutually acceptable to
Purchaser and Seller. Purchaser shall not charge Seller a servicing fee for
providing such services to Seller.
18
<PAGE>
7.4 Seller's Nondisclosure. Seller acknowledges and agrees that
----------------------
irreparable damage would occur in the event any confidential information
regarding the Department were disclosed to or utilized on behalf of any person
or entity that is in competition with the Department. Accordingly, Seller
covenants and agrees that it will not, after the Closing Date, directly or
indirectly, without the prior written consent of Purchaser, use or disclose such
confidential information to any person or entity that is in competition with the
single family residential construction lending business of Purchaser, except to
Purchaser or its representatives. Notwithstanding the foregoing, Seller and its
Affiliates may disclose any confidential information to the extent that, in the
opinion of counsel to Seller, such person or entity is legally compelled to do
so, provided that, prior to making such disclosure, such person or entity
advises and consults with Purchaser regarding such disclosure and provided
further, that such person or entity discloses only that portion of such
confidential information as is legally required. For the purposes of this
Section 8.5, the term "confidential information" means all information
concerning the Department, the Assets or the Assumed Liabilities except
information which (i) was or becomes generally available to the public other
than as a result of disclosure by Seller or any of its Affiliates, or (ii) was
or becomes available to Seller from a nonconfidential source other than
Purchaser, provided that such source is not known by Seller to be bound by a
confidentiality agreement with respect to such information. Nothing in this
Section 7.4 shall require the consent of Purchaser, nor prohibit the disclosure
of any confidential information to any regulatory agency with supervisory
authority over Seller, or to any entity engaged in due diligence with respect to
the sale of the capital stock or substantially all of the assets of Seller,
provided, that each such entity performing due diligence has agreed in writing
with Seller to maintain the confidentiality of such confidential information.
7.5 Data Processing. For a period of sixty (60) days, commencing
---------------
immediately after Closing, Seller agrees to furnish Purchaser with data
processing and consultation services, as mutually agreed by Seller and Purchaser
and as described in Exhibit 7.5 to be provided by Seller at Closing to ensure an
orderly transition from Seller to Purchaser of the Assets and Assumed
Liabilities. Seller shall not charge Purchaser a fee for providing such services
to Purchaser.
7.6 Collections on Loans after Closing Date. Any payment on any of the
---------------------------------------
Loans which is received by Seller within thirty (30) days following the Closing
Date shall be remitted to Purchaser by overnight courier for receipt by
Purchaser on the first business day following the date of receipt by Seller, at
Seller's expense, addressed to Purchaser at such address as Purchaser may notify
Seller in writing. Any such payment received by Seller after the expiration of
such 30-day period shall be promptly remitted to Purchaser by Seller by U.S.
regular mail, first class postage prepaid, at Seller's expense.
ARTICLE 8
INDEMNIFICATION
8.1 Seller's Indemnification. Seller shall indemnify and hold harmless
------------------------
Purchaser from and against any and all claims and losses incurred by or assessed
against Purchaser by reason of , arising out of or in connection with:
(a) Any breach of warranty or representation, misrepresentation or
breach or nonperformance of any agreement or covenant of Seller contained in
this Agreement or any
19
<PAGE>
schedule, exhibit, certificate, agreement or instrument executed and /or
delivered pursuant to the requirements of this Agreement; and
(b) Any obligation or liability of Seller relating to the operation or
ownership of any part of the Assets prior to the Closing Date (including without
limitation, any third-party claim brought against Purchaser by any person after
the Closing Date and relating to the operation of any part of the Assets as
conducted by Seller prior to the Closing Date), not expressly assumed by
Purchaser pursuant to Section 2.2 herein.
8.2 Purchaser's Indemnification. Purchaser shall indemnify and hold
---------------------------
harmless Seller from and against any and all claims and losses incurred by or
assessed against Seller by reason of, arising out of or in connection with:
(a) Any breach of warranty or representation, misrepresentation or
breach or nonperformance of any agreement or covenant of Purchaser contained in
this Agreement or any schedule, exhibit, certificate, agreement or instrument
executed and/or delivered pursuant to the requirements of this Agreement;
(b) Any obligation or liability assumed by Purchaser pursuant to the
terms of this Agreement; and
(c) Any obligation or liability of Purchaser relating to the operation
or ownership of any part of the Assets subsequent to the Closing Date (including
without limitation, any third-party claim brought against Seller by any person
after the Closing Date and relating to the operation of any part of the Assets
as conducted by Purchaser subsequent to the Closing Date).
8.3 Notice. Each party shall promptly notify the other, in writing, of
------
the institution of any action, or the notification of any claim in respect of
which the notifying party may seek indemnification pursuant to Section 8.1 or
8.2. The indemnifying party may, at its option, assume the defense of any
action, including the employment of legal counsel and the payment of reasonable
expenses. The indemnified party agrees to fully cooperate in the defense,
negotiation and/or settlement of any claim or action subject to this Article 8.
Neither Seller nor Purchaser shall be liable for any settlement of any claim or
action effected without their prior written consent.
ARTICLE 9
DEFAULT
9.1 Default by Seller. In the event of the default, breach or non-
-----------------
compliance of Seller of any of the terms, provisions, covenants, representations
or warranties contained herein, Purchaser shall have the right to (i) terminate
this Agreement, and/or (ii) seek such other remedies available to Purchaser at
law or in equity.
9.2 Default by Purchaser. In the event of any default, breach or
--------------------
noncompliance by Purchaser of any of its obligations contained herein, Seller
shall have the right to (i) terminate this Agreement, and/or (ii) seek such
other remedies as may be available to Seller at law or in equity.
20
<PAGE>
ARTICLE 10
TERMINATION
10.1 Termination. This Agreement and the transactions contemplated hereby
-----------
may be terminated prior to the Closing Date under any of the following
circumstances:
(a) By mutual written consent of Purchaser and Seller;
(b) By Purchaser, if a condition to its obligation to close, as
specified herein, has not been satisfied or waived by the Closing Date;
(c) By Seller, if a condition to its obligation to close, as specified
herein, has not been satisfied or waived by the Closing Date;
(d) By Purchaser or Seller if (i) the consummation of the transactions
contemplated by this Agreement shall violate any order, decree or judgment of
any court or governmental body having competent jurisdiction, or (ii) there
shall have been enacted a statute, rule or regulation which makes the
consummation of the transactions contemplated herein illegal or otherwise
prohibited;
(e) By Purchaser or Seller, if there shall have been a material
misrepresentation or breach of warranty or covenant contained in this Agreement
and the breaching party failed to cure the misrepresentation or cure by the
Closing Date;
(f) This Agreement shall automatically terminate at the close of
business on December 31, 1997, if the Closing has not occurred on or prior
thereto.
10.2 Further Obligations. In the event this Agreement is terminated
-------------------
pursuant to Section 10.1(a), (b), (c), (d) or (f) hereof, all further
obligations of either party to the other under this Agreement shall terminate
without further liability of Purchaser or Seller. In the event this Agreement is
terminated pursuant to Section 10.1(e) hereof, or pursuant to Sections 10.1(b),
(c) or (f) hereof due to the breach of this Agreement by the other party, the
terminating party shall retain all legal and equitable rights available to it as
a result of such material misrepresentation or breach of warranty or covenant.
ARTICLE 11
GENERAL
11.1 Applicable Law. This Agreement has been made pursuant to and shall be
--------------
governed by and construed in accordance with the laws of the State of Texas.
This Agreement shall be performable in Dallas County, Texas.
11.2 Severability. If any part or provision of this Agreement shall be
------------
invalid, illegal or inoperative for any reason, the remaining parts and
provisions so far as possible and reasonable shall be effective and fully
operative.
21
<PAGE>
11.3 Survival. Except as otherwise expressly provided herein, the
--------
representations, warranties and obligations contained herein shall survive the
Closing Date.
11.4 Non-Waiver. Except to the extent otherwise specifically provided
----------
herein, the failure at any time to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of those provisions and shall
not affect the right of either Party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.
11.5 Amendment. This Agreement may not be amended except by the mutual
---------
agreement of the Parties evidenced by a writing signed by each Party.
11.6 Notices. All notices and other communications under this Agreement
-------
shall be in writing and shall be deemed to have been duly given if delivered by
hand, by overnight courier, or by registered or certified mail, return receipt
requested, postage prepaid, addressed to the Parties at the following addresses
(or at such other addresses as shall be specified by like notice):
To Seller: Pacific Southwest Bank
4144 N. Central Expressway, Suite 160
Dallas, Texas 75204
Attn: Bobby L. Hashaway
with a copy to: Pacific USA Holdings Corp.
3200 Southwest Freeway, Suite 1220
Houston, Texas 77027
Attn.: Cathryn L. Porter, Esq.
To Purchaser: Construction Portfolio Funding, Inc.
2 ADA
Irvine, California 92618
Attn.: Michael W. Caton
with a copy to: Parsons & Funnell, L.L.P.
8150 N. Central Expressway, Suite 1900
Dallas, Texas 75206
Attn: Kevin J. Funnell, Esq.
Any notice or communication so given shall be deemed to have been
delivered on the date of the receipt of such delivery at the address set forth
above (or such other address designated pursuant hereto).
11.7 Third Party Beneficiaries. This Agreement is intended for the sole
-------------------------
benefit of the Parties and their respective successors and assigns, and there
shall be no other third party beneficiaries.
11.8 Time of Essence. Time is of the essence in the performance of the
---------------
obligations stated in this Agreement.
22
<PAGE>
11.9 Headings. Captions and headings used herein are for convenience of
--------
reference only and are not a part of this Agreement and shall not be used in
construing this Agreement.
11.10 Counterparts. This Agreement may be executed in one or more
------------
counterparts, any one of which shall be considered an original of this
Agreement. All signatures to this Agreement may be delivered by facsimile and
such facsimile signatures shall be binding and have the same force and effect as
original signatures.
11.11 Entire Agreement. This Agreement, together with all of its
----------------
Exhibits, set forth all of the promises, covenants, agreements and
understandings between the parties hereto and supersedes all prior agreements
and understandings, except as herein contained. This Agreement may not be
amended or modified other than by an agreement in writing executed by all
parties hereto.
11.12 Binding. This Agreement shall be binding upon and inure to the
-------
benefit of the parties hereto, and their respective successors and assigns.
Rights under this Agreement may not be assigned and duties hereunder may not be
delegated by either party without the written consent of the other, and any such
assignment or delegation shall be void and of no force or effect.
Notwithstanding the foregoing, Purchaser may assign its rights and obligations
under this Agreement to an Affiliate.
11.13 Attorneys' Fees. In the event either party to this Agreement brings
---------------
an action or suit, in law or in equity, including an action for declaratory
relief, to enforce or interpret the provisions of this Agreement, the prevailing
party shall be entitled to have and recover from the losing party, all costs and
expenses incurred or substantiated by such prevailing party in connection with
such action or suit, including without limitation, reasonable legal fees and
court costs (whether or not taxable as such), in addition to any other relief
which may be awarded.
[SIGNATURE PAGE FOLLOWS]
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SELLER:
PACIFIC SOUTHWEST BANK
By: _________________________________
Bobby L. Hashaway
Executive Vice President
PURCHASER:
CONSTRUCTION PORTFOLIO FUNDING, INC.
By: _________________________________
Alan Ferree
Executive Vice President
24
<PAGE>
Exhibit 10.18
LOAN AND SECURITY AGREEMENT
BETWEEN
CONSTRUCTION PORTFOLIO FUNDING, INC.,
a Texas corporation
AND
BANK UNITED,
a federal savings bank
Dated as of December 30, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<C> <S> <C>
1. DEFINITIONS..................................................Page 1
1.1 Defined Terms.........................................Page 1
1.2 Other Definitional Provisions........................Page 12
2. THE CREDIT..................................................Page 12
2.1 The Commitment.......................................Page 12
2.2 Procedures for Obtaining Advances....................Page 15
2.3 Note.................................................Page 15
2.4 Interest.............................................Page 15
2.5 Principal Payments...................................Page 16
2.6 Expiration of Commitment.............................Page 17
2.7 Method of Making Payments............................Page 17
2.8 Non-Usage Fee........................................Page 18
2.9 Commitment Fee.......................................Page 18
2.10 Bailee...............................................Page 18
3. COLLATERAL..................................................Page 19
3.1 Security.............................................Page 19
3.2 Right of Redemption from Pledge......................Page 19
3.3 Partial Releases.....................................Page 20
3.4 Return or Release of Collateral at End of Commitment.Page 20
4. CONDITIONS PRECEDENT........................................Page 20
4.1 Initial Advance......................................Page 20
4.2 Each Advance.........................................Page 22
5. REPRESENTATIONS AND WARRANTIES..............................Page 23
5.1 Organization; Good Standing; Subsidiaries............Page 23
5.2 Authorization and Enforceability.....................Page 24
5.3 Financial Condition..................................Page 24
5.4 Litigation...........................................Page 25
5.5 Compliance with Laws.................................Page 25
5.6 Regulations G and U..................................Page 25
5.7 Investment Company Act...............................Page 25
5.8 Agreements...........................................Page 25
5.9 Title to Properties..................................Page 25
5.10 ERISA................................................Page 26
5.11 RICO.................................................Page 26
5.12 Proper Names.........................................Page 26
5.13 Direct Benefit From Loans............................Page 26
5.14 Loan Documents Do Not Violate Other Documents........Page 26
5.15 Consents Not Required................................Page 27
5.16 Material Fact Representations........................Page 27
</TABLE>
Page i
<PAGE>
<TABLE>
<C> <S> <C>
5.17 Place of Business....................................Page 27
5.18 Use of Proceeds; Business Loans......................Page 27
5.19 No Undisclosed Liabilities...........................Page 27
5.20 Tax Returns and Payments.............................Page 27
5.21 Subsidiaries.........................................Page 28
5.22 Holding Company......................................Page 28
6. AFFIRMATIVE COVENANTS.......................................Page 28
6.1 Payment of Note......................................Page 28
6.2 Financial Statements and Other Reports...............Page 28
6.3 Maintenance of Existence; Conduct of Business........Page 29
6.4 Compliance with Applicable Laws......................Page 29
6.5 Inspection of Properties and Books...................Page 29
6.6 Notice...............................................Page 30
6.7 Payment of Debt, Taxes, etc..........................Page 30
6.8 Insurance............................................Page 30
6.9 Other Loan Obligations...............................Page 30
6.10 Use of Proceeds of Advances..........................Page 31
6.11 Cure of Defects in Loan Documents....................Page 31
7. NEGATIVE COVENANTS..........................................Page 31
7.1 Contingent Liabilities...............................Page 31
7.2 Merger; Acquisitions.................................Page 31
7.3 Debt to Tangible Net Worth Ratio.....................Page 31
7.4 Minimum Tangible Net Worth...........................Page 31
7.5 Minimum Liquidity....................................Page 31
7.6 RICO.................................................Page 31
7.7 No Loans or Investments Except Approved Investments..Page 32
7.8 Charter Documents and Business Termination...........Page 32
7.9 Changes in Accounting Methods........................Page 32
7.10 No Sales, Leases or Dispositions of Property.........Page 32
7.11 Changes in Business or Assets........................Page 33
7.12 Changes in Office or Inventory Location..............Page 33
7.13 Special Negative Covenants Concerning Collateral.....Page 33
7.14 No Indebtedness......................................Page 33
7.15 Ownership of the Company.............................Page 34
8. DEFAULTS; REMEDIES..........................................Page 34
8.1 Events of Default....................................Page 34
8.2 Remedies.............................................Page 37
8.3 Application of Proceeds..............................Page 39
8.4 Lender Appointed Attorney-in-Fact....................Page 40
8.5 Right of Set-Off.....................................Page 40
9. NOTICES.....................................................Page 40
</TABLE>
Page ii
<PAGE>
<TABLE>
<C> <S> <C>
10. REIMBURSEMENT OF EXPENSES; INDEMNITY...............................Page 41
11. FINANCIAL INFORMATION..............................................Page 42
12. MISCELLANEOUS......................................................Page 43
12.1 Terms Binding Upon Successors; Survival of Representations..Page 43
12.2 Assignment..................................................Page 43
12.3 Amendments..................................................Page 43
12.4 Governing Law...............................................Page 43
12.5 Participations..............................................Page 43
12.6 Relationship of the Parties.................................Page 43
12.7 Severability................................................Page 44
12.8 Usury.......................................................Page 44
12.9 Consent to Jurisdiction.....................................Page 45
12.10 Arbitration.................................................Page 45
12.11 ADDITIONAL INDEMNITY........................................Page 46
12.12 No Waivers Except in Writing................................Page 47
12.13 Waiver of Jury Trial........................................Page 47
12.14 Multiple Counterparts.......................................Page 47
12.15 No Third Party Beneficiaries................................Page 47
12.16 RELEASE OF LENDER LIABILITY.................................Page 47
12.17 Entire Agreement; Amendment.................................Page 48
12.18 Confidentiality and Non-Solicitation........................Page 48
12.19 NO ORAL AGREEMENTS..........................................Page 49
EXHIBIT "A" ............................................................Page 51
EXHIBIT "B" ............................................................Page 53
EXHIBIT "C" ............................................................Page 54
EXHIBIT "D" ............................................................Page 55
EXHIBIT "E" ............................................................Page 57
EXHIBIT "F" ............................................................Page 58
EXHIBIT "G" ............................................................Page 59
EXHIBIT "H" ............................................................Page 60
EXHIBIT "I" ............................................................Page 63
EXHIBIT "J" ............................................................Page 65
EXHIBIT "K" ............................................................Page 67
</TABLE>
Page iii
<PAGE>
<TABLE>
<C> <S> <C>
EXHIBIT "L" ............................................................Page 68
EXHIBIT "M" ............................................................Page 69
EXHIBIT "N" ............................................................Page 72
EXHIBIT "O" ............................................................Page 75
EXHIBIT "P" ............................................................Page 78
EXHIBIT "Q" ............................................................Page 88
</TABLE>
Page iv
<PAGE>
LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is dated as of
December 30, 1997, by and between CONSTRUCTION PORTFOLIO FUNDING, INC., a Texas
corporation (the "Company"), having its principal office at 4144 N. Central
Expressway, Suite 900, Dallas, Texas 75204, and BANK UNITED, a federal savings
bank (the "Lender"), having its principal office at 3200 Southwest Freeway,
Suite 1300, Houston, Texas 77027.
WHEREAS, the Company has requested the Lender to make certain loans to the
Company to finance the origination and funding of Residential Construction Loans
and Residential A&D Loans, Consumer Construction Loans, and Consumer Lot Loans
(as those terms are herein defined) which loans are for the benefit of the
Company;
WHEREAS, the Lender is willing to make such loans as herein provided, upon
the terms, agreements and covenants and subject to the conditions hereinafter
set forth and in reliance on the representations and warranties herein made and
referred to; and
WHEREAS, the Company and the Lender desire to set forth herein the terms
and conditions upon which the Lender shall provide the above financing to the
Company;
NOW, THEREFORE, for good and valuable consideration, the amount and
sufficiency of which are hereby acknowledged by the parties hereto, to induce
the Lender to provide the above financing facility to the Company and in
reliance of the representations and warranties made herein, the parties hereto
hereby agree as follows:
1. DEFINITIONS
-----------
1.1 Defined Terms. Capitalized terms defined below or elsewhere in this
-------------
Agreement (including the exhibits hereto) shall have the following meanings:
"Advance" means a disbursement by the Lender under the Commitment
-------
pursuant to Article 2 of this Agreement.
"Affiliate" means any Person controlling, controlled by or under
---------
common control with any other Person. For purposes of this definition
"control" (including "controlled by" and "under common control with") means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through
the ownership of voting securities, by contract, or otherwise or owning or
possessing the power to vote 10% or more of any class of voting securities
of any Person.
"Aged Loans" means, collectively, (a) any Residential Construction
----------
Loan for any Sold Home and Speculative Home included in Collateral for a
period of more than two hundred seventy (270) days, (b) any Residential
Construction Loan for Model Homes included in Collateral for a period of
more than six hundred thirty (630) days, and (c) any
Page 1
<PAGE>
Residential A&D Loan included in Collateral for a period of more than six
hundred thirty (630) days.
"Agreement" means this Loan and Security Agreement, either as
---------
originally executed or as it may from time to time be supplemented,
modified or amended.
"Applicable Law" means the laws of the State of Texas and the United
--------------
States of America in effect from time to time and applicable to the
transactions between the Lender and the Company pursuant to this Agreement
and the other Loan Documents whichever permits the charging and collection
of the highest nonusurious rate of interest on such transactions.
"Appraisal" means, (a) with respect to each Home to be constructed
---------
under any Residential Construction Loan, a current fair market value
appraisal, accepted by the Company in accordance with the Construction Loan
Agreement, that appraises on a "completed value" basis the Home to be
constructed on a specified Lot; (b) with respect to any Lot under any
Residential Construction Loan or any Residential Land under any Residential
A&D Loan, a current fair market value appraisal of such Lot or Residential
Land; (c) with respect to any Consumer Lot Loan, a current fair market
appraisal of the lot to be acquired with proceeds of such Consumer Lot
Loan; and (d) with respect to any Consumer Construction Loan, a current
fair market value appraisal that appraises on a "completed value" basis the
Home to be constructed from the proceeds of such Consumer Construction Loan
and the lot on which such Home is located; each of the foregoing appraisals
must satisfy the appraisal requirements of the Office of Thrift Supervision
("OTS") pertaining to that particular loan, as amended from time to time,
provided, however, that the Company shall not have any obligation to
conform to any changes in the OTS appraisal requirements occurring after
the effective date herewith unless Lender has notified the Company in
writing of such changes.
"Appraisal Value" means (a) with respect to each Lot and Home to be
---------------
constructed thereon under any Residential Construction Loan, the fair
market value of such Lot and Home, upon one hundred percent (100%)
completion of all construction thereof in accordance with the Plans and
Specifications for such Home plus lot value for such Lot, all as determined
by the Appraisal; (b) with respect to a Lot on which a Home is to be
constructed thereon under any Residential Construction Loan, the fair
market value attributable to such Lot in the Appraisal; (c) with respect to
Residential Land under any Residential A&D Loan, the fair market value
attributable to such Residential Land in the Appraisal; (d) with respect to
each Lot and Home to be constructed thereon under any Consumer Construction
Loan, the fair market value of such Lot and Home, upon one hundred percent
(100%) completion of all construction of such Home plus lot value for such
Lot, all as determined by the Appraisal; and (e) with respect to a Lot on
which a Home is to be constructed thereon under any Consumer Lot Loan, the
fair market value attributable to such Lot in the Appraisal.
"Assignment Documents" means originals of such instruments, documents,
--------------------
agreements, assignments, certificates, UCC Financing Statements, allonges
or endorsements,
Page 2
<PAGE>
in form and substance satisfactory to Lender in Lender's sole discretion,
which Lender reasonably determines are necessary or appropriate to evidence
and/or effectuate the assignment to Lender of all of the Company's right,
title and interest in and to any and all Residential Construction Loans,
Residential A&D Loans, Consumer Construction Loans, and Consumer Lot Loans
in respect of which Advances have been made by the Lender hereunder,
including, without limitation, all Consumer Loan Documents evidencing
Consumer Construction Loans and Consumer Lot Loans, all Construction Loan
Documents evidencing such Residential Construction Loans and Residential
A&D Loans and the proceeds thereof, and Lender's perfection of a valid
first priority lien thereon or therein, including, without limitation, the
UCC Financing Statement.
"Builders" means the Persons listed in Exhibit "C" hereto or any other
-------- -----------
Person which is acceptable to the Lender, in its reasonable discretion.
Any Builder approved by the Company in accordance with the standards set
forth in the Construction Policy and Procedures Manual shall be deemed
acceptable to the Lender, unless otherwise specifically notified in writing
by the Lender to the contrary; provided, however, that Lender's consent
shall not be arbitrarily withheld to gain a competitive advantage against
the Company for the business of such Builder.
"Business Day" means any day excluding Saturday, Sunday and any day on
------------
which Lender is closed for business.
"Capitalized Lease" means any lease under which rental payments are
-----------------
required to be capitalized on a balance sheet of the lessee in accordance
with GAAP.
"Capitalized Rentals" means the amount of aggregate rentals due and to
-------------------
become due under all Capitalized Leases under which the Company is a lessee
that would be reflected as a liability on a balance sheet of the Company.
"Change of Control" means
-----------------
(a) a sale of substantially all of the Company's assets to any
Person or related group of Persons; or
(b) without the Lender's prior written consent, any merger or
consolidation of the Company with or into another Person with the
effect that NAB holds less than eighty percent (80%) of the total
voting power entitled to vote in election of directors, managers, or
trustees of the survivor of such merger or consolidation; or
(c) the occurrence of any event after which NAB no longer owns
eighty percent (80%) of the total voting power entitled to vote in
election of directors of the Company.
"Collateral" has the meaning set forth in Section 3.1 hereof.
----------
Page 3
<PAGE>
"Collateral Documents" means all of the documents and other items
--------------------
described on Exhibit "A" hereto and required to be delivered to the Lender
-----------
in connection with an Advance.
"Commitment" has the meaning set forth in Section 2.1(a) hereof.
---------
"Commitment Fee" has the meaning set forth in Section 2.9 of this
--------------
Agreement.
"Company" has the meaning set forth in the first paragraph of this
-------
Agreement.
"Construction Costs Schedule" means, with respect to each Residential
---------------------------
Construction Loan or Consumer Construction Loan, the schedule provided to
the Company in accordance with the terms of the Construction Loan Agreement
or the Consumer Loan Documents, as the case may be, showing, for each Home
to be constructed under such Residential Construction Loan or Consumer
Construction Loan, the budgeted construction costs for each such Home.
"Construction Draw Schedule" means, with respect to each Residential
--------------------------
Construction Loan or Consumer Construction Loan, a disbursement schedule
substantially in accordance with Exhibit "K" hereto and as more
-----------
particularly described in the Construction Loan Documents evidencing such
Residential Construction Loan or the Consumer Loan Documents evidencing
such Consumer Construction Loan.
"Construction Facility" means, with respect to any Builder, the loan
---------------------
facility provided for in the Construction Loan Agreement between the
Company and such Builder.
"Construction Loan Advance" means, with respect to any Residential
-------------------------
Construction Loan or Residential A&D Loan, as the case may be, any advance
by the Company of loan proceeds under such Residential Construction Loan or
Residential A&D Loan, as the case may be, pursuant to a Construction Loan
Request and in accordance with the Construction Draw Schedule.
"Construction Loan Agreement" means, with respect to any Builder, a
---------------------------
loan agreement executed by and between such Builder, as borrower, and the
Company, as lender, evidencing the construction facility terms and
conditions under which the Company will extend Residential Construction
Loans and/or Residential A&D Loans to such Builder.
"Construction Loan Documents" means, with respect to any Builder, the
---------------------------
Construction Note, Construction Loan Agreement, each Deed of Trust, each
financing statement, and any and all other agreements or instruments now or
hereafter executed and delivered by such Builder or any other Person in
connection with, or as security for the payment or performance of the
Construction Facility extended by the Company to such Builder, all of such
documents to be substantially in the form of the loan documents attached
hereto as Exhibit "Q", as they may from time to time be supplemented,
-----------
modified, or amended, subject to the Lender's written approval in its
reasonable discretion. If the Lender fails to notify the Company in
writing of its election to approve or disapprove any
Page 4
<PAGE>
modification of any loan document within ten (10) Business Days of its
receipt of notice of such modification, Lender shall be deemed to have
approved such modification.
"Construction Loan Guidelines" means the construction loan guidelines
----------------------------
for Residential Construction Loans and Residential A&D Loans set forth on
Exhibit "J" hereto.
-----------
"Construction Loan Request" means, with respect to any Residential
-------------------------
Construction Loan or Residential A&D Loan, as the case may be, a request
for an advance under such Residential Construction Loan or Residential A&D
Loan, as the case may be, submitted by an authorized employee of the
Builder in accordance with the terms of the Construction Loan Agreement, as
it may be from time to time renewed, extended, rearranged, modified,
amended, restated, or replaced.
"Construction Note" means, with respect to any Builder, one or more
-----------------
promissory notes executed by such Builder to the Company to evidence the
Construction Loan Advances to be made under the Construction Facility, as
it may be from time to time renewed, extended, rearranged, modified,
amended, restated, or replaced.
"Construction Policy and Procedures Manual" means those certain
-----------------------------------------
policies and procedures established by the Company governing the
origination and funding of residential construction, acquisition, and
development credit facilities as set forth in the written manual attached
hereto as Exhibit "B" and as it may from time to time be supplemented,
-----------
modified, or amended, subject to the Lender's written approval in its
reasonable discretion. If Lender fails to notify the Company in writing of
its election to approve or disapprove any modification of such policies and
procedures within ten (10) Business Days of its receipt of notice of such
modification, the Lender shall be deemed to have approved such
modification.
"Consumer Construction Loan" means any loan to natural person(s) for
--------------------------
the purpose of constructing their primary Home on a fully developed,
vacant, single-family residential lot in a subdivision acceptable to the
Company, which loan may or may not permit conversion to a permanent loan.
"Consumer Loan Documents" means the Consumer Note, the Consumer
-----------------------
Mortgage, and all other documents, agreements, or instruments executed in
connection with, or as security for, the payment or performance of any
Consumer Construction Loan or Consumer Lot Loan.
"Consumer Lot Loan" means any loan to natural person(s) for the
-----------------
purpose of acquiring a fully developed, vacant, single-family residential
lot in a subdivision acceptable to the Company on which such natural
persons intend to construct their first or second Home (proceeds of such
loan will not cover construction of such Home, only acquisition of the
lot).
"Consumer Mortgage" means, with respect to any Consumer Construction
-----------------
Loan or Consumer Lot Loan, a mortgage, deed of trust, deed to secure debt,
or other form of mortgage instrument that constitutes under the laws of the
applicable jurisdiction a Lien on the property to be financed under such
loan.
Page 5
<PAGE>
"Consumer Note" means a note evidencing a Consumer Construction Loan
-------------
or a Consumer Lot Loan.
"Debt" means, with respect to any Person, at any date (a) all
----
indebtedness or other obligations of such Person which, in accordance with
GAAP, would be included in determining total liabilities as shown on the
liabilities side of a balance sheet of such Person at such date; and (b)
all indebtedness or other obligations of such Person for borrowed money or
for the deferred purchase price of property or services; provided that for
purposes of this Agreement, there shall be excluded from Debt at any date,
loan loss reserves, deferred taxes arising from capitalized excess service
fees, and operating leases.
"Deed of Trust" means, with respect to each Residential Construction
-------------
Loan or Residential A&D Loan, each mortgage, deed of trust, deed to secure
debt or other form of mortgage instrument that constitutes under the laws
of the applicable jurisdiction a first priority Lien in the Lot or Lots or
Residential Land described therein and any and all interests of the Builder
in any improvements, personal property and general intangibles now or
hereafter located on, used in connection with, or related to such Lot or
Lots or Residential Land and, if permitted by the laws of the applicable
jurisdiction, incorporates by reference the terms of a master deed of
trust.
"Default" means the occurrence of any event or existence of any
-------
condition which, but for the giving of notice, the lapse of time, or both,
would constitute an Event of Default.
"Default Rate" has the meaning set forth in Section 2.4(c) hereof.
------------
"Eligible Construction Loan" means a Residential Construction Loan,
--------------------------
Residential A&D Loan, Aged Loan, Consumer Construction Loan, or Consumer
Lot Loan that, at all times during the term of this Agreement, (a) is
evidenced by Construction Loan Documents or Consumer Loan Documents, as
applicable, that are substantially in the forms previously approved, in
writing, by the Lender in its reasonable discretion; (b) is validly pledged
to the Lender, subject to no other Liens; (c) is not in default in the
payment of principal and interest for a period of more than forty-five (45)
days; (d) is not in default in the performance of any obligation under the
Construction Loan Documents or Consumer Loan Documents, as applicable,
evidencing or securing such Eligible Construction Loan that has not been
cured by the borrower; (e) is not subject to a bankruptcy or an act of
fraud by the applicable Builder or other borrowers under such Eligible
Construction Loan, as the case may be; (f) complies with all applicable
Construction Loan Guidelines, and requirements of the Construction Policy
and Procedures Manual in all material respects; (g) is for a loan amount
that does not exceed its Loan Value; and (h) may not comply with all of the
foregoing terms but is otherwise on terms acceptable to the Lender in its
sole discretion as indicated by Lender's specific written or oral waiver of
non-compliance with such foregoing terms.
"ERISA" means the Employee Retirement Income Security Act of 1974 and
-----
all rules and regulations promulgated thereunder, as amended from time to
time and any successor statute.
Page 6
<PAGE>
"Event of Default" means any of the conditions or events set forth in
----------------
Section 8.1 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
------------
from time to time and any successor statute.
"FICA" means the Federal Insurance Contributions Act.
----
"Financial Statements" has the meaning set forth in Section 6.2
--------------------
hereof.
"Floating Rate" has the meaning set forth in Section 2.4(a)(3) hereof.
-------------
"Funding Account" means the non-interest bearing demand checking
---------------
account established with, maintained by, and pledged to the Lender into
which shall be deposited the proceeds of Advances and the proceeds of all
Release Prices.
"GAAP" means generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession, which are applicable to the circumstances as
of the date of determination.
"Guarantor" means, whether one or more, NAB.
---------
"Guaranty" means the Guaranty in substantially the form of Exhibit "P"
-------- -----------
hereto dated of even date herewith executed by the Guarantor.
"Home" means a detached or attached one to four family residential
----
structure and related amenities.
"Indebtedness" means and includes, without duplication, (1) all items
------------
which in accordance with GAAP, consistently applied, would be included on
the liability side of a balance sheet on the date as of which Indebtedness
is to be determined (excluding shareholders' equity), (2) Capitalized
Rentals under any Capitalized Lease, (3) guaranties, endorsements and other
contingent obligations in respect of, or any obligations to purchase or
otherwise acquire, Indebtedness of others, and (4) indebtedness secured by
any mortgage, pledge, security interest or other Lien existing on any
property owned by the Person with respect to which indebtedness is being
determined, whether or not the indebtedness secured thereby shall have been
assumed.
"Indemnified Liabilities" has the meaning set forth in Article 10
-----------------------
hereof.
"Interim Date" has the meaning set forth in Section 4.1(a)(5) hereof.
------------
Page 7
<PAGE>
"Internal Revenue Code" means the Internal Revenue Code of 1986, or
---------------------
any subsequent federal income tax law or laws, as any of the foregoing have
been or may from time to time be amended.
"Lender" has the meaning set forth in the first paragraph of this
------
Agreement.
"LIBOR Rate" means a rate of interest equal to the London Interbank
----------
Offered Rate for U. S. dollar deposits as quoted by Telerate, Bloomberg or
any other rate quoting service, selected by Lender in its sole discretion
for an interest period of one month, effective two (2) Business Days from
the date of quotation. In the event such rate ceases to be published,
LIBOR Rate shall mean a comparable rate of interest reasonably selected by
Lender.
"Lien" means any lien, mortgage, deed of trust, pledge, security
----
interest, charge or encumbrance of any kind (including any conditional sale
or other title retention agreement, any lease in the nature thereof, and
any agreement to give any security interest).
"Loan" means the revolving loan from the Lender to the Company as
----
described in Article 2 of this Agreement.
"Loan Documents" means this Agreement, the Note, the Guaranty, and
--------------
each other document, instrument or agreement executed by the Company or any
other Person in connection herewith or therewith, as any of the same may be
amended, restated, renewed or replaced from time to time.
"Loan Value" means
----------
(a) with respect to each Lot and Home to be constructed thereon
in a Residential Construction Loan, the least of: (i) the sum of the
construction costs shown in the Construction Costs Schedule delivered
to the Company with respect to such Home, which schedule shall in all
cases include the lesser of (1) the cost of the Lot to the Builder as
set forth in the purchase contract, or (2) the Appraised Value of the
Lot as set forth in the Appraisal, or (ii) eighty percent (80%) of the
Appraised Value of such Lot and Home, or (iii) eighty percent (80%) of
the purchase price for any Sold Home; or
(b) with respect to each Lot in a Residential Construction Loan
(which does not include funds for the construction of a Home on such
Lot), the lesser of: (i) one hundred percent (100%) of the actual
purchase price of the Lot as shown on the purchase contract or other
evidence satisfactory to the Company with respect to such Lot, or (ii)
eighty percent (80%) of the Appraised Value of such Lot; or
(c) with respect to each Residential A&D Loan, the lesser of (i)
eighty percent (80%) of the sum of land acquisition costs plus
development costs or (ii) eighty percent (80%) of Appraised Value of
the Residential Land; or
Page 8
<PAGE>
(d) with respect to each Lot and Home to be constructed thereon
in a Consumer Construction Loan, the lesser of: (i) the sum of the
construction costs shown in the Construction Costs Schedule delivered
to the Company with respect to such Home, which schedule shall in all
cases include the lesser of (1) the cost of the Lot to the Builder as
set forth in the purchase contract, or (2) the Appraised Value of the
Lot as set forth in the Appraisal, or (ii) eighty percent (80%) of the
Appraised Value of such Lot and Home; or
(e) with respect to each Lot in a Consumer Lot Loan (which does
not include funds for the construction of a Home on such lot), the
lesser of: (i) eighty percent (80%) of the actual purchase price of
the lot as shown on the purchase contract or other evidence
satisfactory to the Company with respect to such lot, or (ii) eighty
percent (80%) of the Appraised Value of such lot.
"Lot" means a fully developed, vacant single-family residential lot in
---
a subdivision approved by the Company, and a partially developed or
undeveloped, vacant single-family residential lot in a subdivision located
in any state and local jurisdiction that permits builders to commence
construction of a Home on such lot prior to completion of subdivision's
infrastructure including, without limitation, streets, utilities, street
lights, etc.; provided, that such builder has complied with all
governmental requirements relating to commencement of construction of such
Home prior to completion of the subdivision's infrastructure and the
completion of such development including, without limitation, securing a
bond to insure completion of such subdivision's infrastructure.
"Margin Stock" has the meaning assigned to that term in Regulations G
------------
and U of the Board of Governors of the Federal Reserve System as in effect
from time to time.
"Maximum Rate" means the maximum lawful non-usurious rate of interest
------------
(if any) that, under Applicable Law, the Lender may charge the Company on
the Advances from time to time. To the extent that the interest rate laws
of the State of Texas are applicable and unless changed in accordance with
law, the applicable rate ceiling shall be the weekly ceiling determined in
accordance with the Texas Credit Title, as amended.
"Model Home" means any Home owned by a Builder which has been fully
----------
completed, decorated and furnished to be used as a model for display to
prospective purchasers of Homes built by such Builder in the particular
approved subdivision in which such "Model Home" is located.
"Monthly Average LIBOR Rate" means the average of all LIBOR Rates
--------------------------
quoted during a given month. In the event (i) the Note is paid in full and
the Commitment is terminated prior to a month end; or (ii) the initial
Advance hereunder occurs on a date other than the first day of that month
on which LIBOR Rates are quoted, the Monthly Average LIBOR Rate shall mean,
in the case of clause (i), the average of all LIBOR Rates quoted that month
up to and including the last Business Day prior to such payment in full;
or, in the case of clause (ii), the LIBOR Rates quoted on the date of the
initial Advance through the end of that month.
Page 9
<PAGE>
"Multiemployer Plan" means a "multiemployer plan" as defined in
------------------
Section 4001(a)(3) of ERISA that is maintained for employees of the
Company or a Subsidiary of the Company.
"NAB" means NAB Asset Corporation, a Texas corporation.
---
"Non-usage Fee" has the meaning set forth in Section 2.8 hereof.
-------------
"Note" has the meaning set forth in Section 2.3 hereof.
----
"Notices" has the meaning set forth in Article 9 hereof.
-------
"Obligations" means any and all indebtedness, obligations and
-----------
liabilities of the Company to the Lender (whether now existing or hereafter
arising, voluntary or involuntary, whether or not jointly owed with others,
direct or indirect, absolute or contingent, liquidated or unliquidated, and
whether or not from time to time decreased or extinguished and later
increased, created or incurred), arising out of or related to the Loan
Documents, or any of them.
"Officer's Certificate" means a certificate executed on behalf of the
---------------------
Company by its chief financial officer, chief accounting officer, or its
treasurer or by such other officer as may be designated herein, in form and
substance satisfactory to Lender.
"Participant" has the meaning set forth in Section 12.5 hereof.
-----------
"Person" means and includes natural persons, corporations, limited
------
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
federal and state governments and agencies or regulatory authorities and
political subdivisions thereof.
"Plans" has the meaning set forth in Section 5.10 hereof.
-----
"Plans and Specifications" means, for each Home to be constructed
------------------------
under any Residential Construction Loan, the Builder's construction plans
detailing the plans and specifications, and containing architectural
drawings specifying the type and style of such Home.
"Pledged Mortgage" means any Residential Construction Loan,
----------------
Residential A&D Loan, Aged Loan, Consumer Construction Loan, or Consumer
Lot Loan included in the Collateral.
"Release Prices" means, with respect to any Residential Construction
--------------
Loan or Residential A&D Loan, the amounts due and payable by the applicable
Builder in connection with any Lot and/or Home financed under such
Residential Construction Loan or Residential A&D Loan in accordance with
the Construction Loan Agreement.
Page 10
<PAGE>
"Request for Advance" means a disbursement request summary accompanied
-------------------
by a Warehouse Loan Balance Summary, substantially in the form of Exhibits
--------
"L" and "M", respectively, attached hereto, specifying the amount of the
-----------
requested Advance, the Residential Construction Loans, Residential A&D
Loans, Consumer Construction Loans, and Consumer Lot Loans, and the
construction costs specified in the applicable Construction Costs Schedule
relating to such loans that will be funded with the proceeds of such
Advance and a request that Lender make such Advance in accordance with the
terms of this Agreement.
"Residential A&D Loan" means, with respect to any Builder, any loan
--------------------
made by the Company to such Builder in accordance with the terms of a
Construction Loan Agreement to finance the acquisition and development of
Residential Land and shall not include a commitment of loan proceeds for
construction of Homes on Lots to be located in such Residential Land.
"Residential Construction Loan" means, with respect to any Builder,
-----------------------------
any loan made by the Company to such Builder in accordance with the terms
of a Construction Loan Agreement to finance the construction of a Home or
the purchase of a Lot.
"Residential Land" means any residential land that is subject to a
----------------
final recorded subdivision plat or map and possesses all entitlements
necessary for the immediate commencement of residential development of such
land.
"RICO" means the Racketeer Influenced and Corrupt Organizations Act of
----
1970, as amended.
"Sold Home" means a Home with respect to which a Person, other than
---------
the Builder or any Affiliate of the Builder, has executed a valid and
enforceable contract for the purchase thereof (a copy of which shall have
been provided to the Company), provided that upon the recision or
cancellation of any such contract for any reason, the Home shall no longer
be a Sold Home.
"Speculative Home" means any Home that is not a Sold Home or a Model
----------------
Home.
"Subordinated Debt" shall mean all Indebtedness of the Company for
-----------------
borrowed money, which is, by its terms (which terms shall have been
approved by the Lender) or by the terms of a subordination agreement, in
form and substance satisfactory to the Lender, effectively subordinated in
right of payment to all present and future Obligations of the Company, of
every kind and character.
"Subsidiary" means any corporation, association or other business
----------
entity in which more than fifty percent (50%) of the total voting power or
shares of stock entitled to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more of the other Subsidiaries of that
Person or a combination thereof.
Page 11
<PAGE>
"Tangible Net Worth" means, with respect to any Person at any date,
------------------
the sum of the total shareholders' equity in such Person (including capital
stock, additional paid-in capital, and retained earnings, but excluding
treasury stock, if any), plus Subordinated Debt of such Person determined
on a consolidated basis; less the aggregate book value of all intangible
assets of such Person (as determined in accordance with GAAP), including
without limitation, goodwill (excluding any remaining goodwill as it
relates to initial funding of loan loss reserves), trademarks, trade names,
service marks, copyrights, patents, licenses, franchises, each to be
determined in accordance with GAAP consistent with those applied in the
preparation of the financial statements referred to in Section 5.3 hereof;
provided that, for purposes of this Agreement, there shall be excluded from
total assets, advances or loans to officers and assets pledged to secure
any liabilities not included in the Debt of such Person.
"Termination Date" means December 29, 1998, or such earlier date upon
----------------
which Lender's obligation to fund shall be terminated pursuant to the terms
of this Agreement.
"Tribunal" means any court or governmental department, commission,
--------
board, bureau, agency, or instrumentality of any state, commonwealth,
nation, territory, possession, county, parish, or municipality, whether now
or hereafter constituted and/or existing.
"UCC Financing Statement" means, collectively, one or more form
-----------------------
financing statements, executed by the Company, as debtor, in favor of
Lender, as secured party, covering the Collateral, as such financing
statements may be amended or otherwise modified from time to time.
1.2 Other Definitional Provisions.
-----------------------------
(a) Accounting terms not otherwise defined herein shall have the
meanings given the terms under GAAP.
(b) Defined terms may be used in the singular or the plural, as the
context requires.
2. THE CREDIT.
2.1 The Commitment.
--------------
(a) Subject to the terms and conditions of this Agreement and
provided no Default or Event of Default has occurred and is continuing, the
Lender agrees, from time to time during the period from the date hereof to
and including the Termination Date, to make Advances to the Company,
provided the sum of the total aggregate principal amount outstanding at any
one time of all such Advances shall not exceed SEVENTY-FIVE MILLION AND
NO/100 DOLLARS ($75,000,000.00). The obligation of the Lender to make
Advances hereunder up to such limit is hereinafter referred to as the
"Commitment." Within the Commitment, the Company may borrow, repay and
reborrow. All Advances under this Agreement shall constitute a single
indebtedness, and all of the Collateral shall be
Page 12
<PAGE>
security for the Note and for the performance of all the Obligations of the
Company to the Lender.
(b) Advances shall be used by the Company solely for the purpose of
funding or purchasing and/or funding Residential Construction Loans,
Residential A&D Loans, Consumer Construction Loans, and Consumer Lot Loans,
as specified in the Request for Advance, and none other, and shall be made
at the request of the Company in the manner hereinafter provided in Section
2.2, against the pledge of such Residential Construction Loans, Residential
A&D Loans, Consumer Construction Loans, and Consumer Lot Loans, as the case
may be, and such other collateral as is set forth in Section 3.1 hereof as
Collateral therefor. Advances shall also be subject to the following
restrictions:
(1) No Advance shall be made against a Residential Construction
Loan, a Residential A&D Loan, an Aged Loan, a Consumer Construction
Loan, or a Consumer Lot Loan that is not an Eligible Construction
Loan.
(2) The aggregate amount of all Advances against Residential
Construction Loans outstanding at any one time shall not exceed
SEVENTY-FIVE MILLION AND NO/100 DOLLARS ($75,000,000.00). The
aggregate face amount of all Residential Construction Loans in respect
of which an Advance has been made by the Lender hereunder shall not
exceed in the aggregate One Hundred Fifty Million and No/100 Dollars
($150,000,000.00).
(3) The aggregate amount of all Advances against Model Homes
under all Residential Construction Loans outstanding at any one time
shall not exceed Eleven Million Two Hundred Fifty Thousand and No/100
Dollars ($11,250,000.00). The aggregate face amount of all
Residential Construction Loans for Model Homes in respect of which an
Advance has been made by the Lender hereunder shall not exceed in the
aggregate Twenty-Two Million Five Hundred Thousand and No/100 Dollars
($22,500,000.00).
(4) The aggregate amount of all Advances against Speculative
Homes under all Residential Construction Loans outstanding at any one
time shall not exceed Thirty Million and No/100 Dollars
($30,000,000.00). The aggregate face amount of all Residential
Construction Loans for Speculative Homes in respect of which an
Advance has been made by the Lender hereunder shall not exceed in the
aggregate Sixty Million and No/100 Dollars ($60,000,000.00).
(5) The aggregate amount of all Advances against Residential A&D
Loans outstanding at any one time shall not exceed Seven Million Five
Hundred Thousand and No/100 Dollars ($7,500,000.00). The aggregate
face amount of all Residential A&D Loans in respect of which an
Advance has been made by the Lender hereunder shall not exceed in the
aggregate Fifteen Million and No/100 Dollars ($15,000,000.00).
Page 13
<PAGE>
(6) The aggregate amount of all Advances against Residential A&D
Loans, Model Loans, and Speculative Homes outstanding at any one time
shall not exceed Thirty-Seven Million Five Hundred Thousand and No/100
Dollars ($37,500,000.00). The aggregate face amount of all
Residential A&D Loans in respect of which an Advance has been made by
the Lender hereunder shall not exceed in the aggregate Seventy-Five
Million and No/100 Dollars ($75,000,000.00).
(7) The aggregate amount of all Advances against Aged Loans
outstanding at any one time shall not exceed Fifteen Million and
No/100 Dollars ($15,000,000.00). The aggregate face amount of all
Aged Loans in respect of which an Advance has been made by the Lender
hereunder shall not exceed in the aggregate Thirty Million and No/100
Dollars ($30,000,000.00).
(8) The aggregate amount of all Advances against Consumer
Construction Loans outstanding at any one time shall not exceed
SEVENTY-FIVE MILLION AND NO/100 DOLLARS ($75,000,000.00). The
aggregate face amount of all Residential Construction Loans in respect
of which an Advance has been made by the Lender hereunder shall not
exceed in the aggregate One Hundred Fifty Million and No/100 Dollars
($150,000,000.00).
(9) The aggregate amount of all Advances against Consumer Lot
Loans outstanding at any one time shall not exceed Three Million Seven
Hundred Fifty Thousand and No/100 Dollars ($3,750,000.00).
(c) No Advance shall exceed the following amounts applicable to the
type of Collateral acquired with proceeds of the Advance, determined as of
the date the Collateral is pledged to Lender:
(1) with respect to Residential Construction Loans, no Advance
shall exceed an amount equal to ninety percent (90%) of the amount of
the Construction Loan Advance under such Residential Construction Loan
to be funded from the proceeds of the Advance.
(2) with respect to Residential A&D Loans that has a loan-to-
value ratio equal to or less than 70% and a loan-to-cost ratio equal
to or less than 90%, no Advance shall exceed an amount equal to ninety
percent (90%) of the amount of the Construction Loan Advance under
such Residential A&D Loan to be funded from the proceeds of the
Advance.
(3) with respect to Residential A&D Loans that exceed the ratios
set forth in Section 2.1(c)(2) above, no Advance shall exceed an
amount equal to eighty percent (80%) of the amount of the Construction
Loan Advance under such Residential A&D Loan to be funded from the
proceeds of the Advance.
Page 14
<PAGE>
(4) with respect to Aged Loans, no Advance shall exceed an amount
equal to sixty-five percent (65%) of the amount of the Construction
Loan Advance under such Aged Loan to be funded from the proceeds of
the Advance.
(5) with respect to Consumer Lot Loans, no Advance shall exceed
an amount equal to eighty percent (80%) of the amount of the advance
made by the Company under such Consumer Lot Loan to be funded from the
proceeds of the Advance.
(6) with respect to Consumer Construction Loans, no Advance shall
exceed an amount equal to ninety percent (90%) of the amount of the
advance made by the Company under such Consumer Construction Loan to
be funded from the proceeds of the Advance.
2.2 Procedures for Obtaining Advances. The Company shall request Advances
---------------------------------
not more frequently than daily. Requests for Advances shall be made and
evidenced by a Request for Advance accompanied by a Warehouse Loan Balance
Summary Report. Provided that no Event of Default or Default exists under this
Agreement, and subject to the terms and conditions set forth herein and the
conditions precedent set forth below, Lender shall disburse, within one (1)
Business Day after receipt of a Request for Advance, the amount requested by the
Company in such Request for Advance. As a condition precedent to Lender's
obligation to make a disbursement with respect to any Request for Advance, the
Company must have (a) satisfied the terms and conditions of Section 4.2(b) below
with respect to any Additional Builder (as defined in Section 4.2(b)) and five
(5) Business Days must have passed without disapproval of such Additional
Builder and (b) delivered all of the items required by Exhibit "A" II. at least
-----------
one (1) Business Day before the funds requested under the Request for Advance
are to be disbursed by Lender.
2.3 Note. The Company's obligation to pay the principal of, and interest
----
on, all Advances made by the Lender shall be evidenced by a promissory note (the
"Note") of the Company dated as of the date hereof, in form of Exhibit "N"
-----------
hereto. The term "Note" shall include all extensions, renewals and modifications
of the Note and all substitutions therefor. All terms and provisions of the Note
are hereby incorporated herein.
2.4 Interest.
--------
(a) (1) The unpaid amount of each Advance outstanding against a
Residential Construction Loan that is not an Aged Loan shall bear
interest from the date of such Advance until paid in full, at a rate
of interest equal to the lesser of (i) the Maximum Rate, or (ii) a
floating rate of interest which is equal to 200 basis points (2.00%)
per annum over the Monthly Average LIBOR Rate.
(2) The unpaid amount of each Advance outstanding against a
Residential A&D Loan that is not an Aged Loan shall bear interest from
the date of such Advance until paid in full, at a rate of interest
equal to the lesser of (i) the Maximum Rate, or (ii) a floating rate
of interest which is equal to 225 basis points (2.25%) per annum over
the Monthly Average LIBOR Rate.
Page 15
<PAGE>
(3) The unpaid amount of each Advance outstanding against an Aged
Loan shall bear interest from the later to occur of the date such Aged
Loan became an Aged Loan hereunder or the date of such Advance until
paid in full at a rate of interest equal to the lesser of (a) the
Maximum Rate, or (b) a floating rate of interest (the "Floating Rate")
which is equal to 275 basis points (2.75%) per annum over the Monthly
Average LIBOR Rate.
(4) The unpaid amount of each Advance outstanding against a
Consumer Construction Loan and a Consumer Lot Loan shall bear interest
from the date of such Advance until paid in full, at a rate of
interest equal to the lesser of (i) the Maximum Rate, or (ii) a
floating rate of interest which is equal to 225 basis points (2.25%)
per annum over the Monthly Average LIBOR Rate.
(b) Interest shall be computed on the basis of a 360-day year and
applied to the actual number of days elapsed in each interest calculation
period and shall be payable monthly in arrears, on the first day of each
month, commencing with the first month following the date of this
Agreement, and ending on Termination Date.
(c) Obligations not paid when due (whether at stated maturity, upon
acceleration following the occurrence of an Event of Default or otherwise)
shall bear interest, from the date due until paid in full, at a rate of
interest ("Default Rate") at all times equal to the lesser of (i) four
percent (4%) per annum over the Floating Rate; or (ii) the Maximum Rate,
said interest to be payable on demand by Lender.
2.5 Principal Payments.
------------------
(a) The outstanding unpaid principal amount of all Advances shall be
payable in full upon December 29, 1998.
(b) The Company shall have the right to prepay the outstanding
Advances in whole or in part, from time to time, without premium or
penalty, subject to the Company's obligation to pay the Commitment Fee
pursuant to Section 2.9 hereof and the Non-Usage Fee pursuant to Section
2.8 hereof.
(c) The Company shall be obligated to pay to the Lender, without the
necessity of prior demand or notice from the Lender, and the Company
authorizes the Lender to charge the Funding Account or any accounts of the
Company in Lender's possession for the amount of any outstanding Advance
against a specific Residential Construction Loan, Residential A&D Loan,
Aged Loan, Consumer Construction Loan, or Consumer Lot Loan, as the case
may be, upon the earliest occurrence of any of the following events:
(1) Any Residential Construction Loan for any Sold Home and/or
Speculative Home has been included in Collateral for more than two
hundred seventy (270) days; except for any Residential Construction
Loan for any Sold Home, Speculative Home and/or Lot that continues to
be an Eligible Construction Loan at
Page 16
<PAGE>
the end of such period and in such event shall automatically be deemed
an Aged Loan;
(2) Any Residential Construction Loan for Model Homes has been
included in Collateral for more than six hundred thirty (630) days;
except for any Residential Construction Loan for any Model Home that
continues to be an Eligible Construction Loan at the end of such
period and in such event shall automatically be deemed an Aged Loan;
(3) Any Residential A&D Loan has been included in Collateral for
more than six hundred thirty (630) days; except for any such
Residential A&D Loan that continues to be an Eligible Construction
Loan at the end of such period and in such event shall automatically
be deemed an Aged Loan;
(4) Any Consumer Construction Loan or Consumer Lot Loan has been
included in Collateral for more than five hundred forty (540) days;
(5) Any Aged Loan has been included in Collateral (as an Aged
Loan) for more than one hundred eighty (180) days;
(6) Such Residential Construction Loan, Residential A&D Loan,
Aged Loan, Consumer Construction Loan, or Consumer Lot Loan is not or
ceases to be an Eligible Construction Loan; or
(7) Upon receipt by Company of payment by the Builder of such
Residential Construction Loan, Residential A&D Loan or Aged Loan in
full; or
(8) Upon receipt by Company of payment by the borrower of any
such Consumer Construction Loan or Consumer Lot Loan in full.
2.6 Expiration of Commitment. Unless extended or terminated earlier as
------------------------
permitted hereunder, the Commitment shall expire of its own term, and without
the necessity of action by the Lender, at the close of business on the
Termination Date. However, the remainder of this Agreement shall remain in full
force and effect until all amounts due on the Obligations have been paid in
full. The Lender has not made, and does not hereby make, any commitment to
renew, extend, rearrange or otherwise refinance the outstanding and unpaid
principal of the Note or accrued interest thereon. In the event, however, the
Lender from time to time renews, extends, rearranges, increases and/or otherwise
refinances any portion or all of any Obligation and any accrued interest thereon
at any time, such refinancing shall be evidenced by an appropriate promissory
note in form and substance satisfactory to the Lender and, unless otherwise
noted or modified at such time or times by the terms of such promissory note or
any agreements executed in connection therewith, any such promissory note or
notes and refinancing evidenced thereby shall be governed in all respects by the
terms of this Agreement.
2.7 Method of Making Payments. Except as otherwise specifically provided
-------------------------
herein, all payments hereunder shall be made to the Lender not later than the
close of business (Houston time)
Page 17
<PAGE>
on the date when due unless such date is a non-Business Day, in which case, such
payment shall be due on the first Business Day thereafter, and shall be made in
lawful money of the United States of America in immediately available funds.
2.8 Non-Usage Fee. At the end of each month during the term of this
-------------
Agreement (i.e., from its effective date through the Termination Date), the
----
Lender shall determine average usage of the Commitment by calculating the
arithmetic daily average of the outstanding balance of Advances in the preceding
month. The Lender shall then subtract the average usage (the "Used Portion")
from the Commitment (the result being called the "Unused Portion") and the
Company shall pay in arrears (without duplication of payment), on or before five
(5) days after the later of (a) the end of each month or (b) the Company's
receipt of the Lender's bill for such monthly period, a Non-Usage Fee equal to
0.125% per annum on the total amount of the Unused Portion of the Commitment, as
compensation to the Lender for its agreement to make the Commitment available to
the Company during that month and not as compensation for the use, forbearance
or detention of money (i.e., as a "true commitment fee" under Texas law);
----
provided that such fee shall be waived for the first two (2) calendar months
- --------
following execution of this Agreement and for any month thereafter if the Used
Portion for such month is equal to or more than sixty percent (60%) of the
Commitment. Each calculation by the Lender of the amount of any Non-Usage Fee
shall be conclusive and binding on the Company, absent manifest error.
2.9 Commitment Fee. In consideration of Lender's agreement to make
--------------
Advances available to Company under the Commitment, subject to the terms of this
Agreement, Company shall pay to Lender a commitment fee equal to $187,500.00 per
annum (the "Commitment Fee"). The Commitment Fee shall be due in four (4) equal
quarterly installments of $46,875.00 each. The first installment of $46,875.00
shall be due and payable on the execution date hereof and a like installment of
$46,875.00 shall be due and payable on April 1, 1998 and on the 1st day of each
succeeding third calendar month thereafter until the Commitment Fee has been
paid in full. The Commitment Fee shall be deemed fully earned and non refundable
upon the execution and delivery of this Agreement by the parties,
notwithstanding the Commitment is never fully funded during the term of this
Agreement.
2.10 Bailee. Lender appoints Company - and Company shall act - as its
------
bailee to (i) hold in trust for Lender (A) the original recorded Deed of Trust
or Consumer Mortgage, as the case may be, securing each Pledged Mortgage, (B) a
mortgagee interim construction loan binder insuring the Company's perfected,
first priority Lien created by that Deed of Trust or Consumer Mortgage, as the
case may be, (C) certificate of the insurance policies for each Pledged
Mortgage, and (D) to the extent not delivered to the Lender as Collateral
Documents in accordance with this Agreement, all other original documents
relating to each Pledged Mortgage, including any Construction Notes, any other
Construction Loan Documents, Construction Loan Requests, Consumer Notes,
Consumer Loan Documents, and supporting documentation, surveys, settlement
statements, and closing instructions, and (ii) deliver to Lender any of the
foregoing items as soon as reasonably practicable upon Lender's request.
3. COLLATERAL.
Page 18
<PAGE>
3.1 Security. As security for the payment of the Note and for the
--------
performance of all of the Company's Obligations hereunder, the Company hereby
assigns and transfers all right, title and interest in and to and grants a
security interest to the Lender in the following described property, whether now
owned or hereafter acquired (the "Collateral"):
(a) All Residential Construction Loans and all Residential A&D Loans,
including all Construction Notes, Construction Loan Agreements, Deeds of
Trust, and all other Construction Loan Documents evidencing and/or securing
such Residential Construction Loans and such Residential A&D Loans in
respect of which an Advance has been made by the Lender hereunder.
(b) All Consumer Construction Loans and all Consumer Lot Loans,
including all Consumer Notes, Consumer Mortgages, and all other Consumer
Loan Documents evidencing and/or securing such Consumer Construction Loans
and Consumer Lot Loans in respect of which an Advance has been made by the
Lender hereunder.
(c) All personal property, contract rights, and fees and income or
other proceeds, amounts and payments payable to the Company as compensation
or reimbursement, accounts and general intangibles of whatsoever kind
relating to the Pledged Mortgages and all other documents or instruments
relating to the Pledged Mortgages, including, without limitation, any
interest of the Company in any fire, casualty or hazard insurance policies
and any awards made by any public body or decreed by any court of competent
jurisdiction for a taking or for degradation of value in any eminent domain
proceeding as the same relate to the Pledged Mortgages.
(d) All right, title and interest of the Company in and to all escrow
accounts, documents, instruments, files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs, cards,
accounting records (including all information, records, tapes, data,
programs, discs and cards necessary or helpful in the administration of the
foregoing Collateral) and other information and data of the Company
relating to the foregoing Collateral.
(e) All cash and non-cash proceeds of the foregoing Collateral,
including all dividends, distributions and other rights in connection with,
and all additions to, modifications of and replacements for, the foregoing
Collateral, and all products and proceeds of the foregoing Collateral,
together with whatever is receivable or received when the foregoing
Collateral or proceeds thereof are sold, collected, exchanged or otherwise
disposed of, whether such disposition is voluntary or involuntary,
including, without limitation, all rights to payment with respect to any
cause of action affecting or relating to the foregoing Collateral or
proceeds thereof.
3.2 Right of Redemption from Pledge. So long as no Event of Default has
-------------------------------
occurred, the Company may redeem a Residential Construction Loan, Residential
A&D Loan, Aged Loan, Consumer Construction Loan, or Consumer Lot Loan by
notifying the Lender of its intention to redeem such Residential Construction
Loan, Residential A&D Loan, Aged Loan, Consumer Construction Loan, or Consumer
Lot Loan from pledge and by paying to the Lender, for application
Page 19
<PAGE>
to prepayment of the principal balance of the Note, an amount equal to the
amount of all Advances outstanding with respect to or relating to such
Residential Construction Loan, Residential A&D Loan, Aged Loan, Consumer
Construction Loan, or Consumer Lot Loan.
3.3 Partial Releases. All Release Prices received by the Company shall be
----------------
immediately paid to the Lender and shall be applied by the Lender as follows:
(a) first, in an amount equal to the aggregate Advances outstanding hereunder
against all Residential Construction Loans or Residential A&D Loans for which
the Release Prices were paid for application to the prepayment of the principal
balance of the Note and (b) the balance, if any, to the Company. If the Release
Price received is less than the aggregate Advances outstanding hereunder against
the applicable Residential Construction Loan or Residential A&D Loan for which
the Release Price was paid, the Company shall pay to the Lender such deficiency,
simultaneously with the payment of such Release Price. Upon payment in full of
the Advances outstanding against such Residential Construction Loan or
Residential A&D Loan, the Company is then entitled to execute partial releases
of the applicable Deed of Trust in accordance with the terms of the related
Construction Loan Documents.
3.4 Return or Release of Collateral at End of Commitment. If (a) the
----------------------------------------------------
Commitment shall have expired or been terminated, and (b) no Advances, interest
or other Obligations evidenced by the Loan Documents or due under this Agreement
shall be outstanding and unpaid, the Lender shall deliver or release all
Collateral in its possession to the Company. The receipt of the Company for any
Collateral released or delivered to the Company pursuant to any provision of
this Agreement shall be a complete and full acquittance for the Collateral so
returned, and the Lender shall thereafter be discharged from any liability or
responsibility therefor.
4. CONDITIONS PRECEDENT.
4.1 Initial Advance. The obligation of the Lender to make the initial
---------------
Advance under this Agreement is subject to the satisfaction, in the reasonable
discretion of the Lender, on or before the date thereof, of the following
conditions precedent:
(a) The Lender shall have received the following, all of which must
be satisfactory in form and content to the Lender, in its reasonable
discretion:
(1) The Loan Documents dated as of the date hereof duly executed
by the Company and the Guaranty dated as of even date herewith
executed by the Guarantor;
(2) Certified copies of the Company's articles of incorporation
and bylaws and certificates of good standing dated no less recently
than ninety (90) days prior to the date of this Agreement and a
certification from the taxing authority of the state of incorporation
stating that the Company is in good standing with said taxing
authority:
(3) An original resolution of the board of directors of the
Company, certified as of the date of this Agreement by its corporate
secretary, authorizing the execution, delivery and performance of this
Agreement and the other Loan
Page 20
<PAGE>
Documents, and all other instruments or documents to be delivered by
the Company pursuant to this Agreement;
(4) A certificate (in the form of Exhibit "H") of the Company's
-----------
corporate secretary as to the resolution of the board of directors of
the Company authorizing the execution, delivery and performance of
this Agreement and the other Loan Documents and the incumbency and
authenticity of the signatures of the officers of the Company
executing this Agreement and the other Loan Documents and each Request
for Advance and all other instruments or documents to be delivered
pursuant hereto (the Lender being entitled to rely thereon until a new
such certificate has been furnished to the Lender);
(5) Financial statements of NAB (and its Subsidiaries, on a
consolidated basis) containing a balance sheet as of December 31, 1996
(the "Statement Date") and related statements of income, changes in
stockholders' equity and cash flows for the period ended on the
Statement Date and a balance sheet as of September 30, 1997 ("Interim
Date") and related statement of income for the period ended on the
Interim Date, all prepared in accordance with GAAP applied on a basis
consistent with prior periods and in the case of the statements as of
the Statement Date, audited by independent certified public
accountants of recognized standing acceptable to the Lender;
(6) Certified copies of NAB's articles of incorporation and
bylaws and certificates of good standing dated no less recently than
ninety (90) days prior to the date of this Agreement and a
certification from the taxing authority of the state of incorporation
stating that NAB is in good standing with said taxing authority:
(7) An original resolution of the board of directors of NAB,
certified as of the date of this Agreement by its corporate secretary,
authorizing the execution, delivery and performance of the Guaranty
and all other instruments or documents to be delivered by NAB pursuant
to this Agreement;
(8) A certificate (in the form of Exhibit "I") of NAB's
-----------
corporate secretary as to the resolution of the board of directors of
NAB authorizing the execution, delivery and performance of the
Guaranty and the incumbency and authenticity of the signatures of the
officers of NAB executing the Guaranty and all other instruments or
documents to be delivered pursuant hereto (the Lender being entitled
to rely thereon until a new such certificate has been furnished to the
Lender);
(9) A favorable written opinion of counsel to the Company, dated
as of the date of this Agreement, to be in substantially the form of
Exhibit "O" hereto, and addressed to the Lender;
-----------
(10) A tax, lien and judgment search of the appropriate public
records for the Company and NAB, including a search of Uniform
Commercial Code financing
Page 21
<PAGE>
statements, which search shall not have disclosed the existence of any
prior Lien on the Collateral other than in favor of the Lender or as
permitted hereunder;
(11) Certificates of insurance of the Company's errors and
omissions insurance policy and blanket bond coverage policy, all in
form and content satisfactory to the Lender, showing compliance by the
Company as of the date of this Agreement with the related provisions
of Section 6.8 hereof and showing Lender as a joint loss payee or
containing an endorsement with a direct loss-payee feature on such
policies;
(12) Executed financing statements in recordable form covering
the Collateral and ready for filing in all jurisdictions required by
the Lender;
(13) Evidence that the Funding Account has been established and
pledged to the Lender;
(14) Evidence that the purchase and sale between the Company and
Pacific Southwest Bank covering certain Eligible Construction Loans
has been consummated.
4.2 Each Advance. The obligation of the Lender to make the initial and
------------
each subsequent Advance under this Agreement is subject to the satisfaction, in
the sole discretion of the Lender, as of the date of each such Advance, of the
following additional conditions precedent:
(a) In connection with an Advance, the Company shall have delivered
to the Lender the Request for Advance, and documents required under, and
shall have satisfied the procedures set forth in, Section 2.2 and Exhibit
-------
"A". All items delivered to the Lender or its designee shall be reasonably
---
satisfactory to the Lender in form and content, and the Lender may reject
such of them as do not meet the requirements of this Agreement.
(b) If all or a portion of a requested Advance is to be used by the
Company to fund a Construction Loan Advance under a Construction Facility
to a builder not previously approved by Lender (an "Additional Builder"),
then as a condition precedent to Lender's obligation to fund the portion of
the Advance relating to such Additional Builder, the Company must (i)
furnish to Lender a copy of the Construction Loan Agreement and the
original Construction Note endorsed as provided in Exhibit "A" I., together
-----------
with copies of any other Construction Loan Documents executed
contemporaneously with the Construction Loan Agreement as provided in
Exhibit "A" I., and (ii) give Lender no fewer than five (5) Business Days
-----------
advance written notice that the Company intends to request an Advance with
respect to each Additional Builder. In the event such five (5) day period
shall elapse without receipt of notice of disapproval from Lender, such
Additional Builder shall be deemed to be an approved Builder.
(c) Lender shall not be obligated to disburse any Advance unless all
statements made in the applicable Request for Advance are true and correct
in all material respects on
Page 22
<PAGE>
and as of the date of the requested Advance, before and after giving effect
thereto and to the applicable of the proceeds therefrom.
(d) Lender shall not be obligated to fund all or any portion of any
Advance to be used to fund any Residential Construction Loan, Residential
A&D Loan, Consumer Construction Loan, or Consumer Lot Loan unless such
Residential Construction Loan, Residential A&D Loan, Consumer Construction
Loan, or Consumer Lot Loan is an Eligible Construction Loan.
(e) The Lender shall have received evidence reasonably satisfactory
to it as to the due filing and recording in all appropriate offices of all
financing statements and other instruments as may be necessary to perfect
the security interest of the Lender in the Collateral under the Uniform
Commercial Code of Texas or other applicable law.
(f) The representations and warranties of the Company contained in
Article 5 hereof shall be accurate and complete in all material respects as
if made on and as of the date of each Advance.
(g) The Company shall have performed all agreements to be performed
by it hereunder, including without limitation, the payment of all
Commitment Fees and Non-Usage Fees when due hereunder, and, as of the date
of the requested Advance, and after giving effect to the requested Advance,
there shall exist no Default or Event of Default hereunder.
(h) The Lender shall have received from counsel for the Company, if
reasonably requested by the Lender in its reasonable discretion, an updated
opinion, in form and substance satisfactory to the Lender, addressed to the
Lender and dated as of the date of such Advance, covering such of the
matters as the Lender may reasonably request.
(i) Such additional documents, instruments, and information as Lender
or its legal counsel may require.
Acceptance of the proceeds of the requested Advance by the Company shall be
deemed a representation by the Company that all conditions set forth in this
Article 4 shall have been satisfied as of the date of such Advance.
5. REPRESENTATIONS AND WARRANTIES.
The Company hereby represents and warrants to the Lender, as of the date of
this Agreement and (unless otherwise notified in writing by the Company and
Lender, in its sole discretion, approves in writing) as of the date of each
Request for Advance and the making of each Advance, that:
5.1 Organization; Good Standing; Subsidiaries. The Company and each
-----------------------------------------
Subsidiary of the Company is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, has
the full legal power and authority to own its property and to carry on its
business as currently conducted and is duly qualified as a foreign corporation
to do
Page 23
<PAGE>
business and is in good standing in each jurisdiction in which the transaction
of its business makes such qualification necessary, except in jurisdictions, if
any, where a failure to be in good standing has no material adverse effect on
the business, operations, assets or financial condition of the Company or any
such Subsidiary. For the purposes hereof, good standing shall include
qualification for any and all licenses and payment of any and all taxes required
in the jurisdiction of its incorporation and in each jurisdiction in which the
Company transacts business. The Company has no Subsidiaries except as set forth
on Exhibit "E" hereto. Exhibit "E" sets forth with respect to each such
----------- -----------
Subsidiary, its name, address, place of incorporation, each state in which it is
qualified as a foreign corporation, and the percentage ownership of the Company
in such Subsidiary.
5.2 Authorization and Enforceability. The Company has all requisite
--------------------------------
corporate power and authority to execute, deliver, create, issue, comply and
perform this Agreement, the Note and all other Loan Documents to which the
Company is party and to make the borrowings hereunder. The execution, delivery
and performance by the Company of this Agreement, the Note and all other Loan
Documents to which the Company is party and the making of the borrowings
hereunder and thereunder, have been duly and validly authorized by all necessary
corporate action on the part of the Company (none of which actions has been
modified or rescinded, and all of which actions are in full force and effect)
and do not and will not conflict with or violate any provision of law or of the
articles of incorporation or by-laws of the Company, conflict with or result in
a breach of or constitute a default or require any consent under any contracts
to which Company is a party, or result in the creation of any Lien upon any
property or assets of the Company other than the Lien on the Collateral granted
hereunder, or result in or require the acceleration of any Indebtedness of the
Company pursuant to any agreement, instrument or indenture to which the Company
is a party or by which the Company or its property may be bound or affected.
This Agreement, the Note and all other Loan Documents contemplated hereby or
thereby constitute legal, valid, and binding obligations of the Company,
enforceable in accordance with their respective terms, except as limited by
bankruptcy, insolvency or other such laws affecting the enforcement of
creditors' rights generally and by general principles of equity.
5.3 Financial Condition. The balance sheet of NAB provided to Lender
-------------------
pursuant to Section 4.1(a)(5) hereof (and if applicable, its Subsidiaries, on a
consolidating and consolidated basis) as at the Statement Date, and the related
statements of income, changes in stockholders' equity, and cash flows for the
fiscal year ended on the Statement Date, heretofore furnished to the Lender,
fairly present the financial condition of NAB and its Subsidiaries as at the
Statement Date and the Interim Date and the results of its and their operations
for the fiscal period ended on the Statement Date and the Interim Date. NAB had,
on the Statement Date and the Interim Date, no known material liabilities,
direct or indirect, fixed or contingent, matured or unmatured, or liabilities
for taxes, long-term leases or unusual forward or long-term commitments not
disclosed by, or reserved against in, said balance sheet and related statements,
and at the present time there are no material unrealized or anticipated losses
from any loans, advances or other commitments of NAB except as heretofore
disclosed to the Lender in writing. Said financial statements were prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved. Since the Statement Date, there has been no material adverse change in
the business, operations, assets or financial condition of NAB or its
Subsidiaries, nor is NAB aware of any state of facts particular to NAB which
(with or without notice or lapse of time or both) would or could result in any
such material adverse change.
Page 24
<PAGE>
5.4 Litigation. Except as disclosed on Exhibit "F", there are no actions,
---------- -----------
claims, suits or proceedings pending, or to the knowledge of the Company,
threatened or reasonably anticipated against or affecting the Company or any
Subsidiary of the Company in any court or before any arbitrator or before any
government commission, board, bureau or other administrative agency which, if
adversely determined, may reasonably be expected to result in any material and
adverse change in the business, operations, assets or financial condition of the
Company or any of Company's Subsidiaries, as a whole.
5.5 Compliance with Laws. To the knowledge of Company, neither the Company
--------------------
nor any Subsidiary of the Company is in violation of any provision of any law,
or of any judgment, award, rule, regulation, order, decree, writ or injunction
of any court or public regulatory body or authority which might have a material
adverse effect on the business, operations, assets or financial condition of the
Company or any of Company's Subsidiaries, as a whole.
5.6 Regulations G and U. The Company is not engaged principally, or as one
-------------------
of its important activities, in the business of extending credit for the purpose
of purchasing or carrying Margin Stock, and no part of the proceeds of any
Advances made hereunder 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.
5.7 Investment Company Act. Neither the Company nor any of its
----------------------
Subsidiaries is an "investment company" or controlled by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
5.8 Agreements. Neither the Company nor any Subsidiary of the Company is a
----------
party to any agreement, instrument or indenture, or subject to any restriction,
materially and adversely affecting its business, operations, assets or financial
condition, except as disclosed in the financial statements described in Section
5.3 hereof. The Company and each Subsidiary of the Company are not in default in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any agreement, instrument, or indenture which default
could have a material adverse effect on the business, operations, properties or
financial condition of the Company as a whole. No holder of any Indebtedness of
the Company or of any of its Subsidiaries has given notice of any alleged
default thereunder or, if given, the same has been cured or will be cured by
Company within the cure period provided therein, and no liquidation or
dissolution of the Company or any of its Subsidiaries and no receivership,
insolvency, bankruptcy, reorganization or other similar proceedings relative to
the Company or any of its Subsidiaries or any of their respective properties is
pending, or to the knowledge of the Company, threatened.
5.9 Title to Properties. The Company and each Subsidiary of the Company
-------------------
has good, valid, insurable (in the case of real property) and marketable title
to all of its properties and assets (whether real or personal, tangible or
intangible) reflected on the financial statements described in Section 5.3
hereof, and all such properties and assets are free and clear of all Liens
except liens for ad valorem property taxes not yet due and payable and except as
disclosed in such financial statements and not prohibited under this Agreement.
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<PAGE>
5.10 ERISA. All plans ("Plans") of a type described in Section 3(3) of
-----
ERISA in respect of which the Company or any Subsidiary of the Company is an
"Employer," as defined in Section 3(5) of ERISA, are in substantial compliance
with ERISA, and none of such Plans is insolvent or in reorganization, has an
accumulated or waived funding deficiency within the meaning of Section 412 of
the Internal Revenue Code, and neither the Company nor any Subsidiary of the
Company has incurred any material liability (including any material contingent
liability) to or on account of any such Plan pursuant to Sections 4062, 4063,
4064, 4201 or 4204 of ERISA; and no proceedings have been instituted to
terminate any such Plan, and no condition exists which presents a material risk
to the Company or a Subsidiary of the Company of incurring a liability to or on
account of any such Plan pursuant to any of the foregoing Sections of ERISA. No
Plan or trust forming a part thereof has been terminated since December 1, 1974.
5.11 RICO. To the best of the Company's knowledge, the Company is not in
----
violation of any laws, statutes or regulations, including, without limitation,
RICO, which contain provisions which could potentially override Lender's
security interest in the Collateral.
5.12 Proper Names. The Company does not operate in any jurisdiction under
------------
a trade name, division, division name or name other than those names set forth
on Exhibit "G" attached hereto and all such names included on Exhibit "G" are
----------- -----------
utilized by the Company only in the jurisdictions listed therein.
5.13 Direct Benefit From Loans. The Company has received, or, upon the
-------------------------
execution and funding thereof, will receive (a) direct benefit from the making
and execution of this Agreement and the other Loan Documents to which it is a
party, and (b) fair and independent consideration for the entry into, and
performance of, this Agreement and the other Loan Documents to which it is a
party. Contemporaneously with the disbursements of each Advance by the Lender to
the Company, all such proceeds will be used to fund or purchase and/or fund
Residential Construction Loans, Residential A&D Loans, Consumer Construction
Loans, or Consumer Lot Loans in accordance with the applicable Request for
Advance and none other.
5.14 Loan Documents Do Not Violate Other Documents. Neither the execution
---------------------------------------------
and delivery by the Company of this Agreement or any other Loan Document to
which it is a party nor the consummation of the transactions herein and therein
contemplated, nor the performance of, or compliance with, the terms and
provisions hereof and thereof, does or will contravene, breach or conflict with
any provision of either of its articles of incorporation or by-laws, or any
applicable law, statute, rule or regulation or any judgment, decree, writ,
injunction, franchise, order or permit applicable to the Company or its assets
or properties, or does or will conflict or be inconsistent with, or does or will
result in any breach or default of, any of the terms, covenants, conditions or
provisions of, or constitute a default under, or result in the creation or
imposition of any Lien upon any of the property or assets of the Company
pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement,
or other instrument to which the Company is a party or by which the Company or
any of its property may be bound, the contravention, conflict, inconsistency,
breach or default of which will have a materially adverse effect on the
Company's condition, financial or otherwise, or affect its ability to perform,
promptly and fully, its obligations hereunder or under any of the other Loan
Documents.
Page 26
<PAGE>
5.15 Consents Not Required. Except for those consents that have already
---------------------
been obtained and delivered to Lender or required as a condition to any Advance
hereunder, no consent of any Person and no consent, license, permit, approval,
or authorization of, exemption by, or registration or declaration with, any
Tribunal is required in connection with the execution, delivery, performance,
validity, or enforceability of this Agreement or any of the Loan Documents by
the Company.
5.16 Material Fact Representations. Neither the Loan Documents nor any
-----------------------------
other agreement, document, certificate, or written statement furnished to the
Lender by or on behalf of the Company in connection with the transactions
contemplated in any of the Loan Documents contains any untrue statement of a
material fact. There are no material adverse facts or conditions relating to the
making of the Commitment, any of the Collateral, and/or the financial condition
and business of the Company known to the Company which have not been fully
disclosed in the financial statement of the Company or as otherwise disclosed,
in writing, to the Lender, it being understood that this representation is made
as of, and shall be limited to the date of this Agreement. All writings
heretofore or hereafter exhibited or delivered to the Lender by or on behalf of
the Company are and will be genuine and what they purport to be.
5.17 Place of Business. The principal place of business of the Company is
-----------------
4144 N. Central Expressway, Suite 900, Dallas, Texas 75204, and the chief
executive office of the Company and the office where it keeps its financial
books and records relating to its property and all contracts relating thereto
and all accounts arising therefrom is located at the address set forth for the
Company in Section 9 hereof.
5.18 Use of Proceeds; Business Loans. The Company will use the proceeds of
-------------------------------
the Advances made pursuant to the Commitment solely as follows, and for no other
purpose: finance the funding of Residential Construction Loans, Residential A&D
Loans, Consumer Construction Loans, and Consumer Lot Loans. All loans evidenced
by the Note are and shall be "business loans", as such term is used in the
Depository Institutions Deregulation and Monetary Control Act of 1980, as
amended, and such loans are for business or commercial purposes and not
primarily for personal, family, household or agricultural use, as such terms are
used or defined in Chapter 1D, Texas Credit Title, Regulation Z promulgated by
the Board of Governors of the Federal Reserve System, and Titles I and V of the
Consumer Credit Protection Act. The provisions of the Texas Credit Title which
regulate revolving loans and revolving triparty accounts) shall not apply to
this Agreement.
5.19 No Undisclosed Liabilities. Other than as disclosed in the financial
--------------------------
statements provided to the Lender, NAB does not have any liabilities or
Indebtedness, direct or contingent, except for Indebtedness which, in the
aggregate, do not exceed $25,000.00.
5.20 Tax Returns and Payments. All federal, state and local income,
------------------------
excise, property and other tax returns required to be filed with respect to
Company's operations and those of its Subsidiaries in any jurisdiction have been
filed on or before the due date thereof (plus any applicable extensions); all
such returns are true and correct; all taxes, assessments, fees and other
governmental charges upon the Company, and Company's Subsidiaries and upon its
property, income or franchises, which are due and payable have been paid,
including, without limitation, all FICA payments and withholding taxes, if
appropriate, other than those which are being contested in good faith by
appropriate proceedings, diligently pursued and as to which the Company has
Page 27
<PAGE>
established adequate reserves determined in accordance with GAAP, consistently
applied. The amounts reserved, as a liability for income and other taxes
payable, in the financial statements described in Section 5.3 hereof are
sufficient for payment of all unpaid federal, state and local income, excise,
property and other taxes, whether or not disputed, of the Company and its
Subsidiaries, accrued for or applicable to the period and on the dates of such
financial statements and all years and periods prior thereto and for which the
Company, and Company's Subsidiaries may be liable in their own right or as
transferee of the assets of, or as successor to, any other Person.
5.21 Subsidiaries. The Company has not issued, and does not have
------------
outstanding, any warrants, options, rights or other obligations to issue or
purchase any shares of its capital stock or other securities. The outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable. All of Company's Subsidiaries are
listed on Exhibit "E", attached hereto.
-----------
5.22 Holding Company. The Company is not a "holding company" or a
---------------
"subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
6. AFFIRMATIVE COVENANTS.
The Company hereby covenants and agrees that, so long as the Commitment is
outstanding or there remain any Obligations of the Company to be paid or
performed under this Agreement or under any other Loan Document, the Company
shall:
6.1 Payment of Note. Punctually pay or cause to be paid the principal of,
---------------
interest on and all other amounts payable hereunder and under the Note in
accordance with the terms thereof.
6.2 Financial Statements and Other Reports. Deliver to the Lender:
--------------------------------------
(a) As soon as available and in any event within thirty (30) days
after the end of each calendar month, statements of income and changes in
stockholders' equity of the Company and, if applicable, Company's
Subsidiaries, on a consolidated and consolidating basis for the immediately
preceding month, and related balance sheet as at the end of the immediately
preceding month, all in reasonable detail, prepared in accordance with GAAP
applied on a consistent basis, and certified as to the fairness of
presentation by the president and chief financial officer of the Company,
subject, however, to year-end audit adjustments.
(b) As soon as available and in any event within ninety (90) days
after the close of each fiscal year: statements of income, changes in
stockholders' equity and cash flows of the Company, and, if applicable,
Company's Subsidiaries, on a consolidated and consolidating basis for such
year, the related balance sheet as at the end of such year (setting forth
in comparative form the corresponding figures for the preceding fiscal
year), all in reasonable detail, prepared in accordance with GAAP applied
on a consistent basis throughout the periods involved, and accompanied by
an opinion in form and substance satisfactory to the Lender and prepared by
KPMG Peat Marwick, LLP, or other independent certified public accountants
of recognized standing selected by the Company and acceptable
Page 28
<PAGE>
to the Lender, as to said financial statements and a certificate signed by
the president and chief financial officer of the Company stating that said
financial statements fairly present the financial condition and results of
operations of the Company and, if applicable, Company's Subsidiaries as at
the end of, and for, such year.
(c) Together with each delivery of financial statements required in
this Section 6.2, an Officer's Certificate in substantially the form of
Exhibit "D" hereto.
-----------
(d) Reports in respect of the Pledged Mortgages, in such detail and
at such times as the Lender in its reasonable discretion may request at any
time or from time to time, to be delivered with the monthly financial
statements required in Section 6.2(a), including, without limitation,
weekly Warehouse Loan Balance Summary Reports in substantially the form of
Exhibit "L" hereto.
-----------
(e) From time to time, with reasonable promptness, such further
information regarding the business, operations, properties or financial
condition of the Company as the Lender may reasonably request.
6.3 Maintenance of Existence; Conduct of Business. Preserve and maintain
---------------------------------------------
its corporate existence in good standing and all of its rights, privileges,
licenses and franchises necessary in the normal conduct of its business; conduct
its business in an orderly and efficient manner; and make no material change in
the nature or character of its business or engage in any business in which it
was not engaged on the date of this Agreement.
6.4 Compliance with Applicable Laws. Comply with the requirements of all
-------------------------------
applicable laws, rules, regulations and orders of any governmental authority, a
breach of which could materially adversely affect its business, operations,
assets, or financial condition, except where contested in good faith and by
appropriate proceedings, and with sufficient reserves established therefor.
6.5 Inspection of Properties and Books. Permit authorized representatives
----------------------------------
of the Lender to (a) discuss the business, operations, assets and financial
condition of the Company and Company's Subsidiaries with their officers and
employees and to examine their books of account, records, reports and other
papers and make copies or extracts thereof, and (b) inspect all of the Company's
property and all related information and reports at Lender's expense, all at
such reasonable times as the Lender may request or in a manner that will not
unreasonably interfere with the Company's normal operations. The Company will
provide its accountants with a copy of this Agreement promptly after the
execution hereof and will instruct its accountants to answer candidly any and
all questions that the officers of the Lender or any authorized representatives
of the Lender may address to them in reference to the financial condition or
affairs of the Company and Company's Subsidiaries. The Company may have its
representatives in attendance at any meetings between the officers or other
representatives of the Lender and the Company accountants held in accordance
with this authorization.
6.6 Notice. Give prompt written notice to the Lender of (a) any action,
------
suit or proceeding instituted against the Company or any of its Subsidiaries in
any federal or state court or before any commission or other regulatory body
(federal, state or local, domestic or foreign) which action, suit
Page 29
<PAGE>
or proceeding has at issue in excess of One Hundred Thousand Dollars
($100,000.00), or any such proceedings threatened against the Company, or any of
Company's Subsidiaries in writing containing the details thereof, (b) the
filing, recording or assessment of any federal, state or local tax Lien against
it, or any of its assets or any of its Subsidiaries with the exception of ad
valorem taxes not yet due and payable, (c) the occurrence of any Event of
Default hereunder or the occurrence of any Default and continuation thereof for
five (5) days, and (d) any other action, event or condition of any nature of
which the Company has knowledge which may lead to or result in a material
adverse effect upon the business, operations, assets, or financial condition of
the Company or Company's Subsidiaries or which, with or without notice or lapse
of time or both, would constitute a default under any other agreement instrument
or indenture to which the Company is a party or to which the Company, its
properties or assets may be subject.
6.7 Payment of Debt, Taxes, etc.
---------------------------
Pay and perform all obligations and Indebtedness of the Company, and
cause to be paid and performed all obligations and Indebtedness of its
Subsidiaries in accordance with the terms thereof and pay and discharge or
cause to be paid and discharged all taxes, assessments and governmental charges
or levies imposed upon the Company or its Subsidiaries, or upon their respective
income, receipts or properties before the same shall become past due, as well as
all lawful claims for labor, materials and supplies or otherwise which, if
unpaid, might become a Lien or charge upon such properties or any part thereof;
provided, however, that the Company and its Subsidiaries shall not be required
- -------- -------
to pay obligation, Indebtedness, taxes, assessments or governmental charges or
levies or claims for labor, materials or supplies for which the Company or its
Subsidiaries shall have obtained an adequate bond or adequate insurance or which
are being contested in good faith and by proper proceedings which are being
reasonably and diligently pursued if such proceedings do not involve any
likelihood of the sale, forfeiture or loss of any such property or any interest
therein while such proceedings are pending, and provided further that book
reserves adequate under generally accepted accounting principles shall have been
established with respect thereto and provided further that the owing Person's
title to, and its right to use, its property is not materially adversely
affected thereby.
6.8 Insurance. Maintain (a) liability insurance and fire and other
---------
hazard insurance on its properties, with responsible insurance companies
approved by the Lender, in such amounts and against such risks as is reasonably
approved by Lender; and (b) within thirty (30) days after notice from the
Lender, obtain such additional insurance as the Lender shall reasonably require,
all at the sole expense of the Company. Certificates identifying such policies
shall be furnished to the Lender without charge upon obtaining such coverage or
any renewal of or modification to such coverage.
6.9 Other Loan Obligations. Perform all obligations under the terms of
----------------------
each loan agreement, note, mortgage, security agreement or debt instrument by
which the Company is bound or to which any of its property is subject, and
promptly notify the Lender in writing of the termination, cancellation,
reduction or non-renewal of any of its other lines of credit or financing
agreements with any other lender or any default under such lines of credit or
financing agreements if such default causes the lender of such lines of credit
or financing agreements to declare such debt due prior to stated maturity.
6.10 Use of Proceeds of Advances. Use the proceeds of each Advance solely
---------------------------
for the purpose of financing the origination, purchase, and/or funding of
Residential Construction Loans,
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<PAGE>
Residential A&D Loans, Aged Loans, Consumer Construction Loans, and Consumer Lot
Loans in accordance with the applicable Request for Advance and none other.
6.11 Cure of Defects in Loan Documents. The Company will promptly cure
---------------------------------
and cause to be promptly cured any defects in the creation, issuance, execution
and delivery of this Agreement and the other Loan Documents; and upon request of
the Lender and at the Company's expense, the Company will promptly execute and
deliver, and cause to be executed and delivered, to the Lender or its designee,
all such additional documents, agreements and/or instruments in compliance with
or in accomplishment of the covenants and agreements of this Agreement and the
other Loan Documents, and/or to create, perfect, preserve, extend and/or
maintain any and all Liens created pursuant hereto or pursuant to any other Loan
Document as valid and perfected Liens (of a priority as set forth in this
Agreement) in favor of the Lender to secure the Obligations, all as reasonably
requested from time to time by the Lender.
7. NEGATIVE COVENANTS.
The Company hereby covenants and agrees that, so long as the Commitment is
outstanding or there remain any Obligations of the Company to be paid or
performed under this Agreement or any other Loan Document, the Company shall
not, either directly or indirectly, without the prior written consent of the
Lender:
7.1 Contingent Liabilities. Assume, incur, create, guarantee, endorse,
----------------------
or otherwise become or be liable for the obligation of any Person other than the
Company except by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business.
7.2 Merger; Acquisitions. Liquidate, dissolve, consolidate or merge, or
--------------------
acquire any substantial part of the assets of another, except for transactions
involving not more than $50,000.00 each.
7.3 Debt to Tangible Net Worth Ratio. Permit the ratio of Debt to
--------------------------------
Tangible Net Worth of the Company (and its Subsidiaries, on a consolidated
basis) to exceed 10:1 computed as of the end of each calendar month.
7.4 Minimum Tangible Net Worth. Permit Tangible Net Worth of the Company
--------------------------
(and its Subsidiaries, on a consolidated basis) to be less than the sum of Ten
Million Dollars ($10,000,000.00) plus 100% of all capital contributions after
the date hereof, computed as of the end of each calendar month.
7.5 Minimum Liquidity. Permit the liquidity of the Company to be less
-----------------
than an amount reasonably determined by the Lender to be necessary to meet the
Company's funding obligations under the Pledged Mortgages.
7.6 RICO. Violate any laws, statutes or regulations, whether federal or
----
state, for which forfeiture of its properties is a potential penalty, including,
without limitations, RICO.
7.7 No Loans or Investments Except Approved Investments. Without the
---------------------------------------------------
prior written consent of Lender (which consent will not be unreasonably
withheld), make or permit to remain
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<PAGE>
outstanding any loans or advances to, or investments in, any Person (excluding
Affiliates), except that the foregoing restriction shall not apply to:
(a) investments in marketable obligations maturing no later than 180
days from the date of acquisition thereof by the Company and issued and
fully guaranteed, directly, by the full faith and credit of the Government
of the United States of America or any agency thereof; and
(b) investments in certificates of deposit maturing no later than
180 days from the date of issuance thereof and issued by commercial banks
in the United States and such banks rated by Moody's Investor Service, Inc.
and receiving a rating of Prime-2 or higher on Moody's short term debt
rating or rated by Standard & Poor's Corporation and receiving a rating of
AA-/A1+ or higher on S&P's short term debt rating, or issued by Lender, it
being acknowledged and agreed that the foregoing requirements shall pertain
to certificates of deposit issued and/or received on a date on or after the
date of this Agreement); and
(c) investments not to exceed $50,000.00 in the aggregate; and
(d) residential construction loans made by the Company in accordance
with Construction Policy and Procedures Manual or in the ordinary course of
business.
7.8 Charter Documents and Business Termination.
------------------------------------------
(a) Issue, sell or commit to issue or sell any shares of its capital
stock of any class, or other equity or investment security that would
result in a Change of Control,
(b) Amend or otherwise modify its corporate charter or otherwise
change its corporate structure in any manner which will have a materially
adverse effect on the Company's condition, financial or otherwise, or which
will have a material adverse effect upon the Company's ability to perform,
promptly and fully, its obligations hereunder or under any of the other
Loan Documents, or
(c) Take any action with a view toward its dissolution, liquidation
or termination, or, in fact, dissolve, liquidate or terminate its
existence.
7.9 Changes in Accounting Methods. Make any change in its accounting
-----------------------------
method as in effect on the date of this Agreement or change its fiscal year
ending date from December 31, unless such changes (a) are required for
conformity with generally accepted accounting principles and, in such event, the
Company will give prior written notice of each such change to the Lender or (b)
or if not so required, are in conformity with generally accepted accounting
principles and have the prior written approval of the Lender which approval
shall not be unreasonably withheld.
7.10 No Sales, Leases or Dispositions of Property. Except in the ordinary
--------------------------------------------
course of its business, the Company will not sell, lease, transfer or otherwise
dispose of all or any material portion or portions or integral part of its
properties or assets, whether now owned or hereafter acquired (whether in a
single transaction or in a series of transactions), or enter into any
arrangement, directly
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<PAGE>
or indirectly, with any person, whereby it shall sell or transfer any of its
properties or assets, whether now owned or hereafter acquired, and thereafter
rent or lease as lessee such property or any part thereof which it intends to
use for substantially the same purpose or purposes as the property sold or
transferred.
7.11 Changes in Business or Assets. Make any substantial change (a) in
-----------------------------
the nature of its business as now conducted, or (b) in the use of its property
as now used and proposed to be used.
7.12 Changes in Office or Inventory Location. Change the address and/or
---------------------------------------
location of its chief executive office or principal place of business or the
place where it keeps its books and records or its inventory to a location
outside the State of Texas unless, prior to any such change, the Company shall
execute and cause to be executed such additional agreements and/or lien
instruments as the Lender may reasonably request to conform with the provisions
hereof and the transactions and perfected Liens in the Collateral contemplated
under this Agreement and the other Loan Documents.
7.13 Special Negative Covenants Concerning Collateral.
------------------------------------------------
(a) The Company shall not amend or modify, any of the terms and
conditions of, or settle or compromise any claim in respect of, any Pledged
Mortgages in any material respect unless such amendment or modification is
in accordance with the Construction Policy and Procedures Manual.
(b) The Company shall not sell, assign, transfer or otherwise
dispose of, or grant any option with respect to, or pledge or otherwise
encumber (except pursuant to this Agreement or as permitted herein) any of
the Collateral or any interest therein.
(c) The Company shall not make any compromise, adjustment or
settlement in respect of any of the Collateral or accept other than cash in
payment or liquidation of the Collateral.
7.14 No Indebtedness. Without the prior written consent of Lender, the
---------------
Company will not incur, create, assume or guarantee or in any manner become or
be liable or permit to be outstanding any Indebtedness (including obligations
for the payment of rentals other than provided for herein) nor guarantee any
contract or other obligation, and will not in any way become or be responsible
for obligations of any Person, whether by agreement to purchase the Indebtedness
of any other Person or agreement for the furnishing of funds to any other Person
through the purchase of goods, supplies or services (or by way of stock
purchase, capital contribution, advance or loan) for the purpose of paying or
discharging the Indebtedness of any other Person or otherwise, except that the
foregoing restrictions shall not apply to:
(a) the Obligations;
(b) liabilities for taxes, assessments, governmental charges or
levies which are not yet due and payable or which are being contested in
good faith by appropriate proceedings diligently conducted if reserves
adequate under generally accepted accounting principles have been
established therefor;
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<PAGE>
(c) endorsements of negotiable instruments for collection in the
ordinary course of business;
(d) Indebtedness incurred in the ordinary course of business in
connection with normal trade or business obligations which are payable
within 90 days of the occurrence thereof, provided, however, that no
-------- -------
Indebtedness shall be incurred by the Company to any Affiliate other than
in the ordinary course of business and upon substantially the same or
better terms as it could obtain in an arm's length transaction with a
Person who is not an Affiliate.
(e) Indebtedness of less than $50,000.00, in the aggregate, incurred
in the ordinary course of business.
(f) Indebtedness incurred in the ordinary course of business for the
purpose of leasing office space or equipment to be used in the conduct of
the business of the Company.
7.15 Ownership of the Company. Permit any change in the legal or
------------------------
beneficial ownership of any capital stock, instruments convertible to same, or
other equity instruments, of the Company that would result in a Change of
Control.
8. DEFAULTS; REMEDIES.
8.1 Events of Default. The occurrence of any of the following conditions
-----------------
or events shall be an event of default ("Event of Default"):
(a) Failure to pay the principal of any Advance when due, whether at
stated maturity, by acceleration, or otherwise; or failure to pay any
installment of interest on any Advance or any other amount due under this
Agreement within ten (10) days after the due date; or failure to pay,
beyond any applicable grace period, the principal or interest on any other
indebtedness due the Lender; or
(b) Failure of the Company or any of its Subsidiaries to pay, or any
default in the payment of any principal or interest on, any other
Indebtedness or in the payment of any contingent obligation beyond any
period of grace provided; or breach or default with respect to any other
material term of any other Indebtedness of any loan agreement, mortgage,
indenture or other agreement relating thereto, if the effect of such
failure, default or breach is to cause or to permit the holder or holders
thereof (or a trustee on behalf of such holder or holders) to cause,
Indebtedness of the Company or its Subsidiaries in the aggregate amount of
One Hundred Thousand Dollars ($100,000.00) or more to become or be declared
due prior to its stated maturity (upon the giving or receiving of notice,
lapse of time, both, or otherwise); or
(c) Any of the Company's representations or warranties made or
deemed made herein or in any other Loan Document, or in any statement or
certificate at any time given
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<PAGE>
by the Company in writing pursuant hereto or thereto shall be inaccurate or
incomplete in any materially adverse respect on the date as of which made
or deemed made; or
(d) The Company shall default in the performance of or compliance with
any term or covenant contained in this Agreement and such default shall not
have been remedied or waived within thirty (30) days after receipt of
notice from the Lender of such default other than those referred to above
in Subsections 8.1(a), 8.1(b), or 8.1(c); or
(e) (1) A court having jurisdiction shall enter a decree or order for
relief in respect of the Company or any of Company's Subsidiaries in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect in respect of the Company or any of
Company's Subsidiaries, which decree or order is not stayed; or a filing of
an involuntary case under any applicable bankruptcy, insolvency or other
similar law in respect of the Company or any of Company's Subsidiaries has
occurred; or (2) any other similar relief shall be granted under any
applicable federal or state law; or a decree or order of a court having
jurisdiction for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over the Company
or any of Company's Subsidiaries, or over all or a substantial part of
their respective property, shall have been entered; or the involuntary
appointment of an interim receiver, trustee or other custodian of the
Company or any of Company's Subsidiaries, for all or a substantial part of
their respective property; or the issuance of a warrant of attachment,
execution or similar process against any substantial part of the property
of the Company or any of Company's Subsidiaries, and the continuance of any
such events in Subsections (1) and (2) above for sixty (60) days unless
dismissed or discharged; or
(f) The Company or any of Company's Subsidiaries shall have an order
for relief entered with respect to it or commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or shall consent to the entry of an order for relief in an
involuntary case, or to the conversion to an involuntary case, under any
such law, or shall consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of its
property; the making by the Company or any of Company's Subsidiaries of any
assignment for the benefit of creditors; or the failure of the Company or
any of Company's Subsidiaries, or the admission by any of them of its
inability, to pay its debts as such debts become due; or
(g) To the extent not covered by applicable insurance, any money
judgment, writ or warrant of attachment, or similar process involving in
any case an amount in excess of One Hundred Thousand Dollars ($100,000.00)
shall be entered or filed against the Company or any of its Subsidiaries or
any of their respective assets and shall remain undischarged, unvacated,
unbonded or unstayed for a period of thirty (30) days or in any event no
later than five (5) days prior to the date of any proposed sale thereunder;
or
(h) Any order, judgment or decree shall be entered against the Company
decreeing the dissolution or split up of the Company and such order shall
remain undischarged or unstayed for a period in excess of twenty (20) days;
or
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<PAGE>
(i) Any Plan maintained by the Company or any of Company's
Subsidiaries shall be terminated within the meaning of Title IV of ERISA or
a trustee shall be appointed by an appropriate United States district court
to administer any Plan, or the Pension Benefit Guaranty Corporation (or any
successor thereto) shall institute proceedings to terminate any Plan or to
appoint a trustee to administer any Plan if as of the date thereof the
Company's or any Subsidiary's liability (after giving effect to the tax
consequences thereof) to the Pension Benefit Guaranty Corporation (or any
successor thereto) for unfunded guaranteed vested benefits under the Plan
exceeds the then current value of assets accumulated in such Plan by more
than Fifty Thousand Dollars ($50,000.00) (or in the case of a termination
involving the Company or any of Company's Subsidiaries as a "substantial
employer" (as defined in Section 4001(a)(2) of ERISA) the withdrawing
employer's proportionate share of such excess shall exceed such amount); or
(j) The Company or any of Company's Subsidiaries as employer under a
Multiemployer Plan shall have made a complete or partial withdrawal from
such Multiemployer Plan and the plan sponsor of such Multiemployer Plan
shall have notified such withdrawing employer that such employer has
incurred a withdrawal liability in an annual amount exceeding Fifty
Thousand Dollars ($50,000.00); or
(k) The Company shall purport to disavow its obligations hereunder or
shall contest the validity or enforceability hereof, or the Lender's
security interest on any portion of the Collateral shall become
unenforceable or otherwise impaired; provided that, subject to the Lender's
approval, no Event of Default shall occur as a result of such impairment if
all Advances made against any such Collateral shall be paid in full within
ten (10) days of the date of such impairment; or
(l) The Company dissolves or terminates its existence, or discontinues
its usual business; or
(m) Any court shall find or rule, or the Company shall assert or
claim, (i) that the Lender does not have a valid, perfected, enforceable
Lien and security interest in the Collateral of the priority as represented
in this Agreement or in any other Loan Document, or (ii) that this
Agreement or any of the Loan Documents does not or will not constitute the
legal, valid, binding and enforceable obligations of the party or parties
(as applicable) thereto, or (iii) that any Person has a conflicting or
adverse Lien, claim or right in, or with respect to, the Collateral and the
Company is unable within 10 days to have such finding or ruling reversed or
to have such adverse Lien, claim or right removed; or
(n) The Company shall have concealed, removed, or permitted to be
concealed or removed, any part of its property, with intent to hinder,
delay or defraud its creditors or any of them, or made or suffered a
transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law; or shall have made any
transfer of its property to or for the benefit of a creditor at a time when
other creditors similarly situated have not been paid; or shall have
suffered or permitted, while insolvent, any creditor to obtain a Lien upon
any of its property through legal proceedings or distraint or other process
which is not vacated within 60 days from the date thereof; or
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<PAGE>
(o) There shall be a material adverse change in the financial
condition, business or operations of the Company; or
(p) A Change of Control occurs.
8.2 Remedies.
--------
(a) Upon the occurrence of any Event of Default described in Sections
8.1(e) or 8.1(f), the Commitment shall be terminated and all Obligations of
the Company shall automatically become due and payable, without presentment
for payment, demand, notice of non-payment, protest, notice of protest,
notice of intent to accelerate, notice of acceleration, maturity, or any
other notices or requirements of any kind of Lender to the Company or any
other Person liable thereon or with respect thereto, all of which are
hereby expressly waived by the Company.
(b) Upon the occurrence of any Event of Default, other than those
described in Sections 8.1(e) or 8.1(f), the Lender may, by written notice
to the Company, terminate the Commitment and/or declare all Obligations of
the Company to be immediately due and payable, whereupon the same shall
forthwith become due and payable, together with all accrued and unpaid
interest thereon, and the obligation of the Lender to make any Advances
shall thereupon terminate.
(c) Upon the occurrence of any Event of Default, the Lender may also
do any of the following:
(1) Foreclose upon or otherwise enforce its security interest in
and Lien on the Collateral to secure all payments and performance of
Obligations of the Company in any manner permitted by law or provided
for hereunder.
(2) Notify all obligors in respect of the Collateral that the
Collateral has been assigned to the Lender and that all payments
thereon are to be made directly to the Lender or such other party as
may be designated by the Lender; settle, compromise, or release, in
whole or in part, any amounts owing on the Collateral, any such
obligor or any portion of the Collateral, on terms acceptable to the
Lender; enforce payment and prosecute any action or proceeding with
respect to any and all Collateral; and where any such Collateral is in
default, foreclose on and enforce security interests in, such
Collateral by any available judicial procedure or without judicial
process and sell property acquired as a result of any such
foreclosure.
(3) Require the Company to assemble the Collateral and/or books
and records relating thereto and make such available to the Lender at
a place to be designated by the Lender.
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<PAGE>
(4) Enter onto property where any Collateral or books and records
relating thereto are located and take possession thereof with or
without judicial process.
(5) Prior to the disposition of the Collateral, prepare it for
disposition in any manner and to the extent the Lender deems
appropriate.
(6) Exercise all rights and remedies of a secured creditor under
the Uniform Commercial Code of Texas or other applicable law,
including, but not limited to, selling or otherwise disposing of the
Collateral, or any part thereof, at one or more public or private
sales, whether or not such Collateral is present at the place of sale,
for cash or credit or future delivery, on such terms and in such
manner as the Lender may determine. If notice is required under such
applicable law, the Lender will give the Company not less than ten
(10) days' notice of any such public sale or of the date after which
private sale may be held. The Company agrees that ten (10) days'
notice shall be reasonable notice. The Lender may, without notice or
publication, adjourn any public or private sale or cause the same to
be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to
which the same may be so adjourned. In case of any sale of all or any
part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Lender until the selling
price is paid by the purchaser thereof, but the Lender shall not incur
any liability in case of the failure of such purchaser to take up and
pay for the Collateral so sold and, in case of any such failure, such
Collateral may again be sold upon like notice. The Lender may,
however, instead of exercising the power of sale herein conferred upon
it, proceed by a suit or suits at law or in equity to collect all
amounts due upon the Collateral or to foreclose the pledge and sell
the Collateral or any portion thereof under a judgment or decree of a
court or courts of competent jurisdiction, or both.
(7) Proceed against the Company on the Note.
(8) Proceed against the Guarantor.
(9) Exercise any and all other rights, remedies, privileges, and
recourses granted under the Loan Documents or now or hereafter
existing in equity, at law, by virtue of statute, or otherwise.
(d) The Lender shall incur no liability as a result of the sale or
other disposition of the Collateral, or any part thereof, at any public or
private sale or disposition. The Company hereby waives (to the extent
permitted by law) any claims it may have against the Lender arising by
reason of the fact that the price at which the Collateral may have been
sold at such private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the
outstanding Advances and the unpaid interest accrued thereon, even if the
Lender accepts the first offer received and does not offer the Collateral
to more than one offeree and none of the actions described herein shall
render Lender's disposition of the Collateral in such a manner as
commercially unreasonable.
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<PAGE>
(e) The Company specifically waives (to the extent permitted by law)
any equity or right of redemption, all rights of redemption, stay or
appraisal which the Company has or may have under any rule of law or
statute now existing or hereafter adopted, and any right to require the
Lender to (1) proceed against any Person, (2) proceed against or exhaust
any of the Collateral or pursue its rights and remedies as against the
Collateral in any particular order, or (3) pursue any other remedy in its
power. The Lender shall not be required to take any steps necessary to
preserve any rights of the Company against holders of mortgages prior in
lien to the Lien of any Deed of Trust included in the Collateral or to
preserve rights against prior parties.
(f) The Lender may, but shall not be obligated to, advance any sums or
do any act or thing necessary to uphold and enforce the Lien and priority
of, or the security intended to be afforded by, any Deed of Trust included
in the Collateral, including, without limitation, payment of delinquent
taxes or assessments and insurance premiums. All advances, charges, costs
and expenses, including reasonable attorneys' fees and disbursements,
incurred or paid by the Lender in exercising any right, power or remedy
conferred by this Agreement, or in the enforcement hereof, together with
interest thereon, at the Default Rate, from the time of payment until
repaid, shall become a part of the principal balance outstanding hereunder
and under the Note.
(g) No failure on the part of the Lender to exercise, and no delay in
exercising, any right, power or remedy provided hereunder, at law or in
equity shall operate as a waiver thereof; nor shall any single or partial
exercise by the Lender of any right, power or remedy provided hereunder, at
law or in equity preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. Without intending to limit
the foregoing, all defenses based on the statute of limitations are hereby
waived by the Company to the extent permitted by law. The remedies herein
provided are cumulative and are not exclusive of any remedies provided at
law or in equity.
8.3 Application of Proceeds. The proceeds of any sale, disposition or
-----------------------
other enforcement of the Lender's security interest in all or any part of the
Collateral shall be applied by the Lender:
First, to the payment of the costs and expenses of such sale or
-----
enforcement, including reasonable compensation to the Lender's agents and
counsel, and all expenses, liabilities and advances made or incurred by or
on behalf of the Lender in connection therewith;
Second, to the payment of any other amounts due (other than principal
------
and interest) under the Note or this Agreement;
Third, to the payment of interest accrued and unpaid on the Note;
-----
Fourth, to the payment of the outstanding principal balance of the
------
Note; and
Finally, to the payment to the Company, or to 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>
If the proceeds of any such sale, disposition or other enforcement are
insufficient to cover the costs and expenses of such sale, as aforesaid, and the
payment in full of all Obligations of the Company, the Company shall remain
liable for any deficiency.
8.4 Lender Appointed Attorney-in-Fact. The Lender is hereby appointed the
---------------------------------
attorney-in-fact of the Company, with full power of substitution, for the
purpose of carrying out the provisions hereof and taking any action and
executing any instruments which the Lender may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest so long as any part of the Obligations
remains outstanding. Lender agrees it will not exercise any power or authority
granted in connection with its appointment as the Company's attorney-in-fact
unless and until an occurrence of a Default. Without limiting the generality of
the foregoing, the Lender shall have the right and power to give notices of its
security interest in the Collateral to any Person, either in the name of the
Company or in its own name, to endorse all Pledged Mortgages payable to the
order of the Company, or to receive, endorse and collect all checks made payable
to the order of the Company representing any payment on account of the principal
of or interest on, or the proceeds of sale of, any of the Pledged Mortgages and
to give full discharge for the same.
8.5 Right of Set-Off. If the Company shall default in the payment of the
----------------
Note, any interest accrued thereon, or any other sums which may become payable
hereunder when due, or in the performance of any of its other Obligations under
this Agreement, the Lender, shall have the right, at any time and from time to
time, after expiration of any applicable grace period, without notice, to set-
off and to appropriate or apply any and all property or indebtedness of any kind
at any time held or owing by the Lender to or for the credit of the account of
the Company against and on account of the Obligations, irrespective of whether
or not the Lender shall have made any demand hereunder and whether or not said
Obligations shall have matured; provided, however, that the Lender shall not be
-------- -------
allowed to set-off against funds in accounts with respect to which (i) the
Company is a trustee or an escrow agent in respect of bona fide third parties
other than Affiliates, (ii) such trust or escrow arrangement was so denominated
at the time of the creation of such account, and (iii) another party has a valid
security interest approved by Lender.
9. NOTICES.
All notices, demands, consents, requests and other communications required
or permitted to be given or made hereunder (collectively, "Notices") shall,
except as otherwise expressly provided hereunder, be in writing and shall be
delivered in person or mailed, first class, return receipt requested, postage
prepaid, or delivered by overnight courier, addressed to the respective parties
hereto at their respective addresses hereinafter set forth or, as to any such
party, at such other address as may be designated by it in a Notice to the other
or by fax transmitted to the respective parties hereto at their respective fax
numbers hereinafter set forth or to any such party at such other fax number as
may be designated by it in a Notice to the others. All Notices shall be
conclusively deemed to have been properly given or made when duly delivered, in
person or by overnight courier, or if mailed on the third Business Day after
being deposited in the mails, addressed to the respective parties hereto at
their respective addresses set forth below or if by fax, when transmitted to the
appropriate fax number, but, without affecting the date deemed given, the fax
must be promptly confirmed by telephone:
Page 40
<PAGE>
If to the Company: Construction Portfolio Funding, Inc.
Attn: Darcey Carter, Executive Vice President
4144 N. Central Expressway, Suite 900
Dallas, Texas 75204
Fax No.: (214) 841-8886
with a copy to: NAB Asset
Attn: Alan Ferree, Senior Vice President/
Chief Financial Officer
2 Ada, Suite 100
Irvine, California 92618
Fax No.: (714) 790-8010
If to the Lender: Bank United
Attn: Deborah A. Bourque
Vice President, Mortgage Banker Financing
3200 Southwest Freeway, Suite 1325
Houston, Texas 77027
Phone No.: (713) 543-6397
with a copy to: Bank United
Attn: Frank Hattemer
Managing Director, Mortgage Banker Financing
3200 Southwest Freeway, Suite 1300
Houston, Texas 77027
Fax No.: (713) 543-6022
and: Bank United
Attn: Jonathon K. Heffron, General Counsel
3200 Southwest Freeway, Suite 1600
Houston, Texas 77027
Fax No.: (713) 543-6469
10. REIMBURSEMENT OF EXPENSES; INDEMNITY.
The Company shall: (a) pay all out-of-pocket costs and expenses of the
Lender, including, without limitation, reasonable attorneys' fees, in connection
with the preparation, negotiation, documentation, enforcement and administration
of this Agreement, the Note, and other Loan Documents and the making and
repayment of the Advances and the payment of interest thereon; (b) pay, and hold
the Lender and any holder of the Note harmless from and against, any and all
present and future stamp, documentary and other similar taxes with respect to
the foregoing matters and save the Lender and the holder or holders of the Note
harmless from and against any and all liabilities with respect to or resulting
from any delay or omission to pay such taxes; (c) INDEMNIFY, PAY AND HOLD
HARMLESS THE LENDER AND ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS AND
ANY SUBSEQUENT HOLDER OF THE NOTE FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS,
Page 41
<PAGE>
LOSSES, DAMAGES, PENALTIES, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS
OF ANY KIND WHATSOEVER (THE "INDEMNIFIED LIABILITIES") (INCLUDING, WITHOUT
LIMITATION, INDEMNIFIED LIABILITIES RESULTING, IN WHOLE OR IN PART, FROM
LENDER'S OWN NEGLIGENCE OR STRICT LIABILITY) WHICH MAY BE IMPOSED UPON, INCURRED
BY OR ASSERTED AGAINST THE LENDER OR SUCH HOLDER IN ANY WAY RELATING TO OR
ARISING OUT OF THIS AGREEMENT, THE NOTE, OR ANY OTHER LOAN DOCUMENT OR ANY OF
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY TO THE EXTENT THAT ANY SUCH
INDEMNIFIED LIABILITIES RESULT (DIRECTLY OR INDIRECTLY) FROM ANY CLAIMS MADE, OR
ANY ACTIONS, SUITS OR PROCEEDINGS COMMENCED OR THREATENED, BY OR ON BEHALF OF
ANY CREDITOR (EXCLUDING THE LENDER AND THE HOLDER OR HOLDERS OF THE NOTE),
SECURITY HOLDER, SHAREHOLDER, CUSTOMER (INCLUDING, WITHOUT LIMITATION, ANY
PERSON HAVING ANY DEALINGS OF ANY KIND WITH THE COMPANY), TRUSTEE, DIRECTOR,
OFFICER, EMPLOYEE AND/OR AGENT OF THE COMPANY ACTING IN SUCH CAPACITY, THE
COMPANY OR ANY GOVERNMENTAL REGULATORY BODY OR AUTHORITY. THE FOREGOING
INDEMNITY SHALL NOT APPLY TO THE EXTENT THE INDEMNIFIED LIABILITIES RESULT FROM
THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LENDER OR LENDER'S OWN
VIOLATIONS OF REGULATIONS APPLICABLE TO IT. THE AGREEMENT OF THE COMPANY
CONTAINED IN THIS SUBSECTION (C) SHALL SURVIVE THE EXPIRATION OR TERMINATION OF
THIS AGREEMENT AND THE PAYMENT IN FULL OF THE NOTE. REASONABLE ATTORNEYS' FEES
AND DISBURSEMENTS INCURRED IN ENFORCING, OR ON APPEAL FROM, A JUDGMENT PURSUANT
HERETO SHALL BE RECOVERABLE SEPARATELY FROM AND IN ADDITION TO ANY OTHER AMOUNT
INCLUDED IN SUCH JUDGMENT, AND THIS CLAUSE IS INTENDED TO BE SEVERABLE FROM THE
OTHER PROVISIONS OF THIS AGREEMENT AND TO SURVIVE AND NOT BE MERGED INTO SUCH
JUDGMENT.
11. FINANCIAL INFORMATION.
Unless otherwise noted, all financial statements and reports furnished to
the Lender hereunder shall be prepared in accordance with GAAP, applied on a
basis consistent with that applied in preparing the financial statements as at,
and for the period ended, the Statement Date (except to the extent otherwise
required to conform to good accounting practice).
12. MISCELLANEOUS.
12.1 Terms Binding Upon Successors; Survival of Representations. The
----------------------------------------------------------
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns. All
representations, warranties, covenants and agreements herein contained on the
part of the Company shall survive the making of any Advance and the execution of
the Note, and shall be effective so long as the Commitment is outstanding
hereunder
Page 42
<PAGE>
or there remain any Obligations of the Company hereunder or under the Note to be
paid or performed.
12.2 Assignment. This Agreement may not be assigned by the Company. The
----------
Lender may assign, at any time, in whole or in part, its rights and delegate its
obligations under this Agreement and the other Loan Documents, along with the
Lender's security interest in any or all of the Collateral, and any assignee
thereof may enforce this Agreement and the other Loan Documents, and such
security interest. If any assignment occurs, the Company will execute and
deliver to the Lender and its assignees such documents, instruments, and
agreements necessary to effectuate such assignments including, without
limitation, issuing new promissory notes to the assignees and the Lender.
12.3 Amendments. Except as otherwise provided in this Agreement, this
----------
Agreement may not be amended, modified or supplemented unless such amendment,
modification or supplement is set forth in a writing signed by the parties
hereto.
12.4 Governing Law. This Agreement and the other Loan Documents shall be
-------------
governed by the laws of the State of Texas, without reference to its principles
of conflicts of laws.
12.5 Participations. The Lender may at any time sell, assign or grant
--------------
participations in, or otherwise transfer to any other Person (a "Participant"),
all or part of the Obligations of the Company under this Agreement. Without
limitation of the exclusive right of the Lender to collect and enforce such
Obligations, the Company agrees that each disposition will give rise to a
debtor-creditor relationship of the Company to the Participant, and the Company
authorizes each Participant, upon the occurrence of an Event of Default, to
proceed directly by right of setoff, banker's lien, or otherwise, against any
assets of the Company which may be in the hands of such Participant. The Company
authorizes the Lender to disclose to any prospective Participant and any
Participant any and all information in the Lender's possession concerning the
Company, this Agreement and the Collateral.
12.6 Relationship of the Parties. This Agreement provides for the making
---------------------------
of Advances by the Lender, in its capacity as a lender, to the Company, in its
capacity as a borrower, and for the payment of interest, repayment of principal
by the Company to the Lender, and for the payment of certain fees by the Company
to the Lender. The relationship between the Lender and the Company is limited to
that of creditor/secured party, on the one hand, and debtor, on the other hand.
The provisions herein for compliance with financial covenants and delivery of
financial statements are intended solely for the benefit of the Lender to
protect its interests as lender in assuring payments of interest and repayment
of principal and payment of certain fees, and nothing contained in this
Agreement shall be construed as permitting or obligating the Lender to act as a
financial or business advisor or consultant to the Company, as permitting or
obligating the Lender to control the Company or to conduct the Company's
operations, as creating any fiduciary obligation on the part of the Lender to
the Company, or as creating any joint venture, agency, or other relationship
between the parties hereto other than as explicitly and specifically stated in
this Agreement. The Company acknowledges that it has had the opportunity to
obtain the advice of experienced counsel of its own choosing in connection with
the negotiation and execution of this Agreement and to obtain the advice of such
counsel with respect to all matters contained herein, including, without
limitation, the
Page 43
<PAGE>
provision for waiver of trial by jury. The Company further acknowledges that it
is experienced with respect to financial and credit matters and has made its own
independent decisions to apply to the Lender for credit and to execute and
deliver this Agreement.
12.7 Severability. If any provision of this Agreement shall be declared
------------
to be illegal or unenforceable in any respect, such illegal or unenforceable
provision shall be and become absolutely null and void and of no force and
effect as though such provision were not in fact set forth herein, but all other
covenants, terms, conditions and provisions hereof shall nevertheless continue
to be valid and enforceable.
12.8 Usury. It is the intent of Lender and the Company in the execution
-----
and performance of this Agreement and the Note or any Loan Document to remain in
strict compliance with Applicable Law from time to time in effect. In
furtherance thereof, Lender and the Company stipulate and agree that none of the
terms and provisions contained in the Note, this Agreement or any Loan Document
shall ever be construed to create a contract to pay for the use, forbearance or
detention of money with interest at a rate or in an amount in excess of the
Maximum Rate or amount of interest permitted to be charged under Applicable Law.
For purposes of this Agreement, the Note and any other Loan Document, "interest"
shall include the aggregate of all charges which constitute interest under
Applicable Law that are contracted for, taken, charged, reserved, or received
under this Agreement, the Note or any other Loan Document. The Company shall
never be required to pay unearned interest or interest at a rate or in an amount
in excess of the Maximum Rate or amount of interest that may be lawfully charged
under Applicable Law, and the provisions of this paragraph shall control over
all other provisions of this Agreement and the Note or any Loan Document, which
may be in actual or apparent conflict herewith. If the Note is prepaid, or if
the maturity of the Note is accelerated for any reason, or if under any other
contingency the effective rate or amount of interest which would otherwise be
payable under the Note would exceed the Maximum Rate or amount of interest
Lender or any other holder of the Note is allowed by Applicable Law to charge,
contract for, take, reserve or receive, or in the event Lender or any holder of
the Note shall charge, contract for, take, reserve or receive monies that are
deemed to constitute interest which would, in the absence of this provision,
increase the effective rate or amount of interest payable under the Note to a
rate or amount in excess of that permitted to be charged, contracted for, taken,
reserved or received under Applicable Law then in effect, then the principal
amount of the Note or the amount of interest which would otherwise be payable
under the Note or both shall be reduced to the amount allowed under Applicable
Law as now or hereinafter construed by the courts having jurisdiction, and all
such moneys so charged, contracted for, taken, reserved or received that are
deemed to constitute interest in excess of the Maximum Rate or amount of
interest permitted by Applicable Law shall immediately be returned to or
credited to the account of the Company upon such determination. Lender and the
Company further stipulate and agree that, without limitation of the foregoing,
all calculations of the rate or amount of interest contracted for, charged,
taken, reserved or received under the Note which are made for the purpose of
determining whether such rate or amount exceeds the Maximum Rate, shall be made
to the extent not prohibited by Applicable Law, by amortizing, prorating,
allocating and spreading during the period of the full stated term of the Note,
all interest at any time contracted for, charged, taken, reserved or received
from the Company or otherwise by Lender or any other holder of the Note.
Page 44
<PAGE>
12.9 Consent to Jurisdiction. Subject to the provisions of Section 12.10
-----------------------
of this Agreement, the Company hereby agrees that any action or proceeding under
this Agreement, the Note or any document delivered pursuant hereto may be
commenced against it in any court of competent jurisdiction within the State of
Texas, by service of process upon the Company by first class registered or
certified mail, return receipt requested, addressed to the Company at its
address last known to the Lender. The Company agrees that any such suit, action
or proceeding arising out of or relating to this Agreement or any other such
document may be instituted in Harris County, State District Court or in the
United States District Court for the District of Texas at the option of the
Lender; and the Company hereby waives any objection to the venue, or any claim
as to inconvenient forum, of any such suit, action or proceeding. Nothing herein
shall affect the right of the Lender to accomplish service of process in any
other manner permitted by law or to commence legal proceedings or otherwise
proceed against the Company in any other jurisdiction or court.
12.10 Arbitration. To the maximum extent not prohibited by law, any
-----------
controversy, dispute or claim arising out of, in connection with, or relating to
the Commitment 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 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"). If Title 9 of the United States Code is inapplicable to any such claim,
dispute or controversy for any reason, such arbitration shall be conducted
pursuant to the Texas General Arbitration Act and in accordance with the
Commercial Arbitration Rules of the AAA. In any such arbitration proceeding: (i)
all statutes of limitations which would otherwise be applicable shall apply; and
(ii) the proceeding shall be conducted in Houston, Texas, by a single
arbitrator, if the amount in controversy is $1,000,000.00 or less, or by a panel
of three 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 shall be either an active attorney, a mortgage banker or retired
judge with an AAA acknowledged expertise in the subject matter of the
controversy, dispute or claim. 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.
If any party to any Loan Document 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.
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) any Loan Document, (iii) enter judgment on the
debt, (iv) exercise equitable powers or issue or enter any equitable remedies
with respect to matters submitted to arbitration, or (v) allow discovery of
attorney/client privileged information. The Commercial Arbitration Rules of the
AAA are hereby modified to this extent for
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<PAGE>
the purpose of arbitration of any dispute, controversy or claim arising out of,
in connection with, or relating to the Loan or any Loan Document. The parties
hereby further agree to waive, each to the other, any claims for punitive
damages and agree neither an arbitrator nor any court shall have the power to
assess such damages.
No provision of, or the exercise of any rights under, this Section shall
limit or impair the right of any party to any Loan Document before, during or
after any arbitration proceeding to: (i) exercise self-help remedies such as
setoff or repossession; (ii) foreclose (judicially or otherwise) any Lien on or
security interest in any real or personal 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
any Loan Document. 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.
12.11 ADDITIONAL INDEMNITY. IN ADDITION TO THE INDEMNITY PROVIDED IN
--------------------
SECTION 10, THE COMPANY SHALL INDEMNIFY AND HOLD THE LENDER, ITS SUCCESSORS,
ASSIGNS, AGENTS, AND EMPLOYEES, HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS,
ACTIONS, SUITS, PROCEEDINGS, COSTS, EXPENSES, DAMAGES, FINES, PENALTIES, AND
LIABILITIES, INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND COSTS, ARISING
OUT OF, CONNECTED WITH, OR RESULTING FROM (A) THE OPERATION OF THE COMPANY'S
BUSINESSES, (B) THE LENDER'S PRESERVATION OR ATTEMPTED PRESERVATION OF
COLLATERAL, AND (C) ANY FAILURE OF THE SECURITY INTERESTS AND LIENS IN THE
COLLATERAL GRANTED TO THE LENDER PURSUANT TO THIS AGREEMENT TO BE OR TO REMAIN
PERFECTED OR TO HAVE THE PRIORITY AS CONTEMPLATED THEREIN REGARDLESS OF WHETHER
THE CLAIM IS CAUSED BY OR ARISES OUT OF, IN WHOLE OR IN PART, THE NEGLIGENCE OF
THE LENDER OR MAY BE BASED ON THE STRICT LIABILITY OF THE LENDER. THIS INDEMNITY
SHALL NOT APPLY TO THE EXTENT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR
ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LENDER. AT THE
LENDER'S REQUEST, THE COMPANY SHALL, AT ITS OWN COST AND EXPENSE, DEFEND OR
CAUSE TO BE DEFENDED ANY AND ALL SUCH ACTIONS OR SUITS THAT MAY BE BROUGHT
AGAINST THE LENDER AND, IN ANY EVENT, SHALL SATISFY, PAY, AND DISCHARGE ANY AND
ALL JUDGMENTS, AWARDS, PENALTIES, COSTS, AND FINES THAT MAY BE RECOVERED AGAINST
THE LENDER IN ANY SUCH ACTION, PLUS ALL ATTORNEYS' FEES AND COSTS RELATED
THERETO TO THE EXTENT PERMITTED BY APPLICABLE LAW; PROVIDED, HOWEVER, THAT THE
LENDER SHALL GIVE THE COMPANY (TO THE EXTENT THE LENDER SEEKS INDEMNIFICATION
THEREFOR FROM THE COMPANY UNDER THIS SECTION 12.11) WRITTEN NOTICE OF ANY SUCH
CLAIM, DEMAND, OR SUIT AFTER THE LENDER HAS RECEIVED WRITTEN NOTICE THEREOF, AND
THE LENDER SHALL NOT SETTLE ANY SUCH CLAIM, DEMAND, OR SUIT, IF THE LENDER SEEKS
INDEMNIFICATION THEREFOR FROM THE COMPANY, WITHOUT FIRST GIVING NOTICE TO THE
COMPANY OF
Page 46
<PAGE>
THE LENDER'S DESIRE TO SETTLE AND OBTAINING THE CONSENT OF THE COMPANY TO THE
SAME, WHICH CONSENT THE COMPANY HEREBY AGREES NOT TO UNREASONABLY WITHHOLD. ALL
OBLIGATIONS OF THE COMPANY UNDER THIS SECTION 12.11 SHALL SURVIVE THE PAYMENT OF
THE NOTE AND THE OBLIGATIONS.
12.12 No Waivers Except in Writing. No failure or delay on the part of
----------------------------
the Lender in exercising any power or right hereunder or under any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. No notice to or demand on
the Company or any other Person in any case shall entitle the Company or such
other Person to any other or further notice or demand in similar or other
circumstances.
12.13 Waiver of Jury Trial. Company and Lender each hereby expressly
--------------------
waives any right to a trial by jury in any action or legal proceeding arising
out of or relating to this Agreement or any other Loan Document for the
transactions contemplated hereby or thereby.
12.14 Multiple Counterparts. This Agreement may be executed in any number
---------------------
of counterparts, all of which, taken together, shall constitute one and the same
instrument.
12.15 No Third Party Beneficiaries. This Agreement is for the sole and
----------------------------
exclusive benefit of the Company and Lender. This Agreement does not create, and
is not intended to create, any rights in favor of or enforceable by any other
Person. This Agreement may be amended or modified by the agreement of the
Company and Lender, without any requirement or necessity for notice to, or the
consent of or approval of any other Person.
12.16 RELEASE OF LENDER LIABILITY. TO THE MAXIMUM EXTENT NOT PROHIBITED
---------------------------
BY LAW FROM TIME TO TIME IN EFFECT, THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY
AND INTENTIONALLY (AND AFTER IT HAS CONSULTED WITH ITS OWN ATTORNEY) IRREVOCABLY
AND UNCONDITIONALLY AGREES THAT NO CLAIM MAY BE MADE BY THE COMPANY AGAINST THE
LENDER OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS, ACCOUNTANTS,
AGENTS OR INSURERS, OR ANY OF ITS OR THEIR SUCCESSORS AND ASSIGNS, FOR ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY BREACH OR
WRONGFUL CONDUCT (WHETHER THE CLAIM IS BASED ON CONTRACT OR TORT OR DUTY IMPOSED
BY LAW) ARISING OUT OF, OR RELATED TO, THE TRANSACTIONS CONTEMPLATED BY ANY OF
THIS AGREEMENT, THE NOTE, OR ANY OTHER LOAN DOCUMENTS, OR ANY ACT, OMISSION, OR
EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH OTHER THAN ARISING OUT OF
THE WILLFUL MISCONDUCT OF LENDER. IN FURTHERANCE OF THE FOREGOING, THE COMPANY
HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH
DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST
IN ITS FAVOR.
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<PAGE>
12.17 Entire Agreement; Amendment. This Agreement, the Note, and the
---------------------------
other Loan Documents referred to herein 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. The provisions of this Agreement and the other Loan
Documents to which the Company is a party may be amended or waived only by an
instrument in writing signed by the parties hereto.
12.18 Confidentiality and Non-Solicitation. Lender covenants and agrees
------------------------------------
to preserve the confidentiality of any financial data concerning Company or
related to Company's businesses or operations or any information with respect to
which Company has (a) an obligation of confidentiality to a third party (to the
extent such obligation has been disclosed to Lender) or (b) informed Lender of
the confidential nature of the specific information, except to the extent Lender
is required to disclose such information pursuant to any applicable law, rule,
regulation, or order of any Tribunal; provided that (i) any information
contained in any annual report, or any Form 10-K, Form 10-Q, or Form 8-K reports
(if any) which have been delivered to the SEC, or any other annual or quarterly
reports to the stockholders of Company or its affiliates subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended, proxy
material delivered to the stockholders of any Company or any report delivered to
the SEC, or any other information that is in the public domain or has become
publicly known, shall not in any event be deemed confidential, and (ii) Lender
may make any information received by it available (A) to a transferee of or
participant in any interest in the Note, provided that such transferee or
participant agrees in writing to be bound by the provisions of this Section, (B)
to any accountants or other professionals engaged by Lender, provided that each
such accountant or professional agrees to be bound by the provisions of this
Section, or (C) in connection with the enforcement of any of the Loan Documents
or any litigation in connection therewith. Additionally, Lender covenants and
agrees to preserve the confidentiality of this Agreement and the transactions
contemplated herein, except as set forth in (ii)(A), (B), and (C) of the
preceding sentence. Further Lender agrees that, during the term of the Note, it
will not use the information provided by Company and take any action to
personally, by telephone or mail, solicit any underlying mortgagor for any
purpose which is in competition with the services and products which Company is
providing to such underlying mortgagor, including to refinance loans made by
Company to such underlying mortgagor, without the prior written consent of
Company. It is understood and agreed that all rights, title and interest in and
to the list of such underlying mortgagors and data relating to their mortgages
are the property of Company, and Lender shall take no action to undermine these
rights and benefits. Notwithstanding the foregoing, nothing contained herein
shall be construed to prohibit Lender's solicitation of underlying mortgagors or
discussions with such persons or entities for purposes of offering products and
services that may or may not compete with those currently offered by Company
provided that Lender does not utilize confidential information provided to it by
or on behalf of Company in targeting or designing such solicitations or
discussions. Company acknowledges and agrees that Lender and Company may, as of
the date hereof and, from time to time, offer the same or similar products to
the underlying mortgagors without violating this Section.
12.19 NO ORAL AGREEMENTS. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL
------------------
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR
Page 48
<PAGE>
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
CONSTRUCTION PORTFOLIO FUNDING, INC.,
a Texas corporation
By:_______________________________________________
ALAN FERREE, Executive Vice President
BANK UNITED
By:_______________________________________________
DEBORAH A. BOURQUE, Vice President,
Mortgage Banker Financing
<TABLE>
<CAPTION>
EXHIBITS:
- --------
<C> <S>
A - Procedures and Documentation for Collateral Documents
B - Construction Policy and Procedures Manual
C - List of Builders
D - Officer's Certificate
E - Subsidiaries
F - Litigation
G - Trade Names
H - Secretary's Certificate
I - Guarantor's Resolutions
J - Construction Loan Guidelines
K - Construction Draw Schedule
L - Warehouse Loan Balance Summary Report
M - Request for Advance
N - Note
O - Legal Opinion
P - Guaranty
Q - Construction Loan Documents
</TABLE>
Page 49
<PAGE>
EXHIBIT "A"
-----------
PROCEDURES AND DOCUMENTATION FOR
--------------------------------
FUNDING CONSTRUCTION FACILITIES
-------------------------------
The following procedures and documentation requirements must be observed in
all respects by the Company. All documents must be satisfactory to Lender in
its sole discretion. Terms used below, which are not otherwise defined, shall
have the meanings given them in the Loan and Security Agreement, as amended,
modified or renewed from time to time.
I. Within three (3) Business Days after making an Advance that is to be used
by the Company to fund a Construction Loan Advance under a Residential
Construction Loan and/or Residential A&D Loan which has not been previously
pledged to the Lender and against which Advances have not been previously
made hereunder, the Lender must receive the following:
(1) All original signed Construction Notes evidencing Construction Loan
Advances under such Residential Construction Loan and/or Residential
A&D Loan, endorsed by the Company in blank with corresponding interim
endorsements, if applicable.
(2) An original Assignment of all Deeds of Trust securing such Residential
Construction Loan and/or Residential A&D Loan and covering Homes to be
financed from such Advance.
(3) Copy of the signed Construction Loan Agreement relating to such
Residential Construction Loan and/or Residential A&D Loan.
(4) Copy of all other Construction Loan Documents relating to such
Residential Construction Loan and/or Residential A&D Loan.
(5) All other documents, instruments, files, and information reasonably
requested by the Lender.
Prior to making any Advance pursuant to I. above, Lender must receive an
Original Request for Advance and a copy of the executed Construction Notes
evidencing the Residential Construction Loan and/or Residential A&D Loan
against which such Advance is being funded.
II. Within three (3) Business Days after making any Advance to fund any
Construction Loan Advance under any Residential Construction Loan and/or
Residential A&D Loan which has been previously pledged to the Lender by
delivery to the Lender of the documents listed in I. above, the Lender must
receive the following:
(1) All original signed Construction Notes evidencing Construction Loan
Advances under such Residential Construction Loan and/or Residential
A&D Loan, endorsed by the Company in blank with corresponding interim
endorsements, if applicable,
Exhibit "A" Page 50
-----------
<PAGE>
which have not been previously delivered to the Lender hereunder.
(2) An original Assignment of all Deeds of Trust securing such Residential
Construction Loan and/or Residential A&D Loan and covering collateral
to be financed from such Advance that have not been previously
assigned to the Lender in accordance with this Agreement.
(3) Copy of any Deeds of Trust, securing such Residential Construction
Loan and/or Residential A&D Loan and covering collateral to be
financed from such Advance, which have not been previously delivered
to the Lender hereunder.
(4) If requested by the Lender, copies of the Construction Loan Requests
to be funded from such Advance.
(5) Copies of any Construction Loan Documents relating to such Residential
Construction Loan and/or Residential A&D Loan unless previously
provided to the Lender.
Prior to making any Advance pursuant to II. above, Lender must receive an
Original Request for Advance and a copy of the executed Construction Notes
evidencing the Residential Construction Loan and/or Residential A&D Loan
against which such Advance is being funded.
III. Prior to making any Advance to fund any Consumer Construction Loan or
Consumer Lot Loan, the Lender must receive such documents, instruments,
files and information reasonably requested by the Lender to support or
document the requested Advance and the Collateral given as security
therefor and/or perfect the security interest in the Collateral given as
security for such requested Advance, including, without limitation, all
original Consumer Notes evidencing such Consumer Construction Loans or
Consumer Lot Loans, endorsed by the Company in blank, with corresponding
interim endorsements, if applicable, and an assignment of all Consumer
Mortgages securing such Consumer Notes.
Exhibit "A" Page 51
-----------
<PAGE>
EXHIBIT "B"
-----------
CONSTRUCTION POLICY AND PROCEDURES MANUAL
-----------------------------------------
Exhibit "B" Page 52
-----------
<PAGE>
EXHIBIT "C"
-----------
LIST OF BUILDERS
----------------
Exhibit "C" Page 53
-----------
<PAGE>
EXHIBIT "D"
-----------
OFFICER'S CERTIFICATE
---------------------
COMPANY: CONSTRUCTION PORTFOLIO FUNDING, INC.
LENDER: BANK UNITED
DATE: ____________________________________________________________
REPORTING PERIOD: _________________________ ended ____________, 199__
This certificate is delivered to Lender under the Loan Agreement dated
effective as of December 30, 1997, between Company and Lender (the "Agreement"),
all the defined terms of which have the same meanings when used herein.
I hereby certify that: (a) I am, and at all times mentioned herein have
been, the duly elected, qualified, and acting officer of Company designated
below; (b) to the best of my knowledge, the Financial Statements of Company for
the period shown above (the "Reporting Period") and which accompany this
certificate were prepared in accordance with GAAP and present fairly the
financial condition of Company as of the end of the Reporting Period and the
results of its operations for the Reporting Period; (c) a review of the
Agreement and of the activities of the Company during the Reporting Period has
been made under my supervision with a view to determining Company's compliance
with the covenants, requirements, terms, and conditions of the Agreement, and
such review has not disclosed the existence during or at the end of the
Reporting Period (and I have no knowledge of the existence as of the date
hereof) of any Event of Default or Default, except as disclosed on Annex "A"
---------
hereto (which specifies the nature and period of existence of each Event of
Default or Default, if any, and what action Company has taken, is taking, and
proposes to take with respect to each); and (d) the calculations described on
the attached Annex "A" evidence that the Company is in compliance with the
---------
requirements of Sections 7.3 and 7.4, of the Agreement at the end of the
Reporting Period (or if Company is not in compliance, showing the extent of non-
compliance and specifying the period of non-compliance and what actions the
Company proposes to take with respect thereto.
CONSTRUCTION PORTFOLIO FUNDING, INC.,
a Texas corporation
By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
Exhibit "D" Page 54
-----------
<PAGE>
ANNEX "A"
---------
COMPANY NAME: CONSTRUCTION PORTFOLIO FUNDING, INC.
REPORTING PERIOD: ____________________________________________________________
All financial calculations set forth herein are as of the Statement Date.
1. TANGIBLE NET WORTH
The Tangible Net Worth of the Company is:
Shareholder's Equity: $_______________
Plus: Subordinated Debt: $_______________
Minus: Intangible Assets (excluding any remaining
goodwill relating to loan loss reserves): $_______________
Minus: Advances or loans to officers: $_______________
Minus: Assets pledged to secure liabilities not included
in Debt: $_______________
TANGIBLE NET WORTH: $_______________
Minimum Tangible Net Worth is $10,000,000.00
Covenant Satisfied:________________ Covenant Not Satisfied:_______________
2. DEBT OF THE COMPANY
Total Liabilities: $_______________
DEBT: $_______________
3. DEBT TO TANGIBLE NET WORTH
The ratio of Debt to Tangible Net Worth is: _______ to 1.
Maximum Debt to Tangible Net Worth Ratio is 10:1.
Covenant Satisfied:________________ Covenant Not Satisfied:_______________
4. DEFAULTS OR EVENTS OF DEFAULT (disclose nature and period of existence and
action being taken in connection therewith; if none, state none)
Exhibit "D" Page 55
-----------
<PAGE>
EXHIBIT "E"
-----------
LIST OF SUBSIDIARIES
--------------------
<TABLE>
<CAPTION>
================================================================================
NAME ADDRESS OF STATE OF WHERE COMPANY'S
PRINCIPAL INCORPORATION QUALIFIED PERCENTAGE
OFFICE FOREIGN CORP. OWNERSHIP
================================================================================
<S> <C> <C> <C> <C>
None
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
</TABLE>
Exhibit "E" Page 56
-----------
<PAGE>
EXHIBIT "F"
-----------
DISCLOSURE OF PENDING LITIGATION
(Include the caption of the case, including styling, cause number, and court in
which it is pending, date filed, status of the proceedings, and description of
claims, counterclaims and damages asserted.)
NONE
Exhibit "F" Page 57
-----------
<PAGE>
EXHIBIT "G"
-----------
TRADE NAMES OF COMPANY
----------------------
<TABLE>
<CAPTION>
TRADE NAME JURISDICTION USED
<S> <C>
</TABLE>
NONE
Exhibit "G" Page 58
-----------
<PAGE>
EXHIBIT "H"
-----------
CERTIFICATE OF CORPORATE RESOLUTIONS
AND INCUMBENCY OF OFFICERS
(BORROWING AUTHORITY)
I, the undersigned, hereby certify that I am the Secretary of CONSTRUCTION
PORTFOLIO FUNDING, INC., a corporation duly organized and existing under the
laws of the State of Texas (the "Corporation").
I further certify that true and correct copies of the Articles of
Incorporation and Bylaws of the Corporation together with all amendments thereto
are attached hereto as Exhibit "A" and "B", respectively, and that such articles
-------------------
and bylaws remain unaltered and in full force and effect.
I further certify that the following resolutions were duly adopted by the
Board of Directors of the Corporation at a meeting of the Board of Directors of
the Corporation, duly and legally called and held in accordance with the
Articles of Incorporation and Bylaws of the Corporation on the 30th day of
December, 1997, at which meeting a quorum was present and voting throughout, or
(if the foregoing date was not completed) pursuant to a written consent signed
by all of the members of the Board of Directors of the Corporation in accordance
with the Articles of Incorporation and Bylaws of the Corporation, and that such
resolutions are now in full force and effect and have not been amended, modified
or revoked:
"RESOLVED, that each of the following officers of this Corporation:
acting alone without the joinder of any other officer, is hereby authorized
in the name and on behalf of this Corporation (i) to borrow from and to
otherwise incur liabilities to BANK UNITED and its assigns ("Lender") from
time to time, in such amounts, for such periods of time, at such rates of
interest and payable in such manner as such officers may deem necessary or
proper, and (ii) as evidence of such indebtedness so incurred, to execute
and deliver to Lender such promissory notes, loan agreements and other
instruments, documents and agreements, containing such terms and provisions
as may be acceptable or agreeable to any one of such officers, such
acceptance and agreement to be conclusively evidenced by the execution and
delivery thereof by any one of such officers;
FURTHER RESOLVED, that this Corporation grant to Lender a lien and/or
security interest upon such assets of this Corporation as may be agreed
upon between any one of the above named officers and Lender, as security
for all present and future indebtedness, obligations and liabilities of
this Corporation to Lender and that each of said officers, acting alone
without the joinder of any other officer, is hereby authorized in the name
and on behalf of this Corporation to execute and deliver such security
agreements, deeds of trust and other instruments, documents and agreements
Exhibit "H" Page 59
-----------
<PAGE>
as may be required by Lender in connection with each such grant of a lien
and/or security interest and containing such terms and provisions as may be
acceptable or agreeable to any one of such officers, such acceptance and
agreement to be conclusively evidenced by the execution and delivery
thereof by any one of such officers;
FURTHER RESOLVED, that any one of the above named officers, acting
alone without the joinder of any other officer, is hereby authorized in the
name and on behalf of this Corporation to take such further action and to
do all things that any one of such officers deems necessary in connection
with any (i) increases, renewals, extensions, rearrangements, retirements
or compromises of any indebtedness, obligations and liabilities owing to
Lender from time to time by this Corporation, either directly or by
assignment, and (ii) amendments to any of the provisions contained in any
instruments, documents or agreements evidencing, securing, governing and/or
pertaining to any indebtedness, obligations and liabilities owing to Lender
by this Corporation from time to time;
FURTHER RESOLVED, that any one of the above named officers, or any one
of the following representatives of this Corporation:
acting alone without the joinder of any other officer or representative, is
hereby authorized in the name and on behalf of this Corporation to (i) make
requests for advances under any credit facility that this Corporation may
have with Lender from time to time, and (ii) do or cause to be done all
such acts or things and to sign and deliver, or cause to be signed and
delivered, all such instruments, documents, agreements and certificates
(including without limitation, any and all notices and certificates
required or permitted to be given or made to Lender under the terms of any
of the instruments, documents or agreements executed on behalf of this
Corporation in connection with these resolutions), as any and all of such
officers or representatives may deem necessary, advisable or appropriate to
effectuate and carry out the purposes and intent of the foregoing
resolutions and to perform the obligations of this Corporation under all
instruments, documents and agreements executed on behalf of this
Corporation in connection with any indebtedness, obligations or liabilities
incurred by this Corporation to Lender from time to time;
FURTHER RESOLVED, that all acts, transactions or agreements with
Lender undertaken prior to the adoption of the foregoing resolutions by any
one or more of the officers and/or representatives of this Corporation in
its name and on its behalf in connection with the foregoing matters are
hereby ratified, confirmed and adopted by this Corporation; and
Exhibit "H" Page 60
-----------
<PAGE>
FURTHER RESOLVED, that each of the officers of this Corporation is
hereby authorized and directed to certify these resolutions to Lender;
FURTHER RESOLVED, the foregoing resolutions shall continue in full
force and effect, and the Lender is authorized to rely upon the foregoing
resolutions unless and until (i) countermanded by resolution of the Board
of Directors of this Corporation, and (ii) a copy of such resolution,
properly certified by an officer of this Corporation, has actually been
received by Lender."
I further certify that the foregoing resolutions do not conflict with the
Articles of Incorporation or Bylaws of the Corporation, or any amendments
thereto.
I further certify that neither the seal of the Corporation, nor the
attestation by the Secretary, Assistant Secretary or any other officer of the
Corporation, is necessary to make any instruments, documents or agreements
executed by the officers or representatives of this Corporation pursuant to the
foregoing resolutions, enforceable against the Corporation, unless such seal is
affixed to, or such attestation is provided on, such instruments, documents or
agreements.
I further certify that the officers of the Corporation set forth below have
been duly elected and qualified and as of the date hereof hold the specified
offices with the Corporation, that the signature set forth beside each officer's
name is the true signature of such officer, and that the signature set forth
beside the name of each of the representatives specified in the foregoing
resolutions is the true signature of such representative:
<TABLE>
<CAPTION>
TITLE TYPED NAME SIGNATURE
----- ---------- ---------
<S> <C> <C>
Chairman of the Board _________________________ _________________________
President _________________________ _________________________
Vice President _________________________ _________________________
Vice President _________________________ _________________________
Treasurer _________________________ _________________________
Secretary _________________________ _________________________
Assistant Secretary _________________________ _________________________
Assistant Treasurer _________________________ _________________________
</TABLE>
IN WITNESS WHEREOF, I hereunto subscribe my name this 30th day of December,
1997.
By:_____________________________________________
ALAN FERREE, Secretary
Exhibit "H" Page 61
-----------
<PAGE>
EXHIBIT "I"
-----------
CERTIFICATE OF RESOLUTIONS
AND INCUMBENCY OF OFFICERS
--------------------------
I, the undersigned, hereby certify that I am the Secretary of NAB ASSET
CORPORATION, a corporation duly organized and existing under the laws of the
State of Texas (the "Company").
I further certify that true and correct copies of the Articles of
Incorporation and Bylaws of the Corporation together with all amendments thereto
are attached hereto as Exhibit "A" and "B", respectively, and that such articles
-------------------
and bylaws remain unaltered and in full force and effect.
I further certify that the following resolutions were duly adopted by the
directors of the Company at a meeting of the directors of the Company, duly and
legally called and held in accordance with the Articles of Incorporation and
Bylaws of the Company on the 30th day of December, 1997, at which meeting a
quorum was present and voting throughout, or (if the foregoing date was not
completed) pursuant to a written consent signed by all of the directors of the
Company in accordance with the Articles of Incorporation and Bylaws of the
Company, and that such resolutions are now in full force and effect and have not
been amended, modified or revoked:
"RESOLVED, that each of the following officers of this Company:
acting alone without the joinder of any other officer, is hereby authorized
in the name and on behalf of this Company, (i) to unconditionally and
irrevocably guarantee all present and future indebtedness, obligations and
liabilities of CONSTRUCTION PORTFOLIO FUNDING, INC., a Texas corporation
("CPF") to BANK UNITED ("Lender"), (ii) to grant to Lender a lien and/or
security interest upon such assets of this Company as may be agreed upon
between any one of the above named officers and Lender, as security for all
present and future indebtedness, obligations and liabilities of CPF to
Lender and that each of said officers, acting alone without the joinder of
any other officer, is hereby authorized in the name and on behalf of this
Company to execute and deliver such security agreements, deeds of trust and
other instruments, documents and agreements as may be required by Lender in
connection with each such grant of a lien and/or security interest and
containing such terms and provisions as may be acceptable or agreeable to
any one of such officers, such acceptance and agreement to be conclusively
evidenced by the execution and delivery thereof by any one of such
officers, and (iii) that each of said officers, acting alone without the
joinder of any other officer, is hereby authorized in the name and on
behalf of this Company to execute and deliver such guaranty agreements and
other instruments, documents and agreements as may be required by Lender in
connection with such guarantee of indebtedness, obligations and liabilities
of CPF and containing such terms and provisions as may be acceptable or
agreeable to any one
Exhibit "I" Page 62
-----------
<PAGE>
of such officers, such acceptance and agreement to be conclusively
evidenced by the execution and delivery thereof by any one of such
officers;
FURTHER RESOLVED, the foregoing resolutions shall continue in full
force and effect, and the Lender is authorized to rely upon the foregoing
resolutions unless and until (i) countermanded by resolution of the board
of directors of this Company, and (ii) a copy of such resolution, properly
certified by an officer of this Company, has actually been received by
Lender."
I further certify that the foregoing resolutions do not conflict with the
Articles of Incorporation or Bylaws of the Company, or any amendments thereto.
I further certify that neither the seal of the Company, nor the attestation
by the Secretary, Assistant Secretary or any other officer of the Company, is
necessary to make any instruments, documents or agreements executed by the
officers or representatives of this Company pursuant to the foregoing
resolutions, enforceable against the Company, unless such seal is affixed to, or
such attestation is provided on, such instruments, documents or agreements.
I further certify that the officers of the Company set forth below have
been duly elected and qualified and as of the date hereof hold the specified
offices with the Company, that the signature set forth beside each officer's
name is the true signature of such officer, and that the signature set forth
beside the name of each of the representatives specified in the foregoing
resolutions is the true signature of such representative:
<TABLE>
<CAPTION>
TITLE TYPED NAME SIGNATURE
----- ---------- ---------
<S> <C> <C>
Chief Executive Officer ___________________ ____________________
President ___________________ ____________________
Vice President ___________________ ____________________
Vice President ___________________ ____________________
Treasurer ___________________ ____________________
Secretary ___________________ ____________________
Assistant Secretary ___________________ ____________________
Assistant Treasurer ___________________ ____________________
_______________________ ___________________ ____________________
</TABLE>
IN WITNESS WHEREOF, I hereunto subscribe my name this 30th day of December,
1997.
By:______________________________________________
ALAN FERREE, Secretary
Exhibit "I" Page 63
-----------
<PAGE>
EXHIBIT "J"
-----------
CONSTRUCTION LOAN GUIDELINES
----------------------------
I. Residential Construction Loans.
------------------------------
Each Residential Construction Loan under any Construction Facility shall
satisfy each of the following terms and conditions:
(1) Such Construction Facility shall be extended only to a Builder as
defined in the Loan Agreement and the aggregate loan commitments thereunder
shall not exceed $15,000,000.00 nor shall the advances thereunder for Lots
exceed, in the aggregate, $1,000,000.00.
(2) Each Residential Construction Loan shall be solely for the purpose of
acquiring a Lot and constructing a Home thereon for either first-time or move-up
buyers, with a loan amount for such Home of less than $300,000.00; provided,
however, that 20% of the Lender's Commitment may be used to fund Homes in excess
of $300,000.00.
(3) Each Residential Construction Loan for a Sold Home shall not exceed the
lesser of (a) 80% of the Appraised Value of the Home and Lot securing such
Residential Construction Loan or (b) 100% of the actual cost of construction of
Sold Homes.
(4) Each Residential Construction Loan for a Speculative Home shall not
exceed the lesser of (a) 75% of the Appraised Value of the Home and Lot securing
such Residential Construction Loan or (b) 95% of the actual cost of construction
of Speculative Homes.
(5) The aggregate stated principal amount (including any unfunded portion)
of all Residential Construction Loans under such Construction Facility, the
proceeds of which are used for the construction of Speculative Homes and Model
Homes, shall not at any time exceed 50% of the aggregate stated principal amount
(including any unfunded portion) of all Residential Construction Loans under
such Construction Facility.
(6) The aggregate stated principal amount (including any unfunded portion)
of all Residential Construction Loans under such Construction Facility, the
proceeds of which are used for the construction of Model Homes, shall not at any
time exceed 10% of the aggregate stated principal amount (including any unfunded
portion) of all Residential Construction Loans under such Construction Facility.
(7) The term of such Construction Facility shall not exceed eighteen (18)
months.
(8) The term of any Residential Construction Loan for any Speculative Home,
Sold Home, and/or Lot shall not exceed one (1) year but in no event shall the
foregoing extend or be intended to extend the warehouse period for such
Residential Construction Loan set forth in this Agreement.
(9) The term of any Residential Construction Loan for any Model Home shall
not exceed
Exhibit "J" Page 64
-----------
<PAGE>
twenty-four (24) months but in no event shall the foregoing extend or be
intended to extend the warehouse period for such Residential Construction Loan
set forth in this Agreement.
(10) Advances of any loan proceeds under such Residential Construction Loan
shall be made only for completed work and in accordance with the percentage
completion draw schedule approved by the Lender, in its reasonable discretion.
II. Residential A&D Loans.
---------------------
Each Residential A&D Loan under any Construction Facility shall satisfy
each of the following terms and conditions:
(1) Such Construction Facility shall be extended only to a Builder as
defined in the Loan Agreement and the aggregate loan commitments thereunder for
Residential A&D Loans shall not exceed $3,000,000.00.
(2) Each Residential A&D Loan made for the purpose of acquiring and
developing Residential Land shall require that the development will commence
within ninety (90) days after Company's closing of such Residential A&D Loan.
(3) The term of such Residential A&D Loan shall not exceed twenty-four (24)
months.
Exhibit "J" Page 65
-----------
<PAGE>
EXHIBIT "K"
-----------
CONSTRUCTION DRAW SCHEDULE
--------------------------
Exhibit "K" Page 66
-----------
<PAGE>
EXHIBIT "L"
-----------
WAREHOUSE LOAN BALANCE SUMMARY REPORT
-------------------------------------
Exhibit "L" Page 67
-----------
<PAGE>
EXHIBIT "M"
-----------
REQUEST FOR ADVANCE
-------------------
Today's Date: ________________________________________________
Company: CONSTRUCTION PORTFOLIO FUNDING, INC.
Prepared By: ________________________________________________
Requested Advance Date: ________________________________________________
Requested Advance Amount:_____
Wiring Instructions: ________________________________________________
________________________________________________
In connection with the above request, Company certifies that it has
previously provided or is simultaneously providing herewith to Lender each of
the documents listed in Section I and Section II of Exhibit "A" of the Agreement
-----------
detailing documents to be received by Lender prior to funding any Advance
against a Construction Facility and Section III of Exhibit "A" of the Agreement
-----------
with reference to documents necessary for Advances against Consumer Construction
Loans and Consumer Lot Loans.
Please find attached a Warehouse Loan Balance Summary Report detailing the
Construction Loan Advances that relate to this Request for Advance in
substantially the form of Exhibit "L" of the Agreement and, if applicable, a
-----------
summary detailing the Consumer Construction Loans and Consumer Lot Loans to be
funded from this Request.
The Company creates and grants in favor and for the benefit of the Lender a
security interest in and to the Construction Loan Advances listed in the
Warehouse Loan Balance Summary, all Consumer Construction Loans and Consumer Lot
Loans, and all instruments and documents described as Collateral Documents in
the Agreement.
The Company agrees that this Agreement shall be binding upon and inure to
the benefit of the legal representatives, successors or assigns of the Lender.
The Company further agrees that all rights, interest, duties and
liabilities arising hereunder shall be determined according to the laws of the
State of Texas.
Executed as of the __________ day of _________________, 1997.
CONSTRUCTION PORTFOLIO FUNDING, INC.,
a Texas corporation
By:______________________________________________
Name:____________________________________________
Title:___________________________________________
Exhibit "M" Page 68
-----------
<PAGE>
COMPANY'S CERTIFICATION
-----------------------
Reference is made to that certain Loan and Security Agreement dated as of
December 30, 1997, between Lender and Company (as amended or otherwise modified
from time to time, the "Loan Agreement'). Capitalized terms used herein without
definition shall have the meanings set forth in the Loan Agreement, unless the
context shall require otherwise.
To induce Lender to disburse proceeds of the Advance requested in the
attached Request for Advance dated as above, Company hereby represents,
warrants, and certifies to Lender as follows:
(a) No Event of Default or Default presently exists under the Loan
Agreement or any other Loan Documents;
(b) All of the representations and warranties of Company under the
Loan Agreement and the other Loan Documents are hereby remade and restated;
and
(c) With respect to each Residential Construction Loan and
Residential A&D Loan as to which disbursement will be made using Loan
proceeds requested in the attached Request for Advance:
(1) The applicable Builder has satisfied in all material respects
all conditions precedent to the funding of such Residential
Construction Loans and/or Residential A&D Loans as set forth in the
applicable Construction Loan Documents;
(2) The applicable Construction Loan Documents are in full force
and effect;
(3) Each such Residential Construction Loan and Residential A&D
Loan is secured by a first priority lien on the Homes and/or Lots, the
acquisition and construction thereof being financed thereunder, and
the other collateral described in the applicable Construction Loan
Documents; and
(4) Each such Residential Construction Loan and Residential A&D
Loan is an Eligible Construction Loan.
(d) With respect to each Consumer Construction Loan and Consumer Lot
Loan as to which disbursement will be made using Loan proceeds requested in
the attached Request for Advance:
(1) The borrower thereunder has satisfied in all material
respects all conditions precedent to the funding of such Consumer
Construction Loans and/or Consumer Lot Loans as set forth in the
applicable Consumer Loan Documents;
(2) The applicable Consumer Loan Documents are in full force and
effect;
Exhibit "M" Page 69
-----------
<PAGE>
(3) Each such Consumer Construction Loan and Consumer Lot Loan is
secured by a first priority lien on the Homes and/or Lots, the
acquisition and construction thereof being financed thereunder, and
the other collateral described in the applicable Consumer Loan
Documents; and
(4) Each such Consumer Construction Loan and Consumer Lot Loan is
an Eligible Construction Loan.
CONSTRUCTION PORTFOLIO FUNDING, INC.,
a Texas corporation
By:_______________________________________________
Name:_____________________________________________
Title:____________________________________________
Exhibit "M" Page 70
-----------
<PAGE>
EXHIBIT "N"
-----------
PROMISSORY NOTE
---------------
$75,000,000.00 Houston, Texas December 30, 1997
FOR VALUE RECEIVED, the undersigned, CONSTRUCTION PORTFOLIO FUNDING, INC.,
a Texas corporation (herein called the "Borrower"), hereby promises to pay to
the order of BANK UNITED, a federal savings bank (the "Lender" or, together with
its successors and assigns, the "Holder") whose principal place of business is
3200 Southwest Freeway, Suite 1300, Houston, Texas 77027, or at such other place
as the Holder may designate from time to time, the principal sum of SEVENTY-FIVE
MILLION AND NO/100 DOLLARS ($75,000,000.00) or so much thereof as may be
outstanding from time to time pursuant to the Loan Agreement (the "Agreement')
dated the date hereof between the Borrower and the Lender, as the same may be
amended or supplemented from time to time, and to pay interest on said principal
sum or such part thereof as shall remain unpaid from time to time, from the date
of each Advance until repaid in full, and all other fees and charges due under
the Agreement, at the rate and at the times set forth in the Agreement. All
payments hereunder shall be made in lawful money of the United States and in
immediately available funds.
This Note is given to evidence the revolving line of credit in the above
amount and is the Note referred to in the Agreement, and is entitled to the
benefits thereof. Reference is hereby made to the Agreement (which is
incorporated herein by reference as fully and with the same effect as if set
forth herein at length) for a statement of the covenants and agreements, a
statement of the rights and remedies and securities afforded thereby and other
matters contained therein. Capitalized terms used herein, unless otherwise
defined herein, shall have the meanings given them in the Agreement.
The entire unpaid principal balance of this Note plus all accrued and
unpaid interest shall be due and payable in full on December 29, 1998.
This Note may be prepaid in whole or in part at any time without premium or
penalty.
Should this Note be placed in the hands of attorneys for collection, the
Borrower agrees to pay, in addition to principal and interest, fees and charges
due under the Agreement, and all costs of collecting this Note, including
reasonable attorneys' fees and expenses.
This Note shall be construed and enforced in accordance with the laws of
the State of Texas, without reference to its principles of conflicts of law, and
applicable federal laws of the United States of America.
This Note is secured by all security agreements, collateral assignments,
deeds of trust and lien instruments executed by the Borrower in favor of Lender,
or executed by any other Person as security for this Note, including any
executed prior to, simultaneously with, or after the date of this Note.
Exhibit "N" Page 71
-----------
<PAGE>
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 for payment, protest, notice of
protest and non-payment or dishonor, notice of acceleration, notice of intent to
accelerate, 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
Collateral 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.
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 Agreement or in any other Loan
Document 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 Agreement or under any
of the other aforesaid Loan Documents 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 Obligations (or, if the principal amount of the Obligations 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
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 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 Obligations (or, if the principal amount of the
Obligations 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 Loan Documents which are made for the purpose
of determining whether the interest rate exceeds the Maximum 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 of any of the Loan Documents. To the
extent that the Texas Credit Title is relevant for purposes of determining the
Maximum Rate, the Lender hereby elects to determine the applicable rate ceiling
under such Article by the indicated rate ceiling from time to time in effect,
subject to the Lender's right subsequently to change such method in accordance
with applicable law.
Exhibit "N" Page 72
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<PAGE>
This Note is absolutely, unconditionally, and irrevocably guaranteed by NAB
Asset Corporation, a Texas corporation.
CONSTRUCTION PORTFOLIO FUNDING, INC.,
a Texas corporation
By:______________________________________________
ALAN FERREE, Executive Vice President
Exhibit "N" Page 73
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<PAGE>
EXHIBIT "O"
-----------
OPINION LETTER
--------------
December 30, 1997
Bank United
3200 Southwest Freeway
Suite 1300
Houston, Texas 77027
Re: Loan and Security Agreement
Gentlemen:
We have acted as special counsel for CONSTRUCTION PORTFOLIO FUNDING, INC.,
a Texas corporation (the "Company"), in connection with the negotiation and
execution of the following documents (collectively, the "Credit Documents"):
1. the Loan Agreement dated effective as of December 30, 1997 (the "Loan
Agreement"), between the Company and Bank United (the "Lender");
2. the Note dated effective as of December 30, 1997 (the "Note"),
executed and delivered by the Company; and
3. Assignment Documents.
Unless otherwise provided herein, terms used herein which are defined in
the Credit Documents (including schedules and exhibits thereto) and not defined
herein shall have the meanings attributed thereto in the Credit Documents.
A. Basis of Opinion.
----------------
As the basis for the conclusions expressed in this opinion letter, we have
examined, considered and relied upon the following:
(1) A copy of each of the Credit Documents executed by the Company;
(2) A recent Certificate of Good Standing of the Company issued by the
Secretary of State of the State of Texas;
(3) A copy of the Articles of Incorporation and amendments thereto,
and a copy of the Bylaws of the Company, in each case as certified to us by the
Company Certificate;
(4) Such other documents and records as we have deemed relevant,
necessary or appropriate in connection with or as a basis for the opinions
hereafter set forth; and
Exhibit "O" Page 74
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<PAGE>
Bank United
December 30, 1997
(5) Such matters of law as we have considered necessary or appropriate
for the expression of the opinions contained herein.
For the purposes of this opinion letter, the documents and information
referred to in this Section A are herein collectively referred to as the
"Documents".
B. Opinions.
--------
Based upon our examination and consideration of the foregoing Documents,
and subject to the comments, assumptions, exceptions, qualifications and
limitations set forth in Section C below, we are of the opinion that:
(1) The Company (i) is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Texas, (ii) has the full
legal power and authority and all necessary licenses, permits, franchises, and
other authorizations to own and operate its property and assets and to transact
the business in which it is engaged, and (iii) is duly qualified to transact
business as a foreign corporation in each jurisdiction where the nature of the
business it transacts or the property it owns requires such qualification or
licensing except in such jurisdictions where the failure to be in good standing
or be licensed (as the case may be) would have no material adverse effect on the
Company.
(2) The Company has the requisite corporate power to execute, deliver,
and perform the terms and provisions of each of the Credit Documents and has
taken all necessary corporate action to authorize the execution, delivery, and
performance by it of each such Credit Document. The Company has duly executed
each of the Credit Documents, and each such Credit Document constitutes its
legal, valid, and binding obligation enforceable in accordance with its terms,
except as the enforceability of the rights and remedies of the Lender under each
of the Credit Documents may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by general equitable principles (regardless of whether the
issue of enforceability is considered in a proceeding in equity or at law)
including requirements of reasonableness and good faith in the exercise of
rights and remedies under the Credit Documents.
(3) Neither the execution, delivery, or performance by the Company of
the Credit Documents, nor compliance by it with the terms and provisions
thereof, (i) will contravene any law, statute, rule, or regulation; (ii) to the
best of our knowledge, will contravene any order, writ, injunction, or decree of
any court or governmental instrumentality; (iii) to the best of our knowledge,
will conflict or be inconsistent with or result in any breach of any of the
material terms, covenants, conditions, or provisions of, or constitute a default
under, or result in the creation or imposition of (or the obligation to create
or impose) any lien upon any of the property or assets of the Company
Exhibit "O" Page 75
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<PAGE>
pursuant to the terms of any agreement of the Company; (iv) will violate any
provision of the Articles of Incorporation or Bylaws of the Company.
(4) No order, consent, approval, license, authorization or validation
of, or filing, recording or registration with, or exemption by, any governmental
or public body or authority, or any subdivision thereof, is required to
authorize, or is required in connection with, (i) the execution, delivery and
performance of any Credit Document, or (ii) the legality, validity, binding
effect or enforceability of any such Credit Document.
(5) To the best of our knowledge, there are no actions, suits, or
proceedings pending or threatened (i) with respect to any Credit Document or
(iii) that could materially and adversely affect the business, operations,
property, assets, condition (financial or otherwise) or prospects of the
Company.
(6) The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(7) The Company is not a "holding company" or a "subsidiary company"
of a "holding company" within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
(8) The execution and delivery of the Loan Agreement by the Borrower
is effective to create a valid and enforceable security interest in favor of the
Lender in the Collateral and the proceeds thereof.
(9) The Lender will have a valid and duly perfected security interest
in the Collateral described in the Financing Statement without further
requirements for perfection or preservation of such perfection, to the extent
that a security interest therein may be perfected under Article 9 of the UCC
solely by filing a financing statement with the Texas Secretary of State, which
lien shall be superior to any other interests therein.
C. Comments, Assumptions, Limitation, Qualifications and Exceptions.
----------------------------------------------------------------
The opinions expressed in Section B above are based upon, and subject to,
the further comments, assumptions, limitations, qualifications and exceptions
set forth below:
Respectfully submitted,
Exhibit "O" Page 76
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<PAGE>
EXHIBIT "P"
-----------
GUARANTY AGREEMENT
------------------
THIS GUARANTY AGREEMENT (this "Guaranty") by NAB ASSET CORPORATION, a Texas
corporation ("Guarantor"), is in favor of BANK UNITED, a federal savings bank
(such bank, together with its successors and assigns herein called "Lender").
W I T N E S S E T H:
WHEREAS, Lender has extended and will extend credit and financial
accommodations to CONSTRUCTION PORTFOLIO FUNDING, INC., a Texas corporation
("Borrower");
WHEREAS, the Guarantor will derive substantial benefits from such extension
of credit and financial accommodations to Borrower;
NOW, THEREFORE, (i) to induce Lender, at any time from time to time, to
loan monies, with or without security to or for the account of Borrower, (ii) at
the special insistence and request of Lender, and (iii) for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Guarantor hereby agrees as follows:
1. Guarantor hereby absolutely and unconditionally guarantees the prompt
and punctual payment and performance when due (whether at its maturity, by lapse
of time, by acceleration or otherwise) of the Guaranteed Obligations
(hereinafter defined). This is a specific guaranty applicable to and
guaranteeing any and all amounts of principal, interest (including interest
accrued subsequent to the filing of any petition under any bankruptcy,
insolvency or similar law), attorneys' fees, costs of collection and other
amounts owing or which hereafter become owing on or in connection with certain
indebtedness, obligations or liabilities of Borrower to Lender under the
instruments described below, together with all renewals, extensions, increases,
replacements, and rearrangements thereof, even though represented by new
instruments, including, without limitation, all present and future amounts that
would become due but for the operation of (S)502 or (S)506 or any other
provision of Title 11 of the United States Code (hereinafter called the
"Guaranteed Obligations"), as follows:
(a) That certain Loan and Security Agreement dated effective as of
December 30, 1997, executed by and between the Borrower and the Lender;
(b) That certain promissory note dated effective as of December 30,
1997, executed on behalf of Borrower and made payable to the order of
Lender in the original principal sum of $75,000,000.00; and
(c) All other documents and instruments as are now and hereafter
executed by Borrower in connection with the instruments described in 1(a)
and 1(b) above (the instruments described in paragraph 1(a), 1(b) and 1(c)
hereof are hereinafter collectively called the "Loan Documents").
Exhibit "P" Page 77
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<PAGE>
2. Guarantor hereby waives marshalling of assets and liabilities, sale in
inverse order of alienation, notice of acceptance of this Guaranty and of any
indebtedness, obligation or liability to which it applies or may apply, and
waives presentment and demand for payment thereof, notice of dishonor or
nonpayment thereof, notice of intention to accelerate, notice of acceleration,
protest, and notice thereof and all other notices and demands, collection or
instigation of suit or any other action by Lender in collection thereof,
including any notice of default in payment thereof or other notice to, or demand
of payment therefor on, any party. Further, 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 it may have pursuant to
Rule 31, Texas Rules of Civil Procedure, V.T.C.A., Civil Practice and Remedies
Code (S)17.001 and Chapter 34 of the Texas Business and Commerce Code.
3. Guarantor agrees to pay to Lender its collection costs, including any
reasonable additional amount for attorneys' fees, but in no event to exceed the
maximum amount permitted by law, if the Guaranteed Obligations are not paid by
Guarantor upon demand when due as required herein or if this Guaranty is
enforced by suit or through probate or bankruptcy court or through any judicial
proceedings whatsoever, and should it be necessary to reduce Lender's claim to
judgment, such judgment shall bear interest at the rate of 10% per annum or such
greater maximum rate, if any, allowed by applicable laws.
4. This is an absolute and unconditional guaranty of payment and not of
collection, by Guarantor, jointly and severally with any other guarantor of the
Guaranteed Obligations in each and every particular, and Guarantor waives any
right to require that (a) any action be brought against Borrower or any other
person or entity, (b) Lender enforce its rights against any other guarantor of
the Guaranteed Obligations, (c) Lender proceed or enforce its rights against or
exhaust any security given to secure the Guaranteed Obligations, (d) Lender has
Borrower joined with Guarantor or any other guarantor of all or part of the
Guaranteed Obligations in any suit arising out of this Guaranty and/or the
Guaranteed Obligations, or (e) Lender pursue any other remedy in Lender's powers
whatsoever. Lender shall not be required to mitigate damages or take any action
to reduce, collect or enforce the Guaranteed Obligations. Guarantor waives any
defense arising by reason of any disability, lack of corporate authority or
power, or other defense of Borrower or any other guarantor of the Guaranteed
Obligations, and shall remain liable hereon regardless of whether Borrower or
any other guarantor be found not liable thereon for any reason. Should Lender
seek to enforce the obligations of Guarantor by action in any court, Guarantor
waives any necessity, substantive or procedural, that a judgment previously be
rendered against Borrower or any other person or entity or that Borrower or any
other person or entity be joined in such cause or that a separate action be
brought against Borrower or any other person or entity. The obligations of
Guarantor hereunder are several from those of Borrower or any other person or
entity (including without limitation any other surety for Borrower), and are
primary obligations concerning which Guarantor is the principal obligor. All
waivers herein contained shall be without prejudice to Lender at its option to
proceed against Borrower or any other person or entity, whether by separate
action or by joinder. The payment by Guarantor of any amount pursuant to this
Guaranty shall not in anywise entitle Guarantor to any right, title or interest
(whether by way of subrogation or otherwise) in and to any of the Guaranteed
Obligations or any proceeds thereof, or any security therefor, unless and until
the
Exhibit "P" Page 78
-----------
<PAGE>
full amount owing to Lender on the Guaranteed Obligations has been fully
paid, but when the same has been fully paid Guarantor shall be subrogated as to
any payments made by the Guarantors to the rights of Lender as against Borrower
and/or any endorsers, sureties or other guarantors.
5. Guarantor agrees that suit may be brought against Guarantor and any
other guarantors of the Guaranteed Obligations, jointly and severally, and
against one or more of them, less than all, without impairing the rights of
Lender, its successors or assigns, against the other guarantors; nor shall
Lender be required to join Borrower or any other guarantor or liable party in a
suit against a particular guarantor; and Lender may release Borrower and/or one
or more guarantor(s) or settle with such persons or entities as Lender deems fit
without releasing or impairing the rights of Lender to demand and collect the
balance of such indebtedness from the other remaining guarantors not so
released.
6. Guarantor hereby consents and agrees to each of the following to the
fullest extent permitted by law, and agrees that the Guarantor's obligations
under this Guaranty shall not be released, diminished, impaired, reduced or
adversely affected by any of the following, and waives any rights (including
without limitation rights to notice) which Guarantor might otherwise have as a
result of or in connection with any of the following:
(a) Any renewal, extension, modification, increase, decrease,
alteration or rearrangement of all or any part of the Guaranteed
Obligations or any instrument executed in connection therewith, or any
contract or understanding between Borrower and Lender, or any other person
or entity, pertaining to the Guaranteed Obligations;
(b) Any adjustment, indulgence, forbearance or compromise that might
be granted or given by Lender to Borrower or Guarantor or any person or
entity liable on the Guaranteed Obligations;
(c) The insolvency, bankruptcy arrangement, adjustment, composition,
liquidation, disability, dissolution, death or lack of power of Borrower or
Guarantor or any other person or entity at any time liable for the payment
of all or part of the Guaranteed Obligations; or any dissolution of
Borrower or Guarantor, or any sale, lease or transfer of any or all of the
assets of Borrower or Guarantor, or any changes in the shareholders,
partners, or members of Borrower or Guarantor; or any reorganization of
Borrower or Guarantor;
(d) The invalidity, illegality or unenforceability of all or any part
of the Guaranteed Obligations, or any document or agreement executed in
connection with the Guaranteed Obligations, for any reason whatsoever,
including without limitation the fact that the Guaranteed Obligations, or
any part thereof, exceed the amount permitted by law, the act of creating
the Guaranteed Obligations or any part thereof is ultra vires, the officers
----- -----
or representatives executing the documents or otherwise creating the
Guaranteed Obligations acted in excess of their authority, the Guaranteed
Obligations violate applicable usury laws, Borrower has valid defenses,
claims or offsets (whether at law, in equity or by agreement) which render
the Guaranteed Obligations wholly or partially uncollectible from Borrower,
Exhibit "P" Page 79
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<PAGE>
the creation, performance or repayment of the Guaranteed Obligations (or
the execution, delivery and performance of any document or instrument
representing part of the Guaranteed Obligations or executed in connection
with the Guaranteed Obligations, or given to secure the repayment of the
Guaranteed Obligations) is illegal, uncollectible, legally impossible or
unenforceable, or the documents or instruments pertaining to the Guaranteed
Obligations have been forged or otherwise are irregular or not genuine or
authentic;
(e) Any full or partial release of the liability of Borrower on the
Guaranteed Obligations or any part thereof, of any co-guarantors, or any
other person or entity now or hereafter liable, whether directly or
indirectly, jointly, severally, or jointly and severally, to pay, perform,
guarantee or assure the payment of the Guaranteed Obligations or any part
thereof, it being recognized, acknowledged and agreed by Guarantor that
Guarantor may be required to pay the Guaranteed Obligations in full without
assistance or support of any other person or entity, and Guarantor has not
been induced to enter into this Guaranty on the basis of a contemplation,
belief, understanding or agreement that other parties other than Borrower
will be liable to perform the Guaranteed Obligations, or Lender will look
to other parties to perform the Guaranteed Obligations;
(f) The taking or accepting of any other security, collateral or
guaranty, or other assurance of payment, for all or any part of the
Guaranteed Obligations;
(g) Any release, surrender, exchange, subordination, deterioration,
waste, loss or impairment of any collateral, property or security, at any
time existing in connection with, or assuring or securing payment of, all
or any part of the Guaranteed Obligations;
(h) The failure of Lender or any other person or entity to exercise
diligence or reasonable care in the preservation, protection, enforcement,
sale or other handling or treatment of all or any part of such collateral,
property or security;
(i) The fact that any collateral, security, security interest or lien
contemplated or intended to be given, created or granted as security for
the repayment of the Guaranteed Obligations shall not be properly perfected
or created, or shall prove to be unenforceable or subordinate to any other
security interest or lien, it being recognized and agreed by Guarantor that
Guarantor is not entering into this Guaranty in reliance on, or in
contemplation of the benefits of, the validity, enforceability,
collectability or value of any of the collateral for the Guaranteed
Obligations;
(j) Any payment by Borrower to Lender is held to constitute a
preference under the bankruptcy laws, or for any reason Lender is required
to refund such payment or pay such amount to Borrower or someone else;
(k) Any other action taken or omitted to be taken with respect to the
Guaranteed Obligations, or the security and collateral therefor, whether or
not such action or omission prejudices Guarantor or increases the
likelihood that Guarantor will be required to pay the
Exhibit "P" Page 80
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<PAGE>
Guaranteed Obligations pursuant to the terms hereof; it being the
unambiguous and unequivocal intention of Guarantor that Guarantor shall be
obligated to pay the Guaranteed Obligations when due, notwithstanding any
occurrence, circumstance, event, action, or omission whatsoever, whether
contemplated or uncontemplated, and whether or not otherwise or
particularly described herein, except for the full and final payment and
satisfaction of the Guaranteed Obligations; or
(l) The fact that all or any of the Guaranteed Obligations cease to
exist by operation of law, including without limitation by way of a
discharge, limitation or tolling thereof under applicable bankruptcy laws.
7. In the event any payment by Borrower or any other guarantor of all or
part of the Guaranteed Obligations to Lender is held to be a preference under
the bankruptcy laws, or if for any other reason Lender is required to refund
such payment or pay the amount thereof to any other party, such payment by
Borrower or by such guarantor to Lender shall not constitute a release of
Guarantor from any liability respecting payment of the Guaranteed Obligations,
and Guarantor agrees to pay such amount to Lender upon demand.
8. It is the intention of the parties hereto to comply with applicable
usury laws; accordingly, it is agreed that notwithstanding any provision to the
contrary in the Guaranteed Obligations or in this Guaranty, in any note or other
instrument, or in any documents securing payment thereof or hereof, or otherwise
relating thereto or hereto, no such provision shall require the payment or
permit the collection of interest in excess of the maximum permitted by such
laws. If any excess of interest in such respect is provided for, or shall be
adjudged to be so provided for, then in such event (a) the provisions of this
paragraph shall govern and control, (b) neither Guarantor nor Guarantor's heirs,
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 the excess
of the maximum amount permitted by such laws, (c) any such excess which may have
been collected shall be, at Lender's option, either applied as a credit against
the then unpaid principal amount owing on the Guaranteed Obligations, or
refunded, and (d) the effective rate of interest covered by this Guaranty shall
be automatically subject to reduction to the maximum lawful rate allowed under
applicable usury laws.
9. This Guaranty is for the benefit of Lender, and for such other persons
and entities as may from time to time become or be the holders of any Guaranteed
Obligations; and this Guaranty shall be transferable and negotiable, with the
same force and effect and to the same extent as the Guaranteed Obligations may
be transferable, it being understood that upon the assignment or transfer by
Lender of any Guaranteed Obligations, the legal holder of such Guaranteed
Obligations shall have all of the rights granted to Lender under this Guaranty.
10. Payment of all amounts hereunder shall be made at the offices of
Lender.
11. The term "Other Indebtedness" as used herein means all indebtedness, if
any, of Borrower to Lender other than the Guaranteed Obligations. If, at any
time, there is Other
Exhibit "P" Page 81
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<PAGE>
Indebtedness, (a) Lender, without in any manner impairing its rights hereunder,
may, at its option, exercise rights of offset by applying any deposit balances
to the credit of Borrower, first, to the Other Indebtedness, and the balance, if
any, to the Guaranteed Obligations, and (b) except as stated in the last
sentence of this paragraph, Lender may apply all amounts realized by Lender from
collateral or security held by Lender of the payment of Borrower's indebtedness,
first, to the Other Indebtedness and the balance, if any, to the Guaranteed
Obligations. If a particular security instrument expressly requires an
application different from that permitted under the preceding sentence, proceeds
realized by Lender from such security instrument shall be applied as provided in
such instrument.
12. Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by delivering the same against receipt
therefor or by depositing the same in the United States Postal Service, postage
prepaid, registered or certified mail, return receipt requested, addressed to
the respective parties at the address shown below or to such other address as
the intended recipient may have specified in a prior written notice received by
the sender (and if so given, shall be deemed given when mailed).
13. This Guaranty shall not be wholly or partially satisfied or
extinguished by Guarantor's partial payment of any amount due on the Guaranteed
Obligations, but shall continue in full force and effect as against Guarantor
for the full amount of the Guaranteed Obligations until payment in full thereof.
14. This Guaranty shall be binding upon Guarantor, his heirs, devisees,
executors, administrators, personal representatives, successors and assigns and
shall inure to the benefit of, and be enforceable by, Lender and its successors
and assigns and each and every other person who shall from time to time be or
become the owner or holder of any of the Guaranteed Obligations, and each and
every reference herein to "Lender" shall also include each and every successor,
assign, owner or holder. Guarantor shall not assign or delegate its obligations
hereunder without the prior written consent of Lender.
15. In the event of the death of Guarantor, the obligations of the
deceased Guarantor shall continue in full force and effect as to (i) all
Guaranteed Obligations that are outstanding on the date of Guarantor's death and
any renewals, extensions thereof, and (ii) all loans, advances, and other
extensions of credit made to or for the account of Borrower on or after the date
of the Guarantor's death pursuant to an obligation of Lender under any
commitment or agreement described in paragraph 1 hereof and made to or with
Borrower prior to the date of Guarantor's death.
16. The release by Lender of Borrower or one or more other guarantors of
all or part of the Guaranteed Obligations shall not affect the Guarantor, who
shall remain fully liable in accordance with the terms of this Guaranty.
17. This Guaranty, whether continuing, specific, and/or limited, shall be
in addition to and cumulative of, and not in substitution, novation or discharge
of, any and all prior or contemporaneous guaranty agreements by Guarantor or
other persons or entities, in favor of Lender or assigned to Lender by others.
Exhibit "P" Page 82
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<PAGE>
18. Guarantor represents and warrants that (i) this Guaranty is not
given with actual intent to hinder, delay or defraud any entity to which
Guarantor is or will become, on or after the date hereof, indebted; (ii)
Guarantor has received at least a reasonably equivalent value in exchange for
the giving of this Guaranty, including, without limitation, Guarantor's
shareholder interest in the Borrower; (iii) Guarantor is not insolvent on the
date hereof and will not become insolvent as a result of the giving of this
Guaranty; (iv) Guarantor is not engaged in a business or transaction, nor is
about to engage in a business or transaction, for which any property remaining
with Guarantor constitutes an unreasonably small amount of capital; or (v)
Guarantor does not intend to incur debts that will be beyond the Guarantor's
ability to pay as such debts mature.
19. This Guaranty shall be governed by and construed and interpreted in
accordance with the laws of the United States of America and the State of Texas.
Harris County, Texas shall be the proper place of venue to enforce payment or
performance under this Guaranty. Guarantor irrevocably agrees that any legal
proceeding arising out of or in connection with this Guaranty shall be brought
in the state district courts of Harris County, Texas or in the United States
District Court for the District in which Harris County, Texas is located.
20. Guarantor hereby represents and warrants to the Lender as follows:
(a) Financial Statements. Any financial statements and data which
--------------------
have heretofore been given to the Lender with respect to the Guarantor
fairly and accurately represent the financial condition of the Guarantor as
of the date hereof, and, since the date thereof, there has been no material
adverse change in the financial condition of the Guarantor. Guarantor
shall promptly deliver to the Lender, or the Borrower in time for the
Borrower to deliver the same to the Lender, current financial statements of
the Guarantor signed by the Guarantor and dated not more than ninety (90)
days after the close of Borrower's fiscal year.
(b) Address. The address of the Guarantor as specified below is true
-------
and correct and until the Lender shall have actually received a written
notice specifying a change of address and specifically requesting that
notices be issued to such changed address, the Lender may rely on the
address stated as being accurate.
21. No delay on the part of Lender in exercising any right hereunder or
failure to exercise the same shall operate as a waiver of such right, nor shall
any single or partial exercise of any right, power or privilege bar any further
or subsequent exercise of the same or any other right, power or privilege.
22. This Guaranty shall not be changed orally, but shall be changed only
by agreement in writing signed by the person against whom enforcement of such
change is sought.
23. The masculine and neuter genders used herein shall each include the
masculine, feminine and neuter genders and the singular number used herein shall
include the plural number.
Exhibit "P" Page 83
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The words "person" and "entity" shall include without limitation individuals,
corporations, partnerships, joint ventures, associations, joint stock companies,
trusts, unincorporated organizations, and governments and any agency or
political subdivision thereof.
24. If any provision of this Guaranty is determined to be invalid by any
court of competent jurisdiction or to be in violation of any applicable law,
such invalidity or violation shall have no effect on any other provisions of
this Guaranty (which shall remain valid and binding and in full force and
effect) or in any other jurisdiction, and to that end the provisions of this
Guaranty shall be considered severable.
25. If this Guaranty is given by a corporation, then the undersigned
guaranteeing corporation does hereby acknowledge that it has investigated fully
the benefits and advantages which will be derived by the undersigned from
execution of this Guaranty, and the Board of Directors of the undersigned
corporation has decided that, and the undersigned corporation does hereby
acknowledge, warrant and represent that, a direct or an indirect benefit will
accrue to the undersigned by reason of execution of this Guaranty.
26. GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY
OTHER LOAN DOCUMENT FOR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
27. To the maximum extent not prohibited by law, any controversy, dispute
or claim arising out of, in connection with, or relating to the Guaranteed
Obligations, 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 or this Guaranty, shall, at the request of any party (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"). If Title 9 of the United States Code is inapplicable
to any such claim, dispute or controversy for any reason, such arbitration shall
be conducted pursuant to the Texas General Arbitration Act and in accordance
with the Commercial Arbitration Rules of the AAA. In any such arbitration
proceeding: (i) all statutes of limitations which would otherwise be applicable
shall apply; and (ii) the proceeding shall be conducted in Houston, Texas, by a
single arbitrator, if the amount in controversy is $1,000,000.00 or less, or by
a panel of three 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 shall be either an active attorney or retired judge with an AAA
acknowledged expertise in the subject matter of the controversy, dispute or
claim. 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.
If any party to any Loan Document or this Guaranty 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
Exhibit "P" Page 84
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<PAGE>
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.
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) any Loan Document or this Guaranty, (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. The Commercial Arbitration Rules of the AAA are hereby modified to
this extent for the purposes of arbitration of any dispute, controversy or claim
arising out of, in connection with, or relating to the Guaranteed Obligations,
any Loan Document or this Guaranty. The parties hereby further agree to waive,
each to the other, any claims for punitive damages and agree neither an
arbitrator nor any court shall have the power to assess such damages.
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 or this Guaranty,
before, during or after any arbitration proceeding to: (i) exercise self-help
remedies such as setoff, or repossession; (ii) foreclose (judicially or
otherwise) any lien on or security interest in any real or personal 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 any Loan Document. Such emergency relief may be in
the nature of, but is not limited to prejudgment attachments, garnishments,
sequestrations, appointments of receivers, or other emergency injunctive relief
to preserve the status quo.
28. SUBJECT TO THE PROVISIONS OF PARAGRAPH 27 OF THIS GUARANTY AND WITH
RESPECT TO ANY AND ALL DISPUTES ARISING HEREUNDER, THE GUARANTOR HEREBY
IRREVOCABLY AND UNCONDITIONALLY:
(a) SUBMITS FOR HIMSELF AND HIS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS GUARANTY OR FOR RECOGNITION AND ENFORCEMENT OF
ANY JUDGMENT IN RESPECT OF ANY THEREOF, TO THE NON-EXCLUSIVE GENERAL
JURISDICTION OF THE COURTS OF THE STATE OF TEXAS, THE COURTS OF THE UNITED
STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF TEXAS, AND APPELLATE COURTS
FROM ANY THEREOF;
(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS, AND WAIVES ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE
TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT
SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES
NOT TO PLEAD OR CLAIM THE SAME;
(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING
MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL
(OR ANY SUBSTANTIALLY SIMILAR FORM AND MAIL), POSTAGE PREPAID, TO HIM AT
HIS ADDRESS SPECIFIED ON THE SIGNATURE PAGE HEREOF; AND
Exhibit "P" Page 85
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(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT TO SUE IN ANY OTHER JURISDICTION.
EXECUTED effective as of the 30th day of December, 1997.
NAB ASSET CORPORATION, a Texas corporation
By:_______________________________________
ALAN FERREE, Senior Vice President
Address: 2 Ada, Suite 100
Irvine, California 92618
STATE OF CALIFORNIA (S)
(S)
COUNTY OF __________ (S)
This instrument was acknowledged before me on this _________________ day of
December, 1997, by ALAN FERREE, Senior Vice President of NAB ASSET CORPORATION,
a Texas corporation, on behalf of said corporation.
__________________________________________
NOTARY PUBLIC IN AND FOR
THE STATE OF CALIFORNIA
[SEAL]
Exhibit "P" Page 86
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EXHIBIT "Q"
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CONSTRUCTION LOAN DOCUMENTS
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Exhibit "Q" Page 87
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