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EXHIBIT 10.1(a)
CONSTRUCTION LOAN AGREEMENT
(Texas Property)
This CONSTRUCTION LOAN AGREEMENT ("Agreement") is dated for reference
purposes as of August 6, 1997, between PACIFIC UNITED, L.P., a Texas limited
partnership (the "Borrower"), NHC HOLDINGS CORP., a Nevada corporation (the
"Guarantor"), and BANK OF AMERICA TEXAS, N.A. (the "Bank").
FACTUAL BACKGROUND
A. Bank has agreed to make a loan to Borrower in the principal
amount of Three Million Six Hundred Seventy-Five Thousand and No/100 Dollars
($3,675,000.00) (the "Loan"). Borrower will use the Loan to provide financing
for constructing infrastructure and other improvements (the "Improvements") for
development of 87 single-family lots (the "Lots") being situated upon real
property (the "Land") located in Dallas County, Texas, as described in Exhibit
A. Borrower will also use the Loan to pay other costs and expenses related to
the development of the Land. The Improvements are to be built in two phases.
Phase I Improvements (herein so called) shall consist of improvements to serve
44 Lots. Phase II Improvements (herein so called) shall consist of
improvements to serve 43 Lots. Subject to force majeure, Borrower intends to
complete construction of the Phase I Improvements on or before May 30, 1998
(the "Phase I Completion Date") and (subject to obtaining an appropriate
extension of the Maturity Date, in accordance with the provisions of the
promissory note hereinafter described) intends to complete construction of the
Phase II Improvements on or before January 1, 2000 (the "Phase II Completion
Date").
B. The Improvements are described in plans and specifications (the
"Plans and Specifications") which were prepared by a licensed engineer (the
"Engineer") under an agreement with Borrower (the "Engineering Contract"). The
Improvements will be constructed by a licensed general contractor (the
"Contractor"), which may be Borrower or a third party. In this Agreement, the
term "Contractor" refers either to Borrower acting in the capacity of general
contractor, or to a third party general contractor. Exhibit B more fully
describes the Improvements and Plans and Specifications, and also sets forth
further information and requirements of Bank relating to the Engineer and
Contractor.
C. Borrower is executing a promissory note (the "Note") payable to
Bank evidencing the Loan. The Note is to be secured by a Deed of Trust,
Security Agreement, Financing Statement and Assignment of Rental ("Deed of
Trust") covering the Land and Improvements and certain other property. In this
Agreement, the "Property" refers to all or any part of the property affected by
the Deed of Trust, or any interest in all or any part of it, as the context may
require.
D. Guarantor has agreed to guaranty Borrower's obligations to Bank
in accordance with a Payment Guaranty.
E. As of the date of this Agreement, Borrower and Bank do not
contemplate that Borrower will purchase any form of interest rate protection
for the Loan. For this reason, the defined terms "Additional Interest" and
"Interest Rate Protection Agreement" have no application to the Loan and should
be disregarded in construing the Loan Documents.
F. The maturity date of the Loan is August 6, 1999, unless extended
to August 6, 2001, as permitted under the Note.
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G. This Agreement, the Note and the Deed of Trust, together with all
of their exhibits, and all other documents which evidence, guaranty, secure or
otherwise pertain to the Loan, collectively constitute the "Loan Documents."
The Loan Documents include the documents listed on the attached Exhibit C.
Therefore, Bank and Borrower agree as follows:
AGREEMENT
I. Disbursement
1.1 Cost Breakdown
(a) Bank shall make disbursements of the Loan based on a
detailed breakdown ("cost breakdown") of construction, financing and other
development costs for the Improvements, as more fully described in the attached
Exhibit D. The initial cost breakdown, prepared by Borrower and approved by
Bank, is attached as Exhibit D-1.
(b) The cost breakdown restricts disbursements to line items
in cost categories. Borrower agrees to use disbursements solely in conformity
with the cost breakdown. If the Improvements cannot be completed in strict
conformity with the most recently approved cost breakdown, Borrower shall
immediately submit to Bank for its approval a revised cost breakdown in the
form attached as Exhibit D-2. The revised cost breakdown shall identify
Borrower's requested changes in any line items and shall be accompanied by
Borrower's written statement of reasons for the changes. Borrower shall
execute such documentation and provide such endorsements to Bank's title
insurance policy as Bank may reasonably require in connection with the revised
cost breakdown. If further changes are required, Borrower shall seek Bank's
approval, following the procedures described above. Bank need make no further
disbursements as to the changing line items unless and until it approves the
revised cost breakdown. Bank reserves the right to approve or disapprove any
cost breakdown in its reasonable judgment. The most recently approved cost
breakdown supersedes all previously approved cost breakdowns.
1.2 Loan in Balance; Borrower's Funds Account
(a) The Loan is "in balance" whenever the amount of the
undisbursed Loan funds, plus any sums provided or to be provided by Borrower as
shown in the cost breakdown most recently approved by Bank, are sufficient in
the reasonable judgment of Bank to pay, through completion of the Improvements
and maturity of the Loan, all of the following sums: (i) all costs of
construction, marketing, ownership, maintenance and sale of the Lots; and (ii)
all interest, including any and all Additional Interest, and all other sums
which may accrue or be payable under the Loan Documents. Unless otherwise
shown in the cost breakdown, all sums provided by Borrower will be deposited in
an interest-bearing account being maintained at Bank in the name of Borrower
(the "Borrower's Funds Account") on and subject to such terms and conditions,
and at such interest rates, as are generally made available to Bank's
commercial customers. The Loan is "out of balance" if and when Bank in its
reasonable judgment determines that there are insufficient funds (including all
undisbursed Loan funds and any sums provided and to be provided by Borrower) to
pay for all such costs and sums payable under the Loan Documents.
(b) Borrower acknowledges that the Loan may become "out of
balance" in numerous ways, not all of which may now be foreseen. Borrower
further acknowledges that the Loan may become "out of balance" from a shortage
of funds in any single line item or category of the cost breakdown, even if
there are undisbursed Loan funds in other line items or categories.
Undisbursed Loan funds in one category or line item may not be applied to
another category or line item unless
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either the cost breakdown allows such use (and only to the extent specifically
allowed) or Bank consents in writing to such use in each instance, such consent
not to be unreasonably withheld as long as the total undisbursed Loan funds
from line items other than line items for interest on the Loan are equal to or
greater than the unpaid cost to complete the Improvements.
(c) Whenever the Loan becomes "out of balance," Bank may make
written demand on Borrower to deposit Borrower's own funds into the Borrower's
Funds Account in an amount sufficient in Bank's reasonable judgment to cause
the Loan to be "in balance." Upon Borrower's request, Bank shall advise
Borrower of Bank's basis for determining the Loan is "out of balance." Subject
to the provisions of subparagraph 1.2(b), Borrower shall deposit all funds
required by Bank's demand within three (3) business days thereafter. If
required by Bank, Borrower shall also submit, for Bank's approval, a revised
cost breakdown within fifteen (15) days after any such demand.
(d) At any time, Bank may evaluate the sufficiency of
undisbursed Loan funds allocated for payment of future interest, including any
Additional Interest ("Interest Reserve"), exercising its reasonable judgment in
light of: (i) Bank's projections of interest rates for period(s) up to and
including the full remaining term of the Loan (and permitted extensions, if
any); (ii) cost overruns or change orders; (iii) failure of the Lots to sell at
the rate projected by Borrower in Exhibit E (the "Pro Forma Schedule")
described in Section 3.1 below. Based on Bank's evaluation of these data and
projections, the Loan may be "out of balance." If this happens, Bank may
exercise its rights under clause (c) above, or if it so chooses, Bank may make
written demand on Borrower to pay all future interest as it accrues, including
any and all Additional Interest, out of Borrower's own funds until the Interest
Reserve is sufficient in Bank's reasonable judgment to cover any and all such
amounts which might become due during the remaining term of the Loan.
1.3 Disbursement Conditions, Amounts and Procedures. The
Disbursement Schedule attached as Exhibit F sets forth disbursement conditions,
amounts and procedures applicable to the Loan. Bank shall disburse the Loan as
described in Exhibit F and elsewhere in this Agreement.
1.4 Termination of Disbursements. Bank shall have no obligation to
make, and Borrower shall have no right to require, any disbursement of Loan
funds after the earlier to occur of the full disbursement of the Loan or the
Maturity Date, as the same may be extended.
II. Covenants of the Borrower
Borrower promises to keep each of the covenants set forth below, unless
Bank has waived compliance in writing.
2.1 Commencement and Completion of Improvements
(a) Borrower has commenced and shall diligently continue
construction to completion.
(b) By the Phase I Completion Date:
(i) Borrower shall have completed construction of all
Phase I Improvements such that upon application therefor by a builder,
building permits could be obtained for construction of a single family
home upon each of forty-four (44) Lots;
(ii) The Phase I Improvements have been inspected and
finally approved by the appropriate governmental authorities and except
for building permits for construction of specific homes and related
permits customarily obtained by a builder, the appropriate
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governmental authorities shall have issued all permits and approvals
necessary to begin construction of single family homes on each of the
Lots;
(iii) All costs and liens relating to the completed Phase
I Improvements have been paid or discharged.
(c) By the Phase II Completion Date:
(i) Borrower shall have completed construction of all
Phase II Improvements such that upon application therefor by a builder,
building permits could be obtained for construction of a single family
home upon each of the remaining forty-three (43) Lots;
(ii) The Phase II Improvements have been inspected and
finally approved by the appropriate governmental authorities and except
for building permits for construction of specific homes and related
permits customarily obtained by a builder, the appropriate governmental
authorities shall have issued all permits and approvals necessary to
begin construction of single family homes on each of the Lots;
(iii) All costs and liens relating to the completed Phase
II Improvements have been paid or discharged.
2.2 Requirements. Borrower shall construct the Improvements in a
good and workmanlike manner in substantial accordance with sound building
practices as well as the Plans and Specifications and the recommendations of
any soils report which is satisfactory to Bank. Borrower shall comply with all
existing and future laws, regulations, orders, building codes, restrictions and
requirements of, and all agreements with and commitments to, all governmental,
judicial or legal authorities having jurisdiction over the Property, including
those pertaining to the construction, sale, or financing of the Improvements,
and with all recorded covenants and restrictions affecting the Property (all
collectively, the "Requirements").
2.3 Changes
(a) Borrower agrees to provide Bank with copies of all change
orders, together with all additional documents that Bank may reasonably
require. These documents may include the following: (i) plans and
specifications indicating the proposed change; (ii) a written description of
the proposed change and related working drawings; and (iii) a written estimate
of the cost of the proposed change and the time necessary to complete it.
(b) Borrower shall obtain Bank's prior written approval of any
change in the Plans and Specifications which:
(i) at the time of such requested change, it is reasonably
foreseeable that the change might materially adversely affect the value
of Bank's security; or
(ii) regardless of cost, is a material change in
structure, design, function or appearance of the Improvements; or
(iii) requires the approval of any other person or entity;
or
(iv) would cause any line item or category of the cost
breakdown to be increased or decreased by five percent (5%) or more; or
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(v) might delay completion of the Phase I Improvements
beyond the Phase I Completion Date or of the Phase II Improvements
beyond the Phase II Completion Date, provided, that Bank shall not
unreasonably refuse to extend either completion date to the extent
completion is delayed by force majeure.
(c) Borrower shall also obtain Bank's prior written approval
of any change in any work or materials for the Improvements (whether positive
or negative) which exceeds Ten Thousand Dollars ($10,000.00) in amount and
which causes any line item of the cost breakdown to be increased or decreased
by five percent (5%) or more. Also, the prior written approval of Bank shall
be obtained for any change in any work or materials which, when added to all
prior changes, exceeds Twenty-five Thousand and No/100 Dollars ($25,000.00) in
aggregate amount (whether positive or negative).
(d) In addition, Borrower shall obtain Bank's prior written
approval of all material changes in the scope or general conditions of the
Construction Contract, the Engineering Contract, or any other contracts for the
construction of the Improvements. Finally, Borrower shall obtain from the
appropriate persons or entities all approvals of any changes in plans,
specifications, work, materials or contracts that are required by any of the
Requirements, or under the terms of any lease, loan commitment or other
agreement relating to the Property.
(e) Bank may take a reasonable time to evaluate any requests
for proposed changes, and may require that all other approvals required from
other parties be obtained before it reviews any requested change. Bank may
approve or disapprove changes in the exercise of its reasonable judgment.
Borrower acknowledges that delays may result, and agrees that so long as the
delays are not unreasonable in duration, they shall not affect Borrower's
obligation to complete the Phase I Improvements on or before the Phase I
Completion Date or to complete the Phase II Improvements on or before the Phase
II Completion Date.
2.4 Construction Information and Verification
(a) Within fifteen (15) days after receiving notification from
Bank, Borrower shall deliver to Bank any and all of the following information
and documents that Bank may request, all in forms reasonably acceptable to
Bank:
(i) Current plans and specifications for the
Improvements certified by the Engineer as being complete and accurate;
(ii) A current, complete and correct list showing the
name, address and telephone number of each contractor, subcontractor and
material supplier engaged in connection with the construction of the
Improvements, and the total dollar amount of each contract and
subcontract (including any changes) together with the amounts paid
through the date of the list;
(iii) True and correct copies of the most current
versions of all executed contracts and subcontracts identified in the
list described in clause (ii) above, including any changes;
(iv) A current construction progress schedule showing
the progress of construction and the projected sequencing and completion
times for uncompleted work, all as of the date of the schedule;
(v) Any update to any item described above, which
Borrower may have previously delivered to Bank;
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(vi) Following completion of the Improvements, as-built
plans and specifications for the Improvements as actually completed,
certified by the Engineer as being complete and accurate;
(vii) Following completion of the Improvements, as-built
survey for the Improvements as actually completed, certified by a
registered public surveyor acceptable to Bank.
(b) Borrower expressly authorizes Bank to contact the
Engineer, Contractor, Borrower's surveyor, or any contractor, subcontractor,
material supplier, surety or any governmental authority or agency to verify any
information disclosed in accordance with this Section 2.4, and Borrower hereby
consents to and directs all such persons and entities to provide full and
complete information with respect to Borrower, Guarantor, and the Improvements.
Subject to the terms of the applicable contract, any defaulting architect,
engineer, contractor, subcontractor, material supplier or surety shall be
promptly replaced, and Borrower shall promptly deliver all required information
and documents to Bank regarding each replacement architect, engineer,
contractor, subcontractor, material supplier and surety. Bank may disapprove
any architect, engineer, contractor, subcontractor, material supplier, surety
or other party whom Bank in its reasonable judgment may deem financially or
otherwise unqualified; however, the absence of any such disapproval shall not
constitute a representation of qualification.
(c) If, based on any construction progress schedule or other
materials submitted by Borrower, Bank in its reasonable judgment determines
that, subject to Force Majeure, the Phase I Improvements will not be completed
by the Phase I Completion Date or that the Phase II Improvements will not be
completed by the Phase II Completion Date, Bank may request Borrower in writing
to reschedule the work of construction to permit timely completion. Within
fifteen (15) days after receiving such a request from Bank, Borrower shall
deliver to Bank a revised construction progress schedule showing completion of
the Phase I Improvements by the Phase I Completion Date and of the Phase II
Improvements by the Phase II Completion Date or, if such completion cannot be
achieved by such dates, the earliest date thereafter that completion can be
obtained.
2.5 Permits, Licenses and Approvals. Borrower shall properly obtain,
comply with and keep in effect all permits, licenses and approvals which are
required to be obtained from governmental bodies in order to construct the
Improvements and to market and sell the Lots. Borrower shall promptly deliver
copies of all such permits, licenses and approvals to Bank.
2.6 Purchase of Materials; Conditional Sales Contracts. Borrower
shall not purchase or contract for any materials, equipment, furnishings,
fixtures or articles of personal property to be placed or installed on the Land
or in any Improvements under any security agreement or other agreement where
the seller reserves or purports to reserve title or the right of removal or
repossession, or the right to consider them personal property after their
incorporation in the work of construction, unless Bank in each instance has
authorized Borrower to do so in writing.
2.7 Site Visits; Right to Stop Work
(a) Bank and its agents and representatives shall have the
right at any reasonable time to enter and visit the Property for the purposes
of performing an appraisal, observing the work of construction and examining
all materials, plans, specifications, working drawings and other matters
relating to the construction. For purposes of these site visits, Borrower
shall at all times maintain a full set of working drawings at the construction
site. Bank shall also have the right to examine, copy and audit the books,
records, accounting data and other documents of Borrower and its contractors
which relate to the Property or construction of the Improvements. In each
instance, Bank shall give Borrower reasonable notice before entering the
Property. Bank shall make reasonable efforts to avoid
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interfering with Borrower's use of the Property when exercising any of the
rights granted in this Section 2.7.
(b) If Bank in its reasonable judgment determines that any
work or materials fail to conform to the approved Plans and Specifications or
sound building practices in any material manner, or that they otherwise depart
from any of the material requirements of this Agreement, Bank may require the
work to be stopped and withhold disbursements until the matter is corrected.
If this occurs, Borrower shall promptly correct the work to Bank's reasonable
satisfaction, and pending completion of such corrective work shall not allow
any other work to proceed. No such action by Bank shall affect Borrower's
obligation to complete the Phase I Improvements on or before the Phase I
Completion Date and the Phase II Improvements on or before the Phase II
Completion Date.
(c) Bank is under no duty to visit the construction site, or
to supervise or observe construction or to examine any books or records. Any
site visit, observation or examination by Bank shall be solely for the purpose
of protecting Bank's rights and interests. No site visit, observation or
examination by Bank shall impose any liability on Bank or result in a waiver of
any default of Borrower. In no event shall any site visit, observation or
examination by Bank be a representation that there has been or shall be
compliance with the Plans and Specifications, that the construction is free
from defective materials or workmanship, or that the construction complies with
the Requirements or any other applicable governmental law. Neither Borrower
nor any other party is entitled to rely on any site visit, observation or
examination by Bank. Bank owes no duty of care to protect Borrower or any
other party against, or to inform Borrower or any other party of, any negligent
or defective design or construction of the Improvements, or any other adverse
condition affecting the Property.
2.8 Protection Against Lien Claims. Borrower shall promptly pay or
otherwise discharge all claims and liens for labor done and materials and
services furnished in connection with the construction of the Improvements.
Borrower shall have the right to contest in good faith any claim or lien,
provided that it does so diligently and without prejudice to Bank or delay in
completing the Improvements. Upon Bank's request, Borrower shall promptly
provide a bond, cash deposit or other security which Bank in the exercise of
its reasonable judgment determines to be satisfactory.
2.9 Signs and Publicity. At Bank's request, Borrower shall post
signs on the Property for the purpose of identifying Bank as the construction
lender, and shall use its best efforts to identify Bank in publicity concerning
the project, but Borrower shall not be required to incur any material expense
in connection therewith. In addition, Bank shall have the right to post signs
on the Property identifying itself as the construction lender for the Property,
and may refer to the Property in its own promotional and advertising materials.
Borrower shall not post signs, or otherwise identify Bank as the construction
lender, except with Bank's prior written consent in each instance.
2.10 Insurance
(a) Borrower shall provide, maintain and keep in force at all
times during any period of construction the builder's "all risk" insurance
required under subsection 1.1(g) of Exhibit F. At all times prior to repayment
of the Loan, Borrower shall provide, maintain and keep in force all other
insurance required by Exhibit F. Also at all such times, Borrower shall
provide, maintain and keep in force any and all additional insurance that Bank
in its reasonable judgment may from time to time require, against insurable
hazards which at the time are commonly insured against in the case of property
similarly situated. Such additional insurance may include flood insurance as
required by federal law and earthquake insurance as required by Bank. At
Bank's request, Borrower shall supply Bank with an original or certified copy
of any policy.
(b) All policies of insurance required under the Loan
Documents shall be issued by companies approved by Bank having a minimum A.M.
Best's rating acceptable to Bank. The limits,
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coverage, forms, deductibles, inception and expiration dates and cancellation
provisions of all such policies shall be acceptable to Bank. In addition, each
required property insurance policy shall contain a mortgagee clause (Texas Form
130 or its equivalent) in favor of Bank, and shall provide that all proceeds be
payable to Bank to the extent of its interest. An approval by Bank is not, and
shall not be deemed to be, a representation of the solvency of any insurer or
the sufficiency of any amount of insurance.
(c) Each policy of insurance required under the Loan Documents
shall provide that it may not be modified or canceled without at least thirty
(30) days' prior written notice to Bank. When any required insurance policy
expires, Borrower shall furnish Bank with proof acceptable to Bank that the
policy has been reinstated or a new policy issued, continuing in force the
insurance covered by the policy which expired. Borrower shall also furnish
Bank with evidence satisfactory to Bank that all premiums for such policy have
been paid within thirty (30) days of renewal or issuance. If Bank fails to
receive such proof and evidence, Bank shall have the right, but not the
obligation, to obtain current coverage and advance funds to pay the premiums
for it. Borrower shall repay Bank immediately on demand for any advance for
such premiums, which shall be considered to be an additional loan to Borrower
bearing interest at the Reference-based Rate, as defined in the Note, and
secured by the Deed of Trust and any other collateral held by Bank in
connection with the Loan.
2.11 Cooperation. Borrower shall cooperate at all times with Bank in
bringing about the timely completion of the Improvements, and Borrower shall
resolve all disputes arising during the work of construction in a manner which
shall allow work to proceed expeditiously.
2.12 Maximum Loan-to-Value Ratio. Borrower agrees that the ratio of
the total committed amount of the Loan (minus any payment of principal received
and applied to the Loan) to the aggregate wholesale value of the Property then
subject to the Deed of Trust ("Aggregate Wholesale Value") shall at no time
exceed seventy percent (70%) (the "Maximum Loan-to-Value Ratio"). For purposes
of this Section 2.12, Bank shall determine the Aggregate Wholesale Value of the
Property using a methodology which (i) conforms to then-current regulatory
requirements, (ii) is considered by Bank to be reasonable and appropriate under
the circumstances, and (iii) takes into account then-current market conditions,
discount rates, and absorption rates, all as determined by Bank. If Bank at
any time should determine that such ratio has been exceeded, Bank may make
written demand on Borrower to repay principal of the Loan in an amount
sufficient in Bank's reasonable judgment to cause the Maximum Loan-to-Value
Ratio to be met. Borrower shall make any such payment of principal within
fifteen (15) days after Bank's demand.
2.13 [Intentionally omitted]
2.14 Income from Property. Borrower shall first apply all revenues
from sales of Lots, and all other income derived from the Property, to pay
costs and expenses associated with the ownership, maintenance, development,
operation and marketing of the Land and Improvements, including all amounts
then required to be paid under the Loan Documents, before using or applying
such income for any other purpose. Unless and until all such costs and
expenses are paid in full, and the Loan is "in balance," Borrower shall not
distribute any such income to any of its partners or shareholders, or allow any
partner or shareholder to withdraw capital, or make any payments on
indebtedness owed to any partner or shareholder. Despite the foregoing,
Borrower is not prohibited from paying or distributing to any of its partners
or shareholders (a) such reasonable management fees or reasonable salary as
Bank may find acceptable from time to time, and (b) an amount equal to any
income taxes imposed on that partner or shareholder which are attributable to
Borrower's income from the Property.
2.15 Payment of Expenses. Borrower shall pay Bank's reasonable costs
and expenses incurred in connection with the making, disbursement and
administration of the Loan, as well as any revisions, extensions, renewals or
"workouts" of the Loan, and in the exercise of any of Bank's rights
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or remedies under this Agreement. Such reasonable costs and expenses include
charges for title insurance (including endorsements), filing, recording and
escrow charges, fees for appraisal, architectural and engineering review,
construction services and environmental services, mortgage taxes, reasonable
legal fees and expenses of Bank's counsel and any other reasonable fees and
costs for services, regardless of whether such services are furnished by Bank's
employees or agents or independent contractors.
2.16 Financial Information. Borrower shall keep true and correct
financial books and records on a cash basis for the construction of the
Improvements. Within one hundred twenty (120) days after the end of each
fiscal year until the Loan is paid in full, Borrower shall deliver balance
sheets, income statements and financial statements to Bank for itself and
audited financial statements for Guarantor, together with a statement showing
all changes in the financial condition of Borrower and Guarantor which occurred
during the preceding fiscal year. Within forty-five (45) days of the end of
the first three fiscal quarters of each fiscal year, Borrower shall provide to
Bank quarterly operating statements covering Borrower. Borrower shall promptly
provide Bank with any additional audited financial information that Borrower or
Guarantor may obtain, and shall deliver, signed copies of Borrower's and
Guarantor's federal income tax returns within thirty (30) days after filing
with the Internal Revenue Service. Borrower and Guarantor shall deliver such
other information as Bank may reasonably request concerning the affairs and
properties of Borrower and Guarantor.
2.17 Notices. Borrower shall promptly notify Bank in writing of:
(a) Any litigation affecting Borrower or, if known to
Borrower, any litigation affecting Guarantor where the amount claimed is Fifty
Thousand Dollars ($50,000.00) or more, unless the claim does not arise in
connection with the project and is fully covered by Borrower's liability
insurance or Guarantor's liability insurance;
(b) Any communication, whether written or oral, that Borrower
may receive from any governmental, judicial or legal authority, giving notice
of any claim or assertion that the Land or Improvements fail in any respect to
comply with any of the Requirements or any other applicable governmental law;
(c) Any material adverse change in the physical condition of
the Property (including any damage suffered as a result of earthquakes,
hurricanes, tornadoes or floods) or Borrower's or, if known to Borrower,
Guarantor's financial condition or operations; and
(d) Any default by the Contractor or any subcontractor having
a subcontract for more than $100,000, or any material adverse change in the
financial condition or operations of any of them.
2.18 Keeping Guarantor Informed. Borrower shall keep Guarantor
informed of Borrower's financial condition and business operations, the
condition and all uses of the Property, including all changes in condition or
use, and any and all other circumstances which may affect Borrower's ability to
pay or perform its obligations under the Loan Documents. In addition, Borrower
shall deliver to Guarantor all of the financial information described in
Section 2.16 within the times given in that Section.
2.19 Performance of Acts. Upon request by Bank, Borrower shall
perform all acts which may be reasonably necessary or advisable to perfect any
lien or security interest provided for in the Loan Documents or to carry out
the intent of the Loan Documents.
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III. The Lots
3.1 Pro Forma Schedule
(a) Borrower has prepared and Bank has approved the Cash Flow
Projections attached as Exhibit E which sets forth, among other things, the
following projections and economic assumptions made by Borrower:
(i) Absorption during time periods before and after
completion of the Improvements;
(ii) Estimated cash flow through the term of the Loan;
and
(iii) Any and all other material economic terms and
conditions bearing upon Borrower's projections regarding the sale of the
Lots or the Property.
(b) Borrower understands and acknowledges that Bank, in making
the Loan, has relied on Borrower's projections as set forth in the Pro Forma
Schedule. Borrower further understands and acknowledges that such projections
represent the minimum level of economic achievement acceptable to Bank. At all
times, Borrower shall use its best efforts to meet the projections of the
currently approved Pro Forma Schedule.
(c) Whenever Borrower knows or believes there has been or will
be a material failure to meet the projections of the Pro Forma Schedule,
Borrower shall submit to Bank for its approval a revised Pro Forma Schedule in
the form of Exhibit E. Also, whenever Bank in its reasonable judgment
determines that there has been or will be a material failure to meet such
projections, Bank may make written demand on Borrower to submit a revised Pro
Forma Schedule to Bank for its approval. Borrower shall submit a revised Pro
Forma Schedule to Bank within fifteen (15) days after any such demand.
(d) The revised Pro Forma Schedule shall identify any changes
in any projections or other economic terms and shall be accompanied by
Borrower's statement of reasons for the changes. Borrower shall execute such
documentation and provide such endorsements to Bank's title insurance policy as
Bank may reasonably require in connection with the revised Pro Forma Schedule.
If, in Bank's judgment, the Loan is or would be out of balance, Bank need make
no further disbursements unless and until it approves the revised Pro Forma
Schedule. Bank reserves the right to approve or disapprove any Pro Forma
Schedule in its reasonable judgment. The most recently approved Pro Forma
Schedule supersedes all previously approved Pro Forma Schedules.
3.2 Lot Sales
(a) Bank acknowledges that Borrower has entered into contracts
for the sale of the Lots and Bank has approved such contracts, all as described
in Section 3.7. The following provisions shall apply with respect to any sale
of the Lots except pursuant to such approved contracts. Subject to the
provisions of Section 3.7 of this Agreement, except with Bank's prior written
consent, which consent shall not be unreasonably withheld, Borrower shall not
sell, lease, restrict, or encumber any of the Property except in accordance
with this Section 3.2. A contract between Borrower, as seller, and a third
party, as purchaser, for the sale of one or more Lots is hereinafter referred
to as a "Lot Sale Contract." Bank has approved Borrower's standard Lot Sale
Contract in the form attached as Exhibit G. Borrower shall not materially
modify that approved contract form without Bank's prior written consent in each
instance (Bank's approval not to be unreasonably withheld). Each Lot Sale
Contract shall be subject to Bank's written approval (Bank's approval not to be
unreasonably withheld) as to form and substance prior to execution and
delivery. Despite the foregoing, however, Borrower may
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enter into Lot Sale Contract (and amendments to such contracts) in the ordinary
course of business with bona fide third party purchasers without Bank's prior
written consent if:
(i) The contract is executed in the form of Exhibit G
without material modification and provides for the full purchase price
to be payable in cash at the closing of the sale;
(ii) Bank receives a copy of the executed contract within
fifteen (15) days after it is executed (accompanied by all financial
information obtained by Borrower pertaining to the purchaser);
(iii) Borrower, following the exercise of due diligence,
has determined that the purchaser is financially capable of performing
all of its obligations under the contract and has at least two (2)
years' experience in constructing and selling single family homes in the
Dallas-Fort Worth market;
(iv) The contract conforms to the projections of the Pro
Forma Schedule and reflects an arm's-length transaction at the
then-current market rate for comparable lots;
(v) The Lots subject to the contact are not then subject
to purchase agreement or option to purchase in favor of any other party;
(vi) The contract must expressly provide that it is
subject to the rights of Bank under the Loan Documents and that upon a
foreclosure of the Deed of Trust, Bank may, at its option, succeed to
Borrower's rights under such contract or Bank may, without liability to
Borrower or the purchaser, terminate such contract by written notice to
the purchaser;
(vii) The contract does not affect in excess of 44 Lots;
and
(viii) The contract, together with all contracts
previously executed, does not cause the Loan to become "out of balance."
Borrower acknowledges that the Loan may become "out of balance" if the
seller's aggregate economic obligations under the contract exceed those
projected in the Pro Forma Schedule, or if the net sales proceeds from
such contracts would yield revenues at a lower level or at a later time
than set forth in the Pro Forma Schedule.
(b) Bank in the exercise of its sole discretion may consider
any executed Lot Sale Contract it may receive to be unsatisfactory if the
contract fails to meet the requirements of this Agreement in all material
respects. If this happens, or if Borrower at any time fails to submit any
executed Lot Sale Contract (and accompanying information) at the time required
by this Section 3.2, or if any Event of Default (as defined in Section 5.1) has
occurred and is continuing, Bank may make written demand on Borrower to submit
all future Lot Sales Contracts for Bank's approval prior to execution.
Borrower shall comply with any such demand by Bank.
(c) Sales. Borrower will use diligent, good faith efforts to
sell the Lots to third-parties for an all-cash price sufficient to yield net
sales proceeds of at least $50,690 per Lot (the "Minimum Net Proceeds").
Provided no Event of Default (or event which with notice or the passage of time
would be an Event of Default) has occurred under the Loan Documents, Bank will
release Lots from the lien of the Deed of Trust upon application of the Minimum
Net Proceeds or one hundred percent (100%) of the net sales proceeds from such
sale, whichever is greater, to the unpaid principal balance of the Loan. The
Deed of Trust contains additional requirements for obtaining the release of
such tracts from the lien of the Deed of Trust. The Minimum Net Proceeds
required by Bank is intended to be equal to the product of (a) the quotient
resulting from dividing (i) the sum of the total amount of the Loan, including
the unpaid principal balance plus any committed but undisbursed Loan
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Construction Loan Agreement/Pacific United, L.P. Page 11
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amount by (ii) the total number of Lots covered by the Deed of Trust;
multiplied by (b) 120%. Following completion of the Improvements, if the
outstanding balance of the Loan is less than the total committed amount of the
Loan, then upon Borrower's written request Bank shall make an appropriate
adjustment of the Minimum Net Proceeds in accordance with the formula stated
above. Following any such adjustment, Borrower shall be deemed to have waived
the right to obtain any further disbursement of proceeds of the Loan.
3.3 Notices Regarding Contracts. If any purchaser at any time
breaches or disavows its Lot Sale Contract or claims any breach of Borrower's
obligations, Borrower shall promptly notify Bank.
3.4 Lot Information and Documents. Borrower has disclosed to Bank
any and all Lot Sale Contracts or other agreements in effect at the date of
this Agreement which affect the Property or any portion of or interest in it.
Borrower shall promptly deliver to Bank such sales and marketing schedules and
reports, operating statements and other information relating to the Property as
Bank from time to time may request. In addition, Borrower shall promptly
obtain and deliver to Bank such assignments of Borrower's rights under Lot Sale
Contracts, estoppel certificates and subordination agreements executed by such
purchasers under any Lot Sale Contract in such forms as Bank from time to time
may require.
3.5 Purpose and Effect of Contract Approval. No approval of any Lot
Sale Contract by Bank shall be for any purpose other than to protect Bank's
security and to preserve Bank's rights under the Loan Documents. No approval
by Bank shall result in a waiver of any default of Borrower. In no event shall
any approval by Bank of a Lot Sale Contract be a representation of any kind
with regard to the contract or its enforceability, or the financial capacity of
any purchaser or guarantor.
3.6 Seller's Obligations. Borrower shall perform all obligations
required to be performed by it under any Lot Sale Contract or any other
agreement affecting any part of the Property.
3.7 Existing Lot Sale Contracts. Prior to the date of this
Agreement, Borrower entered into a Lot Sale Contract (the "Existing Lot Sale
Contract") with Newmark Homes for the sale of 100% of the Lots, a copy of which
is attached hereto as Exhibit G. Bank has approved such contract. As
additional security for the Loan, Borrower shall collaterally assign to Bank
all of its rights in the Existing Lot Sale Contract and shall deliver to Bank
the agreements of the purchasers thereunder that, at Bank's option, following a
foreclosure of the Deed of Trust, Bank shall have the right, exercisable by
written notice, either to succeed to the rights of Borrower thereunder or to
terminate such contract and that in the event of Bank's termination of such
contract, Bank shall have no liability to Borrower or the Purchaser thereunder.
IV. Representations and Warranties
Borrower promises that each representation and warranty set forth below
is true, accurate and correct as of the date of this Agreement. Except as to
matters for which Borrower has given written notice that such representation or
warranty has become untrue or incorrect, each Draw Request, as defined in
Section 3.1 of Exhibit F, shall be deemed to be a reaffirmation of each and
every representation and warranty made by Borrower in this Agreement. Borrower
shall notify Bank in writing promptly upon obtaining knowledge that any of the
representations and warranties given below are not true and correct in all
material respects. Bank, in its reasonable discretion, may waive or elect not
to waive any Event of Default (hereafter defined) resulting from the failure of
a representation and warranty to be true and correct as of the date of any Draw
Request.
4.1 Authority. Borrower has complied with any and all laws and
regulations concerning its organization, existence and the transaction of its
business. Borrower has the right and power to own the Property and to develop
the Land and Improvements as contemplated in the Loan Documents.
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4.2 Compliance. Borrower is familiar and has complied with all of
the Requirements, as well as all other applicable laws, regulations and
ordinances. Borrower has properly obtained or will properly obtain all
permits, licenses and approvals necessary to construct, occupy, operate, market
and sell the Lots in accordance with all Requirements, including those
pertaining to zoning, and Borrower has delivered true and correct copies of
them to Bank.
4.3 Enforceability. Borrower is authorized to execute, deliver and
perform under the Loan Documents. Those documents are valid and binding
obligations of Borrower.
4.4 No Violation. Borrower is not in violation of any law,
regulation or ordinance, or any order of any court or governmental entity. No
provision or obligation of Borrower contained in any of the Loan Documents
violates any of the Requirements, any other applicable law, regulation or
ordinance, or any order or ruling of any court or governmental entity. No such
provision or obligation conflicts with, or constitutes a breach or default
under, any agreement binding or regulating the Property.
4.5 No Claims. There are no claims, actions, proceedings or
investigations pending against Borrower or affecting the Property except for
those previously disclosed by Borrower to Bank in writing. To the best of
Borrower's knowledge, there has been no threat of any such claim, action,
proceeding or investigation, except for those previously disclosed by Borrower
to Bank in writing.
4.6 Financial Information. All financial information which has been
and will be delivered to Bank, including all information relating to the
financial condition of Borrower, or the Property, fairly and accurately
represents the financial condition being reported on. All such information was
prepared in accordance with generally accepted accounting principles
consistently applied, unless otherwise noted. There has been no material
adverse change in any financial condition reported at any time to Bank.
4.7 Accuracy. All reports, documents, instruments, information and
forms of evidence which have been delivered to Bank concerning the Loan or
required by the Loan Documents are accurate in all material respects and are
correct and sufficiently complete to give Bank true and accurate knowledge of
their subject matter. None of them contains any material misrepresentation or
omission.
4.8 Loan in Balance; Adequacy of Loan. The Loan is "in balance" and
the undisbursed Loan funds, together with any sums provided or to be provided
by Borrower as shown in the cost breakdown, are sufficient to construct the
Improvements through completion and to accomplish the purposes contemplated by
the Loan Documents.
4.9 Taxes. Borrower has filed all required state, federal and local
income tax returns and has paid all taxes which are due and payable. Borrower
knows of no basis for any additional assessment of taxes.
4.10 Utilities. All utility services, including gas, water, sewage,
electrical and telephone, which are necessary to develop and occupy the Land
and Improvements are available at or within the boundaries of the Land. In the
alternative, Borrower has taken all steps necessary to assure that all utility
services will be available upon completion of the Improvements.
4.11 Borrower Not a "Foreign Person". Borrower is not a "foreign
person" within the meaning of Section 1445(f)(3) of the Internal Revenue Code
of 1986, as amended from time to time.
4.12 Disclosure to Guarantor. Before Guarantor became obligated in
connection with the Loan, Borrower made full disclosure to Guarantor regarding
Borrower's financial condition and
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business operations, the present and former condition, uses and ownership of
the Property, and all other circumstances bearing upon Borrower's ability to
pay and perform its obligations under the Loan Documents.
V. Default and Remedies
5.1 Events of Default. Borrower will be in default under this
Agreement upon the occurrence of any one or more of the following events
("Events of Default"):
(a) The failure of Borrower to pay the Loan or any part
thereof, as it becomes due in accordance with the terms of the Note or any
other Loan Documents and the continuance thereof for a period of at least three
(3) days after notice of such failure from Bank or when accelerated pursuant to
any power to accelerate contained in the Loan Documents; or
(b) Borrower fails to make any required payment of principal
or deposit of funds demanded by Bank under this Agreement within fifteen (15)
days after Bank's written demand; or
(c) Borrower or Guarantor fails to comply with any other
covenant contained in this Agreement and does not remedy or cure such failure
(i) within twenty (20) days after notice of such failure from Bank (the
"Initial Cure Period") or (ii) within sixty (60) days after notice of such
failure from Bank so long as Borrower attempts to cure such failure within the
Initial Cure Period and diligently continues to attempt to cure such failure;
or
(d) Borrower or Guarantor becomes insolvent or the subject of
any bankruptcy or other voluntary or involuntary proceeding, in or out of
court, for the adjustment of debtor-creditor relationships ("Insolvency
Proceeding") and such proceeding is not dismissed within sixty (60) days after
the filing thereof; or
(e) Borrower or Guarantor dissolves or liquidates; or
(f) [Intentionally omitted]; or
(g) Any of the representations or warranties contained in
Article IV above are not true and correct as of the date of any Draw Request
and Borrower does not cure the same within the times provided in Section
5.1(b); or
(h) Any representation or warranty made or given in any of the
Loan Documents proves to be false or misleading in any material respect; or
(i) Construction of the Improvements is abandoned, or, subject
to Force Majeure, development of the Phase I Improvements is not completed on
or before the Phase I Completion Date or development of all of the Phase II
Improvements is not completed on or before the Phase II Completion Date; or
(j) Construction of the Improvements is halted prior to
completion for any period of twenty (20) consecutive days for any cause which
is not beyond the reasonable control of Borrower or any of its contractors or
subcontractors; or
(k) Any governmental, judicial or legal authority having
jurisdiction over the Property orders or requires that construction of the
Improvements be stopped in whole or in part, or any required approval, license
or permit is withdrawn or suspended, and the order, requirement, withdrawal or
suspension remains in effect either (i) for a period of thirty (30) consecutive
days, or (ii) for a total period of ninety (90) days, so long as Borrower
begins within the initial 30 day period and
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Construction Loan Agreement/Pacific United, L.P. Page 14
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diligently continues to take steps to remove the effect of the order,
requirement, withdrawal or suspension, and Bank, exercising reasonable
judgment, determines that Borrower is reasonably likely to prevail; or
(l) Borrower is in default in any material respect under the
Engineering Contract, the Construction Contract, any other contract for the
construction of the Improvements, or any Lot Sale Contract or any other
agreement to sell Lots, either (i) for an Initial Cure Period of thirty (30)
consecutive days, or (ii) for a total period of ninety (90) days, so long as
Borrower begins within the Initial Cure Period and diligently continues to cure
the default, and Bank, exercising reasonable judgment, determines that the cure
cannot reasonably be completed at or before expiration of the Initial Cure
Period; or
(m) Borrower fails to comply with any provision contained in
this Agreement other than those provisions elsewhere referred to in this
Section 5.1, and does not cure that failure either (i) within an Initial Cure
Period of thirty (30) consecutive days after written notice from Bank, or (ii)
within ninety (90) days after such written notice, so long as Borrower begins
within the Initial Cure Period and diligently continues to cure the failure,
and Bank, exercising reasonable judgment, determines that the cure cannot
reasonably be completed at or before expiration of the Initial Cure Period; or
(n) Under any of the Loan Documents, an Event of Default (as
defined in that document) occurs; or
(o) There is a material adverse change in Borrower's or
Guarantor's financial condition and Borrower or Guarantor fail to provide other
additional security or assurance of ability to pay and perform their
obligations under the Loan Documents reasonably acceptable to Bank within
twenty (20) days after Bank's written demand.
5.2 Remedies
(a) If an Event of Default occurs under this Agreement, Bank
may exercise any right or remedy which it has under any of the Loan Documents,
or which is otherwise available at law or in equity or by statute, and all of
Bank's rights and remedies shall be cumulative. If any Event of Default
occurs, Bank's obligation to lend under the Loan Documents shall automatically
terminate, and Bank, in its sole discretion, may withhold any one or more
disbursements. Bank may also withhold any one or more disbursements after an
event occurs that with notice or the passage of time could become an Event of
Default. No disbursement of Loan funds by Bank shall cure any default of
Borrower, unless Bank agrees otherwise in writing in each instance.
(b) If Borrower becomes the subject of any Insolvency
Proceeding, all of Borrower's obligations under the Loan Documents shall
automatically become immediately due and payable upon the filing of the
petition commencing such proceeding, all without notice of default, presentment
or demand for payment, protest or notice of nonpayment or dishonor, notice of
intention to accelerate, notice of acceleration, or other notices or demands of
any kind or character, all of which are hereby expressly waived by Borrower.
Upon the occurrence of any other Event of Default, all of Borrower's
obligations under the Loan Documents may become immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, notice of intention to accelerate, notice of
acceleration, or other notices or demands of any kind or character, all of
which are hereby expressly waived by Borrower, all at Bank's option,
exercisable in its sole discretion. If such acceleration occurs, Bank may
apply the undisbursed Loan funds, and any sums in the Account (as defined in
Article III of Exhibit F) or the Borrower's Funds Account to the obligations of
Borrower under the Loan Documents, in any order and proportions that Bank in
its sole discretion may choose.
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Construction Loan Agreement/Pacific United, L.P. Page 15
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(c) Also upon any Event of Default, Bank shall have the right
in its sole discretion to enter and take possession of the Property, whether in
person, by agent or by court-appointed receiver, and to take any and all
actions which Bank in its sole discretion may consider necessary to complete
construction of the Improvements, including making changes in plans,
specifications, work or materials and entering into, modifying or terminating
any contractual arrangements, all subject to Bank's right at any time to
discontinue any work without liability. If Bank chooses to complete the
Improvements, it shall not assume any liability to Borrower or any other person
for completing the Improvements, or for the manner or quality of construction
of the Improvements, and Borrower expressly waives any such liability. If Bank
exercises any of the rights or remedies provided in this clause (c), that
exercise shall not make Bank, or cause Bank to be deemed to be, a partner or
joint venturer of Borrower. Bank in its sole discretion may choose to complete
construction in its own name. All sums which are expended by Bank in
completing construction shall be considered to have been disbursed to Borrower
and shall be secured by the Deed of Trust and any other collateral held by Bank
in connection with the Loan; any sums of principal shall be considered to be an
additional loan to Borrower bearing interest at the Default Rate, as defined in
the Note, and shall be secured by the Deed of Trust and any other collateral
held by Bank in connection with the Loan. For these purposes Bank, in its sole
discretion, may reallocate any line item or cost category of the cost
breakdown.
VI. Arbitration
6.1 Mandatory Arbitration. Any controversy or claim between or among
the parties, including those arising out of or relating to this Agreement or
the Loan Documents and any claim based on or arising from an alleged tort,
shall at the request of any party be determined by arbitration conducted in
Dallas, Texas. THE ARBITRATION SHALL BE CONDUCTED IN ACCORDANCE WITH THE UNITED
STATES ARBITRATION ACT (TITLE 9, U.S. CODE), NOTWITHSTANDING ANY CHOICE OF LAW
PROVISION IN THIS AGREEMENT, AND UNDER THE COMMERCIAL RULES OF THE AMERICAN
ARBITRATION ASSOCIATION. The arbitrator(s) shall be an attorney(s) having no
less than seven (7) years experience in contracts and litigation relating to
commercial construction. The arbitrator(s) shall give effect to statutes of
limitation in determining any claim. Any controversy concerning whether an
issue is arbitrable shall be determined by the arbitrator(s). Judgment upon
the arbitration award may be entered in any court having jurisdiction. The
institution and maintenance of an action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff, to submit the controversy or claim to
arbitration if any other party contests such action for judicial relief. No
provision of this Section 6.1 shall limit the right of any party to this
Agreement (i) to exercise self-help remedies such as setoff, foreclosure
against or sale of any real or personal property collateral or security, or to
obtain provisional or ancillary remedies from a court of competent jurisdiction
before, after or during the pendency of any arbitration or other proceeding or
(ii) seek or obtain injunctive or similar relief during the pendency of any
arbitration or other proceeding except relating directly to the subject matter
of the arbitration proceeding. Notwithstanding the foregoing, during the
pendency of arbitration proceedings that are initiated at the request of Bank
and which are limited to matters for which Bank has requested arbitration
(including any related matters for which Borrower has requested concurrent
arbitration), Bank hereby agrees that it will not exercise its self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security. Notwithstanding the foregoing, Bank, shall
have the unilateral right to dismiss any arbitration proceeding commenced at
Bank's request and following three (3) days' notice to Borrower of Bank's
election to dismiss such arbitration proceeding, the provisions of the
preceding sentence shall not apply. In any subsequent judicial proceeding,
Bank's election to dismiss such arbitration proceeding shall be without
prejudice to Bank's or Borrower's claims or defenses in respect of the subject
matter of that arbitration proceeding. The exercise of a remedy does not waive
the right of either party to resort to arbitration. At Bank's option,
foreclosure under the deed of trust may be accomplished either by exercise of
power of sale under the deed of trust or by judicial foreclosure.
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VII. Miscellaneous Provisions
7.1 No Waiver; Consents. Each waiver by Bank must be in writing, and
no waiver shall be construed as a continuing waiver. No waiver shall be
implied from Bank's delay in exercising or failure to exercise any right or
remedy against Borrower or any security. Consent by Bank to any act or
omission by Borrower shall not be construed as a consent to any other or
subsequent act or omission or as a waiver of the requirement for Bank's consent
to be obtained in any future or other instance. All rights and remedies of
Bank are cumulative.
7.2 Purpose and Effect of Bank Approval. Bank's approval of any
matter in connection with the Loan shall be for the sole purpose of protecting
Bank's security and rights. No such approval shall result in a waiver of any
default of Borrower. In no event shall Bank's approval be a representation of
any kind with regard to the matter being approved.
7.3 No Commitment to Increase Loan. From time to time, Bank may
approve changes to the Plans and Specifications at Borrower's request, and may
also require Borrower to make corrections to the work of construction, all on
and subject to the terms and conditions of this Agreement. Borrower
acknowledges that no such action or other action by Bank shall in any manner
commit or obligate Bank to increase the amount of the Loan.
7.4 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and benefit of Bank and Borrower and their
permitted successors and assigns. No trust fund is created by this Agreement
and no other persons or entities shall have any right of action under this
Agreement or any right to the Loan funds.
7.5 Joint and Several Liability. If Borrower consists of more than
one person or entity, each shall be jointly and severally liable to Bank for
the faithful performance of this Agreement.
7.6 Notices. All notices given under this Agreement shall be in
writing and shall be given by personal delivery, overnight receipted courier
(such as Federal Express), or by registered or certified United States mail,
postage prepaid, sent to the party at its address appearing below its
signature. Notices shall be effective upon receipt or when proper delivery is
refused. Addresses for notice may be changed by either party by notice to the
other party in accordance with this Section 7.6. Service of any notice on any
one Borrower shall be effective service on Borrower for all purposes.
7.7 Authority to File Notices. Borrower irrevocably appoints Bank as
its attorney-in-fact, with full power of substitution, to file for record, at
Borrower's cost and expense and in Borrower's name, any notices of completion,
notices of cessation of labor, or any other notices that Bank in its reasonable
discretion may consider necessary or desirable to protect its security, if
Borrower fails to do so within three (3) days after Bank's written request.
7.8 Actions. Bank shall have the right, but not the obligation, to
commence, appear in, and defend any action or proceeding which might affect its
security or its rights, duties or liabilities relating to the Loan, the
Property, or any of the Loan Documents. Borrower shall pay promptly on demand
all of Bank's reasonable out-of-pocket costs, expenses, and legal fees and
expenses of Bank's counsel incurred in those actions or proceedings.
7.9 Attorneys' Fees. If any lawsuit or arbitration is commenced
which arises out of or relates to this Agreement, the Loan Documents or the
Loan, the prevailing party shall be entitled to recover from each other party
such sums as the court or arbitrator may adjudge to be reasonable attorneys'
fees in the action or arbitration, in addition to costs and expenses otherwise
allowed by law. In all other situations, including any matter arising out of
or relating to any Insolvency Proceeding, Borrower agrees to pay all of Bank's
costs and expenses, including reasonable attorneys' fees, which
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may be incurred in enforcing or protecting Bank's rights or interests. From
the time(s) incurred until paid in full to Bank, all such sums shall bear
interest at the Default Rate.
7.10 In-House Counsel Fees. Whenever Borrower is obligated to pay or
reimburse Bank for any attorneys' fees which may be incurred in enforcing or
protecting Bank's rights or interests, those fees shall include the allocated
costs for services of in-house counsel.
7.11 APPLICABLE LAW. THIS AGREEMENT IS GOVERNED BY THE LAWS OF THE
STATE OF TEXAS, WITHOUT REGARD TO THE CHOICE OF LAW RULES OF THAT STATE.
7.12 Heirs, Successors and Assigns; Participations. The terms of this
Agreement shall bind and benefit the heirs, legal representatives, successors
and assigns of the parties; provided, however, that Borrower may not assign
this Agreement or any Loan funds, or assign or delegate any of its rights or
obligations, without the prior written consent of Bank in each instance. Bank
in its sole discretion may sell or assign participations or other interests in
all or part of the Loan on the terms and subject to the conditions of the Loan
Documents, all without notice to or the consent of Borrower. Also without
notice to or the consent of Borrower, Bank may disclose to any actual or
prospective purchaser of any securities issued or to be issued by Bank, and to
any actual or prospective purchaser or assignee of any participation or other
interest in the Loan or any other loans made by Bank to Borrower (whether under
this Agreement or otherwise), any financial or other information, data or
material in Bank's possession relating to Borrower, the Loan, the Improvements
or the Property.
7.13 Relationships With Other Bank Customers. From time to time, Bank
may have business relationships with Borrower's customers, suppliers,
contractors, tenants, partners, shareholders, officers or directors, or with
businesses offering products or services similar to those of Borrower, or with
persons seeking to invest in, borrow from or lend to Borrower. Borrower agrees
that Bank may extend credit to such parties and may take any action it may deem
necessary to collect the credit, regardless of the effect that such extension
or collection of credit may have on Borrower's financial condition or
operations. Borrower further agrees that in no event shall Bank be obligated
to disclose to Borrower any information concerning any other Bank customer.
7.14 Disclosure to Title Company. Without notice to or the consent of
Borrower, Bank may disclose to any title insurance company which insures any
interest of Bank under the Deed of Trust (whether as primary insurer, coinsurer
or reinsurer) any information, data or material in Bank's possession relating
to Borrower, Guarantor, the Loan, the Improvements or the Property, other than
confidential financial information submitted to Bank in connection with the
Loan.
7.15 Improvement District. Borrower shall not vote in favor of, or
directly or indirectly advocate or assist in the incorporation of any part of
the Property into any improvement or community facilities district, special
assessment district or other district without Bank's prior written consent in
each instance, which consent will not be unreasonably withheld.
7.16 Restriction on Personal Property. Borrower shall not sell,
convey, or otherwise transfer or dispose of its interest in any personal
property in which Bank has a security interest, or contract to do any of the
foregoing, without the prior written consent of Bank in each instance.
7.17 Force Majeure. If the work of construction is directly affected
and delayed by fire, storm or other acts of God, strike, lockout, acts of
public enemy, riot, insurrection, or governmental regulation of the sale or
transportation of materials, supplies or labor, Borrower must notify Bank in
writing within five (5) calendar days after the event occurs which causes the
delay. So long as no Event of Default has occurred and is continuing, Bank
shall extend the Phase I Completion Date or the Phase II Completion Date (and
shall consent to any applicable extension of takedown schedule under any
affected Lot Sale Contract), as applicable, by a period of time equal to the
period of the
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Construction Loan Agreement/Pacific United, L.P. Page 18
19
delay, but not more than a total of ninety (90) days. Such an extension,
however, shall not affect the time for performance of, or otherwise modify, any
of Borrower's other obligations under the Loan Documents or the maturity of the
Note.
7.18 Severability. The invalidity or unenforceability of any one or
more provisions of this Agreement shall in no way affect any other provision.
7.19 Interpretation. Whenever the context requires, all words used in
the singular will be construed to have been used in the plural, and vice versa,
and each gender will include any other gender. The captions of the sections of
this Agreement are for convenience only and do not define or limit any terms or
provisions. The word "include(s)" means "include(s), without limitation," and
the word "including" means "including, but not limited to." No listing of
specific instances, items or matters in any way limits the scope or generality
of any language of this Agreement. Time is of the essence in the performance
of this Agreement by Borrower. The exhibits to this Agreement are hereby
incorporated in this Agreement.
7.20 Maximum Interest. Regardless of any provision contained in this
Agreement or in any of the other Loan Documents, Bank shall never be deemed to
have contracted for or be entitled to receive, collect or apply as interest on
the Loan, any amount in excess of the maximum rate of interest permitted to be
charged by applicable law, and, in the event that Bank ever receive, collect or
apply as interest any such excess, such amount which would be excessive
interest shall be applied to the reduction of the unpaid principal balance of
the Loan, and, if the principal balance of the Loan is paid in full, any
remaining excess shall forthwith be paid to Borrower. In determining whether
or not the interest paid or payable under any specific contingency exceeds the
highest lawful rate, Borrower and Bank shall, to the maximum extent permitted
under applicable law (i) characterize any non-principal payment (other than
payments which are expressly designated as interest payments hereunder) as an
expense, fee, or premium, rather than as interest payments hereunder) as an
expense, fee, or premium, rather than as interest, (ii) exclude voluntary
prepayments and the effect thereof, and (iii) spread the total amount of
interest throughout the entire contemplated term of the Loan so that the
interest rate is uniform throughout such term.
7.21 Amendments. This Agreement may not be modified or amended except
by a written agreement signed by the parties.
7.22 Counterparts. This Agreement and any attached consents or
exhibits requiring signatures may be executed in counterparts, and all
counterparts shall constitute but one and the same document.
7.23 Language of Agreement. The language of this Agreement shall be
construed as a whole according to its fair meaning, and not strictly for or
against any party.
7.24 [Intentionally omitted]
7.25 Integration and Relation to Loan Commitment. The Loan Documents
(a) integrate all the terms and conditions mentioned in or incidental to this
Agreement, (b) supersede all oral negotiations and prior writings with respect
to their subject matter, including Bank's loan commitment to Borrower, and (c)
are intended by the parties as the final expression of the agreement with
respect to the terms and conditions set forth in those documents and as the
complete and exclusive statement of the terms agreed to by the parties. No
representation, understanding, promise or condition shall be enforceable
against any party unless it is contained in the Loan Documents. If there is
any conflict between the terms, conditions and provisions of this Agreement and
those of any other agreement or instrument, including any other Loan Document,
the terms, conditions and provisions of this Agreement shall prevail.
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Construction Loan Agreement/Pacific United, L.P. Page 19
20
7.26 No Oral Agreements.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
As used herein, the term "Loan Agreement" means one or more promises,
promissory notes, agreements, undertakings, security agreements, deeds of trust
or other documents, or commitments, or any combination of those actions or
documents relating to the Loan. This Notice is given with respect to the Loan,
pursuant to Section 26.02 of the Texas Business and Commerce Code.
Date: August 6, 1997
BORROWER:
--------
PACIFIC UNITED, L.P.,
a Texas limited partnership
By: Pacific United Development Corp.,
a Nevada corporation,
its sole general partner
By: /s/ XXXXXXX XXXXXXX, Pres.
------------------------------
Xxxxxxx Xxxxxxx,
President
Addresses Where Notices to
Borrower(s) are to be Sent:
0000 Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000
Telephone No.: (000) 000-0000
Telecopy No.: (000) 000-0000
BANK:
----
BANK OF AMERICA TEXAS, N.A.,
a national banking association
By: /s/ XXXXX X. XXXXX
-------------------------------------
Name: XXXXX X. XXXXX
-------------------------------
Title: VICE PRESIDENT
------------------------------
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Construction Loan Agreement/Pacific United, L.P. Page 20
21
Addresses Where Notices to
Bank are to be Sent:
0000 Xxxx Xxxx Xxxxxxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000
GUARANTOR:
---------
NHC HOLDINGS CORP.,
a Nevada corporation
By: /s/ XXXX X. XXXXXXX
-------------------------------------
Name: XXXX X. XXXXXXX
-------------------------------
Title: CEO
------------------------------
Addresses Where Notices to
Guarantor are to be Sent:
0000 Xxxxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Legal Department, Chief General
Counsel
EXHIBITS:
Exhibit A Property Description
Exhibit B Description of Improvements, Contracts and Plans and
Specifications
Exhibit C Loan Documents
Exhibit D Cost Breakdowns
Exhibit D-1 Initial Cost Breakdowns
Exhibit D-2 Form of Revised Cost Breakdowns
Exhibit E Borrower's Pro Forma Schedule
Exhibit F Disbursement Schedule and Conditions
Exhibit G Lot Sale Contract
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Construction Loan Agreement/Pacific United, L.P. Page 21
