Exhibit 10.16
DEVELOPMENT LOAN AGREEMENT
PREAMBLE
THIS DEVELOPMENT LOAN AGREEMENT is made and entered into effective as
of September 30, 1998, by and between OLY WALDEN GENERAL PARTNERSHIP, a
Texas general partnership (herein called the "Borrower"), and BANK ONE,
TEXAS, NATIONAL ASSOCIATION, a national banking association (herein called
the "Lender").
The Borrower has applied to the Lender for a loan to refinance a
portion of the acquisition costs of certain real property and to finance
the construction of certain improvements to real property and certain other
expenses incurred or to be incurred by the Borrower, and the Lender is
willing to make such loan upon the terms and conditions herein set forth.
In consideration of the mutual covenants and agreements herein contained,
the Lender and the Borrower agree as follows:
ARTICLE I
DEFINITIONS AND TERMS GENERALLY
Section 1.1 Definitions. As used in this Agreement, the following terms
shall have the respective meanings indicated:
Agreement shall mean this Development Loan Agreement, as it may be
amended or supplemented from time to time in writing.
Appraisal shall mean a written appraisal of the Premises by an
appraiser (who may be an employee of the Lender or of a related entity)
satisfactory to the Lender in all respects and reflecting a fair market
value of the Premises of not less than $13,193,000 (the Developed Lots
shall have a fair market value of not less than $12,263,000, and the
Undeveloped Land shall have a fair market value of not less than $930,000).
The values for the Developed Lots and the Premises have been revised from
the amounts set forth in the Appraisal to reflect the sale of 29 Developed
Lots since the date of the Appraisal.
Approved Budget shall mean a schedule prepared by the Borrower and
approved by the Lender, and any and all amendments or supplements thereto
approved in writing by the Lender, reflecting the cost of each item of work
or material required to complete the Improvements and the Off-Site
Improvements, together with all other related costs and expenses, including
interest, commitment fees, professional fees, and other costs. The initial
Approved Budget is attached as Exhibit A hereto.
Business Day shall mean any day other than a Saturday, Sunday or other
day on which the Lender's main banking offices in Dallas, Texas are not
open for regular commercial banking business.
Certificates of Good Standing shall mean original certificates issued
by appropriate Governmental Authority reflecting that a corporation,
limited liability company or limited partnership (or other similar entity)
exists in the state of its organization and is in good standing in the
State of Texas and that (as to corporations and limited liability
companies) all franchise taxes are currently paid. With respect to a
corporation, limited liability company or limited partnership organized in
a state other than the State of Texas, such term shall include a copy of
the certificate of authority to do business in the State of Texas for such
corporation, limited liability company or limited partnership certified to
a current date by the Secretary of State of the State of Texas.
Completion shall mean the performance of all work required to fully
construct the Improvements and the Off-Site Improvements in accordance with
all Development Requirements.
Completion Date shall mean the date on which the Evidence of Completion
has been duly furnished to the Lender.
Construction Contracts shall mean each construction contract which the
Borrower will enter into with each Contractor for construction of all or
any part of the Improvements and the Off-Site Improvements, as the same may
be amended in accordance with this Agreement.
Consulting Architect/Engineer shall mean an architectural or
engineering firm(s) or other Person (and if there is more than one, all
such firms and other Persons) who or which shall be retained by the Lender
at the Borrower's expense for the purpose of performing certain functions
for the Lender if the Lender reasonably elects, including: approving any
Plans and Specifications and Construction Contracts; verifying the Approved
Budget, performing inspections as construction progresses so that the
Improvements are completed in a manner satisfactory to the Lender and in
accordance with the approved Plans and Specifications; certifying that each
draw request is not in excess of the work completed less prior advances and
required Retainage; and certifying that the Loan proceeds remaining
undisbursed are sufficient to complete the Improvements and the Off-Site
Improvements; and performing such other consulting tasks as the Lender
shall reasonably direct from time to time.
Contractor shall mean each "original contractor" (as defined in Section
53.001(7) of the Texas Property Code) selected by the Borrower and
satisfactory to and approved by the Lender to construct all or any portion
of the Improvements.
Contractor/Lender Agreement shall mean a written agreement duly
executed by a Contractor (or if there is more than one Contractor, a
separate written agreement duly executed by each Contractor) in favor of
the Lender by which such Contractor (i) acknowledges that the Borrower has
granted the Lender a security interest in all of the Borrower's right,
title and interest in, under and to the Construction Contract executed by
or otherwise binding upon such Contractor; (ii) subordinates all of such
Contractor's existing and future liens, claims and security interests
against the Premises to all liens and security interests securing the Debt;
and (iii) agrees to continue performance under such Construction Contract
if the Borrower defaults under this Agreement or such Construction Contract
and such continuation is requested by the Lender or by a purchaser of the
Premises at judicial or nonjudicial foreclosure (or by deed in lieu of
foreclosure) or by the successors or assigns of either the Lender or such
purchaser.
Debt shall mean all indebtedness to the Lender incurred under or
evidenced by the Loan Documents, including without limitation all
indebtedness owing to Lender under any interest rate agreements, interest
rate swap agreements, interest rate caps or similar agreements.
Deed of Trust shall mean that certain Deed of Trust, Security Agreement
and Assignment of Rents and Leases dated on or about the date of this
Agreement to Christopher T. Klimko, Trustee for the benefit of the Lender,
and in favor of the Lender, upon and covering the Premises, duly executed
by the Borrower and such other Persons (if any) as shall be required to
vest in the Lender a perfected first priority lien and security interest in
all of the Premises and the other collateral described therein to secure
payment of the Note and all of the Debt, together with all supplements and
amendments thereto.
Default shall have the meaning provided in the definition of Event of
Default below.
Developed Lots shall mean and include each of the 731 existing
single-family residential lots constructed upon the Land, which includes
the Lake Lots.
Development Agreements shall mean and include each Off-Site Agreement,
each Sales Contract and any Utility Agreements applicable to the Land.
Development Plan shall mean an outline prepared in reasonable detail of
the proposed timing, order of development, expenses and sources of funds
associated with the development and sale of the Premises. If requested by
Lender, the Borrower shall provide the Lender with revised outlines as to
such matters as the Premises is developed and sold. Each such outline
shall be subject to the approval of the Lender and the latest such outline
approved by the Lender shall be the Development Plan then in effect
hereunder.
Development-Related Entities shall mean and include each purchaser
under each Sales Contract, each Utility Developer and each party to an
Off-Site Agreement.
Development Requirements shall mean the contractually and legally
established requirements by all Sales Contracts, all Utility Agreements,
all Legal Requirements and all Off-Site Agreements.
District shall mean each municipal utility district now or hereafter
organized under the laws of the State of Texas which has jurisdiction over
all or any portion of the Premises and shall include, without limitation,
Harris County Municipal Utility District No. 153.
Engineering Reports shall mean all soil analysis, construction,
structural and mechanical feasibility reports; all field notes and maps of
surveys; all construction plans and specifications; all topographic,
drainage and contour maps and all other reports, maps, studies and surveys
of engineers, architects and others regarding the Improvements, the
Off-Site Improvements and the Land as shall be required by the Lender,
including without limitation, all Engineering Reports necessary to
determine the load-bearing capacity of the Land, the types of soil
contained in the Land and the amount and type of filling or other remedial
work, if any, that will be necessary to render the Land suitable for the
Premises.
Escrow Deposit shall mean the $3,000,000 cash to be deposited by
Guarantor with Lender and securing the Guaranty in the event the Borrower
does not obtain the Letter of Credit.
Event of Default shall mean any of the events specified in Section 6.1
hereof provided that there has been satisfied or met any requirement or
condition specified in this Agreement for the giving notice, or the lapse
of time, or the happening of any other or further condition, event or act
in respect of such specified event, and Default shall mean any of the
events specified in such Section, whether or not any other requirement or
condition has been satisfied or met.
Evidence of Completion shall mean all of the following:
(a) Engineering drawings and plans required by Harris County, Texas
and any other applicable Governmental Authority, shall have been
delivered to the Lender showing the location of the Improvements
and the Off-Site Improvements;
(b) An affidavit of bills paid executed by each Contractor and, if
requested by Lender, such other subcontractors, laborers and
suppliers as the Lender may require to satisfy itself that the
construction of Improvements (and all other improvements to the
Land completed through the date of any such affidavit) have been
completed lien-free;
(c) There being no outstanding and unpaid conditional sales contracts
(excluding bona fide contracts to sell developed land to
builders, developers, investors or users) or indebtedness secured
by security agreements and financing statements (except only
those securing the Debt) upon the Improvements or any of the
personal property covered by the Deed of Trust or any of the
other Loan Documents;
(d) Evidence that the Improvements, the Off-Site Improvements and
their use comply fully with any and all applicable zoning (if
any), subdivision, building, and environmental requirements and
other Legal Requirements, such evidence to include the recorded
plat of the Land approved by all required Governmental
Authorities and material to establish subdivision approval is
based on no requirement or condition involving any real property,
or rights appurtenant thereto, other than the Land;
(e) Evidence that the Premises has the sewage capacity required by
the Sales Contracts and all Development Agreements and copies of
all sewage permits and commitments from the District establishing
the same, if any;
(f) Copies of all other Governmental Permits, licenses and
rights-of-way in any manner pertaining to the Premises; and
(g) All other evidence required to satisfy the Lender that the
Premises are fully developed in accordance with the Development
Requirements and ready for sale to builders and users for
construction of residences and related improvements.
Financing Statements shall mean and include all such Uniform Commercial
Code financing statements and continuation statements as the Lender shall
require, duly executed by the Borrower and by such other Persons (if any)
as, in the Lender's judgment, shall be necessary to give notice of and to
perfect, or continue perfection of, the Lender's security interest in all
personal property and fixtures constituting a part of the Premises or other
security for the Debt.
Good Accounting Practice shall mean such accounting practice as, in the
opinion of independent accountants of recognized national standing
regularly retained by the Borrower or other Person (as the case may be) and
acceptable to and approved by the Lender, conforms at the time to generally
accepted accounting principles, consistently applied. Generally accepted
accounting principles mean those principles and practices which are
(a) recognized as such by the Financial Accounting Standards Board,
(b) applied after the date of the Borrower's or other Person's (as the case
may be) most recently audited financial statements furnished to the Lender
in a manner consistent with the manner in which such principles and
practices were applied to such statements, and (c) consistently applied for
all periods after the date of such most recent audited financial statements
so as to reflect properly the financial condition, and results of
operations and changes in the financial position, of such Person. If any
change in any accounting principle or practice is required by the Financial
Accounting Standards Board in order for such principle or practice to
continue as a generally accepted accounting principle, all reports and
financial statements required hereunder may be prepared in accordance with
such change only after written notice of such change is given to the
Lender.
Governmental Authority shall mean the United States, the State of
Texas, the County of Harris, the City of Houston, each District, the Texas
Natural Resource Conservation Commission, the Department of Housing and
Urban Development, the Environmental Protection Agency, any political
subdivision of any of the foregoing and any agency, department, commission,
board, bureau, court or instrumentality of any of them which now or
hereafter has jurisdiction over the Lender, the Borrower or any part of the
Premises or construction on the Premises.
Governmental Permits shall mean all certificates, licenses, zoning
variances, permits and "no action" letters from each Governmental Authority
required to evidence full compliance by the Borrower and conformance of the
planned Improvements and the Off-Site Improvements, with all Legal
Requirements applicable to the Premises, complete construction of the
Improvements and the Off-Site Improvements and development of the Land as a
residential subdivision as contemplated hereby and by the Development Plan.
Guaranty shall mean the Guaranty to be executed by STRS Guaranty
Company, L.L.C., a Delaware limited liability company ("Guarantor") in
favor of Lender, which Guaranty is to be secured by the pledge of the
Letter of Credit and/or the Escrow Deposit provided for in this Agreement.
Highest Lawful Rate shall mean the maximum nonusurious rate of interest
permitted by whichever of applicable federal or Texas law from time to time
permits the higher maximum nonusurious interest rate. On each day, if any,
that applicable Texas law establishes the Highest Lawful Rate, the Highest
Lawful Rate shall be the "weekly ceiling" (as defined in S303 of the Texas
Finance Code and Chapter 1D of Title 79, Texas Revised Civil Statutes,
1925, as amended) for that day.
Improvements shall mean all improvements constructed on the Land or
contemplated in the Plans and Specifications, if any, including all
streets, curbs, gutters, drainage facilities, sanitary collection
facilities, water storage and treatment facilities, water supply and
distribution systems, paving, landscaping, street lighting and utilities
and all other improvements necessary or appropriate (in the reasonable
judgment of the Lender) or as shall be required by any Development
Agreement to prepare the Premises for the construction and use of
residential homes and related improvements by builders and users thereof.
Indebtedness shall mean and include (1) all items which in accordance
with Good Accounting Practice would be included on the liability side of a
balance sheet on the date as of which Indebtedness is to be determined
(excluding capital stock, surplus, surplus reserves and deferred credits),
(2) guaranties, endorsements and other contingent obligations in respect of
Indebtedness of others, or any obligations to purchase or otherwise acquire
any such Indebtedness of others, and (3) Indebtedness secured by any
mortgage, pledge, security interest or lien existing on property owned
subject to or burdened by such mortgage, pledge, security interest or lien
whether or not the Indebtedness secured thereby shall have been assumed;
provided, however, that such term shall not mean or include any
Indebtedness monies sufficient to fully pay and discharge which (either on
its stated final maturity date or on such earlier date as such Indebtedness
may be duly called for redemption and payment) are on deposit with a
depositary, agency or trustee in trust for the payment of such
Indebtedness.
Insurance Policies shall mean and include each and every insurance
policy, insurance certificate and other evidence of insurance which is
required by the Deed of Trust.
Lake Lots means the 65 single-family Developed Lots with frontage on
Lake Houston and which are not presently subject to any Sales Contract.
Land shall mean the land described on Exhibit B hereto.
Legal Requirements shall mean any law, ordinance, order, rule or
regulation of a Governmental Authority and any requirements, terms or
conditions contained in any restrictions or restrictive covenants affecting
the Premises.
Letter of Credit shall mean that unconditional and irrevocable letter
of credit obtained by Borrower in the face amount of $2,500,000, issued by
a financial institution acceptable to Lender and naming Lender as the
beneficiary thereof, and having a term of at least 12 months (i.e., the
expiry date shall be at least 12 months after the date of issuance) or such
other expiry date reasonably acceptable to Lender; provided that in any
event, if Guarantor provides a Letter of Credit to Lender that has an
expiry date which is before the maturity date of the Note, then Borrower
shall provide a replacement Letter of Credit (or an Escrow Deposit
complying with the terms of this Agreement) at least thirty (30) days prior
to the expiry date of the Letter of Credit, failing which Lender shall have
the right to present the Letter of Credit and hold the proceeds thereof as
an Escrow Deposit under this Agreement in which event Guarantor shall
execute a Pledge Agreement with respect to such deposit if required by
Lender in the same form as previously executed by Guarantor in favor of
Lender.
Loan shall mean the loans contemplated by this Agreement.
Loan Documents shall include this Agreement, the Note (including all
renewals, extensions and rearrangements thereof), the Deed of Trust, the
Pledge Agreement, the Guaranty, each Request for Advance, each Application
and Certificate for Payment, and all other instruments executed (i)
pursuant hereto or in connection with the Debt or (ii) as security for
either or both payment of the Debt of performance of the Borrower's
obligations under this Agreement and under all other Loan Documents.
Net Sales Proceeds shall mean, with respect to each Developed Lot, the
gross sales proceeds received by or payable to Borrower in connection with
the sale of such Developed Lot pursuant to a Sales Contract, minus normal
and customary closing costs, provided that the Net Sales Proceeds for each
Developed Lot shall in no event be less than the greater of (i)
ninety-three percent (93%) of the gross sales price of such Developed Lot
under the applicable Sales Contract or (ii) 125% of the Par Lot Amount.
Note shall mean the promissory note in the principal amount of
$8,160,000.00, executed by Borrower and payable to the order of Lender, and
all renewals, extensions and rearrangements thereof provided for in this
Agreement or otherwise permitted by the Lender.
Obligors shall mean the Borrower, the Guarantor and the Partners.
Officer's Certificate shall mean a certificate signed in the name of
the Borrower by either (a) any individual Partner of the Borrower, (b) by
the president, a vice president, the treasurer, the secretary or an
assistant treasurer or assistant secretary of a corporate Partner of the
Borrower, or (c) an individual general partner or joint venturer of any
Partner of the Borrower.
Off-Site Agreement shall mean each instrument relating to the ownership
of right of the Borrower to use any Off-Site Improvements or related
improvements including but not limited to any deed, easement, license,
permit, contract, joint venture agreement or partnership agreement,
together with the consent of each landowner on whose property the Off-Site
Improvements are to be located and all rights-of-way and easements,
necessary to allow such use.
Off-Site Improvements shall mean that portion of the Improvements not
intended to be located on the Land and shall also include all other
improvements which are not intended to be located on the Land but which are
necessary or appropriate to the proper development and marketing of the
Premises for sale to builders and users for the construction and use of
residential housing. At the time of execution of this Agreement, it is not
anticipated that there will be any Off-Site Improvements.
Opinion of Borrower's Counsel shall mean an opinion rendered to the
Lender by Borrower's counsel in a form acceptable to the Lender and its
counsel.
Organizational Agreement shall mean (a) in respect of a corporation,
the Articles of Incorporation certified to a current date by the Secretary
of State in which such corporation is incorporated and the Bylaws of a
corporation certified to a current date as true and correct by the
secretary or assistant secretary of a corporation; (b) in respect of a
general partnership, a partnership agreement; (c) in respect of a joint
venture, a joint venture agreement; (d) in respect of a limited
partnership, a partnership agreement and the certificate of limited
partnership certified to a current date by an appropriate Governmental
Authority of the state in which the limited partnership is organized;
(e) in respect of a trust, a trust agreement; and (f) in respect of a
limited liability company, the Articles of Organization certified to a
current date by the Secretary of State in which such limited liability
company is organized and the Operating Agreement of the limited liability
company certified to a current date as true and correct by the manager of
the limited liability company.
Par Lot Amount shall mean $11,163, which is the amount of the Loan
divided by the number of Developed Lots.
Partners shall mean all current general partners of the Borrower and
shall include all additional and substitute general partners, if any,
admitted to such general partnership pursuant to such Organizational
Agreement as it may be amended or supplemented in accordance with this
Agreement.
Past Due Rate shall mean the per annum rate provided in the Note for
interest on past due principal and interest. Without notice to the
Borrower or any other Person, the Past Due Rate shall automatically
fluctuate upward and downward as and in the amount by which such rate
provided in the Note shall fluctuate.
Person shall mean and include a natural person, a partnership, a joint
venture, a corporation, a limited liability company, a trust, an
unincorporated organization, a government and any department or agency
thereof.
Plans and Specifications shall mean all plans and specifications for
the construction of the Improvements and the Off-Site Improvements and
approved by Lender.
Pledge Agreement shall mean the Pledge Agreement executed by Guarantor
in favor of Lender (in the event Guarantor does not deliver the Letter of
Credit to Lender), granting a first and prior security interest to Lender
in and to the Escrow Deposit held by Lender in a deposit account with
Lender.
Premises shall mean the Land, the Improvements, the Off-Site
Improvements now or hereafter owned by the Borrower, all fixtures,
equipment, leases, rentals, accounts, general intangibles and other
personal property of any kind or character now or hereafter related to,
situated on or used or acquired for use, on or in connection with the Land
or any Improvements now or hereafter constructed thereon and all related
parts, accessions and accessories thereto and all replacements or
substitutions therefor, as well as all other improvements, benefits and
appurtenances now or hereafter placed thereon or accruing thereto.
Request for Advance shall mean a written request for an advance under
this Agreement or any of the other Loan Documents in the form of Exhibit C
hereto, true and correct in all respects, completed in all material
respects and signed by the Borrower. Each Request for Advance shall be
accompanied by copies of billing statements, vouchers and invoices relating
to the costs of the items to be paid from the advance requested and upon
request of the Lender, shall also be accompanied by such affidavits of the
Contractor and such other Persons as the Lender shall reasonably require to
satisfy itself that all bills for labor and materials and other goods and
services required to complete the Improvements are being currently paid, if
applicable. In those instances where a Request for Advance covers amounts
to be paid to a Contractor, such Request for Advance shall also be
accompanied by an Application and Certificate for Payment (herein so
called) in the form of Exhibit D hereto, true and correct in all respects,
completed in all material respects, accompanied by all supporting documents
required thereby.
Sales Contracts shall mean each lot sale contract, earnest money
contract, option contract and other agreement now existing or hereafter
executed between the Borrower and any other Person which contemplates a
sale, exchange or other conveyance of all or any part of the Land, and each
other document or instrument executed in connection therewith, together
with each modification thereof or amendment thereto approved by the Lender
in writing, including without limitation, that (i) Earnest Money Contract
between Borrower and Ashton Houston Residential, L.L.C., a Texas limited
liability company, (ii) Earnest Money Contract between Borrower and BTH,
Inc., a Texas corporation, d/b/a Brighton Homes, (iii) Earnest Money
Contract between Borrower and Dover Homes, Inc., (iv) Earnest Money
Contract between Borrower and Holigan Homes Texas, Ltd., a Texas limited
partnership and (v) Earnest Money Contract between Borrower and Perry
Homes, a Texas joint venture, and all rights, title and interest of
Borrower thereunder, including without limitation, all earnest money
deposits thereunder. All sales contracts enumerated in clauses (i) through
(v) of this subparagraph have been approved by the Lender.
Scheduled Completion Date shall mean December 31, 1999.
Subordination Agreements shall mean agreements executed by each
Contractor, subcontractor and any other Person who has supplied or
furnished (or will supply or furnish) labor, materials or both in
connection with the construction of any Improvements on the Premises,
pursuant to which such Person, for himself, his heirs, legal
representatives, successors and assigns, waives and releases any and all
then-present liens, rights, claims, security interests and other interests
owned, claimed or held in the Premises and any Improvements then or
thereafter placed thereon, or any part thereof, and subordinates any and
all present and future liens against all or any part of the Premises and
Improvements thereon to all liens and security interests securing the Debt.
Title Company shall mean Chicago Title Insurance Company and shall also
include its agent, Heritage Title Company of Austin, Inc.
Title Instruments shall mean true and correct copies of all instruments
of record in the Office of the County Clerk of Harris County, Texas or of
any other Governmental Authority affecting title to all or any part of the
Premises, including but not limited to those (if any) which impose
restrictive covenants, easements, rights-of-way or other encumbrances on
all or any part of the Premises.
Title Insurance Policy shall mean a mortgagee policy of title insurance
in the form promulgated by the State Board of Insurance of the State of
Texas, in the face amount of $8,160,000.00 issued by the Title Company to
the Lender insuring that the fee simple absolute title to the Land is
vested in the Borrower and that the Deed of Trust is a valid first lien on
the Land, subject only to such exceptions, if any, as may be acceptable to
and approved in writing by the Lender. Schedule A of the Title Insurance
Policy shall contain a complete and accurate description of the Deed of
Trust, shall specify the recording and filing information applicable to the
Deed of Trust and shall describe the Land identically to the description
thereof in the Deed of Trust.
Title Status Certificate shall mean a certificate issued by the Title
Company to the Lender reflecting all changes (if any) in title to the Land
that have occurred since the date of issuance of the Title Insurance
Policy.
Undeveloped Land shall mean that portion of the Land which is not a
part of the Developed Lots, and which consists of (i) a tract of land
containing approximately 7.28 acres and (ii) a tract of land containing
approximately 71 acres. The Undeveloped Land is not subject to any of the
Sales Contracts and thus will not be available for partial releases as
provided in Article 9 of this Agreement except pursuant to a purchase and
sales agreement acceptable to Lender in Lender's reasonable discretion
(provided that in any event, the gross sales price of the Undeveloped Land
being sold shall be acceptable to Lender in Lender's sole discretion, and
shall be payable in cash at the closing of such sale).
Utility Agreement shall mean each agreement between each Utility
Developer and the Borrower, if any, providing for the planning and
construction of all or a portion of the utility Improvements or the utility
Off-Site Improvements, and the sharing and payment of the costs thereof,
and all other similar agreements with any Governmental Authority or other
Person pertaining to the Land.
Utility Developer shall mean all of the parties to each Utility
Agreement, including the Borrower and the District.
Section 1.2 Terms Generally. Each definition contained in this or any
other Article of this Agreement shall apply equally to both the singular
and plural form of the term defined. Each pronoun shall include the
masculine, the feminine and neuter form, whichever is appropriate to the
context. The words "included", "includes" and "including" shall each be
deemed to be followed by the phrase "without limitation". The words
"herein", "hereby", "hereof" and "hereunder" shall each be deemed to refer
to this entire Agreement and not to any particular Article or Section
hereof. The defined term "Lender" shall be deemed to refer to this entire
Agreement and not to any particular Article or Section hereof. The defined
term "Lender" shall be deemed to include all authorized agents of the
Lender and its successors and assigns. The defined term "Borrower" shall
be deemed to include its heirs, legal representatives, successors and
assigns.
The following terms shall have the respective meanings ascribed to them
in the Uniform Commercial Code as enacted and in force in the State of
Texas:
accessions, continuation statement, equipment,
inventory, financing statement, fixtures, general
intangibles, personal property, proceeds, security
interest and security agreement.
Unless the context otherwise requires or unless otherwise provided, the
terms defined in Section 1.1 which mean or refer to a particular
agreement, instrument, or document shall also mean, refer to and include
all amendments, renewals, extensions, substitutions, and modifications of
such agreement, instrument or document, provided that nothing contained in
this Section 1.2 shall be construed to authorize the execution or entering
into by any Person of any such renewal, extension, substitution, or
modification, except as may be permitted by other provisions of this
Agreement.
ARTICLE II
AGREEMENT TO MAKE SECURED AND GUARANTEED LOAN; PROCEDURES AND
REQUIREMENTS FOR FUNDING AND USE OF LOAN ADVANCES
Section 2.1 The Loan. Lender shall advance such amounts against the
Note as the Borrower may request up to but not more than the amount of the
Note, such sums all to be applied in payment of items set forth in the
Approved Budget. Payment of the Note shall be secured by the Deed of
Trust, and the liens, security interests and collateral assignments created
or evidenced by the other Loan Documents.
Section 2.2 The Note and Security. The Borrower shall execute and
deliver to the Lender the Note to evidence the Loan. Advances of Loan
proceeds made under this Agreement shall be conclusively deemed and
considered to have been made against the Note. The Lender shall make an
appropriate notation on its records reflecting each amount advanced against
the Note and the date of the advance. Interest on the amounts of Loan
proceeds advanced hereunder shall be computed on the amount of each advance
and from the date of each advance.
Section 2.3 Purpose. Funds shall be advanced by the Lender under the
provisions of this Agreement for the purpose of paying the costs of the
items set forth in the Approved Budget. In no event shall the Lender be
required to make (but in its discretion, the Lender may make) any advance
for payment of any item in excess of the amount budgeted for such item in
the Approved Budget or for payment of any item not included in the Approved
Budget; provided, however, that any such excess may, at the Lender's
option, be paid from the "contingency" item set forth in the Approved
Budget. In addition to the foregoing, Borrower may submit a Request for
Advance for an advance from the "other" contingency line item in the
Approved Budget to pay income taxes due by Borrower or its partner in
connection with the Premises. To the extent that Borrower achieves any cost
savings in any Capital Expenditure or Operating Expense line item which is
verified by Lender in Lender's sole discretion, such cost savings may be
reallocated to the "other" contingency line item and thereafter used by
Borrower to pay for costs or expenses associated with the Premises as
provided in this Agreement, including the purposes set forth in the
preceding sentence.
Section 2.4 Request for Advance. Each time the Borrower desires to
receive an advance of Loan proceeds, the Borrower shall deliver to the
Lender a Request for Advance in respect thereto. Each item to be paid from
such advance shall be fully described, itemized and categorized on the
continuation page or pages of such Request for Advance. Within five (5)
Business Days after receipt of a proper Request for Advance and the
satisfaction of all other terms and conditions of this Agreement, the
Lender shall advance the amount set forth in such Request for Advance.
Section 2.5 Advances to Pay Contractors. Each time a Request for
Advance includes amounts to be paid to a Contractor, the amount to be
advanced by the Lender to pay such Contractor shall not exceed a sum equal
to the aggregate amount of the "current payment due" as shown in the
Application and Certificate for Payment executed by such Contractor and
submitted with the Request for Advance.
Section 2.6 Direct and Indirect Advances. All sums advanced to pay a
Contractor shall be advanced directly to the Borrower (or, at the option of
the Lender after the occurrence of a Default, to such Contractor), as part
of the Loan proceeds. All advances made pursuant to a Request for Advance
for payment of any other items set forth in the Approved Budget shall be
advanced to or for the account of the Borrower.
Section 2.7 Application of Sums Advanced. Each time the Borrower
receives Loan proceeds or other sums pursuant to this Agreement or any of
the other Loan Documents, the Borrower shall promptly apply the same toward
the payment of the items covered by the applicable Request for Advance
submitted to the Lender and promptly thereafter shall furnish evidence
reasonably satisfactory to the Lender that all such items have been paid.
Without the prior written consent of the Lender, the Borrower shall not
apply or permit application of any sums advanced hereunder in payment of
any item not included in the Approved Budget.
Section 2.8 Funding Frequency. The Lender shall in no event be
obligated to fund advances more than once each calendar month, but may do
so at its election.
Section 2.9 Debt Absolutely Due at Maturity. The Borrower will pay the
Debt or cause it to be paid to the Lender on a date not later than the
maturity of the Note, whether such maturity occurs on account of lapse of
time until its stated final maturity or by acceleration. The Borrower's
obligation to pay the Debt in accordance with the Note and the other Loan
Documents is absolute and unconditional.
ARTICLE III
BORROWER'S REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
Section 3.1 Due Organization, Existence and Authority of the Borrower.
The Borrower is a duly organized, validly existing Texas general
partnership and has the power and authority to carry on its business as
presently conducted and to enter into and perform its obligations under
this Agreement, the Note, the Deed of Trust and the other Loan Documents to
which the Borrower is a party.
Section 3.2 Due Organization, Existence and Authority of Partners. Each
of the Partners of Borrower are duly organized and valid existing Texas
limited partnerships in good standing under the laws of the State of Texas
and have the power and authority to carry on their business as presently
conducted, to be a Partner and to enter into and perform, and bind the
Borrower, to perform, their respective obligations under this Agreement,
the Note, the Deed of Trust and the other Loan Documents to which the
Partners and the Borrower, respectively, are parties in the capacities
therein stated.
Section 3.3 Loan Documents Authorized. The execution and delivery by
the Borrower and the Partners of this Agreement, the Note, the Deed of
Trust, and the other Loan Documents to which the Borrower and the Partners
are parties in the capacities therein stated and the full and timely
performance of all obligations thereunder have been duly authorized by all
necessary action under the Borrower's Organizational Agreement and under
the Organizational Agreements of its Partners and otherwise.
Section 3.4 Loan Documents Valid, Binding and Enforceable. This
Agreement, the Note, the Deed of Trust and the other Loan Documents to
which the Borrower is a party have been duly and validly executed, issued
and delivered by the Borrower and constitute the valid and legally binding
obligations of the Borrower and the Partners, enforceable in accordance
with their respective terms in all material respects.
Section 3.5 Other Agreements Not Violated by the Borrower. Compliance
by the Borrower and the Partners with this Agreement, the Note, the Deed of
Trust and the other Loan Documents to which the Borrower and the Partners
are parties in the capacities therein stated will not violate any law, the
Borrower's Organizational Agreement or the Organizational Agreement of any
Partner, any Construction Contract, any Development Agreement or any other
instrument or agreement binding upon the Borrower or any Partner.
Section 3.6 Loan Documents Signed by Other Persons. To the best of the
Borrower's knowledge, each Loan Document, each Development Agreement or
other written instrument contemplated in or required by this Agreement
executed or to be executed by any Person other than the Borrower has been
or will be duly authorized by all necessary action and constitutes, or when
executed and delivered to the Lender will constitute, the valid and legally
binding obligation of such Person, enforceable against such Person in
accordance with its terms.
Section 3.7 Permits Effective. The Borrower has obtained (or has
verified the timely availability of and will obtain when required) all
Governmental Permits necessary for the construction of the Improvements and
the Off-Site Improvements and all Governmental Permits necessary for the
development of the Premises as a residential subdivision and all such
Governmental Permits are or will timely be in full force and effect.
Section 3.8 Taxes Paid. The Borrower and each Obligor has filed all tax
returns required to be filed and paid all taxes shown thereon to be due,
including interest and penalties, except for taxes being contested in good
faith and for which such taxpayer has provided adequate reserves for the
payment thereof.
Section 3.9 Suits. There are no actions, suits or proceedings pending,
or to the knowledge of the Borrower threatened, against or affecting the
Borrower, any Obligor, or the Premises, or involving the validity or
enforceability of the Loan Documents or the priority of the liens, security
interests and collateral assignments created or evidenced thereby, at law
or in equity, or before or by any Governmental Authority, except actions,
suits and proceedings which have been fully disclosed to the Lender in
writing.
Section 3.10 Financial Statements Complete and Accurate. All
information supplied and statements made to the Lender by or on behalf of
the Borrower or any Obligor in any financial statement furnished or
application for credit made prior to, contemporaneously with or subsequent
to the execution of this Agreement are and shall be true, correct,
complete, valid and genuine in all material respects; such financial
statements and applications for credit have been prepared in accordance
with Good Accounting Practice and fully and accurately present the
financial condition of the subject thereof as of the date thereof and no
material adverse change has occurred in the financial condition reflected
therein since the respective dates thereof; and no additional borrowings
have been made by the Borrower or any Obligor since the respective dates
thereof other than the borrowing contemplated hereby or other borrowings of
which the Lender has been notified in writing.
Section 3.11 No Other Defaults (Governmental Order). Neither the
Borrower nor any Obligor is in default with respect to any order, writ,
injunction, decree or demand of any court or any Governmental Authority.
Section 3.12 Utilities, Road Access and Drainage. The Land, other
than the Undeveloped Land, has adequate rights of access to public streets
and roads and there is constructed on the Land adequate rights of access to
all water, sanitary sewer and storm facilities necessary for the intended
use of the Developed Lots, and all roads necessary for the intended use of
the Developed Lots have been completed in accordance with the Plans and
Specifications therefor and all Development Requirements.
Section 3.13 Tests and Studies. The Borrower has conducted such
tests and studies as are necessary to determine the flow of surface and
storm waters and the drainage thereof, upon, across, and from the Land and
has prepared appropriate reports showing what grading, sloping, channeling
or construction of artificial drains or retention ponds is necessary to
provide adequate drainage and to prevent accumulation of such waters on the
Land at all times during its development and after Completion.
Section 3.14 Flood Plain. No portion of the Land will be located
in any area designated by the Secretary of Housing and Urban Development or
any other Governmental Authority as being in the 100-year flood plain or as
having special flood or mud slide hazards, except as disclosed by FEMA Maps
or other engineering documentation provided to Lender.
Section 3.15 Legal Requirements Met. No violation of any Legal
Requirement exists with respect to the Premises; the anticipated use
thereof complies with all Legal Requirements and all Legal Requirements as
of the date hereof have been satisfied.
Section 3.16 No Mechanics' Lien Inception. As of the date hereof,
no construction has commenced and is in progress on the Land, nor has any
material been delivered to the Land, nor has the Borrower made any verbal
or written contract or arrangement of any kind, the occurrence, performance
or recordation of which would give rise to a lien on the Premises having
priority equal to or greater than the liens and security interests of the
Deed of Trust.
Section 3.17 Ownership. As of the date hereof, the Borrower owns
all of the Premises.
Section 3.18 Approved Budget Correct. The Approved Budget is true,
correct, complete, valid and genuine and reflects the Borrower's best good
faith estimate of all of the direct and indirect costs of completing the
Improvements and the Off-Site Improvements in accordance with the Plans and
Specifications, all Development Requirements and the Loan Documents.
Section 3.19 No Default. No Default under this Agreement or the
other Loan Documents has occurred and is continuing.
Section 3.20 No Other Default. Neither the Borrower nor any Obligor
is in default under any instrument evidencing any indebtedness or any
agreement thereto or any indenture, mortgage, deed of trust, security
agreement, lease, franchise or other agreement or other instrument to which
such Person is a party or by which it or he is bound.
Section 3.21 Securities Act of 1933. Neither the Borrower nor any
agent acting for it has offered the Note or any similar obligation of the
Borrower for sale to or solicited any offers to buy the Note or any similar
obligation of the Borrower from any Person other than the Lender, and
neither the Borrower nor any agent acting for it will take any action which
would subject the sale of the Note to the provisions of Section 5 of the
Securities Act of 1933, as amended.
Section 3.22 Regulations U and T. The Borrower does not own any
"margin stock" within the meaning of Regulation U of the Board of Governors
of the Federal Reserve System. None of the proceeds of the Loan will be
used for the purpose of purchasing or carrying any such margin stock or for
the purpose of reducing or retiring any Indebtedness which was originally
incurred to purchase or carry any such margin stock or which would
constitute this transaction a "purpose credit" within the meaning of such
Regulation U, as now in effect or as it may hereafter be in effect. None
of the proceeds of the Loan will be used for the purpose of extending or
arranging for the extension of credit secured directly or indirectly, in
whole or in part, by collateral that includes any such margin stock. The
Borrower and its Partners will not take or permit any action which would
involve the Lender in a violation of Regulation U, Regulation T or any
regulation of the Board of Governors of the Federal Reserve System or
violation of the Securities and Exchange Act of 1934, in each case as now
in effect or as the same may hereafter be in effect.
Section 3.23 Representations Not Misleading. No representation or
statement made to the Lender by or on behalf of the Borrower or any Obligor
in connection with the transactions contemplated by this Agreement or made
in any of the other Loan Documents is (or shall be) false or misleading or
fails (or will fail) to state any matter necessary to make such statements
not misleading.
Section 3.24 No Known Material Adverse Fact. The Borrower knows of
no fact which materially and adversely affects the business, operations,
prospects or condition, financial or otherwise, of the Borrower or of any
Obligor.
Section 3.25 Borrower's Place of Business. The principal place of
business of the Borrower is c/o Stratus Management, L.L.C., 98 San Jacinto
Boulevard, Suite 220, Austin, Texas 78701.
Section 3.26 Survival of Representations and Warranties. All
representations and warranties made by or on behalf of the Borrower or any
Obligor herein shall survive the delivery of the Note and the making of the
Loan and any investigation at any time made by or on behalf of the Lender
shall not diminish its rights to rely thereon.
Section 3.27 Business 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, commercial, investment or other similar
purpose and not primarily for personal, family, household or agricultural
use, as such terms are used in Chapter 1D of the Texas Finance Code.
Section 3.28 Guaranty. The Guaranty and the Pledge Agreement have
each been duly and validly executed, issued and delivered by Guarantor and
constitute the valid and legally binding obligation of the Guarantor,
enforceable in accordance with their respective terms. Compliance by the
Guarantor with the Guaranty and the Pledge Agreement will not violate any
law or any other instrument or agreement binding upon the Guarantor.
ARTICLE IV
BORROWER'S COVENANTS AND AGREEMENTS
The Borrower covenants and agrees with the Lender as follows:
Section 4.1 Prosecution of Construction. The Borrower will prosecute
the construction of the Improvements in accordance with all Development
Requirements and this Agreement with reasonable diligence and dispatch, and
in any event will complete the construction of the Improvements on or
before the Scheduled Completion Date.
Section 4.2 Completion Evidence. As soon as reasonably possible after
Borrower is of the opinion that Completion has occurred, the Borrower shall
deliver the Evidence of Completion to the Lender.
Section 4.3 Off-Site Improvements. The Borrower shall promptly commence
and complete, or cause to be commenced and completed, any and all Off-Site
Improvements as and when required for the construction and operation of the
Improvements and by all Development Requirements. The Borrower shall
notify the Lender in writing of the commencement and keep the Lender fully
advised of the progress of all negotiations relating to the use by the
Borrower of any Off-Site Improvements or of any rights to use the property
of third Persons which may be necessary or desirable in connection with the
construction by the Borrower of any such Off-Site Improvements.
Immediately upon receipt, the Borrower shall furnish the Lender with copies
of required approvals and Governmental Permits for all such Off-Site
Improvements.
Section 4.4 Encroachments. Except as disclosed to the Lender in
writing, all Improvements necessary to prepare the Premises for the
construction of residential housing are or shall be entirely within the
boundary lines of the Land and do not and will not encroach upon any
set-back line, easement, right-of-way or adjoining property or breach or
violate any covenant, condition or restriction affecting the Land or any
Legal Requirement.
Section 4.5 Correcting Defects. The Borrower will, upon demand of the
Lender, correct or cause to be corrected:
(a) any structural defect in the Improvements or the Off-Site
Improvements;
(b) any material departure from the Plans and Specifications not
approved by Lender and any applicable Development-Related Entity;
(c) any encroachment by any part of the Improvements, the Off-Site
Improvements or any other structures or improvements over or on any
set-back line, easement, adjoining property or other restricted area; and
(d) any encroachment of any adjoining structure upon the Land which
any inspection reflects.
The advance of Loan proceeds or other sums hereunder shall not constitute a
waiver of the right of the Lender to require compliance with this covenant
with respect to any such defects, departures, encroachments or violations.
Section 4.6 Other Information. The Borrower will furnish to the Lender
such other information concerning the progress of the construction of the
Improvements and the Off-Site Improvements and the development of the Land
as the Lender may from time to time reasonably request.
Section 4.7 Proof of Payment. The Borrower will deliver and cause to be
delivered to the Lender from time to time as required by the Lender, all
such statements, receipts and other data and information as the Lender may
reasonably require reflecting payment of costs and expenses incurred in
connection with the construction of the Improvements, the Off-Site
Improvements or operation of the Premises.
Section 4.8 Free Access. The Borrower shall permit the Lender and its
duly authorized agents free access to the Premises and shall make available
for audit and inspection, at any reasonable time by Lender or its duly
authorized agents, all property, equipment, books, contracts, records and
other papers relating to the Premises and construction of the Improvements,
the Off-Site Improvements and the Development Agreements.
Section 4.9 Changes and Change Orders. No material change will be made
in any Plans and Specifications (including but not limited to the execution
of change orders) or in the Construction Contracts without the prior
written consent of the Lender. For purposes of this Section, a change
shall not be considered a material change unless:
(a) such change alone increases or decreases the contract price for
or other costs in respect of construction of the Improvements or the
Off-Site Improvements by more than $10,000.00, or together with all prior
changes on a "net" basis increases the contract price for or other costs in
respect of construction of the Improvements or the Off-Site Improvements by
more than $50,000.00;
(b) such change alone or together with all prior changes extends the
time to complete the Improvements or the Off-Site Improvements beyond the
Scheduled Completion Date; or
(c) such change alone or together with all prior changes constitutes
a change which would require the prior approval of any Development-Related
Entity so as not to affect or impair its obligations under the applicable
Development Agreement.
The Borrower shall deliver to the Lender true and correct copies of all
changes, amendments or supplements to the Plans and Specifications and the
Construction Contracts (whether material or not) within five (5) Business
Days after execution thereof or agreement thereto by the respective parties
to such changes.
Section 4.10 Title Status Certificates and Title Policies Required.
Until Completion, upon the request of the Lender, the Borrower will furnish
a Title Status Certificate to the Lender within twenty (20) Business Days
of the date which the request is made. After Completion, the Borrower will
furnish a Title Status Certificate to the Lender within twenty (20)
Business Days of the date after written request therefor made by the
Lender. Upon written request of the Lender, the Borrower shall forthwith
deliver to the Lender such endorsements to the Title Insurance Policy as
shall be legally available and as the Lender shall reasonably request from
time to time.
Section 4.11 Insurance Policies Required. Until the Debt is paid in
full, the Borrower shall furnish the Insurance Policies and comply with all
terms thereof.
Section 4.12 Casualty Damage. In case of any damage to or loss of
any of the Premises by fire, storm or other casualty whatever prior to the
payment of the Debt in full, the Borrower will promptly cause the damage to
be repaired and the Improvements and the Off-Site Improvements to be
restored all in accordance with this Agreement, the Plans and
Specifications and the Development Requirements. In such event, the
Borrower will cause all insurance proceeds to be delivered to Lender, and
Lender shall apply the insurance proceeds in the manner set forth in the
Deed of Trust.
Section 4.13 Approval of Contracts and Plans Segments. The Borrower
will not execute any contract or directly become a party to any arrangement
for the furnishing of labor, equipment, supplies or materials for the
Premises for more than $50,000.00 except with Persons approved by the
Lender; provided however, the Lender's approval shall not be unreasonably
withheld or delayed. No work shall be commenced with respect to
construction of any particular segment of the Improvements or the Off-Site
Improvements until the Plans and Specifications for such segment shall have
been submitted to and approved by the Contractor and the Lender, which
approval will not be unreasonably withheld or delayed. All construction
contracts shall provide by their terms that all liens to which the
Contractor is entitled are subordinate in all respects to the lien of the
Deed of Trust.
Section 4.14 Safe Storage. The Borrower will cause all equipment,
supplies and materials acquired or furnished in connection with the
construction of the Improvements but not affixed to or incorporated into
the Premises to be stored on the Land or at other locations approved by the
Lender in writing, in each case under adequate safeguards to minimize the
possibility of loss, theft, damage or commingling with other property.
Upon the reasonable request of the Lender, the Borrower will furnish an
inventory of all such equipment, supplies and materials stored off of the
Land, specifying the location thereof.
Section 4.15 Plans and Specifications Required. The Borrower will
furnish the Plans and Specifications to the Lender before commencement of
construction of the Improvements and the Off-Site Improvements. The Lender
shall have the right at all times to use, examine and copy the Plans and
Specifications. The Borrower assumes full responsibility for compliance of
the Plans and Specifications with all Legal Requirements and with sound
engineering practice and notwithstanding any approval by the Lender of the
Plans and Specifications, the Lender shall have no liability or
responsibility for such compliance or for any other defect or deficiency in
the Plans and Specifications, the Improvements or the Off-Site
Improvements.
Section 4.16 Separate Bank Accounts. The Borrower agrees to
maintain an account with the Lender into which all proceeds of the Loan
shall be deposited and against which checks shall be drawn only to pay the
items set forth in the Approved Budget.
Section 4.17 Sales Contract Approval and Copies Required. No Sales
Contract covering any part of the Land shall be executed by the Borrower
with any purchaser, unless by its terms it is conditional upon approval by
the Lender, which approval will not be unreasonably withheld or delayed
(provided that in any event, the gross sales price of the Land being sold
shall be acceptable to Lender in Lender's sole discretion, and shall be
payable in cash at closing) or unless prior to its execution the Lender has
approved it in writing. In either case, within five (5) Business Days
following the execution of any Sales Contract, the Borrower shall deliver
to the Lender a copy of the executed counterpart of such Sales Contract.
Section 4.18 Seller's Obligations. The Borrower shall faithfully
perform the seller's obligations under the Sales Contracts in all material
respects and in any event will not allow a default by seller to occur
thereunder, the Borrower shall not materially modify any of the Sales
Contracts and shall not terminate any of the Sales Contracts, or any
obligations of any Person thereunder, or take (or omit to take) any other
action, the effect of which may diminish or impair the value of any of the
Sales Contracts.
Section 4.19 Approval of All Development Agreements and Copies
deliver to the Lender for its review and approval the proposed form of such
Development Agreement. No Development Agreement pertaining to the Premises
shall be executed by the Borrower unless approved by the Lender in writing,
which approval shall not be unreasonably withheld or delayed. Within five
(5) Business Days of the execution of any Development Agreement, the
Borrower shall deliver to the Lender an original executed counterpart of
such Development Agreement.
Section 4.20 Security Interest in Development Agreements.
Concurrently with the execution of any Development Agreement, at the
request of the Lender, the Borrower shall execute and deliver to the Lender
an instrument or instruments, in form and substance reasonably satisfactory
to the Lender, creating in favor of the Lender a first priority lien upon
and security interest in, and/or assigning to the Lender, all of the
Borrower's rights in any such instrument together with, such related
financing statements and other instruments necessary to give notice of or
perfect such lien, security interest or assignment as the Lender may then
require.
Section 4.21 Lender's Sign. The Borrower shall permit the Lender to
place and maintain signs on the Premises at mutually agreeable locations
containing such information regarding the financing of the Premises as the
Lender may deem appropriate so long as the same comply with all Legal
Requirements.
Section 4.22 Lender May Fund. If the Borrower fails to satisfy any
covenant or condition set forth in any of the Loan Documents within fifteen
(15) days after written notice thereof from Lender, the Lender shall have
the right without waiving the Default to timely advance Loan proceeds to
satisfy same. Any Loan proceeds so advanced shall be evidenced by the Note
or at the option of the Lender (notwithstanding any contrary provision of
Article II of this Agreement) shall constitute indebtedness of the Borrower
to the Lender payable on demand, bearing interest at the Past Due Rate from
the date advanced by the Lender. All such demand indebtedness shall
constitute a part of the Debt and shall be secured by the liens and
security interests of the Loan Documents.
Section 4.23 Call for Funds. If the Lender reasonably determines at
any time in Lender's good faith judgment that the unadvanced Loan proceeds
will be insufficient to pay for (a) Completion of the Improvements or the
Off-Site Improvements in accordance with the Plans and Specifications and
the Development Requirements and (b) all other items set forth in the
Approved Budget, including but not limited to interest which the Lender
reasonably estimates may accrue on the Debt prior to its maturity, the
Borrower shall make arrangements satisfactory to the Lender to provide
sufficient funds to complete the Improvements and the Off-Site Improvements
in accordance with the Plans and Specifications and the Development
Requirements and to pay for all other items set forth in the Approved
Budget. The obligations of the Borrower under this Section 4.23 are in
addition to the Borrower's obligation to provide the Additional Equity (as
defined in Section 5.1(e) hereof) for the payment of the construction costs
incurred for the Improvements as budgeted in the Approved Budget.
Section 4.24 Call for Funds to Pay Overruns. If the amount budgeted
for any particular category of costs set forth in the Approved Budget
(taking into account the "contingency" line item in the Approved Budget) is
or will be insufficient to pay the actual or projected cost of such
category, at the Lender's reasonable election, the Borrower shall make
arrangements satisfactory to the Lender (which may include reallocation of
savings manifestly realized on other portions of the Improvements to other
Approved Budget categories) to provide sufficient funds to pay the
difference between such actual or projected costs and the amount budgeted
for such category in the Approved Budget. The obligations of the Borrower
under this Section 4.24 are in addition to the Borrower's obligation to
provide the Additional Equity as budgeted in the Approved Budget.
Section 4.25 Expenses of and Claims Against Lender. The Borrower
will pay on demand all expenses incurred by Lender in connection with the
transactions contemplated in the Loan Documents, including but not limited
to charges and disbursements of legal counsel for the Lender, taxes,
recording expenses, closing costs, fees and commissions due to brokers, the
Consulting Architect/Engineer and others, and the costs and expenses of the
Title Insurance Policy. THE BORROWER WILL INDEMNIFY THE LENDER FROM CLAIMS
ARISING IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED IN THE LOAN
DOCUMENTS, INCLUDING, WITHOUT LIMITATION, LOSSES, COSTS OR EXPENSES
INCURRED BY LENDER ON ACCOUNT OF BORROWER'S FAILURE TO COMPLY WITH THE
PROVISIONS OF THIS AGREEMENT AND ANY CLAIMS RESULTING FROM THE ALLEGED
NEGLIGENCE OF LENDER, BUT NOT INCLUDING CLAIMS RESULTING FROM THE LENDER'S
WILLFUL MISCONDUCT OR GROSS NEGLIGENCE.
Section 4.26 Additional Instruments. The Borrower will execute such
additional instruments as may be requested by the Lender in order to carry
out the intent of the Loan Documents and to perfect or give further
assurances of any of the rights granted or provided for in any of the Loan
Documents.
Section 4.27 Notices from Development-Related Entities. The
Borrower will, upon the receipt or giving thereof, promptly furnish to the
Lender a copy of all notices and reports received by the Borrower from or
sent by the Borrower to each Development-Related Entity alleging a breach
or default or the possibility of the occurrence of a breach or default
under any Development Agreement.
Section 4.28 Documents to Comply with Law. All forms of Sales
Contracts for sale of all or any part of the Premises and any and all other
printed documents necessary to fulfill the Borrower's obligations hereunder
shall comply with all Legal Requirements.
Section 4.29 Collection of Development Agreement Proceeds. The
Borrower shall use its best efforts to collect the proceeds of each
Development Agreement as, when, and if they become due and payable and
shall take such steps as may be necessary or appropriate to enforce the
prompt payment and collection thereof.
Section 4.30 Maintenance Standards. The Borrower will keep and
maintain the Premises in good, orderly, clean, safe and sanitary repair and
condition and otherwise in accordance with the standards of property
management customary to developers of comparable subdivisions for
residential housing in the Houston, Texas area.
Section 4.31 Repairs. The Borrower shall cause to be performed and
completed all repairs and restoration of the Premises on a timely basis
after any and all loss and damage thereto.
Section 4.32 Legal Compliance. The Borrower shall operate the
Premises in full compliance with all Legal Requirements.
Section 4.33 Employees. The Borrower shall require the Borrower's
development manager for itself to, employ, supervise, direct, discharge and
compensate (including payment of any and all payroll taxes) such employees
as are necessary for the proper development, maintenance and operation of
the Premises and comply with all Development Requirements regarding the
employment and payment of Persons employed to develop, manage or operate
all or any part of the Improvements or the Off-Site Improvements.
Section 4.34 Operational Standards. The Borrower shall do and
perform any and all other acts and things relating to the development,
management, upkeep and operation of the Premises as are customarily
performed by developers of comparable subdivisions in the Houston, Texas
area.
Section 4.35 Indebtedness to be Paid. The Borrower and each Obligor
will pay punctually and discharge when due, or renew or extend, any
Indebtedness incurred by it when due, and will discharge, perform and
observe the covenants, provisions and conditions to be performed,
discharged and observed on the part of the Borrower or any Obligor in
connection therewith, or in connection with any agreement or other
instrument relating thereto or in connection with any mortgage, pledge or
lien existing at any time upon any of the property or assets of the
Borrower; provided, however, that nothing contained in this Section shall
require the Borrower or any Obligor to pay, discharge, renew or extend any
such Indebtedness or to discharge, perform or observe any such covenants,
provisions and conditions so long as the Borrower in good faith shall be
actively contesting any claims which may be asserted against it or them
with respect to any such Indebtedness or any such covenants, provisions and
conditions and shall set aside on its books reserves with respect thereto
deemed adequate by the Lender.
Section 4.36 Notice of Material Adverse Change. Promptly upon the
obtaining by the Borrower of knowledge or advice of any material adverse
change in the business or financial condition of the Borrower, any
Development-Related Entity or any Obligor, the Borrower shall notify the
Lender thereof.
Section 4.37 Notice of Other Liens. The Borrower shall notify the
Lender in writing within five (5) days of the time that the Borrower
becomes aware of the filing of any mortgage or lien or other security
device whatsoever against the Premises.
Section 4.38 Bonding Off Other Liens. The Borrower shall bond off
under the provisions of all Legal Requirements and to the satisfaction of
the Lender any lien or claim of lien filed for record within fifteen (15)
Business Days of the date of the Borrower's receipt of the notice of filing
of said lien or claim.
Section 4.39 Suitability of Soil. The conformation of the ground
and general and local conditions are suited to the nature of the work to be
performed in connection with the Premises.
Section 4.40 Promotional Standards. The Borrower shall advertise
and promote the project in the manner (expending such amounts) of
developers of other comparable residential developments in the Harris
County, Texas area.
Section 4.41 Reimbursement. Immediately upon receipt by the
Borrower of any money, property or other thing of value from any
Development-Related Entity pursuant to any Development Agreement, the
Borrower will pay or transfer to the Lender such portion of such money,
property or thing as is received by it on account of Loan proceeds financed
under this Agreement, for application by the Lender against the Debt.
Section 4.42 Construction Contract. The Borrower shall fully
observe and perform the requirements of each Construction Contract, shall
maintain them in full force and effect and shall not cause, suffer or
permit any modification or termination thereof without the prior written
consent of the Lender.
Section 4.43 Zoning; Platting. The portion of the Land consisting
of the Developed Lots is properly zoned for residential development (to the
extent any zoning is applicable). A plat or plats of the subdivision or
subdivisions of that portion of the Land consisting of the Developed Lots
has been filed of record showing the location of all lots, blocks, streets,
alleys, parks or other portions of the subdivision or subdivisions
dedicated to public use, or for the use of purchasers or owners of tracts
or lots in the subdivision. The Borrower shall submit any preliminary or
final plat or plats to the Lender for approval which shall not be
unreasonably withheld or delayed. Upon approval by the Lender of any
preliminary plat, final plat or revision thereof, the Borrower shall
prepare final subdivision plat or plats in the form required by all
Development Requirements. The Borrower shall use its best efforts to
obtain the approval by all appropriate Government Authorities of the final
subdivision plat or plats promptly after the Lender's approval thereof.
Section 4.44 Adjacent Properties. The Borrower shall take proper
means to protect the adjacent or adjoining property or properties in any
way encountered, which might be injured or adversely affected by any
process of construction to be undertaken under this Agreement, from any
damage or injury by reason of the construction; and it shall protect the
Lender from any and all claims for such damage on account of its failure to
fully protect all adjoining property.
Section 4.45 Sewer Capacity. If the Lender reasonably determines at
any time that inadequate sewer capacity has been allocated to the Land, the
Borrower shall make arrangements reasonably satisfactory to Lender to
obtain such sewage capacity for the Land as is necessary in the opinion of
Lender for the development of the Land in accordance with its intended use
as a single-family residential subdivision.
Section 4.46 Financial Statements of the Borrower. The Borrower
shall furnish to the Lender the following, within the times indicated:
(a) As soon as available and in any event within ninety (90) days
after the end of each fiscal year of the Borrower, a copy of the annual
unaudited consolidated financial statements of the Borrower, which shall
include a consolidated balance sheet of the Borrower as of the close of
such financial year, a consolidated statement of income and a consolidated
statement of changes in the financial position of the Borrower for such
fiscal year, all setting forth in comparative form the corresponding
figures as at the end of the previous fiscal year, all prepared in
conformity with Good Accounting Practice and certified by a Partner of the
Borrower.
(b) As soon as available and in any event within fifty-five (55) days
after the end of each calendar quarter, a copy of the unaudited
consolidated financial statements of the Borrower, consisting of at least a
consolidated balance sheet as at the close of such quarter, a consolidated
statement of income and consolidated statement of changes in the financial
position of the Borrower for such quarter and for the period ending with
such quarter, all setting forth in comparative form the corresponding
figures for the corresponding period of the previous fiscal year, all
prepared in conformity with Good Accounting Practice and certified by a
joint venturer of the Borrower.
(c) As soon as available and in any event within thirty (30) calendar
days after the end of each calendar quarter, a report detailing sales of
the Premises to purchasers under the Sales Contracts for such quarter,
comparing the requirements of each Sales Contract to each purchaser's
actual performance during such period, and certified by a Partner of the
Borrower.
Section 4.47 Letter of Credit; Escrow Deposit. In connection with
the closing of the Loan, Borrower shall cause Guarantor to have either (i)
delivered the Letter of Credit to Lender or (ii) executed and delivered to
Lender the Guaranty and Pledge Agreement, and to secure its obligations
under the Guaranty by depositing the Escrow Deposit into a restricted
account with Lender. In the event Guarantor elects not to deliver the
Letter of Credit to Lender, then Guarantor shall execute and deliver to
Lender the Guaranty and Pledge Agreement, and shall deliver to Lender the
Escrow Deposit. The Letter of Credit or the Escrow Deposit shall be in
effect at all times during the term of the Loan; provided, however, that
Guarantor may qualify for reductions in the amount of the Letter of Credit
or the Escrow Deposit at the end of each calendar quarter as provided in
Section 9.3 of this Agreement. Guarantor may from time to time, replace
the Escrow Deposit with a Letter of Credit, or replace a Letter of Credit
with the Escrow Deposit, as the case may be, provided that Lender shall at
all times during the term of the Loan have in its possession either a valid
Letter of Credit or the Escrow Deposit, and in the event the Guarantor
delivers the Escrow Deposit to Lender, the Guarantor shall have executed
and delivered to Lender the Guaranty and Pledge Agreement as set forth
above. In addition to the foregoing, Guarantor may deliver to Lender a
combination of both a Letter of Credit and an Escrow Deposit (with the
Guaranty and Pledge Agreement) so long as the total of the face amount of
the Letter of Credit and the Escrow Deposit equals or exceeds the Required
Deposit (as defined in Section 9.3 hereof).
ARTICLE V
REQUIREMENTS FOR ADVANCES
Section 5.1 Conditions. The Lender shall not be obligated to make any
advance of Loan proceeds or other sums under this Agreement or the other
Loan Documents unless all of the following conditions shall be satisfied at
the time of such advance:
(a) no Default or Event of Default shall have occurred under this
Agreement which has not been waived by the Lender or cured to the
satisfaction of the Lender.
(b) the Premises shall not have been injured or damaged by fire or
other casualty; or if so damaged, provisions currently and reasonably
satisfactory to the Lender shall have been made to effect necessary repair
and restoration in accordance with the Loan Documents.
(c) the Deed of Trust shall have been recorded in the Real Property
Records of Harris County, Texas with all filing fees and taxes therefor
paid, all prior to the commencement of any construction on any part of the
Premises or the placing of any equipment, supplies or material on the
Premises.
(d) the Lender shall have received proof of due filing of the
Financing Statements and shall have received such other items and
instruments as are necessary and appropriate in the opinion of the Lender
to perfect a first priority security interest in all property covered by
the Deed of Trust and all of the other Loan Documents.
(e) with respect to any advance requested by Borrower to pay for
construction costs of the Improvements or Off-Site Improvements, there
shall have been delivered to the Lender evidence satisfactory to the Lender
that (i) after the date of this Agreement, the Borrower has expended not
less than an additional $500,000 of its own funds to pay for the
construction of such Improvements or Off-Site Improvements (the "Additional
Equity"), and (ii) the unadvanced Loan proceeds will be sufficient to pay
for completion of all of the Improvements and the Off-Site Improvements in
accordance with all Development Requirements; or if such proceeds are not
adequate, arrangements currently satisfactory to the Lender shall have been
made to provide sufficient funds to complete the Improvements and the
Off-Site Improvements in accordance with all Development Requirements.
(f) if requested by the Lender, the Borrower shall have furnished to
the Lender one or more Officer's Certificates, dated the date of such
advance and/or such other evidence as the Lender shall reasonably require,
that no Default or Event of Default has occurred which has not been waived
by the Lender or cured to the satisfaction of the Lender.
(g) if requested by the Lender, the Sales Contract Schedule and a
current Development Plan.
(h) the Lender shall have approved each Development Agreement
currently in existence and shall have received a security interest in each
Development Agreement currently in existence.
(i) the Lender shall have received the Required Deposit in accordance
with the terms and provisions of this Agreement, and Guarantor shall have
executed and delivered to Lender the Guaranty and the Pledge Agreement.
Section 5.2 Initial Advance. The Lender shall not be obligated to make
the initial advance (the "Initial Advance") in an amount not to exceed
$6,000,000.00 or any subsequent advance under this Agreement or the other
Loan Documents unless:
(a) the Lender shall have received all of the original Loan
Documents, including but not limited to the following:
a counterpart of this Agreement executed by the Borrower;
a Request for Advance;
the Note;
the Deed of Trust;
the Financing Statements;
the Letter of Credit or, in the alternative, the Escrow Deposit,
Guaranty and the Pledge Agreement;
a current Development Plan; and
(b) the Lender shall have received the following additional
instruments and evidence:
the Approved Budget;
the Appraisal;
the Organizational Agreement of the Borrower and each of its
Partners, and the Organizational Agreements for each general
partner of the Partners and their general partners;
the Commitment for the Title Insurance Policy in form and
substance acceptable to Lender;
the Title Instruments;
the Plans and Specifications;
the Governmental Permits, if any;
all Engineering Reports, then available;
the Builder's Consents executed by the applicable purchaser with
respect to each of the Sales Contract; and
the Opinion of Borrower's Counsel.
Section 5.3 Subsequent Advances. The Lender shall not be obligated to
make any advance under this Agreement or the other Loan Documents after the
Initial Advance unless:
(a) the Lender shall have received the following additional original
Loan Documents:
a Request for Advance;
with respect to any Request for Advance to pay for the
construction costs of any Improvements or Off-Site Improvements,
a Contractor/Lender Agreement from each Contractor then engaged
to furnish labor or materials for the Premises and who has not
theretofore executed such an agreement with the Lender;
(b) the Lender shall have received the following additional
instruments, to the extent not previously provided to Lender:
the Title Insurance Policy;
the Plans and Specifications then existing;
Builder Consent agreements in form and substance reasonably
satisfactory to the Lender with each Development-Related Entity
that is at that time a party to a Sales Contract;
a current Title Status Certificate;
all Construction Contracts then existing;
all Governmental Permits;
all Insurance Policies then required by the Deed of Trust;
all Sales Contracts then in existence;
a current Sales Contract Schedule;
all other Development Agreements then in existence; and
all remaining Engineering Reports available.
Section 5.4 Off-Site Improvements. The Lender shall not be obligated to
make any advance under this Agreement in payment of the costs of the
Off-Site Improvements, unless, in addition to satisfaction of all matters
set forth in Sections 5.1, 5.2 and 5.3 above the following conditions shall
have been satisfied in a manner acceptable to the Lender:
(a) the Plans and Specifications for such Off-Site Improvements;
(b) a Construction Contract providing for the construction of such
Off-Site Improvements;
(c) the Off-Site Agreement pertaining to the construction of the
Off-Site Improvements; and
(d) an assignment duly executed by the Borrower assigning to the
Lender all of the Borrower's right, title and interest in and to the
Off-Site Improvements together with the consent of all Persons reasonably
required by the Lender to such assignment.
Section 5.5 Equipment, etc. Stored Off-Site. The Lender shall not be
obligated to make any advance under this Agreement to be applied in payment
of costs of equipment, supplies and materials stored off the Land unless,
in addition to the satisfaction of all matters set forth in Sections 5.2
and 5.3 above, the following conditions shall have been satisfied in a
manner acceptable to the Lender:
(a) the aggregate amount of all advances in respect of such costs
shall not exceed at any time $25,000.00 at any time (which amount shall
include the aggregate total of all previous advances hereunder for payment
of such costs to the extent that such equipment, supplies and materials
continue to be stored off the Land);
(b) title to such equipment, supplies and materials shall be vested
in the Borrower, as evidenced by documentation satisfactory to the Lender,
provided that the possession thereof may be in a Contractor or his or its
subcontractors under an agreement of bailment satisfactory to the Lender so
long as such Contractor or subcontractors shall cause to be recorded an
informational financing statement in form satisfactory to the Lender,
evidencing the security interests of the Lender;
(c) if requested by the Lender, the Borrower shall execute and
deliver to the Lender a separate security agreement and financing statement
covering such equipment, supplies and materials, in form and substance
reasonably satisfactory to the Lender;
(d) the Borrower shall keep the Lender apprised in writing of each
location where any such equipment, supplies and materials are stored off
the Land and the value thereof at each location; and
(e) representatives of the Lender shall have the right to make
inspections of the storage area at any time.
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1 Events of Default. The occurrence (including the passage of
time if any is specified therefor) of any one or more of the following
shall constitute an Event of Default hereunder:
(a) failure of the Borrower to pay when due any accrued interest on
or principal of the Note or any other part of the Debt;
(b) failure of the Borrower to perform, observe or comply with any of
the terms, covenants, conditions or provisions contained in this Agreement,
the Note, the Deed of Trust or any of the other Loan Documents.
(c) failure of the Guarantor to perform, observe or comply with any
of the terms, covenants, conditions or provisions of the Guaranty or the
Pledge Agreement.
(d) failure of the Borrower or any Contractor to perform, observe or
comply with any of the terms, covenants, conditions or provisions of any
Construction Contracts in all material respects (but in any event Borrower
shall not allow a default by Borrower to occur thereunder).
(e) any representation or warranty made by the Borrower or other
Obligor in this Agreement, any Application and Certificate for Payment or
any Request for Advance or in any of the other Loan Documents or otherwise
proves to have been untrue or misleading in any material respect as of the
date made.
(f) any representation or warranty made by the Guarantor in the
Guaranty or the Pledge Agreement proves to have been untrue or misleading
in any material respect as of the date made.
(g) any substantial damage to or destruction of the Premises shall
occur and insurance proceeds, together with sums provided by the Borrower
shall not, in the opinion of the Lender, be sufficient to repair and
restore the Premises.
(h) the Deed of Trust shall not, in the reasonable opinion of counsel
for Lender, constitute a perfected first and prior lien on and security
interest in the Premises securing payment of the Debt.
(i) a survey shall show that any Improvement (other than an Off-Site
Improvements) to the Land is not entirely within the boundary lines of the
Land or encroaches upon any set-back line, easement, right-of-way, street
or any adjoining property, or that any Legal Requirement has been breached
or that any adjoining structure encroaches upon the Land.
(j) the Improvements shall not have been completed (for any reason
whatever) in accordance with the Plans and Specifications and the
Development Requirements by the Scheduled Completion Date.
(k) the Off-Site Improvements shall not have been completed (for any
reason whatever) in accordance with the Plans and Specifications and the
Development Requirements by the Scheduled Completion Date.
(l) the Consulting Architect/Engineer shall at any time certify to
the Lender in writing that the Improvements or the Off-Site Improvements
are not at the date of such certificate being constructed in substantial
accordance with the Plans and Specifications and the Development
Requirements by the Scheduled Completion Date.
(m) any Governmental Authority shall commence proceedings to condemn
all or any material part of the Premises.
(n) any present or future Legal Requirement shall prohibit or impair
the Borrower's intended use of any of the Premises as represented to the
Lender as a material inducement to make the Loan.
(o) any Person shall commence any action, suit or proceeding against
or affecting the Borrower, any Obligor or the Premises or involving the
validity or enforceability of the Loan Documents or the priority of the
liens created thereby, at law or in equity, or before any Governmental
Authority, which in the judgment of the Lender, impairs or would impair its
interest in the Premises, the enforceability of the Loan Documents, or its
ability to collect the Debt when due.
(p) the Borrower or any Guarantor shall be prevented or relieved by
any Governmental Authority from performing or observing any material term,
covenant or condition of any of the Loan Documents, any Utility Agreement
or any Sales Contract.
(q) the Borrower or any Obligor shall:
(1) voluntarily suspend transaction of business.
(2) become insolvent or unable to pay its or his debts as they
mature.
(3) file a voluntary petition in bankruptcy or a voluntary
petition seeking reorganization or to effect a plan or other
arrangement with creditors.
(4) make an assignment for the benefit of creditors.
(5) apply for or consent to the appointment of any receiver or
trustee for any such Person or of all or any substantial
portion of the property of any such Person.
(6) make an assignment to an agent authorized to liquidate any
substantial part of its or his assets.
(r) In respect of the Borrower or any Obligor:
(1) an involuntary petition shall be filed with any court or
other authority seeking reorganization or a creditors'
arrangement of any such Person or the adjudication of any
such Person as bankrupt or insolvent,
(2) an order of any court or other authority shall be entered
appointing any receiver or trustee for any such Person or
for all or any substantial portion of the property of any
such Person, or
(3) a writ or warrant of attachment or any similar petition
shall be issued by any court or other authority against all
or any substantial portion of the property of any such
Person
and such petition seeking reorganization, a creditor's arrangement or
adjudication or such order appointing a receiver or trustee is not vacated
or stayed, or such writ, warrant of attachment or similar process is not
vacated, released or bonded within sixty (60) days after its entry or levy.
(s) the Premises are at any time not operated or maintained in good,
orderly, clean, safe and sanitary repair and condition and otherwise in
accordance with the standards required by this Agreement and in accordance
with the highest standards of residential management in the Harris County,
Texas area.
(t) default shall occur under the terms of any of the Loan Documents
which is not cured within any applicable grace or cure period.
(u) failure of the Borrower or any Guarantor to pay principal or
interest on any valid Indebtedness or obligation in excess of $25,000.00
incurred in connection with or arising out of the development of the
Premises, when due (or within any applicable period of grace or cure) other
than Indebtedness to the Lender or if the holder of such other obligation
declares, such obligation due prior to its stated maturity because of such
party's default thereunder.
(v) any Utility Agreement shall be held to be void, voidable or an
ultra vires act of any Person executing the same, or any Person shall
assert that any Utility Agreement is not binding upon it for any reason and
no alternative arrangements satisfactory to the Lender can be made.
(w) the Borrower shall withdraw, terminate or modify any approved
Development Agreement without the written consent of the Lender; however,
Borrower may enter into non-material amendments to the Sales Contracts from
time to time without the consent of Lender, provided that in any event,
such amendments shall not reduce the number of lots to be sold, reduce the
sales price or materially increase the time for performance by the
purchaser thereunder without the prior written consent of Lender.
(x) a default by the Borrower or any Development-Related Entity
(other than Holigan Homes Texas, Ltd.) under any Development Agreement
which is not cured within any applicable grace or cure period.
(y) failure of the Borrower, within ten (10) days after receipt
thereof, to apply any proceeds received by the Borrower from any
Development Agreement (other than proceeds representing payments or
reimbursements of amounts under Utility Agreements) towards repayment of
the Debt in accordance with the terms of this Agreement.
(z) a default by Guarantor under the Guaranty or the Pledge
Agreement, if the Guarantor has delivered the Escrow Deposit to Lender in
lieu of the Letter of Credit.
(aa) if Borrower has delivered a Letter of Credit to Lender, the
Letter of Credit expires and Borrower fails to deliver to Lender on or
before the date of expiration a replacement Letter of Credit or Escrow
Deposit to replace such Letter of Credit, in accordance with the terms and
conditions set forth in this Agreement.
(bb) in addition, except as specifically provided for in the Loan
Documents or unless the Lender shall otherwise give its prior written
consent, if the Borrower does any of the following, then (without limiting
any other provisions of this Agreement) it will constitute an Event of
Default under this Agreement:
(1) except as provided in any approved Utility Agreement or in
any approved Off-Site Agreement, convey, transfer, lease or
encumber any of the Premises or any right to manage any of
the Premises or to receive any rents, profits, sales
proceeds or any insurance thereof;
(2) demolish any part of the Premises (except only to the
extent, if any, necessary to correct defective work);
(3) liquidate, terminate, consolidate, merge or dissolve;
(4) except to the extent permitted by the Deed of Trust, convey,
transfer, assign or pledge or permit a conveyance, transfer,
assignment or pledge of, a majority or otherwise controlling
interest in the Borrower or a Partner of the Borrower in a
single transaction or a series of transactions;
(5) cause or permit any Hazardous Substances (as defined in the
Environmental Indemnity Agreement between Borrower and
Lender) to be placed, held, used, located or disposed of on,
under or at any of the Premises or any part thereof by any
Person, in violation of any applicable Legal Requirements or
cause or permit any part of any of the Premises to be used
as a manufacturing, storage or dump site for Hazardous
Substances, or cause or suffer any liens to be recorded
against any of the Premises as a consequence of, or in any
way related to, the presence, remediation or disposal of
Hazardous Substances in or about any of the Premises,
including any so-called state, federal or local "Superfund"
lien relating to such matters;
(6) incur any Indebtedness in excess of $50,000.00 that is not
contemplated to be paid with Loan proceeds in accordance
with the Approved Budget;
(7) create or suffer to be created any lien, encumbrance,
easement, use or charge affecting any of the Premises except
for liens, encumbrances or easements approved in writing by
the Lender;
(8) modify or amend its Organizational Agreement;
(9) modify or amend the Development Plan in any material
respect; or
(10) the Borrower shall conceal, remove, or permit to be
concealed or removed, any part of Borrower's property, with
intent to hinder, delay or defraud any of Borrower's
creditors, or make or suffer a transfer of any of Borrower's
property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or shall make any
transfer of Borrower's property to or for the benefit of a
creditor at a time when other creditors similarly situated
have not been paid; or shall suffer or permit, while
insolvent, any creditor to obtain a lien upon any of
Borrower's property through legal proceedings or distraint
which is not vacated within thirty (30) days from the date
thereof.
Notwithstanding anything to the contrary contained in this Section 6.1,
with regard to non-monetary Defaults only (i.e., Defaults which cannot be
cured by payment of a liquidated sum of money to the Lender) where no other
cure period has been specified herein, if the Borrower shall fail to cure
any such non-monetary Default to the Lender's satisfaction within thirty
(30) days after written notice of such non-monetary Default from the Lender
or its agent to the Borrower, then such non-monetary Default shall
constitute an Event of Default under this Agreement.
Section 6.2 Substitute Contractor. Notwithstanding anything to the
contrary as set forth in Section 6.1 of this Agreement, the Lender shall
not accelerate the Debt or foreclose its liens solely by reason of the
occurrence of any event described therein with respect to a Contractor so
long as the Borrower substitutes an alternative Contractor reasonably
satisfactory to the Lender within forty-five (45) days after the occurrence
of the Default.
Section 6.3 Remedies for Default. At any time after the occurrence of
any Event of Default which has not been waived by the Lender in writing or
cured to the Lender's satisfaction, the Lender shall have the right, at its
option:
(a) to declare the unpaid balance of the Debt (including all
principal on the Note and all interest then accrued thereon) immediately
due and payable and thereupon the Debt (and all amounts outstanding under
the Note) shall be immediately due and payable without notice (including
but not limited to notice of acceleration and notice of intent to
accelerate), protest or demand or presentment for payment, all of which are
hereby expressly waived by the Borrower;
(b) to enter the Premises and take over the construction of the
Improvements and the Off-site Improvements, and manage the Premises;
(c) to exercise any rights which the Borrower may have under each and
every Construction Contract, Development Agreement and any other contract
or agreement under which the Borrower has rights which are, or are intended
to be, the subject of a security interest in favor of the Lender to secure
the Debt;
(d) to enforce or avail itself of any and all remedies provided in
any of the Loan Documents, including but not limited to foreclosure of all
the liens and security interests securing the Debt; and
(e) present the Letter of Credit for payment and apply the proceeds
thereof to the Debt outstanding under the Loan Documents or, in the
alternative, offset the funds in the Escrow Account to the Debt then
outstanding under the Loan Documents.
Section 6.4 Commitments Lapse. In addition to the rights and remedies
of the Lender set forth in this Agreement, upon the occurrence of any
Default, the commitment of the Lender (if then outstanding) to make
advances against the Note or otherwise, shall cease until the Lender shall
declare that all such Defaults have been cured to the satisfaction of the
Lender, or until the Lender shall have waived same; but the Lender may, at
its option, continue or at any time commence making one or more advances
and in any case all advances by the Lender shall be deemed to have been
made pursuant to commitment (as such term is used and defined in the
Uniform Commercial Code as enacted and in force in the State of Texas) and
pursuant to this Agreement.
Section 6.5 Lender's Options Regarding Contractors. If the Lender shall
exercise the option to take over the construction of the Improvements, the
Lender shall be authorized, at its option, to discontinue the services of
any Contractor and to employ one or more contractors of its choice to
perform the necessary work, and the Lender shall have no liability or
responsibility to the Borrower or any other Person with respect thereto so
long as the Lender exercises good faith in the selection of such contractor
or contractors.
Section 6.6 Lender's Options Regarding Developers and Managers. If the
Lender shall exercise its option to take over management of the Premises,
the Lender shall be authorized, at its option, to discontinue the services
of any developer, manager or other Person employed with respect to the
Improvements and to employ one or more independent managers, developers or
both to manage and/or develop the Premises and the Lender shall have no
liability or responsibility to the Borrower or any other Person with
respect to its or their management of the Premises so long as the Lender
exercises good faith in the selection of such independent developer or
developers, manager or managers.
Section 6.7 Costs Paid are Sums Lent. All costs and expenses incurred
by the Lender in taking over construction of the Improvements, managing the
Premises and/or developing the Premises shall, as paid, be deemed to be an
advance of Loan proceeds against the Note or at the option of the Lender
(notwithstanding any contrary provision of Section 2.1 or 2.2 of this
Agreement), shall constitute indebtedness of the Borrower to the Lender
payable on demand, bearing interest at the Past Due Rate from the date paid
by the Lender. All such demand indebtedness shall constitute a part of the
Debt and shall be secured by all liens and security interests of the Loan
Documents.
Section 6.8 Rights and Remedies Cumulative. All powers, rights and
remedies of the Lender set forth in this Article VI shall be cumulative and
not exclusive of any other power, right or remedy available to the Lender
under this Agreement, the other Loan Documents or law to enforce the
performance or observance of the covenants and agreements contained in this
Agreement and the other Loan Documents, and no delay or omission of the
Lender to exercise any power, right or remedy accruing to the Lender shall
impair any such power, right or remedy, or shall be construed to be a
waiver of the right to exercise any such power, right or remedy. Every
power, right and remedy of the Lender set forth in this Agreement, the
other Loan Documents or afforded by law may be exercised from time to time,
and as often as may be deemed expedient, by the Lender.
Section 6.9 Termination of this Loan Agreement. This Agreement shall
not terminate until payment of the Debt in full and full performance of the
Borrower's obligations hereunder.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Documentation Requirements; Sufficiency of Consents and
Approvals. Each written instrument and Loan Document required by this
Agreement or any of the other Loan Documents to be furnished to the Lender
shall be duly executed by the Person or Persons specified (or where no
particular Person is specified, by such Person as the Lender shall
require), duly acknowledged where required by the Lender and, in the case
of affidavits and similar sworn instruments, duly sworn to and subscribed
before a notary public duly authorized to act in the premises by
Governmental Authority; shall be furnished to the Lender in one or more
copies as required by the Lender; and shall in all respects be in form and
substance satisfactory to the Lender and to its legal counsel. All title
policies, surveys, appraisals, maps, development plans and other evidence,
information or documentation required by the Lender shall be in form and
substance satisfactory to the Lender and its legal counsel in all respects.
Section 7.2 Usury Savings Clause. Notwithstanding any provision to the
contrary contained in this Agreement or in any of the other Loan Documents,
it is expressly provided that in no case or event shall the aggregate of
(i) all interest on the unpaid balance of the Note, accrued or paid from
the date hereof and (ii) the aggregate of any other amounts accrued or paid
pursuant to the Note, the Deed of Trust or any of the other Loan Documents,
which under applicable laws are or may be deemed to constitute interest
upon the Debt from the date hereof, ever exceed the maximum rate of
interest which could lawfully be contracted for, charged or received on the
unpaid principal balance of the Debt. In this connection, it is expressly
stipulated and agreed that it is the intent of the Borrower and the Lender
to contract in strict compliance with the applicable usury laws of the
State of Texas and of the United States (whichever permit the higher rate
of interest) from time to time in effect. In furtherance thereof, none of
the terms of this Agreement, the Note, the Deed of Trust or any of the
other Loan Documents shall ever be construed to create a contract to pay,
as consideration for the use, forbearance or detention of money, interest
at a rate in excess of the Highest Lawful Rate. The Borrower or other
Persons now or hereafter becoming liable for payment of the Debt shall
never be liable for interest in excess of the Highest Lawful Rate. If
under any circumstances the aggregate amounts paid on the Debt include
amounts which by law are deemed interest which would exceed the Highest
Lawful Rate, the Borrower stipulates that such amounts will be deemed to
have been paid as a result of an error on the part of both the Borrower and
the Lender and the Person receiving such excess payment shall promptly,
upon discovery of such error or upon notice thereof from the Person making
such payment, refund the amount of such excess or at the Lender's option,
credit such excess against the unpaid principal balance of the Debt. In
addition, all sums paid or agreed to be paid to the holder or holders of
the Debt for the use, forbearance, or detention of the Debt shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of the Debt. The provisions of this
Section shall control all agreements, whether now or hereafter existing and
whether written or oral, between the Borrower and the Lender.
Section 7.3 Rights and Remedies Cumulative; Loan Agreement Controls.
The benefits, rights and remedies of the Lender and the security contained
herein or provided for in any of the other Loan Documents are cumulative;
provided, however, that to the extent of any conflict between any provision
of this Agreement and any provision contained in any of the other Loan
Documents, the provisions of this Agreement shall control.
Section 7.4 Unlawful Provisions. If any one or more of the provisions
of this Agreement or any of the other Loan Documents is declared or
adjudged by any Governmental Authority to be unenforceable or unlawful,
then each such unenforceable or unlawful provision shall be deemed excised
herefrom or therefrom and the remainder of the Loan Document so affected,
together with all rights and remedies granted thereby, shall continue and
remain in full force and effect.
Section 7.5 Survival, Republication and Binding Effect of Covenants,
Representations and Warranties. All covenants, agreements, representations
and warranties made by the Borrower or any Guarantor in this Agreement, the
Note, the Deed of Trust and the other Loan Documents, and in any
certificates or other documents or instruments delivered pursuant to this
Agreement or any of the other Loan Documents shall survive the execution
and delivery of this Agreement and the other Loan Documents and any
advances of Loan proceeds made by the Lender pursuant to this Agreement or
any of the other Loan Documents, and shall continue in full force and
effect until the Debt is paid in full. Further, each Request for Advance
shall constitute an affirmation that the representations and warranties
contained in this Agreement are true and correct as of the date such
Request for Advance is submitted to the Lender. All such covenants,
agreements, representations and warranties shall be binding upon any
successors and assigns of the Borrower.
Section 7.6 Notices. Any notice, request or other communication
required or permitted to be given hereunder shall be given in writing by
hand delivery or by depositing the same in the United States Mail, postage
prepaid, certified or registered mail, addressed to the respective parties
as follows:
If to the Borrower:
Oly Walden General Partnership
c/o Stratus Management, L.L.C.
98 San Jacinto Boulevard, Suite 220
Austin, Texas 78701
Attention: William H. Armstrong, III
With required copy to:
Ken Jones, Esq.
Armbrust, Brown & Davis
100 Congress Avenue
Suite 1350
Austin, Texas 78701
Oly/Houston Walden, L.P.
100 Crescent Court
Suite 1625
Dallas, Texas 75201
Attention: Timothy Smith
If to the Lender:
Bank One, Texas, National Association
1700 Pacific Avenue, Suite 2100
Dallas, Texas 75201
Attention: Dale Renner
or such other address as such party shall direct in writing sent in
accordance herewith and actually received by the other party hereto at
least thirty (30) days in advance of the date upon which such change of
address is to become effective. All notices and other communications shall
be deemed to have been effectively given when either delivered to such
address or on the date deposited in the United States Mail.
Section 7.7 Changes Requirement. This Agreement shall not be changed
orally but shall be changed only by agreement in writing signed by all
parties hereto.
Section 7.8 Counterparts. This Agreement may be executed simultaneously
in any number of counterparts, each of which when so executed and delivered
shall be an original, but such counterparts shall together constitute one
and the same instrument.
Section 7.9 Venue. Dallas County, Texas shall be a proper place of
venue to enforce payment or performance of this Agreement, the Note, the
Deed of Trust and the other Loan Documents, unless the Lender shall give
its prior written consent to a different venue. Moreover, the Borrower
hereby irrevocably agrees that any legal proceeding against the Lender
arising out of or in connection with this Agreement or the other Loan
Documents shall be brought in the district courts of Dallas County, Texas,
or the United States District Court for the Northern District of Texas,
Dallas Division.
Section 7.10 No Third Party Beneficiaries. It is expressly
understood and agreed that this Agreement and the other Loan Documents are
made and entered into for the sole protection and benefit of the Lender and
the Borrower and their respective successors and assigns (but in the case
of assigns of the Borrower, only with the prior express written consent of
the Lender) and, without the prior express written consent of the parties
hereto, no Person shall have any right to action hereon or rights to the
Loan proceeds at any time; the Loan proceeds do not constitute trust funds
for the benefit of any third party; and that no such third party shall
under any circumstances have or be entitled to a lien, equitable or
otherwise, or the impression of any trust on any undisbursed Loan proceeds.
Section 7.11 Number, Order and Captions Immaterial. The numbering,
order and captions or headings of the several articles, sections and
paragraphs of this Agreement, the Note, the Deed of Trust and the other
Loan Documents are for convenience of reference only and shall not be
considered in construing such instruments.
Section 7.12 Successors and Assigns. This Agreement and the rights,
obligations and benefits hereunder shall be binding upon and inure to the
parties hereto, their respective heirs, personal representatives,
successors and assigns; provided, however, notwithstanding anything
contained herein to the contrary, (i) the Borrower shall not be entitled to
assign its rights hereunder without the prior express written consent of
the Lender and (ii) Borrower shall not be required to pay any costs or
expenses of Lender in connection with any assignment by Lender of any of
its interest in the Loan or this Agreement.
Section 7.13 Choice of Law. This Agreement, the Note, the Deed of
Trust and the other Loan Documents have been negotiated, executed and
delivered in the State of Texas and shall be governed by the laws of the
State of Texas, including all applicable federal law, from time to time in
force in Texas.
Section 7.14 No Partnership or Agency Intended. Nothing in this
Agreement or the other Loan Documents is intended or shall in any way be
construed so as to create any form of partnership or agency relationship
between the Borrower and the Lender, the parties hereto having expressly
disclaimed any intention of any kind to create any partnership or agency
relationship between them.
Section 7.15 No Waiver. No failure to exercise and no delay on the
part of the Lender in exercising any power or right in connection herewith
or under any of the other Loan Documents 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 course of dealing between the Lender and the Borrower,
any Development-Related Entity or any other Person shall operate as a
waiver of any right of the Lender. No modification or waiver of any
provision of this Agreement or any other Loan Documents nor any consent to
any departure therefrom shall in any event be effective unless the same
shall be in writing and signed by the person against whom enforcement
thereof is to be sought, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given.
Section 7.16 Entire Agreement. This Agreement embodies the entire
agreement and understanding between the Borrower and the Lender relating to
the subject matter hereof and supersedes all prior proposals, negotiations,
agreements and understandings relating to such subject matter. The
Borrower certifies that it is relying on no representation, warranty,
covenant or agreement except for those set forth in this Agreement and the
other Loan Documents of even date herewith. All written or oral
representations made by the Borrower to the Lender respecting the subject
matter hereof shall survive the execution of this Agreement.
Section 7.17 Set-Off. The Borrower hereby gives and confirms to the
Lender, after the occurrence of any Event of Default, a right of set-off of
all moneys, securities and other property of the Borrower (whether special,
general or limited) and the proceeds thereof, now or hereafter delivered to
remain with or in transit in any manner to the Lender, its correspondents
or its agents from or for the Borrower, whether for safekeeping, custody,
pledge, transmission, collection or otherwise or coming into possession of
the Lender in any way, and also, any balance of any deposit accounts and
credits of the Borrower with, and any and all claims of security for the
payment of the Note and of all other liabilities and obligations now or
hereafter owed by the Borrower to the Lender, contracted with or acquired
by the Lender, whether joint, several, absolute, contingent, secured,
unsecured, matured or unmatured, hereby authorizing the Lender at any time
or times, after the occurrence of an Event of Default, to apply such
balances, credits of claims or any part thereof, to such liabilities in
such amounts as it may select, whether contingent, unmatured or otherwise,
and whether any collateral security therefor is deemed adequate or not.
The rights described herein shall be in addition to any collateral security
described in any separate agreement executed by the Borrower. This
provision shall not imply any obligation of the Borrower to maintain any
deposit balances with the Lender.
Section 7.18 Sale or Assignment. The Lender reserves the right, in
its sole discretion, without notice to the Borrower, to sell participations
or assign its interest, or both, in all or any part of any Loan, the Notes
or any commitment evidenced by this Agreement or the other Loan Documents;
provided that Borrower shall not be required to pay any costs or expenses
of Lender in connection with any such assignment or participation.
Section 7.19 Commitment. The Lender has no commitment to lend sums
to the Borrower other than as specifically set forth herein.
Section 7.20 JURY WAIVER. THE BORROWER AND LENDER HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ALL RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON
CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG THE PARTIES HERETO ARISING
OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR ANY OF THE LOAN DOCUMENTS
OR ANY RELATIONSHIP BETWEEN BORROWER AND LENDER. THIS PROVISION IS A
MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE LOAN DESCRIBED HEREIN OR IN
THE OTHER LOAN DOCUMENTS.
Section 7.21 Arbitration. Lender and Borrower agree that upon the
written demand of either party. whether made before or after the
institution of any legal proceedings, but prior to the rendering of any
judgment in that proceeding, all disputes, claims, and controversies
between them, whether individual, joint, or class in nature, arising from
this Agreement, any other Loan Document, or otherwise, including, without
limitation, contract disputes and tort claims, shall be resolved by binding
arbitration pursuant to the Commercial Rules of the American Arbitration
Association (the "AAA"). Any arbitration proceeding held pursuant to this
arbitration provision shall be conducted in the city nearest the Borrower's
address having an AAA regional office, or at any other place selected by
mutual agreement of the parties. No act to take or dispose of any
collateral, whether real or personal, covered by the Deed of Trust or any
other Loan Document ("Collateral") shall constitute a waiver of this
arbitration provision or be prohibited by this arbitration provision. This
arbitration provision shall not limit the right of either party during any
dispute, claim, or controversy to seek, use, and employ ancillary or
preliminary rights and/or remedies, judicial or otherwise, for the purposes
of realizing upon, preserving, protecting, foreclosing upon, or proceeding
under forcible entry and detainer for possession of, any real or personal
property (including the Collateral) and any such action shall not be deemed
an election of remedies. Such remedies include, without limitation,
obtaining injunctive relief or a temporary restraining order, invoking a
power of sale under the Deed of Trust or any other deed of trust or
mortgage, obtaining a writ of attachment or imposition of a receivership,
or exercising any rights relating to personal property, including
exercising the right of set-off, or taking or disposing of such property
with or without judicial process pursuant to Article 9 of the Uniform
Commercial Code. Any disputes, claims or controversies concerning the
lawfulness or reasonableness of an act, or exercise of any right or remedy
concerning the lawfulness or reasonableness of an act, or exercise of any
right or remedy concerning any Collateral, including any claim to rescind,
reform, or otherwise modify any agreement relating to such Collateral,
including any claim to rescind, reform, or otherwise modify any agreement
relating to such Collateral, shall also be arbitrated; provided, however,
that no arbitrator shall have the right or the power to enjoin or restrain
any act of either party. Judgment upon any award rendered by an arbitrator
may be entered in any court having jurisdiction. The statute of
limitations, estoppel, waiver, laches, and similar doctrines which would
otherwise be applicable in an action brought by a party shall be applicable
in any arbitration proceeding, and the commencement of an arbitration
proceeding shall be deemed the commencement of any action for these
purposes. The Federal Arbitration Act (Title 9 of the United States Code)
shall apply to the construction, interpretation, and enforcement of this
arbitration provision.
Section 7.22 Limitation of Liability. Reference is herein made to
Paragraph 21 of the Note limiting the liability of the Lower Tier Borrower
Parties (as defined in the Note), which provision is incorporated herein
for all purposes.
ARTICLE VIII
YEAR 2000 PROVISIONS
Section 8.1 Representations and Warranties Regarding Year 2000
Compliance. Borrower represents and warrants to Lender that as of the date
of this Agreement and any request for an Advance under this Agreement:
(a) All devices, systems, machinery, information technology,
computer software and hardware, and other data sensitive technology
(jointly and severally, the "Systems" necessary for Borrower to carry
on its business as presently conducted and as contemplated to be
conducted in the future are Year 2000 Compliant or will be Year 2000
Compliant within a period of time calculated to result in no material
disruption of any of Borrower's business operations. For purposes of
this Agreement, "Year 2000 Compliant" means that such Systems are
designed to be used prior to, during and after the Gregorian calendar
year 2000 A.D. and will operate during each such time period without
error relating to date data, specifically including any error relating
to, or the product of, date data which represents or references
different centuries or more than one century.
(b) In the event Borrower is not yet Year 2000 compliant,
Borrower has developed a detailed plan and time line for becoming
Year 2000 Compliant on a timely basis.
Section 8.2 Covenants Regarding Year 2000 Compliance. Borrower
covenants and agrees with Lender that, while any portion of the Loan is
outstanding, Borrower will:
(a) Furnish such information, statements and other reports with
respect to Borrower's activities, course of action and progress
towards becoming Year 2000 Compliant as Lender may reasonably request
from time to time.
(b) In the event of any change in circumstances that causes or
will likely cause any of Borrower's representations and warranties
with respect to its being or becoming Year 2000 Compliant to no longer
be true (hereinafter, referred to as a "Change in Circumstances"),
then Borrower shall promptly, and in any event within ten (10) days of
receipt of information regarding a Change in Circumstances, provide
Lender with written notice (the "Notice") that describes in reasonable
detail the Change in Circumstances and how such Change in
Circumstances caused or will likely cause Borrower's representations
and warranties with respect to being or becoming Year 2000 Compliant
to no longer be true. Borrower shall, within ten (10) days of a
request, also provide Lender with any additional information Lender
reasonably requests of Borrower in connection with the Notice and/or a
Change in Circumstances.
(c) give any representative of Lender access during all business
hours to, and permit such representative to examine, copy or make
excerpts from, any and all books, records and documents in the
possession of Borrower and relating to its affairs, and to inspect any
of the properties and Systems of Borrower, and to project test the
Systems to determine if they are Year 2000 Compliant in an integrated
environment, all at the sole cost and expense of Lender.
ARTICLE IX
PARTIAL RELEASES
Section 9.1 Partial Releases. Borrower shall be entitled to obtain
partial releases of the Developed Lots (but not the Undeveloped Land) from
the lien and security interest of the Deed of Trust upon and subject to the
following terms and conditions:
(1) No Event of Default or event which, with the passage of time or
the giving of notice, or both, would constitute an Event of
Default shall have occurred which has not been waived by Lender
or cured to the satisfaction of Lender;
(2) The Developed Lot which is the subject of the partial release
shall be sold pursuant to a Sales Contract approved by Lender,
and Lender shall have received a payment equal to the Net Sales
Proceeds received by or payable to Borrower from such sale of the
Developed Lot.
(3) Lender shall have received all such endorsements to the Title
Insurance Policy which Lender deems reasonably necessary or
appropriate as a result of such partial release, including
without limitation, a partial release endorsement; and
(4) Lender shall have been furnished with a legal description of the
Developed Lot to be released, together with a survey or recorded
plat covering the Developed Lot and delineating the portion of
the Land to be released, in form and substance reasonably
satisfactory to Lender.
(5) Borrower shall be permitted to obtain releases of up to a total
of five (5) Lake Lots during the term of the Loan without the
payment of any release price to Lender as provided in subsection
(b) above, subject, however, to the satisfaction of all other
conditions set forth in this Section 9.1, and provided that such
partial release is in connection with the sale by Borrower of the
Lake Lot in questiion to a home builder for the construction of a
single family residence thereon (provided, further, that Borrower
shall nott be required to obtain Lender's consent to the terms of
any sales contract with such home builder).
Borrower shall pay all costs and expenses of preparation and recordation of
each such partial release, as well as the cost of each endorsement to the
Title Insurance Policy which Lender deems necessary or appropriate as a
result of any such partial release, all of such expenses to be included in
the computation of Net Sales Proceeds.
Section 9.2 Minimum Semi-annual Amortization. From and after the date
of this Agreement, Borrower shall make total payments to Lender from the
sale of Developed Lots or other sources of not less than $1,250,000 (the
"Minimum Semi-annual Amortization") during each six month period ending on
September 30 and March 31 during the term of the Loan (each such six month
period is herein called a "Semi-annual Period"), which payments shall be
applied by Lender against the principal outstanding under the Note. In the
event that the Net Sales Proceeds paid to Lender for any Semi-annual Period
are less than the Minimum Semi-annual Amortization, Borrower shall pay to
Lender as a prepayment of principal under the Note such amount as is
necessary so that Borrower has paid to Lender the Minimum Semi-annual
Amortization for such Semi-annual Period. The first Minimum Semi-annual
Amortization shall occur no later than March 31, 1999, and the Minimum
Semi-annual Amortization shall occur by each September 30 and March 31
thereafter until such time as the Debt is repaid in full. In the event the
total principal payments made to Lender during any Semi-annual Period
exceed the Minimum Semi-annual Amortization for such Semi-annual Period
(the amount of such excess principal being herein called the "Excess
Principal Amortization") then such Excess of such Principal Amortization
shall be applied to the next Semi-annual Period and any subsequent
Semi-annual Periods until Borrower has received full credit for the Excess
Principal Amortization (i.e., Borrower shall receive credit for the Excess
Principal Amortization against the Minimum Semi-annual Amortization
required for the next Semi-annual Period).
Section 9.3 Reductions of Letter of Credit or Escrow Deposit. Guarantor
may qualify for reductions in the amount of the Letter of Credit or the
Escrow Deposit, as the case may be at the end of each calendar month as
hereinafter provided. At the end of each calendar month, the outstanding
balance of the Letter of Credit or the Escrow Deposit (the "Required
Deposit") shall be in an amount not less than the product of (A) thirty
percent (30%), multiplied by (B) the committed balance of the Loan (i.e.,
the stated principal of the Loan reduced by the total of all principal
payments made by Borrower under the Loan). At the end of each calendar
month, provided that no Event of Default is then existing under this
Agreement or any other Loan Document, Guarantor may obtain a replacement
Letter of Credit (which shall contain the same terms and conditions as the
original Letter of Credit except for the reduction in the face amount
thereof) or a release of funds from the Escrow Deposit with Lender, as the
case may be, in the amount necessary to reduce the face amount of the
Letter of Credit or the balance of the Escrow Deposit with Lender to the
amount of the then Required Deposit.
THIS AGREEMENT AND THE LOAN DOCUMENTS CONSTITUTE A WRITTEN LOAN
AGREEMENT AND REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BORROWER:
OLY WALDEN GENERAL PARTNERSHIP, a Texas general partnership
By: Stratus Ventures I Walden, L.P., a Texas limited
partnership, its General Partner
By: STRS L.L.C., a Delaware limited liability company, its
General Partner
By: Stratus Properties Inc., a Delaware corporation,
its sole member
By:/s/ William H. Armstrong III
----------------------------
William H. Armstrong III
President and Chief Executive Officer
LENDER:
BANK ONE, TEXAS, NATIONAL ASSOCIATION, a national banking
association
By:/s/ Douglas M. Ness
----------------------
Name:Douglas M. Ness
Title:Assitant Vice President
EXHIBITS:
Exhibit A - Approved Budget
Exhibit B - Land
Exhibit C - Request for Advance
Exhibit D - Application and Certificate for Payment