EXHIBIT 10.4

MASTER CONSTRUCTION LOAN AGREEMENT

This Master Construction Loan Agreement (“Loan Agreement”), dated September 28,
2005, is made by and between Borrower and Lender, whose names and addresses are
set forth below, in connection with the Loan described below.

 

Borrower:

Wilson Family Communities, Inc.

 

 

Borrower’s Address:

2700 Fortuna, Suite 400

Austin, Texas 78746

 

 

Lender:

PlainsCapital Bank

 

 

Lender’s Address:

919 Congress, Suite 100

Austin, Texas 78701

 

 

Loan:

$2,000,000.00

 

 

ARTICLE 1

 

Definitions

 

Section 1.1            Definitions.  In addition to other defined terms herein,
as used in this Loan Agreement, and unless the context otherwise requires, the
following terms shall have the respective meanings set forth below:

(a)           Applicable Law.   The term “Applicable Law” shall mean all laws,
rules and regulations applicable to the Person, conduct, transaction, covenant
or Loan Documents in question, including all applicable common law and equitable
principles; all provisions of all applicable state and federal constitutions,
statutes, rules, regulations and orders of governmental bodies; and orders,
judgments and decrees of all courts and arbitrators.

 

(b)           Affidavit of Borrower.  The term “Affidavit of Borrower” shall
mean a sworn affidavit of an authorized representative of Borrower (and such
other parties as Lender may require) to the effect that all statements,
invoices, bills, and other expenses incident to the acquisition of the Property
and the construction of the Improvements incurred to a specified date, whether
or not specified in the Approved Budget, have been paid in full, except for
(a) amounts retained pursuant to the Construction Contract, and (b) items to be
paid from the proceeds of a Draw then being requested or in another manner
satisfactory to Lender.

 

(c)           Appraisal.  The term “Appraisal” means, for each house to be built
under this Credit Facility, an “as built” appraisal addressed to Lender and
prepared by an independent appraiser engaged by Lender. Such Appraisal shall be
in form and content satisfactory to Lender. Lender shall select the appraiser
and order all Appraisals required herein; that cost of the Appraisal shall be
the responsibility of Borrower, and Borrower shall pay the costs thereof
promptly upon receipt of the invoice for the Appraisal.

 

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If requested by Lender, Borrower deposit with Lender the estimated cost of the
Appraisals prior to Lender engaging the services of the appraiser.

 

(d)           Approved Budget.  The term “Approved Budget” shall mean a budget
or cost itemization prepared by Borrower specifying, for each Unit, the cost by
item of (a) all labor, materials, and services necessary for the construction of
the Improvements in accordance with the Plans and all Governmental Requirements,
and (b) all other expenses anticipated by Borrower incident to the Loan,
including, if applicable, the amount of the Lot Draw.

 

(e)           Best Knowledge.   The term “Best Knowledge” shall men acts that
are within the actual knowledge of any partner, officer, director, or
shareholder of Borrower or Borrower’s General Partner after due inquiry of
Persons reasonably likely to possess information of the nature described.

 

(f)           Borrower.   The term “Borrower” shall mean the party named as
Borrower on page 1 of this Loan Agreement.

 

(g)           Builder.   The term “Builder” shall mean Green Builders, Inc., a
Texas corporation. It is contemplated that Builder may take title to the Lots
for the purpose of constructing Improvements on the Lots. Whenever in this
Agreement there is a reference to liens to be granted on Lots by Borrower, it
shall be construed to mean, if applicable, liens granted by Builder if Builder
takes title to such Lots.

 

(h)           Code.   The term “Code” shall mean the Uniform Commercial Code as
in force in the state in which the Property is located and, if different, the
state of the Borrower’s formation.

 

(i)            Collateral.   The term “Collateral” shall mean all of the
Property, and all other real or personal property and interests in same that now
or hereafter secure the payment and performance of the Credit Facility.

 

(j)            Construction Contract.   The term “Construction Contract” shall
mean all construction contracts executed by Borrower for the construction of the
Improvements, including, without limitation, contracts between Borrower and
Contractor.

 

(k)           Contractor.   The term “Contractor” shall mean the contractors,
whether one or more, with whom Borrower or Builder contracts for the
construction of any of the Improvements or any other work with respect to the
Property.

 

(l)            Credit Facility.   The term “Credit Facility” shall mean the
credit facility in the aggregate amount of $2,000,000.00 being provided by
Lender to Borrower under this Loan Agreement and evidenced by the Note.

 

(m)          Debt.   The term “Debt” shall mean, as of any applicable date of
determination, all items of indebtedness, obligation or liability of a person,
whether matured or unmatured, liquidated or unliquidated, direct or indirect,
absolute or contingent, joint or several, that should be classified as
liabilities in accordance with GAAP.

 

(n)           Debtor Relief Laws.  The term “Debtor Relief Laws” shall mean any
applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
insolvency, reorganization or similar laws affecting the rights or remedies of
creditors generally, as in effect from time to time.

 

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(o)           Deed of Trust.  The term “Deed of Trust” shall mean a Deed of
Trust executed by Borrower or Builder for each Lot and recorded with the County
Clerk of the County in which the Lot is located, which shall be in the form
required by Lender.

 

(p)           Draw.   The term “Draw” shall mean a disbursement by Lender of any
of the proceeds under the Credit Facility.

 

(q)           Drawn Amount.   The term “Drawn Amount” shall mean, with respect
to a particular Unit, the outstanding principal amount applicable to such Unit
at any time hereunder and, with respect to the Credit Facility, the outstanding
principal amount applicable to all of the Units at any time hereunder.

 

(r)            Draw Request.   The term “Draw Request” shall mean a written
application by Borrower (and such other parties as Lender may require) to Lender
using such form(s) as may be acceptable to Lender specifying by name, current
address, and amount all parties to whom Borrower is obligated for labor,
materials, or services supplied for the construction of the Improvements and all
other expenses incident to the Credit Facility, the Property, and the
construction of the Improvements, whether or not specified in the Approved
Budget, requesting a Draw for the payment of such items, containing, if
requested by Lender, an Affidavit of Borrower, accompanied by such schedules,
certificates, affidavits, releases, waivers, statements, invoices, bills, and
other documents as Lender may reasonably request.

 

 

(s)

(not used)

 

(t)            Environmental Laws.  All laws relating to environmental matters,
including, without limitation, those relating to fines, orders, injunctions,
penalties, damages, contribution, cost recovery compensation, losses or injuries
resulting from the release or threatened release of Hazardous Substances and the
generation, use, storage, transportation, or disposal of Hazardous Substances,
in any manner applicable to Borrower or the Property, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. §9601 et seq.), the Hazardous Material Transportation Act
(49 U.S.C. §1801 et M.), the Resource Conservation and Recovery Act of 1976 (42
U.S.C. §6901 et set.), the Federal Water Pollution Control Act (33 U.S.C §1251
et seq.), the Clean Air Act (42 U.S.C. §7401 et seq.), the Toxic Substances
Control Act of 1976 (15 U.S.C. §2601 et seq.), the Safe Drinking Water Act (42
U.S.C. §300f-§300j-11 et seq.), the Occupational Safety and Health Act of 1970
(29 U.S.C. §651 et mg.) and the Emergency Planning and Community Right-to-Know
Act (42 U.S.C. §11001 et seq.), and such environmental laws, statutes,
ordinances and regulations as may be referenced in the Deed of Trust, each as
heretofore and hereafter amended or supplemented, and any future or present
local, state or federal statutes, rules and regulations promulgated thereunder
or pursuant thereto, and any other present or future law, ordinance, rule,
regulation, permit or permit condition, order or directive addressing
environmental, health or safety issues of or by the federal government, any
state or any political subdivision thereof, or any agency, court or body of the
federal government, any state or any political subdivision thereof, exercising
executive, legislative, judicial, regulatory or administrative functions which
are applicable to the Property.

 

(u)           Event of Default.  The term “Event of Default” (or any reference
to a default) shall have the meanings set forth in Article 9 hereto.

 

(v)           Fair Market Value.  The term “Fair Market Value” shall mean the
fair market value thereof determined by the most recent Appraisal for the
applicable Property. For Lots on which no Improvements have been constructed,
the Fair Market Value shall be the value of the unimproved Lot. For Lots on
which the Improvements have been completed, the Fair Market Value shall be the
value

 

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of  the completed residence (with the Lot). For Improvements under construction,
the actual costs of goods and services incorporated into the construction shall
be deemed to add value on a dollar for dollar basis; such costs, added to the
Fair Market Value of the Lot, shall be deemed to be the Fair Market Value for
such Units for purposes of this Loan Agreement.

 

(w)          Financial Statements.  The term “Financial Statements” shall mean
such balance sheets, profit and loss statements, reconciliations of capital and
surplus, changes in financial condition, schedules of sources and uses of funds,
operating statements with respect to the Property, pro forma schedules of
sources and uses of funds for ensuing twelve-month periods, and other financial
information of Borrower and, if required, of Guarantor, as shall be required by
Lender, from time to time, which statements shall be certified as true and
correct by the party submitting such statements or, if required by Lender, shall
be certified by an independent certified public accountant.

 

(x)           Financing Statements.  The term “Financing Statements” shall mean
the nonstandard and/or form UCC-1 Code financing statements perfecting the
security interests securing the Credit Facility, to be filed with the
appropriate offices for the perfection of a security interest in any of the
Property, as may be required by Lender.

 

(y)           Force Majeure.  The term “Force Majeure” shall mean an occurrence
beyond the control of the party affected, including, but not limited to, acts of
God or of the public enemy; expropriation or confiscation of facilities or
property; compliance with any order or request of any governmental authority or
person purporting to act therefor, adversely affecting the supply, availability
or use of materials or labor; acts of war, public disorders, rebellion,
sabotage, fires, explosions, floods, storms, or breakdowns; riots, strikes or
other concerted acts of workmen, whether direct or indirect, or any other
causes, whether or not of the class or kind specifically named above, not within
the reasonable control of the party affected and which, by the exercise of
reasonable diligence, said party is unable to prevent or avoid; provided,
however, that any claim by Borrower for an extension of time or excused
non-performance as a result of such occurrence shall be made by written notice
to Lender claiming such extension or excused non-performance and delivered not
more than 5 days after the commencement of such occurrence.

 

 

(z)

GAAP.  The term “GAAP” shall mean generally accepted accounting principles.

 

(aa)         Governmental Authority.  The term “Governmental Authority” shall
mean the United States of America, the State, the County, the City, or any other
political subdivision in which the Property is located, and any other political
subdivision, agency, or instrumentality exercising jurisdiction over Borrower,
Guarantor, or the Property, including, without limitation, entities with
jurisdiction over building, health, safety, fire, water, use, zoning and
environmental laws, codes, ordinances, rules and regulations.

 

(bb)         Governmental Requirements.  The term “Governmental Requirements”
shall mean all laws, ordinances, rules, and regulations of any Governmental
Authority applicable to Borrower, Guarantor, or the Property.

 

(cc)         Guarantor.  The term “Guarantor” shall mean the Guarantors (whether
one or more) named on Exhibit A attached hereto and any other individuals or
entities guaranteeing prompt payment at maturity of the Note, or any portion
thereof and any and all other indebtedness or obligations arising under the Loan
Documents.

 

(dd)         Guaranty.  The term “Guaranty” shall collectively mean a guaranty
of payment and performance of the Credit Facility and any and all other
indebtedness or obligations arising under the Loan Documents executed by each
Guarantor.

 

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(ee)         Hazardous Materials.  The term “Hazardous Materials” shall mean (a)
any chemical, material or substance defined as or included in the definition of
“hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely
hazardous waste,” “restricted hazardous waste,” “toxic pollutants,”
“pollutants,” “toxic substances” or words of similar import under any applicable
local, state or federal law or under the regulations adopted or publications
promulgated pursuant thereto, including, without limitation, Environmental Laws;
(b) any oil, petroleum or petroleum derived substance, any drilling fluids,
produced waters or other wastes associated with the exploration, development or
production of crude oil, any flammable substances or explosives, any radioactive
materials, any hazardous wastes or substances, any toxic wastes or substances or
any other materials or pollutants which (i) pose a hazard to the Property or to
persons on or about the Property, or (ii) cause the Property to be in violation
of any Environmental Laws; (c) asbestos in any form which is or could become
friable, radon gas, urea formaldehyde foam insulation, polychlorinated
bipherryls; (d) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated under any Environmental Law; and (e) any
Hazardous Materials referred to in a Deed of Trust.

 

(ff)          Hazardous Materials Contamination.  The term “Hazardous Materials
Contamination” shall mean the contamination (whether presently existing or
hereafter occurring) of the Improvements, facilities, soil, groundwater, air or
other elements on or of the Property by Hazardous Materials; or the
contamination of the buildings, facilities, soil, groundwater, air or other
elements on or of any other property as a result of Hazardous Materials at any
time (whether before or after the date of this Loan Agreement) emanating from
the Property.

 

(gg)         Improvements.   The term “Improvements” shall mean the single
family residences and related improvements constructed or to be constructed on a
Lot.

 

(hh)         Indebtedness.  The term “Indebtedness” shall mean all principal,
interest and other sums owed by Borrower to Lender under the Credit Facility or
otherwise under this Loan Agreement.

 

(ii)           Inspector.  The term “Inspector” shall mean an architect,
engineer or other third party Person selected and retained by Lender at
Borrower’s expense.

 

(jj)           Insurance Policies.  The term “Insurance Policies” shall mean
insurance policies (or a blanket policy endorsed in a manner satisfactory to
Lender) issued by companies acceptable to Lender which have an A.M. Best’s
rating of at least Class A covering loss by perils, hazards, liabilities and
other risks and casualties and in such amounts as required by Lender. All
physical damage policies and renewals shall contain a standard mortgage clause
naming Lender as mortgagee, which clause shall expressly state that any breach
of any condition or warranty by Borrower shall not prejudice the rights of
Lender under such insurance, and a loss payable clause in favor of the Lender
for personal property, contents, inventory, equipment, loss of rents and
business interruption. All liability policies and renewals shall name Lender as
an additional insured. All policies shall include a provision requiring that the
insurer give Lender 60 days prior written notice of non-renewal, cancellation or
modification. No additional parties shall appear in the mortgagee loss payable
clause without Lender’s prior written consent, except as such may be required by
a blanket policy. All deductibles shall be in amounts reasonably acceptable to
Lender. In the event of the foreclosure of one or more of the Deeds of Trust or
any other transfer of title to the Property in full or partial satisfaction of
the Credit Facility, all right, title and interest of Borrower in and to all
casualty insurance policies and renewals thereof then in force shall, to the
extent such interest is transferable, pass to the purchaser or grantee. Without
limiting the generality of the foregoing, the term “Insurance Policies” shall
also mean: (a) during the period of any construction as to any part of the
Property, (i) all-risks form of builder’s risk insurance (on a completed value,
non-reporting form), (ii) contractor’s liability, worker’s compensation and
employer’s liability insurance, (iii) professional liability insurance for
architects and engineers, (iv) 

 

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commercial general liability insurance and excess umbrella liability insurance,
(v) contractual liability insurance, (vi) flood insurance and (vii) all-risks
form of property insurance on personal property (including personal property
stored offsite); and (b) after all the construction of the Property is complete,
(i) all-risks form of property insurance covering real and personal property,
(ii) commercial general liability insurance, (iii) worker’s compensation and
employer’s liability insurance, (iv) contractual liability insurance, and (v)
flood insurance; and (c) such other insurance, if any, as Lender may require
from time to time, or which is required by the Deed of Trust.

 

(kk)         Inventory Status Report.  The term “Inventory Status Report” shall
mean a monthly report with respect to all Lots acquired and the completion
status of each Unit under construction by Borrower (whether or not financed by
Lender) in form and substance satisfactory to Lender. In addition to the Lots
and Units covered by this Loan Agreement, the Inventory Status Report shall
include similar information for lots and homes under construction that are not
financed by Lender under this Loan Agreement.

 

(ll)           Lender.  The term “Lender” shall mean the Lender named in the
first paragraph of this Loan Agreement.

 

(mm)       Loan.  The term “Loan” shall mean the loan to be made by Lender to
Borrower for a particular Unit. This will include, as applicable, the Lot Draw
and the Draws for the construction of the Improvements to that particular Lot.

 

(nn)         Loan Documents.  The term “Loan Documents” shall mean this Loan
Agreement, the Note, Deeds of Trust, the Guaranty (whether one or more), the
Financing Statements, and such other instruments evidencing, securing, or
pertaining to the Loan as shall, from time to time, be executed and delivered by
Borrower, Guarantor, Builder or any other party to Lender pursuant to this Loan
Agreement, including, without limitation, each Affidavit of Borrower, each Draw
Request, and the Approved Budget. “Loan Documents” shall include the “Security
Instruments” referenced below.

 

(oo)         Lot. The term “Lot” shall refer to each of the single-family, fully
developed, platted and subdivided lots, each within a single family residential
subdivision, purchased with the proceeds of Lot Draws under this Loan Agreement.

 

(pp)         Lot Draws.  The term “Lot Draws” shall mean those certain Draws
approved by Lender and made hereunder for which the proceeds are used to
purchase single-family, fully developed Lots. Borrower may not make a Lot Draw
to purchase a Lot to be held as inventory (either by Borrower or Builder); Lot
Draws are only allowed in connection with the construction of Improvements on
that Lot immediately after purchase of the Lot.

 

(qq)         Material Adverse Effect.  The term “Material Adverse Effect” shall
mean the effect of any event or condition which, alone or when taken together
with other events or conditions occurring or existing concurrently therewith,
(i) has a material adverse effect upon the business, operations, Property,
condition (financial or otherwise) or business prospects of Borrower; (ii) has
any material adverse effect whatsoever upon the validity or enforceability of
this Loan Agreement or any of the other Loan Documents; (iii) has or may be
reasonably expected to have any material adverse effect upon the value of the
whole or any material part of the Property, the liens of Lender with respect to
the Property or any material part thereof or the priority of such Liens; (iv)
materially impairs the ability of Borrower to perform its obligations under this
Loan Agreement, any Guaranty or any of the other Loan Documents, including
repayment of the Credit Facility when due; or (v) materially impairs the ability
of Lender to enforce or collect the Indebtedness or realize upon any of the
Collateral in accordance with the Loan Documents and Applicable Law.

 

 

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(rr)

(not used)

 

(ss)          Note.  The term “Note” shall mean the Promissory Note in the
amount of the Credit Facility from Borrower to Lender executed in connection
herewith, such Note in form and substance as required by Lender, as such may be
subsequently modified, amended and extended.

 

(tt)           Origination Fee.  The term “Origination Fee” shall mean that
certain fee payable by Borrower to Lender pursuant to Section 2.7 below.

 

(uu)         Percentage of Completion.  The term “Percentage of Completion”
shall mean the percentage applicable to the Stage at which a particular Unit has
been developed at the time of determination (which determination shall be made
by Lender in its sole discretion). Lender and Borrower hereby agree that the
Percentage of Completion applicable to each Stage of construction of a Unit
shall be as provided in Exhibit A attached hereto and made a part hereof.

 

 

(vv)

(not used)

 

(ww)       Permitted Exceptions.  Those restrictive covenants, easements and
other matters to which Borrower’s interest in the Property may be subject to
that Lender may approve.

 

(xx)         Person.  The term “Person” shall mean an individual, partnership,
limited liability company, corporation, business trust, joint stock company,
trust, unincorporated association, joint venture, governmental authority, or
other entity of whatever nature.

 

(yy)         Plans.  The term “Plans” shall mean the final working drawings and
specifications for the construction of the Improvements.

 

(zz)         Property.  The term “Property” shall mean any and all tracts or
parcels of land, subdivision lots, and improvements constituting the property
described in each Deed of Trust and the other Security Instruments executed in
connection with each Loan.

 

(aaa)        Security Agreement.  The term “Security Agreement” shall mean a
Security Agreement granting to Lender a security interest in Collateral for the
Credit Facility in addition to any Collateral which is described in a Deed of
Trust and covered by the security agreement included therein.

 

(bbb)       Security Instruments.  The term “Security Instruments” shall mean
this Loan Agreement, the Deeds of Trust, the Note, the Guaranty (whether one or
more), the Financing Statements, and such other instruments evidencing,
securing, or pertaining to the Credit Facility as shall, from time to time, be
executed and delivered by Borrower, the Guarantor, or any other party to Lender
pursuant to this Loan Agreement, including, without limitation, each Affidavit
of Borrower, each Draw Request, and the Approved Budget.

 

 

(ccc)

(not used)

 

(ddd)       Stage.  The term “Stage” shall mean the defined stages in the
development of a Unit for purposes of determining the Percentage of Completion
of that Unit.

 

 

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(eee)        Survey.  The term “Survey” shall mean a current, on-the-ground
survey of a Lot prepared by a registered public surveyor satisfying the standard
underwriting requirements of Lender and/or, at Lender’s sole option, a recorded
plat or map of the Property, which such survey, plat or map shall be approved
and accepted by all Governmental Authorities having jurisdiction of the
Property.

 

 

(fff)

(not used)

 

(ggg)       Termination Date.  The term “Termination Date” shall mean September
_____, 2006, provided however if Borrower has not submitted at least one
proposed Unit to Lender for financing hereunder, together with the Approved
Budget applicable to such Unit and any other documents required hereunder with
respect to such Unit, on or before 60 days after the date of this Loan
Agreement, then the Termination Date may, at Lender’s sole option, after written
notice to Borrower, be 90 days after the date of this Loan Agreement. Upon the
Termination Date, Borrower may not submit any further Unit Requests; the only
Draws that will be made on or after the Termination Date will be those to
complete construction of houses for which Unit Requests were made and approved
by Lender prior to the Termination Date.

 

(hhh)       Title Company.  The term “Title Company” shall mean the Title
Company issuing the Title Insurance for the applicable Property in connection
with each Loan.

 

(iii)          Title Insurance.  The term “Title Insurance” shall mean a
Mortgagee Policy of Title Insurance, or Mortgagee Title Policy Binder on Interim
Construction Loan, as Lender may require, issued by the Title Company acceptable
to Lender, naming Lender as the insured party, in the amount of the applicable
Maximum Unit Amount (as hereinafter defined) (which may include a rider or
endorsement limiting the policy to the aggregate amounts actually advanced
thereunder) insuring that the Deed of Trust applicable to each Loan constitutes
a valid first lien covering the Property and, subject only to the Permitted
Exceptions, issued by the Title Company.

 

(jjj)          Unit.  The term “Unit” shall mean an improved subdivision Lot in
a platted subdivision together with the proposed single family residential
dwelling to be constructed thereon, the acquisition of which Lot and/or
construction of which dwelling is submitted to Lender for financing pursuant to
the terms of this Loan Agreement, and against which Lender holds a lien pursuant
to a Deed of Trust.

 

(kkk)       Unit Approval Period.   The term “Unit Approval Period” shall mean a
period of ten (10) business days after Lender’s receipt of a Unit Request and
all documents and information required to be submitted with that Unit Request.

 

(lll)          Unit Request.  The term “Unit Request” shall mean a request for
inclusion of the acquisition or development of a Unit, such request to be duly
and properly executed by an authorized officer of Borrower, in the form and
content approved by Lender and otherwise in accordance with this Loan Agreement.

 

ARTICLE 2

Establishment of Credit Facility, Limitations

Section 2.1            Credit Facility.  Subject to the terms and conditions of
this Loan Agreement, including the limitations on Draws set forth below, Lender
hereby establishes a revolving line of credit for Borrower for an amount not to
exceed the lesser of:

 

(a)

$2,000,000.00, or

 

 

(b)

The legal lending limits of Lender for loans to Borrower and Guarantor.

 

 

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Section 2.2            Draws.   Lender agrees to fund Draws to the Borrower from
time to time during the period beginning on the date of this Loan Agreement
(except that no Draws will be made for the acquisition of Lots or commencement
of construction of Improvements on or after the Termination Date). Within the
limitations set forth herein, Borrower may borrow, repay, and re-borrow upon
Lender’s approval of each Unit Request and Draw Request thereunder. To evidence
the Credit Facility and the Draws to be made thereunder, Borrower simultaneously
herewith executes and delivers to Lender the Note. As Borrower requests that
Lender qualify certain Units for Loans hereunder, Borrower will execute and
deliver to Lender a Deed of Trust covering the Unit or Units to be included
under the Credit Facility and such other Security Instruments as Lender shall
reasonably require. Particular Units will be applied to the Credit Facility
through Unit Requests submitted to and approved by Lender. Draws will be made
pursuant to Draw Requests submitted to and approved by Lender. Draws applicable
to Units which are not Lots shall be used by Borrower solely to pay for costs of
the Units and the labor performed and materials furnished in connection with the
building, construction and completion of the Improvements thereon.

Section 2.3            Unit Approval.   In each instance in which the Borrower
desires to apply a Unit to the Credit Facility, Borrower shall submit a Unit
Request to Lender. Each Unit Request must be submitted by Borrower to Lender
prior to the Termination Date in the form approved by Lender. Lender shall have
the Unit Approval Period in which to review the Unit Request and to determine
whether or not to apply the Unit to the Credit Facility, at which point, if the
Unit Request is granted, the applicable Unit or Units shall be included in the
Credit Facility. With respect to each Unit Request, Lender’s approval of the
Unit Request shall be a condition precedent to making any Draws applicable to
such Unit(s), and the approval of a Unit Request shall be evidenced only by
Lender’s written statement specifying the Maximum Unit Amount for such approved
Unit Request and stating that the Unit Request has been approved under this Loan
Agreement. If Lender does not deliver oral or written notice of Lender’s
disapproval of a Unit Request within the Unit Approval Period, that Unit Request
will be deemed to have been approved. If the Unit Request relates to more than
one Unit, Lender may approve that Unit Request with respect to one (1) or more
Units and disapprove that Unit Request with respect to other Units.

Section 2.4            Approval of Draws.   Each individual Draw Request
submitted by Borrower must be approved by Lender and shall be subject to such
underwriting and other requirements as either Lender or any applicable
Governmental Authority may heretofore or hereafter from time to time establish.

Section 2.5            Limitations on Draws.  In addition to any other
limitations set forth in this Loan Agreement, the following provisions shall
apply, a breach or violation of any of which shall constitute an Event of
Default hereunder and under the Security Instruments:

 

(a)

(not used)

 

 

(b)

(not used)

 

 

(c)

(not used)

 

(d)           Aggregate Fair Market Value for All Units.  In no event shall the
total amount of Draws outstanding (i.e., which are included in the Indebtedness)
exceed 80% of the Fair Market Value of all Units.

 

 

(e)

(not used)

 

(f)            Speculative Unit.  In no event shall Draws be made which result
in more than 6 speculative Units (i.e., Units which are being built for which
there is no contract to sell to a third party buyer) being in existence at any
given time.

 

 

(g)

(not used)

 

 

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(h)

(not used)

 

(i)            Individual Unit.  In no event shall the portion of the Credit
Facility applied to any single Unit hereunder exceed $650,000.00.

 

(j)            Maximum Unit Amount.   Lender shall establish the maximum amount
of the Drawn Amount for each particular Unit, referred to herein as the Maximum
Unit Amount.

 

Section 2.6            Aggregate Fair Market Value.  The total Drawn Amount with
respect to the Credit Facility shall in no event at any time exceed 80% of the
cumulative Fair Market Value of all Units relating to the outstanding amount of
the Credit Facility.

Section 2.7            Origination Fee.  The Origination Fee shall be an annual,
non-refundable fee in the amount of 0.50% of the maximum amount of the Credit
Facility, to be paid by Borrower upon the execution of this Loan Agreement. This
Origination Fee is consideration for the commitment by Lender to provide the
Credit Facility hereunder.

Section 2.8            Interest on the Credit Facility.  Interest provided in
the Note shall be calculated on sums actually advanced to Borrower pursuant to
the terms thereof and only from the date or dates of such Draws. The unpaid
principal amount of the Note outstanding from time to time shall bear interest
as set forth therein. All accrued and unpaid interest shall be due and payable
monthly in accordance with the Note. The Indebtedness shall be evidenced by the
Note, and the respective Loans shall be secured by the Deeds of Trust and such
other Security Instruments as Lender may require.

ARTICLE 3

Draws

Section 3.1            Draws for Purchase of Lots.  Draws for the purchase of a
Lot will be made by Lender upon compliance by Borrower with this Loan Agreement,
but only before actual commencement of construction of any Improvements on that
Lot. As noted above, Borrower may not make a Lot Draw to purchase a Lot to be
held as inventory (either by Borrower or Builder); Lot Draws are only allowed in
connection with the construction of Improvements on that Lot immediately after
purchase of the Lot.

 

 

Section 3.2

Draws for Improvements.

(a)           Draws for the payment of costs of labor, materials, and services
supplied for the construction of the Improvements will be made by Lender upon
compliance by Borrower with this Loan Agreement, subject to the following
conditions:

(i)            the Deed of Trust must have been executed and recorded prior to
actual commencement of construction of any Improvements, and

 

(ii)           Draws for Improvements will only be made only after actual
commencement of construction of the Improvements for work actually done during
the preceding period.

 

From time to time, Borrower shall submit a Draw Request to Lender requesting a
Draw for the payment of costs of labor, materials, and services supplied for the
construction of the Improvements as specified in the Approved Budget, or for the
payment of other costs and expenses incident to the Credit Facility. Lender may
require an inspection of and favorable report on the Improvements and review of
the Draw Request by the Inspector prior to making any Draw. Draws for payment of
costs of construction of the Improvements shall not exceed the costs of labor,
materials, and services already incorporated into the Improvements in a manner
acceptable to Lender, less

 

 

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           (i)            the sum of all prior Draws for payment of costs of
labor, materials, and services for the construction of the Improvements, and

 

(ii)

any retainage amounts required by Lender.

(b)           No Draws for a particular Unit shall be made until after Borrower
has paid, out of its own funds, the costs equal to the difference between:

(i)            the lesser of (x) the estimated cost of construction of the
Improvements per the Approved Budget (together with the cost of the Lot, if
applicable) or (y) the Fair Market Value for that Unit, and

 

(ii)

the amount of the Loan for that Unit.

Borrower will provide to Lender such evidence as Lender may request to evidence
that Borrower has paid, out of its own funds, the costs referenced above.

 

(c)           Each Draw Request shall be submitted by Borrower to Lender within
a reasonable time (but not less than 3 days) prior to the date on which a Draw
is desired by Borrower, and Lender shall make such Draw no later than 5 days
after receipt of a complete Draw Request, subject to Lender’s determination that
the Draw Request is complete and acceptable; provided that Lender shall in no
event be obligated to make more than 1 Draw per week, and no more than 4 Draws
within a 4 week period. Each Draw Request shall be accompanied by the Affidavit
of Borrower.

(d)           Lender shall have no obligation to fund a Draw while there exists
an Event of Default hereunder or under any of the Loan Documents.

Section 3.3            Conditions to Each Initial Draw.  Lender shall have no
obligation to advance any funds to Borrower for either the purchase of a Lot or
for construction of Improvements on a particular Lot unless or until each of the
following conditions are satisfied:

 

(a)

There exists no Event of Default hereunder or under any of the Loan Documents.

 

(b)

A Unit Request has been submitted by Borrower and approved by Lender.

 

(c)

Borrower has provided Lender the following for each Unit:

 

(i)

Plans, if requested by Lender

 

(ii)

Approved Budget

 

(iii)

Appraisal

 

(iv)

Sales Contract, if applicable

 

(v)

Title Insurance

 

(vi)

Deed of Trust

 

(vii)

Survey

 

 

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--------------------------------------------------------------------------------

 

 

(viii)        Soils analysis and environmental reports covering the Lot, if
requested by Lender

 

 

(viii)

Insurance Policies

 

(d)           Such other documents, instruments, and certificates as Lender may
reasonably require from time to time.

 

Section 3.4            Final Draw for Improvements.  The final Draw for the
Improvements on a Lot will not be made until the Lender has received the
following:

 

(e)

There exists no Event of Default hereunder or under any of the Loan Documents.

 

 

(a)

At Lender’s option, a final inspection made by third party Inspectors.

(b)           At Lender’s option, evidence that no mechanics’ or materialmen’s
liens or other encumbrances have been filed and remain in effect against the
Lot.

(c)           At Lender’s option, final lien releases or waivers by Contractor,
and all subcontractors, materialmen, and other parties who have supplied labor,
materials, or services for the construction of the Improvements, or who
otherwise might be entitled to claim a contractual, statutory, or constitutional
lien against the Lot.

(d)           At Lender’s option, a Survey of the Lot showing the Improvements
thereon as completed in compliance with the Plans.

 

(e)

At Lender’s option, the Title Insurance shall:

(a)      (i)      if issued as a mortgagee policy, be endorsed removing any
exception for pending disbursements or

(b)      (ii)      if issued as an interim binder, either extended (if
necessary) or converted to a mortgagee policy.

At no time shall Borrower be entitled to any Draw if, in the reasonable judgment
of the Lender, it appears that after such Draw the remaining undisbursed portion
of the Credit Facility applicable to the Unit related to such Draw will be
insufficient to complete the Improvements on such Unit in accordance with the
Plans therefor and to pay for all labor and material, until such time as the
Borrower shall have reduced the principal balance of the Loan for that Unit to
an amount which leaves the then unfunded and available amount under that Loan
sufficient to complete the applicable Improvements.

 

ARTICLE 4

Repayment of Credit Facility

 

The Indebtedness shall be repaid in accordance with the terms below:

 

Section 4.1            Accrued Interest.  Accrued interest shall be payable
monthly in accordance with the terms of the Note.

Section 4.2            Draws.  Draws shall be repaid upon the earlier to occur
of (i) the sale of the Lot or Unit, as applicable, or (ii) the dates set forth
below. To obtain a release of a Deed of Trust or other lien, Borrower shall pay
in full the outstanding amount of all Draws applicable to such Property.

(a)           Draws on Lots Without Commencement of Construction.  It is not the
intent of this Loan Agreement that Lender fund a Lot Draw unless Borrower
actually constructs Improvements on 

 

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--------------------------------------------------------------------------------

 

the Lot. If Borrower or Builder does not commence construction within 5 days
after the Lot Draw, Lender shall have no obligation to fund Draws for
Improvements to the Lot, and the entire Lot Draw shall be repaid by Borrower to
Lender on or before 5 days following the date of the Lot Draw.

 

(b)           Principal Draws for Units. Draws for construction of Units shall
be due and payable on or before the 1st day of the month following 12 months
after the date of the initial Draw for such Unit. For example, if the initial
Draw occurred on April 15, the entire amount of Draws shall be due on May 1 of
the following year.

 

 

(c)

(not used)

 

Section 4.3            Release Price for Units.   Provided there is no Event of
Default on the date on which Borrower requests a release of the Deed of Trust on
a particular Unit, Lender agrees to release its Deed of Trust lien on a Unit
upon the payment of (i) all accrued unpaid interest on the Credit Facility
allocable to the outstanding Draws for that Unit, plus (ii) the outstanding
Draws applicable to that Unit.

ARTICLE 5

Affirmative Covenants and Agreements of Borrower

Borrower covenants and agrees that, as long as the Credit Facility or any part
thereof is outstanding, unless otherwise allowed by written instrument of
Lender:

 

 

Section 5.1

(not used)

Section 5.2            Commencement of Construction.  Prior to the recordation
of the Deed of Trust for a Loan, no work of any kind (including the destruction
or removal of any existing improvements, site work, clearing, grubbing,
draining, or fencing of the Lot) shall have commenced or shall have been
performed on the Lot, no equipment or material shall have been delivered to or
upon the Lot for any purpose whatsoever, and no contract (or memorandum or
affidavit thereof) for the supplying of labor, materials, or services for the
construction of the Improvements shall have been recorded in the mechanic’s lien
or other appropriate records in the county where the Lot is located. Further, no
affidavit of commencement showing a commencement date prior to the recordation
of the Deed of Trust shall be filed in the records of the county in which the
Lot is located. Construction must commence on a Lot within 90 days after the Lot
Draw. If construction has not commenced on a Lot within 90 days after the Lot
Draw and Borrower delivers to Lender, prior to the expiration of said 90 day
period, a notice that Borrower will not commence construction within said 90
period and requesting an extension of the 90 day period, Borrower will be given
an additional 30 days after the expiration of the 90 day period to commence
construction.

Section 5.3            Compliance with Governmental Requirements.  Borrower
shall timely comply with all Governmental Requirements and deliver to Lender
evidence thereof. Borrower assumes full responsibility for the compliance of the
Plans and the Property with all Governmental Requirements and with sound
building and engineering practices, and, notwithstanding any approvals by
Lender, Lender shall have no obligation or responsibility whatsoever for the
Plans or any other matter incident to the Property or the construction of the
Improvements. Immediately upon Borrower’s receipt of any notice from a
Governmental Authority of noncompliance with any Governmental Requirements,
Borrower shall provide Lender with written notice thereof.

Section 5.4            Construction of the Improvements.  Borrower shall
construct the Improvements with diligence and continuity, in a good and
workmanlike manner, and in accordance with sound building and engineering
practices, all applicable Governmental Requirements, and the Plans. Borrower
shall not stop work for more than 45 cumulative days without the prior written
consent of Lender; provided, however, the days during which there is no
construction by reason of Force Majeure shall not be counted towards the 45
days.

Section 5.5            Correction of Defects.  Borrower shall, within 30 days
after the occurrence of any of the following, correct or cause to be corrected
(a) any material defect in the Improvements, (b) any material departure in the
construction of the Improvements from the Plans or Governmental Requirements, or
(c) any 

 

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encroachment by any part of the Improvements on any easement, property line, or
restricted area, or any encroachment by any such structure on any building line.

Section 5.6            Storage of Materials.  Borrower shall cause all materials
supplied for, or intended to be utilized in, the construction of the
Improvements, but not affixed to or incorporated into the Improvements, to be
stored on the Lot or at such other location as may be approved by Lender in
writing, with adequate safeguards, as required by Lender, to prevent loss,
theft, damage, or commingling with other materials or projects.

Section 5.7            Inspection of the Property.  Borrower shall permit Lender
and any Governmental Authority, and their agents and representatives, to enter
upon the Lots and any location where materials intended to be utilized in the
construction of the Improvements are stored, at all reasonable times.

Section 5.8            Notices by Governmental Authority, Casualty,
Condemnation.  Borrower shall timely comply with and promptly furnish to Lender
true and complete copies of any notice or claim by any Governmental Authority
pertaining to the Property. Borrower shall promptly notify Lender of any fire or
other casualty or any notice of taking or eminent domain action or proceeding
affecting the Property, or the threat of any such action or proceeding of which
Borrower becomes aware.

 

Section 5.9

(not used)

Section 5.10          Application of Draws.  Borrower shall disburse all Draws
for payment of costs and expenses specified in the Approved Budget, and for no
other purpose.

Section 5.11          Reduction of Loan Balance.  If Lender reasonably
determines at any time that the unadvanced portion of a Loan will be
insufficient for payment in full of (a) costs of labor, materials, and services
required for the construction of the Improvements in connection with that Loan,
(b) other costs and expenses specified in the Approved Budget, (c) interest from
time to time owing or to become owing on the Loan, and (d) other costs and
expenses required to be paid in connection with the construction of the
Improvements in accordance with the Plans, any Governmental Requirements, or the
requirements of any lessee, if applicable, then Borrower shall, on request of
Lender, reduce the principal balance of the Loan for that Unit to an amount
which leaves the then unfunded and available amount under that Loan sufficient
to complete the applicable Improvements. Borrower shall promptly notify Lender
in writing if and when the cost of the construction of the Improvements exceeds,
or appears likely to exceed, the amount of the unadvanced portion of the Loan.

Section 5.12          Direct Disbursement and Application by Lender.  After 10
days’ notice to Borrower of its intent to do so, Lender shall have the right,
but not the obligation, to disburse and directly apply the proceeds of any Draw
to the satisfaction of any of Borrower’s obligations hereunder or under any of
the other Loan Documents. Any Draw by Lender for such purpose shall be part of
the Loan and shall be secured by the Loan Documents. Borrower hereby authorizes
Lender to hold, use, disburse, and apply the Loan for payment of costs of
construction of the Improvements, expenses incident to the Loan and the
Property, and the payment or performance of any obligation of Borrower hereunder
or under any of the other Loan Documents. Borrower hereby assigns and pledges
the proceeds of the Loan to Lender for such purposes. Lender may advance and
incur such expenses as Lender deems necessary for the completion of construction
of the Improvements and to preserve the Property, and any other security for the
Loan, and such expenses, even though in excess of the amount of the Loan, shall
be secured by the Loan Documents and payable to Lender. Lender may disburse any
portion of any Draw at any time, and from time to time, to persons other than
Borrower for the purposes specified in this Section 4.11 irrespective of the
provisions of Section 2.03 hereof, and the amount of Draws to which Borrower
shall thereafter be entitled shall be correspondingly reduced.

Section 5.13          Costs and Expenses.  Borrower shall pay when due all costs
and expenses required by this Loan Agreement, including, without limitation,
(a) all taxes and assessments applicable to the Property, (b) all fees for
filing or recording the Loan Documents, (c) all fees and commissions lawfully
due to brokers, salesmen, and agents in connection with the Loan, or the
Property, (d) all fees and expenses of counsel to Lender, (e) all title
insurance and title examination charges, including premiums for the Title
Insurance, (f) all hazard and similar insurance premiums, (g) all survey costs
and expenses, including the cost of the Survey, (h) all Appraisal fees, (i) all
premiums for the Insurance Policies, and (j) all other costs and expenses
payable to third parties incurred by Lender in connection with the consummation
of the transactions contemplated by this Loan Agreement, including all expenses
of Lender in connection with the underwriting, closing, servicing or collection
of the Credit Facility. All expenses shall be paid by Borrower promptly at the
time owing, including 

 

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expenses incurred in connection with proposed Loans denied by Lender. Lender
shall be paid an inspection fee of $25.00 per house. Borrower shall provide a
flood certification for each house; such certifications shall be ordered by
Lender and the cost thereof shall not exceed $8.00 per house. In lieu of a flood
certification for each house, Borrower may provide, if available, a flood
certificate for each entire subdivision.

Section 5.14          Additional Documents.  Borrower shall execute and deliver
to Lender, from time to time as requested by Lender, such other documents as
shall reasonably be necessary to provide the rights and remedies to Lender
granted or provided for by the Loan Documents.

Section 5.15          Inspection of Books and Records.  Borrower shall permit
Lender, at all reasonable times, to examine and copy the books and records of
Borrower pertaining to the Credit Facility and the Property, and all contracts,
statements, invoices, bills, and claims for labor, materials, and services
supplied for the construction of the Improvements.

Section 5.16          Accounting Records.  Borrower shall maintain a standard
and modern system for accounting in accordance with generally accepted
accounting principles consistently applied throughout all accounting periods.

Section 5.17          No Liability of Lender.  Lender shall have no liability,
obligation, or responsibility whatsoever with respect to the construction of the
Improvements except to advance the Credit Facility pursuant to this Loan
Agreement. Lender shall not be obligated to inspect the Property or the
construction of the Improvements, nor be liable or responsible for any defect in
the Property or the Improvements by reason of inspecting same, nor be liable for
the performance or default of Borrower, or any architect, Contractor, or any
other party, or for any failure to construct, complete, protect, or insure the
Improvements, or for the payment of costs of labor, materials, or services
supplied for the construction of the Improvements, or for the performance of any
obligation of Borrower whatsoever. Nothing, including without limitation any
Draw or acceptance of any document or instrument, shall be construed as a
representation or warranty, express or implied, to any party by Lender.

Section 5.18          No Conditional Sale Contracts, Etc.  No materials,
equipment, or fixtures shall be supplied, purchased, or installed for the
construction or operation of the Improvements pursuant to security agreements,
conditional sale contracts, lease agreements, or other arrangements or
understandings whereby a security interest or title is retained by any party or
the right is reserved or accrues to any party to remove or repossess any
materials, equipment, or fixtures intended to be utilized in the construction or
operation of the Improvements.

Section 5.19          Defense of Actions.  Lender may (but shall not be
obligated to) commence, appear in, or defend any action or proceeding purporting
to affect the Credit Facility, the Property, or the respective rights and
obligations of Lender and Borrower pursuant to this Loan Agreement. Lender may
(but shall not be obligated to) pay all necessary expenses, including attorneys’
fees and expenses incurred in connection with such proceedings or actions, which
Borrower agrees to repay to Lender.

Section 5.20          Assignment of Plans.  As additional security for the
payment of the Loan, Borrower hereby transfers and assigns to Lender all of
Borrower’s right, title, and interest in and to the Plans and hereby represents
and warrants to and agrees with Lender as follows:

(a)           The Plans for each Unit delivered to Lender from time to time is a
complete and accurate description of the Plans for that particular Unit.

 

(b)

The Plans are complete and adequate for the construction of the Improvements.

(c)           Lender may use the Plans for any purpose relating to the
Improvements, including but not limited to inspections of construction and the
completion of the Improvements.

 

(d)            Lender’s acceptance of this assignment shall not constitute
approval of the Plans by Lender. Lender has no liability or obligation
whatsoever in connection with the Plans and no responsibility for the adequacy
thereof or for the construction of the Improvements contemplated by the Plans.
Lender has no duty to inspect the Improvements, and, if Lender should inspect
the 

 

- 15 -

 

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Improvements, Lender shall have no liability or obligation to Borrower arising
out of such inspection. No such inspection nor any failure by Lender to make
objections after any such inspection shall constitute a representation by Lender
that the Improvements are in accordance with the Plans or constitute a waiver of
Lender’s right thereafter to insist that the Improvements be constructed in
accordance with the Plans.

 

(e)           This assignment shall inure to the benefit of Lender, its
successors and assigns, including any purchaser upon foreclosure of a Deed of
Trust, any receiver in possession of the Property, and any corporation formed by
or on behalf of Lender which assumes Lender’s rights and obligations under this
Loan Agreement.

 

(f)            Upon Lender’s request, Borrower shall provide a complete copy of
the Plans for a Unit to Lender.

 

Section 5.21          Payment of Claims.  Borrower shall promptly pay or cause
to be paid when due all costs and expenses incurred in connection with the
construction of the Improvements, and Borrower shall keep the Property free and
clear of any lien, charge, or claim other than the encumbrances of the Deed of
Trust and other liens approved in writing by Lender. Notwithstanding anything to
the contrary contained in this Loan Agreement, Borrower (a) may contest the
validity or amount of any claim of any contractor, consultant, architect, or
other person providing labor, materials, or services with respect to the
Property, (b) may contest any tax or special assessments levied by any
Governmental Authority, and (c) may contest the enforcement of or compliance
with any Governmental Requirements. Such contest on the part of Borrower shall
not be a default hereunder and shall not release Lender from its obligations to
make Draws if each of the following conditions are met:

 

(a)

Borrower immediately notifies Lender of any such contest by Borrower,

 

(b)           if requested by Lender, during the pendency of any such contest
Borrower furnishes to Lender and Title Company an indemnity bond with corporate
surety satisfactory to Lender and Title Company or other security acceptable to
them in an amount equal to the amount being contested plus a reasonable
additional sum to cover possible costs, interest, and penalties, and

(c)           Borrower shall pay any amount adjudged by a court of competent
jurisdiction to be due, with all costs, interest, and penalties thereon, before
such judgment becomes a lien on the Property.

Section 5.22          Restrictions and Annexation.  Borrower shall not impose
any restrictive covenants, easements or other encumbrances upon the Property,
execute or file any subdivision plat affecting the Property, or consent to the
annexation of the Property to any city without the prior written consent of
Lender.

 

Section 5.23

(not used)

Section 5.24          Financial Reports.   For purposes of this paragraph,
“financial statements” shall include balance sheets, statements of income and
expenses (and retained earnings, if applicable), and cash flow statements. All
financial statements delivered hereunder shall be prepared on the basis of GAAP
applied on a basis consistent. Borrower shall provide the following:

(a)           On or before the 60 days after the end of each fiscal year of
Borrower and each Guarantor, copies of Borrower’s and Guarantor’s unaudited
financial statements.

(b)           On or before the 30 days of each calendar quarter, unaudited
financial statements of Borrower.

(c)           On or before the 30 days of each calendar quarter, an Inventory
Status Report covering the previous 3-month period.

(d)           On or before 30 days after completion, copies of all (i) Federal
income tax returns for Borrower and Guarantor, certified by Borrower and
Guarantor respectively to be true and correct, and (ii) extensions of time to
file Federal income tax returns.

 

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(e)

Such other financial statements and information as Lender may from time to time
request.

 

Section 5.25

(not used)

 

Section 5.26          Construction Reports.  Upon request of Lender, Borrower
will furnish Lender statements, if form satisfactory to Lender, itemizing the
stage of completion of all Units, including the cost of Improvements made to
date and the estimated remaining costs of completion of the Improvements.

Section 5.27          Tax Receipts.  All taxes, levies, and assessments of
whatever description will be paid by Borrower before interest or penalties
accrue thereon, unless the same is being contested in good faith by appropriate
proceedings. Upon request of Lender, Borrower shall furnish Lender with receipts
or tax statements marked “Paid” to evidence the payment of all taxes levied on
the Property on or before 30 days prior to the date such taxes become
delinquent.

 

Section 5.28

(not used)

Section 5.29          Loan Participations. Borrower acknowledges and agrees that
Lender may, from time to time, sell or offer to sell interests in the Loan and
the Loan Documents to one or more participants. Borrower authorizes Lender to
disseminate any information it has pertaining to the Loan, including, without
limitation, complete and current credit information on Borrower, any of its
principals and any Guarantor, to any such participant or prospective
participant.

Section 5.30          Notice of Litigation, Claims, and Financial Change. 
Borrower shall promptly inform Lender of (a) any litigation against Borrower or
any Guarantor or affecting the Property, which, if determined adversely, might
have a material adverse effect upon the financial condition of Borrower or any
Guarantor or upon the Property, or might cause an Event of Default, (b) any
claim or controversy which might become the subject of such litigation, and
(c) any material adverse change in the financial condition of Borrower or any
Guarantor. For purposes of the conditions stated in (a) through (c) in this
Section 5.30, a “material adverse effect” or “material adverse change” shall be
deemed to exist or have occurred when (1) there has been a decline of 15% or
more in the tangible net worth of Borrower or any Guarantor as shown on the
Financial Statements delivered to Lender in connection with the Loan or (2)
actual sources and uses of funds for any twelve-month period adversely vary by
15% or more with the pro forma sources and uses of funds statement submitted for
such period.

Section 5.31          No Occupancy Contrary to Builder’s Risk Policy.  The
Improvements shall not be occupied until Borrower has obtained and furnished to
Lender a “permission to occupy” endorsement to the builder’s risk insurance
policy, which endorsement is satisfactory to Lender, or Borrower has obtained
replacement coverage in the form of an all-risk insurance policy upon the
completed Improvements, which policy will not be impaired by the occupancy of
the Improvements and is satisfactory to Lender.

Section 5.32          Hold Harmless.  Borrower shall defend, at its own cost and
expense, and hold Lender harmless from, any proceeding or claim in any way
relating to the Property or the Loan Documents. All costs and expenses incurred
by Lender in protecting its interests hereunder, including all court costs and
attorneys’ fees and expenses, shall be borne by Borrower. The provisions of this
Section shall survive the payment in full of the Loan and all other Indebtedness
secured by the Security Instruments and the release of the Deeds of Trust as to
events occurring and causes of action arising before such payment and release.

Section 5.33          Further Assurances.  At its costs and expense, upon
request of Lender, Borrower will duly execute and deliver or cause to be duly
executed and delivered, to Lender such further instruments, documents,
certificates, financing and continuation statements, and do and cause to be done
such further acts that may be reasonably necessary or advisable in the opinion
of Lender to carry out more effectively the provisions and purposes of this Loan
Agreement and the other Loan Documents.

 

Section 5.34

Hazardous Materials; Indemnification.

(a)           Borrower agrees to (i) give notice to Lender immediately upon
Borrower’s acquiring knowledge of the presence of any Hazardous Materials on the
Property or of any Hazardous Materials Contamination with a full description
thereof; (ii) promptly, at Borrower’s sole cost and expense, comply with any
Governmental Requirements requiring the removal, treatment or disposal of such
Hazardous Materials or Hazardous Materials Contamination and provide Lender with
satisfactory

 

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evidence of such compliance; and (iii) provide the Lender, within 30 days after
demand by Lender, with a bond, letter of credit or similar financial assurance
evidencing to Lender’s satisfaction that the necessary funds are available to
pay the cost of removing, treating and disposing of such Hazardous Materials or
Hazardous Materials Contamination and discharging any assessments which may be
established on the Property as a result thereof.

(b)           Borrower shall not cause or suffer any liens to be recorded
against the Property as a consequence of, or in any way related to, the
presence, remediation or disposal of Hazardous Material in or about the
Property, including any state, federal or local so-called “Superfund” lien
relating to such matters.

 

(c)           Borrower shall at all times retain any and all liabilities arising
from the presence, handling, treatment, storage, transportation, removal or
disposal of Hazardous Materials on the Property. Regardless of whether any Event
of Default shall have occurred and be continuing or any remedies in respect of
the Property are exercised by Lender, Borrower shall defend, indemnify and hold
harmless Lender from and against any and all liabilities (including strict
liability), suits, actions, claims, demands, penalties, damages (including,
without limitation, lost profits, consequential damages, interest, penalties,
fines and monetary sanctions), losses, costs or expenses (including, without
limitation, attorneys’ fees and expenses, and remedial costs) (the foregoing are
hereinafter collectively referred to as “Liabilities”) which may now or in the
future (whether before or after the culmination of the transactions contemplated
by this Loan Agreement) incurred or suffered by Lender by reason of, resulting
from, in connection with, or arising in any manner whatsoever out of the breach
of any warranty or covenant or the inaccuracy of any representation of Borrower
contained or referred to in this Section or in a Deed of Trust or which may be
asserted as a direct or indirect result of the presence on or under, or escape,
seepage, leakage, spillage, discharge, emission, or release from the Property of
any Hazardous Materials or any Hazardous Materials Contamination or arise out of
or result from the environmental condition of the Property or the applicability
of any Governmental Requirements relating to Hazardous Materials, whether or not
occasioned wholly or in part by any condition, accident or event caused by any
act or omission of Lender.

 

Such Liabilities shall include, without limitation: (i) injury or death to any
person; (ii) damage to or loss of the use of any property; (iii) the cost of any
demolition and rebuilding of the Improvements, repair or remediation and the
preparation of any activity required by any Governmental Authority; (iv) any
lawsuit brought or threatened, good faith settlement reached, or governmental
order relating to the presence, disposal, release or threatened release of any
Hazardous Material on, from or under the Property; and (v) the imposition of any
lien on the Property arising from the activity of Borrower or Borrower’s
predecessors in interest on the Property or from the existence of Hazardous
Materials or Hazardous Materials Contamination upon the Property.

The covenants and agreements contained in this Section shall survive the
consummation of the transactions contemplated by this Loan Agreement.

If Lender shall become aware of a breach of the covenants and agreements in this
Article 5, Lender agrees to use its good faith efforts to notify Borrower of
such breach. However:

 

(a)           Lender shall be under no duty of inquiry to determine whether such
a breach has occurred,

(b)           the knowledge by Lender of a breach, and/or the failure by Lender
to give any such notice, shall not constitute a waiver of such breach, and such
breach shall constitute an Event of Default hereunder,

 

(c)

Lender shall have no liability whatsoever for failing to give such notice.

 

 

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ARTICLE 6

Negative Covenants of Borrower

Borrower covenants and agrees that on and after the Effective Date, while any
part of the Indebtedness remains unpaid, Borrower shall not, without the written
consent of Lender:

 

Section 6.1            Reorganizations, Acquisitions, Change of Name.  Merge or
consolidate with or into any partnership, trust, or corporation or other entity
whatsoever.

Section 6.2            Management: Ownership.  Except in the case of unforeseen
death, disability, or other similar emergency, make any significant change in
its structure or management.

ARTICLE 7

Conditions Precedent

Notwithstanding any other terms of this Agreement, Lender will not be required
to make any Loan to Borrower unless the following conditions have been met on or
before the date hereof (the “Effective Date”) and are also met on the date of
each Draw, except as noted herein.

 

Section 7.1            Subdivision Approval.  Each subdivision in which any Unit
is to be acquired or constructed for which a Unit Request is made must be
approved by Lender.

Section 7.2            Loan Documents.  All of the Loan Documents have been
executed by Borrower, the Guarantor, or other applicable persons or entities,
and delivered to Lender.

 

Section 7.3

Evidence of Authority, etc.   Lender will have received:

(a)           For Borrower, a copy of the (i) current Certificate of Limited
Partnership on file with the Texas Secretary of State, (ii) filing letter from
the Secretary of State acknowledging receipt of the Certificate of Limited
Partnership, and (iii) limited partnership agreement.

 

(b)           For the General Partner of Borrower, a copy of the (i) Certificate
of Incorporation from the Secretary of State, (ii) Articles of Incorporation,
and (iii) Bylaws.

 

(c)           Signature and incumbency certificates with respect to the officers
executing this Agreement, and the other Loan Documents.

 

(d)           Certified copy of the corporate action taken by the General
Partner of Borrower authorizing execution, delivery and performance of this
Agreement and the other Loan Documents.

 

Section 7.4            Representations True.  The representations and warranties
contained in this Loan Agreement and in any other Loan Document are true; there
is not then in existence any Event of Default hereunder or any event which upon
the service of notice or passage of time would constitute an Event of Default
hereunder; there is not any suit or proceeding at law or in equity or of any
governmental authority instituted or, to the Best Knowledge of Borrower,
threatened which in either case would materially adversely affect the financial
condition of Borrower or the Property.

 

Section 7.5

(not used)

Section 7.6            Material Adverse Change.  No material adverse change will
have occurred in the business, operations, financial condition or prospects of
Borrower or the Collateral.

Section 7.7            Due Diligence: UCC Filings and Searches.  Lender will, to
its satisfaction, have completed and received:

 

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(a)           All audits, inspections, examinations and surveys deemed necessary
in the sole, absolute discretion of Lender with respect to the Property and the
financial and business condition of Borrower.

 

(b)           At Lender’s option, confirmation of UCC-1 Financing Statements
describing the Property having been filed in the proper places in each
jurisdiction designated by Lender.

 

(c)           At Lender’s option, UCC and other record searches acceptable to
Lender showing the first priority of Lender’s security interest in the Property.

 

ARTICLE 8

Representations and Warranties of Borrower  

Borrower makes the following representations and warranties to Lender. Each Draw
Request shall constitute a reaffirmation that the representations and warranties
above are true and correct at that time.

 

 

Section 8.1

Organization, Corporate Authority and Qualifications.

(a)           Organization, Power and Authority.  Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is duly qualified to transact business or own real property in
Texas. Borrower has the power and authority to execute, deliver and perform this
Loan Agreement and the Loan Documents. The person signing this Loan Agreement
and the Loan Documents on behalf of Borrower has full authority to execute the
same on behalf of said entity, and to bind said entity to the terms thereof.

 

(b)           Valid and Binding Obligation.  All of the Loan Documents, and all
other documents referred to herein to which Borrower or Guarantor is a party,
upon execution and delivery will constitute valid and binding obligations of
Borrower and Guarantor, enforceable in accordance with their terms except as
limited by applicable bankruptcy and other debtor relief laws.

 

(c)           Suits, Actions, Etc.  There are no material actions, suits, or
proceedings pending or to the Best Knowledge of Borrower threatened in any court
or before or by any Governmental Authority against or affecting Borrower,
Guarantor, or the Property, or involving the validity, enforceability, or
priority of any of the Loan Documents, at law or in equity, except as previously
disclosed to Lender in writing. The consummation of the transactions
contemplated hereby, and the performance of any of the terms and conditions
hereof and of the other Loan Documents, will not result in a breach of, or
constitute a default in, any mortgage, deed of trust, lease, promissory note,
loan agreement, credit agreement, partnership agreement, or other agreement to
which Borrower or Guarantor is a party or by which Borrower or Guarantor may be
bound or affected. Neither Borrower nor any Guarantor is in default of any order
of any court or any requirement of any Governmental Authority.

 

(d)           Title to the Property.  Borrower or Builder, as applicable, will
hold and will hold full legal and equitable title to the Property, subject only
to title exceptions set forth in the Title Insurance.

 

Section 8.2            Authorization and Compliance with Laws and Material
Agreements.  The execution, delivery and performance of this Loan Agreement and
the Loan Documents, and the borrowings hereunder, by Borrower have been duly
authorized by all requisite corporate action on the part of Borrower and will
not violate the partnership agreement of Borrower and will not violate any
provision of law, or order of any court or governmental agency affecting
Borrower in any respect, and will not conflict with, result in a breach of the
provisions of, constitute a default under, or result in the imposition of any
lien, charge, or encumbrance upon any assets of Borrower pursuant to the
provisions of any indenture, mortgage, deed of trust, franchise, permit,

 

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license, note or other agreement or instrument to which Borrower may be bound.
No approval or consent from any Governmental Authority or other third party is
required in connection with the execution of or performance under this Loan
Agreement and the Loan Documents by Borrower.

Section 8.3            Valid and Binding Obligation.  All of the Loan Documents
to which Borrower is a party, will upon execution and delivery by such party,
constitute a valid binding obligation of Borrower, enforceable in accordance
with their respective terms.

Section 8.4            Financial Condition.  The balance sheets and statements
of income and retained earnings of Borrower, heretofore furnished to Lender, are
complete and correct and fairly represent the financial condition of Borrower as
at the dates of said financial statements and the results of their operations
for the periods ending on said dates. Borrower has no material contingent
obligations, liabilities for taxes, long-term leases, or unusual forward or
long-term commitments not disclosed by, or reserved against in, said balance
sheets or the notes thereto; and at the present time, there are no material
realized or anticipated losses from any unfavorable commitments of Borrower.
Said financial statements were prepared in accordance with GAAP consistently
maintained throughout the periods involved. Since the date of the latest of such
statements, there has been no material adverse change in the financial condition
of Borrower from that set forth in said balance sheets as at that date.

Section 8.5            Litigation and Judgments.  There are no suits or
proceedings pending, or, to the Best Knowledge of Borrower, threatened, against
or affecting Borrower that, if adversely determined, would have a Material
Adverse Effect on the financial condition or business of Borrower or on the
Property; and there are no proceedings by or before any governmental commission,
board, bureau, or other administrative agency pending or to the Best Knowledge
of Borrower, threatened against Borrower, which if adversely determined, would
have a Material Adverse Effect on the business, properties, condition, financial
or otherwise of Borrower. There are no outstanding judgments (final or
otherwise) against Borrower.

Section 8.6            Title to and Perfection of Security Interest in
Property.  Borrower is or will be the owner of all the Property, free and clear
of all liens, security interests, and encumbrances other than those in favor of
Lender, and will execute all such financing statements or other documents and
take such actions as Lender may deem necessary or desirable to evidence or
perfect its first and prior security interest and lien in the Property under the
Loan Documents.

Section 8.7            No Other Financing Statements.  No UCC-1 or other
financing statement covering any assets owned by Borrower to be pledged as
Collateral to Lender have been executed or is on file in any public office.

Section 8.8            Purpose of Borrower; Use of Proceeds.  Borrower has
entered into this Loan Agreement for legitimate purposes, and will use the
proceeds of the Loans exclusively for the construction of single family
residences.

Section 8.9            Ownership of Properties; Liens.  Borrower has good and
indefeasible title or valid leasehold interests in all its significant or
material properties and assets, real and personal, which are owned or used in
connection with its products or services, and none of such properties or assets
or leasehold interests of Borrower are subject to any mortgage, pledge, security
interest, encumbrance, lien or charge of any kind which would materially
restrict the manner in which Borrower uses or intends to use such property.

Section 8.10          Zoning.  All Property is and will be zoned under
applicable zoning laws so as to permit the construction, operation and use of
the Improvements as single family residences. Adequate water, telephone, gas and
electrical service, storm and sanitary sewage facilities and any other required
public utilities are available for and service the Property. The Property fronts
on and has adequate access to public streets for pedestrian and motor vehicles.
To the Best Knowledge of Borrower, construction of the Improvements and
operation of the Property will not be delayed or impeded by virtue of the
requirements under any applicable laws, rules or regulations. To the Best
Knowledge of Borrower, upon completion of the construction of the Improvements,
the Property will comply with all Governmental Requirements.

Section 8.11          Taxes.  Borrower has filed all federal and state tax
returns or reports required of Borrower, including but not limited to income,
franchise, employment and sales taxes, and have paid or made adequate provision
for the payment of all taxes which have become due pursuant to such returns or
reports or pursuant to any assessment which has been received, none of such
being outstanding and unpaid, and

 

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Borrower knows of no pending investigations of Borrower by any taxing authority,
nor of any material pending but unassessed tax liability.

Section 8.12          Compliance with Laws.  Except to the extent that failure
to comply would not have a Material Adverse Effect, Borrower has complied with
all applicable laws, ordinances, statutes, rules, regulations, orders,
injunctions, writs or decrees (collectively, “Laws”) or any agreements,
contracts and understandings, and all agreements and understandings, written or
oral, to which it is party.

Section 8.13          No Materially Adverse Agreements.  Borrower is not a party
to any agreement which in the opinion of Borrower does or will materially and
adversely affect the business, operations or condition, financial or otherwise,
of Borrower.

Section 8.14          Default.  Borrower is not in default in any material
respect under the provisions of any instrument evidencing any material
obligation, indebtedness or liability of Borrower, or of any agreement relating
thereto, or under any order, writ, injunction, or decree of any court, or in
default under or in violation of any order, regulation, or demand of any
governmental instrumentality which default or violation might have consequences
which would have a Material Adverse Effect on the business, financial condition,
or properties of Borrower.

Section 8.15          Misrepresentation.  There is no fact which Borrower has
failed to disclose to Lender, which materially and adversely affects nor, so far
as Borrower can now foresee, is reasonably likely to have a Material Adverse
Effect on the business, operation, properties, profits, or condition of Borrower
or the Property, or the ability of Borrower to perform this Loan Agreement.

Section 8.16          Environmental Liabilities.  To the Best Knowledge of
Borrower, there is no Hazardous Material on or in the Property, nor is there any
Hazardous Material being released or threatened to be released from or on any
Property. To the Best Knowledge of Borrower, (i) no part of the Property has
ever been used as a manufacturing, storage or dump site for Hazardous Material,
nor is any part of the Property affected by any Hazardous Material
contamination; (ii) no real estate adjoining the Property has ever been used as
a manufacturing, storage or dump site for Hazardous Material; and (iii) no real
estate adjoining the Property is affected by Hazardous Material contamination.
To the Best Knowledge of Borrower, no report, analysis, study or other document
exists. Further, no communications have been received by Borrower asserting that
Hazardous Material contamination exists on the Property or identifying any
Hazardous Material as being located upon or released on or from the Property.
These representations shall apply and be deemed to have been made immediately
upon Borrower’s acquisition of any Property.

ARTICLE 9

Events of Default

Section 9.1            Events of Default. The occurrence of any one or more of
the following events shall constitute an “Event of Default”:

(a)           Payment of Loan.  Failure to make any payments of principal or
interest when and as due under the Note or other instruments evidencing the
Credit Facility, whether by acceleration or otherwise, and such default
continues for a period of 10 calendar days after Lender has sent written notice
of such nonpayment to Borrower, which notice shall be deemed effective upon
deposit into the custody of the U.S. Postal Service.

 

(b)           Payment of Other Obligations.  Failure to pay, when due, any other
monetary obligation under the Deeds of Trust, and such default continues for a
period of 10 calendar days after Lender has sent written notice of such
nonpayment to Borrower, which notice shall be deemed effective upon deposit into
the custody of the U.S. Postal Service;

 

 

(c)

(not used)

 

 

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(d)           Failure to Maintain Title Insurance.   If Lender permits the Title
Insurance for any Loan to be in the form of an interim construction binder, the
failure by Borrower to maintain such binder in effect by any necessary
extensions.

 

 

(e)

(not used)

 

(f)            Misrepresentations.  Any representation, warranty or other
statement made or furnished to Lender by or on behalf of Borrower in this Loan
Agreement, any of the other Loan Documents or any instrument, certificate or
financial statement furnished in compliance with or in reference thereto proves
to have been false, misleading or erroneous in any material respect.

 

(g)           Cessation of Construction.  After construction of Improvements of
a Unit commences, the cessation of the construction of the Improvements of that
Unit for more than 45 cumulative days without the prior written consent of
Lender; provided, however, the days during which there is no construction by
reason of Force Majeure shall not be counted towards the 45 days.

 

(h)           Compliance with Plans, etc.   A failure of the construction of the
Improvements or any of the materials supplied therefor to materially comply with
the Plans, and Governmental Requirements or the requirements of Lender.

 

(i)            Compliance with Governmental Requirements.   A failure to
materially comply with all Governmental Requirements, including without
limitation the federal Interstate Land Sales Act, 12 USC Section 1701, et seq.,
if applicable.

 

(j)            Conditions Precedent to Draw.   An inability of Borrower to
satisfy any condition specified herein as precedent to the obligation of Lender
to fund a Draw after a Draw Request has been submitted by Borrower to Lender.

 

 

(k)

Bankruptcy, Insolvency, etc.   The occurrence of any of the following:

 

            (i)    The appointment of a receiver, trustee, custodian,
conservator, or liquidator, or other similar official for any member of Borrower
or Builder, any of its property, or any other property of Borrower or Builder.

 

            (ii)    Borrower or Builder shall generally not pay its debts as
they become due or shall admit in writing an inability to pay its debts, or
shall make a general assignment for the benefit of creditors.

 

            (iii)    Borrower or Builder shall commence any case, proceeding or
other action seeking relief, reorganization, arrangement, adjustment,
liquidation, dissolution or composition of Borrower or its respective debts
under any debtor relief laws.

 

            (iv)    Any case, proceeding or other action is commenced against
Borrower or Builder seeking to have an order for relief entered against Borrower
or Builder, as debtor, or seeking a reorganization, arrangement, adjustment,
liquidation, dissolution or composition of Borrower or Builder or its respective
debts under any debtor relief laws, or seeking an appointment of a receiver,
trustee, custodian or other similar official for Borrower or Builder or for all
or any of its property, or any other property of Borrower or Builder and such
case, proceeding or other action: (i) results in the entry of an order for
relief against Borrower or Builder and (ii) remains undismissed for a period of
30 days after commencement.

 

 

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        (v)     Borrower or Builder shall have concealed, removed or permitted
to be concealed or removed, any part of its property, with intent to hinder,
delay or defraud any of its creditors; or made or suffered a transfer of any of
its property which may be fraudulent under any bankruptcy, fraudulent conveyance
or similar law; or shall have made any transfer of its property to or for the
benefit of a creditor at a time when other creditors similarly situated have not
been paid (unless adequate provision in cash has been made for payment of the
similar claim); or shall have suffered or permitted, while insolvent, any
creditor to obtain a lien upon any of the Collateral through legal proceedings
which is not vacated within 30 days.

 

        (vi)    Borrower or Builder shall have suffered (i) a casualty as to any
material asset or assets used in the conduct of its business which is not,
except for deductibles reasonably acceptable to Lender, fully covered by
insurance or (ii) a material adverse change in the business, properties,
conditions, financial or otherwise of Borrower, Builder or any Guarantor.

 

(l)            Challenge to Agreement.  Borrower or Builder shall challenge or
contest in any action, suit or proceeding the legality, validity or
enforceability of this Loan Agreement or any of the other Loan Documents, or the
perfection or priority of any lien granted to Lender.

 

(m)          Repudiation of or Default Under Guaranty Agreements.  Any Guarantor
shall revoke or attempt to revoke the Guaranty Agreement signed by such
Guarantor, or shall repudiate such Guarantor’s liability thereunder or shall be
in default under the terms thereof.

 

(n)           Cross-Default.  The occurrence of a default (whether defined as a
“default” or “event of default”), or the failure to comply with any obligations,
under any other agreement between Borrower and Lender now existing or hereafter
arising, will constitute an immediate default under this Loan Agreement, the
Loan Documents and all other such agreements.

 

(o)           Other Defaults.  The occurrence of any other event or condition
specified herein or in any of the Loan Documents as being a default.

 

(p)           Noncompliance with Loan Documents.  For any events or occurrences
other than those specifically set forth above, the failure to perform or observe
any of the other agreements, covenants or conditions contained in this Loan
Agreement, in any other Loan Document or otherwise in existence with Lender
regarding the Loan, and such default continues for a period of 30 calendar days
after Lender has sent written notice of such nonperformance to Borrower, which
notice shall be deemed effective upon deposit into the custody of the U.S.
Postal Service. This shall include, as applicable, the failure by Builder to
comply with the terms of any Deed of Trust.

 

ARTICLE 10

Remedies

Upon an Event of Default, Lender shall have, in addition to any other rights or
remedies available at law or in equity, the following rights and remedies:

 

Section 10.1          Termination of Agreement.  Lender may terminate this Loan
Agreement or any part thereof. By way of example only, Lender may terminate the
Credit Facility and refuse to make any further Draws. If Lender elects to
terminate the Credit Facility, it will first give Borrower 30 days’ prior
written notice of same.

 

Section 10.2

Specific Remedies.  Lender shall have the right to:

 

 

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(a)           Foreclose its liens under any Security Agreement, and any other
Security Instrument, including without limitation the Deeds of Trust.

 

(b)           Institute proceedings to collect all or a portion of the
Indebtedness and to recover a judgment for the same and to collect upon such
judgment out of any property of Borrower wherever situated.

 

(c)           Offset and apply any monies, credits or other proceeds of property
of Borrower that has or may come into possession or under the control of Lender
against any amount owing by Borrower to Lender;

 

(d)           With respect to accounts, contract rights, chattel paper, tax
refunds and general intangibles constituting Collateral herein, Lender may/is:

 

(i)     Settle, adjust and compromise all present and future claims arising
thereunder or in connection therewith.

 

 

(ii)

     Sell, assign, pledge or make any other agreement with respect thereto or
the proceeds

  thereof.

 

(iii)    Notify all such account, contract right, or other debtors of Lender’s
interest therein and require direct payment to Lender of such obligations.

 

(iv)    Receive, sign, endorse, and deliver in its name or the name of Borrower
any and all notes, instruments, documents, titles, negotiable instruments and
the like necessary and appropriate to effect the collection of such intangibles,
and Borrower hereby waives notice of presentment, protest and non-payment of any
instrument so endorsed.

 

(e)           Subject to any specific, contrary provision in any other Security
Agreement executed now or in the future pertaining to personal property which is
foreclosed upon pursuant to Article 9 of the Texas Business and Commerce Code:
sell or lease the Collateral, or any portion thereof, after giving 5 days’
written notice, at public or private sale. The sale by Lender of less than the
whole of the Collateral shall not exhaust the power of sale, and Lender is
empowered to make successive sales under such power until all of the Collateral
shall be sold; the liens, security interests and rights hereunder shall remain
in full force and effect as to the unsold portion of the Collateral. The
decision to sell all or only a portion of the Collateral at any sale shall be at
the sole discretion of Secured Party.

 

(f)           Require Borrower to assemble all or any of the Collateral (except
real estate) and make it available to Lender at a place to be designated by
Lender that is reasonably convenient to the parties.

 

(g)           Lender may, at Lender’s option, after the occurrence of an Event
of Default, declare all of the sums due under the Credit Facility to be
immediately due and payable without further demand and may invoke the power of
sale and any other remedies permitted by applicable law or provided in this Loan
Agreement or any of the other Loan Documents. Borrower and each Guarantor (as
applicable) expressly waive all presentations for payment, notices of intention
to accelerate maturity, notices of acceleration of maturity, notices of
intention to demand payment, demands for payment, protests, and notices of
protest.

 

Section 10.3          Remedies Cumulative.  Lender shall have all rights and
remedies contained in any other Loan Document, all of which rights and remedies
shall be cumulative of those granted herein, or otherwise available at law or in
equity. All of Lender’s rights and remedies may be enforced successively or
concurrently.  Lender's rights shall include all rights of a secured party under
the Uniform Commercial Code applicable in any particular state.

 

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Section 10.4          Expenses.  Borrower shall pay all expenses and reimburse
Lender for any expenditures, including reasonable attorney fees and legal
expenses, in connection with Lender’s exercise of any of its rights and remedies
under this Loan Agreement.

Section 10.5          Proceeds.  Proceeds realized by Lender on the sale or
other disposition of the Collateral, after payment of all expenses incurred by
Lender in enforcing the Indebtedness or in retaking, holding, preparing for sale
or lease, selling, leasing or otherwise disposing of or realizing on the
Collateral or the Indebtedness, shall be applied by Lender to the remaining
Indebtedness in such manner as Lender shall elect.

Section 10.6          Default Interest.  In addition to the remedies provided
above or elsewhere in this Loan Agreement, all Indebtedness which is not paid
when due, by acceleration, at maturity or otherwise, shall bear interest (i) in
the case of Indebtedness evidenced by promissory notes, at the default rate (if
any) provided in the applicable notes, and (ii) in the case of all Indebtedness
not covered by item (i), at the highest nonusurious default rate provided for in
any of the notes.

ARTICLE 11

Miscellaneous

Section 11.1          Lender’s Accounts.  Lender shall maintain on its books in
accordance with its usual practice an account or accounts with respect to the
Loan, which account or accounts shall include, without limitation, (i) the
outstanding principal amount of the Credit Facility, (ii) the amount of
principal and interest due under the Credit Facility and the required payment
dates, (iii) all other fees, costs, expenses, losses and indemnities due under
this Loan Agreement or any other Loan Document, and (iv) all amounts received by
Lender with respect to the foregoing. For purposes of any legal action or
proceeding arising out of or in connection with this Loan Agreement or any other
Loan Document, and for all other purposes, the entries made in such account or
accounts maintained by Lender pursuant to this Section 11.1 shall create a
presumption as to the existence and amounts of the foregoing, absent manifest
error. The failure by Lender to maintain such account or accounts shall not in
any manner affect the Indebtedness.

Section 11.2          Notices.  All notices or other communications required or
permitted to be given pursuant to the provisions of this Loan Agreement shall be
in writing and shall be considered as properly given if mailed by first class
United States mail, postage prepaid, registered or certified with return receipt
requested, or by delivering same in person to the intended addressee, or by
prepaid telegram, telex or telecopy. Notice given in any other manner shall be
effective only if and when received by the addressee. For purposes of notice,
the addresses of the parties shall be as set forth below; provided, however,
that either party shall have the right to change its address for notice
hereunder to any other location within the continental United States by the
giving of 30 days’ notice to the other party in the manner set forth
hereinabove. The addresses for notice hereunder are:

 

If to Lender:

919 Congress Avenue, Suite 100

 

Austin, Texas 78701

 

If to Borrower:

2700 Fortuna, Suite 400

 

  Austin, Texas 78746  

 

If to Builder:

2100 Hartford

 

 

Austin, Texas 78703

 

 

Section 11.3          Waiver.  No course of dealing, or any failure by Lender to
insist, or any election by Lender not to insist, upon Borrower’s strict
performance of any of the terms, provisions or conditions of the Loan Documents
shall not be deemed to be a waiver of same or of any other term, provision or
condition thereof; and Lender shall have the right at any time thereafter to
insist upon strict performance by Borrower of   

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any and all of same. Specifically, no Draw by Lender when there exists an Event
of Default under Article 9 shall in any way preclude Lender from thereafter
declaring such failure to comply to be an Event of Default hereunder.

Section 11.4          Survival.  All agreements, representations, warranties and
covenants of Borrower contained in this Loan Agreement shall survive the
execution of this Loan Agreement and the other Loan Documents, and the making of
the Loans.

Section 11.5          Limitations on Interest.  All agreements between Borrower
and Lender, whether now existing or hereafter arising and whether written or
oral, are hereby limited so that in no contingency, whether by reason of demand
for payment or acceleration of the maturity hereof or otherwise, shall the
interest contracted for, charged or received by Lender exceed the maximum amount
permissible under applicable law. If, from any circumstance whatsoever, interest
would otherwise be payable to Lender in excess of the maximum lawful amount, the
interest payable to Lender shall be reduced to the maximum amount permitted
under applicable law; and if from any circumstance Lender shall ever receive
anything of value deemed interest by applicable law in excess of the maximum
lawful amount, an amount equal to any excessive interest shall be applied to the
reduction of the principal balance of the Indebtedness and not to the payment of
interest, or if such excessive interest exceeds the principal balance such
excess shall be refunded to Borrower. All interest paid or agreed to be paid to
Lender shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full period until payment in full of the
principal so that the interest hereon for such full period shall not exceed the
maximum amount permitted by applicable law. This paragraph shall control all
agreements between Lender and Borrower.

Section 11.6          Applicable Law.  This Loan Agreement and the other Loan
Documents (except as may be otherwise expressly provided in such other Loan
Documents), shall be governed by and construed in accordance with the laws of
the State of Texas and the laws of the United States applicable to transactions
within such State.

Section 11.7          Venue.  The parties agree that all actions or proceedings
arising in connection with this Loan Agreement and any of the Loan Documents
shall be tried and litigated only in the state and federal courts located in the
State of Texas or, at the sole option of Lender, in any other court in which
Lender shall initiate legal or equitable proceedings and which has subject
matter jurisdiction over the matter in controversy. All the parties to this Loan
Agreement waive any right each may have to assert the doctrine of forum non
conveniens or to object to venue to the extent any proceeding is brought in
accordance with this Section 11.7.

Section 11.8          Severability.  If any provision hereof or of any of the
other Loan Documents or the application thereof to any person or circumstance
shall, for any reason and to any extent, be invalid or unenforceable, neither
the application of such provision to any other person or circumstance nor the
remainder of the instrument in which such provision is contained shall be
affected thereby, but rather shall be enforced to the greatest extent permitted
by law.

Section 11.9          Construction.  This Loan Agreement and each other Loan
Document are being entered into by competent and experienced businessmen,
represented by counsel, and the parties acknowledge that each party and its
counsel have reviewed and revised this Loan Agreement and the Loan Documents;
therefore, the normal rule of construction to the effect that any ambiguities
are to be resolved against the drafting party shall not be employed in the
interpretation of this Loan Agreement, the Loan Documents or any amendments or
exhibits hereto. The parties intend that all Loan Documents shall be construed
and interpreted in a consistent manner. Unless the terms expressly provide
otherwise, references to “days” herein shall be deemed to refer to calendar
days.

Section 11.10        Lender’s Discretion.  In any instance hereunder (including
any exhibits, schedules, annexes or addenda hereto) where Lender’s satisfaction,
approval or consent or the exercise of Lender’s judgment is required, the
granting or denial of such satisfaction, approval or consent and the exercise of
such judgment shall be within the sole discretion of Lender. This provision
shall govern any such satisfaction requirements, consents, approvals or exercise
of judgment required in connection with any of the Loan Documents.

Section 11.11        No Third Party Beneficiary.  This Loan Agreement is for the
sole benefit of Lender and Borrower and is not for the benefit of any third
party.

Section 11.12        Borrower In Control; No Partnership.  In no event shall
Lender’s rights and interests under the Loan Documents be construed to give
Lender the right to, or be deemed to indicate that Lender is in control of the
business, management or properties of Borrower or has power over the daily
management functions and operating decisions made by Borrower. Nothing contained
herein or in any of the other Loan

 

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Documents shall  be construed as creating joint venture, partnership,
tenancy-in-common or joint tenancy arrangement between Lender and Borrower. The
relationship of Lender and Borrower is and at all times shall be solely that of
debtor and creditor.

Section 11.13        Successors and Assigns.  This Loan Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, successors, legal representatives and assigns. However, Borrower shall
not assign or encumber this Loan Agreement or any rights herein, it being
expressly understood and agreed that the rights of Borrower hereunder are not
assignable.

Section 11.14        Number and Gender.  Whenever used herein, the singular
number shall include the plural and the plural the singular, and the use of any
gender shall be applicable to all genders.

Section 11.15        Captions.  The captions, headings, and arrangements used in
this Loan Agreement are for convenience only and do not in any way affect,
limit, amplify, or modify the terms and provisions hereof. The notation of “(not
used)” herein refers to provisions deleted by agreement between Borrower and
Lender; however, in any action or proceeding to interpret or enforce this Loan
Agreement, Borrower and Lender agree that no such deleted provisions shall be
examined or used in any way.

Section 11.16        Time of the Essence.  Time is of the essence with respect
to each and every matter pertaining to performance under this Loan Agreement and
of each provision hereof.

Section 11.17        Executed Copies.  This Loan Agreement may be executed in
any number of counterpart copies, each of which counterparts shall be deemed an
original for all purposes.

Section 11.18        Entire Agreement of the Parties.  This Loan Agreement,
including all agreements referred to or incorporated herein and all recitals
hereto, is the entire agreement among the parties relating to the subject matter
hereof, supersedes all prior agreements, commitments and understandings among
the parties hereto relating to the subject matter hereof, and cannot be changed
or terminated orally, and shall be deemed effective as of the date hereof.

Section 11.19        Joinder by Builder.   Builder joins in the execution hereof
to evidence its consent to the terms hereof.

Section 11.20        Statutory Notice.   In accordance with Section 26.02 of the
Texas Business and Commerce Code, Lender hereby notifies Borrower that:

 

                    THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

 

 

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

 

EXECUTED to be effective as of the date and year first above written.

 

Borrower:

Wilson Family Communities, Inc.

 

 

 

By:/s/ Clark N. Wilson___________

Name: Clark N. Wilson

Title: President

 

 

 

 

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Lender:

PlainsCapital Bank

 

 

 

By:/s/ James E. Dyess________

Name: James E. Dyess

Title: Senior Vice President

 

 

Builder:

Green Builders, Inc.

 

 

 

By:_/s/ Larry E. Stephenson, Sr.___

Name: Larry E. Stephenson, Sr.,

Title: Vice President

 

 

 

 

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