CONSTRUCTION LOAN AGREEMENT

 

 

 

                                                                    Exhibit 99.1

 

 

                           CONSTRUCTION LOAN AGREEMENT

 

        THIS CONSTRUCTION LOAN AGREEMENT dated April ___, 2005, is made by THE

FROST NATIONAL BANK, a national banking association ("LENDER"), whose address is

P.O. Box 1600, San Antonio, Texas 78296, and BEHRINGER HARVARD NORTHWEST HIGHWAY

LP, a Texas limited partnership ("BORROWER"), whose address is 100 Main Street,

Dallas, Texas 75208.

 

                                    ARTICLE I

                          DEFINITIONS AND USE OF TERMS

 

        1.01    CERTAIN DEFINITIONS. As used herein, the following terms have

the meanings indicated, unless the context otherwise requires:

 

                "ADVANCE" means a disbursement by Lender of any of the proceeds

of the Loan or Borrower's Deposit.

 

                "AFFIDAVIT OF BORROWEr" means a sworn affidavit 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)

acquisition of the Land; (b) amounts retained pursuant to a Construction

Contract, and (c) items to be paid from the proceeds of an Advance then being

requested or in another manner satisfactory to Lender.

 

                "AGREEMENT" means this Construction Loan Agreement, as the same

may from time to time be amended or supplemented.

 

                "APPLICATION FOR ADVANCE" means a written application by

Borrower (and such other parties as Lender may require) to Lender, on a form

approved by 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 Loan,

the Property, and the construction of the Improvements, whether or not specified

in the Approved Budget, requesting an Advance for the payment of such items,

containing, if requested by Lender, an Affidavit of Borrower, accompanied by

such documents as Lender may reasonably request.

 

                "APPROVED BUDGET" means a budget and cost itemization prepared

by Borrower, and approved in writing by Lender, specifying 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, the

Property, and the construction of the Improvements. The Approved Budget is

attached hereto as EXHIBIT D.

 

                "BORROWER" means all parties named Borrower in the first

paragraph of this Agreement.

 

 

CONSTRUCTION LOAN AGREEMENT                                               PAGE 1

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

 

<PAGE>

 

                                                                    Exhibit 99.1

 

 

                "BORROWER'S DEPOSIT" means such cash sums as Lender may

reasonably deem necessary in accordance with SECTION 4.12 hereof.

 

                "BUSINESS DAY" means a day other than a Saturday, Sunday or a

day on which commercial banks in San Antonio, Texas, are authorized to be

closed.

 

                "CLOSING DATE" means the Closing Date specified in EXHIBIT C.

 

                "CODE" means the Uniform Commercial Code of the State of Texas

or of any other state having jurisdiction with respect to any of the Rights of

Lender under the Loan Documents.

 

                "COMMITMENT FEE" means the Commitment Fee specified in EXHIBIT

B, to be paid to Lender in consideration of the commitment of Lender to make the

proceeds of the Loan available to Borrower from time to time during the term of,

and as provided in, this Agreement. Unless otherwise provided in EXHIBIT B, the

Commitment Fee shall be paid to Lender on the date hereof.

 

                "COMPLETION DATE" means the Completion Date specified in EXHIBIT

C.

 

                "CONSTRUCTION CONTRACT" means each agreement made by Borrower

for construction of the Improvements.

 

                "CONTRACTOR" means each Person with whom Borrower makes a

Construction Contract.

 

                "CONTRACTOR'S AGREEMENT" means a written agreement (if expressly

required to be delivered by Borrower on EXHIBIT B to this Agreement) duly

executed by Contractor in favor of Lender (a) consenting to the assignment and

encumbrance hereunder of the Construction Contract; (b) agreeing to continue

performance under the Construction Contract at the request and for the benefit

of Lender or its designee; (c) subordinating all liens, security interests and

claims of Contractor against the Property or Borrower, to those of Lender under

the Loan Documents; and (d) respecting such other matters as Lender may require.

 

                "CURRENT DATE" means a date within thirty (30) days prior to the

Closing Date.

 

                "DEBTOR RELIEF LAWS" means any applicable liquidation,

conservatorship, bankruptcy, moratorium, arrangement, insolvency,

reorganization, or other similar laws, domestic or foreign, including but not

limited to those in Title 11 of the United States Code, as amended from time to

time, affecting the rights or remedies of creditors generally, as in effect from

time to time.

 

                "DEED OF TRUST" means the Deed of Trust, Security Agreement and

Financing Statement covering the Land and Improvements to secure payment and

performance of the Obligation.

 

                "DEFAULT" has the meaning set forth in ARTICLE V and in any

other provision hereof using the term.

 

                "ENGINEER" means Borrower's engineer licensed in the State of

Texas, acceptable to Lender, and named in EXHIBIT C.

 

                "ENGINEER'S AGREEMENT" means a written agreement duly executed

by Engineer in favor of Lender (a) consenting to the assignment and encumbrance

hereunder of the Plans and of

 

 

CONSTRUCTION LOAN AGREEMENT                                               PAGE 2

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

 

<PAGE>

 

                                                                    Exhibit 99.1

 

 

Borrower's Rights in the Engineering Contract, if any; (b) agreeing to continue

performance under the Engineering Contract, if any, at the request and for the

benefit of Lender or its designee; (c) certifying that the Plans comply with all

applicable Governmental Requirements (and have been approved, if required), and

that the Improvements if constructed substantially in accordance with the Plans

will have direct and free access (adequate for the intended uses of the Land and

Improvements) to and connection with one or more dedicated public streets and

thoroughfares and water, storm and sanitary sewer, drainage, gas, electric and

telephone lines, pipes, facilities and services; (d) subordinating all liens,

security interests and claims of Engineer against the Property, Borrower and the

Plans, to those of Lender under the Loan Documents; and (e) respecting such

other matters as Lender may require.

 

                "ENGINEERING CONTRACT" means a written agreement between

Borrower and Engineer for engineering services pertaining to construction of the

Improvements.

 

                "FINANCIAL STATEMENTS" means financial information of Borrower

and of Guarantor, as set forth in SECTION 4.16 hereof, as, at the time in

question, have been most recently furnished to Lender.

 

                "GOVERNMENTAL AUTHORITY" means the United States, the state, the

county, the city or any other political subdivision in which the Property is

located, and any court or political subdivision, agency, or instrumentality

having jurisdiction over Borrower, Guarantor or the Property.

 

                "GOVERNMENTAL REQUIREMENTS" means all statutes, laws,

ordinances, rules, regulations, orders, writs, injunctions or decrees of any

Governmental Authority applicable to Borrower, Guarantor or the Property.

 

                "GUARANTOR" means, jointly and severally, the guarantors

(whether one or more) named in EXHIBIT C.

 

                "GUARANTY" means a continuing guaranty (whether one or more) of

the Obligation executed by Guarantor.

 

                "IMPROVEMENTS" means the Improvements identified in EXHIBIT C

and more particularly described in the Plans, and any items, related to the

construction, installation, equipping or decoration of the Improvements,

required by any lease but not covered by the Plans.

 

                "INSPECTING ARCHITECTS/ENGINEERS" means Inspecting

Architects/Engineers, if any, specified by Lender from time to time.

 

                "LAND" means the real estate described in EXHIBIT A.

 

                "LENDER" means Lender named in the first paragraph of this

Agreement and its successors and assigns, in whole or in part.

 

                "LOAN" means the Loan by Lender to Borrower pursuant to this

Agreement.

 

                "LOAN DOCUMENTS" means this Agreement, the Note, the Guaranty,

the Deed of Trust, and such other documents evidencing, securing or pertaining

to the Loan as shall from time to time be executed and delivered to Lender by

Borrower, Guarantor or any other party pursuant to this Agreement, including,

without limitation, each Affidavit of Borrower, each Application for

 

 

CONSTRUCTION LOAN AGREEMENT                                               PAGE 3

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

 

<PAGE>

 

                                                                    Exhibit 99.1

 

 

Advance, and the Approved Budget, and any future amendments or supplements

hereto or thereto.

 

                "MARGIN STOCK" has the meaning given thereto in Section 221.3(v)

of Regulation U, promulgated by the Board of Governors of the Federal Reserve

System, F.R.S. Reg. U., 12 C.F.R. part 221 (January 1, 1983 revision), as

amended from time to time.

 

                "MATERIAL ADVERSE CHANGE" means any occurrence or combination of

occurrences which could reasonably be expected to be material and adverse to the

financial condition or business operation of Borrower or Guarantor or which

could reasonably be expected to cause a Default.

 

                "NOTE" means the Promissory Note made by Borrower payable to the

order of Lender in the maximum amount of and evidencing the Loan.

 

                "OBLIGATION" means all present and future indebtedness,

obligations and liabilities of Borrower to Lender arising pursuant to this

Agreement or any of the other Loan Documents or otherwise, and any renewals,

extensions or amendments thereof, or any part thereof, regardless of whether

such indebtedness, obligations and liabilities are direct, indirect, fixed,

contingent, liquidated, unliquidated, joint, several or joint and several.

 

                "PERSON" means any individual, firm, corporation, association,

partnership, joint venture, trust, other entity, unincorporated organization or

Governmental Authority.

 

                "PLANS" means the final working drawings and specifications for

the construction of the Improvements (including soil reports and engineering

calculations) prepared by Engineer and as modified or supplemented from time to

time and approved by Lender, Borrower, any lessee of the Property, if

applicable, and, to the extent necessary, by each Governmental Authority.

 

                "PRINCIPAL DEBT" means the aggregate unpaid balance of all

Advances of the Loan and all other principal indebtedness, if any, under the

Note at the time in question.

 

                "PROPERTY" means the Land, the Improvements and all other

property, real and personal, now or hereafter subject to a right, lien or

security interest to secure the Loan as described herein, in the Deed of Trust

or in any of the other Loan Documents.

 

                "RIGHTS" means rights, remedies, powers and privileges.

 

                "SECURITY AGREEMENT" means the security agreement contained in

the Deed of Trust securing the payment and performance of the Obligation,

covering as collateral the personal property (including money), tangible and

intangible, used or useful in connection with, or arising out of any part of,

the Property and any additional collateral specified in EXHIBIT B and the

proceeds of the collateral.

 

                "SURVEY" means a survey of the Land consisting of a plat and

field notes, prepared by a licensed surveyor acceptable to Lender and the Title

Company which survey shall: (a) reflect the actual dimensions of the Land, the

gross and net area of the Land, the location of any easements, rights-of-way,

setback lines, encroachments or overlaps thereof or thereover and the outside

boundary lines of any improvements located thereon; (b) identify by recording

reference any easements, setback lines or other matters referred to in the Title

Commitment; (c) include the surveyor's registration number and seal and the date

of the Survey; (d) include a surveyor's

 

 

CONSTRUCTION LOAN AGREEMENT                                               PAGE 4

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

 

<PAGE>

 

                                                                    Exhibit 99.1

 

 

certificate acceptable to Lender; (e) reflect that the Land has access to and

from a publicly dedicated street, roadway or highway; (f) be sufficient to cause

the Title Company to delete the "survey exception" in Schedule B of the Title

Policy to the extent permitted by the rules of the State Board of Insurance; and

(g) reflect the area within the Land that has been designated by the Federal

Insurance Administration, the Army Corps of Engineers or any other governmental

agency or body as being subject to special or increased flood hazards.

 

                "TITLE COMPANY" means the title company or title companies named

in EXHIBIT C.

 

                "TITLE POLICY" means a mortgagee title insurance policy (or

policies), and any reinsurance agreement (or agreements) issued by the Title

Company in accordance with EXHIBIT E.

 

        1.02    HEADINGS. The headings, captions, and arrangements used in any

of the Loan Documents are, unless specified otherwise, for convenience only and

shall not be deemed to limit, amplify, or modify the terms of the Loan Documents

nor to affect the meaning thereof.

 

        1.03    NUMBER AND GENDER OF WORDS. Whenever herein the singular number

is used, the same shall include the plural where appropriate, and words of any

gender shall include each other gender where appropriate. Reference herein to

Borrower or to Guarantor shall mean, jointly and severally, each Person

comprising same.

 

        1.04    MONEY. Unless stipulated otherwise, all references herein or in

any of the Loan Documents to "Dollars," "money," "payments," or other similar

financial or monetary terms are references to currency of the United States of

America.

 

        1.05    ARTICLES, SECTIONS AND EXHIBITS. All references herein to

Articles and Sections are, unless specified otherwise, references to articles

and sections of this Agreement. All references herein to an "Exhibit," "Annex"

or "Schedule" are references to exhibits, annexes or schedules attached hereto,

all of which are made a part hereof for all purposes, the same as if set forth

herein verbatim, it being understood that if any exhibit, annex or schedule

attached hereto, which is to be executed and delivered, contains blanks, the

same shall be completed correctly and in accordance with the terms and

provisions contained and as contemplated herein prior to or at the time of the

execution and delivery thereof. The words "herein," "hereof," "hereunder" and

other similar compounds of the word "here" when used in this Agreement shall

refer to the entire Agreement and not to any particular provision or section.

 

                                   ARTICLE II

                          COMMITMENT TO LEND; ADVANCES

 

        2.01    COMMITMENT TO LEND. Subject to and upon the terms, covenants,

and conditions hereof, Lender hereby agrees to lend to Borrower an aggregate sum

not in excess of FOUR MILLION FIVE HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS

($4,550,000.00), in Advances, from time to time prior to 2:00 p.m., San Antonio,

Texas, time on the Completion Date. An amount repaid may not be reborrowed.

 

        2.02    INTEREST. Interest at the rate specified in the Note shall be

computed on the Principal Debt which exists from time to time and shall be

computed with respect to each Advance only from the date of the Advance.

 

 

CONSTRUCTION LOAN AGREEMENT                                               PAGE 5

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

 

<PAGE>

 

                                                                    Exhibit 99.1

 

 

        2.03    PROCEDURE FOR BORROWING. Lender shall not be required to make

Advances more frequently than specified in EXHIBIT C. Each Application for

Advance shall be submitted by Borrower to Lender a reasonable time (but not less

than five Business Days) prior to the requested date (which must be a Business

Day) of the Advance. Except as Lender may otherwise determine from time to time,

each Advance will be made at Lender's principal office.

 

        2.04    ADVANCES. Advances shall be made only for costs and expenses

specified in the Approved Budget, and then only for work performed, services

rendered or materials furnished; no Advance shall be made for advance or

unearned payments. Advances for payment of costs of construction of the

Improvements shall be made only after actual commencement of construction of the

Improvements and shall not exceed the aggregate of (a) the costs of labor,

materials and services incorporated into the Improvements in a manner acceptable

to Lender, plus (b) if approved by Lender, the purchase price of all uninstalled

materials to be utilized in the construction of the Improvements stored on the

Property, or elsewhere with the written consent of and in a manner acceptable to

Lender, less (c) retainage, if any, specified in EXHIBIT C, and less (d) all

prior Advances for payment of costs of labor, materials and services for the

construction of the Improvements. Without limitation of other conditions

applicable thereto, the final Advance, including all retainage, if applicable,

will not be made until Lender has received the following: (1) an Affidavit of

Completion complying with ss.53.106 of the Texas Property Code and a completion

certificate from Engineer and from Inspecting Architects/Engineers, if any, (2)

evidence that all Governmental Requirements have been satisfied, (3) evidence

that no mechanic's or materialmen's liens or other encumbrances have been filed

and remain in effect against the Property, and (4) final lien releases or

waivers by Engineer, 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 Property, and (5) evidence

reasonably acceptable to Lender verifying that the Improvements as completed do

not encroach on any boundary line, easement, building setback line or other

restricted area. To the extent that the Improvements are divided into phases or

identifiable segments, references in the preceding sentence to a final Advance

shall include each final Advance with respect to such a phase or segment.

 

        2.05    CONDITIONS TO THE FIRST ADVANCE. As conditions precedent to the

first Advance, Borrower must satisfy the conditions required hereby and execute

and deliver to, procure for and deposit with, and pay to Lender, and if

appropriate record in the proper records with all filing and recording fees

paid, the documents, certificates, and other items referred to in EXHIBIT B,

together with such other documents, certificates and items as Lender may

reasonably require from time to time. Except as otherwise specifically provided

herein or agreed in writing by Lender, all such documents, certificates and

other items shall bear a Current Date.

 

        2.06    CONDITIONS TO EACH ADVANCE. As conditions precedent to each

Advance, including the first Advance, in addition to all other requirements

herein, Borrower must satisfy the following requirements and, if required by

Lender, deliver to Lender evidence of such satisfaction:

 

                (a)     All conditions precedent to the first Advance or stated

elsewhere herein shall have been satisfied.

 

                (b)     There shall then exist no Default nor shall there have

occurred any event which with the giving of notice or the lapse of time, or

both, could become a Default.

 

                (c)     The representations and warranties made in this

Agreement shall be true and correct on and as of the date of each Advance, and

the request for an Advance shall constitute

 

 

CONSTRUCTION LOAN AGREEMENT                                               PAGE 6

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

 

<PAGE>

 

                                                                    Exhibit 99.1

 

 

the representation and warranty by Borrower that such representations and

warranties are true and correct at such time.

 

                (d)     The Title Policy shall be endorsed and extended, if

required by Lender, to cover each Advance with no additional title exceptions

objectionable to Lender.

 

                (e)     Borrower shall procure and deliver to Lender, if

required by Lender, releases or waivers of mechanic's liens and receipted bills

showing payment of all amounts due to all parties who have furnished materials

or services or performed labor of any kind in connection with the construction

of any of the Improvements or otherwise with respect to the Property.

 

                (f)     An inspection of and acceptable report on the

Improvements by Inspecting Architects/Engineers, at Borrower's sole cost and

expense.

 

                (g)     The sum of the Principal Debt plus the amount of the

requested Advance shall not be in excess of the amount then available under

SECTION 2.01.

 

        2.07    APPROVED BUDGET ALLOCATIONS. Lender shall not be obligated to

make an Advance of an item allocated in the Approved Budget to the extent that

the amount of the Advance of such item when added to the amount of prior

Advances of such item would exceed the amount allocated to such item in the

Approved Budget. Lender reserves the right to make Advances which are allocated

to any of the items in the Approved Budget for such other items therein or in

such different proportions as Lender may, in its sole discretion, deem necessary

or advisable. Borrower may not reallocate items of cost in or change the

Approved Budget without the prior written consent of Lender which will not be

unreasonably conditioned, delayed or withheld.

 

        2.08    NO WAIVER. No Advance shall constitute a waiver of any condition

precedent to the obligation of Lender to make any further Advance or preclude

Lender from thereafter declaring the failure of Borrower to satisfy such

condition precedent to be a Default.

 

        2.09    CONDITIONS PRECEDENT FOR THE BENEFIT OF LENDER. All conditions

precedent to the obligation of Lender to make any Advance are imposed hereby

solely for the benefit of Lender, and no other party may require satisfaction of

any such condition precedent or be entitled to assume that Lender will refuse to

make any Advance in the absence of strict compliance with such conditions

precedent. Any requirement of this Agreement may be waived by Lender, in whole

or in part, at any time. Any requirement herein of submission of evidence of the

existence or nonexistence of a fact means that the fact shall exist or not

exist, as the case may be, and without waiving any condition or any obligation

of Borrower, Lender may at all times independently establish to its satisfaction

such existence or nonexistence.

 

        2.10    SUBORDINATION. Lender shall not be obligated to make, and

Borrower shall not be entitled to, any Advance until such time as Lender shall

have received, to the extent requested by Lender, subordination agreements from

Engineer, Contractor and all other Persons furnishing labor, materials or

services for the design or construction of the Improvements, subordinating to

the lien of the Deed of Trust and the Rights of Lender thereunder any lien,

claim or charge they may have against Borrower or the Property.

 

 

CONSTRUCTION LOAN AGREEMENT                                               PAGE 7

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

 

<PAGE>

 

                                                                    Exhibit 99.1

 

 

                                   ARTICLE III

                   REPRESENTATIONS AND WARRANTIES OF BORROWER

 

        Borrower hereby represents and warrants as follows:

 

        3.01    FINANCIAL STATEMENTS. The Financial Statements are true, correct

and complete as of the dates specified therein and fully and accurately present

the financial condition of Borrower and of Guarantor as of the dates specified.

Since the date of the Financial Statements, no Material Adverse Change has

occurred in the financial condition of Borrower or Guarantor nor, except as

heretofore disclosed in writing to Lender, has Borrower or Guarantor incurred

any material liability, direct or indirect, fixed or contingent. Borrower is

solvent.

 

        3.02    SUITS, ACTIONS, ETC. There are no actions, suits or proceedings

pending or to the knowledge of Borrower threatened 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. Neither

Borrower nor Guarantor is, and the consummation of the transactions contemplated

hereby and the performance or satisfaction of any of the terms or conditions

hereof and of the other Loan Documents will not cause Borrower or Guarantor to

be, in violation of or in default with respect to any Governmental Requirement

or in default (or provide cause for acceleration of indebtedness) under any

mortgage, deed of trust, lease, promissory note, loan agreement, credit

agreement, partnership agreement or other agreement or restriction to which

Borrower or Guarantor is a party or by which Borrower or Guarantor or the

Property may be bound or affected. Borrower's development of the Land and

Improvements and any sale or lease thereof by Borrower are and shall be exempt

from the registration and reporting requirements of the Interstate Land Sales

Full Disclosure Act and regulations thereunder as amended from time to time.

 

        3.03    STATUS OF BORROWER; VALID AND BINDING OBLIGATION. If Borrower is

a corporation, partnership or other entity, Borrower is and shall until the

Obligation is fully discharged continue to be (a) duly organized and validly

existing and in good standing under the laws of the state of its organization,

and in good standing under Texas law; (b) in compliance with all conditions

prerequisite to its lawfully doing business in Texas; and (c) possessed of all

power and authority necessary to own the Property, to construct and operate the

Improvements, to enter into and perform Borrower's obligations under the Loan

Documents and to make the borrowings contemplated hereby. 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 or Guarantor, as the case may be, enforceable in

accordance with their terms except as the enforcement thereof may be limited by

Debtor Relief Laws.

 

        3.04    TITLE TO THE PROPERTY. Borrower is the legal and equitable fee

simple absolute owner of the Land and all improvements thereon subject only to

title exceptions (specified in the Title Policy) which are hereafter accepted by

Lender.

 

        3.05    COMMENCEMENT OF CONSTRUCTION. Prior to the recordation of the

Deed of Trust, no work of any kind (including the destruction or removal of any

existing improvements, site work, clearing, grubbing, draining or fencing of the

Land) shall have commenced or shall have been performed on the Land, no

equipment or material shall have been delivered to or upon the Land 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 executed or recorded in any mechanic's lien or

other public records.

 

 

CONSTRUCTION LOAN AGREEMENT                                               PAGE 8

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

 

<PAGE>

 

                                                                    Exhibit 99.1

 

 

        3.06    PURPOSE OF LOAN. The proceeds of the Loan will be used for the

purposes specified in the Approved Budget. Such proceeds are not and will not be

used directly or indirectly for personal, family, household or agricultural

purposes or for the purpose of purchasing or carrying any Margin Stock or for

the purpose of extending credit to others for the purpose of purchasing or

carrying any Margin Stock.

 

        3.07    NO FAILURE TO DISCLOSE. No representation or warranty made by

Borrower under this Agreement and no document, instrument or certificate

furnished, to be furnished or caused or to be caused to be furnished by Borrower

or Guarantor to Lender in anticipation of or pursuant to this Agreement contains

or will contain any untrue statement of a material fact or omits or will omit to

state a material fact necessary to make the statements contained therein not

misleading.

 

                                   ARTICLE IV

                      COVENANTS AND AGREEMENTS OF BORROWER

 

        Borrower hereby covenants and agrees as follows:

 

        4.01    HAZARD AND OTHER INSURANCE. (a) Borrower shall obtain and

maintain the insurance coverage required by EXHIBIT F and any other Loan

Documents and shall furnish to Lender promptly upon request a certificate or

certificates from the respective insurer(s) setting forth the nature and extent

of all such insurance maintained by Borrower and the originals of each insurance

policy (or to the extent permitted by Lender, a certified copy of the original

policy and a satisfactory certificate of insurance) with premiums fully paid.

Any such insurance may be evidenced by blanket insurance policies covering the

Property and other property and assets, provided that each policy otherwise

complies with the requirements of the Loan Documents and specifies the amount

(if less than all) of the total coverage that is allocated to the Property.

Borrower shall not take out separate insurance concurrent in form or

contributing in the event of loss with that required to be maintained hereunder

unless Lender is included thereon under a standard mortgagee clause (without

contribution) acceptable to Lender, with loss payable as provided herein. All

insurance shall be primary without right of contribution from any other

insurance that may be carried by Borrower or Lender and that all of the

provisions thereof shall operate in the manner as if there were a separate

policy covering each insured. Borrower shall immediately notify Lender whenever

any such separate insurance is taken out and shall promptly deliver to Lender

any policy or certificate of such separate insurance. Such insurance shall be in

the form of an all-risk insurance policy meeting the requirements of EXHIBIT F,

which policy is satisfactory to Lender.

 

        (b)     Not later than ten (10) days before the expiration date of any

such insurance policy, Borrower shall deliver to Lender a binder or certificate

of the insurer evidencing the renewal or replacement of that policy, with

premiums fully paid together with (in the case of a renewal) a copy of all

endorsements to the policy affecting the Property and not previously delivered

to Lender, or (in the case of a replacement) an original or certified copy of

the replacement policy. Borrower shall pay all premiums on policies required

hereunder as they become due and payable and promptly deliver to Lender evidence

satisfactory to Lender of the timely payment thereof. Borrower shall at all

times comply with the requirements of the insurance policies required hereunder

and of the issuers of such policies and of any board of fire underwriters or

similar body as applicable to or affecting the Property.

 

        (c)     If Borrower fails to obtain and/or maintain the insurance

required under the Loan Documents, (i) Borrower will indemnify and hold Lender

harmless from and against any damage, loss, liability or expense resulting from

all risks that would have been covered by the required

 

 

CONSTRUCTION LOAN AGREEMENT                                               PAGE 9

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

 

<PAGE>

 

                                                                    Exhibit 99.1

 

 

insurance if so maintained; (ii) if any loss occurs, Lender shall nevertheless

be entitled to the benefit of all insurance covering the loss and held by or for

Borrower, to the same extent as if it had been made payable to Lender; and (iii)

Lender has the right (but not the obligation) to obtain such insurance at

Borrower's expense, which may at Lender's election be coverage for Lender's

interest only, the costs and expenses so expended by Lender shall be due and

payable by Borrower on demand, a part of the Obligation, even if in excess of

the amount set forth in SECTION 2.01, and secured by the Loan Documents. If any

hazard, title, or other insurer becomes insolvent or subject to any bankruptcy,

receivership or similar proceeding or if, in Lender's reasonable opinion the

financial responsibility of such insurer is or becomes inadequate, Borrower

shall promptly obtain and deliver to Lender a like policy (or, if and to the

extent permitted by Lender, a certified copy of the policy or a satisfactory

certificate of insurance) issued by another insurer, which insurer and policy

meet the requirements of the Loan Documents.

 

        (d)     Upon any foreclosure of the Deed of Trust or transfer of title

to the Property in lieu of foreclosure, all of Borrower's right, title and

interest in and to the insurance policies referred to in this Section (including

unearned premiums) and all proceeds payable thereunder shall thereupon vest in

the purchaser at foreclosure or other such transferee to the extent permissible

under such policies.

 

        (e)     Lender has the right (but not the obligation) to make proof of

loss for, settle and adjust any claim under, and receive the proceeds of, all

insurance for loss of or damage to the Property, and the costs and expenses

(including reasonable attorneys' fees), appraisal costs, and consultant fees

incurred by Lender in the adjustment and collection of insurance proceeds shall

be due and payable by Borrower on demand, a part of the Obligation, even if in

excess of the amount set forth in SECTION 2.01, and secured by the Loan

Documents. Lender shall not be, under any circumstances, liable or responsible

for failure to collect or exercise diligence in the collection of any of such

proceeds or for the obtaining, maintaining or adequacy of any insurance or for

failure to see to the proper application of any amount paid over to Borrower.

 

        (f)     Borrower shall take all necessary action, with Lender's consent,

to obtain the benefit of any insurance proceeds lawfully or equitably payable to

Borrower or Lender in connection with any loss of or damage to the Property, all

of which shall be paid directly to Lender, whether or not the security for the

Loan has been impaired or otherwise affected, and applied first to reimburse

Lender and the Trustee for all unreimbursed costs and expenses, including

attorney's fees, incurred in connection with the collection of such proceeds and

the balance of such proceeds shall, at Lender's option in its sole discretion,

be (i) released to Borrower, (ii) applied to repair or restoration, either

partly or entirely, of the Property so damaged, on conditions required by

Lender, or (iii) applied to the payment of the Obligation, whether or not due,

in such order and manner as Lender may elect in its sole discretion. In any

event, the unpaid portion of the Obligation shall remain in full force and

effect and the payment thereof shall not be excused.

 

        4.02    COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS. All Governmental

Requirements shall be timely complied with and evidence thereof delivered to

Lender. 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 for the Plans or any other matter incident

to the Property or the construction of the Improvements.

 

        4.03    CONSTRUCTION CONTRACTS. Borrower shall become party to no

contract, including any Construction Contract, for the performance of any work

on the Property or for the supplying of any labor, materials, or services for

the construction of the Improvements except upon such terms and

 

 

CONSTRUCTION LOAN AGREEMENT                                              PAGE 10

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

 

<PAGE>

 

                                                                    Exhibit 99.1

 

 

with such parties as shall be approved in writing by Lender. Each Construction

Contract shall provide that all liens, claims and charges of Contractor are

subordinate to the Deed of Trust and the Rights of Lender thereunder and shall

require all subcontracts to contain a provision subordinating the

subcontractors' liens, claims and charges to the Deed of Trust and the Rights of

Lender thereunder. Each Construction Contract shall also provide that no change

orders shall be effective without the prior written approval of Lender. No

approval by Lender of any Construction Contract or change order shall make

Lender responsible for the adequacy, form or content of any Construction

Contract or change order.

 

        4.04    UTILITIES; ACCESS. Borrower shall take all steps necessary to

provide that (a) all utility services necessary for the construction of the

Improvements and the operation thereof for their intended purposes are available

for connection to the Improvements, including water supply, storm and sanitary

sewer, drainage facilities, and gas, electric and telephone facilities; and (b)

either all roads necessary for access to and from the Property have been

completed or the necessary rights-of-way therefor have been acquired by the

appropriate Governmental Authority or dedicated to the public use and accepted

by such Governmental Authority, and all necessary steps have been taken by

Borrower and such Governmental Authority to assure the complete construction and

installation thereof prior to the Completion Date.

 

        4.05    CONSTRUCTION OF THE IMPROVEMENTS. The construction of the

Improvements shall be prosecuted 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 commence construction of the Improvements within sixty (60) days from the

date of this Agreement and shall not permit cessation of work for a period in

excess of ten (10) days, except cessation for not more than thirty (30) days in

the aggregate caused by acts of God or other causes not within the control of

Borrower, without the prior written consent of Lender and shall complete

construction of the Improvements on or before the Completion Date, free and

clear of all liens except the lien of the Deed of Trust.

 

        4.06    CORRECTION OF DEFECTS. Borrower shall correct or cause to be

corrected (a) any defect in the Improvements; (b) any material departure in the

construction of the Improvements from the Plans on the Governmental Requirements

or the requirements of any lease, if applicable; or (c) any encroachment by any

part of the Improvements or any structure located on the Land on any building

line, easement, property line, or restricted area.

 

        4.07    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 or the

Property, to be stored on the Land or at such other location as may be approved

by Lender in writing, with adequate safeguards, as required by Lender, to

prevent and insure against loss, theft, damage, or commingling with other

materials or projects. With respect to materials not stored on the Land,

Borrower shall execute and deliver such financing statements and security

agreements as Lender shall require to evidence and perfect Lender's security

interest therein.

 

        4.08    INSPECTION OF THE PROPERTY. Borrower shall permit Lender,

Inspecting Architects/Engineers, any Governmental Authority and their agents and

representatives to enter upon the Property and any location where materials

intended to be utilized in the construction of the Improvements are stored for

the purpose of inspection of the Property and such materials at all reasonable

times.

 

 

CONSTRUCTION LOAN AGREEMENT                                              PAGE 11

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

 

<PAGE>

 

                                                                    Exhibit 99.1

 

 

        4.09    NOTICES BY GOVERNMENTAL AUTHORITY; FIRE AND CASUALTY LOSSES,

ETC. Borrower shall timely comply with and promptly furnish to Lender true and

complete copies of any notice or claim by any Governmental Authority pertaining

to 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. Borrower shall maintain the insurance policies required

hereunder in full force and effect until the Obligation is fully paid and

performed.

 

        4.10    SPECIAL ACCOUNT. Borrower shall maintain a special account with

Lender (with a minimum balance of $1,000.00) into which all Advances (but no

other funds) and excluding direct disbursements made by Lender pursuant to this

Agreement shall be deposited by Borrower and against which checks shall be drawn

only for the payment of (a) costs of labor, materials and services supplied for

the construction of the Improvements specified in the Approved Budget; and (b)

other costs and expenses incident to the Loan, the Property, and the

construction of the Improvements specified in the Approved Budget.

 

        4.11    APPLICATION OF ADVANCES. Borrower shall disburse all Advances

for payment of costs and expenses specified in the Approved Budget and for no

other purpose.

 

        4.12    BORROWER'S DEPOSIT. If from time to time Lender reasonably

determines that the unadvanced portion of the Loan will be insufficient for

payment in full of (a) costs of labor, materials and services required for the

construction of the Improvements; (b) other costs and expenses specified in the

Approved Budget; and (c) other costs and expenses required to be paid in

connection with the construction of the Improvements in accordance with the

Plans, or any Governmental Requirements, then Borrower shall, on request of

Lender, make a Borrower's Deposit with Lender. Lender may advance all or a

portion of Borrower's Deposit prior to any portion of the Loan proceeds.

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 and the unadvanced portion of any

then existing Borrower's Deposit.

 

        4.13    DIRECT DISBURSEMENT AND APPLICATION BY LENDER. Lender shall have

the right, but not the obligation, to disburse and apply directly the proceeds

of any Advance to the satisfaction of any of Borrower's obligations hereunder.

Any Advance by Lender for such purpose, except Borrower's Deposit, 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 and Borrower's

Deposit 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. Borrower hereby assigns and pledges the

proceeds of the Loan and Borrower's Deposit and grants therein a security

interest to Lender for such purposes. Lender may advance and incur such expenses

as Lender reasonably deems necessary to preserve the Property, and any other

security for the Loan, and such expenses shall be secured by the Loan Documents

and payable to Lender upon demand. Lender may disburse any portion of any

Advance at any time, and from time to time, to persons other than Borrower for

the purposes specified in this Section irrespective of any other provision

hereof, and the amount of Advances to which Borrower shall thereafter be

entitled shall be correspondingly reduced.

 

        4.14    COSTS AND EXPENSES. Borrower shall pay when due all costs and

expenses required by this Agreement, including, without limitation (a) all taxes

and assessments applicable to the Property; (b) all fees for filing or recording

any Loan Documents; (c) all fees and commissions lawfully due to brokers,

salesmen and agents in connection with the Loan, or the Property; (d) all

reasonable fees and expenses of counsel to Lender in connection with the

negotiation,

 

 

CONSTRUCTION LOAN AGREEMENT                                              PAGE 12

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

 

<PAGE>

 

                                                                    Exhibit 99.1

 

 

preparation, interpretation, amendment or enforcement of any of the Loan

Documents, the making of any Advance, or any suit to which Lender is a party

involving this Agreement or the Property; (e) all title insurance and title

examination charges, including premiums for the Title Policy; (f) all survey

costs and expenses, including the cost of the Survey; (g) all premiums for the

insurance policies as required hereunder; and (h) all other reasonable costs and

expenses payable to third parties incurred by Lender in connection with the

consummation of the transactions contemplated by this Agreement.

 

        4.15    ADDITIONAL DOCUMENTS. Borrower shall execute and deliver to

Lender, from time to time as required by Lender, such other documents as shall

reasonably be necessary to provide the rights and remedies to Lender granted or

provided for by the Loan Documents.

 

        4.16    FINANCIAL STATEMENTS AND FINANCIAL COVENANTS. Until (i) the

indebtedness represented by the Note and all other obligations and liabilities

of Borrower under this Loan Agreement and the other Loan Documents are fully

paid and satisfied, and (ii) the Lender has no further commitment to lend

hereunder, Borrower will, unless Lender shall otherwise consent in writing,

furnish to Lender the following (the "FINANCIAL STATEMENTS"):

 

        (A)     FINANCIAL STATEMENTS.

 

                (1)     as soon as available, and in any event within ninety

        (90) days after the end of each Borrower's fiscal year, a balance sheet

        and income statement of Borrower as of the end of such Borrower's fiscal

        year, all in form and substance and in reasonable detail satisfactory to

        Lender and duly certified (subject to year-end review adjustments) by

        the President and/or Chief Financial Officer of Borrower (i) as being

        true and correct in all material aspects to the best of his or her

        knowledge and (ii) as having been prepared in accordance with generally

        accepted accounting principles, consistently applied;

 

                (2)     as soon as available, and in any event within ninety

        (90) days after the end of each Guarantor's fiscal year, a balance sheet

        and income statement of Guarantor as of the end of such Guarantor's

        f