CONSTRUCTION LOAN AGREEMENT

 

This Construction Loan Agreement ("Agreement") is made and entered into effective as of May 4 , 2010, by and between THE BANK OF RIVER OAKS (the "Lender") and FIRST STREET HOSPITAL, L.P., a Texas limited partnership (the "Borrower").

 

 

A.          Borrower has applied to Lender for a Loan to aid Borrower in the construction of certain Improvements on the Land (each hereinafter defined).

 

B.          Lender is willing to make the Loan upon the terms and subject to the conditions set forth in this Agreement.

 

 

In consideration of the mutual covenants and agreements herein contained, Lender and Borrower agree as follows:

 

 

1.1        Defined Terms. As used herein, the following terms shall have the respective meanings indicated:

 

A.

Approved Budget - A schedule prepared by Borrower in form and substance reasonably acceptable to Lender, as amended from time to time with Lender's approval, which approval shall not be unreasonably withheld Or delayed, shall reflect the cost of each item or category of work or material required to construct the Improvements, according to the Plans and the approximate dates on which Borrower expects to require advances for such costs and expenses.

 

B.

Architect - An architect or engineer acceptable to Lender.

 

C.

Business Day - Any day other than a Saturday, Sunday, or federal banking holiday upon which Lender is closed.

 

D.

Closing Date - The time of the execution and delivery of this Agreement by Borrower and Lender.

 

E.

Completion Date - On or before the expiration of 12 months from the date of this Agreement.

 

F.

Completion Deposit - An amount (if any) calculated by Lender to equal the difference between (i) the amount which Lender, in the exercise of its reasonable judgment, from time to time determines to be necessary (a) to pay all costs to be incurred in connection with the completion of the development of the Land and the construction, marketing, ownership, management, maintenance, operation and sale of the Improvements in accordance with this Agreement; (b) to pay all sums which may accrue under the Loan Documents prior to repayment of the Indebtedness, including without limiting the generality of the foregoing, interest on the Indebtedness; and (c) to enable Borrower to perform and satisfy all of the Obligations , and (ii) the funds then unadvanced by Lender to Borrower on the Note.

 

P.

Guarantor - DAVID L. BLUMFIELD, M.D.,

MICHAEL CIARAVINO, M.D.,

RIVA LINDA COLLINS, M.D.,

E. LEON ETTER, II, M.D.,

ABDEL FUSTOK, M.D.,

KAARE KOLSTAD, M.D.,

STEFAN W. KRUE7FR,

MARC LABBE, M.D.,

PATRICK C. MCCULLOCH, M.D.,

 

RICHARD G. NIXON, M.D.,

FRANKLIN ROSE, M.D.,

ANTHONY ROTONDO,

TODD SIFF, M.D.,

DAVID E. TOMASZEK,

M.D., KEVIN VARNER, M.D., and

JACOBO VARON, M.D.

 

Q.

Improvements - The improvements described in the Plans.

 

R.

Indebtedness - The principal of, interest on and all other amounts, payments and premiums due under or secured by the Note, the Deed of Trust, and any and all other documents now or hereafter executed by Borrower or any other person or party in connection with the Loan evidenced by the Note.

 

 

T.

Land - The real property described on the attached Exhibit "A".

 

U.

Loan - The loan contemplated by this Agreement as evidenced by the Note, together with all funds advanced by Lender pursuant to any of the Loan Documents,

 

V.

Loan Documents - This Agreement, the Note, Deed of Trust, and any other instrument executed in connection with or as security for the payment of the Indebtedness and/or the performance of the Obligations.

 

W.

Note - The Promissory Note in a form and substance satisfactory to Lender, in the amount of $4,439,150.00, evidencing advances of the amounts contemplated by this Agreement, and all extensions, renewals, modifications, and substitutions thereof.

 

X.

Obligations - Any and all of the covenants, conditions, warranties, representations, and other obligations (other than to repay the Indebtedness) made or undertaken by Borrower, or any other person or party to Lender as set forth in the Loan Documents.

 

Y.

Plans - The final  plans, working drawings, and specifications for the construction of the Improvements on the Land, to be prepared by the Architect, and all amendments and modifications thereof approved by Lender, in the exercise of its reasonable judgment.

 

Z.

Project - The Land and contemplated Improvements.

 

 

 

 

ARTICLE II

COMMITMENT OF LENDER

 

 

 

Advance if such materials are adequately identified by Borrower and assurances are furnished satisfactory to Lender that the security interests created by the Loan Documents has attached and has been perfected as to such materials and there is no other security interests relating to such materials.

 

E.

Excess Costs and Contingencies. In no event shall Lender be required to make any advance for any item in excess of the amount budgeted for such item in the Approved Budget, except as otherwise provided in Section 4.23. Advances for contingencies in the Approved Budget shall be made with the prior written consent of Lender, which consent shall not be unreasonably withheld or delayed, following a written request therefor by Borrower with supporting documentation reasonably required and acceptable to Lender.

 

F.

Unadvanced Proceeds. At no time prior to the final advance shall the unadvanced Loan proceeds, plus the Completion Deposit (if any), be less than the greater of (i) the Retainage (as defined below), or (n) an amount equal to the aggregate of the costs of completing all uncompleted work called for by the Plans, plus the cost of work for which payment is deferred. Wherever such costs, in the reasonable opinion of Lender, exceed the total of the unadvanced Loan proceeds, Borrower will, at the election of Lender (x) within 10 days of notice of such fact, deposit with Lender the Completion Deposit, or (y) pay such excess to the satisfaction of Lender prior to a further advancement of proceeds by Lender.

 

G.

Advancement After Completion Date. Lender shall not be obligated to advance any sums after the Completion Date.

 

H.

Consent of Governmental Authority. Lender shall not be obligated to advance any sums until Borrower has secured certificates evidencing the consent of all Governmental Authority and compliance with all Governmental Requirements to construct the Improvements, including, without limitation, the building permit, to the extent required for construction of the Improvements.

 

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

 

 

 

 

Until the Loan and all other obligations and liabilities of Borrower under this Agreement and the other Loan Documents are fully paid and satisfied, Borrower covenants and agrees with Lender as follows:

 

 

 

A.         All taxes and recording expenses, including stamp taxes, if any.

 

B.          The reasonable fees and expenses of the Inspector (if any), but not more than I inspection per month unless an Event of Default exists.

 

C.

The fees and commissions, if any, lawfully due to brokers in connection with this transaction.

 

D.

The reasonable fees and expenses of counsel for Lender in connection with this Agreement and all transactions pursuant hereto.

 

E.          The Commitment Fee, if any, specified in Article II hereof.

 

 

4.10      Special Account. If requested by Lender, Borrower agrees to maintain a special account with Lender into which all advances under this Agreement (but no other funds other than Completion Deposit) shall be deposited and against which only checks shall be drawn for payment of all bills of labor and materials incident to the construction of the Improvements.

 

4.11      Application of Advances. Borrower shall expend all the proceeds of each advance under this Agreement for the cost of constructi on and completion of the Improvements in accordance with the Plans and Approved Budget. Except as provided in the Approved Budget, no funds advanced by Lender shall ever be used to defray other expenses or items not directly connected with construction costs of the Project.

 

 

 

4.22       Special Conditions. If the construction or use or occupancy of the Land or the Improvements shall, pursuant to any Governmental Requirement, restrictive covenant, or otherwise, be permitted only so long as any special conditions or agreements shall be kept, Borrower will so advise Lender and will cause all such conditions to be continuously fulfilled.

 

4.23       No Material Change in Plans, Approved Budget, or Construction Contracts Without Approval. Borrower will-not make any material change in (a) the Plans (including, but not limited to, the execution of change orders), (b) the Approved Budget, including reallocations of cost items, or (c) the Construction Contracts, without the prior written consent of Lender, provided, however, Lender shall approve reallocations of cost items in the Approved Budget following a written request therefor by Borrower supported by verifiable savings to cost items in the Approved Budget and other documentation reasonably required and acceptable to Lender. For purposes of this Section, a change shall not be considered a material change unless it, alone or together with any other prior change: (i) increases or decreases the contract price for or other costs in respect of construction of the Improvements by more than 5.0%; or (ii) extends or is likely to extend (in the reasonable judgment of Lender) the time within which the Improvements shall be completed beyond the Completion Date. Borrower shall deliver to Lender true and correct copies of all changes, amendments, or supplements to the Plans, Approved Budget, and the Construction Contracts (whether material or not) within 5 days after execution thereof or agreement thereto by the respective parties to such changes.

 

4.24       Cure of Defect. Borrower shall promptly cure any defects in the execution and delivery of any of the Loan Documents.

 

4.25       insurance. Borrower will obtain and maintain, in full force and effect, an owner's and contractor's liability insurance policy or policies (including worker's compensation insurance) and a hazard insurance policy or policies in builder's all risk form, on the completed value, non-reporting Texas Multi-Peril form, premiums prepaid, with loss pa able endorsements reasonably acceptable to Lender insuring the Improvements and all materials and supplies purchased with advances hereunder against all risks and losses, all such insurance policies to be issued by companies, in amounts and on terms approved by Lender in its reasonable discretion. Borrower will additionally provide a fire and extended coverage insurance policy issued by a company reasonably satisfactory to Lender insuring any existing structures or buildings on the Land and the Improvements (upon completion) in a face amount of not less than their full insurable value, containing a loss payable clause in favor of Lender as its interest may appear. If the Land is in an area identified as having special flood hazard, Borrower shall provide Lender with a policy of insurance covering risk of flood, issued under and pursuant to rules and regulations promulgated by the Federal Insurance Administration. Upon request of Lender, Borrower shall provide evidence satisfactory to Lender, including, but not limited to, certificates of insurance indicating that the insurance required herein is in full force and effect.

 

4.26       Completion Deposit. If, in the good faith judgment of Lender, it appears that anytime or from time to time that the unadvanced Note proceeds will be insufficient to (i) pay all costs to be incurred in connection with the development of the Project and the construction, marketing, ownership, management, maintenance, operation, and sale of the Improvements in accordance with this Agreement, (ii) pay all sums which may accrue under the Loan Documents prior to repayment of the Indebtedness, including, without limiting the generality of the foregoing, interest on the Indebtedness, and (iii) enable Borrower to perform and satisfy all of the Obligations, Borrower shall immediately deposit, or shall make arrangements satisfactory to Lender to deposit with Lender, the Completion Deposit. The ,Completion Deposit may be retained by Lender in a non-interest bearing account, need not be segregated from any of Lender's other funds and may be disbursed in accordance with the provisions of the Loan Documents by Lender before making any further advances on the Note.

 

 

4.27       Certificates of Occupancy. Borrower will upon completion of the Improvements obtain a certificate or certificates of occupancy, if available, in form satisfactory to Lender.

 

4.28       Payment of Amounts Owed. All amounts owed by Borrower for the purchase of equipment or other items of personal property incorporated into the Improvements shall be paid in full and Borrower shall not allow any lien or security interest of any kind to be created or filed against the Land, the Improvements or any such personal property of Borrower; provided, however that in the event any lien is filed against the Land and/or Improvements, Borrower shall have the right to contest such lien by bonding around same in accordance with the requirements of the Texas Property Code without being in default hereunder, or as otherwise provided in the Deed of Trust.

 

4.29       Reporting Requirements. Until the Loan and all other obligations and liabilities of Borrower under is Agreement and the other Loan Documents are fully paid and satisfied, Borrower, and each Guarantor to the extent that the stated action or information relates to such Guarantor, will, unless Lender shall otherwise consent in writing, furnish to Lender:

 

A.

Events of Default. As soon as possible and in any event within 5 days after the occurrence of each Event of Default, or each event which, with the giving of notice or lapse of time, or both, would constitute an Event of Default, the statement of Borrower setting forth the details of such Event of Default or event and the action which Borrower proposes to take with respect thereto.

 

B.

Borrower's Monthly. Within 45 days of the last day of each month, the Borrower shall provide financial reports for the Borrower, including, but not limited to, balance sheets, income statements, and accounts receivable aging, acceptable to Lender. An accounts payable aging will not be required.

 

C.

Borrower's Annual. As soon as available and in any event within 90 days after the end of each fiscal year, a CPA reviewed current financial statement of Borrower as of the end of such fiscal year, which financial statement shall contain a balance sheet and income statement.

 

D.

Guarantor's Information. As soon as available and in any event within 60 days after the anniversary of the prior statement furnished to Lender, a current financial statement of each Guarantor for the previous year, which financial statement shall contain a balance sheet, a cash flow statement, and a statement of contingent liabilities.

 

E.

Tax Returns. As soon as available and in any event within 30 days of the filing thereof, a copy of the tax return filed by Borrower and each Guarantor with the Internal Revenue Service and in the event of an extension, verification of the extension filing.

 

F.

Governmental Action. Promptly after the commencement thereof, notice of all material actions, suits, and proceedings before any court or any governmental department, commission or board affecting Borrower or the Project.

 

G.

Evidence of Payment of Obligations. Upon demand of Lender, evidence of payment of all assessments, taxes, charges, levies, liens and claims against the Land.

 

 

 

All references to a preceding period shall mean the period ending as of the end of the month, quarter or fiscal year for which the applicable report is delivered. All references to a period immediately following shall mean the period beginning on the first day of the month, quarter or fiscal year following the end of the period for which the applicable report is delivered. All financial reports furnished to Lender pursuant to this Agreement shall be prepared in such form and such detail as shall be satisfactory to Lender, shall be prepared on the same basis as those prepared in prior years, and duly certified by the reporting party as being true and correct in all material aspects.

 

 

A.

Debt Service Coverage Ratio. Borrower will maintain, as of the last day of each fiscal year beginning with the end of the 1st fiscal year after the date of this Agreement, a ratio of (a) net income after taxes plus (i) depreciation, (ii) amortization, and (iii) other non-cash expenses for the 12 month period ending with such fiscal year to (b) current maturities of long-term debt (principal and interest) for such 12 month period, of not less than 1.25 to 1.00, and supply Lender with a calculation, in form acceptable to Lender, of the Debt Service Coverage Ratio signed by its chief operating officer or equivalent ranking officer.

 

B.

Maintenance of Books and Records. Borrower shall keep records and books of account (including, but not limited to, such records as are necessary to determine compliance with this Agreement) in accordance with generally accepted accounting principles consistently applied and reflecting all transactions of the Borrower.

 

Unless otherwise specified, all accounting and financial terms and covenants set forth above are to be determined according to generally accepted accounting principles, consistently applied.

 

4.31       Primary Operating Account. Borrower shall establish and maintain its primary operating account(s) with Lender.

 

4.32       Automatic Debit. Borrower shall maintain an account with Lender for the auto debit of loan payments on the Loan utilizing the automated clearing house (ACH) System of the Federal Reserve Banks. Borrower acknowledges that (i) that such debit entries may cause an overdraft of any such account which may result in Lender's refusal to honor items drawn on any such account until adequate deposits are made to any such account; (ii) Lender is under no duty or obligation to initiate any debit entry for any purpose; and (iii) if a debit is not made because any such account does not have a sufficient available balance, or otherwise, the payment may be late or past due.

 

4.33       Lock Box. Borrower shall maintain an account with Lender for the deposit of all payments on accounts. All invoices related to Borrower's accounts shall set forth the Lock Box account as the sole address for payment. Lender shall have exclusive and unrestricted access to the Lock Box pursuant to a Lock Box Agreement executed by Borrower and Lender, dated        ,20

 

4.34       Negative Covenants. Borrower will not, without the prior written consent of Lender:

 

 

 

B.

Liquidations; Mergers.; Consolidations. Liquidate, merge or consolidate Borrower with or into any other entity.

 

C.

Sale of Assets. Sell, transfer or otherwise dispose of any of its assets or properties, other than in the ordinary course of business.

 

D.

Liens. Create, incur, or assume any lien or encumbrance on the Project.

 

E.

Loan. Create, incur or assume any Loan for borrowed money or issue or assume any other note, debenture, bond or other evidences of Loan, or guarantee any such Loan or such evidences of Loan of others, other than (i) borrowing from Lender, (ii) borrowing outstanding on the date hereof and disclosed in writing to Lender, and (iii) capital or purchase money obligations not in excess of $100,000.00 in any 12 month period.

 

F.

Distributions. Make or pay any distributions to its partners; provided, however, Borrower may make distributions to each of its partners equal to each such partner's additional federal tax liability attributable to such partner's ownership of partnership interest in Borrower.

 

G.

Government Regulation. (i) be or become subject at any time to any law, regulation, or list of any government agency (including, without limitation, the U.S, Office of Foreign Asset Control list) that prohibits or limits Lender from making any advance or extension of credit to Borrower or from otherwise conducting business with Borrower, or (ii) fail to provide documentary and other evidence of Borrower's identity as may be requested by Lender at any time to enable Lender to verify Borrower's identity or to comply with any applicable law or regulation, including, without limitation, Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318.

 

4.35      Indemnification. Borrower hereby agrees to indemnify and hold Lender harmless from and against any and all loss, cost, damage, claim, and expense incurred by Lender on account of: (i) the violation of any representation or warranty set forth in this Agreement or in the other Loan Documents; (ii) Borrower's failure to perform any obligations of this Agreement or of the other Loan Documents; (iii) any loss, damage, claim, charge, or expense, including reasonable attorneys' fees, resulting from injury or damage to persons or property which may arise in connection with the construction of the Improvements or the use or operation of the Project; (iv) the disbursement of the Loan proceeds, the condition of the Project, or the quality of construction of the Improvements; or (v) Borrower's or the Project's failure to fully comply with all Governmental Requirements, the foregoing indemnifications to survive the closing of the Loan, payment of the Loan, the exercise of any right or remedy under any of the Loan Documents, any subsequent sale or transfer of the Project, and all similar or related evens or occurrences. This indemnity shall not extend to or cover acts of fraud, willful misconduct or gross negligence by Lender.

 

 

As collateral and security for the Loan, Borrower grants, or shall cause the owner thereof to grant to Lender, its successors and assigns, a lien and security interest (which shall be a first and prior lien and security interest therein), in and to the following, together with any and all proceeds thereof:

 

 

 

A.

Borrower represents and warrants that the Construction Manager Agreement and each copy of any Construction Contract furnished to Lender is a true and complete copy thereof and, to Borrower's knowledge, that Borrower's interest therein is not subject to any claim, setoff or encumbrance.

 

B.

Neither this assignment nor any action by Lender shall constitute an assumption by Lender of any obligations under the Construction Manager Agreement or Construction Contracts. Borrower agrees to indemnify and hold harmless against and from any loss, cost liability or expense (including, without limiting the generality of the foregoing reasonable attorney's fees) incurred by Lender and resulting from any failure of Borrower to so perform.

 

C.

Lender shall have the right at any time (but shall have no obligation) upon prior written notice to Borrower (unless an Event of Default exists in which case no notice shall be required), to take, in its name or in the name of Borrower, such action as Lender may at any time reasonably determine to be necessary or advisable to cure any default under the Construction Manager Agreement or Construction Contracts or to protect the rights of Borrower or Lender thereunder. Lender shall incur no liability if any action so taken by it or in its behalf shall prove to be inadequate or invalid, and Borrower agrees to hold Lender free and harmless from any reasonable loss, cost, liability or expense (including, without limiting the generality of the foregoing, reasonable attorneys' fees) incurred in connection with any such action other than such loss, cost, liability, or expense arising out of Lender's gross negligence or willful misconduct.

 

D.

During the existence of an Event of Default, Lender may enforce all rights of Borrower under the Construction Manager Agreement or Construction Contracts; provided, however, Lender shall have no obligation to enforce such rights.

 

E.

Prior to an Event of Default, Borrower shall have the right to exercise its rights as owner under the Construction Manager Agreement or Construction Contracts; provided, however, Borrower shall not cancel or amend the Construction Manager Agreement or Construction Contracts or do, or suffer to be done, any act which would impair the security constituted by this assignment without the prior written consent of Lender, which consent shall not be unreasonably withheld or delayed.

 

F.

This assignment shall inure to the benefit of Lender, its successors and assigns, including any purchaser upon foreclosure of the Land or any grantee under a deed in lieu of foreclosure, any receiver in possession of the Land and any corporation formed by or on behalf of Lender which assumes Lender's rights and obligations under this Agreement.

 

 

 

 

 

C.

To Borrower's knowledge, the Plans are complete and adequate for the construction of the Improvements, and there have been no modifications thereof except as described in such schedule.

 

D.

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.

 

E.

Lender's acceptance of this assignment shall not constitute approval of the Plans by Lender. Lender has no liability or obligations whatsoever in connection with the Plans and no responsibility for the adequacy thereof or for the construction of the Improvements contemplated by the Plans.

 

F.

This assignment shall inure to the benefit of Lender, its successors and assigns, including any purchaser upon foreclosure of the Property or any grantee under a deed in lieu of foreclosure, 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 Agreement.

 

 

Unless waived in writing by Lender, Lender shall not be obligated under the Agreement unless the following conditions shall have first been satisfied and Lender shall have received the following:

 

 

A.

The locations of the perimeter of the Land by courses and distances.

 

B.          All easements and rights-of-way.

 

C.

Evidence that the Land is not located within the 100-year flood plain or within any "wet-lands" as defined by any Governmental Requirements.

 

D.

Encroachments (if any) upon the Land.

 

E.

The relation of the proposed Improvements by distances to the perimeter of the Land, the proposed building lines, the street lines, and points at which utilities are available to service the Land.

 

 

 

ARTICLE VII

CONDITIONS PRECEDENT TO LENDER'S

OBLIGATION TO MAKE ADVANCES

 

 

A.

The representations and warranties made in Article III hereof shall be true and correct in all material respects on and as of the date of the advance with the same effect as ifmade on such date (except for such representations and warranties which expressly relate to an earlier date).

 

B.

There shall be no uncured Event of Default under this Agreement or the Loan Documents.

 

C.

There shall be no change in the state of title to the Land and no survey exceptions not previously approved by Lender have occurred.

 

D.

An Architect's Agreement executed by the Architect, in the form supplied by Lender, affirming, among other items, the Architect's agreement with Lender with respect to the Plans and construction of the Improvements.

 

E.

Borrower shall have delivered to Lender the Approved Budget, Plans, and required insurance as provided in Section 4.25.

 

F.

Lender and the Inspector have received and approved true, legible and correct copies ofthe Plans, the Construction Contracts, and the Approved Budget Each Contractor shall execute a Contractor's Agreement in the form supplied by Lender, confirming, among other items, the Contractor's agreement with Lender with respect to the

 

 

Construction Contract, construction of the Improvements, and advances under this Agreement.

 

 

N.          In case of the last advance, Lender shall have received all of the following:

 

 

 

 

 

 

 

 

 

8.1         Events of Default. The following shall constitute Events of Default hereunder:

 

A.

If Borrower shall fail, refuse, or neglect to pay, in full, any installment or portion of the Indebtedness as and when same is due and payable,

 

B.

If Borrower shall fail to maintain the insurance required by the Loan Documents.

 

C.

If there is a failure to comply with any of the Obligations.

 

D.

If at any time any representation or warranty which has been made by Borrower in this Agreement or in any of the Loan Documents executed in connection herewith is false or incorrect in any Material respect when made or deemed to have been made.

 

E.

If the construction of the Improvements is at any time discontinued or not carried on with reasonable dispatch to such an extent that it is unlikely in Lender's good faith and reasonable judgment that they will be completed by the Completion Date.

 

F.

If the Improvements, in the reasonable judgment of Lender or the Inspector, are not completed on the Completion Date.

 

G.

If Borrower shall (i) apply for or consent in writing to the appointment of a receiver, trustee or liquidator of Borrower, the Land or Improvements or any part thereof, or (ii) file a voluntary petition in bankruptcy, or admit in writing Borrower's inability to pay its or his debts as they come due, or (iii) make a general assignment for the benefit of creditors, or (iv) file a petition or answer seeking reorganization or rearrangement with creditors or taking advantage of any insolvency law, or (v) file an answer admitting the material allegations of a petition filed against it or him in any bankruptcy, reorganization, insolvency or similar proceeding, or if (vi) an order, judgment or decree shall be entered by any court of competent jurisdiction, or by any other duly authorized authority, on the application of a creditor or otherwise, adjudicating Borrower as bankrupt or insolvent or approving a petition seeking reorganization of Borrower or appointing a receiver, trustee or liquidator of the Land or Improvements or of all or any substantial part of the assets of Borrower and if such action is involuntary, such order, judgment or decree shall continue unstayed and in effect for any period of 30 consecutive days.

 

H.

If Lender, Inspector, or their representatives are not permitted at all reasonable times, to enter upon the Land, inspect the Improvements and the construction thereof and all materials, fixtures, and articles used or to be used in the construction and to examine all the Plans.

 

 

I.

If any substantial damage to or destruction of the Land and/or the Improvements shall occur and the insurance proceeds, together with a Completion Deposit made by Borrower, shall not, in the reasonable good faith opinion of Lender, be sufficient to repair and restore the Land and/or Improvements, or if insurance proceeds shall not be paid within a reasonable time.

 

J.

The liquidation, dissolution, merger, or consolidation of Borrower.

 

K.

If any party shall commence any action, suit or proceeding against OT affecting Borrower, or the Land, or involving the validity or enforceability of the Loan Documents or the priority of the liens and/or the security interest created thereby, at law or in equity, or before any Governmental Authority, which in the reasonable judgment of Lender, materially impairs or would materially impair its interest in the Land, the enforceability of the Loan Documents, or its ability to collect when due the Loan.

 

L.

Any material adverse change in the financial condition or results of operation of Borrower since the effective date of any Financial Statement previously furnished to Lender by Borrower has occurred and is continuing.

 

M.

Any default, breach, or failure in performance of any term, condition, warranty, agreement, or covenant of any Guarantor under the terms of any of its obligations to Lender.

 

N.

Any default, breach, or failure in performance of any term, condition, warranty, agreement, or covenant of FIRST STREET HOLDINGS, LTD., or FIRST STREET SURGICAL CENTER, L.P., a Texas limited partnership, under the terms of any of its obligations to Lender.

 

Notwithstanding anything in this Agreement, the Note, or the Loan Documents to the contrary, upon the occurrence of an Event of Default as defined by subparagraph A or B above, Lender shall give Borrower written notice of same and if such Event of Default is not cured within 10 days after the date such notice is given by Lender, Lender may proceed with any of the actions provided in paragraph 8.2 below. Notwithstanding anything in this Agreement, the Note, or the Loan Documents to the contrary, upon the occurrence of an Event of Default other than as specified in subparagraph A or B above, Lender shall give Borrower notice of same, and if such Event of Default is not cured within 30 days after the date such notice is given by Lender, Lender may proceed with any of the actions provided in paragraph 8.2 below; provided, however, if such Event of Default may not be cured within such 30 day period and Borrower is taking all reasonable actions in regard to curing same, Borrower shall be allowed a reasonable time to perform or take such actions required to cure the Default, and Lender shall be advised of the status of all actions being taken by Borrower. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, CONCURRENTLY AND AUTOMATICALLY WITH THE OCCURRENCE OF AN EVENT OF DEFAULT, FURTHER ADVANCES ON THE NOTE SHALL CEASE UNTIL SUCH EVENT OF DEFAULT IS CURED OR LENDER, WITHOUT ANY OBLIGATION TO DO SO, ELECTS TO MAKE FURTHER ADVANCES.

 

 

A.          Cancel this Agreement by written notice to Borrower.

 

 

 

 

ARTICLE IX

GENERAL TERMS AND PROVISIONS

 

 

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. What this means for Borrower: When Borrower opens an account, if Borrower is an individual, Lender will ask for Borrower's name, taxpayer identification number, residential address, date of birth, and other information that will allow Lender to identify Borrower, and, if Borrower is not an individual, Lender will ask for Borrower's name, taxpayer identification number, business address, and other information that will allow Lender to identify Borrower. Lender may also ask, if Borrower is an individual, to see

 

 

 

 

9.10      Non-Usurious Intent. In establishing the charges by Lender to Borrower in connection with this Loan and the services of Lender with respect to the transactions contemplated and mentioned in this Agreement, Borrower provided Lender a schedule estimating the amounts and times of Requests for Advances hereunder, which schedule was used by Lender and Borrower in negotiating the charges for such services and Loan. It is the intention of the parties hereto to conform strictly to all applicable usury laws. Accordingly, notwithstanding anything to the contrary in the Note, this Agreement, any of the other Loan Documents, or any other agreement entered into in connection herewith, it is agreed as follows: (i) the aggregate of all charges which constitute interest under the laws of the State of Texas that are contracted for, chargeable or receivable under the Note, this Agreement, any of the other Loan Documents or otherwise in connection with this loan transaction shall under no circumstances exceed the maximum amount of interest permitted by law, and any excess shall be deemed a mistake in calculation and canceled automatically and, if theretofore paid, shall be either refunded to Borrower or credited on the principal amount of the Note; and (ii) in the event that the maturity of the Note is accelerated by reason. of an election of Lender resulting from an Event of Default under the Note, this Agreement, any of the other Loan Documents, or any Agreement entered into in connection herewith, then earned interest may never include more than the maximum amount permitted by law, and unearned interest, if any provided for in the Note, this Agreement, any of the other Loan Documents or otherwise shall be canceled automatically and, if theretofore paid, shall be either refunded to Borrower or credited on the principal amount of the Note; and (iii) all amounts paid or agreed to be paid in connection with the indebtedness evidenced by the Note which would under applicable law be deemed interest shall, to the extent provided by applicable law, be amortized, prorated, allocated and spread throughout the full term of the Note.

 

 

9_11      Savings Clause. In the event any one or more of the provisions contained in this Agreement, any of the other Loan Documents or in any other instrument referred to herein or executed in connection with or as security for the Note shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement, any of the other Loan Documents or any such other instrument.

 

9.12      Relationship Between Borrower and Lender. Borrower is not a joint venturer, agent or representative of Lender, and Lender shall not be liable to any party asserting a claim against Borrower or against the Land, The rights granted to Lender by Borrower in this Agreement are granted for the protection of Lender's security, and shall not be construed for the benefit of any person not a party to this Agreement.

 

9.13      Waiver of Special Damages. BORROWER WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT BORROWER MAY HAVE TO CLAIM OR RECOVER FROM LENDER IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE, OR CONSEQUENTIAL DAMAGES.

 

9.14      Binding Effect. This Agreement shall inure to the benefit of and be binding upon Borrower and Lender and their respective successors and permitted assigns.

 

9.15      Jury Waiver. BORROWER AND LENDER HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG BORROWER AND LENDER ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENTS. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS.

 

9.16      Imaged Documents. Borrower and all sureties, endorsers, guarantors, and any other party now or hereafter liable for the payment of the Loan, in whole or in part, (i) understand and agree that Lender's document retention policy may involve the imaging of executed Loan Documents, which includes but is not limited to any note, guaranty, deed of trust, security agreement, assignment, financing statement and any other document which evidences any indebtedness owed by Borrower to Lender and/or secures such indebtedness, and the destruction of the paper original, including the original note, and (ii) waive any rights and/or defenses that it may have to the use of such imaged copies of Loan Documents in the enforcement of any of Lender's rights in a court of law or otherwise and/or as to any claim that such imaged copies of the Loan Documents are not originals,

 

9.17      Arbitration. Borrower, Lender and Guarantor agree that all disputes, claims and controversies between them whether individual, joint, or class in nature, arising from this document or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuant to the Rules of the American Arbitration Association in effect at the time the claim is filed, upon request of either party. No act to take or dispose of any Collateral or Property (as defined herein or in any Related Document) securing this document shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, without limitation, obtaining injunctive relief, including but not limited to, a temporary restraining order, temporary injunction or prejudgment writs of garnishment, attachment or sequestration, or a receiver from a court of competent jurisdiction, or -.invoking a power of sale under any deed of trust or mortgage; or exercising any rights relating to personal property, including taking or disposing of such property with or without judicial process pursuant to applicable law. Any disputes, claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral or Property securing this document, including any claim to rescind, reform, or otherwise modify any agreement relating to the Collateral or Property securing this document, shall also be arbitrated, provided however that no arbitrator shall have the right or the power to enjoin or restrain any act of any party such authority being reserved to a court of competent jurisdiction. Judgment upon any award rendered by any arbitrator may be entered and enforced in any court having jurisdiction. Nothing in this document shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be adjudicated in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction, interpretation, and enforcement ofthis arbitration provision. All arbitration proceedings shall be conducted in Houston, Harris County, Texas.

 

 

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the dates of the acknowledgments set forth below, to be effective for all purposes, however, as of the date first above written.

 

Address:	LENDER:
2929 Kirby Drive
Houston, Texas 77098	THE BANK OF RIVER OAKS

	By:	[ILLIGIBLE]
	Name.
	Title:	President
Address:	BORROWER:
4801 Bissonnet
Bellaire, Texas 77401	FIRST STREET HOSPITAL, L.P.
	By:	First Surgical Partners, L.L.C.,
		a Texas limited liability company,
		Its general partner
		By:	/s/ Tony Rotondo
			Tony Rotondo, Member
		By:	/s/ Jacobo Varon
			Jacobo Varon, M.D., Member

 

 

 

0.4521 Acre (or 21,000 square feet) col of Block 3 of the Townshe of Bafeira, in the City of Eatelre, Harris County. Texas, sUcortiing to the plot of avid towesite recorded in Volume 3, Page 59, Hanis County Map Records, and being all of Lots 1, 2 and 3 of said Block and the north half of the adjacent 10 foot Alley described in Quit Claim Dead from the City of Beitaire recorded under Hanle County Cleft File No. 0228250, mkt 0.4821 epos of land being more particularly dosoribcrd as follows:

 

BEGINN0413 ale 5/8" on rod Set for corner al the northeast corner of said Lot 1 on the south right-of-way line of Chestnut Street at he inter-leader, with the wad right-of-way dna of Firsi Shoe!, 60.660 feel wide, and located 0,80 foot south of a found 5/8" iron rod with cap:

 

THENCE South in part With the east line of said Lot 1 and with said weal rigla-ofway Una, at 185,00 Feat 'PBS the southeast corner of said Lot and oorilleuing a total of 140.00 feet to a 513' lion rod 4al for comer on the centerline of said и

 

THENCE West with the centerrine of said obey 180.00 feet to a 818" ken rod set for corner,

 

THENCE North, at 5.00 feel pass The southwest corner of Lot 3 and the southeast corner of La 4. arid -continue a total distance of 140.00 feet ton 6/8' iron rod net for corner at the northwest corner of Lo13 and the northeast corner of Lot 4 en the south right-of-way line of Chestnut Street, cold from which a found 5/8' iron rod Wit, cap boors North 0,18 fool and Wert 0.18 foot

 

THENCE East with the north fine  of Lots 3, 2 end t and with said south tight-of-way line 150.00 feet to the MACE OF BEGINNINt3.

 

TRACT 2:

 

0.1803 Acre Or 8,248 square feet) out of Block 2 of the Townsite of Beiteina. in the Oily of Bellaire, Harris County. Texas, according to the plat of said lownsite recordod In Volume 3, Rage 58, .1-Ionia County Mari Records, and being all of Lot 28 and part of Lot 26 of said Block, said 0.1583 acre of lend being more particularly descrled as fellows:

 

BES1NNIN5 ate 578" kon rod set for corner at the southeast comer of said Lot 25 on the north rfght-of-Wey fine ot Chestnut Street at its intersection Kith the west right-of.way lire of First Skeet, both 60 feet wide:

 

THENCE West with the south line of Lot 25 and said north right-cf-Way line 50.00 feet to a 518- iron rod set ler corner at the southwest corner of Lot 25 end the southeast comer of Lot

 

'THENCE North, in past wit, the west line of Lot 26 end the east lire of Lot 24, at 136.03 feet pass the northwest corner of Lot 25 and the northeast comer of Lot 24 on the south line of Lot 26, and continue a total distance of 150.64 feet to on "X' matt cur one conorele walk for corner on the south right-of-way Ilnit of Biesonrsa Street from which another 'X" mark found on said walk bears South 8.70 foal and West 0.17 foot

 

THENCE North Ur 18' 30" East along said concrete walk with said south 44A-of-way Ng 07-59 feet to an "X" mark cut on said walk for corner at the` northeast corner of Lot 28 at the intersection of said south right-of-way line with the west right-of-way line of First Street, from which another 'X' mark found on said walk bears ...outh 0.88 tent and West 0.17 fool;

 

roam nr- Crereltnekl.rnhelm,...

 

THENCE South with the oast gee of Let 26 and Let 25 and with said west rtghl-of-way ffne, at 44.10 feel pass the southeast comer of Lot n and the northeast corner of Tract 2: end co ritinufng a total disianoe of 1700 feel lc the PLACE Off BEGINNING.

 

TRACT 3

 

Rights regarding an overbroad walkway or pedestrian bridge above that certain 2,330 square foot portion of Crmsinart Street between Block 2 and Block 3 of the Townstle of Bellaire, Haute County, Texas, described in that certain Consent to Encroachroent eicsontad by the City of B lidiaire to Jacobs. Varon, Trusts* and First Street Holdings, Ltd.. recorded Mat Heals County Clorles fie No. Y820021; said 2,300 square fool trent being doscrihnd below;

 

2380 SqUare Feet of land, being a strip of land 30,61 feel wide across the sixty fool wide right-of-way of Chestnut Street between Block 2 and Block 3 of the Townsite of Bellaire, plat of which is recorded In Volume 3, Page 50, Harris County Map R000tds, beirig in the city ofIn Harris County, Texas. said strip of

 

tend being more particularly described as folioun:

 

BEGINNING at a point on the north right.ol-way Yee of Chestnut Street end the south fine of said Block Z from which the solgt1P.4.9/ corner of Block 2 at the in bp Mi. Dilari of sa kl north right-or-way tine with the west right-of-way arta of First Streel beers East 10.00 feat;

 

THENCE South across Chestnut Street 60,00'feet to a paint for corner on the south right-of-way line of Chestnut Street and the north line of said Bieck 3, from which the northeast corner of Block 3 at the Intenseetton of said south right-of-way lkiewith saki west right-of-way line of First Street beets East 10.00 feet

 

THENCE Watt with raid south right-of-way line 30.67 foot to a point for comer.

 

THENCE North across Chestnut Snot:4.60M feet to a point for corner on a td north tight-of.wsy line erre the south lino of Block 2;

 

THENCE East with cad line 35.67 feet to the PLACE OF BEGihfILING.