The following sample reimbursement agreement between jointly liable parties was negotiated between a subdivision developer and a home builder. The subdivision developer and its principals agreed to guarantee a third-party loan from a development lender to a home builder and its principal. These parties also entered into a separate builder’s agreement pursuant to which the subdivision developer sold a lot in the subdivision to the builder and the seller financed the lot. The subdivision developer and home builder agreed in the builder’s agreement to split profit from the sale of the completed house in accordance with percentages that varied depending on the profit obtained.
Note: When preparing this form, the attorney should carefully review Tex. Prop. Code §§ 51.0001, 51.0025, and 51.0075 and Tex. Bus. & Com. Code §§ 3.203 and 3.301 to ensure any reference to a person accurately describes the role the person holds or performs in the context of a foreclosure proceeding, e.g., references to “noteholder,” “beneficiary,” “owner,” “lender,” “obligor of the debt,” “mortgagor,” “mortgagee,” or “mortgage servicer” as appropriate.
Agreement Regarding Liability
This Agreement Regarding Liability is made and entered into by and between [name of developer] (“Subdivision Developer”) and [name of owner], a principal owner of the Subdivision Developer (jointly and severally, “Subdivision Developer Parties”), and [name of corporation], a Texas corporation, and [name of builder] (jointly and severally, “Home Builder Parties”). The Subdivision Developer Parties and the Home Builder Parties are herein collectively referred to as “Co-Obligors” and individually as a “Co-Obligor.”
A.Recitals
1.One or more of the Subdivision Developer Parties and one or more of the Home Builder Parties will sign as maker, borrower, or guarantor a promissory note, loan agreement, and/or guaranty regarding certain indebtedness to [name of lender] or other lender mutually acceptable to the Subdivision Developer Parties and the Home Builder Parties (lender, together with its successors and assigns, “Development Loan Lender”) in the approximate principal amount of up to $[amount]. The principal amount and indebtedness evidenced by the foregoing loan documents may be renewed, extended, modified, or increased (the “Development Loan”) regarding the construction, development, and marketing of a residence on the Lot referenced in the Builder’s Agreement, which is incorporated by reference (capitalized terms used in this Agreement will have the meaning given to such terms in the Builder’s Agreement).
2.In connection with the Development Loan, the Co-Obligors have agreed between themselves as to their respective liabilities for amounts coming due regarding the Development Loan and their associated agreements.
3.In connection with the sale of the Lot as improved by Builder with a single-family residence (the “Improved Property”) and execution of an accompanying Builder’s Agreement, the Co-Obligors have agreed between themselves as to their respective liabilities for amounts coming due in connection with such agreements.
B.Agreements
In consideration of the mutual obligations set forth below, the parties agree as follows:
1.Obligations. Subdivision Developer Parties agree to satisfy 50 percent and Home Builder Parties agree to satisfy 50 percent of (a) all liabilities payable under the Development Loan; (b) all costs, expenses, taxes, insurance, liabilities, and other amounts payable in connection with the property or the construction of the improvements as anticipated by the Builder’s Agreement; and (c) all other obligations arising in connection with the project defined in the Builder’s Agreement (such liabilities being collectively referred to as the “Obligations”), if, as, and when such obligations are required to be paid under the terms of the obligations. Each Co-Obligor agrees to satisfy such Obligations within the time required under any related instrument or by any time prescribed by law or under prudent business practice and agrees to hold harmless and indemnify the other Co-Obligors for failure to satisfy such parties’ pro rata share of such Obligations.
2.Failure to Make Contributions. If any Co-Obligor fails to contribute its proportionate share of the money needed to satisfy the Obligations within the time required to do so, the other Co-Obligors, or such of them as elect to do so, will have the right (but not the obligation) to contribute the defaulting Co-Obligor’s share of the additional money needed (such defaulting Co-Obligor being referred to as the “Defaulting Co-Obligor”). The Co-Obligor electing to contribute the share of the Defaulting Co-Obligor will have the right to contribute the same in such proportions as they agree among themselves or, in the absence of any such agreement, in proportion to their Co-Obligor interests (a Co-Obligor who makes such contribution being referred to as the “Contributing Co-Obligor”).
3.Obligation by Defaulting Co-Obligor to Contributing Co-Obligor. The amounts contributed by a Contributing Co-Obligor to satisfy the obligations of the Defaulting Co-Obligor will, upon contribution by the Contributing Co-Obligor, be immediately due and payable by the Defaulting Co-Obligor to the Contributing Co-Obligor. The Defaulting Co-Obligor agrees to pay to the order of the Contributing Co-Obligor such amounts as were contributed by the Contributing Co-Obligor, and such amount will bear interest from the date contributed by the Contributing Co-Obligor to the date repaid at the rate of 10 percent per year.
4.Right to Action. In addition to any remedies that may be available at law or in equity, each Co-Obligor grants to the other Co-Obligor a right to bring any Defaulting Co-Obligor into any action or suit instituted in connection with collection of any amounts under any note, guaranty, or other loan document executed in connection with the Development Loan. If any Co-Obligor is required to pay more than its stated share of the amounts due under any note, guaranty, or other loan document executed in connection with the Development Loan, that Co-Obligor will have the right to immediately seek recourse against the defaulting Co-Obligor for all such amounts and other amounts due.
5.Right of Subrogation. In addition to any remedies that may be available at law in equity or by this Agreement, any Co-Obligor advancing any amounts as maker, guarantor, or other form of obligor under the Development Loan in excess of that Co-Obligor’s percentageunder paragraph 1. above will be fully subrogated to the rights and liens of the Development Loan Lender.
6.Preexisting Relationship. It is expressly recognized and acknowledged that the parties to this Agreement have a prior relationship and that the note, guaranty, or other loan document executed in connection with the Development Loan was undertaken in part in consideration of the agreements set out herein. The parties to this Agreement acknowledge and agree that it is their intent and agreement that the Co-Obligors be responsible for, and only for, such parties’ stated share of the liability arising under the note, guaranty, or other loan document executed in connection with the Development Loan.
7.Indemnity. Each Co-Obligor agrees to exonerate, indemnify, pay and protect, defend, and save the other Co-Obligor harmless from and against any claims, actions, judgments, damages, liabilities (including amounts paid in settlement of claims), interest, or losses, including reasonable attorney’s fees and expenses (including fees and expenses incurred in enforcing this Agreement or collecting any amounts due), together with all other costs and expenses of any kind or nature (collectively, the “Costs”) that arise directly or indirectly from or in connection with the failure of the indemnifying party to satisfy that party’s part of the Development Loan.
8.Notice. On any demand or other request for performance under the Guaranties, the party so notified will promptly give the other party a copy of the notice. The parties will then endeavor to jointly provide for contemporaneous payment of each of their portions.
9.Development Loan. If one or more of the parties to this Agreement acquires the Development Loan (the “Acquiring Party”) and/or purchases or acquires the property (the “Property”) securing the Development Loan pursuant to foreclosure of the liens securing the Development Loan or deed in lieu thereof, the parties to this Agreement agree that the parties’ obligations under the Builder’s Agreement and this Agreement will survive and are not released, excused, or waived thereby. The Acquiring Party acquiring the Development Loan will proceed first to realize on the Property securing the Development Loan by way of foreclosure or deed in lieu of foreclosure, and on obtaining title to the Property will manage, maintain, market, and liquidate the Property as a commercially reasonable person with the Net Sales Proceeds derived from the sale of the Property being distributed between the parties as provided in the Builder’s Agreement. Funds advanced by the Acquiring Party to purchase the Property are agreed by the parties to be an advance as a Contributing Co-Obligor pursuant to paragraph 3. above. The parties will, on liquidation of the Property securing the Development Loan, apply the proceeds first to any amounts due under paragraph 3. above, next on the Development Loan, and the remainder in the manner set forth in the Builder’s Agreement. In the event that the proceeds of the sale of the Property are insufficient to pay the amounts due under the Development Loan, the parties will contribute any additional funds required to pay the amounts due under the Development Loan as set forth in paragraph 1. above. On the acquisition of the Development Loan by an Acquiring Party, the Property will be liquidated prior to any party’s seeking collection under the Development Loan Note or Guaranty regarding the Development Loan.
10.Priority. This agreement will take priority over all other agreements between the parties regarding their percentages of liability.
Dated [date].
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Include appropriate signatures. |
[Name of developer]
[Name of owner]
[Name of corporation]
[Name of builder]