Additional Clauses for Loan Agreements
Capital Expenditures
Borrower will not make any expenditures for fixed assets in excess of [amount] dollars ($[amount]) in any [fiscal/calendar] year. “Fixed assets” means tangible property that has a useful life in excess of [number] years.
Working Capital
Borrower will maintain at all times an excess of current assets over current liabilities of not less than [amount] dollars ($[amount]). “Current assets” means the sum of Borrower’s cash, marketable securities, and other similar assets that are reasonably expected to be converted into cash or applied within twelve months of the date of determination. “Current liabilities” means the sum of all money owed by Borrower that is payable on demand or within twelve months of the date of determination.
Liquidity Ratio
Borrower will at all times maintain a ratio of the sum of cash and marketable securities to current liabilities of not less than [number] to 1. “Current liabilities” means the sum of all money owed by Borrower that is payable on demand or within twelve months of the date of determination.
Current Ratio
Borrower will maintain at all times a ratio of current assets to current liabilities of not less than [number] to 1. “Current assets” means the sum of Borrower’s cash, marketable securities, and other assets that are reasonably expected to be converted into cash or applied within twelve months of the date of determination. “Current liabilities” means the sum of all money owed by Borrower that is payable on demand or within twelve months of the date of determination.
Debt Service Coverage
Borrower will maintain a ratio of net operating income to debt service for the [calendar/fiscal] year of not less than [number] to 1. “Net operating income” means gross income less operating expenses. “Debt service” means principal and interest payments on all debts with a maturity in excess of one year.
Loan-to-Value Ratio
Borrower will maintain a loan-to-value ratio on the [Collateral/Real Property/Personal Property] of [ratio] or less. The value of the [Collateral/Real Property/Personal Property] shall be the fair market value of the [Collateral/Real Property/Personal Property] as determined by [Lender/an appraisal acceptable to Lender]. “Loan” means the principal of any indebtedness secured by a [lien/security interest] on the [Collateral/Real Property/Personal Property].
Conditions to Lender’s Obligations to Make Loan Advances
G. Conditions to Lender’s Obligations to Make Loan Advances
Lender is not obligated to make any advance, including any after the first advance, of loan proceeds hereunder unless the following conditions have been satisfied, with proof provided in a form and sufficiency as Lender may reasonably request:
G.1. Lender must have received and approved (a) copies of the Plans and Specifications for the construction of the improvements on the Real Property (the “Improvements”) (the “Plans”), any leases of personal property to be used in the construction of the Improvements (the “Equipment Leases”), any contracts between Borrower and contractors and subcontractors for the construction of the Improvements (the “Construction Contracts”), and any contracts between Borrower and any architects and engineers responsible for drafting the Plans (the “Architect’s Agreement”) that may be requested by Lender; (b) all presently procurable authorizations and permits required by any federal, state, or local governmental authority (a “Governmental Authority”) for the construction of the Improvements, including those required for the use and operation of the Real Property and the Improvements (the “Property”) for the purposes contemplated by the Plans; (c) a current title report from the Title Company describing the Real Property with attached copies of all instruments that appear as exceptions in the report; (d) an original current survey of each lot certified to Lender and the Title Company showing the locations of the perimeter of each lot within the Real Property by courses and distances, all easements and rights-of-way (identified as recorded in public records), the proposed building lines, the lines of the streets abutting the Real Property and the width thereof, encroachments, and the extent thereof in feet and inches upon the Real Property, the relation of the proposed Improvements by distances to the perimeter of the Real Property, the proposed building lines and the street lines, and if the Real Property is described as being on a filed map or plat, a legend relating the survey to the map or plat; (e) financial statements of Borrower; (f) advice from an architect or civil engineer and, if Lender elects, an independent architect or civil engineer approving the Plans and indicating that the construction contracts are acceptable and satisfactorily provide for the construction of the Improvements; (g) the policies of insurance required by the Deed of Trust and this Agreement accompanied by evidence of the payment of the policies’ premiums; (h) a satisfactory “As Built” appraisal of the Improvements proposed for each lot in the Property; (i) Assignment of Architect’s Agreement and consent of the architect; and (j) assignment of the Construction Contract and consent of the architect.
G.2.The Deed of Trust must have been executed by the parties to this Agreement and recorded in the office of the county clerk of each county in which any part of the Real Property is located, with all filing fees paid, all before commencement of any construction on any part of the Property and the placing of any material or equipment on the Property.
G.3.Lender must have received financing statements with proof of filing in the appropriate offices in the State of Texas and, if applicable, in other jurisdictions, and other things and instruments necessary or appropriate in the opinion of Lender to perfect a security interest in the property covered by the Deed of Trust in accordance with the Texas Uniform Commercial Code, and Lender must have received proof that no prior financing statements from Borrower as debtor or from any other party affecting any of the Property have been filed in any such office in favor of any other party.
G.4.Lender must have received the Title Insurance showing the lien on the owner’s interest in favor of Lender as holder of the Note, to be valid, first, and prior lien on the Real Property free and clear of all defects and encumbrances except as Lender approves. The Title Insurance must not contain any survey exceptions not already approved by Lender, and the status of title to the owner’s interest shown therein shall otherwise be satisfactory to Lender.
G.5. The representations and warranties made in section B of this Agreement shall be true and correct on the date of the advance with the same effect as if made on that date.
G.6. There must be no default under this Agreement, the Note, or any of the Loan Documents.
G.7. Lender must have received the Note, Deed of Trust, and Loan Documents, all properly executed by the respective parties thereto.
G.8. An endorsement to the title policy or affidavit acceptable to Lender must state that there has been, as of the date of the requested advance, no change in the state of title and no survey exceptions not previously approved by Lender.
G.9. The Improvements, to the extent any have been made before the date of the advance, must not have been materially injured or damaged by fire or other casualty unless Lender has received insurance proceeds sufficient in the judgment of Lender and, if Lender elects, an independent supervising architect, to effect the satisfactory restoration of the Improvements and to permit their completion before the completion date.
G.10. Lender must have received (a) a proper request for advance from Borrower; (b) if construction has been performed before the advance, advice from an architect or inspector providing the opinion that the construction of the Improvements was performed in accordance with the Plans; (c) for advances after the first advance, a copy of a valid building permit issued for the Improvements; and (d) for advances after the first advance, Lender must have received (i) a notice of title continuation or an endorsement of the Title Insurance already delivered indicating that since the last preceding advance, there has been no change in the state of title and no survey exceptions not already approved by Lender, which endorsement shall have the effect of increasing the coverage of the Title Insurance by an amount equal to the advance then being made if the Title Insurance does not by its terms provide for such additional coverage without such an endorsement, and (ii) a forms or foundation survey satisfactory to Lender in its sole and absolute discretion.
G.11. All legal matters incident to this Agreement and the transactions contemplated by it must be satisfactory to counsel to Lender.
G.12. Lender must have received executed affidavits of contractor and Borrower duly and truthfully subscribed and sworn to evidencing any matter that Lender has requested.
[G.13. Lender, if it so requests, must have received one or more photographs of the Property taken on or after the date of the filing of the Deeds of Trust and, if on the date of the filing, on or after the time of the filing. The photograph(s) must clearly show that there has not been actual commencement on the Property or any delivery of material to the Property. The photograph(s) must be signed on the back by the photographer for identification to an accompanying affidavit, and each photograph must include on its back the photographer’s written description of the general area of the Property shown in the photograph and of the location from which the photograph was taken. The accompanying affidavit must be sworn and subscribed to by the photographer and certify that the photograph(s) were taken of the Property by the photographer at the date and time or times stated in the affidavit. Borrower shall pay the expenses of satisfying this condition.]