<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________to_________________.
Commission File Number 1-5899
U.S. HOME CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 21-0718930
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1800 West Loop South, Houston, Texas 77027
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 877-2311
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES X NO
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under
a plan confirmed by a court. YES X NO
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at October 31, 1995
Common stock, $.01 par value 11,233,950 shares
<PAGE> 2
U.S. HOME CORPORATION
INDEX
Page
Number
------
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets--
September 30, 1995 and December 31, 1994 3
Consolidated Condensed Statements of Operations--
Three and Nine Months Ended
September 30, 1995 and 1994 5
Consolidated Condensed Statements of Cash Flows --
Nine Months Ended September 30, 1995 and 1994 6
Notes to Consolidated Condensed Financial
Statements 7
Review by Independent Public Accountants 10
Report of Independent Public Accountants 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Part II. Other Information
Item 2. Changes in Securities 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 17
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
U.S. HOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
ASSETS
------
September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
HOUSING:
Cash (including restricted funds) ........... $ 1,647 $ 1,148
Receivables, net ............................ 52,017 27,471
Single-family housing inventories ........... 629,434 576,779
Option deposits on real estate .............. 57,990 53,621
Deferred tax asset .......................... -- 13,727
Other assets ................................ 43,242 41,869
--------- ---------
784,330 714,615
========= =========
FINANCIAL SERVICES:
Cash (including restricted funds) ........... 4,731 5,567
Residential mortgage loans .................. 44,642 24,672
Other assets ................................ 7,103 8,349
--------- ---------
56,476 38,588
--------- ---------
$840,806 $ 753,203
========= =========
The accompanying notes are an integral part of these balance sheets.
<PAGE> 4
U.S. HOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollars in Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
September 30, December 31,
1995 1994
------------ -----------
(Unaudited)
HOUSING:
Current Liabilities -
Short-term debt $ 46,644 $ 8,642
Current maturities of long-term debt 11,912 10,572
Accounts payable 85,114 85,581
Accrued expenses and other
current liabilities 48,561 40,497
-------- --------
192,231 145,292
Long-Term Debt 288,887 292,666
-------- --------
481,118 437,958
-------- --------
FINANCIAL SERVICES:
Current Liabilities -
Short-term debt 21,628 10,014
Accrued expenses and other
current liabilities 20,272 12,733
-------- --------
41,900 22,747
Long-Term Debt - 1,034
-------- --------
41,900 23,781
-------- --------
Total Liabilities 523,018 461,739
-------- --------
STOCKHOLDERS' EQUITY:
Convertible Preferred Stock, $25 per share
redemption value, authorized 412,221
and 602,133 shares at September 30, 1995
and December 31, 1994, outstanding
327,878 and 518,772 shares at
September 30, 1995 and December 31, 1994 8,197 12,969
Common Stock, $.01 par value, authorized
50,000,000 shares, outstanding
11,233,950 and 10,909,860 shares at
September 30, 1995 and December 31, 1994 112 109
Capital In Excess of Par Value 348,356 340,673
Unearned Compensation on Restricted Stock (2,383) -
Retained Earnings (Deficit) (36,494) (62,287)
-------- --------
Total Stockholders' Equity 317,788 291,464
-------- --------
$840,806 $753,203
======== ========
The accompanying notes are an integral part of these balance sheets.
<PAGE> 5
U.S. HOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1995 1994 1995 1994
--------- --------- --------- ---------
HOUSING:
<S> <C> <C> <C> <C>
Operating Revenues .................. $ 282,422 $ 252,553 $ 798,113 $ 712,696
--------- --------- --------- ---------
Operating Costs and Expenses -
Cost of products sold ............. 237,900 211,597 671,910 597,402
Selling, general and administrative 29,920 27,214 87,312 78,691
--------- --------- --------- ---------
267,820 238,811 759,222 676,093
--------- --------- --------- ---------
Housing Operating Income ............ 14,602 13,742 38,891 36,603
--------- --------- --------- ---------
FINANCIAL SERVICES:
Operating Revenues .................. 4,286 3,287 11,075 9,530
--------- --------- --------- ---------
Operating Costs and Expenses -
General and administrative ........ 2,862 2,713 8,247 8,165
Interest .......................... 283 108 449 428
--------- --------- --------- ---------
3,145 2,821 8,696 8,593
--------- --------- --------- ---------
Financial Services Operating
Income ............................ 1,141 466 2,379 937
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES ............ 15,743 14,208 41,270 37,540
PROVISION FOR INCOME TAXES ............ 5,904 4,978 15,477 14,077
--------- --------- --------- ---------
NET INCOME ............................ $ 9,839 $ 9,230 $ 25,793 $ 23,463
========= ========= ========= =========
INCOME PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary .......................... $ .83 $ .81 $ 2.22 $ 2.05
========= ========= ========= =========
Fully diluted .................... $ .72 $ .70 $ 1.91 $ 1.77
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE> 6
U.S. HOME CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
Nine Months Ended
September 30,
-----------------------
1995 1994
---------- ----------
Net Cash Used by Operating Activities ....... $ (42,963) $ (16,208)
---------- ----------
Net Cash Flows From Investing Activities:
Purchase of property, plant and equipment,
net of disposals ........................ (1,920) (1,221)
Proceeds from investments in mortgages .... 1,386 949
Decrease (increase) in restricted cash .... (264) 244
Other ..................................... (666) (436)
---------- ----------
Net cash used by investing activities ..... (1,464) (464)
---------- ----------
Net Cash Flows From Financing Activities:
Proceeds from short-term debt, net of
repayment ............................... 49,616 6,431
Long-term debt assumed .................... -- 1,037
Repayment of long-term debt ............... (5,790) (5,009)
---------- ----------
Net cash provided by financing activities ... 43,826 2,459
---------- ----------
Net Decrease in Cash ........................ (601) (14,213)
Cash At Beginning of Period ................. 2,050 15,829
---------- ----------
Cash At End of Period ....................... $ 1,449 $ 1,616
========== ==========
Supplemental Disclosure:
Interest paid, before amount capitalized -
Housing ................................. $ 18,026 $ 16,761
Financial Services ...................... 403 468
---------- ----------
$ 18,429 $ 17,229
========== ==========
The accompanying notes are an integral part of these statements.
<PAGE> 7
U.S. HOME CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1995
(Unaudited)
(1) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accompanying consolidated condensed balance sheet as of
December 31, 1994, which has been derived from audited financial
statements, and the accompanying unaudited consolidated condensed
financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
those rules and regulations. Although the Company believes that the
disclosures made are adequate to ensure that the information
presented is not misleading, it is suggested that these
consolidated condensed financial statements should be read in
conjunction with the financial statements and notes thereto
included in the Company's latest Annual Report on Form 10-K.
In the opinion of the Company, the accompanying consolidated
condensed financial statements contain all adjustments (all of
which were normal and recurring adjustments) necessary to present
fairly the Company's financial position as of September 30, 1995
and December 31, 1994 and its results of operations for the three
and nine month periods ended September 30, 1995 and 1994 and cash
flows for the nine month periods ended September 30, 1995 and 1994.
Because of the seasonal nature of the Company's business, the
results of operations for the three and nine month periods ended
September 30, 1995 and 1994 are not necessarily indicative of the
results for the full year.
(2) INVENTORIES
The components of single-family housing inventories are as follows:
September 30, December 31,
1995 1994
------------ ----------
(Dollars in Thousands)
Housing completed and under construction .... $253,107 $224,870
Models ...................................... 57,064 47,914
Finished lots ............................... 111,737 118,508
Land under development ...................... 53,485 60,809
Land held for development or sale ........... 154,041 124,678
-------- --------
$629,434 $576,779
======== ========
<PAGE> 8
(3) SHORT-TERM DEBT
Short-term debt consists of the following:
September 30, December 31,
1995 1994
------------- ------------
(Dollars in thousands)
Housing -
Revolving credit agreement ............ $ - $ -
Revolving working capital facility .... 44,939 7,553
Other short-term debt ................. 1,705 1,089
-------- --------
46,644 8,642
Financial Services ..................... 21,628 10,014
-------- --------
Total short-term debt ................ $ 68,272 $ 18,656
======== ========
On September 29, 1995, the Company entered into a three year
unsecured revolving credit agreement (the "Credit Agreement") with
a group of banks, which on October 5, 1995, replaced the secured
revolving working capital facility when all amounts outstanding
under that facility were repaid. The Credit Agreement enables the
Company to borrow up to a maximum of $130,000,000 of which up to
$20,000,000 may be used for letter of credit obligations, subject
to a borrowing base limitation. At September 30, 1995,
approximately all of the Credit Agreement commitment would have
been available for borrowing. Borrowings under the Credit Agreement
bear interest at a premium over the Eurodollar rate or a bank
corporate base rate. The Credit Agreement expires on September 29,
1998, but may be extended annually for successive one year periods
with the consent of the banks and contains numerous real estate and
financial covenants, including restrictions on incurring additional
debt, creation of liens and the levels of land and housing
inventories maintained by the Company and a prohibition on the
payment of dividends, other than stock dividends.
Financial services short-term debt consists of an agreement with a
financial institution whereby the Company's mortgage banking
subsidiary, U.S. Home Mortgage Corporation ("Mortgage"), may borrow
up to $35,000,000 under a revolving line of credit (the "Mortgage
Credit Facility") secured by residential mortgage loans. The
Mortgage Credit Facility, which is not guaranteed by the Company,
was amended and renewed on August 31, 1995 under substantially the
same terms and conditions as the previous agreement, matures on
August 31, 1996 and bears interest at a premium over the London
Interbank Offered Rate.
<PAGE> 9
(4) LONG-TERM DEBT
Long-term debt consists of the following:
September 30, December 31,
1995 1994
------------- ------------
(Dollars in Thousands)
Housing -
Notes and mortgage notes payable $ 20,799 $ 23,238
9.75% Senior notes due 2003 200,000 200,000
4.875% Convertible subordinated
debentures due 2005 80,000 80,000
-------- --------
300,799 303,238
Less - Current maturities (11,912) (10,572)
-------- --------
288,887 292,666
Financial Services - 1,034
-------- --------
Total long-term debt $288,887 $293,700
======== ========
(5) HOUSING INTEREST
A summary of housing interest for the three and nine month periods
ended September 30, 1995 and 1994 follows (dollars in thousands):
Three Month Period
-----------------------
1995 1994
--------- ---------
Capitalized at beginning of period $ 57,638 $ 55,204
Capitalized 8,375 7,635
Included in cost of sales (6,604) (7,439)
Included in other (1) -
-------- --------
Capitalized at end of period $ 59,408 $ 55,400
======== ========
Nine Month Period
----------------------
1995 1994
--------- ----------
Capitalized at beginning of period $ 56,082 $ 55,580
Capitalized 24,172 22,907
Included in cost of sales (20,335) (21,635)
Included in other (511) (1,452)
-------- --------
Capitalized at end of period $ 59,408 $ 55,400
======== ========
<PAGE> 10
(6) INCOME PER SHARE
The following weighted average number of common and common
equivalent shares were used to compute income per share for the
three and nine month periods ended September 30, 1995 and 1994:
Three Month Period Nine Month Period
----------------------- -----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
Primary 11,908,385 11,373,744 11,607,984 11,430,981
Fully diluted 14,250,376 13,627,265 14,267,372 13,684,502
The weighted average number of common and common equivalent shares
outstanding for primary income per share includes the dilutive
effect of the convertible redeemable preferred stock and Class B
warrants and the assumed exercise of stock options. However, no
effect was given to the shares that would be issuable on the
assumed exercise of the warrants and stock options in the three
month period ended September 30, 1994 and issuable on the assumed
exercise of stock options in the nine month period ended September
30, 1994, since they were antidilutive. Fully diluted income per
share includes the assumed conversion of the convertible
subordinated debentures.
(7) INCOME TAXES
Income tax provisions for the interim periods are estimated based
on projections of a 38% annual effective tax rate. The effective
tax rate for the period from January 1, 1994 to June 30, 1994 was
39%. During the third quarter of 1994, the Company determined that
the effective tax rate for 1994 (and for all subsequent periods
through the present) would be approximately 38%. The effect of this
change reduced the Company's income tax provision for the three
month period ended September 30, 1994 by $350,000 and resulted in
an effective tax rate for the third quarter of 1994 of
approximately 35%.
<PAGE> 11
REVIEW BY INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, independent public accountants, have performed a
review of the consolidated condensed balance sheet as of September 30,
1995 and the related consolidated condensed statements of operations
for the three and nine month periods ended September 30, 1995 and 1994
and cash flows for the nine month periods ended September 30, 1995 and
1994 included in this report. Such review was made in accordance with
standards established by the American Institute of Certified Public
Accountants.
<PAGE> 12
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO U.S. HOME CORPORATION:
We have reviewed the accompanying consolidated condensed balance sheet of
U.S. Home Corporation (a Delaware corporation) and subsidiaries as of
September 30, 1995, and the related consolidated condensed statements of
operations for the three-month and nine-month periods ended September 30,
1995 and 1994 and cash flows for the nine-month periods ended September 30,
1995 and 1994. These financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible
for financial and accounting matters. It is substantially less in scope
than an audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion regarding
the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the financial statements referred to above for them to be
in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of U.S. Home Corporation and
subsidiaries as of December 31, 1994, and the related consolidated
statements of operations, stockholders' equity and cash flows for the year
then ended (not presented herein), and in our report dated February 8,
1995, we expressed an unqualified opinion on those statements. In our
opinion, the information set forth in the accompanying consolidated
condensed balance sheet as of December 31, 1994, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which
it has been derived.
/s/ Arthur Andersen LLP
-------------------------
ARTHUR ANDERSEN LLP
Houston, Texas
October 19, 1995
<PAGE> 13
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Housing
The following table sets forth certain financial information for the
periods indicated (dollars in thousands, except average sales price):
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
1995 1994 1995 1994
--------- --------- --------- ---------
Revenues -
Single-family homes ....... $ 280,223 $ 249,691 $ 788,002 $ 697,785
Land and other ............ 2,199 2,862 10,111 14,911
--------- --------- --------- ---------
Total .................. $ 282,422 $ 252,553 $ 798,113 $ 712,696
========= ========= ========= =========
Single-family homes -
Gross margin amount ....... $ 45,396 $ 40,422 $ 126,340 $ 113,052
Gross margin percentage ... 16.2% 16.2% 16.0% 16.2%
Units delivered ........... 1,743 1,663 4,991 4,654
Average sales price ....... $ 160,800 $ 150,100 $ 157,900 $ 149,900
New orders taken .......... 1,612 1,483 5,757 5,394
Backlog at end of period .. 3,317 3,444
Selling, general and
administrative expenses as
a percentage of housing
revenues .................. 10.6% 10.8% 10.9% 11.0%
Interest expense -
Paid and accrued .......... $ 8,375 $ 7,635 $ 24,172 $ 22,907
Capitalized ............... $ 8,375 $ 7,635 $ 24,172 $ 22,907
Percent capitalized ....... 100.0% 100.0% 100.0% 100.0%
Capitalized interest included
in cost of products sold .. $ 6,604 $ 7,439 $ 20,335 $ 21,635
<PAGE> 14
Revenues and Gross Margin -
Revenues from sales of single-family homes for the three and nine month
periods ended September 30, 1995 increased 12% and 13% compared to the
three and nine month periods ended September 30, 1994. The increases
resulted from 5% and 7% increases in the number of housing units delivered
and 7% and 5% increases in average sales price. The increase in the average
sales prices in 1995 was primarily due to price increases.
New orders taken for the three and nine month periods ended September 30,
1995 increased 9% and 7% compared to the same periods in 1994. See Part II,
"Item 5 - Other Information" on page 16 for a table of unit activity by
market for the three and nine month periods ended September 30, 1995 and
1994.
Selling, General and Administrative Expenses -
As a percentage of housing revenues, selling, general and administrative
expenses for 1995 have declined when compared to 1994. Actual selling,
general and administrative expenses for the three and nine month periods
ended September 30, 1995 increased by $2.7 million and $8.6 million
compared to 1994. These increases were attributable to increases in
volume-related expenses resulting from increased deliveries and revenues in
1995 when compared to 1994 and increases in other selling, general and
administrative expenses resulting from increased activities.
Financial Services
Revenues -
Revenues for the financial services segment for the periods indicated were
as follows (dollars in thousands):
Three Months Nine Months
Ended Ended
September 30, September 30,
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
U.S. Home Mortgage Corporation and
Subsidiary ....................... $ 3,629 $ 2,499 $ 8,783 $ 7,161
Other financial services operations 657 788 2,292 2,369
-------- -------- -------- --------
$ 4,286 $ 3,287 $ 11,075 $ 9,530
======== ======== ======== ========
The increase in U.S. Home Mortgage Corporation and subsidiary's("Mortgage")
revenues for the three and nine month periods ended September 30, 1995 when
compared to the three and nine month periods ended September 30, 1994 was
primarily due to an increase in mortgage loan originations and income from
the sale of mortgage loans and servicing rights.
<PAGE> 15
Financial Condition and Liquidity
Housing
The Company's most significant needs for capital resources are land and
finished lot purchases, land development and housing construction. The
Company's ability to generate cash adequate to meet these needs is
principally achieved from the sale of houses, and the margins thereon, the
utilization of Company-owned lots and periodic borrowings under its
financing facilities. The Company expects, on a long-term basis, that
operations will generate cash to meet substantially all of its housing cash
flow needs and that a financing facility, such as the new $130 million
unsecured Credit Agreement entered into in September 1995 (which replaced
the Company's secured working capital facility), would be utilized to meet
peek operating needs. The Company anticipates that the borrowing base
limitations of the Credit Agreement will not restrict its ability to borrow
under such Agreement. See Note 3 of Notes to Consolidated Condensed
Financial Statements. Further, the Company attempts to reduce initial cash
requirements with respect to investments in land, thereby increasing its
financial flexibility and reducing its risk by limiting the amount invested
in land owned directly by the Company by emphasizing land acquisitions
using rolling lot options, which enable the Company to initially pay a
small fraction of total lot cost and then purchase the lots for a fixed
price on a scheduled or "as needed" basis. The Company intends to continue,
where possible, to use Company-owned lots in inventory to generate
additional cash flow. The Company believes that these steps result in
reduced carrying costs and limited exposure to market changes and direct
land investments. The net cash provided or used by the operating, investing
and financing activities of the housing operations for the nine month
periods ended September 30, 1995 and 1994 is summarized below (dollars in
thousands):
1995 1994
-------- --------
Net cash provided (used) by:
Operating activities $(32,927) $(36,840)
Investing activities (2,090) (1,172)
Financing activities 33,246 15,073
-------- --------
Net decrease in cash $ (1,771) $(22,939)
======== ========
Housing operating activities are, at any time, affected by a number of
factors, including the number of housing units under construction and
housing units delivered. Housing construction and land asset activities
increased in both 1995 and 1994; however, housing operating activities for
1995 used less cash compared to 1994 primarily due to increased
profitability and the timing of payments related to these activities.
<PAGE> 16
Cash flow from housing financing activities for 1995 increased from the
same period in 1994 primarily due to increased net borrowings under the
working capital facility to finance increases in housing and land assets
necessary to meet increased sales activities.
The Company anticipates that cash flow from operations and amounts
available under the Credit Agreement will be sufficient to meet its working
capital obligations.
Financial Services
Mortgage's activities represent a substantial portion of all of the
financial services segment's activities. As loan originations by Mortgage
are primarily from housing units delivered by the Company's homebuilding
operations, Mortgage's financial condition and liquidity are to a
significant extent dependent upon the financial condition of the Company.
Financial services operating activities are affected primarily by
Mortgage's loan originations which result in the sale of mortgage loans and
related servicing rights to third party investors. Cash flows from
financial services operating activities are also affected by the timing of
the sales of loans and servicing rights which generally are sold to
investors within 30 days after homes are delivered. In this regard, cash
flows from financial services operating activities for 1995 used more cash
compared to 1994 primarily due to an increase in residential mortgage loan
receivables.
The Company finances its financial services operations primarily from
internally generated funds, such as from the origination and sale of
residential mortgage loans and related servicing rights, and short-term
debt. As more fully discussed in Note 3 of Notes to Consolidated Condensed
Financial Statements, the short-term debt consists of a $35 million secured
revolving line of credit (the "Mortgage Credit Facility") which matures on
August 31, 1996. While the Mortgage Credit Facility contains numerous
covenants, including a debt to tangible net worth ratio and a minimum
tangible net worth requirement, these covenants are not anticipated to
significantly limit Mortgage's operations.
The Company has no obligation to provide funding to its financial services
operations, nor does it guarantee any of its financial services
subsidiaries' debt. The Company believes that the internally generated
funds and the Mortgage Credit Facility will be sufficient to provide for
Mortgage's working capital needs.
<PAGE> 17
Part II. OTHER INFORMATION
Item 2. Changes in Securities
The Credit Agreement, dated as of September 29, 1995, among the
Company and several banks (filed as Exhibit 10.1 to this Quarterly
Report on Form 10-Q), contains a prohibition on the payment of
dividends by the Company on its capital stock (other than dividends
payable in the form of its capital stock). Reference is made to
Item 5 hereof for a description of such Credit Agreement.
Item 5. Other Information
On September 29, 1995, the Company entered into a $130 million
three year unsecured revolving working capital credit agreement
with several banks (the "Credit Agreement"). The Credit Agreement
replaced the Company's $95 million secured working capital facility
with General Electric Capital Corporation ("GECC"). On October 5,
1995, the Company used a portion of the initial advance under the
Credit Agreement to repay all amounts outstanding under the working
capital facility with GECC. See Note 3 of Notes to Consolidated
Condensed Financial Statements.
<PAGE> 18
The following table provides information (expressed in number of
housing units) with respect to new orders taken, deliveries to
purchasers of single-family homes and backlog by market for the
three and nine month periods ended September 30, 1995 and 1994:
Market New Orders Deliveries
-------------------- ------------- -------------
1995 1994 1995 1994
----- ----- ----- -----
Three Month Period -
Arizona 296 220 230 227
California 123 164 160 165
Colorado 277 198 310 218
Florida 429 453 466 536
Indiana/Ohio 31 5 22 -
Maryland/Virginia 105 103 109 97
Minnesota 73 65 78 114
Nevada 78 54 93 89
New Jersey 101 108 88 55
Texas 99 113 187 162
---- ----- ----- -----
1,612 1,483 1,743 1,663
===== ===== ===== =====
Market New Orders Deliveries Backlog
-------------------- ------------- ------------- -------------
1995 1994 1995 1994 1995 1994
----- ----- ----- ----- ----- -----
Nine Month Period -
Arizona 839 738 624 733 478 393
California 449 524 392 491 143 170
Colorado 975 691 851 630 514 537
Florida 1,755 1,861 1,671 1,376 1,230 1,452
Indiana/Ohio 95 5 38 - 67 5
Maryland/Virginia 330 287 263 274 149 144
Minnesota 276 300 205 311 158 133
Nevada 266 250 221 227 135 104
New Jersey 240 225 210 150 199 164
Texas 532 513 516 462 244 342
----- ----- ----- ----- ----- -----
5,757 5,394 4,991 4,654 3,317 3,444
===== ===== ===== ===== ===== =====
<PAGE> 19
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.1 - Credit Agreement, dated as of
September 29, 1995, between
U.S. Home Corporation and The
First National Bank of Chicago,
as Agent
Exhibit 10.2 - First Amended and Restated
Warehousing Credit and Security
Agreement (single-family mortgage
loans), dated as of August 31, 1995,
between U.S. Home Mortgage Corporation
and Residential Funding Corporation
Exhibit 11 - Computation of Income Per Common Share
Exhibit 15 - Letter with respect to unaudited
interim financial information
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
No Current Report on Form 8-K was filed by the Company during July,
August or September 1995.
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. HOME CORPORATION
Date: November 3, 1995 /s/ Isaac Heimbinder
-------------------------------------
Isaac Heimbinder
President, Co-Chief Executive Officer
and Chief Operating Officer
Date: November 3, 1995 /s/ Chester P. Sadowski
-------------------------------------
Chester P. Sadowski
Vice President, Controller
and Chief Accounting Officer
<PAGE> 21
INDEX OF EXHIBITS
Sequential
Exhibit Numbered
Number Page
- ------- ----------
10.1 Credit Agreement, dated as of September 29, 1995,
between U.S. Home Corporation and The First National
Bank of Chicago, as Agent 22
10.2 First Amended and Restated Warehousing Credit and Security
Agreement (single family mortgage loans), dated as of
August 31, 1995, between U.S. Home Mortgage Corporation
and Residential Funding Corporation 112
11 Computation of Income Per Common Share 187
15 Letter with respect to unaudited interim financial
information 189
27 Financial Data Schedule 190
<PAGE> 22
EXHIBIT 10.1
CREDIT AGREEMENT
This Agreement, dated as of September 29, 1995, is among U.S. Home
Corporation, a Delaware corporation, the Lenders listed on the signature
pages of this Agreement, and The First National Bank of Chicago, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which
the Borrower or any of its Subsidiaries (excluding the Non-Borrowing
Subsidiaries) (i) acquires any going concern or all or substantially all of
the assets of any firm, corporation or division thereof, whether through
purchase of assets, merger or otherwise or (ii) directly or indirectly
acquires (in one transaction or as the most recent transaction in a series
of transactions) at least a majority (in number of votes) of the securities
of a corporation which have ordinary voting power for the election of
directors (other than securities having such power only by reason of the
happening of a contingency) or a majority (by percentage or voting power)
of the outstanding partnership or other ownership interests of a
partnership, joint venture, limited liability company or other similar
business organization.
"Advance" means a borrowing hereunder consisting of the aggregate
amount of the several Loans made by the Lenders to the Borrower of the same
Type and, in the case of a Eurodollar Advance, for the same Interest
Period.
"Affected Lender" is defined in Section 2.21.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with such
Person. A Person shall be deemed to control another Person if the
controlling Person beneficially owns (within the meaning of Rule 13d-3 of
the Securities Exchange Act of 1934, as amended) 20% or more of any class
of voting securities (or other ownership interests) of the controlled
Person or possesses, directly or indirectly, the power to direct or cause
the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
<PAGE> 23
"Agent" means The First National Bank of Chicago in its capacity
as agent for the Lenders pursuant to Article XIII, and not in its
individual capacity as a Lender, and any successor Agent appointed pursuant
to Article XIII.
"Aggregate Available Credit" means the aggregate of the Available
Credits of all of the Lenders.
"Aggregate Commitment" means the aggregate of the Commitments of
all the Lenders, as reduced from time to time pursuant to the terms hereof.
As of the date of this Agreement, the Aggregate Commitment is $130,000,000.
"Agreement" means this credit agreement, as it may be amended or
modified and in effect from time to time.
"Agreement Accounting Principles" is defined in Section 12.9.
"Alternate Base Rate" means, for any day, a rate of interest per
annum equal to the higher of (i) the Corporate Base Rate for such day and
(ii) the sum of (a) the Federal Funds Effective Rate for such day plus (b)
1/2 of 1% per annum.
"Applicable Commitment Rate" means, as at any date of
determination, the rate per annum indicated in Section 2.11 as then
applicable in the determination of the commitment fee under Section 2.5.
"Applicable Eurodollar Margin" means, as at any date of
determination, the margin indicated in Section 2.11 as then applicable in
the determination of Eurodollar Rates and the Applicable Letter of Credit
Rate.
"Applicable Floating Rate Margin" means, as at any date of
determination, the margin indicated in Section 2.11 as then applicable in
the determination of the Floating Rate, provided, however, that, with
respect to the first $25,000,000 of Floating Rate Advances outstanding at
any time, the Applicable Floating Rate Margin shall be zero (0).
"Applicable Letter of Credit Rate" means, as at any date of
determination, a rate per annum equal to (i) the Applicable Eurodollar
Margin as at such date, less (ii) 0.25 percent.
"Applicable Margin(s)" means the Applicable Eurodollar Margin
and/or the Applicable Floating Rate Margin, as the case may be.
<PAGE> 24
"Article" means an article of this Agreement unless another
document is specifically referenced.
"Authorized Officer" means any of the Chairman, President, Senior
Vice President or any Vice President of the Borrower, acting singly.
"Available Credit" means, at any date with respect to any Lender,
the amount (if any) by which such Lender's Commitment exceeds the sum of
(i) the outstanding principal balance of such Lender's Loans as of such
date, plus (ii) such Lender's ratable share (determined in accordance with
Section 4.6) of the Facility Letter of Credit Obligations as of such date.
"Borrower" means U.S. Home Corporation, a Delaware corporation,
and its successors and assigns.
"Borrowing Base" means, with respect to an Inventory Valuation
Date for which it is to be determined, an amount equal to the sum of the
following assets of the Borrower and the Guarantors (but only to the extent
that such assets are not subject to any Liens (other than Permitted
Encumbrances), whether or not such Liens are permitted hereunder): (i) the
Receivables, multiplied by ninety percent (90%), (ii) the book value of
Housing Units Under Contract, multiplied by eighty percent (80%), (iii) the
book value of Inventory Housing Units, multiplied by seventy percent (70%),
but not exceeding thirty percent (30%) of Total Senior Loan Commitments,
and (iv) the book value of Finished Lots, multiplied by fifty percent
(50%), but not exceeding twenty-five percent (25%) of Total Senior Loan
Commitments.
"Borrowing Base Certificate" means a written certificate in a form
acceptable to the Required Lenders setting forth the amount of the
Borrowing Base with respect to the calendar month most recently completed,
certified as true and correct by an Authorized Officer of the Borrower.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.8.
"Business Day" means (i) with respect to any borrowing, payment or
rate selection of Eurodollar Advances, a day (other than a Saturday or
Sunday) on which banks generally are open in Chicago and New York for the
conduct of substantially all of their commercial lending activities and on
<PAGE> 25
which dealings in United States dollars are carried on in the London
interbank market and (ii) for all other purposes, a day (other than a
Saturday or Sunday) on which banks generally are open in Chicago for the
conduct of substantially all of their commercial lending activities.
"Capitalized Lease" of a Person means any lease of Property by
such Person as lessee which would be capitalized on a balance sheet of such
Person prepared in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of
the obligations of such Person under Capitalized Leases which would be
shown as a liability on a balance sheet of such Person prepared in
accordance with Agreement Accounting Principles.
"Change in Control" means the acquisition by any Person, or two or
more Persons acting in concert, of beneficial ownership (within the meaning
of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of 50% or more of the outstanding shares
of voting stock of the Borrower.
"Code" means the Internal Revenue Code of 1986, as amended,
reformed or otherwise modified from time to time.
"Commitment" means, for each Lender, the obligation of such Lender
to make Loans, and to participate in the Facility Letters of Credit in
accordance with Section 4.6(a), not exceeding the amount set forth opposite
its signature below or as set forth in any Notice of Assignment relating to
any assignment that has become effective pursuant to Section 15.3.2, as
such amount may be modified from time to time pursuant to the terms hereof.
"Consolidated Funded Indebtedness" means, at any date, the
outstanding amount of all Indebtedness of the Borrower and the Guarantors,
excluding accrued expenses incurred in the ordinary course of business and
guarantees of performance or completion and performance bonds (but not
excluding guarantees of payment), all determined on a consolidated basis
for the Borrower and the Guarantors in conformity with Agreement Accounting
Principles.
"Consolidated Interest Expense" means for any period, without
duplication, the aggregate amount of interest which, in conformity with
Agreement Accounting Principles, would be set opposite the caption
"interest expense" or any like caption on an income statement for the
Borrower and the Guarantors (including, without limitation, imputed
interest included on Capitalized Lease Obligations, all commissions,
<PAGE> 26
discounts and other fees and charges owed with respect to Letters of Credit
and bankers' acceptance financing, the net costs associated with Rate Hedging
Obligations, amortization of other financing fees and expenses, the interest
portion of any deferred payment obligation, amortization of discount or
premiums, if any, and all other noncash interest expense other than
interest and other charges amortized to cost of sales) and includes,
with respect to the Borrower and the Guarantors, without duplication, all
interest included as a component of cost of sales for such period.
"Consolidated Interest Incurred" means for any period, without
duplication, the aggregate amount of interest which, in conformity with
Agreement Accounting Principles, would be set opposite the caption
"interest expense" or any like caption on an income statement for the
Borrower and the Guarantors (including, without limitation, imputed
interest included on Capitalized Lease Obligations, all commissions,
discounts and other fees and charges owed with respect to Letters of Credit
and bankers' acceptance financing, the net costs associated with Rate
Hedging Obligations, amortization of other financing fees and expenses, the
interest portion of any deferred payment obligation, amortization of
discount or premium, if any, and all other noncash interest expense other
than interest and other charges amortized to cost of sales) and includes,
with respect to the Borrower and the Guarantors, without duplication, all
capitalized interest for such period, all interest attributable to
discontinued operations for such period to the extent not set forth on the
income statement under the caption "interest expense" or any like caption,
and all interest actually paid by the Borrower or a Guarantor under any
Contingent Obligation during such period.
"Consolidated Net Income" means, for any period, the net income
(or loss) of the Borrower and the Guarantors on a consolidated basis for
such period taken as a single accounting period, determined in conformity
with Agreement Accounting Principles; provided that there shall be excluded
from Consolidated Net Income (i) the income (or loss) of any Person that is
not the Borrower or a Guarantor, except to the extent of the amount of
dividends or other distributions actually paid to the Borrower or a
Guarantor by such Person during such period, and (ii) the income (or loss)
of any Person accrued prior to the date it becomes a Subsidiary of the
Borrower or is merged into or consolidated with the Borrower or any of its
Subsidiaries or that Person's assets are acquired by the Borrower or any of
its Subsidiaries.
<PAGE> 27
"Consolidated Senior Debt Borrowings" means, at any date, with
respect to the Borrower and the Guarantors, on a consolidated basis, the
outstanding balance of all obligations described in clauses (i), (iv) or
(viii) of the definition of "Indebtedness" (including the Obligations)
calculated in accordance with Agreement Accounting Principles but excluding
(i) Indebtedness secured by a Lien on Property, (ii) Indebtedness of the
Borrower to a Guarantor, a Guarantor to the Borrower or a Guarantor to
another Guarantor, and (iii) the Convertible Subordinated Notes and any
other Subordinated Indebtedness.
"Consolidated Tangible Net Worth" means, at any date, the
consolidated stockholders' equity of the Borrower determined in conformity
with Agreement Accounting Principles, less its consolidated Intangible
Assets, all determined as of such date. For purposes of this definition
"Intangible Assets" means the amount (to the extent reflected in
determining such consolidated stockholders' equity) of (i) all write-ups
(other than write-ups resulting from foreign currency translations and
write-ups of assets of a going concern business made within twelve months
after the acquisition of such business) subsequent to March 31, 1995 in the
book value of any asset owned by the Borrower, (ii) all investments in
Non-Borrowing Subsidiaries and (iii) all unamortized debt discount,
goodwill, patents, trademarks, service marks, trade names, copyrights,
organization or developmental expenses and other intangible items.
"Contingent Obligation" of a Person means, without duplication,
any agreement, undertaking or arrangement by which such Person assumes,
guarantees (other than a Guaranty), endorses (other than endorsements in
the ordinary course of business or negotiable instruments for deposit or
collection), contingently agrees to purchase or provide funds for the
payment of, or otherwise becomes or is contingently liable upon, the
obligation or liability of any other Person, or agrees to maintain the net
worth or working capital or other financial condition of any other Person,
or otherwise assures any creditor of such other Person against loss,
including, without limitation, any comfort letter, operating agreement,
take-or-pay contract, or application or other contingent obligation with
respect to a Letter of Credit, but excluding guarantees of performance or
completion and performance bonds, or setoff rights of a lender. "Contingent
Obligation" does not include the obligation to make capital contributions
to a joint venture.
"Contribution Agreement" is defined in Section 5.1(xi).
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated)
under common control which, together with the Borrower or any of its
Subsidiaries, are treated as a single employer under Section 414 of the
Code.
<PAGE> 28
"Conversion/Continuation Notice" is defined in Section 2.9.
"Convertible Subordinated Notes" means the 4.875% Convertible
Subordinated Debentures due 2005 of the Borrower issued in the original
principal amount of $80,000,000.
"Corporate Base Rate" means a rate per annum equal to the
corporate base rate of interest announced by First Chicago from time to
time, changing when and as said corporate base rate changes.
"Coverage Test" is defined in Section 9.2(b).
"Default" means an event described in Article X after the
expiration of any applicable cure or notice period.
"EBITDA" means, for any period, without duplication, (i) the sum
of the amounts for such period of (a) Consolidated Net Income, (b)
Consolidated Interest Expense, (c) charges against income for all federal,
state and local taxes, (d) depreciation expense, (e) amortization expense,
(f) other non-cash charges and expenses, and (g) any losses arising outside
of the ordinary course of business which have been included in the
determination of Consolidated Net Income, less (ii) any gains arising
outside of the ordinary course of business which have been included in the
determination of Consolidated Net Income, all as determined on a
consolidated basis for the Borrower and the Guarantors in conformity with
Agreement Accounting Principles.
"ERISA" means the Employee Retirement Income Security Act of l974,
as amended from time to time, and any rule or regulation issued thereunder.
"Eurodollar Advance" means an Advance which bears interest at a
Eurodollar Rate.
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance
for the relevant Interest Period, the rate determined by the Agent to be
the rate at which deposits in U.S. dollars are offered by First Chicago to
first-class banks in the London interbank market at approximately 11 a.m.
(London time) two Business Days prior to the first day of such Interest
Period, in the approximate amount of First Chicago's relevant Eurodollar
Loan and having a maturity approximately equal to such Eurodollar Interest
Period.
<PAGE> 29
"Eurodollar Loan" means a Loan which bears interest at a
Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for
the relevant Interest Period, the sum of (i) the quotient of (a) the
Eurodollar Base Rate applicable to such Interest Period, divided by (b) one
minus the Reserve Requirement (expressed as a decimal) applicable to such
Interest Period, plus (ii) the Applicable Eurodollar Margin. The Eurodollar
Rate shall be rounded to the next higher multiple of 1/16 of 1% if the rate
is not such a multiple.
"Excluded Taxes" is defined in Section 3.1.
"Extension Request" is defined in Section 2.20.
"Facility Letter of Credit" means a Letter of Credit issued by the
Issuing Bank for the account of the Borrower or a Guarantor in accordance
with Article IV.
"Facility Letter of Credit Fee" means a fee, payable with respect
to each Facility Letter of Credit issued by the Issuing Bank, in an amount
per annum equal to the product of (i) the Applicable Letter of Credit Rate
(determined as of the date on which the monthly installment of such fee is
due) and (ii) the greater of (A) $50,000 or (B) the face amount of such
Facility Letter of Credit.
"Facility Letter of Credit Obligations" means, at any date, the
sum of (i) the aggregate undrawn face amount of all outstanding Facility
Letters of Credit, and (ii) the aggregate amount paid by an Issuing Bank on
any Facility Letters of Credit to the extent (if any) not reimbursed by the
Borrower or by the Lenders under Section 4.4.
"Facility Termination Date" means September 29, 1998, as the same
may be extended as provided in Section 2.20.
"Federal Funds Effective Rate" means, for any day, an interest
rate per annum equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published for such day
(or, if such day is not a Business Day, for the immediately preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day which is a Business Day, the average of the
quotations at approximately 10 a.m. (Chicago time) on such day on such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by the Agent in its sole discretion.
<PAGE> 30
"Financial Undertaking" of a Person means (i) any repurchase
obligation or liability of such Person or any of its Subsidiaries with
respect to accounts or notes receivable sold by such Person or any of its
Subsidiaries, (ii) any sale and leaseback transactions which do not create
a liability on the consolidated balance sheet of such Person and its
Subsidiaries, (iii) any other transaction which is the functional
equivalent of or takes the place of borrowing but which does not constitute
a liability on the consolidated balance sheets of such Person and its
Subsidiaries, or (iv) any Rate Hedging Obligations.
"Finished Lots" means parcels of land owned by the Borrower or any
Guarantor which are duly recorded and platted for use as Housing Units and
zoned for such use, with respect to which all requisite governmental
consents and approvals have been obtained and on which (i) all development
activity, other than the application of the seal or finishing coat on
improved roadways and other minor repairs required to dedicate such
roadways, has been completed and (ii) water and sewer connections have been
brought to the lot shown on the plat covering such parcel and are available
for hook-up to a Housing Unit; provided, however, that the term "Finished
Lots" shall not include any real property upon which the construction of a
Housing Unit has commenced.
"First Chicago" means The First National Bank of Chicago in its
individual capacity, and its successors.
"Fixed Rate Debt" means any obligation described in clauses (i),
(iv) or (viii) of the definition of "Indebtedness" (i) that bears interest
at a rate that is fixed until maturity of such Indebtedness and that does
not fluctuate or vary, whether on the basis of rates established from time
to time by the obligee, indices, market conditions or otherwise or (ii)
having an average weighted maturity equal to or exceeding the then
remaining term of this Agreement and with respect to which the Borrower has
arranged Rate Hedging Obligations that protect the Borrower from
fluctuations of interest rates, which Rate Hedging Obligations are
acceptable to the Required Lenders in all respects, including without
limitation the Person or Persons that are parties thereto, the fixed
interest rates thereunder and the other terms and conditions thereof.
"Floating Rate" means, for any day, a rate per annum equal to (i)
the Alternate Base Rate for such day, plus (ii) the Applicable Floating
Rate Margin, in each case changing when and as the Alternate Base Rate
changes.
<PAGE> 31
"Floating Rate Advance" means an Advance which bears interest at
the Floating Rate.
"Floating Rate Loan" means a Loan which bears interest at the
Floating Rate.
"GAAP" means generally accepted accounting principles in effect
from time to time, consistently applied.
"GECC" means General Electric Capital Corporation.
"Guarantors" means the Subsidiaries of the Borrower listed on
Schedule "1-A" hereto and any Subsidiary of Borrower that shall hereafter
execute a Guaranty in accordance with Section 7.11 hereof, and any
successors and assigns or any of the foregoing.
"Guaranty" means a Guaranty, in substantially the form of Exhibit
"A", duly executed by one or more of the Guarantors, as the same may be
amended or modified and in effect from time to time.
"Housing Unit" means a single-family dwelling, whether detached or
attached (including condominiums but excluding mobile homes), including the
parcel of land on which such dwelling is located, that is (or, upon
completion of construction thereof, will be) available for sale; the term
"Housing Unit" includes an Inventory Housing Unit.
"Housing Unit Closing" means a closing of the sale of a Housing
Unit by the Borrower or a Guarantor to a bona fide purchaser for value that
is not an Affiliate.
"Housing Unit Under Contract" means a Housing Unit owned by the
Borrower or a Guarantor as to which the Borrower or such Guarantor has a
bona fide contract of sale, in a form customarily employed by the Borrower
or such Guarantor, entered into not more than 15 months prior to the date
of determination with a Person who is not an Affiliate, under which
contract no defaults then exist and not less than $1,000.00 toward the
purchase price has been paid; provided, however, that in the case of any
Housing Unit the purchase of which is to be financed in whole or in part by
a loan insured by the Federal Housing Administration or guaranteed by the
<PAGE> 32
Veterans Administration, the required minimum downpayment shall be the
amount (if any) required under the rules of the relevant agency.
"Indebtedness" of a Person means, without duplication, such
Person's (i) obligations for borrowed money, (ii) obligations representing
the deferred purchase price of Property or services (other than (A)
accounts payable arising in the ordinary course of such Person's business
and (B) rights or duties under option agreements to acquire real property),
(iii) obligations, whether or not assumed, secured by Liens (other than
Permitted Encumbrances) or payable out of the proceeds or production from
Property now or hereafter owned or acquired by such Person, (iv)
obligations which are evidenced by notes, debentures, or other similar
instruments, (v) Capitalized Lease Obligations, (vi) net liabilities under
Rate Hedging Obligations, (vii) Contingent Obligations and (viii)
reimbursement obligations for which such Person is obligated with respect
to a Letter of Credit.
Indebtedness includes, in the case of the Borrower, the Obligations.
"Indenture" means that certain Indenture, dated as of June 21,
1993, between the Borrower and IBJ Schroder Bank & Trust Company pursuant
to which the Senior Notes were issued.
"Interest Period" means, with respect to a Eurodollar Advance, a
period of one, two, three or six months commencing on a Business Day
selected by the Borrower pursuant to this Agreement. Such Interest Period
shall end on (but exclude) the day which corresponds numerically to such
date one, two, three or six months thereafter, provided, however, that if
there is no such numerically corresponding day in such next, second, third
or sixth succeeding month, such Interest Period shall end on the last
Business Day of such next, second or third or sixth succeeding month. If an
Interest Period would otherwise end on a day which is not a Business Day,
such Interest Period shall end on the next succeeding Business Day,
provided, however, that if said next succeeding Business Day falls in a new
calendar month, such Interest Period shall end on the immediately preceding
Business Day.
"Inventory Housing Unit" means any Housing Unit owned by the
Borrower or any Guarantor that is not a Housing Unit Under Contract.
"Inventory Valuation Date" means the last day of the most recent
calendar month with respect to which the Borrower is required to have
delivered a Borrowing Base Certificate pursuant to Section 7.1(vii) hereof.
<PAGE> 33
"Investment" of a Person means any loan, advance, extension of
credit (other than accounts receivable arising in the ordinary course of
business), deposit account or contribution of capital by such Person to any
other Person or any investment in, or purchase or other acquisition of, the
stock, partnership, joint venture or limited liability company interests,
notes, debentures or other securities of any other Person made by such
Person.
"Issuance Date" means the date on which a Facility Letter of
Credit is issued, amended or extended.
"Issuing Bank" means any Lender that may from time to time be
designated as Issuing Bank in accordance with the provisions of Section
4.10, provided, however, that a Lender may be designated as Issuing Bank
only if, at the time of such designation, it has a rating of not less than
"A" as publicly announced by Standard & Poor's Corporation. As of the date
of this Agreement, First Chicago is the Issuing Bank.
"Lenders" means the lending institutions listed on the signature
pages of this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the
Agent, any office, branch, subsidiary or Affiliate of such Lender or the
Agent.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued by a financial institution upon the application
of such Person or upon which such Person is an account party or for which
such Person is in any way liable.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or other
security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title
retention agreement).
"Loan" means, with respect to a Lender, such Lender's portion of
any Advance.
"Loan Documents" means this Agreement, the Notes and any
Reimbursement Agreements.
"Material Adverse Effect" means a material adverse effect on (i)
the business, Property, condition (financial or otherwise), or results of
operations of the Borrower and the Guarantors, taken as a whole, (ii) the
ability of the Borrower to perform its obligations under the Loan
Documents, or (iii) the validity or enforceability of any of the Loan
Documents or the rights or remedies of the Agent, the Lenders or any
Issuing Bank thereunder.
<PAGE> 34
"Multiemployer Plan" means a Plan maintained pursuant to a
collective bargaining agreement or any other arrangement to which the
Borrower or any member of the Controlled Group is a party to which more
than one employer is obligated to make contributions.
"Non-Borrowing Subsidiaries" means the Subsidiaries of the
Borrower listed on Schedule "1-B" hereto and any Person that (i) hereafter
becomes a Subsidiary of the Borrower and has as its primary business one or
more of the types of businesses currently conducted by the Subsidiaries
listed on Schedule "1-B" or (ii) is or hereafter becomes a Subsidiary of a
Non-Borrowing Subsidiary.
"Non-Recourse Indebtedness" with respect to any Person means
Indebtedness of such Person (i) for which the sole legal recourse for
collection of principal and interest on such Indebtedness is against the
specific property identified in the instruments evidencing or securing such
Indebtedness and such property was acquired with the proceeds of such
Indebtedness or such Indebtedness was incurred within 90 days after the
acquisition of such property and for which no other assets of such Person
may be realized upon in collection of principal or interest on such
Indebtedness or (ii) that refinances Indebtedness described in clause (i)
and for which the recourse is limited to the same extent described in
clause (i).
"Note" means a promissory note, in substantially the form of
Exhibit "B" hereto, duly executed by the Borrower and payable to the order
of a Lender in the amount of its Commitment, including any amendment,
modification, renewal or replacement of such promissory note.
"Notice of Assignment" is defined in Section 15.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, the Facility Letter of Credit Obligations, all
accrued and unpaid fees and all expenses, reimbursements, indemnities and
other obligations of the Borrower to the Lenders or to any Lender, the
Agent, any Issuing Bank or any indemnified party hereunder arising under
the Loan Documents.
"Participants" is defined in Section 15.2.1.
<PAGE> 35
"Payment Date" means the first day of each calendar month.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Permitted Encumbrances" means any of the following:
(i) Liens for taxes, assessments or governmental charges or levies
on its Property if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in good
faith and by appropriate proceedings and for which adequate reserves shall
have been set aside on its books in accordance with GAAP.
(ii) Liens imposed by law, such as carriers', warehousemen's,
mechanics' and materialmen's Liens and other similar Liens arising in the
ordinary course of business which secure payment of obligations not more
than 90 days past due or which are being contested in good faith by
appropriate proceedings and for which adequate reserves shall have been set
aside on its books in accordance with GAAP.
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation in
accordance with GAAP.
(iv) Utility easements, rights of way, zoning restrictions and such
other encumbrances or charges against real property, or other minor
irregularities of title, as are of a nature generally existing with respect
to properties of a similar character and which do not in any material way
interfere with the use thereof or the sale thereof in the business of the
Borrower or the Guarantors.
(v) Easements, dedications, assessment district or similar Liens in
connection with municipal financing and other similar encumbrances or
charges, in each case reasonably necessary or appropriate for the
development of real property of the Borrower or a Guarantor, and which are
granted in the ordinary course of the business of such Borrower or
Guarantor, and which in the aggregate do not materially burden or impair
the fair market value or use of such real property (or the project to which
it is related) for the purposes for which it is or may reasonably be
expected to be held.
<PAGE> 36
"Person" means any natural person, corporation, firm, joint
venture, partnership, limited liability company, association, enterprise,
trust or other entity or organization, or any government or political
subdivision or any agency, department or instrumentality thereof.
"PIR" means, at the date hereof, 1.75, as such amount may
hereafter be adjusted from time to time as provided in Section 9.2.
"Plan" means an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section
412 of the Code as to which the Borrower or any member of the Controlled
Group may have any liability.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets
owned, leased or operated by such Person.
"Purchasers" is defined in Section 15.3.1.
"Rate Hedging Obligations" of a Person means any and all
obligations of such Person, whether absolute or contingent and howsoever
and whensoever created, arising, evidenced or acquired (including all
renewals, extensions and modifications thereof and substitutions therefor),
under (i) any and all agreements, devices or arrangements designed to
protect at least one of the parties thereto from the fluctuations of
interest rates, exchange rates or forward rates applicable to such party's
assets, liabilities or exchange transactions, including, but not limited
to, dollar-denominated or cross-currency interest rate exchange agreements,
forward currency exchange agreements, interest rate cap or collar
protection agreements, forward rate currency or interest rate options, puts
and warrants, and (ii) any and all cancellations, buy backs, reversals,
terminations or assignments of any of the foregoing.
"Receivables" means the net proceeds payable to, but not yet
received by, the Borrower or any Guarantor following a Housing Unit
Closing.
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances or extends any Indebtedness described in Schedule "8.2" hereto
(or that refunds, refinances or extends any refund, refinancing or
extension of such Indebtedness), but only to the extent that (i) the
<PAGE> 37
Refinancing Indebtedness is subordinated to or pari passu with the
Obligations to the same extent as the Indebtedness being refunded,
refinanced or extended, if at all, (ii) the Refinancing Indebtedness
is scheduled to mature no earlier than the then current maturity date of
such Indebtedness, (iii) such Refinancing Indebtedness is in an aggregate
amount that is equal to or less than the sum of the aggregate amount then
outstanding under the Indebtedness being refunded, refinanced or
extended, (iv) the Person or Persons (or Persons who are Subsidiaries
of such Persons or of which such Persons are Subsidiaries) liable
for the payment of such Refinancing Indebtedness are the same Persons
that were liable for the Indebtedness being refunded, refinanced or
extended when such Indebtedness was initially incurred and (v) such
Refinancing Indebtedness is incurred within 120 days after the
Indebtedness being refunded, refinanced or extended is so refunded,
refinanced or extended.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor
thereto or other regulation or official interpretation of said Board of
Governors relating to reserve requirements applicable to member banks of
the Federal Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor
thereto or other regulation or official interpretation of said Board of
Governors relating to the extension of credit by banks for the purpose of
purchasing or carrying margin stocks applicable to member banks of the
Federal Reserve System.
"Rejecting Lender" is defined in Section 2.20(b).
"Reimbursement Agreement" means, with respect to a Facility Letter
of Credit, such form of application therefor and form of reimbursement
agreement therefor (whether in a single or several documents, taken
together) as an Issuing Bank may employ in the ordinary course of business
for its own account, with such modifications thereto as may be agreed upon
by such Issuing Bank and the Borrower and as are not materially adverse (in
the reasonable judgment of such Issuing Bank and the Agent) to the
interests of the Lenders; provided, however, in the event of any conflict
between the terms of any Reimbursement Agreement and this Agreement, the
terms of this Agreement shall control.
"Replacement Lender" is defined in Section 2.21.
<PAGE> 38
"Reportable Event" means a reportable event as defined in Section
4043 of ERISA and the regulations issued under such Section, with respect
to a Plan, excluding, however, such events as to which the PBGC by
regulation waived the requirement of Section 4043(a) of ERISA that it be
notified within 30 days of the occurrence of such event, provided, however,
that a failure to meet the minimum funding standard of Section 412 of the
Code and of Section 302 of ERISA shall be a Reportable Event regardless of
the issuance of any such waiver of the notice requirement in accordance
with either Section 4043(a) of ERISA or Section 412(d) of the Code.
"Required Lenders" means Lenders in the aggregate having at least
66-2/3% of the Aggregate Commitment or, if the Aggregate Commitment has
been terminated, Lenders in the aggregate holding at least 66-2/3% of the
aggregate unpaid principal amount of the outstanding Advances.
"Reserve Requirement" means, with respect to an Interest Period,
the maximum aggregate reserve requirement (including all basic,
supplemental, marginal and other reserves) which is imposed under
Regulation D on Eurocurrency liabilities (as defined therein).
"Section" means a numbered section of this Agreement, unless
another document is specifically referenced.
"Senior Debt" means the Senior Notes or, if the Senior Notes are
refinanced, the Refinancing Indebtedness with respect thereto.
"Senior Debt Rating" means the publicly announced ratings by
Moody's Investors Service, Inc. or Standard & Poor's Corporation (whichever
is lower) on the Borrower's Senior Debt, provided, however, if more than
one rating gradation exists between the two ratings, the Senior Debt Rating
shall be the rating that is one gradation below the higher of the two
ratings. The Senior Debt Rating shall change if and when such rating(s)
change.
"Senior Notes" means the 9-3/4% Senior Notes due 2003 of the
Borrower issued in the original principal amount of $200,000,000 pursuant
to the Indenture.
"Significant Guarantor" means any Guarantor with assets or
liabilities or annual revenues in excess of $1,000,000.
<PAGE> 39
"Single Employer Plan" means a Plan maintained by the Borrower or
any member of the Controlled Group for employees of the Borrower or any
member of the Controlled Group.
"Subordinated Indebtedness" of a Person means any Indebtedness of
such Person the payment of which is subordinated to payment of the
Obligations to the reasonable satisfaction of the Required Lenders,
including, as to the Borrower, the Convertible Subordinated Notes.
"Subordination Agreement" is defined in Section 5.1(xii).
"Subsidiary" of a Person means (i) any corporation more than 50%
of the outstanding securities having ordinary voting power for the election
of the board of directors of which shall at the time be beneficially owned
(within the meaning of Rule 13d-3 of the Securities Exchange Act of 1934,
as amended) directly or indirectly, by such Person or by one or more of its
Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii)
any partnership, association, joint venture, limited liability company or
similar business organization more than 50% of the ownership interests
having ordinary voting power of which shall at the time be so owned or
controlled. Unless otherwise expressly provided, all references herein to a
"Subsidiary" shall mean a Subsidiary of the Borrower.
"Substantial Portion" means, with respect to the Property of the
Borrower and the Guarantors, taken as a whole, Property which (i)
represents more than 10% of Consolidated Tangible Net Worth, as would be
shown in the consolidated financial statements of the Borrower and its
Subsidiaries as at the beginning of the fiscal quarter in which such
determination is made, or (ii) is responsible for more than 10% of
Consolidated Net Income, as reflected in the financial statements referred
to in clause (i) above.
"Total Senior Loan Commitments" means, at any date, on a
consolidated basis for the Borrower and the Guarantors, (i) the sum of (a)
all outstanding obligations described in clauses (i), (iv) and (viii) of
the definition of "Indebtedness" to Persons that are not Affiliates of the
Borrower or of any of its Subsidiaries, plus (b) all bona fide, binding but
unfunded commitments (including the Commitments) of banks or other
financial institutions with respect to the borrowing by the Borrower or any
Guarantor of obligations of the type referred to in clause (a) above,
except to the extent that such commitments are subject to conditions that
have not been satisfied (other than customary conditions that the Borrower
and the Guarantors can reasonably be expected to satisfy in the ordinary
course of business), less (ii) the sum of the outstanding amounts of the
Convertible Subordinated Notes and all other Subordinated Indebtedness,
all as determined in accordance with Agreement Accounting Principles.
<PAGE> 40
"Transferee" is defined in Section 15.4.
"Type" means, with respect to any Advance, its nature as a
Floating Rate Advance or Eurodollar Advance.
"Unfunded Liabilities" means the amount (if any) by which the
present value of all vested nonforfeitable benefits under all Single
Employer Plans exceeds the fair market value of the assets of such Plans
allocable to such benefits, all determined as of the then most recent
valuation date for such Plans, using the actuarial methods and assumptions
utilized in the actuarial report for each such Plan as of such date.
"Unmatured Default" means an event which but for the lapse of time
or the giving of notice, or both, would constitute a Default.
"Unused Commitment" means, at any date with respect to any Lender,
the amount (if any) by which such Lender's Commitment exceeds the sum of
(i) the outstanding principal balance of such Lender's Loans as of such
date and (ii) such Lender's ratable share (determined in accordance with
Section 4.6) of the outstanding amount of the Facility Letters of Credit.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all
of the outstanding voting securities (or the election of the board of
directors) of which shall at the time be beneficially owned (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as amended)
directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership, association, joint
venture, limited liability company or similar business organization 100% of
the ownership interests having ordinary voting power of which shall at the
time be so owned or controlled.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
<PAGE> 41
ARTICLE II
THE CREDITS
2.1. Commitment. From and including the date of this Agreement
and prior to the Facility Termination Date, each Lender severally agrees,
on the terms and conditions set forth in this Agreement, to make Loans to
the Borrower from time to time in amounts not to exceed in the aggregate at
any one time outstanding the amount of its Commitment; provided, however,
that a Lender shall not be required to make any Loan or Loans in excess of
the amount of such Lender's then Available Credit. Subject to the terms of
this Agreement, the Borrower may borrow, repay and reborrow at any time
prior to the Facility Termination Date. The Commitments to lend hereunder
shall expire on the Facility Termination Date.
2.2. Required Payments. Any outstanding Advances and all other
unpaid Obligations shall be paid in full by the Borrower on the Facility
Termination Date.
2.3. Ratable Loans. Each Advance hereunder shall consist of
Loans made from the several Lenders ratably in proportion to the ratio
that their respective Commitments bear to the Aggregate Commitment.
2.4. Types of Advances. The Advances may be Floating Rate
Advances or Eurodollar Advances, or a combination thereof, selected by the
Borrower in accordance with Sections 2.8 and 2.9.
2.5. Commitment Fee; Reductions in Aggregate Commitment. The
Borrower agrees to pay to the Agent for the account of each Lender a
commitment fee, at a rate per annum equal to the Applicable Commitment
Rate, on the daily average of such Lender's Unused Commitment from the date
hereof to and including the Facility Termination Date, payable in arrears
on the first day of each January, April, July and October hereafter and on
the Facility Termination Date. The Borrower may permanently reduce the
Aggregate Commitment in whole, or in part ratably among the Lenders in
integral multiples of $5,000,000 at any time or from time to time, upon at
least three (3) Business Days' written notice to the Agent, which notice
shall specify the amount of any such reduction, provided, however, that the
amount of the Aggregate Commitment may not be reduced below the sum of (i)
the aggregate principal amount of the outstanding Advances and (ii) the
Facility Letter of Credit Obligations. All accrued commitment fees shall be
payable on the effective date of any termination of the obligations of the
Lenders to make Loans hereunder.
<PAGE> 42
2.6. Minimum Amount of Each Advance. Each Advance shall be in the
minimum amount of $2,000,000 (and in multiples of $1,000,000 if in excess
thereof).
2.7. Optional Principal Payments. The Borrower may at any time or
from time to time pay, without penalty or premium, all outstanding Floating
Rate Advances, or, in a minimum aggregate amount of $2,000,000 or any
integral multiple of $1,000,000 in excess thereof, any portion of the
outstanding Floating Rate Advances upon one Business Day's prior notice to
the Agent. The Borrower may, upon three Business Days' prior notice to the
Agent, (a) pay, without penalty or premium, any Eurodollar Advance in full
on the last day of the Interest Period for such Eurodollar Advance, and (b)
prepay any Eurodollar Advance in full prior to the last day of the Interest
Period for such Eurodollar Advance, provided that the Borrower shall also
pay at the time of such prepayment all amounts payable with respect thereto
pursuant to Section 3.4 hereof.
2.8. Method of Selecting Types and Interest Periods for New
Advances. The Borrower shall select the Type of Advance and, in the case of
each Eurodollar Advance, the Interest Period applicable to each Advance
from time to time. The Borrower shall give the Agent irrevocable notice (a
"Borrowing Notice") not later than 10:00 a.m. (Chicago time) on the
Borrowing Date of each Floating Rate Advance and three Business Days before
the Borrowing Date of each Eurodollar Advance, specifying:
(i) the Borrowing Date, which shall be a Business Day, of such Advance,
(ii) the aggregate amount of such Advance,
(iii) the Type of Advance selected, and
(iv) in the case of each Eurodollar Advance, the Interest Period
applicable thereto.
Not later than noon (Chicago time) on each Borrowing Date, each Lender
shall make available its Loan or Loans, in funds immediately available in
Chicago to the Agent at its address specified pursuant to Article XVI. The
Agent will make the funds so received from the Lenders available to the
Borrower at the Agent's aforesaid address.
<PAGE> 43
2.9. Conversion and Continuation of Outstanding Advances
Floating Rate Advances shall continue as Floating Rate Advances unless
and until such Floating Rate Advances are converted into Eurodollar Advances.
Each Eurodollar Advance shall continue as a Eurodollar Advance until the end
of the then applicable Interest Period therefor, at which time such Eurodollar
Advance shall be automatically converted into a Floating Rate Advance
unless the Borrower shall have given the Agent a Conversion/Continuation
Notice requesting that, at the end of such Interest Period, such Eurodollar
Advance either continue as a Eurodollar Advance for the same or another
Interest Period or be repaid. Subject to the terms of Section 2.6, the
Borrower may elect from time to time to convert all or any part of an
Advance of any Type into any other Type or Types of Advances; provided that
any conversion of any Eurodollar Advance may be made on, and only on, the
last day of the Interest Period applicable thereto. The Borrower shall give
the Agent irrevocable notice (a "Conversion/Continuation Notice") of each
conversion of an Advance or continuation of a Eurodollar Advance not later
than 10:00 a.m. (Chicago time) at least one Business Day, in the case of a
conversion into a Floating Rate Advance, or three Business Days, in the
case of a conversion into or continuation of a Eurodollar Advance, prior to
the date of the requested conversion or continuation, specifying:
(i) the requested date which shall be a Business Day, of such
conversion or continuation;
(ii) the aggregate amount and Type of the Advance which is to
be converted or continued; and
(iii) the amount and Type(s) of Advance(s) into which such Advance is
to be converted or continued and, in the case of a conversion into or
continuation of a Eurodollar Advance, the duration of the Interest Period
applicable thereto.
2.10. Changes in Interest Rate, etc. Each Floating Rate Advance
shall bear interest on the outstanding principal amount thereof, for each
day from and including the date such Advance is made or is converted from a
Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.9 to
but excluding the date it becomes due or is converted into a Eurodollar
Advance pursuant to Section 2.9 hereof, at a rate per annum equal to the
Floating Rate for such day. Changes in the rate of interest on that portion
of any Advance maintained as a Floating Rate Advance will take effect
simultaneously with each change in the Alternate Base Rate or in the
Applicable Floating Rate Margin. Each Eurodollar Advance shall bear
interest from and including the first day of the Interest Period applicable
thereto to (but not including) the last day of such Interest Period at the
interest rate determined as applicable to such Eurodollar Advance. No
Interest Period may end after the Facility Termination Date.
<PAGE> 44
2.11. Determination of Applicable Margins and Applicable
Commitment Rate. (a) The Applicable Margins and the Applicable Commitment
Rate shall be determined by reference to the Senior Debt Rating in accordance
with the following table:
Applicable Applicable
Senior Debt Eurodollar Floating Rate Applicable
Rating Margin (%) Margin (%) Commitment Rate (%)
BB-/Baa3 or 1.00 0 0.250
higher
BB+/Ba1 1.25 0 0.300
BB/Ba2 1.50 0 0.350
BB-/Ba3 1.75 0.25 0.375
B+/B1 2.00 0.50 0.400
Lower or no 2.25 0.75 0.500
Senior Debt
Rating
(b) The Applicable Floating Rate Margin and the
Applicable Commitment Rate shall be adjusted, as applicable from time to
time, effective on the first Business Day after any change in the Senior
Debt Rating. The applicable Eurodollar Rate Margin in respect of any
Eurodollar Advance shall be adjusted, as applicable from time to time,
effective on the first day of the Interest Period for any Eurodollar
Advance after any change in the Senior Debt Rating.
2.12. Rates Applicable After Default. Notwithstanding anything to
the contrary contained in Section 2.8, 2.9 or 2.10, during the continuance
of a Default the Required Lenders may, at their option, by notice to the
Borrower (which notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 11.2 requiring unanimous consent
of the Lenders to changes in interest rates), declare that no Advance may
be made as, converted into or continued as a Eurodollar Advance.
Notwithstanding anything to the contrary contained in Section 2.8, 2.9 or
2.10, during the continuance of an Unmatured Default the Required Lenders
may, at their option, by notice to the Borrower (which notice may be
revoked at the option of the Required Lenders notwithstanding any provision
of Section 11.2 requiring unanimous consent of the Lenders to changes in
interest rates), declare that no Advance may be made as or converted into a
Eurodollar Advance. During the continuance of a Default, the Required
Lenders may, at their option, by notice to the Borrower (which notice maybe
<PAGE> 45
revoked at the option of the Required Lenders notwithstanding any
provision of Section 11.2 requiring unanimous consent of the Lenders
to changes in interest rates), declare that (i) each Eurodollar
Advance shall bear interest for the remainder of the applicable Interest
Period at the rate otherwise applicable to such Interest Period plus 2%
per annum and (ii) each Floating Rate Advance shall bear interest at a
rate per annum equal to the Floating Rate otherwise applicable to the
Floating Rate Advance plus 2% per annum.
2.13. Method of Payment. All payments of the Obligations hereunder
shall be made, without setoff, deduction, or counterclaim, in immediately
available funds to the Agent at the Agent's address specified pursuant to
Article XVI, or at any other Lending Installation of the Agent specified in
writing by the Agent to the Borrower, by noon (local time at the place of
receipt) on the date when due, and shall be applied ratably by the Agent
among the Lenders. Each payment delivered to the Agent for the account of
any Lender shall be delivered promptly by the Agent to such Lender in the
same type of funds that the Agent received at its address specified
pursuant to Article XVI or at any Lending Installation specified in a
notice received by the Agent from such Lender. If the Agent receives, for
the account of a Lender, a payment from the Borrower and fails to remit
such payment to the Lender on the Business Day such payment is received (if
received by noon by the Agent) or on the next Business Day (if received
after noon by the Agent), the Agent shall pay to such Lender interest on
such payment at a rate per annum equal to the Federal Funds Effective Rate
for each day for which such payment is so delayed. The Agent is hereby
authorized to charge the account of the Borrower maintained with First
Chicago for each payment of principal, interest and fees as it becomes due
hereunder.
2.14. Notes; Telephonic Notices. Each Lender is hereby authorized
to record the principal amount of each of its Loans and each repayment on
the schedule attached to its Note, provided, however, that the failure to
so record shall not affect the Borrower's obligations under such Note. The
Borrower hereby authorizes the Lenders and the Agent to extend, convert or
continue Advances, effect selections of Types of Advances and to transfer
funds based on telephonic notices made by any person or persons the Agent
or any Lender in good faith believes to be acting on behalf of the
Borrower. The Borrower agrees to deliver promptly to the Agent a written
confirmation, if such confirmation is requested by the Agent or any Lender,
of each telephonic notice signed by an Authorized Officer. If the written
confirmation differs in any material respect from the action taken by the
Agent and the Lenders, the records of the Agent and the Lenders shall
govern absent manifest error.
<PAGE> 46
2.15. Interest Payment Dates; Interest and Fee Basis. Interest
accrued on each Advance shall be payable on each Payment Date, commencing
with the first such date to occur after the date hereof, and on any date on
which the Advance is prepaid, whether due to acceleration or otherwise.
Interest and commitment fees shall be calculated for actual days elapsed on
the basis of a 360-day year. Interest shall be payable for the day an
Advance is made but not for the day of any payment on the amount paid if
payment is received prior to noon (local time at the place of receipt). If
any payment of principal of or interest on an Advance shall become due on a
day which is not a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall be included in
computing interest in connection with such payment.
2.16. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, the Agent will
notify each Lender of the contents of each Aggregate Commitment reduction
notice, Borrowing Notice, Conversion/Continuation Notice, and repayment
notice received by it hereunder. The Agent will notify each Lender of the
interest rate applicable to each Eurodollar Advance promptly upon
determination of such interest rate and will give each Lender prompt notice
of each change in the Alternate Base Rate.
2.17. Lending Installations. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to
any such Lending Installation and the Notes shall be deemed held by each
Lender for the benefit of such Lending Installation. Each Lender may, by
written or telex notice to the Agent and the Borrower, designate a Lending
Installation through which Loans will be made by it and for whose account
Loan payments are to be made.
2.18. Non-Receipt of Funds by the Agent. Unless the Borrower or a
Lender, as the case may be, notifies the Agent prior to the date on which
it is scheduled to make payment to the Agent of (i) in the case of a
Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a
payment of principal, interest or fees to the Agent for the account of the
Lenders, that it does not intend to make such payment, the Agent may assume
that such payment has been made. The Agent may, but shall not be obligated
to, make the amount of such payment available to the intended recipient in
reliance upon such assumption. If the Borrower or such Lender, as the case
may be, has not in fact made such payment to the Agent, the recipient of
such payment shall, on demand by the Agent, repay to the Agent the amount
so made available together with interest thereon in respect of each day
during the period commencing on the date such amount was so made available
by the Agent until the date the Agent recovers such amount at a rate per
annum equal to (a) in the case of payment by a Lender, the Federal Funds
Effective Rate for such day or (b) in the case of payment by the
Borrower, the interest rate applicable to the relevant Advance.
<PAGE> 47
2.19. Withholding Tax Exemption. At least five Business Days prior
to the first date on which interest or fees are payable hereunder for the
account of any Lender, each Lender (if any) that is not incorporated under
the laws of the United States of America, or a state thereof, agrees that
it will deliver to each of the Borrower and the Agent two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224,
certifying in either case that such Lender is entitled to receive payments
under this Agreement and the Notes without deduction or withholding of any
United States federal taxes and an Internal Revenue Service Form W-8 or W-9
entitling such Lender to receive a complete exemption from United States
tax backup withholding. Each Lender which so delivers a Form 1001 or 4224
further undertakes to deliver to each of the Borrower and the Agent two
additional copies of such form (or a successor form) on or before the date
that such form expires (currently, three successive calendar years for Form
1001 and one calendar year for Form 4224) or becomes obsolete or after the
occurrence of any event requiring a change in the most recent forms so
delivered by it, and such amendments thereto or extensions or renewals
thereof as may be reasonably requested by the Borrower or the Agent, in
each case certifying that such Lender is entitled to receive payments under
this Agreement and the Notes without deduction or withholding of any United
States federal taxes, unless an event (including without limitation any
change in treaty, law or regulation) has occurred prior to the date on
which any such delivery would otherwise be required which renders all such
forms inapplicable or which would prevent such Lender from duly completing
and delivering any such form with respect to it and such Lender advises the
Borrower and the Agent that it is not capable of receiving payments without
any deduction or withholding of United States federal tax. If a Lender does
not provide duly executed forms to the Borrower and the Agent within the
time periods set forth in the preceding paragraph, the Borrower or the
Agent shall withhold taxes from payments to such Lender at the applicable
statutory rates and the Borrower shall not be required to pay any
additional amounts as a result of such withholding. Upon the reasonable
request of the Borrower or the Agent, each Lender that has not provided
the forms or other documents, as provided above, on the basis of being
a "United States person," shall submit to Borrower and the Agent a
certificate or other evidence to the effect that it is such a
"United States person."
<PAGE> 48
2.20. Extension of Facility Termination Date. (a) The Borrower may
request a one-year extension of the Facility Termination Date by submitting
a request for an extension to the Agent (an "Extension Request") no more
than 27 months nor less than 25 months prior to the then scheduled Facility
Termination Date. Promptly upon (but not later than five Business Days
after) receipt of the Extension Request, the Agent shall notify each Lender
of the contents thereof and shall request each Lender to approve the
Extension Request. Each Lender approving the Extension Request shall
deliver its written approval no later than 30 days later than the date of
the Extension Request. If the approval of each of the Lenders is received
by the Agent within 30 days of the date of the Extension Request (or as
otherwise provided in Section 2.20(b)), the Agent shall promptly so notify
the Borrower, each Lender and the Issuing Bank, and the Facility
Termination Date shall be extended by one year, and in such event the
Borrower may thereafter request further extension(s) of the then scheduled
Facility Termination Date in accordance with this Section 2.20. If any of
the Lenders does not deliver to the Agent such Lender's written approval to
any Extension Request within the 30 days of the date of such Extension
Request, the Facility Termination Date shall not be extended, except as
otherwise provided in Section 2.20(b).
(b) If (i) any Lenders whose pro rata shares of the
Aggregate Commitment do not exceed (in the aggregate) 20% of the Aggregate
Commitment ("Rejecting Lenders") shall not approve an Extension Request,
(ii) all rights and obligations of such Rejecting Lenders under this
Agreement and under the other Loan Documents (including, without
limitation, their Commitment and all Loans owing to them) shall have been
assigned, within 90 days following such Extension Request, in accordance
with Section 2.21, to one or more Replacement Lenders who shall have
approved in writing such Extension Request at the time of such assignment,
and (iii) no other Lender shall have given written notice to the Agent of
such Lender's withdrawal of its approval of the Extension Request, the
Agent shall promptly so notify the Borrower, each Lender and the Issuing
Bank and the Facility Termination Date shall be extended by one year, and
in such event the Borrower may thereafter request further extension(s) as
provided in Section 2.20(a).
<PAGE> 49
(c) Within ten days of the Agent's notice to the Borrower
that all of the Lenders have approved an Extension Request (whether
pursuant to Section 2.20(a) or 2.20(b)), the Borrower shall pay to the
Agent for the account of each Lender an extension fee equal to the product
of (i) such Lender's Commitment and (ii) the fee set forth with respect to
such Lender (or such Lender's predecessor-in-interest if such Lender is not
a Lender on the date hereof) set forth in Schedule 2.20 hereto.
2.21. Replacement of Certain Lenders. In the event a Lender (the
"Affected Lender") shall have requested compensation from the Borrower
under Sections 3.1 or 3.2 to cover additional costs incurred by such Lender
that are not being incurred generally by the other Lenders or shall have
delivered a notice pursuant to Section 3.3 that such Affected Lender is
unable to extend Eurodollar Loans for reasons not generally applicable to
the other Lenders or such Affected Lender is a Rejecting Lender pursuant to
Section 2.20, then, in any such case, the Borrower or the Agent may make
written demands on such Affected Lender (with a copy to the Agent in the
case of a demand by the Borrower and a copy to the Borrower in the case of
a demand by the Agent) for the Affected Lender to assign, and such Affected
Lender shall use its best efforts to assign, pursuant to one or more duly
executed assignment agreements in substantially the form provided for in
Section 15.3.1, within five Business Days after the date of such demand, to
one or more financial institutions that comply with the provisions of
Section 15.3, and if selected by the Borrower, that are reasonably
acceptable to the Agent, that the Borrower or the Agent, as the case may
be, shall have engaged for such purpose (the "Replacement Lender"), all of
such Affected Lender's rights and obligations under this Agreement and the
other Loan Documents (including, without limitation, its Commitment and all
Loans owing to it) in accordance with Section 15.3. The Agent agrees, upon
the occurrence of such events with respect to an Affected Lender and upon
written request of the Borrower, to use its reasonable efforts to obtain
the commitments from one or more financial institutions to act as a
Replacement Lender. The Agent is authorized, but shall not be obligated to,
execute one or more of such assignment agreements as attorney-in-fact for
any Affected Lender failing to execute and deliver the same within five
Business Days after the date of such demand. Further, with respect to such
assignment, the Affected Lender shall have concurrently received, in cash,
all amounts due and owing to the Affected Lender hereunder or under any
other Loan Document, including without limitation the aggregate outstanding
principal amount of the Loans owed to such Lender, together with accrued
interest thereon through the date of such assignment, amounts payable under
Sections 3.1 and 3.2 with respect to such Affected Lender and all fees
payable to such Affected Lender hereunder; provided that, upon such
Affected Lender's replacement, such Affected Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of
Article III and Section 12.7, as well as to any fees accrued hereunder
and not yet paid, and shall continue to be obligated under Section 13.8
with respect to obligations and liabilities accruing prior to the
replacement of such Affected Lender.
<PAGE> 50
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. Yield Protection. If any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive
(whether or not having the force of law), or any interpretation thereof,
or the compliance of any Lender therewith,
(i) subjects any Lender or any applicable Lending Installation to
any tax, duty, charge or withholding on or from payments due from the
Borrower (excluding any taxes imposed on, or based on, or determined by
reference to the net income of any Lender or applicable Lending
Installation, including, without limitation, franchise taxes, alternative
minimum taxes and any branch profits tax (collectively, "Excluded Taxes")),
any taxes imposed on, or based on, or determined by reference to or changes
the basis of taxation of payments to any Lender in respect of its Loans or
other amounts due it hereunder (except for Excluded Taxes),
(ii) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Lender or
any applicable Lending Installation (other than reserves and assessments
taken into account in determining the interest rate applicable to
Eurodollar Rates), or
(iii) imposes any other condition the result of which is to increase the
cost to any Lender or any applicable Lending Installation of making,
funding or maintaining loans or reduces any amount receivable by any Lender
or any applicable Lending Installation in connection with loans, or
requires any Lender or any applicable Lending Installation to make any
payment calculated by reference to the amount of loans held or interest
received by it, by an amount deemed material by such Lender,
then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an
amount received which such Lender determines is attributable to making,
funding and maintaining its Loans and its Commitment; provided, however,
that the Borrower shall not be required to increase any such amounts
payable to any Lender (i) if such Lender fails to comply with the
requirements of Section 2.19 hereof or (2) to the extent that such Lender
determines, in its sole reasonable discretion, that it can, after notice
from the Borrower, through reasonable efforts, eliminate or reduce the
amount of tax liabilities payable (without additional costs or expenses
unless the Borrower agrees to bear such costs or expenses) or other
disadvantages or risks (economic or otherwise) to such Lender or the Agent.
If any Lender receives a refund in respect of any tax for which such Lender
has received payment from the Borrower hereunder, such Lender shall
promptly notify the Borrower of such refund and such Lender shall repay the
amount of such refund to the Borrower, provided that the Borrower, upon the
request of such Lender, agrees to return such refund (plus any penalties,
interest or other charges) to such Lender in the event such Lender is
required to repay such refund. The determination as to whether any Lender
has received a refund shall be made by such Lender and such determination
shall be conclusive absent manifest error.
<PAGE> 51
3.2. Changes in Capital Adequacy Regulations. If a Lender or
Issuing Bank determines the amount of capital required or expected to be
maintained by such Lender, any Lending Installation of such Lender or
Issuing Bank or any corporation controlling such Lender or Issuing Bank is
increased as a result of a Change, then, within 15 days of demand by such
Lender or Issuing Bank, the Borrower shall pay such Lender or Issuing Bank
the amount necessary to compensate for any shortfall in the rate of return
on the portion of such increased capital which such Lender or Issuing Bank
determines is attributable to this Agreement, its Loans or its obligation
to make Loans hereunder, or its issuance or maintenance of or participation
in, or commitment to issue, to maintain or to participate in, the Facility
Letters of Credit hereunder (after taking into account such Lender's or
Issuing Bank's policies as to capital adequacy). "Change" means (i) any
change after the date of this Agreement in the Risk-Based Capital
Guidelines or (ii) any adoption of or change in any
other law, governmental or quasi-governmental rule, regulation, policy,
guideline, interpretation, or directive (whether or not having the force of
law) after the date of this Agreement which affects the amount of capital
required or expected to be maintained by any Lender, Issuing Bank, Lending
Installation or any corporation controlling any Lender or Issuing Bank.
"Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines
in effect in the United States on the date of this Agreement, including
transition rules, and (ii) the corresponding capital regulations
promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking
Regulation and Supervisory Practices Entitled "International Convergence of
Capital Measurements and Capital Standards," including transition rules,
and any amendments to such regulations adopted prior to the date of this
Agreement.
3.3. Availability of Types of Advances. If any Lender determines
and notifies the Agent that maintenance of any of such Lender's Eurodollar
Loans at a suitable Lending Installation would violate any applicable law,
rule, regulation or directive, whether or not having the force of law, the
Agent shall suspend the availability of the affected Type of Advance and
require any Eurodollar Advances of the affected Type to be repaid; or if
the Required Lenders determine and notify the Agent that (i) deposits of a
type or maturity appropriate to match fund Eurodollar Advances are not
available, the Agent shall suspend the availability of the affected Type of
Advance with respect to any Eurodollar Advances made after the date of any
such determination, or (ii) an interest rate applicable to a Type of
Advance does not accurately reflect the cost of making a Eurodollar Advance
of such Type, then, if for any reason whatsoever the provisions of Section
3.1 are inapplicable, the Agent shall suspend the availability of the
affected Type of Advance with respect to any Eurodollar Advance made after
the date of any such determination.
3.4. Funding Indemnification. If any payment of a Eurodollar
Advance occurs on a date which is not the last day of the applicable
Interest Period, whether because of acceleration, prepayment or otherwise,
or a Eurodollar Advance is not made on the date specified by the Borrower
for any reason other than default by the Lenders, the Borrower will
indemnify each Lender for any loss or cost incurred by it resulting
therefrom, including, without limitation, any loss or cost in liquidating
or employing deposits acquired to fund or maintain the Eurodollar Advance.
<PAGE> 52
3.5. Lender Statements; Survival of Indemnity. To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its Eurodollar Advances to reduce any
liability of the Borrower to such Lender under Sections 3.1 and 3.2 or to
avoid the unavailability of a Type of Advance under Section 3.3, so long as
such designation is not disadvantageous to such Lender. Each Lender or
Issuing Bank shall deliver a written statement of such Lender or Issuing
Bank as to the amount due, if any, under Sections 3.1, 3.2 or 3.4. Such
written statement shall set forth in reasonable detail the calculations
upon which such Lender or Issuing Bank determined such amount and shall be
final, conclusive and binding on the Borrower in the absence of manifest
error. Determination of amounts payable under such Sections in connection
with a Eurodollar Advance shall be calculated as though each Lender funded
its Eurodollar Advance through the purchase of a deposit of the type and
maturity corresponding to the deposit used as a reference in determining
the Eurodollar Advance applicable to such Loan, whether in fact that is the
case or not. Unless otherwise provided herein, the amount specified in the
written statement shall be payable on demand after receipt by the Borrower
of the written statement. The obligations of the Borrower under Sections
3.1, 3.2 and 3.4 shall survive payment of the Obligations and termination
of this Agreement.
ARTICLE IV
THE LETTER OF CREDIT FACILITY
4.1. Facility Letters of Credit. The Issuing Bank agrees, on the
terms and conditions set forth in this Agreement, to issue from time to
time for the account of the Borrower, through such offices or branches as
it and the Borrower may jointly agree, one or more Facility Letters of
Credit in accordance with this Article IV, during the period commencing on
the date hereof and ending on the Business Day prior to the Facility
Termination Date.
4.2. Limitations. No Issuing Bank shall issue, amend or extend,
at any time, any Facility Letter of Credit:
(i) if the aggregate maximum amount then available for
drawing under Letters of Credit issued by such Issuing Bank, after giving
effect to the Facility Letter of Credit or amendment or extension thereof
requested hereunder, shall exceed any limit imposed by law or regulation
upon such Issuing Bank;
<PAGE> 53
(ii) if, after giving effect to the Facility Letter of Credit
or amendment or extension thereof requested hereunder, the aggregate
principal amount of the Facility Letter of Credit Obligations would exceed
$20,000,000;
(iii) that, in the case of the issuance of a Facility Letter of
Credit, is in, or in the case of an amendment of a Facility Letter of
Credit, increases the face amount thereof by, an amount in excess of the
then Aggregate Available Credit;
(iv) if, after giving effect to the Facility Letter of Credit
or amendment or extension thereof requested hereunder, Consolidated Senior
Debt Borrowings would exceed the Borrowing Base as of the most recent
Inventory Valuation Date;
(v) if such Issuing Bank receives written notice from the
Agent at or before noon (Chicago time) on the proposed Issuance Date of
such Facility Letter of Credit that one or more of the conditions precedent
contained in Sections 5.1 or 5.2, as applicable, would not on such Issuance
Date be satisfied, unless such conditions are thereafter satisfied and
written notice of such satisfaction is given to such Issuing Bank by the
Agent;
(vi) that has an expiration date (taking into account any
automatic renewal provisions thereof) later than the Business Day next
preceding the scheduled Facility Termination Date; or
(vii) that is in a currency other than U.S. Dollars.
4.3. Conditions. In addition to being subject to the satisfaction
of the conditions contained in Sections 5.1 and 5.2, as applicable, the
issuance of any Facility Letter of Credit is subject to the satisfaction in
full of the following conditions:
(i) the Borrower shall have delivered to the Issuing Bank
at such times and in such manner as the Issuing Bank may reasonably
prescribe a Reimbursement Agreement and such other documents and materials
as may be reasonably required pursuant to the terms thereof, and the
proposed Facility Letter of Credit shall be reasonably satisfactory to such
Issuing Bank in form and content; and
<PAGE> 54
(ii) as of the Issuance Date no order, judgment or decree of
any court, arbitrator or governmental authority shall enjoin or restrain
such Issuing Bank from issuing the Facility Letter of Credit and no law,
rule or regulation applicable to such Issuing Bank and no directive from
and governmental authority with jurisdiction over the Issuing Bank shall
prohibit such Issuing Bank from issuing Letters of Credit generally or from
issuing that Facility Letter or Credit.
4.4. Procedure for Issuance of Facility Letters of Credit. (a) The
Borrower shall give the Issuing Bank and the Agent not less than 15 days'
prior written notice of any requested issuance of a Facility Letter of
Credit under this Agreement. Such notice shall specify (i) the stated
amount of the Facility Letter of Credit requested, (ii) the requested
Issuance Date, which shall be a Business Day, (iii) the date on which such
requested Facility Letter of Credit is to expire, which date shall be in
compliance with the requirements of Section 4.2(vi), (iv) the purpose for
which such Facility Letter of Credit is to be issued, and (v) the Person
for whose benefit the requested Facility Letter of Credit is to be issued.
At the time such request is made, the Borrower shall also provide the Agent
with a copy of the form of the Facility Letter of Credit it is requesting
be issued.
(b) Upon receipt of a request for issuance of a Facility Letter of
Credit in accordance with Section 4.4(a), the Agent shall promptly deliver
a copy of such request to the Lender then designated as Issuing Bank
pursuant to Section 4.10. Within 10 days after receipt of such request,
such Issuing Bank shall approve or disapprove, in its reasonable
discretion, the issuance of such requested Facility Letter of Credit, but
the issuance of such approved Facility Letter of Credit shall continue to
be subject to the provisions of this Article IV. The Issuing Bank shall use
reasonable efforts to notify the Borrower of any changes in the Issuing
Bank's policies or procedures that could reasonably be expected to affect
adversely the Issuing Bank's approval of requested Facility Letters of
Credit.
(c) Not less than three nor more than five Business Days prior to
the issuance of a Facility Letter of Credit approved by the Issuing Bank as
provided in Section 4.4(b), the Borrower shall confirm in writing to the
Agent and to the Issuing Bank the intended Issuance Date and amount of such
Facility Letter of Credit. The Agent shall determine, as of the close of
business on the day it receives such written confirmation from the
Borrower, whether the issuance of such Facility Letter of Credit would be
<PAGE> 55
permitted under the provisions of Sections 4.2(iii) and (iv) and,
prior to the close of business on the second Business Day after the
Agent received such written confirmation from the Borrower under
Section 4.4(a), the Agent shall notify the Issuing Bank and the Borrower
(in writing or by telephonic notice confirmed promptly thereafter in
writing) whether issuance of the requested Facility Letter of Credit
would be permitted under the provisions of Sections 4.2(iii) and (iv).
If the Agent notifies the Issuing Bank and the Borrower that such issuance
would be so permitted, then, subject to the terms and conditions of this
Article IV and provided that the applicable conditions set forth in
Sections 5.1 and 5.2 have been satisfied, the Issuing Bank shall, on the
requested Issuance Date, issue the requested Facility Letter of Credit
in accordance with the Issuing Bank's usual and customary business practices.
The Issuing Bank shall give the Agent written notice, or telephonic notice
confirmed promptly thereafter in writing, of the issuance of a Facility
Letter of Credit.
(d) An Issuing Bank shall not extend or amend any Facility Letter
of Credit unless the requirements of this Section 4.4 are met as though a
new Facility Letter of Credit were being requested and issued.
(e) Any Lender may, but shall not be obligated to, issue to the
Borrower or any Subsidiary Letters of Credit (that are not Facility Letters
of Credit) for its own account, and at its own risk. None of the provisions
of this Article IV shall apply to any Letter of Credit that is not a
Facility Letter of Credit.
4.5. Duties of Issuing Bank. Any action taken or omitted to be
taken by an Issuing Bank under or in connection with any Facility Letter of
Credit, if taken or omitted in the absence of willful misconduct or gross
negligence, shall not put such Issuing Bank under any resulting liability
to any Lender or, assuming that such Issuing Bank has complied with the
procedures specified in Section 4.4, relieve any Lender of its obligations
hereunder to such Issuing Bank. In determining whether to pay under any
Facility Letter of Credit, the Issuing Bank shall have no obligation
relative to the Lenders other than to confirm that any documents required
to be delivered under such Facility Letter of Credit appear to have been
delivered in compliance and that they appear to comply on their face with
the requirements of such Facility Letter of Credit.
4.6. Participation. (a) Immediately upon issuance by an Issuing
Bank of any Facility Letter of Credit in accordance with Section 4.4,
each Lender shall be deemed to have irrevocably and unconditionally
purchased and received from such Issuing Bank, without recourse or warranty,
an undivided interest and participation (ratably in proportion to the
ratio that such Lender's Commitment bears to the Aggregate Commitment) in
such Facility Letter of Credit (including, without limitation, all
obligations of the Borrower with respect thereto other than amounts owing
to such Issuing Bank under Section 3.2).
<PAGE> 56
(b) In the event that an Issuing Bank makes any payment under any
Facility Letter of Credit and the Borrower shall not have repaid such
amount to such Issuing Bank on or before the date of such payment by such
Issuing Bank, such Issuing Bank shall promptly so notify the Agent, which
shall promptly so notify each Lender. Upon receipt of such notice, each
Lender shall promptly and unconditionally pay to the Agent for the account
of such Issuing Bank the amount of such Lender's share (ratably in
proportion to the ratio that such Lender's Commitment bears to the
Aggregate Commitment) of such payment in same day funds, and the Agent
shall promptly pay such amount, and any other amounts received by the Agent
for such Issuing Bank's account pursuant to this Section 4.6(b), to such
Issuing Bank. If the Agent so notifies such Lender prior to 10:00 A.M.
(Chicago time) on any Business Day, such Lender shall make available to the
Agent for the account of such Issuing Bank such Lender's share of the
amount of such payment on such Business Day in same day funds. If and to
the extent such Lender shall not have so made its share of the amount of
such payment available to the Agent for the account of such Issuing Bank,
such Lender agrees to pay to the Agent for the account of such Issuing Bank
forthwith on demand such amount, together with interest thereon, for each
day from the date such payment was first due until the date such amount is
paid to the Agent for the account of such Issuing Bank, at the Federal
Funds Effective Rate. The failure of any Lender to make available to the
Agent for the account of such Issuing Bank such Lender's share of any such
payment shall not relieve any other Lender of its obligation hereunder to
make available to the Agent for the account of such Issuing Bank its share
of any payment on the date such payment is to be made.
(c) The payments made by the Lenders to an Issuing Bank in
reimbursement of amounts paid by it under a Facility Letter of Credit shall
constitute, and the Borrower hereby expressly acknowledges and agrees that
such payments shall constitute, Advances hereunder and such payments shall
for all purposes be treated as Advances (notwithstanding that the amounts
thereof may not comply with the provisions of Section 2.6). Such Advances
shall be Floating Rate Advances, subject to the Borrower's rights under
Article II hereof.
<PAGE> 57
(d) Upon the request of the Agent or any Lender, an Issuing Bank
shall furnish to the requesting Agent or Lender copies of any Facility
Letter of Credit or Reimbursement Agreement to which such Issuing Bank is
party and such other documentation as may reasonably be requested by the
Agent or the Lender.
(e) The obligations of the Lenders to make payments to the Agent
for the account of an Issuing Bank with respect to a Facility Letter of
Credit shall be irrevocable, not subject to any qualification or exception
whatsoever and shall be made in accordance with, but not subject to, the
terms and conditions of this Agreement under all circumstances:
(i) any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or other
right which the Borrower may have at any time against a beneficiary named
in a Facility Letter of Credit or any transferee of any Facility Letter of
Credit (or any Person for whom any such transferee may be acting), such
Issuing Bank, the Agent, any Lender, or any other Person, whether in
connection with this Agreement, any Facility Letter of Credit, the
transactions contemplated herein or any unrelated transactions (including
any underlying transactions between the Borrower or any Subsidiary and the
beneficiary named in any Facility Letter of Credit);
(iii) any draft, certificate or any other document presented
under the Facility Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect of any statement therein being
untrue or inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan Documents;
(v) any failure by the Agent or the Issuing Bank to make any
reports required pursuant to Section 4.8; or
(vi) the occurrence of any Default or Unmatured Default.
4.7. Compensation for Facility Letters of Credit. (a) The
Borrower agrees to pay to the Agent, in the case of each outstanding
Facility Letter of Credit, the Facility Letter of Credit Fee therefor,
payable in monthly installments in advance on the Issuance Date (which
installment shall be a pro rata portion of the annual Facility Letter
of Credit Fee for the period commencing on the Issuance Date and ending on
the day preceding the Payment Date next following the Issuance Date) and
on each Payment Date after the Issuance Date (which installment shall be
a pro rata portion of the annual Facility Letter of Credit Fee for the
month in which such Payment Date occurs). Facility Letter of Credit
Fees shall be calculated, on a pro rata basis for the period to which such
payment applies, for actual days that will elapse during such period,
on the basis of a 360-day year. The Agent shall promptly remit such
Facility Letter of Credit Fees, when paid, to the Lenders (ratably in the
proportion that each Lender's Commitment bears to the Aggregate Commitment).
<PAGE> 58
(b) An Issuing Bank shall have the right to receive solely for its
own account such amounts as the Borrower may agree, in writing, to pay to
such Issuing Bank with respect to issuance fees and for such Issuing Bank's
out-of-pocket costs of issuing and servicing Facility Letters of Credit.
4.8. Issuing Bank Reporting Requirements. Each Issuing Bank shall,
no later than the tenth day following the last day of each month, provide
to the Agent a schedule of the Facility Letters of Credit issued by it, in
form and substance reasonably satisfactory to the Agent, showing the
Issuance Date, account party, original face amount, amount (if any) paid
thereunder, expiration date and the reference number of each Facility
Letter of Credit outstanding at any time during such month and the
aggregate amount (if any) payable by the Borrower to such Issuing Bank
during the month pursuant to Section 3.2. Copies of such reports shall be
provided promptly to each Lender by the Agent.
4.9. Indemnification; Nature of Issuing Bank's Duties. (a) In
addition to amounts payable as elsewhere provided in this Article IV, the
Borrower hereby agrees to protect, indemnify, pay and save the Agent and
each Lender and Issuing Bank harmless from and against any and all claims,
demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees) arising from the claims of third
parties against the Agent, Issuing Bank or Lender as a consequence, direct
or indirect, of (i) the issuance of any Facility Letter of Credit other
than, in the case of an Issuing Bank, as a result of its willful misconduct
or gross negligence, or (ii) the failure of an Issuing Bank issuing a
Facility Letter of Credit to honor a drawing under such Facility Letter of
Credit as a result of any act or omission, whether rightful or wrongful, of
any present or future de jure or de facto government or governmental
authority.
<PAGE> 59
(b) As among the Borrower, the Lenders, the Agent and the Issuing
Bank, the Borrower assumes all risks of the acts and omissions of, or
misuse of Facility Letters of Credit by, the respective beneficiaries of
such Facility Letters of Credit. In furtherance and not in limitation of
the foregoing, neither the Issuing Bank nor the Agent nor any Lender shall
be responsible: (i) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of the Facility Letters of
Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Facility Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may
prove to be invalid or ineffective for any reason; (iii) for failure of the
beneficiary of a Facility Letter of Credit to comply fully with conditions
required in order to draw upon such Facility Letter of Credit; (iv) for
errors, omissions, interruptions or delays in transmission or delivery of
any messages, by mail, cable, telegraph, telex or otherwise, whether or not
they be in cipher; (v) for errors in interpretation of technical terms;
(vi) for any loss or delay in the transmission or otherwise of any document
required in order to make a drawing under any Facility Letter of Credit or
of the proceeds thereof; (vii) for the misapplication by the beneficiary of
a Facility Letter of Credit of the proceeds of any drawing under such
Facility Letter of Credit; and (viii) for any consequences arising from
causes beyond the control of the Agent, the Issuing Bank and the Lenders
including, without limitation, any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
governmental authority. None of the above shall affect, impair, or prevent
the vesting of any of the Issuing Bank's rights or powers under this
subsection 4.9.
(c) In furtherance and extension and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by
an Issuing Bank under or in connection with the Facility Letters of Credit
or any related certificates, if taken or omitted in good faith, shall not
put such Issuing Bank, the Agent or any Lender under any resulting
liability to the Borrower or relieve the Borrower of any of its obligations
hereunder to any such Person.
(d) Notwithstanding anything to the contrary contained in this
Section 4.9, the Borrower shall have no obligation to indemnify an Issuing
Bank under this Section 4.9 in respect of any liability incurred by such
Issuing Bank arising primarily out of the willful misconduct or gross
negligence of such Issuing Bank, as determined by a court of competent
jurisdiction, or out of the wrongful dishonor by such Issuing Bank of a
proper demand for payment made under the Facility Letters of Credit issued
by such Issuing Bank, unless such dishonor was made at the request of the
Borrower.
<PAGE> 60
4.10. Resignation of Issuing Bank. The Issuing Bank shall continue
to be the Issuing Bank unless and until (i) it shall have given the
Borrower and the Agent notice that it has elected to resign as Issuing Bank
and (ii) a replacement Issuing Bank shall have been designated and approved
in writing by the Agent and the Borrower. The resigning Issuing Bank shall
continue to have the rights and obligations of an Issuing Bank hereunder
solely with respect to Facility Letters of Credit theretofore issued by it
notwithstanding the designation of a replacement Issuing Bank hereunder),
but upon such designation of a replacement Issuing Bank, the resigning
Issuing Bank shall not thereafter issue any Facility Letters of Credit
(unless such Lender shall again thereafter be designated as Issuing Bank in
accordance with the provisions of this Section 4.10).
4.11. Obligations of Issuing Bank and Other Lenders. Except to the
extent that a Lender shall have agreed to be designated as an Issuing Bank,
no Lender shall have any obligation to accept or approve any request for,
or to issue, amend or extend, any Letter of Credit, and the obligations of
the Issuing Bank to issue, amend or extend any Facility Letter of Credit
are expressly limited by and subject to the provisions of this Article IV.
ARTICLE V
CONDITIONS PRECEDENT
5.1. Initial Advance. The Lenders shall not be required to make
the initial Advance hereunder, and the Issuing Bank shall not be required
to issue the initial Facility Letter of Credit hereunder, unless the
Borrower has paid to the Agent the fees set forth in the letter agreement
dated July 31, 1995 between the Agent and the Borrower, and from which
payment the Agent shall have paid to the Lenders the fees provided to be
paid to them in accordance with the Agent's "offer letter" dated August 23,
1995, and the Borrower has furnished to the Agent with sufficient copies
for the Lenders:
(i) Copies of the certificate of incorporation of the Borrower and
each Guarantor, together with all amendments, and a certificate of good
standing, all certified by the appropriate governmental officer in the
jurisdiction of incorporation.
<PAGE> 61
(ii) Copies, certified by the Secretary or Assistant Secretary of the
Borrower and each Guarantor, of each such corporation's by-laws and of its
Board of Directors' resolutions (and resolutions of other bodies, if any
are deemed necessary by counsel for any Lender) authorizing the execution
of the Loan Documents.
(iii) Incumbency certificates, executed by the Secretary or Assistant
Secretary of the Borrower and each Guarantor, which shall identify by name
and title and bear the signature of the officers of the such corporation
authorized to sign the Loan Documents and the Guaranty (as applicable) and
(if applicable) to make borrowings hereunder and to request, apply for and
execute Facility Letter of Credit Reimbursement Agreements with respect to
Facility Letters of Credit hereunder, upon which certificates the Agent,
the Lenders and the Issuing Bank shall be entitled to rely until informed
of any change in writing by the Borrower.
(iv) A certificate, signed by an Authorized Officer, certifying that on
the initial Borrowing Date or initial Issuance Date no Default or Unmatured
Default has occurred and is continuing.
(v) A written opinion of Kaye, Scholer, Fierman, Hays & Handler,
counsel to the Borrower and Guarantors, addressed to the Agent and Lenders
in substantially the form of Exhibit "C" hereto.
(vi) A written opinion of Steven Lane, Director-Legal of the Borrower,
addressed to the Agent and the Lenders in substantially the form of Exhibit
"D' hereto.
(vii) A written opinion of Lord, Bissell & Brook, Illinois counsel to
the Borrower and Guarantors, addressed to the Agent and the Lenders in
substantially the form of Exhibit "E" hereto.
(viii) Notes payable to the order of each of the Lenders.
(ix) Written money transfer instructions, in substantially the form of
Exhibit "F" hereto, addressed to the Agent and signed by an Authorized
Officer, together with such other related money transfer authorizations as
the Agent may have reasonably requested.
<PAGE> 62
(x) The Guaranty duly executed by the Guarantors.
(xi) A Contribution Agreement duly executed by the Guarantors in the
form of Exhibit "G" hereto (the "Contribution Agreement").
(xii) A Subordination Agreement duly executed by the Non-Borrowing
Subsidiaries in the form of Exhibit "H" hereto (the "Subordination
Agreement").
(xiii) Evidence satisfactory to the Agent (A) of payment in full (which
payment may be made from the proceeds of the initial Advance hereunder) of
all obligations of the Borrower to, and termination of the Borrower's
financing arrangements with, GECC, and (B) that all Liens securing such
obligations and financing arrangements shall be discharged promptly, but in
no event later than 90 days, following the payment of such obligations.
(xiv) Such other documents as any Lender or Issuing Bank or their
respective counsel may have reasonably requested.
5.2. Each Advance. The Lenders shall not be required to make any
Advance (other than the conversion of an Advance of one Type to an Advance
of another Type that does not increase the aggregate amount of outstanding
Advances), unless on the applicable Borrowing Date, and an Issuing Bank
shall not be required to issue, amend or extend a Facility Letter of Credit
unless on the applicable Issuance Date:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in Article VI are true
and correct in all material respects as of such Borrowing Date or Issuance
Date except to the extent any such representation or warranty is stated to
relate solely to an earlier date, in which case such representation or
warranty shall be true and correct in all material respects on and as of
such earlier date and except to the extent that any such representation or
warranty relates to changes otherwise permitted by this Agreement.
<PAGE> 63
(iii) After the making of such Advance or issuance of such Facility Letter
of Credit, Consolidated Senior Debt Borrowings shall not exceed the
Borrowing Base (determined as of the most recent Inventory Valuation Date).
(iv) The Borrower shall have delivered to the Agent, not more than three
(3) Business Days prior to the applicable Borrowing Date or Issuance Date,
a duly completed certificate in substantially the form of Exhibit "I"
hereto.
(v) All legal matters incident to (A) the making of such Advance shall
be reasonably satisfactory to the Lenders and their counsel and (B) the
issuance of such Facility Letter of Credit shall be reasonably satisfactory
to the Agent, such Issuing Bank and their respective counsel.
Each Borrowing Notice with respect to each such Advance and each
request for a Facility Letter of Credit shall constitute a representation
and warranty by the Borrower that the conditions contained in Sections
5.2(i) and (ii) have been satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
6.1. Existence and Standing. The Borrower is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite authority to conduct
its business in each jurisdiction in which its business is conducted
(except to the extent that a failure to maintain such existence, good
standing or authority would not reasonably be expected to have and does not
have a Material Adverse Effect). Each of the Significant Guarantors is a
corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has all requisite
authority to conduct its business in each jurisdiction in which its
business is conducted (except to the extent that a failure to maintain such
existence, good standing or authority would not reasonably be expected to
have and does not have a Material Adverse Effect).
<PAGE> 64
6.2. Authorization and Validity. The Borrower has the corporate
power and authority to execute and deliver the Loan Documents and to
perform its obligations hereunder and thereunder. The execution and
delivery by the Borrower of the Loan Documents and the performance of its
obligations thereunder have been duly authorized and the Loan Documents
constitute legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their terms, subject to bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and general principles of equity. Each of the Guarantors has the
corporate power and authority to execute and deliver the Guaranty and to
perform its obligations thereunder. The execution and delivery by the
Guarantors of the Guaranty and the performance of their obligations
thereunder have been duly authorized, and the Guaranty constitutes the
legal, valid and binding obligations of the Guarantors enforceable against
the Guarantors in accordance with its terms, subject to bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally and general principles of equity.
6.3. No Conflict; Government Consent. Neither the execution and
delivery by the Borrower of the Loan Documents or by the Significant
Guarantors of the Guaranty, nor the consummation of the transactions herein
contemplated, nor compliance with the provisions hereof or thereof will
violate in any material respect any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on the Borrower or any of the
Significant Guarantors or the Borrower's or any Significant Guarantor's
certificate of incorporation or by-laws or the provisions of any indenture,
instrument or agreement to which the Borrower or any Significant Guarantor
is a party or is subject, or by which it, or its Property, is bound, or
conflict with or constitute a default thereunder, or result in the creation
or imposition of any Lien in, of or on the Property of the Borrower or any
Significant Guarantor pursuant to the terms of any such indenture,
instrument or agreement except that, until the payment of the Borrower's
Indebtedness to GECC as provided in Section 5.2(xiii) hereof, the execution
and delivery of this Agreement may violate Borrower's credit agreement with
GECC. Except as set forth on Schedule "6.3" hereto, no order, consent,
approval, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or
authority, or any subdivision thereof, is required to authorize, or is
required in connection with the execution, delivery and performance of, or
the legality, validity, binding effect or enforceability of, any of the
Loan Documents or the Guaranty.
<PAGE> 65
6.4. Financial Statements. The June 30, 1995 unaudited condensed
consolidated financial statements of the Borrower and its Subsidiaries
delivered to the Lenders were prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and note disclosures normally included in annual financial statements
prepared in accordance with GAAP have been condensed or omitted pursuant to
those rules and regulations. Such statements fairly present, in all
material respects, the consolidated financial condition and operations of
the Borrower and its Subsidiaries at such date and the consolidated results
of their operations for the period then ended, subject to normal recurring
adjustments.
6.5. Material Adverse Change. Since the date of the financial
statements (whether quarterly or annual) of the Borrower that have most
recently been delivered by the Borrower to the Agent, there has been no
change in the business, Property, condition (financial or otherwise) or
results of operations of the Borrower and the Significant Guarantors (taken
as a whole) that has had or would reasonably be expected to have a Material
Adverse Effect.
6.6. Taxes. The Borrower and the Significant Guarantors have
filed all United States federal income tax returns and all other material
tax returns which are required to be filed and have paid all taxes due
pursuant to said returns or pursuant to any assessment received by the
Borrower or any such Significant Guarantor, except such taxes, if any, as
are being contested in good faith and as to which adequate reserves have
been provided. No tax Liens have been filed and no claims are being
asserted with respect to any such taxes. The charges, accruals and reserves
on the books of the Borrower and the Significant Guarantors in respect of
any taxes or other governmental charges are adequate in accordance with
GAAP.
6.7. Litigation and Contingent Obligations. Except as set forth
on Schedule "6.7" hereto, there is no litigation, arbitration, governmental
investigation, proceeding or inquiry pending or, to the knowledge of any
Authorized Officer, threatened against or affecting the Borrower or any
Significant Guarantor that has had or would reasonably be expected to have
a Material Adverse Effect. Other than any liability incident to such
litigation, arbitration or proceedings, the Borrower and the Significant
Guarantors have no material contingent obligations not provided for or
disclosed in the financial statements (whether quarterly or annual) of the
Borrower that have been most recently delivered by the Borrower to the
Agent that has had or would reasonably be expected to have a Material
Adverse Effect.
<PAGE> 66
6.8. Subsidiaries. Schedule "6.8" hereto contains an accurate
list of all of the Subsidiaries of the Borrower, setting forth their
respective jurisdictions of incorporation or formation and the percentage
of their respective capital stock or partnership interests owned by the
Borrower or its Subsidiaries. All of the issued and outstanding shares of
capital stock of such Subsidiaries that are corporations have been duly
authorized and validly issued and are fully paid and non-assessable.
6.9. ERISA. The Unfunded Liabilities of all Single Employer Plans
do not in the aggregate exceed $5,000,000. Neither the Borrower nor any
other member of the Controlled Group has incurred, or is reasonably
expected to incur, any withdrawal liability to Multiemployer Plans in
excess of $5,000,000 in the aggregate. Each Plan complies in all material
respects with all applicable requirements of law and regulations, no
Reportable Event has occurred with respect to any Plan, neither the
Borrower nor any other member of the Controlled Group has withdrawn from
any Multiemployer Plan or initiated steps to do so, and no steps have been
taken to terminate any Plan.
6.10. Accuracy of Information. All factual information heretofore
or contemporaneously furnished by or on behalf of the Borrower or any
Guarantor to the Agent or any Lender for purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all other
such factual information hereafter furnished by or on behalf of the
Borrower or any Guarantor to the Agent or any Lender will be, true and
accurate (taken as a whole), in all material respects, on the date as of
which such information is dated or certified and not incomplete by omitting
to state any material fact necessary to make such information (taken as a
whole) not misleading at such time.
6.11. Regulation U. Margin stock (as defined in Regulation U)
constitutes less than 25% of those assets of the Borrower and its Subsidiaries
which are subject to any limitation on sale, pledge, or other restriction
hereunder.
6.12. Material Agreements. Neither the Borrower nor any
Significant Guarantor is in default, which default has had or would
reasonably be expected to have a Material Adverse Effect, in the
performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in (i) any agreement to which it is a party, or
(ii) any agreement or instrument evidencing or governing Indebtedness.
6.13. Labor Disputes and Acts of God. Neither the business nor the
Property of the Borrower or of any Significant Guarantor is affected by any
fire, explosion, accident, strike, lockout, or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or of the public
enemy, or other casualty (whether or not covered by insurance), which has
had or would reasonably be expected to have a Material Adverse Effect.
<PAGE> 67
6.14. Ownership and Liens. The Borrower and each of the
Significant Guarantors have title to, or valid leasehold interests in, all
of their respective properties and assets, real and personal, including the
properties and assets and leasehold interests reflected in the financial
statements referred to in Section 6.4 (except to the extent that (i) such
properties or assets have been disposed of in the ordinary course of
business or (ii) the failure to have such title has not had and would not
reasonably be expected to have a Material Adverse Effect) and none of the
properties and assets owned by the Borrower or any Significant Guarantor
and none of their leasehold interests is subject to any Lien, except as may
be permitted pursuant to Section 8.8.
6.15. Operation of Business. The Borrower and each of the
Significant Guarantors possess all licenses, permits, franchises, patents,
copyrights, trademarks, and trade names, or rights thereto, to conduct
their respective businesses substantially as now conducted, and as
presently proposed to be conducted, with such exceptions as have not had
and would not reasonably be expected to have a Material Adverse Effect.
6.16. Laws; Environment. Except as set forth on Schedule "6.16"
hereto, the Borrower and each of the Significant Guarantors have duly
complied, and their businesses, operations and Property are in compliance,
in all material respects, with the provisions of all federal, state, and
local statutes, laws, codes, and ordinances and all rules and regulations
promulgated thereunder (including without limitation those relating to the
environment, health and safety). Except as set forth on Schedule "6.16"
hereto, the Borrower and each of the Significant Guarantors have been
issued all required federal, state, and local permits, licenses,
certificates, and approvals relating to (1) air emissions; (2) discharges
to surface water or groundwater; (3) solid or liquid waste disposal; (4)
the use, generation, storage, transportation, or disposal of toxic or
hazardous substances or hazardous wastes (intended hereby and hereafter to
include any and all such materials listed in any federal, state, or local
law, code, or ordinance and all rules and regulations promulgated
thereunder as hazardous); or (5) other environmental, health or safety
matters. Except in accordance with a valid governmental permit, license,
certificate or approval or as set forth on Schedule "6.16" hereto, to the
best knowledge of the Borrower, there has been no material emission,
spill, release, or discharge into or upon (1) the air; (2) soils, or any
improvements located thereon; (3) surface water or groundwater; or (4)
the sewer, septic system or waste treatment, storage or disposal
system servicing any Property of the Borrower or any
Significant Guarantor, of any toxic or hazardous substances or hazardous
<PAGE> 68
wastes at or from such Property. There has been no written complaint,
order, directive, claim, citation, or notice by any governmental authority
or any person or entity with respect to violations of law or damage by
reason of the Borrower's or any Significant Guarantor's (1) air emissions;
(2) spills, releases, or discharges to soils or improvements located
thereon, surface water, groundwater or the sewer, septic system or waste
treatment, storage or disposal systems servicing any Property; (3) solid or
liquid waste disposal; (4) use, generation, storage, transportation, or
disposal of toxic or hazardous substances or hazardous waste; or (5) other
environmental, health or safety matters affecting the Borrower or any
Significant Guarantor or its business, operation or Property. Except as set
forth on Schedule "6.16" hereto, neither the Borrower nor any Significant
Guarantor has any material Indebtedness, obligation, or liability, absolute
or contingent, matured or not matured, with respect to the storage,
treatment, cleanup, or disposal of any solid wastes, hazardous wastes, or
other toxic or hazardous substances (including without limitation any such
indebtedness, obligation, or liability with respect to any current
regulation, law or statute regarding such storage, treatment, cleanup, or
disposal). A matter will not constitute a breach of this Section 6.16
unless it is reasonably likely to result in costs or liabilities to the
Borrower or a Significant Guarantor in excess of $2,500,000 in the
aggregate.
6.17. Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of
1940, as amended.
6.18. Public Utility Holding Company Act. Neither the Borrower nor
any Subsidiary is a "holding company" or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company", within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
6.19. Subordinated Indebtedness. The Obligations constitute
senior indebtedness which is entitled to the benefits of the subordination
provisions of the Convertible Subordinated Notes and all other outstanding
Subordinated Indebtedness.
<PAGE> 69
ARTICLE VII
AFFIRMATIVE COVENANTS
During the term of this Agreement, unless the Required Lenders
shall otherwise consent in writing:
7.1. Financial Reporting. The Borrower will maintain, for
itself and each Subsidiary, a system of accounting established and
administered in accordance with GAAP, and furnish to the Lenders:
(i) Within 90 days after the close of each fiscal year, an
unqualified audit report certified by nationally recognized independent
certified public accountants, reasonably acceptable to the Lenders,
prepared in accordance with GAAP on a consolidated basis for the Borrower
and its Subsidiaries, including balance sheets as of the end of such
period, related profit and loss and reconciliation of surplus statements,
and a statement of cash flows, accompanied by (a) any management letter
prepared by said accountants, and (b) a certificate of said accountants
that, in the course of their examination necessary for their certification
of the foregoing, they have obtained no knowledge of any Default or
Unmatured Default, or if, in the opinion of such accountants, any Default
or Unmatured Default shall exist, stating the nature and status thereof.
(ii) Within 90 days after the close of each fiscal year, unaudited
balance sheets as of the end of such fiscal year for each of the operating
divisions of the Borrower and a related profit and loss statement for each
Subsidiary, all certified by an Authorized Officer.
(iii) Within 45 days after the close of the first three quarterly
periods of each fiscal year, for the Borrower and its Subsidiaries, on a
consolidated condensed basis, unaudited balance sheets as at the close of
each such period and a related profit and loss statement for the period
from the beginning of such fiscal year to the end of such quarter, all
certified by an Authorized Officer.
<PAGE> 70
(iv) As soon as available, but in any event not later than 10 days
prior to the beginning of each fiscal year, a copy of the business plan
(including a consolidated balance sheet, income statement and cash flow
statement) of the Borrower and its Subsidiaries for such fiscal year.
(v) Within 45 days of the end of each of the first three quarterly
periods of each fiscal year, a quarterly variance analysis comparing actual
quarterly results versus projected quarterly results for the fiscal quarter
most recently ended (including consolidated income statements of the
Borrower and its Subsidiaries, an analysis of revenues, Housing Unit
Closings and operating profits on a consolidated basis, unaudited income
statements and balance sheets (by operating division) for such quarter, and
such other items as are reasonably requested by any of the Lenders),
together with a written explanation of material variances.
(vi) Within 90 days after the end of each fiscal year, a variance
analysis comparing actual annual results versus the business plan for the
fiscal year most recently ended (including consolidated income statements
of the Borrower and its Subsidiaries, an analysis of revenues, Housing Unit
Closings and operating profits on a consolidated basis, unaudited income
statements and balance sheets (by operating division) for such fiscal year,
and such other items as are reasonably requested by any of the Lenders),
together with a written explanation of material variances.
(vii) Within 10 Business Days after the end of each calendar month, a
Borrowing Base Certificate of an Authorized Officer, with respect to the
Inventory Valuation Date occurring on the last day of such calendar month.
(viii) Within 45 days after the end of each quarterly period of each
fiscal year, a certificate of an Authorized Officer certifying the Housing
Units as at such date, which lists (by operating division) the Housing
Units, designated in the same categories as are identified in the
Borrower's report dated June 30, 1995; such summary shall include a
delineation of sold or unsold items in each category.
<PAGE> 71
(ix) Within 45 days after the end of each quarterly period of each
fiscal year, a certificate of an Authorized Officer certifying as of such
date (by operating division) the book values of raw land held for
development or sale, land under development, Finished Lots, Finished Lots
on the books in excess of nine months, Housing Units, Housing Units Under
Contract and Inventory Housing Units.
(x) Within 45 days after the end of each of the first three
quarterly periods, and within ninety (90) days after the end, of each
fiscal year, a certificate of an Authorized Officer of the Borrower in the
form of Exhibit "J" hereto.
(xi) Within 270 days after the close of each fiscal year, a statement
of the Unfunded Liabilities of each Single Employer Plan, certified as
correct by an actuary enrolled under ERISA (which requirement may be
satisfied by the delivery of the most recent actuarial valuation of each
such Single Employer Plan).
(xii) As soon as possible and in any event within ten days after the
Borrower knows that any Reportable Event has occurred with respect to any
Plan, a statement, signed by an Authorized Officer, describing said
Reportable Event and the action which the Borrower proposes to take with
respect thereto.
(xiii) As soon as possible, and in any event within thirty (30) days
after the Borrower knows or has reason to know that any circumstances exist
that constitute grounds entitling the PBGC to institute proceedings to
terminate a Plan subject to ERISA with respect to the Borrower or any
member of the Controlled Group and promptly but in any event within two (2)
Business Days of receipt by the Borrower or any member of the Controlled
Group of notice that the PBGC intends to terminate a Plan or appoint a
trustee to administer the same, and promptly but in any event within five
(5) Business Days of the receipt of notice concerning the imposition of
withdrawal liability in excess of $500,000 with respect to the Borrower or
any member of the Controlled Group, a certificate of an Authorized Officer
setting forth all relevant details of such event and the action which the
Borrower proposes to take with respect thereto.
<PAGE> 72
(xiv) Promptly after the furnishing thereof, copies of any statement,
report, document, notice, certificate, and correspondence furnished to any
other party pursuant to the terms of any indenture (including the
Indenture), loan, credit, or similar agreement with respect to any
Indebtedness in excess of $1,000,000 or to any rating agency and not
otherwise required to be furnished to the Lenders pursuant to any other
provision of this Section 7.1.
(xv) Promptly after the sending or filing thereof, copies of all proxy
statements, financial statements, and reports which the Borrower or any
Significant Guarantor sends to its stockholders, and copies of all regular,
periodic, and special reports, and all registration statements which the
Borrower or any Significant Guarantor files with the Securities and
Exchange Commission or any governmental authority which may be substituted
therefor, or with any national securities exchange.
(xvi) Promptly after the commencement thereof, notice of all actions,
suits, and proceedings before any court or governmental department,
commission, board, bureau, agency, or instrumentality, domestic or foreign,
affecting the Borrower or any Significant Guarantor (a) which, if
determined adversely to the Borrower or such Significant Guarantor, could
reasonably be expected to have a Material Adverse Effect or (b) in which
liability in excess of $2,500,000 (in the aggregate with respect to any
action, suit or proceeding) is asserted against the Borrower or any
Significant Guarantor.
(xvii) As soon as possible and in any event within ten days after receipt
by the Borrower or any Significant Guarantor, a copy of (a) any written
notice or claim to the effect that the Borrower or any Significant
Guarantor is or may be liable to any Person as a result of the release of
any toxic or hazardous waste or substance into the environment, and (b) any
notice alleging any violation of any federal, state or local environmental,
health or safety law or regulation by the Borrower or any Guarantor which,
in the case of either (a) or (b), could reasonably be expected to have a
Material Adverse Effect or could result in liability to the Borrower or any
Significant Guarantor in excess of $2,500,000 (in the aggregate with
respect to any notice or claim).
<PAGE> 73
(xviii) Such other information (including non-financial information) as
the Agent may from time to time reasonably request.
7.2. Use of Proceeds. Subject to the limitations contained in
this Agreement, the Borrower will use the proceeds of the Advances for
general corporate purposes (including payment of reimbursement obligations
with respect to Facility Letters of Credit), and to repay outstanding
Advances. The Borrower will not, nor will it permit any Subsidiary to, use
any of the proceeds of the Advances to purchase or carry any "margin stock"
(as defined in Regulation U) or, except as otherwise permitted by this
Agreement, to purchase any securities in any transaction that is subject to
Sections 13 and 14 of the Securities Exchange Act of 1934, as amended. The
Borrower will not permit any Non-Borrowing Subsidiaries to receive, whether
by loan or other Investment, or otherwise to use any proceeds of, any
Advance if the effect thereof would be to increase the Investments of the
Borrower or any Guarantor in any Non-Borrowing Subsidiaries to an amount
(in the aggregate) in excess of such Investments as of August 31, 1995;
provided that the Borrower and the Guarantors may (i) make advances or
loans to or other Investments in Non-Borrowing Subsidiaries in an amount
not to exceed the aggregate amount of all advances, loans or other
Investments made by the Non-Borrowing Subsidiaries to the Borrower after
August 31, 1995 which have not been repaid to such Non-Borrowing
Subsidiaries and (ii) make Investments in the Non-Borrowing Subsidiaries
permitted under Section 8.6.
7.3. Notice of Default. The Borrower will, and will cause each
Significant Guarantor to, give prompt notice in writing to the Lenders of
the occurrence of (i) any Default or Unmatured Default and (ii) any other
development, financial or otherwise, that has had or would be reasonably
expected to have a Material Adverse Effect.
7.4. Conduct of Business. Except as otherwise permitted under
this Agreement, the Borrower will, and will cause each Significant
Guarantor to, carry on and conduct business in the same general manner and
in substantially the same fields of enterprise as presently conducted and
to do all things necessary to remain duly incorporated, validly existing
and in good standing as a domestic corporation in their respective
jurisdictions of incorporation (or, in the case of any Guarantors that are
partnerships, duly formed and validly existing in their respective
jurisdictions of formation) and maintain all requisite authority to conduct
business in each jurisdiction in which business is conducted; provided,
however, that nothing contained herein shall prohibit the dissolution
of any Guarantor as long as the Borrower or another Guarantor succeeds to
the assets, liabilities and business of the dissolved Guarantor.
<PAGE> 74
7.5. Taxes. The Borrower will, and will cause each Significant
Guarantor to, pay when due all taxes, assessments and governmental charges
and levies upon them or their income, profits or Property, except those
that are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been set aside in accordance with
GAAP.
7.6. Insurance. The Borrower will, and will cause each
Significant Guarantor to, maintain with financially sound and reputable
insurance companies insurance on all their Property in such amounts and
covering such risks as is consistent with sound business practice, and the
Borrower will furnish to any Lender upon request full information as to the
insurance carried.
7.7. Compliance with Laws. The Borrower will, and will cause each
Significant Guarantor to, comply with all laws, rules, regulations, orders,
writs, judgments, injunctions, decrees or awards to which it may be
subject, except to the extent that the failure to do so would not
reasonably be expected to have and does not have a Material Adverse Effect.
7.8. Maintenance of Properties. The Borrower will, and will cause
each Significant Guarantor to, do all things necessary to maintain,
preserve, protect and keep its Property in good repair, working order and
condition, except to the extent that the failure to do so would not
reasonably be expected to have and does not have a Material Adverse Effect.
7.9. Inspection. The Borrower will, and will cause each Guarantor
to, permit the Lenders, by their respective representatives and agents, to
inspect any of the Property, corporate (or partnership) books and financial
records of the Borrower and the Guarantors to examine and make copies of
the books of accounts and other financial records of the Borrower and the
Guarantors, and to discuss the affairs, finances and accounts of the
Borrower and the Guarantors with, and to be advised as to the same by,
their respective officers at such reasonable times and intervals as the
Lenders may designate.
<PAGE>75
7.10. Environment. The Borrower will, and will cause the
Significant Guarantors to, (i) comply, in all material respects, with the
provisions of all federal, state, and local environmental, health, and
safety laws, codes and ordinances, and all rules and regulations issued
thereunder; (ii) promptly contain and remove any hazardous discharge from
or affecting the Property of the Borrower or such Significant Guarantor,
to the extent required by and in compliance with all applicable laws; (iii)
promptly pay any fine or penalty assessed in connection therewith or contest
the same in good faith; and (iv) permit the Agent to inspect such Property,
to conduct tests thereon, and to inspect all books, correspondence,
and records pertaining thereto at reasonable hours and places; and (v)
at the request of the Required Lenders, and at the Borrower's expense,
provide a report of a qualified environmental engineer, satisfactory
in scope, form, and content to the Required Lenders, and such other
and further assurances reasonably satisfactory to the Required Lenders
that any new condition or occurrence hereafter identified in any
revision of Schedule "6.16" delivered by the Borrower pursuant to
Section 7.12 has been corrected; provided that a failure to comply with
the foregoing provisions of this Section 7.10 shall not constitute a
Default or an Unmatured Default unless such noncompliance has resulted
in or is reasonably likely to result in costs or liabilities to the
Borrower or a Significant Guarantor in excess of $2,500,000.
7.11. New Subsidiary. In the event that Borrower shall hereafter
create a new Subsidiary or a Person shall hereafter become a Subsidiary of
the Borrower, the Borrower shall (i) cause such Subsidiary to execute and
deliver to the Agent (a) in the case of a Subsidiary that is not a
Non-Borrowing Subsidiary, a Guaranty and an amendment to the Contribution
Agreement pursuant to which such Guarantor shall become a party thereunder
and (b) in the case of a Non-Borrowing Subsidiary, a Subordination
Agreement, and (ii) deliver or cause to be delivered, by and with respect
to such Subsidiary, certificates, opinions and other documents
substantially similar to those required to be delivered under the
provisions of Sections 5.1(i), (ii), (iii), (vi) and (vii) and such other
documents as any Lender or Issuing Bank or their respective counsel may
reasonably request; all of the foregoing shall be in form and substance
satisfactory to the Required Lenders.
7.12. Change in Schedules. Promptly following the occurrence of
any event or circumstance as a result of which any of Schedules 6.7, 6.8 or
6.16 ceases to be accurate in all material respects, the Borrower shall
furnish to the Agent the applicable revised Schedule and shall certify that
such revised Schedule is true, correct and complete in all material
respects, and such revised Schedule shall be substituted for the applicable
Schedule hereunder.
<PAGE> 76
ARTICLE VIII
NEGATIVE COVENANTS
During the term of the Agreement, unless the Required
Lenders shall otherwise consent in writing:
8.1. Dividends. The Borrower will not, nor will it permit any
Significant Guarantor to, declare or pay any dividends on its capital stock
(other than dividends payable in its own capital stock), except that any
Significant Guarantor may declare and pay dividends to the Borrower or to
a Wholly-Owned Subsidiary.
8.2. Indebtedness. The Borrower will not, nor will it permit any
Significant Guarantor to, create, incur or suffer to exist any Indebtedness,
except:
(i) The Loans.
(ii) Indebtedness existing on August 31, 1995 and described in Schedule
"8.2" hereto and Refinancing Indebtedness.
(iii) Rate Hedging Obligations related to the Loans or otherwise
required pursuant to Section 9.5 hereof.
(iv) Indebtedness of the Borrower to a Subsidiary or of a Subsidiary to
the Borrower or to another Subsidiary, provided the same is permitted under
Section 7.2.
(v) Trade accounts payable and accruals arising or occurring
in the ordinary course of business.
(vi) Indebtedness with respect to Letters of Credit (including Facility
Letters of Credit) in an aggregate amount outstanding at any time not to
exceed $25,000,000.
(vii) Indebtedness secured by purchase-money Liens permitted under
Section 8.8(ii).
(viii) Subordinated Indebtedness.
(ix) Non-Recourse Indebtedness in an aggregate amount outstanding at
any time not to exceed $50,000,000.
<PAGE> 77
(x) Performance bonds, completion bonds, and guarantees of performance.
(xi) Indebtedness of a Person existing as of the time of the
Acquisition of such Person by the Borrower or any Guarantor, provided that,
after giving effect to such Acquisition, the Borrower is in compliance with
the terms of this Agreement (including without limitation Section 7.11 and
Article IX).
(xii) Indebtedness not otherwise permitted by this Section 8.2 in an
aggregate amount outstanding at any time not to exceed $25,000,000.
8.3. Merger. The Borrower will not, nor will it permit any
Guarantor to, merge or consolidate with or into any other Person, except
(i) that a Guarantor may merge with any other Guarantor or with the
Borrower and (ii) for transactions permitted under Section 8.4 or Section
8.6(vii).
8.4. Sale of Assets. The Borrower will not, nor will it permit any
Significant Guarantor to, lease, sell or otherwise dispose of its Property,
to any other Person except (i) for sales or leases in the ordinary course
of business, (ii) for leases, sales or other dispositions of its Property
that, together with all other Property of the Borrower and the Significant
Guarantors previously leased, sold or disposed of (other than in the
ordinary course of business) as permitted by this Section during the
twelve-month period ending with the month in which any such lease, sale or
other disposition occurs, do not constitute a Substantial Portion of the
Property of the Borrower and the Significant Guarantors and (iii) as
permitted in Section 8.5.
8.5. Sale and Leaseback. The Borrower will not, nor will it permit
any Significant Guarantor to, sell or transfer any of its Property in order
to concurrently or subsequently lease as lessee such or similar Property,
except for model homes that do not at any time exceed $10,000,000 in book
value, in the aggregate for the Borrower and the Significant Guarantors.
8.6. Investments and Acquisitions. The Borrower will not, nor will
it permit any Significant Guarantor to, make or suffer to exist any
Investments (including without limitation, loans and advances to, and other
Investments in, Subsidiaries), or commitments therefor, or to create any
Subsidiary or to become or remain a partner in any partnership or joint
venture, or to make any Acquisition of any Person, except:
<PAGE> 78
(i) Obligations of, or fully guaranteed by, the United States of
America or any agency thereof, which obligations have maturities of one
year or less.
(ii) Commercial paper rated A-l or better by Standard and Poor's
Corporation or P-l or better by Moody's Investors Service, Inc.
(iii) Demand deposit accounts maintained in the ordinary course of business.
(iv) Certificates of deposit issued by and time deposits with
commercial banks (whether domestic or foreign) having capital and surplus
in excess of $100,000,000.
(v) Existing Investments in Subsidiaries and other Investments in
existence on August 31, 1995 and described in Schedule "8.6" hereto.
(vi) Investments in joint ventures, partnerships, limited liability
companies or other similar business organizations in which any Person other
than the Borrower or a Significant Guarantor has an interest, provided that
the outstanding amount of such Investments of the Borrower and the
Significant Guarantors do not at any time exceed $25,000,000 in the
aggregate.
(vii) The Acquisition of a business or entity engaged primarily in the
business of home building, provided that (a) the Investment (exclusive of
the issuance of capital stock of the Borrower or its Subsidiaries in
connection therewith) in any single Acquisition after the date hereof does
not exceed $10,000,000 and in all such Acquisitions after the date hereof
does not exceed $25,000,000 in the aggregate, (b) immediately upon the
consummation of any such Acquisition the Borrower is in compliance with the
terms, covenants and conditions of this Agreement (including without
limitation Section 7.11 and Article IX) and (c) the Borrower shall deliver
to the Agent a certificate, signed by an Authorized Officer, certifying
that, on the date of, and taking into account, the consummation of such
Acquisition, no Default or Unmatured Default has occurred and is
continuing.
<PAGE> 79
(viii) Investment of the Borrower in a Guarantor or of a Guarantor in
the Borrower or another Guarantor.
(ix) Investments in Non-Borrowing Subsidiaries to the extent permitted
under the provisions of Section 7.2.
(x) Stock, obligations or securities received in satisfaction
of debts owing to the Borrower or any Guarantor.
(xi) Pledges or deposits in cash by the Borrower or a Guarantor to
support surety bonds, performance bonds or guarantees of completion in the
ordinary course of business.
(xii) The creation of new Subsidiaries engaged primarily in the home
building business (or the purpose of which is principally to preserve the
use of a name in which such business is conducted) or Non-Borrowing
Subsidiaries.
(xiii) Investments pursuant to the Borrower's or a Significant
Guarantor's employment compensation plans or agreements.
(xiv) Investments, in addition to those enumerated in this Section 8.6,
in an aggregate amount outstanding at any time not to exceed $5,000,000.
8.7. Contingent Obligations. The Borrower will not, nor will it
permit any Significant Guarantor to, make or suffer to exist any Contingent
Obligation (including, without limitation, any Contingent Obligation with
respect to the obligations of a Subsidiary), except (i) the Guaranty, and
(ii) to the extent permitted by Section 8.2.
8.8. Liens. The Borrower will not, nor will it permit any
Significant Guarantor to, create, incur, or suffer to exist any Lien in, of
or on the Property of the Borrower or any of the Significant Guarantors,
except:
(i) Permitted Encumbrances.
(ii) Purchase-money Liens on any Property hereafter acquired or the
assumption of any Lien on Property existing at the time of such acquisition
(and not created in contemplation of such acquisition), or a Lien incurred
in connection with any conditional sale or other title retention or a
Capitalized Lease; provided that;
<PAGE> 80
(a) Any Property subject to any of the foregoing is
acquired by the Borrower or any Significant Guarantor in the ordinary
course of its respective business and the Lien on any such Property
attaches to such asset concurrently or within 90 days after the acquisition
thereof;
(b) The obligation secured by any Lien so created,
assumed, or existing shall not exceed ninety percent (90%) of the lesser of
the cost or the fair market value as of the time of acquisition of the
Property covered thereby by the Borrower or the Significant Guarantor
acquiring the same; and
(c) Each Lien shall attach only to the Property so acquired.
(iii) Liens existing on the date hereof and described in Schedule "8.2"
hereto and Liens securing Refinancing Indebtedness with respect thereto.
(iv) Liens incurred in the ordinary course of business not otherwise
permitted by this covenant, provided that the aggregate amount of
Indebtedness secured by such Liens outstanding at any time shall not exceed
$25,000,000.
(v) Judgments and similar Liens arising in connection with court
proceedings; provided the execution or enforcement thereof is stayed and
the claim is being contested in good faith.
(vi) Liens securing Non-Recourse Indebtedness.
(vii) Liens existing with respect to Indebtedness of a Person acquired
in an Acquisition permitted by this Agreement.
8.9. Redemption. The Borrower will not purchase or redeem any of
its capital stock heretofore or hereafter issued, except that the Borrower
may purchase or redeem its capital stock (i) to the extent that the
consideration for such redemption or purchase is limited to capital stock
of the Borrower or (ii) if the consideration for such purchase or
redemption is other than capital stock of the Borrower and does not exceed,
in the aggregate for all such purchases and redemptions from and after the
date hereof, $5,000,000.
8.10. Affiliates. The Borrower will not, nor will it permit any
Significant Guarantor to, enter into any transaction (including, without
limitation, the purchase or sale of any Property or service) with, or make
any payment or transfer to, any Affiliate except (i) in the ordinary course
of business and pursuant to the reasonable requirements of the Borrower's
or such Guarantor's business and upon fair and reasonable terms no less
favorable to the Borrower or such Significant Guarantor than the Borrower
or such Significant Guarantor would obtain in a comparable arms-length
transaction, (ii) Investments permitted under Section 8.6 and (iii)
pursuant to employment compensation plans and agreements.
<PAGE> 81
8.11. Subordinated Indebtedness. The Borrower will not, nor will
it permit any Significant Guarantor to, make any amendment or modification
to the subordination provisions of any indenture, note or other agreement
evidencing or governing any Subordinated Indebtedness, or directly or
indirectly voluntarily prepay, defease or in substance defease, purchase,
redeem, retire or otherwise acquire, any Subordinated Indebtedness;
provided, however, that the foregoing shall not prohibit (i) the conversion
of the Convertible Subordinated Notes in accordance with the Indenture
dated as of November 3, 1993 or an amendment permitting such conversion at
a lower conversion price than is therein provided or (ii) the repayment or
prepayment of Subordinated Indebtedness solely from the net proceeds of
other Subordinated Indebtedness or from capital stock.
8.12. Amendments. The Borrower will not (i) amend or modify the
Indenture or the Senior Notes, except for amendments or modifications that
do not (a) impose upon the Borrower obligations not contained therein as of
the date of this Agreement, (b) accelerate any of the tax obligations of
the Borrower or (c) otherwise adversely affect the Borrower or (ii) permit
any Guarantor to amend or modify the Contribution Agreement, except as
provided in Section 7.11.
8.13. Financial Undertakings. The Borrower will not, nor will
it permit any Significant Guarantor to, enter into or remain liable upon
any Financial Undertaking, except as permitted under Section 8.2 or Section
8.5.
ARTICLE IX
FINANCIAL COVENANTS
During the term of this Agreement, unless the Required
Lenders shall otherwise consent in writing:
<PAGE> 82
9.1. Minimum Consolidated Tangible Net Worth. The Borrower will
maintain at all times a Consolidated Tangible Net Worth of not less than
(i) $250,000,000 plus (ii) fifty percent (50%) of the Consolidated Net
Income earned after March 31, 1995 (excluding any quarter in which there is
a loss) plus (iii) one hundred percent (100%) of the net proceeds of
capital stock issued by the Borrower after March 31, 1995.
9.2. Permitted Indebtedness Ratio. (a) The Borrower
will not at any time permit Consolidated Funded Indebtedness to exceed the
product of (i) the then applicable PIR and (ii) Consolidated Tangible Net
Worth.
(b) If at any time the Borrower shall fail to maintain a
ratio, determined as of the last day of each fiscal quarter for the
four-quarter period ending on such day, of (i) EBITDA to (ii) Consolidated
Interest Incurred, of at least 1.75 to 1.0 (the "Coverage Test"), then the
PIR, effective as of the first day of the fiscal quarter immediately
following the four-quarter period with respect to which the Borrower shall
have so failed the Coverage Test, shall be decreased to the extent herein
provided. Upon the first failure to satisfy the Coverage Test, or any other
failure to satisfy the Coverage Test that occurs on a date on which the PIR
is 1.75, the PIR shall be decreased by 0.25 to 1.50. Upon any failure to
satisfy the Coverage Test that occurs on a date on which the PIR is less
than 1.75, the PIR shall be decreased by 0.10.
(c) If at any time at which the PIR is less than 1.75,
the Borrower shall satisfy the Coverage Test (which for purposes of this
Section 9.2(c) shall be deemed satisfied only if, on the same day on which
the Borrower maintains the ratio set forth in Section 9.2(b), the Borrower
is also in compliance with the covenant set forth in Section 9.2(a)), then
the PIR, effective as of the first day of the fiscal quarter immediately
following the four-quarter period with respect to which the Borrower shall
have so satisfied the Coverage Test, shall be increased to the extent
herein provided. Upon satisfaction of the Coverage Test on a date on which
the PIR is 1.50, the PIR shall be increased to 1.75. Upon satisfaction of
the Coverage Test on a date on which the PIR is less than 1.50, the PIR
shall be increased by 0.10. In no event shall the PIR exceed 1.75.
(d) Any increase or decrease of the PIR provided for in
this Section 9.2 shall be effective as of the first day of a fiscal quarter
as provided in Section 9.2(b) or (c) (as applicable), and the PIR (as
adjusted) shall remain in effect for the entire fiscal quarter and
thereafter unless and until adjusted as of the first day of any subsequent
fiscal quarter as provided in this Section 9.2(b) or (c) (as applicable).
<PAGE> 83
(e) A failure to satisfy the Coverage Test shall not
constitute a Default or an Unmatured Default but a failure at any time to
comply with the covenant set forth in Section 9.2(a) shall constitute a
Default under Section 10.3.
9.3. Land Owned. The Borrower will not at any time permit (a) the
sum of (i) the book value of all raw land owned by the Borrower or any
Guarantor for development or sale, plus (ii) the book value of all land
under development owned by the Borrower or any Guarantor, plus (iii) the
book value of all lots that have been Finished Lots for more than nine
months, to exceed (b) the sum of (i) Consolidated Tangible Net Worth plus
(ii) forty percent (40%) of the outstanding principal amount of the
Convertible Subordinated Notes or Refinancing Indebtedness with respect
thereto.
9.4. Housing Inventory. The Borrower will not at any time permit
the number of InventoryHousing Units to exceed twenty-five percent (25%) of
the number of Housing Unit Closings during the preceding twelve (12) months.
9.5. Rate Protection. The Borrower will not at any time permit
less than fifty percent (50%) of the obligations of the Borrower and the
Guarantors described in clauses (i), (iv) and (viii) of the definition of
"Indebtedness," on a consolidated basis, to be Fixed Rate Debt.
ARTICLE X
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
10.1. Any representation or warranty made or deemed made by or on
behalf of the Borrower or any Significant Guarantor to the Lenders, the
Issuing Bank or the Agent under or in connection with this Agreement, any
Loan Document, or any certificate or information delivered in connection
with this Agreement or any other Loan Document shall not be true and
correct in any material respect on the date as of which made.
<PAGE> 84
10.2. Nonpayment of principal of any Note when due, or nonpayment
of interest upon any Note or of any commitment fee or other obligations
under any of the Loan Documents within five days after the same becomes
due.
10.3. The breach by the Borrower (other than a breach which
constitutes a Default under Section 10.1 or 10.2) of any of the terms or
provisions of this Agreement which is not remedied within 30 days after the
occurrence of such breach.
10.4. Failure of the Borrower or any Significant Guarantor to pay
when due (after any applicable grace or notice period) any Indebtedness
(other than Non-Recourse Indebtedness) equal to or exceeding $5,000,000 (in
the aggregate); or the default by the Borrower or any Significant Guarantor
in the performance of any term, provision or condition contained in any
agreement under which any Indebtedness (other than Non-Recourse
Indebtedness) equal to or exceeding $5,000,000 (in the aggregate) was
created or is governed, or any other event shall occur or condition exist,
the effect of which is to cause, or to permit the holder or holders of such
Indebtedness to cause, such Indebtedness to become due prior to its stated
maturity; or any Indebtedness (other than Non-Recourse Indebtedness) of the
Borrower or any Significant Guarantor equal to or exceeding $5,000,000 (in
the aggregate) shall be declared to be due and payable or required to be
prepaid (other than by a regularly scheduled payment) prior to the stated
maturity thereof; or the Borrower or any Significant Guarantor shall not
pay, or shall admit in writing its inability to pay, its debts generally as
they become due.
10.5. The Borrower or any Significant Guarantor shall (i) have an
order for relief entered with respect to it under the Federal bankruptcy
laws as now or hereafter in effect, (ii) make an assignment for the benefit
of creditors, (iii) apply for, seek, consent to, or acquiesce in, the
appointment of a receiver, custodian, trustee, examiner, liquidator or
similar official for it or any Substantial Portion of its Property, (iv)
institute any proceeding seeking an order for relief under the Federal
bankruptcy laws as now or hereafter in effect or seeking to adjudicate it a
bankrupt or insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file, within the applicable time period for
the filing thereof, an answer or other pleading denying the material
allegations of any such proceeding filed against it, (v) take any corporate
action to authorize or effect any of the foregoing actions set forth in
this Section 10.5 or (vi) fail to contest in good faith any appointment or
proceeding described in Section 10.6.
<PAGE> 85
10.6. A receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Borrower or any Significant Guarantor
or any Substantial Portion of its Property without the application,
approval or consent of the Borrower or such Significant Guarantor, or a
proceeding described in Section 10.5(iv) shall be instituted against the
Borrower or any Significant Guarantor and such appointment continues
undischarged or such proceeding continues undismissed or unstayed for a
period of 60 consecutive days.
10.7. The Borrower or any Significant Guarantor shall fail within
30 days to pay, bond or otherwise discharge any judgment or order for the
payment of money in excess of $10,000,000 which has not been stayed on
appeal or is not otherwise being appropriately contested in good faith.
10.8. The Unfunded Liabilities of all Single Employer Plans shall
exceed in the aggregate $5,000,000 or any Reportable Event shall occur in
connection with any Plan, which Reportable Event has had or would
reasonably be expected to have a Material Adverse Effect.
10.9. The Borrower or any member of the Controlled Group shall
have been notified by the sponsor of a Multiemployer Plan that it has
incurred withdrawal liability to such Multiemployer Plan in an amount
which, when aggregated with all other amounts required to be paid to
Multiemployer Plans by the Borrower or any other member of the Controlled
Group as withdrawal liability (determined as of the date of such
notification), exceeds $5,000,000 or requires payments exceeding $2,000,000
per annum; provided, however, that such event shall not constitute a
Default as long as the Borrower or the Controlled Group member, as
applicable, is contesting in good faith the imposition of withdrawal
liability.
10.10. The Borrower or any other member of the Controlled Group
shall have been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization, if as a result of such
reorganization the aggregate annual contributions of the Borrower and the
other members of the Controlled Group (taken as a whole) to all
Multiemployer Plans which are then in reorganization have been or will be
increased over the amounts contributed to such Multiemployer Plans for the
respective plan years of each such Multiemployer Plan immediately preceding
the plan year in which the reorganization occurs by an amount exceeding
$5,000,000.
<PAGE> 86
10.11. Any Change in Control shall occur.
10.12. Any Guaranty shall fail to remain in full force or effect
with respect to any one or more of the Significant Guarantors (except by
reason of a merger of a Significant Guarantor with the Borrower or another
Guarantor or the dissolution of a Guarantor permitted hereunder or as a
result of a sale permitted under Section 8.4) or any action shall be taken
by any one or more of the Significant Guarantors to discontinue or to
assert the invalidity or unenforceability of any Guaranty, or any
Significant Guarantor shall fail to comply with any of the terms or
provisions of any Guaranty, or any Significant Guarantor denies that it has
any further liability under any Guaranty or gives notice to such effect
(except by reason of a merger of a Significant Guarantor with the Borrower
or another Guarantor or the dissolution of a Guarantor permitted hereunder
or as a result of a sale permitted under Section 8.4).
ARTICLE XI
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
11.1. Acceleration. If any Default described in Section 10.5 or
10.6 occurs with respect to the Borrower, the obligations of the Lenders to
make Loans and of the Issuing Bank to issue Facility Letters of Credit
hereunder shall automatically terminate and the Obligations shall
immediately become due and payable without any election or action on the
part of the Agent, the Issuing Bank or any Lender. If any other Default
occurs, the Required Lenders may terminate or suspend the obligations of
the Lenders to make Loans and of the Issuing Bank to issue Facility Letters
of Credit hereunder, or declare the Obligations to be due and payable, or
both, whereupon the Obligations shall become immediately due and payable,
without presentment, demand, protest or notice of any kind, all of which
the Borrower hereby expressly waives. If, within five days after
acceleration of the maturity of the Obligations or termination of the
obligations of the Lenders to make Loans hereunder as a result of any
Default (other than any Default as described in Section 10.5 or 10.6 with
respect to the Borrower) and before any judgment or decree for the payment
of the Obligations due shall have been obtained or entered, the Required
Lenders (in their sole discretion) shall so direct, the Agent shall, by
notice to the Borrower, rescind and annul such acceleration and/or
termination.
<PAGE> 87
11.2. Amendments. Subject to the provisions of this Article XI,
the Required Lenders (or the Agent with the consent in writing of the
Required Lenders) and the Borrower may enter into agreements supplemental
hereto for the purpose of adding or modifying any provisions to the Loan
Documents or changing in any manner the rights of the Lenders or the
Borrower hereunder or waiving any Default hereunder; provided, however,
that no such supplemental agreement shall, without the consent of each
Lender and Issuing Bank affected thereby:
(i) Extend the maturity of any Loan or Note or forgive all or any
portion of the principal amount thereof, or reduce the rate of, or extend
the time of payment of, interest or fees thereon;
(ii) Reduce the percentage specified in the definition of Required
Lenders;
(iii) Increase the amount of the Commitment of any Lender hereunder,
or permit the Borrower to assign its rights under this Agreement; or
(iv) Amend this Section 11.2.
No amendment of any provision of this Agreement relating to the Agent shall
be effective without the written consent of the Agent. The Agent may waive
payment or reduce the amount of the fees referred to in Section 13.12 or
the fee required under Section 15.3.2 without obtaining the consent of any
other party to this Agreement.
11.3. Preservation of Rights. No delay or omission of any Lender
or Issuing Bank or the Agent to exercise any right under the Loan Documents
shall impair such right or be construed to be a waiver of any Default or an
acquiescence therein, and the making of a Loan or the issuance, amendment
or extension of a Facility Letter of Credit notwithstanding the existence
of a Default or the inability of the Borrower to satisfy the conditions
precedent to such Loan or Facility Letter of Credit shall not constitute
any waiver or acquiescence. Any single or partial exercise of any such
right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the
terms, conditions or provisions of the Loan Documents whatsoever shall be
valid unless in writing signed by the Lenders (and, if applicable, the
Agent) required pursuant to Section 11.2, and then only to the extent in
such writing specifically set forth. All remedies contained in the Loan
Documents or by law afforded shall be cumulative and all shall be available
to the Agent, the Issuing Bank and the Lenders until the Obligations have
been paid in full.
<PAGE> 88
ARTICLE XII
GENERAL PROVISIONS
12.1. Survival of Representations. All representations and
warranties of the Borrower contained in this Agreement shall survive delivery
of the Notes and the making of the Loans and the issuance, amendment or
extension of any Facility Letter of Credit herein contemplated.
12.2. Governmental Regulation. Anything contained in this
Agreement to the contrary notwithstanding, no Lender or Issuing Bank shall
be obligated to extend credit to the Borrower in violation of any limitation
or prohibition provided by any applicable statute or regulation.
12.3. Taxes. Any recording, intangible, filing or stamp fees or
taxes or other similar assessments or charges made by any governmental or
revenue authority in respect of the Loan Documents shall be paid by the
Borrower, together with interest and penalties, if any.
12.4. Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of
any of the provisions of the Loan Documents.
12.5. Entire Agreement. The Loan Documents embody the entire
agreement and understanding among the Borrower, the Agent and the Lenders
and supersede all prior agreements and understandings among the Borrower
and the Agent, the Lenders relating to the subject matter thereof.
12.6. Nature of Obligations; Benefits of this Agreement. (a) The
respective obligations of the Lenders hereunder are several and not joint
and no Lender shall be the partner or agent of any other (except to the
extent to which the Agent is authorized to act as such). The failure of any
Lender to perform any of its obligations hereunder shall not relieve any
other Lender from any of its obligations hereunder.
(b) This Agreement shall not be construed so as to confer
any right or benefit upon any Person other than the parties to this
Agreement and their respective successors and assigns.
<PAGE> 89
12.7. Expenses; Indemnification. The Borrower shall reimburse the
Agent for any reasonable costs, internal charges and out-of-pocket expenses
(including reasonable attorneys' fees and time charges of attorneys for the
Agent, which attorneys may be employees of the Agent) paid or incurred by
the Agent in connection with the preparation, negotiation, execution,
delivery, review, amendment, modification, and administration of the Loan
Documents. The Borrower also agrees to reimburse the Agent, the Lenders and
each Issuing Bank for any reasonable costs, internal charges and
out-of-pocket expenses (including reasonable attorneys' fees and time
charges of attorneys for the Agent, the Lenders and such Issuing Bank,
which attorneys may be employees of the Agent, the Lenders or such Issuing
Bank) paid or incurred by the Agent, any Lender or such Issuing Bank in
connection with the collection and enforcement of the Loan Documents. The
Borrower further agrees to indemnify the Agent and each Lender or Issuing
Bank, its directors, officers and employees against all losses, claims,
damages, penalties, judgments, liabilities and expenses (including, without
limitation, all expenses of litigation or preparation therefor whether or
not the Agent or any Lender or Issuing Bank is a party thereto) which any
of them may pay or incur arising out of or relating to this Agreement, the
other Loan Documents, the transactions contemplated hereby or the direct or
indirect application or proposed application of the proceeds of any Loan
hereunder (except to the extent arising due to the gross negligence or
willful misconduct of the indemnified Person). The obligations of the
Borrower under this Section shall survive the termination of this
Agreement.
12.8. Numbers of Documents. All statements, notices, closing
documents, and requests hereunder shall be furnished to the Agent with
sufficient counterparts so that the Agent may furnish one to each of the
Lenders.
12.9. Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP applied on a
basis consistent with the audited financial statements of the Borrower as
of December 31, 1994 ("Agreement Accounting Principles"). If any change in
GAAP from the principles used in preparing such statements would have a
material effect upon the results of any calculation required by or
compliance with any provision of this Agreement, then such calculation
shall be made or calculated and compliance with such provision shall be
determined using accounting principles used in preparing the audited
financial statements of the Borrower as of December 31, 1994.
<PAGE> 90
12.10. Severability of Provisions. Any provision in any Loan
Document that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable,
or invalid without affecting the remaining provisions in that jurisdiction
or the operation, enforceability, or validity of that provision in any
other jurisdiction, and to this end the provisions of all Loan Documents
are declared to be severable.
12.11. Nonliability of Lenders and Issuing Bank. The relationship
between the Borrower and the Lenders and the Agent shall be solely that of
borrower and lender. Neither the Agent nor any Lender or Issuing Bank shall
have any fiduciary responsibilities to the Borrower. Neither the Agent nor
any Lender or Issuing Bank undertakes any responsibility to the Borrower to
review or inform the Borrower of any matter in connection with any phase of
the Borrower's business or operations.
12.12. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE
STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS.
12.13. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR
ANY LENDER OR ISSUING BANK TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE
COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER
AGAINST THE AGENT OR ANY LENDER OR ISSUING BANK OR ANY AFFILIATE OF THE
AGENT OR ANY LENDER OR ISSUING BANK INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
<PAGE> 91
12.14. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT, AND EACH
LENDER AND ISSUING BANK HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING
IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED
THEREUNDER.
12.15. Confidentiality. Each Lender and the Agent agree to use
commercially reasonable efforts to keep confidential any financial reports
and other information from time to time supplied to them by the Borrower
hereunder to the extent that such information is not and does not become
publicly available through or with the consent or acquiescence of the
Borrower, except for disclosure (i) to the Agent and the other Lenders or
to a Transferee, (ii) to legal counsel, accountants, and other professional
advisors to a Lender, the Agent or a Transferee, (iii) to regulatory
officials, (iv) to any Person as required by law, regulation, or legal
process, (v) to any Person in connection with any legal proceeding to which
that Lender is a party, and (vi) permitted by Section 15.4. Any Lender or
Agent disclosing such information shall use commercially reasonable efforts
to advise the Person to whom such information is disclosed of the foregoing
confidentiality agreement and to direct such Person to comply therewith.
ARTICLE XIII
THE AGENT
13.1. Appointment. The First National Bank of Chicago is hereby
appointed Agent hereunder and under each other Loan Document, and each of
the Lenders irrevocably authorizes the Agent to act as the agent of such
Lender. The Agent agrees to act as such upon the express conditions
contained in this Article XIII. The Agent shall not have a fiduciary
relationship in respect of the Borrower, any Lender or the Issuing Bank by
reason of this Agreement.
13.2. Powers. The Agent shall have and may exercise such powers
under the Loan Documents as are specifically delegated to the Agent by the
terms of each thereof, together with such powers as are reasonably
incidental thereto. The Agent shall have no implied duties to the Lenders,
or any obligation to the Lenders to take any action thereunder except any
action specifically provided by the Loan Documents to be taken by the
Agent.
<PAGE> 92
13.3. General Immunity. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable to the Borrower or
any Lender for action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith
except for its or their own gross negligence or willful misconduct.
13.4. No Responsibility for Loans, Recitals, etc. Neither the
Agent nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into, or verify (i)
any statement, warranty or representation made in connection with any Loan
Document or any borrowing or any request for the issuance, amendment or
extension of any Facility Letter of Credit hereunder; (ii) the performance
or observance of any of the covenants or agreements of any obligor under
any Loan Document or Reimbursement Agreement, including, without
limitation, any agreement by an obligor to furnish information directly to
each Lender; (iii) the satisfaction of any condition specified in Article
IV or V, except receipt of items required to be delivered to the Agent; or
(iv) the validity, effectiveness or genuineness of any Loan Document or
Reimbursement Agreement or any other instrument or writing furnished in
connection with any of the foregoing. The Agent shall have no duty to
disclose to the Lenders information that is not required to be furnished by
the Borrower to the Agent at such time, but is voluntarily furnished by the
Borrower to the Agent (either in its capacity as Agent or in its individual
capacity).
13.5. Action on Instructions of Lenders. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder
and under any other Loan Document in accordance with written instructions
signed by the Required Lenders (except as otherwise provided in Section
11.2), and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders and on all holders
of Notes. The Agent shall be fully justified in failing or refusing to take
any action hereunder and under any other Loan Document unless it shall
first be indemnified to its satisfaction by the Lenders pro rata against
any and all liability, cost and expense that it may incur by reason of
taking or continuing to take any such action.
13.6. Employment of Agents and Counsel. The Agent may execute any
of its duties as Agent hereunder and under any other Loan Document by or
through employees, agents, and attorneys-in-fact and shall not be
answerable to the Lenders, except as to money or securities received by it
or its authorized agents, for the default or misconduct of any such agents
or attorneys-in-fact selected by it with reasonable care. The Agent shall
be entitled to advice of counsel concerning all matters pertaining to the
agency hereby created and its duties hereunder and under any other Loan
Document.
<PAGE> 93
13.7. Reliance on Documents; Counsel. The Agent shall be entitled
to rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document believed by it to be genuine and
correct and to have been signed or sent by the proper person or persons,
and, in respect to legal matters, upon the opinion of counsel selected by
the Agent, which counsel may be employees of the Agent.
13.8. Agent's Reimbursement and Indemnification. The Lenders agree
to reimburse and indemnify the Agent ratably in proportion to their
respective Commitments (i) for any amounts not reimbursed by the Borrower
for which the Agent is entitled to reimbursement by the Borrower under the
Loan Documents, (ii) for any other expenses incurred by the Agent on behalf
of the Lenders, in connection with the preparation, execution, delivery,
administration and enforcement of the Loan Documents and (iii) for any
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind and nature whatsoever
which may be imposed on, incurred by or asserted against the Agent in any
way relating to or arising out of the Loan Documents or any other document
delivered in connection therewith or the transactions contemplated thereby,
or the enforcement of any of the terms thereof or of any such other
documents, provided that no Lender shall be liable for any of the foregoing
to the extent they arise from the gross negligence or willful misconduct of
the Agent. The obligations of the Lenders under this Section 13.8 shall
survive payment of the Obligations and termination of this Agreement.
13.9. Rights as a Lender or Issuing Bank. In the event the Agent
is a Lender, the Agent shall have the same rights and powers hereunder and
under any other Loan Document as any Lender and may exercise the same as
though it were not the Agent, and the term "Lender" or "Lenders" shall, at
any time when the Agent is a Lender, unless the context otherwise
indicates, include the Agent in its individual capacity. In the event the
Agent is an Issuing Bank, the Agent shall have the rights and powers of the
Issuing Bank hereunder and may exercise the same as though it were not the
Agent, and the term "Issuing Bank" shall, at any time when the Agent is the
Issuing Bank, unless the context otherwise indicates, include and mean the
Agent in its capacity as the Issuing Bank. The Agent may accept deposits
from, lend money to, and generally engage in any kind of trust, debt,
equity or other transaction, in addition to those contemplated by this
Agreement or any other Loan Document, with the Borrower or any of its
Subsidiaries in which the Borrower or such Subsidiary is not restricted
hereby from engaging with any other Person. The Agent, in its individual
capacity, is not obligated to remain a Lender.
<PAGE> 94
13.l0. Lender Credit Decision. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender
and based on the financial statements prepared by the Borrower and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other
Loan Documents. Each Lender also acknowledges that it will, independently
and without reliance upon the Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under this Agreement and the other Loan Documents.
13.11. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower, such resignation to
be effective upon the appointment of a successor Agent or, if no successor
Agent has been appointed, 45 days after the retiring Agent gives notice of
its intention to resign. The Agent may be removed at any time with or
without cause by written notice received by the Agent from the Required
Lenders, such removal to be effective on the date specified by the Required
Lenders. Upon any such resignation or removal, the Required Lenders shall
have the right to appoint, on behalf of the Borrower and the Lenders, a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders within thirty days after the resigning Agent's giving
notice of its intention to resign, then the resigning Agent may appoint, on
behalf of the Borrower and the Lenders, a successor Agent. If the Agent has
resigned or been removed and no successor Agent has been appointed, the
Lenders may perform all the duties of the Agent hereunder and the Borrower
shall make all payments in respect of the Obligations to the applicable
Lender and for all other purposes shall deal directly with the Lenders. No
successor Agent shall be deemed to be appointed hereunder until such
successor Agent has accepted the appointment. Any such successor Agent
shall be a commercial bank having capital and retained earnings of at least
$50,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the resigning
or removed Agent. Upon the effectiveness of the resignation or removal of
the Agent, the resigning or removed Agent shall be discharged from its
duties and obligations hereunder and under the Loan Documents. After the
effectiveness of the resignation or removal of an Agent, the provisions of
this Article XIII shall continue in effect for the benefit of such Agent in
respect of any actions taken or omitted to be taken by it while it was
acting as the Agent hereunder and under the other Loan Documents.
<PAGE> 95
13.12. Agent's Fee. The Borrower agrees to pay to the Agent, for
its own account, the fees agreed to by the Borrower and the Agent pursuant
to that certain letter agreement dated July 31, 1995, or as otherwise agreed
from time to time.
ARTICLE XIV
SETOFF; RATABLE PAYMENTS
14.1. Setoff. In addition to, and without limitation of, any
rights of the Lenders or Issuing Bank under applicable law, if the Borrower
becomes insolvent, however evidenced, or any Default occurs, any and all
deposits (including all account balances, whether provisional or final and
whether or not collected or available) and any other Indebtedness at any
time held or owing by any Lender or Issuing Bank to or for the credit or
account of the Borrower may be offset and applied toward the payment of the
Obligations owing to such Lender or Issuing Bank, whether or not the
Obligations, or any part hereof, shall then be due.
14.2. Ratable Payments. If any Lender, whether by setoff or
otherwise, has payment made to it upon its Loans (other than payments
received pursuant to Sections 3.1, 3.2 or 3.4) in a greater proportion than
that received by any other Lender, such Lender agrees, promptly upon
demand, to purchase a portion of the Loans held by the other Lenders so
that after such purchase each Lender will hold its ratable proportion of
Loans. If any Lender, whether in connection with setoff or amounts which
might be subject to setoff or otherwise, receives collateral or other
protection for its Obligations or such amounts which may be subject to
setoff, such Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such collateral
ratably in proportion to their Loans. In case any such payment is disturbed
by legal process, or otherwise, appropriate further adjustments shall be
made.
ARTICLE XV
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
15.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower,
the Lenders and the Issuing Bank and their respective successors and
assigns, except that (i) the Borrower shall not have the right to assign
its rights or obligations under the Loan Documents, and (ii) any assignment
by any Lender must be made in compliance with Section 15.3. Notwithstanding
clause (ii) of this Section, any Lender may at any time, without the
consent of the Borrower or the Agent, assign all or any portion of its
rights under this Agreement and its Notes to a Federal Reserve Bank;
provided, however, that no such assignment shall release the transferor
Lender from its obligations hereunder. The Agent may treat the payee of any
Note as the owner thereof for all purposes hereof unless and until such
payee complies with Section 15.3 in the case of an assignment thereof or,
in the case of any other transfer, a written notice of the
<PAGE> 96
transfer is filed with the Agent. Any assignee or transferee of a Note
agrees by acceptance thereof to be bound by all the terms and provisions of
the Loan Documents. Any request, authority or consent of any Person, who at
the time of making such request or giving such authority or consent is the
holder of any Note, shall be conclusive and binding on any subsequent
holder, transferee or assignee of such Note or of any Note or Notes issued
in exchange therefor.
15.2. Participations.
15.2.1. Permitted Participants; Effect. Any Lender may,
in the ordinary course of its business and in accordance with applicable
law, at any time sell to one or more banks or other Persons that are not,
and that are not Affiliates of a Person, in the home building business
("Participants") participating interests in any Loan owing to such Lender,
any Note held by such Lender, any Commitment of such Lender or any other
interest of such Lender under the Loan Documents in an amount of not less
than $5,000,000. In the event of any such sale by a Lender of participating
interests to a Participant, such Lender's obligations under the Loan
Documents shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, such Lender shall remain the holder of any such Note for all
purposes under the Loan Documents, all amounts payable by the Borrower
under this Agreement shall be determined as if such Lender had not sold
such participating interests, and the Borrower, the Agent and the Issuing
Bank shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under the Loan
Documents.
15.2.2. Voting Rights. Each Lender shall retain the sole
right to approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other than
any amendment, modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which forgives
principal, interest or fees (other than Agent's fees) or reduces the
interest rate or fees (other than Agent's fees) payable with respect to any
such Loan or Commitment, or postpones any date fixed for any
regularly-scheduled payment of principal of, or interest or fees (other
than Agent's fees) on, any such Loan or Commitment.
15.2.3. Benefit of Setoff. The Borrower agrees that each
Participant shall be deemed to have the right of setoff provided in Section
14.1 in respect of its participating interest in amounts owing under the
Loan Documents to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under the Loan Documents,
provided that each Lender shall retain the right of setoff provided in
Section 15.1 with respect to the amount of participating
<PAGE> 97
interests sold to each Participant. The Lenders agree to share with each
Participant, and each Participant, by exercising the right of setoff
provided in Section 14.1, agrees to share with each Lender, any amount
received pursuant to the exercise of its right of setoff, such amounts to
be shared in accordance with Section 14.2 as if each Participant were a
Lender.
15.3. Assignments.
15.3.1. Permitted Assignments. Any Lender may, in the
ordinary course of its business and in accordance with applicable law, at
any time assign to one or more banks or other Persons that are not, and
that are not Affiliates of a Person, in the home building business
("Purchasers") all or any part of its rights and obligations under the Loan
Documents in the amount of not less than $5,000,000, provided that,
immediately following such assignment, the assigning Lender either (i)
shall retain a Commitment of not less than $10,000,000 or (ii) shall have
assigned all of its Commitment and have no remaining interest in the
Obligations. Such assignment shall be substantially in the form of Exhibit
"J" hereto or in such other form as may be agreed to by the parties
thereto. The consent of the Borrower and the Agent shall be required prior
to an assignment becoming effective with respect to a Purchaser which is
not a Lender or an Affiliate thereof; provided, however, that if a Default
has occurred and is continuing, the consent of the Borrower shall not be
required. Such consent shall not be unreasonably withheld.
15.3.2. Effect; Effective Date. Upon (i) delivery to the
Agent of a notice of assignment, substantially in the form attached as
Exhibit "I" to Exhibit "J" hereto (a "Notice of Assignment"), together with
any consents required by Section 15.3.1, and (ii) payment by the Lender of
a $4,000 fee to the Agent for processing such assignment, such assignment
shall become effective on the effective date specified in such Notice of
Assignment. The Notice of Assignment shall contain a representation by the
Purchaser to the effect that none of the consideration used to make the
purchase of the Commitment and Loans under the applicable assignment
agreement are "plan assets" as defined under ERISA and that the rights and
interests of the Purchaser in and under the Loan Documents will not be
"plan assets" under ERISA. On and after the effective date of such
assignment, such Purchaser shall for all purposes be a Lender party to this
Agreement and any other Loan Document executed by the Lenders and shall
have all the rights and obligations of a Lender under the Loan Documents,
to the same extent as if it were an original party hereto, and no further
consent or action by the Borrower, the Lenders or the Agent shall be
required to release the transferor Lender with respect to the percentage of
<PAGE> 98
the Aggregate Commitment and Loans assigned to such Purchaser. Upon the
consummation of any assignment to a Purchaser pursuant to this Section
15.3.2, the transferor Lender, the Agent and the Borrower shall make
appropriate arrangements so that replacement Notes are issued to such
transferor Lender and new Notes or, as appropriate, replacement Notes, are
issued to such Purchaser, in each case in principal amounts reflecting
their Commitment, as adjusted pursuant to such assignment.
15.4. Dissemination of Information. The Borrower authorizes each
Lender to disclose to any Participant or Purchaser or any other Person
acquiring an interest in the Loan Documents by operation of law (each a
"Transferee") and any prospective Transferee any and all information in
such Lender's possession concerning the creditworthiness of the Borrower
and its Subsidiaries; provided that each Transferee and prospective
Transferee agrees to be bound by Section 12.15 of this Agreement.
15.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the
transferor Lender shall cause such Transferee, concurrently with the
effectiveness of such transfer, to comply with the provisions of Section
2.19.
ARTICLE XVI
NOTICES
16.1. Giving Notice. Except as otherwise permitted by Section 2.14
with respect to borrowing notices, all notices and other communications
provided to any party hereto under this Agreement or any other Loan
Document shall be in writing or by telex or by facsimile and addressed or
delivered to such party at its address set forth below its signature hereto
or at such other address as may be designated by such party in a notice to
the other parties. Any notice, if mailed and properly addressed with
postage prepaid, shall be deemed given when received; any notice, if
transmitted by telex or facsimile, shall be deemed given when transmitted
(answerback confirmed in the case of telexes).
16.2. Change of Address. The Borrower, the Agent, any Lender
and the Issuing Bank may each change the address for service of notice upon
it by a notice in writing to the other parties hereto.
<PAGE> 99
ARTICLE XVII
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all
of which taken together shall constitute one agreement, and any of the
parties hereto may execute this Agreement by signing any such counterpart.
This Agreement shall be effective when it has been executed by the
Borrower, the Agent, and the Lenders and each party has notified the Agent
by telex or telephone, that it has taken such action.
IN WITNESS WHEREOF, the Borrower, the Lenders, and the Agent have
executed this Agreement as of the date first above written.
BORROWER:
U.S. HOME CORPORATION
By: /s/ Thomas A. Napoli
-------------------------
Name: Thomas A. Napoli,
Vice President - Finance
and Chief Financial Officer
1800 West Loop South
Houston, TX 77252
Attention: Thomas A. Napoli
LENDERS:
Commitments
$30,000,000 THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: /s/ James D. Benko
--------------------------
Name: James D. Benko,
Assistant Vice President
One First National Plaza
Chicago, Illinois 60670
Attention: James D. Benko
<PAGE> 100
$30,000,000 GUARANTY FEDERAL BANK, F.S.B.
By: /s/ Richard V. Thompson
---------------------------
Name: Richard V. Thompson,
Vice President
8333 Douglas Avenue
Dallas, TX 75225
Attention: Richard V. Thompson
$30,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Robert Ivosevich
--------------------------
Name: Robert Ivosevich,
Senior Vice President
Lincoln Plaza
500 N. Akard - Suite 3210
Dallas, TX 75201
Attention: Cliff Hoover
$25,000,000 BANK ONE, ARIZONA, NA
By: /s/ Rhonda R. Williams
----------------------------
Name: Rhonda R. Williams,
Assistant Vice President
241 N. Central
Phoenix, AZ 85004
Attention: Rhonda R. Williams
$15,000,000 COMERICA BANK, a Michigan
corporation
By: /s/ David J. Campbell
---------------------------
Name: David J. Campbell,
Vice President
500 Woodward Avenue, M/C 3256
Detroit, MI 48226
Attention: David J. Campbell
<PAGE> 101
Exhibit "A"
GUARANTY
This GUARANTY ("Guaranty") is made as of the ___ day of
September, 1995, by _________________________, a __________ corporation
(the "Guarantor"), in favor of the "Lenders" under that certain Credit
Agreement, of even date herewith, by and among U.S. Home Corporation (the
"Borrower"), the financial institutions from time to time parties thereto
(collectively, and including the Issuing Bank (as defined in the Credit
Agreement) the "Lenders") and The First National Bank of Chicago, in its
capacity as Agent. Such Credit Agreement, as it may be amended, modified or
supplemented from time to time, is hereinafter referred to as the "Credit
Agreement". Unless otherwise defined herein, capitalized terms used herein
shall have the meanings ascribed to them in the Credit Agreement.
1. Guaranty. (i) For value received and in consideration
of any loan, advance or financial accommodation of any kind whatsoever
heretofore, now or hereafter made, given or granted to the Borrower by the
Lenders, the Guarantor unconditionally guarantees for the benefit of each
of the Lenders the full and prompt payment when due, whether at maturity or
earlier, by reason of acceleration or otherwise, and at all times
thereafter, of all of the Obligations (including, without limitation,
interest accruing following the filing of a bankruptcy petition by or
against the Borrower, at the applicable rate specified in the Credit
Agreement, whether or not such interest is allowed as a claim in
bankruptcy).
(ii) At any time after the occurrence of a Default, the
Guarantor shall pay to the Agent, for the benefit of the Lenders, on demand
and in immediately available funds, the full amount of the Obligations. The
Guarantor further agrees to pay to the Agent and reimburse the Agent for,
on demand and in immediately available funds, (a) all fees, costs and
expenses (including, without limitation, all court costs and attorneys' and
paralegals' fees, costs and expenses) paid or incurred by the Agent or any
of the Lenders in: (1) endeavoring to collect all or any part of the
Obligations from, or in prosecuting any action against, the Guarantor
relating to this Guaranty; (2) taking any action with respect to any
security or collateral securing the Guarantor's obligations hereunder; and
(3) preserving, protecting or defending the enforceability of, or
enforcing, this Guaranty or their respective rights hereunder (all such
costs and expenses are hereinafter referred to as the "Expenses"). The
Guarantor hereby agrees that this Guaranty is an absolute guaranty of
payment and is not a guaranty of collection.
<PAGE> 102
2. Obligations Unconditional. Subject to Section 10, the
Guarantor hereby agrees that its obligations under this Guaranty shall be
unconditional, irrespective of: (i) the validity, enforceability,
avoidance, novation or subordination of any of the Obligations or any of
the Loan Documents; (ii) the absence of any attempt by, or on behalf of,
any Lender or the Agent to collect, or to take any other action to enforce,
all or any part of the Obligations whether from or against the Borrower,
any other guarantor of the Obligations or any other Person; (iii) the
election of any remedy by, or on behalf of, any Lender or the Agent with
respect to all or any part of the Obligations; (iv) the waiver, consent,
extension, forbearance or granting of any indulgence by, or on behalf of,
any Lender or the Agent with respect to any provision of any of the Loan
Documents; (v) the election by, or on behalf of, any one or more of the
Lenders, in any proceeding instituted under Chapter 11 of Title 11 of the
United States Code (11 U.S.C. 101 et seq.) (the "Bankruptcy Code"), of the
application of Section 1111(b)(2) of the Bankruptcy Code; (vi) any
borrowing or grant of a security interest by the Borrower, as
debtor-in-possession, under Section 364 of the Bankruptcy Code; (vii) the
disallowance, under Section 502 of the Bankruptcy Code, of all or any
portion of the claims of any of the Lenders or the Agent for repayment of
all or any part of the Obligations or any Expenses; or (viii) any other
circumstance which might otherwise constitute a legal or equitable
discharge or defense of the Borrower or the Guarantor.
3. Enforcement; Application of Payments. Upon the
occurrence of a Default, the Agent may proceed directly and at once,
without notice, against the Guarantor to obtain performance of and to
collect and recover the full amount, or any portion, of the Obligations,
without first proceeding against the Borrower or any other Person, or
against any security or collateral for the Obligations. Subject only to the
terms and provisions of the Credit Agreement, the Agent shall have the
exclusive right to determine the application of payments and credits, if
any, from the Guarantor, the Borrower or from any other Person on account
of the Obligations or any other liability of the Guarantor to any Lender.
4. Waivers. (a) The Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event
of receivership or bankruptcy of the Borrower, protest or notice with
respect to the Obligations, all setoffs and counterclaims and all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor and notices of acceptance of this
Guaranty, the benefits of all statutes of limitation, and all other demands
whatsoever (and shall not require that the same be made on the Borrower as
a condition precedent to the Guarantor's obligations hereunder), and
covenants that this Guaranty will not be discharged, except by complete
payment (in cash) and performance of the Obligations and any other
obligations contained herein. The Guarantor further
<PAGE> 103
waives all notices of the existence, creation or incurring of new or
additional indebtedness, arising either from additional loans extended to
the Borrower or otherwise, and also waives all notices that the principal
amount, or any portion thereof, and/or any interest on any instrument or
document evidencing all or any part of the Obligations is due, notices of
any and all proceedings to collect from the maker, any endorser or any
other guarantor of all or any part of the Obligations, or from any other
Person, and, to the extent permitted by law, notices of exchange, sale,
surrender or other handling of any security or collateral given to the
Agent to secure payment of all or any part of the Obligations.
(b) The Guarantor understands that it shall be liable for
the full amount of its liability under this Guaranty, notwithstanding the
occurrence of any event impairing the right of the Guarantor, the Agent or
any of the Lenders to proceed against the Borrower, any other guarantor or
the Borrower's or such guarantor's property. The Guarantor agrees that all
of its obligations under this Guaranty (including its obligation to pay in
full all indebtedness evidenced by or arising under the Credit Agreement)
shall remain in full force and effect without defense, offset or
counterclaim of any kind, notwithstanding that the Guarantor's rights
against the Borrower may be impaired, destroyed or otherwise affected by
reason of any action or inaction on the part of the Agent or any Lender.
(c) The Lenders, either themselves or acting through the
Agent, are hereby authorized, without notice or demand and without
affecting the liability of the Guarantor hereunder, from time to time, (i)
to renew, extend, accelerate or otherwise change the time for payment of,
or other terms relating to, all or any part of the Obligations, or to
otherwise modify, amend or change the terms of any of the Loan Documents;
(ii) to accept partial payments on all or any part of the Obligations;
(iii) to take and hold security or collateral for the payment of all or any
part of the Obligations, this Guaranty, or any other guaranties of all or
any part of the Obligations or other liabilities of the Borrower, (iv) to
exchange, enforce, waive and release any such security or collateral; (v)
to apply such security or collateral and direct the order or manner of sale
thereof as in their discretion they may determine; and (vi) to settle,
release, exchange, enforce, waive, compromise or collect or otherwise
liquidate all or any part of the Obligations, this Guaranty, any other
guaranty of all or any part of the Obligations, and any security or
collateral for the Obligations or for any such guaranty. Any of the
foregoing may be done in any manner, without affecting or impairing the
obligations of the Guarantor hereunder.
5. Setoff. At any time after all or any part of
the Obligations have become due and payable (by acceleration or
otherwise) following the occurrence of a Default, each Lender and
the Agent may, without notice to the Guarantor and regardless of the
acceptance of any security or collateral for
<PAGE> 104
the payment hereof, appropriate and apply toward the payment of all or any
part of the Obligations (i) any indebtedness due or to become due from such
Lender or the Agent to the Guarantor, and (ii) any moneys, credits or other
property belonging to the Guarantor, at any time held by or coming into the
possession of such Lender or the Agent or any of their respective
affiliates.
6. Financial Information. The Guarantor hereby assumes
responsibility for keeping itself informed of the financial condition of
the Borrower and any and all endorsers and/or other guarantors of all or
any part of the Obligations, and of all other circumstances bearing upon
the risk of nonpayment of the Obligations, or any part thereof, that
diligent inquiry would reveal, and the Guarantor hereby agrees that none of
the Lenders nor the Agent shall have any duty to advise the Guarantor of
information known to any of them regarding such condition or any such
circumstances. In the event any Lender, in its sole discretion, undertakes
at any time or from time to time to provide any such information to the
Guarantor, such Lender shall be under no obligation (i) to undertake any
investigation not a part of its regular business routine, (ii) to disclose
any information which such Lender, pursuant to accepted or reasonable
commercial finance or banking practices, wishes to maintain confidential or
(iii) to make any other or future disclosures of such information or any
other information to the Guarantor.
7. No Marshalling; Reinstatement. The Guarantor consents
and agrees that none of the Lenders nor the Agent nor any Person acting for
or on behalf of the Lenders or the Agent shall be under any obligation to
marshall any assets in favor of the Guarantor or against or in payment of
any or all of the Obligations. The Guarantor further agrees that, to the
extent that the Borrower, the Guarantor or any other guarantor of all or
any part of the Obligations makes a payment or payments to any Lender or
the Agent, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to the Borrower, the Guarantor, such other guarantor
or any other Person, or their respective estates, trustees, receivers or
any other party, including, without limitation, the Guarantor, under any
bankruptcy law, state or federal law, common law or equitable cause, then,
to the extent of such payment or repayment, the part of the Obligations
which has been paid, reduced or satisfied by such amount shall be
reinstated and continued in full force and effect as of the time
immediately preceding such initial payment, reduction or satisfaction.
8. Subrogation. Until the Obligations have been paid in
full, the Guarantor (i) shall have no right of subrogation with respect to
such Obligations and (ii) waives any right to enforce any remedy which the
Lenders or the Agent (or any of them) now have or may hereafter have
against the Borrower, any endorser or any guarantor of all or any part of
the Obligations or any other Person, and the Guarantor waives any benefit
of, and any right to participate in, any security or collateral given to
the Lenders and the Agent (or any of them) to secure the payment or
performance of all or any part of the Obligations or any other liability of
the Borrower to the Lenders.
<PAGE> 105
9. Enforcement; Amendments; Waivers. No delay on the part
of any of the Lenders or the Agent in the exercise of any right or remedy
arising under this Guaranty, the Credit Agreement, any of the other Loan
Documents or otherwise with respect to all or any part of the Obligations
or any other guaranty of or security for all or any part of the Obligations
shall operate as a waiver thereof, and no single or partial exercise by any
such Person of any such right or remedy shall preclude any further exercise
thereof. No modification or waiver of any of the provisions of this
Guaranty shall be binding upon the Lenders or the Agent, except as
expressly set forth in a writing duly signed and delivered by the party
making such modification or waiver. Failure by any of the Lenders or the
Agent at any time or times hereafter to require strict performance by the
Borrower, the Guarantor, any other guarantor of all or any part of the
Obligations or any other Person of any of the provisions, warranties, terms
and conditions contained in any of the Loan Documents now or at any time or
times hereafter executed by such Persons and delivered to the Agent or any
Lender shall not waive, affect or diminish any right of the Agent or such
Lender at any time or times hereafter to demand strict performance thereof
and such right shall not be deemed to have been waived by any act or
knowledge of the Agent or any Lender, or their respective agents, officers
or employees, unless such waiver is contained in an instrument in writing,
directed and delivered to the Borrower or the Guarantor, as applicable,
specifying such waiver, and is signed by the party or parties necessary to
give such waiver under the Credit Agreement. No waiver of any Default by
the Agent or any Lender shall operate as a waiver of any other Default or
the same Default on a future occasion, and no action by the Agent or any
Lender permitted hereunder shall in any way affect or impair the Agent's or
any Lender's rights and remedies or the obligations of the Guarantor under
this Guaranty. Any determination by a court of competent jurisdiction of
the amount of any principal and/or interest owing by the Borrower to any of
the Lenders shall be conclusive and binding on the Guarantor irrespective
of whether the Guarantor was a party to the suit or action in which such
determination was made.
10. Effectiveness; Termination. This Guaranty shall
become effective upon its execution by the Guarantor and shall continue in
full force and effect and may not be terminated or otherwise revoked until
the Obligations shall have been fully paid (in cash) and discharged and the
Credit Agreement and all financing arrangements between the Borrower and
the Lenders shall have been terminated. If, notwithstanding the foregoing,
the Guarantor shall have any right under applicable law to terminate or
revoke this Guaranty, the Guarantor agrees that such termination or
revocation shall not be effective until a written notice of such revocation
or termination, specifically referring hereto, signed by the Guarantor, is
actually received by the Agent. Such notice shall not affect the right and
power of any of the Lenders or the Agent to enforce rights arising prior to
receipt thereof by the Agent. If any Lender grants loans or takes other
action after the Guarantor terminates or revokes this Guaranty but before
the Agent receives such written notice, the rights of such Lender with
respect thereto shall be the same as if such termination or revocation had
not occurred.
<PAGE> 106
11. Successors and Assigns. This Guaranty shall be
binding upon the Guarantor and upon its successors and assigns and shall
inure to the benefit of the Lender and the Agent and their respective
successors and assigns; all references herein to the Borrower and to the
Guarantor shall be deemed to include their respective successors and
assigns. The successors and assigns of the Guarantor and the Borrower shall
include, without limitation, their respective receivers, trustees or
debtors-in-possession. All references to the singular shall be deemed to
include the plural where the context so requires.
12. Officer Authority. The Guarantor authorizes its
Chairman, President, and each of its Vice Presidents, respectively, from
time to time, severally and not jointly, on behalf and in the name of the
Guarantor from time to time in the discretion of such officer, to take or
omit to take any and all action and to execute and deliver any and all
documents and instruments which such officer may determine to be necessary
or desirable in relation to, and perform any obligations arising in
connection with, this Guaranty and any of the transactions contemplated
hereby, and, without limiting the generality of the foregoing, hereby gives
to each such officer severally the power and right on behalf of the
Guarantor, without notice to or assent by the Guarantor, to do the
following: (i) to execute and deliver any amendment, waiver, consent,
supplement, other modification or reaffirmation of this Guaranty or any
document relating hereto, and to perform any obligation arising in
connection herewith or therewith; (ii) to sell, transfer, assign, encumber
or otherwise deal in or with any security for this Guaranty or any part
thereof; (iii) to grant liens, security interests or other encumbrances on
or in respect of any property or assets of the Guarantor, whether now owned
or hereafter acquired, in favor of the Lenders and the Agent; (iv) to send
notices, directions, orders and other communications to any Person relating
to this Guaranty, or any security for all or any part of the Obligations;
(v) to take or omit to take any other action contemplated by or referred to
in this Guaranty or any document covering any security for all or any part
of the Obligations; and (vi) to take or omit to take any action with
respect to this Guaranty, any security for all or any part of the
Obligations or any document covering any such security, all as such officer
may determine in his or her sole discretion. The undersigned hereby
certifies that he/she has all necessary authority to grant and execute this
Guaranty on behalf of the Guarantor.
<PAGE> 107
13. Governing Law. This Guaranty has been delivered by
the parties hereto in Chicago, Illinois. Any dispute between the Guarantor
and the Lenders or the Agent arising out of or related to the relationship
established between them in connection with this Guaranty, and whether
arising in contract, tort, equity, or otherwise, shall be resolved in
accordance with the internal laws, and not the conflicts of law provisions,
of the State of Illinois.
14. Consent to Jurisdiction; Counterclaims; Forum Non
Conveniens. (a) Exclusive Jurisdiction. Except as provided in subsection
(b) of this Section 14, the Agent, on behalf of itself and the Lenders, and
the Guarantor agree that all disputes between them arising out of or related
to the relationship established between them in connection with this Guaranty,
whether arising in contract, tort, equity, or otherwise, shall be resolved
only by state or federal courts located in Chicago, Illinois, but the parties
acknowledge that any appeals from those courts may have to be heard by a court
located outside of Chicago, Illinois.
(b) Other Jurisdictions. The Lenders and Agent shall have
the right to proceed against the Guarantor or its real or personal property
in a court in any location to enable the Agent or the Lenders to obtain
personal jurisdiction over the Guarantor or to enforce a judgment or other
court order entered in favor of the Agent or the Lenders.
(c) Venue; Forum Non Conveniens. Each of the Guarantor
and the Agent, on behalf of itself and the Lenders, waives any objection
that it may have (including, without limitation, any objection to the
laying of venue or based on forum non conveniens) to the location of the
court in which any proceeding is commenced in accordance with this Section
14.
15. Waiver of Jury Trial. Each of the Guarantor and the
Agent waives any right to trial by jury in any dispute, whether sounding in
contract, tort, or otherwise, between the Guarantor and the Lenders or the
Agent arising out of or related to the transactions contemplated by this
Guaranty or any other instrument, document or agreement executed or
delivered in connection herewith. Either the Guarantor or the Agent may
file an original counterpart or a copy of this Guaranty with any court as
written evidence of the consent of the parties hereto to the waiver of
their right to trial by jury.
<PAGE> 108
16. Waiver of Bond. The Guarantor waives the posting of
any bond otherwise required of the Agent in connection with any judicial
process or proceeding to enforce any judgment or other court order entered
in favor of the Agent, or to enforce by specific performance, temporary
restraining order, or preliminary or permanent injunction, this Guaranty or
any other agreement or document between the Agent and the Guarantor.
17. Advice of Counsel. The Guarantor represents and
warrants that it has consulted with its legal counsel regarding all waivers
under this Guaranty, including without limitation those under Section 4 and
Sections 14 through 17 hereof, that it believes that it fully understands
all rights that it is waiving and the effect of such waivers, that it
assumes the risk of any misunderstanding that it may have regarding any of
the foregoing, and that it intends that such waivers shall be a material
inducement to the Agent and the Lenders to extend the indebtedness
guaranteed hereby.
18. Notices. All notices and other communications
provided to any party hereto shall be in writing or by facsimile and
addressed to such party at its address set forth below or at such other
address as may be designated by such party in a notice to the other party.
Any notice, if mailed and properly addressed with postage prepaid, shall be
deemed given when received; any notice, if transmitted by facsimile, shall
be deemed given when transmitted. The addresses for notices are as follows:
if to the Guarantor, at:
========================
========================
if to the Agent, at
The First National Bank of Chicago
One First National Plaza
Chicago, Illinois 60670
Attention: James D. Benko
Telecopy: 312/732-1117
19. Severability. Wherever possible, each provision of
this Guaranty shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Guaranty shall be
prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of
this Guaranty.
20. Merger. This Guaranty represents the final agreement
of the Guarantor with respect to the matters contained herein and may not be
contradicted by evidence of prior or contemporaneous agreements, or
subsequent oral agreements, between the Guarantor and the Agent or any Lender.
<PAGE> 109
21. Execution in Counterparts. This Guaranty may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the
same agreement.
IN WITNESS WHEREOF, this Guaranty has been duly executed
by the Guarantor as of the day and year first set forth above.
-------------------------
By: __________________________
Name: ____________________
Title:
Acknowledged and agreed to as of the ___ day of September, 1995.
THE FIRST NATIONAL BANK OF CHICAGO,
as Agent
By:--------------------------------
Name: James D. Benko
Title: Assistant Vice President
<PAGE> 110
EXHIBIT "B"
NOTE
$ ----------------- ----------------- , l9
The undersigned (the "Borrower") promises to pay to the order of
(the "Lender") the lesser of the principal sum of Dollars or the aggregate
unpaid principal amount of all Loans made by the Lender to the Borrower
pursuant to the Credit Agreement (as the same may be amended or modified,
the "Agreement") hereinafter referred to, in immediately available funds at
the main office of The First National Bank of Chicago in Chicago, Illinois,
as Agent, together with interest on the unpaid principal amount hereof at
the rates and on the dates set forth in the Agreement. The Borrower shall
pay the principal of and accrued and unpaid interest on the Loans in full
on the Facility Termination Date.
The Lender shall, and is hereby authorized to, record on the
schedule attached hereto, or to otherwise record in accordance with its
usual practice, the date and amount of each Loan and the date and amount of
each principal payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled
to the benefits of, the Credit Agreement, dated as of September __, 1995
among the Borrower, The First National Bank of Chicago, individually and as
Agent, and the lenders named therein, including the Lender, to which
Agreement, as it may be amended from time to time, reference is hereby made
for a statement of the terms and conditions governing this Note, including
the terms and conditions under which this Note may be prepaid or its
maturity date accelerated. Capitalized terms used herein and not otherwise
defined herein are used with the meanings attributed to them in the
Agreement.
U.S. HOME CORPORATION
By:______________________
Print Name:________________
Title:_____________________
<PAGE> 111
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF U.S. HOME CORPORATION
DATED ____________, 199_
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
- ------ ---------- ----------- --------- -------
<PAGE> 112
EXHIBIT 10.2
FIRST AMENDED AND RESTATED
WAREHOUSING CREDIT AND SECURITY AGREEMENT
(SINGLE-FAMILY MORTGAGE LOANS)
BETWEEN
U.S. HOME MORTGAGE CORPORATION,
a Florida corporation
AND
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
Dated as of August 31, 1995
<PAGE> 113
TABLE OF CONTENTS
PAGE
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions. . . . . . . . . . . . 12
2. THE CREDIT. . . . . . . . . . . . . . . . . . . . . . . . 12
2.1 The Commitment . . . . . . . . . . . . . . . . . . . 12
2.2 Procedures for Obtaining Advances. . . . . . . . . . 14
2.3 Notes. . . . . . . . . . . . . . . . . . . . . . . . 16
2.4 Interest . . . . . . . . . . . . . . . . . . . . . . 16
2.5 Principal Payments . . . . . . . . . . . . . . . . . 18
2.6 Expiration of Commitment . . . . . . . . . . . . . . 21
2.7 Method of Making Payments. . . . . . . . . . . . . . 21
2.8 Commitment and Usage Fees. . . . . . . . . . . . . . 22
2.9 Warehousing Fees . . . . . . . . . . . . . . . . . . 23
2.10 Miscellaneous Charges. . . . . . . . . . . . . . . . 23
2.11 Interest Limitation. . . . . . . . . . . . . . . . . 23
2.12 Increased Costs; Capital Requirements. . . . . . . . 24
3. COLLATERAL. . . . . . . . . . . . . . . . . . . . . . . . 25
3.1 Grant of Security Interest . . . . . . . . . . . . . 25
3.2 Release of Security Interest in Collateral . . . . . 26
3.3 Delivery of Additional Collateral or Mandatory
Prepayment 28
3.4 Release of Collateral. . . . . . . . . . . . . . . . 29
3.5 Collection and Servicing Rights. . . . . . . . . . . 29
3.6 Return of Collateral at End of Commitment. . . . . . 29
<PAGE> 114
4. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . 30
4.1 Initial Advance. . . . . . . . . . . . . . . . . . . 30
4.2 Each Advance . . . . . . . . . . . . . . . . . . . . 32
5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . 33
5.1 Organization; Good Standing; Subsidiaries. . . . . . 33
5.2 Authorization and Enforceability . . . . . . . . . . 34
5.3 Approvals. . . . . . . . . . . . . . . . . . . . . . 34
5.4 Financial Condition. . . . . . . . . . . . . . . . . 34
5.5 Litigation . . . . . . . . . . . . . . . . . . . . . 35
5.6 Compliance with Laws . . . . . . . . . . . . . . . . 35
5.7 Regulations G and U. . . . . . . . . . . . . . . . . 35
5.8 Investment Company Act . . . . . . . . . . . . . . . 36
5.9 Payment of Taxes . . . . . . . . . . . . . . . . . . 36
5.10 Agreements . . . . . . . . . . . . . . . . . . . . . 36
5.11 Title to Properties. . . . . . . . . . . . . . . . . 37
5.12 ERISA. . . . . . . . . . . . . . . . . . . . . . . . 37
5.13 Eligibility. . . . . . . . . . . . . . . . . . . . . 37
5.14 Place of Business. . . . . . . . . . . . . . . . . . 38
5.15 Special Representations Concerning Collateral. . . . 38
5.16 Servicing. . . . . . . . . . . . . . . . . . . . . . 40
5.17 Special Representations Concerning Construction
Advances 40
6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . 42
6.1 Payment of Note. . . . . . . . . . . . . . . . . . . 42
6.2 Financial Statements and Other Reports . . . . . . . 42
6.3 Maintenance of Existence; Conduct of Business. . . . 44
6.4 Compliance with Applicable Laws. . . . . . . . . . . 44
<PAGE> 115
6.5 Inspection of Properties and Books . . . . . . . . . 44
6.6 Notice . . . . . . . . . . . . . . . . . . . . . . . 45
6.7 Payment of Debt, Taxes, etc. . . . . . . . . . . . . 45
6.8 Insurance. . . . . . . . . . . . . . . . . . . . . . 46
6.9 Closing Instructions . . . . . . . . . . . . . . . . 46
6.10 Subordination of Certain Indebtedness. . . . . . . . 46
6.11 Other Loan Obligations . . . . . . . . . . . . . . . 46
6.12 Use of Proceeds of Advances. . . . . . . . . . . . . 47
6.13 Special Affirmative Covenants Concerning Collateral. 47
6.14 Special Affirmative Covenants Concerning
Construction Advances 48
7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . 48
7.1 Contingent Liabilities . . . . . . . . . . . . . . . 49
7.2 Sale or Pledge of Servicing Contracts. . . . . . . . 49
7.3 Merger; Sale of Assets; Acquisitions . . . . . . . . 49
7.4 Deferral of Subordinated Debt. . . . . . . . . . . . 49
7.5 Loss of Eligibility. . . . . . . . . . . . . . . . . 49
7.6 Debt to Tangible Net Worth Ratio . . . . . . . . . . 49
7.7 Minimum Tangible Net Worth . . . . . . . . . . . . . 49
7.8 Acquisition of Recourse Servicing Contracts. . . . . 50
7.9 Gestation Facilities . . . . . . . . . . . . . . . . 50
7.10 Special Negative Covenants Concerning Collateral . . 50
8. DEFAULTS; REMEDIES. . . . . . . . . . . . . . . . . . . . 50
8.1 Events of Default. . . . . . . . . . . . . . . . . . 50
8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . 54
<PAGE> 116
8.3 Application of Proceeds. . . . . . . . . . . . . . . 58
8.4 Lender Appointed Attorney-in-Fact. . . . . . . . . . 58
8.5 Right of Set-Off . . . . . . . . . . . . . . . . . . 59
9. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . 59
10. REIMBURSEMENT OF EXPENSES; INDEMNITY. . . . . . . . . . . 60
11. FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . 61
12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 61
12.1 Terms Binding Upon Successors; Survival of
Representations 61
12.2 Assignment . . . . . . . . . . . . . . . . . . . . . 61
12.3 Amendments . . . . . . . . . . . . . . . . . . . . . 61
12.4 Governing Law. . . . . . . . . . . . . . . . . . . . 61
12.5 Participations . . . . . . . . . . . . . . . . . . . 61
12.6 Relationship of the Parties. . . . . . . . . . . . . 62
12.7 Severability . . . . . . . . . . . . . . . . . . . . 62
12.8 Operational Reviews. . . . . . . . . . . . . . . . . 62
12.9 Consent to Credit References . . . . . . . . . . . . 63
12.10 Consent to Jurisdiction . . . . . . . . . . . . . . 63
12.11 Counterparts. . . . . . . . . . . . . . . . . . . . 63
12.12 Entire Agreement. . . . . . . . . . . . . . . . . . 63
12.13 Waiver of Jury Trial. . . . . . . . . . . . . . . . 63
<PAGE>117
EXHIBITS
Exhibit A-1 Warehousing Promissory Note
Exhibit A-2 Construction Promissory Note
Exhibit B (Intentionally Omitted)
Exhibit C-SF Request for Advance Against Single
Family Mortgage Loans
Exhibit C-SF/CONSTRUCTION Request for Advance Against Single-Family
Construction/Perm Mortgage Loans
Exhibit D-SF Procedures and Documentation for
Warehousing Single Family Mortgage
Loans
Exhibit D-SF/CONSTRUCTION Procedures and Documentation for
Warehousing Single Family
Construction/Perm Mortgage Loans
Exhibit E Schedule of Servicing Contracts
Exhibit F Subordination of Debt Agreement
Exhibit G Subsidiaries
Exhibit H Legal Opinion
Exhibit I-SF Officer's Certificate
Exhibit J Schedule of Existing Warehouse Lines
Exhibit K-1 Funding Bank Agreement (Wire)
Exhibit K-2 Funding Bank Agreement (Checks)
Exhibit L Commitment Summary Report
Exhibit M Bailee Pledge Agreement
<PAGE> 118
THIS FIRST AMENDED AND RESTATED WAREHOUSING CREDIT AND SECURITY
AGREEMENT (SINGLE-FAMILY MORTGAGE LOANS), dated as of August 31, 1995 (as
supplemented, modified or amended from time to time, this "Agreement"),
between U.S. HOME MORTGAGE CORPORATION, a Florida corporation (the
"Company"), having its principal office at 311 Park Place Boulevard, P.O.
Box 4929, Clearwater, Florida 34618 and RESIDENTIAL FUNDING CORPORATION, a
Delaware corporation (the "Lender"), having its principal office at 8400
Normandale Lake Blvd., Suite 600, Minneapolis, Minnesota 55437.
WHEREAS, the Company and the Lender have entered into a Warehousing
Credit and Security Agreement (Single-family Mortgage Loans) dated April
15, 1992, and amended by the First Amendment to Warehousing Credit and
Security Agreement dated as of June 1, 1992, the Second Amendment to
Warehousing Credit and Security Agreement dated as of June 11, 1992, the
Third Amendment to Warehousing Credit and Security Agreement dated as of
October 21, 1992, the Fourth Amendment to Warehousing Credit and Security
Agreement dated as of May 28, 1993, the Fifth Amendment to Warehousing
Credit and Security Agreement dated as of June 15, 1993, the Sixth
Amendment to Warehousing Credit and Security Agreement dated as of
September 15, 1993, the Seventh Amendment to Warehousing Credit and
Security Agreement dated as of July 1, 1994, the Eighth Amendment to
Warehousing Credit and Security Agreement dated as of October 1, 1994, the
Ninth Amendment to Warehousing Credit and Security Agreement dated as of
January 1, 1995, the Tenth Amendment to Warehousing Credit and Security
Agreement dated as of June 1, 1995; and the Eleventh Amendment to
Warehousing Credit and Security Agreement dated as of July 24, 1995;
WHEREAS, the Company and the Lender desire to amended and restate the
Original Agreement and to set forth herein the terms and conditions upon
which the Lender shall provide warehouse financing to the Company;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS.
1.1 Defined Terms. Capitalized terms defined below or
elsewhere in this Agreement (including the Exhibits hereto)
shall have the following meanings:
"Adjustable Rate Mortgage Loan" means a Single-family Mortgage
Loan that bears interest at a fluctuating rate and that is eligible
for purchase by an Investor.
"Adjusted Servicing Portfolio" means, for any Person, the
Servicing Portfolio of such Person, but excluding the principal
balance of Mortgage Loans included in the Servicing Portfolio
at such date (a) which are past due for principal or
interest for sixty (60) days or more, (b) with respect to
<PAGE> 119
which such Person is obligated to repurchase or indemnify the holder
of the Mortgage Loans as a result of defaults on the Mortgage Loans at
any time during the term of such Mortgage Loans, (c) for which the
Servicing Contracts are not owned by such Person free and clear of all
Liens (other than in favor of the Lender), or (d) which are serviced
by the Company for others under subservicing arrangements.
"Adjusted Tangible Net Worth" means with respect to any Person at
any date, the Tangible Net Worth of such Person at such date,
excluding capitalized excess servicing fees and capitalized servicing
rights, plus one percent (1%) of the Adjusted Servicing Portfolio and
deferred taxes arising from excess capitalized servicing fees.
"Advance" means a disbursement by the Lender under the Commitment
pursuant to Article 2 of this Agreement, including, without
limitation, Ordinary Warehousing Advances, Wet Settlement Advances,
Construction Advances, Nonconforming Advances and readvances of funds
previously advanced to the
Company and repaid to the Lender.
"Advance Request" has the meaning set forth in Section
2.2(a) hereof.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
General Rules and Regulations under the Exchange Act.
"Agreement" has the meaning set forth in the first
paragraph hereto.
"Approved Custodian" means First Commonwealth Savings Bank, or
other Person which is deemed acceptable to the Lender from time to
time in its sole discretion.
"As Completed Appraised Value" means, with respect to a
Construction/Perm Mortgage Loan, the value given by a state certified
appraiser prior to the beginning of any construction to the real
property and improvements thereto to be financed by such
Construction/Perm Mortgage Loan (i) as of the completion of
construction and (ii) based on the Total Costs and plans and
specifications for such real property and improvements.
"Bailee Pledge Agreement" has the meaning set forth in
Section 2.2(b) hereof.
"Business Day" means any day excluding Saturday or Sunday and
excluding any day on which national banking associations are closed
for business.
<PAGE> 120
"Buydown" has the meaning set forth in Section 2.5(h)
hereof.
"Cash Collateral Account" means a demand deposit account
maintained at the Funding Bank in the name of the Lender and
designated for receipt of the proceeds of the sale or other
disposition of the Collateral.
"Closing Date" means August 31, 1995.
"Collateral" has the meaning set forth in Section 3.1
hereof.
"Collateral Documents" has the meaning set forth in
Section 2.2(a) hereof.
"Collateral Value" means (a) with respect to any Mortgage Loan as
of the date of determination, the lesser of (i) the amount of any
Advance made against such Mortgage Loan under Section 2.1(c) hereof;
or (ii) the Fair Market Value of such Mortgage Loan; or (b) in the
event Pledged Mortgages have been exchanged for Pledged Securities,
the aggregate Fair Market Value of the Mortgage Loans backing such
Pledged Securities.
"Commitment" has the meaning set forth in Section 2.1(a)
hereof.
"Commitment Amount" means Thirty-Five Million Dollars
($35,000,000).
"Commitment Fee" means a fee payable by the Company in
consideration of the Lender's issuance of the Commitment. The amount
of the Commitment Fee, if any, is set forth in Section 2.8(a) hereof.
"Commitment Summary Report" has the meaning set forth in
Section 6.2(d) hereof.
"Committed Purchase Price" means for a Mortgage Loan the product
of the Mortgage Note Amount multiplied by (a) the price (expressed as
a percentage) as set forth in a Purchase Commitment for such Mortgage
Loan or (b) in the event such Mortgage Loan is to be used to back a
Mortgage-backed Security, the price (expressed as a percentage) as set
forth in a Purchase Commitment for such Mortgage-backed Security.
"Company" has the meaning set forth in the first
paragraph of this Agreement.
"Conforming Mortgage Loan" means a First Mortgage Loan
which is an FHA insured or VA guaranteed Mortgage Loan or a
Conventional Mortgage Loan which is underwritten substantially
<PAGE> 121
in accordance with FNMA or FHLMC underwriting standards, and the
principal amount of which is less than or equal to the maximum amount
eligible for purchase by FNMA or FHLMC.
"Construction Advance" means an Advance made against a
Construction/Perm Mortgage Loan and readvances of funds previously
advanced to the Company and repaid to the Lender.
"Construction Advance Amount" means the amount of Total Costs to
be reimbursed to the Company pursuant to a Construction Advance
Request.
"Construction Advance Request" has the meaning set forth
in Section 2.2(a) hereof.
"Construction/Perm Mortgage Loan" means a First Mortgage Loan in
a principal amount not to exceed Six Hundred Thousand Dollars
($600,000), made for financing the purchase of real property and the
construction of improvements on such real property by the Parent, and
which is converted to a Permanent Mortgage Loan at the completion of
the improvements.
"Construction Promissory Note" means the promissory note
evidencing the Company's Obligations with respect to Construction
Advances in the form of Exhibit A-2 attached hereto.
"Construction Rate" means a floating rate of interest per annum
equal to two percent (2.00%) over LIBOR. The Construction Rate shall
be adjusted on and as of the effective date of any change in LIBOR.
The Lender's determination of the Construction Rate as of any date of
determination shall be conclusive and binding, absent manifest error.
"Conventional Mortgage Loan" means a First Mortgage Loan, other
than an FHA insured or VA guaranteed Mortgage Loan.
"Cost Breakdown" means a list of the costs and expenses to be
financed by Advances under a Construction/Perm Mortgage Loan,
including, without limitation, real property acquisition costs, hard
and soft construction costs, architectural fees and any other costs
and expenses budgeted to construct and complete the improvements.
"Debt" means, with respect to any Person, at any date (a) all
indebtedness or other obligations of such Person which, in accordance
with GAAP, would be included in determining total liabilities as shown
on the liabilities side of a balance sheet of such Person at such date;
and (b) all indebtedness or other obligations of such Person for borrowed
money or for the deferred purchase price of property or services;
provided that for purposes of this Agreement, there shall be excluded
<PAGE> 122
from Debt at any date loan loss reserves, Subordinated Debt not due
within one year of such date, and deferred taxes arising from
capitalized excess servicing fees.
"Default" means the occurrence of any event or existence of any
condition which, but for the giving of Notice, the lapse of time, or
both, would constitute an Event of Default.
"Depository Benefit" shall mean the compensation received by the
Lender, directly or indirectly, as a result of the Company's
maintenance of Eligible Balances with a Designated Bank.
"Designated Bank" means any bank(s) designated from time to time
by the Lender to be a Designated Bank with whom the Lender has an
agreement under which the Lender can receive a Depository Benefit.
"Eligible Balances" means all funds of or maintained by the
Company and its Subsidiaries in accounts at a Designated Bank, less
balances to support fees, interest or other amounts that would
otherwise be payable to the Designated Bank, float, reserve
requirements, Federal Deposit Insurance Corporation insurance premiums
and such other reductions as may be imposed by governmental
authorities from time to time.
"Eligible Mortgage Pool" means a Mortgage Pool for which (a) an
Approved Custodian has issued its initial certification (on the basis
of which a Pledged Security is to be issued), (b) there exists a
Purchase Commitment covering such Pledged Security, and (c) such
Pledged Security will be delivered to the Lender.
"ERISA" means the Employee Retirement Income Security Act of 1974
and all rules and regulations promulgated thereunder, as amended from
time to time and any successor statute.
"Event of Default" means any of the conditions or events
set forth in Section 8.1 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor statute.
"Fair Market Value" means at any date with respect to any
Mortgage Loan covered by a valid Purchase Commitment, the Committed
Purchase Price, or in the absence of a valid Purchase Commitment for a
Mortgage Loan or the related Mortgage-backed Security (if such
Mortgage Loan is to be used to back a Mortgage-backed Security), the
market price (expressed as a percentage of the outstanding principal
balance) for thirty (30) day mandatory future delivery of such
Mortgage Loan or Mortgage-backed Security published by
<PAGE> 123
Knight-Ridder, Inc. on its MoneyCenter system or, if not so published,
the average bid price (expressed as a percentage of the outstanding
principal balance) quoted in writing to the Lender as of the
computation date by any two nationally recognized dealers selected by
the Lender who at the time are making a market in similar Mortgage
Loans or Mortgage-backed Securities, multiplied, in the case of
Mortgage Loans, by the outstanding principal balance thereof and, in
the case of Mortgage-backed Securities, by the product of the pool
factor of such Mortgage-backed Security times the face amount of such
Mortgage-backed Security.
"FHA" means the Federal Housing Administration and any
successor thereto.
"FHLMC" means the Federal Home Loan Mortgage Corporation
and any successor thereto.
"FICA" means the Federal Insurance Contributions Act.
"FIRREA" means the Financial Institutions Reform, Recovery and
Enforcement Act of 1989, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
"FNMA" means the Federal National Mortgage Association
and any successor thereto.
"Funding Bank" means The First National Bank of Chicago or any
other bank designated from time to time by the Lender.
"Funding Bank Agreement" means the letter agreement substantially
in the form of Exhibit K hereto.
"GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards
Board or in such other statements by such other entity as may be
approved by a significant segment of the accounting profession, which
are applicable to the circumstances as of the date of determination.
"Gestation Agreement" means an agreement under which the Company
agrees to sell or finance (a) a Pledged Mortgage prior to the date of
purchase by an Investor, or (b) a Mortgage Pool prior to the date the
Mortgage-backed Security is issued.
"GNMA" means the Government National Mortgage Association
and any successor thereto.
<PAGE> 124
"Home Equity Loan" means an open-ended revolving line of credit
that is a Mortgage Loan secured by a Mortgage.
"HUD" means the Department of Housing and Urban
Development and any successor thereto.
"Indemnified Liabilities" has the meaning set forth in
Article 10 hereof.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
or any subsequent federal income tax law or laws, as any of the
foregoing have been or may from time to time be amended.
"Investor" means FNMA, FHLMC or a financially responsible private
institution which is deemed acceptable by the Lender from time to time
in its sole discretion.
"Jumbo Mortgage Loan" means a Conventional Mortgage Loan which is
underwritten substantially in accordance with FNMA or FHLMC
underwriting standards, but the principal amount of which is in excess
of the maximum amount eligible for purchase by FNMA or FHLMC, and
which meets all eligibility requirements for purchase by an Investor.
"Lender" has the meaning set forth in the first paragraph
of this Agreement.
"LIBOR" means, for each calendar week, the rate of interest per
annum which is equal to the arithmetic mean of the U.S. Dollar London
Interbank Offered Rates for one (1) month periods as of 11:00 a.m.
London time on the first Business Day of each week on which the London
Interbank market is open, as published by Knight-Ridder, Inc. on its
MoneyCenter system. LIBOR shall be rounded, if necessary, to the next
higher one sixteenth of one percent (1/16%). If such U.S. dollar LIBOR
rates are not so offered or published for any period, then during such
period LIBOR shall mean the London Interbank Offered Rate for one (1)
month periods published on the first Business Day of each week on
which the London Interbank market is open, in the Wall Street Journal
in its regular column entitled "Money Rates."
"Lien" means any lien, mortgage, deed of trust, pledge, security
interest, charge or encumbrance of any kind (including any conditional
sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"Loan Documents" means this Agreement, the Note, any agreement of
the Company relating to Subordinated Debt, and each other document,
instrument or agreement executed by the Company in connection herewith
or therewith, as any of the same may be amended, restated, renewed or
replaced from time to time.
<PAGE> 125
"Margin Stock" has the meaning assigned to that term in
Regulations G and U of the Board of Governors of the Federal Reserve
System as in effect from time to time.
"Maturity Date" shall mean the earlier of: (a) the close of
business on August 31, 1996 as such date may be extended from time to
time in writing by the Lender, in its sole discretion, on which date
the Commitment shall expire of its own term, and without the necessity
of action by the Lender, and (b) the date the obligation of the Lender
to make further Advances hereunder is terminated pursuant to Section
8.1 below.
"Miscellaneous Charges" has the meaning set forth in
Section 2.10 hereof.
"Mortgage" means a First mortgage or First deed of trust on
improved real property.
"Mortgage-backed Securities" means GNMA, FNMA or FHLMC securities
that are backed by Mortgage Loans.
"Mortgage Loan" means any loan evidenced by a Mortgage
Note.
"Mortgage Note" means a promissory note secured by a
Mortgage.
"Mortgage Note Amount" means, as of the date of determination,
the then outstanding unpaid principal amount of a Mortgage Note.
"Mortgage Pool" means a pool of one or more Pledged Mortgages on
the basis of which there is to be issued a Mortgage-backed Security.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is maintained for employees of the
Company or a Subsidiary of the Company.
"Nonconforming Advance" means an Advance made against a
Nonconforming Mortgage Loan.
"Nonconforming Mortgage Loan" means a Conventional Mortgage Loan
which is not a Conforming Mortgage Loan or a Jumbo Mortgage Loan, and
which is underwritten and approved by an Investor prior to funding if
its original principal amount exceeds Six Hundred Thousand Dollars
($600,000).
<PAGE> 126
"Nonconforming Rate" means a floating rate of interest per annum
equal to one and one-half percent (1.50%) over LIBOR. The
Nonconforming Rate shall be adjusted on and as of the effective date
of each weekly change in LIBOR. The Lender's determination of the
Nonconforming Rate as of any date of determination shall be conclusive
and binding, absent manifest error.
"Note" has the meaning set forth in Section 2.3 hereof.
"Notices" has the meaning set forth in Article 9 hereof.
"Obligations" means any and all indebtedness, obligations and
liabilities of the Company to the Lender (whether now existing or
hereafter arising, voluntary or involuntary, whether or not jointly
owed with others, direct or indirect, absolute or contingent,
liquidated or unliquidated, and whether or not from time to time
decreased or extinguished and later increased, created or incurred),
arising out of or related to the Loan Documents.
"Officer's Certificate" means a certificate executed on behalf of
the Company by its chief financial officer or its treasurer or by such
other officer as may be designated herein and substantially in the
form of Exhibit I-SF attached hereto.
"Operating Account" has the meaning set forth in the
Funding Bank Agreement.
"Ordinary Warehousing Advance" means an Advance made
against a Conforming Mortgage Loan or a Jumbo Mortgage Loan.
"Ordinary Warehousing Rate" means a floating rate of interest per
annum equal to nine-tenths percent (0.90%) over LIBOR. The Ordinary
Warehousing Rate shall be adjusted on and as of the effective date of
each weekly change in LIBOR. The Lender's determination of the
Ordinary Warehousing Rate as of any date of determination shall be
conclusive and binding, absent manifest error.
"Original Agreement" has the meaning set forth in the
first recital hereto.
"Parent" shall mean U.S. Home Corporation.
"Participant" has the meaning set forth in Section 12.5
hereof.
"Permanent Mortgage Loan" means a Construction/Permanent Mortgage
Loan after the construction or rehabilitation on the premises related
to such Mortgage Loan has been completed and such Mortgage Loan has
been converted to an amortizing permanent Mortgage Loan by the
modification or replacement of the Mortgage Note.
<PAGE> 127
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies,
joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations,
whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"Plans" has the meaning set forth in Section 5.12 hereof.
"Pledged Mortgages" has the meaning set forth in Section
3.1(a) hereof.
"Pledged Securities" has the meaning set forth in Section
3.1(b) hereof.
"Purchase Commitment" means a written commitment, in form and
substance satisfactory to the Lender, issued in favor of the Company
by an Investor pursuant to which that Investor commits to purchase
Mortgage Loans or Mortgage-backed Securities.
"Release Amount" has the meaning set forth in Section
3.2(g) hereof.
"RFC" means Residential Funding Corporation, a Delaware
corporation, and any successor thereto.
"Servicing Contract" means, with respect to any Person, the
arrangement, whether or not in writing, pursuant to which such Person
has the right to service Mortgage Loans.
"Servicing Portfolio" means, as to any Person, the unpaid
principal balance of Mortgage Loans whose Servicing Contracts are
owned by such Person.
"Single-family Mortgage Loan" means a Mortgage Loan secured by a
Mortgage covering improved real property containing one to four family
residences.
"Statement Date" means the date of the most recent financial
statements of the Company (and, if applicable, its Subsidiaries, on a
consolidated basis) delivered to the Lender under the terms of this
Agreement.
"Subordinated Debt" means all indebtedness of the Company, for
borrowed money, which is, by its terms (which terms shall have been
approved by the Lender), effectively subordinated in right of payment
<PAGE> 128
to all other present and future Obligations, solely for purposes of
Section 7.4 hereof, and all indebtedness of the Company which is
required to be subordinated by Section 4.1(b) or Section 6.10 hereof.
"Subsidiary" means any corporation, association or other business
entity in which more than fifty percent (50%) of the total voting
power or shares of stock entitled to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of
the other Subsidiaries of that Person or a combination thereof.
Notwithstanding the above, for the purposes hereof, C.M. Corp. is
excluded from the definition of Subsidiary.
"Tangible Net Worth" means with respect to any Person at any
date, the excess of the total assets over total liabilities of such
Person on such date, each to be determined in accordance with GAAP
consistent with those applied in the preparation of the financial
statements referred to in Section 4.1(a)(5) hereof, plus loan loss
reserves and that portion of Subordinated Debt not due within one year
of such date, provided that, for purposes of this Agreement, there
shall be excluded from total assets advances or loans to shareholders,
officers or Affiliates, investments in Affiliates, assets pledged to
secure any liabilities not included in the Debt of such Person,
intangible assets, those other assets which would be deemed by HUD to
be non-acceptable in calculating adjusted net worth in accordance with
its requirements in effect as of such date, as such requirements
appear in the "Audit Guide for Audit of Approved Non-Supervised
Mortgagees" and other assets deemed unacceptable by the Lender in its
sole discretion.
"Total Costs" means the total of the costs and expenses
listed on the Cost Breakdown.
"Trust Receipt" means a trust receipt in a form approved by and
pursuant to which the Lender may deliver any document relating to the
Collateral to the Company for correction or completion.
"Used Portion" has the meaning set forth in Section
2.8(b) hereof.
"Usage Fee" has the meaning set forth in Section 2.8(b)
hereof.
"VA" means the U.S. Department of Veterans Affairs and
any successor thereto.
"Warehousing Fee" has the meaning set forth in Section
2.9 hereof.
<PAGE> 129
"Warehousing Promissory Note" means the promissory note
evidencing the Company's Obligations with respect to Ordinary
Warehousing Advances in the form of Exhibit A-1 attached hereto.
"Weighted Average Purchase Commitment Price" shall mean the
weighted average of the Committed Purchase Prices of the unfilled
Purchase Commitments (expressed as a percentage) for Mortgage Loans or
Mortgage-backed Securities of the same type, interest rate and term.
"Wet Settlement Advance" means an Advance pursuant to Section
2.2(b) of this Agreement, in respect of the closing or settlement of a
Mortgage Loan, based upon delivery to the Lender of the Bailee Pledge
Agreement, pending subsequent delivery of the Collateral Documents as
provided in such Section.
1.2 Other Definitional Provisions.
(a) Accounting terms not otherwise defined herein shall have
the meanings given the terms under GAAP.
(b) Defined terms may be used in the singular or
the plural, as the context requires.
(c) All references to time of day shall mean the then
applicable time in Chicago, Illinois, unless expressly provided
to the contrary.
2. THE CREDIT.
2.1 The Commitment.
(a) Subject to the terms and conditions of this Agreement
and provided no Default or Event of Default has occurred and is
continuing, the Lender agrees from time to time during the period
from the Closing Date, to, but not including, the Maturity Date,
to make Advances to the Company, provided the total aggregate
principal amount outstanding at any one time of all such Advances
shall not exceed the Commitment Amount. The obligation of the
Lender to make Advances hereunder up to such limit, is
hereinafter referred to as the "Commitment." Within the
Commitment, the Company may borrow, repay and reborrow. Effective
as of the date of this Agreement, all outstanding loans made
pursuant to the Original Agreement shall for all purposes be
deemed to be Advances made under this Agreement. All Advances
under this Agreement shall constitute a single indebtedness, and
all of the Collateral shall be security for the Note and for the
performance of all the Obligations.
<PAGE> 130
(b) Advances shall be used by the Company solely for the
purpose of (i) funding the acquisition or origination of Mortgage
Loans or (ii) reimbursing the Company for its funding the
acquisition or origination of Mortgage Loans, and shall be made
at the request of the Company, in the manner hereinafter provided
in Section 2.2 hereof, against the pledge of such Mortgage Loans
as Collateral therefor. The following limitations on the use of
Advances shall be applicable:
(1) No Advance shall be made against a Mortgage Loan
other than a Single-family Mortgage Loan and no Construction
Advance shall be made against a Construction/Perm Mortgage
Loan which is not a single-family detached dwelling.
(2) No Advance shall be made against a Mortgage Loan
which is not covered by a Purchase Commitment.
(3) No Advance shall be made against a Home Equity
Mortgage Loan.
(4) The aggregate amount of Wet Settlement Advances
outstanding at any one time shall not exceed thirty-five
percent (35%) of the Commitment Amount.
(5) The aggregate amount of Construction Advances
outstanding at any one time shall not exceed Five Million
Dollars ($5,000,000).
(6) The aggregate amount of Nonconforming Advances
outstanding at any one time shall not exceed One Million
Dollars ($1,000,000).
(7) No Ordinary Warehousing Advance (other than a
Construction/Permanent Mortgage Loan) shall be made against
any Mortgage Loan which was closed more than ninety (90)
days prior to the date of the requested Advance.
2.1 (c) No Advance shall exceed the following amount applicable
to the type of Collateral at the time it is pledged:
(1) For a Conforming Mortgage Loan or a Jumbo Mortgage
Loan pledged hereunder, ninety-eight percent (98%) of the
lesser of (i) the Mortgage
<PAGE> 131
Note Amount or (ii) in the case of a Conforming Mortgage
Loan or a Jumbo Mortgage Loan which has been committed to an
Investor at the time of the Advance, the Committed Purchase
Price, or the product of the weekly Weighted Average
Purchase Commitment Price at the time of the Advance
multiplied by the Mortgage Note Amount for all other such
Mortgage Loans.
(2) For a Nonconforming Mortgage Loan pledged
hereunder, ninety-seven percent (97%) of the lesser of (i)
the Mortgage Note Amount or (ii) in the case of a
Nonconforming Mortgage Loan which has been committed to an
Investor at the time of the Advance, the Committed Purchase
Price, or the product of the weekly Weighted Average
Purchase Commitment Price at the time of the Advance
multiplied by the Mortgage Note Amount for all such Mortgage
Loans.
(3) For a Construction/Perm Mortgage Loan pledged
hereunder, eighty percent (80%) of the lesser of (i) the
Total Costs, or (ii) the As Completed Appraised Value.
2.2 Procedures for Obtaining Advances.
(a) The Company may obtain an Advance hereunder, subject to
the satisfaction of the conditions set forth in Sections 4.1 and
4.2 hereof, upon compliance with the procedures set forth in this
Section 2.2 and in Exhibit D-SF with respect to Ordinary
Warehousing Advances and Nonconforming Advances and Exhibit
D-SF/CONSTRUCTION with respect to Construction Advances, attached
hereto and made a part hereof including the delivery of all
documents listed in Exhibit D-SF and Exhibit D-SF/CONSTRUCTION
(the "Collateral Documents") to the Lender. Requests for Advances
(other than Construction Advances) shall be initiated by the
Company by delivering to the Lender, no later than one (1)
Business Day prior to any Business Day that the Company desires
to borrow hereunder, a completed and signed request for an
Advance (an "Advance Request") on the then current form approved
by the Lender. Requests for Construction Advances shall be
initiated by the Company by delivering to the Lender, no later
than two (2) Business Days prior to any Business Day that the
Company desires to borrower hereunder, a completed and signed
request for a Construction Advance (a "Construction Advance
Request"). The current forms in use by the Lender are Exhibit
C-SF for Ordinary Warehousing Advances and Nonconforming Advances
<PAGE> 132
and Exhibit C-SF/CONSTRUCTION for Construction Advances, attached
hereto and made a part hereof. The Lender shall have the right,
on not less than three (3) Business Days' prior Notice to the
Company, to modify any of said Exhibits to conform to current
legal requirements or Lender practices, and, as so modified,
said Exhibits shall be deemed a part hereof.
(b) In the case of any Wet Settlement Advances, the Company
shall follow the procedures and, at or prior to the Lender's
making of such Wet Settlement Advance, shall deliver to the
Lender the documents set forth in Exhibit D-SF or Exhibit
D-SF/CONSTRUCTION hereto, as the case may be, together with a
completed and executed Bailee Pledge Agreement in the form of
Exhibit M hereto. In the case of a Mortgage Loan financed through
a Wet Settlement Advance, the Company shall cause all Collateral
Documents required to be delivered to the Lender pursuant to
Exhibit D-SF or Exhibit D-SF/CONSTRUCTION, as the case may be,
within five (5) Business Days after the date of the Wet
Settlement Advance relating thereto.
(c) Before funding, the Lender shall have a reasonable time
(one (1) Business Day under ordinary circumstances) to examine
such Advance Request and the Collateral Documents to be delivered
prior to such requested Advance, as set forth in the applicable
Exhibit hereto, and may reject such of them as do not meet the
requirements of this Agreement or of the related Purchase
Commitment.
(d) The Company shall hold in trust for the Lender, and the
Company shall deliver to the Lender promptly upon request, or
within one hundred twenty (120) days from the date an Advance was
made against such Pledged Mortgage and the Pledged Mortgage is
not being held by an Investor for purchase or has not been
redeemed from pledge, the following: (1) the originals of the
Collateral Documents for which copies are required to be
delivered to the Lender pursuant to Exhibit D-SF or Exhibit
D-SF/CONSTRUCTION, as the case may be, (2) the original lender's
ALTA Policy of Title Insurance or an equivalent thereto, and (3)
any other documents relating to a Pledged Mortgage which the
Lender may request, including, without limitation, documentation
evidencing the FHA Commitment to Insure or the VA Guaranty of any
Pledged Mortgage which is either FHA insured or VA guaranteed,
the appraisal, Private Mortgage Insurance Certificate, if
applicable, the Regulation Z Statement, certificates of casualty
or hazard insurance, credit information on the maker of each such
<PAGE> 133
Mortgage Note, a copy of a HUD-1 or corresponding purchase advice
and other documents of all kinds which are customarily desired
for inspection or transfer incidental to the purchase of any
Mortgage Note by an Investor and any additional documents which
are customarily executed by the seller of a Mortgage Note to an
Investor.
(e) To make an Advance, the Lender shall cause the Funding
Bank to credit an account of the Company with the Funding Bank,
which account shall be under the exclusive control of the Lender,
upon compliance by the Company with the terms of this Agreement.
(f) If, pursuant to the authorization given by the Company
in the Funding Bank Agreement, for the purpose of financing a
Mortgage Loan against which the Lender has made an Advance in
accordance with a Request for Advance (i) the Lender debits the
Company's Operating Account at the Funding Bank to the extent
necessary to cover a wire to be initiated by the Lender, or (ii)
the Lender directs the Funding Bank to honor a check drawn by the
Company on its Check Disbursement Account at the Funding Bank,
and such debit or direction results in an overdraft, the Lender
may make an additional Advance to fund such overdraft.
2.3 Notes. The Company's Obligations in respect of Ordinary
Warehousing Advances and Nonconforming Advances shall be evidenced by
a Warehousing Promissory Note of the Company substantially in the form
of Exhibit A-1 attached hereto, and the Company's Obligations in
respect of Construction Advances shall be evidenced by a Construction
Promissory Note of the Company substantially in the form of Exhibit
A-2 attached hereto. Each note is dated as of the date hereof
(Warehousing Promissory Note and Construction Promissory Note are
collectively referred to as the "Notes"). The terms "Warehousing
Promissory Note", "Construction Promissory Note," "Note" or "Notes"
shall include all extensions, renewals and modifications of the Notes
and all substitutions therefor. All terms and provisions of the Notes
are hereby incorporated herein.
2.4 Interest.
(a) Prior to the occurrence of an Event of Default, the
unpaid amount of each Ordinary Warehousing Advance (net of
applicable Buydown) shall bear interest, from the date of such
Ordinary Warehousing Advance until paid in full, at the Ordinary
Warehousing Rate.
(b) Prior to the occurrence of an Event of Default, the
unpaid principal balance of each Nonconforming Advance (net of
applicable Buydown) shall bear interest, from the date such
Nonconforming Advance until paid in full, at the Nonconforming
Rate.
<PAGE> 134
(c) Prior to the occurrence of an Event of Default, the
unpaid amount of each Construction Advance (net of applicable
Buydown) shall bear interest, from the date of such Construction
Advance until paid in full, at the Construction Rate.
(d) The Company is entitled to receive a benefit in the form
of an "Earnings Credit" on the portion of the Eligible Balances
maintained in time deposit accounts with a Designated Bank, and
the Company is entitled to receive a benefit in the form of an
"Earnings Allowance" on the portion of the Eligible Balances
maintained in demand deposit accounts with a Designated Bank. Any
Earnings Allowance shall be used first and any Earnings Credit
shall be used second as a credit against accrued Miscellaneous
Charges and fees, including, but not limited to Commitment Fees
and Warehousing Fees, and may be used, at the Lender's option, to
reduce accrued interest. Any Earnings Allowance not used during
the month in which the benefit was received shall be accumulated
for use and must be used during the calendar year in which the
benefit was received. Any Earnings Credit not used during the
month in which the benefit was received shall be used to provide
a cash benefit to the Company. The Lender's determination of the
Earnings Credit and the Earnings Allowance for any month shall be
determined by the Lender in its sole discretion and shall be
conclusive and binding absent manifest error. In no event shall
the sum of the Earnings Credit and the Earnings Allowance for any
month exceed the Depository Benefit for such month.
Either party hereto may terminate the benefits provided for
in this Section effective immediately upon Notice to the other
party, if the terminating party shall have determined (which
determination shall be conclusive and binding absent manifest
error) at any time that any applicable law, rule, regulation,
order or decree or any interpretation or administration thereof
by any governmental authority charged with the interpretation or
administration thereof, or compliance by such party with any
request or directive (whether or not having the force of law) of
any such authority, shall make it unlawful or impossible for such
party to continue to offer or receive the benefits provided for
in this Section.
(e) Interest shall be computed on the basis of a 360-day
year and applied to the actual number of days elapsed in each
interest calculation period and shall be payable monthly in
arrears, on the first day of each month, commencing with the
first month following the Closing Date and on the Maturity Date.
<PAGE> 135
(f) If, for any reason, no interest is due on an Advance,
the Company agrees to pay to the Lender an administrative fee
equal to one day of interest on such Advance at the rate
applicable to such Advances under the applicable section hereof,
as in effect on the date of such Advance. Administrative and
other fees shall be due and payable in the same manner as
interest is due and payable hereunder.
(g) Upon and after the occurrence and during the
continuation of an Event of Default hereunder, the unpaid amount
of each Advance shall bear interest, until paid in full, at a
rate of interest (the "Default Rate") equal to four percent (4%)
per annum over the applicable rate provided in the applicable
subsection of this Section 2.4 or, if no rate is applicable, the
highest rate then applicable to any outstanding Advance.
2.5 Principal Payments.
(a) The outstanding principal amount of all Advances shall
be payable in full on the Maturity Date.
(b) The Company shall have the right to prepay the
outstanding Advances in whole or in part, from time to time,
without premium or penalty.
(c) All payments of outstanding Advances from the proceeds
of the sale or other disposition of Pledged Mortgages and Pledged
Securities shall be paid directly by the Investor to the Cash
Collateral Account to be applied against the Obligations.
(d) The Company shall be obligated to pay to the Lender,
without the necessity of prior demand or notice from the Lender,
and the Company authorizes the Lender to cause the Funding Bank
to charge the Company's account for, the amount of any
outstanding Advance against a specific Pledged Mortgage, upon the
earliest occurrence of any of the following events:
(1) For a Mortgage Loan, other than a Construction/Perm
Mortgage Loan, one hundred twenty (120) days elapse from the
date of the initial Advance made by the Lender against such
Pledged Mortgage, whether or not such Pledged Mortgage is
included in an Eligible Mortgage Pool.
<PAGE> 136
(2) Forty-five (45) days elapse from the date the
Pledged Mortgage was delivered to an Investor for
examination and purchase, without the purchase being made,
or upon rejection of the Pledged Mortgage as unsatisfactory
by an Investor.
(3) One (1) Business Day elapses from the date a Wet
Settlement Advance was made and the Pledged Mortgage which
was to have been funded by such Wet Settlement Advance is
not closed and funded.
(4) Seven (7) Business Days elapse from the date a Wet
Settlement Advance was made without receipt by the Lender of
all Collateral Documents relating to such Pledged Mortgage,
or such Collateral Documents, upon examination by the
Lender, are found not to be in compliance with the
requirements of this Agreement or the related Purchase
Commitment.
(5) Ten (10) Business Days elapse from the date a
Collateral Document was delivered to the Company for
correction or completion under a Trust Receipt, without
being returned to the Lender.
(6) The Mortgage Loan is defaulted and remains in
default for a period of sixty (60) days or more.
(7) One hundred twenty (120) days elapse from the date
an Advance was made against a Pledged Mortgage without
receipt of the items required in Sections 2.2(d) hereof, or
such items, upon examination by the Lender, are found not to
be in compliance with the requirements of this Agreement or
the related Purchase Commitment.
(8) If the outstanding Advances against Pledged
Mortgages of a specific Mortgage Loan type exceed the
aggregate Purchase Commitments for such Mortgage Loan type.
(9) Three (3) Business Days after the mandatory
delivery date of the related Purchase Commitment and the
specific Pledged Mortgage was not delivered under the
Purchase Commitment prior to such mandatory delivery date,
or the Purchase Commitment is terminated; unless in each
case, such Pledged Mortgage is eligible for delivery to an
Investor under a comparable Purchase Commitment acceptable
to the Lender.
<PAGE> 137
(10) Upon sale or other disposition of the
Pledged Mortgage.
(11) For a Construction/Perm Mortgage Loan two hundred
seventy (270) days elapse from the date of the initial
Construction Advance made by the Lender against such Pledged
Mortgage, without such Construction/Perm Mortgage Loan being
converted to a Permanent Mortgage Loan. Notwithstanding the
above, the Company may request and the Lender may approve a
ninety (90) day extension of the construction period for any
Construction/Perm Mortgage Loan. Within fifteen (15) days
after the final Construction Advance, a Construction/Perm
Mortgage Loan shall be converted to a Permanent Mortgage
Loan and the date of such final Construction Advance shall
be deemed to be the initial Advance date of the Permanent
Mortgage Loan and the provisions of Section 2.5(d)(1) shall
apply to such Permanent Mortgage Loan.
(12) For a Construction/Perm Mortgage Loan, a lien is
filed against the premises and not removed within fifteen
(15) days of the filing, or an inspection report indicates
that the improvements to the premises encumbered by the
Pledged Mortgage are not being constructed in accordance
with the approved plans and specifications.
(13) If the Pledged Mortgage is included in a Mortgage
Pool, then, if the Mortgage Pool is an Eligible Mortgage
Pool, upon sale of the Mortgage-backed Security, or if the
Mortgage Pool is not an Eligible Mortgage Pool, within two
(2) Business Days after delivery of the Pledged Mortgages to
the pool custodian.
(e) The outstanding amount of any Advance made pursuant to
Section 2.2(f) shall be payable in full within one (1) Business
Day after the date of such Advance.
(f) In addition to the payments required pursuant to Section
2.5(d), the Company shall be obligated to pay to the Lender,
without the necessity of prior demand or notice from the Lender,
and the Company authorizes the Lender to cause the Funding Bank
to charge the Company's account if the principal amount of any
Pledged Mortgage is prepaid in whole or in part while an Advance
is outstanding against such Pledged Mortgage, for the amount of
such prepayment, to be applied to such Advance.
<PAGE> 138
(g) The Company shall give Notice to the Lender
(telephonically, to be followed by written notice) of the Pledged
Mortgages or Pledged Securities for which proceeds have been
received. Upon receipt of such Notice the Advances against such
Pledged Mortgages or Pledged Securities shall be repaid and such
Pledged Mortgages or Pledged Securities shall be considered to
have been redeemed from pledge. The Lender is entitled to rely
upon the Company's affirmation that deposits in the Cash
Collateral Account represent payment from Investors or the
Company for the purchase or prepayment pursuant to Section 2.5(d)
of Pledged Mortgages or Pledged Securities as specified by the
Company. In the event that the payment from an Investor for the
purchase of Pledged Mortgages or Pledged Securities is less than
the outstanding Advances against such Pledged Mortgages or the
Mortgage Loans backing Pledged Securities, the Lender is
authorized to cause the Funding Bank to charge the Company's
account for an amount equal to such deficiency. Provided no
Default or Event of Default exists, the Lender shall return any
excess payment from an Investor for Pledged Mortgages or Pledged
Securities to the Company.
(h) The Company may, from time to time, prepay a
portion of the Advances pursuant to this Section 2.5(h)
(any such prepayment is hereafter referred to as a "Buydown"). A
Buydown shall not , except as set forth below, be deemed a
prepayment of any particular Advances, and shall not entitle the
Company to the release of any Collateral. All or any portion of a
Buydown may be reborrowed hereunder, provided no Default or Event
of Default has occurred and is continuing, upon written notice to
the Lender no later than 9:30 a.m. on the Business Day that the
Company desires to reborrow such amount. In the event the Lender
receives a payment of Advances that would, as a result of the
Buydown, reduce the outstanding principal balance of the Advances
to an amount less than zero, the Buydowns, or a portion thereof
equal to such excess, shall be re-advanced to the Company. The
Lender shall use its best efforts to apply Buydown to reduce the
interest on Advances in the following order: first, Construction
Advances, second, Nonconforming Advances and third, Ordinary
Warehousing Advances.
2.6 Expiration of Commitment. The Commitment shall
expire on the Maturity Date.
2.7 Method of Making Payments.
<PAGE> 139
(a) Except as otherwise specifically provided herein, all
payments hereunder shall be made to the Lender not later than the
close of business on the date when due unless such date is a
non-Business Day, in which case, such payment shall be due on
the first Business Day thereafter, and shall be made in lawful
money of the United States of America in immediately available
funds transferred via wire to accounts designated by the Lender
from time to time.
(b) Upon an Event of Default, and without the necessity of
prior demand or notice from the Lender, the Company authorizes
the Lender to cause the Funding Bank to charge the Company's
account for any Obligations due and owing the Lender.
2.8 Commitment and Usage Fees.
(a) The Company agrees to pay to the Lender a Commitment Fee
in the amount of one-tenth of one percent (1/10%) per annum of
the lesser of Fifteen Million Dollars ($15,000,000) or the amount
of the Commitment, which Commitment Fee shall be paid quarterly
in advance and shall be computed on the basis of a 365-day year
and applied to the actual number of days elapsed in such calendar
quarter. The Company shall make quarterly payments of the
Commitment Fee on the first (1st) day of each calendar quarter.
If the expiration date of the Commitment is other than the last
day of a calendar quarter, the Company shall pay the prorated
portion of the quarterly Commitment Fee due from the beginning of
the then current calendar quarter to and including the expiration
date. For the purposes hereof, calendar quarters shall be defined
as the three (3) month periods beginning on each April 1, July 1,
October 1 and January 1. The Company shall not be entitled to a
reduction in the amount of the Commitment Fee, in the event the
amount of the Commitment is reduced or in the event that the
Commitment is terminated prior to its stated expiration date. If
the Commitment terminates prior to its stated expiration date,
the unpaid balance of the Commitment Fee shall be due and payable
in full on the date of such termination.
(b) At the end of each calendar quarter during the term
hereof, the Lender shall determine the three month average usage
of the portion of the Commitment (net of Buydown) in excess of
Fifteen Million Dollars ($15,000,000) by calculating the
arithmetic daily average of the Advances outstanding during each
such calendar quarter. To the extent the quarterly average usage
(net of Buydown) (the "Used Portion") exceeds Fifteen Million
Dollars ($15,000,000), the Company shall pay in arrears, within
thirty (30) days after the end of each calendar quarter, a fee
<PAGE> 140
(the "Usage Fee"), equal to one-tenth of one percent (1/10%)
per annum on the total amount by which the Used Portion of the
Commitment exceeds Fifteen Million Dollars ($15,000,000) during
such calendar quarter. If the expiration date of the
Commitment is other than the first (1st) day of a
quarter, the Company shall pay the prorated portion of the
quarterly Usage Fee due from the beginning of the then current
quarter to and including the expiration date. For the purposes
hereof, quarters shall be defined as beginning April 1, July 1,
October 1 and January 1. In the absence of manifest error, the
calculation by the Lender of the amount of any Usage Fee shall be
conclusive.
2.9 Warehousing Fees. The Company agrees, at the time of each
Advance, to pay to the Lender a Warehousing Fee in the amount of Ten
Dollars ($10.00) for each Mortgage Loan pledged as Collateral for such
Advance. Notwithstanding the foregoing, if the arithmetic daily
average of the Advances (net of Buydown) outstanding in any month
exceeds Fifteen Million Dollars ($15,000,000), no Warehousing Fee
shall be payable for such month. Warehousing Fees are due when
incurred, but shall not be delinquent if paid within fifteen (15) days
after receipt of an invoice or an account analysis statement from the
Lender.
2.10 Miscellaneous Charges. The Company agrees to reimburse the
Lender for miscellaneous charges and expenses (collectively,
"Miscellaneous Charges") incurred by or on behalf of the Lender in
connection with the handling and administration of Advances, and to
reimburse the Lender for Miscellaneous Charges incurred by or on
behalf of the Lender in connection with the handling and
administration of the Collateral. For the purposes hereof,
Miscellaneous Charges shall include, but not be limited to, charges
for wire transfers, charges for security delivery fees, charges for
overnight delivery of Collateral to Investors, Funding Bank's service
charges and Designated Bank's service charges. Miscellaneous Charges
are due when incurred, but shall not be delinquent if paid within
fifteen (15) days after receipt of an invoice or an account analysis
statement from the Lender.
2.11 Interest Limitation. All agreements between the Company and
the Lender are hereby expressly limited so that in no contingency or
event whatsoever, whether by reason of acceleration of maturity of
this Agreement or the Note or otherwise, shall the amount paid or
agreed to be paid to the Lender for the use, forbearance, loaning or
retention of the Advances secured by this Agreement exceed the maximum
permissible under applicable law. If from any circumstances
whatsoever, fulfillment of any provisions hereof or of the Note, or
any other document securing this Agreement at any time given shall
<PAGE> 141
involve transcending the limit of validity prescribed by law, then,
the obligation to be fulfilled shall automatically be reduced to
the limit of such validity, and if from any circumstances the Lender
should ever receive as interest an amount which would exceed the
highest lawful rate of interest, such amount which would be in
excess of interest shall be applied to the reduction of the principal
balance secured by the Note and not to the payment of
interest thereunder. This provision shall control every other
provision of all agreements between the Company and Lender and shall
also be binding upon and available to any subsequent holder of the
Note.
2.12 Increased Costs; Capital Requirements. In the event any
applicable law, order, regulation or directive issued by any
governmental or monetary authority, or any change therein or in the
governmental or judicial interpretation or application thereof, or
compliance by the Lender with any request or directive (whether or not
having the force of law) by any governmental or monetary authority:
(a) Does or shall subject the Lender to any tax of any kind
whatsoever with respect to this Agreement or any Advances made
hereunder, or change the basis of taxation on payments to the
Lender of principal, fees, interest or any other amount payable
hereunder (except for change in the rate of tax on the overall
gross or net income of the Lender by the jurisdictions in which
the Lender's principal office is located);
(b) Does or shall impose, modify or hold applicable any
reserve, capital requirement, special deposit, compulsory loan or
similar requirement against assets held by, or deposits or other
liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by,
any office of the Lender which are not otherwise included in the
determination of the interest rate as calculated hereunder; and
the result of any of the foregoing is to increase the cost to the
Lender of making, renewing or maintaining any Advance or to
reduce any amount receivable in respect thereof or to reduce the
rate of return on the capital of the Lender or any Person
controlling the Lender as it relates to credit facilities in the
nature of that evidenced by this Agreement, then, in any such
case, the Company shall promptly pay any additional amounts
necessary to compensate the Lender for such additional cost or
reduced amounts receivable or reduced rate of return as
determined by the Lender with respect to this Agreement or
Advances made hereunder. If the Lender becomes entitled to claim
any additional amounts pursuant to this Section, it shall
notify the Company of the event by reason of
<PAGE> 142
which it has become so entitled and the Company shall pay such
amount within fifteen (15) days thereafter. A certificate as to
any additional amount payable pursuant to the foregoing sentence
containing the calculation thereof in reasonable detail submitted
by the Lender to the Company shall be conclusive in the absence
of manifest error. The obligations of the Company under this
Section shall survive the payment of all other Obligations and
the termination of this Agreement.
3. COLLATERAL.
3.1 Grant of Security Interest. As security for the payment of
the Notes and for the performance of all of the Company's Obligations,
the Company hereby assigns and transfers to the Lender all right,
title and interest in and to and grants a security interest to the
Lender in the following described property (the "Collateral"):
(a) All Mortgage Loans, including all Mortgage Notes and
Mortgages evidencing such Mortgage Loans, which from time to time
are delivered or caused to be delivered to the Lender (including
delivery to a third party on behalf of the Lender), come into the
possession, custody or control of the Lender for the purpose of
assignment or pledge or in respect of which an Advance has been
made by the Lender hereunder, including without limitation all
Mortgage Loans in respect of which Wet Settlement Advances have
been made by the Lender (the "Pledged Mortgages").
(b) All Mortgage-backed Securities which are from time to
time created in whole or in part on the basis of the Pledged
Mortgages or are delivered or caused to be delivered to, or are
otherwise in the possession of the Lender or its agent, bailee or
custodian as assignee, or pledged to the Lender, or for such
purpose are registered by book-entry in the name of the Lender
(including delivery to or registration in the name of a third
party on behalf of the Lender) hereunder or in respect of which
from time to time an Advance has been made by the Lender
hereunder (the "Pledged Securities").
(c) All private mortgage insurance and all commitments
issued by the FHA or VA to insure or guarantee any Mortgage Loans
included in the Pledged Mortgages; all Purchase Commitments held
by the Company covering the Pledged Mortgages or the Pledged
Securities and all proceeds resulting from the sale thereof to
Investors pursuant thereto; and all personal property, contract
rights, servicing and servicing fees and income or other
proceeds, amounts and payments payable to the
Company as compensation or reimbursement, accounts and
<PAGE> 143
general intangibles of whatsoever kind relating to the Pledged
Mortgages, the Pledged Securities, said FHA commitments or VA
commitments and the Purchase Commitments, and all other documents
or instruments relating to the Pledged Mortgages and the Pledged
Securities, including, without limitation, any interest of the
Company in any fire, casualty or hazard insurance policies and
any awards made by any public body or decreed by any court of
competent jurisdiction for a taking or for degradation of value
in any eminent domain proceeding as the same relate to the
Pledged Mortgages.
(d) All right, title and interest of the Company in and to
all escrow accounts, documents, instruments, files, surveys,
certificates, correspondence, appraisals, computer programs,
tapes, discs, cards, accounting records (including all
information, records, tapes, data, programs, discs and cards
necessary or helpful in the administration or servicing of the
Collateral) and other information and data of the Company
relating to the Collateral.
(e) All now existing or hereafter acquired cash delivered to
or otherwise in the possession of the Lender or its agent, bailee
or custodian or designated on the books and records of the
Company as assigned and pledged to the Lender.
(f) All cash and non-cash proceeds of the Collateral,
including all dividends, distributions and other rights in
connection with, and all additions to, modifications of and
replacements for, the Collateral, and all products and proceeds
of the Collateral, together with whatever is receivable or
received when the Collateral or proceeds thereof are sold,
collected, exchanged or otherwise disposed of, whether such
disposition is voluntary or involuntary, including, without
limitation, all rights to payment with respect to any cause of
action affecting or relating to the Collateral or proceeds
thereof.
(g) All right, title and interest of the Company in and to
all building loan agreements, construction contracts, plans and
specifications, building permits, governmental approvals and
licenses, lender's policies of title insurance, "all risk"
builder's insurance or workers' compensation insurance as the
same relate to the Pledged Mortgages.
<PAGE> 144
3.2 Release of Security Interest in Collateral.
(a) Pledged Mortgages shall be released from the Lender's
security interest only against payment to the Lender of the
Release Amount in connection with such Pledged Mortgages.
(b) If Pledged Mortgages are to be transferred to a pool
custodian or to FHLMC or FNMA for inclusion in a Mortgage Pool,
the Lender's security interest in such Pledged Mortgages shall be
released only against payment to the Lender of the Release Amount
in connection with such Pledged Mortgages. If the Lender's
security interest in the Pledged Mortgages comprising the
Mortgage Pool is not released prior to the issuance of the
Mortgage-backed Security, then the Mortgage-backed Security, when
issued, shall be a Pledged Security. The Lender's security
interest shall continue in such Pledged Mortgages and the Pledged
Security. The Lender shall be entitled to possession of such
Pledged Security in the manner provided below.
(c) If Pledged Mortgages are transferred to an Approved
Custodian and included in an Eligible Mortgage Pool, the Lender's
security interest in the Pledged Mortgages comprising the
Eligible Mortgage Pool shall be released upon the issuance of the
Mortgage-backed Security, which shall be a Pledged Security. The
Lender's security interest in such Pledged Security shall be
released only against payment to the Lender of the Release Amount
in connection with the Pledged Mortgages backing such Pledged
Security. The Lender shall be entitled to possession of such
Pledged Security in the manner provided below.
(d) The Lender shall have the exclusive right to the
possession of the Pledged Securities or, if the Pledged
Securities are not to be issued in certificated form or are to be
issued in certificated form and registered exclusively in the
name of, and held by, a clearing agency or its nominee, shall
have the right to have the book entries for the Pledged
Securities issued in the Lender's name or the name or names of
its designees, and the Lender shall have the right to cause
delivery of the Pledged Securities to be made to the Investor or
the book entries registered in the name of the Investor or the
Investor's designee only against payment therefor. The Company
acknowledges that the Lender may enter into one or more standing
arrangements with other financial institutions for the issuance
of Pledged Securities in book entry form in the name of such
other financial institutions, as agent or financial
<PAGE> 145
intermediary for the Lender, and the Company agrees upon request
of the Lender, to execute and deliver to such other financial
institutions the Company's written concurrence in any such
standing arrangements.
(e) Prior to the occurrence of an Event of Default, the
Company may redeem a Pledged Mortgage or Pledged Security from
the Lender's security interest by notifying the Lender of its
intention to redeem such Pledged Mortgage or Pledged Security
from pledge and either (a) paying, or causing an Investor to pay,
to the Lender, for application to prepayment of the principal
balance of the Note, the Release Amount in connection with such
Pledged Mortgage or Pledged Security, or (b) delivering
substitute Collateral which, in addition to being acceptable to
the Lender in its sole discretion will, when included with the
Collateral, result in a Collateral Value of all Collateral held
by the Lender which is at least equal to the aggregate
outstanding Advances.
(f) Following the occurrence of a Default or Event of
Default, the Lender may, with no liability to the Company or any
Person, continue to release its security interest in any Pledged
Mortgage or Pledged Security against payment of the Release
Amount in connection with such Pledged Mortgage or Pledged
Security.
(g) The Release Amount in connection with any Pledged
Mortgage shall be (i) prior to the occurrence of an Event of
Default, the principal amount of the Advances made against such
Pledged Mortgage, and (ii) from and after the occurrence and
during the continuance of an Event of Default, the Committed
Purchase Price of such Pledged Mortgage or, if there is no
Purchase Commitment therefor, the amount paid to the Lender in a
commercially reasonable disposition thereof.
3.3 Delivery of Additional Collateral or Mandatory Prepayment. At
any time that the aggregate Collateral Value of the Pledged Mortgages
and Pledged Securities then pledged hereunder is less than the
aggregate amount of the Advances then outstanding hereunder, the
Lender may request, and the Company shall within two (2) Business Days
after Notice by the Lender (a) deliver to the Lender for pledge
hereunder additional Mortgage Loans and/or cash, with a Collateral
Value sufficient to cover the difference between the Collateral Value
of the Pledged Mortgages and Pledged Securities pledged and the
aggregate amount of Advances outstanding hereunder, or (b) repay the
Advances in an amount sufficient to reduce the aggregate balance
thereof outstanding to or below the Collateral Value of the Pledged
Mortgages and Pledged Securities pledged hereunder.
<PAGE> 146
3.4 Release of Collateral.
(a) The Lender may deliver documents relating to the
Collateral to the Company for correction or completion pursuant
to a Trust Receipt.
(b) Prior to the occurrence of a Default or Event of
Default, upon delivery by the Company to the Lender of shipping
instructions pursuant to Exhibit D-SF, the Lender will transmit
Pledged Mortgages or Pledged Securities and all related loan
documents or pool documents to the applicable Investor, Approved
Custodian or other party.
(c) Upon receipt of Notice from the Company under Section
2.5(g) hereof, and repayment of the Release Amount with respect
to a Pledged Mortgage identified by the Company, any Collateral
Documents relating to the redeemed Pledged Mortgage or Mortgage
Loan backing a Pledged Security which have not been delivered to
an Investor or Approved Custodian shall be released by the Lender
to the Company.
3.5 Collection and Servicing Rights. So long as no Event of
Default shall have occurred and be continuing, the Company shall be
entitled to service and receive and collect directly all sums payable
to the Company in respect of the Collateral other than proceeds of any
Purchase Commitment or proceeds of the sale of any Collateral.
Following the occurrence of any Event of Default, the Lender or its
designee shall thereafter be entitled to service and receive and
collect all sums payable to the Company in respect of the Collateral,
and in such case (a) the Lender or its designee in its discretion may,
in its own name, in the name of the Company or otherwise, demand, sue
for, collect or receive any money or property at any time payable or
receivable on account of or in exchange for any of the Collateral, but
shall be under no obligation to do so, (b) the Company shall, if the
Lender so requests, hold in trust for the benefit of the Lender and
forthwith pay to the Lender at its office designated by Notice
hereunder, all amounts thereafter received by the Company upon or in
respect of any of the Collateral, advising the Lender as to the source
of such funds, and (c) all amounts so received and collected by the
Lender shall be held by it as part of the Collateral.
3.6 Return of Collateral at End of Commitment. If (a)
the Commitment shall have expired or been terminated, and (b)
no Advances, interest or other Obligations shall be
<PAGE> 147
outstanding and unpaid, the Lender shall deliver or release its
security interest and shall deliver all Collateral in its possession
to the Company at the Company's expense. The receipt of the Company
for any Collateral released or delivered to the Company pursuant to
any provision of this Agreement shall be a complete and full
acquittance for the Collateral so returned, and the Lender shall
thereafter be discharged from any liability or responsibility
therefor.
4. CONDITIONS PRECEDENT.
4.1 Initial Advance. The obligation of the Lender to make the
initial Advance under this Agreement is subject to the satisfaction,
in the sole discretion of the Lender, on or before the date thereof of
the following conditions precedent:
(a) The Lender shall have received the following, all of
which must be satisfactory in form and content to the Lender, in
its sole discretion:
(1) The Notes and this Agreement duly
executed by the Company.
(2) The Company's articles of incorporation as
certified by the Secretary of State of the Company's
incorporation, bylaws certified by the corporate secretary
of the Company, or a Certificate of the Company stating that
there has been no change in either the articles of
incorporation or bylaws since those delivered in connection
with that certain Warehousing Credit and Security Agreement
dated April 15, 1992, and certificates of good standing
dated no less recently than ninety (90) days prior to the
date of this Agreement.
(3) An original resolution of the board of directors of
the Company, certified as of the date of this Agreement by
its corporate secretary, authorizing the execution, delivery
and performance of this Agreement and the other Loan
Documents, and all other instruments or documents to be
delivered by the Company pursuant to this Agreement.
(4) A certificate of the Company's corporate secretary
as to the incumbency and authenticity of the signatures of
the officers of the Company executing this Agreement and the
other Loan Documents and each Advance Request and all other
instruments or documents to be delivered pursuant hereto
(the Lender being entitled to rely thereon until a new such
certificate has been furnished to the Lender).
<PAGE> 148
(5) Financial statements of the Company (and, if
applicable, its Subsidiaries, on a consolidated basis)
containing a balance sheet as of December 31, 1994, and
related statements of income, changes in stockholders'
equity and cash flows for the period ended on such date, all
prepared in accordance with GAAP applied on a basis
consistent with prior periods and audited by independent
certified public accountants of recognized standing
acceptable to the Lender.
(6) Financial statements of the Company (and, if
applicable, its Subsidiaries, on a consolidated basis)
containing a balance sheet as of June 30, 1995, related
statements of income and changes in stockholders' equity for
the period ended on such date prepared, except as disclosed
on the financial statements, in accordance with GAAP applied
on a basis consistent with the Company's most recent audited
financial statements.
(7) A favorable written opinion of counsel to the
Company, dated as of the date of this Agreement
substantially in the form of Exhibit H attached hereto,
addressed to the Lender.
(8) In the state of incorporation of the Company, a
tax, lien and judgment search of the appropriate public
records for the Company, including a search of Uniform
Commercial Code financing statements, which search shall not
have disclosed the existence of any prior Lien on the
Collateral other than in favor of the Lender or as permitted
hereunder.
(9) Copies of the certificates, documents or other
written instruments which evidence the Company's eligibility
described in Section 5.13 hereof or a certificate from the
Company stating there has been no change in such eligibility
since those delivered in connection with the Original
Agreement, all in form and substance satisfactory to the
Lender.
(10) Certificate from the Company stating its errors
and omissions insurance policy or mortgage impairment
insurance policy and blanket bond coverage policy are in
compliance as of the date of this Agreement with the related
provisions of Section 6.8 hereof.
<PAGE> 149
(11) Executed amendments to the financing statements in
recordable form covering the Collateral and ready for filing
in all jurisdictions required by the Lender.
(12) Receipt by the Lender of the Commitment
Fee due on the date hereof, if any.
(13) Evidence that all accounts necessary into which
Advances will be funded have been established at the Funding
Bank and receipt of a fully executed Funding Bank Agreement.
(b) All directors, officers and shareholders of the Company,
all Affiliates of the Company or of any Subsidiary of the
Company, to whom or to any of whom the Company shall be indebted
as of the date of this Agreement, shall have subordinated such
indebtedness to the Obligations, by executing a Subordination of
Debt Agreement, in the form of Exhibit F hereto; provided,
however, that earned salaries and bonuses and expense
reimbursements owed to officers of the Company shall be excluded
from this requirement; and the Lender shall have received an
executed copy of any such Subordination of Debt Agreement,
certified by the corporate secretary of the Company to be true
and complete and in full force and effect as of the date of the
Advance. Unsecured indebtedness of the Company to its Affiliates
for warehousing purposes and unclaimed bondholder funds held and
administered by the Company for its Subsidiaries are not required
to be subordinated under the terms of this Section.
4.2 Each Advance. The obligation of the Lender to make the
initial and each subsequent Advance under this Agreement is subject to
the satisfaction, in the sole discretion of the Lender, as of the date
of each such Advance, of the following additional conditions
precedent:
(a) The Company shall have delivered to the Lender the
Advance Request, Collateral Documents, and documents relating to
Wet Settlement Advances, called for under, and shall have
satisfied the procedures set forth in, Section 2.2 hereof and the
applicable Exhibits hereto described in that Section, according
to the type of the requested Advance. All items delivered to the
Lender shall be satisfactory to the Lender in form and content,
and the Lender may reject such of them as do not meet the
requirements of this Agreement or of the related Purchase
Commitment.
<PAGE> 150
(b) The Lender shall have received evidence satisfactory to
it as to the making and/or continuation of any book entry or the
due filing and recording in all appropriate offices of all
financing statements and other instruments as may be necessary to
perfect the security interest of the Lender in the Collateral
under the Uniform Commercial Code of Minnesota or other
applicable law.
(c) The representations and warranties of the Company
contained in Article 5 hereof shall be accurate and complete in
all material respects as if made on and as of the date of each
Advance.
(d) The Company shall have performed all agreements to be
performed by it hereunder, and after giving effect to the
requested Advance, there shall exist no Default or Event of
Default hereunder.
(e) The Company shall not have incurred any material
liabilities, direct or contingent, other than in the ordinary
course of its business, since the Statement Date.
(f) The Lender shall have received from counsel for the
Company, if requested by the Lender in its sole discretion, an
updated opinion, in form and substance satisfactory to the
Lender, addressed to the Lender and dated as of the date of such
Advance, covering such of the matters as the Lender may
reasonably request.
Delivery of an Advance Request by the Company shall be deemed a
representation by the Company that all conditions set forth in this
Section 4.2 shall have been satisfied as of the date of such Advance.
5. REPRESENTATIONS AND WARRANTIES.
The Company hereby represents and warrants to the Lender, as of
the date of this Agreement and as of the date of each Advance Request
and the making of each Advance, that:
5.1 Organization; Good Standing; Subsidiaries. The Company and
each Subsidiary of the Company is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has the full legal power and
authority to own its property and to carry on its business as
currently conducted and is duly qualified as a foreign corporation to
<PAGE> 151
do business and is in good standing in each jurisdiction in which the
transaction of its business makes such qualification necessary, except
in jurisdictions, if any, where a failure to be in good standing has no
material adverse effect on the business, operations, assets or
financial condition of the Company or any such Subsidiary. For the
purposes hereof, good standing shall include qualification for any
and all licenses and payment of any and all taxes required in the
jurisdiction of its incorporation and in each jurisdiction in which
the Company transacts business. The Company has no Subsidiaries
except as set forth on Exhibit G hereto. Exhibit G sets forth with
respect to each such Subsidiary, its name, address, place of
incorporation, each state in which it is qualified as a foreign
corporation, and the percentage ownership of its capital stock by the
Company.
5.2 Authorization and Enforceability. The Company has the power
and authority to execute, deliver and perform this Agreement, the Note
and all other Loan Documents to which the Company is party and to make
the borrowings hereunder. The execution, delivery and performance by
the Company of this Agreement, the Note and all other Loan Documents
to which the Company is party and the making of the borrowings
hereunder and thereunder, have been duly and validly authorized by all
necessary corporate action on the part of the Company (none of which
actions has been modified or rescinded, and all of which actions are
in full force and effect) and do not and will not conflict with or
violate any provision of law, of any judgments binding upon the
Company, or of the articles of incorporation or by-laws of the
Company, conflict with or result in a breach of or constitute a
default or require any consent under, or result in the creation of any
Lien upon any property or assets of the Company other than the Lien on
the Collateral granted hereunder, or result in or require the
acceleration of any indebtedness of the Company pursuant to any
agreement, instrument or indenture to which the Company is a party or
by which the Company or its property may be bound or affected. This
Agreement, the Note and all other Loan Documents contemplated hereby
or thereby constitute legal, valid, and binding obligations of the
Company, enforceable in accordance with their respective terms, except
as limited by bankruptcy, insolvency or other such laws affecting the
enforcement of creditors' rights.
5.3 Approvals. The execution and delivery of this Agreement, the
Note and all other Loan Documents and the performance of the Company's
obligations hereunder and thereunder and the validity and
enforceability hereof and thereof do not require any license, consent,
approval or other action of any state or federal agency or
governmental or regulatory authority other than those which have been
obtained and remain in full force and effect.
<PAGE> 152
5.4 Financial Condition. The balance sheet of the Company (and,
if applicable, its Subsidiaries, on a consolidated basis) as at the
Statement Date, and the related statements of income and changes in
stockholders' equity for the fiscal period ended on the Statement
Date, heretofore furnished to the Lender, fairly present the financial
condition of the Company (and its Subsidiaries) as at the Statement
Date and the results of its operations for the fiscal period ended on
the Statement Date. The Company had, on the Statement Date, no known
material liabilities, direct or indirect, fixed or contingent, matured
or unmatured, or liabilities for taxes, long-term leases or unusual
forward or long-term commitments not disclosed by, or reserved against
in, said balance sheet and related statements, and at the present time
there are no material unrealized or anticipated losses from any loans,
advances or other commitments of the Company except as heretofore
disclosed to the Lender in writing. Except as disclosed in the interim
financial statements, said financial statements were prepared in
accordance with GAAP applied on a consistent basis throughout the
periods involved. Since the Statement Date, there has been no material
adverse change in the business, operations, assets or financial
condition of the Company (and its Subsidiaries), nor is the Company
aware of any state of facts which (with or without notice or lapse of
time or both) would or could result in any such material adverse
change.
5.5 Litigation. There are no actions, claims, suits or
proceedings pending or, to the knowledge of the Company, threatened or
reasonably anticipated against or affecting the Company or any
Subsidiary of the Company in any court or before any arbitrator or
before any government commission, board, bureau or other
administrative agency which, if adversely determined, may reasonably
be expected to result in any material and adverse change in the
business, operations, assets or financial condition of the Company as
a whole, or which would affect the validity or enforceability of this
Agreement, the Notes or any other Loan Document.
5.6 Compliance with Laws. Neither the Company nor any Subsidiary
of the Company is in violation of any provision of any law, or of any
judgment, award, rule, regulation, order, decree, writ or injunction
of any court or public regulatory body or authority which might have a
material adverse effect on the business, operations, assets or
financial condition of the Company as a whole or which would affect
the validity or enforceability of this Agreement, the Notes or any
other Loan Document.
5.7 Regulations G and U. The Company is not engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or
<PAGE> 153
carrying Margin Stock, and no part of the proceeds of any Advances
made hereunder will be used to purchase or carry any Margin Stock or
to extend credit to others for the purpose of purchasing or carrying
any Margin Stock.
5.8 Investment Company Act. The Company is not an
"investment company" or controlled by an "investment company"
within the meaning of the Investment Company Act of 1940, as
amended.
5.9 Payment of Taxes. The Company, through the Parent, has filed
or caused to be filed all federal, state and local income, excise,
property and other tax returns with respect to the operations of the
Company and its Subsidiaries which are required to be filed (except
such taxes, if any, as are being contested in good faith and for which
adequate reserves have been provided), all such returns are true and
correct, and the Company, through the Parent, has paid or caused to be
paid all taxes as shown on such returns or on any assessment, to the
extent that such taxes have become due, including, but not limited to,
all FICA payments and withholding taxes, if appropriate. The amounts
reserved, if any, as a liability for income and other taxes payable,
in the financial statements described in Section 5.4 hereof are
sufficient for payment of all unpaid federal, state and local income,
excise, property and other taxes, whether or not disputed, of the
Company and its Subsidiaries accrued for or applicable to the period
and on the dates of such financial statements and all years and
periods prior thereto and for which the Company and its Subsidiaries
may be liable in their own right or as transferee of the assets of, or
as successor to, any other person or entity. The Company and its
Subsidiaries are included in the consolidated federal income tax
return filed by the Parent. The Company's income tax provisions, if
any, are recorded on a separate entity basis and are in accordance
with a tax allocation agreement with the Parent.
5.10 Agreements. Neither the Company nor any Subsidiary of the
Company is a party to any agreement, instrument or indenture or
subject to any restriction materially and adversely affecting its
business, operations, assets or financial condition, except as
disclosed in the financial statements described in Section 5.4 hereof.
Neither the Company nor any Subsidiary of the Company is in default in
the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement, instrument, or
indenture which default could have a material adverse effect on the
business, operations, properties or financial condition of the Company
as a whole. No holder of any indebtedness of the Company or of any of
its Subsidiaries (except as set forth below) has given notice
of any asserted default thereunder, and no liquidation or
<PAGE> 154
dissolution of the Company or of any of its Subsidiaries and no
receivership, insolvency, bankruptcy, reorganization or other similar
proceedings relative to the Company or of any of its Subsidiaries or
any of its properties is pending, or to the knowledge of the Company,
threatened.
The trustee ("Trustee") under the indenture for mortgage-backed bonds
issued by a Subsidiary of the Company, C.M. Corp. (formerly known as
U.S. Home Finance Corporation) ("Issuer") has notified the Company
that an event of default ("C.M. Corp Default") had occurred and
declared the outstanding principal balance of all of the remaining
mortgage-backed bonds to be immediately due and payable.
5.11 Title to Properties. The Company and each Subsidiary of the
Company has good, valid, insurable (in the case of real property) and
marketable title to all of its properties and assets (whether real or
personal, tangible or intangible) reflected on the financial
statements described in Section 5.4 hereof, except for such properties
and assets as have been disposed of since the date of such financial
statements as no longer used or useful in the conduct of its business
or as have been disposed of in the ordinary course of business, and
all such properties and assets are free and clear of all Liens except
as disclosed in such financial statements.
5.12 ERISA. All plans ("Plans") of a type described in Section
3(3) of ERISA in respect of which the Company or any Subsidiary of the
Company is an "Employer," as defined in Section 3(5) of ERISA, are in
substantial compliance with ERISA, and none of such Plans is insolvent
or in reorganization, has an accumulated or waived funding deficiency
within the meaning of Section 412 of the Internal Revenue Code, and
neither the Company nor any Subsidiary of the Company has incurred any
material liability (including any material contingent liability) to or
on account of any such Plan pursuant to Sections 4062, 4063, 4064,
4201 or 4204 of ERISA; and no proceedings have been instituted to
terminate any such Plan, and no condition exists which presents a
material risk to the Company or a Subsidiary of the Company of
incurring a liability to or on account of any such Plan pursuant to
any of the foregoing Sections of ERISA. No Plan or trust forming a
part thereof has been terminated since September 1, 1974.
5.13 Eligibility. The Company is approved and qualified and in
good standing as a lender or seller/servicer, as set forth below, and
meets all requirements applicable to its status as such:
<PAGE> 155
(a) GNMA approved seller/servicer of Mortgage Loans and
issuer of Mortgage-backed Securities guaranteed by GNMA.
(b) FNMA approved seller/servicer of Mortgage Loans,
eligible to originate, purchase, hold, sell, and service Mortgage
Loans to be sold to FNMA.
(c) FHLMC approved seller/servicer of Mortgage Loans,
eligible to originate, purchase, hold, sell and service Mortgage
Loans to be sold to FHLMC.
(d) Lender in good standing under the VA loan guarantee
program eligible to originate, purchase, hold, sell and service
VA-guaranteed Mortgage Loans.
(e) FHA approved mortgagee, eligible to originate, purchase,
hold, sell and service FHA fully insured Mortgage Loans.
5.14 Place of Business. The principal place of business
of the Company is 311 Park Place Boulevard, P.O. Box 4929,
Clearwater, Florida 34618.
5.15 Special Representations Concerning Collateral. The Company
hereby represents and warrants to the Lender, as of the date of this
Agreement and as of the date of each Advance Request and the making of
each Advance, that:
(a) The Company is the legal and equitable owner and holder,
free and clear of all Liens (other than Liens granted hereunder),
of the Pledged Mortgages and the Pledged Securities. All Pledged
Mortgages, Pledged Securities and Purchase Commitments have been
duly authorized and validly issued to the Company, and all of the
foregoing items of Collateral comply with all of the requirements
of this Agreement, and have been and will continue to be validly
pledged or assigned to the Lender, subject to no other Liens.
(b) The Company has, and will continue to have, the full
right, power and authority to pledge the Collateral pledged and
to be pledged by it hereunder.
(c) Any Mortgage Loan and any related document included in
the Pledged Mortgages (1) other than a Construction/Perm Mortgage
Loan, has been duly executed and delivered by the parties thereto
at a closing held not more than ninety (90) days prior to the
date of the Advance Request for such Mortgage Loan, (2) has been
made in compliance with all requirements of the Real Estate
Settlement Procedures Act, Equal Credit Opportunity Act,
<PAGE> 156
the federal Truth-In-Lending Act and all other applicable laws
and regulations, (3) is and will continue to be valid and
enforceable in accordance with its terms, without defense or
offset, (4) has not been modified or amended except in writing,
which writing is part of the Collateral Documents, nor any
requirements thereof waived, (5) has been evaluated or appraised
in accordance with Title XI of FIRREA, and (6) complies and will
continue to comply with the terms of this Agreement and, if
applicable, with the related Purchase Commitment held by the
Company. Each Mortgage Loan, other than a Construction/Perm
Mortgage Loan, has been fully advanced in the face amount thereof
and each First Mortgage is a first Lien on the premises described
therein, and has or will have a title insurance policy, in
American Land Title Association form or equivalent thereof, from
a recognized title insurance company, insuring the priority of
the Lien of the Mortgage and meeting the usual requirements of
Investors purchasing such Mortgage Loans.
(d) No default has occurred and is continuing for more than
sixty (60) days under any Mortgage Loan included in the Pledged
Mortgages without the Advance against such Pledged Mortgage
having been repaid in accordance with Section 2.5(d)(6) hereof,
provided, however, that with respect to Pledged Mortgages which
have already been pledged as Collateral hereunder, if any default
has occurred, the Company will promptly notify the Lender.
(e) The Company has complied and will continue to comply
with all laws, rules and regulations in respect of the FHA
insurance or VA guaranty of each Mortgage Loan included in the
Pledged Mortgages designated by the Company as an FHA insured or
VA guaranteed Mortgage Loan, and such insurance or guarantee is
and will continue to be in full force and effect. All such FHA
insured and VA guaranteed Mortgage Loans comply and will continue
to comply in all respects with all applicable requirements for
purchase under the FNMA standard form of selling contract for FHA
insured and VA guaranteed loans and any supplement thereto then
in effect.
(f) All fire and casualty policies covering the premises
encumbered by each Mortgage included in the Pledged Mortgages (1)
name and will continue to name the Company and its successors and
assigns as the insured under a standard mortgagee clause, (2) are
and will continue to be in full force and effect, and (3) afford
and will continue to afford insurance against fire and such other
risks as are usually insured against in the broad form of
extended coverage insurance from time to time available.
<PAGE> 157
(g) Pledged Mortgages secured by premises located in a
special flood hazard area designated as such by the Director of
the Federal Emergency Management Agency are and shall continue to
be covered by special flood insurance under the National Flood
Insurance Program.
(h) Each FHA insured Mortgage Loan pledged hereunder meets
all applicable governmental requirements for such insurance. Each
Pledged Mortgage, against which an Advance is made on the basis
of a Purchase Commitment, meets all requirements of such Purchase
Commitment. The Company shall assure that Pledged Mortgages which
are intended to be used in the formation of Mortgage-backed
Securities shall comply or, prior to the formation of any such
Mortgage-backed Security, shall comply with the requirements of
the governmental instrumentality, department or agency
guaranteeing such Mortgage-backed Security.
(i) For Pledged Mortgages which will be pooled and used by
the Company to back GNMA Mortgage-backed Securities, the Company
has received from GNMA a Confirmation Notice or Confirmation
Notices for Request Additional Commitment Authority and for
Request Pool Numbers, and there remains available thereunder a
commitment on the part of GNMA sufficient to permit the issuance
of GNMA Mortgage-backed Securities in an amount at least equal to
the amount of such Pledged Mortgages designated by the Company as
the Mortgage Loans to be used to back such GNMA Mortgage-backed
Securities; each such Confirmation Notice is in full force and
effect; each of such Pledged Mortgages has been assigned by the
Company to one of such Pool Numbers and a portion of the
available GNMA Commitment has been allocated thereto by the
Company, in an amount at least equal to such Pledged Mortgages;
and each such assignment and allocation has been reflected in the
books and records of the Company.
5.16 Servicing. Attached hereto as Exhibit E is a true and
complete list of the Company's Servicing Portfolio. All of the
Company's Servicing Contracts are in full force and effect and, except
as otherwise indicated, are unencumbered by Liens. No default or event
which, with notice or lapse of time or both, would become a default,
exists under any such Servicing Contract, except that the Company has
not reimbursed the Trustee for certain costs and expenses relating to
the C.M. Corp Default or the Trustee's administration services which
were not reimbursed by the Issuer.
<PAGE> 158
5.17 Special Representations Concerning Construction
Advances. The Company hereby represents and warrants to the
Lender, as of the date of this Agreement and as of the date of
each Advance Request, that:
(a) Each Construction/Perm Mortgage Loan included in the
Pledged Mortgages (1) has an American Land Title Association
Lender's construction loan policy or equivalent thereto with
mechanics' lien coverage, (2) has an Assignment of Plan and
Specifications, and an Assignment of General Construction
Contract, that inure to the benefit of the Company's successors
and assigns, (3) has "all risk" builder's insurance and workers'
compensation insurance that name and will continue to name the
Company and its successors and assigns as the insured under a
standard mortgagee clause, (4) has a certification of no
hazardous materials, (5) has a survey prepared and certified by a
duly registered surveyor showing no encroachments of the
improvements or the proposed improvements to be constructed on
the premises encumbered by the Pledged Mortgage on to other lands
or easements or restrictions, unless such encroachments have been
insured over or are acceptable to the Investor, (6) has building
permits and all necessary licenses and approvals for the
construction of the improvements on the premises encumbered by
the Pledged Mortgage, (7) has a "as completed" appraisal giving
an As Completed Appraised Value, (8) has a fixed price General
Contract issued by a licensed contractor, and (9) has all
necessary utilities available to the premises encumbered by the
Pledged Mortgage.
(b) Prior to the initial Construction Advance against a
Pledged Mortgage, the Company shall have received (1) a Cost
Breakdown and (2) a draw schedule.
(c) Prior to each Construction Advance, the Company shall
have received (1) a report of the stage of completion of the
improvements as set forth in the construction accounting system
of the Parent confirming completion of the work for which the
Construction Advance is being requested and (2) a title insurance
updated endorsement for such Construction Advance if the title
insurance policy has a "pending disbursements clause" requiring
an endorsement to the title insurance policy to insure each
Construction Advance after the closing of the Construction/Perm
Mortgage Loan.
(d) Prior to the final Construction Advance, the Company
shall have received (1) a final appraiser inspection report
confirming completion of all work in accordance with the plans
and specifications and (2) a final "as built" survey.
<PAGE> 159
(e) If applicable, within fifteen (15) days after the final
Construction Advance the Company shall receive any Mortgage Note
modification or modified Mortgage Note delivered in connection
with a Construction/Perm Mortgage Loan and a title insurance
policy update endorsement for modification of the construction
Mortgage Loan to the permanent Mortgage Loan.
6. AFFIRMATIVE COVENANTS.
The Company hereby covenants and agrees that, so long as the
Commitment is outstanding or there remain any Obligations to be paid
or performed under this Agreement or under any other Loan Document,
the Company shall:
6.1 Payment of Note. Punctually pay or cause to be paid all
Obligations payable hereunder and under the Note in accordance with
the terms hereof and thereof.
6.2 Financial Statements and Other Reports. Deliver to
the Lender:
(a) As soon as available and in any event within thirty (30)
days after the end of each calendar month of the Company,
statements of income and changes in stockholders' equity of the
Company (and, if applicable, its Subsidiaries, on a consolidated
basis) for the immediately preceding month and for the period
from the beginning of the fiscal year to the end of such calendar
month, and the related balance sheet as at the end of the
immediately preceding month, all in reasonable detail and
certified as to the fairness of presentation by the chief
financial officer of the Company, subject, however, to year-end
audit adjustments.
(b) As soon as available and in any event within ninety (90)
days after the close of each fiscal year of the Company,
statements of income, changes in stockholders' equity and cash
flow of the Company (and, if applicable, its Subsidiaries, on a
consolidated basis) for such year, and the related balance sheet
as at the end of such year (setting forth in comparative form the
corresponding figures for the preceding fiscal year), all in
reasonable detail and accompanied by an opinion in form and
substance satisfactory to the Lender and prepared by an
accounting firm reasonably satisfactory to the Lender, or other
independent certified public accountants of recognized standing
<PAGE> 160
selected by the Company and acceptable to the Lender, as to
said financial statements and a certificate signed by the
chief financial officer of the Company stating that said
financial statements fairly present the financial condition and
results of operations of the Company (and, if applicable, its
Subsidiaries) as at the end of, and for, such year.
(c) Together with each delivery of financial statements
required in this Section 6.2, an Officer's Certificate
substantially in the form of Exhibit I-SF hereto: (1) setting
forth in reasonable detail all calculations necessary to show
that the Company is in compliance with the requirements of
Sections 7.6 and 7.7 hereof as of the end of such month or year
(or, if the Company is not in compliance, showing the extent of
non-compliance and specifying the period of non-compliance and
what actions the Company has taken, is taking or proposes to take
with respect thereto); (2) certifying that the Company was, as of
the end of the period, in compliance and in good standing with
applicable HUD, GNMA, or Investor net worth requirements; and (3)
stating that the signers have reviewed the terms of this
Agreement and have made, or caused to be made under their
supervision, a review in reasonable detail of the transactions
and conditions of the Company (and, if applicable, its
Subsidiaries) during the accounting period covered by such
financial statements and that such review has not disclosed the
existence during or at the end of such accounting period, and
that the signers do not have knowledge of the existence as of the
date of the Officer's Certificate, of any Default or Event of
Default, or if any Default or Event of Default existed or exists,
specifying the nature and period of the existence thereof and
what action the Company has taken, is taking and proposes to take
with respect thereto.
(d) Weekly or more frequently as the Lender may from time to
time request, a commitment summary and pipeline report
substantially in the form of Exhibit L (the "Commitment Summary
Report") dated as of the close of business on the last Business
Day of each week and provided to the Lender by facsimile by the
end of the next succeeding Business Day of the following week.
(e) Reports in respect of the Pledged Mortgages and Pledged
Securities, in such detail and at such times as the Lender in its
discretion may reasonably request at any time or from time to
time.
(f) Copies of all regular or periodic financial and
other reports, if any, which the Company shall file with
<PAGE> 161
the Securities and Exchange Commission or any governmental agency
successor thereto, copies of any audits completed by GNMA, FNMA
or FHLMC and copies of the Mortgage Bankers' Financial Reporting
Forms (FHLMC Form 1055/FNMA Form 1002) which the Company shall
have filed with FNMA or FHLMC.
(g) From time to time, with reasonable promptness, such
further information regarding the business, operations,
properties or financial condition of the Company as the Lender
may reasonably request.
(h) With each Officer's Certificate, a monthly status report
on each Construction/Perm Mortgage Loan, including, without
limitation, the loan number, mortgagor name(s), property address,
general contractor name, completion status (percent completed or
staged draw no. and brief description), estimated completion
date, date of last on-site inspection, and Pledged Mortgage
payment status.
6.3 Maintenance of Existence; Conduct of Business. Preserve and
maintain its corporate existence in good standing and all of its
rights, privileges, licenses and franchises necessary or desirable in
the normal conduct of its business, including, without limitation, its
eligibility as lender, seller/servicer and issuer described under
Section 5.13 hereof; conduct its business in an orderly and efficient
manner; maintain a net worth of acceptable assets as required by FHA,
GNMA, FNMA or FHLMC at any and all times for maintaining the Company's
status as a FHA, FNMA, FHLMC approved mortgagee or GNMA issuer; and
make no change in the nature or character of its business or engage in
any business other than mortgage lending or related ancillary services
in which it was not engaged on the date of this Agreement.
6.4 Compliance with Applicable Laws. Comply with the requirements
of all applicable laws, rules, regulations and orders of any
governmental authority, a breach of which could materially adversely
affect its business, operations, assets, or financial condition,
except where contested in good faith and by appropriate proceedings.
6.5 Inspection of Properties and Books. Permit authorized
representatives of the Lender or any Participant to discuss the
business, operations, assets and financial condition of the Company
and its Subsidiaries with its officers and employees and to examine
its books of account and make copies or extracts thereof, all at such
reasonable times as the Lender or any Participant may request. The
Company will provide its accountants with a copy of this Agreement
promptly after the execution hereof and will instruct its
<PAGE> 162
accountants to answer candidly any and all questions that the officers
of the Lender or any Participant or any authorized representatives of
the Lender or any Participant may address to them in reference to the
financial condition or affairs of the Company and its Subsidiaries.
The Company may have its representatives in attendance at any meetings
between the officers or other representatives of the Lender or any
Participant and the Company accountants held in accordance with this
authorization.
6.6 Notice. Give prompt written notice to the Lender of (a) any
action, suit or proceeding instituted by or against the Company or any
of its Subsidiaries in any federal or state court or before any
commission or other regulatory body (federal, state or local, domestic
or foreign) which action, suit or proceeding has at issue in excess of
Two Hundred Fifty Thousand Dollars ($250,000), or any such proceedings
threatened against the Company or any of its Subsidiaries in a writing
containing the details thereof, (b) the filing, recording or
assessment of any federal, state or local tax Lien against the
Company, or any of its assets or any of its Subsidiaries, (c) the
occurrence of any Event of Default hereunder or the occurrence of any
Default and continuation thereof for five (5) days, (d) the
suspension, revocation or termination of the Company's eligibility, in
any respect, as approved lender, seller/servicer or issuer as
described under Section 5.13 hereof, (e) the transfer, loss or
termination of any Servicing Contract to which the Company is a party,
or which is held for the benefit of the Company, and the reason for
such transfer, loss or termination, if known to the Company, and (f)
any other action, event or condition of any nature which may lead to
or result in a material adverse effect upon the business, operations,
assets, or financial condition of the Company and its Subsidiaries or
which, with or without notice or lapse of time or both, would
constitute a default under any other agreement, instrument or
indenture to which the Company or any of its Subsidiaries is a party
or to which the Company or any of its Subsidiaries, its properties, or
assets may be subject.
6.7 Payment of Debt, Taxes, etc. Pay and perform all obligations
and indebtedness of the Company, and cause to be paid and performed
all obligations and indebtedness of its Subsidiaries (to the extent
the Company is legally obligated to so pay or perform for its
Subsidiaries and, except for reimbursement of Trustee costs which were
not reimbursed to the Trustee C.M. Corp.), promptly and in accordance
with the terms thereof and pay and discharge or cause to be paid and
discharged promptly all taxes, assessments and governmental charges or
levies imposed upon the Company or its Subsidiaries or upon their
respective income, receipts or properties before the same
shall become past due, as well as all lawful claims
<PAGE> 163
for labor, materials and supplies or otherwise which, if unpaid, might
become a Lien or charge upon such properties or any part thereof;
provided, however, that the Company and its Subsidiaries shall not be
required to pay taxes, assessments or governmental charges or levies
or claims for labor, materials or supplies for which the Company or
its Subsidiaries shall have obtained an adequate bond or adequate
insurance or which are being contested in good faith and by proper
proceedings which are being reasonably and diligently pursued and for
which proper reserves have been created.
6.8 Insurance. Maintain (a) errors and omissions insurance or
mortgage impairment insurance and blanket bond coverage, with such
companies and in such amounts as satisfy prevailing FNMA, FHLMC and
GNMA requirements applicable to a qualified mortgage originating
institution, and (b) liability insurance and fire and other hazard
insurance on its properties, with responsible insurance companies
approved by the Lender, in such amounts and against such risks as is
customarily carried by similar businesses operating in the same
vicinity; and (c) within thirty (30) days after Notice from the
Lender, obtain such additional insurance as the Lender shall
reasonably require, all at the sole expense of the Company. Copies of
such policies shall be furnished to the Lender without charge upon
request of the Lender.
6.9 Closing Instructions. Indemnify and hold the Lender harmless
from and against any loss, including reasonable attorneys' fees and
costs, attributable to the failure of a title insurance company, agent
or approved attorney to comply with the disbursement or instruction
letter or letters of the Company relating to any Mortgage Loan. The
Lender shall have the right to pre-approve the closing instructions of
the Company to the title insurance company, agent or attorney in any
case where the Mortgage Loan to be created at settlement is intended
to be warehoused by the Company to be included as Collateral pursuant
hereto.
6.10 Subordination of Certain Indebtedness. Except as qualified
in Section 4.1(b) hereof, cause any indebtedness of the Company,
incurred after the date of this Agreement, to any shareholder,
director or officer of the Company, or to any Affiliate of the Company
or of any Subsidiary of the Company, to be subordinated to all
Obligations by the execution of a Subordination of Debt Agreement in
the form of Exhibit F hereto and deliver to the Lender an executed
copy of said Agreement, certified by the corporate secretary of the
Company to be true and complete and in full force and effect.
6.11 Other Loan Obligations. Perform all material
obligations under the terms of each loan agreement, note,
mortgage, security agreement or debt instrument by which the
<PAGE> 164
Company is bound or to which any of its property is subject, and
promptly notify the Lender in writing of a declared default under or
the termination, cancellation, reduction or nonrenewal of any of its
other lines of credit or agreements with any other lender. Exhibit J
hereto is a true and complete list of all such lines of credit or
agreements as of the date hereof and the Company hereby agrees to give
the Lender at least thirty (30) days Notice before entering into any
additional lines of credit or agreements.
6.12 Use of Proceeds of Advances. Use the proceeds of each
Advance solely for the purpose set forth in Section 2.1(b) for
Advances of that type.
6.13 Special Affirmative Covenants Concerning
Collateral.
(a) Warrant and defend the right, title and interest of the
Lender in and to the Collateral against the claims and demands of
all Persons whomsoever.
(b) Service or cause to be serviced all Mortgage Loans in
accordance with the standard requirements of the issuers of
Purchase Commitments covering the same and all applicable FHA and
VA requirements, including without limitation taking all actions
necessary to enforce the obligations of the obligors under such
Mortgage Loans. The Company shall service or cause to be serviced
all Mortgage Loans backing Pledged Securities in accordance with
applicable governmental requirements and requirements of issuers
of Purchase Commitments covering the same. The Company shall hold
all escrow funds collected in respect of Pledged Mortgages and
Mortgage Loans backing Pledged Securities in trust, without
commingling the same with non-custodial funds, and apply the same
for the purposes for which such funds were collected.
(c) Execute and deliver to the Lender such Uniform
Commercial Code financing statements with respect to the
Collateral as the Lender may request. The Company shall also
execute and deliver to the Lender such further instruments of
sale, pledge or assignment or transfer, and such powers of
attorney, as required by the Lender, and shall do and perform all
matters and things necessary or desirable to be done or observed,
for the purpose of effectively creating, maintaining and
preserving the security and benefits intended to be afforded the
Lender under this Agreement. The Lender shall have all the rights
and remedies of a secured party under the Uniform Commercial Code
of Minnesota, or any other applicable law, in addition to all
rights provided for herein.
<PAGE> 165
(d) Notify the Lender within two (2) Business Days of any
default under, or of the termination of, any Purchase Commitment
relating to any Pledged Mortgage, Eligible Mortgage Pool or
Pledged Security.
(e) Promptly comply in all respects with the terms and
conditions of all Purchase Commitments, and all extensions,
renewals and modifications or substitutions thereof or thereto.
The Company will cause to be delivered to the Investor the
Pledged Mortgages and Pledged Securities to be sold under each
Purchase Commitment not later than three (3) Business Days prior
to the mandatory delivery date thereof.
(f) Maintain, at its principal office or in a regional
office approved by the Lender, or in the office of a computer
service bureau engaged by the Company and approved by the Lender,
and, upon request, make available to the Lender the originals, or
copies in any case where the originals have been delivered to the
Lender or to an Investor, of its Mortgage Notes and Mortgages
included in Pledged Mortgages, Mortgage-backed Securities
delivered to the Lender as Pledged Securities, Purchase
Commitments, and all related Mortgage Loan documents and
instruments, and all files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs,
cards, accounting records and other information and data relating
to the Collateral.
6.14 Special Affirmative Covenants Concerning
Construction Advances.
(a) Use the proceeds of each Construction Advance solely for
the purposes of funding Total Costs for a Construction/Perm
Mortgage Loan.
(b) Notify the Lender within two (2) Business Days of the
following events: (1) upon knowledge of the Company, construction
ceasing for more than fifteen (15) days on the improvements to
the premises encumbered by a Pledged Mortgage, (2) a lien filed
against premises encumbered by a Pledged Mortgage and not removed
within fifteen (15) days of the filing, and (3) any damage or
destruction of the premises encumbered by a Pledged Mortgage.
7. NEGATIVE COVENANTS.
The Company hereby covenants and agrees that, so long as the
Commitment is outstanding or there remain any Obligations to be paid
or performed, the Company shall not, either directly or indirectly,
without the prior written consent of the Lender:
<PAGE> 166
7.1 Contingent Liabilities. Assume, guarantee, endorse, or
otherwise become contingently liable for the obligation of any Person
except by endorsement of negotiable instruments for deposit or
collection in the ordinary course of business and except for
obligations resulting from representations, warranties and covenants
customarily made in connection with non-recourse sales of Mortgage
Loans.
7.2 Sale or Pledge of Servicing Contracts. Sell, pledge or grant
a security interest in any existing or future Servicing Contracts of
the Company other than to the Lender, except as otherwise expressly
permitted in this Agreement, or omit to take any action required to
keep all such Servicing Contracts in full force and effect; provided,
however, that if no Default or Event of Default has occurred and is
continuing, servicing on individual Mortgage Loans may be sold
concurrently with and incidental to the sale of such Mortgage Loans
(with servicing released) in the ordinary course of the Company's
business.
7.3 Merger; Sale of Assets; Acquisitions. Liquidate, dissolve,
consolidate or merge or sell any substantial part of its assets, or
acquire substantially all of the assets of another, except the sale of
Mortgage Loans in the ordinary course of business or the purchase
and/or redemption of the mortgage-backed notes issued by the Company's
Subsidiary, U.S.H. II Corporation.
7.4 Deferral of Subordinated Debt. Pay in advance of the stated
maturity thereof any Subordinated Debt of the Company or, if a Default
or Event of Default hereunder shall have occurred, make any payment of
any kind thereafter on such Subordinated Debt until all Obligations
have been paid and performed in full and any applicable preference
period has expired.
7.5 Loss of Eligibility. Take any action that would cause the
Company to lose all or any part of its status as an eligible lender,
seller/servicer and issuer as described under Section 5.13 hereof.
7.6 Debt to Tangible Net Worth Ratio. Permit the ratio of Debt to
Tangible Net Worth of the Company (and its Subsidiaries, on a
consolidated basis) at any time to exceed 10 to 1.
7.7 Minimum Tangible Net Worth. Permit Tangible Net
Worth of the Company (and its Subsidiaries, on a consolidated
basis) at any time to be less than Five Million Dollars
($5,000,000).
<PAGE> 167
7.8 Acquisition of Recourse Servicing Contracts. Acquire
Servicing Contracts under which the Company is obligated to repurchase
or indemnify the holder of the Mortgage Loans as a result of defaults
on the Mortgage Loans at any time during the term of such Mortgage
Loans.
7.9 Gestation Facilities. Directly or indirectly sell
or finance Pledged Mortgages under any Gestation Agreements.
The Lender's consent shall not be unreasonably withheld.
7.10 Special Negative Covenants Concerning Collateral.
(a) The Company shall not amend or modify, or waive any of
the terms and conditions of, or settle or compromise any claim in
respect of, any Pledged Mortgages or Pledged Securities.
(b) The Company shall not sell, assign, transfer or
otherwise dispose of, or grant any option with respect to, or
pledge or otherwise encumber (except pursuant to this Agreement
or as permitted herein) any of the Collateral or any interest
therein.
(c) The Company shall not make any compromise, adjustment or
settlement in respect of any of the Collateral or accept other
than cash in payment or liquidation of the Collateral.
8. DEFAULTS; REMEDIES.
8.1 Events of Default. The occurrence of any of the
following conditions or events shall be an event of default
("Event of Default"):
(a) Failure to pay the principal of any Advance when due,
whether at stated maturity, by acceleration, or otherwise; or
failure to pay any installment of interest on any Advance or any
other amount due under this Agreement within ten (10) days after
the due date; or failure to pay, within any applicable grace
period, the principal or interest on any other indebtedness of
the Company due the Lender; or
(b) Failure of the Company or any of its Subsidiaries to
pay, or any default in the payment of any principal or interest
on, any other indebtedness in excess of Two Hundred and Fifty
Thousand Dollars ($250,000) or in the payment of any contingent
obligation in excess of Two Hundred and Fifty Thousand Dollars
<PAGE> 168
($250,000) beyond any period of grace provided and such default
shall not be waived or cured unless the Company shall be
diligently contesting such obligation in good faith and such
contesting shall not impair or affect any of the Collateral or
the Lender's security interest in the Collateral; or breach or
default with respect to any other material term of any other
indebtedness or of any loan agreement, mortgage, indenture or
other agreement relating thereto, if the effect of such failure,
default or breach is to cause, or to permit the holder or holders
thereof (or a trustee on behalf of such holder or holders) to
cause, indebtedness of the Company or its Subsidiaries in the
aggregate amount of Fifty Thousand Dollars ($50,000) or more to
become or be declared due prior to its stated maturity (upon the
giving or receiving of notice, lapse of time, both, or
otherwise). Notwithstanding the above, it shall not be an Event
of Default if C.M. Corp. fails to pay any indebtedness for which
it has a legal obligation to pay and for which the Company has no
legal obligation to pay (except for the unreimbursed Trustee
Costs of C.M. Corp.); or
(c) Failure of the Company to perform or comply with any
term or condition applicable to it contained in Sections 6.3,
6.12 and 6.13 or in any Section of Article 7 of this Agreement;
or
(d) Any of the Company's representations or warranties made
or deemed made herein or in any other Loan Document, or in any
statement or certificate at any time given by the Company in
writing pursuant hereto or thereto shall be inaccurate or
incomplete in any material respect on the date as of which made
or deemed made; or
(e) The Company shall default in the performance of or
compliance with any term contained in this Agreement or any other
Loan Document other than those referred to above in Subsections
8.1(a), 8.1(c) or 8.1(d) and such default shall not have been
remedied or waived within thirty (30) days after the earliest of
(i) receipt by the Company of Notice from the Lender of such
default, (ii) receipt by the Lender of Notice from the Company of
such default, or (iii) the date the Company should have notified
the Lender of such default pursuant to Section 6.6(c); or
(f) (1) A court having jurisdiction shall enter a
decree or order for relief in respect of the Company, any
Subsidiary of the Company in an involuntary case under any
applicable bankruptcy, insolvency or other similar law in
respect of the Company, any Subsidiary of the Company
now or hereafter in effect, which decree or order
<PAGE> 169
is not stayed; the Company, any Subsidiary of the Company shall
consent to the entry of any such decree or order; or a filing of
a voluntary case under any applicable bankruptcy, insolvency or
other similar law in respect of the Company, any Subsidiary of
the Company has occurred; or any other similar relief shall be
granted under any applicable federal or state law; or (2) the
filing of an involuntary case in respect of the Company, any
Subsidiary of the Company under any applicable bankruptcy,
insolvency or other similar law; or a decree or order of a court
having jurisdiction for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer
having similar powers over the Company, any Subsidiary of the
Company, or over all or a substantial part of their respective
property, shall have been entered; or the involuntary appointment
of an interim or permanent receiver, trustee or other custodian
of the Company, any Subsidiary of the Company for all or a
substantial part of their respective property; or the issuance of
a warrant of attachment, execution or similar process against any
substantial part of the property of the Company, any Subsidiary
of the Company, and the continuance of any such events in
Subsection (2) above for sixty (60) days unless dismissed, bonded
off or discharged; or
(g) The Company, any Subsidiary of the Company shall consent
to the appointment of or taking possession by a receiver, trustee
or other custodian for all or a substantial part of its property;
the making by the Company, any Subsidiary of the Company of any
assignment for the benefit of creditors; or the inability or
failure of the Company, any Subsidiary of the Company, or the
admission by the Company, any Subsidiary of the Company in
writing of its inability, to pay its debts as such debts become
due; or
(h) Failure of the Company to perform any contractual
obligations which it may have to repurchase Mortgage Loans, if
such obligations in the aggregate exceed One Million Dollars
($1,000,000); or
(i) Any money judgment, writ or warrant of attachment, or
similar process involving in any case an amount in excess of Two
Hundred Fifty Thousand Dollars ($250,000) shall be entered or
filed against the Company or any of its Subsidiaries or any of
their respective assets and shall remain undischarged, unvacated,
unbonded or unstayed for a period of thirty (30) days or in any
event later than five (5) days prior to the date of any proposed
sale thereunder; or
<PAGE> 170
(j) Any order, judgment or decree shall be entered against
the Company decreeing the dissolution or split up of the Company
and such order shall remain undischarged or unstayed for a period
in excess of twenty (20) days; or
(k) Any Plan maintained by the Company or any of its
Subsidiaries shall be terminated within the meaning of Title IV
of ERISA or a trustee shall be appointed by an appropriate United
States district court to administer any Plan, or the Pension
Benefit Guaranty Corporation (or any successor thereto) shall
institute proceedings to terminate any Plan or to appoint a
trustee to administer any Plan if as of the date thereof the
Company's liability or any such Subsidiary's liability (after
giving effect to the tax consequences thereof) to the Pension
Benefit Guaranty Corporation (or any successor thereto) for
unfunded guaranteed vested benefits under the Plan exceeds the
then current value of assets accumulated in such Plan by more
than Twenty-Five Thousand Dollars ($25,000) (or in the case of a
termination involving the Company or any of its Subsidiaries as a
"substantial employer" (as defined in Section 4001(a)(2) of
ERISA) the withdrawing employer's proportionate share of such
excess shall exceed such amount); or
(l) The Company or any of its Subsidiaries as employer under
a Multiemployer Plan shall have made a complete or partial
withdrawal from such Multiemployer Plan and the plan sponsor of
such Multiemployer Plan shall have notified such withdrawing
employer that such employer has incurred a withdrawal liability
in an annual amount exceeding Twenty-Five Thousand Dollars
($25,000); or
(m) The Company shall purport to disavow its obligations
hereunder or shall contest the validity or enforceability hereof;
or the Lender's security interest on any portion of the
Collateral shall become unenforceable or otherwise impaired;
provided that, subject to the Lender's approval, no Event of
Default shall occur as a result of such impairment if all
Advances made against any such Collateral shall be paid in full
within ten (10) days of the date of such impairment; or
(n) (a) The Parent shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency,
readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Parent
or of or relating to all or substantially all
<PAGE> 171
of its property, or (b) a decree or order of a court or agency or
supervisory authority having jurisdiction over the Parent for the
appointment of a conservator or receiver or liquidator in any
insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceedings, or the winding up or
liquidation of its affairs, shall have been entered against the
Parent, or (c) the Parent shall admit in writing its inability to
pay its debts generally as they become due, file a petition to
take advantage of any applicable insolvency or reorganization
statute, make any assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations; or
(o) The Parent shall cease owning, directly or
indirectly, all of the capital stock of the Company; or
(q) There shall be a material adverse change in the
financial condition, business or operations of the Company.
8.2 Remedies.
(a) Upon the occurrence of any Event of Default described in
Sections 8.1(f) or 8.1(g), the Commitment shall be terminated and
the unpaid principal amount of and accrued interest on the Note
and all other Obligations shall automatically become due and
payable, without presentment, demand or other requirements of any
kind, all of which are hereby expressly waived by the Company.
(b) Upon the occurrence of any Event of Default, other than
those described in Sections 8.1(f) and 8.1(g), the Lender may, by
Notice to the Company, terminate the Commitment and/or declare
all Obligations to be immediately due and payable, whereupon the
same shall forthwith become due and payable, together with all
accrued interest thereon, and the obligation of the Lender to
make any Advances shall thereupon terminate.
(c) Upon the occurrence of any Event of Default,
the Lender may also do any of the following:
<PAGE> 172
(1) Foreclose upon or otherwise enforce its security
interest in and Lien on the Collateral to secure all
payments and performance of the Obligations in any manner
permitted by law or provided for hereunder.
(2) Notify all obligors in respect of Collateral that
the Collateral has been assigned to the Lender and that all
payments thereon are to be made directly to the Lender or
such other party as may be designated by the Lender; settle,
compromise, or release, in whole or in part, any amounts
owing on the Collateral, any such obligor or any Investor or
any portion of the Collateral, on terms acceptable to the
Lender; enforce payment and prosecute any action or
proceeding with respect to any and all Collateral; and where
any such Collateral is in default, foreclose on and enforce
security interests in such Collateral by any available
judicial procedure or without judicial process and sell
property acquired as a result of any such foreclosure.
(3) Act, or contract with a third party to act, as
servicer or subservicer of each item of Collateral requiring
servicing and perform all obligations required in connection
with Servicing Contracts and Purchase Commitments, such
third party's fees to be paid by the Company.
(4) Require the Company to assemble the Collateral
and/or books and records relating thereto and make such
available to the Lender at a place to be designated by the
Lender.
(5) Enter onto property where any Collateral or books
and records relating thereto are located and take possession
thereof with or without judicial process.
(6) Prior to the disposition of the Collateral, prepare
it for disposition in any manner and to the extent the
Lender deems appropriate.
(7) Exercise all rights and remedies of a secured
creditor under the Uniform Commercial Code of Minnesota or
other applicable law, including, but not limited to, selling
or otherwise disposing of the Collateral, or any part
thereof, at one or more public or private sales, whether or
not such Collateral is present at the place of sale, for
<PAGE> 173
cash or credit or future delivery, on such terms and in such
manner as the Lender may determine, including, without
limitation, sale pursuant to any applicable Purchase
Commitment. If notice is required under such applicable law,
the Lender will give the Company not less than ten (10)
days' notice of any such public sale or of the date after
which any private sale may be held. The Company agrees that
ten (10) days' notice shall be reasonable notice. The Lender
may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to
time by announcement at the time and place fixed for the
sale, and such sale may be made at any time or place to
which the same may be so adjourned. In case of any sale of
all or any part of the Collateral on credit or for future
delivery, the Collateral so sold may be retained by the
Lender until the selling price is paid by the purchaser
thereof, but the Lender shall not incur any liability in
case of the failure of such purchaser to take up and pay for
the Collateral so sold and, in case of any such failure,
such Collateral may again be sold upon like notice. The
Lender may, however, instead of exercising the power of sale
herein conferred upon it, proceed by a suit or suits at law
or in equity to collect all amounts due upon the Collateral
or to foreclose the pledge of and sell the Collateral or any
portion thereof under a judgment or decree of a court or
courts of competent jurisdiction, or both.
(8) Proceed against the Company on the Notes.
(9) Make additional Construction Advances to be added
to the Obligations of the Company, without the request of
the Company, for the purposes of completing the improvements
to be funded by a Construction/Perm Mortgage Loan pledged
hereunder and employ inspectors to provide inspection
reports at the sole cost and expense of the Company.
(d) The Lender shall incur no liability as a result of the
sale or other disposition of the Collateral, or any part thereof,
at any public or private sale or disposition. The Company hereby
waives (to the extent permitted by law) any claims it may have
against the Lender arising by reason of the fact that the price
at which the Collateral may have been sold at such private sale
was less than the price which might have been
obtained at a public sale or was less than the aggregate
amount of the outstanding Advances and the unpaid
<PAGE> 174
interest accrued thereon, even if the Lender accepts the first
offer received and does not offer the Collateral to more than one
offeree. Any sale of Collateral pursuant to the terms of a
Purchase Commitment shall be deemed to have been made in a
commercially reasonable manner.
(e) The Company acknowledges that Mortgage Loans and
Mortgage-backed Securities are collateral of a type which is
customarily sold on a recognized market. The Company waives any
right it may have to prior notice of the sale of any Pledged
Mortgage or Pledged Security.
(f) The Company specifically waives and releases (to the
extent permitted by law) any equity or right of redemption, all
rights of redemption, stay or appraisal which the Company has or
may have under any rule of law or statute now existing or
hereafter adopted, and any right to require the Lender to (1)
proceed against any Person, (2) proceed against or exhaust any of
the Collateral or pursue its rights and remedies as against the
Collateral in any particular order, or (3) pursue any other
remedy in its power. The Lender shall not be required to take any
steps necessary to preserve any rights of the Company against
holders of mortgages prior in lien to the Lien of any Mortgage
included in the Collateral or to preserve rights against prior
parties.
(g) The Lender may, but shall not be obligated to, advance
any sums or do any act or thing necessary to uphold and enforce
the Lien and priority of, or the security intended to be afforded
by, any Mortgage included in the Collateral, including, without
limitation, payment of delinquent taxes or assessments and
insurance premiums. All advances, charges, costs and expenses,
including reasonable attorneys' fees and disbursements, incurred
or paid by the Lender in exercising any right, power or remedy
conferred by this Agreement, or in the enforcement hereof,
together with interest thereon, at the Default Rate, from the
time of payment until repaid, shall become a part of the
principal balance outstanding hereunder and under the Notes.
(h) No failure on the part of the Lender to exercise, and no
delay in exercising, any right, power or remedy provided
hereunder, at law or in equity shall operate as a waiver thereof;
nor shall any single or partial exercise by the Lender of any
right, power or remedy provided hereunder, at law or in equity
preclude any other or further exercise thereof or the exercise of
any other right, power or remedy. Without intending to
<PAGE> 175
limit the foregoing, all defenses based on the statute of
limitations are hereby waived by the Company to the extent
permitted by law. The remedies herein provided are cumulative and
are not exclusive of any remedies provided at law or in equity.
8.3 Application of Proceeds. The proceeds of any sale,
disposition or other enforcement of the Lender's security interest in
all or any part of the Collateral shall be applied by the Lender:
First, to the payment of the costs and expenses of such sale or
enforcement, including reasonable compensation to the Lender's agents
and counsel, and all expenses, liabilities and advances made or
incurred by or on behalf of the Lender in connection therewith;
Second, to the payment of any other Obligations due (other than
principal and interest) under the this Agreement and the Loan
Documents;
Third, to the payment of interest accrued and unpaid on
the Notes;
Fourth, to the payment of the outstanding principal
balance of the Notes; and
Finally, to the payment to the Company, or to its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
If the proceeds of any such sale, disposition or other
enforcement are insufficient to cover the costs and expenses of such
sale, as aforesaid, and the payment in full of all Obligations, the
Company shall remain liable for any deficiency.
8.4 Lender Appointed Attorney-in-Fact. The Lender is hereby
appointed the attorney-in-fact of the Company, with full power of
substitution, for the purpose of carrying out the provisions hereof
and taking any action and executing any instruments which the Lender
may deem necessary or advisable to accomplish the purposes hereof,
which appointment as attorney-in-fact is irrevocable and coupled with
an interest. Without limiting the generality of the foregoing, the
Lender shall have the right and power to give notices of its security
interest in the Collateral to any Person, either in the name of the
Company or in its own name, to endorse all Pledged Mortgages or
Pledged Securities payable to the order of the Company, to change or
cause to be changed the book-entry registration or
name of subscriber or Investor on any Pledged Security,
or to receive, endorse and collect all checks made
<PAGE> 176
payable to the order of the Company representing any payment on
account of the principal of or interest on, or the proceeds of sale
of, any of the Pledged Mortgages or Pledged Securities and to give
full discharge for the same.
8.5 Right of Set-Off. If the Company shall default in the payment
of the Note, any interest accrued thereon, or any other sums which may
become payable hereunder when due, or in the performance of any of its
other obligations or liabilities under this Agreement, the Lender
shall have the right, at any time and from time to time, without
notice, to set-off and to appropriate or apply any and all property or
indebtedness of any kind at any time held or owing by the Lender to or
for the credit or the account of the Company against and on account of
the Obligations of the Company under the Notes and this Agreement,
irrespective of whether or not the Lender shall have made any demand
hereunder and whether or not said Obligations shall have matured.
9. NOTICES.
All notices, demands, consents, requests and other communications
required or permitted to be given or made hereunder (collectively,
"Notices") shall, except as otherwise expressly provided hereunder, be
in writing and shall be delivered in person or telecopied or mailed,
first class or delivered by overnight courier, return receipt
requested, postage prepaid, addressed to the respective parties hereto
at their respective addresses hereinafter set forth or, as to any such
party, at such other address as may be designated by it in a Notice to
the other. All Notices shall be conclusively deemed to have been
properly given or made when duly delivered, in person, by telecopy or
by overnight courier, or if mailed, on the date of receipt as noted on
the return receipt, addressed as follows:
if to the Company: U.S. Home Mortgage Corporation
311 Park Place Boulevard
P.O. Box 4929
Clearwater, Florida 34618
Attention: Ron McCabe, SVP & CFO
Telecopier No.: (813) 791-3409
with a copy to: U.S. Home Corporation
1800 West Loop South
P.O. Box 2863
Houston, Texas 77252-2863
Attention: Director, Legal
Telecopier No.: (713) 877-2471
<PAGE> 177
if to the Lender: Residential Funding Corporation
440 Sawgrass Corp. Parkway
Suite 212
Sunrise, Florida 33325
Attention: Donna West, Vice President
Telecopier No.: (305) 846-8352
with a copy to: Residential Funding Corporation
8400 Normandale Lake Boulevard
Suite 600
Minneapolis, Minnesota 55437
Attention: Sandra L. Oakes, Esq.
Telecopier No.: (612) 832-7190
10. REIMBURSEMENT OF EXPENSES; INDEMNITY.
The Company shall: (a) pay a documentation production fee of One
Thousand Five Hundred Dollars ($1,500) in connection with the preparation
and negotiation of this Agreement; (b) pay such additional documentation
production fees, as the Lender may require and all out-of-pocket costs and
expenses of the Lender, including, without limitation, reasonable fees and
disbursements of counsel (including allocated costs of internal counsel),
in connection with the amendment, enforcement and administration of this
Agreement, the Notes, and other Loan Documents and the making and repayment
of the Advances and the payment of interest thereon; (c) indemnify, pay,
and hold harmless the Lender and any holder of the Notes from and against,
any and all present and future stamp, documentary and other similar taxes
with respect to the foregoing matters and save the Lender and the holder or
holders of the Notes harmless from and against any and all liabilities with
respect to or resulting from any delay or omission to pay such taxes; and
(d) indemnify, pay and hold harmless the Lender and any of its officers,
directors, employees or agents and any subsequent holder of the Notes
(collectively called the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages, penalties, judgments, suits,
costs, expenses and disbursements of any kind or nature whatsoever
(including without limitation, the reasonable fees and disbursements of
counsel of the Indemnitees (including allocated costs of internal counsel)
in connection with any investigative, administrative or judicial
proceeding, whether or not such Indemnitees shall be designated a party
thereto) which may be imposed upon, incurred by or asserted against such
Indemnitees in any manner relating to or arising out of this Agreement, the
Notes, or any other Loan Document or any of the transactions contemplated
hereby or thereby (the "Indemnified Liabilities"); provided, however, that
the Company shall have no obligation hereunder with respect to Indemnified
Liabilities arising from the gross negligence or willful misconduct of any
such Indemnitees. To the extent that the undertaking to indemnify, pay and
hold harmless as set forth in the preceding sentence may be unenforceable
because it is violative of any law or public policy, the Company shall
<PAGE> 178
contribute the maximum portion which it is permitted to pay and satisfy
under applicable law, to the payment and satisfaction of all Indemnified
Liabilities incurred by the Indemnitees or any of them. The agreement of
the Company contained in this Subsection (d) shall survive the expiration
or termination of this Agreement and the payment in full of the Notes.
Attorneys' fees and disbursements incurred in enforcing, or on appeal from,
a judgment pursuant hereto shall be recoverable separately from and in
addition to any other amount included in such judgment, and this clause is
intended to be severable from the other provisions of this Agreement and to
survive and not be merged into such judgment.
11. FINANCIAL INFORMATION.
All financial statements and reports furnished to the Lender
hereunder shall be prepared in accordance with GAAP (except as
disclosed on the interim financial statements), applied on a basis
consistent with that applied in preparing the financial statements as
at the end of and for the last fiscal year ended (except to the extent
otherwise required to conform to good accounting practice).
12. MISCELLANEOUS.
12.1 Terms Binding Upon Successors; Survival of Representations.
The terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns. All representations, warranties, covenants and
agreements herein contained on the part of the Company shall survive
the making of any Advance and the execution of the Notes, and shall be
effective so long as the Commitment is outstanding hereunder or there
remain any Obligations to be paid or performed.
12.2 Assignment. This Agreement may not be assigned by the
Company. This Agreement and the Notes, along with the Lender's
security interest in any or all of the Collateral, may, at any time,
be transferred or assigned, in whole or in part, by the Lender, and
any assignee thereof may enforce this Agreement, the Notes and such
security interest.
12.3 Amendments. Except as otherwise provided in this Agreement,
this Agreement may not be amended, modified or supplemented unless
such amendment, modification or supplement is set forth in a writing
signed by the parties hereto.
12.4 Governing Law. This Agreement and the other Loan
Documents shall be governed by the laws of the State of
Minnesota, without reference to its principles of conflicts of
laws.
<PAGE> 179
12.5 Participations. The Lender may at any time sell, assign or
grant participations in, or otherwise transfer to any other Person (a
"Participant"), all or part of the Obligations. Without limitation of
the exclusive right of the Lender to collect and enforce such
Obligations, the Company agrees that each disposition will give rise
to a debtor-creditor relationship of the Company to the Participant,
and the Company authorizes each Participant, upon the occurrence of an
Event of Default, to proceed directly by right of setoff, banker's
lien, or otherwise, against any assets of the Company which may be in
the hands of such Participant. The Company authorizes the Lender to
disclose to any prospective Participant and any Participant any and
all information in the Lender's possession concerning the Company,
this Agreement and the Collateral.
12.6 Relationship of the Parties. This Agreement provides for the
making of Advances by the Lender, in its capacity as a lender, to the
Company, in its capacity as a borrower, and for the payment of
interest, repayment of principal by the Company to the Lender, and for
the payment of certain fees by the Company to the Lender. The
relationship between the Lender and the Company is limited to that of
creditor/secured party, on the one hand, and debtor, on the other
hand. The provisions herein for compliance with financial covenants
and delivery of financial statements are intended solely for the
benefit of the Lender to protect its interests as lender in assuring
payments of interest and repayment of principal and payment of certain
fees, and nothing contained in this Agreement shall be construed as
permitting or obligating the Lender to act as a financial or business
advisor or consultant to the Company, as permitting or obligating the
Lender to control the Company or to conduct the Company's operations,
as creating any fiduciary obligation on the part of the Lender to the
Company, or as creating any joint venture, agency, or other
relationship between the parties hereto other than as explicitly and
specifically stated in this Agreement. The Company acknowledges that
it has had the opportunity to obtain the advice of experienced counsel
of its own choosing in connection with the negotiation and execution
of this Agreement and to obtain the advice of such counsel with
respect to all matters contained herein. The Company further
acknowledges that it is experienced with respect to financial and
credit matters and has made its own independent decisions to apply to
the Lender for credit and to execute and deliver this Agreement.
12.7 Severability. If any provision of this Agreement shall be
declared to be illegal or unenforceable in any respect, such illegal
or unenforceable provision shall be and become absolutely null and
void and of no force and effect as though such provision were not in
fact set forth herein, but all other covenants, terms, conditions
and provisions hereof shall nevertheless continue to be valid and
enforceable.
<PAGE> 180
12.8 Operational Reviews. From time to time upon request, the
Company shall permit the Lender or its representative access to its
premises and records, for the purpose of conducting a review of the
Company's general mortgage business methods, policies, and procedures,
auditing loan files and reviewing financial and operational aspects of
the Company's business.
12.9 Consent to Credit References. The Company hereby consents to
the disclosure of information regarding the Company and its
relationships with the Lender to Persons making credit inquiries to
the Lender. This consent is revocable by the Company at any time upon
Notice to the Lender as provided in Section 9 hereof.
12.10 Consent to Jurisdiction. The Company hereby agrees that any
action or proceeding under the Loan Documents, the Notes or any
document delivered pursuant hereto may be commenced against it in any
court of competent jurisdiction within the State of Minnesota, by
service of process upon the Company by first class registered or
certified mail, return receipt requested, addressed to the Company at
its address last known to the Lender. The Company agrees that any such
suit, action or proceeding arising out of or relating to this
Agreement or any other such document may be instituted in the Hennepin
County State District Court or in the United States District Court for
the District of Minnesota at the option of the Lender; and the Company
hereby waives any objection to the jurisdiction or venue of any such
court with respect to, or the convenience of any court as a forum for,
any such suit, action or proceeding. Nothing herein shall affect the
right of the Lender to accomplish service of process in any other
manner permitted by law or to commence legal proceedings or otherwise
proceed against the Company in any other jurisdiction or court.
12.11 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all
such counterparts shall together constitute but one and the same
instrument.
12.12 Entire Agreement. This Agreement, the Notes and the other
Loan Documents represent the final agreement among the parties hereto
and thereto with respect to the subject matter hereof and thereof, and
may not be contradicted by evidence of prior or contemporaneous oral
agreements among such parties. There are no oral agreements among the
parties with respect to the subject matter hereof and thereof.
<PAGE> 181
12.13 WAIVER OF JURY TRIAL. THE COMPANY AND THE LENDER EACH
HEREBY (a) COVENANTS AND AGREES NOT TO ELECT A TRIAL BY JURY OF ANY
ISSUE TRIABLE OF RIGHT BY A JURY, AND (b) WAIVES ANY RIGHT TO TRIAL BY
JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER
EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN,
KNOWINGLY AND VOLUNTARILY, BY THE COMPANY AND THE LENDER, AND THIS
WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH
ISSUE AS TO WHICH THE RIGHT OF A JURY TRIAL WOULD OTHERWISE ACCRUE.
THE LENDER AND THE COMPANY IS EACH HEREBY AUTHORIZED AND REQUESTED TO
SUBMIT THIS AGREEMENT TO ANY COURT HAVING JURISDICTION OVER THE
SUBJECT MATTER AND THE PARTIES HERETO, SO AS TO SERVE AS CONCLUSIVE
EVIDENCE OF THE FOREGOING WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER,
THE COMPANY AND THE LENDER EACH HEREBY CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF THE OTHER PARTY, INCLUDING THE OTHER
PARTY'S COUNSEL, HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO ANY OF
ITS REPRESENTATIVES OR AGENTS THAT THE OTHER PARTY WILL NOT SEEK TO
ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
U.S. HOME MORTGAGE CORPORATION
By: /s/ Chester P. Sadowski
----------------------------
Chester P. Sadowski
Its: Vice President
RESIDENTIAL FUNDING CORPORATION,
a Delaware corporation
By: /s/ Donna A. West
----------------------------
Donna A. West
Its: Vice President
<PAGE> 182
STATE OF Texas)
) ss
COUNTY OF Harris)
On August 31, 1995 before me, a Notary Public, personally appeared
Chester P. Sadowski., the Vice President of U.S. HOME MORTGAGE CORPORATION,
a Florida corporation, personally known to me (or proved to me on the basis
of satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
/s/ Glenda J. Barth
---------------------
Glenda J. Barth
Notary Public
(SEAL) My Commission Expires: 6/21/96
STATE OF Florida)
) ss
COUNTY OF Broward)
On September 1, 1995 before me, a Notary Public, personally appeared
Donna A. West, the Director of RESIDENTIAL FUNDING CORPORATION, a Delaware
corporation, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the
within instrument and acknowledged to me that he/she executed the same in
his/her authorized capacity, and that by his/her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
/s/ Marsha S. Gralin
------------------------
Marsha S. Gralin
Notary Public
(SEAL) My Commission Expires: 9-15-98
<PAGE> 183
EXHIBIT A-1
WAREHOUSING PROMISSORY NOTE
$35,000,000 Date: August 31, 1995
FOR VALUE RECEIVED, the undersigned, U.S. HOME MORTGAGE CORPORATION, a
Florida corporation, (herein called the "Company"), hereby promises to pay
to the order of RESIDENTIAL FUNDING CORPORATION, a Delaware corporation
(the "Lender" or, together with its successors and assigns, the "Holder")
whose principal place of business is 8400 Normandale Lake Blvd., Suite 600,
Minneapolis, Minnesota 55437, or at such other place as the Holder may
designate from time to time, the principal sum of Thirty-Five Million
Dollars ($35,000,000) or so much thereof as may be outstanding from time to
time pursuant to the Warehousing Credit and Security Agreement described
below, and to pay interest on said principal sum or such part thereof as
shall remain unpaid from time to time, from the date of each Advance until
repaid in full, and all other fees and charges due under the Agreement, at
the rate and at the times set forth in the Agreement. All payments
hereunder shall be made in lawful money of the United States and in
immediately available funds.
This Note is given to evidence an actual warehouse line of credit in
the above amount and is the Warehousing Promissory Note referred to in that
certain First Amended and Restated Warehousing Credit and Security
Agreement (Single-family Mortgage Loans) dated the date hereof between the
Company and the Lender (as the same may be amended or supplemented from
time to time, the "Agreement"), and is entitled to the benefits thereof.
Reference is hereby made to the Agreement (which is incorporated herein by
reference as fully and with the same effect as if set forth herein at
length) for a description of the Collateral, a statement of the covenants
and agreements, a statement of the rights and remedies and securities
afforded thereby and other matters contained therein. Capitalized terms
used herein, unless otherwise defined herein, shall have the meanings given
them in the Agreement.
This Note is given in replacement for, and not in satisfaction of,
that certain Fourth Amended and Restated Promissory Note dated June 15,
1993, and issued by the Company to evidence its obligations under the
Original Agreement (the "Existing Note"). All amounts owed by the Company
under the Existing Note (including, without limitation, the unpaid
principal thereunder, interest accrued thereon and fees accrued under the
Original Agreement, whether or not yet due and owing) as of the date
hereof, shall be owed hereunder.
<PAGE> 184
This Note may be prepaid in whole or in part at any time without
premium or penalty.
Should this Note be placed in the hands of attorneys for collection,
the Company agrees to pay, in addition to principal and interest, fees and
charges due under the Agreement, any and all costs of collecting this Note,
including reasonable attorneys' fees and expenses.
The Company hereby waives demand, notice, protest and presentment.
This Note shall be construed and enforced in accordance with the laws
of the State of Minnesota, without reference to its principles of conflicts
of law.
IN WITNESS WHEREOF, the Company has executed this Note as of the day
and year first above written.
U.S. HOME MORTGAGE CORPORATION
By:
Its:
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On , 1995, before me, a Notary Public,
personally appeared , the
of U.S. HOME MORTGAGE CORPORATION, a Florida corporation,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
Notary Public
(SEAL) My Commission Expires:
<PAGE> 185
EXHIBIT A-2
CONSTRUCTION PROMISSORY NOTE
$5,000,000 Date: August 31, 1995
FOR VALUE RECEIVED, the undersigned, U.S. HOME MORTGAGE CORPORATION, a
Florida corporation, (herein called the "Company"), hereby promises to pay
to the order of RESIDENTIAL FUNDING CORPORATION, a Delaware corporation
(the "Lender" or, together with its successors and assigns, the "Holder")
whose principal place of business is 8400 Normandale Lake Blvd., Suite 600,
Minneapolis, Minnesota 55437, or at such other place as the Holder may
designate from time to time, the principal sum of Five Million Dollars
($5,000,000) or so much thereof as may be outstanding from time to time
pursuant to the Warehousing Credit and Security Agreement described below,
and to pay interest on said principal sum or such part thereof as shall
remain unpaid from time to time, from the date of each Advance until repaid
in full, and all other fees and charges due under the Agreement, at the
rate and at the times set forth in the Agreement. All payments hereunder
shall be made in lawful money of the United States and in immediately
available funds.
This Note is given to evidence an actual warehouse line of credit in
the above amount and is the Construction Promissory Note referred to in
that certain First Amended and Restated Warehousing Credit and Security
Agreement (Single-Family Mortgage Loans) dated the date hereof between the
Company and the Lender (as the same may be amended or supplemented from
time to time, the "Agreement"), and is entitled to the benefits thereof.
Reference is hereby made to the Agreement (which is incorporated herein by
reference as fully and with the same effect as if set forth herein at
length) for a description of the Collateral, a statement of the covenants
and agreements, a statement of the rights and remedies and securities
afforded thereby and other matters contained therein. Capitalized terms
used herein, unless otherwise defined herein, shall have the meanings given
them in the Agreement.
This Note may be prepaid in whole or in part at any time without
premium or penalty.
Should this Note be placed in the hands of attorneys for collection,
the Company agrees to pay, in addition to principal and interest, fees and
charges due under the Agreement, any and all costs of collecting this Note,
including reasonable attorneys' fees and expenses.
<PAGE> 186
The Company hereby waives demand, notice, protest and presentment.
This Note shall be construed and enforced in accordance with the laws
of the State of Minnesota, without reference to its principles of conflicts
of law.
IN WITNESS WHEREOF, the Company has executed this Note as of the day
and year first above written.
U.S. HOME MORTGAGE CORPORATION
By:
Its:
STATE OF _______________ )
) ss
COUNTY OF ______________ )
On , 1995, before me, a Notary Public,
personally appeared , the
of U.S. HOME MORTGAGE CORPORATION, a Florida corporation,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the
person, or the entity upon behalf of which the person acted, executed the
instrument.
WITNESS my hand and official seal.
Notary Public
(SEAL) My Commission Expires:
<PAGE> 187
EXHIBIT 11
(Unaudited)
<TABLE>
<CAPTION>
U.S. HOME CORPORATION AND SUBSIDIARIES
COMPUTATION OF INCOME PER COMMON SHARE
(Dollars in Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1995 1994 1995 1994
------------ ----------- ----------- -----------
Income Per Common And Common
Equivalent Share -
<S> <C> <C> <C> <C>
Net income .............. $ 9,839 $ 9,230 $ 25,793 $ 23,463
=========== =========== =========== ===========
Weighted average common
shares outstanding ...... 11,565,499 11,373,744 11,580,411 11,364,108
Effect of assumed exercise
of dilutive stock options
and warrants ............ 342,886 -- 27,573 66,873
----------- ----------- ----------- -----------
Total common and common
equivalent shares ....... 11,908,385 11,373,744 11,607,984 11,430,981
=========== =========== =========== ===========
Income per common and common
equivalent share ........ $ .83 $ .81 $ 2.22 $ 2.05
=========== =========== =========== ===========
</TABLE>
<PAGE> 188
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1995 1994 1995 1994
------------ ----------- ----------- -----------
Income Per Common Share,
Assuming Full Dilution -
<S> <C> <C> <C> <C>
Net income ...................... $ 9,839 $ 9,230 $ 25,793 $ 23,463
Add interest applicable to
4.875% convertible
subordinated debentures,
net of income tax effect 480 266 1,441 798
----------- ----------- ----------- -----------
Income per common share,
assuming full dilution . $ 10,319 $ 9,496 $ 27,234 $ 24,261
=========== =========== =========== ===========
Total common and common
equivalent shares ...... 11,908,385 11,373,744 11,607,984 11,430,981
Assumed additional common
shares from exercise of
dilutive stock options and
warrants resulting from
use of market price of
common stock at end of period . 88,470 -- 405,867 --
Assumed conversion of 4.875%
convertible subordinated
debentures at $35.50 per
share at date of issuance ..... 2,253,521 2,253,521 2,253,521 2,253,521
----------- ----------- ----------- -----------
Total common shares,
assuming full dilution ........ 14,250,376 13,627,265 14,267,372 13,684,502
=========== =========== =========== ===========
Income per common share,
assuming full dilution . $ .72 $ .70 $ 1.91 $ 1.77
=========== =========== =========== ===========
</TABLE>
Note: See Note 6 of Notes to Consolidated Condensed Financial Statements.
<PAGE> 189
Exhibit 15
To U.S. HOME CORPORATION:
We are aware that U.S. Home Corporation has incorporated by reference in
its Registration Statements No. 33-64712, 33-52993 and 33-58863 its Form
10-Q for the quarter ended September 30, 1995, which includes our report
dated October 19, 1995 covering the unaudited interim financial information
contained therein. Pursuant to Regulation C of the Securities Act of 1933,
that report is not considered a part of the registration statement prepared
or certified by our firm within the meaning of Sections 7 and 11 of the
Act.
/s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Houston, Texas
November 3, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule Contains Summary Financial Information Extracted From The
Consolidated Condensed Financial Statements As Of September 30, 1995 And
For The Nine Months Then Ended And Is Qualified In Its Entirety By Reference
To Such Financial Statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 6378
<SECURITIES> 0
<RECEIVABLES> 96659
<ALLOWANCES> 0
<INVENTORY> 629434
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 840806
<CURRENT-LIABILITIES> 234131
<BONDS> 288887
<COMMON> 112
0
8197
<OTHER-SE> 309479
<TOTAL-LIABILITY-AND-EQUITY> 840806
<SALES> 0
<TOTAL-REVENUES> 809188
<CGS> 671910
<TOTAL-COSTS> 767469
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 449
<INCOME-PRETAX> 41270
<INCOME-TAX> 15477
<INCOME-CONTINUING> 25793
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25793
<EPS-PRIMARY> 2.22
<EPS-DILUTED> 1.91
</TABLE>
