<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY Report Pursuant To Section 13 Or 15(d) Of The Securities
Exchange Act Of 1934
For the quarterly period ended March 31, 1999
OR
[ ] Transition Report Pursuant To Section 13 Or 15(d) Of The Securities
EXCHANGE ACT OF 1934
Commission file number 0-22725
CRESCENT OPERATING, INC.
---------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-2701931
- ---------------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
306 West 7th Street, Suite 1025
Fort Worth, Texas 76102
- ---------------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (817) 339-2200
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 [ ]
Number of shares of Common Stock, $.01 par value, outstanding as of May 14,
1999: 11,404,477
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CRESCENT OPERATING, INC.
FORM 10-Q
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets.......................................................................3
Consolidated Statements of Operations.............................................................4
Consolidated Statement of Changes in Shareholders' Equity (Deficit)...............................5
Consolidated Statements of Cash Flows.............................................................6
Notes to Consolidated Financial Statements........................................................7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............14
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......................................24
PART II - OTHER INFORMATION
Item 1. Legal Proceedings................................................................................25
Item 2. Changes in Securities and Use of Proceeds........................................................25
Item 3. Defaults Upon Senior Securities..................................................................25
Item 4. Submission of Matters to a Vote of Security Holders..............................................25
Item 5. Other Information................................................................................25
Item 6. Exhibits and Reports on Form 8-K.................................................................25
</TABLE>
2
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CRESCENT OPERATING, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
(unaudited) (audited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 30,872 $ 42,810
Accounts receivable, net 38,780 35,544
Inventories 40,976 34,203
Real estate 122,559 109,301
Prepaid expenses and other current assets 6,288 7,508
--------- ---------
Total current assets 239,475 229,366
--------- ---------
PROPERTY AND EQUIPMENT, NET 161,159 162,181
--------- ---------
INVESTMENTS 88,648 367,105
--------- ---------
OTHER ASSETS
Real estate 62,536 68,809
Intangible assets, net 80,626 82,513
Other assets 30,488 27,359
--------- ---------
Total other assets 173,650 178,681
--------- ---------
TOTAL ASSETS $ 662,932 $ 937,333
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 58,231 $ 64,749
Accounts payable - CEI 9,489 7,731
Current portion of long-term debt - CEI 5,657 7,668
Current portion of long-term debt 97,359 84,539
Deferred revenue 45,721 46,998
--------- ---------
Total current liabilities 216,457 211,685
LONG-TERM DEBT - CEI, NET OF CURRENT PORTION 208,644 220,944
LONG-TERM DEBT, NET OF CURRENT PORTION 61,788 57,988
OTHER LIABILITIES 37,667 34,578
--------- ---------
Total liabilities 524,556 525,195
--------- ---------
MINORITY INTERESTS 154,361 428,206
--------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.01 par value, 10,000 shares authorized,
no shares issued or outstanding -- --
Common stock, $0.01 par value, 22,500 shares authorized,
11,405 and 11,402 shares issued, respectively 114 114
Additional paid-in capital 17,670 17,667
Deferred compensation on restricted shares (210) (210)
Accumulated comprehensive income (loss) (11,698) (9,763)
Retained deficit (17,610) (21,024)
Treasury stock at cost, 1,088 and 700 shares, respectively (4,251) (2,852)
--------- ---------
Total shareholders' equity (deficit) (15,985) (16,068)
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) $ 662,932 $ 937,333
========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
3
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CRESCENT OPERATING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data, unaudited)
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, 1999 March 31, 1998
-------------- -------------
<S> <C> <C>
REVENUES
Equipment sales & leasing $ 27,159 $ 7,981
Hospitality 63,032 58,265
Land development 46,557 31,131
--------- ---------
Total revenues 136,748 97,377
--------- ---------
OPERATING EXPENSES
Equipment sales & leasing expenses 26,650 7,611
Hospitality expenses 46,996 41,349
Hospitality properties rent - CEI 13,526 12,325
Land development expenses 44,861 31,780
Corporate general and administrative expenses 420 371
--------- ---------
Total operating expenses 132,453 93,436
--------- ---------
INCOME FROM OPERATIONS 4,295 3,941
--------- ---------
INVESTMENT INCOME (LOSS) 10,007 (1,956)
--------- ---------
OTHER (INCOME) EXPENSE
Interest expense 6,185 3,825
Interest income (808) (1,232)
Other (76) 13
--------- ---------
Total other (income) expense 5,301 2,606
--------- ---------
INCOME (LOSS) BEFORE MINORITY
INTERESTS AND INCOME TAXES 9,001 (621)
INCOME TAX PROVISION 372 71
--------- ---------
INCOME (LOSS) BEFORE MINORITY INTERESTS 8,629 (692)
MINORITY INTERESTS (5,215) (487)
--------- ---------
NET INCOME (LOSS) $ 3,414 $ (1,179)
========= =========
EARNINGS (LOSS) PER SHARE
Basic $ 0.32 $ (0.11)
========= =========
Diluted $ 0.31 $ (0.11)
========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic 10,522 11,214
========= =========
Diluted 11,151 11,214
========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
4
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CRESCENT OPERATING, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(Amounts in thousands, unaudited)
<TABLE>
<CAPTION>
Deferred
Common stock Treasury stock compensation
-------------------- ----------------------- Additional on restricted
Shares Amount Shares Amount paid-in capital shares
------ -------- -------- -------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE at December 31, 1998 11,402 $ 114 (700) $ (2,852) $ 17,667 $ (210)
Comprehensive income (loss):
Net Income -- -- -- -- -- --
Unrealized loss on Magellan warrants -- -- -- -- -- --
Comprehensive income (loss)
Stock options exercised 3 -- -- -- 3 --
Purchase of treasury stock -- -- (388) (1,399) -- --
------ -------- -------- -------- -------- --------
BALANCE at March 31, 1999 11,405 $ 114 (1,088) $ (4,251) $ 17,670 $ (210)
====== ======== ======== ======== ======== ========
<CAPTION>
Accumulated
comprehensive Retained
income (loss) deficit Total
------------- -------- --------
<S> <C> <C> <C>
BALANCE at December 31, 1998 $ (9,763) $(21,024) $(16,068)
--------
Comprehensive income (loss):
Net Income -- 3,414 3,414
Unrealized loss on Magellan warrants (1,935) -- (1,935)
--------
Comprehensive income (loss) 1,479
Stock options exercised -- -- 3
Purchase of treasury stock -- -- (1,399)
-------- -------- --------
BALANCE at March 31, 1999 $(11,698) $(17,610) $(15,985)
======== ======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
5
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CRESCENT OPERATING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands, unaudited)
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,414 $ (1,179)
Adjustments to reconcile net income (loss)
to net cash (used in) provided by operating activities:
Depreciation 4,591 2,328
Amortization 3,195 1,162
Provision for deferred income taxes (3,001) (67)
Gain on sale of investments (1,806) --
Equity in (income) losses of unconsolidated subsidiaries (8,201) 2,430
Minority interests in net losses 5,215 487
Gain on sale of property and equipment (618) (30)
Net (purchases of) proceeds from real estate (7,671) 4,479
Changes in assets and liabilities, net of effects from acquistions:
Accounts receivable (4,073) (3,255)
Inventories (5,708) (3,731)
Prepaid expenses and current assets 300 (1,485)
Other assets 384 (197)
Accounts payable and accrued expenses (5,434) (8,915)
Accounts payable - CEI 3,415 1,845
Deferred revenue, current and noncurrent 2,390 7,224
Other liabilities 761 24
-------- --------
Net cash (used in) provided by operating activities (12,847) 1,120
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business interests, net of cash acquired (15,516) --
Acquisition of business interests by minority interests (4,647) --
Purchases of property and equipment (6,740) (2,954)
Purchase of treasury stock (1,399) --
Proceeds from sale of investments 21,273 --
Proceeds from sale of property and equipment 4,135 611
Net proceeds from sale and collection of notes receivable 1,025 21,411
Net distributions from investments 5,960 511
Other (1) (66)
-------- --------
Net cash provided by investing activities 4,090 19,513
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds of long-term debt 41,444 2,975
Payments on long-term debt (29,328) (1,298)
Proceeds of long-term debt - CEI 24,195 500
Payments on long-term debt - CEI (36,584) (32,489)
Capital contributions by minority interests 3,489 --
Distributions to minority interests (5,537) (1,541)
Other (860) 12
-------- --------
Net cash used in financing activities (3,181) (31,841)
-------- --------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (11,938) (11,208)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 42,810 43,401
-------- --------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 30,872 $ 32,193
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
6
<PAGE> 7
CRESCENT OPERATING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION:
Crescent Operating, Inc. ("Crescent Operating" or "COPI") is a diversified
management company that, through various subsidiaries and affiliates
(collectively with Crescent Operating, the "Company"), currently operates
primarily in four business segments: Equipment Sales and Leasing, Hospitality,
Refrigerated Warehousing and Land Development. Through these segments, Crescent
Operating does business throughout the United States. While the Company
continues to own a 50% interest in Charter Behavioral Health Systems, LLC
("CBHS"), the Company has written-off its entire investment and has no
obligation or commitment to fund CBHS' ongoing operations. As a result of the
write-off, the Company does not anticipate that it will recognize any additional
losses from its investment in CBHS. Because the Company has written-off its CBHS
investment and it is unlikely that the Company will recognize any material
income from CBHS in the near future due to the operating losses currently being
incurred by CBHS, the Company no longer reports its operations related to CBHS
as a separate segment.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. These financial statements should be read in conjunction
with the audited financial statements and related footnotes of the Company for
the fiscal year ended December 31, 1998 included in the Company's Form 10-K. In
management's opinion, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation of the unaudited
interim financial statements have been included and all significant intercompany
balances and transactions have been eliminated. Certain prior period information
has been reclassified to conform to current period presentation. Due to
acquisitions and seasonal fluctuations, operating results for interim periods
reflected are not necessarily indicative of the results that may be expected for
a full fiscal year.
Crescent Machinery Company ("Crescent Machinery"), Rosestar Management LLC
("Rosestar"), COI Hotel Group, Inc. ("COI Hotel"), WOCOI Investment Company
("WOCOI") and COPI Cold Storage, LLC ("COPI Cold Storage"), which are
wholly-owned subsidiaries of Crescent Operating, are consolidated. The Company
owns 5% of each of The Woodlands Land Company, Inc. ("LandCo"), Desert Mountain
Development Corporation ("Desert Mountain Development") and CRL Investments,
Inc. ("CRL"). The Company's 5% interests represent 100% of the voting stock of
these entities, and therefore, these entities are consolidated into Crescent
Operating with 95% reported as minority interests. The Company owns 50% of COPI
Colorado, L.P. ("COPI Colorado") which owns 10% of Crescent Development
Management Corp. ("CDMC"). The 10% interest in CDMC represents 100% of the
voting stock, and therefore, CDMC is consolidated into COPI Colorado and COPI
Colorado is consolidated into Crescent Operating resulting in 95% of CDMC being
reported as minority interests. The Company's investments in Corporate Arena
Associates, Inc. ("Corporate Arena") and Hillwood/1642, Ltd. ("Hillwood") are
shown at cost. The 50% interest in CBHS and the 1% interest in each of Crescent
CS Holdings Corporation ("CS I") and Crescent CS Holdings II Corporation ("CS
II") are reported on the equity method of accounting.
2. RECENT DEVELOPMENTS:
EQUIPMENT SALES AND LEASING
Effective March 4, 1999, the Company acquired certain assets of Westco Tractor &
Equipment, Inc. ("Westco"), a company engaged in equipment sales, leasing and
servicing, located in Santa Rosa, California. The purchase price of
approximately $2.7 million was comprised of $0.5 million cash and the assumption
of liabilities of $2.2 million. The transaction was treated as a purchase for
accounting purposes, and accordingly, the results of operations will be included
in the Company's financial statements from the date of acquisition.
7
<PAGE> 8
HOSPITALITY
On April 22, 1999, the Intercompany Committee of the Company's board of
directors approved the terms of a proposed lease with Crescent Real Estate
Equities Limited Partnership ("Crescent Partnership") of the 389-room
Renaissance Hotel located in Houston, Texas. The lease is expected to have a
term of 10 years and provide for base rent and percentage rent. The other terms
of the lease also are expected to be generally consistent with the other
hospitality leases with Crescent Partnership. The Company anticipates that the
effective date of the proposed lease transaction will be May 22, 1999.
REFRIGERATED WAREHOUSING
Effective March 12, 1999, the Company sold 80% of its 5% interest in CS I and CS
II to Crescent Partnership for $13.2 million and received the right to require
Crescent Partnership to purchase the remaining 20% for approximately $3.4
million at any time during the next two years, subject to compliance with
certain regulatory matters. This 5% interest represented a 2% interest in
various corporations and limited liability companies (collectively, "AmeriCold
Logistics") that owned and operated 102 refrigerated warehouse properties
("Refrigerated Warehouses"). The sale of the Company's entire interest in CS I
and CS II will result in an approximately $2.0 million gain which is expected to
be recognized by Crescent Operating in 1999; $1.5 million of that gain was
recognized in the first quarter of 1999. Crescent Operating, through a
wholly-owned limited liability company, then became a 40% partner of AmeriCold
Operations, a newly formed partnership the remaining 60% of which is owned by
Vornado Operating, Inc. ("Vornado Operating"). AmeriCold Operations purchased,
for $48.7 million, all of the operations and non-real estate related assets
associated with the Refrigerated Warehouses. This transaction required an
initial capital contribution of approximately $15.5 million from Crescent
Operating and an agreement to fund up to an additional $4.0 million in the
future under certain conditions, all of which has been or will be funded from a
new $19.5 million loan from Crescent Partnership that bears interest at 9% per
annum. AmeriCold Operations has leased certain of the Refrigerated Warehouses
from certain of the entities comprising AmeriCold Logistics under 15 year leases
which call for base and percentage rent. As a result, the operations formerly
associated with AmeriCold Logistics are now conducted by AmeriCold Operations.
As a result of the transaction, Crescent Operating no longer consolidates CS I
and CS II for accounting purposes which has resulted in a decrease in
consolidated total assets of approximately $294 million.
Under the terms of the partnership agreement for AmeriCold Operations, Vornado
Operating has the right to make all decisions relating to the management and
operations of AmeriCold Operations other than certain major decisions that
require the approval of both the Company and Vornado Operating. The partnership
agreement provides for a buy-sell arrangement upon a failure of the Company and
Vornado Operating to agree on any of the specified major decisions which, until
October 30, 2000, can be exercised only by Vornado Operating. During that time,
Vornado Operating shall be entitled to buy the Company's interest at cost plus a
10% per annum return. Major decisions include approval of the annual capital and
operating budgets for AmeriCold Operations, decisions to deviate from the budget
by 10% or more, additional annual capital contributions in excess of $5 million
and decisions to enter into new leases or amend existing leases.
LAND DEVELOPMENT
On April 29, 1999, a partnership in which CDMC has a 64% economic interest
finalized the purchase of "The Commons", a master planned residential
development on 23 acres in the Central Platte Valley near downtown Denver,
Colorado. Currently, it is contemplated that the project will include both sale
and rental units at multiple price points. An adjacent 28 acres is expected to
be commercially developed by another firm, thus providing a major mixed-use
community adjacent to the lower downtown area of Denver. The acreage connects
with several major entertainment and recreational facilities including Coors
Field (home to the Major League Baseball's Colorado Rockies), Elitch Gardens
(an amusement park) and the new Pepsi Center (home to the National Hockey
League's Colorado Avalanche and the National Basketball Association's Denver
Nuggets).
8
<PAGE> 9
As of May 14, 1999, COPI Colorado had purchased approximately 1.1 million shares
of Crescent Operating common stock at a total purchase price of $4.3 million.
The average price paid for such shares, excluding brokers' commissions, was
$3.91 per share.
Effective January 1, 1999, CDMC increased its $40 million line of credit with
Crescent Partnership to $48 million and entered into a new $40 million credit
line with Crescent Partnership for new development projects.
OTHER
On March 31, 1999, the Company sold its investment in Hicks-Muse for $8.1
million to an unrelated party. The sale resulted in a $0.3 million gain which
was recognized in the first quarter of 1999. All of the sales proceeds were
applied against the Company's indebtedness to Crescent Partnership.
3. INVESTMENTS:
Investments consisted of the following (amounts in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------- ------------
<S> <C> <C>
Investment in The Woodlands Land Development Company, LP. .... $ 40,165 $ 37,880
Investment in CDMC projects .................................. 22,700 22,737
Investment in AmeriCold Operations ........................... 15,425 --
Investment in CR Las Vegas, LLC .............................. 4,635 --
Investment in AmeriCold Logistics ............................ 2,779 293,868
Investment in Hillwood ....................................... 1,039 774
Investment in CR License, LLC ................................ 1,000 1,000
Investment in Houston Center Athletic Club Venture ........... 905 1,011
Investment in Magellan Health Services, Inc. warrants ........ 802 2,737
Investment in Corporate Arena ................................ 180 127
Investment in Hicks-Muse ..................................... -- 7,802
Investment in The Woodlands Operating Company, LP ............ (982) (831)
--------- ---------
$ 88,648 $ 367,105
========= =========
</TABLE>
Investment income (loss) consisted of the following (amounts in thousands):
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1999 March 31, 1998
------------------ ------------------
<S> <C> <C>
Equity in income of The Woodlands Land Development Company, LP ..... $ 4,581 $ 3,583
Equity in income of CDMC Projects .................................. 3,355 --
Gain on sale of CS I and CS II ..................................... 1,493 --
Equity in income of The Woodlands Operating Company, LP ............ 275 40
Hicks-Muse income .................................................. 239 474
Equity in income of Houston Center Athletic Club Venture ........... 67 --
Equity in income (loss) of AmeriCold Logistics ..................... 61 (663)
Equity in loss of CBHS ............................................. -- (5,390)
Equity in loss of AmeriCold Operations ............................. (64) --
-------- --------
$ 10,007 $ (1,956)
======== ========
</TABLE>
9
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A summary of financial information for the Company's investments in The
Woodlands Operating Company, L.P. ("TWOC") and The Woodlands Land Development
Company, L.P. ("Landevco") have been provided as they represent significant
unconsolidated investments (amounts in thousands). A summary of financial
information for the Company's investment in CBHS has not been provided because
the Company's investment balance is zero and no income or loss has been
recognized since February 1998.
<TABLE>
<CAPTION>
TWOC Landevco
------------------- ------------------
Three months ended Three months ended
March 31,1999 March 31,1999
------------------ ------------------
<S> <C> <C>
Revenues .............................................. $17,934 $29,719
Gross profit .......................................... $ 636 $10,861
Net income ............................................ $ 646 $10,778
Crescent Operating's equity in income of subsidiary ... $ 275 $ 229
</TABLE>
4. INTANGIBLE ASSETS:
Intangible assets consisted of the following (amounts in thousands):
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Goodwill, net - Crescent Machinery ............................. $ 8,245 $ 7,757
Goodwill, net - RoseStar ....................................... 1,578 1,632
Goodwill, net - CDMC ........................................... 30,790 31,016
Membership intangible, net - Desert Mountain Properties, LP .... 40,013 42,108
------- -------
$80,626 $82,513
======= =======
</TABLE>
5. LONG-TERM DEBT:
The Company's long-term debt facilities are composed of (i) corporate and
wholly-owned debt and (ii) non wholly-owned debt. Corporate and wholly-owned
debt relates to debt facilities at the Crescent Operating level or owed by
entities which are owned 100% by Crescent Operating. Non wholly-owned debt
represents non-recourse debt of the Company owed by entities which are
consolidated in the Company's financial statements but are not 100% owned by the
Company; the Company's economic investment in these entities is 5% or less.
Following is a summary of the Company's debt financing (amounts in thousands):
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
LONG-TERM DEBT - CORPORATE AND WHOLLY-OWNED SUBSIDIARIES
<S> <C> <C>
Equipment notes payable to finance companies, interest at 6.9%
to 10.9%, due 1999 through 2003 (Crescent Machinery) ................. $72,378 $70,074
Floor plan debt payable to equipment manufacturers, six month term at
0% interest (Crescent Machinery) ..................................... 10,460 7,958
Line of credit in the amount of $19.5 million payable to Crescent
Partnership, interest at 9%, due May 2002 (COPI) ..................... 19,500 --
Note payable to Crescent Partnership, interest at 12%, due May
2002 (COPI) .......................................................... 17,494 24,223
</TABLE>
10
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<TABLE>
<S> <C> <C>
Line of credit in the amount of $15.0 million payable to Bank of
America, interest at LIBOR plus 1%, due August 1999 (COPI) ........... 15,000 15,000
Note payable to Crescent Partnership, interest at 12%, due May
2002 (COPI) .......................................................... 9,000 9,000
Line of credit in the amount of $17.2 million payable to Crescent
Partnership, interest at 12%, due May 2002 or five years after the
last draw (COPI) ..................................................... 8,270 27,733
Notes payable to the sellers of Western Traction and Harvey
Equipment, interest 8.0% to 8.5%, due 2000 to 2002 (COPI) ............ 5,844 6,670
Notes payable to Crescent Partnership, interest at 7.5% to
10.75%, due August 2003 (RoseStar / COI Hotel) ....................... 2,984 3,078
-------- --------
Total debt - corporate and wholly-owned subsidiaries ...... 160,930 163,736
-------- --------
LONG-TERM DEBT - NON WHOLLY-OWNED SUBSIDIARIES
Junior note payable to Crescent Partnership, interest at 14%, due
December 2010 (DMPLP) ................................................ 60,000 60,000
Senior note payable to Crescent Partnership, interest at 10%, due
December 2005 (DMPLP) ................................................ 43,085 50,717
Line of credit in the amount of $35 million payable to National
Bank of Arizona, interest at prime to prime plus 1%, due
May 1999 (DMPLP) ..................................................... 23,101 10,000
Line of credit in the amount of $48.2 million payable to Crescent
Partnership, interest at 11.5%, due August 2004 (CDMC) ............... 33,547 35,976
Construction loans for various East West Resort Development
projects, interest at 6% to 9%, due 1999 to 2003 (CDMC) .............. 32,363 32,825
Line of credit in the amount of $22.9 million payable to Crescent
Partnership, interest at 12%, due January 2003 (CDMC) ................ 15,239 15,035
Note payable to Crescent Partnership, interest at 12%, due June
2005 (CDMC) .......................................................... 2,850 2,850
Line of credit in the amount of $7.0 million payable to Crescent
Partnership, interest at 12%, due August 2003 (CRL) .................. 2,333 --
-------- --------
Total debt - non wholly-owned subsidiaries ................. 212,518 207,403
-------- --------
Total long-term debt ....................................... $373,448 $371,139
======== ========
</TABLE>
11
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<TABLE>
<S> <C> <C>
Current portion of long-term debt - CEI ........ $ 5,657 $ 7,668
Current portion of long-term debt .............. 97,359 84,539
Long-term debt - CEI, net of current portion ... 208,644 220,944
Long-term debt, net of current portion ......... 61,788 57,988
-------- --------
Total long-term debt ................. $373,448 $371,139
======== ========
</TABLE>
Effective March 12, 1999, the Company agreed to make a permanent reduction in
its $30.4 million 12% line of credit with Crescent Partnership in an amount
equal to the proceeds from the sale of 80% of the Company's 5% interest in CS I
and CS II. On March 12, 1999, the Company received $13.2 million of proceeds and
correspondingly permanently reduced the availability under the line of credit
from $30.4 million to $17.2 million.
Also effective March 12, 1999, the Company obtained from Crescent Partnership a
$19.5 million line of credit that bears interest at the rate of 9% per annum.
The line of credit has terms similar to the $17.2 million line of credit from
Crescent Partnership with the exception of the interest rate and is
cross-collateralized and cross-defaulted with the Company's other borrowings
from Crescent Partnership. On March 12, 1999, the Company borrowed the full
$19.5 million, approximately $15.5 million of which the Company contributed as a
capital contribution to AmeriCold Operations in connection with its formation
and the remaining approximately $4.0 million of which the Company used to reduce
the amount outstanding under the $30.4 million 12% line of credit with Crescent
Partnership.
6. OTHER LIABILITIES:
Other liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Deferred revenue ............ $33,091 $29,477
Deferred hospitality rent ... 4,569 3,808
Other ....................... 7 1,293
------- -------
$37,667 $34,578
======= =======
</TABLE>
7. EARNINGS PER SHARE:
Earnings per share ("EPS") is calculated as follows (in thousands, except per
share data):
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1999 March 31, 1998
----------------------------------- ------------------------------------
Net Wtd Avg. Per Share Net Wtd. Avg. Per Share
Income Shares Amount Loss Shares Amount
------- -------- --------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS ........................ $ 3,414 10,522 $ 0.32 $(1,179) 11,214 $ (0.11)
EFFECT OF DILUTIVE SECURITIES:
Stock Options .................... -- 629 -- --
------- ------- ------- -------
DILUTED EPS ...................... $ 3,414 11,151 $ 0.31 $(1,179) 11,214 $ (0.11)
======= ======= ======= ======= ======= =======
</TABLE>
The Company had 70,600 and 890,454 options for the three months ended March 31,
1999 and 1998, respectively, which were not included in the calculation of
diluted EPS as they were anti-dilutive.
12
<PAGE> 13
8. INCOME TAXES:
The table below shows the reconciliation of the federal statutory income tax
rate to the effective tax rate.
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1999 March 31, 1998
------------------ ------------------
<S> <C> <C>
Federal statutory income tax rate ................ 35.0% (35.0)%
State income taxes, net of federal tax benefit ... 5.0 (5.0)%
Equity accounting for AmeriCold Logistics ........ -- 43.2
Desert Mountain minority interest ................ (2.0) 8.4
Change in valuation allowance .................... (30.2) --
Other, net ....................................... (3.7) (0.2)
---- ----
Effective tax rate ....................... 4.1% 11.4%
==== ====
</TABLE>
The Company's effective tax rate differs from the federal statutory income tax
rate due to non wholly-owned subsidiaries, which are consolidated in the
Company's financial statements. The taxes related to the minority interests of
such entities are included in the income tax provision (benefit) on the
Company's statements of operations. The effective tax rate also differs from the
federal statutory income tax rate due to the Company releasing $2.7 million of
its valuation allowance during the first quarter of 1999 based on first quarter
transactions and expected future taxable income.
9. BUSINESS SEGMENT INFORMATION:
Crescent Operating's assets and operations are located entirely within the
United States and are currently comprised primarily of four business segments:
(i) Equipment Sales and Leasing, (ii) Hospitality, (iii) Refrigerated
Warehousing and (iv) Land Development. In addition to these four business
segments, the Company has grouped its investment in Magellan warrants, interest
expense on corporate debt and general corporate overhead costs such as legal and
accounting costs, insurance costs and corporate salaries as "Other" for segment
reporting purposes. The Company uses net income as the measure of segment profit
or loss.
Business segment information is summarized as follows (in thousands):
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Revenues:
Equipment Sales and Leasing ... $ 27,159 $ 7,981
Hospitality ................... 63,032 58,265
Refrigerated Warehousing ...... -- --
Land Development .............. 46,557 31,131
Other ......................... -- --
--------- ---------
Total revenues ................ $ 136,748 $ 97,377
========= =========
Net income (loss):
Equipment Sales and Leasing ... $ (447) $ 56
Hospitality ................... 1,536 2,718
Refrigerated Warehousing ...... 894 (33)
Land Development .............. 133 90
Other ......................... 1,298 (4,010)
--------- ---------
Total net income (loss) ....... $ 3,414 $ (1,179)
========= =========
</TABLE>
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
-------------- -----------------
<S> <C> <C>
Identifiable assets:
Equipment Sales and Leasing .... $133,365 $127,215
Hospitality .................... 41,074 38,536
Refrigerated Warehousing ....... 15,450 293,780
Land Development ............... 471,855 464,634
Other .......................... 1,188 13,168
-------- --------
Total identifiable assets ...... $662,932 $937,333
======== ========
</TABLE>
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This information should be read in conjunction with the accompanying
consolidated financial statements and notes thereto. The financial statements
include all adjustments which are, in the opinion of management, necessary to
reflect a fair statement of the results for the interim periods presented, and
all such adjustments are of a normal and recurring nature. The information
herein should be read in conjunction with the more detailed information
contained in the Company's Form 10-K for the year ended December 31, 1998.
Capitalized terms used but not otherwise defined herein have the meanings
ascribed to those terms in the Notes to the Financial Statements included in
Part l of this report.
This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Although the Company believes that the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, the Company's actual results could differ materially
from those set forth in the forward-looking statements. Certain factors that
might cause such a difference include the following: investment considerations,
such as the effect of economic, demographic, competitive and other conditions in
the market area on cash flows and values, and the relatively high levels of debt
maintained by the Company and its ability to generate revenues sufficient to
meet debt service payments and other operating expenses; financing risks, such
as the continued availability of equity and debt financing that may be necessary
or desirable for expansion or continued operations of the Company and its
investments, the Company's ability to service existing debt, the possibility
that the Company's outstanding debt (some of which requires so-called "balloon"
payments of principal) may be refinanced at higher interest rates or otherwise
on terms less favorable to the Company; and business and investment risks,
including the underperformance or non-performance of its existing business
investments, the inability of the Company to identify or pursue suitable
business or investment opportunities, the impact of changes in the industries in
which the Company's businesses and investments operate and economic, demographic
and other competitive conditions affecting such industries, including equipment
sales and leasing, hospitality, refrigerated warehousing and land development.
Given these uncertainties, readers are cautioned not to place undue reliance on
such statements. The Company undertakes no obligation to update these
forward-looking statements to reflect any future events or circumstances.
OVERVIEW
Crescent Operating is a diversified management company that through various
subsidiaries and affiliates currently operates in four business segments: (i)
Equipment Sales and Leasing, (ii) Hospitality, (iii) Refrigerated Warehousing
and (iv) Land Development. Within these segments, the Company, through various
entities, owned the following as of March 31, 1999 (collectively referred to as
the "Assets"):
o THE EQUIPMENT SALES AND LEASING SEGMENT consisted of a wholly-owned
interest in Crescent Machinery, a construction equipment sales, leasing and
service company with 16 locations in seven states.
o THE HOSPITALITY SEGMENT consisted of (i) the Company's lessee interests in
the Denver Marriott City Center, the Hyatt Regency Beaver Creek, the Hyatt
Regency Albuquerque, Canyon Ranch-Tucson, Canyon Ranch-Lenox, the Ventana
Country Inn, the Sonoma Mission Inn and Spa, the Sonoma Golf Course and the
Four Seasons Hotel in Houston, Texas (the "Hospitality Properties"), (ii) a
two-thirds interest in the Houston Center Athletic Club Venture and (iii) a
5% economic interest in a company that participates in the future use of
the "Canyon Ranch" name.
o THE REFRIGERATED WAREHOUSING SEGMENT consisted primarily of a 40% interest
in the operations of AmeriCold Operations, which currently operates 102
refrigerated storage properties with an aggregate storage capacity of
approximately 537.1 million cubic feet, and a 0.4% interest in AmeriCold
Logistics. This structure reflects the effects of a significant
reorganization in the first quarter of 1999. See "Refrigerated Warehousing
Segment - Recent Developments" below.
14
<PAGE> 15
o THE LAND DEVELOPMENT SEGMENT consisted of (i) a 4.65% economic interest in
Desert Mountain, a master planned, luxury residential and recreational
community in northern Scottsdale, Arizona, (ii) a 42.5% general partner
interest in TWOC, which provides management, advisory, landscaping and
maintenance services to The Woodlands, Texas and is the lessee of The
Woodlands Resort and Conference Center, (iii) a 2.125% economic interest in
The Woodlands Land Development Company L.P., which owns approximately 9,000
acres for commercial and residential development as well as a realty
office, an athletic center, and interests in both a title company and a
mortgage company, (iv) a 50% economic interest in COPI Colorado, a company
that has a 10% economic interest in CDMC, which invests in entities that
develop or manage residential and resort properties (primarily in Colorado)
and provides support services to such properties and (v) a 5% economic
interest in an entity which owns a 6.19% interest in the construction and
operation of a new multipurpose entertainment and sports center (the "Arena
Project") in downtown Dallas, Texas and manages the operations of the
existing arena as well as a 2.6% economic interest in Hillwood/1642, Ltd.,
an entity participating in the development of the land surrounding the
Arena Project.
While the Company continues to own a 50% interest in CBHS, the Company has
written-off its entire investment and has no obligation or commitment to fund
CBHS' ongoing operations. As a result of the write-off, the Company does not
anticipate that it will recognize any additional losses from its investment in
CBHS. Because the Company has written-off its CBHS investment and it is unlikely
that the Company will recognize any material income from CBHS in the near future
due to the operating losses currently being incurred by CBHS, the Company no
longer reports its operations related to CBHS as a separate segment.
EQUIPMENT SALES AND LEASING SEGMENT
RECENT DEVELOPMENTS
Effective March 4, 1999, the Company acquired certain assets of Westco Tractor &
Equipment, Inc., a company engaged in equipment sales, leasing and servicing,
located in Santa Rosa, California. The purchase price of approximately $2.7
million was composed of $0.5 million cash and the assumption of liabilities of
$2.2 million.
Crescent Machinery is currently in the process of opening a new location located
in Fort Worth, Texas. It is anticipated that the location will be open for
business by the end of the second quarter 1999.
FINANCIAL ACTIVITY
<TABLE>
<CAPTION>
(in thousands) Three months ended Three months ended
March 31, 1999 March 31, 1998
------------------ ------------------
<S> <C> <C>
Revenue:
New and used equipment ............. $16,177 $ 3,788
Rental equipment ................... 5,169 2,205
Parts, service and supplies ........ 5,813 1,988
------- -------
Total revenue ......................... 27,159 7,981
Expenses:
Cost of sales:
New and used equipment ........ 13,794 3,326
Rental equipment .............. 3,398 1,340
Parts, service and supplies ... 3,313 1,420
Operating expenses ................. 6,145 1,525
------- -------
Total expenses ........................ 26,650 7,611
------- -------
Income from operations ................ $ 509 $ 370
======= =======
</TABLE>
15
<PAGE> 16
Crescent Machinery has grown substantially through acquisitions since the
quarter ended March 31, 1998 with total revenues increasing approximately 240%
as of March 31, 1999. Earnings before interest expense, income taxes,
depreciation and amortization ("EBITDA") for the Equipment Sales and Leasing
segment for the three months ended March 31, 1999 was $3.8 million as compared
to $1.5 million for the three months ended March 31, 1998. EBITDA for the three
months ended March 31, 1999 represents a full three months of operating results
for all entities in the Equipment Sales and Leasing segment except Westco, which
includes approximately one month of operating results. Management believes that
EBITDA can be a meaningful measure of operating performance, cash generation and
the ability to service debt. However, EBITDA should not be considered as an
alternative to either: (i) net income (determined in accordance with GAAP); (ii)
operating cash flow (determined in accordance with GAAP); or (iii) liquidity.
There can be no assurance that the Company's EBITDA is comparable to similarly
titled items reported by other companies.
HOSPITALITY SEGMENT
RECENT DEVELOPMENTS
On April 22, 1999, the Intercompany Committee of the Company's board of
directors approved the terms of a proposed lease with Crescent Partnership of
the 389-room Renaissance Hotel located in Houston, Texas. The lease is expected
to have a term of 10 years and provide for base rent and percentage rent. The
other terms of the lease also are expected to be generally consistent with the
other hospitality leases with Crescent Partnership. The Company anticipates that
the effective date of the proposed lease transaction will be May 22, 1999.
FINANCIAL ACTIVITY
The following table sets forth certain information about the Hospitality
Properties for the three months ended March 31, 1999 and 1998. The information
for the Hospitality Properties is based on available rooms, except for Canyon
Ranch-Tucson and Canyon Ranch-Lenox, which are destination health and fitness
resorts that measure performance based on available guest nights.
<TABLE>
<CAPTION>
For the Three Months Ended March 31,
-------------------------------------------------------
Revenue Per
Year Average Average Daily Available Room
Completed/ Occupancy Rate Rate ("ADR") ("REVPAR")
Renovated Rooms 1999 1998 1999 1998 1998 1999
---------- ----- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Full-Service/Luxury Hotels
Hyatt Regency Beaver Creek.... 1989 276(1) 82% 78% $399 $377 $327 $296
Denver Marriott City Center... 1982/1994 613 79 81 121 114 96 92
Hyatt Regency Albuquerque..... 1990 395 68 64 107 102 73 65
Sonoma Mission Inn & Spa...... 1927/1987/1997 198 75 72 174 190 131 137
Four Seasons Hotel Houston.... 1982 399 68 69 193 179 131 123
Ventana Country Inn........... 1975/1982/1988 62 81 28(2) 297 270 242 77(2)
----- ----- ----- ------ ----- ----- -----
Total/Weighted Average 1,943 75% 72% $183 $175 $140 $126
===== ===== ===== ====== ===== ===== =====
Destination Health & Fitness
Resorts
Canyon Ranch-Tucson........... 1980 250(3)
Canyon Ranch-Lenox............ 1989 212(3)
----- ----- ----- ------ ----- ------ ------
Total/Weighted Average 462 92%(4) 90%(4) $543(5) $518(5) $483(6) $455(6)
===== ===== ===== ====== ===== ====== ======
</TABLE>
(1) In 1998, the number of rooms at Hyatt Regency Beaver Creek was reduced to
276 due to 19 rooms being converted into a 20,000 square foot spa.
(2) Average occupancy and REVPAR decreased in 1998 due to the closing of the
Ventana Country Inn for approximately three months as a result of the major
access road leading to the property being washed out.
(3) Represents available guest nights, which is the maximum number of guests
that the resort can accommodate per night.
(4) Represents the number of paying and complimentary guests for the period,
divided by the maximum number of available guest nights for the period.
(5) Represents the average daily "all-inclusive" guest package charges for the
period, divided by the average daily number of paying guests for the
period.
16
<PAGE> 17
(6) Represents the total "all-inclusive" guest package charges for the period,
divided by the maximum number of available guest nights for the period.
REFRIGERATED WAREHOUSING SEGMENT
RECENT DEVELOPMENTS
Effective March 12, 1999, the Company sold 80% of its 5% interest in CS I and CS
II to Crescent Partnership for $13.2 million and received the right to require
Crescent Partnership to purchase the remaining 20% for approximately $3.4
million at any time during the next two years, subject to compliance with
certain regulatory matters. This 5% interest represented a 2% interest in
various corporations and limited liability companies (collectively, "AmeriCold
Logistics") that owned and operated 102 refrigerated warehouse properties
("Refrigerated Warehouses"). The sale of the Company's entire interest in CS I
and CS II will result in an approximately $2.0 million gain which is expected to
be recognized by Crescent Operating in 1999; $1.5 million of that gain was
recognized in the first quarter of 1999. Crescent Operating, through a
wholly-owned limited liability company, then became a 40% partner of AmeriCold
Operations, a newly formed partnership the remaining 60% of which is owned by
Vornado Operating. AmeriCold Operations purchased, for $48.7 million, all of the
operations and non-real estate related assets associated with the Refrigerated
Warehouses. This transaction required an initial capital contribution of
approximately $15.5 million from Crescent Operating and an agreement to fund up
to an additional $4.0 million in the future under certain conditions, all of
which has been or will be funded from a new $19.5 million loan from Crescent
Partnership that bears interest at 9% per annum. AmeriCold Operations has leased
certain of the Refrigerated Warehouses from certain of the entities comprising
AmeriCold Logistics under 15 year leases which call for base and percentage
rent. As a result, the operations formerly associated with AmeriCold Logistics
are now conducted by AmeriCold Operations. As a result of the transaction,
Crescent Operating no longer consolidates CS I and CS II for accounting purposes
which has resulted in a decrease in consolidated total assets of approximately
$294 million.
Under the terms of the partnership agreement for AmeriCold Operations, Vornado
Operating has the right to make all decisions relating to the management and
operations of AmeriCold Operations other than certain major decisions that
require the approval of both the Company and Vornado Operating. The partnership
agreement provides for a buy-sell arrangement upon a failure of the Company and
Vornado Operating to agree on any of the specified major decisions which, until
October 30, 2000, can be exercised only by Vornado Operating. During that time,
Vornado Operating shall be entitled to buy the Company's interest at cost plus a
10% per annum return. Major decisions include approval of the annual capital and
operating budgets for AmeriCold Operations, decisions to deviate from the budget
by 10% or more, additional annual capital contributions in excess of $5 million
and decisions to enter into new leases or amend existing leases.
AmeriCold Operations is the largest provider of refrigerated and frozen storage
and distribution services in the country. AmeriCold Operations manages the
storage and distribution of frozen, refrigerated or dry foods and products that
need controlled temperatures in both leased facilities and facilities managed
for third party clients. AmeriCold Operations also provides additional services
such as logistics consulting, transportation management, freight consolidation
and blast freezing.
FINANCIAL ACTIVITY
As a result of the transactions discussed above, as of March 31, 1999, the
Company had a 40% economic interest in AmeriCold Operations and a 0.4% interest
in AmeriCold Logistics. Because the restructuring did not become effective until
March 12, 1999, the Company's economic share of the operations of AmeriCold
Logistics for the three months ended March 31, 1999 included a 2% economic
interest for the period from January 1, 1999 to March 11, 1999 and a 0.4%
economic interest for the period from March 12, 1999 through March 31, 1999. The
Company's economic share of the operations of AmeriCold Operations for the three
months ended March 31, 1999 include a 40% economic interest for the period from
March 12, 1999 through March 31, 1999.
The Company's share of the net loss from AmeriCold Operations for the quarter
ended March 31, 1999 was $39,000. The Company's share of net income (loss) from
AmeriCold Logistics for the quarter ended March 31,
17
<PAGE> 18
1999 and 1998 was $61,000 and $(33,000), respectively. Also included in net
income for the Refrigerated Warehousing segment was the $1.5 million gain on
sale of 80% of the Company's interest in AmeriCold Logistics.
LAND DEVELOPMENT SEGMENT
RECENT DEVELOPMENTS
On April 29, 1999, a partnership in which CDMC has a 64% economic interest
finalized the purchase of "The Commons", a master planned residential
development on 23 acres in the Central Platte Valley near downtown Denver,
Colorado. Currently, it is contemplated that the project will include both sale
and rental units at multiple price points. An adjacent 28 acres is expected to
be commercially developed by another firm, thus providing a major mixed-use
community adjacent to the lower downtown area of Denver. The acreage connects
with several major entertainment and recreational facilities including Coors
Field (home to the Major League Baseball's Colorado Rockies), Elitch Gardens (an
amusement park) and the new Pepsi Center (home to the National Hockey League's
Colorado Avalanche and the National Basketball Association's Denver Nuggets).
As of May 14, 1999, COPI Colorado had purchased approximately 1.1 million shares
of Crescent Operating common stock at a total purchase price of $4.3 million.
The average price paid for such shares, excluding brokers' commissions, was
$3.91 per share.
Effective January 1, 1999, CDMC increased its $40 million line of credit with
Crescent Partnership to $48 million and entered into a new $40 million credit
line with Crescent Partnership for new development projects.
FINANCIAL ACTIVITY
Investment income of the Land Development segment consists of equity investments
in TWOC and Landevco. For the three months ended March 31, 1999 and 1998,
investment income related to these investments was $4.9 million and $3.6
million, respectively. Crescent Operating's economic share of the investment
income from TWOC and Landevco was $0.5 million and $0.2 million for the three
months ended March 31, 1999 and 1998, respectively.
The remaining operations of the Land Development segment are attributable to the
results of Desert Mountain Development and COPI Colorado. For each of the three
months ended March 31, 1999 and 1998, Desert Mountain Development had a net loss
of $1.6 million and $1.0 million, respectively. Crescent Operating's economic
share of the net loss from Desert Mountain Development for each of the three
months ended March 31, 1999 and 1998 was $0.1 million. For the three months
ended March 31, 1999, COPI Colorado had a net loss of $0.2 million. Crescent
Operating's economic share of the net loss from COPI Colorado for the three
months ended March 31, 1999 was $0.1 million. Crescent Operating did not have an
economic interest in COPI Colorado during the first quarter of 1998.
OTHER
RECENT DEVELOPMENTS
On December 11, 1998, the Company received notice from The Nasdaq Stock Market
("Nasdaq") that the Company has failed to maintain a closing bid price of
greater than or equal to $5.00 in accordance with Nasdaq Marketplace Rule 4450
(b)(4) under Maintenance Standard (2) for continued listing on the National
Market System ("NMS"). On May 6, 1999, the Company had a hearing before
representatives of Nasdaq to determine whether the Company will be permitted to
maintain its NMS listing. The outcome of the hearing is expected during June
1999.
On March 31, 1999, the Company sold its investment in Hicks-Muse for $8.1
million to an unrelated party. The sale resulted in a $0.3 million gain in the
first quarter of 1999. All of the sales proceeds were applied against the
Company's indebtedness to Crescent Partnership.
18
<PAGE> 19
SEGMENT FINANCIAL INFORMATION
(Amounts in thousands, except share data)
The following is a summary of Crescent Operating's financial information
reported by segment for the three months ended March 31, 1999:
<TABLE>
<CAPTION>
EQUIPMENT
SALES REFRIGERATED LAND
AND LEASING HOSPITALITY WAREHOUSING DEVELOPMENT
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues ................................... $ 27,159 $ 63,032 $ -- $ 46,557
Operating expenses ......................... 26,650 60,522 -- 44,861
--------- --------- --------- ---------
Income (loss) from operations .............. 509 2,510 -- 1,696
--------- --------- --------- ---------
Investment income (loss) ................... -- 67 1,490 8,211
--------- --------- --------- ---------
Other (income) expense
Interest expense ...................... 1,302 77 -- 2,584
Interest income ....................... (10) (30) -- (734)
Other ................................. (12) -- -- (63)
--------- --------- --------- ---------
Total other (income) expense ............... 1,280 47 -- 1,787
--------- --------- --------- ---------
Income (loss) before income
taxes and minority interest ........... (771) 2,530 1,490 8,120
Income tax provision (benefit) ............. (324) 1,012 596 2,754
--------- --------- --------- ---------
Income (loss) before minority interests .... (447) 1,518 894 5,366
Minority interests ......................... -- 18 -- (5,233)
========= ========= ========= =========
Net income (loss) .......................... $ (447) $ 1,536 $ 894 $ 133
========= ========= ========= =========
Net income (loss) per share, basic ......... $ (0.04) $ 0.15 $ 0.08 $ 0.01
========= ========= ========= =========
Net income (loss) per share, diluted ....... $ (0.04) $ 0.14 $ 0.08 $ 0.01
========= ========= ========= =========
EBITDA Calculation: (1)
Net income (loss) ..................... $ (447) $ 1,536 $ 894 $ 133
Interest expense, net ................. 1,292 19 186 70
Income tax provision (benefit) ........ (324) 1,024 60 253
Depreciation and amortization ......... 3,246 284 436 347
--------- --------- --------- ---------
EBITDA ..................................... $ 3,767 $ 2,863 $ 1,576 $ 803
========= ========= ========= =========
<CAPTION>
OTHER TOTAL
--------- ---------
<S> <C> <C>
Revenues ................................... $ -- $ 136,748
Operating expenses ......................... 420 132,453
--------- ---------
Income (loss) from operations .............. (420) 4,295
--------- ---------
Investment income (loss) ................... 239 10,007
--------- ---------
Other (income) expense
Interest expense ...................... 2,222 6,185
Interest income ....................... (34) (808)
Other ................................. (1) (76)
--------- ---------
Total other (income) expense ............... 2,187 5,301
--------- ---------
Income (loss) before income
taxes and minority interest ........... (2,368) 9,001
Income tax provision (benefit) ............. (3,666) 372
--------- ---------
Income (loss) before minority interests .... 1,298 8,629
Minority interests ......................... -- (5,215)
========= =========
Net income (loss) .......................... $ 1,298 $ 3,414
========= =========
Net income (loss) per share, basic ......... $ 0.12 $ 0.32
========= =========
Net income (loss) per share, diluted ....... $ 0.12 $ 0.31
========= =========
EBITDA Calculation: (1)
Net income (loss) ..................... $ 1,298 $ 3,414
Interest expense, net ................. 2,188 3,755
Income tax provision (benefit) ........ (3,666) (2,653)
Depreciation and amortization ......... (55) 4,258
--------- ---------
EBITDA ..................................... $ (235) $ 8,774
========= =========
</TABLE>
(1) EBITDA represents earnings before interest, income taxes, depreciation and
amortization. Amounts are calculated based on the Company's ownership
percentage of the EBITDA components. Management believes that EBITDA can be
a meaningful measure of the Company's operating performance, cash
generation and ability to service debt. However, EBITDA should not be
considered as an alternative to either: (i) net earnings (determined in
accordance with GAAP); (ii) operating cash flow (determined in accordance
with GAAP); (ii) operating cash flow (determined in accordance with GAAP);
or (iii) liquidity. There can be no assurance that the Company's
calculation of EBITDA is comparable to similarly titled items reported by
other companies.
19
<PAGE> 20
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999, COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1998
Revenues
Equipment sales and leasing revenues increased approximately $19.2 million to
$27.2 million for the three months ended March 31, 1999, compared to $8.0
million for the three months ended March 31, 1998. Approximately $17.5 million
of this increase relates to the Company's acquisitions of Central Texas
Equipment Co. which was effective as of April 30, 1998; Machinery, Inc., which
was effective as of June 8, 1998; Western Traction Company, which was effective
as of July 1, 1998; Harvey Equipment Center, Inc., which was effective as of
July 31, 1998; 4-K Equipment Company, which was effective July 31, 1998; and
Westco Tractor & Equipment, Inc., which was effective March 4, 1999. The
remaining increase in revenues relates to same store growth at locations owned
by the Company at March 31, 1998. Same store revenues increased by $1.6 million
from $8.0 million to $9.6 million for the three months ended March 31, 1999.
Hospitality revenues increased approximately $4.7 million to $63.0 million for
the three months ended March 31, 1999, compared to $58.3 million for the three
months ended March 31, 1998. The increase in hospitality revenues is due to the
following: (i) the operations of the Allegria Spa at the Hyatt Regency Beaver
Creek and the Sonoma Golf Club, which were not leased by the Company during the
first quarter of 1998, and (ii) the Ventana Country Inn ("Ventana") conducted
operations during all three months of the first quarter of 1999 as compared to
only one month during the first quarter of 1998 when Ventana was closed for two
of the three months due to a land slide which washed out a portion of Highway 1,
the major access road to the property, partially offset by the elimination of
the Austin Omni Hotel rental income as the Company no longer leases such hotel
pursuant to a sublease.
Land development revenues represent revenues from Desert Mountain Development
and COPI Colorado prior to the elimination of the minority interests. Land
development revenues increased approximately $15.4 million to $46.5 million for
the three months ended March 31, 1999 compared to $31.1 million for the three
months ended March 31, 1998. The increase over the prior period is composed of
$22.5 million of revenues from COPI Colorado, partially offset by a decrease in
Desert Mountain Development revenues of $7.1 million. The increase in revenues
from COPI Colorado is due to the fact that the Company did not have an interest
in COPI Colorado prior to September 30, 1998. The decrease in Desert Mountain
revenues is primarily due to a lower number of both lot and home sales during
the first quarter of 1999 as compared to the same period in 1998.
Operating Expenses
Equipment sales and leasing expenses increased $19.1 million to $26.7 million
for the three months ended March 31, 1999, compared to $7.6 million for the
three months ended March 31, 1998. Approximately $18.0 million of this increase
relates to the Company's acquisitions as noted above subsequent to March 31,
1998. The remaining increase in operating expenses relates to the additional
costs associated with the increase in equipment sales, rental and repair.
Hospitality expenses increased $6.8 million to $60.5 million for the three
months ended March 31, 1999, compared to $53.7 million for the three months
ended March 31, 1998. The increase is partially a result of additional rent due
to increased revenues and costs of capital projects at the Hospitality
Properties, offset by a decrease in rent due to the termination of the lease of
the Austin Omni Hotel. Additionally, the increase is due to higher incentive
fees recorded in the first quarter of 1999 due to a change in the calculation,
although no significant year over year increase is anticipated. The remaining
increase is attributable to the operations of the Allegria Spa at the Hyatt
Regency Beaver Creek and the Sonoma Golf Club as well as the operation of the
Ventana Country Inn ("Ventana") for all three months during the first quarter of
1999 as compared to the first quarter of 1998 where Ventana was closed for two
of the three months due to a land slide which washed out a portion of Highway 1,
the major access road to the property.
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<PAGE> 21
Land development direct expenses represent operating costs incurred by Desert
Mountain Development and COPI Colorado prior to the elimination of the 95% and
50% minority interests, respectively. Land development direct expenses increased
$13.1 million to $44.9 million for the three months ended March 31, 1999,
compared to $31.8 million for the three months ended March 31, 1998. The
increase over the prior period is primarily attributable to $19.2 million of
expenses incurred by COPI Colorado offset by a decrease in Desert Mountain
Development expenses of $6.2 million. The increase related to COPI Colorado is
due to the fact that the Company did not have an interest in COPI Colorado prior
to September 30, 1998. The decrease in Desert Mountain Development expenses is
primarily due to lower costs associated with lot sales reflecting a decrease in
the number of both lot and home sales during the first quarter of 1999 as
compared to the same period in 1998.
Corporate general and administrative expenses of $0.4 million for the three
months ended March 31, 1999 were comparable with such costs for the three months
ended March 31, 1998 and consisted of general corporate overhead costs such as
legal and accounting costs, insurance costs and corporate salaries.
Investment Income (Loss)
Investment income of $10.0 million for the three months ended March 31, 1999
consisted primarily of the gain on sale of Hicks-Muse of $0.3 million, equity in
income of Landevco of $4.6 million, equity in income of TWOC of $0.3 million,
equity in income of CDMC projects of $3.4 million and the gain of $1.5 million
on the sale of 80% of the Company's interest in CS I and CS II. The investment
loss for the three months ended March 31, 1998 of $2.0 million consisted
primarily of equity in losses of CBHS of $5.4 million and equity in income of
Landevco of $3.6 million. As a result of the write-off, the Company does not
anticipate that it will recognize any additional losses from investments in
CBHS. The overall increase in investment income over the prior year is due to
the investment in CDMC projects, acquired in September 1998, as well as the $5.4
million loss from CBHS during the first quarter of 1998 which did not recur in
1999.
Other (Income) Expense
Interest expense increased $2.4 million to $6.2 million, for the three months
ended March 31, 1999, compared to $3.8 million for the three months ended March
31, 1998. The increase compared to the prior period is due to an increase in
debt incurred in connection with various acquisitions late in 1997 and in 1998
offset by a decrease in overall debt at Desert Mountain Development.
Interest income decreased $0.4 million to $0.8 million for the three months
ended March 31, 1999, compared to $1.2 million for the three months ended March
31, 1998. The decrease compared to the prior period is due primarily to
decreased interest income from notes receivable from lot sales at Desert
Mountain Development.
Minority Interests
Minority interests increased $4.7 million to $5.2 million for the three months
ended March 31, 1999 compared to $0.5 million for the three months ended March
31, 1998. Minority interests consist of the non-voting interests in the Land
Development segment. The increase in minority interests is primarily
attributable to the Company's investment in COPI Colorado which was not acquired
until September 1998.
Income Tax Provision
Income tax provision of approximately $0.4 million for the three months ended
March 31, 1999, consisted of a $3.7 million benefit at the corporate level and a
$0.3 million benefit for the Equipment Sales and Leasing segment, offset by a
$1.0 million provision for the Hospitality segment, a $2.8 million provision for
the Land Development segment and a $0.6 million provision for the Refrigerated
Warehousing segment. These amounts represent a $0.3 million increase in tax
provision over the tax provision of $0.1 million for the three months ended
March 31, 1998. The Company generally provides for taxes using a 40% effective
rate on the Company's share of income or loss. Additionally, in the first
quarter of 1999, the Company released $2.7 million of its net deferred tax asset
valuation allowance based on first quarter transactions and expected future
taxable income.
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<PAGE> 22
LIQUIDITY AND CAPITAL RESOURCES
Approximately $103.0 million (including regularly scheduled payments of
principal) is payable pursuant to existing financing arrangements of the
Company during the twelve months ending March 31, 2000. Of this $103.0 million,
the Company anticipates that approximately $88.0 million (representing all of
these borrowings other than the $15 million line of credit from Bank of America)
will be paid from the Company's cash flow from operating activities. The $15
million line of credit from Bank of America, which bears interest at the LIBOR
rate plus 1%, is due in August 1999. The Company is currently seeking to renew
or refinance the line of credit and also is evaluating its options for a partial
paydown or a complete payoff of the line of credit in August 1999.
The Company expects to meet its other short-term liquidity requirements
primarily through cash flow provided by operating activities. The Company
believes that cash flow provided by operating activities will be adequate to
fund normal recurring operating expenses and, as discussed above, regular debt
service requirements (including debt service relating to any additional or
replacement debt). The Company anticipates that it will fund any acquisitions or
other investments during the next 12 months with cash flow provided by operating
activities, by additional debt financing secured by the assets acquired in the
transaction, issuance of common stock of the Company or by proceeds of equity
offerings.
The Company expects to meet its long-term liquidity requirements (which consist
primarily of amounts due at maturity of its debt) through operating cash flows
of the Company, refinancing of existing debt or obtaining additional debt with
long-term maturities.
For a listing of the Company's primary debt financing arrangements, see Note 5
to the Financial Statements included in Part I.
The Company believes that debt and equity financing alternatives currently
available to it include public or private issuances of equity to existing
holders, issuances of equity in connection with acquisitions of additional
assets, obtaining additional debt secured in connection with acquisitions of
assets, additional secured borrowings from Crescent Partnership, and additional
proceeds from the refinancing of existing secured debt. However, there can be no
assurances that any of these sources will be available to the Company or that
the amount of capital available from these sources will be adequate to meet the
Company's needs or requests. A discontinuation of the Company's NMS listing
could further limit the Company's ability to obtain equity financing.
Cash Flows
Cash and cash equivalents were $30.9 million and $42.8 million at March 31, 1999
and December 31, 1998, respectively. The 28% decrease is attributable to $12.8
million and $3.2 million of cash used in operating and financing activities,
respectively, offset by $4.1 million of cash provided by investing activities.
OPERATING ACTIVITIES
The Company's outflow of cash used in operating activities of $12.8 million is
primarily attributable to outflows from outflows from:
o a decrease in deferred income taxes of $3.0 million;
o gain on sale of investments of $1.8 million;
o equity in income from unconsolidated subsidiaries of $8.2 million;
o purchases of real estate of $7.7 million;
o increases in accounts receivable and inventory of $9.8 million; and
o decreases in accounts payable and accrued expenses of $5.4 million.
The outflow of cash used by operating activities is partially offset by inflows
from:
o net income of $3.4 million;
o non-cash depreciation and amortization of $7.8 million;
o minority interests of $5.2 million; and
o increases in accounts payable - CEI and deferred revenues of $5.8 million.
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<PAGE> 23
INVESTING ACTIVITIES
The Company's inflow of cash provided by investing activities of $4.1 million is
primarily attributable to inflows from:
o proceeds from the sale of investments of $21.3 million;
o proceeds from the sale of property and equipment of $4.1 million; and
o net distributions from investments of $6.0 million.
The inflow of cash provided by investing activities is partially offset by
outflows from:
o acquisitions of business interests of $15.5 million;
o acquisitions of business interests by minority interests of $4.7 million;
and
o the purchase of property and equipment of $6.7 million.
FINANCING ACTIVITIES
The Company's outflow of cash used in financing activities of $3.2 million is
primarily attributable to outflows from:
o payments of all long-term debt of $65.9 million; and
o the distributions to minority interests of $5.5 million.
The outflow of cash used in financing activities is partially offset by inflows
from:
o proceeds of all long-term debt of $65.6 million; and
o capital contributions by minority interests of $3.5 million.
YEAR 2000 READINESS DISCLOSURE
The Company, along with an independent firm, continues to review information
technology systems (such as accounting systems and network operating systems)
and non-information technology systems (such as microcontrollers). The Company
believes that the assessment phase for both information technology and
non-information technology systems is approximately 85% complete and anticipates
that the assessment phase will be completed by June 1999.
As the assessment phase is completed at each of the locations, the Company is
implementing a modification phase to address any issues discovered in the
assessment phase. The modification phase will be followed by a testing phase.
Although the initial assessment and testing is not yet complete for all
locations, the Company has not yet identified any significant problem areas and
believes that the mission-critical systems are or can be made compliant with
minor upgrades.
Based on the assessment and modifications thus far of information technology and
non-information technology systems, the total cost to specifically assess and
remediate both information technology and non-information technology systems if
necessary does not appear to be material to the Company. To date, the Company's
costs related to Year 2000 compliance have not been material. All Year 2000
compliance costs are being expensed as incurred.
The Company believes that its greatest economic exposure lies with its
Hospitality and Equipment Sales and Leasing segments. Specifically, within those
segments, management believes that the most significant risk associated with
Year 2000 compliance issues relates to any inability of the Company's principal
vendors and suppliers to become Year 2000 compliant in a timely manner. For
example, if the computer systems used by the Company's principal equipment
vendors or hotel suppliers were to fail as a result of a failure to achieve Year
2000 compliance, the Company may experience inventory shortages. Consequently,
the Company could experience business interruptions which potentially could have
a material adverse effect on the Company's operating results and financial
position. The Company is requesting from its principal vendors and suppliers
information regarding their Year 2000 issues and their plans to assure timely
Year 2000 compliance. The Equipment Sales and Leasing
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<PAGE> 24
segment has received a letter from JCB, its primary supplier, that JCB is Year
2000 compliant. The Company will continue working with its vendors, suppliers
and other third-party contractors to assure that the Company will not be
subjected to substantial business interruptions as a result of Year 2000 issues.
There can be no assurance; however, that vendors, suppliers and other third
parties will achieve Year 2000 compliance in a timely manner or that any
non-compliance on the part of such persons will not have an adverse effect on
the Company's operations.
Because the Company is still evaluating the status of its systems and those of
third parties with which it conducts business, the Company has not yet developed
a comprehensive contingency plan, and it is difficult to identify the "most
reasonably likely worst-case scenario" at this time. As the Company identifies
significant risks related to the Company's Year 2000 compliance, or if the
Company's Year 2000 compliance program's progress deviates substantially from
the anticipated timeline, the Company will develop appropriate contingency
plans.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since December 31, 1998, there have been no material changes to the information
regarding market risk that was provided in the Company's Form 10-K for the year
ended December 31, 1998.
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<PAGE> 25
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 11, 1999, Magellan Health Services, Inc. ("Magellan") filed a Demand
for Arbitration with the American Arbitration Association alleging that (i) the
Company breached certain contracts that were entered into by the Company,
Magellan and certain subsidiaries of Magellan, (ii) the Company had unilaterally
abandoned the contracts and (iii) the Company failed to use commercially
reasonable best efforts to obtain financing for the transactions contemplated by
the contracts. Magellan is seeking reimbursement of financing costs, payment of
a termination fee and unspecified damages in connection with its claim. On
January 29, 1999, the Company filed an Answer to the Demand in which it denied
any liability to Magellan, asserting that the parties mutually consented to the
abandonment and termination of the contracts in issue and that the condition
precedent to the Company's obligations under the contracts did not occur. The
Company and Magellan have agreed to stay temporarily all proceedings in the
arbitration while they attempt to resolve the disputed issues.
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
On December 11, 1998, the Company received notice from Nasdaq that the Company
has failed to maintain a closing bid price of greater than or equal to $5.00 in
accordance with Nasdaq Marketplace Rule 4450 (b)(4) under Maintenance Standard
(2) for continued listing on the NMS. On May 6, 1999, the Company had a hearing
before representatives of Nasdaq to determine whether the Company will be
permitted to maintain its NMS listing. The outcome of the hearing is expected
during June 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Description of Exhibits
-------------- -----------------------
3.1 First Amended and Restated Certificate of Incorporation
(filed as Exhibit 3.3 to the Company's registration
statement on Form S-1 dated July 12, 1997 ("Form S-1")
and incorporated by reference herein)
3.2 First Amended and Restated Bylaws (filed as Exhibit 3.4
to Form S-1 and incorporated by reference herein)
3.3 Amendment of Article V of First Amended and Restated
Bylaws (filed as Exhibit 3.3 to the Company's June 30,
1998 Form 10-Q ("June 30, 1998 Form 10-Q") and
incorporated by reference herein)
3.4 Repeal of Amendment of Article V of First Amended and
Restated Bylaws (filed as Exhibit 3.4 to the Company's
September 30, 1998 Form 10-Q ("September 30, 1998 Form
10-Q") and incorporated by reference herein)
4.1 Specimen stock certificate (filed as Exhibit 4.1 to
Form S-1 and incorporated by reference herein)
4.2 Preferred Share Purchase Rights Plan (filed as Exhibit
4.2 to Form S-1 and incorporated by reference herein)
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<PAGE> 26
4.3 First Amendment to Preferred Share Purchase Rights
Agreement dated as of September 25, 1998, between
Crescent Operating, Inc. and Bank Boston, N.A., as
Rights Agent (filed as Exhibit 4.3 to September 30,
1998 Form 10-Q and incorporated by reference herein)
4.4 Second Amendment to Preferred Share Purchase Rights
Agreement dated as of March 4, 1999, between Crescent
Operating, Inc. and Bank Boston, N.A., as Rights Agent
(filed herewith)
10.1 Amended Stock Incentive Plan (filed as Exhibit 10.1 to
Form S-1 and incorporated by reference herein)
10.2 Intercompany Agreement between Crescent Operating, Inc.
and Crescent Real Estate Equities Limited Partnership
(filed as Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q for the Quarter Ended June 30, 1997
("June 30, 1997 Form 10-Q") and incorporated herein by
reference)
10.3 Amended and Restated Operating Agreement of Charter
Behavioral Health Systems, LLC (filed as Exhibit 10.3
to June 30, 1997 Form 10-Q and incorporated herein by
reference.)
10.5 Amended and Restated Credit and Security Agreement,
dated as of May 30, 1997, between Crescent Real Estate
Equities Limited Partnership and Crescent Operating,
Inc., together with related Note (filed as Exhibit 10.5
to the Company's September 30, 1997 Form 10-Q
("September 30, 1997 Form 10-Q")and incorporated herein
by reference)
10.6 Line of Credit and Security Agreement, dated as of May
21, 1997, between Crescent Real Estate Equities Limited
Partnership and Crescent Operating, Inc., together with
related Line of Credit Note (filed as Exhibit 10.6 to
September 30, 1997 Form 10-Q and incorporated by
reference herein)
10.7 Acquisition Agreement, dated as of February 10, 1997,
between Crescent Real Estate Equities Limited
Partnership and Carter-Crowley Properties, Inc. (filed
as Exhibit 10.7 to Form S-1 and incorporated by
reference herein)
10.10 Security Agreement dated September 22, 1997 between COI
Hotel Group, Inc., as debtor, and Crescent Real Estate
Equities Limited Partnership, as lender, together with
related $1 million promissory note (filed as Exhibit
10.10 to September 30, 1997 Form 10-Q and incorporated
by reference herein)
10.11 Security Agreement dated September 22, 1997 between COI
Hotel Group, Inc., as debtor, and Crescent Real Estate
Equities Limited Partnership, as lender, together with
related $800,000 promissory note (filed as Exhibit
10.11 to September 30, 1997 Form 10-Q and incorporated
by reference herein)
10.12 Amended and Restated Asset Management dated August 31,
1997, to be effective July 31, 1997, between Wine
Country Hotel, LLC and The Varma Group, Inc. (filed as
Exhibit 10.12 to September 30, 1997 Form 10-Q and
incorporated by reference herein)
10.13 Amended and Restated Asset Management Agreement dated
August 31, 1997, to be effective July 31, 1997, between
RoseStar Southwest, LLC and The Varma Group, Inc.
(filed as Exhibit 10.13 to September 30, 1997 Form 10-Q
and incorporated by reference herein)
10.14 Amended and Restated Asset Management Agreement dated
August 31, 1997, to be effective July 31, 1997, between
RoseStar Management LLC and The Varma Group, Inc.
(filed as Exhibit 10.14 to September 30, 1997 Form 10-Q
and incorporated by reference herein)
10.15 Agreement for Financial Services dated July 1, 1997,
between Crescent Real Estate Equities Company and
Petroleum Financial, Inc. (filed as Exhibit 10.15 to
September 30, 1997 Form 10-Q and incorporated by
reference herein)
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<PAGE> 27
10.16 Credit Agreement dated August 27, 1997, between
Crescent Operating, Inc. and NationsBank of Texas, N.A.
together with related $15.0 million promissory note
(filed as Exhibit 10.16 to September 30, 1997 Form 10-Q
and incorporated by reference herein)
10.17 Support Agreement dated August 27, 1997, between
Richard E. Rainwater, John Goff and Gerald Haddock in
favor of Crescent Real Estate Equities Company and
NationsBank of Texas, N.A. (filed as Exhibit 10.17 to
September 30, 1997 Form 10-Q and incorporated by
reference herein)
10.18 1997 Crescent Operating, Inc. Management Stock
Incentive Plan (filed as Exhibit 10.18 to the Company's
Annual Report on Form 10-K for the year ended December
31, 1997 ("December 31, 1997 Form 10-K") and
incorporated by reference herein)
10.19 Memorandum of Agreement executed November 16, 1997,
among Charter Behavioral Health Systems, LLC, Charter
Behavioral Health Systems, Inc. and Crescent Operating,
Inc. (filed as Exhibit 10.19 to December 31, 1997 Form
10-K and incorporated by reference herein)
10.20 Purchase Agreement dated August 31, 1997, by and among
Crescent Operating, Inc., RoseStar Management LLC,
Gerald W. Haddock, John C. Goff and Sanjay Varma (filed
as Exhibit 10.20 to December 31, 1997 Form 10-K and
incorporated by reference herein)
10.21 Stock Purchase Agreement dated August 31, 1997, by and
among Crescent Operating, Inc., Gerald W. Haddock, John
C. Goff and Sanjay Varma (filed as Exhibit 10.21 to
December 31, 1997 Form 10-K and incorporated by
reference herein)
10.22 Amended and Restated Lease Agreement, dated June 30,
1995 between Crescent Real Estate Equities Limited
Partnership and RoseStar Management LLC, relating to
the Denver Marriott City Center (filed as Exhibit 10.17
to the Annual Report on Form 10-K of Crescent Real
Estate Equities Company for the Fiscal Year Ended
December 31, 1995 (the "1995 10-K") and incorporated
herein by reference)
10.23 Lease Agreement, dated December 19, 1995 between
Crescent Real Estate Equities Limited Partnership and
RoseStar Management LLC, relating to the Hyatt Regency
Albuquerque (filed as Exhibit 10.16 to the 1995 10-K
and incorporated herein by reference)
10.24 Form of Amended and Restated Lease Agreement, dated
January 1, 1996, among Crescent Real Estate Equities
Limited Partnership, Mogul Management, LLC and RoseStar
Management LLC, relating to the Hyatt Regency Beaver
Creek (filed as Exhibit 10.12 to the 1995 10-K and
incorporated herein by reference)
10.25 Lease Agreement, dated July 26, 1996, between Canyon
Ranch, Inc. and Canyon Ranch Leasing, L.L.C., assigned
by Canyon Ranch, Inc. to Crescent Real Estate Equities
Limited Partnership pursuant to the Assignment and
Assumption Agreement of Master Lease, dated July 26,
1996 (filed as Exhibit 10.24 to the Quarterly Report on
Form 10-Q/A of Crescent Real Estate Equities Company
for the Quarter Ended June 30, 1997 (the "1997 10-Q")
and incorporated herein by reference)
10.26 Lease Agreement, dated November 18, 1996 between
Crescent Real Estate Equities Limited Partnership and
Wine Country Hotel, LLC (filed as Exhibit 10.25 to the
Annual Report on Form 10-K of Crescent Real Estate
Equities Company for the Fiscal Year Ended December 31,
1996 and incorporated herein by reference)
10.27 Lease Agreement, dated December 11, 1996, between
Canyon Ranch-Bellefontaine Associates, L.P. and Vintage
Resorts, L.L.C., as assigned by Canyon
Ranch-Bellefontaine Associates, L.P. to Crescent Real
Estate Funding VI, L.P. pursuant to the Assignment and
Assumption Agreement of Master Lease, dated December
11, 1996 (filed as Exhibit 10.26 to the 1997 10-Q and
incorporated herein by reference)
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<PAGE> 28
10.28 Master Lease Agreement, dated June 16, 1997, between
Crescent Real Estate Funding VII, L.P. and Charter
Behavioral Health Systems, LLC and its subsidiaries,
relating to the Facilities (filed as Exhibit 10.27 to
the 1997 10-Q and incorporated herein by reference)
10.29 Form of Indemnification Agreement (filed as Exhibit
10.29 to December 31, 1997 Form 10-K and incorporated
by reference herein)
10.30 Purchase Agreement, dated as of September 29, 1997,
between Crescent Operating, Inc. and Crescent Real
Estate Equities Limited Partnership, relating to the
purchase of Desert Mountain Development Corporation
(filed as Exhibit 10.30 to December 31, 1997 Form 10-K
and incorporated by reference herein)
10.31 Lease Agreement dated December 19, 1997, between
Crescent Real Estate Equities Limited Partnership, as
Lessor, and Wine Country Hotel, as Lessee, for lease of
Ventana Inn (filed as Exhibit 10.31 to the Company's
March 31, 1998 Form 10-Q ("March 31, 1998 Form 10-Q")
and incorporated by reference herein)
10.32 Lease Agreement dated September 22, 1997, between
Crescent Real Estate Equities Limited Partnership, as
lessor, and COI Hotel Group, Inc., as lessee, for lease
of Four Seasons Hotel, Houston (filed as Exhibit 10.32
to March 31, 1998 Form 10-Q and incorporated by
reference herein)
10.33 Asset Purchase Agreement dated December 19, 1997, among
Crescent Operating, Inc. Preco Machinery Sales, Inc.,
and certain individual Preco shareholders (filed as
Exhibit 10.33 to March 31, 1998 Form 10-Q and
incorporated by reference herein)
10.34 Asset Purchase Agreement dated April 30, 1998, among
Crescent Operating, Inc., Central Texas Equipment
Company, and certain individual Central Texas
shareholders (filed as Exhibit 10.34 to March 31, 1998
Form 10-Q and incorporated by reference herein)
10.35 Credit Agreement dated August 29, 1997 between Crescent
Real Estate Equities Limited Partnership, as lender,
and Desert Mountain Properties Limited Partnership, as
borrower, together with related Senior Note, Junior
Note and deed of trust (filed as Exhibit 10.35 to March
31, 1998 Form 10-Q and incorporated by reference
herein)
10.36 Buy-Out Agreement dated April 24, 1998, between
Crescent Operating, Inc. and Crescent Real Estate
Equities Limited Partnership (filed as Exhibit 10.36 to
March 31, 1998 Form 10-Q and incorporated by reference
herein)
10.37 Stock Acquisition Agreement and Plan of Merger dated
June 4, 1998, among Machinery, Inc., Oklahoma
Machinery, Inc., Crescent Machinery Company,
Crescent Operating, Inc. and certain individual
Machinery shareholders (filed as Exhibit 10.37 to June
30, 1998 Form 10-Q and incorporated by reference
herein)
10.38 Master Revolving Line of Credit Loan Agreement
(Borrowing Base and Warehouse) dated May 14, 1998,
between Desert Mountain Properties Limited Partnership
and National Bank of Arizona (filed as Exhibit 10.38 to
June 30, 1998 Form 10-Q and incorporated by reference
herein)
10.39 1997 Management Stock Incentive Plan (filed as Exhibit
10.39 to June 30, 1998 Form 10-Q and incorporated by
reference herein)
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<PAGE> 29
10.40 Credit and Security Agreement, dated as of September
21, 1998, between Crescent Real Estate Equities Limited
Partnership and Crescent Operating, Inc., together with
related Note (filed as Exhibit 10.40 to September 30,
1998 Form 10-Q and incorporated by reference herein)
10.41 First Amendment to Amended and Restated Pledge
Agreement, dated as of September 21, 1998, between
Crescent Real Estate Equities Limited Partnership and
Crescent Operating, Inc. (filed as Exhibit 10.41 to
September 30, 1998 Form 10-Q and incorporated by
reference herein)
10.42 First Amendment to Line of Credit and Security
Agreement, dated as of August 11, 1998, between
Crescent Real Estate Equities Limited Partnership and
Crescent Operating, Inc., together with related Note
(filed as Exhibit 10.42 to September 30, 1998 Form 10-Q
and incorporated by reference herein)
10.43 First Amendment to Amended and Restated Credit and
Security Agreement, dated as of August 11, 1998,
between Crescent Real Estate Equities Limited
Partnership and Crescent Operating, Inc. (filed as
Exhibit 10.43 to September 30, 1998 Form 10-Q and
incorporated by reference herein)
10.44 Second Amendment to Amended and Restated Credit and
Security Agreement, dated as of September 21, 1998,
between Crescent Real Estate Equities Limited
Partnership and Crescent Operating, Inc. (filed as
Exhibit 10.44 to September 30, 1998 Form 10-Q and
incorporated by reference herein)
10.45 Second Amendment to Line of Credit and Security
Agreement, dated as of September 21, 1998, between
Crescent Real Estate Equities Limited Partnership and
Crescent Operating, Inc. (filed as Exhibit 10.45 to
September 30, 1998 Form 10-Q and incorporated by
reference herein)
10.46 Agreement of Limited Partnership of COPI Colorado, L.P.
(filed as Exhibit 10.1 to that Schedule 13D Statement
dated September 28, 1998, filed by COPI Colorado, L.P.,
Crescent Operating, Inc., Gerald W. Haddock, John C.
Goff and Harry H. Frampton, III, and incorporated
herein by reference)
10.47 Contribution Agreement effective as of September 11,
1998, by and among Crescent Operating, Inc., Gerald W.
Haddock, John C. Goff and Harry H. Frampton, III (filed
as Exhibit 10.2 to that Schedule 13D Statement dated
September 28, 1998, filed by COPI Colorado, L.P.,
Crescent Operating, Inc., Gerald W. Haddock, John C.
Goff and Harry H. Frampton, III, and incorporated
herein by reference)
10.48 Agreement Regarding Schedules and Other Matters made as
of September 11, 1998, by and among Crescent Operating,
Inc., Gerald W. Haddock, John C. Goff and Harry H.
Frampton, III (filed as Exhibit 10.3 to that Schedule
13D Statement dated September 28, 1998, filed by COPI
Colorado, L.P., Crescent Operating Inc., Gerald W.
Haddock, John C. Goff and Harry H. Frampton, III, and
incorporated herein by reference)
10.49 Stock Purchase Agreement dated as of August 7, 1998 by
and among Western Traction Company, The Carlston Family
Trust, Ronald D. Carlston and Crescent Operating, Inc.
(filed as Exhibit 10.49 to September 30, 1998 Form 10-Q
and incorporated by reference herein)
10.50 Stock Purchase Agreement dated as of July 31, 1998 by
and among Harvey Equipment Center, Inc., L and H
Leasing Company, William J. Harvey, Roy E. Harvey, Jr.,
Betty J. Harvey and Crescent Operating, Inc. (filed as
Exhibit 10.50 to September 30, 1998 Form 10-Q and
incorporated by reference herein)
10.51 Credit Agreement dated as of July 28, 1998, between
Crescent Real Estate Equities Limited Partnership and
CRL Investments, Inc., together with the related Note
(filed as Exhibit 10.51 to September 30, 1998 Form 10-Q
and incorporated by reference herein)
10.52 Security Agreement dated as of July 28, 1998, between
Crescent Real Estate Equities Limited Partnership and
CRL Investments, Inc. (filed as Exhibit 10.52 to
September 30, 1998 Form 10-Q and incorporated by
reference herein)
29
<PAGE> 30
10.53 First Amendment to Credit Agreement effective as of
August 27, 1998, among Crescent Operating, Inc.,
NationsBank, N. A., and the Support Parties identified
therein (filed as Exhibit 10.53 to September 30, 1998
Form 10-Q and incorporated by reference herein)
10.54 Lease Agreement dated as of October 13, 1998, between
Crescent Real Estate Equities Limited Partnership and
Wine Country Golf Club, Inc., relating to Sonoma Golf
Club (filed as Exhibit 10.54 to September 30, 1998 Form
10-Q and incorporated by reference herein)
10.55 First Amendment to Lease Agreement effective December
31, 1998, between Canyon Ranch Leasing, L.L.C., and
Crescent Real Estate Equities Limited Partnership,
relating to Canyon Ranch - Tucson (filed as Exhibit
10.55 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998 ("December 31, 1998
Form 10-K") and incorporated by reference herein)
10.56 First Amendment to Lease Agreement effective April 1,
1996; Second Amendment to Lease Agreement effective
November 22, 1996; Third Amendment to Lease Agreement
effective August 12, 1998; and Fourth Amendment to
Lease Agreement effective December 31, 1998 between
RoseStar Southwest, LLC, and Crescent Real Estate
Funding II L.P., relating to Hyatt Regency Albuquerque
(filed as Exhibit 10.56 to December 31, 1998 Form 10-K
and incorporated by reference herein)
10.57 First Amendment to Lease Agreement effective December
31, 1998, between Wine Country Hotel, LLC, and Crescent
Real Estate Equities Limited Partnership, relating to
Sonoma Mission Inn & Spa (filed as Exhibit 10.57 to
December 31, 1998 Form 10-K and incorporated by
reference herein)
10.58 First Amendment to Amended and Restated Lease Agreement
effective December 31, 1998, between RoseStar
Management, LLC, and Crescent Real Estate Equities
Limited Partnership, relating to Marriott City Center,
Denver (filed as Exhibit 10.58 to December 31, 1998
Form 10-K and incorporated by reference herein)
10.59 First Amendment to Lease Agreement effective December
31, 1998, between Wine Country Hotel, LLC, and Crescent
Real Estate Equities Limited Partnership, relating to
Ventana Inn (filed as Exhibit 10.59 to December 31,
1998 Form 10-K and incorporated by reference herein)
10.60 First Amendment to Amended and Restated Lease Agreement
effective April 1, 1996 and Second Amendment to Amended
and Restated Lease Agreement effective December 31,
1998, between RoseStar Southwest, LLC, and Crescent
Real Estate Funding II, L.P., relating to Hyatt Regency
Beaver Creek (filed as Exhibit 10.60 to December 31,
1998 Form 10-K and incorporated by reference herein)
10.61 First Amendment to Lease Agreement effective December
31, 1998, between COI Hotel Group, Inc. and Crescent
Real Estate Equities Limited Partnership, relating to
Four Seasons - Houston (filed as Exhibit 10.61 to
December 31, 1998 Form 10-K and incorporated by
reference herein)
10.62 First Amendment to Lease Agreement effective December
31, 1998, between Wine Country Hotel, LLC and Crescent
Real Estate Funding VI, L.P., relating to Canyon Ranch
- Lenox (filed herewith)
30
<PAGE> 31
10.63 Master Guaranty effective December 31, 1998, by
Crescent Operating, Inc. for the benefit of Crescent
Real Estate Equities Limited Partnership, Crescent Real
Estate Funding II, L.P., and Crescent Real Estate
Funding VI, L.P., relating to leases for Hyatt Regency
Albuquerque, Hyatt Regency Beaver Creek, Canyon
Ranch-Lenox, Sonoma Mission Inn & Spa, Canyon Ranch -
Tucson, and Marriott City Center Denver (filed as
Exhibit 10.63 to December 31, 1998 Form 10-K and
incorporated by reference herein)
10.64 Guaranty of Lease effective December 19, 1997, by
Crescent Operating, Inc. for the benefit of Crescent
Real Estate Equities Limited Partnership, relating to
Ventana Inn (filed as Exhibit 10.64 to December 31,
1998 Form 10-K and incorporated by reference herein)
10.65 Amended and Restated Guaranty of Lease effective
December 31, 1998, by Crescent Operating, Inc. for the
benefit of Crescent Real Estate Equities Limited
Partnership, relating to Four Seasons Hotel - Houston
(filed as Exhibit 10.65 to December 31, 1998 Form 10-K
and incorporated by reference herein)
10.66 Amended and Restated Guaranty of Lease effective
December 31, 1998, by Crescent Operating, Inc. for the
benefit of Crescent Real Estate Equities Limited
Partnership, relating to Sonoma Golf Club (filed as
Exhibit 10.66 to December 31, 1998 Form 10-K and
incorporated by reference herein)
10.67 Credit Agreement dated August 11, 1995, between
Crescent Development Management Corp., as borrower, and
Crescent Real Estate Equities Limited Partnership, as
lender; First Amendment to Credit Agreement dated as of
April 15, 1997; Second Amendment to Credit Agreement
dated as of May 8, 1998; and related Note and Security
Agreement (filed as Exhibit 10.67 to December 31, 1998
Form 10-K and incorporated by reference herein)
10.68 Credit Agreement dated January 1, 1998, between
Crescent Development Management Corp., as borrower, and
Crescent Real Estate Equities Limited Partnership, as
lender, and related Note and Security Agreement (filed
as Exhibit 10.68 to December 31, 1998 Form 10-K and
incorporated by reference herein)
10.69 $3,100,000 Note dated February 29, 1996, made by
Crescent Development Management Corp. payable to
Crescent Real Estate Equities Limited Partnership
(filed as Exhibit 10.69 to December 31, 1998 Form 10-K
and incorporated by reference herein)
10.70 Credit Agreement dated January 1, 1999, between
Crescent Development Management Corp., as borrower, and
Crescent Real Estate Equities Limited Partnership, as
lender, and related Line of Credit Note and Security
Agreement (filed herewith)
10.71 Amended and Restated Credit Agreement dated January 1,
1999, between Crescent Development Management Corp., as
borrower, and Crescent Real Estate Equities Limited
Partnership, as lender, and related Line of Credit Note
and Amended and Restated Security Agreement (filed
herewith)
10.72 Purchase Agreement dated March 12, 1999, between
Crescent Operating, Inc. and Crescent Real Estate
Equities Limited Partnership, relating to sale of
interests in Crescent CS Holdings Corp., and Crescent
CS Holdings II Corp., and related Put Agreement of same
date (filed herewith)
10.73 Second Amendment to Lease Agreement effective April 1,
1999, between Wine Country Hotel, LLC, and Crescent
Real Estate Funding VI, L.P., relating to Canyon
Ranch-Lenox (filed herewith)
10.74 Master Revolving Line of Credit Loan Agreement
(Borrowing Base and Warehouse) dated May 14, 1998,
between Desert Mountain Properties Limited Partnership,
as borrower, and National Bank of Arizona, as lender;
Modification Agreement dated December 30, 1998; second
Modification Agreement dated March 31, 1999; and
related Promissory Note (Borrowing Base), Promissory
Note (Warehouse), Pledge Agreement, Deed of Trust, and
Amendment to Deed of Trust (filed herewith)
27 Financial Data Schedule
31
<PAGE> 32
(b) Reports on Form 8-K
Not Applicable
32
<PAGE> 33
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, on the 14th day of May, 1999.
CRESCENT OPERATING, INC.
(Registrant)
By /s/ Gerald W. Haddock
----------------------------------------------
Gerald W. Haddock, President and Chief
Executive Officer and Director (Principal
Executive Officer)
By /s/ Richard P. Knight
----------------------------------------------
Richard P. Knight, Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE> 34
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 First Amended and Restated Certificate of Incorporation
(filed as Exhibit 3.3 to the Company's registration
statement on Form S-1 dated July 12, 1997 ("Form S-1")
and incorporated by reference herein)
3.2 First Amended and Restated Bylaws (filed as Exhibit 3.4
to Form S-1 and incorporated by reference herein)
3.3 Amendment of Article V of First Amended and Restated
Bylaws (filed as Exhibit 3.3 to the Company's June 30,
1998 Form 10-Q ("June 30, 1998 Form 10-Q") and
incorporated by reference herein)
3.4 Repeal of Amendment of Article V of First Amended and
Restated Bylaws (filed as Exhibit 3.4 to the Company's
September 30, 1998 Form 10-Q ("September 30, 1998 Form
10-Q") and incorporated by reference herein)
4.1 Specimen stock certificate (filed as Exhibit 4.1 to
Form S-1 and incorporated by reference herein)
4.2 Preferred Share Purchase Rights Plan (filed as Exhibit
4.2 to Form S-1 and incorporated by reference herein)
</TABLE>
<PAGE> 35
<TABLE>
<S> <C>
4.3 First Amendment to Preferred Share Purchase Rights
Agreement dated as of September 25, 1998, between
Crescent Operating, Inc. and Bank Boston, N.A., as
Rights Agent (filed as Exhibit 4.3 to September 30,
1998 Form 10-Q and incorporated by reference herein)
4.4 Second Amendment to Preferred Share Purchase Rights
Agreement dated as of March 4, 1999, between Crescent
Operating, Inc. and Bank Boston, N.A., as Rights Agent
(filed herewith)
10.1 Amended Stock Incentive Plan (filed as Exhibit 10.1 to
Form S-1 and incorporated by reference herein)
10.2 Intercompany Agreement between Crescent Operating, Inc.
and Crescent Real Estate Equities Limited Partnership
(filed as Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q for the Quarter Ended June 30, 1997
("June 30, 1997 Form 10-Q") and incorporated herein by
reference)
10.3 Amended and Restated Operating Agreement of Charter
Behavioral Health Systems, LLC (filed as Exhibit 10.3
to June 30, 1997 Form 10-Q and incorporated herein by
reference.)
10.5 Amended and Restated Credit and Security Agreement,
dated as of May 30, 1997, between Crescent Real Estate
Equities Limited Partnership and Crescent Operating,
Inc., together with related Note (filed as Exhibit 10.5
to the Company's September 30, 1997 Form 10-Q
("September 30, 1997 Form 10-Q")and incorporated herein
by reference)
10.6 Line of Credit and Security Agreement, dated as of May
21, 1997, between Crescent Real Estate Equities Limited
Partnership and Crescent Operating, Inc., together with
related Line of Credit Note (filed as Exhibit 10.6 to
September 30, 1997 Form 10-Q and incorporated by
reference herein)
10.7 Acquisition Agreement, dated as of February 10, 1997,
between Crescent Real Estate Equities Limited
Partnership and Carter-Crowley Properties, Inc. (filed
as Exhibit 10.7 to Form S-1 and incorporated by
reference herein)
10.10 Security Agreement dated September 22, 1997 between COI
Hotel Group, Inc., as debtor, and Crescent Real Estate
Equities Limited Partnership, as lender, together with
related $1 million promissory note (filed as Exhibit
10.10 to September 30, 1997 Form 10-Q and incorporated
by reference herein)
10.11 Security Agreement dated September 22, 1997 between COI
Hotel Group, Inc., as debtor, and Crescent Real Estate
Equities Limited Partnership, as lender, together with
related $800,000 promissory note (filed as Exhibit
10.11 to September 30, 1997 Form 10-Q and incorporated
by reference herein)
10.12 Amended and Restated Asset Management dated August 31,
1997, to be effective July 31, 1997, between Wine
Country Hotel, LLC and The Varma Group, Inc. (filed as
Exhibit 10.12 to September 30, 1997 Form 10-Q and
incorporated by reference herein)
10.13 Amended and Restated Asset Management Agreement dated
August 31, 1997, to be effective July 31, 1997, between
RoseStar Southwest, LLC and The Varma Group, Inc.
(filed as Exhibit 10.13 to September 30, 1997 Form 10-Q
and incorporated by reference herein)
10.14 Amended and Restated Asset Management Agreement dated
August 31, 1997, to be effective July 31, 1997, between
RoseStar Management LLC and The Varma Group, Inc.
(filed as Exhibit 10.14 to September 30, 1997 Form 10-Q
and incorporated by reference herein)
10.15 Agreement for Financial Services dated July 1, 1997,
between Crescent Real Estate Equities Company and
Petroleum Financial, Inc. (filed as Exhibit 10.15 to
September 30, 1997 Form 10-Q and incorporated by
reference herein)
</TABLE>
<PAGE> 36
<TABLE>
<S> <C>
10.16 Credit Agreement dated August 27, 1997, between
Crescent Operating, Inc. and NationsBank of Texas, N.A.
together with related $15.0 million promissory note
(filed as Exhibit 10.16 to September 30, 1997 Form 10-Q
and incorporated by reference herein)
10.17 Support Agreement dated August 27, 1997, between
Richard E. Rainwater, John Goff and Gerald Haddock in
favor of Crescent Real Estate Equities Company and
NationsBank of Texas, N.A. (filed as Exhibit 10.17 to
September 30, 1997 Form 10-Q and incorporated by
reference herein)
10.18 1997 Crescent Operating, Inc. Management Stock
Incentive Plan (filed as Exhibit 10.18 to the Company's
Annual Report on Form 10-K for the year ended December
31, 1997 ("December 31, 1997 Form 10-K") and
incorporated by reference herein)
10.19 Memorandum of Agreement executed November 16, 1997,
among Charter Behavioral Health Systems, LLC, Charter
Behavioral Health Systems, Inc. and Crescent Operating,
Inc. (filed as Exhibit 10.19 to December 31, 1997 Form
10-K and incorporated by reference herein)
10.20 Purchase Agreement dated August 31, 1997, by and among
Crescent Operating, Inc., RoseStar Management LLC,
Gerald W. Haddock, John C. Goff and Sanjay Varma (filed
as Exhibit 10.20 to December 31, 1997 Form 10-K and
incorporated by reference herein)
10.21 Stock Purchase Agreement dated August 31, 1997, by and
among Crescent Operating, Inc., Gerald W. Haddock, John
C. Goff and Sanjay Varma (filed as Exhibit 10.21 to
December 31, 1997 Form 10-K and incorporated by
reference herein)
10.22 Amended and Restated Lease Agreement, dated June 30,
1995 between Crescent Real Estate Equities Limited
Partnership and RoseStar Management LLC, relating to
the Denver Marriott City Center (filed as Exhibit 10.17
to the Annual Report on Form 10-K of Crescent Real
Estate Equities Company for the Fiscal Year Ended
December 31, 1995 (the "1995 10-K") and incorporated
herein by reference)
10.23 Lease Agreement, dated December 19, 1995 between
Crescent Real Estate Equities Limited Partnership and
RoseStar Management LLC, relating to the Hyatt Regency
Albuquerque (filed as Exhibit 10.16 to the 1995 10-K
and incorporated herein by reference)
10.24 Form of Amended and Restated Lease Agreement, dated
January 1, 1996, among Crescent Real Estate Equities
Limited Partnership, Mogul Management, LLC and RoseStar
Management LLC, relating to the Hyatt Regency Beaver
Creek (filed as Exhibit 10.12 to the 1995 10-K and
incorporated herein by reference)
10.25 Lease Agreement, dated July 26, 1996, between Canyon
Ranch, Inc. and Canyon Ranch Leasing, L.L.C., assigned
by Canyon Ranch, Inc. to Crescent Real Estate Equities
Limited Partnership pursuant to the Assignment and
Assumption Agreement of Master Lease, dated July 26,
1996 (filed as Exhibit 10.24 to the Quarterly Report on
Form 10-Q/A of Crescent Real Estate Equities Company
for the Quarter Ended June 30, 1997 (the "1997 10-Q")
and incorporated herein by reference)
10.26 Lease Agreement, dated November 18, 1996 between
Crescent Real Estate Equities Limited Partnership and
Wine Country Hotel, LLC (filed as Exhibit 10.25 to the
Annual Report on Form 10-K of Crescent Real Estate
Equities Company for the Fiscal Year Ended December 31,
1996 and incorporated herein by reference)
10.27 Lease Agreement, dated December 11, 1996, between
Canyon Ranch-Bellefontaine Associates, L.P. and Vintage
Resorts, L.L.C., as assigned by Canyon
Ranch-Bellefontaine Associates, L.P. to Crescent Real
Estate Funding VI, L.P. pursuant to the Assignment and
Assumption Agreement of Master Lease, dated December
11, 1996 (filed as Exhibit 10.26 to the 1997 10-Q and
incorporated herein by reference)
</TABLE>
<PAGE> 37
<TABLE>
<S> <C>
10.28 Master Lease Agreement, dated June 16, 1997, between
Crescent Real Estate Funding VII, L.P. and Charter
Behavioral Health Systems, LLC and its subsidiaries,
relating to the Facilities (filed as Exhibit 10.27 to
the 1997 10-Q and incorporated herein by reference)
10.29 Form of Indemnification Agreement (filed as Exhibit
10.29 to December 31, 1997 Form 10-K and incorporated
by reference herein)
10.30 Purchase Agreement, dated as of September 29, 1997,
between Crescent Operating, Inc. and Crescent Real
Estate Equities Limited Partnership, relating to the
purchase of Desert Mountain Development Corporation
(filed as Exhibit 10.30 to December 31, 1997 Form 10-K
and incorporated by reference herein)
10.31 Lease Agreement dated December 19, 1997, between
Crescent Real Estate Equities Limited Partnership, as
Lessor, and Wine Country Hotel, as Lessee, for lease of
Ventana Inn (filed as Exhibit 10.31 to the Company's
March 31, 1998 Form 10-Q ("March 31, 1998 Form 10-Q")
and incorporated by reference herein)
10.32 Lease Agreement dated September 22, 1997, between
Crescent Real Estate Equities Limited Partnership, as
lessor, and COI Hotel Group, Inc., as lessee, for lease
of Four Seasons Hotel, Houston (filed as Exhibit 10.32
to March 31, 1998 Form 10-Q and incorporated by
reference herein)
10.33 Asset Purchase Agreement dated December 19, 1997, among
Crescent Operating, Inc. Preco Machinery Sales, Inc.,
and certain individual Preco shareholders (filed as
Exhibit 10.33 to March 31, 1998 Form 10-Q and
incorporated by reference herein)
10.34 Asset Purchase Agreement dated April 30, 1998, among
Crescent Operating, Inc., Central Texas Equipment
Company, and certain individual Central Texas
shareholders (filed as Exhibit 10.34 to March 31, 1998
Form 10-Q and incorporated by reference herein)
10.35 Credit Agreement dated August 29, 1997 between Crescent
Real Estate Equities Limited Partnership, as lender,
and Desert Mountain Properties Limited Partnership, as
borrower, together with related Senior Note, Junior
Note and deed of trust (filed as Exhibit 10.35 to March
31, 1998 Form 10-Q and incorporated by reference
herein)
10.36 Buy-Out Agreement dated April 24, 1998, between
Crescent Operating, Inc. and Crescent Real Estate
Equities Limited Partnership (filed as Exhibit 10.36 to
March 31, 1998 Form 10-Q and incorporated by reference
herein)
10.37 Stock Acquisition Agreement and Plan of Merger dated
June 4, 1998, among Machinery, Inc., Oklahoma
Machinery, Inc., Crescent Machinery Company,
Crescent Operating, Inc. and certain individual
Machinery shareholders (filed as Exhibit 10.37 to June
30, 1998 Form 10-Q and incorporated by reference
herein)
10.38 Master Revolving Line of Credit Loan Agreement
(Borrowing Base and Warehouse) dated May 14, 1998,
between Desert Mountain Properties Limited Partnership
and National Bank of Arizona (filed as Exhibit 10.38 to
June 30, 1998 Form 10-Q and incorporated by reference
herein)
10.39 1997 Management Stock Incentive Plan (filed as Exhibit
10.39 to June 30, 1998 Form 10-Q and incorporated by
reference herein)
</TABLE>
<PAGE> 38
<TABLE>
<S> <C>
10.40 Credit and Security Agreement, dated as of September
21, 1998, between Crescent Real Estate Equities Limited
Partnership and Crescent Operating, Inc., together with
related Note (filed as Exhibit 10.40 to September 30,
1998 Form 10-Q and incorporated by reference herein)
10.41 First Amendment to Amended and Restated Pledge
Agreement, dated as of September 21, 1998, between
Crescent Real Estate Equities Limited Partnership and
Crescent Operating, Inc. (filed as Exhibit 10.41 to
September 30, 1998 Form 10-Q and incorporated by
reference herein)
10.42 First Amendment to Line of Credit and Security
Agreement, dated as of August 11, 1998, between
Crescent Real Estate Equities Limited Partnership and
Crescent Operating, Inc., together with related Note
(filed as Exhibit 10.42 to September 30, 1998 Form 10-Q
and incorporated by reference herein)
10.43 First Amendment to Amended and Restated Credit and
Security Agreement, dated as of August 11, 1998,
between Crescent Real Estate Equities Limited
Partnership and Crescent Operating, Inc. (filed as
Exhibit 10.43 to September 30, 1998 Form 10-Q and
incorporated by reference herein)
10.44 Second Amendment to Amended and Restated Credit and
Security Agreement, dated as of September 21, 1998,
between Crescent Real Estate Equities Limited
Partnership and Crescent Operating, Inc. (filed as
Exhibit 10.44 to September 30, 1998 Form 10-Q and
incorporated by reference herein)
10.45 Second Amendment to Line of Credit and Security
Agreement, dated as of September 21, 1998, between
Crescent Real Estate Equities Limited Partnership and
Crescent Operating, Inc. (filed as Exhibit 10.45 to
September 30, 1998 Form 10-Q and incorporated by
reference herein)
10.46 Agreement of Limited Partnership of COPI Colorado, L.P.
(filed as Exhibit 10.1 to that Schedule 13D Statement
dated September 28, 1998, filed by COPI Colorado, L.P.,
Crescent Operating, Inc., Gerald W. Haddock, John C.
Goff and Harry H. Frampton, III, and incorporated
herein by reference)
10.47 Contribution Agreement effective as of September 11,
1998, by and among Crescent Operating, Inc., Gerald W.
Haddock, John C. Goff and Harry H. Frampton, III (filed
as Exhibit 10.2 to that Schedule 13D Statement dated
September 28, 1998, filed by COPI Colorado, L.P.,
Crescent Operating, Inc., Gerald W. Haddock, John C.
Goff and Harry H. Frampton, III, and incorporated
herein by reference)
10.48 Agreement Regarding Schedules and Other Matters made as
of September 11, 1998, by and among Crescent Operating,
Inc., Gerald W. Haddock, John C. Goff and Harry H.
Frampton, III (filed as Exhibit 10.3 to that Schedule
13D Statement dated September 28, 1998, filed by COPI
Colorado, L.P., Crescent Operating Inc., Gerald W.
Haddock, John C. Goff and Harry H. Frampton, III, and
incorporated herein by reference)
10.49 Stock Purchase Agreement dated as of August 7, 1998 by
and among Western Traction Company, The Carlston Family
Trust, Ronald D. Carlston and Crescent Operating, Inc.
(filed as Exhibit 10.49 to September 30, 1998 Form 10-Q
and incorporated by reference herein)
10.50 Stock Purchase Agreement dated as of July 31, 1998 by
and among Harvey Equipment Center, Inc., L and H
Leasing Company, William J. Harvey, Roy E. Harvey, Jr.,
Betty J. Harvey and Crescent Operating, Inc. (filed as
Exhibit 10.50 to September 30, 1998 Form 10-Q and
incorporated by reference herein)
10.51 Credit Agreement dated as of July 28, 1998, between
Crescent Real Estate Equities Limited Partnership and
CRL Investments, Inc., together with the related Note
(filed as Exhibit 10.51 to September 30, 1998 Form 10-Q
and incorporated by reference herein)
10.52 Security Agreement dated as of July 28, 1998, between
Crescent Real Estate Equities Limited Partnership and
CRL Investments, Inc. (filed as Exhibit 10.52 to
September 30, 1998 Form 10-Q and incorporated by
reference herein)
</TABLE>
<PAGE> 39
<TABLE>
<S> <C>
10.53 First Amendment to Credit Agreement effective as of
August 27, 1998, among Crescent Operating, Inc.,
NationsBank, N. A., and the Support Parties identified
therein (filed as Exhibit 10.53 to September 30, 1998
Form 10-Q and incorporated by reference herein)
10.54 Lease Agreement dated as of October 13, 1998, between
Crescent Real Estate Equities Limited Partnership and
Wine Country Golf Club, Inc., relating to Sonoma Golf
Club (filed as Exhibit 10.54 to September 30, 1998 Form
10-Q and incorporated by reference herein)
10.55 First Amendment to Lease Agreement effective December
31, 1998, between Canyon Ranch Leasing, L.L.C., and
Crescent Real Estate Equities Limited Partnership,
relating to Canyon Ranch - Tucson (filed as Exhibit
10.55 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998 ("December 31, 1998
Form 10-K") and incorporated by reference herein)
10.56 First Amendment to Lease Agreement effective April 1,
1996; Second Amendment to Lease Agreement effective
November 22, 1996; Third Amendment to Lease Agreement
effective August 12, 1998; and Fourth Amendment to
Lease Agreement effective December 31, 1998 between
RoseStar Southwest, LLC, and Crescent Real Estate
Funding II L.P., relating to Hyatt Regency Albuquerque
(filed as Exhibit 10.56 to December 31, 1998 Form 10-K
and incorporated by reference herein)
10.57 First Amendment to Lease Agreement effective December
31, 1998, between Wine Country Hotel, LLC, and Crescent
Real Estate Equities Limited Partnership, relating to
Sonoma Mission Inn & Spa (filed as Exhibit 10.57 to
December 31, 1998 Form 10-K and incorporated by
reference herein)
10.58 First Amendment to Amended and Restated Lease Agreement
effective December 31, 1998, between RoseStar
Management, LLC, and Crescent Real Estate Equities
Limited Partnership, relating to Marriott City Center,
Denver (filed as Exhibit 10.58 to December 31, 1998
Form 10-K and incorporated by reference herein)
10.59 First Amendment to Lease Agreement effective December
31, 1998, between Wine Country Hotel, LLC, and Crescent
Real Estate Equities Limited Partnership, relating to
Ventana Inn (filed as Exhibit 10.59 to December 31,
1998 Form 10-K and incorporated by reference herein)
10.60 First Amendment to Amended and Restated Lease Agreement
effective April 1, 1996 and Second Amendment to Amended
and Restated Lease Agreement effective December 31,
1998, between RoseStar Southwest, LLC, and Crescent
Real Estate Funding II, L.P., relating to Hyatt Regency
Beaver Creek (filed as Exhibit 10.60 to December 31,
1998 Form 10-K and incorporated by reference herein)
10.61 First Amendment to Lease Agreement effective December
31, 1998, between COI Hotel Group, Inc. and Crescent
Real Estate Equities Limited Partnership, relating to
Four Seasons - Houston (filed as Exhibit 10.61 to
December 31, 1998 Form 10-K and incorporated by
reference herein)
10.62 First Amendment to Lease Agreement effective December
31, 1998, between Wine Country Hotel, LLC and Crescent
Real Estate Funding VI, L.P., relating to Canyon Ranch
- Lenox (filed herewith)
</TABLE>
<PAGE> 40
<TABLE>
<S> <C>
10.63 Master Guaranty effective December 31, 1998, by
Crescent Operating, Inc. for the benefit of Crescent
Real Estate Equities Limited Partnership, Crescent Real
Estate Funding II, L.P., and Crescent Real Estate
Funding VI, L.P., relating to leases for Hyatt Regency
Albuquerque, Hyatt Regency Beaver Creek, Canyon
Ranch-Lenox, Sonoma Mission Inn & Spa, Canyon Ranch -
Tucson, and Marriott City Center Denver (filed as
Exhibit 10.63 to December 31, 1998 Form 10-K and
incorporated by reference herein)
10.64 Guaranty of Lease effective December 19, 1997, by
Crescent Operating, Inc. for the benefit of Crescent
Real Estate Equities Limited Partnership, relating to
Ventana Inn (filed as Exhibit 10.64 to December 31,
1998 Form 10-K and incorporated by reference herein)
10.65 Amended and Restated Guaranty of Lease effective
December 31, 1998, by Crescent Operating, Inc. for the
benefit of Crescent Real Estate Equities Limited
Partnership, relating to Four Seasons Hotel - Houston
(filed as Exhibit 10.65 to December 31, 1998 Form 10-K
and incorporated by reference herein)
10.66 Amended and Restated Guaranty of Lease effective
December 31, 1998, by Crescent Operating, Inc. for the
benefit of Crescent Real Estate Equities Limited
Partnership, relating to Sonoma Golf Club (filed as
Exhibit 10.66 to December 31, 1998 Form 10-K and
incorporated by reference herein)
10.67 Credit Agreement dated August 11, 1995, between
Crescent Development Management Corp., as borrower, and
Crescent Real Estate Equities Limited Partnership, as
lender; First Amendment to Credit Agreement dated as of
April 15, 1997; Second Amendment to Credit Agreement
dated as of May 8, 1998; and related Note and Security
Agreement (filed as Exhibit 10.67 to December 31, 1998
Form 10-K and incorporated by reference herein)
10.68 Credit Agreement dated January 1, 1998, between
Crescent Development Management Corp., as borrower, and
Crescent Real Estate Equities Limited Partnership, as
lender, and related Note and Security Agreement (filed
as Exhibit 10.68 to December 31, 1998 Form 10-K and
incorporated by reference herein)
10.69 $3,100,000 Note dated February 29, 1996, made by
Crescent Development Management Corp. payable to
Crescent Real Estate Equities Limited Partnership
(filed as Exhibit 10.69 to December 31, 1998 Form 10-K
and incorporated by reference herein)
10.70 Credit Agreement dated January 1, 1999, between
Crescent Development Management Corp., as borrower, and
Crescent Real Estate Equities Limited Partnership, as
lender, and related Line of Credit Note and Security
Agreement (filed herewith)
10.71 Amended and Restated Credit Agreement dated January 1,
1999, between Crescent Development Management Corp., as
borrower, and Crescent Real Estate Equities Limited
Partnership, as lender, and related Line of Credit Note
and Amended and Restated Security Agreement (filed
herewith)
10.72 Purchase Agreement dated March 12, 1999, between
Crescent Operating, Inc. and Crescent Real Estate
Equities Limited Partnership, relating to sale of
interests in Crescent CS Holdings Corp., and Crescent
CS Holdings II Corp., and related Put Agreement of same
date (filed herewith)
10.73 Second Amendment to Lease Agreement effective April 1,
1999, between Wine Country Hotel, LLC, and Crescent
Real Estate Funding VI, L.P., relating to Canyon
Ranch-Lenox (filed herewith)
10.74 Master Revolving Line of Credit Loan Agreement
(Borrowing Base and Warehouse) dated May 14, 1998,
between Desert Mountain Properties Limited Partnership,
as borrower, and National Bank of Arizona, as lender;
Modification Agreement dated December 30, 1998; second
Modification Agreement dated March 31, 1999; and
related Promissory Note (Borrowing Base), Promissory
Note (Warehouse), Pledge Agreement, Deed of Trust, and
Amendment to Deed of Trust (filed herewith)
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 4.4
SECOND AMENDMENT TO PREFERRED SHARE
PURCHASE RIGHTS AGREEMENT
This Second Amendment to Preferred Share Purchase Rights Agreement
(this "Amendment") is made and entered into effective this 4th day of March 1999
by and between Crescent Operating, Inc., a Delaware corporation (the "Company"),
and BankBoston, N.A., as Rights Agent (the "Rights Agent"), with reference to
that certain Preferred Share Purchase Rights Agreement, dated as of June 11,
1997, by and between the Company and the Rights Agent, as previously amended
(the "Rights Agreement"). Each capitalized term used in this Amendment and not
defined herein shall have the respective meaning ascribed to such term in the
Rights Agreement.
WHEREAS, the Company is the sole general partner of and owns a 50%
partnership interest in COPI Colorado, L.P., a Delaware limited partnership
("COPI Colorado");
WHEREAS, the Company believes that COPI Colorado is or should be
treated as a Subsidiary of the Company;
WHEREAS, the Board of Directors of the Company has approved and adopted
this Amendment and the terms hereof for the purpose of clarifying that, for so
long as certain conditions are met, COPI Colorado shall be characterized as a
Subsidiary of the Company for purposes of the Rights Agreement;
WHEREAS, the Company has authorized certain of its officers and
directors to execute and deliver this Amendment on behalf of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the Company and the Rights Agent agree as follows.
1. Amendment to Section 1(aa). Section 1(aa) of the Rights Agreement
is hereby amended by deleting such section in its entirety and substituting for
such section, as a replacement Section 1(aa), the following:
(aa) "Subsidiary" of any Person shall mean any corporation or
other entity of which a majority of the voting power of the voting
equity securities or equity interest is owned, directly or
indirectly, by such Person. "Subsidiary," when used with reference
to the Company, also shall include COPI Colorado as long as (i)
the Company is the sole general partner of COPI Colorado and (ii)
the Company owns more than 20% of the aggregate partnership
interests in COPI Colorado.
2. Addition of New Section 1(dd). A new Section 1(dd) is hereby added
to the Rights Agreement, which Section 1(dd) shall read as follows:
(dd) "Crescent" shall mean Crescent Real Estate Equities Company,
a Texas real estate investment trust.
<PAGE> 2
3. Amendment to Exhibit C-1. Exhibit C-1 is hereby amended by
deleting such exhibit in its entirety and substituting for such exhibit, as a
replacement, the attached Exhibit C-1, dated March 1999.
4. Effect on Rights Agreement. On or after the date of this
Amendment, each reference in the Rights Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import referring to the Rights
Agreement shall mean and be a reference to the Rights Agreement as amended to
date, and this Amendment, along with all previous amendments, shall be deemed to
be a part of the Rights Agreement. Except as specifically amended by this
Amendment, (i) the Rights Agreement is hereby ratified and confirmed, and (ii)
the terms and provisions of the Rights Agreement shall remain in full force and
effect.
5. Applicable Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to contracts
made and to be performed entirely within such State.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date written above.
CRESCENT OPERATING, INC.
By:
-------------------------------
Its Executive Vice President &
---------------------------
Chief Operating Officer
---------------------------
BANKBOSTON, N.A.
By:
-------------------------------
Its
---------------------------
-2-
<PAGE> 3
EXHIBIT C-1
(MARCH 1999)
FORM OF
SUMMARY OF RIGHT TO PURCHASE
PREFERRED SHARES
On June 12, 1997, the Board of Directors of Crescent Operating, Inc.
(the "Company") declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of common stock, par value $.01 per share,
of the Company (the "Common Shares"). The dividend was payable on June 12, 1997
to the stockholders of record on that date (the "Record Date"). Each Right
entitles the registered holder to purchase from the Company one one-hundredth of
a share of Series A Junior Participating Preferred Stock, par value $.01 per
share, of the Company (the "Preferred Shares") at a price of $5 per one
one-hundredth of a Preferred Share (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Agreement (as amended, the "Rights Agreement") between the Company and
BankBoston, N.A., as Rights Agent (the "Rights Agent"). Until the earlier to
occur of (i) 10 days following a public announcement that a person or group of
affiliated or associated persons has acquired beneficial ownership of 10% or
more of the outstanding Common Shares (subject to certain exceptions described
generally below, an "Acquiring Person") or (ii) 10 business days (or such later
date as may be determined by action of the Board of Directors of the Company
prior to such time as any person or group of affiliated persons becomes an
Acquiring Person) following the commencement of, or announcement of an intention
to make, a tender offer or exchange offer the consummation of which would result
in any person or group of affiliated persons becoming an Acquiring Person (the
earlier of such dates being the "Rights Distribution Date"), the Rights will be
evidenced, with respect to any of the Common Share certificates Outstanding as
of the Record Date, by such Common Share certificate with a copy of this Summary
of Rights attached thereto. The Rights Agreement contains exceptions from its
operating provisions for (i) the Company, (ii) any subsidiary of the Company,
including (as long as certain conditions are met), COPI Colorado, L.P., (iii)
any employee benefit plan of the Company or of any subsidiary of the Company, or
any entity holding Common Shares for or pursuant to the terms of any such plan,
(iv) Crescent Real Estate Equities Company and its controlled affiliates and its
directors and executive officers and their controlled affiliates, and (v) Gotham
Partners, L.P., together with its affiliates and associates, but only if and to
the extent that Gotham Partners, L.P., together with its affiliates and
associates, have beneficial ownership of 15% or less of the outstanding Common
Shares. In addition, the Rights Agreement provides that if a person has become
an Acquiring Person inadvertently, and such person divests as promptly as
practicable a sufficient number of Common Shares so as to no longer be an
Acquiring Person, then such person will not be deemed to be an Acquiring Person
for purposes of the Rights Agreement.
The Rights Agreement provides that, until the Rights Distribution Date
(or earlier redemption or expiration of the Rights), the Rights will be
transferred with and only with the Common Shares. Until the Rights Distribution
Date (or earlier redemption or expiration of the Rights), new Common Share
certificates issued after the Record Date upon transfer or new issuance of
Common Shares will contain a notation incorporating the Rights Agreement by
reference. Until the Rights Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Shares outstanding as of the Record Date, even without such notation or a
copy of this Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificates. As soon as practicable following the Rights Distribution Date,
separate certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the Common
C-1-1
<PAGE> 4
Shares as of the close of business on the Rights Distribution Date and such
separate Right Certificates alone will evidence the Rights.
The Rights are not exercisable until the Rights Distribution Date. The
Rights will expire on the date which is the tenth anniversary of the Record Date
(the "Final Expiration Date"), unless the Final Expiration Date is extended or
unless the Rights are earlier redeemed or exchanged by the Company, in each
case, as described below.
The Purchase Price payable, and the number of Preferred Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Shares; (ii) upon the grant to holders of the Preferred Shares of certain rights
or warrants to subscribe for or purchase Preferred Shares at a price, or
securities convertible into Preferred Shares with a conversion price, less than
the then-current market price of the Preferred Shares; or (iii) upon the
distribution to holders of the Preferred Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Preferred Shares) or of subscription
rights or warrants (other than those referred to above).
The number of outstanding Rights and the number of one one-hundredths
of a Preferred Share issuable upon exercise of each Right are also subject to
adjustment in the event of a stock split of the Common Shares or a stock
dividend on the Common Shares payable in Common Shares or subdivisions,
consolidations or combinations of the Common Shares occurring, in any such case,
prior to the Rights Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an aggregate
dividend of 100 times the dividend declared per Common Share. In the event of
liquidation, the holders of the Preferred Shares will be entitled to a minimum
preferential liquidation payment of $100 per share but will be entitled to an
aggregate payment of 100 times the payment made per Common Share. Each Preferred
Share will have 100 votes, voting together with the Common Shares. Finally, in
the event of any merger, consolidation or other transaction in which Common
Shares are exchanged, each Preferred Share will be entitled to receive 100 times
the amount received per Common Share. These rights are protected by customary
antidilution provisions.
Because of the nature of the Preferred Shares' dividend, liquidation
and voting rights, the value of the one one-hundredth interest in a Preferred
Share purchasable upon exercise of each Right should approximate the value of
one Common Share.
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold after a person or group has become an Acquiring Person, proper
provision will be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the Right, that number of shares of common stock of the acquiring company
which at the time of such transaction will have a market value of two times the
exercise price of the Right. In the event that any person or group of affiliated
or associated persons becomes an Acquiring Person, proper provision shall be
made so that each holder of a Right, other than Rights beneficially owned by the
Acquiring Person (which will thereafter be void), will thereafter have the right
to receive upon exercise that number of Common Shares having a market value of
two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and
prior to the acquisition by such person or group of 50% or more of the
outstanding Common Shares, the Board of Directors of the Company may exchange
the Rights (other than Rights owned by such person or group which will have
become void), in whole or in part, at an exchange ratio of one Common Share, or
one one-hundredth of a Preferred Share, per Right (subject to adjustment).
C-1-2
<PAGE> 5
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price.
No fractional Preferred Shares will be issued (other than fractions
which are integral multiples of one one-hundredth of a Preferred Share, which
may, at the election of the Company, be evidenced by depositary receipts) and,
in lieu thereof, an adjustment in cash will be made based on the market price of
the Preferred Shares on the last trading day prior to the date of exercise.
At any time prior to the time that any person or group of affiliated or
associated persons becomes an Acquiring Person, the Board of Directors of the
Company may redeem the Rights in whole, but not in part, at a price of $.01 per
Right (the "Redemption Price"). The redemption of the Rights may be made
effective at such time on such basis with such conditions as the Board of
Directors in its sole discretion may establish. Immediately upon any redemption
of the Rights, the right to exercise the Rights will terminate and the only
right of the holders of Rights will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, except that from and
after such time as any person or group of affiliated or associated persons
becomes an Acquiring Person no such amendment may adversely affect the interests
of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitations the right
to vote or to receive dividends.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1997 (File No. 0-22725). In addition, a copy of
the First Amendment to the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1998. A copy of the Second Amendment to
the Rights Agreement will be filed with the Securities and Exchange Commission
as an Exhibit to the Company's Annual Report on Form 10-K for the year ended
December 31, 1998. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.
C-1-3
<PAGE> 1
EXHIBIT 10.62
CANYON RANCH-LENOX
FIRST AMENDMENT TO LEASE AGREEMENT
This FIRST AMENDMENT TO LEASE AGREEMENT (the "Amendment") is made and
entered into effective as of the 31st day of December, 1998, between WINE
COUNTRY HOTEL, LLC, a Delaware limited liability company, d/b/a VINTAGE RESORTS,
LLC ("Lessee") and CRESCENT REAL ESTATE FUNDING VI, L.P, a Delaware limited
partnership ("Lessor").
RECITALS:
WHEREAS, Canyon Ranch-Bellefontaine Associates, L.P., a Delaware
limited partnership ("Canyon Ranch") and Lessee entered into that certain Lease
Agreement dated as of December 11, 1996 (the "Lease"), pursuant to which Lessee
leased from Canyon Ranch a resort facility and related assets located in
Berkshire County, Massachusetts, and known as the "Canyon Ranch-Lenox"
(hereinafter called the "Leased Property"); and
WHEREAS, pursuant to that certain Assignment and Assumption of Master
Lease dated as of December 11, 1996, all of Canyon Ranch's interest and estate
as lessor under the Lease was assigned to Lessor, who thereupon assumed all of
Canyon Ranch's liabilities and obligations under the Lease; and
WHEREAS, Lessor and Lessee agreed that if Lessor made substantial
capital investments in the Leased Property, the Lease would be amended to
increase the amount of rental payable thereunder and Lessor has made substantial
capital investment in the Leased Property; and
WHEREAS, Lessor has agreed to delete certain provisions of the Lease
that impose minimum net worth requirements on the Lessee and limit the
distributions by Lessee of its earnings to its beneficial owners in
consideration of the delivery of a guaranty of Lessee's obligations under the
Lease by Crescent Operating, Inc. ("COI"); and
WHEREAS, Lessor and Lessee mutually desire to quantify the value of
working capital associated with the Leased Property and transferred from Lessor
to Lessee upon the commencement of the term of the Lease and to evidence their
mutual understanding and agreement of the value of working capital associated
with the Leased Property to be redelivered to Lessor by Lessee at the expiration
or earlier termination of the Lease; and
WHEREAS, Lessor and Lessee desire to amend the Lease to increase the
rental payable thereunder, to delete the provisions in the Lease described
above, to evidence their understanding regarding working capital and to make
certain other amendments thereto as hereinafter provided.
<PAGE> 2
AGREEMENT:
NOW THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged by the parties hereto, the
parties hereby agree as follows:
1. Definitions. Capitalized terms used but not defined herein shall
have the meanings assigned to them in the Lease.
2. Amendments to Lease. The Lease is hereby amended as follows:
a. Section 4.1 of the Lease is modified to increase the Base
Rent as follows: (i) for the period of August 18, 1998 through December
31, 1998 (the "1998 Period"), by the amount of $331,846.00 per year
during the Term and (ii) effective as of January 1, 1999 by the
additional amount of $568,154.00 per year during the Term. The
additional Base Rent for the 1998 Period is due and payable upon the
effective date of this Amendment and the Base Rent payable under the
Lease on a monthly basis, effective as of January 1, 1999 is
$275,000.00 per month.
b. The period is deleted at the end of the next to last
sentence of Section 4.2(f) of the Lease and the following clause is
inserted after the words "from Lessee": "; provided, in no event shall
Lessor be required to refund any portion of the Guaranteed Percentage
Rent (as hereinafter defined) previously paid by Lessee to Lessor."
c. A new subsection (i) is inserted at the end of Section 4.2
of the Lease, which shall read in its entirety as follows:
(i) Anything in this Lease to the contrary
notwithstanding, eighty-five percent (85%) of the Percentage
Rent payable in any quarter during the term of this Lease
(herein called the "Guaranteed Percentage Rent") shall not be
subject to adjustment under Section 4.2(f) or Section 4.2(h)
hereof.
d. In consideration of the execution and delivery by COI of a
guaranty of all of Lessee's obligations under the Lease, Section 7.7
and Section 7.9 of the Lease are hereby deleted in their entirety and
shall be of no further force and effect.
e. Section 7.10 of the Lease is deleted in its entirety and
the following inserted in lieu thereof:
Section 7.10. Working Capital. At the commencement of the
term of this Lease, there existed working capital pertaining
to the Leased Property (the "Working Capital") in the initial
aggregate positive balance of $468,531.00 (the "Initial
Working Capital Balance"). Within thirty (30) days after the
date of expiration or earlier termination of this Lease,
Lessor and Lessee will work together in good faith to
determine the balance of Working Capital as of such date
-2-
<PAGE> 3
(the "Ending Working Capital Balance"). If the Ending Working
Capital Balance is less than the Initial Working Capital Balance,
Lessee shall pay over to Lessor cash in the amount of such
deficiency, within thirty (30) days of such determination. If the
Ending Working Capital Balance exceeds the Initial Working Capital
Balance, Lessor shall pay over to Lessee cash in the amount of such
excess within thirty (30) days of such determination. Additionally,
both the Initial Working Capital Balance and the Ending Working
Capital Balance shall be calculated without the inclusion of any "in
circulation" operating or consumable supplies ("In-Circulation
Supplies"). Both Lessee and Lessor agree that the In-Circulation
Supplies represent items in use which Lessee does not include on its
balance sheet as of the Commencement Date. Lessee and Lessor further
agree that although no accounting value has been placed on
In-Circulation Supplies, such supplies have value and Lessee agrees
to have reasonable amounts of In-Circulation Supplies on hand in a
quantity and quality customary for a property such as the Leased
Property.
3. General Provision regarding Working Capital. Notwithstanding any
other provision of the Lease which is to the contrary or which is not consistent
with Section 2.e above, including without limitation, Section 7.4 of the Lease,
Lessor and Lessee agree that Section 2.e above represents the general business
terms under which Lessee has taken over the In-Circulation Supplies and working
capital of the Leased Property and the general terms under which Lessee will
return In-Circulation Supplies and working capital to Lessor at the expiration
or earlier termination of the Lease.
4. Modification Supersedes. Except as modified hereby, the Lease
remains in full force and effect, with no other modifications thereto. If there
arises by virtue of this Amendment any conflict between any provision of this
Amendment and any provision of the Lease, the provisions hereof shall supersede
any such conflicting provision of the Lease, but only to the extent of such
conflict, and all of the provisions of the Lease are hereby modified as
necessary so as to be consistent with the terms of this Amendment.
5. Successors and Assigns. This Amendment shall be binding upon and
shall inure to the benefit of Lessor and Lessee and their respective successors
and permitted assigns.
6. Multiple Counterparts. This Amendment may be executed in multiple
counterparts, each of which is to be deemed an original for all purposes, and in
making proof of this Amendment it shall not be necessary to produce more than
one (1) counterpart hereof. A facsimile or similar transmission of a counterpart
signed by a party hereto will be regarded as signed by such party for purposes
hereof.
7. Captions. The captions, headings and arrangements used in this
Amendment are for convenience only and do not in any way affect, limit, amplify
or otherwise modify the terms and provisions hereof.
-3-
<PAGE> 4
8. Representations of Lessee. Lessee represents and warrants to Lessor
that (i) Lessee is the sole legal and beneficial owner of the leasehold estate
under the Lease and (ii) Lessee has the full power and authority to enter into
this Amendment without the joinder or consent of any other party.
9. Representations of Lessor. Lessor represents and warrants to Lessee
that Lessor has the full power and authority to enter into this Amendment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties have duly executed this Amendment to be
effective as of the day and year first above written.
LESSOR:
CRESCENT REAL ESTATE FUNDING VI, L.P., a
Delaware limited partnership
By: CRE Management VI Corp., a Delaware
corporation, General Partner
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
LESSEE:
WINE COUNTRY HOTEL, LLC, a Delaware
limited liability company, d/b/a VINTAGE
RESORTS, LLC
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
-5-
<PAGE> 1
EXHIBIT 10.70
================================================================================
$40,000,000
CREDIT AGREEMENT
dated as of January 1, 1999
between
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP,
a Delaware limited partnership,
as the Lender,
and
CRESCENT DEVELOPMENT MANAGEMENT CORP.,
a Delaware corporation,
as the Borrower
================================================================================
<PAGE> 2
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement"), dated as of January 1, 1999,
between CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Lender") and CRESCENT DEVELOPMENT MANAGEMENT CORP., a Delaware
corporation (the "Borrower").
ARTICLE I
RECITALS
WHEREAS, contemporaneously herewith the Borrower and the Lender have
entered into that certain Amended and Restated Credit Agreement dated January 1,
1999 (the "Amended and Restated Credit Agreement"); and
WHEREAS, the Borrower has applied for and Lender is willing, on the
terms and subject to the conditions hereinafter set forth, to extent to the
Borrower a line of credit loan (the "Loan"), in a maximum aggregate principal
amount at any time outstanding not to exceed $40,000,000 from time to time prior
to the Commitment Termination Date; and
WHEREAS, the proceeds will be used from time to time for working
capital purposes of the Borrower in order to provide funds for making equity
investments, as provided in this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE II
COMMITMENTS, ADVANCE PROCEDURES AND NOTES
Section 2.1 Commitment. On the terms and subject to the conditions of
this Agreement (including Article V), the Lender agrees, until the Commitment
Termination Date, to make advances under the Loan to the Borrower up to an
aggregate outstanding principal amount of Forty Million and No/100 Dollars
($40,000,000) (the "Commitment Amount") pursuant to Section 2.2. Prior to the
available Commitment Termination Date, the Borrower may repay and reborrow up to
the full amount of the Commitment Amount in accordance with the terms hereof.
The Lender shall not make any advances after the Commitment Termination Date.
The Lender shall not be required to make any advance under this Loan if, after
giving effect thereto, (a) the aggregate principal amount of all
<PAGE> 3
Advances made would exceed the Commitment Amount or (b) with respect to an
Approved Project, the aggregate Project Equity Advance then outstanding with
respect to such Project would exceed the Project Advance Limit for such Project
or (c) with respect to any Project, the aggregate Project Equity Advance made
with respect to such Project (whether or not all or any portion of such Project
Equity Advance remains outstanding) would exceed the Total Equity for such
Project. Notwithstanding anything in this Agreement to the contrary, (i) the
Lender shall not be obligated to advance additional funds with respect to a
Project if a Subpartnership shall default (after notice and expiration of cure
periods) under the Project Loan Documents, (ii) the Lender shall not be
obligated to advance additional funds in excess of the aggregate Commitments
pursuant to Approved Project Plans if there is an Incapacity of Frampton (as
defined in the Partnership Agreement), (iii) the Lender shall not be obligated
to advance additional funds if there is an Event of Default (as defined in the
Partnership Agreement) that occurs under the Partnership Agreement and that
remains uncured and (iv) the Lender shall not be obligated to advance more than
20% of the Commitment with respect to a Project until the earlier of that point
in time when (A) the Subpartnership with respect to such Project has entered
into a binding contract for the purchase of real property in connection with the
Project or (B) a Project Loan Commitment has been received from a Project Lender
with respect to the Project.
Section 2.2 Advance Procedure. Prior to the Commitment Termination
Date, the Borrower may from time to time request that an Advance be made. Each
Advance following the Initial Advance shall be in an amount that is equal to the
lesser of (a) the amount of the Commitment Amount not outstanding, or (b) the
allowable Project Equity Advance for the applicable Project. The request shall
be made by delivering a Application for Advance to the Lender not less than
fifteen (15) calendar days prior to the date upon which such Advance is to be
made and, if all such conditions precedent to such Advance have been satisfied,
the Lender shall make such Advance directly to the Borrower by wire transfer to
the accounts the Borrower shall have specified in its Application for Advance.
Section 2.3 Note. The Loan shall be evidenced by a single promissory
note (the "Note") payable to the order of the Lender in the maximum principal
amount of Forty Million Dollars ($40,000,000).
Section 2.4 Limitation on Advances Prior to April 1, 1999.
Notwithstanding anything to the contrary contained in this Agreement, prior to
April 1, 1999, no Initial or other Advance will be made to the Borrower pursuant
to this Agreement.
ARTICLE III
PAYMENTS AND INTEREST
Section 3.1 Payments. Payments of the Loan shall be made as set forth
in this Section 3.1 and shall be without premium or penalty.
2
<PAGE> 4
Section 3.1.1 Final Maturity. On the Stated Maturity Date, the
Borrower shall repay in full all accrued but unpaid interest and the entire
unpaid principal amount of the Loan.
Section 3.1.2 Mandatory Payments. The Borrower shall, within
one (1) Business Day following (a) the Borrower's receipt of any Distribution
other than a Tax Distribution, make a mandatory payment of the Loan in an amount
equal to such Distribution less an amount that the Lender may approve in its
reasonable discretion for unpaid expenses and payables that the Borrower has
incurred in the ordinary course of business and a reasonable reserve for future
expenses and (b) the Borrower's receipt of any payments on an Emergency Loan,
make a mandatory payment of the Loan in an amount equal to the payments received
(less amounts retained for expenses and payables). All mandatory payments made
under this Section shall be applied first to accrued but unpaid interest and
thereafter to the outstanding principal balance of the Loan. The Borrower
acknowledges to the Lender that (i) each Subpartnership is generally obligated
to distribute all net cash flow (other than tax distributions) to its members
(including the Partnership) and (ii) the Partnership is generally obligated to
distribute all net cash flow (other than tax distributions and amounts
established as reserves) to its partners (including the Borrower).
Notwithstanding anything in this Agreement to the contrary, the Lender shall not
be obligated to make any additional Advance to the Borrower pursuant to this
Agreement if, based on the Lender's determination in its reasonable discretion,
the Partnership or any Subpartnership has failed to satisfy its obligation to
make the distributions described in the preceding sentence and such failure is
continuing.
Section 3.1.3 Acceleration of Stated Maturity Date.
Immediately upon any acceleration of the Stated Maturity Date of the Loan
pursuant to Section 8.2 or Section 8.3, the Borrower shall repay the Loan to the
full extent of such acceleration.
Section 3.2 Interest Provisions. Interest on the outstanding principal
amount of the Loan shall accrue and be payable in accordance with this Section
3.2.
Section 3.2.1 Rate. Prior to an Event of Default, the
outstanding principal balance of the Loan shall accrue interest at the rate (the
"Interest Rate") of 11.5%, compounded annually.
Section 3.2.2 Post-Maturity Rates. Upon and after an Event of
Default, the Loan shall accrue interest on the outstanding principal balance of
the Loan and, to the extent permitted by applicable law, on the unpaid interest,
at a rate per annum equal to the Interest Rate plus an additional 5.0% per annum
(the "Default Rate"); provided in no event shall the Default Rate exceed the
maximum rate of interest permitted by applicable law.
Section 3.2.3 Accrual. At the end of each calendar year during
the term hereof, all interest that has accrued but has not been paid during such
calendar year shall be added to the outstanding principal balance of the Loan
and shall, thereafter, bear interest, prior to an Event of Default, at the
Interest Rate.
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ARTICLE IV
CERTAIN OTHER PROVISIONS
Section 4.1 Payments, Computations, etc. Unless otherwise expressly
provided, all payments by the Borrower pursuant to this Agreement, the Note or
any other Loan Document shall be made, without setoff, deduction or
counterclaim, not later than 12:00 noon, Fort Worth, Texas time, on the date
due, in same day or immediately available funds, to such account as the Lender
shall specify from time to time by written notice delivered to the Borrower.
Whenever any payment to be made shall otherwise be due on a day that 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 and fees, if any,
in connection with such payment.
Section 4.2 Setoff. The Lender shall, upon the occurrence of any
Default have the right to appropriate and apply to the payment of the Note
(whether or not then due) all amounts of the Borrower then held by the Lender.
The Lender's rights under this Section are in addition to other rights and
remedies (including other rights of setoff under applicable law or otherwise)
that the Lender may have. The Borrower hereby waives all rights of setoff,
appropriation and application it may have pursuant to applicable law or
otherwise.
Section 4.3 Use of Proceeds. The Borrower shall use each Advance
(including but not limited to the Initial Advance) solely to make capital
contributions to the Partnership, in an amount that does not exceed the Project
Equity Advance for a Project, and to defray expenses incurred in connection with
this transaction.
ARTICLE V
CONDITIONS TO BORROWING
Section 5.1 Initial Advance. The Lender's obligation to fund the
Initial Advance shall be subject to the prior or concurrent satisfaction of each
of the conditions precedent set forth in this Section 5.1.
Section 5.1.1 Application for Advance. The Lender shall have
received an Application for Advance.
Section 5.1.2 Resolutions, etc. The Lender shall have received
from the Borrower a certificate of resolutions and incumbency as to resolutions
of its Board of Directors then in full force and effect authorizing the
execution, delivery and performance of this Agreement, the Note and each other
Loan Document to which it is a party.
Section 5.1.3 Delivery of Note. The Lender shall have received
the Note duly executed and delivered by the Borrower.
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Section 5.1.4 Borrower Security Agreement. The Lender shall
have received executed counterparts of the Borrower's Security Agreement
together with such UCC-1 financing statements and UCC search reports as the
Lender may require.
Section 5.1.5 Financial Information, etc. The Lender shall
have received, in form and scope reasonably satisfactory to the Lender, the
financial statements referred to in Section 6.5.
Section 5.1.6 Closing Fees, Expenses, etc. The Lender shall
have received all fees, costs and expenses due and payable pursuant to this
Agreement.
Section 5.1.7 Equity Contributions. Borrower shall have
received from the Subscribers the equity contributions required under Section
7.1.7 of this Agreement to be received by Borrower prior to the Initial Advance.
Section 5.2 All Advances. The Lender's obligation to fund future
Advances shall be subject to the satisfaction of each of the conditions
precedent set forth in this Section 5.2.
Section 5.2.1 Application for Advance. The delivery of an
Application for Advance.
Section 5.2.2 Compliance with Warranties, No Default, etc.
Both before and after giving effect to any Advances the following statements
shall be true and correct to the Lender's satisfaction:
(a) the representations and warranties set forth in
this Agreement shall be true and correct with the same effect
as if then made; and
(b) no Default shall have then occurred and be
continuing.
Section 5.2.3 Organic Documents. The Lender shall have
received a copy of the Organic Documents for the Subpartnership that will be
capitalized with the proceeds of the requested Advance.
Section 5.2.4 Resolutions, Etc. The Lender shall have received
from the Partnership (in its individual capacity and in its capacity as manager
of the applicable Subpartnership) a certificate of resolutions and incumbency
authorizing the organization of the Subpartnership, and the Subpartnership's
execution, delivery and performance of the Project Loan Documents.
Section 5.2.5 Approved Budget. The Lender shall have received
a final Approved Budget with respect to the Project to be constructed by the
Subpartnership in which the Partnership proposes to make a capital contribution
with the proceeds of the requested Advance (the "Contemplated Project").
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Section 5.2.6 Project Loan Commitment. The Lender shall have
received a fully executed copy of the Project Loan Commitment for the
Contemplated Project if there is a Project Loan Commitment for the Contemplated
Project at the time of the delivery of the Application for Advance. In the event
there is not a Project Loan Commitment for the Contemplated Project at the time
of the delivery of the Application for Advance but such Project Loan Commitment
is later received, the Borrower shall promptly provide a copy of such commitment
to the Lender upon receipt.
Section 5.2.7 Evidence of Insurance. The Lender shall have
received adequate evidence that all insurance required by this Agreement is in
effect with respect to the Contemplated Project.
Section 5.2.8 Evidence of Approval. The Lender shall have
received evidence, satisfactory to it, that the Project Lender has approved all
conditions precedent to its obligation to advance proceeds of the Project Loan
with respect to the Contemplated Project.
Section 5.2.9 Estoppel Letter from Project Lender. If there is
a Project Loan Commitment from a Project Lender at the time of the delivery of
the Application for Advance, the Lender shall have received a duly executed
letter from the Project Lender providing the Lender with written notice of any
event of default under the Project Loan Documents with respect to the
Contemplated Project, and a reasonable opportunity in which the Lender may cure
such default prior to the Project Lender's exercise of any remedies available to
it under the Project Loan Documents.
Section 5.2.10 Fees and Expenses. The Lender shall have
received all fees, costs and expenses due and payable pursuant to this
Agreement.
Section 5.2.11 Satisfactory Legal Form. All documents executed
or submitted pursuant hereto shall be reasonably satisfactory in form and
substance to the Lender and its counsel; the Lender shall have received all
other information, approvals, opinions, documents or instruments as the Lender
or its counsel may reasonably request.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make the Loan
hereunder and to make each Advance pursuant to the Loan, the Borrower represents
and warrants unto the Lender as of the day and year first written above and on
the date of each Advance as set forth in this Article VI.
Section 6.1 Organization, etc. The Borrower is a duly formed
corporation under the laws of Delaware, is duly qualified to do business and has
full power and authority and holds all
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requisite governmental licenses, permits and other approvals to enter into and
perform its obligations under this Agreement, the Note and each other Loan
Document to which it is a party, and to own and hold its property and to conduct
its business substantially as it currently is conducted.
Section 6.2 Due Authorization, Non-Contravention, etc. The Borrower's
execution, delivery and performance of this Agreement, the Note and each other
Loan Document executed or to be executed by it, are within the Borrower's
corporate powers, have been duly authorized by all necessary action (including
but not limited to any consent of stockholders required by law or its Organic
Documents) and do not (a) contravene the Borrower's Organic Documents; or (b)
contravene any contractual restriction, law or governmental regulation or court
decree or order binding on or affecting the Borrower except for such
contraventions that will not, singly or in the aggregate, have a material
adverse effect on the Borrower's ability to perform its obligations under this
Agreement or any Loan Document.
Section 6.3 Government Approval, Regulation, etc. No authorization,
consent or approval or other action by, and no notice to, filing with or license
from, any governmental authority or regulatory body or other Person is required
for the Borrower's due execution or delivery of this Agreement, the Note or any
other Loan Document to which it is a party, or for the consummation and
performance of the transactions contemplated hereby or thereby.
Section 6.4 Validity, etc. Each of this Agreement and, upon the due
execution and delivery thereof, the Note and each other Loan Document executed
by the Borrower or the Partnership, as the case may be, constitutes the legal,
valid and binding obligation of such party enforceable in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
reorganization, insolvency and other similar laws affecting creditors' rights
generally.
Section 6.5 Financial Information. All financial information that has
been or shall hereafter be furnished to the Lender by or on behalf of the
Borrower or by any other Person at the Borrower's direction for the purposes of
or in connection with this Agreement present fairly the financial condition as
at the dates thereof (subject to normal year end adjustments in the case of
unaudited financial statements).
Section 6.6 No Material Adverse Change. There has been no material
adverse change in the business, financial condition, operations, assets,
revenues, or properties, of the Borrower taken as a whole from the financial
information previously provided to the Lender.
Section 6.7 No Default Under Indebtedness. No event of default has
occurred and is continuing, and no event has occurred that with the giving of
notice, passage of time or both would become a material event of default under
any of the Indebtedness permitted to be incurred pursuant to Section 7.2.2
hereof.
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Section 6.8 Litigation, Labor Controversies, etc. There is no pending
or, to the Borrower's knowledge, threatened litigation, action, proceeding or
labor controversy affecting the Borrower, the Partnership or any Subpartnership
that, if adversely determined, reasonably could be expected to have a material
adverse effect on the Borrower, the Partnership, any Subpartnership, any Project
or the Lender.
Section 6.9 Taxes. The Borrower has filed all material tax returns and
reports required by law to have been filed and has paid all taxes and
governmental charges thereby shown to be due and payable.
Section 6.10 ERISA. Neither the Borrower, nor, to the Borrower's best
knowledge, any other person has taken any action or failed to take any action
that would subject the Borrower, the Partnership or any Subpartnership to any
potential liability under ERISA.
Section 6.11 Accuracy of Information. All factual information, as
amended, supplemented or modified, furnished by or on behalf of the Borrower in
writing to (or as directed by) the Lender for purposes of or in connection with
this Agreement, any other Loan Document or any transaction contemplated hereby
is true and accurate in all material respects as of the date of execution and
delivery of this Agreement and all other such factual information thereafter
furnished by or on behalf of the Borrower to (or as directed by) the Lender
pursuant to the terms of this Agreement or any other Loan Document is true and
accurate in every material respect on the date as of which such information as
dated or certified, and does not omit any material fact necessary to make such
Information not misleading.
ARTICLE VII
COVENANTS
Section 7.1 Affirmative Covenants. The Borrower will perform the
obligations set forth in this Section 7.1.
Section 7.1.1 Financial Information, Reports, Notices, etc.
The Borrower will furnish, or will cause to be furnished, to the Lender copies
of the following financial statements, reports, notices and information:
(a) As soon as available and in any event within 45
days after the end of each Fiscal Quarter of each Fiscal Year
of the Borrower (including the final Fiscal Quarter of each
Fiscal Year), the Borrower will deliver, or cause to be
delivered, balance sheets of the Borrower as of the end of
such Fiscal Quarter and statements of income, cash flow and
the Borrower's equity for such Fiscal Quarter and for the
period commencing at the end of the previous Fiscal Year and
ending with the end of such Fiscal Quarter, setting forth in
each case in comparative form the figures for the
corresponding Fiscal Quarter of the previous Fiscal Year,
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certified by the Borrower's chief financial officer in a
manner acceptable to the Lender.
(b) if requested by the Lender for any Fiscal Year,
the Borrower will have prepared at the Borrower's expense and
the Borrower will deliver, or cause to be delivered, to the
Lender a copy of an annual audit report for the Borrower
including therein balance sheets of the Borrower as of the end
of such Fiscal Year and statements of cash flow, income and
the Borrower's equity for such Fiscal Year, in each case
certified (without qualification) by independent public
accountants reasonably acceptable to the Lender.
(c) a copy of all financial accounting and reports
that are to be provided to the Partnership's partners pursuant
to Article 11 of the Partnership Agreement.
(d) As soon as possible and in any event within three
Business Days after becoming aware of
(i) the occurrence of any material adverse
development with respect to any Project,
Subpartnership, Project Loan or the Partnership's
investment in any Subpartnership, or
(ii) copies of any material notices or
communications from a Project Lender or a
Governmental Authority with respect to the Borrower,
the Partnership, a Project or the Project Loan
Documents; or
(iii) copies of any material notices or
communications from the Partnership, a Subpartnership
to a Project Lender or Governmental Authority with
respect to a Project or the Project Loan Documents.
The Borrower will deliver, or will cause to be delivered,
notice thereof and copies of all documentation relating
thereto.
(e) The Borrower will deliver, or will cause to be
delivered, such other information respecting the condition or
operations, financial or otherwise, of the Borrower, the
Partnership or any Subpartnership as the Lender from time to
time reasonably may request.
Section 7.1.2 Compliance with Laws, etc. The Borrower will,
and, consistent with the Borrower's rights and obligations under the Partnership
Agreement, will cause the Partnership and each Subpartnership to, comply in all
material respects with all applicable Governmental Requirements such compliance
to include, but not be limited to:
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(a) the maintenance and preservation of its existence
and qualification in all foreign jurisdictions where it is
required to do so except where the failure to do so would not
be material; and
(b) the payment, before the same become delinquent,
of all taxes, assessments and governmental charges imposed
upon it or upon its property except to the extent they are
being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books.
Section 7.1.3 Maintenance of Properties. The Borrower will,
and, consistent with the Borrower's rights and obligations under the Partnership
Agreement, will cause the Partnership and each Subpartnership to, maintain,
preserve, protect and keep its properties (specifically including but not
limited to, the Projects) in good repair, working order and condition, normal
wear and tear excepted, and make necessary and proper repairs, renewals and
replacements so that its business carried on in connection therewith may be
properly conducted at all times.
Section 7.1.4 Books and Records. The Borrower will, and,
consistent with the Borrower's rights and obligations under the Partnership
Agreement, will cause the Partnership and each of its Subpartnerships to, keep
books and records that accurately reflect all of its business affairs and
transactions in all material respects. The Borrower will, and will cause the
Partnership and each Subpartnership to, permit the Lender at reasonable times
and intervals during normal business hours to examine and photocopy extracts
from any of its books or other corporate records. The Borrower shall pay any
fees of its independent public accountant incurred in connection with the
Lender's exercise of its rights pursuant to this Section.
Section 7.1.5 Environmental Covenant. The Borrower will, and,
consistent with the Borrower's rights and obligations under the Partnership
Agreement, will cause the Partnership and each of its Subpartnerships to,
(a) use and operate all of its assets in compliance
in all material respects with all Environmental Laws, keep all
necessary and material permits, approvals, certificates,
licenses and other authorizations required under Environmental
Laws in effect and remain in compliance therewith, and handle
all Hazardous Materials in compliance in all material respects
with all Environmental Laws; and
(b) immediately notify the Lender and provide copies
upon receipt of all potentially material written claims,
complaints or notices (excluding routine fee or schedule
notices) relating to non-compliance with, or liabilities or
obligations arising under or relating in any way to,
Environmental Laws with respect to its assets.
Section 7.1.6 ERISA Compliance. The Borrower will, and will
cause each of its ERISA affiliates to, maintain all employee benefit plans in
compliance in all material respects with
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all applicable law, including any reporting requirements, and make all
contributions due under the terms of each employee benefit plan or as required
by law.
Section 7.1.7 Additional Funding Instruments. The Borrower
acknowledges to the Lender that the Subscribers have executed Additional Funding
Instruments requiring the contribution from time to time of, in the aggregate,
up to Eight Million and No/100 Dollars ($8,000,000) in cash to the Borrower's
capital upon demand of the Board of Directors of Borrower as described below.
Prior to the Initial Advance, the Borrower will, through its Board of
Directors, make written demand upon each Subscriber to contribute to the
Borrower cash in an amount equal to the product realized by multiplying (i) One
Million and No/100 Dollars ($1,000,000) by (ii) a fraction, the numerator of
which is the number of shares of the Borrower's common stock that Subscriber
owns as of the date of such demand and the denominator of which is the number of
outstanding shares of the Borrower's common stock as of the date of such demand
("Initial Equity Shortfall Share"). Notwithstanding anything to the contrary
contained in this Agreement, no Initial Advance will be made to the Borrower
pursuant to this Agreement unless and until each Subscriber has contributed cash
to the Borrower in an amount equal to such Subscriber's Initial Equity Shortfall
Share.
The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Four Million
and No/100 Dollars ($4,000,000) or would exceed such amount if a requested
Advance were made. In such event, the Borrower's Board of Directors shall make
written demand upon each Subscriber to contribute to the Borrower cash in an
amount equal to the product realized by multiplying (i) One Million and No/100
Dollars ($1,000,000) by (ii) a fraction, the numerator of which is the number of
shares of the Borrower's common stock that Subscriber owns as of the date of the
Assessment Determination and the denominator of which is the number of
outstanding shares of the Borrower's common stock as of the date of the
Assessment Determination ("Secondary Equity Shortfall Share"). Notwithstanding
anything to the contrary contained in this Agreement, no additional Advance will
be made to the Borrower pursuant to this Agreement that would increase the
aggregate unpaid principal and interest on the Loan above Four Million and
No/100 Dollars ($4,000,000) unless and until each Subscriber has contributed
cash to the Borrower in an amount equal to such Subscriber's Secondary Equity
Shortfall Share.
The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Eight Million
and No/100 Dollars ($8,000,000) or would exceed such amount if a requested
Advance were made. In such event, the Borrower's Board of Directors shall make
written demand upon each Subscriber to contribute to the Borrower cash in an
amount equal to the product realized by multiplying (i) One Million and No/100
Dollars ($1,000,000) by (ii) a fraction, the numerator of which is the number of
shares of the Borrower's common stock that Subscriber owns as of the date of the
Assessment Determination and the denominator of which
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is the number of outstanding shares of the Borrower's common stock as of the
date of the Assessment Determination ("Third Equity Shortfall Share").
Notwithstanding anything to the contrary contained in this Agreement, no
additional Advance will be made to the Borrower pursuant to this Agreement that
would increase the aggregate unpaid principal and interest on the Loan above
Eight Million and No/100 Dollars ($8,000,000) unless and until each Subscriber
has contributed cash to the Borrower in an amount equal to such Subscriber's
Third Equity Shortfall Share.
The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Twelve
Million and No/100 Dollars ($12,000,000) or would exceed such amount if a
requested Advance were made. In such event, the Borrower's Board of Directors
shall make written demand upon each Subscriber to contribute to the Borrower
cash in an amount equal to the product realized by multiplying (i) One Million
and No/100 Dollars ($1,000,000) by (ii) a fraction, the numerator of which is
the number of shares of the Borrower's common stock that Subscriber owns as of
the date of the Assessment Determination and the denominator of which is the
number of outstanding shares of the Borrower's common stock as of the date of
the Assessment Determination ("Fourth Equity Shortfall Share"). Notwithstanding
anything to the contrary contained in this Agreement, no additional Advance will
be made to the Borrower pursuant to this Agreement that would increase the
aggregate unpaid principal and interest on the Loan above Twelve Million and
No/100 Dollars ($12,000,000) unless and until each Subscriber has contributed
cash to the Borrower in an amount equal to such Subscriber's Fourth Equity
Shortfall Share.
The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Sixteen
Million and No/100 Dollars ($16,000,000) or would exceed such amount if a
requested Advance were made. In such event, the Borrower's Board of Directors
shall make written demand upon each Subscriber to contribute to the Borrower
cash in an amount equal to the product realized by multiplying (i) One Million
and No/100 Dollars ($1,000,000) by (ii) a fraction, the numerator of which is
the number of shares of the Borrower's common stock that Subscriber owns as of
the date of the Assessment Determination and the denominator of which is the
number of outstanding shares of the Borrower's common stock as of the date of
the Assessment Determination ("Fifth Equity Shortfall Share"). Notwithstanding
anything to the contrary contained in this Agreement, no additional Advance will
be made to the Borrower pursuant to this Agreement that would increase the
aggregate unpaid principal and interest on the Loan above Sixteen Million and
No/100 Dollars ($16,000,000) unless and until each Subscriber has contributed
cash to the Borrower in an amount equal to such Subscriber's Fifth Equity
Shortfall Share.
The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Twenty
Million and No/100 Dollars ($20,000,000) or would exceed such amount if a
requested Advance were made. In such event, the Borrower's Board of
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Directors shall make written demand upon each Subscriber to contribute to the
Borrower cash in an amount equal to the product realized by multiplying (i) One
Million and No/100 Dollars ($1,000,000) by (ii) a fraction, the numerator of
which is the number of shares of the Borrower's common stock that Subscriber
owns as of the date of the Assessment Determination and the denominator of which
is the number of outstanding shares of the Borrower's common stock as of the
date of the Assessment Determination ("Sixth Equity Shortfall Share").
Notwithstanding anything to the contrary contained in this Agreement, no
additional Advance will be made to the Borrower pursuant to this Agreement that
would increase the aggregate unpaid principal and interest on the Loan above
Twenty Million and No/100 Dollars ($20,000,000) unless and until each Subscriber
has contributed cash to the Borrower in an amount equal to such Subscriber's
Sixth Equity Shortfall Share.
The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Twenty-Four
Million and No/100 Dollars ($24,000,000) or would exceed such amount if a
requested Advance were made. In such event, the Borrower's Board of Directors
shall make written demand upon each Subscriber to contribute to the Borrower
cash in an amount equal to the product realized by multiplying (i) One Million
and No/100 Dollars ($1,000,000) by (ii) a fraction, the numerator of which is
the number of shares of the Borrower's common stock that Subscriber owns as of
the date of the Assessment Determination and the denominator of which is the
number of outstanding shares of the Borrower's common stock as of the date of
the Assessment Determination ("Seventh Equity Shortfall Share"). Notwithstanding
anything to the contrary contained in this Agreement, no additional Advance will
be made to the Borrower pursuant to this Agreement that would increase the
aggregate unpaid principal and interest on the Loan above Twenty-Four Million
and No/100 Dollars ($24,000,000) unless and until each Subscriber has
contributed cash to the Borrower in an amount equal to such Subscriber's Seventh
Equity Shortfall Share.
The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Twenty-Eight
Million and No/100 Dollars ($28,000,000) or would exceed such amount if a
requested Advance were made. In such event, the Borrower's Board of Directors
shall make written demand upon each Subscriber to contribute to the Borrower
cash in an amount equal to the product realized by multiplying (i) One Million
and No/100 Dollars ($1,000,000) by (ii) a fraction, the numerator of which is
the number of shares of the Borrower's common stock that Subscriber owns as of
the date of the Assessment Determination and the denominator of which is the
number of outstanding shares of the Borrower's common stock as of the date of
the Assessment Determination ("Eighth Equity Shortfall Share"). Notwithstanding
anything to the contrary contained in this Agreement, no additional Advance will
be made to the Borrower pursuant to this Agreement that would increase the
aggregate unpaid principal and interest on the Loan above Twenty-Eight Million
and No/100 Dollars ($28,000,000) unless and until each Subscriber has
contributed cash to the Borrower in an amount equal to such Subscriber's Eighth
Equity Shortfall Share.
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The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Thirty-Two
Million and No/100 Dollars ($32,000,000) or would exceed such amount if a
requested Advance were made. In such event, the Borrower's Board of Directors
shall make written demand upon each Subscriber to contribute to the Borrower
cash in an amount equal to the product realized by multiplying (i) One Million
and No/100 Dollars ($1,000,000) by (ii) a fraction, the numerator of which is
the number of shares of the Borrower's common stock that Subscriber owns as of
the date of the Assessment Determination and the denominator of which is the
number of outstanding shares of the Borrower's common stock as of the date of
the Assessment Determination ("Ninth Equity Shortfall Share"). Notwithstanding
anything to the contrary contained in this Agreement, no additional Advance will
be made to the Borrower pursuant to this Agreement that would increase the
aggregate unpaid principal and interest on the Loan above Thirty-Two Million and
No/100 Dollars ($32,000,000) unless and until each Subscriber has contributed
cash to the Borrower in an amount equal to such Subscriber's Ninth Equity
Shortfall Share.
The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Thirty-Six
Million and No/100 Dollars ($36,000,000) or would exceed such amount if a
requested Advance were made. In such event, the Borrower's Board of Directors
shall make written demand upon each Subscriber to contribute to the Borrower
cash in an amount equal to the product realized by multiplying (i) One Million
and No/100 Dollars ($1,000,000) by (ii) a fraction, the numerator of which is
the number of shares of the Borrower's common stock that Subscriber owns as of
the date of the Assessment Determination and the denominator of which is the
number of outstanding shares of the Borrower's common stock as of the date of
the Assessment Determination ("Tenth Equity Shortfall Share"). Notwithstanding
anything to the contrary contained in this Agreement, no additional Advance will
be made to the Borrower pursuant to this Agreement that would increase the
aggregate unpaid principal and interest on the Loan above Thirty-Six Million and
No/100 Dollars ($36,000,000) unless and until each Subscriber has contributed
cash to the Borrower in an amount equal to such Subscriber's Tenth Equity
Shortfall Share.
Section 7.2 Negative Covenants. The Borrower will comply with the
obligations set forth in this Section 7.2.
Section 7.2.1 Business Activities. The Borrower will not, and,
consistent with the Borrower's rights and obligations under the Partnership
Agreement, will not permit the Partnership or any of its Subpartnerships to,
engage in any business activity other than those activities set forth in the
Organic Documents for each such entity.
Section 7.2.2 Indebtedness. The Borrower will not, and,
consistent with the Borrower's rights and obligations under the Partnership
Agreement, will not permit the Partnership or any of its Subpartnerships to,
create, incur, assume or suffer to exist or otherwise become or be liable in
respect of any indebtedness, other than, without duplication, the following:
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<PAGE> 16
(a) indebtedness in respect of the Loan and other
obligations;
(b) unsecured Indebtedness incurred in the ordinary
course of its business in the nature of open accounts extended
by suppliers and other vendors on normal trade terms in
connection with purchases of goods and services, accrued
liabilities, deferred income and deferred taxes;
(c) Emergency Loans, as described in the Partnership
Agreement and the Subpartnership Organic Documents;
(d) the Project Loans incurred by Subpartnerships on
terms that are consistent with the requirements of this
Agreement; and
(e) other unsecured Indebtedness of the Borrower, the
Partnership and the Subpartnerships in an aggregate amount not
to exceed $50,000 for the Borrower, $50,000 for the
Partnership and $10,000 for any Subpartnership.
Section 7.2.3 Asset Dispositions, etc. The Borrower will not,
and, consistent with the Borrower's rights and obligations under the Partnership
Agreement, will not permit the Partnership or any of its Subpartnerships to,
sell, transfer, lease, contribute, convey or otherwise dispose of all or any
part of its assets to any Person, unless
(a) no Default has occurred and is continuing or
would occur after giving effect thereto; or
(b) such sale, transfer, lease or other disposition
is approved by the Lender or is approved in the then-current
Approved Annual Business Plan under the Partnership Agreement.
Section 7.2.4 Restriction on Distributions. The Borrower will
not make dividend distributions to its shareholders at any time when there
exists an outstanding balance on the Loan.
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.1 Listing of Events of Default. Each of the following events
or occurrences described in this Section 8.1 shall constitute an "Event of
Default." Upon the occurrence of an Event of Default (or any event or state of
facts that, with the giving of notice or the passage of time or both, would
constitute an Event of Default), the Borrower shall give notice thereof to the
Lender.
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<PAGE> 17
Section 8.1.1 Non-Payment of Obligations. The Borrower shall
default in the payment when due of any principal of the Loan, the East West
Resorts Term Loan, the East West Resorts Credit Loan, or any Other Crescent
Indebtedness, or of any interest in respect of the Loan, the East West Resorts
Term Loan, the East West Resorts Credit Loan, or any Other Crescent
Indebtedness.
Section 8.1.2 Breach of Warranty. Any representation or
warranty made or deemed to be made hereunder or in any other Loan Document, any
East West Resorts Loan Document, any Other Crescent Indebtedness Loan Document,
or any other writing or certificate furnished by or on behalf of the Borrower to
the Lender for the purposes of or in connection with this Agreement, either of
the East West Resorts Loans, or any Other Crescent Indebtedness or any such
other Loan Document, any other East West Resorts Loan Document, or any Other
Crescent Indebtedness Loan Document, is or shall be incorrect when made in any
material respect.
Section 8.1.3 Non-Performance of Other Covenants and
Obligations. There shall be a default in the due performance and observance of
any other agreement contained herein or in any other Loan Document, any East
West Resorts Loan Document, or any Other Crescent Indebtedness Loan Document
executed by the Borrower, and such default shall continue unremedied for a
period of 30 days after the Lender shall have given notice thereof to the
Borrower.
Section 8.1.4 Bankruptcy, Insolvency, etc. The Borrower, the
Partnership, any Subpartnership, East West Resorts or any EWRD Partnership
shall:
(a) become insolvent or generally fail to pay, or
admit in writing its inability or unwillingness to pay, debts
as they become due;
(b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator or other
custodian for the Borrower, the Partnership, any
Subpartnership, East West Resorts or any EWRD Partnership or
any property of any thereof, or make a general assignment for
the benefit of creditors;
(c) absent such application, consent or acquiescence
permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Borrower,
the Partnership, any Subpartnership, East West Resorts or any
EWRD Partnership for a substantial part of the property of any
thereof, and such trustee, receiver, sequestrator or other
custodian shall not be discharged within 60 days, provided
that the Borrower, the Partnership, each Subpartnership, East
West Resorts and each EWRD Partnership hereby expressly
authorize the Lender to appear in any court conducting any
relevant proceeding during such 60-day period to preserve,
protect and defend their rights under the Loan Documents and
the East West Resort Loan Documents;
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<PAGE> 18
(d) permit or suffer to exist the commencement of any
(x) bankruptcy, reorganization, debt arrangement or other case
or proceeding under any bankruptcy or insolvency law, or (y)
any dissolution, winding up or liquidation proceeding, in
respect of the Borrower, the Partnership, any Subpartnership,
East West Resorts or any EWRD Partnership, and, if any such
case or proceeding is not commenced by the Borrower, the
Partnership, any Subpartnership, East West Resorts or any EWRD
Partnership, such case or proceeding shall be consented to or
acquiesced in by the Borrower, the Partnership, such
Subpartnership, East West Resorts or any EWRD Partnership or
shall result in the entry of an order for relief or, in the
event of any case or proceeding described in clause (x), shall
remain for 120 days undismissed, provided that the Borrower,
the Partnership, each Subpartnership, East West Resorts and
each EWRD Partnership hereby expressly authorizes the Lender
to appear in any court conducting any such case or proceeding
during such 120-day period to preserve, protect and defend
their rights under the Loan Documents or the East West Loan
Documents; or
(e) take any partnership, limited liability company
or corporate action authorizing, or with intent to further any
of the foregoing.
Section 8.2 Action if Bankruptcy. If any Event of Default described in
clauses (a) through (e) of Section 8.1.4 shall occur with respect to the
Borrower, the Partnership, any of its Subpartnerships, East West Resorts, or any
EWRD Partnership, the Commitment (if not theretofore terminated) to make
Advances shall automatically terminate and the outstanding principal amount of
the Loan shall automatically be and become immediately due and payable, without
notice or demand.
Section 8.3 Action if Payment Event of Default under East West Loan. If
any Event of Default described in Section 8.1.1 shall occur due to the
Borrower's default in the payment when due of any principal or interest in
respect of the East West Resorts Term Loan, the East West Resorts Credit Loan or
any Other Crescent Indebtedness (but not for any other reason), and the Borrower
fails to pay such principal or interest in full within 30 days after the due
date thereof, then the Lender shall by notice to the Borrower declare all or any
portion of the outstanding principal amount of the Loan and other obligations to
be due and payable and the Commitment (if not theretofore terminated) to be
terminated, whereupon the full unpaid amount of the Loan shall be and become
immediately due and payable, without further notice, demand or presentment and
the Commitment shall terminate.
Section 8.4 Action if Other Event of Default under East West Loan or
Other Crescent Indebtedness. If any Event of Default (other than any Event of
Default described in Section 8.2 or Section 8.3) shall occur with respect to any
East West Resorts Loan Document or Other Crescent Indebtedness Loan Document
(but not for any other reason) for any reason, whether voluntary or involuntary,
and (a) be continuing for a period of 90 days if an Event of Default under
Section 8.1.2 or (b) ,be continuing for a period of 90 days after notice thereof
shall have been given to the Borrower by the Lender if an Event of Default under
Section 8.1.3, then the
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<PAGE> 19
Lender shall by notice to the Borrower declare all or any portion of the
outstanding principal amount of the Loan and other obligations to be due and
payable and the Commitment (if not theretofore terminated) to be terminated,
whereupon the full unpaid amount of the Loan shall be and become immediately due
and payable, without further notice, demand or presentment and the Commitment
shall terminate.
Section 8.5 Action if Other Event of Default. If any Event of Default
(other than any Event of Default described in Section 8.2, Section 8.3, or
Section 8.4) shall occur for any reason, whether voluntary or involuntary, and
be continuing, the Lender shall by notice to the Borrower declare all or any
portion of the outstanding principal amount of the Loan and other obligations to
be due and payable and the Commitment (if not theretofore terminated) to be
terminated, whereupon the full unpaid amount of the Loan shall be and become
immediately due and payable, without further notice, demand or presentment and
the Commitment shall terminate.
Section 8.6 Rescission of Event of Default. If an Event of Default
occurs hereunder and such Event of Default would not have occurred but for the
default by a Subpartnership (for purposes of this Section, the "Defaulting
Subpartnership") under Section 8.1.4 hereof, (such Events of Default being
described in this Section as "Specified Events of Default") then the Lender
shall be required to rescind and annul the Event of Default if and only if,
within twenty (20) Business Days following such Specified Event of Default:
(a) all Defaults and Events of Default, other than the
Specified Events of Default, are remedied or waived to the Lender's
sole satisfaction; and
(b) the Partnership's partners have approved of a revised
business plan with respect to the Project owned by the Defaulting
Subpartnership, the Borrower, on the basis of such revised business
plan, has submitted to the Lender a revised Annual Business Plan and
the Lender, in its reasonable discretion, has Approved such Annual
Business Plan.
No action taken by the Lender pursuant to this provision shall affect any
subsequent Default or Event of Default with respect to the Borrower or impair
any right or remedy consequent thereon.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 Waivers, Amendments, etc. The provisions of this Agreement
and of each other Loan Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and consented to
by the Borrower and the Lender. No failure or delay on the part of the Lender,
or the holder of any Note in exercising any power or right under this Agreement
or any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right. No notice
to or demand on
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<PAGE> 20
the Borrower in any case shall entitle it to any notice or demand in similar or
other circumstances. No waiver or approval by the Lender or the holder of any
Note under this Agreement or any other Loan Document shall, except as may be
otherwise stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
Section 9.2 Notices. All notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing and addressed, delivered or transmitted to such party at its address or
facsimile number set forth below its signature hereto, or at such other address
or facsimile number as may be designated by such party in a notice to the other
parties. Any notice, if sent via United States Postal Service Express Mail or
certified mail, properly addressed with postage prepaid or if sent via
nationally recognized overnight courier service, properly addressed with
delivery fees prepaid, shall be deemed given when received; any notice, if
transmitted by facsimile, shall be deemed given one business day after receipt
of electronic confirmation of transmission.
Section 9.3 Payment of Costs and Expenses. The Borrower agrees to pay
on demand all of the Lender's reasonable expenses (including the reasonable fees
and out-of-pocket expenses of the Lender's counsel and of local counsel, if any,
who the Lender's counsel may retain) in connection with this transaction
Section 9.4 Indemnification.
(a) In consideration of the execution and delivery of this
Agreement by the Lender and the extension of the Commitments, the
Borrower hereby indemnifies, exonerates and holds the Lender and each
of its respective trustees, partners, stockholders, officers,
directors, employees, agents, attorneys, consultants and experts
(collectively, the "Indemnified Parties") free and harmless from and
against any and all actions, causes of action, suits, judgments,
claims, demands, losses, costs, liabilities (including, without
limitation, strict liability), penalties, fines and damages,
(including, without limitation, punitive damages), and expenses
incurred in connection therewith (irrespective of whether any such
Indemnified Party is a party to the action for which indemnification
hereunder is sought), including reasonable attorneys, consultants and
experts fees and disbursements (collectively, the "Indemnified
Liabilities"), imposed upon or incurred by the Indemnified Parties or
any of them as a result of, or arising out of, or relating to
(i) any transaction financed or to be financed in
whole or in part, directly or indirectly, with the Loan
proceeds;
(ii) the entering into and performance of this
Agreement and any other Loan Document by any of the
Indemnified Parties;
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<PAGE> 21
(iii) the actual or alleged release or presence of
any Hazardous Substance at, to or from any asset or former
asset of the Borrower, the Partnership or any Subpartnership;
or
(iv) the actual or alleged violation of any
Environmental Law by any person at or in connection with any
current asset or former asset of the Borrower, the Partnership
or any of any Subpartnership.
except for any such Indemnified Liabilities arising for the
account of a particular Indemnified Party by reason of the
relevant Indemnified Party's gross negligence or wilful
misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower
hereby agrees to make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities that
is permissible under applicable law, except as aforesaid to
the extent not payable by reason of the Indemnified Party's
gross negligence or wilful misconduct or breach of such
obligations.
(b) THE LENDER SHALL NOT BE RESPONSIBLE OR LIABLE TO ANY OTHER
PARTY HEREUNDER OR ANY OTHER PERSON FOR CONSEQUENTIAL DAMAGES THAT MAY
BE ALLEGED AS A RESULT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
Section 9.5 Severability. Any provision of this Agreement or any other
Loan Document that is prohibited or unenforceable in any jurisdiction shall, as
to such provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
Section 9.6 Headings. The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.
Section 9.7 Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be an original and all of which shall constitute together but one
and the same agreement. This Agreement, together with each other Loan Document,
shall become effective when counterparts hereof executed on behalf of the
Borrower and the Lender (or notice thereof satisfactory to the Lender) shall
have been received by the Lender and notice thereof shall have been given by the
Lender to the Borrower.
Section 9.8 Governing Law: Entire Agreement. THIS AGREEMENT, THE NOTES
AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER
AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD FOR CONFLICT OF
LAWS PRINCIPLES. Except as otherwise provided herein, this Agreement, the Note
given in replacement of that promissory note
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<PAGE> 22
made as of May 8, 1998, and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the subject matter hereof
and supersede any prior agreements, written or oral, with respect thereto.
Section 9.9 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that the Borrower may not assign or
transfer its rights or obligations hereunder without the Lender's prior written
consent.
Section 9.10 REIT Compliance. The Borrower acknowledges that the
Lender's affiliate, Crescent Real Estate Equities Company ("Crescent"), is a
real estate investment trust under the Code. The Borrower agrees that it will
not knowingly or intentionally take or omit to take any action that the Borrower
knows would or could result in Crescent being disqualified from treatment as a
real estate investment trust under the Code.
ARTICLE X
DEFINITIONS
Section 10.1 Defined Terms. In addition to the terms defined in
previous portions of this Agreement, the following terms when used in this
Agreement shall, except where the context otherwise requires, have the following
meanings (such meanings to be equally applicable to the singular and plural
forms thereof):
"Additional Funding Instruments" means the Additional Funding
Instruments executed by COPI Colorado, L. P. and the Lender dated January 1,
1999.
"Advance" means all money advances under the Loan made by the Lender
pursuant to an Application for Advance in accordance with Article II.
"Agreement" means, on any date, this Credit Agreement.
"Amended and Restated Credit Loan" means that line of credit loan, and
related Amended and Restated Credit Agreement, promissory note, and security
agreement, from the Lender to the Borrower effective January 1, 1999, and all
extensions, modifications, amendments, and renewals thereof.
"Annual Business Plan" is defined in the Partnership Agreement.
"Application for Advance" means a loan request and certificate duly
executed by the Borrower, in the form that is attached hereto as Exhibit A or
such other form that is approved by the Lender from time to time.
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"Approved" is defined in the Partnership Agreement.
"Approved Budget" means the Proposed Budget in the Approved Project
Plan, as adjusted and approved by the Partnership, the Borrower (both general
and limited partners) and the Project Lender.
"Approved Project Plan" shall be each of the Approved Project Plans
contemplated by Section 3.2 of the Partnership Agreement which shall, among
other things, include a Proposed Budget and for Projects to be developed in more
than one phase, a Project Advance Limit.
"Assessment Determination" is defined in the Additional Funding
Instruments.
"Borrower" means Crescent Development Management Corp., a Delaware
corporation, and its successors and assigns permitted hereunder.
"Borrower Security Agreement" means the Security Agreement executed and
delivered by the Borrower granting the Lender a security interest in (a) all
Partner Loans now or hereafter owing to the Borrower and all security therefor,
and (b) the Borrower's partnership interest in the Partnership.
"Business Day" means any day that is neither a Saturday or Sunday nor a
legal holiday on which banks are authorized or required to be closed in New
York, New York.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment" is defined in the Partnership Agreement.
"Commitment Termination Date" means the earlier of (i) the occurrence
of an Event of Default or (ii) the Stated Maturity Date.
"Construction Contract" means all construction contracts executed by
the Subpartnership for the construction of a Project.
"Contractor" means the general contractor retained by the
Subpartnership with respect to the construction of a Project.
"Default" means any Event of Default or any condition, occurrence or
event that, after notice or lapse of time or both, would constitute an Event of
Default.
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"Distribution" means each Distribution (other than deemed
distributions) made to the Borrower pursuant to Section 4.1 or Article X of the
Partnership Agreement.
"East West Loans" means the East West Resorts Term Loan and East West
Resorts Credit Loan.
"East West Resorts" means East West Resorts, LLC, a Delaware limited
liability company, and its successor or successors by merger, consolidation or
any other business combination as a result of which, by operation of law or by
agreement, such successor or successors assume the obligations or liabilities of
East West Resorts, LLC under any or all East West Resorts Loans.
"East West Resorts Credit Loan" means that line of credit loan, and
related Credit Agreement, promissory note, and security agreement, from the
Lender to the Borrower made effective January 1, 1998, and all extensions,
modifications, amendments, and renewals thereof.
"East West Resorts Loan Documents" means all documents evidencing,
securing or governing either of the East West Loans, including but not limited
to that Promissory Note dated February 29, 1996 in the principal amount of
$3,100,000, that Security Agreement dated February 29, 1996, that Credit
Agreement dated as of January 1, 1998, and all "Loan Documents" as defined
therein, and all extensions, modifications, amendments, and renewals thereof.
"East West Resorts Term Loan" means that term loan, and related
promissory note and Security Agreement made by the Borrower, from the Lender to
the Borrower made February 29, 1996, and all extensions, modifications,
amendments and renewals thereof.
"Emergency Loan" means each Emergency Loan made by the Borrower
pursuant to Section 3.4 of the Partnership Agreement.
"Environmental Laws" means all applicable foreign, federal, state or
local statutes, laws, ordinances, codes, rules, regulations (including, without
limitation, consent decrees and orders and administrative orders) judgments and
permits or other authorizations relating to health, safety or the environment,
including, without limitation, CERCLA and RCRA.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
"Event of Default" is defined in Section 8.1.
"EWRD Partnerships" means East West Resort Development, L.P., East West
Resort Development II, L. P., East West Resort Development III, L. P., EWRD
Summit Holding, L. P., and EWRD Perry Holding, L. P.
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"Governmental Authority" means the United States, the state, county and
city or other political subdivision in which a Project is located and any other
political subdivision, agency or instrumentality exercising jurisdiction over
the Borrower, the Partnership, Subpartnership or a Project.
"Governmental Requirement" means all laws, ordinances, rules and
regulations of any Governmental Authority applicable to the Borrower, the
Partnership, Subpartnership, or a Project.
"Hazardous Material" means any pollutant, hazardous substance,
radioactive substance, toxic substance, hazardous waste, medical waste,
radioactive waste, special waste, petroleum or petroleum-derived substance or
waste, asbestos, polychlorinated biphenyls, or any hazardous or toxic
constituent thereof and includes, but is not limited to, any substance defined
in or regulated under Environmental Laws.
"Initial Advance" means the first Advance made hereunder.
"Loan" is defined in the preamble.
"Loan Document" means this Agreement, the Note, the Partnership
Security Agreement and all other documents evidencing, securing or governing the
Loan, as such documents may be amended, renewed, extended, restated or
supplemented from time to time.
"Note" means the Line of Credit Note of the Borrower delivered to the
Lender pursuant to this Agreement and any note subsequently given in exchange,
substitution, modification, renewal or extension therefor.
"Organic Document" means, relative to the Borrower, any of its
Subsidiaries and any other Obligor, its articles or certificate of
incorporation, as the case may be, its articles of organization, its by-laws and
all partnership agreements, operating agreements, shareholder agreements, voting
trusts and similar arrangements applicable to any partnership or limited
liability company interests issued by such person or authorized shares of
capital stock issued by such person.
"Other Crescent Indebtedness" means all indebtedness for borrowed
monies owing from Borrower to Lender, other than the Loan and the East West
Loans but including the Amended and Restated Credit Loan.
"Other Crescent Indebtedness Loan Documents" means all credit
agreements, loan agreements, notes, security agreements and other documents
evidencing, securing or governing any Other Crescent Indebtedness, as such
documents may be amended, renewed, extended, restated or supplemented from time
to time.
"Partner Loan" means each Partner Loan made by the Borrower pursuant to
Section 3.5 of the Partnership Agreement.
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"Partnership" means East West Resort Development IV, L. L. L. P., a
Delaware registered limited liability limited partnership.
"Partnership Agreement" means that certain Limited Partnership
Agreement of East West Resort Development IV, L. L. L. P., dated January 1,
1999.
"Partnership Security Agreement" means the Security Agreements executed
and delivered by the Partnership from time to time pursuant to this Agreement
granting the Lender a security interest in the Partnership's interest in the
Subpartnerships.
"Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency or any other entity, whether
acting in an individual, fiduciary or other capacity.
"Phased Project" means an Approved Project that is to be developed in
more than one phase.
"Project" means the land owned or acquired by a Subpartnership together
with the improvements to be constructed thereon, as contemplated by the Plans.
"Project Advance Limit" means, with respect to each Phased Project the
amount designated as the Commitment for the Project in the Approved Project Plan
and the Approved Budget.
"Project Equity Advance" means the amount advanced hereunder by the
Lender to the Borrower (in one or more Advances) to enable it to make an equity
contribution to the Partnership.
"Project Lender" means the lender who issues the Project Loan
Commitment.
"Project Loan" means the loan contemplated by the Project Loan
Commitment, the proceeds of which will be used in connection with the
acquisition, construction and development of the Project described in such
Project Loan Commitment.
"Project Loan Commitment" means the commitment issued by the Project
Lender to Subpartnership to make the Project Loan to be secured by a first lien
on the Subpartnership's Project containing only such conditions to funding as
are reasonable and customary.
"Project Loan Documents" means the instruments and documents
evidencing, securing, pertaining to or governing a Project Loan.
"Project Mortgage" means a mortgage or deed of trust and security
agreement securing the payment of the Project Loan and evidencing a first lien
on the Project.
"Proposed Budget" means a budget or cost itemization included in each
Approved Project Plan specifying the cost by item of (a) the real estate that
will constitute a part of the Project, (b)
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<PAGE> 27
all labor, materials and services necessary for the construction of the Project
in accordance with the Plans and all Governmental Requirements, and (b) all
other expenses anticipated that are incident to the Project Loan and the
construction of the Project. The Proposed Budget shall include a calculation of
the anticipated Total Equity for such Project.
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., as in effect from time to time.
"Stated Maturity Date" means December 31, 2006.
"Subpartnership" means each limited liability company, whether now
existing or hereafter formed, in which the Partnership has an equity interest.
"Subscriber" means the stockholders of Borrower that executed the
Additional Funding Instruments.
"Tax Distribution" means each Distribution made to the Borrower
pursuant to Section 4.2 of the Partnership Agreement.
"Total Equity" means, with respect to each Project, 80% of the
difference between the total costs set forth in the Approved Budget as the cost
of the Project and the amount of the Project Loan.
"UCC" means the Uniform Commercial Code as in effect, from time to
time, in the State of Texas.
"United States" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
BORROWER: CRESCENT DEVELOPMENT MANAGEMENT
CORP., a Delaware corporation
By:_________________________________________
Name:_______________________________________
Title:______________________________________
LENDER: CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Crescent Real Estate Equities, Ltd., a
Delaware corporation, Sole General
Partner
By:_____________________________________
Name:___________________________________
Title:__________________________________
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<PAGE> 29
EXHIBIT A
APPLICATION FOR ADVANCE
This Application for Advance is submitted by the undersigned to
Crescent Real Estate Equities Limited Partnership (the "Lender") pursuant to
that Amended and Restated Credit Agreement dated as of January 1, 1999, between
the Lender and the undersigned (the "Credit Agreement"). Capitalized terms used
herein and not otherwise defined shall have the meanings set forth in the Credit
Agreement.
<TABLE>
<S> <C>
1. The undersigned hereby requests an Advance under the
Credit Agreement in the amount of: $____________
2. The undersigned hereby requests this Advance to be made
effective (the "Advance Date"): _____________
2. The undersigned hereby warrants and represents the following to the Lender:
A. The Advance is being requested in connection and will be used
solely to fund the following Project (the "Applicable
Project"):
________________________________________________________________________________
B. Project Advance Limit approved
for the Applicable Project: $____________
C. Total Advances made in accordance with the Credit
Agreement prior to the Advance Date: $____________
D. Additional capital contributions made by the Shareholders
which were subsequently used for the Applicable Project: $____________
E. To Date Total Project Investment for the Applicable
Project made prior to the Advance Date (Sum of C and D): $____________
F. Both before and after giving effect to the Advance that is requested hereby, the
warranties and representations set forth in Article VI of the Credit Agreement are
true and correct with the same effect as if made on the date hereof.
</TABLE>
CRESCENT DEVELOPMENT MANAGEMENT CORP.
By:__________________________________
Name:________________________________
Title:_______________________________
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<PAGE> 30
LINE OF CREDIT NOTE
$40,000,000 January 1, 1999
FOR VALUE RECEIVED, CRESCENT DEVELOPMENT MANAGEMENT CORP., a Delaware
corporation ("Borrower") promises to pay to CRESCENT REAL ESTATE EQUITIES
LIMITED PARTNERSHIP, a Delaware limited partnership ("Lender"), at 777 Main
Street, Suite 2700, Fort Worth, Texas 76102, the principal sum of FORTY MILLION
AND NO/100 DOLLARS ($40,000,000.00), or so much thereof as may be advanced, with
interest on the principal balance from time to time remaining unpaid at the
rates hereinafter provided.
Interest on the principal balance hereof from time to time remaining
unpaid prior to an Event of Default shall be payable at the Interest Rate
prescribed in the Credit Agreement (as hereinafter defined), provided that the
interest payable shall not exceed the maximum rate permitted by applicable law
(the "Maximum Rate"). Interest on the principal hereof from time to time
remaining unpaid and, to the extent permitted by applicable law, interest on the
unpaid interest, shall bear interest from and after an Event of Default at the
Default Rate provided that in no event shall the Default Rate be more than the
Maximum Rate.
This Note is the "Note" referred to in the Credit Agreement dated
January 1, 1999, executed by Lender and Borrower (the "Credit Agreement").
Borrower may borrow, repay and reborrow amounts under this Note as permitted by
the Credit Agreement. Terms defined in the Credit Agreement and not otherwise
defined herein are used herein with the meanings given those terms in the Credit
Agreement.
Borrower may request and receive Advances hereunder only in accordance
with the terms and provisions of the Credit Agreement. This Note shall be
payable as provided in Article III of the Credit Agreement.
Upon the occurrence of any Event of Default (after the giving of any
notice required in the Credit Agreement and the expiration of any applicable
grace periods provided for in the Credit Agreement), all amounts then remaining
unpaid on this Note shall become or may be declared to be immediately due and
payable and the holder hereof shall have all rights and remedies of Lender under
the Credit Agreement and other Loan Documents. The failure to exercise the
option to accelerate the maturity of this Note upon the happening of any one or
more of the Events of Default hereunder shall not constitute a waiver of the
right of the holder of this Note to exercise the same or any other option at
that time or at any subsequent time with respect to such uncured default or any
other event of uncured default hereunder or under any other of the Loan
Documents. The remedies of the holder hereof, as provided in this Note and in
any other of the Loan Documents, shall be cumulative and concurrent and may be
pursued separately, successively or together, as often as occasion therefor
shall arise, at the sole discretion of the holder hereof. The acceptance by the
holder hereof of any payment under this Note which is less than payment in full
of all amounts due and payable at the time of such payment shall not constitute
a waiver of or impair, reduce, release or extinguish any of the rights or
remedies of the holder hereof to exercise the foregoing option or any other
option granted to the holder in this Note or in any other of the Loan Documents,
at that time or at any subsequent time, or nullify any prior exercise of any
such option.
The undersigned and all other parties now or hereafter liable for the
payment hereof, whether as endorser, surety or otherwise, except as provided in
the Credit Agreement, severally waive demand, presentment, notice of dishonor,
notice of intention to accelerate the indebtedness evidenced hereby, notice of
the acceleration of the maturity hereof, diligence in collecting, grace, notice
and protest, and consent to all extensions which from time to time may be
granted by the holder hereof and to all partial payments hereon, whether before
or after maturity.
If this Note is not paid when due, whether at maturity or by
acceleration, or if it is collected through a bankruptcy, probate or other
court, whether before or after maturity, the undersigned agrees to pay all costs
of collection, including, but not limited to, reasonable attorneys' fees and
expenses incurred by the holder hereof.
All agreements between the undersigned and the holder hereof, whether
now existing or hereafter arising and whether written or oral, are hereby
limited so that in no contingency, whether by reason of acceleration of the
maturity
<PAGE> 31
hereof or otherwise, shall the interest contracted for, charged, received, paid
or agreed to be paid to the holder hereof exceed the maximum amount permissible
under applicable law. If from any circumstance the holder hereof shall ever
receive anything of value deemed interest by applicable law in excess of the
maximum lawful amount, an amount equal to any excessive interest shall be
applied to the reduction of the principal hereof and not to the payment of
interest, or if such excessive interest exceeds the unpaid balance of principal
hereof, such excess shall be refunded to the undersigned. All interest paid or
agreed to be paid to the holder hereof shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full period until payment in full of the principal so that the interest hereon
for such full period shall not exceed the maximum amount permitted by applicable
law. This paragraph shall control all agreements between the undersigned and the
holder hereof.
This Note may be prepaid only in accordance with the terms of the
Credit Agreement.
The loan transaction evidenced hereby shall not be governed by, or be
subject to, Chapter 15 or Chapter 346 of the Texas Credit Code or Chapter 303 of
the Texas Finance Code.
EXCEPT WHERE FEDERAL LAW IS APPLICABLE (INCLUDING, WITHOUT LIMITATION,
ANY FEDERAL USURY CEILING OR OTHER FEDERAL LAW WHICH, FROM TIME TO TIME, IS
APPLICABLE TO THE INDEBTEDNESS EVIDENCED HEREIN AND WHICH PREEMPTS STATE USURY
LAWS), THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND THE LAWS OF THE UNITED STATES APPLICABLE TO TRANSACTIONS IN SUCH
STATE.
THIS NOTE, TOGETHER WITH THE CREDIT AGREEMENT AND EACH OTHER
LOAN DOCUMENT REFERENCED HEREIN OR THEREIN, REPRESENT THE FINAL AGREEMENTS
BETWEEN THE PARTIES WITH RESPECT TO THE LOAN AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
CRESCENT DEVELOPMENT MANAGEMENT CORP.,
a Delaware corporation
By:___________________________________
Name:_________________________________
Title:________________________________
2
<PAGE> 32
SECURITY AGREEMENT
(Partnership Interests and Limited Liability Company Interests)
Date: January 1, 1999
A. PARTIES
1. Secured Party: CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
777 Main Street, Suite 2100
Fort Worth, TX 76102
2. Debtor (whether
one or more): CRESCENT DEVELOPMENT MANAGEMENT CORP.
C/O Harry Frampton
100 East Thomas Place, Drawer 2770
Avon, Colorado 81620
Attention: Harry Frampton, President
B. AGREEMENT
1. Security Interest. Subject to the applicable terms of this Security
Agreement, Debtor grants to Secured Party a security interest in the Collateral
(hereinafter defined) to secure the payment of the Obligations (hereinafter
defined).
C. OBLIGATIONS
1. Description of Obligations. The following obligations
("Obligations") are secured by this Security Agreement:
a. The debt, obligations, liabilities and agreements of Debtor
under (i) that Line of Credit Note in the principal sum of $40,000,000
executed by Debtor of even date herewith, bearing interest and being
payable to the order of Secured Party as therein provided (the "Note"),
(ii) the Credit Agreement executed by Debtor and Secured Party of even
date herewith, (iii) all other documents evidencing, governing,
securing or otherwise pertaining to the indebtedness evidenced by the
Note, or any other debts for borrowed monies owing from Debtor to
Secured Party where a default or breach by Debtor thereunder would
cause a default or breach under the Credit Agreement (the Note, Credit
Agreement and all other such documents being called "Loan Documents"),
and (iv) all renewals, extensions, modifications or rearrangements of
the foregoing.
b. All costs incurred by Secured Party to obtain, preserve,
perfect and enforce this Security Agreement and collect the
Obligations, and maintain, preserve, collect and enforce the Collateral
(hereinafter defined), including but not limited to reasonable
attorneys' fees and legal expenses and expenses of sale.
c. Interest on the above amounts at the Default Rate as
defined in the Note.
d. All debt, obligations and liabilities of Debtor to Secured
Party of the kinds described in this Item C., now existing or hereafter
arising.
D. COLLATERAL
1. Description of the Collateral. Debtor assigns to Secured Party and
grants to Secured Party security interests in the following, whether now
existing or hereafter arising (the "Collateral"):
a. All of the rights and interests of Debtor as a limited
partner of each of East West Resort Development, L.P., a Delaware
limited partnership ("EWRD I"); East West Resort Development II, L. P.,
a Delaware limited partnership ("EWRD II"); EWRD Summit Holding, L. P.,
a Delaware limited partnership ("Summit"); East West Resort Development
III, L. P., a Delaware limited partnership ("EWRD III"); EWRD Perry
Holding, L. P., a Delaware limited partnership
<PAGE> 33
("Perry"); and East West Resort Development IV, L. L. L. P., a Delaware
registered limited liability limited partnership ("EWRD IV") (each a
"Subpartnership" and collectively the "Subpartnerships"); and all of
the rights and interests of Debtor as a member of East West Resorts,
LLC, a Delaware limited liability company ("Resorts"); including,
without limitation, Debtor's rights as a partner or a member to receive
distributions of any sale, exchange, refinancing or other disposition
of property owned by EWRD I under the Limited Partnership Agreement of
East West Resort Development, L. P., entered into effective as of
August 11, 1995, as hereinbefore or hereinafter from time to time
amended (the "EWRD I Partnership Agreement"); owned by EWRD II under
the Limited Partnership Agreement of East West Resort Development II,
L. P., dated as of September 26, 1996, as hereinbefore or hereinafter
from time to time amended (the "EWRD II Partnership Agreement"); owned
by Summit under the Limited Partnership Agreement of EWRD Summit
Holding, L. P., entered into effective as of September 23, 1997, as
hereinbefore or hereinafter from time to time amended (the "Summit
Partnership Agreement"); owned by EWRD III under the Limited
Partnership Agreement of East West Resort Development III, L. P., dated
as of January ___, 1998, as hereinbefore or hereinafter from time to
time amended (the "EWRD III Partnership Agreement"); owned by Perry
under the Limited Partnership Agreement of EWRD Perry Holding, L. P.,
entered into effective as of November 1, 1998, as hereinbefore or
hereinafter from time to time amended (the "Perry Partnership
Agreement"); owned by EWRD IV under the Limited Partnership Agreement
of East West Resort Development IV, L. L. L. P., dated January 1, 1999,
as hereinafter from time to time amended (the "EWRD IV Partnership
Agreement"); and owned by the Company under the Second Amended and
Restated Operating Agreement entered into effective as of January 1,
1998, as hereinbefore or hereinafter from time to time amended (the
"Resorts Operating Agreement"); and all other profits, income, and
distributions, whether in cash or in kind, owing to Debtor under the
EWRD I Partnership Agreement, the EWRD II Partnership Agreement, the
Summit Partnership Agreement, the EWRD III Partnership Agreement, the
Perry Partnership Agreement, and the EWRD IV Partnership Agreement
(each a "Partnership Agreement" and collectively the "Partnership
Agreements") and under the Resorts Operating Agreement.
b. All Partner Loans and Default Loans (as those terms are
defined in the EWRD I Partnership Agreement, the EWRD II Partnership
Agreement and the Summit Partnership Agreement) and all Partner Loans
(as that term is defined in the EWRD III Partnership Agreement, the
EWRD IV Partnership Agreement and the Perry Partnership Agreement) now
or hereafter owing to Debtor and all security therefor.
c. All present and future rights and interests Debtor may have
or be or become entitled to in the real and personal property (the
"Collateral Property") now or hereafter owned by any Subpartnership.
d. All present and future proceeds, profits, combinations,
reclassification, improvements, and products of, accessions,
attachments, and other additions to, and substitutes and replacements
for, all or any part of the Collateral described herein.
e. All present and future accounts, contract rights, general
intangibles, chattel paper, documents, instruments, cash and noncash
Proceeds, and other rights arising from or by virtue of, or from the
voluntary or involuntary sale, lease, or other disposition of, or
collections with respect to, or insurance or condemnation proceeds
payable with respect to, or proceeds payable by virtue of warranty,
indemnity, guaranty, or other claims, causes and rights of action,
settlements thereof, judicial and arbitration judgments and awards
against any person with respect to, all or any part of the Collateral
or the Collateral Property described herein. As used herein, the term
"Proceeds" shall have the meaning assigned to it under the UCC and, to
the extent not otherwise included, shall include, but not be limited
to, (i) all income, revenues, fees, distributions, reimbursements and
payments from whatever source received by, or on behalf of Debtor, in
respect of the Collateral, (ii) any and all payments (in any form
whatsoever) made or due and payable to Debtor from time to time in
connection with any casualty with respect to the Collateral Property or
any of the Collateral (whether or not pursuant to an insurance policy),
or any requisition, confiscation, condemnation, seizure or forfeiture
of all or any part of the Collateral by any governmental authority,
(iii) all claims of Debtor for losses or damages arising out of or
related to or for any breach of any agreements, covenants,
representations or warranties or any default under any of the
Collateral described herein, and (iv) any and all other amounts from
time, to time paid or payable to, or on behalf of, Debtor under, or in
connection with, any of the Collateral.
f. All present and future security for the payment to Debtor
of any of the Collateral described herein and goods which gave, or will
give, rise to any of such Collateral or are evidenced, identified, or
represented therein or thereby.
The description of Collateral contained in this paragraph shall not be
deemed to permit any action prohibited by this Security Agreement or by terms
incorporated in this Security Agreement. Portions of the Collateral constitute
accounts, contract rights,
2
<PAGE> 34
general intangibles, chattel paper, documents or instruments, and all books and
records of Debtor concerning such Collateral are, and shall be, located at the
offices of the Debtor specified above.
E. DEBTOR'S WARRANTIES
Debtor represents, warrants, and covenants to Secured Party now and so
long as any Obligations secured hereby are outstanding as follows:
1. No financing statement covering any portion of the Collateral is on
file in any public office, except the financing statements relating to this
security interest created hereunder.
2. Debtor is the sole owner of the Collateral and each item
constituting the Collateral, free and clear of all liens except for the security
interest granted to Secured Party pursuant to this Security Agreement.
3. All actions necessary or desirable to perfect the Security Interest
in the Collateral in each state in which any portion of the Collateral is or
will be located have been, or will forthwith be, duly taken.
4. Each of the Partnership Agreements and the Resorts Operating
Agreement is in full force and effect and, to the knowledge of Debtor, there
exists no material default thereunder, or event or condition which, with the
passage of time or the giving of notice, or both, would constitute a material
default thereunder.
5. Neither any Partnership Agreement nor the Resorts Operating
Agreement will be amended or modified in any manner that would materially affect
Debtor's interest thereunder, or in any manner which would materially impair or
adversely affect the Collateral, nor shall Debtor consent to any such amendment
without the prior written consent of Secured Party.
6. There is no condition, circumstance, event, agreement, document,
instrument, restriction, litigation or other proceeding and, to the best of
Debtor's knowledge, there is no threatened litigation or proceeding or basis
therefor, which could materially adversely affect the validity or priority of
the liens and security interests granted, or intended to be granted, hereunder
when executed, delivered, recorded and filed as required hereunder, or that
could materially adversely affect the ability of Debtor to perform its
obligations hereunder and under the other Loan Documents to which Debtor is a
party, or which would constitute an Event of Default.
7. Each Subpartnership, Resorts and Debtor have fully complied with all
requirements imposed on them in connection with (a) the organization and
formation of such Subpartnership or Resorts, as applicable, and (b) the sale,
distribution and offer of partnership interests in such Subpartnership and
membership interests in Resorts.
F. DEBTOR'S COVENANTS
Debtor covenants to Secured Party and agrees with Secured Party as
follows:
1. Debtor shall promptly perform all of Debtor's agreements herein, and
any other agreements between Debtor and Secured Party.
2. Debtor shall defend the Collateral against all claims and demands of
all persons at any time claiming the same or any interest therein adverse to
Secured Party.
3. Debtor shall keep the Collateral free from liens and other security
interests (except liens for taxes not yet due), and shall not create or suffer
to exist any lien or security interest in the Collateral hereafter acquired
except for the security interests hereby granted. Debtor shall not file, or
permit to be filed, any financing statements or other security instruments,
covering the Collateral, unless by, or on behalf of, Secured Party in connection
with this Security Agreement or to effectuate the assignment to Debtor of the
financing statements currently of record against the Collateral.
4. Debtor shall pay all costs necessary to obtain, preserve, perfect,
defend and enforce the security interests hereby granted, collect the sums owing
under the Collateral Loan Documents, and preserve, defend, enforce, service and
collect the Collateral, including specifically, but without limitation, the
payment of taxes, assessments, reasonable attorneys' fees and legal
3
<PAGE> 35
expenses, and expenses of sales. If Debtor shall have failed to pay such costs
and expenses within five (5) days after request by Secured Party, Secured Party
may, at its option, pay any such costs and expenses, and discharge encumbrances
on the Collateral. Debtor agrees to reimburse the Secured Party on demand for
any costs so incurred, and, until such reimbursement, the amount of any such
payment shall be a part of the Obligation.
5. Prior to or immediately following the occurrence thereof, Debtor
will notify the Secured Party of (i) any material adverse change occurring in or
to any of the Collateral, (ii) any change in Debtor's office address or mailing
address, (iii) any material change in any fact or circumstance warranted or
represented by Debtor in this Security Agreement or furnished to the Secured
Party by Debtor, (iv) any Event of Default or (v) any notices, communications,
or correspondence to be or which have been delivered to Debtor under the
Partnership Agreement and deliver to Secured Party copies thereof.
6. Debtor shall execute and deliver to Secured Party a financing
statement for filing to perfect the security interests hereunder and any other
papers furnished by Secured Party which are necessary in the judgment of Secured
Party to obtain, maintain and perfect the security interest hereunder and to
enable Secured Party to comply with any applicable federal or state law in order
to obtain or perfect Secured Party's interest in the Collateral. Debtor shall
have each Subpartnership and Resorts make appropriate entries in its partnership
or membership records to reflect the existence of the security interest granted
hereby in the Collateral.
7. Debtor shall cause Subpartnerships and Resorts to comply with all of
the representations, warranties, covenants, agreements, indemnities and terms
contained in the Subpartnerships' Organizational Documents and Resorts'
Organizational Documents and all other material agreements to which the
Subpartnerships and Resorts, or any of them, is bound and to enforce rights of
Subpartnerships and Resorts under all material agreements by which any of them
is bound, in a timely manner, consistent with prudent practices and all
applicable laws, and also as required by Secured Party.
8. Debtor shall fully perform all of Debtor's duties under and in
connection with each transaction to which the Collateral, or any part thereof,
relates, so that the amounts thereof shall actually become payable in their
entirety to Secured Party.
9. Debtor shall promptly notify Secured Party of any claim, action, or
proceeding affecting title to all or any of the Collateral or the security
interest and, at the request of Secured Party, appear in and defend, at Debtor's
expense, any such claim, action, demand or proceeding.
10. At Debtor's expense and upon Secured Party's request, after an
Event of Default, Debtor shall file or cause to be filed such applications and
take such other actions as Secured Party may request to obtain the consent or
approval of any governmental authority to Secured Party's rights hereunder,
including, without limitation, the right to sell all of the Collateral upon an
Event of Default without additional consent or approval from such governmental
authority (and, because Debtor agrees that Secured Party's remedies at law for
failure of Debtor to comply with this provision would be inadequate and that
such failure would not be adequately compensable in damages, Debtor agrees that
its covenants in this provision may be specifically enforced).
11. Upon demand by Secured Party, Debtor will deposit upon receipt all
checks, drafts, cash or other remittances on account or accounts or contracts or
received as proceeds of any other Collateral in a special bank account in a bank
of Secured Party's choice over which Secured Party alone shall have power of
withdrawal. The funds in said account shall be held by Secured Party as security
for the Obligation. Said proceeds shall be deposited in the form received,
except for the endorsement of Debtor where necessary to permit collection of
items, which endorsements Debtor agrees to make, but which Secured Party is
authorized to make on Debtor's behalf. Secured Party may from time to time apply
the whole or any part of the funds in such special account against the
Obligations. Any portion of said funds on deposit which Secured Party elects not
to apply to the Obligations may be paid by Secured Party to Debtor.
12. Debtor shall give Secured Party written notice of each office of
Debtor in which records of Debtor pertaining to accounts in the Collateral are
kept, and of any change of any office or location. Except as such notice is
given, all records of Debtor pertaining to the Collateral and to accounts are
and shall be kept in the location shown at the beginning hereof.
G. RIGHTS AND POWERS OF SECURED PARTY
1. Secured Party may in its discretion after an Event of Default but
only after prior written notice to Debtor, without liability to Debtor, obtain
from any person information regarding Debtor or Debtor's business, which
information any such person
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<PAGE> 36
also may furnish without liability to Debtor; endorse as Debtor's agent any
instruments, documents or chattel paper in the Collateral or representing
proceeds of the Collateral; contact any account debtors directly to verify
information furnished by Debtor; take control of proceeds; release the
Collateral in its possession to any Debtor, temporarily or otherwise; after
default, take control of funds generated by the Collateral, such as cash
dividends, interest and proceeds or refunds from insurance, and use same to
reduce any part of the Obligations and exercise all other rights which an owner
of such collateral may exercise; after default, at any time transfer any of the
Collateral or evidence thereof into its own name or that of its nominee; demand,
collect, convert, redeem, receipt for, settle, compromise, adjust, sue for,
foreclose or realize upon the Collateral, in its own name or in the name of
Debtor, as Secured Party may determine. The foregoing rights and powers of
Secured Party will be in addition to, and not a limitation upon, any rights and
powers of Secured Party given by law, elsewhere in this agreement, or otherwise.
2. Secured Party may while any Event of Default continues hereunder
present for conversion any instrument (including any investment security) in the
Collateral which is convertible into any other instrument or investment security
or a combination thereof with cash. But Secured Party shall not have any duty to
present for conversion any instrument in the Collateral unless it shall have
received from Debtor written instructions to that effect at a time reasonably
far in advance of the final conversion date to make such conversion possible.
H. DEFAULT
1. Events of Default. The occurrence of a default under the Note, the
Credit Agreement or any document evidencing, governing, securing, guaranteeing,
indemnifying or otherwise pertaining to the Loan shall constitute an event of
default ("Event of Default") hereunder.
2. Remedies of Secured Party Upon Default. Should an Event of Default
occur and be continuing, Secured Party may, at its election, exercise any and
all rights and remedies available to a secured party under the UCC, in addition
to any and all other rights and remedies afforded by the Loan Documents, at law,
in equity, or otherwise, including, without limitation, such rights and remedies
as (a) Party, (b) applying by appropriate judicial proceedings for appointment
of a receiver for all or part of the Collateral (and Debtor hereby consents to
any such appointment), and (c) applying to the Obligation any cash held by
Secured Party under this Security Agreement. The exercise of one or more rights
or remedies by Secured Party hereunder shall not prejudice or impair the
concurrent or subsequent exercise of any other rights or remedies by Secured
Party. If, in the opinion of Secured Party, there is any question that a public
or semipublic sale or distribution of any Collateral will violate any state or
federal securities law, Secured Party in its discretion (a) may offer and sell
securities privately to purchasers who will agree to take them for investment
purposes and not with a view to distribution and who will agree to imposition of
restrictive legends on the certificates representing the security, or (b) may
sell such securities in an intrastate offering under Section 3(a)(11) of the
Securities Act of 1933, and no sale so made in good faith by Secured Party shall
be deemed to be not "commercially reasonable" because so made.
a. Notice. Reasonable notification of the time and place of
any public sale of the Collateral, or reasonable notification of the
time after which any private sale or other intended disposition of the
Collateral is to be made, shall be sent to Debtor and to any other
Person entitled to notice under the UCC. It is agreed that notice sent
or given not less than twenty (20) business days prior to the taking of
the action to which the notice relates is reasonable notification and
notice for the purposes of this subparagraph.
b. Application of Proceeds. Secured Party shall apply the
proceeds of any sale or other disposition of the Collateral under this
paragraph in the following order: first, to the payment of all its
expenses incurred in retaking, holding, and preparing any of the
Collateral for sale(s) or other disposition, in arranging for such
sale(s) or other disposition, and in actually selling or disposing of
the same (all of which are part of the Obligation); second, toward
repayment of amounts expended by Secured Party under Paragraph I.3; and
third, toward payment of the balance of the Obligation in accordance
with the Credit Agreement. If the proceeds are insufficient to pay the
Obligation in full, Debtor shall remain liable for any deficiency to
the extent provided in the Credit Agreement.
3. Other Rights of Secured Party.
a. Performance. In the event Debtor shall fail to pay when due
all taxes, subject to contest rights permitted by the Credit Agreement,
on any of the Collateral, or to preserve the priority of the Security
Interest in any of the Collateral, or otherwise fail to perform any of
its obligations under the Loan Documents with respect to the
Collateral, then Secured Party may, at its option, but without being
required to do so, pay such taxes, prosecute or defend any suits in
relation to the
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<PAGE> 37
Collateral, or insure and keep insured the Collateral in any amount
deemed appropriate by Secured Party, or take all other action which
Debtor is required, but has failed or refused, to take under the Loan
Documents. Any sum which may be expended or paid by Secured Party
under this subparagraph (including, without limitation, court costs
and attorneys' fees) shall bear interest from the dates of expenditure
or payment at the Default Rate (as defined in the Note) until paid
and, together with such interest, shall be payable by Debtor to
Secured Party upon demand and shall be part of the Obligation.
b. Collection. After the occurrence of an Event of Default and
during the continuation thereof, upon notice from Secured Party, each
obligor with respect to any payments on any of the Collateral
(including without limitation condemnation proceeds, dividends and
other distributions with respect to securities, and insurance proceeds
payable by reason of loss or damage to any of the Collateral Property)
is hereby authorized and directed by Debtor to make payment directly to
Secured Party, regardless of whether Debtor was previously making
collections thereon. Subject to Subparagraph I.3(d) hereof, until such
notice is given, Debtor is authorized to retain and expend all payments
made on the Collateral. After the occurrence of an Event of Default and
during the continuation thereof, Secured Party shall have the right in
its own name or in the name of Debtor to compromise or extend the time
of payment with respect to all or any portion of the Collateral for
such amounts and upon such terms as Secured Party may determine; to
demand, collect, receive, receipt for, sue for, compound, settle,
compromise, adjust, realize upon and give acquittances for any and all
amounts due or to become due with respect to Collateral; to file any
claims or take any action or initiate any proceedings which Secured
Party may deem necessary or desirable for the collection of any of the
Collateral or to otherwise enforce the rights or remedies of Debtor
with respect to any Collateral; to take control of cash and other
Proceeds of any Collateral; to endorse the name of Debtor on any notes,
acceptances, checks, drafts, money orders, or other evidences of
payment on Collateral that may come into the possession of Secured
Party; to sign the name of Debtor on any drafts against obligors or
other Persons making payment with respect to Collateral, on assignments
and verifications of accounts or other Collateral and on notices to
obligors making payment with respect to Collateral; to send requests
for verification of obligations to any such obligor; to take any action
Debtor is required to take or any other necessary action to obtain,
preserve, and enforce this Security Agreement, and maintain, preserve
and collect the Collateral, without notice to Debtor, and add the costs
of same to the Obligation; to release Collateral in Secured Party's
possession to any Person, temporarily or otherwise; to set standards
from time to time to govern what may be deemed after-acquired
Collateral; to transfer any of the Collateral, or evidence thereof,
into its own name or that of its nominee and receive the Proceeds
therefrom and hold the same as security for the Obligation, or apply
the same thereon; to exercise as to the Collateral all the rights of
the owner thereof; and to do all other acts and things necessary to
carry out the intent of this Security Agreement. If any obligor fails
or refuses to make payment on any Collateral when due, Secured Party is
authorized, in its sole discretion, either in its own name or in the
name of Debtor, to take such action as Secured Party shall deem
appropriate for the collection of any amounts owed with respect to the
Collateral or upon which a delinquency exists. Regardless of any other
provision hereof, however, Secured Party shall never be liable for its
failure to collect, or for its failure to exercise diligence in the
collection of, any amounts owed with respect to Collateral, nor shall
it be under any duty whatever to anyone except Debtor to account for
funds that it shall actually receive hereunder. Without limiting the
generality of the foregoing, Secured Party shall have no responsibility
for ascertaining any maturities, calls, conversions, exchanges, offers,
tenders, or similar matters relating to any Collateral, or for
informing Debtor with respect to any of such matters (irrespective of
whether Secured Party actually has, or may be deemed to have, knowledge
thereof). The receipt of Secured Party to any obligor shall be a full
and complete release, discharge, and acquittance to such obligor, to
the extent of any amount so paid to Secured Party.
c. Certain Proceeds. After the occurrence and during the
continuance of an Event of Default, any cash Proceeds of Collateral
which come into the possession of Secured Party (including, without
limitation, insurance and condemnation proceeds) may, at Secured
Party's option, be applied in whole or in part to the Obligation, be
released in whole or in part to or on the written instructions of
Debtor for any general or specific purpose, or be retained in whole or
in part by Secured Party as additional Collateral. Any cash Collateral
in the possession of Secured Party may be invested by Secured Party but
Secured Party shall never be obligated to make any such investment and
shall never have any liability to Debtor for any loss which may result
therefrom. All interest and other amounts earned from any investment
of Collateral may be dealt with by Secured Party in the same manner as
other cash Collateral.
d. Use and Operation of Collateral. Should any Collateral come
into the possession of Secured Party, Secured Party may use or operate
such Collateral for the purpose of preserving it or its value pursuant
to the order of a court of appropriate jurisdiction or in accordance
with any other rights held by Secured Party with respect to such
Collateral. Debtor covenants promptly to reimburse and pay to Secured
Party, at Secured Party's request, the amount of all reasonable
expenses (including, without limitation, the cost of any insurance and
payment of taxes or other charges) incurred by Secured Party in
connection with its custody and preservation of Collateral, and all
such expenses, costs, taxes, and other charges shall bear
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<PAGE> 38
interest at the Maximum Rate (as defined in the Note) until repaid
and, together with such interest, shall be payable by Debtor to
Secured Party upon demand and shall become part of the Obligation.
However, the risk of accidental loss or damage to, or diminution in
value of, Collateral is on Debtor, and Secured Party shall have no
liability whatever for failure to obtain or maintain insurance, nor to
determine whether any insurance ever in force is adequate as to amount
or as to the risks insured. With respect to Collateral that is in the
possession of Secured Party, Secured Party shall have no duty to fix
or preserve rights against prior parties to such Collateral and shall
never be liable for any failure to use diligence to collect any amount
payable in respect of such Collateral, but shall be liable only to
account to Debtor for what it may actually collect or receive thereon.
The provisions of this subparagraph shall be applicable whether or not
an Event of Default has occurred and is continuing.
e. Diminution in Value of Collateral. Secured Party shall have
no liability or responsibility whatsoever for any diminution in or loss
of value of any Collateral.
I. MULTIPLE COUNTERPARTS
This Security Agreement may be executed in counterparts, each of which
shall be deemed an original, and all of which shall be deemed but one and the
same instrument.
J. GENERAL
1. Waiver. No delay on the part of Secured Party in exercising any
power or right shall operate as a waiver thereof; nor shall any single or
partial exercise of any power or right preclude other or further exercise
thereof or the exercise of any other power or right. No waiver by Secured Party
of any right hereunder or of any default by Debtor shall be binding upon Secured
Party unless in writing, and no failure by Secured Party to exercise any power
or right hereunder or waiver of any default by Debtor shall operate as a waiver
of any other or further exercise of such right or power or of any further
default.
2. Parties Bound. The rights of Secured Party hereunder shall inure to
the benefit of its successors and assigns. The terms of this Security Agreement
shall be binding upon the successors and assigns of the parties. All
representations, warranties and agreements of Debtor are joint and several if
Debtor is more than one and shall bind Debtor's personal representatives, heirs,
successors and assigns.
3. Definitions. Unless the context indicates otherwise, definitions in
the UCC apply to words and phrases in this Security Agreement; if UCC
definitions conflict, Chapter 9 definitions apply.
4. Notice. Notice shall be deemed reasonable if mailed postage prepaid
at least ten (10) days before the related action (or if the UCC elsewhere
specifies a longer period, such longer period) to Debtor's address given above.
5. Expenses. Debtor agrees to reimburse Secured Party's out-of-pocket
expenses, including reasonable attorney's fees, incurred in negotiating,
administering or enforcing any part of the Obligations, and in preparation,
execution, delivery and recording of any documents in connection with any part
of the Obligations, when not contrary to law.
6. Limitation on Interest. All agreements between Debtor and Secured
Party, whether now existing or hereafter arising and whether written or oral,
are hereby expressly limited so that in no contingency, whether by reason of
demand or acceleration of the indebtedness secured hereby or otherwise, shall
the interest contracted for, charged, received, paid or agreed to be paid to
Secured Party exceed the maximum amount permissible under applicable law. If,
from any circumstance whatsoever interest would otherwise be payable to the
holder hereof in excess of the maximum lawful amount, the interest payable to
Secured Party shall be reduced to the maximum amount permitted under applicable
law; and if from any such circumstance Secured Party shall ever receive anything
of value deemed interest by applicable law in excess of the maximum lawful
amount, an amount equal to any excessive interest shall be applied to the
reduction of the principal amount owing on the indebtedness secured hereby and
not to the payment of interest, or if such excessive interest exceeds such
unpaid balance of the principal, such excess shall be refunded to the
undersigned. All interest paid or agreed to be paid to Secured Party on the
indebtedness secured hereby shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness (including the period of any renewal or extension thereof) until
payment in full so that the interest on account of such indebtedness shall not
exceed the maximum amount permitted by applicable law. The terms and provisions
of this paragraph shall control all agreements between Debtor and Secured Party.
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<PAGE> 39
7. Modifications. No provision hereof shall be modified or limited
except by a written agreement expressly referring hereto and to the provision so
modified or limited and signed by the Debtor and Secured Party, nor by course of
conduct, usage of trade, or by the law merchant.
8. Severability. The unenforceability of any provision of this Security
Agreement shall not affect the enforceability or validity of any other
provision.
9. Gender and Number. Where appropriate, the use of one gender shall be
construed to include the others or any of them; and the singular number shall be
construed to include the plural, and vice versa.
10. Applicable Law and Venue. THIS SECURITY AGREEMENT SHALL BE
CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF TEXAS.
11. Financing Statement. A carbon, photographic or other reproduction
of this Security Agreement or any financing statement covering the Collateral
shall be sufficient as a financing statement.
EXECUTED as of the date and year first above written.
DEBTOR: CRESCENT DEVELOPMENT MANAGEMENT CORP.,
a Delaware corporation
By:_______________________________________________
Name:_________________________________________
Title_________________________________________
SECURED PARTY: CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Crescent Real Estate Equities, Ltd.,
Sole general partner
By:___________________________________________
Name:_________________________________________
Title_________________________________________
8
<PAGE> 1
EXHIBIT 10.71
================================================================================
$48,166,666
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of January 1, 1999
between
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP,
a Delaware limited partnership,
as the Lender,
and
CRESCENT DEVELOPMENT MANAGEMENT CORP.,
a Delaware corporation,
as the Borrower
================================================================================
<PAGE> 2
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement"), dated as
of January 1, 1999, between CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, a
Delaware limited partnership (the "Lender") and CRESCENT DEVELOPMENT MANAGEMENT
CORP., a Delaware corporation (the "Borrower").
RECITALS
WHEREAS, the Borrower and the Lender entered into that certain Credit
Agreement dated as of August 11, 1995 (the "Credit Agreement"), as amended by
that certain First Amendment to Credit Agreement dated as of April 15, 1997 and
by that certain Second Amendment to the Credit Agreement dated as of May 8, 1998
(jointly, the "Amendments"), pursuant to which the Lender has extended to the
Borrower a line of credit loan (as amended hereby, the "Loan"); and
WHEREAS, the proceeds of the Loan have been and will be used from time
to time for working capital purposes of the Borrower in order to provide funds
for making equity investments the East West Resort Development, L. P., a
Delaware limited partnership (the "EWRD Partnership") and to the Other EWRD
Partnerships (each a "Partnership" and collectively the "Partnerships") to the
purpose of providing the Partnerships with funds to develop the Approved
Projects; and
WHEREAS, under the Credit Agreement (as amended by the Amendments) the
Borrower has borrowed funds for the purposes permitted under Section 4.3 of the
Credit Agreement, as amended by the Amendments, and letter agreements between
the Borrower and the Lender dated September 30, 1997, May 8, 1998, and November
1, 1998, including the making of capital contributions to the Partnerships; and
WHEREAS, the Borrower desires contemporaneously herewith to enter into
amendments to one or more amendments to the Partnership Agreements pursuant to
which the Borrower's obligation to make additional capital contributions to such
Partnerships will increase; and to enable it in part to enter into and
subsequently satisfy that obligation, the Borrower has requested that the Lender
agree to increase the Commitment Amount by Eight Million Dollars ($8,000,000);
and
WHEREAS, the Lender is willing, on the terms and subject to the
conditions set forth in this Agreement, to modify and increase the Commitment
Amount and to make the Loan in a maximum aggregate principal amount at any one
time outstanding not to exceed $48,166,666, from time to time prior to the
Commitment Termination Date; and
<PAGE> 3
WHEREAS, the parties wish to amend and restate the Original Credit
Agreement so as to set forth in a single document the terms and conditions
thereof, as amended by the Amendments, and as amended hereby for the purposes
hereinabove expressed, and to effect the additional revisions thereto referenced
above.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
This Agreement amends and restates in its entirety the Credit
Agreement, as heretofore amended by the Amendments.
ARTICLE II
COMMITMENTS, ADVANCE PROCEDURES AND NOTES
Section 2.1 Commitment. On the terms and subject to the conditions of
this Agreement (including Article V), the Lender agrees, until the Commitment
Termination Date, to make advances under the Loan to the Borrower up to an
aggregate outstanding principal amount of Forty-Eight Million One Hundred
Sixty-Six Thousand Six Hundred Sixty-Six and No/100 Dollars ($48,166,666) (the
"Commitment Amount") pursuant to Section 2.2. Prior to the available Commitment
Termination Date, the Borrower may repay and reborrow up to the full amount of
the Commitment Amount in accordance with the terms hereof. The Lender shall not
make any advances after the Commitment Termination Date. The Lender shall not be
required to make any advance under this Loan if, after giving effect thereto,
(a) the aggregate principal amount of all Advances made would exceed the
Commitment Amount or (b) with respect to an Approved Project, the aggregate
Project Equity Advance then outstanding with respect to such Project would
exceed the Project Advance Limit for such Project or (c) with respect to an
Approved Project, the aggregate Project Equity Advance made with respect to such
Project (whether or not all or any portion of such Project Equity Advance
remains outstanding) would exceed the Total Equity for such Project.
Notwithstanding anything in this Agreement to the contrary, (i) the Lender shall
not be obligated to advance additional funds with respect to a Project if a
Subpartnership shall default (after notice and expiration of cure periods) under
the Project Loan Documents, (ii) the Lender shall not be obligated to advance
additional funds in excess of the aggregate Commitments pursuant to Approved
Project Plans if there is an Incapacity of Frampton (as defined in the
Partnership Agreement), (iii) the Lender shall not be obligated to advance
additional funds to be contributed by Borrower to any Partnership if with
respect to such Partnership there is an Event of Default (as defined in the
Partnership Agreement of such Partnership) that occurs under the Partnership
Agreement of such Partnership and that remains uncured and (iv) the Lender shall
not be obligated to advance more than 20% of the Commitment with respect to a
Project until the earlier of that point in time when (A) the Subpartnership with
respect to such Project has entered into a binding contract for the purchase of
real property in connection with the Project or (B) a Project Loan Commitment
has been received from a Project Lender with respect to the Project.
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<PAGE> 4
The Lender shall not be required to make any advance under this Loan for any
Project other than an Approved Project.
Section 2.2 Advance Procedure. Prior to the Commitment Termination
Date, the Borrower may from time to time request that an Advance be made. Each
Advance following the Initial Advance shall be in an amount that is equal to the
lesser of (a) the amount of the Commitment Amount not outstanding, or (b) the
allowable Project Equity Advance for the applicable Project. The request shall
be made by delivering a Application for Advance to the Lender not less than
fifteen (15) calendar days prior to the date upon which such Advance is to be
made and, if all such conditions precedent to such Advance have been satisfied,
the Lender shall make such Advance directly to the Borrower by wire transfer to
the accounts the Borrower shall have specified in its Application for Advance.
Section 2.3 Note. The Loan shall be evidenced by a single promissory
note (the "Note") payable to the order of the Lender in the maximum principal
amount of Forty-Eight Million One Hundred Sixty-Six Thousand Six Hundred
Sixty-Six and No/100 Dollars ($48,166,666), which modifies, restates, replaces
and substitutes for that Note dated May 8, 1998, made by the Borrower in favor
of the Lender, which itself modified, restated, replaced and substituted for
that Note dated April 15, 1997, which itself modified, restated, replaced and
substituted for that Note dated August 11, 1995.
Section 2.4 Limitation on Certain Advances Prior to April 1, 1999.
Notwithstanding anything to the contrary contained in this Agreement, prior to
April 1, 1999, no additional Advance will be made to the Borrower pursuant to
this Agreement that would increase the aggregate outstanding principal balance
on the Loan above Forty Million One Hundred Sixty-Six Thousand Six Hundred
Sixty-Six and No/100 Dollars ($40,166,666).
ARTICLE III
PAYMENTS AND INTEREST
Section 3.1 Payments. Payments of the Loan shall be made as set forth
in this Section 3.1 and shall be without premium or penalty.
Section 3.1.1 Final Maturity. On the Stated Maturity Date, the
Borrower shall repay in full all accrued but unpaid interest and the entire
unpaid principal amount of the Loan.
Section 3.1.2 Mandatory Payments. The Borrower shall, within
one (1) Business Day following (a) the Borrower's receipt of any Distribution
other than a Tax Distribution, make a mandatory payment of the Loan in an amount
equal to such Distribution less an amount that the Lender may approve in its
reasonable discretion for unpaid expenses and payables that the Borrower has
incurred in the ordinary course of business and a reasonable reserve for future
expenses and (b) the Borrower's receipt of any payments on an Emergency Loan or
a Default
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<PAGE> 5
Loan, make a mandatory payment of the Loan in an amount equal to the payments
received (less amounts retained for expenses and payables). All mandatory
payments made under this Section shall be applied first to accrued but unpaid
interest and thereafter to the outstanding principal balance of the Loan. The
Borrower acknowledges to the Lender that (i) each Subpartnership is generally
obligated to distribute all net cash flow (other than tax distributions) to its
members (including the Partnership) and (ii) the Partnership is generally
obligated to distribute all net cash flow (other than tax distributions and
amounts established as reserves) to its partners (including the Borrower).
Notwithstanding anything in this Agreement to the contrary, the Lender shall not
be obligated to make any additional Advance to the Borrower pursuant to this
Agreement if, based on the Lender's determination in its reasonable discretion,
the Partnership or any Subpartnership has failed to satisfy its obligation to
make the distributions described in the preceding sentence and such failure is
continuing.
Section 3.1.3 Acceleration of Stated Maturity Date.
Immediately upon any acceleration of the Stated Maturity Date of the Loan
pursuant to Section 8.2 or Section 8.3, the Borrower shall repay the Loan to the
full extent of such acceleration.
Section 3.2 Interest Provisions. Interest on the outstanding principal
amount of the Loan shall accrue and be payable in accordance with this Section
3.2.
Section 3.2.1 Rate. Prior to an Event of Default, the
outstanding principal balance of the Loan shall accrue interest at the rate (the
"Interest Rate") of 11.5%, compounded annually.
Section 3.2.2 Post-Maturity Rates. Upon and after an Event of
Default, the Loan shall accrue interest on the outstanding principal balance of
the Loan and, to the extent permitted by applicable law, on the unpaid interest,
at a rate per annum equal to the Interest Rate plus an additional 5.0% per annum
(the "Default Rate"); provided in no event shall the Default Rate exceed the
maximum rate of interest permitted by applicable law.
Section 3.2.3 Accrual. At the end of each calendar year during
the term hereof, all interest that has accrued but has not been paid during such
calendar year shall be added to the outstanding principal balance of the Loan
and shall, thereafter, bear interest, prior to an Event of Default, at the
Interest Rate.
ARTICLE IV
CERTAIN OTHER PROVISIONS
Section 4.1 Payments, Computations, etc. Unless otherwise expressly
provided, all payments by the Borrower pursuant to this Agreement, the Note or
any other Loan Document shall be made, without setoff, deduction or
counterclaim, not later than 12:00 noon, Fort Worth, Texas time, on the date
due, in same day or immediately available funds, to such account as the Lender
shall specify from time to time by written notice delivered to the Borrower.
Whenever any
4
<PAGE> 6
payment to be made shall otherwise be due on a day that 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 and fees, if any, in
connection with such payment.
Section 4.2 Setoff. The Lender shall, upon the occurrence of any
Default have the right to appropriate and apply to the payment of the Note
(whether or not then due) all amounts of the Borrower then held by the Lender.
The Lender's rights under this Section are in addition to other rights and
remedies (including other rights of setoff under applicable law or otherwise)
that the Lender may have. The Borrower hereby waives all rights of setoff,
appropriation and application it may have pursuant to applicable law or
otherwise.
Section 4.3 Use of Proceeds. The proceeds of the Loan shall be used as
follows:
(a) the Borrower shall use the Initial Advance to defray
expenses incurred in connection with this transaction; and
(b) the Borrower shall use each other Advance (other than the
Initial Advance) solely to make capital contributions to one or more of
the Partnerships in an amount that does not exceed the Project Equity
Advance for an Approved Project; provided, however, that the Borrower
may use none of the proceeds from Advances requested or made subsequent
to April 14, 1997, to make capital contributions to a Partnership for
Projects Approved prior to that date; provided further, however, that
the Borrower may use none of the proceeds from any Advance made during
any rolling three year period to make capital contributions to a
Partnership for Approved Projects for which the Borrower previously has
made capital contributions during the three year period ending on the
date of such advance; provided further, however, that the Borrower may
use none of the proceeds from Advances requested or made on or
subsequent to the date of this Agreement but prior to April 1, 1999, to
make capital contributions to a Partnership for any of the Projects
listed in Schedule B hereto; and provided further, however, that the
Borrower may use none of the proceeds from Advances requested or made
on or subsequent to the date of this Agreement to make capital
contributions to a Partnership for any Project other than an Approved
Project listed in Schedule A hereto and then only in an amount not
exceeding the Remaining Project Equity Advance for that Approved
Project as shown on Schedule A hereto.
ARTICLE V
CONDITIONS TO BORROWING
Section 5.1 Initial Advance. The Lender's obligation to fund the
Initial Advance shall be subject to the prior or concurrent satisfaction of each
of the conditions precedent set forth in this Section 5.1.
5
<PAGE> 7
Section 5.1.1 Application for Advance. The Lender shall have
received an Application for Advance.
Section 5.1.2 Resolutions, etc. The Lender shall have received
from the Borrower a certificate of resolutions and incumbency as to resolutions
of its Board of Directors then in full force and effect authorizing the
execution, delivery and performance of this Agreement, the Note and each other
Loan Document to which it is a party.
Section 5.1.3 Delivery of Note. The Lender shall have received
the Note duly executed and delivered by the Borrower.
Section 5.1.4 Borrower Security Agreement. The Lender shall
have received executed counterparts of the Borrower's Security Agreement
together with such UCC-1 financing statements and UCC search reports as the
Lender may require.
Section 5.1.5 Financial Information, etc. The Lender shall
have received, in form and scope reasonably satisfactory to the Lender, the
financial statements referred to in Section 6.5.
Section 5.1.6 Closing Fees, Expenses, etc. The Lender shall
have received all fees, costs and expenses due and payable pursuant to this
Agreement.
Section 5.2 All Advances. The Lender's obligation to fund future
Advances shall be subject to the satisfaction of each of the conditions
precedent set forth in this Section 5.2.
Section 5.2.1 Application for Advance. The delivery of an
Application for Advance.
Section 5.2.2 Compliance with Warranties, No Default, etc.
Both before and after giving effect to any Advances the following statements
shall be true and correct to the Lender's satisfaction:
(a) the representations and warranties set forth in
this Agreement shall be true and correct with the same effect
as if then made; and
(b) no Default shall have then occurred and be
continuing.
Section 5.2.3 Organic Documents. The Lender shall have
received a copy of the Organic Documents for the Subpartnership that will be
capitalized with the proceeds of the requested Advance.
Section 5.2.4 Resolutions, Etc. The Lender shall have received
from that Partnership (in its individual capacity and in its capacity as manager
of the applicable Subpartnership) which owns an interest in the Subpartnership
referenced in Section 5.2.3, a
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<PAGE> 8
certificate of resolutions and incumbency authorizing the organization of the
Subpartnership, and the Subpartnership's execution, delivery and performance of
the Project Loan Documents.
Section 5.2.5 Approved Budget. The Lender shall have received
a final Approved Budget with respect to the Project to be constructed by the
Subpartnership in which a Partnership proposes to make a capital contribution
with the proceeds of the requested Advance (the "Contemplated Project").
Section 5.2.6 Project Loan Commitment. The Lender shall have
received a fully executed copy of the Project Loan Commitment for the
Contemplated Project if there is a Project Loan Commitment for the Contemplated
Project at the time of the delivery of the Application for Advance. In the event
there is not a Project Loan Commitment for the Contemplated Project at the time
of the delivery of the Application for Advance but such Project Loan Commitment
is later received, the Borrower shall promptly provide a copy of such commitment
to the Lender upon receipt.
Section 5.2.7 Evidence of Insurance. The Lender shall have
received adequate evidence that all insurance required by this Agreement is in
effect with respect to the Contemplated Project.
Section 5.2.8 Evidence of Approval. The Lender shall have
received evidence, satisfactory to it, that the Project Lender has approved all
conditions precedent to its obligation to advance proceeds of the Project Loan
with respect to the Contemplated Project.
Section 5.2.9 Estoppel Letter from Project Lender. If there is
a Project Loan Commitment from a Project Lender at the time of the delivery of
the Application for Advance, the Lender shall have received a duly executed
letter from the Project Lender providing the Lender with written notice of any
event of default under the Project Loan Documents with respect to the
Contemplated Project, and a reasonable opportunity in which the Lender may cure
such default prior to the Project Lender's exercise of any remedies available to
it under the Project Loan Documents.
Section 5.2.10 Fees and Expenses. The Lender shall have
received all fees, costs and expenses due and payable pursuant to this
Agreement.
Section 5.2.11 Satisfactory Legal Form. All documents executed
or submitted pursuant hereto shall be reasonably satisfactory in form and
substance to the Lender and its counsel; the Lender shall have received all
other information, approvals, opinions, documents or instruments as the Lender
or its counsel may reasonably request.
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<PAGE> 9
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make the Loan
hereunder and to make each Advance pursuant to the Loan, the Borrower represents
and warrants unto the Lender as of the day and year first written above and on
the date of each Advance as set forth in this Article VI.
Section 6.1 Organization, etc. The Borrower is a duly formed
corporation under the laws of Delaware, is duly qualified to do business and has
full power and authority and holds all requisite governmental licenses, permits
and other approvals to enter into and perform its obligations under this
Agreement, the Note and each other Loan Document to which it is a party, and to
own and hold its property and to conduct its business substantially as it
currently is conducted.
Section 6.2 Due Authorization, Non-Contravention, etc. The Borrower's
execution, delivery and performance of this Agreement, the Note and each other
Loan Document executed or to be executed by it, are within the Borrower's
corporate powers, have been duly authorized by all necessary action (including
but not limited to any consent of stockholders required by law or its Organic
Documents) and do not (a) contravene the Borrower's Organic Documents; or (b)
contravene any contractual restriction, law or governmental regulation or court
decree or order binding on or affecting the Borrower except for such
contraventions that will not, singly or in the aggregate, have a material
adverse effect on the Borrower's ability to perform its obligations under this
Agreement or any Loan Document.
Section 6.3 Government Approval, Regulation, etc. No authorization,
consent or approval or other action by, and no notice to, filing with or license
from, any governmental authority or regulatory body or other Person is required
for the Borrower's due execution or delivery of this Agreement, the Note or any
other Loan Document to which it is a party, or for the consummation and
performance of the transactions contemplated hereby or thereby.
Section 6.4 Validity, etc. Each of this Agreement and, upon the due
execution and delivery thereof, the Note and each other Loan Document executed
by the Borrower or the Partnership, as the case may be, constitutes the legal,
valid and binding obligation of such party enforceable in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
reorganization, insolvency and other similar laws affecting creditors' rights
generally.
Section 6.5 Financial Information. All financial information that has
been or shall hereafter be furnished to the Lender by or on behalf of the
Borrower or by any other Person at the Borrower's direction for the purposes of
or in connection with this Agreement present fairly the financial condition as
at the dates thereof (subject to normal year end adjustments in the case of
unaudited financial statements).
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<PAGE> 10
Section 6.6 No Material Adverse Change. There has been no material
adverse change in the business, financial condition, operations, assets,
revenues, or properties, of the Borrower taken as a whole from the financial
information previously provided to the Lender.
Section 6.7 No Default Under Indebtedness. No event of default has
occurred and is continuing, and no event has occurred that with the giving of
notice, passage of time or both would become a material event of default under
any of the Indebtedness permitted to be incurred pursuant to Section 7.2.2
hereof.
Section 6.8 Litigation, Labor Controversies, etc. There is no pending
or, to the Borrower's knowledge, threatened litigation, action, proceeding or
labor controversy affecting the Borrower, any Partnership or any Subpartnership
that, if adversely determined, reasonably could be expected to have a material
adverse effect on the Borrower, any Partnership, any Subpartnership, any Project
or the Lender.
Section 6.9 Taxes. The Borrower has filed all material tax returns and
reports required by law to have been filed and has paid all taxes and
governmental charges thereby shown to be due and payable.
Section 6.10 ERISA. Neither the Borrower, nor, to the Borrower's best
knowledge, any other person has taken any action or failed to take any action
that would subject the Borrower, the Partnership or any Subpartnership to any
potential liability under ERISA.
Section 6.11 Information Regarding Approved Projects. Attached to this
Agreement as Schedule A is an accurate and complete list of all Projects which
have been Approved in accordance with the Partnership Agreement of any
Partnership prior to January 1, 1999, and the information set forth in Schedule
A with respect to each Approved Project listed therein is accurate and complete
as of January 1, 1999.
Section 6.12 Accuracy of Information. All factual information, as
amended, supplemented or modified, furnished by or on behalf of the Borrower in
writing to (or as directed by) the Lender for purposes of or in connection with
this Agreement, any other Loan Document or any transaction contemplated hereby
is true and accurate in all material respects as of the date of execution and
delivery of this Agreement and all other such factual information thereafter
furnished by or on behalf of the Borrower to (or as directed by) the Lender
pursuant to the terms of this Agreement or any other Loan Document is true and
accurate in every material respect on the date as of which such information as
dated or certified, and does not omit any material fact necessary to make such
Information not misleading.
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ARTICLE VII
COVENANTS
Section 7.1 Affirmative Covenants. The Borrower will perform the
obligations set forth in this Section 7.1.
Section 7.1.1 Financial Information, Reports, Notices, etc.
The Borrower will furnish, or will cause to be furnished, to the Lender copies
of the following financial statements, reports, notices and information:
(a) As soon as available and in any event within 45
days after the end of each Fiscal Quarter of each Fiscal Year
of the Borrower (including the final Fiscal Quarter of each
Fiscal Year), the Borrower will deliver, or cause to be
delivered, balance sheets of the Borrower as of the end of
such Fiscal Quarter and statements of income, cash flow and
the Borrower's equity for such Fiscal Quarter and for the
period commencing at the end of the previous Fiscal Year and
ending with the end of such Fiscal Quarter, setting forth in
each case in comparative form the figures for the
corresponding Fiscal Quarter of the previous Fiscal Year,
certified by the Borrower's chief financial officer in a
manner acceptable to the Lender.
(b) if requested by the Lender for any Fiscal Year,
the Borrower will have prepared at the Borrower's expense and
the Borrower will deliver, or cause to be delivered, to the
Lender a copy of an annual audit report for the Borrower
including therein balance sheets of the Borrower as of the end
of such Fiscal Year and statements of cash flow, income and
the Borrower's equity for such Fiscal Year, in each case
certified (without qualification) by independent public
accountants reasonably acceptable to the Lender.
(c) a copy of all financial accounting and reports
that are to be provided to any Partnership's partners pursuant
to the Partnership Agreement of such Partnership.
(d) As soon as possible and in any event within three
Business Days after becoming aware of
(i) the occurrence of any material adverse
development with respect to any Project,
Subpartnership, Project Loan or any Partnership's
investment in any Subpartnership, or
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(ii) copies of any material notices or
communications from a Project Lender or a
Governmental Authority with respect to the Borrower,
any Partnership, a Project or the Project Loan
Documents; or
(iii) copies of any material notices or
communications from any Partnership, a Subpartnership
to a Project Lender or Governmental Authority with
respect to a Project or the Project Loan Documents.
The Borrower will deliver, or will cause to be delivered,
notice thereof and copies of all documentation relating
thereto.
(e) The Borrower will deliver, or will cause to be
delivered, such other information respecting the condition or
operations, financial or otherwise, of the Borrower, the
Partnership or any Subpartnership as the Lender from time to
time reasonably may request.
Section 7.1.2 Compliance with Laws, etc. The Borrower will,
and, consistent with the Borrower's rights and obligations under each
Partnership Agreement, will cause each Partnership and each Subpartnership to,
comply in all material respects with all applicable Governmental Requirements
such compliance to include, but not be limited to:
(a) the maintenance and preservation of its existence
and qualification in all foreign jurisdictions where it is
required to do so except where the failure to do so would not
be material; and
(b) the payment, before the same become delinquent,
of all taxes, assessments and governmental charges imposed
upon it or upon its property except to the extent they are
being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with
GAAP shall have been set aside on its books.
Section 7.1.3 Maintenance of Properties. The Borrower will,
and, consistent with the Borrower's rights and obligations under each
Partnership Agreement, will cause each Partnership and each Subpartnership to,
maintain, preserve, protect and keep its properties (specifically including but
not limited to, the Projects) in good repair, working order and condition,
normal wear and tear excepted, and make necessary and proper repairs, renewals
and replacements so that its business carried on in connection therewith may be
properly conducted at all times.
Section 7.1.4 Books and Records. The Borrower will, and,
consistent with the Borrower's rights and obligations under each Partnership
Agreement, will cause each Partnership and each of its Subpartnerships to, keep
books and records that accurately reflect all of its business affairs and
transactions in all material respects. The Borrower will, and will cause each
Partnership and each Subpartnership to, permit the Lender at reasonable times
and intervals during
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normal business hours to examine and photocopy extracts from any of its books or
other corporate records. The Borrower shall pay any fees of its independent
public accountant incurred in connection with the Lender's exercise of its
rights pursuant to this Section.
Section 7.1.5 Environmental Covenant. The Borrower will, and,
consistent with the Borrower's rights and obligations under each Partnership
Agreement, will cause each Partnership and each of its Subpartnerships to,
(f) use and operate all of its assets in compliance
in all material respects with all Environmental Laws, keep all
necessary and material permits, approvals, certificates,
licenses and other authorizations required under Environmental
Laws in effect and remain in compliance therewith, and handle
all Hazardous Materials in compliance in all material respects
with all Environmental Laws; and
(g) immediately notify the Lender and provide copies
upon receipt of all potentially material written claims,
complaints or notices (excluding routine fee or schedule
notices) relating to non-compliance with, or liabilities or
obligations arising under or relating in any way to,
Environmental Laws with respect to its assets.
Section 7.1.6 ERISA Compliance. The Borrower will, and will
cause each of its ERISA affiliates to, maintain all employee benefit plans in
compliance in all material respects with all applicable law, including any
reporting requirements, and make all contributions due under the terms of each
employee benefit plan or as required by law.
Section 7.1.7 Additional Funding Instruments. The Borrower
acknowledges to the Lender that, prior to the Initial Advance, the Subscribers
contributed (or executed subscription agreements requiring the immediate
contribution of), in the aggregate, Three Million and No/100 Dollars
($3,000,000) in cash to the Borrower's capital.
The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Twelve
Million and No/100 Dollars ($12,000,000) or would exceed such amount if a
requested Advance were made. In such event, the Borrower's Board of Directors
shall make written demand upon each Subscriber to contribute to the Borrower
cash in an amount equal to the product realized by multiplying (i) One Million
and No/100 Dollars ($1,000,000) by (ii) a fraction, the numerator of which is
the number of shares of the Borrower's common stock that Subscriber owns as of
the date of the Assessment Determination and the denominator of which is the
number of outstanding shares of the Borrower's common stock as of the date of
the Assessment Determination ("Initial Equity Shortfall Share"). Notwithstanding
anything to the contrary contained in this Agreement, no additional Advance will
be made to the Borrower pursuant to this Agreement that would increase the
aggregate unpaid principal and interest on the Loan above Twelve Million and
No/100 Dollars ($12,000,000) unless and until
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each Subscriber has contributed cash to the Borrower in an amount equal to such
Subscriber's Initial Equity Shortfall Share.
The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Sixteen
Million and No/100 Dollars ($16,000,000) or would exceed such amount if a
requested Advance were made. In such event, the Borrower's Board of Directors
shall make written demand upon each Subscriber to contribute to the Borrower
cash in an amount equal to the product realized by multiplying (i) One Million
and No/100 Dollars ($1,000,000) by (ii) a fraction, the numerator of which is
the number of shares of the Borrower's common stock that Subscriber owns as of
the date of the Assessment Determination and the denominator of which is the
number of outstanding shares of the Borrower's common stock as of the date of
the Assessment Determination ("Secondary Equity Shortfall Share").
Notwithstanding anything to the contrary contained in this Agreement, no
additional Advance will be made to the Borrower pursuant to this Agreement that
would increase the aggregate unpaid principal and interest on the Loan above
Sixteen Million and No/100 Dollars ($16,000,000) unless and until each
Subscriber has contributed cash to the Borrower in an amount equal to such
Subscriber's Secondary Equity Shortfall Share.
The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Twenty
Million and No/100 Dollars ($20,000,000) or would exceed such amount if a
requested Advance were made. In such event, the Borrower's Board of Directors
shall make written demand upon each Subscriber to contribute to the Borrower
cash in an amount equal to the product realized by multiplying (i) One Million
and No/100 Dollars ($1,000,000) by (ii) a fraction, the numerator of which is
the number of shares of the Borrower's common stock that Subscriber owns as of
the date of the Assessment Determination and the denominator of which is the
number of outstanding shares of the Borrower's common stock as of the date of
the Assessment Determination ("Third Equity Shortfall Share"). Notwithstanding
anything to the contrary contained in this Agreement, no additional Advance will
be made to the Borrower pursuant to this Agreement that would increase the
aggregate unpaid principal and interest on the Loan above Twenty Million and
No/100 Dollars ($20,000,000) unless and until each Subscriber has contributed
cash to the Borrower in an amount equal to such Subscriber's Third Equity
Shortfall Share.
The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Twenty-Four
Million and No/100 Dollars ($24,000,000) or would exceed such amount if a
requested Advance were made. In such event, the Borrower's Board of Directors
shall make written demand upon each Subscriber to contribute to the Borrower
cash in an amount equal to the product realized by multiplying (i) One Million
and No/100 Dollars ($1,000,000) by (ii) a fraction, the numerator of which is
the number of shares of the Borrower's common stock that Subscriber owns as of
the date of the Assessment Determination and the denominator of which is the
number of outstanding shares of the Borrower's common stock as of
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the date of the Assessment Determination ("Fourth Equity Shortfall Share").
Notwithstanding anything to the contrary contained in this Agreement, no
additional Advance will be made to the Borrower pursuant to this Agreement that
would increase the aggregate unpaid principal and interest on the Loan above
Twenty-Four Million and No/100 Dollars ($24,000,000) unless and until each
Subscriber has contributed cash to the Borrower in an amount equal to such
Subscriber's Fourth Equity Shortfall Share.
The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Twenty-Eight
Million and No/100 Dollars ($28,000,000) or would exceed such amount if a
requested Advance were made. In such event, the Borrower's Board of Directors
shall make written demand upon each Subscriber to contribute to the Borrower
cash in an amount equal to the product realized by multiplying (i) One Million
and No/100 Dollars ($1,000,000) by (ii) a fraction, the numerator of which is
the number of shares of the Borrower's common stock that Subscriber owns as of
the date of the Assessment Determination and the denominator of which is the
number of outstanding shares of the Borrower's common stock as of the date of
the Assessment Determination ("Fifth Equity Shortfall Share"). Notwithstanding
anything to the contrary contained in this Agreement, no additional Advance will
be made to the Borrower pursuant to this Agreement that would increase the
aggregate unpaid principal and interest on the Loan above Twenty-Eight Million
and No/100 Dollars ($28,000,000) unless and until each Subscriber has
contributed cash to the Borrower in an amount equal to such Subscriber's Fifth
Equity Shortfall Share.
The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Thirty-Two
Million and No/100 Dollars ($32,000,000) or would exceed such amount if a
requested Advance were made. In such event, the Borrower's Board of Directors
shall make written demand upon each Subscriber to contribute to the Borrower
cash in an amount equal to the product realized by multiplying (i) One Million
and No/100 Dollars ($1,000,000) by (ii) a fraction, the numerator of which is
the number of shares of the Borrower's common stock that Subscriber owns as of
the date of the Assessment Determination and the denominator of which is the
number of outstanding shares of the Borrower's common stock as of the date of
the Assessment Determination ("Sixth Equity Shortfall Share"). Notwithstanding
anything to the contrary contained in this Agreement, no additional Advance will
be made to the Borrower pursuant to this Agreement that would increase the
aggregate unpaid principal and interest on the Loan above Thirty-Two Million and
No/100 Dollars ($32,000,000) unless and until each Subscriber has contributed
cash to the Borrower in an amount equal to such Subscriber's Sixth Equity
Shortfall Share.
The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Thirty-Six
Million and No/100 Dollars ($36,000,000) or would exceed such amount if a
requested Advance were made. In such event, the Borrower's Board of Directors
shall make written demand upon each Subscriber to contribute to the Borrower
cash in
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an amount equal to the product realized by multiplying (i) One Million and
No/100 Dollars ($1,000,000) by (ii) a fraction, the numerator of which is the
number of shares of the Borrower's common stock that Subscriber owns as of the
date of the Assessment Determination and the denominator of which is the number
of outstanding shares of the Borrower's common stock as of the date of the
Assessment Determination ("Seventh Equity Shortfall Share"). Notwithstanding
anything to the contrary contained in this Agreement, no additional Advance will
be made to the Borrower pursuant to this Agreement that would increase the
aggregate unpaid principal and interest on the Loan above Thirty-Six Million and
No/100 Dollars ($36,000,000) unless and until each Subscriber has contributed
cash to the Borrower in an amount equal to such Subscriber's Seventh Equity
Shortfall Share.
The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Forty Million
and No/100 Dollars ($40,000,000) or would exceed such amount if a requested
Advance were made. In such event, the Borrower's Board of Directors shall make
written demand upon each Subscriber to contribute to the Borrower cash in an
amount equal to the product realized by multiplying (i) One Million and No/100
Dollars ($1,000,000) by (ii) a fraction, the numerator of which is the number of
shares of the Borrower's common stock that Subscriber owns as of the date of the
Assessment Determination and the denominator of which is the number of
outstanding shares of the Borrower's common stock as of the date of the
Assessment Determination ("Eighth Equity Shortfall Share"). Notwithstanding
anything to the contrary contained in this Agreement, no additional Advance will
be made to the Borrower pursuant to this Agreement that would increase the
aggregate unpaid principal and interest on the Loan above Forty Million and
No/100 Dollars ($40,000,000) unless and until each Subscriber has contributed
cash to the Borrower in an amount equal to such Subscriber's Eighth Equity
Shortfall Share.
The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Forty-Four
Million and No/100 Dollars ($44,000,000) or would exceed such amount if a
requested Advance were made. In such event, the Borrower's Board of Directors
shall make written demand upon each Subscriber to contribute to the Borrower
cash in an amount equal to the product realized by multiplying (i) One Million
and No/100 Dollars ($1,000,000) by (ii) a fraction, the numerator of which is
the number of shares of the Borrower's common stock that Subscriber owns as of
the date of the Assessment Determination and the denominator of which is the
number of outstanding shares of the Borrower's common stock as of the date of
the Assessment Determination ("Ninth Equity Shortfall Share"). Notwithstanding
anything to the contrary contained in this Agreement, no additional Advance will
be made to the Borrower pursuant to this Agreement that would increase the
aggregate unpaid principal and interest on the Loan above Forty-Four Million and
No/100 Dollars ($44,000,000) unless and until each Subscriber has contributed
cash to the Borrower in an amount equal to such Subscriber's Ninth Equity
Shortfall Share.
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The Borrower will, through its Board of Directors, make an Assessment
Determination at that point in time when the aggregate of the accrued but unpaid
interest and the unpaid principal balance of the Loan first equals Forty-Eight
Million and No/100 Dollars ($48,000,000) or would exceed such amount if a
requested Advance were made. In such event, the Borrower's Board of Directors
shall make written demand upon each Subscriber to contribute to the Borrower
cash in an amount equal to the product realized by multiplying (i) Forty-One
Thousand Six Hundred Sixty-Six and 50/100 Dollars ($41,666.50) by (ii) a
fraction, the numerator of which is the number of shares of the Borrower's
common stock that Subscriber owns as of the date of the Assessment Determination
and the denominator of which is the number of outstanding shares of the
Borrower's common stock as of the date of the Assessment Determination ("Tenth
Equity Shortfall Share"). Notwithstanding anything to the contrary contained in
this Agreement, no additional Advance will be made to the Borrower pursuant to
this Agreement that would increase the aggregate unpaid principal and interest
on the Loan above Forty-Eight Million and No/100 Dollars ($48,000,000) unless
and until each Subscriber has contributed cash to the Borrower in an amount
equal to such Subscriber's Tenth Equity Shortfall Share.
Section 7.2 Negative Covenants. The Borrower will comply with the
obligations set forth in this Section 7.2.
Section 7.2.1 Business Activities. The Borrower will not, and,
consistent with the Borrower's rights and obligations under each Partnership
Agreement, will not permit any Partnership or any of its Subpartnerships to,
engage in any business activity other than those activities set forth in the
Organic Documents for each such entity.
Section 7.2.2 Indebtedness. The Borrower will not, and,
consistent with the Borrower's rights and obligations under each Partnership
Agreement, will not permit any Partnership or any of its Subpartnerships to,
create, incur, assume or suffer to exist or otherwise become or be liable in
respect of any indebtedness, other than, without duplication, the following:
(a) indebtedness in respect of the Loan and other
obligations;
(b) unsecured Indebtedness incurred in the ordinary
course of its business in the nature of open accounts extended
by suppliers and other vendors on normal trade terms in
connection with purchases of goods and services, accrued
liabilities, deferred income and deferred taxes;
(c) Emergency Loans and Default Loans, as described
in the Partnership Agreements and the Subpartnership Organic
Documents;
(d) the Project Loans incurred by Subpartnerships on
terms that are consistent with the requirements of this
Agreement; and
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(e) other unsecured Indebtedness of the Borrower, the
Partnerships and the Subpartnerships in an aggregate amount
not to exceed $50,000 for the Borrower, $50,000 for any
Partnership and $10,000 for any Subpartnership.
Section 7.2.3 Asset Dispositions, etc. The Borrower will not,
and, consistent with the Borrower's rights and obligations under each
Partnership Agreement, will not permit any Partnership or any of its
Subpartnerships to, sell, transfer, lease, contribute, convey or otherwise
dispose of all or any part of its assets to any Person, unless
(a) no Default has occurred and is continuing or
would occur after giving effect thereto; or
(b) such sale, transfer, lease or other disposition
is approved by the Lender or is approved in the then-current
Approved Annual Business Plan under the applicable Partnership
Agreement.
Section 7.2.4 Restriction on Distributions. The Borrower will
not make dividend distributions to its shareholders at any time when there
exists an outstanding balance on the Loan.
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.1 Listing of Events of Default. Each of the following events
or occurrences described in this Section 8.1 shall constitute an "Event of
Default." Upon the occurrence of an Event of Default (or any event or state of
facts that, with the giving of notice or the passage of time or both, would
constitute an Event of Default), the Borrower shall give notice thereof to the
Lender.
Section 8.1.1 Non-Payment of Obligations. The Borrower shall
default in the payment when due of any principal of the Loan, the East West
Resorts Term Loan, the East West Resorts Credit Loan, or any Other Crescent
Indebtedness or of any interest in respect of the Loan, the East West Resorts
Term Loan, the East West Resorts Credit Loan, or any Other Crescent
Indebtedness.
Section 8.1.2 Breach of Warranty. Any representation or
warranty made or deemed to be made hereunder or in any other Loan Document, any
East West Resorts Loan Document, any Other Crescent Indebtedness Loan Document,
or any or any other writing or certificate furnished by or on behalf of the
Borrower to the Lender for the purposes of or in connection with this Agreement,
either of the East West Resorts Loans, any Other Crescent Indebtedness or any
such other Loan Document, any other East West Resorts Loan Document, or any
Other Crescent Indebtedness Loan Document is or shall be incorrect when made in
any material respect.
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Section 8.1.3 Non-Performance of Other Covenants and
Obligations. There shall be a default in the due performance and observance of
any other agreement contained herein or in any other Loan Document, any East
West Resorts Loan Document, or any Other Crescent Indebtedness Loan Document
executed by the Borrower, and such default shall continue unremedied for a
period of 30 days after the Lender shall have given notice thereof to the
Borrower.
Section 8.1.4 Bankruptcy, Insolvency, etc. The Borrower,
any Partnership, any Subpartnership or East West Resorts shall:
(a) become insolvent or generally fail to pay, or
admit in writing its inability or unwillingness to pay, debts
as they become due;
(b) apply for, consent to, or acquiesce in, the
appointment of a trustee, receiver, sequestrator or other
custodian for the Borrower, any Partnership or any
Subpartnership or East West Resorts or any property of any
thereof, or make a general assignment for the benefit of
creditors;
(c) absent such application, consent or acquiescence
permit or suffer to exist the appointment of a trustee,
receiver, sequestrator or other custodian for the Borrower,
any Partnership, any Subpartnership or East West Resorts or
for a substantial part of the property of any thereof, and
such trustee, receiver, sequestrator or other custodian shall
not be discharged within 60 days, provided that the Borrower,
any Partnership and each Subpartnership and East West Resorts
hereby expressly authorize the Lender to appear in any court
conducting any relevant proceeding during such 60-day period
to preserve, protect and defend their rights under the Loan
Documents and the East West Resort Loan Documents;
(d) permit or suffer to exist the commencement of any
(x) bankruptcy, reorganization, debt arrangement or other case
or proceeding under any bankruptcy or insolvency law, or (y)
any dissolution, winding up or liquidation proceeding, in
respect of the Borrower, any Partnership, any Subpartnership
or East West Resorts, and, if any such case or proceeding is
not commenced by the Borrower, any Partnership, any
Subpartnership or East West Resorts, such case or proceeding
shall be consented to or acquiesced in by the Borrower, such
Partnership, such Subpartnership or East West Resorts or shall
result in the entry of an order for relief or, in the event of
any case or proceeding described in clause (x), shall remain
for 120 days undismissed, provided that the Borrower, each
Partnership, each Subpartnership and East West Resorts hereby
expressly authorizes the Lender to appear in any court
conducting any such case or proceeding during such 120-day
period to preserve, protect and defend their rights under the
Loan Documents or the East West Loan Documents; or
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(e) take any partnership, limited liability company
or corporate action authorizing, or with intent to further,
any of the foregoing.
Section 8.2 Action if Bankruptcy. If any Event of Default described in
clauses (a) through (e) of Section 8.1.4 shall occur with respect to the
Borrower, any Partnership, any Subpartnerships or East West Resorts, the
Commitment (if not theretofore terminated) to make Advances shall automatically
terminate and the outstanding principal amount of the Loan shall automatically
be and become immediately due and payable, without notice or demand.
Section 8.3 Action if Payment Event of Default under East West Loan or
Other Crescent Indebtedness. If any Event of Default described in Section 8.1.1
shall occur due to the Borrower's default in the payment when due of any
principal or interest in respect of the East West Resorts Term Loan, the East
West Resorts Credit Loan, or any Other Crescent Indebtedness (but not for any
other reason), and the Borrower fails to pay such principal or interest in full
within 30 days after the due date thereof, then the Lender shall by notice to
the Borrower declare all or any portion of the outstanding principal amount of
the Loan and other obligations to be due and payable and the Commitment (if not
theretofore terminated) to be terminated, whereupon the full unpaid amount of
the Loan shall be and become immediately due and payable, without further
notice, demand or presentment and the Commitment shall terminate.
Section 8.4 Action if Other Event of Default under East West Loan or
Other Crescent Indebtedness. If any Event of Default (other than any Event of
Default described in Section 8.2 or Section 8.3) shall occur with respect to any
East West Resorts Loan Document or Other Crescent Indebtedness Loan Document
(but not for any other reason) for any reason, whether voluntary or involuntary,
and (a) be continuing for a period of 90 days if an Event of Default under
Section 8.1.2 or (b) ,be continuing for a period of 90 days after notice thereof
shall have been given to the Borrower by the Lender if an Event of Default under
Section 8.1.3, then the Lender shall by notice to the Borrower declare all or
any portion of the outstanding principal amount of the Loan and other
obligations to be due and payable and the Commitment (if not theretofore
terminated) to be terminated, whereupon the full unpaid amount of the Loan shall
be and become immediately due and payable, without further notice, demand or
presentment and the Commitment shall terminate.
Section 8.5 Action if Other Event of Default. If any Event of Default
(other than any Event of Default described in Section 8.2, Section 8.3, or
Section 8.4) shall occur for any reason, whether voluntary or involuntary, and
be continuing, the Lender shall by notice to the Borrower declare all or any
portion of the outstanding principal amount of the Loan and other obligations to
be due and payable and the Commitment (if not theretofore terminated) to be
terminated, whereupon the full unpaid amount of the Loan shall be and become
immediately due and payable, without further notice, demand or presentment and
the Commitment shall terminate.
Section 8.6 Rescission of Event of Default. If an Event of Default
occurs hereunder and such Event of Default would not have occurred but for the
default by a Subpartnership (for purposes of this Section, the "Defaulting
Subpartnership") under Section 8.1.4 hereof, (such
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Events of Default being described in this Section as "Specified Events of
Default") then the Lender shall be required to rescind and annul the Event of
Default if and only if, within twenty (20) Business Days following such
Specified Event of Default:
(a) all Defaults and Events of Default, other than the
Specified Events of Default, are remedied or waived to the Lender's
sole satisfaction; and
(b) partners of the Partnership which owns an interest in the
Subpartnership have approved of a revised business plan with respect to
the Project owned by the Defaulting Subpartnership, the Borrower, on
the basis of such revised business plan, has submitted to the Lender a
revised Annual Business Plan and the Lender, in its reasonable
discretion, has Approved such Annual Business Plan.
No action taken by the Lender pursuant to this provision shall affect any
subsequent Default or Event of Default with respect to the Borrower or impair
any right or remedy consequent thereon.
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section 9.1 Waivers, Amendments, etc. The provisions of this Agreement
and of each other Loan Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and consented to
by the Borrower and the Lender. No failure or delay on the part of the Lender,
or the holder of any Note in exercising any power or right under this Agreement
or any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right. No notice
to or demand on the Borrower in any case shall entitle it to any notice or
demand in similar or other circumstances. No waiver or approval by the Lender or
the holder of any Note under this Agreement or any other Loan Document shall,
except as may be otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.
Section 9.2 Notices. All notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing and addressed, delivered or transmitted to such party at its address or
facsimile number set forth below its signature hereto, or at such other address
or facsimile number as may be designated by such party in a notice to the other
parties. Any notice, if sent via United States Postal Service Express Mail or
certified mail, properly addressed with postage prepaid or if sent via
nationally recognized overnight courier service, properly addressed with
delivery fees prepaid, shall be deemed given when received; any notice, if
transmitted by facsimile, shall be deemed given one business day after receipt
of electronic confirmation of transmission.
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Section 9.3 Payment of Costs and Expenses. The Borrower agrees to pay
on demand all of the Lender's reasonable expenses (including the reasonable fees
and out-of-pocket expenses of the Lender's counsel and of local counsel, if any,
who the Lender's counsel may retain) in connection with this transaction
Section 9.4 Indemnification.
(a) In consideration of the execution and delivery of this
Agreement by the Lender and the extension of the Commitments, the
Borrower hereby indemnifies, exonerates and holds the Lender and each
of its respective trustees, partners, stockholders, officers,
directors, employees, agents, attorneys, consultants and experts
(collectively, the "Indemnified Parties") free and harmless from and
against any and all actions, causes of action, suits, judgments,
claims, demands, losses, costs, liabilities (including, without
limitation, strict liability), penalties, fines and damages,
(including, without limitation, punitive damages), and expenses
incurred in connection therewith (irrespective of whether any such
Indemnified Party is a party to the action for which indemnification
hereunder is sought), including reasonable attorneys, consultants and
experts fees and disbursements (collectively, the "Indemnified
Liabilities"), imposed upon or incurred by the Indemnified Parties or
any of them as a result of, or arising out of, or relating to
(i) any transaction financed or to be financed in
whole or in part, directly or indirectly, with the Loan
proceeds;
(ii) the entering into and performance of this
Agreement and any other Loan Document by any of the
Indemnified Parties;
(iii) the actual or alleged release or presence of
any Hazardous Substance at, to or from any asset or former
asset of the Borrower, the Partnership or any Subpartnership;
or
(iv) the actual or alleged violation of any
Environmental Law by any person at or in connection with any
current asset or former asset of the Borrower, any Partnership
or any Subpartnership.
except for any such Indemnified Liabilities arising for the
account of a particular Indemnified Party by reason of the
relevant Indemnified Party's gross negligence or wilful
misconduct, and if and to the extent that the foregoing
undertaking may be unenforceable for any reason, the Borrower
hereby agrees to make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities that
is permissible under applicable law, except as aforesaid to
the extent not payable by reason of the Indemnified Party's
gross negligence or wilful misconduct or breach of such
obligations.
21
<PAGE> 23
(b) THE LENDER SHALL NOT BE RESPONSIBLE OR LIABLE TO ANY OTHER
PARTY HEREUNDER OR ANY OTHER PERSON FOR CONSEQUENTIAL DAMAGES THAT MAY
BE ALLEGED AS A RESULT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.
Section 9.5 Severability. Any provision of this Agreement or any other
Loan Document that is prohibited or unenforceable in any jurisdiction shall, as
to such provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
Section 9.6 Headings. The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.
Section 9.7 Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be an original and all of which shall constitute together but one
and the same agreement. This Agreement, together with each other Loan Document,
shall become effective when counterparts hereof executed on behalf of the
Borrower and the Lender (or notice thereof satisfactory to the Lender) shall
have been received by the Lender and notice thereof shall have been given by the
Lender to the Borrower.
Section 9.8 Governing Law: Entire Agreement. THIS AGREEMENT, THE NOTES
AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER
AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD FOR CONFLICT OF
LAWS PRINCIPLES. Except as otherwise provided herein, this Agreement, the Note
given in replacement of that promissory note made as of May 8, 1998, and the
other Loan Documents constitute the entire understanding among the parties
hereto with respect to the subject matter hereof and supersede any prior
agreements, written or oral, with respect thereto.
Section 9.9 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that the Borrower may not assign or
transfer its rights or obligations hereunder without the Lender's prior written
consent.
Section 9.10 REIT Compliance. The Borrower acknowledges that the
Lender's affiliate, Crescent Real Estate Equities Company ("Crescent"), is a
real estate investment trust under the Code. The Borrower agrees that it will
not knowingly or intentionally take or omit to take any action that the Borrower
knows would or could result in Crescent being disqualified from treatment as a
real estate investment trust under the Code.
22
<PAGE> 24
ARTICLE X
DEFINITIONS
Section 10.1 Defined Terms. In addition to the terms defined in
previous portions of this Agreement, the following terms when used in this
Agreement shall, except where the context otherwise requires, have the following
meanings (such meanings to be equally applicable to the singular and plural
forms thereof):
"Additional Funding Instruments" means the Additional Funding
Instruments executed by John Goff, Gerald Haddock, Harry Frampton and the Lender
on August 11, 1995, as of April 15, 1997, and as of May 8, 1998; and the
Additional Funding Instruments executed by COPI Colorado, L. P. and the Lender
on January 1, 1999.
"Advance" means all money advances under the Loan made by the Lender
pursuant to an Application for Advance in accordance with Article II.
"Agreement" means, on any date, this Amended and Restated Credit
Agreement.
"Annual Business Plan" is defined in the Partnership Agreement.
"Application for Advance" means a loan request and certificate duly
executed by the Borrower, in the form that is attached hereto as Exhibit A or
such other form that is approved by the Lender from time to time.
"Approved" is defined in the Partnership Agreements.
"Approved Budget" means the Proposed Budget in the Approved Project
Plan, as adjusted and approved by a Partnership, the Borrower (both general and
limited partners) and the Project Lender.
"Approved Project" means each of the Projects listed in Schedule A
hereto; except that the following Projects shall not be considered Approved
Projects until April 1, 1999: the Phase II developments of Deer Trail, Buckhorn
and Bear Paw at Bachelor Gulch and the Phase III development of Bear Paw at
Bachelor Gulch.
"Approved Project Plan" shall be each of the Approved Project Plans
contemplated by Section 3.2 of the Partnership Agreement which shall, among
other things, include a Proposed Budget and for Projects to be developed in more
than one phase, a Project Advance Limit..
"Assessment Determination" is defined in the Additional Funding
Instruments.
"Borrower" means Crescent Development Management Corp., a Delaware
corporation, and its successors and assigns permitted hereunder.
23
<PAGE> 25
"Borrower Security Agreement" means the Security Agreement (as amended
or restated from time to time) executed and delivered by the Borrower granting
the Lender a security interest in (a) all Partner Loans and Default Loans now or
hereafter owing to the Borrower and all security therefor, and (b) the
Borrower's partnership interest in one or more of the Partnerships.
"Business Day" means any day that is neither a Saturday or Sunday nor a
legal holiday on which banks are authorized or required to be closed in New
York, New York.
"CERCLA" means the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment" is defined in the Partnership Agreement.
"Commitment Termination Date" means the earlier of (i) the occurrence
of an Event of Default or (ii) April 15, 2000.
"Construction Contract" means all construction contracts executed by
the Subpartnership for the construction of a Project.
"Contractor" means the general contractor retained by the
Subpartnership with respect to the construction of a Project.
"Default" means any Event of Default or any condition, occurrence or
event that, after notice or lapse of time or both, would constitute an Event of
Default.
"Default Loan" means each Default Loan made by the Borrower under a
Partnership Agreement.
"Distribution" means each Distribution (other than deemed
distributions) made to the Borrower pursuant to Section 4.1 or Article X of the
Partnership Agreement.
"East West Loans" means the East West Resorts Term Loan and East West
Resorts Credit Loan.
"East West Resorts" means East West Resorts, LLC, a Delaware limited
liability company, and its successor or successors by merger, consolidation or
any other business combination as a result of which, by operation of law or by
agreement, such successor or successors assume the obligations or liabilities of
East West Resorts, LLC under any or all East West Resorts Loans.
24
<PAGE> 26
"East West Resorts Credit Loan" means that line of credit loan, and
related Credit Agreement, promissory note, and security agreement, from the
Lender to the Borrower made effective January 1, 1998, and all extensions,
modifications, amendments, and renewals thereof.
"East West Resorts Loan Documents" means all documents evidencing,
securing or governing either of the East West Loans, including but not limited
to that Promissory Note dated February 29, 1996 in the principal amount of
$3,100,000, that Security Agreement dated February 29, 1996, that Credit
Agreement dated as of January 1, 1998, and all "Loan Documents" as defined
therein, and all extensions, modifications, amendments, and renewals thereof.
"East West Resorts Term Loan" means that term loan, and related
promissory note and Security Agreement made by the Borrower, from the Lender to
the Borrower made February 29, 1996, and all extensions, modifications,
amendments and renewals thereof.
"Emergency Loan" means each Emergency Loan made by the Borrower under a
Partnership Agreement.
"Environmental Laws" means all applicable foreign, federal, state or
local statutes, laws, ordinances, codes, rules, regulations (including, without
limitation, consent decrees and orders and administrative orders) judgments and
permits or other authorizations relating to health, safety or the environment,
including, without limitation, CERCLA and RCRA.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
"Event of Default" is defined in Section 8.1.
"EWRD Partnership" means East West Resort Development, L.P., a Delaware
limited partnership.
"Governmental Authority" means the United States, the state, county and
city or other political subdivision in which a Project is located and any other
political subdivision, agency or instrumentality exercising jurisdiction over
the Borrower, the Partnership, Subpartnership or a Project.
"Governmental Requirement" means all laws, ordinances, rules and
regulations of any Governmental Authority applicable to the Borrower, the
Partnership, Subpartnership, or a Project.
"Hazardous Material" means any pollutant, hazardous substance,
radioactive substance, toxic substance, hazardous waste, medical waste,
radioactive waste, special waste, petroleum or petroleum-derived substance or
waste, asbestos, polychlorinated biphenyls, or any hazardous or toxic
constituent thereof and includes, but is not limited to, any substance defined
in or regulated under Environmental Laws.
25
<PAGE> 27
"Initial Advance" means the first Advance made hereunder, in an amount
not to exceed $1,000.00.
"Loan" is defined in the preamble.
"Loan Document" means this Agreement, the Note, the Partnership
Security Agreement and all other documents evidencing, securing or governing the
Loan, as such documents may be amended, renewed, extended, restated or
supplemented from time to time.
"Note" means the Line of Credit Note of the Borrower delivered to the
Lender pursuant to this Agreement and any note subsequently given in exchange,
substitution, modification, renewal or extension therefor.
"Organic Document" means, relative to the Borrower, any of its
Subsidiaries and any other Obligor, its articles or certificate of
incorporation, as the case may be, its articles of organization, its by-laws and
all partnership agreements, operating agreements, shareholder agreements, voting
trusts and similar arrangements applicable to any partnership or limited
liability company interests issued by such person or authorized shares of
capital stock issued by such person.
"Other Crescent Indebtedness" means all indebtedness for borrowed
monies owing from Borrower to Lender, other than the Loan and the East West
Loans.
"Other Crescent Indebtedness Loan Documents" means all credit
agreements, loan agreements, notes, security agreements and other documents
evidencing, securing or governing any Other Crescent Indebtedness, as such
documents may be amended, renewed, extended, restated or supplemented from time
to time.
"Other EWRD Partnerships" means East West Resort Development II, L. P.,
East West Resort Development III, L. P., EWRD Summit Holding, L. P., and EWRD
Perry Holding, L. P.
"Partnerships" means the EWRD Partnership and the Other EWRD
Partnerships; any of the Partnerships is sometimes terms a "Partnership".
"Partnership Agreement" means the Limited Partnership Agreement of a
Partnership, as from time to time amended.
"Partnership Security Agreement" means the Security Agreements executed
and delivered by the Partnership from time to time pursuant to this Agreement
granting the Lender a security interest in the Partnership's interest in the
Subpartnerships.
"Person" means any natural person, corporation, partnership, firm,
association, trust, government, governmental agency or any other entity, whether
acting in an individual, fiduciary or other capacity.
26
<PAGE> 28
"Phased Project" means an Approved Project that is to be developed in
more than one phase.
"Project" means the land owned or acquired by a Subpartnership together
with the improvements to be constructed thereon, as contemplated by the Plans.
"Project Advance Limit" means, with respect to each Phased Project
listed in Schedule A hereto the amount designated in Schedule A hereto as the
Commitment for the Project in the Approved Project Plan and the Approved Budget.
"Project Equity Advance" means the amount advanced hereunder by the
Lender to the Borrower (in one or more Advances) to enable it to make an equity
contribution to the Partnership.
"Project Lender" means the lender who issues the Project Loan
Commitment.
"Project Loan" means the loan contemplated by the Project Loan
Commitment, the proceeds of which will be used in connection with the
acquisition, construction and development of the Project described in such
Project Loan Commitment.
"Project Loan Commitment" means the commitment issued by the Project
Lender to a Subpartnership to make the Project Loan to be secured by a first
lien on the Subpartnership's Project containing only such conditions to funding
as are reasonable and customary.
"Project Loan Documents" means the instruments and documents
evidencing, securing, pertaining to or governing a Project Loan.
"Project Mortgage" means a mortgage or deed of trust and security
agreement securing the payment of the Project Loan and evidencing a first lien
on the Project.
"Proposed Budget" means a budget or cost itemization included in each
Approved Project Plan specifying the cost by item of (a) the real estate that
will constitute a part of the Project, (b) all labor, materials and services
necessary for the construction of the Project in accordance with the Plans and
all Governmental Requirements, and (b) all other expenses anticipated that are
incident to the Project Loan and the construction of the Project. The Proposed
Budget shall include a calculation of the anticipated Total Equity for such
Project.
"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., as in effect from time to time.
"Stated Maturity Date" means August 31, 2004.
"Subpartnership" means each limited liability company, whether now
existing or hereafter formed, in which a Partnership has an equity interest.
27
<PAGE> 29
"Subscriber" means, with respect to the Additional Funding Instruments
executed August 11, 1995, April 15, 1997 and May 8, 1998, John Goff, Gerald
Haddock, Harry Frampton and the Lender, and means, with respect to the
Additional Funding Instruments executed January 1, 1999, COPI Colorado, L. P.
and the Lender.
"Tax Distribution" means each Distribution made to the Borrower
pursuant to Section 4.2 of the Partnership Agreement.
"Total Equity" means, with respect to each Project, 80% of the
difference between the total costs set forth in the Approved Budget as the cost
of the Project and the amount of the Project Loan.
"UCC" means the Uniform Commercial Code as in effect, from time to
time, in the State of Texas.
"United States" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
28
<PAGE> 30
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Credit Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
BORROWER: CRESCENT DEVELOPMENT MANAGEMENT
CORP., a Delaware corporation
By:________________________________________
Name:______________________________________
Title:_____________________________________
LENDER: CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Crescent Real Estate Equities, Ltd., a
Delaware corporation, Sole General
Partner
By:________________________________________
Name:______________________________________
Title:_____________________________________
29
<PAGE> 31
SCHEDULE A
List of Approved Projects
30
<PAGE> 32
SCHEDULE B
List of Projects for which Advances Cannot be Used Prior to April 1, 1999
<TABLE>
<CAPTION>
Partnership Project
----------- -------
<S> <C>
East West Resort Development II, L. P. Deer Trail Phase II
East West Resort Development II, L. P. Bear Paw Lodge Phases II and III
East West Resort Development II, L. P. Buckhorn Townhomes Phase II
</TABLE>
31
<PAGE> 33
EXHIBIT A
APPLICATION FOR ADVANCE
This Application for Advance is submitted by the undersigned to
Crescent Real Estate Equities Limited Partnership (the "Lender") pursuant to
that Amended and Restated Credit Agreement dated as of January 1, 1999, between
the Lender and the undersigned (the "Credit Agreement"). Capitalized terms used
herein and not otherwise defined shall have the meanings set forth in the Credit
Agreement.
<TABLE>
<S> <C>
1. The undersigned hereby requests an Advance under the
Credit Agreement in the amount of: $____________
2. The undersigned hereby requests this Advance to be made
effective (the "Advance Date"): _____________
2. The undersigned hereby warrants and represents the following to the Lender:
A. The Advance is being requested in connection and will be used
solely to fund the following Project (the "Applicable
Project"):
______________________________________________________________________________________
B. Project Advance Limit approved
for the Applicable Project: $____________
C. Total Advances made in accordance with the Credit
Agreement prior to the Advance Date: $____________
D. Additional capital contributions made by the Shareholders
which were subsequently used for the Applicable Project: $____________
E. To Date Total Project Investment for the Applicable
Project made prior to the Advance Date (Sum of C and D): $____________
F. Both before and after giving effect to the Advance that is
requested hereby, the warranties and representations set forth
in Article VI of the Credit Agreement are true and correct
with the same effect as if made on the date hereof.
</TABLE>
CRESCENT DEVELOPMENT MANAGEMENT CORP.
By:__________________________________
Name:________________________________
Title:_______________________________
Exhibit A - Solo Page
<PAGE> 34
LINE OF CREDIT NOTE
$48,166,666.00 January 1, 1999
FOR VALUE RECEIVED, CRESCENT DEVELOPMENT MANAGEMENT CORP., a Delaware
corporation ("Borrower") promises to pay to CRESCENT REAL ESTATE EQUITIES
LIMITED PARTNERSHIP, a Delaware limited partnership ("Lender"), at 777 Main
Street, Suite 2700, Fort Worth, Texas 76102, the principal sum of FORTY-EIGHT
MILLION ONE HUNDRED SIXTY-SIX THOUSAND SIX HUNDRED SIXTY-SIX AND NO/100 DOLLARS
($48,166,666.00), or so much thereof as may be advanced, with interest on the
principal balance from time to time remaining unpaid at the rates hereinafter
provided.
Interest on the principal balance hereof from time to time remaining
unpaid prior to an Event of Default shall be payable at the Interest Rate
prescribed in the Credit Agreement (as hereinafter defined), provided that the
interest payable shall not exceed the maximum rate permitted by applicable law
(the "Maximum Rate"). Interest on the principal hereof from time to time
remaining unpaid and, to the extent permitted by applicable law, interest on the
unpaid interest, shall bear interest from and after an Event of Default at the
Default Rate provided that in no event shall the Default Rate be more than the
Maximum Rate.
This Note renews, modifies, replaces and is given in substitution for
that certain Note dated May 8, 1998, in the principal amount of $40,166,666.00
made by Borrower and payable to Lender and is the "Note" referred to in the
Amended and Restated Credit Agreement dated January 1, 1999, executed by Lender
and Borrower (the "Credit Agreement"). Borrower may borrow, repay and reborrow
amounts under this Note as permitted by the Credit Agreement. Terms defined in
the Credit Agreement and not otherwise defined herein are used herein with the
meanings given those terms in the Credit Agreement.
Borrower may request and receive Advances hereunder only in accordance
with the terms and provisions of the Credit Agreement. This Note shall be
payable as provided in Article III of the Credit Agreement.
Upon the occurrence of any Event of Default (after the giving of any
notice required in the Credit Agreement and the expiration of any applicable
grace periods provided for in the Credit Agreement), all amounts then remaining
unpaid on this Note shall become or may be declared to be immediately due and
payable and the holder hereof shall have all rights and remedies of Lender under
the Credit Agreement and other Loan Documents. The failure to exercise the
option to accelerate the maturity of this Note upon the happening of any one or
more of the Events of Default hereunder shall not constitute a waiver of the
right of the holder of this Note to exercise the same or any other option at
that time or at any subsequent time with respect to such uncured default or any
other event of uncured default hereunder or under any other of the Loan
Documents. The remedies of the holder hereof, as provided in this Note and in
any other of the Loan Documents, shall be cumulative and concurrent and may be
pursued separately, successively or together, as often as occasion therefor
shall arise, at the sole discretion of the holder hereof. The acceptance by the
holder hereof of any payment under this Note which is less than payment in full
of all amounts due and payable at the time of such payment shall not constitute
a waiver of or impair, reduce, release or extinguish any of the rights or
remedies of the holder hereof to exercise the foregoing option or any other
option granted to the holder in this Note or in any other of the Loan Documents,
at that time or at any subsequent time, or nullify any prior exercise of any
such option.
The undersigned and all other parties now or hereafter liable for the
payment hereof, whether as endorser, surety or otherwise, except as provided in
the Credit Agreement, severally waive demand, presentment, notice of dishonor,
notice of intention to accelerate the indebtedness evidenced hereby, notice of
the acceleration of the maturity hereof, diligence in collecting, grace, notice
and protest, and consent to all extensions which from time to time may be
granted by the holder hereof and to all partial payments hereon, whether before
or after maturity.
If this Note is not paid when due, whether at maturity or by
acceleration, or if it is collected through a bankruptcy, probate or other
court, whether before or after maturity, the undersigned agrees to pay all costs
of collection, including, but not limited to, reasonable attorneys' fees and
expenses incurred by the holder hereof.
All agreements between the undersigned and the holder hereof, whether
now existing or hereafter arising and whether written or oral, are hereby
limited so that in no contingency, whether by reason of acceleration of the
maturity hereof or otherwise, shall the interest contracted for, charged,
received, paid or agreed to be paid to the holder hereof exceed the maximum
amount permissible under applicable law. If from any circumstance the holder
hereof shall ever receive anything of value deemed interest by applicable law in
excess of the maximum lawful amount, an amount equal to any excessive interest
shall be applied to the reduction of the principal hereof and not to the payment
of interest, or if such excessive interest exceeds the unpaid balance of
principal hereof, such excess shall be refunded to the undersigned. All interest
paid or agreed to be paid to the holder hereof shall, to the extent permitted by
applicable law, be amortized,
<PAGE> 35
prorated, allocated, and spread throughout the full period until payment in full
of the principal so that the interest hereon for such full period shall not
exceed the maximum amount permitted by applicable law. This paragraph shall
control all agreements between the undersigned and the holder hereof.
This Note may be prepaid only in accordance with the terms of the
Credit Agreement.
The loan transaction evidenced hereby shall not be governed by, or be
subject to, Chapter 15 or Chapter 346 of the Texas Credit Code or Chapter 303 of
the Texas Finance Code.
EXCEPT WHERE FEDERAL LAW IS APPLICABLE (INCLUDING, WITHOUT LIMITATION,
ANY FEDERAL USURY CEILING OR OTHER FEDERAL LAW WHICH, FROM TIME TO TIME, IS
APPLICABLE TO THE INDEBTEDNESS EVIDENCED HEREIN AND WHICH PREEMPTS STATE USURY
LAWS), THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
TEXAS AND THE LAWS OF THE UNITED STATES APPLICABLE TO TRANSACTIONS IN SUCH
STATE.
THIS NOTE, TOGETHER WITH THE CREDIT AGREEMENT AND EACH OTHER
LOAN DOCUMENT REFERENCED HEREIN OR THEREIN, REPRESENT THE FINAL AGREEMENTS
BETWEEN THE PARTIES WITH RESPECT TO THE LOAN AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
CRESCENT DEVELOPMENT MANAGEMENT CORP.,
a Delaware corporation
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
2
<PAGE> 36
AMENDED AND RESTATED SECURITY AGREEMENT
(Partnership Interests and Limited Liability Company Interests)
Date: January 1, 1999
THIS AMENDED AND RESTATED SECURITY AGREEMENT (this "Security
Agreement") amends and restates in its entirety that Security Agreement dated
August 11, 1995, between Secured Party and Debtor, as amended by that First
Amended and Restated Security Agreement dated April 15, 1997, and as further
amended by those letter agreements dated September 30, 1997, May 8, 1998 and
November 1, 1998 ("Old Security Agreement").
This Agreement is entered into simultaneously with the execution and
delivery by Secured Party and Debtor of that Amended and Restated Credit
Agreement of even date herewith (the "Restated Credit Agreement") and pursuant
to the terms of the Restated Credit Agreement. Debtor is entering into this
Security Agreement to induce Secured Party to execute that Restated Credit
Agreement and pursuant to its terms to increase the Debtor's borrowing capacity
under the line of credit established by the Restated Credit Agreement. Debtor
hereby acknowledges, represents and warrants, confirms and agrees that the
security interests granted by the Old Security Agreement in the Collateral (as
therein and herein described) continue and are restated and confirmed by this
Security Agreement.
A. PARTIES
1. Secured Party: CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
777 Main Street, Suite 2100
Fort Worth, TX 76102
2. Debtor (whether
one or more): CRESCENT DEVELOPMENT MANAGEMENT CORP.
C/O Harry Frampton
100 East Thomas Place, Drawer 2770
Avon, Colorado 81620
Attention: Harry Frampton, President
B. AGREEMENT
1. Security Interest. Subject to the applicable terms of this Security
Agreement, Debtor previously has granted to Secured Party, and hereby restates
and confirms the grant to Secured Party of, a security interest in the
Collateral (hereinafter defined) to secure the payment of the Obligations
(hereinafter defined).
C. OBLIGATIONS
1. Description of Obligations. The following obligations
("Obligations") are secured by this Security Agreement:
a. The debt, obligations, liabilities and agreements of Debtor
under (i) that Line of Credit Note in the principal sum of $48,166,666
executed by Debtor of even date herewith, bearing interest and being
payable to the order of Secured Party as therein provided (the "Note"),
(ii) the Restated Credit Agreement executed by Debtor and Secured Party
of even date herewith, (iii) all other documents evidencing, governing,
securing or otherwise pertaining to the indebtedness evidenced by the
Note, or any other debts for borrowed monies owing from Debtor to
Secured Party where a default or breach by Debtor thereunder would
cause a default or breach under the Restated Credit Agreement (the
Note, Restated Credit Agreement and all other such documents being
called "Loan Documents"), and (iv) all renewals, extensions,
modifications or rearrangements of the foregoing.
b. All costs incurred by Secured Party to obtain, preserve,
perfect and enforce this Security Agreement and collect the
Obligations, and maintain, preserve, collect and enforce the Collateral
(hereinafter defined), including but not limited to reasonable
attorneys' fees and legal expenses and expenses of sale.
c. Interest on the above amounts at the Default Rate as
defined in the Note.
d. All debt, obligations and liabilities of Debtor to Secured
Party of the kinds described in this Item C., now existing or hereafter
arising.
<PAGE> 37
D. COLLATERAL
1. Description of the Collateral. Debtor has assigned and granted
security interests, and hereby confirms the assignments and grants of security
interests, to Secured Party in the following, whether now existing or hereafter
arising (the "Collateral"):
a. All of the rights and interests of Debtor as a limited
partner of each of East West Resort Development, L.P., a Delaware
limited partnership ("EWRD I"); East West Resort Development II, L. P.,
a Delaware limited partnership ("EWRD II"); EWRD Summit Holding, L. P.,
a Delaware limited partnership ("Summit"); East West Resort Development
III, L. P., a Delaware limited partnership ("EWRD III"); and EWRD Perry
Holding, L. P., a Delaware limited partnership ("Perry") (each a
"Subpartnership" and collectively the "Subpartnerships"); and all of
the rights and interests of Debtor as a member of East West Resorts,
LLC, a Delaware limited liability company ("Resorts"); including,
without limitation, Debtor's rights as a partner or a member to receive
distributions of any sale, exchange, refinancing or other disposition
of property owned by EWRD I under the Limited Partnership Agreement of
East West Resort Development, L. P., entered into effective as of
August 11, 1995, as hereinbefore or hereinafter from time to time
amended (the "EWRD I Partnership Agreement"); owned by EWRD II under
the Limited Partnership Agreement of East West Resort Development II,
L. P., dated as of September 26, 1996, as hereinbefore or hereinafter
from time to time amended (the "EWRD II Partnership Agreement"); owned
by Summit under the Limited Partnership Agreement of EWRD Summit
Holding, L. P., entered into effective as of September 23, 1997, as
hereinbefore or hereinafter from time to time amended (the "Summit
Partnership Agreement"); owned by EWRD III under the Limited
Partnership Agreement of East West Resort Development II, L. P., dated
as of January ___, 1998, as hereinbefore or hereinafter from time to
time amended (the "EWRD III Partnership Agreement"); owned by Perry
under the Limited Partnership Agreement of EWRD Perry Holding, L. P.,
entered into effective as of November 1, 1998, as hereinbefore or
hereinafter from time to time amended (the "Perry Partnership
Agreement"); and owned by the Company under the Second Amended and
Restated Operating Agreement entered into effective as of January 1,
1998, as hereinbefore or hereinafter from time to time amended (the
"Resorts Operating Agreement"); and all other profits, income, and
distributions, whether in cash or in kind, owing to Debtor under the
EWRD I Partnership Agreement, the EWRD II Partnership Agreement, the
Summit Partnership Agreement, the EWRD III Partnership Agreement and
the Perry Partnership Agreement (each a "Partnership Agreement" and
collectively the "Partnership Agreements") and under the Resorts
Operating Agreement.
b. All Partner Loans and Default Loans (as those terms are
defined in the EWRD I Partnership Agreement, the EWRD II Partnership
Agreement and the Summit Partnership Agreement) and all Partner Loans
(as that term is defined in the EWRD III Partnership Agreement and the
Perry Partnership Agreement); now or hereafter owing to Debtor and all
security therefor.
c. All present and future rights and interests Debtor may have
or be or become entitled to in the real and personal property (the
"Collateral Property") now or hereafter owned by any Subpartnership.
d. All present and future proceeds, profits, combinations,
reclassification, improvements, and products of, accessions,
attachments, and other additions to, and substitutes and replacements
for, all or any part of the Collateral described herein.
e. All present and future accounts, contract rights, general
intangibles, chattel paper, documents, instruments, cash and noncash
Proceeds, and other rights arising from or by virtue of, or from the
voluntary or involuntary sale, lease, or other disposition of, or
collections with respect to, or insurance or condemnation proceeds
payable with respect to, or proceeds payable by virtue of warranty,
indemnity, guaranty, or other claims, causes and rights of action,
settlements thereof, judicial and arbitration judgments and awards
against any person with respect to, all or any part of the Collateral
or the Collateral Property described herein. As used herein, the term
"Proceeds" shall have the meaning assigned to it under the UCC and, to
the extent not otherwise included, shall include, but not be limited
to, (i) all income, revenues, fees, distributions, reimbursements and
payments from whatever source received by, or on behalf of Debtor, in
respect of the Collateral, (ii) any and all payments (in any form
whatsoever) made or due and payable to Debtor from
time to time in connection with any casualty with respect to the
Collateral Property or any of the Collateral (whether or not pursuant
to an insurance policy), or any requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the
Collateral by any governmental authority, (iii) all claims of Debtor
for losses or damages arising out of or related to or for any breach of
any agreements, covenants, representations or warranties or any default
under any of the Collateral described herein, and (iv) any and all
other amounts from time, to time paid or payable to, or on behalf of,
Debtor under, or in connection with, any of the Collateral.
f. All present and future security for the payment to Debtor
of any of the Collateral described herein and goods which gave, or will
give, rise to any of such Collateral or are evidenced, identified, or
represented therein or thereby.
The description of Collateral contained in this paragraph shall not be
deemed to permit any action prohibited by this Security Agreement or by terms
incorporated in this Security Agreement. Portions of the Collateral constitute
accounts, contract rights, general intangibles, chattel paper, documents or
instruments, and all books and records of Debtor concerning such Collateral are,
and shall be, located at the offices of the Debtor specified above.
E. DEBTOR'S WARRANTIES
Debtor represents, warrants, and covenants to Secured Party now and so
long as any Obligations secured hereby are outstanding as follows:
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1. No financing statement covering any portion of the Collateral is on
file in any public office, except the financing statements relating to this
security interest created hereunder.
2. Debtor is the sole owner of the Collateral and each item
constituting the Collateral, free and clear of all liens except for the security
interest granted to Secured Party pursuant to this Security Agreement.
3. All actions necessary or desirable to perfect the Security Interest
in the Collateral in each state in which any portion of the Collateral is or
will be located have been, or will forthwith be, duly taken.
4. Each of the Partnership Agreements and the Resorts Operating
Agreement is in full force and effect and, to the knowledge of Debtor, there
exists no material default thereunder, or event or condition which, with the
passage of time or the giving of notice, or both, would constitute a material
default thereunder.
5. Neither any Partnership Agreement nor the Resorts Operating
Agreement will be amended or modified in any manner that would materially affect
Debtor's interest thereunder, or in any manner which would materially impair or
adversely affect the Collateral, nor shall Debtor consent to any such amendment
without the prior written consent of Secured Party.
6. There is no condition, circumstance, event, agreement, document,
instrument, restriction, litigation or other proceeding and, to the best of
Debtor's knowledge, there is no threatened litigation or proceeding or basis
therefor, which could materially adversely affect the validity or priority of
the liens and security interests granted, or intended to be granted, hereunder
when executed, delivered, recorded and filed as required hereunder, or that
could materially adversely affect the ability of Debtor to perform its
obligations hereunder and under the other Loan Documents to which Debtor is a
party, or which would constitute an Event of Default.
7. Each Subpartnership, Resorts and Debtor have fully complied with all
requirements imposed on them in connection with (a) the organization and
formation of such Subpartnership or Resorts, as applicable, and (b) the sale,
distribution and offer of partnership interests in such Subpartnership and
membership interests in Resorts.
F. DEBTOR'S COVENANTS
Debtor covenants to Secured Party and agrees with Secured Party as
follows:
1. Debtor shall promptly perform all of Debtor's agreements herein, and
any other agreements between Debtor and Secured Party.
2. Debtor shall defend the Collateral against all claims and demands of
all persons at any time claiming the same or any interest therein adverse to
Secured Party.
3. Debtor shall keep the Collateral free from liens and other security
interests (except liens for taxes not yet due), and shall not create or suffer
to exist any lien or security interest in the Collateral hereafter acquired
except for the security interests hereby granted. Debtor shall not file, or
permit to be filed, any financing statements or other security instruments,
covering the Collateral, unless by, or on behalf of, Secured Party in connection
with this Security Agreement or to effectuate the assignment to Debtor of the
financing statements currently of record against the Collateral.
4. Debtor shall pay all costs necessary to obtain, preserve, perfect,
defend and enforce the security interests hereby granted, collect the sums owing
under the Collateral Loan Documents, and preserve, defend, enforce, service and
collect the Collateral, including specifically, but without limitation, the
payment of taxes, assessments, reasonable attorneys' fees and legal expenses,
and expenses of sales. If Debtor shall have failed to pay such costs and
expenses within five (5) days after request by Secured Party, Secured Party may,
at its option, pay any such costs and expenses, and discharge encumbrances on
the Collateral. Debtor agrees to reimburse the Secured Party on demand for any
costs so incurred, and, until such reimbursement, the amount of any such payment
shall be a part of the Obligation.
5. Prior to or immediately following the occurrence thereof, Debtor
will notify the Secured Party of (i) any material adverse change occurring in or
to any of the Collateral, (ii) any change in Debtor's office address or mailing
address, (iii) any material change in any fact or circumstance warranted or
represented by Debtor in this Security Agreement or furnished to the Secured
Party by Debtor, (iv) any Event of Default or (v) any notices, communications,
or correspondence to be or which have been delivered to Debtor under the
Partnership Agreement and deliver to Secured Party copies thereof.
6. Debtor shall execute and deliver to Secured Party a financing
statement for filing to perfect the security interests hereunder and any other
papers furnished by Secured Party which are necessary in the judgment of Secured
Party to obtain, maintain and perfect the security interest hereunder and to
enable Secured Party to comply with any applicable federal or state law in order
to obtain or perfect Secured Party's interest in the Collateral. Debtor shall
have each Subpartnership and Resorts make appropriate entries in its partnership
or membership records to reflect the existence of the security interest granted
hereby in the Collateral.
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7. Debtor shall cause Subpartnerships and Resorts to comply with all of
the representations, warranties, covenants, agreements, indemnities and terms
contained in the Subpartnerships' Organizational Documents and Resorts'
Organizational Documents and all other material agreements to which the
Subpartnerships and Resorts, or any of them, is bound and to enforce rights of
Subpartnerships and Resorts under all material agreements by which any of them
is bound, in a timely manner, consistent with prudent practices and all
applicable laws, and also as required by Secured Party.
8. Debtor shall fully perform all of Debtor's duties under and in
connection with each transaction to which the Collateral, or any part thereof,
relates, so that the amounts thereof shall actually become payable in their
entirety to Secured Party.
9. Debtor shall promptly notify Secured Party of any claim, action, or
proceeding affecting title to all or any of the Collateral or the security
interest and, at the request of Secured Party, appear in and defend, at Debtor's
expense, any such claim, action, demand or proceeding.
10. At Debtor's expense and upon Secured Party's request, after an
Event of Default, Debtor shall file or cause to be filed such applications and
take such other actions as Secured Party may request to obtain the consent or
approval of any governmental authority to Secured Party's rights hereunder,
including, without limitation, the right to sell all of the Collateral upon an
Event of Default without additional consent or approval from such governmental
authority (and, because Debtor agrees that Secured Party's remedies at law for
failure of Debtor to comply with this provision would be inadequate and that
such failure would not be adequately compensable in damages, Debtor agrees that
its covenants in this provision may be specifically enforced).
11. Upon demand by Secured Party, Debtor will deposit upon receipt all
checks, drafts, cash or other remittances on account or accounts or contracts or
received as proceeds of any other Collateral in a special bank account in a bank
of Secured Party's choice over which Secured Party alone shall have power of
withdrawal. The funds in said account shall be held by Secured Party as security
for the Obligation. Said proceeds shall be deposited in the form received,
except for the endorsement of Debtor where necessary to permit collection of
items, which endorsements Debtor agrees to make, but which Secured Party is
authorized to make on Debtor's behalf. Secured Party may from time to time apply
the whole or any part of the funds in such special account against the
Obligations. Any portion of said funds on deposit which Secured Party elects not
to apply to the Obligations may be paid by Secured Party to Debtor.
12. Debtor shall give Secured Party written notice of each office of
Debtor in which records of Debtor pertaining to accounts in the Collateral are
kept, and of any change of any office or location. Except as such notice is
given, all records of Debtor pertaining to the Collateral and to accounts are
and shall be kept in the location shown at the beginning hereof.
G. RIGHTS AND POWERS OF SECURED PARTY
1. Secured Party may in its discretion after an Event of Default but
only after prior written notice to Debtor, without liability to Debtor, obtain
from any person information regarding Debtor or Debtor's business, which
information any such person also may furnish without liability to Debtor;
endorse as Debtor's agent any instruments, documents or chattel paper in the
Collateral or representing proceeds of the Collateral; contact any account
debtors directly to verify information furnished by Debtor; take control of
proceeds; release the Collateral in its possession to any Debtor, temporarily or
otherwise; after default, take control of funds generated by the Collateral,
such as cash dividends, interest and proceeds or refunds from insurance, and use
same to reduce any part of the Obligations and exercise all other rights which
an owner of such collateral may exercise; after default, at any time transfer
any of the Collateral or evidence thereof into its own name or that of its
nominee; demand, collect, convert, redeem, receipt for, settle, compromise,
adjust, sue for, foreclose or realize upon the Collateral, in its own name or in
the name of Debtor, as Secured Party may determine. The foregoing rights and
powers of Secured Party will be in addition to, and not a limitation upon, any
rights and powers of Secured Party given by law, elsewhere in this agreement, or
otherwise.
2. Secured Party may while any Event of Default continues hereunder
present for conversion any instrument (including any investment security) in the
Collateral which is convertible into any other instrument or investment security
or a combination thereof with cash. But Secured Party shall not have any duty to
present for conversion any instrument in the Collateral unless it shall have
received from Debtor written instructions to that effect at a time reasonably
far in advance of the final conversion date to make such conversion possible.
H. DEFAULT
1. Events of Default. The occurrence of a default under the Note, the
Restated Credit Agreement or any document evidencing, governing, securing,
guaranteeing, indemnifying or otherwise pertaining to the Loan shall constitute
an event of default ("Event of Default") hereunder.
2. Remedies of Secured Party Upon Default. Should an Event of Default
occur and be continuing, Secured Party may, at its election, exercise any and
all rights and remedies available to a secured party under the UCC, in addition
to any and all other rights and remedies afforded by the Loan Documents, at law,
in equity, or otherwise, including, without limitation, such rights and remedies
as (a) Party, (b) applying by appropriate judicial proceedings for appointment
of a receiver for all or part of the Collateral (and Debtor hereby consents to
any such appointment), and (c) applying to the Obligation any cash held by
Secured Party under this Security Agreement. The exercise of one or more rights
or remedies by Secured Party hereunder shall not prejudice or impair the
concurrent or subsequent exercise of any other rights or remedies
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by Secured Party. If, in the opinion of Secured Party, there is any question
that a public or semipublic sale or distribution of any Collateral will violate
any state or federal securities law, Secured Party in its discretion (a) may
offer and sell securities privately to purchasers who will agree to take them
for investment purposes and not with a view to distribution and who will agree
to imposition of restrictive legends on the certificates representing the
security, or (b) may sell such securities in an intrastate offering under
Section 3(a)(11) of the Securities Act of 1933, and no sale so made in good
faith by Secured Party shall be deemed to be not "commercially reasonable"
because so made.
a. Notice. Reasonable notification of the time and place of
any public sale of the Collateral, or reasonable notification of the
time after which any private sale or other intended disposition of the
Collateral is to be made, shall be sent to Debtor and to any other
Person entitled to notice under the UCC. It is agreed that notice sent
or given not less than twenty (20) business days prior to the taking of
the action to which the notice relates is reasonable notification and
notice for the purposes of this subparagraph.
b. Application of Proceeds. Secured Party shall apply the
proceeds of any sale or other disposition of the Collateral under this
paragraph in the following order: first, to the payment of all its
expenses incurred in retaking, holding, and preparing any of the
Collateral for sale(s) or other disposition, in arranging for such
sale(s) or other disposition, and in actually selling or disposing of
the same (all of which are part of the Obligation); second, toward
repayment of amounts expended by Secured Party under Paragraph I.3; and
third, toward payment of the balance of the Obligation in accordance
with the Credit Agreement. If the proceeds are insufficient to pay the
Obligation in full, Debtor shall remain liable for any deficiency to
the extent provided in the Credit Agreement.
3. Other Rights of Secured Party.
a. Performance. In the event Debtor shall fail to pay when due
all taxes, subject to contest rights permitted by the Credit Agreement,
on any of the Collateral, or to preserve the priority of the Security
Interest in any of the Collateral, or otherwise fail to perform any of
its obligations under the Loan Documents with respect to the
Collateral, then Secured Party may, at its option, but without being
required to do so, pay such taxes, prosecute or defend any suits in
relation to the Collateral, or insure and keep insured the Collateral
in any amount deemed appropriate by Secured Party, or take all other
action which Debtor is required, but has failed or refused, to take
under the Loan Documents. Any sum which may be expended or paid by
Secured Party under this subparagraph (including, without limitation,
court costs and attorneys' fees) shall bear interest from the dates of
expenditure or payment at the Default Rate (as defined in the Note)
until paid and, together with such interest, shall be payable by Debtor
to Secured Party upon demand and shall be part of the Obligation.
b. Collection. After the occurrence of an Event of Default and
during the continuation thereof, upon notice from Secured Party, each
obligor with respect to any payments on any of the Collateral
(including without limitation condemnation proceeds, dividends and
other distributions with respect to securities, and insurance proceeds
payable by reason of loss or damage to any of the Collateral Property)
is hereby authorized and directed by Debtor to make payment directly to
Secured Party, regardless of whether Debtor was previously making
collections thereon. Subject to Subparagraph I.3(d) hereof, until such
notice is given, Debtor is authorized to retain and expend all payments
made on the Collateral. After the occurrence of an Event of Default and
during the continuation thereof, Secured Party shall have the right in
its own name or in the name of Debtor to compromise or extend the time
of payment with respect to all or any portion of the Collateral for
such amounts and upon such terms as Secured Party may determine; to
demand, collect, receive, receipt for, sue for, compound, settle,
compromise, adjust, realize upon and give acquittances for any and all
amounts due or to become due with respect to Collateral; to file any
claims or take any action or initiate any proceedings which Secured
Party may deem necessary or desirable for the collection of any of the
Collateral or to otherwise enforce the rights or remedies of Debtor
with respect to any Collateral; to take control of cash and other
Proceeds of any Collateral; to endorse the name of Debtor on any notes,
acceptances, checks, drafts, money orders, or other evidences of
payment on Collateral that may come into the possession of Secured
Party; to sign the name of Debtor on any drafts against obligors or
other Persons making payment with respect to Collateral, on assignments
and verifications of accounts or other Collateral and on notices to
obligors making payment with respect to Collateral; to send requests
for verification of obligations to any such obligor; to take any action
Debtor is required to take or any other necessary action to obtain,
preserve, and enforce this Security Agreement, and maintain, preserve
and collect the Collateral, without notice to Debtor, and add the costs
of same to the Obligation; to release Collateral in Secured Party's
possession to any Person, temporarily or otherwise; to set standards
from time to time to govern what may be deemed after-acquired
Collateral; to transfer any of the Collateral, or evidence thereof,
into its own name or that of its nominee and receive the Proceeds
therefrom and hold the same as security for the Obligation, or apply
the same thereon; to exercise as to the Collateral all the rights of
the owner thereof; and to do all other acts and things necessary to
carry out the intent of this Security Agreement. If any obligor fails
or refuses to make payment on any Collateral when due, Secured Party is
authorized, in its sole discretion, either in its own name or in the
name of Debtor, to take such action as Secured Party shall deem
appropriate for the collection of any amounts owed with respect to the
Collateral or upon which a delinquency exists. Regardless of any other
provision hereof, however, Secured Party shall never be liable for its
failure to collect, or for its failure to exercise diligence in the
collection of, any amounts owed with respect to Collateral, nor shall
it be under any duty whatever to anyone except Debtor to account for
funds that it shall actually receive hereunder. Without limiting the
generality of the foregoing, Secured Party shall have no responsibility
for ascertaining any maturities, calls, conversions, exchanges, offers,
tenders, or similar matters relating to any Collateral, or for
informing Debtor with respect to any of such matters (irrespective of
whether Secured Party actually has, or may be deemed to have, knowledge
thereof). The receipt of Secured Party to any obligor shall be a full
and complete release, discharge, and acquittance to such obligor, to
the extent of any amount so paid to Secured Party.
c. Certain Proceeds. After the occurrence and during the
continuance of an Event of Default, any cash Proceeds of Collateral
which come into the possession of Secured Party (including, without
limitation, insurance and condemnation proceeds) may, at Secured
Party's option, be applied in whole or in part
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to the Obligation, be released in whole or in part to or on the
written instructions of Debtor for any general or specific purpose, or
be retained in whole or in part by Secured Party as additional
Collateral. Any cash Collateral in the possession of Secured Party may
be invested by Secured Party but Secured Party shall never be
obligated to make any such investment and shall never have any
liability to Debtor for any loss which may result therefrom. All
interest and other amounts earned from any investment of Collateral
may be dealt with by Secured Party in the same manner as other cash
Collateral.
d. Use and Operation of Collateral. Should any Collateral come
into the possession of Secured Party, Secured Party may use or operate
such Collateral for the purpose of preserving it or its value pursuant
to the order of a court of appropriate jurisdiction or in accordance
with any other rights held by Secured Party with respect to such
Collateral. Debtor covenants promptly to reimburse and pay to Secured
Party, at Secured Party's request, the amount of all reasonable
expenses (including, without limitation, the cost of any insurance and
payment of taxes or other charges) incurred by Secured Party in
connection with its custody and preservation of Collateral, and all
such expenses, costs, taxes, and other charges shall bear interest at
the Maximum Rate (as defined in the Note) until repaid and, together
with such interest, shall be payable by Debtor to Secured Party upon
demand and shall become part of the Obligation. However, the risk of
accidental loss or damage to, or diminution in value of, Collateral is
on Debtor, and Secured Party shall have no liability whatever for
failure to obtain or maintain insurance, nor to determine whether any
insurance ever in force is adequate as to amount or as to the risks
insured. With respect to Collateral that is in the possession of
Secured Party, Secured Party shall have no duty to fix or preserve
rights against prior parties to such Collateral and shall never be
liable for any failure to use diligence to collect any amount payable
in respect of such Collateral, but shall be liable only to account to
Debtor for what it may actually collect or receive thereon. The
provisions of this subparagraph shall be applicable whether or not an
Event of Default has occurred and is continuing.
e. Diminution in Value of Collateral. Secured Party shall have
no liability or responsibility whatsoever for any diminution in or loss
of value of any Collateral.
I. MULTIPLE COUNTERPARTS
This Security Agreement may be executed in counterparts, each of which
shall be deemed an original, and all of which shall be deemed but one and the
same instrument.
J. GENERAL
1. Waiver. No delay on the part of Secured Party in exercising any
power or right shall operate as a waiver thereof; nor shall any single or
partial exercise of any power or right preclude other or further exercise
thereof or the exercise of any other power or right. No waiver by Secured Party
of any right hereunder or of any default by Debtor shall be binding upon Secured
Party unless in writing, and no failure by Secured Party to exercise any power
or right hereunder or waiver of any default by Debtor shall operate as a waiver
of any other or further exercise of such right or power or of any further
default.
2. Parties Bound. The rights of Secured Party hereunder shall inure to
the benefit of its successors and assigns. The terms of this Security Agreement
shall be binding upon the successors and assigns of the parties. All
representations, warranties and agreements of Debtor are joint and several if
Debtor is more than one and shall bind Debtor's personal representatives, heirs,
successors and assigns.
3. Definitions. Unless the context indicates otherwise, definitions in
the UCC apply to words and phrases in this Security Agreement; if UCC
definitions conflict, Chapter 9 definitions apply.
4. Notice. Notice shall be deemed reasonable if mailed postage prepaid
at least ten (10) days before the related action (or if the UCC elsewhere
specifies a longer period, such longer period) to Debtor's address given above.
5. Expenses. Debtor agrees to reimburse Secured Party's out-of-pocket
expenses, including reasonable attorney's fees, incurred in negotiating,
administering or enforcing any part of the Obligations, and in preparation,
execution, delivery and recording of any documents in connection with any part
of the Obligations, when not contrary to law.
6. Limitation on Interest. All agreements between Debtor and Secured
Party, whether now existing or hereafter arising and whether written or oral,
are hereby expressly limited so that in no contingency, whether by reason of
demand or acceleration of the indebtedness secured hereby or otherwise, shall
the interest contracted for, charged, received, paid or agreed to be paid to
Secured Party exceed the maximum amount permissible under applicable law. If,
from any circumstance whatsoever interest would otherwise be payable to the
holder hereof in excess of the maximum lawful amount, the interest payable to
Secured Party shall be reduced to the maximum amount permitted under applicable
law; and if from any such circumstance Secured Party shall ever receive anything
of value deemed interest by applicable law in excess of the maximum lawful
amount, an amount equal to any excessive interest shall be applied to the
reduction of the principal amount owing on the indebtedness secured hereby and
not to the payment of interest, or if such excessive interest exceeds such
unpaid balance of the principal, such excess shall be refunded to the
undersigned. All interest paid or agreed to be paid to Secured Party on the
indebtedness secured hereby shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness (including the period of any renewal or extension thereof) until
payment in full so that the interest on account of such
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indebtedness shall not exceed the maximum amount permitted by applicable law.
The terms and provisions of this paragraph shall control all agreements between
Debtor and Secured Party.
7. Modifications. No provision hereof shall be modified or limited
except by a written agreement expressly referring hereto and to the provision so
modified or limited and signed by the Debtor and Secured Party, nor by course of
conduct, usage of trade, or by the law merchant.
8. Severability. The unenforceability of any provision of this Security
Agreement shall not affect the enforceability or validity of any other
provision.
9. Gender and Number. Where appropriate, the use of one gender shall be
construed to include the others or any of them; and the singular number shall be
construed to include the plural, and vice versa.
10. Applicable Law and Venue. THIS SECURITY AGREEMENT SHALL BE
CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF TEXAS.
11. Financing Statement. A carbon, photographic or other reproduction
of this Security Agreement or any financing statement covering the Collateral
shall be sufficient as a financing statement.
EXECUTED as of the date and year first above written.
DEBTOR: CRESCENT DEVELOPMENT MANAGEMENT CORP.,
a Delaware corporation
By:_______________________________________________
Name:_________________________________________
Title_________________________________________
SECURED PARTY: CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP,
a Delaware limited partnership
By: Crescent Real Estate Equities, Ltd.,
Sole general partner
By:___________________________________________
Name:_________________________________________
Title_________________________________________
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<PAGE> 1
Exhibit 10.72
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is entered into March 12,
1999, by and between Crescent Operating, Inc., a Delaware corporation
("Seller"), and Crescent Real Estate Equities Limited Partnership, a Delaware
limited partnership ("Purchaser").
RECITALS:
A. Seller is the owner of Fifty (50) shares of Voting Common Stock (the
"Voting Shares") of each of Crescent CS Holdings Corp., a Delaware corporation
("CS One"), and Crescent CS Holdings II Corp., a Delaware corporation ("CS
Two"). Purchaser is the owner of Nine Hundred Fifty (950) shares of Nonvoting
Common Stock (the "Nonvoting Shares") each of CS One and CS Two. CS One and CS
Two each is termed a "Company" and together are termed the "Companies". The
Voting Shares and the Nonvoting Shares comprise all of the outstanding capital
stock of the Companies.
B. Seller acquired the Voting Shares of both Companies from Purchaser
pursuant to that Purchase Agreement dated December 30, 1997 (the "1997 Purchase
Agreement").
C. CS One is the nonmanaging general partner of Vornado Crescent
Atlanta Partnership, a Delaware general partnership ("Atlanta Partnership"),
pursuant to that letter agreement dated October 30, 1997, between CS One and
Atlanta Parent, Inc. (the "Atlanta Partnership Agreement"); CS Two is the
nonmanaging general partner of Vornado Crescent Portland Partnership, a Delaware
general partnership ("Portland Partnership"), pursuant to that letter agreement
dated October 30, 1997, between CS Two and Portland Parent, Inc. (the "Portland
Partnership Agreement"); CS Two also is the sole stockholder of Crescent CSHS II
Corp., a Delaware corporation ("Subsidiary") and Subsidiary is the nonmanaging
general partner of Vornado Crescent Omaha Partnership (the "Omaha Partnership")
pursuant to that letter agreement dated May 28, 1998 (the "Omaha Partnership
Agreement"). The Atlanta Partnership, Portland Partnership and Omaha Partnership
each is termed a "Partnership" and together are termed the "Partnerships." The
Atlanta Partnership Agreement, the Portland Partnership Agreement and the Omaha
Partnership Agreement each is termed a "Partnership Agreement" and together are
termed the "Partnership Agreements." The managing general partners of each
Partnership are subsidiaries of Vornado Realty, L. P., Vornado Realty Trust
and/or Vornado Operating Company (collectively "Vornado"), which are public
companies that file registration statements, periodic reports and proxy
statements (the "Vornado SEC Documents") with the Securities and Exchange
Commission under the Securities Act of 1933 and the Securities Exchange Act of
1934.
D. The Portland Partnership owns all of the capital stock of Americold
Corporation, an Oregon corporation ("Americold"); the Atlanta Partnership owns
all of the capital stock of URS Logistics, Inc., a Delaware corporation ("URS");
and the Omaha Partnership owns all of the assets formerly owned by Freezer
Services, Inc. ("Freezer Services") and Carmar Group, Inc., a Missouri
<PAGE> 2
corporation ("Carmar"). Americold and URS were acquired by merger pursuant to,
respectively, that Agreement and Plan of Merger dated as of September 26, 1997,
among Vornado Realty Trust, Portland Parent, Inc., Portland Storage Acquisition
Co. and Americold Corporation (the "Americold Merger Agreement") and that
Agreement and Plan of Merger dated as of September 26, 1997, among Vornado
Realty Trust, Atlanta Parent, Inc., Atlanta Storage Acquisition Co. and URS
Logistics, Inc. (the "URS Merger Agreement"). The Americold Merger Agreement and
the URS Merger Agreement are collectively termed the "Merger Agreements."
E. Seller desires to exchange Forty (40) of the Voting Shares of CS One
and Forty (40) of the Voting Shares of CS Two for an equivalent number of shares
of Nonvoting Common Stock of, respectively, CS One and CS Two and to sell to
Purchaser the Forty (40) shares of Nonvoting Common Stock of CS One and Forty
(40) shares of Nonvoting Common Stock of CS Two resulting from such exchange;
and Purchaser desires to purchase from Seller all of the Nonvoting Shares so
offered (the "Offered Shares") on the terms and subject to the conditions set
forth in this Agreement.
F. Simultaneously herewith, Seller and Purchaser have entered into that
Put Agreement (the "Put Agreement") whereby Seller has the right at any time or
times subsequent to the date of this Agreement and prior to the second
anniversary of this Agreement, to require Purchaser, subject to certain
conditions set forth in the Put Agreement, to purchase the Voting Shares of CS
One and/or CS Two on the terms set forth in the Put Agreement.
G. Purchaser and Seller are entering into this Agreement and the Put
Agreement in connection with the anticipated restructuring (the "Restructuring")
of the refrigerated warehouse businesses conducted by the Partnerships; the
agreements, now or hereafter executed, pursuant to which the Restructuring would
be accomplished are collectively referred to as the "Restructuring Agreement."
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
execution and delivery by Purchaser of the Put Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to the conditions set forth herein, the parties hereto
agree as follows:
ARTICLE I
SALE AND TRANSFER OF THE OFFERED SHARES;
AGREEMENTS REGARDING VOTING AND RECAPITALIZATION
SECTION 1.1 SALE OF OFFERED SHARES. On the terms and subject to the
conditions of this Agreement and in reliance on the respective representations,
warranties and covenants contained in this Agreement, Seller hereby sells,
assigns, conveys, transfers and delivers to Purchaser, and Purchaser hereby
purchases from Seller, all of the Offered Shares for the sum of $13,200,000 cash
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<PAGE> 3
(the "Purchase Price"). Purchaser and Seller agree that 24.4% ($3,220,800) of
the Purchase Price is attributable to purchase of the Offered Shares of CS One
and 75.6% ($9,979,200) of the Purchase Price is attributable to purchase of the
Offered Shares of CS Two.
SECTION 1.2 CLOSING DELIVERIES. Concurrently with the execution of this
Agreement and against delivery of stock certificates representing the Offered
Shares, Purchaser has delivered the full amount of the Purchase Price in good
funds to an account designated by Seller. Subject only to Section 1.4 of this
Agreement, Seller shall deliver to Purchaser as promptly as practicable a stock
certificate representing 40 shares of Nonvoting Common Stock of CS One and a
stock certificate representing 40 shares of Nonvoting Common Stock of CS Two,
each registered in the name of Seller, duly endorsed to Purchaser.
SECTION 1.3 [INTENTIONALLY OMITTED]
SECTION 1.4 RECAPITALIZATION. Seller and Purchaser recognize,
acknowledge and agree that, as of the date of this Agreement, Seller cannot
deliver the Offered Shares to Purchaser because Seller does not own any
Nonvoting Common Stock of either Company. As recited above, however, Purchaser
does own 50 shares of Voting Common Stock of each Company and desires to
exchange 40 of the Voting Common Stock shares of each Company for 40 shares of
Nonvoting Common Stock of such Company; upon completion of that exchange, Seller
shall own 40 shares of Nonvoting Common Stock of each Company which Seller can
deliver to Purchaser and which Seller agrees to deliver to Purchaser as
contemplated by Section 1.2 of this Agreement. Seller's obligation to deliver
the Offered Shares to Purchaser is conditioned upon amendment of the Certificate
of Incorporation of each Company to increase the authorized Nonvoting Common
Stock of such Company and to effect an exchange of each outstanding Voting Share
of each Company into 4/5 of a share of Nonvoting Common Stock and 1/5 of a share
of Voting Common Stock of that Company. As the sole holder of Voting Shares of
each Company, Seller agrees to take all steps necessary to cause the board of
directors of each Company to adopt an amendment to the charter of such Company
which, upon due filing with the Delaware Secretary of State, shall effect the
aforementioned exchange; and as the sole stockholders of each Company, Seller
and Purchaser mutually agree that, voting together as a single class and voting
separately as different classes, they shall execute a written consent in favor
of each such amendment. The foregoing charter amendments and exchange of stock
is called the "Recapitalization." Where the context requires in this Agreement,
the term "Voting Shares" of a Company shall mean, prior to the Recapitalization,
the 50 shares of Voting Common Stock of that Company outstanding and,
immediately subsequent to the Recapitalization, the ten shares of Voting Common
Stock of that Company outstanding; and the term "Nonvoting Shares" of a Company
shall mean, prior to the Recapitalization, the 950 shares of Nonvoting Common
Stock of that Company outstanding and, immediately subsequent to the
Recapitalization, the 990 shares of Nonvoting Common Stock of that Company
outstanding.
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<PAGE> 4
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
To induce Purchaser to enter into this Agreement and to consummate the
transactions contemplated hereby, Seller -- subject to the assumptions,
qualifications and conditions set forth in Section 3.8 of this Agreement --
represents and warrants to Purchaser as follows:
SECTION 2.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER. Each of
the Companies is a corporation and each of the Partnerships is a general
partnership, each duly organized, validly existing and in good standing under
the laws of the state of its organization, and each of the Companies has, and to
Seller's knowledge each of the Partnerships has, all powers and all material
governmental licenses, authorizations, licenses, permits, consents and approvals
required to carry on the business in which it is engaged and to own and use the
properties owned and used by it. Since the 1997 Purchase Agreement, neither the
Certificate of Incorporation nor the Bylaws of either Company has been amended,
nor has the Atlanta Partnership Agreement nor the Portland Partnership Agreement
been amended. Seller has delivered to Purchaser a true and complete copy of the
Omaha Partnership Agreement, as in effect as of the date of this Agreement. Each
of the Companies and Subsidiary is and to the knowledge of Seller each of the
Partnerships is duly qualified to do business as a foreign company and is in
good standing in each jurisdiction where the character of the property owned or
leased by it, the employment of its employees or the nature of its activities
makes such qualification necessary.
SECTION 2.2 AUTHORIZATION. The execution, delivery and performance by
the Seller of this Agreement and the agreements, instruments and documents
contemplated hereby which are to be executed by the Seller, and the consummation
by the Seller of the transactions contemplated hereby and thereby are within the
powers of the Seller and have been duly authorized by all necessary corporate
actions of Seller. This Agreement and the agreements, instruments and documents
contemplated hereby which are to be executed by the Seller have been duly
executed and delivered by the Seller and constitute or, upon execution and
delivery by the Seller will constitute, valid and binding agreements of the
Seller enforceable against the Seller, in each case, in accordance with their
respective terms, except as such enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors' rights,
generally or by general principles of equity.
SECTION 2.3 GOVERNMENTAL AUTHORIZATION. To the knowledge of Seller,
none of the execution and delivery by Seller of this Agreement or the
agreements, instruments and documents contemplated hereby, the performance by
Seller of its obligations hereunder and thereunder or the consummation by Seller
of the transactions contemplated hereunder and thereunder requires any filing by
Seller with any governmental body, agency, official or authority, unless the
failure to make any such filing would not have a material adverse effect on the
Company; provided, that Seller disclaims any representation regarding the
Hart-Scott-Rodino Antitrust Improvements Act.
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SECTION 2.4 NON-CONTRAVENTION. To Seller's knowledge and based in part
upon the representation of Seller set forth in Section 3.8 of this Agreement,
but subject to due consummation of the Recapitalization, neither the execution,
delivery nor performance by Seller of this Agreement or the agreements,
instruments and documents contemplated hereby, does or will:
(a) violate or breach the certificate of incorporation or bylaws
of Seller;
(b) constitute a violation of any provision of any law, regulation,
judgment, injunction, order, decree, governmental permit or license or statute
to which Seller, either Company or either Partnership is a party or by which
Seller, either Company, Subsidiary or either Partnership is bound; provided,
that Seller disclaims any representation regarding the Hart-Scott-Rodino
Antitrust Improvements Act;
(c) violate, materially breach, be in conflict with or constitute a
default (or an event that, with notice or lapse of time or both, would
constitute a default) under any material note, bond, indenture, mortgage, deed
of trust, lease, franchise, permit, authorization, license, contract, instrument
or other agreement or commitment to which either Company, Subsidiary or either
Partnership is a party or by which Seller, Subsidiary, either Company or either
Partnership or any of their respective assets or properties is bound or
encumbered;
(d) result in a contractual right to cause the termination or
cancellation of or loss of a material benefit under, or the right to accelerate
any obligations pursuant to, any material note, bond, indenture, mortgage, deed
of trust, lease, franchise, permit, authorization, license, contract, instrument
or other agreement or commitment to which either Company, Subsidiary or either
Partnership is a party or which is binding upon either Company, Subsidiary or
either Partnership or any material license, franchise, permit or other similar
authorization held by either Company, Subsidiary or either Partnership; or
(e) result in the creation or imposition of any mortgage, lien, pledge,
charge, security interest, claim, option, or encumbrance of any kind ("Lien")
upon any properties, assets or business of either Company, Subsidiary or either
Partnership.
SECTION 2.5 TITLE. The Voting Shares constitute all of the outstanding
shares of the Voting Common Stock of the Companies, and the Nonvoting Shares
constitute all of the outstanding shares of the Nonvoting Common Stock of the
Companies, issued and outstanding as of the date of this Agreement. Upon
consummation of the Recapitalization, the Offered Shares shall constitute
approximately 4.04% of the outstanding Nonvoting Shares of the Companies and
shall constitute 4% of the outstanding shares of Common Stock of the Companies.
The Voting Shares are (and immediately following the Recapitalization shall be)
owned (of record and beneficially) by Seller, free and clear of all Liens other
than the buy-sell agreements set forth in Paragraph 8 of the Portland and
Atlanta Partnership Agreements and other than the pledge and security interest
to Purchaser referenced in Section 3.8 of this Agreement. The Voting Shares and
the Nonvoting Shares comprise all of the authorized capital stock of the
Companies; and neither Company, nor to Seller's knowledge
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<PAGE> 6
any Partnership, has any outstanding or authorized subscriptions, options,
warrants, rights, commitments or any other arrangements, preemptive or
contractual, obligating it to issue any securities or obligations to any person.
Upon consummation of the transactions contemplated by this Agreement (including
the Recapitalization) and the agreements, instruments and documents contemplated
hereby and in reliance upon the representation of Seller set forth in Section
3.8 of this Agreement, Purchaser will acquire good and marketable title to all
of the Offered Shares free and clear of any Liens other than the buy-sell
agreements set forth in Paragraph 8 of the Portland and Atlanta Partnership
Agreements. The Voting Shares and the Nonvoting Shares of each Company
outstanding as of the date of this Agreement have been duly authorized and are
validly issued; and the Voting Shares and the Nonvoting Shares of each Company
outstanding upon completion of the Recapitalization shall be duly authorized and
validly issued.
SECTION 2.6 SUBSIDIARIES AND JOINT VENTURES. Except for its general
partner's interests in the Portland and Atlanta Partnerships and Subsidiary and
its general partner's interest in the Omaha Partnership, neither Company owns
any equity interest in any entity, is a party to any partnership (limited or
general), joint venture or similar agreement or is obligated to purchase any
equity interest in or any interest convertible into or exchangeable for an
equity interest in any entity or to enter into any such agreement. CS One and
Atlanta Parent, Inc. are the sole general partners of the Atlanta Partnership;
CS Two and Portland Parent are the sole general partners of the Portland
Partnership; and Subsidiary and Vornado Omaha Holdings, Inc. are the sole
general partners of Omaha Partnership. CS One owns a 40% partnership interest in
the ownership, capital and financial interest of the Atlanta Partnership as set
forth in the Atlanta Partnership Agreement; CS Two owns a 40% partnership
interest in the ownership, capital and financial interest of the Portland
Partnership as set forth in the Portland Partnership Agreement; and Subsidiary
owns a 40% partnership interest in the ownership, capital and financial interest
of the Omaha Partnership as set forth in the Omaha Partnership Agreement.
Neither Company nor Subsidiary has any funding obligation or other obligation
with respect to either Partnership except as set forth in the Partnership
Agreements or the Restructuring Agreement. Seller has not taken or caused
Subsidiary to take any action that would trigger the right of the other partners
in the Partnerships to exercise buy-sell rights under Paragraph 8 of the
Partnership Agreements.
SECTION 2.7 FINANCIAL INFORMATION. Purchaser has received from Seller
copies of all financial statements of each Partnership which Seller has received
from the managing general partner of such Partnership ("Financial Statements").
Seller makes no representation regarding the accuracy or completeness of such
financial statements but does represent that Seller has no knowledge that any of
those financial statements is materially inaccurate or incomplete.
SECTION 2.8 [INTENTIONALLY OMITTED]
SECTION 2.9 BUSINESS ACTIVITY. Neither Company is engaged or has
engaged in any business activities other than ownership and management of a
general partner's interest in the Partnerships and ownership and management of
Subsidiary. To Seller's knowledge, the Partnerships
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are only engaging in ownership and management of a 100% stock ownership of
Americold, URS, Freezer Services and Carmar (the "Operating Companies").
SECTION 2.10 ABSENCE OF CERTAIN CHANGES. The Companies, and to Seller's
knowledge the Partnerships, have conducted their respective businesses in the
ordinary course, except as disclosed in the Financial Statements and the
Restructuring Agreement, and except for the acquisition and financing of the
Operating Companies, the refinancing of indebtedness in 1998, the Restructuring
Agreement, and as contemplated by this Agreement (including the
Recapitalization), there has not been:
(a) any loan to or other transaction (excluding transactions related to
the performance of services as an officer, manager or employee) outside the
ordinary course of business with any officer, manager, employee or shareholder
of either Company, Subsidiary or Partnership;
(b) any damage, destruction or other property or casualty loss (whether
or not covered by insurance) materially adversely affecting the business,
assets, liabilities, earnings or prospects of either Company, Subsidiary or
Partnership;
(c) any incurrence of indebtedness for borrowed money or capitalized
lease obligations of either Company, Subsidiary or Partnership, except financing
indebtedness incurred in connection with the consummation of the Merger
Agreements, formation of the Partnerships, acquisition of the Operating
Companies and the 1998 refinancing of indebtedness;
(d) any sale, assignment, transfer or other disposition of any tangible
or intangible asset material to the business of either Company, Subsidiary or
Partnership other than in the ordinary course of business;
(e) any amendment, termination or waiver by either Company, Subsidiary
or Partnership of any right of substantial value under any material note, bond,
indenture, mortgage, deed of trust, lease, franchise, permit, authorization,
license, or other commitment or any material license, franchise, permit or other
similar authorization held by either Company, Subsidiary or Partnership;
(f) any material reduction in the amounts of coverage provided by
existing casualty and liability insurance policies with respect to the business
or properties of either Company, Subsidiary or Partnership;
(g) any adoption of or amendment to or alteration of any bonus,
incentive, compensation, severance, stock option, stock appreciation right,
pension, matching gift, profit-sharing, employee stock ownership, retirement,
pension, group insurance, death benefit, or other fringe benefit plan in which
the employees, officers or managers of either Company, Subsidiary or Partnership
participate;
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(h) the entering into of any agreement by either Company, Subsidiary or
Partnership or any person on behalf of the Company, Subsidiary or the
Partnership to take any of the foregoing actions.
SECTION 2.11 NO UNDISCLOSED LIABILITIES. To Seller's knowledge neither
Company nor Subsidiary nor to Seller's knowledge neither Partnership has
incurred any material liability or material obligations except (i) as disclosed
in the Financial Statements, or (ii) as contemplated by the Restructuring
Agreement. The term "liabilities" shall include, without limitation, any
indebtedness, guarantee, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility of any nature whatsoever, whether or not
accrued, absolute or contingent, liquidated or unliquidated, secured or
unsecured.
SECTION 2.12 LITIGATION. Neither Company nor Subsidiary nor to Seller's
knowledge neither Partnership is (a) subject to any judgment or order (other
than orders of general applicability) of any court or quasi-judicial or
administrative agency of any jurisdiction, domestic or foreign, or where there
is any charge, complaint, lawsuit or governmental investigation pending or
threatened in writing against either Company, Subsidiary or Partnership, which
has or if adversely determined would have a material adverse effect on that
Company, Subsidiary or that Partnership, or (b) a plaintiff in any action,
domestic or foreign, judicial or administrative in which a counterclaim against
either Company, Subsidiary or Partnership is pending, which counterclaim, if
adversely determined, would have a material adverse effect on that Company,
Subsidiary or that Partnership.
SECTION 2.13 TAX RETURNS AND AUDITS. To Seller's knowledge, neither
Company nor Subsidiary nor Partnership has failed to file any federal, state or
local income, franchise, sales and use, value added, property, employment,
excise, informational or any other tax return required to be filed prior to the
date of this Agreement or to pay any tax liability reported therein. Neither
Company is a United States real property holding corporation as defined in
Section 897 of the Internal Revenue Code of 1986, as amended (the "Code").
SECTION 2.14 MATERIAL AGREEMENTS.
(a) Neither Company (in its individual capacity, not in its capacity as
a partner of a Partnership) nor to Seller's knowledge neither Partnership is
bound by any contracts, agreements, leases, and instruments which are material
to the operations, assets or business of either Company, Subsidiary or either
Partnership (the "Material Agreements") except in connection with or as
contemplated in this Agreement, the Restructuring Agreement or as disclosed in
the Vornado SEC Documents.
(b) To Seller's knowledge, neither Company, Subsidiary nor Partnership
nor any other party is in default of a material term under any Material
Agreement and no event has occurred which (after notice or lapse of time or
both) would become a material breach or default under, or would permit the
modification, cancellation or termination of or the acceleration of any
obligation under any Material Agreement which are material to the business of
either Company, Subsidiary or
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Partnership or result in the creation of any Lien upon, or any person obtaining
any right to acquire, any material portion of any properties, assets or rights
of either Company or Partnership; provided, however, that the Seller shall not
be considered in breach of this subparagraph if any such breaches and defaults,
taken together, do not have a material adverse effect.
(c) To Seller's knowledge, each such Material Agreement is in full
force and effect and is valid and legally binding and there are no material
unresolved disputes involving or with respect to any such Material Agreement,
and no party to a Material Agreement has advised either Company or Partnership
that it intends either to terminate a Material Agreement or to refuse to renew a
Material Agreement upon the expiration of the term thereof.
SECTION 2.15 PROPERTIES. To Seller's knowledge, no item of tangible
property, whether real, personal or mixed, reflected on its books and records as
owned or used by either Company, Subsidiary or Partnership has become subject to
Liens or encumbrances of any nature except financing debt incurred in connection
with the consummation of the transactions under the Merger Agreements, formation
of the Partnerships, the acquisitions of Freezer Services and Carmar, or
financing in the ordinary course of business.
SECTION 2.16 GUARANTEES. To Seller's knowledge, neither Company nor
Partnership is a guarantor or otherwise liable for any indebtedness (singly or
in the aggregate involving more than $50,000) of any other person, firm or
corporation.
SECTION 2.17 POWERS OF ATTORNEY. There are no outstanding powers of
attorney or similar instruments executed by Seller with respect to the Company,
Subsidiary or the Partnership.
SECTION 2.18 [INTENTIONALLY OMITTED]
SECTION 2.19 NO PROCEEDINGS. No legal action or governmental proceeding
or investigation has been filed or instituted or, to the knowledge of Seller,
threatened against Seller or either Company, Subsidiary or Partnership that
would adversely affect or prevent the consummation of the transactions
contemplated by this Agreement or the agreements, instruments or documents
contemplated hereby, nor has Seller, either Company, Subsidiary or either
Partnership become subject to any outstanding order of any court or governmental
authority that could adversely affect or prevent the consummation of the
transactions contemplated by this Agreement or the agreements, instruments or
documents contemplated hereby.
SECTION 2.20 ASSUMPTIONS, QUALIFICATIONS AND CONDITIONS TO
REPRESENTATIONS. The foregoing representations and warranties are completely
qualified and limited as follows, in addition to other qualifications and
limitations in this Agreement:
(A) Seller and Purchaser acknowledge that management of each
Partnership is vested in the other general partner in the Partnership and not
the Companies or Subsidiary and, consequently, there may exist liabilities,
litigation, agreements, indebtedness, compensation arrangements, etc.
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incurred or entered into by that Partnership but without the knowledge of the
Company or Subsidiary that is a partner therein; therefore all representations
made "to Seller's knowledge" with respect to the Partnerships only mean that
Seller, without inquiry, has no actual knowledge that such statements are not
true; and therefore also all representations made with respect to the Companies
and Subsidiary are made with respect to such entities in their individual
capacities and not in their capacities as partners in any Partnership (for
example, litigation of a material nature pending against a Partnership shall not
be imputed to a Company or Subsidiary as litigation against that Company or
Subsidiary on the ground that, as a general partner, the Company or Subsidiary
may be generally liable like the Partnership with respect to such matter);
(B) In the 1997 Purchase Agreement, Purchaser (then seller of the
Voting Shares) made certain representations and warranties to Seller (then
purchaser of the Voting Shares) regarding the Companies, the Partnerships and
other matters (such representations and warranties are called the "Purchaser's
Prior Representations"); notwithstanding that the 1997 Purchase Agreement
provides that the Purchaser's Prior Representations survived for a period of one
year following the date of the 1997 Purchase Agreement, all of the
representations and warranties made in this Agreement by Seller are made in
reliance upon the accuracy and completeness of Purchaser's Prior
Representations; and
(C) Purchaser acknowledges access to the Vornado SEC Documents and all
representations made herein by Seller are qualified by reference to information
disclosed in the Vornado SEC Documents concerning the Partnerships and the
Operating Companies; and the disclosures made herein by Seller shall be deemed
modified to the extent that information in the Vornado SEC Documents is
different from or more complete than the disclosures made herein, but no
representation is made by Seller regarding the accuracy or completeness of any
information contained in the Vornado SEC Documents and Purchaser is not relying
upon Seller in any way in connection with the information contained in the
Vornado SEC Documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
To induce Seller to enter into this Agreement and to consummate the
transactions contemplated hereby, Purchaser represents and warrants as follows:
SECTION 3.1 CORPORATE EXISTENCE AND GOOD STANDING. Purchaser is a
limited partnership duly organized, validly existing and in good standing under
the laws of the state of Delaware.
SECTION 3.2 AUTHORIZATION. The execution, delivery and performance by
Purchaser of this Agreement and the agreements, instruments and documents
contemplated hereby which are to be executed by Purchaser, and the consummation
by Purchaser of the transactions contemplated hereby and thereby are within the
powers of Purchaser and have been duly authorized by all necessary actions of
Purchaser and its sole general partner. This Agreement and the agreements,
instruments and documents contemplated hereby which are to be executed by
Purchaser have been duly executed
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and delivered by Purchaser and constitute, or upon execution and delivery by
Purchaser will constitute, valid and binding agreements of Purchaser enforceable
against Purchaser in each case in accordance with their respective terms, except
as such enforcement may be limited by bankruptcy, insolvency or other similar
laws affecting the enforcement of creditors' rights generally or by general
principles of equity.
SECTION 3.3 GOVERNMENTAL AUTHORIZATION. None of the execution and
delivery by Purchaser of this Agreement or the agreements, instruments and
documents contemplated hereby, performance by Purchaser of its obligations
hereunder and thereunder or the consummation by Purchaser of the transactions
contemplated hereunder or thereunder requires any filing by Purchaser with any
governmental body, agency, official or authority.
SECTION 3.4 NON-CONTRAVENTION. Neither the execution, delivery nor
performance by Purchaser of this Agreement and the agreements, instruments or
documents contemplated does or will:
(a) contravene or conflict with the limited partnership agreement of
Purchaser or any other agreement, contract or obligation by which Purchaser is
bound or to which Purchaser is a party; or
(b) contravene or conflict with or constitute a violation of any
provision of any law, regulation, judgment, injunction, order or decree,
governmental permit or license or statute to which Purchaser is a party or by
which Purchaser is bound.
SECTION 3.5 NO PROCEEDINGS. There is no legal action or governmental
proceeding or investigation pending or, to the knowledge of Purchaser,
threatened against Purchaser that would adversely affect or prevent the
consummation of the transactions contemplated by this Agreement and the
agreements, instruments and documents contemplated hereby, nor is Purchaser
subject to any outstanding order of any court or governmental authority that
could adversely affect or prevent the consummation of the transactions
contemplated by this Agreement and the agreements, instruments and documents
contemplated hereby.
SECTION 3.6 SECURITIES REPRESENTATIONS. Purchaser is an existing
stockholder of the Companies and is purchasing the Offered Shares for its own
account, and not with a view to, or in connection with, any resale, disposition
or distribution of any of the Offered Shares not in compliance with the
Securities Act of 1933 and state securities laws. Except as provided by the
representations of Seller contained in this Agreement, Purchaser is not looking
to or relying upon the Seller to inform it about the Companies or the
Partnerships, their businesses, operations, conditions or prospects. Purchaser
has had access to all information with respect to the Companies, Subsidiary, the
Partnerships and the Offered Shares that it deems necessary to make a complete
evaluation thereof and on which to base its decision to purchase the Voting
Shares; and in that connection, Purchaser acknowledges that at all times since
the formation of the Companies it has owned a majority equity interest in the
Companies and as sole voting stockholder of the Companies from their formation
until the 1997 Purchase Agreement, it caused the Companies to enter into the
Portland and
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Atlanta Partnerships and that at all times thereafter it has owned a majority
equity interest in the Companies.
SECTION 3.7 RECEIPT OF DOCUMENTS. Purchaser has received from Seller
the financial projections referenced in Section 2.7 and the documents referenced
in Section 2.1 and the documents referenced in Paragraphs B and C of the
Recitals at the beginning of this Agreement.
SECTION 3.8 RELEASE OF PLEDGE. The Voting Shares are pledged to
Purchaser pursuant to that Amended and Restated Pledge Agreement dated June 16,
1997, as amended by that First Amendment dated September 21, 1998, which
prohibits Seller from selling or otherwise disposing of the Voting Shares
without the pledgee's prior written consent. Purchaser has consented and hereby
does consent to the surrender of Voting Shares pursuant to the Recapitalization
and Purchaser has consented and hereby does consent to the sale of the Offered
Shares pursuant to this Agreement, free and clear of the pledge and security
interest created by that agreement. Seller agrees that the pledge shall continue
with respect to the shares of Voting Common Stock received by Seller pursuant to
the Recapitalization,
ARTICLE IV
ADDITIONAL AGREEMENTS OF THE PARTIES
SECTION 4.1 TAX COOPERATION. Purchaser and Seller shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any gains, sales, use, transfer or
value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes or fees which become payable
in connection with the transactions contemplated by this Agreement that are
required or permitted to be filed at any time before or after the date of this
Agreement.
ARTICLE V
INDEMNIFICATION
SECTION 5.1 INDEMNIFICATION. Until the first anniversary date of this
Agreement, each party (the "Indemnifying Party") hereto agrees to indemnify and
hold harmless the other party hereto and its directors, partners, officers,
shareholders, employees, agents, and controlling persons (the "Indemnified
Parties"), against and in respect of any and all actions, suits, proceedings,
claims, demands, assessments, judgments, fines, costs, expenses (including
reasonable attorneys' fees), damages, losses, liabilities, obligations and
causes of action (a) arising from any inaccuracy, misrepresentation or breach of
any of the representations, warranties or covenants made by the Indemnifying
Party in this Agreement; and (b) arising out of, resulting from or incident to
any of the foregoing or the enforcement by any such means of a valid right of
indemnity pursuant hereto.
12
<PAGE> 13
This indemnity shall not preclude or limit the assertion by either
party hereto or Indemnified Party of any other rights or the seeking of any
other remedies against the other party hereto or any Indemnifying Party.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 FURTHER ASSURANCES. Each party agrees to cooperate fully
with the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
SECTION 6.2 FEES AND EXPENSES. Each party will bear one-half of the
fees and expenses, including, without limitation, counsel fees and fees incurred
by the parties in connection with the preparation, negotiation, execution and
delivery of this Agreement and the Put Agreement and the transactions
contemplated hereby and thereby.
SECTION 6.3 NOTICES. All notices, demands, requests or other
communications that may be or are required to be given, served or sent by either
party to the other party pursuant to this Agreement will be in writing and will
be mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by hand delivery, telegram or
facsimile transmission addressed as follows:
(a) If to Purchaser: Crescent Operating, Inc.
306 W. 7th Street, Suite 1025
Fort Worth, Texas 76102
Facsimile Transmission No.: (817) 339 2220
(b) If to Seller: Crescent Real Estate Equities Limited Partnership
777 Main Street, Suite 2100
Fort Worth, Texas 76102
Facsimile Transmission No.: (817) 321 2000
Either party may designate by written notice a new address to which any notice,
demand, request or communication may thereafter be given, served or sent. Each
notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above will be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a facsimile transmission) the answer back being
deemed conclusive evidence of such delivery or at such time as delivery is
refused by the addressee upon presentation.
13
<PAGE> 14
SECTION 6.4 APPLICABLE LAW. THIS AGREEMENT AND THE AGREEMENTS,
INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (EXCLUSIVE OF CONFLICTS OF LAW
PRINCIPLES) AND WILL, TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR
PERFORMANCE IN TARRANT COUNTY, TEXAS. COURTS WITHIN THE STATE OF TEXAS WILL HAVE
JURISDICTION OVER ANY AND ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER IN
LAW OR EQUITY, ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE AGREEMENTS,
INSTRUMENTS AND DOCUMENTS CONTEMPLATED HEREBY. THE PARTIES CONSENT TO AND AGREE
TO SUBMIT TO THE JURISDICTION OF SUCH COURTS. VENUE IN ANY SUCH DISPUTE, WHETHER
IN FEDERAL OR STATE COURT, WILL BE LAID IN TARRANT COUNTY, TEXAS. EACH OF THE
PARTIES HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (I) SUCH PARTY IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND SUCH
PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (III)
ANY LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
SECTION 6.5 BINDING UPON SUCCESSORS AND ASSIGNS. This Agreement and the
provisions hereof shall be binding upon each of the parties, their permitted
successors and assigns. This Agreement may not be assigned by any party without
the prior consent of the other; provided, however, that Purchaser may assign all
or any portion of its rights and delegate all or any portion of its obligations
under this Agreement to any subsidiary of Purchaser; provided that Purchaser
will remain jointly and severally liable for the performance of Purchaser's
obligations hereunder.
SECTION 6.6 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall for any reason or to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such provision
to other persons or circumstances shall continue in full force and effect and in
no way be affected, impaired or invalidated.
SECTION 6.7 ENTIRE AGREEMENT. This Agreement, together with the
agreements, instruments and documents contemplated hereby constitute the entire
understanding and agreement of the parties with respect to the subject matter
hereof and thereof and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between parties with respect to such subject matter.
SECTION 6.8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations, warranties and covenants contained in this Agreement shall
survive the consummation of the transactions contemplated hereby until the first
anniversary date of this Agreement.
14
<PAGE> 15
SECTION 6.9 AMENDMENT AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the parties hereto. No waiver by any part of any default, misrepresentation or
breach of warranty or covenant hereunder, whether intentional or not, shall not
be deemed to extend to any prior or subsequent default, misrepresentation or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
SECTION 6.10 NO WAIVER. The failure of any party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
SECTION 6.11 CONSTRUCTION OF AGREEMENT. A reference to an Article,
Section or an Exhibit shall mean an Article of, a Section in, or Exhibit to,
this Agreement unless otherwise explicitly set forth. The titles and headings
herein are for reference purposes only and shall not in any manner limit the
construction of this Agreement which shall be considered as a whole. The words
"include," "includes" and "including" when used herein shall be deemed in each
case to be followed by the words "without limitation."
SECTION 6.12 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original as against any party whose
signature appears thereon and all of which together shall constitute one and the
same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all the parties reflected hereon as signatories.
15
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PURCHASER:
CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP
By: Crescent Real Estate Equities,
Ltd., its sole general partner
By:
----------------------------------
Its:
--------------------------------
SELLER:
CRESCENT OPERATING, INC.
By:
----------------------------------
Its:
--------------------------------
<PAGE> 17
PUT AGREEMENT
This Put Agreement is entered into as of March 12, 1999, by and between
Crescent Real Estate Equities Limited Partnership, a Delaware limited
partnership ("Crescent"), and Crescent Operating, Inc., a Delaware corporation
("COI").
RECITALS
WHEREAS, contemporaneously herewith Crescent and COI are entering into
that certain Purchase Agreement (the "Purchase Agreement") pursuant to which COI
is selling to Crescent forty (40) shares of the Nonvoting Common Stock of
Crescent CS Holdings Corp., a Delaware corporation ("CS Holdings"), and forty
(40) shares of the Nonvoting common stock of Crescent CS Holdings II Corp., a
Delaware corporation ("CS Holdings II"); and
WHEREAS, following consummation of such transaction, COI's holdings in
CS Holdings and CS Holdings II will consist of ten shares of the Voting Common
Stock of CS Holdings and ten shares of the Voting Common Stock of CS Holdings
II; and
WHEREAS, the parties have agreed that, subject to certain terms and
conditions, COI shall have the right to sell to Crescent, and Crescent shall be
required to purchase, the Subject Securities (as defined below); and
WHEREAS, Crescent and COI wish to memorialize their understanding with
respect to such potential sale and purchase;
NOW, THEREFORE, in consideration of the premises, of $10.00 and of
other good and valuable consideration, the receipt and sufficiency of which the
parties hereby acknowledge, the parties hereby agree as follows:
Section 1. Definitions. For the purposes of this Agreement, the
following terms shall have the following respective meanings:
(a) "Closing Date" shall mean the date on which a Put Option exercise
is consummated in accordance with Section 3 hereof.
(b) "CS Holdings Put Option" shall mean COI's put option with respect
to the CS Holdings Subject Securities as set forth in Section 2(a) hereof.
Put Agreement between Crescent Real Estate Equities Limited Partnership
and Crescent Operating, Inc. - Page 1 of 7
<PAGE> 18
(c) "CS Holdings Put Option Exercise Price" shall mean an amount equal
to (i) $805,200.00, plus (ii) an amount calculated like interest that equals an
annualized return of twelve percent, compounded quarterly, on such amount from
the date hereof through and including the Closing Date.
(d) "CS Holdings Subject Securities" shall mean the ten (10) shares of
Voting Common Stock of CS Holdings that COI owns following consummation of the
transactions contemplated by the Purchase Agreement, as the same may be changed
in nature or amount by reason of any stock dividend, split-up, reclassification,
recapitalization, merger, consolidation, reorganization or similar transaction.
(e) "CS Holdings II Put Option" shall mean COI's put option with
respect to the CS Holdings II Subject Securities as set forth in Section 2(b)
hereof.
(f) "CS Holdings II Put Option Exercise Price" shall mean an amount
equal to (i) $2,494,800.00, plus (ii) an amount calculated like interest that
equals an annualized return of twelve percent, compounded quarterly, on such
amount from the date hereof through and including the Closing Date.
(g) "CS Holdings II Subject Securities" shall mean the ten (10) shares
of Voting Common Stock of CS Holdings II that COI owns following consummation of
the transactions contemplated by the Purchase Agreement, as the same may be
changed in nature or amount by reason of any stock dividend, split-up,
reclassification, recapitalization, merger, consolidation, reorganization or
similar transaction.
(h) "Exercise Date" shall mean the date that Crescent receives actual
notice of a Put Option exercise in accordance with Section 3 hereof.
(i) "Put Option" shall mean the CS Holdings Put Option and/or the CS
Holdings II Put Option.
(j) "Put Option Exercise Price" shall mean the CS Holdings Put Option
Exercise Price and/or the CS Holdings II Put Option Exercise Price.
(k) "Put Option Period" shall mean the period beginning on the date
hereof and ending at 5:00 p.m. Fort Worth, Texas time on the second anniversary
hereof.
(l) "REIT" shall mean Crescent Real Estate Equities Company, a Texas
real estate investment trust.
(m) "Subject Securities" shall mean the CS Holdings Subject Securities
and/or the CS Holdings II Subject Securities.
Put Agreement between Crescent Real Estate Equities Limited Partnership
and Crescent Operating, Inc. - Page 2 of 7
<PAGE> 19
Section 2. COI's Put Options.
(a) At any time during the Put Option Period, but subject to the
remaining terms and conditions of this Agreement, COI shall have the right to
sell to Crescent, and Crescent shall be obligated to purchase from COI, all but
not less than all of the CS Holdings Subject Securities at the CS Holdings Put
Option Exercise Price.
(b) At any time during the Put Option Period, but subject to the
remaining terms and conditions of this Agreement, COI shall have the right to
sell to Crescent, and Crescent shall be obligated to purchase from COI, all but
not less than all of the CS Holdings II Subject Securities at the CS Holdings II
Put Option Exercise Price.
Section 3. Manner of Put Option Exercise.
(a) To exercise one or both of its Put Options, COI shall deliver
notice thereof to Crescent. Thereafter, at such time and place, and on such date
no later than ten (10) days after the Exercise Date, as the parties may agree,
(i) COI shall deliver to Crescent one or more certificates representing the
applicable Subject Securities duly indorsed (with signature guaranteed) and
otherwise in proper form for transfer and (ii) Crescent simultaneously shall
deliver to COI the applicable Put Option Exercise Price in immediately-available
funds by wire transfer to such account or accounts as COI shall have specified
to Crescent; provided, however, if Section 3(b) hereof applies to the exercise
of a Put Option, then the closing shall be extended until a date after, but no
later than ten (10) days after, the expiration or early termination of the
Waiting Period (as defined hereinbelow).
(b) Whenever the purchase by Crescent of Subject Securities pursuant to
the exercise of a Put Option would require the filing of a Premerger
Notification and Report (a "Premerger Notification") under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and expiration
or early termination of the applicable ensuing waiting period (the "Waiting
Period") before the purchase of such Subject Securities could be closed in
compliance with the HSR Act, then, as promptly as practicable (but not later
than 30 days) following exercise of that Put Option, Crescent shall prepare and
duly file with the appropriate governmental authorities a Premerger Notification
and pay the associated filing fee and COI shall prepare and duly file a
Premerger Notification with the appropriate governmental authorities. Crescent
and COI thereafter shall seek early termination of the Waiting Period and shall
fully and timely comply with all requests for additional information, if any,
made under the HSR Act by any appropriate governmental authority.
Section 4. Contractual Relationship Only. The parties intend hereby to
create only a contractual relationship between them, and in no event shall this
Agreement be construed to create any trust, partnership, joint venture, agency,
fiduciary or similar relationship.
Section 5. Further Assurances. Crescent and COI each agrees to execute
and deliver such other instruments and take such other actions as the other
party reasonably may request following
Put Agreement between Crescent Real Estate Equities Limited Partnership
and Crescent Operating, Inc. - Page 3 of 7
<PAGE> 20
COI's exercise of one or both of its Put Options in order to effect the purchase
and sale of, and the transfer of title to, the applicable Subject Securities as
hereby contemplated in accordance with applicable laws and otherwise to effect
the intents and purposes of this Agreement.
Section 6. Notices. All notices, consents and other communications
required or permitted under this Agreement shall be in writing and shall be
delivered personally, by same-day or overnight courier, or by facsimile
transmission, as follows:
If to Crescent:
Crescent Real Estate Equities Limited Partnership
777 Main Street, Suite 2100
Fort Worth TX 76102
Facsimile: 817/321-2000
Attention: Mr. Gerald W. Haddock, President
Mr. David M. Dean, Senior Vice President, Law
If to COI:
Crescent Operating, Inc.
306 West Seventh Street, Suite 1025
Fort Worth TX 76102
Facsimile: 817/339-2220
Attention: Mr. Jeffrey L. Stevens, Executive Vice President
or to such other person, address or facsimile number as a party may designate to
the other party in the manner set forth above. Notwithstanding anything herein
to the contrary, however, no such notice, consent or other communication shall
be effective until actually received.
Section 7. Severability. If a court of competent jurisdiction shall
determine that any provision of this Agreement is invalid or otherwise
unenforceable, the remainder of this Agreement shall not be affected thereby and
shall continue in full force and effect.
Section 8. Entire Agreement. This Agreement embodies the entire
agreement and understanding of the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and understandings between the
parties in such regard.
Section 9. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas (other than any such
laws that would result in the application of the laws of any jurisdiction other
than the State of Texas).
Section 10. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Crescent may not assign any of its obligations
under this Agreement without in each instance COI's specific
Put Agreement between Crescent Real Estate Equities Limited Partnership
and Crescent Operating, Inc. - Page 4 of 7
<PAGE> 21
prior consent, and any attempted assignment without such written consent shall
be null and void.
Section 11. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original and all of
which taken together shall constitute one and the same instrument.
Section 12. Headings. Section headings in this Agreement are for
convenience of reference only and shall not be deemed to have any substantive
effect.
Section 13. Amendments and Waivers. This Agreement may be amended only
by a writing executed by the party against whom enforcement of such amendment is
sought. No course of dealing between the parties nor any party's failure or
delay in exercising any right, power or privilege hereunder shall operate as a
waiver thereof. No waiver of any term or provision hereof shall be construed as
a further or continuing waiver of such term or provision or any other term or
provision.
Put Agreement between Crescent Real Estate Equities Limited Partnership
and Crescent Operating, Inc. - Page 5 of 7
<PAGE> 22
Section 14. Time of Essence. Time is of the essence with respect to
each party's performance of its obligations under this Agreement.
Section 15. REIT Provision. Notwithstanding anything in this Agreement
to the contrary, COI may not exercise a Put Option, and no assignment or
transfer of any interest in either CS Holdings or CS Holdings II shall be
permitted, if such exercise, assignment or transfer would, in the opinion of
counsel to the REIT, adversely impact the REIT's ability to qualify as a real
estate investment trust within the meaning of Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended, and in such event (i) any attempt to
effect such exercise, assignment or transfer shall be null and void and shall be
of no force or effect and (ii) that portion of any document or instrument
indicating that such exercise, assignment or transfer may be made shall be of no
force or effect.
Put Agreement between Crescent Real Estate Equities Limited Partnership
and Crescent Operating, Inc. - Page 6 of 7
<PAGE> 23
IN WITNESS WHEREOF, the parties have entered into this Put Agreement as
of March 12, 1999.
CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: CRESCENT REAL ESTATE EQUITIES, LTD.,
a Delaware corporation, General Partner
By:
------------------------------------
David M. Dean, Senior Vice
President, Law
CRESCENT OPERATING, INC.,
a Delaware corporation
By:
----------------------------------------
Jeffrey L. Stevens, Executive Vice
President
Put Agreement between Crescent Real Estate Equities Limited Partnership
and Crescent Operating, Inc. - Page 7 of 7
<PAGE> 1
EXHIBIT 10.73
CANYON RANCH-LENOX
SECOND AMENDMENT TO LEASE AGREEMENT
This SECOND AMENDMENT TO LEASE AGREEMENT (this "Amendment") is made and
entered into effective as of the first day of April, 1999, between WINE COUNTRY
HOTEL, LLC, a Delaware limited liability company, d/b/a VINTAGE RESORTS, LLC
("Lessee") and CRESCENT REAL ESTATE FUNDING VI, L.P, a Delaware limited
partnership ("Lessor").
RECITALS:
WHEREAS, Canyon Ranch-Bellefontaine Associates, L.P., a Delaware
limited partnership ("Canyon Ranch") and Lessee entered into that certain Lease
Agreement dated as of December 11, 1996 (the "Original Lease") pursuant to which
Lessee leased from Canyon Ranch a resort facility and related assets located in
Berkshire County, Massachusetts, and known as the "Canyon Ranch-Lenox"
(hereinafter called the "Leased Property"); and
WHEREAS, pursuant to that certain Assignment and Assumption of Master
Lease dated as of December 11, 1996, all of Canyon Ranch's interest and estate
as lessor under the Lease was assigned to Lessor, who thereupon assumed all of
Canyon Ranch's liabilities and obligations under the Lease; and
WHEREAS, Lessor and Lessee amended the Original Lease pursuant to the
terms of that certain First Amendment to Lease Agreement dated as of December
31, 1998 (the Original Lease, as so amended, herein called the "Lease"); and
WHEREAS, Lessor has made additional capital investment in the Leased
Property and Lessor and Lessee have agreed to amend the Lease to increase the
amount of rental payable thereunder in consideration of such capital investment
made by Lessor.
AGREEMENT:
NOW THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable consideration, the receipt and
legal sufficiency of which are hereby acknowledged by the parties hereto, the
parties hereby agree as follows:
1. Definitions. Capitalized terms used but not defined herein shall
have the meanings assigned to them in the Lease.
2. Amendment to Lease. Section 4.1 of the Lease is modified to increase
the Base Rent, effective as of January 1, 1999, by the additional amount of
$100,000.00 per year during the Term. Accordingly, the Base Rent payable under
the Lease on a monthly basis, effective as of January 1, 1999, is $283,333.33
per month.
<PAGE> 2
3. Modification Supersedes. Except as modified hereby, the Lease
remains in full force and effect, with no other modifications thereto. If there
arises by virtue of this Amendment any conflict between any provision of this
Amendment and any provision of the Lease, the provisions hereof shall supersede
any such conflicting provision of the Lease, but only to the extent of such
conflict, and all of the provisions of the Lease are hereby modified as
necessary so as to be consistent with the terms of this Amendment.
4. Successors and Assigns. This Amendment shall be binding upon and
shall inure to the benefit of Lessor and Lessee and their respective successors
and permitted assigns.
5. Multiple Counterparts. This Amendment may be executed in multiple
counterparts, each of which is to be deemed an original for all purposes, and in
making proof of this Amendment it shall not be necessary to produce more than
one (1) counterpart hereof. A facsimile or similar transmission of a counterpart
signed by a party hereto will be regarded as signed by such party for purposes
hereof.
6. Captions. The captions, headings and arrangements used in this
Amendment are for convenience only and do not in any way affect, limit, amplify
or otherwise modify the terms and provisions hereof.
7. Representations of Lessee. Lessee represents and warrants to Lessor
that (i) Lessee is the sole legal and beneficial owner of the leasehold estate
under the Lease and (ii) Lessee has the full power and authority to enter into
this Amendment without the joinder or consent of any other party.
8. Representations of Lessor. Lessor represents and warrants to Lessee
that Lessor has the full power and authority to enter into this Amendment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties have duly executed this Amendment to be
effective as of the day and year first above written.
LESSOR:
CRESCENT REAL ESTATE FUNDING VI, L.P., a
Delaware limited partnership
By: CRE Management VI Corp., a Delaware
corporation, General Partner
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
LESSEE:
WINE COUNTRY HOTEL, LLC, a Delaware
limited liability company, d/b/a VINTAGE
RESORTS, LLC
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
-3-
<PAGE> 4
CONSENT OF GUARANTOR
The undersigned, as the guarantor of the obligations of the Lessee
under the Lease Agreement (as amended by the Second Amendment to Lease Agreement
(the "AMENDMENT") to which this Consent is attached) pursuant to that certain
Master Guaranty dated as of December 31, 1998 (the "Guaranty"), (a) acknowledges
and consents to the terms of the Amendment, (b) agrees that the execution and
delivery of the Amendment and any other documents in connection therewith will
in no way change or modify the undersigned's obligations under the Guaranty and
(c) acknowledges and confirms that the Guaranty is in full force and effect and
there are no claims, counterclaims, offsets or defenses to the Guaranty.
EXECUTED effective as of the 1st day of April, 1999.
CRESCENT OPERATING, INC., a Delaware
corporation
By:
-------------------------------------
Name:
-------------------------------
Title:
------------------------------
-4-
<PAGE> 1
EXHIBIT 10.74
MASTER REVOLVING LINE OF CREDIT
LOAN AGREEMENT
(BORROWING BASE AND WAREHOUSE)
By and Between
DESERT MOUNTAIN PROPERTIES LIMITED PARTNERSHIP
("BORROWER")
And
NATIONAL BANK OF ARIZONA
("LENDER")
Dated: May 14, 1998
<PAGE> 2
MASTER REVOLVING LINE OF CREDIT
LOAN AGREEMENT
(BORROWING BASE AND WAREHOUSE)
This MASTER REVOLVING LINE OF CREDIT LOAN AGREEMENT (BORROWING BASE AND
WAREHOUSE), dated as of May 14, 1998, is made and entered into by and between
DESERT MOUNTAIN PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership
("BORROWER"), and NATIONAL BANK OF ARIZONA, a national banking association
("LENDER").
RECITALS:
Borrower has applied to Lender for (i) a revolving line of credit
(borrowing base) for the purpose of financing the development of Lots and the
construction of Spec Units and Presold Units (as such terms are hereinafter
defined) and (ii) a revolving line of credit (warehouse) for the purpose of
warehousing carry back notes and deeds of trust in favor of Borrower from the
purchasers of custom lots in an Approved Subdivision (as such term is
hereinafter defined), subject to the conditions set forth herein.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In this Agreement, the following capitalized terms
have the following meanings:
"ADVANCE" means an advance of Loan proceeds, other than a
Protective Advance, by the Lender to Borrower hereunder.
"ADVANCE REQUEST", as defined in SECTION 2.2(d)(iv).
"AFFILIATE" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect
common control with such Person. For the purposes of this definition,
"control", when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled"
have meanings correlative to the foregoing.
<PAGE> 3
"AGREEMENT" means this Master Revolving Line of Credit Loan
Agreement (Borrowing Base and Warehouse), as it may be amended,
modified, extended, renewed, restated, or supplemented from time to
time.
"APPRAISAL" means, as the context requires, a Unit Appraisal,
Eligible Lot Appraisal, or any other appraisal undertaken pursuant to
the provisions of this Agreement.
"APPROVALS AND PERMITS" means each and all approvals,
authorizations, bonds, consents, certificates, franchises, licenses,
permits, registrations, qualifications, entitlements and other actions
and rights granted by or filings with any Person necessary, or
appropriate for the state of construction of Units, for the sale of
Units and Eligible Lots, for occupancy, ownership, and use by Borrower
and other Persons of the Units, or otherwise for the conduct of, or in
connection with, the business and operations of Borrower.
"APPROVED SUBDIVISION" means a Subdivision that has been
approved as provided in SECTION 4.2.
"AVAILABLE BORROWING BASE COMMITMENT" means, at any time, the
lesser of:
(a) The Borrowing Base Commitment Amount;
(b) 50% of the total Unit Collateral Values for all
Units plus 50% of the total of the Eligible Lot Collateral
Values for all Eligible Lots; or
(c) 100% of the total Unit Collateral Values,
all as reported in the most recent Borrowing Base Reconciliation
Report,
LESS in any case any remargining payment required pursuant to SECTION
2.9 but not yet paid.
"BORROWING BASE" consists of the Eligible Collateral from time
to time prior to the Maturity Date and as reflected in the most current
Borrowing Base Reconciliation Report.
"BORROWING BASE ADVANCE" means an advance of Borrowing Base
Loan proceeds by the Lender to Borrower hereunder.
"BORROWING BASE COMMITMENT" means the agreement of Lender to
make Advances on the Borrowing Base Loan pursuant to the terms and
conditions of this Agreement.
"BORROWING BASE COMMITMENT AMOUNT" means the total maximum
amount that the Lender is obligated to fund, and that is available at
any particular time under the Borrowing Base Loan, under this
Agreement. The total Borrowing Base Commitment Amount is
$25,000,000.00.
2
<PAGE> 4
"BORROWING BASE LOAN" means the borrowing base credit facility
made available to Borrower in accordance with this Agreement.
"BORROWING BASE NOTE" means the promissory note executed by
Borrower and payable to Lender in the maximum Borrowing Base Commitment
Amount, evidencing Borrower's indebtedness hereunder, as such note may
be amended, modified, extended, renewed, supplemented or restated from
time to time.
"BORROWING BASE RECONCILIATION REPORT" means a report prepared
by the Lender setting forth, inter alia, the Eligible Collateral then
constituting the Borrowing Base, the Collateral Value of the Borrowing
Base, the Cost to Complete relating to the Eligible Collateral, the
Available Borrowing Base Commitment and certain other information, in
the format prescribed by the Lender from time to time.
"BUSINESS DAY" means a day of the year on which banks are not
required or authorized to close in Phoenix, Arizona.
"CALENDAR MONTH" means any of the 12 calendar months of the
year.
"CC&RS" means and includes restrictive covenants, conditions,
restrictions, easements, and other rights that exist or are
contemplated with respect to a Subdivision.
"CLUB" means The Desert Mountain Club, currently a fictitious
business name of Borrower, as owner and operator of the private club
facilities at Desert Mountain comprised of five golf courses (inclusive
of the course now under construction), the clubhouses and pro shops
adjoining such courses, the Sonoran Clubhouse and the swim, tennis,
fitness and other recreational facilities adjacent thereto. At such
time as such facilities are transferred to an entity other than
Borrower, the "Club," as used in this Agreement, shall refer to such
successor owner. Where the context so requires, "Club" shall also mean
the association of members enjoying use privileges with respect to such
facilities.
"CODE" means the United States Internal Revenue Code of 1986,
as amended from time to time.
"COLLATERAL" means the property, interests in property, and
rights to property securing any or all Obligations from time to time.
"COLLATERAL CERTIFICATE" means the certificate of Borrower, in
form and substance satisfactory to the Lender and containing such
certifications as the Lender may require, setting forth the information
required by SECTION 3.4.
"COLLATERAL DOCUMENTS", as defined in SECTION 2.2(d)(v).
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<PAGE> 5
"COLLATERAL INVENTORY REPORT" means the report prepared by
Borrower as required by SECTION 3.4.
"COLLATERAL VALUE" means, from time to time, the aggregate
total of the Unit Collateral Values for all Units and the Eligible Lot
Collateral Values for all Eligible Lots included in Eligible Collateral
at the time the Collateral Value of the Borrowing Base is determined.
"COMMITMENT" shall mean collectively the Borrowing Base
Commitment and the Warehouse Commitment.
"CONVERSION FEE" means the amount payable to the Club in order
to convert a non-equity Membership to a Deferred Equity Golf
Membership, or to upgrade a Deferred Equity Club Membership to a
Deferred Equity Golf Membership, or to "attach" a Deferred Equity Golf
Membership to a Lot as to which no Membership was associated at the
time the related Lot or Mortgage Note was pledged to Lender. EXHIBIT A,
attached hereto, lists the Conversion Fee payable with respect to the
Membership associated with each Eligible Mortgage Loan covered by this
Agreement based on the Membership Contribution of $125,000 in effect as
of March, 1998 (the Conversion Fee for "Type 2" and "Type 5"
Memberships are an approximation only). Changes in the Membership
Contribution over time, at the discretion of the Club, will result in
changes in the Conversion Fee for each Membership type, as follows:
<TABLE>
<CAPTION>
Membership Type Calculation
--------------- -----------
<S> <C>
20, 25 25% of Membership Contribution
3 Membership Contribution less $50,000
2, 5 Membership Contribution less the sum of
dues actually paid on a given Membership
account through time of conversion, subject
to $50,000 cap on such dues credit
1, 8, 22 Full Membership Contribution
41, 44 68% of Membership Contribution
19 120% of Membership Contribution
</TABLE>
"COST TO COMPLETE" shall mean, as applicable, the total of all
hard costs and soft costs as reasonably determined by Lender to
complete an Eligible Lot or a Unit as provided in the Unit Budgets and
Eligible Lot Budgets provided to Lender.
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<PAGE> 6
"CRESCENT" shall mean Crescent Real Estate Equities Limited
Partnership, a Delaware limited partnership, or as the context
requires, Crescent Operating, Inc., the general or limited partner of
Borrower or Affiliates.
"CRESCENT DEEDS OF TRUST" shall mean those certain deeds of
trust executed by Borrower as trustor, in favor of Crescent as
beneficiary, subordinated to Lender pursuant to the Subordination
Agreement.
"CRESCENT NOTES" shall mean that certain promissory note dated
August 29, 1997 in the original principal amount of $110,000,000.00 and
that certain promissory note dated August 29, 1997 in the original
principal amount of $60,000,000.00, each of which was executed by
Borrower in favor of Crescent and secured by the Crescent Deeds of
Trust.
"DEED OF TRUST" and "DEEDS OF TRUST" mean each and all deeds
of trust, mortgages, assignments of leases and rents, fixture filings,
and security agreements, securing the Note and the Obligations, granted
from time to time by Borrower, as mortgagor, trustor, or assignor, to
the Lender, as mortgagee, beneficiary and trustee (unless the Lender
consents to the transfer to another Person to act as trustee under a
deed of trust), or assignee, each being substantially in the form
required by the Lender from time to time, as the same may be amended,
modified, supplemented, extended, restated, or renewed from time to
time.
"DEFAULT INTEREST RATE" shall mean a rate of interest equal to
the aggregate of 4% per annum plus the Interest Rate. The Default
Interest Rate shall change as and when the Prime Rate changes.
"DEFERRED EQUITY MEMBERSHIP PLAN" means the Deferred Equity
Membership Plan dated July 1, 1994, as published by the Club, together
with all future amendments thereto.
"DRAW REQUEST" means a completed, written request in form and
substance satisfactory to the Lender, from Borrower to the Lender
requesting a Borrowing Base Advance under the Borrowing Base Loan,
together with such other documents and information as the Lender may
require from time to time.
"DUE DILIGENCE INFORMATION" means any and all information
regarding the Mortgage Loans that exists or was developed in connection
with Borrower's or its agent's generating, servicing or analysis of the
Mortgage Loans prior to assignment to Lender.
"EFFECTIVE DATE" means the date on which all of the conditions
precedent in SECTION 4.1 have first been satisfied.
"ELIGIBLE COLLATERAL" means the Units and the Eligible Lots
that meet the requirements of this Agreement for inclusion as Eligible
Collateral and that are included in a Borrowing Base Reconciliation
Report.
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<PAGE> 7
"ELIGIBLE LOT" means a Lot in an Approved Subdivision that has
satisfied the requirements in SECTION 4.3 for inclusion in Eligible
Collateral as an Eligible Lot.
"ELIGIBLE LOT APPRAISAL" means a FNMA/URAR Appraisal of an
Eligible Lot.
"ELIGIBLE LOT APPRAISED VALUE" means the market value for an
Eligible Lot, as if complete, as reasonably determined by the Lender
after its review of the Eligible Lot Appraisal for an Eligible Lot.
"ELIGIBLE LOT BUDGET" means the amount allocated by Borrower
to the hard and soft costs associated with the development of each
Eligible Lot included as Eligible Collateral, as set forth in budgets
and cost breakdowns delivered to Lender. The Eligible Lot Budget will
specifically set forth the building permit fees, tap fees, impact fees,
development fees, and other municipal, county, school district, and
special district fees and assessments required for the development of
the Eligible Lot. The Eligible Lot Budget will be subject to review and
reasonable approval by the Lender.
"ELIGIBLE LOT COLLATERAL VALUE" means with respect to each
Eligible Lot, an amount equal to the difference between the Eligible
Lot Appraised Value and the Cost to Complete, if any, of the Eligible
Lot.
"ELIGIBLE LOT ELIGIBILITY DATE" means, with respect to each
Eligible Lot, the date on which the Eligible Lot is first included in
Eligible Collateral as an Eligible Lot pursuant to this Agreement, as
reflected on the Borrowing Base Reconciliation Report, and regardless
of whether periods exist during which such Eligible Lot is not included
as Eligible Collateral.
"ELIGIBLE MORTGAGE LOAN" means a Mortgage Loan which is
secured by a Mortgage constituting a first lien on a Lot located in an
Approved Subdivision and its corresponding Membership, if any, and
satisfies the conditions precedent pursuant to SECTION 4.6 of this
Agreement.
"ENVIRONMENTAL AGREEMENT" means each environmental indemnity
or similar agreement, executed by Borrower for the benefit of the
Lender, as any such agreement may be amended, modified, extended,
renewed, restated, or supplemented from time to time.
"ERISA" means the Employee Retirement Income Security Act of
1974 and the regulations and published interpretations thereunder, as
in effect from time to time.
"EVENT OF DEFAULT" means as defined in SECTION 9.1.
"FICO", as defined in SECTION 4.6.
6
<PAGE> 8
"FINANCIAL COVENANT DEFAULT" means any Event of Default that
occurs by reason of a breach by Borrower with respect to any of the
Financial Covenants.
"FINANCIAL COVENANTS" means the covenants set forth in
ARTICLE 7.
"GAAP" means generally accepted accounting principles
consistently applied.
"GOVERNMENTAL AUTHORITY" or "GOVERNMENTAL AUTHORITIES" means
any and all governments or courts and/or any and all agencies,
authorities, bodies, bureaus, departments, or instrumentalities of any
government.
"HARD COSTS" shall mean the hard costs for the construction of
a Unit and/or development of a Lot as provided in the Unit Budget
and/or Eligible Lot Budget.
"IMPOSITIONS" means any and all of the following:
(a) Real property taxes and assessments (general and
special) assessed against or imposed upon or in respect of any
of the Collateral or the Obligations;
(b) Personal property taxes assessed against or
imposed upon or in respect of any of the Collateral or the
Obligations;
(c) Other taxes and assessments of any kind or nature
that are assessed or imposed upon or in respect of the
Collateral or the Obligations or that may result in a Lien or
Encumbrance upon any of the Collateral (including, without
limitation, non-governmental assessments, levies, maintenance
and other charges whether resulting from covenants,
conditions, and restrictions or otherwise, water and sewer
rents and charges, assessments on any water stock, utility
charges and assessments, and owner association dues, fees, and
levies);
(d) Taxes or assessments on any of the Collateral in
lieu of or in addition to any of the foregoing;
(e) Taxes on income, revenues, rents, issues, and
profits, and franchise taxes;
(f) Costs, expenses, and fees arising from or related
to any of the Approvals and Permits or the Requirements; and
(g) Assessment, documentary, indebtedness, license,
stamp, and revenue charges, fees, and taxes and any other fees
or taxes imposed on the Lender and measured by or based in
whole or in part upon ownership of any Deed of Trust,
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<PAGE> 9
interest in Collateral, or any promissory note, guaranty, or
indebtedness secured by any Deed of Trust or upon the nature
or amount of the Obligations,
EXCLUDING, HOWEVER, from all of the foregoing any estate, excess
profits, franchise, income, inheritance, or similar tax levied on the
Lender.
"INTEREST RATE" means the rate of interest as provided in the
Note.
"INVOLUNTARY LIEN" means any Lien or Encumbrance securing the
payment of money or the performance of any other obligation created
involuntarily under any law, ordinance, regulation, or rule, or
otherwise and any claim of any such Lien or Encumbrance. For purposes
of the Loan Documents and the rights and remedies thereunder, "stop
notices" or similar notices and demands from Persons performing work or
supplying materials with respect to any Collateral and who are
asserting lien rights, shall be considered as Involuntary Liens.
"LATE CHARGES" means the charges described in SECTION 2.4(e).
"LIEN OR ENCUMBRANCE" and "LIENS AND ENCUMBRANCES" mean,
respectively, each and all of the following:
(a) Any lease or other right to use;
(b) Any assignment as security, conditional sale,
grant in trust, lien, mortgage, pledge, security interest,
title retention arrangement, other encumbrance, or other
interest or right securing the payment of money or the
performance of any other liability or obligation, whether
voluntarily or involuntarily created (including, without
limitation, Involuntary Liens) and whether arising by
agreement, document, or instrument, under any law, ordinance,
regulation, or rule (federal, state, or local), or otherwise;
and
(c) Any option, right of first refusal, or other
interest or right.
"LOAN" means collectively the Borrowing Base Loan and the
Warehouse Loan.
"LOAN DOCUMENTS" means this Agreement, the Note, the Deeds of
Trust, the Pledge Agreement, the Environmental Agreements, the
Subordination Agreement and any other guaranties, agreements,
documents, or instruments now or hereafter evidencing, guarantying or
securing the Obligations and any and all Advances and Protective
Advances made hereunder, as this Agreement, the Note, the Deeds of
Trust, the Pledge Agreement, the Environmental Agreements, the
Subordination Agreement and such other agreements, documents, and
instruments may be amended, modified, extended, renewed, restated, or
supplemented from time to time.
8
<PAGE> 10
"LOAN SALE AGREEMENT" shall mean that certain Loan Sale
Agreement dated March 20, 1998, by and between Borrower as Seller and
Lender as Buyer as the same may be amended, supplemented and modified
from time to time.
"LOT" means an individual lot designated as such on a final
subdivision plat or map, subdivision filing, or condominium declaration
or plan.
"MATERIAL ADVERSE CHANGE" means any significant change in the
assets, liabilities, financial condition, or results of operations of
Borrower or any other event or condition with respect to Borrower that
materially and adversely affects the likelihood of performance by
Borrower of any of the Obligations, the ability of Borrower to perform
any of the Obligations, the legality, validity, or binding nature of
any of the Obligations, or any Lien or Encumbrance securing any of the
Obligations or the priority of any Lien or Encumbrance securing any of
the Obligations.
"MATURITY DATE" means May 14, 1999.
"MAXIMUM ALLOWED BORROWING BASE ADVANCE" means with respect to
Borrowing Base Advances, the following:
(a) With respect to each Presold Unit, the lowest of
(i) 80% of the Unit Appraised Value for that Unit, or (ii)
100% of the Hard Costs of construction of the Unit plus 50% of
the Eligible Lot Collateral Value.
(b) With respect to each Spec Unit, the lowest of (i)
65% of the Unit Appraised Value for that Unit, or (ii) 100% of
the Hard Costs of construction of the Unit plus 50% of the
Eligible Lot Collateral Value.
(c) With respect to each Eligible Lot, 50% of the
Eligible Lot Collateral Value.
"MAXIMUM ALLOWED WAREHOUSE ADVANCE" means with respect to
Warehouse Advances, an amount equal to 100% of the face amount of such
Eligible Mortgage Loan.
"MEMBERSHIP" means the particular membership associated with
each Lot and Mortgage Loan subject to this Agreement which confers upon
the Designated Member thereunder specific uses and other privileges in
the Club, pursuant to the terms of the particular Membership Agreement
related thereto, the Bylaws of The Desert Mountain Club, and, in the
case of Deferred Equity Memberships, the July 1, 1994 Deferred Equity
Membership Plan of The Desert Mountain Club. Any such membership could
be one of various versions of the non-equity "Regular Membership"
(having full golf and other use privileges), a "Deferred Equity Club
Membership" (having social, swim/tennis/fitness and limited golf
privileges) or a "Deferred Equity Golf Membership" (having full golf
and other
9
<PAGE> 11
privileges). The type of Membership associated with each Eligible
Mortgage Loan is identified by a "Mem Type" number on EXHIBIT A,
attached hereto, which numbers correlate with Borrower's membership
records.
"MEMBERSHIP CONTRIBUTION" means the Membership Contribution
for a Deferred Equity Golf Membership, as defined in the Deferred
Equity Membership Plan.
"MONETARY DEFAULT" means any Event of Default under SECTION
9.1(a).
"MORTGAGE" means a mortgage or deed of trust in the form
attached hereto as EXHIBIT B-2 securing a Mortgage Note.
"MORTGAGE BORROWER" means a borrower or collectively joint
borrowers under a Mortgage Note.
"MORTGAGE LOAN" means a loan made by Borrower to a party who
is not an Affiliate of Borrower for the purchase of a Lot in an
Approved Subdivision for the purpose of construction of a custom home
thereon, evidenced by a Mortgage Note, and secured by a Mortgage.
"MORTGAGE NOTE" means a note in the form attached hereto as
EXHIBIT B-1, which Mortgage Note is secured by a Mortgage.
"MORTGAGE NOTE AMOUNT" means the outstanding unpaid principal
amount of a Mortgage Note at the time such Mortgage Note is pledged to
Lender.
"NET WORTH", as defined in SECTION 7.1.
"NET SALES PROCEEDS" means (i) in the case of a Unit, the
gross sales price of the Unit (including, without limitation, all
options, upgrades and change orders) set forth in the Purchase Contract
for such Unit (expressed in U.S. dollars), less the down payment paid
pursuant to the Purchase Contract to a maximum of twenty percent (20%)
of the gross sales price of the Unit; customary tax and assessment
prorations; reasonable and customary real estate brokerage commissions
paid to third party brokers who are not Affiliates of Borrower (other
than Desert Mountain Associates, Inc.); reasonable and customary
closing costs; pool and landscaping funds submitted to escrow (provided
such funds are directly released to Lender upon their release from
escrow) and (ii) in the case of an Eligible Lot, the gross sales price
of the Lot set forth in the Purchase Contract for such Lot (expressed
in U.S. dollars), less customary tax and assessment prorations;
reasonable and customary real estate brokerage commissions paid to
third party brokers who are not Affiliates of Borrower (other than
Desert Mountain Associates, Inc.) and; reasonable and customary closing
costs.
10
<PAGE> 12
"NOTE" means collectively the Borrowing Base Note and the
Warehouse Note.
"OBLIGATIONS" means the obligations of Borrower under the Loan
Documents.
"OFF-SITE IMPROVEMENTS" means offsite improvements which may
exist or which are to be constructed (including, without limitation,
curbs, grading, landscape, sprinklers, storm and sanitary sewers,
paving, sidewalks, and utilities) necessary to make the land suitable
for the construction of single family homes or condominiums, and any
common area improvements which may exist or which are to be
constructed, together with the associated fixtures and other tangible
personal property located or used in or on land on which such
improvements are constructed.
"OTHER AMOUNTS" means all amounts, other than principal and
interest, payable by Borrower under any of the Loan Documents to or for
the benefit of Lender.
"OTHER DEFAULT" means any Event of Default under this
Agreement or any of the other Loan Documents, other than a Monetary
Default or a Financial Covenant Default.
"OUTSTANDING BORROWINGS", at any time, means the aggregate
amount of then outstanding Advances and Protective Advances.
"PERMITTED EXCEPTIONS" means:
(a) Involuntary Liens for Impositions that are not
delinquent;
(b) Involuntary Liens (other than for Impositions)
with respect to which Borrower satisfies each of the following
requirements: (i) Borrower contests the validity of such
Involuntary Lien in good faith by appropriate legal
proceedings; (ii) Borrower gives written notice to the Lender
of Borrower's intent to contest or object to the same; (iii)
Borrower demonstrates to the Lender's satisfaction that the
procedures will conclusively operate to prevent the sale of
any part of the property subject to the applicable Deed of
Trust to satisfy the Involuntary Lien prior to final
determination of such proceedings; (iv) the aggregate amount
of such Involuntary Liens does not exceed $50,000.00 (unless
otherwise approved by the Lender and excluding any Involuntary
Liens for which Borrower has received a bond); and (v)
Borrower takes any and all other actions (including, without
limitation, obtaining bonds, title insurance endorsements, or
other security) as the Lender may deem reasonably necessary or
appropriate in order to prevent the sale of any Collateral to
satisfy the Involuntary Lien and prevent any impairment of any
such Collateral or, if such Collateral is Eligible Collateral,
Borrower removes the affected Collateral from the Eligible
Collateral;
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<PAGE> 13
(c) All items, except Impositions and Liens and
Encumbrances (other than Impositions and Liens and
Encumbrances referenced in and permitted by the other
subsections of this definition), in Schedule B to any Title
Policy that have been approved by the Lender; and
(d) The Crescent Deeds of Trust.
"PERSON" means a natural person, a partnership, a joint
venture, an unincorporated association, a limited liability company, a
corporation, a trust, any other legal entity, or any Governmental
Authority.
"PLEDGE AGREEMENT" shall mean that certain Pledge Agreement of
even date herewith by and between Lender and Borrower and as accepted
by the Servicing Agent.
"PRESOLD UNIT" means a Unit that is subject to a Purchase
Contract.
"PROTECTIVE ADVANCE" means amounts advanced by the Lender to
pay the following amounts:
(a) All amounts that are necessary to protect the
validity, priority and enforceability of the liens,
encumbrances and security interests in favor of the Lender
arising pursuant to the Loan Documents (such amounts to
include, without limitation, taxes, assessments and other
Liens and Encumbrances that may have a priority superior to
the priority of the Liens and Encumbrances of the Lender on
the Collateral); and
(b) All insurance premiums that are necessary to
insure the Collateral against loss, damage or destruction
pursuant to the requirements of the Loan Documents.
"PURCHASE CONTRACT" means a bona fide written agreement
between Borrower and a purchaser who is not an Affiliate of Borrower
entered into in the ordinary course of Borrower's business and pursuant
to which such purchaser has agreed to purchase a Unit, which agreement
calls for a cash earnest money deposit or down payment of at least
twenty percent (20%) of the purchase price of the Unit, which is
nonrefundable except in the event of a default by the Borrower, as
seller under the agreement.
"REGULATORY CHANGE" means any change effective after the date
of this Agreement in United States federal, state, or foreign law,
regulations, or rules or the adoption or making after such date of any
interpretation, directive, or request applying to a class of banks,
including the Lender, of or under any United States federal, state, or
foreign law, regulation, or rule (whether or not having the force of
law) by any court or governmental or monetary
12
<PAGE> 14
authority charged with the interpretation or administration thereof
which has a material effect on the rights of Lender under the Loan
Documents.
"REQUIREMENTS" means any and all obligations, other terms and
conditions, requirements, and restrictions in effect now or in the
future, of a material nature, by which Borrower or any or all of the
Collateral are bound or which are otherwise applicable to any or all of
the Collateral, construction of any Units or Off-Site Improvements, or
occupancy, operation, ownership, or use of Lots, Units, or Off-Site
Improvements, including without limitation, such obligations; other
terms and conditions, restrictions, and requirements imposed by any
law, ordinance, regulation, or rule (federal, state, or local); any
Approvals and Permits; any Permitted Exceptions; any condition,
covenant, restriction, easement, right-of-way, or reservation
applicable to such Collateral; any insurance policies; any other
agreement, document, or instrument to which Borrower is a party or by
which Borrower or any of the Collateral or the business or operations
of Borrower is bound; or any judgment, order, or decree of any
arbitrator, other private adjudicator, or Governmental Authority to
which Borrower is a party or by which Borrower or any of the Collateral
is bound.
"RICO RELATED LAW" means the Racketeer Influenced and Corrupt
Organizations Act of 1970 and any other federal or state law, for which
forfeiture of assets is a potential penalty.
"SERVICING AGENT" means First American Title Insurance
Company, as servicing agent for the Mortgage Loans.
"SERVICING AGREEMENT" shall mean that certain Servicing
Agreement by and between Borrower and the Servicing Agreement.
"SPEC UNIT" means a Unit constructed for the purpose of
addition to Borrower's inventory of Units and which is not subject to a
Purchase Contract.
"SUBDIVISION" means a group of Lots marketed and sold together
regardless of whether dwellings in such group of Lots are to be
constructed at the same time or in phases.
"SUBDIVISION DOCUMENTS" means a plat map or similar document
covering a Subdivision and dividing the Subdivision into lots in
accordance with the Requirements of the applicable Governmental
Authorities.
"SUBORDINATION AGREEMENT" shall mean that certain
subordination agreement by and among, Borrower, Lender and Crescent.
"TITLE COMPANY" means a title insurance company that issues a
Title Policy.
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<PAGE> 15
"TITLE POLICY" and "TITLE POLICIES" mean, respectively, each
and all title insurance policies and endorsements thereto issued
pursuant to the requirements of this Agreement and any reinsurance or
co-insurance agreements and endorsements. Each Title Policy shall be an
extended coverage American Land Title Association loan policy of title
insurance (1992 form) with the creditor's rights exception and
arbitration provisions deleted and with a revolving credit endorsement
and such other endorsements as the Lender may require.
"UNIT" means a residential dwelling constructed or to be
constructed on a Lot, together with the associated Lot.
"UNIT APPRAISAL" means a FNMA/URAR base plan type Appraisal of
a Unit.
"UNIT APPRAISED VALUE" means the value of the Unit (including
the associated Lot) upon completion, as reasonably determined by the
Lender after its review of the applicable Unit Appraisal.
"UNIT BUDGET" means the amount allocated by Borrower to the
hard and soft costs associated with the construction of each Unit
included as Eligible Collateral, as set forth in budgets and cost
breakdowns delivered to Lender. The Unit Budget will specifically set
forth the building permit fees, tap fees, impact fees, development
fees, and other municipal, county, school district, and special
district fees and assessments required prior to the start of
construction, and the amount of each Unit Budget will be set forth in
the Borrowing Base Reconciliation Report. The Unit Budget will be
subject to review and approval by the Lender.
"UNIT COLLATERAL VALUE" means with respect to each Unit, an
amount equal to the difference between the Unit Appraised Value and the
Cost to Complete, if any, of the Unit, as reasonably determined by
Lender.
"UNIT ELIGIBILITY DATE" means, with respect to each Unit, the
date on which that Unit is first included in Eligible Collateral as a
Unit pursuant to this Agreement, as reflected on the Borrowing Base
Reconciliation Report, and regardless of whether periods exist during
which such Unit is not included as Eligible Collateral.
"UNMATURED EVENT OF DEFAULT" means any failure by Borrower to
observe or perform any of Borrower's obligations under any of the Loan
Documents or any other violation by Borrower of any of the terms and
conditions of any of the Loan Documents that with notice, passage of
time, or both would be an Event of Default.
"WAREHOUSE ADVANCE" means an advance of Warehouse Loan
proceeds by the Lender to Borrower hereunder.
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<PAGE> 16
"WAREHOUSE ADVANCE" means the agreement of Lender to make
Advances on the Warehouse Loan pursuant to the terms and conditions of
this Agreement.
"WAREHOUSE COMMITMENT AMOUNT" means the total maximum amount
that the Lender is obligated to fund, and that is available at any
particular time under the Warehouse Loan, under this Agreement. The
total Warehouse Commitment Amount is $10,000,000.00.
"WAREHOUSE LOAN" means the warehousing credit facility made
available to Borrower in accordance with this Agreement.
"WAREHOUSE NOTE" means the promissory note executed by
Borrower and payable to Lender in the maximum Warehouse Commitment
Amount, evidencing Borrower's indebtedness hereunder, as such note may
be amended, modified, extended, renewed, supplemented or restated from
time to time.
ARTICLE 2
LOAN FACILITIES
2.1 Borrowing Base Loan Facility.
(a) Commitment to Make Borrowing Base Advances. Subject to the
terms and conditions of this Agreement and from time to time prior to
the Maturity Date, the Lender agrees to make Borrowing Base Advances to
Borrower up to the current Available Borrowing Base Commitment as
determined pursuant to the most current Borrowing Base Reconciliation
Report.
(b) Revolving Nature of Loan Facility. Borrowing Base Advances
repaid may be re-borrowed on a revolving basis through the Maturity
Date. Although the outstanding principal of the Borrowing Base Note may
be zero from time to time, the Loan Documents will remain in full force
and effect until the Borrowing Base Commitment terminates and all
Obligations are paid and performed in full. Upon the occurrence of an
Event of Default, the Lender may suspend or terminate the Borrowing
Base Commitment. The obligation of Borrower to repay Borrowing Base
Advances will be evidenced by the Borrowing Base Note.
(c) Method for Borrowing Base Advances. Borrowing Base
Advances may be made by the Lender at the written request of the Person
or Persons designated by Borrower from time to time on the Lender's
form of signature authorization; PROVIDED, HOWEVER, that the Lender
shall have acknowledged receipt of any changes in the Person or Persons
designated by Borrower, and such Person or Persons designated by
Borrower will have executed a new signature authorization form. Subject
to this SECTION 2.1 and the other terms and conditions of this
Agreement (including those hereinafter set forth), such Person or
Persons are hereby authorized by Borrower to request Borrowing Base
Advances up to the
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amount of the Available Borrowing Base Commitment less Outstanding
Borrowings at the time the Borrowing Base Advance is requested
(determined pursuant to the most recent Borrowing Base Reconciliation
Report) not more frequently than 2 times per Calendar Month, and to
direct the disposition of the proceeds of Borrowing Base Advances until
written notice of the revocation of such authority is received from
Borrower by the Lender and the Lender has had a reasonable time to act
upon such notice. The Lender has no duty to monitor for Borrower or to
report to Borrower the use of proceeds of Borrowing Base Advances.
Subject to the satisfaction of all applicable terms and conditions,
including the timely giving by Borrower of a Draw Request, the Lender
will make the requested advance on or before noon on the borrowing date
specified in the Draw Request.
(d) Use of Borrowing Base Advances. Borrowing Base Advances
may be used for any general working capital purposes of Borrower,
PROVIDED, HOWEVER, that the provisions of this SECTION 2.1(b) do not
restrict the Lender from making Protective Advances as otherwise
permitted by this Agreement (such as pursuant to SECTION 2.6(d)).
2.2 Warehouse Advances.
(a) Commitment to Make Warehouse Advances. Subject to the
terms and conditions of this Agreement and from time to time prior to
the Maturity Date, the Lender agrees to make Warehouse Advances to
Borrower up to the current Warehouse Commitment. Warehouse Advances
shall be used by Borrower for general working capital purposes.
Warehouse Advances shall be made at the request of Borrower, in the
manner hereinafter provided in this SECTION 2.2, against the pledge of
such Eligible Mortgage Loans as Collateral therefor. No Warehouse
Advance shall exceed the Maximum Allowed Warehouse Advance.
(b) Revolving Nature of Loan Facility. Warehouse Advances
repaid may be re-borrowed on a revolving basis through the Maturity
Date. Although the outstanding principal of the Warehouse Note may be
zero from time to time, the Loan Documents will remain in full force
and effect until the Warehouse Commitment terminates and all
Obligations are paid and performed in full. Upon the occurrence of an
Event of Default, the Lender may suspend or terminate the Warehouse
Commitment. The obligation of Borrower to repay Warehouse Advances will
be evidenced by the Warehouse Note.
(c) Use of Warehouse Advances. Subject to the terms and
conditions of this Agreement and provided no Unmatured Event of Default
has occurred and is continuing, Lender agrees, from time to time during
the period from the Effective Date to and including the Maturity Date,
to make Warehouse Advances to Borrower for the purpose of warehousing
carry back Mortgage Notes and Mortgages in favor of Borrower until such
time as the Mortgage Notes and Mortgages meet eligibility requirements
for purchase by Lender under the Loan Sale Agreement, provided the
total aggregate principal amount outstanding at any one time of all
such Warehouse Advances shall not exceed the
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Warehouse Commitment Amount. Notwithstanding the foregoing, the amount
of the Warehouse Commitment and individual Warehouse Advances
thereunder is subject to SECTION 2.2(d) and SECTION 4.6 hereof. Within
the Warehouse Commitment, Borrower may borrow, repay and reborrow.
(d) Conditions Precedent. The obligation of Lender to make any
Warehouse Advances is subject to the satisfaction, in the sole
discretion of Lender, on or before the date of funding of each
Warehouse Advance, of the following conditions precedent:
(i) Effective Date. All of the conditions
precedent set forth in SECTIONS 4.1 and 4.6 shall have been satisfied.
(ii) No Defaults. No Unmatured Event of
Default or Event of Default shall have occurred and be continuing.
(iii) Accuracy of Representations and
Warranties. All representations and warranties made herein or in any other Loan
Document shall be true and correct as of the date of each such Warehouse Advance
as if made on and as of such date.
(iv) Advance Request. Borrower shall have
executed and delivered to Lender a properly completed and duly executed request
for Warehouse Advance in such form as Lender may require from time to time (an
"Advance Request"). Each Advance Request shall constitute a representation and
warranty by Borrower that (A) each of the conditions precedent to the requested
Warehouse Advance set forth in this SECTION 2.2(d) have been satisfied, (B) all
the Eligible Mortgage Loans included in such Advance Request have closed and
been funded or will be closed and funded simultaneously with the making of the
requested Warehouse Advance and (C) Borrower is in possession of the originals
of all items listed in EXHIBIT C hereto.
(v) Collateral Documents. Borrower shall
have delivered to Lender the documents required in EXHIBIT C hereto under the
heading "Required Deliveries" and, to the extent requested by Lender, those
documents listed in EXHIBIT C under the heading "Other Deliveries"
(collectively, the "Collateral Documents"). Lender shall have the right, on not
less than three (3) Business Days' prior notice to Borrower, as reasonably
required to include different or additional items than those which are listed on
EXHIBIT C hereto to conform to current legal requirements or Lender's practices
and/or to require that items listed under "Other Deliveries" on EXHIBIT C be
made "Required Deliveries".
(e) Timing of Warehouse Advance. So long as all
conditions precedent to a Warehouse Advance have been satisfied prior to (i)
10:00 a.m. Phoenix, Arizona time, on any Business Day, if Lender will be wiring
the Warehouse Advances, or (ii) 1:00 p.m. Phoenix, Arizona time, on any Business
Day that Warehouse Advances are made by any method other than wiring, Lender
shall use reasonable efforts to make the Warehouse Advance prior to 5:00 p.m.,
Phoenix, Arizona time, on the same Business Day, and in any event not later than
5:00 p.m.
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Phoenix, Arizona time on the second Business Day thereafter. If the conditions
precedent to an Warehouse Advance are satisfied after 10:00 a.m. or 1:00 p.m.,
as applicable, Phoenix, Arizona time, on any Business Day, Lender will use
reasonable efforts to make the Warehouse Advance by 5:00 p.m. Phoenix, Arizona
time on the next Business Day, and in any event not later than 5:00 p.m.
Phoenix, Arizona time on the second (2nd) Business Day thereafter.
(f) Single Indebtedness. All Warehouse Advances under
this Agreement shall constitute a single indebtedness and all of the Collateral
Documents shall be security for the Warehouse Note and for the performance of
all obligations of Borrower to Lender.
2.3 Interest Rate Provisions.
(a) Pricing. All Advances will bear interest from the date
advanced at a per annum interest rate determined in accordance with the
terms of the Note.
(b) Default Interest Rate. Principal will bear interest at the
Interest Rate from the date of disbursement until the due date thereof,
whether due by acceleration or otherwise. Principal, interest, and
Other Amounts not paid when due and any judgment therefor will bear
interest from the due date or the judgment date, as applicable, until
paid at the Default Interest Rate, and such interest will be
immediately due and payable. In addition, from and after the occurrence
and during the continuance of an Event of Default, all principal,
interest and Other Amounts shall bear interest at the Default Interest
Rate.
(c) Effective Rate. Borrower agrees to pay an effective rate
of interest that is the sum of (i) the interest rate provided in this
Agreement and (ii) any additional rate of interest resulting from any
other charges or fees paid or to be paid in connection herewith that
are determined to be interest or in the nature of interest.
2.4 Payments.
(a) Required Payments. Accrued and unpaid interest shall be
due and payable in accordance with the terms of the Note.
(b) Making Payments.
(i) With respect to the Borrowing Base Loan, Borrower
will make each payment hereunder and under the Borrowing Base
Note, whether on account of principal, interest, fees or
otherwise, without set-off or counterclaim, not later than
1:00 p.m. (Phoenix, Arizona time) on the day when due, and in
each case such payments will be in U.S. dollars to the Lender
and will be at Lender's main office in Phoenix, Arizona or at
such other place as Lender may request from time to time.
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Payments received after the required time on a Business Day
will be deemed to have been received on the next succeeding
Business Day and will bear interest accordingly.
(ii) With respect to the Warehouse Loan, Servicing
Agent will make each payment hereunder and under the Warehouse
Note, whether on account of principal, interest, fees or
otherwise, without set-off or counterclaim, not later than
1:00 p.m. (Phoenix, Arizona time) on the day when due, and in
each case such payments will be in U.S. dollars to the Lender
and will be at Lender's main office in Phoenix., Arizona or at
such other place as Lender may request from time to time. If
payments for a month collected by the Servicing Agent are
insufficient to pay the payment due under the Warehouse Note,
Borrower shall remit the difference between the amount
remitted by the Servicing Agent and the amount due under the
Warehouse Note within ten (10) days after the due date.
Payments received after the required time on a Business Day
will be deemed to have been received on the next succeeding
Business Day and will bear interest accordingly.
(c) Payment of Net Sales Proceeds. Within 1 Business Day
following the closing of a sale of a Unit or an Eligible Lot, or within
1 Business Day following the closing of any other transaction in which
Borrower is required to pay a release price to the Lender pursuant to
SECTION 2.8, Borrower will pay or cause to be paid to the Lender, the
amount required pursuant to SECTION 2.8. If any Net Sales Proceeds or
other amounts payable to the Lender pursuant to SECTION 2.8 are held by
any Title Company, escrow agent, or any other Person, Borrower will
direct such Title Company, escrow agent and other Persons to pay all
such amounts directly to the Lender and to take all other action
required by the Lender to cause such amounts to be paid to the Lender.
If Borrower collects or receives any such amounts, Borrower will
forthwith, upon receipt, transmit and deliver to the Lender, in the
form received, all cash, checks, drafts, chattel paper, and other
instruments or writings for the payment of money (endorsed without
recourse, where required, so that such items may be collected by the
Lender). Any such items which may be so received by Borrower will not
be commingled with any other of Borrower's funds or property, but will
be held separate and apart from Borrower's own funds or property and
upon express trust for the Lender until delivery is made to the Lender.
(d) Business Days. Whenever any payment hereunder or under the
Note is due on a day other than a Business Day, such payment will be
made on the next succeeding Business Day, and such extension of time
will in such case be included in the computation of interest or fees,
as the case may be.
(e) Late Charges. If any payment of interest, principal, or
Other Amount required pursuant to any provision of this Agreement is
not received by the Lender within 10 days after its due date, then, in
addition to the other rights and remedies of Lender, a late charge of
5% of the amount due and unpaid, will be charged to Borrower without
notice to
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Borrower. Such late charge will be immediately due and payable and is
in addition to any other costs, fees, and expenses that Borrower may
owe as a result of such late payment.
(f) Payment at Maturity. On the Maturity Date, Borrower will
pay to the Lender the unpaid principal, all accrued and unpaid
interest, and all Other Amounts that are due and unpaid.
2.5 Prepayments.
(a) Prepayments. Borrower may prepay the outstanding principal
balance hereof in whole or in part at any time prior to the Maturity
Date without penalty or premium.
2.6 Fees. As additional consideration for the Borrowing Base Commitment
and the Warehouse Commitment, Borrower agrees to pay the following fees to the
Lender, which fees are earned by the Lender on the date due under the Loan
Documents, are non-refundable to Borrower, and, in the case of payments with
respect to the fees described in SUBSECTION (b), shall be calculated on a pro
rata basis for the period to which such payment relates, for actual days elapsed
(or to elapse) during such period on the basis of a 360-day year and shall be
paid by Borrower to the Lender within 5 days after the Lender gives notice to
Borrower of the amount of fees due (which notice may be given telephonically to
the chief financial officer or treasurer of Borrower, by facsimile or in
writing):
(a) Borrowing Base Commitment Fee. A "commitment fee", payable
on the Closing Date, in the amount of one-quarter of one percent (.25%)
per annum of the Borrowing Base Commitment Amount.
(b) Unused Borrowing Base Commitment Fee. An "unused
commitment fee" based on an annual rate of one-quarter of one percent
(.25%), but calculated on a quarterly basis in arrears as of the first
day of each January, April, July, and October and on the Maturity Date
or the date upon which the Borrowing Base Commitment is terminated or
expires, such unused commitment fee to be payable quarterly. For each
quarter (or portion thereof), the unused commitment fee is equal to (i)
the Borrowing Base Commitment Amount as in effect at the beginning of
such quarter; MINUS (ii) the Average Quarterly Outstanding for such
quarter (or portion thereof) with respect to which the unused
commitment fee is being computed; with (iii) the resulting number being
MULTIPLIED BY 0.000625 (that is, one-quarter of the annual unused
commitment fee rate). As used herein, "AVERAGE QUARTERLY OUTSTANDING"
means the sum of the Outstanding Borrowings on each day during the
quarter (or portion thereof) with respect to which the unused
commitment fee is being computed, divided by the number of days in that
quarter (or portion thereof). If the unused commitment fee is being
computed for less than a full quarter, the percentage used in CLAUSE
(c) above will be computed on a daily basis for the number of days for
which the fee is being computed.
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(c) Warehouse Commitment Fee. A "commitment fee", payable on
the Closing Date, in the amount of one-quarter of one percent (.25%)
per annum of the Warehouse Commitment Amount.
(d) Costs and Expenses.
(i) Costs and Expenses--Generally. Borrower agrees to
pay on demand all reasonable costs, expenses, and fees of the
Lender (including, without limitation, reasonable fees and
expenses for outside attorneys, consultants and other
professional advisers, paralegals, document clerks and
specialists, and costs and expenses of appraisals, appraisal
review, title review, title insurance, surveys, environmental
assessments, environmental testing, environmental cleanup,
other inspection, processing, title, filing, and recording
costs, expenses, and fees):
(A) In the negotiation, execution, delivery,
administration and modification of the Loan
Documents, including this Agreement;
(B) In inspecting the Eligible Collateral;
and
(C) Otherwise in relation to the Loan
Documents.
(ii) Costs and Expenses--After Default. In addition,
after the occurrence and during the continuation of an Event
of Default, Borrower agrees to pay on demand all reasonable
costs, expenses, and fees of the Lender (including, without
limitation, fees and expenses for attorneys, consultants and
other professional advisors, paralegals, documents clerks and
specialists, the allocated costs of in-house legal counsel and
other staff, and costs and expenses of market studies,
absorption studies, appraisals, appraisal review, title
review, title insurance, surveys, environmental assessments,
environmental testing, environmental clean-up, and other
inspection, processing, title, filing and recording costs,
expenses, and fees):
(A) In enforcement of the Loan Documents and
exercise of the rights and remedies of the Lender;
(B) In defense of the legality, validity,
binding nature, and enforceability of the Loan
Documents and the perfection and priority of the
Liens and Encumbrances granted in the Loan Documents;
(C) In gaining possession of, holding,
repairing, maintaining, preserving, and protecting
any Collateral prior to foreclosure;
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(D) In selling or otherwise disposing of the
Collateral prior to foreclosure;
(E) Otherwise in relation to the Loan
Documents, the Collateral, or the rights and remedies
of the Lender under the Loan Documents or relating to
the Collateral after the occurrence and during the
continuation of an Event of Default; and
(F) In preparing for the foregoing, whether
or not any legal proceeding is brought or other
action is taken.
Such costs, expenses, and fees will include, without
limitation, all such costs, expenses, and fees incurred in
connection with any court proceedings (whether at the trial or
appellate level).
(e) Failure to Pay. If any reasonable costs, expenses and fees
from time to time due under the Loan Documents are not paid when due
(or if no time is specified, then within 10 days after written demand
by the Lender), Borrower agrees to pay interest on such costs,
expenses, and fees at the Default Interest Rate from the date incurred
until paid in full. In addition, if such costs, expenses and fees are
not paid when due (or within such 10-day period, if applicable), the
Lender shall, to the extent that such Advance will not cause the
Available Borrowing Base Commitment or the Available Warehouse
Commitment to be exceeded, as applicable, cause an Advance to be made
to pay such costs, expenses and fees, whether or not such Advance has
been requested by Borrower and whether or not the conditions precedent
to an Advance have been satisfied. If an Advance is made pursuant to
the immediately preceding sentence, such costs, expenses and fees shall
be included in such Advance and shall accrue interest at the rates from
time to time applicable pursuant to this Agreement.
2.7 Security. Payment of the Note, all indebtedness and liabilities of
Borrower to the Lender, and performance of all Obligations, due or to become
due, under this Agreement and the other Loan Documents shall be secured by the
following:
(a) The Deeds of Trust;
(b) such other assignments and security interests as may be
required or granted pursuant to the terms of the Loan Documents
including but not limited to a security interest in the following:
(i) the Mortgages, the Mortgage Notes and the
Servicing Agreement;
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(ii) All cash, payments and prepayments of principal,
interest, penalties and other income due or to become due in respect of
the Mortgages and the Mortgage Notes;
(iii) All of the right, title and interest of every
nature whatsoever of Borrower in and to the following:
(1) All rights, liens and security interests
existing with respect to, or as security for, the Mortgages or
any part thereof;
(2) All hazard and liability insurance
policies, title insurance policies, (or any binders or
commitments to issue any of such policies) and all
condemnation proceeds with respect to or relating to any of
the Mortgages;
(3) All other rights and interests of
Borrower in respect of the Mortgages.
(iv) All files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs, cards,
accounting records, and other records, information, and data of
Borrower relating to the Mortgages, including all information, records,
data, programs, tapes, discs and cards necessary to administer and
service such Collateral (provided that Borrower may retain or
subsequently make copies of the foregoing for its use);
(v) All personal property, contract rights, accounts
and general intangibles of whatsoever kind relating to the Mortgages
and all other documents or instruments delivered to Lender in respect
of the Mortgages, including, without limitation, the right to receive
all insurance proceeds and condemnation awards which may be payable in
respect of the premises encumbered by any Mortgage; and
(vi) All proceeds of any of the foregoing.
.
Lender shall have no duty to Borrower or any other Person as
to the collection or protection of Collateral held hereunder or any income
thereon, nor as to the preservation of any rights pertaining thereto, beyond the
reasonable care thereof. Such care as Lender gives to the safekeeping of its own
property of like kind shall constitute reasonable care of Collateral when in
Lender's possession; but Lender is not required to make presentment, demand or
protest, or give notice, and need not take action to preserve any rights against
prior parties, obligors, account debtors, or others, in connection with any
obligation or evidence of indebtedness held as Collateral or in connection with
Borrower's obligations. Notwithstanding any provision hereof to the contrary,
the transmittal and delivery of any Mortgage Notes, Mortgages, Collateral
Documents and other documents or instruments shall be at the sole risk and
expense of Borrower, and Lender shall not be liable or obligated in any respect
in the event of the loss, damage or destruction of any Collateral Documents,
Mortgage Notes, Mortgages, and other documents or instruments, or any
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delay in the transmission or delivery thereof, except for Lender's gross
negligence or intentional misconduct with respect thereto.
2.8 Releases of Collateral.
(a) Releases of Units and Eligible Lots. Borrower may request
releases of Eligible Lots and Units from the lien and encumbrance of a
Deed of Trust from time to time; PROVIDED, HOWEVER, the Lender has no
obligation to release any Eligible Lot or Unit unless each of the
following conditions precedent is satisfied:
(i) Generally.
(A) Notification to the Lender. Borrower or
the closing agent handling the sale will have
notified the Lender in writing of the requested
release;
(B) Remargining Payments Required. Borrower
will have made all payments required to be made
pursuant to SECTION 2.9 after giving effect to such
Release;
(C) No Default. No Event of Default and no
Unmatured Event of Default shall have occurred and be
continuing;
(D) Endorsements. Borrower shall provide the
Lender with such endorsements to the Title Policy as
the Lender may reasonably request in connection with
each release;
(E) Processing/Release Fees. If required by
Lender, Borrower shall pay the standard
processing/release fees of the Lender and the trustee
under the Deed of Trust, in connection with such
release; and
(F) Escrow Arrangements. Each release shall
be made by the Lender by delivery of the release
documents to a title company or other escrow agent
satisfactory to the Lender on such conditions as
shall assure the Lender that all conditions precedent
to such release have been satisfied and that the
applicable transaction will be completed.
(ii) Releases of Units.
(A) Releases in the Ordinary Course of
Business. With respect to any release of Units, the
requested release is for the purpose of sale in the
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ordinary course of Borrower's business to a non-
related third party purchaser; and
(B) Payment of Release Price. In connection
with the sale of the Unit, Borrower will have paid to
the Lender a release price equal to the Net Sales
Proceeds.
(iii) Releases of Eligible Lots.
(A) Releases for Custom Lot Sale. With
respect to any release of Eligible Lots, the
requested release is for the sale to a party who is
not an Affiliate of Borrower; and
(B) Payment of Release Price. In connection
with the sale of the Eligible Lot, Borrower will have
paid to the Lender a release price equal to the Net
Sales Proceeds.
(b) Releases for Dedications and Similar Purposes. Upon
written request of Borrower and so long as no Event of Default or
Unmatured Event of Default has occurred and is continuing and provided
the Lender shall have approved the request, in the Lender's reasonable
discretion, Borrower may release from the lien and encumbrance of a
Deed of Trust such portions of the Collateral as Borrower (i) is
required to convey to a Governmental Authority or a bona fide public
utility in connection with the development of an Approved Subdivision
(such as roads, drainage easements, and utility easements) and for
which Borrower receives no monetary compensation; or (ii) proposes to
convey to a homeowners' association or similar Person in connection
with the development of an Approved Subdivision (such as common areas)
and for which Borrower receives no monetary compensation. Releases that
satisfy the requirements of this Section do not require the payment of
any release price.
(c) Adjustment to Borrowing Base. Any Collateral released
shall no longer be Eligible Collateral and the Collateral Value of
Eligible Collateral shall be immediately and automatically adjusted to
reflect such release. An item of Collateral not included as Eligible
Collateral shall be released by Lender subject to any remargining
payments required of Borrower as set forth in SECTION 2.9.
(d) Return of Collateral at End of Warehouse Commitment. If
(i) the Warehouse Commitment shall have expired or been terminated and
(ii) no Warehouse Advances, interest or other amounts evidenced by the
Note or due under this Agreement shall be outstanding and unpaid,
Lender shall deliver or release all Collateral Documents in its
possession. The receipt by Borrower of any Collateral released or
delivered to Borrower pursuant to any provision of this Agreement shall
he a complete and full acquittance for the Collateral so returned, and
Lender shall thereafter be discharged from any liability or
responsibility therefor.
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2.9 Remargining; Principal Payments; Borrowing Base. Anything in the
Loan Documents to the contrary notwithstanding, the total of Outstanding
Borrowings under the Borrowing Base Loan may not at any time exceed the
Available Borrowing Base Commitment, and Borrower shall not be entitled to any
Borrowing Base Advances if the effect thereof would be to cause the Outstanding
Borrowings to exceed the Available Borrowing Base Commitment. If for any reason
at any time the total of Outstanding Borrowings under the Borrowing Base Loan
exceeds the Available Borrowing Base Commitment (including, without limitation,
by reason of Borrowing Base Commitment Amount reductions, changes in Unit
Appraised Values or Eligible Lot Appraised Values, adjustments to the Borrowing
Base or Collateral Value, or otherwise), Borrower will make a principal payment
to the Lender in an amount equal to such excess amount. Each payment pursuant to
this SECTION 2.9 will be due no later than 11:00 a.m. (Phoenix, Arizona time) on
the 5th Business Day after the day upon which the Lender notifies Borrower in
writing that such payment is required.
2.10 Repayment of Warehouse Loan. Borrower shall be obligated to pay to
Lender, without the necessity of prior demand or notice from Lender, the amount
of any outstanding Warehouse Advance against a specific Eligible Mortgage Loan
as shown on Lender's records, upon the occurrence of any of the following
events:
(a) The Collateral Documents, upon examination by Lender, are
found not to be in compliance with the requirements of this Agreement;
(b) If any of the items required to be delivered pursuant to
EXHIBIT C after a Warehouse Advance are not delivered as and when
required or if delivered are not in compliance with this Agreement;
(c) Five (5) Business Days have elapsed from the date a
Collateral Document was delivered to Borrower for correction or
completion, without being returned to Lender;
(d) Such Eligible Mortgage Loan is defaulted and remains in
default for a period of sixty (60) days;
(e) If any of the representations and warranties set forth in
SECTION 5.1(t) with respect to an Eligible Mortgage Loan are untrue or
incorrect in any material respect; or
(f) Upon the sale of such Eligible Mortgage Loan.
2.11 Remargining; Principal Payments; Warehouse. Anything in the Loan
Documents to the contrary notwithstanding, Borrower shall, upon demand by
Lender, pay to Lender an amount equal to the amount by which total outstanding
Warehouse Advances exceed the lesser (i) the Warehouse Commitment Amount or (ii)
the aggregate outstanding principal balance of all Eligible Mortgage Loans. Each
payment pursuant to this SECTION 2.11 will be due no later than 11:00 a.m.
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(Phoenix, Arizona time) on the 5th Business Day after the day upon which the
Lender notifies Borrower in writing that such payment is required.
ARTICLE 3
BORROWING BASE
3.1 Determination of Eligible Collateral/Borrowing Base. Eligible
Collateral in the Borrowing Base will be determined by the Lender from time to
time as set forth in this ARTICLE 3.
3.2 Additional Limitations on Eligible Collateral.
(a) Limitation on Spec Units. Borrower may not include in
Eligible Collateral more than thirty (30) Spec Units financed under the
Borrowing Base Commitment.
(b) Classification and Reclassification of Units; Adjustment
of Borrowing Base. The Lender may classify or reclassify Units as to
type from time to time, or change Borrower's proposed classification of
any and all Units, PROVIDED that such reclassified Unit meets the
requirements set forth herein for that type of Unit.
(c) Events Affecting Units and Eligible Lots; Exclusions from
Eligible Collateral. If any Unit or Eligible Lot included in Eligible
Collateral is materially damaged, destroyed, or becomes subject to any
condemnation proceeding, such item may be declared by the Lender to no
longer be Eligible Collateral. In addition, if any such item does not
continue to meet all the requirements applicable to Eligible
Collateral, such item will no longer constitute Eligible Collateral.
Any determination by the Lender, in the reasonable judgment of the
Lender, as to whether Units or any Eligible Lot constitutes Eligible
Collateral will be final, conclusive, binding and effective
immediately.
3.3 Limitations on Collateral Values. Once the Maximum Allowed
Borrowing Base Advance is initially established for a particular Eligible Lot,
that Maximum Allowed Borrowing Base Advance is subject to either increase or
decrease based on subsequent events, such as updated Appraisals or change
orders. If any of the limitations on Eligible Collateral, Collateral Value,
Outstanding Borrowings, or outstanding Borrowing Base Advances set forth in this
SECTION 3.3 or elsewhere in this Agreement are exceeded, the Lender may at its
option either delete Units and Eligible Lots from Eligible Collateral until such
requirements are met or require Borrower to make a remargining payment pursuant
to SECTION 2.9.
3.4 Collateral Inventory Report, Collateral Certificate, and Borrowing
Base Reconciliation Report.
(a) Collateral Inventory Report. On or before the day that is
the 15th day of each Calendar Month, Borrower will prepare and submit
to the Lender a Collateral Inventory Report for all of the Collateral,
including for each Unit and Lot in Eligible Collateral, among
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other things that Lender may require from time to time, the following:
(i) the total number, and a description of, the Presold Units, Spec
Units and Eligible Lots that constitute Eligible Collateral; (ii) the
name of the Approved Subdivision; (iii) the Lot number as indicated on
the recorded plat of the Approved Subdivision; (iv) whether the Unit is
a Presold Unit, a Spec Unit or ineligible collateral; (v) the Unit
Budget for each plan; (vi) the Eligible Lot Budget, (vii) percentage of
completion up to the date of the report; (viii) the Unit Appraised
Value; (ix) the Eligible Lot Appraised Value, (xi) the listing price of
the Unit or the amount of the Purchase Contract, as applicable; (xii)
the date of the first Borrowing Base Advance against the Unit or
Eligible Lot, as applicable, in Eligible Collateral and the applicable
Unit Eligibility Date or Eligible Lot Eligibility Date for each Unit or
Eligible Lot; (xiii) the Unit Collateral Value and the Maximum Allowed
Borrowing Base Advance for the Unit; (xiv) the Eligible Lot Collateral
Value and the Maximum Allowed Borrowing Base Advance for the Eligible
Lot, (xv) the amount of Loan proceeds that are available for Borrowing
Base Advances against each item of Eligible Collateral based on the
terms of this Agreement; and (xvi) a list of all Collateral that is not
Eligible Collateral that may be in the Collateral pool. Borrower shall
not prepare and submit more than one (1) Collateral Inventory Reports
per Calendar Month.
(b) Collateral Certificate. Each Collateral Inventory Report
will be accompanied by a Collateral Certificate signed by an executive
officer of Borrower. As the Lender may from time to time request, each
Collateral Inventory Report shall also be accompanied by such
certificates and other evidence as the Lender may require to assist the
Lender in verifying the information therein. Units and Eligible Lots
may be added as Eligible Collateral only upon receipt of the Collateral
Inventory Report and Collateral Certificate and upon satisfaction of
all other provisions of this Agreement. Each Collateral Certificate
shall be in form and substance satisfactory to the Lender, shall
contain such certifications as the Lender may require, and shall set
forth the following:
(i) The Eligible Lot Collateral Value for each
Eligible Lot that constitutes Eligible Collateral;
(ii) The total Collateral Value for the Borrowing
Base;
(iii) The calculated amount of Collateral Value and
usage for all types of Eligible Collateral and a calculation
of all applicable limitations; and
(iv) A statement that Borrower is in compliance with
the terms and conditions of the Loan Documents.
(c) Form of Report and Certificate. The Collateral Inventory
Report and the Collateral Certificate will be in written form and on
computer disk formatted to the Lender's specifications.
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(d) Borrowing Base Reconciliation Report. The Lender will
prepare the Borrowing Base Reconciliation Report and determine the
Borrowing Base, Eligible Collateral, and the Collateral Value of the
Borrowing Base (and all other amounts and items relating thereto) based
upon (i) the Collateral Inventory Report and Collateral Certificate
most recently submitted by Borrower; (ii) the Lender's inspections made
pursuant to SECTION 6.12 (as such inspections may result in any
adjustments to reflect any variance between the Borrowing Base
Reconciliation Report and/or the Collateral Inventory Report and the
results of such inspections by the Lender); and (iii) such other
information as the Lender may reasonably require in order to verify the
Borrowing Base, Eligible Collateral, the Collateral Value of the
Borrowing Base, and all other amounts and items relating thereto. The
Borrowing Base Reconciliation Report will also take into account the
sale of Units and all other adjustments and limitations permitted or
required by this Agreement. Each determination by the Lender, in its
reasonable judgment, of the Borrowing Base, Eligible Collateral and the
Collateral Value of the Borrowing Base, and each determination by the
Lender, in its reasonable judgment, as to the amount of any Borrowing
Base Advance to which Borrower is entitled, based on the information in
the Borrowing Base Reconciliation Report (and all other amounts and
items entering into such determinations), will be final, conclusive and
binding upon Borrower. The Lender will provide a copy of each Borrowing
Base Reconciliation Report to Borrower within 5 Business Days of
receipt of the Collateral Inventory Report and accompanying Collateral
Certificate.
3.5 General. Anything in this ARTICLE 3 or the Loan Documents to the
contrary notwithstanding, Borrower agrees that no limitation on any Advances
specified herein will limit or otherwise change Borrower's obligations and
liabilities under this Agreement, that Borrower will remain obligated to pay all
costs, expenses, and fees required to be paid by Borrower pursuant to this
Agreement and the other Loan Documents, and that Borrower will remain obligated
to pay all costs, expenses, and fees now or hereafter arising in connection with
acquisition, development, maintenance, occupancy, operation, and use of the
Collateral.
3.6 Appraisals.
(a) Appraisal Requirements. The form and substance of each
Appraisal must be reasonably satisfactory to the Lender.
(b) Appraiser Engagement. Each Appraisal must be prepared by
an appraiser selected and engaged by the Lender. Borrower will notify
the Lender in writing that Borrower desires to obtain approval of a
Subdivision or include a Unit or an Eligible Lot in Eligible Collateral
for which no Appraisal then exists and will provide to the Lender all
information necessary to allow an Appraisal to be ordered by the
Lender. The Lender will engage an appraiser to perform an Appraisal
only when it receives all information deemed necessary by the Lender
and the appraiser for preparation of such Appraisal. Lender will have
no liability to Borrower or any other Person with respect to delays in
the Appraisal
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process. The Lender may employ a staff appraiser or a fee appraiser and
Borrower will reimburse the Lender at the Lender's reasonable cost
therefor.
(c) Appraisal Evaluation. Upon receipt of an Appraisal, the
Lender will review the Appraisal and establish a Unit Appraised Value
or a Eligible Lot Appraised Value, as applicable. The Lender will
notify Borrower of such Unit Appraised Value or Eligible Lot Appraised
Value and deliver to Borrower a copy of each Appraisal upon receipt.
(d) Additional Appraisals. Notwithstanding anything in this
SECTION 3.6 to the contrary, the Lender may order updated Appraisals at
the sole cost and expense of Borrower (i) if such Appraisals are
required by any laws, rules, regulations, or generally applicable
lending procedures; (ii) if the Lender determines in its reasonable
discretion that there has occurred or is occurring a general
deterioration in market conditions affecting any Approved Subdivision;
(iii) upon the failure of Borrower to meet any absorption assumptions
in an existing Appraisal; or (iv) with respect to Eligible Collateral,
annually after receipt of the original Appraisal, in the sole and
absolute discretion of the Lender. Any required adjustments to the Unit
Collateral Value or the Eligible Lot Collateral Value as a result of
such updated Appraisals will be made effective upon 30 days written
notice from the Lender to Borrower setting forth the adjusted Unit
Appraised Values or Eligible Lot Appraised Values based on the Lender's
review of such reappraisals or valuations.
(e) Expenses. Borrower will reimburse the Lender for all
reasonable costs and expenses incurred in the appraisal process and in
establishing and monitoring appraised values. All reimbursement of
Borrower to the Lender required by this SECTION 3.6 will be paid to the
Lender within 15 days after notice from the Lender to Borrower.
ARTICLE 4
CONDITIONS PRECEDENT
4.1 Conditions Precedent to Effectiveness of this Agreement. This
Agreement will become effective only upon satisfaction of the following
conditions precedent, in each case as determined by the Lender in its sole and
absolute discretion. If the conditions precedent are not satisfied (or waived by
the Lender) on or before such deadline, the Lender may cancel this Agreement
upon written notice to Borrower. The conditions precedent to be satisfied are as
follows:
(a) Representations and Warranties Accurate. The
representations and warranties by Borrower in the Loan Documents are
correct on and as of the date of this Agreement and as of the Effective
Date, as though made on and as of each such date.
(b) No Defaults. As of the date of this Agreement and as of
the Effective Date, no Event of Default or Unmatured Event of Default
will have occurred and be continuing, and Borrower will be in
compliance with the Financial Covenants set forth in this Agreement.
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(c) Borrower's Financial Condition. The Lender will be
satisfied, in its sole and absolute discretion, with its review and
analysis of the financial condition of Borrower as of the Effective
Date.
(d) Documents. The Lender will have received the following
agreements, documents, and instruments, each duly executed by the
parties thereto and in form and substance satisfactory to the Lender
and its legal counsel, in their absolute and sole discretion:
(i) Loan Documents. This Agreement and such
amendments, ratifications, and confirmations of the other Loan
Documents as the Lender may require in its sole discretion.
(ii) Partnership Documents. A partnership certificate
authorizing the general partner of Borrower to execute,
deliver, and perform its obligations under this Agreement and
the other documents to be executed and delivered by Borrower
in connection herewith and ratifying and confirming the Liens
and Encumbrances of the Lender on the Collateral.
(iii) Contracts. Copies of all construction contracts
entered into by Borrower executed in connection with the
construction of the Approved Subdivisions and the Lots and
Units therein.
(e) Other Items or Actions by Borrower. The Lender will have
received such other agreements, documents, certificates (including
bring-down certificates), and instruments, and Borrower will have
performed such other actions, as the Lender may reasonably require.
(f) Payment of Costs, Expenses and Fees. All costs, expenses
and fees to be paid by Borrower under the Loan Documents on or before
the Effective Date will have been paid in full, including, without
limitation, the applicable fees set forth or referenced in SECTION 2.6.
4.2 Approval of Subdivisions. Approved Subdivisions as of the date
hereof are listed on EXHIBIT D attached hereto and incorporated herein by
reference. Borrower may, from time to time, request Lender to approve
Subdivisions pursuant to this SECTION 4.2. Approval of new Subdivisions shall be
at the sole and absolute discretion of the Lender, and the Lender shall have no
obligation to approve such Subdivisions. In any event, the Lender will only
consider approval of Subdivisions located in "Desert Mountain". When requesting
consideration of a new Subdivision, Borrower, at Borrower's sole cost and
expense, shall deliver to the Lender each of the following items, unless
otherwise directed by Lender, and shall satisfy the following conditions
precedent, unless otherwise waived by Lender (each of which items must be
satisfactory to the Lender in its reasonable discretion
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and each of which conditions precedent must be satisfied, as determined by the
Lender in its reasonable discretion, at all times that such Subdivision is
considered an Approved Subdivision.
(a) Request. Borrower shall have submitted to the Lender a
request in form satisfactory to the Lender for approval of such
Subdivision.
(b) Representations and Warranties Accurate. The
representations and warranties by Borrower in the Loan Documents are
correct in all material respects.
(c) No Defaults. No Event of Default or Unmatured Event of
Default shall have occurred and be continuing.
(d) Ownership. Borrower shall be the owner of the Subdivision,
subject only to Permitted Exceptions.
(e) Proposed Development. To the extent not included in the
other items to be provided pursuant to this SECTION 4.2, Borrower shall
have submitted to the Lender budgets, feasibility studies (if
available), environmental and engineering reports and studies, proforma
financial statements, income projections, development schedules and
other information as the Lender may require to establish that the
development of Lots and/or the construction and sale of Units on Lots
in the Subdivision and the estimated costs, expenses and profits
acceptable to the Lender in its sole and absolute discretion.
(f) Plat. Borrower shall have delivered to the Lender a
preliminary parcel map, preliminary plat or survey of the Subdivision.
(g) Zoning Approvals. Borrower shall have provided to the
Lender evidence that the Subdivision is subject to vested zoning
consistent with its proposed uses.
(h) Preliminary Title Commitment. Borrower shall have provided
to the Lender a preliminary title commitment for the Subdivision,
prepared by the Title Company, together with a legible copy of each
Schedule B item.
(i) Environmental Assessment. Borrower shall have delivered to
the Lender a report of an environmental assessment which includes the
Subdivision addressed to the Lender by an environmental engineer
acceptable to the Lender containing such information, results, and
certifications as are required by the Lender. Depending upon the
results of the environmental assessment, Borrower will also provide
such follow up testing, reports, and other actions as may be required
by the Lender. The contents of the environmental assessment report and
any follow up must be satisfactory to the Lender, in its sole and
absolute discretion.
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(j) Soils Tests. Borrower shall have provided the Lender a
soils compaction test report for the Subdivision prepared by a licensed
soils engineer reasonably satisfactory to the Lender showing the
locations of, and containing boring logs for, all borings in the same
form as those previously delivered to the Lender in connection with
existing Approved Subdivisions.
(k) Marketing Information. Borrower shall have provided the
Lender marketing information with respect to the Lots and Units to be
developed in the Subdivision, including, to the extent available, floor
plans, square footage, anticipated absorption, estimated Unit mix, Unit
cost breakdowns, subdivision pro formas and anticipated gross margins.
(l) Budgets. Borrower shall have provided the Lender a budget
and pro forma cash flow for the Subdivision and providing detail
regarding projected sales revenues, hard and soft costs of
construction, allocated overhead, and projected gross profit margins,
with the budget, projected sales revenues, profit margins, and other
financial and economic aspects of the proposed Project.
(m) Other. Borrower shall have provided the Lender such other
documents and information as the Lender may reasonably request.
4.3 Qualification of Eligible Lots as Eligible Collateral. Eligible
Lots as of the date hereof are listed on the EXHIBIT E attached hereto and
incorporated herein by reference. Borrower may, from time to time, request the
Lender to approve an Eligible Lot as Eligible Collateral. Lender is under no
obligation to accept into Eligible Collateral any Eligible Lot proposed by
Borrower more frequently than twice in each Calendar Month. When requesting
consideration of a new Eligible Lot, Borrower, at Borrower's sole cost and
expense, shall deliver to the Lender each of the following items. Each of the
items required by this Section must be satisfactory to the Lender in its sole
and absolute discretion and each of the conditions precedent required to be
satisfied pursuant to this Section must be satisfied, as determined by the
Lender in its sole and absolute discretion, at all times that such Eligible Lot
is included as Eligible Collateral:
(a) Eligible Lots in General.
(i) All of the conditions precedent in SECTION 4.2
have been and continue to be satisfied.
(ii) Either (A) all Off-Site Improvements in the
Subdivision are fully and finally completed, all dedications
have occurred, all governmental acceptances and approvals have
been obtained and are in full force and effect in order to
permit the immediate construction and sale of Units within the
Subdivision; or (B) to the extent that such Off-Site
Improvements have not been completed within the Subdivision
and will have received such assurances as the Lender
reasonably requests with
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respect to the completion of such offsite improvements (which
may include without limitation, payment and performance bonds
covering such completion).
(b) Limitations. After giving effect to the addition of such
Lots to Eligible Collateral as an Eligible Lot, the limitations and
restrictions on Eligible Collateral in ARTICLE 3 are not violated.
4.4 Qualification of Units as Eligible Collateral. Borrower may, from
time to time, request the Lender to approve a Unit as Eligible Collateral.
Lender is under no obligation to accept into Eligible Collateral any Units
proposed by Borrower more frequently than twice in each Calendar Month. When
requesting consideration of a new Unit, Borrower, at Borrower's sole cost and
expense, shall deliver to the Lender each of the following items. Each of the
items required by this Section must be satisfactory to the Lender in its
reasonable discretion and each of the conditions precedent required to be
satisfied pursuant to this Section must be satisfied, as determined by the
Lender in its reasonable discretion, at all times that such Unit is included in
Eligible Collateral:
(a) Inclusion in an Approved Subdivision. Such Lot is legally
described as a Lot on a final subdivision plat or map or subdivision
filing.
(b) Documents. Except to the extent already provided in the
information submitted to and approved by the Lender pursuant to
SECTIONS 4.2 or 4.3, to the extent applicable (unless there has been a
material change in such information), Lender shall have received the
following agreements, documents, and instruments, each duly executed by
the parties thereto:
(i) Approvals. If requested by the Lender, evidence
of all approvals of Governmental Authorities and other third
parties necessary to permit the construction and sale of the
Unit, including, without limitation, all applicable public
reports, architectural committee approvals, and any other
approvals required under the CC&Rs.
(ii) Contracts for Unit Construction. If requested by
the Lender, copies of all executed contracts between Borrower
and any other Person (including, without limitation, the
architect and each contractor or subcontractor for labor,
materials, or services) relating to design and construction of
Units within the Subdivision.
(iii) Final CC&Rs. Copies of the final CC&Rs for the
Approved Subdivision.
(iv) Purchase Contract. If such Unit is a Presold
Unit and if requested by the Lender, a copy of the fully
executed Purchase Contract for such Unit.
(v) Unit Appraisal. A Unit Appraisal for the Unit in
question.
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(vi) Unit Budget. A Unit Budget for the Unit in
question.
(vii) Unit Plans and Specifications. Unit Plans and
Specifications for the Unit in question.
(viii) Deed of Trust. If the Lot on which the Unit is
to be constructed has not previously been encumbered by a Deed
of Trust, a first lien Deed of Trust, subject only to
Permitted Exceptions, duly executed, acknowledged, delivered
and recorded.
(ix) Impositions, Assessments, and Charges. Borrower
shall have provided the Lender with evidence that all
Impositions and water, sewer, and other charges assessed
against the Unit which are then due and payable have been paid
in the amount required unless the Lender is able to verify
such information from other sources of information reasonably
available to the Lender.
(x) Completion of Filings and Recordings. Evidence of
the completion of all recordings and filings to establish or
maintain the perfection and priority of the Liens and
Encumbrances on such Unit granted in the Loan Documents.
(xi) Title Insurance. If the Unit has not previously
been encumbered by a Deed of Trust, (A) a new Title Policy or
(B) an endorsement to an existing Title Policy issued by a
Title Company and in form satisfactory to the Lender. Such
policy or endorsement will provide coverage (including without
limitation, mechanic's lien coverage) satisfactory to the
Lender and insure the Lender's interest under the applicable
Deed of Trust as a valid first lien on the property encumbered
by the Deed of Trust, subject only to Permitted Exceptions. If
the Unit has previously been encumbered by an insured Deed of
Trust, Borrower will have provided an endorsement to such
Title Policy, in form satisfactory to the Lender, eliminating
any Schedule B items that are not Permitted Exceptions with
respect to Units included in Eligible Collateral.
(c) Distressed Improvement Districts. Any improvement or
assessment district in which the Unit is located is not insolvent under
applicable law or subject to any bankruptcy or similar proceedings if
such situation, in the reasonable opinion of the Lender, would have a
material adverse impact on development of Units or directly or
indirectly cause the Approved Subdivision in which the Unit is to be
built to be subject to any suspension, disqualification, or disapproval
by FHA, FNMA, VA, FHLMC, or any similar governmental or
quasi-governmental agency that originates, purchases, insures or
guarantees home mortgage loans, if the Approved Subdivision has been
qualified with any such agency and Units in the Approved Subdivision
are proposed to be sold with the benefits of such qualification.
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(d) Limitations. After giving effect to the addition of such
Unit to Eligible Collateral, the limitations and restrictions on
Eligible Collateral in ARTICLE 3 are not violated.
(e) Other Items. Borrower shall have provided to the Lender
such other agreements, documents, and instruments as the Lender may
reasonably request.
(f) Other Actions. Borrower shall have performed such other
actions as the Lender may reasonably request.
4.5 Additional Conditions Precedent to All Borrowing Base Borrowing
Base Advances Against Eligible Collateral. Notwithstanding the other provisions
of this ARTICLE 4, the Lender will only be obligated to make Borrowing Base
Advances against Eligible Collateral if Borrower, at Borrower's sole cost and
expense, shall have delivered to the Lender each of the following items. Each of
the items required by this Section must be satisfactory to the Lender in its
reasonable discretion and each of the conditions precedent required to be
satisfied pursuant to this Section must be satisfied, as determined by the
Lender in its reasonable discretion:
(a) Representations and Warranties Accurate. The
representations and warranties by Borrower to Lender shall be correct
in all material respects on and as of the date of such Borrowing Base
Advance, both before and after giving effect to such Borrowing Base
Advance, other than matters disclosed by Borrower to the Lender and
approved by all the Lender in its absolute and sole discretion.
(b) Defaults. No Event of Default or Unmatured Event of
Default shall have occurred and be continuing on the date of such
Borrowing Base Advance, both before and after giving effect thereto.
(c) Subordination Agreement. Borrower shall have delivered the
executed Subordination Agreement in form and substance satisfactory to
Lender.
(d) Other Conditions Precedent. Borrower shall have satisfied
all conditions precedent in SECTIONS 4.1, 4.2, 4.3, and 4.4, as
applicable.
(e) Inspection Report. The Lender shall not have received
written evidence from the Lender's inspectors or from the Lender's
employees performing inspections for the Lender (i) that construction
of any Unit constituting Eligible Collateral does not comply with the
respective Unit Plans and Specifications in all material respects; and
(ii) that Borrower has not completed each such Unit to the stage
reported on the most recent Borrowing Base Reconciliation Report
received by the Lender.
(f) Lien Waivers. If requested by the Lender, Borrower shall
have provided the Lender with invoices and vouchers for the work for
which the Borrowing Base Advance is requested and lien waivers for all
work covered by prior Borrowing Base Advances. Such
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lien waivers may be conditional, so long as the only condition is
receipt of payment for the work and Borrower includes with the
conditional lien waiver a copy of the canceled check for payment or
other evidence of payment.
(g) Approvals and Inspections by Governmental Authorities. If
requested by the Lender, all inspections and approvals by Governmental
Authorities required for the stage of completion of each Unit shall
have been obtained and the Lender shall have received satisfactory
evidence thereof or will have been provided access thereto satisfactory
to the Lender, or shall have obtained such evidence upon inspection of
the Approved Subdivision.
(h) Payment of Costs, Expenses, and Fees. All costs, expenses,
and fees due to be paid by Borrower on or before the date of the
Borrowing Base Advance under the Loan Documents shall have been paid in
full.
(i) Draw Request. Borrower shall have delivered to the Lender
a Draw Request for such Borrowing Base Advance.
(j) Limit on Total Outstanding. After giving effect to the
requested Borrowing Base Advance, the Outstanding Borrowings shall not
exceed the Available Borrowing Base Commitment and no remargining
payment shall be required under SECTION 2.9.
4.6 Additional Conditions Precedent to All Warehouse Advances Against
Eligible Mortgages. Notwithstanding the other provisions of this ARTICLE 4 and
in addition to the Requirements of SECTION 2.2(d), the Lender will only be
obligated to make Warehouse Advances against Eligible Mortgages if Borrower, at
Borrower's sole cost and expense, shall have delivered to the Lender each of the
following items. Each of the items required by this Section must be satisfactory
to the Lender in its sole and absolute discretion and each of the conditions
precedent required to be satisfied pursuant to this Section must be satisfied,
as determined by the Lender in its sole and absolute discretion:
(a) Mortgage Loan Criteria. Each Mortgage Loan must be (i) for
not more than a ten (10) year term, (ii) with not less than a twenty
percent (20%) downpayment and(iii) with principal and interest payments
due not less frequently than quarterly.
(b) Credit Application. For each Eligible Mortgage Loan
applied for after January 1, 1998, Lender must have received a
substantially completed HUD 1003 application form in all material
respects, acceptable to Lender.
(c) Default under Sale Agreement. There shall be no breach or
default of a material nature by Borrower under the terms and conditions
of the Loan Sale Agreement, nor the existence of any event which with
the giving of notice or the passage of time would give rise to a breach
and default thereunder.
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(d) Other Conditions Precedent. Borrower shall have satisfied
all conditions precedent in SECTIONS 4.1, 4.2, 4.3, 4.4 and 4.5, as
applicable.
(e) Lender's Right to Lend. Notwithstanding anything contained
herein to the contrary, Lender, in its sole and absolute discretion,
may decide to accept Mortgage Loans as Collateral which do not satisfy
any of the foregoing conditions precedent set forth in this Article, on
a case by case basis, and make Warehouse Advances against such Mortgage
Loans.
4.7 Verification and Other Matters Relating to Conditions Precedent .
Borrower authorizes the Lender and the Lender reserves the right, in its
absolute and sole discretion, to verify any documents and information submitted
to it in connection with this Agreement. Delay or failure by the Lender to
insist on satisfaction of any condition precedent will not be a waiver of such
condition precedent or any other condition precedent. The making of an Advance
by the Lender will not be deemed a waiver by the Lender of the occurrence of an
Event of Default or an Unmatured Event of Default.
ARTICLE 5
BORROWER REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties. Borrower represents and warrants to
the Lender as of the Effective Date and as of the various other dates specified
in this Agreement on which such representations and warranties are to be
accurate, complete, and correct the following:
(a) Partnership Authorization. Borrower is a Delaware limited
partnership validly existing and in good standing under the laws of
Delaware and qualified to do business in the state of Arizona and each
other state in which Borrower conducts business, and Borrower has the
requisite power and authority to execute, deliver, and perform the Loan
Documents. The execution, delivery, and performance by Borrower of the
Loan Documents have been duly authorized by all requisite action by
Borrower and do not conflict with, or result in a violation of or a
default under the certificate partnership or Partnership Agreement of
Borrower. Borrower's headquarters and principal place of business is
presently located in Scottsdale, Arizona. Borrower has all requisite
power and authority to own its assets and to carry on its business.
(b) No Approvals, etc. No approval, authorization, bond,
consent, certificate, franchise, license, permit, registration,
qualification, or other action or grant by or filing with any
Governmental Authority or other Person is required (which has not been
obtained) in connection with the execution, delivery, or performance
(other than performance which is not yet due) by Borrower of the Loan
Documents.
(c) No Conflicts. The execution, delivery, and performance by
Borrower of the Loan Documents will not conflict with, or result in a
violation of or a default under, (i) any
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applicable law, ordinance, regulation, or rule (federal, state, or
local); (ii) any judgment, order, or decree of any arbitrator, other
private adjudicator, or Governmental Authority to which Borrower is a
party or by which Borrower or any of the assets of Borrower is bound;
(iii) any of the Approvals and Permits; or (iv) any agreement,
document, or instrument to which Borrower is a party or by which
Borrower or any of the assets of Borrower is bound.
(d) Execution and Delivery and Binding Nature of Borrower Loan
Documents. The Loan Documents have been duly executed and delivered by
or on behalf of Borrower. The Loan Documents are legal, valid, and
binding obligations of Borrower, enforceable in accordance with their
terms against Borrower, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization, or similar laws and
by equitable principles of general application.
(e) Accurate Information. To the best of Borrower's knowledge,
all information in any loan application, financial statement (other
than financial projections), certificate, or other document, and all
other information delivered by or on behalf of Borrower to the Lender
in connection with this transaction is correct and complete in all
material respects as of the date thereof, and there are no omissions
from any such information that result in any such information being
materially incomplete, incorrect, or misleading as of the date thereof.
Borrower has no knowledge of any material change in any such
information. All financial statements (other than financial
projections) heretofore delivered to the Lender by Borrower were
prepared in accordance with the requirements in SECTION 6.4 and
accurately present the financial conditions and results of operations
as at the dates thereof and for the periods covered thereby in all
material respects. All financial projections have been and will be
prepared in accordance with the requirements of this Agreement, will be
complete in all material respects as of the date thereof, and will be
based on Borrower's best good faith estimates, compiled and prepared
with due diligence, of the matters set forth therein. Since the
Effective Date, no Material Adverse Change has occurred.
(f) Purpose of Advances. The purpose of each Advance is as set
forth in SECTIONS 2.1(d) and 2.2(c). The purpose of Advances is a
business purpose and not a personal, family, or household purpose.
(g) Legal Proceedings, Hearings, Inquiries, and
Investigations. Except as disclosed to the Lender in writing:
(i) No legal proceeding, individually or in the
aggregate with related proceedings, involving a sum of
$250,000 or more, is pending or, to best knowledge of
Borrower, threatened before any arbitrator, other private
adjudicator, or Governmental Authority to which Borrower is a
party or by which Borrower or any assets of Borrower may be
bound or affected that if resolved adversely to Borrower could
result in a Material Adverse Change;
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(ii) No hearing, inquiry, or investigation relating
to Borrower or any assets of Borrower is pending or, to the
best knowledge of Borrower, threatened by any Governmental
Authority that if resolved adversely to Borrower could result
in a Material Adverse Change; and
(iii) There are no suits, actions or proceedings
pending or threatened against Borrower or Affiliates of
Borrower under any RICO Related Law that would have a material
adverse effect on Borrower.
(h) No Event of Default or Unmatured Event of Default;
Financial Covenant Compliance. No Event of Default and no Unmatured
Event of Default has occurred and is continuing. Borrower is in
compliance with each of the Financial Covenants as set forth in this
Agreement.
(i) Approvals and Permits; Assets and Property. Borrower has
obtained and there are in full force and effect all Approvals and
Permits presently necessary for the conduct of the business of
Borrower, and Borrower owns, leases, licenses or otherwise has rights
to all assets necessary for conduct of the business and operations of
Borrower, except as otherwise permitted pursuant to this Agreement,
except for any failure to obtain and maintain in full force and effect
any Approval or Permit or any failure to own, lease or license such
assets that would not, individually or in the aggregate, (i) be
materially adverse to the business, properties, assets, operations or
condition (financial or otherwise) of Borrower or (ii) materially and
adversely affect any Units, Lots or other property that is at any time
included as Eligible Collateral. The assets of Borrower are not subject
to any Liens and Encumbrances, other than (A) the Liens and
Encumbrances created pursuant to this Agreement; (B) the Permitted
Exceptions with respect to property encumbered by a Deed of Trust; and
(C) with respect to other assets of Borrower that are not encumbered by
a Deed of Trust, Liens and Encumbrances that have been taken into
account in the preparation of financial statements and reports of
Borrower delivered to the Lender. To the extent Borrower makes or
intends to make sales of Units prior to the issuance of any applicable
public reports, Borrower has, and will at all times maintain, all
special exemption orders and other approvals and permits that are
necessary or appropriate.
(j) Impositions. Except as otherwise permitted pursuant to
SECTION 6.6, Borrower has filed or caused to be filed all tax returns
(federal, state, and local) required to be filed by Borrower and has
paid all Impositions and other amounts shown thereon to be due
(including, without limitation, any interest or penalties) except for
any failure to so file or to so pay that would not, individually or in
the aggregate, be materially adverse to the business properties,
assets, operations or condition (financial or otherwise) of Borrower.
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(k) ERISA.
(i) Neither the execution and delivery of this
Agreement by Borrower, the borrowings hereunder, the
performance by Borrower of the Obligations nor the
consummation of any of the other transactions contemplated by
this Agreement constitutes or will constitute a "prohibited
transaction" within the meaning of Section 4975 of the Code or
Section 406 of ERISA. Borrower has delivered to the Lender a
complete and correct list of any "employee benefit plan"
(within the meaning of Section 3(3) of ERISA) (a "PLAN").
(ii) Each Plan is in compliance in all material
respects with applicable provisions of ERISA, the Code and
applicable foreign law. The Borrower has made all
contributions to the Plans required to be made by it.
(iii) Except for liabilities to make contributions
and to pay Pension Benefit Guaranty Corporation (or any
successor thereto) ("PBGC") premiums and administrative costs,
Borrower has not incurred any material liability to or on
account of any Plan under applicable provisions of ERISA, the
Code or applicable foreign law, and no condition exists which
presents a material risk to Borrower of incurring any such
liability. No domestic Plan has an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code),
whether or not waived, and no foreign Plan is in violation of
any funding requirements imposed by applicable foreign law.
None of Borrower, the PBGC or any other Person has instituted
any proceedings or taken any other action to terminate any
Plan.
(iv) The actuarial present value of all accrued
benefit liabilities under each domestic Plan and under each
foreign Plan (based on the assumptions used in the funding of
such Plan, which assumptions are reasonable, and determined as
of the last day of the most recent plan year of such domestic
Plan for which an annual report has been filed with the
Internal Revenue Service or of such foreign Plan for which
year-end actuarial information is available) did not exceed
the current fair market value of the assets of such Plan as of
such last day.
(v) None of the Plans is a "Multiemployer Plan" (as
defined in ERISA), and Borrower has not contributed or been
obligated to contribute to any Multiemployer Plan at any time
within the preceding six years.
(vi) Borrower qualifies as an "operating company"
within the meaning of United States Department of Labor
Regulations ss.2510.3-101(c). Pursuant to such regulations,
the assets of Borrower are not "plan assets" of any employee
benefit plan subject to the fiduciary responsibility
requirements of ERISA. The Loans represented by this Agreement
are not prohibited loans or transactions under Section 406 of
ERISA.
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(l) Compliance with Law. Other than noncompliance with
applicable building codes which is not material, is not unusual in the
ordinary course of business, and is correctable (and is in the process
of being corrected) by Borrower, none of Borrower, the Approved
Subdivisions, the Units, the Off-Site Improvements, or the Eligible
Lots are in material violation of any law, ordinance, regulation, or
rule (federal, state, or local).
(m) Unit Budgets, Unit Plans and Specifications, and
Construction Contracts. Each Unit Budget (as updated from time to time)
contains all costs, expenses, and fees anticipated to be incurred by
Borrower in connection with the respective type of Unit. The Unit Plans
and Specifications and related working drawings are a substantially
accurate and complete description of the Unit. The construction
contracts relating to the construction of the Unit provide for all work
and materials anticipated to be necessary to construct and all payments
necessary to pay for the construction of the Unit.
(n) Environmental Matters. To the best of Borrower's knowledge
and except for matters disclosed to the Lender in writing pursuant to
the questionnaires, information, reports, and certificates delivered
pursuant to this Agreement, neither Borrower nor any of the Collateral
is in violation of any Environmental Laws (as defined in the
Environmental Agreement), or subject to any existing, pending, or to
Borrower's knowledge, any threatened investigation by any Governmental
Agency under any Environmental Laws. Borrower hereby acknowledges that
the Lender has made a written request of Borrower for information
concerning the environmental condition of the Collateral, including,
without limitation, (A) the presence, alleged presence or threatened
presence of Hazardous Substances (as defined in the Environmental
Agreement) on, under, in, or about any of the Collateral or property
adjacent to the Collateral other than naturally occurring radon; (B)
the release, alleged release or threatened release of Hazardous
Substances on, under, in, from, or about any of the Collateral or
property adjacent to the Collateral; or (C) the presence of any
underground storage tank on any real property constituting Collateral.
Borrower has no actual knowledge or notice of the presence, alleged
presence, threatened presence, release, alleged release, or threatened
release of Hazardous Substances on, under, in, from, or about the
Collateral or property adjacent to any of the Collateral, except as has
been disclosed to the Lender in writing. As used herein, the term
"release" means any release (including, without limitation, any
discharge, disposal, dumping, emitting, emptying, escape, injection,
leaching, leaking, pouring, pumping, or spilling) in violation of any
applicable laws, rules, regulations or ordinances of any Governmental
Authority.
(o) Special Representations and Agreements Relating to
Collateral.
(i) Ownership. Except as permitted pursuant to
SECTION 6.3(b), Borrower is and will at all times be the legal
and equitable owner of the Collateral, free and clear of all
Liens and Encumbrances, except for Deeds of Trust encumbering
such Collateral and the Permitted Exceptions.
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(ii) Authority to Encumber. Borrower has, and will
continue to have, the full right and authority to encumber all
of the Collateral, including each of the Units and Eligible
Lots included or to be included in Eligible Collateral.
(iii) Validity of the Lien and Encumbrance Created by
each Deed of Trust. The Lien and Encumbrance created by each
Deed of Trust is (A) legal, valid, binding and enforceable
subject to any bankruptcy, insolvency, reorganization,
arrangement, moratorium, fraudulent conveyance or transfer or
other similar laws relating to or affecting the rights of
creditors generally and (B) is first priority except for
Permitted Exceptions.
(p) Full Disclosure. There is no material fact that Borrower
has not disclosed to the Lender which could cause a Material Adverse
Change with respect to Borrower or any subsidiaries of Borrower.
Neither the financial statements nor any other certificate or document
delivered herewith or heretofore by Borrower to the Lender in
connection with negotiations of this Agreement and the Loan Documents
contains any untrue statement of material fact or omits to state any
material fact necessary to keep the statements contained herein and
therein from being untrue or misleading.
(q) Use of Proceeds; Margin Stock. The proceeds of the
Advances will be used by Borrower solely for the purposes specified in
this Agreement. None of such proceeds will be used for the purpose of
purchasing or carrying any "margin stock" as defined in Regulation U or
G of the Board of Governors of the Federal Reserve System (12 C.F.R.
Part 221 and 207), or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry margin
stock or for any other purpose which might constitute this transaction
a "purpose credit" within the meaning of such Regulation U or G.
Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock. Neither Borrower nor
any Person acting on behalf of Borrower has taken or will take any
action which might cause any Loan Documents to violate Regulation U or
G or any other regulations of the Board of Governors of the Federal
Reserve System or to violate Section 7 of the Securities Exchange Act
of 1934, or any rule or regulation thereunder, in each case as now in
effect or as the same may hereafter be in effect. Borrower and
Borrower's subsidiaries own no "margin stock".
(r) Governmental Regulation. Borrower is not subject to
regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Investment Company Act of 1940, the Interstate
Commerce Act (as any of the preceding have been amended), or any other
law which regulates the incurring by Borrower of indebtedness,
including but not limited to laws relating to common or contract
carriers or the sale of electricity, gas, steam, water, or other public
utility services.
(s) Memberships.
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i. Membership Availability Following
Foreclosure. Borrower acknowledges and agrees that
Lender would not enter into this Agreement without
the express written agreement of Borrower that, in
the event of a foreclosure or trustee's sale of a Lot
instituted by Lender, or deed in lieu thereof in
favor of Lender, Borrower would make adequate
arrangements to ensure that a Deferred Equity Golf
Membership would be available for the ultimate
purchaser of such Lot following such foreclosure,
trustee's sale, or deed in lieu thereof. Accordingly,
Borrower covenants and agrees that, in the event a
Mortgage Borrower defaults on a Mortgage Note subject
to this Agreement, resulting in the foreclosure,
trustee's sale or deed "in lieu" of the Lot
encumbered by the Mortgage securing such Mortgage
Note, Borrower shall permit the substitute buyer
(i.e., the third-party buyer who takes title through
such foreclosure or trustee's sale or upon resale
following Lender coming into title to the Lot through
such foreclosure, trustee's sale or deed "in lieu")
to receive a Deferred Equity Golf Membership, upon
payment by Lender or such substitute buyer of (a) any
unpaid charges against the defaulting Borrower's
terminated Club membership account, (b) any Surrender
Value (as hereinafter defined) that the Club actually
may have paid to the defaulting Borrower, (c) an
amount equal to the then-applicable Conversion Fee,
if the affected Membership is a non-equity
Membership, plus (d) an amount equal to twenty
percent (20%) of the Membership Contribution in its
full then-applicable amount. By way of example, but
not limitation, if a Mortgage Borrower were in
default under a Mortgage Note and Mortgage relating
to a Lot with respect to which a 1992 non-equity
Regular Membership (having a 75% Surrender Payment
Benefit) was associated, and such default ultimately
resulted in Lender acquiring title thereto pursuant
to a foreclosure, trustee's sale, or deed "in lieu,"
and, thereafter, Lender sold the Lot to a third-party
purchaser desirous of enjoying membership privileges
in the Club, then Borrower would cause a Deferred
Equity Golf Membership to be issued to such
third-party purchaser upon the payment of any sums
required under (a) and (b) above, if applicable,
together with an amount equal to the then-applicable
Conversion Fee (e.g., $31,250 if the Membership
Contribution were then $125,000 and the defaulting
Borrower held a "Type 20" Membership), plus an amount
equal to twenty percent (20%) of the then-applicable
Membership Contribution for a Deferred Equity Golf
Membership (i.e., $25,000 if the Membership
Contribution in effect at the time of such resale
were $125,000).
ii. Payment of Surrender Value. By way of
continuing covenant and agreement, when a Membership
is surrendered, whether voluntarily or otherwise, and
should Borrower determine the Dues Repayment Benefits
or Surrender Payment Benefit (as those terms are
defined in the governing documents of the Club,
collectively herein, the
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"Surrender Value") associated with such Membership is
payable, and such Membership is associated with Lots
encumbered by Mortgages subject to this Agreement,
Borrower shall cause the Club to retain and/or pay,
with respect to all such Memberships, the Surrender
Value to the following recipients in the following
order and priority, and, to the extent the amount of
the Surrender Value is sufficient to cover such
retentions and payments: first, the Club would deduct
therefrom, for its own retention, an amount equal to
all accrued and unpaid dues, fees, food and beverage
charges, merchandise charges, late charges, and all
other charges against the terminated Membership
account and any outstanding principal and interest on
any promissory notes payable to Borrower hereunder in
connection with Borrower-financed Membership
conversions, reservations or pre-purchased
Memberships; second, the Club would pay Lender, or
Lender's assignee as successor holder in due course
of the related Mortgage Note, a sum equal to the
amount of all accrued and unpaid principal, interest,
and charges under such Mortgage Note; and third, the
Club would pay the individual or entity designated in
the applicable Membership Agreement the remaining
balance, if any, of such Surrender Value.
(t) Representations and Warranties as to the Eligible Mortgage
Loans. Borrower hereby represents and warrants to Lender that, as of
the Closing Date:
As to each Eligible Mortgage Loan, except as otherwise
disclosed in writing:
(i) Borrower is the sole owner and holder of such Mortgage
Loan;
(ii) Borrower has full right and authority to assign such
Mortgage Loan;
(iii) Such Mortgage Loan meets, or is exempt from, applicable
state or federal laws, regulations and other requirements,
pertaining to usury; and any and all other requirements of any
federal, state or local law including, without limitation,
truth-in-lending, real estate settlement procedures, consumer
credit protection, equal credit opportunity or disclosure laws
applicable to such Mortgage Loan have been materially complied
with;
(iv) The Mortgage Note, the Mortgage, and other agreements
executed in connection therewith, are genuine, and each is the
legal, valid and binding obligation of the maker thereto,
enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement
of creditors' rights generally and by general equity
principles (regardless of whether such enforcement is
considered in a proceeding in equity or at law);
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(v) Borrower is assigning such Mortgage Loan free and clear of
any and all liens, pledges, charges or security interests of
any nature encumbering such Mortgage Loan;
(vi) To the best of Borrower's knowledge and belief, all Due
Diligence Information requested by Lender was provided to
Lender and was true and correct in all material respects,
excluding Due Diligence information prepared by a party other
than Borrower;
(vii) Each Mortgage is a valid and enforceable first lien on
the related real property, which real property is free and
clear of any loan having priority over the lien of the
Mortgage, except for (i) liens for real estate taxes and
special assessments not yet due and payable, (ii) covenants,
conditions and restrictions, rights of way, easements and
other matters of public record of the date of recording of
such Mortgage, such exceptions appearing of record being
acceptable to mortgage lending institutions generally or
specifically reflected in the appraisal made in connection
with the origination of the related Mortgage Loan, and (iii)
other matters to which like properties are commonly subject
which do not, individually or in the aggregate, materially
interfere with the benefits of the security intended to be
provided by such Mortgage;
(viii) Neither Borrower nor any prior holder of the Mortgage
has modified the Mortgage Note or Mortgage in any material
respect, or satisfied, canceled or subordinated any Mortgage
Note or Mortgage in whole or in part or released all or any
material portion of the real property from the lien of any
Mortgage, or executed any instrument of release, cancellation
or satisfaction;
(ix) All Mortgage Loans are covered by a generally acceptable
insurance policy issued by, and is the valid and binding
obligation of, First American Title Insurance Company,
insuring Borrower, its successors and assigns, as to the first
priority lien of any Mortgage in the original principal amount
of the Mortgage Loan and subject only to (A) the lien of
current real property taxes and assessments not yet due and
payable, (B) covenants, conditions and restrictions,
rights-of-way, easements and other matters of public record as
of the date of recording of such Mortgage acceptable to
mortgage lending institutions in the area in which the real
property is located or specifically referred to in the
Appraisal performed in connection with the origination of the
related Mortgage Loan and (C) such other matters to which like
properties are commonly subject which do not, individually or
in the aggregate, materially interfere with the benefits of
the security intended to be provided by the Mortgage;
(x) There is no default, breach, violation or event of
acceleration existing under any Mortgage Note or related
Mortgage and no event which, with the passage of time
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or with notice and the expiration of any grace or cure period,
would constitute a default, breach, violation or event of
acceleration, other than payments less than sixty (60) days
past due on any Mortgage Note;
(xi) Any Mortgage Note or related Mortgage contains customary
and enforceable provisions such as to render the rights and
remedies of the holder thereof adequate for the realization
against the real property of the benefits of the security,
including realization by judicial or, if applicable,
non-judicial foreclosure, and there is no homestead or other
exemption available to the Mortgage Borrower which would
interfere with such right to foreclose;
(xii) Each Lot encumbered by an Eligible Mortgage has the
Membership attributed thereto, included with such Lot, as
listed on EXHIBIT A attached hereto, which membership shall
not be sold, transferred or surrendered; and
(xiii) Each Mortgage Loan is currently being serviced by the
Servicing Agent.
As to each Eligible Mortgage Loan assigned hereunder, to the best of
Borrower's knowledge and belief:
(i) Unless previously disclosed to Lender, all taxes and
governmental assessments which, having priority over the lien
of any Eligible Mortgage Loan is not more than sixty (60) days
delinquent or an escrow of funds in an amount sufficient to
cover such payments has been established; and
(ii) There is no proceeding pending or threatened for the
total or partial condemnation of any related real property.
5.2 Representations and Warranties Upon Requests for Advances. Each
request for an Advance will be a representation and warranty by Borrower to the
Lender that the representations and warranties of Borrower in this ARTICLE 5 and
elsewhere in the Loan Documents are correct and complete as of the date of the
Advance request and as of the date that the Advance is made, except as otherwise
disclosed to the Lender and approved by Lender, in its sole and absolute
discretion, and that the conditions precedent in ARTICLE 4 are satisfied as of
the date of the Advance.
5.3 Representations and Warranties Upon Delivery of Financial
Statements, Documents, and Other Information. Each delivery by Borrower of
financial statements, other documents, or information after the date of this
Agreement (including, without limitation, documents and information delivered in
obtaining an Advance) will be a representation and warranty to the Lender that
such financial statements, other documents, or information (other than financial
projections) are correct and complete in all material respects, that there are
no material omissions therefrom that result in such financial statements, other
documents, or information being materially incomplete, incorrect, or misleading
as of the date thereof, and that such financial statements accurately present
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the financial condition and results of operations of the subject thereof as at
the dates thereof and for the periods covered thereby. Each delivery by Borrower
of financial projections is a representation and warranty to the Lender that
such financial projections have been prepared in accordance with the
requirements in this Agreement, are complete in all material respects as of the
date thereof, and are based on Borrower's best good faith estimates, compiled
and prepared with due diligence, of the matters set forth therein.
5.4 Representations and Warranties Untrue. The failure of any
representation or warranty of Borrower in this Article 5 to be true with respect
to an Eligible Mortgage Loan shall not constitute and Event of Default under the
Loan, however, any and all Mortgage Loans for which such representations and
warranties have proved to be untrue shall no longer be Eligible Mortgage Loans
and Borrower shall be required to meet the remargining requirements of Section
2.11 based on the new Maximum Allowed Warehouse Advance after excluding the
subject Mortgage Loans.
ARTICLE 6
BORROWER AFFIRMATIVE COVENANTS
Until the Commitment terminates in full and the Obligations are
otherwise paid and performed in full, Borrower agrees to be bound by and to
perform each of the covenants in this ARTICLE 6.
6.1 Partnership Existence. Borrower will continue to be validly
existing, and in good standing as a limited partnership under the law of the
State of Delaware. Borrower will continue to be qualified to do business in the
State of Arizona and under the laws of each state in which the nature of the
activities of Borrower requires such qualification.
6.2 Books and Records; Access. Borrower will maintain a standard,
modern system of accounting (including, without limitation, a single, complete,
and accurate set of books and records of its assets, business, financial
condition, operations, prospects, and results of operations) in accordance with
GAAP. Borrower will also maintain complete and accurate records regarding the
acquisition, development and construction of Units and Eligible Lots, including,
without limitation, all construction contracts, architectural contracts,
engineering contracts, field and inspection reports, applications for payment,
estimates and analyses regarding construction costs, names and addresses of all
contractors and subcontractors performing work or providing materials or
supplies with respect to the development and construction of Units and Eligible
Lots, invoices and bills of sale for all costs and expenses incurred by
contractors and subcontractors in connection with the development and
construction of Units and Eligible Lots, payment, performance and other surety
bonds (if applicable), releases and waivers of lien for all such work performed
and materials supplied by those contracting directly with the Borrower, evidence
of completion of all inspections required by any Governmental Authority,
certificates of substantial completion, notices of completion, any surveys, any
as-built plans, Approvals and Permits, Purchase Contracts, escrow instructions,
records regarding all sales of Units and Eligible Lots, and all other documents
and instruments relating to the acquisition, development, construction and/or
sale of Units and of Eligible Lots. Books and records required to
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be maintained by Borrower pursuant to this Section shall be maintained for a
period of time following payment in full of the Obligations at least equal to
the statute of limitations period within which the Lender would be entitled to
commence an action with respect to the Obligations, except that books and
records with respect to Collateral that has been released need only be retained
for a period of 2 years following the date of release. During business hours
Borrower will give representatives of the Lender access to all assets, property,
books, records, and documents of Borrower and will permit such representatives
to inspect such assets and property and to audit, copy, examine, and make
excerpts from such books, records, and documents. Upon request by the Lender,
Borrower will provide the Lender with copies of the reports, documents,
agreements, and other instruments described in this Section.
6.3 Special Covenants Relating to Collateral.
(a) Defense of Title. Borrower will defend the Collateral, the
title and interest therein of Borrower represented and warranted in
each Deed of Trust, and the legality, validity, binding nature, and
enforceability of each Lien and Encumbrance contained in each Deed of
Trust and the first priority of each Deed of Trust against all matters,
including, without limitation, (i) any attachment, levy, or other
seizure by legal process or otherwise of any or all Collateral; (ii)
except for Permitted Exceptions, any Lien or Encumbrance or claim
thereof on any or all Collateral; (iii) any attempt to foreclose,
conduct a trustee's sale, or otherwise realize upon any or all
Collateral under any Lien or Encumbrance, regardless of whether a
Permitted Exception and regardless of whether junior or senior to the
Deed of Trust; and (iv) any claim questioning the legality, validity,
binding nature, enforceability, or priority of any Deed of Trust.
Borrower will notify the Lender promptly in writing of any of the
foregoing and will provide such information with respect thereto as the
Lender may from time to time request.
(b) No Encumbrances. Borrower will not sell, assign, transfer
or otherwise dispose of, or grant any option with respect to, or pledge
or otherwise encumber, any of the Collateral covered by the Deeds of
Trust or any interest therein or any fixtures thereof or proceeds
thereof, except for (i) the Permitted Exceptions; (ii) sales and
transfers in connection with releases permitted pursuant to SECTION
2.8; and (iii) with respect to Units and Eligible Lots, a transfer of
legal title to such Units or Eligible Lots to a title company pursuant
to a single beneficiary trust wherein such title company holds bare
legal title and Borrower, as sole beneficiary, holds all equitable
title subject to the Lien and Encumbrance of the applicable Deed of
Trust.
(c) Further Assurances. Borrower will execute and deliver such
further instruments and will do and perform all matters and things
necessary or expedient to be done or performed for the purpose of
effectively creating, maintaining and preserving the Collateral and the
Liens and Encumbrances of the Lender on such Collateral.
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(d) Utilities. Borrower will provide or cause to be provided
all telephone service, electric power, storm sewer (if required),
sanitary sewer (if required) and water facilities for each Eligible Lot
and each Unit included in Eligible Collateral, and such utilities will
be adequate to serve such Units and Eligible Lots. No condition will
exist to affect Borrower's right to connect into and have adequate use
of such utilities, except for the payment of normal connection charges
or tap charges, development impact fees and except for the payment of
subsequent charges for such services to the utility supplier.
(e) Contracts. Borrower will perform all of Borrower's
obligations under any contracts and agreements relating to the
construction of Units and Off-Site Improvements and will pay all
amounts thereunder as and when due, except to the extent such amounts
are contested in accordance with the definition of "Permitted
Exceptions". Borrower will be the sole owner of all Unit Plans and
Specifications or, to the extent that Borrower is not the sole owner of
such Unit Plans and Specifications, Borrower will have the
unconditional right to use such Unit Plans and Specifications in
connection with the construction of Units. The Lender will not be
restricted in any way in use of such Unit Plans and Specifications in
connection with the construction of any Units, and Borrower will obtain
all consents and authorizations necessary for the use of such Unit
Plans and Specifications by the Lender.
(f) No Residential Use. Approved Subdivisions and all Units
from time to time encumbered by a Deed of Trust are held only for
construction and eventual sale to its first occupant upon or after
release from the lien of the applicable Deed of Trust. Borrower (i)
represents and warrants that Borrower has no intent to ever occupy any
Unit as a residence or to lease or otherwise permit such occupancy of a
Unit, and (ii) agrees that Borrower will never so occupy, lease or
permit occupancy of any Unit by Borrower other than for a sales office
or as a model home.
(g) Flood Insurance. Unless insurance in accordance with
SECTION 6.8(c) will first have been obtained, no Unit in an Approved
Subdivision will be located in an area that has been identified by the
Secretary of Housing and Urban Development as an area having special
flood hazards and in which flood insurance has been made available
under the National Flood Insurance Act of 1968.
(h) Compliance with Permitted Exceptions. Borrower will keep
and maintain in full force and effect all restrictive covenants,
development agreements, easements and other agreements with
Governmental Authorities and other Persons that are necessary or
desirable for the use and occupancy of each Approved Subdivision and
the sale of Units and Eligible Lots therein. Borrower will not default
in any material respect under any such covenants, development
agreements, easements and other agreements and will diligently enforce
its rights thereunder.
(i) Title Policy Endorsements. If required by the Lender in
its reasonable discretion, Borrower will have provided (i) such
continuation endorsements and date down
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endorsements to the Title Policies, in form and substance satisfactory
to the Lender in its absolute and sole discretion, as the Lender
determines necessary to insure the priority of the Deeds of Trust as
valid first liens on the Collateral; or (ii) an unconditional and
irrevocable written commitment by the Title Company to issue such
endorsements. Borrower agrees to furnish to the Title Company such
surveys and other documents and information as the Lender or the Title
Company may require for the Title Company to issue such endorsements.
(j) Improvement Districts. Without obtaining the prior written
consent of the Lender, Borrower will not consent to, or vote in favor
of, the inclusion of all or any part of the Collateral in any community
facilities district formed pursuant to the Community Facilities
District Act, ARS Section 48-701, et seq., as amended from time to
time, or any other improvement district. Borrower will give immediate
notice to the Lender of any notification or advice that Borrower may
receive from any municipality or other third party of any intent or
proposal to include all or any part of the Collateral in a community
facilities district or other improvement district. Upon prior written
notice to Borrower, the Lender shall have the right to file a written
objection to the inclusion of all or any part of the Collateral in a
community facilities district or other improvement district, either in
its own name or in the name of Borrower, and to appear at, and
participate in, any hearing with respect to the formation of any such
district.
(k) Borrower warrants and will defend the right, title and
interest of Lender in and to the Mortgages against the claims and
demands of all persons whomsoever. Borrower shall take all action
necessary to assure Lender has, and will at all times have, a valid and
perfected first priority security interest in each Mortgage.
(l) Borrower shall execute and deliver to Lender such Uniform
Commercial Code financing statements with respect to the Collateral as
Lender may request. Borrower also shall execute and deliver to Lender
such further instruments of sale, pledge or assignment or transfer, and
such powers of attorney, as required by 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 Lender
under this Agreement. Lender shall have all the rights and remedies of
a secured party under the Uniform Commercial Code of the State of
Arizona, or any other applicable law, in addition to all rights
provided for herein.
(m) Borrower shall not amend or modify, or waive any of the
terms and conditions of, or settle or compromise any claim in respect
of, any Mortgages or any related rights, except upon the written
consent of Lender.
(n) Other than as otherwise provided for herein this
Agreement, Borrower 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), any of the Collateral or
any interest therein.
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(o) Borrower shall perform all of its duties and obligations
with respect to the Servicing Agreement.
6.4 Information and Statements. Borrower will furnish to the Lender:
(a) Annual Reports. Within 90 days after the close of each
fiscal year of Borrower (unless a different time is specified) the
following:
(i) Annual Statements of Borrower. (A) an
unqualified, audited financial statement, reasonably
acceptable to the Lender, prepared in accordance with GAAP on
a consolidated basis, including balance sheets as of the end
of such fiscal year and statements of income and retained
earnings and a statement of cash flows, and setting forth in
comparative form the balance sheet, income statement, retained
earnings and cash flow figures for the preceding fiscal year.
(ii) Other Reports. Such other annual reports,
documents, and schedules as the Lender may reasonably request
from time to time.
(b) Quarterly Reports. The following quarterly reports, each
within 45 days after the close of the first 3 quarterly periods of each
fiscal year, each of which shall be certified true, complete, and
materially correct to the Lender by an authorized officer of Borrower:
(i) Quarterly Financial Statements. Unaudited
financial statements for Borrower, including balance sheets as
of the end of such period, statements of income and cash flow,
in each case for the portion of the fiscal year ending with
such fiscal period.
(ii) Quarterly Cash Flow Statements. Internally
prepared cash flow statements, in form and substance
reasonably satisfactory to Lender, in each case for the
portion of the fiscal year ending with such fiscal period.
(iii) Other Reports. Such other quarterly reports,
documents, and schedules as the Lender may reasonably request
from time to time.
(c) Collateral Reports. The Collateral Inventory Report and
the Collateral Certificate when required by this Agreement.
(d) Financial Covenant Compliance Information. All annual
financial reports pursuant to SECTION 6.4(a)(i) and all quarterly
financial reports pursuant to SECTION 6.4(b)(i) will also be
accompanied by a compliance certificate signed by the chief financial
officer of Borrower. Notwithstanding anything in this Agreement to the
contrary, Borrower will be required to timely deliver such financial
information as may be necessary to promptly and
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accurately calculate any financial ratio or covenant required under
this Agreement even if such information is not specifically enumerated
herein. Any review of any financial statements provided by Borrower
used to test any financial ratio or covenant will not waive the
Lender's rights to require further review or audit of such information
or any rights if such further review or audit indicates financial
information contrary to the financial statements provided by Borrower.
6.5 Law; Judgments; Material Agreements; Approvals and Permits. Except
for normal construction corrections occasioning temporary noncompliance which
are corrected by Borrower with diligence and without substantial expense,
Borrower will comply with all laws, ordinances, regulations, and rules (federal,
state, and local) and all judgments, orders, and decrees of any arbitrator,
other private adjudicator, or Governmental Authority relating to Borrower, any
Approved Subdivisions, any Eligible Lots, or any Units or the other assets,
business, or operations of Borrower. Borrower will comply in all material
respects with all material agreements, documents, and instruments to which
Borrower is a party or by which Borrower, any Approved Subdivisions, any
Eligible Lots or any Units, or any of the other assets of Borrower are bound or
affected. Borrower will comply with all Requirements (including, without
limitation, as applicable, requirements of the Federal Housing Administration
and the Veterans Administration) and all conditions and requirements of all
Approvals and Permits. Borrower, at Borrower's expense, will obtain and maintain
in effect from time to time all Approvals and Permits required for the business
activities and operations then being conducted by Borrower and as may be
required to enable it to comply with its obligations hereunder and under the
other Loan Documents.
6.6 Impositions and Other Indebtedness. Except for amounts being
contested as provided in CLAUSE (b) of the definition of Permitted Exceptions,
Borrower will pay and discharge (a) before delinquency all Impositions; (b) when
due all lawful claims (including, without limitation, claims for labor,
materials, and supplies), which, if unpaid, might become a Lien or Encumbrance
upon any of its assets.
6.7 Assets and Property. Borrower will maintain, keep, and preserve all
of its assets (tangible and intangible) necessary or customary in the proper
conduct of its business and operations in good working order and condition,
ordinary wear and tear excepted.
6.8 Insurance. Borrower will obtain and maintain the following
insurance and will pay all related premiums as they become due:
(a) Property. Insurance of all Collateral against damage or
loss by fire, lightning, and other perils, on an all-risks basis, such
coverage to be in an amount not less than the full insurable value of
such Collateral on a replacement cost basis. Such policy will be
written on an all-risks basis, with no coinsurance requirement, and
will contain a provision granting the insured permission to complete
and/or occupy the Units or Eligible Lots, as applicable.
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(b) Liability. Commercial general liability insurance
protecting Borrower and the Lender against loss or losses from
liability imposed by law or assumed in any agreement, document, or
instrument and arising from bodily injury, death, or property damage
with a limit of liability of not less than $1,000,000.00 per occurrence
and $1,000,000.00 general aggregate. Also, "umbrella" excess liability
insurance in an amount not less than $10,000,000.00 or such greater
amount as the Lender may reasonably require. Such policies must be
written on an occurrence basis so as to provide blanket contractual
liability, broad form property damage coverage, and coverage for
products and completed operations.
(c) Flood. If required by Lender, a policy or policies of
flood insurance in the maximum amount of not less than $500,000.00 in
the aggregate with respect to each Unit in an Approved Subdivision
under the Flood Disaster Protection Act of 1973, as amended. This
requirement will be waived with respect to Units in an Approved
Subdivision upon presentation of evidence satisfactory to the Lender
that no portion of the Unit in question is or will be located within an
area identified by the U.S. Department of Housing and Urban Development
as having special flood hazards.
(d) Worker's Compensation. Worker's compensation insurance
disability benefits insurance and such other forms of insurance as
required by law covering loss resulting from injury, sickness,
disability, or death of employees of Borrower.
(e) Contractors. During the construction of any Unit or any
Off-Site Improvements, any and all contractors and subcontractors will
be required to carry liability insurance of the type and providing the
minimum limits set forth below:
(i) Worker's Compensation. Worker's compensation
insurance, disability benefits insurance and each other form
of insurance which such contractor is required by law to
provide, covering loss resulting from injury, sickness,
disability or death of employees of the contractor who are
located on or assigned to the construction of any Unit or
Off-Site Improvements.
(ii) Liability. Comprehensive general liability
insurance coverage for:
Property and Operations
Products and Completed Operations
Contractual Liability
Personal Injury Liability
Broad Form Property Damage
(including completed operations)
Explosion Hazard
Collapse Hazard
Underground Property Damage Hazard
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Such policy will have a limit of liability of not less than
$1,000,000 (combined single limit for personal injury,
including bodily injury or death, and property damage).
(f) Additional Insurance. Such other policies of insurance as
the Lender may reasonably request in writing.
All policies for required insurance will be in form and substance satisfactory
to the Lender in its reasonable discretion. Such insurance may be carried under
blanket policies, so long as such policy provides the coverage for each Unit as
provided in this SECTION 6.8 and otherwise complies with this SECTION 6.8. All
required insurance will be procured and maintained in financially sound and
generally recognized responsible insurance companies selected by Borrower and
reasonably approved by the Lender. Deductibles under insurance policies required
pursuant to this SECTION 6.8 will not exceed the amounts approved from time to
time by the Lender. Such companies must be authorized to write such insurance in
the State of Arizona. Each company will be rated "A" or better by A.M. Best Co.,
in Bests' Key Guide, or such other rating acceptable to the Lender in the
Lender's absolute and sole discretion. All property policies evidencing required
insurance will name the Lender as first mortgagee and loss payee. All liability
policies evidencing required insurance will name the Lender as additional
insured. The policies will not be cancelable as to the interests of the Lender
due to the acts of Borrower. The policies will provide for at least 30 days
prior written notice of the cancellation or modification thereof to be given to
the Lender. A certified copy of each insurance policy or, if acceptable to the
Lender in its reasonable discretion, certificates of insurance evidencing that
such insurance is in full force and effect, will be delivered to the Lender,
together with proof of the payment of the premiums thereof. Prior to the
expiration of each such policy, Borrower will furnish the Lender evidence that
such policy has been renewed or replaced in the form of the original or a
certified copy of the renewal or replacement policy or, if acceptable to the
Lender in its reasonable discretion, a certificate reciting that there is in
full force and effect, with a term covering at least the next succeeding
calendar year, insurance of the types and in the amounts required in this
SECTION 6.8.
6.9 ERISA.
(a) Borrower will take all actions and fulfill all conditions
necessary to maintain any and all Plans in substantial compliance with
applicable requirements of ERISA, the Code and applicable foreign law
until such Plans are terminated, and the liabilities thereof
discharged, in accordance with applicable law.
(b) No Plan will have any "accumulated funding deficiency"
(within the meaning of Section 412 of the Code), which deficiency could
materially adversely affect the business, earnings, prospects,
properties or condition (financial or otherwise) of Borrower.
(c) Borrower will take and fulfill all actions and conditions
necessary to maintain, and will maintain, substantial compliance of any
and all employee benefit plans established
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or maintained, or to which contributions are made, by Borrower with the
requirements of ERISA and the rules and regulations adopted thereunder,
in each case as in effect at the time.
(d) Borrower shall qualify at all times as an "operating
company" pursuant to United States Department of Labor Regulation
Section 2510.3-101(c). Borrower shall act to ensure that the assets of
Borrower are not "plan assets" of any employee benefit plan subject to
the fiduciary responsibility requirements of ERISA, or, subject to
receipt of prior notice by the Lender and the Lender's consent thereto,
Borrower shall ensure that an exemption from Section 406 of ERISA is
available to cover the loan transaction with respect to each portion
thereof.
6.10 Commencement and Completion of Units. Borrower will cause
construction of Units to be prosecuted and completed in good faith, with due
diligence and in accordance with industry standards, and without delay subject
to acts of God, labor strikes and other force majeure events beyond the
reasonable control of Borrower. Borrower will cause Units to be constructed in a
good and workmanlike manner; in substantial compliance with all applicable
Requirements; and, unless otherwise consented to by the Lender in advance in
writing in the absolute and sole discretion of the Lender, in substantial
accordance with the respective Unit Plans and Specifications. Upon demand by the
Lender, Borrower will correct any defect in its respective Units or any material
departure from any applicable Requirements or, to the extent not theretofore
approved in writing by the Lender, the respective Unit Plans and Specifications.
Borrower understands and agrees that the inspection of the Units by or on behalf
of the Lender, the review by the Lender or others acting on behalf of the Lender
of Draw Requests and related documents and information, the making of Borrowing
Base Advances by the Lender, any actions by the Lender under SECTION 6.12, and
any other actions by the Lender will not be a waiver of the right to require
compliance with this SECTION 6.10.
6.11 Title Insurance; Title Insurance Claims. The Lender may determine
from time to time the allocation of title insurance between parcels of
Collateral, and the amount of title insurance coverage that Borrower is required
to provide pursuant to all Title Policies (provided that the aggregate amount of
title insurance shall not be required to exceed the Borrowing Base Commitment
Amount) and the Lender may enter into such agreements with each Title Company as
the Lender reasonably deems appropriate including, without limitation,
aggregation agreements, which shall contain such terms and conditions as the
Lender may reasonably require. The Lender may, from time to time, in its
reasonable discretion, (a) require endorsements to Title Policies including,
without limitation, endorsements insuring against any mechanics', materialmen's,
or other Liens and Encumbrances affecting the Collateral; (b) require
co-insurance with respect to the Title Policies; and/or (c) disapprove title
insurance companies and require that Borrower obtain Title Policies from other
title insurers acceptable to the Lender. The Lender may require separate Title
Policies with respect to each Subdivision or groupings of Subdivisions. Borrower
acknowledges that pursuant to aggregation agreements, Title Policies issued by
the same Title Company may be grouped together to create a single insurance
coverage amount that applies to all collateral covered by such Title Policies.
If a Title Company pays any claims under any Title Policies and if the Lender
advises Borrower that the Lender has determined that the remaining coverage is
insufficient, in the
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reasonable discretion of the Lender, Borrower will take any and all action
necessary to cause the total liability under the Title Policies to remain at or
to be increased to the original liability notwithstanding the payment of such
claim or claims, including without limitation, providing any supplemental Title
Policies or endorsements or reinsurance agreements if requested by the Lender,
the cost of which will be paid by Borrower. Upon payment of any such claims,
Borrower will obtain and provide to the Lender any and all documentation
reasonably requested by the Lender to ensure that the maximum coverage provided
for hereunder will not have been diminished as a result of the payment of such
claims.
6.12 Rights of Inspection; Correction of Defects.
(a) Generally. The Lender and its respective agents,
employees, and representatives will have the right at any time and from
time to time to enter upon the Collateral in order to inspect the
Collateral and all aspects thereof.
(b) Inspector(s). Commencing in the first full Calender Month
of the Loan and continuing every other Calendar Month thereafter, an
officer of the Lender shall inspect the Collateral pursuant to this
SECTION 6.12. Commencing in the second full Calendar Month of the Loan
and continuing every other Calendar Month thereafter, Lender shall
employ outside inspectors to perform the inspection duties set forth in
this SECTION 6.12.
(c) Miscellaneous. Any inspections or determinations made by
the Lender or lien waivers, receipts, or other agreements, documents,
and instruments obtained by the Lender are made or obtained solely for
the Lender's own benefit and not in any way for the benefit or
protection of Borrower. The Lender may accept and rely on any
information from an architect, any other Person providing labor,
materials, or services for Units or Eligible Lots, Borrower, or any
other Person as to labor or materials furnished or incorporated in the
Units or the Eligible Lots and the cost and payment therefor and as to
all other matters relating to construction of the Units and the
Off-Site Improvements without the necessity of verifying such
information. The Lender will not have any obligation to Borrower to
ensure compliance by contractor, engineer, or any other Person in
carrying out construction of the Units or Off-Site Improvements.
6.13 Verification of Costs. The Lender will have the right at any time
and from time to time to review and verify all costs, expenses, and fees in each
Unit Budget and each Eligible Lot Budget. Based on its review and verification
of costs, expenses, and fees in each Unit Budget and each Eligible Lot Budget,
the Lender will have the right to (a) adjust any and all such budgeted amounts
and (b) reduce or increase the applicable Collateral Values; PROVIDED, HOWEVER,
that once the Maximum Allowed Borrowing Base Advance for an item of Eligible
Collateral has been determined, that Maximum Allowed Borrowing Base Advance
amount is not subject to increase, notwithstanding any subsequent Appraisal and
notwithstanding any increase in an Unit Budget; HOWEVER, the Maximum Allowed
Borrowing Base Advance amount is subject to increase or decrease based on
subsequent events, such as updated Appraisals and subsequent change orders.
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6.14 Use of Proceeds of Advances. Borrower will use proceeds of
Advances only for the purposes described in SECTION 2.1(b) and 2.2.(c).
6.15 Further Assurances. Borrower will promptly execute, acknowledge,
and deliver such additional agreements, documents, and instruments and do or
cause to be done such other acts as the Lender may reasonably request from time
to time to better assure, preserve, protect, and perfect the interest of the
Lender in the Collateral and the rights and remedies of the Lender under the
Loan Documents. Without limiting the foregoing, to the extent that the Lender
determines from time to time that additional Deeds of Trust, amendments to Deeds
of Trust, financing statements, subordinations, and other documents are required
in order to perfect all Liens and Encumbrances in favor of the Lender, and cause
all Collateral encumbered by any of the Deeds of Trust to be subject only to
Permitted Exceptions, Borrower will execute and deliver such documents,
instruments and other agreements as the Lender may request.
6.16 Costs and Expenses of Borrower's Performance of Covenants and
Satisfaction of Conditions. Borrower will perform all of its obligations and
satisfy all conditions under the Loan Documents at its sole cost and expense.
ARTICLE 7
FINANCIAL COVENANTS
7.1 Minimum Net Worth Covenant. At all times during the term of this
Commitment, Borrower shall maintain a minimum Net Worth in the amount of
$62,500,000. "NET WORTH" shall be determined in accordance with GAAP and shall
include capital, surplus, retained earnings, plus deferred revenue from Golf
Course Memberships less the sum of all intangible assets (other than intangible
membership costs). If Borrower's Net Worth ever drops below $62,500,000,
Borrower will have 15 days after prior written notice from Lender to comply with
this covenant or a Financial Covenant Default will be deemed to have occurred.
ARTICLE 8
BORROWER NEGATIVE COVENANTS
Until the Commitment terminates in full and the Obligations are
otherwise paid and performed in full, Borrower agrees to be bound by and to
comply with each of the covenants in this ARTICLE 8:
8.1 Fundamental Changes. Unless otherwise consented to by Lender in
writing, Borrower will not dissolve or liquidate, or become a party to any
merger or consolidation, or acquire by purchase, lease or otherwise all or
substantially all of the assets or capital stock of any Person; PROVIDED,
HOWEVER, that the foregoing shall not operate to prevent: (a) mergers or
consolidations of any subsidiary of Borrower into Borrower or a sale, transfer
or lease of assets by any such subsidiary to Borrower; or (b) a transaction
otherwise prohibited pursuant to this SECTION 8.1 but that results in the
Obligations being paid and performed in full and the termination of the
Commitment.
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8.2 Prohibition on Sales of Assets. Except for encumbrances permitted
pursuant to SECTION 8.9, Borrower will not convey, sell, lease, encumber,
transfer or otherwise dispose of to any Person, in one transaction or a series
of transactions, all or substantially all of Borrower's business or property. In
addition, Borrower will not convey, sell, lease, encumber, transfer or otherwise
dispose of to any Affiliate of Borrower, in one transaction or a series of
transactions, any property of Borrower which would violate any covenant of
Borrower set forth herein including, without limitation, the Financial
Covenants. However, the restrictions in this SECTION 8.2 do not preclude the
Liens and Encumbrances created pursuant to the Loan Documents or the sale of
Eligible Lots and Units in the ordinary course of Borrower's business and in
compliance with the requirements of this Agreement.
8.3 Prohibition on Amendments to Organic Agreements. Borrower will not
amend, modify, restate, supplement, or terminate its certificate of
incorporation or bylaws in any manner that would materially affect the validity
and enforceability of the Obligations or Borrower's ability to borrow hereunder,
or that would materially impair any security for the Obligations.
8.4 Lines of Business. Borrower (directly or through any subsidiaries
or other Persons) will not engage to any substantial extent in any line or lines
of business activity other than (a) the business of developing residential real
property, and constructing Units and Off-Site Improvements and selling Units and
Eligible Lots; (b) business directly related thereto; (c) the business of
originating home mortgage loans; (d) construction and management of golf courses
and other recreational developments (e) other lines of business actively engaged
in as of the date hereof; and (f) other lines of business related to
homebuilding, construction, real estate development and recreation development
and management. Borrower will not cease to engage in the business of developing
residential real property and constructing and selling Units.
8.5 No Development Projects Outside the Ordinary Course of Business.
Borrower will not undertake any development project outside the ordinary course
of business without the prior written consent of Lender in its sole and absolute
discretion.
8.6 Issuance of Additional Securities. Borrower will not issue any new
capital stock or any debt securities that are convertible into, or exchangeable
for, capital stock, except pursuant to normal and customary employee stock
options pursuant to employee stock option plans that have been approved in
advance by the Lender in its reasonable discretion.
8.7 Loans. Except for loans to Persons in Borrower's ordinary course of
business as a homebuilder, Borrower will not make or allow loans to Borrower's
Affiliates or to any other Person.
8.8 Other Financing. Borrower will not finance the housing construction
in any Approved Subdivision that contains Eligible Lots or Units that are
included in Eligible Collateral with lenders other than the Lender.
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8.9 No Further Indebtedness. Borrower will not incur any indebtedness
to any Person other than (a) indebtedness incurred pursuant to this Agreement;
(b) trade payables and accruals incurred in the ordinary course of Borrower's
business as now conducted and other indebtedness incurred in the ordinary course
of Borrower's business as now conducted; (c) indebtedness arising in connection
with payment and performance bonds obtained by Borrower in the ordinary course
of business; (d) indebtedness reasonably approved by Lender including, without
limitation, the financing of subdivisions not approved by Lender hereunder; (e)
loans from Crescent subordinated to the same extent as the Crescent Notes not to
exceed Ten Million and No/100 Dollars ($10,000,000.00) and (e) sales and options
back that, under GAAP, must be treated as indebtedness. Notwithstanding the
foregoing, Borrower may not incur any indebtedness if the effect of incurring
such indebtedness would be to cause or contribute to a breach of the Financial
Covenants set forth in ARTICLE 7 (on a pro forma basis).
8.10 Transactions with Affiliates. Borrower will not enter into, or
cause, suffer, or permit to exist, any arrangement or contract with any of its
Affiliates, including, without limitation, any management contract, except any
currently existing management contracts which are reflected in the financial
statements of Borrower and any renewals thereof, unless such transaction is on
terms that are no less favorable to Borrower than those that could have been
obtained in a comparable transaction on an arms' length basis from a Person that
is not an Affiliate.
8.11 Investments. Other than as previously disclosed to Lender and
except as expressly permitted by the Loan Documents, Borrower will not make any
investment in any Person in excess of $100,000 in the aggregate (including,
without limitation, entering into any joint venture, partnership, or similar
arrangement) without prior written approval of Lender in its reasonable
discretion.
8.12 Negative Pledge. With the exception of Liens and Encumbrances on
collateral (other than the Collateral) granted to a particular lender to secure
indebtedness from that lender permitted pursuant to SECTION 8.9, no asset of
Borrower will be pledged or otherwise become subject to any Lien or Encumbrance
to any Person without the prior written approval of the Lender in its sole and
absolute discretion.
ARTICLE 9
EVENTS OF DEFAULT
9.1 Events of Default. Each of the following will be an event of
default (an "EVENT OF DEFAULT"):
(a) Payments. Failure by Borrower (i) to pay any payment of
interest within the time period required pursuant to SECTION 2.4(a) and
the expiration of 10 Business Days after written notice from Lender
(ii) to pay, within 5 Business Days of the due date, any principal,
including without limitation pursuant to SECTION 2.9 or SECTION 2.11;
(iii) to pay and perform all of the Obligations on the Maturity Date;
(iv) to pay when due any other amount pursuant
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to the Loan Documents and the expiration of 10 Business Days after
notice of such failure is given by the Lender to Borrower without such
failure being cured; or (v) to cause Net Sales Proceeds or other
amounts payable under SECTION 2.4(c) to be paid to the Lender in
accordance with SECTION 2.4(c) by 11:00 a.m. (Phoenix, Arizona time) on
the first Business Day after the day the Lender notifies Borrower in
writing of the failure by the Lender to receive any such amounts.
(b) Specified Defaults. Failure of Borrower to comply with any
of the Financial Covenants and the expiration of 30 Business Days after
written notice from Lender.
(c) Other Defaults. Except as otherwise provided in this
SECTION 9.1, failure of Borrower to perform any other obligation not
involving the payment of money, or to comply with any other term or
condition applicable in any of the Loan Documents, and the expiration
of 30 days after written notice of such failure is given by the Lender
to Borrower without such failure being cured to Lender's reasonable
satisfaction.
(d) Representations and Warranties. Any representation or
warranty made by Borrower in any of the Loan Documents or otherwise
(other than as otherwise provided in SECTION 5.4 of this Agreement and
the last paragraph of SECTION 2 of the Pledge Agreement) with respect
to any information now or hereafter delivered by Borrower to the Lender
in obtaining the Commitment, in negotiating and entering into this
Agreement, in obtaining each Advance or otherwise in connection with
the Obligations is materially incomplete, incorrect, or misleading as
of the date made or renewed, and the expiration of 30 Business Days
after written notice from Lender of such failure.
(e) Insolvency. Borrower (i) is unable or admits in writing
Borrower's inability to pay Borrower's monetary obligations as they
become due; (ii) makes a general assignment for the benefit of
creditors; or (iii) applies for, consents to, or acquiesces in, the
appointment of a trustee (other than a trustee under a deed of trust),
receiver, or other custodian for Borrower or any material portion or
all of the property of Borrower, or in the absence of such application,
consent, or acquiescence by Borrower a trustee, receiver, or other
custodian is appointed for Borrower or any or all of the property of
Borrower.
(f) Bankruptcy. Commencement of any case under the Bankruptcy
Code (Title 11 of the United States Code) or commencement of any other
bankruptcy, arrangement, reorganization, receivership, custodianship,
or similar proceeding under any federal, state, or foreign law by or
against Borrower.
(g) Dissolution, etc. The dissolution, or liquidation of
Borrower; the consolidation or merger of Borrower with any other Person
where Borrower is not the surviving entity; or the taking of any action
by Borrower toward a dissolution, liquidation, consolidation or merger
where Borrower is not the surviving entity (other than in connection
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with a transaction that results in the Obligations being paid and
performed in full and the termination of the Commitment).
(h) Claims. Borrower or any other Person on behalf of Borrower
claims that any Loan Document to which it is a party is not legal,
valid, binding, and enforceable against Borrower, that any lien,
security interest, or other encumbrance securing any of the obligations
under the Loan Documents is not legal, valid, binding, and enforceable,
or that the priority of any lien, security interest, or other
encumbrance securing any of the obligations in the Loan Documents is
different than the priority represented and warranted in the Loan
Documents.
(i) Failure to Maintain Insurance. Any of the insurance
coverages required pursuant to SECTION 6.8 actually lapses or expires
without being replaced by other insurance policies that comply with
SECTION 6.8 prior to such lapse or expiration, and the expiration of
one (1) Business Day after notice from Lender.
(j) Default Under Other Indebtedness. A default occurs in the
payment when due (after giving effect to any applicable notice and
grace periods), whether by acceleration or otherwise, of any
indebtedness of Borrower in an aggregate amount exceeding $250,000, and
the expiration of 15 Business Days after written notice from Lender of
such default.
(k) Judgments. Any judgment or order for the payment of money
in excess of $250,000 (not covered by insurance subject to customary
deductibles) is rendered against Borrower either (i) enforcement
proceedings are commenced by any creditor upon such judgment or order
and expiration of 15 Business Days after written notice from Lender of
such commencement; or (ii) such judgment or order is not vacated,
stayed, satisfied, discharged or bonded pending appeal within 60 days
from the entry thereof.
(l) Foreclosure Proceedings. Filing of any foreclosure
proceeding, giving notice of a trustee's sale, or any other action by
any Person, other than the Lender, to realize upon any of the
Collateral under any Lien or Encumbrance on any or all of the
Collateral, regardless of whether such Lien or Encumbrance is a
Permitted Exception and regardless of whether junior or senior to the
Deed of Trust, and the expiration of 15 Business Days after written
notice from Lender.
(m) RICO. The filing of formal charges by any Governmental
Authority, including, without limitation, the issuance of any
indictment, under any RICO Related Law against Borrower or any
Affiliate of Borrower that has a material adverse effect on Borrower.
9.2 Remedies. Upon the occurrence of any Event of Default and at any
time thereafter, for so long as such Event of Default is continuing:
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(a) Suspension and Termination of Commitment. Upon the
occurrence and during the continuance of an Event of Default or an
Unmatured Event of Default, the Lender shall declare the Commitment of
the Lender to make Advances to be suspended, whereupon any obligation
to make further Advances will immediately be suspended.
(b) Acceleration. Upon the occurrence of an Event of Default,
the Lender may declare the Obligations to be immediately due and
payable in full, whereupon all of the principal, interest and other
Obligations will forthwith become due and payable in full without
presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived.
(c) Delivery of Contracts, Etc. Borrower will, upon request of
the Lender, deliver to the Lender all surveys, plans and
specifications, building permits, construction contracts and
subcontracts, plats and other maps, lien releases, subdivision reports,
annexation documents, declarant's rights, marketing material and other
documents, permits, licenses and contracts which are necessary to
complete construction and marketing of the Units and Eligible Lots, and
Borrower will, on request of the Lender, assign to the Lender such of
Borrower's rights thereunder as the Lender may request.
(d) Enforcement of Rights. The Lender may enforce any and all
rights and remedies under the Loan Documents, the Deeds of Trust and
all other documents delivered in connection therewith and against any
or all Collateral and shall pursue all rights and remedies available at
law or in equity.
(e) Receivers. Without limiting any other rights and remedies
to which it is entitled, the Lender may, at its option, without notice
to Borrower or without regard to the adequacy of the Collateral for the
payment of the Obligations, have appointed one or more receivers of the
Collateral, and Borrower does hereby irrevocably consent to such
appointment, with such receivers having all the usual powers and duties
of receivers in similar cases, including the full power to maintain,
sell, dispose and otherwise operate the Collateral upon such terms that
may be approved by a court of competent jurisdiction.
(f) Payments. The Lender may direct all escrow companies and
closing agents to pay over to the Lender directly all moneys to which
Borrower is entitled and held by such parties in pending escrows.
9.3 Protective Advances. The Lender, at any time following the
occurrence and during the continuance of an Event of Default or an Unmatured
Event of Default, may, but will not be obligated to, make Protective Advances.
All Protective Advances are an obligation of the Borrower and will be due and
payable by Borrower within 5 days of written demand. The making of a Protective
Advance by the Lender will not be deemed a waiver by the Lender of the
occurrence of an Event of Default or an Unmatured Event of Default.
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9.4 Completion of Construction. After an Event of Default, the Lender
may take all action necessary to complete the construction of any Off-Site
Improvements or Units and expend all sums necessary therefor including, without
limitation, to cause an independent contractor selected by Lender to enter into
possession of any Approved Subdivision and to perform any and all work and labor
necessary for the completion of the Units and Eligible Lots thereon and to
perform Borrower's obligations under this Agreement. The Lender may, but will
not be obligated to, make Borrowing Base Advances from time to time to pay all
costs and expenses of such completion and such amounts will be due and payable
within 5 days of written demand and will be added to the outstanding principal
amount of all Borrowing Base Advances. The Lender will not have any duty to
account to Borrower for any such expenditures. All amounts advanced by the
Lender, and all other charges, costs and expenses, including reasonable
attorneys' fees, incurred or paid by the Lender, in exercising any right, power
or remedy conferred by this Agreement, the Deeds of Trust or any other Loan
Document, or in the enforcement hereof, or in the protection of the Collateral
or the completion of the Collateral, are an obligation of Borrower and shall
bear interest at the Variable Rate, prior to the occurrence of an Event of
Default or Unmatured Event of Default, and at the Default Interest Rate
thereafter, from the date advanced, paid or incurred until repaid by Borrower.
All such amounts so advanced, incurred or paid will be secured by the Deeds of
Trust and the Collateral.
ARTICLE 10
MISCELLANEOUS
10.1 The Lender's Obligations to Borrower Only and Disclaimer by
Lender. No Person, other than Borrower or Lender, will have any rights hereunder
or be a third-party beneficiary hereof. The Lender is not a joint venturer or a
partner with Borrower.
10.2 Survival. The representations, warranties, and covenants of
Borrower in the Loan Documents will survive the execution and delivery of the
Loan Documents and the making of Advances to Borrower.
10.3 Integration. The Loan Documents contain the complete understanding
and agreement of Borrower and the Lender with respect to the transactions
contemplated by this Agreement and supersede all prior representations,
warranties, agreements, arrangements, understandings, and negotiations. If there
is any conflict between the provisions of this Agreement and the provisions of
any of the other Loan Documents, the provisions of this Agreement will control.
10.4 Effect of Certain Actions. Delay or failure by the Lender to
insist on performance of any obligation when due or compliance with any other
term or condition in the Loan Documents will not operate as a waiver thereof or
of any other obligation, term or condition or of the time of the essence
provision. Acceptance of late payments will not be a waiver of the time of the
essence provision, the right of the Lender to require that subsequent payments
be made when due, or the right of the Lender to declare an Event of Default if
subsequent payments are not made when due.
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10.5 Binding Effect. The Loan Documents will be binding upon and will
inure to the benefit of the Lender and Borrower and their respective successors
and assigns; PROVIDED, HOWEVER, that Borrower may not assign any of its rights
or delegate any of its obligations under the Loan Documents and any purported
assignment or delegation will be void.
10.6 Severability. If any provision or any part of any provision of the
Loan Documents is unenforceable, the enforceability of the other provisions and
the remainder of the subject provision, respectively, will not be affected and
they will remain in full force and effect.
10.7 CHOICE OF LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER WILL BE CONSTRUED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF ARIZONA, WITHOUT GIVING EFFECT TO
THE CHOICE OF LAW RULES OF ARIZONA. EXCEPT WITH RESPECT TO ACTIONS TO REALIZE
UPON SECURITY WHICH MAY BE BROUGHT IN THE STATE IN WHICH SUCH SECURITY IS
LOCATED, ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE STATE COURTS OF ARIZONA OR IN THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF
THE AFORESAID COURTS. BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE SAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT BROUGHT IN THE COURTS REFERRED TO ABOVE AND HEREBY FURTHER
IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY
SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
10.8 Time of Essence; Time for Performance. Time is of the essence with
regard to each provision of the Loan Documents as to which time is a factor.
Whenever any performance under the Loan Documents is stated to be due on a day
other than a Business Day or whenever the time for taking any action under the
Loan Documents would fall on a day other than a Business Day, then unless
otherwise specifically provided in the Loan Documents the due date for such
performance or the time for taking such action, as the case may be, will be
extended to the next succeeding Business Day, and such extension of time will be
included in the computation of interest or fees, as the case may be.
10.9 Notices and Demands. Except to the extent otherwise provided
herein, all demands or notices under the Loan Documents will be in writing and
mailed or hand-delivered to the respective party hereto at the address specified
below or such other address as will have been specified in a written notice. Any
demand or notice mailed will be mailed first-class mail, postage-
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prepaid, return-receipt-requested and will be effective upon the earlier of (a)
actual receipt by the addressee, and (b) the date shown on the return-receipt.
Any demand or notice not mailed will be effective upon actual receipt by the
addressee:
To Borrower: Desert Mountain Properties Limited Partnership
10550 E. Desert Hills Drive
Scottsdale, Arizona 85262
Attention: Jeff L. Fitzgerald and Jim Ekins
With Copies to: Fennemore Craig PC
3003 North Central Avenue, Suite 2600
Phoenix, Arizona 85012-2913
Attention: Ronald L. Ballard, Esq.
To Lender: National Bank of Arizona
3101 North Central Avenue
Phoenix, Arizona 85012
Attention: Marshall D. Wong
With Copies to: Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
Attention: Craig K. Williams
10.10 Indemnification of the Lender. Borrower agrees to indemnify, hold
harmless, and on demand defend the Lender and its respective stockholders,
directors, officers, employees, agents, and representatives for, from, and
against any and all damages, losses, liabilities, costs, and expenses
(including, without limitation, costs and expenses of litigation and reasonable
attorneys' fees) arising from any claim or demand in respect of the Loan
Documents, the Collateral, or the transactions described in the Loan Documents
and arising at any time, whether before or after payment and performance of the
Obligations in full, excepting any such matters arising solely from the gross
negligence or willful misconduct of the indemnitee. The obligations of Borrower
and the rights of the Lender under this Section will survive payment and
performance of the Obligations in full and will remain in full force and effect
without termination.
10.11 Headings; References. The headings at the beginning of each
section of the Loan Documents are solely for convenience and are not part of the
Loan Documents. References in this Agreement to "Sections", "Articles", and
"Exhibits" refer to the Sections and Articles in this Agreement and the Exhibits
to this Agreement, unless otherwise noted.
10.12 Number and Gender. In the Loan Documents the singular will
include the plural and vice versa and each gender will include the other
genders.
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10.13 Waiver of Statute of Limitations. BORROWER WAIVES, TO THE FULL
EXTENT PERMITTED BY LAW, THE RIGHT TO PLEAD ANY STATUTES OF LIMITATIONS AS A
DEFENSE TO PAYMENT OR PERFORMANCE OF ANY OR ALL OF THE OBLIGATIONS.
10.14 Waivers by Borrower. Borrower (a) waives, to the full extent
permitted by law, presentment, notice of dishonor, protest, notice of protest,
notice of intent to accelerate, notice of acceleration, and all other notices or
demand of any kind (except notices specifically provided for in the Loan
Documents); and (b) agrees that the Lender may enforce the Loan Documents
against Borrower without first having sought enforcement against any Collateral.
10.15 No Brokers. Except as disclosed by Borrower to the Lender in
writing prior to the date of this Agreement, Borrower represents and warrants
that it knows of no broker's or finder's fee due in respect of the transaction
described in this Agreement and that it has not used the services of a broker or
a finder in connection with this transaction.
10.16 Counterpart Execution. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original and all of which
together will constitute one and the same document. Signature pages may be
detached from the counterparts and attached to a single copy of this Agreement
to physically form one document. Telecopied signature pages will be acceptable,
provided originally signed signature pages are provided to each of the other
parties by overnight courier.
10.17 Duty to Act in Good Faith. To the extent required by applicable
law, each of the parties to this Agreement agrees to act in good faith with
respect to all of its rights, privileges, duties, and obligations under this
Agreement.
10.18 Jury Waiver. BORROWER AND LENDER HEREBY VOLUNTARILY, KNOWINGLY,
IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN
OR AMONG THE UNDERSIGNED AND LENDER ARISING OUT OF OR IN ANY WAY RELATED TO THIS
DOCUMENT OR ANY OTHER RELATED DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT
TO LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN
DOCUMENTS.
ARTICLE 11
LIST OF EXHIBITS AND SCHEDULES
11.1 List of Exhibits The following Exhibits are incorporated into this
Agreement as if set forth fully in the body of this Agreement:
Exhibit A Schedule of Lots and Memberships for
Eligible Mortgage Loans
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Exhibit B-1 Form of Mortgage Note
Exhibit B-2 Form of Mortgage
Exhibit C Collateral Documents
Exhibit D Approved Subdivisions
Exhibit E Eligible Lots
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
BORROWER: DESERT MOUNTAIN PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Desert Mountain Development Corporation, a
Delaware corporation, General Partner
By:_______________________________________
Name:_____________________________________
Title:____________________________________
LENDER: NATIONAL BANK OF ARIZONA, a national
banking association
By: ________________________________________
Name:______________________________________
Title:_______________________________________
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EXHIBIT A
DESCRIPTION OF MORTGAGE LOANS
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EXHIBIT B-1
FORM OF MORTGAGE NOTE
<PAGE> 72
EXHIBIT B-2
FORM OF MORTGAGE
<PAGE> 73
EXHIBIT C
COLLATERAL DOCUMENTS
1. REQUIRED DELIVERIES: Each Warehouse Advance Request shall include the
following:
A. Mortgage Note. Unless otherwise approved by Lender in its absolute
and sole discretion, Borrower shall deliver to Lender the original Mortgage Note
evidencing the indebtedness secured by the applicable Eligible Mortgage Loan,
duly executed by the mortgagor to Borrower as payee.
B. Endorsement. A blank endorsement by Borrower of the Mortgage Note,
duly executed by Borrower.
C. Mortgage. A copy of the Mortgage securing the Mortgage Note
certified by Borrower and by the closing attorney or title company presiding at
the closing to be a true and complete copy of the original which is being
recorded. The certified copy of the Mortgage must be a photocopy which shows due
execution by the individual(s) who has (have) executed the corresponding
Mortgage Note. The Mortgage must accurately describe the Mortgage Note which it
is intended to secure, and the Mortgage must be prepared in accordance with the
local recording requirements.
D. Assignment. A duly executed assignment to Lender of each Mortgage,
of the indebtedness secured thereby, and of all documents and rights related to
each Mortgage Loan, including the right to any casualty insurance proceeds or
condemnation awards. This instrument must accurately describe the Mortgage which
it is intended to assign, must be in recordable form, and be otherwise
satisfactory to Lender.
2. OTHER DELIVERIES: If requested by Lender, each Advance Request shall
also include the following:
A. Commitment for Title Insurance. A commitment for the issuance of an
ALTA title insurance loan policy in favor of Borrower and its successors and
assigns, in the amount of the original principal balance of the Mortgage Loan.
The interim title binder or commitment must obligate the title insurance company
to issue a policy insuring that the Mortgage is a valid first lien on the
premises described in the Mortgage, with only exceptions permitted by Lender.
The title binder or commitment must be countersigned by an authorized
representative or agent of the applicable title insurance company.
B. Appraisal. With respect to each Mortgage Loan, a copy of the
Appraisal.
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C. Insurance. Originals or certified copies of all fire and casualty
insurance policies, in form and issued by companies reasonably satisfactory to
Lender, covering the premises covered by each Mortgage, including, if
applicable, insurance against flood hazards, or a certificate of the insurance
underwriter evidencing the same, certifying that such insurance is in full force
and effect. The policy must stipulate that losses are payable in favor of
Borrower and its assigns.
D. Disclosure and Settlement Statements. Certified copies of all
settlement statements (including, without limitation, the HUD-1) and any
disclosure statements required under the Federal Truth-in-Lending Act and the
provisions of Regulation Z of the Federal Reserve Board, and any applicable
disclosure statements required under the Real Estate Settlement Procedures Act.
All disclosure statements must include all the necessary signatures of the
involved parties.
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EXHIBIT D
APPROVED SUBDIVISIONS
<PAGE> 76
EXHIBIT E
ELIGIBLE LOTS
<PAGE> 77
MODIFICATION AGREEMENT
DATE: December 30, 1998
PARTIES: Borrower: DESERT MOUNTAIN PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited partnership
Borrower 10550 E. Desert Hills Drive
Address: Scottsdale, Arizona 85262
Bank: NATIONAL BANK OF ARIZONA, a national banking
association.
Bank 3101 North Central Avenue
Address: Phoenix, Arizona 85012
RECITALS:
A. Bank has extended to Borrower credit ("Loan"), in the maximum
principal amount of $35,000,000.00, pursuant to that certain Master Revolving
Line of Credit Loan Agreement (Borrowing Base and Warehouse), dated as of May
14, 1998 ("Loan Agreement"), and evidenced by that certain Promissory Note
(Borrowing Base), dated May 14, 1998 ( "Borrowing Base Note") and that certain
Promissory Note (Warehouse), dated May 14, 1998 ("Warehouse Note"). That portion
of the Loan evidenced by the Borrowing Base Note shall hereinafter be referred
to as the "Borrowing Base Loan" and that portion of the Loan evidenced by the
Warehouse Note shall hereinafter be referred to as the "Warehouse Loan".
B. The Loan is secured by, among other things, that certain Deed of
Trust, Assignment of Rents and Security Agreement and Fixture Filing, dated May
14, 1998 ("Deed of Trust"), by Borrower, as trustor, for the benefit of Bank, as
beneficiary, recorded on June 15, 1998, as Instrument No. 98-0507873, records of
Maricopa County, Arizona, and that certain Pledge Agreement dated May 14, 1998
("Pledge Agreement"). The Deed of Trust, the Pledge Agreement and any and all
other agreements, documents, and instruments securing the Loan and the Note are
referred to individually and collectively as the "Security Documents". The Note,
the Loan Agreement, the Security Documents, any arbitration resolution, any
environmental certification and indemnity agreement, and all other agreements,
documents, and instruments evidencing, securing, or otherwise relating to the
Loan are sometimes referred to individually and collectively as the "Loan
Documents". Capitalized terms not otherwise defined herein shall have the same
meaning as set forth in the Loan Agreement.
<PAGE> 78
C. Borrower from time to time, offers members of The Desert Mountain
Club the opportunity to convert their non-equity Memberships in The Desert
Mountain Club to Deferred Equity Memberships for a Conversion Fee. In order to
facilitate collection of these fees, Borrower sometimes enters into carry back
promissory notes with the applicable Member in order to finance over time a
portion of the Conversion Fee. It is Borrower's request that the Bank modify the
Loan and the Loan Documents to provide for the pledge of these Conversion Notes
as additional collateral for the Loan and for the Bank to allow Borrower to
request Advances against the Conversion Notes under the Warehouse Loan. Bank is
willing to so modify the Loan and the Loan Documents, subject to the terms and
conditions herein.
DEFINITIONS:
In this Agreement, the following capitalized terms have the following meanings:
"CONVERSION LOAN" means a loan made by Borrower to a party who is not
an Affiliate of Borrower for the financing of a portion of the Conversion Fee to
convert a non-equity Membership into a Deferred Equity Membership, evidenced by
a Conversion Note.
"CONVERSION LOAN DUE DILIGENCE INFORMATION" means any and all
information regarding the Conversion Loans that exists or was developed in
connection with Borrower's or its agent's generating, servicing or analysis of
the Conversion Loans prior to assignment to Lender.
"CONVERSION NOTE" means a note in any of the forms attached hereto as
EXHIBIT A.
"DEFERRED EQUITY MEMBERSHIP" means a Membership in The Desert Mountain
Club issued pursuant to the Deferred Equity Membership Plan dated July 1, 1994,
as published by the Desert Mountain Club, as the same may be amended from time
to time.
"ELIGIBLE CONVERSION LOAN" means a Conversion Loan that satisfies the
conditions precedent pursuant to SECTION 2.1.4 of this Agreement.
"MEMBERS" shall mean non-equity members of The Desert Mountain Club who
have elected to convert their Memberships to Deferred Equity Memberships.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
Borrower acknowledges the accuracy of the Recitals.
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2. MODIFICATION OF LOAN DOCUMENTS.
2.1 The Loan Documents are modified as follows, by supplementing the
Loan Agreement to add the following terms and conditions relating to the
Conversion Loans:
2.1.1 Warehouse Advances Against Eligible Conversion Notes .
(a) Commitment to Make Warehouse Advances Against Eligible
Conversion Notes. Subject to the applicable terms and conditions of the
Loan Agreement and this Agreement and from time to time prior to the
Maturity Date, Lender agrees to make Warehouse Advances to Borrower up
to the current Warehouse Commitment. Warehouse Advances shall be used
by Borrower for general working capital purposes. Warehouse Advances
shall continue to be made at the request of Borrower, in the manner
provided in SECTION 2.2 of the Loan Agreement against the pledge of
such Eligible Conversion Loans and Eligible Mortgage Loans as
Collateral therefor. The Maximum Allowed Warehouse Advance against any
Eligible Conversion Loan shall be an amount equal to 100% of the face
amount of such Eligible Conversion Loan.
(b) Use of Warehouse Advances. Subject to the terms and
conditions of this Agreement and provided no Unmatured Event of Default
has occurred and is continuing, Lender agrees, from time to time during
the period from the date hereof to and including the Maturity Date, to
make Warehouse Advances to Borrower for the purpose of warehousing
carry back Conversion Notes and Mortgage Notes and Mortgages in favor
of Borrower, provided the total aggregate principal amount outstanding
at any one time of all such Warehouse Advances shall not exceed the
Warehouse Commitment Amount.
(c) Conditions Precedent. The obligation of Lender to make any
Warehouse Advances against Eligible Conversion Notes is subject to the
satisfaction, on or before the date of funding of each such Warehouse
Advance, of the following conditions precedent:
(i) Effective Date. All of the conditions precedent
set forth in SECTIONS 4.1 of the Loan Agreement shall have been
satisfied.
(ii) No Defaults. No Unmatured Event of Default or
Event of Default shall have occurred and be continuing.
(iii) Accuracy of Representations and Warranties. All
representations and warranties made herein or in any other Loan
Document shall be true and correct as of the date of each such
Warehouse Advance as if made on and as of such date.
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(iv) Advance Request. Borrower shall have executed
and delivered to Lender a properly completed and duly executed request
for Warehouse Advance in such form as Lender may require from time to
time (an "Advance Request"). Each Advance Request shall constitute a
representation and warranty by Borrower that (A) each of the conditions
precedent to the requested Warehouse Advance set forth in this SECTION
2.1.1(c) have been satisfied, (B) all the Eligible Conversion Loans
included in such Advance Request have closed and been funded or will be
closed and funded simultaneously with the making of the requested
Warehouse Advance and (C) Borrower is in possession of the originals of
all items listed in SECTION 2.1.1(c)(v) hereto.
(v) Collateral Documents. Borrower shall have
delivered to Lender, (i) unless otherwise approved by Lender in its
absolute and sole discretion, the original Conversion Note evidencing
the indebtedness of the applicable Eligible Conversion Loan, duly
executed by the Member to Borrower as payee and (ii) a blank
endorsement by Borrower of the Conversion Note, duly executed by
Borrower. Lender shall have the right, on not less than three (3)
Business Days' prior notice to Borrower, as reasonably required to
include different or additional items than those listed above to
conform to current legal requirements or Lender's practices. The
documents referenced in this SECTION 2.1.1(c)(v) hereinafter shall be
included in the definition of "Collateral Documents" as defined in the
Loan Agreement.
2.1.2 Repayment of Warehouse Loan. Borrower shall be obligated to pay
to Lender, without the necessity of prior demand or notice from Lender,
the amount of any outstanding Warehouse Advance against a specific
Eligible Conversion Loan as shown on Lender's records, upon the
occurrence of any of the following events:
(a) The Collateral Documents, upon examination by Lender, are
found not to be in compliance with the requirements of this Agreement;
(b) If any of the items required to be delivered pursuant to
SECTION 2.1.1(c)(v) after a Warehouse Advance are not delivered as and
when required or if delivered are not in compliance with this
Agreement;
(c) Five (5) Business Days have elapsed from the date a
Collateral Document was delivered to Borrower for correction or
completion, without being returned to Lender;
(d) Such Eligible Conversion Loan is defaulted and remains in
default for a period of sixty (60) days; or
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(e) If any of the representations and warranties set forth in
SECTION 4.6 of this Agreement with respect to an Eligible Conversion
Loan are untrue or incorrect in any material respect.
2.1.3. Remargining; Principal Payments; Warehouse. Anything in the Loan
Documents to the contrary notwithstanding, Borrower shall, upon demand
by Lender, pay to Lender an amount equal to the amount by which total
outstanding Warehouse Advances exceed the lesser (i) the Warehouse
Commitment Amount or (ii) the aggregate outstanding principal balance
of all Eligible Mortgage Loans and Eligible Conversion Loans. Each
payment pursuant to this SECTION 2.1.3 will be due no later than 11:00
a.m. (Phoenix, Arizona time) on the 5th Business Day after the day upon
which Lender notifies Borrower in writing that such payment is
required.
2.1.4 Additional Conditions Precedent to All Warehouse Advances Against
Eligible Conversion Loans. In addition to the Requirements of SECTION
2.1.1(c) of this Agreement, Lender will only be obligated to make
Warehouse Advances against Eligible Conversion Loans if Borrower, at
Borrower's sole cost and expense, shall have delivered to Lender each
of the following items. Each of the items required by this SECTION
2.1.4 must be satisfactory to Lender and each of the conditions
precedent referenced in this SECTION 2.1.4 must be satisfied:
(a) Conversion Loan Criteria. If the Conversion Loan has been
used to finance not more than 80% of the Conversion Fee, then the term
shall be not greater than five (5) years (15 year amortization). If the
Conversion Loan has been used to finance greater than 80% but not more
than 90% of the Conversion Fee, then the term shall be not greater than
five (5) years (5 year amortization). For all Conversion Loans,
interest payments shall be due not less frequently than quarterly and
the maximum principal amount financed shall not exceed 90% of the
Conversion Fee .
(b) Other Conditions Precedent. Borrower shall have satisfied
all conditions precedent in SECTIONS 4.1 and 4.5 of the Loan Agreement,
as applicable.
(c) Conversion Loan Reports. On or before the day that is the
15th day of each Calendar Month, Borrower will prepare and submit to
Lender a report relating to the Conversion Loans ("Conversion Loan
Report"), in form and substance satisfactory to Lender, including for
each Conversion Loan pledged as Collateral on the Loan, among other
things that Lender may require from time to time, the following: (i)
the Member's name; (ii) the original principal balance; (iii) the
outstanding principal balance; (iv) the last payment date; (v) the next
payment due date; (vi) the number of days past due (if any) and (vii)
the maturity date. Borrower shall not prepare and submit more than one
(1) Conversion Loan Report per Calendar Month.
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(d) Lender's Right to Lend. Notwithstanding anything contained
herein to the contrary, Lender, in its sole and absolute discretion,
may decide to accept Conversion Loans as Collateral which do not
satisfy any of the foregoing conditions precedent set forth in this
SECTION 2.1.4, on a case by case basis, and make Warehouse Advances
against such Conversion Loans.
2.2 Each of the Loan Documents is modified to provide that it shall be
a default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of Borrower herein or if any representation or
warranty by Borrower herein or by any guarantor in any related Consent and
Agreement of Guarantor(s) is materially incomplete, incorrect, or misleading as
of the date hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents
shall be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or interests
in property granted as security in the Loan Documents shall remain as security
for the Loan and the obligations of Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial
condition of Borrower or any other person whose financial statement has been
delivered to Bank in connection with the Loan from the most recent financial
statement received by Bank.
4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance with
their terms.
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4.6 Borrower hereby represents and warrants to Lender that, as of the
date hereof, as to each Eligible Conversion Loan, except as otherwise disclosed
in writing:
(i) Borrower is the sole owner and holder of such Conversion
Loan;
(ii) Borrower has full right and authority to assign such
Conversion Loan;
(iii) Such Conversion Loan meets, or is exempt from,
applicable state or federal laws, regulations and other
requirements, pertaining to usury; and any and all other
requirements of any federal, state or local law including,
without limitation, truth-in-lending, consumer credit
protection, equal credit opportunity or disclosure laws
applicable to such Conversion Loan have been materially
complied with;
(iv) The Conversion Note and other agreements executed in
connection therewith, are genuine, and each is the legal,
valid and binding obligation of the maker thereto, enforceable
in accordance with its terms, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting the enforcement of creditors' rights
generally and by general equity principles (regardless of
whether such enforcement is considered in a proceeding in
equity or at law);
(v) Borrower is assigning such Conversion Loan free and clear
of any and all liens, pledges, charges or security interests
of any nature encumbering such Conversion Loan;
(vi) To the best of Borrower's knowledge and belief, all
Conversion Loan Due Diligence Information requested by Lender
was provided to Lender and was true and correct in all
material respects, excluding Conversion Loan Due Diligence
information prepared by a party other than Borrower;
(vii) Borrower has not modified the Conversion Note in any
material respect, or satisfied, canceled or subordinated any
Conversion Note in whole or in part, or executed any
instrument of release, cancellation or satisfaction;
(viii) There is no default, breach, violation or event of
acceleration existing under any Conversion Note and no event
which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a
default, breach, violation or event of acceleration, other
than payments less than sixty (60) days past due on any
Conversion Note;
(ix) Any Conversion Note contains customary and enforceable
provisions such as to render the rights and remedies of the
holder thereof adequate for the realization of the amount due
under the Conversion Note;
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(xiii) Each Conversion Loan is currently being serviced by the
Borrower.
The failure of any representation or warranty of Borrower in this
SECTION 4.6 to be true with respect to an Eligible Conversion Loan shall not
constitute and Event of Default under the Loan, however, any and all Conversion
Loans for which such representations and warranties have proved to be untrue
shall no longer be Eligible Conversion Loans and Borrower shall be required to
meet the remargining requirements of SECTION 2.1.3 of this Agreement based on
the new Maximum Allowed Warehouse Advance after excluding the subject Conversion
Loans.
4.7 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly authorized by all requisite action
by or on behalf of Borrower. This Agreement has been duly executed and delivered
on behalf of Borrower.
5. BORROWER COVENANTS.
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such
additional agreements, documents, and instruments as reasonably required by Bank
to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in law
or equity, that Borrower has or in the future may have, whether known or
unknown, (i) in respect of the Loan, the Loan Documents, or the actions or
omissions of Bank in respect of the Loan or the Loan Documents and (ii) arising
from events occurring prior to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this
Agreement, Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all
amounts, other than interest and principal, due and payable by Borrower under
the Loan Documents as of the date hereof.
5.3.2 All of the internal and external costs and expenses
incurred by Bank in connection with this Agreement (including, without
limitation, outside attorneys fees).
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6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
Bank shall not be bound by this Agreement until each of the following shall have
occurred: (i) Bank has executed and delivered this Agreement and (ii) Borrower
has performed all of the obligations of Borrower under this Agreement to be
performed contemporaneously with the execution and delivery of this Agreement.
7. ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
The Loan Documents as modified herein contain the entire understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, and understandings. No
provision of the Loan Documents as modified herein may be changed, discharged,
supplemented, terminated, or waived except in a writing signed by Bank and
Borrower.
8. BINDING EFFECT.
The Loan Documents as modified herein shall be binding upon, and inure to the
benefit of, Borrower and Bank and their respective successors and assigns.
9. CHOICE OF LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Arizona, without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
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DATED as of the date first above stated.
DESERT MOUNTAIN PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Desert Mountain Development Corporation, a
Delaware corporation, General Partner
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
NATIONAL BANK OF ARIZONA, a national banking
association
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
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SECOND MODIFICATION AGREEMENT
DATE: March 31, 1999
PARTIES: Borrower: DESERT MOUNTAIN PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited partnership
Borrower 10550 E. Desert Hills Drive
Address: Scottsdale, Arizona 85262
Lender: NATIONAL BANK OF ARIZONA, a national banking
association.
Lender 3101 North Central Avenue
Address: Phoenix, Arizona 85012
RECITALS:
A. Lender has extended to Borrower credit ("Loan"), in the
maximum principal amount of $35,000,000.00, pursuant to that certain Master
Revolving Line of Credit Loan Agreement (Borrowing Base and Warehouse), dated as
of May 14, 1998 ("Loan Agreement"), and evidenced by that certain Promissory
Note (Borrowing Base), dated May 14, 1998 ( "Borrowing Base Note") and that
certain Promissory Note (Warehouse), dated May 14, 1998 ("Warehouse Note"). That
portion of the Loan evidenced by the Borrowing Base Note shall hereinafter be
referred to as the "Borrowing Base Loan" and that portion of the Loan evidenced
by the Warehouse Note shall hereinafter be referred to as the "Warehouse Loan".
B. The Loan is secured by, among other things, that certain
Deed of Trust, Assignment of Rents and Security Agreement and Fixture Filing,
dated May 14, 1998 ("Deed of Trust"), by Borrower, as trustor, for the benefit
of Lender, as beneficiary, recorded on June 15, 1998, as Instrument No.
98-0507873, records of Maricopa County, Arizona, and that certain Pledge
Agreement dated May 14, 1998 ("Pledge Agreement"). The Deed of Trust, the Pledge
Agreement and any and all other agreements, documents, and instruments securing
the Loan and the Note are referred to individually and collectively as the
"Security Documents". Capitalized terms not otherwise defined herein shall have
the same meaning as set forth in the Loan Agreement.
C. Lender and Borrower have executed and delivered previously
that certain Modification Agreement dated December 31, 1998 (the
"Modification"), modifying the terms of the Loan, the Note, the Credit
Agreement, and/or the Security Documents (The Note, the Credit Agreement, the
Security Documents, any arbitration resolution, any environmental certification
and
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indemnity agreement, and all other agreements, documents, and instruments
evidencing, securing, or otherwise relating to the Loan, as modified in the
Modification, are sometimes referred to individually and collectively as the
"Loan Documents". Hereinafter, "Note", "Credit Agreement", "Deed of Trust",
Pledge Agreement, and "Security Documents" shall mean such documents as modified
in the Modification.)
D. Borrower has requested that Lender (i) increase the
Borrowing Base Commitment Amount; (ii) add certain Lots within the "Village of
Lookout Ridge" (as more particularly described in Exhibit A attached hereto, the
"Additional Real Property"), as Collateral under the Borrowing Base; (iii) allow
for Warehouse Advances against loans other than Conversion Loans and Mortgage
Loans; and (iv) modify the Loan Documents as further provided in this Agreement.
Lender is willing to so modify the Loan and the Loan Documents, subject to the
terms and conditions herein.
DEFINITIONS:
In this Agreement, the following capitalized terms have the following meanings:
"ELIGIBLE MISCELLANEOUS LOANS" means a Miscellaneous Loan which
Borrower would like to include as Collateral under the Loan for purposes of
obtaining Warehouse Advances and Lender has agreed, IN ITS SOLE AND ABSOLUTE
DISCRETION, to include as an Eligible Miscellaneous Loan subject further to the
terms and conditions of this Agreement and the Loan Agreement.
"MISCELLANEOUS LOAN" means a loan made by Borrower to a party who
is not an Affiliate of Borrower (or in the alternative made by Lender to a party
who is not an Affiliate of Borrower, with full recourse to Borrower), which is
neither a Mortgage Loan nor a Conversion Loan but which Lender may make
Warehouse Advances against, pursuant to the terms and conditions of SECTION
2.1.3 of this Agreement.
"MISCELLANEOUS LOAN DUE DILIGENCE INFORMATION" means any and all
information regarding the Miscellaneous Loans that exists or was developed in
connection with Borrower's or its agent's generating, servicing or analysis of
the Miscellaneous Loans prior to assignment to Lender.
"MISCELLANEOUS LOAN SUBLIMIT" means a sublimit under the
Warehouse Commitment Amount for Warehouse Advances against Eligible
Miscellaneous Loans, which sublimit shall not exceed Three Million and No/100
Dollars ($3,000,000.00). The Miscellaneous Loan Sublimit relates solely to
Borrower's ability to obtain Warehouse Advances against Miscellaneous Loans and
shall not impact Borrower's ability to obtain Warehouse Advances against
Eligible Conversion Loans and Eligible Mortgage Loans up to the Warehouse
Commitment Amount, subject to the terms and conditions of the Loan Agreement.
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"MISCELLANEOUS NOTE" means a promissory note which evidences a
Miscellaneous Loan.
"MISCELLANEOUS NOTE AMOUNT" means the outstanding unpaid
principal amount of a Miscellaneous Note at the time such Miscellaneous Note is
pledged to Lender.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Lender agree as follows:
1. ACCURACY OF RECITALS.
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
2.1 The Loan Documents are modified as follows:
2.1.1 The Maturity Date of the Loan and the Note is changed
from MAY 14, 1999 to JUNE 1, 2000. On the Maturity Date Borrower shall pay to
Lender the unpaid principal, accrued and unpaid interest, and all other amounts
payable by Borrower under the Loan Documents as modified herein.
2.1.2 The maximum Borrowing Base Commitment Amount available
for Borrowing Base Advances under the Borrowing Base Loan and the Borrowing Base
Note is hereby amended to THIRTY-FIVE MILLION AND NO/100 DOLLARS
($35,000,000.00), subject to the terms and conditions of the Loan Documents
applicable to Borrowing Base Advances.
2.1.3 The Loan Documents are modified as follows, by
supplementing the Loan Agreement to add the following terms and conditions
relating to the Miscellaneous Loans:
2.1.3.1 Warehouse Advances Against Eligible Miscellaneous
Loans.
(a) Commitment to Make Warehouse Advances Against Eligible
Miscellaneous Loans. Lender may allow Borrower Warehouse Advances
not to exceed the Miscellaneous Loan Sublimit, under the
Warehouse Commitment Amount against Eligible Miscellaneous Loans,
subject to the applicable terms and conditions of the Loan
Agreement and this Agreement and from time to time prior to the
Maturity Date. Warehouse Advances hereunder shall be used by
Borrower for general working capital
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purposes. Warehouse Advances shall continue to be made at the
request of Borrower, in the manner provided in SECTION 2.2 of the
Loan Agreement against the pledge of such Eligible Miscellaneous
Loans as well as Eligible Conversion Loans and Eligible Mortgage
Loans as Collateral therefor. The Maximum Allowed Warehouse
Advance against any Eligible Miscellaneous Loan shall be an
amount equal to 100% of the face amount of such Eligible
Miscellaneous Loan.
(b) Use of Warehouse Advances. Subject to the terms and
conditions of the Loan Agreement and this Agreement and provided
no Unmatured Event of Default has occurred and is continuing,
Lender agrees, from time to time during the period from the date
hereof to and including the Maturity Date, to make Warehouse
Advances to Borrower for the purpose of warehousing Miscellaneous
Notes, Eligible Conversion Notes and Mortgage Notes and Mortgages
in favor of Borrower, provided the total aggregate principal
amount outstanding at any one time of all such Warehouse Advances
shall not exceed the Warehouse Commitment Amount and the total
aggregate principal amount outstanding at any one time of all
such Warehouse Advances made against Eligible Miscellaneous Loans
shall not exceed the Miscellaneous Loan Sublimit.
(c) Conditions Precedent. Notwithstanding the fact that
Lender's agreement to include a Miscellaneous Loan as an Eligible
Loan is at Lender's sole and absolute discretion, the obligation
of Lender to make any Warehouse Advances against Eligible
Miscellaneous Loans is subject further to the satisfaction, on or
before the date of funding of each such Warehouse Advance, of the
following conditions precedent:
(i) Approval. Borrower shall
have obtained Lender's approval of the inclusion the applicable
Miscellaneous Loan as an Eligible Miscellaneous Loan.
(ii) Effective Date. All of the
conditions precedent set forth in SECTIONS 4.1 of the Loan
Agreement shall have been satisfied.
(iii) No Defaults. No Unmatured
Event of Default or Event of Default shall have occurred and be
continuing.
(iv) Accuracy of Representations
and Warranties. All representations and warranties made herein or
in any other Loan Document shall be true and correct as of the
date of each such Warehouse Advance as if made on and as of such
date.
(v) Advance Request. Borrower
shall have executed and delivered to Lender a properly completed
and duly executed request for Warehouse Advance in such form as
Lender may require from time to time (an
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"Advance Request"). Each Advance Request shall constitute a
representation and warranty by Borrower that (A) each of the
conditions precedent to the requested Warehouse Advance set forth
in this SECTION 2.1.3.1(c) have been satisfied, (B) all the
Eligible Miscellaneous Loans included in such Advance Request
have closed and been funded or will be closed and funded
simultaneously with the making of the requested Warehouse Advance
and (C) Borrower is in possession of the originals of all items
listed in SECTION 2.1.3.1(c)(VI) hereto.
(vi) Collateral Documents.
Borrower shall have delivered to Lender, (i) unless otherwise
approved by Lender in its absolute and sole discretion, the
original Miscellaneous Note evidencing the indebtedness of the
applicable Eligible Miscellaneous Loan, duly executed by the
maker thereunder to Borrower as payee; (ii) a blank endorsement
by Borrower of the Miscellaneous Note, duly executed by Borrower;
and (iii) any other security agreements, documents, instruments
or other agreements related to the Miscellaneous Loan with any
applicable assignments or endorsements to Lender thereof, which
may be requested by Lender in its sole and absolute discretion.
Lender shall have the right, on not less than three (3) Business
Days' prior notice to Borrower, as reasonably required to include
different or additional items than those listed above to conform
to current legal requirements or Lender's practices. The
documents referenced in this SECTION 2.1.3.1(c)(vi) hereinafter
shall be included in the definition of "Collateral Documents" as
defined in the Loan Agreement.
2.1.3.2 Repayment of Warehouse Loan. Borrower shall be
obligated to pay to Lender, without the necessity of prior demand
or notice from Lender, the amount of any outstanding Warehouse
Advance against a specific Eligible Miscellaneous Loan as shown
on Lender's records, upon the occurrence of any of the following
events:
(a) The Collateral Documents, upon examination by Lender,
are found not to be in compliance with the requirements of this
Agreement;
(b) If any of the items required to be delivered pursuant
to SECTION 2.1.3.1(c)(vi) after a Warehouse Advance are not
delivered as and when required or if delivered are not in
compliance with this Agreement;
(c) Five (5) Business Days have elapsed from the date a
Collateral Document was delivered to Borrower for correction or
completion, without being returned to Lender;
(d) Such Eligible Miscellaneous Loan is defaulted and
remains in default for a period of sixty (60) days; or
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(e) If any of the representations and warranties set forth
in SECTION 4.6 of this Agreement with respect to an Eligible
Miscellaneous Loan are untrue or incorrect in any material
respect.
2.1.3.3 Remargining; Principal Payments; Warehouse.
Anything in the Loan Documents to the contrary notwithstanding,
Borrower shall, upon demand by Lender, pay to Lender an amount
equal to the amount by which total outstanding Warehouse Advances
exceed the lesser of (i) the Warehouse Commitment Amount or (ii)
the aggregate outstanding principal balance of all Eligible
Conversion Loans, Eligible Mortgage Loans and Eligible
Miscellaneous Loans and in addition, Borrower shall, upon demand
by Lender, pay to Lender an amount equal to the amount by which
total outstanding Warehouse Advances against Eligible
Miscellaneous Loans exceed the lesser of (i) the Miscellaneous
Loan Sublimit or (ii) the aggregate outstanding principal balance
of all Eligible Miscellaneous Loans. Each payment pursuant to
this SECTION 2.1.3.3 will be due no later than 11:00 a.m.
(Phoenix, Arizona time) on the 5th Business Day after the day
upon which Lender notifies Borrower in writing that such payment
is required.
2.1.3.4 Additional Conditions Precedent to All Warehouse
Advances Against Eligible Miscellaneous Loans. In addition to the
Requirements of SECTION 2.1.3.1(c) of this Agreement, Lender will
only be obligated to make Warehouse Advances against Eligible
Miscellaneous Loans if Borrower, at Borrower's sole cost and
expense, shall have delivered to Lender each of the following
items. Each of the items required by this SECTION 2.1.3.4 must be
satisfactory to Lender and each of the conditions precedent
referenced in this SECTION 2.1.3.4 must be satisfied:
(a) Other Conditions Precedent. Borrower shall have
satisfied all conditions precedent in SECTIONS 4.1 and 4.6 of the
Loan Agreement, as applicable.
(b) Miscellaneous Loan Reports. On or before the day that
is the 15th day of each Calendar Month, Borrower will prepare and
submit to Lender a report relating to the Miscellaneous Loans
("Miscellaneous Loan Report"), in form and substance satisfactory
to Lender, including for each Miscellaneous Loan pledged as
Collateral on the Loan, among other things that Lender may
require from time to time, the following: (i) the maker's name;
(ii) the original principal balance; (iii) the outstanding
principal balance; (iv) the last payment date; (v) the next
payment due date; (vi) the number of days past due (if any) and
(vii) the maturity date. Borrower shall not prepare and submit
more than one (1) Miscellaneous Loan Report per Calendar Month.
2.1.4 SECTION 3.2(a) of the Loan Agreement is hereby deleted
in its entirety and the following is inserted in place thereof:
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(a) Limitation on Spec Units. Borrower may not include in
Eligible Collateral more than thirty (30) Spec Units financed
under the Borrowing Base Commitment. In the event a Unit is
subject to a Purchase Agreement which calls for a cash earnest
money deposit or down payment of less than twenty percent (20%)
of the purchase price of the Unit, such Unit shall be treated as
a Spec Unit for purposes of determining the Maximum Allowed
Borrowing Base Advance for said Unit, however, said Unit shall
not be included when determining the limitation on Spec Units
pursuant to this SECTION 3.2(a).
2.1.5 A new SECTION 6.12(d) is hereby added to the Loan
Agreement as follows:
(d) Vertical Construction Inspection. In addition,
periodically, as may be determined by Lender in its sole and
absolute discretion, an officer of Lender or in the alternative,
an outside inspector chosen by Lender, shall inspect and verify
the percentage of completion of Units under construction and
shall prepare a report in form and substance satisfactory to
Lender, regarding the percentage of completion of the Units under
construction.
2.2 Each of the Loan Documents is modified to provide that it
shall be a default or an event of default thereunder if Borrower shall fail to
comply with any of the covenants of Borrower herein or if any representation or
warranty by Borrower herein or by any guarantor in any related Consent and
Agreement of Guarantor(s) is materially incomplete, incorrect, or misleading as
of the date hereof.
2.3 Each reference in the Loan Documents to any of the Loan
Documents shall be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or interests
in property granted as security in the Loan Documents shall remain as security
for the Loan and the obligations of Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Lender:
4.1 No default or event of default under any of the Loan Documents
as modified herein, nor any event, that, with the giving of notice or the
passage of time or both, would be a default or an event of default under the
Loan Documents as modified herein has occurred and is continuing.
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4.2 There has been no material adverse change in the financial
condition of Borrower or any other person whose financial statement has been
delivered to Lender in connection with the Loan from the most recent financial
statement received by Lender.
4.3 Each and all representations and warranties of Borrower in the
Loan Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs
with respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid,
and binding obligation of Borrower, enforceable against Borrower in accordance
with their terms.
4.6 Borrower hereby represents and warrants to Lender that, with
respect to any Miscellaneous Loan presented by Borrower to Lender for inclusion
as an Eligible Miscellaneous Loan hereunder, unless as otherwise disclosed in
writing:
(i) Borrower shall be the sole owner and holder of such
Miscellaneous Loan;
(ii) Borrower shall have full right and authority to
assign such Miscellaneous Loan;
(iii) Such Miscellaneous Loan shall meet, or be exempt
from, applicable state or federal laws, regulations and
other requirements, pertaining to usury; and any and all
other requirements of any federal, state or local law
including, without limitation, truth-in-lending, consumer
credit protection, equal credit opportunity or disclosure
laws applicable to such Miscellaneous Loan shall have been
materially complied with;
(iv) The Miscellaneous Note and other agreements executed
in connection therewith, shall genuine, and each shall be
the legal, valid and binding obligation of the maker
thereto, enforceable in accordance with its terms, except
as such enforcement may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting
the enforcement of creditors' rights generally and by
general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at
law);
(v) Borrower shall be assigning such Miscellaneous Loan
free and clear of any and all liens, pledges, charges or
security interests of any nature encumbering such
Miscellaneous Loan;
(vi) To the best of Borrower's knowledge and belief, all
Miscellaneous Loan Due Diligence Information requested by
Lender shall be provided to Lender and
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shall be true and correct in all material respects,
excluding Miscellaneous Loan Due Diligence information
prepared by a party other than Borrower;
(vii) Borrower shall not have modified the Miscellaneous
Note in any material respect, or satisfied, canceled or
subordinated any Miscellaneous Note in whole or in part,
or executed any instrument of release, cancellation or
satisfaction;
(viii) There shall have been no default, breach, violation
or event of acceleration existing under any Miscellaneous
Note and no event which, with the passage of time or with
notice and the expiration of any grace or cure period,
would constitute a default, breach, violation or event of
acceleration, other than payments less than sixty (60)
days past due on any Miscellaneous Note;
(ix) Any Miscellaneous Note shall contain customary and
enforceable provisions such as to render the rights and
remedies of the holder thereof adequate for the
realization of the amount due under the Miscellaneous
Note;
(xiii) Each Miscellaneous Loan shall be currently serviced
by the Borrower or the Servicing Agent.
The failure of any representation or warranty of Borrower in this
SECTION 4.6 to be true with respect to an Eligible Miscellaneous Loan shall not
constitute and Event of Default under the Loan, however, any and all
Miscellaneous Loans for which such representations and warranties have proved to
be untrue shall no longer be Eligible Miscellaneous Loans and Borrower shall be
required to meet the remargining requirements of SECTION 2.1.3.3 of this
Agreement based on the new Maximum Allowed Warehouse Advance after excluding the
subject Miscellaneous Loans.
4.7 Borrower is validly existing under the laws of the State of
its formation or organization and has the requisite power and authority to
execute and deliver this Agreement and to perform the Loan Documents as modified
herein. The execution and delivery of this Agreement and the performance of the
Loan Documents as modified herein have been duly authorized by all requisite
action by or on behalf of Borrower. This Agreement has been duly executed and
delivered on behalf of Borrower.
5. BORROWER COVENANTS.
Borrower covenants with Lender:
5.1 Borrower shall execute, deliver, and provide to Lender such
additional agreements, documents, and instruments as reasonably required by
Lender to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges
Lender and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all
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actions, causes of action, claims, debts, demands, liabilities, obligations, and
suits, of whatever kind or nature, in law or equity, that Borrower has or in the
future may have, whether known or unknown, (i) in respect of the Loan, the Loan
Documents, or the actions or omissions of Lender in respect of the Loan or the
Loan Documents and (ii) arising from events occurring prior to the date of this
Agreement.
5.3 Contemporaneously with the execution and delivery of this
Agreement, Borrower has paid to Lender:
5.3.1 All accrued and unpaid interest under the Note and all
amounts, other than interest and principal, due and payable by Borrower under
the Loan Documents as of March 31, 1999.
5.3.2 All of the internal and external costs and expenses
incurred by Lender in connection with this Agreement (including, without
limitation, outside attorneys fees).
5.4 Contemporaneously with the execution and delivery of this
Agreement, Borrower has executed and delivered, or caused to be executed and
delivered, to Lender, an Amendment to the Deed of Trust, dated of even date
herewith ("Amendment") to be recorded in the Office of the County Clerk of
Maricopa County, Arizona and UCC-2 financing statements ("UCC-2s"), to be filed
with the Arizona Secretary of State and recorded with the Maricopa County
recorder's office. As used in this Agreement, "Loan Documents" shall include the
Deed of Trust as amended by the Amendment and the financing statements executed
in connection with the Loan as amended by the UCC-2.
5.5 Contemporaneously with the execution and delivery of this
Agreement, Borrower, Lender and Crescent have executed and delivered, or caused
to be executed and delivered, to Lender, a Subordination Agreement, dated of
even date herewith, in form and substance satisfactory to Lender, to be recorded
in the Office of the County Clerk of Maricopa County, Arizona.
5.6 Contemporaneously with the execution and delivery of this
Agreement, Borrower has caused to be delivered to Lender, at Borrower's sole
cost and expense, such endorsements to the Title Insurance Policy as Lender
shall require, in its sole and absolute discretion, recognizing the modification
of the Loan Documents herein, including the increase to the Borrowing Base
Commitment Amount and the inclusion as additional Collateral of the Additional
Real Property and subject only to the exceptions in Schedule B, Part I, of the
commitment for title insurance as Lender may approve.
6. EXECUTION AND DELIVERY OF AGREEMENT BY LENDER.
Lender shall not be bound by this Agreement until each of the following shall
have occurred: (i) Lender has executed and delivered this Agreement and (ii)
Borrower has performed all of the obligations of Borrower under this Agreement
to be performed contemporaneously with the execution and delivery of this
Agreement.
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7. ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
The Loan Documents as modified herein contain the entire understanding and
agreement of Borrower and Lender in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, and understandings. No
provision of the Loan Documents as modified herein may be changed, discharged,
supplemented, terminated, or waived except in a writing signed by Lender and
Borrower.
8. BINDING EFFECT.
The Loan Documents as modified herein shall be binding upon, and inure to the
benefit of, Borrower and Lender and their respective successors and assigns.
9. CHOICE OF LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Arizona, without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
DATED as of the date first above stated.
DESERT MOUNTAIN PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Desert Mountain Development Corporation, a
Delaware corporation, General Partner
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
11
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NATIONAL BANK OF ARIZONA, a national banking
association
By:
---------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
12
<PAGE> 99
EXHIBIT A
LEGAL DESCRIPTION - LOOKOUT RIDGE
1
<PAGE> 100
Account No. ___________
PROMISSORY NOTE
(Borrowing Base)
$25,000,000.00 Phoenix, Arizona May 14, 1998
1. Promise to Pay.
FOR VALUE RECEIVED, DESERT MOUNTAIN PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited partnership ("Borrower"), promises to pay on or
before the May 14, 1999 (the "Maturity Date") to NATIONAL BANK OF ARIZONA, a
national banking association ("Bank"), or order, the aggregate principal amount
outstanding as shown on Bank's records which shall at all times be conclusive
and govern, with interest (payable on the first day of each calendar month after
the date of the first advance) on the unpaid balance outstanding from time to
time at an annual rate equal to the "Prime Rate" published from time to time in
The Western Edition of The Wall Street Journal, as such rate shall change from
time to time during the term hereof ("Agreed Rate").
3. Calculation of Interest.
Interest shall be calculated on a 360-day year for all advances, but,
in any case, shall be computed for the actual number of days in the period for
which interest is charged, which period shall consist of a 365-day period on an
annual basis.
4. Place of Payment.
Principal and interest shall be payable at the 3101 North Central
Avenue office of Bank in Phoenix, Arizona, or at such other place as the holder
hereof may designate. All amounts payable hereunder shall be paid in lawful
money of the United States.
5. Maximum Amount of Advances.
Bank and Borrower have established specific instructions and procedures
by which Advances on the Loan will be disbursed pursuant to the terms and
conditions of that certain Master Revolving Line of Credit Loan Agreement of
even date herewith (the "Loan Agreement"), but nothing contained herein shall
create a duty on the part of Bank to make any Advance if an Event of Default or
Unmatured Event of Default has occurred. This Note evidences a revolving line of
credit and amounts hereunder may be re-borrowed by Maker in accordance with the
terms of the Loan Agreement. Prior to the Maturity Date, the Loan may be drawn,
repaid and drawn again in unlimited repetition so long as the sum of (a) the
amounts outstanding on the Loan, and (b) the amounts that are committed but not
yet advanced on the Loan never exceed the maximum principal amount of
<PAGE> 101
Twenty-Five Million and No/100 Dollars ($25,000,000.00). Capitalized terms used
in this Note and not otherwise defined are used with the meanings set forth in
the Loan Agreement and other Loan Documents.
6. Application of Payments.
Absent an Event of Default or Unmatured Event of Default, any payments
received by the holder hereof shall be applied first, to sums other than
principal and interest due the holder hereof, second, to the payment of all
interest accrued to the date of such payment, and the balance, if any, to the
payment of principal. Any payments received by the holder hereof after any
default shall be applied to the amounts specified in this paragraph in such
order as the holder hereof may, in its sole discretion, elect.
7. Late Charge and Default Interest.
If any payment of interest and/or principal is not received by the
holder hereof when such payment is due, then, as additional remedies, (a) a late
charge of five percent (5%) of the amount due and unpaid will be added to the
delinquent amount for any payment past due in excess of ten (10) days, and (b)
all past due payments of principal and/or interest shall bear interest from
their due date until paid at an annual rate equal to four percent (4%) in excess
of the Agreed Rate, payable on demand.
8. Default.
Borrower will be in default under this Note upon the occurrence of an
Event of Default as defined pursuant to Article 8 of the Loan Agreement. Time is
of the essence with regard to all payment obligations in this Note. Upon an
Event of Default, this Note shall become immediately due and payable at the
option of the holder hereof without presentment or demand or any notice to
Borrower or any other person obligated hereon.
9. Exercise of Rights.
Failure to exercise any remedy or right hereunder shall not constitute
a waiver of the right to exercise the same in the event of any subsequent
default.
10. Costs of Collection.
In the event any holder hereof utilizes the services of an attorney in
attempting to collect the amounts due hereunder or to enforce the terms hereof
or of any agreements related to this indebtedness, or if any holder hereof
becomes party plaintiff or defendant in any legal proceeding in relation to the
property described in any instrument securing this Note or for the recovery or
protection of the indebtedness evidenced hereby, Borrower, its successors and
assigns, shall repay to such holder hereof, on demand, all costs and expenses so
incurred, including reasonable attorney's
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fees, including those costs, expenses and attorney's fees incurred after the
filing by or against the Borrower of any proceeding under any chapter of the
Bankruptcy Code, or similar federal or state statute, and whether incurred in
connection with the involvement of any holder hereof as creditor in such
proceedings or otherwise.
11. Waivers.
Borrower and all sureties, endorsers and guarantors of this Note waive
demand, presentment for payment, notice of nonpayment, protest, notice of
protest and all other notice, filing of suit and diligence in collecting this
Note or the release of any part primarily or secondarily liable hereon and
further agree that it will not be necessary for any holder hereof, in order to
enforce payment of this Note by any of them, to first institute suit or exhaust
its remedies against any maker or others liable herefor, and consent to any
extension or postponement of time or payment of this Note or any other
indulgence with respect hereto without notice thereof to any of them.
12. Joint and Several Obligations.
Should this Note be signed by more than one person and/or entity, all
of the obligations herein contained shall be considered joint and several
obligations of each signer hereof.
13. Agreed Rate.
Notwithstanding any provision contained herein to the contrary, the
Agreed Rate shall include the applicable interest rate described herein plus any
compensating balance requirement and any additional charges, costs and fees
incident to the Loan to the extent they are deemed to be interest under
applicable Arizona law. Should the Agreed Rate as calculated under this Note at
any time exceed that allowed by law, the Agreed Rate will be the maximum rate of
interest allowed by applicable Arizona law.
14. Prepayment.
Borrower shall have the right to prepay the Note, at any time, without
premium or penalty.
DESERT MOUNTAIN PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Desert Mountain Development Corporation, a
Delaware corporation, General Partner
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
"Borrower"
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Account No. ___________
PROMISSORY NOTE
(Warehouse)
$10,000,000.00 Phoenix, Arizona May 14, 1998
1. Promise to Pay.
FOR VALUE RECEIVED, DESERT MOUNTAIN PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited partnership ("Borrower"), promises to pay on or
before the May 14, 1999 (the "Maturity Date") to NATIONAL BANK OF ARIZONA, a
national banking association ("Bank"), or order, the aggregate principal amount
outstanding as shown on Bank's records which shall at all times be conclusive
and govern, with interest (payable on the first day of each calendar month after
the date of the first advance) on the unpaid balance outstanding from time to
time at an annual rate equal to one percent (1.0%) in excess of the "Prime Rate"
published from time to time in The Western Edition of The Wall Street Journal,
as such rate shall change from time to time during the term hereof ("Agreed
Rate").
3. Calculation of Interest.
Interest shall be calculated on a 360-day year for all advances, but,
in any case, shall be computed for the actual number of days in the period for
which interest is charged, which period shall consist of a 365-day period on an
annual basis.
4. Place of Payment.
Principal and interest shall be payable at the 3101 North Central
Avenue office of Bank in Phoenix, Arizona, or at such other place as the holder
hereof may designate. All amounts payable hereunder shall be paid in lawful
money of the United States.
5. Maximum Amount of Advances.
Bank and Borrower have established specific instructions and procedures
by which Advances on the Loan will be disbursed pursuant to the terms and
conditions of that certain Master Revolving Line of Credit Loan Agreement of
even date herewith (the "Loan Agreement"), but nothing contained herein shall
create a duty on the part of Bank to make any Advance if an Event of Default or
Unmatured Event of Default has occurred. This Note evidences a revolving line of
credit and amounts hereunder may be re-borrowed by Maker in accordance with the
terms of the Loan Agreement. Prior to the Maturity Date, the Loan may be drawn,
repaid and drawn again in unlimited repetition so long as the sum of (a) the
amounts outstanding on the Loan, and (b) the amounts that are committed but not
yet advanced on the Loan never exceed the maximum principal amount of Ten
<PAGE> 104
Million and No/100 Dollars ($10,000,000.00). Capitalized terms used in this Note
and not otherwise defined are used with the meanings set forth in the Loan
Agreement and other Loan Documents.
6. Application of Payments.
Absent an Event of Default or Unmatured Event of Default, any payments
received by the holder hereof shall be applied first, to sums other than
principal and interest due the holder hereof, second, to the payment of all
interest accrued to the date of such payment, and the balance, if any, to the
payment of principal. Any payments received by the holder hereof after any
default shall be applied to the amounts specified in this paragraph in such
order as the holder hereof may, in its sole discretion, elect.
7. Late Charge and Default Interest.
If any payment of interest and/or principal is not received by the
holder hereof when such payment is due, then, as additional remedies, (a) a late
charge of five percent (5%) of the amount due and unpaid will be added to the
delinquent amount for any payment past due in excess of ten (10) days, and (b)
all past due payments of principal and/or interest shall bear interest from
their due date until paid at an annual rate equal to four percent (4%) in excess
of the Agreed Rate, payable on demand.
8. Default.
Borrower will be in default under this Note upon the occurrence of an
Event of Default as defined pursuant to Article 8 of the Loan Agreement. Time is
of the essence with regard to all payment obligations in this Note. Upon an
Event of Default, this Note shall become immediately due and payable at the
option of the holder hereof without presentment or demand or any notice to
Borrower or any other person obligated hereon.
9. Exercise of Rights.
Failure to exercise any remedy or right hereunder shall not constitute
a waiver of the right to exercise the same in the event of any subsequent
default.
10. Costs of Collection.
In the event any holder hereof utilizes the services of an attorney in
attempting to collect the amounts due hereunder or to enforce the terms hereof
or of any agreements related to this indebtedness, or if any holder hereof
becomes party plaintiff or defendant in any legal proceeding in relation to the
property described in any instrument securing this Note or for the recovery or
protection of the indebtedness evidenced hereby, Borrower, its successors and
assigns, shall repay to such holder hereof, on demand, all costs and expenses so
incurred, including reasonable attorney's fees, including those costs, expenses
and attorney's fees incurred after the filing by or against the
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<PAGE> 105
Borrower of any proceeding under any chapter of the Bankruptcy Code, or similar
federal or state statute, and whether incurred in connection with the
involvement of any holder hereof as creditor in such proceedings or otherwise.
11. Waivers.
Borrower and all sureties, endorsers and guarantors of this Note waive
demand, presentment for payment, notice of nonpayment, protest, notice of
protest and all other notice, filing of suit and diligence in collecting this
Note or the release of any part primarily or secondarily liable hereon and
further agree that it will not be necessary for any holder hereof, in order to
enforce payment of this Note by any of them, to first institute suit or exhaust
its remedies against any maker or others liable herefor, and consent to any
extension or postponement of time or payment of this Note or any other
indulgence with respect hereto without notice thereof to any of them.
12. Joint and Several Obligations.
Should this Note be signed by more than one person and/or entity, all
of the obligations herein contained shall be considered joint and several
obligations of each signer hereof.
13. Agreed Rate.
Notwithstanding any provision contained herein to the contrary, the
Agreed Rate shall include the applicable interest rate described herein plus any
compensating balance requirement and any additional charges, costs and fees
incident to the Loan to the extent they are deemed to be interest under
applicable Arizona law. Should the Agreed Rate as calculated under this Note at
any time exceed that allowed by law, the Agreed Rate will be the maximum rate of
interest allowed by applicable Arizona law.
14. Prepayment.
Borrower shall have the right to prepay the Note, at any time, without
premium or penalty.
DESERT MOUNTAIN PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Desert Mountain Development Corporation, a
Delaware corporation, General Partner
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
"Borrower"
3
<PAGE> 106
PLEDGE AGREEMENT
DATE: May 14, 1998
PARTIES: BORROWER: DESERT MOUNTAIN PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited partnership
BANK: NATIONAL BANK OF ARIZONA, a national banking association
FOR VALUE RECEIVED, Borrower, in accordance with this Pledge Agreement,
pledges, assigns, transfers and grants to Bank a continuing security interest in
and lien upon all of its right, title and interest in and to the Pledged
Collateral (as defined below).
A. THIS PLEDGE AGREEMENT IS MADE FOR THE PURPOSE OF SECURING:
(1) The payment of all indebtedness evidenced by (i) that
certain Secured Promissory Note (Borrowing Base) of even date herewith in the
principal amount of up to Twenty- Five Million Dollars ($25,000,000.00) with
interest thereon, executed by Borrower and delivered to Bank and (ii) that
certain Secured Promissory Note (Warehouse) of even date herewith in the
principal amount of up to Ten Million Dollars ($10,000,000.00) with interest
thereon, executed by Borrower and delivered to Bank (as they may be amended,
modified, executed, and renewed from time to time, collectively the "NOTE").
(2) The performance of and compliance with all of the terms,
covenants and conditions set forth herein, in that certain Master Revolving Line
of Credit Loan Agreement of even date herewith, executed by Borrower and Bank
(the "LOAN AGREEMENT"), in the Note, in the Deeds of Trust, or in any other Loan
Document (all as defined in the Loan Agreement), and in any other loan
agreement, promissory note or other agreement now or hereafter executed by
Borrower which recites that performance of the obligations thereunder is secured
hereby (collectively, the "OBLIGATIONS"). All capitalized terms used herein and
not otherwise defined shall have the meanings given to such terms in the Loan
Agreement.
B. THE PARTIES HEREBY AGREE:
SECTION 1. GRANT OF SECURITY INTEREST. In addition to and not in
substitution for or in lieu of any other assignment, security interest, pledge
or lien granted by Borrower to Bank, Borrower hereby pledges, assigns, and
grants to Bank a continuing security interest in and lien upon, all right, title
and interest of Borrower (but not its duties and obligations), whether now
existing or hereafter arising or acquired, in, to and under the following
(herein collectively called the "PLEDGED COLLATERAL"):
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<PAGE> 107
(i) the Mortgage Notes described in EXHIBIT A hereto and all
other Mortgage Notes from time to time pledged to Bank pursuant to the
terms of the Loan Agreement, and the indebtedness evidenced thereby,
together with all cash and noncash payments and any other property
received or to be received with respect thereto;
(ii) all deeds of trust, mortgages and security agreements which
secure payment to Borrower of the Mortgage Notes (the "MORTGAGES");
(iii) all other documents, instruments, rights, interests and
agreements relating to or executed in connection with the Mortgage
Notes, whether now existing or hereinafter arising, including, without
limitation, all title insurance policies with respect to the Mortgages,
any and all "contingent interest" or similar agreements, any and all
other extension, modification, or "workout" agreements now or hereafter
executed in connection with any of the Mortgage Notes, and any other
documents and instruments described in EXHIBIT A hereto;
(iv) any and all extensions, renewals, replacements or
substitutions of or for any of the items described in the foregoing
clauses (i)-(iii);
(v) any and all other property at any time delivered, pledged,
assigned or transferred by Borrower to Bank, including, without
limitation, any additional promissory notes, deeds of trust, mortgages,
security agreements, chattel paper and contract rights pledged, or in
which a security interest is granted, pursuant to the Loan Agreement,
and any other property of every kind or description of Borrower, now or
hereafter, for any reason or purpose whatsoever, in the possession or
control of, or in transit to, Bank or any agent of Bank, or in which
Bank now or hereafter has a security interest securing payment and
performance of any of the Obligations pursuant to the provisions of any
written agreement or instrument other than this Pledge Agreement,
including all distributions or other rights with respect to any
property hereinabove referred to; and
(vi) any and all proceeds with respect to any of the items
described in the foregoing clauses (i)-(v).
TO HAVE AND TO HOLD the Pledged Collateral, together with all rights, titles,
interests, privileges and preferences appertaining or incidental thereto, unto
Bank, their successors and assigns, forever, subject, however, to the terms,
covenants and conditions hereinafter set forth.
SECTION 2. REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants to Bank that:
(a) Borrower is and will be the lawful owner of all the
Pledged Collateral, free of all liens and claims whatsoever, other than
the security interest hereunder, and no presently effective Uniform
Commercial Code financing statement covering any of the
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<PAGE> 108
Pledged Collateral is on file in any public office (other than
financing statements pursuant to which the makers of the Mortgage Notes
are debtors and Borrower is the secured party);
(b) The execution and delivery of this Pledge Agreement and
the performance by Borrower of its obligations hereunder are within
Borrower's powers, have been duly authorized by all necessary action,
have received all necessary governmental approval (if any shall be
required), and do not and will not contravene or conflict with any
provision of law or of the partnership agreement of Borrower or of any
agreement binding upon Borrower, and this Pledge Agreement is a legal,
valid and binding obligation of Borrower, enforceable in accordance
with its terms;
(c) Borrower has furnished to the Servicing Agent (i) the
true, executed originals of the Mortgage Notes, properly endorsed to
the order of Bank or otherwise as directed by Bank, (ii) true, executed
originals of the Mortgages, properly assigned to Bank and (iii) true,
executed originals of any other documents giving Borrower security for
the Mortgage Notes properly assigned to Bank; and none of the above
have been amended, modified or altered, except as disclosed to Bank in
writing, and each of the above remains in full force and effect in
accordance with its terms;
(d) Borrower has delivered to Bank from Servicing Agent, the
attached Acceptance, which shall provide that all future payments under
the Mortgage Notes after the date hereof shall be remitted to Bank by
Servicing Agent;
(e) The Mortgage Notes are genuine, legal, valid, binding and
enforceable obligations of the makers thereof subject to any
bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent conveyance or transfer or other similar laws relating to or
affecting the rights of creditors generally. There have been no
prepayments of principal or interest with respect to the Mortgage Notes
except as disclosed in EXHIBIT A hereto, to the best knowledge of
Borrower, no defaults exist with respect to the Mortgage Notes (except
as disclosed in writing to Bank), and none of the Mortgage Notes are
presently subject to any credits, claims, defenses or offsets;
(f) All information with respect to the Pledged Collateral set
forth in any schedule, certificate or other writing at any time
heretofore or hereafter furnished by Borrower to Bank, including,
without limitation, EXHIBIT A hereto, and all other written information
heretofore or hereafter furnished by Borrower to Bank, is and will be
true and correct in all material respects as of the date furnished;
(g) So long as any of the Obligations shall remain
outstanding, the Borrower shall not, without the express prior written
consent of Bank, which may be withheld in the sole and absolute
discretion of Bank, sell, assign, exchange, pledge or otherwise
transfer, encumber, modify, waive, release, diminish or otherwise
impair any of its rights in, to or under any of the Pledged Collateral;
and
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<PAGE> 109
(h) All of the Pledged Collateral complies with and was
originated in compliance with all applicable laws, rules, and
regulations, including, without limitation, the Equal Credit
Opportunity Act, the Real Estate Settlement Procedures, Act, and the
Truth-in- Lending Act.
The failure of any representation or warranty of Borrower in this
SECTION 2 with respect to the Pledged Collateral to be true shall not constitute
and Event of Default hereunder, however, any and all Pledged Collateral for
which such representations and warranties have proved to be untrue shall no
longer be Eligible Mortgage Loans and Borrower shall be required to meet the
remargining requirements of Section 2.11 of the Loan Agreement based on the new
Maximum Allowed Warehouse Advance after excluding the subject Pledged
Collateral.
SECTION 3. CARE OF THE PLEDGED COLLATERAL. Bank shall be deemed to have
exercised reasonable care with respect to the interest of Borrower in the
custody and preservation of the Pledged Collateral if it takes such action for
that purpose as Borrower shall request in writing, but failure of Bank to comply
with any such request shall not of itself be deemed a failure to exercise
reasonable care, and no failure of Bank to preserve or protect any rights with
respect to the Pledged Collateral against prior parties, or to do any act with
respect to preservation of the Pledged Collateral not so requested by Borrower,
shall be deemed a failure to exercise reasonable care in custody or preservation
of the Pledged Collateral.
SECTION 4. COLLECTION OF PAYMENTS DUE UNDER PLEDGED COLLATERAL.
(a) Bank will, at Borrower's expense, be entitled to receive
and collect, as and when due, all amounts due with respect to any of
the Pledged Collateral, including all payments of interest and
principal on the Mortgage Notes and all other amounts received in
respect of the Mortgage Notes (including, without limitation, insurance
proceeds, condemnation awards and proceeds of any security).
(b) If and to the extent received by Borrower, Borrower will
forthwith, upon receipt, transmit and deliver to Bank, in the form
received, all cash, checks, drafts, chattel paper and other instruments
or writings for the payment of money (endorsed, where required, so that
such items may be collected by Bank) which may be received by Borrower
at any time in full or partial payment or otherwise as proceeds of any
of the Pledged Collateral. Any such items which may be received by
Borrower will not be commingled with any other of its funds or
property, but will be held separate and apart from its own funds or
property and upon express trust for Bank until delivery is made to
Bank.
(c) Except as otherwise provided in the Loan Agreement, any
amounts which are delivered to Bank on account of partial or full
payment or otherwise as proceeds of any of the Pledged Collateral shall
be applied to the Advances on the date received if actually received by
Bank prior to 1:00 p.m. (Arizona time) on a Business Day (as defined in
the Loan Agreement) and in the event received after 1:00 p.m. (Arizona
time) on any Business Day, on the next succeeding Business Day.
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SECTION 5. UNDERTAKINGS AND AGREEMENTS OF THE DEBTOR.
(a) Borrower (i) will execute such Uniform Commercial Code
financing statements and other documents (and pay the costs of filing
and recording or refiling and rerecording the same in all public
offices required by law or deemed necessary or appropriate by Bank) and
do such other acts and things, all as may be necessary or as Bank may
from time to time request, to establish and maintain a valid, perfected
security interest in the Pledged Collateral (free of all other liens,
claims and rights of third parties whatsoever) to secure the
performance and payment of the Obligations; (ii) will keep, at the
address indicated in SECTION 9 below, all its records concerning the
Pledged Collateral, which records will be of such character as will
enable Bank or its designees to determine at any time the status
thereof; (iii) will furnish Bank such information concerning the
Pledged Collateral as Bank may from time to time reasonably request,
and will permit Bank and its designees, from time to time, to inspect,
audit and make copies of and extracts from all records and all other
papers in the possession of Borrower which pertain to the Pledged
Collateral, and will, upon request of Bank, deliver to Bank all of such
records and papers; (iv) will not, without the prior written consent of
Bank, enter into any modification, amendment or supplement, or execute
any waiver, extension, renewal or other agreement, with respect to any
of the Mortgage Notes, the Mortgages or any other of the Pledged
Collateral, except as specifically permitted pursuant to the Loan
Agreement; (v) will furnish to Bank, as soon as possible and in any
event within five (5) days after the occurrence from time to time of
any change in the address of Borrower, notice in writing of such
change; and (vi) will reimburse Bank for all costs and expenses,
including reasonable attorneys' fees and legal expenses, incurred by
Bank in seeking to collect or enforce any rights under the Pledged
Collateral and, in case of an Event of Default, incurred by Bank in
seeking to collect the Obligations and to enforce Bank's rights
hereunder.
(b) In addition, Borrower will not commence any action to
collect indebtedness under the Pledged Collateral, commence any
judicial or non-judicial foreclosure, or accept any transfer in lieu of
such foreclosure, without the written consent of Bank in its sole
discretion; provided, however, that the foregoing shall not prohibit
Borrower from sending customary demand letters and/or collection
notices with respect to delinquencies or other defaults under the
Mortgage Notes. If Borrower commences any such collection action,
foreclosure or other action, such action shall be conducted in a manner
satisfactory to Bank in its sole discretion, all costs and expense
thereof shall be borne solely by the Borrower and Borrower will
indemnify Bank from all claims, liability, losses, damages, judgments,
costs, and expenses arising therefrom or relating thereto. Any
proceeds, property or other rights or interests obtained as a result of
any such judicial or non-judicial foreclosure or action in lieu thereof
shall immediately be mortgaged, pledged and assigned to the Bank as
further security for the Obligations on such terms and conditions as
Bank may require.
(c) Upon the inclusion of any Mortgage Notes or other property
in the Pledged Collateral pursuant to the Loan Agreement, such Mortgage
Notes and other property shall be subject to all of the terms and
conditions of this Pledge Agreement, and Borrower shall
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be deemed to have made and restated all representations and warranties
set forth herein and in the other Loan Documents with respect to such
additional Mortgage Notes and other property.
(d) From time to time upon request of Bank, Borrower shall
deliver such endorsements, assignments, and other documents of transfer
with respect to the Mortgage Notes as shall be requested by Bank in
order to evidence and secure Bank's rights pursuant to the Loan
Documents, together with resolutions, authorizations and other
documents to evidence the authority of those signing on behalf of
Borrower.
SECTION 6. EVENTS OF DEFAULT. The following shall constitute an Event
of Default hereunder: (i) the failure of Borrower to pay any amount when due
hereunder and the expiration of ten (10) days after notice thereof from Bank to
Borrower without such failure being cured; (ii) the failure of Borrower to
comply with SECTION 5 hereof; (iii) the sale, assignment, exchange, pledge,
transfer, encumbrance, diminishment or impairment of any of the Pledged
Collateral by Borrower in violation hereof; (iv) the amendment, modification,
renewal of any of the Pledged Collateral without the written consent of Bank;
(v) the failure to Borrower to comply with SECTION 4 hereof; (vi) the failure of
Borrower to comply with any other term or condition hereof and the expiration of
thirty (30) days after notice thereof from Bank to Borrower without such failure
being cured; (vii) the breach of any representation and warranty hereunder
(except as otherwise provided in SECTION 2 hereof; and (viii) the occurrence of
an Event of Default under the terms of the Loan Agreement. Whenever an Event of
Default shall be existing, Bank may (i) without demand or notice of any kind,
appropriate and apply toward the payment of the Obligations any and all
balances, credits, deposits, accounts or moneys of or in the name of Borrower
then or thereafter with such party and (ii) exercise from time to time any
rights and remedies available to it under the Uniform Commercial Code as in
effect in the applicable jurisdictions or otherwise available to it under
applicable law. Without limiting the foregoing, upon the occurrence and during
the continuance of an Event of Default, Bank may, to the fullest extent
permitted by applicable law, without notice, advertisement, hearing or process
of law of any kind, (a) sell any or all of the Pledged Collateral, free of all
rights and claims of the Borrower therein and thereto at any public or private
sale or broker's board, and (b) bid for and purchase any or all of the Pledged
Collateral at any such public or private sale or broker's board. Any
notification of intended disposition of any of the Pledged Collateral required
by law shall be deemed reasonably and properly given if given pursuant to
SECTION 9 hereof at least twenty (20) days before such disposition. Borrower
agrees that in any sale of any of the Pledged Collateral after an Event of
Default (where such Pledged Collateral may be deemed to constitute a security),
Bank is hereby authorized to comply with any limitation or restriction in
connection with such sale as it may be advised by counsel is necessary in order
to avoid any violation of applicable law or in order to obtain any required
approval of the purchaser by any governmental or regulatory authority or
officer, and Borrower further agrees that such compliance shall not result in
such sale being considered or deemed not to have been made in a commercially
reasonable manner, nor shall Bank be liable or accountable to Borrower for any
discount allowed by the reason of the fact that such Pledged Collateral is sold
in compliance with any such limitation or restriction. Any proceeds of any
disposition by Bank of, or other recovery under, any of the Pledged Collateral
may be applied by
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<PAGE> 112
Bank to the payment of costs and expenses in connection with the Pledged
Collateral, including reasonable attorneys' fees and legal expenses, and any
balance of such proceeds may be applied by Bank toward the payment of the
Obligations, as determined by Bank. In the event that such proceeds shall fail
to pay the Obligations in full, Borrower shall remain liable for the amount of
any deficiency. No delay on the part of Bank in the exercise of any right or
remedy shall operate as a waiver thereof, and no single or partial exercise by
Bank of any right or remedy shall preclude other or further exercise thereof or
the exercise of any other right or remedy, but all rights and remedies of Bank
hereunder shall be cumulative, and may be exercised concurrently if Bank so
elects.
SECTION 7. AUTHORITY OF BANK. Bank shall have and be entitled to
exercise all such powers hereunder as are specifically delegated to Bank by the
terms hereof, together with such powers as are incidental thereto. In addition
to all of Bank's other rights and remedies, Borrower hereby appoints Bank as
Borrower's agent and attorney-in-fact, which appointment is coupled with an
interest and irrevocable, to take all actions as shall be necessary after the
occurrence of an Event of Default to transfer the Mortgage Notes to the name of
the Bank or any other person in connection with the exercise by the Bank of its
rights and remedies, which authority shall include, without limitation, the
right and power to complete all endorsements to any evidence of indebtedness for
the Mortgage Notes, to attach such endorsements to all such evidences of
indebtedness, and to make all deliveries, record all notices in any public
offices and otherwise take all action necessary to complete such transfer. Bank
is also authorized at any time and from time to time to give notice to the
obligors under any of the Pledged Collateral of its rights and interests
hereunder and to request information and confirmation from such obligors
regarding the Pledged Collateral and require that all such obligors make
payments on the Pledged Collateral directly to Bank (provided that prior to a
Default, Bank shall notify Borrower of such communications and cooperate with
Borrower in preparing the form of such communications and the manner of delivery
thereof). This authority may be exercised without any further consent of or
notice to Borrower and each such obligor and any other person dealing with Bank
may rely exclusively on the authorizations contained in this Pledge Agreement,
including, without limitation, this SECTION 7. Bank may execute any of its
rights and duties hereunder by or through agents or employees and shall be
entitled to retain counsel and to act in reliance upon the advice of such
counsel concerning all matters pertaining to its duties hereunder. Neither Bank,
nor any director, officer or employee of Bank, shall be liable for any action
taken or omitted to be taken by it or them hereunder or in connection herewith,
except for its or their own gross negligence or willful misconduct. Borrower
hereby agrees to reimburse Bank on demand, for all reasonable costs and expenses
incurred by Bank in connection with the administration of this Pledge Agreement
(including costs and expenses incurred by any agent employed by Bank) and agrees
to indemnify and hold harmless Bank and/or any such agent from and against any
and all liability incurred by Bank (or such agent) hereunder or in connection
herewith, unless such liability shall be due to gross negligence or willful
misconduct on the part of Bank or such agent.
SECTION 8. TERMINATION. This Pledge Agreement shall terminate when all
the Obligations have been fully paid and Bank shall have no further obligation
to make any loans or advances to Borrower pursuant to the Loan Agreement or
otherwise, at which time Bank shall, at the cost and expense of Borrower,
reassign and redeliver (or cause to be reassigned and redelivered) to Borrower,
or to such person or persons as Borrower shall designate, against receipt, such
of the Pledged
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<PAGE> 113
Collateral (if any) as shall not have been sold or otherwise applied by Bank
pursuant to the terms hereof and shall still be held by it hereunder, together
with appropriate instruments of reassignment and release. Any such reassignment
shall be without recourse upon or representation or warranty by Bank.
SECTION 9. PROVISIONS IN OTHER LOAN DOCUMENTS GOVERN THIS AGREEMENT.
This Pledge Agreement is subject to certain terms and provisions in the other
Loan Documents (including, without limitation, provisions regarding limited
partner liability in the Note), to which reference is made for a statement of
such terms and provisions.
SECTION 10. COUNTERPARTS. This Pledge Agreement may be executed and
acknowledged in counterparts, all of which executed and acknowledged
counterparts shall together constitute a single document. Signature and
acknowledgment pages may be detached from the counterparts and attached to a
single copy of this Pledge Agreement to physically form one document.
SECTION 11. FILING AS A FINANCING STATEMENT. At the option of Bank,
this Pledge Agreement, or a carbon, photographic or other reproduction of this
Pledge Agreement or of any Uniform Commercial Code financing statement covering
the Pledged Collateral (or any portion thereof) shall be sufficient as a Uniform
Commercial Code financing statement and may be filed as such.
DESERT MOUNTAIN PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Desert Mountain Development Corporation, a
Delaware corporation, General Partner
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
NATIONAL BANK OF ARIZONA, a national banking
association
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
8
<PAGE> 114
ACCEPTANCE
The undersigned acknowledges that it is Servicing Agent of the Pledged
Collateral (as such term is defined in the foregoing Pledge Agreement) pursuant
to that certain Servicing Agreement by and between the undersigned and DESERT
MOUNTAIN PROPERTIES LIMITED PARTNERSHIP ("Debtor"). From and after the date of
the foregoing Pledge Agreement and for so long as National Bank of Arizona
("Bank") holds a security interest in the Pledged Collateral, the undersigned
will hold the same as agent for possession for Bank for the purpose of thereby
permitting Bank to perfect its possessory pledge lien in the Pledged Collateral
through means of such possession-by-agent.
Further, the foregoing Pledge Agreement is hereby accepted only as notice
to the undersigned and the undersigned agrees to pay or perform to Bank all
moneys or obligations with respect to the indebtedness herein assigned, which,
but for this Pledge Agreement, would have been paid or performed to Debtor, with
the understanding, however, that the acceptance of this Pledge Agreement places
no greater burden upon the undersigned than if this Pledge Agreement had not
been accepted, other than to pay such moneys or to perform those obligations to
Bank rather than to Debtor. By this acceptance, no representations are held out
as to title insurance, responsibility of the undersigned, or the sufficiency of
this Pledge Agreement.
DATED this day of , 19
---- ---------------- --
First American Title Insurance Company,
a California corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
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<PAGE> 115
When recorded return to:
NATIONAL BANK OF ARIZONA
3101 North Central Avenue
Phoenix, Arizona 85012
Attn: Randall Pappas
FOR RECORDER'S USE
- --------------------------------------------------------------------------------
DEED OF TRUST, ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT AND FIXTURE FILING
(No Impoundments)
THIS DEED OF TRUST SECURES A VARIABLE RATE PROMISSORY NOTE WHICH VARIES
IN ACCORDANCE WITH THE TERMS OF SAID NOTE.
TRUSTOR: DESERT MOUNTAIN PROPERTIES LIMITED PARTNERSHIP, a
Delaware limited partnership
10550 East Desert Hills Drive
Scottsdale, Arizona 85262
BENEFICIARY: NATIONAL BANK OF ARIZONA, a national banking association
3101 North Central Avenue
Phoenix, Arizona 85012
TRUSTEE: NATIONAL BANK OF ARIZONA, a national banking association
3101 North Central Avenue
Phoenix, Arizona 85012
PROPERTY in Maricopa County, State of Arizona, described as:
See Exhibit "A" attached hereto and incorporated herein.
This Deed of Trust made between the Trustor, Trustee and Beneficiary above
named,
WITNESSETH: That Trustor IRREVOCABLY GRANTS, BARGAINS, SELLS, CONVEYS,
TRANSFERS and ASSIGNS to TRUSTEE, IN TRUST WITH POWER OF SALE, the above
described real property and all improvements, all fixtures, and all equipment,
machinery, and apparatus of every kind and nature now located on said property
or hereafter attached to or used in connection with the property described
above, all of which Trustor represents are and shall be and are intended to be a
part of the realty, together with all permits, licenses, grazing and range
rights relating to or pertaining to said property, if any, together with all and
singular the tenements,
<PAGE> 116
hereditaments, and appurtenances, and all of the rents, issues and profits
thereof, and the reversion and reversions, remainder and remainders, and
together with all water rights thereunto belonging, to have and hold unto
Trustee, its successors and assigns forever (hereinafter called "Trust
Property").
FOR THE PURPOSE OF SECURING:
(1) To secure performance of the covenants and agreements herein set
forth and payment of (i) that certain Secured Promissory Note (Borrowing Base)
dated the 13th day of May, 1998, in the sum of Twenty-Five Million and No/100
Dollars ($25,000,000.00) and interest as specified therein and (ii) that certain
Secured Promissory Note (Warehouse) dated the 13th day of May, 1998, in the sum
of Ten Million and No/100 Dollars ($10,000,000.00) and interest as specified
therein (collectively, the "Note"). The Note contains a variable rate interest
rate;
(2) The obligations set forth in that certain Master Revolving Line of
Credit Loan Agreement, dated May 14, 1998 (the "Agreement") between Trustor and
Beneficiary, pursuant to which Beneficiary may from time to time make loans
provided the sum of (a) the outstanding principal balance of all obligations
under the Agreement, and (b) the amounts committed but not yet advanced pursuant
to the Agreement shall not exceed the aggregate principal amount of
$35,000,000.00 at any one time, and any and all extensions, revisions or
renewals of the Note or the Agreement, in whole or in part;
(3) Performance of each covenant, promise and agreement of Trustor
contained herein or incorporated herein by reference; and
(4) Payment of all sums required to be made by Trustor pursuant to the
terms hereof.
This Deed of Trust secures a revolving line of credit, and shall
continue as a valid lien with continued priority, regardless of the outstanding
balance of the Note or the repayment or advance of any loan funds.
TO PROTECT THE TRUST PROPERTY AND SECURITY GRANTED BY THIS TRUST DEED,
IT IS AGREED:
1. Trustor warrants that it is seized of good and merchantable
fee simple title to the Trust Property, subject only to reservations in the
patent, water right application, obligations arising in favor of water use or
irrigation associations or companies (none of the assessments of which are
delinquent), current taxes not delinquent, easements and restrictions of record,
and none other.
Trustor acknowledges that all legal descriptions of real estate listed herein
were provided by Trustor, warrants the correctness of such descriptions, and
agrees that, in the event there does exist an error or defect in such legal
descriptions, Trustor authorizes Trustee to do all acts and things and execute
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<PAGE> 117
all documents deemed necessary by Beneficiary, proper and convenient for the
perfection, protection, preservation or enforcement of Beneficiary's rights
hereunder.
2. Trustor agrees to pay all indebtedness secured hereby
including principal, interest, costs and attorney's fees in accordance with the
terms of each evidence of indebtedness.
3. Trustor agrees to pay, before the same becomes delinquent,
all taxes, assessments, water and other charges levied or assessed upon or
against the Trust Property, and in addition all charges for gas, electricity and
other items furnished to or charged against the Trust Property.
Trustor agrees to pay, prior to delinquency, any and all
ground rents and amounts payable under any lease, trust deed, mortgage or other
instrument which may be an encumbrance on the Trust Property.
4. Trustor agrees to keep the Trust Property insured against
loss by fire and other hazards and casualties in such amounts and for such
periods as may be required from time to time by Beneficiary and as required
pursuant to the Agreement. Trustor also agrees to maintain and keep in force
during the term hereof flood hazard insurance as may be or may have been
required by Beneficiary, by law or regulation and as required pursuant to the
Agreement. Trustor agrees to pay the premiums on such insurance, when due and
prior to delinquency, and furnish proof of such payment to Beneficiary. All
insurance shall be carried in responsible insurance companies approved by
Beneficiary. The policies shall be held by Beneficiary and shall have, at all
times, loss payable clauses attached thereto in favor of and approved by
Beneficiary. Notwithstanding the foregoing, Beneficiary shall allow Trustor to
apply such proceeds to repair, rebuilding or restoration, provided that either:
(A) (i) at the time the loss, damage or destruction occurs and at the time the
proceeds are to be paid on account thereof, no default exists; (ii) an
independent architect acceptable to the Beneficiary and engaged by the Trustor
certifies to the Beneficiary that such repair, rebuilding or restoration can be
substantially completed by not later than the Maturity Date (as defined in the
Agreement) and (iii) that the insurance proceeds, together with other funds
deposited by Trustor for such purpose, will be sufficient to effect such repair,
rebuilding or restoration or (B) at the time that the loss, damage or
destruction occurs, the Trust Property affected thereby is subject to a Purchase
Agreement (as such term is defined in the Loan Agreement), in which case the
application of the insurance proceeds shall be governed by the terms thereof.
In the event of any loss or damage to the Trust Property,
Trustor will give immediate notice by mail to Beneficiary and make proper proof
of loss (and if not made by Trustor, Beneficiary may make the same). Beneficiary
may require that the payment for such loss be paid directly to Beneficiary only
and not jointly to Trustor and Beneficiary. Beneficiary may, at its option,
apply the payment to the reduction of the indebtedness secured hereby or may
apply the same to the restoration or repair of the property damaged. Trustor
hereby assigns to Beneficiary all such policies and the payments to be made
thereunder.
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<PAGE> 118
In the event of foreclosure of this Trust Deed, or exercise
of the power of sale given to Trustee, or acquisition of the title to the Trust
Property by Beneficiary or its assigns, all right, title, and interest of
Trustor in and to the policies and proceeds thereof and sums payable thereunder
shall forthwith pass automatically to the purchaser of said Trust Property.
5. Trustor agrees to keep the Trust Property at all times in
good condition and repair. All apparatus and machinery shall be kept in good
working order and properly serviced and repaired. Trustor will not allow nor
commit any waste, and will not demolish nor structurally alter the Trust
Property, and will do no act to injure or depreciate the value of such Trust
Property. Any portion of said Trust Property used for the growing of crops and
ditches, shall be kept free of noxious weeds and Johnson grass, and kept in a
good farmer-like manner. The Trust Property shall be kept in a reasonably clean,
safe and sanitary condition and shall not be allowed to become dilapidated or
rundown.
Trustor agrees that it will not remove or allow to be
removed any fixture or fixtures from the Trust Property without the prior
written consent of Beneficiary. Trustor further agrees that in adding any new
fixtures or in substituting fixtures on the Trust Property, prior proof will be
furnished Beneficiary that no security exists therein.
6. In the event Trustor fails to make any payment required to
be made by it hereunder, or fails to keep the Trust Property so insured, or
fails to keep the Trust Property so repaired, or fails to perform any of its
other obligations hereunder, Beneficiary may make any such payment, obtain any
such insurance, make any such repairs (Trustor hereby grants Beneficiary the
right to go upon the premises for such purpose), or remedy any other default of
Trustor. All expenditures made by Beneficiary shall be prima facie evidence of
the necessity therefor and reasonableness thereof. Such expenditures, together
with all incidental costs of Beneficiary, including reasonable attorney's fees
if incurred, shall be immediately due and payable by Trustor to Beneficiary,
shall bear interest until paid at a rate four percent (4%) more than the
non-default rate of interest applicable under the Note, and shall be secured by
this trust deed.
7. Trustee and Beneficiary and their officers, employees, and
agents may enter upon and inspect the Trust Property at any reasonable time or
times.
8. The proceeds of any judgment, award or settlement in any
condemnation or eminent domain proceeding or on account of injury to the Trust
Property by reason of public use, or by reason of private trespass, or other
injury to the Trust Property, shall be paid to Beneficiary, who may at its
option, either reapply the proceeds to reduce the indebtedness secured hereby
(whether matured or to mature in the future) or be released to Trustor. Trustor
hereby assigns and transfers to Beneficiary all such amounts and proceeds and
agrees that Beneficiary may receipt for the same on behalf of Trustor.
9. Trustor by execution of this Deed of Trust assigns and
transfers to Beneficiary all of Trustor's right, title and interest in and to
all leases, rents, profits or income from the Trust Property and each and every
part thereof, including all present and future leases or rental agreements,
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<PAGE> 119
which assignment and transfer may be enforced by Beneficiary only upon any
default by Trustor, existing under this Deed of Trust, by any one or more of the
following methods: (1) appointment of a receiver; (2) Beneficiary taking
possession of the Trust Property; (3) Beneficiary collecting any moneys payable
under leases or rental agreements directly from the parties obligated for
payment; (4) injunction; or (5) any other method permitted by law.
Unless and until Beneficiary shall elect to collect said
rents and rentals, the same shall be collected by Trustor, but Beneficiary may
at any time, after Trustor's default, collect all such rents and rentals and
Trustor agrees not to hinder or delay Beneficiary in collecting the same.
Any rents or rentals received by Beneficiary shall be
applied first to the cost of collection, second to any expenses Beneficiary may
expend in making the Trust Property ready for or satisfactory to any lessee or
tenant, and the remainder shall be applied on the indebtedness secured hereby
(whether matured or unmatured) as Beneficiary may elect.
Trustor shall not consent to the cancellation or surrender
of any lease on the Trust Property, or any portion thereof, having an unexpired
term of two (2) years or more, or decrease the rental payable under any lease,
or receive or collect more than two (2) month's rent in advance, and Trustor
agrees not to default in performing its obligations under all leases on the
Trust Property.
10. Time is of the essence of this Trust Deed. No failure on
the part of Beneficiary to exercise any of its rights hereunder shall be
construed as a waiver of or prejudice its rights in the event of any other
subsequent default or breach. No delay on the part of Beneficiary in exercising
any of its rights hereunder shall preclude it from the exercise thereof at any
time during the continuance of any such default. The acceptance of late payments
shall not waive the "time is of the essence" provision. All rights and remedies
of Beneficiary are cumulative and concurrent, and may be exercised singly,
severally or concurrently as Beneficiary may elect.
11. In the event the indebtednesses secured hereby or this
Trust Deed is placed in the hands of attorneys for collection or foreclosure,
then Trustor agrees to pay reasonable attorney's fees to Beneficiary, in
addition to the amount due thereon, together with all costs and expenses
incurred by Beneficiary in the collection and foreclosure thereof, and together
with the cost of a title search, the payment of which sums are secured by this
Trust Deed.
12. In the event that any of the following shall occur:
(i) Failure by Trustor (i) to pay any payment of
interest within the time period required pursuant to SECTION
2.4(a) of the Agreement and the expiration of 10 Business Days
after written notice from Beneficiary (ii) to pay, within 5
Business Day of the due date, any principal, including without
limitation pursuant to SECTION 2.9 or SECTION 2.11 of the
Agreement; (iii) to pay and perform all of the Obligations on
the Maturity Date; (iv) to pay when due any other amount
pursuant to the Loan Documents (as such term is defined in the
Agreement) and the expiration of 10 Business Days after notice
of such failure is given by the Beneficiary to Trustor
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<PAGE> 120
without such failure being cured; or (v) to cause Net Sales
Proceeds (as such term is defined in the Agreement) or other
amounts payable under SECTION 2.4(c) of the Loan Agreement to
be paid to the Beneficiary in accordance with SECTION 2.4(c)
of the Loan Agreement by 11:00 a.m. (Phoenix, Arizona time) on
the first Business Day after the day the Beneficiary notifies
Trustor in writing of the failure by the Beneficiary to
receive any such amounts.
(ii) Failure of Trustor to comply with any of the
Financial Covenants in the Agreement and the expiration of 30
Business Days after written notice from Beneficiary.
(iii) Except as otherwise provided in this Section 12
of the Deed of Trust, failure of Trustor to perform any other
obligation not involving the payment of money, or to comply
with any other term or condition applicable in any of the Loan
Documents, and the expiration of 30 days after written notice
of such failure is given by the Beneficiary to Trustor without
such failure being cured to Beneficiary's reasonable
satisfaction.
(iv) Any representation or warranty made by Trustor
in any of the Loan Documents or otherwise with respect to any
information now or hereafter delivered by Trustor to the
Beneficiary in obtaining the Commitment (as such term is
defined in the Agreement) (other than as otherwise provided in
SECTION 5.4 of the Agreement and the last paragraph of SECTION
2 of that certain Pledge Agreement dated as of the date
hereof), in negotiating and entering into the Agreement, in
obtaining each Advance (as such term is defined in the
Agreement) or otherwise in connection with the Obligations (as
such term is defined in the Agreement) is materially
incomplete, incorrect, or misleading as of the date made or
renewed, and the expiration of 30 Business Days after written
notice from Beneficiary of such failure.
(v) Trustor (i) is unable or admits in writing
Trustor's inability to pay Trustor's monetary obligations as
they become due; (ii) makes a general assignment for the
benefit of creditors; or (iii) applies for, consents to, or
acquiesces in, the appointment of a trustee (other than a
trustee under a deed of trust), receiver, or other custodian
for Trustor or any material portion or all of the property of
Trustor, or in the absence of such application, consent, or
acquiescence by Trustor a trustee, receiver, or other
custodian is appointed for Trustor or any or all of the
property of Trustor.
(vi) Commencement of any case under the Bankruptcy
Code (Title 11 of the United States Code) or commencement of
any other bankruptcy, arrangement, reorganization,
receivership, custodianship, or similar proceeding under any
federal, state, or foreign law by or against Trustor.
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<PAGE> 121
(vii) The dissolution, or liquidation of Trustor; the
consolidation or merger of Trustor with any other Person (as
such term is defined in the Agreement) where Trustor is not
the surviving entity; or the taking of any action by Trustor
toward a dissolution, liquidation, consolidation or merger
where Trustor is not the surviving entity (other than in
connection with a transaction that results in the Obligations
being paid and performed in full and the termination of the
Commitment).
(viii) Trustor or any other Person on behalf of
Trustor claims that any Loan Document to which it is a party
is not legal, valid, binding, and enforceable against Trustor,
that any lien, security interest, or other encumbrance
securing any of the obligations under the Loan Documents is
not legal, valid, binding, and enforceable, or that the
priority of any lien, security interest, or other encumbrance
securing any of the obligations in the Loan Documents is
different than the priority represented and warranted in the
Loan Documents.
(ix) Any of the insurance coverages required pursuant
to SECTION 6.8 of the Agreement actually lapses or expires
without being replaced by other insurance policies that comply
with SECTION 6.8 of the Agreement prior to such lapse or
expiration, and the expiration of one (1) Business Day after
notice from Beneficiary.
(x) A default occurs in the payment when due (after
giving effect to any applicable notice and grace periods),
whether by acceleration or otherwise, of any indebtedness of
Trustor in an aggregate amount exceeding $250,000, and the
expiration of 15 Business Days after written notice from
Beneficiary of such default.
(xi) Any judgment or order for the payment of money
in excess of $250,000 (not covered by insurance subject to
customary deductibles) is rendered against Trustor either (i)
enforcement proceedings are commenced by any creditor upon
such judgment or order and expiration of 15 Business Days
after written notice from Beneficiary of such commencement; or
(ii) such judgment or order is not vacated, stayed, satisfied,
discharged or bonded pending appeal within 60 days from the
entry thereof.
(xii) Filing of any foreclosure proceeding, giving
notice of a trustee's sale, or any other action by any Person,
other than the Beneficiary, to realize upon any of the
Collateral under any Lien or Encumbrance on any or all of the
Collateral, regardless of whether such Lien or Encumbrance is
a Permitted Exception and regardless of whether junior or
senior to the Deed of Trust, and the expiration of 15 Business
Days after written notice from Beneficiary.
(xiii) The filing of formal charges by any
Governmental Authority, including, without limitation, the
issuance of any indictment, under any RICO
7
<PAGE> 122
Related Law against Trustor or any Affiliate (as such term is
defined in the Agreement) of Trustor that has a material
adverse effect on Trustor.
then and in any such event Beneficiary may declare the entire debt and all
indebtedness of Trustor to Beneficiary to be immediately due and payable without
notice to Trustor. Beneficiary may thereupon, at its option, and without prior
notice and without affecting the lien of this Trust Deed, do any one or more of
the following: enter upon the Trust Property and inspect, repair, improve and
maintain the same, rent or lease the Trust Property or portions thereof as
Beneficiary shall see fit, and perform such other acts thereon as Beneficiary
may deem necessary or advisable; sue for all or part of the indebtedness owing
from Trustor to Beneficiary without affecting or without losing the security of
this Trust Deed; foreclose this Trust Deed as a mortgage in the manner provided
by law; cause the exercise of the power of sale granted herein; bring an action
for damages, or exercise such other remedies or combination of remedies
Beneficiary may have under law and equity.
13. Upon payment in full of all sums secured hereby and
performance of all obligations of Trustor hereunder, the lien of this Trust Deed
upon the Trust Property shall be released by reconveyance by Deed of Release,
which said reconveyance and release shall be without warranty and shall operate
to reconvey the estate vested in Trustee hereby.
Beneficiary may, at any time, without notice, release any
person liable for payment of any indebtedness secured hereby, release portions
of the Trust Property from this Trust Deed, or extend or modify the time for
payment of the indebtedness secured hereby by agreement with Trustor or by
agreement with subsequent owners of the Trust Property, and any such release,
extension or modification shall not affect the personal liability of any person
for the payment of said indebtedness or the lien of this Trust Deed upon the
portion of the Trust Property not released herefrom.
At any time, without liability therefore and without notice,
and without affecting the personal liability of Trustor of any other person for
payment of the indebtedness secured hereby, Trustee may, with the consent of
Beneficiary: (1) release and reconvey by Deed of Release any part of the Trust
Property from the lien hereof; (2) consent to the making and recording of any
maps or plats of the Trust Property; (3) join in granting any easement on the
Trust Property; or (4) join in any extension agreement or any agreement
subordinating or modifying the lien or charge hereof. If Trustee shall perform
any such acts or execute complete or partial reconveyances it shall be paid a
fee in accordance the its established fees and charges therefor.
If reconveyance by Deed of Release is to be made by Trustee,
Beneficiary shall deliver the original of this Trust Deed and the note secured
hereby to Trustee with a request for reconveyance by Deed of Release.
The Grantee in any Deed of Release executed pursuant to this
Trust Deed may be described as "the person or persons legally entitled thereto"
and the recitals therein of any matters or facts shall be conclusive proof of
the truthfulness thereof.
8
<PAGE> 123
14. In the event of default hereunder, Beneficiary, if it
desires Trustee to exercise the power of sale granted hereby, shall execute and
deliver to Trustee a written declaration of default and demand for sale and
shall surrender to Trustee this Trust Deed, the note secured hereby and all
documents evidencing any expenditures hereunder, together with such other
documents as Trustee may require. Beneficiary shall also execute and deliver to
Trustee all notices to Trustor that must be signed by Beneficiary. Upon receipt
thereof, Trustee shall sell the Trust Property as provided by law. Trustee may
postpone the sale as provided by law. After sale of the Trust Property, Trustee
shall deliver its deed to the purchaser conveying the Trust Property or any
portions thereof so sold but without any covenant or warranty, express or
implied. The recital in any such deed of any matters or facts, stated either
specifically or in general terms, or as conclusions of law or facts, shall be
conclusive proof of the truthfulness thereof.
15. Beneficiary may, at any time, request cancellation of
Trustee's Notice of Sale, whereupon Trustee shall execute and record, or cause
to be recorded, a Cancellation of Notice of Sale in the same county in which the
Notice of Sale was recorded. The exercise by Beneficiary of this right shall not
constitute a waiver of any default then existing or subsequently occurring.
In the event this Trust Deed and the indebtedness and
obligations secured hereby are reinstated in the manner provided by law,
Beneficiary shall forthwith notify Trustee thereof as provided by law. Upon such
notification, Trustee shall record, or cause to be recorded, a Cancellation of
Notice of Sale in the same county in which the Notice of Sale was recorded
within the period then required by law.
16. In the event of default hereunder, at any time before the
Trust Property has been sold pursuant to the power of sale granted hereby, this
Trust Deed may be foreclosed in the manner provided by law for the foreclosure
of mortgages on real property.
17. In the event of default hereunder, Beneficiary shall be
entitled to the appointment of a Receiver to take charge of the Trust Property,
collect the rents, issues and profits therefrom, care for and repair the same,
improve the same when necessary or desirable, lease and rent the Trust Property
or portions thereof (including leases existing beyond the term of receivership),
plant, cultivate and harvest crops thereon, and otherwise use and utilize the
Trust Property and to have such other duties as may be fixed by the Court.
Trustor specifically agrees that the Receiver may be
appointed without any notice to Trustor whatsoever, and the Court may appoint a
Receiver without reference to matters normally taken into account by Courts in
the discretionary appointment of Receivers, it being the intention of Trustor to
hereby authorize the appointment of a Receiver when Trustor is in default and
Beneficiary has requested the appointment of a Receiver. Trustor hereby agrees
and consents to the appointment of the particular person or firm (including an
officer or employee of Beneficiary) designated by Beneficiary as Receiver and
hereby waives its rights to suggest or nominate any person or firm as Receiver
in opposition to that designated by Beneficiary.
9
<PAGE> 124
18. Beneficiary may substitute another Trustee herein named to
exercise the rights, powers and duties granted by law and contained herein. Upon
such appointment, and without the necessity of a conveyance to the successor
Trustee, the latter shall be vested with all the title, powers and duties
conferred upon the Trustee herein named.
19. Beneficiary or any purchaser at Trustee's sale or at any
foreclosure sale may, if it so elects, be subrogated to and succeed to all the
rights of Trustor under any or all leases on the Trust Property or portions
thereof. Beneficiary may, if it so elects, subordinate its rights hereunder to
any lease on the Trust Property, or a portion thereof, and keep the lease in
effect through and after any foreclosure action or Trustee's sale.
20. Beneficiary shall be subrogated to the lien,
notwithstanding its release of record, of any prior mortgage, trust deed or
other encumbrance paid or discharged from the proceeds of the note secured
hereby, or from any advance made by Beneficiary.
21. Any payments made after the due date will accrue interest
at the default rate specified in the Note secured by this Deed of Trust.
22. In the event of the passage after the date of this Trust
Deed of any law levying any tax upon this Trust Deed or the debt secured hereby,
which Beneficiary is obliged to pay, then Trustor agrees to pay said tax or
reimburse Beneficiary for the payment of the same, provided that Trustor shall
not be obligated to pay any amount which would be considered as interest at a
rate higher than allowed by law, and provided further that in the event of the
enactment of any such law Beneficiary shall have the right, at its option, to
declare the indebtedness secured hereby to be immediately due and payable.
23. Trustor will not, except as otherwise provided in the
Agreement, sell, convey, transfer, dispose of or further encumber the Trust
Property or any part thereof or any interest therein or enter into a lease
covering all or any portion thereof or an undivided interest therein, either
voluntarily, involuntarily or otherwise, without the prior written consent of
Beneficiary being first had and obtained, which consent may be withheld or
conditioned in the sole and absolute discretion of Beneficiary. Notwithstanding
the foregoing, Trustor may enter into contracts to sell Lots (as defined in the
Agreement) in the ordinary course of Trustor's business in connection with sales
contemplated to result in releases pursuant to Section 2.8 of the Agreement. Any
transfer or encumbrance of the controlling interest of the shares of stock of
Trustor, shall be deemed a transfer requiring Beneficiary's prior written
consent. All easements, declarations of covenants, conditions and restrictions
and private and public dedications affecting the Trust Property shall be
submitted to Beneficiary for its approval and such approval shall be obtained
prior to the execution or granting of any thereof by Trustor, accompanied by a
drawing or survey showing the precise location of each thereof.
24. Trustee may, but shall be under no obligation or duty to,
appear in or defend any action or proceeding purporting to affect the security
hereof or the rights or powers of Beneficiary or Trustee. If Trustee shall take
such action at the request of Beneficiary, it shall be paid
10
<PAGE> 125
therefor in accordance with its established fees and charges and shall be
reimbursed for its costs and expenses actually incurred, including attorney's
fees.
25. The Trust created hereby is irrevocable by Trustor.
Trustee accepts the Trust when this Trust Deed, duly executed and acknowledged,
is made a public record as provided by law, but acceptance is not required as a
condition to the validity hereof, and this Trust Deed is effective upon
delivery. Trustee shall not be obligated to notify any party hereto of pending
sale under any other trust deed, or any action or proceeding in which Trustor,
Beneficiary or Trustee shall be a party, except as required by law.
26. The word "Trustor" and the language of this instrument
shall, where there is more than one Trustor, be construed as plural and be
binding equally on Trustors. The obligations of Trustors hereunder and under the
note secured hereby shall be joint and several. This Trust Deed applies to, is
binding upon, and inures to the benefit of all parties hereto, their heirs,
executors, administrators, successors and assigns. The term "Beneficiary" shall
include not only the original Beneficiary hereunder, but also any future owner
and holder of the note secured hereby.
27. If any provision hereof should be held unenforceable or
invalid, in whole or in part, then such unenforceable or void provision or part
shall be deemed separable from the remaining provisions hereof and shall in no
way affect the validity of this Trust Deed.
28. Notwithstanding any provisions herein, or in the Note,
notes or other evidences of indebtedness, secured hereby, or in any related
agreement between Trustor and Beneficiary, the total liability of Trustor for
payments in the nature of interest shall not exceed the limits now imposed by
the laws of the State of Arizona.
29. Trustor requests that a copy of any Notice of Sale
hereunder be mailed to him at his mailing address set forth above. Any notices
required to be given to Trustor by mailing shall be effective and complete when
mailed and shall be mailed to the address set forth above. Lack of receipt
thereof shall in no way invalidate the notice or any sale by Trustee hereunder,
unless otherwise provided by law. If Trustor desires to change the address to
which notices shall be mailed, such change shall be accomplished by a request as
provided by law.
30. Trustee shall be paid for all acts performed by it
hereunder or in connection herewith in accordance with its established fees and
charges. All such fees and charges shall be paid by Trustor, and if Beneficiary
shall advance any such fees or charges, Trustor shall reimburse Beneficiary for
same on demand. Payment thereof is secured by this Trust Deed.
31. This is a Construction Deed of Trust and is entitled to
the priorities of Arizona Revised Statutes, Section 47-9313(F).
32. To the extent that any of the Trust Property constitutes
personal property or fixtures under applicable law, Trustor hereby grants to
Beneficiary a security interest in such property and agrees that in addition to
all other rights and remedies, Beneficiary shall have the rights
11
<PAGE> 126
and remedies of a secured party under Article 9 of the Uniform Commercial Code
as in effect in Arizona in the event of a default hereunder.
33. Upon its recording in the real property records, this Deed
of Trust shall be effective as a financing statement filed as a fixture filing.
In addition, a carbon, photographic or other reproduced copy of this Deed of
Trust and/or any financing statement relating hereto shall be sufficient for
filing and/or recording as a financing statement. The filing of any other
financing statement relating to any personal property, rights or interests
described herein shall not be construed to diminish any right or priority
hereunder.
34. Section 2.8 of the Agreement states in part as follows:
"2.8 Releases of Collateral.
(a) Releases of Units and Eligible Lots. Borrower may request
releases of Eligible Lots and Units from the lien and encumbrance of a
Deed of Trust from time to time; PROVIDED, HOWEVER, the Beneficiary has
no obligation to release any Eligible Lot or Unit unless each of the
following conditions precedent is satisfied:
(i) Generally.
(A) Notification to the Lender. Borrower or
the closing agent handling the sale will have
notified the Lender in writing of the requested
release;
(B) Remargining Payments Required. Borrower
will have made all payments required to be made
pursuant to SECTION 2.9 after giving effect to such
Release;
(C) No Default. No Event of Default and no
Unmatured Event of Default shall have occurred and be
continuing;
(D) Endorsements. Borrower shall provide the
Lender with such endorsements to the Title Policy as
the Lender may reasonably request in connection with
each release;
(E) Processing/Release Fees. If required by
Lender, Borrower shall pay the standard
processing/release fees of the Lender and the trustee
under the Deed of Trust, in connection with such
release; and
(F) Escrow Arrangements. Each release shall
be made by the Lender by delivery of the release
documents to a title company or other escrow agent
satisfactory to the Lender on such conditions as
12
<PAGE> 127
shall assure the Lender that all conditions precedent
to such release have been satisfied and that the
applicable transaction will be completed.
(ii) Releases of Units.
(A) Releases in the Ordinary Course of
Business. With respect to any release of Units, the
requested release is for the purpose of sale in the
ordinary course of Borrower's business pursuant to a
Purchase Contract; and
(B) Payment of Release Price. In connection
with the sale of the Unit, Borrower will have paid to
the Lender a release price equal to the Net Sales
Proceeds.
(iii) Releases of Eligible Lots.
(A) Releases for Custom Lot Sale. With
respect to any release of Eligible Lots, the
requested release is for the sale to a party who is
not an Affiliate of Borrower for the construction of
a custom home thereon; and
(B) Payment of Release Price. In connection
with the sale of the Eligible Lot, Borrower will have
paid to the Lender a release price equal to the Net
Sales Proceeds.
(b) Releases for Dedications and Similar Purposes. Upon
written request of Borrower and so long as no Event of Default or
Unmatured Event of Default has occurred and is continuing and provided
the Lender shall have approved the request, in the Lender's reasonable
discretion, Borrower may release from the lien and encumbrance of a
Deed of Trust such portions of the Collateral as Borrower (i) is
required to convey to a Governmental Authority or a bona fide public
utility in connection with the development of an Approved Subdivision
(such as roads, drainage easements, and utility easements) and for
which Borrower receives no monetary compensation; or (ii) proposes to
convey to a homeowners' association or similar Person in connection
with the development of an Approved Subdivision (such as common areas)
and for which Borrower receives no monetary compensation. Releases that
satisfy the requirements of this Section do not require the payment of
any release price.
(c) Adjustment to Borrowing Base. Any Collateral released
shall no longer be Eligible Collateral and the Collateral Value of
Eligible Collateral shall be immediately and automatically adjusted to
reflect such release. An item of Collateral
13
<PAGE> 128
not included as Eligible Collateral shall be released by Lender subject
to any remargining payments required of Borrower as set forth in
SECTION 2.9."
IN WITNESS WHEREOF, Trustor has executed this Deed of Trust
this 14th day of May, 1998.
DESERT MOUNTAIN PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited partnership
By: Desert Mountain Development Corporation, a
Delaware corporation, General Partner
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
STATE OF )
-------------------- ) ss.
County of )
-------------------
The foregoing instrument was acknowledged before me this day
of ________________, 1998, by , the of DESERT MOUNTAIN DEVELOPMENT CORPORATION,
a Delaware corporation, as General Partner of DESERT MOUNTAIN PROPERTIES LIMITED
PARTNERSHIP, a Delaware limited partnership, on behalf of the corporation.
My commission expires: ----------------------------------------
Notary Public
- --------------------------
14
<PAGE> 129
When Recorded Return To:
Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
Attn: David J. Carroll, Esquire
Recorder's Use
- --------------------------------------------------------------------------------
AMENDMENT TO DEED OF TRUST
DATE: March 31, 1999
PARTIES:
Trustor: DESERT MOUNTAIN PROPERTIES LIMITED PARTNERSHIP, a
Delaware limited partnership
Trustor's
Address: 10550 East Desert Hills Drive
Scottsdale, Arizona 85262
Trustee: NATIONAL BANK OF ARIZONA, a national banking association
Trustee's
Address: 3101 North Central Avenue
Phoenix, Arizona 85012
Beneficiary: NATIONAL BANK OF ARIZONA, a national banking association
Beneficiary's
Address: 3101 North Central Avenue
Phoenix, Arizona 85012
RECITALS:
A. Beneficiary has extended to Trustor credit (the "Loan") in the
original principal amount of Thirty-Five Million and No/100 Dollars
($35,000,000.00) pursuant to that certain Master Revolving Line of Credit Loan
Agreement (Borrowing Base) between Trustor and Beneficiary dated May 14, 1998,
evidenced by (i) that certain Promissory Note (Borrowing Base) dated May 14,
1998, in the original principal amount of Twenty-Five Million and No/100 Dollars
($25,000,000.00) (the ""Borrowing Base Note) and (ii) that certain Promissory
Note (Warehouse) dated May 14, 1998, in
<PAGE> 130
the original principal amount of Ten Million and No/100 Dollars
($10,000,000.00), both made by Trustor in favor of Beneficiary.
B. The Loan is secured by, among other things, that certain Deed of
Trust, Assignment of Rent and Security Agreement and Fixture Filing executed by
Borrower, as trustor in favor of Bank, as Beneficiary, dated May 14, 1998,
recorded on June 15, 1998, as Instrument No. 98- 0507873, Official Records of
Maricopa County, Arizona (the "Deed of Trust").
C. Trustor and Beneficiary are parties to that certain Second
Modification Agreement dated of even date herewith, pursuant to which, inter
alia, Trustor has requested and Beneficiary has agreed (i) to increase the
principal amount available for advance under the Borrowing Base Note from
Twenty-Five Million and No/100 Dollars ($25,000,000.00) to Thirty-Five Million
and No/100 Dollars ($35,000,000.00) and (ii) to add additional real property as
collateral under the Deed of Trust.
D. Trustor and Beneficiary desire to amend the Deed of Trust for the
purpose of increasing the maximum principal amount secured by the Deed of Trust
and adding additional property to the lien and encumbrance thereof.
NOW, THEREFORE, in consideration of the premises and promises hereafter
set forth, the parties hereto agree as follows:
AGREEMENTS:
1. Accuracy of Recitals. Trustor hereby acknowledges the accuracy of
the foregoing Recitals.
2. Amendment to Deed of Trust.
(a) Paragraph (1) of the Securing Clause on Page 2 of the Deed
of Trust is hereby deleted in its entirety and the following in inserted in
place thereof:
(1) To secure performance of the covenants and agreements herein set
forth and payment of (i) that certain Secured Promissory Note (Borrowing Base)
dated the 13th day of May, 1998, as amended by that certain Second Modification
Agreement dated March 31, 1999, in the sum of Thirty-Five Million and No/100
Dollars ($35,000,000.00) and interest as specified therein and (ii) that certain
Secured Promissory Note (Warehouse) dated the 13th day of May, 1998, in the sum
of Ten Million and No/100 Dollars ($10,000,000.00) and interest as specified
therein (collectively, the "Note"). The Note contains a variable rate interest
rate;
(b) Exhibit A to the Deed of Trust is hereby amended to add
thereto, and Trustor hereby irrevocably grants, transfers, conveys and assigns
to Trustee, IN TRUST, WITH POWER OF SALE AND RIGHT OF ENTRY AND POSSESSION, for
the benefit and security of Beneficiary,
2
<PAGE> 131
the real property more particularly described on Exhibit A attached hereto and
incorporated herein by this reference.
3. Miscellaneous. Except for the amendment above stated, all of the
remaining conditions and covenants of the Deed of Trust shall remain in full
force effect, unchanged, and the Deed of Trust is in all respects ratified,
confirmed and approved.
4. Counterparts. This Amendment to Deed of Trust may be executed in any
number of counterparts, each of which shall be an original, but all of which
shall constitute one and the same instrument.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
3
<PAGE> 132
IN WITNESS WHEREOF, the parties have executed this Amendment to Deed of
Trust as of the day and year first above written.
DESERT MOUNTAIN PROPERTIES LIMITED PARTNERSHIP
By: Desert Mountain Development Corporation, General
Partner
By:
-----------------------------------------------
Name:
---------------------------------------------
Title:
--------------------------------------------
NATIONAL BANK OF ARIZONA, a national banking association
By:
------------------------------------------------------
Name:
----------------------------------------------------
Title:
---------------------------------------------------
STATE OF )
-------------------- ) ss
County of )
-------------------
The foregoing instrument was acknowledged before me this ___ day of
_______________, 1999, by __________________________, the
_______________________ of Desert Mountain Development Corporation, on behalf of
the corporation, as General Partner of Desert Mountain Properties Limited
Partnership, on behalf of the partnership.
My Commission Expires:
-----------------------
- ---------------------- NOTARY PUBLIC
4
<PAGE> 133
STATE OF )
-------------------- ) ss
County of )
-------------------
The foregoing instrument was acknowledged before me this ___ day of
_______________, 1999, by __________________________, the
_______________________ of National Bank of Arizona, a national banking
association, on behalf of the association.
My Commission Expires:
-----------------------
- ---------------------- NOTARY PUBLIC
5
<PAGE> 134
EXHIBIT A
LEGAL DESCRIPTION - LOOKOUT RIDGE
6
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 30,872
<SECURITIES> 0
<RECEIVABLES> 39,258
<ALLOWANCES> 478
<INVENTORY> 40,976
<CURRENT-ASSETS> 239,475
<PP&E> 179,066
<DEPRECIATION> 17,907
<TOTAL-ASSETS> 662,932
<CURRENT-LIABILITIES> 216,457
<BONDS> 0
0
0
<COMMON> 114
<OTHER-SE> (16,099)
<TOTAL-LIABILITY-AND-EQUITY> 662,932
<SALES> 136,748
<TOTAL-REVENUES> 136,748
<CGS> 132,453
<TOTAL-COSTS> 132,453
<OTHER-EXPENSES> 5,301
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,185
<INCOME-PRETAX> 9,001
<INCOME-TAX> 372
<INCOME-CONTINUING> 3,414
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,414
<EPS-PRIMARY> .32
<EPS-DILUTED> .31
</TABLE>
