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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 1997
Commission file number 1-11749
LENNAR CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 59-1281887
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 NORTHWEST 107TH AVENUE, MIAMI, FLORIDA 33172
(Address of principal executive offices)(Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (305) 559-4000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, par value 10(cents) New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO ____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. YES X NO ____
As of February 10, 1998, registrant had outstanding 43,415,217 shares
of common stock and 9,918,631 shares of Class B common stock (which can be
converted into common stock). Of the total shares outstanding, 42,936,218 shares
of common stock and 38,701 shares of Class B common stock, having a combined
aggregate market value (assuming the Class B shares were converted) on that date
of $1,154,950,948, were held by non-affiliates of the registrant.
Documents incorporated by reference:
RELATED
SECTION DOCUMENTS
- --------------------------------------------------------------------------------
II Pages 26 through 57 of the Annual Report to
Stockholders for the year ended November 30, 1997.
III Definitive Proxy Statement to be filed pursuant to
Regulation 14A on or before March 30, 1998.
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PART I
ITEM 1. BUSINESS.
GENERAL DEVELOPMENT OF BUSINESS
Lennar Corporation (together with its subsidiaries, the "Company") is one
of the nation's premier homebuilders and is a provider of residential financial
services. The Company's homebuilding operations include the construction and
sale of homes, as well as the purchase, development and sale of residential
land. The purchase, development and sale of residential land is conducted
through its own efforts and its partnership interests. The financial services
operations provide mortgage financing, title insurance and closing services for
Lennar homebuyers and others; acquire, package and resell mortgage loans and
mortgage-backed securities; perform mortgage loan servicing activities and
provide cable television and alarm monitoring services to residents of Lennar
communities and others. The Company is the surviving corporation of a merger
between Lennar Corporation and Pacific Greystone Corporation ("Greystone"),
which became effective October 31, 1997.
Prior to October 31, 1997, the Company was also engaged in commercial
real estate investment and management activities. On June 10, 1997, the
Company's Board of Directors approved a plan to spin-off the commercial real
estate investment and management business consisting of the Investment Division,
the portions of the Financial Services Division involved in commercial mortgage
lending and investments (but not the portions of its Financial Services Division
which are involved in lending to homeowners, servicing residential mortgages or
providing services to homebuyers or homeowners) and certain assets of the
Company's Homebuilding Division utilized in related businesses. The spin-off was
conducted through the distribution of the stock of LNR Property Corporation
("LNR") pursuant to a separation and distribution agreement that provided that
for each existing share of the Company, the shareholders received one share of
common stock of LNR, with the right during a limited period after the spin-off
to exchange that common stock for Class B common stock of LNR. On August 20,
1997, the Company received a ruling from the Internal Revenue Service that the
distribution would not result in taxes to the Company or its shareholders. The
spin-off, in the form of a tax-free distribution, was completed effective
October 31, 1997.
In connection with the spin-off, the Company and LNR formed a general
partnership ("Lennar Land Partners") to acquire, develop and sell land. The
Company and LNR contributed properties to Lennar Land Partners in exchange for
50% general partnership interests in Lennar Land Partners. Pursuant to a
management agreement, the Company manages the day-to-day operations of Lennar
Land Partners and receives a management fee. The partnership agreement relating
to Lennar Land Partners permits the Company and LNR to (i) engage in business
activities which conflict with or are in direct competition with Lennar Land
Partners and (ii) acquire properties from, or sell properties to, Lennar Land
Partners. The Company has options to purchase a portion of the assets originally
contributed to Lennar Land Partners and may be granted options to purchase all
or portions of properties which subsequently are acquired by Lennar Land
Partners. The formation of Lennar Land Partners was effective as of October 31,
1997.
Also on June 10, 1997, the Company's Board of Directors approved a plan
to acquire Greystone through a merger in which the shareholders of the Company
received one share of common stock or Class B common stock of the corporation
which survives the merger for each share of common stock or Class B common stock
of the Company held by them, and the shareholders of Greystone received 1.138
shares of common stock of the surviving corporation for each outstanding share
of Greystone common stock. The surviving corporation was renamed Lennar
Corporation. This merger resulted in the Company's shareholders owning
approximately 68% of the surviving corporation and Greystone shareholders owning
approximately 32% of the surviving corporation. The merger became effective
after the distribution of the stock of LNR to which the Company transferred its
commercial real estate investment and management business and the Greystone
shareholders did not receive any interest in LNR. The merger was conditioned
upon the distribution taking place. Such merger became effective on October 31,
1997.
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FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Company operates in two industry segments - homebuilding and
financial services. The financial information related to these industry segments
and the discontinued operations of the Investment Division is contained in the
financial statements incorporated by reference to pages 36 through 56 of the
Company's 1997 Annual Report to Stockholders.
NARRATIVE DESCRIPTION OF BUSINESS
HOMEBUILDING
The Company and its predecessor have been building homes since 1954.
The Company believes that since its acquisition of Development Corporation of
America in 1986, it has delivered more homes in Florida each year than any other
homebuilder. The Company has been building homes in Arizona since 1972, where it
currently is one of the leading homebuilders. In 1991, the Company began
building homes in the Dallas/Fort Worth area of Texas. In 1992, it started
homebuilding operations in Houston, Texas. During 1995, the Company entered the
California homebuilding market through the acquisition of Bramalea California,
Inc. and during 1996 through the acquisition of Renaissance Homes, Inc. and
through several partnership investments. During 1996, the Company significantly
expanded its operations in Texas with the acquisition of the assets and
operations of Houston-based Village Builders (a homebuilder) and Friendswood
Development Company (a developer of master-planned communities). During 1997,
the Company continued its expansion in California through homesite acquisitions
and additional partnership investments. Additionally during 1997, the Company
further expanded its operations in the California and Arizona homebuilding
markets and entered the Nevada homebuilding market with the acquisition of
Pacific Greystone Corporation. Subsequent to November 30, 1997, the Company
acquired Winncrest Homes in California and also established a new homebuilding
division in Austin, Texas. The Company has constructed and sold approximately
140,000 homes to date.
The Company's homebuilding activities in Florida are principally
conducted through Lennar Homes, Inc. In Arizona, these activities are conducted
through Lennar Homes of Arizona, Inc. and Greystone Homes, Inc. In Texas, these
activities are conducted through Lennar Homes of Texas, Inc. and Houston Village
Builders, Inc. Homebuilding activities in California are principally conducted
through Lennar Homes of California, Inc., Lennar Renaissance, Inc. and Greystone
Homes, Inc. In Nevada, these activities are conducted through Greystone Homes,
Inc.
The Company, through its own efforts and its partnership interests, is
involved in all phases of planning and building in its residential communities,
including land acquisition, site planning, preparation of land, improvement of
undeveloped and partially developed acreage, and design, construction and
marketing of homes. The Company subcontracts virtually all segments of
development and construction to others.
The Company sells single-family attached and detached homes and
condominiums in buildings generally one to five stories in height. Homes sold by
the Company are primarily in the moderate price range for the areas in which
they are located. They are targeted primarily at first-time homebuyers, move-up
homebuyers and, in some communities, active adults. The average sales price of a
Lennar home was $168,800 in fiscal 1997.
CURRENT HOMEBUILDING ACTIVITIES
The table on the following page summarizes information about the
Company's recent homebuilding activities:
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<TABLE>
<CAPTION>
HOMEBUILDING ACTIVITIES
NOVEMBER 30, 1997
--------------------------------------------------------------------------------------------
LENNAR CORPORATION LENNAR CORPORATION PARTNERSHIPS
---------------------------------------------------------------- ------------------- ------------------
ESTMATED NUMBER ESTIMATED NUMBER
OF HOMES THAT COULD OF HOMES THAT COULD
HOMES DELIVERED HOMES COMPLETED OR BE CONSTRUCTED ON BE CONSTRUCTED ON
IN YEARS ENDED UNDER CONSTRUCTION LAND CURRENTLY LAND CURRENTLY
NOVEMBER 30, ----------------------- SOLD HOMES OWNED (2)(4) OWNED(2)(3)(4)(5) TOTAL
--------------------------- AVAILABLE FOR NOT YET ------------------- ----------------- OWNED AND
REGION 1997 1996 1995 SOLD (1) SALE STARTED(1) OWNED CONTROLLED OWNED CONTROLLED CONTROLLED
- ----------- -------- --------- --------- ---------- ------------ ----------- -------- ----------- ------------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Florida 3,367 3,363 3,395 836 649 459 4,852 2,577 20,199 3,242 30,870
California 587 58 -- 718 446 65 3,542 2,260 10,897 5,781 22,480
Texas 2,075 1,832 781 560 419 108 2,996 692 5,203 -- 8,891
Arizona 645 715 504 321 109 133 1,623 822 762 -- 3,207
Nevada 28 -- -- 99 20 19 927 243 -- -- 1,170
======== ========= ========= ========== ============ =========== ======== ========= ========= ======== ===========
Totals 6,702 5,968 4,680 2,534 1,643 784 13,940 6,594 37,061 9,023 66,618
======== ========= ========= ========== ============ =========== ======== ========= ========= ======== ===========
</TABLE>
Notes:
(1) Although firm contracts relating to these homes were executed, there
can be no assurance that purchasers will meet their obligations under
the contracts.
(2) Based on current management estimates, which are subject to change.
(3) As of November 30, 1997, one of the Company's partnerships had equity
interests in other partnerships that owned approximately 4,100
homesites for sale to the Company and other builders.
(4) Includes homesites that are currently designated for sale to other
builders.
(5) Represents partnerships and similar entities in which the Company has
less than a controlling interest and are accounted for by the equity
method.
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MANAGEMENT AND OPERATING STRUCTURE
The Company balances its local operating structure with centralized
corporate-level management. The Company's local managers, who have significant
experience in the homebuilding industry generally and in their respective
markets, are responsible for operating decisions regarding land identification,
home design, construction and marketing. Decisions related to overall Company
strategy, acquisitions, financing and disbursements are centralized at the
corporate level.
PARTNERSHIPS AND SIMILAR ENTITIES
The Company views partnerships and other similar entities as a means to
both expand its market opportunities and manage its risk profile. Typically, the
Company acts as the general partner and the day-to-day manager.
On October 31, 1997, following the spin-off transaction, the Company and
LNR formed Lennar Land Partners to acquire, develop and sell land. The Company
and LNR contributed properties in exchange for 50% general partnership interests
in Lennar Land Partners. The Company manages the day-to-day operations of Lennar
Land Partners and receives a management fee. The Company has options to purchase
a portion of the assets originally contributed to Lennar Land Partners and may
be granted options to purchase all or portions of properties which subsequently
are acquired by Lennar Land Partners.
The Company also has investments in two similar type entities, Lennar
Bressi Carlsbad, L.L.C. and HCC Investors, L.L.C., whose purposes are also to
acquire, develop and sell land.
PROPERTY ACQUISITION
The Company continuously considers the purchase of, and from time to time
acquires, land for its development and sales programs. These acquisitions may be
made directly or through the Company's partnership interests. The Company
generally does not acquire land for speculation. In some instances, the Company
acquires land by acquiring options enabling it to purchase parcels as they are
needed. Although some of the Company's land is held subject to purchase money
mortgages, most of the Company's land is not subject to mortgages.
CONSTRUCTION AND DEVELOPMENT
The Company supervises and controls the development and building of its
own residential communities. It employs subcontractors for site improvements and
virtually all of the work involved in the construction of homes. In almost all
instances, the arrangements between the Company and the subcontractors commit
the subcontractors to complete specified work in accordance with written price
schedules. These price schedules normally change to meet changes in labor and
material costs. The Company does not own heavy construction equipment and
generally only has a labor force used to supervise development and construction
and perform routine maintenance and minor amounts of other work.
The Company generally finances construction with its own funds or
borrowings under its unsecured working capital lines.
MARKETING
The Company generally has an inventory of homes under construction. A
majority of these homes are sold (i.e., the Company has received executed sales
contracts and deposits) before the Company starts construction.
The Company employs sales associates who are paid salaries, commissions
or both to make onsite sales of the Company's homes. The Company also sells
through independent brokers. The Company advertises its residential communities
through local media and sells primarily from models that it has designed and
constructed. In addition, the Company advertises its active adult communities in
areas where potential active adults live.
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MORTGAGE FINANCING
The Company's financial services subsidiaries make conventional,
FHA-insured and VA-guaranteed mortgage loans available to qualified purchasers
of the Company's homes. Because of the availability of mortgage loans from the
Company's financial services subsidiaries, as well as independent mortgage
lenders, the Company believes access to financing has not been, and is not, a
significant problem for most purchasers of the Company's homes.
QUALITY SERVICE
The Company employs a process which is intended to provide a positive
atmosphere for each customer throughout the pre-sale, sale, building, closing
and post-closing periods. The participation of sales representatives, on-site
construction supervisors and post-closing customer personnel, working in a team
effort, is intended to foster the Company's reputation for quality service and
ultimately lead to enhanced customer retention and referrals.
COMPETITION
The housing industry is highly competitive. In its activities, the
Company competes with numerous developers and builders in and near the areas
where the Company's communities are located, including homebuilders with
nationwide operations. Competition is on the basis of location, design, quality,
amenities and price. The Company is the largest homebuilder in Florida. The
Company is also a leading homebuilder in Arizona and Texas and entered the
California market in 1995. The Company significantly expanded its California and
Arizona homebuilding operations and entered the Nevada market during 1997
through its merger with Greystone. Some of the Company's principal competitors
include Continental Homes, UDC Homes, Pulte and Kaufman and Broad in Arizona,
Centex Homes in Texas and Florida, Arvida/JMB Partners in Florida, Lewis Homes
in Nevada and Kaufman and Broad, Pardee Construction and Standard Pacific in
California.
FINANCIAL SERVICES
The Company's financial services subsidiaries provide mortgage financing,
title insurance and closing services for Lennar homebuyers and others; acquire,
package and resell mortgage loans and mortgage-backed securities; perform
mortgage loan servicing activities and provide cable television and alarm
monitoring services to residents of Lennar communities and others. Previously,
this division would also acquire, package and resell commercial mortgage loans
and mortgage-backed securities and invest in partnerships and in issues of rated
portions of commercial real estate mortgage-backed securities for which Lennar's
discontinued Investment Division was the special servicer and an investor in the
unrated portions of those securities. On October 31, 1997, such commercial real
estate assets were distributed as part of the spin-off of the Company's
commercial real estate investment and management business.
MORTGAGE ORIGINATION
Through a financial services subsidiary, Universal American Mortgage
Company, the Company provides conventional, FHA-insured and VA-guaranteed
mortgage loans to buyers of the Company's homes and others from offices located
in Florida, California, Arizona, Texas and Nevada. In 1997, loans to buyers of
the Company's homes represented approximately 70% of the Company's $420 million
of loan originations.
The Company sells the loans it originates in the secondary mortgage
market, generally on a non-recourse basis, and retains most of the servicing
rights. The Company has an interest rate risk management policy under which it
hedges its interest rate locked loan commitments and loans held for sale against
exposure to interest rate fluctuations. The Company finances its loans held for
sale with borrowings under the financial services subsidiaries' $110 million
line of credit (secured by the loans and by certain servicing rights) or from
Lennar Corporation when, on a consolidated basis, this enables the Company to
minimize its overall cost of funds.
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MORTGAGE SERVICING
The Company obtains earnings from servicing loans originated or acquired
by its financial services subsidiaries. The Company services loans for the
Government National Mortgage Association (Ginnie Mae), the Federal National
Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation
(Freddie Mac) and other mortgage investors. At November 30, 1997, it had a
servicing portfolio of approximately 39,700 loans with an unpaid principal
balance of approximately $3.1 billion.
ASSET ACQUISITION AND DISPOSITION
The Company, from time to time, purchases pools of mortgage loans
originated by financial institutions and then resells the loans in the secondary
market. The benefits to the Company from these transactions include gains from
the sales of the loans and retention of the right to service the loans after
they are sold in the secondary market.
TITLE INSURANCE AND CLOSING SERVICES
The Company arranges title insurance for, and provides closing services
to, buyers of the Company's homes and others. It provided these services in
connection with approximately 9,700 real estate transactions during 1997. In
1994, the Company formed TitleAmerica Insurance Corporation, a title insurance
underwriter, which provides title insurance to buyers of the Company's homes and
others. In 1996, the Company acquired the assets and business of Regency Title
Company in Texas, and thereby, significantly expanded its title insurance and
closing business that had begun with the formation of Universal Title Insurors.
Subsequent to November 30, 1997, the Company acquired the North American Title
Group, which significantly expanded its title insurance business into
California, Arizona and Colorado.
STRATEGIC TECHNOLOGIES
During 1996, the Company formed Strategic Technologies, Inc. to
provide cable television and alarm monitoring services to residents of Lennar
communities and others. At November 30, 1997, the Company had approximately
3,800 cable television subscribers and approximately 3,800 alarm monitoring
customers located in Florida and California.
OTHER ACTIVITIES
The Company has a number of limited-purpose finance subsidiaries which
have placed mortgages and other receivables as collateral for various long-term
financings. These subsidiaries pay the debt service on the long-term borrowings
primarily from the cash flows generated by the related pledged collateral. The
Company believes that the cash flows generated by these subsidiaries will be
adequate to meet the required debt payment schedules. As part of the spin-off of
the Company's commercial real estate investment and management business, LNR
received an interest in the assets of the limited-purpose finance subsidiaries
to the extent such assets exceeded the related liabilities.
RELATIONSHIP WITH LNR
In connection with the transfer of the Company's commercial real estate
investment and management business to LNR, and the spin-off of LNR to the
Company's stockholders, the Company entered into an agreement which, among other
things, prevents the Company from engaging at least until 2002 in any of the
business in which LNR was engaged, or anticipated becoming engaged, at the time
of the spin-off, and prohibited LNR from engaging, at least until 2002, in any
business in which the Company was engaged, or anticipated becoming engaged, at
the time of the spin-off (except in limited instances in which the activities or
anticipated activities of the Company and LNR overlapped). Specifically, the
Company is precluded, at least until 2002, from engaging in the business of (i)
acquiring and actively managing commercial or residential multi-family rental
real estate, other than as an incident to, or otherwise in connection with,
their homebuilding business, (ii) acquiring portfolios of commercial mortgage
loans or real estate assets acquired through foreclosures of mortgage loans,
other than real estate acquired as sites of homes to be built or sold as part of
its homebuilding business, (iii) making or acquiring mortgage loans, other than
mortgage loans secured by detached or attached homes or residential condominium
units, (iv) constructing office buildings or
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other commercial or industrial buildings, other than small shopping centers,
professional office buildings and similar facilities which will be adjuncts to
its residential developments, (v) purchasing commercial mortgage-backed
securities or real estate asset backed securities or (vi) acting as a servicer
or special servicer with regard to securitized commercial mortgage pools. The
Company is not, however, prevented from owning or leasing office buildings in
which it occupies a majority of the space; acquiring securities backed by pools
of residential mortgages; acquiring an entity which, when it is acquired, is
engaged in one of the prohibited activities as an incidental part of its
activities; owning as a passive investor an interest of less than 10% of a
publicly traded company which is engaged in a prohibited business; acquiring
commercial paper or short-term debt instruments of entities engaged in one or
more of the prohibited businesses; or owning an interest in, and managing,
Lennar Land Partners.
Although Lennar and LNR are separate companies, Leonard Miller owns stock
which gives him voting control of both companies. There are provisions in the
by-laws both of Lennar and LNR requiring approval by an Independent Directors
Committee of any significant transactions between the Company and LNR or any of
its subsidiaries.
The Company leases some office space, including its principal offices,
from LNR. The two companies are, for a period, sharing some computers and
related equipment and computer service personnel and Lennar is providing
construction management with regard to two properties owned by LNR.
REGULATION
Homes and residential communities built by the Company must comply with
state and local regulations relating to, among other things, zoning, treatment
of waste, construction materials which must be used, density requirements,
certain aspects of building design and minimum elevation of properties and other
local ordinances. These include laws requiring use of construction materials
which reduce the need for energy-consuming heating and cooling systems. These
laws and regulations are subject to frequent change and often increase
construction costs. In some cases, there are laws which require that commitments
to provide roads and other offsite infrastructure be in place prior to the
commencement of new construction. The provisions of these laws are usually
administered by individual counties and municipalities and may result in
additional fees and assessments or building moratoriums. In addition, certain
new development projects, particularly in Southern California, are subject to
assessments for schools, parks, streets and highways and other public
improvements, the costs of which can be substantial.
The residential homebuilding industry also is subject to a variety of
local, state and federal statutes, ordinances, rules and regulations concerning
the protection of health and the environment. Environmental laws and conditions
may result in delays, may cause the Company to incur substantial compliance and
other costs, and can prohibit or severely restrict homebuilding activity in
certain environmentally sensitive regions or areas. Additionally, the climate
and geology of the markets in Florida, California and Texas present risks of
natural disasters that could adversely affect the homebuilding industry in those
areas in general, and the Company's business in particular.
In recent years, several cities and counties in which the Company has
developments have approved submission to voters of "slow growth" initiatives and
other ballot measures which could impact the affordability and availability of
homes and land within those localities. Although many of these initiatives have
been defeated, the Company believes that if similar initiatives are introduced
and approved, future residential construction by the Company and others within
certain cities or counties could be negatively impacted.
In order to make it possible for purchasers of some of the Company's
homes to obtain FHA-insured or VA-guaranteed mortgages, the Company must
construct those homes in compliance with regulations promulgated by those
agencies.
The Company has registered condominium communities with the appropriate
authorities in Florida. It has registered some of its Florida communities with
authorities in New Jersey and New York. Sales in other states would require
compliance with laws in those states regarding sales of condominium homes.
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The Company's title insurance agency subsidiaries must comply with
applicable insurance laws and regulations.
The Company's subsidiary which underwrites title insurance is licensed in
the states in which it does business and must comply with laws and regulations
in those states regarding title insurance companies. These laws and regulations
include provisions regarding capitalization, investments, forms of policies and
premiums.
CAUTIONARY STATEMENTS
Certain statements contained in this Report may be "forward-looking
statements" as defined in the Private Securities Litigation Reform Act of 1995.
Such statements involve known and unknown risks, uncertainties and other factors
that may cause actual results to differ materially. Such factors include, but
are not limited to, changes in general economic conditions, the market for homes
generally and in areas where the Company has developments, the availability and
cost of land suitable for residential development, materials prices, labor
costs, interest rates, consumer confidence, competition, environmental factors
and government regulations affecting the Company's operations.
The following factors, among others, could particularly affect the
Company's operations and financial results and cause results to differ from
those anticipated by "forward-looking statements" in this Report.
REAL ESTATE, ECONOMIC AND CERTAIN OTHER CONDITIONS
The residential homebuilding industry is cyclical and is highly
sensitive to changes in general economic conditions, such as levels of
employment, consumer confidence and income, availability of financing for
acquisition, construction and permanent mortgages, interest rate levels and
demand for housing. Sales of new homes are also affected by the condition of the
resale market for used homes, including foreclosed homes.
The residential homebuilding industry has, from time to time,
experienced fluctuating lumber prices and supply, as well as serious shortages
of labor and other materials, including insulation, drywall, concrete,
carpenters, electricians and plumbers. Delays in construction of homes due to
these factors or to inclement weather conditions could have an adverse effect
upon the Company's operations.
INTEREST RATES AND MORTGAGE FINANCING
Virtually all of the purchasers of the Company's homes finance their
acquisitions through third-party lenders or the Company's financial services
subsidiaries. In general, housing demand is adversely affected by increases in
interest rates, housing costs and unemployment and by decreases in the
availability of mortgage financing. In addition, various proposals for changes
in the federal income tax have been discussed, some of which would remove or
limit the deduction for home mortgage interest. If effective mortgage interest
rates increase and the ability or willingness of prospective buyers to finance
home purchases is adversely affected, the Company's operating results may also
be negatively affected. The Company's homebuilding activities also are dependent
upon the availability and cost of mortgage financing for buyers of homes owned
by potential customers permitting those customers to sell their existing homes
and purchase homes from the Company. Any limitations or restrictions on the
availability of such financing could adversely affect the Company's sales.
VARIABILITY OF RESULTS
The Company has historically experienced, and in the future expects to
continue to experience, variability in operating results on a quarterly basis.
Factors which may contribute to this variability include, among others (i) the
timing of home closings; (ii) the Company's ability to continue to acquire land
on acceptable terms; (iii) the timing of receipt of regulatory approvals for the
construction of homes; (iv) the condition of the real estate market and general
economic conditions; (v) the cyclical nature of the homebuilding industry; (vi)
the prevailing interest rates and the availability of mortgage financing; (vii)
pricing policies of the Company's competitors; (viii) the timing of the opening
of new residential communities; (ix) weather and (x) the cost and availability
of
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materials and labor. The Company's historical financial performance is not
necessarily a meaningful indicator of future results and, in particular, the
Company expects its financial results to continue to vary from quarter to
quarter.
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends to a significant degree on the
efforts of the Company's senior management, especially its president and chief
executive officer and other officers. The Company's operations may be adversely
affected if one or more members of senior management cease to be active in the
Company. The Company has designed its compensation structure and employee
benefit programs to encourage long-term employment of executive officers.
EMPLOYEES
At November 30, 1997, the Company employed 2,173 individuals of whom 298
were office management and supervisory personnel, 389 were construction
management and supervisory personnel, 492 were real estate salespersons and 994
were other professional personnel, support personnel and skilled workers.
Some of the subcontractors utilized by the Company may employ members of
labor unions. The Company does not have collective bargaining agreements
relating to its employees.
ITEM 2. PROPERTIES.
For information about properties owned by the Company for use in its
homebuilding activities, see Item 1.
The Company leases and maintains its executive offices, financial
services subsidiary headquarters and principal Miami-Dade County, Florida
homebuilding office in an office complex built by the Company and now owned by
LNR. The leases for these offices expire in 2002. Other Company offices are
located in Company-owned communities or in leased space.
ITEM 3. LEGAL PROCEEDINGS.
The Company is a defendant in various lawsuits brought by condominium and
homeowner associations in communities constructed by the Company. Although the
specific allegations in the lawsuits differ, in general each of the lawsuits
asserts that the Company failed to construct buildings in the community involved
in accordance with plans and specifications and applicable construction codes,
and each of them seeks reimbursement for sums the plaintiff association claims
it will have to spend to remedy the alleged construction deficiencies.
Associations in other communities have threatened similar suits. Suits of this
type are common within the homebuilding industry. The Company does not believe
that these lawsuits or threatened lawsuits will have a material effect upon the
Company.
The Company had a number of claims for damages relating to a hurricane
which occurred in 1992. Most have been settled and to date, the Company's
insurers have made all payments required under settlements. Based on historical
experience with past claims, it is likely that the remaining claims will not be
material to the Company's financial position or results of operations. However,
the ultimate outcome cannot presently be determined.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At special meetings of stockholders held on October 31, 1997, the
Company's stockholders approved a merger of Lennar Corporation with Greystone
with 118,340,137 votes cast in favor, 20,115 votes cast against and 14,820
shares present but abstaining, and Greystone's stockholders approved that merger
with 11,795,150 votes cast in favor, 14,883 votes cast against and 510,961
shares present but abstaining.
9
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS.
Information concerning the market data for the Company's common stock
and related security holder matters is incorporated by reference to page 57 of
the Company's 1997 Annual Report to Stockholders.
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data is incorporated by reference to page 26 of the
Company's 1997 Annual Report to Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Management's discussion and analysis of financial condition and results
of operations is incorporated by reference to pages 27 through 33 of the
Company's 1997 Annual Report to Stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Consolidated financial statements and supplementary data about the
Company are incorporated by reference to pages 36 through 56 of the Company's
1997 Annual Report to Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information about the Company's directors is incorporated by reference
to the Company's definitive proxy statement, which will be filed with the
Securities and Exchange Commission not later than March 30, 1998 (120 days after
the end of the Company's fiscal year). The following people were the executive
officers of Lennar Corporation on February 10, 1998:
<TABLE>
<CAPTION>
NAME/POSITION AGE YEAR OF ELECTION
------------- --- ----------------
<S> <C> <C>
Stuart A. Miller,
President and Chief Executive Officer 40 1997
Irving Bolotin,
Senior Vice President 65 1969
Bruce Gross,
Vice President and Chief Financial Officer 39 1997
Marshall H. Ames,
Vice President 54 1982
Jonathan M. Jaffe,
Vice President 38 1994
Sherman J. Kronick,
Vice President 72 1979
Allan J. Pekor,
Vice President and Secretary 61 1997
Diane J. Bessette,
Controller 37 1997
Waynewright Malcolm,
Treasurer 34 1997
</TABLE>
10
<PAGE>
The year of election represents the year that the executive officer was
elected to his/her current position.
Mr. Stuart Miller (who is the son of Leonard Miller, the Chairman of
the Board of Directors of the Company) has held various executive positions with
the Company for more than five years. Mr. Stuart Miller had been a Vice
President since 1985, and previously headed the Company's Homebuilding and
Investment Divisions. Mr. Miller is also the Chairman of the Board of LNR.
Messrs. Bolotin, Ames and Kronick have each held substantially their
present positions with the Company for more than five years. Mr. Ames also
serves as a Regional President in the Company's Homebuilding Division.
Mr. Gross has been employed by the Company since 1997. Prior to joining
the Company, Mr. Gross was employed as Senior Vice President, Controller and
Treasurer of Pacific Greystone Corporation which he joined at its inception in
1991.
Mr. Jaffe has been a Vice President since 1994 and serves as a Regional
President in the Company's Homebuilding Division.
Mr. Pekor has held various executive positions with the Company for
more than five years. Mr. Pekor presently serves as Vice President and Secretary
for the Company and President of Lennar Financial Services, Inc. Since 1979, Mr.
Pekor had been the Company's Financial Vice President.
Ms. Bessette has been employed by the Company since 1995. Prior to
joining the Company, Ms. Bessette was employed as a Financial Senior Manager at
the Holson Burnes Group, Inc. and before that, was employed by Price Waterhouse
LLP.
Mr. Malcolm has been employed by the Company since 1997. Prior to
joining the Company, Mr. Malcolm was employed as Director, Finance and
Regulatory Affairs at Citizens Utilities Company.
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this item is incorporated by reference to
the Company's definitive proxy statement, which will be filed with the
Securities and Exchange Commission not later than March 30, 1998 (120 days after
the end of the Company's fiscal year).
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information called for by this item is incorporated by reference to
the Company's definitive proxy statement, which will be filed with the
Securities and Exchange Commission not later than March 30, 1998 (120 days after
the end of the Company's fiscal year).
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information called for by this item is incorporated by reference to
the Company's definitive proxy statement, which will be filed with the
Securities and Exchange Commission not later than March 30, 1998 (120 days after
the end of the Company's fiscal year).
11
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this Report.
1. The following financial statements are incorporated by
reference in Item 8:
<TABLE>
<CAPTION>
PAGE IN 1997 ANNUAL
FINANCIAL STATEMENT REPORT TO STOCKHOLDERS
------------------- ----------------------
<S> <C>
Independent Auditors' Report 34
Consolidated Balance Sheets as of November 30,
1997 and 1996 36
Consolidated Statements of Earnings for the
years ended November 30, 1997, 1996 and 1995 37
Consolidated Statements of Cash Flows for the
years ended November 30, 1997, 1996 and 1995 38 - 39
Consolidated Statements of Stockholders' Equity
for the years ended November 30, 1997, 1996
and 1995 40
Notes to Consolidated Financial Statements 41 - 56
</TABLE>
2. The following financial statement schedule is included in this
Report:
<TABLE>
<CAPTION>
FINANCIAL STATEMENT SCHEDULE PAGE IN THIS REPORT
---------------------------- -------------------
<S> <C>
Independent Auditors' Report on Schedule 16
II - Valuation and Qualifying Accounts 17
</TABLE>
Information required by other schedules has either been incorporated in
the financial statements and accompanying notes or is not applicable
to the Company.
12
<PAGE>
3. The following exhibits are filed with this Report or incorporated by
reference:
3(a). Restated Certificate of Incorporation -
Incorporated by reference to Form 8-K dated
October 31, 1997, file number 1-11749.
3(b). Bylaws - Incorporated by reference to Form
8-K dated October 31, 1997, file number
1-11749.
10(a). Amended and Restated Lennar Corporation 1997
Stock Option Plan.
10(b). Lennar Corporation 1991 Stock Option Plan -
Incorporated by reference to Registration
Statement No. 33-45442.
10(c). Lennar Corporation Employee Stock Ownership
Plan and Trust - Incorporated by reference
to Registration Statement No. 2-89104.
10(d). Amendment dated December 13, 1989 to Lennar
Corporation Employee Stock Ownership Plan -
Incorporated by reference to Annual Report
on Form 10-K for the year ended November 30,
1990.
10(e). Lennar Corporation Employee Stock
Ownership/401k Trust Agreement dated
December 13, 1989 - Incorporated by
reference to Annual Report on Form 10-K for
the year ended November 30, 1990.
10(f). Amendment dated April 18, 1990 to Lennar
Corporation Employee Stock Ownership/401k
Plan - Incorporated by reference to Annual
Report on Form 10-K for the year ended
November 30, 1990.
10(g). Partnership Agreement by and between Lennar
Land Partners Sub, Inc. and LNR Land
Partners Sub, Inc., dated October 24, 1997.
10(h). Separation and Distribution Agreement, dated
June 10, 1997, between Lennar Corporation
and LNR Property Corporation - Incorporated
by reference to Registration Statement No.
333-35671.
10(i). Plan and Agreement of Merger, dated as of
June 10, 1997, between Lennar Corporation
and Pacific Greystone Corporation -
Incorporated by reference to Form 8-K dated
October 31, 1997, file number 1-11749.
10(j). Amendment No. 1 to Plan and Agreement of
Merger, dated as of October 31, 1997,
between Lennar Corporation and Pacific
Greystone Corporation - Incorporated by
reference to Form 8-K dated October 31,
1997, file number 1-11749.
10(k). Credit Agreement, dated October 31, 1997, by
and among Lennar Land Partners and the
Lenders named therein and a Guaranty
Agreement of Lennar Corporation, dated
October 31, 1997.
10(l). Revolving Credit Agreement (Facilities A and
B), dated October 31, 1997, among Lennar
Corporation and Certain Subsidiaries and the
First National Bank of Chicago, as agent.
10(m). First Amendment to Revolving Credit
Agreement (Facilities A and B) dated January
20, 1998, among Lennar Corporation and
Certain Subsidiaries and the First National
Bank of Chicago, as agent.
13
<PAGE>
10(n). Indenture, dated as of March 1, 1994, among
Greystone Homes, Inc., Pacific Greystone
Corporation, HLDC Acquisition Corp.,
Stonegrey Corporation, PGC Holdings, Inc.,
A-M Homes, a California Limited Partnership
and U.S. Trust Company of California, N.A.,
as Trustee, relating to the 10-3/4% Senior
Notes due March 1, 2004 of Greystone Homes,
Inc. - Incorporated by reference to Annual
Report on Form 10-K for the year ended
December 31, 1996 for Pacific Greystone
Corporation (which was acquired by Lennar
Corporation on October 31, 1997), file
number 1-11749.
13. Pages 26 through 57 of the 1997 Annual
Report to Stockholders.
21. List of subsidiaries.
23. Independent Auditors' Consents.
27. Financial Data Schedule.
(b) Reports on Form 8-K filed during the quarter ended
November 30, 1997.
Forms 8-K dated October 31, 1997, file number
1-11749, as amended by Form 8-K/A, dated December
18, 1997.
(c) The exhibits to this Report are listed in Item 14(a)3.
(d) The financial statement schedules required by
Regulation S-X which are excluded from the Annual
Report to Stockholders as permitted by Rule
14a-3(b)(1) are listed in Item 14(a)2.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
LENNAR CORPORATION
/S/ STUART A. MILLER
-------------------------
Stuart A. Miller
President, Chief Executive Officer
and Director
Date: February 25, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Principal Executive Officer:
<S> <C>
Stuart A. Miller /S/ STUART A. MILLER
------------------------------
President, Chief Executive Officer and Director Date: February 25, 1998
Principal Financial Officer:
Bruce Gross /S/ BRUCE GROSS
------------------------------
Vice President and Chief Financial Officer Date: February 25, 1998
Principal Accounting Officer:
Diane J. Bessette /S/ DIANE J. BESSETTE
------------------------------
Controller Date: February 25, 1998
Directors:
Charles I. Babcock, Jr. /S/ CHARLES I. BABCOCK, JR.
------------------------------
Date: February 25, 1998
Irving Bolotin /S/ IRVING BOLOTIN
------------------------------
Date: February 23, 1998
Jonathan M. Jaffe /S/ JONATHAN M. JAFFE
------------------------------
Date: February 25, 1998
Sidney Lapidus /S/ SIDNEY LAPIDUS
------------------------------
Date: February 25, 1998
Reuben S. Leibowitz /S/ REUBEN S. LEIBOWITZ
------------------------------
Date: February 25, 1998
Leonard Miller /S/ LEONARD MILLER
------------------------------
Date: February 25, 1998
Arnold P. Rosen /S/ ARNOLD P. ROSEN
------------------------------
Date: February 23, 1998
Steven J. Saiontz /S/ STEVEN J. SAIONTZ
------------------------------
Date: February 25, 1998
</TABLE>
15
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Lennar Corporation
We have audited the consolidated financial statements of Lennar Corporation (the
"Corporation") as of November 30, 1997 and 1996 and for each of the three years
in the period ended November 30, 1997, and have issued our report thereon dated
January 20, 1998; such financial statements and report are included in your 1997
Annual Report to Stockholders and are incorporated herein by reference. Our
audits also included the financial statement schedule of Lennar Corporation,
listed in Item 14(a)2. The financial statement schedule is the responsibility of
the Corporation's management. Our responsibility is to express an opinion based
on our audits. In our opinion, such financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
- ----------------------------
DELOITTE & TOUCHE LLP
Certified Public Accountants
Miami, Florida
January 20, 1998
16
<PAGE>
<TABLE>
<CAPTION>
LENNAR CORPORATION AND CONSOLIDATED SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED NOVEMBER 30, 1997, 1996 AND 1995
ADDITIONS
---------------------------
CHARGED CHARGED
BEGINNING TO COSTS (CREDITED)TO ENDING
DESCRIPTION BALANCE AND EXPENSES OTHER ACCOUNTS (DEDUCTIONS) BALANCE
- ------------------------------------------------------ ------------- ------------- -------------- ------------- -----------
<S> <C> <C> <C> <C>
Year ended November 30, 1997
Allowances deducted from assets to which they apply:
Allowances for doubtful accounts and notes $ 3,037,000 552,000 -- (1,637,000)(A) 1,952,000
receivable =========== ========== ============= =========== =========
Deferred income and unamortized discounts $ 601,000 -- -- (516,000)(A) 85,000
=========== ========== ============= =========== =========
Loan loss reserve $ 5,840,000 1,220,000 -- (3,529,000)(A) 3,531,000
=========== ========== ============= =========== =========
Valuation allowance $ 2,745,000 1,119,000 -- (1,688,000) 2,176,000
=========== ========== ============= =========== =========
Year ended November 30, 1996
Allowances deducted from assets to which they
apply:
Allowances for doubtful accounts and notes
receivable $ 2,372,000 1,202,000 97,000 (634,000) 3,037,000
=========== ========== ============= =========== =========
Deferred income and unamortized discounts $ 601,000 116,000 (116,000) -- 601,000
=========== ========== ============= =========== =========
Loan loss reserve $ 3,730,000 2,490,000 896,000 (1,276,000) 5,840,000
=========== ========== ============= =========== =========
Valuation allowance $ 1,286,000 3,341,000 -- (1,882,000) 2,745,000
=========== ========== ============= =========== =========
Year ended November 30, 1995
Allowances deducted from assets to which they
apply:
Allowances for doubtful accounts and notes
receivable $ 1,528,000 2,209,000 1,000 (1,366,000) 2,372,000
=========== ========== ============= =========== =========
Deferred income and unamortized discounts $ 2,361,000 -- (681,000) (1,079,000)(B) 601,000
=========== ========== ============= =========== =========
Loan loss reserve $ 3,534,000 1,271,000 -- (1,075,000) 3,730,000
=========== ========== ============= =========== =========
Valuation allowance $ -- 1,581,000 -- (295,000) 1,286,000
=========== ========== ============= =========== =========
</TABLE>
Notes:
(A) Includes amounts that were distributed in connection with the spin-off
of the commercial real estate investment and management business as
follows:
Allowances for doubtful accounts and notes receivable $739,000
Deferred income and unamortized discounts $493,000
Loan loss reserve $1,996,000
(B) Amortization of discounts and recognition of deferred income.
17
<PAGE>
LENNAR CORPORATION
EXHIBITS TO
FORM 10K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
FISCAL YEAR ENDED NOVEMBER 30, 1997
<PAGE>
INDEX TO EXHIBITS
EXHIBITS
3(a). Restated Certificate of Incorporation - Incorporated by reference to
Form 8-K dated October 31, 1997, file number 1-11749.
3(b). Bylaws - Incorporated by reference to Form 8-K dated October 31, 1997,
file number 1-11749.
10(a). Amended and Restated Lennar Corporation 1997 Stock Option Plan.
10(b). Lennar Corporation 1991 Stock Option Plan - Incorporated by reference
to Registration Statement No. 33-45442.
10(c). Lennar Corporation Employee Stock Ownership Plan and Trust -
Incorporated by reference to Registration Statement No. 2-89104.
10(d). Amendment dated December 13, 1989 to Lennar Corporation Employee Stock
Ownership Plan - Incorporated by reference to Annual Report on Form
10-K for the year ended November 30, 1990.
10(e). Lennar Corporation Employee Stock Ownership/401k Trust Agreement dated
December 13, 1989 - Incorporated by reference to Annual Report on Form
10-K for the year ended November 30, 1990.
10(f). Amendment dated April 18, 1990 to Lennar Corporation Employee Stock
Ownership/401k Plan - Incorporated by reference to Annual Report on
Form 10-K for the year ended November 30, 1990.
10(g). Partnership Agreement by and between Lennar Land Partners Sub, Inc. and
LNR Land Partners Sub, Inc., dated October 24, 1997.
10(h). Separation and Distribution Agreement, dated June 10, 1997, between
Lennar Corporation and LNR Property Corporation - Incorporated by
reference to Registration Statement No. 333-35671.
10(i). Plan and Agreement of Merger, dated as of June 10, 1997, between Lennar
Corporation and Pacific Greystone Corporation - Incorporated by
reference to Form 8-K dated October 31, 1997, file number 1-11749.
10(j). Amendment No. 1 to Plan and Agreement of Merger, dated as of October
31, 1997, between Lennar Corporation and Pacific Greystone Corporation
- Incorporated by reference to Form 8-K dated October 31, 1997, file
number 1-11749.
10(k). Credit Agreement, dated October 31, 1997, by and among Lennar Land
Partners and the Lenders named therein and a Guaranty Agreement of
Lennar Corporation, dated October 31, 1997.
10(l). Revolving Credit Agreement (Facilities A and B), dated October 31,
1997, among Lennar Corporation and Certain Subsidiaries and the First
National Bank of Chicago, as agent.
10(m). First Amendment to Revolving Credit Agreement (Facilities A and B)
dated January 20, 1998, among Lennar Corporation and Certain
Subsidiaries and the First National Bank of Chicago, as agent.
10(n). Indenture, dated as of March 1, 1994, among Greystone Homes, Inc.,
Pacific Greystone Corporation, HLDC Acquisition Corp., Stonegrey
Corporation, PGC Holdings, Inc., A-M Homes, a California Limited
Partnership and U.S. Trust Company of California, N.A., as Trustee,
relating to the 10-3/4% Senior Notes due March 1, 2004 of Greystone
Homes, Inc. - Incorporated by reference to Annual Report on Form 10-K
for the year ended December 31, 1996 for Pacific Greystone Corporation
(which was acquired by Lennar Corporation on October 31, 1997), file
number 1-11749.
<PAGE>
13. Pages 26 through 57 of the 1997 Annual Report to Stockholders.
21. List of subsidiaries.
23. Independent Auditors' Consents.
27. Financial Data Schedule.
EXHIBIT 10.a
AMENDED AND RESTATED
LENNAR CORPORATION
1997 STOCK OPTION PLAN
<PAGE>
TABLE OF CONTENTS
PAGE
----
1. Definitions 1
2. Purpose of the Plan 2
3. Authority to Grant Stock Options 2
4. Authority to Grant Stock Appreciation Rights 3
5. Terms of Stock Options 3
6. Payment of Option Exercise Price 4
7. Withholding Payments 4
8. Written Agreement 5
9. Administration of the Plan 5
10. Shares Available for Options 6
11. Laws and Regulations 6
12. Modifications of Number of Shares and Other Securities; 6
Changes in Capital Structure.
13. Effects of Termination of Employment 7
14. No Rights to Continued Employment 8
15. Effective Date 8
16. Amendments of the Plan 8
17. Termination of the Plan 8
<PAGE>
LENNAR CORPORATION
1997 STOCK OPTION PLAN
OCTOBER 31, 1997, AS AMENDED ON DECEMBER 9, 1997
1. DEFINITIONS
As used in this Plan the following definitions apply:
(a) "Board of Directors" means the Board of Directors of Lennar.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Compensation Committee of the Board of
Directors, or such other committee consisting of at least two members of the
Board of Directors as may be specified by the Board of Directors to perform the
functions and duties of the Committee under the Plan. If there is no
Compensation Committee and the Board of Directors does not appoint another
Committee, the Board of Directors will be the Committee.
(d) "Common Stock" means common stock, par value $.10 per share, of
Lennar.
(e) "Company" means Lennar and all its more than 50% owned subsidiaries.
(f) "Director" means any person serving as a member of the board of
directors of any corporation included in the Company.
(g) "Incentive Option" means an option to purchase Common Stock which
meets the requirements set forth in the Plan and is intended to be, and
qualifies as, an Incentive Stock Option as that term is used in Section 422 of
the Code.
(h) "Key Employee" means an officer or employee of the Company who the
Committee determines can contribute significantly to the growth and successful
operations of the Company.
(i) "Holder" means a person who holds a stock option or Stock Appreciation
Right granted under the Plan.
(j) "Lennar" means Lennar Corporation, a Delaware corporation, or its
successor by merger or any similar transaction.
(k) "Nonqualified Option" means an option to purchase Common Stock which
meets the requirements set forth in the Plan but is not intended to be, or does
not qualify as, an Incentive Stock Option as that term is used in Section 422 of
the Code.
(l) "Plan" means this Lennar Corporation 1997 Stock Option Plan.
<PAGE>
(m) "Stock Appreciation Right" means a right to receive the appreciation
in value, or a portion of the appreciation value, of a specified number of
shares of Common Stock, as provided in Section 4(b).
(n) "10% Stockholder" means a person who owns (after applying the
attribution rules contained in Section 424(d) of the Code) more than 10% of the
total combined voting stock of all classes of Lennar or of any parent or
subsidiary of Lennar.
2. PURPOSE OF THE PLAN
The purpose of the Plan is to encourage and enable those officers,
employees and Directors of the Company upon whose judgment, initiative and
efforts the Company largely depends for the successful conduct of its business
to acquire a proprietary interest in Lennar, and by doing so to stimulate the
efforts of those officers, employees and Directors on behalf of the Company and
strengthen their desire to remain officers, employees or Directors of the
Company.
3. AUTHORITY TO GRANT STOCK OPTIONS
(a) Except as provided in Section 3(b), the Committee may at any time
authorize the grant of stock options under the Plan to any one or more Key
Employees or Directors. These stock options may be Incentive Options (i.e.,
options which qualify as Incentive Stock Options under Section 422 of the Code)
or Nonqualified Options, except that (i) no officer or Director who is not an
employee may be granted an Incentive Option, and (ii) no employee may be granted
an Incentive Option which would result in the aggregate fair market value,
determined as of the date the stock option is granted, of the Common Stock with
respect to which that Incentive Option and all other Incentive Options held by
that employee under any plan maintained by Lennar (or any parent or subsidiary
of Lennar) are exercisable for the first time by that employee during any
calendar year to exceed $100,000. No employee, officer or Director may receive
options for more than 500,000 shares of Common Stock over the life of the Plan.
Each stock option will be designated at the time of grant as an Incentive Option
or as a Nonqualified Option.
(b) Any grant to an officer or Director of Lennar must be made either by
(i) the full Board of Directors or (ii) a committee of the Board of Directors
which consists solely of two or more "non-employee directors" as defined in Rule
16b-3 under the Securities Exchange Act of 1934, as amended. Any grant with
respect to which an exception is sought from the deduction limitations under
Section 162(m) of the Code must be made by a committee of the Board of Directors
consisting solely of two or more "outside directors" as that term is defined in
Section 162(m) of the Code.
(c) Without limiting the generality of what is stated in Sections 3(a) and
(b), stock options may be granted to a Key Employee or Director regardless of
the fact that stock options or Stock Appreciation Rights previously granted to
that Key Employee or Director remain unexercised, and a Holder may exercise a
stock option or Stock Appreciation Right when it is exercisable by its own
terms, notwithstanding that there are stock options and Stock Appreciation
2
<PAGE>
Rights which were previously granted to that Holder which remain unexercised.
4. AUTHORITY TO GRANT STOCK APPRECIATION RIGHTS
(a) The Committee may at any time authorize the grant of Stock
Appreciation Rights to any Key Employees or Directors who hold or are receiving
stock options granted under the Plan. Each Stock Appreciation Right will relate
to a specific stock option granted under the Plan. A Stock Appreciation Right
may be granted concurrently with the stock option to which it relates or at any
time after the stock option has been granted and before it has been exercised,
terminates or expires. The number of shares subject to a Stock Appreciation
Right may not exceed the number of shares which may be issued on exercise of the
stock option to which the Stock Appreciation Right relates.
(b) The term "Stock Appreciation Right" means the right to receive from
the Company, without payment by the Holder, an amount equal to the excess of the
fair market value on the date the Stock Appreciation Right is exercised of the
number of shares of Common Stock for which the Stock Appreciation Right is
exercised over the exercise price the Holder would have had to pay to exercise
the related stock option in order to purchase that number of shares of Common
Stock. Upon exercise of a Stock Appreciation Right the Participant will
automatically be deemed to surrender the related stock option with regard to the
number of shares of Common Stock as to which the Stock Appreciation Right is
exercised. Except as provided in subsection 4(c), at the Discretion of the
Committee, Stock Appreciation Rights may specify that the sum to be paid upon
their exercise may be paid by the Company in cash, in Common Stock valued at its
fair market value on the date the Stock Appreciation Right is exercised, or in
any combination of cash and Common Stock valued in that manner.
(c) A Stock Appreciation Right granted under the Plan will be exercisable
only when, and with regard to the number of shares of Common Stock as to which,
the related stock option is exercisable and will lapse when the related stock
option terminates or expires. A Stock Appreciation Right granted under the Plan
may only be transferred when, and to the person, to whom the right to exercise
the related stock option is transferred in accordance with Section 13.
5. TERMS OF STOCK OPTIONS
(a) Each stock option granted under the Plan will expire on a date
determined by the Committee when the option is granted, which will be not more
than 10 years after the date of grant, except that an Incentive Option granted
to a Key Employee who, at the time of the grant, is a 10% Stockholder will
expire not more than five years after the date of grant.
(b) Each stock option granted under the Plan will be exercisable at such
time or times, and in such installments, as are determined by the Committee when
the stock option is granted. However, no stock option granted under the Plan may
be exercisable until at least six months after the date of grant, except upon
the death or disability of the Holder prior to the expiration of that six month
period.
3
<PAGE>
(c) The exercise price of each stock option granted under the Plan will be
determined by the Committee on the date the stock option is granted, except that
with respect to Incentive Options, the exercise price may not be less than (i)
if the Incentive Option is granted to a person who is not a 10% Stockholder,
100% of the fair market value of the Common Stock on the date the Incentive
Option is granted, and (ii) if the Incentive Option is granted to a 10%
Stockholder, 110% of the fair market value of the Common Stock on the date the
Incentive Option is granted. For the purposes of the Plan, the fair market value
of a share of the Common Stock on any day will be the mean between the highest
and lowest quoted selling prices of the Common Stock in composite trading
reported on the New York Stock Exchange (or, if the Common Stock is not traded
on the New York Stock Exchange, on the principal securities exchange or market
on which the Common Stock is traded) on that day, or if there are no sales on
that day, on the next following day on which there are sales.
(d) No stock option granted under the Plan may be assigned or transferred,
other than as provided in Section 13 upon the death of the Holder to whom the
stock option was granted except that the Committee may (but need not) permit
other transfers, where the Committee concludes that such transferability (i)
does not result in accelerated taxation, (ii) does not cause any option intended
to be an Incentive Option to fail to meet the requirements set forth in Section
422(b) of the Code (or any applicable successor to that Section) and (iii) is
otherwise appropriate and desirable.
6. PAYMENT OF OPTION EXERCISE PRICE
The exercise price of any stock option will be payable in cash or by check
payable to the order of Lennar, except that the Committee may determine that the
exercise price of the stock option may be paid by delivering shares of the
Common Stock with a fair market value at the date the stock option is exercised
equal to all or any part of the exercise price, with any remaining balance to be
paid in cash or by check payable to the order of Lennar.
7. WITHHOLDING PAYMENTS
(a) If as a result of the exercise of a Nonqualified Option or a Stock
Appreciation Right, or otherwise, the Company is required to pay any amount as
withheld income tax, the Company may, at its discretion, either (i) reduce the
number of shares of Common Stock issuable upon exercise of the stock option, or
the cash or Common Stock to be paid or delivered upon exercise of the Stock
Appreciation Right, by the amount of the required withholding (with the Common
Stock valued at its fair market value on the date the stock option or Stock
Appreciation Right is exercised), (ii) require that, as a condition to exercise
of the stock option or Stock Appreciation Right, the Holder remit to the Company
the amount of withholding tax required to be paid as a result of the exercise or
(iii) withhold the amount of the withholding tax from payments of salary or
other payments the Company is required to make to the Holder.
(b) If a person makes a disqualifying disposition (as described in Section
422(a)(1) of the Code) of shares acquired upon exercise of an Incentive Option,
that person will promptly notify the Company of the disqualifying disposition
and pay to the Company an amount equal to any
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withholding tax the Company is required to pay as a result of the disqualifying
disposition. If a person fails to pay the Company an amount equal to any
withholding tax the Company is required to pay as a result of a disqualifying
disposition of shares acquired upon exercise of an Incentive Option, the Company
may withhold that amount from any payments of salary or other payments the
Company is required to make to the person or may take any other lawful steps to
collect that amount from the person.
8. WRITTEN AGREEMENT
Promptly after a stock option or Stock Appreciation Right is granted under
the Plan, Lennar will provide the Holder of that stock option or Stock
Appreciation Right with a written agreement containing the provisions of the
stock option or Stock Appreciation Right. The terms of the agreement will be in
accordance with the Plan, but may contain additional provisions and restrictions
(including, without limitation, special provisions and restrictions applicable
to Incentive Stock Options) authorized by the Committee which are not
inconsistent with the Plan. Each agreement relating to a stock option will state
whether the stock option is or is not intended to be an Incentive Option.
Each Holder of a stock option or Stock Appreciation Right granted under
the Plan will be bound by the terms of the Plan and of the agreement relating to
the stock option or Stock Appreciation Right.
9. ADMINISTRATION OF THE PLAN
(a) The Plan will be administered by the Committee.
(b) The Committee will have full power to construe, interpret and
administer the Plan and to establish and change the rules and regulations for
its administration.
(c) Subject to the limitations contained in the Plan, the Committee will
have full power (i) to grant Incentive Options, Nonqualified Options and Stock
Appreciation Rights to any one or more Key Employees and Directors, and (ii) to
determine as to any stock option or Stock Appreciation Right granted to any Key
Employee or Director the number of shares of Common Stock to which the stock
option or Stock Appreciation Right will relate, the exercise price of the stock
option or Stock Appreciation Right, the term of the stock option or Stock
Appreciation Right, and all other terms of the stock option or Stock
Appreciation Right.
(d) In exercising its powers under the Plan, the Committee may act in its
sole discretion, with no requirement that it follow past practice or treat one
employee, officer or Director in a manner consistent with the treatment afforded
to any other employee, officer or Director.
(e) All actions taken and decisions made by the Committee will be binding
and conclusive on all Holders of stock options and Stock Appreciation Rights
granted under the Plan and all other officers, employees and Directors of the
Company, and on their respective legal representatives and beneficiaries. No
member of the Committee will be liable for any
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determination made or action taken in good faith with respect to the Plan or any
stock options or Stock Appreciation Rights granted under the Plan, or for any
decision not to grant stock options or Stock Appreciation Rights under the Plan
to any officer, employee or Director of the Company.
10. SHARES AVAILABLE FOR OPTIONS
The aggregate number of shares of Common Stock which may be issued upon
exercise of stock options or Stock Appreciation Rights granted under this Plan
is 3,000,000 shares, subject to adjustment as provided in Section 12(b). Any
shares which are subject to stock options or Stock Appreciation Rights which
terminate or are surrendered (including shares subject to stock options which
are deemed surrendered because of exercise of Stock Appreciation Rights, to the
extent the shares are not issued on exercise of the Stock Appreciation Rights)
will be available to be issued on exercise of subsequently granted stock options
or Stock Appreciation Rights. Any shares as to which stock options or Stock
Appreciation Rights are exercised but which are retained by Lennar to pay the
exercise price of stock options, to reimburse the Company for paying withholding
taxes or otherwise will be deemed to have been issued upon exercise of stock
options or Stock Appreciation Rights, and will not be available to be issued on
exercise of other stock options or Stock Appreciation Rights.
11. LAWS AND REGULATIONS
The obligation of the Company to issue shares of Common Stock (or other
securities as provided in Section 12) upon exercise of Options will be subject
to (i) the condition that counsel for the Company is satisfied that the sale and
delivery will be in compliance with the Securities Act of 1933, as amended, and
all other applicable laws, rules or regulations, and (ii) the condition that the
shares of Common Stock reserved for issuance under the Plan have been authorized
for listing on any securities exchange or exchanges on which the Common Stock is
listed.
12. MODIFICATIONS OF NUMBERS OF SHARES AND OTHER SECURITIES; CHANGES IN
CAPITAL STRUCTURE
(a) If (i) the Company at any time is involved in a merger, consolidation,
dissolution, liquidation, reorganization, exchange of shares, sale of all or
substantially all of the assets or stock of the Company or similar transaction,
(ii) there is a stock dividend, stock split, reverse stock split, stock
combination, reclassification, recapitalization or other similar change in the
capital structure of Lennar, or a distribution to holders of Common Stock other
than a cash dividend or (iii) any other event occurs which in the judgment of
the Committee necessitates an adjustment to the terms of the outstanding stock
options or Stock Appreciation Rights which were issued under the Plan, the
Committee may (x) make such modifications in the terms of outstanding stock
options as in its judgment are appropriate so the Holders' rights will in
aggregate be substantially the same after the event as they were before the
event, and (y) make such change in the aggregate number of shares which may be
granted under the Plan as in its judgment will cause the number of shares
available for issuance on exercise of stock options which are outstanding at the
time of the event and the number of shares available to be issued on exercise of
stock options which may be granted in the future will be the same proportion of
the outstanding Common Stock
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immediately after the event that they were of the outstanding Common Stock
immediately before the event, including, without limitation, adjustments in (A)
the number and kind of shares subject to options, (B) the exercise price of
outstanding stock options and (C) the number and kind of shares available under
Section 10. The judgment of the Committee with respect to any matter referred to
in this Section 12 will be conclusive and binding upon each Holder without the
need for any amendment to the Plan or any stock options or Stock Appreciation
Rights which had been granted under the Plan.
13. EFFECTS OF TERMINATION OF EMPLOYMENT
(a) Each Nonqualified Option and related Stock Appreciation Right granted
under the Plan will terminate when the Holder ceases to be an officer, employee
or Director of the Company, except that
(i) If a Holder of a Nonqualified Option dies while an officer,
employee or Director of the Company, each Nonqualified Option and related
Stock Appreciation Right held by the Holder at the date of the Holder's
death may be exercised, to the extent it was exercisable at the date of
death (or, with the consent of the Committee, in full), by the Holder's
legal representative until the earlier of 12 months after the date of death
or the date on which the Nonqualified Option expires by its terms.
(ii) If a Holder of a Nonqualified Option ceases to be an officer
or employee of the Company,
(A) after the Holder becomes 65 years old,
(B) because of the disability of the Holder (as determined by
the Committee in its discretion), or
(C) under other circumstances which the Committee determines
to justify continued exercise of stock options and related Stock
Appreciation Rights,
each Nonqualified Option and related Stock Appreciation Right held by the Holder
on the date the Holder ceased to be an officer, employee or Director of the
Company may be exercised, to the extent it was exercisable on the date the
Holder ceased to be an officer, employee or Director of the Company (or, with
the consent of the Committee, in full), until the earlier of (x) three months
after the date the Holder ceased to be an officer, employee or Director of the
Company, or (y) the date the stock option expires by its own terms.
(b) Each Incentive Option and related Stock Appreciation Right granted
under the Plan will terminate when the Holder ceases to be an employee of the
Company (whether or not the Holder continues to be an officer of the Company),
except that if the Holder dies while an employee of the Company, or ceases to be
an employee of the Company under a circumstance described in clause (A), (B) or
(C) of subparagraph (a) (ii) , each Incentive Option and related Stock
Appreciation Right held at the date the Holder ceases to be an employee of the
Company
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may be exercised by the Holder's legal representative until twelve months after
the date of death, or by the Holder until three months after the Holder ceases
to be an employee of the Company under a circumstance described in clause (A),
(B) or (C) of subparagraph (a)(ii), to the same extent a Nonqualified Option
could have been exercised in accordance with subparagraph (a)(i) or (ii) until
twelve months after the date of death or three months after the Holder ceases to
be an officer, employee or Director of the Company under a circumstance
described in clause (A), (B) or (C) of subparagraph (a)(ii).
14. NO RIGHTS TO CONTINUED EMPLOYMENT
Nothing in the Plan or in any stock option or Stock Appreciation Right
granted under the Plan, and no other action taken by the Committee, will give
any officer, employee or Director of the Company a right to continue to be an
officer, employee or Director of the Company or in any other way affect the
right of the Company to terminate the officer or Director position or employment
of any officer, employee or Director at any time for any reason, with or without
cause.
15. EFFECTIVE DATE
The Plan will be effective on the date it is adopted by the Board of
Directors, provided that the stockholders of Lennar approve the Plan within 12
months after it is adopted by the Board of Directors. Stock options and Stock
Appreciation Rights may be granted prior to approval of the Plan by the
stockholders of Lennar, but each stock option and Stock Appreciation Right
granted prior to stockholder approval of the Plan will be subject to approval of
the Plan by the stockholders of Lennar within 12 months after the Plan is
adopted. No stock option or Stock Appreciation Right may be exercised until the
Plan is approved by the stockholders of Lennar, and all stock options and Stock
Appreciation Rights granted before the Plan is approved by the stockholders of
Lennar will automatically terminate at the end of 12 months after the Plan is
adopted by the Board of Directors if the Plan is not approved by the
stockholders of Lennar by that date.
16. AMENDMENTS OF THE PLAN
The Board of Directors may amend the Plan at any time; provided that the
Board of Directors may not make any amendment in the Plan that would, if such
amendment were not approved by the stockholders of Lennar, cause the Plan to
fail to comply with any requirement of applicable law or regulation, or make it
not possible for stock options to be granted under the plan which qualify as
incentive stock options, unless and until the approval of the stockholders of
Lennar is obtained. No amendment to the Plan will change the exercise price, or
otherwise alter any provision, of any stock option or Stock Appreciation Right
which has been granted prior to the amendment, unless the Holder of the stock
option or Stock Appreciation Right consents to the change.
17. TERMINATION OF THE PLAN
The Plan may be terminated at any time by the Board of Directors. The Plan
will terminate on the 10th anniversary of the date it is adopted by the Board of
Directors unless it is terminated
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before that. No stock options or Stock Appreciation Rights may be granted after
the Plan terminates. However, termination of the Plan will not affect any stock
option or Stock Appreciation Right which is outstanding when the Plan is
terminated.
* * *
As approved by the Board of Directors of Lennar
Corporation on October 31, 1997 and as amended on December 9, 1997.
Exhibit 10.g
PARTNERSHIP AGREEMENT
BY AND BETWEEN
LENNAR LAND PARTNERS SUB, INC.
AND
LNR LAND PARTNERS SUB, INC.
<PAGE>
PARTNERSHIP AGREEMENT
BY AND BETWEEN
LENNAR LAND PARTNERS SUB, INC.
AND
LNR LAND PARTNERS SUB, INC.
TABLE OF CONTENTS
PAGE
----
ARTICLE I
Organizational Matters
1.1 Formation.......................................................... 1
1.2 Name .......................................................... 1
1.3 Principal Office................................................... 1
1.4 Term .......................................................... 1
1.5 Purpose .......................................................... 2
1.6 Powers ........................................................... 2
1.7 Statutory Filings.................................................. 2
ARTICLE II
Definitions
ARTICLE III
Capital Contributions
3.1 Initial Capital Contributions..................................... 5
3.2 Voluntary Contributions........................................... 5
3.3 Required Additional Capital Contributions......................... 5
3.4 No Withdrawal..................................................... 6
3.5 Interest ......................................................... 6
3.6 Loans to the Partnership.......................................... 6
3.7 Capital Accounts.................................................. 6
ARTICLE IV
Allocations and Distributions
4.1 Allocations for Capital Account Purposes......................... 8
4.2 Allocations for Tax Purposes..................................... 9
4.3 Distributions.................................................... 10
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ARTICLE V
Governance and Management of Business
5.1 Executive Committee............................................. 10
5.2 Management Agreement............................................ 12
5.3 Indemnification................................................. 13
5.4 Insurance....................................................... 13
5.5 Annual Business Plan............................................ 13
5.6 Reimbursement of Partners....................................... 14
5.7 Outside Activities.............................................. 14
5.8 Dealings With Partnership....................................... 14
5.9 Partnership Funds............................................... 14
5.10 Title to Partnership Assets..................................... 15
ARTICLE VI
Books, Records, Accounting and Reports
6.1 Records and Accounting.......................................... 15
6.2 Fiscal Year..................................................... 15
6.3 Financial Statements and Financial Information.................. 15
6.4 Other Information............................................... 16
6.5 Reimbursement................................................... 16
ARTICLE VII
Tax Matters
7.1 Recognition of Partnership...................................... 16
7.2 Preparation of Tax Returns...................................... 16
7.3 Accounting Methods; Tax Elections............................... 16
7.4 Tax Controversies............................................... 17
7.5 Withholding..................................................... 17
7.6 Reimbursement................................................... 17
ARTICLE VIII
Transfer of Interests
8.1 Restrictions on Transfer........................................ 17
8.2 Permissible Transfers........................................... 17
8.3 Right of First Refusal.......................................... 17
ARTICLE IX
Admission of Partners
9.1 Admission of Additional Partners................................ 19
9.2 Interest of New Partner......................................... 19
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ARTICLE X
Dissolution and Liquidation
10.1 Dissolution..................................................... 19
10.2 Effect of Dissolution........................................... 19
10.3 Liquidation..................................................... 19
10.4 Distribution in Kind............................................ 20
10.5 Reasonable Time for Winding Up.................................. 20
10.6 Waiver of Partition............................................. 20
10.7 Voluntary Termination........................................... 20
ARTICLE XI
General Provisions
11.1 Indemnification................................................. 20
11.2 Contribution by Partners........................................ 20
11.3 Notices ........................................................ 21
11.4 Amendments...................................................... 21
11.5 Titles and Captions............................................. 21
11.6 Binding Effect.................................................. 21
11.7 Integration..................................................... 21
11.8 Creditors....................................................... 22
11.9 Counterparts.................................................... 22
11.10 Applicable Law.................................................. 22
11.11 Survival........................................................ 22
iv
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EXHIBITS
A. Schedule of Original Properties, Fair Market Values and Option Prices
B. Management Agreement
C. Business Plan and Budget for the Partnership's fiscal year 1997
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PARTNERSHIP AGREEMENT
This is a PARTNERSHIP AGREEMENT (the "AGREEMENT"), dated as of
October 24, 1997, by and among LENNAR LAND PARTNERS SUB, INC., a Delaware
corporation (the "MANAGING GENERAL PARTNER"), and LNR LAND PARTNERS SUB, INC., a
Delaware corporation (the "GENERAL PARTNER" and together with the Managing
General Partner, the "PARTNERS"), and, only with respect to Section 8.1, LENNAR
CORPORATION, a Delaware corporation ("LENNAR") and LNR Property Corporation, a
Delaware corporation ("LNR").
RECITALS
A. The Partners desire to form a general partnership under the
laws of the State of Florida for the purposes and on the terms and conditions
stated in this Agreement.
B. The Managing General Partner was formed solely for the
purpose of participating in the partnership created by this Agreement, and is a
wholly owned subsidiary of Lennar.
C. The General Partner was formed solely for the purpose of
participating in the partnership created by this Agreement, and is a wholly
owned subsidiary of LNR.
All capitalized terms used in this Agreement which are not
otherwise defined are defined in Article II.
ARTICLE I
Organizational Matters
1.1 FORMATION. By signing this Agreement, the Managing General
Partner and the General Partner form a general partnership (the "PARTNERSHIP")
under the laws of the State of Florida.
1.2 NAME. The name of the Partnership is "Lennar Land Partners."
1.3 PRINCIPAL OFFICE. The principal business address of the
Partnership will be 700 Northwest 107th Avenue, Miami, Florida 33172, or such
other place as the Executive Committee may from time to time provide. The
Partnership may maintain offices at such other place or places as the Executive
Committee deems advisable.
1.4 TERM. The Partnership will begin on the date of this
Agreement and will continue until one or more of the Partners gives written
notice to the Partnership and to the other Partner(s) of an election to
terminate the Partnership, which any Partner may do at any time after November
30, 2002, but not before then. Beginning 60 days after a Partner elects to
terminate the Partnership, the Partnership will cease acquiring assets and will
engage in no activities other than (i) fulfilling agreements in effect at the
end of the 60 day period, (ii) disposing of assets in the ordinary course, and
(iii) when an event described in any of paragraphs 10.1 (a) through (d) occurs,
dissolving and liquidating the Partnership as described in Article X.
<PAGE>
1.5 PURPOSE. The purposes of the Partnership will be to acquire,
own, invest in, hold, develop, improve and sell land and to engage in all
activities which are incidental or necessary to the foregoing.
1.6 POWERS. The Partnership is empowered to do any and all
things necessary, appropriate, or convenient for the furtherance and
accomplishment of its purposes, and for the protection and benefit of the
Partnership and its properties.
1.7 STATUTORY FILINGS. The Partnership shall execute and file
with the Florida Department of State a registration statement pursuant to
Section 620.8105 of the Florida Act in which the name of the Partnership and the
location and complete address of the Partnership's principal office in Miami,
Florida, as set forth above, is set forth and in which an agent of the
Partnership for service of process is designated.
ARTICLE II
Definitions
The following definitions will, unless otherwise clearly
indicated to the contrary, apply to the terms used in this Agreement.
"ADJUSTED ASSET" means any Partnership asset, the Carrying Value
of which has been adjusted pursuant to Section 3.7(c) or (d).
"AFFILIATE" means any Person that directly or indirectly
controls, is controlled by, or is under common control with, the Person in
question. As used in the definition of "Affiliate," the term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through ownership
of voting securities, by contract or otherwise. The Partnership will not be
deemed an Affiliate of any Partner.
"AGREEMENT" means this Partnership Agreement, as it may be
amended, supplemented or restated from time to time.
"BUSINESS DAY" means Monday through Friday of each week, except
that a day on which state chartered banks in the State of Florida are not
required to be open for general business will not be regarded as a Business Day.
"BUSINESS PLAN" means the annual Business Plan for the
Partnership contemplated by Section 5.5.
"CAPITAL ACCOUNT" means the capital account maintained for a
Partner pursuant to Section 3.7.
"CAPITAL CONTRIBUTION" means any cash or Contributed Asset that
a Partner contributes to the Partnership pursuant to Sections 3.1, 3.2 or 9.2.
"CARRYING VALUE" means (a) with respect to a Contributed Asset,
the Fair Market Value of the asset reduced (but not below zero) by all
depreciation, cost recovery and amortization deductions charged to the Partners'
Capital Accounts pursuant to Section 3.7(a) with respect to the
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asset, and (b) with respect to any other asset, the adjusted basis of the asset
for Federal income tax purposes, as of the time of determination. The Carrying
Value of any asset will be adjusted from time to time in accordance with
Sections 3.7(c) and (d), and to reflect costs or proceeds of dispositions,
acquisitions or improvements relating to the asset, as deemed appropriate by the
Executive Committee.
"CODE" means the Internal Revenue Code of 1986, as amended (and
any successor to it). Any reference in this Agreement to a specific section of
the Code will be deemed to include a reference to any corresponding provision of
any future law.
"CONTRIBUTED ASSET" means the interest in a property or other
asset (at the time of contribution to the Partnership), other than cash,
contributed to the Partnership by a Partner, including the Original Properties.
"EXECUTIVE COMMITTEE" means the committee which governs the
Partnership pursuant to Section 5.1.
"FAIR MARKET VALUE" of any Contributed Asset (other than the
Original Properties, which have the Fair Market Values shown on Exhibit A) means
the gross fair market value of that asset (I.E., without regard to any
liabilities assumed by the Partnership or to which that asset is subject) as
determined by the Executive Committee. The Executive Committee shall, in its
discretion, use such method as it deems reasonable and appropriate to allocate
the Fair Market Value of any group of Contributed Assets (other than the
Original Properties) transferred to the Partnership in a single or integrated
transaction among each separate asset. The Fair Market Value of any Contributed
Asset will reflect any adjustments made pursuant to Section 3.7(c).
"FLORIDA ACT" means the Florida Revised Uniform Partnership Act
of 1995, Florida Statutes Section 620.81001 to Section 620.8908, as it may be
amended from time to time, and any successor to such Act.
"GENERAL PARTNER" means LNR Land Partners Sub, Inc., a Delaware
corporation and a wholly-owned subsidiary of LNR, or any successor to such
Person admitted as a Partner of the Partnership, in its capacity as a Partner of
the Partnership.
"LENNAR" means Lennar Corporation, a Delaware corporation.
"LIQUIDATION DATE" means the earlier of the date upon which (i)
the Partnership is terminated under Section 708(b)(1) of the Code or (ii) the
Partnership ceases to be a going concern.
"LNR" means LNR Property Corporation, a Delaware corporation.
"MANAGEMENT AGREEMENT" means the management agreement, dated
[the date hereof], between the Partnership and the Manager, pursuant to which
the Manager will conduct the day-to-day activities of the Partnership.
"MANAGER" means Lennar in its capacity as manager under the
Management Agreement or, if the Management Agreement terminates, the manager
under a successor agreement. If there is no management agreement, the Managing
General Partner will be the Manager.
3
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"MANAGING GENERAL PARTNER" means Lennar Land Partners Sub, Inc.,
a Delaware corporation and a wholly-owned subsidiary of Lennar, or any successor
to such Person admitted as a Partner of the Partnership, in its capacity as a
Partner of the Partnership.
"MASTER PLAN" means a subdivision plan, zoning plan or other
plan required to be filed with any governmental authority relating to the manner
in which a property can be developed.
"NET FAIR MARKET VALUE" means (a) in the case of any Contributed
Asset, the Fair Market Value of the Contributed Asset reduced by any
indebtedness or liabilities assumed by the Partnership, or to which the
Contributed Asset is subject, when the Contributed Asset is contributed to the
Partnership and (b) in the case of any asset distributed to a Partner pursuant
to Section 4.3 or distributed in liquidation of the Partnership pursuant to
Sections 10.3 and 10.4, the Fair Market Value of the asset at the time it is
distributed reduced by any indebtedness assumed by the Partner, or to which the
asset is subject, when it is distributed.
"ORIGINAL PROPERTIES" mean the assets described on Exhibit A.
"PARTNER" means the Managing General Partner, the General
Partner and any Person admitted as a general partner pursuant to Article VII or
IX of this Agreement.
"PARTNER MINIMUM GAIN" has the meaning set forth in Regulation
Section 1.704-2(i).
"PARTNERSHIP" means the general partnership created pursuant to
this Agreement.
"PARTNERSHIP INTEREST" means the interest of a Partner in the
Partnership under this Agreement and the Florida Act.
"PARTNERSHIP MINIMUM GAIN" has the meaning set forth in
Regulation Section 1.704-2(d).
"PERCENTAGE INTEREST" of a Partner at a point in time means the
quotient of that Partner's Capital Account at that point in time divided by the
total Capital Accounts of all the Partners at that point in time.
"PERSON" means an individual or a corporation, partnership,
limited liability company, trust, estate, unincorporated organization,
association or other entity.
"REGULATIONS" mean the Income Tax Regulations promulgated under
the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"UNREALIZED GAIN" attributable to a Partnership asset means, as
of any date, the excess, if any, of the fair market value of the asset (as
determined under Section 3.7(d)) on that date over the Carrying Value of the
asset on that date (prior to any adjustment to be made pursuant to Section
3.7(d) as of that date).
"UNREALIZED LOSS" attributable to a Partnership asset means, as
of any date, the excess, if any, of the Carrying Value of the asset on that date
(prior to any adjustment to be made pursuant to Section 3.7(d) on that date)
over the fair market value of the asset (as determined under Section 3.7(d)) on
that date.
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ARTICLE III
Capital Contributions
3.1 INITIAL CAPITAL CONTRIBUTIONS. The aggregate Net Fair Market
Value on the date of this Agreement of the Capital Contribution made by each
Partner is $_____________ and the initial Percentage Interest of each Partner is
50%.
3.2 VOLUNTARY CONTRIBUTIONS. A Partner may with the consent of
the Executive Committee (but not without it) make voluntary contributions of
capital to the Partnership.
3.3 REQUIRED ADDITIONAL CAPITAL CONTRIBUTIONS. (a) If at any
time the Managing General Partner requests that the Executive Committee require
the Partners to make additional capital contributions to the Partnership in a
specified aggregate amount (the requested aggregate amount being a "Requested
Additional Capital Contribution") and the Executive Committee approves the
request, each Partner will be required to contribute to the Partnership a
portion of the aggregate amount approved by the Executive Committee (the
"Additional Capital Contribution"), whether or not it is the same as the
Requested Additional Capital Contribution) equal to the Partner's Percentage
Interest (the portion of an Additional Capital Contribution which a Partner is
required to contribute being the "Partner's Additional Contribution"). The
Executive Committee may reject a request for a Requested Additional Capital
Contribution, may approve Additional Capital Contributions in an aggregate
amount which is greater or less than the Requested Additional Capital
Contribution, and may cause the Partnership to borrow some or all of the funds
which would have been provided by the Requested Additional Capital Contribution
instead of asking the Partners to contribute those funds.
(b) Each Partner will make any Partner's Additional Contribution
it is required to make within 20 business days after the day on which the
Executive Committee approves the Additional Capital Contribution of which the
Partner's Additional Contribution is a part, by wire transfer to a bank account
of the Partnership specified by the Executive Committee.
(c) If any Partner (the "Non-Contributing Partner") fails to
make any Partner's Additional Contribution when it is due, the Partner which
made its required Partner's Additional Contribution (the "Contributing Partner")
will have the option to (i) bring an action at law or in equity, in the
Partner's own name or on behalf of the Partnership, to enforce the obligation of
the Non-Contributing Partner to make the required Partner's Additional
Contribution (provided that the liability of the Non-Contributing Partner will
be limited to its own assets, and no shareholder, officer or director of the
Non-Contributing Partner will have any liability as a result of a failure of the
Non-Contributing Partner to make the required Partner's Additional
Contribution), or (ii) pay into the Partnership a sum equal to the Partner's
Additional Contribution which the Non-Contributing Partner failed to make, which
payment will be treated as (x) a capital contribution by the Non-Contributing
Partner and (y) a loan from the Contributing Partner to the Non-Contributing
Partner, which is (A) payable on demand by the Contributing Partner, (b) will
bear interest from the date the sum is paid into the Partnership until the date
it is repaid at 20% per annum (or such lower rate as is the maximum rate
permitted by law), (C) will be secured by a lien on the Non-Contributing
Partner's Partnership Interest, and (D) will be automatically repaid (whether or
not the Contributing Partner has demanded payment) by the Partnership's paying
to the Contributing Partner all sums which otherwise would be paid to the
Non-Contributing Partner, to be applied first against interest, and then against
principal, until the loan and all interest on it has been repaid in full.
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3.4 NO WITHDRAWAL. No Partner will be entitled to withdraw any
part of its Capital Contribution or Capital Account or to receive any
distribution from the Partnership without the consent of the Executive
Committee.
3.5 INTEREST. No interest will be paid by the Partnership on
Capital Contributions or on balances in Partners' Capital Accounts.
3.6 LOANS TO THE PARTNERSHIP. No Partner may lend to the
Partnership or advance money for the Partnership's benefit without the approval
of the Executive Committee. Except as otherwise provided in Section 3.3, loans
by a Partner to the Partnership, or advances by a Partner for the Partnership's
benefit, (a) will not be considered Capital Contributions, and (b) will be on
terms (including terms as to interest and repayment) which are approved by the
Executive Committee.
3.7 CAPITAL ACCOUNTS. (a) The Partnership will maintain a
separate Capital Account for each Partner. A Partner's Capital Account will be:
(i) increased by (A) the cash amount or Net Fair Market Value of all Capital
Contributions made by the Partner and (B) all items of Partnership income and
gain allocated to the Partner pursuant to Section 4.1, and (ii) decreased by (A)
the cash amount or Net Fair Market Value of all distributions of cash or assets
made by the Partnership to the Partner and (B) all items of Partnership
deduction and loss allocated to the Partner pursuant to Section 4.1.
(b) For the purpose of computing the amount of any item of
income, gain, loss or deduction to be reflected in a Partner's Capital Account,
the determination, recognition and classification of each item will be the same
as its determination, recognition and classification for Federal income tax
purposes (including any method of depreciation, cost recovery or amortization
used for this purpose), subject to the following exceptions:
(i) In accordance with Section 704 of the Code, any deduction
for depreciation, cost recovery or amortization attributable to a Contributed
Asset will be determined as if the adjusted basis of the asset on the date it
was contributed to the Partnership were equal to the Fair Market Value of the
asset ("BOOK DEPRECIATION"). Upon an adjustment pursuant to Section 3.7(c) or
(d) to the Carrying Value of any Partnership asset subject to depreciation,
cost recovery or amortization, any further deductions for the Book
Depreciation with regard to the asset immediately after the adjustment will be
determined as if the adjusted basis of the asset immediately after the
adjustment were equal to the Carrying Value of the asset immediately following
the adjustment. For any period, Book Depreciation attributable to any asset
will be the amount that bears the same relationship to the Fair Market Value
(in the case of Contributed Asset) or Carrying Value (immediately following
any adjustment referred to in the preceding sentence), as the case may be, of
the asset at the beginning of the period that the Federal income tax
depreciation, cost recovery or amortization deduction with respect to the
asset for the period bears to the adjusted basis of the asset at the beginning
of the period; PROVIDED that if an asset has a zero adjusted basis, the Book
Depreciation may be determined under any reasonable method selected by the
Managing General Partner. For all purposes of this Section 3.7, Book
Depreciation will be in lieu of any Federal income tax depreciation, cost
recovery or amortization deductions with respect to Partnership Assets and
will be allocated among the Partners pursuant to Section 4.1.
(ii) Any income, gain or loss resulting from the taxable
disposition of any Partnership asset will be determined as if the adjusted
basis of the asset at the date of the disposition were equal in amount to the
Carrying Value of the asset at that date. For all purposes of this Section
3.7, the income, gain or loss computed in that manner will be in lieu of any
income, gain or loss for Federal
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income tax purposes resulting from such a disposition and will be allocated
among the Partners pursuant to Section 4.1.
(iii) Any expenditures of the Partnership described, or treated
under, Regulation Section 1.704-1(b)(2)(iv)(i) as described in Section
705(a)(2)(B) of the Code and not otherwise taken into account in computing any
item of income, gain, deduction or loss for Federal income tax purposes will
be treated as an item of deduction and allocated among the Partners pursuant
to Section 4.1.
(iv) To the extent an adjustment to the adjusted basis of any
Partnership asset under Section 734(b) of the Code or Section 743(b) of the
Code is required by Regulation Section 1.704-1(b)(2)(iv)(m) to be taken into
account in determining Capital Accounts, the amount of the adjustment to the
Capital Account of each of the Partners will be treated as an item of gain (if
the adjustment increases the basis of the Partnership asset) or loss (if the
adjustment decreases its basis), and that gain or loss will be specially
allocated to the Partners in a manner consistent with the manner in which
their Capital Accounts are required to be adjusted pursuant to such
Regulation; PROVIDED that no adjustment pursuant to this Section 3.7(b)(iv)
will be made to the extent that the Managing General Partner determines that
an adjustment to Capital Accounts pursuant to Section 3.7(c) or (d) is
necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this Section 3.7(b)(iv).
(v) Any income of the Partnership that is exempt from Federal
income tax, or any expense of the Partnership that is not deductible or
available as a credit for Federal income tax purposes, will be treated as an
item of income or expense and allocated among the Partners pursuant to Section
4.1.
(c) If there is a termination of the Partnership under Section
708(b)(1)(B) of the Code, to the extent provided in applicable Regulations, the
Partnership assets will be deemed to have been distributed in liquidation of the
Partnership to the remaining Partners (including the transferee of the
Partnership Interest) and deemed contributed by those Partners and transferees
in reconstitution of the Partnership. Those deemed distributions and deemed
contributions will be made in accordance with all provisions of this Agreement
relating to Capital Accounts. In addition, in such event, the Carrying Values of
the Partnership properties will be adjusted immediately prior to the deemed
distribution pursuant to Section 3.7(d)(ii) (and those adjusted Carrying Values
will constitute the Fair Market Values of the assets upon the deemed
contribution to the reconstituted Partnership). The Capital Accounts of the
reconstituted Partnership will be maintained in accordance with the principles
of this Section 3.7.
(d) (i) Upon the admission of additional Partners pursuant to
Article IX, the Capital Accounts of all Partners and the Carrying Values of all
Partnership assets will, immediately prior to the admission of the additional
Partners, be adjusted upwards or downwards to reflect any Unrealized Gain or
Unrealized Loss attributable to those assets (as if that Unrealized Gain or
Unrealized Loss had been recognized upon an actual sale of each such asset,
immediately prior to such admission, and had been allocated to the Partners at
that time pursuant to Section 4.1). In determining such Unrealized Gain or
Unrealized Loss, the Executive Committee will determine the aggregate gross fair
market value of Partnership using any reasonable method of valuation which it
deems appropriate and shall adjust the Carrying Value of the Partnership's
assets to reflect that fair market value.
(ii) Immediately prior to a distribution (whether in connection
with a Liquidation of the Partnership or otherwise) of Partnership property
(other than a DE MINIMIS distribution, as determined by the Managing General
Partner), the Capital Accounts of all Partners and the Carrying Values of all
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Partnership assets shall, be adjusted upwards or downwards to reflect any
Unrealized Gain or Unrealized Loss attributable to those assets (as if the
Unrealized Gain or Unrealized Loss had been recognized upon an actual sale of
each asset immediately prior to the distribution, and had been allocated to the
Partners at that time pursuant to Section 4.1). In determining such Unrealized
Gain or Unrealized Loss, the Managing General Partner shall determine the
aggregate gross fair market value of the Partnership using any reasonable method
of valuation which it deems appropriate.
(iii) Notwithstanding anything to the contrary in this Section
3.7(d), all or any portion of any adjustment pursuant to Section 3.7(d)(i) or
(ii) will be made only if, and to the extent that, the Managing General Partner
reasonably determines that the adjustment is necessary or appropriate to reflect
the relative economic interests of the Partners in the Partnership.
(e) The determination of the amount of any liability for
purposes of this Section 3.7 (including, without limitation, in connection with
the computation of Net Fair Market Value, Unrealized Gain and Unrealized Loss)
will be made in accordance with Section 752(c) of the Code and any other
applicable provisions of the Code and Regulations.
(f) If all or a portion of a Partnership Interest is transferred
in accordance with the terms of this Agreement, the transferee will succeed to
the Capital Account of the transferor in accordance with Regulation Section
1.704-1(b)(2)(iv)(1).
(g) It is the intention of the Partners that Capital Accounts
will be determined in a manner so that the allocations in this Agreement will
have, or be deemed to have, substantial economic effect under Section 704(b) of
the Code and Regulations thereunder. If the Managing General Partner determines
that it is prudent to modify the manner in which Capital Accounts, or any debits
or credits (including, without limitation, debits or credits relating to
liabilities that are secured by contributed or distributed property or that are
assumed by the Partnership or the Partners or their Affiliates), are computed in
order to comply with such Regulations, the Managing General Partner shall make
that modification. The Managing General Partner may also make any modifications
to this Agreement which are necessary so unanticipated events will not cause
this Agreement to fail to comply with those Regulations.
ARTICLE IV
Allocations and Distributions
4.1 ALLOCATIONS FOR CAPITAL ACCOUNT PURPOSES. (a) For purposes
of maintaining the Capital Accounts, except as otherwise provided in this
Section 4.1, each item of Partnership income, gain, loss and deduction will be
allocated to the Partners in proportion to their respective Percentage
Interests, determined as of the end of each fiscal year or other applicable
period and before taking into account the allocations under this Section 4.1.
(b) Notwithstanding anything to the contrary in this Agreement,
if there is a net decrease in Partnership Minimum Gain or Partner Minimum Gain
for any fiscal year, each Partner will be specially allocated items of
Partnership income and gain for that fiscal year (and, if necessary, for each
subsequent fiscal year) equal to that Partner's share of the net decrease in
Partnership Minimum Gain and Partner Minimum Gain for that fiscal year to the
extent required in Regulation Sections 1.704-2(f) and 1.704-2(i)(4). This
Section 4.1(b) is intended to constitute a "minimum gain
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chargeback" and "partner minimum gain chargeback" within the meaning of those
Regulations and is to be interpreted consistently with those Regulations.
(c) The Managing General Partner is authorized to adopt any
convention or combination of conventions (including, without limitation, a
semi-monthly or full-month convention) likely to be upheld under Section 706 of
the Code regarding the allocation of items of Partnership income, gain, loss and
deduction with respect to a transferred Partnership Interest or a newly issued
Partnership Interest.
(d) Except as otherwise provided in Section 4.1(b), if Federal
income tax principles dealing with the deduction, apportionment or allocation of
tax items between or among commonly controlled taxpayers apply to any
transaction between the Partnership and a Partner, any items of Partnership
income, gain, loss or deduction with regard to that transaction shall be
allocated by the Managing General Partner, and correlative adjustments to
Capital Accounts will be deemed to have been made by the Managing General
Partner, such that each Partner will be in the same net after-tax position it
would have been in (to the fullest extent practicable and taking into account
net after-tax disparities, if any, remaining from prior taxable years), and have
the same Capital Account balance that it would have had (to the fullest extent
practicable and taking into account Capital Account disparities, if any,
remaining from prior taxable years) if those Federal income tax principles had
not applied.
4.2 ALLOCATIONS FOR TAX PURPOSES. (a) For Federal, state and
local income tax purposes, except as otherwise provided in this Section 4.2,
each item of Partnership income, gain, loss and deduction shall be allocated to
the Partners consistent with the allocations of income, gain, loss and deduction
described in Section 4.1.
(b) In the case of a Contributed Asset or Adjusted Asset, items
of income, gain, and loss and depreciation, cost recovery and amortization
deductions, attributable to the Contributed Asset or Adjusted Asset will be
allocated for Federal income tax purposes among the Partners as follows:
(i) In the case of a Contributed Asset, deductions for
depreciation, cost recovery or amortization attributable to the asset and gain
or loss upon the sale or other disposition of the assets will be allocated to
the Partners in accordance with Regulation Section 1.704-3, using methods
permitted by that Regulation selected by the Managing General Partner.
(ii) In the case of an Adjusted Asset which was not originally
a Contributed Asset, such items will be allocated among the Partners in a
manner consistent with the principles of Section 704(c) of the Code to take
into account the Unrealized Gain or Unrealized Loss attributable to the
Adjusted Asset and the allocations of that Unrealized Gain or Unrealized Loss
pursuant to Section 3.7(d)(i). In the case of an Adjusted Asset which was
originally a Contributed Asset, such items shall be allocated among the
Partners in a manner consistent with Section 4.2(b)(i).
(c) All items of income, gain, loss, deduction, credit and basis
allocation recognized by the Partnership for Federal income tax purposes and
allocated to the Partners in accordance with the provisions of this Section 4.2
will be determined without regard to any election under Section 754 of the Code
that may be made by the Partnership; PROVIDED that those allocations, once made,
will be adjusted, as necessary or appropriate, to take into account the
adjustments permitted by Sections 734 and 743 of the Code and, where
appropriate, to provide only Partners recognizing gain on Partnership
distributions covered by Section 734 of the Code with the Federal income tax
benefits attributable to the increased basis in Partnership assets resulting
from any election under Section 754 of the Code.
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(d) Any credits of the Partnership will be allocated to the
Partners in accordance with their respective Percentage Interests.
(e) Allocations pursuant to this Section 4.2 are solely for
Federal, state and local tax purposes and will not affect, or in any way be
taken into account in computing, any Partner's Capital Account or share of
income, gain, loss and deduction described in Section 4.1 or distributions
pursuant to any provision of this Agreement.
(f) The Partners are aware of the income and other tax
consequences of the allocations made by this Article IV and agree to report
their shares of items of Partnership income, gain, loss, deduction and credit in
accordance with this Article IV; subject, however, to any adjustments required
as a result of an audit of the Partnership or a Partner by a taxing authority.
4.3 DISTRIBUTIONS. The Executive Committee may from time to time
cause the Partnership to distribute cash or other property to the Partners in
accordance with their respective Percentage Interests.
ARTICLE V
Governance and Management of Business
5.1 EXECUTIVE COMMITTEE. The Partnership will be governed by an
Executive Committee as follows:
(a) The Executive Committee will consist of not more than three
members designated by each Partner. The members of the Executive Committee
designated by a Partner (the Partner's "Representatives") will act as
representatives of that Partner, and in voting or otherwise acting in their
capacity as members of the Executive Committee, the Representatives of a Partner
will have no obligation to consider what may be in the best interests of any
other Partner and will have no fiduciary or other obligations to any other
Partner. All the members of the Executive Committee designated by a Partner
will, together, have one vote, which they will cast as determined by the Partner
(or by those representatives in accordance with authority granted to them by the
Partner). Except as provided in subsection (c) of this Section, all actions of
the Executive Committee will be by majority vote (based upon one vote per
Partner). Each Partner will have the power to remove and replace any member of
the Executive Committee designated by that Partner.
(b) The business and affairs of the Partnership will be managed
by or under the direction of the Executive Committee, except (i) as specifically
provided in this Agreement or in the Management Agreement, and (ii) that, except
as provided in subsection (c) of this Section, the Executive Committee may
delegate authority to the Managing General Partner or its designees to manage
the affairs of the Partnership.
(c) Each of the following matters will require the unanimous
vote of the Executive Committee (based upon one vote per Partner):
(i) The acquisition by the Partnership of any real property,
other than the acquisition by the Partnership of the Original
Properties.
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(ii) The sale of any real property to a Partner or an
Affiliate of a Partner, other than upon exercise by that Partner
or its Affiliate of an option, or under a purchase agreement,
which had been approved by the Executive Committee, or upon
exercise of the options dated on or before October 31, 1997
relating to portions of the Original Properties.
(iii) The adoption of an annual Business Plan.
(iv) Approval of a Master Plan relating to property owned by
the Partnership.
(v) Any transaction or related series of transactions
involving the expenditure by the Partnership of more than
$50,000, unless the transaction or series of transactions was
contemplated by a Business Plan adopted by the Executive
Committee as contemplated in clause (iii), in which case the
transaction or related series of transactions must be separately
approved only if it exceeds the greater of $50,000 or 110% of
the budgeted amount.
(vi) Any borrowing from, or loan to, any person (including,
but not limited to, a Partner or an Affiliate of a Partner).
(vii) Any amendment to the Management Agreement.
(viii) Any decision by the Executive Committee to require
the Partners to make Additional Capital Contributions as
contemplated by Section 3.3.
(ix) Any agreement with a Partner or an Affiliate of a
Partner, other than one described in clauses (i) through (vii).
(x) The institution of legal proceedings against anyone.
(xi) The selection of the Partnership's auditors.
If any Partner binds the Partnership to any undertaking or liability not
authorized as provided in this Agreement, that Partner will indemnify the
Partnership and each of the other Partners against, and hold each of them
harmless from, any loss, liability or expense (including reasonable attorneys'
fees) incurred by the Partnership or the other Partner as a result of the
unauthorized action.
(d) QUORUM. No meeting of the Executive Committee will be
validly convened unless at least one member appointed by each Partner is
present. The Executive Committee may act without a meeting by written consent
executed on behalf of each Partner by at least one member appointed by that
Partner.
(e) MEETINGS. Meetings of the Executive Committee will be held
at such place as may be determined by the Managing General Partner. Meetings may
be called by any member of the Executive Committee on at least five days' prior
written notice to each member. Decisions made by the Executive Committee at any
meeting will be valid even if the required notice is not given if there was a
quorum present at the meeting or if all Partners waived the requirement of
notice, whether before or after the meeting.
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(f) CONFERENCE TELEPHONE. Meetings of the Executive Committee
may be held by conference telephone or similar communications equipment by means
of which all members participating in a meeting can hear each other member.
(g) MINUTES. Minutes of each meeting of the Executive Committee
will be kept by the Manager (or, if the Manager does not do that, by the
Managing General Partner) and copies will be sent to each member.
(h) LIMITATION OF LIABILITIES AND OBLIGATIONS. (i) No Partner,
no Affiliate, stockholder, officer, director, employee or agent, of any Partner,
and no Representative of any Partner will be liable to the Partnership, any
other Partner or any Affiliate of any Partner for any breach of any alleged duty
to the Partnership or to any other Partner in connection with the management of
the business and affairs of the Partnership, or the exercise of any voting
rights as a member of the Executive Committee, except to the extent such a
breach is found to have involved a knowing violation of law, or, in the case of
an individual only, an improper personal benefit.
(ii) Each Partner, through its Representatives, will be
entitled to act with regard to the business and affairs of the Partnership in
the manner it believes in its sole discretion is in the Partner's best
interests, and will be entitled to cause its Representatives to vote for or
against any matter submitted to a vote or for consent pursuant to this Agreement
in the Partner's sole discretion as it deems to be in its best interests.
Subject to clause (i), no Partner, nor any Affiliate, stockholder, officer,
director, employee or agent, including any Representative, of any Partner will
be liable to the Partnership or any other Partner or any Affiliate of any other
Partner for any such conduct. Without limiting the foregoing, each
Representative of a Partner on the Executive Committee is entitled to manage the
business and affairs of the Partnership, and exercise his or her voting rights
on the Executive Committee, in interest of the Partner for which such person is
a Representative, even if such conduct is not in the interest of the other
Partners, or the Partnership as a whole, and, subject to clause (i), no such
Representative shall be liable to the Partnership, or any other Partner or any
Affiliate of any Partner, for any such act or omission.
(iii) To the extent the provisions of this Section 5.1
eliminate or reduce any duties and liabilities of any person otherwise existing
at law or in equity, the Partners have expressly agreed to eliminate or reduce
those obligations. To the extent that, but for these provisions, any person
would have duties (including fiduciary duties) to the Partnership, the Partners
or any Affiliate of any Partner, or could be liable for failing to perform those
duties, the person is entitled to rely on the provisions of this Section 5.1,
and, except as provided in clause (i), will not be liable to the Partnership,
any Partner or any Affiliate of any Partner for acts or omissions in good faith
reliance on the provisions of this Section 5.1.
5.2 MANAGEMENT AGREEMENT. The Partnership will enter into the
Management Agreement with the Manager. Pursuant to the Management Agreement, the
Manager will conduct the day-to-day activities of the Partnership, including but
not limited to, overseeing planning and development of properties, overseeing
sales of portions of properties to Lennar and its Affiliates upon exercise of
options or otherwise, and the marketing and sale of portions of properties to
other builders. The Manager will be compensated as provided in of the Management
Agreement. Unless otherwise specifically directed by the Executive Committee or
provided in Section 5.1, the Manager will be authorized, without further
approval of the Executive Committee, to conduct the day-to-day operations and
business of the Partnership in accordance with the applicable Business Plan and
Budget or as otherwise provided in Section 5.5.
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5.3 INDEMNIFICATION. The Partnership shall indemnify each member
of the Executive Committee, the Manager and each employee, director or officer
of the Manager as follows:
(a) OBLIGATION TO INDEMNIFY. To the extent permitted by law, the
Partnership will indemnify each Partner, each person who at any time is or was a
member of the Executive Committee, the Manager and each person who at any time
is or was an employee, director or officer of the Manager (each, an "INDEMNIFIED
PERSON") against, and will hold each Indemnified Person harmless from, any
liability, loss, damage, or reasonable expense (including reasonable attorneys'
fees and other costs of investigation and defense and any amounts expended in
the settlement of any claims) incurred in connection with or resulting from a
claim, action, suit, investigation, or proceeding (other than one brought by the
Partnership on its own behalf) by reason of the Indemnified Person's being or
having been a Partner, a member of the Executive Committee, the Manager or an
employee, director or officer of the Manager, except in instances in which the
Indemnified Person is found not to have acted in good faith or to have acted in
a manner opposed to the best interests of the Partnership and, in addition, with
respect to any criminal action or proceeding, except in instances in which the
Indemnified Person had reasonable grounds to believe that conduct was lawful.
(b) SOURCE OF INDEMNIFICATION. Any indemnification pursuant to
this Section 5.3 will be recoverable only from the assets of the Partnership and
not from the assets of the Partners.
5.4 INSURANCE. The Partnership may purchase insurance insuring
the Manager and any Person who is or was a member of the Executive Committee, an
officer, employee, or agent of the Partnership, or an employee, director or
officer of the Manager against any liability asserted against that Person
because that Person served in that capacity or because of any action or omission
by that Person in that capacity, whether or not the Partnership would have the
power to indemnify the Person against the applicable liability under the
provisions of this Agreement.
5.5 ANNUAL BUSINESS PLAN. Attached to this Agreement as Exhibit
C is the Business Plan for the period from the inception of the Partnership to
the end of the Partnership's fiscal year ending November 30, 1997. Not later
than two months before the end of each fiscal year of the Partnership, the
Manager will submit to the Executive Committee a proposed Business Plan for the
next succeeding Partnership fiscal year, which will include a schedule for
development of particular properties, a property development budget, and, if
applicable, a property acquisition budget and such other schedules and details
as are reasonably necessary to enable the Partners fully to understand, and to
evaluate, the proposed Business Plan. If the Executive Committee does not
approve a Business Plan for a fiscal year prior to the beginning of the fiscal
year, until the Executive Committee approves the Business Plan and Budget for
the fiscal year:
(i) the Manager will continue all property development
projects and marketing programs which were in process at the end of the prior
fiscal year,
(ii) the Partnership will not begin any new property
development projects,
(iii) any items or portions of the Business Plan and amounts
of expenses provided therein which have been approved by the Executive Committee
shall become operative immediately and the Partnership shall be entitled to
expend funds in accordance with those operative portions;
(iv) the Partnership will be entitled to expend, in respect
of noncapital, recurring expenses in any quarter of the then-current fiscal
year, an amount equal to the budgeted amount for the corresponding quarter of
the immediately preceding fiscal year, as set forth on the immediately
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preceding fiscal year's Business Plan, after giving effect to any dispositions
or other material changes to the Partnership property or its operations during
the prior fiscal year; provided, however, that if any contract approved by the
Executive Committee provides for an automatic increase in costs thereunder after
the beginning of the then current fiscal year, then the Partnership shall be
entitled to expend the amount of such increase;
(v) the Partnership shall be entitled to expend funds in
respect of debt service on the Partnership's financing (including the expense of
curing any defaults); and
(vi) the Manager will cause the Partnership to conduct its
other activities in a manner consistent with the way in which they were
conducted during the prior fiscal year, except to the extent of differences
because of prior contractual obligations of the Partnership.
5.6 REIMBURSEMENT OF PARTNERS. (a) Each Partner shall be
reimbursed by the Partnership as a cost of the Partnership for all expenses,
disbursements and advances incurred or made in connection with the organization
of the Partnership and the qualification of the Partnership to do business.
(b) Each Partner shall be reimbursed on a monthly basis, or such
other basis as the Executive Committee may determine, for all direct
out-of-pocket expenses the Partner incurs on behalf of the Partnership
(including amounts paid to other Persons to perform services to the
Partnership). Except to the extent provided in the Management Agreement, no
Partner will be reimbursed for time spent by its employees on matters relating
to the Partnership.
5.7 OUTSIDE ACTIVITIES. Any Partner or Affiliate of a Partner
may have business interests and engage in business activities in addition to
those relating to the Partnership, including business interests and activities
which conflict with or are in direct competition with the Partnership. Without
limiting what is said in the preceding sentence, any Partner or any Affiliate of
a Partner (including Lennar, even though it is the Manager) may acquire
properties for its own account without considering whether those properties
would be suitable for the Partnership, and if a Partner or an Affiliate of a
Partner (including Lennar in its role as Manager) proposes to the Executive
Committee that the Partnership acquire a property on particular terms but the
Executive Committee does not approve the acquisition of the property, the
Partner who proposed that the Partnership acquire the property, or any other
Partner, may acquire all or any portion of the property for its own account on
the same terms as those on which it was proposed that the Partnership acquire
the property or on any other terms, even if the other terms are more favorable
to the buyer than the terms proposed to the Partnership.
5.8 DEALINGS WITH PARTNERSHIP. Subject to the approval
requirements of Section 5.1, any Partner or any Affiliate of a Partner
(including Lennar, even though it is the Manager) may acquire properties or
other assets, or interests in them, from, sell properties or other assets, or
interests in them, to, borrow or lend money from or to, and enter into option
agreements or other agreements with, the Partnership on any terms which are
approved by the Executive Committee. Neither the Partnership nor any of the
Partners will have any rights by virtue of this Agreement or the partnership
relationship created by it to participate in any business ventures of any other
Partners or Affiliates of other Partners or any revenues, profits or losses from
any such business ventures.
5.9 PARTNERSHIP FUNDS. Until funds of the Partnership are used
in connection with Partnership activities or distributed to the Partners, the
funds shall be deposited in the Partnership's name in such bank accounts as the
Manager determines or may be invested in commercial paper,
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money market funds or other short or long term investments which the Manager
deems appropriate for the Partnership.
5.10 TITLE TO PARTNERSHIP ASSETS. All Partnership assets,
whether real, personal or mixed, tangible or intangible, will be owned by the
Partnership as an entity, and no Partner individually (or collectively with
other Partners) will have any ownership interest in any Partnership assets.
Title to Partnership assets may be held in the name of the Partnership or one or
more nominees, as the Manager may determine. All Partnership assets will be
recorded on the books of the Partnership as being owned by the Partnership
irrespective of the name in which legal title to such Partnership assets is
held.
ARTICLE VI
Books, Records, Accounting and Reports
6.1 RECORDS AND ACCOUNTING. Complete and accurate books of
account of the Partnership will be kept at the Partnership's principal place of
business and will be open to inspection by any of the Partners or their
authorized representatives at any reasonable times during business hours. The
books of the Partnership will be maintained, for financial reporting purposes,
on an accrual basis in accordance with generally accepted accounting principles.
All decisions as to accounting matters, except as specifically provided to the
contrary in this Agreement, will be made by the Manager.
6.2 FISCAL YEAR. The fiscal year of the Partnership will end on
November 30 of each year or such other date as may be required to be used for
Federal income tax purposes.
6.3 FINANCIAL STATEMENTS AND FINANCIAL INFORMATION. (a) As soon
as practicable, but in no event later than 60 days, after the close of each
fiscal year, the Manager will cause financial statements of the Partnership for
the fiscal year, prepared in accordance with generally accepted accounting
principles, including a balance sheet, a statement of income, a statement of
Partners' equity and a cash flow statement, audited by a firm of independent
public accountants selected by the Manager and approved by the Executive
Committee, to be given to each Partner.
(b) As soon as practicable, but in no event later than the
fifteenth day, after the end of each month, the Manager will cause a flash
report regarding the net income, cash flow and other material operating results
of the Partnership during the month, to be given to each Partner.
(c) As soon as practicable, but not later than the 25th day,
after the end of each month, the Manager will cause financial statements and
other relevant financial information about the Partnership during and at the end
of the month, to be given to each Partner.
(d) As soon as practicable, but in no event later than 30 days,
after the close of each fiscal quarter, except the last quarter of each fiscal
year, the Manager will cause quarterly financial information about the
Partnership, including any financial information which any Partner requires for
any filing it is required to make with the Securities and Exchange Commission,
any stock exchange or securities quotation system, or any other governmental or
self-regulatory organization, to be given to each Partner.
15
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(e) The Partnership will, and will cause the Manager to,
cooperate in all ways with each of the Partners in enabling the Partner to make
all filings it is required to make generally, or in connection with offerings of
its securities or other transactions, with the Securities and Exchange
Commission, any stock exchange or securities quotation system, or any other
governmental agency or self-regulatory organization, including causing financial
information to be prepared in sufficient detail to enable the Partner to comply
with applicable Securities and Exchange Commission or other governmental
regulations and including permitting auditors for the Partner to review the
audit workpapers relating to the Partnership and to make comfort reviews or
other reviews regarding the Partnership.
6.4 OTHER INFORMATION. The Manager may release to the public
such information concerning the operations of the Partnership as is customary in
the industry or required by law or regulation of any regulatory body.
6.5 REIMBURSEMENT. The Partnership will pay all costs relating
to matters described in this Article VI.
ARTICLE VII
Tax Matters
7.1 RECOGNITION OF PARTNERSHIP. The Partners recognize that this
Agreement creates a partnership for U.S. Federal income tax purposes, and the
Partners shall not elect to be excluded from the application of Subchapter K of
Chapter I of Subtitle A of the Code, or any similar state statute.
7.2 PREPARATION OF TAX RETURNS. The Managing General Partner
shall arrange for the preparation and timely filing of all returns of
Partnership income, gains, deductions, losses and other items necessary for
Federal and state income or other tax purposes and shall use all reasonable
efforts to furnish to each Partner within 75 days after the close of each
taxable year the tax information reasonably required by the Partners for Federal
and state income tax reporting purposes. Each Partner shall provide to the
Manager, when and as requested, all information concerning the affairs of the
Partner which is reasonably required to permit the preparation of such returns.
The Partnership will not file any federal or state income tax return until it
has been approved by the Executive Committee.
7.3 ACCOUNTING METHODS; TAX ELECTIONS. The classification,
realization and recognition of income, gains, losses and deductions and other
items with regard to the Partnership will be on the accrual method of accounting
for Federal income tax purposes; PROVIDED that the Managing General Partner may
change the method of accounting used for Federal income tax purposes if the
Managing General Partner determines that such a change would be possible and
desirable. The taxable year of the Partnership will be the same as the
Partnership's fiscal year, unless the Managing General Partner determines
otherwise. The Partnership shall elect to deduct expenses incurred in organizing
the Partnership ratably over a 60-month period as provided in Section 709 of the
Code. The Managing General Partner may make or revoke (if made) the election
under Section 754 of the Code. Except as specifically provided in this
Agreement, the Managing General Partner may determine whether the Partnership
should make any other available tax elections or select any other appropriate
tax accounting methods or conventions.
16
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7.4 TAX CONTROVERSIES. The Managing General Partner is
designated the "Tax Matters Partner" (as defined in Section 6231 of the Code)
and is authorized to represent the Partnership (at the Partnership's expense) in
connection with all examinations of the Partnership's affairs by tax authorities
and all resulting administrative and judicial proceedings, and to expend
Partnership funds for costs of professional services and other costs incurred in
connection with those examinations and proceedings. Any Partner may participate
in any such examination or proceeding at the Partner's expense. Each Partner
shall cooperate with the Managing General Partner in connection with all tax
examinations and resulting administrative or judicial proceedings. The Managing
General Partner may not agree to any settlement or adjustment to any tax item in
connection with any examination by any tax authority or legal proceeding without
the consent of the Executive Committee.
7.5 WITHHOLDING. Notwithstanding any other provision of this
Agreement, the Managing General Partner is authorized to cause the Partnership
to comply with any Federal, state, local or foreign withholding requirement with
respect to any payment or distribution by the Partnership to any Partner or
other Person. Any amount withheld from a payment or distribution to a Partner
and paid over to a tax authority will, for the purposes of this Agreement, be
treated as having been paid or distributed to the Partner. Any amount withheld
from any payment or distribution by any Person to the Partnership will be
treated as a distribution to the Partners allocated among them in accordance
with Section 4.3 or Article X, as the case may be.
7.6 REIMBURSEMENT. The Managing General Partner will be
reimbursed for all out-of-pocket costs relating to matters described in Sections
7.2 through 7.5.
ARTICLE VIII
Transfer of Interests
8.1 RESTRICTIONS ON TRANSFER. Except as otherwise provided in
this Article VIII, no Partner may directly or indirectly assign, transfer,
hypothecate, or otherwise dispose of all or any portion of its Partnership
Interests (including, without limitation, any right to receive distributions or
allocations of profits or losses in respect of such Partnership Interests),
whether voluntarily, by operation of law or otherwise (a "TRANSFER" for purposes
of this Article VIII), and any attempt to do so will be null and void and will
not bind, or be recognized by, the Partnership. In addition, neither Lennar nor
LNR may, without the prior written consent of the other of them, transfer any
interest in the Managing General Partner or the General Partner.
8.2 PERMISSIBLE TRANSFERS. Notwithstanding the provisions of
Section 8.1, at any time after November 30, 2002, a Partner may, upon compliance
with Section 8.3, transfer all, but not less than all, of the Partner's
Partnership Interests to a Person on terms permitted by Section 8.3, provided
that (i) the transferee agrees in writing (in a form approved by the other
Partner) to be bound as a party to this Agreement and (ii) the Partnership
receives a written opinion from its counsel that the transferee's acquisition of
the Partnership Interest will not cause the termination of the Partnership or
loss of partnership status under the Code or cause the Partnership to be deemed
to be other than a U.S. partnership for purposes of the Code.
8.3 RIGHT OF FIRST REFUSAL. If a Partner (the "DISPOSING
PARTNER") proposes to transfer all, but not less than all, of its Partnership
Interests to any Person, the Disposing Partner may give the other Partner (the
"NOTIFIED PARTNER") a written notice (a "NOTICE OF INTENTION") stating that the
Disposing Partner intends to sell its Partnership Interests, identifying the
Person to whom the
17
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Partnership Interests are to be sold and stating the price and other terms of
the proposed sale. The Notified Partner may then, by a notice to the Disposing
Partner given within 30 days after the day on which the Notice of Intention was
given, elect to purchase the Partnership Interests of the Disposing Partner for
the price and on the terms specified in the Notice of Intention. If the Notified
Partner gives that notice, the closing of the purchase will take place at the
Partnership's principal office (or another place agreed upon by the Disposing
Partner and the Notified Partner) at a time and on a date specified in the
notice, which is not fewer than 10 nor more than 30 days after the day on which
the notice is given. If the Notified Partner does not give that notice, the
Disposing Partner may within 90 days after the end of the 30 day period, sell
the Disposing Partner's Partnership Interests to the Person identified in the
Notice of Intention for a price, and on other terms, which are not more
favorable to the buyer than those stated in the Notice of Intention.
18
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ARTICLE IX
Admission of Partners
9.1 ADMISSION OF ADDITIONAL PARTNERS. The Partners may by
unanimous written consent (but not otherwise), admit new Partners to the
Partnership from time to time. Each new Partner will be admitted when the new
Partner executes this Agreement or an appropriate supplement to it in which the
new Partner agrees to be bound by the terms and provisions of this Agreement as
they may be modified by that supplement. Admission of a new Partner will not
cause dissolution of the Partnership.
9.2 INTEREST OF NEW PARTNER. A newly admitted Partner's Capital
Contribution and share of the Partnership's profits and losses will be set forth
in the written consents of the Partners described in Section 9.1.
ARTICLE X
Dissolution and Liquidation
10.1 DISSOLUTION. Except as otherwise provided in this
Agreement, the business of the Partnership will be continued by the Partners
pursuant to this Agreement, notwithstanding the occurrence of any event which
would result in the dissolution of a Partnership under the laws of the State of
Florida, and no Partner will be released or relieved of any duty or obligation
under this Agreement by reason of any such event. The Partnership will dissolve,
and its affairs will be wound up, upon:
(a) the unanimous approval of all the Partners;
(b) an election to dissolve the Partnership by a Partner as
provided in Section 1.4;
(c) the bankruptcy or insolvency of the Partnership; or
(d) the sale or disposition of all or substantially all of the
assets of the Partnership.
10.2 EFFECT OF DISSOLUTION. Upon dissolution of the Partnership
in accordance with Section 10.1, the Partnership will conduct only activities
necessary to wind up its affairs.
10.3 LIQUIDATION. Upon dissolution of the Partnership pursuant
to Section 10.1, as expeditiously as possible, the Executive Committee shall
appoint a special liquidator (which may be a Partner and may be the Manager) to
wind up the affairs of the Partnership, liquidate the assets of the Partnership
in accordance with a plan prepared by the liquidator and approved by the
Executive Committee, and apply and distribute the proceeds of such liquidation
in the following order of priority, unless otherwise required by mandatory
provisions of applicable law:
(a) to the payment of all costs and expenses of the liquidation;
(b) to creditors of the Partnership, including Partners, in
order of priority provided by law, and the creation of a reserve of cash or
other assets of the Partnership for contingent liabilities in an amount, if any,
determined by the liquidator to be appropriate for that purpose; and
19
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(c) to the Partners in accordance with the positive balances in
their respective Capital Accounts, after taking into account all adjustments to
Capital Accounts for all periods.
If upon liquidation of the Partnership any Partner has a deficit balance in its
Capital Account, that Partner shall promptly contribute the amount of the
deficit to the Partnership for payment or distribution in accordance with the
preceding sentence.
10.4 DISTRIBUTION IN KIND. If upon dissolution of the
Partnership, the liquidator determines that an immediate sale of part or all of
the Partnership's assets would be impractical or would cause undue loss to the
Partners, the liquidator may defer for a reasonable time the liquidation of any
assets except those necessary to satisfy liabilities of the Partnership (other
than those to Partners) and may distribute to the Partners, in lieu of cash, as
tenants in common and in accordance with the provisions of Section 10.3(b),
undivided interests in the Partnership assets which the liquidator deems not
suitable for liquidation. Any such distributions in kind will be subject to such
conditions relating to the disposition and management of particular assets as
the liquidator deems reasonable and equitable and to any options and any
agreements governing the operation of those assets which are in effect when they
are distributed in kind. The liquidator shall determine the fair market value of
any asset distributed in kind using such reasonable method of valuation as it
deems appropriate.
10.5 REASONABLE TIME FOR WINDING UP. A reasonable time will be
allowed for the orderly winding up of the business and affairs of the
Partnership and the liquidation of its assets pursuant to Section 10.3 in order
to minimize any losses otherwise attendant upon such winding up.
10.6 WAIVER OF PARTITION. Each Partner waives any right to
partition of the Partnership property.
10.7 VOLUNTARY TERMINATION. Notwithstanding anything contained
in this Article X to the contrary, if either Partner desires to terminate the
Partnership pursuant to Section 1.4, that Partner (the "TERMINATING PARTNER")
will give written notice to the other Partner (the "RECEIVING PARTNER") of its
intention to terminate. The Receiving Partner will then have 30 days either to
(i) agree in writing to a termination of the Partnership in accordance with
Sections 10.1 through 10.5, or (ii) propose a price at which the Receiving
Partner would be willing to purchase the Partnership Interests of the
Terminating Partner. If the Receiving Partner proposes a purchase price, the
Terminating Partner may (i) accept the proposed purchase price and sell its
Partnership Interests to the Receiving Partner for the proposed purchase price,
or (ii) reject the proposed purchase price and buy the Receiving Partner's
Partnership Interests for the proposed purchase price.
ARTICLE XI
General Provisions
11.1 INDEMNIFICATION BY PARTNERS. Each Partner will indemnify
the Partnership and each of the other Partners against, and hold each of them
harmless from, any expense or liability resulting from or arising out of any
gross negligence or wilful misconduct on the part of the indemnifying Partner to
the extent the amount is not covered by insurance carried by the Partnership.
11.2 CONTRIBUTION BY PARTNERS. If any Partner (the "Paying
Partner") makes any payment as a result of a liability of the Partnership, or
incurs any costs or expenses on behalf of the
20
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Partnership, and the Paying Partner is not promptly reimbursed by the
Partnership for the amount paid, or the costs or expenses incurred, by the
Paying Partner, each other Partner will make a payment to the Paying Partner,
promptly after being requested to do so by the Paying Partner, equal to (i) the
amount paid, or the costs or expenses incurred, by the Paying Partner, times
(ii) the other Partner's Percentage Interest, so that, after the payments by all
the other Partners, each Partner (including the Paying Partner) will have borne
a portion of the total amount paid by all the Partners as a result of the
liability of the Partnership, or the total costs or expenses incurred by all the
Partners on behalf of the Partnership, equal to the Partner's Percentage
Interest.
11.3 NOTICES. Any notice, report or other communication required
or permitted to be given to a Partner under this Agreement must be in writing
and will be deemed given or made when delivered in person or sent by facsimile
transmission, or on the third day after the day when mailed by first class mail
from within the United States of America, to the Partner at the following
address (or at the most recent address specified to the sender by the addressee
in the manner provided in this Section):
If to Lennar Land Partners Sub, Inc.
Lennar Land Partners Sub, Inc.
c/o Lennar Corporation
700 N.W. 107th Avenue
Miami, Florida 33172
Attention: President
Facsimile No.: (305) 226-7691
If to LNR Land Partners Sub, Inc.
LNR Land Partners Sub, Inc.
c/o LNR Property Corporation
760 N.W. 107th Avenue
Miami, Florida 33172
Attention: President
Facsimile No.: 305-226-7691
11.4 AMENDMENTS. This Agreement may be amended at any time with
the written consent of all Partners.
11.5 TITLES AND CAPTIONS. The article and section titles or
captions in this Agreement are for convenience only, and are not intended to
affect the terms or the interpretation of this Agreement.
11.6 BINDING EFFECT. This Agreement will be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors and permitted assigns, except to the extent of any contrary provision
in this Agreement.
11.7 INTEGRATION. This Agreement constitutes the entire
agreement among the parties relating to the subject matter of this Agreement and
supersedes all prior agreements and understandings relating to that subject
matter.
21
<PAGE>
11.8 CREDITORS. None of the provisions of this Agreement will be
for the benefit of or enforceable by any creditors of the Partnership or of any
Partner.
11.9 COUNTERPARTS. The parties may execute this Agreement in two
or more counterparts, each of which will be an original, but all of which will
constitute one and the same document.
11.10 APPLICABLE LAW. This Agreement will be governed by and
construed in accordance with the substantive laws of the State of Florida.
11.11 SURVIVAL. All indemnities and reimbursement obligations in
this Agreement will survive dissolution and liquidation of the Partnership until
expiration of the longest applicable statute of limitations (including
extensions and waivers) with respect to any matter for which a party would be
entitled to be indemnified or reimbursed, as the case may be.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
or caused it to be executed on their behalf, as of the date shown on the first
page of this Agreement.
LENNAR LAND PARTNERS SUB, INC. LNR LAND PARTNERS SUB, INC.
By:/S/ CORY J. BOYDSTON By:/S/ SHELLY RUBIN
--------------------- ------------------------
Name: Cory J. Boydston Name: Shelly Rubin
Title: Vice President Title: Vice President
Address: Address:
700 Northwest 107th Avenue 760 Northwest 107th Avenue
Miami, Florida 33172 Miami, Florida 33172
Facsimile No.: Facsimile No.:
LENNAR CORPORATION LNR PROPERTY CORPORATION
By:/S/ CORY J. BOYDSTON By:/S/ SHELLY RUBIN
--------------------- -----------------------
Name: Cory J. Boydston Name: Shelly Rubin
Title: Vice President Title: Vice President
Address: Address:
700 Northwest 107th Avenue 760 Northwest 107th Avenue
Miami, Florida 33172 Miami, Florida 33172
Facsimile No.: Facsimile No.:
22
EXHIBIT 10.k
CREDIT AGREEMENT
AMONG
LENNAR LAND PARTNERS,
AS BORROWER
AND
THE FIRST NATIONAL BANK OF CHICAGO,
NATIONSBANK, N.A.,
CREDIT LYONNAIS ATLANTA AGENCY,
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION,
COMERICA BANK,
FLEET NATIONAL BANK,
GUARANTY FEDERAL BANK, F.S.B.,
THE INDUSTRIAL BANK OF JAPAN, LIMITED, ATLANTA AGENCY,
U. S. BANK NATIONAL ASSOCIATION,
PNC BANK, NATIONAL ASSOCIATION,
SOCIETE GENERALE,
AMSOUTH BANK,
BARNETT BANK, N.A., SOUTH FLORIDA,
THE DAI-ICHI KANGYO BANK, LTD.,
THE FUJI BANK AND TRUST COMPANY,
KREDIETBANK, N.V.,
SAKURA BANK,
SUNTRUST BANK, MIAMI, N.A. AND
BANQUE PARIBAS
AND
THE FIRST NATIONAL BANK OF CHICAGO,
AS ARRANGER AND ADMINISTRATIVE AGENT,
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION,
AS SYNDICATION AGENT AND
COMERICA BANK
AS DOCUMENTATION AGENT
NATIONSBANK, N.A. AND CREDIT LYONNAIS ATLANTA AGENCY,
AS MANAGING AGENTS
FLEET NATIONAL BANK AND GUARANTY FEDERAL BANK, F.S.B.
AS CO-AGENTS
CLOSING DATE: NOVEMBER 3, 1997
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
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ARTICLE I CERTAIN DEFINED TERMS.................................................1
SECTION 1.01. Certain Defined Terms.................................1
SECTION 1.02. Computation of Time Periods..........................23
SECTION 1.03. Accounting Terms.....................................23
ARTICLE II THE CREDITS.........................................................23
SECTION 2.01. Commitments..........................................23
SECTION 2.02. Types of Advances; Mandatory Principal Payments;
Final Maturity.......................................24
SECTION 2.03. Optional Principal Payments..........................25
SECTION 2.04. Commitment Fee and Reduction of Commitments..........26
SECTION 2.05. Method of Borrowing..................................26
SECTION 2.06. Method of Selecting Types and Interest Periods
for Advances.........................................26
SECTION 2.07. Method of Selecting Types and Interest Periods
for Conversion and Continuation of Advances..........27
SECTION 2.08. Minimum Amount of Each Advance.......................28
SECTION 2.09. Rate after Maturity..................................28
SECTION 2.10. Method of Payment....................................28
SECTION 2.11. Notes; Telephonic Notices............................29
SECTION 2.12. Interest Payment Dates; Interest and Fee Basis.......29
SECTION 2.13. Notification of Advances, Interest Rates,
Prepayments and Commitment Reductions................29
SECTION 2.14. Lending Installations................................30
SECTION 2.15. Facility Letters of Credit...........................30
SECTION 2.16. Non-Receipt of Funds by the Agent....................36
SECTION 2.17. Withholding Tax Exemption............................36
SECTION 2.18. Unconditional Obligation to Make Payments............37
SECTION 2.19. Compensating Balances................................37
SECTION 2.20. Extension of Facility A Termination Date.............37
SECTION 2.21. Determination of Borrowing Base......................38
ARTICLE III CHANGE IN CIRCUMSTANCES............................................39
SECTION 3.01. Yield-Protection.....................................39
SECTION 3.02. Changes in Capital Adequacy Regulations..............39
SECTION 3.03. Availability of Types of Advances....................40
SECTION 3.04. Funding Indemnification..............................40
SECTION 3.05. Lender Statements: Survival of Indemnity.............41
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ARTICLE IV REPRESENTATIONS AND WARRANTIES......................................41
SECTION 4.01. Organization, Powers, etc. of Borrower...............41
SECTION 4.02. Organization, Powers, Etc. of
Subsidiary Guarantor.................................41
SECTION 4.03. Organization, Powers, Etc. of Lennar and LNR.........42
SECTION 4.04. Authorization and Validity of this Agreement,
Etc. of Borrower.....................................42
SECTION 4.05. Authorization and Validity of this Agreement,
Etc. By Subsidiary Guarantor.........................42
SECTION 4.06. Authorization and Validity of this Agreement,
Etc. By Lennar and LNR...............................43
SECTION 4.07. INTENTIONALLY OMITTED................................43
SECTION 4.08. INTENTIONALLY OMITTED................................43
SECTION 4.09. No Material Adverse Effect...........................44
SECTION 4.10. Title to Properties..................................44
SECTION 4.11. Litigation...........................................44
SECTION 4.12. Payment of Taxes by Subsidiary Guarantors............44
SECTION 4.13. Agreements...........................................44
SECTION 4.14. Foreign Direct Investment Regulations................45
SECTION 4.15. Federal Reserve Regulations..........................45
SECTION 4.16. Consents, Etc........................................45
SECTION 4.17. Compliance with Applicable Laws......................45
SECTION 4.18. Relationship of the Borrower and the
Subsidiary Guarantors................................46
SECTION 4.19. Subsidiaries; Joint Ventures.........................46
SECTION 4.20. ERISA................................................47
SECTION 4.21. Investment Company Act...............................47
SECTION 4.22. Public Utility Holding Company Act...................47
SECTION 4.23. Post-Retirement Benefits.............................47
SECTION 4.24. Insurance............................................47
SECTION 4.25. Environmental Representations........................47
SECTION 4.26. Security Documents...................................48
SECTION 4.27. Solvency.............................................48
SECTION 4.28. No Misrepresentation.................................48
SECTION 4.29. No Encroachments; Licenses and Permits...............48
SECTION 4.30. Independent Units....................................49
SECTION 4.31. Minimum Tangible Net Worth...........................49
SECTION 4.32. Stevenson Ranch Venture L............................49
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ARTICLE V CONDITIONS PRECEDENT.................................................49
SECTION 5.01. Conditions of Effectiveness..........................49
SECTION 5.02. Conditions Precedent to All Borrowings...............54
ARTICLE VI AFFIRMATIVE COVENANTS...............................................56
SECTION 6.01. Existence, Properties, etc...........................56
SECTION 6.02. Notice...............................................56
SECTION 6.03. Payments of Debts, Taxes, Etc........................56
SECTION 6.04. Accounts and Reports.................................57
SECTION 6.05. Access to Premises and Records.......................60
SECTION 6.06. Maintenance of Properties and Insurance..............60
SECTION 6.07. Financing; New Investments...........................60
SECTION 6.08. Compliance with Applicable Laws......................61
SECTION 6.09. Use of Proceeds......................................61
SECTION 6.10. Further Assurances...................................61
SECTION 6.11. Appraisals...........................................61
ARTICLE VII NEGATIVE COVENANTS.................................................62
SECTION 7.01. Minimum Tangible Net Worth...........................62
SECTION 7.02. Limitation on Indebtedness...........................62
SECTION 7.03. Guaranties...........................................62
SECTION 7.04. Sale of Assets; Acquisitions; Merger.................63
SECTION 7.05. Investments..........................................63
SECTION 7.06. Subordinated Debt....................................64
SECTION 7.07. No Margin Stock......................................64
SECTION 7.08. Transactions with Affiliates.........................64
SECTION 7.09. Fixed Charge Coverage................................65
SECTION 7.10. Pro Forma Fixed Charge Coverage......................65
SECTION 7.11. Restrictions on Distributions........................65
SECTION 7.12. Liens and Encumbrances...............................66
ARTICLE VIII COLLATERAL........................................................66
SECTION 8.01. Security for Obligations.............................66
SECTION 8.02. Collateral Documentation.............................66
SECTION 8.03. Powers and Duties of the Borrower and
Subsidiary Guarantors with Respect to
the Collateral.......................................66
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SECTION 8.04. Power of Attorney....................................66
SECTION 8.05. Joinder in Subdivision Plats, Subdivision
Maps or Parcel Maps..................................67
SECTION 8.06. Sale of Lots.........................................67
SECTION 8.07. Partial Releases of Lots.............................67
ARTICLE IX EVENTS OF DEFAULT...................................................70
SECTION 9.01. Events of Default....................................70
SECTION 9.02. Acceleration.........................................72
SECTION 9.03. Rights as to Collateral..............................73
SECTION 9.04. Application of Funds.................................75
ARTICLE X THE AGENT............................................................76
SECTION 10.01. Appointment..........................................76
SECTION 10.02. Powers...............................................76
SECTION 10.03. General Immunity.....................................76
SECTION 10.04. No Responsibility for Loans, Recitals, Etc...........76
SECTION 10.05. Employment of Agents and Counsel.....................77
SECTION 10.06. Reliance on Documents; Counsel.......................77
SECTION 10.07. No Waiver of Rights..................................77
SECTION 10.08. Knowledge of Event of Default........................78
SECTION 10.09. Agent's Reimbursement and Indemnification............78
SECTION 10.10. Notices to the Borrower or Subsidiary Guarantor......78
SECTION 10.11. Action on Instructions of Lenders....................78
SECTION 10.12. Lender Credit Decision...............................79
SECTION 10.13. Resignation or Removal of the Agent..................79
SECTION 10.14. Benefits of Article X................................79
SECTION 10.15. Agent's Custodial Duties.............................79
SECTION 10.16. Collateral Value Determination;
Determination Assumptions............................81
ARTICLE XI RATABLE PAYMENTS....................................................81
SECTION 11.01. Ratable Payments.....................................81
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS..................81
SECTION 12.01. Successors and Permitted Assigns.....................81
SECTION 12.02. Participations.......................................82
SECTION 12.03. Assignments..........................................83
ARTICLE XIII MISCELLANEOUS.....................................................84
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SECTION 13.01. Notice...............................................84
SECTION 13.02. Survival of Representations..........................84
SECTION 13.03. Expenses.............................................84
SECTION 13.04. Indemnification of the Lenders and the Agent.........84
SECTION 13.05. Maximum Interest Rate................................85
SECTION 13.06. Modification of Agreement............................85
SECTION 13.07. Preservation of Rights...............................86
SECTION 13.08. Joint and Several Obligations of Borrower;
Several Obligations of Lenders.......................87
SECTION 13.09. Severability.........................................87
SECTION 13.10. Counterparts.........................................87
SECTION 13.11. Representation and Warranty by the Lenders...........87
SECTION 13.12. The Borrower as Agent for Each
Subsidiary Guarantor.................................87
SECTION 13.13. Loss, Etc., Notes or Subsidiary Guarantees...........87
SECTION 13.14. Governmental Regulation..............................88
SECTION 13.15. Taxes................................................88
SECTION 13.16. Headings.............................................88
SECTION 13.17. Entire Agreement.....................................88
SECTION 13.18. CHOICE OF LAW........................................88
SECTION 13.19. CONSENT TO JURISDICTION..............................88
SECTION 13.20. WAIVER OF JURY TRIAL.................................89
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EXHIBITS
EXHIBIT DESCRIPTION
A Facility A Note
B Facility B Note
C Assignment Agreement
C-1 Notice of Assignment
C-2 Consent and Release
D Form of Mortgage/Deed of Trust and Security Agreement,
E Joinder Agreement
F Pricing Grid
G Borrowing Base Certificate
H Environmental Indemnity
I Subsidiary Guaranty
J Lennar and LNR Guaranty
K Security Agreement (Capital Stock and Partnership Interests)
L Requirements for Entitled Land
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<TABLE>
<CAPTION>
SCHEDULES
WHERE FOUND
SCHEDULE DESCRIPTION IN AGREEMENT
- -------- ----------- ------------
<S> <C> <C>
I Subsidiaries and Joint Venture Subsidiaries (Definition of
of Borrower which are Subsidiary Guarantors "Subsidiary Guarantor")
II Lenders Opening Paragraph
III Mortgaged Property/Real Estate Owned (Definition of
"Mortgaged Property")
IV Required Consents 4.16
V Subsidiaries and Joint Ventures 4.19
VI Permitted Liens (Definition of
"Permitted Liens")
VII Mortgage Filing Offices 4.26(a)
VIII UCC Filing Offices 4.26(b)
</TABLE>
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CREDIT AGREEMENT, dated as of October 31, 1997, among LENNAR LAND
PARTNERS, a general partnership formed under the laws of the State of Florida
(the "Borrower"), the lenders listed in Schedule II hereto (hereinafter
collectively referred to as the "Lenders"), and THE FIRST NATIONAL BANK OF
CHICAGO, as Agent (the "Agent").
RECITAL
The Borrower desires to obtain from the Lenders and the Lenders are
willing to provide to the Borrower loans and letters of credit in an aggregate
principal amount outstanding from time to time not to exceed $225,000,000, upon
the terms and subject to the conditions hereinafter set forth.
AGREEMENT
In consideration of the foregoing and of the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINED TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used herein, each of the
following terms shall have the meaning ascribed to it below, which meaning shall
be applicable to both the singular and plural forms of the terms defined:
"ADDITIONAL MORTGAGED PROPERTY" means each Property added as a
Mortgaged Property in the manner described in Section 2.21(c).
"ADJUSTED TANGIBLE NET WORTH" means, at any date, Tangible Net Worth at
such date less, to the extent not already deducted in the definition of Tangible
Net Worth, the aggregate of all of the following at such date: (i) the
stockholders' equity of each Subsidiary which is not a Subsidiary Guarantor
hereunder, (ii) the capital account of the Borrower and each Subsidiary in a
Joint Venture wherein the Joint Venture is not a Subsidiary Guarantor hereunder
and (iii) the principal amount of any loan or commitment to loan to any
Subsidiary or Joint Venture wherein the Borrower is an owner or venturer which
is not a Subsidiary Guarantor hereunder.
"ADVANCE" includes any or all of a Facility A Advance and a Facility B
Advance.
"AFFILIATE" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to
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direct or cause the direction of the management or policies of the controlled
Person, whether through ownership of stock, by contract or otherwise.
"AGENT" means The First National Bank of Chicago in its capacity as
agent for the Lenders pursuant to Article X, and not in its individual capacity
as a Lender or an Issuer, and any successor Agent appointed pursuant to Article
X.
"AGREEMENT DATE" means October 31, 1997.
"AGGREGATE COMMITMENT" means, at any time, the sum of the then
applicable Aggregate Facility A Commitment and Aggregate Facility B Commitment.
"AGGREGATE FACILITY A COMMITMENT" means $125,000,000, as such amount
may be reduced from time to time pursuant to the terms hereof.
"AGGREGATE FACILITY B COMMITMENT" means $100,000,000, as such amount
may be reduced from time to time pursuant to the terms hereof.
"AGGREGATE LETTER OF CREDIT COMMITMENT" means $20,000,000, as such
amount may be reduced from time to time pursuant to the terms hereof.
"AGREEMENT" means this Credit Agreement, including the exhibits and
schedules hereto, as it may be amended, renewed, modified or restated and in
effect from time to time.
"APPLICABLE MARGIN" shall be determined in accordance with the pricing
grid set forth as Exhibit "F" hereto.
"APPRAISAL" means, with respect to any Property, a written appraisal of
such Property prepared by an MAI appraiser approved by the Agent in writing,
which appraisal is acceptable to the Agent and the Majority Lenders, done in
conformity with the following standards: Uniform Standards of Professional
Appraisal Practice, the requirements of the Code of Professional Ethics,
Financial Institutions Reform and Recovery Act and the Standards of Professional
Appraisal Practice of the Appraisal Institute and the Appraisal Guidelines set
forth by the Office of the Controller of the Currency and the Federal Reserve
Board.
"APPRAISED VALUE" means the "as is" value of the land as determined by
the Appraisal for the Real Estate.
"ARTICLE" means an article of this Agreement unless another document is
specifically referenced.
"AUTHORIZED OFFICER" means any Person designated by the Borrower in
writing to act as an Authorized Officer hereunder, acting singly.
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"BORROWER" has the meaning assigned to that term in the introductory
paragraph of this Agreement. All of the Partners of the Borrower shall be
jointly and severally liable as Borrower under this Agreement, the Notes, and
all other Loan Documents.
"BORROWER OBLIGATIONS" means all unpaid principal of and accrued and
unpaid interest on the Notes, all Facility Letter of Credit Obligations; all
accrued and unpaid fees, all expenses, reimbursements, indemnities and other
obligations of the Borrower to the Lenders or to any Lender, the Agent or any
indemnified party arising under the Loan Documents, and all Rate Hedging
Obligations of the Borrower to the Lenders, any Lender or to the Agent.
"BORROWER SECURITY DOCUMENTS" means collectively the Borrower
Mortgages, Security Agreement (Capital Stock and Partnership Interests) and all
other security documents hereafter delivered to the Agent granting a Lien on any
asset or assets of the Borrower to secure the Borrower Obligations.
"BORROWER'S COUNSELS' OPINIONS" means those opinions of counsel
described in Section 5.01(r) and (s).
"BORROWER'S ORGANIZATIONAL DOCUMENTS" means those documents described
in Section 5.01(y) hereof.
"BORROWING BASE" means, from time to time, the sum of the following
amounts, all as reflected from time to time in accordance with GAAP consistently
applied in the consolidated balance sheet of the Borrower but only to the extent
the same constitutes Collateral: (i) 65% of the Net Book Value of all Finished
Lots owned by the Borrower or a Subsidiary Guarantor, (ii) 50% of the Net Book
Value of all Land Under Development owned by the Borrower or a Subsidiary
Guarantor, (iii) 30% of the Net Book Value of all Unimproved Entitled Land owned
by the Borrower or a Subsidiary Guarantor, (iv) zero percent (0%) of the Net
Book Value of all Unentitled Land owned by the Borrower or a Subsidiary
Guarantor; and (v) 50% of the Net Book Value of Real Estate included in a
project which is under development that is not designated to be used for the
construction of housing units; PROVIDED that the amount determined pursuant to
this clause shall not exceed five percent (5%) of the Borrowing Base; PROVIDED
FURTHER that notwithstanding anything to the contrary provided herein, any asset
which is encumbered by a Lien (other than a Permitted Lien, other than Permitted
Liens described in clauses (a) and (d)) shall not be included in the calculation
of the Borrowing Base pursuant to clauses (i) through (v) above; PROVIDED
FURTHER, the Net Book Value of the Bramalea Land shall be adjusted for the
Purchase Price Accounting Adjustment and, provided further, no Mortgaged
Property shall be included in the Borrowing Base, unless and until all of the
conditions precedent set forth in Section 5.01 with respect to such Mortgaged
Property have been satisfied.
"BORROWING BASE CERTIFICATE" means a certificate of the Borrower
setting forth the components of the Borrowing Base, substantially in the form of
Exhibit "G" delivered under this Agreement. The Borrowing Base Certificate shall
describe all of the Finished Lots, Land Under Devel-
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opment, Unimproved Entitled Land, Unentitled Land, and other Real Estate. The
Borrowing Base Certificate shall further describe any change in condition from
the last preceding delivered Borrowing Base Certificate.
"BORROWING DATE" means a date on which an Advance is made hereunder.
"BORROWING NOTICE" is defined in Section 2.06.
"BRAMALEA" means Bramalea California, LLC, a California limited
liability company.
"BRAMALEA LAND" means that certain Property owned by Bramalea that is a
part of the Borrowing Base.
"BUSINESS DAY" means (i) with respect to any borrowing, payment or rate
selection of Fixed Rate Advances, a day (other than a Saturday or Sunday) on
which banks are open for business in Chicago and New York and on which dealings
in United States dollars are carried on in the London interbank market and (ii)
for all other purposes, a day (other than a Saturday or Sunday) on which banks
are open for business in Chicago.
"CAPITAL STOCK" means, with respect to any corporation, any and all
shares, interests, rights to purchase (other than convertible or exchangeable
Indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
"CAPITALIZED LEASE" of a Person means any lease of property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with GAAP.
"CLOSING DATE" means the date on which the Lenders shall first become
obligated to make Advances after satisfaction or waiver of all of the conditions
precedent set forth in Section 5.01 and Section 5.02.
"CODE" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"COLLATERAL" means, at any time, any assets owned by the Borrower or a
Subsidiary Guarantors that then are subject to a Lien in favor of the Agent as
security for the Obligations.
"COLLATERAL DOCUMENTS" is defined in Section 10.15(a).
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"COMMITMENT" means, for each of the Lenders, the Facility A Commitment
and the Facility B Commitment of such Lender.
"COMMITMENT FEE" means the fee determined in accordance with the
pricing grid set forth as Exhibit "F" hereto.
"CONDEMNATION PROCEEDS" means all compensation, awards, rights of
action and proceeds awarded to the Borrower or any Subsidiary Guarantor by
reason of any Taking.
"CONSOLIDATED INTEREST INCURRED" means, for any period, the aggregate
amount (without duplication and determined in each case in accordance with GAAP)
of (a) interest expensed or capitalized, paid, accrued, or scheduled to be paid
or accrued, of the Borrower, and its consolidated Subsidiaries during such
period, including (i) original issue discount and non-cash interest payments or
accruals on any Indebtedness, (ii) the interest portion of all deferred payment
obligations, and (iii) all commissions, discounts and other fees and charges
owed with respect to bankers' acceptances and letter of credit financings and
interest swap and hedging obligations, in each case to the extent attributable
to such period PLUS (b) the amount of dividends accrued or payable by any of the
consolidated Subsidiaries in respect of Disqualified Capital Stock (other than
by a Subsidiary of the Borrower to the Borrower or a Subsidiary Guarantor),
PROVIDED, HOWEVER, that interest, dividends or other payments or accruals of a
consolidated Subsidiary that is not wholly owned shall be included only to the
extent of the interest of the Borrower in such Subsidiary. For purposes of this
definition, (x) interest on Capitalized Lease Obligations shall be deemed to
accrue at an interest rate reasonably determined by the Borrower to be the rate
of interest implicit in such Capitalized Lease Obligations in accordance with
GAAP and (y) interest expense attributable to any Indebtedness represented by
the guaranty by the Borrower or a Subsidiary of the Borrower of an obligation of
another Person shall be deemed to be the interest expense attributable to the
Indebtedness guaranteed.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or
loss) of the Borrower and the consolidated Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP; PROVIDED, that (i)
net income (or loss) of any other Person which is not a Subsidiary or is
accounted for by such Person by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid to
the Borrower or a consolidated Subsidiary, (ii) the net income (or loss) of any
other Person acquired by the Borrower or a consolidated Subsidiary in a pooling
of interests transaction for any period prior to the date of such acquisition
shall be excluded, (iii) all gains and losses which are either extraordinary (as
determined in accordance with GAAP) or are either unusual or nonrecurring
(including any gain from the sale or other disposition of assets outside the
ordinary course of business or from the issuance or sale of any Capital Stock),
shall be excluded, and (iv) the net income, if positive, of any of the
consolidated Subsidiaries to the extent that the declaration or payment of
dividends or similar distributions is not at the time permitted by operation of
the terms of its charter or bylaws or any other agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to such
consolidated Subsidiary shall be excluded, PROVIDED, HOWEVER, in the case of
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exclusions from Consolidated Net Income set forth in clauses (ii), (iii) and
(iv), such amounts shall be excluded only to the extent included in computing
such net income (or loss) in accordance with GAAP and without duplication;
PROVIDED FURTHER, HOWEVER, that for purposes of determining Consolidated Net
Income, the net income of any Person which is not a Subsidiary Guarantor shall
be excluded.
"CONTINGENT OBLIGATION" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement or take-or-pay contract. With respect to the Borrower, Contingent
Obligation includes, without limitation of the foregoing, obligations under
reimbursement agreements with financial institutions (including Lenders)
relating to letters of credit issued by such financial institutions for the
account of Borrower.
"CONVERSION/CONTINUATION NOTICE" is defined in Section 2.07(d).
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower or its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"CORPORATE BASE RATE" means a rate per annum equal to the corporate
base rate of interest announced by First Chicago from time to time, changing
when and as said corporate base rate changes.
"DEFAULT RATE" means the rate after maturity as provided for in Section
2.09.
"DISQUALIFIED CAPITAL STOCK" means (a) except as set forth in (b), with
respect to any Person, Capital Stock of such Person that, by its terms or by the
terms of any security into which it is convertible, exercisable or exchangeable,
is, or upon the happening of an event or the passage of time would be, required
to be redeemed or repurchased (including at the option of the holder thereof) by
such Person or any of its subsidiaries, in whole or in part, on or prior to the
stated maturity of the securities, and (b) with respect to any subsidiary of
such Person (including with respect to any Subsidiary of the Borrower), any
Capital Stock other than any common stock with no preference, privileges, or
redemption or repayment provisions.
"DISTRIBUTION" means (i) any dividend or other distribution, direct or
indirect, on account of any equity interest of the Borrower or of any Subsidiary
(other than those payable or distributable solely to the Borrower or a
Subsidiary Guarantor) now or hereafter outstanding, except (i) a dividend
payable solely in shares of a class of stock to the holders of that class; (ii)
any redemption, conversion, exchange, retirement or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any class of
Capital Stock of either of the Borrower or of any
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Subsidiary (other than those payable or distributable solely to the Borrower or
a Subsidiary Guarantor) now or hereafter outstanding; (iii) any payment made to
retire, or obtain the surrender of, any outstanding warrants, options or other
rights to acquire shares of any class of Capital Stock of the Borrower or of any
Subsidiary now or hereafter outstanding; and (iv) any issuance and sale of
Capital Stock of any Subsidiary other than to the Borrower.
"DOLLARS" and the sign "$" each means lawful money of the United States
of America.
"DUFF & PHELPS" means Duff & Phelps Credit Rating Co. or any Person
succeeding to the securities rating business of such company.
"ENGINEER" means each reputable engineer approved by the Agent licensed
as such in the state, province or other jurisdiction in which the Property in
question is located and experienced with real estate of the same type as the
Properties.
"ENGINEERING REPORT" means with respect to any Property, a written
report prepared by an Engineer describing and analyzing the physical condition
of the Improvements of such Property and otherwise in form and substance
reasonably satisfactory to the Agent.
"ENTITLED LAND" means a parcel of Real Estate constituting a part of
the Mortgaged Property owned by the Borrower or a Subsidiary Guarantor which is
to be developed primarily for residential dwelling units and which satisfies the
requirements for the state and county wherein it is located as more particularly
described in the Requirements for Entitled Land attached hereto as Exhibit L.
"ENVIRONMENTAL CLAIM" means any third party (including governmental
agencies and employees) action, lawsuit, claim, demand, regulatory action or
proceeding, order, decree, consent agreement or notice of potential or actual
responsibility or violation (including claims or proceedings under the
Occupational Safety and Health Acts or similar laws or requirements relating to
health or safety of the employees) which seeks to impose liability under any
Environmental Law.
"ENVIRONMENTAL INDEMNITY" means one or more environmental indemnity
agreements dated as of the Closing Date in substantially the form attached as
Exhibit "H" executed or to be executed by the Borrower and the Subsidiary
Guarantors and any future Environmental Indemnities executed in connection with
any land as any of such Environmental Indemnities may be amended, modified or
restated hereafter in accordance with the terms of such agreements.
"ENVIRONMENTAL LAW(S)" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions, grants,
franchises, licenses, agreements and other governmental restrictions relating to
(i) the protection of the environment, (ii) the effect of the environment on
human health, (iii) emissions, discharges or releases of pollutants,
contaminants, Hazardous Substances or wastes
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into surface water, ground water or land, or (iv) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, Hazardous Substances or wastes or the clean-up or
other remediation thereof.
"ENVIRONMENTAL PERMIT" means any permit, license, order, approval or
other authorization under Environmental Law.
"ENVIRONMENTAL REPORT" means with respect to the Mortgaged Property, an
environmental report issued not earlier than 12 months prior to the Closing Date
that can be relied on by the Agent and Lenders, which is satisfactory to the
Agent certifying to the Agent and the Lenders that the Mortgaged Property and
the soil and groundwater thereunder do not contain Hazardous Substances except
for Hazardous Substances as permitted by applicable laws.
"EQUITY INVESTMENT" means the ownership of, or participation in the
ownership of, an equity interest in Real Estate or an equity interest in a
Person in the business of owning, developing, improving, operating or managing
Real Estate.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"EURODOLLAR BASE RATE" means, with respect to a Fixed Rate Advance for
the relevant Eurodollar Interest Period, the rate determined by the Agent to be
the rate at which deposits in U.S. dollars are offered by First Chicago to
first-class banks in the London interbank market at approximately 11 a.m.
(London time) two Business Days prior to the first day of such Eurodollar
Interest Period, in the approximate amount of First Chicago's relevant Fixed
Rate Loan and having a maturity approximately equal to such Eurodollar Interest
Period.
"EURODOLLAR INTEREST PERIOD" means, with respect to a Fixed Rate
Advance, a period of one, two, three or six months, as available, commencing on
a Business Day selected by the Borrower pursuant to this Agreement. Such
Eurodollar Interest Period shall end on (but exclude) the day which corresponds
numerically to such date one, two, three or six months thereafter, PROVIDED,
HOWEVER, that if there is no such numerically corresponding day in such next,
second, third or sixth succeeding month, such Eurodollar Interest Period shall
end on the last Business Day of such next, second, third or sixth succeeding
month. If a Eurodollar Interest Period would otherwise end on a day which is not
a Business Day, such Eurodollar Interest Period shall end on the next succeeding
Business Day, PROVIDED, HOWEVER, that if said next succeeding Business Day falls
in a new calendar month, such Eurodollar Interest Period shall end on the
immediately preceding Business Day.
"EURODOLLAR RATE" means, with respect to a Fixed Rate Advance for the
relevant Eurodollar Interest Period, the sum of (i) the quotient of (a) the
Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided by
(b) one minus the Reserve Requirement (expressed as a decimal) applicable to
such Eurodollar Interest Period, plus (ii) the Applicable Margin. The Eurodollar
Rate shall be rounded to the next higher multiple of 1/16 of 1% if the rate is
not such a multiple.
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"EVENT" means an event, circumstance, condition or state of facts.
"EVENT OF DEFAULT" is defined in Section 9.01.
"EXISTING CREDIT AGREEMENT" means the Second Amended and Restated
Revolving Credit Agreement, dated as of April 4, 1997, among Lennar and certain
of its Subsidiaries, as borrowers thereunder, First Chicago as Agent and lender
thereunder, and certain other lenders named therein.
"FACILITIES" means Facility A and Facility B.
"FACILITY A" means the revolving credit facility described in Section
2.01(a).
"FACILITY A ADVANCE" means a Loan pursuant to Facility A.
"FACILITY A COMMITMENT" means, for each of the Lenders, the obligation
of such Lender to make Loans pursuant to Facility A and purchase participations
in Facility Letters of Credit in the aggregate not exceeding the amount set
forth opposite its signature below as its "Facility A Commitment", as such
amount may be modified from time to time pursuant to the terms hereof.
"FACILITY A NOTE" means a promissory note in substantially the form of
Exhibit "A" hereto, completed, executed and delivered by the Borrower and
payable to the order of a Lender in the amount of the Facility A Commitment,
including any amendments, modifications, restatements, renewals or replacements
of such promissory note.
"FACILITY A TERMINATION DATE" means the fourth anniversary of the
Closing Date, or such later date, if any, to which the Facility A Commitment is
extended pursuant to Section 2.20.
"FACILITY B" means the term loan facility described in Section 2.01(b).
"FACILITY B ADVANCE" means a term loan made pursuant to Facility B.
"FACILITY B COMMITMENT" means, for each of the Lenders, the obligation
of such Lender to make a term Loan pursuant to the Facility B Advance in the
amount set forth opposite its signature below as its "Facility B Commitment".
"FACILITY B NOTE" means a promissory note in substantially the form of
Exhibit "B" hereto, completed, executed and delivered by the Borrower and
payable to the order of a Lender in the amount of its Facility B Commitment,
including any amendments, modifications, restatements, renewals or replacements
of such promissory note.
"FACILITY B TERMINATION DATE" means the fourth anniversary of the
Closing Date.
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"FACILITY LETTER OF CREDIT" means a letter of credit issued by an
Issuer pursuant to Section 2.15.
"FACILITY LETTER OF CREDIT FEE" means the fee identified in Section
2.15(f)(i).
"FACILITY LETTER OF CREDIT OBLIGATIONS" means, as at the time of
determination thereof, all liabilities, whether actual or contingent, of the
Borrower with respect to Facility Letters of Credit, including the sum of (a)
the Reimbursement Obligations and (b) the aggregate undrawn face amount of the
then outstanding Facility Letters of Credit.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"FINANCING STATEMENT" means any Uniform Commercial Code - Financing
Statement - Form UCC-1 to be executed and delivered by Borrower in connection
with perfecting the security interest assigned by any Borrower Security Document
or Subsidiary Guarantor Security Document or any extension, renewal,
restatement, modification, or amendment thereof.
"FINISHED LOT" means a parcel of Entitled Land which satisfies the
requirements for Land Under Development and which the owner thereof has invested
not less than 85% of the cost to complete the Improvements thereon, and which;
in Florida, is a Lot described within a final recorded subdivision plat or
agreement in lieu of plat; in California is a Lot reflected on a duly recorded
final subdivision map or a parcel reflected on a duly recorded parcel map and is
subject to a final public subdivision report, if required, duly, validly and
unconditionally issued by the California Department of Real Estate pursuant to
and in accordance with the Subdivided Lands Act, Business and Professions Code
Section 11018.2; in Arizona, is a Lot described in a final public subdivision
report duly, validly and unconditionally issued with the Arizona Department of
Real Estate pursuant to and in accordance with Arizona Revised Statute Section
32-2181 et seq.; and, in Texas, is a Lot which constitutes a valid, legally
subdivided Lot within the meanings of the applicable laws of Texas, the County
and/or the City within which it is located, and other requirements governing the
subdivision of land and constitutes a Lot reflected on a duly recorded plat or
delineated representation of the subdivision of lands, being a complete and
exact representation of the subdivision and other conformation in compliance
with the requirements of all applicable sections of VTCA Local Government Code
Section 212, all the applicable local ordinances and other requirements
governing the subdivision of land and approved by the appropriate Governmental
Authority.
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"FIRST CHICAGO" means The First National Bank of Chicago in its
individual capacity, and its successors.
"FITCH" means Fitch Investors Service, L.P. or any Person succeeding to
the securities rating business of such company.
"FIXED RATE" means the Eurodollar Rate.
"FIXED RATE ADVANCE" means an Advance which bears interest at a Fixed
Rate.
"FIXED RATE LOAN" means a Loan which bears interest at a Fixed Rate.
"FLOATING RATE" means, for any day, a rate per annum equal to the
higher of (i) the Corporate Base Rate for such day or (ii) the sum of the
Federal Funds Effective Rate plus 0.5%, in each case changing when and as the
Corporate Base Rate and the Federal Funds Effective Rate change.
"FLOATING RATE ADVANCE" means an Advance which bears interest at the
Floating Rate.
"FLOATING RATE LOAN" means a Loan which bears interest at the Floating
Rate.
"FREE CASH FLOW" means Net Proceeds from the sale of Real Estate less
the sum of: (a) Real Estate development expenses incurred (excluding capitalized
interest), (b) property taxes paid or accrued, (c) general and administrative
expenses, and (d) other property expenses.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession as in effect from time to time.
"GOVERNMENTAL AUTHORITY" means any foreign governmental authority, the
United States of America, any state of the United States of America and any
subdivision of any of the foregoing, and any agency, department, commission,
board, authority or instrumentality, bureau or court having jurisdiction over
the Lender, the Borrower, any Subsidiaries of the Borrower or any of their
respective properties.
"GOVERNMENTAL PROCEEDINGS" means any action or proceeding by any
Governmental Authority, including without limitation, the promulgation,
enactment or entry of any legal requirement.
"HAZARDOUS SUBSTANCES" means any toxic or hazardous wastes, pollutants
or substances, including, without limitation, asbestos, PCBs, petroleum products
and by-products, substances defined or listed as "hazardous substances" or
"toxic substances" or similarly identified in or
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pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. ss 9061 ET SEQ., hazardous materials
identified in or pursuant to the Hazardous Materials Transportation Act 49
U.S.C. ss 1802 ET SEQ., hazardous wastes identified in or pursuant to The
Resource Conservation and Recovery Act, 42 U.S.C. ss 6901 ET SEQ., any chemical
substance or mixture regulated under the Toxic Substance Control Act of 1976, as
amended, 15 U.S.C. ss 2601 ET seq., any "toxic pollutant" under the Clean Water
Act, 33 U.S.C. ss 466 ET SEQ., as amended, any hazardous air pollutant under the
Clean Air Act, 42 U.S.C. ss 7401 ET SEQ., and any hazardous or toxic substance
or pollutant regulated under any other applicable federal, state or local
Environmental Laws.
"IMPROVEMENTS" means on and off-site development work, including but
not limited to filling to grade, main water distribution and sewer collection
systems and drainage system installation, paving, and other improvements
necessary for the use of residential dwelling units and as required pursuant to
development agreements which may have been entered into with Governmental
Authorities.
"INDEBTEDNESS" of any Person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such Person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any Property or services,
except those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors, (iv) evidenced by
bankers' acceptances, (v) consisting of obligations, whether or not assumed,
secured by Liens or payable out of the proceeds or production from property now
or hereafter owned or acquired by such Person, (vi) consisting of Capitalized
Lease Obligations, (vii) consisting of liabilities and obligations under any
sales/leaseback and receivable sales transactions, or (viii) consisting of a
letter of credit or a reimbursement obligation of such Person with respect to
any letter of credit; (b) all net obligations of such Person under interest swap
and hedging obligations; and (c) all liabilities and obligations of others of
the kind described in the preceding clauses (a) or (b) that such Person has
guaranteed or that is otherwise its legal liability or which are secured by any
assets or property of such Person and all obligations to purchase, redeem or
acquire any Capital Stock, other than liability under executory contracts to
purchase Capital Stock. With respect to the Borrower, Indebtedness includes,
without limitation of the foregoing, all Obligations.
"INSURANCE CERTIFICATES" is defined in Section 5.01(o).
"INTEREST PERIOD" means a Eurodollar Interest Period.
"INVESTMENT" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in the
ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade), deposit account or contribution of capital by such Person to any
other Person or any
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investment in, or purchase or other acquisition of, the stock, partnership
interests, membership interests, notes, debentures or other securities of any
other Person made by such Person.
"ISSUANCE DATE" is defined in Section 2.15(c)(i).
"ISSUANCE NOTICE" is defined in Section 2.15(c)(iii).
"ISSUER" means, with respect to each Facility Letter of Credit, First
Chicago or such other Lender selected by the Borrower with the approval of the
Agent to issue such Facility Letter of Credit so long as such other Lender
consents to act in such capacity.
"JOINDER AGREEMENT" means an agreement, in form and substance
substantially similar to the form attached hereto as Exhibit "E", executed by a
future Subsidiary pursuant to which such Subsidiary becomes a Subsidiary
Guarantor hereunder.
"JOINT VENTURE" means a joint venture (whether in the form of a
corporation, a partnership, limited liability company or otherwise) (i) to which
the Borrower or a Joint Venture Subsidiary is or becomes a party, (ii) whether
or not Borrower is required to consolidate the joint venture in its financial
statements in accordance with GAAP, and (iii) in which the Borrower has or will
have a total investment exceeding $25,000 or which has total assets plus
contingent liabilities exceeding $100,000. For the purposes of this definition,
the Borrower's investment in a joint venture shall be deemed to include any
Securities of the joint venture owned by the Borrower, any loans, advances or
accounts payable to the Borrower from the joint venture, any commitment,
arrangement or other agreement by the Borrower to provide funds or credit to the
joint venture and the Borrower's share of the undistributed profits of the joint
venture.
"JOINT VENTURE SUBSIDIARY" means a Subsidiary which is a partner,
shareholder or other equity owner in a Joint Venture.
"LAND UNDER DEVELOPMENT" means Entitled Land upon which construction of
Improvements has commenced but not been completed and for which: (a) to the
extent required, a performance bond, surety or other security has been issued to
and in favor of and unconditionally accepted by each local agency and all
relevant Governmental Authorities, including any municipal utility district in
which the Real Estate is situated with regard to all work to be performed
pursuant to each and all of said subdivision improvement agreements or other
agreements; (b) all necessary plans have been approved by all relevant
Governmental Authorities for the installation of any and all Improvements
required to be installed upon such Real Estate; (c) all necessary permits have
been issued for the installation of said Improvements; and (d) utility services
necessary for construction of Improvements and residential dwelling units and
the operation thereon for the purpose intended will be available to such Real
Estate upon completion of the Improvements and there exists a binding obligation
on the part of each and every utility company to deliver necessary utility
services to such Real Estate.
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"LEGAL REQUIREMENT" means any law, statute, ordinance, decree,
requirement, order, directive, rule, regulation (or official interpretation of
any of the foregoing of, in the terms of any license or permit issued by, any
Governmental Authority).
"LENDERS" means the lending institutions listed on the signature pages
of this Agreement and the respective successors and permitted assigns of such
lending institutions.
"LENDING INSTALLATION" means, with respect to a Lender or the Agent,
any office, branch, subsidiary or affiliate of such Lender or the Agent.
"LENNAR" means Lennar Corporation, a corporation organized and existing
under the laws of the State of Delaware, and its successors.
"LENNAR AND LNR GUARANTY" means the guaranty of the Loans in
substantially the form of Exhibit "J" hereto including amendments,
modifications, renewals or replacements thereof.
"LENNAR CREDIT AGREEMENT" means the Revolving Credit Agreement
(Facility A) and the Revolving Credit Agreement (Facility B), each dated the
Agreement Date among Lennar and certain Subsidiaries of Lennar, as borrowers
thereunder, First Chicago as agent and lender thereunder, and certain other
lenders named therein, as the same may be amended, modified, or restated from
time to time.
"LETTER OF CREDIT" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"LETTER OF CREDIT COMMITMENT" means, for each Lender, the obligation of
such Lender to participate in Facility Letters of Credit in an amount not
exceeding the lesser of (i) its Pro Rata Share of the Aggregate Letter of Credit
Commitment or (ii) its Pro Rata Share of the unused amount of the Aggregate
Facility A Commitment.
"LETTER OF CREDIT COLLATERAL ACCOUNT" is defined in Section 2.15(g).
"LETTER OF CREDIT REQUEST" is defined in Section 2.15(c)(i).
"LIABILITIES" of a Person means all items included in the liability
section of a balance sheet of that Person prepared in accordance with GAAP
consistently applied as of the date of calculation. Without limiting the
generality of the foregoing, the term "Liabilities" shall include, without
limitation: (i) all Indebtedness secured by any Mortgage, lien, pledge, security
interest, charge or encumbrance upon or in property owned by that Person, to the
extent attributable to that Person's interest in the property, even though that
Person has not assumed or become liable for the payment of the Indebtedness;
(ii) the aggregate amount of the reserves established on the books of that
Person in respect of contingent liabilities and other contingencies (except
reserves which are prop-
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erly treated as deductions from assets) and in any event shall include with
respect to the Borrower the amount of all outstanding Loans; and (iii)
obligations under reimbursement agreements with financial institutions
(including Lenders) relating to letters of credit issued by such financial
institutions for the account of Borrower.
"LIEN" means any lien (statutory or other), Mortgage (including,
without limitation, purchase money mortgages), security interest, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).
"LLP PARTNER" means Lennar Land Partners Sub, Inc., a Delaware
corporation, a Wholly-Owned Subsidiary of Lennar which holds a 50% interest in
the Borrower and the managing general partner of the Borrower.
"LNR" means LNR Property Corporation, a corporation organized under the
laws of the State of Delaware.
"LNR PARTNER" means LNR Land Partners Sub, Inc., a Delaware
corporation, an indirect Wholly-Owned Subsidiary of LNR which holds a 50%
interest in the Borrower.
"LOAN" means, with respect to a Lender, a loan made by such Lender
pursuant to Article II (and any conversion or continuation thereof).
"LOAN DOCUMENTS" means this Agreement, the Notes, the Subsidiary
Guarantees, the Facility Letters of Credit (and any application and/or
reimbursement agreement delivered in connection therewith) the Lennar and LNR
Guaranty, the Borrower Security Documents, the Subsidiary Guarantor Security
Documents, and any and all other instruments or documents delivered or to be
delivered by the Borrower and the Subsidiary Guarantors pursuant hereto and
thereto, as such documents may be amended or modified and in effect from time to
time.
"LOT" means parcel of Real Estate constituting a part of the Mortgaged
Property as depicted upon a subdivision plat or site plan upon which a
residential dwelling unit may be constructed according to a site plan which has
been approved by applicable Governmental Authorities.
"MAJORITY LENDERS" means Lenders in the aggregate having in excess of
fifty percent (50%) of the Aggregate Commitment or, if the Aggregate Commitment
has been terminated, Lenders in the aggregate holding in excess of fifty percent
(50%) of the aggregate unpaid principal amount of the outstanding Loans.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, properties, assets, condition (financial or otherwise), results of
operations, or prospects of (a) the Borrower and the Subsidiary Guarantors,
taken as a whole, or (b) if so specified, the Borrower or a
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Subsidiary Guarantor, (ii) the ability of the Borrower or a Subsidiary Guarantor
to perform its obligations under the Loan Documents, or (iii) the validity or
enforceability of any of the Loan Documents or the rights or remedies of the
Agent or the Lenders thereunder.
"MATURITY DATE" means the date upon which the outstanding principal
amount of the Notes, all accrued but unpaid interest thereon, and all other
Obligations become due and payable, whether as a result of the occurrence of the
stated maturity date or the acceleration of maturity pursuant to the terms of
any of the Loan Documents.
"MOODY'S" means Moody's Investors Service, Inc. or any Person
succeeding to the securities rating business of such company.
"MONTHLY PAYMENT DATE" means the first day of each calendar month.
"MORTGAGE" means collectively the mortgages and deeds of trust and
security agreement (including leasehold mortgages or deeds of trust) to be
executed and delivered by the Borrower and by the appropriate Subsidiary
Guarantor, substantially in the form of Exhibit "D" (with such changes therein
as may be required to reflect different laws and practices in the various
jurisdictions in which the mortgages are to be recorded) as the same may be
amended, supplemented or otherwise modified from time to time.
"MORTGAGED PROPERTIES" means Properties as to which, now or hereafter,
the Agent for the benefit of the Lenders has been granted a first priority
mortgage pursuant to the Mortgages. As of the Closing Date, the Mortgaged
Properties shall be the Properties listed in Schedule III.
"MULTIEMPLOYER PLAN" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"NET BOOK VALUE" means, with respect to an asset owned by the Borrower
or a Subsidiary, the gross investment of Borrower or a Subsidiary in the asset,
less all reserves (including loss reserves and reserves for depreciation)
attributable to that asset, all determined in accordance with GAAP consistently
applied.
"NET PROCEEDS" means, in connection with the sale of any Mortgaged
Property or Additional Mortgaged Property or any Recovery Event, the proceeds
thereof net of (A) all bona fide prorations and adjustments to the sales price
required to be made pursuant to the terms of the sales contract and (B) the
aggregate amount of bona fide closing costs due to any Person, PROVIDED that if
such closing costs are due to an Affiliate of the Borrower, such costs comply
with Section 7.08.
"NONRECOURSE DEBT" means Indebtedness of the Borrower or a Subsidiary
secured by a Mortgage on Real Estate of the Borrower or a Subsidiary, as to
which Indebtedness the sole recourse of the holders thereof is to the Real
Estate encumbered by that Mortgage and none of such
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holders has the right (as a matter of law, by contract or otherwise) to enforce
payment thereof against the Borrower or a Subsidiary or any of the Borrower's or
Subsidiary's properties and assets other than the Real Estate encumbered by that
Mortgage.
"NOTES" means, collectively, the Facility A Notes and the Facility B
Notes, and "Note" means any one of the Notes, as the same may be amended,
modified, restated, renewed, or replaced.
"NOTICE OF ASSIGNMENT" is defined in Section 12.03(b).
"OBLIGATIONS" means collectively the Borrower Obligations and the
Subsidiary Guarantor Obligations. Any document which incorporates by reference
the definition of Obligations contained in this Agreement shall in the instance
of a document executed by the Borrower refer to the Borrower Obligations and in
the instance of a document executed by a Subsidiary Guarantor refer to the
Subsidiary Guarantor Obligations.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"PARTICIPANTS" is defined in Section 12.02.
"PERFORMANCE LETTER OF CREDIT" means a letter of credit issued to a
governmental authority or quasi-governmental agency to insure the completion by
the Borrower of a development of land improvement or to ensure payment by the
Borrower of escrow accounts.
"PERMITTED TITLE EXCEPTIONS" means those exceptions from coverage taken
in the Title Policy which are acceptable to Agent in its sole discretion.
"PERMITTED LIENS" means (a) Liens existing on the date of this
Agreement and described on Schedule VI hereto; (b) Liens imposed by governmental
authorities for taxes, assessments or other charges not yet subject to penalty
or which are being contested in good faith and by appropriate proceedings, if
adequate reserves with respect thereto are maintained on the books of the
Borrower in accordance with GAAP; (c) statutory liens of carriers, warehousemen,
mechanics, materialmen, landlords, repairmen or other like Liens arising by
operation of law in the ordinary course of business PROVIDED that (i) the
underlying obligations are not overdue for a period of more than 30 days or (ii)
such Liens are being contested in good faith and by appropriate proceedings and
adequate reserves with respect thereto are maintained on the books of the
Borrower in accordance with GAAP; (d) Liens securing the performance of bids,
trade contracts (other than borrowed money), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business; (e) the Permitted Title
Exceptions; (f) zoning, similar restrictions and other similar encumbrances or
title defects which, singly or in the aggregate, do not in any case materially
detract from the value of the Real Estate subject thereto (as such Real Estate
is used by the Borrower or any of the Subsidiaries) or interfere with the
ordinary conduct of the business of the Borrower or any of the Subsidiaries; (g)
Liens
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arising by operation of law in connection with judgments, only to the extent,
for an amount and for a period not resulting in a default with respect thereto;
(h) pledges or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security legislation; and (i) Liens securing the Obligations.
"PERSON" means any natural person, corporation, firm, enterprise,
trust, association, company, partnership, limited liability company, joint
venture or other entity or organization, or any government or political
subdivision or any agency, department, or instrumentality thereof.
"PLAN" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have any
liability.
"PRO RATA SHARE" means, for each Lender, the ratio that such Lender's
Commitment bears to the Aggregate Commitment.
"PROJECT" means a parcel of Real Estate, owned by the Borrower or a
Subsidiary Guarantor which is to be developed or sold as part of a common
scheme.
"PROPERTY" means the Real Estate now or hereafter forming a part of the
Borrowing Base.
"PURCHASE PRICE ACCOUNTING ADJUSTMENT" means at the Closing Date the
lower of (x) the appraised value of the Bramalea Land less the book value of the
Bramalea Land at the Closing Date or (y) the absolute value of the purchase
price accounting adjustment as shown on the books of Bramalea or (z) Thirty Nine
Million Dollars ($39,000,000.00); and, following the Closing Date, decreased by
the book value of the purchase price accounting adjustment as determined at the
Closing Date for each Lot sold after the Closing Date.
"PURCHASERS" is defined in Section 12.03(a).
"QUARTERLY PAYMENT DATE" means the first day of each April, July,
October and January.
"RATE HEDGING AGREEMENT" means an agreement, device or arrangement
providing for payments which are related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements, forward
currency exchange agreements, interest rate cap or collar protection agreements,
forward rate currency or interest rate options, puts and warrants.
"RATE HEDGING OBLIGATIONS" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any all Rate
Hedging Agreements, and (ii) any and all cancellations, buy backs, reversals,
terminations or assignments of any Rate Hedging Agreement.
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"RATING AGENCY" means any one of Duff & Phelps, Fitch, Moody's or S&P.
"RATINGS" means a rating of Lennar's senior unsecured long-term debt
from one or more of the Rating Agencies.
"REAL ESTATE" means land, together with all rights, privileges,
tenements, hereditaments, rights-of-way, easements, appendages, projections,
appurtenances, water rights including riparian and littoral rights, streets,
ways, alleys, and strips and gores of land now or hereafter in any way
belonging, adjoining, crossing or pertaining to the land (including, without
limitation, leasehold interests), and improvements thereto, located on or used
in connection with land, rights in land or interests therein (including
leasehold interests), but shall not include Mortgages or interests therein.
"RECOVERY EVENT" means any settlement or repayment in respect of a
Property or casualty insurance claim or any Taking relating to any Mortgaged
Property (including any condemnation proceeds or insurance proceeds).
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to member banks of the Federal
Reserve System.
"REORGANIZATION" means (i) the formation of LNR, (ii) the transfer to
LNR of all of the business and assets of the Asset Management Division of Lennar
and that portion of the Financial Services Division of Lennar relating to the
servicing, acquisition and management of commercial mortgages and real estate,
(iii) the distribution to the shareholders of Lennar of all of the capital stock
of LNR, (iv) the transfer by LLP Partner to the Borrower of the Real Estate
described on Schedule III hereto in exchange for a 50% general partnership
interest in the Borrower, and (v) the merger of Lennar with and into Pacific
Greystone Corporation.
"REGULATION U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"REIMBURSEMENT OBLIGATIONS" means, at any time, the aggregate of the
Borrower Obligations to the Lenders, the Issuers and the Agent in respect of all
unreimbursed payments or disbursements made by the Lenders, the Issuers and the
Agent under or in respect of the Facility Letters of Credit.
"REPORTABLE EVENT" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, PROVIDED, HOWEVER, that a failure to meet
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the minimum funding standard of Section 412 of the Code and of Section 302 of
ERISA shall be a Reportable Event regardless of the issuance of any such waiver
of the notice requirement in accordance with either Section 4043(a) of ERISA or
Section 412(d) of the Code.
"REQUIRED LENDERS" means Lenders in the aggregate having at least 66
2/3% of the Aggregate Commitment or, if the Aggregate Commitment has been
terminated, Lenders in the aggregate holding at least 66 2/3% of the sum of (i)
the aggregate unpaid principal amount of the outstanding Loans PLUS (ii) the
Facility Letter of Credit Obligations.
"RESERVE REQUIREMENT" means, with respect to a Eurodollar Interest
Period, the maximum aggregate reserve requirement (including all basic,
supplemental, marginal and other reserves) which is imposed under Regulation D
on Eurocurrency liabilities.
"REVOLVING COMMITMENT" means, for each Lender, the obligation of such
Lender to make Facility A Loans and purchase participations in Facility Letters
of Credit not exceeding its Pro Rata Share of the Facility A Commitment.
"S&P" means Standard & Poor's Corporation and any Person succeeding to
the securities rating business of such company.
"SECTION" means a numbered section of this Agreement, unless another
document is specifically referenced.
"SECURITIES" of any Person means equity securities and debt securities
and any other instrument commonly understood to be a security issued by that
Person.
"SECURITY DOCUMENTS" means collectively the Borrower Security Documents
and Subsidiary Guarantor Security Documents.
"SECURITY AGREEMENT (CAPITAL STOCK AND PARTNERSHIP INTERESTS)" means
the Security Agreement substantially in the form of Exhibit "K" including any
amendment, modification, renewal or restatement thereof.
"SINGLE EMPLOYER PLAN" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"SOLVENT" means, as to any Person, that such Person has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage and is able to pay its debts as they
mature and owns property having a value, both at fair valuation and at present
fair saleable value, greater than the amount required to pay its debts.
"SUBORDINATED DEBT" means any Indebtedness of the Borrower which by its
terms is subordinated, in form and substance and in a manner satisfactory to the
Required Lenders, in
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time and right of payment to the prior payment in full of
the Obligations, but which in any event matures after the Facility A Termination
Date.
"SUBSIDIARY" means (i) any corporation more than 50% of the outstanding
securities having ordinary voting power of which shall at the time be owned or
controlled, directly or indirectly, by the Borrower, or by one or more
Subsidiaries or by the Borrower and one or more Subsidiaries, or (ii) any
partnership, limited liability company, association, joint venture or similar
business organization more than 50% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled.
"SUBSIDIARY GUARANTOR" means a Subsidiary or Joint Venture of the
Borrower listed in Schedule I hereto, and any Subsidiary or Joint Venture of the
Borrower hereafter guaranteeing the Loans.
"SUBSIDIARY GUARANTOR SECURITY DOCUMENTS" means collectively the
Subsidiary Guarantor Mortgages, and all other security documents hereafter
delivered to the Agent granting a Lien on any asset or assets of any Subsidiary
Guarantor to secure the Subsidiary Guarantor Obligations.
"SUBSIDIARY GUARANTOR OBLIGATIONS" means all unpaid principal of and
accrued and unpaid interest on the Subsidiary Guarantees, all accrued and unpaid
fees and expenses, reimbursements, indemnities and other obligations of the
Subsidiary Guarantors to the Lenders or to any lender, the Agent or any
indemnified party arising under the Loan Documents.
"SUBSIDIARY GUARANTY" means the guarantee of the Loans, in
substantially the form of Exhibit "I" hereto, including any amendment,
modification, renewal, restatement or replacement thereof.
"SURVEY" means a survey of the Mortgaged Property prepared by a
registered land surveyor which shall show the legal description of the Mortgaged
Property to be the same as Schedule III hereto; set forth an accurate meets and
bounds description of the Mortgaged Property; be certified to the Lenders and to
the title company; include a certificate of the map or plat and the survey on
which it is based or prepared (i) in accordance with the "minimum standard
detail requirements for land title surveys" jointly established and adopted by
the American Land Title Association and the American Congress on Surveying and
Mapping in 1992, and including items 1, 2, 3, 4, 6, 7, 8, 9, 10, 11 and 13 of
Table A thereof and (ii) pursuant to the Accuracy Standards (as adopted by ALTA
and ACSM and in effect on the date of this certification) of an urban survey.
For Real Estate located in Texas, the survey shall be made in accordance with
then current Texas Surveyor's Association Standards and Specifications for a
Category IA, Condition II Survey.
"SWAP DOCUMENTS" mean any existing or future agreement between the
Borrower and a Lender or any affiliate of a Lender governing or evidencing the
terms of any foreign exchange or derivatives transaction, including, without
limitation, any interest rate swap or option, currency swap or option, any
combination thereof, or any option with respect to any of the foregoing.
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"TAKING" means the taking or appropriation (including by deed in lieu
of condemnation or by voluntary sale or transfer under threat of condemnation or
while legal proceedings for condemnation are pending) of any Mortgaged Property,
or any part thereof or interest therein, for public or quasi public use under
the power of eminent domain, or reason of any public improvement or condemnation
proceedings, or in any other manner or any damage or injury or diminution in
value through condemnation, inverse condemnation or the exercise of the power of
eminent domain. The term "Taking" used as a verb has a correlative meaning.
"TANGIBLE NET WORTH" means, as at any date, the amount of consolidated
partners' equity of the Borrower and its consolidated Subsidiaries as shown on
its balance sheet as of such date, less the aggregate amount of the goodwill and
other assets that are properly classified as "intangible assets" at such date in
accordance with GAAP.
"TITLE POLICY" means, with respect to the Mortgaged Properties, a
mortgagee policy of title insurance which (a) is in the form of American Land
Title Association Standard Loan Policy - 1970 (without modification, revision or
amendment) (or such other form as required by the laws of the state wherein such
Real Estate is located approved by the Agent) with such endorsements as are
available in the state wherein the Real Estate is located and required by the
Agent in its sole discretion, such as endorsements, commonly known as variable
or adjustable rate, environmental protection, comprehensive or ALTA 9, doing
business, usury, contiguity, survey, plat act, revolving credit, tie-in, if more
than one policy is issued for Real Estate located within a single state, patent
reservation, water rights, tax parcel and a Lender's group endorsement, (b) is
issued by underwriters reasonably acceptable to the Agent with such reinsurance
as Agent shall reasonably request, (c) insures that the grantor of the Lien
insured by such policy owns the Real Estate subject to such Lien in fee simple
and that the mortgage covering the Real Estate is a valid lien on the Real
Estate in favor of the Agent for the benefit of the Lenders (subject only to
permitted exceptions), (d) does not contain any exceptions for rights of parties
in possession, or unpaid delinquent sums or taxes, special assessments or
subsequent assessments due to changes in ownership or usage, or any other
exceptions to coverage other than Permitted Exceptions. and (e) contains a
lender's group endorsement.
"TRANSFEREE" is defined in Section 12.03(c).
"TYPE" means, with respect to any Advance, its nature as a Floating
Rate Advance or a Fixed Rate Advance.
"UCC SEARCH" is defined in Section 5.01(n).
"UNAUDITED FINANCIAL STATEMENTS" is defined in Section 4.08.
"UNENTITLED LAND" means a parcel of Real Estate constituting a part of
the Mortgaged Property owned by the Borrower or a Subsidiary which is not either
a Finished Lot, Land Under Development, or Unimproved Entitled Land.
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"UNFUNDED LIABILITIES" means the amount (if any) by which the present
value of all vested nonforfeitable benefits under all Single Employer Plans
exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans.
"UNIMPROVED ENTITLED LAND" means Entitled Land upon which no
Improvements have been commenced.
"UNMATURED DEFAULT" means an event which but for the lapse of time or
the giving of notice, or both, would constitute an Event of Default.
"WHOLLY-OWNED SUBSIDIARY" of a Person means (i) any subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership, association, joint venture
or similar business organization 100% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled.
SECTION 1.02. COMPUTATION OF TIME PERIODS. For the purposes of this
Agreement, in the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including", the words "to"
and "until" each means "to but excluding" and the word "through" means "to and
including".
SECTION 1.03. ACCOUNTING TERMS. All accounting terms used and not
specifically defined herein shall be construed in accordance with GAAP. All
references herein to GAAP shall be deemed to refer to those principles.
ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS.
(a) FACILITY A REVOLVING COMMITMENT. On and after the Closing Date and
prior to the Facility A Termination Date, upon the terms and conditions set
forth in this Agreement and in reliance upon the representations and warranties
of Borrower herein set forth, each Lender severally agrees to make Advances to
the Borrower from time to time in amounts not to exceed in the aggregate at any
one time outstanding the amount of its Facility A Commitment PROVIDED that (A)
if any Facility Letters of Credit are issued and outstanding or drawn and
unreimbursed, the aggregate availability under the Facility A Commitments of
the Lenders shall be reduced by the aggregate amount of the Facility Letter of
Credit Obligations for as long as, and to the extent that, they remain
outstanding or unreimbursed, and the availability under the Facility A
Commitment of
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each Lender shall accordingly be reduced on a PRO RATA basis in accordance with
its Pro Rata Share, (B) in no event may the aggregate principal amount of all
outstanding Facility A Advances and the aggregate amount of all Facility Letter
of Credit Obligations exceed the Aggregate Facility A Commitment, and (C) in no
event shall the aggregate principal amount of all outstanding Advances at any
time exceed the Borrowing Base at such time. Subject to the terms of this
Agreement, the Borrower may borrow, repay and reborrow under Facility A at any
time prior to the Facility A Termination Date. The Facility A Commitments to
lend hereunder shall expire on the Facility A Termination Date.
(b) FACILITY B COMMITMENT. On the Closing Date, upon the terms and
conditions set forth in this Agreement and in reliance upon the representations
and warranties of Borrower herein set forth, each Lender severally agrees to
make the Facility B Advance to the Borrower in the amount of its Facility B
Commitment.
(c) LETTER OF CREDIT COMMITMENT. On and after the Closing Date and
prior to the Facility A Termination Date, each Lender severally agrees, on the
terms and conditions set forth in this Agreement and in reliance upon the
representations and warranties of Borrower herein set forth, to participate in
Facility Letters of Credit issued for the account of the Borrower pursuant to
Section 2.15; PROVIDED that in no event may the aggregate amount of all Facility
Letter of Credit Obligations exceed the lesser of (i) the Aggregate Letter of
Credit Commitment and (ii) the Aggregate Facility A Commitment minus all
outstanding Facility A Advances.
(d) ADVANCES AND PARTICIPATIONS PRO RATA. Each Advance and each
purchase of a Facility Letter of Credit participation hereunder shall be made by
the several Lenders ratably in accordance with their respective Pro Rata Shares.
SECTION 2.02. TYPES OF ADVANCES; MANDATORY PRINCIPAL PAYMENTS; FINAL
MATURITY.
(a) The Advances may be Floating Rate Advances, or Fixed Rate Advances,
or a combination thereof, selected by the Borrower in accordance with Section
2.06.
(b) Upon the sale, transfer or the disposition of any of the Collateral
in accordance with the provisions of Section 8.07, Borrower shall make a
mandatory prepayment to the Agent of 100% of Net Proceeds as follows:
(i) For each Lot sold, $6,000 shall be applied to Facility B
(first to the next following four scheduled principal payments and then, on a
pro rata basis to all future scheduled principal payments) until paid in full,
and then to prepay the outstanding balance under Facility A;
(ii) any Net Proceeds in excess of $6,000 per Lot shall be
applied to prepayment of the then outstanding balance under Facility A; and
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(iii) for Real Estate other than Lots sold, the Net Proceeds
shall be applied to Facility B in such amount as Agent, in its sole discretion,
deems to be equivalent to a sale of Lots (the payment shall first be applied to
the next following four (4) scheduled principal payments and then on a prorata
basis to all future scheduled principal payments) until paid in full, and then
to repay the outstanding balance under Facility A and, any Net Proceeds in
excess of the amount applied to Facility B shall be applied to prepayment of the
then outstanding balance under Facility A.
(c) Upon the issuance of any debt or equity security by the Borrower,
100% of the Net Proceeds therefrom shall be used to reduce the Facilities as
follows:
(i) first to retire Facility B applied pro rata to all future
scheduled principal payments until paid in full; and
(ii) thereafter to repay Facility A until paid in full.
(d) If at any time the outstanding principal amount of the Advances
exceeds the Borrowing Base at such time, the Borrower shall forthwith prepay the
outstanding Advances by the amount of the excess, plus accrued and unpaid
interest thereon.
(e) Principal of the Facility B Note shall be repaid as follows:
beginning on the third Quarterly Payment Date after the Closing Date and
continuing thereafter on each Quarterly Payment Date the Borrower shall pay the
sum of $7,000,000 (less any amounts paid since the immediately preceding
Quarterly Payment Date pursuant to Section 2.02(b) or (c)) and shall pay the
outstanding principal balance at the Facility B Termination Date.
(f) All Obligations evidenced by the Facility A Notes shall be repaid
on the Facility A Termination Date.
(g) Except as provided above in this Section or elsewhere in this
Agreement, the Borrower may direct the Agent to apply prepayments of the
Obligations against either of the Facilities.
SECTION 2.03. OPTIONAL PRINCIPAL PAYMENTS. The Borrower may from time
to time pay, without penalty or premium, all outstanding Floating Rate Advances,
or, in a minimum aggregate amount of $100,000 or any integral multiple of
$100,000 (or the amount required to repay all Advances in full) in excess
thereof, any portion of the outstanding Floating Rate Advances upon one Business
Day's prior notice to the Agent. A Fixed Rate Advance may not be paid prior to
the last day of the applicable Interest Period.
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SECTION 2.04. COMMITMENT FEE AND REDUCTION OF COMMITMENTS.
(a) The Borrower agrees to pay to the Agent for the account of each
Lender a Commitment Fee per annum on the daily unborrowed and unused portion of
such Lender's Facility A Commitment (i.e., after deducting from such Facility A
Commitment the then outstanding amount of all Loans made by such Lender under
Facility A and the then outstanding amount of all participations by such Lender
in Facility Letters of Credit) from the Closing Date to and including the
Facility A Termination Date, payable in arrears on each Quarterly Payment Date
thereafter and on the Facility A Termination Date. Such Commitment Fee shall be
determined on each Quarterly Payment Date in accordance with the pricing grid
set forth as Exhibit "F" hereto.
(b) The Borrower may permanently reduce the Aggregate Commitment in
whole, or in part ratably among the Lenders in integral multiples of $5,000,000,
upon at least three Business Days' written notice to the Agent, which notice
shall specify the amount of any such reduction, PROVIDED, HOWEVER, that the
amount of the Aggregate Commitment may not be reduced below the aggregate
principal amount of the outstanding Advances and Facility Letter of Credit
Obligations. All accrued Commitment Fees under this Section 2.04 shall be
payable on the effective date of any termination of the obligations of the
Lenders to make Loans hereunder. The fees payable under this Section 2.04, once
paid, shall not be refundable for any reason.
SECTION 2.05. METHOD OF BORROWING. Not later than noon (Chicago time)
on each Borrowing Date, each Lender shall make available its Loan or Loans, in
funds immediately available in Chicago to the Agent at its address specified
pursuant to Section 13.01. The Agent will make the funds so received from the
Lenders available to the Borrower by deposit into Account No. 5596467 maintained
by the Borrower at First Chicago.
SECTION 2.06. METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR
ADVANCES.
(a) The Borrower shall select the Type of Advance and, in the case of
each Fixed Rate Advance, the Interest Period applicable to each Advance from
time to time; PROVIDED, HOWEVER, that the Borrower may have no more than ten
(10) Fixed Rate Advances in Facility A and ten (10) Fixed Rate Advances in
Facility B outstanding at any one time. The Borrower shall give the Agent
irrevocable notice (a "Borrowing Notice") not later than 10:00 a.m. (Chicago
time) on the Borrowing Date for each Floating Rate Advance and prior to 10:00
a.m. (Chicago time) on the date which is two Business Days before the Borrowing
Date for each Fixed Rate Advance, specifying:
(i) the Borrowing Date, which shall be a Business Day, of
such Advance,
(ii) the aggregate amount of such Advance,
(iii) the Type of Advance selected, and
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(iv) in the case of each Fixed Rate Advance, the Interest Period
applicable thereto.
The Borrower shall be entitled to obtain only one Advance in any single Business
Day, which may be comprised in whole or in part of any Fixed Rate Advance.
Changes in the rate of interest on that portion of any Advance maintained as a
Floating Rate Advance will take effect simultaneously with each change in the
Floating Rate. Each Fixed Rate Advance shall bear interest from and including
the first day of the Interest Period applicable thereto to (but not including)
the last day of such Interest Period at the interest rate determined as
applicable to such Fixed Rate Advance. The Borrower shall select Interest
Periods with respect to Fixed Rate Advances so that it is not necessary to pay a
Fixed Rate Advance prior to the last day of the applicable Interest Period in
order to make any mandatory payment required to be made pursuant to Section 2.02
above or to repay the Obligations in full on the Maturity Date.
(b) Each Borrowing Notice shall be irrevocable and binding on the
Borrower and, in respect of the borrowing specified in the Borrowing Notice, the
Borrower shall indemnify each Lender against any loss or expense incurred by
that Lender as a result of any failure to fulfill the applicable conditions set
forth in Section 5.02 on or before the proposed Borrowing Date specified in the
Borrowing Notice, including, without limitation, any loss (including loss of
profit) or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by any Lender to fund the Loan to be made by
that Lender as part of that borrowing when that Loan, as a result of that
failure, is not made on that date.
SECTION 2.07. METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR
CONVERSION AND CONTINUATION OF ADVANCES.
(a) RIGHT TO CONVERT. The Borrower may elect from time to time, subject
to the provisions of Section 2.07(c), to convert all or any part of an Advance
of any Type into any other Type or Types of Advances; PROVIDED that any
conversion of any Fixed Rate Advance shall be made on, and only on, the last day
of the Interest Period applicable thereto.
(b) AUTOMATIC CONVERSION AND CONTINUATION. Floating Rate Advances shall
continue as Floating Rate Advances unless and until such Floating Rate Advances
are converted into Fixed Rate Advances. Fixed Rate Advances of any Type shall
continue as Fixed Rate Advances of such Type until the end of the then
applicable Interest Period therefor, at which time such Fixed Rate Advance shall
be automatically converted into a Floating Rate Advance unless the Borrower
shall have given the Agent notice in accordance with Section 2.07(d) requesting
that, at the end of such Interest Period, such Fixed Rate Advance either
continue as a Fixed Rate Advance of such Type for the same or another Interest
Period or be converted into an Advance of another Type.
(c) NO CONVERSION IN CASE OF AN EVENT OF DEFAULT OR UNMATURED DEFAULT.
Notwithstanding anything to the contrary contained in Section 2.07(a) or
2.07(b), no Advance may be
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converted into or continued as a Fixed Rate Advance (except with the consent of
the Required Lenders) when any Event of Default or Unmatured Default has
occurred and is continuing.
(d) CONVERSION/CONTINUATION NOTICE. The Borrower shall give the Agent
irrevocable notice (a "Conversion/Continuation Notice") of each conversion of an
Advance or continuation of a Fixed Rate Advance not later than 10:00 a.m.
(Chicago time) on the day of any conversion into a Floating Rate Advance or
prior to 10:00 a.m. (Chicago time) on the date which is two Business Days prior
to the date of the requested conversion into or continuation of a Fixed Rate
Advance, specifying:
(i) the requested date (which shall be a Business Day) of such
conversion or continuation;
(ii) the amount and Type of the Advance to be converted or
continued; and
(iii) the amount and Type(s) of Advance(s) into which such
Advance is to be converted or continued and, in the case of a
conversion into or continuation of a Fixed Rate Advance, the duration
of the Interest Period applicable thereto.
SECTION 2.08. MINIMUM AMOUNT OF EACH ADVANCE. Each Advance shall be in
the minimum amount of $500,000 for Floating Rate Advances (and in multiples of
$100,000, if in excess thereof) and $3,000,000 for Fixed Rate Advances (and in
multiples of $100,000, if in excess thereof).
SECTION 2.09. RATE AFTER MATURITY. Except as provided in the next
sentence, any Advance which is not paid at maturity for such Advance, whether by
acceleration or otherwise, shall bear interest until paid in full at a rate per
annum equal to the Floating Rate plus 5% per annum. In the case of a Fixed Rate
Advance the maturity of which is accelerated, such Fixed Rate Advance shall bear
interest at the rate otherwise applicable to such Interest Period plus 5% per
annum for the remainder of the applicable Interest Period, and thereafter at the
Floating Rate plus 5% per annum.
SECTION 2.10. METHOD OF PAYMENT. All payments of principal, interest,
and fees hereunder shall be made, without setoff, deduction, or counterclaim, in
immediately available funds to the Agent at the Agent's address specified
pursuant to Article XIII, or at any other Lending Installation of the Agent
specified in writing by the Agent to the Borrower, by 1:00 p.m. (local time) on
the date when due and shall be made ratably by the Agent among the Lenders with
respect to their Loans. Each payment delivered to the Agent for the account of
any Lender shall be delivered promptly by the Agent to such Lender in the same
type of funds which the Agent received at its address specified pursuant to
Article XIII or at any Lending Installation specified in a notice received by
the Agent from such Lender. The Agent is hereby authorized to charge any account
of the Borrower maintained with First Chicago for each payment of principal,
interest and fees as it becomes due hereunder. The Agent shall endeavor in good
faith to provide telephonic notice to
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Borrower prior to any such charge, but the Agent shall not be liable to Borrower
or any other Person if Agent fails to provide any such notice. If and to the
extent payment owed to any Lender is not made by the Borrower to the Agent or
that Lender, as the case may be, when due hereunder or under the Note held by
that Lender, the Borrower further authorizes such Lender to charge from time to
time against any or all of the accounts maintained by the Borrower with the
Lender, its subsidiaries, affiliates or branches any amount so due, subject to
the provisions of Article XI.
SECTION 2.11. NOTES; TELEPHONIC NOTICES. Each Lender is hereby
authorized to record the principal amount of each of its Loans and each
repayment on the schedule attached to its applicable Notes; PROVIDED, however,
that the failure to so record shall not affect the Borrower's obligations under
any such Note. The Borrower hereby authorizes the Lenders and the Agent to
extend, convert or continue Advances, effect selections of Types of Advances and
to transfer funds based on telephonic notices made by any person or persons the
Agent or any Lender in good faith believes to be acting on behalf of the
Borrower. All actions taken by the Lenders and the Agent upon such telephonic
notices are hereby approved by the Borrower, and the Lenders and the Agent shall
incur no liability as a result of any such actions. The Borrower agrees to
deliver promptly to the Agent a written confirmation, if such confirmation is
requested by the Agent or any Lender, of each telephonic notice signed by an
Authorized Officer. If the written confirmation differs in any material respect
from the action taken by the Agent and the Lenders, the records of the Agent and
the Lenders shall govern absent manifest error.
SECTION 2.12. INTEREST PAYMENT DATES; INTEREST AND FEE BASIS. Interest
accrued on each Floating Rate Advance shall be payable on each Monthly Payment
Date, commencing with the first such date to occur after the date hereof, on any
date on which the Floating Rate Loan is prepaid, whether due to acceleration or
otherwise, and on the Facility A Termination Date or the Facility B Termination
Date, as the case may be. Interest accrued on that portion of the outstanding
principal amount of any Floating Rate Advance converted into a Fixed Rate
Advance on a day other than a Monthly Payment Date shall be payable on the date
of conversion. Interest accrued on each Fixed Rate Advance shall be payable on
the last day of its applicable Interest Period, on any date on which the Fixed
Rate Advance is prepaid, whether by acceleration or otherwise, and at maturity.
Interest accrued on each Fixed Rate Advance having an Interest Period longer
than three months shall also be payable on the last day of each three-month
interval during such Interest Period. Interest on Floating Rate Loans and
Commitment Fees shall be calculated for actual days elapsed on the basis of a
365-day year; interest on Fixed Rate Loans shall be calculated for actual days
elapsed on the basis of a 360-day year. Interest shall be payable for the day an
Advance is made but not for the day of any payment on the amount paid if payment
is received prior to 1:00 p.m. (Chicago time) at the place of payment. If any
payment of principal of or interest on an Advance shall become due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and, in the case of a principal payment, such extension of time
shall be included in computing interest in connection with such payment.
SECTION 2.13. NOTIFICATION OF ADVANCES, INTEREST RATES, PREPAYMENTS AND
COMMITMENT REDUCTIONS. Promptly after receipt thereof, the Agent will notify
each Lender of the contents
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of each Aggregate Commitment reduction notice, Borrowing Notice,
Conversion/Continuation Notice, Letter of Credit Request, Issuance Notice,
notice from a Lender pursuant to Section 2.15(e)(i) and repayment notice
received by it hereunder. The Agent will notify each Lender of the interest rate
applicable to each Fixed Rate Advance promptly upon determination of such
interest rate.
SECTION 2.14. LENDING INSTALLATIONS. Each Lender may book its Loans and
participation in Facility Letters of Credit at any Lending Installation selected
by such Lender and may change its Lending Installation from time to time. All
terms of this Agreement shall apply to any such Lending Installation and the
Notes shall be deemed held by each Lender for the benefit of such Lending
Installation. Each Lender may, by written or telex notice to the Agent and the
Borrower, designate a Lending Installation through which Loans will be made by
it and for whose account Loan payments are to be made.
SECTION 2.15. FACILITY LETTERS OF CREDIT.
(a) OBLIGATION TO ISSUE. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of the
Borrower herein set forth, each Issuer hereby agrees to issue upon the request
of and for the account of the Borrower, through such of the Issuer's Lending
Installations or Affiliates as the Issuer and the Borrower may jointly agree
(PROVIDED that in the absence of such joint agreement for any Facility Letter of
Credit for which the Agent is the Issuer, the Agent agrees to issue such
Facility Letters of Credit out of its main office), one or more Facility Letters
of Credit in accordance with this Section 2.15, from time to time during the
period, commencing on the Closing Date and ending on the tenth Business Day
prior to the Facility A Termination Date.
(b) CONDITIONS FOR ISSUANCE. In addition to being subject to the
satisfaction of the conditions contained in Section 5.02, the obligation of an
Issuer to issue any Facility Letter of Credit is subject to the satisfaction in
full of the following conditions:
(i) the requested Facility Letter of Credit is (x) for a
Performance Letter of Credit and (y) for the installation of Improvements on
Mortgaged Property;
(ii) the aggregate maximum amount then available for drawing
under Facility Letters of Credit issued by such Issuer, after giving effect to
the Facility Letter of Credit requested hereunder, shall not exceed any limit
imposed by law or regulation upon such Issuer;
(iii) after giving effect to the requested issuance of any
Facility Letter of Credit, the Facility Letter of Credit Obligations do not
exceed the lesser of (a) the Aggregate Letter of Credit Commitment, or (b) an
amount equal to the Aggregate Facility A Commitment minus the outstanding
principal amount of the Facility A Advances;
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(iv) the requested Facility Letter of Credit has an expiration
date not later than the earlier of (x) ten Business Days prior to the Facility A
Termination Date and (y) one year after its date of issuance;
(v) the Borrower shall have delivered to such Issuer at such
times and in such manner as such Issuer may reasonably prescribe such documents
and materials as may be required pursuant to the terms of the proposed Facility
Letter of Credit, and the proposed Facility Letter of Credit shall be
satisfactory to such Issuer as to form and content; and
(vi) as of the date of issuance, no order, judgment or decree
of any court, arbitrator or governmental authority shall purport by its terms to
enjoin or restrain such Issuer from issuing the Facility Letter of Credit and no
law, rule or regulation applicable to such Issuer and no request or directive
(whether or not having the force of law) from any governmental authority with
jurisdiction over the Issuer shall prohibit or request that such Issuer refrain
from the issuance of Letters of Credit generally or the issuance of that
Facility Letter of Credit (and in any such case, such Issuer shall promptly
notify the Agent and the Borrower of such fact).
(c) PROCEDURE FOR ISSUANCE.
(i) The Borrower shall give an Issuer at least three Business
Days' prior written notice of any requested issuance of a Facility Letter of
Credit under this Agreement (a "Letter of Credit Request"). Such notice shall be
irrevocable and shall specify:
(A) the stated amount of the Facility Letter of Credit
requested (which stated amount shall not be less than
$1,000,000), PROVIDED, HOWEVER, that up to five
Facility Letters of Credit issued in any twelve-month
period may have a stated amount of less than
$1,000,000 each;
(B) the effective date (which day shall be a Business
Day) of issuance of such requested Facility Letter of
Credit (the "Issuance Date");
(C) the date on which such requested Facility Letter of
Credit is to expire (which date shall be a Business
Day and shall comply with the provisions of Section
2.15(b)(iv));
(D) the name of the Issuer chosen by the Borrower to
issue the requested Facility Letter of Credit;
(E) the purpose for which such Facility Letter of Credit
is to be issued; and
(F) the Person for whose benefit the requested Facility
Letter of Credit is to be issued.
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At the time the Letter of Credit Request is made, the Borrower shall also
provide the Agent and the Issuer with a copy of the form (if specified by the
beneficiary) of the Facility Letter of Credit it is requesting be issued. Such
Letter of Credit Request, to be effective, must be received by such Issuer and
the Agent not later than 2:00 p.m. (Chicago time) on the last Business Day on
which a Letter of Credit Request can be given under this Section 2.15(c)(i).
(ii) Subject to the terms and conditions of this Section 2.15
and PROVIDED that the applicable conditions set forth in Sections 5.01 and 5.02
hereof have been satisfied, such Issuer shall, on the Issuance Date, issue a
Facility Letter of Credit on behalf of the Borrower in accordance with the
Issuer's usual and customary business practices unless the Issuer has actually
received (a) written notice from the Borrower specifically revoking the Letter
of Credit Request with respect to such Facility Letter of Credit, (b) written
notice from a Lender, which complies with the provisions of Section 2.15(e)(i)
or (c) written or telephonic notice from the Agent stating that the issuance of
such Facility Letter of Credit would violate Section 2.15(b).
(iii) Each Issuer shall give the Agent and the Borrower
written or telex notice, or telephonic notice confirmed promptly thereafter in
writing, of the issuance of a Facility Letter of Credit (the "Issuance Notice"),
together with (for the Borrower and the Agent) a copy of such Facility Letter of
Credit.
(iv) An Issuer shall not extend or amend any Facility Letter
of Credit or allow a Facility Letter of Credit to be automatically extended
unless the requirements of this Section 2.15(c) are met as though a new Facility
Letter of Credit was being requested and issued.
(d) PAYMENT OF REIMBURSEMENT OBLIGATIONS; DUTIES OF ISSUERS.
(i) (A) Each Issuer shall promptly notify the Borrower and the
Agent of any draw under a Facility Letter of Credit and the Borrower shall
reimburse such Issuer in accordance with Section 2.15(f), and (B) any
Reimbursement Obligation with respect to any Facility Letter of Credit shall
bear interest from the date of the relevant drawings under the pertinent
Facility Letter of Credit until payment in full is received by the pertinent
Issuer at (X) the Floating Rate until the next succeeding Business Day and (Y)
the Floating Rate plus 2% thereafter.
(ii) Any action taken or omitted to be taken by an Issuer
under or in connection with any Facility Letter of Credit, if taken or omitted
in the absence of bad faith, willful misconduct or gross negligence, shall not
put that Issuer under any resulting liability to any Lender or, assuming that
such Issuer has complied with the procedures specified in Section 2.15(c) all
conditions to the issuance of a Facility Letter of Credit have been satisfied
and any such Lender has not given a notice contemplated by Section 2.15(e)(i)
that continues in full force and effect, relieve any such Lender of its
obligations hereunder to that Issuer. In determining whether to pay under any
Facility Letter of Credit, an Issuer shall have no obligation relative to the
Lenders or to the Borrower other than to confirm that any documents required to
be delivered under such Facility Letter of Credit have been delivered in
compliance and that they comply on their face (including
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that any draw request has been purportedly executed by an authorized signatory,
if and to the extent such a requirement is specified in the related Facility
Letter of Credit), with the requirements of such Facility Letter of Credit.
(iii) The Borrower agrees to pay to each Issuer the amount of
all Reimbursement Obligations, interest and other amounts payable to such Issuer
under or in connection with any Facility Letter of Credit immediately when due
(and in any event shall reimburse an Issuer for drawings under a Facility Letter
of Credit issued by it no later than the next Business Day after payment by that
Issuer), irrespective of any claim, set-off, defense or other right which the
Borrower may have at any time against any Issuer or any other Person, under all
circumstances, including without limitation, any of the following circumstances:
(A) any lack of validity or enforceability of this Agreement
or any of the other Loan Documents;
(B) the existence of any claim, setoff, defense or other
right which the Borrower may have at any time against a
beneficiary named in a Facility Letter of Credit or, if
such Facility Letter of Credit is transferable, any
transferee of any Facility Letter of Credit (or any
Person for whom any such transferee may be acting), the
Agent, the Issuer, any Lender, or any other Person,
whether in connection with this Agreement, any Facility
Letter of Credit, the transactions contemplated herein or
any unrelated transactions (including any underlying
transactions between the Borrower and the beneficiary
named in any Facility Letter of Credit);
(C) any draft, certificate or any other document presented
under the Facility Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement
therein being untrue or inaccurate in any respect (except
to the extent any such invalidity or insufficiency is
found in a final judgment of a court of competent
jurisdiction to have resulted from the gross negligence
or willful misconduct of such Issuer);
(D) the surrender or impairment of any guaranty or security
for the performance or observance of any of the terms of
any of the Loan Documents; or
(E) the occurrence of any Event of Default or Unmatured
Default.
(iv) As among the Borrower, the Issuers, the Agent and the
Lenders, the Borrower assumes all risks of the acts and omissions of, or misuse
of the Facility Letters of Credit by, the respective beneficiaries of the
Facility Letters of Credit (except such as are found in a final judgment by a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of an Issuer). In furtherance and not in limitation of the
foregoing, the Issuers, the Agent and the Lenders shall not be responsible
(absent gross negligence or willful misconduct in
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connection therewith, as determined by the final judgment of a court of
competent jurisdiction) for (A) the forms, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in connection
with the application for and issuance of any Facility Letter of Credit, even if
it should in fact prove to be in any or all respects invalid, insufficient,
inaccurate, fraudulent or forged; (B) the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or assign a
Facility Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective for
any reason; (C) failure of the beneficiary of a Facility Letter of Credit to
comply fully with underlying conditions required in order to draw upon such
Facility Letter of Credit, so long as such beneficiary has presented the
appropriate documentation required to draw upon such Facility Letter of Credit;
(D) errors, omissions, interruptions or delays in transmission or delivery of
any messages, by mail, cable, telegraph, telex or otherwise; (E) errors in
interpretation of technical terms; (F) misapplication by the beneficiary of a
Facility Letter of Credit of the proceeds of any drawing under such Facility
Letter of Credit; (G) any consequences arising from causes beyond the control of
any Issuer, the Agent or any Lender.
(e) PARTICIPATION.
(i) Immediately upon issuance by an Issuer of any Facility
Letter of Credit in accordance with the procedures set forth in Section
2.15(c) each Lender shall be deemed to have irrevocably and unconditionally
purchased and received from the Issuer, without recourse or warranty, an
undivided interest and participation equal to its Pro Rata Share of such
Facility Letter of Credit (including, without limitation, all rights and
obligations of the Issuer with respect thereto) and any security therefor or
guaranty pertaining thereto; PROVIDED, that a Letter of Credit issued by any
Issuer shall not be deemed to be a Facility Letter of Credit for purposes of
this Agreement if the Agent and such Issuer shall have received written notice
from any Lender on or before the Business Day prior to the date of its issuance
of such Letter of Credit that one or more of the conditions contained in
Sections 5.01 and 5.02 is not then satisfied, and, in the event an Issuer
receives such a notice, it shall have no further obligation to issue any
Facility Letter of Credit until such notice is withdrawn by that Lender or it
receives a notice from the Agent that such condition has been effectively waived
in accordance with the provisions of this Agreement.
(ii) In the event that any Issuer makes any payment under any
Facility Letter of Credit and the Borrower shall not have repaid such amount to
such Issuer pursuant to Section 2.15(d), such Issuer shall promptly notify the
Agent, which shall promptly notify each Lender, of such failure, and each Lender
shall promptly and unconditionally pay to the Agent for the account of such
Issuer the amount of such Lender's Pro Rata Share of the unreimbursed amount of
any such payment. The failure of any Lender to make available to the Agent its
Pro Rata Share of the unreimbursed amount of any such payment shall not relieve
any other Lender of its obligation hereunder to make available to the Agent its
Pro Rata Share of the unreimbursed amount of any payment on the date such
payment is to be made, but no Lender shall be responsible for the failure of any
other Lender to make available to the Agent its Pro Rata Share of the
unreimbursed amount of any payment on the date such payment is to be made.
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(iii) Whenever an Issuer receives a payment on account of a
Reimbursement Obligation, including any interest thereon, it shall promptly pay
to the Agent and the Agent shall promptly pay to each Lender which has funded
its participating interest therein, in immediately available funds, an amount
equal to such Lender's Pro Rata Share thereof.
(iv) Upon the request of the Agent or any Lender, an Issuer
shall furnish to such Agent or Lender copies of any Facility Letter of Credit to
which that Issuer is party and such other documentation as may reasonably be
requested by the Agent or Lender.
(v) The obligations of a Lender to make payments to the Agent
for the account of an Issuer with respect to a Facility Letter of Credit shall
be absolute, unconditional and irrevocable, not subject to any counterclaim,
set-off, qualification or exception whatsoever and shall be made in accordance
with the terms and conditions of this Agreement under all circumstances.
(vi) In the event any payment by the Borrower received by an
Issuer with respect to a Facility Letter of Credit and distributed by the Agent
to the Lenders on account of their participations is thereafter set aside,
avoided or recovered from that Issuer in connection with any receivership,
liquidation, reorganization or bankruptcy proceeding, each Lender which received
such distribution shall, upon demand by that Issuer, contribute such Lender's
Pro Rata Share of the amount set aside, avoided or recovered together with
interest at the rate required to be paid by that Issuer upon the amount required
to be repaid by it.
(f) COMPENSATION FOR FACILITY LETTERS OF CREDIT.
(i) The Borrower shall pay to the Agent, for the ratable
account of the Lenders, based upon the Lenders' respective Pro Rata Shares, a
fee with respect to each Facility Letter of Credit that is for the period from
the Issuance Date thereof to and including the final expiration date thereof, in
a per annum amount equal to the product of (x) the average daily undrawn amount
of such Facility Letter of Credit times (y) the Facility Letter of Credit Fee
percentage shown in the pricing grid set forth in Exhibit "F" hereto. The
Facility Letter of Credit Fees shall be due and payable in arrears on each
Monthly Payment Date and, to the extent any such fees are then due and unpaid,
on the Facility A Termination Date. The Agent shall promptly remit such Facility
Letter of Credit Fees, when paid, to the other Lenders in accordance with their
Pro Rata Shares thereof.
(ii) Each Issuer shall have the right to receive, solely for
its own account, an issuing fee equal to the product of (x) 12.5 basis points
times (y) the amount of each Facility Letter of Credit, and other customary and
competitive fees agreed to between the Borrower and the Issuer with respect to
any Facility Letter of Credit which it issued. In addition, each Issuer shall be
entitled to receive its reasonable out-of-pocket costs of issuing and servicing
Facility Letters of Credit.
(g) LETTER OF CREDIT COLLATERAL ACCOUNT. From and after the occurrence
and during the continuance of an Event of Default, (i) the Borrower hereby
agrees that it will, until the Facility A
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Termination Date, maintain a special collateral account (the "Letter of Credit
Collateral Account") at the Agent's office at the address specified pursuant to
Article XIII, in the name of the Borrower but under the sole dominion and
control of the Agent, for the benefit of the Lenders, and in which the Borrower
shall have no interest other than as set forth in Section 9.03 and (ii) the
Agent shall not be obligated to release any Lots or other Collateral from the
Lien of the Mortgage if the Borrower has not deposited in the Letter of Credit
Collateral Account an amount equal to the aggregate undrawn face amount of all
outstanding Facility Letters of Credit and all fees and other amounts due or
which may become due with respect thereto. In addition to the foregoing, the
Borrower hereby grants to the Agent, for the benefit of the Lenders as security
for the repayment of the Obligations, a security interest in and to the Letter
of Credit Collateral Account and any funds that may hereafter be on deposit in
such account pursuant to Section 9.02.
SECTION 2.16. NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Borrower or
a Lender, as the case may be, notifies the Agent prior to the date on which it
is scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or the unreimbursed amount of any payment required pursuant
to Section 2.15(e)(ii), (ii) in the case of an Issuer, payment of any
Reimbursement Obligation received from the Borrower, or (iii) in the case of the
Borrower, a payment of principal, interest or fees to the Agent for the account
of the Lenders or an Issuer, that it does not intend to make such payment, the
Agent may assume that such payment has been made. The Agent may, but shall not
be obligated to, make the amount of such payment available to the intended
recipient in reliance upon such assumption. If such Lender, or the Borrower, as
the case may be, has not in fact made such payment to the Agent, the recipient
of such payment shall, on demand by the Agent, repay to the Agent the amount so
made available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the Agent
until the date the Agent recovers such amount at a rate per annum equal to (i)
in the case of payment by a Lender or an Issuer, the Federal Funds Effective
Rate for such day or (ii) in the case of payment by the Borrower, the interest
rate applicable to the relevant Loan or Reimbursement Obligation.
SECTION 2.17. WITHHOLDING TAX EXEMPTION. At least five Business Days
prior to the first date on which interest or fees are payable hereunder for the
account of any Lender, each Lender that is not incorporated under the laws of
the United States of America, or a state thereof, agrees that it will deliver to
each of the Borrower and the Agent two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, certifying in either case that such
Lender is entitled to receive payments under this Agreement and the Notes
without deduction or withholding of any United States federal income taxes. Each
Lender which so delivers a Form 1001 or 4224 further undertakes to deliver to
each of the Borrower and the Agent two additional copies of such form (or a
successor form) on or before the date that such form expires (currently, three
successive calendar years for Form 1001 and one calendar year for Form 4224) or
becomes obsolete or after the occurrence of any event requiring a change in the
most recent forms so delivered by it, and such amendments thereto or extensions
or renewals thereof as may be reasonably requested by the Borrower or the Agent,
in each case certifying that such Lender is entitled to receive payments under
this Agreement and the Notes without deduction or withholding of any
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United States federal income taxes, unless an event (including without
limitation any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender from duly completing
and delivering any such form with respect to it and such Lender advises the
Borrower and the Agent that it is not capable of receiving payments without any
deduction or withholding of United States federal income tax.
SECTION 2.18. UNCONDITIONAL OBLIGATION TO MAKE PAYMENTS. To the fullest
extent permitted by law, the Borrower shall make all payments hereunder, under
the Notes and under all of the other Loan Documents regardless of any defense,
claim, offset, cross claim, or counterclaim, including any defense, claim,
offset, cross claim, or counterclaim based on any law, rule or policy which is
now or hereafter promulgated by any governmental authority or regulatory body
and which may adversely affect the Borrower's obligations to make, or the right
of the holder of any Note to receive, those payments.
SECTION 2.19. COMPENSATING BALANCES. First Chicago shall have the right
(but no obligation) to enter into a separate agreement with the Borrower or any
Subsidiary which provides for the reduction of the interest rate payable to
First Chicago hereunder in the event that the Borrower or such Subsidiary
maintains collected balances in non-interest bearing accounts at First Chicago,
but in no event shall such agreement affect the amounts payable under this
Agreement to any other Lender. Similarly, each other Lender shall have the right
(but no obligation) to enter into a separate agreement with the Borrower or any
Subsidiary which provides for the rebate to Borrower of a portion of the
interest paid to such Lender under this Agreement in the event that the Borrower
or such Subsidiary maintains collected balances in non-interest bearing accounts
at such Lender, but in no event shall any such agreement affect the amounts
payable under this Agreement to such Lender.
SECTION 2.20. EXTENSION OF FACILITY A TERMINATION DATE. At any time
following the first anniversary of this Agreement, the Borrower may request a
one (1) year extension of the Facility A Termination Date by submitting a
request for an extension to the Agent (an "Extension Request") not less than 60
days prior to the Facility A Termination Date. Promptly following receipt of an
Extension Request, the Agent shall notify each Lender of the contents thereof,
shall request each Lender to approve the Extension Request, and shall specify
the date (which must be at least 30 days but not more than 60 days after the
Extension Request is delivered to the Lenders) as of which the Lenders must
respond to the Extension Request (the "Reply Date"). Each Lender approving the
Extension Request shall deliver its written consent no later than the Reply
Date. If the consent of all of the Lenders is received by the Agent on or prior
to the Reply Date, the Facility A Termination Date specified in the Extension
Request shall become effective at the expiration of the existing Facility A
Termination Date and the Agent shall promptly notify the Borrower and each
Lender of the new Facility A Termination Date. The Borrower may only request one
extension of the Facility A Termination Date pursuant to this Section. If an
Extension Request is granted, the Borrower, prior to same being effective, shall
deliver to the Agent, an endorsement to
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each of the Title Policies insuring that the policy continues to be effective
with respect to any Advances made during the extended term.
SECTION 2.21. DETERMINATION OF BORROWING BASE. The Borrowing Base shall
be determined by the Agent as follows:
(a) MONTHLY. On the 30th day following each month, the
Borrower shall submit to the Agent a Borrowing Base Certificate dated as of the
last day of the immediately preceding calendar month.
(b) NOTICE OF BORROWING BASE CHANGE. Promptly upon receipt,
the Agent shall furnish a copy of the Borrowing Base Certificate to each of the
Lenders.
(c) ADDITIONAL MORTGAGED PROPERTY/ADDITION TO BORROWING BASE.
So long as there is no Event of Default or Unmatured Default, the Borrower may,
but shall not be required to, add additional Real Estate as Mortgaged Property.
Within sixty (60) days after the Closing Date, the Borrower may add to the
Borrowing Base any and all of the Real Estate described in Schedule III hereto,
subject to the Borrower satisfying all of the conditions precedent set forth in
Sections 5.01(e), (g), (h), (i), (l), (m), (p), (q) and (w) hereof with respect
thereto. In addition, if the Borrower wishes to add other Real Estate as a
Mortgaged Property, it shall provide the Agent, with a copy for each Lender,
such information with respect to such Real Estate as shall be required by the
Agent and the Required Lenders, which information shall be generally the same
type of information as that provided in respect of the initial Mortgaged
Properties prior to the Closing Date. The Agent and the Required Lenders shall
review such information to determine, by applying the standards and criteria
consistent with the valuation of the Mortgaged Properties included in the
Borrowing Base on the Closing Date, whether or not to accept such proposed Real
Estate as a Mortgaged Property. If the Agent and the Required Lenders approve
such property to become a Mortgaged Property, the Borrower shall deliver a
Mortgage with respect thereto, together with all other documentation, opinions,
insurance and other items, and take all other actions, consistent with the
deliveries made and actions taken in respect to the Mortgaged Properties
included in the Borrowing Base on the Closing Date. After such approval and upon
delivery of all the foregoing documents, information and approvals thereof in
writing by the Agent and the Required Lenders, such Additional Mortgaged
Property shall be added to the Borrowing Base. The delivery by the Borrower of a
request to add such Real Estate to the Borrowing Base shall constitute a
representation by the Borrower on the date of delivery of the Mortgage with
respect to such Real Estate, and on each date thereafter on which the Borrower
is deemed to make the representations and warranties set forth in Article IV in
respect of each Mortgaged Property, to such additional Real Estate.
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ARTICLE III
CHANGE IN CIRCUMSTANCES
SECTION 3.01. YIELD-PROTECTION. If the adoption, on or after the
Agreement Date, of any law or any governmental or quasi-governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law), or any change, on or after the Agreement Date, in interpretation thereof,
or the compliance of any Lender (which term, for purposes of this Article III,
shall be deemed to include such Issuer in such capacity) therewith,
(i) subjects any Lender or any applicable Lending Installation to
any tax, duty, charge or withholding on or from payments due from the
Borrower (excluding federal taxation of the overall net income of any
Lender or applicable Lending Installation), or changes the basis of
taxation of payments to any Lender in respect of its Loans or other
amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, any Lender or any applicable Lending Installation (other
than reserves and assessments taken into account in determining the
interest rate applicable to Fixed Rate Advances), or
(iii) imposes any other condition the result of which is to
increase the cost to any Lender or any applicable Lending Installation
of making, funding or maintaining loans (or letters of credit or
participations therein) or reduces any amount receivable by any Lender
or any applicable Lending Installation in connection with loans (or
letters of credit or participations therein), or requires any Lender or
any applicable Lending Installation to make any payment calculated by
reference to the amount of loans held or interest received by it, by an
amount deemed material by such Lender,
then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an amount
received which such Lender determines is attributable to making, funding and
maintaining its Loans (PROVIDED, that the foregoing shall not include any
amounts which First Chicago certifies is reflected in an increase of the
Corporate Base Rate for the relevant period).
SECTION 3.02. CHANGES IN CAPITAL ADEQUACY REGULATIONS. If a Lender
reasonably determines the amount of capital required or expected to be
maintained by such Lender, any Lending Installation of such Lender or any
corporation controlling such Lender is increased as a result of a Change, and
such increase will have the effect of reducing the rate of return on such
Lender's capital as a consequence of such Lender's obligations hereunder to a
level below that which such Lender or such corporation, as the case may be,
could have achieved but for such Change (taking into account such Lender's or
such corporation's policies, as the case may be, with
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respect to capital adequacy and any payments made to such Lender pursuant to
Section 3.01 which relate to capital adequacy and assuming that such Lender's
capital was fully utilized prior to such Change), then within 15 days of demand
by such Lender, the Borrower shall pay to the Agent, for the account of such
Lender, such additional amount or amounts as will compensate such Lender for
such reduction. If any Lender becomes entitled to claim any additional amounts
pursuant to this Section 3.02 it shall promptly notify the Borrower through the
Agent of the event by reason of which it has become so entitled, but in any
event within 90 days, after such Lender obtains actual knowledge thereof;
PROVIDED that if such Lender fails to give such notice within the 90-day period
after it obtains actual knowledge of such an event, such Lender shall, with
respect to such compensation in respect of any costs resulting from such event,
only be entitled to payment for costs incurred from and after the date 90 days
prior to the date that such Lender does give such notice. A certificate setting
forth in reasonable detail the computation of any additional amount payable
pursuant to this Section 3.02, submitted by such Lender to the Borrower through
the Agent, shall be delivered to the Borrower promptly after the initial
incurrence of such additional amounts. "Change" means (i) any change after the
Agreement Date in the Risk-Based Capital Guidelines or (ii) any adoption of or
change in any other law, governmental or quasi-governmental rule, regulation,
policy, guideline, interpretation, or directive (whether or not having the force
of law) after the date of this Agreement which affects the amount of capital
required or expected to be maintained by any Lender or any Lending Installation
or any corporation controlling any Lender or any Lending Institution.
"Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines in
effect in the United States on the date of this Agreement, including transition
rules, and (ii) the corresponding capital regulations promulgated by regulatory
authorities outside the United States implementing the July 1988 report of the
Basle Committee on Banking Regulation and Supervisory Practices entitled
"International Convergence of Capital Measurements and Capital Standards,"
including transition rules, and any amendments to such regulations adopted prior
to the date of this Agreement.
SECTION 3.03. AVAILABILITY OF TYPES OF ADVANCES. If any Lender
determines that maintenance of its Fixed Rate Loans at a suitable Lending
Installation would violate any applicable law, rule, regulation, or directive,
whether or not having the force of law, or if the Agent determines that (i)
deposits of a type and maturity appropriate to match fund Fixed Rate Advances
are not available or (ii) the interest rate applicable to a Type of Advance does
not accurately reflect the cost of making or maintaining such Advance, then the
Agent shall suspend the availability of the affected Type of Advance and require
any Fixed Rate Advances of the affected Type to be repaid or to be converted (in
accordance with the terms of this Agreement) to any Type of Advance which is not
affected and is then available under this Agreement.
SECTION 3.04. FUNDING INDEMNIFICATION. If any payment of a Fixed Rate
Advance occurs on a date which is not the last day of the applicable Interest
Period, whether because of acceleration, prepayment or otherwise, or a Fixed
Rate Advance is not made on the date specified by the Borrower for any reason
other than default by the Lenders, the Borrower will indemnify each Lender for
any loss or cost incurred by it resulting therefrom, including, without
limitation,
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any loss or cost in liquidating or employing deposits acquired to fund or
maintain the Fixed Rate Advance.
SECTION 3.05. LENDER STATEMENTS: SURVIVAL OF INDEMNITY. To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its Fixed Rate Loans to reduce any liability of the
Borrower to such Lender under Sections 3.01 and 3.02 or to avoid the
unavailability of a Type of Advance under Section 3.03, so long as such
designation is not disadvantageous to such Lender. Each Lender shall deliver a
written statement of such Lender as to the amount due, if any, under Sections
3.01, 3.02 or 3.04. Such written statement shall set forth in reasonable detail
the calculations upon which such Lender determined such amount and shall be
final, conclusive and binding on the Borrower in the absence of manifest error.
Determination of amounts payable under such Sections in connection with a Fixed
Rate Loan shall be calculated as though each Lender funded its Fixed Rate Loan
through the purchase of a deposit of the type and maturity corresponding to the
deposit used as a reference in determining the Fixed Rate applicable to such
Loan, whether in fact that is the case or not. Unless otherwise provided herein,
the amount specified in the written statement shall be payable on demand after
receipt by the Borrower of the written statement. The obligations of the
Borrower under Sections 3.01, 3.02 and 3.04 shall survive payment of the
Obligations and termination of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to each of the Lenders that:
SECTION 4.01. ORGANIZATION, POWERS, ETC. OF BORROWER. Borrower (i) is a
general partnership duly organized, validly existing and in good standing under
laws of Florida, (ii) has the power and authority to own or hold under lease the
properties it purports to own or hold under lease and to carry on its business
as now conducted, (iii) is duly qualified or licensed to transact business in
every jurisdiction in which such qualification or licensing is necessary to
enable it to enforce all of its material contracts and other material rights and
to avoid any material penalty or forfeiture or in which the failure to be so
qualified would have a Material Adverse Effect.
SECTION 4.02. ORGANIZATION, POWERS, ETC. OF SUBSIDIARY GUARANTORS. Each
Subsidiary Guarantor (i) is an entity duly organized, validly existing and in
good standing under laws of its state of organization, (ii) has the power and
authority to own or hold under lease the properties it purports to own or hold
under lease and to carry on its business as now conducted, (iii) is duly
qualified or licensed to transact business in every jurisdiction in which such
qualification or licensing is necessary to enable it to enforce all of its
material contracts and other material rights and to avoid any material penalty
or forfeiture, or in which the failure to be so qualified would have a Material
Adverse Effect.
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SECTION 4.03. ORGANIZATION, POWERS, ETC. OF LENNAR AND LNR. Lennar and
LNR (i) are each an entity duly organized, validly existing and in good standing
under laws of its state of organization, (ii) have the power and authority to
own or hold under lease the properties they purport to own or hold under lease
and to carry on their business as now conducted, (iii) are duly qualified or
licensed to transact business in every jurisdiction in which such qualification
or licensing is necessary to enable them to enforce all of their material
contracts and other material rights and to avoid any material penalty or
forfeiture, or in which the failure to be so qualified would have a Material
Adverse Effect.
SECTION 4.04. AUTHORIZATION AND VALIDITY OF THIS AGREEMENT, ETC. OF
BORROWER. Each of the Borrower and LLP Partner has the power and authority to
execute and deliver this Agreement, the Notes and the other Loan Documents to
which it is a party and to perform all its obligations hereunder and thereunder.
The execution and delivery by the Borrower, LLP Partner and LNR Partner of this
Agreement, the Notes and the other Loan Documents to which it is a party and the
performance by the Borrower, LLP Partner and LNR Partner of all its obligations
hereunder and thereunder and any and all actions taken by the Borrower (i) have
been duly authorized by all requisite partnership action, (ii) will not violate
or be in conflict with (a) any provisions of law (including, without limitation,
any applicable usury or similar law), (b) any order, rule, regulation, writ,
judgment, injunction, decree or award of any court or other agency of
government, or (c) any provision of its partnership agreement, (iii) will not
violate, be in conflict with, result in a breach of or constitute (with or
without the giving of notice or the passage of time or both) a default under any
material indenture, agreement or other instrument to which it is a party or by
which it or any of its properties or assets is or may be bound, and (iv) except
as otherwise contemplated by this Agreement, will not result in the creation or
imposition of any Lien upon, or any security interest in, any of its properties
or assets. Each of this Agreement, the Notes and the other Loan Documents to
which the Borrower, LLP Partner or LNR Partner is a party has been duly executed
and delivered by the Borrower, LLP Partner or LNR Partner, as the case may be.
The Loan Documents constitute legal, valid and binding obligations of the
Borrower, LLP Partner and LNR Partner, enforceable against the Borrower, LLP
Partner and LNR Partner in accordance with their terms, except as enforceability
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally.
SECTION 4.05. AUTHORIZATION AND VALIDITY OF THIS AGREEMENT, ETC. BY
SUBSIDIARY GUARANTORS. Each Subsidiary Guarantor has the power and authority to
execute and deliver this Agreement, the Subsidiary Guaranty and the other Loan
Documents and to perform all its obligations thereunder. The execution and
delivery by each Subsidiary Guarantor of the Subsidiary Guaranty and the other
Loan Documents to which such Subsidiary Guarantor is a party and the performance
by each Subsidiary Guarantor of all its obligations thereunder and any and all
actions taken by such Subsidiary Guarantor (i) have been duly authorized by all
requisite entity action, (ii) will not violate or be in conflict with (a) any
provisions of law (including, without limitation, any applicable usury or
similar law), (b) any order, rule, regulation, writ, judgment, injunction,
decree or award of any court or other agency of government, or (c) any provision
of its certificate of organization, joint venture, partnership agreement, or
by-laws, (iii) will not violate, be in conflict
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with, result in a breach of or constitute (with or without the giving of notice
or the passage of time or both) a default under any material indenture,
agreement or other instrument to which it is a party or by which it or any of
its properties or assets is or may be bound, and (iv) except as otherwise
contemplated by this Agreement, will not result in the creation or imposition of
any Lien upon, or any security interest in, any of its properties or assets.
Each of the Subsidiary Guarantees and the other Loan Documents to which a
Subsidiary Guarantor is a party has been duly executed and delivered by such
Subsidiary Guarantor and the Loan Documents to which such Subsidiary Guarantor
is a party constitutes the legal, valid and binding obligations of such
Subsidiary Guarantor, enforceable against such Subsidiary Guarantor in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.
SECTION 4.06. AUTHORIZATION AND VALIDITY OF THIS AGREEMENT, ETC. BY
LENNAR AND LNR. Each of Lennar and its subsidiaries and LNR and its subsidiaries
has the power and authority to execute and deliver the Lennar and LNR Guaranty
and the other Loan Documents to which it is a party and to perform all its
obligations thereunder. The execution and delivery by Lennar and its
subsidiaries and LNR and its subsidiaries of the Lennar and LNR Guaranty and the
other Loan Documents to which Lennar and its subsidiaries or LNR and its
subsidiaries are a party and the performance by Lennar and its subsidiaries and
LNR and its subsidiaries of all their obligations thereunder and any and all
actions taken by Lennar and its subsidiaries and LNR and its subsidiaries (i)
have been duly authorized by all requisite entity action, (ii) will not violate
or be in conflict with (a) any provisions of law (including, without limitation,
any applicable usury or similar law), (b) any order, rule, regulation, writ,
judgment, injunction, decree or award of any court or other agency of
government, or (c) any provision of its certificate of organization or by-laws,
(iii) will not violate, be in conflict with, result in a breach of or constitute
(with or without the giving of notice or the passage of time or both) a default
under any material indenture, agreement or other instrument to which it is a
party or by which it or any of its properties or assets is or may be bound, and
(iv) except as otherwise contemplated by this Agreement, will not result in the
creation or imposition of any lien, charge or encumbrance upon, or any security
interest in, any of their properties or assets. Each of the Lennar and LNR
Guaranty and the other Loan Documents to which Lennar and its subsidiaries or
LNR and its subsidiaries are a party has been duly executed and delivered by
Lennar and its subsidiaries and LNR and its subsidiaries, as the case may be.
The Loan Documents to which Lennar and its subsidiaries or LNR and its
subsidiaries are a party constitute legal, valid and binding obligations of
Lennar and its subsidiaries and LNR and its subsidiaries, as the case may be,
enforceable against Lennar and its subsidiaries and LNR and its subsidiaries in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.
SECTION 4.07. INTENTIONALLY OMITTED.
SECTION 4.08. INTENTIONALLY OMITTED.
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SECTION 4.09. NO MATERIAL ADVERSE EFFECT WITH RESPECT TO SUBSIDIARY
GUARANTORS. No Event has occurred which has had or could reasonably be expected
to have a Material Adverse Effect upon the Subsidiary Guarantors.
SECTION 4.10. TITLE TO PROPERTIES. Schedule III hereto contains a
complete and accurate list of all Real Estate owned by the Borrower and the
Subsidiary Guarantors and constituting Collateral as of the Closing Date.
SECTION 4.11. LITIGATION. There is no action, suit, proceeding,
arbitration, inquiry or investigation (whether or not purportedly on behalf of
the Borrower or any Subsidiary Guarantor) pending or, to the best knowledge of
the Borrower, threatened against or affecting the Borrower or any Subsidiary
Guarantor which could reasonably be expected to have a Material Adverse Effect.
Neither the Borrower nor any Subsidiary Guarantor is in default with respect to
any final judgment, writ, injunction, decree, rule or regulation of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which default would or
could have a Material Adverse Effect on the Borrower or Subsidiary Guarantors.
The Borrower and Subsidiary Guarantors have no material contingent obligations
not provided for or disclosed in the Unaudited Financial Statements.
SECTION 4.12. PAYMENT OF TAXES BY SUBSIDIARY GUARANTORS. There have
been filed all federal, state and local tax returns with respect to the
operations of the Subsidiary Guarantors which are required to be filed,
including federal tax returns for the fiscal year ended November 30, 1996 and
all prior fiscal years of the Subsidiary Guarantors, except where extensions of
time to make those filings have been granted by the appropriate taxing
authorities and the extensions have not expired. Each Subsidiary Guarantor has
paid or caused to be paid to the appropriate taxing authorities all taxes as
shown on those returns and on any assessment received by any of them, to the
extent that those taxes have become due, except for taxes the failure to pay
which do not violate the provisions of Section 6.03 hereof. The Internal Revenue
Service has completed an examination of the Subsidiary Guarantors' federal
income tax returns for the years ended 1980 through 1994, as part of its
examination of Lennar's consolidated tax returns for those years, and Subsidiary
Guarantors have paid all additional taxes, assessments, interest and penalties
with respect to such years.
SECTION 4.13. AGREEMENTS. Neither the Borrower nor any Subsidiary
Guarantor is a party to any agreement or instrument or is subject to any charter
or other restriction that could reasonably be expected to have a Material
Adverse Effect on it. Neither the Borrower nor any Subsidiary Guarantor is in
material default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any material agreement or
instrument to which it is a party and consummation of the transactions
contemplated hereby and in the other Loan Documents will not cause Borrower or
such Subsidiary Guarantor to be in material default thereof.
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SECTION 4.14. FOREIGN DIRECT INVESTMENT REGULATIONS. Neither the making
of the Advances nor the repayment thereof nor any other transaction contemplated
hereby will involve or constitute a violation by the Borrower or any Subsidiary
Guarantor any provision of the Foreign Direct Investment Regulations of the
United States Department of Commerce or of any license, ruling, order, or
direction of the Secretary of Commerce thereunder.
SECTION 4.15. FEDERAL RESERVE REGULATIONS.
(a) Neither the Borrower nor any Subsidiary Guarantor is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any margin stock (within the
meaning of Regulation U or Regulation X of the Board of Governors of the Federal
Reserve System of the United States). Margin stock (as defined in Regulation U)
constitutes less than 25% of those assets of the Borrower and its Subsidiaries
and of any Subsidiary Guarantor which are subject to any limitation on sale,
pledge, or other restriction hereunder.
(b) No part of the proceeds of any of the Advances will be used to
purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock. If requested by the
Lenders, the Borrower and the Subsidiaries shall furnish to the Lenders a
statement in conformity with the requirements of Federal Reserve Form U-l
referred to in Regulation U of said Board of Governors. No part of the proceeds
of the Advances will be used for any purpose that violates, or which is
inconsistent with, the provisions of Regulation X of said Board of Governors.
SECTION 4.16. CONSENTS, ETC. Except as set forth on Schedule IV, no
order, license, consent, approval, authorization of, or registration,
declaration, recording or filing (except for the filing of a Current Report on
Form 8-K, and a Quarterly Report on Form 10-Q, in each case by Lennar and LNR
with the Securities and Exchange Commission) with, or validation of, or
exemption by, any governmental or public authority (whether federal, state or
local, domestic or foreign) or any subdivision thereof is required in connection
with, or as a condition precedent to, the due and valid execution, delivery and
performance by Borrower of this Agreement, the Notes, the other Loan Documents,
and by the Subsidiary Guarantors of the Subsidiary Guarantees and other Loan
Documents to which they are a party or the legality, validity, binding effect or
enforceability of any of the respective terms, provisions or conditions thereof.
To the extent that any franchises, licenses, certificates, authorizations,
approvals or consents from any federal, state or local (domestic or foreign)
government, commission, bureau or agency are required for the acquisition,
ownership, operation or maintenance by the Borrower and the Subsidiary
Guarantors of properties now owned, operated or maintained by it, those
franchises, licenses, certificates, authorizations, approvals and consents have
been validly granted, are in full force and effect and constitute valid and
sufficient authorization therefor.
SECTION 4.17. COMPLIANCE WITH APPLICABLE LAWS. The Borrower and the
Subsidiaries are in compliance with and conform to all statutes, laws,
ordinances, rules,
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regulations, orders, restrictions and all other legal requirements of all
domestic or foreign governments or any instrumentality thereof having
jurisdiction over the conduct of their respective businesses or the ownership of
their respective properties, the violation of which would have a Material
Adverse Effect on it, including, without limitation, regulations of the Board of
Governors of the Federal Reserve System, the Federal Interstate Land Sales Full
Disclosure Act and the Florida Land Sales Act, The California Subdivided Lands
Act, the California Subdivision Map, and Regulations promulgated by the
California Department of Real Estate, Arizona Revised Statutes Sections
9-463.01, ET SEQ. and A.R.S. Sections 11-806.01, ET SEQ., A.R.S. Sections
32-2181, ET SEQ. and similar laws, if any in the State of Texas. Neither the
Borrower nor any Subsidiary has received any notice to the effect that its
operations are not in material compliance with any of the requirements of
applicable federal, state and local health and safety statutes and regulations.
SECTION 4.18. RELATIONSHIP OF THE BORROWER AND THE SUBSIDIARY
GUARANTORS. The Borrower and the Subsidiary Guarantors are engaged as an
integrated group in the business of owning, developing and selling Real Estate.
The Borrower and the Subsidiary Guarantors require financing on such a basis
that funds can be made available from time to time to such entities, to the
extent required for the continued successful operation of their integrated
operations. The Advances to be made to the Borrower and the Facility Letters of
Credit to be issued for the account of the Borrower under this Agreement are for
the purpose of financing the integrated operations of the Borrower and the
Subsidiary Guarantors, and each of the Borrower and the Subsidiary Guarantors
expects to derive benefit, fair consideration and reasonably equivalent value,
directly or indirectly, from the Advances and Facility Letters of Credit, both
individually and as a member of the integrated group, since the financial
success of the operations of each Borrower and Subsidiary Guarantor is dependent
upon the continued successful performance of the integrated group as a whole.
SECTION 4.19. SUBSIDIARIES; JOINT VENTURES. Schedule V hereto contains
a complete and accurate list with respect to the Borrower of (i) all
Subsidiaries, including, with respect to each such Subsidiary, (a) its state of
incorporation, (b) all jurisdictions (if any) in which it is qualified as a
foreign corporation, (c) the number of shares of its Capital Stock outstanding,
and (d) the number and percentage of those shares owned by the Borrower and/or
by any other Subsidiary, and (ii) each Joint Venture, including, with respect to
each such Joint Venture, (a) its jurisdiction of organization, (b) all other
jurisdictions in which it is qualified as a foreign entity and (c) all Persons
other than the Borrower that are parties, partners, venturers, or members,
whether direct or indirect, thereto. All the outstanding shares of Capital Stock
of each Subsidiary are validly issued, fully paid and nonassessable, except as
otherwise provided by state wage claim laws of general applicability. All of the
outstanding shares of Capital Stock of each Subsidiary as specified in Schedule
V are owned free and clear of all liens, pledges, security interests, equity or
other beneficial interests, charges and encumbrances of any kind whatsoever. The
Borrower does not own of record or beneficially any shares of the Capital Stock
of any corporation that is not a Subsidiary Guarantor or a Joint Venture
Subsidiary.
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SECTION 4.20. ERISA. Neither the Borrower nor any Subsidiary Guarantor
is executing or delivering any of the Loan Documents or entering into any of the
transactions contemplated hereby, directly or indirectly, in connection with any
arrangement or understanding in any respect involving any "employee benefit
plan" with respect to which the Borrower or any Subsidiary is a "party in
interest" within the meaning of the Employee Retirement Income Security Act of
1974, or a "disqualified person", within the meaning of the Internal Revenue
Code 1986, as amended. No Unfunded Liabilities exist with respect to any Single
Employer Plans. Each Plan complies in all material respects with all applicable
requirements of law and regulations, no Reportable Event has occurred with
respect to any Plan, neither the Borrower nor any other members of the
Controlled Group has withdrawn from any Plan or initiated steps to do so, and no
steps have been taken to reorganize or terminate any Plan.
SECTION 4.21. INVESTMENT COMPANY ACT. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.22. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower
nor any Subsidiary is a "holding company" or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
SECTION 4.23. POST-RETIREMENT BENEFITS. The present value of the
expected cost of post-retirement medical and insurance benefits payable by the
Borrower and the Subsidiaries to its employees and former employees, as
estimated by the Borrower in accordance with procedures and assumptions deemed
reasonable by the Required Lenders, does not exceed $ -0- .
SECTION 4.24. INSURANCE. The certificate signed by the President or
Chief Financial Officer of the Borrower, that attests to the existence and
adequacy of, and summarizes, the property, casualty, and liability insurance
programs carried by the Borrower and each Subsidiary Guarantor and that has been
furnished by the Borrower to the Agent and the Lenders, is complete and
accurate. This summary includes the insurer's or insurers' name(s), policy
number(s), expiration date(s), amount(s) of coverage, type(s) of coverage,
exclusion(s), and deductibles. This summary also includes similar information,
and describes any reserves, relating to any self-insurance program that is in
effect.
SECTION 4.25. ENVIRONMENTAL REPRESENTATIONS. To the best of the
Borrower's knowledge and belief, no Hazardous Substances in material violation
of any Environmental Laws are present upon any of the Real Estate owned by
Borrower or any Subsidiary, and neither the Borrower nor any Subsidiary has
received any notice to the effect that any of the Real Estate owned by Borrower
or any Subsidiary or any their respective operations are not in compliance with
any of the requirements of applicable Environmental Laws or are the subject of
any federal or state investigation evaluating whether any remedial action is
needed to respond to a release of any
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Hazardous Substance into the environment which non-compliance or remedial action
could be reasonably expected to have a Material Adverse Effect.
SECTION 4.26. SECURITY DOCUMENTS.
(a) Each Mortgage, when executed and delivered by the relevant
Loan party, and properly filed and recorded (with all required filing and
recording fees being paid) in the office(s) specified in Schedule VIII shall
constitute a Lien on, and security interest in, all right, title, interest,
claim and estate of each Subsidiary Guarantor, Joint Venturer, or Borrower
executing such Mortgage on the Mortgaged Property described therein, security
for the Obligations (as defined in the relevant Mortgage), in each case prior
and superior in right to any other Person, other than with respect to the
Permitted Liens.
(b) The Security Agreement (Capital Stock and Partnership
Interest) is effective to create in favor of the Agent, for the benefit of the
Lenders, legal, valid and enforceable security interests in the Capital Stock
and partnership interests of the Subsidiaries described therein and proceeds
thereof and, when the stock certificates and partnership certificates (if any)
described therein are delivered to the Agent, and such financing statements
describing such Collateral as may be necessary to be filed in the appropriate
jurisdictions in order to perfect the security interest being granted, the
Security Agreement (Capital Stock and Partnership Interests) shall constitute a
perfected first priority lien on, and security interest in, all right, title and
interest of the Borrower, or each Subsidiary owning Capital Stock or partnership
interests of another Subsidiary, in such Capital Stock and partnership interests
and the proceeds thereof as security for the Obligations, in each case prior and
superior in right to any other Person when financing statements in appropriate
form are properly filed (with all required filing fees deemed paid) in the
office(s) specified in Schedule IX.
SECTION 4.27. SOLVENCY. The Borrower, each partner of Borrower, and
each Subsidiary Guarantor are, and after giving effect to the Reorganization and
the incurrence of all Indebtedness and Obligations being incurred and the
transfers to be made in connection herewith and therewith will be and will
continue to be, Solvent.
SECTION 4.28. NO MISREPRESENTATION. No representation or warranty
contained herein or made hereunder and no certificate, schedule, exhibit, report
or other document provided or to be provided by Borrower or any Subsidiary
Guarantor in connection with the transactions contemplated hereby or thereby
(including, without limitation, the negotiation of and compliance with the Loan
Documents) contains or will contain a misstatement of a material fact or omit to
state a material fact required to be stated herein or therein in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading.
SECTION 4.29. NO ENCROACHMENTS; LICENSES AND PERMITS. Except as shown
on the Title Policy or on the survey referred to in the Title Policy, all of the
Improvements lie wholly within the boundaries and building restriction lines of
the Mortgaged Properties and no
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improvements on adjoining properties encroach upon the Mortgaged Properties,
except in either case for immaterial encroachments which do not adversely affect
the benefits of the security intended to be provided by the Mortgage or the use,
enjoyment, value or marketability of the Mortgaged Properties. Each of the
Mortgaged Properties is in compliance with, and is lawfully occupied and used in
compliance with, all applicable laws and insurance requirements, including,
without limitation, building and zoning ordinances and codes. Each of the
Borrower or the Subsidiary Guarantors, as the case may be, is in possession of,
and in compliance with, all licenses, permits, certificates or other
authorizations necessary or required by applicable law or insurance requirements
for the conduct of its business or the use or occupancy of the Mortgaged
Properties; all such licenses, permits, certificates and authorizations are
valid and in full force and effect and have not been modified or qualified in a
manner detrimental to the operation of the Mortgaged Properties. Neither the
Borrower nor any of the Subsidiary Guarantors has received any material written
notification or threat of any action or proceeding regarding the non-compliance
or non-conformity of the Mortgaged Properties with any applicable law or
insurance requirements, nor is the Borrower or any of the Subsidiary Guarantors
aware of any such pending actions or proceedings.
SECTION 4.30. INDEPENDENT UNITS. Each of the Mortgaged Properties is an
independent unit which does not rely on any drainage, water, sewer, access,
parking, structural or other facilities located on any property not included in
the Mortgaged Properties or on public or utility easements (i) to fulfill any
zoning, building code or other requirement of any governmental authority that
has jurisdiction over the Mortgaged Properties, (ii) for structural support or
(iii) to fulfill the requirements of any lease or other agreement affecting the
Mortgaged Properties.
SECTION 4.31. MINIMUM TANGIBLE NET WORTH. On the Closing Date, the
Tangible Net Worth of the Borrower will not be less than $175,000,000.
SECTION 4.32. STEVENSON RANCH VENTURE L.L.C. AND BRESSI RANCH. On the
Closing Date, Investments by the Borrower in Stevenson Ranch Venture L.L.C. and
Bressi Ranch collectively shall not exceed $23,500,000.
SECTION 4.33 IMPROVEMENTS ON PROPERTY. None of the Property is
"improved", as such term is defined in 12 CFR Section 22.1, Subpart (b), except
as has been disclosed to the Lenders, in writing, prior to the Agreement Date.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01. CONDITIONS OF EFFECTIVENESS. This Agreement shall become
effective when the Agent shall have received counterparts of this Agreement
executed by the Borrower and each of the Lenders; PROVIDED, HOWEVER, that the
Lenders shall not be required to make any
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Advance and the Issuer shall not be required to issue any Facility Letters of
Credit, hereunder, unless and until the Agent shall have received each of the
following items (with all documents required below, except as otherwise
specified, to be dated the Closing Date, which date shall be the same for all
such documents, and each of such documents to be in form and substance
satisfactory to the Agent, in the sole and absolute discretion of the Agent, be
fully and properly executed by all parties thereto, and (except for the Notes)
to be in sufficient copies for each Lender), and the conditions specified below
shall have been satisfied:
(a) Facility A Notes and the Facility B Notes payable to the order of
each of the Lenders.
(b) The Subsidiary Guarantees.
(c) The Lennar and LNR Guaranty.
(d) Borrowing Base Certificate calculating the Borrowing Base as of the
Closing Date, based upon the Book Value of the Collateral as of August 31, 1997,
executed by an Authorized Officer.
(e) Fully executed and acknowledged counterparts of the Mortgages, and
all other security documents with respect to the Mortgaged Properties as of the
Closing Date and the delivery of evidence satisfactory to the Agent and
counterparts of the Mortgages and all other of such documents the Agent desires
to have recorded have been or will be recorded in all places necessary or
desirable to create and maintain valid and enforceable first priority liens on
the fee simple or leasehold interest of the Borrower and the Subsidiary
Guarantors, as applicable, in the Mortgaged Properties in favor of the Agent, as
mortgagee (or as beneficiary in those jurisdictions where the lien is granted to
a trustee for the benefit of the Agent) and in all other items of Collateral as
of the Closing Date in favor of the Agent.
(f) Security Agreement (Capital Stock and Partnership Interests).
(g) Properly executed Financing Statements or any other documents
required to be filed by legal requirements, satisfactory in form and substance
of the Agent in each jurisdiction as may be necessary (in the Agent's reasonable
judgment) effectively to perfect and maintain the security interest in the
Collateral created by the Borrower Security Documents and Subsidiary Guarantor
Security Documents and the delivery of evidence that such financing statements
or other documents will have been or will be filed and recorded in all places
necessary or desirable, in the reasonable judgment of the Agent, to create and
maintain valid and enforceable first priority Liens on the Collateral in favor
of the Agent.
(h) The Title Policy or marked title commitment for each Mortgaged
Property.
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(i) The Survey (or as to the Lots which have been platted, a copy of
the plat) of all of the constituent parts of the Mortgaged Property dated within
sixty (60) days next prior to the Closing Date.
(j) INTENTIONALLY OMITTED.
(k) The stock certificates (which certificates shall be accompanied by
irrevocable undated stock powers duly endorsed in blank and irrevocable proxies,
all satisfactory in form and substance to the Agent), certificates of
certificated partnership interest, and certificates of certificated limited
liability company membership interest, representing the Capital Stock and
partnership and limited liability company interests to be pledged on the Closing
Date pursuant to the Security Agreement (Capital Stock and Partnership
Interests).
(l) The Environmental Indemnity.
(m) A draft of an Appraisal of each Mortgaged Property satisfactory in
form and substance to the Agent evidencing that the Appraised Value of the
Finished Lots, Land Under Development, Entitled Land, and Unentitled Land
included in the Borrowing Base in the aggregate equals or exceeds the Net Book
Value of such Collateral in the aggregate; PROVIDED, HOWEVER that the Net Book
Value of the Bramalea Land shall be adjusted for the Purchase Price Accounting
Adjustment.
(n) The results of a recent search (the "UCC Search") in such states
and other jurisdictions as the Agent shall determine by a Person satisfactory to
the Agent of the Uniform Commercial Code (or similar legislation), judgment and
tax lien filings which may have been filed with respect to personal property of
the Borrower and the Subsidiary Guarantors, and the results of such search shall
be satisfactory to the Agent.
(o) Evidence of insurance (the "Insurance Certificates") required by
this Agreement satisfactory to the Agent.
(p) A flood plain certificate (if not included in the survey relating
to each Mortgaged Property).
(q) An Environmental Report.
(r) The favorable written opinion by Rubin Baum Levin Constant Friedman
& Bilzin, counsel for the Borrower, the Subsidiary Guarantors, Lennar and LNR
addressed to the Lenders and in form and substance satisfactory to the Agent,
(i) confirming the accuracy of the representations and warranties set forth in
Sections 4.01, 4.02 and 4.03 (excluding from each such section clause (ii)
thereof, and limited, in the case of clause (iii) thereof, to the jurisdictions
listed under the heading "Where Qualified" in Schedule V hereto), 4.11, 4.17,
4.18 and the second sentence of Section 4.13 hereof (which opinion, as to the
representations set forth in clauses (ii)(b),
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(iii) and (iv) of Sections 4.04, 4.05 and 4.06, Sections 4.11, 4.17, 4.18 and
the second sentence of Section 4.13 hereof, may be to the best knowledge of such
counsel, and may in its entirety be limited to Florida, Arizona, Delaware,
Texas, California and United States federal law); and (ii) to the effect that
this Agreement, the Notes, Subsidiary Guarantees, and other Loan Documents have
been duly authorized, executed and delivered by the Borrower and Subsidiary
Guarantors. Such counsel may rely, in its opinion, on the opinions of special
counsel to the Borrower referred to in Section 5.01(s) below, as to matters of
law of the State of Illinois, on the opinion of Fennemore, Craig of Phoenix,
Arizona as to matters of law of the State of Arizona, on the opinion of Belinger
& DeWolf, P.C. as to matters of law of the State of Texas and on the opinion of
Palmieri, Tyler, Wiener, Wilhelm & Waldron as to matters of law of the State of
California. In addition, Rubin, Baum, Levin, Constant, Friedman & Bilzin may
rely on the opinion of Rogers & Wells as to matters of Delaware law applicable
to the transaction. The Borrower hereby instructs its counsel to prepare its
opinion and deliver it to Lenders for their benefit, and such opinion shall
contain a statement to such effect.
(s) The favorable written opinion of Rudnick & Wolfe, special counsel
to the Borrower, the Subsidiary Guarantors, Lennar and LNR that (i) no
authorization, consent, approval, license or exemption of, or filing nor
registration with or other action by any Illinois, United States federal or
Delaware governmental department, commission, board, bureau, regulatory body,
agency or instrumentality or to the best knowledge of such counsel, any court is
or will be necessary for the execution, delivery and performance by the Borrower
of this Agreement, the Notes, and the Subsidiary Guarantees and (ii) this
Agreement, the Notes and the Subsidiary Guarantees constitute the legal, valid
and binding obligations of the Borrower and the Subsidiary Guarantors,
enforceable in accordance with their respective terms, except as the rights and
remedies of the Lenders thereunder may be limited by (A) applicable bankruptcy,
Reorganization, insolvency and other laws effecting creditors' rights generally
from time to time in effect, (B) the exercise of the discretionary powers of the
court before which any proceeding seeking equitable remedies (including, without
limitation, specific performance and injunctive relief) may be brought, and (C)
such other qualifications expressed in the opinion PROVIDED that such
qualifications are acceptable to Agent. Such counsel may rely on the opinion of
counsel to the Borrower and the Subsidiary Guarantors delivered pursuant to
subsection (b) above relating to the representations set forth in Sections 4.01
and 4.02 hereof and on the opinion of Palmieri, Tyler, Wiener, Wilhelm & Waldron
as to matters of law of the State of California. The Borrower hereby instructs
its special counsel to prepare its opinion and deliver it to Lenders for their
benefit, and such opinion shall contain a statement to such effect.
(t) The favorable written opinion of Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A., special counsel to the Agent and the Lenders, dated
the Closing Date, addressed to the Lenders to the effect that: while it has not
independently considered the matters covered by the opinions provided pursuant
to Sections 5.01(s) and (t) to the extent necessary to enable it to express the
conclusions stated therein, those opinions of counsel and the other documents
provided pursuant to this Section 5.01 are substantially responsive to the
requirements of this Agreement.
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(u) The following supporting documents with respect to the Borrower,
each Subsidiary Guarantor, Lennar and LNR: (i) a copy of its certificate of
existence or certificate or articles of incorporation, as the case may be, and,
with respect to the Borrower, the certificate of incorporation of LLP Partner
and LNR Partner certified as of a date reasonably close to the Closing Date to
be a true and accurate copy by the Secretary of State of its state of
incorporation, as the case may be, or if a copy of such certificate of
incorporation has been previously delivered to the Agent in connection with the
Existing Credit Agreement, a certificate of its Secretary or Assistant Secretary
to the effect that there have been no amendments to its certificate of
incorporation since April 4, 1997; (ii) a certificate of that Secretary of
State, dated as of a date reasonably close to the Closing Date, as to its
existence and (if available) good standing and, with respect to the Borrower,
also as to LLP Partner and LNR Partner; (iii) a certificate of the Secretary of
State of each jurisdiction, other than its state of incorporation, in which it
does business, as to its qualification as a foreign corporation; (iv) a copy of
its by-laws, certified by its Secretary or Assistant Secretary to be a true and
accurate copy of its by-laws in effect on the Closing Date, or, if a copy of
such by-laws has been previously delivered to the Agent in connection with the
Existing Credit Agreement, a certificate of its Secretary or Assistant Secretary
to the effect that there have been no amendments to its by-laws since April 4,
1997; (v) a certificate of its Secretary or Assistant Secretary, dated the
Closing Date, as to the incumbency and signatures of its general partner or
officers, as the case may be, who have executed any documents in connection with
the transactions contemplated by this Agreement; (vi) a copy of resolutions of
the Executive Committee of its Board of Directors, certified by its Secretary or
Assistant Secretary to be a true and accurate copy of resolutions duly adopted
by such Executive Committee or a certificate executed by an authorized officer
of the general partner as to the partnership actions duly adopted by such
general partner, as the case may be, that are in full force and effect on the
Closing Date, authorizing the execution and delivery by it of this Agreement,
the Notes and the other Loan Documents and the performance by it of all its
obligations thereunder; and (vii) such additional supporting documents and other
information with respect to its operations and affairs as the Agent may
reasonably request.
(v) A certificate signed by a duly authorized officer of the Borrower
stating that: (i) the representations and warranties of the Borrower contained
in Article IV hereof are correct and accurate on and as of the date of that
certificate as though made on and as of that date and (ii) no event has occurred
and is continuing which constitutes an Event of Default or Unmatured Default
hereunder.
(w) Such other documents as any Lender or its counsel may reasonably
request.
(x) There shall not have occurred any changes in the consolidated
financial condition, results of operations or cash flows of the Subsidiary
Guarantors from that reflected in the Pro Forma Financial Statements which has
or reasonably could be expected to have, in the judgment of the Required
Lenders, a Material Adverse Effect on the Borrower's financial condition or
results of operations, taken as a whole.
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(y) The Borrower shall not have entered into or agreed to any amendment
or modification of the Borrower's Partnership Agreement, or waived or released
any material right or benefits of the Borrower thereunder without the prior
written consent of the Agent or the Required Lenders.
(z) The Agent shall have received the Pro Forma consolidated balance
sheet of Lennar referred to in Section 5.01(p) of the Lennar Credit Agreement.
(aa) All conditions precedent to the effectiveness of the Lennar Credit
Agreement and the obligations of the "Lenders" thereunder to make "Advances"
thereunder shall have been satisfied.
(bb) A certificate signed by the Chief Financial Officer of Lennar
showing in reasonable detail the calculations used to determine the Leverage
Ratio for the Pricing Grids attached hereto as Exhibit F.
(cc) A report in reasonable detail and in form and substance
satisfactory to the Agent, with calculations indicating that the Borrower, as of
the Closing Date is in compliance with the provisions of Article VII, which
calculations shall be based upon the financial statements of the Borrower.
(dd) The Agent shall have received an estimated consolidating balance
sheet of the Borrower and its consolidated Subsidiaries, dated as of the Closing
Date, reflecting (i) the combined accounts of the Borrower and all of its
Subsidiaries, (ii) the combined accounts of the Borrower and the Subsidiary
Guarantors, and (iii) the combined accounts of all Subsidiaries that are not
Subsidiary Guarantors (the "Estimated Opening Balance Sheet"). The Estimated
Opening Balance Sheet shall be prepared in accordance with sound accounting
practices, consistent with the financial statements of those Subsidiaries of the
Borrower which were included in the historical financial statements of Lennar
and, to the extent the Estimated Opening Balance Sheet includes estimates, such
estimates shall be made based on factors and assumptions that are reasonable
under the circumstances.
SECTION 5.02. CONDITIONS PRECEDENT TO ALL BORROWINGS.
(a) No Lender shall be required to make any Advance (other than an
Advance that after giving effect thereto and to the application of the proceeds
thereof, does not increase the amount of the sum of outstanding (a) Advances and
(b) Reimbursement Obligations) and no Issuer shall be obligated to issue any
Facility Letter of Credit, unless on the applicable Borrowing Date:
(i) the Agent shall have received notice of Borrower's request
for the Advance and/or the issuance of a Facility Letter of Credit with
respect thereto as provided in Sections 2.06(a) and 2.15(c)(i),
respectively, and such other approvals, opinions or documents as the
Agent may reasonably request; and
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(ii) the representations and warranties of the Borrower contained
in Article IV hereof are true and correct as of such Borrowing Date or
Issuance Date, PROVIDED, HOWEVER, for the purposes hereof (A) from and
after the date of delivery by the Borrower pursuant to Section 6.04(a)
of its Consolidated Financial Statements for the year ending November
30, 1997, the Borrower shall represent and warrant to each of the
Lenders that the annual audited financial statements, and the related
notes and schedules (if any), audited and reported upon by Deloitte &
Touche, independent certified public accountants, most recently
delivered by the Borrower pursuant to Section 6.04(a) as of the date of
the request for an Advance and/or the issuance of a Facility Letter of
Credit (a) were prepared in accordance with GAAP, consistently applied
throughout the respective periods covered thereby, (b) present fairly
the consolidating financial condition of the Borrower and the
Subsidiary Guarantors as of the respective dates thereof, (c) show all
material Liabilities, direct or contingent, of each Subsidiary
Guarantor as of those dates (including, without limitations,
Liabilities for taxes and material commitments), and (d) present fairly
the consolidating results of operations and cash flows of the
Subsidiary Guarantors for the respective periods covered thereby; and
(B) from and after the date of delivery by the Borrower pursuant to
Section 6.04(b) of its Consolidated Financial Statements for the
quarter ending February 28, 1998, the references in Section 4.08 to
"Unaudited Financial Statements" shall be deemed to be references to
the quarterly unaudited financial statements most recently delivered by
the Borrower pursuant to Section 6.04(b) as of the date of the request
for an Advance and/or the issuance of a Facility Letter of Credit and
such financial statements shall present fairly the consolidating
results of operations and cash flows of the Subsidiary Guarantors for
the respective periods covered thereby;
(iii) All legal matters incident to the making of such Advance
shall be satisfactory to the Lenders and their counsel;
(iv) There exists no Event of Default or Unmatured Default;
(v) The making of the Advance and/or the issuance of a Facility
Letter of Credit will not result in any Event of Default or Unmatured
Default.
(b) Each Borrowing Notice with respect to each such Advance or the
Issuance Notice with respect to such Facility Letter of Credit shall constitute
a representation and warranty by the Borrower that all of the conditions
contained in this Section 5.02 have been satisfied.
SECTION 5.03 TERMINATION. Notwithstanding anything to the contrary
contained in this Agreement or any of the other Loan Documents, if all of the
conditions precedent to the obligations of the Lenders set forth in Sections
5.01 and 5.02 (as to the initial Borrowing Date only) shall not have been
satisfied or waived by the Lenders prior to December 31, 1997, the Commitments
and all other obligations of the Lenders under this Agreement and the other Loan
Documents shall terminate as of such date and be of no further force or effect
thereafter. Such termination shall not diminish or affect or relieve the
Borrower or any Subsidiary Guarantor, from
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any of their respective Obligations which are stated to survive a termination of
the Commitments or the termination of this Agreement or the other Loan
Documents.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that from the date hereof until
payment in full of all the Obligations, unless the Required Lenders otherwise
shall consent in writing as provided in Section 13.06 hereof, the Borrower will,
and will cause each of the Subsidiaries to:
SECTION 6.01. EXISTENCE, PROPERTIES, ETC. Do or cause to be done all
things or proceed with due diligence with any actions or courses of action which
may be necessary to preserve and keep in full force and effect its existence
under the laws of their respective states of incorporation and all
qualifications or licenses in jurisdictions in which such qualification or
licensing is required for the conduct of its business or in which the Lenders
shall request such qualification; PROVIDED, HOWEVER, that nothing herein shall
be deemed to prohibit the Borrower or any Subsidiary other than the Borrower
from (i) merging into or consolidating with any other Subsidiary (including the
Borrower, if the Borrower is the surviving entity) or (ii) declaring and paying
dividends in complete liquidation. The Borrower will, and will cause each
Subsidiary to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is presently
conducted and maintain all requisite authority to conduct its business in each
jurisdiction in which its business is conducted. The primary business of the
Borrower and the Subsidiaries shall at all times be the acquisition,
development, and sale of land.
SECTION 6.02. NOTICE. Give prompt written notice to the Agent of (i)
any proceeding instituted by or against the Borrower or any of the Subsidiaries
in any federal or state court or before any commission or other regulatory body,
federal, state or local, or any such proceedings threatened against the Borrower
or any Subsidiary in writing by any federal, state or other governmental agency,
which, if adversely determined, could reasonably be expected to have a Material
Adverse Effect, and (ii) any other Event which could reasonably be expected to
lead to or result in a Material Adverse Effect, or which, with or without the
giving of notice or the passage of time or both, would constitute an Event of
Default or a default under any material agreement, other than this Agreement or
the other Loan Documents, to which the Borrower is a party or by which any of
its properties or assets is or may be bound.
SECTION 6.03. PAYMENTS OF DEBTS, TAXES, ETC. Pay all its debts and
perform all its obligations promptly and in accordance with the respective terms
thereof, and pay and discharge or cause to be paid and discharged promptly all
taxes, assessments and governmental charges or levies imposed upon the Borrower
or Subsidiary or upon its incomes or receipts or upon any of their properties
before the same shall become in default or past due, as well as all lawful
claims for labor, materials and supplies or otherwise which, if unpaid, might
result in the imposition of a lien
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or charge upon such properties or any part thereof; PROVIDED, HOWEVER, that it
shall not constitute a violation of the provisions of this Section 6.03 if the
Borrower or a Subsidiary shall fail to perform any such obligation or to pay any
such debt (except for obligations for money borrowed), tax, assessment,
governmental charge or levy or claim for labor, materials or supplies which is
being contested in good faith, by proper proceedings diligently pursued, and as
to which adequate reserves have been provided.
SECTION 6.04. ACCOUNTS AND REPORTS. Maintain a standard system of
accounting established and administered in accordance with GAAP, and provide to
the Lenders the following:
(a) as soon as available and in any event within 120 days after the end
of each fiscal year of the Borrower (commencing with the fiscal year ending
November 30, 1997), a consolidated balance sheet of the Borrower and the
Subsidiaries as of the end of that fiscal year and the related consolidated
statements of earnings, partners' equity and cash flows for that fiscal year,
all with accompanying notes and schedules, prepared in accordance with GAAP
consistently applied and audited and reported upon by Deloitte & Touche or
another firm of independent certified public accountants of recognized standing
selected by the Borrower and acceptable to the Agent (such audit report shall be
unqualified except for qualifications relating to changes in GAAP and required
or approved by the Borrower's independent certified public accountants);
(b) as soon as available and in any event within 60 days after the end
of each of the first three quarters, and within 120 days after the end of the
fourth quarter, of each fiscal year of the Borrower (commencing with the quarter
and Fiscal Year ending November 30, 1997), a consolidated balance sheet of the
Borrower and the Subsidiaries as of the end of that quarter, and the related
consolidated statement of partners' and stockholders' equity earnings and cash
flows of the Borrower and the Subsidiaries for the period from the beginning of
the fiscal year to the end of that quarter, all prepared in accordance with GAAP
consistently applied, unaudited but certified to be true and accurate, subject
to normal year-end audit adjustments, by the Chief Financial Officer of the
Borrower;
(c) within 60 days after the end of each of the first three quarters,
and within 120 days after the end of the fourth quarter, of each fiscal year of
the Borrower (commencing with the quarter and Fiscal Year ending November 30,
1997), the following described balance sheets and statement of earnings all
prepared in accordance with GAAP consistently applied, unaudited but certified
to be true and accurate, subject to normal year-end audit adjustments, by the
Chief Financial Officer of the Borrower, (i) a consolidated balance sheet of the
Borrower (in a form acceptable to the Agent) as of the end of that quarter and
the related consolidated statement of earnings of the Borrower (in a form
acceptable to the Agent) for the period from the beginning of the fiscal year to
the end of that quarter and (ii) a balance sheet of each Subsidiary Guarantor
(in a form acceptable to the Agent) as of the end of that quarter and the
related statement of earnings of such Subsidiary Guarantor (in a form acceptable
to the Agent) for the period from the beginning of the fiscal year to the end of
that quarter;
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(d) concurrently with the delivery of the financial statements
described in subsection (a) above, a letter signed by that firm of independent
certified public accountants to the effect that, during the course of their
examination, nothing came to their attention which caused them to believe that
any Event of Default or Unmatured Default has occurred, or if such Event of
Default or Unmatured Default has occurred, specifying the facts with respect
thereto; and concurrently with the delivery of the financial statements
described in subsections (b) and (c) above, a certificate signed by the
President or Executive Vice President and the Chief Financial Officer of the
Borrower to the effect that, having read this Agreement, and based upon an
examination which they deemed sufficient to enable them to make an informed
statement, there does not exist any Event of Default or Unmatured Default, or if
such Event of Default or Unmatured Default has occurred, specifying the facts
with respect thereto;
(e) within 60 days after the end of each fiscal quarter and within 120
days after the end of each fiscal year of the Borrower (commencing with the
fiscal year ending November 30, 1997), a schedule of all Real Estate owned by
the Borrower and the Subsidiaries in the form of Schedule III annexed hereto or
as otherwise required by Agent, which schedule, in addition to providing all the
categories of information specified in Schedule III, shall specify those
properties the interest and carrying charges attributable to which are being
deducted, for financial reporting purposes, for the fiscal year in which they
are paid and shall contain all such other information as Agent shall require;
(f) within 90 days after the beginning of each fiscal year of the
Borrower, a projection, in reasonable detail and in form and substance
satisfactory to the Agent, on a quarterly basis of the cash flow and of the
earnings of the Borrower and the Subsidiaries for that fiscal year and for the
immediately succeeding fiscal year;
(g) Promptly upon becoming available, copies of all financial
statements, reports, notices and proxy statements sent by Lennar and LNR to
their respective stockholders, and of all regular and periodic reports and other
material (including copies of all registration statements and reports under the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended) filed by Lennar and LNR with any securities exchange or any
governmental authority or commission, except material filed with governmental
authorities or commissions relating to the development of Real Estate in the
ordinary course of the business of Lennar and LNR;
(h) as soon as available and in any event within 60 days after the end
of each of the first three quarters, and within 120 days after the end of the
fourth quarter, of each fiscal year of each Joint Venture, a balance sheet of
that Joint Venture as of the end of that quarter and a statement of earnings of
that Joint Venture for the period from the beginning of the fiscal year to the
end of that quarter, prepared in accordance with GAAP consistently applied,
unaudited but certified to be true and accurate, subject (in the case of the
financial statements delivered for the first three quarter of each fiscal year)
to normal year-end adjustments, by the Chief Financial Officer of the Borrower;
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(i) within 60 days after the end of each of the first three quarters,
and within 90 days after the end of each fiscal year of the Borrower (commencing
with the quarter and Fiscal Year ending November 30, 1997), a report, in
reasonable detail and in form and substance satisfactory to the Agent, with
calculations indicating that the Borrower is in compliance with the provisions
of Article VII and, Article VIII, of this Agreement;
(j) within 270 days after the close of each fiscal year, a statement of
the Unfunded Liabilities of each Single Employer Plan, certified as correct by
an actuary enrolled under ERISA, but the foregoing statement shall be required
only if any Single Employer Plan shall exist;
(k) as soon as possible and in any event within 10 days after the
Borrower knows that any Reportable Event has occurred with respect to any Plan,
a statement, signed by the Chief Financial Officer of the Borrower, describing
said Reportable Event and the action which the Borrower proposes to take with
respect thereto;
(l) as soon as possible and in any event within 10 days after receipt
thereof by the Borrower, a copy of (a) any Environmental Claim against the
Borrower or any of the Subsidiaries, and (b) any notice alleging any violation
of any Environmental Law or any federal, state or local health or safety law or
regulation by the Borrower or any of the Subsidiaries, which, in either case,
could reasonably be expected to have a Material Adverse Effect;
(m) such supplements to the aforementioned documents and additional
information (including, but not limited to, leasing, occupancy and non-financial
information) and reports as the Agent or any Lender may from time to time
reasonably require;
(n) concurrently with the quarterly financial statements described in
subsection (b) above following the end of any quarter in which each new
Subsidiary that is to become a Subsidiary Guarantor under Section 6.07 hereof
was formed, the Borrower shall deliver to the Agent (i) revised copies of
Schedule I to this Agreement and Schedule I to the Notes, adding thereto the
name of such new Subsidiary Guarantor, (ii) a revised copy of Schedule V to this
Agreement, adding thereto the information with respect to such new Subsidiary
required by Section 4.19 hereof, (iii) a Joinder Agreement, in form and content
satisfactory to the Agent, executed by a duly authorized officer of such new
Subsidiary, pursuant to which such Subsidiary agrees to become a Subsidiary
Guarantor hereunder, assumes all of the Obligations, and agrees that Schedule I
hereto and Schedule I to the Notes shall be amended to include the name of such
Subsidiary; (iv) a copy of the certificate of incorporation or other
organizational document of such new Subsidiary, certified by the secretary of
state or other official of the state or other jurisdiction of its incorporation;
and (v) a copy of the bylaws of such new Subsidiary, certified by the secretary
or other appropriate officer or partner of such Subsidiary.
(o) within 60 days of the Closing Date, a Closing Date balance sheet of
the Borrower, as of such date and after giving effect to the formation of the
Borrower, the transfer of assets by LLP Partner to the Borrower pursuant to the
Reorganization and the effectiveness of this
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Agreement and the Lennar Credit Agreement and the funding of the initial loans
thereunder, prepared in accordance with GAAP, unaudited but certified to be true
and accurate by the Chief Financial Officer of the Borrower.
SECTION 6.05. ACCESS TO PREMISES AND RECORDS. At all reasonable times
and as often as any Lender may reasonably request, permit authorized
representatives and agents designated by that Lender to (i) have access to the
premises of the Borrower and each Subsidiary and to their respective corporate
books and financial records, and all other records relating to their respective
operations and procedures, (ii) make copies of or excerpts from those books and
records and (iii) upon reasonable notice to the Borrower, discuss the respective
affairs, finances and operations of the Borrower and the Subsidiaries with, and
to be advised as to the same by, their respective officers and directors.
SECTION 6.06. MAINTENANCE OF PROPERTIES AND INSURANCE. Maintain all its
and each Subsidiary Guarantor's properties and assets in good working order and
condition and make all necessary repairs, renewals and replacements thereof so
that its business carried on in connection therewith may be properly conducted
at all times; and maintain or require to be maintained (i) adequate insurance,
by financially sound and reputable insurers, on all properties of the Borrower
and each Subsidiary Guarantor which are of character usually insured by Persons
engaged in the same or a similar business against loss or damage resulting from
fire, defects in title or other risks insured against by extended coverage and
of the kind customarily insured against by those Persons, (ii) adequate public
liability insurance against tort claims which may be incurred by the Borrower,
and (iii) such other insurance as may be required by law. Upon the request of
the Agent, the Borrower will furnish to the Lenders full information as to the
insurance carried.
SECTION 6.07. FINANCING; NEW INVESTMENTS. Give the Agent (i) written
notice of any serious negotiations for debt or equity financing or for the
placement of the Borrower's Securities in either a private or public financing,
if any of the foregoing transactions are to be in excess of $1,000,000 in any
one transaction or series of related transactions, (ii) advance written notice
of the formation of any new Significant Subsidiary (as hereinafter defined), the
establishment of any new Joint Venture or the commencement of any new Project,
which such new Significant Subsidiary shall become a party to this Agreement as
a Subsidiary Guarantor hereunder, effective upon the date of such Subsidiary's
formation, unless (x) such Subsidiary is a Joint Venture Subsidiary and (y) all
of the issued and outstanding equity Securities of such Subsidiary are pledged
to the Lenders pursuant to Section 7.05 hereof, and (iii) written notice of the
formation of any new Subsidiary which is not a Significant Subsidiary given not
later than ten (10) days after such formation, which new Subsidiary shall become
a party to this Agreement as a Subsidiary Guarantor hereunder effective upon
such Subsidiary's formation; PROVIDED, HOWEVER, that nothing in this Section
6.07 shall be deemed to authorize the Borrower to enter into any such
transaction if the same would violate any of the limitations set forth in
Article VII hereof. As used in this Section 6.07, the term "Significant
Subsidiary" means a Subsidiary in which the Borrower or another Subsidiary makes
investments (whether through the purchase of Capital Stock or instru-
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ments evidencing debt, advances or loans to such Subsidiary or by the guaranty
of Indebtedness of such Subsidiary) in a cumulative amount in excess of
$1,000,000.
SECTION 6.08. COMPLIANCE WITH APPLICABLE LAWS. Promptly and fully
comply with, conform to and obey all present and future laws, ordinances, rules,
regulations, orders, writs, judgments, injunctions, decrees, awards and all
other legal requirements applicable to the Borrower, the Subsidiaries and their
respective properties, including Environmental Laws, Regulation Z of the Board
of Governors of the Federal Reserve System, the Federal Interstate Land Sales
Full Disclosure Act, ERISA and the Florida Land Sales Act, the violation of
which would have a Material Adverse Effect on the Borrower or impose a liability
on the Lender.
SECTION 6.09. USE OF PROCEEDS. Use the proceeds of the Advances to
repay existing Indebtedness outstanding on the Closing Date, to make the
Distributions permitted by the last sentence of Section 7.11, for working
capital including interest payments and general partnership purposes.
SECTION 6.10. FURTHER ASSURANCES. Upon the request of the Agent,
promptly perform or cause to be performed any and all acts, execute or cause to
be executed any and all documents (including without limitation, financing
statements and continuation statements) for filing or recording under the
provisions of the Uniform Commercial Code or any other Legal Requirement which
is necessary or advisable to maintain in favor of the Agent, for the benefit of
the Lenders, Liens on the collateral that are duly perfected in accordance with
all applicable Legal Requirements or otherwise appropriately recorded so as to
put third parties on notice with respect to the Liens on the collateral.
SECTION 6.11. APPRAISALS. Within sixty (60) days of the Closing Date,
each draft Appraisal furnished pursuant to Section 5.01(m) hereof shall be made
final and reviewed for FIRREA compliance by the Agent and each Lender. If and to
the extent that any such Appraisal is not satisfactory to the Agent or if the
Majority Lenders determine that such Appraisal does not comply with FIRREA, such
Mortgaged Property described in such Appraisal shall thereupon no longer be
included in the Borrowing Base and Borrower shall, if necessary, make a
mandatory prepayment of the Loan in such amount as may be necessary to cause the
Borrower to be in compliance with Section 2.02(d) hereof. Furthermore, after
each such Appraisal has been approved for FIRREA compliance by the Majority
Lenders, and such Appraisal is satisfactory to the Agent, the aggregate
appraised value on an "as is basis" of the Mortgaged Property described in such
Appraisals must be greater than the aggregate Net Book Value of the Finished
Lots, Land Under Development, Entitled Land, and Unentitled Land included in the
Borrowing Base at the Closing Date. Upon the request of the Agent, obtain one or
more Appraisals at any time; PROVIDED that, so long as no Unmatured Default has
occurred and is continuing, the Borrower shall not be required to pay for more
than one Appraisal per Property every two years.
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ARTICLE VII
NEGATIVE COVENANTS
The Borrower covenants and agrees that from the date hereof until
payment in full of all the Obligations, unless the Required Lenders otherwise
shall consent in writing as provided in Section 13.06 hereof, Borrower will not,
either directly or indirectly:
SECTION 7.01. MINIMUM TANGIBLE NET WORTH. Permit the Tangible Net Worth
of the Borrower at any time to be less than the sum of (a) $150,000,000, (b) an
amount equal to 50% of the cumulative amount of Consolidated Net Income of the
Borrower and the Subsidiaries for each fiscal quarter of the Borrower ending
after the Closing Date for which the Borrower and the Subsidiaries, taken as a
whole, had Consolidated Net Income, and (c) an amount equal to 100% of the
aggregate amount of the increase in the consolidated partners' equity of the
Borrower resulting from contributions to the capital of the Borrower and the
issuance of equity Securities of the Borrower after the Closing Date. For
purposes of this Section 7.01, "Consolidated Net Income", when used in respect
of any period, shall not include any loss for such period.
SECTION 7.02. LIMITATION ON INDEBTEDNESS.
(a) MAXIMUM LEVERAGE RATIO. As of the last day of each fiscal
quarter of the Borrower, permit the aggregate outstanding amount of the
Indebtedness of the Borrower (excluding the Nonrecourse Debt owed by
Subsidiaries of the Borrower which are not Subsidiary Guarantors), to exceed
150% of Adjusted Tangible Net Worth.
(b) OTHER INDEBTEDNESS. Permit the sum of the Borrower's other
Indebtedness (including Nonrecourse Debt, but excluding the Obligations and
Nonrecourse Debt of Subsidiaries which are not Subsidiary Guarantors), recourse
Indebtedness and Contingent Obligations of Subsidiaries and Joint Ventures
(excluding letters of credit related to assets in the Borrowing Base) to exceed
15% of Tangible Net Worth (excluding Tangible Net Worth of any Subsidiary which
is not a Subsidiary Guarantor).
SECTION 7.03. GUARANTIES. Make or suffer to exist any Contingent
Obligation (including, without limitation, any Contingent Obligation with
respect to the obligations of a Subsidiary or Joint Venture) or otherwise
assume, secure, provide Collateral for, or otherwise hypothecate or transfer any
property in respect of, guarantee or in any way become contingently liable or
responsible for obligations of any other Person, whether by agreement to
purchase those obligations of any other Person, or by agreement for the
furnishing of funds through the purchase of goods, supplies or services (whether
by way of stock purchase, capital contribution, advance or loan) for the purpose
of paying or discharging the obligations of any other Person, except for: (a)
guaranties of obligations of another Borrower issued in the ordinary course of
business; (b) the endorsement of negotiable instruments in the ordinary course
of business; (c) guaranties of performance and completion and performance and
completion bonds issued in connection with the
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construction of Real Estate developments owned by the Borrower; (d) guaranties
of liabilities incurred by Joint Ventures to which the Borrower or a Joint
Venture Subsidiary is a party except as provided in Section 7.02(b) above.
SECTION 7.04. SALE OF ASSETS; ACQUISITIONS; MERGER.
(a) Do any of the following:
(i) sell, assign, lease or otherwise dispose of (whether in
one transaction or in a series of transactions) all or substantially
all of the assets (whether now owned or hereafter acquired) of the
Borrower and the Subsidiaries (on a consolidated basis) except for the
sale of inventory in the ordinary course of business;
(ii) merge into or consolidate with any other Person or permit
any other Person to merge into or consolidate with it;
(iii) dissolve, liquidate or wind up its business by operation
of law or otherwise; or
(iv) distribute to the partners of the Borrower any Securities
of any Subsidiary;
PROVIDED, HOWEVER, that any Subsidiary or any other Person may merge into or
consolidate with or may dissolve and liquidate into the Borrower, if (and only
if), (1) in the case of a merger or consolidation, the Borrower is the surviving
Person, (2) in the case of a merger or consolidation involving the Borrower, the
Borrower is the surviving Person, (3) the character of the business of the
Borrower and the Subsidiaries on a consolidated basis will not be materially
changed by such occurrence, and (4) such occurrence shall not constitute or give
rise to an Event of Default or Unmatured Default or a default in respect of any
of the covenants contained in any agreement to which the Borrower or such
Subsidiary is a party or by which its property may be bound.
(b) Acquire another Person unless (i) such Person is involved in the
acquisition, development and/or sale of Real Estate as its primary business and
(ii) the board of directors or other governing body and such Person approves
such acquisition.
Nothing contained in this Section 7.04, however, shall restrict any
sale of assets between the Borrower and any Subsidiary Guarantor, or between
Subsidiary Guarantors, which is in compliance with all other provisions of this
Agreement and the other Loan Documents.
SECTION 7.05. INVESTMENTS. Purchase or otherwise acquire, hold or
invest in the Securities (whether Capital Stock or instruments evidencing debt)
of, make loans or advances to, enter into any arrangements for the purpose of
providing funds or credit to, or make any Equity Investment in, any Person which
is not on the Closing Date a Subsidiary Guarantor or which becomes a Subsidiary
Guarantor upon the making of the investment, except for: (i) Investments in
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or loans or advances to Joint Ventures to which the Borrower or a Subsidiary is
a party, PROVIDED that (A) all such Investments, loans and advances outstanding
at any time, not including Investments, loans and advances with respect to
Stevenson Ranch Venture L.L.C. and Bressi Ranch, when aggregated with the then
outstanding guaranties of the obligations of the Joint Ventures of the type
referred to in clause (d) of Section 7.03 hereof do not exceed 25% of Tangible
Net Worth and (B) all such Investments, loans and advances made after the
Agreement Date with respect to Stevenson Ranch Venture L.L.C. and Bressi Ranch
do not exceed an aggregate of $3,000,000 (the "Additional Investment") at any
one time outstanding, it being presumed that any payment or distribution made to
the Borrower by either Stevenson Ranch Venture L.L.C. or Bressi Ranch, as the
case may be, after the date of making such Additional Investment shall be first
a repayment or return of such Additional Investment and the balance of such
distribution being presumed to be a repayment or return of the Investment made
in such entities prior to the Agreement Date, and (ii) with respect to
Investments in, or loans and advances to each Joint Venture Subsidiary, all of
the issued and outstanding equity Securities of such Joint Venture Subsidiary
shall have been pledged to the Agent pursuant to the terms and provisions of the
Security Agreement (Capital Stock and Partnership Interests) and such pledge
shall not be prohibited by, or result in a breach or violation of, any
agreement, indenture or other instrument to which the Borrower or any Subsidiary
is a party or is bound; (iii) purchases of direct obligations of the government
of the United States of America, or any agency thereof, or obligations
unconditionally guaranteed by the United States of America; (iv) certificates of
deposit of any bank organized or licensed to conduct a banking business under
the laws of the United States or any state thereof having capital, surplus and
undivided profits of not less than $100,000,000; (v) Investments in commercial
paper which, at the time of acquisition by the Borrower, is accorded an "A" or
equivalent rating by any of the Rating Agencies or any other nationally
recognized credit rating agency of similar standing; and (vi) Investments in
publicly traded, readily marketable securities, traded on a recognized national
exchange or over-the-counter, PROVIDED, HOWEVER, that no more than an aggregate
of $15,000,000, may be invested in such securities.
SECTION 7.06. SUBORDINATED DEBT. Directly or indirectly make any
payment of principal or interest with respect to any Subordinated Debt prior to
the date the same is due, or amend or modify the terms of any Subordinated Debt
except for extensions of the due date thereof, or directly or indirectly redeem,
retire, defease, purchase, retire or otherwise acquire any Subordinated Debt.
SECTION 7.07. NO MARGIN STOCK. Use any of the proceeds of the Advances
to purchase or carry any "margin stock" (as defined in Regulation U).
SECTION 7.08. TRANSACTIONS WITH AFFILIATES. Enter into any transaction
(including, without limitation, the purchase or sale of any property or service)
with, or make any payment or transfer to, any Affiliate, except in the ordinary
course of business and pursuant to the reasonable requirements of the Borrower's
or a Subsidiary's business and upon fair and reasonable terms no less favorable
to the Borrower or such Subsidiary than the Borrower or such Subsidiary would
obtain in a comparable arms-length transaction.
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SECTION 7.09. FIXED CHARGE COVERAGE. Permit Free Cash Flow to be less
than 125% of the sum of (x) principal payments made on all Indebtedness of the
Borrower and the Subsidiaries, (y) Consolidated Interest Incurred and (z)
Distributions (other than Distributions permitted by the last sentence of
Section 7.11), in each case calculated (i) with respect to the period commencing
on the date of the formation of the Borrower and ending on the last day of the
quarter in which the first anniversary of the Closing Date occurs, on a
cumulative basis, and (ii) commencing with the first day of the first full
quarter next following the first anniversary of the Closing Date and on the
first day of each quarter thereafter for the four (4) quarters preceding such
day.
SECTION 7.10. PRO FORMA FIXED CHARGE COVERAGE. On the last day of each
fiscal quarter next following the Closing Date and the last day of each fiscal
quarter thereafter, permit unrestricted cash in excess of $2,000,000 plus the
amount, if any, by which the Borrowing Base exceeds all (i) Loans then
outstanding under Facility A and Facility B and (ii) then outstanding Facility
Letters of Credit Obligations to be less than 125% of the sum of the following
for the quarter commencing on such Quarterly Payment Date, (a) required
(including but not limited to scheduled) principal payments (remaining after any
prepayments), (b) interest payments to be made in said quarter and (c) projected
tax distributions which for the purpose of this Agreement shall mean tax
payments on the Consolidated Net Income of the Borrower excluding income from
Subsidiaries which are not Subsidiary Guarantors or Joint Ventures, calculated
at the maximum federal tax rate for a corporation plus the maximum applicable
state income tax.
SECTION 7. 11. RESTRICTIONS ON DISTRIBUTIONS. Permit Distributions by
the Borrower to exceed 50% of the Borrower's Consolidated Net Income. The
Borrower may elect to make Distributions not more frequently than once per
quarter. Free Cash Flow from Subsidiaries which are not Subsidiary Guarantors
may be distributed without limitation; PROVIDED no Default or Event of Default
then exists or would result from such Distribution. No Distribution (other than
for the cash payment of Lennar's and LNR's income taxes related to the Borrower
and Distributions from Subsidiaries that are not Subsidiary Guarantors) shall be
made until after the first two fiscal quarters next following the Closing Date.
No Distributions (other than for the cash payment of Lennar's and LNR's income
taxes related to the Borrower) shall be made in any quarter unless the Borrower
delivers its quarterly compliance certificate showing compliance with all
covenants after giving effect to the Distribution as if it had been made during
said the immediately preceding quarter. Any permitted Distributions which are
not made in a quarter may be made in the following quarter. Notwithstanding
anything in this section to the contrary, the Borrower shall be permitted to
make Distributions by way of return of capital to its partners of up to fifty
percent (50%) of the Net Book Value of all Mortgaged Property contributed by
Lennar (including indirect contributions by way of Capital Stock of Subsidiary
Guarantors) to the capital of the Borrower on or before the Closing Date and
reflected on Schedule III hereto, PROVIDED that (i) such Distributions do not,
individually or in the aggregate, result in an Event of Default or Unmatured
Default, (ii) all such Distributions are completed by December 31, 1997, and
(iii) such Distributions do not, individually or in the aggregate, result in a
violation of Section 4.31.
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SECTION 7.12. LIENS AND ENCUMBRANCES.
(a) NEGATIVE PLEDGE. Grant any Liens on any of its or any Subsidiary's
rights, properties or assets other than Permitted Liens.
(b) NO AGREEMENT FOR NEGATIVE PLEDGE. Agree with any third party not to
create, assume or suffer to exist any Lien securing a charge or obligation on or
of any of Borrower's or any Subsidiary's property, real or personal, whether now
owned or hereafter acquired.
ARTICLE VIII
COLLATERAL
SECTION 8.01. SECURITY FOR OBLIGATIONS. The Borrower and the Subsidiary
Guarantors, respectively, shall grant the Agent, on behalf of the Lenders, as
security for the payment in full of all the Borrower Obligations and Subsidiary
Guarantor Obligations, a first Lien on all of the Borrower's and each Subsidiary
Guarantor's respectively now or hereafter owned assets which are included in the
Borrowing Base.
SECTION 8.02. COLLATERAL DOCUMENTATION. With respect to the assets
forming the Borrowing Base as at the Closing Date and any other asset hereafter
added to the Borrowing Base, the Borrower and each Subsidiary Guarantor shall
deliver to the Agent their respective documentation described in Section 5.01.
SECTION 8.03. POWERS AND DUTIES OF THE BORROWER AND SUBSIDIARY
GUARANTORS WITH RESPECT TO THE COLLATERAL.
(a) Subject to the provisions of this Agreement, so long as no Event of
Default shall have occurred and be continuing, the Borrower and the Subsidiary
Guarantors shall have the right to deal with, manage and administer the
Collateral and to collect and use the proceeds thereof in such manner as they
shall deem appropriate (subject to the provisions of Section 2.02).
(b) Unless the Borrower shall have been notified, pursuant to Section
9.03 hereof, that it has been discharged from its right to deal with, manage and
administer all items of the Collateral, the Borrower shall, subject to the
provisions of this Agreement, manage and administer all the Collateral in such
manner as they shall deem appropriate, without charge to the Lenders; PROVIDED,
HOWEVER, that the Borrower shall remain fully responsible for all its
obligations as owner, creditor or otherwise with respect to the Collateral.
SECTION 8.04. POWER OF ATTORNEY. With respect to the Collateral which
the Agent may from time to time hold and/or be entitled to obtain hereunder, the
Agent hereby is irrevocably appointed by the Borrower and each Subsidiary
Guarantor as Borrower's and each Subsidiary
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Guarantor's true and lawful attorney-in-fact with full power, from time to time
upon the occurrence and during the continuance of an Event of Default, to (i)
take possession of and endorse in Borrower's and each Subsidiary Guarantor's
name any pledges, assignments and other documents and any notes, checks, drafts,
bills of exchange, money orders and any other documents received in payment for
or on account of those assets and properties, (ii) to collect, sue for and give
acquittance for moneys due on account of those assets and properties, (ii) to
withdraw any claims, suits or proceedings pertaining to or arising out of those
assets and properties. The foregoing appointment is with full power of
substitution and is coupled with an interest. The Agent shall not be liable for
any failure to collect or enforce the payment of any of those assets and
properties.
SECTION 8.05. JOINDER IN SUBDIVISION PLATS, SUBDIVISION MAPS OR PARCEL
MAPS. To the extent required by Governmental Authorities, Agent will join in the
execution of plats, subdivision maps or parcel maps of the Mortgaged Property
and Additional Mortgaged Property (each a "Plat"), which joinder shall be
provided within ten (10) Business Days of the fulfillment of each and every one
of the following conditions precedent:
(i) Lenders shall not incur any liability of any kind in
connection with the execution and processing of the Plat, and all
reasonable out-of-pocket costs and expenses incurred by Lenders shall
be paid by Borrower;
(ii) The Borrower, each Subsidiary Guarantor and the Plat
shall have complied in all respects with all Governmental Authority
requirements; and,
(iii) A written commitment from the Title Company that the
Title Policy will be endorsed to insure that the Plat is a valid
subdivision upon recordation of the Plat.
SECTION 8.06. SALE OF LOTS. Borrower and the Subsidiary Guarantors
shall:
(i) Sell all Lots upon a fee simple basis;
(ii) Comply with all Legal Requirements affecting the sale of
the Lots, or any interest in the Lot or any part of the Lot; and
(iii) Assign to Lenders all reservations, deposits, down
payments, or the like, under contracts of sale (which contracts of sale
shall be expressly inferior and subordinate to the lien of any Mortgage
now or hereafter existing which encumbers the subject property) and
reservation receipts for lots, or any similar deposits respecting the
Project.
SECTION 8.07. PARTIAL RELEASES OF LOTS. As long as (i) no Event of
Default or Unmatured Default has occurred and is continuing, and (ii) all then
outstanding Loans do not exceed the Borrowing Base at such time, Lenders agree
to grant partial releases of Lots or other Collateral from the Lien of the
Mortgage within thirty (30) days of a request therefor in accordance with and
subject to all of the following:
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(i) As necessary to satisfy Legal Requirements, the Plat shall
have first been recorded in the public records of the county in which
the Lot is located;
(ii) The Borrower shall be current in all payments required by
this Agreement;
(iii) Requests for partial releases must be in writing,
delivered to Agent, and accompanied by all data necessary to support
the Borrower's entitlement to the partial release, including, without
limitation, (a) a partial release form, in form and content
satisfactory to Agent; (b) a schedule containing a list of the Lots
previously released by Lender, and the Lots remaining to be released;
and (c) if the Lots are not described in a recorded Plat, a Survey
certified to the Agent in accordance with the Agent's requirements,
which survey shall show the unreleased portion of the Real Estate, the
location of the Lot to be released and the location of all previously
released lots;
(iv) The Real Estate encumbered by the Mortgage following the
release shall have access to a publicly dedicated right-of-way insured
by an access endorsement to the applicable Title Policy to the extent
such endorsement is available in the application jurisdiction;
(v) The partial release documents shall be prepared by
Borrower at Borrower's expense, and must be in form and content
satisfactory to the Agent and the Agent's counsel;
(vi) Borrower shall pay all out-of-pocket costs of the Agent
and the Lenders attendant upon obtaining any partial release; and
(vii) The requested release is in connection with payments
made pursuant to Sections 2.02(b)(i) and 2.02(b)(ii) and an all-cash
sale made in the ordinary course of the Borrower's business of the Real
Estate as to which the partial release of the Mortgage is requested;
PROVIDED, HOWEVER, that unless the Required Lenders shall otherwise consent, the
Agent shall not be obligated to grant any such release if, after giving effect
to such release, the sum of all then outstanding Advances and Letter of Credit
Obligations exceeds the sum of (i) the Borrowing Base at such time and (ii) the
amount of cash on deposit at such time in the Letter of Credit Collateral
Account pursuant to Section 9.02.
SECTION 8.08. SALE OF ACREAGE. Borrower and the Subsidiary Guarantor
shall:
(i) Sell all Real estate, not constituting a Lot, upon a fee
simple basis;
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(ii) Comply with all Legal Requirements affecting the sale of
such Real Estate; and
(iii) Assign to Lenders all reservations, deposits, down
payments, or the like under contracts of sale (which contracts of sale
shall be expressly inferior and subordinate to the lien of any mortgage
now or hereafter existing which encumbers the subject property).
SECTION 8.09. PARTIAL RELEASES OF ACREAGE AND COMMON AREAS. As long as
no Event of Default or Unmatured Default has occurred and is continuing, and
(ii) all then outstanding Loans do not exceed the Borrowing Base at such time,
Lenders agree to grant partial releases of Real Estate not constituting Lots
from the Lien of the mortgage within thirty (30) days after the request therefor
in accordance with and subject to all of the following:
(i) The Borrower shall be current in all payments required by
this Agreement;
(ii) Requests for partial releases must be in writing,
delivered to the Agent and accompanied by all data necessary to support
the Borrower's entitlement to the partial release, including, without
limitation, (a) a partial release form, in form and content
satisfactory to the Agent; and (b) a map or sketch showing the real
estate to be released and the real estate remaining encumbered by the
mortgage;
(iii) The Real Estate encumbered by the mortgage following the
release shall have access to a publicly dedicated right-of-way insured
by an access endorsement to the applicable Title Policy to the extent
available in the applicable jurisdiction;
(iv) The partial release document shall be prepared by
Borrower, at Borrower's expense, and must be in form and content
satisfactory to the Agent and the Agent's counsel;
(v) Borrower shall pay all out-of-pocket costs of the Agent
and the Lenders attendant upon obtaining any partial release;
(vii) Unless the Real Estate to be released from the lien of
the Mortgage is common area for the use of homeowners in the Project,
for which no consideration is to be received by the Mortgagor, the
requested release is in connection with payments made pursuant to
Section 2.02(b)(iii) and an all-cash sale made in the ordinary course
of the Borrower's business of the Real Estate as to which the partial
release of the Mortgage is requested;
PROVIDED, HOWEVER, that unless the Required Lenders shall otherwise consent, the
Agent shall not be obligated to grant any such release if, after giving effect
to such release, the sum of all then outstanding Advances and Letter of Credit
Obligations exceeds the sum of (i) the Borrowing Base
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at such time and (ii) the amount of cash on deposit at such time in the Letter
of Credit Collateral Account pursuant to Section 9.02.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.01. EVENTS OF DEFAULT. The occurrence of any one or more of
the following Events shall constitute an "Event of Default":
(a) any representation or warranty made or deemed made by or on behalf
of the Borrower or any Subsidiary Guarantor to the Lenders or the Agent under or
in connection with this Agreement or any Loan Document shall be false or
misleading in any material respect when made;
(b) any report, certificate, financial statement or other document or
instrument furnished in connection with this Agreement or the Loans hereunder
shall be false or misleading in any material respect when furnished;
(c) default shall be made in the payment of (i) the principal of any of
the Notes or of any Reimbursement Obligation when and as due and payable, or
(ii) the interest on any of the Notes, any fees or any other sums due pursuant
to Article II (other than mandatory prepayments pursuant to Section 2.02), which
default continues for five days after the same becomes due and payable;
(d) default shall be made with respect to any Indebtedness or
Contingent Obligations of the Borrower or any Subsidiary Guarantor (other than
the Indebtedness evidenced by the Notes), or in any net liabilities under
interest rate swap, exchange or cap agreements or any Swap Documents, beyond any
applicable period of grace, or default shall be made with respect to the
performance of any other obligation incurred in connection with any such
Indebtedness or liabilities beyond any applicable period of grace, or default
shall be made with respect to any other liability of $100,000 or more, if the
effect of any such default is to accelerate the maturity of such Indebtedness or
liability or to cause any other liability to become due prior to its stated
maturity, or any such Indebtedness or liability shall not be paid when due and
such default shall not have been remedied or cured by the Borrower or such
Subsidiary Guarantor or waived by the obligor;
(e) default shall be made in the due observance or performance of any
of the provisions of Article VII or Article VIII of this Agreement;
(f) default shall be made in the due observance or performance of any
other covenant, agreement or condition on the part of the Borrower or any
Subsidiary Guarantor to be performed under or in connection with this Agreement
or any Loan Document, and such default shall have continued for a period of 30
days after the occurrence thereof;
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(g) the Borrower or any Subsidiary Guarantor shall (i) petition or
apply for, seek, consent to, or acquiesce in, the appointment of a receiver,
trustee, examiner, custodian, liquidator or similar official of the Borrower or
any Subsidiary Guarantor or any of its properties or assets, (ii) be unable, or
admit in writing its inability, to pay its debts as they mature, (iii) make a
general assignment for the benefit of or a composition with its creditors, (iv)
have an order for relief entered with respect to it under the Federal bankruptcy
laws as now or hereafter in effect, (v) institute any proceeding seeking an
order for relief under the Federal bankruptcy laws as now or hereafter in
effect, or file a petition or an answer seeking dissolution, winding up,
liquidation or reorganization or an arrangement with creditors or a composition
of its debts or to take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debts, dissolution or liquidation law or statute or other
statute or law for the relief of debtors, or file any answer admitting the
material allegations of a petition filed against it in any proceeding under such
law, or fail to file an answer or other pleading denying the material
allegations of any such proceeding filed against it, or if corporate or other
action shall be taken by the Borrower or such Subsidiary Guarantor for the
purpose of effecting any of the foregoing, or (vi) fail to contest in good faith
any appointment or proceeding described in Section 9.01(h);
(h) an order, judgment, or decree shall be entered without the
application, approval, or consent of the Borrower or any Subsidiary Guarantor by
any court of competent jurisdiction appointing a receiver, trustee or liquidator
of the Borrower or any Subsidiary Guarantor or a proceeding described in Section
9.01(g) shall be instituted against the Borrower or any Subsidiary Guarantor,
and such appointment shall continue undischarged or such proceeding continues
undismissed or unstayed for any period of 45 days;
(i) final judgment for the payment of money in excess of $250,000 shall
be rendered against the Borrower or any Subsidiary Guarantor and the same shall
remain undischarged for a period of 30 days during which execution shall not be
effectively stayed;
(j) final judgment(s) for the payment of money in excess of an
aggregate of $250,000 shall be rendered against the Borrower or any Subsidiary
Guarantor after the Closing Date and shall remain undischarged and unstayed for
a period of ten days;
(k) there shall occur any Event or Events which, individually or in the
aggregate, shall be deemed by the Required Lenders to have had a Material
Adverse Effect;
(l) The Borrower or any Subsidiary Guarantor shall be the subject of
any proceeding or investigation pertaining to the release by the Borrower, any
Subsidiary Guarantor or any other Person of any Hazardous Substance into the
environment, or any violation of any Environmental Law or any federal, state or
local health or safety law or regulation, which, in either case, could
reasonably be expected to have a Material Adverse Effect;
(m) The occurrence of any "default", as defined in any Loan Document
(other than this Agreement or the Notes) or the breach of any of the terms or
provisions of any Loan Document
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(other than this Agreement or the Notes), which default or breach continues
beyond any period of grace therein provided;
(n) An Event of Default (as such term in defined in the Lennar Credit
Agreement) under the Lennar Credit Agreement shall have occurred;
(o) Lennar or its subsidiaries, LNR or its subsidiaries, or any
Subsidiary Guarantor shall take any action or threaten to take any action to
avoid its obligations under the Lennar and LNR Guaranty or the Subsidiary
Guarantees, respectively, including, without limitation, any repudiation,
revocation, termination or purported revocation or termination thereof;
(p) Any Lien that has been granted to the Lenders pursuant hereto no
longer continues to be a first priority Lien; or
(q) Lennar shall cease to own directly or indirectly a 50% interest in
the Borrower or Lennar or its Wholly-Owned Subsidiary shall at any time for any
reason cease to be the managing general partner of the Borrower.
SECTION 9.02. ACCELERATION. If any Event of Default described in
subsection 9.01(g) or (h) occurs, the obligations of the Lenders to make Loans
and of an Issuer to issue Facility Letters of Credit hereunder shall
automatically terminate and the Obligations shall immediately become due and
payable without any election or action on the part of the Agent or any Lender.
If any other Event of Default occurs and is continuing, the Required Lenders may
terminate or suspend the obligations of the Lenders to make Loans and of an
Issuer to issue Facility Letters of Credit hereunder, or declare the Obligations
to be due and payable, or both, whereupon the Obligations shall become
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which the Borrower and each Subsidiary Guarantor hereby
expressly waives. In addition to the foregoing following the occurrence and
during the continuance of an Event of Default, so long as any Facility Letter of
Credit has not been fully drawn and has not been canceled or expired by its
terms, upon demand by the Agent the Borrower shall deposit in the Letter of
Credit Collateral Account cash in an amount equal to the aggregate undrawn face
amount of all outstanding Facility Letters of Credit and all fees and other
amounts due or which may become due with respect thereto. The Borrower shall
have no control over funds in the Letter of Credit Collateral Account, which
funds shall be invested by the Agent from time to time in its discretion in
certificates of deposit of First Chicago having a maturity not exceeding 30
days, so long as the Borrower has provided the Agent with such documents as the
Agent shall have requested in order to perfect a security interest in such
certificates of deposit. Such funds shall be promptly applied by the Agent to
reimburse any Issuer for drafts drawn from time to time under the Facility
Letters of Credit. Such funds, if any, remaining in the Letter of Credit
Collateral Account following the payment of all of the Borrower Obligations in
full shall, unless the Agent is otherwise directed by a court of competent
jurisdiction, be promptly paid over to the Borrower.
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If, within 30 days after acceleration of the maturity of the
Obligations or termination of the obligations of the Lenders to make Loans and
of an Issuer to issue Facility Letters of Credit hereunder as a result of any
Event of Default (other than any Event of Default as described in subsection
9.01 (g) or (h) with respect to the Borrower) and before any judgment or decree
for the payment of the Obligations due shall have been obtained or entered, the
Required Lenders (in their sole discretion) shall so direct, the Agent shall, by
notice to the Borrower, rescind and annul such acceleration and/or termination.
SECTION 9.03. RIGHTS AS TO COLLATERAL.
(a) If, on the Maturity Date for Facility A or Facility B, the Borrower
shall not have paid in full all the Obligations which are due and payable on
such Maturity Date, the Agent, at the direction of the Required Lenders, shall
take (and/or shall cause one or more of its designees to take) any or all of the
following actions, in addition to and not in derogation of any right contained
in the Loan Documents, after giving at least three Business Days' (which notice
period the Borrower acknowledges to be adequate and reasonable) written notice
to the Borrower (a single such notice being sufficient to entitle the Agent to
take one or more of the actions described below):
(i) prohibit the Borrower from taking any action otherwise
permitted by Section 8.03(a) hereof, and/or discharge the Borrower from
their right to manage and administer the items of Collateral as
provided in Section 8.03(b) hereof;
(ii) notify the obligors or other parties interested in any item
of the Collateral of the interest of the Lenders therein and of any
action proposed to be taken with respect thereto, and inform any of
those parties that all payments otherwise payable to the Borrower with
respect thereto thereafter shall be made to the Agent until all the
Obligations have been paid in full;
(iii) receive and retain all payments and all other distributions
of any kind with respect to any and all of the Collateral;
(iv) exercise any rights of voting or consent pertaining to any
item of Collateral to the same extent as if the Agent were the outright
owner thereof for the benefit of the Lenders, or cause any item of the
Collateral to be transferred to its own name and have such transfer
recorded in any place or places deemed appropriate by the Agent;
(v) deal with the Collateral in all respects as if it were the
outright owner thereof for the benefit of the Lenders;
(vi) take such action as directed by the Required Lenders with
respect to the sale, assignment and delivery of the whole of, or from
time to time any one or more items of, the Collateral, including,
without limitation: to sell, assign and deliver the whole of, or from
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time to time any part of, the Collateral at any broker's board or at
any private sale or at public auction, with or without demand on the
Borrower or advertisement of the time or place of sale or adjournment
thereof or otherwise, for cash, for credit or for other property, for
immediate or future delivery, and for such price or prices and on such
terms as the Required Lenders in their discretion may determine, and
the Agent or any of the other Lenders may bid for and purchase the
whole or any one or more items of the Collateral so sold free from any
right or equity of redemption; to adjourn any such sale or cause the
same to be adjourned from time to time to a subsequent time and place
announced at the time and place fixed for the sale; and to carry out
any agreement to sell any item or items of Collateral in accordance
with the terms of such agreement, notwithstanding that after the Agent
shall have entered into such agreement, all the Obligations may have
been paid in full; and
(vii) in addition to, and not by way of limitation of, any of the
rights specified above, exercise any and all rights and remedies
afforded to it, as a secured party in possession of collateral or
otherwise, under any and all applicable provisions of laws.
(b) The Agent, any Person designated by the Agent to take any of the
action as enumerated in subsection (a) above, any of the Lenders, and their
respective officers, directors, employees, agents and counsel shall not incur
any liability (other than for acts or omissions amounting to gross negligence or
willful misconduct) as a result of the sale of the Collateral, or any part
thereof, in a commercially reasonable manner in accordance with the provisions
of subsection (a)(vi) above or of applicable law, or for the failure to sell or
offer for sale the Collateral, for any reason whatsoever. The Borrower waives
any claims (other than those attributable to acts or omissions amounting to
gross negligence or willful misconduct) against the Agent, any Person designated
by the Agent to take any action, the Lenders, and their respective officers,
directors, employees, agents and counsel arising with respect to the price at
which the Collateral, or any part thereof, may have been sold or by reason of
the fact that such price was less than the aggregate of all the Obligations,
PROVIDED that all such sales have been effected in a commercially reasonable
manner.
(c) The Agent shall collect the cash proceeds received from any sale or
other disposition or from any other source contemplated by subsection (a) above
and, after deducting all costs and expenses incurred by the Agent, any person
designated by the Agent to take any of the actions enumerated in subsection (a)
above, and the Lenders (other than in connection with the purchase by any of the
Lenders of any item of the Collateral) in connection with such collection and
sale (including, without limitation, reasonable counsel fees and expenses),
shall apply the same in accordance with the provisions of Section 9.04 below.
Noncash proceeds received by the Agent shall be held by it, unless and until
instructions are received from the Required Lenders to distribute those
proceeds. Upon any such distribution in the order set forth in Section 9.04
below, the Obligations shall be reduced by the fair market value of any such
noncash proceeds.
(d) If the amount of all proceeds received in liquidation of the
Collateral which shall be applied to payment of the Obligations shall be
insufficient to pay all the Obligations in full, the Borrower acknowledges that
it shall continue to remain liable for any deficiency, together with any
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interest thereon and costs of collection thereof (including reasonable counsel
fees and legal expenses), in accordance with the terms of this Agreement and the
other Loan Documents. The Agent shall account to the Borrower as to all
applications of the proceeds of the Collateral in reduction of the Obligations.
(e) Notwithstanding the foregoing, none of the provisions of this
Section 9.03 shall confer on the Agent or any of the Lenders any rights or
privileges not permissible under applicable law; PROVIDED, HOWEVER, that to the
extent the Borrower may waive any provisions of applicable law which would or
could be in conflict with the terms of this Section 9.03, the Borrower hereby
expressly waives the application of any such laws and provisions.
(f) In connection with the foregoing provisions of this Section 9.03,
the Borrower from time to time promptly shall execute and deliver, or cause to
be executed and delivered, to the Agent such reasonable documents and
instruments, and take or cause to be taken other reasonable and lawful action,
as the Agent reasonably shall deem necessary or desirable to enable it to
exercise any of the rights with respect to the Collateral granted to it pursuant
to this Section 9.03.
SECTION 9.04. APPLICATION OF FUNDS. In the event that all the
Obligations shall have become or been declared due and payable pursuant to the
terms of Section 9.02 hereof, the Lenders agree, by and among themselves (and,
with respect to subsection (f) below, with the Borrower), that any funds
received from or on behalf of the Borrower (pursuant to the provisions of
Section 9.03 or otherwise) by the Agent or any of the Lenders (except funds
retained by any Lender pursuant to the terms of Section 11.01 hereof) shall be
remitted to the Agent, if received by any Lender, and applied by the Agent (in
the case of subsections (c), (d) and (e) below), on a pro rata basis among the
Lenders in accordance with their respective percentages of the Loans outstanding
at the time of such declaration in the following manner and order:
(a) first, to pay to or reimburse the Agent for any out-of-pocket
expenses for which it is entitled to be paid or reimbursed pursuant to the
provisions of Section 13.03 hereof;
(b) second, to reimburse any of the Lenders pursuant to the provisions
of Section 13.03 hereof;
(c) third, to payment of accrued and unpaid interest due on the Notes;
(d) fourth, to payment of the outstanding principal of the Notes;
(e) fifth, to payment in full of all the remaining Obligations (other
than Facility Letter of Credit Obligations and Rate Hedging Obligations);
(f) sixth, if any Facility Letter of Credit remains outstanding, the
Agent shall retain in the Letter of Credit Collateral Account an amount equal to
the aggregate face amount of all outstanding Facility Letters of Credit;
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(g) seventh, to payment in full of all remaining Rate Hedging
Obligations PARI PASSU among those Lenders to whom such Rate Hedging Obligations
are owed; and
(h) eighth, any remainder, including any funds no longer required to
remain on deposit pursuant to subsection (f) of this section, shall be returned
to the Borrower or as otherwise required by applicable law.
ARTICLE X
THE AGENT
SECTION 10.01. APPOINTMENT. The First National Bank of Chicago is
hereby appointed Agent hereunder and under each other Loan Document and, subject
to the provisions of Section 10.13 below, each of the Lenders irrevocably
authorizes the Agent to act as the agent of such Lender. The Agent agrees to act
as such upon the express conditions contained in this Article X. The Agent shall
not have a fiduciary relationship in respect of any Lender by reason of this
Agreement. Bank of America National Trust & Savings Association is hereby
appointed to act as Syndication Agent, Comerica Bank is hereby appointed to act
as Documentation Agent, and NationsBank, N.A. and Credit Lyonnais Atlanta Agency
are hereby appointed as Managing Agents, and Fleet National Bank and Guaranty
Federal Bank, F.S.B. are hereby appointed as Co-Agents. Neither the Syndication
Agent, the Documentation Agent, nor the Managing Agents shall have any right,
power, obligation, liability, responsibility or duty under this Agreement in
such capacity.
SECTION 10.02. POWERS. The Agent shall have and may exercise such
powers under the Loan Documents as are specifically delegated to the Agent by
the terms of each thereof, together with such powers as are reasonably
incidental thereto. The Agent shall have no implied duties to the Lenders, or
any obligation to the Lenders to take any action thereunder except any action
specifically provided by the Loan Documents to be taken by the Agent.
SECTION 10.03. GENERAL IMMUNITY. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable to the Borrower, any
Subsidiary Guarantor, the Lenders or any Lender for any action taken or omitted
to be taken by it or them hereunder or under any other Loan Document or in
connection herewith or therewith except for its or their own gross negligence or
willful misconduct.
SECTION 10.04. NO RESPONSIBILITY FOR LOANS, RECITALS, ETC. Neither the
Agent nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into, or verify (i) any
statement, warranty or representation made in connection with any Loan Document
or any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of any obligor under any Loan Document; (iii) the
satisfaction of any condition specified in Article V, except receipt of items
required to be delivered to the Agent; or
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(iv) the validity, effectiveness or genuineness (except its own due execution
thereof) of any Loan Document or any other instrument or writing furnished in
connection therewith. Further, the Agent assumes no obligation to any other
Lender as to the collectibility of any Loans made by any Lender to the Borrower.
Each Lender expressly acknowledges that the Agent has not made any
representations or warranties to it on or prior to the date hereof and that no
act by the Agent hereafter taken shall be deemed to constitute any
representation or warranty by the Agent to any other Lender. Each Lender
acknowledges that it has taken and will take such action and make such
investigation as it deems necessary to inform itself as to the affairs and
creditworthiness of the Borrower and the Subsidiary Guarantors.
SECTION 10.05. EMPLOYMENT OF AGENTS AND COUNSEL. The Agent may execute
any of its duties as Agent hereunder and under any other Loan Document by or
through employees, agents, and attorneys-in-fact and shall not be answerable to
the Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.
SECTION 10.06. RELIANCE ON DOCUMENTS; COUNSEL. The Agent shall not be
under a duty to examine into or pass upon the validity, effectiveness,
genuineness or value of this Agreement, the Notes or any other document
furnished pursuant hereto or thereto or in connection herewith, and the Agent
shall be entitled to assume that the same are valid, effective and genuine and
what they purport to be. The Agent shall be entitled to rely upon any Note,
notice, consent, certificate, affidavit, letter, telegram, statement, paper or
document reasonably believed by it to be genuine and correct and to have been
signed or sent by the proper person or persons, and, in respect to legal
matters, upon the opinion of counsel selected by the Agent, which counsel may be
employees of the Agent. The Agent shall not be liable for any action taken or
suffered in good faith by it based on or in accordance with any of the
foregoing.
SECTION 10.07. NO WAIVER OF RIGHTS. With respect to its Commitment,
Loans made and Facility Letters of Credit issued by it and the Notes issued to
it, the Agent shall have the same rights and powers hereunder and under any
other Loan Document as any Lender or Issuer and may exercise the same as though
it was not the Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Agent in its individual capacity as a
Lender. The Agent may accept deposits from, lend money to and issue letters of
credit for the account of, and generally engage in any kind of business with the
Borrower or its Affiliates (including, without limitation, trust, debt, equity
and other transactions) in addition to the transaction contemplated by this
Agreement or any other Loan Document; it being expressly understood and agreed
that neither the Agent nor any other Lender shall be deemed by the execution
hereof to have waived any rights under any term loan or other agreement with the
Borrower relating to any other business or loans to the Borrower which are not a
part of the Aggregate Commitment under this Agreement. Without limiting the
generality of the foregoing, each of the Lenders acknowledges and consents to
First
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Chicago acting as Agent under the Lennar Credit Agreement and the other loan
documents referred to in such agreement.
SECTION 10.08. KNOWLEDGE OF EVENT OF DEFAULT. It is expressly
understood and agreed that the Agent shall be entitled to assume that no Event
of Default or Unmatured Default has occurred and is continuing, unless the
officers of the Agent active on the Borrower's account have actual knowledge of
such occurrence or have been notified by a Lender that such Lender considers
that an Event of Default or Unmatured Default has occurred and is continuing and
specifying the nature thereof.
SECTION 10.09. AGENT'S REIMBURSEMENT AND INDEMNIFICATION. The Lenders
agree to reimburse and indemnify the Agent ratably in accordance with their
respective Pro Rata Shares (i) for any amounts not reimbursed by the Borrower
for which the Agent is entitled to reimbursement by the Borrower under the Loan
Documents, (ii) for any other expenses incurred by the Agent on behalf of the
Lenders, in connection with the preparation, execution, delivery, administration
and enforcement of the Loan Documents and (iii) for any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against the Agent in any way relating to or arising
out of the Loan Documents or any other document delivered in connection
therewith or the transactions contemplated thereby, or the enforcement of any of
the terms thereof or of any such other documents, PROVIDED that no Lender shall
be liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the Agent.
SECTION 10.10. NOTICES TO THE BORROWER OR SUBSIDIARY GUARANTORS. In
each instance that a notice is required, pursuant to the terms hereof, to be
given by one or more of the Lenders to the Borrower or a Subsidiary Guarantor,
the Lenders desiring that such notice be given shall so advise the Agent (which
advice, if given by telephone, shall be promptly confirmed by telex or letter to
the Agent at its address listed in the signature pages hereto), which shall
transmit such notice to the Borrower or such Subsidiary Guarantor promptly after
its having been so advised by the appropriate number of Lenders; PROVIDED,
HOWEVER, that subject to the provisions of Section 10.14 hereof, if the Agent
shall fail to transmit such notice to the Borrower within a reasonable period of
time after its having been so advised by the appropriate number of Lenders, the
Lenders desiring that such notice be given may transmit such notice directly to
the Borrower and PROVIDED FURTHER, HOWEVER, that, in all cases, notice to the
Borrower shall be deemed notice to each Subsidiary Guarantor.
SECTION 10.11. ACTION ON INSTRUCTIONS OF LENDERS. The Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
and under any other Loan Document in accordance with written instructions signed
by the Required Lenders or all Lenders, as the case may be, and such
instructions and any action taken or failure to act pursuant thereto shall be
binding on all of the Lenders and on all holders of Notes. Except where an
action or inaction is expressly required under this Agreement, the Agent shall
be fully justified in failing or refusing to take any action hereunder and under
any other Loan Document unless it shall first be indemnified
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to its satisfaction by the Lenders, pro rata in accordance with their respective
Pro Rata Shares against any and all liability, cost and expense that it may
incur by reason of taking or continuing to take any such action.
SECTION 10.12. LENDER CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender and
based on the financial statements prepared by the Borrower and the Subsidiary
Guarantors and such other documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement and the other Loan Documents. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement and the other Loan Documents.
SECTION 10.13. RESIGNATION OR REMOVAL OF THE AGENT. If, at any time,
Lenders holding Notes having aggregate outstanding principal balances equal to
at least 75% of the then outstanding amount of the Aggregate Commitment
(excluding from such computation the Agent and its Notes) shall deem it
advisable, those Lenders may submit to the Agent notification by certified mail,
return receipt requested of its removal as Agent under this Agreement, which
removal shall be effective as of the date of receipt of such notice by the
Agent. If, at any time, the Agent shall deem it advisable, in its sole
discretion, it may submit to each of the Lenders written notification, by
certified mail, return receipt requested, of its resignation as Agent under this
Agreement, which resignation shall be effective as of thirty days after the date
of such notice. In the event of any such removal or resignation, the Required
Lenders may appoint a successor to the Agent. In the event the Agent shall have
resigned and/or have been removed and so long as no successor shall have been
appointed, the Borrower shall make all payments due each Lender hereunder
directly to that Lender and all powers specifically delegated to the Agent by
the terms hereof may be exercised by the Required Lenders. Upon the removal or
resignation of the Agent, the retiring Agent shall be discharged from its duties
and obligations hereunder and under the other Loan Documents. After the removal
or resignation of the Agent, the provisions of this Article X shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken
while it was acting as the Agent hereunder and under the other Loan Documents.
SECTION 10.14. BENEFITS OF ARTICLE X. None of the provisions of this
Article X shall inure to the benefit of the Borrower or of any Person other than
Agent and each of the Lenders and their respective successors and permitted
assigns. Accordingly, neither the Borrower nor any Person other than Agent and
the Lenders (and their respective successors and permitted assigns) shall be
entitled to rely upon, or to raise as a defense, the failure of the Agent or any
Lenders to comply with the provisions of this Article X.
SECTION 10.15. AGENT'S CUSTODIAL DUTIES.
(a) The Agent shall take custody of and hold on behalf of the Lenders
the following documents (the "Collateral Documents"):
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(i) the Borrower Security Documents;
(ii) the Subsidiary Guarantor Security Documents;
(iii) the Title Policies for each Mortgaged Property;
(iv) the Surveys (or plat or subdivision map if no survey has
been furnished);
(v) the Zoning Certificates;
(vi) the stock certificates, certificates of certificated
partnership interest and certificates of certificated limited
liability company membership interest representing the Capital
Stock and partnership and limited liability company interests
pledged pursuant to the Security Agreement;
(vii) the Environmental Indemnity;
(viii) an Appraisal of each Mortgaged Property;
(ix) the UCC Search;
(x) the Insurance Certificate;
(xi) the Environmental Report;
(xii) the Borrower's Counsels' Opinions; and
(xiii) the Borrower's Organizational Documents.
(b) The Agent's duties with respect to the Collateral Documents are
limited to reviewing the same and verifying that:
(i) they appear regular on their face and are in its
possession;
(ii) that each Collateral Document bears an original signature
which appears to be that of a person authorized to sign such
document;
(iii) there is a loan title commitment which appears to commit
to insure the lien of the Mortgage on each of the Mortgaged
Properties (and the Title Policy when it is issued pursuant to
such commitment);
(iv) there is a plat, subdivision map or a Survey apparently
prepared by a surveyor for each parcel of Mortgaged Property;
and
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(v) they have received information regarding flood zone
verification on each of the Mortgaged Properties.
(c) At the request of any Lender, at any time, at Borrower's sole cost
and expense, the Agent shall cause to be copied any or all of the Collateral
Documents and deliver same to such lender.
SECTION 10.16. COLLATERAL VALUE DETERMINATION; DETERMINATION
ASSUMPTIONS.
(a) Upon the receipt of each Borrowing Notice, the Agent shall review
the computation of the Borrowing Base (a "Collateral Value Determination") and
notify each Lender thereof.
(b) In making any Collateral Value Determination, the Agent shall be
permitted to rely, without independent investigation of the correctness thereof,
on the most recent information supplied by, or at the direction of, the Borrower
pursuant to this Agreement.
ARTICLE XI
RATABLE PAYMENTS
SECTION 11.01. RATABLE PAYMENTS. If any Lender has payment made to it
upon any of its Loans or participations in Facility Letters of Credit (other
than payments received pursuant to Sections 3.01, 3.02 or 3.04) in a greater
proportion than that received by any other Lender with respect to Loans or
participations in Facility Letters of Credit, such Lender agrees, promptly upon
demand, to purchase a portion of such Loans held by the other Lenders so that
after such purchase each Lender will hold its Pro Rata Share of all Loans or
participations in Facility Letters of Credit. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or otherwise,
receives collateral or other protection for its Obligations or such amounts
which may be subject to setoff, such Lender agrees, promptly upon demand, to
take such action necessary such that all Lenders share in the benefits of such
collateral ratably in accordance with their respective Pro Rata Shares. In case
any such payment is disturbed by legal process, or otherwise, appropriate
further adjustments shall be made.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
SECTION 12.01. SUCCESSORS AND PERMITTED ASSIGNS. The terms and
provisions of the Loan Documents shall be binding upon and inure to the benefit
of the Borrower, the Subsidiary
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Guarantors and the Lenders and their respective successors and permitted
assigns, except that (i) neither the Borrower nor any Subsidiary Guarantor shall
have the right to assign its rights or obligations under the Loan Documents and
(ii) any assignment by any Lender must be made in compliance with Section 12.03.
Notwithstanding clause (ii) of this Section, any Lender may at any time, without
the consent of the Borrower, any Subsidiary Guarantor, or the Agent, assign all
or any portion of its rights under this Agreement and its Notes to a Federal
Reserve Bank; PROVIDED, HOWEVER, that no such assignment shall release the
transferor Lender from its obligations hereunder. The Agent may treat the payee
of any Note as the owner thereof for all purposes hereof unless and until such
payee complies with Section 12.03 in the case of an assignment thereof or, in
the case of any other transfer, a written notice of the transfer is filed with
the Agent. Any assignee or transferee of a Note agrees by acceptance thereof to
be bound by all the terms and provisions of the Loan Documents. Any request,
authority or consent of any Person, who at the time of making such request or
giving such authority or consent is the holder of any Note, shall be conclusive
and binding on any subsequent holder, transferee or assignee of such Note or of
any Note or Notes issued in exchange therefor. A Lender may not assign less than
the lesser of its Commitment or $10,000,000.
SECTION 12.02. PARTICIPATIONS.
(a) PERMITTED PARTICIPANTS; EFFECT. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any time sell
to one or more banks or other entities ("Participants") participating interests
in any Loan owing to such Lender, any Note held by such Lender, any Commitment
of such Lender or any other interest of such Lender under the Loan Documents. In
the event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under the Loan Documents shall remain
unchanged, such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, such Lender shall remain the
holder of any such Note for all purposes under the Loan Documents, all amounts
payable by the Borrower under this Agreement shall be determined as if such
Lender had not sold such participating interests, and the Borrower and the Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under the Loan Documents.
(b) VOTING RIGHTS. Each Lender shall retain the sole right to approve,
without the consent of any Participant, any amendment, modification or waiver of
any provision of the Loan Documents other than any amendment, modification or
waiver with respect to any Loan, Facility Letter of Credit Obligations or
Commitment in which such Participant has an interest which forgives principal,
interest or fees or reduces the interest rate or fees payable with respect to
any such Loan, Facility Letter of Credit Obligations or Commitment, postpones
any date fixed for any regularly-scheduled payment of principal of, or interest
or fees on, any such Loan or Commitment, releases any Subsidiary Guarantor of
any such Loan, Facility Letter of Credit Obligations or releases any substantial
portion of collateral, if any, securing any such Loan or Facility Letter of
Credit Obligations.
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(c) NO SETOFF. No Participant shall have the right of setoff in respect
of its participating interest in amounts owing under the Loan Documents without
the prior written consent of the Agent.
SECTION 12.03. ASSIGNMENTS.
(a) PERMITTED ASSIGNMENTS. Any Lender may, in the ordinary course of
its business and in accordance with applicable law, at any time assign to one or
more banks or other entities ("Purchasers") all or any part of its rights and
obligations under the Loan Documents. Such assignment shall be substantially in
the form of Exhibit "C" hereto. Unless an Event of Default has occurred and is
continuing, the consent of the Borrower and the Agent shall be required prior to
an assignment becoming effective with respect to a Purchaser which is not a
Lender or an Affiliate thereof. Such consent shall be substantially in the form
attached as Exhibit "C-2" hereto and shall not be unreasonably withheld.
(b) EFFECT; EFFECTIVE DATE. Upon (i) delivery to the Agent of a notice
of assignment, substantially in the form attached as Exhibit "C-1" hereto (a
"Notice of Assignment"), together with any consents required by Section
12.03(a), and (ii) payment of a $4,000 fee to the Agent for processing such
assignment (PROVIDED that no such fee shall be required if the assignee is an
Affiliate of an assignor Lender or if the assignee is already a Lender
hereunder), such assignment shall become effective on the effective date
specified in such Notice of Assignment. On and after the effective date of such
assignment, such Purchaser shall for all purposes be a Lender party to this
Agreement and any other Loan Document executed by the Lenders and shall have all
the rights and obligations of a Lender under the Loan Documents, to the same
extent as if it were an original party hereto, and no further consent or action
by the Borrower, the Lenders or the Agent shall be required to release the
transferor Lender with respect to the percentage of the Aggregate Commitment and
Loans assigned to such Purchaser. Upon the consummation of any assignment to a
Purchaser pursuant to this Section 12.03(b), the transferor Lender, the Agent
and the Borrower and each Subsidiary Guarantor shall make appropriate
arrangements so that replacement Notes and Subsidiary Guarantees are issued to
such transferor Lender and new Notes and Subsidiary Guarantees or, as
appropriate, replacement Notes and Subsidiary Guarantees, are issued to such
Purchaser, in each case in principal amounts reflecting their Commitment, as
adjusted pursuant to such assignment.
(c) DISSEMINATION OF INFORMATION. The Borrower authorizes each Lender
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Borrower and the Subsidiaries.
(d) TAX TREATMENT. If any interest in any Loan Document is transferred
to any Transferee which is organized under the laws of any jurisdiction other
than the United States or any state thereof, the transferor Lender shall cause
such Transferee, concurrently with the effectiveness of such transfer, to comply
with the provisions of Section 2.17.
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ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. NOTICE.
(a) Except as otherwise permitted by Section 2.11 with respect to
borrowing notices, all notices and other communications provided to any party
hereto under this Agreement or any other Loan Document shall be in writing or by
telex or by facsimile and addressed or delivered to such party at its address
set forth below its signature hereto or at such other address as may be
designated by such party in a notice to the other parties. Any notice, if mailed
and properly addressed with postage prepaid, shall be deemed given when received
(or when delivery is refused); any notice, if transmitted by telex or facsimile,
shall be deemed given when transmitted (answerback confirmed in the case of
telexes and facsimile confirmation in the case of a facsimile).
(b) The Borrower, the Agent and any Lender may each change the address
for service of notice upon it by a notice in writing to the other parties
hereto.
(c) Notice to the Borrower shall be deemed notice to each Subsidiary
Guarantor.
SECTION 13.02. SURVIVAL OF REPRESENTATIONS. All covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by the Lenders of any Loans herein
contemplated and the execution and delivery to the Lenders of the Notes
evidencing the Commitments, and shall continue in full force and effect until
all of the Obligations have been paid in full and the Aggregate Commitment has
been terminated.
SECTION 13.03. EXPENSES. The Borrower shall pay (i) all expenses,
including attorneys' fees and disbursements (which attorneys may be employees of
the Agent or any Lender), incurred by the Agent and any Lender in connection
with the administration of this Agreement and the other Loan Documents, any
amendments, modifications or waivers with respect to any of the provisions
thereof and the enforcement and protection of the rights of the Lenders and the
Agent under this Agreement or any of the other Loan Documents, including all
recording and filing fees, documentary stamp, intangibles and similar taxes,
title insurance premiums, appraisal fees and other costs and disbursements
incurred in connection with the taking of collateral and the perfection and
preservation of the Lenders' security therein, and (ii) the reasonable fees and
the disbursements of Agent's attorneys (which attorneys may be employees of the
Agent) in connection with the preparation, negotiation, execution, delivery and
review of this Agreement, the Notes and the other Loan Documents (whether or not
the transactions contemplated by this Agreement shall be consummated) and the
closing of the transactions contemplated hereby.
SECTION 13.04. INDEMNIFICATION OF THE LENDERS AND THE AGENT. The
Borrower shall indemnify and hold harmless the Agent and each Lender, and their
respective directors, officers
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and employees against all losses, claims, damages, penalties, judgments,
liabilities and expenses (including, without limitation, all expenses of
litigation or preparation therefor whether or not the Agent or any Lender is a
party thereto) which any of them may pay or incur arising out of or relating to,
directly or indirectly, this Agreement, the other Loan Documents, the
transactions contemplated hereby or the direct or indirect application or
proposed application of the proceeds of any Loan hereunder; PROVIDED, HOWEVER,
that in no event shall the Agent or a Lender have the right to be indemnified
hereunder for its own gross negligence or willful misconduct nor shall the Agent
be indemnified against any liabilities which arise as a result of any claims
made or actions, suits or proceedings commenced or maintained against any Lender
(including the Agent, in its capacity as such) (i) by that Lender's shareholders
or any governmental regulatory body or authority asserting that such Lender or
any of its directors, officers, employees or agents violated any banking or
securities law or regulation or any duty to its own shareholders, customers
(excluding the Borrower) or creditors in any manner whatsoever in entering into
or performing any of its obligations contemplated by this Agreement or (ii) by
any other Lender. The obligations of the Borrower under this Section shall
survive the termination of this Agreement.
SECTION 13.05. MAXIMUM INTEREST RATE. It is the intention of the
Lenders and the Borrower that the interest (as defined under applicable law) on
the Indebtedness evidenced by the Notes which may be charged to, or collected or
received from the Borrower shall not exceed the maximum rate permissible under
applicable law. Accordingly, anything herein or in any of the Notes to the
contrary notwithstanding, should any interest (as so defined) be charged to, or
collected or received from the Borrower by the Lenders pursuant hereto or
thereto in excess of the maximum legal rate, then the excess payment shall be
applied to the reduction of the aggregate outstanding principal balance of the
Obligations, and any portion of the excess payment remaining after payment in
full thereof shall be returned by the Lenders to the Borrower.
SECTION 13.06. MODIFICATION OF AGREEMENT.
(a) No modification, amendment or waiver of any provision of this
Agreement or the Notes, nor any consent to any departure by the Borrower
therefrom, in any event shall be effective unless the same shall be in writing
and signed by the Borrower and by the Required Lenders (or by the Agent on their
behalf if the Required Lenders have so authorized the Agent), and then the
waiver or consent shall be effective only in the specific instance and for the
purpose for which given; PROVIDED, HOWEVER, that no such modification, amendment
or waiver shall, without the consent of all of the Lenders affected thereby:
(i) extend the maturity of any Loan or Note or reduce or
forgive the principal amount thereof, or reduce the rate or extend the
time of payment of interest or fees thereon;
(ii) reduce the percentage specified in the definition of
Required Lenders;
(iii) extend the Facility A Termination Date or the Facility B
Termination Date, as the case may be, or reduce the amount or extend
the payment date for, the mandatory
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<PAGE>
payments required under Section 2.02, or increase the amount of the
Commitment of any Lender hereunder, or permit the Borrower to assign
its rights under this Agreement;
(iv) amend, modify or waive any provision of this Section
13.06; or
(v) increase the maximum drawable amount or extend the
expiration date of any outstanding Facility Letter of Credit (except as
expressly permitted by its terms and in accordance with Section 2.15)
or reduce the principal amount of or extend the time of payment of any
Reimbursement Obligation or fee associated with any Facility Letter of
Credit; or
(vi) amend, modify or waive Section 5.03.
(b) Anything in this Agreement to the contrary notwithstanding, if at a
time when the conditions precedent set forth in Article V hereof to any Loan
are, in the opinion of the Required Lenders, satisfied, any Lender (a
"Defaulting Lender") shall fail to fulfill its obligations to make such Loan and
such failure continues for at least two Business Days then, for so long as such
failure shall continue, such Defaulting Lender shall (unless the Required
Lenders, determined as if such Defaulting Lender were not a "Lender" hereunder,
shall otherwise consent in writing) be deemed for all purposes relating to
amendments, modifications, waivers or consents under this Agreement (including,
without limitation, under Section 13.06(a)) to have no Loans or Commitments,
shall not be treated as a "Lender" hereunder when performing the computation of
Required Lenders, and shall have no rights under Section 13.06(a); PROVIDED that
any action taken by the other Lenders with respect to the matters referred to in
clauses (i) through (v) of Section 13.06(a) shall not be effective as against
such Defaulting Lender.
(c) No amendment, modification or waiver of any provision of this
Agreement relating to the Agent shall be effective without the written consent
of the Agent. No notice to or demand of the Borrower in any case shall entitle
the Borrower to any other or further notice or demand in the same, similar or
other circumstances.
SECTION 13.07. PRESERVATION OF RIGHTS. No delay or omission of the
Lenders or the Agent to exercise any right under the Loan Documents shall impair
such right or be construed to be a waiver of any Event of Default or an
acquiescence therein, and the making of a Loan notwithstanding the existence of
an Event of Default or Unmatured Default, or the inability of the Borrower to
satisfy the conditions precedent to such Loan shall not constitute any waiver or
acquiescence. Any single or partial exercise of any such right shall not
preclude other or further exercise thereof or the exercise of any other right,
and no waiver, amendment or other variation of the terms, conditions or
provisions of the Loan Documents whatsoever shall be valid unless in writing
signed by the Lenders required pursuant to Section 13.06, and then only to the
extent in such writing specifically set forth. All remedies contained in the
Loan Documents or by law afforded shall be cumulative and all shall be available
to the Agent and the Lenders until the Obligations have been paid in full.
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<PAGE>
SECTION 13.08. JOINT AND SEVERAL OBLIGATIONS OF BORROWER; SEVERAL
OBLIGATIONS OF LENDERS; THIRD PARTY BENEFICIARIES. All obligations,
representations and warranties hereunder and under any of the Loan Documents,
unless otherwise expressly stated, shall be the joint and several liability of
the Borrower and all of the Partners of the Borrower and the Subsidiary
Guarantors. The respective obligations of the Lenders hereunder are several and
not joint and no Lender shall be the partner or agent of any other (except to
the extent to which the Agent is authorized to act as such). The failure of any
Lender to perform any of its obligations hereunder shall not relieve any other
Lender from any of its obligations hereunder. This Agreement shall not be
construed so as to confer any right or benefit upon any Person other than the
parties to this Agreement and their respective successors and assigns.
SECTION 13.09. SEVERABILITY. If any one or more of the provisions
contained in this Agreement or the Notes is held invalid, illegal or
unenforceable in any respect, the validity, legality or enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby.
SECTION 13.10. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which may be executed by one or more of the parties
hereto, but all of which, when taken together, shall constitute a single
agreement binding on all the parties hereto.
SECTION 13.11. REPRESENTATION AND WARRANTY BY THE LENDERS. The Lenders
represent and warrant to the Borrower that the Notes to be acquired by them
hereunder will evidence loans made in the ordinary course of their respective
commercial banking or real estate lending businesses.
SECTION 13.12. THE BORROWER AS AGENT FOR EACH SUBSIDIARY GUARANTOR.
Pursuant to the terms of the Subsidiary Guarantees, each Subsidiary Guarantor
will appoint the Borrower as its agent and attorney-in-fact to execute and
deliver any and all documents for an on behalf of each Subsidiary Guarantor in
connection with the transactions contemplated by this Agreement or any of the
other Loan Documents, or in connection with the amendment, modification or
termination of any thereof, and hereby agree that upon execution of any such
documents or instruments they shall be binding upon each of the Subsidiary
Guarantor. Each Subsidiary Guarantor will further acknowledge that such power is
coupled with an interest and may not be revoked.
SECTION 13.13. LOSS, ETC., NOTES OR SUBSIDIARY GUARANTEES. Upon receipt
by the Borrower of reasonably satisfactory evidence of the loss, theft,
destruction or mutilation of any of the Notes and/or any Subsidiary Guaranty,
upon reimbursement to the Borrower of all reasonable expenses incidental thereto
and upon surrender and cancellation of the relevant Note and/or Subsidiary
Guaranty, if mutilated, the Borrower shall make and deliver in lieu of that Note
or shall cause the Subsidiary Guarantor to make and delivery a new Subsidiary
Guaranty (the "Prior Note" or "Prior Guaranty") a new Note or Subsidiary
Guaranty of like tenor, except that no reference need be made in the new Note to
any installment or installments of principal, if any, previously due and paid
upon the Prior Note. Any Note made and delivered in accordance with the
provisions of this
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<PAGE>
Section shall be dated as of the date to which interest has been paid on the
unpaid principal amount of the Prior Note.
SECTION 13.14. GOVERNMENTAL REGULATION. Anything contained in this
Agreement to the contrary notwithstanding, no Lender shall be obligated to
extend credit to the Borrower in violation of any limitation or prohibition
provided by any applicable statute or regulation.
SECTION 13.15. TAXES. Any taxes (excluding federal, state or local
income taxes on the overall net income of any Lender) or other similar
assessments or charges payable or ruled payable by any governmental authority in
respect of the Loan Documents shall be paid by the Borrower, together with
interest and penalties, if any.
SECTION 13.16. HEADINGS. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.
SECTION 13.17. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto with respect to the subject matter hereof;
PROVIDED, HOWEVER, that the fees payable by Borrower to First Chicago in
consideration of its agreement to serve as Agent hereunder are set forth in a
separate letter agreement between Borrower and First Chicago.
SECTION 13.18. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF
THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS.
SECTION 13.19. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN
SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL
LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE
BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE
BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY
LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT
IN CHICAGO, ILLINOIS.
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<PAGE>
SECTION 13.20. WAIVER OF JURY TRIAL. THE BORROWER , THE AGENT AND EACH
LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
[Signatures appear on following pages]
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<PAGE>
IN WITNESS WHEREOF, the Borrower and the Lenders have caused this
Agreement to be duly executed as of the date first above written.
BORROWER:
LENNAR LAND PARTNERS, A GENERAL PARTNERSHIP
ORGANIZED UNDER THE LAWS OF THE STATE OF FLORIDA
By: Lennar Land Partners Sub, Inc., a Delaware
corporation, Managing General Partner
By: /s/ CORY J. BOYDSTON
----------------------------------------------
Cory J. Boydston, as Vice President
Address:
700 Northwest 107th Avenue
Miami, Florida 33172
Attention: ________________________
By: LNR Land Partners Sub, Inc., a Delaware
corporation
By: /s/ CORY J. BOYDSTON
----------------------------------------------
________________, as ____________________
Address:
700 Northwest 107th Avenue
Miami, Florida 33172
Attention: ________________________
<PAGE>
COMMITMENTS: LENDERS:
- ------------ --------
FACILITY A: $11,290,322.58 THE FIRST NATIONAL BANK OF CHICAGO,
FACILITY B: $ 9,032.258.06 Individually and as Agent
By: /s/ GREGORY A. GILBERT
------------------------------------------------
Gregory A. Gilbert, Vice President
Address:
The First National Bank of Chicago
One First National Plaza
14th Floor, Suite 0151
Chicago, Illinois 60670-0151
Attention: Gregory A. Gilbert, Vice President
with a copy to:
The First National Bank of Chicago
One First National Plaza, Suite 0801
Chicago, Illinois 60670-0801
Attention: Law Department
FACILITY A: $ 9,677,419.35 NATIONSBANK, N.A.
FACILITY B: $ 7,741,935.48
By: /s/ PHILIP CARROLL
-----------------------------------------------
Philip Carroll, Senior Vice President
Address:
100 S.E. 2nd Street, 14th FL
Miami, Florida 33131
Attention: Mr. Philip Carroll
FACILITY A: $ 9,677,419.35 CREDIT LYONNAIS ATLANTA AGENCY
FACILITY B: $ 7,741,935.48
By: /s/ DAVID M. CAWRSE
-----------------------------------------------
David M. Cawrse, First Vice President
& Manager
Address:
303 Peachtree Street, N.E., Suite 4400
Atlanta, Georgia 30308
Attention: Mr. Kevin Murphy, Vice President
<PAGE>
FACILITY A: $ 9,677,419.35 BANK OF AMERICA NATIONAL TRUST &
FACILITY B: $ 7,741,935.48 SAVINGS ASSOCIATION
By: /s/ MARK LARIVIERE
----------------------------------------------
Mark Lariviere, Vice President
Address:
231 S. LaSalle, 15th Floor
Chicago, Illinois 60697
Attention: Mr. Mark Lariviere
FACILITY A: $ 9,677,419.35 COMERICA BANK
FACILITY B: $ 7,741,935.48
By: /s/ MARTIN G. ELLIS
------------------------------------------------
Martin G. Ellis, Vice President
Address:
One Detroit Center
500 Woodward Avenue, 9th Floor
Detroit, Michigan 48226
Attention: Mr. Martin Ellis, Vice President
FACILITY A: $ 8,467,741.94 FLEET NATIONAL BANK
FACILITY B: $ 6,774,193.55
By: /s/ JAMES B. MCLAUGHLIN
-----------------------------------------------
James B. McLaughlin, Vice President
Address:
111 Westminster Street
RIMO0215 - 8th FL
Providence, Rhode Island 02903
Attention: Mr. James B. McLaughlin
<PAGE>
FACILITY A: $ 8,467,741.94 GUARANTY FEDERAL BANK, F.S.B.
FACILITY B: $ 6,774,193.55
By: /s/ RANDALL REID
----------------------------------------------
Randall Reid, Vice President
Address:
8333 Douglas Avenue
Dallas, Texas 75225
Attention: Mr. Randy Reid
FACILITY A: $ 6,451,612.90 THE INDUSTRIAL BANK OF JAPAN,
FACILITY B: $ 5,161,290.32 LIMITED, ATLANTA AGENCY
By: /s/ KAZUO IIDA
----------------------------------------------
Kazuo Iida, General Manager
Address:
191 Peachtree Street, Suite 3600
Atlanta, Georgia 30303-1757
Attention: Mr. Michael Harvey, Vice President
FACILITY A: $ 6,451,612.90 U. S. BANK NATIONAL ASSOCIATION
FACILITY B: $ 5,161,290.32
By: /s/ KATHLEEN M. CONNOR
----------------------------------------------
Kathleen M. Connor, Vice President
Address:
Real Estate Banking Division
601 2nd Avenue South
First Bank Place
Minneapolis, Minnesota 55402
Attention: Ms. Kathleen Connor
<PAGE>
FACILITY A: $ 6,451,612.90 PNC BANK, NATIONAL ASSOCIATION
FACILITY B: $ 5,161,290.32
By: /s/ DOUGLAS G. PAUL
----------------------------------------------
Douglas G. Paul, Vice President
Address:
Two Tower Center
Suite J3-JTTC-18-6
East Brunswick, New Jersey 08816
Attention: Mr. Douglas G. Paul
FACILITY A: $ 6,451,612.90 SOCIETE GENERALE
FACILITY B: $ 5,161,290.32
By: /s/ RALPH SAHEB
----------------------------------------------
Ralph Saheb, Manager
Address:
303 Peachtree Street, Suite 3840
Atlanta, Georgia 30308
Attention: Mr. Ed Forseberg
FACILITY A: $ 4,838,709.68 AMSOUTH BANK
FACILITY B: $ 3,870,967.74
By: /s/ RONNY HUDSPETH
----------------------------------------------
Ronny Hudspeth, Vice President
Address:
1900 Fifth Avenue
Birmingham, Alabama 35288
Attention: Mr. William Staples
<PAGE>
FACILITY A: $ 4,032,258.06 BARNETT BANK, N.A., SOUTH FLORIDA
FACILITY B: $ 3,225,806.45
By: /s/ CLAY F. WILSON
----------------------------------------------
____________________,_________________________
Address:
701 Brickell Avenue, 6th FL
Miami, Florida 33131
Attention: Mr. Clay F. Wilson,
Group Senior Vice President
FACILITY A: $ 4,032,258.06 THE DAI-ICHI KANGYO BANK, LTD.
FACILITY B: $ 3,225,806.45
By: /s/ TAKAO MOCHIZUKI
----------------------------------------------
Takao Mochizuki, General Manager
Address:
Marquis Two Tower, Suite 2400
285 Peachtree Center Avenue, N.E.
Atlanta, Georgia 30303
Attention: Mr. Guenter Kittel
FACILITY A: $ 4,032,258.06 THE FUJI BANK AND TRUST COMPANY
FACILITY B: $ 3,225,806.45
By: /s/ TORO UENO
----------------------------------------------
Toro Ueno, Executive Vice President
Address:
Two World Trade Center, 79th FL
New York, New York 10048
Attention: Mr. David Lee, Assistant Vice President
<PAGE>
FACILITY A: $ 4,032,258.06 KREDIETBANK, N.V.
FACILITY B: $ 3,225,806.45
By: /s/ MICHAEL V. CURRAN /s/ ROBERT SNAUFFER
----------------------------------------------
Michael V. Curran, Vice President
Robert Snauffer, Vice President
Address:
125 West 55th Street
New York, New York 10019
Attention: Mr. Michael Curran
FACILITY A: $ 4,032,258.06 SAKURA BANK
FACILITY B: $ 3,225,806.45
By: /s/ HIROYASU IMANISHI
----------------------------------------------
Hiroyasu Imanishi, V.P. & Senior Manager
Address:
Marquis 1 Tower
245 Peachtree Center Avenue
Atlanta, Georgia 30303
Attention: Mr. Ric Spenser
FACILITY A: $ 4,032,258.06 SUNTRUST BANK, MIAMI, N.A.
FACILITY B: $ 3,225,806.45
By: /s/ ROBERT E. HUMMEL
----------------------------------------------
Robert E. Hummel, Senior Vice President
Address:
Real Estate Division
777 Brickell Avenue
Miami, Florida 33131
Attention: Mr. Robert Hummel, Senior Vice President
<PAGE>
FACILITY A: $ 3,225,806.45 BANQUE PARIBAS
FACILITY B: $ 2,580,645.16
By: /s/ DUANE HELKOWSKI /s/ JOHN J. MCCORMICK III
------------------------------------------------
Duane Helkowski, Vice President
John J. McCormick III, Vice President
Address:
787 Seventh Avenue
New York, New York 10019
Attention: Mr. Duane Helkowski
<PAGE>
GUARANTY
THIS GUARANTY (this "Guaranty") is made as of the 31st day of October,
1997, jointly and severally by LENNAR CORPORATION, a corporation organized under
the laws of the State of Delaware ("Lennar") AND ITS SUBSIDIARIES LISTED ON
SCHEDULE I ATTACHED HERETO (the "Lennar Subsidiaries; and together with Lennar
the "Lennar Guarantors"), LNR PROPERTY CORPORATION, a corporation organized
under the laws of the State of Delaware ("LNR") AND ITS SUBSIDIARIES LISTED ON
SCHEDULE II ATTACHED HERETO (the "LNR Subsidiaries"; and together with LNR the
"LNR Guarantors") in favor of the Agent, for the ratable benefit of the Lenders,
under the Credit Agreement referred to below. The Lennar Guarantors and the LNR
Guarantors are hereinafter referred to collectively as the "Guarantors").
RECITALS
A. Lennar Land Partners, a general partnership formed under the laws of
the State of Florida (the "Borrower"), and The First National Bank of Chicago,
as Agent (the "Agent"), and certain other Lenders from time to time party
thereto have entered into a certain Credit Agreement dated as of even date
herewith (as same may be amended, modified, extended or restated from time to
time, the "Credit Agreement"), providing, subject to the terms and conditions
thereof, for loans to be made by the Lenders to the Borrower;
B. It is a condition precedent to the obligations of the Agent and the
Lenders under the Credit Agreement (including obligations to make Advances and
issue Facility Letters of Credit) that the Guarantors shall have executed and
delivered this Guaranty whereby the Guarantors shall jointly and severally
guarantee the payment when due, of all principal, interest, fees and other
amounts that shall be at any time payable by the Borrower under the Credit
Agreement and the Notes and the other Loan Documents referred to therein.
C. Lennar indirectly owns a 50% interest in the Borrower through its
wholly-owned subsidiary Lennar Land Partners Sub, Inc. and LNR indirectly owns a
50% interest in the Borrower through LNR Land Partners Sub, Inc,. a wholly-owned
subsidiary of Leisure Colony Management Corp., which is a wholly-owned
subsidiary of LNR, and each of the Guarantors will derive direct and indirect
economic benefit from the Loans and Facility Letters of Credit.
D. In order to induce the Lenders and the Agent to enter into the
Credit Agreement, each of the Guarantors is willing to guarantee the obligations
of the Borrower under the Credit Agreement, the Notes and the other Loan
Documents.
<PAGE>
AGREEMENT
In consideration of the forgoing recitals and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS. Terms defined in the Credit Agreement and not
otherwise defined herein have, as used herein, the respective meanings provided
for therein.
SECTION 2.01. REPRESENTATIONS AND WARRANTIES. Each of the Guarantors
represents and warrants (which representations and warranties shall be deemed to
have been renewed upon each Borrowing Date under the Credit Agreement) that:
(a) it (i) is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation; (ii) has all requisite corporate power, and has all
material governmental licenses, authorizations, consents and approvals
necessary to own its assets and carry on its business as now being or
as proposed to be conducted; and (iii) is qualified to do business in
all jurisdictions in which the nature of the business conducted by it
makes such qualification necessary and where failure so to qualify
would have a material adverse effect on its business, properties,
assets, condition (financial or otherwise), results of operations, or
prospects;
(b) it has all necessary corporate power and authority to
execute, deliver and perform its obligations under this Guaranty; the
execution, delivery and performance of this Guaranty have been duly
authorized by all necessary corporate action; and this Guaranty has
been duly and validly executed and delivered by it and constitutes its
legal, valid and binding obligation, enforceable in accordance with its
terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or moratorium or other similar
laws relating to the enforcement of creditors' rights generally and by
general equitable principles; and
(c) neither the execution and delivery by it of this Guaranty
nor compliance with the terms and provisions hereof will conflict with
or result in a breach of, or require any consent under, its certificate
of incorporation or by-laws or any applicable law or regulation, or any
order, writ, injunction or decree of any court or governmental
authority or agency, or any agreement or instrument to which it is a
party or by which it is bound or to which it is subject, or constitute
a default under any such agreement or instrument, or result in the
creation or imposition of any Lien upon any of its revenues or assets
pursuant to the terms of any such agreement or instrument.
-2-
<PAGE>
SECTION 2.02. COVENANTS. Each of the Guarantors covenants that, so long
as any Lender has any Commitment outstanding under the Credit Agreement or any
amount payable under the Credit Agreement or any Note shall remain unpaid, that
it will cause the Borrower to, fully comply with those covenants and agreements
set forth in the Credit Agreement.
SECTION 3. THE GUARANTY. The Guarantors hereby jointly, severally and
unconditionally guarantee the full and punctual payment (whether at stated
maturity, upon acceleration or otherwise) of the principal of and interest on
each Note issued by the Borrower pursuant to the Credit Agreement, and the full
and punctual payment of all other amounts payable by the Borrower under the
Credit Agreement and the other Loan Documents including, without limitation, the
Obligations (all of the foregoing being referred to collectively as the
"Guaranteed Obligations"). Upon failure by the Borrower to pay punctually any
such amount, each of the Guarantors agrees that it shall forthwith on demand pay
the amount not so paid at the place and in the manner specified in the Credit
Agreement, any Note or the relevant Loan Document, as the case may be.
SECTION 4. GUARANTY UNCONDITIONAL. The obligations of the Guarantors
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the Borrower under the Credit
Agreement, any Note, or any other Loan Document, by operation of law or
otherwise or any obligation of any other guarantor of any of the
Obligations;
(b) any modification, amendment, renewal or restatement of or
supplement to the Credit Agreement, any Note or any other Loan
Document;
(c) any release, exchange, enforcement, waiver, (whether
intentional or unintentional) nonperfection, invalidity, purchase at a
public or private sale, or application and direction of order or manner
of sale in the Agent's discretion, of any direct or indirect security
or any part thereof for any obligation of the Borrower under the Credit
Agreement, any Note, the Security Agreement (Capital Stock and
Partnership Interest), any Loan Document, or any obligations of any
other guarantor of any of the Obligations;
(d) any change in the corporate existence, structure or
ownership of the Borrower or any other guarantor of any of the
Obligations, or any insolvency, bankruptcy, reorganization or other
similar proceeding affecting the Borrower, or any other guarantor of
any of the Obligations, or its assets or any resulting release or
discharge of any obligation of the Borrower, or any other guarantor of
any of the Obligations;
-3-
<PAGE>
(e) the existence of any claim, setoff or other rights which
the Guarantors may have at any time against the Borrower, any other
guarantor of any of the Obligations, the Agent, any Lender or any other
Person, whether in connection herewith or any unrelated transactions;
(f) any invalidity or unenforceability relating to or against
the Borrower, or any other guarantor of any of the Obligations, for any
reason related to the Credit Agreement, any other Loan Document, or any
provision of applicable law or regulation purporting to prohibit the
payment by the Borrower, or any other guarantor of any of the
Obligations, of the principal of or interest on any Note or any other
amount payable by the Borrower under the Credit Agreement, the Notes or
any other Loan Document; or
(g) any other act or omission to act or delay of any kind by
the Borrower, any other guarantor of any of the Obligations, the Agent,
any Lender or any other Person or any other circumstance whatsoever
which might, but for the provisions of this paragraph, constitute a
legal or equitable discharge of any Guarantor's obligations hereunder.
SECTION 5. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN
CERTAIN CIRCUMSTANCES. The Guarantors' obligations hereunder shall remain in
full force and effect until all Guaranteed Obligations shall have been paid in
full and the Commitments under the Credit Agreement shall have terminated or
expired. If at any time any payment of the principal of or interest on any Note
or any other amount payable by the Borrower or any other party under the Credit
Agreement or any other Loan Document is rescinded or must be otherwise restored
or returned upon the insolvency, bankruptcy or reorganization of the Borrower or
otherwise, the Guarantors' obligations hereunder with respect to such payment
shall be reinstated as though such payment had been due but not made at such
time.
SECTION 6. WAIVER OF RIGHTS.
(a) Each of the Guarantors waives the right to require the
Agent or any of the Lenders to proceed against the Borrower or any other Person
liable on the Obligations, to proceed against or exhaust any security held from
the Borrower or any other Person, or to pursue any other remedy in the Agent's
or any of the Lenders's power whatsoever and each of the Guarantors waives the
right to have the property of the Borrower first applied to the discharge of the
Obligations. Either the Agent or any of the Lenders may, at its election,
exercise any right or remedy it may have against the Borrower or any security
held by the Agent or any Lenders, including, without limitation, the right to
foreclose upon any such security by one or more judicial or nonjudicial sales,
whether or not every aspect of any such sale is commercially reasonable, without
affecting or impairing in any way the liability of the Guarantors hereunder,
except to the extent the Obligations have been paid, and each of the Guarantors
waives any defense arising out of the absence, impairment or loss of any right
-4-
<PAGE>
of reimbursement, contribution or subrogation or any other right or remedy of
the Guarantors against the Borrower or any such security, whether resulting from
such election by the Agent or any Lenders or otherwise. Each of the Guarantors
waives any defense arising by reason of any disability or other defense of the
Borrower or by reason of the cessation from any cause whatsoever (including
without limitation, any intervention or omission by the Agent or any Lenders) of
the liability, either in whole or in part, of the Borrower to the Agent or any
Lenders for the Obligations. Each of the Guarantors understands that if all or
any part of the liability of the Borrower to the Agent or any Lenders for the
Obligations is secured by real property each of the Guarantors shall be liable
for the full amount of its liability hereunder notwithstanding foreclosure on
such real property by trustee sale or any other reason impairing the Guarantors'
right to proceed against the Borrower. Each of the Guarantors hereby waives, to
the fullest extent permitted by law, all rights and benefits under Section 2809
of the California Civil Code purporting to reduce a guarantor's obligations in
proportion to the obligation of the principal. Each of the Guarantors hereby
waives all rights and benefits under Section 580a of the California Code of
Civil Procedure purporting to limit the amount of any deficiency judgment which
might be recoverable following the occurrence of a trustee's sale under a deed
of trust, all rights and benefits under Section 580b of the California Code of
Civil Procedure stating that no deficiency may be recovered on a real property
purchase money obligation and all rights and benefits under Section 580d of the
California Code of Civil Procedure stating that no deficiency may be recovered
on a note secured by a deed of trust on real property in case such real property
is sold under the power of sale contained in such deed of trust, if such
sections, or any of them, have any application hereto or any application to the
Guarantors. In addition, each of the Guarantors hereby waives, to the fullest
extent permitted by law, (i) any defense arising as a result of any election by
the Agent or any Lenders, in any proceeding instituted under the Bankruptcy
Code, under Section 1111(b)(2) of the Bankruptcy Code, (ii) any defense based on
any borrowing or grant of a security interest under Section 364 of the
Bankruptcy Code, (iii) any defense arising as a result of any election made by
the Agent or any Lenders under Section 9501(4) of the California Uniform
Commercial Code, and (iv) without limiting the generality of the foregoing or
any other provision hereof, all rights and benefits which might otherwise be
available to the Guarantors under California Civil Code Sections 2810, 2819,
2839, 2845, 2818, 2849, 2850, 2899, and 3433.
(b) Each of the Guarantors expressly acknowledges that it will
be and remain fully liable for the Guaranteed Obligations hereunder even if, as
a result of any exercise of the power of sale under the Mortgages and/or any
other election of remedies by the Agent or any Lenders under the Mortgages
and/or any of the other Loan Documents or for any other reason, any rights of
reimbursement, contribution or subrogation on the part of the Guarantors against
the Borrower, in respect of the Mortgaged Property or from or against any other
guarantor has been destroyed or impaired. Each of the Guarantors further
expressly acknowledges that it could, in the absence of the waivers and
agreements set forth herein, have one or more defenses to or otherwise be
exonerated from the obligations and liabilities arising under this Guaranty as a
result of any such election of remedies by the Agent or any Lenders, including,
without limitation, exercise of the power of sale under the Mortgages, and each
of the Guarantors hereby knowingly, expressly and irrevocably
-5-
<PAGE>
waives each and every such defense to its liability hereunder, and expressly
acknowledges the reliance hereon of the Agent and the Lenders.
SECTION 7. WAIVER OF NOTICE. The Guarantors irrevocably waive
acceptance hereof, presentment, demand, protest and, to the fullest extent
permitted by law, any notice not provided for herein, as well as any requirement
that at any time any action be taken by any Person against the Borrower, any
other guarantor of the Obligations, or any other Person.
SECTION 8. SUBROGATION. The Guarantors hereby agree not to assert any
right, claim or cause of action, including, without limitation, a claim for
subrogation, reimbursement, indemnification or otherwise, against the Borrower
arising out of or by reason of this Guaranty or the obligations hereunder,
including, without limitation, the payment or securing or purchasing of any of
the Obligations by the other Guarantor unless and until the Guaranteed
Obligations are paid in full and any commitment to lend under the Credit
Agreement and other Loan Documents is terminated.
SECTION 9. STAY OF ACCELERATION. If acceleration of the time for
payment of any amount payable by the Borrower under the Credit Agreement, any
Note or any other Loan Document is stayed upon the insolvency, bankruptcy or
reorganization of the Borrower, all such amounts otherwise subject to
acceleration under the terms of the Credit Agreement, any Note or any other Loan
Document shall nonetheless be payable by the Guarantors hereunder forthwith on
demand by the Agent made at the request of the Required Lenders.
SECTION 10. NOTICES. All notices, requests and other communications to
any party hereunder shall be given or made by telecopier or other writing and
telecopied, or mailed or delivered to the intended recipient at its address or
telecopier number set forth on the signature pages hereof or such other address
or telecopier number as such party may hereafter specify for such purpose by
notice to the Agent in accordance with the provisions of Section 13.01 of the
Credit Agreement. Except as otherwise provided in this Guaranty, all such
communications shall be deemed to have been duly given when transmitted by
telecopier, or personally delivered or, in the case of a mailed notice sent by
certified mail return-receipt requested, on the date set forth on the receipt
(PROVIDED that any refusal to accept any such notice shall be deemed to be
notice thereof as of the time of any such refusal), in each case given or
addressed as aforesaid.
SECTION 11. NO WAIVERS. No failure or delay by the Agent or any Lenders
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies provided in this Guaranty, the Credit Agreement, the
Notes and the other Loan Documents shall be cumulative and not exclusive of any
rights or remedies provided by law. Each of the Guarantors assumes the
responsibility for being and keeping itself informed of the financial condition
of the Borrower and of all other circumstances bearing upon the risk of
nonpayment of the Obligations which diligent inquiry would reveal, and agrees
that
-6-
<PAGE>
the Agent and the Lenders shall have no duty to advise the Guarantors of
information known to the Agent or the Lenders regarding such condition or any
such circumstances.
SECTION 12. SUCCESSORS AND ASSIGNS. This Guaranty is for the benefit of
the Agent and the Lenders and their respective successors and permitted assigns
and, in the event of an assignment of any amounts payable under the Credit
Agreement, the Notes or the other Loan Documents, the rights hereunder, to the
extent applicable to the indebtedness so assigned, may be transferred with such
indebtedness. This Guaranty shall be binding upon each of the Guarantors and
their respective successors and permitted assigns.
SECTION 13. CHANGES IN WRITING. Neither this Guaranty nor any provision
hereof may be changed, waived, discharged or terminated orally, but only in
writing signed by each of the Guarantors and the Agent with the consent of the
Required Lenders.
SECTION 14. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAW OF THE STATE OF ILLINOIS. EACH OF THE GUARANTORS HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS AND OF ANY ILLINOIS STATE COURT SITTING IN CHICAGO,
ILLINOIS FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS GUARANTY (INCLUDING, WITHOUT LIMITATION, ANY OF THE OTHER LOAN DOCUMENTS)
OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE GUARANTORS IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH ANY OF THEM
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE GUARANTORS, AND THE
AGENT AND THE LENDERS ACCEPTING THIS GUARANTY, HEREBY IRREVOCABLY WAIVES ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 15. TAXES, ETC. All payments required to be made by any of the
Guarantors hereunder shall be made without setoff or counterclaim and free and
clear of and without deduction or withholding for or on account of, any present
or future taxies, levies, imposts, duties or other charges of whatsoever nature
imposed by any government or any political or taxing authority thereof,
PROVIDED, HOWEVER, that if any of the Guarantors is required by law to make such
deduction or withholding, such Guarantor shall forthwith pay to the Agent or any
Lender, as applicable, such additional amount as results in the net amount
received by the Agent or any Lender, as applicable, equaling the full amount
which would have been received by the Agent or any Lender, as applicable, had no
such deduction or withholding been made.
-7-
<PAGE>
IN WITNESS WHEREOF, each of the Guarantors has caused this Guaranty to
be duly executed by its authorized officer as of the day and year first above
written.
LENNAR CORPORATION AND EACH OF THE SUBSIDIARIES OF
LENNAR CORPORATION LISTED ON SCHEDULE I
By: /S/ STUART A. MILLER
------------------------------------------------
Stuart A. Miller, President or authorized
signatory of each of such corporations
LNR PROPERTY CORPORATION AND EACH OF THE SUBSIDIARIES
OF LNR PROPERTY CORPORATION LISTED ON SCHEDULE II
By: /S/ STUART A. MILLER
------------------------------------------------
Name: Stuart A. Miller
Title: Chairman of the Board or authorized
signatory of each of such corporations
-8-
<PAGE>
SCHEDULE I
LENNAR CORPORATION SUBSIDIARIES
<PAGE>
SCHEDULE II
LNR PROPERTY CORPORATION SUBSIDIARIES
-10-
EXHIBIT 10.l
REVOLVING CREDIT AGREEMENT (FACILITY A)
AMONG
LENNAR CORPORATION
AND
CERTAIN SUBSIDIARIES
AND
THE FIRST NATIONAL BANK OF CHICAGO,
NATIONSBANK, N.A.,
CREDIT LYONNAIS ATLANTA AGENCY,
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION,
COMERICA BANK,
FLEET NATIONAL BANK,
GUARANTY FEDERAL BANK, F.S.B.,
THE INDUSTRIAL BANK OF JAPAN, LIMITED, ATLANTA AGENCY,
U. S. BANK NATIONAL ASSOCIATION,
PNC BANK, NATIONAL ASSOCIATION,
SOCIETE GENERALE,
AMSOUTH BANK,
BARNETT BANK, N.A., SOUTH FLORIDA,
THE DAI-ICHI KANGYO BANK, LTD.,
THE FUJI BANK AND TRUST COMPANY,
KREDIETBANK, N.V.,
SAKURA BANK,
SUNTRUST BANK, MIAMI, N.A., AND
BANQUE PARIBAS
AND
THE FIRST NATIONAL BANK OF CHICAGO,
AS ARRANGER, ADMINISTRATIVE AGENT, SWING LINE BANK AND LETTER OF CREDIT ISSUER,
NATIONSBANK, N.A.,
AS SYNDICATION AGENT,
CREDIT LYONNAIS ATLANTA AGENCY,
AS DOCUMENTATION AGENT,
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION AND
COMERICA BANK,
AS MANAGING AGENTS, AND
FLEET NATIONAL BANK AND
GUARANTY FEDERAL BANK, F.S.B.,
AS CO-AGENTS
<PAGE>
DATED: OCTOBER 31, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I CERTAIN DEFINED TERMS.......................................1
SECTION 1.01. Certain Defined Terms.................................1
SECTION 1.02. Computation of Time Periods..........................22
SECTION 1.03. Accounting Terms.....................................22
ARTICLE II THE CREDITS................................................23
SECTION 2.01. Commitments..........................................23
SECTION 2.02. Types of Advances; Mandatory Principal Payments;
Final Maturity.......................................24
SECTION 2.03. Competitive Bid Advances.............................24
SECTION 2.04. Swing Line Loans.....................................28
SECTION 2.05. Optional Principal Payments..........................29
SECTION 2.06. Facility Fee and Reduction of Facility A Commitments.29
SECTION 2.07. Method of Borrowing..................................30
SECTION 2.08. Method of Selecting Types and Interest Periods for
Advances.............................................30
SECTION 2.09. Method of Selecting Types and Interest Periods for
Conversion and Continuation of Advances..............31
SECTION 2.10. Minimum Amount of Each Advance.......................31
SECTION 2.11. Rate after Maturity..................................32
SECTION 2.12. Method of Payment....................................32
SECTION 2.13. Committed A Notes; Telephonic Notices................32
SECTION 2.14. Interest Payment Dates; Interest and Fee Basis.......33
SECTION 2.15. Notification of Advances, Interest Rates, Prepayments
and Commitment Reductions............................33
SECTION 2.16. Lending Installations................................33
SECTION 2.17. Facility Letters of Credit...........................34
SECTION 2.18. Non-Receipt of Funds by the Agent....................39
SECTION 2.19. Withholding Tax Exemption............................40
SECTION 2.20. Unconditional Obligation to Make Payments............40
SECTION 2.21. Compensating Balances................................41
ARTICLE III CHANGE IN CIRCUMSTANCES....................................41
SECTION 3.01. Yield-Protection.....................................41
SECTION 3.02. Changes in Capital Adequacy Regulations..............42
SECTION 3.03. Availability of Types of Advances....................42
SECTION 3.04. Funding Indemnification..............................43
SECTION 3.05. Lender Statements: Survival of Indemnity.............43
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<PAGE>
ARTICLE IV REPRESENTATIONS AND WARRANTIES.............................43
SECTION 4.01. Organization, Powers, etc............................43
SECTION 4.02. Authorization and Validity of this Agreement, etc....44
SECTION 4.03. Financial Statements.................................44
SECTION 4.04. No Material Adverse Effect...........................45
SECTION 4.05. Title to Properties..................................46
SECTION 4.06. Litigation...........................................46
SECTION 4.07. Payment of Taxes.....................................46
SECTION 4.08. Agreements...........................................47
SECTION 4.09. Foreign Direct Investment Regulations................47
SECTION 4.10. Federal Reserve Regulations..........................47
SECTION 4.11. Consents, etc........................................47
SECTION 4.12. Compliance with Applicable Laws......................48
SECTION 4.13. Relationship of the Borrower.........................48
SECTION 4.14. Subsidiaries; Joint Ventures.........................48
SECTION 4.15. ERISA................................................49
SECTION 4.16. Investment Company Act...............................49
SECTION 4.17. Public Utility Holding Company Act...................49
SECTION 4.18. Subordinated Debt....................................49
SECTION 4.19. Post-Retirement Benefits.............................49
SECTION 4.20. Insurance............................................50
SECTION 4.21. Environmental Representations........................50
SECTION 4.22. Reorganization.......................................50
SECTION 4.23. Minimum Adjusted Tangible Net Worth..................50
SECTION 4.24. No Misrepresentation.................................50
ARTICLE V CONDITIONS PRECEDENT; TERMINATION..........................51
SECTION 5.01. Conditions of Effectiveness..........................51
SECTION 5.02. Conditions Precedent to All Borrowings...............54
SECTION 5.03. Termination..........................................55
ARTICLE VI AFFIRMATIVE COVENANTS......................................55
SECTION 6.01. Existence, Properties, etc...........................55
SECTION 6.02. Notice...............................................56
SECTION 6.03. Payments of Debts, Taxes, etc........................56
SECTION 6.04. Accounts and Reports.................................56
SECTION 6.05. Access to Premises and Records.......................60
SECTION 6.06. Maintenance of Properties and Insurance..............61
SECTION 6.07. Financing; New Investments...........................61
-(ii)-
<PAGE>
SECTION 6.08. Compliance with Applicable Laws......................62
SECTION 6.09. Advances to the Mortgage Banking Subsidiaries........62
SECTION 6.10. Use of Proceeds......................................62
ARTICLE VII NEGATIVE COVENANTS.........................................63
SECTION 7.01. Minimum Tangible Net Worth...........................63
SECTION 7.02. Limitation on Indebtedness...........................63
SECTION 7.03. Guaranties...........................................64
SECTION 7.04. Sale of Assets; Acquisitions; Merger.................64
SECTION 7.05. Investments..........................................65
SECTION 7.06. Disposition, Encumbrance or Issuance of Certain Stock66
SECTION 7.07. Subordinated Debt....................................66
SECTION 7.08. Housing Unit. ......................................66
SECTION 7.09. Construction in Progress.............................66
SECTION 7.10. No Margin Stock......................................66
SECTION 7.11. Mortgage Banking Subsidiaries' Capital Ratio.........67
SECTION 7.12. Transactions with Affiliates.........................67
SECTION 7.13. Restrictions on Advances to Mortgage Banking
Subsidiaries.........................................67
SECTION 7.14. Adjusted Net Worth of Mortgage Banking Subsidiaries..68
SECTION 7.15. Investments in Land..................................68
SECTION 7.16. Liens and Encumbrances...............................68
SECTION 7.17. Reorganization Documents.............................68
SECTION 7.18. Investments in Marlborough Subsidiaries..............68
ARTICLE VIII COLLATERAL.................................................69
SECTION 8.01. Security for Obligations.............................69
SECTION 8.02. Collateral Documentation.............................69
SECTION 8.03. Powers and Duties of the Borrower with Respect to the
Collateral...........................................69
SECTION 8.04. Power of Attorney....................................70
ARTICLE IX EVENTS OF DEFAULT..........................................70
SECTION 9.01. Events of Default....................................70
SECTION 9.02. Acceleration.........................................72
SECTION 9.03. Rights as to Collateral..............................73
SECTION 9.04. Application of Funds.................................75
ARTICLE X THE AGENT..................................................76
SECTION 10.01. Appointment..........................................76
SECTION 10.02. Powers...............................................76
SECTION 10.03. General Immunity.....................................76
-(iii)-
<PAGE>
SECTION 10.04. No Responsibility for Loans, Recitals, etc...........77
SECTION 10.05. Employment of Agents and Counsel.....................77
SECTION 10.06. Reliance on Documents; Counsel.......................77
SECTION 10.07. No Waiver of Rights..................................77
SECTION 10.08. Knowledge of Event of Default........................78
SECTION 10.09. Agent's Reimbursement and Indemnification............78
SECTION 10.10. Notices to the Borrower..............................78
SECTION 10.11. Action on Instructions of Lenders....................78
SECTION 10.12. Lender Credit Decision...............................79
SECTION 10.13. Resignation or Removal of the Agent..................79
SECTION 10.14. Benefits of Article X................................79
ARTICLE XI SETOFF; RATABLE PAYMENTS...................................80
SECTION 11.01. Setoff...............................................80
SECTION 11.02. Ratable Payments.....................................80
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS..........81
SECTION 12.01. Successors and Permitted Assigns.....................81
SECTION 12.02. Participations.......................................81
SECTION 12.03. Assignments..........................................82
ARTICLE XIII MISCELLANEOUS..............................................83
SECTION 13.01. Notice...............................................83
SECTION 13.02. Survival of Representations..........................83
SECTION 13.03. Expenses.............................................84
SECTION 13.04. Indemnification of the Lenders and the Agent.........84
SECTION 13.05. Maximum Interest Rate................................84
SECTION 13.06. Modification of Agreement............................85
SECTION 13.07. Preservation of Rights...............................86
SECTION 13.08. Joint and Several Obligations of Borrower; Several
Obligations of Lenders...............................86
SECTION 13.09. Severability.........................................86
SECTION 13.10. Counterparts.........................................86
SECTION 13.11. Representation and Warranty by the Lenders...........87
SECTION 13.12. The Company as Agent for Each Other Borrower.........87
SECTION 13.13. Loss, etc., Notes....................................87
SECTION 13.14. Governmental Regulation..............................87
SECTION 13.15. Taxes................................................87
SECTION 13.16. Headings.............................................87
SECTION 13.17. Entire Agreement.....................................87
-(iv)-
<PAGE>
SECTION 13.18. CHOICE OF LAW........................................88
SECTION 13.19. CONSENT TO JURISDICTION..............................88
SECTION 13.20. WAIVER OF JURY TRIAL.................................88
-(v)-
<PAGE>
PAGE
----
-(vi)-
<PAGE>
PAGE
----
-(vii)-
<PAGE>
EXHIBITS PAGE
----
EXHIBIT DESCRIPTION
A-1 Committed A Note
A-2 Competitive Bid Note
A-3 Swing Line Note
B Subsidiary Guaranty
C Assignment Agreement
C-1 Notice of Assignment
C-2 Consent and Release
D Mortgage Banking Subsidiaries Note
E Report on Investments
F Form of Pledge Agreement
G Joinder Agreement
H Competitive Bid Quote Request
I Invitation for Competitive Bid Quotes
J Competitive Bid Quote
K Pricing Grid
L Greystone Assumption Agreement
M Money Transfer Instructions
-(viii)-
<PAGE>
PAGE
N Requirements for Entitled Land ----
-(ix)-
<PAGE>
SCHEDULES
WHERE FOUND
SCHEDULE DESCRIPTION IN AGREEMENT
- -------- ----------- ------------
I Subsidiaries Which are Borrowers Opening Paragraph
II Lenders Opening Paragraph
III Real Estate Owned 4.05
IV Required Consents 4.11
V Subsidiaries and Joint Ventures 4.14
VI Tenancies In Common 1.01
(Definition of
"Joint Venture")
VII Real Estate Transferred to LLP (Definition of
"Reorganization");
4.05
VIII Permitted Liens "Definition of
"Permitted Liens")
-(x)-
<PAGE>
REVOLVING CREDIT AGREEMENT (FACILITY A), dated as of October 31, 1997,
among LENNAR CORPORATION, a corporation organized and existing under the laws of
the State of Delaware (the "Company"), the Subsidiaries of the Company listed in
Schedule I hereto (said Subsidiaries, together with the Company, hereinafter
individually and collectively referred to as the "Borrower"), the lenders listed
in Schedule II hereto (hereinafter collectively referred to as the "Lenders"),
and THE FIRST NATIONAL BANK OF CHICAGO, as Agent (the "Agent").
RECITAL
The Borrower desires to obtain from the Lenders and the Lenders are
willing to provide to the Borrower revolving credit loans and letters of credit
in an aggregate principal amount outstanding from time to time not to exceed
$450,000,000, upon the terms and subject to the conditions hereinafter set
forth.
AGREEMENT
In consideration of the foregoing and of the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINED TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used herein, each of the following
terms shall have the meaning ascribed to it below, which meaning shall be
applicable to both the singular and plural forms of the terms defined:
"ADJUSTED TANGIBLE NET WORTH" means, at any date, Tangible Net Worth at
such date less, to the extent not already deducted in the definition of Tangible
Net Worth, the aggregate of all of the following at such date: (i) the
consolidated stockholders' equity of the Mortgage Banking Subsidiaries, and (ii)
the stockholders' equity of each other Subsidiary of the Company which is not a
Borrower or Subsidiary Guarantor hereunder.
"ADVANCE" includes any or all of a Facility A Advance and a Competitive
Bid Advance.
"AFFILIATE" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause
<PAGE>
the direction of the management or policies of the controlled Person, whether
through ownership of stock, by contract or otherwise.
"AFSI" means Ameristar Financial Services, Inc.
"AGENT" means The First National Bank of Chicago in its capacity as agent
for the Lenders pursuant to Article X, and not in its individual capacity as a
Lender, the Swing Line Bank or the Issuer, and any successor Agent appointed
pursuant to Article X.
"AGGREGATE COMMITMENT" means, at any time, the sum of the then applicable
Aggregate Facility A Commitment and Aggregate Facility B Commitment.
"AGGREGATE FACILITY A COMMITMENT" means $450,000,000, as such amount may
be reduced from time to time pursuant to the terms hereof.
"AGGREGATE FACILITY B COMMITMENT" means $100,000,000, as such amount may
be reduced from time to time pursuant to the terms of the Facility B Credit
Agreement.
"AGGREGATE LETTER OF CREDIT COMMITMENT" means $50,000,000, as such amount
may be reduced from time to time pursuant to the terms hereof.
"AGREEMENT" means this Revolving Credit Agreement (Facility A), including
the exhibits and schedules hereto, as it may be amended, renewed, modified or
restated and in effect from time to time.
"AGREEMENT DATE" means October 31, 1997.
"APPLICABLE MARGIN" shall be determined in accordance with the pricing
grid set forth as Exhibit "K" hereto.
"ARTICLE" means an article of this Agreement unless another document is
specifically referenced.
"AUTHORIZED OFFICER" means any of Leonard Miller, Stuart Miller,
Waynewright Malcolm, Cory Boydston, Mary Raurell, or any other Person designated
by the Borrower in writing to act as an Authorized Officer hereunder, acting
singly.
"BORROWER" has the meaning assigned to that term in the introductory
paragraph of this Agreement. Whenever used in this Agreement, the term
"Borrower" refers to and means each of the entities comprising the Borrower,
individually, and all of such entities, collectively, including all entities
which become Borrowers pursuant to each Joinder Agreement and the Greystone
Assumption Agreement. All of the entities comprising the Borrower shall be
jointly and severally liable as Borrower under this Agreement, the Notes, and
all other Loan Documents.
<PAGE>
"BORROWING BASE" means, from time to time, the sum of the following
amounts, all as reflected from time to time in accordance with GAAP consistently
applied in the consolidated balance sheet of the Borrower: (i) 100% of
Borrower's unrestricted cash up to a maximum of $10,000,000 (with any excess
cash being excluded from the Borrowing Base); (ii) 100% of the Net Proceeds due
to Borrower at closing as a result of the consummation of the sale of any
Housing Unit, which Net Proceeds have been paid to the closing agent handling
such sale but which have not yet been received by Borrower; PROVIDED, HOWEVER,
that if, and to the extent that, such Net Proceeds which are reported as
outstanding on the last day of any fiscal quarter of Borrower are not received
by Borrower on or before the tenth (10th) day following the end of any such
fiscal quarter, such Net Proceeds shall not be included in the Borrowing Base;
(iii) 75% of the Net Book Value of all Housing Units Under Contract; (iv) 65% of
the Net Book Value of all Housing Units owned by Borrower (including, without
limitation, model Housing Units) that are not subject to a contract for sale;
(v) 50% of the Net Book Value of all Land Under Development owned by the
Borrower, PROVIDED that the amount determined pursuant to this clause (v), when
combined with the amount determined pursuant to clauses (vi) and (vii) below,
shall not exceed 40% of the Aggregate Commitment (with any excess being excluded
from the Borrowing Base); (vi) 65% of the Net Book Value of all Finished Lots
owned by the Borrower; and (vii) 30% of the Net Book Value of all Unimproved
Entitled Land owned by the Borrower, PROVIDED that the amount determined
pursuant to this clause (vii) shall not exceed $50,000,000 (with any excess
being excluded from the Borrowing Base); PROVIDED FURTHER, that notwithstanding
anything to the contrary provided herein, any asset which is encumbered by a
Lien shall not be included in the calculation of the Borrowing Base pursuant to
clauses (i) through (vii) above.
"BORROWING BASE LIMITATION" is defined in Section 7.02.
"BORROWING DATE" means a date on which an Advance or a Swing Line Loan is
made hereunder.
"BORROWING NOTICE" is defined in Section 2.08.
"BUSINESS DAY" means (i) with respect to any borrowing, payment or rate
selection of Fixed Rate Advances, a day (other than a Saturday or Sunday) on
which banks are open for business in Chicago and New York and on which dealings
in United States dollars are carried on in the London interbank market and (ii)
for all other purposes, a day (other than a Saturday or Sunday) on which banks
are open for business in Chicago.
"CAPITAL STOCK" means, with respect to any corporation, any and all
shares, interests, rights to purchase (other than convertible or exchangeable
Indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
"CAPITALIZED LEASE" of a Person means any lease of property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with GAAP.
3
<PAGE>
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with GAAP.
"CLOSING DATE" means the date on which the Lenders shall first become
obligated to make Advances after satisfaction or waiver of all of the conditions
precedent set forth in Sections 5.01 and 5.02.
"CODE" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"COLLATERAL" means, at any time, any assets owned by the Borrower that
then are subject to a security interest in favor of the Agent as security for
the Obligations.
"COMMITMENT" means, for each of the Lenders, the Facility A Commitment and
the Facility B Commitment of such Lender.
"COMMITTED ADVANCE" means a borrowing hereunder (or the conversion or
continuation thereof) consisting of the aggregate amount of the several
Committed Loans made by the Lenders to the Borrower of the same Type and, in the
case of Fixed Rate Advances, for the same Interest Period.
"COMMITTED LOAN" means, with respect to a Lender, a Loan made by such
Lender pursuant to Section 2.01.
"COMMITTED A NOTE" means a promissory note in substantially the form of
Exhibit AA-1" hereto, completed, executed and delivered by the Borrower and
payable to the order of a Lender in the amount of its Facility A Commitment,
including any amendment, modification, restatement, renewal or replacement of
such promissory note.
"COMPANY" (i) prior to the Merger, has the meaning assigned to that term
in the introductory paragraph of this Agreement and (ii) from and after the
effective time of the Merger, means Greystone as the surviving corporation of
the Merger (which shall thereupon change its name to Lennar Corporation).
"COMPANY AUDITED FINANCIAL STATEMENTS" is defined in Section 4.03.
"COMPANY UNAUDITED FINANCIAL STATEMENTS" is defined in Section 4.03.
"COMPETITIVE BID ADVANCE" means a borrowing hereunder consisting of the
aggregate amount of the several Competitive Bid Loans made by any, some or all
of the Lenders to the Borrower on the same Borrowing Date.
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"COMPETITIVE BID BORROWING NOTICE" is defined in Section 2.03(f).
"COMPETITIVE BID LOAN" means, with respect to a Lender, a Loan made by
such Lender pursuant to Section 2.03.
"COMPETITIVE BID NOTE" means a promissory note, substantially in the form
of Exhibit "A-2" hereto, with appropriate insertions, duly executed and
delivered to the Agent by the Borrower for the account of a Lender and payable
to the order of such Lender, including any amendment, modification, renewal,
restatement or replacement of such promissory note.
"COMPETITIVE BID QUOTE" means a Competitive Bid Quote, substantially in
the form of Exhibit "J" hereto, completed and delivered by a Lender to the Agent
in accordance with Section 2.03(d).
"COMPETITIVE BID QUOTE REQUEST" means a Competitive Bid Quote Request,
substantially in the form of Exhibit "H" hereto, completed and delivered by the
Borrower to the Agent in accordance with Section 2.03(b).
"COMPLETED HOUSING UNIT" means, at any time, a Housing Unit the
construction of which was commenced more than 10 months, in the case of a single
family home, more than 12 months, in the case of a townhouse, or more than 18
months, in the case of a condominium, before that time or was completed prior to
the expiration of the applicable period.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the sum of the
aggregate of all expenditures (whether paid in cash or other consideration or
accrued as a liability) by the Borrower and each Subsidiary Guarantor during
such period that, in accordance with GAAP, are or should be included in
"additions to property, plant or equipment" or similar items reflected in the
consolidated statement of cash flows of the Borrower and each Subsidiary
Guarantor for such period.
"CONSOLIDATED EBITDA" means, for any period, the Consolidated Net Income
PLUS, to the extent deducted from revenues in determining Consolidated Net
Income, (i) Consolidated Interest Expense, (ii) expense for income taxes paid or
accrued, (iii) depreciation, (iv) amortization and (v) extraordinary losses
incurred other than in the ordinary course of business, MINUS, to the extent
included in Consolidated Net Income, extraordinary gains realized other than in
the ordinary course of business, all calculated for the Company and its
Subsidiaries on a consolidated basis.
"CONSOLIDATED INTEREST EXPENSE" means, with reference to any period, the
interest expense of the Company and its Subsidiaries calculated on a
consolidated basis for such period.
"CONSOLIDATED INTEREST INCURRED" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of (a) interest expensed or capitalized, paid, accrued, or scheduled
to be paid or accrued of such Person and its consolidated
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Subsidiaries during such period, including (i) original issue discount and
non-cash interest payments or accruals on any Indebtedness, (ii) the interest
portion of all deferred payment obligations, and (iii) all commissions,
discounts and other fees and charges owed with respect to bankers' acceptances
and letter of credit financings and interest swap and hedging obligations, in
each case to the extent attributable to such period PLUS (b) the amount of
dividends accrued or payable by such Person or any of its consolidated
Subsidiaries in respect of Disqualified Capital Stock (other than by
Subsidiaries of such Person to such Person or such Person's Subsidiary
guarantors), PROVIDED, HOWEVER, that interest, dividends or other payments or
accruals of a consolidated Subsidiary that is not wholly owned shall be included
only to the extent of the interest of such Person in such Subsidiary. For
purposes of this definition, (x) interest on Capitalized Lease Obligations shall
be deemed to accrue at an interest rate reasonably determined by the Borrower to
be the rate of interest implicit in such Capitalized Lease Obligations in
accordance with GAAP and (y) interest expense attributable to any Indebtedness
represented by the guaranty by such Person or a Subsidiary of such Person of an
obligation of another Person shall be deemed to be the interest expense
attributable to the Indebtedness guaranteed.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the net income (or loss) of such Person and its Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP; PROVIDED,
that (i) net income (or loss) of any other Person which is not a Subsidiary of
the Person or is accounted for by such specified Person by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid to the specified Person or a Subsidiary of such Person, (ii)
the net income (or loss) of any other Person acquired by such specified Person
or a Subsidiary of such Person in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, (iii) all gains
and losses which are either extraordinary (as determined in accordance with
GAAP) or are either unusual or nonrecurring (including any gain from the sale or
other disposition of assets outside the ordinary course of business or from the
issuance or sale of any Capital Stock), shall be excluded, and (iv) the net
income, if positive, of any of such Person's consolidated Subsidiaries (other
than non-guarantor Subsidiaries) to the extent that the declaration or payment
of dividends or similar distributions is not at the time permitted by operation
of the terms of its charter or bylaws or any other agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
such consolidated Subsidiary shall be excluded, PROVIDED, HOWEVER, in the case
of exclusions from Consolidated Net Income set forth in clauses (ii), (iii) and
(iv), such amounts shall be excluded only to the extent included in computing
such net income (or loss) in accordance with GAAP and without duplication;
PROVIDED FURTHER, HOWEVER, that for purposes of determining Consolidated Net
Income of the Borrower, the net income of any Subsidiary which is not a Borrower
or Subsidiary Guarantor shall be excluded.
"CONTINGENT OBLIGATION" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss,
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including, without limitation, any comfort letter, operating agreement or
take-or-pay contract. With respect to the Borrower, Contingent Obligation
includes, without limitation of the foregoing, obligations under reimbursement
agreements with financial institutions (including Lenders) relating to letters
of credit issued by such financial institutions for the account of Borrower.
"CONVERSION/CONTINUATION NOTICE" is defined in Section 2.09(d).
"CONTROLLED GROUP" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower or any of its Subsidiaries, are treated as a
single employer under Section 414 of the Code.
"CORPORATE BASE RATE" means a rate per annum equal to the corporate base
rate of interest announced by First Chicago from time to time, changing when and
as said corporate base rate changes.
"DEFAULT RATE" means the rate after maturity as provided for in Section
2.11.
"DISQUALIFIED CAPITAL STOCK" means (a) except as set forth in (b), with
respect to any Person, Capital Stock of such Person that, by its terms or by the
terms of any security into which it is convertible, exercisable or exchangeable,
is, or upon the happening of an event or the passage of time would be, required
to be redeemed or repurchased (including at the option of the holder thereof) by
such Person or any of its Subsidiaries, in whole or in part, on or prior to the
stated maturity of the securities, and (b) with respect to any Subsidiary of
such Person (including with respect to any Subsidiary of the Borrower), any
Capital Stock other than any common stock with no preference, privileges, or
redemption or repayment provisions.
"DOLLARS" and the sign "$" each means lawful money of the United States of
America.
"DUFF & PHELPS" means Duff & Phelps Credit Rating Co. or any Person
succeeding to the securities rating business of such company.
"ENTITLED LAND" means a parcel of Real Estate owned by the Borrower or a
Subsidiary Guarantor which is to be developed primarily for residential dwelling
units and which satisfies the requirements for the state and county wherein it
is located as more particularly described in the Requirements for Entitled Land
attached hereto as Exhibit N.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to (i) the
protection of the environment, (ii) the effect of the environment on human
health, (iii) emissions, discharges or releases of pollutants, contaminants,
Hazardous Substances or wastes into surface water, ground water or land, or (iv)
the manufacture, processing, distribution, use,
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treatment, storage, disposal, transport or handling of pollutants, contaminants,
Hazardous Substances or wastes or the clean-up or other remediation thereof.
"EQUITY INVESTMENT" means the ownership of, or participation in the
ownership of, an equity interest in Real Estate or an equity interest in a
Person in the business of owning, developing, improving, operating or managing
Real Estate.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"EURODOLLAR BASE RATE" means, with respect to a Fixed Rate Advance for the
relevant Eurodollar Interest Period, the rate determined by the Agent to be the
rate at which deposits in U.S. dollars are offered by First Chicago to
first-class banks in the London interbank market at approximately 11 a.m.
(London time) two Business Days prior to the first day of such Eurodollar
Interest Period, in the approximate amount of First Chicago's relevant Fixed
Rate Loan and having a maturity approximately equal to such Eurodollar Interest
Period.
"EURODOLLAR INTEREST PERIOD" means, with respect to a Fixed Rate Advance,
a period of one, two, three or six months, as available, commencing on a
Business Day selected by the Borrower pursuant to this Agreement. Such
Eurodollar Interest Period shall end on (but exclude) the day which corresponds
numerically to such date one, two, three or six months thereafter, PROVIDED,
HOWEVER, that if there is no such numerically corresponding day in such next,
second, third or sixth succeeding month, such Eurodollar Interest Period shall
end on the last Business Day of such next, second, third or sixth succeeding
month. If a Eurodollar Interest Period would otherwise end on a day which is not
a Business Day, such Eurodollar Interest Period shall end on the next succeeding
Business Day, PROVIDED, HOWEVER, that if said next succeeding Business Day falls
in a new calendar month, such Eurodollar Interest Period shall end on the
immediately preceding Business Day.
"EURODOLLAR RATE" means, with respect to a Fixed Rate Advance for the
relevant Eurodollar Interest Period, the sum of (i) the quotient of (a) the
Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided by
(b) one minus the Reserve Requirement (expressed as a decimal) applicable to
such Eurodollar Interest Period, plus (ii) the Applicable Margin. The Eurodollar
Rate shall be rounded to the next higher multiple of 1/16 of 1% if the rate is
not such a multiple.
"EVENT" means an event, circumstance, condition or state of facts.
"EVENT OF DEFAULT" is defined in Section 9.01.
"EXISTING CREDIT AGREEMENT" means the Second Amended and Restated
Revolving Credit Agreement, dated as of April 4, 1997, among the Company and
certain of its Subsidiaries, as borrowers thereunder, First Chicago, as Agent
and lender thereunder, and certain other lenders named therein.
"FACILITIES" means Facility A and Facility B.
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"FACILITY A" means the revolving credit facility described in Section
2.01(a).
"FACILITY A ADVANCE" means a Committed Advance pursuant to Facility A.
"FACILITY A COMMITMENT" means, for each of the Lenders, the obligation of
such Lender to make Committed Loans pursuant to Facility A and purchase
participations in Facility Letters of Credit in the aggregate not exceeding the
amount set forth opposite its signature below as its "Facility A Commitment", as
such amount may be modified from time to time pursuant to the terms hereof.
"FACILITY A LOAN DOCUMENTS" means this Agreement, the Notes, the
Subsidiary Guaranties, the Facility Letters of Credit (and any application
and/or reimbursement agreement delivered in connection therewith), the Pledge
Agreement, the Greystone Assumption Agreement, any Joinder Agreements and any
and all other instruments or documents delivered or to be delivered by the
Borrower pursuant hereto and thereto, as such documents may be amended or
modified and in effect from time to time.
"FACILITY A OBLIGATIONS" means all unpaid principal of and accrued and
unpaid interest on the Loans, all Facility Letter of Credit Obligations, all
accrued and unpaid fees and all expenses, reimbursements, indemnities and other
obligations of the Borrower and each Subsidiary Guarantor to the Lenders or to
any Lender, the Agent or any indemnified party arising under the Facility A Loan
Documents.
"FACILITY A TERMINATION DATE" means June 30, 2002, subject, however, to
earlier termination in whole of the Aggregate Commitment pursuant to the terms
of this Agreement.
"FACILITY B" means the revolving credit facility described in the Facility
B Credit Agreement.
"FACILITY B ADVANCE" means a committed advance pursuant to Facility B.
"FACILITY B COMMITMENT" means, for each of the Lenders, the obligation of
such Lender to make revolving credit loans pursuant to Facility B in the
aggregate not exceeding the amount set forth opposite its signature in the
Facility B Credit Agreement as its "Facility B Commitment", as such amount may
be modified from time to time pursuant to the terms thereof.
"FACILITY B CREDIT AGREEMENT" means the Revolving Credit Agreement
(Facility B), dated the Agreement Date, among the Borrower, First Chicago, as
Agent and a Lender thereunder, and certain other Lenders named therein, as the
same may be amended, modified, renewed or restated and in effect from time to
time.
"AFACILITY B LOAN DOCUMENTS" means the AFacility B Loan Documents' as such
term is defined in the Facility B Credit Agreement.
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"FACILITY B OBLIGATIONS" has the meaning set forth in the Facility B
Credit Agreement.
"FACILITY FEE" means the fee determined in accordance with the pricing
grid set forth as Exhibit "K" hereto.
"FACILITY LETTER OF CREDIT" means a letter of credit issued by an Issuer
pursuant to Section 2.17.
"FACILITY LETTER OF CREDIT FEE" means the fee identified in Section
2.17(f)(i).
"FACILITY LETTER OF CREDIT OBLIGATIONS" means, as at the time of
determination thereof, all liabilities, whether actual or contingent, of the
Borrower with respect to Facility Letters of Credit, including the sum of (a)
the Reimbursement Obligations and (b) the aggregate undrawn face amount of the
then outstanding Facility Letters of Credit.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"FINISHED LOT" means a parcel of Entitled Land which satisfies the
requirements for Land Under Development and which the owner thereof has invested
85% or more of the cost to complete the Improvements thereon, and which: in
Florida, is a lot described within a final recorded subdivision plat or
agreement in lieu of plat; in California is a lot reflected on a duly recorded
final subdivision map or a parcel reflected on a duly recorded parcel map and is
subject to a final public subdivision report, if required, duly, validly and
unconditionally issued by the California Department of Real Estate pursuant to
and in accordance with the Subdivided Lands Act, Business and Professions Code
Section 11018.2; in Arizona, is a lot described in a final public subdivision
report duly, validly and unconditionally issued with the Arizona Department of
Real Estate pursuant to and in accordance with Arizona Revised Statute Section
32-2181 et seq.; and, in Texas, is a lot which constitutes a valid, legally
subdivided lot within the meanings of the applicable laws of Texas, the County
and/or the City within which it is located, and other requirements governing the
subdivision of land and constitutes a lot reflected on a duly recorded plat or
delineated representation of the subdivision of lands, being a complete and
exact representation of the subdivision and other conformation in compliance
with the requirements of all applicable sections of VTCA Local Government Code
Section 212, all the applicable local ordinances and other requirements
governing the subdivision of land and approved by the appropriate Governmental
Authority.
"FIRST CHICAGO" means The First National Bank of Chicago in its individual
capacity, and its successors.
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"FITCH" means Fitch Investors Service, L.P. or any Person succeeding to
the securities rating business of such company.
"FIXED RATE" means the Eurodollar Rate.
"FIXED RATE ADVANCE" means a Committed Advance which bears interest at a
Fixed Rate.
"FIXED RATE LOAN" means a Committed Loan which bears interest at a Fixed
Rate.
"FLOATING RATE" means, for any day, a rate per annum equal to the higher
of (i) the Corporate Base Rate for such day or (ii) the sum of the Federal Funds
Effective Rate plus 0.5%, in each case changing when and as the Corporate Base
Rate and the Federal Funds Effective Rate change.
"FLOATING RATE ADVANCE" means a Committed Advance which bears interest at
the Floating Rate.
"FLOATING RATE LOAN" means a Committed Loan which bears interest at the
Floating Rate.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession as in effect from time to time.
"GOVERNMENTAL AUTHORITY" means any foreign governmental authority, the
United States of America, any state of the United States of America and any
subdivision of any of the foregoing, and any agency, department, commission,
board, authority or instrumentality, bureau or court having jurisdiction over
the Lender, the Borrower, any Subsidiaries of the Borrower or any of their
respective properties.
"GREYSTONE" means Pacific Greystone Corporation, a Delaware corporation,
and its successors.
"GREYSTONE ASSUMPTION AGREEMENT" means an agreement, in form and substance
substantially similar to the form attached hereto as Exhibit "L", executed by
Greystone and each of Greystone's Subsidiaries which does not become a
Subsidiary Guarantor on or prior to the Closing Date, pursuant to which
Greystone and such non-guaranteeing Subsidiaries become Borrowers hereunder.
"HAZARDOUS SUBSTANCES" means any toxic or hazardous wastes, pollutants or
substances, including, without limitation, asbestos, PCBs, petroleum products
and by-products, substances defined or listed as "hazardous substances" or
"toxic substances" or similarly identified in or pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
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as amended, 42 U.S.C. ss. 9061 ET SEQ., hazardous materials identified in or
pursuant to the Hazardous Materials Transportation Act 49 U.S.C. ss. 1802 ET
SEQ., hazardous wastes identified in or pursuant to The Resource Conservation
and Recovery Act, 42 U.S.C. ss. 6901 ET SEQ., any chemical substance or mixture
regulated under the Toxic Substance Control Act of 1976, as amended, 15 U.S.C.
ss. 2601 ET SEQ., any "toxic pollutant" under the Clean Water Act, 33 U.S.C. ss.
466 ET SEQ., as amended, any hazardous air pollutant under the Clean Air Act, 42
U.S.C. ss. 7401 ET SEQ., and any hazardous or toxic substance or pollutant
regulated under any other applicable federal, state or local Environmental Laws.
"HOUSING UNIT" means a residential housing unit that is (or, upon
completion of construction thereof, will be) available for sale.
"HOUSING UNIT CLOSING" means a closing of the sale of a Housing Unit by
the Borrower to a bona fide purchaser for value that is not an Affiliate of the
Borrower.
"HOUSING UNIT UNDER CONTRACT" means a Housing Unit owned by the Borrower
as to which the Borrower has a bona fide contract of sale, in a form customarily
employed by the Borrower and reasonably satisfactory to the Agent, entered into
not more than 15 months prior to the date of determination with a Person who is
not an Affiliate of the Borrower, under which contract no defaults then exist;
PROVIDED, HOWEVER, that in the case of any Housing Unit the purchase of which is
to be financed in whole or in part by a loan insured by the Federal Housing
Administration or guaranteed by the Veterans Administration, the minimum
downpayment shall be the amount (if any) required under the rules of the
relevant agency.
"IMPROVEMENTS" means on and off-site development work, including but not
limited to filling to grade, main water distribution and sewer collection
systems and drainage system installation, paving, and other improvements
necessary for the use of residential dwelling units and as required pursuant to
development agreements which may have been entered into with Governmental
Authorities.
"INDEBTEDNESS" of any Person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such Person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors, (iv) evidenced by
bankers' acceptances, (v) consisting of obligations, whether or not assumed,
secured by Liens or payable out of the proceeds or production from property now
or hereafter owned or acquired by such Person, (vi) consisting of Capitalized
Lease Obligations, (vii) consisting of liabilities and obligations under any
sales/leaseback and receivable sales transactions, or (viii) consisting of a
letter of credit, other than a Performance Letter of Credit, or a reimbursement
obligation of such Person with respect to any letter of credit; (b) all net
obligations of such Person under interest swap and hedging obligations; (c) all
liabilities and obligations of others of the kind described in the
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preceding clauses (a) or (b) that such Person has guaranteed or that is
otherwise its legal liability or which are secured by any assets or property of
such Person and all obligations to purchase, redeem or acquire any Capital
Stock, other than liability under executory contracts to purchase Capital Stock;
and (d) obligations of such Person to purchase securities or other property
arising out of or in connection with the sale of the same or substantially
similar securities or property. With respect to the Borrower, Indebtedness
includes, without limitation of the foregoing, all Obligations.
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement dated as of
October 31, 1997, by and among the Borrower, the Agent, the Lenders, UAMC, UAMC
Asset Corp. and certain lenders to UAMC and UAMC Asset Corp., as the same may be
amended, modified, supplemented or restated from time to time.
"INTEREST COVERAGE RATIO" of the Borrower on any date means the ratio of
(i) Consolidated EBITDA for the four fiscal quarters ended on such date to (ii)
total Consolidated Interest Incurred of the Borrower for such fiscal quarters.
"INTEREST PERIOD" means a Eurodollar Interest Period.
"INVESTMENT" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable arising
in the ordinary course of business on terms customary in the trade), deposit
account or contribution of capital by such Person to any other Person or any
investment in, or purchase or other acquisition of, the stock, partnership
interests, membership interests, notes, debentures or other securities of any
other Person made by such Person.
"INVITATION FOR COMPETITIVE BID QUOTES" means an Invitation for
Competitive Bid Quotes, substantially in the form of Exhibit "I" hereto,
completed and delivered by the Agent to the Lenders in accordance with Section
2.03(c).
"ISSUANCE DATE" is defined in Section 2.17(c)(i).
"ISSUANCE NOTICE" is defined in Section 2.17(c)(iii).
"ISSUER" means, with respect to each Facility Letter of Credit, First
Chicago or such other Lender selected by the Borrower with the approval of the
Agent to issue such Facility Letter of Credit so long as such other Lender
consents to act in such capacity.
"JOINDER AGREEMENT" means an agreement, in form and substance
substantially similar to the form attached hereto as Exhibit "G", executed by a
future Subsidiary of the Company, pursuant to which such Subsidiary becomes a
Borrower hereunder.
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"JOINT VENTURE" means a joint venture (whether in the form of a
corporation, a partnership, limited liability company or otherwise) (i) to which
the Borrower or a Joint Venture Subsidiary is or becomes a party (other than the
tenancies in common listed in Schedule VI annexed hereto), (ii) whether or not
Borrower is required to consolidate the joint venture in its financial
statements in accordance with GAAP, and (iii) in which the Borrower has or will
have a total investment exceeding $25,000 or which has total assets plus
contingent liabilities exceeding $100,000. For the purposes of this definition,
the "Borrower" includes the Company and Greystone and their respective
Subsidiaries, and the Borrower's investment in a joint venture shall be deemed
to include any Securities of the joint venture owned by the Borrower, any loans,
advances or accounts payable to the Borrower from the joint venture, any
commitment, arrangement or other agreement by the Borrower to provide funds or
credit to the joint venture and the Borrower's share of the undistributed
profits of the joint venture.
"JOINT VENTURE SUBSIDIARY" means a Subsidiary of the Company which is a
partner, shareholder or other equity owner in a Joint Venture which is not a
Borrower.
"LAND UNDER DEVELOPMENT" means Entitled Land upon which construction of
Improvements has commenced but not been completed and for which: (a) to the
extent required, a performance bond, surety or other security has been issued to
and in favor of and unconditionally accepted by each local agency and all
relevant Governmental Authorities, including any municipal utility district in
which the Real Estate is situated with regard to all work to be performed
pursuant to each and all of said subdivision improvement agreements or other
agreements; (b) all necessary plans have been approved by all relevant
Governmental Authorities for the installation of any and all Improvements
required to be installed upon such Real Estate; (c) all necessary permits have
been issued for the installation of said Improvements; and (d) utility services
necessary for construction of Improvements and residential dwelling units and
the operation thereon for the purpose intended will be available to such Real
Estate upon completion of the Improvements and there exists a binding obligation
on the part of each and every utility company to deliver necessary utility
services to such Real Estate.
"LENDERS" means the lending institutions listed on the signature pages of
this Agreement and the respective successors and permitted assigns of such
lending institutions.
"LENDING INSTALLATION" means, with respect to a Lender or the Agent, any
office, branch, subsidiary or affiliate of such Lender or the Agent.
"LETTER OF CREDIT" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"LETTER OF CREDIT COMMITMENT" means, for each Lender, the obligation of
such Lender to participate in Facility Letters of Credit in an amount not
exceeding the lesser of (i) its Pro Rata Share
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of the Aggregate Letter of Credit Commitment or (ii) its Pro Rata Share of the
unused amount of the Aggregate Facility A Commitment.
"LETTER OF CREDIT COLLATERAL ACCOUNT" is defined in Section 2.17(g).
"LETTER OF CREDIT REQUEST" is defined in Section 2.17(c)(1).
"LIEN" means any lien (statutory or other), mortgage (including, without
limitation, purchase money mortgages), pledge, hypothecation, assignment,
deposit arrangement, encumbrance or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, the interest of a vendor or lessor under any
conditional sale, Capitalized Lease or other title retention agreement).
"LIMITED PURPOSE FINANCE SUBSIDIARIES" means the limited purpose finance
subsidiaries as identified on the financial statements referred to in Section
4.03.
"LLP" means Lennar Land Partners, a Florida general partnership.
"LLP CREDIT AGREEMENT" means the Revolving Credit Agreement, dated as of
the Agreement Date, among LLP and certain Subsidiaries and joint ventures of
LLP, as guarantors thereunder, First Chicago as agent and lender thereunder, and
certain other lenders named therein.
"LLP LOANS" means all Indebtedness of LLP pursuant to the LLP Credit
Agreement and the other "Loan Documents" as defined therein.
"LLP LOANS GUARANTY" means the Guaranty, dated the Agreement Date,
executed by the Borrower in favor of the lenders under the LLP Credit Agreement
pursuant to which the Borrower and LNR have unconditionally, jointly and
severally guaranteed payment of the LLP Loans, including any amendment,
modification, renewal, restatement or replacement thereof.
"LLP PARTNER" means Lennar Land Partners Sub, Inc., a Delaware
corporation, a Wholly-Owned Subsidiary of the Company which holds a 50% interest
in LLP.
"LLP PARTNERSHIP AGREEMENT" means the Partnership Agreement, dated October
24, 1997, between LLP Partner and LNR Partner forming LLP, as the same may, if
permitted hereunder, be amended, modified or restated.
"LNR" means LNR Property Corporation, a Delaware corporation, and its
successors.
"LNR LOANS GUARANTIES" means the guaranties executed by the Company,
guaranteeing payment of Indebtedness of LNR.
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"LNR PARTNER" means LNR Land Partners Sub, Inc., a Delaware corporation,
an indirect Wholly-Owned Subsidiary of LNR which holds a 50% interest in LLP.
"LOAN" means, with respect to a Lender, a loan made by such Lender
pursuant to Article II (and, in the case of a Committed Loan, any conversion or
continuation thereof).
"LOAN DOCUMENTS" means the Facility A Loan Documents and the Facility B
Loan Documents.
"MARLBOROUGH SUBSIDIARIES" means collectively, Marlborough Development
Corporation, an Arizona corporation, Marlborough Financial Corporation, a
California corporation, and Marlborough Mortgage Corporation, a California
corporation.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, properties, assets, condition (financial or otherwise), results of
operations, or prospects of (a) the Company and the other entities comprising
the Borrower and the Subsidiary Guarantors, taken as a whole, or (b) if so
specified, any entity comprising the Borrower or any Subsidiary Guarantor,
PROVIDED that the consummation of the transactions referred to in the definition
of "Reorganization" herein shall be deemed not to result in a material adverse
effect under this clause (i), (ii) the ability of the Borrower or any Subsidiary
Guarantor to perform its obligations under the Loan Documents, or (iii) the
validity or enforceability of any of the Loan Documents or the rights or
remedies of the Agent or the Lenders thereunder.
"MATURITY DATE" means the date upon which the outstanding principal amount
of the Notes, all accrued but unpaid interest thereon, and all other Facility A
Obligations become due and payable, whether as a result of the occurrence of the
stated maturity date or the acceleration of maturity pursuant to the terms of
any of the Facility A Loan Documents.
"MAXIMUM LEVERAGE RATIO" is defined in Section 7.02.
"MERGER" means the merger of the Company with and into Greystone pursuant
to the Merger Agreement.
"MERGER AGREEMENT" means the Plan and Agreement of Merger dated as of June
10, 1997, between Greystone and the Company.
"MINIMUM INTEREST COVERAGE RATIO" means an Interest Coverage Ratio of not
less than two (2) to one (1).
"MOODY'S" means Moody's Investors Service, Inc. or any Person succeeding
to the securities rating business of such company.
"MONTHLY PAYMENT DATE" means the first day of each calendar month.
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"MORTGAGE" means any mortgage, deed of trust or other security deed in
Real Estate, or in rights or interests, including leasehold interests, in Real
Estate.
"MORTGAGE BANKING SUBSIDIARY" means a Subsidiary which is engaged or
hereafter engages in the mortgage banking business, including the origination,
servicing, packaging and/or selling of mortgages on residential single- and
multi-family dwellings and/or commercial property, and in any event shall
include AFSI and UAMC.
"MORTGAGE BANKING SUBSIDIARIES NOTE" means the promissory note dated the
Closing Date, in the principal amount of $150,000,000 executed by the Mortgage
Banking Subsidiaries as joint makers payable to the order of the Company which
is to be held by the Agent pursuant to Section 6.09. The Mortgage Banking
Subsidiaries Note shall be in form and substance as provided in Exhibit "D"
attached hereto.
"MULTIEMPLOYER PLAN" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"NET BOOK VALUE" means, with respect to an asset owned by a Borrower, the
gross investment of that Borrower in the asset, less all reserves (including
loss reserves and reserves for depreciation) attributable to that asset, all
determined in accordance with GAAP consistently applied.
"NET PROCEEDS" means, in connection with the sale of any asset by the
Borrower, the gross sales price less (A) all bona fide prorations and
adjustments to the sales price required to be made pursuant to the terms of the
sales contract and (B) the aggregate amount of bona fide closing costs due to
any Person, PROVIDED that if such closing costs are due to an Affiliate of the
Borrower, such costs comply with Section 7.12.
"NET WORTH" means, at any date, the amount of consolidated stockholders'
equity of the Company and its consolidated Subsidiaries as shown on its balance
sheet as of such date in accordance with GAAP.
"NOTES" means, collectively, the Committed A Notes, the Competitive Bid
Notes and the Swing Line Note; and "Note" means any one of the Notes.
"NOTICE OF ASSIGNMENT" is defined in Section 12.03(b).
"OBLIGATIONS" means the Facility A Obligations and the Facility B
Obligations.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"PARTICIPANTS" is defined in Section 12.02.
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"PERFORMANCE LETTER OF CREDIT" means a letter of credit issued to a
governmental authority or quasi-governmental agency to insure the completion by
the Borrower of a development of land improvements or to insure payment by the
Borrower of escrow accounts.
"PERMITTED LIENS" means (a) Liens existing on the date of this Agreement
and described on Schedule "VIII" hereto; (b) Liens imposed by governmental
authorities for taxes, assessments or other charges not yet subject to penalty
or which are being contested in good faith and by appropriate proceedings, if
adequate reserves with respect thereto are maintained on the books of the
Borrower in accordance with GAAP; (c) statutory liens of carriers, warehousemen,
mechanics, materialmen, landlords, repairmen or other like Liens arising by
operation of law in the ordinary course of business provided that (i) the
underlying obligations are not overdue for a period of more than 30 days or (ii)
such Liens are being contested in good faith and by appropriate proceedings and
adequate reserves with respect thereto are maintained on the books of the
Borrower in accordance with GAAP; (d) Liens securing the performance of bids,
trade contracts (other than borrowed money), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business; (e) easements,
rights-of-way, zoning, similar restrictions and other similar encumbrances or
title defects which, singly or in the aggregate, do not in any case materially
detract from the value of the Real Estate subject thereto (as such Real Estate
is used by the Borrower or any of its Subsidiaries) or interfere with the
ordinary conduct of the business of the Borrower or any of its Subsidiaries; (f)
Liens arising by operation of law in connection with judgments, only to the
extent, for an amount and for a period not resulting in a default with respect
thereto; (g) pledges or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security legislation; (h) Liens securing Indebtedness of a Person
existing at the time such Person becomes a Subsidiary or is merged with or into
the Borrower or a Subsidiary or Liens securing Indebtedness incurred in
connection with an acquisition of Real Property, PROVIDED that (1) such Liens
were in existence prior to the date of such acquisition, merger or
consolidation, were not incurred in anticipation thereof, and do not extend to
any other assets or (2) such Liens are granted to the seller of such Real
Property to secure the purchase price therefor; (i) Liens securing Indebtedness
incurred to refinance any Indebtedness that was previously so secured and
permitted hereunder in a manner no more adverse to the Lenders than the terms of
the Liens securing such refinanced Indebtedness; and (j) Liens securing the
Obligations.
"PERSON" means any natural person, corporation, firm, enterprise, trust,
association, company, partnership, limited liability company, joint venture or
other entity or organization, or any government or political subdivision or any
agency, department, or instrumentality thereof.
"PLAN" means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have any
liability.
"PLEDGE AGREEMENT" means the Pledge Agreement substantially in the form of
Exhibit "F" hereto, including any amendment, modification, renewal or
restatement thereof.
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"PROJECT" means a parcel of Real Estate, owned by the Borrower or a
Subsidiary Guarantor which is to be developed or sold as part of a common
scheme.
"PRO RATA SHARE" means, for each Lender, the ratio that such Lender's
Facility A Commitment bears to the Aggregate Facility A Commitment.
"PURCHASERS" is defined in Section 12.03(a).
"QUARTERLY PAYMENT DATE" means the first day of each April, July, October
and January.
"RATING AGENCY" means any one of Duff & Phelps, Fitch, Moody's or S&P.
"RATINGS" means a rating of the Company's senior unsecured long-term debt
from one or more of the Rating Agencies.
"REAL ESTATE" means land, rights in land and interests therein (including,
without limitation, leasehold interests), and equipment, structures,
improvements, furnishings, fixtures and buildings (including a mobile home of
the type usually installed on a developed site) located on or used in connection
with land, rights in land or interests therein (including leasehold interests),
but shall not include Mortgages or interests therein.
"RECENT BALANCE SHEET" is defined in Section 4.05.
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.
"REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"REIMBURSEMENT OBLIGATIONS" means, at any time, the aggregate of the
Obligations of the Borrower to the Lenders, the Issuers and the Agent in respect
of all unreimbursed payments or disbursements made by the Lenders, the Issuers
and the Agent under or in respect of the Facility Letters of Credit.
"REORGANIZATION" means (i) the formation of LNR, (ii) the transfer to LNR
of all of the business and assets of the Company's Asset Management Division and
that portion of the Company's Financial Services Division relating to the
servicing, acquisition and management of commercial mortgages and real estate,
(iii) the distribution to the shareholders of the Company of all of the capital
stock of LNR, (iv) the transfer by LLP Partner to LLP of the Real Estate
described on
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Schedule VII hereto in exchange for a 50% general partnership interest in LLP,
and (v) the Company's merger with and into Greystone.
"REORGANIZATION DOCUMENTS" means the (i) Spin-Off Agreement, (ii) the LLP
Partnership Agreement, (iii) the Merger Agreement, (iv) the IRS Ruling dated
August 14, 1997, with respect to the Spin-Off Agreement, (v) the Registration
Statement on Form S-4 filed by Greystone with the Securities and Exchange
Commission on September 15, 1997 and as declared effective on September 30, 1997
pertaining to the Reorganization, and all amendments thereto and (vi) all other
documents which are an integral part of the Reorganization.
"REPORTABLE EVENT" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, PROVIDED, HOWEVER, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"REQUIRED LENDERS" means Lenders in the aggregate having at least 66 2/3%
of the Aggregate Facility A Commitment or, if the Aggregate Facility A
Commitment has been terminated, Lenders in the aggregate holding at least 66
2/3% of the sum of (i) the aggregate unpaid principal amount of the outstanding
Loans PLUS (ii) the Facility Letter of Credit Obligations.
"RESERVE REQUIREMENT" means, with respect to a Eurodollar Interest Period,
the maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.
"REVOLVING COMMITMENT" means, for each Lender, the obligation of such
Lender to make Committed Loans not exceeding its Pro Rata Share of the Aggregate
Facility A Commitment.
"SECTION" means a numbered section of this Agreement, unless another
document is specifically referenced.
"SECURITIES" of any Person means equity securities and debt securities and
any other instrument commonly understood to be a security issued by that Person.
"SINGLE EMPLOYER PLAN" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"SPIN-OFF AGREEMENT" means the Separation and Distribution Agreement,
dated as of June 10, 1997, between the Company and Greystone, as the same may,
if permitted hereunder, be amended, modified or restated.
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"S&P" means Standard & Poor's Ratings Services, a division of The McGraw
Hill Companies, Inc., and any Person succeeding to the securities rating
business of such company.
"STI" means Strategic Technologies, Inc., a Florida corporation.
"SUBORDINATED DEBT" means any Indebtedness of any entity comprising the
Borrower which by its terms is subordinated, in form and substance and in a
manner satisfactory to the Required Lenders, in time and right of payment to the
prior payment in full of the Obligations, but which in any event matures after
the Facility A Termination Date.
"SUBSIDIARY" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
"SUBSIDIARY GUARANTOR" means a Subsidiary of the Company or Greystone
which has executed a Subsidiary Guaranty.
"SUBSIDIARY GUARANTY" means a guaranty, in substantially the form of
Exhibit "B" hereto, including any amendment, modification, renewal, restatement
or replacement thereof.
"SWING LINE BANK" means First Chicago or any other Lender as a
successor Swing Line Bank.
"SWING LINE COMMITMENT" means the obligation of the Swing Line Bank to
make Swing Line Loans up to a maximum of $15,000,000 at any one time
outstanding.
"SWING LINE LOAN" means a Loan made available to the Borrower by the Swing
Line Bank pursuant to Section 2.04 hereof.
"SWING LINE NOTE" means a promissory note, in substantially the form of
Exhibit "A-3" hereto, duly executed by the Borrower and payable to the order of
the Swing Line Bank in the amount of its Swing Line Commitment, including any
amendment, modification, renewal, restatement or replacement of such note and
evidencing such Lender's Swing Line Loans.
"TANGIBLE NET WORTH" means, at any date, Net Worth less the aggregate
amount of all goodwill and other assets that are properly classified as
"intangible assets" at such date in accordance with GAAP.
"TITLE COMPANIES" means collectively, Lennar Title Services, Inc.,
TitleAmerica Insurance Corporation, Regency Title Company and Universal Title
Insurance Inc.
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"TRANSFEREE" is defined in Section 12.03(c).
"TYPE" means, with respect to any Facility A Advance, its nature as a
Floating Rate Advance or Fixed Rate Advance.
"UAMC" means Universal American Mortgage Company.
"UNFUNDED LIABILITIES" means the amount (if any) by which the present
value of all vested nonforfeitable benefits under all Single Employer Plans
exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans.
"UNIMPROVED ENTITLED LAND" means Entitled Land upon which no Improvements
have been commenced.
"UNMATURED DEFAULT" means an event which but for the lapse of time or the
giving of notice, or both, would constitute an Event of Default.
"WHOLLY-OWNED SUBSIDIARY" of a Person means (i) any Subsidiary all of the
outstanding voting securities of which shall at the time be owned or controlled,
directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries
of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of
such Person, or (ii) any partnership, association, joint venture or similar
business organization 100% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled.
SECTION 1.02. COMPUTATION OF TIME PERIODS. For the purposes of this
Agreement, in the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including", the words "to"
and "until" each means "to but excluding" and the word "through" means "to and
including".
SECTION 1.03. ACCOUNTING TERMS. All accounting terms used and not
specifically defined herein shall be construed in accordance with GAAP. All
references herein to GAAP shall be deemed to refer to those principles;
PROVIDED, HOWEVER, that notwithstanding the requirements imposed by GAAP which
require the consolidation of the operations of the Mortgage Banking Subsidiaries
with the operations of the Borrower, for the purposes of the calculations set
forth in Article VII hereof, the operations of such Subsidiary shall be so
included only as specifically provided for herein.
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ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS.
(a) FACILITY A REVOLVING COMMITMENT. On and after the Closing Date and
prior to the Facility A Termination Date, upon the terms and conditions set
forth in this Agreement and in reliance upon the representations and warranties
of Borrower herein set forth: (i) each Lender severally agrees to make Committed
Advances to the Borrower from time to time in amounts not to exceed in the
aggregate at any one time outstanding the amount of its Facility A Commitment,
and (ii) each Lender may, in its sole discretion, make bids to make Competitive
Bid Loans to the Borrower in accordance with Section 2.03; PROVIDED that (A) if
any Competitive Bid Loans are outstanding and/or any Facility Letters of Credit
are issued and outstanding or drawn and unreimbursed, the aggregate availability
under the Facility A Commitments of the Lenders shall be reduced by the
aggregate amount of such Competitive Bid Loans and of such Facility Letters of
Credit for as long as, and to the extent that, they remain outstanding or
unreimbursed, and the availability under the Facility A Commitment of each
Lender shall accordingly be reduced on a PRO RATA basis in accordance with its
Pro Rata Share, and (B) in no event may the aggregate principal amount of all
outstanding Facility A Advances, Competitive Bid Advances and Swing Line Loans
and the aggregate amount of all Facility Letter of Credit Obligations exceed the
Aggregate Facility A Commitment; AND PROVIDED FURTHER, HOWEVER, that the
outstanding Competitive Bid Advances and Swing Line Loans of any Lender shall
not reduce the availability under such Lender's Facility A Commitment. Subject
to the terms of this Agreement, the Borrower may borrow, repay and reborrow
under Facility A at any time prior to the Facility A Termination Date. The
Facility A Commitments to lend hereunder shall expire on the Facility A
Termination Date.
(b) LETTER OF CREDIT COMMITMENT. On and after the Closing Date and prior
to the Facility A Termination Date, each Lender severally agrees, on the terms
and conditions set forth in this Agreement and in reliance upon the
representations and warranties of Borrower herein set forth, to participate in
Facility Letters of Credit issued for the account of the Borrower pursuant to
Section 2.17; PROVIDED that in no event may the aggregate amount of all Facility
Letter of Credit Obligations exceed the lesser of (i) the Aggregate Letter of
Credit Commitment, or (ii) an amount equal to the Aggregate Facility A
Commitment minus the sum of all outstanding Advances and all outstanding Swing
Line Loans.
(c) ADVANCES AND PARTICIPATIONS PRO RATA. Each Committed Advance and each
purchase of a Facility Letter of Credit participation hereunder shall be made by
the several Lenders ratably in accordance with their respective Pro Rata Shares.
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SECTION 2.02. TYPES OF ADVANCES; MANDATORY PRINCIPAL PAYMENTS; FINAL
MATURITY.
(a) The Committed Advances may be Floating Rate Advances or Fixed Rate
Advances, or a combination thereof, selected by the Borrower in accordance with
Section 2.09; PROVIDED, HOWEVER, that there shall not be more than five (5)
Facility A Advances which are Fixed Rate Advances outstanding at any time.
(b) The Borrower shall prepay the principal of the Committed A Notes in
the amount, and promptly upon its receipt, of any principal payment made with
respect to the Mortgage Banking Subsidiaries Note from and after the date the
Agent is granted a security interest therein pursuant to Section 8.01; PROVIDED,
HOWEVER, that if the Company does not designate which of the Facilities is to be
reduced by such prepayment, the prepayment shall be applied first to any
Obligations outstanding under Facility B and then to any Obligations outstanding
under Facility A.
(c) All Facility A Obligations shall be due and payable by the Borrower on
the Facility A Termination Date or shall become due and payable pursuant to
Section 9.02 below.
(d) Except as provided above in this Section or elsewhere in this
Agreement or in the Facility B Credit Agreement, the Company may direct the
Agent to apply prepayments of the Obligations against either of the Facilities.
SECTION 2.03. COMPETITIVE BID ADVANCES.
(a) COMPETITIVE BID OPTION; REPAYMENT OF COMPETITIVE BID ADVANCES;
AGGREGATE LIMITATION. In addition to Committed Advances pursuant to Section
2.01, but subject to the terms and conditions of this Agreement (including,
without limitation, the limitation set forth in Section 2.01 as to the maximum
aggregate principal amount of all outstanding Advances hereunder), the Borrower
may, as set forth in this Section 2.03, request the Lenders, prior to the
Facility A Termination Date, to make offers to make Competitive Bid Advances to
the Borrower. Each Lender may, but shall have no obligation to, make such offers
and the Borrower may, but shall have no obligation to, accept any such offers in
the manner set forth in this Section 2.03. Competitive Bid Advances shall be
evidenced by the Competitive Bid Notes. Each Competitive Bid Advance shall be
repaid in full by the Borrower in accordance with the repayment terms contained
in the Competitive Bid Quote to which it relates. The maximum principal amount
of Competitive Bid Loans outstanding at any time shall not exceed fifty percent
(50%) of the Aggregate Commitment.
(b) COMPETITIVE BID QUOTE REQUEST. When the Borrower wishes to request
offers to make Competitive Bid Loans under this Section 2.03, the Borrower shall
transmit to the Agent by telex or facsimile transmission a Competitive Bid Quote
Request so as to be received not later than (x) 10:00 a.m. (Chicago time) at
least five Business Days prior to the Borrowing Date proposed therein (or such
other time or date as the Borrower and the Agent shall have mutually agreed
upon), specifying:
(i) the proposed Borrowing Date for the proposed Competitive
Bid Advance;
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(ii) the aggregate principal amount of such Competitive Bid Advance,
which shall be in the minimum amount of $10,000,000 (and in multiples of
$1,000,000 if in excess thereof); and
(iii) the maturity date of the Competitive Bid Advance, which shall
not be more than 30 days from the making of such Advance.
No Competitive Bid Quote Request shall be given within five Business Days (or,
upon reasonable prior notice to the Lenders, such other number of days as the
Borrower and the Agent may agree upon) of any other Competitive Bid Quote
Request. A Competitive Bid Quote Request that does not conform substantially to
the format of Exhibit "H" hereto shall be rejected, and the Agent shall promptly
notify the Borrower of such rejection by telex or facsimile transmission.
(c) INVITATION FOR COMPETITIVE BID QUOTES. Promptly upon receipt of a
Competitive Bid Quote Request that is not rejected pursuant to Section 2.03(b),
the Agent shall send to each of the Lenders by telex or facsimile transmission
an Invitation for Competitive Bid Quotes, which shall constitute an invitation
by the Borrower to each Lender to submit Competitive Bid Quotes offering to make
the Competitive Bid Loans to which such Competitive Bid Quote Request relates in
accordance with this Section 2.03.
(d) SUBMISSION AND CONTENTS OF COMPETITIVE BID QUOTES.
(i) Each Lender may, in its sole discretion, submit a Competitive
Bid Quote containing an offer or offers to make Competitive Bid Loans in
response to any Invitation for Competitive Bid Quotes. Each Competitive
Bid Quote must comply with the requirements of this Section 2.03(d) and
must be submitted to the Agent by telex or facsimile transmission at its
offices specified in or pursuant to Section 13.01 not later than (i) 1:00
p.m. (Chicago time) at least four Business Days prior to the proposed
Borrowing Date (or such other time or date as the Borrower and the Agent
shall have mutually agreed upon); PROVIDED that Competitive Bid Quotes
submitted by the Agent (or any Affiliate of the Agent) in the capacity of
a Lender may be submitted, and may only be submitted, if the Agent or such
Affiliate notifies the Borrower of the terms of the offer or offers
contained therein not later than fifteen minutes prior to the deadline for
the other Lenders. Subject to Article IV and Section 13.06, any
Competitive Bid Quote so made shall be irrevocable except with the written
consent of the Agent given on the instructions of the Borrower.
(ii) Each Competitive Bid Quote shall in any case specify:
(A) the proposed Borrowing Date, which shall be the same as that
set forth in the applicable Invitation for Competitive Bid
Quotes;
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(B) the principal amount of the Competitive Bid Loan for which
each such offer is being made, which principal amount (1)
may be greater than, less than or equal to the Facility A
Commitment of the quoting Lender, but in no case greater
than fifty percent (50%) of the unutilized Aggregate
Facility A Commitment, (2) must be at least $10,000,000
(and an integral multiple of $1,000,000 if in excess
thereof), (3) may not exceed the principal amount of
Competitive Bid Loans for which offers were requested, and
(4) may be subject to an aggregate limitation as to the
principal amount of Competitive Bid Loans for which offers
being made by such quoting Lender may be accepted;
(C) the minimum or maximum amount, if any, of the Competitive Bid
Loan which may be accepted by the Borrower;
(D) the proposed interest rate and repayment terms to be
applicable to the Competitive Bid Loan; and
(E) the identity of the quoting Lender.
(iii) The Agent shall reject any Competitive Bid Quote that:
(A) is not substantially in the form of Exhibit "J" hereto or does
not specify all of the information required by Section
2.03(d)(ii);
(B) contains qualifying, conditional or similar language, other
than any such language contained in Exhibit "J" hereto;
(C) proposes terms other than or in addition to those set forth in
the applicable Invitation for Competitive Bid Quotes; or
(D) arrives after the time set forth in Section 2.03(d)(i).
(iv) If any Competitive Bid Quote shall be rejected pursuant to
Section 2.03(d)(iii), then the Agent shall notify the relevant Lender of
such rejection as soon as practicable.
(e) NOTICE TO BORROWER. The Agent shall promptly notify the Borrower of
the terms (i) of any Competitive Bid Quote submitted by a Lender that is in
accordance with Section 2.03(d) and (ii) of any Competitive Bid Quote that is in
accordance with Section 2.03(d) and amends, modifies or is otherwise
inconsistent with a previous Competitive Bid Quote submitted by such Lender with
respect to the same Competitive Bid Quote Request. Any such subsequent
Competitive Bid Quote shall be disregarded by the Agent unless such subsequent
Competitive Bid Quote specifically states that it is submitted solely to correct
a manifest error in such former Competitive Bid Quote. The Agent's notice to the
Borrower shall specify the aggregate principal amount of Competitive Bid
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Loans for which offers have been received and the respective principal amounts
and interest rates so offered.
(f) ACCEPTANCE AND NOTICE BY BORROWER. Subject to the receipt of the
notice from the Agent referred to in Section 2.03(e), not later than 10:00 a.m.
(Chicago time) at least three Business Days prior to the proposed Borrowing Date
(or such other time or date as the Borrower and the Agent shall have mutually
agreed upon), the Borrower shall notify the Agent of the Borrower's acceptance
or rejection of the offers so notified to it pursuant to Section 2.03(e);
PROVIDED, HOWEVER, that the failure by the Borrower to give such notice to the
Agent shall be deemed to be a rejection by the Borrower of all such offers. In
the case of acceptance, such notice (a "Competitive Bid Borrowing Notice") shall
specify the aggregate principal amount of offers that are accepted. The Borrower
may accept or reject any Competitive Bid Quote in whole or in part (subject to
the terms of Section 2.03(d)(ii)(C)); PROVIDED THAT:
(i) the aggregate principal amount of each Competitive Bid Advance
may not exceed the applicable amount set forth in the related
Competitive Bid Quote Request;
(ii) the principal amount of each Competitive Bid Advance must be
at least $10,000,000 (and an integral multiple of $1,000,000
if in excess thereof);
(iii) acceptance of offers may only be made on the basis of
ascending interest rates; and
(iv) the Borrower may not accept any offer of the type described in
Section 2.03(d)(iii) or that otherwise fails to comply with
the requirements of this Agreement in respect of obtaining a
Competitive Bid Loan under this Agreement.
(g) ALLOCATION BY THE AGENT. If offers are made by two or more Lenders
with the same interest rates for a greater aggregate principal amount than the
amount in respect of which offers are permitted to be accepted, the principal
amount of Competitive Bid Loans in respect of which such offers are accepted
shall be allocated by the Agent among such Lenders as nearly as possible (in
such multiples as the Agent may deem appropriate) in proportion to the aggregate
principal amount of such offers; PROVIDED, HOWEVER, that no Lender shall be
allocated a portion of any Competitive Bid Advance which is less than the
minimum amount which such Lender has indicated that it is willing to accept.
Allocations by the Agent of the amounts of Competitive Bid Loans shall be
conclusive in the absence of manifest error. The Agent shall promptly, but in
any event by 11:00 a.m. (Chicago time) on the same Business Day, notify each
Lender of its receipt of a Competitive Bid Borrowing Notice and the aggregate
principal amount of each Competitive Bid Advance allocated to each participating
Lender.
(h) ADMINISTRATION FEE. The Borrower hereby agrees to pay to the Agent an
administration fee of $2,500 per Competitive Bid Quote Request transmitted by
the Borrower to the Agent
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pursuant to Section 2.03(b). Such administration fee shall be payable in arrears
on each Monthly Payment Date hereafter and on the Facility A Termination Date
(or such earlier date on which the Aggregate Facility A Commitment shall
terminate or be canceled) for any period then ending for which such
administration fee, if any, shall not have been theretofore paid.
SECTION 2.04. SWING LINE LOANS. In addition to Advances pursuant to
Sections 2.01 and 2.03, but subject to the terms and conditions of this
Agreement (including but not limited to those limitations set forth in Section
2.01 and 2.03), the Swing Line Bank agrees to make the Swing Line Loans to the
Borrower in accordance with this Section 2.04 up to the amount of the Swing Line
Commitment; PROVIDED, HOWEVER, that the aggregate amount of the Swing Line
Bank's ratable Loans made pursuant to Section 2.01 and Swing Line Loans
outstanding (after giving effect to any concurrent repayment of Loans) at such
time shall not exceed the Swing Line Bank's Facility A Commitment. Amounts
borrowed under this Section 2.04 may be borrowed, repaid and reborrowed to, but
not including, the Facility A Termination Date. All outstanding Swing Line Loans
shall bear interest at the Floating Rate.
(a) SWING LINE REQUEST. The Borrower may request a Swing Line Loan from
the Swing Line Bank on any Business Day before the Facility A Termination Date
by giving the Agent and the Swing Line Bank notice by 12:00 noon (Chicago time)
on such Borrowing Date specifying the aggregate amount of such Swing Line Loan,
which shall be an amount not less than $500,000. The Agent shall promptly notify
each Lender of such request.
(b) MAKING OF SWING LINE LOANS. The Swing Line Bank shall, no later than
2:00 p.m. on such Borrowing Date, make the funds for such Swing Line Loan
available to the Borrower at the Agent's address, or at such other place as
indicated in written money transfer instructions from the Borrower, signed by an
Authorized Officer.
(c) SWING LINE NOTES. The Swing Line Loans shall be evidenced by the Swing
Line Note and each Swing Line Loan shall be paid in full by the Borrower on or
before the earlier of the fifth Business Day after the Borrowing Date for such
Swing Line Loan or the Facility A Termination Date.
(d) REPAYMENT OF SWING LINE LOANS. The Borrower may at any time pay,
without penalty or premium, all outstanding Swing Line Loans, or, in a minimum
amount of $500,000, any portion of the outstanding Swing Line Loans upon notice
to the Agent and the Swing Line Bank. In addition, the Agent: (i) may at any
time in its sole discretion or (ii) shall on the fifth Business Day after the
Borrowing Date for such Swing Line Loan, require the Lenders (including the
Swing Line Bank) to make a Facility A Advance at the Floating Rate plus the
Applicable Margin in an amount up to the amount of Swing Line Loans outstanding
on such date for the purpose of repaying Swing Line Loans; PROVIDED, HOWEVER,
that the obligation of each Lender to make any such Advance is subject to the
condition that the Swing Line Bank believed in good faith that all conditions
under Section 5.02 were satisfied at the time the Swing Line Loan was made. If
the Swing Line Bank receives notice from any Lender that a condition under
Section 5.02 has not been satisfied, no Swing
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Line Loans shall be made until (a) such notice is withdrawn by that Lender or
(b) the Required Lenders have waived satisfaction of any such condition. The
Lenders shall deliver the proceeds of such Advance to the Agent by 12:00 noon
(Chicago time) on the applicable Borrowing Date for application to the Swing
Line Bank's outstanding Swing Line Loans. Subject to the proviso contained in
the second sentence of this Section 2.04(d), each Lender's obligation to make
available its Pro Rata Share of the Facility A Advance referred to in this
Section shall be absolute and unconditional and shall not be affected by any
circumstances, including without limitation, (i) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have against the Swing
Line Bank, or anyone else, (ii) the occurrence or continuance of an Event of
Default or Unmatured Default, (iii) any adverse change in the condition
(financial or otherwise) of the Borrower or (iv) any Event whatsoever. If for
any reason a Lender does not make available its Pro Rata Share of the foregoing
Advance, such Lender shall be deemed to have unconditionally and irrevocably
purchased from the Swing Line Bank, without recourse or warranty, an undivided
interest and participation in each Swing Line Loan then being repaid, equal to
its Pro Rata Share of all such Swing Line Loans being repaid, so long as such
purchase would not cause such Lender to exceed its Facility A Commitment. If any
portion of any amount paid (or deemed paid) to the Agent is recovered by or on
behalf of the Borrower from the Agent in bankruptcy or otherwise, the loss of
the amount so recovered shall be shared ratably among all Lenders in accordance
with their respective Pro Rata Shares.
SECTION 2.05. OPTIONAL PRINCIPAL PAYMENTS. The Borrower may from time to
time pay, without penalty or premium, all outstanding Floating Rate Advances,
or, in a minimum aggregate amount of $100,000 or any integral multiple of
$100,000 in excess thereof, any portion of the outstanding Floating Rate
Advances upon one Business Day's prior notice to the Agent. A Fixed Rate Advance
may not be paid prior to the last day of the applicable Interest Period.
SECTION 2.06. FACILITY FEE AND REDUCTION OF FACILITY A COMMITMENTS.
(a The Borrower agrees to pay to the Agent for the account of each Lender
a Facility Fee per annum on the amount of such Lender's Facility A Commitment
from the Closing Date to and including the Facility A Termination Date, payable
in arrears on each Quarterly Payment Date thereafter and on the Facility A
Termination Date. Such Facility Fee shall be determined on the first day of each
fiscal quarter in accordance with the pricing grid set forth as Exhibit "K"
hereto.
(b The Borrower may permanently reduce the Aggregate Facility A Commitment
in whole, or in part ratably among the Lenders in integral multiples of
$5,000,000, upon at least three Business Days' written notice to the Agent,
which notice shall specify the amount of any such reduction, PROVIDED, HOWEVER,
that the amount of the Aggregate Facility A Commitment may not be reduced below
the aggregate principal amount of the outstanding Advances, Facility Letter of
Credit Obligations and Swing Line Loans. All accrued Facility Fees under this
Section 2.06 shall be payable on the effective date of any termination of the
obligations of the Lenders to make Loans hereunder. The fees payable under this
Section 2.06, once paid, shall not be refundable for any reason.
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SECTION 2.07. METHOD OF BORROWING. Not later than noon (Chicago time) on
each Borrowing Date, each Lender shall make available its Loan or Loans, in
funds immediately available in Chicago to the Agent at its address specified
pursuant to Section 13.01. The Agent will make the funds so received from the
Lenders available to the Borrower by deposit into Account No. 5801117 maintained
by the Borrower at First Chicago.
SECTION 2.08. METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR ADVANCES.
(a The Borrower shall select the Type of Advance and, in the case of each
Fixed Rate Advance, the Interest Period applicable to each Advance from time to
time. The Borrower shall give the Agent irrevocable notice (a "Borrowing
Notice") not later than 10:00 a.m. (Chicago time) on the Borrowing Date for each
Floating Rate Advance and prior to 10:00 a.m. (Chicago time) on the date which
is two Business Days before the Borrowing Date for each Fixed Rate Advance,
specifying:
(i0 the Borrowing Date, which shall be a Business Day, of such
Advance,
(ii0 the aggregate amount of such Advance,
(iii0 the Type of Advance selected, and
(iv0 in the case of each Fixed Rate Advance, the Interest Period
applicable thereto.
The Borrower shall be entitled to obtain only one Advance in any single Business
Day, which may be comprised in whole or in part of any Fixed Rate Advance.
Changes in the rate of interest on that portion of any Advance maintained as a
Floating Rate Advance will take effect simultaneously with each change in the
Floating Rate. Each Fixed Rate Advance shall bear interest from and including
the first day of the Interest Period applicable thereto to (but not including)
the last day of such Interest Period at the interest rate determined as
applicable to such Fixed Rate Advance. The Borrower shall select Interest
Periods with respect to Fixed Rate Advances so that it is not necessary to repay
a Fixed Rate Advance prior to the last day of the applicable Interest Period in
order to make any mandatory payment required to be made pursuant to Section 2.02
above or to repay the Obligations in full on the Maturity Date.
(b Each Borrowing Notice shall be irrevocable and binding on the
Borrower and, in respect of the borrowing specified in the Borrowing Notice, the
Borrower shall indemnify each Lender against any loss or expense incurred by
that Lender as a result of any failure to fulfill the applicable conditions set
forth in Section 5.02 on or before the proposed Borrowing Date specified in the
Borrowing Notice, including, without limitation, any loss (including loss of
profit) or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by any Lender to fund the Loan to be made by
that Lender as part of that borrowing when that Loan, as a result of that
failure, is not made on that date.
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SECTION 2.09. METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR .
CONVERSION AND CONTINUATION OF ADVANCES.
(a RIGHT TO CONVERT. The Borrower may elect from time to time, subject to
the provisions of Section 2.09(c), to convert all or any part of a Committed
Advance of any Type into any other Type or Types of Advances; PROVIDED that any
conversion of any Fixed Rate Advance shall be made on, and only on, the last day
of the Interest Period applicable thereto.
(b AUTOMATIC CONVERSION AND CONTINUATION. Floating Rate Advances shall
continue as Floating Rate Advances unless and until such Floating Rate Advances
are converted into Fixed Rate Advances. Fixed Rate Advances of any Type shall
continue as Fixed Rate Advances of such Type until the end of the then
applicable Interest Period therefor, at which time such Fixed Rate Advance shall
be automatically converted into a Floating Rate Advance unless the Borrower
shall have given the Agent notice in accordance with Section 2.09(d) requesting
that, at the end of such Interest Period, such Fixed Rate Advance either
continue as a Fixed Rate Advance of such Type for the same or another Interest
Period or be converted into a Committed Advance of another Type.
(c NO CONVERSION IN CASE OF AN EVENT OF DEFAULT OR UNMATURED DEFAULT.
Notwithstanding anything to the contrary contained in Section 2.09(a) or
2.09(b), no Advance may be converted into or continued as a Fixed Rate Advance
(except with the consent of the Required Lenders) when any Event of Default or
Unmatured Default has occurred and is continuing.
(d CONVERSION/CONTINUATION NOTICE. The Borrower shall give the Agent
irrevocable notice (a "Conversion/Continuation Notice") of each conversion of a
Committed Advance or continuation of a Fixed Rate Advance not later than 10:00
a.m. (Chicago time) on the day of any conversion into a Floating Rate Advance or
prior to 10:00 a.m. (Chicago time) on the date which is two Business Days prior
to the date of the requested conversion into or continuation of a Fixed Rate
Advance, specifying:
(i0 the requested date (which shall be a Business Day) of such
conversion or continuation;
(ii0 the amount and Type of the Advance to be converted or continued;
and
(iii0 the amount and Type(s) of Advance(s) into which such Advance is
to be converted or continued and, in the case of a conversion into or
continuation of a Fixed Rate Advance, the duration of the Interest Period
applicable thereto.
SECTION 2.10. MINIMUM AMOUNT OF EACH ADVANCE. Each Fixed Rate Advance
shall be in the minimum amount of $5,000,000 (and in multiples of $100,000 if in
excess thereof), and each Floating Rate Advance shall be in the minimum amount
of $500,000 and in multiples of $100,000 if in excess thereof), PROVIDED,
HOWEVER, that any Floating Rate Advance may be in the amount of the unused
Aggregate Facility A Commitment.
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SECTION 2.11. RATE AFTER MATURITY. Except as provided in the next
sentence, any Advance which is not paid at maturity for such Advance, whether by
acceleration or otherwise, shall bear interest until paid in full at a rate per
annum equal to the Floating Rate plus 5% per annum. In the case of a Fixed Rate
Advance the maturity of which is accelerated, such Fixed Rate Advance shall bear
interest at the rate otherwise applicable to such Interest Period plus 5% per
annum for the remainder of the applicable Interest Period, and thereafter at the
Floating Rate plus 5% per annum.
SECTION 2.12. METHOD OF PAYMENT. All payments of principal, interest, and
fees hereunder shall be made, without setoff, deduction, or counterclaim, in
immediately available funds to the Agent at the Agent's address specified
pursuant to Article XIII, or at any other Lending Installation of the Agent
specified in writing by the Agent to the Borrower, by 1:00 p.m. (Chicago time)
on the date when due and unless the Borrower had directed that such payment be
applied to outstanding Swing Line Loans, shall be made ratably by the Agent
among (i) the Lenders with respect to their Committed Loans and (ii) the Lenders
which have made Competitive Bid Loans in response to the same Competitive Bid
Rate Request. Each payment delivered to the Agent for the account of any Lender
shall be delivered promptly by the Agent to such Lender in the same type of
funds which the Agent received at its address specified pursuant to Article XIII
or at any Lending Installation specified in a notice received by the Agent from
such Lender. The Agent is hereby authorized to charge any account of the
Borrower maintained with First Chicago for each payment of principal, interest
and fees as it becomes due hereunder. The Agent shall endeavor in good faith to
provide telephonic notice to Borrower prior to any such charge, but the Agent
shall not be liable to Borrower or any other Person if Agent fails to provide
any such notice. If and to the extent payment owed to any Lender is not made by
the Borrower to the Agent or that Lender, as the case may be, when due hereunder
or under the Note held by that Lender, the Borrower further authorizes such
Lender to charge from time to time against any or all of the accounts maintained
by the Borrower with the Lender, its subsidiaries, affiliates or branches any
amount so due, subject to the provisions of Article XI.
SECTION 2.13. COMMITTED A NOTES; TELEPHONIC NOTICES. Each Lender is hereby
authorized to record the principal amount of each of its Loans and each
repayment on the schedule attached to its applicable Committed A Notes;
PROVIDED, HOWEVER, that the failure to so record shall not affect the Borrower's
obligations under any such Committed A Note. The Borrower hereby authorizes the
Swing Line Bank to extend Swing Line Loans, Lenders and the Agent to extend,
convert or continue Committed Advances, effect selections of Types of Advances
and to transfer funds based on telephonic notices made by any person or persons
the Agent or any Lender in good faith believes to be acting on behalf of the
Borrower. All actions taken by the Lenders and the Agent upon such telephonic
notices are hereby approved by the Borrower, and the Lenders and the Agent shall
incur no liability as a result of any such actions. The Borrower agrees to
deliver promptly to the Agent a written confirmation, if such confirmation is
requested by the Agent or any Lender, of each telephonic notice signed by an
Authorized Officer. If the written confirmation differs in any material respect
from the action taken by the Agent and the Lenders, the records of the Agent and
the Lenders shall govern absent manifest error.
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SECTION 2.14. INTEREST PAYMENT DATES; INTEREST AND FEE BASIS. Interest
accrued on each Swing Line Loan and Floating Rate Advance shall be payable on
each Monthly Payment Date, commencing with the first such date to occur after
the date hereof, on any date on which the Swing Line Loan or Floating Rate Loan
is prepaid, whether due to acceleration or otherwise, and on the Facility A
Termination Date. Interest accrued on that portion of the outstanding principal
amount of any Floating Rate Advance converted into a Fixed Rate Advance on a day
other than a Monthly Payment Date shall be payable on the date of conversion.
Interest accrued on each Fixed Rate Advance shall be payable on the last day of
its applicable Interest Period, on any date on which the Fixed Rate Advance is
prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued
on each Fixed Rate Advance having an Interest Period longer than three months
shall also be payable on the last day of each three-month interval during such
Interest Period. Interest on Floating Rate Loans and Facility Fees shall be
calculated for actual days elapsed on the basis of a 365-day year; interest on
Fixed Rate Loans shall be calculated for actual days elapsed on the basis of a
360-day year. Interest shall be payable for the day a Committed Advance or a
Swing Line Loan is made but not for the day of any payment on the amount paid if
payment is received prior to 1:00 p.m. (Chicago time) at the place of payment.
If any payment of principal of or interest on a Committed Advance or a Swing
Line Loan shall become due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and, in the case of a
principal payment, such extension of time shall be included in computing
interest in connection with such payment.
SECTION 2.15. NOTIFICATION OF ADVANCES, INTEREST RATES, PREPAYMENTS AND
COMMITMENT REDUCTIONS.
Promptly after receipt thereof, the Agent will notify each Lender of the
contents of each Aggregate Facility A Commitment reduction notice, Borrowing
Notice, Competitive Bid Borrowing Notice, Conversion/Continuation Notice, Letter
of Credit Request, Issuance Notice, notice from a Lender pursuant to Section
2.17(e)(i) and repayment notice received by it hereunder. The Agent will notify
each Lender of the interest rate applicable to each Fixed Rate Advance promptly
upon determination of such interest rate.
SECTION 2.16. LENDING INSTALLATIONS. Each Lender may book its Loans and
participation in Facility Letters of Credit at any Lending Installation selected
by such Lender and may change its Lending Installation from time to time. All
terms of this Agreement shall apply to any such Lending Installation and the
Committed A Notes shall be deemed held by each Lender for the benefit of such
Lending Installation. Each Lender may, by written or telex notice to the Agent
and the Borrower, designate a Lending Installation through which Loans will be
made by it and for whose account Loan payments are to be made.
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SECTION 2.17. FACILITY LETTERS OF CREDIT
(a OBLIGATION TO ISSUE. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of the
Borrower herein set forth, each Issuer hereby agrees to issue upon the request
of and for the account of the Borrower, through such of the Issuer's Lending
Installations or Affiliates as the Issuer and the Borrower may jointly agree
(provided that in the absence of such joint agreement for any Facility Letter of
Credit for which the Agent is the Issuer, the Agent agrees to issue such
Facility Letters of Credit out of its main office), one or more Facility Letters
of Credit in accordance with this Section 2.17, from time to time during the
period, commencing on the Closing Date and ending on the tenth Business Day
prior to the Facility A Termination Date.
(b CONDITIONS FOR ISSUANCE. In addition to being subject to the
satisfaction of the conditions contained in Section 5.02, the obligation of an
Issuer to issue any Facility Letter of Credit is subject to the satisfaction in
full of the following conditions:
(i0 the aggregate maximum amount then available for drawing under
Facility Letters of Credit issued by such Issuer, after giving effect to the
Facility Letter of Credit requested hereunder, shall not exceed any limit
imposed by law or regulation upon such Issuer;
(ii0 after giving effect to the requested issuance of any Facility
Letter of Credit, the Facility Letter of Credit Obligations do not exceed the
lesser of (a) the Aggregate Letter of Credit Commitment, or (b) an amount equal
to the Aggregate Facility A Commitment minus the sum of the outstanding Advances
and all outstanding Swing Line Loans;
(iii0 the requested Facility Letter of Credit has an expiration date
not later than the earlier of (x) ten Business Days prior to the Facility A
Termination Date and (y) one year after its date of issuance;
(iv0 the Borrower shall have delivered to such Issuer at such times
and in such manner as such Issuer may reasonably prescribe such documents and
materials as may be required pursuant to the terms of the proposed Facility
Letter of Credit, and the proposed Facility Letter of Credit shall be
satisfactory to such Issuer as to form and content; and
(v0 as of the date of issuance, no order, judgment or decree of any
court, arbitrator or governmental authority shall purport by its terms to enjoin
or restrain such Issuer from issuing the Facility Letter of Credit and no law,
rule or regulation applicable to such Issuer and no request or directive
(whether or not having the force of law) from any governmental authority with
jurisdiction over the Issuer shall prohibit or request that such Issuer refrain
from the issuance of Letters of Credit generally or the issuance of that
Facility Letter of Credit (and in any such case, such Issuer shall promptly
notify the Agent and the Borrower of such fact).
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(c PROCEDURE FOR ISSUANCE.
(i0 The Borrower shall give an Issuer at least three Business Days'
prior written notice of any requested issuance of a Facility Letter of Credit
under this Agreement (a "Letter of Credit Request"). Such notice shall be
irrevocable and shall specify:
(A) the stated amount of the Facility Letter of Credit requested
(which stated amount shall not be less than $1,000,000),
PROVIDED, HOWEVER, that up to five Facility Letters of Credit
issued in any twelve-month period may have a stated amount of
less than $1,000,000 each;
(B) the effective date (which day shall be a Business Day) of
issuance of such requested Facility Letter of Credit (the
"Issuance Date");
(C) the date on which such requested Facility Letter of Credit is
to expire (which date shall be a Business Day and shall comply
with the provisions of Section 2.17(b)(iii));
(D) the name of the Issuer chosen by the Borrower to issue the
requested Facility Letter of Credit;
(E) the purpose for which such Facility Letter of Credit is to be
issued; and
(F) the Person for whose benefit the requested Facility Letter of
Credit is to be issued.
At the time the Letter of Credit Request is made, the Borrower shall also
provide the Agent and the Issuer with a copy of the form (if specified by the
beneficiary) of the Facility Letter of Credit it is requesting be issued. Such
Letter of Credit Request, to be effective, must be received by such Issuer and
the Agent not later than 2:00 p.m. (Chicago time) on the last Business Day on
which a Letter of Credit Request can be given under this Section 2.17(c)(i).
(ii0 Subject to the terms and conditions of this Section 2.17 and
provided that the applicable conditions set forth in Sections 5.01 and 5.02
hereof have been satisfied, such Issuer shall, on the Issuance Date, issue a
Facility Letter of Credit on behalf of the Borrower in accordance with the
Issuer's usual and customary business practices unless the Issuer has actually
received (a) written notice from the Borrower specifically revoking the Letter
of Credit Request with respect to such Facility Letter of Credit, (b) written
notice from a Lender, which complies with the provisions of Section 2.17(e)(i)
or (c) written or telephonic notice from the Agent stating that the issuance of
such Facility Letter of Credit would violate Section 2.17(b).
(iii0 Each Issuer shall give the Agent and the Borrower written or
telex notice, or telephonic notice confirmed promptly thereafter in writing, of
the issuance of a Facility Letter of
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Credit (the "Issuance Notice"), together with (for the Borrower and the Agent) a
copy of such Facility Letter of Credit.
(iv0 An Issuer shall not extend or amend any Facility Letter of
Credit or allow a Facility Letter of Credit to be automatically extended unless
the requirements of this Section 2.17(c) are met as though a new Facility Letter
of Credit was being requested and issued.
(d PAYMENT OF REIMBURSEMENT OBLIGATIONS; DUTIES OF ISSUERS.
(i0 (A) Each Issuer shall promptly notify the Borrower and the Agent
of any draw under a Facility Letter of Credit and the Borrower shall reimburse
such Issuer in accordance with Section 2.17(f), and (B) any Reimbursement
Obligation with respect to any Facility Letter of Credit shall bear interest
from the date of the relevant drawings under the pertinent Facility Letter of
Credit until payment in full is received by the pertinent Issuer at (X) the
Floating Rate until the next succeeding Business Day and (Y) the Floating Rate
plus 2% thereafter.
(ii0 Any action taken or omitted to be taken by an Issuer under or
in connection with any Facility Letter of Credit, if taken or omitted in the
absence of bad faith, willful misconduct or gross negligence, shall not (A) put
that Issuer under any resulting liability to any Lender or (B) assuming that
such Issuer has complied with the procedures specified in Section 2.17(c), all
conditions to the issuance of a Facility Letter of Credit have been satisfied
and any such Lender has not given a notice contemplated by Section 2.17(e)(i)
that continues in full force and effect, relieve any such Lender of its
obligations hereunder to that Issuer. In determining whether to pay under any
Facility Letter of Credit, an Issuer shall have no obligation relative to the
Lenders or to the Borrower other than to confirm that any documents required to
be delivered under such Facility Letter of Credit have been delivered in
compliance and that they comply on their face (including that any draw request
has been purportedly executed by an authorized signatory, if and to the extent
such a requirement is specified in the related Facility Letter of Credit), with
the requirements of such Facility Letter of Credit.
(iii0 The Borrower agrees to pay to each Issuer the amount of all
Reimbursement Obligations, interest and other amounts payable to such Issuer
under or in connection with any Facility Letter of Credit immediately when due
(and in any event shall reimburse an Issuer for drawings under a Facility Letter
of Credit issued by it no later than the next Business Day after payment by that
Issuer), irrespective of any claim, set-off, defense or other right which the
Borrower or any Subsidiary may have at any time against any Issuer or any other
Person, under all circumstances, including without limitation, any of the
following circumstances:
(A) any lack of validity or enforceability of this Agreement or
any of the other Loan Documents;
(B) the existence of any claim, setoff, defense or other right
which the Borrower or any Subsidiary may have at any time
against a beneficiary named in a
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Facility Letter of Credit or, if such Facility Letter of
Credit is transferable, any transferee of any Facility Letter
of Credit (or any Person for whom any such transferee may be
acting), the Agent, the Issuer, any Lender, or any other
Person, whether in connection with this Agreement, any
Facility Letter of Credit, the transactions contemplated
herein or any unrelated transactions (including any underlying
transactions between the Borrower or any Subsidiary and the
beneficiary named in any Facility Letter of Credit);
(C) any draft, certificate or any other document presented under
the Facility Letter of Credit proving to be forged, fraudulent
or invalid in any respect or any statement therein being
untrue or inaccurate in any respect (except to the extent any
such invalidity or insufficiency is found in a final judgment
of a court of competent jurisdiction to have resulted from the
gross negligence or willful misconduct of such Issuer);
(D) the surrender or impairment of any guaranty or security for
the performance or observance of any of the terms of any of
the Loan Documents; or
(E) the occurrence of any Event of Default or Unmatured Default.
(iv0 As among the Borrower, the Issuers, the Agent and the Lenders,
the Borrower assumes all risks of the acts and omissions of, or misuse of the
Facility Letters of Credit by, the respective beneficiaries of the Facility
Letters of Credit (except such as are found in a final judgment by a court of
competent jurisdiction to have resulted from the gross negligence or willful
misconduct of an Issuer). In furtherance and not in limitation of the foregoing,
the Issuers, the Agent and the Lenders shall not be responsible (absent gross
negligence or willful misconduct in connection therewith, as determined by the
final judgment of a court of competent jurisdiction) for (A) the forms,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any Facility Letter of Credit, even if it should in fact prove to be in any or
all respects invalid, insufficient, inaccurate, fraudulent or forged; (B) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Facility Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (C) failure of the beneficiary of a
Facility Letter of Credit to comply fully with underlying conditions required in
order to draw upon such Facility Letter of Credit, so long as such beneficiary
has presented the appropriate documentation required to draw upon such Facility
Letter of Credit; (D) errors, omissions, interruptions or delays in transmission
or delivery of any messages, by mail, cable, telegraph, telex or otherwise; (E)
errors in interpretation of technical terms; (F) misapplication by the
beneficiary of a Facility Letter of Credit of the proceeds of any drawing under
such Facility Letter of Credit; (G) any consequences arising from causes beyond
the control of any Issuer, the Agent or any Lender.
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(e PARTICIPATION.
(i0 Immediately upon issuance by an Issuer of any Facility Letter of
Credit in accordance with the procedures set forth in Section 2.17(c) each
Lender shall be deemed to have irrevocably and unconditionally purchased and
received from the Issuer, without recourse or warranty, an undivided interest
and participation equal to its Pro Rata Share of such Facility Letter of Credit
(including, without limitation, all rights and obligations of the Issuer with
respect thereto) and any security therefor or guaranty pertaining thereto;
PROVIDED, that a Letter of Credit issued by any Issuer shall not be deemed to be
a Facility Letter of Credit for purposes of this Agreement if the Agent and such
Issuer shall have received written notice from any Lender on or before the
Business Day prior to the date of its issuance of such Letter of Credit that one
or more of the conditions contained in Sections 5.01 and 5.02 is not then
satisfied, and, in the event an Issuer receives such a notice, it shall have no
further obligation to issue any Facility Letter of Credit until such notice is
withdrawn by that Lender or it receives a notice from the Agent that such
condition has been effectively waived in accordance with the provisions of this
Agreement.
(ii0 In the event that any Issuer makes any payment under any
Facility Letter of Credit and the Borrower shall not have repaid such amount to
such Issuer pursuant to Section 2.17(d), such Issuer shall promptly notify the
Agent, which shall promptly notify each Lender, of such failure, and each Lender
shall promptly and unconditionally pay to the Agent for the account of such
Issuer the amount of such Lender's Pro Rata Share of the unreimbursed amount of
any such payment. The failure of any Lender to make available to the Agent its
Pro Rata Share of the unreimbursed amount of any such payment shall not relieve
any other Lender of its obligation hereunder to make available to the Agent its
Pro Rata Share of the unreimbursed amount of any payment on the date such
payment is to be made, but no Lender shall be responsible for the failure of any
other Lender to make available to the Agent its Pro Rata Share of the
unreimbursed amount of any payment on the date such payment is to be made.
(iii0 Whenever an Issuer receives a payment on account of a
Reimbursement Obligation, including any interest thereon, it shall promptly pay
to the Agent and the Agent shall promptly pay to each Lender which has funded
its participating interest therein, in immediately available funds, an amount
equal to such Lender's Pro Rata Share thereof.
(iv0 Upon the request of the Agent or any Lender, an Issuer shall
furnish to such Agent or Lender copies of any Facility Letter of Credit to which
that Issuer is party and such other documentation as may reasonably be requested
by the Agent or Lender.
(v0 The obligations of a Lender to make payments to the Agent for
the account of an Issuer with respect to a Facility Letter of Credit shall be
absolute, unconditional and irrevocable, not subject to any counterclaim,
set-off, qualification or exception whatsoever and shall be made in accordance
with the terms and conditions of this Agreement under all circumstances.
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(vi0 In the event any payment by the Borrower received by an Issuer
with respect to a Facility Letter of Credit and distributed by the Agent to the
Lenders on account of their participations is thereafter set aside, avoided or
recovered from that Issuer in connection with any receivership, liquidation,
reorganization or bankruptcy proceeding, each Lender which received such
distribution shall, upon demand by that Issuer, contribute such Lender's Pro
Rata Share of the amount set aside, avoided or recovered together with interest
at the rate required to be paid by that Issuer upon the amount required to be
repaid by it.
(f COMPENSATION FOR FACILITY LETTERS OF CREDIT.
(i0 The Borrower shall pay to the Agent, for the ratable account of
the Lenders, based upon the Lenders' respective Pro Rata Shares, a fee with
respect to each Facility Letter of Credit that is for the period from the
Issuance Date thereof to and including the final expiration date thereof, in a
per annum amount equal to the product of (x) the average daily undrawn amount of
such Facility Letter of Credit times (y) the Facility Letter of Credit Fee
percentage shown in the pricing grid set forth in Exhibit "K" hereto. The
Facility Letter of Credit Fees shall be due and payable in arrears on each
Monthly Payment Date and, to the extent any such fees are then due and unpaid,
on the Facility A Termination Date. The Agent shall promptly remit such Facility
Letter of Credit Fees, when paid, to the other Lenders in accordance with their
Pro Rata Shares thereof.
(ii0 Each Issuer shall have the right to receive, solely for its own
account, an issuing fee equal to the product of (x) 12.5 basis points times (y)
the amount of each Facility Letter of Credit, and other customary and
competitive fees agreed to between the Borrower and the Issuer with respect to
any Facility Letter of Credit which it issued. In addition, each Issuer shall be
entitled to receive its reasonable out-of-pocket costs of issuing and servicing
Facility Letters of Credit.
(g LETTER OF CREDIT COLLATERAL ACCOUNT. From and after the occurrence
and during the continuance of an Event of Default, the Borrower hereby agrees
that it will, until the Facility A Termination Date, maintain a special
collateral account (the "Letter of Credit Collateral Account") at the Agent's
office at the address specified pursuant to Article XIII, in the name of the
Borrower but under the sole dominion and control of the Agent, for the benefit
of the Lenders, and in which the Borrower shall have no interest other than as
set forth in Section 9.03. In addition to the foregoing, the Borrower hereby
grants to the Agent, for the benefit of the Lenders as security for repayment of
the Obligations, a security interest in and to the Letter of Credit Collateral
Account and any funds that may hereafter be on deposit in such account pursuant
to Section 9.02.
SECTION 2.18. NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Borrower or a
Lender, as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or the unreimbursed amount of any payment required pursuant
to Section 2.17(e)(ii), (ii) in the case of an Issuer, payment of any
Reimbursement Obligation received from the Borrower, or (iii) in the case of the
Borrower, a payment of principal, interest or fees to the Agent for the account
of the Lenders or an Issuer, that it does not intend to make such payment, the
Agent may assume that such payment has been made.
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The Agent may, but shall not be obligated to, make the amount of such payment
available to the intended recipient in reliance upon such assumption. If such
Lender, Issuer or the Borrower, as the case may be, has not in fact made such
payment to the Agent, the recipient of such payment shall, on demand by the
Agent, repay to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to (i) in the case of payment by a Lender or an
Issuer, the Federal Funds Effective Rate for such day or (ii) in the case of
payment by the Borrower, the interest rate applicable to the relevant Loan or
Reimbursement Obligation.
SECTION 2.19. WITHOLDING TAX EXEMPTION. At least five Business Days prior
to the first date on which interest or fees are payable hereunder for the
account of any Lender, each Lender that is not incorporated under the laws of
the United States of America, or a state thereof, agrees that it will deliver to
each of the Borrower and the Agent two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, certifying in either case that such
Lender is entitled to receive payments under this Agreement and the Notes
without deduction or withholding of any United States federal income taxes. Each
Lender which so delivers a Form 1001 or 4224 further undertakes to deliver to
each of the Borrower and the Agent two additional copies of such form (or a
successor form) on or before the date that such form expires (currently, three
successive calendar years for Form 1001 and one calendar year for Form 4224) or
becomes obsolete or after the occurrence of any event requiring a change in the
most recent forms so delivered by it, and such amendments thereto or extensions
or renewals thereof as may be reasonably requested by the Borrower or the Agent,
in each case certifying that such Lender is entitled to receive payments under
this Agreement and the Notes without deduction or withholding of any United
States federal income taxes, unless an event (including without limitation any
change in treaty, law or regulation) has occurred prior to the date on which any
such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender advises the Borrower
and the Agent that it is not capable of receiving payments without any deduction
or withholding of United States federal income tax.
SECTION 2.20. UNCONDITIONAL OBLIGATION TO MAKE PAYMENTS. To the fullest
extent permitted by law, the Borrower shall make all payments hereunder, under
the Notes and under all of the other Loan Documents regardless of any defense or
counterclaim, including any defense or counterclaim based on any law, rule or
policy which is now or hereafter promulgated by any governmental authority or
regulatory body and which may adversely affect the Borrower's obligations to
make, or the right of the holder of any Note to receive, those payments.
SECTION 2.21. COMPENSATION BALANCES. First Chicago shall have the right
(but no obligation) to enter into a separate agreement with the Borrower which
provides for the reduction of the interest rate payable to First Chicago
hereunder in the event that the Borrower maintains collected balances in
non-interest bearing accounts at First Chicago, but in no event shall such
agreement affect the amounts payable under this Agreement to any other Lender.
Similarly, each
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other Lender shall have the right (but no obligation) to enter into a separate
agreement with the Borrower which provides for the rebate to Borrower of a
portion of the interest paid to such Lender under this Agreement in the event
that the Borrower maintains collected balances in non-interest bearing accounts
at such Lender, but in no event shall any such agreement affect the amounts
payable under this Agreement to such Lender.
ARTICLE III
CHANGE IN CIRCUMSTANCES
SECTION 3.01. YIELD-PROTECTION. If the adoption, on or after the
Agreement Date, of any law or any governmental or quasi-governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law), or any change, on or after the Agreement Date, in interpretation thereof,
or the compliance of any Lender (which term, for purposes of this Article III,
shall be deemed to include such Issuer in such capacity) therewith,
(i0 subjects any Lender or any applicable Lending Installation to any
tax, duty, charge or withholding on or from payments due from the Borrower
(excluding federal taxation of the overall net income of any Lender or
applicable Lending Installation), or changes the basis of taxation of
payments to any Lender in respect of its Loans or other amounts due it
hereunder, or
(ii0 imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against assets
of, deposits with or for the account of, or credit extended by, any Lender
or any applicable Lending Installation (other than reserves and
assessments taken into account in determining the interest rate applicable
to Fixed Rate Advances), or
(iii0 imposes any other condition the result of which is to increase the
cost to any Lender or any applicable Lending Installation of making,
funding or maintaining loans (or letters of credit or participations
therein) or reduces any amount receivable by any Lender or any applicable
Lending Installation in connection with loans (or letters of credit or
participations therein), or requires any Lender or any applicable Lending
Installation to make any payment calculated by reference to the amount of
loans (or letters of credit or participations therein) held or interest
received by it, by an amount deemed material by such Lender,
then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an amount
received which such Lender determines is attributable to making, funding and
maintaining its Loans, Facility Letters of Credit (or participations therein)
and its Facility A Commitment (provided, that the foregoing shall not include
any amounts which First Chicago certifies are reflected in an increase of the
Corporate Base Rate for the relevant period).
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SECTION 3.02. CHANGES IN CAPITAL ADEQUACY REGULATIONS. If a Lender
reasonably determines the amount of capital required or expected to be
maintained by such Lender, any Lending Installation of such Lender or any
corporation controlling such Lender is increased as a result of a Change, and
such increase will have the effect of reducing the rate of return on such
Lender's capital as a consequence of such Lender's obligations hereunder to a
level below that which such Lender or such corporation, as the case may be,
could have achieved but for such Change (taking into account such Lender's or
such corporation's policies, as the case may be, with respect to capital
adequacy and any payments made to such Lender pursuant to Section 3.01 which
relate to capital adequacy and assuming that such Lender's capital was fully
utilized prior to such Change), then within 15 days of demand by such Lender,
the Company shall pay to the Agent, for the account of such Lender, such
additional amount or amounts as will compensate such Lender for such reduction.
If any Lender becomes entitled to claim any additional amounts pursuant to this
Section 3.02 it shall promptly notify the Company through the Agent of the event
by reason of which it has become so entitled, but in any event within 90 days,
after such Lender obtains actual knowledge thereof; PROVIDED that if such Lender
fails to give such notice within the 90-day period after it obtains actual
knowledge of such an event, such Lender shall, with respect to such compensation
in respect of any costs resulting from such event, only be entitled to payment
for costs incurred from and after the date 90 days prior to the date that such
Lender does give such notice. A certificate setting forth in reasonable detail
the computation of any additional amount payable pursuant to this Section 3.01,
submitted by such Lender to the Company through the Agent, shall be delivered to
the Company promptly after the initial incurrence of such additional amounts.
"Change" means (i) any change after the Agreement Date in the Risk-Based Capital
Guidelines or (ii) any adoption of or change in any other law, governmental or
quasi-governmental rule, regulation, policy, guideline, interpretation, or
directive (whether or not having the force of law) after the date of this
Agreement which affects the amount of capital required or expected to be
maintained by any Lender or any Lending Installation or any corporation
controlling any Lender or any Lending Institution. "Risk-Based Capital
Guidelines" means (i) the risk-based capital guidelines in effect in the United
States on the date of this Agreement, including transition rules, and (ii) the
corresponding capital regulations promulgated by regulatory authorities outside
the United States implementing the July 1988 report of the Basle Committee on
Banking Regulation and Supervisory Practices entitled "International Convergence
of Capital Measurements and Capital Standards," including transition rules, and
any amendments to such regulations adopted prior to the date of this Agreement.
SECTION 3.03. AVAILABILITY OF TYPES OF ADVANCES. If any Lender determines
that maintenance of its Fixed Rate Loans at a suitable Lending Installation
would violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Agent determines that (i) deposits of a type
and maturity appropriate to match fund Fixed Rate Advances are not available or
(ii) the interest rate applicable to a Type of Advance does not accurately
reflect the cost of making or maintaining such Advance, then the Agent shall
suspend the availability of the affected Type of Advance and require any Fixed
Rate Advances of the affected Type to be repaid or to be converted (in
accordance with the terms of this Agreement) to any Type of Advance which is not
affected and is then available under this Agreement.
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SECTION 3.04. FUNDING INDEMNIFICATION. If any payment of a Fixed Rate
Advance occurs on a date which is not the last day of the applicable Interest
Period, whether because of acceleration, prepayment or otherwise, or a Fixed
Rate Advance is not made on the date specified by the Borrower for any reason
other than default by the Lenders, the Borrower will indemnify each Lender for
any loss or cost incurred by it resulting therefrom, including, without
limitation, any loss or cost in liquidating or employing deposits acquired to
fund or maintain the Fixed Rate Advance.
SECTION 3.05. LENDER STATEMENTS; SURVIVAL OF INDEMNITY.To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its Fixed Rate Loans to reduce any liability of the
Borrower to such Lender under Sections 3.01 and 3.02 or to avoid the
unavailability of a Type of Advance under Section 3.03, so long as such
designation is not disadvantageous to such Lender. Each Lender shall deliver a
written statement of such Lender as to the amount due, if any, under Sections
3.01, 3.02 or 3.04. Such written statement shall set forth in reasonable detail
the calculations upon which such Lender determined such amount and shall be
final, conclusive and binding on the Borrower in the absence of manifest error.
Determination of amounts payable under such Sections in connection with a Fixed
Rate Loan shall be calculated as though each Lender funded its Fixed Rate Loan
through the purchase of a deposit of the type and maturity corresponding to the
deposit used as a reference in determining the Fixed Rate applicable to such
Loan, whether in fact that is the case or not. Unless otherwise provided herein,
the amount specified in the written statement shall be payable on demand after
receipt by the Borrower of the written statement. The obligations of the
Borrower under Sections 3.01, 3.02 and 3.04 shall survive payment of the
Obligations and termination of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The entities comprising the Borrower jointly and severally represent and
warrant to each of the Lenders that:
SECTION 4.01. ORGANIZATION, POWERS, ETC. Each Borrower (i) is a
corporation duly organized, validly existing and in good standing under laws of
its state of incorporation, (ii) has the power and authority to own or hold
under lease the properties it purports to own or hold under lease and to carry
on its business as now conducted, (iii) is duly qualified or licensed to
transact business in every jurisdiction in which such qualification or licensing
is necessary to enable it to enforce all of its material contracts and other
material rights and to avoid any material penalty or forfeiture.
SECTION 4.02. AUTHORIZATION AND VALIDITY OF THIS AGREEMENT, ETC. The
Borrower has the power and authority to execute and deliver this Agreement, the
Notes and the other Loan Documents and to perform all its obligations
thereunder. The execution and delivery by each of the entities comprising the
Borrower of this Agreement, the Notes and the other Loan Documents and
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the performance by the Borrower of all its obligations thereunder and any and
all actions taken by the Borrower (i) have been duly authorized by all requisite
corporate action, (ii) will not violate or be in conflict with (a) any
provisions of law (including, without limitation, any applicable usury or
similar law), (b) any order, rule, regulation, writ, judgment, injunction,
decree or award of any court or other agency of government, or (c) any provision
of its certificate of incorporation or by-laws, (iii) will not violate, be in
conflict with, result in a breach of or constitute (with or without the giving
of notice or the passage of time or both) a default under any material
indenture, agreement or other instrument to which it is a party or by which it
or any of its properties or assets is or may be bound, and (iv) except as
otherwise contemplated by this Agreement, will not result in the creation or
imposition of any lien, charge or encumbrance upon, or any security interest in,
any of its properties or assets. Each of this Agreement, the Notes and the other
Loan Documents has been duly executed and delivered by the Borrower. The Loan
Documents constitute legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
SECTION 4.03. FINANCIAL STATEMENTS.
(a) The Borrower heretofore has provided to the Lenders (i) the
consolidated balance sheet of the Company and its Subsidiaries as of November
30, 1996, and the related consolidated statements of earnings, stockholders'
equity and cash flows for the 12-month period ended on that date, audited and
reported upon by Deloitte & Touche, independent certified public accountants
(the "Company Audited Financial Statements"), and (ii) the consolidated balance
sheet of the Company as of August 31, 1997, and the consolidated statements of
earnings and cash flows of the Company and its Subsidiaries for the three-month
and nine-month periods ended on that date, both unaudited, but certified to be
true and accurate (subject to normal year-end audit adjustments) by the
President and the Chief Financial Officer of the Company (the "Company Unaudited
Financial Statements"). Those financial statements and reports (subject, in the
case of the Company Unaudited Financial Statements, to normal year-end audit
adjustments), and the related notes and schedules (if any), (a) were prepared in
accordance with GAAP consistently applied throughout the respective periods
covered thereby, (b) present fairly the consolidated financial condition of the
Company and its Subsidiaries as of the respective dates thereof, (c) show all
material liabilities, direct or contingent, of the Company and its Subsidiaries
as of those dates (including, without limitation, liabilities for taxes and
material commitments), and (d) present fairly the consolidated shareholders'
equity, results of operations and cash flows of the Company and its Subsidiaries
at the dates and for the respective periods covered thereby.
(b) The Borrower heretofore has provided to the Lenders (i) the
consolidated balance sheet of Greystone and its Subsidiaries as of December 31,
1996, and the related consolidated statements of earnings, stockholders' equity
and cash flows for the year then ended, audited and reported upon by Ernst &
Young, independent certified public accountants (the "Greystone Audited
Financial Statements"), and (ii) the consolidated balance sheet of Greystone and
its Subsidiaries as of June 30, 1997, and the consolidated statement of earnings
and cash flows of Greystone and its
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Subsidiaries for the three-month and six-month periods ended on that date, both
unaudited, but certified to be true and accurate (subject to normal year-end
audit adjustments) by the President and the Chief Financial Officer of Greystone
(the "Greystone Unaudited Financial Statements"). Those financial statements and
reports (subject, in the case of the Greystone Unaudited Financial Statements,
to normal year-end audit adjustments), and the related notes and schedules (if
any), (a) were prepared in accordance with GAAP consistently applied throughout
the respective periods covered thereby, (b) present fairly the consolidated
financial condition of Greystone and its Subsidiaries as of the respective dates
thereof, (c) show all material liabilities, direct or contingent, of Greystone
and its Subsidiaries as of those dates (including, without limitation,
liabilities for taxes and material commitments), and (d) present fairly the
consolidated stockholders' equity, results of operations and cash flows of
Greystone and its Subsidiaries at the dates and for the respective periods
covered thereby.
(c) The Borrower heretofore has provided to the Lenders the following pro
forma financial statements which are included in the Registration Statement on
Form S-4 of the Company containing the Prospectus/Proxy Statement to be sent to
the shareholders of the Company and Greystone in connection with the Merger
(collectively, the "Pro Forma Financial Statements"): (i) the pro forma
consolidated balance sheets of the Company and its Subsidiaries and Greystone
and its Subsidiaries as of November 30 and December 31, 1996, and the related
pro forma consolidated statements of earnings for the fiscal years then ended,
and (ii) the pro forma consolidated balance sheets of the Company and its
Subsidiaries and Greystone and its Subsidiaries as of May 31 and June 30, 1997,
and the pro forma consolidated statements of earnings of the Company and its
Subsidiaries and Greystone and its Subsidiaries for the six-month period ended
on those dates. The Pro Forma Financial Statements (A) have been prepared, in
all material respects, in accordance with the applicable requirements of the
rules and regulations promulgated under the Securities Exchange Act of 1934, as
amended, and (B) the pro forma adjustments have been properly applied on the
bases described therein and the assumptions used in the preparation of the Pro
Forma Financial Information are reasonable and appropriate to give effect to the
transactions or circumstances referred to therein.
SECTION 4.04. NOT MATERIAL ADVERSE EFFECT. Since the date of the Audited
Financial Statements, no Event has occurred which has had or could reasonably be
expected to have a Material Adverse Effect. There are no material unrealized or
expected losses in connection with loans, advances and other commitments of the
Borrower.
SECTION 4.05. TITLE TO PROPERTIES. Schedule III hereto contains a complete
and accurate list of all Real Estate owned by the Borrower, except those
properties (i) acquired or disposed of by the Borrower after May 31, 1997 in the
ordinary course of business or pursuant to the Reorganization, (ii) to be
transferred or conveyed to LLP or a Subsidiary of LLP pursuant to the LLP
Partnership Agreement, all of which are completely and accurately described on
Schedule VII hereto, or (iii) the loss or forfeiture of which individually or in
the aggregate would not have a Material Adverse Effect. The Borrower and its
Subsidiaries have good and marketable fee title, or title insurable by a
reputable and nationally recognized title insurance company, to the Real Estate
owned by it listed in Schedules III and VII hereto, and to all the other assets
owned by it and either reflected
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on the balance sheet and related notes and schedules most recently delivered by
the Borrower to the Lenders (the "Recent Balance Sheet") or acquired by it after
the date of that balance sheet and prior to the date hereof, except (x) for
those properties and assets which have been disposed of since the date of the
Recent Balance Sheet or pursuant to the Reorganization or which no longer are
used or useful in the conduct of its business and (y) that good and marketable
fee title, or title insurable by a reputable and nationally recognized title
insurance company, to certain of the properties located in Arizona listed in
Schedule III is held by the Persons and in the manner described in Schedule III
hereto. All such Real Estate and other assets owned by the Borrower (including
the properties referred to in clause (y) above) are free and clear of all
Mortgages, pledges, liens, charges and other encumbrances, except (i) in the
case of Real Estate, as reflected on title insurance policies insuring the
interest of the Borrower in the Real Estate or in title insurance binders issued
with respect to the Real Estate (some of which title insurance binders have
expired but were valid at the time of acquisition of the relevant Real Estate),
(ii) as reflected in the Recent Balance Sheet, and none of those Mortgages,
pledges, liens, charges or other encumbrances, individually or in the aggregate,
prevents or has a Material Adverse Effect upon the use by the Borrower of any of
their respective properties or assets as currently conducted or as planned for
the future.
SECTION 4.06. LITIGATION. There is no action, suit, proceeding,
arbitration, inquiry or investigation (whether or not purportedly on behalf of
the Borrower) pending or, to the best knowledge of the Borrower, threatened
against or affecting the Borrower or any of the Subsidiaries which could
reasonably be expected to have a Material Adverse Effect. The Borrower is not in
default with respect to any final judgment, writ, injunction, decree, rule or
regulation of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which default would or could have a Material Adverse Effect on the
Borrower. The Borrower has no material contingent obligations not provided for
or disclosed in the pro forma consolidated balance sheet as of November 30 and
December 31, 1997, included in the Pro Forma Financial Statements.
SECTION 4.07. PAYMENT OF TAXES. There have been filed all federal, state
and local tax returns with respect to the operations of the Borrower which are
required to be filed, except where extensions of time to make those filings have
been granted by the appropriate taxing authorities and the extensions have not
expired. The Borrower has paid or caused to be paid to the appropriate taxing
authorities all taxes as shown on those returns and on any assessment received
by any of them, to the extent that those taxes have become due, except for taxes
the failure to pay which do not violate the provisions of Section 6.03 hereof.
The Internal Revenue Service has completed an examination of the Company's
federal income tax returns for the years ended 1980 through 1994, and Borrower
has paid all additional taxes, assessments, interest and penalties with respect
to such years.
SECTION 4.08. AGREEMENTS. Neither the Borrower nor any Subsidiary is a
party to any agreement, other than the Spin-Off Agreement, the Merger Agreement
or the LLP Partnership Agreement, or instrument or is subject to any charter or
other restriction that could reasonably be expected to have a Material Adverse
Effect on it. Neither the Borrower nor any Subsidiary is in
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material default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any material agreement or
instrument to which it is a party, including, without limitation, the
Reorganization Documents, and consummation of the transactions contemplated
hereby and in the other Loan Documents will not cause any Borrower to be in
material default thereof.
SECTION 4.09. FOREIGN DIRECT INVESTMENT REGULATIONS. Neither the making of
the Facility A Advances nor the repayment thereof nor any other transaction
contemplated hereby will involve or constitute a violation by the Borrower of
any provision of the Foreign Direct Investment Regulations of the United States
Department of Commerce or of any license, ruling, order, or direction of the
Secretary of Commerce thereunder.
SECTION 4.10. FEDERAL RESERVE REGULATIONS.
(a) The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying any margin stock (within the meaning of Regulation U or Regulation X of
the Board of Governors of the Federal Reserve System of the United States).
Margin stock (as defined in Regulation U) constitutes less than 25% of those
assets of the Borrower and its Subsidiaries which are subject to any limitation
on sale, pledge, or other restriction hereunder.
(b) No part of the proceeds of any of the Advances will be used to
purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock. If requested by the
Lenders, the Borrower shall furnish to the Lenders a statement in conformity
with the requirements of Federal Reserve Form U-l referred to in Regulation U of
said Board of Governors. No part of the proceeds of the Advances will be used
for any purpose that violates, or which is inconsistent with, the provisions of
Regulation X of said Board of Governors.
SECTION 4.11. CONSENTS, ETC. Except as set forth on Schedule IV, no order,
license, consent, approval, authorization of, or registration, declaration,
recording or filing (except for the filing of a Current Report on Form 8-K, and
a Quarterly Report on Form 10-Q, in each case with the Securities and Exchange
Commission) with, or validation of, or exemption by, any governmental or public
authority (whether federal, state or local, domestic or foreign) or any
subdivision thereof is required in connection with, or as a condition precedent
to, the due and valid execution, delivery and performance by Borrower of this
Agreement, the Notes or the other Loan Documents, or the legality, validity,
binding effect or enforceability of any of the respective terms, provisions or
conditions thereof. To the extent that any franchises, licenses, certificates,
authorizations, approvals or consents from any federal, state or local (domestic
or foreign) government, commission, bureau or agency are required for the
acquisition, ownership, operation or maintenance by the Borrower of properties
now owned, operated or maintained by it, those franchises, licenses,
certificates, authorizations, approvals and consents have been validly granted,
are in full force and effect and constitute valid and sufficient authorization
therefor.
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SECTION 4.12. COMPLIANCE WITH APPLICABLE LAWS. The Borrower and its
Subsidiaries are in compliance with and conform to all statutes, laws,
ordinances, rules, regulations, orders, restrictions and all other legal
requirements of all domestic or foreign governments or any instrumentality
thereof having jurisdiction over the conduct of their respective businesses or
the ownership of their respective properties, the violation of which would have
a Material Adverse Effect on it, including, without limitation, regulations of
the Board of Governors of the Federal Reserve System, the Federal Interstate
Land Sales Full Disclosure Act and the Florida Land Sales Act. Neither the
Borrower nor any Subsidiary has received any notice to the effect that its
operations are not in material compliance with any of the requirements of
applicable Environmental Laws or any applicable federal, state and local health
and safety statutes and regulations or the subject of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release of any Hazardous Substances into the environment, which non-compliance
or remedial action could reasonably be expected to have a Material Adverse
Effect.
SECTION 4.13. RELATIONSHIP OF THE BORROWER. The entities comprising the
Borrower and the Subsidiary Guarantors are engaged as an integrated group in the
business of owning, developing and selling Real Estate and of providing the
required services, credit and other facilities for those integrated operations.
The Borrower and the Subsidiary Guarantors require financing on such a basis
that funds can be made available from time to time to such entities, to the
extent required for the continued successful operation of their integrated
operations. The Advances to be made to the Borrower and the Facility Letters of
Credit to be issued for the account of the Borrower under this Agreement are for
the purpose of financing the integrated operations of the Borrower and the
Subsidiary Guarantors, and each of the entities comprising the Borrower and the
Subsidiary Guarantors expects to derive benefit, directly or indirectly, from
the Advances and Facility Letters of Credit, both individually and as a member
of the integrated group, since the financial success of the operations of each
Borrower and the Subsidiary Guarantors is dependent upon the continued
successful performance of the integrated group as a whole.
SECTION 4.14. SUBSIDIARIES; JOINT VENTURES. Schedule V hereto contains a
complete and accurate list of (i) all Subsidiaries of the Company and Greystone,
including, with respect to each Subsidiary, (a) its state of incorporation, (b)
all jurisdictions (if any) in which it is qualified as a foreign corporation,
(c) the number of shares of its Capital Stock outstanding, and (d) the number
and percentage of those shares owned by the Company, Greystone and/or by any
other Subsidiary, and (ii) each Joint Venture, including, with respect to each
such Joint Venture, (a) its jurisdiction of organization, (b) all other
jurisdictions in which it is qualified as a foreign entity and (c) all Persons
other than the Borrower that are parties thereto. All the outstanding shares of
Capital Stock of each Subsidiary are validly issued, fully paid and
nonassessable, except as otherwise provided by state wage claim laws of general
applicability. All of the outstanding shares of Capital Stock of each Subsidiary
owned by the Company, Greystone or another Subsidiary as specified in Schedule V
are owned free and clear of all liens, pledges, security interests, equity or
other beneficial interests, charges and encumbrances of any kind whatsoever,
except for Permitted Liens. None of the entities comprising the Borrower owns of
record or beneficially any shares of the Capital Stock of any corporation (other
than Greystone, UAMC, AFSI, STI, the Title Companies, the Limited Purpose
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Finance Subsidiaries and the other Subsidiaries the equity Securities of which
have been pledged to the Agent pursuant to the Pledge Agreement) that is not a
Borrower or a Subsidiary Guarantor. None of the Marlborough Subsidiaries has
total assets with a fair market value of more than $100,000 in the aggregate.
SECTION 4.15. ERISA. The Borrower is not executing or delivering any of
the Loan Documents or entering into any of the transactions contemplated hereby,
directly or indirectly, in connection with any arrangement or understanding in
any respect involving any "employee benefit plan" with respect to which the
Borrower is a "party in interest" within the meaning of the Employee Retirement
Income Security Act of 1974, or a "disqualified person", within the meaning of
the Internal Revenue Code 1986, as amended. No Unfunded Liabilities exist with
respect to any Single Employer Plans. Each Plan complies in all material
respects with all applicable requirements of law and regulations, no Reportable
Event has occurred with respect to any Plan, neither the Borrower nor any other
members of the Controlled Group has withdrawn from any Plan or initiated steps
to do so, and no steps have been taken to reorganize or terminate any Plan.
SECTION 4.16. INVESTMENT COMPANY ACT. Neither the Borrower nor any
Subsidiary thereof is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.17. PUBLICE UTILITY HOLDING COMPANY ACT. Neither the Borrower
nor any Subsidiary is a "holding company" or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
SECTION 4.18. SUBORDINATED DEBT. The Obligations constitute senior
indebtedness which is entitled to the benefits of the subordination provisions
of all outstanding Subordinated Debt.
SECTION 4.19. POST-RETIREMENT BENEFITS. The present value of the expected
cost of post-retirement medical and insurance benefits payable by the Borrower
and its Subsidiaries to its employees and former employees, as estimated by the
Borrower in accordance with procedures and assumptions deemed reasonable by the
Required Lenders, does not exceed $ -0- exclusive of post-retirement medical and
insurance benefits payable to the President and Chief Financial Officer of
Greystone pursuant to the Merger Agreement.
SECTION 4.20. INSURANCE. The certificate signed by the President or Chief
Financial Officer of the Company, that attests to the existence and adequacy of,
and summarizes, the property, casualty, and liability insurance programs carried
by the Borrower and that has been furnished by the Borrower to the Agent and the
Lenders, is complete and accurate. This summary includes the insurer's or
insurers' name(s), policy number(s), expiration date(s), amount(s) of coverage,
type(s) of coverage, exclusion(s), and deductibles. This summary also includes
similar information, and describes any reserves, relating to any self-insurance
program that is in effect.
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SECTION 4.21. ENVIRONMENTAL REPRESENTATIONS. To the best of the Borrower's
knowledge and belief, no Hazardous Substances in material violation of any
Environmental Laws are present upon any of the Real Estate owned by Borrower or
any Real Estate which is encumbered by any Mortgage held by Borrower, and
neither the Borrower nor any Subsidiary has received any notice to the effect
that any of the Real Estate owned by Borrower or any Subsidiary or any their
respective operations are not in compliance with any of the requirements of
applicable Environmental Laws or are the subject of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release of any Hazardous Substance into the environment which non-compliance or
remedial action could be reasonably expected to have a Material Adverse Effect.
SECTION 4.22. REORGANIZATION. The Borrower has furnished to the Lender
true and complete copies of all executed Reorganization Documents, as amended to
the Agreement Date.
SECTION 4.23. MINIMUM ADJUSTED TANGIBLE NET WORTH. On the Agreement Date,
after giving effect to the Reorganization, Adjusted Tangible Net Worth, less
advances to and Investments in LLP, is in excess of $215,000,000.
SECTION 4.24. NO MISREPRESENTATION. No representation or warranty by the
Borrower contained herein or made hereunder or in the Reorganization Documents
and no certificate, schedule, exhibit, report or other document provided or to
be provided by the Borrower in connection with the transactions contemplated
hereby or thereby (including, without limitation, the negotiation of and
compliance with the Loan Documents) or in connection with the Reorganization
contains or will contain a misstatement of a material fact or omit to state a
material fact required to be stated therein in order to make the statements
contained therein, in the light of the circumstances under which made, not
misleading.
ARTICLE V
CONDITIONS PRECEDENT; TERMINATION
SECTION 5.01. CONDITIONS OF EFFECTIVENESS. This Agreement shall become
effective when the Agent shall have received counterparts of this Agreement
executed by the Borrower and each of the Lenders; PROVIDED, HOWEVER, that the
Lenders shall not be required to make any Advance, the Swing Line Bank shall not
be obligated to make any Swing Line Loan, and the Issuer shall not be obligated
to issue any Facility Letters of Credit hereunder, unless and until the Agent
shall have received each of the following items (with all documents required
below, except as otherwise specified, to be dated the Closing Date, which date
shall be the same for all such documents, and each of such documents to be in
form and substance satisfactory to the Agent, be fully and properly executed by
all parties thereto, and (except for the Committed A Notes) to be in sufficient
copies for each Lender), and the conditions specified below shall have been
satisfied:
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(a) A Committed A Note and a Competitive Bid Note payable to the order of
each of the Lenders, a Swing Line Note payable to the order of the Swing Line
Bank, a Subsidiary Guaranty from each Subsidiary Guarantor, and the Greystone
Assumption Agreement executed by Greystone.
(b) The favorable written opinion by Rubin Baum Levin Constant Friedman &
Bilzin, counsel for the Borrower addressed to the Lenders and in form and
substance satisfactory to the Agent, (i) confirming the accuracy of the
representations and warranties set forth in Sections 4.01 (excluding clause (ii)
thereof, and limited, in the case of clause (iii) thereof, to the jurisdictions
listed under the heading "Where Qualified" in Schedule V hereto), 4.02, 4.06,
4.11, 4.12 and the second sentence of Section 4.08 hereof, (which opinion, as to
the representations set forth in clauses (ii)(b), (iii) and (iv) of Section
4.02, Sections 4.06, 4.11, 4.12 and the second sentence of Section 4.08 hereof,
may be to the best knowledge of such counsel, and may in its entirety be limited
to Florida, Arizona, Delaware, Texas, California, Nevada and United States
federal law); (ii) to the effect that this Agreement, the Notes and the
Subsidiary Guarantees have been duly authorized, executed and delivered by the
Borrower and each Subsidiary Guarantor; and (iii) that the Merger and the
Spin-Off have been consummated and become effective in accordance with the terms
of the Reorganization Documents. Such counsel may rely, in its opinion, on the
opinions of special counsel to the Borrower referred to in Section 5.01(c)
below, as to matters of law of the State of Illinois, on the opinion of
Fennemore, Craig of Phoenix, Arizona as to matters of law of the State of
Arizona, on the opinions of Bellinger & DeWolf, P.C. as to matters of law of the
State of Texas and on the opinion of Palmieri, Tyler, Wiener, Wilhelm & Waldron
as to matters of law of the State of California. In addition, Rubin Baum Levin
Constant Friedman & Bilzin may rely on the opinions of Rogers & Wells as to
matters of Delaware law applicable to Greystone and its Subsidiaries. The
Borrower hereby instructs its counsel to prepare its opinion and deliver it to
Lenders for their benefit, and such opinion shall contain a statement to such
effect.
(c) The favorable written opinion of Rudnick & Wolfe, special counsel to
the Borrower, that (i) no authorization, consent, approval, license or exemption
of, or filing nor registration with or other action by any Illinois, United
States federal or Delaware governmental department, commission, board, bureau,
regulatory body, agency or instrumentality or to the best knowledge of such
counsel, any court is or will be necessary for the execution, delivery and
performance by the Borrower of this Agreement and the Notes and (ii) this
Agreement and the Notes constitute the legal, valid and binding obligations of
the Borrower, enforceable in accordance with their respective terms, except as
the rights and remedies of the Lenders thereunder may be limited by (A)
applicable bankruptcy, reorganization, insolvency and other laws effecting
creditors' rights generally from time to time in effect, (B) the exercise of the
discretionary powers of the court before which any proceeding seeking equitable
remedies (including, without limitation, specific performance and injunctive
relief) may be brought, and (C) such other qualifications expressed in the
opinion PROVIDED that such qualifications are acceptable to Agent. Such opinion
shall also cover the matters set forth in clauses (i) and (ii) of this
subsection with respect to each Subsidiary Guaranty. Such counsel may rely on
the opinion of counsel to the Borrower delivered pursuant to subsection (b)
above relating to the representations set forth in Sections 4.01 and 4.02 hereof
and on the opinion of Palmieri, Tyler, Wiener, Wilhelm & Waldron as to matters
of law of the State of California. The
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Borrower hereby instructs its special counsel to prepare its opinion and deliver
it to Lenders for their benefit, and such opinion shall contain a statement to
such effect.
(d) The favorable written opinion of Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A., special counsel to the Agent and the Lenders,
addressed to the Lenders to the effect that: while it has not independently
considered the matters covered by the opinions provided pursuant to Sections
5.01(b) and (c) to the extent necessary to enable it to express the conclusions
stated therein, those opinions of counsel and the other documents provided
pursuant to this Section 5.01 are substantially responsive to the requirements
of this Agreement.
(e) The following supporting documents with respect to each Borrower and
Subsidiary Guarantor: (i) a copy of its certificate or articles of
incorporation, certified as of a date reasonably close to the Closing Date to be
a true and accurate copy by the Secretary of State of its state of
incorporation, or if a copy of such certificate or articles of incorporation has
been previously delivered to the Agent, a certificate of its Secretary or
Assistant Secretary to the effect that there have been no amendments to its
certificate or articles of incorporation since April 4, 1997; (ii) a certificate
of that Secretary of State, dated as of a date reasonably close to the Closing
Date, as to its existence and (if available) good standing; (iii) a certificate
of the Secretary of State of each jurisdiction, other than its state of
incorporation, in which it does business, as to its qualification as a foreign
corporation; (iv) a copy of its by-laws, certified by its Secretary or Assistant
Secretary to be a true and accurate copy of its by-laws in effect on the Closing
Date, or, if a copy of such by-laws has been previously delivered to the Agent
in connection with the Existing Credit Agreement, a certificate of its Secretary
or Assistant Secretary to the effect that there have been no amendments to its
by-laws since April 4, 1997; (v) a certificate of its Secretary or Assistant
Secretary as to the incumbency and signatures of its officers who have executed
any documents in connection with the transactions contemplated by this
Agreement; (vi) a copy of resolutions of its Board of Directors or the Executive
Committee of its Board of Directors, certified by its Secretary or Assistant
Secretary to be a true and accurate copy of resolutions duly adopted by such
Board of Directors or Executive Committee that are in full force and effect on
the Closing Date, authorizing the execution and delivery by it of this
Agreement, the Notes, the Subsidiary Guarantees and the other Loan Documents to
which it is a party and the performance by it of all its obligations thereunder;
and (vii) such additional supporting documents and other information with
respect to its operations and affairs as the Agent may reasonably request.
(f) A certificate signed by a duly authorized officer of each Borrower
stating that: (i) the representations and warranties of the Borrower contained
in Article IV hereof are correct and accurate on and as of the Closing Date as
though made on and as of the Closing Date and (ii) no event has occurred and is
continuing which constitutes an Event of Default or Unmatured Default hereunder.
(g) The Borrowing Base report for the fiscal quarter ended August 31,
1997, as required pursuant to Section 6.04(j).
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(h) Such other documents as any Lender or its counsel may reasonably
request.
(i) There shall not have occurred any changes in the consolidated
financial condition or results of operations or cash flows of the Borrower from
that reflected in the Interim Pro Forma Financial Statements which has or
reasonably could be expected to have, in the judgment of the Required Lenders, a
Material Adverse Effect on the Borrower's financial condition or results of
operations, taken as a whole.
(j) All conditions precedent to the effectiveness of the Facility B Credit
Agreement and the LLP Credit Agreement and the obligations of the "Lenders"
thereunder to make Advances" thereunder shall have been satisfied.
(k) All transactions contemplated by the Reorganization Documents to take
place on the consummation of the Reorganization shall have occurred and been
lawfully consummated to the satisfaction of the Agent.
(l) The Company shall not have entered into or agreed to any amendment or
modification of the Merger Agreement, the Spin-Off Agreement or the LLP
Partnership Agreement, or waived or released any material rights or benefits of
the Company thereunder, in each case without the prior written consent of the
Agent or the Required Lenders.
(m) The Borrower shall have executed and delivered the Intercreditor
Agreement.
(n) The Company shall have executed and delivered the Pledge Agreement and
shall have pledged to the Agent all outstanding capital stock of each Joint
Venture Subsidiary which is not a Borrower or a Subsidiary Guarantor and of each
Joint Venture Subsidiary which is pledged to the Agent pursuant to the Existing
Credit Agreement, unless such Joint Venture Subsidiary has been transferred to
LNR in connection with the Reorganization.
(o) Written money transfer instructions, in substantially the form of
Exhibit M hereto, signed by an Authorized Officer, together with such other
related money transfer authorizations as the Agent may reasonably request.
(p) Pro forma consolidated balance sheet of the Borrower including the
accounts of the Company and its Subsidiaries as of May 31, 1997 and Greystone
and its Subsidiaries as of June 30, 1997, and assuming all of the following
transactions had occurred as of such dates: the formation of LLP, the
transactions contemplated under the Spin-Off Agreement, the effectiveness of the
Merger, the effectiveness of this Agreement, the Facility B Credit Agreement and
the LLP Credit Agreement, and the funding of the initial loans hereunder and
thereunder.
(q) A report, in reasonable detail and in form and substance satisfactory
to the Agent, with calculations indicating that the Borrower, on a pro forma
basis as of May 31, 1997 (including the accounts of Greystone as of June 30,
1997) would have been in compliance with the provisions
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of Article VII (if this Agreement had been in effect as of such dates), which
calculations shall be based upon the pro forma financial statements of the
Company after making the assumptions referred to in section 5.01(p) above.
(r) A certificate signed by the Chief Financial Officer of the Company
showing in reasonable detail the calculations used to determine the Leverage
Ratio for the Pricing Grid attached hereto as Exhibit K.
SECTION 5.02. CONDITIONS PRECEDENT TO ALL BORROWINGS
(a) No Lender shall be required to make any Advance or Swing Line Loan
(other than an Advance or Swing Line Loan that, after giving effect thereto and
to the application of the proceeds thereof, does not increase the aggregate
amount of the sum of outstanding (a) Advances and Swing Line Loans and (b)
Reimbursement Obligations) and no Issuer shall be obligated to issue any
Facility Letter of Credit, unless on the applicable Borrowing Date or Issuance
Date :
(i) the Agent shall have received notice of Borrower's request for the
Advance and/or the issuance of a Facility Letter of Credit with respect
thereto as provided in Sections 2.08(a) and 2.17(c)(i), respectively, and
such other approvals, opinions or documents as the Agent may reasonably
request;
(ii) the representations and warranties of the Borrower contained in
Article IV hereof are true and correct as of such Borrowing Date or
Issuance Date; PROVIDED, HOWEVER, that for the purposes hereof, (A) from
and after the date of delivery by the Borrower pursuant to Section 6.04(a)
of their consolidated financial statements for the year ended November 30,
1997, the references in Section 4.03 to "Audited Financial Statements"
shall be deemed to be references to the annual audited financial
statements most recently delivered by the Borrower pursuant to Section
6.04(a) as of the date of the request for an Advance and/or the issuance
of a Facility Letter of Credit; and (B) from and after that date of
delivery by the Borrower pursuant to Section 6.04(b) of its consolidated
financial statements for the quarter ending November 30, 1997, the
references in Section 4.03 to "Unaudited Financial Statements" shall be
deemed to be references to the quarterly unaudited financial statements
most recently delivered by the Borrower pursuant to Section 6.04(b) as of
the date of that request for an Advance and/or the issuance of a Facility
Letter of Credit;
(iii) All legal matters incident to the making of such Advance shall be
satisfactory to the Lenders and their counsel;
(iv) There exists no Event of Default or Unmatured Default; and
(v) The making of the Advance and/or the issuance of the Facility
Letter of Credit will not result in any Event of Default or Unmatured
Default.
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(b) Each Borrowing Notice with respect to each such Advance and each Swing
Line Loan or the Issuance Notice with respect to such Facility Letter of Credit
shall constitute a representation and warranty by the Borrower that all of the
conditions contained in this Section 5.02 have been satisfied.
SECTION 5.03. TERMINATION. Notwithstanding anything to the contrary
contained in this Agreement or any of the other Loan Documents, if all of the
conditions precedent to the obligations of the Lenders set forth in Sections
5.01 and 5.02 (as to the initial Borrowing Date only) shall not have been
satisfied or waived by the Lenders prior to December 31, 1997, the Commitments
and all other obligations of the Lenders under this Agreement and the other Loan
Documents shall terminate as of such date and be of no further force or effect
thereafter. Such termination shall not diminish or affect, or relieve the
Borrower or any Subsidiary Guarantor from, any of their respective Obligations
which are stated to survive a termination of the Commitments or the termination
of this Agreement or the other Loan Documents.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that from the date hereof until payment
in full of all the Obligations, unless the Required Lenders otherwise shall
consent in writing as provided in Section 13.06 hereof, the Borrower will, and
will cause each of its Subsidiaries to:
SECTION 6.01. EXISTENCE, PROPERTIES, ETC. Do or cause to be done all
things or proceed with due diligence with any actions or courses of action which
may be necessary to preserve and keep in full force and effect its existence
under the laws of their respective states of incorporation and all
qualifications or licenses in jurisdictions in which such qualification or
licensing is required for the conduct of its business or in which the Lenders
shall request such qualification; PROVIDED, HOWEVER, that nothing herein shall
be deemed to prohibit any Borrower other than the Company from (i) merging into
or consolidating with any other Borrower (including the Company, if the Company
is the surviving entity) or (ii) declaring and paying dividends in complete
liquidation. The Borrower will, and will cause each Subsidiary to, carry on and
conduct its business in substantially the same manner and in substantially the
same fields of enterprise as it is presently conducted and maintain all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted. The primary business of the Borrower and the Subsidiaries
shall at all times be the acquisition, development and sale of real estate
assets.
SECTION 6.02. NOTICE. Give prompt written notice to the Agent of (i) any
proceeding instituted by or against the Borrower or any of the Subsidiaries in
any federal or state court or before any commission or other regulatory body,
federal, state or local, or any such proceedings threatened against the Borrower
in writing by any federal, state or other governmental agency, which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect on the
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Borrower, and (ii) any other Event which could reasonably be expected to lead to
or result in a Material Adverse Effect on the Borrower, or which, with or
without the giving of notice or the passage of time or both, would constitute an
Event of Default or a default under any material agreement other than this
Agreement to which the Borrower is a party or by which any of its properties or
assets is or may be bound.
SECTION 6.03. PAYMENTS OF DEBTS, TAXES, ETC. Pay all its debts and perform
all its obligations promptly and in accordance with the respective terms
thereof, and pay and discharge or cause to be paid and discharged promptly all
taxes, assessments and governmental charges or levies imposed upon the Borrower
or upon its incomes or receipts or upon any of its properties before the same
shall become in default or past due, as well as all lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might result in the
imposition of a lien or charge upon such properties or any part thereof;
PROVIDED, HOWEVER, that it shall not constitute a violation of the provisions of
this Section 6.03 if the Borrower shall fail to perform any such obligation or
to pay any such debt (except for obligations for money borrowed), tax,
assessment, governmental charge or levy or claim for labor, materials or
supplies which is being contested in good faith, by proper proceedings
diligently pursued, and as to which adequate reserves have been provided.
SECTION 6.04. ACCOUNTS AND REPORTS. Maintain a standard system of
accounting established and administered in accordance with GAAP, and provide to
the Lenders the following:
(a) as soon as available and in any event within 120 days after the end of
each fiscal year of the Borrower (commencing with the fiscal year ending
November 30, 1997), a consolidated balance sheet of the Company and its
Subsidiaries as of the end of that fiscal year and the related consolidated
statements of earnings, stockholders' equity and cash flows for that fiscal
year, all with accompanying notes and schedules, prepared in accordance with
GAAP consistently applied and audited and reported upon by Deloitte & Touche or
another firm of independent certified public accountants of recognized standing
selected by the Borrower and acceptable to the Agent (such audit report shall be
unqualified except for qualifications relating to changes in GAAP and required
or approved by the Borrower's independent certified public accountants);
(b) as soon as available and in any event within 60 days after the end of
each of the first three quarters, and within 120 days after the end of the
fourth quarter, of each fiscal year of the Borrower (commencing with the quarter
ending November 30, 1997), a consolidated balance sheet of the Company and its
Subsidiaries as of the end of that quarter, and the related consolidated
statement of earnings and cash flows of the Company and its Subsidiaries for the
period from the beginning of the fiscal year to the end of that quarter, all
prepared in accordance with GAAP consistently applied, unaudited but certified
to be true and accurate, subject to normal year-end audit adjustments, by the
Chief Financial Officer of the Company;
(c) within 60 days after the end of each of the first three quarters, and
within 120 days after the end of the fourth quarter, of each fiscal year of the
Borrower (commencing with the quarter ending November 30, 1997), (i) a
consolidating balance sheet of the Borrower (in a form acceptable
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to the Agent) as of the end of that quarter and the related consolidating
statement of earnings of the Borrower (in a form acceptable to the Agent) for
the period from the beginning of the fiscal year to the end of that quarter, and
(ii) a consolidating balance sheet of the Mortgage Banking Subsidiaries (in a
form acceptable to the Agent) as of the end of that quarter and the related
consolidating statement of earnings of the Mortgage Banking Subsidiaries (in a
form acceptable to the Agent) for the period from the beginning of the fiscal
year to the end of that quarter, all prepared in accordance with GAAP
consistently applied, unaudited but certified to be true and accurate, subject
to normal year-end audit adjustments, by the Chief Financial Officer of the
Company;
(d) concurrently with the delivery of the financial statements described
in subsection (a) above, a letter signed by that firm of independent certified
public accountants to the effect that, during the course of their examination,
nothing came to their attention which caused them to believe that any Event of
Default or Unmatured Default has occurred, or if such Event of Default or
Unmatured Default has occurred, specifying the facts with respect thereto; and
concurrently with the delivery of the financial statements described in
subsections (b) and (c) above, a certificate signed by the President or
Executive Vice President and the Chief Financial Officer of the Company to the
effect that, having read this Agreement, and based upon an examination which
they deemed sufficient to enable them to make an informed statement, there does
not exist any Event of Default or Unmatured Default, or if such Event of Default
or Unmatured Default has occurred, specifying the facts with respect thereto;
(e) within 30 days after the end of each calendar month (commencing with
the month ending October 31, 1997), a report, in reasonable detail and in form
and substance satisfactory to the Agent, setting forth, as of the end of the
month, with respect to each Project owned by the Company and its Subsidiaries,
(i) the number of Housing Unit Closings, (ii) the number of Housing Units either
completed or under construction, specifying the number thereof that are
Completed Housing Units, (iii) the number of Housing Units Under Contract;
(f) within 120 days after the end of each fiscal year of the Borrower
(commencing with the fiscal year ending November 30, 1997), a schedule of all
Real Estate owned by the Borrower in the form of Schedule III annexed hereto or
as otherwise required by Agent, which schedule, in addition to providing all the
categories of information specified in Schedule III, shall specify those
properties the interest and carrying charges attributable to which are being
deducted, for financial reporting purposes, for the fiscal year in which they
are paid and shall contain all such other information as Agent shall require;
(g) within 90 days after the beginning of each fiscal year of the
Borrower, a projection, in reasonable detail and in form and substance
satisfactory to the Agent, on a quarterly basis, of the cash flow and of the
earnings of the Company and its Subsidiaries for that fiscal year and for the
immediately succeeding fiscal year;
(h) promptly upon becoming available, copies of all financial statements,
reports, notices and proxy statements sent by the Borrower to its stockholders,
and of all regular and periodic reports
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and other material (including copies of all registration statements and reports
under the Securities Act of 1933, as amended, and the Securities Exchange Act of
1934, as amended) filed by the Borrower with any securities exchange or any
governmental authority or commission, except material filed with governmental
authorities or commissions relating to the development of Real Estate in the
ordinary course of the business of the Borrower and which does not relate to or
disclose any Material Adverse Effect;
(i) as soon as available and in any event within 60 days after the end of
each of the first three quarters, and within 120 days after the end of the
fourth quarter, of each fiscal year of each Joint Venture, a balance sheet of
that Joint Venture as of the end of that quarter and a statement of earnings of
that Joint Venture for the period from the beginning of the fiscal year to the
end of that quarter, prepared in accordance with GAAP consistently applied,
unaudited but certified to be true and accurate, subject (in the case of the
financial statements delivered for the first three quarter of each fiscal year)
to normal year-end adjustments, by the Chief Financial Officer of the Company;
(j) within 60 days after the Closing Date and the end of each of the first
three quarters, and within 90 days after the end of each fiscal year of the
Borrower (commencing with the quarter and fiscal year ending November 30, 1997),
a report, in reasonable detail and in form and substance satisfactory to the
Agent, with calculations indicating that the Borrower is in compliance, as of
the Closing Date and as of the last day of such quarterly or annual period, as
the case may be, with the provisions of Article VII and, if the Borrower shall
have been required to provide Collateral, Article VIII, of this Agreement.
Without limiting the generality of the foregoing, Borrower shall provide to the
Lenders (i) a report calculating the Borrowing Base in form and substance
satisfactory to Agent, in which report the Borrower shall include a report of
all accounts receivable from the sales of Housing Units included in the
Borrowing Base, showing all such receivables which remain uncollected on the
tenth (10th) day after the Closing Date or end of the quarter or fiscal year, as
the case may be, (ii) a report containing the calculations necessary to indicate
that the Borrower is in compliance with the provisions of Sections 6.09 and
7.14, including a certification of the outstanding principal amount of all loans
and advances made by the Company to each of the Mortgage Banking Subsidiaries,
as the case may be, and that all such loans and advances are duly evidenced by
the Mortgage Banking Subsidiaries Note in the possession of Agent, and (iii) a
report on investments substantially in the form attached as Exhibit E hereto.
The reports furnished pursuant to this subsection (j) shall be certified to be
true and correct by the Chief Financial Officer of the Company and shall also
contain a representation and warranty by the Borrower that it is in full
compliance with the provisions of Article VII of this Agreement;
(k) within 60 days after the Closing Date and the end of each of the first
three quarters, and within 90 days after the end of each fiscal year of the
Borrower (commencing with the quarter and fiscal year ending November 30, 1997),
a report, in reasonable detail and in form and substance satisfactory to the
Agent, with calculations indicating whether the Borrower, as of the Closing Date
and as of the last day of such quarterly or annual period, as the case may be,
is in compliance with the Minimum Interest Coverage Ratio;
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(l) within 270 days after the close of each fiscal year, a statement of
the Unfunded Liabilities of each Single Employer Plan, certified as correct by
an actuary enrolled under ERISA, but the foregoing statement shall be required
only if any Single Employer Plan shall exist;
(m) as soon as possible and in any event within 10 days after the Borrower
knows that any Reportable Event has occurred with respect to any Plan, a
statement, signed by the Chief Financial Officer of the Borrower, describing
said Reportable Event and the action which the Borrower proposes to take with
respect thereto;
(n) as soon as possible and in any event within 10 days after receipt
thereof by the Borrower, a copy of (a) any notice or claim to the effect that
the Borrower or any of its Subsidiaries is or may be liable to any Person as a
result of the release by the Borrower, any of its Subsidiaries, or any other
Person of any Hazardous Substance into the environment, and (b) any notice
alleging any violation of any Environmental law or any federal, state or local
health or safety law or regulation by the Company or any of its Subsidiaries,
which, in either case, could reasonably be expected to have a Material Adverse
Effect;
(o) promptly upon the request of the Agent or any Lender, an accurate
legal description with respect to any Real Estate included in the calculation of
the Borrowing Base;
(p) such supplements to the aforementioned documents and additional
information (including, but not limited to, leasing, occupancy and non-financial
information) and reports as the Agent or any Lender may from time to time
reasonably require;
(q) prior to or contemporaneously with the making of any investment in any
Joint Venture, copies of each proposed shareholders' agreement, certificate or
articles of incorporation, partnership agreement, joint venture agreement or
similar organizational instrument or agreement, relating to the formation of
each Joint Venture, and each material restatement, modification, amendment or
supplement thereto;
(r) concurrently with the quarterly financial statements described in
subsection (b) above following the end of any quarter in which each new
Subsidiary that is to become a Borrower under Section 6.07 hereof was formed,
the Company shall deliver to the Agent (i) revised copies of Schedule I to this
Agreement and Schedule I to the Notes, adding thereto the name of such new
Subsidiary, (ii) a revised copy of Schedule V to this Agreement, adding thereto
the information with respect to such new Subsidiary required by Section 4.14
hereof, (iii) a Joinder Agreement, in form and content satisfactory to the
Agent, executed by a duly authorized officer of such new Subsidiary, pursuant to
which such Subsidiary agrees to become a Borrower hereunder, assumes all of the
Obligations, and agrees that Schedule I hereto and Schedule I to the Notes shall
be amended to include the name of such Subsidiary; (iv) a copy of the
certificate of incorporation or other organizational document of such new
Subsidiary, certified by the secretary of state or other official of the state
or other jurisdiction of its incorporation; and (v) a copy of the bylaws of such
new Subsidiary, certified by the secretary or other appropriate officer or
partner of such Subsidiary;
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(s) concurrently with the consolidated balance sheet delivered pursuant to
subsection (s) above, a copy of Schedule III (Real Estate Owned), updated from
Schedule III most recently delivered to the Lenders, including therein all real
estate owned by the Company and its Subsidiaries, including Greystone and its
Subsidiaries, immediately following the Merger and after giving effect to the
Reorganization; and
(t) within 60 days of the Closing Date, a Closing Date consolidated
balance sheet of the Company and its Subsidiaries (including Greystone and its
Subsidiaries), as of such date and after giving effect to the formation of LLP,
the transactions contemplated under the Spin-Off Agreement, the Merger, the
effectiveness of this Agreement, the Facility B Credit Agreement and the LLP
Credit Agreement and the funding of the initial loans thereunder, prepared in
accordance with GAAP consistently applied, unaudited but certified to be true
and accurate by the Chief Financial Officer of the Company.
SECTION 6.05. ACCESS TO PREMISES AND RECORDS. At all reasonable times and
as often as any Lender may reasonably request, permit authorized representatives
and agents designated by that Lender to (i) have access to the premises of the
Borrower and each Subsidiary and to their respective corporate books and
financial records, and all other records relating to their respective operations
and procedures, (ii) make copies of or excerpts from those books and records and
(iii) upon reasonable notice to the Company, discuss the respective affairs,
finances and operations of the Borrower and its Subsidiaries with, and to be
advised as to the same by, their respective officers and directors.
SECTION 6.06. MAINTENANCE OF PROPERTIES AND INSURANCE. Maintain all its
properties and assets in good working order and condition and make all necessary
repairs, renewals and replacements thereof so that its business carried on in
connection therewith may be properly conducted at all times; and maintain or
require to be maintained (i) adequate insurance, by financially sound and
reputable insurers, on all properties of the Borrower which are of character
usually insured by Persons engaged in the same or a similar business (including,
without limitation, all Real Estate encumbered by Mortgages securing mortgage
loans made by the Borrower, to the extent normally required by prudent
mortgagees, and all Real Estate which is subject of an Equity Investment by the
Borrower, to the extent normally carried by prudent builder-developers) against
loss or damage resulting from fire, defects in title or other risks insured
against by extended coverage and of the kind customarily insured against by
those Persons, (ii) adequate public liability insurance against tort claims
which may be incurred by the Borrower, and (iii) such other insurance as may be
required by law. Upon the request of the Agent, the Borrower will furnish to the
Lenders full information as to the insurance carried. Notwithstanding the
foregoing provisions of this Section 6.06, Borrower shall be permitted to
self-insure against all property and casualty risks associated with its
construction of single-family dwelling units up to a maximum aggregate
construction exposure for any Project not to exceed at any time 10% of Adjusted
Tangible Net Worth.
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SECTION 6.07. FINANCING; NEW INVESTMENTS. Give the Agent (i) written
notice of any serious negotiations for debt or equity financing or for the
placement of the Borrower's Securities in either a private or public financing,
if any of the foregoing transactions are to be in excess of $1,000,000 in any
one transaction or series of related transactions, (ii) advance written notice
of the formation of any new Significant Subsidiary (as hereinafter defined), the
establishment of any new Joint Venture or the commencement of any new project or
work-out involving Real Estate not owned by the Borrower as of the Agreement
Date, which such new Significant Subsidiary shall become a party to this
Agreement as a Borrower hereunder, effective upon the date of such Subsidiary's
formation, unless (x) such Subsidiary is a Joint Venture Subsidiary, (y) the
terms of the agreement creating such Joint Venture prohibit the joint venturers
thereof from being or becoming liable for any Indebtedness other than
Indebtedness of the Joint Venture, and (z) all of the issued and outstanding
equity Securities of such Subsidiary are pledged to the Lenders pursuant to
Section 7.05 hereof, and (iii) written notice of the formation of any new
Subsidiary which is not a Significant Subsidiary given not later than ten (10)
days after such formation, which new Subsidiary shall become a party to this
Agreement as a Borrower hereunder effective upon such Subsidiary's formation;
PROVIDED, HOWEVER, that nothing in this Section 6.07 shall be deemed to
authorize the Borrower to enter into any such transaction if the same would
violate any of the limitations set forth in Article VII hereof. As used in this
Section 6.07, the term "Significant Subsidiary" means a Subsidiary of one or
more entities comprising the Borrower in which the Borrower makes investments
(whether through the purchase of Capital Stock or instruments evidencing debt,
advances or loans to such Subsidiary or by the guaranty of Indebtedness of such
Subsidiary) in a cumulative amount in excess of $1,000,000.
SECTION 6.08. COMPLIANCE WITH APPLICABLE LAWS. Promptly and fully comply
with, conform to and obey all present and future laws, ordinances, rules,
regulations, orders, writs, judgments, injunctions, decrees, awards and all
other legal requirements applicable to the Borrower, its Subsidiaries and their
respective properties, including, without limitation, Regulation Z of the Board
of Governors of the Federal Reserve System, the Federal Interstate Land Sales
Full Disclosure Act, ERISA and the Florida Land Sales Act, the violation of
which would have a Material Adverse Effect on the Borrower.
SECTION 6.09. ADVANCES TO THE MORTGAGE BANKING SUBSIDIARIES. Cause the
Mortgage Banking Subsidiaries to execute and deliver the Mortgage Banking
Subsidiaries Note in order to evidence all loans and advances that now exist or
are hereafter made by the Company to any of the Mortgage Banking Subsidiaries,
respectively; deposit the original Mortgage Banking Subsidiaries Note with
Agent; and obtain, prior to or contemporaneously with the execution of this
Agreement, written acknowledgments from each Mortgage Banking Subsidiary that
the aggregate of all loans and advances hereafter made by the Company to such
Mortgage Banking Subsidiary shall be evidenced and governed by the Mortgage
Banking Subsidiaries Note held by Agent. At all times the principal amount of
the Mortgage Banking Subsidiaries Note held by Agent must equal or exceed the
aggregate principal amount of all loans and advances made by the Company to
Mortgage Banking Subsidiaries, and upon the request of Agent (but no more
frequently than monthly), the Company shall obtain and deliver to the Agent
specific written acknowledgments from each of the Mortgage Banking Subsidiaries
to the effect that loans and advances theretofore made by the
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Company to the Mortgage Banking Subsidiaries are evidenced by the Mortgage
Banking Subsidiaries Note. In the event that after the Agreement Date the
Borrower organizes or acquires any Mortgage Banking Subsidiary, such Mortgage
Banking Subsidiary shall, upon such organization or acquisition, join in and
become a maker of a replacement Mortgage Banking Subsidiaries Note, such new
Mortgage Banking Subsidiaries Note shall be deposited with the Agent pursuant to
this Section 6.09, and all references in this Agreement to Mortgage Banking
Subsidiaries shall thereafter be deemed references to all such Mortgage Banking
Subsidiaries.
SECTION 6.10. USE OF PROCEEDS. Use the proceeds of the Advances to repay
all Indebtedness outstanding on the Closing Date under the Existing Credit
Agreement, all Indebtedness of Greystone to its institutional lenders on the
Closing Date, for working capital and general corporate purposes and to finance
acquisitions consummated with the prior approval of the Board of Directors of
the Person to be acquired.
ARTICLE VII
NEGATIVE COVENANTS
The Borrower covenants and agrees that from the date hereof until payment
in full of all the Obligations, unless the Required Lenders otherwise shall
consent in writing as provided in Section 13.06 hereof, Borrower will not,
either directly or indirectly:
SECTION 7.01. MINIMUM TANGIBLE NET WORTH. Permit the Tangible Net Worth of
the Company at any time to be less than the sum of (a) $300,000,000, (b) an
amount equal to 50% of the cumulative amount of positive Consolidated Net Income
of the Company and its Subsidiaries for each fiscal quarter of the Company
ending after the Closing Date for which the Company and its Subsidiaries, taken
as a whole, had Consolidated Net Income, and (c) an amount equal to 75% of the
aggregate amount of the increase in the consolidated stockholders' equity of the
Company resulting from the issuance of equity Securities of the Company after
the Closing Date. For purposes of this Section 7.01, the term "Consolidated Net
Income" when used in respect of any period, shall not include any loss for such
period.
SECTION 7.02. LIMITATION ON INDEBTEDNESS
(a) BORROWING BASE LIMITATION. At any time, permit the aggregate
outstanding amount of the sum of (i) all outstanding Obligations plus (ii) all
other senior unsecured debt of the Borrower to exceed the Borrowing Base at such
time (the "Borrowing Base Limitation"); PROVIDED, HOWEVER, that the Borrower
shall not be required to comply with the Borrowing Base Limitation if, but only
so long as, the Borrower's senior unsecured long-term debt has a Rating of BBB-
or higher from S&P OR Baa3 or higher from Moody's.
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(b) MAXIMUM LEVERAGE RATIO. At any time, permit the aggregate
outstanding amount of the sum of (i) all outstanding Obligations plus (ii) all
other Indebtedness of the Borrower (excluding from such Indebtedness all LNR
Loan Guaranties outstanding at any time after the Closing Date and prior to
February 28, 1998, but including all LNR Loan Guaranties outstanding on or after
such date), plus (iii) all LLP Loans less (iv) unrestricted cash of the Borrower
in excess of $15,000,000, to exceed 240% through November 30, 1997, 225% through
November 30, 1999, and 200% thereafter of the sum of (x) the Adjusted Tangible
Net Worth and (y) 50% of Subordinated Debt (not to exceed $100,000,000) (the
"Maximum Leverage Ratio"); PROVIDED, HOWEVER, that if as of the last day of any
quarter (i) the Interest Coverage Ratio as reported pursuant to Section 6.04(k)
is less than the Minimum Interest Coverage Ratio, and (ii) the Borrower is not
in compliance with the Borrowing Base Limitation (without regard to the proviso
contained in Section 7.02(a)), the Maximum Leverage Ratio shall decrease by ten
(10) percentage points for the next succeeding quarter and for each quarter
thereafter until Borrower is in compliance with the Minimum Interest Coverage
Ratio; PROVIDED FURTHER, however, that if on the last day in any subsequent
quarter, Borrower is in compliance with both the Minimum Interest Coverage Ratio
and the Borrowing Base Limitation (without regard to the proviso contained in
Section 7.02(a)), the Maximum Leverage Ratio shall increase by ten (10)
percentage points (but not above 225% through November 30, 1999, and 200%
thereafter) for such quarter.
SECTION 7.03. GUARANTIES. Make or suffer to exist any Contingent
Obligation (including, without limitation, any Contingent Obligation with
respect to the obligations of a Subsidiary or Joint Venture) or otherwise
assume, guarantee or in any way become contingently liable or responsible for
obligations of any other Person, whether by agreement to purchase those
obligations of any other Person, or by agreement for the furnishing of funds
through the purchase of goods, supplies or services (whether by way of stock
purchase, capital contribution, advance or loan) for the purpose of paying or
discharging the obligations of any other Person, except for: (a) guaranties of
obligations of another Borrower issued in the ordinary course of business; (b)
the endorsement of negotiable instruments in the ordinary course of business;
(c) guaranties of performance and completion and performance and completion
bonds issued in connection with the construction of Real Estate developments
owned by the Borrower; (d) guaranties of liabilities incurred by Joint Ventures
to which the Borrower or a Joint Venture Subsidiary is a party, PROVIDED that
all such guaranties outstanding at any one time (including without limitation
Stevenson Ranch Venture L.L.C. and Bressi Ranch) do not exceed the lesser of
$60,000,000 or 15% of the Tangible Net Worth, (e) the obligations of the
Borrower under the LLP Loans Guaranty; or (f) the LNR Loans Guaranties;
PROVIDED, HOWEVER, that the maximum permissible amount of the LNR Loans
Guaranties (i) until November 30, 1998, shall be limited to the lesser of
Indebtedness of LNR which exists on the Closing Date or $50,000,000, and (ii)
from and after November 30, 1998 shall be zero. None of the foregoing clauses,
however, shall be deemed to permit the Borrower to guaranty any obligations of
the Mortgage Banking Subsidiaries, the Limited Purpose Finance Subsidiaries, STI
or the Title Companies, if any such guaranty would cause the Borrower to be in
violation of Section 7.02 hereof.
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SECTION 7.04. SALE OF ASSETS; ACQUISITIONS; MERGER.
(a) Do either of the following: (i) sell any single asset with a book
value of $5,000,000 or more for a sales price which is less than the book value
of that asset, or (ii) sell any single asset with a book value of $10,000,000 or
more unless such sale is in the ordinary course of business; PROVIDED, HOWEVER,
that in no event shall the aggregate sales price of all assets sold or disposed
of by the Borrower, other than those sold in the ordinary course of business,
exceed $25,000,000 in any single calendar year.
(b) Do any of the following:
(i) sell, assign, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of
the assets (whether now owned or hereafter acquired) of the Company and
the Subsidiaries (on a consolidated basis) except for the sale of
inventory in the ordinary course of business;
(ii) except as contemplated by the Reorganization Documents, merge into
or consolidate with any other Person or permit any other Person to merge
into or consolidate with it;
(iii) dissolve, liquidate or wind up its business by operation of law or
otherwise; or
(iv) except as contemplated by the Reorganization Documents, distribute
to the stockholders of the Company any Securities of any Subsidiary;
PROVIDED, HOWEVER, that any Subsidiary or any other Person may merge into or
consolidate with or may dissolve and liquidate into any Borrower, if (and only
if), (1) in the case of a merger or consolidation, a Borrower is the surviving
Person, (2) in the case of a merger or consolidation involving the Company, the
Company is the surviving Person, (3) the character of the business of the
Company and the Subsidiaries on a consolidated basis will not be materially
changed by such occurrence, and (4) such occurrence shall not constitute or give
rise to an Event of Default or Unmatured Default or a default in respect of any
of the covenants contained in any agreement to which the Company or such
Subsidiary is a party or by which its property may be bound.
(c) Acquire another Person unless (i) such Person is involved in the
acquisition, development, management, rental and/or sale of real estate assets
and/or the provision of financial services as its primary business and (ii) the
board of directors or other governing body of such Person approves such
acquisition.
Nothing contained in this Section 7.04, however, shall restrict any sale
of assets between the entities comprising the Borrower which is in compliance
with all other provisions of this Agreement.
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SECTION 7.05. INVESTMENTS. Purchase or otherwise acquire, hold or invest
in the Securities (whether Capital Stock or instruments evidencing debt) of,
make loans or advances to, enter into any arrangements for the purpose of
providing funds or credit to, or make any Equity Investment in, any Person which
is not either a Borrower on the Closing Date or a Subsidiary which becomes a
Borrower upon the making of the investment, except for: (i) (A) Investments in
or loans or advances to Joint Ventures (other than its investment in LLP but
including Investments in the Mortgage Banking Subsidiaries) to which the
Borrower or a Subsidiary is a party; and (B) Investments in or loans or advances
to STI, Limited Purpose Finance Subsidiaries and the Title Companies, PROVIDED
that (1) the aggregate of all such Investments, loans and advances outstanding
in (A) and (B) at any time do not exceed 25% of the Tangible Net Worth and (2)
with respect to Investments in, or loans and advances to each Joint Venture
Subsidiary (other than LLP Partner) which is not a Borrower or a Subsidiary
Guarantor, all of the issued and outstanding equity Securities of such Joint
Venture Subsidiary shall have been pledged to the Agent pursuant to the terms
and provisions of the Pledge Agreement and such pledge shall not be prohibited
by, or result in a breach or violation of, any agreement, indenture or other
instrument to which the Company or any Subsidiary is a party or is bound; and
(ii) (A) purchases of direct obligations of the government of the United States
of America, or any agency thereof, or obligations unconditionally guaranteed by
the United States of America; (B) certificates of deposit of any bank organized
or licensed to conduct a banking business under the laws of the United States or
any state thereof having capital, surplus and undivided profits of not less than
$100,000,000; (C) Investments in commercial paper which, at the time of
acquisition by the Borrower, is accorded an "A" or equivalent rating by any of
the Rating Agencies or any other nationally recognized credit rating agency of
similar standing; (D) investments in publicly traded, readily marketable
securities, traded on a recognized national exchange or over-the-counter; and
(E) loans or advances by the Borrower to, or Securities or Indebtedness of, a
real estate or homebuilding company to be acquired by the Borrower for the
purpose of obtaining control of specific homebuilding assets of that
homebuilding company, PROVIDED, HOWEVER, that such loans, advances or
Indebtedness are secured by Mortgages, land, homes under construction and/or
homes inventory of such real estate or homebuilding company.
SECTION 7.06. DISPOSITION, ENCUMBRANCE OR ISSUANCE OF CERTAIN STOCK. Sell,
transfer or otherwise dispose of, or pledge, grant a security interest, equity
interest or other beneficial interest in or otherwise encumber any of the
outstanding shares of Capital Stock of any Mortgage Banking Subsidiary, or
permit any Mortgage Banking Subsidiary to sell, issue or otherwise transfer any
shares of its Capital Stock to any Person other than the Borrower.
SECTION 7.07. SUBORDINATED DEBT. Directly or indirectly make any payment
of principal or interest with respect to any Subordinated Debt prior to the date
the same is due, or amend or modify the terms of any Subordinated Debt except
for extensions of the due date thereof, or directly or indirectly redeem,
retire, defease, purchase, retire or otherwise acquire any Subordinated Debt.
SECTION 7.08. HOUSING UNIT. Permit the total number of Housing Units owned
by the Borrower, including Housing Units under construction, but excluding model
housing units and
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Housing Units Under Contract, at any time to exceed 35% of the total number of
Housing Unit Closings during the immediately preceding 12-month period;
PROVIDED, HOWEVER, that the total number of Housing Unit Closings during the
twelve-month period immediately preceding the Closing Date shall include Housing
Unit Closings of Greystone during such period.
SECTION 7.09. CONSTRUCTION Cause, suffer or permit to exist any Mortgage,
security interest or other encumbrance to secure Indebtedness on any Housing
Unit or other building or structure (including, without limitation, any asset
reported as "Construction in Progress" in the financial statements of the
Borrower) that is under construction on any land owned or leased by the
Borrower; PROVIDED, HOWEVER, that the Borrower may cause, suffer or permit to
exist purchase money Mortgages having an aggregate outstanding principal balance
not exceeding $10,000,000 at any time on assets so reported as "Construction in
Progress".
SECTION 7.10. NO MARGIN STOCK. Use any of the proceeds of the Advances to
purchase or carry any "margin stock" (as defined in Regulation U).
SECTION 7.11. MORTGAGE BANKING SUBSIDIARIES' CAPITAL RATIO. Permit the
"Mortgage Banking Subsidiaries' Capital Ratio" to exceed, at any time, eight (8)
to one (1). As used in this Section 7.11, the term "Mortgage Banking
Subsidiaries' Capital Ratio" shall mean the ratio of the combined total
Indebtedness of the Mortgage Banking Subsidiaries to Adjusted Net Worth (as
defined in Section 7.14 below).
SECTION 7.12. TRANSACTIONS WITH AFFILIATES. Enter into any transaction
(including, without limitation, the purchase or sale of any property or service)
with, or make any payment or transfer to, any Affiliate, except in the ordinary
course of business and pursuant to the reasonable requirements of the Borrower's
or a Subsidiary's business and upon fair and reasonable terms no less favorable
to the Borrower or such Subsidiary than the Borrower or such Subsidiary would
obtain in a comparable arms'-length transaction.
SECTION 7.13. RESTRICTIONS ON ADVANCES TO MORTGAGE BANKING SUBSID. Subject
to Section 7.05, (i) Permit any loan or advance to be made by the Borrower to a
Mortgage Banking Subsidiary except for loans and advances from the Company to
the Mortgage Banking Subsidiaries which are made under, and evidenced by, the
Mortgage Banking Subsidiaries Note that is in the possession of Agent and for
which the Company shall have obtained a written acknowledgment from each
Mortgage Banking Subsidiary that the same are evidenced and governed by the
Mortgage Banking Subsidiaries Note; (ii) permit the aggregate amount of all
loans and advances made by the Company to any Mortgage Banking Subsidiary
outstanding at any time to exceed the sum of (a) the net carrying value of all
mortgage loans held by such Mortgage Banking Subsidiary, less the aggregate
principal amount of all promissory notes payable by such Mortgage Banking
Subsidiary to banks or other lenders, and less the aggregate principal amount of
all mortgage loans held for sale by such Mortgage Banking Subsidiaries which are
pledged, assigned or otherwise encumbered, to the extent that said aggregate
amount exceeds the aggregate principal amount of notes payable by such Mortgage
Banking Subsidiary to banks or other lenders, and (b) 1.5% of the principal
amount of all mortgages serviced by such Mortgage Banking Subsidiary, less any
loans or other financing
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to such Mortgage Banking Subsidiary associated with the servicing portfolio
(exclusive of those amounts deducted in the calculation required under clause
(a) above) if, and to the extent that, the servicing rights with respect to such
mortgages are not subject to any Lien; (iii) assign, transfer, pledge,
hypothecate or encumber in any way the Mortgage Banking Subsidiaries Note, any
interest therein or any sums due or to become due thereunder; (iv) modify,
amend, extend or in any way change the terms of the Mortgage Banking
Subsidiaries Note; (v) make any principal advances to any Mortgage Banking
Subsidiary, under the Mortgage Banking Subsidiaries Note or otherwise, at any
time after the Agent has been granted a security interest in the Mortgage
Banking Subsidiaries Note except to the extent of any principal prepayments
under the Mortgage Banking Subsidiaries Note in excess of the mandatory
principal payments required thereunder; or (vi) permit a Mortgage Banking
Subsidiary to enter into any agreement or agreements which (a) in any way
restrict the payment of dividends by such Mortgage Banking Subsidiary or (b)
individually, or in the aggregate, impose any restriction on the repayment of
any indebtedness of a Mortgage Banking Subsidiary to any Person (including,
without limitation, the indebtedness payable under the Mortgage Banking
Subsidiaries Note) other than a restriction on the payment of the last
$5,000,000 of principal indebtedness of UAMC (i.e., such permitted restriction
shall be applicable only after the aggregate principal amount of indebtedness
owed by UAMC to any Person shall be less than or equal to $5,000,000).
SECTION 7.14. ADJUSTED NET WORTH OF MORTGAGE BANKING SUBSIDIARIES. Permit
the Consolidated Tangible Net Worth of the Mortgage Banking Subsidiaries at any
time to be less than $30,000,000. For purposes of this Section 7.14, the term
"Consolidated Tangible Net Worth" shall mean, as of any date of determination
thereof, the net worth of the Mortgage Banking Subsidiaries on a consolidated
basis as determined in accordance with GAAP (including Capitalized Mortgage
Servicing) less the book value of any assets of the Mortgage Banking
Subsidiaries which would be treated as intangibles under GAAP including, without
limitation, goodwill, research and development costs, trademarks, trade names,
copyrights, patents and unamortized debt discount and expenses and the term
"Capitalized Mortgage Servicing" shall mean, as of any date, the sum of UAMC's
(i) purchased mortgage servicing rights, (ii) originated mortgage servicing
rights that are then included in UAMC's capital assets and (iii) excess
servicing, net of any amortization or write-downs with respect thereto, all as
determined in accordance with GAAP.
SECTION 7.15. INVESTMENTS IN LAND. At any time, permit the Borrower's
investment in improved and unimproved land and investments in and advances to
LLP to exceed the sum of 100% of Net Worth PLUS 50% of all Subordinated Debt at
such time LESS all goodwill and other assets that are properly classified as
"intangible assets" in accordance with GAAP and which are acquired after the
Closing Date and are owned by the Borrower at such time.
SECTION 7.16. LIENS AND ENCUMBRANCES
(a) NEGATIVE PLEDGE. Grant any Liens on any of its rights, properties or
assets other than Permitted Liens.
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(b) NO AGREEMENT FOR NEGATIVE PLEDGE. Agree with any third party not to
create, assume or suffer to exist any Lien securing a charge or obligation on or
of any of its property, real or personal, whether now owned or hereafter
acquired.
SECTION 7.17. REORGANIZATION DOCUMENTS. Enter into or agree to any
amendment or modification of the Merger Agreement, the Spin-Off Agreement or the
LLP Partnership Agreement, or waive or release any material rights or benefits
of the Company thereunder.
SECTION 7.18. INVESTMENTS IN MARLBOROUGH SUBSIDIARIES. Make any further
Investment in any of the Marlborough Subsidiaries.
ARTICLE VIII
COLLATERAL
SECTION 8.01. SECURITY FOR OBLIGATIONS. Upon the request of the Agent
(which may not be made without the prior written or telegraphic consent from the
Required Lenders and which shall be made upon the written or telegraphic request
of the Required Lenders), the Borrower shall grant the Agent, on behalf of the
Lenders, as security for the payment in full of all the Obligations, a first
lien and security interest in the Mortgage Banking Subsidiaries Note.
Notwithstanding anything to the contrary provided in this Agreement, the
Borrower agrees that the security agreement relating to the Mortgage Banking
Subsidiaries Note shall require all principal payments payable under the
Mortgage Banking Subsidiaries Note to be made directly to the Agent and applied
to the principal outstanding under the Notes as required under Section 2.02.
SECTION 8.02. COLLATERAL DOCUMENTATION. If and when the Borrower is
required to grant the Agent a security interest in the Mortgage Banking
Subsidiaries Note pursuant to the foregoing provisions of this Article VIII, the
Borrower shall deliver to the Agent:
(i) a duly executed pledge and security agreement, in form and
substance satisfactory to the Agent, granting the Agent on behalf of the
Lenders, a first lien on, and security interest in, the Mortgage Banking
Subsidiaries Note;
(ii) an endorsement or allonge to the Mortgage Banking Subsidiaries
Note, in form and substance satisfactory to the Agent, transferring the
Mortgage Banking Subsidiaries Note to the Agent on behalf of the Lenders;
and
(iii) a written acknowledgment from the Company that the Agent holds the
Mortgage Banking Subsidiaries Note as Collateral for the Obligations.
All the foregoing documents shall be delivered to the Agent on or before the
date that the Borrower is required to grant the Agent the security interest in
the Mortgage Banking Subsidiaries Note. All
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of the documentation and other items required under this Section 8.02 must be
fully satisfactory, both in form and substance, to the Agent. In addition to the
foregoing, the Borrower shall, at the request of the Agent, execute and deliver
to the Agent such assignments, pledges, financing statements and other
documents, and cause to be done such further acts, all as the Agent from time to
time may deem necessary or appropriate to evidence, confirm, perfect or protect
any security interest required to be granted to the Agent hereunder.
SECTION 8.03. POWERS AND DUTIES OF THE BORROWER WITH RESPECT TO THE
COLLATERAL
(a) Subject to the provisions of this Agreement, so long as no Event of
Default shall have occurred and be continuing, the Borrower shall have the right
to deal with, manage and administer the Collateral and to collect and use the
proceeds thereof in such manner as it shall deem appropriate (subject to the
provisions of Section 2.02).
(b) Unless the Borrower shall have been notified, pursuant to Section 9.03
hereof, that it has been discharged from its right to deal with, manage and
administer all items of the Collateral, the Borrower shall, subject to the
provisions of this Agreement, manage and administer all the Collateral in such
manner as they shall deem appropriate, without charge to the Lenders; PROVIDED,
HOWEVER, that the Borrower shall remain fully responsible for all its
obligations as owner, creditor or otherwise with respect to the Collateral.
SECTION 8.04. POWER OF ATTORNEY. With respect to the Collateral which the
Agent may from time to time hold and/or be entitled to obtain hereunder, the
Agent hereby is irrevocably appointed by the Borrower as Borrower's true and
lawful attorney-in-fact with full power, from time to time upon the occurrence
and during the continuance of an Event of Default, to (i) take possession of and
endorse in Borrower's name any pledges, assignments and other documents and any
notes, checks, drafts, bills of exchange, money orders and any other documents
received in payment for or on account of those assets and properties, (ii) to
collect, sue for and give acquittance for moneys due on account of those assets
and properties, (ii) to withdraw any claims, suits or proceedings pertaining to
or arising out of those assets and properties. The foregoing appointment is with
full power of substitution and is coupled with an interest. The Agent shall not
be liable for any failure to collect or enforce the payment of any of those
assets and properties.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.01. EVENTS OF DEFAULT. The occurrence of any one or more of the
following Events shall constitute an "Event of Default":
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(a) any representation or warranty made or deemed made by or on behalf of
the Borrower or any Subsidiary Guarantor to the Lenders or the Agent under or in
connection with this Agreement or any Loan Document shall be false or misleading
in any material respect when made;
(b) any report, certificate, financial statement or other document or
instrument furnished in connection with this Agreement or the Loans hereunder
shall be false or misleading in any material respect when furnished;
(c) default shall be made in the payment of (i) the principal of any of
the Notes or of any Reimbursement Obligation when and as due and payable, or
(ii) the interest on any of the Notes, any fees or any other sums due pursuant
to Article II, which default continues for five days after the same becomes due
and payable;
(d) default shall be made with respect to any Indebtedness or Contingent
Obligations of the Borrower or any Subsidiary Guarantor (other than the
Indebtedness evidenced by the Notes), or in any net liabilities under interest
rate swap, exchange or cap agreements, beyond any applicable period of grace, or
default shall be made with respect to the performance of any other obligation
incurred in connection with any such Indebtedness or liabilities beyond any
applicable period of grace, or default shall be made with respect to any other
liability of $100,000 or more, if the effect of any such default is to
accelerate the maturity of such Indebtedness or liability or to cause any other
liability to become due prior to its stated maturity, or any such Indebtedness
or liability shall not be paid when due and such default shall not have been
remedied or cured by the Borrower or such Subsidiary Guarantor or waived by the
obligor;
(e) default shall be made in the due observance or performance of any of
the provisions of Article VII or Article VIII of this Agreement;
(f) default shall be made in the due observance or performance of any
other covenant, agreement or condition on the part of the Borrower or any
Subsidiary Guarantor to be performed under or in connection with this Agreement
or any Loan Document, and such default shall have continued for a period of 30
days after the occurrence thereof;
(g) the Borrower or any Subsidiary Guarantor shall (i) petition or apply
for, seek, consent to, or acquiesce in, the appointment of a receiver, trustee,
examiner, custodian, liquidator or similar official of the Borrower or any
Subsidiary Guarantor or any of its properties or assets, (ii) be unable, or
admit in writing its inability, to pay its debts as they mature, (iii) make a
general assignment for the benefit of or a composition with its creditors, (iv)
have an order for relief entered with respect to it under the Federal bankruptcy
laws as now or hereafter in effect, (v) institute any proceeding seeking an
order for relief under the Federal bankruptcy laws as now or hereafter in
effect, or file a petition or an answer seeking dissolution, winding up,
liquidation or reorganization or an arrangement with creditors or a composition
of its debts or to take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debts, dissolution or liquidation law or statute or other
statute or law for the relief of debtors, or file any answer admitting the
material allegations of a
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petition filed against it in any proceeding under such law, or fail to file an
answer or other pleading denying the material allegations of any such proceeding
filed against it, or if corporate or other action shall be taken by the Borrower
or such Subsidiary Guarantor for the purpose of effecting any of the foregoing,
or (vi) fail to contest in good faith any appointment or proceeding described in
Section 9.01(h);
(h) an order, judgment, or decree shall be entered without the
application, approval, or consent of the Borrower or any Subsidiary Guarantor by
any court of competent jurisdiction appointing a receiver, trustee or liquidator
of the Borrower or any Subsidiary Guarantor or a proceeding described in Section
9.01(g) shall be instituted against the Borrower or any Subsidiary Guarantor,
and such appointment shall continue undischarged or such proceeding continues
undismissed or unstayed for any period of 45 days;
(i) final judgment for the payment of money in excess of $250,000 shall be
rendered against the Borrower or any Subsidiary Guarantor and the same shall
remain undischarged for a period of 30 days during which execution shall not be
effectively stayed;
(j) final judgment(s) for the payment of money in excess of an aggregate
of $250,000 shall be rendered against the Borrower (or any of them) or any
Subsidiary Guarantor after the Closing Date and shall remain undischarged and
unstayed for a period of ten days;
(k) there shall occur any Event or Events which, individually or in the
aggregate, shall be deemed by the Required Lenders to have had a Material
Adverse Effect;
(l) The Borrower or any Subsidiary Guarantor shall be the subject of any
proceeding or investigation pertaining to the release by the Borrower or any
Subsidiary Guarantor, any of its Subsidiaries or any other Person of any
Hazardous Substance into the environment, or any violation of any Environmental
Law or any federal, state or local health or safety law or regulation, which, in
either case, could reasonably be expected to have a Material Adverse Effect;
(m) The occurrence of any "default", as defined in any Facility A Loan
Document (other than this Agreement or the Notes) or the breach of any of the
terms or provisions of any Facility A Loan Document (other than this Agreement
or the Notes), which default or breach continues beyond any period of grace
therein provided;
(n) An Event of Default (as such term is defined in the LLP Credit
Agreement) shall occur; or
(o) An Event of Default (as such term is defined in the Facility B Credit
Agreement) shall occur.
SECTION 9.02. ACCELERATION. If any Event of Default described in
subsection 9.01(g) or (h) occurs the obligations of the Lenders to make Loans
and of an Issuer to issue Facility Letters
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of Credit hereunder shall automatically terminate and the Facility A Obligations
shall immediately become due and payable without any election or action on the
part of the Agent or any Lender. If any other Event of Default occurs and is
continuing, the Required Lenders may terminate or suspend the obligations of the
Lenders to make Loans and of an Issuer to issue Facility Letters of Credit
hereunder, or declare the Facility A Obligations to be due and payable, or both,
whereupon the Facility A Obligations shall become immediately due and payable,
without presentment, demand, protest or notice of any kind, all of which the
Borrower hereby expressly waives. In addition to the foregoing following the
occurrence and during the continuance of an Event of Default, so long as any
Facility Letter of Credit has not been fully drawn and has not been canceled or
expired by its terms, upon demand by the Agent the Borrower shall deposit in the
Letter of Credit Collateral Account cash in an amount equal to the aggregate
undrawn face amount of all outstanding Facility Letters of Credit and all fees
and other amounts due or which may become due with respect thereto. The Borrower
shall have no control over funds in the Letter of Credit Collateral Account,
which funds shall be invested by the Agent from time to time in its discretion
in certificates of deposit of First Chicago having a maturity not exceeding 30
days, so long as the Borrower has provided the Agent with such documents as the
Agent shall have requested in order to perfect a security interest in such
certificates of deposit. Such funds shall be promptly applied by the Agent to
reimburse any Issuer for drafts drawn from time to time under the Facility
Letters of Credit. Such funds, if any, remaining in the Letter of Credit
Collateral Account following the payment of all Obligations in full shall,
unless the Agent is otherwise directed by a court of competent jurisdiction, be
promptly paid over to the Borrower.
If, within 30 days after acceleration of the maturity of the Facility A
Obligations or termination of the obligations of the Lenders to make Loans and
of an Issuer to issue Facility Letters of Credit hereunder as a result of any
Event of Default (other than any Event of Default as described in subsection
9.01 (g) or (h) with respect to the Borrower) and before any judgment or decree
for the payment of the Facility A Obligations due shall have been obtained or
entered, the Required Lenders (in their sole discretion) shall so direct, the
Agent shall, by notice to the Borrower, rescind and annul such acceleration
and/or termination.
SECTION 9.03. RIGHTS AS TO COLLATERAL
(a) If, on the Maturity Date, the Borrower shall not have paid in full all
the Facility A Obligations which are due and payable on such Maturity Date, the
Agent, at the direction of the Required Lenders, shall take (and/or shall cause
one or more of its designees to take) any or all of the following actions, after
giving at least three Business Days' (which notice period the Borrower
acknowledges to be adequate and reasonable) written notice to the Borrower (a
single such notice being sufficient to entitle the Agent to take one or more of
the actions described below):
(i) prohibit the Borrower from taking any action otherwise permitted by
Section 8.03(a) hereof, and/or discharge the Borrower from their right to
manage and administer the items of Collateral as provided in Section
8.03(b) hereof;
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(ii) notify the obligors or other parties interested in any item of the
Collateral of the interest of the Lenders therein and of any action
proposed to be taken with respect thereto, and inform any of those parties
that all payments otherwise payable to the Borrower with respect thereto
thereafter shall be made to the Agent until all the Facility A Obligations
have been paid in full;
(iii) receive and retain all payments and all other distributions of any
kind with respect to any and all of the Collateral;
(iv) exercise any rights of voting or consent pertaining to any item of
Collateral to the same extent as if the Agent were the outright owner
thereof for the benefit of the Lenders, or cause any item of the
Collateral to be transferred to its own name and have such transfer
recorded in any place or places deemed appropriate by the Agent;
(v) deal with the Collateral in all respects as if it were the outright
owner thereof for the benefit of the Lenders;
(vi) take such action as directed by the Required Lenders with respect
to the sale, assignment and delivery of the whole of, or from time to time
any one or more items of, the Collateral, including, without limitation:
to sell, assign and deliver the whole of, or from time to time any part
of, the Collateral at any broker's board or at any private sale or at
public auction, with or without demand on the Borrower or advertisement of
the time or place of sale or adjournment thereof or otherwise, for cash,
for credit or for other property, for immediate or future delivery, and
for such price or prices and on such terms as the Required Lenders in
their discretion may determine, and the Agent or any of the other Lenders
may bid for and purchase the whole or any one or more items of the
Collateral so sold free from any right or equity of redemption; to adjourn
any such sale or cause the same to be adjourned from time to time to a
subsequent time and place announced at the time and place fixed for the
sale; and to carry out any agreement to sell any item or items of
Collateral in accordance with the terms of such agreement, notwithstanding
that after the Agent shall have entered into such agreement, all the
Facility A Obligations may have been paid in full; and
(vii) in addition to, and not by way of limitation of, any of the rights
specified above, exercise any and all rights and remedies afforded to it,
as a secured party in possession of collateral or otherwise, under any and
all applicable provisions of laws.
(b) The Agent, any Person designated by the Agent to take any of the
action as enumerated in subsection (a) above, any of the Lenders, and their
respective officers, directors, employees, agents and counsel shall not incur
any liability (other than for acts or omissions amounting to gross negligence or
willful misconduct) as a result of the sale of the Collateral, or any part
thereof, in a commercially reasonable manner in accordance with the provisions
of subsection (a)(vi) above or of applicable law, or for the failure to sell or
offer for sale the Collateral, for any reason whatsoever. The Borrower waives
any claims (other than those attributable to acts or omissions amounting to
gross negligence or willful misconduct) against the Agent, any Person designated
by the Agent to
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take any action, the Lenders, and their respective officers, directors,
employees, agents and counsel arising with respect to the price at which the
Collateral, or any part thereof, may have been sold or by reason of the fact
that such price was less than the aggregate of all the Obligations, PROVIDED
that all such sales have been effected in a commercially reasonable manner.
(c) The Agent shall collect the cash proceeds received from any sale or
other disposition or from any other source contemplated by subsection (a) above
and, after deducting all costs and expenses incurred by the Agent, any person
designated by the Agent to take any of the actions enumerated in subsection (a)
above, and the Lenders (other than in connection with the purchase by any of the
Lenders of any item of the Collateral) in connection with such collection and
sale (including, without limitation, reasonable counsel fees and expenses),
shall apply the same in accordance with the provisions of Section 9.04 below.
Noncash proceeds received by the Agent shall be held by it, unless and until
instructions are received from the Required Lenders to distribute those
proceeds. Upon any such distribution in the order set forth in Section 9.04
below, the Obligations shall be reduced by the fair market value of any such
noncash proceeds.
(d) If the amount of all proceeds received in liquidation of the
Collateral which shall be applied to payment of the Obligations shall be
insufficient to pay all the Obligations in full, the Borrower acknowledges that
it shall continue to remain liable for any deficiency, together with any
interest thereon and costs of collection thereof (including reasonable counsel
fees and legal expenses), in accordance with the terms of this Agreement and the
other Facility A Loan Documents and the Facility B Credit Agreement and the
other Facility B Loan Documents. The Agent shall account to the Borrower as to
all applications of the proceeds of the Collateral in reduction of the
Obligations.
(e) Notwithstanding the foregoing, none of the provisions of this Section
9.03 shall confer on the Agent or any of the Lenders any rights or privileges
not permissible under applicable law; PROVIDED, HOWEVER, that to the extent the
Borrower may waive any provisions of applicable law which would or could be in
conflict with the terms of this Section 9.03, the Borrower hereby expressly
waives the application of any such laws and provisions.
(f) In connection with the foregoing provisions of this Section 9.03, the
Borrower from time to time promptly shall execute and deliver, or cause to be
executed and delivered, to the Agent such reasonable documents and instruments,
and take or cause to be taken other reasonable and lawful action, as the Agent
reasonably shall deem necessary or desirable to enable it to exercise any of the
rights with respect to the Collateral granted to it pursuant to this Section
9.03.
SECTION 9.04. APPLICATION OF FUNDS. In the event that all the Facility A
Obligations shall have become or been declared due and payable pursuant to the
terms of Section 9.02 hereof, the Lenders agree, by and among themselves (and,
with respect to subsection (f) below, with the Borrower), that any funds
received from or on behalf of the Borrower (pursuant to the provisions of
Section 9.03 or otherwise) by the Agent or any of the Lenders (except funds
retained by any Lender pursuant to the terms of Section 11.01 hereof) shall be
remitted to the Agent, if received by any
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Lender, and applied by the Agent (in the case of subsections (c), (d) and (e)
below), on a pro rata basis among the Lenders in accordance with their
respective percentages of the Loans outstanding at the time of such declaration
in the following manner and order:
(a) first, to pay to or reimburse the Agent for any out-of-pocket expenses
for which it is entitled to be paid or reimbursed pursuant to the provisions of
Section 13.03 hereof;
(b) second, to reimburse any of the Lenders pursuant to the provisions of
Section 13.03 hereof;
(c) third, to payment of accrued and unpaid interest due on the Notes;
(d) fourth, to payment of the outstanding principal of the Notes;
(e) fifth, to payment in full of all the remaining Obligations;
(f) sixth, if any Facility Letter of Credit remains outstanding, the Agent
shall retain in the Letter of Credit Collateral Account an amount equal to the
aggregate face amount of all outstanding Facility Letters of Credit; and
(g) seventh, any remainder, including any funds no longer required to
remain on deposit pursuant to subsection (f) of this section shall be returned
to the Borrower or as otherwise required by applicable law.
ARTICLE X
THE AGENT
SECTION 10.01. APPOINTMENT. The First National Bank of Chicago is hereby
appointed Agent hereunder and under each other Loan Document and, subject to the
provisions of Section 10.13 below, each of the Lenders irrevocably authorizes
the Agent to act as the agent of such Lender. The Agent agrees to act as such
upon the express conditions contained in this Article X. The Agent shall not
have a fiduciary relationship in respect of any Lender by reason of this
Agreement. NationsBank, N.A. is hereby appointed as Syndication Agent, Credit
Lyonnais Atlanta Agency is hereby appointed as Documentation Agent hereunder,
Bank of America National Trust & Savings Association and Comerica Bank are
hereby appointed as Managing Agents, and Fleet National Bank and Guaranty
Federal Bank, F.S.B. are hereby appointed as Co-Agents. Neither the Syndication
Agent, the Documentation Agent, the Managing Agents nor the Co-Agents shall have
any right, power, obligation, liability, responsibility or duty under this
Agreement in such capacity.
SECTION 10.02. POWERS. The Agent shall have and may exercise such powers
under the Loan Documents as are specifically delegated to the Agent by the terms
of each thereof, together
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with such powers as are reasonably incidental thereto. The Agent shall have no
implied duties to the Lenders, or any obligation to the Lenders to take any
action thereunder except any action specifically provided by the Loan Documents
to be taken by the Agent.
SECTION 10.03. GENERAL IMMUNITY. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable to the Borrower, the
Lenders or any Lender for any action taken or omitted to be taken by it or them
hereunder or under any other Loan Document or in connection herewith or
therewith except for its or their own gross negligence or willful misconduct.
SECTION 10.04. NO RESPONSIBILITY FOR LOANS. Neither the Agent nor any of
its directors, officers, agents or employees shall be responsible for or have
any duty to ascertain, inquire into, or verify (i) any statement, warranty or
representation made in connection with any Loan Document or any borrowing
hereunder; (ii) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document; (iii) the satisfaction of any
condition specified in Article V, except receipt of items required to be
delivered to the Agent; or (iv) the validity, effectiveness or genuineness
(except its own due execution thereof) of any Loan Document or any other
instrument or writing furnished in connection therewith. Further, the Agent
assumes no obligation to any other Lender as to the collectibility of any Loans
made by any Lender to the Borrower. Each Lender expressly acknowledges that the
Agent has not made any representations or warranties to it on or prior to the
date hereof and that no act by the Agent hereafter taken shall be deemed to
constitute any representation or warranty by the Agent to any other Lender. Each
Lender acknowledges that it has taken and will take such action and make such
investigation as it deems necessary to inform itself as to the affairs and
creditworthiness of the Borrower.
SECTION 10.05. EMPLOYMENT OF AGENTS AND COUNSEL. The Agent may execute any
of its duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.
SECTION 10.06. RELIANCE ON DOCUMENTS; COUNSEL. The Agent shall not be
under a duty to examine into or pass upon the validity, effectiveness,
genuineness or value of this Agreement, the Notes or any other document
furnished pursuant hereto or thereto or in connection herewith, and the Agent
shall be entitled to assume that the same are valid, effective and genuine and
what they purport to be. The Agent shall be entitled to rely upon any Note,
notice, consent, certificate, affidavit, letter, telegram, statement, paper or
document reasonably believed by it to be genuine and correct and to have been
signed or sent by the proper person or persons, and, in respect to legal
matters, upon the opinion of counsel selected by the Agent, which counsel may be
employees of the Agent. The Agent shall not be liable for any action taken or
suffered in good faith by it based on or in accordance with any of the
foregoing.
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SECTION 10.07. NO WAIVER OF RIGHTS. With respect to its Facility A
Commitment, Loans made and Facility Letters of Credit issued by it and the Notes
issued to it, the Agent shall have the same rights and powers hereunder and
under any other Loan Document as any Lender or Issuer and may exercise the same
as though it was not the Agent, and the term "Lender" or "Lenders" shall, unless
the context otherwise indicates, include the Agent in its individual capacity.
The Agent may accept deposits from, lend money to and issue letters of credit
for the account of, and generally engage in any kind of business with the
Borrower or its Affiliates (including, without limitation, trust, debt, equity
and other transactions) in addition to the transaction contemplated by this
Agreement or any other Loan Document; it being expressly understood and agreed
that neither the Agent nor any other Lender shall be deemed by the execution
hereof to have waived any rights under any term loan or other agreement with the
Borrower relating to any other business or loans to the Borrower which are not a
part of the Aggregate Facility A Commitment under this Agreement. Without
limiting the generality of the foregoing, each of the Lenders acknowledges and
consents to First Chicago acting as Agent under the Facility B Credit Agreement
and the LLP Credit Agreement and the other loan documents referred to in such
agreements.
SECTION 10.08. KNOWLEDGE OF EVENT OF DEFAULT. It is expressly understood
and agreed that the Agent shall be entitled to assume that no Event of Default
or Unmatured Default has occurred and is continuing, unless the officers of the
Agent active on the Borrower's account have actual knowledge of such occurrence
or have been notified by a Lender that such Lender considers that an Event of
Default or Unmatured Default has occurred and is continuing and specifying the
nature thereof.
SECTION 10.09. AGENT'S REIMBURSEMENT AND INDEMNIFICATION. The Lenders
agree to reimburse and indemnify the Agent ratably in accordance with their
respective Pro Rata Shares (i) for any amounts not reimbursed by the Borrower
for which the Agent is entitled to reimbursement by the Borrower under the
Facility A Loan Documents, (ii) for any other expenses incurred by the Agent on
behalf of the Lenders, in connection with the preparation, execution, delivery,
administration and enforcement of the Facility A Loan Documents and (iii) for
any liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind and nature whatsoever which
may be imposed on, incurred by or asserted against the Agent in any way relating
to or arising out of the Facility A Loan Documents or any other document
delivered in connection therewith or the transactions contemplated thereby, or
the enforcement of any of the terms thereof or of any such other documents,
PROVIDED that no Lender shall be liable for any of the foregoing to the extent
they arise from the gross negligence or willful misconduct of the Agent.
SECTION 10.10. NOTICES TO THE BORROWER. In each instance that a notice is
required, pursuant to the terms hereof, to be given by one or more of the
Lenders to the Borrower, the Lenders desiring that such notice be given shall so
advise the Agent (which advice, if given by telephone, shall be promptly
confirmed by telex or letter to the Agent at its address listed in the signature
pages hereto), which shall transmit such notice to the Borrower promptly after
its having been so advised by the appropriate number of Lenders; PROVIDED,
HOWEVER, that subject to the provisions of Section 10.14 hereof, if the Agent
shall fail to transmit such notice to the Borrower within a reasonable
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period of time after its having been so advised by the appropriate number of
Lenders, the Lenders desiring that such notice be given may transmit such notice
directly to the Borrower and in all cases, notice to the Borrower shall be
deemed notice to the Subsidiary Guarantors.
SECTION 10.11. ACTION ON INSTRUCTIONS OF LENDERS. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder and
under any other Facility A Loan Document in accordance with written instructions
signed by the Required Lenders or all of the Lenders, as the case may be, and
such instructions and any action taken or failure to act pursuant thereto shall
be binding on all of the Lenders and on all holders of Notes. Except where an
action or inaction is expressly required under this Agreement, the Agent shall
be fully justified in failing or refusing to take any action hereunder and under
any other Facility A Loan Document or the Facility B Loan Documents unless it
shall first be indemnified to its satisfaction by the Lenders, pro rata in
accordance with their respective Pro Rata Shares, against any and all liability,
cost and expense that it may incur by reason of taking or continuing to take any
such action.
SECTION 10.12. LENDER CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender and
based on the financial statements prepared by the Borrower and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Facility A Loan
Documents. Each Lender also acknowledges that it will, independently and without
reliance upon the Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and the
other Facility A Loan Documents.
SECTION 10.13. RESIGNATION OR REMOVAL OF THE AGENT. If, at any time,
Lenders holding Notes having aggregate outstanding principal balances equal to
at least 75% of the then outstanding amount of the Aggregate Facility A
Commitment (excluding from such computation the Agent and its Notes) shall deem
it advisable, those Lenders may submit to the Agent notification by certified
mail, return receipt requested of its removal as Agent under this Agreement,
which removal shall be effective as of the date of receipt of such notice by the
Agent. If, at any time, the Agent shall deem it advisable, in its sole
discretion, it may submit to each of the Lenders written notification, by
certified mail, return receipt requested, of its resignation as Agent under this
Agreement, which resignation shall be effective as of 30 days after the date of
such notice. In the event of any such removal or resignation, the Required
Lenders may appoint a successor to the Agent. In the event the Agent shall have
resigned and/or have been removed and so long as no successor shall have been
appointed, the Borrower shall make all payments due each Lender hereunder
directly to that Lender and all powers specifically delegated to the Agent by
the terms hereof may be exercised by the Required Lenders. Upon the removal or
resignation of the Agent, the retiring Agent shall be discharged from its duties
and obligations hereunder and under the other Loan Documents. After the removal
or resignation of the Agent, the provisions of this Article X shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken
while it was acting as the Agent hereunder and under the other Loan Documents.
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SECTION 10.14. BENEFITS OF ARTICLE X. None of the provisions of this
Article X shall inure to the benefit of the Borrower or of any Person other than
Agent and each of the Lenders and their respective successors and permitted
assigns. Accordingly, neither the Borrower nor any Person other than Agent and
the Lenders (and their respective successors and permitted assigns) shall be
entitled to rely upon, or to raise as a defense, the failure of the Agent or any
Lenders to comply with the provisions of this Article X.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
SECTION 11.01. SETOFF. In addition to, and without limitation of, any
rights of the Lenders under applicable law, if the Borrower becomes insolvent,
however evidenced, or any Event of Default or Unmatured Default occurs, any
indebtedness from any Lender to the Borrower (including all account balances,
whether provisional or final and whether or not collected or available) may be
offset and applied toward the payment of the Facility A Obligations owing to
such Lender, whether or not the Facility A Obligations, or any part hereof,
shall then be due. Each Lender agrees promptly to notify the Borrower after any
such set-off and application made by such Lender; PROVIDED, HOWEVER, that the
failure to give such notice shall not affect the validity of any such set-off
and application. The rights of each Lender under this Section 11.01 are in
addition to any other rights and remedies which that Lender may have under this
Agreement or otherwise.
SECTION 11.02. RATABLE PAYMENTS. If any Lender, whether by setoff or
otherwise, has payment made to it upon any of its Committed Loans or
participations in Facility Letters of Credit (other than payments received
pursuant to Sections 3.01, 3.02 or 3.04) in a greater proportion than that
received by any other Lender with respect to Committed Loans or participations
in Facility Letters of Credit, such Lender agrees, promptly upon demand, to
purchase a portion of such Committed Loans or participations held by the other
Lenders so that after such purchase each Lender will hold its Pro Rata Share of
all Committed Loans or participations in Facility Letters of Credit. If any
Lender, whether by setoff or otherwise, has payment made to it upon any of its
Competitive Bid Loans (other than payments received pursuant to Sections 3.01,
3.02 or 3.04) in a greater proportion than that received by any other Lender
with respect to Competitive Bid Loans having the same principal repayment terms
and made pursuant to the same Competitive Bid Quote Request, such Lender agrees,
promptly upon demand, to purchase a portion of such Competitive Bid Loans held
by the other Lenders so that after such purchase each Lender which has
Competitive Bid Loans made pursuant to the same Competitive Bid Quote Request
outstanding at the time of such payment will hold its ratable proportion of all
Competitive Bid Loans made pursuant to such Competitive Bid Quote Request then
outstanding, such ratable proportion to be determined solely by reference to all
such Competitive Bid Loans then outstanding. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or otherwise,
receives collateral or other protection for its Obligations or such amounts
which may be subject to setoff, such Lender agrees, promptly upon demand, to
take such action necessary such that all Lenders share in the benefits of such
collateral
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ratably in accordance with their respective Pro Rata Shares. In case any such
payment is disturbed by legal process, or otherwise, appropriate further
adjustments shall be made.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
SECTION 12.01. SUCCESSORS AND PERMITTED ASSIGNS. The terms and provisions
of the Facility A Loan Documents shall be binding upon and inure to the benefit
of the Borrower and the Lenders and their respective successors and permitted
assigns, except that (i) the Borrower shall not have the right to assign its
rights or obligations under the Loan Documents and (ii) any assignment by any
Lender must be made in compliance with Section 12.03. Notwithstanding clause
(ii) of this Section, any Lender may at any time, without the consent of the
Borrower or the Agent, assign all or any portion of its rights under this
Agreement and its Notes to a Federal Reserve Bank; PROVIDED, HOWEVER, that no
such assignment shall release the transferor Lender from its obligations
hereunder. The Agent may treat the payee of any Note as the owner thereof for
all purposes hereof unless and until such payee complies with Section 12.03 in
the case of an assignment thereof or, in the case of any other transfer, a
written notice of the transfer is filed with the Agent. Any assignee or
transferee of a Note agrees by acceptance thereof to be bound by all the terms
and provisions of the Loan Documents. Any request, authority or consent of any
Person, who at the time of making such request or giving such authority or
consent is the holder of any Note, shall be conclusive and binding on any
subsequent holder, transferee or assignee of such Note or of any Note or Notes
issued in exchange therefor. A Lender may not assign less than the lesser of its
Commitment or $10,000,000.
SECTION 12.02. PARTICIPATIONS
(a) PERMITTED PARTICIPANTS; EFFECT. Any Lender may, in the ordinary course
of its business and in accordance with applicable law, at any time sell to one
or more banks or other entities ("Participants") participating interests in any
Loan owing to such Lender, any Note held by such Lender, any Commitment of such
Lender or any other interest of such Lender under the Loan Documents; PROVIDED
that any such sale is accompanied by the assignment to the same Participant of a
Pro Rata Share of the selling Lender's interest under the Facility B Credit
Agreement and the other Facility B Loan Documents. In the event of any such sale
by a Lender of participating interests to a Participant, such Lender's
obligations under the Loan Documents shall remain unchanged, such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, such Lender shall remain the holder of any such Note for all
purposes under the Loan Documents, all amounts payable by the Borrower under
this Agreement shall be determined as if such Lender had not sold such
participating interests, and the Borrower and the Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under the Loan Documents.
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(b) VOTING RIGHTS. Each Lender shall retain the sole right to approve,
without the consent of any Participant, any amendment, modification or waiver of
any provision of the Loan Documents other than any amendment, modification or
waiver with respect to any Loan, Facility Letter of Credit Obligations or
Commitment in which such Participant has an interest which forgives principal,
interest or fees or reduces the interest rate or fees payable with respect to
any such Loan, Facility Letter of Credit Obligations or Commitment, postpones
any date fixed for any regularly-scheduled payment of principal of, or interest
or fees on, any such Loan or Commitment, releases any guarantor of any such
Loan, Facility Letter of Credit Obligations or releases any substantial portion
of collateral, if any, securing any such Loan or Facility Letter of Credit
Obligations.
(c) BENEFIT OF SETOFF. The Borrower agrees that each Participant shall be
deemed to have the right of setoff provided in Section 11.01 in respect of its
participating interest in amounts owing under the Loan Documents to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under the Loan Documents, PROVIDED that each Lender shall retain the
right of setoff provided in Section 11.01 with respect to the amount of
participating interests sold to each Participant. The Lenders agree to share
with each Participant, and each Participant, by exercising the right of setoff
provided in Section 11.01, agrees to share with each Lender, any amount received
pursuant to the exercise of its right of setoff, such amounts to be shared in
accordance with Section 11.02 as if each Participant were a Lender.
SETION 12.03. ASSIGNMENTS
(a) PERMITTED ASSIGNMENTS. Any Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time assign to one or
more banks or other entities ("Purchasers") all or any part of its rights and
obligations under the Facility A Loan Documents; PROVIDED that (i) any such
assignment shall be accompanied by the assignment to the same Purchaser of a Pro
Rata Share of the assigning Lender's rights and obligations under the Facility B
Credit Agreement and the other Facility B Loan Documents and (ii) such
assignment may, but need not, include rights of such transferor Lender in
respect of its outstanding Competitive Bid Loans. Such assignment shall be
substantially in the form of Exhibit C hereto. Unless an Event of Default has
occurred and is continuing, the consent of the Borrower and the Agent shall be
required prior to an assignment becoming effective with respect to a Purchaser
which is not a Lender or an Affiliate thereof. Such consent shall be
substantially in the form attached as Exhibit C-2 hereto and shall not be
unreasonably withheld.
(b) EFFECT; EFFECTIVE DATE. Upon (i) delivery to the Agent of a notice of
assignment, substantially in the form attached as Exhibit C-1 hereto (a "Notice
of Assignment"), together with any consents required by Section 12.03(a), and
(ii) payment of a $4,000 fee to the Agent for processing such assignment
(provided that no such fee shall be required if the assignee is an Affiliate of
an assignor Lender or if the assignee is already a Lender hereunder), such
assignment shall become effective on the effective date specified in such Notice
of Assignment. On and after the effective date of such assignment, such
Purchaser shall for all purposes be a Lender party to this Agreement and any
other Loan Document executed by the Lenders and shall have all the rights and
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obligations of a Lender under the Loan Documents, to the same extent as if it
were an original party hereto, and no further consent or action by the Borrower,
the Lenders or the Agent shall be required to release the transferor Lender with
respect to the percentage of the Aggregate Commitment and Loans assigned to such
Purchaser. Upon the consummation of any assignment to a Purchaser pursuant to
this Section 12.03(b), the transferor Lender, the Agent and the Borrower shall
make appropriate arrangements so that replacement Notes are issued to such
transferor Lender and new Notes or, as appropriate, replacement Notes, are
issued to such Purchaser, in each case in principal amounts reflecting their
Commitment, as adjusted pursuant to such assignment.
(c) DISSEMINATION OF INFORMATION. The Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Borrower and its Subsidiaries.
(d) TAX TREATMENT. If any interest in any Loan Document is transferred to
any Transferee which is organized under the laws of any jurisdiction other than
the United States or any state thereof, the transferor Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply with
the provisions of Section 2.19.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. NOTICE
(a) Except as otherwise permitted by Section 2.13 with respect to
borrowing notices, all notices and other communications provided to any party
hereto under this Agreement or any other Loan Document shall be in writing or by
telex or by facsimile and addressed or delivered to such party at its address
set forth below its signature hereto or at such other address as may be
designated by such party in a notice to the other parties. Any notice, if mailed
and properly addressed with postage prepaid, shall be deemed given when received
(or when delivery is refused); any notice, if transmitted by telex or facsimile,
shall be deemed given when transmitted (answerback confirmed in the case of
telexes and facsimile confirmation in the case of a facsimile).
(b) The Borrower, the Agent and any Lender may each change the address for
service of notice upon it by a notice in writing to the other parties hereto.
SECTION 13.02. SURVIVAL OF REPRESENTATIONS. All covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by the Lenders of any Loans herein
contemplated and the execution and delivery to the Lenders of the Notes
evidencing the Commitments, and shall continue in full force and effect until
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all of the Obligations have been paid in full and the Aggregate Facility A
Commitment has been terminated.
SECTION 13.03. EXPENSES. The Borrower shall pay (i) all expenses,
including attorneys' fees and disbursements (which attorneys may be employees of
the Agent or any Lender), incurred by the Agent and any Lender in connection
with the administration of this Agreement and the other Loan Documents, any
amendments, modifications or waivers with respect to any of the provisions
thereof and the enforcement and protection of the rights of the Lenders and the
Agent under this Agreement or any of the other Loan Documents, including all
recording and filing fees, documentary stamp, intangibles and similar taxes,
title insurance premiums, appraisal fees and other costs and disbursements
incurred in connection with the taking of collateral and the perfection and
preservation of the Lenders' security therein, and (ii) the reasonable fees and
the disbursements of Agent's attorneys (which attorneys may be employees of the
Agent) in connection with the preparation, negotiation, execution, delivery and
review of this Agreement, the Notes and the other Loan Documents (whether or not
the transactions contemplated by this Agreement shall be consummated) and the
closing of the transactions contemplated hereby.
SECTION 13.04. INDEMNIFICATION OF THE LENDERS AND THE AGENTS. The Borrower
shall indemnify and hold harmless the Agent and each Lender, and their
respective directors, officers and employees against all losses, claims,
damages, penalties, judgments, liabilities and expenses (including, without
limitation, all expenses of litigation or preparation therefor whether or not
the Agent or any Lender is a party thereto) which any of them may pay or incur
arising out of or relating to, directly or indirectly, this Agreement, the other
Loan Documents, the transactions contemplated hereby or the direct or indirect
application or proposed application of the proceeds of any Loan hereunder;
PROVIDED, HOWEVER, that in no event shall the Agent or a Lender have the right
to be indemnified hereunder for its own gross negligence or willful misconduct
nor shall the Agent be indemnified against any liabilities which arise as a
result of any claims made or actions, suits or proceedings commenced or
maintained against any Lender (including the Agent, in its capacity as such) (i)
by that Lender's shareholders or any governmental regulatory body or authority
asserting that such Lender or any of its directors, officers, employees or
agents violated any banking or securities law or regulation or any duty to its
own shareholders, customers (excluding the Borrower) or creditors in any manner
whatsoever in entering into or performing any of its obligations contemplated by
this Agreement or (ii) by any other Lender. The obligations of the Borrower
under this Section shall survive the termination of this Agreement.
SECTION 13.05. MAXIMUM INTEREST RATE. It is the intention of the Lenders
and the Borrower that the interest (as defined under applicable law) on the
Indebtedness evidenced by the Notes which may be charged to, or collected or
received from the Borrower shall not exceed the maximum rate permissible under
applicable law. Accordingly, anything herein or in any of the Notes to the
contrary notwithstanding, should any interest (as so defined) be charged to, or
collected or received from the Borrower by the Lenders pursuant hereto or
thereto in excess of the maximum legal rate, then the excess payment shall be
applied first, to the reduction of the aggregate outstanding principal balance
of the Facility A Obligations, second, to the reduction of the Facility B
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Obligations, and any portion of the excess payment remaining after payment in
full thereof shall be returned by the Lenders to the Borrower.
SECTION 13.06. MODIFICATION OF AGREEMENT
(a) No modification, amendment or waiver of any provision of this
Agreement or the Notes, or any Subsidiary Guaranty nor any consent to any
departure by the Borrower or the Subsidiary Guarantors therefrom, in any event
shall be effective unless the same shall be in writing and signed by the
Borrower (or by the Company on their behalf) and by the Required Lenders (or by
the Agent on their behalf if the Required Lenders have so authorized the Agent),
and then the waiver or consent shall be effective only in the specific instance
and for the purpose for which given; PROVIDED, HOWEVER, that no such
modification, amendment or waiver shall, without the consent of all of the
Lenders affected thereby:
(i) extend the maturity of any Loan or Note or reduce or forgive the
principal amount thereof, or reduce the rate or extend the time of payment
of interest or fees thereon;
(ii) reduce the percentage specified in the definition of Required
Lenders;
(iii) extend the Facility A Termination Date, or reduce the amount or
extend the payment date for, the mandatory payments required under Article
II, or increase the amount of the Commitment of any Lender hereunder,
increase the amount of the Swing Line Commitment of the Swing Line Bank
hereunder, or permit the Borrower or a Subsidiary Guarantor to assign its
rights under this Agreement;
(iv) amend, modify or waive any provision of this Section 13.06;
(v) increase the maximum drawable amount or extend the expiration date
of any outstanding Facility Letter of Credit (except as expressly
permitted by its terms and in accordance with Section 2.17) or reduce the
principal amount of or extend the time of payment of any Reimbursement
Obligation or fee associated with any Facility Letter of Credit; or
(vi) amend, modify or waive Section 5.03.
(b) Anything in this Agreement to the contrary notwithstanding, if at a
time when the conditions precedent set forth in Article V hereof to any Loan
are, in the opinion of the Required Lenders, satisfied, any Lender (a
"Defaulting Lender") shall fail to fulfill its obligations to make such Loan and
such failure continues for at least two Business Days then, for so long as such
failure shall continue, such Defaulting Lender shall (unless the Required
Lenders, determined as if such Defaulting Lender were not a "Lender" hereunder,
shall otherwise consent in writing) be deemed for all purposes relating to
amendments, modifications, waivers or consents under this Agreement (including,
without limitation, under Section 13.06(a)) to have no Loans or Commitments,
shall not
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be treated as a "Lender" hereunder when performing the computation of Required
Lenders, and shall have no rights under Section 13.06(a); PROVIDED that any
action taken by the other Lenders with respect to the matters referred to in
clauses (i) through (v) of Section 13.06(a) shall not be effective as against
such Defaulting Lender.
(c) No amendment, modification or waiver of any provision of this
Agreement relating to the Agent shall be effective without the written consent
of the Agent. No notice to or demand of the Borrower in any case shall entitle
the Borrower to any other or further notice or demand in the same, similar or
other circumstances.
SECTION 13.06. PRESERVATION OF RIGHTS. No delay or omission of the Lenders
or the Agent to exercise any right under the Loan Documents shall impair such
right or be construed to be a waiver of any Event of Default or an acquiescence
therein, and the making of a Loan notwithstanding the existence of an Event of
Default or Unmatured Default, or the inability of the Borrower to satisfy the
conditions precedent to such Loan shall not constitute any waiver or
acquiescence. Any single or partial exercise of any such right shall not
preclude other or further exercise thereof or the exercise of any other right,
and no waiver, amendment or other variation of the terms, conditions or
provisions of the Loan Documents whatsoever shall be valid unless in writing
signed by the Lenders required pursuant to Section 13.06, and then only to the
extent in such writing specifically set forth. All remedies contained in the
Loan Documents or by law afforded shall be cumulative and all shall be available
to the Agent and the Lenders until the Obligations have been paid in full.
SECTION 13.08. JOINT AND SEVERAL OBLIGATIONS OF BORROWER; SEVERAL OBLIGA.
All obligations, representations and warranties hereunder and under any of the
Loan Documents, unless otherwise expressly stated, shall be the joint and
several liability of all of the entities comprising the Borrower. The respective
obligations of the Lenders hereunder are several and not joint, and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any of
its obligations hereunder shall not relieve any other Lender from any of its
obligations hereunder. This Agreement shall not be construed so as to confer any
right or benefit upon any Person other than the parties to this Agreement and
their respective successors and assigns.
SECTION 13.09. SEVERABILITY. If any one or more of the provisions
contained in this Agreement or the Notes is held invalid, illegal or
unenforceable in any respect, the validity, legality or enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby.
SECTION 13.10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which may be executed by one or more of the parties
hereto, but all of which, when taken together, shall constitute a single
agreement binding on all the parties hereto.
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SECTION 13.11. REPRESENTATION AND WARRANTY BY THE LENDERS. The Lenders
represent and warrant to the Borrower that the Notes to be acquired by them
hereunder will evidence loans made in the ordinary course of their respective
commercial banking or real estate lending businesses.
SECTION 13.12. THE COMPANY AS AGENT FOR EACH OTHER BORROWER. Each of the
entities comprising the Borrower hereby appoints the Company as their agent and
attorney-in-fact to execute and deliver any and all documents for an on behalf
of the Borrower in connection with the transactions contemplated by this
Agreement or any of the other Loan Documents, or in connection with the
amendment, modification or termination of any thereof, and hereby agree that
upon execution of any such documents or instruments they shall be binding upon
each of the Borrower. The Borrower further agrees that the Lenders may rely upon
written representations from the Company that it is acting on behalf of the
Borrower in accordance with the provisions of this Section 13.12 until such time
as it receives notice in writing from the Borrower of the termination of the
designation of the Company as agent an attorney-in-fact for each Borrower.
SECTION 13.13. LOSS, ETC, NOTES. Upon receipt by the Borrower of
reasonably satisfactory evidence of the loss, theft, destruction or mutilation
of any of the Notes, upon reimbursement to the Borrower of all reasonable
expenses incidental thereto and upon surrender and cancellation of the relevant
Note, if mutilated, the Borrower shall make and deliver in lieu of that Note
(the "Prior Note") a new Note of like tenor, except that no reference need be
made in the new Note to any installment or installments of principal, if any,
previously due and paid upon the Prior Note. Any Note made and delivered in
accordance with the provisions of this Section shall be dated as of the date to
which interest has been paid on the unpaid principal amount of the Prior Note.
SECTION 13.14. GOVERNMENTAL REGULATION. Anything contained in this
Agreement to the contrary notwithstanding, no Lender shall be obligated to
extend credit to the Borrower in violation of any limitation or prohibition
provided by any applicable statute or regulation.
SECTION 13.15. TAXES. Any taxes (excluding federal, state or local income
taxes on the overall net income of any Lender) or other similar assessments or
charges payable or ruled payable by any governmental authority in respect of the
Loan Documents shall be paid by the Borrower, together with interest and
penalties, if any.
SECTION 13.16. HEADINGS. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.
SECTION 13.17. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto with respect to the subject matter hereof;
PROVIDED, HOWEVER, that the fees payable by Borrower to First Chicago in
consideration of its agreement to serve as Agent hereunder are set forth in a
separate letter agreement between Borrower and First Chicago.
SECTION 13.18. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE
86
<PAGE>
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW
OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.
SECTION 13.19. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF
ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE
AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO,
ILLINOIS.
SECTION 13.20. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
[Signatures appear on following pages]
87
<PAGE>
IN WITNESS WHEREOF, the Borrower and the Lenders have caused this
Agreement to be duly executed as of the date first above written.
BORROWER:
LENNAR CORPORATION AND EACH OF THE SUBSIDIARIES
LISTED ON SCHEDULE I
By: /s/ STUART A. MILLER
--------------------------
Stuart A. Miller as President or authorized
signatory of each of such corporations
Address:
Lennar Corporation
700 Northwest 107th Avenue
Miami, Florida 33172
Attention: Cory J. Boydston, Vice President-Finance
FACILITY A COMMITMENTS: LENDERS:
$40,645,161.29 THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: /s/ GREGORY A. GILBERT
--------------------------
Gregory A. Gilbert, Vice President
Address:
The First National Bank of Chicago
One First National Plaza
14th Floor, Suite 0151
Chicago, Illinois 60670-0151
Attention: Gregory A. Gilbert, Vice President
with a copy to:
The First National Bank of Chicago
One First National Plaza, Suite 0801
Chicago, Illinois 60670-0801
Attention: Law Department
<PAGE>
$34,838,709.68 NATIONSBANK, N.A.
By: /s/ PHILIP CARROLL
--------------------------
PHILIP CARROLL
Address:
100 S.E. 2nd Street, 14th FL
Miami, Florida 33131
Attention: Mr. Philip Carroll
$34,838,709.68 CREDIT LYONNAIS ATLANTA AGENCY
By: /s/ DAVID M. CAWRSE
--------------------------
DAVID M.CAWRSE, FIRST VICE PRESIDENT AND
MANAGER
Address:
303 Peachtree Street, N.E., Suite 4400
Atlanta, Georgia 30308
Attention: Mr. Kevin Murphy, Vice President
$34,838,709.68 BANK OF AMERICA NATIONAL
TRUST & SAVINGS ASSOCIATION
By: /s/ MARK LARIVIERE
--------------------------
MARK LARIVIERE, VICE PRESIDENT
Address:
231 S. LaSalle, 12th Floor
Chicago, Illinois 60697
Attention: Mr. Mark Lariviere
<PAGE>
$34,838,709.68 COMERICA BAN
By: /s/ MARTIN ELLIS
--------------------------
MARTIN ELLIS, VICE PRESIDENT
Address:
One Detroit Center
500 Woodward Avenue, 9th Floor
Detroit, Michigan 48226
Attention: Mr. Martin Ellis, Vice President
$30,483,870.97 FLEET NATIONAL BANK
By: /s/ JAMES B. MCLAUGHLIN
--------------------------
JAMES B. MCLAUGHLIN, VICE PRESIDENT
Address:
111 Westminster Street
RIMO0215 - 8th FL
Providence, Rhode Island 02903
Attention: Mr. James B. McLaughlin
$30,483,870.97 GUARANTY FEDERAL BANK, F.S.B.
By: /s/ RANDALL S. REID
--------------------------
RANDALL S. REID, VICE PRESIDENT
Address:
8333 Douglas Avenue
Dallas, Texas 75225
Attention: Mr. Randy Reid
<PAGE>
$23,225,806.45 THE INDUSTRIAL BANK OF JAPAN, LIMITED,
ATLANTA AGENCY
By: /s/ KAZUO IIDA
--------------------------
KAZUO, IIDA, GENERAL MANAGER
Address:
191 Peachtree Street, Suite 3600
Atlanta, Georgia 30303-1757
Attention: Mr. Michael Harvey, Vice President
$23,225,806.45 U.S. BANK NATIONAL ASSOCIATION
By: /s/ KATHLEEN M. CONNOR
--------------------------
KATHLEEN M. CONNOR, VICE PRESIDENT
Address:
Real Estate Banking Division
601 2nd Avenue South
First Bank Place
Minneapolis, Minnesota 55402
Attention: Ms. Kathleen Connor
$23,225,806.45 PNC BANK, NATIONAL ASSOCIATION
By: /s/ DOUGLAS PAUL
--------------------------
DOUGLAS G. PAUL
Address:
Two Tower Center
Suite J3-JTTC-18-6
East Brunswick, New Jersey 08816
Attention: Mr. Douglas G. Paul
<PAGE>
$23,225,806.45 SOCIETE GENERALE
By: /s/ RALPH SAHEB
--------------------------
RALPH SAHEB, MANAGER
Address:
303 Peachtree Street, Suite 3040
Atlanta, Georgia 30308
Attention: Mr. Ed Forseberg
$17,419,354.84 AMSOUTH BANK
By: /s/ RONNY HUDSPETH
--------------------------
RONNY HUDSPETH, VICE PRESIDENT
Address:
1900 Fifth Avenue
Birmingham, Alabama 35288
Attention: Mr. William Staples
$14,516,129.03 BARNETT BANK, N.A., SOUTH FLORIDA
By: /s/ CLAY F. WILSON
--------------------------
CLAY F. WILSON
Address:
701 Brickell Avenue, 6th FL
Miami, Florida 33131
Attention: Mr. Clay F. Wilson, Group Vice
President
<PAGE>
$14,516,129.03 THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ TAKAO MOCHIZUKI
--------------------------
TAKAO MOCHIZUKI, GENERAL MANAGER
Address:
Marquis Two Tower, Suite 2400
285 Peachtree Center Avenue, N.E.
Atlanta, Georgia 30303
Attention: Mr. Guenter Kittel
$14,516,129.03 THE FUJI BANK AND TRUST COMPANY
By: /s/ TORO UENO
--------------------------
TORO UENO, EXECUTIVE VICE PRESIDENT
Address:
Two World Trade Center, 79th FL
New York, New York 10048
Attention: Mr. David Lee, Assistant Vice President
$14,516,129.03 KREDIETBANK, N.V.
By: /s/ MICHAEL V. CURRAN /s/ ROBERT SNAUFFER
------------------------------------------
MICHAEL V. CURRAN, VICE PRESIDENT
ROBERT SNAUFFER, VICE PRESIDENT
Address:
125 West 55th Street
New York, New York 10019
Attention: Mr. Michael Curran
<PAGE>
$14,516,129.03 SAKURA BANK
By: /s/ HIROYASU IMANISHI
--------------------------
HIROYASU IMANISHI, V.P. & SENIOR MANAGER
Address:
Marquis 1 Tower
245 Peachtree Center Avenue
Atlanta, Georgia 30303
Attention: Mr. Ric Spenser
$14,516,129.03 SUNTRUST BANK, MIAMI, N.A
By: /s/ ROBERT HUMMEL
--------------------------
ROBERT E. HUMMEL, SENIOR VICE
PRESIDENT
Address:
Real Estate Division
777 Brickell Avenue
Miami, Florida 33131
Attention: Mr. Robert Hummel, Senior Vice
President
$11,612,903.23 BANQUE PARIBAS
By: /s/ DUANE HELKOWSKI /s/ JOHN MCCORMICK
--------------------------------------
DUANE HELKOWSKI, VICE PRESIDENT
JOHN J. MCCORMICK III, VICE PRESIDENT
Address:
787 Seventh Avenue
New York, New York 10019
Attention: Mr. Duane Helkowski
<PAGE>
REVOLVING CREDIT AGREEMENT (FACILITY B)
AMONG
LENNAR CORPORATION
AND
CERTAIN SUBSIDIARIES
AND
THE FIRST NATIONAL BANK OF CHICAGO,
NATIONSBANK, N.A.,
CREDIT LYONNAIS ATLANTA AGENCY,
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION,
COMERICA BANK,
FLEET NATIONAL BANK,
GUARANTY FEDERAL BANK, F.S.B.,
THE INDUSTRIAL BANK OF JAPAN, LIMITED, ATLANTA AGENCY,
U. S. BANK NATIONAL ASSOCIATION,
PNC BANK, NATIONAL ASSOCIATION,
SOCIETE GENERALE,
AMSOUTH BANK,
BARNETT BANK, N.A., SOUTH FLORIDA,
THE DAI-ICHI KANGYO BANK, LTD.,
THE FUJI BANK AND TRUST COMPANY,
KREDIETBANK, N.V.,
SAKURA BANK,
SUNTRUST BANK, MIAMI, N.A., AND
BANQUE PARIBAS
AND
THE FIRST NATIONAL BANK OF CHICAGO,
AS ARRANGER AND ADMINISTRATIVE AGENT,
NATIONSBANK, N.A.,
AS SYNDICATION AGENT, AND
CREDIT LYONNAIS ATLANTA AGENCY,
AS DOCUMENTATION AGENT,
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION AND
COMERICA BANK,
AS MANAGING AGENTS, AND
FLEET NATIONAL BANK AND
GUARANTY FEDERAL BANK, F.S.B.,
AS CO-AGENTS
DATED: OCTOBER 31, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I CERTAIN DEFINED TERMS.......................................1
SECTION 1.01. Certain Defined Terms.................................1
SECTION 1.02. Computation of Time Periods..........................20
SECTION 1.03. Accounting Terms.....................................20
ARTICLE II THE CREDITS................................................21
SECTION 2.01. Commitments..........................................21
SECTION 2.02. Types of Advances; Mandatory Principal Payments;
Final Maturity.......................................21
SECTION 2.03. Optional Principal Payments..........................22
SECTION 2.04. Facility Fee and Reduction of Facility B Commitments.22
SECTION 2.05. Method of Borrowing..................................22
SECTION 2.06. Method of Selecting Types and Interest Periods for
Advances.............................................22
SECTION 2.07. Method of Selecting Types and Interest Periods for
Conversion and Continuation of Advances..............23
SECTION 2.08. Minimum Amount of Each Advance.......................24
SECTION 2.09. Rate after Maturity..................................24
SECTION 2.10. Method of Payment....................................24
SECTION 2.11. Facility B Notes; Telephonic Notices.................25
SECTION 2.12. Interest Payment Dates; Interest and Fee Basis.......25
SECTION 2.13. Notification of Advances, Interest Rates, Prepayments
and Commitment Reductions............................26
SECTION 2.14. Lending Installations................................26
SECTION 2.15. Extension of Facility B Termination Date.............26
SECTION 2.16. Facility B Term-Out Option. .........................26
SECTION 2.17. Non-Receipt of Funds by the Agent....................27
SECTION 2.18. Withholding Tax Exemption............................27
SECTION 2.19. Unconditional Obligation to Make Payments............28
SECTION 2.20. Compensating Balances................................28
ARTICLE III CHANGE IN CIRCUMSTANCES....................................28
SECTION 3.01. Yield-Protection.....................................28
SECTION 3.02. Changes in Capital Adequacy Regulations..............29
SECTION 3.03. Availability of Types of Advances....................30
SECTION 3.04. Funding Indemnification..............................30
SECTION 3.05. Lender Statements: Survival of Indemnity.............30
- (i) -
<PAGE>
ARTICLE IV REPRESENTATIONS AND WARRANTIES.............................31
SECTION 4.01. Organization, Powers, etc............................31
SECTION 4.02. Authorization and Validity of this Agreement, etc....31
SECTION 4.03. Financial Statements.................................32
SECTION 4.04. No Material Adverse Effect...........................33
SECTION 4.05. Title to Properties..................................33
SECTION 4.06. Litigation...........................................34
SECTION 4.07. Payment of Taxes.....................................34
SECTION 4.08. Agreements...........................................34
SECTION 4.09. Foreign Direct Investment Regulations................34
SECTION 4.10. Federal Reserve Regulations..........................35
SECTION 4.11. Consents, etc........................................35
SECTION 4.12. Compliance with Applicable Laws......................35
SECTION 4.13. Relationship of the Borrower.........................36
SECTION 4.14. Subsidiaries; Joint Ventures.........................36
SECTION 4.15. ERISA................................................36
SECTION 4.16. Investment Company Act...............................37
SECTION 4.17. Public Utility Holding Company Act...................37
SECTION 4.18. Subordinated Debt....................................37
SECTION 4.19. Post-Retirement Benefits.............................37
SECTION 4.20. Insurance............................................37
SECTION 4.21. Environmental Representations........................37
SECTION 4.22. Reorganization.......................................38
SECTION 4.23. Minimum Adjusted Tangible Net Worth..................38
SECTION 4.24. No Misrepresentation.................................38
ARTICLE V CONDITIONS PRECEDENT; TERMINATION..........................38
SECTION 5.01. Conditions of Effectiveness..........................38
SECTION 5.02. Conditions Precedent to All Borrowings...............41
SECTION 5.03. Termination..........................................42
ARTICLE VI AFFIRMATIVE COVENANTS......................................42
SECTION 6.01. Existence, Properties, etc...........................43
SECTION 6.02. Notice...............................................43
SECTION 6.03. Payments of Debts, Taxes, etc........................43
SECTION 6.04. Accounts and Reports.................................44
SECTION 6.05. Access to Premises and Records.......................48
SECTION 6.06. Maintenance of Properties and Insurance..............48
SECTION 6.07. Financing; New Investments...........................48
SECTION 6.08. Compliance with Applicable Laws......................49
SECTION 6.09. Advances to the Mortgage Banking Subsidiaries........49
- (ii) -
<PAGE>
SECTION 6.10. Use of Proceeds......................................49
ARTICLE VII NEGATIVE COVENANTS...............................................50
SECTION 7.01. Minimum Tangible Net Worth...........................50
SECTION 7.02. Limitation on Indebtedness...........................50
SECTION 7.03. Guaranties...........................................51
SECTION 7.04. Sale of Assets; Acquisitions; Merger.................51
SECTION 7.05. Investments..........................................52
SECTION 7.06. Disposition, Encumbrance or Issuance of Certain
Stock................................................53
SECTION 7.07. Subordinated Debt....................................53
SECTION 7.08. Housing Unit.........................................53
SECTION 7.09. Construction in Progress.............................53
SECTION 7.10. No Margin Stock......................................54
SECTION 7.11. Mortgage Banking Subsidiaries' Capital Ratio.........54
SECTION 7.12. Transactions with Affiliates.........................54
SECTION 7.13. Restrictions on Advances to Mortgage Banking
Subsidiaries.........................................54
SECTION 7.14. Adjusted Net Worth of Mortgage Banking Subsidiaries..55
SECTION 7.15. Investments in Land..................................55
SECTION 7.16. Liens and Encumbrances...............................55
SECTION 7.17. Reorganization Documents.............................55
SECTION 7.18. Investments in Marlborough Subsidiaries..............55
ARTICLE VIII COLLATERAL.................................................56
SECTION 8.01. Security for Obligations.............................56
SECTION 8.02. Collateral Documentation.............................56
SECTION 8.03. Powers and Duties of the Borrower with Respect to the
Collateral...........................................56
SECTION 8.04. Power of Attorney....................................57
ARTICLE IX EVENTS OF DEFAULT..........................................57
SECTION 9.01. Events of Default....................................57
SECTION 9.02. Acceleration.........................................59
SECTION 9.03. Rights as to Collateral..............................60
SECTION 9.04. Application of Funds.................................62
ARTICLE X THE AGENT..................................................62
SECTION 10.01. Appointment..........................................62
SECTION 10.02. Powers...............................................63
SECTION 10.03. General Immunity.....................................63
SECTION 10.04. No Responsibility for Loans, Recitals, etc...........63
SECTION 10.05. Employment of Agents and Counsel.....................63
- (iii) -
<PAGE>
SECTION 10.06. Reliance on Documents; Counsel.......................64
SECTION 10.07. No Waiver of Rights..................................64
SECTION 10.08. Knowledge of Event of Default........................64
SECTION 10.09. Agent's Reimbursement and Indemnification............64
SECTION 10.10. Notices to the Borrower..............................65
SECTION 10.11. Action on Instructions of Lenders....................65
SECTION 10.12. Lender Credit Decision...............................65
SECTION 10.13. Resignation or Removal of the Agent..................65
SECTION 10.14. Benefits of Article X................................66
ARTICLE XI SETOFF; RATABLE PAYMENTS...................................66
SECTION 11.01. Setoff...............................................66
SECTION 11.02. Ratable Payments.....................................66
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS................67
SECTION 12.01. Successors and Permitted Assigns.....................67
SECTION 12.02. Participations.......................................67
SECTION 12.03. Assignments..........................................68
ARTICLE XIII MISCELLANEOUS..............................................69
SECTION 13.01. Notice...............................................69
SECTION 13.02. Survival of Representations..........................70
SECTION 13.03. Expenses.............................................70
SECTION 13.04. Indemnification of the Lenders and the Agent.........70
SECTION 13.05. Maximum Interest Rate................................71
SECTION 13.06. Modification of Agreement............................71
SECTION 13.07. Preservation of Rights...............................72
SECTION 13.08. Joint and Several Obligations of Borrower; Several
Obligations of Lenders...............................72
SECTION 13.09. Severability.........................................72
SECTION 13.10. Counterparts.........................................72
SECTION 13.11. Representation and Warranty by the Lenders...........73
SECTION 13.12. The Company as Agent for Each Other Borrower.........73
SECTION 13.13. Loss, etc., Notes....................................73
SECTION 13.14. Governmental Regulation..............................73
SECTION 13.15. Taxes................................................73
SECTION 13.16. Headings.............................................73
SECTION 13.17. Entire Agreement.....................................73
SECTION 13.18. CHOICE OF LAW........................................74
SECTION 13.19. CONSENT TO JURISDICTION..............................74
SECTION 13.20. WAIVER OF JURY TRIAL.................................74
- (iv) -
<PAGE>
Page
----
- (v) -
<PAGE>
Page
----
- (vi) -
<PAGE>
EXHIBITS
EXHIBIT DESCRIPTION
- ------ -----------
A-1 Facility B Note
A-2 Facility B Term Note
B Subsidiary Guaranty
C Assignment Agreement
C-1 Notice of Assignment
C-2 Consent and Release
D Joinder Agreement
E Pricing Grids
F Greystone Assumption Agreement
G Requirements for Entitled Land
- (vii) -
<PAGE>
SCHEDULES
WHERE FOUND
SCHEDULE DESCRIPTION IN AGREEMENT
- -------- ----------- -----------------
I Subsidiaries Which are Borrowers Opening Paragraph
II Lenders Opening Paragraph
III Real Estate Owned 4.05
IV Required Consents 4.11
V Subsidiaries and Joint Ventures 4.14
VI Tenancies In Common 1.01
(Definition of
"Joint Venture")
VII Real Estate Transferred to LLP (Definition of
"Reorganization")
4.05
VIII Permitted Liens ("Definition of
"Permitted Liens")
- (viii) -
<PAGE>
REVOLVING CREDIT AGREEMENT (FACILITY B), dated as of October 31, 1997,
among LENNAR CORPORATION, a corporation organized and existing under the laws of
the State of Delaware (the "Company"), the Subsidiaries of the Company listed in
Schedule I hereto (said Subsidiaries, together with the Company, hereinafter
individually and collectively referred to as the "Borrower"), the lenders listed
in Schedule II hereto (hereinafter collectively referred to as the "Lenders"),
and THE FIRST NATIONAL BANK OF CHICAGO, as Agent (the "Agent").
RECITAL
The Borrower desires to obtain from the Lenders and the Lenders are
willing to provide to the Borrower revolving credit loans in an aggregate
principal amount outstanding from time to time not to exceed $100,000,000, upon
the terms and subject to the conditions hereinafter set forth.
AGREEMENT
In consideration of the foregoing and of the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINED TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used herein, each of the following
terms shall have the meaning ascribed to it below, which meaning shall be
applicable to both the singular and plural forms of the terms defined:
"ADJUSTED TANGIBLE NET WORTH" means, at any date, Tangible Net Worth at
such date less, to the extent not already deducted in the definition of Tangible
Net Worth, the aggregate of all of the following at such date: (i) the
consolidated stockholders' equity of the Mortgage Banking Subsidiaries, and (ii)
the stockholders equity of each other Subsidiary of the Company which is not a
Borrower or Subsidiary Guarantor hereunder.
"AFFILIATE" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
"AFSI" means Ameristar Financial Services, Inc.
<PAGE>
"AGENT" means The First National Bank of Chicago in its capacity as agent
for the Lenders pursuant to Article X, and not in its individual capacity as a
Lender, and any successor Agent appointed pursuant to Article X.
"AGGREGATE COMMITMENT" means, at any time, the sum of the then applicable
Aggregate Facility A Commitment and Aggregate Facility B Commitment.
"AGGREGATE FACILITY A COMMITMENT" means $450,000,000, as such amount may
be reduced from time to time pursuant to the terms of the Facility A Credit
Agreement.
"AGGREGATE FACILITY B COMMITMENT" means $100,000,000, as such amount may
be reduced from time to time pursuant to the terms hereof.
"AGREEMENT" means this Revolving Credit Agreement (Facility B), including
the exhibits and schedules hereto, as it may be amended, renewed, modified or
restated and in effect from time to time.
"AGREEMENT DATE" means October 31, 1997.
"APPLICABLE MARGIN" shall be determined in accordance with the pricing
grids set forth as Exhibit "E" hereto.
"ARTICLE" means an article of this Agreement unless another document is
specifically referenced.
"AUTHORIZED OFFICER" means any of Leonard Miller, Stuart Miller,
Waynewright Malcolm, Cory Boydston, Mary Raurell, or any other Person designated
by the Borrower in writing to act as an Authorized Officer hereunder, acting
singly.
"BORROWER" has the meaning assigned to that term in the introductory
paragraph of this Agreement. Whenever used in this Agreement, the term
"Borrower" refers to and means each of the entities comprising the Borrower,
individually, and all of such entities, collectively, including all entities
which become Borrowers pursuant to each Joinder Agreement and the Greystone
Assumption Agreement. All of the entities comprising the Borrower shall be
jointly and severally liable as Borrower under this Agreement, the Facility B
Notes, and all other Facility B Loan Documents.
"BORROWING BASE" means, from time to time, the sum of the following
amounts, all as reflected from time to time in accordance with GAAP consistently
applied in the consolidated balance sheet of the Borrower: (i) 100% of
Borrower's unrestricted cash up to a maximum of $10,000,000 (with any excess
cash being excluded from the Borrowing Base); (ii) 100% of the Net Proceeds due
to Borrower at closing as a result of the consummation of the sale of any
Housing Unit,
2
<PAGE>
which Net Proceeds have been paid to the closing agent handling such sale but
which have not yet been received by Borrower; PROVIDED, HOWEVER, that if, and to
the extent that, such Net Proceeds which are reported as outstanding on the last
day of any fiscal quarter of Borrower are not received by Borrower on or before
the tenth (10th) day following the end of any such fiscal quarter, such Net
Proceeds shall not be included in the Borrowing Base; (iii) 75% of the Net Book
Value of all Housing Units Under Contract; (iv) 65% of the Net Book Value of all
Housing Units owned by Borrower (including, without limitation, model Housing
Units) that are not subject to a contract for sale; (v) 50% of the Net Book
Value of all Land Under Development owned by the Borrower, PROVIDED that the
amount determined pursuant to this clause (v), when combined with the amount
determined pursuant to clauses (vi) and (vii) below, shall not exceed 40% of the
Aggregate Commitment (with any excess being excluded from the Borrowing Base);
(vi) 65% of the Net Book Value of all Finished Lots owned by the Borrower; and
(vii) 30% of the Net Book Value of all Unimproved Entitled Land owned by the
Borrower, PROVIDED that the amount determined pursuant to this clause (vii)
shall not exceed $50,000,000 (with any excess being excluded from the Borrowing
Base); PROVIDED FURTHER, that notwithstanding anything to the contrary provided
herein, any asset which is encumbered by a Lien shall not be included in the
calculation of the Borrowing Base pursuant to clauses (i) through (vii) above.
"BORROWING BASE LIMITATION" is defined in Section 7.02.
"BORROWING DATE" means a date on which a Facility B Advance is made
hereunder.
"BORROWING NOTICE" is defined in Section 2.08.
"BUSINESS DAY" means (i) with respect to any borrowing, payment or rate
selection of Fixed Rate Advances, a day (other than a Saturday or Sunday) on
which banks are open for business in Chicago and New York and on which dealings
in United States dollars are carried on in the London interbank market and (ii)
for all other purposes, a day (other than a Saturday or Sunday) on which banks
are open for business in Chicago.
"CAPITAL STOCK" means, with respect to any corporation, any and all
shares, interests, rights to purchase (other than convertible or exchangeable
Indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.
"CAPITALIZED LEASE" of a Person means any lease of property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with GAAP.
3
<PAGE>
"CLOSING DATE" means the date on which the Lenders shall first become
obligated to make Facility B Advances after satisfaction or waiver of all of the
conditions precedent set forth in Sections 5.01 and 5.02.
"CODE" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"COLLATERAL" means, at any time, any assets owned by the Borrower that
then are subject to a security interest in favor of the Agent as security for
the Obligations.
"COMMITMENT" means, for each of the Lenders, the Facility A Commitment and
the Facility B Commitment of such Lender.
"COMPANY" (i) prior to the Merger, has the meaning assigned to that term
in the introductory paragraph of this Agreement and (ii) from and after the
effective time of the Merger, means Greystone as the surviving corporation of
the Merger (which shall thereupon change its name to Lennar Corporation).
"COMPANY AUDITED FINANCIAL STATEMENTS" is defined in Section 4.03.
"COMPANY UNAUDITED FINANCIAL STATEMENTS" is defined in Section 4.03.
"COMPLETED HOUSING UNIT" means, at any time, a Housing Unit the
construction of which was commenced more than 10 months, in the case of a single
family home, more than 12 months, in the case of a townhouse, or more than 18
months, in the case of a condominium, before that time or was completed prior to
the expiration of the applicable period.
"CONSOLIDATED CAPITAL EXPENDITURES" means, for any period, the sum of the
aggregate of all expenditures (whether paid in cash or other consideration or
accrued as a liability) by the Borrower and each Subsidiary Guarantor during
such period that, in accordance with GAAP, are or should be included in
"additions to property, plant or equipment" or similar items reflected in the
consolidated statement of cash flows of the Borrower and each Subsidiary
Guarantor for such period.
"CONSOLIDATED EBITDA" means, for any period, the Consolidated Net Income
PLUS, to the extent deducted from revenues in determining Consolidated Net
Income, (i) Consolidated Interest Expense, (ii) expense for income taxes paid or
accrued, (iii) depreciation, (iv) amortization and (v) extraordinary losses
incurred other than in the ordinary course of business, MINUS, to the extent
included in Consolidated Net Income, extraordinary gains realized other than in
the ordinary course of business, all calculated for the Company and its
Subsidiaries on a consolidated basis.
"CONSOLIDATED INTEREST EXPENSE" means, with reference to any period, the
interest expense of the Company and its Subsidiaries calculated on a
consolidated basis for such period.
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"CONSOLIDATED INTEREST INCURRED" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of (a) interest expensed or capitalized, paid, accrued, or scheduled
to be paid or accrued of such Person and its consolidated Subsidiaries during
such period, including (i) original issue discount and non-cash interest
payments or accruals on any Indebtedness, (ii) the interest portion of all
deferred payment obligations, and (iii) all commissions, discounts and other
fees and charges owed with respect to bankers' acceptances and letter of credit
financings and interest swap and hedging obligations, in each case to the extent
attributable to such period PLUS (b) the amount of dividends accrued or payable
by such Person or any of its consolidated Subsidiaries in respect of
Disqualified Capital Stock (other than by Subsidiaries of such Person to such
Person or such Person's Subsidiary guarantors), PROVIDED, HOWEVER, that
interest, dividends or other payments or accruals of a consolidated Subsidiary
that is not wholly owned shall be included only to the extent of the interest of
such Person in such Subsidiary. For purposes of this definition, (x) interest on
Capitalized Lease Obligations shall be deemed to accrue at an interest rate
reasonably determined by the Borrower to be the rate of interest implicit in
such Capitalized Lease Obligations in accordance with GAAP and (y) interest
expense attributable to any Indebtedness represented by the guaranty by such
Person or a Subsidiary of such Person of an obligation of another Person shall
be deemed to be the interest expense attributable to the Indebtedness
guaranteed.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the net income (or loss) of such Person and its Subsidiaries for such
period, determined on a consolidated basis in accordance with GAAP; PROVIDED,
that (i) net income (or loss) of any other Person which is not a Subsidiary of
the Person or is accounted for by such specified Person by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid to the specified Person or a Subsidiary of such Person, (ii)
the net income (or loss) of any other Person acquired by such specified Person
or a Subsidiary of such Person in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, (iii) all gains
and losses which are either extraordinary (as determined in accordance with
GAAP) or are either unusual or nonrecurring (including any gain from the sale or
other disposition of assets outside the ordinary course of business or from the
issuance or sale of any Capital Stock), shall be excluded, and (iv) the net
income, if positive, of any of such Person's consolidated Subsidiaries (other
than non-guarantor Subsidiaries) to the extent that the declaration or payment
of dividends or similar distributions is not at the time permitted by operation
of the terms of its charter or bylaws or any other agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
such consolidated Subsidiary shall be excluded, PROVIDED, HOWEVER, in the case
of exclusions from Consolidated Net Income set forth in clauses (ii), (iii) and
(iv), such amounts shall be excluded only to the extent included in computing
such net income (or loss) in accordance with GAAP and without duplication;
PROVIDED FURTHER, HOWEVER, that for purposes of determining Consolidated Net
Income of the Borrower, the net income of any Subsidiary which is not a Borrower
or Subsidiary Guarantor shall be excluded.
"CONTINGENT OBLIGATION" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds
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for the payment of, or otherwise becomes or is contingently liable upon, the
obligation or liability of any other Person, or agrees to maintain the net worth
or working capital or other financial condition of any other Person, or
otherwise assures any creditor of such other Person against loss, including,
without limitation, any comfort letter, operating agreement or take-or-pay
contract. With respect to the Borrower, Contingent Obligation includes, without
limitation of the foregoing, obligations under reimbursement agreements with
financial institutions (including Lenders) relating to letters of credit issued
by such financial institutions for the account of Borrower.
"CONVERSION/CONTINUATION NOTICE" is defined in Section 2.09(d).
"CONTROLLED GROUP" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Borrower or any of its Subsidiaries, are treated as a
single employer under Section 414 of the Code.
"CORPORATE BASE RATE" means a rate per annum equal to the corporate base
rate of interest announced by First Chicago from time to time, changing when and
as said corporate base rate changes.
"DEFAULT RATE" means the rate after maturity as provided for in Section
2.09.
"DISQUALIFIED CAPITAL STOCK" means (a) except as set forth in (b), with
respect to any Person, Capital Stock of such Person that, by its terms or by the
terms of any security into which it is convertible, exercisable or exchangeable,
is, or upon the happening of an event or the passage of time would be, required
to be redeemed or repurchased (including at the option of the holder thereof) by
such Person or any of its Subsidiaries, in whole or in part, on or prior to the
stated maturity of the securities, and (b) with respect to any Subsidiary of
such Person (including with respect to any Subsidiary of the Borrower), any
Capital Stock other than any common stock with no preference, privileges, or
redemption or repayment provisions.
"DOLLARS" and the sign "$" each means lawful money of the United States of
America.
"DUFF & PHELPS" means Duff & Phelps Credit Rating Co. or any Person
succeeding to the securities rating business of such company.
"ENTITLED LAND" means a parcel of Real Estate owned by the Borrower or a
Subsidiary Guarantor which is to be developed primarily for residential dwelling
units and which satisfies the requirements for the state and county wherein it
is located as more particularly described in the Requirements for Entitled Land
attached hereto as Exhibit G.
"ENVIRONMENTAL LAWS" means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to (i) the
protection of the environment, (ii) the effect of the environment on human
health,
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(iii) emissions, discharges or releases of pollutants, contaminants, Hazardous
Substances or wastes into surface water, ground water or land, or (iv) the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, Hazardous Substances or
wastes or the clean-up or other remediation thereof.
"EQUITY INVESTMENT" means the ownership of, or participation in the
ownership of, an equity interest in Real Estate or an equity interest in a
Person in the business of owning, developing, improving, operating or managing
Real Estate.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"EURODOLLAR BASE RATE" means, with respect to a Fixed Rate Advance for the
relevant Eurodollar Interest Period, the rate determined by the Agent to be the
rate at which deposits in U.S. dollars are offered by First Chicago to
first-class banks in the London interbank market at approximately 11 a.m.
(London time) two Business Days prior to the first day of such Eurodollar
Interest Period, in the approximate amount of First Chicago's relevant Fixed
Rate Loan and having a maturity approximately equal to such Eurodollar Interest
Period.
"EURODOLLAR INTEREST PERIOD" means, with respect to a Fixed Rate Advance,
a period of one, two, three or six months, as available, commencing on a
Business Day selected by the Borrower pursuant to this Agreement. Such
Eurodollar Interest Period shall end on (but exclude) the day which corresponds
numerically to such date one, two, three or six months thereafter, PROVIDED,
HOWEVER, that if there is no such numerically corresponding day in such next,
second, third or sixth succeeding month, such Eurodollar Interest Period shall
end on the last Business Day of such next, second, third or sixth succeeding
month. If a Eurodollar Interest Period would otherwise end on a day which is not
a Business Day, such Eurodollar Interest Period shall end on the next succeeding
Business Day, PROVIDED, HOWEVER, that if said next succeeding Business Day falls
in a new calendar month, such Eurodollar Interest Period shall end on the
immediately preceding Business Day.
"EURODOLLAR RATE" means, with respect to a Fixed Rate Advance for the
relevant Eurodollar Interest Period, the sum of (i) the quotient of (a) the
Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided by
(b) one minus the Reserve Requirement (expressed as a decimal) applicable to
such Eurodollar Interest Period, plus (ii) the Applicable Margin. The Eurodollar
Rate shall be rounded to the next higher multiple of 1/16 of 1% if the rate is
not such a multiple.
"EVENT" means an event, circumstance, condition or state of facts.
"EVENT OF DEFAULT" is defined in Section 9.01.
"EXISTING CREDIT AGREEMENT" means the Second Amended and Restated
Revolving Credit Agreement, dated as of April 4, 1997, among the Company and
certain of its Subsidiaries, as borrowers thereunder, First Chicago, as Agent
and lender thereunder, and certain other lenders named therein.
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"FACILITIES" means Facility A and Facility B.
"FACILITY A" means the revolving credit, competitive bid, swing line and
letter of credit facilities described in the Facility A Credit Agreement.
"FACILITY A COMMITMENT" means, for each of the Lenders, the obligation of
such Lender to make "Committed Loans" pursuant to Facility A and purchase
participations in Facility Letters of Credit in the aggregate not exceeding the
amount set forth opposite its signature in the Facility A Credit Agreement as
its "Facility A Commitment", as such amount may be modified from time to time
pursuant to the terms hereof.
"FACILITY A CREDIT AGREEMENT" means the Revolving Credit Agreement
(Facility A), dated the Agreement Date, among the Borrower, First Chicago, as
Agent, a Lender, Swing Line Bank and Letter of Credit Issuer thereunder, and
certain other Lenders named therein, as the same may be amended, modified,
renewed or restated and in effect from time to time.
"FACILITY A OBLIGATIONS" has the meaning set forth in the Facility A
Credit Agreement.
"FACILITY A TERMINATION DATE" means June 30, 2002, subject, however, to
earlier termination in whole of the Aggregate Commitment pursuant to the terms
of this Agreement.
"FACILITY B" means the revolving credit facility described in Section
2.01.
"FACILITY B ADVANCE" means a borrowing hereunder (or the conversion or
continuation thereof) consisting of the aggregate amount of the several loans
made by the Lenders to the Borrower of the same Type and, in the case of Fixed
Rate Advances, for the same Interest Period.
"FACILITY B COMMITMENT" means, for each of the Lenders, the obligation of
such Lender to make revolving credit loans pursuant to Facility B in the
aggregate not exceeding the amount set forth opposite its signature below as its
"Facility B Commitment", as such amount may be modified from time to time
pursuant to the terms hereof.
"FACILITY B LOAN DOCUMENTS" means this Agreement, the Facility B Notes,
the Facility B Term Notes, the Subsidiary Guaranties, the Pledge Agreement, the
Greystone Assumption Agreement, any Joinder Agreements and any and all other
instruments or documents delivered or to be delivered by the Borrower pursuant
hereto and thereto, as such documents may be amended or modified and in effect
from time to time.
"FACILITY B MATURITY DATE" means the date upon which the outstanding
principal amount of the Facility B Notes or Facility B Term Notes, as
applicable, all accrued but unpaid interest thereon, and all other Facility B
Obligations become due and payable, whether as a result of the occurrence
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of the stated maturity date or the acceleration of maturity pursuant to the
terms of any of the Facility B Loan Documents.
"FACILITY B NOTE" means a promissory note in substantially the form of
Exhibit AA-1" hereto, completed, executed and delivered by the Borrower and
payable to the order of a Lender in the amount of its Facility B Commitment,
including any amendment, modification, restatement, renewal or replacement of
such promissory note.
"FACILITY B OBLIGATIONS" means all unpaid principal of and accrued and
unpaid interest on the Loans, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower and each
Subsidiary Guarantor to the Lenders or to any Lender, the Agent or any
indemnified party arising under the Facility B Loan Documents.
"FACILITY B TERM LOAN" shall mean a loan under Facility B which is
converted to a term loan pursuant to Section 2.16.
"FACILITY B TERM NOTE" means a promissory note in substantially the form
of Exhibit AA-2" hereto, completed, executed and delivered by the Borrower and
payable to the order of a Lender in the amount of its Facility B Term Loan,
including any amendment, modification, restatement, renewal or replacement of
such promissory note.
"FACILITY B TERMINATION DATE" means October 30, 1998, or such later date,
if any, to which the Facility B Commitment is extended pursuant to Section 2.15.
"FACILITY FEE" means the fee determined in accordance with the pricing
grids set forth as Exhibit "E" hereto.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"FINISHED LOT" means a parcel of Entitled Land which satisfies the
requirements for Land Under Development and which the owner thereof has invested
85% or more of the cost to complete the Improvements thereon, and which: in
Florida, is a lot described within a final recorded subdivision plat or
agreement in lieu of plat; in California is a lot reflected on a duly recorded
final subdivision map or a parcel reflected on a duly recorded parcel map and is
subject to a final public subdivision report, if required, duly, validly and
unconditionally issued by the California Department of Real Estate pursuant to
and in accordance with the Subdivided Lands Act, Business and
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Professions Code Section 11018.2; in Arizona, is a Lot described in a final
public subdivision report duly, validly and unconditionally issued with the
Arizona Department of Real Estate pursuant to and in accordance with Arizona
Revised Statute Section 32-2181 et seq.; and, in Texas, is a Lot which
constitutes a valid, legally subdivided Lot within the meanings of the
applicable laws of Texas, the County and/or the City within which it is located,
and other requirements governing the subdivision of land and constitutes a Lot
reflected on a duly recorded plat or delineated representation of the
subdivision of lands, being a complete and exact representation of the
subdivision and other conformation in compliance with the requirements of all
applicable sections of VTCA Local Government Code Section 212, all the
applicable local ordinances and other requirements governing the subdivision of
land and approved by the appropriate Governmental Authority.
"FIRST CHICAGO" means The First National Bank of Chicago in its individual
capacity, and its successors.
"FITCH" means Fitch Investors Service, L.P. or any Person succeeding to
the securities rating business of such company.
"FIXED RATE" means the Eurodollar Rate.
"FIXED RATE ADVANCE" means a Facility B Advance which bears interest at a
Fixed Rate.
"FIXED RATE LOAN" means a Loan which bears interest at a Fixed Rate.
"FLOATING RATE" means, for any day, a rate per annum equal to the higher
of (i) the Corporate Base Rate for such day or (ii) the sum of the Federal Funds
Effective Rate plus 0.5%, in each case changing when and as the Corporate Base
Rate and the Federal Funds Effective Rate change.
"FLOATING RATE ADVANCE" means a Facility B Advance which bears interest at
the Floating Rate.
"FLOATING RATE LOAN" means a Loan which bears interest at the Floating
Rate.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession as in effect from time to time.
"GOVERNMENTAL AUTHORITY" means any foreign governmental authority, the
United States of America, any state of the United States of America and any
subdivision of any of the foregoing, and any agency, department, commission,
board, authority or instrumentality, bureau or court having jurisdiction over
the Lender, the Borrower, any Subsidiaries of the Borrower or any of their
respective properties.
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"GREYSTONE" means Pacific Greystone Corporation, a Delaware corporation,
and its successors.
"GREYSTONE ASSUMPTION AGREEMENT" means an agreement, in form and substance
substantially similar to the form attached hereto as Exhibit "F", executed by
Greystone and each of Greystone's Subsidiaries which does not become a
Subsidiary Guarantor on or prior to the Closing Date, pursuant to which
Greystone and such non-guaranteeing Subsidiaries become Borrowers hereunder.
"HAZARDOUS SUBSTANCES" means any toxic or hazardous wastes, pollutants or
substances, including, without limitation, asbestos, PCBs, petroleum products
and by-products, substances defined or listed as "hazardous substances" or
"toxic substances" or similarly identified in or pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. ss. 9061 ET SEQ., hazardous materials identified in or pursuant to the
Hazardous Materials Transportation Act 49 U.S.C. ss. 1802 ET SEQ., hazardous
wastes identified in or pursuant to The Resource Conservation and Recovery Act,
42 U.S.C. ss. 6901 ET SEQ., any chemical substance or mixture regulated under
the Toxic Substance Control Act of 1976, as amended, 15 U.S.C. ss. 2601 ET SEQ.,
any "toxic pollutant" under the Clean Water Act, 33 U.S.C. ss. 466 ET SEQ., as
amended, any hazardous air pollutant under the Clean Air Act, 42 U.S.C. ss. 7401
ET SEQ., and any hazardous or toxic substance or pollutant regulated under any
other applicable federal, state or local Environmental Laws.
"HOUSING UNIT" means a residential housing unit that is (or, upon
completion of construction thereof, will be) available for sale.
"HOUSING UNIT CLOSING" means a closing of the sale of a Housing Unit by
the Borrower to a bona fide purchaser for value that is not an Affiliate of the
Borrower.
"HOUSING UNIT UNDER CONTRACT" means a Housing Unit owned by the Borrower
as to which the Borrower has a bona fide contract of sale, in a form customarily
employed by the Borrower and reasonably satisfactory to the Agent, entered into
not more than 15 months prior to the date of determination with a Person who is
not an Affiliate of the Borrower, under which contract no defaults then exist;
PROVIDED, HOWEVER, that in the case of any Housing Unit the purchase of which is
to be financed in whole or in part by a loan insured by the Federal Housing
Administration or guaranteed by the Veterans Administration, the minimum down
payment shall be the amount (if any) required under the rules of the relevant
agency.
"IMPROVEMENTS" means on and off-site development work, including but not
limited to filling to grade, main water distribution and sewer collection
systems and drainage system installation, paving, and other improvements
necessary for the use of residential dwelling units and as required pursuant to
development agreements which may have been entered into with Governmental
Authorities.
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"INDEBTEDNESS" of any Person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such Person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors, (iv) evidenced by
bankers' acceptances, (v) consisting of obligations, whether or not assumed,
secured by Liens or payable out of the proceeds or production from property now
or hereafter owned or acquired by such Person, (vi) consisting of Capitalized
Lease Obligations, (vii) consisting of liabilities and obligations under any
sales/leaseback and receivable sales transactions, or (viii) consisting of a
letter of credit, other than a Performance Letter of Credit, or a reimbursement
obligation of such Person with respect to any letter of credit; (b) all net
obligations of such Person under interest swap and hedging obligations; (c) all
liabilities and obligations of others of the kind described in the preceding
clauses (a) or (b) that such Person has guaranteed or that is otherwise its
legal liability or which are secured by any assets or property of such Person
and all obligations to purchase, redeem or acquire any Capital Stock, other than
liability under executory contracts to purchase Capital Stock; and (d)
obligations of such Person to purchase securities or other property arising out
of or in connection with the sale of the same or substantially similar
securities or property. With respect to the Borrower, Indebtedness includes,
without limitation of the foregoing, all Obligations.
"INTERCREDITOR AGREEMENT" means the Intercreditor Agreement dated as of
October 31, 1997, by and among the Borrower, the Agent, the Lenders, UAMC, UAMC
Asset Corp. and certain lenders to UAMC and UAMC Asset Corp., as the same may be
amended, modified, supplemented or restated from time to time.
"INTEREST COVERAGE RATIO" of the Borrower on any date means the ratio of
(i) Consolidated EBITDA for the four fiscal quarters ended on such date to (ii)
total Consolidated Interest Incurred of the Borrower for such fiscal quarters.
"INTEREST PERIOD" means a Eurodollar Interest Period.
"INVESTMENT" of a Person means any loan, advance (other than commission,
travel and similar advances to officers and employees made in the ordinary
course of business), extension of credit (other than accounts receivable arising
in the ordinary course of business on terms customary in the trade), deposit
account or contribution of capital by such Person to any other Person or any
investment in, or purchase or other acquisition of, the stock, partnership
interests, membership interests, notes, debentures or other securities of any
other Person made by such Person.
"JOINDER AGREEMENT" means an agreement, in form and substance
substantially similar to the form attached hereto as Exhibit "D", executed by a
future Subsidiary of the Company, pursuant to which such Subsidiary becomes a
Borrower hereunder.
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"JOINT VENTURE" means a joint venture (whether in the form of a
corporation, a partnership, limited liability company or otherwise) (i) to which
the Borrower or a Joint Venture Subsidiary is or becomes a party (other than the
tenancies in common listed in Schedule VI annexed hereto), (ii) whether or not
Borrower is required to consolidate the joint venture in its financial
statements in accordance with GAAP, and (iii) in which the Borrower has or will
have a total investment exceeding $25,000 or which has total assets plus
contingent liabilities exceeding $100,000. For the purposes of this definition,
the "Borrower" includes the Company and Greystone and their respective
Subsidiaries, and the Borrower's investment in a joint venture shall be deemed
to include any Securities of the joint venture owned by the Borrower, any loans,
advances or accounts payable to the Borrower from the joint venture, any
commitment, arrangement or other agreement by the Borrower to provide funds or
credit to the joint venture and the Borrower's share of the undistributed
profits of the joint venture.
"JOINT VENTURE SUBSIDIARY" means a Subsidiary of the Company which is a
partner, shareholder or other equity owner in a Joint Venture which is not a
Borrower.
"LAND UNDER DEVELOPMENT" means Entitled Land upon which construction of
Improvements has commenced but not been completed and for which: (a) to the
extent required, a performance bond, surety or other security has been issued to
and in favor of and unconditionally accepted by each local agency and all
relevant Governmental Authorities, including any municipal utility district in
which the Real Estate is situated with regard to all work to be performed
pursuant to each and all of said subdivision improvement agreements or other
agreements; (b) all necessary plans have been approved by all relevant
Governmental Authorities for the installation of any and all Improvements
required to be installed upon such Real Estate; (c) all necessary permits have
been issued for the installation of said Improvements; and (d) utility services
necessary for construction of Improvements and residential dwelling units and
the operation thereon for the purpose intended will be available to such Real
Estate upon completion of the Improvements and there exists a binding obligation
on the part of each and every utility company to deliver necessary utility
services to such Real Estate.
"LENDERS" means the lending institutions listed on the signature pages of
this Agreement and the respective successors and permitted assigns of such
lending institutions.
"LENDING INSTALLATION" means, with respect to a Lender or the Agent, any
office, branch, subsidiary or affiliate of such Lender or the Agent.
"LIEN" means any lien (statutory or other), mortgage (including, without
limitation, purchase money mortgages), pledge, hypothecation, assignment,
deposit arrangement, encumbrance or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, the interest of a vendor or lessor under any
conditional sale, Capitalized Lease or other title retention agreement).
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"LIMITED PURPOSE FINANCE SUBSIDIARIES" means the limited purpose finance
subsidiaries as identified on the financial statements referred to in Section
4.03.
"LLP" means Lennar Land Partners, a Florida general partnership.
"LLP CREDIT AGREEMENT" means the Revolving Credit Agreement, dated as of
the Agreement Date, among LLP and certain Subsidiaries and joint ventures of
LLP, as guarantors thereunder, First Chicago as agent and lender thereunder, and
certain other lenders named therein.
"LLP LOANS" means all Indebtedness of LLP pursuant to the LLP Credit
Agreement and the other "Facility B Loan Documents" as defined therein.
"LLP LOANS GUARANTY" means the Guaranty, dated the Agreement Date,
executed by the Borrower in favor of the lenders under the LLP Credit Agreement
pursuant to which the Borrower and LNR have unconditionally, jointly and
severally guaranteed payment of the LLP Loans, including any amendment,
modification, renewal, restatement or replacement thereof.
"LLP PARTNER" means Lennar Land Partners Sub, Inc., a Delaware
corporation, a Wholly-Owned Subsidiary of the Company which holds a 50% interest
in LLP.
"LLP PARTNERSHIP AGREEMENT" means the Partnership Agreement, dated October
24, 1997, between LLP Partner and LNR Partner forming LLP, as the same may, if
permitted hereunder, be amended, modified or restated.
"LNR" means LNR Property Corporation, a Delaware corporation, and its
successors.
"LNR LOANS GUARANTIES" means the guaranties executed by the Company,
guaranteeing payment of Indebtedness of LNR.
"LNR PARTNER" means LNR Land Partners Sub, Inc., a Delaware corporation,
an indirect Wholly-Owned Subsidiary of LNR which holds a 50% interest in LLP.
"LOAN" means, with respect to a Lender, a loan made by such Lender
pursuant to Article II and any conversion or continuation thereof.
"MARLBOROUGH SUBSIDIARIES" means collectively, Marlborough Development
Corporation, an Arizona corporation, Marlborough Financial Corporation, a
California corporation, and Marlborough Mortgage Corporation, a California
corporation.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, properties, assets, condition (financial or otherwise), results of
operations, or prospects of (a) the Company and the other entities comprising
the Borrower and the Subsidiary Guarantors, taken as a whole, or (b) if so
specified, any entity comprising the Borrower or any Subsidiary Guarantor,
PROVIDED that the
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consummation of the transactions referred to in the definition of
"Reorganization" herein shall be deemed not to result in a material adverse
effect under this clause (i), (ii) the ability of the Borrower or any Subsidiary
Guarantor to perform its obligations under the Facility B Loan Documents, or
(iii) the validity or enforceability of any of the Facility B Loan Documents or
the rights or remedies of the Agent or the Lenders thereunder.
"MAXIMUM LEVERAGE RATIO" is defined in Section 7.02.
"MERGER" means the merger of the Company with and into Greystone pursuant
to the Merger Agreement.
"MERGER AGREEMENT" means the Plan and Agreement of Merger dated as of June
10, 1997, between Greystone and the Company.
"MINIMUM INTEREST COVERAGE RATIO" means an Interest Coverage Ratio of not
less than two (2) to one (1).
"MOODY'S" means Moody's Investors Service, Inc. or any Person succeeding
to the securities rating business of such company.
"MONTHLY PAYMENT DATE" means the first day of each calendar month.
"MORTGAGE" means any mortgage, deed of trust or other security deed in
Real Estate, or in rights or interests, including leasehold interests, in Real
Estate.
"MORTGAGE BANKING SUBSIDIARY" means a Subsidiary which is engaged or
hereafter engages in the mortgage banking business, including the origination,
servicing, packaging and/or selling of mortgages on residential single- and
multi-family dwellings and/or commercial property, and in any event shall
include AFSI and UAMC.
"MORTGAGE BANKING SUBSIDIARIES NOTE" means the promissory note dated the
Closing Date, in the principal amount of $150,000,000 executed by the Mortgage
Banking Subsidiaries as joint makers payable to the order of the Company which
is to be held by the Agent pursuant to Section 6.09. The Mortgage Banking
Subsidiaries Note shall be in form and substance as provided in Exhibit "D"
attached hereto.
"MULTIEMPLOYER PLAN" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"NET BOOK VALUE" means, with respect to an asset owned by a Borrower, the
gross investment of that Borrower in the asset, less all reserves (including
loss reserves and reserves for depreciation) attributable to that asset, all
determined in accordance with GAAP consistently applied.
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"NET PROCEEDS" means, in connection with the sale of any asset by the
Borrower, the gross sales price less (A) all bona fide prorations and
adjustments to the sales price required to be made pursuant to the terms of the
sales contract and (B) the aggregate amount of bona fide closing costs due to
any Person PROVIDED that if such closing costs are due to an Affiliate of the
Borrower, such costs comply with Section 7.12.
"NET WORTH" means, at any date, the amount of consolidated stockholders'
equity of the Company and its consolidated Subsidiaries as shown on its balance
sheet as of such date in accordance with GAAP.
"NOTES" means, collectively, the Facility B Notes and, if the Facility B
Advances outstanding are converted as provided in this Agreement, the Facility B
Term Notes; and "Note" means any one of the Notes.
"NOTICE OF ASSIGNMENT" is defined in Section 12.03(b).
"OBLIGATIONS" means the Facility A Obligations and the Facility B
Obligations.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"PARTICIPANTS" is defined in Section 12.02.
"PERFORMANCE LETTER OF CREDIT" means a letter of credit issued to a
governmental authority or a quasi-governmental agency to insure the completion
by the Borrower of a development of land improvements or to insure payment by
the Borrower of escrow accounts.
"PERMITTED LIENS" means (a) Liens existing on the date of this Agreement
and described on Schedule "VIII" hereto; (b) Liens imposed by governmental
authorities for taxes, assessments or other charges not yet subject to penalty
or which are being contested in good faith and by appropriate proceedings, if
adequate reserves with respect thereto are maintained on the books of the
Borrower in accordance with GAAP; (c) statutory liens of carriers, warehousemen,
mechanics, materialmen, landlords, repairmen or other like Liens arising by
operation of law in the ordinary course of business provided that (i) the
underlying obligations are not overdue for a period of more than 30 days or (ii)
such Liens are being contested in good faith and by appropriate proceedings and
adequate reserves with respect thereto are maintained on the books of the
Borrower in accordance with GAAP; (d) Liens securing the performance of bids,
trade contracts (other than borrowed money), leases, statutory obligations,
surety and appeal bonds, performance bonds and other obligations of a like
nature incurred in the ordinary course of business; (e) easements,
rights-of-way, zoning, similar restrictions and other similar encumbrances or
title defects which, singly or in the aggregate, do not in any case materially
detract from the value of the Real Estate subject thereto (as such Real Estate
is used by the Borrower or any of its Subsidiaries) or interfere with the
ordinary conduct of the business of the Borrower or any of its Subsidiaries; (f)
Liens arising by operation of law in
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connection with judgments, only to the extent, for an amount and for a period
not resulting in a default with respect thereto; (g) pledges or deposits made in
the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security legislation; (h) Liens
securing Indebtedness of a Person existing at the time such Person becomes a
Subsidiary or is merged with or into the Borrower or a Subsidiary or Liens
securing Indebtedness incurred in connection with an acquisition of Real
Property, PROVIDED that (1) such Liens were in existence prior to the date of
such acquisition, merger or consolidation, were not incurred in anticipation
thereof, and do not extend to any other assets or (2) such Liens are granted to
the seller of such Real Property to secure the purchase price therefor; (i)
Liens securing Indebtedness incurred to refinance any Indebtedness that was
previously so secured and permitted hereunder in a manner no more adverse to the
Lenders than the terms of the Liens securing such refinanced Indebtedness; and
(j) Liens securing the Obligations.
"PERSON" means any natural person, corporation, firm, enterprise, trust,
association, company, partnership, limited liability company, joint venture or
other entity or organization, or any government or political subdivision or any
agency, department, or instrumentality thereof.
"PLAN" means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have any
liability.
"PLEDGE AGREEMENT" means the Pledge Agreement substantially in the form of
Exhibit "F" to the Facility A Credit Agreement, including any amendment,
modification, renewal or restatement thereof.
"PROJECT" means a parcel of Real Estate, owned by the Borrower or a
Subsidiary Guarantor which is to be developed or sold as part of a common
scheme.
"PRO RATA SHARE" means, for each Lender, the ratio that such Lender's
Facility B Commitment bears to the Aggregate Facility B Commitment.
"PURCHASERS" is defined in Section 12.03(a).
"QUARTERLY PAYMENT DATE" means the first day of each April, July, October
and January.
"RATING AGENCY" means any one of Duff & Phelps, Fitch, Moody's or S&P.
"RATINGS" means a rating of the Company's senior unsecured long-term debt
from one or more of the Rating Agencies.
"REAL ESTATE" means land, rights in land and interests therein (including,
without limitation, leasehold interests), and equipment, structures,
improvements, furnishings, fixtures and buildings (including a mobile home of
the type usually installed on a developed site) located on or used in
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connection with land, rights in land or interests therein (including leasehold
interests), but shall not include Mortgages or interests therein.
"RECENT BALANCE SHEET" is defined in Section 4.05.
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or other
regulation or official interpretation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.
"REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to member banks of the Federal Reserve System.
"REORGANIZATION" means (i) the formation of LNR, (ii) the transfer to LNR
of all of the business and assets of the Company's Asset Management Division and
that portion of the Company's Financial Services Division relating to the
servicing, acquisition and management of commercial mortgages and real estate,
(iii) the distribution to the shareholders of the Company of all of the capital
stock of LNR, (iv) the transfer by LLP Partner to LLP of the Real Estate
described on Schedule VII hereto in exchange for a 50% general partnership
interest in LLP, and (v) the Company's merger with and into Greystone.
"REORGANIZATION DOCUMENTS" means the (i) Spin-Off Agreement, (ii) the LLP
Partnership Agreement, (iii) the Merger Agreement, (iv) the IRS Ruling dated
August 14, 1997 with respect to the Spin-Off Agreement, (v) the Registration
Statement on Form S-4 filed by Greystone with the Securities and Exchange
Commission on September 15, 1997 and as declared effective on September 30, 1997
pertaining to the Reorganization, and all amendments thereto, and (vi) all other
documents which are an integral part of the Reorganization.
"REPORTABLE EVENT" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, PROVIDED, HOWEVER, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
"REQUIRED LENDERS" means Lenders in the aggregate having at least 66 b% of
the Aggregate Facility B Commitment or, if the Aggregate Facility B Commitment
has been terminated, Lenders in the aggregate holding at least 66 b% of the
aggregate unpaid principal amount of the outstanding Loans.
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"RESERVE REQUIREMENT" means, with respect to a Eurodollar Interest Period,
the maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities.
"SECTION" means a numbered section of this Agreement, unless another
document is specifically referenced.
"SECURITIES" of any Person means equity securities and debt securities and
any other instrument commonly understood to be a security issued by that Person.
"SINGLE EMPLOYER PLAN" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member of
the Controlled Group.
"SPIN-OFF AGREEMENT" means the Separation and Distribution Agreement,
dated as of June 10, 1997, between the Company and Greystone, as the same may,
if permitted hereunder, be amended, modified or restated.
"S & P" means Standard & Poor's Ratings Services, a division of The McGraw
Hill Companies, Inc., and any Person succeeding to the securities rating
business of such company.
"STI" means Strategic Technologies, Inc., a Florida corporation.
"SUBORDINATED DEBT" means any Indebtedness of any entity comprising the
Borrower which by its terms is subordinated, in form and substance and in a
manner satisfactory to the Required Lenders, in time and right of payment to the
prior payment in full of the Obligations, but which in any event matures after
the Facility A Termination Date.
"SUBSIDIARY" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(ii) any partnership, limited liability company, association, joint venture or
similar business organization more than 50% of the ownership interests having
ordinary voting power of which shall at the time be so owned or controlled.
"SUBSIDIARY GUARANTOR" means a Subsidiary of the Company or Greystone
which has executed a Subsidiary Guaranty.
"SUBSIDIARY GUARANTY" means a guaranty, in substantially the form of
Exhibit "B" hereto, including any amendment, modification, renewal, restatement
or replacement thereof.
"TANGIBLE NET WORTH" means, at any date, Net Worth less the aggregate
amount of all goodwill and other assets that are properly classified as
"intangible assets" at such date in accordance with GAAP.
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"TITLE COMPANIES" means collectively, Lennar Title Services, Inc.,
TitleAmerica Insurance Corporation, Regency Title Company and Universal Title
Insurance Inc.
"TRANSFEREE" is defined in Section 12.03(c).
"TYPE" means, with respect to any Facility B Advance, its nature as a
Floating Rate Advance or Fixed Rate Advance.
"UAMC" means Universal American Mortgage Company.
"UNFUNDED LIABILITIES" means the amount (if any) by which the present
value of all vested nonforfeitable benefits under all Single Employer Plans
exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans.
"UNIMPROVED ENTITLED LAND" means Entitled Land upon which no Improvements
have been commenced.
"UNMATURED DEFAULT" means an event which but for the lapse of time or the
giving of notice, or both, would constitute an Event of Default.
"WHOLLY-OWNED SUBSIDIARY" of a Person means (i) any Subsidiary all of the
outstanding voting securities of which shall at the time be owned or controlled,
directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries
of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of
such Person, or (ii) any partnership, association, joint venture or similar
business organization 100% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled.
SECTION 1.02. COMPUTATION OF TIME PERIODS. For the purposes of this
Agreement, in the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including", the words "to"
and "until" each means "to but excluding" and the word "through" means "to and
including".
SECTION 1.03. ACCOUNTING TERMS. All accounting terms used and not
specifically defined herein shall be construed in accordance with GAAP. All
references herein to GAAP shall be deemed to refer to those principles;
PROVIDED, HOWEVER, that notwithstanding the requirements imposed by GAAP which
require the consolidation of the operations of the Mortgage Banking Subsidiaries
with the operations of the Borrower, for the purposes of the calculations set
forth in Article VII hereof, the operations of such Subsidiary shall be so
included only as specifically provided for herein.
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ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS.
(a) FACILITY B COMMITMENT. On and after the Closing Date and prior to the
Facility B Termination Date, upon the terms and conditions set forth in this
Agreement and in reliance upon the representations and warranties of Borrower
herein set forth, each Lender severally agrees to make Facility B Advances to
the Borrower from time to time in amounts not to exceed in the aggregate at any
one time outstanding the amount of its Facility B Commitment, PROVIDED that in
no event may the aggregate principal amount of all outstanding Facility B
Advances exceed the Aggregate Facility B Commitment. Subject to the terms of
this Agreement, the Borrower may borrow, repay and reborrow under Facility B at
any time prior to the Facility B Termination Date. The Facility B Commitments to
lend hereunder shall expire on the Facility B Termination Date.
(b) ADVANCES AND PARTICIPATIONS PRO RATA. Each Facility B Advance
hereunder shall be made by the several Lenders ratably in accordance with their
respective Pro Rata Shares.
SECTION 2.02. TYPES OF ADVANCES; MANDATORY PRINCIPAL PAYMENTS;
FINAL MATURITY.
(a) The Facility B Advances may be Floating Rate Advances, or Fixed Rate
Advances, or a combination thereof, selected by the Borrower in accordance with
Section 2.06; PROVIDED, HOWEVER, that there shall not be more than Five (5)
Facility B Advances which are Fixed Rate Advances outstanding at any time.
(b) The Borrower shall prepay the principal of the Notes in the amount,
and promptly upon its receipt, of any principal payment made with respect to the
Mortgage Banking Subsidiaries Note from and after the date the Agent is granted
a security interest therein pursuant to Section 8.01; PROVIDED, HOWEVER, that if
the Company does not designate which of the Facilities is to be reduced by such
prepayment, the prepayment shall be applied first to any outstanding Facility B
Obligations and then to any outstanding Facility A Obligations.
(c) All Facility B Obligations shall be due and payable by the Borrower on
the Facility B Termination Date unless such Obligations are converted to
Facility B Term Loans pursuant to Section 2.16, or, if earlier, shall become due
and payable pursuant to Section 9.02.
(d) Except as provided above in this Section or elsewhere in this
Agreement or in the Facility A Credit Agreement, the Company may direct the
Agent to apply prepayments of the Obligations against either of the Facilities.
SECTION 2.03. OPTIONAL PRINCIPAL PAYMENTS. The Borrower may from time to
time pay, without penalty or premium, all outstanding Floating Rate Advances,
or, in a minimum
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aggregate amount of $100,000 or any integral multiple of $100,000 in excess
thereof, any portion of the outstanding Floating Rate Advances upon one Business
Day's prior notice to the Agent. A Fixed Rate Advance may not be paid prior to
the last day of the applicable Interest Period.
SECTION 2.04. FACILITY FEE AND REDUCTION OF FACILITY B Commitments.
(a) The Borrower agrees to pay to the Agent for the account of each Lender
a Facility Fee per annum on the amount of such Lender's Facility B Commitment
from the Closing Date to and including the Facility B Termination Date, payable
in arrears on each Quarterly Payment Date thereafter and on the Facility B
Termination Date. Such Facility Fee shall be determined on the first day of each
fiscal quarter in accordance with the pricing grid set forth as Exhibit "E"
hereto.
(b) The Borrower may permanently reduce the Aggregate Facility B
Commitment in whole, or in part ratably among the Lenders in integral multiples
of $5,000,000, upon at least three Business Days' written notice to the Agent,
which notice shall specify the amount of any such reduction, PROVIDED, HOWEVER,
that the amount of the Aggregate Facility B Commitment may not be reduced below
the aggregate principal amount of the outstanding Facility B Advances. All
accrued Facility Fees under this Section 2.04 shall be payable on the effective
date of any termination of the obligations of the Lenders to make Loans
hereunder. The fees payable under this Section 2.04, once paid, shall not be
refundable for any reason.
SECTION 2.05. METHOD OF BORROWING. Not later than noon (Chicago time) on
each Borrowing Date, each Lender shall make available its Loan, in funds
immediately available in Chicago to the Agent at its address specified pursuant
to Section 13.01. The Agent will make the funds so received from the Lenders
available to the Borrower by deposit into Account No. 5801117 maintained by the
Borrower at First Chicago.
SECTION 2.06. METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR ADVANCES.
(a) The Borrower shall select the Type of Facility B Advance and, in the
case of each Fixed Rate Advance, the Interest Period applicable to each Advance
from time to time. The Borrower shall give the Agent irrevocable notice (a
"Borrowing Notice") not later than 10:00 a.m. (Chicago time) on the Borrowing
Date for each Floating Rate Advance and prior to 10:00 a.m. (Chicago time) on
the date which is two Business Days before the Borrowing Date for each Fixed
Rate Advance, specifying:
(i) the Borrowing Date, which shall be a Business Day, of such
Facility B Advance,
(ii) the aggregate amount of such Facility B Advance,
(iii) the Type of Facility B Advance selected, and
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(iv) in the case of each Fixed Rate Advance, the Interest Period
applicable thereto.
The Borrower shall be entitled to obtain only one Facility B Advance in any
single Business Day, which may be comprised in whole or in part of any Fixed
Rate Advance. Changes in the rate of interest on that portion of any Facility B
Advance maintained as a Floating Rate Advance will take effect simultaneously
with each change in the Floating Rate. Each Fixed Rate Advance shall bear
interest from and including the first day of the Interest Period applicable
thereto to (but not including) the last day of such Interest Period at the
interest rate determined as applicable to such Fixed Rate Advance. The Borrower
shall select Interest Periods with respect to Fixed Rate Advances so that it is
not necessary to repay a Fixed Rate Advance prior to the last day of the
applicable Interest Period in order to make any mandatory payment required to be
made pursuant to Section 2.02 above or to repay the Obligations in full on the
Facility B Maturity Date.
(b) Each Borrowing Notice shall be irrevocable and binding on the Borrower
and, in respect of the borrowing specified in the Borrowing Notice, the Borrower
shall indemnify each Lender against any loss or expense incurred by that Lender
as a result of any failure to fulfill the applicable conditions set forth in
Section 5.02 on or before the proposed Borrowing Date specified in the Borrowing
Notice, including, without limitation, any loss (including loss of profit) or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by any Lender to fund the Loan to be made by that Lender as
part of that borrowing when that Loan, as a result of that failure, is not made
on that date.
SECTION 2.07. METHOD OF SELECTING TYPES AND INTEREST PERIODS FOR
CONVERSION AND CONTINUATION OF ADVANCES.
(a) RIGHT TO CONVERT. The Borrower may elect from time to time, subject to
the provisions of Section 2.07(c), to convert all or any part of a Facility B
Advance of any Type into any other Type or Types of Facility B Advances;
PROVIDED that any conversion of any Fixed Rate Advance shall be made on, and
only on, the last day of the Interest Period applicable thereto.
(b) AUTOMATIC CONVERSION AND CONTINUATION. Floating Rate Advances shall
continue as Floating Rate Advances unless and until such Floating Rate Advances
are converted into Fixed Rate Advances. Fixed Rate Advances of any Type shall
continue as Fixed Rate Advances of such Type until the end of the then
applicable Interest Period therefor, at which time such Fixed Rate Advance shall
be automatically converted into a Floating Rate Advance unless the Borrower
shall have given the Agent notice in accordance with Section 2.07(d) requesting
that, at the end of such Interest Period, such Fixed Rate Advance either
continue as a Fixed Rate Advance of such Type for the same or another Interest
Period or be converted into a Facility B Advance of another Type.
(c) NO CONVERSION IN CASE OF AN EVENT OF DEFAULT OR UNMATURED DEFAULT.
Notwithstanding anything to the contrary contained in Section 2.07(a) or
2.07(b), no Facility B Advance may be converted into or continued as a Fixed
Rate Advance (except with the consent of the Required Lenders) when any Event of
Default or Unmatured Default has occurred and is continuing.
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(d) CONVERSION/CONTINUATION NOTICE. The Borrower shall give the Agent
irrevocable notice (a "Conversion/Continuation Notice") of each conversion of a
Facility B Advance or continuation of a Fixed Rate Advance not later than 10:00
a.m. (Chicago time) on the day of any conversion into a Floating Rate Advance or
prior to 10:00 a.m. (Chicago time) on the date which is two Business Days prior
to the date of the requested conversion into or continuation of a Fixed Rate
Advance, specifying:
(i) the requested date (which shall be a Business Day) of such
conversion or continuation;
(ii) the amount and Type of the Facility B Advance to be converted
or continued; and
(iii) the amount and Type(s) of Facility B Advance(s) into which
such Advance is to be converted or continued and, in the case of a
conversion into or continuation of a Fixed Rate Advance, the duration of
the Interest Period applicable thereto.
SECTION 2.08. MINIMUM AMOUNT OF EACH ADVANCE. Each Fixed Rate Advance
shall be in the minimum amount of $5,000,000 (and in multiples of $100,000 if in
excess thereof), and each Floating Rate Advance shall be in the minimum amount
of $500,000 and in multiples of $100,000 if in excess thereof), PROVIDED,
HOWEVER, that any Floating Rate Advance may be in the amount of the unused
Aggregate Facility B Commitment.
SECTION 2.09. RATE AFTER MATURITY. Except as provided in the next
sentence, any Facility B Advance which is not paid at maturity for such Advance,
whether by acceleration or otherwise, shall bear interest until paid in full at
a rate per annum equal to the Floating Rate plus 5% per annum. In the case of a
Fixed Rate Advance the maturity of which is accelerated, such Fixed Rate Advance
shall bear interest at the rate otherwise applicable to such Interest Period
plus 5% per annum for the remainder of the applicable Interest Period, and
thereafter at the Floating Rate plus 5% per annum.
SECTION 2.10. METHOD OF PAYMENT. All payments of principal, interest, and
fees hereunder shall be made, without setoff, deduction, or counterclaim, in
immediately available funds to the Agent at the Agent's address specified
pursuant to Article XIII, or at any other Lending Installation of the Agent
specified in writing by the Agent to the Borrower, by 1:00 p.m. (Chicago time)
on the date when due and shall be made ratably by the Agent among the Lenders
with respect to their Loans. Each payment delivered to the Agent for the account
of any Lender shall be delivered promptly by the Agent to such Lender in the
same type of funds which the Agent received at its address specified pursuant to
Article XIII or at any Lending Installation specified in a notice received by
the Agent from such Lender. The Agent is hereby authorized to charge any account
of the Borrower maintained with First Chicago for each payment of principal,
interest and fees as it becomes due hereunder. The Agent shall endeavor in good
faith to provide telephonic notice to Borrower
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prior to any such charge, but the Agent shall not be liable to Borrower or any
other Person if Agent fails to provide any such notice. If and to the extent
payment owed to any Lender is not made by the Borrower to the Agent or that
Lender, as the case may be, when due hereunder or under the Note held by that
Lender, the Borrower further authorizes such Lender to charge from time to time
against any or all of the accounts maintained by the Borrower with the Lender,
its subsidiaries, affiliates or branches any amount so due, subject to the
provisions of Article XI.
SECTION 2.11. FACILITY B NOTES; TELEPHONIC NOTICES. Each Lender is hereby
authorized to record the principal amount of each of its Loans and each
repayment on the schedule attached to its applicable Facility B Notes; PROVIDED,
HOWEVER, that the failure to so record shall not affect the Borrower's
obligations under any such Facility B Note. The Borrower hereby authorizes the
Agent to extend, convert or continue Facility B Advances, effect selections of
Types of Advances and to transfer funds based on telephonic notices made by any
person or persons the Agent or any Lender in good faith believes to be acting on
behalf of the Borrower. All actions taken by the Lenders and the Agent upon such
telephonic notices are hereby approved by the Borrower, and the Lenders and the
Agent shall incur no liability as a result of any such actions. The Borrower
agrees to deliver promptly to the Agent a written confirmation, if such
confirmation is requested by the Agent or any Lender, of each telephonic notice
signed by an Authorized Officer. If the written confirmation differs in any
material respect from the action taken by the Agent and the Lenders, the records
of the Agent and the Lenders shall govern absent manifest error.
SECTION 2.12. INTEREST PAYMENT DATES; INTEREST AND FEE BASIS. Interest
accrued on each Floating Rate Advance shall be payable on each Monthly Payment
Date, commencing with the first such date to occur after the date hereof, on any
date on which the Floating Rate Loan is prepaid, whether due to acceleration or
otherwise, and on the Facility B Termination Date. Interest accrued on that
portion of the outstanding principal amount of any Floating Rate Advance
converted into a Fixed Rate Advance on a day other than a Monthly Payment Date
shall be payable on the date of conversion. Interest accrued on each Fixed Rate
Advance shall be payable on the last day of its applicable Interest Period, on
any date on which the Fixed Rate Advance is prepaid, whether by acceleration or
otherwise, and at maturity. Interest accrued on each Fixed Rate Advance having
an Interest Period longer than three months shall also be payable on the last
day of each three-month interval during such Interest Period. Interest on
Floating Rate Loans and Facility Fees shall be calculated for actual days
elapsed on the basis of a 365-day year; interest on Fixed Rate Loans shall be
calculated for actual days elapsed on the basis of a 360-day year. Interest
shall be payable for the day a Facility B Advance is made but not for the day of
any payment on the amount paid if payment is received prior to 1:00 p.m.
(Chicago time) at the place of payment. If any payment of principal of or
interest on a Facility B Advance shall become due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day
and, in the case of a principal payment, such extension of time shall be
included in computing interest in connection with such payment.
SECTION 2.13. NOTIFICATION OF ADVANCES, INTEREST RATES, PREPAYMENTS AND
COMMITMENT REDUCTIONS. Promptly after receipt thereof, the Agent will notify
each Lender of the contents of each Aggregate Facility B Commitment reduction
notice, Borrowing Notice,
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Conversion/Continuation Notice and repayment notice received by it hereunder.
The Agent will notify each Lender of the interest rate applicable to each Fixed
Rate Advance promptly upon determination of such interest rate.
SECTION 2.14. LENDING INSTALLATIONS. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and the Facility B Notes shall be deemed held by each
Lender for the benefit of such Lending Installation. Each Lender may, by written
or telex notice to the Agent and the Borrower, designate a Lending Installation
through which Loans will be made by it and for whose account Loan payments are
to be made.
SECTION 2.15. EXTENSION OF FACILITY B TERMINATION DATE. The Borrower may
request an extension of the Facility B Termination Date by submitting a request
for an extension to the Agent (an "Extension Request") not more than 90 nor less
than 60 days prior to the Facility B Termination Date. The new Facility B
Termination Date shall be no more than 364 days after the Facility B Termination
Date in effect at the time the Extension Request is received, including the
Facility B Termination Date as one of the days in the calculation of the days
elapsed. Promptly following receipt of an Extension Request, the Agent shall
notify each Lender of the contents thereof, shall request each Lender to approve
the Extension Request, and shall specify the date (which must be at least 30
days after the Extension Request is delivered to the Lenders) as of which the
Lenders must respond to the Extension Request (the "Reply Date"). Each Lender
approving the Extension Request shall deliver its written consent no later than
the Reply Date. If the consent of all of the Lenders is received by the Agent on
or prior to the Reply Date, the Facility B Termination Date specified in the
Extension Request shall become effective at the expiration of the existing
Facility B Termination Date and the Agent shall promptly notify the Borrower and
each Lender of the new Facility B Termination Date. The Borrower may not request
more than two extensions of the Facility B Termination Date pursuant to this
Section.
SECTION 2.16. FACILITY B TERM-OUT OPTION. The Company shall have the
option to convert the Loans outstanding under Facility B on the Facility B
Termination Date (as extended pursuant to Section 2.15) to a term loan (the
"Facility B Term Loan") which shall mature and become due and payable in full on
the Facility A Termination Date. In order to request such conversion, the
Company shall give written notice (the "Term-Out Notice") to the Agent not less
than 30 or more than 90 days prior to the Facility B Termination Date, which
shall specify the principal amount of the Loans outstanding under Facility B
which the Company desires to convert to the Facility B Term Loan. Promptly
following its receipt of the Term-Out Notice, the Agent shall send a copy of the
Term-Out Notice to each of the Lenders. If the Company has given the Term-Out
Notice as provided herein, the Loans outstanding under Facility B on the
Facility B Termination Date shall automatically convert to Facility B Term
Loans, with each Lender being deemed to have made its Pro Rata Share of the
Facility B Term Loans, and the Agent shall promptly notify each Lender of the
principal amount thereof. The principal amount of the Facility B Term Loans
shall be repayable in equal quarterly installments on the last day of each
fiscal quarter of the Company, commencing with the first full quarter following
the Facility B Termination Date, with the final installment due
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and payable on the Facility A Termination Date. Facility B Term Loans shall be
either Fixed Rate Loans or Floating Rate Loans, with interest accruing and being
paid in the same manner as Loans outstanding under Facility A, and with the
Facility B Term Loans to be designated as, continued as, or converted into Fixed
Rate Loans in the same manner as Facility B Advances could be designated as,
continued as, or converted into Fixed Rate Advances or Floating Rate Advances as
provided in Section 2.07. In the event of such conversion, the Facility B Term
Note held by each Lender shall thereafter evidence the Facility B Term Loan made
by such Lender hereunder.
SECTION 2.17. NON-RECEIPT OF FUNDS BY THE AGENT. Unless the Borrower or a
Lender, as the case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal,
interest or fees to the Agent for the account of the Lenders, that it does not
intend to make such payment, the Agent may assume that such payment has been
made. The Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
such Lender or the Borrower, as the case may be, has not in fact made such
payment to the Agent, the recipient of such payment shall, on demand by the
Agent, repay to the Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date such
amount was so made available by the Agent until the date the Agent recovers such
amount at a rate per annum equal to (i) in the case of payment by a Lender, the
Federal Funds Effective Rate for such day or (ii) in the case of payment by the
Borrower, the interest rate applicable to the relevant Loan.
SECTION 2.18. WITHHOLDING TAX EXEMPTION. At least five Business Days prior
to the first date on which interest or fees are payable hereunder for the
account of any Lender, each Lender that is not incorporated under the laws of
the United States of America, or a state thereof, agrees that it will deliver to
each of the Borrower and the Agent two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, certifying in either case that such
Lender is entitled to receive payments under this Agreement and the Facility B
Notes or the Facility B Term Notes, as applicable, without deduction or
withholding of any United States federal income taxes. Each Lender which so
delivers a Form 1001 or 4224 further undertakes to deliver to each of the
Borrower and the Agent two additional copies of such form (or a successor form)
on or before the date that such form expires (currently, three successive
calendar years for Form 1001 and one calendar year for Form 4224) or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent forms so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by the Borrower or the Agent, in
each case certifying that such Lender is entitled to receive payments under this
Agreement and the Facility B Notes or Facility B Term Notes, as applicable,
without deduction or withholding of any United States federal income taxes,
unless an event (including without limitation any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form with
respect to it and such Lender advises the Borrower and the Agent that it is not
capable of receiving payments without any deduction or withholding of United
States federal income tax.
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SECTION 2.19. UNCONDITIONAL OBLIGATION TO MAKE PAYMENTS. To the fullest
extent permitted by law, the Borrower shall make all payments hereunder, under
the Facility B Notes, the Facility B Term Notes and under all of the other
Facility B Loan Documents regardless of any defense or counterclaim, including
any defense or counterclaim based on any law, rule or policy which is now or
hereafter promulgated by any governmental authority or regulatory body and which
may adversely affect the Borrower's obligations to make, or the right of the
holder of any Facility B Note or Facility B Term Note, as applicable, to
receive, those payments.
SECTION 2.20. COMPENSATING BALANCES. First Chicago shall have the right
(but no obligation) to enter into a separate agreement with the Borrower which
provides for the reduction of the interest rate payable to First Chicago
hereunder in the event that the Borrower maintains collected balances in
non-interest bearing accounts at First Chicago, but in no event shall such
agreement affect the amounts payable under this Agreement to any other Lender.
Similarly, each other Lender shall have the right (but no obligation) to enter
into a separate agreement with the Borrower which provides for the rebate to
Borrower of a portion of the interest paid to such Lender under this Agreement
in the event that the Borrower maintains collected balances in non-interest
bearing accounts at such Lender, but in no event shall any such agreement affect
the amounts payable under this Agreement to such Lender.
ARTICLE III
CHANGE IN CIRCUMSTANCES
SECTION 3.01. YIELD-PROTECTION. If the adoption, on or after the Agreement
Date, of any law or any governmental or quasi-governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law), or any
change, on or after the Agreement Date, in interpretation thereof, or the
compliance of any Lender (which term, for purposes of this Article III, shall be
deemed to include such Issuer in such capacity) therewith,
(i0 subjects any Lender or any applicable Lending Installation to any
tax, duty, charge or withholding on or from payments due from the Borrower
(excluding federal taxation of the overall net income of any Lender or
applicable Lending Installation), or changes the basis of taxation of
payments to any Lender in respect of its Loans or other amounts due it
hereunder, or
(ii0 imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against assets
of, deposits with or for the account of, or credit extended by, any Lender
or any applicable Lending Installation (other than reserves and
assessments taken into account in determining the interest rate applicable
to Fixed Rate Advances), or
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(iii0 imposes any other condition the result of which is to increase the
cost to any Lender or any applicable Lending Installation of making,
funding or maintaining loans (or letters of credit or participations
therein) or reduces any amount receivable by any Lender or any applicable
Lending Installation in connection with loans (or letters of credit or
participations therein), or requires any Lender or any applicable Lending
Installation to make any payment calculated by reference to the amount of
loans (or letters of credit or participations therein) held or interest
received by it, by an amount deemed material by such Lender,
then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an amount
received which such Lender determines is attributable to making, funding and
maintaining its Loans and its Facility B Commitment (PROVIDED, THAT the
foregoing shall not include any amounts which First Chicago certifies are
reflected in an increase of the Corporate Base Rate for the relevant period).
SECTION 3.02. CHANGES IN CAPITAL ADEQUACY REGULATIONS. If a Lender
reasonably determines the amount of capital required or expected to be
maintained by such Lender, any Lending Installation of such Lender or any
corporation controlling such Lender is increased as a result of a Change, and
such increase will have the effect of reducing the rate of return on such
Lender's capital as a consequence of such Lender's obligations hereunder to a
level below that which such Lender or such corporation, as the case may be,
could have achieved but for such Change (taking into account such Lender's or
such corporation's policies, as the case may be, with respect to capital
adequacy and any payments made to such Lender pursuant to Section 3.01 which
relate to capital adequacy and assuming that such Lender's capital was fully
utilized prior to such Change), then within 15 days of demand by such Lender,
the Company shall pay to the Agent, for the account of such Lender, such
additional amount or amounts as will compensate such Lender for such reduction.
If any Lender becomes entitled to claim any additional amounts pursuant to this
Section 3.02 it shall promptly notify the Company through the Agent of the event
by reason of which it has become so entitled, but in any event within 90 days,
after such Lender obtains actual knowledge thereof; PROVIDED that if such Lender
fails to give such notice within the 90-day period after it obtains actual
knowledge of such an event, such Lender shall, with respect to such compensation
in respect of any costs resulting from such event, only be entitled to payment
for costs incurred from and after the date 90 days prior to the date that such
Lender does give such notice. A certificate setting forth in reasonable detail
the computation of any additional amount payable pursuant to this Section 3.02,
submitted by such Lender to the Company through the Agent, shall be delivered to
the Company promptly after the initial incurrence of such additional amounts.
"Change" means (i) any change after the Agreement Date in the Risk-Based Capital
Guidelines or (ii) any adoption of or change in any other law, governmental or
quasi-governmental rule, regulation, policy, guideline, interpretation, or
directive (whether or not having the force of law) after the date of this
Agreement which affects the amount of capital required or expected to be
maintained by any Lender or any Lending Installation or any corporation
controlling any Lender or any Lending Institution. "Risk-Based Capital
Guidelines" means (i) the risk-based capital guidelines in effect in the United
States on the date of this Agreement, including transition rules, and (ii) the
corresponding capital regulations promulgated by regulatory authorities outside
the United States implementing the July 1988 report
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of the Basle Committee on Banking Regulation and Supervisory Practices entitled
"International Convergence of Capital Measurements and Capital Standards,"
including transition rules, and any amendments to such regulations adopted prior
to the date of this Agreement.
SECTION 3.03. AVAILABILITY OF TYPES OF ADVANCES. If any Lender determines
that maintenance of its Fixed Rate Loans at a suitable Lending Installation
would violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Agent determines that (i) deposits of a type
and maturity appropriate to match fund Fixed Rate Advances are not available or
(ii) the interest rate applicable to a Type of Advance does not accurately
reflect the cost of making or maintaining such Advance, then the Agent shall
suspend the availability of the affected Type of Advance and require any Fixed
Rate Advances of the affected Type to be repaid or to be converted (in
accordance with the terms of this Agreement) to any Type of Advance which is not
affected and is then available under this Agreement.
SECTION 3.04. FUNDING INDEMNIFICATION. If any payment of a Fixed Rate
Advance occurs on a date which is not the last day of the applicable Interest
Period, whether because of acceleration, prepayment or otherwise, or a Fixed
Rate Advance is not made on the date specified by the Borrower for any reason
other than default by the Lenders, the Borrower will indemnify each Lender for
any loss or cost incurred by it resulting therefrom, including, without
limitation, any loss or cost in liquidating or employing deposits acquired to
fund or maintain the Fixed Rate Advance.
SECTION 3.05. LENDER STATEMENTS: SURVIVAL OF INDEMNITY. To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its Fixed Rate Loans to reduce any liability of the
Borrower to such Lender under Sections 3.01 and 3.02 or to avoid the
unavailability of a Type of Advance under Section 3.03, so long as such
designation is not disadvantageous to such Lender. Each Lender shall deliver a
written statement of such Lender as to the amount due, if any, under Sections
3.01, 3.02 or 3.04. Such written statement shall set forth in reasonable detail
the calculations upon which such Lender determined such amount and shall be
final, conclusive and binding on the Borrower in the absence of manifest error.
Determination of amounts payable under such Sections in connection with a Fixed
Rate Loan shall be calculated as though each Lender funded its Fixed Rate Loan
through the purchase of a deposit of the type and maturity corresponding to the
deposit used as a reference in determining the Fixed Rate applicable to such
Loan, whether in fact that is the case or not. Unless otherwise provided herein,
the amount specified in the written statement shall be payable on demand after
receipt by the Borrower of the written statement. The obligations of the
Borrower under Sections 3.01, 3.02 and 3.04 shall survive payment of the
Obligations and termination of this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The entities comprising the Borrower jointly and severally represent and
warrant to each of the Lenders that:
SECTION 4.01. ORGANIZATION, POWERS, ETC. Each Borrower (i) is a
corporation duly organized, validly existing and in good standing under laws of
its state of incorporation, (ii) has the power and authority to own or hold
under lease the properties it purports to own or hold under lease and to carry
on its business as now conducted, (iii) is duly qualified or licensed to
transact business in every jurisdiction in which such qualification or licensing
is necessary to enable it to enforce all of its material contracts and other
material rights and to avoid any material penalty or forfeiture.
SECTION 4.02. AUTHORIZATION AND VALIDITY OF THIS AGREEMENT, ETC. The
Borrower has the power and authority to execute and deliver this Agreement, the
Facility B Notes and the other Facility B Loan Documents and to perform all its
obligations thereunder. The execution and delivery by each of the entities
comprising the Borrower of this Agreement, the Facility B Notes and the other
Facility B Loan Documents and the performance by the Borrower of all its
obligations thereunder and any and all actions taken by the Borrower (i) have
been duly authorized by all requisite corporate action, (ii) will not violate or
be in conflict with (a) any provisions of law (including, without limitation,
any applicable usury or similar law), (b) any order, rule, regulation, writ,
judgment, injunction, decree or award of any court or other agency of
government, or (c) any provision of its certificate of incorporation or by-laws,
(iii) will not violate, be in conflict with, result in a breach of or constitute
(with or without the giving of notice or the passage of time or both) a default
under any material indenture, agreement or other instrument to which it is a
party or by which it or any of its properties or assets is or may be bound, and
(iv) except as otherwise contemplated by this Agreement, will not result in the
creation or imposition of any lien, charge or encumbrance upon, or any security
interest in, any of its properties or assets. Each of this Agreement, the
Facility B Notes and the other Facility B Loan Documents has been duly executed
and delivered by the Borrower. The Facility B Loan Documents constitute legal,
valid and binding obligations of the Borrower enforceable against the Borrower
in accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.
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SECTION 4.03. FINANCIAL STATEMENTS.
(a The Borrower heretofore has provided to the Lenders (i) the
consolidated balance sheet of the Company and its Subsidiaries as of November
30, 1996, and the related consolidated statements of earnings, stockholders'
equity and cash flows for the 12-month period ended on that date, audited and
reported upon by Deloitte & Touche, independent certified public accountants
(the "Company Audited Financial Statements"), and (ii) the consolidated balance
sheet of the Company as of August 31, 1997, and the consolidated statements of
earnings and cash flows of the Company and its Subsidiaries for the three-month
and nine-month periods ended on that date, both unaudited, but certified to be
true and accurate (subject to normal year-end audit adjustments) by the
President and the Chief Financial Officer of the Company (the "Company Unaudited
Financial Statements"). Those financial statements and reports (subject, in the
case of the Company Unaudited Financial Statements, to normal year-end audit
adjustments), and the related notes and schedules (if any), (a) were prepared in
accordance with GAAP consistently applied throughout the respective periods
covered thereby, (b) present fairly the consolidated financial condition of the
Company and its Subsidiaries as of the respective dates thereof, (c) show all
material liabilities, direct or contingent, of the Company and its Subsidiaries
as of those dates (including, without limitation, liabilities for taxes and
material commitments), and (d) present fairly the consolidated shareholders'
equity, results of operations and cash flows of the Company and its Subsidiaries
at the dates and for the respective periods covered thereby.
(b The Borrower heretofore has provided to the Lenders (i) the
consolidated balance sheet of Greystone and its Subsidiaries as of December 31,
1996, and the related consolidated statements of earnings, stockholders' equity
and cash flows for the year then ended, audited and reported upon by Ernst &
Young, independent certified public accountants (the "Greystone Audited
Financial Statements"), and (ii) the consolidated balance sheet of Greystone and
its Subsidiaries as of June 30, 1997, and the consolidated statement of earnings
and cash flows of Greystone and its Subsidiaries for the three-month and
six-month periods ended on that date, both unaudited, but certified to be true
and accurate (subject to normal year-end audit adjustments) by the President and
the Chief Financial Officer of Greystone (the "Greystone Unaudited Financial
Statements"). Those financial statements and reports (subject, in the case of
the Greystone Unaudited Financial Statements, to normal year-end audit
adjustments), and the related notes and schedules (if any), (a) were prepared in
accordance with GAAP consistently applied throughout the respective periods
covered thereby, (b) present fairly the consolidated financial condition of
Greystone and its Subsidiaries as of the respective dates thereof, (c) show all
material liabilities, direct or contingent, of Greystone and its Subsidiaries as
of those dates (including, without limitation, liabilities for taxes and
material commitments), and (d) present fairly the consolidated stockholders'
equity, results of operations and cash flows of Greystone and its Subsidiaries
at the dates and for the respective periods covered thereby.
(c The Borrower heretofore has provided to the Lenders the following pro
forma financial statements which are included in the Registration Statement on
Form S-4 of the Company containing the Prospectus/Proxy Statement to be sent to
the shareholders of the Company and
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Greystone in connection with the Merger (collectively, the "Pro Forma Financial
Statements"): (i) the pro forma consolidated balance sheets of the Company and
its Subsidiaries and Greystone and its Subsidiaries as of November 30 and
December 31, 1996, and the related pro forma consolidated statements of earnings
for the fiscal years then ended, and (ii) the pro forma consolidated balance
sheets of the Company and its Subsidiaries and Greystone and its Subsidiaries as
of May 31 and June 30, 1997, and the pro forma consolidated statements of
earnings of the Company and its Subsidiaries and Greystone and its Subsidiaries
for the six-month period ended on those dates. The Pro Forma Financial
Statements (A) have been prepared, in all material respects, in accordance with
the applicable requirements of the rules and regulations promulgated under the
Securities Exchange Act of 1934, as amended, and (B) the pro forma adjustments
have been properly applied on the bases described therein and the assumptions
used in the preparation of the Pro Forma Financial Information are reasonable
and appropriate to give effect to the transactions or circumstances referred to
therein.
SECTION 4.04. NO MATERIAL ADVERSE EFFECT. Since the date of the Audited
Financial Statements, no Event has occurred which has had or could reasonably be
expected to have a Material Adverse Effect. There are no material unrealized or
expected losses in connection with loans, advances and other commitments of the
Borrower.
SECTION 4.05. TITLE TO PROPERTIES. Schedule III hereto contains a complete
and accurate list of all Real Estate owned by the Borrower, except those
properties (i) acquired or disposed of by the Borrower after May 31, 1997 in the
ordinary course of business or pursuant to the Reorganization, (ii) to be
transferred or conveyed to LLP or a Subsidiary of LLP pursuant to the LLP
Partnership Agreement, all of which are completely and accurately described on
Schedule VII hereto, or (iii) the loss or forfeiture of which individually or in
the aggregate would not have a Material Adverse Effect. The Borrower and its
Subsidiaries have good and marketable fee title, or title insurable by a
reputable and nationally recognized title insurance company, to the Real Estate
owned by it listed in Schedules III and VII hereto, and to all the other assets
owned by it and either reflected on the balance sheet and related notes and
schedules most recently delivered by the Borrower to the Lenders (the "Recent
Balance Sheet") or acquired by it after the date of that balance sheet and prior
to the date hereof, except (x) for those properties and assets which have been
disposed of since the date of the Recent Balance Sheet or pursuant to the
Reorganization or which no longer are used or useful in the conduct of its
business and (y) that good and marketable fee title, or title insurable by a
reputable and nationally recognized title insurance company, to certain of the
properties located in Arizona listed in Schedule III is held by the Persons and
in the manner described in Schedule III hereto. All such Real Estate and other
assets owned by the Borrower (including the properties referred to in clause (y)
above) are free and clear of all Mortgages, pledges, liens, charges and other
encumbrances, except (i) in the case of Real Estate, as reflected on title
insurance policies insuring the interest of the Borrower in the Real Estate or
in title insurance binders issued with respect to the Real Estate (some of which
title insurance binders have expired but were valid at the time of acquisition
of the relevant Real Estate), (ii) as reflected in the Recent Balance Sheet, and
none of those Mortgages, pledges, liens, charges or other encumbrances,
individually or in the aggregate,
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prevents or has a Material Adverse Effect upon the use by the Borrower of any of
their respective properties or assets as currently conducted or as planned for
the future.
SECTION 4.06. LITIGATION. There is no action, suit, proceeding,
arbitration, inquiry or investigation (whether or not purportedly on behalf of
the Borrower) pending or, to the best knowledge of the Borrower, threatened
against or affecting the Borrower or any of the Subsidiaries which could
reasonably be expected to have a Material Adverse Effect. The Borrower is not in
default with respect to any final judgment, writ, injunction, decree, rule or
regulation of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which default would or could have a Material Adverse Effect on the
Borrower. The Borrower has no material contingent obligations not provided for
or disclosed in the pro forma consolidated balance sheet as of November 30 and
December 31, 1997, included in the Pro Forma Financial Statements.
SECTION 4.07. PAYMENT OF TAXES. There have been filed all federal, state
and local tax returns with respect to the operations of the Borrower which are
required to be filed, except where extensions of time to make those filings have
been granted by the appropriate taxing authorities and the extensions have not
expired. The Borrower has paid or caused to be paid to the appropriate taxing
authorities all taxes as shown on those returns and on any assessment received
by any of them, to the extent that those taxes have become due, except for taxes
the failure to pay which do not violate the provisions of Section 6.03 hereof.
The Internal Revenue Service has completed an examination of the Company's
federal income tax returns for the years ended 1980 through 1994, and Borrower
has paid all additional taxes, assessments, interest and penalties with respect
to such years.
SECTION 4.08. AGREEMENTS. Neither the Borrower nor any Subsidiary is a
party to any agreement, other than the Spin-Off Agreement, the Merger Agreement
or the LLP Partnership Agreement, or instrument or is subject to any charter or
other restriction that could reasonably be expected to have a Material Adverse
Effect on it. Neither the Borrower nor any Subsidiary is in material default in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any material agreement or instrument to which it is a
party, including, without limitation, the Reorganization Documents, and
consummation of the transactions contemplated hereby and in the other Facility B
Loan Documents will not cause any Borrower to be in material default thereof.
SECTION 4.09. FOREIGN DIRECT INVESTMENT REGULATIONS. Neither the making of
the Facility B Advances nor the repayment thereof nor any other transaction
contemplated hereby will involve or constitute a violation by the Borrower of
any provision of the Foreign Direct Investment Regulations of the United States
Department of Commerce or of any license, ruling, order, or direction of the
Secretary of Commerce thereunder.
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SECTION 4.10. FEDERAL RESERVE REGULATIONS.
(a The Borrower is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying any margin stock (within the meaning of Regulation U or Regulation X of
the Board of Governors of the Federal Reserve System of the United States).
Margin stock (as defined in Regulation U) constitutes less than 25% of those
assets of the Borrower and its Subsidiaries which are subject to any limitation
on sale, pledge, or other restriction hereunder.
(b No part of the proceeds of any of the Facility B Advances will be used
to purchase or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock. If requested by the
Lenders, the Borrower shall furnish to the Lenders a statement in conformity
with the requirements of Federal Reserve Form U-l referred to in Regulation U of
said Board of Governors. No part of the proceeds of the Facility B Advances will
be used for any purpose that violates, or which is inconsistent with, the
provisions of Regulation X of said Board of Governors.
SECTION 4.11. CONSENTS, ETC. Except as set forth on Schedule IV, no order,
license, consent, approval, authorization of, or registration, declaration,
recording or filing (except for the filing of a Current Report on Form 8-K, and
a Quarterly Report on Form 10-Q, in each case with the Securities and Exchange
Commission) with, or validation of, or exemption by, any governmental or public
authority (whether federal, state or local, domestic or foreign) or any
subdivision thereof is required in connection with, or as a condition precedent
to, the due and valid execution, delivery and performance by Borrower of this
Agreement, the Facility B Notes or the other Facility B Loan Documents, or the
legality, validity, binding effect or enforceability of any of the respective
terms, provisions or conditions thereof. To the extent that any franchises,
licenses, certificates, authorizations, approvals or consents from any federal,
state or local (domestic or foreign) government, commission, bureau or agency
are required for the acquisition, ownership, operation or maintenance by the
Borrower of properties now owned, operated or maintained by it, those
franchises, licenses, certificates, authorizations, approvals and consents have
been validly granted, are in full force and effect and constitute valid and
sufficient authorization therefor.
SECTION 4.12. COMPLIANCE WITH APPLICABLE LAWS. The Borrower and its
Subsidiaries are in compliance with and conform to all statutes, laws,
ordinances, rules, regulations, orders, restrictions and all other legal
requirements of all domestic or foreign governments or any instrumentality
thereof having jurisdiction over the conduct of their respective businesses or
the ownership of their respective properties, the violation of which would have
a Material Adverse Effect on it, including, without limitation, regulations of
the Board of Governors of the Federal Reserve System, the Federal Interstate
Land Sales Full Disclosure Act and the Florida Land Sales Act. Neither the
Borrower nor any Subsidiary has received any notice to the effect that its
operations are not in material compliance with any of the requirements of
applicable Environmental Laws or any applicable federal, state and local health
and safety statutes and regulations or the subject of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release
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of any Hazardous Substances into the environment, which non-compliance or
remedial action could reasonably be expected to have a Material Adverse Effect.
SECTION 4.13. RELATIONSHIP OF THE BORROWER. The entities comprising the
Borrower and the Subsidiary Guarantors are engaged as an integrated group in the
business of owning, developing and selling Real Estate and of providing the
required services, credit and other facilities for those integrated operations.
The Borrower and the Subsidiary Guarantors require financing on such a basis
that funds can be made available from time to time to such entities, to the
extent required for the continued successful operation of their integrated
operations. The Facility B Advances to be made to the Borrower under this
Agreement are for the purpose of financing the integrated operations of the
Borrower and the Subsidiary Guarantors, and each of the entities comprising the
Borrower and the Subsidiary Guarantors expects to derive benefit, directly or
indirectly, from the Facility B Advances, both individually and as a member of
the integrated group, since the financial success of the operations of each
Borrower and the Subsidiary Guarantors is dependent upon the continued
successful performance of the integrated group as a whole.
SECTION 4.14. SUBSIDIARIES; JOINT VENTURES. Schedule V hereto contains a
complete and accurate list of (i) all Subsidiaries of the Company and Greystone,
including, with respect to each Subsidiary, (a) its state of incorporation, (b)
all jurisdictions (if any) in which it is qualified as a foreign corporation,
(c) the number of shares of its Capital Stock outstanding, and (d) the number
and percentage of those shares owned by the Company, Greystone and/or by any
other Subsidiary, and (ii) each Joint Venture, including, with respect to each
such Joint Venture, (a) its jurisdiction of organization, (b) all other
jurisdictions in which it is qualified as a foreign entity and (c) all Persons
other than the Borrower that are parties thereto. All the outstanding shares of
Capital Stock of each Subsidiary are validly issued, fully paid and
nonassessable, except as otherwise provided by state wage claim laws of general
applicability. All of the outstanding shares of Capital Stock of each Subsidiary
owned by the Company, Greystone or another Subsidiary as specified in Schedule V
are owned free and clear of all liens, pledges, security interests, equity or
other beneficial interests, charges and encumbrances of any kind whatsoever,
except for Permitted Liens. None of the entities comprising the Borrower owns of
record or beneficially any shares of the Capital Stock of any corporation (other
than Greystone, UAMC, AFSI, STI, the Title Companies, the Limited Purpose
Finance Subsidiaries and the other Subsidiaries the equity Securities of which
have been pledged to the Agent pursuant to the Pledge Agreement) that is not a
Borrower or a Subsidiary Guarantor. None of the Marlborough Subsidiaries has
total assets with a fair market value of more than $100,000 in the aggregate.
SECTION 4.15. ERISA. The Borrower is not executing or delivering any of
the Facility B Loan Documents or entering into any of the transactions
contemplated hereby, directly or indirectly, in connection with any arrangement
or understanding in any respect involving any "employee benefit plan" with
respect to which the Borrower is a "party in interest" within the meaning of the
Employee Retirement Income Security Act of 1974, or a "disqualified person",
within the meaning of the Internal Revenue Code 1986, as amended. No Unfunded
Liabilities exist with respect to any Single Employer Plans. Each Plan complies
in all material respects with all
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applicable requirements of law and regulations, no Reportable Event has occurred
with respect to any Plan, neither the Borrower nor any other members of the
Controlled Group has withdrawn from any Plan or initiated steps to do so, and no
steps have been taken to reorganize or terminate any Plan.
SECTION 4.16. INVESTMENT COMPANY ACT. Neither the Borrower nor any
Subsidiary thereof is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.17. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Borrower nor
any Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
SECTION 4.18. SUBORDINATED DEBT. The Obligations constitute senior
indebtedness which is entitled to the benefits of the subordination provisions
of all outstanding Subordinated Debt.
SECTION 4.19. POST-RETIREMENT BENEFITS. The present value of the expected
cost of post-retirement medical and insurance benefits payable by the Borrower
and its Subsidiaries to its employees and former employees, as estimated by the
Borrower in accordance with procedures and assumptions deemed reasonable by the
Required Lenders, does not exceed $ -0- exclusive of post-retirement medical and
insurance benefits payable to the President and Chief Financial Officer of
Greystone pursuant to the Merger Agreement.
SECTION 4.20. INSURANCE. The certificate signed by the President or Chief
Financial Officer of the Company, that attests to the existence and adequacy of,
and summarizes, the property, casualty, and liability insurance programs carried
by the Borrower and that has been furnished by the Borrower to the Agent and the
Lenders, is complete and accurate. This summary includes the insurer's or
insurers' name(s), policy number(s), expiration date(s), amount(s) of coverage,
type(s) of coverage, exclusion(s), and deductibles. This summary also includes
similar information, and describes any reserves, relating to any self-insurance
program that is in effect.
SECTION 4.21. ENVIRONMENTAL REPRESENTATIONS. To the best of the Borrower's
knowledge and belief, no Hazardous Substances in material violation of any
Environmental Laws are present upon any of the Real Estate owned by Borrower or
any Real Estate which is encumbered by any Mortgage held by Borrower, and
neither the Borrower nor any Subsidiary has received any notice to the effect
that any of the Real Estate owned by Borrower or any Subsidiary or any their
respective operations are not in compliance with any of the requirements of
applicable Environmental Laws or are the subject of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release of any Hazardous Substance into the environment which non-compliance or
remedial action could be reasonably expected to have a Material Adverse Effect.
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SECTION 4.22. REORGANIZATION. The Borrower has furnished to the Lender
true and complete copies of all executed Reorganization Documents, as amended to
the Agreement Date.
SECTION 4.23. MINIMUM ADJUSTED TANGIBLE NET WORTH. On the Agreement Date,
after giving effect to the Reorganization, Adjusted Tangible Net Worth, less
advances to and Investments in LLP, is in excess of $215,000,000.
SECTION 4.24. NO MISREPRESENTATION. No representation or warranty by the
Borrower contained herein or made hereunder or in the Reorganization Documents
and no certificate, schedule, exhibit, report or other document provided or to
be provided by the Borrower in connection with the transactions contemplated
hereby or thereby (including, without limitation, the negotiation of and
compliance with the Facility B Loan Documents) or in connection with the
Reorganization contains or will contain a misstatement of a material fact or
omit to state a material fact required to be stated therein in order to make the
statements contained therein, in the light of the circumstances under which
made, not misleading.
ARTICLE V
CONDITIONS PRECEDENT; TERMINATION
SECTION 5.01. CONDITIONS OF EFFECTIVENESS. This Agreement shall become
effective when the Agent shall have received counterparts of this Agreement
executed by the Borrower and each of the Lenders; PROVIDED, however, that the
Lenders shall not be required to make any Advance hereunder unless and until the
Agent shall have received each of the following items (with all documents
required below, except as otherwise specified, to be dated the Closing Date,
which date shall be the same for all such documents, and each of such documents
to be in form and substance satisfactory to the Agent, be fully and properly
executed by all parties thereto, and (except for the Facility B Notes) to be in
sufficient copies for each Lender), and the conditions specified below shall
have been satisfied:
(a A Facility B Note and a Facility B Term Note payable to the order of
each of the Lenders, a Subsidiary Guaranty from each Subsidiary Guarantor, and
the Greystone Assumption Agreement executed by Greystone.
(b The favorable written opinion by Rubin Baum Levin Constant Friedman &
Bilzin, counsel for the Borrower addressed to the Lenders and in form and
substance satisfactory to the Agent, (i) confirming the accuracy of the
representations and warranties set forth in Sections 4.01 (excluding clause (ii)
thereof, and limited, in the case of clause (iii) thereof, to the jurisdictions
listed under the heading "Where Qualified" in Schedule V hereto), 4.02, 4.06,
4.11, 4.12 and the second sentence of Section 4.08 hereof, (which opinion, as to
the representations set forth in clauses (ii)(b), (iii) and (iv) of Section
4.02, Sections 4.06, 4.11, 4.12 and the second sentence of Section 4.08 hereof,
may be to the best knowledge of such counsel, and may in its entirety be limited
to Florida,
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Arizona, Delaware, Texas, California, Nevada and United States federal law);
(ii) to the effect that this Agreement, the Notes and the Subsidiary Guarantees
have been duly authorized, executed and delivered by the Borrower and each
Subsidiary Guarantor; and (iii) that the Merger and the Spin-Off have been
consummated and become effective in accordance with the terms of the
Reorganization Documents. Such counsel may rely, in its opinion, on the opinions
of special counsel to the Borrower referred to in Section 5.01(c) below, as to
matters of law of the State of Illinois, on the opinion of Fennemore, Craig of
Phoenix, Arizona as to matters of law of the State of Arizona, on the opinions
of Bellinger & DeWolf, P.C. as to matters of law of the State of Texas and on
the opinion of Palmieri, Tyler, Wiener, Wilhelm & Waldron as to matters of law
of the State of California. In addition, Rubin Baum Levin Constant Friedman &
Bilzin may rely on the opinions of Rogers & Wells as to matters of Delaware law
applicable to Greystone and its Subsidiaries. The Borrower hereby instructs its
counsel to prepare its opinion and deliver it to Lenders for their benefit, and
such opinion shall contain a statement to such effect.
(c The favorable written opinion of Rudnick & Wolfe, special counsel to
the Borrower, that (i) no authorization, consent, approval, license or exemption
of, or filing nor registration with or other action by any Illinois, United
States federal or Delaware governmental department, commission, board, bureau,
regulatory body, agency or instrumentality or to the best knowledge of such
counsel, any court is or will be necessary for the execution, delivery and
performance by the Borrower of this Agreement and the Facility B Notes and (ii)
this Agreement and the Facility B Notes constitute the legal, valid and binding
obligations of the Borrower, enforceable in accordance with their respective
terms, except as the rights and remedies of the Lenders thereunder may be
limited by (A) applicable bankruptcy, reorganization, insolvency and other laws
effecting creditors' rights generally from time to time in effect, (B) the
exercise of the discretionary powers of the court before which any proceeding
seeking equitable remedies (including, without limitation, specific performance
and injunctive relief) may be brought, and (C) such other qualifications
expressed in the opinion PROVIDED that such qualifications are acceptable to
Agent. Such opinion shall also cover the matters set forth in clauses (i) and
(ii) of this subsection with respect to each Subsidiary Guaranty. Such counsel
may rely on the opinion of counsel to the Borrower delivered pursuant to
subsection (b) above relating to the representations set forth in Sections 4.01
and 4.02 hereof and on the opinion of Palmieri, Tyler, Wiener, Wilhelm & Waldron
as to matters of law of the State of California. The Borrower hereby instructs
its special counsel to prepare its opinion and deliver it to Lenders for their
benefit, and such opinion shall contain a statement to such effect.
(d The favorable written opinion of Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A., special counsel to the Agent and the Lenders,
addressed to the Lenders to the effect that: while it has not independently
considered the matters covered by the opinions provided pursuant to Sections
5.01(b) and (c) to the extent necessary to enable it to express the conclusions
stated therein, those opinions of counsel and the other documents provided
pursuant to this Section 5.01 are substantially responsive to the requirements
of this Agreement.
(e The following supporting documents with respect to each Borrower and
Subsidiary Guarantor: (i) a copy of its certificate or articles of
incorporation, certified as of a date reasonably
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close to the Closing Date to be a true and accurate copy by the Secretary of
State of its state of incorporation, or if a copy of such certificate or
articles of incorporation has been previously delivered to the Agent, a
certificate of its Secretary or Assistant Secretary to the effect that there
have been no amendments to its certificate or articles of incorporation since
April 4, 1997; (ii) a certificate of that Secretary of State, dated as of a date
reasonably close to the Closing Date, as to its existence and (if available)
good standing; (iii) a certificate of the Secretary of State of each
jurisdiction, other than its state of incorporation, in which it does business,
as to its qualification as a foreign corporation; (iv) a copy of its by-laws,
certified by its Secretary or Assistant Secretary to be a true and accurate copy
of its by-laws in effect on the Closing Date, or, if a copy of such by-laws has
been previously delivered to the Agent in connection with the Existing Credit
Agreement, a certificate of its Secretary or Assistant Secretary to the effect
that there have been no amendments to its by-laws since April 4, 1997; (v) a
certificate of its Secretary or Assistant Secretary, as to the incumbency and
signatures of its officers who have executed any documents in connection with
the transactions contemplated by this Agreement; (vi) a copy of resolutions of
its Board of Directors or the Executive Committee of its Board of Directors,
certified by its Secretary or Assistant Secretary to be a true and accurate copy
of resolutions duly adopted by such Board of Directors or Executive Committee
that are in full force and effect on the Closing Date, authorizing the execution
and delivery by it of this Agreement, the Facility B Notes, the Subsidiary
Guarantees and the other Facility B Loan Documents to which it is a party and
the performance by it of all its obligations thereunder; and (vii) such
additional supporting documents and other information with respect to its
operations and affairs as the Agent may reasonably request.
(f A certificate signed by a duly authorized officer of each Borrower
stating that: (i) the representations and warranties of the Borrower contained
in Article IV hereof are correct and accurate on and as of the Closing Date as
though made on and as of the Closing Date and (ii) no event has occurred and is
continuing which constitutes an Event of Default or Unmatured Default hereunder.
(g) The Borrowing Base report for the fiscal quarter ended August 31,
1997, as required pursuant to Section 6.04(j).
(h) Such other documents as any Lender or its counsel may reasonably
request.
(i) There shall not have occurred any changes in the consolidated
financial condition or results of operations or cash flows of the Borrower from
that reflected in the Interim Pro Forma Financial Statements which has or
reasonably could be expected to have, in the judgment of the Required Lenders, a
Material Adverse Effect on the Borrower's financial condition or results of
operations, taken as a whole.
(j) All conditions precedent to the effectiveness of the Facility A Credit
Agreement and the LLP Credit Agreement and the obligations of the "Lenders"
thereunder to make "Advances" thereunder shall have been satisfied.
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(k) All transactions contemplated by the Reorganization Documents to take
place on the consummation of the Reorganization shall have occurred and been
lawfully consummated to the satisfaction of the Agent.
(l) The Company shall not have entered into or agreed to any amendment or
modification of the Merger Agreement, the Spin-Off Agreement or the LLP
Partnership Agreement, or waived or released any material rights or benefits of
the Company thereunder, in each case without the prior written consent of the
Agent or the Required Lenders.
(m) A certificate signed by the Chief Financial Officer of the Company
showing in reasonable detail the calculations used to determine the Leverage
Ratio for the Pricing Grids attached hereto as Exhibit E.
(n) The Borrower shall have executed and delivered the Intercreditor
Agreement.
(o) Pro forma consolidated balance sheet of the Borrower including the
accounts of the Company and its Subsidiaries as of May 31, 1997 and Greystone
and its Subsidiaries as of June 30, 1997, and assuming all of the following
transactions had occurred as of such dates: the formation of LLP, the
transactions contemplated under the Spin-Off Agreement, the effectiveness of the
Merger, the effectiveness of this Agreement, the Facility A Credit Agreement and
the LLP Credit Agreement, and the funding of the initial loans hereunder and
thereunder.
(p) A report, in reasonable detail and in form and substance satisfactory
to the Agent, with calculations indicating that the Borrower, on a pro forma
basis as of May 31, 1997 (including the accounts of Greystone as of June 30,
1997) would have been in compliance with the provisions of Article VII (if this
Agreement had been in effect as of such dates), which calculations shall be
based upon the pro forma financial statements of the Company after making the
assumptions referred to in section 5.01(o) above.
SECTION 5.02. CONDITIONS PRECEDENT TO ALL BORROWINGS.
(a) No Lender shall be required to make any Facility B Advance (other than
an Advance that, after giving effect thereto and to the application of the
proceeds thereof, does not increase the aggregate amount of outstanding Facility
B Advances), unless on the applicable Borrowing Date:
(i) the Agent shall have received notice of Borrower's request for the
Facility B Advance as provided in Section 2.06(a) and such other
approvals, opinions or documents as the Agent may reasonably request;
(ii) the representations and warranties of the Borrower contained in
Article IV hereof are true and correct as of such Borrowing Date or
Issuance Date; PROVIDED, HOWEVER, that for the purposes hereof, (A) from
and after the date of delivery by the Borrower pursuant to Section 6.04(a)
of their consolidated financial statements for the year ended November 30,
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1997, the references in Section 4.03 to "Audited Financial Statements"
shall be deemed to be references to the annual audited financial
statements most recently delivered by the Borrower pursuant to Section
6.04(a) as of the date of the request for a Facility B Advance and (B)
from and after that date of delivery by the Borrower pursuant to Section
6.04(b) of its consolidated financial statements for the quarter ending
November 30, 1997, the references in Section 4.03 to "Unaudited Financial
Statements" shall be deemed to be references to the quarterly unaudited
financial statements most recently delivered by the Borrower pursuant to
Section 6.04(b) as of the date of that request for a Facility B Advance;
(iii) All legal matters incident to the making of such Advance shall be
satisfactory to the Lenders and their counsel;
(iv) There exists no Event of Default or Unmatured Default; and
(v) The making of the Facility B Advance will not result in any Event
of Default or Unmatured Default.
(b) Each Borrowing Notice with respect to each such Facility B Advance
shall constitute a representation and warranty by the Borrower that all of the
conditions contained in this Section 5.02 have been satisfied.
SECTION 5.03. TERMINATION. Notwithstanding anything to the contrary
contained in this Agreement or any of the other Facility B Loan Documents, if
all of the conditions precedent to the obligations of the Lenders set forth in
Sections 5.01 and 5.02 (as to the initial Borrowing Date only) shall not have
been satisfied or waived by the Lenders prior to December 31, 1997, the
Commitments and all other obligations of the Lenders under this Agreement and
the other Facility B Loan Documents shall terminate as of such date and be of no
further force or effect thereafter. Such termination shall not diminish or
affect, or relieve the Borrower or any Subsidiary Guarantor from, any of their
respective Obligations which are stated to survive a termination of the
Commitments or the termination of this Agreement or the other Facility B Loan
Documents.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that from the date hereof until payment
in full of all the Obligations, unless the Required Lenders otherwise shall
consent in writing as provided in Section 13.06 hereof, the Borrower will, and
will cause each of its Subsidiaries to:
SECTION 6.01. EXISTENCE, PROPERTIES, ETC. Do or cause to be done all
things or proceed with due diligence with any actions or courses of action which
may be necessary to preserve and keep in full force and effect its existence
under the laws of their respective states of
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incorporation and all qualifications or licenses in jurisdictions in which such
qualification or licensing is required for the conduct of its business or in
which the Lenders shall request such qualification; PROVIDED, HOWEVER, that
nothing herein shall be deemed to prohibit any Borrower other than the Company
from (i) merging into or consolidating with any other Borrower (including the
Company, if the Company is the surviving entity) or (ii) declaring and paying
dividends in complete liquidation. The Borrower will, and will cause each
Subsidiary to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is presently
conducted and maintain all requisite authority to conduct its business in each
jurisdiction in which its business is conducted. The primary business of the
Borrower and the Subsidiaries shall at all times be the acquisition, development
and sale of real estate assets.
SECTION 6.02. NOTICE. Give prompt written notice to the Agent of (i) any
proceeding instituted by or against the Borrower or any of the Subsidiaries in
any federal or state court or before any commission or other regulatory body,
federal, state or local, or any such proceedings threatened against the Borrower
in writing by any federal, state or other governmental agency, which, if
adversely determined, could reasonably be expected to have a Material Adverse
Effect on the Borrower, and (ii) any other Event which could reasonably be
expected to lead to or result in a Material Adverse Effect on the Borrower, or
which, with or without the giving of notice or the passage of time or both,
would constitute an Event of Default or a default under any material agreement
other than this Agreement to which the Borrower is a party or by which any of
its properties or assets is or may be bound.
SECTION 6.03. PAYMENTS OF DEBTS, TAXES, ETC. Pay all its debts and perform
all its obligations promptly and in accordance with the respective terms
thereof, and pay and discharge or cause to be paid and discharged promptly all
taxes, assessments and governmental charges or levies imposed upon the Borrower
or upon its incomes or receipts or upon any of its properties before the same
shall become in default or past due, as well as all lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might result in the
imposition of a lien or charge upon such properties or any part thereof;
PROVIDED, HOWEVER, that it shall not constitute a violation of the provisions of
this Section 6.03 if the Borrower shall fail to perform any such obligation or
to pay any such debt (except for obligations for money borrowed), tax,
assessment, governmental charge or levy or claim for labor, materials or
supplies which is being contested in good faith, by proper proceedings
diligently pursued, and as to which adequate reserves have been provided.
SECTION 6.04. ACCOUNTS AND REPORTS. Maintain a standard system of
accounting established and administered in accordance with GAAP, and provide to
the Lenders the following:
(a) as soon as available and in any event within 120 days after the end of
each fiscal year of the Borrower (commencing with the fiscal year ending
November 30, 1997), a consolidated balance sheet of the Company and its
Subsidiaries as of the end of that fiscal year and the related consolidated
statements of earnings, stockholders' equity and cash flows for that fiscal
year, all with accompanying notes and schedules, prepared in accordance with
GAAP consistently applied and audited and reported upon by Deloitte & Touche or
another firm of independent certified public
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accountants of recognized standing selected by the Borrower and acceptable to
the Agent (such audit report shall be unqualified except for qualifications
relating to changes in GAAP and required or approved by the Borrower's
independent certified public accountants);
(b) as soon as available and in any event within 60 days after the end of
each of the first three quarters, and within 120 days after the end of the
fourth quarter, of each fiscal year of the Borrower (commencing with the quarter
ending November 30, 1997), a consolidated balance sheet of the Company and its
Subsidiaries as of the end of that quarter, and the related consolidated
statement of earnings and cash flows of the Company and its Subsidiaries for the
period from the beginning of the fiscal year to the end of that quarter, all
prepared in accordance with GAAP consistently applied, unaudited but certified
to be true and accurate, subject to normal year-end audit adjustments, by the
Chief Financial Officer of the Company;
(c) within 60 days after the end of each of the first three quarters, and
within 120 days after the end of the fourth quarter, of each fiscal year of the
Borrower (commencing with the quarter ending November 30, 1997), (i) a
consolidating balance sheet of the Borrower (in a form acceptable to the Agent)
as of the end of that quarter and the related consolidating statement of
earnings of the Borrower (in a form acceptable to the Agent) for the period from
the beginning of the fiscal year to the end of that quarter, and (ii) a
consolidating balance sheet of the Mortgage Banking Subsidiaries (in a form
acceptable to the Agent) as of the end of that quarter and the related
consolidating statement of earnings of the Mortgage Banking Subsidiaries (in a
form acceptable to the Agent) for the period from the beginning of the fiscal
year to the end of that quarter, all prepared in accordance with GAAP
consistently applied, unaudited but certified to be true and accurate, subject
to normal year-end audit adjustments, by the Chief Financial Officer of the
Company;
(d) concurrently with the delivery of the financial statements described
in subsection (a) above, a letter signed by that firm of independent certified
public accountants to the effect that, during the course of their examination,
nothing came to their attention which caused them to believe that any Event of
Default or Unmatured Default has occurred, or if such Event of Default or
Unmatured Default has occurred, specifying the facts with respect thereto; and
concurrently with the delivery of the financial statements described in
subsections (b) and (c) above, a certificate signed by the President or
Executive Vice President and the Chief Financial Officer of the Company to the
effect that, having read this Agreement, and based upon an examination which
they deemed sufficient to enable them to make an informed statement, there does
not exist any Event of Default or Unmatured Default, or if such Event of Default
or Unmatured Default has occurred, specifying the facts with respect thereto;
(e) within 30 days after the end of each calendar month (commencing with
the month ending October 31, 1997), a report, in reasonable detail and in form
and substance satisfactory to the Agent, setting forth, as of the end of the
month, with respect to each Project owned by the Company and its Subsidiaries,
(i) the number of Housing Unit Closings, (ii) the number of Housing Units either
completed or under construction, specifying the number thereof that are
Completed Housing Units, (iii) the number of Housing Units Under Contract;
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(f) within 120 days after the end of each fiscal year of the Borrower
(commencing with the fiscal year ending November 30, 1997), a schedule of all
Real Estate owned by the Borrower in the form of Schedule III annexed hereto or
as otherwise required by Agent, which schedule, in addition to providing all the
categories of information specified in Schedule III, shall specify those
properties the interest and carrying charges attributable to which are being
deducted, for financial reporting purposes, for the fiscal year in which they
are paid and shall contain all such other information as Agent shall require;
(g) within 90 days after the beginning of each fiscal year of the
Borrower, a projection, in reasonable detail and in form and substance
satisfactory to the Agent, on a quarterly basis, of the cash flow and of the
earnings of the Company and its Subsidiaries for that fiscal year and for the
immediately succeeding fiscal year;
(h) promptly upon becoming available, copies of all financial statements,
reports, notices and proxy statements sent by the Borrower to its stockholders,
and of all regular and periodic reports and other material (including copies of
all registration statements and reports under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended) filed by the
Borrower with any securities exchange or any governmental authority or
commission, except material filed with governmental authorities or commissions
relating to the development of Real Estate in the ordinary course of the
business of the Borrower and which does not relate to or disclose any Material
Adverse Effect;
(i) as soon as available and in any event within 60 days after the end of
each of the first three quarters, and within 120 days after the end of the
fourth quarter, of each fiscal year of each Joint Venture, a balance sheet of
that Joint Venture as of the end of that quarter and a statement of earnings of
that Joint Venture for the period from the beginning of the fiscal year to the
end of that quarter, prepared in accordance with GAAP consistently applied,
unaudited but certified to be true and accurate, subject (in the case of the
financial statements delivered for the first three quarter of each fiscal year)
to normal year-end adjustments, by the Chief Financial Officer of the Company;
(j) within 60 days after the Closing Date and the end of each of the first
three quarters, and within 90 days after the end of each fiscal year of the
Borrower (commencing with the quarter and fiscal year ending November 30, 1997),
a report, in reasonable detail and in form and substance satisfactory to the
Agent, with calculations indicating that the Borrower is in compliance, as of
the Closing Date and as of the last day of such quarterly or annual period, as
the case may be, with the provisions of Article VII and, if the Borrower shall
have been required to provide Collateral, Article VIII, of this Agreement.
Without limiting the generality of the foregoing, Borrower shall provide to the
Lenders (i) a report calculating the Borrowing Base in form and substance
satisfactory to Agent, in which report the Borrower shall include a report of
all accounts receivable from the sales of Housing Units included in the
Borrowing Base, showing all such receivables which remain uncollected on the
tenth (10th) day after the Closing Date or end of the quarter or fiscal year, as
the case may be, (ii) a report containing the calculations necessary to indicate
that the Borrower is in compliance with the provisions of Sections 6.09 and
7.14, including a certification of the outstanding
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principal amount of all loans and advances made by the Company to each of the
Mortgage Banking Subsidiaries, as the case may be, and that all such loans and
advances are duly evidenced by the Mortgage Banking Subsidiaries Note in the
possession of Agent, and (iii) a report on investments substantially in the form
attached as Exhibit E hereto. The reports furnished pursuant to this subsection
(j) shall be certified to be true and correct by the Chief Financial Officer of
the Company and shall also contain a representation and warranty by the Borrower
that it is in full compliance with the provisions of Article VII of this
Agreement;
(k) within 60 days after the Closing Date and the end of each of the first
three quarters, and within 90 days after the end of each fiscal year of the
Borrower (commencing with the quarter and fiscal year ending November 30, 1997),
a report, in reasonable detail and in form and substance satisfactory to the
Agent, with calculations indicating whether the Borrower, as to the Closing Date
and as of the last day of such quarterly or annual period, as the case may be,
is in compliance with the Minimum Interest Coverage Ratio;
(l) within 270 days after the close of each fiscal year, a statement of
the Unfunded Liabilities of each Single Employer Plan, certified as correct by
an actuary enrolled under ERISA, but the foregoing statement shall be required
only if any Single Employer Plan shall exist;
(m) as soon as possible and in any event within 10 days after the Borrower
knows that any Reportable Event has occurred with respect to any Plan, a
statement, signed by the Chief Financial Officer of the Borrower, describing
said Reportable Event and the action which the Borrower proposes to take with
respect thereto;
(n) as soon as possible and in any event within 10 days after receipt
thereof by the Borrower, a copy of (a) any notice or claim to the effect that
the Borrower or any of its Subsidiaries is or may be liable to any Person as a
result of the release by the Borrower, any of its Subsidiaries, or any other
Person of any Hazardous Substance into the environment, and (b) any notice
alleging any violation of any Environmental law or any federal, state or local
health or safety law or regulation by the Company or any of its Subsidiaries,
which, in either case, could reasonably be expected to have a Material Adverse
Effect;
(o) promptly upon the request of the Agent or any Lender, an accurate
legal description with respect to any Real Estate included in the calculation of
the Borrowing Base;
(p) such supplements to the aforementioned documents and additional
information (including, but not limited to, leasing, occupancy and non-financial
information) and reports as the Agent or any Lender may from time to time
reasonably require;
(q) prior to or contemporaneously with the making of any investment in any
Joint Venture, copies of each proposed shareholders' agreement, certificate or
articles of incorporation, partnership agreement, joint venture agreement or
similar organizational instrument or agreement,
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relating to the formation of each Joint Venture, and each material restatement,
modification, amendment or supplement thereto;
(r) concurrently with the quarterly financial statements described in
subsection (b) above following the end of any quarter in which each new
Subsidiary that is to become a Borrower under Section 6.07 hereof was formed,
the Company shall deliver to the Agent (i) revised copies of Schedule I to this
Agreement and Schedule I to the Notes, adding thereto the name of such new
Subsidiary, (ii) a revised copy of Schedule V to this Agreement, adding thereto
the information with respect to such new Subsidiary required by Section 4.14
hereof, (iii) a Joinder Agreement, in form and content satisfactory to the
Agent, executed by a duly authorized officer of such new Subsidiary, pursuant to
which such Subsidiary agrees to become a Borrower hereunder, assumes all of the
Obligations, and agrees that Schedule I hereto and Schedule I to the Notes shall
be amended to include the name of such Subsidiary; (iv) a copy of the
certificate of incorporation or other organizational document of such new
Subsidiary, certified by the secretary of state or other official of the state
or other jurisdiction of its incorporation; and (v) a copy of the bylaws of such
new Subsidiary, certified by the secretary or other appropriate officer or
partner of such Subsidiary;
(s) concurrently with the consolidated balance sheet delivered pursuant to
subsection (s) above, a copy of Schedule III (Real Estate Owned), updated from
Schedule III most recently delivered to the Lenders, including therein all real
estate owned by the Company and its Subsidiaries, including Greystone and its
Subsidiaries, immediately following the Merger and after giving effect to the
Reorganization; and
(t) within 60 days of the Closing Date, a Closing Date consolidated
balance sheet of the Company and its Subsidiaries (including Greystone and its
Subsidiaries), as of such date and after giving effect to the formation of LLP,
the transactions contemplated under the Spin-Off Agreement, the Merger, the
effectiveness of this Agreement, the Facility A Credit Agreement and the LLP
Credit Agreement and the funding of the initial loans thereunder, prepared in
accordance with GAAP consistently applied, unaudited but certified to be true
and accurate by the Chief Financial Officer of the Company.
SECTION 6.05. ACCESS TO PREMISES AND RECORDS. At all reasonable times and
as often as any Lender may reasonably request, permit authorized representatives
and agents designated by that Lender to (i) have access to the premises of the
Borrower and each Subsidiary and to their respective corporate books and
financial records, and all other records relating to their respective operations
and procedures, (ii) make copies of or excerpts from those books and records and
(iii) upon reasonable notice to the Company, discuss the respective affairs,
finances and operations of the Borrower and its Subsidiaries with, and to be
advised as to the same by, their respective officers and directors.
SECTION 6.06. MAINTENANCE OF PROPERTIES AND INSURANCE. Maintain all its
properties and assets in good working order and condition and make all necessary
repairs, renewals and replacements thereof so that its business carried on in
connection therewith may be properly conducted at all times; and maintain or
require to be maintained (i) adequate insurance, by
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financially sound and reputable insurers, on all properties of the Borrower
which are of character usually insured by Persons engaged in the same or a
similar business (including, without limitation, all Real Estate encumbered by
Mortgages securing mortgage loans made by the Borrower, to the extent normally
required by prudent mortgagees, and all Real Estate which is subject of an
Equity Investment by the Borrower, to the extent normally carried by prudent
builder-developers) against loss or damage resulting from fire, defects in title
or other risks insured against by extended coverage and of the kind customarily
insured against by those Persons, (ii) adequate public liability insurance
against tort claims which may be incurred by the Borrower, and (iii) such other
insurance as may be required by law. Upon the request of the Agent, the Borrower
will furnish to the Lenders full information as to the insurance carried.
Notwithstanding the foregoing provisions of this Section 6.06, Borrower shall be
permitted to self-insure against all property and casualty risks associated with
its construction of single-family dwelling units up to a maximum aggregate
construction exposure for any Project not to exceed at any time 10% of Adjusted
Tangible Net Worth.
SECTION 6.07. FINANCING; NEW INVESTMENTS. Give the Agent (i) written
notice of any serious negotiations for debt or equity financing or for the
placement of the Borrower's Securities in either a private or public financing,
if any of the foregoing transactions are to be in excess of $1,000,000 in any
one transaction or series of related transactions, (ii) advance written notice
of the formation of any new Significant Subsidiary (as hereinafter defined), the
establishment of any new Joint Venture or the commencement of any new project or
work-out involving Real Estate not owned by the Borrower as of the Agreement
Date, which such new Significant Subsidiary shall become a party to this
Agreement as a Borrower hereunder, effective upon the date of such Subsidiary's
formation, unless (x) such Subsidiary is a Joint Venture Subsidiary, (y) the
terms of the agreement creating such Joint Venture prohibit the joint venturers
thereof from being or becoming liable for any Indebtedness other than
Indebtedness of the Joint Venture and (z) all of the issued and outstanding
equity Securities of such Subsidiary are pledged to the Lenders pursuant to
Section 7.05 hereof, and (iii) written notice of the formation of any new
Subsidiary which is not a Significant Subsidiary given not later than ten (10)
days after such formation, which new Subsidiary shall become a party to this
Agreement as a Borrower hereunder effective upon such Subsidiary's formation;
PROVIDED, HOWEVER, that nothing in this Section 6.07 shall be deemed to
authorize the Borrower to enter into any such transaction if the same would
violate any of the limitations set forth in Article VII hereof. As used in this
Section 6.07, the term "Significant Subsidiary" means a Subsidiary of one or
more entities comprising the Borrower in which the Borrower makes investments
(whether through the purchase of Capital Stock or instruments evidencing debt,
advances or loans to such Subsidiary or by the guaranty of Indebtedness of such
Subsidiary) in a cumulative amount in excess of $1,000,000.
SECTION 6.08. COMPLIANCE WITH APPLICABLE LAWS. Promptly and fully comply
with, conform to and obey all present and future laws, ordinances, rules,
regulations, orders, writs, judgments, injunctions, decrees, awards and all
other legal requirements applicable to the Borrower, its Subsidiaries and their
respective properties, including, without limitation, Regulation Z of the Board
of Governors of the Federal Reserve System, the Federal Interstate Land Sales
Full Disclosure Act, ERISA and the Florida Land Sales Act, the violation of
which would have a Material Adverse Effect on the Borrower.
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SECTION 6.09. ADVANCES TO THE MORTGAGE BANKING SUBSIDIARIES. Cause the
Mortgage Banking Subsidiaries to execute and deliver the Mortgage Banking
Subsidiaries Note in order to evidence all loans and advances that now exist or
are hereafter made by the Company to any of the Mortgage Banking Subsidiaries,
respectively; deposit the original Mortgage Banking Subsidiaries Note with
Agent; and obtain, prior to or contemporaneously with the execution of this
Agreement, written acknowledgments from each Mortgage Banking Subsidiary that
the aggregate of all loans and advances hereafter made by the Company to such
Mortgage Banking Subsidiary shall be evidenced and governed by the Mortgage
Banking Subsidiaries Note held by Agent. At all times the principal amount of
the Mortgage Banking Subsidiaries Note held by Agent must equal or exceed the
aggregate principal amount of all loans and advances made by the Company to
Mortgage Banking Subsidiaries, and upon the request of Agent (but no more
frequently than monthly), the Company shall obtain and deliver to the Agent
specific written acknowledgments from each of the Mortgage Banking Subsidiaries
to the effect that loans and advances theretofore made by the Company to the
Mortgage Banking Subsidiaries are evidenced by the Mortgage Banking Subsidiaries
Note. In the event that after the Agreement Date the Borrower organizes or
acquires any Mortgage Banking Subsidiary, such Mortgage Banking Subsidiary
shall, upon such organization or acquisition, join in and become a maker of a
replacement Mortgage Banking Subsidiaries Note, such new Mortgage Banking
Subsidiaries Note shall be deposited with the Agent pursuant to this Section
6.09, and all references in this Agreement to Mortgage Banking Subsidiaries
shall thereafter be deemed references to all such Mortgage Banking Subsidiaries.
SECTION 6.10. USE OF PROCEEDS. Use the proceeds of the Advances for
working capital and general corporate purposes and to finance acquisitions
consummated with the prior approval of the Board of Directors of the Person to
be acquired.
ARTICLE VII
NEGATIVE COVENANTS
The Borrower covenants and agrees that from the date hereof until payment
in full of all the Obligations, unless the Required Lenders otherwise shall
consent in writing as provided in Section 13.06 hereof, Borrower will not,
either directly or indirectly:
SECTION 7.01. MINIMUM TANGIBLE NET WORTH. Permit the Tangible Net Worth of
the Company at any time to be less than the sum of (a) $300,000,000, (b) an
amount equal to 50% of the cumulative amount of positive Consolidated Net Income
of the Company and its Subsidiaries for each fiscal quarter of the Company
ending after the Closing Date for which the Company and its Subsidiaries, taken
as a whole, had Consolidated Net Income, and (c) an amount equal to 75% of the
aggregate amount of the increase in the consolidated stockholders' equity of the
Company resulting from the issuance of equity Securities of the Company after
the Closing Date. For purposes
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of this Section 7.01, the term "Consolidated Net Income" when used in respect of
any period, shall not include any loss for such period.
SECTION 7.02. LIMITATION ON INDEBTEDNESS.
(a) BORROWING BASE LIMITATION. At any time, permit the aggregate
outstanding amount of the sum of (i) all outstanding Obligations plus (ii) all
other senior unsecured debt of the Borrower to exceed the Borrowing Base at such
time (the "Borrowing Base Limitation"); PROVIDED, HOWEVER, that the Borrower
shall not be required to comply with the Borrowing Base Limitation if, but only
so long as, the Borrower's senior unsecured long-term debt has a Rating of BBB-
or higher from S&P OR Baa3 or higher from Moody's.
(b) MAXIMUM LEVERAGE RATIO. At any time, permit the aggregate
outstanding amount of the sum of (i) all outstanding Obligations PLUS (ii) all
other Indebtedness of the Borrower, (excluding from such Indebtedness all LNR
Loan Guaranties outstanding at any time after the Closing Date and prior to
February 28, 1998, but including all LNR Loan Guaranties outstanding on or after
such date), PLUS (iii) all LLP Loans LESS (iv) unrestricted cash of the Borrower
in excess of $15,000,000, to exceed 240% through November 30, 1997, 225% through
November 30, 1999, and 200% thereafter of the sum of (x) the Adjusted Tangible
Net Worth and (y) 50% of Subordinated Debt (not to exceed $100,000,000) (the
"Maximum Leverage Ratio"); PROVIDED, HOWEVER, that if as of the last day of any
quarter (i) the Interest Coverage Ratio as reported pursuant to Section 6.04(k)
is less than the Minimum Interest Coverage Ratio, and (ii) the Borrower is not
in compliance with the Borrowing Base Limitation (without regard to the proviso
contained in Section 7.02(a)), the Maximum Leverage Ratio shall decrease by ten
(10) percentage points for the next succeeding quarter and for each quarter
thereafter until Borrower is in compliance with the Minimum Interest Coverage
Ratio; PROVIDED FURTHER, however, that if on the last day in any subsequent
quarter, Borrower is in compliance with both the Minimum Interest Coverage Ratio
and the Borrowing Base Limitation (without regard to the proviso contained in
Section 7.02(a)), the Maximum Leverage Ratio shall increase by ten (10)
percentage points (but not above 225% through November 30, 1999, and 200%
thereafter) for such quarter.
SECTION 7.03. GUARANTIES. Make or suffer to exist any Contingent
Obligation (including, without limitation, any Contingent Obligation with
respect to the obligations of a Subsidiary or Joint Venture) or otherwise
assume, guarantee or in any way become contingently liable or responsible for
obligations of any other Person, whether by agreement to purchase those
obligations of any other Person, or by agreement for the furnishing of funds
through the purchase of goods, supplies or services (whether by way of stock
purchase, capital contribution, advance or loan) for the purpose of paying or
discharging the obligations of any other Person, except for: (a) guaranties of
obligations of another Borrower issued in the ordinary course of business; (b)
the endorsement of negotiable instruments in the ordinary course of business;
(c) guaranties of performance and completion and performance and completion
bonds issued in connection with the construction of Real Estate developments
owned by the Borrower; (d) guaranties of liabilities incurred by Joint Ventures
to which the Borrower or a Joint Venture Subsidiary is a party, PROVIDED
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that all such guaranties outstanding at any one time (including without
limitation Stevenson Ranch Venture L.L.C. and Bressi Ranch), do not exceed the
lesser of $60,000,000 or 15% of the Tangible Net Worth, (e) the obligation of
the Borrower under the LLP Loans Guaranty; or (f) the LNR Loans Guaranties;
PROVIDED, HOWEVER, that the maximum permissible amount of the LNR Loans
Guaranties (i) until November 30, 1998, shall be limited to the lesser of
Indebtedness of LNR which exists on the Closing Date or $50,000,000, and (ii)
from and after November 30, 1998, shall be zero. None of the foregoing clauses,
however, shall be deemed to permit the Borrower to guaranty any obligations of
the Mortgage Banking Subsidiaries, the Limited Purpose Finance Subsidiaries, STI
or the Title Companies, if any such guaranty would cause the Borrower to be in
violation of Section 7.02 hereof.
SECTION 7.04. SALE OF ASSETS; ACQUISITIONS; MERGER.
(a) Do either of the following: (i) sell any single asset with a book
value of $5,000,000 or more for a sales price which is less than the book value
of that asset, or (ii) sell any single asset with a book value of $10,000,000 or
more unless such sale is in the ordinary course of business; PROVIDED, HOWEVER,
that in no event shall the aggregate sales price of all assets sold or disposed
of by the Borrower, other than those sold in the ordinary course of business,
exceed $25,000,000 in any single calendar year.
(b) Do any of the following:
(i) sell, assign, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of
the assets (whether now owned or hereafter acquired) of the Company and
the Subsidiaries (on a consolidated basis) except for the sale of
inventory in the ordinary course of business;
(ii) except as contemplated by the Reorganization Documents, merge into
or consolidate with any other Person or permit any other Person to merge
into or consolidate with it;
(iii) dissolve, liquidate or wind up its business by operation of law or
otherwise; or
(iv) except as contemplated by the Reorganization Documents, distribute
to the stockholders of the Company any Securities of any Subsidiary;
PROVIDED, HOWEVER, that any Subsidiary or any other Person may merge into or
consolidate with or may dissolve and liquidate into any Borrower, if (and only
if), (1) in the case of a merger or consolidation, a Borrower is the surviving
Person, (2) in the case of a merger or consolidation involving the Company, the
Company is the surviving Person, (3) the character of the business of the
Company and the Subsidiaries on a consolidated basis will not be materially
changed by such occurrence, and (4) such occurrence shall not constitute or give
rise to an Event of Default or Unma-
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tured Default or a default in respect of any of the covenants contained in any
agreement to which the Company or such Subsidiary is a party or by which its
property may be bound.
(c) Acquire another Person unless (i) such Person is involved in the
acquisition, development, management, rental and/or sale of real estate assets
and/or the provision of financial services as its primary business and (ii) the
board of directors or other governing body of such Person approves such
acquisition.
Nothing contained in this Section 7.04, however, shall restrict any sale
of assets between the entities comprising the Borrower which is in compliance
with all other provisions of this Agreement.
SECTION 7.05. INVESTMENTS. Purchase or otherwise acquire, hold or invest
in the Securities (whether Capital Stock or instruments evidencing debt) of,
make loans or advances to, enter into any arrangements for the purpose of
providing funds or credit to, or make any Equity Investment in, any Person which
is not either a Borrower on the Closing Date or a Subsidiary which becomes a
Borrower upon the making of the investment, except for: (i) (A) Investments in
or loans or advances to Joint Ventures (other than its investment in LLP but
including Investments in the Mortgage Banking Subsidiaries) to which the
Borrower or a Subsidiary is a party; and (B) Investments in or loans or advances
to STI, Limited Purpose Finance Subsidiaries and the Title Companies, PROVIDED
that (1) the aggregate of all such Investments, loans and advances outstanding
at any time in (A) and (B) do not exceed 25% of the Tangible Net Worth and (2)
with respect to Investments in, or loans and advances to each Joint Venture
Subsidiary (other than LLP Partner) which is not a Borrower or a Subsidiary
Guarantor, all of the issued and outstanding equity Securities of such Joint
Venture Subsidiary shall have been pledged to the Agent pursuant to the terms
and provisions of the Pledge Agreement and such pledge shall not be prohibited
by, or result in a breach or violation of, any agreement, indenture or other
instrument to which the Company or any Subsidiary is a party or is bound; and
(ii) (A) purchases of direct obligations of the government of the United States
of America, or any agency thereof, or obligations unconditionally guaranteed by
the United States of America; (B) certificates of deposit of any bank organized
or licensed to conduct a banking business under the laws of the United States or
any state thereof having capital, surplus and undivided profits of not less than
$100,000,000; (C) Investments in commercial paper which, at the time of
acquisition by the Borrower, is accorded an "A" or equivalent rating by any of
the Rating Agencies or any other nationally recognized credit rating agency of
similar standing; (D) investments in publicly traded, readily marketable
securities, traded on a recognized national exchange or over-the-counter; and
(E) loans or advances by the Borrower to, or Securities or Indebtedness of, a
real estate or homebuilding company to be acquired by the Borrower for the
purpose of obtaining control of specific homebuilding assets of that
homebuilding company, PROVIDED, HOWEVER, that such loans, advances or
Indebtedness are secured by Mortgages, land, homes under construction and/or
homes inventory of such real estate or homebuilding company.
SECTION 7.06. DISPOSITION, ENCUMBRANCE OR ISSUANCE OF CERTAIN Stock. Sell,
transfer or otherwise dispose of, or pledge, grant a security interest, equity
interest or other beneficial interest in or otherwise encumber any of the
outstanding shares of Capital Stock of any Mortgage Banking
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Subsidiary, or permit any Mortgage Banking Subsidiary to sell, issue or
otherwise transfer any shares of its Capital Stock to any Person other than the
Borrower.
SECTION 7.07. SUBORDINATED DEBT. Directly or indirectly make any payment
of principal or interest with respect to any Subordinated Debt prior to the date
the same is due, or amend or modify the terms of any Subordinated Debt except
for extensions of the due date thereof, or directly or indirectly redeem,
retire, defease, purchase, retire or otherwise acquire any Subordinated Debt.
SECTION 7.08. HOUSING UNIT. Permit the total number of Housing Units owned
by the Borrower, including Housing Units under construction, but excluding model
housing units and Housing Units Under Contract, at any time to exceed 35% of the
total number of Housing Unit Closings during the immediately preceding 12-month
period; PROVIDED, HOWEVER, that the total number of Housing Unit Closings during
the twelve-month period immediately preceding the Closing Date shall include
Housing Unit Closings of Greystone during such period.
SECTION 7.09. CONSTRUCTION IN PROGRESS. Cause, suffer or permit to exist
any Mortgage, security interest or other encumbrance to secure Indebtedness on
any Housing Unit or other building or structure (including, without limitation,
any asset reported as "Construction in Progress" in the financial statements of
the Borrower) that is under construction on any land owned or leased by the
Borrower; PROVIDED, HOWEVER, that the Borrower may cause, suffer or permit to
exist purchase money Mortgages having an aggregate outstanding principal balance
not exceeding $10,000,000 at any time on assets so reported as "Construction in
Progress".
SECTION 7.10. NO MARGIN STOCK. Use any of the proceeds of the Advances to
purchase or carry any "margin stock" (as defined in Regulation U).
SECTION 7.11. MORTGAGE BANKING SUBSIDIARIES' CAPITAL RATIO. Permit the
"Mortgage Banking Subsidiaries' Capital Ratio" to exceed, at any time, eight (8)
to one (1). As used in this Section 7.11, the term "Mortgage Banking
Subsidiaries' Capital Ratio" shall mean the ratio of the combined total
Indebtedness of the Mortgage Banking Subsidiaries to Adjusted Net Worth (as
defined in Section 7.14 below).
SECTION 7.12. TRANSACTIONS WITH AFFILIATES. Enter into any transaction
(including, without limitation, the purchase or sale of any property or service)
with, or make any payment or transfer to, any Affiliate, except in the ordinary
course of business and pursuant to the reasonable requirements of the Borrower's
or a Subsidiary's business and upon fair and reasonable terms no less favorable
to the Borrower or such Subsidiary than the Borrower or such Subsidiary would
obtain in a comparable arms'-length transaction.
SECTION 7.13. RESTRICTIONS ON ADVANCES TO MORTGAGE BANKING SUBSIDIARIES.
Subject to Section 7.05, (i) Permit any loan or advance to be made by the
Borrower to a Mortgage Banking Subsidiary except for loans and advances from the
Company to the Mortgage Banking Subsidiaries
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which are made under, and evidenced by, the Mortgage Banking Subsidiaries Note
that is in the possession of Agent and for which the Company shall have obtained
a written acknowledgment from each Mortgage Banking Subsidiary that the same are
evidenced and governed by the Mortgage Banking Subsidiaries Note; (ii) permit
the aggregate amount of all loans and advances made by the Company to any
Mortgage Banking Subsidiary outstanding at any time to exceed the sum of (a) the
net carrying value of all mortgage loans held by such Mortgage Banking
Subsidiary, less the aggregate principal amount of all promissory notes payable
by such Mortgage Banking Subsidiary to banks or other lenders, and less the
aggregate principal amount of all mortgage loans held for sale by such Mortgage
Banking Subsidiaries which are pledged, assigned or otherwise encumbered, to the
extent that said aggregate amount exceeds the aggregate principal amount of
notes payable by such Mortgage Banking Subsidiary to banks or other lenders, and
(b) 1.5% of the principal amount of all mortgages serviced by such Mortgage
Banking Subsidiary, less any loans or other financing to such Mortgage Banking
Subsidiary associated with the servicing portfolio (exclusive of those amounts
deducted in the calculation required under clause (a) above) if, and to the
extent that, the servicing rights with respect to such mortgages are not subject
to any Lien; (iii) assign, transfer, pledge, hypothecate or encumber in any way
the Mortgage Banking Subsidiaries Note, any interest therein or any sums due or
to become due thereunder; (iv) modify, amend, extend or in any way change the
terms of the Mortgage Banking Subsidiaries Note; (v) make any principal advances
to any Mortgage Banking Subsidiary, under the Mortgage Banking Subsidiaries Note
or otherwise, at any time after the Agent has been granted a security interest
in the Mortgage Banking Subsidiaries Note except to the extent of any principal
prepayments under the Mortgage Banking Subsidiaries Note in excess of the
mandatory principal payments required thereunder; or (vi) permit a Mortgage
Banking Subsidiary to enter into any agreement or agreements which (a) in any
way restrict the payment of dividends by such Mortgage Banking Subsidiary or (b)
individually, or in the aggregate, impose any restriction on the repayment of
any indebtedness of a Mortgage Banking Subsidiary to any Person (including,
without limitation, the indebtedness payable under the Mortgage Banking
Subsidiaries Note) other than a restriction on the payment of the last
$5,000,000 of principal indebtedness of UAMC (i.e., such permitted restriction
shall be applicable only after the aggregate principal amount of indebtedness
owed by UAMC to any Person shall be less than or equal to $5,000,000).
SECTION 7.14. ADJUSTED NET WORTH OF MORTGAGE BANKING SUBSIDIARIES. Permit
the Consolidated Tangible Net Worth of the Mortgage Banking Subsidiaries at any
time to be less than $30,000,000. For purposes of this Section 7.14, the term
"Consolidated Tangible Net Worth" shall mean, as of any date of determination
thereof, the net worth of the Mortgage Banking Subsidiaries on a consolidated
basis as determined in accordance with GAAP (including Capitalized Mortgage
Servicing) less the book value of any assets of the Mortgage Banking
Subsidiaries which would be treated as intangibles under GAAP including, without
limitation, goodwill, research and development costs, trademarks, trade names,
copyrights, patents and unamortized debt discount and expenses and the term
"Capitalized Mortgage Servicing" shall mean, as of any date, the sum of UAMC's
(i) purchased mortgage servicing rights, (ii) originated mortgage servicing
rights that are then included in UAMC's capital assets and (iii) excess
servicing, net of any amortization or write-downs with respect thereto, all as
determined in accordance with GAAP.
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SECTION 7.15. INVESTMENTS IN LAND. At any time, permit the Borrower's
investment in improved and unimproved land and investments in and advances to
LLP to exceed the sum of 100% of Net Worth PLUS 50% of all Subordinated Debt at
such time LESS all goodwill and other assets that are properly classified as
"intangible assets" in accordance with GAAP and which are acquired after the
Closing Date and are owned by the Borrower at such time.
SECTION 7.16. LIENS AND ENCUMBRANCES.
(a) NEGATIVE PLEDGE. Grant any Liens on any of its rights, properties or
assets other than Permitted Liens.
(b) NO AGREEMENT FOR NEGATIVE PLEDGE. Agree with any third party not to
create, assume or suffer to exist any Lien securing a charge or obligation on or
of any of its property, real or personal, whether now owned or hereafter
acquired.
SECTION 7.17. REORGANIZATION DOCUMENTS. Enter into or agree to any
amendment or modification of the Merger Agreement, the Spin-Off Agreement or the
LLP Partnership Agreement, or waive or release any material rights or benefits
of the Company thereunder.
SECTION 7.18. INVESTMENTS IN MARLBOROUGH SUBSIDIARIES. Make any further
Investment in any of the Marlborough Subsidiaries.
ARTICLE VIII
COLLATERAL
SECTION 8.01. SECURITY FOR OBLIGATIONS. Upon the request of the Agent
(which may not be made without the prior written or telegraphic consent from the
Required Lenders and which shall be made upon the written or telegraphic request
of the Required Lenders), the Borrower shall grant the Agent, on behalf of the
Lenders, as security for the payment in full of all the Obligations, a first
lien and security interest in the Mortgage Banking Subsidiaries Note.
Notwithstanding anything to the contrary provided in this Agreement, the
Borrower agrees that the security agreement relating to the Mortgage Banking
Subsidiaries Note shall require all principal payments payable under the
Mortgage Banking Subsidiaries Note to be made directly to the Agent and applied
to the principal outstanding under the Notes as required under Section 2.02.
SECTION 8.02. COLLATERAL DOCUMENTATION. If and when the Borrower is
required to grant the Agent a security interest in the Mortgage Banking
Subsidiaries Note pursuant to the foregoing provisions of this Article VIII, the
Borrower shall deliver to the Agent:
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(i) a duly executed pledge and security agreement, in form and
substance satisfactory to the Agent, granting the Agent on behalf of the
Lenders, a first lien on, and security interest in, the Mortgage Banking
Subsidiaries Note;
(ii) an endorsement or allonge to the Mortgage Banking Subsidiaries
Note, in form and substance satisfactory to the Agent, transferring the
Mortgage Banking Subsidiaries Note to the Agent on behalf of the Lenders;
and
(iii) a written acknowledgment from the Company that the Agent holds the
Mortgage Banking Subsidiaries Note as Collateral for the Obligations.
All the foregoing documents shall be delivered to the Agent on or before the
date that the Borrower is required to grant the Agent the security interest in
the Mortgage Banking Subsidiaries Note. All of the documentation and other items
required under this Section 8.02 must be fully satisfactory, both in form and
substance, to the Agent. In addition to the foregoing, the Borrower shall, at
the request of the Agent, execute and deliver to the Agent such assignments,
pledges, financing statements and other documents, and cause to be done such
further acts, all as the Agent from time to time may deem necessary or
appropriate to evidence, confirm, perfect or protect any security interest
required to be granted to the Agent hereunder.
SECTION 8.03. POWERS AND DUTIES OF THE BORROWER WITH RESPECT TO THE
COLLATERAL.
(a) Subject to the provisions of this Agreement, so long as no Event of
Default shall have occurred and be continuing, the Borrower shall have the right
to deal with, manage and administer the Collateral and to collect and use the
proceeds thereof in such manner as it shall deem appropriate (subject to the
provisions of Section 2.02).
(b) Unless the Borrower shall have been notified, pursuant to Section 9.03
hereof, that it has been discharged from its right to deal with, manage and
administer all items of the Collateral, the Borrower shall, subject to the
provisions of this Agreement, manage and administer all the Collateral in such
manner as they shall deem appropriate, without charge to the Lenders; PROVIDED,
HOWEVER, that the Borrower shall remain fully responsible for all its
obligations as owner, creditor or otherwise with respect to the Collateral.
SECTION 8.04. POWER OF ATTORNEY. With respect to the Collateral which the
Agent may from time to time hold and/or be entitled to obtain hereunder, the
Agent hereby is irrevocably appointed by the Borrower as Borrower's true and
lawful attorney-in-fact with full power, from time to time upon the occurrence
and during the continuance of an Event of Default, to (i) take possession of and
endorse in Borrower's name any pledges, assignments and other documents and any
notes, checks, drafts, bills of exchange, money orders and any other documents
received in payment for or on account of those assets and properties, (ii) to
collect, sue for and give acquittance for moneys due on account of those assets
and properties, (ii) to withdraw any claims, suits or proceedings pertaining to
or arising out of those assets and properties. The foregoing appointment is with
full
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power of substitution and is coupled with an interest. The Agent shall not be
liable for any failure to collect or enforce the payment of any of those assets
and properties.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.01. EVENTS OF DEFAULT. The occurrence of any one or more of the
following Events shall constitute an "Event of Default":
(a) any representation or warranty made or deemed made by or on behalf of
the Borrower or any Subsidiary Guarantor to the Lenders or the Agent under or in
connection with this Agreement or any Loan Document shall be false or misleading
in any material respect when made;
(b) any report, certificate, financial statement or other document or
instrument furnished in connection with this Agreement or the Loans hereunder
shall be false or misleading in any material respect when furnished;
(c) default shall be made in the payment of (i) the principal of any of
the Notes when and as due and payable, or (ii) the interest on any of the Notes,
any fees or any other sums due pursuant to Article II, which default continues
for five days after the same becomes due and payable;
(d) default shall be made with respect to any Indebtedness or Contingent
Obligations of the Borrower or any Subsidiary Guarantor (other than the
Indebtedness evidenced by the Notes), or in any net liabilities under interest
rate swap, exchange or cap agreements, beyond any applicable period of grace, or
default shall be made with respect to the performance of any other obligation
incurred in connection with any such Indebtedness or liabilities beyond any
applicable period of grace, or default shall be made with respect to any other
liability of $100,000 or more, if the effect of any such default is to
accelerate the maturity of such Indebtedness or liability or to cause any other
liability to become due prior to its stated maturity, or any such Indebtedness
or liability shall not be paid when due and such default shall not have been
remedied or cured by the Borrower or such Subsidiary Guarantor or waived by the
obligor;
(e) default shall be made in the due observance or performance of any of
the provisions of Article VII or Article VIII of this Agreement;
(f) default shall be made in the due observance or performance of any
other covenant, agreement or condition on the part of the Borrower or any
Subsidiary Guarantor to be performed under or in connection with this Agreement
or any Loan Document, and such default shall have continued for a period of 30
days after the occurrence thereof;
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(g) the Borrower or any Subsidiary Guarantor shall (i) petition or apply
for, seek, consent to, or acquiesce in, the appointment of a receiver, trustee,
examiner, custodian, liquidator or similar official of the Borrower or any
Subsidiary Guarantor or any of its properties or assets, (ii) be unable, or
admit in writing its inability, to pay its debts as they mature, (iii) make a
general assignment for the benefit of or a composition with its creditors, (iv)
have an order for relief entered with respect to it under the Federal bankruptcy
laws as now or hereafter in effect, (v) institute any proceeding seeking an
order for relief under the Federal bankruptcy laws as now or hereafter in
effect, or file a petition or an answer seeking dissolution, winding up,
liquidation or reorganization or an arrangement with creditors or a composition
of its debts or to take advantage of any bankruptcy, reorganization, insolvency,
readjustment of debts, dissolution or liquidation law or statute or other
statute or law for the relief of debtors, or file any answer admitting the
material allegations of a petition filed against it in any proceeding under such
law, or fail to file an answer or other pleading denying the material
allegations of any such proceeding filed against it, or if corporate or other
action shall be taken by the Borrower or such Subsidiary Guarantor for the
purpose of effecting any of the foregoing, or (vi) fail to contest in good faith
any appointment or proceeding described in Section 9.01(h);
(h) an order, judgment, or decree shall be entered without the
application, approval, or consent of the Borrower or any Subsidiary Guarantor by
any court of competent jurisdiction appointing a receiver, trustee or liquidator
of the Borrower or any Subsidiary Guarantor or a proceeding described in Section
9.01(g) shall be instituted against the Borrower or any Subsidiary Guarantor,
and such appointment shall continue undischarged or such proceeding continues
undismissed or unstayed for any period of 45 days;
(i) final judgment for the payment of money in excess of $250,000 shall be
rendered against the Borrower or any Subsidiary Guarantor and the same shall
remain undischarged for a period of 30 days during which execution shall not be
effectively stayed;
(j) final judgment(s) for the payment of money in excess of an aggregate
of $250,000 shall be rendered against the Borrower (or any of them) or any
Subsidiary Guarantor after the Closing Date and shall remain undischarged and
unstayed for a period of ten days;
(k) there shall occur any Event or Events which, individually or in the
aggregate, shall be deemed by the Required Lenders to have had a Material
Adverse Effect;
(l) The Borrower or any Subsidiary Guarantor shall be the subject of any
proceeding or investigation pertaining to the release by the Borrower or any
Subsidiary Guarantor, any of its Subsidiaries or any other Person of any
Hazardous Substance into the environment, or any violation of any Environmental
Law or any federal, state or local health or safety law or regulation, which, in
either case, could reasonably be expected to have a Material Adverse Effect;
(m) The occurrence of any "default", as defined in any Facility B Loan
Document (other than this Agreement or the Notes) or the breach of any of the
terms or provisions of any Facility B
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Loan Document (other than this Agreement or the Facility B Notes), which default
or breach continues beyond any period of grace therein provided;
(n) An Event of Default (as such term is defined in the LLP Credit
Agreement) shall occur; or
(o) An Event of Default (as such term is defined in the Facility A Credit
Agreement) shall occur.
SECTION 9.02. ACCELERATION. If any Event of Default described in
subsection 9.01(g) or (h) occurs the obligations of the Lenders to make Loans
hereunder shall automatically terminate and the Facility B Obligations shall
immediately become due and payable without any election or action on the part of
the Agent or any Lender. If any other Event of Default occurs and is continuing,
the Required Lenders may terminate or suspend the obligations of the Lenders to
make Loans hereunder, or declare the Facility B Obligations to be due and
payable, or both, whereupon the Facility B Obligations shall become immediately
due and payable, without presentment, demand, protest or notice of any kind, all
of which the Borrower hereby expressly waives.
If, within 30 days after acceleration of the maturity of the Facility B
Obligations or termination of the obligations of the Lenders to make Loans
hereunder as a result of any Event of Default (other than any Event of Default
as described in subsection 9.01 (g) or (h) with respect to the Borrower) and
before any judgment or decree for the payment of the Facility B Obligations due
shall have been obtained or entered, the Required Lenders (in their sole
discretion) shall so direct, the Agent shall, by notice to the Borrower, rescind
and annul such acceleration and/or termination.
SECTION 9.03. RIGHTS AS TO COLLATERAL.
(a) If, on the Facility B Maturity Date, the Borrower shall not have paid
in full all the Facility B Obligations which are due and payable on such
Facility B Maturity Date, the Agent, at the direction of the Required Lenders,
shall take (and/or shall cause one or more of its designees to take) any or all
of the following actions, after giving at least three Business Days' (which
notice period the Borrower acknowledges to be adequate and reasonable) written
notice to the Borrower (a single such notice being sufficient to entitle the
Agent to take one or more of the actions described below):
(i) prohibit the Borrower from taking any action otherwise permitted by
Section 8.03(a) hereof, and/or discharge the Borrower from their right to
manage and administer the items of Collateral as provided in Section
8.03(b) hereof;
(ii) notify the obligors or other parties interested in any item of the
Collateral of the interest of the Lenders therein and of any action
proposed to be taken with respect thereto, and inform any of those parties
that all payments otherwise payable to the Borrower with respect thereto
thereafter shall be made to the Agent until all the Facility B Obligations
have been paid in full;
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(iii) receive and retain all payments and all other distributions of any
kind with respect to any and all of the Collateral;
(iv) exercise any rights of voting or consent pertaining to any item of
Collateral to the same extent as if the Agent were the outright owner
thereof for the benefit of the Lenders, or cause any item of the
Collateral to be transferred to its own name and have such transfer
recorded in any place or places deemed appropriate by the Agent;
(v) deal with the Collateral in all respects as if it were the outright
owner thereof for the benefit of the Lenders;
(vi) take such action as directed by the Required Lenders with respect
to the sale, assignment and delivery of the whole of, or from time to time
any one or more items of, the Collateral, including, without limitation:
to sell, assign and deliver the whole of, or from time to time any part
of, the Collateral at any broker's board or at any private sale or at
public auction, with or without demand on the Borrower or advertisement of
the time or place of sale or adjournment thereof or otherwise, for cash,
for credit or for other property, for immediate or future delivery, and
for such price or prices and on such terms as the Required Lenders in
their discretion may determine, and the Agent or any of the other Lenders
may bid for and purchase the whole or any one or more items of the
Collateral so sold free from any right or equity of redemption; to adjourn
any such sale or cause the same to be adjourned from time to time to a
subsequent time and place announced at the time and place fixed for the
sale; and to carry out any agreement to sell any item or items of
Collateral in accordance with the terms of such agreement, notwithstanding
that after the Agent shall have entered into such agreement, all the
Facility B Obligations may have been paid in full; and
(vii) in addition to, and not by way of limitation of, any of the rights
specified above, exercise any and all rights and remedies afforded to it,
as a secured party in possession of collateral or otherwise, under any and
all applicable provisions of laws.
(b) The Agent, any Person designated by the Agent to take any of the
action as enumerated in subsection (a) above, any of the Lenders, and their
respective officers, directors, employees, agents and counsel shall not incur
any liability (other than for acts or omissions amounting to gross negligence or
willful misconduct) as a result of the sale of the Collateral, or any part
thereof, in a commercially reasonable manner in accordance with the provisions
of subsection (a)(vi) above or of applicable law, or for the failure to sell or
offer for sale the Collateral, for any reason whatsoever. The Borrower waives
any claims (other than those attributable to acts or omissions amounting to
gross negligence or willful misconduct) against the Agent, any Person designated
by the Agent to take any action, the Lenders, and their respective officers,
directors, employees, agents and counsel arising with respect to the price at
which the Collateral, or any part thereof, may have been sold or by reason of
the fact that such price was less than the aggregate of all the Obligations,
PROVIDED that all such sales have been effected in a commercially reasonable
manner.
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(c) The Agent shall collect the cash proceeds received from any sale or
other disposition or from any other source contemplated by subsection (a) above
and, after deducting all costs and expenses incurred by the Agent, any person
designated by the Agent to take any of the actions enumerated in subsection (a)
above, and the Lenders (other than in connection with the purchase by any of the
Lenders of any item of the Collateral) in connection with such collection and
sale (including, without limitation, reasonable counsel fees and expenses),
shall apply the same in accordance with the provisions of Section 9.04 below.
Noncash proceeds received by the Agent shall be held by it, unless and until
instructions are received from the Required Lenders to distribute those
proceeds. Upon any such distribution in the order set forth in Section 9.04
below, the Facility B Obligations shall be reduced by the fair market value of
any such noncash proceeds.
(d) If the amount of all proceeds received in liquidation of the
Collateral which shall be applied to payment of the Obligations shall be
insufficient to pay all the Obligations in full, the Borrower acknowledges that
it shall continue to remain liable for any deficiency, together with any
interest thereon and costs of collection thereof (including reasonable counsel
fees and legal expenses), in accordance with the terms of this Agreement and the
other Facility B Loan Documents and the Facility A Credit Agreement and the
other Facility A Loan Documents. The Agent shall account to the Borrower as to
all applications of the proceeds of the Collateral in reduction of the
Obligations.
(e) Notwithstanding the foregoing, none of the provisions of this Section
9.03 shall confer on the Agent or any of the Lenders any rights or privileges
not permissible under applicable law; PROVIDED, HOWEVER, that to the extent the
Borrower may waive any provisions of applicable law which would or could be in
conflict with the terms of this Section 9.03, the Borrower hereby expressly
waives the application of any such laws and provisions.
(f) In connection with the foregoing provisions of this Section 9.03, the
Borrower from time to time promptly shall execute and deliver, or cause to be
executed and delivered, to the Agent such reasonable documents and instruments,
and take or cause to be taken other reasonable and lawful action, as the Agent
reasonably shall deem necessary or desirable to enable it to exercise any of the
rights with respect to the Collateral granted to it pursuant to this Section
9.03.
SECTION 9.04. APPLICATION OF FUNDS. In the event that all the Facility B
Obligations shall have become or been declared due and payable pursuant to the
terms of Section 9.02 hereof, the Lenders agree, by and among themselves (and,
with respect to subsection (f) below, with the Borrower), that any funds
received from or on behalf of the Borrower (pursuant to the provisions of
Section 9.03 or otherwise) by the Agent or any of the Lenders (except funds
retained by any Lender pursuant to the terms of Section 11.01 hereof) shall be
remitted to the Agent, if received by any Lender, and applied by the Agent (in
the case of subsections (c), (d) and (e) below), on a pro rata basis among the
Lenders in accordance with their respective percentages of the Loans outstanding
at the time of such declaration in the following manner and order:
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(a) first, to pay to or reimburse the Agent for any out-of-pocket expenses
for which it is entitled to be paid or reimbursed pursuant to the provisions of
Section 13.03 hereof;
(b) second, to reimburse any of the Lenders pursuant to the provisions of
Section 13.03 hereof;
(c) third, to payment of accrued and unpaid interest due on the Notes;
(d) fourth, to payment of the outstanding principal of the Notes;
(e) fifth, to payment in full of all the remaining Obligations; and
(f) sixth, any remainder shall be returned to the Borrower or as otherwise
required by applicable law.
ARTICLE X
THE AGENT
SECTION 10.01. APPOINTMENT. The First National Bank of Chicago is hereby
appointed Agent hereunder and under each other Loan Document and, subject to the
provisions of Section 10.13 below, each of the Lenders irrevocably authorizes
the Agent to act as the agent of such Lender. The Agent agrees to act as such
upon the express conditions contained in this Article X. The Agent shall not
have a fiduciary relationship in respect of any Lender by reason of this
Agreement. NationsBank, N.A. is hereby appointed to act as Syndication Agent,
Credit Lyonnais Atlanta Agency is hereby appointed as Documentation Agent
hereunder, Bank of America National Trust & Savings Association and Comerica
Bank are hereby appointed as Managing Agents, and Fleet National Bank and
Guaranty Federal Bank, F.S.B. are hereby appointed as Co-Agents. Neither the
Syndication Agent, the Documentation Agent, the Managing Agents nor the
Co-Agents shall have any right, power, obligation, liability, responsibility or
duty under this Agreement in such capacity.
SECTION 10.02. POWERS. The Agent shall have and may exercise such powers
under the Facility B Loan Documents as are specifically delegated to the Agent
by the terms of each thereof, together with such powers as are reasonably
incidental thereto. The Agent shall have no implied duties to the Lenders, or
any obligation to the Lenders to take any action thereunder except any action
specifically provided by the Facility B Loan Documents to be taken by the Agent.
SECTION 10.03. GENERAL IMMUNITY. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable to the Borrower, the
Lenders or any Lender for any action taken or omitted to be taken by it or them
hereunder or under any other Loan Document or in connection herewith or
therewith except for its or their own gross negligence or willful misconduct.
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SECTION 10.04. NO RESPONSIBILITY FOR LOANS, RECITALS, ETC. Neither the
Agent nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into, or verify (i) any
statement, warranty or representation made in connection with any Loan Document
or any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of any obligor under any Loan Document; (iii) the
satisfaction of any condition specified in Article V, except receipt of items
required to be delivered to the Agent; or (iv) the validity, effectiveness or
genuineness (except its own due execution thereof) of any Loan Document or any
other instrument or writing furnished in connection therewith. Further, the
Agent assumes no obligation to any other Lender as to the collectibility of any
Loans made by any Lender to the Borrower. Each Lender expressly acknowledges
that the Agent has not made any representations or warranties to it on or prior
to the date hereof and that no act by the Agent hereafter taken shall be deemed
to constitute any representation or warranty by the Agent to any other Lender.
Each Lender acknowledges that it has taken and will take such action and make
such investigation as it deems necessary to inform itself as to the affairs and
creditworthiness of the Borrower.
SECTION 10.05. EMPLOYMENT OF AGENTS AND COUNSEL. The Agent may execute any
of its duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.
SECTION 10.06. RELIANCE ON DOCUMENTS; COUNSEL. The Agent shall not be
under a duty to examine into or pass upon the validity, effectiveness,
genuineness or value of this Agreement, the Notes or any other document
furnished pursuant hereto or thereto or in connection herewith, and the Agent
shall be entitled to assume that the same are valid, effective and genuine and
what they purport to be. The Agent shall be entitled to rely upon any Note,
notice, consent, certificate, affidavit, letter, telegram, statement, paper or
document reasonably believed by it to be genuine and correct and to have been
signed or sent by the proper person or persons, and, in respect to legal
matters, upon the opinion of counsel selected by the Agent, which counsel may be
employees of the Agent. The Agent shall not be liable for any action taken or
suffered in good faith by it based on or in accordance with any of the
foregoing.
SECTION 10.07. NO WAIVER OF RIGHTS. With respect to its Facility B
Commitment, Loans made by it and the Facility B Notes issued to it, the Agent
shall have the same rights and powers hereunder and under any other Facility B
Loan Document as any Lender or Issuer and may exercise the same as though it was
not the Agent, and the term "Lender" or "Lenders" shall, unless the context
otherwise indicates, include the Agent in its individual capacity. The Agent may
accept deposits from, lend money to and issue letters of credit for the account
of, and generally engage in any kind of business with the Borrower or its
Affiliates (including, without limitation, trust, debt, equity and other
transactions) in addition to the transaction contemplated by this Agreement or
any
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other Facility B Loan Document; it being expressly understood and agreed that
neither the Agent nor any other Lender shall be deemed by the execution hereof
to have waived any rights under any term loan or other agreement with the
Borrower relating to any other business or loans to the Borrower which are not a
part of the Aggregate Facility B Commitment under this Agreement. Without
limiting the generality of the foregoing, each of the Lenders acknowledges and
consents to First Chicago acting as Agent under the Facility A Credit Agreement
and the LLP Credit Agreement and the other Facility B Loan Documents referred to
in such agreements.
SECTION 10.08. KNOWLEDGE OF EVENT OF DEFAULT. It is expressly understood
and agreed that the Agent shall be entitled to assume that no Event of Default
or Unmatured Default has occurred and is continuing, unless the officers of the
Agent active on the Borrower's account have actual knowledge of such occurrence
or have been notified by a Lender that such Lender considers that an Event of
Default or Unmatured Default has occurred and is continuing and specifying the
nature thereof.
SECTION 10.09. AGENT'S REIMBURSEMENT AND INDEMNIFICATION. The Lenders
agree to reimburse and indemnify the Agent ratably in accordance with their
respective Pro Rata Shares (i) for any amounts not reimbursed by the Borrower
for which the Agent is entitled to reimbursement by the Borrower under the
Facility B Loan Documents, (ii) for any other expenses incurred by the Agent on
behalf of the Lenders, in connection with the preparation, execution, delivery,
administration and enforcement of the Facility B Loan Documents and (iii) for
any liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind and nature whatsoever which
may be imposed on, incurred by or asserted against the Agent in any way relating
to or arising out of the Facility B Loan Documents or any other document
delivered in connection therewith or the transactions contemplated thereby, or
the enforcement of any of the terms thereof or of any such other documents,
PROVIDED that no Lender shall be liable for any of the foregoing to the extent
they arise from the gross negligence or willful misconduct of the Agent.
SECTION 10.10. NOTICES TO THE BORROWER. In each instance that a notice is
required, pursuant to the terms hereof, to be given by one or more of the
Lenders to the Borrower, the Lenders desiring that such notice be given shall so
advise the Agent (which advice, if given by telephone, shall be promptly
confirmed by telex or letter to the Agent at its address listed in the signature
pages hereto), which shall transmit such notice to the Borrower promptly after
its having been so advised by the appropriate number of Lenders; PROVIDED,
HOWEVER, that subject to the provisions of Section 10.14 hereof, if the Agent
shall fail to transmit such notice to the Borrower within a reasonable period of
time after its having been so advised by the appropriate number of Lenders, the
Lenders desiring that such notice be given may transmit such notice directly to
the Borrower and in all cases, notice to the Borrower shall be deemed notice to
the Subsidiary Guarantors.
SECTION 10.11. ACTION ON INSTRUCTIONS OF LENDERS. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder and
under any other Facility B Loan Document in accordance with written instructions
signed by the Required Lenders, or all of the Lenders, as the case may be, and
such instructions and any action taken or failure to act pursuant
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thereto shall be binding on all of the Lenders and on all holders of Facility B
Notes. Except where an action or inaction is expressly required under the
Agreement, the Agent shall be fully justified in failing or refusing to take any
action hereunder and under any other Facility B Loan Document or the Facility A
Loan Documents unless it shall first be indemnified to its satisfaction by the
Lenders in accordance with their respective Pro Rata Shares, against any and all
liability, cost and expense that it may incur by reason of taking or continuing
to take any such action.
SECTION 10.12. LENDER CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Agent or any other Lender and
based on the financial statements prepared by the Borrower and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Facility B Loan
Documents. Each Lender also acknowledges that it will, independently and without
reliance upon the Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and the
other Facility B Loan Documents.
SECTION 10.13. RESIGNATION OR REMOVAL OF THE AGENT. If, at any time,
Lenders holding Notes having aggregate outstanding principal balances equal to
at least 75% of the then outstanding amount of the Aggregate Facility B
Commitment (excluding from such computation the Agent and its Notes) shall deem
it advisable, those Lenders may submit to the Agent notification by certified
mail, return receipt requested of its removal as Agent under this Agreement,
which removal shall be effective as of the date of receipt of such notice by the
Agent. If, at any time, the Agent shall deem it advisable, in its sole
discretion, it may submit to each of the Lenders written notification, by
certified mail, return receipt requested, of its resignation as Agent under this
Agreement, which resignation shall be effective as of 30 days after the date of
such notice. In the event of any such removal or resignation, the Required
Lenders may appoint a successor to the Agent. In the event the Agent shall have
resigned and/or have been removed and so long as no successor shall have been
appointed, the Borrower shall make all payments due each Lender hereunder
directly to that Lender and all powers specifically delegated to the Agent by
the terms hereof may be exercised by the Required Lenders. Upon the removal or
resignation of the Agent, the retiring Agent shall be discharged from its duties
and obligations hereunder and under the other Facility B Loan Documents. After
the removal or resignation of the Agent, the provisions of this Article X shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken while it was acting as the Agent hereunder and under the other Facility
B Loan Documents.
SECTION 10.14. BENEFITS OF ARTICLE X. None of the provisions of this
Article X shall inure to the benefit of the Borrower or of any Person other than
Agent and each of the Lenders and their respective successors and permitted
assigns. Accordingly, neither the Borrower nor any Person other than Agent and
the Lenders (and their respective successors and permitted assigns) shall be
entitled to rely upon, or to raise as a defense, the failure of the Agent or any
Lenders to comply with the provisions of this Article X.
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ARTICLE XI
SETOFF; RATABLE PAYMENTS
SECTION 11.01. SETOFF. In addition to, and without limitation of, any
rights of the Lenders under applicable law, if the Borrower becomes insolvent,
however evidenced, or any Event of Default or Unmatured Default occurs, any
indebtedness from any Lender to the Borrower (including all account balances,
whether provisional or final and whether or not collected or available) may be
offset and applied toward the payment of the Facility B Obligations owing to
such Lender, whether or not the Facility B Obligations, or any part hereof,
shall then be due. Each Lender agrees promptly to notify the Borrower after any
such set-off and application made by such Lender; PROVIDED, HOWEVER, that the
failure to give such notice shall not affect the validity of any such set-off
and application. The rights of each Lender under this Section 11.01 are in
addition to any other rights and remedies which that Lender may have under this
Agreement or otherwise.
SECTION 11.02. RATABLE PAYMENTS. If any Lender, whether by setoff or
otherwise, has payment made to it upon any of its Loans (other than payments
received pursuant to Sections 3.01, 3.02 or 3.04) in a greater proportion than
that received by any other Lender with respect to Loans, such Lender agrees,
promptly upon demand, to purchase a portion of such Loans held by the other
Lenders so that after such purchase each Lender will hold its Pro Rata Share of
all Loans. If any Lender, whether in connection with setoff or amounts which
might be subject to setoff or otherwise, receives collateral or other protection
for its Obligations or such amounts which may be subject to setoff, such Lender
agrees, promptly upon demand, to take such action necessary such that all
Lenders share in the benefits of such collateral ratably in accordance with
their respective Pro Rata Shares. In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be made.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
SECTION 12.01. SUCCESSORS AND PERMITTED ASSIGNS. The terms and provisions
of the Facility B Loan Documents shall be binding upon and inure to the benefit
of the Borrower and the Lenders and their respective successors and permitted
assigns, except that (i) the Borrower shall not have the right to assign its
rights or obligations under the Facility B Loan Documents and (ii) any
assignment by any Lender must be made in compliance with Section 12.03.
Notwithstanding clause (ii) of this Section, any Lender may at any time, without
the consent of the Borrower or the Agent, assign all or any portion of its
rights under this Agreement and its Notes to a Federal Reserve Bank; PROVIDED,
HOWEVER, that no such assignment shall release the transferor Lender from its
obligations hereunder. The Agent may treat the payee of any Note as the owner
thereof for all purposes hereof
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unless and until such payee complies with Section 12.03 in the case of an
assignment thereof or, in the case of any other transfer, a written notice of
the transfer is filed with the Agent. Any assignee or transferee of a Note
agrees by acceptance thereof to be bound by all the terms and provisions of the
Facility B Loan Documents. Any request, authority or consent of any Person, who
at the time of making such request or giving such authority or consent is the
holder of any Note, shall be conclusive and binding on any subsequent holder,
transferee or assignee of such Note or of any Note or Notes issued in exchange
therefor. A Lender may not assign less than the lesser of its Commitment or
$10,000,000.
SECTION 12.02. PARTICIPATIONS.
(a) PERMITTED PARTICIPANTS; EFFECT. Any Lender may, in the ordinary course
of its business and in accordance with applicable law, at any time sell to one
or more banks or other entities ("Participants") participating interests in any
Loan owing to such Lender, any Note held by such Lender, any Commitment of such
Lender or any other interest of such Lender under the Facility B Loan Documents;
PROVIDED that any such sale is accompanied by the assignment to the same
Participant of a Pro Rata Share of the selling Lender's interest under the
Facility A Credit Agreement and the other Facility A Loan Documents. In the
event of any such sale by a Lender of participating interests to a Participant,
such Lender's obligations under the Facility B Loan Documents shall remain
unchanged, such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, such Lender shall remain the
holder of any such Note for all purposes under the Facility B Loan Documents,
all amounts payable by the Borrower under this Agreement shall be determined as
if such Lender had not sold such participating interests, and the Borrower and
the Agent shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under the Facility B Loan
Documents.
(b) VOTING RIGHTS. Each Lender shall retain the sole right to approve,
without the consent of any Participant, any amendment, modification or waiver of
any provision of the Facility B Loan Documents other than any amendment,
modification or waiver with respect to any Loan, Facility Letter of Credit
Obligations or Commitment in which such Participant has an interest which
forgives principal, interest or fees or reduces the interest rate or fees
payable with respect to any such Loan, Facility Letter of Credit Obligations or
Commitment, postpones any date fixed for any regularly-scheduled payment of
principal of, or interest or fees on, any such Loan or Commitment, releases any
guarantor of any such Loan, Facility Letter of Credit Obligations or releases
any substantial portion of collateral, if any, securing any such Loan or
Facility Letter of Credit Obligations.
(c) BENEFIT OF SETOFF. The Borrower agrees that each Participant shall be
deemed to have the right of setoff provided in Section 11.01 in respect of its
participating interest in amounts owing under the Facility B Loan Documents to
the same extent as if the amount of its participating interest were owing
directly to it as a Lender under the Facility B Loan Documents, PROVIDED that
each Lender shall retain the right of setoff provided in Section 11.01 with
respect to the amount of participating interests sold to each Participant. The
Lenders agree to share with each Participant, and
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each Participant, by exercising the right of setoff provided in Section 11.01,
agrees to share with each Lender, any amount received pursuant to the exercise
of its right of setoff, such amounts to be shared in accordance with Section
11.02 as if each Participant were a Lender.
SECTION 12.03. ASSIGNMENTS.
(a) PERMITTED ASSIGNMENTS. Any Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time assign to one or
more banks or other entities ("Purchasers") all or any part of its rights and
obligations under the Facility B Loan Documents; PROVIDED that (i) any such
assignment shall be accompanied by the assignment to the same Purchaser of a Pro
Rata Share of the assigning Lender's rights and obligations under the Facility A
Credit Agreement and the other Facility A Loan Documents and (ii) such
assignment may, but need not, include rights of such transferor Lender in
respect of its outstanding Competitive Bid Loans. Such assignment shall be
substantially in the form of Exhibit C hereto. Unless an Event of Default has
occurred and is continuing, the consent of the Borrower and the Agent shall be
required prior to an assignment becoming effective with respect to a Purchaser
which is not a Lender or an Affiliate thereof. Such consent shall be
substantially in the form attached as Exhibit C-2 hereto and shall not be
unreasonably withheld.
(b) EFFECT; EFFECTIVE DATE. Upon (i) delivery to the Agent of a notice of
assignment, substantially in the form attached as Exhibit C-1 hereto (a "Notice
of Assignment"), together with any consents required by Section 12.03(a), and
(ii) payment of a $4,000 fee to the Agent for processing such assignment
(provided that no such fee shall be required if the assignee is an Affiliate of
assignor Lender or if the assignee is already a Lender hereunder), such
assignment shall become effective on the effective date specified in such Notice
of Assignment. On and after the effective date of such assignment, such
Purchaser shall for all purposes be a Lender party to this Agreement and any
other Loan Document executed by the Lenders and shall have all the rights and
obligations of a Lender under the Facility B Loan Documents, to the same extent
as if it were an original party hereto, and no further consent or action by the
Borrower, the Lenders or the Agent shall be required to release the transferor
Lender with respect to the percentage of the Aggregate Commitment and Loans
assigned to such Purchaser. Upon the consummation of any assignment to a
Purchaser pursuant to this Section 12.03(b), the transferor Lender, the Agent
and the Borrower shall make appropriate arrangements so that replacement Notes
are issued to such transferor Lender and new Notes or, as appropriate,
replacement Notes, are issued to such Purchaser, in each case in principal
amounts reflecting their Commitment, as adjusted pursuant to such assignment.
(c) DISSEMINATION OF INFORMATION. The Borrower authorizes each Lender to
disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Facility B Loan Documents by operation of law (each a
"Transferee") and any prospective Transferee any and all information in such
Lender's possession concerning the creditworthiness of the Borrower and its
Subsidiaries.
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(d) TAX TREATMENT. If any interest in any Loan Document is transferred to
any Transferee which is organized under the laws of any jurisdiction other than
the United States or any state thereof, the transferor Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply with
the provisions of Section 2.18.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.01. NOTICE.
(a) Except as otherwise permitted by Section 2.11 with respect to
borrowing notices, all notices and other communications provided to any party
hereto under this Agreement or any other Loan Document shall be in writing or by
telex or by facsimile and addressed or delivered to such party at its address
set forth below its signature hereto or at such other address as may be
designated by such party in a notice to the other parties. Any notice, if mailed
and properly addressed with postage prepaid, shall be deemed given when received
(or when delivery is refused); any notice, if transmitted by telex or facsimile,
shall be deemed given when transmitted (answerback confirmed in the case of
telexes and facsimile confirmation in the case of a facsimile).
(b) The Borrower, the Agent and any Lender may each change the address for
service of notice upon it by a notice in writing to the other parties hereto.
SECTION 13.02. SURVIVAL OF REPRESENTATIONS. All covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by the Lenders of any Loans herein
contemplated and the execution and delivery to the Lenders of the Notes
evidencing the Commitments, and shall continue in full force and effect until
all of the Obligations have been paid in full and the Aggregate Facility B
Commitment has been terminated.
SECTION 13.03. EXPENSES. The Borrower shall pay (i) all expenses,
including attorneys' fees and disbursements (which attorneys may be employees of
the Agent or any Lender), incurred by the Agent and any Lender in connection
with the administration of this Agreement and the other Facility B Loan
Documents, any amendments, modifications or waivers with respect to any of the
provisions thereof and the enforcement and protection of the rights of the
Lenders and the Agent under this Agreement or any of the other Facility B Loan
Documents, including all recording and filing fees, documentary stamp,
intangibles and similar taxes, title insurance premiums, appraisal fees and
other costs and disbursements incurred in connection with the taking of
collateral and the perfection and preservation of the Lenders' security therein,
and (ii) the reasonable fees and the disbursements of Agent's attorneys (which
attorneys may be employees of the Agent) in connection with the preparation,
negotiation, execution, delivery and review of this Agreement, the Notes and the
other Facility B Loan Documents (whether or not the transactions contemplated by
this Agreement shall be consummated) and the closing of the transactions
contemplated hereby.
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SECTION 13.04. INDEMNIFICATION OF THE LENDERS AND THE AGENT. The Borrower
shall indemnify and hold harmless the Agent and each Lender, and their
respective directors, officers and employees against all losses, claims,
damages, penalties, judgments, liabilities and expenses (including, without
limitation, all expenses of litigation or preparation therefor whether or not
the Agent or any Lender is a party thereto) which any of them may pay or incur
arising out of or relating to, directly or indirectly, this Agreement, the other
Facility B Loan Documents, the transactions contemplated hereby or the direct or
indirect application or proposed application of the proceeds of any Loan
hereunder; PROVIDED, HOWEVER, that in no event shall the Agent or a Lender have
the right to be indemnified hereunder for its own gross negligence or willful
misconduct nor shall the Agent be indemnified against any liabilities which
arise as a result of any claims made or actions, suits or proceedings commenced
or maintained against any Lender (including the Agent, in its capacity as such)
(i) by that Lender's shareholders or any governmental regulatory body or
authority asserting that such Lender or any of its directors, officers,
employees or agents violated any banking or securities law or regulation or any
duty to its own shareholders, customers (excluding the Borrower) or creditors in
any manner whatsoever in entering into or performing any of its obligations
contemplated by this Agreement or (ii) by any other Lender. The obligations of
the Borrower under this Section shall survive the termination of this Agreement.
SECTION 13.05. MAXIMUM INTEREST RATE. It is the intention of the Lenders
and the Borrower that the interest (as defined under applicable law) on the
Indebtedness evidenced by the Notes which may be charged to, or collected or
received from the Borrower shall not exceed the maximum rate permissible under
applicable law. Accordingly, anything herein or in any of the Notes to the
contrary notwithstanding, should any interest (as so defined) be charged to, or
collected or received from the Borrower by the Lenders pursuant hereto or
thereto in excess of the maximum legal rate, then the excess payment shall be
applied first, to the reduction of the aggregate outstanding principal balance
of the Facility A Obligations, second, to the reduction of the Facility B
Obligations, and any portion of the excess payment remaining after payment in
full thereof shall be returned by the Lenders to the Borrower.
SECTION 13.06. MODIFICATION OF AGREEMENT.
(a) No modification, amendment or waiver of any provision of this
Agreement or the Notes, or any Subsidiary Guaranty nor any consent to any
departure by the Borrower or the Subsidiary Guarantors therefrom, in any event
shall be effective unless the same shall be in writing and signed by the
Borrower (or by the Company on their behalf) and by the Required Lenders (or by
the Agent on their behalf if the Required Lenders have so authorized the Agent),
and then the waiver or consent shall be effective only in the specific instance
and for the purpose for which given; PROVIDED, HOWEVER, that no such
modification, amendment or waiver shall, without the consent of all of the
Lenders affected thereby:
(i) extend the maturity of any Loan or Note or reduce or forgive the
principal amount thereof, or reduce the rate or extend the time of payment
of interest or fees thereon;
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(ii) reduce the percentage specified in the definition of Required
Lenders;
(iii) extend the Facility B Termination Date, or reduce the amount or
extend the payment date for, the mandatory payments required under Article
II, or increase the amount of the Commitment of any Lender hereunder or
permit the Borrower or a Subsidiary Guarantor to assign its rights under
this Agreement;
(iv) amend, modify or waive any provision of this Section 13.06; or
(v) amend, modify or waive Section 5.03.
(b) Anything in this Agreement to the contrary notwithstanding, if at a
time when the conditions precedent set forth in Article V hereof to any Loan
are, in the opinion of the Required Lenders, satisfied, any Lender (a
"Defaulting Lender") shall fail to fulfill its obligations to make such Loan and
such failure continues for at least two Business Days then, for so long as such
failure shall continue, such Defaulting Lender shall (unless the Required
Lenders, determined as if such Defaulting Lender were not a "Lender" hereunder,
shall otherwise consent in writing) be deemed for all purposes relating to
amendments, modifications, waivers or consents under this Agreement (including,
without limitation, under Section 13.06(a)) to have no Loans or Commitments,
shall not be treated as a "Lender" hereunder when performing the computation of
Required Lenders, and shall have no rights under Section 13.06(a); PROVIDED that
any action taken by the other Lenders with respect to the matters referred to in
clauses (i) through (v) of Section 13.06(a) shall not be effective as against
such Defaulting Lender.
(c) No amendment, modification or waiver of any provision of this
Agreement relating to the Agent shall be effective without the written consent
of the Agent. No notice to or demand of the Borrower in any case shall entitle
the Borrower to any other or further notice or demand in the same, similar or
other circumstances.
SECTION 13.07. PRESERVATION OF RIGHTS. No delay or omission of the Lenders
or the Agent to exercise any right under the Facility B Loan Documents shall
impair such right or be construed to be a waiver of any Event of Default or an
acquiescence therein, and the making of a Loan notwithstanding the existence of
an Event of Default or Unmatured Default, or the inability of the Borrower to
satisfy the conditions precedent to such Loan shall not constitute any waiver or
acquiescence. Any single or partial exercise of any such right shall not
preclude other or further exercise thereof or the exercise of any other right,
and no waiver, amendment or other variation of the terms, conditions or
provisions of the Facility B Loan Documents whatsoever shall be valid unless in
writing signed by the Lenders required pursuant to Section 13.06, and then only
to the extent in such writing specifically set forth. All remedies contained in
the Facility B Loan Documents or by law afforded shall be cumulative and all
shall be available to the Agent and the Lenders until the Obligations have been
paid in full.
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SECTION 13.08. JOINT AND SEVERAL OBLIGATIONS OF BORROWER; SEVERAL
OBLIGATIONS OF LENDERS. All obligations, representations and warranties
hereunder and under any of the Facility B Loan Documents, unless otherwise
expressly stated, shall be the joint and several liability of all of the
entities comprising the Borrower. The respective obligations of the Lenders
hereunder are several and not joint, and no Lender shall be the partner or agent
of any other (except to the extent to which the Agent is authorized to act as
such). The failure of any Lender to perform any of its obligations hereunder
shall not relieve any other Lender from any of its obligations hereunder. This
Agreement shall not be construed so as to confer any right or benefit upon any
Person other than the parties to this Agreement and their respective successors
and assigns.
SECTION 13.09. SEVERABILITY. If any one or more of the provisions
contained in this Agreement or the Notes is held invalid, illegal or
unenforceable in any respect, the validity, legality or enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby.
SECTION 13.10. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which may be executed by one or more of the parties
hereto, but all of which, when taken together, shall constitute a single
agreement binding on all the parties hereto.
SECTION 13.11. REPRESENTATION AND WARRANTY BY THE LENDERS. The Lenders
represent and warrant to the Borrower that the Notes to be acquired by them
hereunder will evidence loans made in the ordinary course of their respective
commercial banking or real estate lending businesses.
SECTION 13.12. THE COMPANY AS AGENT FOR EACH OTHER BORROWER. Each of the
entities comprising the Borrower hereby appoints the Company as their agent and
attorney-in-fact to execute and deliver any and all documents for an on behalf
of the Borrower in connection with the transactions contemplated by this
Agreement or any of the other Facility B Loan Documents, or in connection with
the amendment, modification or termination of any thereof, and hereby agree that
upon execution of any such documents or instruments they shall be binding upon
each of the Borrower. The Borrower further agrees that the Lenders may rely upon
written representations from the Company that it is acting on behalf of the
Borrower in accordance with the provisions of this Section 13.12 until such time
as it receives notice in writing from the Borrower of the termination of the
designation of the Company as agent an attorney-in-fact for each Borrower.
SECTION 13.13. LOSS, ETC., NOTES. Upon receipt by the Borrower of
reasonably satisfactory evidence of the loss, theft, destruction or mutilation
of any of the Notes, upon reimbursement to the Borrower of all reasonable
expenses incidental thereto and upon surrender and cancellation of the relevant
Note, if mutilated, the Borrower shall make and deliver in lieu of that Note
(the "Prior Note") a new Note of like tenor, except that no reference need be
made in the new Note to any installment or installments of principal, if any,
previously due and paid upon the Prior Note. Any Note made and delivered in
accordance with the provisions of this Section shall be dated as of the date to
which interest has been paid on the unpaid principal amount of the Prior Note.
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SECTION 13.14. GOVERNMENTAL REGULATION. Anything contained in this
Agreement to the contrary notwithstanding, no Lender shall be obligated to
extend credit to the Borrower in violation of any limitation or prohibition
provided by any applicable statute or regulation.
SECTION 13.15. TAXES. Any taxes (excluding federal, state or local income
taxes on the overall net income of any Lender) or other similar assessments or
charges payable or ruled payable by any governmental authority in respect of the
Facility B Loan Documents shall be paid by the Borrower, together with interest
and penalties, if any.
SECTION 13.16. HEADINGS. Section headings in the Facility B Loan Documents
are for convenience of reference only, and shall not govern the interpretation
of any of the provisions of the Facility B Loan Documents.
SECTION 13.17. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the parties hereto with respect to the subject matter hereof;
PROVIDED, HOWEVER, that the fees payable by Borrower to First Chicago in
consideration of its agreement to serve as Agent hereunder are set forth in a
separate letter agreement between Borrower and First Chicago.
SECTION 13.18. CHOICE OF LAW. THE FACILITY B LOAN DOCUMENTS (OTHER THAN
THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF
CONFLICTS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.
SECTION 13.19. CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO ANY FACILITY B LOAN DOCUMENTS AND THE BORROWER HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO BRING
PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY
JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY
AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
SECTION 13.20. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH
LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN
73
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TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
[Signatures appear on following pages]
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<PAGE>
IN WITNESS WHEREOF, the Borrower and the Lenders have caused this
Agreement to be duly executed as of the date first above written.
BORROWER:
LENNAR CORPORATION AND EACH OF THE SUBSIDIARIES
LISTED ON SCHEDULE I
By: /s/ STUART A. MILLER
----------------------------------------------
Stuart A. Miller as President or authorized
signatory of each of such corporations
Address:
Lennar Corporation
700 Northwest 107th Avenue
Miami, Florida 33172
Attention: Cory J. Boydston, Vice President-Finance
FACILITY B COMMITMENTS: LENDERS:
$9,032,258.02 THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: /s/ GREGORY A. GILBERT
--------------------------------------------
Gregory A. Gilbert, Vice President
Address:
The First National Bank of Chicago
One First National Plaza
14th Floor, Suite 0151
Chicago, Illinois 60670-0151
Attention: Gregory A. Gilbert, Vice President
with a copy to:
The First National Bank of Chicago
One First National Plaza, Suite 0801
Chicago, Illinois 60670-0801
Attention: Law Department
<PAGE>
$7,741,935.48 NATIONSBANK, N.A.
By: /s/ PHILIP CARROLL
--------------------------------------------
PHILIP CARROLL
Address:
100 S.E. 2nd Street, 14th FL
Miami, Florida 33131
Attention: Mr. Philip Carroll
$7,741,935.48 CREDIT LYONNAIS ATLANTA AGENCY
By: /s/ DAVID M. CAWRSE
--------------------------------------------
DAVID M. CAWRSE, FIRST VICE PRESIDENT
AND MANAGER
Address:
303 Peachtree Street, N.E., Suite 4400
Atlanta, Georgia 30308
Attention: Mr. Kevin Murphy, Vice President
$7,741,935.48 BANK OF AMERICA NATIONAL
TRUST & SAVINGS ASSOCIATION
By: /s/ MARK LARIVIERE
--------------------------------------------
MARK LARIVIERE, VICE PRESIDENT
Address:
231 S. LaSalle, 12th Floor
Chicago, Illinois 60697
Attention: Mr. Mark Lariviere
<PAGE>
$7,741,935.48 COMERICA BANK
By: /s/ MARTIN ELLIS
--------------------------------------------
MARTIN ELLIS, VICE PRESIDENT
Address:
One Detroit Center
500 Woodward Avenue, 9th Floor
Detroit, Michigan 48226
Attention: Mr. Martin Ellis, Vice President
$6,774,193.55 FLEET NATIONAL BANK
By: /s/ JAMES B. MCLAUGHLIN
--------------------------------------------
JAMES B. MCLAUGHLIN, VICE PRESIDENT
Address:
111 Westminster Street
RIMO0215 - 8th FL
Providence, Rhode Island 02903
Attention: Mr. James B. McLaughlin
$6,774,193.55 GUARANTY FEDERAL BANK, F.S.B.
By: /s/ RANDALL S. REID
--------------------------------------------
RANDALL S. REID, VICE PRESIDENT
Address:
8333 Douglas Avenue
Dallas, Texas 75225
Attention: Mr. Randy Reid
<PAGE>
$5,161,290.32 THE INDUSTRIAL BANK OF JAPAN, LIMITED,
ATLANTA AGENCY
By: /s/ KAZUO IIDA
--------------------------------------------
KAZUO IIDA, GENERAL MANAGER
Address:
191 Peachtree Street, Suite 3600
Atlanta, Georgia 30303-1757
Attention: Mr. Michael Harvey, Vice President
$5,161,290.32 U.S. BANK NATIONAL ASSOCIATION
By: /s/ KATHLEEN M. CONNOR
--------------------------------------------
KATHLEEN M. CONNOR, VICE PRESIDENT
Address:
Real Estate Banking Division
601 2nd Avenue South
First Bank Place
Minneapolis, Minnesota 55402
Attention: Ms. Kathleen Connor
$5,161,290.32 PNC BANK, NATIONAL ASSOCIATION
By: /s/ DOUGLAS PAUL
--------------------------------------------
DOUGLAS G. PAUL
Address:
Two Tower Center
Suite J3-JTTC-18-6
East Brunswick, New Jersey 08816
Attention: Mr. Douglas G. Paul
<PAGE>
$5,161,290.32 SOCIETE GENERALE
By: /s/ RALPH SAHEB
--------------------------------------------
RALPH SAHEB, MANAGER
Address:
303 Peachtree Street, Suite 3040
Atlanta, Georgia 30308
Attention: Mr. Ed Forseberg
$3,870,967.74 AMSOUTH BANK
By: /s/ RONNY HUDSPETH
--------------------------------------------
RONNY HUDSPETH, VICE PRESIDENT
Address:
1900 Fifth Avenue
Birmingham, Alabama 35288
Attention: Mr. William Staples
$3,225,806.45 BARNETT BANK, N.A., SOUTH FLORIDA
By: /s/ CLAY F. WILSON
--------------------------------------------
CLAY F. WILSON, ____________________________
Address:
701 Brickell Avenue, 6th FL
Miami, Florida 33131
Attention: Mr. Clay F. Wilson, Group Vice President
<PAGE>
$3,225,806.45 THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ TAKAO MOCHIZUKI
--------------------------------------------
TAKAO MOCHIZUKI, GENERAL MANAGER
Address:
Marquis Two Tower, Suite 2400
285 Peachtree Center Avenue, N.E.
Atlanta, Georgia 30303
Attention: Mr. Guenter Kittel
$3,225,806.45 THE FUJI BANK AND TRUST COMPANY
By: /s/ TORO UENO
--------------------------------------------
TORO UENO, EXECUTIVE VICE PRESIDENT
Address:
Two World Trade Center, 79th FL
New York, New York 10048
Attention: Mr. David Lee, Assistant Vice President
$3,225,806.45 KREDIETBANK, N.V.
By: /s/ MICHAEL V. CURRAN /s/ ROBERT SNAUFFER
--------------------------------------------
MICHAEL V. CURRAN, VICE PRESIDENT
ROBERT SNAUFFER, VICE PRESIDENT
Address:
125 West 55th Street
New York, New York 10019
Attention: Mr. Michael Curran
<PAGE>
$3,225,806.45 SAKURA BANK
By: /s/ HIROYASU IMANISHI
--------------------------------------------
HIROYASU IMANISHI, V.P. & SENIOR MANAGER
Address:
Marquis 1 Tower
245 Peachtree Center Avenue
Atlanta, Georgia 30303
Attention: Mr. Ric Spenser
$3,225,806.45 SUNTRUST BANK, MIAMI, N.A.
By: /s/ ROBERT HUMMEL
--------------------------------------------
ROBERT E. HUMMEL, SENIOR VICE PRESIDENT
Address:
Real Estate Division
777 Brickell Avenue
Miami, Florida 33131
Attention: Mr. Robert Hummel, Senior Vice President
$2,580,645.16 BANQUE PARIBAS
By: /s/ DUANE HELKOWSKI /s/ JOHN MCCORMICK
--------------------------------------------
DUANE HELKOWSKI, VICE PRESIDENT
JOHN J, MCCORMICK III, VICE PRESIDENT
Address:
787 Seventh Avenue
New York, New York 10019
Attention: Mr. Duane Helkowski
EXHIBIT 10.m
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT (FACILITY A)
First Amendment to Revolving Credit Agreement (Facility A) (this
"Amendment"), dated as of January 20, 1998 (the "Amendment Date"), by and among
LENNAR CORPORATION, a corporation organized and existing under the laws of the
State of Delaware (the "Company"), the Subsidiaries of the Company listed in
Schedule I (said Subsidiaries, together with the Company, hereinafter
individually and collectively referred to as the "Borrower") to the Agreement
(as hereinafter defined), the lenders listed in Schedule II to the Agreement
(the "Lenders"), and THE FIRST NATIONAL BANK OF CHICAGO, as Agent (the "Agent"),
amending the Revolving Credit Agreement (Facility A), dated as of October 31,
1997, by and among the Borrower, the Lenders and the Agent (the "Agreement").
RECITAL
The Borrower has requested that the Lenders amend the Agreement to provide
for a possible increase in the Aggregate Facility A Commitment from $450,000,000
to $500,000,000 and to increase the Swing Line Commitment from $15,000,000 to
$30,000,000, and the Lenders are willing to make such amendment, all upon the
terms and subject to the conditions set forth herein.
AGREEMENT
In consideration of the foregoing and of the mutual covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT RECITAL. The Recital at the beginning of the Agreement
is amended in its entirety to read as follows:
The Borrower desires to obtain from the Lenders and the Lenders are
willing to provide to the Borrower revolving credit loans in an aggregate
principal amount outstanding from time to time not to exceed $450,000,000
(subject to increase as provided herein), upon the terms and subject to
the conditions hereinafter set forth.
2. CAPITALIZED TERMS. Capitalized terms used in this Amendment, and
not otherwise defined or redefined herein, shall have the meanings ascribed to
them in the Agreement.
3. DEFINITIONS. The following definitions contained in Section 1 of
the Agreement are amended in their entirety to read as follows:
<PAGE>
"AGGREGATE FACILITY A COMMITMENT" means $450,000,000, as such amount
may be increased pursuant to Section 2.22 (but not beyond $500,000,000) or
reduced from time to time pursuant to the terms hereof.
"LENDERS" means the lending institutions listed on the signature
pages of this Agreement, any additional financial institutions which
become Lenders pursuant to Section 2.22, and the respective successors and
permitted assigns of such lending institutions.
"SWING LINE COMMITMENT" means the obligation of the Swing Line Bank
to make Swing Line Loans up to a maximum of $30,000,000 at any time
outstanding.
4. INCREASE IN FACILITY A COMMITMENT; ADMISSION OF ADDITIONAL
LENDERS. A new Section 2.22 is added to the Agreement to read as follows:
SECTION 2.22 INCREASE IN FACILITY A COMMITMENT; ADMISSION OF
ADDITIONAL LENDERS.
(a) Upon the approval of the Agent, additional financial
institutions may become Lenders hereunder provided that (i) each such
additional Lender and the amount of the Facility A Commitment of such
Lender have been approved in writing by Borrower, (ii) Borrower shall have
agreed in writing that all of the terms, covenants and provisions of this
Agreement and all of the other Facility A Loan Documents shall, from and
after the admission of each additional Lender, inure to the benefit of
such Lender, (iii) each additional Lender shall agree in writing to the
amount of its Facility A Commitment and to be bound, from and after the
date of its admission as an additional Lender, by all of the terms,
conditions and provisions of this Agreement and the Facility A Loan
Documents, to the same extent and with the same effect as if such
additional Lender were an original signatory to this Agreement, (iv)
Borrower shall have executed and delivered a Facility A Note which is
payable to the order of the additional Lender in the amount of its
Facility A Commitment, and (v) in no event shall the Aggregate Facility A
Commitment at any time exceed $500,000,000. The form and substance of the
documents required under clause (ii), (iii) and (iv) above must be fully
acceptable to the Agent. The Agent shall provide written notice to all of
the other Lenders hereunder of the admission of any additional Lender
pursuant to this Section 2.22 and shall furnish to each of the other
Lenders a copy of the agreements required under clauses (ii) and (iii)
above.
(b) Upon the admission of any additional Lender pursuant to this
Section 2.22, such Lender shall make a Loan to Borrower in an amount
sufficient, upon application of the proceeds thereof to the reduction of
the outstanding
-2-
<PAGE>
Floating Rate Advances held by the other Lenders, to cause the principal
amount outstanding under the Loans made by each Lender (including, without
limitation, the Loan made by the additional Lender) to be in proportion to
the ratio that the respective Facility A Commitments of the Lenders
(including, without limitation, the additional Lender) bear to the
Aggregate Facility A Commitment. The Borrower hereby irrevocably
authorizes each additional Lender to fund to the Agent the Loan required
to be made pursuant to the immediately preceding sentence for application
to the reduction of the outstanding Floating Rate Advances. To the extent
that the amount of outstanding Floating Rate Advances at the time of the
proposed admission of a Lender hereunder is less than the amount of the
Loan required to be made by the additional Lender to achieve each Lender's
Loan being in such proportion, then the obligation of the additional
Lender to fund its Pro Rata Share of the Floating Rate Advances shall be
deferred until there are sufficient Floating Rate Advances, as a result of
the conversion of Fixed Rate Advances in accordance with the terms of this
Agreement, to achieve such proportion. After the additional Lender makes
the Loan required to be made under this Section 2.22(b), each Facility A
Advance under this Agreement shall consist of Loans made ratably by the
several Lenders in accordance with this Article II.
(c) Notwithstanding the forgoing provisions of this Section 2.22, in
lieu of one or more new financial institutions becoming Lenders hereunder
with respect to any increase in the Facility A Commitment, First Chicago
shall have the right to fund all or any part of such increase and to that
extent increase the Facility A Commitment of First Chicago as a Lender
hereunder.
5. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective
when (A) the Agent shall have received (i) counterparts of this Amendment duly
executed by the Borrower and each of the Lenders, and (ii) each of the documents
specified in subsections (a) - (f) below (with all documents required below,
except as otherwise specified, to be dated the date of receipt thereof by the
Agent, which date shall be the same for all such documents, each of such
documents to be in form and substance satisfactory to the Agent), and (B) the
condition specified in subsection (g) below shall have been satisfied:
(a) The favorable written opinion by Rubin Baum Levin Constant
Friedman & Bilzin, counsel for the Borrower, addressed to the Lenders and in
form and substance satisfactory to the Agent, and dated the Amendment Date, that
(i) this Amendment has been duly authorized, executed and delivered by the
Borrower, (ii) this Amendment is enforceable in accordance with its terms,
except as the rights and remedies of the Lenders or First Chicago thereunder may
be limited by (A) applicable bankruptcy, reorganization, insolvency and other
laws effecting creditors' rights generally from time to time in effect, (B) the
exercise of the discretionary powers of the court before which any proceeding
seeking equitable remedies (including, without limitation, specific performance
and injunctive relief) may be brought, and (C) such other qualifications
expressed in
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<PAGE>
the opinion, PROVIDED that such qualifications are acceptable to Agent; and
(iii) nothing contained in this Amendment extinguishes, terminates or in any way
adversely affects the rights or remedies of the Lenders under the Subsidiary
Guarantees or the validity or enforceability thereof in accordance with their
respective terms. Such counsel may rely, in their opinion, on the opinions of
special counsel to the Borrower referred to in subsection 6(b) below, as to
matters of law of the State of Illinois. The Borrower hereby instructs its
counsel to prepare its opinion and deliver it to the Lenders for their benefit,
and such opinion shall contain a statement to such effect.
(b) The favorable written opinion of Rudnick & Wolfe, special
counsel to the Borrower, addressed to the Lenders and in form and substance
satisfactory to the Agent, dated the Amendment Date, that (i) no authorization,
consent, approval, license or exemption of, or filing nor registration with or
other action by any Illinois, United States federal or Delaware governmental
department, commission, board, bureau, regulatory body, agency or
instrumentality or, to the best knowledge of such counsel, any court is or will
be necessary for the execution, delivery and performance by the Borrower of this
Amendment, (ii) this Amendment constitutes the legal, valid and binding
obligations of the Borrower, enforceable in accordance with its terms, except as
the rights and remedies of the Lenders thereunder may be limited by (A)
applicable bankruptcy, reorganization, insolvency and other laws effecting
creditors' rights generally from time to time in effect, (B) the exercise of the
discretionary powers of the court before which any proceeding seeking equitable
remedies (including, without limitation, specific performance and injunctive
relief) may be brought, and (C) such other qualifications expressed in the
opinion, PROVIDED that such qualifications are acceptable to Agent; and (iii)
nothing contained in this Amendment extinguishes, terminates or in any way
adversely affects the rights or remedies of the Lenders under the Subsidiary
Guarantees or the validity or enforceability thereof in accordance with their
respective terms. Such opinion shall also cover the matters set forth in clause
(i) of this subsection with respect to each Subsidiary Guaranty. The Borrower
hereby instructs its special counsel to prepare its opinion and deliver it to
Lenders for their benefit, and such opinion shall contain a statement to such
effect.
(c) The favorable written opinion of Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A., special counsel to the Agent and the Lenders, dated
the Amendment Date, addressed to the Lenders to the effect that: while it has
not independently considered the matters covered by the opinions provided
pursuant to subsections (a) and (b) above, to the extent necessary to enable it
to express the conclusions stated therein, those opinions of counsel and the
other documents provided pursuant to this Amendment are substantially responsive
to the requirements of this Amendment.
(d) The following supporting documents with respect to each Borrower: (i)
with respect to each Borrower which was formed after October 31, 1997, a copy of
its certificate or articles of incorporation, certified as of a date reasonably
close to the Amendment Date to be a true and accurate copy by the Secretary of
State of its state of incorporation, (ii) with respect to
-4-
<PAGE>
all Borrowers formed prior to October 31, 1997, a certificate of its Secretary
or Assistant Secretary, dated the Amendment Date, to the effect that there have
been no amendments to its certificate or articles of incorporation since October
31, 1997; (iii) a certificate of the Secretary of State of its state of
incorporation, dated as of a date reasonably close to the Amendment Date, as to
its existence and (if available) good standing; (iv) a certificate of the
Secretary of State of each jurisdiction, other than its state of incorporation,
in which it does business, as to its qualification as a foreign corporation,
dated as of a date reasonably close to the Amendment Date; (v) a copy of its
by-laws, certified by its Secretary or Assistant Secretary to be a true and
accurate copy of its by-laws in effect on the Amendment Date, or a certificate
of its Secretary or Assistant Secretary to the effect that there have been no
amendments thereto since October 31, 1997; (vi) a certificate of its Secretary
or Assistant Secretary, dated the Amendment Date, as to the incumbency and
signatures of its officers who have executed any documents in connection with
the transactions contemplated by this Amendment; (vii) a copy of resolutions of
its Board of Directors or the Executive Committee of its Board of Directors,
certified by its Secretary or Assistant Secretary as of the Amendment Date to be
a true and accurate copy of resolutions duly adopted by such Board of Directors
or Executive Committee that are in full force and effect on the Amendment Date,
authorizing the execution and delivery by it of this Amendment and the
performance by it of all its obligations hereunder; and (viii) such additional
supporting documents and other information with respect to its operations and
affairs as the Agent may reasonably request.
(e) A certificate signed by a duly authorized officer of each
Borrower stating that: (i) the representations and warranties of the Borrower
contained in Article IV of the Agreement and in Section 6 of this Amendment are
correct and accurate on and as of the Amendment Date as though made on and as of
the Amendment Date and (ii) no event has occurred and is continuing which
constitutes an Event of Default or Unmatured Default under the Agreement.
(f) Such other documents as any Lender or its counsel may reasonably
request.
(g) There shall not have occurred any changes in the consolidated
financial condition or results of operations of the Borrower from that reflected
in the financial statements dated August 31, 1997 which has or reasonably could
be expected to have, in the judgment of the Required Lenders, a Material Adverse
Effect on the Borrower's operations, taken as a whole.
6. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THIS AMENDMENT,
ETC. The Borrower hereby represents and warrants to the Agent and the Lenders
that the execution and delivery by the Borrower of this Amendment and each other
document executed by the Borrower in connection herewith and the performance by
the Borrower of all its obligations hereunder and thereunder and any and all
actions taken by the Borrower (i) have been duly authorized by all requisite
corporate action of the Borrower, (ii) will not violate or be in conflict with
(a) any provisions of law (including, without limitation, any applicable usury
or similar law), (b) any
-5-
<PAGE>
order, rule, regulation, writ, judgment, injunction, decree or award of any
court or other agency of government, or (c) any provision of its certificate or
articles of incorporation or by-laws, (iii) will not violate, be in conflict
with, result in a breach of or constitute (with or without the giving of notice
or the passage of time or both) a default under any material indenture,
agreement or other instrument to which it is a party or by which it or any of
its properties or assets is or may be bound, and (iv) except as otherwise
contemplated by the Agreement, will not result in the creation or imposition of
any lien, charge or encumbrance upon, or any security interest in, any of its
properties or assets. This Amendment constitutes the legal, valid and binding
obligation of the Borrower enforceable against the Borrower in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally.
7. LOCATION OF EXECUTION. This Amendment has been executed by the
Borrower in Los Angeles, California, and delivered to the Agent in Chicago,
Illinois. The Borrower reaffirms its obligation to reimburse and indemnify the
Lenders for any documentary stamp tax or other taxes which may be imposed upon
the Lenders in respect of the Agreement or any Facility A Loan Documents.
8. NO OTHER MODIFICATIONS. Except as expressly amended or modified by
the terms hereof, the Agreement and the other Facility A Loan Documents shall
remain in full force and effect. This Amendment shall not affect, modify or
diminish the obligations of Borrower which have accrued prior to the Amendment
Date including, but not limited to, obligations to pay commitment fees and
interest at the levels and rates as in effect prior to the Amendment Date.
9. REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The Borrower
hereby certifies that the representations and warranties contained in the
Agreement and the other Facility A Loan Documents continue to be true and
correct and that no Event of Default or Unmatured Default has occurred.
10. CHOICE OF LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the Amendment Date.
[Signatures begin on next page]
-6-
<PAGE>
BORROWER:
LENNAR CORPORATION AND EACH OF THE SUBSIDIARIES
LISTED ON SCHEDULE I
By: /s/ BRUCE GROSS
-----------------------------------------------
Bruce Gross as Vice President or authorized
signatory of each of such corporations
Address:
Lennar Corporation
700 Northwest 107th Avenue
Miami, Florida 33172
Attention: Bruce Gross, Vice President-Finance
FACILITY A COMMITMENTS: LENDERS:
$40,645,161.29 THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: /s/ GREGORY GILBERT
-----------------------------------------------
Gregory A. Gilbert, Vice President
Address:
The First National Bank of Chicago
One First National Plaza
14th Floor, Suite 0151
Chicago, Illinois 60670-0151
Attention: Gregory A. Gilbert, Vice President
with a copy to:
The First National Bank of Chicago
One First National Plaza, Suite 0801
Chicago, Illinois 60670-0801
Attention: Law Department
-7-
<PAGE>
$34,838,709.68 NATIONSBANK, N.A.
By: /s/ PHILIP CARROLL
-----------------------------------------------
PHILIP CARROLL, SR.VICE PRESIDENT
Address:
100 S.E. 2nd Street, 14th FL
Miami, Florida 33131
Attention: Mr. Philip Carroll
$34,838,709.68 CREDIT LYONNAIS ATLANTA AGENCY
By: /s/ DAVID M. CAWRSE
-----------------------------------------------
DAVID M. CAWRSE, FIRST VICE PRESIDENT &
MANAGER
Address:
303 Peachtree Street, N.E., Suite 4400
Atlanta, Georgia 30308
Attention: Mr. Kevin Murphy, Vice President
$34,838,709.68 BANK OF AMERICA NATIONAL
TRUST & SAVINGS ASSOCIATION
By: /s/ MARK W. LARIVIERE
-----------------------------------------------
MARK W. LARIVIERE, VICE PRESIDENT
Address:
231 S. LaSalle, 12th Floor
Chicago, Illinois 60697
Attention: Mr. Mark Lariviere
-8-
<PAGE>
$34,838,709.68 COMERICA BANK
By: /s/ MARTIN G. ELLIS
-----------------------------------------------
___________________, ______________________
Address:
One Detroit Center
500 Woodward Avenue, 9th Floor
Detroit, Michigan 48226
Attention: Mr. Martin Ellis, Vice President
$30,483,870.97 FLEET NATIONAL BANK
By: /s/ PATRICK BURNS
-----------------------------------------------
PATRICK BURNS, VICE PRESIDENT
Address:
111 Westminster Street
RIMO0215 - 8th FL
Providence, Rhode Island 02903
Attention: Mr. James B. McLaughlin
$30,483,870.97 GUARANTY FEDERAL BANK, F.S.B.
By: /s/ JENNIFER RAY
-----------------------------------------------
JENNIFER RAY, ASST. VICE PRES.
Address:
8333 Douglas Avenue
Dallas, Texas 75225
Attention: Mr. Randy Reid
-9-
<PAGE>
$23,225,806.45 THE INDUSTRIAL BANK OF JAPAN, LIMITED,
ATLANTA AGENCY
By: /s/ KAZUO IIDA
-----------------------------------------------
KAZUO IIDA, GENERAL MANAGER
Address:
191 Peachtree Street, Suite 3600
Atlanta, Georgia 30303-1757
Attention: Mr. Michael Harvey, Vice President
$23,225,806.45 U.S. BANK NATIONAL ASSOCIATION
By: /s/ KATHLEEN CONNOR
-----------------------------------------------
KATHLEEN CONNOR, VICE PRESIDENT
Address:
Real Estate Banking Division
601 2nd Avenue South
First Bank Place
Minneapolis, Minnesota 55402
Attention: Ms. Kathleen Connor
$23,225,806.45 PNC BANK, NATIONAL ASSOCIATION
By: /s/ DOUGLAS PAUL
-----------------------------------------------
DOUGLAS G. PAUL, VICE PRESIDENT
Address:
Two Tower Center
Suite J3-JTTC-18-6
East Brunswick, New Jersey 08816
Attention: Mr. Douglas G. Paul
-10-
<PAGE>
$23,225,806.45 SOCIETE GENERALE
By: /s/ LOUIS P. LAVILLE
-----------------------------------------------
LOUIS P. LAVILLE, VICE PRESIDENT
Address:
303 Peachtree Street, Suite 3040
Atlanta, Georgia 30308
Attention: Mr. Ed Forseberg
$17,419,354.84 AMSOUTH BANK
By: /s/ RONNY HUDSPETH
-----------------------------------------------
RONNY HUDSPETH, VICE PRESIDENT
Address:
1900 Fifth Avenue
Birmingham, Alabama 35288
Attention: Mr. Ronny Hudspeth
$14,516,129.03 BARNETT BANK, N.A., SOUTH FLORIDA
By: /s/ CLAY F. WILSON
-------------------------------------------
CLAY F. WILSON, GROUP SR. VICE PRESIDENT
Address:
701 Brickell Avenue, 6th FL
Miami, Florida 33131
Attention: Mr. Clay F. Wilson, Group Vice President
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<PAGE>
$14,516,129.03 THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ TATSUJI NOGUCHI
-------------------------------------------
TATSUJI NOGUCHI, JOINT GENERAL MANAGER
Address:
Marquis Two Tower, Suite 2400
285 Peachtree Center Avenue, N.E.
Atlanta, Georgia 30303
Attention: Mr. Guenter Kittel
$14,516,129.03 THE FUJI BANK AND TRUST COMPANY
By: /s/ TEIJI TERAMOTO
-------------------------------------------
TEIJI TERAMOTO, VICE PRESIDENT & MANAGER
Address:
Two World Trade Center, 79th FL
New York, New York 10048
Attention: Mr. David Lee, Assistant Vice
President
$14,516,129.03 KREDIETBANK, N.V.
By: /s/ R. SNAUFFER /s/ MICHAEL CURRAN
-----------------------------------------------
ROBERT SNAUFFER, VICE PRESIDENT
MICHAEL V. CURRAN, VICE PRESIDENT
Address:
125 West 55th Street
New York, New York 10019
Attention: Mr. Michael Curran
-12-
<PAGE>
$14,516,129.03 SAKURA BANK
By: /s/ HIROYASU IMANISHI
-------------------------------------------
HIROYASU IMANISHI, V.P. & SENIOR MANAGER
Address:
Marquis 1 Tower
245 Peachtree Center Avenue
Atlanta, Georgia 30303
Attention: Mr. Ric Spenser
$14,516,129.03 SUNTRUST BANK, MIAMI, N.A.
By: /s/ ROBERT HUMMEL
-------------------------------------------
ROBERT E. HUMMEL, SENIOR VICE PRESIDENT
Address:
Real Estate Division
777 Brickell Avenue
Miami, Florida 33131
Attention: Mr. Robert Hummel, Senior Vice
President
$11,612,903.23 BANQUE PARIBAS
By: /s/ ROBERT CARINO /s/ DUANE HELKOWSKI
-------------------------------------------
ROBERT G. CARINO, VICE PRESIDENT
DUANE HELKOWSKI, VICE PRESIDENT
Address:
787 Seventh Avenue
New York, New York 10019
Attention: Mr. Duane Helkowski
-13-
<PAGE>
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT (FACILITY B)
First Amendment to Revolving Credit Agreement (Facility B) (this
"Amendment"), dated as of January 20, 1998 (the "Amendment Date"), by and among
LENNAR CORPORATION, a corporation organized and existing under the laws of the
State of Delaware (the "Company"), the Subsidiaries of the Company listed in
Schedule I (said Subsidiaries, together with the Company, hereinafter
individually and collectively referred to as the "Borrower") to the Agreement
(as hereinafter defined), the lenders listed in Schedule II to the Agreement
(the "Lenders"), and THE FIRST NATIONAL BANK OF CHICAGO, as Agent (the "Agent"),
amending the Revolving Credit Agreement (Facility B), dated as of October 31,
1997, by and among the Borrower, the Lenders and the Agent (the "Agreement").
RECITAL
The Borrower has requested that the Lenders amend the Agreement to
increase the Aggregate Facility B Commitment from $100,000,000 to $150,000,000,
and the Lenders are willing to make such amendment, all upon the terms and
subject to the conditions set forth herein.
AGREEMENT
In consideration of the foregoing and of the mutual covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT RECITAL. The Recital at the beginning of the Agreement
is amended in its entirety to read as follows:
The Borrower desires to obtain from the Lenders and the Lenders are
willing to provide to the Borrower revolving credit loans in an aggregate
principal amount outstanding from time to time not to exceed $150,000,000,
upon the terms and subject to the conditions hereinafter set forth.
2. CAPITALIZED TERMS. Capitalized terms used in this Amendment, and
not otherwise defined or redefined herein, shall have the meanings ascribed to
them in the Agreement.
3. DEFINITIONS. The following definitions contained in Section 1 of
the Agreement are amended in their entirety to read as follows:
"AGGREGATE FACILITY A COMMITMENT" means $450,000,000, as such amount
may be increased or reduced from time to time pursuant to the terms of the
Facility A Credit Agreement.
<PAGE>
"AGGREGATE FACILITY B COMMITMENT" means $150,000,000, as such amount
may be reduced from time to time pursuant to the terms hereof.
"LENDERS" means the lending institutions listed on the signature
pages of this Agreement, any additional financial institutions which
become Lenders pursuant to Section 2.21, and the respective successors and
permitted assigns of such lending institutions.
4. INCREASE IN FIRST CHICAGO COMMITMENT. The Facility B Commitment of
First Chicago is hereby increased from $9,032,258.02 to $59,032,258.02, and the
Facility B Note and Facility B Term Note issued to First Chicago on the
Effective Date under the Agreement shall be exchanged with the Borrower for a
new Facility B Note and Facility B Term Note, each payable to First Chicago
(collectively, the "First Chicago Notes") and reflecting First Chicago's
increased Facility B Commitment. The dollar amount of the Facility B Commitment
of each of the Lenders other than First Chicago is and shall remain unaffected
by this Amendment.
5. ADMISSION OF ADDITIONAL LENDERS. A new Section 2.21 is added to
the Agreement to read as follows:
SECTION 2.21 ADMISSION OF ADDITIONAL LENDERS.
(a) Upon the approval of the Agent, additional financial
institutions may become Lenders hereunder provided that (i) each such
additional Lender and the amount of the Facility B Commitment of such
Lender have been approved in writing by Borrower, (ii) Borrower shall have
agreed in writing that all of the terms, covenants and provisions of this
Agreement and all of the other Facility B Loan Documents shall, from and
after the admission of each additional Lender, inure to the benefit of
such Lender, (iii) each additional Lender shall agree in writing to the
amount of its Facility B Commitment and to be bound, from and after the
date of its admission as an additional Lender, by all of the terms,
conditions and provisions of this Agreement and the Facility B Loan
Documents, to the same extent and with the same effect as if such
additional Lender were an original signatory to this Agreement, (iv)
Borrower shall have executed and delivered a Facility B Note which is
payable to the order of the additional Lender in the amount of its
Facility B Commitment, and (v) in no event shall the Aggregate Facility B
Commitment at any time exceed $150,000,000. The form and substance of the
documents required under clause (ii), (iii) and (iv) above must be fully
acceptable to the Agent. The Agent shall provide written notice to all of
the other Lenders hereunder of the admission of any additional Lender
pursuant to this Section 2.21 and shall furnish to each of the other
Lenders a copy of the agreements required under clauses (ii) and (iii)
above.
(b) Upon the admission of any additional Lender pursuant to this
Section 2.21, such Lender shall make a Loan to Borrower in an amount
sufficient,
-2-
<PAGE>
upon application of the proceeds thereof to the reduction of the
outstanding Floating Rate Advances held by the other Lenders, to cause the
principal amount outstanding under the Loans made by each Lender
(including, without limitation, the Loan made by the additional Lender) to
be in proportion to the ratio that the respective Facility B Commitments
of the Lenders (including, without limitation, the additional Lender) bear
to the Aggregate Facility B Commitment. The Borrower hereby irrevocably
authorizes each additional Lender to fund to the Agent the Loan required
to be made pursuant to the immediately preceding sentence for application
to the reduction of the outstanding Floating Rate Advances. To the extent
that the amount of outstanding Floating Rate Advances at the time of the
proposed admission of a Lender hereunder is less than the amount of the
Loan required to be made by the additional Lender to achieve each Lender's
Loan being in such proportion, then the obligation of the additional
Lender to fund its Pro Rata Share of the Floating Rate Advances shall be
deferred until there are sufficient Floating Rate Advances, as a result of
the conversion of Fixed Rate Advances in accordance with the terms of this
Agreement, to achieve such proportion. After the additional Lender makes
the Loan required to be made under this Section 2.21(b), each Facility A
Advance under this Agreement shall consist of Loans made ratably by the
several Lenders in accordance with this Article II.
6. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective
when (A) the Agent shall have received (i) counterparts of this Amendment duly
executed by the Borrower and each of the Lenders, (ii) the First Chicago Notes,
duly executed by the Borrower, and (iii) each of the documents specified in
subsections (a) - (f) below (with all documents required below, except as
otherwise specified, to be dated the date of receipt thereof by the Agent, which
date shall be the same for all such documents, each of such documents to be in
form and substance satisfactory to the Agent), and (B) the condition specified
in subsection (g) below shall have been satisfied:
(a) The favorable written opinion by Rubin Baum Levin Constant
Friedman & Bilzin, counsel for the Borrower, addressed to the Lenders and in
form and substance satisfactory to the Agent, and dated the Amendment Date, that
(i) this Amendment and the First Chicago Notes have been duly authorized,
executed and delivered by the Borrower, (ii) this Amendment and the First
Chicago Notes are enforceable in accordance with their respective terms, except
as the rights and remedies of the Lenders or First Chicago thereunder may be
limited by (A) applicable bankruptcy, reorganization, insolvency and other laws
effecting creditors' rights generally from time to time in effect, (B) the
exercise of the discretionary powers of the court before which any proceeding
seeking equitable remedies (including, without limitation, specific performance
and injunctive relief) may be brought, and (C) such other qualifications
expressed in the opinion, PROVIDED that such qualifications are acceptable to
Agent; and (iii) nothing contained in this Amendment extinguishes, terminates or
in any way adversely affects the rights or remedies of the Lenders under the
Subsidiary Guarantees or the validity or enforceability thereof in accordance
with their respective terms. Such counsel may rely, in their opinion, on the
opinions of special counsel to the Borrower referred to in subsection 6(b)
below, as to matters of law of the State of
-3-
<PAGE>
Illinois. The Borrower hereby instructs its counsel to prepare its opinion and
deliver it to the Lenders for their benefit, and such opinion shall contain a
statement to such effect.
(b) The favorable written opinion of Rudnick & Wolfe, special
counsel to the Borrower, addressed to the Lenders and in form and substance
satisfactory to the Agent, dated the Amendment Date, that (i) no authorization,
consent, approval, license or exemption of, or filing nor registration with or
other action by any Illinois, United States federal or Delaware governmental
department, commission, board, bureau, regulatory body, agency or
instrumentality or, to the best knowledge of such counsel, any court is or will
be necessary for the execution, delivery and performance by the Borrower of this
Amendment or the First Chicago Notes, (ii) this Amendment and the First Chicago
Notes constitute the legal, valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms, except as the rights and
remedies of the Lenders and First Chicago thereunder may be limited by (A)
applicable bankruptcy, reorganization, insolvency and other laws effecting
creditors' rights generally from time to time in effect, (B) the exercise of the
discretionary powers of the court before which any proceeding seeking equitable
remedies (including, without limitation, specific performance and injunctive
relief) may be brought, and (C) such other qualifications expressed in the
opinion, PROVIDED that such qualifications are acceptable to Agent; and (iii)
nothing contained in this Amendment extinguishes, terminates or in any way
adversely affects the rights or remedies of the Lenders under the Subsidiary
Guarantees or the validity or enforceability thereof in accordance with their
respective terms. Such opinion shall also cover the matters set forth in clause
(i) of this subsection with respect to each Subsidiary Guaranty. The Borrower
hereby instructs its special counsel to prepare its opinion and deliver it to
Lenders for their benefit, and such opinion shall contain a statement to such
effect.
(c) The favorable written opinion of Stearns Weaver Miller Weissler
Alhadeff & Sitterson, P.A., special counsel to the Agent and the Lenders, dated
the Amendment Date, addressed to the Lenders to the effect that: while it has
not independently considered the matters covered by the opinions provided
pursuant to subsections (a) and (b) above, to the extent necessary to enable it
to express the conclusions stated therein, those opinions of counsel and the
other documents provided pursuant to this Amendment are substantially responsive
to the requirements of this Amendment.
(d) The following supporting documents with respect to each
Borrower: (i) with respect to each Borrower which was formed after October 31,
1997, a copy of its certificate or articles of incorporation, certified as of a
date reasonably close to the Amendment Date to be a true and accurate copy by
the Secretary of State of its state of incorporation, (ii) with respect to all
Borrowers formed prior to October 31, 1997, a certificate of its Secretary or
Assistant Secretary, dated the Amendment Date, to the effect that there have
been no amendments to its certificate or articles of incorporation since October
31, 1997; (iii) a certificate of the Secretary of State of its state of
incorporation, dated as of a date reasonably close to the Amendment Date, as to
its existence and (if available) good standing; (iv) a certificate of the
Secretary of State of each jurisdiction, other than its state of incorporation,
in which it does business, as to its
-4-
<PAGE>
qualification as a foreign corporation, dated as of a date reasonably close to
the Amendment Date; (v) a copy of its by-laws, certified by its Secretary or
Assistant Secretary to be a true and accurate copy of its by-laws in effect on
the Amendment Date, or a certificate of its Secretary or Assistant Secretary to
the effect that there have been no amendments thereto since October 31, 1997;
(vi) a certificate of its Secretary or Assistant Secretary, dated the Amendment
Date, as to the incumbency and signatures of its officers who have executed any
documents in connection with the transactions contemplated by this Amendment;
(vii) a copy of resolutions of its Board of Directors or the Executive Committee
of its Board of Directors, certified by its Secretary or Assistant Secretary as
of the Amendment Date to be a true and accurate copy of resolutions duly adopted
by such Board of Directors or Executive Committee that are in full force and
effect on the Amendment Date, authorizing the execution and delivery by it of
this Amendment and the First Chicago Notes and the performance by it of all its
obligations thereunder; and (viii) such additional supporting documents and
other information with respect to its operations and affairs as the Agent may
reasonably request.
(e) A certificate signed by a duly authorized officer of each
Borrower stating that: (i) the representations and warranties of the Borrower
contained in Article IV of the Agreement and in Section 7 of this Amendment are
correct and accurate on and as of the Amendment Date as though made on and as of
the Amendment Date and (ii) no event has occurred and is continuing which
constitutes an Event of Default or Unmatured Default under the Agreement.
(f) Such other documents as any Lender or its counsel may reasonably
request.
(g) There shall not have occurred any changes in the consolidated
financial condition or results of operations of the Borrower from that reflected
in the financial statements dated August 31, 1997 which has or reasonably could
be expected to have, in the judgment of the Required Lenders, a Material Adverse
Effect on the Borrower's operations, taken as a whole.
7. REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THIS AMENDMENT,
Etc. The Borrower hereby represents and warrants to the Agent and the Lenders
that the execution and delivery by the Borrower of this Amendment, the First
Chicago Notes and each other document executed by the Borrower in connection
herewith and the performance by the Borrower of all its obligations hereunder
and thereunder and any and all actions taken by the Borrower (i) have been duly
authorized by all requisite corporate action of the Borrower, (ii) will not
violate or be in conflict with (a) any provisions of law (including, without
limitation, any applicable usury or similar law), (b) any order, rule,
regulation, writ, judgment, injunction, decree or award of any court or other
agency of government, or (c) any provision of its certificate or articles of
incorporation or by-laws, (iii) will not violate, be in conflict with, result in
a breach of or constitute (with or without the giving of notice or the passage
of time or both) a default under any material indenture, agreement or other
instrument to which it is a party or by which it or any of its properties or
assets is or may be bound, and (iv) except as otherwise contemplated by the
Agreement, will not result in the creation or imposition of any lien, charge or
encumbrance upon,
-5-
<PAGE>
or any security interest in, any of its properties or assets. This Amendment and
the First Chicago Notes constitute legal, valid and binding obligations of the
Borrower enforceable against the Borrower in accordance with their respective
terms, except as enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally.
8. LOCATION OF EXECUTION. This Amendment and the First Chicago Notes
have been executed by the Borrower in Los Angeles, California, and delivered to
the Agent in Chicago, Illinois. The Borrower reaffirms its obligation to
reimburse and indemnify the Lenders for any documentary stamp tax or other taxes
which may be imposed upon the Lenders in respect of the Agreement, the First
Chicago Notes or any Facility B Loan Documents.
9. NO OTHER MODIFICATIONS. Except as expressly amended or modified by
the terms hereof, the Agreement and the other Facility B Loan Documents shall
remain in full force and effect. This Amendment shall not affect, modify or
diminish the obligations of Borrower which have accrued prior to the Amendment
Date including, but not limited to, obligations to pay commitment fees and
interest at the levels and rates as in effect prior to the Amendment Date.
10. REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The Borrower hereby
certifies that the representations and warranties contained in the Agreement and
the other Facility B Loan Documents continue to be true and correct and that no
Event of Default or Unmatured Default has occurred.
11. CHOICE OF LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the Amendment Date.
[Signatures begin on next page]
-6-
<PAGE>
BORROWER:
LENNAR CORPORATION AND EACH OF THE SUBSIDIARIES
LISTED ON SCHEDULE I
By: /s/ BRUCE GROSS
-------------------------------------------
Bruce Gross as Vice President or authorized
signatory of each of such corporations
Address:
Lennar Corporation
700 Northwest 107th Avenue
Miami, Florida 33172
Attention: Bruce Gross, Vice President-Finance
FACILITY B COMMITMENTS: LENDERS:
$59,032,258.02 THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By: /s/ GREGORY GILBERT
-------------------------------------------
Gregory A. Gilbert, Vice President
Address:
The First National Bank of Chicago
One First National Plaza
14th Floor, Suite 0151
Chicago, Illinois 60670-0151
Attention: Gregory A. Gilbert, Vice President
with a copy to:
The First National Bank of Chicago
One First National Plaza, Suite 0801
Chicago, Illinois 60670-0801
Attention: Law Department
-7-
<PAGE>
$7,741,935.48 NATIONSBANK, N.A.
By: /s/ PHILIP CARROLL
-------------------------------------------
PHILIP CARROLL, SR. VICE PRESIDENT
Address:
100 S.E. 2nd Street, 14th FL
Miami, Florida 33131
Attention: Mr. Philip Carroll
$7,741,935.48 CREDIT LYONNAIS ATLANTA AGENCY
By: /s/ DAVID M. CAWRSE
-------------------------------------------
DAVID M. CAWRSE, FIRST VICE PRESIDENT &
MANAGER
Address:
303 Peachtree Street, N.E., Suite 4400
Atlanta, Georgia 30308
Attention: Mr. Kevin Murphy, Vice President
$7,741,935.48 BANK OF AMERICA NATIONAL
TRUST & SAVINGS ASSOCIATION
By: /s/ MARK W. LARIVIERE
-----------------------------------------------
MARK W. LARIVIERE, VICE PRESIDENT
Address:
231 S. LaSalle, 12th Floor
Chicago, Illinois 60697
Attention: Mr. Mark Lariviere
-8-
<PAGE>
$7,741,935.48 COMERICA BANK
By: /s/ MARTIN G. ELLIS
-----------------------------------------------
MARTIN G. ELLIS, __________________________
Address:
One Detroit Center
500 Woodward Avenue, 9th Floor
Detroit, Michigan 48226
Attention: Mr. Martin Ellis, Vice President
$6,774,193.55 FLEET NATIONAL BANK
By: /s/ PATRICK BURNS
-----------------------------------------------
PATRICK BURNS, VICE PRESIDENT
Address:
111 Westminster Street
RIMO0215 - 8th FL
Providence, Rhode Island 02903
Attention: Mr. James B. McLaughlin
$6,774,193.55 GUARANTY FEDERAL BANK, F.S.B.
By: /s/ JENNIFER E. RAY
-----------------------------------------------
JENNIFER E. RAY, ASST. VICE PRESIDENT
Address:
8333 Douglas Avenue
Dallas, Texas 75225
Attention: Mr. Randy Reid
-9-
<PAGE>
$5,161,290.32 THE INDUSTRIAL BANK OF JAPAN, LIMITED,
ATLANTA AGENCY
By: /s/ KAZUO IIDA
-----------------------------------------------
KAZUO IIDA, GENERAL MANAGER
Address:
191 Peachtree Street, Suite 3600
Atlanta, Georgia 30303-1757
Attention: Mr. Michael Harvey, Vice President
$5,161,290.32 U.S. BANK NATIONAL ASSOCIATION
By: /s/ KATHLEEN CONNOR
-----------------------------------------------
KATHLEEN CONNOR, VICE PRESIDENT
Address:
Real Estate Banking Division
601 2nd Avenue South
First Bank Place
Minneapolis, Minnesota 55402
Attention: Ms. Kathleen Connor
$5,161,290.32 PNC BANK, NATIONAL ASSOCIATION
By: /s/ DOUGLAS PAUL
-----------------------------------------------
DOUGLAS G. PAUL, VICE PRESIDENT
Address:
Two Tower Center
Suite J3-JTTC-18-6
East Brunswick, New Jersey 08816
Attention: Mr. Douglas G. Paul
-10-
<PAGE>
$5,161,290.32 SOCIETE GENERALE
By: /s/ LOUIS P. LAVILLE
-----------------------------------------------
LOUIS P. LAVILLE III, VICE PRESIDENT
Address:
303 Peachtree Street, Suite 3040
Atlanta, Georgia 30308
Attention: Mr. Ed Forseberg
$3,870,967.74 AMSOUTH BANK
By: /s/ RONNY HUDSPETH
-----------------------------------------------
RONNY HUDSPETH, VP
Address:
1900 Fifth Avenue
Birmingham, Alabama 35288
Attention: Mr. Ronny Hudspeth
$3,225,806.45 BARNETT BANK, N.A., SOUTH FLORIDA
By: /s/ CLAY F. WILSON
-----------------------------------------------
CLAY F. WILSON, GROUP SR. VICE PRESIDENT
Address:
701 Brickell Avenue, 6th FL
Miami, Florida 33131
Attention: Mr. Clay F. Wilson, Group Vice
President
-11-
<PAGE>
$3,225,806.45 THE DAI-ICHI KANGYO BANK, LTD.
By: /s/ TATSUJI NOGUCHI
-----------------------------------------------
TATSUJI NOGUCHI, JOINT GENERAL MANAGER
Address:
Marquis Two Tower, Suite 2400
285 Peachtree Center Avenue, N.E.
Atlanta, Georgia 30303
Attention: Mr. Guenter Kittel
$3,225,806.45 THE FUJI BANK AND TRUST COMPANY
By: /s/ TEIJI TERAMOTO
-----------------------------------------------
TEIJI TERAMOTO, VICE PRESIDENT & MNANAGER
Address:
Two World Trade Center, 79th FL
New York, New York 10048
Attention: Mr. David Lee, Assistant Vice President
$3,225,806.45 KREDIETBANK, N.V.
By: /s/ R SNAUFFER /s/ MICHAEL CURRAN
-----------------------------------------------
ROBERT SNAUFFER, VICE PRESIDENT
MICHAEL V. CURRAN, VICE PRESIDENT
Address:
125 West 55th Street
New York, New York 10019
Attention: Mr. Michael Curran
-12-
<PAGE>
$3,225,806.45 SAKURA BANK
By: /s/ HIROYASU IMANISHI
-----------------------------------------------
HIROYASU IMANISHI, V.P. & SENIOR MAnager
Address:
Marquis 1 Tower
245 Peachtree Center Avenue
Atlanta, Georgia 30303
Attention: Mr. Ric Spenser
$3,225,806.45 SUNTRUST BANK, MIAMI, N.A.
By: /s/ ROBERT HUMMEL
-----------------------------------------------
ROBERT E. HUMMEL, SENIOR VICE PRESIDENT
Address:
Real Estate Division
777 Brickell Avenue
Miami, Florida 33131
Attention: Mr. Robert Hummel, Senior Vice President
$2,580,645.16 BANQUE PARIBAS
By: /s/ DUANE HELKOWSKI /s/ ROBERT CARINO
-----------------------------------------------
DUANE HELKOWSKI, VICE PRESIDENT
ROBERT G. CARINO, VICE PRESIDENT
Address:
787 Seventh Avenue
New York, New York 10019
Attention: Mr. Duane Helkowski
-13-
EXHIBIT 13
<TABLE>
<CAPTION>
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
Lennar Corporation and Subsidiaries
At or for the Years Ended November 30,
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1997 1996 1995 1994 1993
- ------------------------------------------------ ---------- --------- --------- --------- ---------
RESULTS OF OPERATIONS:
<S> <C> <C> <C> <C> <C>
Revenues:
Homebuilding $1,208,570 952,648 665,510 647,750 532,150
Financial services $ 89,369 82,577 57,787 54,348 59,204
Limited-purpose finance subsidiaries $ 5,143 6,436 7,689 9,485 14,355
Total revenues $1,303,082 1,041,661 730,986 711,583 605,709
Operating earnings - business segments:
Homebuilding $ 120,240 91,066 58,530 70,645 60,207
Financial services $ 35,532 28,653 19,013 14,844 15,104
Corporate general and administrative
expenses $ 15,850 12,396 10,523 10,309 8,670
Earnings from continuing operations before
income taxes and cumulative effect of
changes in accounting principles $ 85,727 84,429 53,310 64,626 56,935
Earnings from continuing operations $ 50,605 51,502 32,519 39,422 36,438
Earnings from discontinued operations $ 33,826 36,484 37,908 28,743 16,073
Net earnings $ 84,431 87,986 70,427 69,126 52,511
Per share amounts:
Earnings from continuing operations $ 1.34 1.42 .90 1.09 1.05
Earnings from discontinued operations $ .89 1.01 1.05 .80 .46
Cumulative effect of changes
in accounting principles $ -- -- -- .03 --
Net earnings per share $ 2.23 2.43 1.95 1.92 1.51
Cash dividends - common stock $ .088 .10 .10 .095 .08
Cash dividends - Class B common stock $ .079 .09 .09 .084 .067
FINANCIAL POSITION:
Total assets $1,343,284 1,589,593 1,341,065 1,205,214 1,152,193
Total debt $ 661,695 689,159 557,055 493,203 497,317
Stockholders' equity $ 438,999 695,456 607,794 534,088 467,473
Shares outstanding (000's) 53,160 35,928 35,864 35,768 35,716
Stockholders' equity per share $ 8.26 19.36 16.95 14.93 13.09
DELIVERY AND BACKLOG INFORMATION:
Number of homes delivered 6,702 5,968 4,680 4,965 4,634
Backlog of home sales contracts 3,318 1,929 1,802 1,703 2,105
Dollar value of backlog $ 665,000 312,000 255,000 247,000 264,000
</TABLE>
As a result of the Company's spin-off of its commercial real estate investment
and management business, including the Investment Division business segment, the
Five Year Summary of Selected Financial Data has been restated to reflect the
Company's Investment Division as a discontinued operation.
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
CERTAIN STATEMENTS CONTAINED IN THE FOLLOWING MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS MAY BE
"FORWARD-LOOKING STATEMENTS" AS DEFINED IN THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. SUCH STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY. SUCH FACTORS INCLUDE, BUT ARE NOT LIMITED TO, CHANGES IN GENERAL
ECONOMIC CONDITIONS, THE MARKET FOR HOMES GENERALLY AND IN AREAS WHERE THE
COMPANY HAS DEVELOPMENTS, THE AVAILABILITY AND COST OF LAND SUITABLE FOR
RESIDENTIAL DEVELOPMENT, MATERIALS PRICES, LABOR COSTS, INTEREST RATES, CONSUMER
CONFIDENCE, COMPETITION, ENVIRONMENTAL FACTORS AND GOVERNMENT REGULATIONS
AFFECTING THE COMPANY'S OPERATIONS.
RESULTS OF OPERATIONS
OVERVIEW
In 1997, Lennar successfully completed the spin-off of its commercial real
estate investment and management business consisting of the Investment Division,
the portions of the Financial Services Division involved in commercial mortgage
lending and investments (but not the portions of its Financial Services Division
which are involved in lending to homeowners, servicing residential mortgages or
providing services to homebuyers or homeowners) and certain assets of the
Homebuilding Division utilized in related businesses. The spin-off was conducted
through the distribution of the stock of LNR Property Corporation ("LNR"). The
spin-off, in the form of a tax-free distribution, was completed effective
October 31, 1997. At the time of the spin-off transaction, Lennar and LNR formed
a general partnership ("Lennar Land Partners") to acquire, develop and sell
land. Lennar and LNR contributed properties to Lennar Land Partners in exchange
for 50% general partnership interests in Lennar Land Partners. Lennar also
successfully completed a merger with Pacific Greystone Corporation, thereby
significantly expanding its homebuilding operations in California and Arizona
and entering the Nevada market. The merger was effective October 31, 1997.
Net earnings for 1997, excluding an after-tax restructuring charge related to
the spin-off of $17.5 million ($0.46 per share), were $101.9 million, ($2.69 per
share), compared to $88.0 million ($2.43 per share) in 1996. The restructuring
charge reduced 1997 net earnings to $84.4 million ($2.23 per share). Fiscal 1996
net earnings had increased from 1995 earnings of $70.4 million ($1.95 per
share).
Lennar's earnings from continuing operations decreased in 1997 to $50.6 million
($1.34 per share) from 1996 earnings from continuing operations of $51.5 million
($1.42 per share) on total revenues from continuing operations in 1997 of $1.3
billion compared to $1.0 billion of revenues in 1996. Fiscal 1996 earnings from
continuing operations had increased from 1995 earnings of $32.5 million ($0.90
per share), and revenues from continuing operations in 1996 had increased from
1995 revenues of $731.0 million.
Lennar's results of operations for 1997 include the results of the discontinued
commercial real estate investment and management business for the period from
December 1, 1996 to October 31, 1997, and the results of operations for Pacific
Greystone Corporation and the Company's share of the earnings from Lennar Land
Partners for the period from November 1, 1997 to November 30, 1997.
HOMEBUILDING
The Homebuilding Division constructs and sells single- family and multi-family
homes. These activities also include the purchase, development and sale of
residential land. The following tables set forth selected financial and
operational information for the periods indicated:
SELECTED HOMEBUILDING DIVISION FINANCIAL DATA
(DOLLARS IN THOUSANDS, YEARS ENDED NOVEMBER 30,
EXCEPT AVERAGE SALES PRICES) 1997 1996 1995
- ---------------------------- ---------- ---------- ----------
Sales of homes $1,130,989 894,663 646,986
Other 77,581 57,985 18,524
---------- ---------- ----------
Total revenues $1,208,570 952,648 665,510
Gross profit - home sales ($) $ 223,298 171,513 123,958
Gross profit - home sales (%) 19.7% 19.2% 19.2%
Selling, general &
administrative expenses $ 130,006 99,301 70,004
Operating earnings ($) $ 120,240 91,066 58,530
Operating earnings (%) 10.0% 9.6% 8.8%
Average sales price $ 168,800 149,900 138,200
========== ========== ==========
SUMMARY OF HOME AND BACKLOG DATA
DELIVERIES 1997 1996 1995
- -------------------------------- ---------- ---------- ----------
Florida 3,367 3,363 3,395
California 587 58 --
Texas 2,075 1,832 781
Arizona 645 715 504
Nevada 28 -- --
---------- ---------- ----------
6,702 5,968 4,680
========== ========== ==========
NEW ORDERS
- ----------
Florida 3,457 3,251 3,390
California 758 52 --
Texas 2,305 1,884 821
Arizona 573 660 568
Nevada 19 -- --
---------- ---------- ----------
7,112 5,847 4,779
========== ========== ==========
BACKLOG - HOMES
- ---------------
Florida 1,295 1,205 1,317
California 783 39 --
Texas 668 438 183
Arizona 454 247 302
Nevada 118 -- --
---------- ---------- ----------
3,318 1,929 1,802
========== ========== ==========
BACKLOG - DOLLAR VALUE
(IN THOUSANDS) $ 665,000 312,000 255,000
- ----------------------- ========== ========== ==========
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Revenues from homebuilding operations were $1.2 billion in 1997, $952.6 million
in 1996 and $665.5 million in 1995. The increased revenues in both years were
primarily the result of additional revenues from home sales. Revenues from the
sale of homes increased 26% in 1997 and 38% in 1996. These increases were
attributable to both an increase in the number of new home deliveries and an
increase in the average sales price. The increases in deliveries were primarily
generated from growth in the California and Texas homebuilding markets in 1997
and from growth in the Texas homebuilding market in 1996. The higher average
sales price in 1997 was due to a proportionately greater number of sales of
higher priced homes from the Company's move-up segment and a greater percentage
of deliveries in the California market, which has higher priced homes. The
addition of Pacific Greystone Corporation late in 1997 should further increase
the percentage of 1998 deliveries which are in California. The higher average
sales price in 1996 was due to price increases for existing products, as well as
a proportionately greater number of sales of higher priced homes. Other
Homebuilding Division revenues consisted primarily of residential land sales in
all three years. In 1997, 1996 and 1995, sales of residential land totaled $63.8
million, $50.8 million and $16.2 million, respectively.
The gross profit percentages from the sales of homes were 19.7% in 1997 and
19.2% in both 1996 and 1995. The increase in the gross profit percentage during
1997 is primarily attributable to the Company's expansion in the California
market, where the Company is currently experiencing higher margins on home
sales.
Selling, general and administrative expenses increased by $30.7 million in 1997
and $29.3 million in 1996. The higher level in 1997 was primarily attributable
to start-up and operating costs in California related to the Company's expansion
into the California market, prior to the merger with Pacific Greystone
Corporation, and additional expenses associated with the increased sales
revenues. The higher level of expenses in 1996 was primarily attributable to the
Company's expansion in Texas, with the acquisition of Houston-based Village
Builders and Friendswood Development Company, and additional expenses associated
with the increased sales revenues. Also contributing to the 1996 increase were
additional expenses relating to the Company's expansion into California and
adult communities in Central Florida. Selling, general and administrative
expenses as a percentage of total homebuilding revenues increased to 10.8% in
1997 from 10.4% in 1996 and during 1996, decreased from 10.5% in 1995. The
higher percentage in 1997 when compared to 1996 is primarily due to the
aforementioned expansion into the California market which should generate
increased revenues in future periods. The lower percentage in 1996 when compared
to 1995 is primarily due to selling, general and administrative expenses being
absorbed by more homes delivered in 1996 than in 1995.
New sales orders increased 22% for both 1997 and 1996. The growth in new orders
for 1997 was attributed primarily to the Company's expansion in California and
Texas. The growth for 1996 was attributable primarily to expansion in Texas. The
new sales orders increase in 1997, coupled with the acquisition of Pacific
Greystone Corporation's backlog which was 950 homes at November 30, 1997,
resulted in a 72% increase in the Company's backlog of home sales contracts to
3,318 at November 30, 1997, as compared to a backlog of 1,929 contracts a year
earlier. The dollar value of contracts in backlog increased 113% to $665.0
million at November 30, 1997 from $312.0 million a year before.
FINANCIAL SERVICES
Lennar Financial Services, Inc.'s subsidiaries provide mortgage financing, title
insurance and closing services for Lennar homebuyers and others; acquire,
package and resell mortgage loans and mortgage-backed securities and perform
mortgage loan servicing activities and provide cable television and alarm
monitoring services to residents of Lennar communities and others. This division
also invested in issues of rated portions of commercial real estate
mortgage-backed securities ("CMBS") for which Lennar's discontinued Investment
Division was the special servicer and also an investor in related securities.
Such CMBS were distributed as part of the spin-off of the commercial real estate
management and investment business. The following table sets forth selected
financial and operational information relating to the Financial Services
Division:
YEARS ENDED NOVEMBER 30,
(DOLLARS IN THOUSANDS) 1997 1996 1995
- --------------------- ---------- ---------- ----------
Revenues $ 89,369 82,577 57,787
Costs and expenses 53,837 53,924 38,774
Intercompany interest expense 364 233 2,313
---------- ---------- ----------
Operating earnings $ 35,168 28,420 16,700
========== ========== ==========
Dollar volume of
mortgages originated $ 419,933 527,036 650,074
========== ========== ==========
Number of mortgages
originated 3,500 4,600 5,900
========== ========== ==========
Principal balance of
servicing portfolio $3,073,010 3,286,225 3,400,120
========== ========== ==========
Number of loans serviced 39,700 42,100 44,300
========== ========== ==========
Operating earnings of the Financial Services Division in 1997 increased to $35.2
million from $28.4 million in 1996. The increase in 1997 was primarily the
result of the expansion of the title business in the Houston market, increased
mortgage profits and the effect of capitalization of mortgage servicing rights
as required by Statement of Financial Accounting Standards ("SFAS") No. 122,
Accounting for Mortgage Servicing Rights, as amended by SFAS No. 125,
28
<PAGE>
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities. Additionally, operating earnings increased due to the division's
investment in the rated portion of CMBS, partnerships and commercial loans,
prior to the spin-off transaction. Mortgage loan originations were lower in
1997, when compared to 1996 and 1995, due to a reduction in the division's
involvement in the less profitable wholesale loan origination business.
Operating earnings of the Financial Services Division in 1996 had increased from
$16.7 million in 1995. The 1996 increase in earnings was primarily the result of
earnings from the division's investment in the rated portions of CMBS,
partnerships and commercial loans. Additionally, earnings from the division's
title and closing services operations increased during 1996 due to the
acquisition of Regency Title Company in Houston. The increases in operating
earnings during 1996 were partially offset by lower gains from bulk sales of
mortgage servicing rights.
DISCONTINUED OPERATIONS
On June 10, 1997, the Company's Board of Directors approved a plan to spin-off
its commercial real estate investment and management business, which primarily
consisted of the Investment Division. The spin-off was conducted through the
distribution of the stock of LNR Property Corporation. The spin-off, in the form
of a tax-free distribution, was completed effective October 31, 1997. The
Investment Division was involved in the development, management and leasing, as
well as the acquisition and sale, of commercial and multi-family residential
rental properties and land. The Investment Division also was a participant and
manager in a number of partnerships which acquired portfolios of commercial
mortgage loans and real estate. The division shared in the profits or losses of
the partnerships and also received fees for management and disposition of the
partnerships' assets. This division also acquired, at a discount, the unrated
portions of debt securities which were collateralized by commercial real estate
loans. The division only invested in securities for which it acted as the
special servicer on behalf of all the holders of the securities. The division
earned interest on its investment, as well as fees for the special servicing
activities.
Operating earnings related to the discontinued operations increased in 1997 to
$68.4 million from 1996 earnings of $68.0 million. The increase in 1997 related
to increased sales of other real estate and other revenues, primarily consisting
of the discontinued Investment Division's increased investment in CMBS, offset
by lower management fees, rental income generated by operating properties owned
by the Company and earnings from the division's partnerships. The increase in
operating earnings was also positively impacted by lower costs and expenses.
Operating earnings related to discontinued operations increased to $68.0 million
in 1996 from $67.7 million in 1995. The increase in 1996 relates to a decrease
in sales of other real estate being offset by increases in management fees,
higher rental income generated by operating properties owned by the Company,
additional earnings from the discontinued Investment Division's partnerships and
higher other revenues which were primarily the result of the discontinued
Investment Division's additional investment in CMBS.
INTEREST
During 1997, 1996 and 1995, interest costs of $62.8 million, $50.1 million and
$35.8 million, respectively, were incurred (excluding the limited-purpose
finance subsidiaries) and $33.5 million, $24.9 million and $23.4 million,
respectively, were capitalized by the Company's Homebuilding and discontinued
Investment Divisions. Previously capitalized interest charged to expense was
$25.7 million in 1997, $20.9 million in 1996 and $17.8 million in 1995.
Interest amounts incurred and charged to expense during 1997 were greater than
those of 1996 (which were greater than that of 1995) due to higher debt levels
as a result of the Company's continued expansion and an increase in the number
of homes delivered, which increased the amount of previously capitalized
interest charged to expense. The amount of interest capitalized by the Company's
real estate operations in any one year is a function of the assets under
development, outstanding debt levels and interest rates. At November 30, 1997,
capitalized interest as a percentage of homebuilding inventories approximated
4%.
RESTRUCTURING CHARGE
During the fourth quarter of 1997, the Company recorded a restructuring charge
to continuing operations for the estimated costs of the spin-off of LNR Property
Corporation and formation of Lennar Land Partners. The restructuring charge was
$29.2 million and consisted of expenses incurred for professional fees,
transaction costs, the write-off of deferred loan costs on mortgages and notes
which were paid off to effect the spin-off and an impairment charge resulting
from the change in use of the land previously held for development or investment
that was contributed to Lennar Land Partners. The impairment charge, which
approximated $13.7 million, was a result of the change from the Company's
previous intended use of the property for development and sale of homes to the
new intended use in Lennar Land Partners where the land will be developed for
sale as lots. There were no restructuring charges during 1996 or 1995.
INCOME TAXES
The provisions for income taxes for 1997, 1996 and 1995 were 40.0%, 39.0% and
39.0% of pre-tax income, respectively. The increase in 1997 resulted primarily
from permanent differences arising from the restructuring charge recorded during
the fourth quarter.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
PRO FORMA RESULTS OF OPERATIONS
The pro forma results of operations give effect to the spin-off of the Company's
commercial real estate investment and management business, the merger with
Pacific Greystone Corporation and the formation of Lennar Land Partners, all of
which were completed on October 31, 1997, as if such transactions had occurred
at the beginning of the periods. Lennar Corporation pro forma results were
derived from the 12 months ended November 30; Pacific Greystone Corporation pro
forma results were derived from the 12 months ended December 31.
The aforementioned transactions have resulted in reported results for 1997 that
are not comparable to 1996. Accordingly, the following pro forma information is
presented to report 1997 and 1996 on a more comparable basis. The following pro
forma financial information does not purport to be indicative of the results of
operations which would have been reported if the transactions had occurred on
the dates or for the periods indicated:
YEARS ENDED
NOVEMBER 30,/DECEMBER 31,
-------------------------------
(IN THOUSANDS) 1997 1996
- -------------- ---------- ----------
REVENUES:
Homebuilding $1,692,083 1,354,568
Financial services 52,305 44,218
Limited-purpose
finance subsidiaries 5,143 6,436
---------- ----------
Total revenues $1,749,531 1,405,222
========== ==========
OPERATING EARNINGS:
Homebuilding $ 172,141 142,988
Financial services 11,642 6,470
Limited-purpose
finance subsidiaries 13 (3)
---------- ----------
Total operating earnings 183,796 149,455
Corporate general and
administrative expenses 23,212 18,894
Interest expense 30,657 29,440
---------- ----------
Pre-tax earnings 129,927 101,121
Income taxes 52,646 41,348
---------- ----------
Net earnings $ 77,281 59,773
========== ==========
HOMEBUILDING
Homebuilding revenues on a pro forma basis increased to $1.7 billion in 1997
from $1.4 billion in 1996. Revenues were higher due to a greater number of home
deliveries and an increase in the average sales price. New home deliveries on a
pro forma basis increased to 8,943 homes in 1997 from 7,929 homes in 1996. The
greatest increases in deliveries were generated from growth in the California
and Texas homebuilding markets. The average sales price on homes closed on a pro
forma basis increased to $185,000 in 1997 from $166,000 in 1996. The higher
average sales price was due to a proportionately greater number of sales of
higher priced homes from the Company's move-up segment and a greater percentage
of deliveries in the California market, which has higher priced homes. The
Company recorded land sales on a pro forma basis totaling $16.7 million and
$29.1 million in 1997 and 1996, respectively.
Gross margin percentages on home sales on a pro forma basis increased slightly
to 19.7% in 1997 from 19.6% in 1996. Gross margin from land sales on a pro forma
basis totaled $1.5 million, or 9%, and $5.3 million, or 18%, in 1997 and 1996,
respectively. Margins achieved on sales of land may vary significantly from
period to period.
Selling, general and administrative expenses on a pro forma basis as a
percentage of homebuilding revenues increased to 9.5% in 1997 from 9.3% in 1996.
This increase in 1997 was primarily attributable to start-up and operating costs
in California related to the Company's expansion into the California market,
prior to the merger with Pacific Greystone Corporation, that should generate
increased revenues in future periods.
FINANCIAL SERVICES
Operating earnings of the Financial Services Division on a pro forma basis
increased to $11.6 million in 1997 from $6.5 million in 1996. This increase was
primarily due to expansion of the title business in the Houston market,
increased mortgage profits and the effect of the capitalization of mortgage
servicing rights.
CORPORATE GENERAL AND ADMINISTRATIVE EXPENSES
Corporate general and administrative expenses on a pro forma basis as a
percentage of total revenues remained consistent at 1.3% for both 1997 and 1996.
INTEREST EXPENSE
Interest expense increased on a pro forma basis to $30.7 million in 1997 from
$29.4 million in 1996. The increase in interest expense was the result of higher
debt levels due to the Company's expansion and an increase in the number of
homes delivered which increased the amount of previously capitalized interest
charged to expense. Previously capitalized interest charged to expense on a pro
forma basis was $25.0 million and $23.7 million in 1997 and 1996, respectively.
FINANCIAL CONDITION AND CAPITAL RESOURCES
Lennar meets the majority of its short-term financing needs with cash generated
from operations and funds available under its unsecured revolving credit
agreement. During 1997, the Company obtained unsecured revolving credit
facilities in the
30
<PAGE>
aggregate amount of $550.0 million, which may be used to refinance existing
indebtedness, for working capital, for acquisitions and for general corporate
purposes. Of the total new indebtedness, $450.0 million was structured as a
five-year revolving credit facility maturing in June 2002. The second facility
(up to $100.0 million) was structured as a revolving credit facility maturing
364 days after the closing date of the facility, subject to extension for two
one-year periods. The Company may elect, at the maturity of the second facility,
to convert borrowings under that facility to a term loan which amortizes
quarterly and matures during June 2002. At November 30, 1997, there was $376.5
million outstanding under the Company's revolving credit facilities, compared to
$324.9 million outstanding under the previous agreement as of the same date last
year. Subsequent to November 30, 1997, the Company amended the unsecured
revolving credit facilities, increasing the amount to $600.0 million.
During 1997, $91.1 million in cash was used by the Company's operations compared
to $31.4 million in cash provided during 1996. Cash flow from operations
decreased primarily due to $107.0 million of cash used to increase inventories
through land purchases, land development and construction and $32.4 million of
cash used to increase the loans held for sale or disposition by the Company's
Financial Services Division. These uses were partially offset by an increase in
accounts payable and other liabilities of $34.7 million. In 1996, in addition to
earnings, cash flow from operations increased primarily as a result of $29.2
million of cash which was provided by an increase in accounts payable and other
liabilities and a $21.5 million reduction in loans held for sale or disposition
by the Company's Financial Services Division. The primary use of cash in 1996
was $62.0 million used to increase inventories through land purchases, land
development and construction.
Cash provided by investing activities totaled $171.3 million in 1997, compared
to $175.4 million of cash used in 1996. During 1997, $131.8 million was provided
by the Company's investments in partnerships and $158.1 million was provided by
sales of and principal payments received from the Company's portfolio of
investment securities (CMBS) by both the discontinued Investment Division and
Financial Services Division. This generation of cash was partially offset by
$113.0 million used to purchase investment securities. During 1996, $133.8
million was used in the acquisitions of businesses and $119.5 million was used
to purchase investment securities by both the discontinued Investment Division
and the Financial Services Division. These uses of cash were partially offset by
$48.1 million of sales and principal payments provided by the Company's
portfolio of investment securities. In addition, $42.8 million of cash was
provided by the Company's investments in partnerships.
HOMEBUILDING AND FINANCIAL SERVICES OPERATIONS
The Company finances its land acquisition and development activities,
construction activities, mortgage banking activities and general operating needs
primarily from its own base of $439.0 million of equity at November 30, 1997, as
well as from revolving lines of credit, financial institution borrowings and
purchase money notes. The Company also buys land under option agreements. Option
agreements permit the Company to acquire portions of properties when it is ready
to build homes on them. The financial risk of adverse market conditions
associated with longer term land holdings is managed by strategic purchasing in
areas that the Company has identified as desirable growth markets along with
careful management of the land development process. Based on its current
financing capabilities, the Company does not believe that its land holdings have
an adverse effect on its liquidity.
The Company has maintained excellent relationships with the financial
institutions participating in its financing arrangements and has no reason to
believe that such relationships will not continue in the future. Despite the
spin-off of the commercial real estate investment and management business, the
Company substantially increased its credit lines during 1997. The Company
anticipates that there will be adequate mortgage financing available for the
purchasers of its homes during 1998 through the Company's own financial services
subsidiaries as well as from external sources.
The Company has supplemented its short-term borrowings with secured term loans.
Total secured borrowings, which include term loan debt, as well as mortgage
notes payable on certain land and/or operating properties, were $12.5 million
and $82.1 million at November 30, 1997 and 1996, respectively. A significant
portion of housing inventories, land held for development, model homes and
operating properties remained unencumbered at the end of the current fiscal
year. Total non-financial services borrowings increased to $527.3 million at
November 30, 1997 from $361.3 million at November 30, 1996. This increase was
primarily attributable to the Homebuilding Division's expansion in Texas and
into California, as well as increases in homebuilding inventories.
Lennar Financial Services, Inc.'s subsidiaries finance their mortgage loans held
for sale on a short-term basis by either pledging them as collateral for
borrowings under a line of credit totaling $110.0 million or borrowing funds
from Lennar Corporation in instances where, on a consolidated basis, this
minimizes the overall cost of funds. Total borrowings under the line of credit
were $86.9 million and $48.3 million at November 30, 1997 and 1996,
respectively.
Lennar Financial Services, Inc.'s subsidiaries sell the mortgage
loans they originate within thirty to sixty days of origination. At November 30,
1997, the balance of loans held for sale or disposition was $106.0 million,
compared with $127.6 million one year earlier.
31
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Based on the Company's current financial condition and credit relationships,
Lennar believes that its operations and borrowing resources will provide for its
current and long-term capital requirements at the Company's anticipated levels
of growth.
LIMITED-PURPOSE FINANCE SUBSIDIARIES
Limited-purpose finance subsidiaries of Lennar Financial Services, Inc. have
placed mortgage loans and other receivables as collateral for various long-term
financings. These subsidiaries pay the debt service on the long-term borrowings
primarily from the cash flows generated by the related pledged collateral.
Therefore, the related interest income and interest expense, for the most part,
offset one another in each of the years in the three-year period ended November
30, 1997. As part of the spin-off of the Company's commercial real estate
investment and management business, LNR received an interest in the assets of
the limited-purpose finance subsidiaries to the extent such assets exceeded the
related liabilities. The Company believes that the cash flows generated by these
subsidiaries will be adequate to meet the required debt payment schedules.
BACKLOG
Backlog is the number of homes subject to pending sales contracts. Homes are
sold using sales contracts which are usually accompanied by sales deposits.
Before entering into sales contracts, the Company generally prequalifies its
customers. Purchasers are permitted to cancel sales contracts if they are unable
to close on the sale of their existing home or fail to qualify for financing and
under certain other circumstances. The Company experienced a cancellation rate
of 19% in 1997, 20% in 1996 and 23% in 1995. Although cancellations can delay
the sales of the Company's homes, they have not had a material impact on sales,
operations or liquidity since the Company closely monitors the progress of
prospective buyers in obtaining financing and monitors and adjusts construction
start plans to match the level of demand for homes. The Company does not
recognize revenue on homes covered by pending sales contracts until the sales
are closed and title passes to the new homeowners.
Total revenues and earnings in 1998 will be affected by both the new home sales
order rate during the year and the backlog of home sales contracts at the
beginning of the year. The Company is entering fiscal 1998 with a backlog of
$665.0 million, which is 113% higher than at the beginning of the prior fiscal
year. Revenues and earnings should be positively affected in 1998 by both the
increased housing demand as well as the Company's expansion, particularly in
California.
INTEREST RATES AND INFLATION
Inflation can have a long-term impact on the Company because increasing costs of
land, materials and labor result in a need to increase the sales prices of
homes. In addition, inflation is often accompanied by higher interest rates,
which can have a negative impact on housing demand and the costs of financing
land development activities and housing construction. Increased construction
costs, rising interest rates, as well as increased material and labor costs, may
reduce gross margins in the short-term; however, the Company attempts to recover
the increased costs through increased sales prices without reducing sales
volume. In recent years the increases in these costs have followed the general
rate of inflation and hence have not had a significant adverse impact on the
Company. However, there can be no assurance that inflation will not have a
material adverse impact on the Company's future results of operations.
YEAR 2000
The Company utilizes a number of software systems in conjunction with its
homebuilding and financial services operations. The Company has and will
continue to make certain investments in its software systems and applications to
ensure the Company is Year 2000 compliant. The financial impact of becoming Year
2000 compliant has not been and is not expected to be material to the Company's
financial position or results of operations in a given year.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share. SFAS No.
128, which supersedes Accounting Principles Board ("APB") Opinion No. 15,
requires a dual presentation of basic and diluted earnings per share on the face
of the statement of earnings. Basic earnings per share excludes dilution and is
computed by dividing income or loss attributable to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted earnings per share is computed similarly
to fully diluted earnings per share under APB Opinion No. 15. SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not permitted. When
adopted, all prior-period earnings per share data are required to be restated.
The Company is required to implement SFAS No. 128 during the quarter ending
February 28, 1998. The Company is in the process of determining the impact of
the adoption of SFAS No. 128.
Also in February 1997, the Financial Accounting Standards Board issued SFAS No.
129, Disclosure of Information About Capital Structure. SFAS No. 129, which
applies to all entities that have issued securities, requires in summary form,
the pertinent rights and privileges of the various securities outstanding.
Examples of information that shall be disclosed are
32
<PAGE>
dividends and liquidation preferences, participation rights, call prices and
dates, conversion or exercise prices or rates and pertinent dates, sinking-fund
requirements, unusual voting rights and significant terms of contracts to issue
additional shares. SFAS No. 129 is effective for financial statements issued for
periods ending after December 15, 1997.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130 requires that all components of
comprehensive income be reported on one of the following: (1) the statement of
earnings, (2) the statement of stockholders' equity or (3) a separate statement
of comprehensive income. Comprehensive income is comprised of net income and all
changes to stockholders' equity, except those due to investments by owners
(changes in additional paid-in capital) and distributions to owners (dividends).
This statement is effective for fiscal years beginning after December 15, 1997.
Additionally in June 1997, the Financial Accounting Standards Board issued SFAS
No. 131, Disclosures About Segments of an Enterprise and Related Information.
SFAS No. 131 requires public companies to report certain information about their
operating segments in their annual financial statements and quarterly reports
issued to shareholders. It also requires public companies to report certain
information about their products and services, the geographic areas in which
they operate and their major customers. This statement is effective for fiscal
years beginning after December 15, 1997.
33
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of Lennar Corporation:
We have audited the accompanying consolidated balance sheets of Lennar
Corporation and subsidiaries (the "Company") as of November 30, 1997 and 1996
and the related consolidated statements of earnings, cash flows and
stockholders' equity for each of the three years in the period ended November
30, 1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Lennar Corporation
and subsidiaries at November 30, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
November 30, 1997, in conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, effective
December 1, 1994, the Company changed its method of accounting for its
investments in debt securities to conform with Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity
Securities. Effective December 1, 1996, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
/s/ Deloitte & Touche LLP
Miami, Florida
January 20, 1998
34
<PAGE>
REPORT OF MANAGEMENT
The accompanying consolidated financial statements are the responsibility of
management. The statements have been prepared in accordance with generally
accepted accounting principles and include amounts that are based on
management's best judgments and estimates. Management relies on internal
accounting controls, among other things, to produce records suitable for the
preparation of financial statements. The Company employs internal auditors whose
work includes evaluating and testing internal accounting controls.
The responsibility of our independent auditors for the financial statements is
limited to their expressed opinion on the fairness of the consolidated financial
statements taken as a whole. Their examination is performed in accordance with
generally accepted auditing standards which include tests of our accounting
records and internal accounting controls and evaluation of estimates and
judgments used to prepare the financial statements.
An Audit Committee of outside members of the Board of Directors periodically
meets with management, the external auditors and internal auditors to evaluate
the scope of auditing activities and review results. Both the external and
internal auditors have full and free access to the Committee, without management
present, to discuss any appropriate matters.
/s/ Bruce Gross /s/ Diane J. Bessette
Chief Financial Officer Controller
35
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
Lennar Corporation and Subsidiaries
November 30, 1997 and 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1997 1996
- --------------------------------------- ---------- ----------
<S> <C> <C>
ASSETS
HOMEBUILDING:
Cash and cash equivalents $ 52,926 43,312
Receivables, net 34,646 16,411
Inventories:
Construction in progress and model homes 636,622 259,747
Land held for development 170,353 436,580
---------- ----------
Total inventories 806,975 696,327
Operating properties and equipment, net 8,598 9,330
Investments in partnerships 108,064 40,757
Other assets 127,631 55,918
Financial services assets 156,988 382,083
Net investment in discontinued operations -- 285,557
---------- ----------
1,295,828 1,529,695
---------- ----------
Limited-purpose finance subsidiaries - Collateral for bonds
and notes payable 47,456 59,898
---------- ----------
$1,343,284 1,589,593
========== ==========
Liabilities and Stockholders' Equity
Homebuilding:
Accounts payable and other liabilities $ 198,386 158,641
Income taxes currently payable 22,634 26,045
Mortgage notes and other debts payable 527,303 361,333
Financial services liabilities 108,506 291,606
---------- ----------
856,829 837,625
---------- ----------
Limited-purpose finance subsidiaries - Bonds and notes payable 47,456 56,512
---------- ----------
Stockholders' equity:
Common stock of $0.10 par value per share
Authorized 100,000 shares; issued and outstanding:
1997 - 43,223; 1996 - 25,943 4,322 2,594
Class B common stock of $0.10 par value per share
Authorized 30,000 shares; issued and outstanding:
1997 - 9,937; 1996 - 9,985 994 999
Additional paid-in capital 388,797 171,618
Retained earnings 44,886 512,345
Unrealized gain on securities available-for-sale, net -- 7,900
---------- ----------
438,999 695,456
---------- ----------
$1,343,284 1,589,593
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
36
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF EARNINGS
Lennar Corporation and Subsidiaries
Years Ended November 30, 1997, 1996 and 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1997 1996 1995
- ---------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Homebuilding $1,208,570 952,648 665,510
Financial services 89,369 82,577 57,787
Limited-purpose finance subsidiaries 5,143 6,436 7,689
---------- ---------- ----------
Total revenues 1,303,082 1,041,661 730,986
---------- ---------- ----------
COSTS AND EXPENSES:
Homebuilding 1,088,330 861,582 606,980
Financial services 53,837 53,924 38,774
Limited-purpose finance subsidiaries 5,130 6,439 7,687
Corporate general and administrative 15,850 12,396 10,523
Interest 24,979 22,891 13,712
Restructuring charge 29,229 -- --
---------- ---------- ----------
Total costs and expenses 1,217,355 957,232 677,676
---------- ---------- ----------
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 85,727 84,429 53,310
Income taxes 35,122 32,927 20,791
---------- ---------- ----------
Earnings from continuing operations 50,605 51,502 32,519
Earnings from discontinued operations
(net of income taxes of: 1997 - $21,166;
1996 - $23,326 and 1995 - $24,237) 33,826 36,484 37,908
---------- ---------- ----------
Net earnings $ 84,431 87,986 70,427
========== ========== ==========
EARNINGS PER SHARE:
Continuing operations $ 1.34 1.42 .90
Discontinued operations .89 1.01 1.05
---------- ---------- ----------
NET EARNINGS PER SHARE $ 2.23 2.43 1.95
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
37
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Lennar Corporation and Subsidiaries
Years Ended November 30, 1997, 1996 and 1995
(IN THOUSANDS) 1997 1996 1995
- -------------- --------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Earnings from continuing operations $ 50,605 51,502 32,519
Earnings from discontinued operations 33,826 36,484 37,908
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 9,039 12,039 10,274
Equity in earnings of partnerships (32,947) (52,278) (31,203)
Gain on sales of other real estate (25,401) (4,098) (15,776)
Restructuring charge 29,229 -- --
Decrease in deferred income taxes (30,086) (16,067) (8,185)
Changes in assets and liabilities, net of
effects from acquisitions:
(Increase) decrease in receivables (22,468) 1,303 (24,261)
Increase in inventories (106,995) (62,015) (35,581)
(Increase) decrease in financial services' loans
held for sale or disposition (32,358) 21,476 30
Increase in accounts payable and other liabilities 34,708 29,158 13,310
(Decrease) increase in income taxes currently payable (3,411) 13,826 2,014
Other, net 5,194 89 (1,432)
--------- --------- ---------
Net cash provided by (used in) operating activities (91,065) 31,419 (20,383)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Operating properties and equipment:
Additions (70,773) (26,310) (10,053)
Sales 48,178 10,840 21,813
Sales of land held for investment 6,253 11,515 16,365
Decrease (increase) in investments in partnerships 131,777 42,812 (3,701)
Decrease (increase) in financial services' loans held for
investment 745 (6,970) (7,416)
Purchases of investment securities (113,011) (119,525) (57,450)
Receipts from investment securities 158,053 48,059 16,279
Acquisitions of businesses -- (133,792) --
Acquisition of Pacific Greystone Corporation - cash acquired 7,764 -- --
Other, net 2,279 (2,054) (7,082)
--------- --------- ---------
Net cash provided by (used in) investing activities 171,265 (175,425) (31,245)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under revolving credit agreement 7,600 153,700 (4,500)
Net borrowings (repayments) under financial services'
short-term debt 30,641 (45,058) (11,234)
Mortgage notes and other debts payable:
Proceeds from borrowings 164,873 162,022 159,039
Principal payments (212,206) (109,333) (85,377)
Limited-purpose finance subsidiaries:
Principal reduction of mortgage loans and other receivables 9,593 15,226 14,058
Principal reduction of bonds and notes payable (9,289) (14,581) (12,818)
Spin-off transaction - assets distributed, cash (69,035) -- --
Common stock:
Issuance 2,829 1,038 991
Dividends (3,277) (3,492) (3,482)
--------- --------- ---------
Net cash provided by (used in) financing activities (78,271) 159,522 56,677
--------- --------- ---------
Net increase in cash and cash equivalents 1,929 15,516 5,049
Cash and cash equivalents at beginning of year 60,670 45,154 40,105
--------- --------- ---------
Cash and cash equivalents at end of year $ 62,599 60,670 45,154
========= ========= =========
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS) 1997 1996 1995
- -------------- --------- --------- ---------
<S> <C> <C> <C>
Summary of cash and cash equivalent balances:
Homebuilding $ 52,926 43,312 35,549
Financial services 9,673 13,560 8,373
Discontinued operations -- 3,798 1,232
--------- --------- ---------
$ 62,599 60,670 45,154
--------- --------- ---------
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized $ 27,511 31,921 20,815
Cash paid for income taxes $ 86,796 60,329 47,028
Supplemental disclosures of non-cash investing and
financing activities:
Purchases of investment securities financed by sellers $ 23,366 25,619 24,162
Assumption of mortgages related to acquisitions
of properties $ 25,348 17,353 --
Exchange transactions - like kind tax deferred $ 46,000 -- --
Contribution to Lennar Land Partners $ 146,803 -- --
Acquisition of Pacific Greystone Corporation:
Fair value of assets acquired, inclusive of cash of $7,764 $ 394,786 -- --
Goodwill recorded 45,803 -- --
Liabilities assumed (224,516) -- --
--------- --------- ---------
Common stock issued $ 216,073 -- --
--------- --------- ---------
Spin-off of commercial real estate investment and management business:
Assets distributed, non-cash $(959,752) -- --
Assets distributed, cash (69,035) -- --
Liabilities distributed 461,400 -- --
Net unrealized gain on securities available-for-sale distributed 18,774 -- --
--------- --------- ---------
Distribution $(548,613) -- --
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
39
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Lennar Corporation and Subsidiaries
Years Ended November 30, 1997, 1996 and 1995
(IN THOUSANDS) 1997 1996 1995
- ------------- --------- --------- ---------
<S> <C> <C> <C>
COMMON STOCK:
Beginning balance $ 2,594 2,588 2,578
Shares issued - merger with Pacific Greystone Corporation 1,703 -- --
Conversion of Class B common stock 5 -- --
Shares issued under employee stock plans 20 6 10
--------- --------- ---------
Balance at November 30 4,322 2,594 2,588
--------- --------- ---------
CLASS B COMMON STOCK:
Beginning balance 999 999 999
Conversion to common stock (5) -- --
--------- --------- ---------
Balance at November 30 994 999 999
--------- --------- ---------
ADDITIONAL PAID-IN CAPITAL:
Beginning balance 171,618 170,586 169,605
Shares issued - merger with Pacific Greystone Corporation 214,370 -- --
Shares issued under employee stock plans 2,809 1,032 981
--------- --------- ---------
Balance at November 30 388,797 171,618 170,586
--------- --------- ---------
RETAINED EARNINGS:
Beginning balance 512,345 427,851 360,906
Net earnings 84,431 87,986 70,427
Spin-off of commerical real estate investment and management business (548,613) -- --
Cash dividends - common stock (2,493) (2,593) (2,583)
Cash dividends - Class B common stock (784) (899) (899)
--------- --------- ---------
Balance at November 30 44,886 512,345 427,851
--------- --------- ---------
UNREALIZED GAIN ON SECURITIES AVAILABLE-FOR-SALE, NET:
Beginning balance 7,900 5,770 --
Net unrealized gains for the year 10,874 2,130 5,770
Spin-off of commerical real estate investment and management business (18,774) -- --
--------- --------- ---------
Balance at November 30 -- 7,900 5,770
--------- --------- ---------
Total stockholders' equity $ 438,999 695,456 607,794
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Lennar Corporation, all wholly owned subsidiaries and partnerships in which a
controlling interest is held (the "Company"). The Company's investments in
partnerships (and similar entities) in which less than a controlling interest is
held are accounted for by the equity method. All significant intercompany
transactions and balances have been eliminated.
As a result of the Company's spin-off of its commercial real estate investment
and management business, including the Investment Division business segment, the
accompanying financial statements have been restated to reflect the Investment
Division as a discontinued operation (see Note 2).
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
REVENUE RECOGNITION
Revenues from sales of homes are recognized when the sales are closed and title
passes to the new homeowners. Revenues from sales of other real estate
(including the sales of land and operating properties) are recognized when a
significant down payment is received, the earnings process is complete and the
collection of any remaining receivables is reasonably assured.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with a maturity of
three months or less to be cash equivalents. Due to the short maturity period of
the cash equivalents, the carrying amount of these instruments approximates
their fair values. Cash and cash equivalents as of November 30, 1997 and 1996
include $41.9 million and $34.1 million, respectively, of cash held in escrow
for periods of up to three days.
INVENTORIES
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, during the first quarter of 1997. Under this standard,
inventories to be held and used are stated at cost unless the inventory within a
community is determined to be impaired, in which case the impaired inventories
will be written down to fair value. SFAS No. 121 requires companies to evaluate
long-lived assets for impairment based on the undiscounted future cash flows of
the assets. Write-downs of inventories deemed to be impaired will be recorded as
adjustments to the cost basis of the respective inventories. The Company's
adoption of SFAS No. 121 in the first quarter of 1997 did not have any material
affect on the Company's financial position or results of operations. As a result
of the change in use of certain land previously held for development, the
Company recorded an impairment charge of $13.7 million during the fourth quarter
of 1997 (see Note 2).
Prior to the adoption of SFAS No. 121, inventories were stated at the lower of
accumulated costs or net realizable value. Net realizable value was evaluated at
the community level and was defined as the estimated proceeds upon disposition
less all future costs to complete and sell. Inventory adjustments to net
realizable value in 1996 and 1995 were not material.
Start-up costs, construction overhead and selling expenses are expensed as
incurred. Homes held for sale are classified as construction in progress until
delivered. Land, land development, amenities and other costs are accumulated by
specific area and allocated proportionately to homes within the respective area.
INTEREST AND REAL ESTATE TAXES
Interest and real estate taxes attributable to land, homes and operating
properties are capitalized and added to the cost of those properties as long as
the properties are being actively developed. Interest related to homebuilding,
including interest costs relieved from inventories, is included in interest
expense. Interest expense relating to financial services operations and
limited-purpose finance subsidiaries is included in their respective costs and
expenses.
During 1997, 1996 and 1995, interest costs of $62.8 million, $50.1 million and
$35.8 million, respectively (excluding the limited-purpose finance
subsidiaries), were incurred by the Company and $33.5 million, $24.9 million and
$23.4 million, respectively, were capitalized by the Company's homebuilding and
discontinued investment operations. Previously capitalized interest charged to
expense, including amounts charged to discontinued investment operations, in
1997, 1996 and 1995 was $25.7 million, $20.9 million and $17.8 million,
respectively.
OPERATING PROPERTIES AND EQUIPMENT
Operating properties and equipment are recorded at cost. Depreciation is
calculated to amortize the cost of depreciable assets over their estimated
useful lives using the straight-line method. The range of estimated useful lives
for operating properties is 15 to 40 years and for equipment is 2 to 10 years.
41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
INVESTMENT SECURITIES
Effective December 1, 1994, the Company adopted SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities. This standard requires that
debt and equity securities that have determinable fair values be classified as
available-for-sale unless they are classified as held-to-maturity. Securities
classified as held-to-maturity are carried at amortized cost because they are
purchased with the intent and ability to hold to maturity. Available-for-sale
securities are recorded at fair value in the consolidated balance sheets. Any
unrealized holding gains or losses on available-for-sale securities are reported
in a separate component of stockholders' equity, net of tax effects, until
realized.
WARRANTIES
The Company subcontracts virtually all segments of construction to others and
its contracts call for the subcontractors to repair or replace any deficient
items related to their trade. Extended warranties are offered in some
communities through independent homeowner warranty insurance companies. The
costs of these extended warranties are fixed to the Company and are expensed in
the period the homes are delivered.
GOODWILL
Goodwill represents the excess of the purchase price over the fair value of net
assets acquired and is amortized by the Company over a 20-year period on a
straight-line basis. Accumulated amortization at November 30, 1997 was $0.2
million. In the event that facts and circumstances indicated that the carrying
value of goodwill may be impaired, an evaluation of recoverability would be
performed. If an evaluation is required, the estimated future undiscounted cash
flows associated with the goodwill would be compared to the carrying amount to
determine if a write-down to fair value or discounted cash flow is required. No
impairment existed at November 30, 1997. Goodwill is recorded in other assets in
the consolidated balance sheets.
INCOME TAXES
Income taxes are accounted for in accordance with SFAS No. 109, Accounting for
Income Taxes. Under SFAS No. 109, deferred tax assets and liabilities are
determined based on differences between financial reporting and tax bases of
assets and liabilities, and are measured by using enacted tax rates expected to
apply to taxable income in the years in which those differences are expected to
reverse.
STOCK-BASED COMPENSATION
The Company grants stock options to certain employees for a fixed number of
shares with an exercise price not less than the fair value of the shares at the
date of grant. The Company accounts for the stock option grants in accordance
with Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock
Issued to Employees. No compensation expense is recognized because all stock
options granted have exercise prices equal to the market value of the Company's
stock on the date of the grant. The impact of the pro forma disclosures required
by SFAS No. 123, Accounting for Stock-Based Compensation, is included in Note
13.
NET EARNINGS PER SHARE
Net earnings per share is calculated by dividing net earnings
by the weighted average number of the total of common shares, Class B common
shares and common share equivalents outstanding during each year. The weighted
average number of shares outstanding was 37,918,000, 36,223,000 and 36,100,000
in 1997, 1996 and 1995, respectively.
FINANCIAL SERVICES
Mortgage loans held for sale or disposition by the Financial Services Division
are recorded at the lower of cost or market, as determined on an aggregate
basis. Premiums and discounts recorded on these loans are presented as an
adjustment to the carrying amount of the loans and are not amortized.
This division enters into forward sales and option contracts to protect the
value of loans held for sale or disposition from increases in market interest
rates. Adjustments are made to these loans based on changes in the market value
of these hedging contracts (see Note 14).
When the division sells loans or mortgage-backed securities in the secondary
market, a gain or loss is recognized to the extent that the sales proceeds
exceed, or are less than, the book value of the loans or the securities. Loan
origination fees, net of direct origination costs, are deferred and recognized
as a component of the gain or loss when loans are sold.
The division generally retains the servicing on the loans and mortgage-backed
securities it sells and recognizes servicing fee income as those services are
performed.
On December 1, 1996, the Company adopted SFAS No. 122, Accounting for Mortgage
Servicing Rights. SFAS No. 122, among other provisions, requires mortgage loan
servicing rights to be recognized as separate assets from the related loans.
Upon origination of a mortgage loan, the book value of the mortgage loan is
allocated to the mortgage servicing right and to the loan (without the mortgage
servicing right) based on its estimated relative fair value, provided there is a
plan to sell or securitize the related loan. The adoption of SFAS No. 122
resulted in an increase of $1.5 million of after-tax net earnings during the
year ended November 30, 1997. In accordance with SFAS No. 122, prior period
financial statements have not been restated. On January 1, 1997, the Company
adopted SFAS No. 125, Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities, which amends SFAS No. 122, and
42
<PAGE>
requires, among other things, that the book value of loans be allocated between
the mortgage servicing right and the related loan at the time of sale or
securitization, if servicing is retained.
Mortgage servicing rights are periodically evaluated for impairment based on the
fair value of these rights. The fair value of mortgage servicing rights is
determined by discounting the estimated future cash flows using a discount rate
commensurate with the risks involved. This method of valuation incorporates
assumptions that market participants would use in their estimates of future
servicing income and expense, including assumptions about prepayment, default
and interest rates. For purposes of measuring impairment, the loans underlying
the mortgage servicing rights are stratified on the basis of interest rate and
type. The amount of impairment is the amount by which the mortgage servicing
rights, net of accumulated amortization, exceed their fair value by strata.
Impairment, if any, is recognized through a valuation allowance and a charge to
current operations. At November 30, 1997 the book value and fair value of
mortgage servicing rights was $2.5 million and $3.6 million, respectively. A
valuation allowance related to its mortgage servicing rights was not required at
or for the year ended November 30, 1997.
Mortgage servicing rights are amortized in proportion to, and over the period
of, the estimated net servicing income of the underlying mortgages.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
Earnings Per Share. SFAS No. 128, which supersedes APB Opinion No. 15, requires
a dual presentation of basic and diluted earnings per share on the face of the
statement of earnings. Basic earnings per share excludes dilution and is
computed by dividing income or loss attributable to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted earnings per share is computed similarly
to fully diluted earnings per share under APB Opinion No. 15. SFAS No. 128 is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods; earlier application is not permitted. When
adopted, all prior-period earnings per share data are required to be restated.
The Company is required to implement SFAS No. 128 during the quarter ending
February 28, 1998. The Company is in the process of determining the impact of
the adoption of SFAS No. 128.
Also in February 1997, the Financial Accounting Standards Board issued SFAS No.
129, Disclosure of Information About Capital Structure. SFAS No. 129, which
applies to all entities that have issued securities, requires in summary form,
the pertinent rights and privileges of the various securities outstanding.
Examples of information that shall be disclosed are dividends and liquidation
preferences, participation rights, call prices and dates, conversion or exercise
prices or rates and pertinent dates, sinking-fund requirements, unusual voting
rights and significant terms of contracts to issue additional shares. SFAS No.
129 is effective for financial statements issued for periods ending after
December 15, 1997.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
Reporting Comprehensive Income. SFAS No. 130 requires that all components of
comprehensive income be reported on one of the following: (1) the statement of
earnings, (2) the statement of stockholders' equity or (3) a separate statement
of comprehensive income. Comprehensive income is comprised of net income and all
changes to stockholders' equity, except those due to investments by owners
(changes in additional paid-in capital) and distributions to owners (dividends).
This statement is effective for fiscal years beginning after December 15, 1997.
Additionally in June 1997, the Financial Accounting Standards Board issued SFAS
No. 131, Disclosures About Segments of an Enterprise and Related Information.
SFAS No. 131 requires public companies to report certain information about their
operating segments in their annual financial statements and quarterly reports
issued to shareholders. It also requires public companies to report certain
information about their products and services, the geographic areas in which
they operate and their major customers. This statement is effective for fiscal
years beginning after December 15, 1997.
RECLASSIFICATION
Certain prior year amounts in the consolidated financial statements have been
reclassified to conform with the 1997 presentation.
2. SPIN-OFF OF COMMERCIAL REAL ESTATE INVESTMENT
AND MANAGEMENT BUSINESS AND FORMATION OF
LENNAR LAND PARTNERS
On June 10, 1997, the Company's Board of Directors approved a plan to spin-off
the commercial real estate investment and management business consisting of the
Investment Division, the portions of the Financial Services Division involved in
commercial mortgage lending and investments (but not the portions of its
Financial Services Division which are involved in lending to homeowners,
servicing residential mortgages or providing services to homebuyers or
homeowners) and certain assets of the Company's Homebuilding Division utilized
in related businesses. The spin-off was conducted through the distribution of
the stock of LNR Property
43
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
Corporation ("LNR") pursuant to a separation and distribution agreement that
provided that for each existing share of the Company, the shareholders received
one share of common stock of LNR, with the right during a limited period after
the spin-off to exchange that common stock for Class B common stock of LNR. On
August 20, 1997, the Company received a ruling from the Internal Revenue Service
that the spin-off would not result in taxes to the Company or its shareholders.
The spin-off, in the form of a tax-free distribution, was completed effective
October 31, 1997 and was recorded as an adjustment to stockholders' equity.
At the time of the spin-off transaction, the Company and LNR formed a general
partnership ("Lennar Land Partners") to acquire, develop and sell land. The
Company and LNR contributed properties to Lennar Land Partners in exchange for
50% general partnership interests in Lennar Land Partners. Pursuant to a
management agreement, the Company manages the day-to-day operations of Lennar
Land Partners and receives a management fee. The partnership agreement for
Lennar Land Partners permits the Company and LNR to (i) engage in business
activities which conflict with or are in direct competition with Lennar Land
Partners and (ii) acquire properties from, or sell properties to, Lennar Land
Partners. The Company has options to purchase a portion of the assets originally
contributed to Lennar Land Partners and may be granted options to purchase all
or portions of properties which subsequently are acquired by Lennar Land
Partners. The formation of Lennar Land Partners was effective as of October 31,
1997.
The Company's consolidated financial statements have been restated to reflect
the spin-off of the Investment Division business segment as a discontinued
operation. Accordingly, the revenues and expenses and assets and liabilities
have been excluded from the respective captions in the consolidated statements
of earnings and consolidated balance sheets, and have been reported through the
date of disposition as "earnings from discontinued operations" and "net
investment in discontinued operations" for all periods presented.
The components of net investment in discontinued operations at October 31, 1997,
the date of disposition, and November 30, 1996 are as follows:
OCTOBER 31, NOVEMBER 30,
(IN THOUSANDS) 1997 1996
- -------------- ----------- ------------
Cash and cash equivalents $ 69,035 3,798
Receivables, net 47,348 11,597
Land held for investment 57,505 67,171
Operating properties and
equipment, net 218,752 211,982
Investments in partnerships 203,149 98,821
Other assets 147,792 68,621
Accounts payable and
other liabilities (64,843) (28,094)
Morgtage notes and other
debts payable (258,300) (148,339)
---------- ---------
Net investment in
discontinued operations $ 420,438 285,557
========= =========
The components of earnings from discontinued operations are as follows:
YEARS ENDED NOVEMBER 30,
(IN THOUSANDS) 1997 1996 1995
-------- -------- --------
Revenues:
Rental income $ 51,254 56,686 49,439
Equity in earnings of
partnerships 21,071 36,382 30,852
Management fees 13,343 18,229 10,274
Gain on sales of real estate, net 20,401 4,098 15,775
Other 18,418 12,278 10,744
-------- -------- --------
Total revenues 124,487 127,673 117,084
Costs and expenses 56,099 59,721 49,396
-------- -------- --------
Operating earnings 68,388 67,952 67,688
Interest 13,396 8,142 5,543
-------- -------- --------
Earnings from discontinued
operations before income taxes 54,992 59,810 62,145
Income taxes 21,166 23,326 24,237
-------- -------- --------
Earnings from
discontinued operations $ 33,826 36,484 37,908
======== ======== ========
Earnings from discontinued operations include the results of operations
through October 31, 1997, the measurement and disposal dates. Accordingly, the
Company did not recognize a loss on disposal of the discontinued Investment
Division. During the fourth quarter of 1997, the Company recorded a
restructuring charge to continuing operations for the estimated costs of the
spin-off and formation of Lennar Land Partners. The restructuring charge was
$29.2 million and consisted of expenses incurred for professional fees,
transaction costs, the write-off of deferred loan costs on mortgages and notes
which were paid off to effect the spin-off and an impairment charge resulting
from the change in use of the land previously held for development or investment
that was contributed to Lennar Land Partners. The impairment charge, which
approximated $13.7 million, was a result of the change from the Company's
previous intended use of the property for development and sale of homes to the
new
44
<PAGE>
intended use in Lennar Land Partners where the land will be developed for sale
as lots. No impairment charge was recorded for the portions of the land that the
Company has options to purchase from Lennar Land Partners.
In addition to the Investment Division business segment, assets and liabilities
of the Homebuilding and Financial Services Divisions utilized in the commercial
real estate investment and management business were also distributed in the
spin-off of LNR. The components at October 31, 1997, the date of spin-off, and
November 30, 1996, are as follows:
OCTOBER 31, NOVEMBER 30,
(IN THOUSANDS) 1997 1996
HOMEBUILDING DIVISION: ----------- ------------
ASSETS:
Land held for development $ 17,716 21,006
Investments in partnerships 4,093 2,610
Other assets 9,618 10,067
-------- --------
$ 31,427 33,683
-------- --------
LIABILITIES:
Accounts payable and
other liabilities $ 451 524
======== ========
FINANCIAL SERVICES DIVISION:
Assets:
Loans held for sale or disposition, net $ 50,853 51,776
Investment securities
available-for-sale 188,248 193,869
Loans and mortgage-backed
securities held for investment, net 497 790
Investments in partnerships 9,450 11,428
Other 4,731 2,182
-------- --------
$253,779 260,045
-------- --------
LIABILITIES:
Notes and other debts payable $126,539 223,048
Other 11,267 10,036
-------- --------
$137,806 233,084
======== ========
Other assets of the Financial Services Division include an interest of the
limited-purpose finance subsidiaries that were distributed as part of the
spin-off of LNR (see Note 11).
The following revenues and expenses are associated with the assets and
liabilities of the Financial Services Division distributed in the spin-off of
LNR:
YEARS ENDED NOVEMBER 30,
(IN THOUSANDS) 1997 1996 1995
- -------------- -------- ------ ------
Revenues $ 39,913 37,466 17,838
-------- ------ ------
Expenses $ 15,518 14,980 9,758
======== ====== ======
The revenues and expenses associated with the assets and liabilities of the
Homebuilding Division distributed in the spin-off of LNR are not significant for
the periods presented.
3. ACQUISITIONS
On June 10, 1997, the Company's Board of Directors approved a plan to acquire
Pacific Greystone Corporation ("Greystone") through a merger in which the
shareholders of the Company received one share of common stock or Class B common
stock of the corporation which survives the merger for each share of common
stock or Class B common stock of the Company held by them, and the shareholders
of Greystone received 1.138 shares of common stock of the surviving corporation
for each outstanding share of Greystone common stock. The surviving corporation
was renamed Lennar Corporation. This merger resulted in the Company's
shareholders owning approximately 68% of the surviving corporation and Greystone
shareholders owning the remaining 32% of that corporation. The merger became
effective after the distribution of the stock of LNR to which the Company
transferred its commercial real estate investment and management business and
the Greystone shareholders did not receive any interest in LNR. The merger was
conditioned upon the distribution taking place. Such merger became effective on
October 31, 1997. Total consideration for this acquisition was $216.1 million,
of which $45.8 million has been assigned to the excess of the purchase price
over the fair value of net assets acquired and has been recorded as goodwill.
Goodwill is being amortized on a straight-line basis over 20 years. The
consideration consisted of $213.7 million (approximately 17 million shares) for
newly issued common stock and $2.4 million for Greystone stock options which
vested at the acquisition date.
The Company accounted for the merger using the purchase method of accounting and
the results of Greystone's operations have been included in the Company's
consolidated statements of earnings since November 1, 1997. Revenues and net
earnings on an unaudited pro forma basis would have increased by $580.6 million
and $28.5 million, respectively, during 1997 and by $423.5 million and $20.0
million, respectively, during 1996 had the acquisition occurred on December 1,
1995. The pro forma earnings per share would be $2.16 in 1997 and $2.04 in 1996.
For additional pro forma information to present 1997 and 1996 on a more
comparable basis and to give effect to the spin-off transaction and the
formation of Lennar Land Partners, refer to the unaudited supplemental pro forma
financial information attached to these consolidated financial statements.
On December 29, 1995, the Company purchased the assets and operations of the
residential business of Houston-based Village Builders and Friendswood
Development Company, real estate subsidiaries of Exxon Corporation, for $110.5
million in cash (substantially all of which was allocated to inventories). The
Company financed this transaction through borrowings under its revolving credit
agreement. Revenues
45
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
for 1995 would have increased to approximately $1.1 billion on an unaudited pro
forma basis if the acquisition had occurred on December 1, 1994. The pro forma
effect of the acquisition on 1996 was not considered significant since the
acquisition occurred near the beginning of the year. The acquisition of these
assets and operations was accounted for using the purchase method of accounting.
During 1995, the Company acquired virtually all of the secured debt of Bramalea
California, Inc. ("BCI") for approximately $50 million after BCI had filed for
Chapter 11 bankruptcy protection. The Company acquired this debt, at a
significant discount from its face amount, in order to convert the debt into an
ownership interest when BCI was reorganized out of bankruptcy. During the third
quarter of 1996, the bankruptcy plan of BCI was confirmed and the Company
completed its acquisition. The total purchase price for the BCI assets (which
principally consisted of inventories) was approximately $60 million. This
included $50 million paid to acquire BCI's debt and approximately $10 million of
advances to BCI subsequent to the purchase of its debt. Substantially all of the
purchase price was allocated to a deferred tax benefit, which will be realized
as the Company disposes of the assets. BCI had no significant operations in 1995
and 1996 through the date of acquisition. The acquisition was accounted for
using the purchase method of accounting.
4. BUSINESS SEGMENTS
The Company has two business segments: Homebuilding and Financial Services. The
limited-purpose finance subsidiaries are not considered a business segment and
are not included in the following tables. See Note 2 on the discontinued
Investment Division business segment.
HOMEBUILDING
Homebuilding operations include the construction and sale of single-family and
multi-family homes. These activities also include the purchase, development and
sale of residential land. See Note 2 regarding portions of the Homebuilding
Division that were distributed as part of the spin-off of the Company's
commercial real estate investment and management business. The following table
sets forth financial information relating to the homebuilding operations:
YEARS ENDED NOVEMBER 30,
(IN THOUSANDS) 1997 1996 1995
- -------------- ---------- ---------- ----------
Revenues:
Sales of homes $1,130,989 894,663 646,986
Other 77,581 57,985 18,524
---------- ---------- ----------
Total revenues 1,208,570 952,648 665,510
---------- ---------- ----------
Costs and expenses:
Cost of homes sold 907,691 723,150 523,028
Cost of other revenues 50,633 39,131 13,948
Selling, general and
administrative 130,006 99,301 70,004
---------- ---------- ----------
Total costs and expenses 1,088,330 861,582 606,980
---------- ---------- ----------
Operating earnings $ 120,240 91,066 58,530
---------- ---------- ----------
Identifiable assets $1,110,002 813,472 541,266
---------- ---------- ----------
Depreciation and
amortization $ 2,085 3,167 1,842
========== ========== ==========
FINANCIAL SERVICES
Lennar Financial Services, Inc.'s subsidiaries provide mortgage financing, title
insurance and closing services for Lennar homebuyers and others; acquire,
package and resell mortgage loans and mortgage-backed securities; perform
mortgage loan servicing activities and provide cable television and alarm
monitoring services to residents of Lennar communities and others. This division
also invested in issues of rated portions of commercial real estate
mortgage-backed securities for which Lennar's discontinued Investment Division
business segment was the special servicer and an investor in the unrated portion
of those securities. See Note 2 regarding certain assets and portions of the
operations of the Financial Services Division that were distributed as part of
the spin-off of the Company's commercial real estate investment and management
business. The following table sets forth financial information relating to the
financial services operations:
YEARS ENDED NOVEMBER 30,
(IN THOUSANDS) 1997 1996 1995
- -------------- -------- -------- --------
Revenues $ 89,369 82,577 57,787
Costs and expenses 53,837 53,924 38,774
Intercompany
interest expense* 364 233 2,313
-------- -------- --------
Operating earnings $ 35,168 28,420 16,700
-------- -------- --------
Identifiable assets $156,988 382,083 353,809
-------- -------- --------
Depreciation and
amortization $ 594 1,416 2,196
======== ======== ========
*Intercompany interest expense is reflected above to show interest expense on
intercompany debt of the financial services operations.
46
<PAGE>
5. RESTRICTED CASH
Cash includes restricted deposits of $0.7 million and $1.0 million as of
November 30, 1997 and 1996, respectively. These balances are comprised primarily
of escrow deposits held related to sales of homes.
6. RECEIVABLES
NOVEMBER 30,
(IN THOUSANDS) 1997 1996
- -------------- -------- --------
Accounts receivable $ 21,077 7,324
Receivable from LNR 12,607 --
Mortgages and notes receivable 2,175 10,456
-------- --------
35,859 17,780
Allowance for doubtful accounts (1,213) (1,369)
-------- --------
$ 34,646 16,411
======== ========
The receivable from LNR bears interest at a rate of 10% and was repaid during
December 1997.
7. PARTNERSHIPS
Summarized financial information on a combined 100% basis related to the
Company's significant Homebuilding and Financial Services Divisions'
partnerships and other similar entities (collectively the "Partnerships")
accounted for by the equity method are as follows:
NOVEMBER 30,
(IN THOUSANDS) 1997 1996
- -------------- -------- --------
ASSETS:
Cash $ 5,947 17,518
Land under development 338,074 148,797
Portfolio investments -- 116,906
Other assets 60,547 28,376
-------- --------
$404,568 311,597
-------- --------
LIABILITIES AND EQUITY:
Accounts payable and
other liabilities $ 37,701 20,329
Notes and mortgages payable 163,608 104,653
Equity of:
The Company 108,064 52,008
Others 95,195 134,607
-------- --------
$404,568 311,597
======== ========
Portfolio investments consisted primarily of mortgage loans and business loans
collateralized by real property, as well as commercial properties and land held
for investment or sale. Such portfolio investments related to certain
partnerships that were distributed as part of the spin-off of the Company's
commercial real estate investment and management business.
YEARS ENDED NOVEMBER 30,
(IN THOUSANDS) 1997 1996 1995
- -------------- -------- -------- --------
Revenues $227,517 170,081 148,972
Costs and expenses 173,951 80,191 27,115
-------- -------- --------
Pre-tax earnings of
Partnerships $ 53,566 89,890 121,857
-------- -------- --------
The Company's share of
pre-tax earnings $ 11,876 15,674 351
======== ======== ========
At November 30, 1997, the Company's equity interest in each of these
Partnerships was 50%. At November 30, 1997, these Partnerships are primarily
involved in the acquisition and development of residential land. Prior to the
spin-off of the commercial real estate investment and management business, the
Partnerships were also involved in the acquisition and management of portfolios
of real estate loans and assets. The Company shares in the profits and losses of
these Partnerships and, when appointed the manager of the Partnerships, receives
fees for the management and disposition of the assets. In most cases, when the
Company is involved in a partnership, it is through a subsidiary which is the
general partner and whose only asset is its interest in the partnership. Certain
of the Partnerships have partnership interests in other Partnerships. The
outstanding debt of four of these Partnerships, including two second-tier
Partnerships, amounting to $123.0 million at November 30, 1997, is guaranteed by
the Company.
8. OPERATING PROPERTIES AND EQUIPMENT
NOVEMBER 30,
(IN THOUSANDS) 1997 1996
- -------------- -------- --------
Community recreational facilities $ 4,341 4,863
Offices and sales centers 125 2,149
Furniture, fixtures and equipment 10,395 6,590
-------- --------
14,861 13,602
Accumulated depreciation (6,263) (4,272)
-------- --------
$ 8,598 9,330
======== ========
47
<PAGE>
<TABLE>
<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
9. MORTGAGE NOTES AND OTHER DEBTS PAYABLE
November 30,
(IN THOUSANDS) 1997 1996
- -------------- -------- --------
<S> <C> <C>
Secured without recourse to the Company:
Mortgage notes on land with fixed interest rates from
0% to 10.0% due through 2006 $ 12,485 736
Other secured debt:
Term loan notes with floating interest rates, secured
by certain real estate -- 60,000
Mortgage notes on land -- 21,343
Unsecured revolving credit notes payable with floating
interest rates 376,500 257,900
Senior unsecured notes payable 137,812 --
Other notes payable with floating interest rates (9.3%
to 10.3% at November 30, 1997), due through 2001 506 21,354
-------- --------
$527,303 361,333
======== ========
</TABLE>
During 1997, the Company obtained unsecured revolving credit facilities
(together the "New Facilities") in the aggregate amount of $550.0 million, which
may be used to refinance existing indebtedness, for working capital, for
acquisitions and for general corporate purposes. The New Facilities agreement is
with 19 financial institutions. Of the total New Facilities, $450.0 million was
structured as a five-year revolving credit facility maturing June 30, 2002. The
second facility (up to $100.0 million) was structured as a revolving credit
facility maturing 364 days after the closing date of the facility (October 31,
1997), subject to extension for two one-year periods at the request of the
Company and with the consent of the lenders. The Company may elect, at the
maturity of the second facility, to convert borrowings under that facility to a
term loan which amortizes in equal quarterly amounts and matures on June 30,
2002. At November 30, 1997, the total amounts outstanding under the New
Facilities were $376.5 million. Subsequent to November 30, 1997, the Company
amended the New Facilities, increasing the amount to $600.0 million. Certain
Financial Services Division subsidiaries are co-borrowers under this facility.
At November 30, 1997, no borrowings were allocated to this division. The
weighted average interest rate at November 30, 1997 was 7.3%.
During 1996, the Company amended its unsecured revolving credit agreement and
increased the amount to $450.0 million. The term of the agreement was for five
years and the agreement was with 14 financial institutions. Certain Financial
Services Division subsidiaries were co-borrowers under this facility and at
November 30, 1996 their allocated borrowings under this agreement amounted to
$67.0 million. The total amount outstanding under the Company's revolving credit
agreement at November 30, 1996 was $324.9 million. The interest rate under this
agreement was 6.4% at November 30, 1996. This credit agreement was refinanced
during November 1997.
The Company utilizes interest rate swap agreements to manage interest costs and
hedge against risks associated with changing interest rates (see Note 14).
Previously, Greystone Homes, Inc. a wholly owned subsidiary of Greystone, sold
in a private placement $125.0 million aggregate principal amount of 10.75%
Senior Notes (the "Notes") and were subsequently registered with the Securities
and Exchange Commission. In conjunction with the Company's acquisition of
Greystone (see Note 3), such Notes were recorded at fair value at the
acquisition date ($138.2 million) to reflect an effective rate of 7.75%. The
premium is being amortized on an effective yield basis. The Notes are due March
1, 2004 with interest payable semi-annually. The Company may, at its option,
redeem the Notes, in whole or in part, at any time on or after March 1, 1999,
initially at 105.375% of the principal amount thereof, declining to 100% of the
principal amount thereof on or after March 1, 2001. The Notes are general
unsecured senior obligations, ranking pari passu in right of payment with all
existing and future unsecured indebtedness that is not, by its terms, expressly
subordinated in right of payment to the Notes. The Notes contain certain
restrictive covenants including limitations on additional indebtedness. The
indentures with respect to the Notes limit the ability of Greystone Homes, Inc.
to pay cash dividends or make loans and advances to the Company. Under the terms
of the indentures, Greystone Homes, Inc. could pay cash dividends or make loans
to the Company in an amount of $50.6 million at November 30, 1997. The Notes are
fully and unconditionally guaranteed by the Company.
The minimum aggregate principal maturities of mortgage notes and other debts
payable during the five years subsequent to November 30, 1997 are as follows:
1998 - $9.9 million, 1999 - $1.1 million and 2002 - $376.5 million. The
remaining principal obligations are due subsequent to November 30, 2002. All of
the notes secured by land contain collateral release provisions for accelerated
payment which may be made as necessary to maintain construction schedules.
48
<PAGE>
10. FINANCIAL SERVICES
The assets and liabilities related to the Company's financial services
operations (as described in Note 4) are summarized as follows:
NOVEMBER 30,
(IN THOUSANDS) 1997 1996
- -------------- ---- ----
Assets:
Loans held for sale or disposition, net $106,020 127,606
Investment securities available-for-sale -- 193,869
Loans and mortgage-backed securities
held for investment, net 19,600 21,323
Investments in partnerships -- 11,428
Cash and receivables, net 14,993 22,224
Servicing acquisition costs 2,471 1,201
Other 13,904 4,432
-------- -------
$156,988 382,083
======== =======
Liabilities:
Notes and other debts payable $86,936 271,314
Other 21,570 20,292
-------- -------
$108,506 291,606
======== =======
See Note 2 regarding certain assets and portions of the operations of the
Financial Services Division that were distributed as part of the spin-off of the
Company's commercial real estate investment and management business.
Investments in partnerships consisted primarily of a 15.1% equity interest,
acquired in the fourth quarter of 1995, in a partnership in which the
discontinued Investment Division business segment also owned a 9.9% equity
interest. The Financial Services Division's investment was distributed as part
of the spin-off of the Company's commercial real estate investment and
management business.
The Financial Services Division finances its activities through various lines of
credit or borrowings from Lennar Corporation, when, on a consolidated basis, the
Company can minimize its cost of funds.
A warehouse line of credit is used to fund the division's mortgage loan
activities. Borrowings under this agreement were $86.9 million and $48.3 million
at November 30, 1997 and 1996, respectively, and were collateralized by mortgage
loans with outstanding principal balances of $87.6 million and $53.9 million,
respectively, and by servicing rights in both years of approximately $1.0
billion of loans serviced by the Financial Services Division. There are several
interest rate pricing options which fluctuate with market rates. The borrowing
rate has been reduced to the extent that custodial escrow balances exceeded
required compensating balance levels. The effective interest rate on this
agreement at November 30, 1997 was 1.1%. The warehouse line of credit facility
totaling $125.0 million was reduced to $110.0 million by the Company and
extended until April 30, 1998.
The division had two revolving lines of credit to finance certain
mortgage-backed securities which provide for aggregate borrowings of $75.0
million, expiring in 1998. Borrowings under these agreements were $74.4 million
at November 30, 1996 and were collateralized by mortgage-backed securities with
an aggregate carrying value of $114.9 million. The weighted average interest
rate of these borrowings at November 30, 1996 was 6.2%. Such mortgage-backed
securities and related revolving lines of credit were distributed as part of the
spin-off of the Company's commercial real estate investment and management
business.
During 1996, the division entered into two revolving credit agreements to
finance certain commercial assets which provided for borrowings of $60.0
million, expiring in 1997 and 1998. Borrowings under these agreements were $23.1
million at November 30, 1996 and were collateralized by loans held for sale and
investments in and advances to partnerships with an aggregate carrying value of
$33.3 million. The weighted average interest rate of these borrowings at
November 30, 1996 was 6.5%. Such commercial assets and related revolving credit
agreements were distributed as part of the spin-off of the Company's commercial
real estate investment and management business.
The division also utilized financing arrangements to sell mortgage-backed
securities under agreements to repurchase them with securities dealers in the
business of providing such financing. At November 30, 1996, repurchase
agreements outstanding totaled $58.5 million and had a weighted average
borrowing rate of 6.2%, which expire in 1998. The repurchase agreements were
collateralized by mortgage-backed securities with an aggregate carrying value of
$76.2 million at November 30, 1996. Such mortgage-backed securities sold under
agreements to repurchase were distributed as part of the spin-off of the
Company's commercial real estate investment and management business.
Certain subsidiaries of the Financial Services Division are co-borrowers in the
Company's revolving credit facility (see Note 9). As of November 30, 1996, the
division's allocated borrowings amounted to $67.0 million. No borrowings were
allocated to the division as of November 30, 1997.
Certain of the division's servicing agreements require it to pass through
payments on loans even though it is unable to collect such payments and, in
certain instances, be responsible for losses incurred through foreclosure.
Exposure to this credit risk is minimized through geographical diversification
and review of the mortgage loan servicing created or purchased. Management
believes that it has provided adequate reserves for expected losses based on the
fair value of the underlying collateral. Provisions for these losses have not
been material to the Company.
49
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
11. LIMITED-PURPOSE FINANCE SUBSIDIARIES
In prior years, limited-purpose finance subsidiaries of the Financial Services
Division placed mortgages and other receivables as collateral for various
long-term financings. These limited-purpose finance subsidiaries pay the
principal of, and interest on, these financings primarily from the cash flows
generated by the related pledged collateral which includes a combination of
mortgage notes, mortgage-backed securities and funds held by trustee.
At November 30, 1997 and 1996, the balances outstanding for the bonds and notes
payable were $47.5 million and $56.5 million, respectively. The borrowings
mature in years 2013 through 2018 and carry interest rates ranging from 7.2% to
14.3%. The annual principal repayments are dependent upon collections on the
underlying mortgages, including prepayments, and cannot be reasonably
determined. As part of the spin-off of the Company's commercial real estate
investment and management business, LNR received an interest in the assets of
the limited-purpose finance subsidiaries to the extent such assets exceeded the
related liabilities. This interest amounted to $3.0 million at the date of the
spin-off.
12. INCOME TAXES
The provisions (benefits) for income taxes consist of the following:
YEARS ENDED NOVEMBER 30,
(IN THOUSANDS) 1997 1996 1995
- ------------- ------- ------ ------
Current:
Federal $75,769 65,635 47,857
State 7,239 8,604 6,787
------- ------ ------
83,008 74,239 54,644
------- ------ ------
Deferred:
Federal (26,043) (17,591) (9,982)
State (677) (395) 366
------- ------- ------
(26,720) (17,986) (9,616)
------- ------- ------
Total expense $56,288 56,253 45,028
------- ------- ------
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of the assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The tax effects
of significant temporary differences of the Company's deferred tax assets and
liabilities are as follows:
NOVEMBER 30,
(IN THOUSANDS) 1997 1996
- ------------- ------- -------
Deferred tax assets:
Acquisition adjustments $56,823 51,366
Reserves and accruals 36,003 22,812
Net operating loss and capital loss
carryforwards, tax effected 6,340 --
Investment securities income -- 14,629
Investments in partnerships -- 10,928
Other 2,882 2,308
------- -------
Deferred tax assets 102,048 102,043
Less: valuation allowance (7,659) --
------- -------
Total deferred tax assets, net 94,389 102,043
------- -------
Deferred tax liabilities:
Capitalized expenses 15,397 30,393
Deferred gains 1,061 20,534
Investments in partnerships 2,813 --
Installment sales 3,397 3,898
Unrealized gain on securities
available-for-sale -- 3,081
Other 2,467 4,368
------- ------
Total deferred tax liabilities 25,135 62,274
------- ------
Net deferred tax asset $69,254 39,769
------- ------
The Homebuilding Division's net deferred tax asset amounting to $61.3 million
and $29.7 million at November 30, 1997 and 1996, respectively, is included in
other assets in the consolidated balance sheets. The discontinued Investment
Division's net deferred tax asset amounting to $9.9 million at November 30, 1996
was included in net investment in discontinued operations in the consolidated
balance sheets.
At November 30, 1997 and 1996, the Financial Services Division and the
limited-purpose finance subsidiaries had net deferred tax assets of $8.0 million
and $0.2 million, respectively.
SFAS No. 109 requires the reduction of the deferred tax asset by a valuation
allowance if, based on the weight of available evidence, it is more likely than
not a portion or all of the deferred tax asset will not be realized. For the
year ended November 30, 1997, the Company established a $7.7 million valuation
allowance for net operating loss and capital loss carryforwards and certain
acquisition adjustments which currently are not expected to be realized. Based
on management's assessment, it is more likely than not that the net deferred tax
asset will be realized through future taxable earnings.
A reconciliation of the statutory rate with the effective tax rate follows:
% OF PRE-TAX INCOME
----------------------------
1997 1996 1995
---- ---- ----
Statutory rate 35.0 35.0 35.0
State income taxes, net of
federal income tax benefit 4.0 4.0 4.0
Other 1.0 -- --
---- ---- ----
Effective rate 40.0 39.0 39.0
==== ==== ====
50
<PAGE>
13. CAPITAL STOCK
COMMON STOCK
The Company has two classes of common stock. The common stockholders have one
vote for each share owned in matters requiring stockholder approval and during
1997 received quarterly dividends of $0.025 per share prior to the spin-off and
$0.0125 per share subsequent to the spin-off and during 1996 received quarterly
dividends of $0.025 per share. Class B common stockholders have ten votes for
each share of stock owned and during 1997 received quarterly dividends of
$0.0225 per share prior to the spin-off and $0.01125 per share subsequent to the
spin-off and during 1996 received quarterly dividends of $0.0225 per share. As
of November 30, 1997, Mr. Leonard Miller, Chairman of the Board of the Company,
owned or controlled 9.9 million shares of Class B common stock, which represents
approximately 69% voting control of the Company.
STOCK OPTION PLANS
The Lennar Corporation 1980 Stock Option Plan ("1980 Plan") expired on December
8, 1990. However, under the terms of the 1980 Plan, certain options granted
prior to the plan termination date were still outstanding during the periods
presented. The last options granted under the 1980 Plan were exercised in
November 1995.
The Lennar Corporation 1991 Stock Option Plan ("1991 Plan") provides for the
granting of options to certain key employees of the Company to purchase shares
at prices not less than market value as of the date of the grant. No options
granted under the 1991 Plan may be exercisable until at least six months after
the date of the grant. Thereafter, exercises are permitted in varying
installments, on a cumulative basis. Each stock option granted will expire on a
date determined at the time of the grant, but not more than 10 years after the
date of the grant.
The Lennar Corporation 1997 Stock Option Plan ("1997 Plan") provides for the
granting of options or stock appreciation rights to certain key employees of the
Company to purchase shares at prices not less than market value as of the date
of the grant. No options granted under the 1997 Plan may be exercisable until at
least six months after the date of the grant. Thereafter, exercises are
permitted in varying installments, on a cumulative basis. Each stock option
granted will expire on a date determined at the time of the grant, but not more
than 10 years after the date of the grant. The 1997 Plan was approved by the
Company's Board of Directors and is subject to approval by the Company's
stockholders. No stock options or stock appreciation rights granted under the
1997 Plan can be exercised until the 1997 Plan is approved by the Company's
stockholders.
A summary of the Company's stock option activity for the years ended November
30, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------- -------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
STOCK EXERCISE STOCK EXERCISE STOCK EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- --------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year 1,056,350 $ 12.65 995,250 $11.15 1,011,400 $10.49
Granted 972,500 $ 19.52 126,500 $23.74 78,500 $16.31
Forfeited:
Spin-off transaction (249,150) $ 12.55 -- -- -- --
Other terminations (13,900) $ 19.47 (16,600) $12.90 (19,500) $17.20
Exercised (173,850) $ 11.17 (48,800) $10.91 (75,150) $ 6.05
Spin-off adjustment 459,030 $(11.45) -- -- -- --
Greystone options assumed 764,900 $ 11.58 -- -- -- --
--------- ------- --------- ------ -------- ------
Outstanding, end of year 2,815,880 $ 10.60 1,056,350 $12.65 995,250 $11.15
--------- ------- --------- ------ -------- ------
Exercisable, end of year 1,012,946 $ 10.24 232,912 $11.20 203,600 $10.58
--------- ------- --------- ------ -------- ------
Weighted average fair value
of options granted during
the year under SFAS No. 123 $7.96 $9.21
----- -----
</TABLE>
51
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
The following table summarizes information about fixed stock options outstanding
at November 30, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------- --------------------------------
RANGE OF NUMBER WEIGHTED WEIGHTED NUMBER WEIGHTED
PER SHARE OUTSTANDING AT AVERAGE AVERAGE OUTSTANDING AT AVERAGE
EXERCISE NOVEMBER 30, REMAINING PER SHARE NOVEMBER 30, PER SHARE
PRICES 1997 CONTRACTUAL LIFE EXERCISE PRICE 1997 EXERCISE PRICE
--------- ------------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$ 1.61-$ 5.86 514,551 3.5 years $ 3.43 142,220 $ 3.53
$ 6.66-$ 9.97 685,426 4.9 years $ 8.86 109,060 $ 8.28
$10.14-$14.39 955,903 8.3 years $11.52 761,666 $11.78
$16.47-$18.16 660,000 9.6 years $16.67 -- --
</TABLE>
The above range of per share exercise prices at November 30, 1997 have been
adjusted to reflect the spin-off of the commercial real estate investment and
management business, as applicable, for each individual option holder.
The Company applies APB Opinion No. 25 and related Interpretations in accounting
for its fixed stock option plans. No compensation expense is recognized because
all stock options granted have exercise prices equal to the market value of the
Company's stock on the date of the grant. Under SFAS No. 123, compensation cost
for the Company's stock-based compensation plans would be determined based on
the fair value at the grant dates for awards under those plans. Had the Company
adopted SFAS No. 123 in the accounting for their fixed stock option plans, the
pro forma effect would not be material to the Company's reported earnings from
continuing operations, net earnings and earnings per share for the years ended
November 30, 1997 and 1996.
The fair value of each option grant was estimated on the grant date using the
Black-Scholes option-pricing model with the following assumptions:
1997 1996
----------- -----------
Dividend yield 0.3% - 0.4% 0.4%
Volatility rate 25% - 28% 30% - 35%
Risk-free interest rate 5.8% - 6.1% 5.8% - 6.1%
Expected option life (years) 3.9 - 8.6 4.5 - 8.6
EMPLOYEE STOCK OWNERSHIP/401(K) PLAN
The Employee Stock Ownership/401(k) Plan ("Plan") provides shares of stock to
employees who have completed one year of continuous service with the Company.
All contributions for employees with five years or more of service are fully
vested. The Plan was amended in 1989 to add a cash or deferred program under
Section 401(k) of the Internal Revenue Code. Under the 401(k) portion of the
Plan, employees may make contributions which are invested on their behalf, and
the Company may also make contributions for the benefit of employees. The
Company records as compensation expense an amount which approximates the vesting
of the contributions to the Employee Stock Ownership portion of the Plan, as
well as the Company's contribution to the 401(k) portion of the Plan. This
amount was $1.7 million in 1997, $1.1 million in 1996 and $0.8 million in 1995.
In 1997, 1996 and 1995, 34,469, 20,505 and 15,332 shares, respectively, were
contributed to participants' accounts.
RESTRICTIONS ON PAYMENT OF DIVIDENDS
Other than as required to maintain the financial ratios and net worth
requirements under the revolving credit and term loan agreements, there are no
restrictions on the payment of dividends on common stock by the Company. The
cash dividends paid with regard to a share of Class B common stock in a calendar
year may not be more than 90% of the cash dividends paid with regard to a share
of common stock in that calendar year. Furthermore, there are no agreements
which restrict the payment of dividends by subsidiaries to the Company, except
for the indentures with respect to the Notes (see Note 9).
14. FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values of
financial instruments held by the Company at November 30, 1997 and 1996, using
available market information and appropriate valuation methodologies.
Considerable judgment is required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that the Company could realize in a
current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts. The table excludes cash and cash equivalents, accounts receivable and
accounts payable, which had fair values approximating their carrying values.
52
<PAGE>
14. FINANCIAL INSTRUMENTS (CONTINUED)
<TABLE>
<CAPTION>
NOVEMBER 30,
(IN THOUSANDS) 1997 1996
- ------------- ------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- ------- -------- --------
<S> <C> <C> <C> <C>
ASSETS
Homebuilding:
Receivables $ 14,782 14,782 10,456 10,456
Financial services:
Loans held for sale or disposition, net $106,020 107,617 127,606 135,786
Investment securities available-for-sale -- -- 193,869 193,869
Loans and mortgage-backed securities
held for investment, net $ 19,600 19,773 21,323 22,649
Limited-purpose finance subsidiaries:
Collateral for bonds and notes payable $ 47,456 50,715 59,898 63,186
LIABILITIES
Homebuilding:
Mortgage notes and other debts payable $527,303 527,303 361,333 361,333
Financial services:
Notes and other debts payable $ 86,936 86,936 271,314 271,314
Limited-purpose finance subsidiaries:
Bonds and notes payable $ 47,456 47,886 56,512 59,710
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS
Homebuilding:
Interest rate swap agreements $ -- (139) -- (972)
Financial services:
Commitments to originate loans $ -- (42) -- 16
Commitments to sell loans $ -- (103) -- (196)
</TABLE>
The following methods and assumptions were used by the Company in estimating
fair values:
Receivables: The fair values are based on discounting future cash flows using
the current interest rates at which similar loans would be made or are estimated
by the Company on the basis of financial or other information.
Notes, mortgages notes, and other debts payable: The fair value of fixed rate
borrowings is based on discounting future cash flows using the Company's
incremental borrowing rate. Variable rate borrowings are tied to market indices
and thereby approximate fair value.
Investment securities, loans held for sale or disposition, loans and
mortgage-backed securities held for investment, collateral for bonds and notes
payable, bonds and notes payable and loan commitments: The fair values are based
on quoted market prices if available. The fair values for instruments which do
not have quoted market prices are estimated by the Company on the basis of
financial and other information.
Interest rate swap agreements: The fair value is based on dealer quotes and
generally represents an estimate of the amount the Company would pay to
terminate the agreement at the reporting date.
The Company's investment securities available-for-sale consisted of the
Financial Services Division's rated commercial mortgage-backed securities. These
investments represented securities which were collateralized by pools of
mortgage loans on commercial real estate assets located across the country. Such
investment securities were distributed as part of the Company's spin-off of its
commercial real estate investment and management business (see Note 2).
Concentrations of credit risk with respect to these securities were limited due
to the diversity of the underlying loans across geographical areas and among
property types and to the performance of significant due diligence analysis on
the real estate supporting the underlying loans. In addition, the Company only
invested in these securities when the Company's discontinued Investment Division
was named special servicer for the entire securitization. As special servicer,
the Company monitored the performance of the securitization and had the ability
to impact the performance of the securitization by having the ability to resolve
non-performing loans using its loan work-out and asset management expertise.
At November 30, 1996, the amortized cost and fair value of investment securities
available-for-sale consisted of the following (in thousands):
GROSS UNREALIZED
AMORTIZED ------------------ FAIR
COST GAINS LOSSES VALUE
--------- ------ ------ -------
Investment securities
available-for-sale $180,918 14,626 (1,675) 193,869
53
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
During 1997, proceeds from the sale of available-for-sale securities amounted to
$122.5 million and resulted in gross realized gains of $2.9 million. During
1996, proceeds from the sale of available-for-sale securities amounted to $18.1
million and resulted in gross realized gains of $1.7 million. During 1995,
proceeds from the sale of available-for-sale securities amounted to $11.0
million and resulted in gross realized gains of $0.5 million.
The Company utilizes interest rate swap agreements to manage interest costs and
hedge against risks associated with changing interest rates. The Company
designates interest rate swaps as hedges of specific debt instruments and
recognizes interest differentials as adjustments to interest expense as the
differentials occur. Counterparties to these agreements are major financial
institutions. Credit loss from counterparty non-performance is not anticipated.
A majority of the Company's variable rate borrowings are based on the London
Interbank Offering Rate ("LIBOR") index. At November 30, 1997, Lennar had three
interest rate swap agreements outstanding with a total notional amount of $200.0
million, which will mature in 2002. These agreements fixed the LIBOR index at
6.0% to 6.1%. The effect of the interest rate swap agreements on interest
incurred and on the cost of borrowing was approximately $0.8 million and 0.17%,
$1.5 million and 0.18%, and $0.7 million and 0.11%, for the years ended November
30, 1997, 1996 and 1995, respectively.
As of November 30, 1997, the Financial Services Division's pipeline of loans in
process totaled approximately $39.2 million. There is no exposure to credit risk
in this type of commitment until the loans are funded. However, the division
uses the same credit policies in the approval of the commitments as are applied
to all lending activities. Since a portion of these commitments is expected to
expire without being exercised by the borrower, the total commitments do not
necessarily represent future cash requirements. There is no exposure to market
risk until a rate commitment is extended by the Company to a borrower. Loans in
the pipeline of loans in process for which interest rates were committed to the
borrower totaled approximately $16.1 million as of November 30, 1997.
Substantially all of these commitments are for periods of 30 days or less.
Mandatory mortgage-backed securities ("MBS") forward commitments are used by the
Company to hedge its interest rate exposure during the period from when the
Company extends an interest rate lock to a loan applicant until the time in
which the loan is sold to an investor. These instruments involve, to varying
degrees, elements of credit and interest rate risk. Credit risk is managed by
the Company by entering into agreements with investment bankers with primary
dealer status and with permanent investors meeting the credit standards of the
Company. At any time, the risk to the Company, in the event of default by the
purchaser, is the difference between the contract price and current market
value. At November 30, 1997, the Company had open commitments amounting to $58.5
million to sell MBS with varying settlement dates through February 1998. The
mortgage loan inventory and pipeline will be used to form the MBS that will fill
the forward delivery contracts.
15. COMMITMENTS AND CONTINGENT LIABILITIES
The Company and certain subsidiaries are parties to various claims, legal
actions and complaints arising in the ordinary course of business. In the
opinion of management, the disposition of these matters will not have a material
adverse effect on the financial condition of the Company.
The Company had a number of claims for damages relating to a hurricane which
occurred in 1992. Most have been settled, and to date, the Company's insurers
have made all payments required under settlements. Based on historical
experience with past claims, it is likely that the remaining claims will not be
material to the Company's financial position or results of operations. However,
the ultimate outcome cannot presently be determined.
The Company is subject to the usual obligations associated with entering into
contracts for the purchase (including option contracts), development and sale of
real estate in the routine conduct of its business. Option contracts for the
purchase of land permit the Company to acquire portions of properties when it is
ready to build homes on them. The use of option contracts allows the Company to
manage the financial risk of adverse market conditions associated with longer
term land holdings.
The Company has entered into agreements to lease certain office facilities under
operating leases which expire at various dates through 2004. Future minimum
payments under the noncancelable leases having an initial or remaining term in
excess of one year are as follows: 1998 - $4.5 million; 1999 - $4.0 million;
2000 - $2.7 million; 2001 - $2.2 million; 2002 - $1.8 million and thereafter -
$1.2 million.
The Company is committed, under various letters of credit, to perform certain
development and construction activities and provide certain guarantees in the
normal course of business. Outstanding letters of credit under these
arrangements totaled $82.1 million at November 30, 1997. The Company also had
outstanding performance bonds with estimated costs to complete of $122.5 million
related principally to its obligations for site improvements at various projects
at November 30, 1997. The Company does not believe that any such bonds are
likely to be drawn upon.
54
<PAGE>
16. SUPPLEMENTAL INFORMATION ON GREYSTONE HOMES, INC.
Summarized financial information for Greystone Homes, Inc. is presented below:
SUMMARY CONSOLIDATED BALANCE SHEET
NOVEMBER 30, 1997
(IN THOUSANDS)
- -------------
ASSETS:
Cash and cash equivalents $ 5,565
Inventories 330,568
Deferred tax assets 29,943
Goodwill, net 45,612
Other assets 12,578
--------
$424,266
--------
LIABILITIES AND STOCKHOLDER'S EQUITY:
Accounts payable and other liabilities $ 47,460
Intercompany payable to Lennar Corporation 19,600
Notes payable 4,160
Senior unsecured notes payable 137,812
--------
Total liabilities 209,032
Stockholder's equity 215,234
--------
$424,266
--------
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
PRO FORMA
FOR THE PERIOD FROM ------------------------
NOVEMBER 1, 1997 YEARS ENDED NOVEMBER 30,
(IN THOUSANDS) TO NOVEMBER 30, 1997 1997 1996
- ------------- -------------------- ------- -------
Homebuilding revenues $48,997 577,729 421,708
Cost of homes sold 46,487 456,829 329,067
------- ------- -------
Gross margin 2,510 120,900 92,641
Selling, general and
administrative expenses (4,023) (57,901) (44,976)
Interest and other, net 113 (14,005) (12,905)
------- ------- -------
Pretax earnings (loss) (1,400) 48,994 34,760
Provision for income tax
expense (benefit) (560) 20,498 14,804
------- ------- -------
Net earnings (loss) $ (840) 28,496 19,956
------- ------- -------
The consolidated statements of operations for all periods presented reflect all
purchase accounting adjustments related to the merger between the Company and
Greystone. The primary purchase accounting adjustment was an increase to cost of
homes sold of $6.8 million to reflect the inventories of Greystone Homes, Inc.
to estimated fair value. Greystone Homes, Inc. is a wholly owned subsidiary of
the Company and is the obligor on the Notes (see Note 9). The Notes are fully
and unconditionally guaranteed by the Company. Separate financial statements and
other related disclosures for Greystone Homes, Inc. are not presented, as the
Company's management does not consider the information material to investors.
17. SUBSEQUENT EVENT
Subsequent to November 30, 1997, the Company completed the acquisition of the
stock and certain assets of a Northern California homebuilder for approximately
$78 million. Additionally, a joint venture was formed between Lennar Land
Partners and an entity affiliated with the Northern California homebuilder.
55
<PAGE>
<TABLE>
<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Lennar Corporation and Subsidiaries
18. QUARTERLY DATA (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) FIRST SECOND THIRD FOURTH
- --------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
1997
Revenues $232,455 271,924 332,620 466,083
Earnings from continuing operations before income taxes $ 16,082 20,866 32,634 16,145
Earnings from discontinued operations $ 9,617 9,276 8,374 6,559
Net earnings $ 19,427 22,004 28,281 14,719
Earnings per share:
Continuing operations $ .27 .35 .55 .19
Discontinued operations .27 .26 .23 .16
-------- -------- -------- --------
Net earnings per share $ .54 .61 .78 .35
======== ======== ======== ========
1996
Revenues $194,963 224,743 283,653 338,302
Earnings from continuing operations before income taxes $ 13,478 14,288 24,332 32,331
Earnings from discontinued operations $ 8,981 9,578 9,042 8,883
Net earnings $ 17,203 18,293 23,884 28,606
Earnings per share:
Continuing operations $ .23 .24 .41 .54
Discontinued operations .25 .27 .25 .25
-------- -------- -------- --------
Net earnings per share $ .48 .51 .66 .79
======== ======== ======== ========
</TABLE>
Quarterly and year-to-date computations of per share amounts are made
independently. Therefore, the sum of per share amounts for the quarters may not
agree with per share amounts for the year.
SUPPLEMENTAL PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
On June 10, 1997, the Company's Board of Directors approved a plan to spin-off
its commercial real estate investment and management business through the
distribution of the stock of LNR. The spin-off, in the form of a tax-free
distribution, was completed effective October 31, 1997. Following the spin-off
transaction, the Company and LNR formed Lennar Land Partners to acquire, develop
and sell land. The Company and LNR contributed properties to Lennar Land
Partners in exchange for 50% general partnership interests in Lennar Land
Partners. The formation of Lennar Land Partners was effective as of October 31,
1997. On June 10, 1997, the Company's Board of Directors also approved a plan to
acquire Pacific Greystone Corporation. The merger became effective after the
spin-off of the commercial real estate investment and management business. Such
merger became effective on October 31, 1997.
These transactions have resulted in reported results for 1997 that are not
comparable to 1996. Accordingly, the following pro forma information is
presented to report 1997 and 1996 on a more comparable basis. Results for 1997
and 1996 have been adjusted to give pro forma effect to these transactions as if
such transactions had been completed as of the beginning of each period for
which pro forma consolidated operating data is presented. The following pro
forma results for Lennar were derived from the 12 months ended November 30 and
the pro forma results for Greystone were derived from the 12 months ended
December 31. The following pro forma financial information does not purport to
be indicative of the results of operations which would actually have been
reported if the transactions had occurred on the dates or for the periods
indicated:
YEARS ENDED
NOVEMBER 30,/DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1997 1996
- ---------------------------------------- ------------ ------------
REVENUES:
Homebuilding $1,692,083 1,354,568
Financial services 52,305 44,218
Limited-purpose
finance subsidiaries 5,143 6,436
---------- ----------
Total revenues $1,749,531 1,405,222
---------- ----------
OPERATING EARNINGS:
Homebuilding $ 172,141 142,988
Financial services 11,642 6,470
Limited-purpose
finance subsidiaries 13 (3)
---------- ----------
Total operating earnings 183,796 149,455
Corporate general and
administrative expenses 23,212 18,894
Interest expense 30,657 29,440
---------- ----------
Earnings before income taxes 129,927 101,121
Income taxes 52,646 41,348
---------- ----------
Net earnings $ 77,281 59,773
---------- ----------
Net earnings per share $ 1.46 1.13
========== ==========
56
<PAGE>
SHAREHOLDER INFORMATION
Lennar Corporation and Subsidiaries
Annual Meeting
The Annual Stockholders' Meeting will be
held at 11:00 a.m. on April 7, 1998
at the Doral Park Golf and Country Club,
5001 N.W. 104th Avenue
Miami, Florida 33178
Registrar and Transfer Agent
The First National Bank of Boston
150 Royall Street
Canton, Massachusetts 02021
Listing
New York Stock Exchange (LEN)
Corporate Counsel
Rogers & Wells
200 Park Avenue
New York City, New York 10166
Independent Auditors
Deloitte & Touche LLP
100 Southeast Second Street
Miami, Florida 33131
Form 10-K Available
A copy of the Company's Annual Report on Form 10-K as filed with the Securities
and Exchange Commission is available without charge to any stockholder upon
written request to:
Investor Relations
Lennar Corporation
700 N.W. 107th Avenue
Miami, Florida 33172
Telephone: (305) 559-4000
<TABLE>
<CAPTION>
COMPARATIVE COMMON STOCK DATA
COMMON STOCK PRICES CASH DIVIDENDS
NEW YORK STOCK EXCHANGE PER SHARE
---------------------------------- ------------------------------------------------------------
FISCAL HIGH/LOW PRICE COMMON STOCK CLASS B
QUARTER 1997 1996 1997 1996 1997 1996
- ------- --------------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
First $27.75 - 25.00* 27.00 - 22.00 2 1/2(cents) 2 1/2(cents) 2 1/4(cents) 2 1/4(cents)
Second 27.50 - 24.00* 26.13 - 22.88 2 1/2(cents) 2 1/2(cents) 2 1/4(cents) 2 1/4(cents)
Third 37.63 - 26.00* 26.88 - 21.63 2 1/2(cents) 2 1/2(cents) 2 1/4(cents) 2 1/4(cents)
Fourth 44.81 - 15.81* 26.75 - 21.75 1 1/4(cents) 2 1/2(cents) 1 1/8(cents) 2 1/4(cents)
<FN>
- ----------
* Market prices prior to November 1, 1997 are reflective of the stock value
prior to the spin-off of the commercial real estate investment and management
business.
</FN>
</TABLE>
As of November 30, 1997, there were approximately 800 holders of record of the
Company's common stock.
57
EXHIBIT 21
State of
Incorporation
-------------
Lennar Corporation Delaware
Subsidiaries
Adjustable Mortgage Finance Corp. Florida
Ameristar Financial Services, Inc. California
BCDC Corporation California
Boca Greens, Inc. Florida
Boca Isles Club, Inc. Florida
Boca Isles South Club, Inc. Florida
Bramalea California Properties, Inc. California
Bramalea California Realty, Inc. California
Bramalea California, Inc. California
Bramalea Mortgage, Inc. California
Club Pembroke Isles, Inc. Florida
Colorado Asset Development Corporation Colorado
DCA Acceptance Corp. Alabama
DCA at Banyan Tree, Inc. Florida
DCA at North Lauderdale, Inc. Florida
DCA at Pembroke Pointe, Inc. Florida
DCA at Wiggins Bay, Inc. Florida
DCA Builder Issuer, Inc. Florida
DCA CML Acceptance Corp. Florida
DCA Financial Corp. Florida
DCA General Contractors, Inc. Florida
DCA Homes of Central Florida, Inc. Florida
DCA of Broward County, Inc. Florida
DCA of Fort Worth, Inc. Texas
DCA of Hialeah, Inc. Florida
DCA of Lake Worth, Inc. Florida
DCA of New Jersey, Inc. New Jersey
DCA of Texas, Inc. Texas
DCA Oil of Texas, Inc. Texas
DCA NJ Realty, Inc. New Jersey
Devco Land Corporation Florida
Dyeing & Finishing, Inc. Florida
First Atlantic Building Corp. Florida
Friendswood Land Development Company Texas
Greystone Construction, Inc. Arizona
Greystone Homes, Inc. Delaware
Hillside, Inc. Florida
Houston Village Builders, Inc. Florida
Inactive Corporations, Inc. Florida
Institutional Mortgages, Inc. Florida
Kings Isle Recreation Corp. Florida
Page 1
<PAGE>
Kings Ridge Golf Corporation Florida
Kings Ridge Recreation Corporation Florida
Kings Wood Development Corporation Florida
La Canada Holding Company California
Lennar Communities Development, Inc. Delaware
Lennar Financial Services, Inc. Florida
Lennar Homes of Arizona, Inc. Arizona
Lennar Homes of California, Inc. California
Lennar Homes of Texas, Inc. Texas
Lennar Homes, Inc. Florida
Lennar Land Partners Sub, Inc. Delaware
Lennar Management, Inc. California
Lennar Realty, Inc. Florida
Lennar Renaissance, Inc. California
Lennar Sacramento, Inc. California
Lennar San Jose Holdings, Inc. California
Lennar Title Services, Inc. Florida
Lentex Development Corporation Texas
Lucerne Greens, Inc. Florida
Lucerne Merged Condominiums, Inc. Florida
M.A.P. Builders, Inc. Florida
M.A.P. Vineyards of Plantation, Inc. Florida
Marlborough Development Corporation Arizona
Marlborough Development Corporation California
Marlborough Financial Corporation California
Marlborough Investment Corporation California
Marlborough Mortgage Corporation California
Midland Housing Industries California
Midland Investment Corporation California
Mission Viejo Holdings, Inc. California
Monterey Village Development Corp. Florida
Multi-Builder Acceptance Corp. Alabama
NGMC Finance Corp. Florida
NGMC Finance Corp., IV Florida
North American Asset Development
Corporation California
North American Real Estate
Services, Inc. California
North American Title Agency of
Arizona, Inc. Arizona
North American Title Company California
North American Title Company
of Colorado Colorado
North American Title Insurance Company California
Quality Roof Truss Company Florida
Rancho Summit LLC California
Regency Title Company Texas
Riviera Land Corp. Florida
Satisfaction, Inc. Florida
Silver Lakes-Gateway Clubhouse, Inc. Florida
Page 2
<PAGE>
State Home Acceptance Corp. Florida
Stevenson Ranch Cable, Inc. California
Strategic Holdings, Inc. Nevada
Strategic Technologies, Inc. Florida
Superior Realty & Marketing, Inc Florida
TitleAmerica Insurance Corp. Florida
UAMC Asset Corp. Nevada
Universal American Finance Corp., I Florida
Universal American Mortgage Company Florida
Universal American Mortgage Company
of California, Inc. California
Universal Title Insurors, Inc. Florida
W-B Homes, Inc. Florida
West Venture California
West Venture BFA Corporation California
Page 3
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-3017 of Lennar Corporation on Form S-3 of our reports dated January 20,
1998, appearing in and incorporated by reference in this Annual Report on Form
10-K of Lennar Corporation for the year ended November 30, 1997.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Certified Public Accountants
Miami, Florida
February 26, 1998
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-45442 and No. 2-89104 of Lennar Corporation on Form S-8 of our reports dated
January 20, 1998, appearing in and incorporated by reference in this Annual
Report on Form 10-K of Lennar Corporation for the year ended November 30, 1997.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Certified Public Accountants
Miami, Florida
February 26, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> NOV-30-1997
<CASH> 52,926
<SECURITIES> 0
<RECEIVABLES> 34,646
<ALLOWANCES> 0
<INVENTORY> 806,975
<CURRENT-ASSETS> 894,547
<PP&E> 14,861
<DEPRECIATION> (6,263)
<TOTAL-ASSETS> 1,343,284
<CURRENT-LIABILITIES> 221,020
<BONDS> 661,695
0
0
<COMMON> 5,316
<OTHER-SE> 433,683
<TOTAL-LIABILITY-AND-EQUITY> 1,343,284
<SALES> 1,130,989
<TOTAL-REVENUES> 1,303,082
<CGS> 907,691
<TOTAL-COSTS> 958,324
<OTHER-EXPENSES> 234,052
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,979
<INCOME-PRETAX> 85,727
<INCOME-TAX> 35,122
<INCOME-CONTINUING> 50,605
<DISCONTINUED> 33,826
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84,431
<EPS-PRIMARY> 2.23
<EPS-DILUTED> 2.23
</TABLE>
