<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] - Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 25, 1994
or
[ ] - Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File Number: 0-19292
PATTEN CORPORATION
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(Exact name of registrant as specified in its charter)
Massachusetts 03-0300793
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5295 Town Center Road, Boca Raton, Florida 33486
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(Address of principal executive offices) (Zip Code)
(407) 391-6336
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
-- --
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of October 23, 1994, there were 18,511,996 shares of Common Stock, $.01
par value per share, outstanding.
<PAGE> 2
<TABLE>
<CAPTION>
PATTEN CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q
PART I - FINANCIAL INFORMATION (1)
ITEM 1. FINANCIAL STATEMENTS PAGE
<S> <C>
CONSOLIDATED BALANCE SHEETS AT
SEPTEMBER 25, 1994 AND MARCH 27, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
CONSOLIDATED STATEMENTS OF INCOME - THREE MONTHS
ENDED SEPTEMBER 25, 1994 AND SEPTEMBER 26, 1993 . . . . . . . . . . . . . . . . . . . . . . 4
CONSOLIDATED STATEMENTS OF INCOME - SIX MONTHS
ENDED SEPTEMBER 25, 1994 AND SEPTEMBER 26, 1993 . . . . . . . . . . . . . . . . . . . . . . 5
CONSOLIDATED STATEMENTS OF CASH FLOWS - SIX MONTHS
ENDED SEPTEMBER 25, 1994 AND SEPTEMBER 26, 1993 . . . . . . . . . . . . . . . . . . . . . . 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ITEM 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . 25
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
(1) With the exception of the Consolidated Balance Sheet at March 27, 1994,
which is audited, the accompanying interim Consolidated Financial Statements
are unaudited but include all adjustments consisting only of normal recurring
accruals and provisions for losses which management considers necessary to
present fairly the consolidated financial position of the Company as of
September 25, 1994, the consolidated results of operations for the three and
six months ended September 25, 1994 and September 26, 1993 and the consolidated
cash flows for the six months ended September 25, 1994 and September 26, 1993.
The interim financial information should be read in conjunction with the
Consolidated Financial Statements and Notes thereto included in the Company's
Annual Report to Shareholders for the fiscal year ended March 27, 1994.
2.
<PAGE> 3
PART I - FINANCIAL INFORMATION
PATTEN CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
SEPTEMBER 25, MARCH 27,
ASSETS 1994 1994
------------- --------------
<S> <C> <C>
Cash and cash equivalents (including restricted cash of
approximately $3.0 million and $5.0 million at
September 25, 1994 and March 27, 1994, respectively) . . . . $ 12,510,969 $ 9,308,047
Contracts receivable, net. . . . . . . . . . . . . . . . . . . 11,501,948 9,928,602
Notes receivable, net . . . . . . . . . . . . . . . . . . . . . 34,762,603 42,881,842
Investment in securities . . . . . . . . . . . . . . . . . . . 16,988,474 26,469,714
Inventory, net . . . . . . . . . . . . . . . . . . . . . . . . 55,854,854 40,113,942
Property and equipment, net . . . . . . . . . . . . . . . . . . 4,110,423 3,634,478
Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . 1,672,152 1,724,387
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . 4,780,704 5,556,201
------------- --------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . $ 142,182,127 $ 139,617,213
============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . $ 3,040,237 $ 1,906,170
Accrued liabilities and other . . . . . . . . . . . . . . . . . 8,660,796 10,079,007
Line of credit and notes payable . . . . . . . . . . . . . . . 17,787,534 11,524,150
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . 4,777,895 3,742,928
Mortgage-backed notes payable . . . . . . . . . . . . . . . . . 17,927,075 25,772,299
Commitments and contingencies . . . . . . . . . . . . . . . . . --- ---
8.25% convertible subordinated debentures . . . . . . . . . . . 34,739,000 34,739,000
------------- --------------
TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . 86,932,537 87,763,554
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000 shares authorized;
none issued . . . . . . . . . . . . . . . . . . . . . . . . --- ---
Common stock, $.01 par value, 90,000,000 shares authorized;
18,508,642 and 17,795,974 shares outstanding at
September 25, 1994 and March 27, 1994, respectively . . . . 185,086 177,960
Capital-in-excess of par value . . . . . . . . . . . . . . . . 63,672,843 61,099,625
Retained earnings (deficit) . . . . . . . . . . . . . . . . . . ( 8,608,339 ) ( 9,423,926 )
------------ --------------
Total shareholders' equity . . . . . . . . . . . . . . . . . . 55,249,590 51,853,659
------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . . . . . . . . . $ 142,182,127 $ 139,617,213
============= ==============
</TABLE>
See accompanying notes to consolidated financial statements.
3.
<PAGE> 4
PATTEN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------
SEPTEMBER 25, SEPTEMBER 26,
1994 1993
------------ ------------
<S> <C> <C>
REVENUES:
Sales of real estate . . . . . . . . . . . . . . . . $ 25,383,870 $ 17,798,399
Interest income . . . . . . . . . . . . . . . . . . 1,755,758 1,963,812
------------- -------------
27,139,628 19,762,211
COST AND EXPENSES:
Cost of real estate sold . . . . . . . . . . . . . . 11,881,739 8,321,757
Selling, general and administrative expense . . . . 9,853,989 6,948,435
Interest expense . . . . . . . . . . . . . . . . . . 1,654,473 1,919,228
Provision for losses . . . . . . . . . . . . . . . . 250,000 265,000
------------- -------------
23,640,201 17,454,420
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Income from operations . . . . . . . . . . . . . . . . 3,499,427 2,307,791
Other income . . . . . . . . . . . . . . . . . . . . . 90,074 404,433
------------- -------------
Income before income taxes . . . . . . . . . . . . . . 3,589,501 2,712,224
Provision for income taxes . . . . . . . . . . . . . . 1,471,695 1,030,645
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NET INCOME . . . . . . . . . . . . . . . . . . . . . . $ 2,117,806 $ 1,681,579
============= =============
INCOME PER COMMON SHARE - PRIMARY AND
FULLY DILUTED:
Net income . . . . . . . . . . . . . . . . . . . . . . $ .11 $ .09
============= =============
Weighted average number of common and common
equivalent shares used to calculate primary and fully
diluted net income per common share . . . . . . . . 19,548,521 19,403,464
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
4.
<PAGE> 5
PATTEN CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------------------------
SEPTEMBER 25, SEPTEMBER 26,
1994 1993
------------ ------------
<S> <C> <C>
REVENUES:
Sales of real estate . . . . . . . . . . . . . . . . $ 47,428,359 $ 31,115,984
Interest income . . . . . . . . . . . . . . . . . . 3,206,682 3,707,431
------------ -------------
50,635,041 34,823,415
COST AND EXPENSES:
Cost of real estate sold . . . . . . . . . . . . . . 22,614,267 14,728,855
Selling, general and administrative expense . . . . 18,538,711 12,803,333
Interest expense . . . . . . . . . . . . . . . . . . 3,439,790 3,500,046
Provision for losses . . . . . . . . . . . . . . . . 415,000 415,000
------------ -------------
45,007,768 31,447,234
------------ -------------
Income from operations . . . . . . . . . . . . . . . . 5,627,273 3,376,181
Other income . . . . . . . . . . . . . . . . . . . . . 128,741 928,623
------------ -------------
Income before income taxes . . . . . . . . . . . . . . 5,756,014 4,304,804
Provision for income taxes . . . . . . . . . . . . . . 2,359,966 1,635,825
------------ -------------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . $ 3,396,048 $ 2,668,979
============ =============
INCOME PER COMMON SHARE - PRIMARY AND
FULLY DILUTED:
Net income . . . . . . . . . . . . . . . . . . . . . . $ .18 $ .14
============ =============
Weighted average number of common and common
equivalent shares used to calculate primary and fully
diluted net income per common share . . . . . . . . 19,470,380 19,297,186
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
5.
<PAGE> 6
PATTEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------------------------
SEPTEMBER 25, SEPTEMBER 26,
1994 1993
------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Cash received from customers including net
cash collected as servicer of notes receivable
to be remitted to investors . . . . . . . . . . $ 38,205,043 $ 24,099,500
Interest received . . . . . . . . . . . . . . . 2,507,526 2,471,000
Cash paid for land acquisitions and real estate
development . . . . . . . . . . . . . . . . . . ( 27,296,430 ) ( 12,796,203 )
Cash paid to suppliers, employees and sales
representatives . . . . . . . . . . . . . . . . ( 15,929,555 ) ( 12,993,614 )
Interest paid . . . . . . . . . . . . . . . . . ( 3,267,116 ) ( 2,849,451 )
Net income taxes paid . . . . . . . . . . . . . ( 1,772,945 ) ( 2,003,073 )
Proceeds from legal settlement . . . . . . . . . --- 549,538
Proceeds from borrowings collateralized by notes
receivable . . . . . . . . . . . . . . . . . . 3,057,065 10,681,159
Proceeds from sale of mortgage-backed securities,
net of transaction costs and amount paid to
retire securities . . . . . . . . . . . . . . . 22,706,101 8,352,973
Payments on borrowings collateralized by notes
receivable . . . . . . . . . . . . . . . . . . ( 10,902,289 ) ( 2,178,322 )
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . 7,307,400 13,333,507
------------- -------------
INVESTING ACTIVITIES:
Net cash flow from purchases and sales of
property and equipment . . . . . . . . . . . . ( 952,724 ) ( 324,364 )
Additions to other long-term assets . . . . . . ( 76,408 ) ( 592,266 )
------------- -------------
NET CASH FLOW USED BY INVESTING ACTIVITIES. . . . . ( 1,029,132 ) ( 916,630 )
------------- ------------
FINANCING ACTIVITIES:
Borrowings under line of credit facility . . . . 8,941,904 ---
Payments under line of credit facility . . . . . ( 5,359,782 ) ( 583,478 )
Payments under repurchase agreement . . . . . . --- ( 6,500,000 )
Borrowings under short-term secured debt facility --- 6,500,000
Payments under short-term secured debt facility --- ( 6,500,000 )
Payments on other long-term debt . . . . . . . . ( 6,657,350 ) ( 4,948,070 )
Proceeds from exercise of employee stock options 2,694 9,000
Payment for dividends in lieu of fractional shares. ( 2,812 ) ( 976 )
------------- ------------
NET CASH FLOW USED BY FINANCING ACTIVITIES . . . . ( 3,075,346 ) ( 12,023,524 )
------------- -------------
Net increase in cash and cash equivalents . . . . . 3,202,922 393,353
Cash and cash equivalents at beginning of period . 9,308,047 10,113,748
------------- -------------
Cash and cash equivalents at end of period . . . . $ 12,510,969 $ 10,507,101
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
6.
<PAGE> 7
PATTEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------------
SEPTEMBER 25, SEPTEMBER 26,
1994 1993
-------------- --------------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH FLOW
PROVIDED BY OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,396,048 $ 2,668,979
Adjustments to reconcile net income to net
cash flow provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . 670,335 916,765
Gain on sale of property and equipment . . . . . . . . . ( 20,366 ) ( 86,105 )
Provision for losses . . . . . . . . . . . . . . . . . . 415,000 415,000
Proceeds from borrowings collateralized
by notes receivable net of principal repayments . . . . ( 7,845,224 ) 8,502,838
(INCREASE) DECREASE IN ASSETS:
Contracts receivable . . . . . . . . . . . . . . . . . . . ( 1,573,346 ) 640,094
Investment in securities . . . . . . . . . . . . . . . . . 9,481,240 7,054,310
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . ( 5,326,700 ) 2,267,922
Other assets . . . . . . . . . . . . . . . . . . . . . . . 773,085 ( 1,612,620 )
Notes receivable . . . . . . . . . . . . . . . . . . . . . 6,586,505 ( 7,582,899 )
INCREASE (DECREASE) IN LIABILITIES:
Accounts payable and accrued liabilities and other . . . . ( 284,144 ) ( 1,486,602 )
Deferred income taxes . . . . . . . . . . . . . . . . . . . 1,034,967 1,635,825
------------ -----------
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . $ 7,307,400 $13,333,507
============ ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH OPERATING
AND FINANCING ACTIVITIES
Inventory acquired through financing . . . . . . . . . . . $ 9,296,477 $ 6,267,873
============ ===========
Inventory acquired through foreclosure,
"insubstance foreclosure" or
deedback in lieu of foreclosure . . . . . . . . . . . . . $ 1,117,734 $ 519,268
============ ===========
Investment in securities retained in
connection with issuance of mortgage-
backed securities . . . . . . . . . . . . . . . . . . . . . $ 2,674,370 $ ---
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
7.
<PAGE> 8
PATTEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. RESULTS OF OPERATIONS
The accompanying unaudited Consolidated Financial Statements have been prepared
in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
The financial information furnished herein reflects all adjustments consisting
only of normal recurring accruals and provisions for loan losses which, in the
opinion of management, are necessary for a fair presentation of the results for
the interim period. In addition, a non-recurring gain of approximately
$800,000 attributable to the settlement of certain litigation is included in
other income in the consolidated statement of income for the six months ended
September 26, 1993. The results of operations for the three and six month
periods ended September 25, 1994 are not necessarily indicative of the results
to be expected for the entire year. For further information, refer to the
Consolidated Financial Statements and Notes thereto included in the Company's
Annual Report to Shareholders for the fiscal year ended March 27, 1994.
2. REVENUE RECOGNITION
The Company recognizes revenue on retail land sales when a minimum of 10% of
the sales price has been received in cash, collectibility of the receivable is
reasonably assured, the Company has completed substantially all of its
obligations with respect to any development related to the real estate sold and
any recission period has passed.
The Company recognizes revenue on other land sales, which primarily includes
large-acreage bulk sales and sales to investors and developers, when the
buyer's initial and continuing investment are adequate to demonstrate
commitment to pay for the property, which generally requires a minimum of 20%
of the sales price to be received in cash, the collectibility of the receivable
is reasonably assured, the Company has completed substantially all of its
obligations with respect to any development related to the real estate sold and
any recission period has passed. In cases where all development has not been
completed, the Company recognizes revenue in accordance with the percentage of
completion method of accounting. All related costs are recorded when the sale
is recorded.
The Company recognizes revenue on housing operation sales when the unit is
complete and title is transferred to the buyer. With respect to its timeshare
operations, the Company recognizes revenue when a minimum of 10% of the sales
price has been received in cash, collectibility of the receivable is reasonably
assured, any statutory recission period has passed and the Company has
completed substantially all of its obligations with respect to any development
related to the unit sold. In cases where all development has not been
completed, revenue is recognized in accordance with the percentage of
accounting method of accounting.
3. CONTINGENT LIABILITIES
In the ordinary course of business, the Company has completed various whole
loan sales of its land receivables to banks and financial institutions to
supplement its liquidity. At September 25, 1994, the Company was contingently
liable for the outstanding principal balance of notes receivable sold
aggregating approximately $3.1 million. Delinquency on these loans was not
material. In most cases, the recourse of the buyer of the loans to the Company
terminates when a customer achieves 30% equity in the property underlying the
loan. Equity is defined as the difference between the purchase price of the
property paid by the customer and the current outstanding balance of the related
loan.
8.
<PAGE> 9
PATTEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
4. PROVISION FOR LOSSES
The Company recorded provisions for loan losses totaling $415,000 for each of
the six months ended September 25, 1994 and September 26, 1993. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", included under Item 2 herein, for a further discussion of the
provisions for loan losses.
5. INVENTORY
The Company's inventory holdings are summarized below by product type.
<TABLE>
<CAPTION>
SEPTEMBER 25, 1994 MARCH 27, 1994
------------------ --------------
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . $ 44,800,920 $ 31,104,433
Housing . . . . . . . . . . . . . . . . . 8,976,966 6,633,653
Timeshare . . . . . . . . . . . . . . . . 2,076,968 2,375,856
------------- ------------
$ 55,854,854 $ 40,113,942
============= ============
</TABLE>
6. 1994 REMIC TRANSACTION
On May 11, 1994, the Company completed a private placement transaction which
the Company elected to treat as a Real Estate Mortgage Investment Conduit (the
"1994 REMIC"), involving the securitization of $27.7 million aggregate
principal amount of its mortgage notes receivable. The notes were sold to a
REMIC trust, which issued four classes of Certificates, with each Certificate
evidencing a fractional undivided interest in the pool of notes. The initial
principal balances of the Class A, Class B, Class C and Class R Certificates
were $23.3 million, $2.8 million, $1.6 million and $0, respectively. On May
11, 1994, the Company sold the Class A and Class B Certificates to an
institutional investor for aggregate proceeds of $26 million and retained the
Class C and Class R Certificates. A portion of the proceeds from the
transaction were used to repay approximately $13.5 million of outstanding debt,
including $6.8 million of borrowings under a $10 million credit facility
secured by notes receivable, $4.3 million of borrowings under a $20 million
credit facility secured by notes receivable and $2.4 million associated with
amounts paid to retire securities previously sold pursuant to the Company's
1989 REMIC financing. Proceeds to the Company after payment of issuance
expenses and fees, resulted in an approximate $12.4 million increase in
unrestricted cash. The 1994 REMIC resulted in a pre-tax loss of approximately
$411,000 which is included in the Consolidated Statement of Income as a
reduction to interest income for the six months ended September 25, 1994.
7. STOCK DIVIDENDS
In addition to a 4% Common Stock dividend paid on August 16, 1993, which
consisted of the issuance of 683,005 shares, the Company paid another 4% Common
Stock dividend on May 31, 1994, which consisted of the issuance of an
additional 711,076 common shares. The Company paid an aggregate $2,812 to
certain shareholders in lieu of issuing any fractional shares of stock. The
weighted average number of common and common equivalent shares used to
calculate primary and fully diluted net income per common share has been
adjusted in the consolidated statements of income to give effect to the August,
1993 and May, 1994 stock dividends, including retroactive restatement of the
net income per common share amounts for the three and six months ended
September 26, 1993.
9.
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES.
Sources of Capital. The Company's capital resources are provided from both
internal and external sources. The Company's primary capital resources from
internal operations include down payments on real estate sales which are
financed, cash sales of real estate, principal and interest payments on the
purchase money mortgage loans ("Receivables") arising from real estate sales
and proceeds from the sale of, or borrowings collateralized by, Receivables.
External sources of liquidity have historically included borrowings under
secured and unsecured lines of credit, seller and bank financing of inventory
acquisitions and the issuance of debt and equity securities. Currently, the
primary external sources of liquidity include seller and bank financing of
inventory acquisitions and development. The Company anticipates that it will
continue to require external sources of liquidity to support its operations and
satisfy its debt and other obligations.
Net cash provided by the Company's operations was $7.3 million for the six
months ended September 25, 1994 and $13.3 million for the six months ended
September 26, 1993. The 45.2% decrease in cash flow provided by operations was
primarily attributable to decreased cash flows associated with the pledge of
Receivables under credit facilities. The decrease in cash flows from these
sources was not offset by the increased cash collections from customers, net of
increased spending for land acquisitions, land development and cash paid to
suppliers, employees and sales representatives.
During the six months ended September 25, 1994 and September 26, 1993, the
Company received in cash $35.5 million or 78% and $20.3 million or 64%,
respectively, of its sales of real estate that closed during these periods.
The increase in the percentage of cash received is attributable in part, to the
Company's program directed at obtaining increased down payments on financed
sales of real estate as well as encouraging cash sales through the structure of
its compensation program for certain regional office personnel. Management
believes that the increase in cash sales was also the result of strengthened
relationships with local banks in certain regions resulting in more direct
third party customer financing during the current fiscal period. In addition,
home sales have been financed entirely by third parties and, accordingly,
resulted in cash sales to the Company.
Receivables arising from real estate sales generally are transferred to the
Company's wholly-owned, special purpose finance subsidiaries (the "Receivable
Subsidiaries") and then pledged to institutional lenders or sold in connection
with REMIC financings. The Receivable Subsidiaries are generally advanced
between 80% and 90% of the face amount of the mortgage notes by lenders. The
Company has also directly sold or pledged Receivables to banks or other
institutional investors. The Company is subject to certain obligations and has
certain contingent liabilities with respect to the Receivables sold. See Note
2 to the Consolidated Financial Statements included under Part I, Item 1.
During the six months ended September 25, 1994 and September 26, 1993, the
Company raised $3.1 million and $10.7 million, respectively, from the pledge of
Receivables. During the six months ended September 25, 1994, the Company also
raised $22.7 million in net proceeds from the 1994 REMIC.
The Company has a revolving credit facility of $20.0 million secured by
eligible Receivables with a financial institution. Under the terms of this
facility, the Company is advanced proceeds equal to 90% of the outstanding
principal balance of the pledged Receivables. In the event that pledged
Receivables become 90 or more days delinquent, the Company is obligated to
repurchase the Receivable or substitute a performing Receivable. Aggregate
repurchases and substitutions have not been material. The interest rate
charged under the facility is prime plus 2.0%. At September 25, 1994, the
outstanding principal balance under the facility was $9.9 million.
Accordingly, as of September 25, 1994, the Company had the ability to borrow up
to an additional $10.1 million secured by, and subject to the availability of,
up to $11.2 million of eligible Receivables. All principal and interest
payments received from the pledged Receivables are applied to the principal and
interest due under this facility. The ability to receive advances expires
June, 1996. The indebtedness matures ten years from the date of the last
advance. The Company is currently negotiating an amendment to this agreement
to provide for a $5 million line of credit for land inventory acquisitions.
10.
<PAGE> 11
The Company also has an agreement with this same lender which provides for
construction and Receivable financing for the first phase of a multi-phase
timeshare project in Gatlinburg, Tennessee. Under the terms of the
construction financing, the lender will advance up to an aggregate of $3.1
million for development, provided that the outstanding balance shall not at any
time exceed $2.1 million. The receivable loan has a maximum borrowing limit of
$5 million less any outstanding balance on the construction loan. At September
25, 1994, there was no outstanding balance under the loan. The interest rate
charged under the facility is prime plus 2.25%. The facility expires in
August, 1995. See "Uses of Capital" below for further discussion of the
Company's timeshare operation. The Company is currently negotiating an
amendment to the agreement to cover construction and Receivable financing for
the second phase of the project.
The Company has a credit facility with another financial institution which
allows it to receive aggregate advances up to $25.0 million secured by eligible
Receivables. Under the terms of this facility, the Company is advanced
proceeds equal to 80% of the outstanding principal balance of the pledged
Receivables. The interest rate charged under the facility is 1.75% plus the
greater of the prime rate or commercial paper rate as published in the Wall
Street Journal. At September 25, 1994, the outstanding principal balance under
this facility was $5.8 million and the Company had received $9.6 million in
aggregate advances from the pledge of Receivables. As of that date, the
Company had the ability to borrow up to an additional $15.4 million secured by
up to $19.3 million of eligible Receivables. All principal and interest
payments received on the pledged Receivables are applied to the principal and
interest due under this facility. The ability to receive advances expires in
June, 1995. The indebtedness matures in June, 1998.
The Company has a $10 million revolving credit facility with another financial
institution secured by Receivables and inventory. Under the terms of this
facility, the Company is entitled to advances equal to 80% of the outstanding
principal balance of eligible pledged Receivables and advances of up to $3
million secured by inventory to fund the acquisition and development of real
estate. Borrowings secured by Receivables under this facility bear interest at
prime plus 2.5%. At September 25, 1994, the outstanding principal balance of
borrowings secured by Receivables was $2.2 million. At September 25, 1994, the
outstanding principal balance of borrowings secured by inventory totaled
$643,000 with interest at prime plus 3.0%. The Company is required to pay the
financial institution 55% of the contract price of land sales associated with
pledged inventory when any such inventory is sold until the indebtedness is
paid in full. At September 25, 1994, the Company had the ability to borrow up
to an additional $7.2 million secured by Receivables and inventory. The
facility expires in October, 1998.
The Company continues to obtain bank or seller financing for its property
acquisitions. During the six months ended September 25, 1994 and September 26,
1993, the Company financed $9.3 million or 25% and $6.3 million or 33%,
respectively, of its property inventory, including acquisition and development
costs.
In addition to the sources of capital available under credit facilities
totaling $37.7 million as discussed above, the balance of the Company's
unrestricted cash and cash equivalents was $9.5 million at September 25, 1994.
Based upon existing credit relationships, the current financial condition of
the Company and its operating plan, management believes the Company has, or can
obtain, adequate financial resources to satisfy its capital requirements.
Uses of Capital. The Company's capital resources, both internal and external,
are used to support the Company's operations, including the acquisition of real
estate, development of land, housing and timeshare properties, purchase of
building materials, financing customer purchases, meeting operating expenses
and satisfying the Company's debt obligations.
11.
<PAGE> 12
The Company's net inventory was $55.9 million at September 25, 1994 and $40.1
million at March 27, 1994. The Company attempts to maintain inventory at a
level adequate to support anticipated sales of real estate. Accordingly,
inventory levels in the Midwestern, Southwestern and Western regions have
increased to accommodate strong consumer demand and expanded sales efforts.
The Company intends to continue to decrease its inventory levels in the
Northeastern region of the United States due to the continued overall soft real
estate market conditions as evidenced by the reduction in Northeast inventory
from $5.2 million at September 26, 1993 to $4.0 million at September 25, 1994.
The Company estimates that the total cash required to complete preparation for
the retail sale of the inventory owned as of September 25, 1994, was
approximately $44.4 million. The $44.4 million does not include housing and
timeshare unit costs subsequent to fiscal 1995 which the Company is not able to
determine at this time. Of the $44.4 million of cash requirements, the Company
currently estimates that approximately $22.6 million will be expended to
complete preparation for sale of inventory intended to be marketed through the
remainder of fiscal 1995. With respect to inventory owned as of September 25,
1994, the Company requires capital to (a) improve land intended for
recreational, vacation, retirement or primary homesite use by purchasers,
(b) fund its housing operation in certain locations and (c) develop timeshare
property as set forth in the table below. The information below outlines
capital requirements by operating segment.
Land The Company expends capital to improve the land which typically includes
expenditures for road and utility construction, surveys and engineering fees.
Housing Operation The Company expends capital for building materials and
other infrastructure costs, including road and utility construction, surveys
and engineering fees. In fiscal 1994, the Company introduced a site-built
housing product in the Southwestern region. The Company expanded this program
into the Southeastern region in fiscal 1995 along with its existing
manufactured and modular housing programs.
Timeshare Property The Company expends capital for building materials,
ammenities and other infrastructure costs including road and utility
construction, surveys and engineering fees. In November, 1993 the Company
purchased property in Gatlinburg, Tennessee, for the site of its first
timeshare project. Although plans for the final phases of the project have not
been finalized, the preliminary plans provide for approximately 171 units.
Development is being phased for the project with residential units constructed
in agreed-upon intervals prompted by pre-sales levels.
The following table sets forth the estimated funds required to complete
preparation for the retail sale of inventory intended to be marketed through
the remainder of fiscal 1995, by geographic region and product type:
<TABLE>
<CAPTION>
GEOGRAPHIC REGION LAND HOUSING TIMESHARE TOTAL
----------------- ------------ ---------------- ------------- -------------
<S> <C> <C> <C> <C>
Northeast . . . . . $ 348,482 $ --- $ --- $ 348,482
Mid-Atlantic . . . 155,450 --- --- 155,450
Southeast . . . . . 395,347 7,446,918 --- 7,842,265
Midwest . . . . . . 1,253,033 --- 1,849,386 3,102,419
Southwest . . . . . 7,502,410 1,724,411 --- 9,226,821
West . . . . . . . 1,108,546 863,200 --- 1,971,746
Canada . . . . . . 730 --- --- 730
------------ --------------- ------------- -------------
Totals . . . . . . $ 10,763,998 $ 10,034,529 $ 1,849,386 $ 22,647,913
============ =============== ============= =============
</TABLE>
12.
<PAGE> 13
The Company's inventory as of September 25, 1994 and March 27, 1994 summarized
by product type is outlined in the following tables:
<TABLE>
<CAPTION>
SEPTEMBER 25, 1994
---------------------------------------------------------------------------
GEOGRAPHIC REGION LAND HOUSING (1) TIMESHARE TOTAL
----------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Northeast . . . . . . $ 4,045,805 $ --- $ --- $ 4,045,805
Mid-Atlantic . . . . 3,958,988 --- --- 3,958,988
Southeast . . . . . . 6,031,913 6,767,504 --- 12,799,417
Midwest . . . . . . . 7,670,091 --- 2,076,968 9,747,059
Southwest . . . . . . 13,646,012 (2) 1,284,702 --- 14,930,714
West . . . . . . . . 9,125,666 924,760 --- 10,050,426
Canada . . . . . . . 322,445 --- --- 322,445
------------ ------------ ------------ -------------
Totals . . . . . . . $ 44,800,920 $ 8,976,966 $ 2,076,968 $ 55,854,854
============ ============ ============ =============
<CAPTION>
MARCH 27, 1994
---------------------------------------------------------------------------
GEOGRAPHIC REGION LAND HOUSING (1) TIMESHARE TOTAL
----------------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Northeast . . . . . . $ 4,587,051 $ --- $ --- $ 4,587,051
Mid-Atlantic . . . . 5,182,178 --- --- 5,182,178
Southeast . . . . . . 6,808,053 4,394,360 --- 11,202,413
Midwest . . . . . . . 5,106,059 --- 2,375,856 7,481,915
Southwest . . . . . . 4,051,153 (2) 1,134,688 --- 5,185,841
West . . . . . . . . 4,983,355 1,104,605 --- 6,087,960
Canada . . . . . . . 386,584 --- --- 386,584
----------- ----------- ------------ -------------
Totals . . . . . . . $31,104,433 $ 6,633,653 $ 2,375,856 $ 40,113,942
=========== =========== ============ =============
</TABLE>
_________________
(1) Housing operation inventory as of September 25, 1994, includes land
inventory of $6.6 million and $2.4 million of housing unit
construction-in-progress. As of March 27, 1994, the Company had $5.4
million of land inventory with $1.2 million of housing unit
construction-in-progress. The increase in land inventory is attributable
to infrastructure development. The Company has not acquired any additional
housing land inventory during the six months ended September 25, 1994.
(2) During the six months ended September 25, 1994, the Company acquired two
large tracts of inventory comprised of 1,434 acres in Texas at a purchase
price of approximately $6.1 million and 4,700 acres located in New Mexico
for approximately $3.8 million.
The Company maintains inventory valuation reserves which totaled $3.4 million
at September 25, 1994, on certain land properties acquired prior to fiscal 1990
which serve as contra assets against the historical cost of such parcels.
During the six months ended September 25, 1994, $534,000 and $644,000 of the
Company's inventory reserves were released as credits to cost of real estate
sold and selling, general and administrative (S,G&A) expense, respectively,
while during the six months ended September 26, 1993, $521,000 and $665,000 of
the Company's inventory reserves were released as credits to cost of real
estate sold and S,G&A expense, respectively.
13.
<PAGE> 14
The Company offers financing of up to 90% of the purchase price of real estate
sold to all purchasers of its properties who qualify for such financing.
During the six months ended September 25, 1994 and September 26, 1993, the
Company received 22% and 36%, respectively, of its aggregate sales of real
estate which closed during the period in the form of mortgage notes receivable.
The decrease in the percentage of sales financed by the Company is attributable
to the Company's program which commenced in fiscal 1992 directed at increasing
cash sales of real estate or down payments in cases where Company financing is
extended. At September 25, 1994, $24.8 million of Receivables were pledged as
collateral to secure financings of the Company's Receivable Subsidiaries or
other Company indebtedness while $10.7 million were not pledged or encumbered.
At March 27, 1994, $34.1 million of Receivables were pledged as collateral to
secure financings of the Company's Receivable Subsidiaries or other Company
indebtedness while $9.4 million were not pledged or encumbered. The reduction
in encumbered notes at September 25, 1994 was attributable to the sale of notes
in connection with the 1994 REMIC.
At September 25, 1994, 2.1% or $789,000 of the aggregate $38.6 million
principal amount of Company-originated loans which were held by the Company or
sold through programs under which the Company has a recourse liability were
more than 30 days past due. Of these $38.6 million principal amount of loans,
$35.5 million were held by the Company, while approximately $3.1 million were
sold with limited recourse. In most cases, the recourse to the Company
terminates when the principal balance of the loan becomes 70% or less of the
original selling price of the property underlying the loan. At March 27, 1994,
3.3% or $1.6 million of the aggregate $48.9 million principal amount of
Company-originated loans which were held by the Company or sold through
programs under which the Company has a recourse liability were more than 30
days past due. The decrease in the delinquency rate during the current period
was attributable to the Company's ongoing program of expanded collection
efforts and strengthened underwriting criteria involved in the origination and
servicing of Receivables.
The Company recorded loan loss provisions of $415,000 for each of the six
months ended September 25, 1994 and September 26, 1993. The adequacy of the
Company's reserve for loan losses is determined by management and reviewed on a
regular basis, considering historical frequency of default, loss experience, as
well as the quality of Receivables, as evidenced by loans more than 30 days
past due.
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the Consolidated
Financial Statements and related Notes thereto included in the Company's Annual
Report to Shareholders for the fiscal year ended March 27, 1994.
The real estate market is cyclical in nature and highly sensitive to changes in
national and regional economic conditions, including, among other factors,
levels of employment and discretionary disposable income, consumer confidence
and interest rates. Management believes that general economic conditions are
improving in most of its principal markets of operation. However, the real
estate markets in the Northeast and Canada continue to remain depressed and the
Company has experienced reduced levels of sales in the Mid-Atlantic region.
In the latter part of fiscal 1994, the Company began pursuing a program of
diversification into the timeshare industry. Management believes that this
newly formed operation complements the core retail land business and will
provide desired opportunities for revenue growth. The Company has also
identified housing as a means to increase the absorbtion of select land
inventory. During the current fiscal period, such operations have emerged as
related, but distinct business units with different operating characteristics
from that of the Company's core retail land sales business.
14.
<PAGE> 15
Comparison of Three Months Ended September 25, 1994 and September 26, 1993.
The following table sets forth the respective results of operations for the
various business units comprising the consolidated operations of the Company
for the three months ended September 25, 1994. The Company was not involved in
timeshare operations and housing operation activity was not material during the
three months ended September 26, 1993. Accordingly, separate results of
operations for the second quarter of fiscal 1994 are not presented.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED SEPTEMBER 25, 1994
-----------------------------------------------------------------------------------
LAND HOUSING TIMESHARE TOTAL
------------------ --------------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales of real estate . . . . . . $ 20,604 100.0 % $ 3,466 100.0 % $1,314(2) 100.0 % $25,384 100.0%
Cost of real estate sold . . . . 8,451 41.0 3,037 87.6 394 30.0 11,882 46.8
-------- --------- -------- --------- ------ --------- ------- -----
Gross profit . . . 12,153 59.0 429 12.4 920 70.0 13,502 53.2
Selling, general and
administrative expense (1) . . . 8,229 40.0 525 15.1 1,100 83.7 9,854 38.8
Interest (income) . . . . . . . . (1,722) (8.4) --- --- (34) (2.6) (1,756) (6.9)
Interest expense . . . . . . . . 1,722 8.4 30 .9 (98) (7.4) 1,654 6.5
Provision for losses . . . . . . 250 1.2 --- --- --- --- 250 1.0
-------- --------- -------- --------- ------ --------- ------- -----
8,479 41.2 555 16.0 968 73.7 10,002 39.4
-------- --------- -------- --------- ------ --------- ------- -----
Income/(loss) from
operations . . . . . . . . . . . 3,674 17.8 (126) (3.6) (48) (3.7) 3,500 13.8
Other income . . . . . . . . . . 55 29 6 90
-------- --------- -------- --------- ------ --------- ------- -----
Income/(loss)
before income taxes . . . . . . . 3,729 (97) (42) 3,590
Provision/(benefit)
for income taxes . . . . . . . . 1,529 (40) (17) 1,472
-------- ---------- --- -------
Net income/(loss) . . . . . . . . $ 2,200 10.7 % $ (57) (1.6) % $ (25)(2) (1.9) % $ 2,118 8.3%
======== ========= ======== ========= ====== ========== ======= =====
</TABLE>
_________________
(1) Aggregate general and administrative expenses associated with corporate
overhead of approximately $2.1 million have been allocated to the land,
housing and timeshare operations in the amounts of $1.8 million, $200,000
and $121,000, respectively.
(2) The Company's timeshare project generated sales of $2.1 million from the
sale of 325 units which reflects an average sales price per unit of $6,624.
The figures reported above exclude $838,000 of such interval sales and
$486,000 of operating income which have been deferred under the percentage
of completion method of accounting.
Consolidated sales of real estate increased 42.6% to $25.4 million for the
three months ended September 25, 1994 compared to $17.8 million for the three
months ended September 26, 1993.
15.
<PAGE> 16
The following table sets forth certain information regarding sales of parcels
associated with the Company's retail land operations for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------
SEPTEMBER 25, SEPTEMBER 26,
1994 1993
------------- --------------
<S> <C> <C>
Number of parcels sold (1) . . . . . . . . . 649 672
Average sales price per parcel (1) . . . . . $ 32,108 $ 24,912
Gross margins on retail land sales . . . . . 59% 53%
</TABLE>
(1) Calculated by including sales of real estate deferred under the percentage
of completion method of accounting during the respective periods. The
average sales price per parcel, excluding the effects of deferred sales,
was $32,507 and $26,157 for the three months ended September 25, 1994 and
September 26, 1993, respectively. See table to follow outlining number of
parcels sold by geographic region.
The Company's Investment Committee, consisting of executive officers, approve
all property acquisitions. All land properties under contract for purchase are
expected to achieve certain minimum economics including a gross margin of at
least 55% of sales. Due to improved regional conditions in many of the
Company's principal markets, gross margins have strengthened from the targeted
55%. While management expects to continue to achieve the targeted 55% level,
no assurances can be given that this trend will continue. However, the sale of
certain inventory acquired prior to the formation of the Investment Committee
or sales of inventory reacquired through foreclosure or deed in lieu of
foreclosure will continue to adversely affect overall gross margins.
Specifically, the Company anticipates little or no gross margins on the sale of
the remaining $4.0 million of net inventory holdings in the Northeast. The
Company continues to liquidate its Northeast inventory.
The table set forth below outlines the numbers of parcels sold and the average
sales price per parcel for the Company's land operations by geographic region
for the three months ended on the dates indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------
SEPTEMBER 25, 1994 SEPTEMBER 26, 1993
------------------ ------------------
AVERAGE AVERAGE
NUMBER OF SALES PRICE NUMBER OF SALES PRICE
GEOGRAPHIC REGION PARCELS SOLD PER PARCEL (1) PARCELS SOLD PER PARCEL (1)
----------------- ------------ -------------- ---- --------------
<S> <C> <C> <C> <C>
Northeast . . . . . . . 40 $ 20,340 41 $ 17,159
Mid-Atlantic . . . . . 80 23,915 94 22,532
Southeast . . . . . . . 86 32,949 93 24,860
Midwest . . . . . . . . 87 33,237 139 21,177
Southwest . . . . . . . 262 35,284 238 26,634
West . . . . . . . . . 87 35,745 61 36,722
Canada . . . . . . . . 7 4,534 6 14,199
---- -------- ---- --------
Totals . . . . . . . . 649 $ 32,108 672 $ 24,912
==== ====
</TABLE>
(1) Calculated by including sales of real estate deferred under the percentage
of completion method of accounting during the respective periods.
16.
<PAGE> 17
The Company has experienced an increase in the number of parcels sold in the
Southwest and intends to continue expansion in this area subject to changing
market conditions. Moreover, management expects increased sales activity in
the West in future quarters due to recent acquisitions of inventory in this
region. The number of parcels sold in the Northeast geographic region
(comprised of New York, New Hampshire, Maine, Vermont, Connecticut and
Massachusetts) reflects the continuing soft economy in that region and the
Company's ongoing effort to de-emphasize its operations in the Northeast in
favor of a broader geographic distribution. The Company intends to continue to
reduce inventory in the Northeast while increasing inventory in geographic
areas with more stimulated real estate market conditions. The reduction in
parcels sold in the Mid-Atlantic geographic region resulted from decreased
demand for certain properties in this market. The Company continues to
liquidate unprofitable operations in this region. The reduction of parcels
sold in the Midwest geographic region is a result of a change in product mix
from back and interior parcels to waterview and waterfront parcels.
The substantial increase in the average sales price per parcel from September
26, 1993 to September 25, 1994 in the Midwestern, Southeastern and Southwestern
regions was attributable, in large part, to the sale of real estate at higher
than historical selling prices from the sale of lake front properties.
During the second quarter of fiscal 1995, the Company's housing operation
generated 43 sales at an average sales price of $80,607 contributing a total of
$3.5 million in sales revenue, or approximately 13.7% of total consolidated
revenues from sales of real estate. The 43 sales consist of 41 manufactured
homes with an average sales price of $76,037 and 2 site-built homes with an
average sales price of $174,289. In addition, at September 25, 1994, there was
$8.2 million in backlog of home sales for future delivery representing 64
contracts. There was no backlog of homes at the end of the second quarter of
the prior year.
Prior to the deferral of $838,000 in revenues under the percentage of
completion method of accounting, the Company's timeshare project generated
revenues of $2.1 million from the sale of 325 units which reflects an average
sales price per unit of $6,624 for the second quarter of fiscal 1995. Net of
deferred revenues, timeshare sales of $1.3 million for the period represent
approximately 5.2% of consolidated revenues from the sale of real estate.
The Company's housing and timeshare operations reflect characteristics that
differ from the core retail land sales business with respect to the gross
margins that are generated. The housing and timeshare operations generated
gross margins for the three months ended September 25, 1994 of 12% and 70%,
respectively. These operations, when combined with the 59% margins produced by
the core retail land sales business, reduced the overall consolidated gross
margin to 53% for the current period.
17.
<PAGE> 18
The tables set forth below outline sales by geographic region and product type
for the three months ended on the dates indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 25, 1994
-----------------------------------------------------------------------------------
GEOGRAPHIC REGION LAND HOUSING TIMESHARE TOTAL %
----------------- ------------ ----------- ----------- ------------ ------
<S> <C> <C> <C> <C> <C>
Northeast . . . . . $ 813,600 $ --- $ --- $ 813,600 3.2 %
Mid-Atlantic . . . 1,876,179 --- --- 1,876,179 7.4
Southeast . . . . . 2,376,599 1,775,111 --- 4,151,710 16.4
Midwest . . . . . . 2,590,903 --- 1,314,402 3,905,305 15.4
Southwest . . . . . 9,804,566 348,577 --- 10,153,143 40.0
West . . . . . . . 3,109,775 1,342,423 --- 4,452,198 17.5
Canada . . . . . . 31,735 --- --- 31,735 .1
------------ ----------- ----------- ----------- -----
Totals . . . . . . $ 20,603,357 $ 3,466,111 $ 1,314,402 $25,383,870 100.0 %
============ =========== =========== =========== =====
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 26, 1993
-------------------------------------
GEOGRAPHIC REGION TOTAL LAND %
----------------- ------------ --------
<S> <C> <C>
Northeast . . . . . $ 703,500 3.9 %
Mid-Atlantic . . . 2,235,778 12.5
Southeast . . . . . 2,312,010 13.0
Midwest . . . . . . 3,923,268 22.1
Southwest . . . . . 5,993,780 33.7
West . . . . . . . 2,544,868 14.3
Canada . . . . . . 85,195 .5
------------ -----
Totals . . . . . . $ 17,798,399 100.0 %
============ =====
</TABLE>
Interest income decreased 10.1% to $1.8 million for the second quarter of
fiscal 1995 compared to $2.0 million for the same quarter of fiscal 1994. The
decrease in interest income was primarily attributable to a $239,000 reduction
in the amount of interest accreted on the Company's investment in its REMIC
securities. The Company's investment in REMIC securities decreased from $25.0
million at September 26, 1993 to $17.0 million at September 25, 1994 due to the
retirement of the 1989 REMIC securities. Interest earnings on the Company's
Receivables portfolio remained relatively flat at approximately $1.0 million
for both periods. The average interest rate earned on the Company's
Receivables portfolio increased slightly from 11.0% at September 26, 1993 to
11.5% at September 25, 1994. The average interest rate earned on the Company's
Receivables will increase in the upcoming quarters due to indexing of the
portfolio on the anniversary dates of individual prime- based adjustable rate
Receivables.
S,G&A expense totaled $9.9 million and $6.9 million for the three months ended
September 25, 1994 and September 26, 1993, respectively. As a percentage of
sales of real estate, S,G&A expenses were 38.8% and 39.0% for the three months
ended September 25, 1994 and September 26, 1993, respectively. S,G&A expenses
includes increased field operating expenses (a significant portion of which are
variable in relation to sales and profitability levels) which rose
proportionately with the corresponding growth in sales of real estate.
Economies in field operating expenses achieved through the increased sales
volume were mitigated by increased start-up costs associated with the Company's
timeshare and housing operations, land sales expansion and increased expense
attributable to profit-based compensation for certain regional managers.
General and administrative expenses associated with corporate overhead remained
flat at approximately $2.1 million for both periods.
Interest expense totaled $1.7 million and $1.9 million for the second quarter
of fiscal 1995 and 1994, respectively. The slight decrease in interest expense
was attributable to approximately $235,000 in non-refundable financing costs
associated with a public debt offering that was withdrawn by the Company in the
second quarter of fiscal 1994. The withdrawal was prompted by alternate
attractive sources of financing being obtained by the Company.
18.
<PAGE> 19
The Company recorded provisions for loan losses totaling $250,000 and $265,000
for the three months ended September 25, 1994 and September 26, 1993,
respectively. During the three months ended September 25, 1994 and September
26, 1993, the Company charged $217,000 and $228,000, respectively, against its
reserves for loan losses.
Income from consolidated operations was $3.5 million and $2.3 million for the
three months ended September 25, 1994 and September 26, 1993, respectively.
The improvement for the current period is primarily the result of increased
sales of real estate at higher gross margins attributable to the Company's core
retail land sales business.
Gains and losses from sources other than normal operating activities of the
Company are reported separately as other income (expense). Other income for
the second quarter of fiscal 1994 includes non-recurring income of
approximately $247,000 associated with the settlement of certain litigation and
a gain of approximately $100,000 on the sale of property and equipment. Other
income for the second quarter of fiscal 1995 was not material to the Company's
results of operations.
The Company recorded a tax provision of 41% of pre-tax income for the three
months ended September 25, 1994, which represents an increase in the effective
rate from the provision of 38% of pre-tax income recorded for the three months
ended September 26, 1993. The increase in the effective tax rate for the
current period is due to state income taxes which reflect the full utilization
of certain of the Company's net operating loss carryforwards associated with
state income taxes in fiscal 1994.
Net income was $2.1 million and $1.7 for the three months ended September 25,
1994 and September 26, 1993, respectively.
19.
<PAGE> 20
Comparison of Six Months Ended September 25, 1994 and September 26,1993.
The following table sets forth the respective results of operations for the
various business units comprising the consolidated operations of the Company
for the six months ended September 25, 1994. The Company was not involved in
timeshare operations and housing operation activity was not material during the
six months ended September 26, 1993. Accordingly, separate results of
operations for the first two quarters of fiscal 1994 are not presented.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
SIX MONTHS ENDED SEPTEMBER 25, 1994
-----------------------------------------------------------------------------------
LAND HOUSING TIMESHARE TOTAL
------------------ --------------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales of real estate . . . . . . $ 39,296 100.0 % $ 6,269 100.0 % 1,863 (2) 100.0 % $ 47,428 100.0%
Cost of real estate sold . . . . 16,734 42.6 5,300 84.5 580 31.1 22,614 47.7
-------- --------- -------- ---------- ----- -------- -------- -----
Gross profit . . . 22,562 57.4 969 15.5 1,283 68.9 24,814 52.3
Selling, general and
administrative
expense (1) . . . . . . . . . . . 15,298 38.9 1,335 21.3 1,906 102.3 18,539 39.1
Interest (income) . . . . . . . . (3,169) (8.1) --- --- (38) (2.0) (3,207) (6.8)
Interest expense . . . . . . . . 3,422 8.7 75 1.2 (57) (3.1) 3,440 7.2
Provision for losses . . . . . . 415 1.1 --- --- --- --- 415 .9
------- --------- -------- ---------- ----- -------- -------- -----
15,966 40.6 1,410 22.5 1,811 97.2 19,187 40.4
------- --------- -------- ---------- ----- -------- -------- -----
Income/(loss) from
operations . . . . . . . . . . . 6,596 16.8 (441) (7.0) (528) (28.3) 5,627 11.9
Other income . . . . . . . . . . 82 38 9 129
-------- -------- -------- ---------- ----- -------- -------- -----
Income/(loss) before
income taxes . . . . . . . . . . 6,678 (403) (519) 5,756
Provision/(benefit) for
income taxes . . . . . . . . . . 2,738 (165) (213) 2,360
-------- -------- ----- --------
Net income/(loss) . . . . . . . . $ 3,940 10.0 % $ (238) (3.8) % (306) (2) (16.4) % $ 3,396 7.2%
======== ======== ======== ========== ====== ========== ======== =======
</TABLE>
_________________
(1) Aggregate general and administrative expenses associated with corporate
overhead of approximately $4.2 million have been allocated to the land,
housing and timeshare operations in the amounts of $3.6 million, $404,000
and $244,000, respectively.
(2) The Company's timeshare project generated revenues of $2.7 million from the
sale of 398 units which reflects an average sales price per unit of $6,787
for the six months ended September 25, 1994. The figures reported above
exclude $838,000 of interval sales and $486,000 of operating income which
have been deferred under the percentage of completion method of accounting.
Consolidated sales of real estate increased 52.4% to $47.4 million for the six
months ended September 25, 1994 compared to $31.1 million for the six months
ended September 26, 1993.
20.
<PAGE> 21
The following table sets forth certain information regarding sales of parcels
associated with the Company's retail land operations for the periods indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
-----------------------------------------
SEPTEMBER 25, SEPTEMBER 26,
1994 1993
------------- --------------
<S> <C> <C>
Number of parcels sold (1) . . . . . . . . . 1,262 1,268
Average sales price per parcel (1) . . . . . $ 31,471 $ 23,955
Gross margins on retail land sales . . . . . 57% 53%
</TABLE>
(1) Calculated by including sales of real estate deferred under the percentage
of completion method of accounting during the respective periods. The
average sales price per parcel, exluding the effects of deferred sales, was
$31,138 and $24,365 for the six months ended September 25, 1994 and
September 26, 1993, respectively. See table to follow outlining number of
parcels sold by geographic region.
The Company's Investment Committee, consisting of executive officers, approve
all property acquisitions. All land properties under contract for purchase are
expected to achieve certain minimum economics including a gross margin of at
least 55% of sales. Due to improved regional conditions in many of the
Company's principal markets, gross margins have strengthened from the targeted
55%. While management expects to continue to achieve the targeted 55% level,
no assurances can be given that this trend will continue. However, the sale of
certain inventory acquired prior to the formation of the Investment Committee
or sales of inventory reacquired through foreclosure or deed in lieu of
foreclosure will continue to adversely affect overall gross margins.
Specifically, the Company anticipates little or no gross margins on the sale of
the remaining $4.0 million of net inventory holdings in the Northeast. The
Company continues to liquidate its Northeast inventory.
The table set forth below outlines the numbers of parcels sold and the average
sales price per parcel for the Company's land operations by geographic region
for the six months ended on the dates indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------------------------------------
SEPTEMBER 25, 1994 SEPTEMBER 26, 1993
------------------ ------------------
AVERAGE AVERAGE
NUMBER OF SALES PRICE NUMBER OF SALES PRICE
GEOGRAPHIC REGION PARCELS SOLD PER PARCEL (1) PARCELS SOLD PER PARCEL (1)
----------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Northeast . . . . . . . 66 $ 22,306 70 $ 17,052
Mid-Atlantic . . . . . 137 22,872 199 22,342
Southeast . . . . . . . 158 30,744 170 22,005
Midwest . . . . . . . . 180 30,643 243 21,245
Southwest . . . . . . . 558 34,626 446 25,558
West . . . . . . . . . 151 35,104 134 32,451
Canada . . . . . . . . 12 9,627 6 14,199
----- -------- ----- --------
Totals . . . . . . . . 1,262 $ 31,471 1,268 $ 23,955
===== =====
</TABLE>
(1) Calculated by including sales of real estate deferred under the percentage
of completion method of accounting during the respective periods.
21.
<PAGE> 22
The Company has experienced a significant increase in the number of parcels
sold in the Southwest and intends to continue expansion in this area subject to
changing market conditions. Moreover, management expects increased sales
activity in the West in future quarters due to recent acquisitions of inventory
in this region. The number of parcels sold in the Northeast geographic region
(comprised of New York, New Hampshire, Maine, Vermont, Connecticut and
Massachusetts) reflects the soft economy in that region and the Company's
ongoing effort to de-emphasize its operations in the Northeast in favor of a
broader geographic distribution. The Company intends to continue to reduce
inventory in the Northeast while increasing inventory in geographic areas with
more stimulated real estate market conditions. The reduction in parcels sold in
the Mid-Atlantic geographic region resulted from decreased demand for certain
properties in this market. The Company continues to liquidate unprofitable
operations in this region. The reduction in the number of parcels sold in the
Midwest geographic region is a result of a change in product mix from back and
interior parcels to waterview and waterfront parcels.
The substantial increase in the average sales price per parcel from September
26, 1993 to September 25, 1994 in the Midwestern and Southwestern regions was
attributable, in large part, to the sale of real estate at higher than
historical selling prices from the sale of lake front properties.
During the six months ended September 25, 1994, the Company's housing operation
generated 80 sales at an average sales price of $78,365 contributing a total of
$6.3 million in sales revenue, or approximately 13.2% of total consolidated
revenues from sales of real estate. The 80 sales consist of 76 manufactured
homes with an average sales price of $73,512 and 4 site-built homes with an
average sales price of $170,569. In addition, at September 25, 1994, there was
$8.2 million in backlog of home sales for future delivery representing 64
contracts. There was no backlog of homes at the end of the second quarter of
the prior year.
Prior to the deferral of $838,000 in revenues under the percentage of
completion method of accounting, the Company's timeshare project generated
revenues of $2.7 million from the sale of 398 units which reflects an average
sales price per unit of $6,787 for the six months ended September 25, 1994. Net
of deferred revenues, timeshare sales of $1.9 million for the period represent
approximately 3.9% of consolidated revenues from the sale of real estate.
The Company's housing and timeshare operations reflect characteristics that
differ from the core retail land sales business with respect to the gross
margins that are generated. The housing and timeshare operations generated
gross margins for the six months ended September 25, 1994 of 15% and 69%,
respectively. These operations, when combined with the 57% margins produced by
the core retail land sales business, reduced the overall consolidated gross
margin to 52% for the current period.
22.
<PAGE> 23
The tables set forth below outline sales by geographic region and geographic
type for the six months ended on the dates indicated.
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 25, 1994
-----------------------------------------------------------------------------------
GEOGRAPHIC REGION LAND HOUSING TIMESHARE TOTAL %
----------------- ------------ ----------- --------- ----- -------
<S> <C> <C> <C> <C> <C>
Northeast . . . . . $ 1,472,200 $ --- $ --- $ 1,472,200 3.1 %
Mid-Atlantic . . . 3,133,479 --- --- 3,133,479 6.6
Southeast . . . . . 4,857,528 3,058,142 --- 7,915,670 16.7
Midwest . . . . . . 5,214,979 --- 1,862,792 7,077,771 14.9
Southwest . . . . . 19,202,003 682,277 --- 19,884,280 41.9
West . . . . . . . 5,300,643 2,528,788 --- 7,829,431 16.5
Canada . . . . . . 115,528 --- --- 115,528 .3
------------ ----------- ----------- ----------- -----
Totals . . . . . . $ 39,296,360 $ 6,269,207 $ 1,862,792 $47,428,359 100.0 %
============ =========== =========== =========== =====
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 26, 1993
-----------------------------------
GEOGRAPHIC REGION TOTAL LAND %
----------------- ------------ --------
<S> <C> <C>
Northeast . . . . . $ 1,193,650 3.9 %
Mid-Atlantic . . . 4,857,774 15.6
Southeast . . . . . 3,740,850 12.0
Midwest . . . . . . 5,965,263 19.2
Southwest . . . . . 10,775,582 34.6
West . . . . . . . 4,497,670 14.4
Canada . . . . . . 85,195 .3
------------ -----
Totals . . . . . . $ 31,115,984 100.0 %
============ =====
</TABLE>
Interest income decreased 13.5% to $3.2 million for the first two quarters of
fiscal 1995 compared to $3.7 million for the same period of fiscal 1994. The
decrease in interest income is due primarily to a charge of $411,000 associated
with non-recurring transaction costs of the 1994 REMIC. The charge is included
as an offset to interest income in the Consolidated Statement of Income for the
six months ended September 25, 1994. Interest earnings on the Company's
Receivables portfolio remained relatively flat at approximately $2.0 million
for both periods. The average interest rate earned on the Company's
Receivables portfolio increased slightly from 11.0% at September 26, 1993 to
11.5% at September 25, 1994 while the average balance of Receivables decreased
slightly. The Company anticipates that the average interest rate earned on the
Company's Receivables will increase in the upcoming quarters due to indexing of
the portfolio on the anniversary dates of individual prime-based adjustable
rate Receivables.
S,G&A expense totaled $18.5 million and $12.8 million for the six months ended
September 25, 1994 and September 26, 1993, respectively. As a percentage of
sales of real estate, S,G&A expenses were 39.1% and 41.1% for the six months
ended September 25, 1994 and September 26, 1993, respectively. The increase in
the dollar amount of S,G&A expense is attributable to field operating expenses
(a significant portion of which are variable in relation to sales and
profitability levels) increasing with the corresponding growth in sales of real
estate. Economies in field operating expenses achieved through the increased
sales volume were mitigated by increased start-up costs associated with the
Company's timeshare and housing operations, land sales expansion and increased
expense attributable to profit-based compensation for certain regional
managers. General and administrative expenses associated with corporate
overhead remained flat at approximately $4.2 million for both periods.
Interest expense totaled $3.4 million and $3.5 million for the first two
quarters of fiscal 1995 and 1994, respectively. The slight decrease in
interest expense was attributable to approximately $235,000 in non-refundable
financing costs associated with a public debt offering that was withdrawn by
the Company, coupled with $264,000 of interest accrued on deferred taxes during
the prior fiscal period. Such costs were somewhat offset during the current
period by a rise in interest expense associated with increased average
outstanding borrowings.
23.
<PAGE> 24
The Company recorded provisions for loan losses totaling $415,000 for each of
the six months ended September 25, 1994 and September 26, 1993. In addition to
the provision recorded for the six months ended September 25, 1994, the Company
also increased the reserve by $114,000 to provide for possible losses on
certain non-conforming notes excluded from the 1994 REMIC. These loans were
reacquired in connection with the early retirement of mortgage-backed
securities issued under the 1989 REMIC. This amount is a component of the
$411,000 net loss on the 1994 REMIC. During the six months ended September 25,
1994 and September 26, 1993, the Company charged $435,000 and $459,000,
respectively, against its reserves for loan losses.
Income from consolidated operations was $5.6 million and $3.4 million for the
six months ended September 25, 1994 and September 26, 1993, respectively. The
improvement for the current period is primarily the result of increased sales
of real estate at higher gross margins attributable to the Company's core
retail land sales business.
Gains and losses from sources other than normal operating activities of the
Company are reported separately as other income (expense). Other income for
the six months ended September 26, 1993 includes, among other items,
non-recurring income of approximately $800,000 associated with the settlement
of certain litigation. Other income for the six months ended September 25,
1993 was not material to the Company's results of operations.
The Company recorded a tax provision of 41% of pre-tax income for the six
months ended September 25, 1994, which represents an increase in the effective
rate from the provision of 38% of pre-tax income recorded for the six months
ended September 26, 1993. The increase in the effective tax rate for the
current period is due to state income taxes which reflect the full utilization
of certain of the Company's net operating loss carryforwards associated with
state income taxes in fiscal 1994.
Net income was $3.4 million and $2.7 for the six months ended September 25,
1994 and September 26, 1993, respectively.
24.
<PAGE> 25
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Certain legal proceedings have been previously described in Item 1
under the caption "Business - Regulation" and Item 3 under the caption
"Legal Proceedings" in the Company's Annual Report on Form 10-K for
the fiscal year ended March 27, 1994. Certain of the claims,
proceedings or disputes referred to therein have passed the
administrative or demand stage and have resulted in civil lawsuits.
However, there has been no significant change in the status of any
material proceedings.
ITEM 2. CHANGES IN SECURITIES
On April 15, 1994, the Company declared a 4% Common Stock dividend
consisting of 711,076 shares of its common stock, which was paid on
May 31, 1994 to shareholders of record at the close of business on May
2, 1994 (the "Stock Dividend"). In connection with the Stock
Dividend, $2,812 in the aggregate was paid to certain shareholders of
record in lieu of fractional shares. The weighted average number of
common and common equivalent shares used to calculate primary and
fully diluted net income per common share has been adjusted in the
consolidated statements of income to give effect to the stock
dividend, including retroactive restatement of the net income per
common share amounts for the three and six months ended September 26,
1993.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Special Meeting in Lieu of the Annual Meeting of Shareholders
held on July 27, 1994, the shareholders voted to fix the number of
directors of the Company for the ensuing year at seven (13,384,944
shares were voted for, 166,356 shares withheld, and 66,626 abstentions
and broker non-votes) and to elect each of the following persons as
directors of the Company: Joseph C. Abeles, George F. Donovan, Ralph
A. Foote, Frederick M. Myers, Harry S. Patten, Stuart A. Shikiar and
Bradford T. Whitmore.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.90 - Loan Agreement dated as of August 12, 1994 by and among
Patten Homes, Inc., Patten Corporation and Branch Banking
and Trust Company
10.91 - Amendment dated June 29, 1994 to Amended and Restated
Loan and Security Agreement entered into as of January 9,
1990 by Patten Receivables Finance Corporation VI,
Greyhound Financial Corporation and Patten Corporation as
Guarantor
10.92 - Loan Agreement dated as of June 29, 1994 by and between
Greyhound Financial Corporation and Properties of the
Southwest, Inc.
27 - Financial Data Schedule (for the SEC use only)
(b) Reports on Form 8-K
None
25.
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PATTEN CORPORATION
(Registrant)
Date: November 4, 1994 By: /S/ GEORGE F. DONOVAN
------------------------------
George F. Donovan
President and Chief Executive
Officer
Date: November 4, 1994 By: /S/ ALAN L. MURRAY
------------------------------
Alan L. Murray
Treasurer and Chief Financial
Officer (Principal Financial
Officer)
Date: November 4, 1994 By: /S/ DANIEL C. KOSCHER
------------------------------
Daniel C. Koscher
Vice President, Assistant
Secretary and Chief
Accounting Officer (Principal
Accounting Officer)
26.
<PAGE> 27
PATTEN CORPORATION
QUARTERLY REPORT ON FORM 10-Q
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description of Exhibit
- - - - ------- ----------------------
<S> <C>
10.90 Loan Agreement dated as of August 12, 1994 by and among Patten Homes, Inc., Patten Corporation and Branch Banking
and Trust Company
10.91 Amendment dated June 29, 1994 to Amended and Restated Loan and Security Agreement entered into as of January 9,
1990 by Patten Receivables Finance Corporation VI, Greyhound Financial Corporation and Patten Corporation as
Guarantor
10.92 Loan Agreement dated as of June 29, 1994 by and between Greyhound Financial Corporation and Properties of the
Southwest, Inc.
27 Financial Data Schedule (for the SEC use only)
</TABLE>
<PAGE> 1
Exhibit 10.90
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of the 12th day of August, 1994 (the
"Loan Agreement"), is by and among
PATTEN HOMES, INC., a Delaware corporation, (the "Borrower") with a
place of business in Cabarrus County, North Carolina;
PATTEN CORPORATION, a Massachusetts corporation, (the "Guarantor")
with its principal place of business in Boca Raton, Florida; and
BRANCH BANKING AND TRUST COMPANY, a banking corporation organized and
existing under the laws of the State of North Carolina with offices in
Charlotte, North Carolina (the "Bank")
RECITALS
A. The Borrower has applied to the Bank for a line of credit in a
principal amount of up to $5,000,000 (the "Loan" or "Line of Credit") to be
advanced by the Bank pursuant to the terms hereof.
B. The Borrower will use the proceeds of the loan to acquire lots
from Guarantor and to construct single family residences on land in Cabarrus
County, North Carolina and known as "Bradford Park" subdivision (the
"Project"), or for other purposes approved by Bank.
C. The Bank is willing to make the loan described hereinabove based
on the terms and conditions set forth in this Loan Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the Borrower and the Bank hereby agree as
follows:
ARTICLE I
Definitions
1.1 For the purposes hereof:
(a) "Advance Note" means each promissory note of the Borrower
dated as of the date of each Deed of Trust in favor of the Bank in the
principal amount requested by the Borrower to finance construction of
the Improvements for each separately described and subdivided lot, as
well as any promissory note or notes issued by the Borrower in
substitution, replacement, extension, amendment or renewal of any such
promissory note or notes;
(b) "Closing Date" means the date as of which this Loan
Agreement is executed by the Borrower and the Bank;
(c) "Completion Date" means the date upon which the Bank has
received evidence satisfactory to it that the Improvements described
in each Deed of Trust have been completely installed in accordance
with the Plans and certificates of completion have been issued by the
General Contractor or by an individual acceptable to the Bank;
(d) "Construction Inspector" means an architectural or
engineering firm or a Bank employee acceptable to the Bank, to be
engaged by the Bank at the Borrower's expense as provided herein to
perform various services on behalf of the Bank including examination
of the Plans and changes thereto,
<PAGE> 2
examination of cost break-downs and estimates, periodic
inspections on the Bank's behalf, and advising and rendering periodic
reports to the Bank concerning the same; provided that the Bank
reserves the right to designate an independent construction inspector
if necessary in the Bank's sole opinion;
(e) "Deed of Trust" means the deed of trust and security
agreement dated as of the date of each corresponding Advance Note
executed by the Borrower for the benefit of the Bank securing the
portion of the Land and fixtures more particularly described therein;
(f) "Event of Default" shall have the meaning given to such
term in Article VII hereof;
(g) "Generally Accepted Accounting Principles" means those
principles of accounting set forth in pronouncements of the Financial
Accounting Standards Board of the American Institute of Certified
Public Accountants or which have other substantial authoritative
support and are applicable in the circumstances as of the date of a
report, as such principles are from time to time supplemented and
amended.
(h) "Guaranty" means the guaranty dated as of the Closing Date
pursuant to which the Guarantor guarantees payment of the Loan as
described and pursuant to the terms and provisions contained therein;
(i) "Governmental Authorities" means any governmental
(including health and environmental) office, officer or official whose
consent or approval is required as a prerequisite to the commencement
of the grading or other development of the Land or to the commencement
of the construction of the Improvements or to the performance of any
act or obligation or the observance of any agreement, provision or
condition of whatever nature herein contained;
(j) "Improvements" means all improvements placed on the Land
by the Borrower in connection with its development, as will be
described in the Plans;
(k) "Indebtedness" means, with respect to any Person, all
indebtedness of such Person for borrowed money, all indebtedness of
such Person for the acquisition of property other than purchases of
products or merchandise in the ordinary course of business,
indebtedness secured by any Lien on the property of such Person
whether or not such indebtedness is assumed, all liability of such
Person by way of endorsements (other than for collection or deposit in
the ordinary course of business), all contingent liabilities required
to be presented in the financial statements of such Person in
accordance with Generally Accepted Accounting Principles, all leases
and other items which in accordance with Generally Accepted Accounting
Principles are classified as capitalized leases or liabilities,
respectively, on a balance sheet and all liabilities and obligations
of the Borrower to make contributions to all employee benefit Plans
which it maintains under Title IV of ERISA;
(l) "Land" shall mean the land in Cabarrus County, North
Carolina and known as "Bradford Park" subdivision. In addition,
depending on the context, Land, where used herein, may refer to the
individual lot secured by a Deed of Trust given in connection with an
Advance Note.
(m) "Loan Documents" means this Loan Agreement, each Advance
Note, each Deed of Trust, the Guaranty, and all other documents as
required by the Bank, as the same may be amended and modified from
time to time;
(n) "Maturity Date" means June 30, 1995;
(o) "Person" means an individual, partnership, corporation,
trust, unincorporated organization, association, joint venture or a
government or agent, instrumentality or political subdivision thereof;
(p) "Plans" means plans and specifications for the development
of the Land and the construction and installation of the Improvements
prepared by an engineer or other professional approved by the Bank,
and including such amendments thereto as may from time to time be made
by Borrower and approved by the Bank, and incorporated herein by
reference;
2.
<PAGE> 3
(q) "Prime Rate" or "Bank's Prime Rate" means the rate of
interest per annum publicly announced by the Bank in Charlotte, North
Carolina as its prime lending rate in effect from time to time, which
rate is not necessarily the best or lowest rate offered by the Bank;
(r) "Property" means the collective reference to the
Improvements and the Land as described herein; and
ARTICLE II
The Loan
2.1 Loan Terms.
(a) Subject to the terms and conditions of this Loan
Agreement, and for the purpose set forth in Recital B hereof, the Bank
will lend and the Borrower will borrow up to a principal sum of
$5,000,000, such borrowing to be evidenced by this Loan Agreement, and
each Advance Note. Disbursements under an Advance Note may only be
used to acquire Lots and construct improvements on the Land described
in each Deed of Trust given to secure that Advance Note.
(b) The principal balance outstanding from time to time under
this Loan Agreement and each Advance Note shall bear interest at a
variable rate ("Variable Interest Rate") equal to the Prime Rate plus
three quarters of one percent (.75%) per annum. The interest rate
hereunder shall change as of the same date the Prime Rate changes.
Interest shall be computed on the basis of a 360-day year on the
actual number of days the principal is outstanding during the interest
period.
(c) Accrued interest outstanding on each Advance Note only
shall be payable monthly on the first day of each month following the
Closing Date. Principal and accrued interest outstanding on each
Advance Note shall be repayable in full one year after the closing
date of each Advance Note.
(d) Borrower may prepay the outstanding Loan balance, in whole
or in part, at any time from time to time and in any appropriate place
without prepayment fee or penalty.
(e) Until repaid, the maximum amount of each Advance Note
shall be reserved against and act as a reduction of the credit
available under the Line of Credit. Subject to this credit
availability, the Borrower may not have more than 25 residences under
construction at the Property at any one time, the construction of
which is being financed by the Line of Credit. No more than 8 of the
25 residences under construction at the Property at any one time by
the Borrower may be built on a speculative basis (i.e., without a
signed sales contract containing only standard contingencies).
(f) An origination fee of one half of one percent of the
maximum principal amount of each Advance Note will be payable by the
Borrower to the Bank at the closing of each Advance Note. In the event
of extension of the time of maturity of any of the Advance Notes, then
each such extension shall require the payment of a fee of one half of
one percent of the outstanding principal balance of the Advance Note.
2.2 Disbursements. The Bank agrees that it will from time to time
until the Maturity Date, and so long as the Borrower is not in default under
any of the Loan Documents, but not more frequently than once a month, disburse
Loan proceeds for each Advance Note to the Borrower. The conditions set forth
in Article III hereof must be satisfied before the Bank will make the first
advance or disbursement for each Advance Note. The conditions set forth in
Section 4.1 hereof must be satisfied before the Bank will make each subsequent
disbursement or advance, and the conditions set forth in Section 4.2 hereof
must be satisfied, in addition to the conditions in Section 4.1, before the
final disbursement or advance will be made for each Advance Note. Waiver of a
condition for any one disbursement shall not constitute a waiver of that
condition for any future disbursements or for any other Advance Note.
3.
<PAGE> 4
2.3 Draw Requests. Prior to each Loan disbursement by the Bank, the
Borrower must submit to the Bank:
(a) A Draw Request in format acceptable to Bank for each
Advance Note for which funds are requested, which shall include
information acceptable to Bank regarding the disbursement, its
intended uses and the status of construction.
(b) Upon request of the Bank, a Draw Request shall include
originals of AIA Documents G702 and AIA Document G703.
Inspections may be made of the Property each month during the
term of the Loan by qualified construction experts selected by Bank.
Additional inspections may be made as determined by the Bank in its
sole discretion.
2.4 Disbursement Amount. Following a request by Borrower for a Loan
disbursement under an Advance Note, the Bank shall determine the amount of the
disbursement it will make in accordance with the following standards:
Disbursements under each Advance Note will be made in an
amount equal to the percentage of the amount of work completed on the
portion of the Land described in the Deed of Trust securing the
Advance Note minus the amounts of previous disbursements on such
Advance Note and required equity. The amount advanced under each
Advance Note shall not exceed eighty percent (80%) of the appraised
value of any pre-sold lots and improvements and seventy-five percent
(75%) of the appraised value of any lots and improvements built on a
speculative basis.
2.5 Value of Work in Place. The value of work and material in place
at any time shall be determined by the Bank in its reasonable discretion and
shall be binding on Borrower.
2.6 Loan Disbursements. All Loan disbursements are to be made at the
Charlotte office of the Bank located at 200 South Tryon Street or at such other
place as the Bank may designate and shall be made by depositing same in
Borrower's account with the Bank or by the Bank's official check, or such other
method to which the parties may mutually agree.
2.7 Equity Requirements. If the Bank at any time determines in its
reasonable discretion that the Loan proceeds remaining to be disbursed
scheduled to be made after that time are not sufficient to pay the cost of
developing the land and installing the Improvements as described in Borrower's
Plans approved by the Bank, the Bank shall have the option of requiring the
Borrower to deposit with the Bank funds from other sources sufficient to cover
the resulting deficit before the Bank will disburse any additional Loan
proceeds. Such funds shall be advanced as construction progresses in accordance
with this Loan Agreement before any or any additional Loan disbursements are
made.
2.8 Option to Pay Contractors. After an Event of Default or upon
request by the Borrower to the Bank, the Bank may make all Loan disbursements
directly to the General Contractor or any unpaid subcontractor, laborer or
material supplier providing labor, services or materials in connection with the
installation of the Improvements, and the execution of this Loan Agreement by
Borrower shall, and hereby does, constitute an irrevocable direction and
authorization to so disburse the funds. No further direction or authorization
from Borrower shall be necessary to warrant such direct disbursements and all
such disbursements shall be secured by each Deed of Trust as fully as if made
to Borrower, regardless of the disposition thereof by the General Contractor,
any subcontractor, laborer or material supplier so paid.
4.
<PAGE> 5
ARTICLE III
Conditions Precedent to First Disbursement
The Bank shall not be obligated to make the first Loan disbursement
for any Advance Note until all of the following conditions have been satisfied
by proper evidence, execution and/or delivery to the Bank of the following
items, all in form and substance satisfactory to the Bank and the Bank's
counsel:
3.1 Note. An Advance Note as described in Article I hereof
evidencing the terms of the Loan.
3.2 Deed of Trust. The Deed of Trust which shall be of first lien or
title priority on that subdivided portion of the Property where the
Improvements are to be constructed with the proceeds of such Advance Note, for
the full amount of the Loan and shall also be a security agreement securing all
fixtures thereon. The recorded document shall be submitted to the Bank as soon
as possible after recording.
3.3 Guaranty. The Guaranty executed by the Guarantor.
3.4 Title Policy. A standard ALTA mortgagee policy as to the
Property, from a company or from companies approved by the Bank V providing
coverage for the full principal amount of the Advance Note and containing no
title exceptions for matters of survey or exceptions not approved by the Bank.
3.5 Title Exceptions. Copies of all recorded documents creating
exceptions to the Title Policy.
3.6 Survey.
(a) One copy of a recent survey of the Land, signed and certified by a
registered engineer or land surveyor acceptable to the Bank. Such survey shall
show all boundaries of the Land with courses and distances indicated, including
chord bearings and arc and chord distances for all curves, and shall show
dimensions and locations of all existing improvements and of all easements,
private drives, roadways, encroachments, utility and transmission lines, and
shall show the distances to, and names of the nearest intersecting streets, and
other facts in any way affecting the Land, and shall show such other details as
the Bank may request. The survey must show at least the same amount of Land as
depicted in the Plans. Survey discrepancies of any nature must be corrected or
waived by the Bank. Survey will not be required if Title Insurer will issue
policy without exceptions to surveys;
(b) One copy of a recent survey of that part of the Land, generally in
the form of a subdivided lot subject to the applicable Deed of Trust, signed
and certified by a registered engineer or land surveyor acceptable to the Bank
and complying with the requirements of 3.6(a) above relating to said lot;
(c) The surveyor should provide a flood hazard certification to the
Bank that improvements will not be located in an area designated as a Zone V or
Zone A flood hazard area. In the event that any portion of the Property on
which any improvements are to be constructed is located in a federally
designated flood hazard area, a flood hazard insurance policy from an insurance
company providing insurance acceptable to the Bank and naming the Bank as a
loss payee shall be delivered at closing to Bank.
3.7 Liability Insurance. Policies or-certificates of liability
insurance coverage as to Borrower. The coverage types and amounts must be
reasonably satisfactory to the Bank and satisfactory evidence of premium
payments must also be provided.
3.8 Authority Documents of the Borrower and Guarantor. For each of
the Borrower and the Guarantor: (a) certificates of good standing from the
Secretary of State of North Carolina and the Secretary of State of their
respective states of incorporation; and (b) borrowing resolutions in form and
substance acceptable to the Bank.
3.9 Attorney's Opinion. Upon request, and initially at the Closing
Date, the written opinion of counsel to the Borrower and the Guarantor
acceptable to Bank and Poyner & Spruill, L.L.P., its special counsel.
3.10 Compliance with Laws. Upon request, and initially at the Closing
Date, evidence that the Land and the intended uses of the Land are in
compliance with all applicable laws, regulations and ordinances. Such evidence
may include letters, licenses, permits, certificates and other correspondence
from the appropriate Governmental Authorities, and opinions of Borrower's
counsel or other counsel. The laws, regulations and ordinances with which
5.
<PAGE> 6
compliance should be evidenced include, without limitation, the following:
health and environmental protection laws, erosion control ordinances, private
sewer plant laws and regulations, doing business and/or licensing laws and
zoning laws (the evidence submitted as to zoning should include the zoning
designation made for the Land, the permitted uses of the Land under such zoning
designation and zoning requirements as to parking, lot size, ingress, egress
and building setbacks).
3.11 Taxes. Evidence that the Land is, or will be, assessed for tax
purposes and information as to tax identification numbers, tax rates, estimated
tax values and the identities of the taxing authorities; and evidence that all
taxes and assessments affecting the Property or any part thereof, due and
payable as to prior years, have been discharged or paid in full whether or not
such items are confirmed, payable in installments or constitute a lien against
the Property or any part thereof.
3.12 Utilities. Upon request of Bank, evidence of the availability
and suitability of the water and sewer utilities needed to properly serve the
Property and each lot financed in its intended use.
3.13 Plans and Specifications. Two sets of the Plans. The Plans must
have been approved in writing by Borrower and certified by an engineer or
registered land surveyor.
3.14
3.15 Subdivision Plat. A copy of the recorded subdivision plat for
the Property or for each phase of development, which must comply with the
requirements of all applicable subdivision ordinances.
3.16
3.17 Environmental Audit.
3.18 Miscellaneous. All other Loan Documents or items that are
customarily provided in loan transactions of this type.
3.19 No Default. No uncured Event of Default, as hereafter defined,
nor any event which, upon notice or lapse of time, or both, would constitute an
Event of Default, shall exist.
3.20 Adverse Change. No default shall have occurred and be continuing
to the performance of any obligation in the instrument evidencing or securing
the loan or incidental thereto.
3.21 Loan Fees. The Bank shall have received from the Borrower,
nonrefundable loan fees required herein.
3.22 Appraisal. Prior to closing the Bank will receive two copies of
an original appraisal of the Property performed by an appraiser acceptable to
the Bank, complying with all applicable FDIC, USPAP and FIRREA standards, and
in form and substance satisfactory to the Bank. The Borrower shall pay the cost
of the appraisal.
3.23 Survey. Upon request of the Bank, a foundation survey for the
Improvements acceptable to Bank.
ARTICLE IV
Conditions Precedent to Disbursements
Following the First Disbursement
4.1 Periodic Disbursements. The Bank shall not be obligated to make
any Loan disbursements after the first disbursement until all of the following
conditions have been satisfied:
(a) All of the conditions stated in Article III hereof remain
satisfied, including submission of a Draw Request.
6.
<PAGE> 7
(b) No lien or other interest shall have been permitted to
attach to the Property superior to the interest off the Bank under any
of the Deeds of Trust, except taxes for the current year, mechanics
lien claims bonded over within twenty (20) days after filing, and
other matters acceptable to the Bank.
(c) Development of the Land and installation of the
Improvements has been in accordance with the Plans.
(d) The Title Policy insurer shall have agreed to issue to the
Bank an endorsement to the Title Policy or have otherwise agreed to
insure that since the last preceding disbursement, there has been no
change in the state of the title to the Property, there are no liens
which may take priority over the disbursement to be made and there are
no survey exceptions not theretofore approved by the Bank in writing;
provided, that such endorsements shall not be required prior to each
Loan disbursement if Borrower obtains and submits to the Bank a title
insurance policy that automatically provides title insurance coverage
for the full amount of the outstanding principal balance without the
necessity of such title updates and endorsements to the policy.
(e) Certified copies of grading and other permits necessary to
make the improvements contemplated herein.
(f) A copy of the construction budget projecting the cash
disbursements and build-out schedule.
(g) At the time of each disbursement: (i) the Bank is
satisfied with the progress of construction; and (ii) in the
reasonable opinion of the Bank, the estimated remaining cost of
developing the Land and constructing and installing the Improvements
does not exceed the balance of the Loan to be disbursed.
4.2 Final Construction Disbursements. The Bank shall not be
obligated to make the final disbursement under the Loan until all of the
following additional conditions have been satisfied:
(a) The Land development and installation of the Improvements
have been fully completed in accordance with the Plans and
certificates as to strict completion in accordance with the approved
Plans have been issued by the General Contractor.
(b) The Title Policy insurer shall have agreed to issue to the
Bank the Title Policy or endorsement thereto insuring the principal
balance of the Loan after such final disbursement and containing only
exceptions for possible mechanics' lien claims bonded over within ten
(10) days after filing or other exceptions approved by the Bank,
provided, that such endorsements shall not be required prior to each
Loan disbursement if Borrower obtains and submits to the Bank a title
insurance policy that automatically provides title insurance coverage
for the full amount of the outstanding principal balance without the
necessity of such title updates and endorsements to the policy.
(c) Upon request, as an as-built survey of the individual lot
secured by the Deed of Trust, containing no exceptions unacceptable to
Bank.
ARTICLE V
Releases
5.1 Release Terms and Fees.
So long as no uncured Event of Default, as hereinafter defined, nor
any event which, upon the giving of notice or the lapse of time, or both, would
constitute an Event of Default shall exist, and the Borrower requests the
release of a subdivided lot (according to a plat recorded in the records of the
Cabarrus County Public Registry) of the Land, then as appropriate, the
7.
<PAGE> 8
lien of the Deed of Trust will be canceled or a parcel shall be released from
the lien of the Deed of Trust upon repayment of the Advance Note and submission
to the Bank of documents acceptable to Bank.
ARTICLE VI
Borrower's Representations. Warranties and Covenants
In order to induce the Bank to enter into this Agreement and the other
Loan Documents herein provided for, the Borrower and the Guarantor represent,
warrant and covenant with the Bank (which covenants, representations and
warranties shall survive the delivery of the Loan Documents and the making of
the Loan) as follows:
6.1 Guarantor is and will continue to be a duly organized and
existing corporation created under the laws of the State of Massachusetts and
in good standing and qualified to do business to the extent necessary in the
State of Massachusetts and North Carolina, and in all other jurisdictions where
the nature of the business transacted by it, or the ownership of its property,
makes such licensing or qualification necessary. Guarantor's headquarters and
principal place of business is presently located in Boca Raton, Florida.
Guarantor has as of the date hereof and will continue to have, all requisite
power and authority to own its assets and to carry on its business.
6.2 Borrower is and will continue to be a duly organized and
existing corporation created under the laws of the State of Delaware and in
good standing and qualified to do business to the extent necessary in the
States of Delaware and North Carolina and in all other jurisdictions where the
nature of the business transacted by it, or the ownership of its property,
makes such licensing or qualification necessary. Borrower's headquarters and
principal place of business is presently located in Florida. Borrower has as of
the date hereof, and will continue to have, all requisite power and authority
to own its assets and to carry on its business.
6.3 All financial statements delivered by Borrower and Guarantor to
Bank have been prepared in conformity with generally accepted accounting
principles and fairly present the financial condition and the results of
operations of Borrower and Guarantor at the times and for the periods therein
stated, and, between the date of the financial statements for the year ended
December 31, 1993, and the date of this Agreement, there has been no material
adverse change in the financial condition, the operations or any other status
of Borrower. There are no liabilities, direct or indirect, fixed or contingent,
as of the date of such financial statements, not disclosed by such financial
statements, which are required to be disclosed pursuant to generally accepted
accounting principles.
6.4 Capacity and Standing. Borrower and Guarantor are, and as of the
date of each Advance Note will be, each duly authorized under all applicable
provisions of law to execute and deliver the Advance Notes or the Guaranty and
to execute, deliver and perform this Agreement and all other Loan Documents to
which the Borrower or the Guarantor is a party, and all action on its part
required for the lawful execution, delivery and performance thereof has been
duly taken; and this Agreement, said Advance Notes and all other Loan Documents
to which the Borrower or the Guarantor is a party have been duly authorized,
executed and delivered and constitute the legal, valid and binding instruments
and obligations of the Borrower and the Guarantor enforceable with their terms.
6.5 Violation of Other Agreements. Neither the execution of this
Agreement or any other Loan Document to which the Borrower or Guarantor is a
party, nor the creation or issuance of the Loan Documents nor the fulfillment
of or compliance with their provisions and terms, will conflict with or violate
any provision of law, other agreement, indenture, note, or other instrument
binding upon the Borrower or Guarantor or any Subsidiary of either, or give
cause for the acceleration of any obligations of the Borrower or Guarantor.
6.6 Authority. All authority from and approval by any governmental
body, commission, or agency, State or Federal, necessary to the making or
validity of this Agreement or the Advance Notes has been obtained.
6.7 Asset Ownership. The Borrower and Guarantor have good and
marketable title to all of their respective properties and assets reflected on
the Balance Sheets and Financial Statements supplied to the Bank by the
Borrower and Guarantor.
8.
<PAGE> 9
6.8 Discharge of Liens and Taxes. Borrower and Guarantor have filed
all Federal, state and local franchise and income tax returns required to be
filed by them and all taxes shown thereon have been paid, and no controversy in
respect of additional income taxes, state or Federal, of Borrower or Guarantor
is pending or, to the knowledge of Borrower or Guarantor, threatened.
6.9 Litigation. There is no pending or threatened orders, claims,
actions, investigations or proceedings against or affecting the Borrower or the
Guarantor before any court arbitrator or governmental or administrative body or
agency, which may materially adversely affect the financial condition,
operations, properties, or business of the Borrower, Guarantor or the ability
of the Borrower or the Guarantor to perform its obligations under this
Agreement whether or not covered by insurance. Attached hereto as Exhibit 6.9
is a summary of all material litigation, proceedings and actions pending
against either Borrower or Guarantor.
6.10 Compliance with Laws. Except as to minor or technical violations
which do not impact on operations, the Borrower and the Guarantor have each
complied with, and is in compliance with, all applicable laws, rules and
regulations with respect to: (1) any restrictions, specifications, permits, or
other requirements pertaining to or services that each performs; (2) the
conduct of its business; and (3) the use, maintenance, and operation of the
real and personal properties owned by it or leased by it in the conduct of its
business.
6.11 Solvency. Borrower (i) now has, and after giving effect to each
disbursement will have, capital sufficient to carry on its business and
transactions and all business and transactions in which it is about to engage,
(ii) is and will be able to pay its debts as they mature and (iii) owns
property having a value, both at fair valuation and at present fair saleable
value, greater than the amount required to pay its debts.
6.12 Default. As of the Closing Date, there does not exist any
Default or Event of Default hereunder.
6.13 Existing Indebtedness. Neither the Borrower nor the Guarantor
are in Default with respect to any existing Indebtedness.
6.14 Development. Borrower will continue conscientiously the
development of the Land and the installation of the Improvements subject to the
phasing of the project consistent with the plans delivered to the Bank; and, in
any event, will complete the development in substantial compliance with the
Plans and in compliance with the requirements of all governmental authorities,
free and clear of liens or claims of liens for material supplied or for labor
services performed in connection with the construction of the Improvements
except for those mechanics' lien claims bonded over within ten (10) days after
filing.
6.15 Payment of Contractors. Borrower will advise the Bank in writing
immediately if Borrower receives any notice, written or oral, from any laborer,
contractor, subcontractor or material furnisher to the effect that said
laborer, contractor or material furnisher has not been paid for any labor or
materials furnished to or in the Property. Borrower will deliver to the Bank
within ten days of request, any contracts, bills of sale, statements, receipted
vouchers or agreements, under which Borrower claims title to any materials,
fixtures or articles used in the development of the Land or the installation of
the Improvements.
6.16 Compliance with Plans. Borrower will not permit any material
deviations by any contractor(s) from the Plans.
6.17 Subcontractors. Borrower will deliver to the Bank, upon request,
the names of persons with whom General Contractor has contracted or intends to
contract for the development of the Land and the installation of the
Improvements or for the furnishing of labor or materials there for.
6.18 Inspection. Borrower will permit the Bank and its authorized
agents to enter upon the Land during normal working hours and as often as the
Bank desires, for the purpose of inspecting the construction of the Property.
6.19 Fees and Expenses. Whether or not the Loan is made, or all funds
disbursed hereunder, Borrower agrees to pay all expenses incurred by the Bank,
or by Borrower in order to meet the Bank's requirements, in
9.
<PAGE> 10
connection with the Loan (pre- and post-closing), including (without
limitation) fees for recording, title insurance premiums, property taxes,
document and intangible taxes, the Construction Inspector's fees, and such
legal fees as are incurred by the Bank in connection with the making of the
Loan, drafting of any Loan Documents, and the enforcement of the Bank's rights
hereunder. Such legal fees shall be based on the actual amount of time expended
in enforcing the Bank's rights, at the usual hourly rates of Bank's attorneys
notwithstanding the provisions of Section 6-21.2 of the North Carolina General
Statutes. The Bank may pay any such amounts and, if Borrower shall not
reimburse the Bank therefor, the Bank shall in its discretion advance these
funds under the Advance Notes or add the same to the unpaid principal of the
Loan and these amounts shall bear interest at the rate specified in the Advance
Notes.
6.20 Use of Loan Funds. Borrower shall use all Loan proceeds
disbursed to Borrower solely in payment of costs incurred in connection with
acquiring, financing and developing the Land and installing the Improvements,
in accordance with the cost breakdown approved by the Bank.
6.21 Insurance and Taxes.
(a) The Borrower covenants to maintain general accident and
public liability insurance against all claims for bodily injury, death
or property damage occurring upon, in or about any part of the Land.
(b) The Borrower agrees to deliver to the Bank, as additional
security hereto, the original policy of such insurance as is required
by the Bank, or original certificates thereof accompanied by certified
copies of the policies pursuant to subsections (a) hereof and of any
additional insurance which shall be taken out upon the Land while any
part of the Loan shall remain unpaid. Renewals of such policies shall
be so delivered at least ten (10) days before any such insurance shall
expire. The insurance policies are to be in form, for such amounts and
from such insurance companies as are satisfactory to the Bank. The
Borrower hereby assigns the proceeds of any such casualty insurance
policies to the Bank and hereby directs and authorizes each insurance
company to make payment for such loss directly to the Bank.
(c) Upon the request of the Bank, the Borrower shall submit to
the Bank such receipts and other statements which shall evidence, to
the satisfaction of Bank, that all taxes, assessments and insurance
premiums have been paid in full.
6.22 Affirmative Covenants. The Borrower (and where applicable the
Guarantor) covenants and agrees that from the date hereof and until payment in
full of the principal of and interest under the Loan, the Borrower and the
Guarantor each will:
(a) Preserve and maintain its existence in good standing in
the state of its formation, and qualify and remain qualified in each
jurisdiction in which such qualification is required;
(b) Keep adequate records and books of account, in which
complete entries will be made in accordance with Generally Accepted
Accounting Procedures consistently applied, reflecting all financial
transactions of the Borrower and Guarantor;
(c) Maintain, keep and preserve all of its properties
(tangible and intangible), including without limitation the Land and
Improvements necessary or useful in the conducting of its business in
good working order and condition, and, from time to time, make all
needful and proper repairs, renewals, replacements, additions and
improvements thereto, so that the business carried on may be properly
and advantageously conducted at all times in accordance with prudent
business management;
(d) Continue to engage in an efficient and economical manner
in a business of the same general type as now conducted;
(e) Maintain insurance with financially sound and reputable
insurance companies or associations in such amounts and covering such
risks as are usually carried by companies engaged in the same or a
similar business, which insurance may provide for a reasonable
deductible;
10.
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(f) Comply in all respects with all applicable laws, rules,
regulations, and orders to include, without limitation, paying before
the delinquency of, all taxes, assessments, and governmental charges
imposed upon it or upon its property;
(g) Permit the Bank, at any reasonable time, to examine and
make copies of the financial information reasonably requested from the
Borrower, and to visit the properties of the Borrower, and upon
reasonable advance notice to discuss its affairs, finances and
accounts with the officers of the General Partner of the Borrower.
(h) Promptly pay, or cause to be paid, (i) all income and ad
valorem or other property taxes, assessments and other governmental
charges which may lawfully be levied or assessed against the Borrower,
(ii) any lawful claims for labor, material and supplies, and (iii) any
and all amounts required to be paid to all federal, state, local and
other taxing authorities in respect of employee withholdings, except
those being contested in good faith and against which deposits
satisfactory to Bank shall be deposited with it.
(I) (i) Make full and timely payment of the principal of and
interest on the Advance Notes and all other Indebtedness due Bank
whether now existing or hereafter arising; and (ii) duly comply with
all the terms and covenants contained in this Agreement and all other
Loan Documents;
(j) Borrower shall pay when due, declared due or within 30
days of the end of applicable grace periods (provided for in loan
documents signed by the creditor) all Indebtedness for money borrowed
due Persons other than the Bank.
(k) Conform to and duly observe all laws with respect to the
conduct of its business;
(l) Upon an officer of the Guarantor or the Borrower obtaining
knowledge of any material litigation, dispute or proceedings being
instituted or threatened against the Borrower or the Guarantor or any
attachment, levy, execution or other process being instituted against
any assets of the Borrower or the Guarantor, promptly deliver to the
Bank a certificate of a duly authorized officer stating the nature and
status of such litigation, dispute, proceeding, levy, execution or
other process;
(m) As soon as practical and in any event not later than one
hundred twenty (120) days after the end of each fiscal year, each
Borrower and the Guarantor will deliver to the Bank its annual
financial statements including balance sheets as at the end of such
fiscal year, and the notes (if any) thereto, and the related
statements of income and the notes (if any) thereto, and of changes in
financial position for such fiscal year, all prepared in accordance
with Generally Accepted Accounting Principles applied on a consistent
basis. The financial statements of Borrower may be internally
prepared. The financial statements of Guarantor shall be audited and
contain an opinion acceptable to the Bank of nationally recognized
independent certified public accountants selected by the Borrower and
acceptable to the Bank, which approval will not be unreasonably
withheld;
(n) Not later than one hundred twenty (120) days after the end
of the Guarantor's fiscal year, a copy of its filed 10-K;
(o) As soon as practical and in any event not later than
forty-five (45) days after the end of each fiscal quarter (other than
the last fiscal quarter) of each fiscal year, the Guarantor will
deliver to the-Bank its quarterly balance sheet, income and cash flow
statements, prepared in accordance with Generally Accepted Accounting
Principles applied on a consistent basis and within sixty (60) days
after the end of each fiscal quarter of the Guarantor (other than the
last fiscal quarter) the filed 10-Q of the Guarantor;
(p) Together with each delivery of financial reports required
by the above Sections, the Borrower will deliver to the Bank a
certificate signed by the Borrower stating that: (i) to the best of
its knowledge, the Borrower has kept, observed performed and fulfilled
each and every agreement binding on it contained
11.
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in the Loan Documents and is not at the time in default in the
keeping, observance, performance or fulfillment of any of the terms,
provisions and conditions of any of the Loan Documents and that no
Event of Default specified in Article VII hereof (or event which, with
notice or lapse of time or both, would constitute such Event of
Default) has occurred, and that there is no pending action, suit or
other proceeding which challenges the validity or enforceability of
this Loan Agreement, the Guaranty or the Advance Notes or, if such
action, suit, proceeding, event or Event of Default exists or would
occur, as the case may be, stating the nature thereof, the period of
existence thereof and what action the Borrower proposes to take with
respect thereto; (ii) the income statements hereof have been prepared
in accordance with Generally Accepted Accounting Principles and
present fairly the operations of the Borrower for the respective
periods covered thereby, subject only to normal, recurring year-end
adjustments; and (iii) each of the representations and warranties of
the Borrower and the Guarantors contained in the Loan Documents are
true and correct on and as of the date of delivery of such financial
statements and is reaffirmed on behalf of the Borrower and the
Guarantor;
(q) Promptly, from time to time, the Borrower will deliver to
the Bank such other information regarding its operations, business
affairs and financial condition as the Bank may reasonably request
within fifteen (15) days of any such request. The Bank is hereby
authorized to deliver a copy of any such financial information
delivered hereunder to the Bank to any regulatory authority having
jurisdiction over the Bank;
(r) The Borrower will do or cause to be done all things
necessary to preserve and keep in full force and effect its limited
partnership existence, rights and franchises;
(s) The Borrower will at all times keep its insurable
properties insured to such extent and against such risks, including,
without limitation, property insurance, public liability insurance,
worker's compensation and other insurance required by law, as is
customary with operations of comparable size in the same or similar
business unless higher limits or other types of coverage are
reasonably required in writing by the Bank; and
(t) The Borrower and the Guarantor will comply with, or cause
to be complied with, all applicable local, state and federal laws,
rules and regulations relating to all of their respective activities.
ARTICLE VII
Events of Default
The following shall be Events of Default hereunder by Borrower or
Guarantor:
7.1 The failure to make payment of any amount of principal of, or
interest on any of the Advance Notes or the Loan Documents;
7.2 Any representation or warranty made in this Agreement or the
Loan Documents which shall prove to be false or misleading in any material
respect;
7.3 Any report, certificate, financial statement or other document
furnished in connection with this Agreement, with the Advance Notes or the Loan
Documents shall prove to be false or misleading in any material respect;
7.4 If the Borrower shall not pay when due or declared due all
Indebtedness for money borrowed due Persons other than the Bank;
7.5 The breach or Default of any other covenant, condition, or
agreement of payment or performance made by the Borrower or Guarantor pursuant
to this Agreement, or any of the Loan Documents;
7.6 The liquidation or dissolution of the Borrower or the Guarantor
or suspension of the business of the Borrower or the Guarantor or filing by the
Borrower or the Guarantor of a voluntary petition or an answer seeking
12.
<PAGE> 13
reorganization, arrangement, readjustment of its or their debts or for any
other relief under the Bankruptcy Code, as amended, or under any other
insolvency act or law, state or federal, now or hereafter existing, or any
other action of the Borrower or any Guarantor indicating its consent to,
approval of, or acquiescence in, any such petition or proceeding; or the
application by the Borrower or the Guarantor for, or the appointment by consent
or acquiescence of, a receiver, a trustee or a custodian of the Borrower or the
Guarantor or for all or a substantial part of its property; or the making by
the Borrower or the Guarantor of an assignment for the benefit of creditors; or
the failure of the Borrower or the Guarantor or the admission by the Borrower
or the Guarantor in writing of its inability to remain Solvent;
7.7 The filing of an involuntary petition against the Borrower or
the Guarantor in bankruptcy or seeking reorganization, arrangement,
readjustment of its debts or for any other relief under the Bankruptcy Code, as
amended, or under any other insolvency act or law, state or federal, now or
hereafter existing; or the involuntary appointment of a receiver, a trustee or
a custodian of the Borrower or the Guarantor or for all or a substantial part
of its property; or the issuance of a warrant of attachment, execution or
similar process against any substantial part of the property of the Borrower or
the Guarantor;
7.8 Any provision of this Agreement shall at any time for any reason
cease in any material respect to be valid and binding on any Borrower, or shall
be declared to be null and void, or the validity or enforceability thereof
shall be contested by any Borrower, or a proceeding shall be commenced by any
governmental agency or authority having jurisdiction over any Borrower seeking
to establish the invalidity or unenforceability thereof, or any Borrower shall
deny that it has any liability or obligation under this Agreement;
7.9 Any other Event of Default under or as defined in the Loan
Documents, the Guaranty Agreement, the Security Agreement or any other related
document shall have occurred;
7.10 Any of the security interests or liens created by the Loan
Documents shall for any reason cease to be valid and perfected, security
interests or mortgage liens in favor of the Bank;
7.11 Beginning with the time the Bank makes an advance under the
Advance Note, Borrower fails to keep the Property (described in the Deed of
Trust for which the advance is made) free and clear of all encumbrances, liens,
deeds of trust, security interests and secondary financing, except as may be
approved in writing by the Bank in advance;
7.12 Unless otherwise authorized by terms of Loan Documents any
material change in the ownership, membership or control of the Borrower or any
sale, transfer or conveyance, whether voluntary or involuntary, of the Property
or any portion thereof without the prior written consent of the Bank; or
ARTICLE VIII
The Bank's Rights and Remedies
The following rights and remedies are available to the Bank:
8.1 Acceleration. Upon the occurrence of an Event of Default, the
entire unpaid principal balance of the indebtedness of the Borrower to the Bank
evidenced by this Loan Agreement and each Advance Note, and all accrued
interest thereon shall, at the option of the Bank and without advance notice to
Borrower, become immediately due and payable. In addition, upon acceleration,
any and all other obligations of Borrower to the Bank shall be immediately due
and payable.
8.2 Completion of Construction. Effective upon the occurrence of an
Event of Default, Borrower hereby assigns to the Bank all of Borrower's
interest in contracts relating to the development of the Land and the
installation of the Improvements, but this assignment shall not, in the absence
of affirmative ratification of such contracts by the Bank, be deemed to impose
upon the Bank any of Borrower's obligations under any such contract. Borrower
hereby constitutes and appoints the Bank its true and lawful attorney-in-fact;
with full power of substitution in the premises to complete the Improvements in
the name of the Borrower. Borrower hereby empowers
13.
<PAGE> 14
said attorney as follows: (a) to use any funds of Borrower, including any funds
which may remain undisbursed hereunder, for the purpose of completing the
development of the Land and the installation of the Improvements in the manner
called for by the Plans; (b) to make such additions, changes, and corrections
in the Plans as shall be necessary or desirable to complete the development and
installation; (c) to employ such contractors, subcontractors, agents,
architects, engineers and inspectors as shall be required for said purposes;
(d) to pay, settle, or compromise all existing bills and claims which may be
liens against the Land or Improvements, or as may be necessary or desirable in
the sole discretion of the Bank for the completion of the development and
installation or for clearance of title; (e) to take over and use all or any
part of the labor, materials, supplies and equipment contracted for, owned by,
or under the control of Borrower, whether or not previously incorporated into
the Land or Improvements; (f) to execute all applications and certificates in
the name of Borrower which may be required by any of the contract documents;
(g) to prosecute and defend all actions or proceedings in connection with the
Property or the construction of the Improvements and to take such action and
require such performance as the Bank shall deem necessary under any performance
or payment bond; and (h) to do any and every act with respect to completion of
the development and installation or the closing of any permanent financing
which Borrower might do on its own behalf including, without limitation,
execution acknowledgment, and delivery of all instruments, documents, and
papers in the name of Borrower as may be necessary or desirable in the sole
discretion of the Bank. It is further understood and agreed that this power of
attorney, which shall be deemed to be a power coupled with an interest, cannot
be revoked. All sums so expended by the Bank shall be deemed to have been
disbursed to Borrower and secured by the Deed of Trust and any other Loan
Documents. Borrower hereby also assigns and quitclaims to the Bank all sums
undisbursed under the Loan, such assignment and quitclaim to be effective only
in case of Borrower's default.
8.3 Disputes. After an Event of Default hereunder or upon request by
the Borrower to the Bank, the Bank may agree to disburse Loan funds for the
account of Borrower without prejudice to Borrower's rights, if any, to recover
said funds from the party to whom paid. Such agreement or agreements may take
the form which the Bank in its discretion, deems proper, including, but without
limiting the generality of the foregoing, agreements to indemnify (on behalf of
Borrower and/or for the Bank's own account) any title insurer against possible
assertion of lien claims, agreements to pay disputed amounts and the like. All
sums paid or agreed to be paid pursuant to such undertaking shall be for the
account of Borrower, and Borrower agrees to reimburse the Bank for any such
payments made upon demand therefor, with interest at the rate applicable under
the Advance Notes from the date of payment until date of reimbursement. Such
disbursements are secured by the Deed of Trust and by all other Loan Documents
which are applicable.
8.4 Remedies Cumulative: Nonwaiver. All remedies of the Bank
provided for herein or in the other Loan Documents are cumulative and shall be
in addition to any and all other rights and remedies provided or available
under the Loan Documents, at law or in equity. The exercise of any right or
remedy by the Bank hereunder shall not in any way constitute a cure or waiver
of default hereunder or under the Advance Notes, the Deed of Trust or any Loan
Document, or invalidate any act done pursuant to any notice of default, or
prejudice the Bank in the exercise of any of its rights hereunder or under the
Advance Notes, the Deed of Trust or any Loan Document, or invalidate any act
done pursuant to any notice of default, or prejudice the Bank in the exercise
of any of its rights hereunder or under the Advance Notes, the Deed of Trust or
any applicable Loan Document, unless, in the exercise of said rights, the Bank
realizes all amounts owed to it under the Advance Notes, the Deed of Trust, and
other Loan Documents.
8.5 No Liability of the Bank. Whether or not the Bank elects to
employ any or all remedies available to it in the Event of Default, the Bank
shall not be liable for the development of the Land or the installation of or
failure to install or complete or protect the development or installation of
the Improvements or for payment of any expense incurred in connection with the
exercise or any remedy available to the Bank or for the completion of the
development of the Land or the installation of Borrower as may be necessary or
desirable in the sole discretion of the Bank. It is further understood and
agreed that this power of attorney, which shall be deemed to be a power coupled
with an interest, cannot be revoked. All sums so expended by the Bank shall be
deemed to have been disbursed to Borrower and secured by the Deed of Trust and
any other Loan Documents. Borrower hereby also assigns and quitclaims to the
Bank all sums undisbursed under the Loan, such assignment and quitclaim to be
effective only in case of Borrower's default.
14.
<PAGE> 15
8.6 Security Interest. It is understood and agreed that the Bank
shall have and enjoy and is hereby granted a lien on and a security interest
in, any and all reserves, deferred payments, undisbursed loan proceeds,
insurance refunds, impound accounts, refunds for overpayment of any kind, and
any surplus of withheld funds resulting from the invalidity of "stop notice"
claims or the failure of claimants to prosecute their claims to judgment, to
the extent the same arise out of or occur in connection with the Loan, and such
lien and security interest shall constitute additional security for the
indebtedness of Borrower evidenced by the Advance Notes, and upon the
occurrence of any default hereunder the Bank shall have and possess any and all
remedies of a secured party provided by law with respect to enforcement of
recovery on its security interest on such items and amounts.
ARTICLE IX
General Conditions
The following conditions shall be applicable throughout the term of
this Loan Agreement:
9.1 Waivers. No waiver of any Event of Default or breach by Borrower
hereunder shall be implied from any delay or omission by the Bank to take
action on account of such default, and no express waiver shall affect any
default other than the default specified in the waiver and it shall be
operative only for the time and to the extent therein stated. Waivers of any
covenants, terms or conditions contained herein must be in writing and shall
not be construed as a waive of any subsequent breach of the same covenant, term
or condition. The consent or approval by the Bank to or of any act by Borrower
requiring further consent of approval shall not be deemed to waive or render
unnecessary the consent or approval to or of any subsequent or similar act. No
single or partial exercise or any right or remedy of the Bank hereunder shall
preclude any further exercise thereof or the exercise of any other or different
right or remedy.
9.2 Benefit. This Loan Agreement is made and entered into for the
sole protection and benefit of the Bank and the Borrower, their successors and
assigns, and no other person or persons shall have any right to action hereon
or rights to the Loan funds at any time, nor shall the Bank owe any duty
whatsoever to any claimant for labor performed or material furnished in
connection with the development of the Land or the installation of the
Improvements, or to apply any undisbursed portion of the Loan to the payment of
any such claim, or to exercise any right or power of the Bank hereunder or
arising from any default by Borrower. Upon the sale or encumbrance of the
Property by the Borrower, if prior to the maturity date of any of the Advance
Notes, all principal and interest then outstanding shall be due and payable.
9.3 Assignment. The terms hereof shall be binding upon and inure to
the benefit of the successors and assigns of the parties hereto; provided,
however, that Borrower shall not assign this Loan Agreement or any of its
rights, interests, duties or obligations hereunder or any moneys to be advanced
hereunder in whole or in part without the prior written consent of the Bank.
Any such assignment (whether voluntary or by operation of law) without Bank's
consent shall be void.
9.4 Terms. Whenever the context and construction so require, all
words used in the singular number herein shall be deemed to have been used in
the plural, and vice versa, and the masculine gender shall include the feminine
and neuter and the neuter shall include the masculine and feminine.
9.5 Governing Law. This Loan Agreement and the other Loan Documents
and all matters relating thereto shall be governed by and construed and
interpreted in accordance with the laws of the State of North Carolina. The
Borrower and the Guarantor each hereby submits to the jurisdiction of the State
and Federal courts located in North Carolina and agree that the Bank may, at
its option, enforce its rights under the Loan Documents in such courts.
9.6 Deposit Accounts. All deposit and operating accounts of the
Borrower relating to the Project will be deposited with Bank. Pertaining only
to BBT transactions.
15.
<PAGE> 16
9.7 Savings Clause. Invalidation of any one or more of the
provisions of this Loan Agreement shall in no way affect any of the other
provisions hereof, which shall remain in full force and effect.
9.8 Execution in Counterparts. This Loan Agreement may be executed
in two or more counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same instrument, and in making
proof of this Loan Agreement, it shall not be necessary to produce or account
for more than one such counterpart.
9.9 Captions. The captions herein are inserted only as a matter of
convenience and for reference and in no way define, limit or describe the scope
of this Loan Agreement nor the intent of any provision hereof.
9.10 Notices. All notices required to be given hereunder shall be in
writing and shall be deemed served twenty-four (24) hours after deposit in
registered, certified, or first-class United States mail, postage prepaid,
addressed to the parties as follows:
to Borrower: Patten Homes, Inc.
9515 Millen Drive
Harrisburg, NC 28075
16.
<PAGE> 17
IN WITNESS WHEREOF, parties hereto have caused these presents to be
executed as of the day and year first above written.
BRANCH BANKING AND TRUST COMPANY
By: Gilbert Harper
-------------------------------------
Vice President
PATTEN HOMES, INC.
ATTEST:
Daniel C. Koscher By: Patrick Rondeau
- - - - ----------------------------- -------------------------------------
Ass't Secretary President
(CORPORATE SEAL)
PATTEN CORPORATION
ATTEST:
Daniel C. Koscher By: Patrick Rondeau
- - - - ----------------------------- -------------------------------------
Ass't Secretary President
(CORPORATE SEAL)
17.
<PAGE> 1
Exhibit 10.91
AMENDMENT NO. 9 TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
BY THIS AMENDMENT NO. 9 TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
("Amendment No. 9") dated as of June 29, 1994, PATTEN RECEIVABLES FINANCE
CORPORATION VI, a Delaware corporation ("Borrower"), and GREYHOUND FINANCIAL
CORPORATION, a Delaware corporation ("Lender"), for good and valuable
consideration, the receipt of which is hereby acknowledged, hereby confirm and
agree as follows:
ARTICLE 1
INTRODUCTION
1.1 Lender, as successor-in-interest to Greyhound Real Estate Finance
Company, an Arizona corporation, and Borrower are parties to that Amended and
Restated Loan and Security Agreement dated as of January 9, 1990, as amended by
a June 12, 1990 letter amendment, a July 18, 1990 letter amendment, an August
31, 1990 Amendment No. 1 to the Amended and Restated Loan and Security
Agreement, a November 19, 1990 letter agreement, a March 23, 1991 Amendment No.
2 to the Amended and Restated Loan and Security Agreement, a November 21, 1991
Amendment No. 3 to the Amended and Restated Loan and Security Agreement, a
January 30, 1992 Amendment No. 4 to the Amended and Restated Loan and Security
Agreement, a May 11, 1992 letter agreement, an October , 1992 Amendment No. 5
to the Amended and Restated Loan and Security Agreement, a December 14, 1992
letter agreement, a May 12, 1993 Amendment No. 6 to the Amended and Restated
Loan and Security Agreement, a February 18, 1994 Amendment No. 7 to the Amended
and Restated Loan Agreement, and a March 25, 1994 Amendment No. 8 to Amended
and Restated Loan and Security Agreement (collectively, the "Agreement").
1.2 Borrower and Lender wish to amend the Agreement, among other
ways, to extend the borrowing term, to confirm the approval by Lender of
the Cypress Springs, Indigo Lake Estates and the Lake Ridge PROPERTIES, AND
to include cross-default provisions in the Agreement with respect to loans
from Lender to Affiliates of PRFCVI, including, without limitation, a loan from
Lender to Properties of the Southwest, Inc., a Delaware corporation ("PSI") an
affiliate of Borrower, all as more fully provided below.
ARTICLE 2
AGREEMENT
2.1 Except as otherwise defined herein or unless the context otherwise
requires, capitalized terms used in this Amendment No. 9 shall have the
meaning given to them in the Loan Agreement.
2.2 The Loan Agreement is amended as follows:
(a) Paragraph 1.16 of the Loan Agreement is amended by deleting
"fourteen percent (14%) when it appears and inserting "eleven and one-half
percent (11 1/2%)" in its place:
(b) Paragraph 1.7 is deleted in its entirety and the following is
substituted in its place:
"1.7 "Borrowing Term": the period of time commencing on the date of this
Agreement and ending on the close of Lender's business day (or, if such
is not a normal business day of Lender, on the next business day of
Lender) on the earlier of (a) the date which is twenty-four (24) months
after the date of the first Advance of the Loan after May 9, 1994 or (b)
June 30, 1996."
(c) Paragraph 1.30 is deleted in its entirety and the following is
substituted in its place:
"1.30 "Project": a lot or parcel of land located in the following
vacation communities: (a) Eagle Creek, located in Wilson County, Texas; (b)
The Springs at Rebecca Creek, located in Comal County, Texas; (c) Sendera
Lakes, located in Montgomery County, Texas; (d) Cedar Hills, located in
Jefferson
<PAGE> 2
County, Montana; (e) Holiday Shores at Lake Sinclair, located in
Hancock County, Georgia; (f) Carolina Lakes, located in Sanford, North
Carolina; (g) Mallard Bay, located in Northumberland County, Virginia; (h)
Norris Shores, located in Sharp's Chappel, Tennessee; (i) Valley View
Ranch, located in Hays County, Texas; (j) Summer Mountain Ranch, located in
Hays County, Texas; and (k) Cypress Springs located in Comal County, Texas;
(l) Indigo Lake Estates located in Montgomery County, Texas; (m) Lake Ridge
(Phase I) located in Dallas County, Texas; and (n) such other
vacation/residential communities which satisfy the conditions set forth in
Exhibit 3 to Amendment No. 6 to Amended and Restated Loan and Security
Agreement, which Exhibit 3 is incorporated herein by this reference. The
inclusion of Cypress Springs, Indigo Lake Estates and Lake Ridge (Phase I)
within the definition of "Project" is not intended to waive the full
satisfaction by Borrower of all of the conditions specified in Exhibit 3 to
Amendment No. 6 to Loan and Security Agreement with regard thereto."
(d) Paragraph 4.3 is deleted in its entirety and the following is
inserted in its place:
4.3 Advances shall not be made more frequently than twice monthly or in
amounts less than One Hundred Thousand Dollars ($100,000); provided,
however, that Borrower will pay to Lender at the time of the second Loan
Advance made during a month an administrative fee equal to the greater of
(a) 0.25% of such Advance or (b) $500.00.
(e) Paragraph (c) to Exhibit 1 to the Agreement is deleted in its
entirety and the following is substituted in its place:
"(c) Patten or the selling Operating Subsidiary has received from the
Purchaser a minimum cash down payment of 10% of the total sales price,
unless the total sales price for a Parcel is in excess of $28,000 for
Projects other than the Lake Ridge (Phase I) Project or the unpaid
principal of the Instrument is in excess of $32,000 for the Lake Ridge
(Phase I) Project, in which case Patten or the selling Operating
Subsidiary must have received a minimum cash down payment of 20% of the
total sales price, no part of which has been advanced or loaned to such
Purchaser by Borrower, Patten or an Operating Subsidiary, either directly
or indirectly; provided, however, that unless otherwise approved in writing
by Lender in its sole and absolute discretion, the unpaid principal balance
of an Instrument arising from the Lake Ridge (Phase I) Project may not
exceed $40,000. Lender agrees to consider for approval as Eligible
Instruments, on a case by case basis, Instruments arising from the Lake
Ridge (Phase I) Project which have unpaid principal balances in excess of
$50,000 but otherwise qualify as Eligible Instruments, provided that such
approval may be withheld in Lender's sole and absolute discretion."
(f) Paragraph (k) to Exhibit 1 to the Agreement is deleted in its
entirety and the following is substituted in its place:
(k) For each Advance, the average net outstanding principal balance on
all Instruments being assigned to Lender in connection with such Advance,
excluding Instruments arising from the Lake Ridge (Phase I) Project, shall
not exceed $28,000.
(g) Paragraph (l) to Exhibit 1 to the Agreement is deleted in its
entirety and the following is substituted in its place:
(l) The Instrument must not arise from the sale of a Parcel in a Project
for which ninety percent (90%) of the then unpaid principal balance of
Instruments arising from such Project and assigned to Lender, exceeds
$3,000,000; provided, however that such limitation shall not apply to
Instruments arising from Carolina Lakes, Carolina Trace or Lake Ridge."
(h) Paragraph 9.12 is deleted in its entirety and the following
is substituted in its place:
9.12 (a) Lender has entered into a Construction and Receivables Loan
and Security Agreement ("Mountainloft Loan Agreement") dated as of February
18, 1994, with Patten, the sole stockholder and
2.
<PAGE> 3
an affiliate of Borrower, pursuant to which Lender has agreed to make to Patten
a construction loan in the maximum amount of Three Million One Hundred Thousand
Dollars ($3,100,000) ("Mountainloft Construction Loan") and a receivables
revolving line of credit loan in the amount not to exceed Five Million Dollars
($5,000,000) at any time ("Mountainloft Receivables Loan"; and the Mountainloft
Construction Loan and Mountainloft Receivables Loan collectively, "Mountainloft
Loans"), subject to the terms and conditions of the Mountainloft Loan
Agreement. Lender is entering into or has entered into a Loan Agreement ("Lake
Ridge Loan Agreement") with Properties of the Southwest, Inc., a Delaware
corporation ("PSI"), a wholly-owned subsidiary of Patten, pursuant to which
Lender has agreed to make to PSI a loan in an amount not to exceed Four Million
Five Hundred Thousand Dollars ($4,500,000) ("Lake Ridge Loan"; and the
Mountainloft Loans and Lake Ridge Loan collectively "Mountainloft/Lake Ridge
Loans"). As used in this Agreement, the term "Other Credit Facilities" shall
mean at any time, all other loans and credit facilities then outstanding
between PSI, Patten and/or any Affiliate of Borrower on the one hand, and
Lender on the other hand, including, without limitation, the Lake Ridge Loan
and the Mountainloft Loans; the term "Credit Facility" means any one of the
Other Credit Facilities or this Loan; the term "Lake Ridge Loan Documents"
shall mean the documents now or hereafter executed in connection with the Lake
Ridge Loan, as they may be from time to time renewed, amended, restated or
replaced; the term "Mountainloft Construction Loan Documents" shall mean the
documents now or hereafter executed in connection with the Mountainloft
Construction Loan, as they may be from time to time renewed, amended, restated
or replaced; the term "Mountainloft Receivables Loan Documents" shall mean the
documents now or hereafter executed in connection with the Mountainloft
Receivables Loan, as they may be from time to time renewed, amended, restated
or replaced; and the term "Other Credit Facilities Documents" shall mean the
documents now or hereafter executed in connection with the Other Credit
Facilities, including, without limitation, the Lake Ridge Loan Documents, the
Mountainloft Construction Loan Documents, and the Mountainloft Receivables Loan
Documents, as they may be from time to time renewed, amended, restated or
replaced.
(b) An Event of Default under the Documents shall constitute an
"Event of Default" as that term is defined in any of the Other Credit
Facilities Documents; or if an "Event of Default" is not a defined term with
respect to any of the Other Credit Facilities, shall, without further condition
or delay, permit Lender to accelerate the payment of such Other Credit
Facility, cease funding under any Other Credit Facility or to foreclose its
lien or security interest on any of the collateral for such Other Credit
Facility. An "Event of Default" as that term is defined in any of the Other
Credit Facilities Documents and/or any act or event which, without further
condition or delay, permits Lender to accelerate the payment of any Other
Credit Facility and/or exercise its remedies to either cease funding under such
Other Credit Facility or foreclose its lien or security interest on any
collateral for any Other Credit Facility shall constitute an Event of Default
under the Documents.
(c) Without limiting the generality of any other provision
contained herein, the Security Interest granted by Borrower hereunder and all
collateral now or hereafter given under the Documents as security for the Loan
is intended to and does secure performance of the obligations of Patten under
the Mountainloft Construction Loan Documents and the Mountainloft Receivables
Loan Documents (collectively "Mountainloft Obligations"); and all collateral
now or hereafter given under the Mountainloft Construction Loan Documents and
Mountainloft Receivables Loan Documents as security for the Mountainloft
Obligations is intended to and does secure the Obligations.
(d) If an Event of Default exists and Lender is entitled to apply
the proceeds of the Receivables Collateral to the Obligations, it may apply
such proceeds to the Mountainloft Obligations in such order and manner as
Lender may determine.
(e) Notwithstanding anything in this Agreement to the contrary, in
no event shall Lender have any obligation to make any Advance if after giving
effect to the Advance, the sum of the Advance and the unpaid principal balance
of the Loan and the Lake Ridge Loan would exceed Twenty-Four Million Dollars
Five Hundred Thousand ($24,500,000). Notwithstanding anything in this Agreement
or the
3.
<PAGE> 4
Note to the contrary, in no event may Borrower prepay the Loan in full
unless the Lake Ridge Loan and all other obligations under the Lake Ridge
Loan Documents are paid in full at the same time.
2.3 Borrower shall pay Lender a non-refundable renewal fee ("Renewal
Fee") equal to one (1.0%) of the difference on May 13, 1994 between Twenty
Million Dollars ($20,000,000) and the unpaid principal balance of the Loan.
Borrower shall pay a documentation fee in the amount of Twenty-Five Thousand
Dollars ($25,000) for the documentation and closing of the transaction
contemplated by this Amendment No. 9 ("Documentation Fee"). The Documentation
Fee is inclusive of, and not in addition to, that "Documentation Fee" payable
pursuant to the terms of the Lake Ridge Loan Documents. The entire Renewal Fee
and Documentation Fee shall be due and payable upon execution of this Amendment
No. 9, but not later than June 30, 1994. Borrower acknowledges that the Renewal
Fee and Documentation Fee have been earned and are non-refundable except as
provided below. Borrower will pay on demand or, at Lender's election, reimburse
Lender for all Lender's out-of-pocket expenses for the documentation and
closing of the transaction contemplated by this Amendment No. 9. Without
limiting the generality of the foregoing, Borrower shall pay all costs and
expenses (including computer, telecopy, telephone and staff overtime charges)
of Lender's attorneys in connection with the preparation, negotiation and
execution of the Lake Ridge Loan Documents and the Modification Documents (as
defined in paragraph 2.7(a)), the first advance of the Lake Ridge Loan Advance,
the first Receivables Advance following execution of the Modification Documents
and the first Advance against Eligible Instruments arising from the sale of
lots in the Lake Ridge Phase I Project. However, Borrowers shall have no
obligation to pay or reimburse Lender for attorneys' fees (excluding costs and
expenses) for such matters, except for such attorneys' fees which are in excess
of Twenty-Five Thousand Dollars ($25,000) and are caused by the negligence or
lack of diligence or cooperation by Borrower or PSI or third parties in the
negotiation of such documents and the closing of such advances, changes
requested by Borrower or PSI to the commitment letter dated as June 15, 1994
from Lender to Borrower and accepted by Borrower on June, 1994 or circumstances
which could not reasonably have been foreseen by Lender or its counsel.
2.4 Borrower confirms and restates to Lender as of the date hereof
all its representations and warranties set forth in the Agreement, as amended
hereby, and the other documents executed by. Borrower evidencing, securing or
otherwise pertaining to the Loan ("Documents"). Borrower represents and
warrants to Lender that since May 12, 1993, except for such changes shown in
the documents delivered to Lender pursuant to paragraph 2.6(e) and any changes
to advertising materials in conformance with applicable law, there have been no
material changes to the documents used in connection with the sale of Parcels
or the governance of the Projects. Borrower agrees that all liens and security
interests granted by it in the Documents are reaffirmed for the benefit of
Lender and shall secure the Loan and the Mountainloft/Lake Ridge Obligations
(as defined in the Agreement). Borrower further acknowledges that Lender has
performed and is not in default of its Obligations under the Documents and that
there are no offsets, defenses or counterclaims with respect to any of its
Obligations under the Documents.
2.5 Borrower will execute and deliver such further instruments and do
such things as in the sole and absolute judgment of Lender are necessary or
desirable to effect the intent of this Amendment and to secure to Lender the
benefits of all rights and remedies conferred upon Lender by the terms of this
Amendment No. 9 and any other documents executed in connection herewith,
including, without limitation, amendments to security loan documents and
financing statements.
2.6 This Amendment No. 9 shall not be binding upon Lender unless and
until the following conditions have been satisfied, which in no event shall be
later than June 30, 1994:
(a) Borrower has delivered to Lender the following documents and
other items, all of which shall be properly completed and executed and
shall otherwise be satisfactory in form and substance to Lender in its
sole and absolute discretion:
(i) a resolution from Borrower authorizing (A) the execution
and delivery of this Amendment and the other documents called for
in this Amendment or requested by Lender pursuant to this
paragraph ("Modification Documents") and (B) the transaction
contemplated hereby;
(ii) a resolution from Guarantor authorizing the execution and
delivery of the Modification Documents required to be executed by
it;
4.
<PAGE> 5
(iii) a Consent of Guarantor and Amendment to Guarantee
(Patten);
(iv) an opinion from counsel to Borrower and Guarantor as to
such matters as Lender may require, which counsel shall be
reasonably satisfactory to Lender;
(v) such amendments to recorded and filed Documents as Lender
may deem necessary; and
(vi) such other items as Lender may reasonably require.
(b) Lender has received and approved, in its sole and absolute
discretion, the results of updated lien, litigation, judgment and
bankruptcy searches for Borrower, Guarantor and Operating
Subsidiaries.
(c) Lender has received the Renewal Fee and the Documentation Fee.
(d) Lender has received evidence that Borrower is in compliance
with all environmental, health and safety laws and that it does not
have any material contingent liability in connection with such
matters.
(e) Lender has received all material changes made since May 13,
1993 to the documents used in connection with the sale of Parcels and/or
the governance of the Projects, and copies of all public reports/offering
statements/prospectuses required by law to be utilized in those
jurisdictions where it (or its Operating Subsidiaries) is currently
selling Parcels or offering them for sale.
(f) Lender has received evidence that Borrower (or Guarantor or
its Operating Subsidiaries) has been registered and maintained all
necessary licenses and permits as required by applicable law in all
jurisdictions where it (or Guarantor or its Operating Subsidiaries) has
sold or offered Parcels for sale since May 13, 1993.
(g) Lender has received current financial statements for the
property owners' associations Project.
Waiver by Lender of any of the foregoing as a condition to the effectiveness of
this Amendment shall not relieve Borrower of the obligation to satisfy such
condition as promptly as possible thereafter.
2.7 This Amendment may not be amended or otherwise modified except in
a writing duly executed by the parties hereto.
2.8 If any one or more of the provisions of this Amendment is held to
be invalid, illegal or unenforceable in any respect or for any reason (all of
which invalidating laws are waived to the fullest extent possible), the
validity, legality and enforceability of any remaining portions of such
provision(s) in every other respect and of the remaining provision(s) of this
Amendment shall not be in any respect impaired. In lieu of each such
unenforceable provision, there shall be added automatically as a part of this
Amendment a provision that is legal, valid and enforceable and is similar in
terms to such unenforceable provisions as may be possible.
2.9 This Amendment constitutes the entire agreement and understanding
of the parties with respect to the subject matter hereof and this Amendment and
the Documents, as amended hereby, supersedes all prior written or oral
understandings and agreements between the parties in connection with its
subject matter.
2.10 All Schedules and Exhibits referred to herein are herein
incorporated by this reference.
2.11 This Amendment may be executed in one or more counterparts, and
any number of which having been signed by all the parties hereto shall be taken
as one original.
2.12 Borrower and Lender hereby ratify and confirm the Loan Agreement,
as amended hereby, in all respects; and, except as expressly amended hereby,
the Loan Agreement shall remain in full force and effect.
5.
<PAGE> 6
IN WITNESS WHEREOF this instrument is executed as of the date set
forth above.
"BORROWER" PATTEN RECEIVABLES FINANCE
CORPORATION VI, a Delaware
corporation
By: Alan L. Murray
Type/Print Name: Alan L. Murray
Title: Treasurer
"LENDER" GREYHOUND FINANCIAL CORPORATION, a
Delaware corporation
By: Jack Fields, III
Type/Print Name: Jack Fields, III
Title: Senior Vice President
6.
<PAGE> 1
Exhibit 10.92
LOAN AGREEMENT
This LOAN AGREEMENT entered into as of June 29, 1994, by GREYHOUND
FINANCIAL CORPORATION, a Delaware corporation, and PROPERTIES OF THE SOUTHWEST,
INC., a Delaware corporation.
1. DEFINITIONS.
As used in this Agreement and the other Documents (as defined below)
unless otherwise expressly indicated in this Agreement or the other
Documents, the following terms shall have the following meanings (such
meanings to be applicable equally both to the singular and plural terms
defined).
1.1 "Advance": the advance of the proceeds of the Loan.
1.2 "Affiliate": with respect to any individual or entity, any other
individual or entity that directly or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under
common control with, such individual or entity.
1.3 "Agreement": this Loan Agreement, as it may be from time to time
renewed, amended, restated or replaced.
1.4 "Applicable Usury Law": the usury law chosen by the parties
pursuant to the terms of paragraph 8.10 or such other usury law
which is applicable if such usury law is not.
1.5 "Articles of Organization": the charter, articles, operating
agreement, partnership agreement, by-laws and any other written
documents evidencing the formation, organization and continuing
existence of an entity.
1.6 "Assignment(s)": a written assignment or assignments, which may be
separate from and/or included within the Mortgage, executed by
Borrower and creating in favor of Lender, as security for the
Performance of the Obligations, a perfected, direct, first and
exclusive assignment (subject only to the Permitted Encumbrances)
of: all leases, rents, Purchase Contracts and sales and other
proceeds pertaining to or arising from the Real Property or any
business of Borrower conducted thereon or with respect thereto; the
Borrower-Affiliated Management Agreements; the other Project
Governing Documents; and the other Contracts, Intangibles, Licenses
and Permits, as such assignments may be from time to time renewed,
amended, restated or replaced.
1.7 "Borrower": Properties of the Southwest, Inc., a Delaware
corporation, and, subject to the restrictions on assignment and
transfer contained in this Agreement or the other Documents, its
successors and assigns.
1.8 "Borrower-Affiliate Management Agreement": a Management Agreement
under which Borrower or an Affiliate of Borrower has been
contracted by a Project Association to manage all or a portion of
the Real Property and/or affairs of such Project Association.
1.9 "Business Day": any day other than a Saturday, Sunday or a day on
which banks in Arizona or Nevada are required to close.
1.10 "Collateral": the Property, the Insurance Policies and any and all
other property now or hereafter serving as security for the
Performance of the Obligations, and all products and proceeds
thereof.
1.11 "Contracts, Intangibles, Licenses and Permits": the property so
described in Exhibit C.
1.12 "Default Rate": as defined in the Note.
1.13 "Documents": the Note, the Guaranty, the Environmental Certificate,
the Security Documents, this Agreement, and all other documents now
or hereafter executed in connection with the Loan, as they may be
from time to time renewed, amended, restated or replaced.
<PAGE> 2
1.14 "Environmental Certificate": an environmental certificate executed
by Borrower and such other persons or parties as required by Lender
in form and substance satisfactory to Lender, as it may be from
time to time renewed, amended, restated or replaced.
1.15 "Event of Default": the meaning set forth in paragraph 7.1. -
1.16 "Guarantor": each person or entity now or hereafter guaranteeing
the Obligations (which initially is limited to Parent).
1.17 "Guaranty": a primary, joint and several guarantee made by a
Guarantor of the Obligations, as it may be from time to time
renewed, amended, restated or replaced.
1.18 "Incentive Fee": the meaning given to it in paragraph 6.12(b).
1.19 "Incipient Default": an event which after notice and/or lapse of
time would constitute an Event of Default.
1.20 "Insurance Policies": the insurance policies that Borrower is
required to maintain and deliver pursuant to paragraph 6.6.
1.21 "Lender": Greyhound Financial Corporation and its successors and
assigns.
1.22 "Loan": the loan made pursuant to this Agreement.
1.23 "Loan Fee": Sixty-Seven Thousand Five Hundred Dollars ($67,500).
1.24 "Lot": a lot which is part of the Real Property and has been
legally created and upon which a single family residence may be
built subject only to issuance of a building permit for the
residence to be constructed.
1.25 "Management Agreement": whether one or more, the agreement or
agreements executed or to be executed between Borrower or an
Affiliate of Borrower and the Project Association(s).
1.26 "Maturity Date": the date (or if not a Business Day, the first
Business Day thereafter) twenty (20) months from the date of the
initial Advance, but not later than February 28, 1996.
1.27 "Maximum Loan Amount": Four Million Five Hundred Thousand Dollars
($4,500,000).
1.28 "Minimum Equity": a cash expenditure in an amount not less than
thirty percent (30%) of the total cost of the acquisition of the
Real Property.
1.29 "Minimum Required Lot Sales Approvals": all approvals required from
governmental agencies in order to sell Lots and offer them for sale
in the State where the Real Property is located.
1.30 "Mortgage": a deed of trust executed by Borrower and under the
terms of which Borrower has conveyed or granted in favor of Lender,
as security for the Performance of the Obligations, a perfected,
direct, first and exclusive lien (subject only to the Permitted
Encumbrances) upon the Real Property, as it may be from time to
time renewed, amended, restated or replaced.
1.31 "Note": the "Promissory Note" in form and substance identical to
Exhibit A to be made and delivered by Borrower to Lender pursuant
to paragraph 4.1(a)(i), as it may be from time to time renewed,
amended, restated or replaced.
1.32 "Obligations": all obligations, agreements, duties, covenants and
conditions that Borrower is now or hereafter required to Perform
under the Documents.
1.33 "Other Credit Facilities": the meaning given to it in paragraph
10.1(a).
2.
<PAGE> 3
1.34 "Other Credit Facilities Documents": the meaning given to it in
paragraph 10.1(a).
1.35 "Parent": Patten Corporation, a Massachusetts corporation, and,
subject to the restrictions on assignment and transfer contained in
this Agreement or the other Documents, its successors and assigns.
1.36 "Partial Release Fee": with respect to a Lot which is a part of the
Phase One Property and is to be released from the Mortgage, an
amount to be paid at the time of release of such Lot and to be
equal to the greater of (a) Sixteen Thousand Five Hundred Dollars
($16,500) or (b) forty-six percent (46%) of the gross sales price
of such Lot.
1.37 "Performance" or "Perform": full, timely and faithful performance.
1.38 "Permitted Development Loans": the meaning given to it in paragraph
6.16.
1.39 "Permitted Encumbrances": the rights, restrictions, reservations,
encumbrances, easements and liens of record which Lender has agreed
to accept as set forth in Exhibit B.
1.40 "Personal Property": the property described in Exhibit C.
1.41 "Phase One Property": the portion of the Real Property described in
Exhibit D.
1.42 "PRFCVI Loan": the meaning given to it in paragraph 9.1(a).
1.43 "PRFCVI Loan Documents": the meaning given to it in paragraph
9.1(a).
1.44 "PRFCVI Loan Modification Documents": the meaning given to it in
paragraph 9.1(c).
1.45 "Project Association": whether one or more, the association or
associations of property owners which have been or will be provided
for in the Project Declaration to manage the Real Property, or
portions thereof, and in which all owners of such Real Property
will be members.
1.46 "Project Declaration": whether one or more, the declaration or
declarations recorded or to be recorded in the real estate records
where the Real Property is located for the purpose of creating a
plan of covenants, conditions and restrictions according to which
ownership and use of the Real Property, or portions thereof, are
to be enjoyed.
1.47 "Project Consumer Documents": the purchase contract, purchase money
promissory note, purchase money deed of trust, credit application,
credit disclosures, rescission right notices, final subdivision
public reports/prospectuses/public offering statements, and other
documents used or to be used by Borrower in connection with the
sale of Lots.
1.48 "Project Governing Documents": the Project Declaration, the
Articles of Organization for the Project Association, any and all
rules and regulations from time to time adopted by the Project
Association, the Management Agreement and any subsidy agreement by
which Borrower is obligated to subsidize shortfalls in the
operation of the Real Property affected thereby in lieu of paying
assessments.
1.49 "Property": the Real Property and Personal Property.
1.50 "Purchase Contract": a purchase contract pursuant to which Borrower
has agreed to sell and a third party has agreed to purchase a Lot
Interest.
1.51 "Purchaser": a purchaser who has executed a Purchase Contract which
has not been rescinded or terminated.
1.52 "Real Property": the real property described in Exhibit E.
3.
<PAGE> 4
1.53 "Resolution": a resolution of a corporation certified as true and
correct by an authorized officer of such corporation, a certificate
signed by the manager of a limited liability company and such
members whose approval is required, or a partnership certificate
signed by all of the general partners of such partnership and such
other partners whose approval is required.
1.54 "Security Agreement": a written security agreement which may be
separate from and/or included within the Mortgage or this
Agreement, executed by Borrower and creating in favor of Lender, as
security for the Performance of the Obligations, a perfected,
direct, first and exclusive security interest (subject only to the
Permitted Encumbrances) in the Personal Property, as it may be from
time to time renewed, amended, restated or replaced.
1.55 "Security Documents": the Mortgage, the Security Agreement, the
Assignments and all other documents now or hereafter securing the
Obligations, as they may from time to time renewed, amended,
restated or replaced.
1.56 "Security Interest": a perfected, direct, first and exclusive
security interest in and charge upon the property intended to be
covered by it.
1.57 "Subordination Agreement": a "Subordination Agreement" made and
delivered pursuant to paragraph 6.19, as it may be from time to
time renewed, amended, restated or replaced.
1.58 "Term": the duration of this Agreement, commencing on the date as
of which this Agreement is entered into and ending when all of the
Obligations shall have been Performed.
1.59 "Third Party Consents": those consents which Lender requires
Borrower to obtain, or which Borrower is contractually or legally
obligated to obtain, from others in connection with the transaction
contemplated by the Documents.
1.60 "Title Insurer": a title company which is acceptable to Lender and
issues the Title Policy.
1.61 "Title Policy": a policy of title insurance in an amount not less
than the sum of the Maximum Loan Amount and the Incentive Fee,
insuring Lender's interest in the Mortgage as a perfected, direct,
first and exclusive lien on the Real Property, subject only to the
Permitted Encumbrances, issued by Title Insurer and in form and
substance acceptable to Lender.
2. LOAN COMMITMENT; USE OF PROCEEDS; RIGHT OF FIRST REFUSAL.
2.1 Loan Commitment. Lender hereby agrees, if Borrower has Performed
all the Obligations then due, to make the Advance in an amount not to exceed
the Maximum Loan Amount.
2.2 Non-Revolving Loan. The Loan shall be disbursed as a single Advance
and be non-revolving. The Advance shall be viewed as a single loan.
2.3 Use of the Advance. The Advance will be used for the purpose of
refinancing a portion of the acquisition cost of the Real Property.
2.4 Lender's Right of First Refusal For Project Financing. Subject to
the terms and conditions of this paragraph, Lender shall have the right of
first refusal with respect to all development loans for the Real Property and
receivables financings for Lot sales (collectively, "Future Financings"). If
Borrower wishes to have a third party process an application from Borrower for
a Future Financing or Borrower wishes to accept a third party's proposal for a
Future Financing or a third party's commitment for a Future Financing, Borrower
must give Lender a notice ("Future Financing Notice") of its intent to do so,
together with (a) a written copy of Borrower's application for the Future
Financing and the prospective third party investor's agreement to process the
application, or a copy of the financing proposal for the Future Financing from
the third party investor, or a copy of the commitment for the Future Financing
from the third party
4.
<PAGE> 5
investor, as the case may be, and (b) all information and other materials
delivered to such prospective investor in connection with the Future Financing.
As used above, the term "application" means a written loan application for a
Future Financing made by Borrower which an investor has expressed a willingness
to consider and for which a proposal will not be issued as an intermediate step
between the application and the commitment; the term "proposal" means a
proposal made by an investor to provide a Future Financing to Borrower, which
proposal is an expression of intent by an investor to further consider
providing Future Financing and must be accepted by Borrower as a condition
precedent to the investor's further consideration to providing the Future
Financing, but does not constitute a firm and binding offer to provide Future
Financing; and the term "commitment n means a firm and binding offer by an
investor to provide a Future Financing, subject only to approval by Borrower
and the completion of due diligence and closing conditions which do not involve
further approval of the type or amount of investment or the type or quantity of
collateral or credit enhancement by the investor's credit approval authorities.
Lender shall have twenty (20) days from receipt of a Future Financing Notice
and the items required to be given to it with such Future Financing Notice (a)
to issue a proposal to extend financing to Borrower upon terms and conditions
financially equivalent to or better than those contained in the application,
proposal or commitment, as the case may be, from the third party investor or
(b) to refuse to do so. Issuance of such a conditional proposal in a timely
manner shall constitute adequate exercise (albeit conditional) of Lender's
right of first refusal. Lender's failure to issue such a conditioned financing
proposal in a timely manner shall be deemed to be an election by Lender to
refuse to make the newly requested Future Financing to Borrower; and Lender's
failure to issue, within ninety (90) days after receipt by Lender of its
financing proposal accepted in writing Borrower ("Accepted Lender Financing
Proposal"), a commitment to provide financing upon terms and conditions
financially equivalent to those contained in the Accepted Lender Financing
Proposal shall be deemed an election by Lender to refuse to make the newly
requested Future Financing to Borrower. Lender's election not to make any newly
requested Future Financing shall not be deemed a waiver of any of the other
terms and conditions of the Documents or the PRFCVI Loan Documents.
3. SECURITY.
3.1 Maintenance of Security. Borrower will deliver or cause to be
delivered to Lender and will maintain or cause to be maintained in full force
and effect throughout the Term (except as otherwise expressly provided in such
Document), the Guaranties, the Subordination Agreement(s), the Security
Documents and all other security required to be given to Lender pursuant to the
terms of this Agreement. Without limiting the generality of the foregoing,
Borrower shall notify Lender whenever a Borrower-Affiliated Management
Agreement or a Project Declaration is executed in the future and shall, upon
request by Lender, execute or cause its Affiliate to execute an Assignment
thereof.
3.2 Sale of Lots: Partial Releases of Lots. Borrower may enter into
Purchase Contracts for the sale of Lots which are part of the Real Property to
third parties so long as the sale is made in the ordinary course of Borrower's
business when no Event of Default exists, complies with the provisions of
paragraph 6.3(b) and, upon closing of such contract, Lender receives the
appropriate Partial Release Fee. Borrower shall be entitled to close a Purchase
Contract entered into in connection with a sale satisfying the criteria of the
preceding sentence and to have the Lots and are covered by such sale contract
released from the Mortgage only upon satisfaction of the following conditions:
(a) there exists no Event of Default [excluding an Event of Default arising
solely by virtue of the cross-default provisions of paragraph 9.1(b)]; (b) the
average size of the Lots to be released and all other Lots which have been
released from the Mortgage is not greater than approximately one (1) acre; and
(c) Lender has received from Borrower (i) a written request certifying to
Lender that the sale and partial release satisfy the criteria set forth in this
paragraph, (ii) a completed partial release document in recordable form and
otherwise satisfactory to Lender, and (iii) the Partial Release Fee and all its
reasonable out-of-pocket expenses incurred in connection with the partial
release.
3.3 Subordination of Mortgage to Permitted Development Loans. Within a
reasonable period of time after receipt by Lender of a written request by
Borrower that it do so, Lender will from time to time subordinate to the lien
of a Permitted Development Loan the lien of this Mortgage with respect to the
portion of the Real Property to be developed with proceeds of such Permitted
Development Loan, if but only if:
(a) such loan is being made by a person or entity not a Parent or
Affiliate of Borrower;
(b) no Event of Default or Incipient Default exists at the time of
such subordination;
5.
<PAGE> 6
(c) the Phase One Property has been subdivided into not less than
three hundred forty-nine (349) lots, which with the exception of the
Wildwood Lots [as defined in paragraph 6.3(b)] are approximately one (1)
acre in size;
(d) the portion of the Real Property affected by the subordination
will be developed according to a master development plan approved in
writing by Lender, such approval not to be unreasonably withheld; and
(e) Lender has received from Borrower (i) a completed subordination
agreement in recordable form and otherwise satisfactory to Lender and
(ii) all its reasonable out-of-pocket expenses incurred in connection
with the subordination.
3.4 Lender's Consent to and Partial Releases for Dedications. Within a
reasonable time after receipt of a written request from Borrower that it do so,
Lender will from time to time consent to the dedication or conveyance of
portions of the Real Property for rights of way, utility easements and common
areas as contemplated by a master development plan which has been approved in
writing by Lender, such approval not to be unreasonably withheld; and, to the
extent necessary as part of such transaction, Lender will release such property
from the Mortgage without the necessity to pay any partial release fee to
Lender. However, it shall be a condition precedent to Lender's obligation under
the preceding sentence that
(a) no Event of Default or Incipient Default exists at the time of
such release; and
(b) Lender has received from Borrower (i) a completed partial
release document in recordable form and otherwise satisfactory to Lender
and (ii) all its reasonable out-of-pocket expenses incurred in
connection with the partial release.
4. ADVANCE.
4.1 General Conditions Precedent to the Advance. Lender's obligation to
make the Advance shall be subject to and conditioned upon the terms
and conditions set forth in the following subparagraphs and
elsewhere in this Agreement having been satisfied at Borrower's
expense:
(a) Documents. Borrower shall have delivered to Lender the
following Documents, duly executed, delivered and in form and
substance satisfactory to Lender:
(i) the Note;
(ii) the Guaranty(ies);
(iii) the Subordination Agreement(s);
(iv) the Mortgage;
(v) the Security Agreement;
(vi) the Assignments;
(vii) the Environmental Certificate;
(viii) UCC financing statements for filing and/or recording,
as appropriate, where necessary to perfect the Security
Interest in the collateral for the Loans;
(ix) a favorable opinion from independent counsel for Borrower
in form and substance substantially identical to Exhibit
F;
(x) a favorable opinion from independent counsel for
Guarantor(s) in form and substance substantially
identical to Exhibit G;
6.
<PAGE> 7
(xi) the Title Policy;
(xii) the Third Party Consents;
(xiii) this Agreement;
(xiv) the documents required pursuant to paragraph 9.1(c) in
connection with the other Credit Facilities; and
(xv) such other documents as Lender may reasonably require.
(b) Organizational Project and Other Due Diligence Documents.
Borrower shall have delivered to Lender within a reasonable time
prior to the date of the Advance in form and substance
satisfactory to Lender, provided that Borrower may defer
satisfaction of the conditions specified in item 4.1(b)(xi)
until the date specified in paragraph 6.3(b):
(i) the Articles of Organization of Borrower, each of the
Guarantor(s), any other surety for the Obligations and,
if applicable, their respective managers, members and
partners, to the extent any such entity is not a natural
person;
(ii) the Resolutions of Borrower, each of the Guarantor(s),
any other surety for the Obligations and, if applicable,
their respective managers, members and partners, to the
extent any such entity is not a natural person;
(iii) current certificates of good standing for Borrower, each
of the Guarantor(s), any other surety for the Obligations
and, if applicable, their respective managers, members
and partners, to the extent any such entity is not a
natural person, from their respective States of
incorporation and; in the case of Borrower, in the State
where the Real Property is located;
(iv) a Level I environmental assessment of the Real Property;
(v) evidence that all taxes and assessments on the Property
have been paid;
(vi) a title commitment or preliminary title report for the
issuance of the Title Policy, together with copies of all
documents referred to therein;
(vii) a 1988 ALTA/ACSM survey map of the Real Property prepared
by a licensed land surveyor acceptable to Lender, showing
the Real Property, all easements necessary to the
operation and use of the Real Property, and such other
details as Lender may reasonably require;
(viii) all licenses and certificates for the intended use
and operation (exclusive of licenses and certificates
dependent upon completion of construction) of the Real
Property, including environmental permits;
(ix) evidence the Real Property is zoned for the intended uses;
(x) the Minimum Required Lot Sales Approvals for the Real
Property;
(xi) except as provided above, a copy of the Project Consumer
Documents for the Phase One Property, the operating
budget for the Project Association for the Phase One
Property and the Project Governing Documents for the
Phase One Property;
(xii) the Insurance Policies;
7.
<PAGE> 8
(xiii) evidence that the Real Property is not located within
a flood prone area, except for such portion thereof which
does not materially adversely affect the development, use
or value of the Real Property taken as a whole;
(xiv) evidence of the current and continued availability of
utilities necessary to serve the Real Property for the
intended uses;
(xv) evidence of adequate access to the Real Property;
(xvi) a copy of the purchase contract pursuant to which
Borrower purchased the Real Property and the closing
settlement statement (which closing settlement statement
shall be delivered to Lender within a reasonable period
of time prior to closing);
(xvii) evidence that Borrower continues to have invested in
the Property an amount equal to the Minimum Equity;
(xviii)a soils test report or other evidence with respect to
the suitability of the soils on the Real Property for the
intended uses;
(xix) an appraisal of the Property reflecting a fair market
value not less than Six Million Two Hundred Fifty
Thousand Dollars ($6,250,000); and
(xx) such other items as Lender may reasonably request to
confirm Borrower's compliance with the conditions
precedent to the Advance.
(c) Litigation and Judgment Searches. Lender shall have received
the following in form and substance satisfactory to Lender:
(i) the results of current lien, litigation and judgment
searches for Borrower and each of the Guarantor(s)
conducted in such jurisdictions as Lender deems
appropriate; and
(ii) the results of a site inspection made by Lender's
employees.
(d) No Change in Project, Borrower or Sureties. No material
adverse change shall have occurred in the prospects for the
development and sale of subdivided lots in the Real Property or
in the business or financial condition of Borrower or any
Guarantor since the date of the latest financial and operating
statements given to Lender by or on behalf of Borrower or any
Guarantor.
(e) No Change in Representations and Warranties. There shall have
been no material, adverse change in the warranties and
representations made in the Documents by Borrower, any
Guarantor and/or any other surety for the performance of the
Obligations.
(f) No Event of Default or Incipient Default. Neither an Event of
Default nor an Incipient Default shall have occurred and be
continuing.
(g) Interest Rate Not Usurious. The interest rate applicable to
the Advance (before giving effect to any savings clause) will
not exceed the maximum rate permitted by the Applicable Usury
Law.
(h) Payment of Fees. Borrower shall have paid to Lender the Loan
Fee and all other fees required to be paid at the time of the
Advance.
(i) Closing Date. Borrower shall not be entitled to any Advance
unless on or before June 30, 1994, all Documents have been
executed by persons required to do so and the initial Advance
has been made.
8.
<PAGE> 9
4.2 Disbursement of Advance. The Advance may be payable to Borrower; or
if requested by Borrower and approved in writing by Lender, to
others, either severally or jointly with Borrower, for the credit
or benefit of Borrower. The Advance shall be disbursed by check or
draft or, at Lender's option (if Borrower first so requests), by
wire transfer. Borrower will pay Lender's reasonable charge in
connection with any wire transfer, which is currently Twenty-Five
Dollars ($25). Lender may, at its option, withhold from the
Advance any sum (including costs and expenses) then due to it under
the terms of the Documents or which Borrower would be obligated to
reimburse Lender pursuant to the Documents if first paid directly
by Lender.
4.3 No Waiver. Although Lender shall have no obligation to make the
Advance unless and until all of the conditions precedent to the
Advance have been satisfied, Lender may, at its discretion, make
the Advance prior to that time without waiving or releasing any of
the Obligations.
5. NOTE; MANDATORY PAYMENTS.
5.1 Repayment of Loan. The Loan shall be evidenced by the Note and
shall be repaid in immediately available funds according to the
terms of the Note and the Documents.
5.2 Partial Release Principal Payments. Until the principal of the Loan
has been paid, Borrower will make to Lender at the time of each
partial release of a Lot from the Mortgage a principal payment on
the Note equal to the Partial Release Fee required to be paid in
connection with such partial release.
5.3 Additional Principal Payments; Payment in Full on Maturity Date. On
the dates which are six (6), twelve (12) and eighteen (18) months
after the Advance, Borrower will make principal payments on the
Note in an amount which, when aggregated with all other principal
payments made on the note prior to such payment date (including,
without limitation, payments made pursuant to paragraph 5.2), is
equal to the amounts set forth in the following schedule:
<TABLE>
<CAPTION>
Aggregate
Payment Date Principal Payments
------------ ------------------
<S> <C>
Sixth (6th) Month $1,350,000
Twelfth (12th) Month $2,700,000
Eighteenth (18th) Month $4,050,000
</TABLE>
The entire remaining unpaid principal balance of the Loan shall be
payable in full on the Maturity Date.
5.4 Application of Proceeds. Except as provided in the following
sentence, any and all payments received by Borrower with respect to
the Obligations (including, without limitation, payments made with
proceeds of the Collateral) shall be first applied to the payment
of all late charges, costs, expenses and fees then due under the
Documents, other than Incentive Fee ("First Priority Application");
then to accrued and unpaid interest on the Loan; then to principal
of the Loan; and then to the Incentive Fee; provided that after the
First Priority Application, the proceeds of Partial Release Fees
shall be applied to the principal balance of the Loan and then to
the Incentive Fee. The provisions of this paragraph are subject to
Lender's rights under Article VII and the other Documents as to the
application of proceeds of the Collateral following an Event of
Default.
5.5 Borrower's Unconditional Obligation to Make Payments. Whether or
not the proceeds from the Collateral shall be sufficient for that
purpose, Borrower will pay when due all payments required to be
made pursuant to any of the Documents, Borrower's Obligation to
make such payments being absolute and unconditional.
6. BORROWER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 (a) Good Standing. Borrower is, and will remain at all times, duly
organized, validly existing and in good standing under the
laws of Delaware and in each jurisdiction in which it is at
any time selling Lots or
9.
<PAGE> 10
where at any time the location or nature of its properties or
its business makes such qualification necessary. Borrower has
and will maintain full authority to Perform the Obligations
and to carry on its business and own its property.
(b) Power and Authority; Enforceability. Borrower has and will
maintain full power and authority to execute and deliver the
Documents and to Perform the Obligations. All action necessary
and required by Borrower's Articles of Organization and all
applicable laws for Borrower to obtain the Loan, to execute
and deliver the Documents which have been or will be executed
and delivered in connection with the Loan and to perform the
Obligation, has been duly and effectively taken. The Documents
are and shall be, legal, valid, binding and enforceable
against Borrower; and do not violate the Applicable Usury Law
or constitute a default or result in the imposition of a lien
under the terms or provisions of any agreement to which
Borrower is a party. No consent of any governmental agency or
any other person not a party to this Agreement is or will be
required as a condition to the execution, delivery, or
enforceability of the Documents.
(c) Borrower's Principal Place of Business. Borrower's principal
place of business is located in the State of Texas, and
Borrower will not move its principal place of business except
upon not less than sixty (60) days prior written notice to
Lender.
6.2 No Litigation. There is no action, litigation or other proceeding
pending or, to Borrower's knowledge, threatened before any
arbitration tribunal, court, governmental agency or administrative
body against Borrower, which might materially adversely affect the
Performance of the Obligations, the Project, the business or
financial condition of Borrower, or the ability of Borrower to
Perform the Obligations. Borrower will promptly notify Lender if
any such action, litigation or proceeding is commenced or
threatened.
6.3 (a) Compliance with Laws. Borrower has complied, and will comply,
with all applicable laws and regulations, including, without
limitation, all laws and regulations of the state in which the
Real Property is located and all other governmental
jurisdictions in which the Real Property is located or in
which Lots will be sold or offered for sale.
(b) Sales Activities; Development and Sale of Real Property.
Borrower has sold and/or offered for sale only Lots which are
part of the Wildwood subdivision in the Phase One Property
("Wildwood Lots"). Except for the Wildwood Lots, Borrower will
not sell any Lot or offer any Lot for sale in any
jurisdiction, unless: (i) Borrower has delivered to Lender
true and complete copies of all approvals required to be
obtained by Borrower in such jurisdiction prior to engaging in
its proposed conduct, and all other evidence required by
Lender that Borrower has complied with all laws of such
jurisdiction governing its proposed - conduct with respect to
such Lot; and (ii) Borrower has delivered to Lender the
Project Consumer Documents and the Project Governing Documents
which Borrower will be using in connection with the sale or
offering for sale of such Lots and their use and enjoyment,
and such documents have been approved by Lender, which
approval shall not be unreasonably withheld or delayed.
Borrower represents and warrants that it has all Minimum
Required Lot Sales Approvals. Not later than June 30, 1995,
Borrower will deliver to Lender pro-forma operating budget for
the Phase One Property, the Project Governing Documents, and
Project Consumer Documents (which have, to the extent
required, been approved for use in the State of Texas and
fairly disclose the common area and other amenities in the
Real Property which are or will be available to owners of Lots
and the terms and conditions of such availability) for the
Phase One Property and will take all steps necessary to
commence the sale of Lots in Texas; and Borrower will
thereafter maintain an active marketing program for the sale
of Lots in the Phase One Property in conformance with all
applicable laws and regulations and consistent with the
provisions of this paragraph and the terms and conditions of
Mortgage pertaining to the sale of Lots in the Phase One
Property.
(c) Lot Not a Security. Neither the sale nor the offering for sale
of any Lot by Borrower will constitute the sale or the
offering of a security for sale under any applicable law.
10.
<PAGE> 11
(d) Zoning Compliance. Residential development and use of Lots in
the Phase One Property will not violate or constitute a
non-conforming use or require a variance under any private
covenant or restriction or any zoning, use or similar law,
ordinance or regulation affecting the development, use or
occupancy of the Real Property.
(e) Fulfillment of Obligations to Purchasers. Borrower at all
times will fulfill and will cause its Affiliates, agents and
independent contractors at all times to fulfill all
obligations to Purchasers. Borrower will perform, and will
cause its Affiliates to perform, all of their respective
obligations under the Project Consumer Documents and the
Project Governing Documents.
(f) No Modification of Project Consumer and Project Governing
Documents. Borrower, without the prior written consent of
Lender, will not cancel or materially modify any of the
Project Consumer Documents or the Project Governing Documents.
6.4 Notice of Lender's Interest. Lender may notify persons bound
thereby of the existence of Lender's interest as assignee in the
Purchase Contracts and request from any person bound by them any
information relating to them. Borrower will deliver such notice
under its letterhead if requested.
6.5 Restrictions on Transfer, Liens and Change of Control. Except as
otherwise provided in paragraphs 3.2 and 3.3, Borrower, without the
prior written consent of Lender, will not: (a) sell, convey,
pledge, hypothecate, encumber or otherwise transfer any security
for the Performance of the Obligations; (b) permit or suffer to
exist any liens, security interests or other encumbrances on any
security for the Performance of the Obligations, except for the
Permitted Encumbrances and liens and security interests expressly
granted to Lender; (c) sell, lease, transfer or dispose of all or
substantially all of its assets to another entity not a Borrower;
or (d) permit or suffer to exist any transfer of the ownership
interests or control of Borrower.
6.6 Insurance. Borrower will pay the cost of and will maintain and
deliver evidence to Lender of insurance policies required by
Lender, and written by insurers and in amounts and on forms
satisfactory to, Lender.
6.7 (a) No Misrepresentations. The Documents and all certificates,
financial statements and written materials furnished to Lender
by or on behalf of Borrower in connection with the Loan do not
contain any untrue statement of a material fact or omit to
state a fact which materially adversely affects or in the
future may materially adversely affect the Collateral, the
Project, the business or financial condition of Borrower, or
the ability of Borrower to Perform the Obligations.
(b) Reliance. Lender's examination, inspection, or receipt of
information pertaining to the Collateral or the Project and
its proposed operation shall not in any way be deemed to
reduce the full scope and protection of the warranties,
representations and Obligations contained in this Agreement.
6.8 (a) Sales Reports. On or before the tenth (10th) day of each
month, Borrower will cause to be furnished to Lender a sales
report for the prior month showing the number of sales and
closings of Lots and the aggregate dollar amount thereof,
including down payments.
(b) Financial Information. Borrower will furnish or cause to be
furnished to Lender within one hundred twenty (120) days after
each fiscal year of the subject, a copy of the current annual
consolidated financial statements of Parent and, subject to
the best efforts of Borrower, the Project Association; and
shall furnish or cause to be furnished to Lender within
forty-five (45) days after each interim quarterly fiscal
period of Parent a copy of the current financial consolidated
statements of Parent for the period commencing with the first
day of the fiscal year and concluding with such quarter end.
Such financial statements shall contain a balance sheet as of
the end of the relevant fiscal period and statements of income
and of cash flow for such fiscal period (together with the
comparable figures for the corresponding period of the
previous fiscal year, all in reasonable detail. All financial
statements shall be prepared in accordance with generally
accepted accounting principles, consistently applied. All
financial statements of Parent shall be certified by the chief
financial officer of Parent. All other financial statements
required pursuant to this paragraph shall be certified by the
chief financial officer,
11.
<PAGE> 12
general partner, or manager, as the case may be, of the
subject of such statements. Annual statements of Parent shall
be audited and certified by a recognized firm of certified
public accountants reasonably satisfactory to Lender. Together
with such financial statements, Parent will deliver to Lender
a certificate signed by its chief executive officer or chief
financial officer stating that there exists no Event of
Default or Incipient Default or, if any such Event of Default
or Incipient Default exists, specifying the nature and period
of its existence and what action Parent proposes to take with
respect to it.
(c) Project and Sales Documents. Borrower will deliver to Lender
from time to time, as available, and promptly upon amendment
or effective date: current price lists, sales literature,
registrations/consents to sell, and final subdivision public
reports/public offering statements/prospectuses. Borrower will
deliver to Lender any changes which Borrower proposes or any
other person having the power to do so proposes be made to the
Project Consumer Documents and/or the Project Governing
Documents last delivered to Lender, together with a
description and explanation of the changes; and other items
requested by Lender which relate to the Lots.
(d) Right to Inspect. Borrower will at its expense permit Lender
and its representatives at all reasonable times to inspect the
Real Property and to inspect, audit and copy Borrower's books
and records.
(e) Project Association Budget. Borrower will submit to Lender
annually within ten (10) days after each is available,
proposed annual maintenance and operating budgets of the
Project Association, certified to be adequate by the manager
of the Project Association and a statement of any annual
assessment to be levied upon the owners of Lots, and will use
its best efforts to cause to be made available to Lender for
inspection, auditing and copying, upon Lender's request, the
books and records of the Project Association.
(f) Additional Information. Borrower will make available such
further information as Lender may from time to time reasonably
request.
6.9 Subordination of Indebtedness Owing to Affiliates. Borrower will
cause any and all indebtedness owing by it to its shareholders,
directors or officers, Guarantors, or the relatives and Affiliates
of Borrower or the foregoing and all liens, security interests and
other charges on the assets of Borrower, including, without
limitation, the Collateral, to be fully subordinated in all aspects
to the Obligations pursuant to written agreements satisfactory to
Lender; provided, however, that if neither an Event of Default nor
an Incipient Default is outstanding, such subordination shall not
extend to reasonable salaries and fees at normal and customary
rates for services actually rendered or payments or distributions
of any kind to Patten. Any such creditor shall execute a
subordination agreement in form and substance satisfactory to
Lender.
6.10 No Default for Third Party Obligations. Borrower is not in default
of any payment on account of indebtedness for borrowed money or of
any repurchase obligations in connection with a receivables
purchase financing, or in violation of or in default under any
material term in any agreement, instrument, order, decree or
judgment of any court, arbitration or governmental authority to
which it is a party or by which it is bound.
6.11 Payment of Taxes. Borrower has filed all tax returns and paid all
taxes, assessments, levies and penalties, if any, required to be
filed by it or paid by it to any governmental or quasi-governmental
authority or subdivision, including ad valorem taxes and
assessments relating to the Property.
6.12 Fees, Costs and Expenses.
(a) Loan Fee. Borrower will pay to Lender the Loan Fee and, in
addition thereto, a documentation fee ("Documentation Fee")
equal to Twenty-Five Thousand Dollars ($25,000) for the
preparation of the Documents executed at or in connection with
the closing of the Loan. The Documentation Fee is inclusive
of, and not in addition to, that "Documentation Fee" payable
pursuant to the terms of the PRFCVI Loan Modification
Documents. Borrower has paid to Lender Ten Thousand Dollars
12.
<PAGE> 13
($10,000) of the Loan Fee. The balance of the Loan Fee and the
entire Documentation Fee shall be due and payable upon
execution of this Agreement, but not later than June 30, 1994.
Borrower acknowledges that the Loan Fee and the Documentation
Fee have been earned and are nonrefundable. Borrower will pay
on demand any and all reasonable costs and expenses incurred
by Lender in connection with the initiation, documentation and
closing of the Loan, the making of the Advance, the protection
of the security for the Performance of the Obligations, or the
enforcement of the Obligations against Borrower, including,
without limitation, all attorneys' (except as provided below)
and other professionals' fees, costs and expenses, charges for
lien, litigation and judgment searches, and revenue,
documentary stamp and intangible taxes. Without limiting the
generality of the foregoing, Borrower will pay all costs and
expenses (including, without limitation, computer, telecopy,
telephone and staff overtime charges) of Lender's attorneys
which are incurred in connection with the preparation,
negotiation and execution of the Documents executed at or in
connection with the closing of the Loan or the PRFCVI Loan
Modification Documents. However, Borrower will have no
obligation to pay or reimburse Lender for Lender's attorneys'
fees (excluding costs and expenses) for such matters, except
for such attorneys' fees which are in excess of the
Documentation Fee and are caused by the negligence of Borrower
or third parties, or lack of diligence or cooperation by
Borrower or third parties in the negotiation of the Documents
and the closing of the Advance and the making of the next
advance of the PRFCVI Loan.
(b) Incentive Fee. Borrower will pay to Lender, in addition to all
basic interest payable under the Note and other charges and
fees due under the Documents, an incentive fee ("Incentive
Fee") equal to One Hundred Ninety-Eight Thousand Dollars
($198,000). The Incentive Fee shall be paid after the
principal, interest and charges on the Loan (other than the
Incentive Fee) have been paid in full through payment of the
Partial Release Fees. Any remaining balance of the Incentive
Fee shall be due upon the earlier of (a) the Maturity Date, or
(b) the acceleration of the Loan.
6.13 Indemnification. Borrower will INDEMNIFY, PROTECT, HOLD HARMLESS,
and defend Lender, its successors, assigns and shareholders
(including corporate shareholders), and the directors, officers,
employees, agents and servants of the foregoing, for, from and
against any and all losses, costs, expenses (including, without
limitation, court costs, and reasonable attorneys' fees), demands,
claims, suits, proceedings (whether civil or criminal), orders,
judgments, penalties, fines and other sanctions arising from or
brought in connection with (a) the Collateral, Lender's status by
virtue of the Documents, creation of Security Interests, the terms
of the Documents or the transactions related thereto, or any act or
omission of Borrower or its employees or agents, whether actual or
alleged unless such act or omission is caused by Lender's gross
negligence or willful misconduct, and (b) any and all brokers'
commissions or finders' fees or other costs of similar type by any
party in connection with the Loan. On written request by a person
or other entity covered by the above agreement of indemnity,
Borrower will undertake, at its own cost and expense, on behalf of
such indemnitee, using counsel satisfactory to the indemnitee, the
defense of any legal action or proceeding to which such person or
entity shall be a party. At Lender's option, Lender may at
Borrower's reasonable expense prosecute or defend any action
involving the priority, validity or enforceability of the Security
Interests in the security for the Performance of the Obligations.
6.14 Perfection of Security Interests. Borrower will execute or cause to
be executed all documents and do or cause to be done all acts
necessary for Lender to perfect and to continue the perfection of
the Security Interest of Lender in the collateral or otherwise to
effect the intent and purposes of the Documents.
6.15 Survival and Additional Representations, Warranties and Covenants.
The representations, warranties and covenants contained in this
Article VI are in addition to, and not in derogation of, the
representations and warranties contained elsewhere in the Documents
and shall be deemed to be made and reaffirmed immediately prior to
the making of the Advance.
6.16 Restrictions on Additional Financing. Without Lender's prior
written approval, Borrower shall not incur any additional debt
(including without limitation any contingent or guarantor liability
or capitalized lease obligations) with respect to, or in connection
with its ownership and operation of the Real Property, except for
the following ("Permitted Debt"): (a) short term accounts payable
incurred in connection with the
13.
<PAGE> 14
development or operation of the Real Property; and (b) loans for
the purpose of Lot development costs of portions of the Real
Property and Lot sales ("Permitted Development Loans") receivables
financings as to which Lender has elected not to exercise its right
of first refusal provided for in paragraph 2.4 and which, subject
to the provisions of paragraph 2.3, are not secured by any of the
Collateral or any of the security for the Other Credit Facilities
Documents. Without limiting the generality of its rights under the
Documents and Other Credit Facilities Documents, Lender may
require, as a condition to its approval of any debt which is not
Permitted Debt, copies of the financing documents and also estoppel
certificates executed by the persons providing the financing,
containing among other things, full subordination, and notice
provisions and cure rights required by and for the benefit of
Lender.
7. DEFAULT.
7.1 Events of Default. The occurrence of any of the following events or
conditions shall constitute an Event of Default under the
Documents:
(a) failure of Lender to receive from Borrower within five (5)
Business Days of the date when due and payable (i) any amount
payable under the Note or (ii) any other payment due under the
Documents, except for a payment due at the Maturity Date of
the Note for which no grace period is allowed;
(b) any representation or warranty which is made by a person other
than Lender and is contained in the documents or in any
certificate furnished to Lender under the Documents by or on
behalf of Lender proves to be, in any material adverse
respect, false or misleading as of the date deemed made;
(c) a default in the Performance of the Obligations - set forth in
paragraph 6.5(a), 6.5(c), 6.5(d), 6.6, 6.8, 6.16 or 9.2;
(d) a default in the Performance of the Obligations or a violation
of any term, covenant or provision of the Documents (other
than a default or violation referred to elsewhere in this
paragraph 7.1) which continues unremedied (i) for a period of
five (5) Business Days after notice of such default or
violation to Borrower in the case of a default under or
violation of paragraph 6.5(b) or any other default or
violation which can be cured by the payment of money alone or
(ii) for a period of twenty (20) Business Days after notice to
Borrower in the case of any other default or violation;
(e) an "Event of Default", as defined elsewhere in any of the
Documents;
(f) any default by Borrower under any other agreement evidencing,
guaranteeing, or securing borrowed money or a receivables
purchase financing involving an obligation in excess of Fifty
Thousand Dollars ($50,000) to make a payment of principal or
interest or to repurchase receivables or any other material
default by Borrower permitting the acceleration of the payment
or repurchase obligations of Borrower, which accelerated
payment or repurchase obligations are in excess of Fifty
Thousand Dollars ($50,000) in the aggregate;
(g) any final, non-appealable judgment or decree for money damages
or for a fine or penalty against Borrower which is not paid
and discharged or stayed within thirty (30) days thereafter
and when aggregated with all other judgment(s) or decree(s)
that have remained unpaid and undischarged or stayed for such
period is in excess of Fifty Thousand Dollars ($50,000);
(h) any-party holding a lien or security interest in the
Collateral commences foreclosure or similar sale thereof;
(i) Borrower shall (i) generally not be paying its debts as they
become due, (ii) file, or consent by answer or otherwise to
the filing against it of a petition for relief or
reorganization, arrangement or liquidation or any other
petition in bankruptcy or insolvency under the laws of any
jurisdiction, (iii) make an assignment for the benefit of its
creditors, (iv) consent to the appointment of a custodian,
receiver, trustee or other officer with similar powers for
itself or any substantial part of its property, (v) be
14.
<PAGE> 15
adjudicated insolvent, (vi) dissolve or commence to wind-up
its affairs or (vii). take any action for purposes of the
foregoing; or a petition for relief or reorganization,
arrangement or liquidation or any other petition in bankruptcy
or insolvency or the appointment of a custodian under the laws
of any jurisdiction is filed against it or a custodian is
appointed for Borrower, the Collateral or any material part of
its properties and such proceeding is not dismissed and
appointment vacated within ninety (90) days thereafter;
(j) a material adverse change in the Property, the Project or in
the business or financial condition of Borrower or in the
Collateral, which change is not enumerated in this paragraph
7.1 as the result of which Lender in good faith deems the
prospect of Performance of the Obligations impaired or its
security for the Performance of the Obligations imperiled;
(k) any of the events enumerated in paragraphs 7.1(b), (f), (g),
(i) or (j) occurs with respect to any Guarantor or other
surety for the Performance of the Obligation or default occurs
under Article 6 of the Guaranty dated as of even date herewith
and executed by Parent; provided, however, that when applying
paragraphs 7.1(f) and (g) to Parent, the amount which must be
exceeded shall be Two Hundred Fifty Thousand Dollars
($250,000) in all cases rather than Fifty Thousand Dollars
($50,000);
(l) failure of Lender to receive from Borrower, within twenty (20)
days of the date Borrower knows or should have known of such
change, notice of any material change in any representations
or warranties in the Documents or otherwise made in connection
with the Loan; or
(m) an order or decree has been entered by any court of competent
jurisdiction enjoining or otherwise prohibiting the intended
use of the Real Property, for single family residential
purposes, and judgment is not vacated within ninety (90) days
after Borrower has obtained knowledge or notice thereof.
7.2 Remedies. At any time after an Event of Default has occurred and
while it is continuing, Lender may, without obligation, in addition
to the rights and powers granted elsewhere in the Documents and not
in limitation thereof, do any one or more of the following:
(a) cease to make the Advance;
(b) declare the Note, together with prepayment premiums, the
Incentive Fee and all other sums owing by Borrower to Lender
in connection with the Documents, immediately due and payable
without notice, presentment, demand or protest, which are
hereby waived by Borrower; and/or
(c) proceed to protect and enforce its rights and remedies under
the Documents and to foreclose or otherwise realize upon the
Collateral or to exercise any other rights and remedies
available to it at law, in equity or by statute.
7.3 Application of Proceeds During an Event of Default. Notwithstanding
anything in the Documents to the contrary, while an Event of
Default exists, any cash received and retained by Lender in
connection with the Collateral may be applied to payment of the
Obligations in the manner provided in paragraph 7.5.
7.4 Uniform Commercial Remedies; Sale; Assembly of Collateral.
(a) UCC Remedies: Lender shall have all of the rights and remedies
of a secured party under the Uniform Commercial Code of the
State of Arizona and all other rights and remedies accorded to
a Secured Party at equity or law.
(b) Obligation to Assemble Collateral. Upon request of Lender when
an Event of Default exists, Borrower shall assemble the
Personal Property not already in Lender's possession and make
it available to Lender at a time and place designated by
Lender.
15.
<PAGE> 16
7.5 Application of Proceeds. The proceeds of any sale of all or any
part of the Collateral made in connection with the exercise of
Lender's rights and remedies shall be applied in the following
order of priorities; first, to the payment of all costs and
expenses of such sale, including without limitation, reasonable
compensation to Lender and its agents, attorneys fees, and all
other expenses, liabilities and advances incurred or made by
Lender, its agents and attorneys, in connection with such sale, and
any other unreimbursed expenses for which Lender may be reimbursed
pursuant to the Documents; second, to the payment of the other
Obligations, in such order and manner as Lender shall in its
discretion determine, with no amounts applied to payment of
principal until all accrued interest has been paid; and third, to
the payment to Borrower, its successors or assigns, or to whosoever
may be lawfully entitled to receive the same, or as a court of
competent jurisdiction may direct, of any surplus then remaining
from such proceeds.
7.6 Lender's Right to Perform. Lender may, at its option, and without
any obligation to do so, pay, perform and discharge any and all
obligations (including, without limitation, the Obligations under
paragraph 6.6) agreed to be paid or performed in the Documents by
Borrower, any Guarantor or any surety for the Performance of the
Obligations if (a) such person fails to do so, and (b)(i) an Event
of Default exists or (ii) in the opinion of Lender, such action
must be taken because an emergency exists or to preserve any of the
Collateral or its value. For such purposes Lender may use the
proceeds of the Collateral. All amounts expended by Lender in so
doing or in exercising its remedies under the Documents following
an Event of Default shall become part of the Obligations, shall be
immediately due and payable by Borrower to Lender upon demand, and
shall bear interest at the Default Rate from the dates of such
expenditures until paid.
7.7 Non-Exclusive Remedies. No remedy in any Document conferred on or
reserved to Lender is intended to be exclusive of any other remedy
or remedies, but each and every such remedy shall be cumulative and
shall be in addition to every other remedy given under any Document
or now or hereafter existing at law or in equity. No delay or
omission to exercise any right or power shall be construed to be a
waiver of or acquiescence to any default or a waiver of any right
or power; and every such right and power may be exercised from time
to time and as often as may be deemed expedient.
7.8 Waiver of Marshalling. Borrower, for itself and for all who may
claim through or under it, hereby expressly waives and releases all
right to have the Collateral or any other security for the
Performance of the Obligations, or any part of such security,
marshalled on any foreclosure, sale or other enforcement of
Lender's rights and remedies.
7.9 Attorney-in-Fact. For the purpose of exercising its rights and
remedies under paragraph 7.6, Lender may do so in Borrower's name
or its name and is hereby appointed as Borrower's attorney-in-fact
to take any and all actions in Borrower's name and/or on Borrower's
behalf as Lender may deem necessary or appropriate in its sole and
absolute discretion in the accomplishment of such purposes.
8. CONSTRUCTION AND GENERAL TERMS.
8.1 Payment Location. A11 monies payable under the Documents shall be
paid to Lender at its address set forth on the signature page of
this Agreement in lawful monies of the United States of America,
unless otherwise designated in the Documents or by Lender by
notice.
8.2 Entire Agreement. The Documents exclusively and completely state
the rights and obligations of Lender and Borrower with respect to
the Loans. No modification, variation, termination, discharge,
abandonment, or waiver of any of the provisions or conditions of
the Documents shall be valid unless in writing and signed by duly
authorized representatives of the party sought to be bound by such
action. The Documents supersede any and all prior representations,
warranties and/or inducements, written or oral, heretofore made by
Lender concerning this transaction, including any commitment for
financing.
8.3 Powers Coupled with an Interest. The powers and agency hereby
granted by Borrower are coupled with an interest and are
irrevocable until the Obligations have been Performed in full and
are granted as cumulative to Lender's other remedies for collection
and enforcement of the Obligations.
16.
<PAGE> 17
8.4 Counterparts. Any Document may be executed simultaneously in any
number of identical copies each of which shall constitute an
original for all purposes.
8.5 Notices. All notices, requests or demands required or permitted to
be given under the Documents shall be in writing, and shall be
deemed effective (a) upon hand delivery, if hand delivered; (b) one
(1) Business Day after such are deposited for delivery via Federal
Express or other nationally recognized overnight courier service;
or (c) three (3) Business Days after such are deposited in the
United States mails, certified or registered mail, all with
delivery charges and/or postage prepaid, and addressed as shown
below, or to such other address as either party may, from time to
time, designate in writing. Written notice may be given by telecopy
to the telecopier number shown below or to such other telecopy
number as either party may designate, from time to time, in
writing, provided that such notice shall not be deemed effective
unless it is confirmed within twenty-four (24) hours by hand
delivery, courier delivery or mailing of a copy of such notice in
accordance with the requirements set forth above.
If to Lender: Greyhound Financial Corporation
(two copies) Dial Tower
Dial Corporate Center
1850 North Central Avenue
Phoenix, Arizona 85077-1141
Telecopy: (602) 207-5036
One copy marked "Attention: Vice
President - Law" and the other
marked "Attention: Vice President -
Operations Management"
If to Borrower: Properties of the Southwest, Inc.
c/o Patten Corporation
5295 Town Center Road, Suite 400
Boca Raton, Florida 33486
Attn: Patrick Rondeau
Telecopy: (407) 391-6337
8.6 Successors and Assigns. All the covenants of Borrower and all the
rights and remedies of the Lender contained in the Documents shall
bind Borrower, and, subject to the restrictions on merger,
consolidation and assignment contained in the Documents, its
successors and assigns, and shall inure to the benefit of Lender,
its successors and assigns, whether so expressed or not. Borrower
may not assign its rights in the Documents in whole or in part.
Except as may be expressly provided in a Document, no person or
other entity shall be deemed a third party beneficiary of any
provision of the Documents.
8.7 Severability. If any one or more of the provisions contained in any
Document shall be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained in the Document shall not in any way be
affected or impaired thereby.
8.8 Time of Essence. Time is of the essence in the Performance of the
Obligations.
8.9 Miscellaneous. All headings are inserted for convenience only and
shall not affect any construction or interpretation of the
Documents. Unless otherwise indicated, all references in a Document
to clauses and other subdivisions refer to the corresponding
paragraphs, clauses and other subdivisions of the Document; the
words "herein," "hereof," "hereto," hereunder" and words of similar
import refer to the Document as a whole and not to any particular
paragraph, clause or other subdivision; and reference to a numbered
or lettered subdivision of an Article, or paragraph shall include
relevant matter within the Article or paragraph which is applicable
to but not within such numbered or lettered subdivision. All
Schedules and Exhibits referred to in this Agreement are
incorporated in this Agreement by reference.
8.10 (a) CHOICE OF LAW. EXCEPT AS MAY BE SPECIFICALLY PROVIDED TO THE
CONTRARY IN ANOTHER DOCUMENT THE DOCUMENTS AND THE RIGHTS, DUTIES
AND OBLIGATIONS OF
17.
<PAGE> 18
THE PARTIES THERETO SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ARIZONA AND TO
THE EXTENT THEY PREEMPT THE LAWS OF SUCH STATE, THE LAWS OF THE
UNITED STATES.
(b) CHOICE OF JURISDICTION AND VENUE. EXCEPT AS MAY BE
SPECIFICALLY PROVIDED TO THE CONTRARY IN ANOTHER DOCUMENT,
BORROWER: (A) HEREBY IRREVOCABLY SUBMITS ITSELF TO THE PROCESS,
JURISDICTION AND VENUE OF THE COURTS OF THE STATE OF ARIZONA,
MARICOPA COUNTY, AND TO THE PROCESS, JURISDICTION, AND VENUE OF THE
UNITED STATES DISTRICT COURT FOR The DISTRICT OF ARIZONA, FOR THE
PURPOSES OF SUIT, ACTION OR OTHER PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE SUBJECT MATTER HEREOF, OR, IF
LENDER INITIATES SUCH ACTION, ANY COURT IN WHICH LENDER SHALL
INITIATE SUCH ACTION AND THE CHOICE OF SUCH VENUE SHALL IN ALL
INSTANCES BE AT LENDER'S ELECTION; AND (B) WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, HEREBY WAIVES AND AGREES NOT TO ASSERT
BY WAY OF MOTION, DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR
PROCEEDING ANY CLAIM THAT BORROWER IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF THE ABOVE-NAMED COURTS, THAT SUCH SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FOR FORUM OR THAT THE
VENUE OF SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. BORROWER
HEREBY WAIVES THE RIGHT TO COLLATERALLY ATTACK ANY JUDGMENT OR
ACTION IN ANY OTHER FORUM.
(c) WAIVER OF JURY TRIAL. LENDER AND BORROWER ACKNOWLEDGE AND
AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER ANY OF THE
DOCUMENTS WOULD BE BASED UPON DIFFICULT AND COMPLEX ISSUES AND
THEREFORE, THE PARTIES AGREE THAT ANY LAWSUIT ARISING OUT OF ANY
SUCH CONTROVERSY SHALL BE TRIED BY A JUDGE SITTING WITHOUT A JURY,
AND BORROWER HEREBY KNOWINGLY AND VOLUNTARILY WAIVES TRIAL BY JURY
IN ANY SUCH PROCEEDING.
(d) INDUCEMENT TO LENDER. ALL OF THE PROVISIONS SET FORTH IN THIS
PARAGRAPH ARE A MATERIAL INDUCEMENT FOR LENDER'S MAKING THE LOAN TO
BORROWER.
[Borrower (initials _____)]
8.11 Compliance With Applicable Usury Law. It is the intent of the
parties hereto to comply with the Applicable Usury Law.
Accordingly, notwithstanding any provisions to the contrary in the
Documents, in no event shall this Agreement or the Documents
require the payment or permit the collection of interest in excess
of the maximum contract rate permitted by the Applicable Usury Law.
8.12 NO RELATIONSHIP, WITH PURCHASERS. LENDER DOES NOT HEREBY ASSUME AND
SHALL HAVE NO RESPONSIBILITY, OBLIGATION OR LIABILITY TO
PURCHASERS, LENDER'S RELATIONSHIP BEING THAT ONLY OF A CREDITOR WHO
HAS TAKEN, AS SECURITY FOR INDEBTEDNESS OWED TO IT, A COLLATERAL
ASSIGNMENT FROM BORROWER OF THE PURCHASE CONTRACTS. EXCEPT AS
REQUIRED BY LAW, BORROWER WILL NOT, AT ANY TIME, USE THE NAME OF OR
MAKE REFERENCE TO LENDER WITH RESPECT TO THE PROJECT, THE SALE OF
LOTS OR OTHERWISE, WITHOUT THE EXPRESS WRITTEN CONSENT OF LENDER.
8.13 NO JOINT VENTURE. THE RELATIONSHIP OF BORROWER AND LENDER IS THAT
OF DEBTOR AND CREDITOR, AND IT IS NOT THE INTENTION OF EITHER OF
SUCH PARTIES BY THIS OR ANY OTHER INSTRUMENT BEING EXECUTED IN
CONNECTION WITH THE LOAN TO ESTABLISH A PARTNERSHIP, AND THE
PARTIES HERETO SHALL NOT UNDER ANY CIRCUMSTANCES BE CONSTRUED TO BE
PARTNERS OR JOINT VENTURERS.
8.14 Standards Applied to Lender's Actions. Unless otherwise
specifically stipulated elsewhere in the Documents, if a matter is
left in the Documents to the decision, requirement, request,
determination,
18.
<PAGE> 19
judgment, opinion, approval, consent, satisfaction, acceptance,
agreement, option or discretion of Lender, its employees, Lender's
counsel or any agent for or contractor of Lender, such action shall
be deemed to be exercisable by Lender or such other person in its
sole and absolute discretion and according to standards established
in its sole and absolute discretion. Without limiting the
generality of the foregoing, "option" and "discretion" shall be
implied by use of the words "if" or "may."
8.15 Meaning of Subordination. Any subordinations required to be given
under the Documents by third parties to Lender shall include
subordination of and the deferral of the right to receive payments
on the subordinated obligations except to the extent permitted in
paragraph 6.9; the remittances to Lender of all prohibited payments
received by the third party; the subordination of all liens,
security interests, assignments and other encumbrances and claims
held by the third party on or against any of Borrower's property to
Lender's interest (whenever acquired) in such property; and an
agreement on the part of the third party not to exercise any
remedies against Borrower so long as all obligations under the
Documents have not been fully satisfied.
9. SPECIAL PROVISIONS.
9.1 Cross-Default of Other Loan Obligations.
(a) Lender entered into a Loan and Security Agreement ("PRFCVI
Loan Agreement") dated as of January 9, 1990, with Patten
Receivables Finance Corporation VI, a Delaware corporation and
an Affiliate of Borrower, as it has been modified and is to be
modified by instrument of even date herewith, pursuant to
which it has committed to make to Borrower a loan in an amount
not to exceed at any time Twenty Million Dollars ($20,000,000)
("PRFCVI Loan"), subject to the terms and conditions of the
PRFCVI Loan Agreement. Lender also entered into a Construction
and Receivables Loan and Security Agreement dated as of
February 18, 1994, pursuant to which Lender has committed to
make a construction loan to Parent in a principal amount not
to exceed Three Million One Hundred Thousand Dollars
($3,100,000) ("Patten Mountainloft Construction Loan") and a
revolving receivables line of credit in a principal amount not
to exceed Five Million Dollars ($5,000,000) at any time
("Patten Mountainloft Receivables Loan"). As used in this
Agreement, the term "Other Credit Facilities" shall mean at
any time, all other loans and credit facilities then
outstanding between Borrower, PRFCVI, Parent and/or any
Affiliate of Borrower on the one hand, and Lender on the other
hand, including, without limitation, the PRFCVI Loan, the
Patten Mountainloft Construction Loan, the Patten Mountainloft
Receivables Loan; the term "Credit Facility" means any one of
the Other Credit Facilities or this Loan; the term "PRFCVI
Loan Documents" shall mean the documents now or hereafter
executed in connection with the PRFCVI Loan, as they may be
from time to time renewed, amended, restated or replaced; the
term "Patten Mountainloft Construction Loan Documents" shall
mean the documents now or hereafter executed in connection
with the Patten Mountainloft Construction Loan, as they may be
from time to time renewed, amended, restated or replaced; the
term "Patten Mountainloft Receivables Loan Documents" shall
mean the documents now or hereafter executed in connection
with the Patten Mountainloft Receivables Loan, as they may be
from time to time renewed, amended, restated or replaced; and
the term "Other Credit Facilities Documents" shall mean the
documents now or hereafter executed in connection with the
Other Credit Facilities, as they may be from time to time
renewed, amended, restated or replaced, including, without
limitation, the PRFCVI Loan Documents, the Patten Mountainloft
Construction Loan Documents and the Patten Mountainloft
Receivables Loan Documents.
(b) An Event of Default under the Documents shall constitute an
"Event of Default" as that term is defined in any of the Other
Credit Facilities Documents; or if an "Event of Default" is
not a defined term with respect to any of the Other Credit
Facilities, shall, without further condition or delay, permit
Lender to accelerate the payment of such Other Credit
Facility, cease funding under any Other Credit Facility or to
foreclose its lien or security interest on any of the
collateral for such Other Credit Facility. An "Event of
Default" as that term is defined in any of the Other Credit
Facilities Documents and/or any act or event which, without
further condition or delay, permits Lender to accelerate the
payment of any Other Credit Facility and/or exercise its
remedies to either cease funding under such Other Credit
19.
<PAGE> 20
Facility or foreclose its lien or security interest on any
collateral for any Other Credit Facility shall constitute an
Event of Default under the Documents.
(c) Simultaneously with the execution of this Agreement, Borrower
and Lender are executing an Amendment No. 9 to the PRFCVI Loan
Documents and other documents called for therein
(collectively, "PRFCVI Loan Modification Documents"). It is a
condition precedent to the initial Advance that all PRFCVI
Loan Modification Documents and all other documents necessary
to accomplish the cross-default of the Documents and the Other
Credit Facilities Documents have been executed and delivered
to Lender and that all fees due under the PRFCVI Loan
Documents have been paid.
(d) Notwithstanding anything in this Agreement to the contrary, in
no event shall Lender have any obligation to make the Advance
if after giving effect to the Advance, the sum of the Advance
and the unpaid principal balance of the Loan and the PRFCVI
Loan would exceed Twenty-Four Million Five Hundred Thousand
Dollars ($24,500,000).
9.2 Not later than ninety (90) days after the date hereof, Borrower
will do the following in accordance with applicable federal and state laws ands
regulations and provide evidence reasonably satisfactory to Lender that such
obligation has been performed:
(a) remove and dispose of dump site contents and materials
(including farm dump, brush and debris dump and discarded
shingles) disclosed in that Phase I Environmental Assessment
("Environmental Assessment") dated as of April 20, 1994,
prepared by Horizon Environmental Services ("Horizon"), during
which removal an environmental consultant from Horizon shall
be present to identify any materials that may indicate
environmental concern (asbestos containing materials, drums or
containers, buried tanks, etc. . . .);
(b) abandon and cap all on-site wells;
(c) remove and dispose of the transformer located in the southeast
portion of the Real Property suspected of containing
polychlorinated biphenyols ("PCB's"); and
(d) test the transformer located in the central portion of the
Real Property near the outparcel and, if PCB's are detected,
flush the transformer.
20.
<PAGE> 21
Lender reserves the right to require Borrower to take additional action
warranted by the condition of the Real Property.
[Signature page to follow]
[this space intentionally left blank]
21.
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their respective name, personally or by their duly authorized
representatives as of the date above written.
"Lender" GREYHOUND FINANCIAL CORPORATION, a
Delaware corporation
By: Jack Fields, III
------------------------------
Type/Print Name: Jack Fields, III
----------------
Title: Senior Vice President
---------------------
"Borrower" PROPERTIES OF THE SOUTHWEST, INC., a
Delaware corporation
By: Alan L. Murray
-------------------------------
Type/Print Name: Alan L. Murray
-----------------
Title: Treasurer
----------------------------
22.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENT OF PATTEN CORPORATION FOR THE SIX MONTHS ENDED SEPTEMBER 25,
1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-02-1995
<PERIOD-START> MAR-28-1994
<PERIOD-END> SEP-25-1994
<EXCHANGE-RATE> 1
<CASH> 12,510,969
<SECURITIES> 0
<RECEIVABLES> 47,000,544
<ALLOWANCES> 735,993
<INVENTORY> 55,854,854
<CURRENT-ASSETS> 0
<PP&E> 9,235,729
<DEPRECIATION> 5,125,306
<TOTAL-ASSETS> 142,182,127
<CURRENT-LIABILITIES> 0
<BONDS> 34,739,000
<COMMON> 185,086
0
0
<OTHER-SE> 55,064,504
<TOTAL-LIABILITY-AND-EQUITY> 142,182,127
<SALES> 47,428,359
<TOTAL-REVENUES> 50,635,041
<CGS> 22,614,267
<TOTAL-COSTS> 41,152,978
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 415,000
<INTEREST-EXPENSE> 3,439,790
<INCOME-PRETAX> 5,756,014
<INCOME-TAX> 2,359,966
<INCOME-CONTINUING> 3,396,048
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,396,048
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
