SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
____________________________________________________________________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-14830
CONTINENTAL HOMES HOLDING CORP.
(Exact name of registrant as specified in its charter)
Delaware 86-0554624
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
7001 N. Scottsdale Road, Suite 2050 85253
Scottsdale, Arizona (Zip Code)
(Address of principal executive offices)
(602) 483-0006
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock February 28, 1994
--------------------- ------------------
$.01 par value 6,961,970
____________________________________________________________________________
<PAGE>
CONTINENTAL HOMES HOLDING CORP.
FORM 10-Q
FOR THE QUARTER ENDED
FEBRUARY 28, 1994
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements:
Consolidated Balance Sheets as of February 28, 1994
and May 31, 1993 . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income for the three and
nine months ended February 28, 1994 and 1993 . . . . . . . . 4
Consolidated Statements of Cash Flows for the nine
months ended February 28, 1994 and 1993 . . . . . . . . . . . 5
Notes to unaudited Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 15
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
February 28, May 31,
1994 1993
------------ -------
ASSETS (In thousands)
Homebuilding:
Cash $ 12,597 $ 11,552
Receivables 9,105 8,648
Homes, lots and improvements in production 187,458 142,589
Property and equipment, net 1,962 667
Prepaid expenses and other assets 9,497 7,107
Excess of cost over related net assets acquired 7,482 2,235
Investment in unconsolidated joint ventures 2,270 --
-------- --------
230,371 172,798
-------- --------
Mortgage banking and title operations:
Mortgage loans held for sale 14,614 8,825
Mortgage loans held for long-term
investment, net 23,097 5,003
Other assets 1,582 899
-------- --------
39,293 14,727
-------- --------
Total assets $269,664 $187,525
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable and other liabilities $ 25,545 $ 21,059
Notes payable, senior and convertible debt 117,551 106,183
Deferred income taxes 2,007 ( 89)
-------- --------
145,103 127,153
-------- --------
Mortgage banking and title operations:
Notes payable 4,530 3,500
Bonds payable 23,837 5,104
Other 1,554 218
-------- --------
29,921 8,822
-------- --------
Total liabilities 175,024 135,975
-------- --------
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value:
Authorized - 2,000,000 shares
Issued - None -- --
Common stock, $.01 par value:
Authorized - 20,000,000 shares
Issued - 7,080,900 and 5,376,500 shares 71 54
Treasury stock, at cost - 118,930 and
187,055 shares (93) (631)
Capital in excess of par value 59,244 25,033
Retained earnings 35,418 27,094
-------- --------
Total stockholders' equity 94,640 51,550
-------- --------
Total liabilities and stockholders' equity $269,664 $187,525
======== ========
The accompanying notes to consolidated financial statements are an integral
part of these unaudited consolidated balance sheets.
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
Three months ended Nine months ended
February 28, February 28,
------------------ -----------------
1994 1993 1994 1993
---- ---- ---- ----
REVENUES
Home sales $ 72,647 $ 45,442 $237,273 $144,213
Land sales 260 45 680 3,227
Mortgage banking 1,344 425 4,209 1,696
Other income, net 415 (207) 1,021 99
-------- -------- -------- --------
Total revenues 74,666 45,705 243,183 149,235
-------- -------- -------- --------
COSTS AND EXPENSES
Homebuilding:
Cost of home sales 59,344 36,360 193,602 116,212
Cost of land sales 291 64 718 3,399
Selling, general and
administrative expenses 8,141 4,881 25,913 15,428
Interest, net 748 1,505 3,267 4,290
Mortgage banking and title
operations:
Selling, general and
administrative expenses 1,380 394 3,408 1,144
Interest, net (26) 45 (7) (9)
-------- -------- -------- --------
Total costs and expenses 69,878 43,249 226,901 140,464
-------- -------- -------- --------
Equity in loss of unconsolidated
joint ventures (26) -- (58) (332)
-------- -------- -------- --------
Income before income taxes 4,762 2,456 16,224 8,439
Income taxes 2,035 980 7,033 3,378
-------- -------- -------- --------
Net income $ 2,727 $ 1,476 $ 9,191 $ 5,061
======== ======== ======== ========
Earnings per common share $ .39 $ .29 $ 1.55 $ .99
Earnings per common share
assuming full dilution $ .37 $ .28 $ 1.38 $ .94
Cash dividend per share $ .05 $ .05 $ .15 $ .15
Weighted average number of
shares outstanding 6,953,734 5,169,407 5,946,950 5,128,354
========= ========= ========= =========
The accompanying notes to consolidated financial statements are an integral
part of these unaudited consolidated statements.
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended
February 28,
-----------------
1994 1993
---- ----
(In thousands)
Cash flows from operating activities:
Net income $ 9,191 $ 5,061
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,711 1,180
Increase (decrease) in deferred income taxes 241 (479)
Decrease (increase) in assets
Homes, lots and improvements in production (10,662) (13,426)
Receivables 15,988 9,082
Prepaid expenses and other assets (2,662) 1,560
Increase in liabilities
Accounts payable and other liabilities (3,859) (1,687)
-------- --------
Net cash provided by operating activities 9,948 1,291
-------- --------
Cash flows from investing activities:
Net additions of property and equipment (383) (105)
Cash advanced to unconsolidated joint ventures -- (1,225)
Cash received from unconsolidated joint ventures 2,417 --
Cash paid for Milburn Investments, Inc.
and Subsidiaries, net of cash acquired (7,042) --
Cash paid for Aspen Homes (6,982) --
-------- --------
Net cash used by investing activities (11,990) (1,330)
-------- --------
Cash flows from financing activities:
Decrease in notes payable to financial
institutions (17,511) (48,875)
Retirement of bonds payable (7,101) (3,453)
Sale of common stock 34,219 --
Redemption of Series A Preferred Stock (6,200) --
Issuance of 12% Senior Notes -- 71,598
Retirement of 12-3/4% Senior Notes -- (16,817)
Stock options exercised 538 546
Dividends paid (867) (767)
-------- --------
Net cash provided (used) by financing activities 3,087 2,232
-------- --------
Net increase in cash 1,045 2,193
Cash at beginning of period 11,552 5,070
-------- --------
Cash at end of period $ 12,597 $ 7,263
======== ========
The accompanying notes to consolidated financial statements are an integral
part of these unaudited consolidated statements.
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(CONTINUED)
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 5,606 $ 5,681
Income taxes $ 9,644 $ 3,650
Supplemental schedule of non-cash investing and financing activities:
On July 29, 1993, the Company acquired Milburn Investments, Inc. and
Subsidiaries. Non-cash consideration paid included the issuance of $6.3
million of Series A preferred stock. As a result of the acquisition, the
Company recorded additional assets of $92,660,000 (primarily homes, lots and
improvements in production and mortgage related assets) and liabilities of
$66,590,000 (primarily notes payable to financial institutions and mortgage
related debt).
The accompanying notes to consolidated financial statements are an integral
part of these unaudited consolidated statements.
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The consolidated financial statements include the accounts of
Continental Homes Holding Corp. and its subsidiaries ("Company"). In
the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the
Company's financial position, results of operations and cash flows for
the periods presented.
These consolidated financial statements should be read in conjunction
with the consolidated financial statements and the related disclosures
contained in the Company's annual report on Form 10-K for the year
ended May 31, 1993, filed with the Securities and Exchange Commission.
The results of operations for the three and nine months ended February
28, 1994 are not necessarily indicative of the results to be expected
for the full year.
Note 2. Interest Capitalization
The Company follows the practice of capitalizing for its homebuilding
operations certain interest costs incurred on land under development
and homes under construction. Such capitalized interest is included
in cost of home sales when the units are delivered. The Company
capitalized such interest in the amount of $6,016,000 and $4,283,000
and expensed as a component of cost of goods sold $5,527,000 and
$4,646,000 in the nine months ended February 28, 1994 and 1993,
respectively.
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 3. Notes Payable, Senior and Subordinated Debt
Notes payable, senior and convertible debt for homebuilding consist
of:
February 28, May 31,
1994 1993
------------ -------
(In thousands)
12% senior notes, due 1999, net of
discount of $654 and $752 $ 74,346 $ 74,248
6-7/8% convertible subordinated notes,
due 2002, net of discount of $2,795
and $3,065 32,205 31,935
Notes payable 11,000 --
-------- --------
$117,551 $106,183
======== ========
Note 4. Interest, Net
Interest, net is comprised of interest expense and interest income.
The summary of the components of interest, net is as follows:
Three months ended Nine months ended
February 28, February 28,
------------------ ----------------
1994 1993 1994 1993
---- ---- ---- ----
(In thousands)
Interest expense,
homebuilding $ 805 $ 1,570 $ 3,442 $ 4,607
Interest income,
homebuilding (57) (65) (175) (317)
------- ------- ------- -------
$ 748 $ 1,505 $ 3,267 $ 4,290
======= ======= ======= =======
Interest expense, mortgage
banking $ 780 $ 330 $ 2,164 $ 1,076
Interest income, mortgage
banking (806) (285) (2,171) (1,085)
------- ------- ------- -------
$ (26) $ 45 $ (7) $ (9)
======= ======= ======= =======
Note 5. Acquisition of Milburn Investments, Inc. and Aspen Homes ( t h e
"Acquisitions")
On July 29, 1993, the Company completed the acquisition of 100% of the
Common Stock of Milburn Investments, Inc. ("Milburn"), for approximately
$26.3 million ("Milburn Acquisition"). The consideration consisted of
approximately $20 million in cash and $6.3 million in Series A Preferred
Stock issued by the Company. On November 4, 1993 the Company redeemed the
Series A Preferred Stock. On January 28, 1994, the Company acquired the
operations of Aspen Homes ("Aspen") for total cash consideration of
$6,982,000.
The following unaudited pro forma combined financial data give effect
to the Milburn Acquisition as if it had occurred on the first day of each
period. This pro forma information has been prepared utilizing the
historical consolidated financial statements of the Company and Milburn.
This information should be read in conjunction with the historical financial
statements and notes
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
thereto. The pro forma financial data is provided for comparative purposes
only and does not purport to be indicative of the results which would have
been obtained if the Milburn Acquisition had been effected during the
periods presented. The pro forma financial information is based on the
purchase method of accounting for the Milburn Acquisition and reflects
adjustments to record the profit of acquired inventories, amortize the non-
compete agreement and the excess purchase price over the underlying value of
net assets acquired, reflect the additional interest on acquisition
indebtedness assumed and adjust income taxes for the pro forma adjustments.
Nine Months ended
February 28,
-----------------
1994 1993
---- ----
(In thousands)
Total revenues $262,429 $205,587
Net income 9,632 5,813
Earnings per common share 1.62 1.13
Earnings per common share
assuming full dilution 1.43 1.05
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
ITEM 2.
-------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
---------------------
Homebuilding
The following table sets forth, for the periods indicated, unit
activity, average sales price and revenue from home sales for the Company:
Quarters ended Nine months ended
February 28, February 28,
---------------- -----------------
1994 1993 1994 1993
---- ---- ---- ----
Units delivered 604 402 2,013 1,290
Average sales price $120,276 $113,040 $117,870 $111,793
Revenue from homes
sales (000's) $ 72,647 $ 45,442 $237,273 $144,213
Percentage increase
from prior year 59.9 % 32.4 % 64.5% 25.8%
Change due to volume 50.3 % 29.7 % 56.0% 25.0%
Change due to average
sales price 9.6 % 2.7 % 8.5% .8%
The volume increase in the quarter ended February 28, 1994 compared to
the same period in the prior year was attributable to the Texas operations.
Without Texas, the Company's unit volume was 6.2% less during the quarter
than in the same quarter last year. The volume increase in the nine months
ended February 28, 1994 compared to the nine months ended February 28, 1993
was attributable to the Texas operations, improved housing markets in the
Phoenix and Denver areas and increased deliveries in California as a result
of the Company's aggresive marketing in that location. The increase in
average sales price was primarily due to deliveries in California, most of
which were in the move-up market. The quarter ended February 28, 1994
results include an aggregate of 227 deliveries from Milburn and Aspen with
an average sales price of $105,400 per home, resulting in incremental
revenue of $23,917,000.
The following table summarizes information related to the Company's
backlog at the dates indicated:
February 28,
------------------------------------
(Dollars in thousands)
1994 1993
---- ----
Units Dollars Units Dollars
----- ------- ----- -------
Phoenix 678 $ 84,418 658 $ 69,703
Texas 309 33,852 -- --
Denver 94 16,837 56 8,163
California 25 6,850 28 7,139
----- -------- ----- --------
Total backlog 1,106 $141,957 742 $ 85,005
===== ======== ===== ========
Average price per unit $128 $115
======== ========
The increase in backlog at February 28, 1994 in Phoenix and Denver was
due to the improved housing markets in both locations, which the Company
believes resulted primarily from improved economic conditions in these
markets and lower mortgage interest rates. The aggregate sales value of new
contracts signed increased 70% in the three months ended February 28, 1994
as a result of the Acquisitions to $94,623,000 representing 754 homes
(including $32,372,000 in Texas representing 294 homes) as compared with
$55,694,000 representing 501 homes for the three months ended February 28,
1993. Significant volume increases in earlier quarters resulted in the
Company selling out of several subdivisions in Phoenix faster than
anticipated. This resulted in fewer homes available for sale in Phoenix in
the third fiscal quarter of 1994 compared to the same period in fiscal 1993.
The Company will have additional new subdivisions opening in Phoenix in the
fourth quarter of fiscal 1994 and the first quarter of fiscal 1995.
The following table summarizes information related to cost of home
sales, selling, general and administrative ("SG&A") expenses and interest,
net for homebuilding:
<TABLE>
<CAPTION>
Quarters ended February 28, Nine months ended Feburary 28,
--------------------------- ------------------------------
1994 1993 1994 1993
---- ---- ---- ----
Dollars % Dollars % Dollars % Dollars %
------- --- ------- --- ------- --- ------- ---
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue from home sales $ 72,647 100.0% $ 45,442 100.0% $237,273 100.0% $144,213 100.0%
Cost of homes sales 59,344 81.7 36,360 80.0 193,602 81.6 116,212 80.6
-------- ----- -------- ----- -------- ----- -------- -----
Gross profit 13,303 18.3 9,082 20.0 43,671 18.4 28,001 19.4
SG&A expenses 8,141 11.2 4,881 10.7 25,913 10.9 15,428 10.7
-------- ----- -------- ----- -------- ----- -------- -----
Operating income
from homebuilding 5,162 7.1 4,201 9.3 17,758 7.5 12,573 8.7
Interest, net 748 1.0 1,505 3.3 3,267 1.4 4,290 3.0
-------- ----- -------- ----- -------- ----- -------- -----
Pre-tax profit
from homebuilding $ 4,414 6.1% $ 2,696 6.0% 14,491 6.1% $ 8,283 5.7%
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
Gross profit from home sales was 18.3% (20.9% excluding California
operations) for the three months ended February 28, 1994 compared to 20.0%
(21.4% excluding California operations) for the corresponding fiscal 1993
period. For the three months ended February 28, 1994, the gross profit on
the Texas deliveries was 19.2% (20.8% before purchase accounting
adjustments). Gross profit from home sales was 18.4% (20.8% excluding
California operations) for the nine months ended February 28, 1994 compared
to 19.4% (20.8% excluding California operations) for the nine months ended
February 28, 1993. The Southern California market remains very weak due to
difficult economic conditions, concerns about home values and low consumer
confidence. Accordingly, the Company has aggressively marketed its
California homes by offering sales incentives and discounts. California's
depressed market will continue to have a negative impact on the Company's
earnings since volume is not sufficient to offset general and administrative
expenses and interest which is expensed and not capitalized.
The increase in total SG&A expenses for the quarter and nine months
ended February 28, 1994 was due to higher variable marketing costs
(primarily sales commissions and model furniture amortization) due to the
increase in the number of homes delivered, higher salaries and higher
customer service costs. In addition, the current fiscal quarter and nine
months included $3,257,000 and $7,529,000, respectively of SG&A expenses
from Texas and $195,000 and $455,000, respectively related to the
amortization of the excess of cost over related net assets acquired. SG&A
expenses for each home delivered were $13,478 and $12,142 in the third
quarter of fiscal 1994 and 1993, respectively and $12,872 and $11,960 in the
first nine months of fiscal 1994 and 1993, respectively. The Company
capitalizes certain SG&A expenses for homebuilding. Accordingly, total SG&A
costs incurred for homebuilding were $9,668,000 and $29,647,000 for the
three and nine months ended February 28, 1994 compared to $4,878,000 and
$15,007,000 for the corresponding fiscal 1993 periods.
The Company capitalizes certain interest costs for its homebuilding
operations and includes such capitalized interest in cost of home sales when
the related units are delivered. Accordingly, total interest incurred by
the Company was $2,960,000 and $9,458,000 for the three and nine months
ended February 28, 1994 respectively compared to $3,021,000 and $8,888,000
for the three and nine months ended February 28, 1993, respectively.
Interest, net for homebuilding was $748,000 and $1,505,000 for the three
months ended February 28, 1994 and 1993, respectively. For the nine month
period ended February 28, 1994, interest, net for homebuilding was
$3,267,000 compared with $4,290,000 for the nine months ended February 28,
1993.
The Company's pre-tax profit from homebuilding (excluding
unconsolidated joint ventures) for the nine months ended February 28, 1994
was $14,491,000 compared to $8,283,000 for the corresponding period ended
February 28, 1993. The increase in pre-tax profit was due primarily to
greater deliveries in Phoenix and Milburn's results which contributed
$3,529,000 of pre-tax profit.
Mortgage Banking
The Company's mortgage banking operations are conducted through its
wholly-owned subsidiaries American Western Mortgage Company ("AWMC") in
Arizona and Miltex Management, Inc. ("MMI") in Texas. The following table
summarizes operating information for the Company's mortgage banking
operations:
Quarters ended Nine months ended
February 28, February 28,
----------------- ------------------
1994 1993 1994 1993
---- ---- ---- ----
(Dollars in thousands)
Number of loans originated 579 208 1,751 734
Loan origination fees $ 498 $ 188 $1,529 $ 639
Sale of servicing and
marketing gains 760 150 2,382 798
Other revenue 86 87 298 259
------ ------ ------ ------
Total revenues 1,344 425 4,209 1,696
General and administrative
expenses 1,082 394 2,779 1,144
------ ------ ------ ------
Operating income $ 262 $ 31 $1,430 $ 552
====== ====== ====== ======
Revenues from mortgage banking operations increased in the quarter and
nine months ended February 28, 1994 primarily due to the Acquisitions. The
amounts for the quarter ended February 28, 1994 include 378 loan
originations and $813,000 and $173,000 of
revenues and operating income, respectively, from MMI. The Company retains
a portion of the loan servicing and, at February 28, 1994, the servicing
portfolio was approximately $59,037,000.
Consolidated Operations
Net income was $9,191,000 ($1.55 per share, $1.38 fully diluted) for
the nine months ended February 28, 1994 compared to $5,061,000 ($.99 per
share, $.94 fully diluted) for the period ended February 28, 1993. The nine
months ended February 28, 1994 included $2,998,000 of net income from the
results of Texas.
Liquidity and Capital Resources
-------------------------------
The Company's financing needs depend primarily upon sales volume, asset
turnover, land acquisition and inventory balances. The Company has
financed, and expects to continue to finance, its working capital needs
through funds generated by operations and borrowings. Funds for future land
acquisitions and construction costs are expected to be provided primarily by
cash flows from operations and future borrowings as permitted under the 12%
Senior Note Indenture. At February 28, 1994, the Company had unsecured
lines of credit from two lenders for aggregate borrowings (excluding
mortgage warehouse lines) of up to $15,000,000. At February 28, 1994,
$6,000,000 was outstanding under these credit lines. In connection with the
Milburn Acquisition, the Company assumed a $25,000,000 secured revolving
line of credit. At February 28, 1994, $5,000,000 was outstanding under this
credit line. The Company's revolving lines of credit bear interest at rates
ranging from prime plus 1/2% to prime plus 1%. The Company believes that
amounts generated from operations and such additional borrowings will
provide funds adequate to finance its homebuilding activities and meet its
debt service requirements. The Company does not have any significant
current commitments for capital expenditures.
AWMC has a warehouse line of credit for $15,000,000 which is guaranteed
by the Company. In addition, MMI has a warehouse line of credit for
$10,000,000. Pursuant to the warehouse lines of credit, the Company issues
drafts to fund its mortgage loans. The amount represented by a draft is
drawn on the warehouse line of credit when the draft is presented for
payment. At February 28, 1994, no amounts were outstanding under the
warehouse lines of credit and the amount of funding drafts that had not been
presented for payment was $4,530,000. The Company believes that these lines
are sufficient for its mortgage banking operations.
On August 5, 1992, the Company completed the sale of $75,000,000
principal amount of its 12% Senior Notes due 1999. The Senior Notes were
issued at 98.85% of par and are not redeemable until 1997. The Company used
a portion of the net proceeds thereof to repay all amounts outstanding under
its lines of credit. On September 4, 1992 the Company used $16,817,000 of
these proceeds to redeem its 12-3/4% Senior Notes.
On July 29, 1993 the Company acquired all of the outstanding capital
stock of Milburn for approximately $26.3 million ($20 million in cash and
$6.3 million of Series A Preferred Stock). On January 28, 1994, the Company
acquired the operations of Aspen Homes for total cash consideration of
$6,982,000.
In November, the Company completed a public offering of 1,704,400
shares of Common Stock at $21.50 per share. The net proceeds of the
offering (approximately $34,219,000) were used to redeem the Series A
Preferred Stock and to reduce temporarily all amounts outstanding under the
Company's revolving lines of credit and mortgage banking warehouse lines of
credit.
On March 22, 1994, the Company obtained the consent of the holders of
the majority of the outstanding 12% Senior Notes to certain amendments to
the Indenture, including to permit the sale of an additional $35,000,000 of
Senior Notes. In connection therewith, the Company has agreed to pay a
total of $1,102,020 to the holders of the outstanding Notes. The Company
agreed to sell the additional Senior Notes at 107% of par and the closing is
scheduled for March 31, 1994.
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
4.1 First Supplemental Indenture dated as of March 22, 1994 to
the Indenture dated August 1, 1992, between CHHC and First
Fidelity Bank, National Association, (formerly First
Fidility Bank, National Association) as Trustee.
10.1 First Modification Agreement dated as of February 25, 1994
between Bank One, Arizona, NA (formerly Valley National Bank
of Arizona) and CHHC.
10.2 Modification and Extension Agreement dated as of January 31,
1994 between Bank One, Arizona, NA (formerly Valley National
Bank of Arizona) and AWMC.
11 Statement of Computation of Earnings Per Share.
(b) Reports on Form 8-K: There were no reports on Form 8-K
filed for the three months ended February 28, 1994.
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
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.
CONTINENTAL HOMES HOLDING CORP.
Date: March 29, 1994 By: /s/ Kenda B. Gonzales
--------------------------
KENDA B. GONZALES
Secretary and Treasurer
(Chief Financial Officer)
Date: March 29, 1994 By: /s/ Donald R. Loback
--------------------------
DONALD R. LOBACK
Co-Chief Executive Officer
EXHIBIT INDEX
-------------
Exhibit
Number Description Page
------ ----------- ----
4.1 First Supplemental Indenture dated as of
March 22, 1994 to the Indenture dated
August 1, 1992, between CHHC and First
Fidelity Bank, National Association,
(formerly Fidelity Bank, National
Association) as Trustee.
10.1 First Modification Agreement dated as of
February 25, 1994 between Bank One,
Arizona, NA (formerly Valley National
Bank of Arizona) and CHHC.
10.2 Modification and Extension Agreement dated
as of January 31, 1994 between Bank One,
Arizona, NA (formerly Valley National
Bank of Arizona) and AWMC.
11 Statement of Computation of Earnings Per
Share.
FIRST SUPPLEMENTAL INDENTURE
----------------------------
THIS FIRST SUPPLEMENTAL INDENTURE, dated as of March 22, 1994,
to the INDENTURE, dated as of August 1, 1992, between CONTINENTAL HOMES
HOLDING CORP., a Delaware corporation (the "Issuer"), and FIRST FIDELITY
BANK, NATIONAL ASSOCIATION (formerly Fidelity Bank, National Association), a
national banking association organized and existing under the laws of the
United States of America, as trustee hereunder (the "Trustee").
W I T N E S S E T H :
WHEREAS, the Issuer and the Trustee have heretofore executed and
delivered an Indenture dated as of August 1, 1992 (the "Indenture")
providing for the issuance by the Issuer of up to $75,000,000 in principal
amount of its 12% Senior Notes Due August 1, 1999 (the "Securities");
WHEREAS, the Issuer desires to amend the Indenture as set forth in
this First Supplemental Indenture;
WHEREAS, Section 9.02 of the Indenture provides, among other
things, that, subject to certain exceptions not herein relevant, with the
consent of the Holders of at least a majority in aggregate principal amount
of the Securities at the time outstanding, the Issuer and the Trustee may
amend or supplement the Indenture or the Securities;
WHEREAS, the Company has received consents to the amendments to
the Indenture contained herein (the "Proposed Amendments") of Holders of at
least a majority in aggregate principal amount of the Securities outstanding
on the date hereof (the "Requisite Consents"); and
WHEREAS, all things necessary to make this First Supplemental
Indenture a valid agreement of the Issuer and the Trustee and a valid
amendment of and supplement to the Indenture and all of the conditions and
requirements set forth in Section 9.02 of the Indenture have been performed
and fulfilled and the execution and delivery hereof have been in all
respects duly authorized;
NOW, THEREFORE, the Issuer and the Trustee mutually covenant and
agree for the equal and proportionate benefit of the respective holders from
time to time of the Securities as follows:
ARTICLE 1.
AMENDMENTS TO INDENTURE
Section 1.1. Section 1.01 of the Indenture is hereby amended as
follows:
(1) The definition of "Bank Facility" shall be amended by
(i) deleting the words "a commitment" in the first line thereof and
inserting, in lieu thereof, the words "one or more commitments", and
(ii) deleting the words "for working capital or other general corporate
purposes" in the third line thereof;
(2) The definition of "EBITDA" shall be amended by inserting the
language ", to the extent deducted in calculating Consolidated Net Income,"
following the word "plus" in the second line thereof;
(3) The definition of "Permitted Liens" shall be amended by
(i) deleting clause (ii) thereof and replacing it in its entirety with the
following language:
"Liens securing a Warehouse Facility, provided that such
Liens shall not extend to any assets other than the
mortgages, promissory notes and other collateral that secures
mortgage loans made by the Company or any of its
Subsidiaries;",
(ii) deleting clauses (xi) and (xii) thereof and replacing them in their
entirety with the following language:
"(xi) Liens with respect to Acquisition Debt; provided that
such Liens do not extend to any other assets of the Company
or the assets of any of the Company's other Subsidiaries;
(xii) Liens securing Refinancing Debt; provided that such
Liens only extend to the assets securing the Debt being
refinanced, such refinanced Debt was previously secured, and
such Liens do not extend to any other assets of the Company
or to the assets of the Company's other Subsidiaries;";
(4) The definition of "Subsidiary" shall be amended by inserting
"(i)" after "Person," in the first line thereof and inserting immediately
before the period the following language:
"or (ii) any partnership or joint venture at least a majority
of the voting power of which is at the time directly or
indirectly owned by such Person or one or more of the other
Subsidiaries of that Person or a combination or successor
thereof"; and
(5) The definition of "Warehouse Facility" shall be deleted and
replaced in its entirety with the following language:
"'Warehouse Facility' means a Bank Facility to finance the
making of FHA/VA and conforming conventional mortgage loans
originated by the Company or any of its Subsidiaries.".
Section 1.2. Section 2.02 of the Indenture is hereby amended
as follows:
(1) The first sentence in the fourth paragraph thereof shall
be deleted and replaced in its entirety with the following language:
"The Trustee shall authenticate Securities for
original issue in the aggregate principal amount of
up to $110,000,000, upon a written order or orders
of the Company signed by two Officers or by an
Officer and an Assistant Treasurer or Assistant
Secretary of the Company."; and
(2) The word "such" shall be inserted in the second sentence
of the fourth paragraph thereof after the words "issue of".
Section 1.3. The definition of "Permitted Debt" contained in
Section 4.10 of the Indenture is hereby amended as follows:
(1) The language in paragraph (b) thereof shall be deleted
and replaced in its entirety with the following language:
"Debt incurred under or in respect of a Bank Facility
(including any guarantees related thereto) for working
capital or general corporate purposes, Debt evidenced by
letters of credit, and guarantees of Debt of the Great
Singing Hills joint venture in excess of amounts committed on
the date of the Indenture and which are Incurred after the
date of the Indenture; provided that the aggregate amount of
all such Debt outstanding at any time pursuant to this clause
(b) may not exceed $30,000,000;";
(2) The language in paragraph (c) thereof shall be deleted
and replaced in its entirety with the following language:
"Debt incurred under a Warehouse Facility; provided that the
amount of such Debt (including funding drafts issued
thereunder) outstanding at any time pursuant to this clause
(c) may not exceed $30,000,000 and the amount of such Debt
(excluding funding drafts issued thereunder) may not exceed
98% of the value of the Mortgages available to be pledged to
secure Debt thereunder;";
(3) The word "the" in the parenthetical in paragraph (d)
thereof shall be replaced with the word "a"; and
(4) The number "$500,000" in paragraph (h) thereof shall be
replaced with "$5,000,000".
ARTICLE 2.
AMENDMENT TO FORM OF SECURITY
-----------------------------
Section 2.1. The face of the security is hereby amended by adding
"FIRST" immediately preceding "FIDELITY" and adding "(formerly Fidelity
Bank, National Association)" immediately following "ASSOCIATION,".
Section 2.2. Paragraph 1 of the reverse of the security is hereby
amended by deleting "February 1, 1993" in the second sentence thereof and
replacing it with "on the first of such dates following the original
issuance hereof."
Section 2.3. Paragraph 4 of the reverse of the security is hereby
amended by adding ", as it may be supplemented or amended from time to time
in accordance with the terms thereof," immediately following "August 1,
1992" in the first sentence thereof and deleting "$75,000,000" in the fourth
sentence thereof and replacing it with "$110,000,000".
Section 2.4. Paragraph 3 of the reverse of the security is hereby
amended by adding "First" immediately preceding "Fidelity" and adding
"(formerly Fidelity Bank, National Association)" immediately following
"Association".
Section 2.5. Paragraph 16 of the reverse of the security is
hereby amended by adding "First" immediately preceding "Fidelity" and adding
"(formerly Fidelity Bank, National Association)" immediately following
"Association".
ARTICLE 3.
MISCELLANEOUS
SECTION 3.1. Defined Terms. All capitalized terms not otherwise
defined herein shall have the meanings ascribed to them in the Indenture.
SECTION 3.2. Operation of Proposed Amendments. Upon the
execution and delivery of this First Supplemental Indenture by the Trustee
and the Issuer, the Proposed Amendments contained herein will become
effective but will not become operative until after the expiration of the
Consent Solicitation of the Issuer dated March 4, 1994.
SECTION 3.3. Trustee. The recitals contained herein shall be
taken as the statements of the Issuer, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representation as to the validity of this First Supplemental Indenture. The
Indenture, as supplemented and amended by this First Supplemental Indenture,
is in all respects hereby ratified and confirmed.
SECTION 3.4. Binding Effect. This First Supplemental Indenture
shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns. Except as amended herein, the
terms, provisions and covenants of the Indenture shall remain in full force
and effect and continue to govern the parties thereto.
SECTION 3.5. Counterparts. This First Supplemental Indenture may
be executed in two or more counterparts, each of which shall be deemed
original and all of which together will constitute the same agreement,
whether or not all parties execute each counterpart.
SECTION 3.6. Governing Law. The laws of the State of New York,
without regard to principles of conflicts of law, shall govern this First
Supplemental Indenture and the Securities.
IN WITNESS WHEREOF, the parties have caused this First
Supplemental Indenture to be duly executed, all as of the date first above
written.
CONTINENTAL HOMES HOLDING CORP.
By: /s/ Donald R. Loback
-----------------------------
Name: Donald R. Loback
Title: Co-Chief Executive Officer
FIRST FIDELITY BANK, NATIONAL
ASSOCIATION, as Trustee
By: /s/ Howard R. Parker
------------------------------
Name: Howard R. Parker
Title: Assistant Vice President
FIRST MODIFICATION AGREEMENT
----------------------------
DATE: February 25, 1994
----
PARTIES: Borrower: CONTINENTAL HOMES HOLDING CORP., a Delaware corporation
-------
Bank: BANK ONE, ARIZONA, NA, formerly known as The Valley
National Bank of Arizona, a national banking
association.
RECITALS:
--------
A. Bank has extended to Borrower credit ("Loan") in the principal
amount of $10,000,000.00 pursuant to the Loan Agreement, dated February 25,
1993 ("Loan Agreement"), and evidenced by the Promissory Note, dated
February 25, 1993 ("Note"). The unpaid principal of the Loan as of the date
hereof is $3,000,000.
B. The Note, the Loan Agreement, any arbitration resolution, any
environmental certification and indemnity agreement, and all other
agreements, documents, and instruments evidencing, securing, or otherwise
relating to the Loan, are sometimes referred to individually and
collectively as the "Loan Documents". Hereinafter, "Note", "Loan
Agreement", and "Loan Documents" shall mean such documents as modified in
the Modifications.
C. Borrower has requested that Bank modify the Loan and the Loan
Documents as provided herein. Bank is willing to so modify the Loan and the
Loan Documents, subject to the terms and conditions herein.
AGREEMENT:
---------
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
--------------------
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
------------------------------
2.1 The Loan Documents are modified as follows:
2.1.1 The term "Maturity Date" as used in the Note is hereby extended
from February 25, 1994 to February 25, 1995.
2.1.2 The term "Commitment Expiration Date" as used in the Loan
Agreement is hereby extended from February 25, 1994 to February 25, 1995.
2.1.3 Section 6.12.1 of the Loan Agreement is hereby amended in its
entirety to provide as follows:
6.12.1 Tangible Net Worth. A minimum Tangible Net Worth in the
amount of $70,000,000.00.
2.1.4 Section 6.12.3 of the Loan Agreement is hereby amended in its
entirety to provide as follows:
6.12.3 Debt to Equity Ratio. A Debt to Equity Ratio of not more
than 3.50 to 1.0. An Adjusted Debt to Equity Ratio of not more than
2.0 to 1.0. As used herein, "Adjusted Debt to Equity Ratio" means the
ratio of Borrower's outstanding Adjusted Debt, on a consolidated basis,
to Net Worth. As used herein, "Adjusted Debt" means all Debt of
Borrower on a consolidated basis plus all accounts payable and other
accrued expenses of Borrower on a consolidated basis, excluding Debt
arising from "mortgage banking and title operations" of American
Western Mortgage Company, Miltex Mortgage Company, and Travis Title,
all as shown on a consolidated balance sheet of Borrower prepared in
accordance with GAAP and approved by Bank.
2.1.5 Section 6.14 of the Loan Agreement is hereby modified in its
entirety to provide as follows:
6.14 Compensating Balances. Borrower shall at all times maintain on
deposit with Bank (i) free, collected, non-interest-bearing compensating
balances in the amount of not less than $500,000.00 and (ii) such
additional compensating balance deposits (which may be interest bearing)
as may be necessary to cause the total deposits maintained at Bank
(including amounts maintained pursuant to clause (i) of this sentence) to
be equal to or greater than two-thirds of the total deposits maintained
by Borrower with all financial institutions.
2.1.6 Section 6.13 of the Loan Agreement is hereby amended in its
entirety to provide as follows:
6.13 Clean-Up. With respect to (i) the six-month period commencing
on February 25, 1994 and ending on August 24, 1994, Borrower shall not
have any Advances outstanding pursuant to this Agreement for a period
of at least thirty (30) consecutive days, and (ii) the six-month period
commencing on August 25, 1994 and ending on the Commitment expiration
date specified in Section 1, Borrower shall not have any Advances
outstanding pursuant to this Agreement for a period of at least fifteen
(15) consecutive days.
2.1.7 The definition of "Permitted Debt" as set forth in Section 1 of
the Loan Agreement is hereby modified to include as Permitted Debt the Debt
arising pursuant to that certain Loan Agreement, dated July 28, 1993,
between Milburn Investments, Inc., a Texas corporation, and Bank, in the
maximum principal amount of $25,000,000.00.
2.1.8 A new paragraph 14 is hereby added to the section of the Note
entitled "EVENTS OF DEFAULT" to provide as follows:
14. The occurrence of any condition or event that is a default or
is designated as a default, an event of default or an Event of Default,
in that certain Loan Agreement, dated July 28, 1993, between Milburn
Investments, Inc., a Texas corporation, and Bank, in the maximum
principal amount of $25,000,000.00.
2.2 Each of the Loan Documents is modified to provide that it shall be a
default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of Borrower herein or if any representation or
warranty by Borrower herein or by any guarantor in any related Consent and
Agreement of Guarantor(s) is materially incomplete, incorrect, or misleading
as of the date hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents
shall be a reference to such document as modified herein.
2.4 From and after the date hereof, the certificates required pursuant
to Section 6.3.4 of the Loan Agreement shall include certifications
regarding the Adjusted Debt to Equity Ratio in form satisfactory to Bank.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
--------------------------------------------
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or
interests in property granted as security in the Loan Documents shall remain
as security for the Loan and the obligations of Borrower in the Loan
Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
---------------------------------------
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the
passage of time or both, would be a default or an event of default under the
Loan Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial condition
of Borrower or any other person whose financial statement has been delivered
to Bank in connection with the Loan from the most recent financial statement
received by Bank.
4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance
with their terms.
5. BORROWER COVENANTS.
-----------------
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such additional
agreements, documents, and instruments as reasonably required by Bank to
effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in
law or equity of Borrower, whether now known or unknown to Borrower, (i) in
respect of the Loan, the Loan Documents, or the actions or omissions of Bank
in respect of the Loan or the Loan Documents and (ii) arising from events
occurring prior to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this Agreement,
Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all amounts,
other than interest and principal, due and payable by Borrower under the
Loan Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses incurred by
Bank in connection with this Agreement (including, without limitation,
inside and outside attorneys).
5.3.3 An extension and modification fee of $50,000.00.
5.3.4 A documentation fee to the Bank of $500.00.
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
-------------------------------------------
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations
of Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) each guarantor(s) of the
Loan, if any, has executed and delivered to Bank a Consent and Agreement of
Guarantor(s), and (iv) if required by Bank, Borrower and any guarantor(s)
have executed and delivered to Bank an arbitration resolution, an
environmental questionnaire, and an environmental certification and
indemnity agreement.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
WAIVER.
-----------------------------------------------------------------------
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all
prior representations, warranties, agreements, arrangements, understandings,
and negotiations. No provision of the Loan Documents as modified herein may
be changed, discharged, supplemented, terminated, or waived except in a
writing signed by the parties thereto.
8. BINDING EFFECT.
--------------
The Loan Documents as modified herein shall be binding upon and shall inure
to the benefit of Borrower and Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees,
and beneficiaries of Borrower, provided, however, Borrower may not assign
any of its right or delegate any of its obligation under the Loan Documents
and any purported assignment or delegation shall be void.
9. CHOICE OF LAW.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Arizona, without giving effect to conflicts of law
principles.
10. COUNTERPART EXECUTION.
---------------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one
and the same document. Signature pages may be detached from the
counterparts and attached to a single copy of this Agreement to physically
form one document.
DATED as of the date first above stated.
CONTINENTAL HOMES HOLDING CORP., a
Delaware corporation
By:/s/ Kenda B. Gonzales
--------------------------------------
Name: Kenda B. Gonzales
----------------------------------
Title: Secretary and Treasurer
----------------------------------
BANK ONE, ARIZONA, NA, a national banking
association
By:/s/ Carol Grumley
--------------------------------------
Name: Carol Grumley
----------------------------------
Title: Vice President
----------------------------------
CONSENT AND AGREEMENT OF GUARANTOR(S)
-------------------------------------
With respect to the Modification Agreement, dated February 25, 1994
("Agreement"), between Continental Homes Holding Corp., a Delaware
corporation ("Borrower") and Bank One, Arizona, NA, formerly known as The
Valley National Bank of Arizona, a national banking association ("Bank"),
the undersigned (individually and, if more than one, collectively
"Guarantor") agrees for the benefit of Bank as follows:
1. Guarantor acknowledges (i) receiving a copy of and reading the
Agreement, (ii) the accuracy of the Recitals in the Agreement, and (iii) the
effectiveness of (A) the Guaranty of Payment, dated February 25, 1993
("Guaranty"), by the undersigned for the benefit of Bank, as modified
herein, and (B) any other agreements, documents, or instruments securing or
otherwise relating to the Guaranty, (including, without limitation, any
arbitration resolution and any environmental certification and indemnity
agreement previously executed and delivered by the undersigned), as modified
herein. The Guaranty and such other agreements, documents, and instruments,
as modified herein, are referred to individually and collectively as the
"Guarantor Documents".
2. Guarantor consents to the modification of the Loan Documents and all
other matters in the Agreement.
3. Guarantor fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits of whatever kind or nature, in
law or equity, that Guarantor has or in the future may have, whether known
or unknown, (i) in respect of the Loan, the Loan Documents, the Guarantor
Documents, or the actions or omissions of Bank in respect of the Loan, the
Loan Documents, or the Guarantor Documents and (ii) arising from events
occurring prior to the date hereof.
4. Guarantor agrees that all references, if any, to the Note, the Loan
Agreement, and the Loan Documents in the Guarantor Documents shall be deemed
to refer to such agreements, documents, and instruments as modified by the
Agreement.
5. Guarantor reaffirms the Guarantor Documents and agrees that the
Guarantor Documents continue in full force and effect and remain unchanged,
except as specifically modified by this Consent and Agreement of
Guarantor(s). Any property or rights to or interests in property granted as
security in the Guarantor Documents shall remain as security for the
Guaranty and the obligations of Guarantor in the Guaranty.
6. Guarantor agrees that the Loan Documents, as modified by the
Agreement, and the Guarantor Documents, as modified by this Consent and
Agreement of Guarantor(s), are the legal, valid, and binding obligations of
Borrower and the undersigned, respectively, enforceable in accordance with
their terms against Borrower and the undersigned, respectively.
7. Guarantor agrees that Guarantor has no claims, counterclaims,
defenses, or offsets with respect to the enforcement against Guarantor of
the Guarantor Documents.
8. Guarantor represents and warrants that there has been no material
adverse change in the financial condition of any Guarantor from the most
recent financial statement received by Bank.
9. Guarantor agrees that this Consent and Agreement of Guarantor(s) may
be executed in one or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one and the same
document. Signature and acknowledgement pages may be detached from the
counterparts and attached to a single copy of this Consent and Agreement of
Guarantor(s) to physically form one document.
DATED as of the date of the Agreement.
CONTINENTAL HOMES, INC., a Delaware
corporation
By:/s/ Kenda B. Gonzales
----------------------------------------
Name: Kenda B. Gonzales
------------------------------------
Title: Financial Vice President
------------------------------------
CONSENT AND AGREEMENT OF GUARANTOR(S)
-------------------------------------
With respect to the Modification Agreement, dated February 25, 1994
("Agreement"), between Continental Homes Holding Corp., a Delaware
corporation ("Borrower") and Bank One, Arizona, NA, formerly known as The
Valley National Bank of Arizona, a national banking association ("Bank"),
the undersigned (individually and, if more than one, collectively
"Guarantor") agrees for the benefit of Bank as follows:
1. Guarantor acknowledges (i) receiving a copy of and reading the
Agreement, (ii) the accuracy of the Recitals in the Agreement, and (iii) the
effectiveness of (A) the Guaranty of Payment, dated February 25, 1993
("Guaranty"), by the undersigned for the benefit of Bank, as modified
herein, and (B) any other agreements, documents, or instruments securing or
otherwise relating to the Guaranty, (including, without limitation, any
arbitration resolution and any environmental certification and indemnity
agreement previously executed and delivered by the undersigned), as modified
herein. The Guaranty and such other agreements, documents, and instruments,
as modified herein, are referred to individually and collectively as the
"Guarantor Documents".
2. Guarantor consents to the modification of the Loan Documents and all
other matters in the Agreement.
3. Guarantor fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits of whatever kind or nature, in
law or equity, that Guarantor has or in the future may have, whether known
or unknown, (i) in respect of the Loan, the Loan Documents, the Guarantor
Documents, or the actions or omissions of Bank in respect of the Loan, the
Loan Documents, or the Guarantor Documents and (ii) arising from events
occurring prior to the date hereof.
4. Guarantor agrees that all references, if any, to the Note, the Loan
Agreement, and the Loan Documents in the Guarantor Documents shall be deemed
to refer to such agreements, documents, and instruments as modified by the
Agreement.
5. Guarantor reaffirms the Guarantor Documents and agrees that the
Guarantor Documents continue in full force and effect and remain unchanged,
except as specifically modified by this Consent and Agreement of
Guarantor(s). Any property or rights to or interests in property granted as
security in the Guarantor Documents shall remain as security for the
Guaranty and the obligations of Guarantor in the Guaranty.
6. Guarantor agrees that the Loan Documents, as modified by the
Agreement, and the Guarantor Documents, as modified by this Consent and
Agreement of Guarantor(s), are the legal, valid, and binding obligations of
Borrower and the undersigned, respectively, enforceable in accordance with
their terms against Borrower and the undersigned, respectively.
7. Guarantor agrees that Guarantor has no claims, counterclaims,
defenses, or offsets with respect to the enforcement against Guarantor of
the Guarantor Documents.
8. Guarantor represents and warrants that there has been no material
adverse change in the financial condition of any Guarantor from the most
recent financial statement received by Bank.
9. Guarantor agrees that this Consent and Agreement of Guarantor(s) may
be executed in one or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one and the same
document. Signature and acknowledgement pages may be detached from the
counterparts and attached to a single copy of this Consent and Agreement of
Guarantor(s) to physically form one document.
DATED as of the date of the Agreement.
CHI CONSTRUCTION COMPANY, an Arizona
corporation
By:/s/ Kenda B. Gonzales
----------------------------------------
Name: Kenda B. Gonzales
------------------------------------
Title: Vice President
------------------------------------
MODIFICATION AND EXTENSION AGREEMENT
DATE: January 31, 1994
PARTIES: Borrower: AMERICAN WESTERN MORTGAGE COMPANY, a
Colorado corporation
Bank: BANK ONE, ARIZONA, NA, a national banking
association, formerly known as The Valley
National Bank of Arizona.
RECITALS:
A. Bank has extended to Borrower credit ("Loan") in the principal
amount of $15,000,000.00 pursuant to that certain Amended and Restated
Warehousing Credit and Security Agreement, dated September 26, 1991 as
amended ("Loan Agreement"), and evidenced by that certain Promissory Note,
dated November 27, 1992 ("Note"). The unpaid principal of the Loan as of
the date hereof is $0.00.
B. The Loan is secured by, among other things, the security interest
in various promissory notes and deeds of trust granted by Borrower to Bank
pursuant to the Loan Agreement. The agreements, documents, and instruments
securing the Loan and the Note are referred to individually and collectively
as the "Security Documents".
C. Bank and Borrower have executed and delivered previously the
following agreements ("Modifications") modifying the terms of the Loan, the
Note, the Loan Agreement, and/or the Security Documents:
(i) Letter of Agreement dated May 28, 1992;
(ii) Modification Agreement dated September 22, 1992;
(iii) Modification Agreement dated November 27, 1992;
(iv) Letter Agreement dated February 25, 1993;
(v) Modification and Extension Agreement dated November 22, 1993.
(The Note, the Loan Agreement, the Security Documents, any arbitration
resolution, any environmental certification and indemnity agreement, and all
other agreements, documents, and instruments evidencing, securing, or
otherwise relating to the Loan, as modified in the Modifications, are
sometimes referred to individually and collectively as the "Loan Documents".
Hereinafter, "Note", "Loan Agreement", "and "Security Documents" shall mean
such documents as modified in the Modifications. All other capitalized
terms used herein and not otherwise defined shall have the meanings given to
such terms in the Loan Agreement.)
D. Borrower has requested that Bank modify the Loan and the Loan
Documents as provided herein. Bank is willing to so modify the Loan and the
Loan Documents, subject to the terms and conditions set forth herein.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
2.1 The Loan Documents are modified as follows:
2.1.1 The definition of "Uncommitted Mortgage Loan" in Section
1 of the Loan Agreement is hereby modified in its entirety to provide as
follows:
"Uncommitted Mortgage Loan" means any Eligible Mortgage Loan which
is not subject to a Purchase Commitment. The term "Uncommitted
Mortgage Loan" also shall include any Eligible Mortgage Loan with
respect to which a Purchase Commitment has been cancelled, or has
otherwise expired or terminated for any reason.
2.1.2 The maturity date of the Loan and the Note is extended
from February 1, 1994, to December 1, 1994. On the maturity date Borrower
shall pay to Bank the unpaid principal, accrued and unpaid interest, and all
other amounts payable by Borrower under the Loan Documents as modified
herein. All commitments of Bank to make loans and advances pursuant to the
Loan Documents shall expire on the maturity date as so extended.
2.1.3 In addition to all other fees, payable pursuant to the
Loan Documents and this Agreement, Borrower agrees to pay a fee of $20.00
for each Pledged Mortgage to cover the costs of Bank's handling and
monitoring of each Pledged Mortgage. All such fees shall be earned each
month as each Advance is made and shall be payable on the first day of the
following month.
2.1.4 In addition to all other fees payable pursuant to the
Loan Documents and this Agreement, Borrower agrees to pay an Unused
Commitment Fee of one-quarter of one percent (1/4%) per annum calculated on
a monthly basis and payable monthly in arrears on the first day of each
month, commencing with the first day of January, 1993, and on expiration or
termination of the Commitment. For each month (or portion thereof), the
Unused Commitment Fee shall be equal to (A) $15,000,000.00 minus (B) the
"Average Monthly Outstandings" for the month (or portion thereof) with
respect to which the Unused Commitment Fee is being computed, with the
resulting number multiplied by (C) one-twelfth of the annual Unused
Commitment Fee rate. As used herein, "Average Monthly Outstandings" means
the sum of the outstanding principal balance of the Loan on each day during
the month (or portion thereof) with respect to which the Unused Commitment
Fee is being computed divided by the number of days in that month (or
portion thereof). If the Unused Commitment Fee is being computed for less
than a full month, the percentage used in clause (C) above shall be computed
on a daily basis for the number of days for which the fee is being computed.
2.1.5 Section 2.1(b) of the Loan Agreement is hereby modified
in its entirety to provide as follows:
(b) Subject to the terms and conditions of this
Agreement and provided no Default has occurred and is continuing,
Lender agrees, from time to time during the period from the
Effective Date to and including December 1, 1994 (unless such
period is earlier terminated pursuant hereto), to make Advances to
Borrower, provided the total aggregate principal amount
outstanding at any one time of all such Advances shall not exceed
Fifteen Million Dollars ($15,000,000.00) (the "Commitment").
Notwithstanding the foregoing, the amount of the Commitment and
individual Advances thereunder is subject to Section 2.1(d)
hereof. Within the Commitment, Borrower may borrow, repay and
reborrow.
2.1.6 Section 2.1(d) of the Loan Agreement is hereby modified
in its entirety to provide as follows:
(d) No Advance shall exceed the following amount (the
"Collateral Value") applicable to the type of Collateral at the
time it is pledged:
(1) An Advance made against a Committed Mortgage
Loan pledged hereunder shall be in an amount equal to ninety-eight
percent (98%) of the committed purchase price thereof set forth in
the applicable Purchase Commitment.
(2) An Advance made against an Uncommitted Mortgage
Loan pledged hereunder shall be in an amount equal to ninety-six
percent (96%) of the Current Market Value of the Eligible Mortgage
Loan.
2.1.7 Section 2.2(e) of the Loan Agreement is hereby modified
in its entirety to provide as follows:
(e) At Lender's option, Advances may be made (i) by
deposit to Borrower's zero balance account maintained by Borrower
at Lender (which deposit will be applied to pay drafts drawn by
title companies or other persons conducting the closing of the
related Eligible Mortgage Loan), (ii) by wire transfer to the
applicable title companies or (iii) by payment directly to
Borrower (provided that Lender will not make Advances directly to
Borrower in any case where Lender has permitted Borrower to retain
possession of the Mortgage Note in question). As a further
condition to Advances, Borrower shall present to Lender
appropriate wiring instructions or such drafts, as required by
Lender.
2.1.8 A new Section 2.2(f) is hereby added to the Loan
Agreement to provide as follows:
(f) From time to time in the sole and absolute
discretion of Lender, Borrower may be permitted to cause drafts
drawn on Borrower's zero balance account maintained at Lender to
be presented to Lender for payment in connection with the funding
of Eligible Mortgage Loans, notwithstanding that Borrower has not
made an Advance Request or submitted Collateral Documents in
connection with such Mortgage Loan. Lender may pay any such
drafts without any further consent of or notice to Borrower and
shall be entitled to assume that each draft is proper, duly
authorized, and validly presented. Any payment by Lender of such
draft shall be deemed to be an Advance, notwithstanding that the
conditions precedent to Advances have not been satisfied. Any
such Advance for which an Advance Request or Collateral Documents
have not been submitted shall be due and payable in full prior to
1:00 p.m., Phoenix, Arizona time on the first Business Day after
the date the related draft was presented to Lender.
Notwithstanding any other provision of the Loan Documents to the
contrary, Borrower hereby irrevocably authorizes Lender to
withdraw from and set off against any deposit accounts maintained
by Borrower or Guarantor with Lender the amount of any such
Advances as due and payable; provided, however, that such right of
set-off shall not apply to any deposits of escrow monies being
held on behalf of mortgagors under Mortgage Loans or other third
parties or accounts containing only principal and interest
payments by borrowers under Mortgage Loans that are maintained in
connection with Borrower's servicing of Mortgage Loans. If at any
time, Lender elects, in its sole and absolute discretion, not to
permit further Advances pursuant to this Section 2.2(f), Borrower
shall immediately cease allowing title companies or other persons
to submit such drafts except in connection with Advances for which
all the conditions precedent set forth herein have been satisfied.
2.1.9 Section 2.4(a) of the Loan Agreement is hereby modified
in its entirety to provide as follows:
(a) The unpaid amount of each Advance shall bear
interest from the date of such Advance until paid in full, at a
floating rate of interest (the "Floating Rate") (computed on the
basis of a 360-day year and applied to the actual number of days
elapsed in each interest calculation period) which is equal to the
Prime Rate plus one half of one (1/2) percent. As used herein,
the term "Prime Rate" shall mean the rate of interest established
and publicly announced from time to time by Bank One, Arizona, NA,
as its "Prime Rate" or "Reference Rate", whether or not such rate
actually is the lowest rate available to commercial borrowers or
other customers of such bank. The Floating Rate will be adjusted
as of the effective date of each change in the Prime Rate.
2.1.10 Section 4(a) of the Promissory Note is hereby modified in
its entirety to provide as follows:
(a) Absent an Event of Default hereunder or under any of the
Credit Agreement Documents, each Advance made hereunder
shall bear interest at the Interest Rate in effect from
time to time, which rate is equal to one-half of one
percent (1/2 of 1%) per annum above the Prime Rate, as
such term is defined on Section 2.4 of the Credit
Agreement. Throughout the term of this Note, interest
shall be calculated on a 360-day year with respect to the
unpaid balance of any Advance and, in all cases, shall be
computed for the actual number of days in the period for
which interest is charged.
2.1.11 Section 2.4(e)(2) of the Loan Agreement is hereby modified
in its entirety to provide as follows:
(2) The Interest Credit shall be an amount, determined
on a quarterly basis, equal to (i) the amount of (A) the average
daily amount of free collected compensating balances maintained by
Borrower with Lender in noninterest-bearing accounts for the
period in question, reduced by (B) the amount required to be
maintained or deposited in reserve pursuant to Regulation D of the
Federal Reserve Board, or otherwise, with respect to such
compensating balances during the period in question and (C)
further reduced by the portion of such compensating balances
required to be maintained and/or pledged pursuant to any other
loan or agreement between Borrower and Lender, multiplied by (ii)
the average 90-day treasury bill auction rate (based on quotations
thereof in the Lender's Investment Department) during the period
in question reduced by forty (40) basis points, and (iii) with the
product of (i) and (ii) further reduced by all FDIC assessments
and premiums incurred by Lender and all other service charges
imposed by Lender with respect to such compensating balances;
provided, however, that the amount of the Interest Credit shall
not be greater than one half of one percent (1/2%) per annum on
the Loan amount outstanding during the period in question. An
example of the computation of the Interest Credit is set forth in
Exhibit D hereto.
2.1.12 Section 2.4(e)(4) of the Loan Agreement is hereby modified
in its entirety to provide as follows:
(4) Lender and Borrower acknowledge that the intent of
this Section 2.4(e) is (i) that all Advances pursuant to this
Agreement yield to Lender a minimum interest rate of Prime Rate
plus one half of one percent (1/2%) per annum but against this
yield Borrower will be credited an amount equal to the net value
to Lender of Borrower's accounts with Lender as determined by
Lender, not to exceed the limitations set forth in Section
2.4(e)(2) above and (ii) that after giving effect to the Interest
Credit, interest on all Advances shall never be less than the
Prime Rate.
2.1.13 A new section 2.4(e)(5) of the Loan Agreement is hereby
added to the Loan Agreement to provide as follows:
(5) Notwithstanding the foregoing provisions of this
Section 2.4, no Interest Credit shall be earned during any period
in which no Advances are outstanding under this Loan Agreement.
In addition, Borrower shall not be entitled to any Interest Credit
with respect to interest on Advances made pursuant to Section
2.2(f) of this Loan Agreement.
2.1.14 Sections 2.5(a), 2.6(a) and 2.6(b) of the Loan Agreement
are modified by deleting "December 1, 1993" and inserting in its place
"December 1, 1994" in each place said date appears therein.
2.1.15 Section 2.5(c) of the Loan Agreement is hereby modified in
its entirety to provide as follows:
(c) In addition, Borrower shall be obligated to pay to
Lender, without the necessity of prior demand or notice from
Lender, the amount of any outstanding Advance against a specific
Eligible Mortgage Loan, upon the occurrence of any of the
following events:
(1) One Hundred and Eighty (180) days have lapsed
from the date of the Advance made by Lender with respect to such
Eligible Mortgage Loan;
(2) Twenty (20) days have elapsed from the date
such Eligible Mortgage Loan was delivered to an Investor for
examination and purchase, without the purchase being made, or upon
rejection of such Eligible Mortgage Loan as unsatisfactory by an
Investor;
(3) The Collateral Documents, upon examination by
Lender, are found not to be in compliance with the requirements of
this Agreement;
(4) If any of the items required to be delivered
pursuant to Exhibit A after an Advance are not delivered as and
when required or if delivered are not in compliance with this
Agreement;
(5) Ten (10) Business Days have elapsed from the
date a Collateral Document was delivered to Borrower for
correction or completion, without being returned to Lender;
(6) Such Eligible Mortgage Loan is defaulted and
remains in default for a period of sixty (60) days;
(7) If any of the representations and warranties
set forth in Section 5.12 with respect to an Eligible Mortgage
Loan are untrue or incorrect in any material respect; and
(8) Upon the sale of such Eligible Mortgage Loan.
Upon making such payment to Lender, so long as no Event of Default
has occurred and is continuing, Borrower shall be deemed to have
redeemed such Eligible Mortgage Loan from pledge, and the
Collateral Documents relating thereto shall be released by Lender
to Borrower or to a designated Investor.
2.1.16 Section 3.2 of the Loan Agreement is hereby modified in its
entirety to provide as follows:
3.2 Valuation of Collateral.
The Collateral shall be valued as set forth below at
least weekly and more often at Lender's sole discretion.
All valuations of individual Mortgage Loans shall be
based on yields which are net of all servicing charges
whether or not specified below. For purposes hereof,
"Current Market Value" shall mean: (a) with respect to
any Eligible Mortgage Loan that is not an FHA loan or VA
loan, the current price for 30-day delivery quoted by
FNMA and reported to Lender on "Telerate Systems Reports"
or other source acceptable to Lender, and (b) in the case
of Eligible Mortgage Loans that are FHA Loans and VA
Loans, the price most recently quoted by GNMA for
immediate purchase and reported to Bank on "Telerate
Systems Reports" or other source acceptable to Bank.
2.1.17 Section 3.3 "Margin Call" of the Loan Agreement is hereby
modified in its entirety to provide as follows:
3.3 Margin Call. The parties intend that the amount
advanced and outstanding under this Agreement with respect to
an Uncommitted Mortgage Loan, shall at no time exceed ninety-
six percent (96%) of its then Current Market Value. If, at
any time, the amount advanced with respect to an Uncommitted
Mortgage Loan, is greater than ninety-six percent (96%) of its
then Current Market Value, as determined in accordance with
Section 3.2 hereof, then Borrower shall be required to make
the payments set forth in this Section 3.3 ("Margin Call"). A
Margin Call shall require Borrower to pay to Lender an amount
equal to the difference between ninety-six percent (96%) of
the then Current Market Value and the amount advanced with
respect to such Uncommitted Mortgage Loan. Payment for each
Margin Call due to Lender pursuant to this Section 3.3 shall
be made by Borrower in immediately available funds within one
(1) Business Day following the occurrence of such event,
provided, however, if the outstanding aggregate amount of all
Margin Calls is equal to or less than $25,000, then Borrower
shall not be obligated to make payment for such Margin Calls
unless and until the aggregate amount of all Margin Calls is
greater than $25,000, at which time Borrower shall be
obligated to immediately pay the entire amount of all
outstanding Margin Calls. Such amounts paid by Borrower shall
reduce, by a corresponding amount, the amount outstanding
under the Note.
2.1.18 Section 3.4 of the Loan Agreement is hereby amended in
its entirety to provide as follows:
3.4 Margin Credit. If it is determined from any
valuation that ninety-six percent (96%) of the Current Market
Value of any Uncommitted Mortgage Loan, as determined in
accordance with Section 3.2 hereof, exceeds the amount of the
Advance against such Uncommitted Mortgage Loan, such amount in
excess of the Collateral Value (the "Margin Credit") shall,
upon the written request of Borrower submitted pursuant to the
terms of this Agreement for an Advance, be payable to Borrower
as an additional Advance against such Uncommitted Mortgage
Loan, but only (i) if all obligations to be observed or
performed by Borrower under this Agreement are complied with
and (ii) there is no Margin Call then outstanding and no other
required principal payments then due pursuant to the terms of
this Agreement.
2.1.19 The second sentence of Section 3.5 of the Loan Agreement is
hereby amended in its entirety to provide as follows:
In connection with such a redemption, the Lender will, at
Borrower's request either (i) transmit or otherwise deliver
the Pledged Mortgages to responsible third parties for the
purpose of sale or (ii) release such Pledged Mortgages to
Borrower for the prompt transmission by Borrower of such
Pledged Mortgages to responsible third parties (as determined
by Lender) for the purpose of sale.
2.1.20 "Exhibit A" to this Agreement is hereby substituted for
Exhibit "A" to the Loan Agreement.
2.1.21 "Exhibit D" to this Agreement is hereby substituted for
Exhibit "D" to the Loan Agreement.
2.1.22 In addition to the other provisions of Section 6.3 of the
Loan Agreement, (i) within thirty (30) days after the end of each month,
Borrower shall deliver to Bank a report in form satisfactory to Bank
itemizing the Mortgage Loans of Borrower closed in such month and the
Mortgage Loans of Borrower being processed for closing as of the end of such
month and containing such other information as Bank may request, (ii)
promptly upon the availability thereof, Borrower shall deliver to Bank
copies of all reports, filings, disclosures, responses, and other materials
filed with or submitted to any regulatory authority (federal, state or
local) having regulatory jurisdiction over Borrower's business of making,
selling, servicing or otherwise dealing in Mortgage Loans, and (iii) within
thirty (30) days after the receipt thereof, Borrower shall deliver to Bank
copies of all notices, reports, orders, claims and other information from
any such regulatory authority to the extent relating to or affecting such
business of Borrower.
2.2 Notwithstanding any other provisions of the Loan Documents and in
addition to the requirements thereof, Borrower agrees that (i) the number of
Pledged Mortgages that represent Mortgage Loans secured by condominiums,
townhouses, zero lot line residences, or other forms of "attached" housing
shall never be more than ten percent (10%) of the number of all Pledged
Mortgages and (ii) the outstanding principal balance of Uncommitted Mortgage
Loans shall never be more than fifteen percent (15%) of the aggregate
outstanding principal balance of all Eligible Mortgage Loans. If either of
the requirements of the immediately preceding sentence are not satisfied at
any time, then (A) Borrower shall not be entitled to any Advances unless and
until such requirements are again satisfied and (B) Borrower shall within
one (1) business day after demand by Lender prepay the amount of any
outstanding Advances against Eligible Mortgage Loans until such requirements
are satisfied.
2.3 In addition to all of the other terms and conditions of the Loan
Documents, Borrower agrees that Borrower shall not cause or permit, whether
voluntarily or involuntarily, any lien, encumbrance, security interest, or
other assignment to exist with respect to, or otherwise affect, any of
Borrower's Servicing Rights. As used herein, "Servicing Rights" shall mean
the rights of Borrower to service Mortgage Loans (including, without
limitation, the right to collect payments of principal and interest, receive
late charges and other payments, maintain tax and insurance impound and
escrow accounts, and to otherwise administer, monitor, and act with respect
to Mortgage Loans), whether or not such Mortgage Loans are owned by
Borrower, together with all fees, payments, and other amounts received or
receivable with respect to such loan servicing and all proceeds of such loan
servicing.
2.4 Each of the Loan Documents is modified to provide that it shall be
a default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of Borrower herein or if any representation or
warranty by Borrower herein or by any guarantor in any related Consent and
Agreement of Guarantor(s) is materially incomplete, incorrect, or misleading
as of the date hereof or if any "default" or "event of default" shall occur
under any other Loan Document.
2.5 Each reference in the Loan Documents to any of the Loan Documents
shall be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
---------------------------------------------
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or
interests in property granted as security in the Loan Documents shall remain
as security for the Loan and the obligations of Borrower in the Loan
Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
---------------------------------------
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the
passage of time or both, would be a default or an event of default under the
Loan Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial
condition of Borrower or any other person whose financial statement has been
delivered to Bank in connection with the Loan from the most recent financial
statement received by Bank.
4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance
with their terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to
execute and deliver this Agreement and to perform the Loan Documents as
modified herein. The execution and delivery of this Agreement and the
performance of the Loan Documents as modified herein have been duly
authorized by all requisite action by or on behalf of Borrower. This
Agreement has been duly executed and delivered on behalf of Borrower.
5. BORROWER COVENANTS.
------------------
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such
additional agreements, documents, and instruments as reasonably required by
Bank to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in
law or equity, that Borrower has or in the future may have, whether known or
unknown, (i) in respect of the Loan, the Loan Documents, or the actions or
omissions of Bank in respect of the Loan or the Loan Documents and (ii)
arising from events occurring prior to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this
Agreement, Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all
amounts, other than interest and principal, due and payable by Borrower
under the Loan Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses incurred
by Bank in connection with this Agreement (including, without limitation,
inside and outside attorneys, appraisal, appraisal review, processing,
title, filing, and recording costs, expenses, and fees).
5.3.3 An extension fee of $37,500.00, which is fully earned and
nonrefundable.
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
-------------------------------------------
Bank shall not be bound by this Agreement until each of the following shall
have occurred: (i) Bank has executed and delivered this Agreement, (ii)
Borrower has performed all of the obligations of Borrower under this
Agreement to be performed contemporaneously with the execution and delivery
of this Agreement, (iii) each guarantor(s) of the Loan, if any, has executed
and delivered to Bank a Consent and Agreement of Guarantor(s), and (iv) if
required by Bank, Borrower and any guarantor(s) have executed and delivered
to Bank an arbitration resolution, an environmental questionnaire, and an
environmental certification and indemnity agreement.
7. ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
-----------------------------------------------------------
The Loan Documents as modified herein contain the entire understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all
prior representations, warranties, agreements, arrangements, and
understandings. No provision of the Loan Documents as modified herein may
be changed, discharged, supplemented, terminated, or waived except in a
writing signed by Bank and Borrower.
8. BINDING EFFECT.
--------------
The Loan Documents as modified herein shall be binding upon, and inure to
the benefit of, Borrower and Bank and their respective successors and
assigns.
9. CHOICE OF LAW.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Arizona, without giving effect to conflicts of law
principles.
10. COUNTERPART EXECUTION.
---------------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one
and the same document. Signature pages may be detached from the
counterparts and attached to a single copy of this Agreement to physically
form one document.
DATED as of the date first above stated.
AMERICAN WESTERN MORTGAGE COMPANY, a
Colorado corporation
By:/s/ Kenda B. Gonzales
-----------------------------------
Name: Kenda B. Gonzales
---------------------------------
Title: President
--------------------------------
"Borrower"
BANK ONE, ARIZONA, NA, a
national banking association, formerly
known as The Valley National Bank of
Arizona
By:/s/ Rhonda R. Williams
-----------------------------------
Name: Rhonda R. Williams
---------------------------------
Title: Corporate Officer
--------------------------------
"Bank"
State of _______________ )
) ss.
County of ______________ )
The above instrument was acknowledged before me this ____ day of
______________, 1994, by _______________________________________________ ,
the _____________________ of AMERICAN WESTERN MORTGAGE COMPANY, a Colorado
corporation, on behalf of the corporation.
My commission expires:
______________________ ______________________________
Notary Public
State of _______________ )
) ss.
County of ______________ )
The above instrument was acknowledged before me this ____ day of __________,
1994, by _______________________________________________, the ______________
of BANK ONE, ARIZONA, NA, a national banking association, formerly known as
The Valley National Bank of Arizona, on behalf of the association.
My commission expires:
______________________ ______________________________
Notary Public
EXHIBIT A
---------
COLLATERAL DOCUMENTS
Each Advance Request shall include the following:
1. Mortgage Note. The original Mortgage Note evidencing the
indebtedness secured by the applicable Eligible Mortgage Loan, duly executed
by the mortgagor to Borrower as payee.
2. Endorsement. A blank endorsement by Borrower of the Mortgage
Note, duly executed by Borrower.
3. Mortgage. A copy of the Mortgage securing the Mortgage Note
certified by Borrower and by the closing attorney or title company presiding
at the closing to be a true and complete copy of the original which is being
recorded. The certified copy of the Mortgage must be a photocopy which
shows due execution by the individual(s) who has (have) executed the
corresponding Mortgage Note. The Mortgage must accurately describe the
Mortgage Note which it is intended to secure, and the Mortgage must be
prepared in accordance with the local recording requirements.
4. Assignment. A duly executed assignment to Bank of each
Mortgage, of the indebtedness secured thereby, and of all documents and
rights related to each Mortgage Loan, including the right to any casualty
insurance proceeds or condemnation awards. This instrument must accurately
describe the Mortgage which it is intended to assign, must be in recordable
form, and be otherwise satisfactory to Bank.
5. Commitment for Title Insurance. A commitment for the issuance
of an ALTA title insurance loan policy in favor of Borrower and its
successors and assigns, in the amount of the original principal balance of
the Mortgage Loan. The interim title binder or commitment must obligate the
title insurance company to issue a policy insuring that the Mortgage is a
valid first lien on the premises described in the Mortgage, and containing
all affirmative insurance required by the FHA, VA or the Investor with only
exceptions permitted by these parties and Bank. The title binder or
commitment must be countersigned by an authorized representative or agent of
the applicable title insurance company.
6. Escrow Instructions; Funding Draft. A copy of Borrower's
escrow instructions to the title company responsible for closing the
Eligible Mortgage Loan, together with a copy of the draft to be presented by
such title company in connection with such closing.
7. Appraisal; PMI. With respect to each Mortgage Loan, a copy of
the appraisal (or MCC or MCRV, as applicable) and, in the case of
conventional loans with a loan-to-value ratio of greater than 80% (or such
other percentage above which private mortgage insurance is required pursuant
to applicable laws, rules and regulations), copies of the private mortgage
insurance certificates.
8. Insurance. Originals or certified copies of all fire and
casualty insurance policies, in form and issued by companies reasonably
satisfactory to Bank, covering the premises covered by each Mortgage,
including, if required by the FHA, private mortgage insurance, or VA,
insurance against flood hazards (together with a "flood letter" signed by
the borrower under the applicable Mortgage Loan), or a certificate of the
insurance underwriter evidencing the same, certifying that such insurance is
in full force and effect. The policy must stipulate that losses are payable
in favor of Borrower and its assigns.
9. Disclosure and Settlement Statements. Certified copies of all
settlement statements (including, without limitation, the HUD-1) and
disclosure statements required under the Federal Truth-in-Lending Act and
the provisions of Regulation Z of the Federal Reserve Board, and disclosure
statements required under the Real Estate Settlement Procedures Act. All
disclosure statements must include all the necessary signatures of the
involved parties.
10. Purchase Commitment. A certified copy of a letter or
agreement executed by the applicable Approved Investor obligating the
investor to purchase each Committed Mortgage Loan, together with the price
at which each Committed Mortgage Loan is to be purchased and shipping
instructions for the delivery of each Committed Mortgage Loan to the
Approved Investor.
11. Instruction Letter. A certified copy of the instruction
letter from the Borrower to the Approved Investor instructing the Approved
Investor to remit the proceeds of the purchase of the Mortgage Loan directly
to Bank and otherwise evidencing the transmittal of the Mortgage Loan (or
copies of applicable loan documents if the originals have been transmitted
to Bank) to the Approved Investor.
EXHIBIT D
---------
EXAMPLES
Example of Interest Credit Computation
A. Assumptions:
1. Period: 1/1/90 - 4/1/90
2. Average daily free collected balances for period: $2,000,000
3. Reserve requirements: $250,000
4. Average 90-day T-bill rate for period: 8%
5. FDIC Premiums: $200
6. Other Fees/Charges: $1,000
7. Balance of Loan for period: $10,000,000
B. Computation:
1. Average daily collected
balances: $2,000,000
2. (Less: Reserve): (250,000)
----------
3. Net balances: $1,750,000
4. Earnings @ 7.6% per
annum (8% - .4%) for
the calendar quarter
in question: $33,250
5. (Less: FDIC Premiums
and other charges): (1,200)
----------
$ 31,050
$10,000,000 @ 1/2 of 1% per annum for
the calendar quarter in question = $ 12,500
Since Interest Credit cannot be
greater than 1/2 of 1% per annum on
the outstanding Loan for the period
in question, the Interest Credit
for the calendar quarter
in question is: $ 12,500
EXHIBIT 11
Continental Homes Holding Corp.
Computation of Earnings Per Share
(In thousands, except per share data)
Three months ended Nine months ended
February 28, February 28,
--------------- --------------
1994 1993 1994 1993
---- ---- ---- ----
Fully diluted:
Net income $ 2,727 $ 1,476 $ 9,191 $ 5,061
Interest expense on convertible
subordinated notes, net of
income taxes 401 415 1,203 1,245
------- ------- ------- -------
$ 3,128 $ 1,891 $10,394 $ 6,306
======= ======= ======= =======
Weighted average number of
shares outstanding 6,954 5,170 5,947 5,129
Conversion of convertible
subordinated notes (42.55 shares
per $1,000 principal amount of
notes) 1,489 1,489 1,489 1,489
Incremental shares relating to
stock options exercisable 98 95 117 103
------- ------- ------- -------
Weighted average number of shares
outstanding assuming full dilution 8,541 6,754 7,553 6,721
======= ======= ======= =======
Fully diluted net income per share $ .37 $ .28 $ 1.38 $ .94
======= ======= ======= =======
