SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 18, 1994
-----------------
CONTINENTAL HOMES HOLDING CORP.
(Exact name of registrant as specified in its charter)
Delaware 0-14830 86-0554624
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
7001 North Scottsdale Road, Suite 2050
Scottsdale, Arizona 85253
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (602) 483-0006
Not Applicable
_____________________________________________________________________________
(Former name or former address, if changed since last report)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On November 18, 1994, Continental Homes Holding Corp. (the "Company")
consummated the acquisition of Heftler Realty Co., a Florida Corporation
("Heftler"). The acquisition was effected pursuant to a Stock Purchase
Agreement (the "Agreement") between Herbert Heftler, Monica Heftler, Roger
Heftler, Joel Kovin, Thomas Iglesias, Jack Shell, and Candice Sharpsteen
(collectively "Seller") and the Company.
Under the terms of the Agreement, the total consideration given to
Seller was $28,500,000 in cash paid at closing. The sources of funds used
for the acquisition were funds generated from operations and borrowings
under the Company's existing lines of credit with Bank One, Arizona N.A. and
Norwest Bank. The consideration was determined pursuant to arms-length
negotiations between the Company and Seller.
In 1993, Heftler ranked as the third largest builder in Dade County,
Florida and the 11th largest builder in Broward County, Florida both in
terms of revenues and units closed. Since its founding almost fifty years
ago, Heftler has built and sold more that 27,000 homes in 15 states and
Puerto Rico. Heftler began its Florida operations in 1956 and has operated
exclusively in South Florida for the last 19 years.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
It is impracticable to provide the required financial information
for Heftler at the time this report on Form 8-K is filed. The
required financial statements will be filed under Form 8-K/A as
soon as practicable but in no event later than February 1, 1995.
(b) Pro Forma Financial Information.
It is impracticable to provide the required pro forma financial
information for Heftler at the time this report on Form 8-K is
filed. The required pro forma financial information will be filed
under cover of a Form 8-K/A as soon as practicable but in no event
later than February 1, 1995.
(c) Exhibits.
2.1 Stock Purchase Agreement between Seller and Continental Homes
Holding Corp. dated November 3, 1994.
10.1 Loan Agreement dated November 17, 1994 between Bank One,
Arizona NA ("BOAZ") and Heftler Realty Co. ("Heftler").
10.2 Promissory Note dated November 17, 1994 by Heftler in favor
of BOAZ in the principal amount of $10,000,000.
10.3 Master Loan Agreement dated August 29, 1994 between
NationsBank of Florida, N.A. ("Nations") and Heftler.
10.4 First Amendment to Loan Agreement dated November 16, 1994
between Nations and Heftler.
10.5 Consolidation Promissory Note dated November 16, 1994 by
Heftler in favor of Nations in the principal amount of
$20,000,000.
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 hereunto duly authorized.
CONTINENTAL HOMES HOLDING CORP.
Date: December 2, 1994 /s/ Kenda B. Gonzales
------------------ -----------------------------
Kenda B. Gonzales
Secretary and Treasurer
(Chief Financial Officer)
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
REGARDING
HEFTLER REALTY CO.
November 2, 1994
<PAGE>
TABLE OF CONTENTS
Page
1. Definitions
2. Purchase and Sale of Purchased Shares . . . . . . . . . . . . . . . 6
(a) Basic Transaction . . . . . . . . . . . . . . . . . . . . . . . 6
(b) Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Good Faith Deposit . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Diligence Period . . . . . . . . . . . . . . . . . . . . . . . . 7
(e) The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(f) Deliveries at the Closing . . . . . . . . . . . . . . . . . . . 7
(g) Dividends for Taxes of Seller . . . . . . . . . . . . . . . . . 7
3. Representations and Warranties of the Buyer. . . . . . . . . . . . . 8
(a) Organization, Power . . . . . . . . . . . . . . . . . . . . . . 8
(b) Authorization of Transaction . . . . . . . . . . . . . . . . . . 8
(c) Brokers' Fees . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(e) Noncontravention of the Buyer . . . . . . . . . . . . . . . . . 8
4. Representations and Warranties of the Seller . . . . . . . . . . . . 9
(a) Authorization of Transaction . . . . . . . . . . . . . . . . . . 9
(b) Noncontravention of the Seller . . . . . . . . . . . . . . . . . 10
(c) Brokers' Fees of the Seller . . . . . . . . . . . . . . . . . . 10
(d) Organization, Qualification and Corporate Power . . . . . . . . 10
(e) Capitalization of the Company . . . . . . . . . . . . . . . . . 11
(f) Ownership of the Joint Venture, etc . . . . . . . . . . . . . . 11
(g) Noncontravention of the Company, etc . . . . . . . . . . . . . . 11
(h) Financial Statements . . . . . . . . . . . . . . . . . . . . . . 12
(i) Events Subsequent to Date of Audited Financial Statements . . . 12
(j) Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . 14
(k) Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(l) Leasehold for Company Headquarters . . . . . . . . . . . . . . . 17
(m) Real Property . . . . . . . . . . . . . . . . . . . . . . . . . 17
(n) Intellectual Property . . . . . . . . . . . . . . . . . . . . . 22
(o) Personal Property . . . . . . . . . . . . . . . . . . . . . . . 23
(p) Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(q) Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(r) Notes and Accounts Receivable . . . . . . . . . . . . . . . . . 25
(s) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(t) Product Warranty . . . . . . . . . . . . . . . . . . . . . . . . 26
(u) Product Liability . . . . . . . . . . . . . . . . . . . . . . . 26
(v) Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
(w) Employee Benefits Plans . . . . . . . . . . . . . . . . . . . . 27
(x) Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(y) Environment, Health, and Safety . . . . . . . . . . . . . . . . 31
(z) Transactions with Related Parties . . . . . . . . . . . . . . . 32
(aa) Special Taxing Districts . . . . . . . . . . . . . . . . . . . 32
(bb) Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . 32
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(b) Notices and Consents . . . . . . . . . . . . . . . . . . . . . . 32
(c) Operation of Business . . . . . . . . . . . . . . . . . . . . . 33
(d) Preservation of Business . . . . . . . . . . . . . . . . . . . . 33
(e) Full Access . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(f) Notice of Developments . . . . . . . . . . . . . . . . . . . . . 33
(g) Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(h) Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . 33
(i) Platting of Pembroke Shores . . . . . . . . . . . . . . . . . . 34
(j) Lawsuits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(k) Acquisition and Disposition of Real Property . . . . . . . . . . 34
(l) Tax Information . . . . . . . . . . . . . . . . . . . . . . . . 34
(m) Sale of Joint Venture Property, etc . . . . . . . . . . . . . . 34
(n) Option to Exclude Assets . . . . . . . . . . . . . . . . . . . . 34
6. Post-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . 34
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(b) Litigation Support . . . . . . . . . . . . . . . . . . . . . . . 35
(c) Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(d) Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . 35
(e) Life Insurance Policies . . . . . . . . . . . . . . . . . . . . 36
(f) Dividends for Taxes . . . . . . . . . . . . . . . . . . . . . . 36
(g) Barnett Financing Statements . . . . . . . . . . . . . . . . . . 36
7. Conditions to Obligation to Close and Covenant of Seller . . . . . . 36
(a) Conditions to Obligation of the Buyer . . . . . . . . . . . . . 36
(b) Conditions to Obligation of the Seller . . . . . . . . . . . . 39
(c) Financing from Herbert Heftler . . . . . . . . . . . . . . . . 40
8. Remedies; Indemnifications . . . . . . . . . . . . . . . . . . . . 41
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
(b) Survival of Representations and Warranties . . . . . . . . . . 41
(c) Post-Closing Indemnification Provisions
for Benefit of the Buyer . . . . . . . . . . . . . . . . . . 41
(d) Post-Closing Indemnification Provisions
for Benefit of the Seller . . . . . . . . . . . . . . . . . . . . 43
(e) Matters Involving Third Parties . . . . . . . . . . . . . . . 43
(f) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 44
(g) Other Indemnification Provisions . . . . . . . . . . . . . . . 44
9. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(a) Termination of Agreement . . . . . . . . . . . . . . . . . . . . 45
(b) Effect of Termination . . . . . . . . . . . . . . . . . . . . . 45
10. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(a) Press Releases and Public Announcements . . . . . . . . . . . . 45
(b) No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . 45
(c) Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 45
(d) Succession and Assignment . . . . . . . . . . . . . . . . . . . 46
(e) Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(f) Heading . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(g) Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(h) Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 47
(i) Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . 47
(j) Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(k) Cost of Transaction . . . . . . . . . . . . . . . . . . . . . . 48
(l) Legal Fees & Costs . . . . . . . . . . . . . . . . . . . . . . . 47
(m) Gender and Number . . . . . . . . . . . . . . . . . . . . . . . 47
(n) Obligations of Seller . . . . . . . . . . . . . . . . . . . . . 47
(o) Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 47
(p) Incorporation of Exhibits, Annexes, and Schedules . . . . . . . 48
(q) Submission to Jurisdiction . . . . . . . . . . . . . . . . . . . 48
(r) Hart-Scott-Rodino . . . . . . . . . . . . . . . . . . . . . . . 48
(s) Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . 48
(t) WAIVER OF TRIAL BY JURY . . . . . . . . . . . . . . . . . . . . . . . 48
(u) Power of Attorney; Deposit of Shares . . . . . . . . . . . . . . . . 49
<PAGE>
STOCK PURCHASE AGREEMENT
Agreement ("Agreement") entered into as of November 2, 1994 by and
between Continental Homes Holding Corp., a Delaware corporation (the
"Buyer"), and those persons set forth on Exhibit A hereto (collectively and
severally, "Seller").
Seller owns all of the issued and outstanding capital stock of the
Heftler Realty Co., a Florida corporation ("Company"); and each Person
comprising the Seller owns that number of shares of the Seller's capital
stock set forth opposite his name on Exhibit A.
This Agreement contemplates a transaction in which the Buyer will
purchase from the Seller, and the Seller will sell to the Buyer, all of the
issued and outstanding capital stock of the Company ("Purchased Shares") in
return for the consideration specified below.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations,
warranties, and covenants herein contained, the parties hereto agree as
follows.
1. Definitions.
"Adverse Consequences" means all material actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, Liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
"Affiliated Group" means any affiliated group within the meaning of
Code Sec. 1504 or any similar group defined under a similar provision of
state, local or foreign law.
"Assets" means all property and interests of the Company, whether real,
personal or mixed, tangible or intangible, wherever located, as of the date
hereof and acquired after the date hereof but prior to Closing.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that if known to a reasonable person
would cause such reasonable person to determine that a particular specified
consequence is likely to result therefrom.
"Buyer" has the meaning set forth in the preface above.
"Closing" has the meaning set forth in Section 2(e) below.
"Closing Date" has the meaning set forth in Section 2(e) below.
"Code" means the Internal Revenue Code of 1986, as amended, and
regulations promulgated thereunder.
"Company" has the meaning set forth in the preface above.
"Company Names" has the meaning set out in Section 4(o)(iii).
"Confidential Information" means any information concerning the
businesses and affairs of the Company that is not already generally
available to the public.
"Deferred Intercompany Transaction" has the meaning set forth in Treas.
Reg. Section 1.1502-13.
"Disclosure Schedule" has the meaning set forth in Section 4 below.
"Environmental, Health and Safety Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and
Health Act of 1970 each as amended, together with all other laws (including
rules, regulations, codes, injunctions, judgments, orders, decrees, and
rulings, thereunder) of federal, state, local, and foreign governments (and
all agencies thereof) concerning pollution or protection of the environment,
public health and safety, or employee health and safety, including laws
relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic
materials or wastes into ambient air, surface water, ground water, or lands
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or
wastes.
"Environmental Reports" mean all reports, studies and audits prepared
by environmental consultants relating to the Assets which were prepared at
the request of or are otherwise in the possession of the Company or the
Seller.
"Extremely Hazardous Substance" means any chemical or substance: (i)
contained in the list published under Sec. 302 of the Emergency Planning and
Community Right-to-Know Act of 1986, as amended; (ii) contained in the
United States Department of Transportation Hazardous Materials Table (49 CFR
Section 172.101, including the appendix to Section 172.101); (iii) identified by
the Environmental Protection Agency as a Hazardous substance in 40 CFR Part 302;
(iv) any asbestos containing material; (v) petroleum or any petroleum product or
material in any way derived from or concerning any petroleum product or any oil
or substances containing oil.
"Financial Statements" has the meaning set forth in Section 4(i) below.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"Hart-Scott-Rodino Act" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Indemnified Party" has the meaning set forth in Section 8 below.
"Indemnifying Party" has the meaning set forth in Section 8 below.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements
thereto, and all patents, patent applications, and patent disclosures,
together with all reissuances, continuations, continuations-in-part,
revisions, extensions, and re-examinations thereof, (b) all trademarks,
service marks, trade dress, logos, trade names, and corporate names,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations,
and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all
rights of publicity with respect to the Company Names, (f) all trade secrets
and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (g) all computer software (including data
and related documentation), (h) all other proprietary rights, and (i) all
copies and tangible embodiments (in whatever form or medium) of all of the
foregoing items included within the definition of Intellectual Property.
"Interim Financial Statements" has the meaning set forth in Section
4(i) below.
"Joint Venture" means HHP Venture, a Florida joint venture, of Pasadena
Homes, Inc., a Florida corporation, Heftler Realty Co., a Florida
corporation, and K. Hovnanian at Pembroke Isles, Inc., a Florida
corporation, pursuant to the Joint Venture Agreement.
"Joint Venture Agreement" means that certain Agreement dated November 18,
1993, as amended by that First Amendment to Agreement dated December 15, 1993,
by that Second Amendment to Agreement dated July 20, 1994, by and among the
partners of the Joint Venture, and by that Third Amendment to Agreement, dated
October 28, 1994.
"Knowledge" means actual knowledge after reasonable investigation;
provided, however, that
(a) Knowledge of any Person included in the term "Seller" shall
be imputed to all persons constituting the Seller; and
(b) reasonable investigation by Seller with respect to any
matters shall mean that Seller has made inquiry of (i) employees,
officers, directors. shareholders, agents, managers, independent
contractors and partners (as applicable) of the Company and the
Joint Venture who Seller believes have within their job
responsibilities the duty to monitor such matters, (ii) M.
Randolph Prince with respect to tax matters only and (iii)
consulting engineers, architects, land planners, attorneys and
accountants, if any, hired by the Company or the Joint Venture
with respect to matters handled or analyzed by them.
"Liability" means any material liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether
accrued or unaccrued, whether liquidated or unliquidated, and whether due or
to become due), including without limitation any liability for Taxes and any
liability under Environmental, Health and Safety Laws.
"Material Adverse Effect" means a material adverse effect on the
business, financial condition, operations, or results of operations of the
Company or the Joint Venture or an event or occurrence that prevents the
parties from consummating the transactions contemplated by this Agreement.
"NationsBank" means NationsBank of Florida, N.A.
"NationsBank Agreement" means that Master Loan Agreement, dated as of
August 29, 1994, by and between the Company and NationsBank and all other
Loan Documents (as such term is defined in such Master Loan Agreement).
"Ordinary Course of Business" means the ordinary and usual course of
the Company's business consistent with the Company's past custom and
practice and sound industry practice (including with respect to quantity,
quality, price and frequency).
"Outside Closing Date" has the meaning set forth in Section 2(e) below.
"Owned Real Property" has the meaning set forth in Section 4(n)(i) of
the Disclosure Schedule.
"Pembroke Shores" means that real property described on Exhibit B
hereto.
"Person" means any natural or legal entity, including, without
limitation, an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
"Preferred Builder's Warranty Program" means the limited dwelling
warranty program made available pursuant to that Dwelling Warranty attached
as Exhibit C, by Preferred Builders Warranty Corp. to purchasers of
certain homes constructed by the Company.
"Purchase Price" has the meaning set forth in Section 2(b) below.
"Purchased Shares" means all of the issued and outstanding shares of
the capital stock of the Company as of the date hereof and as of Closing.
"Securities Act" means the Securities Act of 1933, as amended, and
regulations promulgated thereunder.
"Security Interest" means any mortgage, pledge, lien, encumbrance, or
other security interest, including nonconsensual liens, other than liens for
Taxes not yet due and payable.
"Seller" has the meaning set forth in the preface above.
"Skylake Letter of Credit" means that Irrevocable Letter of Credit No.
354 in the amount of $2,275,800.00 issued August 1, 1994 by The Skylake
State Bank for the account of the Company in favor of Broad and Cassel.
"Stockholders' Agreements" means collectively: (i) that Stockholders'
Agreement, dated as of October 1, 1988, by and among Herbert Heftler, Monica
A. Heftler, Roger Heftler, Thomas Iglesias, Joel B. Kovin, Candace
Sharpsteen and Jack Shell (collectively the "Stockholders"), and the
Company, as amended by that First Amendment to Stockholders' Agreement,
dated as of May 31, 1991, between the Stockholders and the Company, as
amended by that Termination Agreement, dated as of September 22, 1992, by
and among the Stockholders, Richard Molinari and the Company, and as amended
by that Second Amendment to Stockholders' Agreement, dated as of November 2,
1993, by and between the Stockholders and the Company; (ii) that
Stockholders' Agreement, by and among the Company, Herbert Heftler, Monica
Heftler and Roger Heftler; (iii) that Stockholders' Agreement, dated as of
May 31, 1991, by and among the Company, Herbert Heftler and Roger Heftler,
as amended by that First Amendment to Stockholders' Agreement, dated as of
September 27, 1991, by and among the Company, Herbert Heftler and Roger
Heftler; and (iv) that Stockholders' Agreement, dated as of May 31, 1991, by
and among the Company, Herbert Heftler and Joel B. Kovin.
"Stock Incentive Plan" means that Stock Incentive Plan of the Company
adopted pursuant to that consent in writing of the Directors of the Company
dated September 9, 1988.
"Surveys" has the meaning set forth in Section 5(i) below.
"Tax" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp (including,
without limitation documentary stamp tax and surtax), intangibles,
occupation, premium, windfall profits, environmental (including taxes under
Code Sec. 59A), customs-duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule
or attachment thereto, and including any amendment thereof.
"Title Policies" means those certain policies of owner's title
insurance insuring the title to the Owned Real Property and the endorsements
thereto listed in Section 4(m)(i) of the Disclosure Statement (also see
Section 4(m)(i)(O) below).
"Unaudited" means as prepared by the Company.
2. Purchase and Sale of Purchased Shares.
A. Basic Transaction. On and subject to the terms and conditions
of this Agreement, the Buyer agrees to purchase from the Seller, and the
Seller agrees to sell to the Buyer, all of the Purchased Shares for the
consideration specified below in this Section 2.
B. Purchase Price. The total consideration (the "Purchase Price")
for the sale, transfer, conveyance and delivery of the Purchased Shares to
the Buyer and the covenant not to compete set forth in Section 6(e) is the
sum of $28,500,000. The Purchase Price shall be payable by application of
the Good Faith Deposits (as defined in this Section 2) to payment of the
Purchase Price at Closing, with the balance of the Purchase Price to be paid
to Seller at Closing by means of a completed Federal Funds transfer of
immediately available funds to such bank and account within the continental
United States of America designated by the Seller to the Buyer in writing at
least five business days prior to the Closing Date.
C. Good Faith Deposit. Upon execution and delivery of this
Agreement by Seller and Buyer, Buyer will deposit $100,000 with Mershon,
Sawyer, Johnston, Dunwody & Cole as escrow agent ("Escrow Agent"), which
amount shall be placed in an interest bearing escrow account at such
federally insured financial institution as Seller and Buyer may mutually
agree and designate to Escrow Agent. Such amount (inclusive of interest)
("Initial Deposit") shall be refunded to Buyer if at any time during the Due
Diligence Period (as defined below in this Section 2) Buyer shall determine,
in its sole discretion, that Buyer is not satisfied with the results of its
due diligence and shall give written notice to Seller and Escrow Agent that
Buyer is declining to proceed with the transaction herein contemplated or
Seller shall breach or terminate this Agreement. If no such notice is given
on or before the expiration of the Due Diligence Period, the Initial Deposit
shall not be refundable to Buyer except as otherwise provided herein, and
the Buyer shall thereupon deliver to Escrow Agent an additional $400,000
deposit to bind the transaction herein contemplated, which additional
deposit shall also be placed into the interest bearing escrow account
("Second Deposit"). The Initial Deposit and the Second Deposit, inclusive
of all interest earned thereon, are herein referred to collectively as the
"Good Faith Deposit". If the Closing shall fail to occur through no fault
or breach of Buyer, the Good Faith Deposit shall be refundable in full to
Buyer upon written demand of Buyer to Escrow Agent. If the Closing shall
occur, the Good Faith Deposit shall be applied to the payment of the
Purchase Price. If the Closing shall fail to occur as a result of Buyer's
breach of this Agreement, the Good Faith Deposit shall be paid to and
retained by Seller as agreed and liquidated damages, and not as a penalty,
as Seller's sole and exclusive remedy hereunder. The parties recognize and
agree that Seller's damages upon Buyer's default would be substantial but
are not ascertainable with any degree of certainty, and the parties have
therefore determined that forfeiture of the Good Faith Deposit to Seller is
a fair and reasonable provision for liquidated damages.
The parties hereto agree to execute and deliver to Escrow Agent an Escrow
Agreement, substantially on the foregoing terms and with such additional
provisions as the Escrow Agent may reasonably require, upon the execution
and delivery of this Agreement and further agree to thereafter timely
provide Escrow Agent with such written instructions as may be reasonably
necessary or appropriate to carry out the foregoing terms. In all events,
the Escrow Agent shall have the right (but not the obligation) to institute
an interpleader action if any conflict, dispute or claim shall arise
concerning the Good Faith Deposit or any part thereof. The Escrow Agent
shall have no liability for its acts or omissions in the performance of its
duties as Escrow Agent unless the same shall be judicially determinated to
constitute gross negligence or willful misconduct. The parties acknowledge
that the Escrow Agent is counsel to Buyer but is acting solely in a
ministerial capacity with respect to the Good Faith Deposit at the request
of and as an accommodation to the parties. The parties knowingly and
voluntarily waive any claim of conflict against the Escrow Agent with
respect to the Good Faith Deposit, the Escrow Agreement herein contemplated
and the Escrow Agent's performance thereunder.
D. Diligence Period. Buyer shall be afforded the right to conduct
such due diligence reviews and inspections of the Company, the Assets, the
Joint Venture and matters pertaining thereto as Buyer shall, in its sole
discretion, deem expedient for a period ("Due Diligence Period") ending on
November 2, 1994. Seller agrees to fully cooperate with Buyer and will use
its best efforts to cause the Company, its employees and all others to
cooperate with Buyer in all due diligence reviews Buyer may wish to conduct.
Buyer shall have the absolute right to terminate this Agreement and receive
a refund of the Initial Deposit for any reason whatsoever by giving written
notice of termination to Seller and Escrow Agent on or before expiration of
the Due Diligence Period; and upon such termination neither Seller nor Buyer
shall any further rights or obligations under this Agreement.
E. The Closing. The closing of the transaction contemplated by
this Agreement (the "Closing") shall take place at the offices of Mershon
Sawyer in Miami, Florida, commencing at 9:00 a.m. local time on or before
November 30, 1994 or such date as the Buyer and the Seller may mutually
determine, or on such other date to which the Closing may be extended as
provided below in the following sentence (the date on which Closing actually
occurs is herein called the "Closing Date"). If all conditions to Closing
have been accomplished or waived, except that the waiting period under the
Hart-Scott-Rodino Act shall not have expired or been terminated, then Buyer
or Seller may elect to extend the Closing Date to a date no later than
December 31, 1994 (the "Outside Closing Date").
F. Deliveries at the Closing. At the Closing, (i) the Seller will
deliver to the Buyer the various certificates, instruments, and documents
referred to in Section 7(a) below, (ii) the Buyer will deliver to the Seller
the various certificates, instruments, and documents referred to in Section
7(b) below, (iii) the Seller will deliver to the Buyer stock certificates
representing all of the Purchased Shares, endorsed in blank, or accompanied
by duly executed assignment documents, with the signatures thereon
guaranteed by a commercial bank located in Dade County, Florida selected by
the Seller and reasonably satisfactory to the Buyer, (iv) Seller and Buyer
will execute and deliver a joint written instruction to Escrow Agent to
disburse the Good Faith Deposit to the order of Seller, and (v) the Buyer
will deliver to the Seller the balance of the Purchase Price specified in
Section 2(b) above.
G. Dividends for Taxes of Seller. At the Closing, the Seller will
cause the Company (i) to estimate the book income before tax for the Company
for the period January 1, 1994 through the Closing Date, (ii) to pay to the
Seller a dividend in an amount equal to 39.6% of such income for that
period, which dividend shall not be duplicative of any dividend paid prior
to the Closing Date, and (iii) pay to the Seller a dividend representing the
Seller's deferred personal federal income taxes for 1993 in the amount of
$481,000.00 which dividend shall not be duplicative of any dividend paid to
the Seller prior to the Closing Date.
3. Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller that the statements contained in this
Section 3 are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 3).
A. Organization, Power. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own, operate
and lease its properties and to carry on its business as now being
conducted. The copy of the Certificate of Incorporation of Buyer certified
by the Secretary of State of the State of Delaware and the copy of the By-
Laws of Buyer certified by the Secretary of Buyer attached hereto as Exhibit
D are true and correct.
B. Authorization of Transaction. The Buyer has full power and
authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the Buyer,
enforceable in accordance with its terms and conditions. The Buyer need not
give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order to
lawfully and effectively consummate the transactions contemplated by this
Agreement, except for the filing required under the Hart-Scott-Rodino Act.
C. Brokers' Fees. The Buyer has not engaged any broker, finder, or
agent with respect to the transactions contemplated by this Agreement for
which the Seller could become liable or obligated.
D. Investment. The Buyer is not acquiring the Purchased Shares
with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act. Buyer understands and
acknowledges that the Purchased Shares have not been, and will not be
registered under the Securities Act, or the state securities or Blue Sky
laws of any jurisdiction, and that the transaction contemplated by this
Agreement has not been reviewed by, passed on or submitted to any federal or
state agency or commission. Buyer understands that its acquisition of the
Purchased Shares is intended to be exempt from registration under the
Securities Act. Buyer will not sell or otherwise transfer the Purchased
Shares without registration under the Securities Act and applicable state
securities laws or relying on an exemption therefrom, and fully understands
and agrees that it must bear the economic risks of its purchase for an
indefinite period of time because, among other reasons, the Purchased Shares
have not been registered under the Securities Act or under the securities
laws of any state and, therefore, cannot be resold, pledged, assigned,
hypothecated or otherwise disposed of unless the Purchased Shares are
subsequently registered under the Securities Act and under the applicable
securities laws of the appropriate states or unless an exemption from such
registration is available.
E. Noncontravention of the Buyer. Except where it will not have a
Material Adverse Effect, neither the execution and delivery of this
Agreement by Buyer nor the consummation by Buyer of the transactions
contemplated hereby will (A) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or a court, to which
Buyer is subject or any provision of its charter or bylaws, or (B) conflict
with, or result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement, to which Buyer is a party
or by which it is bound or to which any of its assets is subject.
4. Representations and Warranties of the Seller. The Seller
represents and warrants to the Buyer that the statements contained in this
Section 4 are correct and complete as of the date of this Agreement and will
be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 4), except as set forth in the disclosure schedule
delivered by the Seller to the Buyer on the date hereof, initialed by the
parties and attached hereto as Exhibit E (the "Disclosure Schedule"). Each
item in the Disclosure Schedule that is an exception to the representations
and warranties set forth in this Section 4 must reference at least one
particular lettered and numbered paragraph of this Section 4 to which such
exception applies. The mere listing (or inclusion of a copy) of a document
or other item in the Disclosure Schedule shall not be deemed adequate to
disclose an exception to a representation or warranty made herein, it being
necessary for Seller to give some explanation of the way in which the
document or other item constitutes an exception, unless that is obvious.
The Seller need not disclose any item more than once as long as such item is
disclosed in an appropriate Section of the Disclosure Schedule. Seller
warrants that the Disclosure Schedule is arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this
Section 4. If prior to Closing Seller becomes aware of information that
makes any disclosure set out in the Disclosure Schedule inaccurate,
incomplete, or misleading, Seller shall promptly give written notice to
Buyer of such information, and such written notice shall be an amendment to
the Disclosure Schedule if Seller's notice expressly states that the notice
is an amendment to the Disclosure Schedule. Without the prior consent of
Buyer, Seller shall not, and shall not cause or permit the Company to,
intentionally act or fail to act so as to cause an effect that would require
an amendment to the Disclosure Schedule except for such amendments as might
be necessitated by the operations of the Company in the Ordinary Course of
Business. Any amendment of the Disclosure Schedule must be accepted in
writing by Buyer as a condition precedent to the Buyer's obligations
hereunder except for such amendments as might be necessitated by the
operations of the Company in the Ordinary Course of Business.
A. Authorization of Transaction. The Seller has full power and
authority to execute and deliver this Agreement and to perform the Seller's
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in accordance with its terms
and conditions. Except to comply with the Hart-Scott-Rodino Act, the Seller
need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this Agreement.
B. Noncontravention of the Seller. Except where it will not have a
Material Adverse Effect, neither the execution and the delivery by Seller of
this Agreement, nor the consummation by Seller of the transactions
contemplated hereby, will (A) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the
Seller is subject or (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to
which the Seller is a party or by which he is bound or to which any of the
Seller's assets is subject.
C. Brokers' Fees of the Seller. Except for the payment to be made
to Prudential Securities Incorporated (the "Prudential Securities Payment"),
neither the Seller, the Joint Venture nor the Company has any Liability or
obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated. The Seller acknowledges and
represents its obligation to fully and timely pay the Prudential Securities
Payment, and further acknowledges that said Payment shall not be paid by the
Company, the Joint Venture or the Buyer. At Closing, Seller shall deliver
to Buyer a written release executed by Prudential Securities Incorporated
releasing the Company, the Joint Venture and the Buyer of any claim for
brokerage, consulting or other fees and expenses.
D. Organization, Qualification and Corporate Power.
i. The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida, and has all
requisite corporate power and authority to own and lease the Assets and to
carry on its business and activities as currently conducted. Attached
hereto as Exhibit F are true, correct and complete copies of the articles of
incorporation and bylaws, each as amended to the date hereof, of the
Company. The Company only does business in the State of Florida. The
minute books (containing the records of meetings of the stockholders, the
board of directors, and any committees of the board of directors), the stock
certificate books, and the stock record books of the Company are correct and
complete. The Company is not in default under or in violation of any
provision of its charter or bylaws.
ii. To Seller's Knowledge, the Joint Venture is a general
partnership duly organized and validly existing under the laws of the State
of Florida and has all requisite power and authority under the partnership
laws of the State of Florida to own and lease the property and assets which
it currently owns and leases and to carry on its business and activities as
currently conducted. Attached hereto as Exhibit G is (A) a true, correct,
and complete copy of the Joint Venture Agreement of the Joint Venture, as
amended through the date of this Agreement, modified, or clarified to the
date hereof, and (B) the Land Trust Agreement of the Joint Venture. To
Seller's Knowledge, none of the joint venturers is in default under, or is
in violation of, any provisions of the Joint Venture Agreement.
E. Capitalization of the Company. The entire authorized capital
stock of the Company consists of 10,000 shares of common stock of which 990
shares are issued and outstanding and 10 shares of common stock are held in
treasury. All of the issued and outstanding Purchased Shares have been duly
authorized, are validly issued, fully paid, and nonassessable, have not been
issued in violation of the pre-emptive rights or first refusal rights of any
Person, and are held beneficially and of record by the Seller free and clear
of all liens, charges, encumbrances, claims, rights of others, mortgages,
pledges, Taxes or Security Interests, and are not subject to any agreements
or understandings among any Persons with respect to the voting or transfer
thereof, except for any Security Interests set out in the Disclosure
Schedule, all of which shall be released on or before the Closing Date.
There are no outstanding subscriptions, options, convertible securities,
warrants or calls of any kind issued or granted by, or binding upon, the
Seller or the Company to purchase or otherwise acquire any security of or
equity interest in the Company. The Seller has full legal right to sell,
assign and transfer the Purchased Shares to the Buyer and, upon delivery of
the certificates representing the Purchased Shares to the Buyer pursuant to
the terms hereof, the Buyer shall receive good and marketable title to the
Purchased Shares free and clear of any liens, charges, encumbrances,
pledges, Security Interests, claims or rights of others.
F. Ownership of the Joint Venture, etc. Except for a 37.93% joint
venture interest in the Joint Venture, the Company does not own or possess
any interest (direct or indirect, contingent or otherwise) in any Person.
To Seller's Knowledge, the 62.07% interest in the Joint Venture not owned by
the Company is owned as described in Section 4(f) of the Disclosure
Schedule. The Company's ownership interests in the Joint Venture and the
profits and losses thereof are free and clear of all liens, charges,
encumbrances, claims, rights of others, mortgages, pledges, or Security
Interests, and are not subject to any agreement or understanding between or
among any Persons with respect to the transfer or voting thereof, except as
set forth in the Joint Venture Agreement. There are no outstanding
subscriptions, options, convertible securities, warrants or calls of any
kind issued or granted by, or binding upon the Company or the Joint Venture
to purchase or otherwise acquire any security or equity interest in the
Joint Venture. There are no outstanding subscriptions, options, rights,
warrants, convertible securities or other agreements or commitments
obligating the Joint Venture to issue any ownership interests therein..
G. Noncontravention of the Company, etc. To Seller's Knowledge and
subject only to compliance with the Hart-Scott-Rodino Act, neither the
execution and the delivery of this Agreement by the Seller, nor the
consummation by the Seller of the Seller's obligations contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Company is subject or
any provision of the charter or bylaws of the Company, or to which the Joint
Venture is subject or any provisions of the Joint Venture Agreement, or
(ii) except as set forth in Section 4(g) of the Disclosure Schedule,
conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any Person the right to accelerate,
terminate, modify, or cancel, or require any notice under, any agreement,
contract, lease, license, instrument, or other arrangement to which the
Company or the Joint Venture is a party or by which either is bound or to
which either of them is subject (or result in the imposition of any Security
Interest upon either of their assets). Subject only to the Hart-Scott-
Rodino Act, neither the Company nor the Joint Venture is required to give
any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order for the Seller
to consummate the Seller's obligations under this Agreement.
H. Financial Statements. Attached hereto (or not less than three
(3) business days prior to the Closing Date there shall be attached hereto)
as Exhibit H are the following financial statements of the Company
(collectively the "Financial Statements"): (i) audited balance sheet and
statement of income, changes in stockholders' equity and cash flow as of and
for the twelve month period ended May 31, 1994 ("Audited Financial
Statements"); (ii) Unaudited balance sheets and statements of income and
changes in stockholders' equity (the "Interim Financial Statements") as of
and for the 5 month period ended October 31, 1994; and (iii) Unaudited
balance sheet and statement of income and changes in stockholders' equity as
of and for the fiscal year ended December 31, 1993 and December 31, 1992.
The Financial Statements (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, present fairly the financial condition of the Company, as
of such dates and the results of operations of the Company for such periods,
and are complete; provided, however, that the Interim Financial Statements
are subject to normal year-end adjustments (which will not be material,
individually or in the aggregate) and lack footnotes and other presentation
items. Section 4(h) of the Disclosure Schedule lists all Liabilities of the
Company and the Joint Venture that are secured by any Security Interest, any
purchase money liens, or liens having rental payments under capital lease
arrangements.
I. Events Subsequent to Date of Audited Financial Statements.
Since the date of the Audited Financial Statements, other than as set out in
the Disclosure Schedule, there has not been any change in the business,
condition (financial or otherwise), operations, results of operations, or
future prospects of the Company or the Joint Venture, except for such
changes that would not have a Material Adverse Effect and except for changes
in general economic conditions and laws, if any. Except as shown on the
Financial Statements or the Disclosure Schedule, and without limiting the
generality of the foregoing, since the date of the Audited Financial
Statements neither the Company nor the Joint Venture has:
i. sold, leased, transferred, or assigned any of its assets,
tangible or intangible, other than for a fair consideration in the Ordinary
Course of Business;
ii. entered into any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) outside the
Ordinary Course of Business;
iii. been a party to or been bound by any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) which has been accelerated, terminated, modified or canceled by
any other Person, except in the Ordinary Course of Business;
iv. imposed any Security Interest upon any of its assets, tangible
or intangible, except for the Company, pursuant to, and as contemplated by,
the NationsBank Agreement;
v. made any capital expenditure (or series of related capital
expenditures) outside the Ordinary Course of Business;
vi. made any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person (or series of
related capital investments, loans, and acquisitions) outside the Ordinary
Course of Business;
vii. issued any note, bond, or other debt security or created,
incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation, except as may be otherwise agreed by Buyer and
Seller;
viii. delayed or postponed the payment of accounts payable and other
Liabilities outside the Ordinary Course of Business;
ix. canceled, compromised, waived, or released any right or claim
(or series of related rights and claims) outside the Ordinary Course of
Business;
x. granted any license or sublicense of any rights under or with
respect to any Intellectual Property;
xi. suffered any change, or made or authorized any change, in its
Articles of Incorporation or Bylaws or the Joint Venture Agreement, unless
Buyer shall have received prior notice of such change and shall have
consented thereto in writing;
xii. issued, sold, or otherwise disposed of any of its capital
stock or ownership interests or granted any options, warrants, or other rights
to purchase or obtain (including upon conversion, exchange, or exercise) any of
its capital stock or ownership interests;
xiii. declared, set aside, or paid any dividend or made any
distribution with respect to its capital stock or ownership interests
(whether in cash or in kind) or redeemed, purchased, or otherwise acquired
any of its capital stock or ownership interests, except for cash dividends
paid or set aside by the Company in an amount sufficient for the payment of
(A) the Seller's personal federal income taxes for the period from January
1, 1994 through the Closing Date but Seller represents that such dividends
shall not exceed 39.6% of the Company's book income before tax for that
period, and shall not be duplicative of any dividend previously made for
such purpose and (B) the Seller's deferred personal federal income taxes for
1993 in the amount of $481,000.00 to the extent not previously paid;
xiv. experienced any damage, destruction, or loss (whether or not
covered by insurance) to its property which damage, destruction or loss will
have a Material Adverse Effect;
xv. made any loan to, or entered into any other transaction with,
any of its directors, officers, shareholders, partners, owners, independent
contractors, managers and employees;
xvi. entered into any employment contract or collective bargaining
agreement, written or oral, or modified the terms of any existing such
contract or agreement;
xvii. granted any increase in the base compensation of any of its
directors, officers, managers, independent contractors and employees outside
the Ordinary Course of Business;
xviii. adopted, amended, modified, or terminated any bonus, profit-
sharing, incentive, severance, or other plan, contract, or commitment for
the benefit of any of its directors, officers, and employees (or taken any
such action with respect to any other Pension Benefit Plan as defined in
Section 4(w) below);
xix. made any other change in employment terms or contractual
arrangements for any of its directors, officers, managers, independent
contractors and employees outside the Ordinary Course of Business;
xx. made or pledged to make any charitable or other capital
contribution outside the Ordinary Course of Business;
xxi. suffered any other material occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of Business;
xxii. made any change in accounting methods or principles which
would be required to be disclosed under GAAP, or reclassified or restated any
material asset or liability;
xxiii. mortgaged, pledged, or granted or permitted to be created
and remain in existence any Security Interests on any of its assets or any of
its ownership interest in the Joint Venture, other than liens for real and
personal property taxes for the year 1994 which are not yet due and payable and
other than pursuant to, and as contemplated by, the NationsBank Agreement; or
xxiv. committed to any of the foregoing.
J. Legal Compliance. To Seller's Knowledge, each of the Company
and the Joint Venture has complied in all material respects with all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal,
state, local and foreign governments (and all agencies thereof); and no
action, suit, proceeding, hearing, investigation, complaint, claim, demand,
or notice has been filed or commenced against any of the Company or the
Joint Venture alleging any failure so to comply.
K. Tax Matters. To Seller's Knowledge:
i. The Company has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all material
respects. Section 4(k) of the Disclosure Schedule lists all federal, state,
local, and foreign income Tax Returns filed with respect to the Company for
taxable periods ended on or after July 31, 1987, indicates those Tax Returns
that have been audited, and indicates those Tax Returns that currently are the
subject of audit or with respect to which a notice of audit has been received.
All Taxes owed by the Company and each Person included within the Seller
(whether or not shown on any Tax Return) have been paid except as shown in
Section 4(k) of the Disclosure Schedule. The Company currently is not the
beneficiary of any extension of time within which to file any Tax Return. The
Joint Venture has not filed and has never been required to file Tax Returns. No
claim is being made by any authority in a jurisdiction where the Company or the
Joint Venture does not file Tax Returns that it is or may be subject to taxation
by that jurisdiction. There are no Security Interests on any of the assets of
any of the Company or the Joint Venture that arose in connection with any
failure (or alleged failure) to pay any Tax.
ii. The Company and the Joint Venture have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts
paid or owing to any creditor, stockholder, owner, or other third party.
The Company and the Joint Venture have withheld and paid all Taxes required
to have been withheld and paid in connection with amounts paid or owing to
any employee or independent contractor.
iii. Neither Seller, the Company nor the Joint Venture expects any
authority to assess any additional taxes for any period for which tax
returns have been filed that are not specifically provided for in the
Financial Statements. Without limiting the generality of the foregoing, the
Seller warrants that the Company has no liability for any built-in gains tax
under Code Sec. 1374 resulting from the sale of property during any of the
Company's S Corporation years through the short period ending on the Closing
Date. There is no dispute or claim concerning any Tax Liability of the
Company or the Joint Venture either (A) claimed or raised by any authority
in writing or (B) as to which any of the Seller, the directors and officers
(and employees responsible for Tax matters) of the Company and owners or
manager of the Joint Venture has Knowledge. Except as shown on the
Disclosure Schedule, the Seller has delivered to the Buyer correct and
complete copies of all federal income Tax Returns, examination reports, and
statements of deficiencies assessed against or agreed to by the Company or
the Joint Venture relating to tax periods ending on or after July 31, 1987
including but not limited to the final tax return filed by the Company as a
"C" Corporation.
iv. The Company has not filed and/or will not file prior to
Closing any amendments to any Tax Returns previously filed by the Company.
v. Neither the Company nor the Joint Venture has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
vi. The Company has not filed a consent under Code Sec. 341(f)
concerning collapsible corporations. Neither the Company nor the Joint
Venture has made any payments, is obligated to make any payments, or is a
party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Code Sec. 280G. The
Company has not been a United States real property holding corporation
within the meaning of Code Sec. 897(c)(2) during the applicable period
specified in Code Sec. 897(c)(1)(A)(ii). The Company has disclosed on its
federal tax returns all positions taken therein that could give rise to a
substantial understatement of federal income tax within the meaning of Code
Sec. 6662. The Company is not a party to any Tax allocation or sharing
agreement. The Company (A) has not been a member of an Affiliated Group
filing a consolidated federal income Tax Return or (B) has no Liability for
the Taxes of any Person under Treas. Reg. Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise.
vii. Section 4(k) of the Disclosure Schedule sets forth the
following information with respect to the Company and the Joint Venture as of
the most recent practicable date: (A) the basis of the Company and the Joint
Venture in their respective assets; (B) the amount of any net operating loss,
net capital loss, unused investment or other credit, unused foreign tax, or
excess charitable contribution allocable to the Company; and (C) the amount of
any deferred gain or loss allocable to the Company arising out of any deferred
intercompany transaction as set forth in Treas. Reg. Section 1.1502-3.
viii. The unpaid Taxes of the Company (A) did not, as of the
Interim Financial Statements, exceed the reserve for tax liability (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the Interim Financial Statements
(rather than in any notes thereto) and (B) do not exceed that reserve as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company in filing its Tax Returns.
ix. Neither the Company, the Seller (with respect to the Company)
nor the Joint Venture has any pending requests for rulings with any taxing
authority.
x. None of the property owned or used by the Company or the
Joint Venture is subject to any lease other than a "true" lease as that term is
commonly used for federal income tax purposes.
xi. Neither the Company nor the Joint Venture is under any
contractual obligation to indemnify any other person with respect to Taxes
or is a party to any agreement providing for payment of Taxes, except as
contemplated by this Agreement.
xii. The Company will not be required, as a result of a change in
method of accounting, to include any adjustment under Section 481(c) of the
Code in any period after the Closing Date.
xiii. Neither the Seller nor the Company (nor any director, officer
or employee responsible for tax matters) is aware of facts, circumstances or
events which could cause the Company to be classified as other than an "S
corporation" or cause termination of its "S Corporation" status as defined at
Code Section 1361 (including agreements, distributions or other facts which
could result in a determination that the Company does not comply with Code
Section 1361(b)(1)(D)) for the entire period for which the Company has reported
Taxes as an "S Corporation".
xiv. The Company shall prepare all short period tax returns for
the current tax year through the date of Closing. All taxable income earned by
the Company through the date of Closing shall be included in such short- period
return.
L. Leasehold for Company Headquarters. The headquarters for the
Company located at 9450 Sunset Drive, Miami, Florida 33173 is occupied
pursuant to a lease agreement, a correct and complete copy of which,
together with all amendments thereto, is attached hereto as Exhibit I (the
"Headquarters Lease"). The Company does not have a leasehold interest in
any other real property.
M. Real Property.
i. Section 4(m) of the Disclosure Schedule lists and contains
the legal description of all real property that the Company owns or has rights
to acquire, including, without limitation parcels 3, 4, 5 and 9 of Pembroke
Shores (according to the Site Plan for Pembroke Shores dated January 27,
1994 (as revised August 26, 1994), prepared by R. P. Legg and Associates,
Inc.) that is owned by a land trust pursuant to the Joint Venture Agreement
and will be conveyed to the Company without material diminution to acreage
and without diminution to the density provided in such site plan
(collectively "Owned Real Property"), identifying the owner of each parcel
and whether each parcel is housing inventory, lot inventory, or land.
Except as set out in the Disclosure Schedule, with respect to each such
parcel of real property:
(a) the identified owner has good, marketable and
indefeasible fee title to the Owned Real Property (as identified in the
Disclosure Schedule), and except as set out in the Title Policies and
endorsements thereto defined in the Disclosure Schedule, free and clear of any
Security Interest, easement, covenant, or other restriction, except for liens
for real estate taxes not yet delinquent and notices of commencement recorded in
the Ordinary Course of Business;
(b) there are no pending or, to the Knowledge of Seller,
threatened condemnation proceedings, moratoria, lawsuits, or administrative
actions relating to the property or other matters affecting materially and
adversely the current use, occupancy, or value thereof;
(c) except as set out in the Title Policies, there are no
leases, subleases, licenses, concessions, or other agreements, written or oral,
granting to any party or parties the right of use or occupancy of any portion of
the Owned Real Property provided that the representation made in this Section
4(m)(i)(C) shall be limited , with respect to Pembroke Shores, to Seller's
Knowledge thereof;
(d) there are no outstanding contracts, options or rights
of first refusal to purchase any of the Owned Real Property or any portion
thereof or interest therein except for contracts for the sale of homes as
described in Section 4(m) of the Disclosure Schedule, all of which were entered
into in the Ordinary Course of Business;
(e) there are no parties (other than the Company or the
Joint Venture) in possession of the Owned Real Property, other than as disclosed
in Section 4(m)(i) of the Disclosure Schedule provided that the representation
made in this Section 4(m)(i)(E) shall be limited, with respect to Pembroke
Shores, to Seller's Knowledge thereof;
(f) Section 4 (m)(i) of the Disclosure Statement
identifies each lot or parcel of Owned Real Property upon which a unit has been
completed or is being constructed and indicates which lots or parcels are
subject to a contract of sale (and if so, the name of the purchaser, the deposit
received, the purchase price and anticipated closing date). To Seller's
Knowledge, each lot or parcel and the buildings located thereon are consistent
and in compliance with the applicable local government comprehensive plan and
applicable zoning laws and ordinances and have received all approvals of
governmental authorities (including licenses and permits) for the construction
and, if the unit is completed, the use and occupancy thereof. Section 4 (m)(i)
of the Disclosure Schedule includes a true, complete and correct copy of the
Company's standard form contract for the sale of houses, which the Seller
represents to be the form used for all pending sales of houses. Section 4
(m)(i) of the Disclosure Schedule also contains true, correct and complete
copies of the Company's standard form reservation receipt, which Seller
represents to be the form used by the Company for all pending reservations of
the right to purchase any lot or parcel constituting any part of the Owned Real
Property from the Company, and a list of all such pending reservations including
the amount deposited and the purchase price placed on the receipt or quoted
verbally in connection with each such reservation;
(g) section 4 (m)(i) of the Disclosure Statement
identifies each lot or parcel of Owned Real Property upon which no housing unit
has been, or is being, constructed. Section 4 (m)(i) identifies (a) the nature
and type of housing units planned for each such lot or parcel ("Planned
Improvements"); (b) the status to Seller's Knowledge of all government approvals
required to permit construction of the Planned Improvements and all government
approvals obtained through the Closing Date with respect to the Planned
Improvements; (c) an identification of all developer's agreements to Seller's
knowledge in effect, together with all amendments thereto; (d) the status of
construction to Seller's Knowledge of all land improvements and infrastructure
required to complete developed lots which will allow construction of the Planned
Improvements; (e) a list the nature and extent to Seller's Knowledge of all
off-site and on-site obligations required in connection with the Planned
Improvements, and the status to Seller's Knowledge of each and the instrument
creating each such obligation; (f) a full description to Seller's Knowledge of
all mitigation requirements that the Company or the Joint Venture must satisfy
with respect to the Owned Real Property, all such requirements completed through
the Closing Date and the instrument pursuant to which each such mitigation
obligation was imposed; and (g) a list to Seller's Knowledge of the impact fees
applicable to the Planned Improvements, the impact fees paid through the Closing
Date and the instrument creating the obligation to pay each such impact fee. To
Seller's Knowledge, the development of the Planned Improvements on each such
parcel is consistent, and will be in compliance, with applicable local
government comprehensive plan and zoning laws and ordinances currently in effect
(without the necessity of amending the local government comprehensive plan or
zoning laws or obtaining changes to, or variances from existing zoning except as
disclosed in Section 4(m) of the Disclosure Schedule and except as will not
cause a substantial change in the accuracy of any of the representations and
warranties contained in Section 4(m)(i));
(h) to Seller's Knowledge, except as disclosed in
Section 4 (m)(i) of the Disclosure Statement, the existing and the Planned
Improvements have the right to receive (pursuant to enforceable agreements)
electricity, telephone, potable water, solid waste, sanitary sewer and storm
sewer service, all of which are adequate in accordance with all applicable laws,
ordinances, rules and regulations to serve the existing and Planned Improvements
and are provided via public roads or via permanent, irrevocable, unencumbered,
appurtenant easements benefiting the parcel of real property. The agreements
establishing such rights are identified in Section 4 (m)(i) of the Disclosure
Statement;
(i) to Seller's Knowledge, the existing and the Planned
Improvements are vested for purposes of "concurrency" (i.e., for purposes
contemplated by Section 163.3180 Florida Statutes and the applicable local
government comprehensive plan) and construction and use thereof will not be
delayed, impaired or prohibited on the grounds that there is inadequate
infrastructure available concurrent with construction to adequately serve the
improvement. The period of vesting and the instruments, if any, pursuant to
which such vested rights were created are set forth in Section 4 (m)(i) of the
Disclosure Statement;
(j) to Seller's Knowledge, there are no unusual physical
site characteristics that will prevent construction of, or will result in
unusual costs of construction of, the Planned Improvements (including, without
limitation, unusual soil conditions, existence of plants or animals that are
endangered, threatened or are of special concern or any habitat of the
foregoing, existence of wetlands, or the need to dredge and fill). To Seller's
Knowledge, there is no fact or circumstance that will cause any of the Planned
Improvements to be delayed substantially beyond the respective dates set forth
in Section 4(m) of the Disclosure Schedule;
(k) each parcel of Owned Real Property has legal access
to dedicated public rights-of-way without the necessity of obtaining or relying
upon easements from any third party, except for such easements as have been or
will be obtained by the Company prior to the Closing Date;
(l) to Seller's Knowledge, neither Seller nor the
Company nor the Joint Venture has received any notice of any violations of any
zoning laws, building laws or other regulatory laws, statutes, ordinances or
agreements relating to the Owned Real Property that would have a Material
Adverse Effect;
(m) except as disclosed in Section 4 (m)(i) of the
Disclosure Statement, the Owned Real Property is not subject to any homeowners'
or property owners' associations. Section 4 (m)(i) of the Disclosure Statement
identifies each such association that was formed by, or is controlled by, the
Company or to which the Owned Real Property is subject. To Seller's Knowledge,
as to each such association the Company or the Joint Venture, as applicable,
has fully complied with all of its obligations under the documents establishing
the association and all applicable laws, and has paid all dues and other
obligations to the associations that were the obligations of the Company to pay.
To Seller's Knowledge, with respect to each association that is or was formerly
controlled by the Company or the Joint Venture, the budgets fairly represented
the costs for which the association was liable and established adequate reserves
for replacement of all capital improvements (and all required payments with
respect to such reserves have been made);
(n) to Seller's knowledge except as disclosed in
Section 4(m)(i) of the Disclosure Statement, the Owned Real Property is not
subject to any special taxing district in existence as of the Closing Date.
Section 4 (m)(i) of the Disclosure Statement identifies any such district that
was formed by Seller or the Joint Venture;
(o) the Company possesses good, valid, and enforceable
policies of owner's title insurance) with respect to each parcel of Owned Real
Property ("Title Policies"). Each such Title Policy is listed in Section
4(m)(i) of the Disclosure Statement and true and complete copies of each such
policy (including all endorsements and amendments thereto) have been provided by
Seller to Buyer. To Seller's Knowledge, the Title Policies accurately reflect
the current status of title with respect to the Owned Real Property and there
have been no additional liens, encumbrances, or other matters affecting the
status of the title of the Owned Real Property except as set forth in Section
4(m)(i) of the Disclosure Schedule;
(p) Seller has no Knowledge of any legislation,
ordinance, or other governmental action pending or contemplated that would have
a Material Adverse Effect upon the ability to construct and sell the Planned
Improvements, except as set forth in Section 4 (m)(i) of the Disclosure
Statement;
(q) Seller has delivered to Buyer those surveys and
plats of the Owned Real Property identified in Section 4(m)(i) of the Disclosure
Schedule (the "Surveys"). Subsequent to the last certificate date of each such
Survey, there have arisen, to Seller's Knowledge, no new encroachments or other
matters of survey other than as listed in Section 4(m)(i) of the Disclosure
Schedule. The representations and warranties made above in Sections 4(m)(i)(C)
through (Q) shall be limited, with respect to the Owned Real Property described
in the Disclosure Schedules as the "Titusville Property", the "Rolling Green
Ridge Property", the two lots owned by the Company in the "Chapel Trail
Property" and the two lots owned by the Company in the "Lago Mar Property", to
the matters, if any, set forth in the Disclosure Schedule with respect to those
properties.
ii. The Headquarters Lease is the only lease or sublease for
real property to which the Company is a party. The Joint Venture is not the
lessor or the lessee of any real property. With respect to the Headquarters
Lease:
(a) the lease is legal, valid, binding, enforceable,
and in full force and effect in all material respects;
(b) the lease will continue to be legal valid, binding,
enforceable, and in full force and effect on identical terms following the
consummation of the transactions contemplated hereby;
(c) neither the Company nor to the Knowledge of Seller
the landlord is in breach or default, and no event has occurred which, with
notice or lapse of time, would constitute a material breach or default or permit
termination, modification, or acceleration thereunder;
(d) neither the Company nor, to the Knowledge of Seller,
has the landlord repudiated any provision thereof;
(e) there are no material disputes, oral agreements, or
forbearance programs in effect as to the lease;
(f) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold;
(g) the leased premises have received all approvals of
governmental authorities (including licenses and permits) required in connection
with the operation thereof and have been operated and maintained substantially
in accordance with applicable laws, rules, and regulations; and
(h) the leased premises are supplied with utilities and
other services necessary for the operation thereof.
iii. Except for (a) the Company's right to acquire parcels 3, 4,
5 and 9 of Pembroke Shores according to the preliminary site plan thereof under
the Joint Venture Agreement and (b) contracts for the sale of individual housing
units as set forth in Section 4 (m)(i) of the Disclosure Schedule, neither the
Company nor, to Seller's knowledge, the Joint Venture is a party to any
contract, agreement, option or understanding pursuant to which the Company, the
Joint Venture or any other Person has the option or other right to acquire real
property or any interest therein.
N. Intellectual Property.
i. To Seller's Knowledge, the Company and the Joint Venture own
or have the right to use pursuant to license, sublicense, agreement, or
permission all Intellectual Property necessary for the operation of their
respective businesses as presently conducted. To Seller's Knowledge, each item
of Intellectual Property owned or used by the Company or the Joint Venture
immediately prior to the Closing hereunder will be owned or available for use by
the Company or the Joint Venture on identical terms and conditions immediately
subsequent to the Closing hereunder.
ii. To Seller's Knowledge, neither the Company nor the Joint
Venture has interfered with, infringed upon, misappropriated, or otherwise come
into conflict with any Intellectual Property rights of third parties, and (b)
none of the Seller and the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Company has ever
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that the Company or the Joint Venture must license or refrain from using any
Intellectual Property rights of any third party). To Seller's Knowledge, no
third party has interfered with, infringed upon, misappropriated, or otherwise
come into conflict with any Intellectual Property rights of the Company or the
Joint Venture.
iii. To Seller's Knowledge, Section 4(n) of the Disclosure
Schedule sets forth all names, trade names, trademark and service marks owned by
the Company or the Joint Venture, respectively ("Company Names"); and no other
Person has the right to use the Company Names either in the identical form or in
such near resemblance as to be likely, when applied to the goods or services of
such entity, to cause confusion, or to cause mistake, or to deceive.
iv. Pursuant to the agreements between the Company and Sotolongo
Oliva & Associates identified in Section 4(n) of the Disclosure Schedule
(the "Architect's Agreements"), the Company has the right to use all housing
plans, blueprints, elevation drawings, diagrams, and the like (collectively
the "Plans") which have been or are currently being used by it in the
construction of homes and all Intellectual Property rights relating to the
Plans used by it. The Company has the right to use such Plans now and in
the future without further payment of fees or other compensation to any
other Person, except as set forth in the Architect's Agreements.
v. The parties agree and acknowledge that the parties intend
for the Buyer and the Company, upon Closing and thereafter, to have the sole and
exclusive right to use the Company Names and all other marks and names which
include the term "Heftler", and any and all variations thereof, whether or not
incorporating any design features or the like and whether or not registered.
Accordingly, the Seller agrees that, upon Closing, the Seller shall not
thereafter use any of the Company Names. The Seller further agrees that, upon
Closing, the Seller shall not thereafter adopt or use (alone or with others) any
trade name, trademark, service mark, logo, device, or the like which is or may
be confusingly similar to any or all of the Company Names. The Seller agrees
and acknowledges that Seller intends to relinquish all rights to use the term
"Heftler" (whether alone or with other terms, design features, or the like or
not) as a trade name, trademark, service mark, or the like in the real estate
business.
O. Personal Property.
i. To Seller's Knowledge, Section 4(o) of the Disclosure
Schedule lists all motor vehicles owned, leased, or otherwise used by the
Company, all of which are included in the September 30, 1994 Interim Financial
Statements.
ii. To Seller's Knowledge, the Company and the Joint Venture,
respectively, own or lease all buildings, machinery, equipment, and other
items of personal property actually used by them, located on their premises,
or necessary for the conduct of their respective businesses as presently
conducted. Prior to the date hereof, the Seller has caused the Company and
the Joint Venture to deliver to the Buyer copies of all leases covering such
personal property. To Seller's Knowledge, each such item of personal
property is free from material defects (patent and latent), has been
maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear), and is suitable for
the purposes for which it presently is used.
P. Inventory. To Seller's Knowledge, the inventory of the Company
and of the Joint Venture consists of raw materials and supplies, houses,
houses under construction, finished lots, and undeveloped land all of which
are (i) free from material defect, and (ii) have (with respect to houses and
houses under construction) been engineered and constructed properly, taking
into account soils and other existing conditions, in accordance with all
applicable plans, specifications, laws, regulations, codes, ordinances and
standards, including, without limitation, the South Florida Building Code,
and (iii) not obsolete, damaged, or defective, subject only to the reserve
for inventory write-down, if any, set forth in the Financial Statements as
adjusted for the passage of time through the Closing Date in accordance with
the past custom and practice of such entities.
Q. Contracts. The Disclosure Schedule lists the following
contracts and other agreements to which the Company or the Joint Venture is
a party, or under which either of them has rights or obligations:
i. any agreement (or group of related agreements) for the
lease of property to or from any Person, exclusive of sign or storage leases, or
leases costing less than $1,000 a year and in the Ordinary Course of Business;
ii. any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services (including,
without limitation, all construction contracts and infrastructure contracts),
the performance of which will extend over a period of more than one year, result
in a material loss to the Company or the Joint Venture or involve consideration
in excess of $10,000 (but excluding contracts for any single house to be sold in
the Ordinary Course of Business listed in Section 4(q) of the Disclosure
Schedule);
iii. any material agreement concerning a partnership or joint
venture;
iv. any agreement (or group of related agreements) under which
the Company or the Joint Venture has created, incurred, assumed, or guaranteed
any indebtedness for borrowed money, or any capitalized lease obligation, in
excess of $1,000 or under which Company or the Joint Venture has imposed a
Security Interest on any of its assets, tangible or intangible;
v. any agreement concerning confidentiality or noncompetition;
vi. any agreement with any Person included in the definition of
Seller or any Affiliates;
vii. any profit sharing plan, stock option plan, stock purchase
plan, or stock appreciation plan, and any bonus, incentive, supplemental income,
deferred compensation, severance, vacation, personnel policies or other material
plan, arrangement, program, policy, practice or understanding for the benefit of
its current or former directors, officers, and employees outside the Ordinary
Course of Business;
viii. any collective bargaining agreement;
ix. any agreement for the employment (other than at will) of
any individual on a full-time, part-time, consulting or other basis providing
annual compensation in excess of $15,000 or providing severance benefits;
x. any agreement under which either the Company or, to
Seller's Knowledge, the Joint Venture has advanced or loaned any amount to any
of their respective directors, officers, shareholders, partners, independent
contractors, managers and employees outside the Ordinary Course of Business;
xi. any agreement under which the consequences of a default or
termination could have a Material Adverse Effect;
xii. any agreement concerning any indemnity, guaranty or other
contingent liability, including any surety bond and any letter of credit;
xiii. any agreement with any lender concerning any loan or loan
workout where there is any Liability, contingent or otherwise;
xiv. all casualty, liability, or other insurance policy or
agreement; and
xv. any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000. Seller has
delivered to the Buyer a correct and complete copy of each written agreement (as
amended to date) listed in Section 4(q) of the Disclosure Schedule (or a list
thereof for subcontracts for the construction of homes and not the written
agreements all of which are in substantially the form of Exhibit J hereto ), and
a written summary setting forth the material terms and conditions of each oral
agreement referred to in the Disclosure Schedule. To Seller's Knowledge, with
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect in all material respects; (B) the
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) the Company is not, and to Seller's
Knowledge no other party is, in material breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under such
agreement; and (D) no party has repudiated any material provision of such
agreement.
R. Notes and Accounts Receivable. To Seller's Knowledge, all notes
and accounts receivable of the Company and the Joint Venture are reflected
properly on their books and records, are valid receivables subject to no
setoffs or counterclaims, are current and collectible, have not been
assigned (except in the Ordinary Course of Business), and will be collected
in accordance with their terms at their recorded amounts, subject only to
the reserve for bad debts set forth in the Financial Statements and the
financial statements of the Joint Venture as adjusted for the passage of
time through the Closing Date in accordance with the past custom and
practice of the Company and the Joint Venture.
S. Litigation. To Seller's Knowledge, Section 4(s) of the
Disclosure Schedule sets forth each instance in which the Company or the
Joint Venture or their respective assets and interests is subject to any
outstanding complaint (in litigation), injunction, judgment, order, decree,
ruling, or is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction
or before any arbitrator. None of the actions, suits, proceedings,
hearings, and investigations set forth in the Disclosure Schedule could
reasonably be expected to result in any Material Adverse Effect.
T. Product Warranty. To Seller's Knowledge, all structures and
improvements sold, constructed or delivered by the Company (including,
without limitation, all structures and improvements constructed on behalf of
the Company by subcontractors) have been designed and built in a good and
workman-like manner and in substantial conformity with (i) all plans,
specifications and applicable contractual commitments; (ii) all express and
implied warranties; and (iii) all applicable laws, regulations, codes,
industry standards and building codes (including, without limitation, the
South Florida Building Code with respect to structures and improvements
subject thereto). Except as set out in Section 4(t) of the Disclosure
Schedule, Seller has no Knowledge of any Basis for any present or future
product warranty claim against the Company in excess of $1,000.00 per claim.
No product manufactured, sold, leased, or delivered by either the Company or
the Joint Venture is subject to any guaranty, warranty, or other indemnity
(except pursuant to applicable law) beyond the applicable standard terms and
conditions of sale or lease, which terms and conditions are set forth in
Section 4(t) of the Disclosure Schedule including copies of the standard
terms and conditions of sale or lease for each of the Company and the Joint
Venture, containing applicable guaranty, warranty, and indemnity provisions.
U. Product Liability. Except as set out in Section 4(u) of the
Disclosure Schedule, neither the Company nor the Joint Venture has, to
Seller's Knowledge, any Liability (and to Seller's Knowledge there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against the Company or
the Joint Venture giving rise to any Liability) in excess of $1,000.00 per
claim arising out of any injury to individuals or property as a result of
the ownership, possession, or use of any product manufactured, sold, leased,
or delivered by any of such entities.
V. Employees. To Seller's Knowledge, no executive, key employee,
or group of employees of the Company other than Herbert Heftler has
expressed any plans to terminate employment with the Company during the next
12 months. Neither the Company nor the Joint Venture, is a party to or
bound by any collective bargaining agreement, nor has either of them
experienced any strikes, unresolved grievances, unresolved claims of unfair
labor practices, or other collective bargaining disputes within the last
three years. Neither the Company nor, to Seller's Knowledge, the Joint
Venture has committed any material unfair labor practice. Seller has no
Knowledge of any organizational effort presently being made or threatened by
or on behalf of any labor union with respect to employees of the Company or
the Joint Venture. Section 4(v) of the Disclosure Schedule sets forth a
complete listing of all employees of the Company, inclusive of employment
classifications. To Seller's Knowledge, no material representations,
warranties, or promises have been made to or agreements have been reached
with any employee at variance with the provisions of the employee manual
with respect to their employment, compensation, benefits, or other
consideration or matters with respect to the employment by the Company.
W. Employee Benefits Plans.
i. The Disclosure Schedule contains a list of each "employee
welfare benefit plan" (as defined in Section 3 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")): (A) which is (or had
within the three-year period before the Closing Date been) maintained or
administered by the Company, (B) to which the Company contributes or is (or
had within the three-year period before the Closing Date been) legally
obligated to contribute, or (C) under which the Company has (or had within
the three-year period before the Closing Date) any liability, with respect
to its current or former employees or independent contractors (collectively
the "Welfare Benefit Plans" and individually a "Welfare Benefit Plan").
ii. The Disclosure Schedule also contains a list of each
"employee pension benefit plan" (as defined in ERISA Section 3): (A) which is
(or had within the three-year period before the Closing Date been) maintained or
administered by the Company, (B) to which the Company contributes or is (or had
within the three-year period before the Closing Date been) legally obligated to
contribute, or (C) under which the Company has (or had within the three-year
period before the Closing Date) any liability with respect to its current or
former employees or independent contractors (collectively the "Pension Benefit
Plans" and individually a "Pension Benefit Plan").
iii. The Disclosure Schedule also contains a list of each employee
benefit plan, program, arrangement, agreement, policy or commitment whether
insured or uninsured, funded or unfunded, that is not a Welfare Benefit Plan
or Pension Benefit Plan, relating to deferred compensation, bonus or
compensation in addition to regular pay or wages, stock options, employee
stock purchases, severance, unemployment, flexible benefits, disability,
vacation, sickness, leave of absence, fringe benefits, employee awards,
educational assistance or reimbursement, equity participation (including but
not limited to stock appreciation and phantom stock), restricted stock,
employee discounts, excess benefits, secular or vesting trust, child or
dependent care, long-term and nursing home care, and profit sharing: (A)
which is maintained or administered by the Company; (B) to which the Company
contributes, or is legally obligated to contribute; or (C) under which the
Company has any liability, with respect to its current or former employees
or independent contractors (collectively, the "Employee Plans" and
individually an "Employee Plan"). Solely for the purposes of this Section,
the Employee Plans, Welfare Benefit Plans and Pension Benefit Plans are
collectively referred to as "Employee Benefit Plans" and individually
referred to as an "Employee Benefit Plan."
iv. As of the Closing Date, the fair market value (determined
in accordance with the Code and ERISA) of the assets (excluding for this purpose
any accrued but unpaid contributions) of each Pension Benefit Plan, that is a
defined benefit plan as defined in ERISA Section 3(35), exceed the present value
of all benefits accrued under each such Pension Benefit Plan determined on a
termination basis using the assumptions established by the Pension Benefit
Guaranty Corporation ("PBGC") as in effect on such date. With respect to each
Pension Benefit Plan, the funding method used in connection with such Pension
Benefit Plan has at all times satisfied and will as of the Closing Date satisfy
any and all requirements under ERISA or the Code. There is as of the date
hereof no "accumulated funding deficiency" as defined in ERISA Section 302(a)(2)
and Code Section 412(a) (whether or not waived) which exists, asserted or
unasserted, with respect to any plan year of any Pension Benefit Plan.
v. There is no action, lawsuit, claim for benefits, proceeding,
investigation, audit or arbitration pending, as of the date of this
Agreement and as of the Closing Date, involving any Employee Benefit Plan.
vi. There are no liabilities of the Company, contingent or
otherwise, accrued or unaccrued, asserted or unasserted, with respect to any
Employee Benefit Plan.
vii. With respect to each Employee Benefit Plan, the Disclosure
Schedule sets forth the amount of any contribution made or expense incurred
with respect to the Plan's most recent fiscal year ended prior to the date
of this Agreement, and the amount of any contribution made, or expense
incurred with respect to the period between the close of the Plan's most
recent fiscal year and the date hereof, and the amount of any contribution
or expense payable in accordance with the contribution formula set forth in
any Employee Benefit Plan, authorized by the governing body or duly
authorized officer of the Company, or for which the Company is otherwise
liable with respect to the period between the close of the most recent plan
year for any such plan and the Closing Date.
viii. All contributions (including all employer contributions and
employee salary reduction contributions) which were due have been paid to
each such Employee Benefit Plan which is an Employee Pension Benefit Plan
and all contributions to any period ending on or before the Closing Date
which were not yet due have been paid to each such Employee Pension Benefit
Plan or accrued in accordance with the past custom and practice of the
Company. All premiums or other payments for all periods ending on or
before the Closing Date have been paid with respect to each such Employee
Benefit Plan which is an Employee Welfare Benefit Plan.
ix. Each Pension Benefit Plan has at all times qualified under
Section 401(a) or 403(a) of the Code and has been tax exempt under Section
501(a) of the Code; each such Pension Benefit Plan at all times prior to the
date hereof has been operated and administered in compliance with any and
all requirements of the Tax Reform Act of 1986 as amended without regard to
when such plan is required to be amended to comply with such Act.
x. (1) No Pension Benefit Plan has ever acquired or held
any "employer security" or "employer real property" each as defined in Section
407(d) of ERISA or if it has, any such acquisition or holding, as so set forth,
has at all times been in compliance with ERISA, the Code and all other
applicable laws, rules and regulations.
(2) No Pension Benefit Plan has ever engaged in a
"prohibited transaction" as that term is defined in Code Section 4975 or if it
has, any such transaction is set forth in detail in Section 4(w) of the
Disclosure Schedule.
(3) No Fiduciary has any liability for breach of fiduciary
duty or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, hearing, or investigation with respect
to the administration or the investment of the assets of any such Employee
Benefit Plan (other than routine claims for benefits) is pending or to the
knowledge of the Seller and the officers and directors of the Company
threatened. Neither the Seller nor the directors and officers of the
Company has any Knowledge of any Basis for any such action, suit,
proceeding, hearing or investigation.
xi. There are no premiums due to PBGC for any Pension Benefit
Plan and the Company has not incurred nor does it expect to incur any liability
to the PBGC or otherwise under ERISA Sections 4062, 4063 or 4064 or to a trust
under ERISA Section 4049.
xii. The Company has not taken any action, and no proceeding has
been commenced by the PBGC to terminate or partially terminate any Pension
Benefit Plan and no condition, fact or circumstance exists which would permit a
distress termination of any Pension Benefit Plan under ERISA Section 4042(c).
xiii. Separately identified on the Disclosure Schedule are true and
complete copies of: (A) each Employee Benefit Plan listed on the Disclosure
Schedule (including any amendments or modifications), and all related trust
agreements, custodial agreements, agency agreements, insurance or annuity
contracts, and any other funding instruments), including any amendments or
modifications to such agreements or instruments; (B) the most recent summary
plan description for each Welfare Benefit Plan and each Pension Benefit Plan
(and any subsequent summary of material modifications) and any other written
description of such plans or written interpretations of such plans whether
or not distributed to participants or beneficiaries; (C) the most recent
determination letter issued by the Internal Revenue Service with respect to
each Pension Benefit Plan and each private letter ruling or determination
letter issued by the Internal Revenue Service relating to any Employee
Benefit Plan; (D) the Annual Reports on the form 5500 Series (and each
related summary annual report) required to be filed with any governmental
agency for each Employee Benefit Plan for the three (3) most recent plan
years (together with any actuarial, accounting, fiduciary or trustee reports
for such plan years; (E) documentation or reports reflecting any tests
showing compliance with Code Sections 415, 401(k) and 401(m), as applicable,
with respect to each Pension Benefit Plan; (F) minutes of the governing body
of the Company, each plan administrator or administrative committee relating
to each Employee Benefit Plan; (G) filings with, or reports to, the PBGC
with respect to each Pension Benefit Plan; (H) each advisory opinion,
private exemption or other letter from the U.S. Department of Labor or PBGC
or Internal Revenue Service relating to any Employee Benefit Plan; and (I)
all information relating to the termination, merger or curtailment of any
Employee Benefit Plan of the Company occurring in any of the five (5)
calendar years preceding the date of this Agreement, have heretofore been
delivered to the Purchaser.
xiv. All required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports, PBGC-1s and Summary Plan
Descriptions) have been filed or distributed appropriately with respect to
each such Employee Benefit Plan. The requirements of Part 6 of Subtitle B
of Title 1 of ERISA and of Code Section 4980B have been met with respect to
each such Employee Benefit Plan which is an Employee Welfare Benefit Plan.
xv. All trust agreements, custodial agreements, investment
management agreements, insurance or annuity contracts (or any other funding
instruments) and any other agreement relating to any Employee Benefit Plan
are legally valid and binding and in full force and effect.
xvi. The Company does not have any obligation to provide any
medical or health benefits to any former employees or retired employees, except
to the extent required by Title X of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended (hereinafter referred to as "COBRA").
xvii. The Company has complied with the requirements of COBRA and
the rules and regulations thereunder. The Company shall be solely responsible
and liable for providing any and all benefits to employees or others (or their
covered dependents) of the Company required under COBRA arising from any
qualifying event as defined under Code Section 4980B(f)(3) and ERISA Section 603
occurring on or before the Closing Date. The Disclosure Schedule contains a
list of: (a) all persons who have elected or who are eligible to elect COBRA
continuation coverage under any of the Welfare Benefit Plans, (b) the dates of
each qualifying event and COBRA continuation coverage periods for each such
person; and (c) the claims experience of each such person for the preceding
twelve months plus pending claims for benefits which as of the date of such
Schedule have not yet been paid and a prognosis with respect to each such person
who has had a significant claim in the preceding twelve months.
xviii. No condition, fact, or circumstances exists, or will exist at
Closing, which would prevent the Company from amending or terminating any
Employee Benefit Plan with respect to any current, former or retired
employee or independent contractor of the Company.
xix. Neither the Joint Venture nor any other member of the
Controlled Group of Corporations that includes the Joint Venture has sponsored,
maintained, or contributed to any Pension Benefit Plan within six years prior to
the Closing Date.
xx. The Joint Venture does not maintain and never has maintained
or contributed, or ever has been required to contribute to any Employee Welfare
Benefit Plan except in compliance with all laws and regulations relating to any
medical, health, or life insurance or other welfare-type benefits.
xxi. Neither the Company (nor any other member of any controlled
group of corporations that now includes or previously included the Company)
contributes to, ever has contributed to, or ever has been required to
contribute to any Multi-employer Plan or has any liability (including
withdrawal Liability) under any Multi-employer Plan.
X. Guaranties. To Seller's Knowledge, neither the Company nor the
Joint Venture is a guarantor or otherwise is liable for any Liability or
obligation (including indebtedness) of any other Person.
Y. Environment, Health, and Safety.
i. To Seller's Knowledge, except as disclosed in the
Environmental Reports, (A) the Company and the Joint Venture have each complied
with all Environmental, Health, and Safety Laws applicable to them or to the
Owned Real Property or the Headquarters Lease in all material respects, and (B)
no action, suit, proceeding, hearing, or written notice, investigation, charge,
complaint, claim, or demand has been filed or commenced against either of them
alleging any failure so to comply. To Seller's Knowledge, without limiting the
generality of the preceding sentence, the Company and the Joint Venture have
each obtained and been in substantial compliance with all of the terms and
conditions of all permits, licenses, and other authorizations which are required
under, and have in all material respects complied with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables which are contained in, all Environmental, Health, and
Safety Laws applicable to them or to the Owned Real Property or the Headquarters
Lease.
ii. To Seller's Knowledge, there has been no material Liability
asserted against either the Company or the Joint Venture (and neither of
such entities has handled or disposed of any substance, arranged for the
disposal of any substance, exposed any employee or other individual to any
substance or condition, or owned or operated any property or facility in any
manner that could reasonably be expected to give rise to any material
Liability) for damage to any site, location, or body of water (surface or
subsurface), for any illness of or personal injury to any employee or other
individual, or for any reason under any applicable Environmental, Health,
and Safety Law.
iii. To Seller's Knowledge, the Owned Real Property does not
contain asbestos, PCB's, methylene chloride, trichloroethylene, 1,2-
transdichloroethylene, dioxins, dibenzofurans, or Extremely Hazardous
Substances, except for the following which are handled in material compliance
with applicable Environmental, Health, and Safety Laws: (A) as to the
Headquarters Lease only, chemicals, substances or materials routinely used in
office areas and janitorial supplies, cleaning fluids, pesticides and herbicides
reasonably necessary for the day-to-day operations of the Owned Real Property,
and (B) chemicals, substances or materials reasonably necessary for the
construction or repair of improvements on the Owned Real Property.
Z. Transactions with Related Parties. Except as disclosed in
Section 4(z) of the Disclosure Schedule, neither the Seller, nor, to
Seller's Knowledge, any officer, director, shareholder, partner, manager,
independent contractor or employee of the Company or the Joint Venture, nor
any spouse, parent, or child of any of them, has any direct or indirect
interest in any competitor, supplier or customer of any of such entities or
in any Person from whom or to whom any of such entities leases any property
(real or personal), or in any other Person with whom any of such entities is
doing business (other than any other Person acting as a customer of any of
such entities).
AA. Special Taxing Districts. Except as disclosed in Section 4(aa)
of the Disclosure Schedule, neither the Company nor the Joint Venture is a
party to any agreement with any special taxing district.
BB. Disclosure. This Agreement and the Exhibits and Schedules
hereto do not contain any untrue statements of material fact by the Seller
or omit to state a material fact necessary to make the statements by Seller
herein contained not misleading.
5. Pre-Closing Covenants. The parties agree as follows with
respect to the period between the execution of this Agreement and the
Closing:
A. General. Each of the parties will use his or its reasonable
best efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of
the closing conditions set forth in Section 7 below).
B. Notices and Consents. The Seller will cause each of the Company
and the Joint Venture to give any notices to third parties, and will cause
each of such entities to use its reasonable efforts to obtain any third-
party consents that are required for this transaction or that the Buyer
reasonably may request. Without limiting the generality of the foregoing,
the Seller shall obtain the written consent and estoppel of (i) the partners
of the Joint Venture and (ii) NationsBank, all in form and content
reasonably satisfactory to the Buyer, provided that a consent and estoppel
will not be required from NationsBank if Herbert Heftler provides financing
to the Company in accordance with Section 7(c). Each of the Parties will
(and the Seller will cause each of the Company and the Joint Venture to)
give any notices to, make any filings with, and use its reasonable efforts
to obtain any authorizations, consents, and approvals of governments and
governmental agencies in connection with the matters referred to in Section
3(b), Section 4(a), and Section 4(g) above. Without limiting the generality
of the foregoing, each of the parties will file any Notification and Report
Forms and related material that he or it may be required to file with the
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the Hart-Scott-Rodino Act, will use his or its
reasonable best efforts to obtain an early termination of the applicable
waiting-period, and will make any further filings pursuant thereto that may
be necessary, proper, or advisable in connection therewith, provided that
all such filings will be prepared by Buyer (Seller shall cooperate, and
shall cause the Company to cooperate, in supplying the information necessary
to the preparation of such filings) and at Buyer's expense.
C. Operation of Business. Except as set out on the Disclosure
Schedule, the Seller will cause the Company and the Joint Venture to refrain
from engaging in any practice, taking any action, or entering into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, except as set out on the Disclosure Schedule,
the Seller will cause the Company and the Joint Venture to refrain from
engaging in any practice, taking any action, or entering into any
transaction of the sort described in Section 4(i) above.
D. Preservation of Business. The Seller will cause the Company and
the Joint Venture to keep their respective businesses and properties
substantially intact, including present operations, physical facilities,
working conditions, and relationships with lessors, licensors, suppliers,
customers, and employees.
E. Full Access. The Seller will permit, and the Seller will cause
each of the Company and the Joint Venture to permit, representatives of the
Buyer to have full access at all reasonable times to all premises,
properties, personnel, books, records (including Tax records), contracts,
and documents of or pertaining to each of such entities.
F. Notice of Developments. Each party will give prompt written
notice to the others of any material adverse development causing a breach of
any of his or its own representations and warranties in Section 3 and
Section 4 above, respectively. No disclosure by any Party pursuant to this
Section 5(f), however, shall be deemed to amend or supplement the Disclosure
Schedule or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
G. Exclusivity. Seller will not (and Seller will not cause or
permit the Company and will not vote to allow the Joint Venture to) (i)
solicit, initiate, or encourage the submission of any proposal or offer from
any Person relating to the acquisition of any ownership interest or capital
stock or other voting securities, or any substantial portion of the assets
of the Company and/or the Joint Venture (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii)
participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing. The Seller will notify the Buyer immediately if any Person makes
any proposal, offer, inquiry, or contact with respect to any of the
foregoing.
H. Title Insurance. Buyer may arrange to obtain endorsements (the
costs of which shall be paid by Buyer) to each of the Title Policies which
endorsements shall (a) bring the effective date of each Title Policy current
through the date of Closing and (b) provide such other assurance as the
Buyer shall reasonably request. Seller will cooperate with Buyer in efforts
to obtain such endorsements. If Buyer deems it necessary or desirable to
obtain new policies of owner's title insurance in order to obtain the above
coverage, Buyer may elect to obtain new policies in lieu of endorsements.
Each title insurance policy delivered under this Section 5(h) shall insure
title to the real property and all recorded easements benefiting such real
property, and shall at Buyer's option have an endorsement of the survey
exception, limiting it to an exception to "shortages in area" only.
I. Platting of Pembroke Shores. Seller shall cause the Company to
diligently continue efforts to obtain final plat approval from all
governmental bodies having jurisdiction with respect to the plat of the
Pembroke Shores.
J. Lawsuits. Seller will cause the Company, and will vote to
require the Joint Venture, to preserve all rights under any existing
lawsuits to which any of the Company or the Joint Venture is a party and
Seller will not permit the Company (and will not vote to allow the Joint
Venture to) (i) incur any expenses in connection with any such lawsuits
other than those expenses that are reasonably necessary to preserve their
rights in connection with any such lawsuit, or (ii) settle any lawsuits
without Buyer's prior consent.
K. Acquisition and Disposition of Real Property. The Company will
not, and will not vote to permit the Joint Venture to, acquire or dispose of
or agree to acquire or dispose of any interest in real property, other than
sales of single family houses by the Company in the Ordinary Course of
Business.
L. Tax Information. The Seller will provide all schedules,
computations and details of carry forward attributes necessary for future
tax work, including (i) detailed federal tax depreciation schedules,
including accumulated depreciation by asset, (ii) schedule of previous and
future book-tax differences related to stock incentive plan expenses, (iii)
detail of tax capitalization (sec. 263A) methodology, including differences
between book and tax capitalized values for any assets as of the Closing
Date, (iv) schedule of all deferred temporary differences between book and
tax basis in assets and liabilities, and (v) detail of any tax attributes,
including quantification of earnings & profits, carrying forward from the
Company's last C corporation year.
M. Sale of Joint Venture Property, etc. The Joint Venture shall
not transfer, assign, convey, create a lien, security interest or other
encumbrance on (except for liens, security interests or other encumbrances
permitted by the Joint Venture Agreement) or otherwise dispose of any
interest in any part of Pembroke Shores.
N. Option to Exclude Assets. If the Buyer so notifies Seller not
less than Five (5) days prior to Closing, the Buyer may elect to require the
Seller to cause the Company to convey to a third party chosen by Seller
prior to Closing either or both of the real property owned by the Company in
Brevard County, Florida known as the "Titusville" property and the real
property located in Palm Beach County, Florida known as the "Rolling Green
Ridge" property. If Buyer makes such election, Seller shall cause the
Company to convey to a third party prior to Closing either or both of such
properties in accordance with the election of Seller.
6. Post-Closing Covenants. The parties agree as follows with
respect to the period following the Closing:
A. General. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instrument and documents) as any
other party reasonably may request, all at the sole cost and expense of the
requesting party (unless the requesting party is entitled to indemnification
therefor under Section 8 below). The Seller acknowledges and agrees that
from and after the Closing the Buyer will be entitled to possession of all
documents, books, records (including Tax records), agreements, and financial
data belonging to the Company.
B. Litigation Support. In the event and for so long as Seller,
Buyer or the Company actively is contesting or defending against any action,
suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving the Company or the
Joint Venture, each of the other parties will cooperate with him or it and
his or its counsel in the contest or defense, make available their
personnel, and provide such testimony and access to their books and records
as shall be necessary in connection with the contest or defense, all at the
sole cost and expense of the contesting or defending party (unless the
contesting or defending party is entitled to indemnification therefor under
Section 8 below).
C. Transition. Seller will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Company or the Joint Venture
from maintaining the same business relationships with such entities after
the Closing as it maintained with such entities prior to the Closing.
Seller will refer all customer inquiries relating to the businesses of such
entities to Buyer from and after the Closing.
D. Confidentiality. Seller will treat and shall retain in strict
confidence all of the Confidential Information, refrain from using any of
the Confidential Information in competition with or otherwise in a manner
detrimental to Buyer, the Company or the Joint Venture except in connection
with this Agreement, and deliver promptly to Buyer or destroy, at the
request and option of Buyer, any tangible embodiments (and all copies) of
the Confidential Information which are in his possession. In the event that
Seller is requested or required (by oral question or request for information
or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, then Seller will notify Buyer promptly of the request or
requirement so that Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Section 6(d). If, in the absence of
a protective order or the receipt of a waiver hereunder, Seller is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, Seller may disclose the
Confidential Information to the tribunal; provided, however, that Seller
shall use his best efforts to obtain, at the request of Buyer, an order or
other assurance that confidential treatment will be accorded to such portion
of the Confidential Information required to be disclosed as Buyer shall
designate. The foregoing provisions shall not apply to any Confidential
Information which is generally available to the public immediately prior to
the time of disclosure.
E. Life Insurance Policies. On or before thirty (30) days after
the Closing Date: (i) Roger Heftler shall notify the Buyer of whether he
wishes to have the Company assign to him that Life Insurance Policy No.
0511919 issued by Manufacturers Life Insurance Company on the life of Roger
Heftler in the amount of $2,500,000.00 and that Life Insurance Policy No.
1304081 issued by National Life of Vermont on the life of Roger Heftler in
the amount of $125,000.00 (collectively, the "Life Insurance Policies");
(ii) if he shall have notified the Buyer that he wishes to receive an
assignment of the Life Insurance Policies, then he shall have paid to the
Company an amount equal to the cash surrender value and any and all other
amounts due under the Life Insurance Policies which is approximately
$75,000.00 in exchange for the assignment of the Life Insurance Policies to
him by the Company; and (iii) if he does not wish to receive an assignment
of the Life Insurance Policies, he shall cooperate with the Company in
obtaining a cancellation of the Life Insurance Policies and the payment to
the Company of the cash surrender values and all other amounts due under the
Life Insurance Policies.
F. Dividends for Taxes. When the final federal income tax return
of the Company for the period from January 1, 1994 through the Closing Date
is filed, an adjustment to the dividends for 1994 personal federal income
Taxes of the Seller paid at the Closing pursuant to Section 2(g) shall be
made based on the final taxable income of the Company for that period so
that the Seller will have received dividends for 1994 in an amount equal to
39.6% of such final taxable income (the "Final Dividend"). If the dividends
paid to the Seller at the Closing pursuant to Section 2(g) with respect to
the income of the Company from January 1, 1994 through the Closing Date are
less than the Final Dividend, then the Company shall pay to the Seller the
amount of such deficiency. If the dividends paid to the Seller at the
Closing with respect to the income of the Company from January 1, 1994
through the Closing Date are more than the amount of the Final Dividend,
then the Seller shall pay to the Company an amount equal to such excess.
G. Barnett Financing Statements. Not later than sixty (60) days
after the Closing Date, the Seller shall deliver to the Buyer UCC-3
Statements of Change in form reasonably satisfactory to the Buyer
terminating the following UCC-1 Financing Statements; (i) UCC-1 Financing
Statement by the Company in favor of Barnett Bank of South Florida, N.A.
filed June 20, 1994 with the Florida Secretary of State under file number
94-0000124831; and (b) UCC-1 Financing Statement by the Company in favor of
Barnett Bank of South Florida, N.A. filed June 15, 1994 in Official Records
Book 16402 at Page 3187 of the Public Records of Dade County, Florida.
7. Conditions to Obligation to Close and Covenant of Seller.
A. Conditions to Obligation of the Buyer. The obligation of the
Buyer to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
i. the representations and warranties of the Seller set forth
in Section 4 above shall be true and correct in all material respects at and as
of the Closing Date;
ii. the Seller shall have performed and complied with all of his
covenants hereunder in all material respects through the Closing;
iii. the Company and the Joint Venture shall have procured and
delivered to the Buyer all of the third party consents specified in Section
5(b) above, except where failure to do so will not have a Material Adverse
Effect provided that the consent of NationsBank shall not be required if
Herbert Heftler provides financing to the Company in accordance with Section
7(a)(xvii);
iv. Seller shall have delivered to Buyer not less than three (3)
Business Days prior to the Closing Date the Financial Statements (including,
without limitation, the October 31, 1994 Interim Financial Statements), and
the October 31, 1994 Interim Financial Statements shall not differ
materially and adversely from the September 30, 1994 Interim Financial
Statements of the Company;
v. no action, suit, or proceeding shall be pending or threatened
before any court or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement, (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect materially and adversely the right of the
Buyer to own the Purchased Shares and to control the Company or (D) affect
materially and adversely the right of any of the Company or the Joint
Venture to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);
vi. the Seller shall have delivered to the Buyer a certificate to
the effect that each of the conditions specified above in Section 7(a)(i) -
(iv) is satisfied in all respects; and to his Knowledge, 7(a)(v);
vii. all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated and the parties shall have received all other authorizations,
consents, and approvals of governments and governmental agencies, if any are
required;
viii. the Buyer shall have received from counsel to the Seller an
opinion in form reasonably satisfactory to the parties and their respective
counsel;
ix. the Buyer shall have received the resignation, effective
as of the Closing, of Herbert Heftler (a) from each position as director and
officer of the Company or the Joint Venture, and (b) as a member of each
architectural control committee and as a member of each board of directors of
any homeowner's association, with respect to any real property owned by the
Company or the Joint Venture;
x. those persons identified in Exhibit K shall have entered into
Employment Agreements with the Company in the form and on the terms of those
certain Employment Agreements attached hereto as Exhibit K ("Employment
Agreements");
xi. all certificates, opinions, instruments, and other documents
required to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Seller and the Buyer;
xii. Buyer shall have received an Agreement Not To Compete, in the
form of Exhibit L, executed by Herbert Heftler and Monica A. Heftler;
xiii. Buyer shall have received a consent and estoppel certificate
in the form of Exhibit M, and an amendment to the Joint Venture Agreement in the
form of Exhibit N, executed by all partners of the Joint Venture;
xiv. except for changes in the Ordinary Course of Business the
Unaudited consolidated balance sheets and statements of income and changes
in stockholders' and partners' equity as of and for the period ended the
last day of the calendar month immediately preceding the month in which
Closing occurs are not materially and adversely different than the
October 31, 1994 Interim Financial Statements;
xv. all letters of credit identified on Exhibit O, including,
without limitation the Skylake Letter of Credit, shall have been replaced,
or shall continue in effect, on substantially the same terms and conditions
as govern such letters of credit on the date of this Agreement;
xvi. the Buyer shall have received copies of all current casualty,
liability, and other insurance policies, including without limitation
Preferred Builders Warranty Program with respect to the Company and the
Joint Venture;
xvii. (A) the Buyer shall have received confirmation
satisfactory to the Buyer that NationsBank has consented to the Buyer's purchase
of the Purchased Shares with the result that the NationsBank Agreement shall
continue in full force and effect pursuant to its terms and that NationsBank has
consented to increase the loan to the Company to not less than $20,000,000 which
shall include an amount sufficient to replace the Skylake Letter of Credit (or
such other terms to which the Buyer may agree) following consummation of the
transactions herein contemplated without breach, default or acceleration
thereunder (or any act or omission which with the giving of notice, lapse of
time or both would constitute a breach or default or permit acceleration
thereunder), or (B) Buyer and Herbert Heftler shall have entered into agreements
for the furnishing of financing to the Company on the same terms and conditions
as provided in the NationsBank Agreement in accordance with Section 7(c);
xviii. the Buyer shall have received a written termination
satisfactory to Buyer of each of the Stockholders' Agreements executed by the
respective parties thereto;
xix. none of the Owned Real Property is found to contain or be
contaminated by an Extremely Hazardous Substance and Seller has not been
found to have generated, transported or disposed of any Extremely Hazardous
Substance on any property or land for which Seller may have a material
liability;
xx. the Buyer shall have received written terminations
satisfactory to the Buyer of that Co-Ownership Agreement, dated as of September
27, 1991, by and between Thomas Iglesias, Joel B. Kovin, Candace Sharpsteen and
Jack Shell (the "Owners"), and of that Split Dollar Insurance Agreement, dated
as of September 27, 1991, by and between the Company and the Owners, as amended
by that Termination Agreement, dated as of September 22, 1992, by and between
the Company, Richard Molinari and the Owners; and
xxi. as of the Closing Date, the Joint Venture Agreement shall not
have been amended without Buyer's prior written consent (which consent will
not be unreasonably withheld).
The Buyer may waive any condition specified in this Section 7(a) if it
executes a writing so stating at or prior to the Closing.
B. Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by Seller in
connection with the Closing is subject to satisfaction of the following
conditions:
i. the representations and warranties of the Buyer set forth in
Section 3 above shall be true and correct in all material respects at and as
of the Closing Date;
ii. the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing, including
without limitation payment of the Purchase Price;
iii. no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this
Agreement or (B) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
iv. the Buyer shall have delivered to the Seller a certificate to
the effect that each of the conditions specified above in 7(b)(i)-(iii) is
satisfied in all respects;
v. all applicable waiting periods (and any extensions thereof)
under the Hart-Scott-Rodino Act shall have expired or otherwise been
terminated and the Seller, the Buyer, the Company and the Joint Venture
shall have received all other authorizations, consents, and approvals of
governments and governmental agencies referred to in this Agreement;
vi. in connection with any Liabilities shown on or reflected in
the Financial Statements and which will remain outstanding after the Closing
(the Parties hereto acknowledge that the Liabilities listed on Exhibit P
attached hereto will be paid at the Closing), the Seller shall have either (A)
been released from and against all liability relating to any outstanding
guarantees executed by Seller in connection with such Liabilities or (B)
received an indemnity from the Company in form and substance satisfactory to
Seller and Buyer pursuant to which the Company shall indemnify and hold Seller
harmless from and against all liability relating to any such guarantees;
vii. all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to the Seller;
viii. the Company and those Persons identified in Exhibit K shall
have entered into Employment Agreements in the form and on the terms of those
certain Employment Agreements attached hereto as Exhibit K;
ix. if NationsBank issues a letter of credit to replace the
Skylake Letter of Credit, then, simultaneously with the Closing, Herbert Heftler
shall be released from any and all liability with respect to the Skylake Letter
of Credit and any and all liens, security interests and assignments of any
assets of Herbert Heftler given in connection with the Skylake Letter of Credit
shall be released; and
x. the Seller shall have received from counsel to the Buyer an
opinion reasonably satisfactory to the parties and their respective counsel.
The Seller may waive any condition specified in this Section 7(b) if he
executes a writing so stating at or prior to the Closing.
C. Financing from Herbert Heftler. If NationsBank does not consent
to the Buyer's purchase of the Purchased Shares with a result that the
NationsBank Agreement does not continue in full force and effect with
provision for an increase in the loan to the Company to not less than
$20,000,000.00 including an amount sufficient to replace the Skylake Letter
of Credit, or if NationsBank does not make a new loan to the Company on the
aforesaid terms and conditions, then Herbert Heftler shall furnish financing
to the Company on the same terms and conditions as provided in the
NationsBank Agreement, including, without limitation, the furnishing of a
revolving credit facility of not less than $12,000,000.00 and a letter of
credit facility of not less than $5,000,000.00.
8. Remedies; Indemnifications.
A. General. Prior to Closing, if Buyer is in material default of
this Agreement, Seller's sole remedy shall be to receive the Good Faith
Deposit as liquidated damages pursuant to Section 2(c) above. After
Closing, if the Buyer, after ten (10) days' written notice and opportunity
to cure, is in material default under this Agreement, the Seller shall be
entitled to all rights and remedies available to Seller at law or in equity
including, without limitation, the right to seek specific performance of
Buyer's obligations hereunder. Before or after Closing, if the Seller,
after ten (10) days' notice and opportunity to cure, is in material default
under this Agreement, the Buyer shall be entitled to all rights and remedies
available to Buyer at law or in equity including, without limitation, the
right to seek specific performance of the Seller's obligations hereunder.
Seller acknowledges that monetary damages would not adequately compensate
Buyer for Seller's breach or default hereunder.
B. Survival of Representations and Warranties. All of the
representations, warranties and indemnities of the parties contained in this
Agreement shall survive the Closing hereunder and continue in full force and
effect thereafter through the earlier of: (i) expiration of the applicable
statutes of limitations shall have expired for claims which may be brought
hereunder and for claims in respect of which a party is entitled to
indemnification hereunder may be brought; or (ii) seven (7) years from the
Closing Date.
C. Post-Closing Indemnification Provisions for Benefit of the
Buyer. After Closing, and provided that Buyer or the Company makes a
written claim for indemnification against the Seller pursuant to Section
10(g) below, the Seller agrees to indemnify the Buyer, the Buyer's officers,
directors, employees and agents and the Company and hold each of them
harmless from any claim, loss, liability, cost or expense (including
reasonable attorney's fees and court costs at all levels) (collectively,
"Losses") incurred by the Buyer or the Company occurring or resulting from:
(i) any breach of any warranty, representation or covenant by the Seller
contained in this Agreement (or the allegation of facts by a third party
which if true would constitute a breach by the Seller); (ii) the non-
performance by the Seller hereunder; (iii) claims of whatever nature
(including, without limitation, claims for personal injury, wrongful death
or property damage) against the Company (including, without limitation, the
Company in its capacity as a general partner of the Joint Venture) or any of
the Assets based upon facts, circumstances, causes of action or occurrences
arising prior to the Closing, except for such facts, circumstances, causes
of action and occurrences as have been specifically, properly and accurately
disclosed on the Disclosure Schedule or in the Financial Statements; or (iv)
any Tax imposed on the Seller, the Company or the Joint Venture for all
periods prior to the Closing Date or on the Seller or the Company for any
built-in-gain under Code Section 1376 resulting from the sale of property
during any of the Company's S corporation years through the short period
ending on the Closing Date.. The preceding clause (iv) is intended to
impose strict liability to indemnify the Buyer and the Company with respect
to any Loss suffered by the Buyer or the Company for any Tax imposed on
Seller, the Company or the Joint Venture for all periods prior to the
Closing Date or on the Seller or the Company for any built-in gain under
Code Sec. 1374 resulting from the sale of property during any of the
Company's S corporation years through the short period ending on the Closing
Date, even though Seller may not have breached any representation or
warranty contained in Section 4(k) by reason of Seller's lack of knowledge
with respect to those representations and warranties.
The foregoing notwithstanding, the Seller shall have no obligation to
indemnify the Buyer or the Company for: (i) any matter referenced in (i),
(ii), or (iii) in the immediately preceding paragraph until one or both of
the Buyer and the Company have suffered Losses in excess of the aggregate
amount of $100,000.00 as a result thereof (after which point the Seller's
obligation to indemnify for such matters shall be unqualified); (ii) any
Loss occurring or resulting from any product warranty claim by a purchaser
of a housing unit, or from injury to an individual or property, of less than
$1,000.00, provided that, if any Loss occurring or resulting from any
product warranty claim by a purchaser of a housing unit, or from injury to
an individual or property, shall be in the amount of $1,000.00 or more, only
the amount, if any, of each such Loss in excess of $1,000.00 shall be
counted towards the $100,000.00 limitation stated in the immediately
preceding clause (i); and (iii) any Loss occurring or resulting from any
matter disclosed in Section 4 of the Disclosure Schedule if such matter has
been properly and accurately disclosed in the Disclosure Schedule, . The
limitations set forth in this paragraph shall not be applicable with respect
to the indemnification contemplated by Clause (iv) (regarding Taxes) in the
immediately preceding paragraph or with respect to any breach by Seller (or
the allegation of facts by a third party which, if true, would constitute a
breach by Seller) of any representation, warranty or covenant set forth in
Section 4(w) (regarding employee benefit plans).
If any third party shall notify the Buyer or the Company with respect to any
matter which may give rise to a claim for indemnification or if the Buyer or
the Company shall incur a Loss for which indemnification may be provided
under this Section 8 (each an "Indemnified Claim"), then the Buyer or the
Company, as the case may be, shall notify the Seller and any insurance
carrier providing applicable coverage of the Indemnified Claim. If the
carrier under any insurance policy applicable to the Indemnified Claim
denies coverage, then the Indemnified Claim shall be defended in accordance
with Section 8(e).
If any third party may be responsible for an Indemnified Claim, then the
Buyer or the Company, as the case may be, shall seek recovery of the
Indemnified Claim from such third party by appropriate proceedings
diligently pursued. If all or any portion of the Indemnified Claim cannot
be recovered from any such third party (or from an applicable insurance
carrier) by appropriate proceedings diligently pursued, then the Seller
shall pay such Indemnified Claim subject to the provisions of this Section
8(c).
If Buyer has given all notices of an Indemnified Claim to Seller as required
by this Section 8, then, in the event Seller shall otherwise become liable
for such Indemnified Claim under this Section 8, the obligation for
indemnification shall not be barred by any statute of limitations or by the
survival period provided in this Section 8; provided, further that Buyer
shall have notified Seller that such Indemnified Claim is still pending
within ninety (90) days prior to the end of such survival period; and,
provided further, that demand for payment upon Seller is made within ninety
(90) days after the obligation of the Seller to indemnify such Indemnified
Claim becomes final.
D. Post-Closing Indemnification Provisions for Benefit of the
Seller. If after Closing, in the event the Buyer breaches or has breached
(or in the event any third party alleges facts that, if true, would mean the
Buyer has breached) any of its representations, warranties, covenants and
agreements contained herein, and, provided that the Seller makes a written
claim for indemnification against the Buyer pursuant to Section 10(g) below
within the survival period for such claim, then the Buyer agrees to
indemnify the Seller from and against the entirety of any Loss (including
any Loss the Seller may suffer after the end of any applicable survival
period) occurring or resulting from the breach (or the alleged breach);
provided, however, that the Buyer shall not have any obligation to indemnify
the Seller from and against any Loss occurring or resulting from the breach
of any representation, or warranty, covenant or agreement contained herein
until the Seller has suffered Losses by reason of any such breach or
breaches in excess of the aggregate amount of $100,000 (after which point
the Buyer will be obligated to indemnify the Seller from and against further
Loss).
E. Matters Involving Third Parties. Subject to Sections 8(c) and
8(d) above:
i. If any third party shall notify the Seller or the Buyer
(the "Indemnified Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against any other party (the
"Indemnifying Party") under this Section 8, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the Indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced.
ii. Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third Party Claim that
the Indemnifying Party will indemnify the Indemnified Party from and against
the entirety of any Loss the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party
Claim, (B) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the
Third Party Claim and fulfill its indemnification obligations hereunder, (C)
the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief that could have a Material Adverse
Effect, (D) settlement of, or an adverse judgment with respect to, the Third
Party Claim is not, in the good faith judgment of the Indemnified Party,
likely to establish a precedential custom or practice materially adverse to
the continuing business interests of the Indemnified Party, and (E) the
Indemnifying Party conducts the defense of the Third Party Claim actively
and diligently.
iii. So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with Section 8(e)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, (B) the Indemnified
Party will not consent to the entry of any judgment or enter into any settlement
or with respect to the Third Party Claim without the prior written consent of
the Indemnifying Party (not to be withheld unreasonably) and (C) the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld unreasonably) unless the
judgment or proposed settlement involves only the payment of money damages by
one or more of the Indemnifying Parties and does not impose an injunction or
other equitable relief upon the Indemnified Party that could have a Material
Adverse Effect.
iv. In the event any of the conditions in Section 8(e)(ii) above
is or becomes unsatisfied however, (A) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, (but shall advise) any Indemnifying Party in connection
therewith), (B) the Indemnifying Parties will reimburse the Indemnified Party
promptly and periodically for the costs of defending against the Third Party
Claim (including reasonable attorneys' fees and expenses), and (C) the
Indemnifying Parties will remain responsible for any Loss the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim to the fullest extent provided in this Section
8.
F. Insurance. For seven (7) years from and after the Closing Date,
the Buyer shall cause the Company to maintain each type of insurance
coverage in the amount maintained by the Company as of the date of this
Agreement so long as such type of coverage is available from a recognized
commercial insurance carrier selected by the Buyer and accepted by the
Seller (which acceptance shall not be unreasonably withheld). If such
coverage is unavailable and cannot be obtained as provided in the
immediately preceding sentence, then Buyer shall notify Seller sixty (60)
days (or as soon as is otherwise practical if Buyer has not been notified of
such unavailability before sixty (60) days prior to the termination of such
coverage) prior to the termination of the existing insurance policy at that
time. Further, in the event Buyer dissolves the Company or otherwise causes
the Company to cease to exist as an entity, Buyer will thereafter for the
remainder of the period of seven (7) years after the Closing Date cause the
Company to be included as a named insured on Buyer's insurance policies so
that the intent and effect of this Section 8(f) remains unchanged. If any
claim that would give rise to indemnification under this Section 8 during
such seven year period is still pending at the end of such seven year
period, Buyer shall be responsible to maintain the insurance required herein
until all such claims are disposed of.
G. Other Indemnification Provisions. The Seller will not make any
claim for indemnification against the Company or the Joint Venture by reason
of the fact that Seller was a director, officer, employee, or agent of
either such entity or was serving at the request of the Company or the Joint
Venture as a partner, trustee, director, officer, employee, or agent of
another entity (whether such claim is for judgments, damages, penalties,
fines, costs, amounts paid in settlement, losses, expenses, or otherwise and
whether such claim is pursuant to any statute, charter document, bylaw,
agreement, or otherwise) with respect to any action, suit, proceeding,
complaint, claim, or demand brought by the Buyer against the Seller (whether
such action, suit, proceeding, complaint, claim, or demand is pursuant to
this Agreement, applicable law, or otherwise).
9. Termination.
A. Termination of Agreement. The parties may terminate this
Agreement as provided below:
i. the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
ii. the Buyer may terminate this Agreement by giving written
n tice to the Seller on or before the Closing Date or the Outside Closing Date,
as the case may be, if the conditions to Closing in Section 7(a) are not
satisfied by the Closing Date or the Outside Closing Date; and
iii. the Seller may terminate this Agreement by giving written
notice to the Buyer on or before the Closing Date or the Outside Closing Date,
as the case may be, if the conditions to Closing in Section 7(b) are not
satisfied by the Closing Date or the Outside Closing Date.
B. Effect of Termination. If either Party terminates this
Agreement pursuant to Section 9(a) above as a result of a default of the
other Party, the Parties shall have the rights and remedies set forth in
Section 8 above.
10. Miscellaneous.
A. Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior approval of
the other Party hereto; provided, however, that any Party may make any
public disclosure it believes in good faith is required by applicable law or
any listing or trading agreement concerning its publicly-traded securities
(in which case the disclosing Party will use its reasonable best efforts to
advise the other Parties prior to such disclosure).
B. No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the parties and their
respective heirs, successors and permitted assigns.
C. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements, or representations by or
among the parties, written or oral, to the extent they related in any way to
the subject matter hereof.
D. Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties named herein and their respective
heirs, successors and permitted assigns. No party may assign either this
Agreement or any of his or its rights, interests, or obligations hereunder
without the prior written approval of the other party hereto; provided,
however, that the Buyer may (i) assign any or all of its rights and
interests hereunder to one or more of its Affiliates and (ii) designate one
or more of its Affiliates to perform its obligations hereunder (in any or
all of which cases the Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
E. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
F. Heading. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
G. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and
then two business days after) it is sent by registered or certified mail,
return receipt requested, postage prepaid, and addressed to the intended
recipient as set forth below:
If to the Seller: Copy to:
c/o Heftler Realty Co. Juan E. Rodriguez, Esq.
9450 Sunset Drive Salomon, Kanner, Damian
Miami, Florida 33173 &Rodriguez,P.A.
Attention: Mr. Joel B. Kovin Suite 2550
Telecopy No.: (305) 279-1619 World Trade Center
80 S.W. 8th Street
Miami, Florida 33130
Telecopy No.: (305) 374-1719
If to the Buyer: Copy to:
Continental Homes Holding Corp. David B. McCrea, Esq.
c/o Timothy C. Westfall, Esq. Mershon, Sawyer, Johnston,
Vice President/General Counsel Dunwody & Cole
7001 North Scottsdale Rd. 4500 First Union Financial
Suite 2050 Center
Scottsdale, Arizona 85253 200 S. Biscayne Blvd.
Telecopy No.: (602) 991-1682 Miami, Florida 33131
Telecopy No.: (305) 376-8655
Each person included in the term Seller hereby irrevocably appoints Joel B.
Kovin as agent for the receipt of notice under this Agreement. Notice of
any matter under this Agreement given to Joel B. Kovin in accordance with
this Section 10(g) shall be binding on each such person. Any party may send
any notice, request, demand, claim, or other communication hereunder to the
intended recipient at the address set forth above using any other means
(including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been
duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
H. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Florida
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Florida or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Florida.
I. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Seller. No waiver by any party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
such occurrence.
J. Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
K. Cost of Transaction. Each of the parties will bear his or its
own costs and expenses (including legal fees and expenses) incurred in
connection with the negotiation, preparation, execution and delivery of this
Agreement and the transaction contemplated hereby.
L. Legal Fees & Costs. In the event that either Seller or Buyer
elects to incur legal expenses to enforce or interpret this Agreement or to
claim damages for any alleged breach or default in the performance of this
Agreement or any misrepresentation contained in this Agreement, the
prevailing party shall be entitled to recover all its legal expenses arising
in connection therewith, including, without limitation, attorneys' fees,
costs and disbursements through appeal, in addition to such other relief to
which such party may be entitled.
M. Gender and Number. Whenever the context of this Agreement
requires, the gender all of words herein shall include the masculine,
feminine and neuter, and the number of all words shall include singular and
the plural.
N. Obligations of Seller. All covenants, agreements,
representations, warranties, and obligations of the Seller in this Agreement
are binding on each Person included in the Seller, in proportion to the
percentage of the Purchased Shares owned by each such Person as set forth on
Exhibit A.
O. Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local, or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" shall mean including
without limitation. The parties intend that each representation, warranty,
and covenant contained herein shall have independent significance. If any
party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
P. Incorporation of Exhibits, Annexes, and Schedules. Any
Exhibits, Annexes, and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
Q. Submission to Jurisdiction. Each of the parties submits to the
personal jurisdiction of any state or federal court sitting in Miami,
Florida in any action or proceeding arising out of or relating to this
Agreement. Each of the parties waives any defense of inconvenient forum to
the maintenance of any action or proceeding so brought and waives any bond,
surety, or other security that might be required of any other party with
respect thereto. Nothing in this Section 10(q), however, shall affect the
right of any party to bring any action or proceeding arising out of or
relating to this Agreement in any other court in which jurisdiction and
venue are proper. Each party agrees that a final non-appealable judgment in
any action or proceeding so brought shall be conclusive and may be enforced
by suit on the judgment or in any other manner provided by law or at equity.
R. Hart-Scott-Rodino. It is agreed that Buyer shall pay the
$45,000 filing fee with respect to the Hart-Scott-Rodino filing. Said
payment shall serve as independent consideration for this Agreement, and in
no event shall Seller be obligated to repay such sum or to reimburse Buyer
for same.
S. Time of Essence. Time shall be of the essence in performance of
the obligations under this Agreement.
T. WAIVER OF TRIAL BY JURY. THE PARTIES EACH HEREBY WAIVE ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (A)
ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT
EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR (B) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY
OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND
WHETHER IN CONTRACT OR TORT OR OTHERWISE. THE PARTIES EACH HEREBY AGREE AND
CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTIONS SHALL BE
DECIDED BY COURT TRIAL, WITHOUT A JURY, AND THAT ANY PARTY MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
U. Power of Attorney; Deposit of Shares. Each Person included in
the Seller hereby names and appoints Juan E. Rodriquez, Esq. as his or her
true and lawful attorney (the "Attorney-in-Fact"), with full power of
substitution, in the name and on behalf of each such Person for the
following purposes:
i. Each Person included in the Seller shall within 10 days
following execution of this Agreement deliver to and deposit with the
Attorney-in-Fact the certificate or certificates representing the Purchased
Shares owned by such Person, duly endorsed in blank for transfer or accompanied
by assignment(s) separate from certificate duly executed by such Person. The
Attorney-in-Fact shall accept the delivery and deposit and take possession of
and hold such certificate(s) for the Purchased Shares (and accompanying
assignments) on behalf of such Person pending the Closing.
ii. At the Closing, the Attorney-in-Fact shall deliver and
surrender to the Buyer such certificate(s) (duly endorsed or accompanied by duly
executed assignment(s) as provided above) of each Person included in the Seller
in exchange for the Purchase Price at Closing, and the Attorney-in-Fact shall
remit to each Person included in the Seller such Person's pro rata portion of
the Purchase Price (net of expenses authorized by such Person).
iii. In the event of the termination of this Agreement pursuant to
Section 9, the Attorney-in-Fact shall forthwith return to the Persons
included in the Seller the certificate(s) for the Purchased Shares (together
with any assignment(s) separate from certificate) owned by such Persons.
iv. The Attorney-in-Fact is empowered, authorized and directed to
take any and all action and execute any and all assignments, transfers,
certificates, receipts, notices, instructions other documents and
instruments on behalf of each Person included in the Seller which may be
necessary or desirable prior to, at or after Closing in order to perform and
carry out the foregoing actions to be performed and carried out by the
Attorney-in-Fact on behalf and in the name of such Person, to perform and
carry out the obligations and exercise the rights of such Person under this
Agreement and to carry out and consummate the Closing and the sale of the
Purchased Shares owned by such Person pursuant to this Agreement.
v. Prior to the Closing, each Person included in the Seller
shall be entitled to vote the Purchased Shares owned and represented by the
certificate(s) surrendered by such Person and to receive all dividends or other
distributions of whatever kind or nature in respect of such Purchased Shares.
vi. Each Person included in the Seller hereby ratifies and
approves, as fully and to all intents and purposes as such Person might or could
do in person, the actions taken or omitted to be taken by the Attorney-in-Fact
on behalf of such Person pursuant to this Section. The authority granted to
the Attorney-in-Fact under this Section is irrevocable and shall be terminable
only upon termination of this Agreement pursuant to Section 9 hereof. The power
of the attorney herein conferred on the Attorney-in-Fact shall survive, and not
be affected by, the death or disability of any or all Persons included in the
Seller.
vii. The Seller shall indemnify the Attorney-in-Fact against and
hold him harmless from any liability, costs, damages or expenses (including
reasonable attorneys' fees) arising from or growing out of any actions taken or
omitted to be taken by such Attorney-in-Fact hereunder, except in the case of
bad faith or willful misconduct.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
BUYER
CONTINENTAL HOMES HOLDING CORP.
By: /s/Timothy C. Westfall
-------------------------
Title: Vice President
SELLER SIGNATURES ARE SET FORTH
ON FOLLOWING PAGE
EXHIBIT 10.1
LOAN AGREEMENT
DATE: November 17, 1994
PARTIES: Borrower: HEFTLER REALTY CO.,
a Florida corporation
Borrower 9450 Sunset Drive
Address: Miami, Florida 33173
Bank: BANK ONE, ARIZONA, NA,
a national banking association
Bank Address: Post Office Box 29542
Phoenix, Arizona 85038
Attention: Real Estate Finance Division
Facsimile No.: (602) 221-1372
AGREEMENT: For good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Borrower and Bank agree as follows:
SCHEDULE OF TERMS.
2. Commitment Amount: $10,000,000.00, as the same may be reduced
from time to time pursuant to Sections 3.1.2, 3.1.3 and 3.1.4.
Maximum Allowed Advances:
(i) With respect to each parcel of Raw Land upon which
construction of Improvements has commenced, the lesser of (A)
fifty percent (50%) of the Raw Land Costs of such parcel, plus
fifty percent (50%) of the Development Costs related to such
parcel or (B) sixty-five percent (65%) of the respective Raw
Land/If Improved Appraised Value for Raw Land in Florida or
seventy percent (70%) of the respective Raw Land/If Improved
Appraised Value for Raw Land in Arizona;
(ii) With respect to each Improved Lot, the lesser of (A)
sixty-five percent (65%) of the respective Lot Costs for each
Improved Lot in Florida or seventy percent (70%) of the respective
Lot Costs for each Improved Lot in Arizona, or (B) sixty-five
percent (65%) of the respective Improved Lot Appraised Value for
each Improved Lot in Florida or seventy percent (70%) of the
respective Improved Lot Appraised Value for each Improved Lot in
Arizona;
(iii) With respect to each Presold Unit, the lesser of (A)
eighty percent (80%) of the respective Unit Base Appraised Value
for each Presold Unit in Arizona or seventy-five percent (75%) of
the respective Unit Base Appraised Value for each Presold Unit in
Florida, or (B) eighty percent (80%) of the sales price in the
respective Purchase Contract for each Presold Unit in Arizona or
seventy-five percent (75%) of the respective Purchase Contract for
each Presold Unit in Florida, or (C) ninety (90%) of the
respective Unit Total Costs;
(iv) with respect to each Spec Unit, the lesser of (A)
seventy-five percent (75%) of the respective Unit Base Appraised
Value, or (B) ninety percent (90%) of the respective Unit Total
Costs;
(v) with respect to each Model Unit, the lesser of (A)
seventy percent (70%) of the respective Unit Base Appraised Value,
or (B) ninety percent (90%) of the respective Unit Total Costs;
provided, however, that the Maximum Allowed Advance, as so
determined, may be adjusted from time to time by Bank pursuant to
any applicable Reclassification Adjustment, Term Adjustment,
Presold Adjustment, Model Adjustment, Spec Adjustment, or Raw Land
Adjustment.
Title Company: FIRST AMERICAN TITLE INSURANCE COMPANY, a
California corporation.
Unit Completion Date: Twelve (12) Calendar Months after such Unit
first constitutes Eligible Collateral
3.3.1 Each of the Persons listed on a signature authorization form
executed by Borrower and delivered to Bank from time to time,
and approved by Bank. Initially, each of the Persons listed
on Exhibit A acting alone is authorized to request Advances.
3.4.1 Commitment Fee: Five-eighths of one percent (.625%) per
annum of the Commitment Amount.
Quarterly Loan Fee: Five-eighths of one percent (.625%) per
annum of the Commitment Amount.
3.4.2 Unused Commitment Fee Rate: One-quarter of one percent
(.25%) per annum.
5.1.5, 6.2, 6.3.1, and 6.3.2. Financial statements and accounting
system requirements: Accrual Basis and GAAP.
5.1.5 Fiscal year of Borrower: From January 1 to December 31.
6.3.1. Financial statements due within thirty (30) days after the
end of each Calendar Month. Financial statements due within
forty-five (45) days after the end of each fiscal quarter.
Certification requirements: Borrower prepared financial
statements.
Person(s) to sign financial statements on behalf of Borrower:
Each of the Persons listed on a signature authorization form
executed by Borrower and delivered to Bank from time to time,
and approved by Bank. Initially, each of those Persons
listed on Exhibit A are authorized to sign financial
statements.
6.3.2 Financial statements due within 90 days after the end of each
fiscal year of Borrower.
Certification requirements: Independent certified public
accountant satisfactory to Bank to audit financial statements
and deliver an unqualified opinion on the financial
statements.
6.7.1 Minimum property insurance amount: Replacement Value per
Unit.
6.7.2 Minimum liability insurance amount:
Per occurrence: $500,000.00.
General aggregate: $1,000,000.00.
Minimum umbrella excess liability insurance amount:
$20,000,000.00.
Minimum business motor vehicle liability insurance amount:
$500,000.00.
6.8 Other indebtedness of Borrower to be subordinated: None.
DEFINITIONS. In this Agreement, the following terms shall have the
following meanings:
"Advance" means an advance by Bank to Borrower hereunder.
"Agreement" means this Loan Agreement, as it may be amended, modified,
extended, renewed, restated, or supplemented from time to time.
"Approvals and Permits" means each and all approvals, authorizations, bonds,
consents, certificates, franchises, licenses, permits, registrations,
qualifications, and other actions and rights granted by or filings with any
Persons necessary, appropriate, or desirable for acquisition of Raw Land or
Improved Lots, for construction of Units, for occupancy, ownership, and use
by Borrower and other Persons of the Units, or for the conduct of the
business and operations of Borrower.
"Arizona" means Maricopa County, Arizona.
"Available Commitment" means, at any time, the lowest of (i) the applicable
Commitment Amount less the aggregate of all Letter of Credit Subcommitment
amounts, or (ii) or the total of (A) the aggregate of the current Maximum
Allowed Advances with respect to all Raw Land and Improved Lots that
constitute Eligible Collateral, plus (B) the aggregate of the current Unit
Collateral Values for all Units that constitute Eligible Collateral, less
(C) the aggregate of all Letter of Credit Subcommitment amounts.
"Borrower Loan Documents" means the Loan Documents executed or delivered by
Borrower from time to time.
"Borrowing Base Report" means Borrower's monthly report disclosing the
matters required pursuant to Section 6.3.7.
"Business Day" means a day of the year on which banks are not required or
authorized to close in Phoenix, Arizona.
"Calendar Month" shall mean the twelve (12) calendar months of the year.
Any payment or obligation that is due or required to be performed within a
specified number of Calendar Months shall become due on the day in the last
of such specified number of Calendar Months that corresponds numerically to
the date on which such payment or obligation was incurred or commenced,
provided, however, that with respect to any obligation that is incurred or
commences on the 29th, 30th, or 31st day of any Calendar Month and if the
Calendar Month in which such payment or obligation would otherwise be due
does not have a numerically corresponding date, such payment or obligation
shall become due on the first day of the next succeeding Calendar Month.
"Cash Collateral Account" means a deposit account maintained by Bank, in
Bank's name, and subject to the terms and conditions of the Cash Collateral
Agreement.
"Cash Collateral Agreement" means that Cash Collateral Agreement by and
between Borrower and Bank of even date herewith, governing the use of monies
held in the Cash Collateral Account, as it may be amended, modified,
extended, renewed, restated, or supplemented from time to time.
"CHHC" means Continental Homes Holding Corp., a Delaware corporation.
"Collateral Certificate" means the certificate delivered to Bank pursuant to
Section 6.3.8.
"Collateral" means the property, interests in property, and rights to
property securing any or all Obligations from time to time.
"Commitment" means the agreement by Bank in Section 3.1 to issue Letters of
Credit and to make Advances pursuant to the terms and conditions herein and
in the Letter of Credit Agreements.
"Commitment Amount" means the amount specified in Section 1.
"Conversion Date" means November 17, 1996; provided, however, that Bank may,
in Bank's absolute and sole discretion, extend the Conversion Date annually
for periods of twelve (12) months each, upon such terms and conditions as
Bank may require, in its absolute and sole discretion, and with such changes
to this Agreement or the terms and conditions herein as Bank may require, in
its absolute and sole discretion, including, without limitation, any changes
in or additions to required financial and other covenants, or such earlier
date determined pursuant to Section 3.1.2 or Section 3.1.3.
"Conversion Period" means the period of time following the Conversion Date
during which the Commitment Amount is reduced from time to time pursuant to
Section 3.1.2.
"Debt" means, as to any Person, without limitation, (i) any indebtedness of
such Person for borrowed money, (ii) all indebtedness of such Person
evidenced by bonds, debentures, notes, letters of credit, drafts or similar
instruments, (iii) all indebtedness of such Person to pay the deferred
purchase price of property or services, (iv) all capital lease obligations
of such Person, (v) all Debt of others secured by a lien on any asset of
such Person, whether or not such Debt is assumed by such Person or
guaranteed by such Person, and (vi) with respect to Borrower, payables and
accrued liabilities relating to Borrower's homebuilding activities. Debt
specifically excludes any indebtedness of Borrower to CHHC or any wholly
owned subsidiaries of CHHC. The amount of Debt of any Person at any date
pursuant to clauses (i)-(iv) and (vi) above shall be as would appear as a
liability upon a balance sheet of such Person prepared on a consolidated
basis in accordance with GAAP.
"Debt to Tangible Net Worth Ratio" means, with respect to Borrower, the
ratio of (ii) Borrower's Debt to (ii) Borrower's Tangible Net Worth.
"Deed of Trust" and "Deeds of Trust" mean, respectively, each and all Deeds
of Trust, Assignment of Leases and Rents, Security Agreement, Fixture Filing
and Financing Statement and each and all Mortgages, Assignment of Leases and
Rents, Security Agreement, Fixture Filing, and Financing Statement, in each
case securing the Note and the other Obligations, granted from time to time
by Borrower, as trustor or mortgagor, for the benefit of Bank, as
beneficiary or mortgagee, as the same may be amended, modified, extended,
renewed, restated, or supplemented from time to time, each being
substantially in the form of Exhibit B, provided, however in the case of any
Deed of Trust to be recorded in Florida, such form may be modified as
appropriate for recordation in that state or to minimize excise tax thereon,
if practicable.
"Development Costs" means costs, expenses and fees for services, work, and
materials previously used in construction of the Improvements for a parcel
of Raw Land as approved by Bank in its reasonable discretion, and which are
accompanied by such invoices, lien waivers and other supporting
documentation reasonably required by Bank, and which are confirmed by Bank's
on-site inspection. Development Costs, in any event, shall specifically not
include Borrower's overhead or other "soft costs."
"Draw Request" means a completed, written request in a form acceptable to or
specified by Bank from Borrower to Bank for an Advance, together with such
other documents and information as Bank may require or specify from time to
time.
"Eligible Collateral" means Raw Land, Improved Lots and Units which satisfy
each of the following requirements: (i) such Raw Land, Improved Lots, and
Units have been approved by Bank pursuant to the applicable portions of
Section 4.2; (ii) Borrower has satisfied the conditions precedent set forth
in Section 4.3 with respect to such Raw Land, Improved Lots, and Units; and
(iii) such Raw Land, Improved Lots and Units have not become subject to
Section 3.3.8.
"Environmental Agreement" and "Environmental Agreements" means,
respectively, each and all Environmental Indemnity Agreements executed by
Borrower from time to time, for the benefit of Bank, and relating to the
Collateral, as the same may be amended, modified, extended, renewed,
restated, or supplemented from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974 and the
regulations and published interpretations thereunder, as in effect from time
to time.
"Event of Default" means the occurrence of any event identified as an Event
of Default in the Note or any of the other Loan Documents.
"Florida" means the counties of Dade and Broward, Florida, and such other
counties in Florida as Bank may approve in its absolute and sole discretion.
"GAAP" means generally accepted accounting principles consistently applied.
"Governmental Authority" means any government, any court, and any agency,
authority, body, bureau, department, or instrumentality of any government.
"Impositions" has the meaning specified in the Deed of Trust.
"Improved Lot" means a Lot (i) owned by Borrower and (ii) located in a
Subdivision where all Improvements have been installed and accepted by the
applicable Governmental Authorities, and evidence of such installation and
acceptance has been approved by Bank and verified by Bank's inspector(s) or
employee(s).
"Improved Lot Appraisal" means, with respect to each Improved Lot, an
appraisal of an Improved Lot in the applicable Subdivision selected by Bank,
as it will exist upon completion of the Improvements (i) ordered by Bank,
(ii) prepared by an appraiser satisfactory to Bank, (iii) in compliance with
all federal and state standards for appraisals, (iv) reviewed by Bank, and
(iv) in form and substance satisfactory to Bank in its absolute and sole
discretion.
"Improved Lot Appraised Value" means the value of a typical Improved Lot in
the applicable Subdivision, as selected by Bank, without lot premiums,
options, and upgrades, approved or determined by Bank in its absolute and
sole discretion after review of a Improved Lot Appraisal.
"Improved Lot Term" means the maximum period for which an Improved Lot may
continue to qualify as Eligible Collateral, as set forth in Section 3.3.4.
"Improvements" means (i) offsite improvements on land (including without
limitation, curbs, grading, landscaping, sprinklers, storm and sanitary
sewers, paving, sidewalks, and utilities) necessary to make the land
suitable for the construction of single family homes, and (ii) any common
area improvements to be constructed on the land.
"Initial Approved Raw Land, Improved Lots and Units" means the Raw Land,
Improved Lots and Units located in Arizona and approved by Bank as Eligible
Collateral as of the date hereof, and which are more particularly described
on Exhibit C hereto.
"Intangible Assets" means all intangible assets under GAAP, including,
without limitation, copyrights, franchises, goodwill, licenses, non-
competition covenants, organization or formation expenses, patents, service
marks, service names, trademarks, tradenames, write-up in the book value of
any asset in excess of the acquisition cost of the asset to such Person, any
amount, however designated on the balance sheet, representing the excess of
the purchase price paid for assets or stock acquired over the value assigned
thereto on the books of such Person, unamortized leasehold improvements
expense not recoverable at the end of the lease term, and unamortized debt
discount.
"Letter of Credit" means a standby letter of credit in Bank's standard form
from time to time issued pursuant to Section 3.2 in conjunction with the
construction of off-site improvements relating to Eligible Collateral for
the benefit of the Governmental Authority, utility company, improvement
district, or similar Person specified as beneficiary of the Letter of Credit
in an amount requested by Borrower and approved by Bank.
"Letter of Credit Agreement" means Bank's standard form Application for
Standby Letter of Credit and Standby Letter of Credit Agreement.
"Letter of Credit Subcommitment" means the face amount of each Letter of
Credit.
"Lien or Encumbrance" and "Liens and Encumbrances" mean, respectively, each
and all of the following: (i) any lease or other right to use; (ii) any
assignment as security, conditional sale, grant in trust, lien, mortgage,
pledge, security interest, title retention arrangement, other encumbrance,
or other interest or right securing the payment of money or the performance
of any other liability or obligation, whether voluntarily or involuntarily
created and whether arising by agreement, document, or instrument, under any
law, ordinance, regulation, or rule (federal, state, or local), or
otherwise; and (iii) any option, right of first refusal, or other interest
or right.
"Loan Documents" means this Agreement, the Note, the Deeds of Trust, the
Letter of Credit Agreements executed and delivered by Borrower in connection
with the Letters of Credit, the Cash Collateral Agreement, the Environmental
Agreements, and any other agreements, documents, or instruments evidencing,
guarantying, securing, or otherwise relating to the Note, as such
agreements, documents, and instruments may be amended, modified, extended,
renewed, or supplemented from time to time.
"Loan Party" means Borrower and each other Person that from time to time is
or becomes obligated to Bank under any Loan Document or grants any
Collateral.
"Lot" means an individual lot designated on the final subdivision plat or
filing for each Subdivision.
"Lot Cost" means the actual costs paid by Borrower to third parties not
affiliated with Borrower to acquire a Lot plus Development Costs allocated
to such Lot, all as approved by Bank in its absolute and sole discretion.
"Lot Takedown Deficit" means the Minimum Lot Takedown Requirement for a
Subdivision for a fiscal quarter minus the number of Improved Lots in such
Subdivision reclassified as a Unit during such fiscal quarter. In no event
will the Lot Takedown Deficit be less than zero (0).
"Material Adverse Change" means any change in the assets, business,
financial condition, operations, or results of operations of any Loan Party
or any other event or condition that in the reasonable opinion of Bank is
(i) reasonably likely to affect the likelihood of performance by any Loan
Party of any of the Obligations, (ii) reasonably likely to affect the
ability of any Loan Party to perform any of the Obligations,
(iii) reasonably likely to affect the legality, validity, or binding nature
of any of the Obligations or any Lien or Encumbrance securing any of the
Obligations, or (iv) reasonably likely to affect the priority of any Lien or
Encumbrance securing any of the Obligations.
"Maximum Allowed Advances" has the meaning specified in Section 1.
"Maximum Rate" has the meaning specified in the Note.
"Minimum Lot Takedown Requirement" means the number of Improved Lots in a
specified Subdivision required by Bank to be reclassified as a Unit during
each fiscal quarter (and not on a cumulative basis for one or more fiscal
quarters) following the initial inclusion of such Improved Lots as Eligible
Collateral (as determined by Bank). Unless otherwise agreed to by Bank in
its sole and absolute discretion, the Minimum Lot Takedown Requirement is
nine (9) Improved Lots per Subdivision per each fiscal quarter, as measured
on an individual, and not aggregate, Subdivision basis.
"Model Adjustment" means, with respect to a Model Unit, a decrease in the
otherwise applicable percentages used to determine the Maximum Allowed
Advance to (i) sixty-five percent (65%) following the eighteenth Calendar
Month of the initial inclusion (as determined by Bank) of the Model Unit as
Eligible Collateral, and to (ii) sixty percent (60%) following the twenty-
first Calendar Month of the initial inclusion (as determined by Bank) of the
Model Unit as Eligible Collateral.
"Model Term" means the maximum period for which a Model Unit may continue to
qualify as Eligible Collateral, as set forth in Section 3.3.4.
"Model Unit" means a Unit constructed and furnished initially for inspection
by prospective purchasers that is not intended to be sold until all or
substantially all other Units in the Subdivision are sold.
"Net Income" means, for any period, the net income (loss) of any Person for
such period, determined in accordance with GAAP.
"Net Sales Proceeds" means the gross sales price of an Improved Lot, Unit or
parcel of Raw Land set forth in the Purchase Contract therefor, less (i)
customary tax prorations, (ii) ordinary and customary real estate brokerage
commissions payable to any Person who is neither (A) employed by or
affiliated with Borrower, nor (B) engaged in on-site sales at the site where
the Improved Lot, Unit or parcel of Raw Land is located, and (iii)
reasonable and customary closing costs, including any "points" paid by
Borrower for the benefit of such purchaser.
"Nonrecourse Debt" means indebtedness secured by a lien on property of
Borrower, if and only if the liability for such indebtedness (and any
interest thereon) is limited to the security of Borrower's rights in such
property, without direct or indirect liability on the part of Borrower for
such indebtedness.
"Note" means the Promissory Note, dated of even date herewith, of Borrower
payable to Bank, as it may be amended, modified, extended, renewed,
restated, or supplemented from time to time.
"Obligations" means the obligations of the Loan Parties under the Loan
Documents (including without limitation, the obligation to pay the
Reimbursement Amount).
"Operating Losses" means operating losses of Borrower, calculated in
accordance with GAAP.
"Permitted Exceptions" has the meaning specified in the Deed of Trust.
"Person" means a natural person, a partnership, a joint venture, an
unincorporated association, a corporation, a trust, any other legal entity,
or any Governmental Authority.
"Presold Adjustment" means, with respect to a Presold Unit, decreases in the
otherwise applicable percentages used to determine the Maximum Allowed
Advance to fifty percent (50%) following the ninth Calendar Month of the
initial inclusion (as determined by Bank) of the Presold Unit as Eligible
Collateral.
"Presold Term" means the maximum period for which a Presold Unit may
continue to qualify as Eligible Collateral, as set forth in Section 3.3.4.
"Presold Unit" means a Unit that is subject to a Purchase Contract.
"Project" means all of the Raw Land, Improved Lots and Units that are owned
by Borrower and are encumbered by a Deed of Trust from time to time.
"Purchase Contract" means a bona fide written agreement between Borrower and
a third Person purchaser for sale in the ordinary course of Borrower's
business of any Unit and the related Lot, or an Improved Lot, or a parcel of
Raw Land, and such agreement is accompanied by a cash earnest money deposit
or down payment in an amount that is customary and that is satisfactory to
Bank.
"Raw Land" means any real property owned by Borrower and encumbered by a
Deed of Trust and is not an Improved Lot or a Unit.
"Raw Land Adjustment" means, with respect to a parcel of Raw Land, (i) a
decrease in the otherwise applicable percentages used to determine the
Maximum Allowed Advances to forty percent (40%) following the Conversion
Date, and (ii) a limitation on the aggregate amount of Maximum Allowed
Advances for all parcels of Raw Land included in Eligible Collateral to
fifteen percent (15%) of the Available Commitment following the Conversion
Date.
"Raw Land Costs" means the actual costs paid by Borrower to third parties
not affiliated with Borrower to acquire a parcel of Raw Land, all as
approved by Bank in its absolute and sole discretion. Raw Land Costs, in
any event, shall specifically not include Borrower's overhead or other "soft
costs."
"Raw Land/If Improved Appraisal" means, with respect to each parcel of Raw
Land that is Eligible Collateral, an appraisal of such parcel of Raw Land
(i) ordered by Bank, (ii) prepared by an appraiser satisfactory to Bank,
(iii) in compliance with all federal and state standards for appraisals,
(iv) reviewed by Bank, and (v) in form and substance satisfactory to Bank in
its absolute and sole discretion.
"Raw Land/If Improved Appraised Value" means the value of a parcel of Raw
Land, as it will exist upon completion of all Improvements, as approved or
determined by Bank in its absolute and sole discretion after review of a Raw
Land/If Improved Appraisal.
"Raw Land Term" means the maximum period for which a parcel of Raw Land may
continue to qualify as Eligible Collateral, as set forth in Section 3.3.4.
"Reclassification Adjustment" means with respect to each type of Collateral
(i.e., each parcel of Raw Land, each Improved Lot, and each Unit that is
classified as such under this Agreement which becomes reclassified as a
different type of Collateral under this Agreement, a change in the otherwise
Maximum Allowed Advance to the respective amount set forth in Section 1 for
such Collateral as reclassified; provided, however, that in all cases the
Maximum Allowed Advance, as so determined, may be adjusted from time to time
by Bank pursuant to any applicable Term Adjustment, Raw Land Adjustment,
Presold Adjustment, Model Adjustment or Spec Adjustment.
"Reduction Date" has the meaning specified in Section 3.1.2.
"Reimbursement Amount" means the amount Borrower is obligated to pay to Bank
under the Letter of Credit Agreement in respect of a draft drawn or drawn
and accepted under the Letter of Credit, which amount shall be the amount of
the draft or acceptance and all costs, expenses, fees, and other amounts
then payable by Borrower to Bank under the Letter of Credit Agreement.
"Requirements" shall have the meaning specified in the Deed of Trust.
"Seller Financing" means indebtedness of Borrower secured by a Lien or
Encumbrance on property of Borrower, where such indebtedness is owed to, and
Lien or Encumbrance is for the benefit of, the Person that sold such
property to Borrower and such indebtedness represents a portion of the
purchase price payable by Borrower to such Person for said property.
"Shortage" means the amount by which the Maximum Allowed Advance applicable
to a Unit, Improved Lot or Raw Land exceeds the Net Sales Proceeds received
from the sale of such Unit, Improved Lot, or Raw Land.
"Spec Adjustment" means, with respect to a Spec Unit, a decrease in the
otherwise applicable percentages used to determine the Maximum Allowed
Advance to (i) sixty-five percent (65%), following the sixth Calendar Month
of the initial inclusion (as determined by Bank) of the Spec Unit as
Eligible Collateral, and to (ii) fifty percent (50%) following the ninth
Calendar Month of the initial inclusion (as determined by Bank) of the Spec
Unit as Eligible Collateral.
"Spec Term" means the maximum period for which a Spec Unit may continue to
qualify as Eligible Collateral, as set forth in Section 3.3.4.
"Spec Unit" means a Unit constructed for the purpose of addition to
Borrower's inventory of Units and not subject to a Purchase Contract. A
Unit that is not a Presold Unit or a Model Unit shall be deemed a Spec Unit.
"Specific Unit Budget" means an actual construction budget for each Unit
proposed to be included in Eligible Collateral containing the information
required in the corresponding Unit Budget for that type of Unit.
"Standard Number of Days" means the standard number of days established by
Bank from time to time to allow for delivery to Bank of drafts drawn under
letters of credit issued by Bank and presented to financial institutions
other than Bank for delivery to Bank. Bank may change such number of days
at any time and from time to time in its absolute and sole discretion
without notice to Borrower and may have a different number of days for
commercial letters of credit and standby letters of credit.
"Subdivision" means a group of Lots designated on an individual subdivision
plat or filing; provided, however, that with respect to multiple subdivision
plats or filings that are phases of a larger development or are part of the
same planned community, or are advertised under common marketing plans, and
which include a common product line, then all of the Lots shown on such
subdivision plats or filings shall be deemed in the aggregate to constitute
a single Subdivision.
"Tangible Net Worth" means, with respect to Borrower, the sum of all capital
accounts (including without limitation, any paid-in capital, capital
surplus, and retained earnings), less the sum of (i) the value on Borrower's
books of all Intangible Assets, and (ii) loans and advances to stockholders,
directors, officers, and employees of Borrower.
"Term Adjustment" means
(i) with respect to a Presold Unit remaining in Eligible
Collateral beyond the first nine (9) months of the Presold Unit's Term,
a decrease in the otherwise applicable Maximum Allowed Advance to the
lesser of (A) fifty percent (50%) of the Unit Base Appraised Value or
(B) fifty percent (50%) of the sales price in the respective Purchase
Contract, or (C) fifty percent (50%) of the respective Unit Total
Costs;
(ii) with respect to a Spec Unit remaining in Eligible Collateral
beyond the first six (6) months of the Spec Unit's Term, a decrease in
the otherwise applicable Maximum Allowed Advance to the lesser of (A)
sixty-five percent (65%) of the respective Unit Base Appraised Value,
or (B) sixty-five percent (65%) of the respective Unit Total Costs; and
with respect to a Spec Unit remaining in Eligible Collateral beyond the
first nine (9) months of the Spec Unit's Term, a decrease in the
otherwise applicable Maximum Allowed Advance to the lesser of (I) fifty
percent (50%) of the respective Unit Base Appraised Value, or (II)
fifty percent (50%) of the respective Unit Total Costs;
(iii) with respect to a Model Unit remaining in Eligible
Collateral beyond the first eighteen (18) months of the Model Unit's
Term, a decrease in the otherwise applicable Maximum Allowed Advance to
the lesser of (A) sixty-five percent (65%) of the respective Unit Base
Appraised Value, or (B) sixty-five percent (65%) of the respective Unit
Total Costs, and with respect to a Model Unit remaining in Eligible
Collateral beyond the first twenty-one (21) months of the Model Unit's
Term, a decrease in the otherwise applicable Maximum Allowed Advance to
the lesser of (I) sixty percent (60%) of the respective Unit Base
Appraised Value, or (II) sixty percent (60%) of the respective Unit
Total Costs;
(iv) with respect to a parcel of Raw Land remaining in Eligible
Collateral beyond the Conversion Date, (i) a decrease in the otherwise
applicable percentages used to determine the Maximum Allowed Advances
to forty percent (40%); and (ii) a limitation on the aggregate amount
of Maximum Allowed Advances for all parcels of Raw Land included in
Eligible Collateral to fifteen percent (15%) of the Available
Commitment; and
(v) with respect to any parcel of Raw Land, Improved Lot or Unit
whose Raw Land Term, Improved Lot Term or Unit Term has expired, a
decrease in the otherwise applicable Maximum Allowed Advance to zero
(0) and the exclusion of such Raw Land, Improved Lot or Unit from
Eligible Collateral.
"Termination Date" means the date twelve (12) Calendar Months after the
Conversion Date.
"Title Company" means the title insurance company and any reinsurers or co-
insurers required by Bank specified in Section 1, which company, reinsurers,
and co-insurers shall be satisfactory to Bank in its absolute and sole
discretion.
"Title Policy" and "Title Policies" mean, respectively, each and all title
insurance policies and endorsements thereto and reinsurance or co-insurance
agreements and endorsements described in this Agreement insuring the Deeds
of Trust.
"Unit" means a single-family dwelling (i) constructed or to be constructed
on an Improved Lot, provided, however, that construction shall have
commenced or be completed on such dwelling (as determined by Bank); and (ii)
described in a set of Unit Plans and Specifications, including, without
limitation, any furniture, furnishings, fixtures, and equipment to be
installed therein as shown in the respective Unit Plans and Specifications.
For purposes of this Agreement, each Unit is either (A) a Model Unit, (B) a
Presold Unit, or (C) a Spec Unit.
"Unit Base Appraisal" means, with respect to each type of Unit, an appraisal
of the Unit and a typical Lot selected by Bank, as they will exist upon
completion of the Unit (i) ordered by Bank, (ii) prepared by an appraiser
satisfactory to Bank, (iii) in compliance with all federal and state
standards for appraisals, (iv) reviewed by Bank, and (iv) in form and
substance satisfactory to Bank in its absolute and sole discretion.
"Unit Base Appraised Value" means the value of a Unit and a typical Lot,
without lot premiums, options, and upgrades, approved or determined by Bank
in its absolute and sole discretion after review of a Unit Base Appraisal.
"Unit Budget" means, with respect to each type of Unit, the budget of the
costs, expenses, and fees necessary for or related to construction of one
type of Unit approved by Bank in its absolute and sole discretion. Such
budget (i) shall include a typical sale price for the Unit and a typical
Lot, the onsite cost of labor and materials directly related to construction
of the type of Unit (including, without limitation, construction permits,
building permits, tap fees, improvement district fees and fees charged by
Governmental Authorities prior to the start of construction), (ii) shall
exclude costs and expenses related to upgrades, options, and decorator
items, (iii) shall include the other costs, expenses, and fees for the type
of Unit (including, without limitation, property taxes, insurance, escrow
and title fees, processing and closing fees, wiring fees, legal fees,
appraisal fees, closing costs, insurance costs, and costs of direct project
supervision), (iv) shall include "soft costs" including but not limited to,
supervision costs, an estimation of construction interest and reserves for
repair and maintenance, and (v) shall exclude advertising and marketing
costs, expenses, and fees and any amendments or modifications thereof
consented to by Bank in its absolute and sole discretion. There shall be a
separate budget for each type of Unit.
"Unit Collateral Value" means the percentage of the Maximum Allowed Advances
Borrower may obtain against a Unit that constitutes Eligible Collateral
based on the Unit's stage of construction, determined on the actual
percentage of completion of such Unit as determined by Bank in its absolute
and sole discretion rounded down to the nearest five percent (5%).
"Unit Completion Date" has the meaning specified in Section 1.
"Unit Plans and Specifications" means, with respect to each type of Unit,
plans and specifications for construction of that type of Unit, prepared by
an architect, certified by Borrower to Bank, and approved by Bank in its
absolute and sole discretion, together with any amendments or modifications
thereof consented to by Bank in its absolute and sole discretion.
"Unit Sales Price" means the price at which a Unit is to be sold to a
purchaser under the applicable Purchase Contract.
"Unit Term" means the maximum period for which a Unit may continue to
qualify as Eligible Collateral, as set forth in Section 3.3.4.
"Unit Total Costs" means, with respect to each type of Unit, the total
costs, expenses, and fees included in the respective Unit Budget, plus one-
half (1/2) of the Lot Cost for the Lot related to such Unit.
"Unmatured Event of Default" means any condition or event that with notice,
passage of time, or both would be an Event of Default.
LETTER OF CREDIT AND LOAN FACILITY.
i Loan Facility.
i Commitment. Subject to the terms and conditions of this
Agreement, Bank agrees to make Advances to Borrower from time to time on or
before the Termination Date, provided that the aggregate amount of Advances
outstanding from time to time shall not exceed the Available Commitment.
Proceeds of Advances may be used only for the purpose described in Sections
3.2.2 and 5.1.6. Advances shall be on a revolving basis. Advances repaid
may be re-borrowed subject to the terms and the conditions herein and any
re-borrowing shall be deemed a refinancing of amounts repaid. Although the
outstanding principal of the Note may be zero from time to time, the Loan
Documents shall remain in full force and effect until the Commitment
terminates, the Letters of Credit have expired or are drawn in full, all
drafts drawn or drawn and accepted under all Letters of Credit have been
paid in full, and all Obligations are paid and performed in full. If monies
are being held in the Cash Collateral Account at any time, Bank shall be
entitled to apply such monies to the outstanding balance of the Advances.
Upon occurrence of an Event of Default or an Unmatured Event of Default,
Bank, in its absolute and sole discretion and without notice, may suspend
the commitment to make Advances. In addition, upon occurrence of an Event
of Default, Bank, in its absolute and sole discretion and without notice,
may terminate the commitment to make Advances. The obligation of Borrower
to repay all Advances is evidenced by the Note.
` Borrower acknowledges that Bank is entering into this
Agreement in reliance upon, and in connection with, the acquisition by CHHC
of all of the issued and outstanding shares of stock in Borrower. If CHHC
does not acquire such stock on or before the earlier of (i) two (2) Business
Days after Bank executes this Agreement or (ii) December 30, 1994 (the
earlier of such dates is referred to as the "Automatic Expiration Date"),
then (A) Bank will have no further obligation to make Advances hereunder,
and the Commitment will terminate automatically, and (B) Borrower will pay
to Bank in immediately available funds on or before the Automatic Expiration
Date, all principal, interest, and other amounts owed by Borrower to Bank in
connection with the Loan Documents. Upon receipt of such funds, Bank will
execute, record and file as applicable Deeds of Full Release and
Reconveyance and Terminations of Financing Statements as reasonably
necessary in order to release the Collateral. Upon such payment by
Borrower, Borrower will have no further liability to Bank under the Loan
Documents, except the Environmental Agreements.
ii Conversion Period. The Conversion Date shall occur
(a) on the calendar date or anniversary date thereof set forth in
the definition of Conversion Date in Section 2; or
(b) if Borrower's quarterly financial statements submitted to
Bank pursuant to Section 6.3.1.2 show Operating Losses for two (2)
consecutive fiscal quarters, then unless Bank in its sole and absolute
discretion agrees otherwise, the Conversion Date shall automatically
occur and the Conversion Period shall automatically commence, effective
as of the first day of the first Calendar Month immediately following
the second such fiscal quarter.
From and after the Conversion Date, the Commitment Amount shall be reduced
on the first day of each quarter-annual period (a "Reduction Date") as
follows:
Commitment Remaining
Period Reduction Commitment
- - ------ ---------- ----------
3 Calendar Months after
Conversion Date $2,500,000 $7,500,000
6 Calendar Months after
Conversion Date $2,500,000 $5,000,000
9 Calendar Months after
Conversion Date $2,500,000 $2,500,000
Termination Date $2,500,000 $0
iii Acceleration of Conversion Date upon the Occurrence of a
Material Adverse Change. Notwithstanding anything in this Agreement to the
contrary, Bank may, in its absolute and sole discretion, accelerate the
Conversion Date immediately upon the occurrence of a Material Adverse
Change, and commence the Conversion Period and the reductions in the
Commitment Amount set forth in Section 3.1.2. Bank may exercise its right
to cause the Conversion Date to occur pursuant to this Section 3.1.3
pursuant to a written notice to Borrower setting forth the accelerated
Conversion Date, which notice may be given by Bank at any time after the
occurrence of a Material Adverse Change and Bank's failure to exercise such
right with respect to a Material Adverse Change shall not be deemed to waive
Bank's rights pursuant to this Section 3.1.3 with respect to any other
Material Adverse Change whether similar or dissimilar. If Bank exercises
its right pursuant to this Section 3.1.3, Borrower shall not be entitled to
a refund of any fees previously paid and shall continue to be obligated to
pay all fees accruing from and after the Conversion Date; provided, however,
with respect to fees paid by Borrower in advance on the date hereof pursuant
to Section 3.4.1, the portion of such fees attributable to the period
commencing on the accelerated Conversion Date and ending on the regularly
scheduled Conversion Date shall be credited by Bank against any fees payable
by Borrower pursuant to Section 3.4.1 or Section 3.4.2 during the Conversion
Period.
iv Voluntary Reductions in Commitment Amount. At any time
during the Conversion Period, Borrower may elect to reduce the Commitment
Amount in amounts greater than those set forth in Section 3.1.2; provided,
however, Borrower shall have provided Bank written notice of Borrower's
desire to reduce the Commitment Amount, and Borrower shall have paid to Bank
any amount payable pursuant to Section 3.5 after giving effect to the
reduction in the Commitment Amount. Any such additional reductions shall be
applied toward the amount of any subsequent scheduled reductions.
ii Letters of Credit.
i Issuance of Letters of Credit. Subject to the terms and
conditions of this Agreement and the applicable Letter of Credit Agreements
and subject to the policies, procedures, and requirements of Bank in effect
from time to time for issuance of Letters of Credit (including, without
limitation, payment of letter of credit fees), Bank agrees to issue from
time to time, after CHHC acquires the stock of Borrower (as described in
Section 3.1.1) and on or before the Termination Date, Letters of Credit upon
request by and for the account of Borrower, provided that as to each
requested Letter of Credit Borrower has delivered to Bank a completed and
executed Letter of Credit Agreement, and provided further that (i) the date
that is the Standard Number of Days after the last date for payment of
drafts drawn or drawn and accepted under the requested Letter of Credit is
before twelve (12) months after the Termination Date, and (ii) the
expiration date of each Letter of Credit shall be on or before one year
after the date the Letter of Credit is issued. The issuance fee for a
Letter of Credit will be one percent (1%) of the Letter of Credit
Subcommitment amount, payable prior to, and as a condition of, issuance.
Each reference in this Agreement to "issue" or "issuance" or other forms of
such words in relation to Letters of Credit shall also include any extension
or renewal of a Letter of Credit. Upon occurrence of an Event of Default or
an Unmatured Event of Default, Bank, in its absolute and sole discretion and
without notice, may suspend the commitment to issue Letters of Credit. In
addition, upon occurrence of an Event of Default, Bank, in its absolute and
sole discretion and without notice, may terminate the commitment to issue
Letters of Credit.
ii Issuance Procedure. To obtain a Letter of Credit, Borrower
shall complete and execute a Letter of Credit Agreement and submit it to the
letter of credit department of Bank and to the address of Bank specified on
the first page of this Agreement. In no event shall Bank have any
obligation to act upon an oral request for a Letter of Credit, or any
request that otherwise does not conform to Bank's policies and procedures.
Upon receipt of a completed and executed Letter of Credit Agreement, Bank
will process the application in accordance with the policies, procedures,
and requirements of Bank then in effect. If the application meets the
requirements of Bank and is within the policies of Bank then in effect, and
meets the regulatory requirements applicable thereto, Bank will issue the
requested Letter of Credit.
iii Reimbursement of Bank for Payment of Drafts Drawn or Drawn
and Accepted Under the Letter of Credit. The obligation of Borrower to
reimburse Bank for payment by Bank of drafts drawn or drawn and accepted
under a Letter of Credit shall be as provided in the Letter of Credit
Agreement. Bank will notify Borrower of payment by Bank of a draft drawn or
drawn and accepted under a Letter of Credit and of the Reimbursement Amount
and will give Borrower the election (i) to pay the Reimbursement Amount
pursuant to the respective Letter of Credit Agreement or (ii) to pay the
Reimbursement Amount by Bank making an Advance, subject to the terms and
conditions of this Agreement and applying the proceeds of the Advance to pay
the Reimbursement Amount. If Borrower does not communicate to Bank its
election within two (2) Business Days after notification by Bank of payment
of the draft or acceptance, then Borrower shall be deemed to have elected to
pay the Reimbursement Amount by Bank making an Advance hereunder, provided
that if the terms and conditions in this Agreement for an Advance hereunder
are not satisfied, Borrower shall be deemed to have elected to pay the
Reimbursement Amount pursuant to the Letter of Credit Agreement. The
Advance to pay the Reimbursement Amount will be dated the date that Bank
pays the respective draft or acceptance and will accrue interest from and
after such date.
If Borrower is to pay the Reimbursement Amount pursuant to the Letter
of Credit Agreement, Borrower shall also pay to Bank interest on the
Reimbursement Amount from and including the date Bank pays the respective
draft or acceptance at the Variable Rate (as defined in the Note) until the
Reimbursement Amount and such interest are paid in full, provided that if
Borrower fails to pay the Reimbursement Amount and accrued interest thereon
within five (5) days after notification by Bank to Borrower of payment of
the respective draft or acceptance, interest thereafter will accrue at the
Default Rate (as such term is defined in the Note). Such interest shall be
computed on the basis of a 360-day year and accrue on a daily basis for the
actual number of days elapsed.
Notwithstanding the above, if Borrower elects or is deemed to have
elected to pay the Reimbursement Amount pursuant to the Letter of Credit
Agreement and fails to pay the Reimbursement Amount and interest thereon
within five (5) days after notification by Bank to Borrower, Bank, in its
absolute and sole discretion and without notice to Borrower and regardless
of whether the terms and conditions in this Agreement for such Advances are
satisfied, may make an Advance under this Agreement in the amount of the
Reimbursement Amount and accrued interest thereon and apply the proceeds of
such Advance to pay the Reimbursement Amount and accrued interest.
iv Limits on Letters of Credit. Anything in the Loan Documents to
the contrary notwithstanding, the sum from time to time of (i) the aggregate
amount of outstanding and undrawn Letters of Credit, (ii) the aggregate
amount of outstanding and unpaid drafts drawn and accepted under Letters of
Credit, (iii) the aggregate amount of unpaid Reimbursement Amounts, and (iv)
the amount of outstanding and unpaid Advances shall not exceed the sum of
(A) the Available Commitment and (B) the aggregate of the Letter of Credit
Subcommitment amounts. In addition, the sum from time to time of the
amounts described in clauses (i), (ii), and (iii) shall not exceed twenty-
five percent (25%) of the Commitment Amount.
iii Advances.
i Method for Advances and Letters of Credit. A Letter of
Credit may be issued and Advances may be made by Bank at the written request
of the Person or Persons designated in Section 1. Such Person or Persons
are hereby authorized by Borrower to direct the disposition of the proceeds
of Advances and to request Letters of Credit until written notice of the
revocation of such authority is received from Borrower by Bank and Bank has
had a reasonable time to act upon such notice. Bank shall have no duty to
monitor for Borrower or to report to Borrower the use of Letters of Credit
or proceeds of Advances.
ii Use of Advances. Advances shall be used only to pay interest
and fees due under the Loan Documents (including without limitation
Reimbursement Amounts due Bank) and to pay or reimburse Borrower for costs,
expenses, and fees actually incurred by Borrower in connection with the
acquisition of Raw Land, Improved Lots, or Units, the construction of
Improvements, the construction of Units, and other costs incurred by
Borrower in the ordinary course of Borrower's business, as Bank may approve
in its reasonable discretion.
iii Determination of Amount of Advances. The Available
Commitment, the Maximum Allowed Advance for each parcel of Raw Land, each
Improved Lot, and each Unit, the Unit Collateral Value, and the amount of
each Advance shall be determined by Bank based upon: (i) the Borrowing Base
Report and the Collateral Certificate most recently submitted by Borrower
(adjusted to reflect Collateral sold, Reclassification Adjustments, Term
Adjustments and other adjustments and limitations pursuant to this
Agreement), (ii) Bank's inspections made pursuant to Sections 6.13 and 6.18
(as such inspections may result in any adjustments to reflect any variance
between (A) the Borrowing Base Report and the Collateral Certificate, and
(B) the results of such inspections), and (iii) such other information as
Bank may reasonably require in order to verify such amounts.
Notwithstanding anything herein or in any other Loan Document to the
contrary, Bank may withhold from any Advance the amount of Florida
documentary stamp or intangible tax due on such Advance, and pay the same
directly to the taxing authority. Nothing herein shall limit or impair any
obligation of Borrower for payment of such taxes arising under any Loan
Document, applicable hereof, or otherwise, if Bank shall fail to do so.
iv Term Periods. Each parcel of Raw Land, Improved Lot and Unit
shall constitute Eligible Collateral only during the applicable Term
therefor set forth below; provided, however, that in no event shall any Term
exceed the Termination Date:
` Raw Land Term. A parcel of Raw Land will constitute
Eligible Collateral for not more than the Raw Land Term commencing on the
date an Advance is first made against Eligible Collateral that includes such
parcel; provided, however, any parcel of Raw Land remaining in Eligible
Collateral after the Conversion Date shall be subject to a Term Adjustment
for purposes of determining the Maximum Allowed Advance. The Raw Land Term
will be determined by Bank in its reasonable discretion and established at
the time the parcel of Raw Land first constitutes Eligible Collateral.
` Improved Lot Term. An Improved Lot will constitute
Eligible Collateral for not more than the Improved Lot Term commencing on
the date an Advance is first made against Eligible Collateral that includes
such Improved Lot. The Improved Lot Term will be determined by Bank in its
reasonable discretion and established at the time the Improved Lot first
constitutes Eligible Collateral. Bank may elect to establish, in Bank's
reasonable discretion, a Minimum Lot Takedown Requirement with respect to
the Subdivision in which the Improved Lot is located and measure the
Improved Lot Term for all Improved Lots in such Subdivision in the
aggregate, based on the Minimum Lot Takedown Requirement. If the Minimum
Lot Takedown Requirement for a Subdivision is not satisfied during any
fiscal quarter, then the Improved Lot Term will be deemed to have expired
with respect to the number of Improved Lots (to be designated by Bank) in
such Subdivision equal to the Lot Takedown Deficit for such Subdivision for
such fiscal quarter.
` Presold Unit. A Presold Unit may constitute Eligible
Collateral for not more than twelve (12) Calendar Months from the date an
Advance is first made against Eligible Collateral that includes such Presold
Unit; provided, however, any Presold Unit remaining as Eligible Collateral
for more than nine (9) Calendar Months from the date an Advance is first
made against Eligible Collateral that includes such Presold Unit shall be
subject to a Term Adjustment for purposes of determining the applicable
Maximum Allowed Advance.
` Spec Unit. A Spec Unit may constitute Eligible
Collateral for not more than twelve (12) Calendar Months from the date an
Advance is first made against Eligible Collateral that includes such Spec
Unit; provided, however, (i) any Spec Unit remaining as Eligible Collateral
for more than six (6) Calendar Months from the date an Advance is first made
against Eligible Collateral that includes such Spec Unit shall be subject to
a Term Adjustment for purposes of determining the applicable Maximum Allowed
Advance, and (ii) any Spec Unit remaining as Eligible Collateral for more
than nine (9) Calendar Months from the date an Advance is first made against
Eligible Collateral that includes such Spec Unit shall be subject to a Term
Adjustment for purposes of determining the applicable Maximum Allowed
Advance.
` Model Unit. A Model Unit may constitute Eligible
Collateral for not more than thirty (30) Calendar Months from the date an
Advance is first made against Eligible Collateral that includes such Model
Unit; provided, however, (i) any Model Unit remaining as Eligible Collateral
for more than eighteen (18) Calendar Months from the date an Advance is
first made against Eligible Collateral that includes such Model Unit shall
be subject to a Term Adjustment for purposes of determining the applicable
Maximum Allowed Advance; and (ii) any Model Unit remaining as Eligible
Collateral for more than twenty-one (21) Calendar Months from the date an
Advance is first made against Eligible Collateral that includes such Model
Unit shall be subject to a Term Adjustment for purposes of determining the
applicable Maximum Allowed Advance.
v Intentionally Omitted.
vi Classification and Reclassification of Units. Bank may
classify or reclassify Raw Land, Improved Lots and Units as to type from
time to time, or change Borrower's proposed classification of any and all
Raw Land, Improved Lots and Units, provided that such reclassified Raw Land,
Improved Lot or Unit meets the requirements set forth herein for that type
of Collateral. At any time a parcel of Raw Land, Improved Lot or Unit is
reclassified as to type, such reclassification shall give rise to a
Reclassification Adjustment to the Maximum Allowed Advance applicable to
such Collateral. In no event shall a reclassification change the
commencement date of any Unit Term.
vii Release of Raw Land, Improved Lots and Units at Request of
Borrower. So long as no Event of Default or Unmatured Event of Default has
occurred and is continuing, Borrower may request releases of Raw Land,
Improved Lots or Units from the lien and encumbrance of a Deed of Trust from
time to time; provided, however, Bank shall be under no obligation to
release any Raw Land, Improved Lot or Unit unless each of the following
conditions precedent is satisfied:
(i) in the case of any Raw Land, Improved Lot or Unit that is
being released for the purpose of sale, (A) Borrower shall have
paid to Bank, from Borrower's own funds (including Net Sales
Proceeds), the greater of (X) the applicable Maximum Allowed
Advance or (Y) the Net Sales Proceeds; provided, however, that if
more than one Improved Lot is sold to a single purchaser, then the
release price shall be 130% of the aggregate Maximum Allowed
Advances for such Improved Lots; (B) Borrower shall have delivered
to Bank a closing report pursuant to Section 6.3.3; and (C) both
before and after giving effect to such release and any payments to
be made pursuant to clause (i)(A) of this sentence, the
outstanding Advances do not exceed the Available Commitment and
Borrower has made any payments then required pursuant to
Section 3.5; or
(ii) with respect to releases for purposes other than sale,
both before and after giving effect to such release, the
outstanding Advances do not exceed the Available Commitment and
Borrower has made any payments required pursuant to Section 3.5,
and Borrower shall have paid to Bank, from Borrower's own funds,
an amount equal to the Maximum Allowed Advance for such parcel of
Raw Land, Improved Lot or Unit; and
(iii) Borrower shall have satisfied the conditions precedent
for releases set forth in the Deed of Trust encumbering the
property to be released.
Any amounts payable to Bank under subparagraph (i) and (ii), including,
without limitation, Net Sales Proceeds, shall be applied to the outstanding
principal balance of all Advances and, if no unpaid Advances are then
outstanding, for deposit to the Cash Collateral Account.
viii Extraordinary Events Affecting Raw Land, Improved Lots or
Units. Upon the occurrence of any of the following events, Raw Land,
Improved Lots, and Units at any time constituting Eligible Collateral may be
declared by Bank to no longer be Eligible Collateral:
` Material Damage, Destruction, or Condemnation. Any Unit
or Improvements are materially damaged or destroyed, or any Raw Land,
Improved Lot or Unit becomes subject to any condemnation proceeding.
` Default Regarding Title Insurance. The requirements of
the Loan Documents for title insurance with respect to any Collateral are
not satisfied.
ix Advances During Conversion Period. Borrower may continue to
request Advances and Letters of Credit during the Conversion Period. Such
Advances and Letters of Credit may be made by Bank pursuant to the terms and
conditions of this Agreement.
iv Fees. As additional consideration for the Commitment, Borrower
agrees to pay to Bank (subject to the provisions hereof and of the other
Loan Documents limiting the charging, collection and receipt of interest to
the maximum amount permitted by applicable law) the following fees, from
Borrower's own funds, which shall be earned by Bank on the date due under
the Loan Documents and shall be non-refundable to Borrower:
i Commitment and Other Fees.
` Commitment Fee. A fee for the Commitment at the annual
rate set forth in Section 1, computed for the period commencing on the date
hereof and ending on the scheduled Conversion Date, and which shall be
payable as follows: $62,500.00 payable on or before the date hereof, and
$62,500.00 payable on or before November 30, 1995.
` Extension Fee. In addition to the Commitment Fee, as a
condition precedent to any extension of the Conversion Date (and without in
any way obligating Bank to extend the Conversion Date, which is intended to
be in the absolute and sole discretion of Bank), Borrower shall pay to Bank
a fee determined by Bank in its absolute and sole discretion.
` Quarterly Loan Fee. On the Conversion Date and on the
last day of each three (3) month period thereafter, Borrower shall pay to
Bank a Quarterly Loan Fee at the rate specified in Section 1 on the
Commitment amount then in effect, after giving effect to any reductions
thereof pursuant to Sections 3.1.2 and 3.1.4.
ii Unused Commitment Fee. An Unused Commitment Fee computed at
the rate per annum set forth in Section 1 on a portion of the unused
Commitment Amount, calculated from the date hereof and payable monthly in
arrears. For each month (or portion thereof) the Unused Commitment Fee
shall be equal to: (i) seventy-five percent (75%) of the Commitment Amount
(as in effect at the beginning of such month) minus (ii) the "average
monthly outstandings" for the month (or portion thereof) with respect to
which the unused commitment is being computed, with the resulting number
multiplied by (iii) one-twelfth (1/12th) of the rate per annum set forth in
Section 1.
As used herein, "average monthly outstandings" means the sum of the
outstanding Loan balance at the end of each calendar day during the month
(or portion thereof) for 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 (iii) above shall be computed on a daily basis for
the number of days for which the fee is being computed. Such fee shall
continue to payable during the Conversion Period, until the Termination
Date.
iii Attorneys' Costs, Expenses, and Fees. Attorneys' costs,
expenses, and fees for Bank's counsel as provided in the Loan Documents,
payable on or before the date hereof and during the term of the Commitment,
from time to time upon the presentation by Bank of statements therefor.
iv Appraisal Fees, Title Insurance Premium, and Other Costs,
Expenses, and Fees. Appraisal fees, appraisal review fees, title insurance
premiums, and other costs, expenses, and fees that Borrower is obligated to
pay pursuant to the Loan Documents, including without limitation, all fees
and costs associated with periodic inspections of the Project, in the
amounts specified by Bank, payable on or before the date hereof, and monthly
thereafter during the term of the Commitment; provided, however, that
Borrower shall be obligated to pay the cost of only four (4) periodic
inspections of the Project in any twelve (12) month period.
v Mandatory Prepayments. If for any reason at any time the
outstanding principal amount of Advances exceeds the Available Commitment,
Borrower shall, within five (5) business days after receipt of notice from
Bank, make a payment to Bank in an amount equal to the sum of (i) such
excess principal, and (ii) accrued and unpaid interest thereon.
CONDITIONS PRECEDENT
i Conditions Precedent to Effectiveness of this Agreement and to the
Effectiveness of the Commitment. This Agreement and the Commitment shall
become effective only upon satisfaction of the following conditions
precedent, in each case as determined by Bank in its absolute and sole
discretion:
i Representations and Warranties Accurate. The representations
and warranties by each Loan Party in the Loan Documents are correct on and
as of the date of this Agreement, as though made on and as of such date.
ii Documents. Bank has received the following agreements,
documents, and instruments, each duly executed by the parties thereto and in
form and substance satisfactory to Bank in its absolute and sole discretion:
` Loan Documents. The Loan Documents, which shall include
all agreements, documents, and instruments specified by Bank.
` Corporation, Limited Liability Company, or Partnership
Documents. If any Loan Party is a corporation, a limited liability company,
or a partnership, certified copies of (i) resolutions of its board of
directors or, if all members or all general partners do not sign the Loan
Documents, resolutions of the members of the limited liability company or
partners of the partnership, as the case may be, authorizing such Loan Party
to execute, deliver, and perform its Loan Documents and to grant to Bank the
Liens and Encumbrances on the Collateral in the Loan Documents and
certifying the names and signatures of the officer(s), member(s),
manager(s), or partner(s), as the case may be, of such Loan Party authorized
to execute the Loan Documents and, in the case of Borrower, to request
Advances on behalf of Borrower, (ii) the certificate of incorporation and
bylaws, limited liability company operating agreement, or partnership
agreement, as the case may be, of such Loan Party and all amendments
thereto, (iii), if any Loan Party is a general partnership or joint venture,
the filed or recorded fictitious name certificate for such Loan Party and
all amendments thereto, (iv), if any Loan Party is a limited partnership,
the filed or recorded certificate of limited partnership of such Loan Party
and all amendments thereto, and (v) a certificate of good standing as a
corporation, limited liability company, or limited partnership, as the case
may be, from the jurisdiction of formation or organization of such Loan
Party.
` Insurance Policies. The policies of insurance required
under the Loan Documents.
` Financial Statements. Audited financial statements
prepared by independent certified public accountants acceptable to Bank,
including, without limitation, a balance sheet, a cash flow statement,
reconciliation of net worth, and a profit and loss statement of Borrower,
for the twelve-month period ending May 31, 1994.
` Contracts. If required by Bank, all executed contracts
relating to design and construction of the Units or Improvements between
Borrower and any other Person (including, without limitation, each architect
and each contractor or subcontractor for labor, material, or services).
` of Filings and Recordings. Evidence of the completion
of all recordings and filings to establish or maintain the perfection and
priority of the Liens and Encumbrances on the Collateral granted in the Loan
Documents.
` Opinion Letter. A favorable opinion from a law firm
representing Borrower covering such matters as Bank may require.
iii Payment of Costs, Expenses, and Fees. All costs, expenses,
and fees to be paid by the Loan Parties under the Loan Documents on or
before the effectiveness of this Agreement, the effectiveness of the
Commitment, or the making of the Advance have been paid in full.
iv Initial Approved Raw Land, Improved Lots and Units. All
conditions precedent set forth in Section 4.2 hereof shall have been
satisfied with respect to the Initial Approved Raw Land, Improved Lots and
Units.
v Defaults. No Event of Default or Unmatured Event of Default
shall have occurred and be continuing.
vi Other Actions by Loan Parties. The Loan Parties have
performed such other actions as Bank may reasonably require.
ii Conditions Precedent to Approval of Raw Land, Improved Lots and
Units. After CHHC has acquired the stock of Borrower (as described in
Section 3.1.1), Borrower may, from time to time, request Bank to approve
additional Raw Land, Improved Lots and Units as Eligible Collateral, or to
reclassify existing Raw Land, Improved Lots and Units. Reclassifications of
Eligible Collateral will be reasonably approved by Bank so long as such
Eligible Collateral satisfies the applicable requirements of this Agreement.
Approvals of new Raw Land, Improved Lots and Units as Eligible Collateral
shall be at Bank's absolute and sole discretion and Bank shall have no
obligation to approve such Raw Land, Improved Lots or Units. In any event,
Bank will only consider approval of Raw Land, Improved Lots and Units
located in Florida (except the Initial Approved Raw Land, Improved Lots and
Units, which are located in Arizona). When requesting consideration of new
Raw Land, Improved Lots or Units as Eligible Collateral, and with respect to
the Initial Approved Raw Land, Improved Lots and Units, Borrower shall
deliver to Bank such documentation as Bank may require, and each of the
following conditions precedent shall have been satisfied, as determined by
Bank in its absolute and sole discretion:
i Plat. Borrower shall have delivered to Bank and Bank shall
have approved one or more recorded plats, one of which covers each Improved
Lot and Unit and, if applicable, each parcel of Raw Land. Each plat must
contain a legal description of the land covered by the plat, must describe
and show all boundaries of and lot lines within such land, all streets and
other dedications, and all easements affecting such land, and must satisfy
such additional requirements as Bank may prescribe in its absolute and sole
discretion.
ii Survey. Borrower shall have delivered to Bank and Bank
shall have approved one or more current surveys, one of which covers each
parcel of Raw Land not covered by a plat described in Section 4.2.1. Each
survey must be certified by, and stamped with the professional seal of, a
surveyor or civil engineer satisfactory to Bank and licensed in the State in
which the Raw Land is located. Each survey must satisfy the then current
requirements for an ALTA or similar survey and such additional requirements
as Bank may prescribe in its absolute and sole discretion.
iii Preliminary Title Report. Borrower shall have provided to
Bank, and Bank shall have approved, in its absolute and sole discretion, one
or more preliminary title reports, one of which covers each Unit, Improved
Lot or parcel of Raw Land, by the Title Company, together with a copy of
each Schedule B item.
iv Deed of Trust/Modification to Deed of Trust. Borrower
shall have executed, delivered, acknowledged, and recorded Deeds of Trust
(or modifications to existing Deeds of Trust) covering the Raw Land,
Improved Lots and Units (together with any financing statements and
assignments of declarant's rights required by Bank).
v Title Insurance. Borrower shall have provided to Bank and
Bank shall have approved an American Land Title Association or similar loan
policy or policies of title insurance or an endorsement to an existing title
policy or policies or an irrevocable and unconditional commitment to issue
such policy or policies or endorsement issued by the Title Company and a
commitment by the Title Company to issue disbursement endorsements at Bank's
request insuring the Deed of Trust encumbering each such Improved Lot, Unit
or parcel of Raw Land. Each such policy shall have a liability limit of not
less than the Commitment Amount and shall provide coverage and otherwise be
in form and substance satisfactory to Bank (including without limitation
mechanic's lien coverage, comprehensive coverage, and revolving credit
coverage) insuring Bank's interest under the applicable Deed of Trust as a
valid first lien on the property encumbered by the Deed of Trust. Such
policy shall be accompanied by such reinsurance and co-insurance agreements
and endorsements as Bank may require in its absolute and sole discretion.
Such policy must contain only such exceptions as are satisfactory to Bank in
its absolute and sole discretion and must have attached such endorsements as
Bank may require in its absolute and sole discretion.
vi Insurance Policies. Borrower shall have provided to Bank
the policies of insurance required under the Loan Documents.
vii Assessments, Charges, and Taxes. For Impositions that Bank
has approved in writing in its absolute and sole discretion for payment in
installments pursuant to the Deed of Trust, evidence that such installments
are current and evidence of Borrower's future payment obligations. For all
other Impositions and all utility and services charges, evidence that they
have been paid in full.
viii No Contracts and No Commencement of Construction. Except
as approved in writing by Bank, neither Borrower nor any other Loan Party
nor any other Person on behalf of Borrower shall have (i) filed an affidavit
of commencement or commenced construction of any Improvements or any Unit
(including, without limitation, the clearing, grubbing, or staking of the
land on which any such Unit is to be located), (ii) contracted for,
purchased, or otherwise brought upon any such Collateral any materials
specifically fabricated or otherwise to be incorporated in any Improvements
or any Unit, (iii) entered into any construction contract relating to any
Improvements or any Unit, or (iv) entered into any agreement, arrangement,
or understanding the performance of which could or would give rise to a Lien
or Encumbrance on any Raw Land, Lot or any Unit. The provisions of this
Section 4.2.8 shall not apply to Collateral that is being reclassified as
another type of Collateral.
ix Contracts. If required by Bank, Borrower shall have
delivered to Bank all executed contracts relating to design and construction
of the Units or Improvements between Borrower and any other Person
(including, without limitation, each architect and each contractor or
subcontractor for labor, material, or services).
x Payment of Costs, Expenses, and Fees. All costs, expenses,
and fees to be paid by the Loan Parties under the Loan Documents on or
before the effectiveness of this Agreement, the effectiveness of the
Commitment, or the making of the Advance, including, without limitation
recording, documentary stamp tax and intangible taxes, shall have been paid
in full.
xi Other Actions by Loan Parties. The Loan Parties have
performed such other actions as Bank may reasonably require.
iii Additional Conditions Precedent to the Inclusion of Each Parcel of
Raw Land, Each Improved Lot and Each Unit in Eligible Collateral. In
addition to the conditions precedent for Advances herein, Borrower may
include and maintain a parcel of Raw Land, an Improved Lot or a Unit in
Eligible Collateral only if the following conditions precedent are
satisfied, in each case as determined by Bank in its absolute and sole
discretion, and provided Bank has inspected each such parcel of Raw Land,
Improved Lot or Unit, which inspections Bank will be required to make only
once in each Calendar Month on or before the tenth (10th) day of each
Calendar Month:
i Conditions Previously Satisfied. All of the conditions
precedent set forth in Section 4.2 shall have been satisfied with respect to
each such parcel of Raw Land, Improved Lot or Unit.
ii Documents. Bank has received the following agreements,
documents, and instruments, each duly executed by the parties thereto and in
form and substance satisfactory to Bank in its absolute and sole discretion:
` Appraisal. Either (i) a Unit Base Appraisal for the
respective type of Unit, valid as determined by Bank in its absolute and
sole discretion, and, if requested by Bank, an updated Unit Base Appraisal
for the respective type of Unit, (ii) an Improved Lot Appraisal for the
Improved Lots in the respective Subdivision with the date of valuation
within 120 days of the date of the request to include the Improved Lot in
Eligible Collateral, (iii) a Raw Land/If Improved Appraisal for parcels of
Raw Land, with the date of valuation within 120 days of the date of the
request to include the Raw Land in Eligible Collateral. The Unit Base
Appraised Value, Improved Lot Appraised Value, or Raw Land/If Improved
Appraised Value for the respective Collateral shall have been approved by
Bank in its absolute and sole discretion.
` Unit Budget. A Unit Budget for the respective type
of Unit.
` Unit Plans and Specifications. Unit Plans and
Specifications for the respective type of Unit.
` Purchase Contract. If such Unit is a Presold Unit, a
copy of a Purchase Contract for such Unit.
` Construction. At the request of Bank, evidence that
construction has commenced or been completed on the Unit or the
Improvements, as applicable.
` Environmental Questionnaire. The form of
environmental questionnaire requested by Bank, fully completed and duly
executed by Borrower. The answers to the questions in the questionnaire
must be satisfactory to Bank in its absolute and sole discretion.
` Environmental Assessment. If required by Bank, a
report of an environmental assessment of each parcel of Raw Land, Improved
Lot and Unit addressed to Bank by an environmental engineer acceptable to
Bank containing such information, results, and certifications as Bank may
require, in its absolute and sole discretion. Depending upon the results of
the environmental assessment, Borrower shall also provide such follow up
testing, reports, and other actions as may be required by Bank in its
absolute and sole discretion. The contents of the environmental assessment
report and any follow up must be satisfactory to Bank in its absolute and
sole discretion. All environmental reports shall be the sole property of
Bank. Bank shall have no obligation to release any environmental report to
Borrower or any other Person.
` Flood Zone. Evidence as to whether (i) each parcel
of Raw Land, Improved Lot and Unit is located in an area designated by the
United States Department of Housing and Urban Development as having special
flood or mudslide hazards, and (ii) the community in which each such parcel
of Raw Land, Improved Lot and Unit is located is participating in the
National Flood Insurance Program.
` Services. Evidence, which may be in the form of
letters from local utility and other service companies or local Governmental
Authorities, that (i) telephone service, electric power, garbage removal,
storm sewer, sanitary sewer, water, and any other services or utilities
required by Bank exist at the boundary of each parcel of Raw Land, Improved
Lot and Unit and are available thereto, (ii) such services and utilities are
adequate to serve such property, and (iii) no conditions exist to affect
Borrower's or any subsequent owner's right to connect to, to obtain, and to
have unlimited use of such services and utilities, except for the payment of
a normal connection charge and except for payment of subsequent charges for
such services and utilities to the service or utility supplier.
` Improvements. Evidence for each Improved Lot and
Unit that all Improvements have been installed and accepted by the
applicable Governmental Authorities, and Bank has received written evidence
acceptable to Bank from Bank's inspector(s) or from Bank's employee(s) that
construction of the Improvements complies with plans and specifications
previously approved by Bank.
` Soils Tests. If required by Bank, a soils test
report addressed to Bank prepared by a licensed soils engineer acceptable to
Bank showing the locations of, and containing boring logs for, all borings,
together with recommendations for the design of the foundations of the
Units.
` Bonds. If required by Bank, payment, performance,
materials, delivery, or other bonds in form and substance and issued by
companies satisfactory to Bank in its absolute and sole discretion.
` Other Items. Such other agreements, documents, and
instruments as Bank may reasonably require (including, without limitation,
if required by Bank, a copy of the zoning for the Lots, all related
stipulations, and the zoning ordinances; a copy of all conditions,
covenants, and restrictions related to the Lots; a copy of any public
reports or disclosures required under applicable state or federal law; a
copy of the architectural committee approval and any other approvals
required under the conditions, covenants, and restrictions).
iii Defaults. No Event of Default or Unmatured Event of
Default shall have occurred and be continuing.
iv Other Actions by Loan Parties. The Loan Parties have
performed such other actions as Bank may reasonably require.
iv Additional Conditions Precedent to Advances. Bank shall be
obligated to make an Advance or to issue a Letter of Credit only upon
satisfaction by Borrower of the following additional conditions precedent,
as determined by Bank in its absolute and sole discretion:
i Representations and Warranties Accurate. The
representations and warranties by each Loan Party in the Loan Documents are
correct on and as of the date of the Advance or the date of issuance of the
Letter of Credit, as though made on and as of such date, and after giving
effect to such Advance or issuance.
ii Defaults. No Event of Default or Unmatured Event of
Default shall have occurred and be continuing both before and after giving
effect to such issuance or Advance.
iii Draw Request. Borrower shall have delivered or sent by
facsimile to Bank a Draw Request for such Advance. Bank shall not be
required to make any requested Advance before one (1) Business Day after
receipt of the Draw Request.
iv Letters of Credit. With respect to any Letter of Credit,
Borrower shall have complied with the terms and conditions of Section 3
hereof.
v Title Policy Endorsements. If required by Bank in its
absolute and sole discretion, Bank has received (i) such continuation
endorsements and date-down endorsements to the Title Policies, in form and
substance satisfactory to Bank in its absolute and sole discretion, as Bank
determines necessary to insure the priority of the Deed of Trust as a valid
first lien on the Raw Land, Improved Lots, and the Units described therein
as of the date of and including the amount covered by the requested Advance,
or (ii) an unconditional, irrevocable written commitment by the Title
Company to issue such endorsements. Borrower has furnished to the Title
Company such surveys and other documents and information as Bank or the
Title Company may require for the Title Company to issue such endorsements.
vi Inspection Report. Bank has received written evidence
acceptable to Bank from Bank's inspector(s) or from Bank's employee(s)
performing inspections for Bank (i) that construction of the Unit complies
with the respective Plans and Specifications, and (ii) that Borrower has
completed the Unit to the stage necessary to obtain the requested Advance.
vii Foundation Endorsement. If required by Bank in its
absolute and sole discretion, and if available under applicable law, after
completion of the foundation of any Unit and before any further Advances for
such Unit, Bank has received a foundation endorsement with respect to such
foundation to be attached to the applicable Title Policy. This endorsement
shall insure that the foundation is within the boundary line of the
respective Lot, does not violate any applicable covenants, conditions,
restrictions, agreements, or other items described in the Title Policy or
otherwise applicable to the Lot or the applicable subdivision, and does not
encroach upon any easements, rights of way, or other rights affecting or
applicable to the Lot or the applicable subdivision or any part thereof.
viii Approvals and Inspections by Governmental Authorities. As
required by Bank, all inspections and approvals by Governmental Authorities
required for the stage of completion of the infrastructure or the Unit have
been obtained and Bank has received evidence thereof satisfactory to Bank.
ix Payment of Costs, Expenses, and Fees. All costs, expenses,
and fees to be paid by the Loan Parties under the Loan Documents on or
before the Advance have been paid in full.
Borrower hereby authorizes Bank, and Bank reserves the right in its absolute
and sole discretion, to verify any documents and information submitted to
Bank in connection with this Agreement. Bank may elect, in its absolute and
sole discretion, to waive any of the foregoing conditions precedent. Any
such waiver shall be effective only if (i) it is in writing executed by
Bank, (ii) it specifically identifies the condition precedent, and (iii) it
states whether the condition precedent is waived as a requirement of the
effectiveness of this Agreement, as a requirement of the effectiveness of
the Commitment, or as a requirement for a particular Advance or Letter of
Credit, or otherwise. Any such waiver shall be limited to the condition(s)
precedent therein and the requirements therein. Delay or failure by Bank to
insist on satisfaction of any condition precedent shall not be a waiver of
such condition precedent or any other condition precedent. If Borrower is
unable to satisfy any condition precedent of an Advance or a Letter of
Credit, the making of the Advance or the issuance of the Letter of Credit
shall not preclude Bank from thereafter declaring the condition or event
causing such inability to be an Event of Default.
BORROWER REPRESENTATIONS AND WARRANTIES.
i Closing Representations and Warranties. Borrower represents and
warrants to Bank as of the date of this Agreement:
i Corporate, Limited Liability Company, or Partnership
Existence and Authorization. If Borrower is a corporation, a limited
liability company, or a partnership, Borrower is validly existing, and in
the case of a corporation or limited liability company is in good standing,
under the laws of the jurisdiction of its formation or organization and has
the requisite power and authority to execute, deliver, and perform the
Borrower Loan Documents. The execution, delivery, and performance by
Borrower of the Borrower Loan Documents have been duly authorized by all
requisite action by or on behalf of Borrower and will not conflict with, or
result in a violation of or a default under, the certificate of
incorporation and bylaws, the limited liability company operating agreement,
or the partnership agreement of Borrower, as the case may be.
ii No Approvals etc. No approval, authorization, bond,
consent, certificate, franchise, license, permit, registration,
qualification, or other action or grant by or filing with any Person is
required in connection with the execution, delivery, or performance by
Borrower of the Borrower Loan Documents, except for the approval of
NationsBank of Florida, which approval has been received by Borrower.
iii No Conflicts. The execution, delivery, and performance by
Borrower of the Borrower Loan Documents will not conflict with, or result in
a violation of or a default under: any applicable law, ordinance,
regulation, or rule (federal, state, or local); any judgment, order, or
decree of any arbitrator, other private adjudicator, or Governmental
Authority to which Borrower is a party or by which Borrower or any of the
assets or property of Borrower is bound; any of the Approvals and Permits;
or any agreement, document, or instrument to which Borrower is a party or by
which Borrower or any of the assets or property of Borrower is bound.
iv Execution and Delivery and Binding Nature of Borrower Loan
Documents. The Borrower Loan Documents have been duly executed and
delivered by or on behalf of Borrower. The Borrower Loan Documents are
legal, valid, and binding obligations of Borrower, enforceable in accordance
with their terms against Borrower, except as such enforceability may be
limited by bankruptcy, insolvency, moratorium, reorganization, or similar
laws and by equitable principles of general application.
v Accurate Information. All information in any loan
application, financial statement, certificate, or other document, and all
other information delivered by or on behalf of Borrower to Bank in obtaining
the Commitment is correct and complete, and there are no omissions therefrom
that result in any such information being incomplete, incorrect, or
misleading as of the date thereof. There has been no Material Adverse
Change relative to Borrower since the date of such information. All
financial statements heretofore delivered to Bank by Borrower were prepared
in accordance with the requirements in Section 1 and accurately present the
financial conditions and results of operations as at the dates thereof and
for the periods covered thereby. The fiscal year of Borrower is as set
forth in Section 1.
vi Purpose of Advances. The purpose of Advances is to pay
interest and fees due under the Loan Documents and to pay or reimburse
Borrower for costs, expenses, and fees actually incurred by Borrower in
connection with the acquisition of Raw Land, Improved Lots or Units, the
construction of Improvements, the construction of Units, and other costs
incurred by Borrower in the ordinary course of Borrower's business, as Bank
may approve in its reasonable discretion. The purpose of Advances is a
business purpose and not a personal, family, or household purpose, and no
portion of the Collateral is being used or claimed as Borrower's residential
or business homestead.
vii Legal Proceedings; Hearings, Inquiries, and Investigations.
Except as disclosed to Bank in writing prior to the date of this Agreement,
(i) no legal proceeding is pending or, to best knowledge of Borrower,
threatened before any arbitrator, other private adjudicator, or Governmental
Authority to which Borrower is a party or by which Borrower or any assets or
property of Borrower may be bound or affected that if resolved adversely to
Borrower could result in a Material Adverse Change, and to the best
knowledge of Borrower, there exist no facts that would form any basis for
any of the foregoing, and (ii) no hearing, inquiry, or investigation
relating to Borrower or any assets or property of Borrower is pending or, to
the best knowledge of Borrower, threatened by any Governmental Authority
(other than in connection with customary zoning and platting).
viii No Event of Default or Unmatured Event of Default. No
Event of Default and no Unmatured Event of Default has occurred and is
continuing.
ix Approvals and Permits; Assets and Property. Borrower has
obtained and there are in full force and effect all Approvals and Permits
necessary for the conduct of the business of the Borrower, provided that
Borrower may not have obtained all of the Approvals and Permits necessary
for the construction of Improvements and Units. Borrower owns or leases all
assets and property necessary for conduct of the business and operations of
Borrower. Such assets and property are not subject to any Liens and
Encumbrances, other than the Permitted Exceptions.
x Taxes. Borrower has filed or caused to be filed all tax
returns (federal, state, and local) required to be filed by Borrower and has
paid all taxes and other amounts shown thereon to be due (including, without
limitation, any interest or penalties).
xi ERISA. Borrower is in compliance with ERISA. No
Reportable Event or Prohibited Transaction (as defined in ERISA) or
termination of any plan has occurred and no notice of termination has been
filed with respect to any plan established or maintained by Borrower and
subject to ERISA. Borrower has not incurred any material funding deficiency
within the meaning of ERISA or any material liability to the Pension Benefit
Guarantee Corporation in connection with any such plan established or
maintained by Borrower. Borrower is not a party to any Multiemployer Plan
(as defined in ERISA).
xii Compliance with Law. Neither Borrower nor the Project is
in violation of any law, ordinance, regulation, or rule (federal, state, or
local).
xiii Unit Budgets and Unit Plans and Specifications. Each Unit
Budget contains all costs, expenses, and fees to be incurred by Borrower in
connection with Units of the respective Unit plan type. Each Unit Plans and
Specifications and related working drawings are an accurate and complete
description of the respective Unit type.
ii Representations and Warranties Upon Requests for Advances. Each
request for an Advance shall be a representation and warranty by Borrower to
Bank that the representations and warranties in this Section 5 are correct
and complete as of the date the Advance and that the conditions precedent in
Section 4 are satisfied as of the date of the Advance.
iii Representations and Warranties Upon Delivery of Financial
Statements, Documents, and Other Information. Each delivery by Borrower to
Bank of financial statements, other documents, or information after the date
of this Agreement (including, without limitation, documents and information
delivered in obtaining an Advance) shall be a representation and warranty
that such financial statements, other documents, or information is correct
and complete, that there are no omissions therefrom that result in such
financial statements, other documents, or information being incomplete,
incorrect, or misleading as of the date thereof, and that such financial
statements accurately present the financial condition and results of
operations of Borrower as at the dates thereof and for the periods covered
thereby.
BORROWER AFFIRMATIVE COVENANTS. Until the Commitment terminates in full
and the Obligations are paid and performed in full, Borrower agrees that,
unless Bank otherwise agrees in writing in Bank's absolute and sole
discretion:
i Corporate, Limited Liability Company, or Partnership Existence.
If Borrower is a corporation, a limited liability company, or a partnership,
Borrower shall continue to be validly existing, and in the case of a
corporation or a limited liability company in good standing, under the law
of the jurisdiction of its organization or formation.
ii Books and Records; Access By Bank. Borrower will maintain a
single, standard, modern system of accounting, in accordance with the
requirements in Section 1 (including, without limitation, a single,
complete, and accurate set of books and records of its assets, business,
financial condition, operations, property, prospects, and results of
operations) in accordance with good accounting practices. During business
hours Borrower will give representatives of Bank access to all assets,
property, books, records, and documents of Borrower and will permit such
representatives to inspect such assets and property and to audit, copy,
examine, and make excerpts from such books, records, and documents.
iii Information and Statements. Borrower shall furnish to Bank the
following information and statements, each of which shall, unless otherwise
indicated, be signed on behalf of Borrower by the person(s) then authorized
to request Advances on behalf of Borrower pursuant to Section 1:
i Fiscal Period Financial Statements. As soon as available
and in any event within the number of days set forth in Section 1 after the
end of each fiscal period of Borrower set forth in Section 1, except the
last period in each fiscal year of Borrower:
` Monthly Statements. Copies of the balance sheet and
income statements of Borrower, together with such supporting schedules as
required by Bank, as of the end of such fiscal period and for the portion of
the fiscal year of Borrower ending with such fiscal period, in each case
setting forth in comparative form the figures for the corresponding period
for the preceding fiscal year, all in reasonable detail, prepared in
accordance with the requirements in Section 1, containing the certifications
specified in Section 1, and signed on behalf of Borrower by a person named
in Section 1.
` Quarterly Statements. Copies of the balance sheet
and income statement of Borrower, together with such supporting schedules as
required by Bank, for the fiscal period and for the portion of the fiscal
year of Borrower ending with such fiscal period, in each case setting forth
in comparative form the figures for the corresponding period for the
preceding fiscal year, and a twenty-four (24) month projection of cash flow
for Borrower, all in reasonable detail, prepared in accordance with the
requirements in Section 1, containing the certifications specified in
Section 1, and signed on behalf of Borrower by a person named in Section 1.
ii Annual Financial Statements. As soon as available and in
any event within the number of days set forth in Section 1 after the end of
each fiscal year of Borrower, copies of the balance sheet of Borrower as of
the end of such fiscal year and statements of income and retained earnings
and a statement of cash flow of Borrower for such fiscal year, in each case
setting forth in comparative form the figures for the preceding fiscal year
of Borrower, all in reasonable detail and prepared in accordance with the
requirements in Section 1, containing the certifications specified in
Section 1, and signed on behalf of Borrower by a person named in Section 1.
Borrower's annual financial statements shall also be accompanied by
Borrower's budget and business plan for each of the upcoming two (2) fiscal
years, all in reasonable detail and containing such information as Bank may
request. The budget and business plan shall be signed on behalf of Borrower
by a person named in Section 1.
iii Closing Report. On each Business Day, a report of all
Unit, Improved Lot, and Raw Land sales closed on the previous Business Day,
in form and substance satisfactory to Bank, which report shall be supported
by settlement statements given to Bank within five (5) days thereafter
relating to each Unit, Improved Lot, and Raw Land sale, together with a
reconciliation of the most recently submitted Borrowing Base Report and
recalculation of Eligible Collateral after giving effect to such closings.
For purposes of this paragraph, a sale will be deemed to have closed when
Title Company has received all funds necessary to close the sale and to pay
Bank all sums owed to Bank pursuant to Section 3.3.7.
iv Sales Reports and Inventory Reports. As soon as the same
are available, and in any event within ten (10) days after the end of each
Calendar Month, (i) a monthly report showing sales of Units, Improved Lots,
and Raw Land during the preceding month, and (ii) a monthly report showing
(A) the inventory of Units under construction and Improved Lots as of the
end of the preceding Calendar Month, and (B) Units and Improved Lots in
progress as of the end of the preceding Calendar Month. Such reports shall
contain such detailed information as Bank may require.
v Backlog Report. Within ten (10) days after the end of each
Calendar Month, a backlog report, effective as of the end of such Calendar
Month, reflecting the number of Units then under construction pursuant to
contracts for sale, at the request of Bank, the anticipated delivery date of
all such Units, and the aggregate value of such Units upon completion
thereof.
vi Gross Profit Analysis. Within thirty (30) days after the
end of each Calendar Month, an analysis of gross profit and a profit and
loss statement for each Subdivision, as of the end of such Calendar Month,
and cumulatively for the calendar year.
vii Borrowing Base Report. Within fifteen (15) days after the
end of each Calendar Month, a Borrowing Base Report in form and content
satisfactory to Bank, showing for each parcel of Raw Land, Improved Lot and
Unit that is part of the Project, the following:
` All Collateral. With respect to all Collateral, (i)
the address, (ii) the subdivision name, (iii) the date of the first Advance
against such Unit, Improved Lot, or Raw Land in Eligible Collateral, (iv)
the Maximum Allowed Advance for such Units, Improved Lots, or parcels of Raw
Land, including a designation of all applicable percentages used to
calculate the Maximum Allowed Advance, (v) a separate summary of new starts
for Unit construction, (vi) the Raw Land Costs and Development Costs related
to each parcel of Raw Land, the Lot Costs related to each Improved Lot, and
the Lot Costs related to each Unit, and (vii) a separate summary of all
Collateral not included in Eligible Collateral.
` Raw Land. With respect to each parcel of Raw Land,
(i) Raw Land/If Improved Appraised Value, (ii) Development Costs expended to
date, (iii) number of projected lots, (iv) percentage of construction
complete, and (v) anticipated completion date for Improvements.
` Improved Lots. With respect to each Improved Lot,
(i) the Lot number and the Subdivision as indicated on the recorded plat of
the Subdivision, and (ii) Improved Lot Appraised Value.
` Units. With respect to each Unit, (i) the Lot number
as indicated on the recorded plat of the Subdivision, (ii) the Unit plan
type, (iii) whether the Unit is a Presold Unit, a Spec Unit or a Model Unit,
(iv) the Unit construction budget, (v) percentage of completion, (vi) the
Unit Base Appraised Value, (vii) the selling price of the Unit or the amount
of the Purchase Contract, as applicable, (viii) the estimated closing date
of the sale of the Unit, if the Unit is a Presold Unit, (ix) the maximum
Advance against the Unit based upon the stage of completion (the Unit
Collateral Value), and (x) the Unit Total Cost.
viii Collateral Certificate. Within fifteen (15) days after the
end of each Calendar Month, a Collateral Certificate (which accompanies the
Borrowing Base Report for such month) in form and substance satisfactory to
Bank setting forth the following:
(a) The information required to be shown on the Borrowing Base
Report, together with a designation of each parcel of Raw Land, Improved
Lot and Unit included in Eligible Collateral.
(b) The total number of Letter of Credit Subcommitments and the
amount of each Letter of Credit Subcommitment.
ix Other Indebtedness. Within forty-five (45) days after the
end of each fiscal quarter, a Certificate in form and substance satisfactory
to Bank stating that Borrower is in compliance with all covenants, terms,
and conditions applicable to Borrower under or pursuant to the Loan
Documents and any other Debt owed by Borrower to any other Person.
x Land Holdings. Within forty-five (45) days after the end
of each fiscal quarter, a detailed schedule of all land owned by Borrower
setting forth, without limitation, the location and book value of all such
holdings.
xi Certificate of Compliance. A certificate in form and
substance satisfactory to Bank that Borrower is in compliance with all
financial covenants set forth in Sections 6.22 and 7.3. Such certificate
shall accompany Borrower's quarterly and annual financial statements
required in Section 6.3.1 and 6.3.2.
xii Other Items and Information. Such other information
concerning Borrower, the Project, and the assets, business, financial
condition, operations, property, prospects, and results of operations of
Borrower as Bank reasonably requests from time to time. In this regard,
immediately upon request of Bank, Borrower shall deliver to Bank
counterparts and/or conditional assignments as security of any and all
construction contracts, receipted invoices, bills of sale, statements,
conveyances, and other agreements, documents, and instruments of any nature
relating to the Project or under which Borrower claims title to any
materials or supplies used or to be used in the Project. Also, in this
regard, immediately upon request of Bank, Borrower shall deliver to Bank a
complete list of all contractors, subcontractors, material suppliers, other
vendors, artisans, and laborers performing work or services or providing
materials or supplies for the Project.
iv Law; Judgments; Material Agreements; Approvals and Permits.
Borrower shall comply with all laws, ordinances, regulations, and rules
(federal, state, and local) and all judgments, orders, and decrees of any
arbitrator, other private adjudicator, or Governmental Authority relating to
Borrower, the Project, or the assets, business, operations, or property of
Borrower. Borrower shall comply in all material respects with all material
agreements, documents, and instruments to which Borrower is a party or by
which Borrower, the Project, or any of the other assets or property of
Borrower is bound or affected. Borrower shall comply with all Requirements
(including, without limitation, as applicable, requirements of the Federal
Housing Administration and the Veterans Administration) and all conditions
and requirements of all Approvals and Permits. Borrower shall obtain and
maintain in effect from time to time all Approvals and Permits required for
the business activities and operations then being conducted by Borrower in
the Project.
v Taxes and Other Indebtedness. Except for Impositions being
contested in accordance with the Deed of Trust and except for Impositions
that Bank has agreed in its absolute and sole discretion may be paid in
installments as provided in the Deed of Trust, Borrower shall pay and
discharge (i) before delinquency all taxes, assessments, and governmental
charges or levies imposed upon it, upon its income or profits, or upon any
property belonging to it, or upon the Note, any Deed of Trust, or the
indebtedness evidenced or secured thereby, (ii) when due all lawful claims
(including, without limitation, claims for labor, materials, and supplies),
which, if unpaid, might become a Lien or Encumbrance upon any of its assets
or property, and (iii) all its other indebtedness.
vi Assets and Property. Borrower will maintain, keep, and preserve
all of its assets and property (tangible and intangible) (including, without
limitation, the Project) necessary or useful in the proper conduct of its
business and operations in good working order and condition, ordinary wear
and tear excepted.
vii Insurance. The following insurance shall be obtained and
maintained and all related premiums shall be paid as they become due:
i Property. Insurance of the Project against damage or loss
by fire, lightning, and other perils, on an all-risks basis, such coverage
to be in an amount not less than the amount set forth in Section 1. During
the period of construction of the Project, such policy shall be written in
the so-called "Builder's Risk Completed Value Non-Reporting Form," on an
all-risks basis, with no coinsurance requirement except as approved by Bank,
and shall contain a provision granting the insured permission to complete
and/or occupy the Project.
ii Liability. Commercial general liability insurance
protecting Borrower and Bank against loss or losses from liability imposed
by law or assumed in any agreement, document, or instrument and arising from
bodily injury, death, or property damage with a limit of liability of not
less than the respective amounts specified in Section 1 per occurrence and
general aggregate. Also, "umbrella" excess liability insurance in an amount
not less than the amount set forth in Section 1. Such policies must be
written on an occurrence basis so as to provide blanket contractual
liability, broad form property damage coverage, and coverage for products
and completed operations. In addition, there shall be obtained and
maintained business motor vehicle liability insurance protecting Borrower
and Bank against loss or losses from liability relating to motor vehicles
owned, non-owned, or hired used by Borrower, any contractor, any
subcontractor, or any other Person in any manner related to the Project with
a limit of liability of not less than the amount set forth in Section 1
(combined single limit for personal injury (including bodily injury and
death) and property damage).
iii Flood. A policy or policies of flood insurance in the
maximum amount of flood insurance available with respect to the Project
under the Flood Disaster Protection Act of 1973, as amended. This
requirement will be waived upon presentation of evidence satisfactory to
the Bank that no portion of the Project is located within an area identified
by the U.S. Department of Housing and Urban Development as having special
flood hazards.
iv Workman's Compensation. Workman's compensation insurance,
disability benefits insurance, and such other forms of insurance as required
by law covering loss resulting from injury, sickness, disability, or death
of employees of Borrower, any contractor, and any subcontractor located on
or assigned to the Project. Borrower shall cause each contractor and each
subcontractor having employees located on or assigned to the Project to
obtain and maintain this same coverage for all eligible employees.
v Engineer. If required by Bank, each engineer, each soils
engineer, and each environmental contractor employed by Borrower in
connection with the Project shall maintain engineer's professional liability
insurance with a limit of liability of not less than the amount approved by
Bank. Each policy shall permit claims for a period of not less than three
(3) years after the completion of the Project.
vi Architect. If required by Bank, each architect employed by
Borrower in connection with the Project shall maintain architect's
professional liability insurance with a limit of liability of not less than
the amount approved by Bank. This policy shall permit claims for a period
of not less than three (3) years after the completion of the Project.
vii Additional Insurance. Borrower shall obtain and maintain
such other policies of insurance as Bank may request in writing.
viii Other. All policies for required insurance shall be in
form and substance satisfactory to Bank in its absolute and sole discretion.
Unless otherwise agreed by Bank in advance in its absolute and sole
discretion, required insurance may not be provided under any blanket
insurance policy. All required insurance shall be procured and maintained
in financially sound and generally recognized responsible insurance
companies selected by Borrower and approved by Bank. Such companies must be
authorized to write such insurance in the states of Florida and Arizona.
Each company shall be rated "A" or better by A.M. Best Co., in Bests' Key
Guide, or such other rating acceptable to Bank in Bank's absolute and sole
discretion. All property policies evidencing required insurance shall name
Bank as first mortgagee and loss payee. All liability policies evidencing
required insurance shall name Bank as additional insured. The policies
shall not be cancelable as to the interests of the Bank due to the acts of
Borrower. The policies shall provide for at least thirty (30) days prior
written notice of the cancellation or modification thereof to Bank.
ix Evidence. The original or a certified copy of each
insurance policy or, if acceptable to Bank in its absolute and sole
discretion, certificates of insurance evidencing that such insurance is in
full force and effect, shall be delivered to Bank, together with proof of
the payment of the premiums thereof. At least fifteen (15) days prior to
the expiration of such policies, Borrower shall furnish Bank evidence that
such policy has been renewed or replaced in the form of the original or a
certified copy of the renewal or replacement policy or, if acceptable to
Bank in its absolute and sole discretion, a certificate reciting that there
is in full force and effect, with a term covering at least the next
succeeding calendar year, insurance of the types and in the amounts required
in this Section 6.7.
viii Subordination of Other Indebtedness. The indebtedness of Borrower
described in Section 1 shall be subordinated to the Obligations of Borrower
in a manner satisfactory to Bank. So long as no Event of Default or
Unmatured Event of Default has occurred, Borrower shall be entitled to repay
such indebtedness in the ordinary course of business.
ix ERISA. Borrower will fund each Defined Benefit Plan and Defined
Contribution Plan (as such terms are defined in ERISA) established or
maintained by Borrower so that there is never an Accumulated Funding
Deficiency (as defined in Section 412 of the Internal Revenue Code of 1986,
as amended).
x Appraisals. Bank shall have the right to order Unit Base
Appraisals, Raw Land/If Improved Appraisals and Improved Lot Appraisals from
time to time. Each Appraisal is subject to review and approval by Bank.
Borrower agrees upon demand by Bank to pay to Bank the cost and expense for
such Appraisals and a fee determined by Bank for review of each such
Appraisal by Bank. All FNMA appraisals or other appraisals of Units
accepted by Bank that do not have a specific expiration date shall be
updated at Bank's request. Based on the updated, respective Unit Base
Appraised Value, Raw Land/If Improved Appraised Value and Improved Lot
Appraised Value approved or determined by Bank in its absolute and sole
discretion, Bank shall have the right to revise the Unit Budget and the
Maximum Allowed Advances applicable to any Mandatory Collateral at any time.
If the outstanding principal amount of Advances exceeds the available
Commitment as a result of such revision, then Borrower shall be required to
make a mandatory prepayment to Bank pursuant to Section 3.5.
xi Commencement and Completion. As requested by Bank, Borrower shall
cause construction of Improvements and Units to be prosecuted and completed
in good faith, with due diligence, and without delay. Borrower may commence
construction of Improvements and Units at any time. Each Unit shall be
fully completed and ready for occupancy not later than the respective Unit
Completion Date or shall be excluded from Eligible Collateral on the
respective Unit Completion Date. Borrower shall obtain the issuance of a
permanent certificate of occupancy or other equivalent permit required by
the applicable Governmental Authority and, if requested by Bank, deliver a
copy thereof to Bank on or before the respective Unit Completion Date.
Borrower shall cause Units to be constructed (i) in a good and workmanlike
manner, (ii) in compliance with all applicable Requirements, and (iii),
unless otherwise consented to by Bank in advance in writing in the absolute
and sole discretion of Bank, in accordance with the respective Unit Plans
and Specifications. Upon demand by Bank, Borrower shall correct any defect
in the Units or any departure from any applicable Requirements or, to the
extent not theretofore approved in writing by Bank, the respective Unit
Plans and Specifications. Borrower understands and agrees that inspection
of the Units by or on behalf of Bank, the review by Bank of Draw Requests
and related documents and information, the making of Advances by Bank, any
actions by Bank under Section 6.13, and any other actions by Bank shall not
be a waiver of Bank's right to require compliance with this Section 6.11.
xii Title Insurance. If Title Company pays any claims under any Title
Policies, Borrower will take any and all actions necessary to cause the
total liability under the Title Policies to remain at or to be increased to
the Commitment Amount notwithstanding the payment of such claim or claims,
including without limitation, providing any supplemental Title Policies or
endorsements or reinsurance agreements if requested by Bank, the cost of
which shall be paid by Borrower. Upon payment of any such claims, Borrower
will obtain and provide to Bank any and all documentation reasonably
requested by Bank to ensure that the maximum coverage provided for hereunder
shall not have been diminished as a result of the payment of such claims.
xiii Rights of Inspection; Correction of Defects; Agency. Bank and its
agents, employees, and representatives shall have the right at any time and
from time to time to enter upon the Project in order to inspect the Project.
If Bank, in its judgment, determines that any materials or work do not
conform with the respective Unit Plans and Specifications or with any
applicable Requirements or are otherwise not in conformity with sound
building practice, Bank shall have the right to stop the work and to order
replacement or correction of any such materials or work regardless of
whether or not such materials or work have theretofore been incorporated in
the Units, regardless of whether Bank's representatives have previously
inspected such work or materials, and regardless of whether Bank has
previously made Advances to pay for such work or materials. Borrower shall
promptly make such replacement or correction. Inspection by Bank or by
Bank's inspectors of the Project or the Units is for the sole purpose of
protecting the security of Bank and is not to be construed as a
representation by Bank that there has been compliance with the Unit Plans
and Specifications or the applicable Requirements or that the Units are free
of defects in materials or workmanship. Borrower may make or cause to be
made such other independent inspections as Borrower may desire for its own
protection. Borrower hereby appoints and authorizes Bank, as Borrower's
agent and attorney-in-fact, to record any notices of completion, cessation
of labor, and other notices that Bank determines to be necessary to record
to protect any interest of Bank under the Loan Documents. This agency and
power of attorney is coupled with an interest and is irrevocable. Based on
any such inspections, Bank shall have the right in its absolute and sole
discretion to revise the Unit Budget and the Maximum Allowed Advances
applicable to any Raw Land, Improved Lot or Unit at any time. If the
outstanding principal amount of advances exceeds the Available Commitment as
a result of such revision, then Borrower shall be required to make a
mandatory prepayment to Bank pursuant to Section 3.5.
xiv Miscellaneous. Any inspections or determinations made by Bank or
lien waivers, receipts, or other agreements, documents, and instruments
obtained by Bank are made or obtained solely for Bank's own benefit and not
in any way for the benefit or protection of Borrower. Bank may accept and
rely on any information from Architect, any other Person providing labor,
materials, or services for Improvements or Units, Borrower, or any other
Person as to labor or materials furnished or incorporated in the
Improvements or Units and the cost and payment therefor and as to all other
matters relating to construction of Improvements or the Units and the
Project without the necessity of verifying such information. Bank has no
obligation to Borrower to ensure compliance by Architect or any other Person
in carrying out construction of the Improvements or Units.
xv Verification of Costs. Bank shall have the right at any time and
from time to time to review and verify all costs, expenses, and fees in each
Unit Budget. Based on its review and verification of costs, expenses, and
fees in each Unit Budget, Bank shall have the right to adjust any and all
such budgeted amounts.
xvi Use of Proceeds of Advances. Borrower shall use proceeds of
Advances only for the purposes described in Sections 3.3.2 and 5.1.6.
xvii Cross-Collateralization. At Bank's request at any time and from
time to time, Borrower agrees to execute and deliver such additional
agreements, documents, and instruments as Bank determines to be necessary or
appropriate so that all Collateral shall also secure any or all (as
determined by Bank) other obligations of Borrower to Bank and/or so that any
or all property, interests in property, and rights to property selected by
Bank securing other obligations of Borrower to Bank also secure the
Obligations. Borrower agrees to pay all costs, expenses, and fees incurred
by Bank in connection with any and all such cross-collateralization requests
by Bank (including, without limitation, taxes, costs, expenses, and fees of
Bank's attorneys).
xviii Lender's Inspector(s). Borrower agrees that during construction of
Units, Bank shall have the right to employ an outside inspector or
inspectors who shall review as agent for Bank all construction activities
undertaken in regard to Units and who shall prepare reports of such reviews.
Alternatively, Bank may elect to have employees of Bank perform such reviews
and prepare such reports. In addition, the employees of Bank will review
the inspection reports of any outside inspector(s), will review Draw
Requests, will perform other activities related to Draw Requests, and will
perform other activities in administering and monitoring the Advances.
xix Further Assurances. Borrower shall promptly execute, acknowledge,
and deliver such additional agreements, documents, and instruments and do or
cause to be done such other acts as Bank may reasonably request from time to
time to better assure, preserve, protect, and perfect the interest of Bank
in the Collateral and the rights and remedies of Bank under the Loan
Documents.
xx Costs and Expenses of Borrower's Performance of Covenants and
Satisfaction of Conditions. Borrower will perform all of its obligations
and satisfy all conditions under the Loan Documents at its sole cost and
expense.
xxi Payment of Net Sales Proceeds. Borrower shall, upon the closing of
a sale of any Unit, Improved Lot or parcel of Raw Land, pay to Bank for
application to the outstanding unpaid aggregate amount of Advances
hereunder, an amount equal to the Net Sales Proceeds from such sale and, if
applicable, any Shortage. To the extend that such Net Sales Proceeds are
held by Title Company or any other Person, Borrower shall take all action
requested by Bank to cause such Net Sales Proceeds to be paid directly to
Bank. If Borrower collects or receives any such Net Sales Proceeds,
Borrower shall forthwith, upon receipt, transmit and deliver the same to
Bank, in the form of cash. Any such amounts which may be so received by
Borrower will not be commingled with any other of Borrower's funds or
property, but will be held separate and apart from Borrower's own funds or
property and upon express trust for Bank until delivery is made to Bank.
xxii Financial Covenants. Borrower shall maintain, at all times:
i Tangible Net Worth. Tangible Net Worth in an amount not less
than $24,000,000.00 as of November 30, 1994, and increasing thereafter
during each fiscal quarter (with the first such fiscal quarter commencing
December 1, 1994) by an amount equal to fifty percent (50%) of Borrower's
net profit after tax, as shown on Borrower's quarterly financial statements
delivered to Bank pursuant to Section 6.3.1.2 for the immediately preceding
fiscal quarter.
ii Debt to Tangible Net Worth Ratio. A Debt to Tangible Net
Worth Ratio of not more than 1.4 to 1.
iii Spec and Model Limit. An inventory of Spec Units and Model
Units that in the aggregate does not exceed the number of Presold Units.
xxiii Construction and Sales Records. Borrower shall, at all
times, maintain complete and accurate records of Borrower's construction and
sales activities and shall, upon prior notice thereof by Bank, permit Bank
to review such records upon request by Bank at any time and from time to
time during regular business hours. Such records shall include, without
limitation, (i) any and all documents, instruments, contracts and agreements
relating to the construction or sale of Units or Improvements entered into
by Borrower with or for the benefit of purchasers, contracts,
subcontractors, or other Persons, as applicable, (ii) lien waivers and
releases with respect to all construction in place, (iii) requests for
disbursement and voucher submitted by contracts, subcontractors, or other
Persons, and (iv) all permits, licenses and approvals necessary for the
continuation and completion of construction.
BORROWER NEGATIVE COVENANTS. Until the Commitment terminates in full and
the Obligations are paid and performed in full, Borrower agrees that, unless
Bank otherwise agrees in writing in Bank's absolute and sole discretion:
i Corporate, Limited Liability Company, and Partnership Restrictions.
If Borrower is a corporation, a limited liability company, or a partnership,
Borrower shall not issue any capital stock or other securities of or any
limited liability company interest or partnership interest in Borrower or
grant any option, right-of-first-refusal, warrant, or other right to
purchase any capital stock or other securities of or any limited liability
company interest or partnership interest in Borrower, except to CHHC.
Borrower shall not be dissolved or liquidated. Borrower shall not amend,
modify, restate, supplement, or terminate its certificate of incorporation
or bylaws, its limited liability company operating agreement, or its
partnership agreement, as the case may be. If a corporation, Borrower shall
not reorganize itself or consolidate with or merge into any other
corporation or permit any other corporation to be merged into Borrower. If
a limited liability company, Borrower shall not consolidate or merge with
any corporation, any other limited liability company, or any other legal
entity.
ii Change in or Reacquisition of Ownership Interests in Borrower. In
addition to any requirement in any other Loan Document, if Borrower is a
corporation, a limited liability company, or a partnership, Borrower will
not repurchase any capital stock of or any limited liability company
interest or partnership interest in Borrower or any option, right-of-first
refusal, warrant or other right to purchase any capital stock or other
securities of or any limited liability company interest or partnership
interest in Borrower. In addition, Borrower will not suffer to occur or
exist, whether occurring voluntarily or involuntarily, after the date of
this Agreement any change in the legal or beneficial ownership of any
capital stock of or limited liability company interest or partnership
interest in Borrower, without the prior written consent of Bank in its
absolute and sole discretion.
iii Other Indebtedness. Borrower shall not grant a Lien or Encumbrance
on any asset of Borrower as security for any Debt except (i) pursuant to
this Agreement; (ii) the Liens and Encumbrances granted by Borrower to
NationsBank of Florida encumbering property located in Florida and securing
repayment of that promissory note in the original principal amount of
$20,000,000.00, to be executed by Borrower in connection with CHHC's
acquisition of the stock of Borrower, and which will be payable to
NationsBank of Florida; and (iii) Nonrecourse Debt and/or Seller Financing
not to exceed in the aggregate $2,500,000.00 at any time. For purposes of
this Section 7.3, Debt specifically includes any indebtedness of Borrower
subordinated to the Obligations of Borrower pursuant to Section 6.8.
BANK'S OBLIGATIONS TO BORROWER ONLY AND DISCLAIMER BY BANK. No Person,
other than Borrower and Bank, shall have any rights hereunder or be a third-
party beneficiary hereof. Bank is not a joint venturer or a partner with
Borrower. Prior to an Event of Default and thereafter until Bank elects in
writing to assume specific obligations of Borrower, Bank shall not be
obligated to any Person providing labor, materials, or other services for
the Project and payment of funds from Advances directly to any such Persons
shall not give or be a recognition of any third-party beneficiary status.
PUBLICITY. Bank shall have the right to place one or more signs on the
Lots at location(s) visible from public street(s) indicating that Bank has
provided financing for the Project.
NO BROKERS. Except as disclosed by Borrower to Bank in writing prior to
the date of this Agreement, each of Borrower and Bank represent and warrant
to the other that it knows of no broker's or finder's fee due in respect of
the transaction described in this Agreement and that it has not used the
services of a broker or a finder in connection with this transaction.
PROVISIONS IN THE NOTE GOVERN THIS AGREEMENT. This Agreement is subject
to certain terms and provisions in the Note, to which reference is made for
a statement of such terms and provisions.
ASSUMED NAMES. Borrower acknowledges that Borrower sometimes does
business under the name Heftler Homes. For purposes of the Loan Documents,
"Borrower" shall mean Heftler Realty Co. and Heftler Realty Co. doing
business under each and all of the assumed names for Borrower described in
this Section 12.
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.
COMPLETE AGREEMENT. The written Loan Documents represent the final
agreement and reflect the reasonable expectations of the parties and may not
be contradicted by evidence of prior, contemporaneous, or subsequent oral
agreements of the parties. There are no unwritten oral agreements between
the parties.
CHOICE OF LAW. The Loan Documents shall be governed by the laws of the
State of Arizona, without giving effect to conflict of laws principles,
except that the laws of the State of Florida shall govern the creation,
attachment, perfection, priority, and foreclosure of liens on the Collateral
located in Florida, and except to the extent such laws are preempted by
applicable federal laws.
SAVINGS CLAUSE. This Agreement and all of the other Loan Documents are
intended to be performed in accordance with, and only to the extent
permitted by, all applicable usury laws. If any provision hereof or of any
of the other Loan Documents or the application thereof to any person or
circumstance shall, for any reason and to any extent, be invalid or
unenforceable, neither the application of such provision to any other person
or circumstance nor the remainder of the instrument in which such provision
is contained shall be affected thereby and shall be enforced to the greatest
extent permitted by law. It is expressly stipulated and agreed to be the
intent of the holder hereof to at all times comply with the usury and other
applicable laws now or hereafter governing the interest payable on the
indebtedness evidenced by the Note. If at any time from any circumstance
whatsoever, fulfillment of any provision hereof shall render usurious, or if
the applicable law is ever revised, repealed or judicially interpreted so as
to render usurious, any amount called for under the Note, this Agreement, or
under any of the other Loan Documents, or contracted for, charged, taken,
reserved or received with respect to the indebtedness evidenced by the Note,
or if Bank's exercise of the option to accelerate the maturity of the Note,
or if any prepayment by Borrower results in Borrower having paid any
interest in excess of that permitted by law, then it is the express intent
of Borrower and Bank that all excess amounts theretofore collected by Bank
be credited on the principal balance of the Note (or, if the Note and all
other indebtedness arising under or pursuant to the other Loan Documents
have been paid in full, refunded to Borrower), and the provisions of the
Note and the other Loan Documents immediately be deemed reformed and the
amounts thereafter collectable hereunder and thereunder reduced, without the
necessity of the execution of any new document, so as to comply with the
then applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder or thereunder. All sums paid, or agreed to
be paid, by Borrower for the use, forbearance, detention, taking, charging,
receiving or reserving of the indebtedness of Borrower to Bank under the
Note or arising under or pursuant to the other Loan Documents shall, to the
maximum extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full term of such indebtedness until
payment in full so that the rate or amount of interest on account of such
indebtedness does not exceed the usury ceiling from time to time in effect
and applicable to such indebtedness for so long as such indebtedness is
outstanding. To the extent federal law permits Bank to contract for, charge
or receive a greater amount of interest, Bank will rely on federal law, for
the purpose of determining the Maximum Rate. Notwithstanding anything to
the contrary contained herein or in any of the other Loan Documents, it is
not the intention of Bank to accelerate the maturity of any interest that
has not accrued at the time of such acceleration or to collect unearned
interest at the time of such acceleration.
DATED as of the date first above stated.
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/Rhonda R. Williams
-------------------------------
Name: Rhonda R. Williams
----------------------------
Title: Assistant Vice President
----------------------------
HEFTLER REALTY CO., a Florida
corporation
By: /s/Roger Heftler
-------------------------------
Name: Roger Heftler
----------------------------
Title: Secretary
----------------------------
<PAGE>
EXHIBIT A
TO LOAN AGREEMENT
PERSONS AUTHORIZED TO REQUEST ADVANCES
NAME SIGNATURE
Roger Heftler /s/Roger Heftler
- - ------------- ------------------------------------------------------
Joel B. Kovin /s/Joel B. Kovin
- - ------------- ------------------------------------------------------
- - ------------- ------------------------------------------------------
- - ------------- ------------------------------------------------------
EXHIBIT 10.2
PROMISSORY NOTE
Principal Amount: $10,000,000.00 Date: November 17, 1994
Home Office, Phoenix, Arizona
PROMISE TO PAY AND INTEREST. For value received, the undersigned
("Borrower"), promises to pay to BANK ONE, ARIZONA, NA, a national banking
association, or order ("Bank") at its above office, or at such other place
as Bank may designate in writing, in lawful money of the United States of
America, the principal sum of TEN MILLION AND NO/100 DOLLARS
($10,000,000.00), or such lesser amount as shall have been disbursed and is
unpaid as shown on the records of Bank which shall be conclusive as to such
amount, with interest thereon from the date advanced at the applicable rate
from time to time ("Interest Rate") from time to time on each advance
("Advance") under the Loan Agreement of even date herewith between Borrower
and Bank, as amended, modified, extended, renewed, restated, and
supplemented from time to time ("Loan Agreement"), from the date advanced as
follows:
(a) Except to the extent that an Advance bears interest at
the Fixed Rate, as defined herein, pursuant to this Note, interest
shall accrue on the unpaid principal of each Advance at the
Variable Rate. Interest at the Variable Rate shall be computed on
the basis of a 360 day year and accrue on a daily basis for the
actual number of days elapsed.
(b) To the extent Borrower shall elect as provided in this
Note and to the extent not otherwise provided in this Note,
interest shall accrue on the unpaid principal of an Advance at the
Fixed Rate. Interest at the Fixed Rate shall be computed on the
basis of a 360 day year and accrue on a daily basis for the actual
number of days elapsed.
As used in this Note:
"Business Day" means a day of the year on which banks are not required
or authorized to close in Phoenix, Arizona, and, with respect to a Fixed
Rate Advance, a day on which dealings are carried on in the London interbank
market.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors to the Federal Reserve System, as in
effect from time to time.
"Eurodollar Rate Reserve Percentage" for the Interest Period for each
Fixed Rate Advance means the reserve percentage applicable two (2) Business
Days before the first day of such Interest Period under regulations issued
from time to time by the Board of Governors of the Federal Reserve System
(or any successor) for determining the maximum reserve requirement
(including, but not limited to, any emergency, supplemental, or other
marginal reserve requirement) for a member bank of the Federal Reserve
System in San Francisco with respect to liabilities or assets consisting of
or including Eurocurrency Liabilities (or with respect to any other category
of liabilities which includes deposits by reference to which the Interest
Rate on Fixed Rate Advances is determined) having a term equal to such
Interest Period.
"Fixed Rate" means the rate per annum equal to the sum of (i) two and
one-half percent (2.5%) per annum, and (ii) the rate per annum obtained by
dividing (A) the rate of interest determined by Bank, based on Telerate
System reports or such other source as may be selected by Bank, to be the
"London Interbank Offered Rate" at which deposits in United States dollars
are offered by major banks in London, England, one (1) Business Day before
the first day of the respective Interest Period by (B) a percentage equal to
one hundred percent (100%) minus the Eurodollar Rate Reserve Percentage for
the period equal to such Interest Period.
"Fixed Rate Advance" means an Advance that bears or is requested to
bear interest at the Fixed Rate.
"Interest Period" means, for each Fixed Rate Advance, the period
commencing on the date of such Fixed Rate Advance and ending on the last day
of the period selected by Borrower pursuant to the provisions herein and,
thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the
period selected by Borrower pursuant to the provisions herein. The duration
of each Interest Period shall be 30, 60, 90, or 120 days, as selected by
Borrower (A), for a new Advance, in the request for a Fixed Rate Advance or
(B), for an outstanding Advance, in the request for a Fixed Rate Advance to
continue bearing interest at the Fixed Rate; provided, however, that:
(i) Interest Periods commencing on the same date shall be of
the same duration;
(ii) Whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the last
day of such Interest Period shall be extended to occur on the next
succeeding Business Day, provided that if such extension would
cause the last day of such Interest Period to occur in the next
following calendar month, the last day of such Interest Period
shall occur on the next preceding Business Day; and
(iii) No Interest Period with respect to any Advance shall
extend beyond the Maturity Date.
"Regulatory Change" means any change effective after the date of this
Note in United States federal, state, or foreign law, regulations, or rules
or the adoption or making after such date of any interpretation, directive,
or request applying to a class of banks including Bank, of or under any
United States federal, state, or foreign law, regulation or rule (whether or
not having the force of law) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
"Variable Rate" means the rate per annum equal to the sum of (i) one-
half of one percent (.5%) per annum, and (ii) the rate per annum most
recently publicly announced by Bank, or its successors, in Phoenix, Arizona,
as its "prime rate," as in effect from time to time. The Variable Rate will
change on each day that the "prime rate" changes. The "prime rate" is not
necessarily the best or lowest rate offered by Bank, and Bank may lend to
its customers at rates that are at, above, or below its "prime rate."
"Variable Rate Advance" means an Advance that bears or that is
requested to bear interest at the Variable Rate.
Each request for an Advance under the Loan Agreement shall, in addition
to complying with the other requirements in the Loan Agreement, (i) specify
the date and amount of the requested Advance, (ii) specify whether the
Advance shall be an Advance that bears interest at the Variable Rate or
shall be an Advance that bears interest at the Fixed Rate, and (iii) if the
Advance is to bear interest at the Fixed Rate, (A) specify the Interest
Period, (B) be delivered to Bank at least two (2) Business Days prior to the
date of the requested Advance, (C) be in a minimum amount of $1,000,000 with
integral multiples of $500,000 in excess thereof, and (D), when added to the
number of previous Advances bearing interest at the Fixed Rate, not cause
the aggregate number of all outstanding Advances bearing interest at the
Fixed Rate to exceed three (3). Any Advance not complying with the
foregoing requirements for an Advance bearing interest at the Fixed Rate
shall bear interest at the Variable Rate.
If Borrower desires that a Fixed Rate Advance continue to bear interest
at the Fixed Rate after the end of an existing Interest Period, Borrower
shall deliver to Bank a notice making such election and specifying the new
Interest Period. If Borrower does not deliver such notice within such time,
then after the existing Interest Period the Fixed Rate Advance shall become
a Variable Rate Advance and shall bear interest at the Variable Rate.
Borrower may on any Business Day, upon written notice to and received
by Bank not later than 12:00 p.m. (Phoenix, Arizona local time) (i) on the
second Business Day, in the case of any conversion of a Variable Rate
Advance into a Fixed Rate Advance and (ii) on the first Business Day in the
case of any conversion of a Fixed Rate Advance into a Variable Rate Advance,
prior to the date of the proposed conversion, convert any Advance of one
type into an Advance of the other type; provided, however, that any
conversion of a Fixed Rate Advance (A) shall only be made on the last day of
the applicable Interest Period, (B) shall be made only as to an Advance in a
minimum amount of $1,000,000 with integral multiples of $500,000 in excess
thereof, and (C) shall not result after such requested conversion in the
aggregate number of Fixed Rate Advances exceeding three (3). Each such
notice of a conversion shall specify the date of such conversion and the
Advance(s) to be converted.
Notwithstanding any provision of the Loan Documents to the contrary,
Bank shall be entitled to fund and maintain its funding of all or any part
of any Advance in any manner it sees fit; provided, however, that for the
purposes of this Note, all determinations hereunder shall be made as if Bank
had actually funded and maintained each Fixed Rate Advance during the
Interest Period therefor through the purchase of deposits having a maturity
corresponding to the last day of the Interest Period and bearing an interest
rate equal to the Fixed Rate for such Interest Period.
If, due to any Regulatory Change, there shall be any increase in the
cost to Bank of agreeing to make or making, funding, or maintaining Fixed
Rate Advances (including, without limitation, any increase in any applicable
reserve requirement), then Borrower shall from time to time, upon demand by
Bank, pay to Bank such amounts as Bank may reasonably determine to be
necessary to compensate Bank for any additional costs that Bank reasonably
determines are attributable to such Regulatory Change and Bank will notify
the Borrower of any Regulatory Change that will entitle Bank to compensation
pursuant to this paragraph as promptly as practicable, but in any event
within 90 days after Bank obtains knowledge thereof; provided, however, that
if Bank fails to give such notice within 90 days after it obtains knowledge
of such a Regulatory Change, Bank shall, with respect to compensation
payable in respect of any costs resulting from such Regulatory Change, only
be entitled to payment for costs incurred from and after the date that Bank
does give such notice. Bank will furnish to Borrower a certificate setting
forth in reasonable detail the basis for the amount of each request by Bank
for compensation under this paragraph. Determinations by Bank of the
amounts required to compensate Bank shall be conclusive, absent manifest
error. Bank shall be entitled to compensation in connection with any
Regulatory Change only for costs actually incurred by Bank.
Notwithstanding any provision of the Loan Documents, if Bank shall
notify Borrower that as a result of a Regulatory Change it is unlawful for
Bank to make Advances at the Fixed Rate, or to fund or maintain Fixed Rate
Advances, (i) the obligations of Bank to make Advances at the Fixed Rate and
to convert Advances to the Fixed Rate shall be suspended until Bank shall
notify Borrower that the circumstances causing such suspension no longer
exist, and (ii) in the event such Regulatory Change makes the maintenance of
Advances at the Fixed Rate unlawful, Borrower shall forthwith prepay in full
all Fixed Rate Advances then outstanding, together with interest accrued
thereon and all amounts in connection with such prepayment specified in the
paragraph in this Note titled "PREPAYMENT," unless Borrower, within five (5)
Business Days of notice from Bank, converts all Fixed Rate Advances then
outstanding into Variable Rate Advances pursuant to the conversion
procedures in this Note and pays all amounts in connection with such
prepayments or conversions specified in the paragraph in this Note titled
"PREPAYMENT."
Notwithstanding any other provision of the Loan Documents, if prior to
the commencement of any Interest Period, Bank shall determine (i) that
United States dollar deposits in the amount of any Fixed Rate Advance to be
outstanding during such Interest Period are not readily available to Bank in
the London interbank market, or (ii) by reason of circumstances affecting
the London interbank market, adequate and reasonable means do not exist for
ascertaining the Fixed Rate for such Interest Period in the manner
prescribed above in the definition of "Fixed Rate," then Bank shall promptly
give notice thereof to Borrower and the obligation of Bank to create,
continue, or effect by conversion any Fixed Rate Advance in such amount and
for such Interest Period shall terminate until United States dollar deposits
in such amount and for the Interest Period shall again be readily available
in the London interbank market and adequate and reasonable means exist for
ascertaining the Fixed Rate.
Notwithstanding the foregoing, if at any time the contract rate shall
exceed the Maximum Rate, thereby causing the interest on this Note to be
limited to the Maximum Rate, then any subsequent reduction in the contract
rate shall not reduce the rate of interest on this Note below the Maximum
Rate until the total amount of interest accrued on this Note equals the
amount of interest which would have accrued on this Note if the contract
rate had at all times been in effect. The term "Maximum Rate," as used
herein, shall mean at the particular time in question the maximum rate of
interest which, under applicable law, may then be charged on this Note. If
such maximum rate of interest changes after the date hereof and this Note
provides for a fluctuating rate of interest, the Maximum Rate shall be
automatically increased or decreased, as the case may be, without notice to
Borrower from time to time as of the effective date of each change in such
maximum rate.
All accrued interest shall be due and payable on December 1, 1994, and
continuing on the same day of each successive month thereafter until that
date that is twelve (12) months after the Conversion Date (the "Maturity
Date"); the "Conversion Date" shall have the meaning set forth in the Loan
Agreement. Prior to the Maturity Date, principal shall be due and payable
as provided in the Loan Agreement, including, without limitation, Section
3.4 thereof. All capitalized terms used herein and not otherwise defined
shall have the meanings given to such terms in the Loan Agreement. On the
Maturity Date, Borrower shall pay to Bank the unpaid principal, all accrued
and unpaid interest, and all other amounts ("Other Amounts") payable by
Borrower to Bank under the Loan Documents.
Principal shall bear interest at the Interest Rate from the date of
disbursement until the due date thereof, whether due by acceleration or
otherwise. Principal, interest, and Other Amounts not paid when due and any
judgment therefor shall bear interest from its due date or the judgment
date, as applicable, until paid at a rate ("Default Rate") equal to the
lesser of (i) the sum of (A) four percent (4%) per annum and (B) the
Variable Rate; or (ii) the Maximum Rate, if any, and such interest shall be
immediately due and payable.
All interest shall be computed on the basis of a 360-day year and
accrue on a daily basis for the actual number of days elapsed. Borrower
agrees to pay an effective rate of interest that is the sum of (i) the
interest rate provided herein and (ii) any additional rate of interest
resulting from any other charges or fees paid or to be paid in connection
herewith that are determined to be interest or in the nature of interest;
provided, however, that in no event shall the amounts payable under clause
(i) and (ii) exceed the Maximum Rate.
APPLICATION OF PAYMENTS. At the option of Bank, payments shall be applied
to principal, interest, and Other Amounts in such order as Bank shall
determine. This Note evidences a revolving line of credit. Amounts paid or
prepaid hereunder may be reborrowed in accordance with the Loan Agreement.
PREPAYMENT. Except as to payments due under this paragraph with respect to
payment or conversion of a Fixed Rate Advance on a day other than the last
Business Day in the Interest Period for such Fixed Rate Advance, Borrower
may prepay the outstanding principal balance hereof in whole or in part at
any time prior to the Maturity Date without penalty or premium as stated in
such notice by Borrower; provided, however, that if any payment of all or
any portion of a Fixed Rate Advance shall be made other than on the last day
of the Interest Period for such Fixed Rate Advance for any reason
(including, without limitation, any optional or required prepayment and any
acceleration of the Maturity Date) then, anything in the Loan Documents to
the contrary notwithstanding, Borrower shall pay to Bank contemporaneously
with such prepayment, a payment equal to any losses, costs, or expenses that
Bank may reasonably incur as a result of such prepayment, including, without
limitation, any loss (including, without limitation, loss of anticipated
profits), cost, or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by Bank to fund or maintain
such Fixed Rate Advance. Borrower agrees to also make a payment under the
immediately preceding sentence upon each conversion of a Fixed Rate Advance
to a Variable Rate Advance on a date other than the last Business Day of the
Interest Period for such Fixed Rate Advance to be determined as if the
amount so converted had been prepaid on the date of conversion. The
obligations of Borrower and the rights of Bank under this paragraph shall
survive payment and performance of the obligations of the Loan Parties under
the Loan Documents and shall remain in full force and effect without
termination. Bank will furnish to Borrower a certificate setting forth in
reasonable detail the basis for the amount of each request by Bank for
payment under this paragraph. The determination by Bank of amounts due
under this paragraph shall be conclusive, absent manifest error.
LATE CHARGE. If any payment of principal and/or interest is not received by
Bank within fifteen (15) days after its due date, then, in addition to the
other rights and remedies of Bank, a late charge of four percent (4%) of the
amount due and unpaid will be charged to Borrower without notice to
Borrower, such late charge to be immediately due and payable; provided,
however, that the obligation to pay a late charge shall be subject to the
provisions hereof limiting the charging, collection and receipt of interest
to the Maximum Rate.
NO COUNTERCLAIMS, DEDUCTIONS, ETC. All payments and other obligations of
Borrower under the Loan Documents will be made and performed without
counterclaim, deduction, defense, deferment, reduction, or set-off.
EVENTS OF DEFAULT. Each of the following shall be an event of default
("Event of Default"):
Failure by any Loan Party to pay when due any amount
payable by such Loan Party under any of the Loan Documents or
failure by Borrower to pay when due any other indebtedness of
Borrower to Bank and, in each case, the continuation of such
failure for fifteen (15) days after the due date.
Failure by any Loan Party to comply with Sections 6.22,
7.1, 7.2 or 7.3 of the Loan Agreement.
Failure by any Loan Party to comply with Sections 6.16
or 6.21 of the Loan Agreement and the continuation of such failure
for five (5) days after notice thereof from Bank.
If Borrower's quarterly financial statements submitted
to Bank pursuant to the Loan agreement show Operating Losses for
two (2) consecutive fiscal quarters.
Failure by any Loan Party to comply with any covenants,
terms, and conditions applicable to such Loan Party under or
pursuant to any other Debt owed by such Loan Party to any other
Person, and the continuation of such failure after the expiration
of any contractual grace or cure periods provided with respect to
such Debt.
Failure by any Loan Party to perform any other
obligation not involving the payment of money, or to comply with
any other term or condition applicable to such Loan Party, in any
of the Loan Documents (that is not otherwise described in any
other Event of Default under this Note) and the continuation of
such failure for thirty (30) days after notice thereof from Bank
(or such shorter period as may otherwise be set forth in the Loan
Documents).
Any representation or warranty made by any Loan Party in
any of the Loan Documents or otherwise or any information
delivered by any Loan Party to Bank in obtaining or hereafter in
connection with the credit evidenced by this Note is materially
incomplete, incorrect, or misleading as of the date made or
delivered.
Bank believes in good faith that a Material Adverse
Change has occurred after the date of the financial statements and
other information provided by any Loan Party in obtaining the
credit evidenced by this Note. "Material Adverse Change" means
any change in the assets, business, financial condition,
operations, or results of operations of any Loan Party or any
other event or condition that in the reasonable opinion of Bank is
(i) reasonably likely to affect the likelihood of performance by
any Loan Party of any of the obligations in the Loan Documents,
(ii) reasonably likely to affect the ability of any Loan Party to
perform any of the obligations in any of the Loan Documents, (iii)
reasonably likely to affect the legality, validity, or binding
nature of any of the obligations in the Loan Documents or any
lien, security interest, or other encumbrance securing any of the
obligations under the Loan Documents, or (iv) reasonably likely to
affect the priority of any lien or encumbrance securing any of the
obligations in the Loan Documents.
Any Loan Party (i) is unable or admits in writing such
Loan Party's inability to pay such Loan Party's monetary
obligations as they become due, (ii) makes a general assignment
for the benefit of creditors, or (iii) applies for, consents to,
or acquiesces in, appointment of a trustee, receiver, or other
custodian for such Loan Party or any or all of the property of
such Loan Party, or in the absence of such application, consent,
or acquiescence by such Loan Party a trustee, receiver, or other
custodian is appointed for such Loan Party or any or all of the
property of such Loan Party.
Commencement of any case under the Bankruptcy Code
(Title 11 of the United States Code) or commencement of any other
bankruptcy, arrangement, reorganization, receivership,
custodianship, or similar proceeding under any federal, state, or
foreign law by or against any Loan Party.
The dissolution or liquidation of any Loan Party; the
consolidation or merger of any Loan Party with any other Person;
or the taking of any action by any Loan Party toward a
dissolution, liquidation, consolidation, or merger.
Any Loan Party or any other person on behalf of any Loan
Party claims that any Loan Document is not legal, valid, binding,
and enforceable against any Loan Party, that any lien, security
interest, or other encumbrance securing any of the obligations
under the Loan Documents is not legal, valid, binding, and
enforceable, or that the priority of any lien, security interest,
or other encumbrance securing any of the obligations in the Loan
Documents is different than the priority represented and warranted
in the Loan Documents.
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 any other Loan Document or in any agreement,
document, or instrument relating to any other indebtedness of
Borrower to Bank.
Failure by Continental Homes Holding Corp., a Delaware
corporation ("CHHC") to purchase, on or before the earlier of (i)
two (2) business days after the date that Bank executes the Loan
Agreement, or (ii) December 30, 1994, one hundred percent (100%)
of the issued and outstanding shares of stock in Borrower.
Failure by counsel for CHHC and counsel for Borrower and
reasonably acceptable to Bank to issue to Bank, within two (2)
business days after the date of this Note, opinion letters in form
and substance reasonably satisfactory to Bank concerning CHHC's
acquisition of Borrower's stock as described in Paragraph 14 and
concerning the loan documents executed in connection with this
Note.
Failure by CHHC, or the Board of Directors of Borrower
to deliver to Bank, within two (2) business days after the date of
this Note, Ratifications of Loan Documents following consummation
of the stock purchase described in Paragraph 14.
Failure by CHHC to issue to Bank, within two (2)
business days after the date of this Note, a Certificate in form
and substance reasonably satisfactory to Bank concerning certain
Indentures executed by CHHC.
RIGHTS AND REMEDIES OF BANK. Upon occurrence of an Event of Default, Bank
may, at its option, in its absolute and sole discretion, and without demand
or notice, (i) declare the obligations in the Loan Documents to be
immediately due and payable, whereupon the obligations in the Loan Documents
shall be immediately due and payable, and (ii) exercise any or all other
rights and remedies of Bank concurrently or consecutively in such order as
Bank elects. The rights and remedies of Bank shall be cumulative and non-
exclusive. Delay, discontinuance, or failure to exercise any right or
remedy of Bank shall not be a waiver thereof, or of any other right or
remedy of Bank, or of the time of the essence provision. Exercise of any
right or remedy of Bank shall not cure or waive any Event of Default or
invalidate any act done in response to any Event of Default.
LIMIT ON LIABILITY OF BANK. In exercising rights and remedies, neither Bank
nor any stockholder, director, officer, employee, agent, or representative
of Bank shall have any liability for any injury to the assets, business,
operations, or property of Borrower or any other liability to Borrower,
other than for its own gross negligence or willful misconduct.
SURVIVAL. The representations, warranties, and covenants of the Loan
Parties in the Loan Documents shall survive the execution and delivery of
the Loan Documents and the making of advances to Borrower.
INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, WAIVER,
APPROVAL, CONSENT, ETC. The Loan Documents contain the complete
understanding and agreement of Borrower and Bank and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Loan Documents may be changed,
discharged, supplemented, terminated, or waived except in a writing signed
by the parties thereto. Delay or failure by Bank to insist on performance
of any obligation when due or compliance with any other term or condition in
the Loan Documents shall not operate as a waiver thereof or of any other
obligation, term, or condition or of the time of the essence provision.
Acceptance of late payments shall not be a waiver of the time of the essence
provision, the right of Bank to require that subsequent payments be made
when due, or the right of Bank to declare an Event of Default if subsequent
payments are not made when due. Any approval, consent, or statement that a
matter is satisfactory by Bank under the Loan Documents must be in writing
executed by Bank and shall be construed to apply only to the person(s) and
facts specifically set forth in the writing.
BINDING EFFECT. The Loan Documents shall be binding upon and shall inure to
the benefit of Bank and the Loan Parties and their successors and assigns
and the executors, legal administrators, personal representatives, heirs,
devisees, and beneficiaries of the Loan Parties; provided, however, that the
Loan Parties may not assign any of their rights or delegate any of their
obligations under the Loan Documents and any purported assignment or
delegation shall be void. Bank may from time to time in its absolute and
sole discretion assign it rights and delegate its obligations under the Loan
Documents, in whole or in part, without notice to or consent by any Loan
Party (including, without limitation, participations). In addition to any
greater or lesser limitation provided by law, no Loan Party shall assert
against any assignee of Bank any claims or defenses such Loan Party may have
against Bank, except claims and defenses arising under the Loan Documents.
COSTS, EXPENSES, AND FEES. Borrower agrees to pay on demand all external
and internal costs, expenses, and fees (including, without limitation, as
applicable, inside and outside attorneys, paralegals, document clerks and
specialists, appraisal, appraisal review, environmental assessment,
environmental testing, environmental cleanup, other inspection, processing,
title, filing, and recording costs, expenses, and fees) of Bank (i) in the
negotiation, execution, delivery, and modification of the Loan Documents,
(ii) in the making of advances, in the monitoring the activities of
Borrower, and otherwise in administering the credit evidenced by this Note,
(iii) in enforcement of the Loan Documents and exercise of the rights and
remedies of Bank, (iv) in defense of the legality, validity, binding nature,
and enforceability of the Loan Documents and the perfection and priority of
the liens and encumbrances granted in the Loan Documents, (v) in gaining
possession of, holding, repairing, maintaining, preserving, and protecting
the property ("Collateral") securing the obligations in the Loan Documents,
(vi) in selling or otherwise disposing of the Collateral, (vii) otherwise in
relation to the Loan Documents, the Collateral, or the rights and remedies
of Bank under the Loan Documents or relating to the Collateral, and (viii)
in preparing for the foregoing, whether or not any legal proceeding is
brought or other action is taken. Such costs, expenses, and fees shall
include, without limitation, all such costs, expenses, and fees incurred in
connection with any bankruptcy, receivership, replevin, or other court
proceedings (whether at the trial or appellate level). Borrower agrees, to
the extent permitted by applicable law, to pay interest on such costs,
expenses, and fees at the Default Rate from the date incurred by Bank until
paid in full.
SEVERABILITY. If any provision or any part of any provision of the Loan
Documents is unenforceable, the enforceability of the other provisions or
the other provisions and the remainder of the subject provision,
respectively, shall not be affected and they shall remain in full force and
effect.
CHOICE OF LAW. The Loan Documents shall be governed by the laws of the
State of Arizona, without giving effect to conflict of laws principles,
except that the laws of the State of Florida shall govern the creation,
attachment, perfection, priority, and foreclosure of liens on the Collateral
located in Florida, and except to the extent such laws are preempted by
applicable federal laws.
TIME OF ESSENCE. Time is of the essence with regard to each provision of
the Loan Documents as to which time is a factor.
NOTICES AND DEMANDS. All demands or notices under the Loan Documents shall
be in writing (including, without limitation, telecopy, telegraphic, telex,
or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled, or delivered to the respective party hereto at the address specified
at the end of this paragraph or such other address as shall have been
specified in a written notice. Any demand or notice mailed shall be mailed
first-class mail, postage-prepaid, return-receipt-requested and shall be
effective upon the earlier of (i) actual receipt by the addressee, and (ii)
the date shown on the return-receipt. Any demand or notice not mailed will
be effective upon the earlier of (i) actual receipt by the addressee, and
(ii) the time the receipt of the telecopy, telegram, telex, or cable is
mechanically confirmed.
Address for Notices to Borrower:
Heftler Realty Co.
9450 Sunset Drive
Miami, Florida 33173
Address for Notices to Bank:
Bank One, Arizona, NA
Post Office Box 29542
Phoenix, Arizona 85038
Attention: Real Estate Finance Division, Dept. A-383
JOINT AND SEVERAL OBLIGATIONS. All obligations in any of the Loan Documents
executed by more than one Loan Party shall be the joint and several
obligations of each such person, and each reference in any Loan Document to
Borrower, Obligor, or Trustor shall be a reference to each such person
individually and all such persons collectively.
COMMUNITY PROPERTY AND SEPARATE PROPERTY OF BORROWER. If Borrower includes
one or more persons who are married to each other or to other persons, each
such person included in Borrower agrees that (i) the Loan Documents executed
by Borrower are made on behalf of the marital community of each person
included in Borrower and his or her spouse, and (ii) Bank may have recourse
against the separate property of each person included in Borrower and the
community property of each such person included in Borrower and his or her
spouse for satisfaction of the obligations of Borrower under the Loan
Documents.
BANK'S RIGHT OF SET-OFF. Borrower grants to Bank (i) the right at any time
and from time to time after an Event of Default, in the absolute and sole
discretion of Bank and without demand or notice to the Borrower, to set-off
and apply deposits (whether certificates of deposit, demand, general,
savings, special, time, or other, and whether provisional or final) held by
Bank for Borrower and any other liabilities or other obligations of Bank to
Borrower ("Deposits, Liabilities, and Obligations") against or to the
obligations of Borrower under the Loan Documents, regardless of whether the
Deposits, Liabilities, and Obligations are contingent, matured, or
unmatured, and (ii) a security interest in the Deposits, Liabilities, and
Obligations to secure the obligations of Borrower under the Loan Documents.
In addition, Borrower grants to Bank the right upon the occurrence of an
event that with notice, passage of time, or both would be an Event of
Default to segregate all Deposits, Liabilities, and Obligations into an
account or otherwise under the sole control of Bank.
INDEMNIFICATION OF BANK. Borrower agrees to indemnify, hold harmless, and
on demand defend Bank and its stockholders, directors, officers, employees,
agents, and representatives for, from, and against any and all damages,
losses, liabilities, costs, and expenses (including, without limitation,
costs and expenses of litigation and reasonable attorneys' fees) arising
from any claim or demand in respect of the Loan Documents, the Collateral,
or the transaction described in the Loan Documents and arising at any time,
whether before or after payment and performance of the Obligations in full,
excepting any such matters arising solely from the gross negligence or
willful misconduct of Bank. The obligations of Borrower and the rights of
Bank under this paragraph shall survive payment and performance of the
Obligations in full and shall remain in full force and effect without
termination.
RESCISSION OR RETURN OF PAYMENTS. If at any time or from time to time,
whether before or after payment and performance of the obligations of the
Loan Parties under the Loan Documents in full, all or any part of any amount
received by Bank in payment of, or on account of, any obligation of the Loan
Parties under the Loan Documents is or must be, or is claimed to be,
avoided, rescinded, or returned by Bank to Borrower or any other Person for
any reason whatsoever (including, without limitation, bankruptcy,
insolvency, or reorganization of Borrower or any other Person), such
obligation and any liens, security interests, and other encumbrances that
secured such obligations at the time such avoided, rescinded, or returned
payment was received by Bank shall be deemed to have continued in existence
or shall be reinstated, as the case may be, all as though such payment had
not been received.
NO CONSTRUCTION AGAINST BANK OR BORROWER. The Loan Documents are the result
of negotiations between Borrower and Bank. Accordingly, the Loan Documents
shall not be construed for or against Borrower or Bank, regardless of which
party drafted the Loan Documents or any part thereof.
HEADINGS. The headings at the beginning of each section of the Loan
Documents are solely for convenience and are not part of the Loan Documents.
NUMBER AND GENDER. In the Loan Documents the singular shall include the
plural and vice versa and each gender shall include the other genders.
MULTIPLE CREDIT ACCOMMODATIONS. If from time to time Borrower has more than
one loan or other credit accommodation with Bank, Borrower agrees that,
unless otherwise agreed by Bank and Borrower in writing, (i) the Loan
Documents and the agreements, documents, and instruments evidencing and
relating to such other loan(s) and credit accommodation(s) shall all remain
in effect and neither shall supersede the other, regardless of whether the
Loan Documents and such other agreements, documents, and instruments have
differing terms, conditions, and requirements, and (ii), regardless of any
such differences, Borrower shall comply with all the terms, conditions, and
requirements of the Loan Documents and of such other agreements, documents,
and instruments.
WAIVER OF STATUTE OF LIMITATIONS. Borrower waives, to the full extent
permitted by law, the right to plead any statutes of limitations as a
defense to any or all obligations under the Loan Documents.
WAIVERS BY BORROWER. Borrower (i) waives, to the full extent permitted by
law, presentment, notice of dishonor, protest, notice of protest, notice of
intent to accelerate, notice of acceleration, notice of dishonor, and all
other notices or demands of any kind (except notices specifically provided
for in the Loan Documents), and (ii) agrees that Bank may enforce this Note
and any other Loan Documents against any person included in Borrower without
first having sought enforcement against any other Loan Party or any
Collateral.
SAVINGS CLAUSE. This Note and all of the other Loan Documents are intended
to be performed in accordance with, and only to the extent permitted by, all
applicable usury laws. If any provision hereof or of any of the other Loan
Documents or the application thereof to any person or circumstance shall,
for any reason and to any extent, be invalid or unenforceable, neither the
application of such provision to any other person or circumstance nor the
remainder of the instrument in which such provision is contained shall be
affected thereby and shall be enforced to the greatest extent permitted by
law. It is expressly stipulated and agreed to be the intent of the holder
hereof to at all times comply with the usury and other applicable laws now
or hereafter governing the interest payable on the indebtedness evidenced by
this Note. If at any time from any circumstance whatsoever, fulfillment of
any provision hereof shall render usurious, or if the applicable law is ever
revised, repealed or judicially interpreted so as to render usurious, any
amount called for under this Note or under any of the other Loan Documents,
or contracted for, charged, taken, reserved or received with respect to the
indebtedness evidenced by this Note, or if Bank's exercise of the option to
accelerate the maturity of this Note, or if any prepayment by Borrower
results in Borrower having paid any interest in excess of that permitted by
law, then it is the express intent of Borrower and Bank that all excess
amounts theretofore collected by Bank be credited on the principal balance
of this Note (or, if this Note and all other indebtedness arising under or
pursuant to the other Loan Documents have been paid in full, refunded to
Borrower), and the provisions of this Note and the other Loan Documents
immediately be deemed reformed and the amounts thereafter collectable
hereunder and thereunder reduced, without the necessity of the execution of
any new document, so as to comply with the then applicable law, but so as to
permit the recovery of the fullest amount otherwise called for hereunder or
thereunder. All sums paid, or agreed to be paid, by Borrower for the use,
forbearance, detention, taking, charging, receiving or reserving of the
indebtedness of Borrower to Bank under this Note or arising under or
pursuant to the other Loan Documents shall, to the maximum extent permitted
by applicable law, be amortized, prorated, allocated and spread throughout
the full term of such indebtedness until payment in full so that the rate or
amount of interest on account of such indebtedness does not exceed the usury
ceiling from time to time in effect and applicable to such indebtedness for
so long as such indebtedness is outstanding. To the extent federal law
permits Bank to contract for, charge or receive a greater amount of
interest, Bank will rely on federal law, for the purpose of determining the
Maximum Rate. Notwithstanding anything to the contrary contained herein or
in any of the other Loan Documents, it is not the intention of Bank to
accelerate the maturity of any interest that has not accrued at the time of
such acceleration or to collect unearned interest at the time of such
acceleration.
HEFTLER REALTY CO., a Florida corporation
By: /s/Roger Heftler
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Name: Roger Heftler
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Title: Secretary
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EXHIBIT 10.3
MASTER LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of the 29th day of August, 1994 (the
"Loan Agreement" or "Agreement"), is made by and between Heftler Realty Co.,
a Florida corporation ("Borrower"), with its principal offices at 9450
Sunset Drive, Miami, FL 33173, and NationsBank of Florida, N.A., a national
banking association organized and existing under the laws of the United
States, with its offices located at Suite 101, 701 West Cypress Creek Road,
Fort Lauderdale, Florida 33309 ("Bank").
RECITALS
A. Borrower has applied to Bank for a revolving line of credit loan
in the principal amount of $8,000,000.00 (the "Construction Line") to be
used for the purpose of acquiring and developing single family and townhouse
lots as well as the construction of Units thereon in Approved Projects
located in Broward and Dade County, Florida, as well as the issuance of
Letters of Credit to serve as performance bonds for projects financed with
such loan facility (and for the letter of credit guaranty of payment in the
amount of $2,300,000.00 to the master developer for the Pembroke Shores
project) [the foregoing collectively referred to herein as the "Loan"].
B. Bank has agreed to establish a Borrowing Base secured by the
assets of the Borrower and the property described in the Mortgage under
which the Borrower may acquire and develop land and construct Units thereon
pursuant to the plans, specifications, terms, and conditions approved by
Bank.
C. Bank is willing to make the Loan described above based on the
terms and conditions set forth in this Loan Agreement and in the Loan
Documents referred to herein.
NOW, THEREFORE, in consideration of the premises, of the loan advances
which may be agreed to by Bank and Borrower hereinafter and the Note,
Mortgage and other Loan Documents given by Borrower in evidence thereof, and
for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Borrower and Bank hereby agree as follows:
ARTICLE I
Definitions
1.1 For the purposes hereof:
(a) "Approved Projects" means the collective reference to the
developments identified in Section 2.3 of this Agreement, together with the
Land, the Improvements, rights, property, and appurtenances as defined,
described or identified in the Mortgage, and means, as the context may
require, an individual Unit, as well as the aggregate of all such Units.
(b) "Architect" means such licensed architect or architectural
firm (if not the Borrower) which will serve as Borrower's supervising
architect. Borrower shall retain a supervising architect who will perform
various services in connection with the construction of Improvements on
behalf of Borrower under a "full-service" contract with Borrower for each
Approved Project. Bank's construction consultant and Borrower's Architect
shall not be the same person or firm.
(c) "Borrower's Representative" means the person or persons
designated in writing to Bank by Borrower as being authorized to submit Draw
Requests on Borrower's behalf per the Borrowing Base Certificate and to
consent to changes in the Cost Breakdown. Unless and until changed by
written notice to Bank, Borrower designates Joel Kovin and Roger Heftler as
its Borrower's Representative(s).
(d) "Borrowing Base" means the value of collateral against which
Loan proceeds are disbursed as described on the Borrowing Base Certificate.
(e) "Borrowing Base Availability" means availability of funding
under the Borrowing Base as computed on the Borrowing Base Schedule "A"
attached hereto as Exhibit "2".
(f) "Borrowing Base Certificate" means the certificate set forth
on Exhibit "1" attached hereto which annexes Exhibits "2", "3" and "4"
defining the monthy available funding.
(g) "Closing Date" means the date as of which this Loan Agreement
is executed by Borrower and Bank.
(h) "Collateral" means the Mortgaged Property, Rents, Intangible
Property, Corporate Assets and other property and property rights as defined
in and encumbered by the Mortgage and Security Agreements both of even date
herewith.
(i) "Commitment" means Bank's commitment letter to Borrower dated
July 28, 1994 and all amendments thereto. The parties intend that this
Agreement and the Loan Documents shall supersede and replace the Commitment.
(j) "Construction Documents" means the stipulated sum
construction contract between Borrower and the General Contractor, if a
General Contractor is engaged, and all other contracts, plans or documents
concerning the construction of the Improvements and any addenda, amendments
or modifications thereto. The Construction Documents shall include a hard
cost breakdown and a maximum fixed cost for the performance of all services,
labor, and materials furnished thereunder.
(k) "Construction Inspector" means the architectural or engineer-
ing firm or such party which Bank shall designate to perform various
services on behalf of Bank. The services to be performed by Bank's
Construction Inspector shall include the issuance of reports and
certification solely for the benefit of Bank and shall not impose upon Bank
any obligation to make inspections, or to correct or require any other
person to correct any defects, or to notify any person with respect to such
defects, review of the Plans and all proposed changes to them, preparation
of a "cost breakdown" construction analysis, periodic inspection of
construction and development work for conformity with the Plans and approval
of Draw Requests.
(l) "Construction Line" means the $8,000,000.00 of the Loan
amount available for acquisition and development of single family and
townhouse lots and the construction of Units thereon.
(m) "Cost" means the costs submitted by Borrower to Bank which
are reviewed and approved by Bank.
(n) "Cost Breakdown" means the detailed trade breakdown of the
cost of constructing the Improvements and an itemization of non-construction
and Land costs, all as approved by Bank from time to time.
(o) "Default" means a violation of any term, covenant, or
condition hereunder or a Default as defined under any of the other Loan
Documents.
(p) "Default Condition" means the occurrence or existence of an
event or condition which, upon the giving of notice or the passage of time,
or both, would constitute a Default.
(q) "Draw Request" means a written request for any disbursement
of Loan proceeds, which shall be submitted for each requested disbursement
as set forth in Article V and VI hereof, in accordance with the Request for
Funding form attached hereto as Exhibit "5".
(r) "Engineer" means such licensed engineer or engineering firm
(if not the Borrower) which will serve as Borrower's supervising engineer in
accordance with the Plans for each Approved Project.
(s) "Financing Statements" means the UCC financing statements
filed in order to perfect Bank's lien on certain personal property and
corporate assets as more particularly described therein.
(t) "Firm Contract" means an arm's length, bona-fide binding
contract for purchase and sale, in form and content satisfactory to Bank,
for the sale of a Unit to a purchaser unaffiliated and unrelated to Borrower
under which (i) Borrower has received a cash deposit equal to a minimum of
five (5%) percent; (ii) Borrower is not obligated to provide any purchase-
money financing, (iii) all applicable statutory cancellation or rescission
periods have expired, (iv) there are no contingencies other than a first
mortgage financing contingency for which Borrower has confirmed to Lender
that purchaser has made a mortgage application, (v) the closing date for the
contract is within thirty (30) days of the date of issuance of the Certifi-
cate of Occupancy for the Unit.
(u) "General Contractor" means the Borrower (or such licensed
general contractor or contracting firm as to site development work) who will
serve as the general contractor in accordance with the Construction
Documents.
(v) "Governmental Authorities" means any local, state, or federal
governmental agency, regulatory body or office, or any quasi-governmental
office (including health and environmental), or any officer or official of
any such agency, office, or body whose consent or approval is required as a
prerequisite to the commencement of the construction of the Improvements or
to the operation and occupancy of the Improvements or the Approved Project
or to the performance of any act or obligation or the observance of any
agreement, provision or condition of whatsoever nature herein contained.
(w) "Improvements" means all site development and Units
constructed or to be constructed on the Land as defined in the Mortgage,
together with all fixtures and appurtenances now or later to be located on
the Land and/or in such Improvements.
(x) "Land" means the real property described in the Mortgage at
the inception of the Loan and as may be later included by modification and
spreader agreement.
(y) "Letters of Credit" means the $5,000,000.00 committed by Bank
for standby letters of credit issued for the account of the Borrower through
the actions of the Bank, as the same may be transferred, renewed, modified,
amended or restated from time to time in the manner provided therein, which
shall serve as performance bonds for the Approved Projects (and for the
letter of credit guaranty of payment in the amount of $2,300,000.00 to the
master developer for the Pembroke Shores project).
(z) "Loan Documents" means this Loan Agreement, the Note and any
funding agreement, the Mortgage, the Financing Statements, and any other
document or writing executed in connection therewith or in furtherance
thereof.
(aa) "Model Unit" means a Unit constructed and furnished initially
for inspection by prospective purchasers.
(bb) "Mortgage" means the Real Estate Mortgage, Assignment and
Security Agreement of even date herewith executed by Borrower for the
benefit of Bank encumbering the Collateral (as defined in the Mortgage), and
any extensions, modifications, renewals or replacements thereof.
(cc) "Note" means the promissory note dated as of the Closing Date
executed by Borrower in favor of Bank in the amount of $8,000,000.00 as well
as any promissory note, sub-note, or other notes issued by Borrower in
substitution, replacement, extension, future advance, amendment or renewal
of the Note or any such promissory note or notes.
(dd) "Permitted Encumbrances" means those liens, encumbrances,
easements and other matters defined in the Mortgage as "Permitted
Encumbrances".
(ee) "Plans" means plans and specifications for the construction
of the Improvements submitted to and approved by Bank from time to time, and
including such amendments thereto as may from time to time be made by
Borrower and approved by Bank.
(ff) "Pre-Sold Unit" means a Unit owned by Borrower and covered by
a Firm Contract.
(gg) "Security Documents" means the Mortgage, the Financing
Statements, and any other instrument executed to establish and perfect
Bank's lien, and any extensions, modifications, renewals, or replacements
thereof.
(hh) "Spec Unit" means a Unit owned by the Borrower for which a
Firm Contract has not been received or approved and which is not used as a
Model Unit.
(ii) "Subsequently Approved Project" means the collective
reference to the developments subsequently approved by Bank for inclusion
under the Borrowing Base, together with the Land, the Improvements, rights,
property, and appurtenances as defined, described or identified in the
Mortgage (as spread upon the Subsequently Approved Project), and means, as
the context may require, an individual Unit, as well as the aggregate of all
such Units. If the proposed project meets the criteria set forth in Article
III herein and is located in either Broward or Dade County, Florida, such
project shall be designated a Subsequently Approved Project. With respect to
projects owned by Borrower not meeting the criteria set forth in Article III
herein and not located in such Counties, approval of the project shall be at
Bank's sole discretion and Bank shall under no circumstances be obligated to
disburse Loan proceeds except as expressly set forth in this Loan Agreement.
(jj) "Title Policy" means the mortgagee title policy meeting the
requirements of this Loan Agreement.
(kk) "Unit" means a portion of the Land and its respective
improvements constituting a single family or townhouse dwelling unit.
Capitalized terms not defined in this Loan Agreement shall have the
meanings ascribed to them in the Mortgage.
ARTICLE II
The Loan
2.1 Loan Terms. Subject to the terms and conditions of this Loan
Agreement, Bank will lend and Borrower will borrow up to a principal sum of
$8,000,000.00 which borrowing shall be evidenced by the Note. Also, all of
the terms, definitions, conditions, and covenants of the Note, the Mortgage,
and any other documents executed in connection therewith or pursuant thereto
are expressly made a part of this Loan Agreement by reference in the same
manner and with the same effect as if set forth herein at length and shall
have the meaning set forth in such instrument(s) unless otherwise defined
herein.
2.2 Revolving Loan. The Loan is a revolving line of credit and
the principal amount outstanding under the Loan may increase or decrease
from time to time as Borrower draws and repays Loan funds thereunder.
Provided Borrower is not in default, outstanding amounts under the Loan may
be repaid or reborrowed from time to time subject to the terms, conditions
and limitations set forth in this Agreement, but the principal balance of
the Loan outstanding from time to time shall not exceed the original,
principal amount of the Note.
2.3 Loan Purpose. The purpose of the Loan is to finance the
acquisition and development of single family and townhouse lots and the
construction of Units thereon in certain Approved Projects known as Lago Mar
South, Lago Mar South - First Addition, Lago Mar South - 2nd Addition and
Sunlake Estates all located in Dade County, Florida, and Chapel Trail,
Pembroke Shores and Miramar Gardens, all located in Broward County, Florida,
and Subsequently Approved Projects. Loan proceeds in the amount of
$8,000,000.00 shall be used solely to fund acquisition, development and
construction of Units described above for which Bank has approved the Plans.
In addition to the Loan, $5,000,000.00, shall be available for standby
letters of credit to serve a performance bonds for the Approved Projects and
Subsequently Approved Projects (and for the letter of credit guaranty of
payment in the amount of $2,300,000.00 to the master developer for the
Pembroke Shores project).
2.4 Borrowing Base Availability: Limitations on Use of Loan
Proceeds. Bank will disburse Loan proceeds for the purposes set forth above
subject to the terms and conditions of this Loan Agreement and the following
limitations. Availability for the Construction Line and Letters of Credit
shall not exceed the sum of the amounts determined by the following
formulas, less any amount of issued Letters of Credit.
(a) Miramar Gardens: Twenty (20%) percent of the purchase price
of the real property.
(b) Land Under Development: Fifty (50%) percent of Cost. [For any
new land parcel to continue to be included in the Borrowing Base, final site
plan development must be submitted for approval to the appropriate county
within ninety (90) days, approval must be received within one hundred eighty
(180) days, and development must start within ninety (90) days of final site
plan approval on the initial phase of each project.]
(c) Fully Developed Lots: ("Fully Developed Lots" are defined as
lots upon which a Certificate of Occupancy for a completed dwelling can be
obtained.) Sixty five (65%) percent of Cost.
(d) Site Development: Seventy five (75%) percent of development
Costs per project.
(e) Direct Overhead: Seventy five (75%) percent of Costs per
project.
(f) Construction: One hundred percent (100%) of Cost.
To the extent that the total of advances outstanding under the Borrowing
Base at any time exceeds the Borrowing Base Availability, Borrower shall
within ten (10) days written notice from Bank prepay the Loan to such an
extent. Borrower's investments in subsidiaries, affiliates and joint
ventures will be excluded from the Borrowing Base (except for payments made
under the master development contract for improvments associated with HHP
Venture, a Florida partnership, for the development of Pembroke Shores).
2.5 Letters of Credit. Bank will issue standby letters of credit
for Borrower to serve as performance bonds for Approved Projects in amounts
not to cumulatively exceed $5,000,000.00. All Letters of Credit issued
shall be reduced and/or cash secured so as not to exceed the amount
available under the Borrowing Base. Issued Letters of Credit shall be
deducted from the Borrowing Base Availability to determine amounts available
for funding under the Construction line. No Letter of Credit may have an
expiry beyond thirty (30) days before the maturity of the Loan unless such
Letter of Credit is cash secured.
2.6 Construction Line Limitations. The following limitations
shall apply to the use of Loan proceeds for the construction of Units under
the Construction line:
(a) Proceeds for the construction of Units shall be limited to
fifteen (15) single family Spec and Model Units per Approved Project, not to
exceed forty five (45) in the aggregate, and a total of fifteen (15)
townhouse Spec and Model Units, at any one time, with the balance of
proceeds available for the construction of Pre-Sold Units.
(b) If the Borrower exceeds the limits set forth in Paragraph
2.6(a), then additional Spec and Model Unit construction shall be excluded
from the Borrowing Base. All Pre-Sold Units upon which the sales contract
has been canceled due to the default of the buyer and which are available
for sale, shall become designated as a Spec Unit.
(c) Excluding Model Units, each individual Unit financed under
the Loan shall only be included in the Borrowing Base for a period not to
exceed twelve (12) months from the date construction commences.
2.7 Loan Maturity. The maturity date of the Loan is August 29,
1996. On the Loan Maturity Date, all sums outstanding under the Loan shall
be immediately due and payable, and the Bank's obligation to fund shall
cease and terminate. At Borrower's request and at Bank's option, the Loan
may be extended annually to maintain a two (2) year term. Request for such
an extension must be made after receipt by Bank of the annual audited
statement of the Borrower and at least ninety (90) days prior to each
anniversary date of the Note.
2.8 Future Availability Under the Construction Line. At
Borrower's request and provided Borrower is not in default under the Loan,
Bank shall increase the amount of the Construction Line to $12,000,000.00.
ARTICLE III
Criteria for Acquisition and Development Financing
Bank's obligations to create Approved Projects shall be expressly
conditioned upon satisfaction of the following conditions, or execution
and/or delivery to Bank of the following items, all in form and substance
reasonably satisfactory to Bank and Bank's counsel:
3.1 Plans and Specifications. As to the development of Land and
as to each Unit type, two sets of the Plans which have been approved by
Borrower. The Plans must include architectural, structural, mechanical,
plumbing, electrical and site development (including storm drainage, utility
lines, mitigation, erosion control and landscaping) plans and
specifications, as appropriate. The Plans for Units must have been
architecturally and structurally approved by prevailing authorities and
agencies and the existing homeowners' associations (if applicable). The
Plans for site development must incorporate the recommendations of the soil
testing report.
3.2 Concurrency Approval. Documentary evidence, satisfactory to
Bank and its counsel, that Borrower's development proposal for the Approved
Project and the construction of the Improvements are consistent with
concurrency requirements and other applicable provisions of the local
comprehensive plan and local land development regulations, as defined and
required by the Local Government Comprehensive Planning and Land Development
Regulations Act, Florida Statutes Section 163.3161, et seq.
3.3 Zoning Evidence: Written evidence from the appropriate
governmental authority that the zoning of the property is proper for its
intended use.
3.4 Utilities Evidence. Written Evidence from the appropriate
Water Management District and all other necessary utility providers that
there is available capacity for water and sewer service to the Units as well
as the availability of electric and telephone service to the proposed Units.
3.5 Plat Approval. A copy of the recorded plat or if such plat
is unrecorded, a copy of the approved preliminary plat.
3.6 Soil Tests. A certificate of a qualified engineer addressed
to Bank stating that any necessary soil testing has been performed and soil
conditions are satisfactory for the proposed development.
3.7 Cost Breakdown. A detailed cost breakdown for all costs
associated with the construction of Units (all product types) and site
development. Upon receipt of the foregoing, Bank will order the appraisal
(as described in Paragraph 4.24 (with respect to any new product type, an
appraisal for such type must be received and approved by Bank prior to being
eligible for inclusion in the Borrowing Base).
3.8 Profit Proforma. A written proforma outlining the
anticipated profit associated with the intended development and construction
of Units on the property.
3.9 Environmental Report. An environmental assessment of the Land
and Improvements performed at Borrower's expense by a licensed engineer or
other environmental consultant satisfactory to Bank stating that:
(a) The Land is not located within any area designated as a
hazardous substance site by any governmental authority;
(b) No hazardous or toxic wastes or other materials or
substances regulated, controlled, or prohibited by any federal, state, or
local environmental laws, including but not limited to asbestos, are located
on the Land or Improvements; and
(c) The Land has not been cited or investigated in the past for
any violation of any such laws, regulations, or ordinances.
If the Environmental assessments shall reveal any condition
unacceptable to Bank, Bank shall be relieved of any obligation to approve
the project for funding under the Loan. If the environmental assessment
recommends, or if Bank so requests, in its sole and absolute discretion, a
Phase II audit, additional testing or remedial action, Borrower, at its sole
cost and expense shall promptly conduct such additional audits and testing
and/or provide evidence that all necessary actions have been taken to remove
any hazardous substance contamination and/or restore the site to a condition
acceptable to Bank and all governmental agencies.
3.10 Site Plan. Final site plan development must be submitted for
approval to the appropriate County within ninety (90) days, approval must be
received within one hundred eighty (180) days, and development must start
within ninety (90) days of final site plan approval on the initial phase of
such project.
3.11 General Conditions. Subsequent Approved Projects shall be
subject to the following criteria for inclusion under the Borrowing Base:
(a) Location. Acquisition financing of projects outside of Dade
and Broward Counties may be approved by Bank on an individual basis in
Bank's sole and absolute discretion.
(b) Land Acquisition Costs. Land Acquisition Costs in excess of
$5,400,000.00 per project shall be excluded.
(c) Developed Lot Acquisition Costs. Developed lot acquisition
costs in excess of $7,500,000.00 per project shall be excluded.
(d) Development Costs. Development costs in excess of
$6,500,000.00 per project shall be excluded.
(e) Lot Costs. The costs of developed lots shall not exceed
$50,000.00 per lot.
(f) Sales Price. The sales price of the proposed product shall
not exceed $200,000.00 per Unit.
(g) Fee Simple. The product must be for sale with fee simple
title.
(h) Height. The single family product must not exceed two (2)
stories in height however Bank will consider three (3) story products at
Borrower's request.
ARTICLE IV
General Pre-Closing Conditions
Bank's obligations to close the loan shall be expressly conditioned
upon satisfaction of the following conditions, or execution and/or delivery
to Bank of the following items, all in form and substance reasonably satis-
factory to Bank and Bank's counsel:
4.1 Note. The original Note, properly executed, shall have been
delivered to Bank.
4.2 Mortgage. The Mortgage, which shall be a first lien on the Land
and Improvements, shall have been properly executed in recordable form and
delivered to Bank.
4.3 Indemnity: The Hazardous Substance Certificate and Indemnifica-
tion Agreement, properly executed by Borrower shall have been delivered to
Bank.
4.4 Financing Statements. The Financing Statements on forms approved
for filing in the appropriate state and local filing offices shall have been
properly executed.
4.5 Title Policy. A standard ALTA mortgagee title policy insuring the
lien of the Mortgage as a first priority lien encumbering the Land and
Improvements from a company or from companies approved by Bank (including
any reinsurance agreements required by Bank, together with direct access
provisions in favor of Bank): (1) providing coverage for the full principal
amount of the Loan, (2) providing a variable rate endorsement, if appropri-
ate, the Form 9 Endorsement, the Revolving Loan Endorsement, the Survey
Endorsement, and any other endorsements requested by Bank, (3) deleting all
"standard" exceptions except taxes for the current year, (4) insuring all
appurtenant easements, (5) containing no bankruptcy or creditors' rights
exceptions or exclusions; and (6) containing no title exceptions not
approved by Bank.
4.6 Title Exceptions. Copies of all documents creating exceptions to
the Title Policy.
4.7 Survey/Recorded Plat. If the Land is unplatted, three copies of a
recent boundary survey of the Land prepared by a registered land surveyor
acceptable to Bank and certified to Bank, the title insurance company, and
Borrower. Such survey shall contain a certification as to the applicable
flood zone(s) for the Land, and a certification that the survey was made in
accordance with the Minimum Technical Standards for Surveys as set out in
Chapter 21HH-6, Florida Administrative Code. If the Land is platted, a copy
of the recorded plat for the Land, together with a certification that the
plat is the most recent recorded plat on record.
4.8 Flood Hazards. Evidence as to whether or not the Land is located
within an area identified as having "special flood hazards" as such term is
used in the federal Flood Disaster Protection Act of 1973.
4.9 Flood Hazard Insurance. If all or any part of the Improvements is
or is to be located in an area having "special flood hazards", a flood
insurance application or policy naming the Bank as mortgagee must be
submitted to Bank. Satisfactory evidence of premium payments must also be
provided.
4.10 Builder's Risk Insurance. A builder's risk insurance policy
meeting the requirements set forth in the Mortgage.
4.11 Liability Insurance. Liability insurance meeting the requirements
set forth in the Mortgage.
4.12 Borrower's Organizational Documents and Resolutions. A certified
copy, from the appropriate governmental body or corporate officer, of
organizational documents of Borrower, and any partner of Borrower, as
appropriate, certifying that Borrower and/or such partner (i) is duly
organized, validly existing, and in good standing under the state of its
existence, (ii) has the authority under such documents and laws to enter
into the Loan as contemplated by the Loan Documents, and (iii) has made all
appropriate filings, including without limitation, qualification to do
business in the State of Florida, necessary to enter into the Loan and
execute the Loan Documents. Additionally, Borrower shall provide (i) if
appropriate, certified resolutions or other internal documents or writing of
Borrower and such partner evidencing that Borrower and such partner have
taken all requisite organizational action, and received all organizational
approvals necessary to enter into the Loan and execute the Loan Documents,
and (ii) such other documents or writings as Bank may request.
4.13 Fictitious Name Certificate. If Borrower utilizes or intends
to utilize a fictitious name, a copy of the Fictitious Name Certificate of
the Borrower issued by the Florida Secretary of State.
4.14 Attorney's Opinion: The written opinions of counsel to
Borrower addressed to Bank acceptable to Bank and Bank's counsel as to those
matters required by Bank. The attorney's opinion, with respect to the
enforceability of remedies provided in any instrument may be made subject to
or affected by, applicable bankruptcy, moratorium, reorganization,
insolvency or similar laws from time to time in effect affecting the rights
of creditors generally. As to matters of fact, such opinions may be
qualified to the extent of the knowledge of such counsel based upon inquiry
and reasonable investigation.
4.15 Restrictive Covenants. A copy of the executed and recorded
homeowners' documents, filed articles of incorporation for the homeowners'
associations, executed by-laws for the associations, and any other related
documents as Bank may request for the Approved Projects.
4.16 Assignment of Contracts and Plans. Assignment for the benefit
of the Bank of the Engineer's and Architect's contracts and Plans.
4.17 Permits and Governmental Approvals. A copy certified by
Borrower of all applicable permits required for development and completion
of the Improvements, including, without limitation, all site development and
building permits, and all governmental approvals received to date for the
completion of the Approved Project.
4.18 Taxpayer Identification Number. Borrower's federal taxpayer
identification number.
4.19 Borrower's Affidavit. An affidavit of Borrower regarding the
absence of any other parties in possession of the Land, stating that a
notice of commencement has not been filed with respect to the Property, the
non-commencement of construction, and such other matters as may be requested
by Bank.
4.20 Loan Fees. Borrower agrees to pay to Bank a commitment fee in
the amount of $60,000.00 for the first year of the initial two (2) year
period and agrees to pay an additional $60,000.00 loan fee on the
anniversary date of the Loan. Borrower further agrees to pay to Bank an
additional commitment fee in the amount of one half(.50%) of one percentage
point for each one (1) year extension granted, payable at the exercise of
the extension such that for every year that the Commitment is outstanding,
the Bank shall receive one half (.50) of one percentage point. With respect
to the Letters of Credit, Borrower agrees to pay to Bank a fee equivalent to
one half (.50%) of one percent of the amount of each Letter of Credit issued
under the Loan. An additional one half (.50%) of one percent shall be due
and payable on each anniversary date of Letters of Credit issued under the
$5,000,000.00 sublimit.
4.21 Facilities For Handicapped. Bank shall have received and
approved evidence, satisfactory to Bank, that the plans and specifications
do, and the improvements, when constructed, will comply to the extent
applicable with all legal requirements regarding access and facilities for
handicapped or disabled persons, including, without limitation, and to the
extent applicable, Part V of the Florida Building Construction Standards Act
entitled "Accessibility by Handicapped Persons", Chapter 553, Fla Stat.; the
Federal Architectural Barriers Act of 1988 (42 U.S.C. Section 4151, et.seq.),
The Fair Housing Amendment Act of 1988 (42 U.S.C. Section 3601, et.seq), The
Americans With Disabilities Act of 1990 (42 U.S.C. Section 12101 et. seq.),
and The Rehabilitation Act of 1973 (29 U.S.C. Section 794).
4.22 Cost Breakdown. A detailed cost breakdown for each Unit
type.
4.23 Contract. The proposed contract for sale and purchase of a
completed Unit, and other documents to be used by Borrower to market and
convey Units in the Approved Projects.
4.24 Appraisals. Appraisals will be required with values for "as
is" and "as if fully completed." A ceiling will be established for costs
eligible for inclusion in the Borrowing Base on a project by project basis
as follows: fifty (50%) percent of "as is" for land held for development and
seventy five (75%) percent of "as if" for the combined cost of land,
development and direct overhead. Master appraisals will be required at
Borrower's expense for product offered for sale and a ceiling will be
established for construction costs eligible for inclusion in the Borrowing
Base as follows: budgeted and actual construction costs per unit cannot
exceed eighty (80%) percent of appraised value less the average lot cost
(such average lot cost being determined by including land, development and
direct overhead costs on a per unit prorata basis).
4.25 Miscellaneous. All other Loan Documents or items that are
customarily provided in loan transactions of this type and all other loan
documents or items set forth in the Commitment.
ARTICLE V
Site Development and Construction Disbursements
Bank agrees that it will, from time to time, and so long as there shall
exist no Default Condition or Default, but not more frequently than weekly,
disburse Loan proceeds for site development and the construction of Units in
the Approved Projects, subject to the terms and conditions of this
Agreement.
5.1 Request for Initial Funding for Commencement of Site Develop-
ment/Construction of a Unit. When Borrower wishes to commence funding for
site development or construction of a particular Unit, Borrower shall submit
a draw request, accompanied by all items required in Articles IV and VI, to
the extent applicable. All supporting documentation shall be submitted no
later than five days prior to the requested date of the initial
disbursement. No disbursement by Bank shall constitute an approval or
acceptance by Bank of any construction work or constitute a waiver by Bank
of any conditions precedent to any future disbursements. Bank shall not be
obligated to approve any disbursement of Loan funds for purposes other than
those contemplated in this Agreement. The conditions set forth in Article
VI hereof must be satisfied before Bank will make the first advance or
disbursement for the construction of a Unit, and the conditions set forth in
Article VII hereof must be and remain satisfied before Bank will make each
subsequent disbursement or advance for Unit construction or Site
Development, as applicable.
5.2 Interim Draw Requests. No later than five (5) days prior to
each Loan disbursement by Bank, Borrower must submit to Bank a Draw Request,
which shall include or be accompanied by the requirements set out herein for
draws.
5.3 Disbursement Amounts. Following receipt of a Draw Request
and after Bank has verified construction in place, Bank shall determine the
amount of the disbursement it will make in accordance with the Borrowing
Base Availability, provided no Default Condition or Default exists. Upon
request by Bank related to the site development or specific Units, Borrower
will provide detailed job cost schedules reflecting costs in place and
budgeted line items.
5.4 Equity Requirements. Intentionally deleted.
5.5 Option to Disburse Funds to Pay Obligor or Contractors. If a
Default shall exist, at its option, Bank may make Loan disbursements
directly to any obligor of the Debt when such party shall be performing the
obligations of Borrower hereunder or the general contractor or any unpaid
subcontractor, laborer or material supplier providing labor, services or
materials in connection with the construction of the Improvements, and the
execution of this Loan Agreement by Borrower shall, and hereby does,
constitute an irrevocable direction and authorization to Bank to so disburse
the funds. No further direction or authorization from Borrower shall be
necessary to warrant such direct disbursements and all such disbursements
shall be secured by the Security Documents as fully as if made to Borrower,
regardless of the disposition thereof by the general contractor, any
subcontractor, laborer or material supplier so paid.
5.6 Inspection Fees. The cost to Borrower for inspecting the
construction work in place will be $400.00 per month for all Approved
Projects. In the event the Construction component of the Borrower Base is
not needed to support funding under the Loan, Bank will waive such
inspection fee.
5.7 Engineer's Certification. Borrower's in-house engineer (or
the president or any vice president of the Borrower) will certify each
Borrowing Base report with respect to all costs incurred for site
development, the actual costs of work in place and that the remaining costs
to complete each project's site development are within the budgets submitted
by Borrower to Bank. With respect to Pembroke Shores and any other Approved
Project for which an independent engineer has been hired, Bank will be
provided with copies of the site development draw requests reflecting work
in place as certified by said Engineer.
ARTICLE VI
Conditions Precedent to First Disbursement for a Unit
Bank shall not be obligated to make the first Loan disbursement for
construction of a particular Unit until all of the following conditions have
been satisfied by proper evidence, execution and/or delivery to Bank of the
following items, all in form and substance reasonably satisfactory to Bank
and Bank's counsel:
6.1 There shall be no Loan Default or Default Condition.
6.2 The Land shall be free and clear of all liens and
encumbrances except for Bank's Mortgage, the Permitted Exceptions and any
lien approved by Bank.
6.3 All conditions precedent as set forth in Articles IV and V,
as applicable, shall have been satisfied.
6.4 Bank shall have received an appraisal for such Unit, in form
and substance satisfactory to Bank, indicating its "completed value".
6.5 If the Unit is a Pre-Sold Unit, the requirements necessary
for establishing a Firm Contract shall have been met.
6.6 Bank shall have received satisfactory evidence that the Unit
is covered by Borrower's builder's risk insurance policy (subsequent to the
installation of the tie beam but prior to truss installation); if the Unit
is located in a flood hazard zone, Bank shall have received satisfactory
evidence that the Unit is covered by Borrower's flood insurance policy or
that application for flood insurance has been made. No advance will be made
toward the construction of the Unit subsequent to the slab being poured
prior to the effective date of the flood hazard insurance application or
policy.
6.7 Bank shall have received a true and correct copy of the Plans
for that Unit type.
6.8 Bank shall have received a copy of the Notice of Commencement
recorded for that Unit under the Florida Construction Lien Act, which Notice
of Commencement must have been recorded after the recording of Bank's
Mortgage.
6.9 If such Unit is not already encumbered by Bank's Mortgage, a
spreader agreement, spreading the lien of Bank's Mortgage to the land upon
which the Unit will be constructed, and providing Bank with a first priority
lien, not subject to any exceptions to title which are unacceptable to Bank.
Borrower shall have obtained, at its own expense, an endorsement to Bank's
title policy insuring that the lien of the Mortgage is a first priority lien
encumbering the Unit without any title exceptions which have not been
approved by Bank.
6.10 Bank shall have received and approved Borrower's Draw
Request.
6.11 There shall not be any construction prior to Bank's receipt
of a recorded Notice of Commencement with respect to that Unit and no
material shall have been provided to the portion of the Land where the Unit
will be located which will be used in the construction of that Unit.
6.12 Bank is satisfied that all roads necessary for ingress and
egress to the Unit and the Approved Project have been completed and that all
utility services necessary for the construction of the Improvements are
available at the boundaries of the Land and the lot upon which the Unit will
be constructed is in a condition which permits construction of a Unit on the
lot.
ARTICLE VII
Conditions Precedent to Disbursements
Following the First Disbursement
7.1 Periodic Disbursements. Bank shall not be obligated to make
any Loan disbursements for site development or construction of a Unit after
the first disbursement until the following requirements and conditions have
been and remain satisfied as of the date of each such disbursement:
(a) The real estate is free and clear of all liens and
encumbrances except for the Bank's Mortgage, Permitted Exceptions and any
lien approved by Bank.
(b) All evidence, statements and writings required to be
furnished under the terms of this Agreement are true and omit no material
fact, the omission of which may make them misleading.
(c) All monies previously advanced have been used solely to pay
for financing, labor, materials and fixtures used or to be used in the site
development or construction of Improvements.
(d) No mechanic's or materialmen's lien or other encumbrance
shall have been filed and remain in effect against the Land or Improvements.
(f) No Event of Default, as herein defined, shall have occurred.
(g) The building permits for the site development and
Improvements have been issued and are posted at the respective construction
sites.
(h) The representations and warranties made in the Loan Documents
must be true and correct on and as of the date of each advance.
(i) As to Unit Construction, as a condition to further disburse-
ments after a Unit's foundation has been completed, Borrower shall deliver
to Bank a foundation survey consistent with the requirements set forth in
Section 4.8 hereof, in form and substance satisfactory to Bank.
7.2 Limitations on Disbursements. If any of the above conditions
are not satisfied, as determined by Bank, in its sole discretion, Bank shall
not be obligated to disburse any Loan proceeds. In addition to the
foregoing requirements, Bank reserves the right to require the Borrower to
furnish prior to each disbursement at Borrower's expense: (a) a waiver of
lien or release of lien from any contractor, subcontractor, supplier,
laborer or other lienor who has furnished labor, materials, or other
services for construction of the Improvements or who has issued a Notice to
Owner or filed a claim of lien; (b) a certificate from the Architect,
Engineer, or Bank's inspector, certifying that the Improvements have been
completed to date in accordance with the plans and specifications or have
been substantially completed in accordance with the plans and specifica-
tions; (c) an as-built survey; (d) any permits, certificate of occupancy,
licenses, or other evidence of compliance with applicable laws and building
codes; (e) an endorsement to Bank's title policy or other form of title
update satisfactory to Bank evidencing that the Mortgage continues to be a
first lien on the Property and that no intervening liens or other
encumbrances not consented to by Bank have been filed against the Property
since the recordation of the Mortgage; (f) affidavit of the Borrower that
each person or entity supplying materials or performing labor or services in
connection with the Improvements has been paid in full; (g) such other items
as may be required by the Bank in its discretion.
7.3 Requirements for Disbursement at Unit Completion. At Bank's
request, prior to the final disbursement for a Unit, Borrower shall provide
the following items:
(a) The unconditional certificate of occupancy or final certifi-
cate of inspection by appropriate Governmental Authority for the Unit has
been delivered to Bank;
(b) The General Contractor's final waivers and releases of lien
made by parties satisfactory to Bank shall have been delivered to Bank.
(c) Three (3) copies of an "as-built" survey prepared by a
registered surveyor consistent the survey requirements set forth in this
Agreement and additionally detailing all of the Improvements in place.
(d) Two (2) sets of detailed as-built Plans approved and
identified as such in writing by Borrower, the Architect and the General
Contractor. The two sets must include the Plans for all architectural,
structural, mechanical, plumbing and electrical work.
7.4 Requirements for Disbursement at Site Development Completion.
At Bank's request, prior to the final disbursement for site development of
an Approved Project or Subsequently Approved Project, Borrower shall provide
the following items:
(a) Proof that the site development has been completed in
accordance with the Plans and Bank has received an inspection report
performed by the Construction Inspector in substance satisfactory to Bank
and Construction Inspector's written approval of the final Draw Request.
(b) Certificates of completion issued in satisfactory form to
Bank by the Engineer and the General Contractor including the AIA G704
Certificate of Substantial Completion.
(c) The General Contractor's final waivers and releases of lien
made by parties satisfactory to Bank shall have been delivered to Bank.
(d) Three (3) copies of an "as-built" survey prepared by a
registered surveyor consistent the survey requirements set forth in this
Agreement and additionally detailing all of the Improvements in place.
(e) Two (2) sets of detailed as-built Plans approved and
identified as such in writing by Borrower, the Engineer and the General
Contractor. The two sets must include the Plans for all site development
(including without limitation, mitigation, storm drainage, utility lines and
landscaping) work.
ARTICLE VIII
The Borrower's Covenants and Agreements
8.1 Payment and Performance. Borrower will pay when due all sums
owing to Bank under the Note, this Loan Agreement, the Mortgage and the
other Loan Documents, and perform all obligations as outlined or referenced
therein.
8.2 Further Assurances. On demand by Bank, Borrower will do any
act and execute any additional documents reasonably required by Bank to
secure the Loan, to confirm or perfect the lien of the Security Documents,
including, but not limited to, additional financing statements or continua-
tion statements, new or replacement notes and/or Security Documents and
agreements supplementing, extending or otherwise modifying the Loan Docu-
ments, certificates as to the amount of the indebtedness evidenced by the
Note from time to time, and certificates that Borrower knows of no defaults
by or defenses or set-offs against Bank.
8.3 Construction. The Borrower will: (a) continue conscien-
tiously the construction of the Improvements; (b) not discontinue or permit
the discontinuance of work on the Improvements unless delayed by the event
of unavailability of materials at reasonable cost, strikes, other labor
problems, governmental orders or other events which would support a defense
by Borrower based upon impossibility of performance for reasons beyond the
control of Borrower; (c) in any event, complete the Improvements, including
installation of any required items of personalty in substantial compliance
with the Plans, free and clear of liens or claims of liens for material
supplied or for labor or services performed in connection with the construc-
tion of the Improvements; and (d) not file, prior to the recording of the
Mortgage, a Notice of Commencement (not previously terminated or agreed to
by Bank) for any Approved Project.
8.4 Payment of Contractors. Borrower covenants to advise Bank
immediately, and in writing if Borrower receives any claim of lien in
connection with any services, labor or materials furnished in connection
with the construction of Units, and to remove such liens within ten (10)
days of the date of filing. Borrower shall comply with the Construction
Contract Prompt Payment Law contained in the Florida Construction Lien Law,
Chapter 713, Fla. Stat.
8.5 Fees and Expenses. Whether or not the Loan is made or all
Loan proceeds disbursed hereunder, Borrower agrees to pay all expenses
incurred by Bank, or by Borrower in order to meet Bank's requirements, in
connection with the Loan, including without limitation, commitment and
renewal fees or deposits to Bank, fees for appraisal, reappraisal, survey,
recording, title insurance, builder's risk and other insurance premiums,
brokerage commissions and claims of brokerage, property taxes, intangible
taxes, documentary stamp taxes, architect's fees, engineer's fees,
inspection fees, the General Contractor's fees, and such legal fees and
costs incurred by Bank in connection with the making and administration of
the Loan, the enforcement of Bank's rights under the Loan Documents, the
renewal, modification, or extension of the Loan, or in connection with
litigation or threatened litigation by a third party which arises because
Bank made the Loan. Any such amounts paid by Bank shall constitute part of
the indebtedness which is secured by the Security Documents, and shall be
due and payable upon demand.
8.6 Insurance. Borrower covenants to maintain insurance as
required herein and in the Mortgage.
8.7 Taxes and Insurance. Upon the request of Bank, Borrower
shall submit to Bank such receipts and other statements which shall
evidence, to the satisfaction of Bank, that all taxes, assessments and
insurance premiums have been paid in full.
8.8 Title Policy. When requested by Bank during the Loan term,
Borrower shall provide an endorsement to the Title Policy certifying that
(a) real estate taxes due through such date have been paid; (b) no
additional restrictions or encumbrances are of record which have not been
approved by Bank; and (c) no liens or lis pendens have been filed against
the Land or the Improvements. In the event that periodic title endorsements
are not required to be issued in connection with the title insurance,
Borrower agrees to cause title endorsements to be issued as reasonably
required by Bank. When requested, after the final disbursement of Loan
proceeds, Borrower will provide Bank with an endorsement to the Title Policy
insuring the principal balance of the Loan and containing no exceptions not
approved by Bank.
8.9 Additional Construction. Borrower shall not construct or
permit the construction of any improvements on the Approved Projects other
than those Improvements described in the Plans, or approved in writing by
Bank.
8.10 Reporting Requirements. During the term of the Loan Borrower
shall submit to Bank the following:
(a) Monthly, within twenty (20) days of the end of each month, a
Borrowing Base Certificate executed by Borrower certifying the value of the
eligible assets in form and content acceptable to Bank.
(b) Monthly, within twenty (20) days of the end of each month,
internally prepared financial statement of the Borrower, including a balance
sheet and income statement.
(c) Monthly, within twenty (20) days of the end of each month,
inventory status reports for all active projects, reflecting the number of
units sold, closed and under construction, along with a current price list
as set forth in the Borrowing Base Schedule "C" attached hereto as Exhibit
"4".
(d) Annually, within one hundred twenty (120) days of year end,
by April 30, Borrower will provide Bank with current audited financial
statements and such audit shall include verification of Borrowing Base asset
allocations.
8.11 Appraisals. In addition to the appraisals required by Bank
in connection with the disbursement of Loan proceeds for the development of
lots and construction of Units, updated appraisals shall be prepared at
Borrower's expense when requested by Bank or when required in connection
with any extension options in the Note. Such appraisals shall be prepared
in accordance with written instructions from Bank and by a professional
appraiser selected and engaged by Bank. Borrower shall cooperate fully with
the appraisal process and shall allow the appraisers reasonable access to
the Approved Projects.
8.12 Hazardous Substances. Borrower affirms and incorporates by
reference the representations, warranties, terms, conditions, and
indemnities contained in that certain Hazardous Substance Certificate and
Indemnification Agreement of even date herewith.
8.13 Leases Affecting Approved Project. Borrower shall not,
without the express prior written consent of Bank, enter into any lease
affecting the Approved Project or any part thereof.
8.14 Assignment of Contracts. As additional security for the Loan
and for the performance by Borrower of all of its obligations hereunder,
Borrower hereby assigns to Bank all of Borrower's interest in any and all
contracts, agreements, permits, licenses, approvals, or other documents or
writings relating to the construction, leasing, management or operation of
the Improvements, including but not limited to the Construction Documents,
the Architect's contract, the Engineer's contract, and the Plans. This
assignment shall not, however, be deemed to impose upon Bank any of
Borrower's obligations under any such contract. Incident to the assignment
of the Construction Documents, the Architect's contract, the Engineer's
contract, and the Plans, Borrower will fulfill the obligations of Borrower
thereunder, enforce the performance thereof and give immediate notice to
Bank of any default by the Architect, the Engineer, or the General
Contractor thereunder. Further, Borrower will not, without the prior
written consent of Bank (i) materially modify, or amend the terms of the
Architect's contract, the Plans, Engineer's contract, or the Construction
Documents; or (ii) waive or release the performance of any material
obligation to be performed by the Architect, the Engineer, or the General
Contractor thereunder.
8.15 Subordinate Financing. Borrower shall not permit there to
exist nor shall Borrower obtain any subordinate financing of the Land or any
other property granted as security for the Loan.
8.16 Transfer of Property of Borrower. The Borrower shall not
permit any change in its ownership, its corporate or trade name, the nature
and operation of its business or the nature and character of the Borrower or
the Approved Projects, nor shall the Borrower sell, assign, transfer,
hypothecate or dispose of all or any portion of the Land, Improvements, or
the Approved Projects, except as may be permitted hereby, without the prior
written consent of Bank, which consent shall be withheld or granted in
Bank's sole and absolute discretion.
8.17 Partial Releases of Property. Provided the Borrower is not
then in Default hereunder, under the Note, the Mortgage or any other Loan
Document, Bank will provide partial releases in respect of its interest
under the Mortgage and other Loan Documents (i) as to any Unit being
conveyed to a single purchaser, for no additional release price and (ii) as
to land, lots or more than one unit being conveyed to a single purchaser for
a release price acceptable to Bank but at an amount not to exceed the
eligible amount for funding for such property shown on the most recent
Borrowing Base Certificate. Payments made for releases shall be applied by
Bank against the outstanding principal of the Loan unless the release
payment is calculated to take into account allocable interest or other
constituent costs or accruals, in which event Bank may apply the release
payment in accord with such calculations. Borrower agrees to reimburse Bank
for all out-of-pocket fees and costs, including, without limitation, legal
fees, in connection with the granting of such partial releases and shall
provide Bank with any and all information requested by Bank with respect to
the Unit to be released.
8.18 Disclosure of Contracts and Notices. Borrower shall disclose
to Bank upon demand, the names of all persons with whom Borrower has
contracted or intends to contract for any construction or for the furnishing
of labor or materials therefor, and when required by Bank obtain the
approval by Bank of all such persons. Borrower shall, at all times during
the construction period of any Improvements, provide to the Bank, within 10
days of the Borrower's receipt thereof, copies of all notices to owner,
claims of lien, and demands for sworn statement of account, issued by any
party, whether pursuant to any notice of commencement or otherwise, in
connection with the Approved Projects or the Land.
8.19 Construction Lien Law Notification Requirements: Borrower
hereby authorizes Bank to provide written notices to Contractor and lienors
providing notices to owner pursuant to Section 713.3471(1)(a), Fla. Stat., and
Section 713.3471(2)(b), Fla. Stat., to the extent such notices are required by
law. Borrower hereby releases Bank and waives all claims it may have against
Bank for damages Borrower may incur as a result of Bank's failure to deliver
said notices. Borrower hereby agrees to provide all required notices to the
Contractor and all lienors providing notices to owner in compliance with Section
713.3471(2)(a), Fla. Stat., in a timely fashion.
8.20 Amendments to Cost Breakdown. If Borrower amends the Cost
Breakdown or reallocate items in the Cost Breakdown such that written notice to
the Contractor and lienors serving notices to owner would be required under
Section 713.3471(2)(a), Fla. Stat. (1992), Borrower agrees to provide written
notice to the Contractor and all required lienors in compliance with Section
713.3471(2)(a), Fla. Stat. Lender shall not be obligated to make any
disbursements of Loan proceeds until Borrower has provided Lender with copies of
any required notices to the Contractor and required lienors in compliance with
Section 713.3471(2)(a), Fla. Stat., together with evidence that such notices
have been countersigned by the Contractor and all lienors who are required to
receive the notice under Section 713.3471(2)(a), Fla. Stat., thereby confirming
receipt thereof.
8.21 Americans With Disabilities Act: Borrower covenants and
agrees that, during the term of the Loan, to the extent such Act is
applicable, the Improvements and Approved Projects will be in full
compliance with the Americans with Disabilities Act ("ADA") of July 26,
1990, 42 U.S.C Section 12191, et. seq.) as amended from time to time, and
the regulations promulgated pursuant thereto. Borrower shall be solely
responsible for all ADA compliance costs, including without limitation,
attorneys' fees and litigation costs, which responsibility shall survive the
repayment of the Loan and foreclosure of the Land and Improvements.
8.22 Regulation "Z". The Loan is exempt from the provisions of
the Federal Consumers Credit Protection Act (Truth-in-Lending Act) and
Regulation "Z" of the Board of Governors of the Federal Reserve System,
because Borrower is a person fully excluded therefrom, and/or because the
Loan is only for business or commercial purposes of Borrower and the
proceeds of the Loan are not being used for personal, household, family or
agricultural purposes.
8.23 Financial Covenants. Borrower at all times maintain its
financial condition as follows using generally accepted accounting
principles consistently applied, except to the extent modified by the
following definitions:
(a) Minimum Tangible Net Worth: Borrower's "Tangible Net Worth",
as defined as the aggregate of total shareholders' equity less any
intangible assets and any obligations due from shareholders, partners,
employees, and/or affiliates, shall not at any time be less than
$21,000,000.00.
(b) Ratio of Total Debt to Tangible Net Worth: The "Ratio of
Borrower's Total Debt to Tangible Net Worth", defined as the aggregate of
current liabilities and non-current liabilities (excluding contingent
liabilities) divided by Tangible Net Worth, shall not at any time exceed one
(1) to one (1). Borrower's investments in subsidiaries, affiliates and
joint ventures will be excluded from the Borrower Base and will be deducted
from Tangible Net Worth in calculating Debt/Tangible Net Worth coverage and
Minimum Tangible Net Worth ratios.
(c) Minimum Liquidity. Borrower's "Minimum Liquidity" as
measured by unrestricted cash, defined as all available cash excluding any
escrowed or pledged cash, shall not at any time be less than $1,000,000.00.
(d) Losses. No losses in excess of $1,000,000.00 shall be
incurred on an annual basis.
(e) Dividends. Borrower's dividends shall be limited to seventy
(70%) percent of the year end Net Profit.
(f) Additional Debt. No additional debt shall be incurred,
excluding Shareholder Debt which must be unsecured if present.
For purposes of this Section 7.24, "Related Parties" shall mean the partners
or shareholders of Borrower, or any corporations, trusts, partnership, or
other entities in which Borrower owns directly, or indirectly, a fifty one
(51%) percent interest.
8.24 Indemnifications. In connection with the making of the Loan,
Borrower shall indemnify and hold Bank and its directors, officers, agents,
employees and attorneys harmless from all liability, loss, expense or damage
of any kind or nature, including, without limitation, any suits,
proceedings, claims, demands, or damages (including attorneys' fees and
costs paid or incurred in connection therewith at both trial and appellate
levels), incurred or arising by reason of:
(a) the Commitment or the making of the Loan (except for
liability, loss, expense, or damage arising from the negligent or willful
misconduct of Bank);
(b) Any claim or action for the payment of any brokerage
commissions or fees which may be claimed to be payable in connection with
the Commitment; and
(c) the past, present or future handling, storage,
transportation, or disposal of hazardous substances upon the Property.
These indemnification shall survive the full payment and performance of
the obligations of the Borrower under the Loan Documents.
8.24 Lien Waivers. Prior to each Loan disbursement, at Bank's
request, Borrower shall provide lien waivers for any contractors,
subcontractor, or suppliers who have filed a Notice to Owner for work being
performed or materials being supplied on the Approved Projects.
ARTICLE IX
Representations and Warranties
9.1 Representations and Warranties. Borrower hereby represents
and warrants to Bank that:
(a) Representations and Warranties in Mortgage. All of the
representations and warranties contained in the Mortgage are true and
correct and are incorporated herein by reference as if set out in full.
(b) Other Financing. The Borrower has not (i) received any other
financing for the acquisition of the Land existing as of the date hereof for
which a lien equal to or superior to Bank's mortgage could be successfully
asserted, or (ii) received any other financing for the construction of the
Improvements.
(c) Plans. The Plans have been approved by the Borrower, the
Guarantors, and each appropriate Governmental Authority.
(d) Governmental Requirements and Other Requirements. Borrower
will cause the Units to be constructed in accordance with the Plans
submitted to and approved by Bank, and when so constructed the Land and the
Units do and shall comply with all covenants, conditions and restrictions
affecting the Land or any portion thereof, and do and shall comply with all
Governmental Requirements.
(e) Use of the Approved Projects. There is no (i) plan, study or
effort by any Governmental Authority or any nongovernmental person or agency
which may adversely affect the current or planned use of the Approved
Projects, or (ii) any intended or proposed Governmental Requirement
(including, but not limited to, zoning changes) which may adversely affect
the current or planned use of the Approved Projects.
(f) Moratorium. There is no moratorium or like governmental
order or restriction now in effect with respect to the Approved Projects
and, to the best of Borrower's knowledge, no moratorium or similar ordinance
or restriction is now contemplated.
(g) Permits. All permits, approvals and consents of Governmental
Authorities and public and private utilities having jurisdiction necessary
in connection with the Approved Projects have been issued and are in good
standing.
(h) Condition of Approved Projects. No defect or condition of
the Land or the soil or geology thereof exists which will impair the
construction, use, or the operation of the Approved Projects for their
intended purpose.
(i) Labor and Materials. All labor and materials contracted for
in connection with the construction of the Improvements shall be used and
employed solely on the Land in said construction and only in accordance with
the Plans.
(j) Surveys. The Survey, the recorded plat for the Land, and all
plot plans and other documents heretofore furnished by the Borrower to Bank
with respect to Land and Improvements are accurate and complete as of their
respective dates. There are no encroachments onto the Land and no improve-
ments on the Land encroach onto any adjoining property.
(k) Construction Costs. The Costs supplied to Bank are accurate,
true and correct and are satisfactory to Borrower.
(l) Sale of Securities. The Borrower has not instituted, caused
to be instituted or been a party to and, to the best of Borrower's
knowledge, there has not been any public offering with respect to the Land
and Improvements, or either, within the meaning of the Securities Act of
1933 and the Securities Exchange Act of 1934.
(m) Construction Lien Law. At the time of Closing and at the
time of the recording of the Mortgage, no work has been done on Improvements
or on the Approved Projects by the Borrower or anyone else acting for, or on
behalf of the Borrower, and no materials have been placed on the Property by
any materialmen or by anyone else which has not been paid current by the
Borrower. No Notice of Commencement (not previously terminated or agreed to
by Bank) has been recorded in the Public Records with respect to the
Approved Projects or the Land at the time of Closing. Borrower shall not
permit the commencement of any excavation or construction work of any nature
whatsoever, nor the delivery of any materials to the Approved Projects or
the Land, prior to the recordation and posting of a Notice of Commencement
as hereinafter set forth. Borrower shall execute an appropriate Notice of
Commencement and cause the same to be recorded in the public records of the
county in which the Property is located in sequence after the recording of
the Mortgage. Borrower shall post a certified copy of the Notice of
Commencement on the Approved Projects, in strict conformity with the Florida
Construction Lien Law. If construction is commenced prior to the
recordation and posting of the Notice of Commencement, or the Notice of
Commencement is recorded prior to the Mortgage, Bank shall have the absolute
right to cancel this Agreement and be immediately reimbursed by Borrower for
all disbursements of loan proceeds, together with expenses and reasonable
attorneys' fees incurred in connection therewith. Construction shall
commence within 90 days after recordation of the Notice of Commencement.
Construction shall proceed continuously in a workmanlike manner. Bank
reserves the right to require Borrower to furnish an itemized cost breakdown
for the Improvements to be constructed.
(n) Representations and Warranties in Other Loan Documents. All
of the representations and warranties contained in the other Loan Documents
are true and correct.
9.2 Reliance on Representations. The Borrower acknowledges that
Bank has relied upon the Borrower's representations and is not charged with
any knowledge contrary thereto that may be received by an examination of the
public records wherein the Land is located or that may have been received by
any officer, director, agent, employee or shareholder of Bank.
9.3 Certificate Regarding Loan Status. Upon Bank's request,
Borrower shall provide Bank with a written certification, certifying to such
matters related to the Loan as Bank may request, including, but not limited
to, a statement that Borrower is not in Default and that no Default
Conditions have occurred.
ARTICLE X
Events of Default
10.1 Default. The occurrence of any one or more of the following
events (time being of the essence as to this Loan Agreement and all of its
provisions) constitutes a "Default" by Borrower under this Loan Agreement,
and at the option of Bank, under the other Loan Documents:
(a) Scheduled Payment. Borrower's failure to make any payment
required under the Note when due. Notwithstanding the foregoing, Borrower
shall have a ten (10) day grace period as to the payment of interest and
other charges.
(b) Monetary Default. Borrower's failure to make any other
payment required by this Loan Agreement or the other Loan Documents when
due.
(c) Other. Borrower's failure to perform any other obligation
imposed upon Borrower by this Loan Agreement or any other Loan Document
within 30 days after written notice from Bank. This provision shall not be
construed to provide Borrower with any grace period in complying with any
obligations imposed on Borrower by the terms of the Loan Documents.
(d) Representation. Any representation or warranty of Borrower
contained in this Loan Agreement or in any certificate delivered pursuant
hereto, or in any other instrument or statement furnished in connection
herewith, proves to be incorrect or misleading in any adverse respect as of
the time when the same shall have been made, including, without limitation,
any and all financial statements, operating statements, and schedules
attached thereto, furnished by Borrower to Bank or pursuant to any provision
of this Loan Agreement.
(e) Bankruptcy. Borrower (i) files a voluntary petition in
bankruptcy or a petition or answer seeking or acquiescing in any reorganiza-
tion or for an arrangement, composition, readjustment, liquidation,
dissolution, or similar relief for itself pursuant to the United State
Bankruptcy Code or any similar law or regulation, federal or state, relating
to any relief for debtors, now or hereafter in effect; or (ii) makes an
assignment for the benefit of creditors or admits in writing its inability
to pay or fails to pay its debts as they become due; or (iii) suspends
payment of its obligations or takes any action in furtherance of the
foregoing; or (iv) consents to or acquiesces in the appointment of a
receiver, trustee, custodian, conservator, liquidator or other similar
official of Borrower, a general partner of Borrower for all or any part of
the Collateral or other assets of such party, or either; or (v) has filed
against it an involuntary petition, arrangement, composition, readjustment,
liquidation, dissolution, or an answer proposing an adjudication of it as a
bankrupt or insolvent, or is subject to reorganization pursuant to the
United States Bankruptcy Code, an action seeking to appoint a trustee,
receiver, custodian, or conservator or liquidator, or any similar law,
federal or state, now or hereinafter in effect, and such action is approved
by any court of competent jurisdiction and the order approving the same
shall not be vacated or stayed within sixty (60) days from entry; or (vi)
consents to the filing of any such petition or answer, or shall fail to deny
the material allegations of the same in a timely manner.
(f) Judgments. (1) A final judgment other than a final judgment
in connection with any condemnation is entered against Borrower, that (i)
adversely affects the value, use or operation of the Land or the
Improvements in Bank's sole judgment, or (ii) adversely affects, or may
adversely affect, the validity, enforceability or priority of the lien or
security interest created by the Mortgage or any other Loan Document in
Bank's sole judgment, or both; or (2) execution or other final process
issues thereon with respect to the Land or the Improvements; and (3)
Borrower does not discharge the same or provide for its discharge in
accordance with its terms, or procure a stay of execution thereon, in any
event within thirty (30) days from entry, or Borrower shall not, within such
period or such longer period during which execution on such judgment shall
have been entered, and cause its execution to be stayed during such appeal,
or if on appeal such order, decree or process shall be affirmed and Borrower
shall not discharge such judgment or provide for its discharge in accordance
with its terms within sixty (60) days after the entry of such order or
decree or affirmance, or if any stay of execution on appeal is released or
otherwise discharged.
(g) Liens. Any federal, state or local tax lien or any claim of
lien for labor or materials or any other lien or encumbrance of any nature
whatsoever is recorded against Borrower or the Land or Improvements and is
not removed by payment or transferred to substitute security in the manner
provided by law, within ten (10) days after it is recorded in accordance
with applicable law.
(h) Other Notes or Mortgages. Borrower's default in the
performance or payment of Borrower's obligations under any other note, or
under any other mortgage encumbering all or any part of the Land or the
Improvements, if the other mortgage is permitted by the Bank, whether such
other note or mortgage is held by Bank or by any other party.
(i) Borrower Default Under Loan Documents. Borrower's default in
the payment or performance of any of Borrower obligations under any of the
Loan Documents, including this Loan Agreement and any riders thereto.
(j) Borrower's Actions. Any action by Borrower which would, in
the opinion of Bank, significantly endanger the security of the Loan will
render the Loan payable on demand.
(k) Borrower's Continued Existence. Borrower shall cease to
exist or to be qualified to do or transact business in the State in which
the Land and Improvements are located, or shall be dissolved or shall be a
party to a merger or consolidation, or shall sell all or substantially all
of its assets, or shall change its corporate name or trade name without
prior written notice to Bank.
(l) Stock in Borrower. Without the prior written consent of
Bank, any shares of stock of Borrower are issued, sold, transferred,
conveyed, assigned, mortgaged, pledged, or otherwise disposed of so as to
result in change of control of Borrower, whether voluntarily or by operation
of law, and whether with or without consideration, or any agreement for any
of the foregoing is entered into.
(m) Transfer of Property or Ownership. Any sale, conveyance,
transfer, assignment, or other disposition or encumbrance of all or any part
of the Land, Improvements, or the Approved Projects, or any ownership
interest in Borrower or any guarantor without the prior consent of Bank or
except as otherwise permitted hereby.
(n) False Statement. Any statement or representation of Borrower
contained in the loan application or any financial statements or other
materials furnished to Bank or any other lender prior or subsequent to the
making of the Loan secured hereby are discovered to have been false or
incorrect or incomplete.
(o) Default Under Indemnity. Borrower or any guarantor shall
default under any obligation imposed by any indemnity whether contained
within any of the Loan Documents, the Hazardous Waste Certification and
Indemnification, or otherwise.
(p) Cross Default. Any default by the Borrower under any other
documents or instruments evidencing any other loans by Bank to Borrower or
in any mortgages or other collateral documents securing such loans.
(q) Non-Compliance with the Plans and Specifications. Failure of
any of the materials supplied for the construction of the Units to comply
with the Plans and Specifications or any requirements of any Governmental
Authority unless the Borrower undertakes and diligently pursues the
correction of such failure.
(r) Projected Completion of Construction. Failure to construct
the Improvements with reasonable dispatch, or the discontinuance of
construction unless delayed by the event of unavailability of materials at
reasonable cost, strikes, other labor problems, governmental orders or other
events which would support a defense by Borrower based upon impossibility of
performance for reasons beyond the control of Borrower, or determination by
Bank that construction of the Improvements will not be timely completed and
Borrower's failure to complete, cure or provide satisfactory assurances
after notice or demand from Bank.
(s) Non-Payment of Debts. Borrower is generally not paying its
debts as such debts become due.
(t) Securities Laws Violation. The assertion of any violation of
the 1933 Securities Act, 1934 Securities Act or the Florida Blue Sky Laws by
any Governmental Authorities or the institution of any securities litigation
not dismissed within sixty (60) days of the commencement of same.
(u) Non-Compliance with Homeowner Association Documents.
Borrower shall fail to perform any duty required of it, fulfill any
condition, abide by any covenant or in any manner default under the
homeowners' association documents encumbering the Approved Projects, if any.
(v) Adverse Actions. Any legal or equitable action is commenced
against Borrower which, if adversely determined, could reasonably be
expected to impair substantially the ability of Borrower to perform each and
every obligation under the Loan Documents and this Agreement.
(w) Government Challenges. The validity of any permit, approval
or consent by any Governmental Authority relating to the Land, the Improve-
ments, or the Approved Projects, or the operation thereof is challenged by a
proceeding before a board, commission, agency, court or other authority
having jurisdiction.
(x) Letters of Credit. A Letter of Credit issued by Bank is drawn
upon by the beneficiary of such instrument and Borrower, after notice from
Bank, has not repaid Bank for the amount of the disbursement under such
Letter of Credit within two (2) business days. During the two (2) business
day period or until the amount disbursed is repaid to Bank, whichever is
earlier, Bank shall suspend any disbursements to Borrower under the Loan.
(y) Miscellaneous. If at any time the Bank shall determine that
there has been a material adverse change in the financial condition or
prospects of Borrower, which is not corrected or cured after reasonable
notice from Bank.
ARTICLE XI
Bank's Rights and Remedies
The following rights and remedies are available to Bank:
11.1 Acceleration. Upon the occurrence of a Default, the entire
unpaid principal balance of the Loan and all accrued but unpaid interest
thereon and any costs or expenses then due to Bank and any and all other
obligations of Borrower to Bank, shall, at the option of Bank and without
notice to Borrower, become immediately due and payable.
11.2 Completion of Construction. From and after the occurrence of
a Default, Bank shall be entitled to have and use the Plans and the
Construction Documents and, after first having given written notice to the
Architect, the Engineer, or the General Contractor, shall be entitled from
and after such notice to enjoy and enforce all of the rights of Borrower
under the Architect's contract, Engineer's contract, the Plans or the
Construction Contracts. Borrower hereby irrevocably constitutes and
appoints Bank its true and lawful attorney-in-fact with full power of
substitution in the Approved Projects to complete the Improvements in the
name of Borrower. Borrower hereby empowers Bank as it attorney-in-fact as
follows: (a) to use any funds of Borrower, including any Loan proceeds or
equity deposits which may remain undisbursed hereunder, for the purpose of
completing the Improvements in accordance with the Plans; (b) to make such
additions, changes, modifications, or corrections in, or deviations from,
the Plans as shall be necessary or desirable to complete the Improvements;
(c) to employ such contractors, subcontractors, agents, architects,
engineers, inspectors, or other parties as shall be required for said
purposes; (d) to pay, settle, or compromise all existing bills and claims
which may be liens against the Improvements or as may be necessary or
desirable in the sole discretion of Bank for the completion of the
Improvements or for clearance of title; (e) to direct use of and/or use all
or any part of the labor, materials, supplies and equipment contracted for,
owned by, or under the control of Borrower, whether or not previously
incorporated into the Improvements; (f) to execute all applications and
certificates in the name of Borrower which may be required by the
Construction Documents, the Architect's contract, the Engineer's contract,
Plans, or any of the contract documents; (g) to prosecute and defend all
actions or proceedings in connection with the Approved Project or the
construction of the Improvements and take such action and require such
performance as Bank shall deem necessary under any performance or payment
bond; and (h) to do any and every act with respect to construction or
completion of the Improvements or the closing of any permanent financing
which Borrower might do in its own behalf including, without limitation,
execution, acknowledgment, and delivery of all instruments, documents, and
papers in the name of Borrower as may be necessary or desirable in the sole
discretion of Bank. It is further understood and agreed that this power of
attorney which shall be deemed to be a power coupled with an interest,
cannot be revoked. All sums expended by Bank pursuant hereto shall be
deemed to have been disbursed to Borrower and secured by the Security Docu-
ments, and the other Loan Documents.
11.3 Disputes. Where disputes have arisen which, in the opinion
of Bank, may endanger timely completion of the Improvements or fulfillment
of any condition or covenant herein, Bank may agree to disburse Loan
proceeds for the account of Borrower without prejudice to Borrower's rights,
if any, to recover said proceeds from the party to whom paid. Such
agreement or agreements may take the form which Bank in its discretion deems
proper, including, but without limiting the generality of the foregoing,
agreements to indemnify (on behalf of Borrower and/or for Bank's own
account) any title insurer against possible assertion of lien claims, agree-
ments to pay disputed amounts and the like. All sums paid or agreed to be
paid pursuant to such undertaking shall be advances of Loan proceeds.
11.4 Remedies Cumulative; Nonwaiver. All remedies of Bank
provided for herein or in the other Loan Documents are cumulative and shall
be in addition to any and all other rights and remedies provided for or
available under the other Loan Documents, at law or in equity. The exercise
of any right or remedy by Bank hereunder shall not in any way constitute a
cure or waiver of a Default Condition or a Default hereunder or under the
Loan Documents, or invalidate any act done pursuant to any notice of the
occurrence of a Default Condition or Default, or prejudice Bank in the
exercise of any of its rights hereunder or under any of the other Loan Docu-
ments, unless, in the exercise of said rights, Bank realizes all amounts
owed to it under the Loan Documents.
11.5 No Liability of Bank. Whether or not Bank elects to employ
any or all remedies available to it in the event of an occurrence of a
Default Condition or Default, Bank shall not be liable for the construction
of or failure to construct or complete or protect the Improvements or for
payment of any expense incurred in connection with the exercise or any
remedy available to Bank or for the construction or Completion of the
Improvements or for the performance or nonperformance of any other
obligation of Borrower.
11.6 Security Interest. It is understood and agreed that Bank
shall have and enjoy and is hereby granted a lien on, and a security
interest in, all collateral described in the Mortgage, and including without
limitation, any and all materials (stored on-site or off-site), reserves,
deferred payments, deposits or advance payments for materials (stored on-
site or off-site) undisbursed Loan proceeds, insurance refunds, impound
accounts, refunds for overpayment of any kind, and such lien and security
interest shall constitute additional security for the Indebtedness of
Borrower to Bank, and Bank shall have and possess any and all rights and
remedies of a secured party provided by law with respect to enforcement of
and recovery on its security interest on such items and amounts. In the
event of a conflict between this paragraph and any security interest granted
pursuant to the Mortgage, the Mortgage shall control.
11.7 Cessation of Funding. Upon the occurrence of a Default, Bank
shall have the right to immediately terminate further funding of site
development and construction of all Units then under construction irrespec-
tive of the stage of completion.
ARTICLE XII
General Conditions
The following conditions shall be applicable throughout the term of
this Loan Agreement:
12.1 Waivers. No waiver of any Default Condition or Default or
breach by Borrower hereunder shall be implied from any delay or omission by
Bank to take action on account of such Default Condition or Default, and no
express waiver shall affect any Default Condition or Default other than the
Default specified in the waiver and it shall be operative only for the time
and to the extent therein stated. Waivers of any covenants, terms or
conditions contained herein must be in writing and shall not be construed as
a waiver of any subsequent breach of the same covenant, term or condition.
The consent or approval by Bank to or of any act by Borrower requiring
further consent or approval shall not be deemed to waive or render unneces-
sary the consent or approval to or of any subsequent or similar act. No
single or partial exercise of any right or remedy of Bank hereunder shall
preclude any further exercise thereof or the exercise of any other or
different right or remedy.
12.2 Benefit. This Loan Agreement is made and entered into for
the sole protection and benefit of Bank and Borrower, their successors and
assigns, and no other person or persons have any right to action hereon or
rights to the Loan all proceeds at any time, nor shall Bank owe any duty
whatsoever to any claimant for labor or services performed or material
furnished in connection with the Approved Projects, or to apply any undis-
bursed portion of the Loan to the payment of any such claim, or to exercise
any right or power of Bank hereunder or arising from any Default Condition
or Default by Borrower.
12.3 Assignment. The terms hereof shall be binding upon and inure
to the benefit of the heirs, successors, assigns, and personal representa-
tives of the parties hereto; provided, however, that Borrower shall not
assign this Loan Agreement or any of its rights, interests, duties or
obligations hereunder or any Loan proceeds or other moneys to be advanced
hereunder in whole or in part without the prior written consent of Bank and
that any such assignment (whether voluntary or by operation of law) without
said consent shall be void. It is expressly recognized and agreed that Bank
may assign this Loan Agreement, the Note, the Security Documents, and any
other Loan Documents, in whole or in part, to any other person, firm, or
legal entity provided that all of the provisions hereof shall continue in
full force and effect and, in the event of such assignment, Bank shall
thereafter be relieved of all liability under the Loan Documents and any
Loan disbursements made by any assignee shall be deemed made in pursuant and
not in modification hereof and shall be evidenced by the Note and secured by
the Security Documents and any other Loan Documents.
12.4 Amendments. This Loan Agreement shall not be amended except
by a written instrument signed by all parties hereto.
12.5 Terms. Whenever the context and construction so require, all
words used in the singular number herein shall be deemed to have been used
in the plural, and vice versa, and the masculine gender shall include the
feminine and neuter and the neuter shall include the masculine and feminine.
12.6 Governing Law and Jurisdiction. This Loan Agreement and the
other Loan Documents and all matters relating thereto shall be governed by
and construed and interpreted in accordance with the laws of the State of
Florida. Borrower hereby submits to the jurisdiction of the state and
federal courts located in Florida and agree that Bank may, at its option,
enforce its rights under the Loan Documents in such courts.
12.7 Publicity. At Bank's request and expense, and subject to
applicable laws, regulations and restrictions, Borrower shall place upon the
Approved Projects, at a location mutually acceptable to Borrower and Bank, a
sign or signs advertising the fact that financing is being provided by Bank.
Bank shall also have the right to secure printed publicity through newspaper
and other media concerning the Approved Projects and source of financing.
12.8 Savings Clause. Invalidation of any one or more of the
provisions of this Loan Agreement shall in no way affect any of the other
provisions hereof, which shall remain in full force and effect.
12.9 Execution in Counterparts. This Loan Agreement may be
executed in two or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same instrument, and
in making proof of this Loan Agreement, it shall not be necessary to produce
or account for more than one such counterpart.
12.10 Captions. The captions herein are inserted only as a
matter of convenience and for reference and in no way define, limit or
describe the scope of this Loan Agreement nor the intent of any provision
hereof.
12.11 Notices. All notices required to be given hereunder
shall be given in accordance with the requirements of the Mortgage.
12.12 Mandatory Arbitration. Any controversy or claim between
or among the parties hereto including but not limited to those arising out
of or relating to this Loan Agreement or any related agreements or
instruments, including any claim based on or arising from an alleged tort,
shall be determined by binding arbitration in accordance with the Federal
Arbitration Act (or if not applicable, the applicable state law), the Rules
of Practice and Procedure for the Arbitration of Commercial Disputes of
Judicial Arbitration and Mediation Services, Inc. (J.A.M.S.), and the
"Special Rules" set forth below. In the event of any inconsistency, the
Special Rules shall control. Judgment upon any arbitration award may be
entered in any court having jurisdiction. Any party to this Loan Agreement
may bring an action, including a summary or expedited proceeding, to compel
arbitration of any controversy or claim to which this Loan Agreement applies
in any court having jurisdiction over such action.
(a) Special Rules. The arbitration shall be conducted in the
city of the Borrower's domicile at time of this Loan Agreement's execution
and administered by J.A.M.S. who will appoint an arbitrator; if J.A.M.S. is
unable or legally precluded from administering the arbitration, then the
American Arbitration Association will serve. All arbitration hearings will
be commenced within 90 days of the demand for arbitration; further, the
arbitrator shall only, upon a showing of cause, be permitted to extend the
commencement of such hearing for up to an additional 60 days.
(b) Reservation of Rights. Nothing in this Loan Agreement shall
be deemed to (i) limit the applicability of any otherwise applicable
statutes of limitation or repose and any waivers contained in this Loan
Agreement; or (ii) be a waiver by the Bank of the protection afforded to it
by 12 U.S.C. Sec. 91 or any substantially equivalent state law; or (iii)
limit the right of the Bank hereto (A) to exercise self help remedies such
as (but not limited to) setoff, or (B) to foreclose against any real or
personal property collateral, or (C) to obtain from a court provisional or
ancillary remedies such as (but not limited to) injunctive relief or the
appointment of a receiver. The Bank may exercise such self help rights,
foreclose upon such property, or obtain such provisional or ancillary
remedies before, during or after the pendency of any arbitration proceeding
brought pursuant to this Agreement. At Bank's option, foreclosure under a
deed of trust or mortgage may be accomplished by any of the following: the
exercise of a power of sale under the deed of trust or mortgage, or by
judicial sale under the deed of trust or mortgage, or by judicial
foreclosure. Neither this exercise of self help remedies nor the
institution or maintenance of an action for foreclosure or provisional or
ancillary remedies shall constitute a waiver of the right of any party,
including the claimant in any such action, to arbitrate the merits of the
controversy or claim occasioning resort to such remedies.
12.13 Disbursement of Loan Funds at Renewal. If, in Bank's
sole and absolute discretion, Bank agrees to extend the Loan, and the
outstanding principal balance of the Loan is less than the original,
principal Loan amount at the time of the extension, then Bank may, in its
sole and absolute discretion, but is not obligated to, disburse sufficient
Loan funds to increase the outstanding principal balance of the Loan up the
original, principal amount of the Loan, provided that Borrower pledges to
Bank as additional security for the Loan liquid collateral in kind and
amount acceptable to Bank in its sole discretion and deposits the same in an
account with Bank. In connection with any such pledge of liquid collateral,
Borrower shall deliver to Bank any original securities or other instruments
evidencing the collateral and shall execute such security agreements,
assignments, powers-of-attorney, stock powers, endorsements, financing
statements or other documentation as Bank may require to establish and
perfect the security interest so granted by Borrower. Nothing contained
herein shall constitute Bank's agreement or commitment to renew the Loan.
IN WITNESS WHEREOF, Borrower and Bank have executed this Loan Agreement
as of the above written date.
Heftler Realty Co., a Florida
corporation
- - ------------------------------------------
Witness
By: /s/ Joel B. Kovin
- - ------------------------------------------ ---------------------------
Witness Joel B. Kovin
Its: Vice President
"Borrower"
NATIONSBANK OF FLORIDA, N.A.
- - ------------------------------------------
Witness
By: /s/ Carmen de Essaye
- - ------------------------------------------ ----------------------------
Witness Carmen de Essaye
Its:Assistant Vice President
"Bank"
<PAGE>
EXHIBITS
"1" Borrowing Base Certificate
"2" Borrowing Base Schedule "A"
"3" Borrowing Base Schedule "B"
"4" Borrowing Base Schedule "C.1, C.2, and C.3"
"5" Request For Funding
EXHIBIT 10.4
FIRST AMENDMENT TO LOAN AGREEMENT
THIS AMENDMENT TO LOAN AGREEMENT made this 16 day of November, 1994,
by and between Heftler Realty Co., a Florida corporation, 9450 Sunset Drive,
Miami, FL 33173 (hereinafter referred to as "Borrower"), and NationsBank of
Florida, N.A., a national banking association, with its offices located at
Fort Lauderdale, Florida ("Bank" or "Lender").
W I T N E S S E T H:
WHEREAS, Borrower and Lender have agreed to amend certain terms of the
Loan Agreement between the parties dated August 29, 1994.
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
($10.00) Dollars and other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. Article IV, Paragraph 4.20, Loan Fees, shall be amended by the addition
of the following:
In addition to all other amounts due and payable herewith, the Borrower
covenants and agrees to pay to Lender a commitment fee in the amount of
$32,000.00 at closing of the First Loan Modification for the first year of
the initial two (2) year period, and agrees to pay an additional $40,000.00
loan fee on the anniversary date of the Loan. If this First Loan
Modification does not close, then Borrower agrees to pay Lender $16,000.00
as a one-time commitment fee. Borrower further agrees to pay to Lender an
additional commitment fee in the amount of one-half (0.50%) of one
percentage point for each one (1) year extension granted, payable at the
exercise of the extension such that for every year that the Commitment is
outstanding, the Bank shall receive one-half (0.50%) of one percentage
point.
The Letters of Credit issued by Lender under the Loan shall require no
additional commitment fee for the first year of the two (2) year Loan term.
Thereafter, Borrower agrees to pay Lender one half (.50%) of one percent of
the face value of such Letters of Credit on the anniversary date of the
original Closing Date in the event that the commitment fee paid to Lender at
that time excludes Letters of Credit.
2. Article IV, Paragraph 4.25, Miscellaneous, shall be deleted and the
following substituted in its place:
4.25 Miscellaneous. All other Loan Documents or items that are
customarily provided in loan transactions of this type and all other loan
documents or items set forth in the Commitment, as requested by Lender.
3. Article VIII, Paragraph 8.10, Reporting Requirements, Subparagraph (d)
shall be deleted and the following provisions added:
(d) Annually, within ninety (90) days of year end, by August
31st, the Borrower will provide Lender with audited financial statements for
itself, both including and excluding activities related to Arizona real
property set forth on Exhibit "A" attached hereto ("Arizona Property"). Such
audit shall include verification of Borrowing Base asset allocations for
Borrower.
(e) Quarterly, within sixty (60) days of the end of each quarter,
financial statements of Borrower's new parent company, CONTINENTAL HOMES
HOLDING CORP., a Delaware corporation, (hereinafter referred to as
"Continental"), including balance sheet, income statement, and inventory
reports on a project-by-project basis.
(f) Annually, within ninety (90) days of year end, by August
31st, Continental will provide the Lender with current audited financial
statements and such audit shall include consolidating schedules.
(g) Quarterly, within sixty (60) days of each quarter end, the
Borrower will provide Lender with quarterly financial statements for itself,
both including and excluding activities related to the Arizona Property.
4. Article VIII, 8.23, Financial Covenants, Paragraphs (a), (b), (e) and
(f) shall be deleted and following substituted in their place:
(a) Minimum Tangible Net Worth: Borrower's "Tangible Net Worth",
defined as the aggregate of total shareholders' equity less any intangible
assets and any obligations due from shareholders, partners, employees,
and/or affiliates, shall not at any time be less than $24,000,000.00
effective November ___, 1994, the date upon which the Continental Stock
Purchase Agreement closes.
(b) Ratio of Total Debt to Tangible Net Worth: The "Ratio of
Borrower's Total Debt to Tangible Net Worth", defined as the aggregate of
current liabilities and non-current liabilities (excluding contingent
liabilities) divided by Tangible Net Worth, shall not at any time exceed 1.4
to 1. Borrower's payables to Continental and affiliates will be deducted
from debt when calculating this ratio. Borrower's investments in, and
receivables from Continental and affiliates will be deducted from Tangible
Net Worth when calculating this ratio.
(e) Minimum Tangible Net Worth Floor. Borrower's Minimum Tangible
Net Worth floor of $24,000,000.00 will be increased by fifty (50%) percent
of Net Income After Taxes on earnings subsequent to October 31, 1994.
(f) Additional Debt. No additional debt shall be incurred, except
as follows:
(i) If present, intercompany debt shall be unsecured and
repayment on same shall be prohibited in the event of default. Furthermore,
intercompany debt shall be junior to Lender's debt, and will be repayable
only in the event that Borrower is not in default and is in full compliance
under the terms and conditions of the Loan Documents.
(ii) Lender will allow a $10,000,000.00 credit facility from
Bank One - Arizona ("Bank One") initially for the acquisition and develop-
ment of the Arizona Property which is being sold to Borrower by Continental
in the latter's leveraged purchase of Borrower. Subsequent to use for the
Arizona Property, the Bank One line of credit may be used for Borrower's
future Florida properties only, except that Lender shall have a right of
first refusal to extend credit on any new projects financed by Borrower, and
Lender through this right of first refusal will have the opportunity to
replace the $10,000,000.00 Bank One line of credit through future increases
to the Loan.
5. Article X, Events of Default, Paragraph 10.1, Default, Subparagraphs
10.1(l) and 10.1(m), shall be amended to add the following:
Lender hereby consents to the sale of all of the outstanding
shares of the Borrower to Continental. Said sale shall be in form and
substance as set forth on Exhibit "B" attached hereto and made a part hereof
by reference. Notwithstanding the foregoing, the approval is subject to
Lender's receipt and satisfactory review of the following:
a. Management contracts between Continental and Borrower's key
management;
b. The appraisal upon the Arizona Property;
c. The definitive agreement between Borrower and Continental and
d. Continental's Bond Indentures.
6. In the event the Stock Purchase Agreement with Continental does not
close, then the financial covenants and reporting requirements provided
above will be null and void, and the financial covenants and reporting
requirements will revert back to those contained in the Loan Agreement.
7. The Commitment Letter from Lender to Borrower Dated November 15, 1994
shall be incorporated by reference into this Agreement.
8. All other terms and conditions of the Loan Agreement shall be amended
consistent with the matters set forth above.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first set forth above.
Signed, sealed and delivered "BORROWER"
in the presence of:
Heftler Realty Co., a Florida
corporation
By: /s/ Joel B. Kovin
- - -------------------------- -------------------------------
(Witness) Joel B. Kovin
Vice President
(seal)
- - --------------------------
Type or Print Name
- - -------------------------- Address: 9450 Sunset Drive
(Witness) Miami, FL 33173
- - --------------------------
Type or Print Name
"LENDER"
NATIONSBANK OF FLORIDA, N.A., a
national banking association
BY: /s/ Carmen de Essaye
- - -------------------------- -------------------------------
(Seal) Carmen de Essaye
(Witness) Asst. Vice Pres.
- - --------------------------
Type or Print Name
Address: 701 W. Cypress Creek Rd.
- - -------------------------- Suite 101
(Witness) Ft.Lauderdale, FL 33309
- - --------------------------
Type or Print Name
Borrower's Taxpayer
Identification No. 59-1237314
EXHIBIT 10.5
CONSOLIDATION PROMISSORY NOTE
(For Revolving Line of Credit)
$20,000,000.00
- - --------------
November 16, 1994
Fort Lauderdale, Florida
FOR VALUE RECEIVED, HEFTLER REALTY CO., a Florida corporation, (some-
times hereinafter referred to as the "undersigned" or the "Borrower"),
promises to pay to the order of NationsBank of Florida, N.A., a national
banking association or any subsequent holder of this note ("Bank") at its
principal offices located at 701 West Cypress Creek Road, Suite 101, Fort
Lauderdale, Florida (or at such other place or places as Bank may designate)
the principal sum of TWENTY MILLION and NO/100 DOLLARS ($20,000,000.00) or
so much thereof as may be from time to time outstanding, plus interest
thereon at the Rate hereinafter defined, all in accordance with the terms
and conditions of this Promissory Note (the "Note") and in accordance with
the Loan Agreement dated August 29, 1994, and as amended between Borrower
and Bank (the "Loan Agreement"). This Note is secured by a Real Estate
Mortgage, Assignment and Security Agreement dated August 29, 1994, as
amended, filed for record in the Public Records of Dade and Broward County,
Florida (the "Mortgage"), Security Agreements, UCC Financing Statements
filed for record in the Public Records of Dade and Broward County, Florida,
and in the Office of the Secretary of State of the State of Florida (the
"Financing Statements"), the Loan Agreement and other agreements by and
between Borrower and Bank. The Mortgage, the Financing Statements, the
Letter(s) of Credit issued by Bank for the benefit of Borrower and such
other agreements are hereinafter referred to collectively as the "Security
Documents" and the loan evidenced thereby is hereinafter referred to as the
"Loan." Terms used herein but not otherwise defined hereunder are defined
as set forth in the Security Documents or the Loan Agreement. All of the
terms, definitions, conditions and covenants of the Loan Agreement and the
Security Documents are expressly made a part of this Note by reference in
the same manner and with the same effect as if set forth herein at length,
and any holder of this Note is entitled to the benefits of and remedies
provided in the Loan Agreement and the Security Documents. Subject to the
terms and conditions of this Note and the Security Documents, Bank shall
advance funds to Borrower pursuant to the terms of the Loan Agreement, such
that Borrower may borrow, partially or wholly repay, and reborrow, on a
revolving basis, up to a maximum principal sum equal to the face amount of
this Note at any one time outstanding.
1. Prime Rate. For purposes hereof, "Prime Rate" means the fluctuating
rate of interest per annum established by Bank as its prime lending rate in
effect from time to time whether or not such rate shall be otherwise
published. Such Prime Rate is established by Bank as an index or base rate
and may or may not at any time be the best or lowest rate of interest
offered by Bank.
2. Interest. The outstanding Loan principal balance shall bear interest at
a variable rate per annum equal to the Prime Rate plus one-half of one
percent (0.50%). The interest rate hereunder shall be adjusted daily in
accordance with fluctuations in the Prime Rate. Interest shall be computed
on the basis of a daily amount of interest accruing on the daily outstanding
principal balance during a 360-day year multiplied by the actual number of
days the principal is outstanding during such applicable interest period.
The initial Prime Rate at the time of execution of this Note is 7.75% so the
initial Note rate is 8.25%.
3. Payment of Interest. Interest accrued in accordance with this Note
shall be due and payable monthly, in arrears, on the first day of each month
immediately following the calendar month for which said interest has
accrued. All accrued but unpaid interest and principal shall be due and
payable in full on the Maturity Date, as defined in Paragraph 6 below. All
payments of principal and interest shall be made in lawful currency of the
United States of America which shall be legal tender in payment of all
debts, public and private, at the time of payment.
4. Prepayment. This Note may be prepaid in whole or in part at any time
without fee, premium or penalty. Any partial prepayment shall be applied in
accordance with paragraph 10 below and shall not postpone the due date of
any subsequent periodic installments or the Maturity Date, or change the
amount of such installments due, unless Bank shall otherwise agree in
writing.
5. Late Charges. Should Borrower fail to pay the installments of interest
or principal (if applicable) on any due date provided for herein or within
ten (10) days thereafter, then Borrower further promises to pay a late
payment charge equal to four percent (4%) of the amount of the unpaid
installment as liquidated compensation to Bank for the extra expense to Bank
to process and administer the late payment, Borrower agreeing, by execution
hereof, that any other measure of compensation for a late payment is
speculative and impossible to compute. This provision for late charges
shall not be deemed to extend the time for payment or be a "grace period" or
"cure period" that gives Borrower a right to cure a Default or Default
Condition. Imposition of late charges is not contingent upon the giving of
any notice or lapse of any cure period provided for in the Mortgage and
shall not be deemed a waiver of any right or remedy of Bank, including
without limitation, acceleration of this Note.
6. Maturity Date. The then outstanding principal balance plus all accrued
but unpaid interest shall be due and payable on August 29, 1996 (the
"Maturity Date").
7. Default. Any failure of Borrower to comply with any term, covenant, or
condition of this Note, including without limitation, Borrower's failure to
pay principal, interest, or expenses when same shall become due or the
existence of any Default Condition or Default under the Security Documents
or Loan Agreement shall be deemed, at the option of Bank, a Default under
this Note. Notwithstanding the foregoing, Borrower shall have a ten (10) day
grace period as to the payment of interest and other charges.
8. Acceleration. Upon the occurrence of a Default hereunder or under the
terms of any one or more of the Security Documents or the Loan Agreement,
Bank may declare the then outstanding principal and all accrued but unpaid
interest immediately due and payable and upon acceleration and thereafter
this Note shall bear interest at the Default Rate, hereinafter defined,
until all indebtedness evidenced hereby and secured by the Security Docu-
ments has been paid in full. Further, in the event of such acceleration,
the Loan, and all other indebtedness of Borrower to Bank arising out of or
in connection with the Loan shall become immediately due and payable,
without presentation, demand, protest or notice of any kind, all of which
are hereby waived by Borrower.
9. Default Rate. After default or maturity or upon acceleration, and
thereafter, the unpaid indebtedness then evidenced by this Note and due
under and secured by the Security Documents shall bear interest at a fixed
rate equal to the lesser of (a) the maximum rate then permitted under
applicable law, or (b) twenty percent (20%) per annum.
10. Application of Payments. All sums received by Bank for application to
the Loan may be applied by Bank to late charges, expenses, costs, interest,
principal, and other amounts owing to Bank in connection with the Loan in
the order selected by Bank in its sole discretion.
11. Expenses. In the event this Note is not paid when due on any stated or
accelerated maturity date, or should it be necessary for Bank to enforce any
other of its rights under this Note, the Loan Agreement, or the Security
Documents, Borrower will pay to Bank, in addition to principal, interest and
other charges due hereunder or under the Loan Agreement or the Security
Documents, all costs of collection or enforcement, including reasonable
attorneys' fees, paralegals' fees, legal assistants' fees, costs and
expenses, whether incurred with respect to collection, litigation,
bankruptcy proceedings, interpretation, dispute, negotiation, trial, appeal,
defense of actions instituted by a third party against Bank arising out of
or related to the Loan, enforcement of any judgment based on this Note, or
otherwise, whether or not a suit to collect such amounts or to enforce such
rights is brought or, if brought, is prosecuted to judgment. Notwithstanding
the foregoing, the prevailing party in any litigation arising out of or
related to the Loan shall recover its fees and costs described in this
subparagraph from the non-prevailing party.
12. Waiver. All persons now or at any time liable for payment of this
Note, whether directly or indirectly, including without limitation any
Guarantor, hereby waive presentment, protest, notice of protest and
dishonor. The undersigned expressly consents to any extensions and
renewals, in whole or in part, to the release of any co-makers and any
collateral security or portions thereof, given to secure this Note, and all
delays in time of payment or other performance which Bank may grant, in its
sole discretion, at any time and from time to time without limitation all
without any notice or further consent of Borrower, and any such grant by
Bank shall not be deemed a waiver of any subsequent delay or any of Bank's
rights hereunder or under the Loan Agreement or the Security Documents.
13. Usury. In no event shall this or any other provision herein or in the
Loan Agreement or Security Documents, permit the collection of any interest
which would be usurious under the laws of the State of Florida. If any such
interest in excess of the maximum rate allowable under applicable law has
been collected, Borrower agrees that the amount of interest collected above
the maximum rate permitted by applicable law, together with interest thereon
at the rate required by applicable law, shall be refunded to Borrower, and
Borrower agrees to accept such refund, or, at Borrower's option, such refund
shall be applied as a principal payment hereunder.
14. Modification. This Note may not be changed orally, but only by an
agreement in writing signed by the Bank and Borrower.
15. Applicable Law. This Note shall be governed by and construed in
accordance with the laws of the State of Florida.
16. Notices. All notices or other communications required or permitted to
be given pursuant to the provisions of this Note shall be given in
accordance with the notice provisions of the Mortgage.
17. Successors and Assigns. As used herein, the terms "Borrower" and
"Bank" shall be deemed to include their respective heirs, personal represen-
tatives, successors and assigns.
18. Severability. In the event any one or more of the provisions of this
Note shall for any reason be held to be invalid, illegal, or unenforceable,
in whole or in part or in any respect, or in the event that any one or more
of the provisions of this Note operates or would prospectively operate to
invalidate this Note, then and in any of those events, only such provision
or provisions shall be deemed null and void and shall not affect any other
provision of this Note. The remaining provisions of this Note shall remain
operative and in full force and effect and shall in no way be affected,
prejudiced, or disturbed thereby. In the event any provisions of this Note
are inconsistent with the provisions of the Loan Agreement, the Security
Documents, or any other agreements or documents executed in connection with
this Note, this Note shall control.
19. Captions; Pronouns. Captions are for reference only and in no way
limit the terms of this Note. The pronouns used in this instrument shall be
construed as masculine, feminine, or neuter as the occasion may require.
Use of the singular includes the plural, and vice versa.
20. Business Day. Any reference herein or in the Loan Agreement or
Security Documents to a day or business day shall be deemed to refer to a
banking day which shall be a day on which Bank is open for the transaction
of business, excluding any national holidays, and any performance which
would otherwise be required on a day other than a banking day shall be
timely performed in such instance, if performed on the next succeeding
banking day. Notwithstanding such timely performance, interest shall
continue to accrue hereunder until such payment or performance has been
made.
21. Mandatory Arbitration. Any controversy or claim between or among the
parties hereto including, but not limited to, those arising out of or
relating to this agreement or any related agreements or instruments,
including any claim based on or arising from an alleged tort, shall be
determined by binding arbitration in accordance with the Federal Arbitration
Act (or if not applicable, the applicable state law), the Rules of Practice
and Procedure for the Arbitration of Commercial Disputes of Judicial
Arbitration and Mediation Services, Inc. (J.A.M.S.), and the "Special Rules"
set forth below. In the event of any inconsistency, the Special Rules shall
control. Judgment upon any arbitration award may be entered in any court
having jurisdiction. Any party to this agreement may bring an action,
including a summary or expedited proceeding, to compel arbitration of any
controversy or claim to which this agreement applies in any court having
jurisdiction over such action.
(a) Special Rules: The arbitration shall be conducted in the city of
the Borrower's domicile at the time of this agreement's execution and
administered by J.A.M.S. who will appoint an arbitrator; if J.A.M.S. is
unable or legally precluded from administering the arbitration, then the
American Arbitration Association will serve. All arbitration hearings will
be commenced within 90 days of the demand for arbitration; further, the
arbitrator shall only, upon a showing of cause, be permitted to extend the
commencement of such hearing for up to an additional 60 days.
(b) Reservations of Rights: Nothing in this agreement shall be deemed
to (i) limit the applicability of any otherwise applicable statutes of
limitation or repose and any waivers contained in this agreement; or (ii) be
a waiver by the Bank of the protection afforded to it by 12 U.S.C. Section
91 or any substantially equivalent state law; or (iii) limit the right of
the Bank hereto (A) to exercise self help remedies such as (but not limited
to) setoff, or (B) to foreclose against any real or personal property
collateral, or (C) to obtain from a court provisional or ancillary remedies
such as (but not limited to) injunctive relief or the appointment of a
receiver. The Bank may exercise such self help rights, foreclose upon such
property, or obtain such provisional or ancillary remedies before, during or
after the pendency of any arbitration proceeding brought pursuant to this
agreement. At Bank's option, foreclosure under a mortgage or deed of trust
may be accomplished by any of the following: the exercise of a power of
sale under the deed of trust or mortgage, or by judicial sale under the deed
of trust or mortgage, or by judicial foreclosure. Neither this exercise of
self help remedies nor the institution or maintenance of an action for
foreclosure or provisional or ancillary remedies shall constitute a waiver
of the right of any party, including the claimant in any such action, to
arbitrate the merits of the controversy or claim occasioning resort to such
remedies.
22. Future Advance. This Note is a consolidation of that certain Promissory
Note (For Revolving Line of Credit) dated August 29, 1994 in the original
principal amount of Eight Million and No/100 Dollars ($8,000,000.00) and
that certain Future Advance Promissory Note (For Revolving Line of Credit)
dated November 16, 1994 in the original principal amount of Twelve Million
and No/100 Dollars ($12,000,000.00) both made by Borrower in favor of Bank.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed
as of the day and year first above written.
Heftler Realty Co., a Florida corporation
By: /s/Joel B. Kovin
---------------------
Joel B. Kovin
Vice President (SEAL)
DOCUMENTARY STAMPS ON THE AMOUNT OF THIS NOTE HAVE BEEN PAID AND
AFFIXED TO THE MORTGAGE AND MORTGAGE MODIFICATION AGREEMENT SECURING THIS
NOTE.
