SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-14830
CONTINENTAL HOMES HOLDING CORP.
(Exact name of registrant as specified in its charter)
Delaware 86-0554624
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
7001 N. Scottsdale Road, Suite 2050 85253
Scottsdale, Arizona (Zip Code)
(Address of principal executive offices)
(602) 483-0006
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class of Common Stock December 31, 1994
--------------------- -----------------
$.01 per value 6,939,270
<PAGE>
CONTINENTAL HOMES HOLDING CORP.
FORM 10-Q
FOR THE QUARTER ENDED
NOVEMBER 30, 1994
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements:
Consolidated Balance Sheets as of November 30, 1994
and May 31, 1994 . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income for the three and
six months ended November 30, 1994 and 1993 . . . . . . . . 4
Consolidated Statements of Cash Flows for the six
months ended November 30, 1994 and 1993 . . . . . . . . . . 5
Notes to unaudited Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 15
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
November 30, May 31,
1994 1994
------------ -------
ASSETS (In thousands)
Homebuilding:
Cash $ 12,995 $ 28,809
Receivables 7,405 9,928
Homes, lots and improvements in production 284,252 205,369
Property and equipment, net 2,026 1,914
Prepaid expenses and other assets 19,788 13,621
Excess of cost over related net assets acquired 10,619 6,743
-------- --------
337,085 266,384
-------- --------
Mortgage banking and title operations:
Mortgage loans held for sale 11,559 17,570
Mortgage loans held for long-term
investment, net 18,234 20,132
Other assets 1,604 1,404
-------- --------
31,397 39,106
-------- --------
Total assets $368,482 $305,490
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable and other liabilities $ 36,672 $ 35,179
Notes payable, senior and convertible debt 192,929 144,048
Deferred income taxes 2,620 2,232
-------- --------
232,221 181,459
-------- --------
Mortgage banking and title operations:
Notes payable 10,384 3,439
Bonds payable 18,583 20,832
Other 1,781 1,200
-------- --------
30,748 25,471
-------- --------
Total liabilities 262,969 206,930
-------- --------
Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value:
Authorized - 2,000,000 shares
Issued - None -- --
Common stock, $.01 par value:
Authorized - 20,000,000 shares
Issued - 7,080,900 shares 71 71
Treasury stock, at cost - 111,630 and
118,130 shares (37) (83)
Capital in excess of par value 59,610 59,610
Retained earnings 45,869 38,962
-------- --------
Total stockholders' equity 105,513 98,560
-------- --------
Total liabilities and stockholders' equity $368,482 $305,490
======== ========
The accompanying notes to consolidated financial statements are an integral
part of these unaudited consolidated balance sheets.
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
Three months ended Six months ended
November 30, November 30,
------------------ ----------------
1994 1993 1994 1993
---- ---- ---- ----
REVENUES
Home sales $ 96,170 $ 87,702 $201,270 $164,626
Land sales -- 166 -- 420
Mortgage banking and
title operations 1,617 1,820 3,483 2,865
Other income, net 155 407 232 574
-------- -------- -------- --------
Total revenues 97,942 90,095 204,985 168,485
-------- -------- -------- --------
COSTS AND EXPENSES
Homebuilding:
Cost of home sales 79,027 71,593 164,644 134,258
Cost of land sales 75 85 150 427
Selling, general and
administrative expenses 10,687 10,085 21,805 17,772
Interest, net 1,308 1,362 2,246 2,519
Mortgage banking and title
operations:
Selling, general and
administrative expenses 1,302 1,325 2,741 2,028
Interest, net (116) (16) (289) 19
-------- -------- -------- --------
Total costs and expenses 92,283 84,434 191,297 157,023
-------- -------- -------- --------
Income before income taxes 5,659 5,661 13,688 11,462
Income taxes 2,567 2,434 6,080 4,998
-------- -------- -------- --------
Net income $ 3,092 $ 3,227 $ 7,608 $ 6,464
======== ======== ======== ========
Earnings per common share $ .44 $ .56 $ 1.09 $ 1.19
Earnings per common share
assuming full dilution $ .41 $ .50 $ .99 $ 1.03
Cash dividend per share $ .05 $ .05 $ .10 $ .10
Weighted average number of
shares outstanding 6,963,341 5,711,566 6,963,054 5,451,810
========= ========= ========= =========
The accompanying notes to consolidated financial statements are an integral
part of these unaudited consolidated statements.
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
November 30,
----------------
1994 1993
---- ----
(In thousands)
Cash flows from operating activities:
Net income $ 7,608 $ 6,464
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,325 1,080
Increase (decrease) in deferred income taxes (637) 260
Decrease (increase) in assets
Homes, lots and improvements in production (45,590) 2,660
Receivables 10,512 9,297
Prepaid expenses and other assets (6,544) (1,043)
Increase (decrease) in liabilities
Accounts payable and other liabilities (2,006) 1,226
-------- --------
Net cash provided (used) by operating activities (35,332) 19,944
-------- --------
Cash flows from investing activities:
Net additions of property and equipment (310) (281)
Cash received from unconsolidated joint ventures -- 2,391
Cash paid for Milburn Investments, Inc.
and Subsidiaries, net of cash acquired -- (7,042)
Cash paid for Heftler Realty Co.,
net of cash acquired (15,498) --
-------- --------
Net cash used by investing activities (15,808) (4,932)
-------- --------
Cash flows from financing activities:
Increase (decrease) in notes payable to financial
institutions 38,296 (28,557)
Retirement of bonds payable (2,315) (3,609)
Sale of common stock -- 34,219
Redemption of Series A Preferred Stock -- (6,200)
Stock options exercised 46 328
Dividends paid (701) (520)
-------- --------
Net cash provided (used) by financing activities 35,326 (4,339)
-------- --------
Net increase (decrease) in cash (15,814) 10,673
Cash at beginning of period 28,809 11,552
-------- --------
Cash at end of period $ 12,995 $ 22,225
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 3,502 $ 4,021
Income taxes $ 7,218 $ 4,510
The accompanying notes to consolidated financial statements are an integral
part of these unaudited consolidated statements.
Supplemental schedule of non-cash investing and financing activities:
On July 29, 1993, the Company acquired Milburn Investments, Inc. and
Subsidiaries. Non-cash consideration paid included the issuance of $6.3
million of Series A preferred stock. As a result of the acquisition, the
Company recorded additional assets of $92,660,000 (primarily homes, lots and
improvements in production and mortgage related assets) and liabilities of
$66,590,000 (primarily notes payable to financial institutions and mortgage
related debt).
On November 18, 1994, the Company acquired Heftler Realty Co. As a result
of the acquisition, the Company recorded additional assets of $51,116,000
(primarily homes, lots and improvements in production ) and liabilities of
$22,616,000 (primarily notes payable to financial institutions).
The accompanying notes to consolidated financial statements are an integral
part of these unaudited consolidated statements.
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The consolidated financial statements include the accounts of
Continental Homes Holding Corp. and its subsidiaries ("Company"). In
the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the
Company's financial position, results of operations and cash flows for
the periods presented.
These consolidated financial statements should be read in conjunction
with the consolidated financial statements and the related disclosures
contained in the Company's annual report on Form 10-K for the year
ended May 31, 1994, filed with the Securities and Exchange Commission.
The results of operations for the three and six months ended November
30, 1994 are not necessarily indicative of the results to be expected
for the full year.
Note 2. Interest Capitalization
The Company follows the practice of capitalizing for its homebuilding
operations certain interest costs incurred on land under development
and homes under construction. Such capitalized interest is included
in cost of home sales when the units are delivered. The Company
capitalized such interest in the amount of $6,211,000 and $3,861,000
and expensed as a component of cost of goods sold $4,806,000 and
$3,568,000 in the six months ended November 30, 1994 and 1993,
respectively. The increase in interest capitalized is attributable to
the Company's increased level of homes, lots and improvements in
production.
Note 3. Notes Payable, Senior and Subordinated Debt
Notes payable, senior and convertible debt for homebuilding consist
of:
November 30, May 31,
1994 1994
------------ ------
(In thousands)
12% senior notes, due 1999, net of
premium of $1,592 and $1,753 $111,592 $111,753
6-7/8% convertible subordinated notes,
due 2002, net of discount of $2,525
and $2,705 32,475 32,295
Notes payable 48,862 --
-------- --------
$192,929 $144,048
======== ========
Note 4. Interest, Net
Interest, net is comprised of interest expense and interest income.
The summary of the components of interest, net is as follows:
Three months ended Six months ended
November 30, November 30,
------------------ ----------------
1994 1993 1994 1993
---- ---- ---- ----
(In thousands)
Interest expense,
homebuilding $ 1,367 $ 1,416 $ 2,454 $ 2,637
Interest income,
homebuilding (59) (54) (208) (118)
------- ------- ------- -------
$ 1,308 $ 1,362 $ 2,246 $ 2,519
======= ======= ======= =======
Interest expense,
mortgage banking $ 532 $ 871 $ 1,048 $ 1,384
Interest income,
mortgage banking (648) (887) (1,337) (1,365)
------- ------- ------- -------
$ (116) $ (16) $ (289) $ 19
======= ======= ======= =======
Note 5. Acquisition of Milburn Investments, Inc., Aspen Homes and Heftler
Realty Co. (the "Acquisitions")
On July 29, 1993, the Company completed the acquisition of 100% of the
Common Stock of Milburn Investments, Inc. ("Milburn"), an Austin, Texas
homebuilder, for approximately $26.3 million ("Milburn Acquisition"). The
consideration consisted of approximately $20 million in cash and $6.3
million in Series A Preferred Stock issued by the Company. On November 4,
1993 the Company redeemed the Series A Preferred Stock. On January 28,
1994, the Company acquired the operations of Aspen Homes ("Aspen"), a San
Antonio, Texas homebuilder for total cash consideration of $6,982,000. On
November 18, 1994, the Company completed the acquisition of 100% of the
Common Stock of Heftler Realty Co. ("Heftler"), a Miami, Florida
homebuilder, for $28.5 million in cash ("Heftler Acquisition").
The following unaudited pro forma combined financial data give effect
to the Milburn and Heftler Acquisitions as if they had occurred on the first
day of each period. This pro forma information has been prepared utilizing
the historical consolidated financial statements of the Company, Milburn and
Heftler. This information should be read in conjunction with the historical
financial statements and notes thereto. The pro forma financial data is
provided for comparative purposes only and does not purport to be indicative
of the results which would have been obtained if the Milburn and Heftler
Acquisitions had been effected during the period presented. The pro forma
financial information is based on the purchase method of accounting for the
Milburn and Heftler Acquisitions and reflects adjustments to record the
profit of acquired inventories, amortize the non-compete agreements and the
excess purchase price over the underlying value of net assets acquired,
reflect the additional interest on acquisition indebtedness assumed and
adjust income taxes for pro forma adjustments.
Six Months ended
November 30,
----------------
1994 1993
---- ----
(In thousands)
Total revenues 219,263 213,909
Net income 8,868 7,247
Earnings per common share 1.16 1.33
Earnings per common share
assuming full dilution 1.04 1.14
Milburn has been the subject of an Internal Revenue Service ("IRS")
audit for periods prior to its acquisition by the Company. In December
1994, the IRS completed their examination and the Company paid the resulting
tax liability (including interest) of approximately $4,700,000. Such
payment exceeded the tax liability recorded by the Company at the time
Milburn was acquired. The Company will reflect this excess payment of
approximately $3,900,000 (including interest) as an adjustment to the
purchase price of Milburn. The Company believes that it is indemnified by
the terms of the acquisition agreement and will seek recovery from the
seller.
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
ITEM 2.
-------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
- ---------------------
Homebuilding
The following table sets forth, for the periods indicated, unit
activity, average sales price and revenue from home sales for the Company:
Quarters ended Six months ended
November 30, November 30,
----------------- ----------------
1994 1993 1994 1993
---- ---- ---- ----
Units delivered 734 738 1,560 1,409
Average sales price $131,022 $118,837 $129,019 $116,838
Revenue from homes
sales (000's) $ 96,170 $ 87,702 $201,270 $164,626
Percentage increase
from prior year 9.7% 82.4% 22.3% 66.7%
Change due to volume (.5)% 69.3% 10.7% 58.7%
Change due to average
sales price 10.2% 13.1% 11.6% 8.0%
The volume increase for the six months ended November 30, 1994 compared
to the same period in the prior year was attributable to the Texas and Miami
operations. Without Texas and Miami, the Company's unit volume was 14.5%
less during the six months than in the same period last year. The decrease
in unit volume (without Texas and Miami) resulted from fewer home sales in
the Phoenix market in prior quarters. Significant volume increases in
earlier quarters resulted in the Company selling out of several subdivisions
in Phoenix faster than anticipated. This resulted in fewer homes available
for sale in Phoenix in the third and fourth fiscal quarters of 1994 compared
to the same periods in fiscal 1993. The increase in average sales price was
primarily due to deliveries in Phoenix and Denver, which are experiencing
improved housing markets.
The following table summarizes information related to the Company's
backlog at the dates indicated:
November 30,
-----------------------------------
(Dollars in thousands)
1994 1993
Units Dollars Units Dollars
----- ------- ----- -------
Phoenix 617 $ 80,021 605 $ 71,422
Texas 278 30,157 181 19,849
Miami 109 14,991 -- --
Denver 91 16,644 69 12,092
California 50 14,096 40 10,408
----- -------- ----- --------
Total backlog 1,145 $155,909 895 $113,771
===== ======== ===== ========
Average price per unit $136 $127
======== ========
The aggregate sales value of new contracts signed increased 12% as a
result of the Texas operations in the three months ended November 30, 1994
to $93,003,000 representing 719 homes (including $29,048,000 in Texas
representing 272 homes) as compared with $83,270,000 representing 671 homes
(including $22,477,000 in Texas representing 206 homes) for the three months
ended November 30, 1993.
<TABLE>
The following table summarizes information related to cost of home
sales, selling, general and administrative ("SG&A") expenses and interest,
net for homebuilding:
<CAPTION>
Quarters ended November 30, Six months ended November 30,
---------------------------------- ----------------------------------
1994 1993 1994 1993
---- ---- ---- ----
Dollars % Dollars % Dollars % Dollars %
-------- ----- -------- ----- -------- ----- -------- -----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue from home sales $ 96,170 100.0% $ 87,702 100.0% $201,270 100.0% $164,626 100.0%
Cost of homes sales 79,027 82.2 71,593 81.6 164,644 81.8 134,258 81.6
-------- ----- -------- ----- -------- ----- -------- -----
Gross profit 17,143 17.8 16,109 18.4 36,626 18.2 30,368 18.4
SG&A expenses 10,687 11.1 10,085 11.5 21,805 10.8 17,772 10.8
-------- ----- -------- ----- -------- ----- -------- -----
Operating income
from homebuilding 6,456 6.7 6,024 6.9 14,821 7.4 12,596 7.6
Interest, net 1,308 1.4 1,362 1.6 2,246 1.1 2,519 1.5
-------- ----- -------- ----- -------- ----- -------- -----
Pre-tax profit
from homebuilding $ 5,148 5.3% $ 4,662 5.3% $ 12,575 6.3% $ 10,077 6.1%
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
Gross profit from home sales was 17.8% (18.9% excluding California
operations) for the three months ended November 30, 1994 compared to 18.4%
(20.9% excluding California operations) for the corresponding fiscal 1994
period. Gross profit from home sales was 18.2% (19.4% excluding California
operations) for the six months ended November 30, 1994 compared to 18.4%
(20.8% excluding California operations) for the six months ended November
30, 1993. The decrease in gross profit for the quarter and six-month period
ended November 30, 1994 compared to the same periods in fiscal 1994 was
primarily the result of sales incentives and discounts that are being
offered in the Austin Market. The Austin market is experiencing competitive
pressure and the Company anticipates it will continue to offer sales
incentives and discounts in the Austin market. The Southern California
market has been weak due to difficult economic conditions, concerns about
home values and low consumer confidence. Accordingly, the Company has
aggressively marketed its California homes by offering sales incentives and
discounts. Deliveries from the Southern California subdivision opened in
June have produced a significant improvement in gross margins compared to
the older subdivisions. An additional Southern California subdivision
opened in October 1994 and the Company anticipates opening another
subdivision in the fourth quarter. The California market, however, will
continue to have a negative impact on the Company's earnings since volume is
not sufficient to offset general and administrative expenses and interest
which is expensed and not capitalized.
The increase in total SG&A expenses for the quarter and six months
ended November 30, 1994 was primarily due to the Texas operations. The
current fiscal quarter and six months included $3,782,000 and $7,743,000,
respectively of SG&A expenses from Texas compared to $3,319,000 and
$4,735,000, respectively in the second quarter and six-month period ended
November 30, 1993. In addition the current fiscal quarter included $362,000
of SG&A expense related to the Miami operations. SG&A expenses for each
home delivered were $14,560 and $13,665 in the second quarter of fiscal 1995
and 1994, respectively and $13,978 and $12,613 in the first six months of
fiscal 1995 and 1994, respectively. The Company capitalizes certain SG&A
expenses for homebuilding, accordingly, total SG&A costs incurred for
homebuilding were $12,057,000 and $24,717,000 for the three and six months
ended November 30, 1994 compared to $11,157,000 and $19,979,000 for the
corresponding fiscal 1994 periods.
The Company capitalizes certain interest costs for its homebuilding
operations and includes such capitalized interest in cost of home sales when
the related units are delivered. Accordingly, total interest incurred by
the Company was $4,356,000 and $8,665,000 for the three and six months ended
November 30, 1994 respectively compared to $3,324,000 and $6,498,000 for the
three and six months ended November 30, 1993, respectively. Interest, net
for homebuilding was $1,308,000 and $1,362,000 for the three months ended
November 30, 1994 and 1993, respectively. For the six month period ended
November 30, 1994, interest, net for homebuilding was $2,246,000 compared
with $2,519,000 for the six months ended November 30, 1993.
The Company's pre-tax profit from homebuilding for the six months ended
November 30, 1994 was $12,575,000 compared to $10,077,000 for the
corresponding period ended November 30, 1993. The increase in pre-tax
profit was due primarily to San Antonio and improved results from Denver and
Southern California which contributed an additional $1,694,000 of pre-tax
profit in the six months ended November 30, 1994 compared to the six months
ended November 30, 1993.
Mortgage Banking
The Company's mortgage banking operations are conducted through its
wholly-owned subsidiaries American Western Mortgage Company ("AWMC") in
Arizona and Miltex Management, Inc. ("MMI") in Texas. The following table
summarizes operating information for the Company's mortgage banking
operations:
Quarters ended
Three months ended Six months ended
November 30, November 30,
------------ ------------
1994 1993 1994 1993
---- ---- ---- ----
(Dollars in thousands)
Number of loans originated 468 753 1,016 1,172
Loan origination fees $ 448 $ 643 $ 965 $1,031
Sale of servicing and
marketing gains 645 1,044 1,445 1,622
Other revenue 156 133 319 212
------ ------ ------ ------
Total revenues 1,249 1,820 2,729 2,865
General and administrative
expenses 1,090 1,083 2,291 1,697
------ ------ ------ ------
Operating income from
mortgage banking 159 737 438 1,168
Interest, net (116) (16) (289) 19
------ ------ ------ ------
Pre-Tax profit from
mortgage banking $ 275 $ 753 $ 727 $1,149
====== ====== ====== ======
Revenues from mortgage banking operations decreased in the second quarter of
fiscal 1994 primarily as a result of a decrease in originations in Texas to
customers other than its homebuyers. General and administrative expenses
increased in the six months ended November 30, 1994 primarily as a result of
the Texas operations being reflected for the entire period in fiscal 1995.
The Company retains a portion of the loan servicing of the loan it
originates. At November 30, 1994, the servicing portfolio was approximately
$57,759,000 compared to $60,570,000 at November 30, 1993.
Consolidated Operations
Net income was $7,608,000 ($1.09 per share, $.99 fully diluted) for the
six months ended November 30, 1994 compared to $6,464,000 ($1.19 per share,
$1.03 fully diluted) for the period ended November 30, 1993.
Liquidity and Capital Resources
- -------------------------------
The Company's financing needs depend primarily upon sales volume, asset
turnover, land acquisition and inventory balances. The Company has
financed, and expects to continue to finance, its working capital needs
through funds generated by operations and borrowings. Funds for future land
acquisitions and construction costs are expected to be provided primarily by
cash flows from operations and future borrowings as permitted under the 12%
Senior Note Indenture. At November 30, 1994, the Company had unsecured
lines of credit from two lenders for aggregate borrowings (excluding
mortgage warehouse lines) of up to $20,000,000 and guaranteed a $10,000,000
secured line of credit for one of its subsidiaries. Additionally, the
Company assumed, $55 million of credit facilities ($15 million of which are
unsecured) in connection with the Acquisitions. At November 30, 1994, there
was $48,862,000 outstanding in the aggregate under these credit lines. The
Company's revolving lines of credit bear interest at rates ranging from
prime plus 1/2% to prime plus 1%. The Company believes that amounts
generated from operations and such additional borrowings will provide funds
adequate to finance its homebuilding activities and meet its debt service
requirements. The Company does not have any significant current commitments
for capital expenditures.
AWMC has a warehouse line of credit for $15,000,000 which is guaranteed
by the Company. In addition, MMI has a warehouse line of credit for
$10,000,000. Pursuant to the warehouse lines of credit, the Company issues
drafts to fund its mortgage loans. The amount represented by a draft is
drawn on the warehouse line of credit when the draft is presented for
payment. At November 30, 1994, the amount outstanding under the warehouse
lines of credit and the amount of funding drafts that had not been presented
for payment was $10,384,000. The Company believes that these lines are
sufficient for its mortgage banking operations.
On July 29, 1993, the Company acquired all of the outstanding capital
stock of Milburn for approximately $26.3 million ($20 million in cash and
$6.3 million of Series A Preferred Stock). On January 28, 1994, the Company
acquired the operations of Aspen Homes for total cash consideration of
$6,982,000. On November 18, 1994, the Company acquired all of the
outstanding capital stock of Heftler for $28.5 million in cash.
In November 1993, the Company completed a public offering of 1,704,400
shares of Common Stock at $21.50 per share. The net proceeds of the
offering (approximately $34,219,000) were used to redeem the Series A
Preferred Stock and to reduce temporarily all amounts outstanding under the
Company's revolving lines of credit and mortgage banking warehouse lines of
credit.
On March 22, 1994, the Company obtained the consent of the holders of
the majority of the outstanding 12% Senior Notes to certain amendments to
the Indenture, including to permit the sale of an additional $35,000,000 of
Senior Notes. In connection therewith, the Company paid $1,102,020 to the
holders of the outstanding Notes. On March 31, 1994, the Company completed
the sale of the additional Senior Notes at 107% of par.
As a result of the trading price of the Company's Common Stock, the
Board of Directors authorized on December 22, 1994 the repurchase from time
to time of up to 500,000 shares of its Common Stock. Through December 31,
1994, the Company had purchased 30,000 shares for an aggregate price of
$374,250.
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
10.1(a) Third modification Agreement dated as of November 17,
1994 between Bank One, Arizona NA "BOAZ" (formerly
Valley National Bank of Arizona "VNB") and CHHC.
10.1(b) Fourth Modification Agreement dated as of November 22,
1994 between BOAZ (formerly VNB) and CHHC.
10.2(a) Amended and Restated Loan Agreement dated as of October
28, 1994 between BOAZ and Milburn Investments, Inc.
("MII").
10.2(b) First Modification Agreement dated as of December 8,
1994 between BOAZ and MII.
10.3 Replacement Promissory Note dated October 28, 1994 by
MII in favor of BOAZ in the principal amount of
$25,000,000.
10.4 First Modification Agreement dated as of November 22,
1994 between BOAZ and Heftler Realty Co.
10.5 Loan Agreement dated as of November 17, 1994 between
BOAZ and KDB Homes, Inc. ("KDB").
10.6 Promissory Note dated November 17, 1994 by KDB in favor
of BOAZ in the principal amount of $10,000,000.
10.7 Modification and Extension Agreement dated as of
November 29, 1994 between BOAZ and AWMC.
10.8(a) Loan Agreement dated as of April 5, 1993 between Norwest
Bank Arizona, National Association "Norwest" (formerly
Citibank (Arizona) and CHHC.
10.8(b) First Amendment to Loan Agreement dated as of November,
1993 between Norwest and CHHC.
10.8(c) Second Amendment to Loan Agreement dated as of April 1,
1994 between Norwest and CHHC.
10.8(d) Third Amendment to Loan Agreement dated as of July 7,
1994 between Norwest and CHHC.
10.8(e) Fourth Amendment to Loan Agreement dated as of November
14, 1994 between Norwest and CHHC.
11 Statement of Computation of Earnings Per Share.
27 Financial Data Schedule
(b) Reports on Form 8-K: The Company filed a report on Form
8-K dated November 18, 1994.
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONTINENTAL HOMES HOLDING CORP.
Date: January 13, 1995 By: /s/ Kenda B. Gonzales
--------------------------
KENDA B. GONZALES
Secretary and Treasurer
(Chief Financial Officer)
Date: January 13, 1995 By: /s/ Donald R. Loback
--------------------------
DONALD R. LOBACK
Co-Chief Executive Officer
Exhibit 10.1(a)
THIRD MODIFICATION AGREEMENT
DATE: November 17, 1994
- ----
PARTIES: Borrower: CONTINENTAL HOMES HOLDING CORP.,
- ------- a Delaware corporation.
Bank: BANK ONE, ARIZONA, NA,
a national banking association.
RECITALS:
- --------
A. Bank has extended to Borrower credit ("Loan") in the principal
amount of $10,000,000.00 pursuant to the Loan Agreement, dated February 25,
1993 ("Loan Agreement"), and evidenced by the Promissory Note, dated
February 25, 1993 ("Note"). The unpaid principal of the Loan as of the date
hereof is $10,000,000.00.
B. Bank and Borrower have executed and delivered previously the
following agreements ("Modifications") modifying the terms of the Loan, the
Note, and/or the Loan Agreement: First Modification Agreement, dated
February 25, 1994, and Second Modification Agreement, dated March 31, 1994.
(The Note, the Loan Agreement, any arbitration resolution, any environmental
certification and indemnity agreement, and all other agreements, documents,
and instruments evidencing, securing, or otherwise relating to the Loan, as
modified in the Modifications, are sometimes referred to individually and
collectively as the "Loan Documents". Hereinafter, "Note", "Loan
Agreement", and "Loan Documents" shall mean such documents as modified in
the Modifications.)
C. Borrower has requested that Bank modify the Loan and the Loan
Documents as provided herein. Bank is willing to so modify the Loan and the
Loan Documents, subject to the terms and conditions herein.
AGREEMENT:
- ---------
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
--------------------
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
------------------------------
2.1 The Loan Documents are modified as follows:
2.1.1 The first paragraph of the Note is hereby amended in its
entirety to read as follows:
PROMISE TO PAY AND INTEREST. For value received, the undersigned
("Borrower"), promises to pay to BANK ONE, ARIZONA, NA, a national
banking association formerly known as The Valley National Bank of
Arizona, 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 (as hereafter defined), 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.
2.1.2 The term "Maturity Date," as used in the Note is hereby
extended from February 25, 1995 to November 30, 1995.
2.1.3 The Default Rate, as defined in the fourth paragraph of
the Note, is hereby modified as follows: clause (ii) which currently reads
"the Interest Rate" is modified to be "the Variable Rate."
2.1.4 The section of the Note entitled "PREPAYMENT" is
modified in its entirety to read as follows:
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.
2.1.5 Paragraph 14 of the section of the Note entitled "EVENTS
OF DEFAULT" is hereby deleted, and the following Paragraphs 14-17 are hereby
added to such section of the Note to provide as follows:
14. The occurrence of any condition or event that is a
default or is designated as a default, an event of default or an
Event of Default, in that certain Amended and Restated Loan
Agreement dated October 28, 1994 between Milburn Investments,
Inc., a Texas corporation, and Bank, providing for a loan by Bank
in the maximum principal amount of $25,000,000.00. as the same may
be amended, modified, extended, renewed, restated, and
supplemented from time to time.
15. The occurrence of any condition or event that is a
default or is designated as a default, an event of default or an
Event of Default, in that certain Mortgage Warehousing Credit and
Security Agreement dated May 27, 1994 between Miltex Mortgage of
Texas Limited Partnership, a Texas limited partnership, and Bank,
providing for a loan by Bank in the maximum principal amount of
$10,000,000.00. as the same may be amended, modified, extended,
renewed, restated, and supplemented from time to time.
16. The occurrence of any condition or event that is a
default or is designated as a default, an event of default or an
Event of Default, in that certain Loan Agreement dated November
17, 1994 between KDB Homes, Inc., a Delaware corporation, and
Bank, providing for a loan by Bank in the maximum principal amount
of $10,000,000.00. as the same may be amended, modified, extended,
renewed, restated, and supplemented from time to time.
2.1.6 Clause (j) in the definition of "Permitted Debt" in
Section 2 of the Loan Agreement is hereby amended by increasing the dollar
amount of $500,000.00 to $5,000,000.00. Additionally, the following clauses
are hereby added to the end of such definition of "Permitted Debt:"
and (m) the Debt arising pursuant to that certain Amended and
Restated Loan Agreement dated October 28, 1994 between Milburn
Investments, Inc., a Texas corporation, and Bank, providing for a
loan by Bank in the maximum principal amount of $25,000,000.00. as
the same may be amended, modified, extended, renewed, restated,
and supplemented from time to time; (n) the Debt arising pursuant
to that certain Mortgage Warehousing Credit and Security Agreement
dated May 27, 1994 between Miltex Mortgage of Texas Limited
Partnership, a Texas limited partnership, and Bank, providing for
a loan by Bank in the maximum principal amount of $10,000,000.00,
as the same may be amended, modified, extended, renewed, restated,
and supplemented from time to time; (o) the Debt arising pursuant
to that certain Loan Agreement dated November 17, 1994 between KDB
Homes, Inc., a Delaware corporation, and Bank, providing for a
loan by Bank in the maximum principal amount of $10,000,000.00. as
the same may be amended, modified, extended, renewed, restated,
and supplemented from time to time.
2.1.7 The time period of forty-five (45) days, as it is set
forth in Section 6.3.1 of the Loan Agreement, is hereby amended to be thirty
(30) days.
2.1.8 Section 6.12.1 of the Loan Agreement is hereby amended
in its entirety to provided as follows:
6.12.1 Tangible Net Worth A minimum Tangible Net Worth in
the amount of $90,000,000.00.
2.1.9 The first sentence of Section 6.12.3 of the Loan
Agreement is hereby deleted. The second sentence of Section 6.12.3 of the
Loan Agreement is hereby amended in its entirety to provide as follows:
An Adjusted Debt to Equity Ratio of not more than 2.7 to 1
for the fiscal quarter ending November 30, 1994, 2.65 to 1 for the
fiscal quarter ending February 28, 1995, 2.60 to 1 for the fiscal
quarter ending May 31, 1995 and 2.55 to 1 for the fiscal quarter
ending August 31, 1995.
2.2 Each of the Loan Documents is modified to provide that it shall be
a default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of Borrower herein or if any representation or
warranty by Borrower herein or by any guarantor in any related Consent and
Agreement of Guarantor(s) is materially incomplete, incorrect, or misleading
as of the date hereof.
2.1.10 Section 6.13 of the Loan Agreement is hereby amended in
its entirety to provide as follows:
6.13 Clean-Up. With respect to (i) the six-month period
commencing on August 25, 1994 and ending on February 25, 1995,
Borrower shall not have any Advances outstanding pursuant to this
Agreement for a period of at least fifteen (15) consecutive days,
and (ii) the period commencing on February 26, 1995 and ending on
the Commitment expiration date specified in Section 1, Borrower
shall not have any Advances outstanding pursuant to this Agreement
for a period of at least thirty (30) consecutive days.
2.3 Each reference in the Loan Documents to any of the Loan Documents
shall be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
---------------------------------------------
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or
interests in property granted as security in the Loan Documents shall remain
as security for the Loan and the obligations of Borrower in the Loan
Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
---------------------------------------
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the
passage of time or both, would be a default or an event of default under the
Loan Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial
condition of Borrower or any other person whose financial statement has been
delivered to Bank in connection with the Loan from the most recent financial
statement received by Bank.
4.3 Each and all representations and warranties of Borrower in the
Loan Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance
with their terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to
execute and deliver this Agreement and to perform the Loan Documents as
modified herein. The execution and delivery of this Agreement and the
performance of the Loan Documents as modified herein have been duly
authorized by all requisite action by or on behalf of Borrower. This
Agreement has been duly executed and delivered on behalf of Borrower.
5. BORROWER COVENANTS.
------------------
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such
additional agreements, documents, and instruments as reasonably required by
Bank to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in
law or equity of Borrower, whether now known or unknown to Borrower, (i) in
respect of the Loan, the Loan Documents, or the actions or omissions of Bank
in respect of the Loan or the Loan Documents and (ii) arising from events
occurring prior to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this
Agreement, Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all
amounts, other than interest and principal, due and payable by Borrower
under the Loan Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses incurred
by Bank in connection with this Agreement (including, without limitation,
inside and outside attorneys' expenses and fees).
5.4 On or before March 1, 1995, Borrower shall pay to Bank an
extension and modification fee of $37,500.00.
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
-------------------------------------------
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations
of Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) each guarantor(s) of the
Loan, if any, has executed and delivered to Bank a Consent and Agreement of
Guarantor(s), and (iv) if required by Bank, Borrower and any guarantor(s)
have executed and delivered to Bank an arbitration resolution, an
environmental questionnaire, and an environmental certification and
indemnity agreement.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
-----------------------------------------------------------------
WAIVER.
------
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all
prior representations, warranties, agreements, arrangements, understandings,
and negotiations. No provision of the Loan Documents as modified herein may
be changed, discharged, supplemented, terminated, or waived except in a
writing signed by the parties thereto.
8. BINDING EFFECT.
-------------
The Loan Documents as modified herein shall be binding upon and shall inure
to the benefit of Borrower and Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees,
and beneficiaries of Borrower, provided, however, Borrower may not assign
any of its right or delegate any of its obligation under the Loan Documents
and any purported assignment or delegation shall be void.
9. CHOICE OF LAW.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Arizona, without giving effect to conflicts of law
principles.
10. COUNTERPART EXECUTION.
---------------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one
and the same document. Signature pages may be detached from the
counterparts and attached to a single copy of this Agreement to physically
form one document.
DATED as of the date first above stated.
CONTINENTAL HOMES HOLDING CORP.,
a Delaware corporation
By: /s/Kenda B. Gonzales
--------------------
Name: Kenda B. Gonzales
-------------------
Title: Secretray and Treasurer
------------------------
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/Rhonda R. Williams
---------------------
Name: Rhonda R. Williams
--------------------
Title: Assistant Vice President
-------------------------
CONSENT AND AGREEMENT OF GUARANTOR(S)
-------------------------------------
With respect to the Modification Agreement, dated November 17, 1994
("Agreement"), between Continental Homes Holding Corp., a Delaware
corporation ("Borrower") and Bank One, Arizona, NA, a national banking
association formerly know as The Valley National Bank of Arizona ("Bank"),
the undersigned (individually and, if more than one, collectively
"Guarantor") agrees for the benefit of Bank as follows:
1. Guarantor acknowledges (i) receiving a copy of and reading the
Agreement, (ii) the accuracy of the Recitals in the Agreement, and (iii) the
effectiveness of (A) the Guaranty of Payment, dated February 25, 1993
("Guaranty"), by the undersigned for the benefit of Bank, as modified
herein, and (B) any other agreements, documents, or instruments securing or
otherwise relating to the Guaranty, (including, without limitation, any
arbitration resolution and any environmental certification and indemnity
agreement previously executed and delivered by the undersigned), as modified
herein. The Guaranty and such other agreements, documents, and instruments,
as modified herein, are referred to individually and collectively as the
"Guarantor Documents".
2. Guarantor consents to the modification of the Loan Documents and
all other matters in the Agreement. The Guaranty is hereby amended as
follows: the definition of "Default Rate," as set forth in Section 2 of the
Guaranty is hereby amended to read as follows:
"Default Rate" means a rate per annum of interest equal to the sum
of (i) four percent (4%) per annum, and (ii) the Variable Rate of
Interest as defined in the promissory note guaranteed hereby.
3. Guarantor fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits of whatever kind or nature, in
law or equity, that Guarantor has or in the future may have, whether known
or unknown, (i) in respect of the Loan, the Loan Documents, the Guarantor
Documents, or the actions or omissions of Bank in respect of the Loan, the
Loan Documents, or the Guarantor Documents and (ii) arising from events
occurring prior to the date hereof.
4. Guarantor agrees that all references, if any, to the Note, the
Loan Agreement, and the Loan Documents in the Guarantor Documents shall be
deemed to refer to such agreements, documents, and instruments as modified
by the Agreement.
5. Guarantor reaffirms the Guarantor Documents and agrees that the
Guarantor Documents continue in full force and effect and remain unchanged,
except as specifically modified by this Consent and Agreement of
Guarantor(s). Any property or rights to or interests in property granted as
security in the Guarantor Documents shall remain as security for the
Guaranty and the obligations of Guarantor in the Guaranty.
6. Guarantor agrees that the Loan Documents, as modified by the
Agreement, and the Guarantor Documents, as modified by this Consent and
Agreement of Guarantor(s), are the legal, valid, and binding obligations of
Borrower and the undersigned, respectively, enforceable in accordance with
their terms against Borrower and the undersigned, respectively.
7. Guarantor agrees that Guarantor has no claims, counterclaims,
defenses, or offsets with respect to the enforcement against Guarantor of
the Guarantor Documents.
8. Guarantor represents and warrants that there has been no material
adverse change in the financial condition of any Guarantor from the most
recent financial statement received by Bank.
9. Guarantor agrees that this Consent and Agreement of Guarantor(s)
may be executed in one or more counterparts, each of which shall be deemed
an original and all of which together shall constitute one and the same
document. Signature and acknowledgement pages may be detached from the
counterparts and attached to a single copy of this Consent and Agreement of
Guarantor(s) to physically form one document.
DATED as of the date of the Agreement.
CONTINENTAL HOMES, INC.,
a Delaware corporation
By: /s/Kenda B. Gonzales
--------------------
Name: Kenda B. Gonzales
-------------------
Title: Vice President
------------------
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/Rhonda R. Williams
---------------------
Name: Rhonda R. Williams
--------------------
Title: Assistant Vice President
-------------------------
CONSENT AND AGREEMENT OF GUARANTOR(S)
-------------------------------------
With respect to the Modification Agreement, dated November 17, 1994
("Agreement"), between Continental Homes Holding Corp., a Delaware
corporation ("Borrower") and Bank One, Arizona, NA, a national banking
association formerly know as The Valley National Bank of Arizona ("Bank"),
the undersigned (individually and, if more than one, collectively
"Guarantor") agrees for the benefit of Bank as follows:
1. Guarantor acknowledges (i) receiving a copy of and reading the
Agreement, (ii) the accuracy of the Recitals in the Agreement, and (iii) the
effectiveness of (A) the Guaranty of Payment, dated February 25, 1993
("Guaranty"), by the undersigned for the benefit of Bank, as modified
herein, and (B) any other agreements, documents, or instruments securing or
otherwise relating to the Guaranty, (including, without limitation, any
arbitration resolution and any environmental certification and indemnity
agreement previously executed and delivered by the undersigned), as modified
herein. The Guaranty and such other agreements, documents, and instruments,
as modified herein, are referred to individually and collectively as the
"Guarantor Documents".
2. Guarantor consents to the modification of the Loan Documents and
all other matters in the Agreement. The Guaranty is hereby amended as
follows: the definition of "Default Rate," as set forth in Section 2 of the
Guaranty is hereby amended to read as follows:
"Default Rate" means a rate per annum of interest equal to the sum
of (i) four percent (4%) per annum, and (ii) the Variable Rate of
Interest as defined in the promissory note guaranteed hereby.
3. Guarantor fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits of whatever kind or nature, in
law or equity, that Guarantor has or in the future may have, whether known
or unknown, (i) in respect of the Loan, the Loan Documents, the Guarantor
Documents, or the actions or omissions of Bank in respect of the Loan, the
Loan Documents, or the Guarantor Documents and (ii) arising from events
occurring prior to the date hereof.
4. Guarantor agrees that all references, if any, to the Note, the
Loan Agreement, and the Loan Documents in the Guarantor Documents shall be
deemed to refer to such agreements, documents, and instruments as modified
by the Agreement.
5. Guarantor reaffirms the Guarantor Documents and agrees that the
Guarantor Documents continue in full force and effect and remain unchanged,
except as specifically modified by this Consent and Agreement of
Guarantor(s). Any property or rights to or interests in property granted as
security in the Guarantor Documents shall remain as security for the
Guaranty and the obligations of Guarantor in the Guaranty.
6. Guarantor agrees that the Loan Documents, as modified by the
Agreement, and the Guarantor Documents, as modified by this Consent and
Agreement of Guarantor(s), are the legal, valid, and binding obligations of
Borrower and the undersigned, respectively, enforceable in accordance with
their terms against Borrower and the undersigned, respectively.
7. Guarantor agrees that Guarantor has no claims, counterclaims,
defenses, or offsets with respect to the enforcement against Guarantor of
the Guarantor Documents.
8. Guarantor represents and warrants that there has been no material
adverse change in the financial condition of any Guarantor from the most
recent financial statement received by Bank.
9. Guarantor agrees that this Consent and Agreement of Guarantor(s)
may be executed in one or more counterparts, each of which shall be deemed
an original and all of which together shall constitute one and the same
document. Signature and acknowledgement pages may be detached from the
counterparts and attached to a single copy of this Consent and Agreement of
Guarantor(s) to physically form one document.
DATED as of the date of the Agreement.
CHI CONSTRUCTION COMPANY,
an Arizona corporation
By: /s/Kenda B. Gonzales
--------------------
Name: Kenda B. Gonzales
-------------------
Title: Vice President
---------------
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/Rhonda R. Williams
---------------------
Name: Rhonda R. Williams
--------------------
Title: Assistant Vice President
-------------------------
Exhibit 10.1(b)
FOURTH MODIFICATION AGREEMENT
-----------------------------
DATE: November 22, 1994
- ----
PARTIES: Borrower: CONTINENTAL HOMES HOLDING CORP.,
- ------- a Delaware corporation.
Bank: BANK ONE, ARIZONA, NA,
a national banking association.
RECITALS:
- --------
A. Bank has extended to Borrower credit ("Loan") in the principal
amount of $10,000,000.00 pursuant to the Loan Agreement, dated February 25,
1993 ("Loan Agreement"), and evidenced by the Promissory Note, dated
February 25, 1993 ("Note"). The unpaid principal of the Loan as of the date
hereof is $10,000,000.00.
B. Bank and Borrower have executed and delivered previously the
following agreements ("Modifications") modifying the terms of the Loan, the
Note, and/or the Loan Agreement: First Modification Agreement, dated
February 25, 1994, Second Modification Agreement, dated March 31, 1994, and
Third Modification Agreement, dated November 17, 1994. (The Note, the Loan
Agreement, any arbitration resolution, any environmental certification and
indemnity agreement, and all other agreements, documents, and instruments
evidencing, securing, or otherwise relating to the Loan, as modified in the
Modifications, are sometimes referred to individually and collectively as
the "Loan Documents". Hereinafter, "Note", "Loan Agreement", and "Loan
Documents" shall mean such documents as modified in the Modifications.)
C. Borrower has requested that Bank modify the Loan and the Loan
Documents as provided herein. Bank is willing to so modify the Loan and the
Loan Documents, subject to the terms and conditions herein.
AGREEMENT:
- ---------
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
--------------------
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
------------------------------
2.1 The Loan Documents are modified as follows:
2.1.1 Paragraph 17 is hereby added to the section of the Note
entitled "EVENTS OF DEFAULT" as follows:
17. The occurrence of any condition or event that is a
default or is designated as a default, an event of default or an
Event of Default in that certain Loan Agreement dated November 17,
1994 between Heftler Realty Co., a Florida corporation, and Bank,
providing for a loan by Bank in the maximum principal amount of
$10,000,000.00. as the same may be amended, modified, extended,
renewed, restated, and supplemented from time to time.
2.1.2 The following clause is hereby added to the end of the
definition of "Permitted Debt" in Section 2 of the Loan Agreement:
(p) the Debt arising pursuant to that certain Loan Agreement dated
November 17, 1994 between Heftler Realty Co., a Florida
corporation, and Bank, providing for a loan by Bank in the maximum
principal amount of $10,000,000.00. as the same may be amended,
modified, extended, renewed, restated, and supplemented from time
to time.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
---------------------------------------------
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or
interests in property granted as security in the Loan Documents shall remain
as security for the Loan and the obligations of Borrower in the Loan
Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
---------------------------------------
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the
passage of time or both, would be a default or an event of default under the
Loan Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial
condition of Borrower or any other person whose financial statement has been
delivered to Bank in connection with the Loan from the most recent financial
statement received by Bank.
4.3 Each and all representations and warranties of Borrower in the
Loan Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance
with their terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to
execute and deliver this Agreement and to perform the Loan Documents as
modified herein. The execution and delivery of this Agreement and the
performance of the Loan Documents as modified herein have been duly
authorized by all requisite action by or on behalf of Borrower. This
Agreement has been duly executed and delivered on behalf of Borrower.
5. BORROWER COVENANTS.
------------------
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such
additional agreements, documents, and instruments as reasonably required by
Bank to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in
law or equity of Borrower, whether now known or unknown to Borrower, (i) in
respect of the Loan, the Loan Documents, or the actions or omissions of Bank
in respect of the Loan or the Loan Documents and (ii) arising from events
occurring prior to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this
Agreement, Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all
amounts, other than interest and principal, due and payable by Borrower
under the Loan Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses incurred
by Bank in connection with this Agreement (including, without limitation,
inside and outside attorneys' expenses and fees).
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
-------------------------------------------
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations
of Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) each guarantor(s) of the
Loan, if any, has executed and delivered to Bank a Consent and Agreement of
Guarantor(s), and (iv) if required by Bank, Borrower and any guarantor(s)
have executed and delivered to Bank an arbitration resolution, an
environmental questionnaire, and an environmental certification and
indemnity agreement.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
-----------------------------------------------------------------
WAIVER.
------
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all
prior representations, warranties, agreements, arrangements, understandings,
and negotiations. No provision of the Loan Documents as modified herein may
be changed, discharged, supplemented, terminated, or waived except in a
writing signed by the parties thereto.
8. BINDING EFFECT.
--------------
The Loan Documents as modified herein shall be binding upon and shall inure
to the benefit of Borrower and Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees,
and beneficiaries of Borrower, provided, however, Borrower may not assign
any of its right or delegate any of its obligation under the Loan Documents
and any purported assignment or delegation shall be void.
9. CHOICE OF LAW.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Arizona, without giving effect to conflicts of law
principles.
10. COUNTERPART EXECUTION.
---------------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one
and the same document. Signature pages may be detached from the
counterparts and attached to a single copy of this Agreement to physically
form one document.
DATED as of the date first above stated.
CONTINENTAL HOMES HOLDING CORP.,
a Delaware corporation
By: /s/Kenda B. Gonzales
--------------------
Name: Kenda B. Gonzales
-------------------
Title: Secretary and Treasurer
------------------------
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/Kenda B. Gonzales
--------------------
Name: Kenda B. Gonzales
-------------------
Title: Assistant Vice President
-------------------------
CONSENT AND AGREEMENT OF GUARANTOR(S)
-------------------------------------
With respect to the Modification Agreement, dated November 22, 1994
("Agreement"), between Continental Homes Holding Corp., a Delaware
corporation ("Borrower") and Bank One, Arizona, NA, a national banking
association formerly know as The Valley National Bank of Arizona ("Bank"),
the undersigned (individually and, if more than one, collectively
"Guarantor") agrees for the benefit of Bank as follows:
1. Guarantor acknowledges (i) receiving a copy of and reading the
Agreement, (ii) the accuracy of the Recitals in the Agreement, and (iii) the
effectiveness of (A) the Guaranty of Payment, dated February 25, 1993
("Guaranty"), by the undersigned for the benefit of Bank, as modified
herein, and (B) any other agreements, documents, or instruments securing or
otherwise relating to the Guaranty, (including, without limitation, any
arbitration resolution and any environmental certification and indemnity
agreement previously executed and delivered by the undersigned), as modified
herein. The Guaranty and such other agreements, documents, and instruments,
as modified herein, are referred to individually and collectively as the
"Guarantor Documents".
2. Guarantor consents to the modification of the Loan Documents and
all other matters in the Agreement.
3. Guarantor fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits of whatever kind or nature, in
law or equity, that Guarantor has or in the future may have, whether known
or unknown, (i) in respect of the Loan, the Loan Documents, the Guarantor
Documents, or the actions or omissions of Bank in respect of the Loan, the
Loan Documents, or the Guarantor Documents and (ii) arising from events
occurring prior to the date hereof.
4. Guarantor agrees that all references, if any, to the Note, the
Loan Agreement, and the Loan Documents in the Guarantor Documents shall be
deemed to refer to such agreements, documents, and instruments as modified
by the Agreement.
5. Guarantor reaffirms the Guarantor Documents and agrees that the
Guarantor Documents continue in full force and effect and remain unchanged,
except as specifically modified by this Consent and Agreement of
Guarantor(s). Any property or rights to or interests in property granted as
security in the Guarantor Documents shall remain as security for the
Guaranty and the obligations of Guarantor in the Guaranty.
6. Guarantor agrees that the Loan Documents, as modified by the
Agreement, and the Guarantor Documents, as modified by this Consent and
Agreement of Guarantor(s), are the legal, valid, and binding obligations of
Borrower and the undersigned, respectively, enforceable in accordance with
their terms against Borrower and the undersigned, respectively.
7. Guarantor agrees that Guarantor has no claims, counterclaims,
defenses, or offsets with respect to the enforcement against Guarantor of
the Guarantor Documents.
8. Guarantor represents and warrants that there has been no material
adverse change in the financial condition of any Guarantor from the most
recent financial statement received by Bank.
9. Guarantor agrees that this Consent and Agreement of Guarantor(s)
may be executed in one or more counterparts, each of which shall be deemed
an original and all of which together shall constitute one and the same
document. Signature and acknowledgement pages may be detached from the
counterparts and attached to a single copy of this Consent and Agreement of
Guarantor(s) to physically form one document.
DATED as of the date of the Agreement.
CONTINENTAL HOMES, INC.,
a Delaware corporation
By: /s/Kenda B. Gonzales
--------------------
Name: Kenda B. Gonzales
-------------------
Title: Financial Vice President
-------------------------
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/Rhonda R. Williams
---------------------
Name: Rhonda R. Williams
--------------------
Title: Assistant Vice President
-------------------------
CONSENT AND AGREEMENT OF GUARANTOR(S)
-------------------------------------
With respect to the Modification Agreement, dated November 22, 1994
"Agreement"), between Continental Homes Holding Corp., a Delaware
corporation ("Borrower") and Bank One, Arizona, NA, a national banking
association formerly know as The Valley National Bank of Arizona ("Bank"),
the undersigned (individually and, if more than one, collectively
"Guarantor") agrees for the benefit of Bank as follows:
1. Guarantor acknowledges (i) receiving a copy of and reading the
Agreement, (ii) the accuracy of the Recitals in the Agreement, and (iii) the
effectiveness of (A) the Guaranty of Payment, dated February 25, 1993
("Guaranty"), by the undersigned for the benefit of Bank, as modified
herein, and (B) any other agreements, documents, or instruments securing or
otherwise relating to the Guaranty, (including, without limitation, any
arbitration resolution and any environmental certification and indemnity
agreement previously executed and delivered by the undersigned), as modified
herein. The Guaranty and such other agreements, documents, and instruments,
as modified herein, are referred to individually and collectively as the
"Guarantor Documents".
2. Guarantor consents to the modification of the Loan Documents and
all other matters in the Agreement.
3. Guarantor fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits of whatever kind or nature, in
law or equity, that Guarantor has or in the future may have, whether known
or unknown, (i) in respect of the Loan, the Loan Documents, the Guarantor
Documents, or the actions or omissions of Bank in respect of the Loan, the
Loan Documents, or the Guarantor Documents and (ii) arising from events
occurring prior to the date hereof.
4. Guarantor agrees that all references, if any, to the Note, the
Loan Agreement, and the Loan Documents in the Guarantor Documents shall be
deemed to refer to such agreements, documents, and instruments as modified
by the Agreement.
5. Guarantor reaffirms the Guarantor Documents and agrees that the
Guarantor Documents continue in full force and effect and remain unchanged,
except as specifically modified by this Consent and Agreement of
Guarantor(s). Any property or rights to or interests in property granted as
security in the Guarantor Documents shall remain as security for the
Guaranty and the obligations of Guarantor in the Guaranty.
6. Guarantor agrees that the Loan Documents, as modified by the
Agreement, and the Guarantor Documents, as modified by this Consent and
Agreement of Guarantor(s), are the legal, valid, and binding obligations of
Borrower and the undersigned, respectively, enforceable in accordance with
their terms against Borrower and the undersigned, respectively.
7. Guarantor agrees that Guarantor has no claims, counterclaims,
defenses, or offsets with respect to the enforcement against Guarantor of
the Guarantor Documents.
8. Guarantor represents and warrants that there has been no material
adverse change in the financial condition of any Guarantor from the most
recent financial statement received by Bank.
9. Guarantor agrees that this Consent and Agreement of Guarantor(s)
may be executed in one or more counterparts, each of which shall be deemed
an original and all of which together shall constitute one and the same
document. Signature and acknowledgement pages may be detached from the
counterparts and attached to a single copy of this Consent and Agreement of
Guarantor(s) to physically form one document.
DATED as of the date of the Agreement.
CHI CONSTRUCTION COMPANY,
an Arizona corporation
By: /s/Kenda B. Gonzales
--------------------
Name: Kenda B. Gonzales
-------------------
Title: Vice President
------------------
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/Rhonda R. Williams
---------------------
Name: Rhonda R. Williams
--------------------
Title: Assistant Vice President
-------------------------
Exhibit 10.2(a)
AMENDED AND RESTATED LOAN AGREEMENT
-----------------------------------
DATE: October 28, 1994
- ----
PARTIES: Borrower: MILBURN INVESTMENTS, INC.,
- ------- a Texas corporation
Borrower 11911 Burnet
Address: Austin, Texas 78758
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:
1. SCHEDULE OF TERMS.
2. Commitment Amount: $25,000,000.00, 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 and that is not
Mandatory Collateral, (A) fifty percent (50%) of the Raw Land
Costs of such parcel, plus (B) fifty percent (50%) of the
Development Costs related to such parcel;
(ii) With respect to each Improved Lot that is not Mandatory
Collateral, seventy percent (70%) of the respective Lot Costs;
(iii) With respect to each Unit that is not Mandatory
Collateral, (A) seventy percent (70%) of the respective Lot
Costs, plus (B) ninety percent (90%) of the respective Unit Work
in Process Costs;
(iv) With respect to each parcel of Raw Land upon which
construction of Improvements has commenced and that is Mandatory
Collateral, one hundred percent (100%) of Development Costs
related to such parcel, not to exceed seventy-five percent (75%)
of the respective Raw Land/If Improved Appraised Value;
(v) With respect to each Improved Lot that is Mandatory
Collateral, seventy percent (70%) of the respective Improved Lot
Appraised Value;
(vi) With respect to each Presold Unit that is Mandatory
Collateral, the lesser of (A) seventy-five percent (75%) of the
respective Unit Base Appraised Value, or (B) eighty percent (80%)
of the sales price in the respective Purchase Contract, or (C)
ninety (90%) of the respective Unit Total Costs;
(vii) with respect to each Spec Unit and Model Unit that is
Mandatory Collateral, 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 Mandatory Collateral
3.2.1 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.
3.2.6 Maximum number of Model Units under construction or complete
at any one time in any single Subdivision: Three (3)
3.3.1 Commitment Fee: One-half of one percent (.5%) per annum of
the Commitment Amount, subject to the provisions of Section
3.3.1.
Quarterly Loan Fee: One-half of one percent (.5%) per annum
of the Commitment Amount, subject to the provisions of
Section 3.3.1.
3.3.2 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 June 1 to May 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: $200,000.00 per Unit.
6.7.2 Minimum liability insurance amount:
Per occurrence: $1,000,000.00.
General aggregate: $2,000,000.00.
Minimum umbrella excess liability insurance amount:
$20,000,000.00.
Minimum business motor vehicle liability insurance amount:
$1,000,000.00.
6.8 Other indebtedness of Borrower to be subordinated: None.
2. DEFINITIONS. In this Agreement, the following terms shall have the
following meanings:
"Advance" means an advance by Bank to Borrower hereunder.
"Agreement" means this Amended and Restated 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.
"Available Commitment" means, at any time, the lowest of (i) the applicable
Commitment Amount, or (ii) the total of (A) the aggregate of the current
Maximum Allowed Advances with respect to all Raw Land, Improved Lots and
Units that do not constitute Mandatory Collateral, plus (B) the aggregate of
the current Maximum Allowed Advances with respect to all Raw Land and
Improved Lots that constitute Mandatory Collateral, plus (C) the aggregate
of the current Unit Collateral Values for all Units that constitute
Mandatory Collateral.
"Borrowing Base Report" means Borrower's monthly report disclosing the
matters required pursuant to Section 6.3.7.
"Borrower Loan Documents" means the Loan Documents executed or delivered by
Borrower from time to time.
"Business Day" means a day of the year on which banks are not required or
authorized to close in Phoenix, Arizona.
"Calendar Month" 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 dated July 28, 1993, 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" means the property, interests in property, and rights to
property securing any or all Obligations from time to time.
"Collateral Certificate" means the certificate delivered to Bank pursuant to
Section 6.3.8.
"Commitment" means the agreement by Bank in Section 3.1 to make Advances
pursuant to the terms and conditions herein.
"Commitment Amount" means the amount specified in Section 1.
"Conversion Date" means July 28, 1995; 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 (A) any indebtedness of Borrower to CHHC, and (B) any
mortgage indebtedness held by Miltex Mortgage of Texas Limited Partnership
for resale on the secondary mortgage market, and (C) any mortgage backed
bonds held by Miltex Financial IV G.P.
"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.
"Debt to Net Worth Ratio" means, with respect to Borrower, the ratio of (ii)
Borrower's Debt to (ii) Borrower's Net Worth.
"Deed of Trust" and "Deeds of Trust" mean, respectively, each and all Deeds
of Trust, Assignment of Leases and Rents, Security Agreement, and Financing
Statement securing the Note and the other Obligations, granted from time to
time by Borrower, as trustor, for the benefit of Bank, as beneficiary, 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.
"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 shown on Borrower's most recent balance sheet provided to
Bank pursuant to Section 6.3.1.1, and, as to Mandatory Collateral, (i) as
approved by Bank in its reasonable discretion, (ii) which are accompanied by
such invoices, lien waivers and other supporting documentation reasonably
required by Bank, and (iii) 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.
"EBITDA" means, with respect to Borrower, earnings before interest, taxes,
depreciation and amortization, all as determined in accordance with GAAP.
"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 3.2.9.
"Environmental Agreement" and "Environmental Agreements" mean, 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, each being substantially in the form of
Exhibit C.
"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.
"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 shown on Borrower's
most recent balance sheet provided to Bank pursuant to Section 6.3.1.1, and
(ii) located in a Subdivision where all Improvements have been installed and
accepted by the applicable Governmental Authorities, and with respect to
Improved Lots that are Mandatory Collateral, 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 that is
Eligible Collateral, 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 3.2.5.
"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 approved by Bank as Eligible Collateral and
encumbered by the Deeds of Trust as of the date hereof.
"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.
"Interest Coverage Ratio" means, with respect to Borrower, the ratio of (i)
Borrower's EBITDA to (ii) the interest paid under all of Borrower's Debt,
all as determined on an aggregate basis with respect to the four (4) most
recent fiscal quarters of Borrower.
"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
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 as shown on Borrower's most recent balance sheet provided to
Bank pursuant to Section 6.3.1.1 and, with respect to Mandatory Collateral,
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).
"Mandatory Collateral" means Eligible Collateral that Borrower is obligated
to provide to Bank as Collateral pursuant to the provisions of Section
3.2.3.
"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.
"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 Mandatory
Collateral (as determined by Bank). Unless otherwise agreed to by Bank in
its sole and absolute discretion, the Minimum Lot Takedown Requirement for
the Improved Lots included in Mandatory Collateral is eight (8) Improved
Lots per Subdivision per each fiscal quarter, as measured on an individual,
and not aggregate, Subdivision basis.
"Maximum Rate" has the meaning specified in the Note.
"Model Adjustment" means, with respect to a Model Unit that is Mandatory
Collateral, 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 Mandatory 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 Mandatory Collateral.
"Model Term" means the maximum period for which a Model Unit may continue to
qualify as Eligible Collateral, as set forth in Section 3.2.5.
"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.
"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), calculated in accordance with GAAP.
"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 Replacement 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.
"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 that is Mandatory
Collateral, decreases in the otherwise applicable percentages of Unit Total
Costs 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 Mandatory Collateral.
"Presold Term" means the maximum period for which a Presold Unit may
continue to qualify as Eligible Collateral, as set forth in Section 3.2.5.
"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 shown on Borrower's most recent balance sheet submitted to
Bank pursuant to Section 6.3.1.1.
"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 shown on the balance sheet of Borrower
that is intended for single family residential use and is not an Improved
Lot or a Unit.
"Raw Land Adjustment" means, with respect to a parcel of Raw Land that is
Mandatory Collateral, (i) decreases in the otherwise applicable percentages
used to determine the Maximum Allowed Advances to (A) forty percent (40%)
following the Conversion Date and (B) thirty percent (30%) following the
ninth Calendar Month of the Conversion Period, and (ii) a limitation on the
aggregate amount of Maximum Allowed Advances for all parcels of Raw Land
included in Mandatory Collateral to (x) fifteen percent (15%) of the
Available Commitment following the Conversion Date, and (y) ten percent
(10%) of the Available Commitment following the ninth Calendar Month of the
Conversion Period.
"Raw Land Costs" means the actual costs paid by Borrower to third parties
not affiliated with Borrower to acquire a parcel of Raw Land as shown on
Borrower's most recent balance sheet provided to Bank pursuant to Section
6.3.1.1. 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 3.2.5.
"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 and that may also be classified as
Mandatory Collateral) 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.
"Requirements" shall have the meaning specified in the Deed of Trust.
"Securitization Event" means the occurrence of any of the following:
(a) Borrower's quarterly financial statements submitted to Bank
pursuant to Section 6.3.1.2 show Operating Losses equal to or greater
than $1,000,000.00 for one (1) fiscal quarter; or
(b) Borrower's quarterly financial statements submitted to Bank
pursuant to Section 6.3.1.2 show Operating Losses for two (2)
consecutive fiscal quarters; or
(c) Borrower breaches the provisions of Section 6.22.2 or Section
6.22.3;
(d) Borrower breaches the provisions of Section 6.22.1, 6.22.4,
6.22.5, 6.22.6, 6.22.7 or Section 7.3, and fails to cure such breach
within thirty (30) days after the last day of the fiscal quarter or
Calendar Month, as applicable, to which such breach relates.
"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 that is Mandatory
Collateral, decreases in the otherwise applicable percentages used to
determine the Maximum Allowed Advance in increments of five (5) percentage
points for each one month period, following the fourth Calendar Month of the
initial inclusion (as determined by Bank) of the Spec Unit as Mandatory
Collateral.
"Spec Term" means the maximum period for which a Spec Unit may continue to
qualify as Eligible Collateral, as set forth in Section 3.2.5.
"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.
"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 Mandatory
Collateral beyond the first nine (9) months of the Presold Unit's Term,
a decrease in the otherwise applicable Maximum Allowed Advance to fifty
percent (50%) of the Unit Base Appraised Value;
(ii) with respect to a Spec Unit remaining in Mandatory Collateral
beyond the portion of the Spec Unit's Term designated below, decreases
in the otherwise applicable percentage of Unit Base Appraised Value
used to determine the Maximum Allowed Advance in increments of five (5)
percentage points for each one month period following the fourth
Calendar Month of the Spec Unit's Term;
(iii) with respect to a Model Unit remaining in Mandatory
Collateral beyond the first eighteen (18) months of the Model Unit's
Term, a decrease in the otherwise applicable Maximum Allowed Advance to
sixty-five percent (65%) of the respective Unit Base Appraised Value,
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 sixty
percent (60%) of the respective Unit Base Appraised Value; or
(iv) 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 (o) and the exclusion of such Raw Land, Improved
Lot or Unit from Mandatory Collateral.
"Termination Date" means the date twenty-four (24) Calendar Months after the
Conversion Date.
"Texas" means the counties of Travis, Williamson and Bell, Texas.
"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)
if such Unit is Eligible Collateral, 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 that is
Eligible Collateral, 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 that is Eligible
Collateral, 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
that is Eligible Collateral.
"Unit Collateral Value" means the maximum Advances Borrower may obtain
against a Unit that constitutes Mandatory 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
that is Eligible Collateral, 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 3.2.5.
"Unit Total Costs" means, with respect to each type of Unit that is
Mandatory Collateral, 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.
"Unit Work in Process Costs" means the actual costs paid by Borrower to
third parties not affiliated with Borrower to construct a Unit, as shown on
Borrower's most recent balance sheet provided to Bank pursuant to Section
6.3.1.1. Such costs (i) include the onsite cost of labor and materials
directly related to construction of the 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) include costs and expenses related to upgrades, options,
and decorator items, (iii) include the other costs, expenses, and fees for
the 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) include "soft costs" including but not limited to,
supervision costs, construction interest and reserves for repair and
maintenance, and (v) exclude advertising and marketing costs, expenses, and
fees.
"Unmatured Event of Default" means any condition or event that with notice,
passage of time, or both would be an Event of Default.
3. LOAN FACILITY.
3.1 Loan Facility.
3.1.1 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 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.
3.1.2 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 equal to or
greater than $1,000,000.00 for any fiscal quarter, 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 such fiscal quarter; or
(c) 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 Conversation 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; or
(d) if Borrower breaches the provisions of Section 6.22.2 or
Section 6.22.3, then unless Bank in its sole and absolute discretion
agrees otherwise, the Conversation 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
Calendar Month to which such breach relates; or
(e) if Borrower breaches the provisions of Section 6.22.1,
6.22.4, 6.22.5, 6.22.6, 6.22.7 or Section 7.3, and fails to cure such
breach within thirty (30) days after the last day of the fiscal quarter
or Calendar Month, as applicable, to which such breach relates, then
unless Bank in its sole and absolute discretion agrees otherwise, the
Conversation 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 expiration of such 30-
day period.
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 $3,125,000 $21,875,000
6 Calendar Months after
Conversion Date $3,125,000 $18,750,000
9 Calendar Months after
Conversion Date $3,125,000 $15,625,000
12 Calendar Months after
Conversion Date $3,125,000 $12,500,000
15 Calendar Months after
Conversion Date $3,125,000 $9,375,000
18 Calendar Months after
Conversion Date $3,125,000 $6,250,000
21 Calendar Months after
Conversion Date $3,125,000 $3,125,000
Termination Date $3,125,000 $0
3.1.3 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 3.3.1, 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 3.3.1 or Section 3.3.2 during the Conversion
Period.
3.1.4 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 3.4 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.
3.2 Advances.
3.2.1 Method for Advances. 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 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 proceeds of
Advances.
3.2.2 Use of Advances. Advances shall be used only 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.
3.2.3 Mandatory Collateral. Until a Securitization Event has
occurred, Borrower shall be entitled to request Advances in an amount not to
exceed the lesser of (i) $15,000,000.00 or (ii) the Available Commitment,
and Borrower shall not be required to provide Collateral to Bank with
respect to such Advances (the Advances that may be requested by Borrower on
an unsecured basis pursuant to this sentence are referred to herein as the
"Unsecured Portion of the Commitment"; any Advances in excess of the
Unsecured Portion of the Commitment are referred to herein as the "Secured
Portion of the Commitment"). Such Advances will be made by Bank with
respect to Raw Land, Improved Lots and Units shown on the most recent
balance sheet submitted by Borrower pursuant to Section 6.3.1.1, but
Borrower shall not be obligated to include such Raw Land, Improved Lots and
Units in Collateral. If a Securitization Event has not occurred, any
Advances by Bank from the Secured Portion of the Commitment shall be made
only with respect to Eligible Collateral, and such Eligible Collateral shall
be deemed Mandatory Collateral to the extent of, and for purposes of
determining the amount of, such Advances. If Borrower fails to provide
Mandatory Collateral, then Borrower shall not be entitled to Advances from
the Secured Portion of the Commitment. During the Conversion Period, the
reductions in the Commitment Amount shall be applied first to reduce the
Secured Portion of the Commitment and then to the Unsecured Portion of the
Commitment.
If a Securitization Event occurs, then Borrower shall be required to
provide Mandatory Collateral to Bank with respect to all outstanding
Advances in accordance with the terms of this Section 3.2.3. Such Mandatory
Collateral will be in an amount such that the Maximum Allowed Advances with
respect to such Mandatory Collateral shall be equal to or greater than the
outstanding Advances under the Note. If Securitization Event occurs, any
Advances by Bank shall thereafter be made only with respect to Eligible
Collateral, and such Eligible Collateral shall be deemed Mandatory
Collateral to the extent of, and for purposes of determining the amount of,
such Advances.
If Borrower is required to provide Mandatory Collateral as a result of
a Securitization Event, then such Mandatory Collateral will be provided by
Borrower with the time periods set forth below:
(a) If the Securitization Event occurs when Borrower's quarterly
financial statements submitted to Bank pursuant to Section 6.3.1.2 show
Operating Losses equal to or greater than $1,000,000.00 for one (1)
fiscal quarter, then such Mandatory Collateral will be provided within
seventy-five (75) days after the end of the fiscal quarter to which
such Operating Losses relate; or
(b) If the Securitization Event occurs when 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 such
Mandatory Collateral will be provided within seventy-five (75) days
after the end of the second such fiscal quarter to which such Operating
Losses relate; or
(c) If the Securitization Event occurs when Borrower breaches the
provisions of Section 6.22.2 or Section 6.22.3, then such Mandatory
Collateral will be provided within seventy-five (75) days after the end
of the fiscal quarter to which such breach relates; and
(d) If the Securitization Event occurs when Borrower breaches the
provisions of Section 6.22.1, 6.22.4, 6.22.5, 6.22.6, 6.22.7 or Section
7.3, and Borrower fails to cure such breach within seventy-five (75)
days after the last day of the fiscal quarter to which such breach
relates, then such Mandatory Collateral will be provided within said
75-day period.
3.2.4 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, if applicable, 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), (iii) the balance
sheet most recently submitted by Borrower pursuant to Section 6.3.1.1, and
(iv) such other information as Bank may reasonably require in order to
verify such amounts.
3.2.5 Term Periods. During any period that Borrower provides
Mandatory Collateral, 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:
3.2.5.1 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 Mandatory Collateral
that includes such parcel; provided, however, (i) any parcel of Raw Land
remaining in Mandatory Collateral after the Conversion Date shall be subject
to a Term Adjustment for purposes of determining the Maximum Allowed
Advance; and (ii) any parcel of Raw Land remaining in Mandatory Collateral
beyond the ninth Calendar Month of the Conversion Period 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
Mandatory Collateral.
3.2.5.2 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 Mandatory 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 Mandatory 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.
3.2.5.3 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 Mandatory Collateral that includes
such Presold Unit; provided, however, any Presold Unit remaining as
Mandatory Collateral for more than nine (9) Calendar Months from the date an
Advance is first made against Mandatory Collateral that includes such
Presold Unit shall be subject to a Term Adjustment for purposes of
determining the applicable Maximum Allowed Advance.
3.2.5.4 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 Mandatory Collateral that includes such Spec
Unit; provided, however, any Spec Unit remaining as Eligible Collateral for
more than four (4) Calendar Months from the date an Advance is first made
against Mandatory Collateral that includes such Spec Unit shall be subject
to a Term Adjustment for purposes of determining the applicable Maximum
Allowed Advance.
3.2.5.5 Model Unit. A Model Unit may constitute Eligible
Collateral for not more than twenty-four (24) Calendar Months from the date
an Advance is first made against Mandatory Collateral that includes such
Model Unit; provided, however, (i) any Model Unit remaining as Mandatory
Collateral for more than eighteen (18) Calendar Months from the date an
Advance is first made against Mandatory 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 Mandatory Collateral that includes
such Model Unit shall be subject to a Term Adjustment for purposes of
determining the applicable Maximum Allowed Advance.
3.2.6 Limitation on Number of Units. During any period that
Borrower provides Mandatory Collateral, Borrower shall not have under
construction or complete at any time (i) more than the number of Model Units
set forth in Section 1, or (ii) more than the number of Spec Units set forth
in Section 1.
3.2.7 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 property or 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.
3.2.8 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
Mandatory Collateral 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;
(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 3.4; 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 3.4,
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; provided, however, that the
Initial Approved Raw Land, Improved Lots and Units shall be
released only for the purpose of sale; 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.
3.2.9 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:
3.2.9.1 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.
3.2.9.2 Default Regarding Title Insurance. The
requirements of the Loan Documents for title insurance with respect to any
Collateral are not satisfied.
3.2.10 Advances During Conversion Period. Borrower may
continue to request Advances during the Conversion Period. Such Advances
may be made by Bank pursuant to the terms and conditions of this Agreement;
provided, however, if Borrower is then providing Mandatory Collateral,
Borrower may not add any new Units, Raw Land or Improved Lots to Eligible
Collateral after the first anniversary of the Conversion Date.
3.3 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:
3.3.1 Commitment and Other Fees
3.3.1.1 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:
(a) one-half of one percent (.5%) per annum of
$15,000,000.00 of the Commitment Amount (i.e., $75,000.00) payable
on or before the date hereof.
(b) one-quarter of one percent (.25%) per annum of the
remaining $10,000,000.00 of the Commitment Amount (i.e.,
$25,000.00) payable on or before the date hereof; and one-quarter
of one percent (.25%) per annum of such remaining $10,000,000.00
of the Commitment Amount (i.e., $25,000.00) payable simultaneously
with Borrower's first request for an Advance that will result in
the total Advances outstanding under the Loan to exceed
$15,000,000.00.
3.3.1.2 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.
3.3.1.3 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.
3.3.2 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) sixty percent (60%) 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.
3.3.3 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.
3.3.4 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 two (2)
periodic inspections of the Project in any twelve (12) month period.
3.4 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.
4. CONDITIONS PRECEDENT
4.1 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:
4.1.1 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.
4.1.2 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:
4.1.2.1 Loan Documents. The Loan Documents, which shall
include all agreements, documents, and instruments specified by Bank.
4.1.2.2 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.
4.1.2.3 Insurance Policies. The policies of insurance
required under the Loan Documents.
4.1.2.4 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 Borrower's most recent fiscal year.
4.1.2.5 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).
4.1.2.6 Completion of Filings and Recordings. Evidence of
the completion of all recordings and filings to establish or maintain the
perfection and priority of the Liens and Encumbrances on the Collateral
granted in the Loan Documents.
4.1.3 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.
4.1.4 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.
4.1.5 Defaults. No Event of Default or Unmatured Event of
Default shall have occurred and be continuing.
4.1.6 Other Actions by Loan Parties. The Loan Parties have
performed such other actions as Bank may reasonably require.
4.2 Conditions Precedent to Approval of Raw Land, Improved Lots and
Units. 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 that are Eligible Collateral.
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 Texas. 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:
4.2.1 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.
4.2.2 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.
4.2.3 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.
4.2.4 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).
4.2.5 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 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.
4.2.6 Insurance Policies. Borrower shall have provided to
Bank the policies of insurance required under the Loan Documents.
4.2.7 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.
4.2.8 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.
4.2.9 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).
4.2.10 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.
4.2.11 Other Actions by Loan Parties. The Loan Parties have
performed such other actions as Bank may reasonably require.
4.3 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 (i)
only once in each Calendar Month on or before the tenth (10th) day of each
Calendar Month, with respect to Mandatory Collateral, and (ii) only twice in
each twelve month period, with respect to all other parcels of Raw Land,
Improved Lots and Units:
4.3.1 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.
4.3.2 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:
4.3.2.1 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.
4.3.2.2 Unit Budget. A Unit Budget for the respective type
of Unit.
4.3.2.3 Unit Plans and Specifications. Unit Plans and
Specifications for the respective type of Unit.
4.3.2.4 Purchase Contract. If such Unit is a Presold Unit,
a copy of a Purchase Contract for such Unit.
4.3.2.5 Construction. At the request of Bank, evidence
that construction has commenced or been completed on the Unit or the
Improvements, as applicable.
4.3.2.6 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.
4.3.2.7 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.
4.3.2.8 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.
4.3.2.9 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.
4.3.2.10 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.
4.3.2.11 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.
4.3.2.12 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.
4.3.2.13 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).
4.3.3 Defaults. No Event of Default or Unmatured Event of
Default shall have occurred and be continuing.
4.3.4 Other Actions by Loan Parties. The Loan Parties have
performed such other actions as Bank may reasonably require.
4.4 Additional Conditions Precedent to Advances. Bank shall be
obligated to make an Advance only upon satisfaction of the following
additional conditions precedent, as determined by Bank in its absolute and
sole discretion:
4.4.1 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.
4.4.2 Defaults. No Event of Default or Unmatured Event of
Default shall have occurred and be continuing.
4.4.3 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.
4.4.4 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.
4.4.5 Inspection Report. With respect to Units that are
Mandatory Collateral, 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.
4.4.6 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.
4.4.7 Approvals and Inspections by Governmental Authorities.
With respect to Mandatory Collateral, 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.
4.4.8 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 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, the making of the Advance
shall not preclude Bank from thereafter declaring the condition or event
causing such inability to be an Event of Default.
5. BORROWER REPRESENTATIONS AND WARRANTIES.
5.1 Closing Representations and Warranties. Borrower represents and
warrants to Bank as of the date of this Agreement:
5.1.1 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.
5.1.2 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.
5.1.3 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.
5.1.4 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.
5.1.5 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.
5.1.6 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.
5.1.7 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).
5.1.8 No Event of Default or Unmatured Event of Default. No
Event of Default and no Unmatured Event of Default has occurred and is
continuing.
5.1.9 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.
5.1.10 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).
5.1.11 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).
5.1.12 Compliance with Law. Neither Borrower nor the Project
is in violation of any law, ordinance, regulation, or rule (federal, state,
or local).
5.1.13 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.
5.2 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.
5.3 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.
6. 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:
6.1 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.
6.2 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.
6.3 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:
6.3.1 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:
6.3.1.1 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.
6.3.1.2 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.
6.3.2 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.
6.3.3 Closing Report. On each Business Day during any period
that Borrower provides Mandatory Collateral, 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 3.2.8.
6.3.4 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.
6.3.5 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.
6.3.6 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.
6.3.7 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:
6.3.7.1 All Property. With respect to all Raw Land,
Improved Lots and Units owned by Borrower, (i) with respect to Mandatory
Collateral, the address, (ii) the subdivision name, (iii) the date of the
first Advance against such Unit, Improved Lot, or Raw Land in Mandatory
Collateral, if applicable, (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, and (vi) with respect
to Mandatory Collateral, 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 and the Unit Work in Process Costs related to each Unit, together
with the calculations deducting such amounts from Borrower's most recent
balance sheet submitted to Bank pursuant to Section 6.3.1.1 (the amounts
remaining on the balance sheet after such deduction will be used for
purposes of determining the Maximum Allowed Advances with respect to those
parcels of Raw Land, Improved Lots, and Units that are not Mandatory
Collateral).
6.3.7.2 Raw Land. With respect to each parcel of Raw Land
that is Mandatory Collateral, (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.
6.3.7.3 Improved Lots. With respect to each Improved Lot
that is Mandatory Collateral, (i) the Lot number and the Subdivision as
indicated on the recorded plat of the Subdivision, and (ii) Improved Lot
Appraised Value.
6.3.7.4 Units. With respect to each Unit that is Mandatory
Collateral, (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, and (x) the Unit Total Cost.
6.3.8 Collateral Certificate. Within fifteen (15) days after
the end of each Calendar Month during which Borrower provides Mandatory
Collateral, a Collateral Certificate (which accompanies the Borrowing Base
Report for such month) in form and substance satisfactory to Bank setting
forth the following:
6.3.8.1 Collateral. 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 Mandatory Collateral.
6.3.9 Financial Covenants. A certificate in form and
substance satisfactory to Bank stating that Borrower is in compliance with
all financial covenants set forth in Section 6.22 and 7.3. Such certificate
shall accompany Borrower's quarterly and annual financial statements
required under Sections 6.3.1.2 and 6.3.2.
6.3.10 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.
6.3.11 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.
6.3.12 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.
6.4 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.
6.5 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, (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.
6.6 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.
6.7 Insurance. The following insurance shall be obtained and
maintained and all related premiums shall be paid as they become due:
6.7.1 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.
6.7.2 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).
6.7.3 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.
6.7.4 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.
6.7.5 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.
6.7.6 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.
6.7.7 Additional Insurance. Borrower shall obtain and
maintain such other policies of insurance as Bank may request in writing.
6.7.8 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 State of Texas. 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.
6.7.9 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.
6.8 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.
6.9 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).
6.10 Appraisals. Bank shall have the right to order Unit Base
Appraisals, Raw Land/If Improved Appraisals and Improved Lot Appraisals from
time to time with respect to any Mandatory Collateral. 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
3.4.
6.11 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. Borrower shall obtain the issuance of a permanent certifi-
cate 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.
6.12 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.
6.13 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 3.4.
6.14 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.
6.15 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.
6.16 Use of Proceeds of Advances. Borrower shall use proceeds of
Advances only for the purposes described in Sections 3.2.2 and 5.1.6.
6.17 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, costs, expenses, and fees of Bank's
attorneys).
6.18 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.
6.19 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.
6.20 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.
6.21 Payment of Net Sales Proceeds. Borrower shall, upon the closing
of a sale of any Unit, Improved Lot or parcel of Raw Land that is Mandatory
Collateral, 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.
6.22 Financial Covenants. Borrower shall maintain, at all times:
6.22.1 Tangible Net Worth. Tangible Net Worth in an amount not
less than $19,000,000.00 as of May 31, 1994, and increasing thereafter
during each fiscal quarter (with the first such fiscal quarter commencing
June 1, 1994) by an amount equal to twenty-five percent (25%) 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.
6.22.2 Debt to Tangible Net Worth Ratio. A Debt to Tangible
Net Worth Ratio of not more than 2 to 1.
6.22.3 Debt to Net Worth Ratio. A Debt to Net Worth Ratio of
not more than 1.4 to 1.
6.22.4 Interest Coverage Ratio. An Interest Coverage Ratio of
not less than 2.25 to 1.
6.22.5 Maximum Lot Inventory. An inventory of lots that does
not exceed 2,500. For purposes hereof, "lots" shall include only (i)
Improved Lots (excluding those Improved Lots where construction of the Unit
thereon has been commenced or completed), and (ii) those Lots located on Raw
Land upon which construction of Improvements has commenced.
6.22.6 Raw Land. An inventory of Raw Land that does not exceed
forty percent (40%) of Borrower's Tangible Net Worth.
6.22.7 Spec Limit. An inventory of Spec Units that does not
exceed the number of Presold Units.
6.23 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.
7. 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:
7.1 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.
7.2 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, except to CHHC.
7.3 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, and (ii) 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 (A) any
indebtedness of Borrower subordinated to the Obligations of Borrower
pursuant to Section 6.8, and (B) any mortgage indebtedness held by Miltex
Mortgage of Texas Limited Partnership for resale on the secondary mortgage
market, and (C) any mortgage backed bonds held by Miltex Financial IV G.P.
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.
9. 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.
10. 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.
11. 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.
12. ASSUMED NAMES. Borrower acknowledges that Borrower sometimes does
business under the names "Cypress Creek Ranch of Austin, Travis County,
Texas," "Cypress Creek Ranch," "The Bill Milburn Company," and "Bill
Milburn, Inc." For purposes of the Loan Documents, "Borrower" shall mean
Milburn Investments, Inc. and Milburn Investments, Inc. doing business under
each and all of the assumed names for Borrower described in this Section 12.
13. 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.
14. 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.
15. 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 Texas shall govern the creation,
attachment, perfection, priority, and foreclosure of liens on the Collateral
located in Texas, and except to the extent such laws are preempted by
applicable federal laws.
16. 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 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.
If the laws of the State of Texas are ever deemed to govern this Agreement
or the Note notwithstanding the parties expressed intent to the contrary,
the parties agree that TEX. REV. CIV. STAT. ANN. art. 5069 Ch. 15 (which
regulates certain revolving loan accounts and revolving tri-party accounts)
shall in no event apply to this Agreement or the Note. Further, to the
extent that TEX. REV. CIV. STAT. ANN. art. 5069-1.04, as amended, is
applicable to the Note or this Agreement, the "indicated rate ceiling"
specified in such article is the applicable ceiling; provided that, if any
applicable law permits greater interest, the law permitting the greatest
interest shall apply.
17. PRIOR AGREEMENT. The parties hereto agree that this Agreement
supersedes and replaces that Loan Agreement dated as of July 28, 1993
between Borrower and Bank (the "Prior Loan Agreement") in its entirety. All
indebtedness of Borrower under the Prior Loan Agreement shall automatically
and without further notice become indebtedness under this Agreement and
shall be evidenced by the Note. All Collateral under the Prior Loan
Agreement shall automatically without further action become Collateral under
this Agreement and be appropriately classified under the terms of this
Agreement, except real property Collateral located in Arizona, which shall
be released by Bank contemporaneously herewith. Borrower hereby reaffirms,
ratifies and confirms the granting of the security interest in and the liens
and encumbrances on the Collateral for the purpose of securing the revolving
line of credit pursuant to this Agreement, the Note and the obligations
contained herein. Borrower shall execute and deliver such further instru-
ments and shall do and perform all matters and things necessary to maintain
and preserve Bank's security and benefits in the Collateral. Borrower
represents, warrants and reaffirms that it has no defense, set off, or
counterclaim against Bank in regard to Borrower's obligations under the
Prior Agreement or any other documents executed in connection therewith.
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
-------------------------
MILBURN INVESTMENTS, INC.,
a Texas corporation
By: /s/Kenda B. Gonzales
--------------------
Name: Kenda B. Gonzales
-------------------
Title: Treasurer
---------
EXHIBIT A
---------
TO LOAN AGREEMENT
PERSONS AUTHORIZED TO REQUEST ADVANCES
NAME SIGNATURE
David Matlock /s/David Matlock
------------------------------------------------------
Richard Marek /s/Richard Marek
------------------------------------------------------
Julie Collins /s/Julie Collins
------------------------------------------------------
Kenda Gonzales /s/Kenda Gonzales
------------------------------------------------------
Exhibit 10.2(b)
FIRST MODIFICATION AGREEMENT
----------------------------
DATE: December 8, 1994
- ----
PARTIES: Borrower: MILBURN INVESTMENTS, INC.,
- ------- a Texas corporation.
Bank: BANK ONE, ARIZONA, NA,
a national banking association.
RECITALS:
- --------
A. Bank has extended to Borrower credit ("Loan") in the principal
amount of $25,000,000.00 pursuant to the Amended and Restated Loan
Agreement, dated October 28, 1994 ("Loan Agreement"), and evidenced by the
Replacement Promissory Note, dated October 28, 1994 ("Note"). The unpaid
principal of the Loan as of the date hereof is $2,288,438.45 (the Note, the
Loan Agreement, any arbitration resolution, any environmental certification
and indemnity agreement, and all other agreements, documents, and
instruments evidencing, securing, or otherwise relating to the Loan are
sometimes referred to individually and collectively as the "Loan
Documents").
B. Borrower has requested that Bank modify the Loan and the Loan
Documents as provided herein. Bank is willing to so modify the Loan and the
Loan Documents, subject to the terms and conditions herein.
AGREEMENT:
- ---------
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
--------------------
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
------------------------------
2.1 The Loan Documents are modified as follows:
2.1.1 Clause (i) of the last paragraph on page 3 of the Note
is hereby modified in its entirety to provide as follows: "(i) on the second
Business Day, in the case of any conversion of a Variable Rate Advance into
a Fixed Rate Advance and".
2.1.2 Paragraph 15 of the section of the Note entitled "EVENTS
OF DEFAULT" is hereby modified in its entirety to provide as follows:
15. 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, Heftler Realty Co., a Florida corporation, Continental
Homes Holding Corp., a Delaware corporation, any other Loan Party,
American Western Mortgage Company, a Colorado corporation, Miltex
Mortgage of Texas Limited Partnership, a Texas limited
partnership, KDB Homes, Inc., a Delaware corporation or CHI
Construction Company, an Arizona corporation, to Bank.
2.1.3 Clauses (vi) and (vii) of the definition of Maximum
Allowed Advances in Section 1 of the Loan Agreement are hereby modified in
their entirety to provide as follows:
(vi) With respect to each Presold Unit that is Mandatory
Collateral, the lesser of (A) seventy-five percent (75%) of the
respective Unit Base Appraised Value, or (B) eighty percent (80%)
of the sales price in the respective Purchase Contract, or (C)
ninety percent (90%) of the respective Unit Total Costs plus fifty
percent (50%) of the Lot Cost for the Lot related to such Unit;
(vii) With respect to each Spec Unit and Model Unit that is
Mandatory Collateral, 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 plus fifty percent (50%)
of the Lot Cost for the Lot related to such Unit;
2.1.4 Clause 6.7.1 in Section 1 of the Loan Agreement is
hereby modified in its entirety to provide as follows:
6.7.1 Minimum property insurance amount: Replacement
Value per Unit.
2.1.5 The following sentence is hereby added to the end of the
definition of Debt in Section 2 of the Loan Agreement:
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.
2.1.6 The definitions of Presold Adjustment, Model Adjustment,
Spec Adjustment, and Raw Land Adjustment are hereby deleted from Section 2
of the Loan Agreement, and each other place in the Loan Agreement where such
phrases appear.
2.1.7 The following clause (iv) is hereby added to the
definition of Term Adjustment in Section 2 of the Loan Agreement, and the
existing clause (iv) is hereby renumbered to be clause (v):
(iv) with respect to a parcel of Raw Land that is Mandatory
Collateral, (i) decreases in the otherwise applicable percentages
used to determine the Maximum Allowed Advances to (A) forty
percent (40%) following the Conversion Date and (B) thirty percent
(30%) following the ninth Calendar Month of the Conversion Period,
and (ii) a limitation on the aggregate amount of Maximum Allowed
Advances for all parcels of Raw Land included in Mandatory
Collateral to (x) fifteen percent (15%) of the Available
Commitment following the Conversion Date, and (y) ten percent
(10%) of the Available Commitment following the ninth Calendar
Month of the Conversion Period;
2.1.8 The definition of Unit Total Costs in Section 2 of the
Loan Agreement is hereby modified in its entirety to provided as follows:
"Unit Total Costs" means, with respect to each type of Unit,
the total costs, expenses and fees included in the respective Unit
Budget.
2.1.9 The phrase "Conversation Date" as it appears in Section
3.1.2 of the Loan Agreement is hereby modified to be "Conversion Date."
2.1.10 Section 3.2.6 of the Loan Agreement is hereby modified
in its entirety to provide as follows:
During any period that Borrower provides Mandatory
Collateral, Borrower shall not have under construction or complete
at any time more than the number of Model Units set forth in
Section 1.
2.1.11 The third sentence of Section 6.11 of the Loan Agreement
is hereby modified in its entirety to provide as follows:
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.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
---------------------------------------------
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or
interests in property granted as security in the Loan Documents shall remain
as security for the Loan and the obligations of Borrower in the Loan
Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
---------------------------------------
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the
passage of time or both, would be a default or an event of default under the
Loan Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial
condition of Borrower or any other person whose financial statement has been
delivered to Bank in connection with the Loan from the most recent financial
statement received by Bank.
4.3 Each and all representations and warranties of Borrower in the
Loan Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance
with their terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to
execute and deliver this Agreement and to perform the Loan Documents as
modified herein. The execution and delivery of this Agreement and the
performance of the Loan Documents as modified herein have been duly
authorized by all requisite action by or on behalf of Borrower. This
Agreement has been duly executed and delivered on behalf of Borrower.
5. BORROWER COVENANTS.
------------------
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such
additional agreements, documents, and instruments as reasonably required by
Bank to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in
law or equity of Borrower, whether now known or unknown to Borrower, (i) in
respect of the Loan, the Loan Documents, or the actions or omissions of Bank
in respect of the Loan or the Loan Documents and (ii) arising from events
occurring prior to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this
Agreement, Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all
amounts, other than interest and principal, due and payable by Borrower
under the Loan Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses incurred
by Bank in connection with this Agreement (including, without limitation,
inside and outside attorneys' expenses and fees).
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
-------------------------------------------
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations
of Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) each guarantor(s) of the
Loan, if any, has executed and delivered to Bank a Consent and Agreement of
Guarantor(s), and (iv) if required by Bank, Borrower and any guarantor(s)
have executed and delivered to Bank an arbitration resolution, an
environmental questionnaire, and an environmental certification and
indemnity agreement.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
-----------------------------------------------------------------
WAIVER.
------
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all
prior representations, warranties, agreements, arrangements, understandings,
and negotiations. No provision of the Loan Documents as modified herein may
be changed, discharged, supplemented, terminated, or waived except in a
writing signed by the parties thereto.
8. BINDING EFFECT.
--------------
The Loan Documents as modified herein shall be binding upon and shall inure
to the benefit of Borrower and Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees,
and beneficiaries of Borrower, provided, however, Borrower may not assign
any of its right or delegate any of its obligation under the Loan Documents
and any purported assignment or delegation shall be void.
9. CHOICE OF LAW.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Arizona, without giving effect to conflicts of law
principles.
10. COUNTERPART EXECUTION.
---------------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one
and the same document. Signature pages may be detached from the
counterparts and attached to a single copy of this Agreement to physically
form one document.
DATED as of the date first above stated.
MILBURN INVESTMENTS, INC.,
a Texas corporation
By: /s/Kenda B. Gonzales
--------------------
Name: Kenda B. Gonzales
-------------------
Title: Treasurer
----------
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/Rhonda R. Williams
---------------------
Name: Rhonda R. Williams
--------------------
Title: Assistant Vice President
-------------------------
Exhibit 10.3
REPLACEMENT PROMISSORY NOTE
---------------------------
Principal Amount: $25,000,000.00 Date: October 28, 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 TWENTY-FIVE MILLION AND NO/100 DOLLARS
($25,000,000.00), 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 Amended and Restated 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 four (4). 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 Fixed Rate Advance
into a Variable 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 four (4). 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 November 1, 1994, and
continuing on the same day of each successive month thereafter until that
date that is twenty-four (24) 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"):
1. 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.
2. Failure by any Loan Party to comply with Section 7.1 or
7.2 of the Loan Agreement.
3. Failure by Borrower to comply with Section 7.3 of the
Loan Agreement after a Securitization Event occurs.
4. 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.
5. Failure by Borrower to provide Mandatory Collateral as
required in Section 3.2.3 of the Loan Agreement.
6. Failure by Borrower to maintain any of the financial
covenants described in Section 6.22 of the Loan Agreement after a
Securitization Event occurs.
7. Failure by Borrower to comply with any covenants, terms,
and conditions applicable to Borrower under or pursuant to any
other Debt owed by Borrower 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.
8. 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).
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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.
15. 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 any
Loan Party or Continental Homes Holding Corp., a Delaware
corporation, American Western Mortgage Company, a Colorado
corporation, or Miltex Mortgage of Texas Limited Partnership, a
Texas limited partnership, to Bank.
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 Texas shall govern the creation,
attachment, perfection, priority, and foreclosure of liens on the portion of
the Collateral located in Texas, 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:
Milburn Investments, Inc.
11911 Burnet
Austin, Texas 78758
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 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.
If the laws of the State of Texas are ever deemed to govern this Note
notwithstanding the parties expressed intent to the contrary, the parties
agree that TEX. REV. CIV. STAT. ANN. art. 5069 Ch. 15 (which regulates
certain revolving loan accounts and revolving tri-party accounts) shall in
no event apply to this Note. Further, to the extent that TEX. REV. CIV.
STAT. ANN. art. 5069-1.04, as amended, is applicable to this Note, the
"indicated rate ceiling" specified in such article is the applicable
ceiling; provided that, if any applicable law permits greater interest, the
law permitting the greatest interest shall apply.
REPLACEMENT NOTE. This Note is a replacement of that certain Promissory
Note in the principal amount of $25,000,000.00 dated July 28, 1993, made by
Borrower and payable to Bank.
MILBURN INVESTMENTS, INC.,
a Texas corporation
By: /s/Kenda B. Gonzales
--------------------
Name: Kenda B. Gonzales
--------------------
Title: Treasurer
-----------
Exhibit 10.4
FIRST MODIFICATION AGREEMENT
----------------------------
DATE: November 22, 1994
- ----
PARTIES: Borrower: HEFTLER REALTY CO.,
- ------- a Florida corporation.
Bank: BANK ONE, ARIZONA, NA,
a national banking association.
RECITALS:
- --------
A. Bank has extended to Borrower credit ("Loan") in the principal
amount of $10,000,000.00 pursuant to the Loan Agreement, dated November 17,
1994 ("Loan Agreement"), and evidenced by the Promissory Note, dated
November 17, 1994 ("Note"). The unpaid principal of the Loan as of the date
hereof is $9,511,081.59 (the Note, the Loan Agreement, any arbitration
resolution, any environmental certification and indemnity agreement, and all
other agreements, documents, and instruments evidencing, securing, or
otherwise relating to the Loan are sometimes referred to individually and
collectively as the "Loan Documents").
B. Borrower has requested that Bank modify the Loan and the Loan
Documents as provided herein. Bank is willing to so modify the Loan and the
Loan Documents, subject to the terms and conditions herein.
AGREEMENT:
- ---------
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
--------------------
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
------------------------------
2.1 The Loan Documents are modified as follows:
2.1.1 Paragraph 13 of the section of the Note entitled "EVENTS
OF DEFAULT" is hereby modified in its entirety to provide as follows:
13. 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, Milburn Investments, Inc., a Texas corporation,
Continental Homes Holding Corp., a Delaware corporation, any other
Loan Party, American Western Mortgage Company, a Colorado
corporation, Miltex Mortgage of Texas Limited Partnership, a Texas
limited partnership, KDB Homes, Inc., a Delaware corporation or
CHI Construction Company, an Arizona corporation, to Bank.
2.1.2 Clauses (iii), (iv) and (v) of the definition of Maximum
Allowed Advances in Section 1 of the Loan Agreement are hereby replaced in
their entirety by the following:
(iii) With respect to each Presold Unit located in Arizona,
the lesser of (A) eighty percent (80%) of the respective Unit Base
Appraised Value, or (B) eighty percent (80%) of the sales price in
the respective Purchase Contract, or (C) ninety percent (90%) of
the respective Unit Total Costs plus fifty percent (50%) of the
Lot Cost for the Lot related to such Unit;
(iv) With respect to each Presold Unit located in Florida,
the lesser of (A) seventy-five percent (75%) of the respective
Unit Base Appraised Value, or (B) seventy-five percent (75%) of
the sales price in the respective Purchase Contract, or (C) ninety
percent (90%) of the respective Unit Total Costs plus fifty
percent (50%) of the Lot Cost for the Lot related to such Unit;
(v) 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 plus fifty percent (50%) of the Lot Cost for the Lot related
to such Unit;
(vi) 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
plus fifty percent (50%) of the Lot Cost for the Lot related to
such Unit;
2.1.3 The definitions of Presold Adjustment, Model Adjustment, Spec
Adjustment, and Raw Land Adjustment are hereby deleted from Section 2 of the
Loan Agreement, and each other place in the Loan Agreement where such
phrases appear.
2.1.4 Clauses (i), (ii) and (iii) in the definition of Term
Adjustment in Section 2 of the Loan Agreement are hereby modified in their
entirety as follows:
(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 respective
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 plus fifty percent (50%)
of the Lot Cost for the Lot related to such Unit;
(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 plus one fifty percent (50%) of the
Lot Cost for the Lot related to such Unit; 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 plus one
fifty percent (50%) of the Lot Cost for the Lot related to such
Unit;
(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 plus one fifty percent
(50%) of the Lot Cost for the Lot related to such Unit; 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 plus one fifty percent (50%) of the Lot Cost for
the Lot related to such Unit;
2.1.5 The definition of Unit Total Costs in Section 2 of the
Loan Agreement is hereby modified in its entirety to provided as follows:
"Unit Total Costs" means, with respect to each type of Unit,
the total costs, expenses and fees included in the respective Unit
Budget.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
---------------------------------------------
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or
interests in property granted as security in the Loan Documents shall remain
as security for the Loan and the obligations of Borrower in the Loan
Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
---------------------------------------
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the
passage of time or both, would be a default or an event of default under the
Loan Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial
condition of Borrower or any other person whose financial statement has been
delivered to Bank in connection with the Loan from the most recent financial
statement received by Bank.
4.3 Each and all representations and warranties of Borrower in the
Loan Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance
with their terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to
execute and deliver this Agreement and to perform the Loan Documents as
modified herein. The execution and delivery of this Agreement and the
performance of the Loan Documents as modified herein have been duly
authorized by all requisite action by or on behalf of Borrower. This
Agreement has been duly executed and delivered on behalf of Borrower.
5. BORROWER COVENANTS.
------------------
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such
additional agreements, documents, and instruments as reasonably required by
Bank to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in
law or equity of Borrower, whether now known or unknown to Borrower, (i) in
respect of the Loan, the Loan Documents, or the actions or omissions of Bank
in respect of the Loan or the Loan Documents and (ii) arising from events
occurring prior to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this
Agreement, Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all
amounts, other than interest and principal, due and payable by Borrower
under the Loan Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses incurred
by Bank in connection with this Agreement (including, without limitation,
inside and outside attorneys' expenses and fees).
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
-------------------------------------------
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations
of Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) each guarantor(s) of the
Loan, if any, has executed and delivered to Bank a Consent and Agreement of
Guarantor(s), and (iv) if required by Bank, Borrower and any guarantor(s)
have executed and delivered to Bank an arbitration resolution, an
environmental questionnaire, and an environmental certification and
indemnity agreement.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
-----------------------------------------------------------------
WAIVER.
------
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all
prior representations, warranties, agreements, arrangements, understandings,
and negotiations. No provision of the Loan Documents as modified herein may
be changed, discharged, supplemented, terminated, or waived except in a
writing signed by the parties thereto.
8. BINDING EFFECT.
--------------
The Loan Documents as modified herein shall be binding upon and shall inure
to the benefit of Borrower and Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees,
and beneficiaries of Borrower, provided, however, Borrower may not assign
any of its right or delegate any of its obligation under the Loan Documents
and any purported assignment or delegation shall be void.
9. CHOICE OF LAW.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Arizona, without giving effect to conflicts of law
principles.
10. COUNTERPART EXECUTION.
---------------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one
and the same document. Signature pages may be detached from the
counterparts and attached to a single copy of this Agreement to physically
form one document.
DATED as of the date first above stated.
HEFTLER REALTY CO.,
a Florida corporation
By: /s/Donald R. Loback
-------------------
Name: Donald R. Loback
------------------
Title: President
----------
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/Rhonda R. Williams
---------------------
Name: Rhonda R. Williams
--------------------
Title: Assistant Vice President
-------------------------
Exhibit 10.5
LOAN AGREEMENT
--------------
DATE: November 17, 1994
- ----
PARTIES: Borrower: KDB HOMES, INC.,
- ------- a Delaware corporation
Borrower 7001 North Scottsdale Road, Suite 2050
Address: Scottsdale, Arizona 85253
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:
17. 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.
Guarantor: Continental Homes Holding Corp., a Delaware
corporation.
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;
(ii) With respect to each Improved Lot, the lesser of (A)
sixty-five percent (65%) of the respective Lot Costs, or (B)
sixty-five percent (65%) of the respective Improved Lot Appraised
Value;
(iii) With respect to each Presold Unit, the lesser of (A)
eighty percent (80%) of the respective Unit Base Appraised Value,
or (B) eighty percent (80%) of the sales price in the respective
Purchase Contract, 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.
3.3.5 Maximum aggregate number of Model Units under construction or
complete at any one time in any single Subdivision: Three
(3)
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 June 1 to May 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 Guarantor's
consolidated 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: $1,000,000.00.
General aggregate: $2,000,000.00.
Minimum umbrella excess liability insurance amount:
$20,000,000.00.
Minimum business motor vehicle liability insurance amount:
$1,000,000.00.
6.8 Other indebtedness of Borrower to be subordinated: None.
18. 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.
"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) 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.
"Collateral" means the property, interests in property, and rights to
property securing any or all Obligations from time to time.
"Collateral Certificate" means the certificate delivered to Bank pursuant to
Section 6.3.8.
"Colorado" means the counties of Jefferson, Douglas, and Arapahoe, Colorado,
and such other counties in Colorado as Bank may approve in its absolute and
sole discretion.
"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 Guarantor. 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.
"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.
"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" mean, 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.
"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,
and any quasi-municipal corporation, general improvement district, special
improvement district, and any other corporate district, any other corporate
authority, any corporate commission, or any other political subdivision of
the State of Colorado or Colorado constituting a body corporate.
"Guarantor" means Continental Homes Holding Corp., a Delaware corporation.
"Guaranty" means the Guaranty of Payment executed by Guarantor, for the
benefit of Bank, guaranteeing repayment of the indebtedness under the Note.
"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 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, including without
limitation, Guarantor, 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.
"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 s '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, 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.
19. LETTER OF CREDIT AND LOAN FACILITY.
19.1 Loan Facility.
19.1.1 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.
19.1.2 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
19.1.3 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.
19.1.4 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.
19.2 Letters of Credit.
19.2.1 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, 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.
19.2.2 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.
19.2.3 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.
19.2.4 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.
19.3 Advances.
19.3.1 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.
19.3.2 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.
19.3.3 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.
19.3.4 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:
19.3.4.1 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.
19.3.4.2 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.
19.3.4.3 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.
19.3.4.4 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.
19.3.4.5 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.
19.3.5 Limitation on Number of Units. Borrower shall not have
under construction or complete at any time more than the aggregate number of
Model Units and Spec Units set forth in Section 1.
19.3.6 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.
19.3.7 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.
19.3.8 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:
19.3.8.1 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.
19.3.8.2 Default Regarding Title Insurance. The
requirements of the Loan Documents for title insurance with respect to any
Collateral are not satisfied.
19.3.9 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.
19.4 Fees. As additional consideration for the Commitment, Borrower
agrees to pay to Bank 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:
19.4.1 Commitment and Other Fees
19.4.1.1 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.
19.4.1.2 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.
19.4.1.3 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.
19.4.2 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.
19.4.3 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.
19.4.4 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.
19.5 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.
20. CONDITIONS PRECEDENT
20.1 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:
20.1.1 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.
20.1.2 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:
20.1.2.1 Loan Documents. The Loan Documents, which shall
include all agreements, documents, and instruments specified by Bank.
20.1.2.2 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.
20.1.2.3 Insurance Policies. The policies of insurance
required under the Loan Documents.
20.1.2.4 Financial Statements. Audited (with respect to
Guarantor) and company prepared (with respect to Borrower) 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 and Guarantor, for Borrower's and Guarantor's two (2) most recent
fiscal years.
20.1.2.5 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).
20.1.2.6 Completion of Filings and Recordings. Evidence of
the completion of all recordings and filings to establish or maintain the
perfection and priority of the Liens and Encumbrances on the Collateral
granted in the Loan Documents.
20.1.2.7 Opinion Letter. A favorable opinion from a law
firm representing Borrower and Guarantor covering such matters as Bank may
require.
20.1.3 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.
20.1.4 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.
20.1.5 Defaults. No Event of Default or Unmatured Event of
Default shall have occurred and be continuing.
20.1.6 Other Actions by Loan Parties. The Loan Parties have
performed such other actions as Bank may reasonably require.
20.2 Conditions Precedent to Approval of Raw Land, Improved Lots and
Units. 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 Colorado. 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:
20.2.1 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.
20.2.2 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.
20.2.3 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.
20.2.4 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).
20.2.5 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) 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.
20.2.6 Insurance Policies. Borrower shall have provided to
Bank the policies of insurance required under the Loan Documents.
20.2.7 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.
20.2.8 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.
20.2.9 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).
20.2.10 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.
20.2.11 Other Actions by Loan Parties. The Loan Parties have
performed such other actions as Bank may reasonably require.
20.3 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:
20.3.1 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.
20.3.2 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:
20.3.2.1 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.
20.3.2.2 Unit Budget. A Unit Budget for the respective type
of Unit.
20.3.2.3 Unit Plans and Specifications. Unit Plans and
Specifications for the respective type of Unit.
20.3.2.4 Purchase Contract. If such Unit is a Presold Unit,
a copy of a Purchase Contract for such Unit.
20.3.2.5 Construction. At the request of Bank, evidence
that construction has commenced or been completed on the Unit or the
Improvements, as applicable.
20.3.2.6 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.
20.3.2.7 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.
20.3.2.8 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.
20.3.2.9 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.
20.3.2.10 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.
20.3.2.11 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.
20.3.2.12 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.
20.3.2.13 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).
20.3.3 Defaults. No Event of Default or Unmatured Event of
Default shall have occurred and be continuing.
20.3.4 Other Actions by Loan Parties. The Loan Parties have
performed such other actions as Bank may reasonably require.
20.4 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:
20.4.1 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.
20.4.2 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.
20.4.3 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.
20.4.4 Letters of Credit. With respect to any Letter of
Credit, Borrower shall have complied with the terms and conditions of
Section 3 hereof.
20.4.5 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.
20.4.6 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.
20.4.7 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.
20.4.8 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.
20.4.9 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.
21. BORROWER REPRESENTATIONS AND WARRANTIES.
21.1 Closing Representations and Warranties. Borrower represents and
warrants to Bank as of the date of this Agreement:
21.1.1 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.
21.1.2 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.
21.1.3 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.
21.1.4 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.
21.1.5 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.
21.1.6 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.
21.1.7 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).
21.1.8 No Event of Default or Unmatured Event of Default. No
Event of Default and no Unmatured Event of Default has occurred and is
continuing.
21.1.9 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.
21.1.10 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).
21.1.11 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).
21.1.12 Compliance with Law. Neither Borrower nor the Project
is in violation of any law, ordinance, regulation, or rule (federal, state,
or local).
21.1.13 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.
21.2 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.
21.3 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.
22. 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:
22.1 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.
22.2 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.
22.3 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:
22.3.1 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:
22.3.1.1 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.
22.3.1.2 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.
22.3.2 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.
22.3.3 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.
22.3.4 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.
22.3.5 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.
22.3.6 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.
22.3.7 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:
22.3.7.1 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, and (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.
22.3.7.2 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.
22.3.7.3 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.
22.3.7.4 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.
22.3.8 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.
22.3.9 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.
22.3.10 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.
22.3.11 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.
22.4 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.
22.5 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, (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.
22.6 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.
22.7 Insurance. The following insurance shall be obtained and
maintained and all related premiums shall be paid as they become due:
22.7.1 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.
22.7.2 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).
22.7.3 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.
22.7.4 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.
22.7.5 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.
22.7.6 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.
22.7.7 Additional Insurance. Borrower shall obtain and
maintain such other policies of insurance as Bank may request in writing.
22.7.8 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 State of Colorado. 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.
22.7.9 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.
22.8 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.
22.9 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).
22.10 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.
22.11 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.
22.12 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.
22.13 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.
22.14 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.
22.15 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.
22.16 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.
22.17 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, costs, expenses, and fees of Bank's
attorneys).
22.18 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.
22.19 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.
22.20 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.
22.21 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.
22.22 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.
23. 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:
23.1 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 Guarantor. 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.
23.2 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.
23.3 Districts. Borrower shall not form or consent to the formation
of any special district(s) pursuant to Title 32, Colorado Revised
Statutes ("C.R.S."), general improvement districts pursuant to C.R.S.
31-25-601 et seq., special improvement districts pursuant to C.R.S.
30-28-501 et seq. or any similar governmental or quasi-governmental
entities.
24. 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.
25. 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.
26. 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.
27. 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.
28. ASSUMED NAMES. Borrower acknowledges that Borrower sometimes does
business under the name Continental Homes. For purposes of the Loan
Documents, "Borrower" shall mean KDB Homes, Inc. and KDB Homes, Inc. doing
business under each and all of the assumed names for Borrower described in
this Section 12.
29. 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.
30. 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.
31. 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 Colorado shall govern the creation,
attachment, perfection, priority, and foreclosure of liens on the Collateral
located in Colorado, and except to the extent such laws are preempted by
applicable federal laws.
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
---------------------------
KDB HOMES, INC., a Delaware
corporation
By: /s/Kenda B. Gonzales
----------------------
Name: Kenda B. Gonzales
--------------------
Title: Secretary and Treasurer
--------------------------
EXHIBIT A
---------
TO LOAN AGREEMENT
PERSONS AUTHORIZED TO REQUEST ADVANCES
NAME SIGNATURE
- ---- ---------
Kathleen R. Wade /s/Kathleen R. Wade
--------------------------------------------------------
Kenda B. Gonzales /s/Kenda B. Gonzales
--------------------------------------------------------
Julie E. Collins /s/Julie E. Collins
--------------------------------------------------------
Donald R. Loback /s/Donald R. Loback
--------------------------------------------------------
Exhibit 10.6
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.
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 sum
of (A) four percent (4%) per annum and (B) the Variable Rate, 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.
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.
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"):
31.0.1 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.
31.0.2 Failure by any Loan Party to comply with Sections
7.1 or 7.2 of the Loan Agreement.
31.0.3 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.
31.0.4 If Borrower's quarterly financial statements
submitted to Bank pursuant to the Loan agreement show Operating
Losses for two (2) consecutive fiscal quarters.
31.0.5 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.
31.0.6 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).
31.0.7 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.
31.0.8 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.
31.0.9 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.
31.0.10 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.
31.0.11 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.
31.0.12 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.
31.0.13 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, Milburn Investments, Inc., a Texas corporation,
Continental Homes Holding Corp., a Delaware corporation ("CHHC"),
any other Loan Party, American Western Mortgage Company, a
Colorado corporation, Miltex Mortgage of Texas Limited
Partnership, a Texas limited partnership, or CHI Construction
Company, an Arizona corporation to Bank.
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 Colorado shall govern the creation,
attachment, perfection, priority, and foreclosure of liens on the Collateral
located in Colorado, 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:
KDB Homes, Inc.
7001 North Scottsdale Road, Suite 2050
Scottsdale, Arizona 85253
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.
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.
KDB HOMES, INC., a Delaware
corporation
By: /s/Kenda B. Gonzales
--------------------
Name: Kenda B. Gonzales
--------------------
Title: Secretary and Treasurer
------------------------
Exhibit 10.7
MODIFICATION AND EXTENSION AGREEMENT
------------------------------------
DATE: November 29, 1994
- ----
PARTIES: Borrower: AMERICAN WESTERN MORTGAGE COMPANY,
- ------- a Colorado corporation.
Bank: BANK ONE, ARIZONA, NA, a national banking
association, formerly known as The Valley
National Bank of Arizona.
RECITALS:
- --------
A. Bank has extended to Borrower credit ("Loan") in the principal
amount of $15,000,000.00 pursuant to the Amended and Restated Warehousing
Credit and Security Agreement, dated September 26, 1991 ("Loan Agreement"),
and evidenced by the Promissory Note, dated November 27, 1992 ("Note"). The
unpaid principal of the Loan as of the date hereof is $4,019,633.00.
B. The Loan is secured by, among other things, the security interest
granted by Borrower to Bank contained in the Loan Agreement. The
agreements, documents and instruments securing the Loan and the note are
referred to individually and collectively as the "Security Documents".
C. Bank and Borrower have executed and delivered previously the
following agreements ("Modifications") modifying the terms of the Loan, the
Note, the Loan Agreement and/or the Security Documents: (i) Letter of
Agreement dated May 28, 1992; (ii) Modification Agreement dated September
22, 1992; (iii) Modification Agreement dated November 27, 1992; (iv) Letter
of Agreement dated February 25, 1993; (v) Modification and Extension
Agreement dated November 22, 1993; and (vi) Modification and Extension
Agreement dated January 31, 1994. (The Note, the Loan Agreement, the
Security Documents, any arbitration resolution, any environmental
certification and indemnity agreement, and all other agreements, documents,
and instruments evidencing, securing, or otherwise relating to the Loan, as
modified in the Modifications, are sometimes referred to individually and
collectively as the "Loan Documents". Hereinafter, "Note", "Loan
Agreement", and "Security Documents" shall mean such documents as modified
in the Modifications.)
D. Borrower has requested that Bank modify the Loan and the Loan
Documents as provided herein. Bank is willing to so modify the Loan and the
Loan Documents, subject to the terms and conditions herein.
AGREEMENT:
- ---------
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
--------------------
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
------------------------------
2.1 The Loan Documents are modified as follows:
2.1.1 The Maturity Date of the Loan and the Note is
changed from December 1, 1994 to December 1, 1995. On the
Maturity Date Borrower shall pay to Bank the unpaid principal,
accrued and unpaid interest, and all other amounts payable by
Borrower under the Loan Documents as modified herein. All
commitments of Bank to make loans and advances pursuant to the
Loan Documents shall expire on the Maturity Date as so extended.
2.1.2 Section 3 of the Note is hereby amended in its
entirety to provide as follows:
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, Maker 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 Maker; 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 Credit Agreement Documents to the contrary
notwithstanding, Maker shall pay to the holder hereof
contemporaneously with such prepayment, a payment equal to any
losses, costs, or expenses that the holder hereof 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
the holder hereof to fund or maintain such Fixed Rate Advance.
Maker agrees to also make a payment under the immediately
preceding sentence upon each conversion of a Fixed Rate Advance to
a Floating 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 Maker and the rights of
the holder hereof under this paragraph shall survive payment and
performance of the obligations of Maker and Guarantors under the
Credit Agreement Documents and shall remain in full force and
effect without termination. The holder hereof will furnish to
Maker a certificate setting forth in reasonable detail the basis
for the amount of each request by the holder hereof for payment
under this paragraph. The determination by the holder hereof of
amounts due under this paragraph shall be conclusive, absent
manifest error.
2.1.3 Section 4(a) of the Note is hereby amended in its
entirety to provide as follows:
Absent an Event of Default hereunder or under any of the
Credit Agreement Documents, each Advance made hereunder shall bear
interest from the date advanced at the applicable rate from time
to time ("Interest Rate") 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 Floating Rate.
Interest at the Floating 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 Maker 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
the holder hereof, based on Telerate System reports or such other
source as may be selected by the holder hereof, 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.
"Floating Rate" means the rate per annum equal to the sum of
(i) one-half of one percent (.5%) per annum, and (ii) the Prime
Rate. The Floating Rate will change on each day that the Prime
Rate changes.
"Floating Rate Advance" means an Advance that bears or that
is requested to bear interest at the Floating 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 Maker 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 Maker
pursuant to the provisions herein. The duration of each Interest
Period shall be 30, 60, 90, or 120 days, as selected by Maker (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.
"Prime Rate" means the rate per annum most recently announced
by Bank One, Arizona, NA, or its successors, in Phoenix, Arizona,
as its " prime rate," as in effect from time to time. The Prime
Rate is not necessarily the best or lowest rate offered by said
bank, and said bank may lend to its customers at rates that are
at, above, or below, the Prime Rate.
"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 the holder hereof, 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.
Each request for an Advance under the Credit Agreement shall,
in addition to complying with the other requirements in the Credit
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 Floating 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 the holder hereof 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 Floating Rate.
If Maker desires that a Fixed Rate Advance continue to bear
interest at the Fixed Rate after the end of an existing Interest
Period, Maker shall deliver to the holder hereof a notice making
such election and specifying the new Interest Period. If Maker
does not deliver such notice within such time, then after the
existing Interest Period the Fixed Rate Advance shall become a
Floating Rate Advance and shall bear interest at the Floating
Rate.
Maker may on any Business Day, upon written notice to and
received by the holder hereof 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 Floating 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 Floating 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 Credit Agreement
Documents to the contrary, the holder hereof 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 the
holder hereof 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 the holder hereof of agreeing to make or making,
funding, or maintaining Fixed Rate Advances (including, without
limitation, any increase in any applicable reserve requirement),
then Maker shall from time to time, upon demand by the holder
hereof, pay to the holder hereof such amounts as the holder hereof
may reasonably determine to be necessary to compensate the holder
hereof for any additional costs that the holder hereof reasonably
determines are attributable to such Regulatory Change and the
holder hereof will notify the Maker of any Regulatory Change that
will entitle the holder hereof to compensation pursuant to this
paragraph as promptly as practicable, but in any event within 90
days after the holder hereof obtains knowledge thereof; provided,
however, that if the holder hereof fails to give such notice
within 90 days after it obtains knowledge of such a Regulatory
Change, the holder hereof 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 the holder hereof does give such notice. the
holder hereof will furnish to Maker a certificate setting forth in
reasonable detail the basis for the amount of each request by the
holder hereof for compensation under this paragraph.
Determinations by the holder hereof of the amounts required to
compensate the holder hereof shall be conclusive, absent manifest
error. the holder hereof shall be entitled to compensation in
connection with any Regulatory Change only for costs actually
incurred by the holder hereof.
Notwithstanding any provision of the Credit Agreement
Documents, if the holder hereof shall notify Maker that as a
result of a Regulatory Change it is unlawful for the holder hereof
to make Advances at the Fixed Rate, or to fund or maintain Fixed
Rate Advances, (i) the obligations of the holder hereof to make
Advances at the Fixed Rate and to convert Advances to the Fixed
Rate shall be suspended until the holder hereof shall notify Maker
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, Maker 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 Maker, within five (5) Business Days of
notice from the holder hereof, converts all Fixed Rate Advances
then outstanding into Floating 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 Credit Agreement
Documents, if prior to the commencement of any Interest Period,
the holder hereof 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 the
holder hereof 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 the holder hereof shall promptly
give notice thereof to Maker and the obligation of the holder
hereof 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.
2.1.4 The term "Interest Rate", as set forth in Section 9 of
the Note, is hereby modified to be "Floating Rate."
2.1.5 The following definitions are hereby added to Section
1.1 of the Loan Agreement:
"Collateral to Come Advances" means those Advances made by Lender
hereunder where Lender has accepted a telecopy of the Advance Request
in lieu of the Collateral Documents, as provided in Section 2.2(a)(v).
When Lender receives the Collateral Documents, such Advances will no
longer be Collateral to Come Advances.
"Floating Rate" has the meaning set forth in the Note.
"Intangible Assets" has the meaning set forth in Section
6.17.
"Prime Rate" has the meaning set forth in the Note.
"Tangible Net Worth" has the meaning set forth in Section
6.17.
2.1.6 The following Section 2.1(f) is hereby added to the
Loan Agreement:
(f) Lender shall not be obligated to make Advances that are
Collateral to Come Advances (A) during the first five (5) Business
Days of each calendar month or during the last five (5) Business
Days of each calendar month if the aggregate amount of all
Advances that are Collateral to Come Advances during such time
exceeds or would exceed thirty percent (30%) of the Commitment
amount; or (B) during all other times if the aggregate amount of
all Advances that are Collateral to Come Advances during such time
exceeds or would exceed twenty percent (20%) of the Commitment
amount.
2.1.7 Section 2.2(b) of the Loan Agreement is hereby modified
in its entirety to provide as follows:
(b) Collateral Documents. At the time of making an Advance
Request, Borrower shall deliver to Lender the documents required
in Exhibit A hereto (the "Collateral Documents"). Lender shall
have the right, on not less than three (3) Business Days prior
notice to Borrower, to include different or additional items than
those which are listed in Exhibit A hereto to conform to current
legal requirements or Lender's practices. Lender shall accept a
telecopy of the Advance Request described in Section 2.2(a), in
lieu of the Collateral Documents; provided, however, that Borrower
will provide to Lender all Collateral Documents within two (2)
Business Days thereafter.
2.1.8 Section 2.4(a) of the Loan Agreement is hereby modified
in its entirety to provide as follows:
(a) The unpaid amount of each Advance shall bear interest
from the date of such Advance until paid in full at the applicable
rate of interest as set forth in the Note.
2.1.9 Section 2.5(b) of the Loan Agreement is hereby modified
in its entirety to provide as follows:
(b) Borrower shall have the right to prepay the outstanding
Advances in whole or in part, from time to time, in accordance
with the provisions of the Note.
2.1.10 Section 2.5(c)(2) of the Loan Agreement is hereby
amended in its entirety to read as follows:
(2) Forty (40) days have elapsed from the date such Eligible
Mortgage Loan was delivered to an Investor for examination and
purchase, without the purchase being made, or upon rejection of
such Eligible Mortgage Loan as unsatisfactory by an Investor.
2.1.11 The following Sections 2.5(c)(9) and (10) are hereby added
to the Loan Agreement:
(9) With respect to Collateral to Come Fundings, two (2)
Business Days have elapsed from the date the Advance Request was
telecopied to Lender without Borrower providing the Collateral
Documents; and
(10) If the aggregate number of Advances constituting
Collateral to Come Advances exceeds the respective limitations
established in Section 2.1(f).
2.1.12 The following Section 6.18 is hereby added to the Loan
Agreement:
6.18 Tangible Net Worth.
Borrower shall at all times maintain a minimum Tangible
Net Worth of not less than $3,000,000.00. The financial
statements of Borrower delivered pursuant to Section 6.3 shall
reflect the detailed calculation of the foregoing ratio.
2.1.13 Exhibit A to the Loan Agreement is hereby modified in
its entirety to mean that document attached hereto as Exhibit A.
2.2 Each of the Loan Documents is modified to provide that it shall be
a default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of Borrower herein or if any representation or
warranty by Borrower herein or by any guarantor in any related Consent and
Agreement of Guarantor(s) is materially incomplete, incorrect, or misleading
as of the date hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents
shall be a reference to such documents as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
---------------------------------------------
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or
interests in property granted as security in the Loan Documents shall remain
as security for the Loan and the obligations of Borrower in the Loan
Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
---------------------------------------
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the
passage of time or both, would be a default or an event of default under the
Loan Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial
condition of Borrower or any other person whose financial statement has been
delivered to Bank in connection with the Loan from the most recent financial
statement received by Bank.
4.3 Each and all representations and warranties of Borrower in the
Loan Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance
with their terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to
execute and deliver this Agreement and to perform the Loan Documents as
modified herein. The execution and delivery of this Agreement and the
performance of the Loan Documents as modified herein have been duly
authorized by all requisite action by or on behalf of Borrower. This
Agreement has been duly executed and delivered on behalf of Borrower.
5. BORROWER COVENANTS.
------------------
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such
additional agreements, documents, and instruments as reasonably required by
Bank to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits, of whatever kind or nature, in
law or equity of Borrower, whether now known or unknown to Borrower, (i) in
respect of the Loan, the Loan Documents, or the actions or omissions of Bank
in respect of the Loan or the Loan Documents and (ii) arising from events
occurring prior to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this
Agreement, Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all
amounts, other than interest and principal, due and payable by Borrower
under the Loan Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses incurred
by Bank in connection with this Agreement (including, without limitation,
inside and outside attorneys' expenses and fees).
5.3.3 An extension fee of $37,500.00, which is fully earned and
nonrefundable.
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
-------------------------------------------
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations
of Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) each guarantor(s) of the
Loan, if any, has executed and delivered to Bank a Consent and Agreement of
Guarantor(s), and (iv) if required by Bank, Borrower and any guarantor(s)
have executed and delivered to Bank an arbitration resolution, an
environmental questionnaire, and an environmental certification and
indemnity agreement.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
-----------------------------------------------------------------
WAIVER.
------
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all
prior representations, warranties, agreements, arrangements, understandings,
and negotiations. No provision of the Loan Documents as modified herein may
be changed, discharged, supplemented, terminated, or waived except in a
writing signed by the parties thereto.
8. BINDING EFFECT.
--------------
The Loan Documents as modified herein shall be binding upon and shall inure
to the benefit of Borrower and Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees,
and beneficiaries of Borrower, provided, however, Borrower may not assign
any of its right or delegate any of its obligation under the Loan Documents
and any purported assignment or delegation shall be void.
9. CHOICE OF LAW.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Arizona, without giving effect to conflicts of law
principles.
10. COUNTERPART EXECUTION.
---------------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one
and the same document. Signature pages may be detached from the
counterparts and attached to a single copy of this Agreement to physically
form one document.
DATED as of the date first above stated.
AMERICAN WESTERN MORTGAGE COMPANY,
a Colorado corporation
By: /s/Julie E. Collins
-------------------
Name: Julie E. Collins
------------------
Title: Vice President and Treasurer
-----------------------------
BANK ONE, ARIZONA, NA, a national banking association, formerly known
as The Valley National Bank of
Arizona
By: /s/Rhonda R. Williams
---------------------
Name: Rhonda R. Williams
--------------------
Title: Assistant Vice President
-------------------------
CONSENT AND AGREEMENT OF GUARANTOR(S)
-------------------------------------
With respect to the Modification Agreement, dated November 29, 1994
("Agreement"), between American Western Mortgage Company, a Colorado
corporation ("Borrower") and Bank One, Arizona, NA, a national banking
association formerly know as The Valley National Bank of Arizona ("Bank"),
the undersigned (individually and, if more than one, collectively
"Guarantor") agrees for the benefit of Bank as follows:
1. Guarantor acknowledges (i) receiving a copy of and reading the
Agreement, (ii) the accuracy of the Recitals in the Agreement, and (iii) the
effectiveness of (A) the Guaranty, dated November 27, 1992 ("Guaranty"), by
the undersigned for the benefit of Bank, as modified herein, and (B) any
other agreements, documents, or instruments securing or otherwise relating
to the Guaranty, (including, without limitation, any arbitration resolution
and any environmental certification and indemnity agreement previously
executed and delivered by the undersigned), as modified herein. The Guaranty
and such other agreements, documents, and instruments, as modified herein,
are referred to individually and collectively as the "Guarantor Documents".
2. Guarantor consents to the modification of the Loan Documents and
all other matters in the Agreement.
3. Guarantor fully, finally, and forever releases and discharges Bank
and its successors, assigns, directors, officers, employees, agents, and
representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits of whatever kind or nature, in
law or equity, that Guarantor has or in the future may have, whether known
or unknown, (i) in respect of the Loan, the Loan Documents, the Guarantor
Documents, or the actions or omissions of Bank in respect of the Loan, the
Loan Documents, or the Guarantor Documents and (ii) arising from events
occurring prior to the date hereof.
4. Guarantor agrees that all references, if any, to the Note, the
Loan Agreement, the Security Documents and the Loan Documents in the
Guarantor Documents shall be deemed to refer to such agreements, documents,
and instruments as modified by the Agreement.
5. Guarantor reaffirms the Guarantor Documents and agrees that the
Guarantor Documents continue in full force and effect and remain unchanged,
except as specifically modified by this Consent and Agreement of
Guarantor(s). Any property or rights to or interests in property granted as
security in the Guarantor Documents shall remain as security for the
Guaranty and the obligations of Guarantor in the Guaranty.
6. Guarantor agrees that the Loan Documents, as modified by the
Agreement, and the Guarantor Documents, as modified by this Consent and
Agreement of Guarantor(s), are the legal, valid, and binding obligations of
Borrower and the undersigned, respectively, enforceable in accordance with
their terms against Borrower and the undersigned, respectively.
7. Guarantor agrees that Guarantor has no claims, counterclaims,
defenses, or offsets with respect to the enforcement against Guarantor of
the Guarantor Documents.
8. Guarantor represents and warrants that there has been no material
adverse change in the financial condition of any Guarantor from the most
recent financial statement received by Bank.
9. Guarantor agrees that this Consent and Agreement of Guarantor(s)
may be executed in one or more counterparts, each of which shall be deemed
an original and all of which together shall constitute one and the same
document. Signature and acknowledgement pages may be detached from the
counterparts and attached to a single copy of this Consent and Agreement of
Guarantor(s) to physically form one document.
DATED as of the date of the Agreement.
CONTINENTAL HOMES, INC.,
a Delaware corporation
By: /s/Kenda B. Gonzales
--------------------
Name: Kenda B. Gonzales
-------------------
Title: Financial Vice President
-------------------------
CONTINENTAL HOMES HOLDING CORP., a Delaware corporation
By: /s/Kenda B. Gonzales
--------------------
Name: Kenda B. Gonzales
-------------------
Title: Secretary and Treasurer
------------------------
Exhibit 10.8(a)
LOAN AGREEMENT
--------------
dated as of
April 5, 1993
RECITALS
1. Continental Homes Holding Corp., a Delaware corporation ("BORROWER") has
requested that Citibank (Arizona) ("CITIBANK") advance money in the total
aggregate amount of FIVE MILLION and NO/100THS DOLLARS ($5,000,000) (the
"Loan"). CHI Construction Company, an Arizona corporation, and Continental
Homes, Inc., a Delaware corporation, (collectively, "GUARANTOR") has agreed
to guaranty the repayment of all moneys advanced by CITIBANK to or on behalf
of BORROWER.
2. CITIBANK will advance money to BORROWER, subject to full and strict
compliance with and satisfaction of the terms and conditions of this
Agreement.
1. PRIOR AGREEMENTS
1.1 Prior Agreements Superseded. This Agreement supersedes in its entirety
all prior credit agreements between CITIBANK and BORROWER, regarding the
Loan except as otherwise specifically provided for in this Agreement.
1.2 Prior Agreement Acknowledgements. BORROWER and GUARANTOR acknowledge
with respect to the amounts owing to CITIBANK under all prior agreements
that BORROWER and GUARANTOR have no offset, defense or counterclaim with
respect thereto, no claim or defense in abatement or reduction thereof, nor
any other claim against CITIBANK or with respect to any document forming
part of the transaction in respect of which prior agreements were made or
forming part of any other transaction under which BORROWER or GUARANTOR is
indebted to CITIBANK. BORROWER and GUARANTOR acknowledge that all interest
imposed under all prior agreements through the date hereof, and all fees and
other charges that have been collected from or imposed upon BORROWER with
respect to all loans evidenced by prior agreements were and are agreed to,
and were properly computed and collected, and that CITIBANK has fully
performed all obligations that it may have had or now has to BORROWER, and
that CITIBANK has no obligation to make any additional loan or extension of
credit to or for the benefit of BORROWER under prior agreements.
2. THE GENERAL TERMS OF THE LOAN
2.1 Revolving Loan. Subject to these terms and conditions CITIBANK shall
make funds available to BORROWER from time to time (the "Advances"), which
BORROWER may borrow, repay and reborrow from the date first shown above to,
but not including a date one year from the date that Related Documents are
signed and delivered to CITIBANK, in an amount not to exceed in the
aggregate outstanding at any time the principal amount of FIVE MILLION AND
NO/100THS DOLLARS ($5,000,000.00). The Loan shall be evidenced by and bear
interest as provided in CITIBANK'S form of Promissory Note dated on or about
the date of this Agreement and duly executed and delivered to CITIBANK by
BORROWER, and any note or notes taken wholly or partially in renewal or
extension thereof or substitution or replacement of it (the "Note").
2.2 Nonuse Fee. BORROWER shall pay CITIBANK a fee equal to one-half
percentage point (0.5%) per annum of the average daily undisbursed portion
of the Loan, payable in arrears in quarterly installments, on the first day
of each quarter, as billed by CITIBANK, throughout the term of the Loan. The
fees to be paid under this Section shall be fully earned by CITIBANK as of
the date paid and shall be nonrefundable to BORROWER.
2.3 Purpose. The proceeds of the Loan are to be used to support fluctuating
working capital needs for residential acquisition, development and
construction projects.
2.4 Prepayment. The Loan may be prepaid at any time in any amount, without
premium or penalty. Prepayments shall be applied in the inverse order of
maturities.
2.5 Asset Base. BORROWER and CITIBANK shall mutually designate subdivisions
containing homes under construction and Improved Lots, which shall mean lots
in a residential subdivision of BORROWER which are ready for housing unit
construction (where streets and all utilities are completed and operating
and the subdivision is open and actively selling), and which are not bare
subdivided land. The subdivisions shall constitute an Asset Base (the "Asset
Base" or the "Asset Base Property") which shall have a minimum actual
allocated cost on BORROWER'S books of at least Eight Million Seven Hundred
Fifty Thousand Dollars ($8,750,000.00), but not more than Ten Million
Dollars ($10,000,000.00). CITIBANK shall have sole and absolute\discretion
to accept or reject subdivisions or Improved Lots as part of the Asset Base
at any time.
2.6 Advance on Asset Base. CITIBANK shall make Advances under the Loan, at
the request of BORROWER, or persons authorized by it in writing from time to
time to do so, up to amount of the Loan. In the event that the Asset Base
amount falls below $8,750,000.00, CITIBANK shall have no duty to make an
Advance until BORROWER and CITIBANK shall first designate additional
subdivisions containing homes under construction and Improved Lots to be a
part of the Asset Base, and BORROWER has signed and delivered to CITIBANK
the documents required to add the additional designated property to the
Default Collateral (as defined on page 3).
2.7 Disbursement of the Loan. Upon satisfaction of all Conditions Precedent
provided in Section 4 of this Agreement, and upon receipt of request from
BORROWER, and so long as BORROWER shall not then be in Default hereunder,
CITIBANK shall disburse to itself such sums as are payable to it by BORROWER
and shall disburse the balance of the Loan by direct deposit into BORROWER'S
account with CITIBANK.
2.8 Computation of Business Days. Whenever any payment to be made pursuant
to the Related Documents is due on a Saturday, Sunday or any other day which
is not a Business Day (as defined below), payment may be made on the next
succeeding Business Day, and the resulting extension of time shall be
included in computing interest in connection with such payments.
3. COLLATERAL SECURITY
3.1 Default Collateral. The Loan shall be secured by a pledge that there
currently are no liens (other than liens which have been disclosed to
CITIBANK that it has expressly accepted and approved and assessments for
improvement districts) and BORROWER or GUARANTOR may not incur further liens
on the homes under construction and Improved Lots or subdivisions included
in the Asset Base, as set out in Section 6.9. BORROWER or GUARANTOR (as a
third party pledgor) shall also sign and deliver to CITIBANK, as a condition
to the funding of the Loan, deeds of trust or similarly-named security
instruments and UCC-1 Financing Statements (which, with the negative pledge
are the "Default Collateral"), to be held, unrecorded, by CITIBANK and
recorded under the terms and conditions set out below only if certain events
of default shall occur. Receipt of any deed of trust delivered to CITIBANK
shall be evidenced by a written receipt to the trustor and CITIBANK shall
hold the deed of trust in safekeeping on its premises where safekeeping
documents are customarily held. CITIBANK, BORROWER and GUARANTOR expressly
intend the act of signing and delivery of the signed deeds of trust and
UCC-1 financing statements shall not constitute the creation of a lien on
the Asset Base Property. CITIBANK expressly disclaims any security interest
which it may otherwise be construed to have in the Asset Base Property until
entitled to record one or all of them on the default of BORROWER. Until
recording no deed of trust and UCC-1 financing statements shall constitute a
lien for purposes of this Agreement or for any other purpose.
3.2 Guaranty. The Loan, and all other indebtedness of BORROWER to CITIBANK
shall be unconditionally guaranteed, jointly and severally by each GUARANTOR
pursuant to CITIBANK'S form of written commercial guaranty (the "Guaranty"),
and all indebtedness owed by BORROWER to each GUARANTOR shall be subordinate
to payment of the obligations under the Related Documents.
3.3 Subordination. BORROWER and each GUARANTOR subordinate (and shall
execute such further instruments the "Subordination Agreement" as may be
required by CITIBANK to further evidence and define the extent of the
subordination) with respect to the Asset Base, the option agreements in
which CHI Construction Company grants to Continental Homes, Inc. an option
to purchase housing units, for the purpose of selling them to consumer
occupants, to their joint and several indebtedness to, and to any security
interest held by, CITIBANK.
3.4 Return of Default Collateral Security Instruments. In the event that
CITIBANK does not desire to continue to hold one or more deeds of trust and
UCC-1 financing statements, for any reason, CITIBANK shall return the actual
deed of trust and UCC-1 financing statements to BORROWER.
4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Making the Loan. CITIBANK'S obligation to make
the Loan is subject to its receipt, on or before the date of this Agreement,
of all of the Related Documents, including the following, in form and
substance satisfactory to and approved by CITIBANK, duly and validly
executed and delivered by BORROWER, GUARANTOR or such other Person as may be
appropriate, and in recordable form where appropriate:
4.1(a) Good Standing. A certificate of BORROWER'S and
GUARANTOR'S good standing and authority to transact business in Arizona from
the Arizona Corporation Commission and BORROWER'S or GUARANTOR'S state of
incorporation, if other than Arizona
4.1(b) Articles. Bylaws. A copy of BORROWER'S and GUARANTOR'S Articles of
Incorporation (certified by the Arizona Corporation Commission or Secretary
of State of the state in which BORROWER is incorporated), and a copy of
BORROWER'S and GUARANTOR'S Bylaws with all amendments certified by
BORROWER'S corporate secretary.
4.1(c) Reimbursement of Expenses. Reimbursement for the reasonable accrued
fees (including internal or external attorneys' fees) and expenses incurred
by CITIBANK and CITIBANK'S agents in connection with the negotiation,
preparation and execution of the Related Documents and the disbursement of
the Loan proceeds. BORROWER further agrees to pay or reimburse CITIBANK for
all such fees and expenses n demand, whether or not any disbursement of the
Loan is ever made.
4.1(d) Resolutions. A resolution of BORROWER'S Board of Directors certified
by BORROWER's corporate secretary authorizing BORROWER to enter into this
Agreement and the Related Documents and a resolution of GUARANTOR'S Board of
Directors certified by GUARANTOR'S corporate secretary authorizing GUARANTOR
to enter into this Agreement and the Related documents.
4.1 (e) Hazardous Waste Certificate. A Hazardous Waste Certificate for
the subdivisions included in the Asset Base.
4.1(f) Hazard and Liability Insurance. The original policy or a certificate
of insurance, evidencing the Hazard Insurance, the Liability Insurance and
workmen's compensation coverage.
4.1(g) CITIBANK Review of Unsecured Debt Agreements. CITIBANK shall have
the right to review and accept the terms of the Indenture defined below and
of any other unsecured debt whether existing now or in the future.
4.1(h) Legal Opinion. A legal opinion from BORROWER'S and GUARANTOR'S
counsel, dated the date of the Loan and acceptable to CITIBANK, to the
effect that: (i) BORROWER and GUARANTOR is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and is duly qualified and in good standing as a foreign
corporation authorized to do business in each state where, because of the
nature of its activities or properties, such qualification is required; (ii)
BORROWER and GUARANTOR has full power to execute and deliver and perform its
obligations under this Agreement and any mortgages, deeds of trust, security
agreements, assignments and pledges, if any, executed by BORROWER and
GUARANTOR in connection with the Loan; (iii) such actions have been duly
authorized by all necessary corporate action, and are not in conflict with
any provision of law or of the charter or bylaws of BORROWER or GUARANTOR of
which counsel has knowledge; (iv) BORROWER and GUARANTOR have agreed to the
contracted for rate of interest as set forth in the Note; (v) to the best of
counsel's knowledge and belief there are no material actions, suits or
proceedings pending or threatened against or materially affecting BORROWER
or GUARANTOR or its business or involving the validity or enforceability of
any of the Related Documents or the priority of the liens or security
interests granted thereunder, at law or in equity, or before or by any
governmental authority and BORROWER or GUARANTOR is not in default with
respect to any order, writ, injunction, decree or demand of any court or any
governmental authority; (vi) the consummation of the transaction described
in the Related Documents and performance of BORROWER or GUARANTOR under and
by virtue of the Related Documents will not result in any breach of or
constitute a default under any mortgage, deed of trust, lease, loan or
credit agreement, bond indenture or other agreement to which BORROWER or
GUARANTOR is a party; (vii) this Agreement, and any mortgages, deeds of
trust, security agreements, assignments and pledges, if any, executed by
BORROWER or GUARANTOR in connection with the Loan, have been duly executed
and delivered by BORROWER or GUARANTOR to CITIBANK and are the legal and
binding obligations of BORROWER or GUARANTOR, except that they are not
enforceable in accordance with their terms, until CITIBANK shall be entitled
to record or enforce them after a BORROWER default and except as their
enforcement may be limited by applicable liquidation, conservatorship,
bankruptcy, insolvency, rearrangement, moratorium, reorganization, or
similar debtor relief laws affecting the rights of creditors generally from
time to time in effect; and (viii) the opinion shall also state, with
respect to that certain indenture dated August 1, 1992, for the
$75,000,000.00 12% senior notes due August 1, 1999 (the Indenture) the
following: (a) the full amount of the Loan is within the definition of Bank
Facility and Permitted Debt as defined in the Indenture; (b) on the making
of the Loan, the aggregate amount of Permitted Debt allowed in the Indenture
is not exceeded; (c) the deeds of trust on the Default Collateral which
CITIBANK may record in the event of certain defaults set out in this
Agreement, are Permitted Liens allowed in the Indenture; (d) the events of
default set out in this Agreement and CITIBANK'S remedies with respect to
them, do not constitute an event of default under the Indenture which will
cause or allow acceleration of the debt evidenced by the 12% senior notes.
4.1 (i) Other. Other items which may be reasonably required by CITIBANK.
4.2 Conditions Precedent to all Advances. The obligation of CITIBANK to make
any Advance (including the Initial Advance) is subject to the further
condition precedent that: (i) the representations and warranties contained
in this Agreement, and the Related Documents shall be correct and accurate
on and as of the date of the Advances as though made on and as of that date;
(ii) no Default (as defined here or in the Related Documents) shall have
occurred and be continuing and no event or circumstance shall have occurred
which, with notice or lapse of time or both, would if unremedied be a
Default; (iii) there has not been any material adverse change in the
financial condition of BORROWER, any GUARANTOR or any other Person whose
financial condition is reflected in any of the financial statements
furnished to CITIBANK in connection with the Loan; (iv) BORROWER is not
aware of any facts or circumstances which might give rise to any material
adverse change in its or any Guarantor's financial condition; (v) there have
been no material adverse changes in the Default Collateral; and (vi) there
exists no material default of any agreement in favor of any Person as
defined in section 9.15.
4.3 Governmental Approvals. BORROWER must satisfy CITIBANK that BORROWER has
complied with all governmental regulations pertaining to the subdivisions in
the Asset Base, and has obtained all necessary licenses, authorizations,
consents, approvals and permits required for the present use of said
property.
4.4 Third-Party Approvals. BORROWER must satisfy CITIBANK that any Person
required pursuant to any instrument, contract, commitment or other agreement
of any kind, or pursuant to any law or regulation to assent to or in any
manner approve of any of the acts or transactions contemplated by this
Agreement (or any of the other Related Documents), or the means of affecting
any of the same, shall have given such assent or approval, and shall have
been duly authorized so to do.
5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties Generally. BORROWER and each GUARANTOR
represents and warrants to CITIBANK as of the date hereof, each of the
matters described in this Section 5.
5.2 Accuracy of Information and Representations. No information, document,
exhibit or report furnished to CITIBANK by BORROWER or any GUARANTOR in
connection with the application for the Loan or the negotiation or execution
of the Related Documents, and no report, statement or information required
to be furnished by BORROWER to CITIBANK under the Related Documents, has
contained any material misstatement of fact or has omitted to state a
material fact or any fact necessary to make any statement contained therein
not misleading. Any document delivered in support of the Loan shall be
deemed to have been relied on by CITIBANK in making the Loan, and shall
survive the execution and delivery of any of the Related Documents and any
disbursement or advance of funds made pursuant to the Related Documents.
BORROWER knows of no fact which if not disclosed in writing to CITIBANK may
in the future have a material adverse effect on BORROWER.
5.3 Other Agreements. BORROWER and each GUARANTOR is not a party to or bound
by any contract or agreement which materially and adversely affects any of
their respective businesses, operations or financial condition. BORROWER and
each GUARANTOR is not in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in
any material contract or agreement to which any of them is a party.
5.4 Authorization and Validity. BORROWER and each GUARANTOR have all
requisite power and authority to enter into this Agreement and the other
Related Documents to be entered into by them, and to perform all actions
required or contemplated by any provision contained in any of the Related
Documents. The consummation of all the transactions contemplated here create
legal, valid and binding obligations subject to equitable remedies and
bankruptcy law on BORROWER and each GUARANTOR.
5.5 BORROWER'S and GUARANTOR'S Status. BORROWER or GUARANTOR is a
corporation duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation, and is duly
qualified and admitted as a foreign corporation in good standing with
all requisite authority to conduct its business and own its property in
each jurisdiction where such conduct of business or ownership of
property makes such qualification and admission necessary and where the
failure to so qualify would have a material adverse effect on its
business, financial condition or operations.
5.6 Compliance with Environmental Protection Laws. BORROWER or GUARANTOR has
conducted an appropriate inquiry and, to the best of their knowledge, except as
specifically disclosed in writing and approved by CITIBANK, the property
included in the Asset Base has never been used to manufacture, store or dispose
of toxic or hazardous substances, materials or wastes covered by the Resource
Conservation and Recovery Act or the Comprehensive Environmental Response,
Compensation and Liability Act of 1980. The Asset Base Property is in all
respects in compliance with all Federal, State of Arizona and local laws,
ordinances and regulations relating to environmental protection, occupational
health and safety, public health and safety or public nuisance or menace,
including, without limitation, the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901, et seq., the Comprehensive Environmental Response
Compensation and Liability Act of 1980, 42 U.S.C. Section 9600, et seq., the
Toxic Substances Control Act, 15 U.S.C. Section 2601, et seq., the Clean Air
Act, 42, U.S.C. Section 7401 et seq., and the Clean Water Act, 33 U.S.C. Section
1251 et seq. (collectively, "Environmental Laws"). To the best of Borrower's
knowledge, there are no underground storage tanks or leaking PCB Transformers
serving or stored on the Asset Base Property. To the best of Borrower's ability,
no Hazardous Substances (as hereafter defined) will be used, generated, stored,
released or disposed of on, under, from, or about the Asset Base Property,
either by BORROWER or GUARANTOR, an employee or agent of Borrower or Guarantor
(not including homeowners) except those that have been previously disclosed to
CITIBANK in writing, except such amounts as are lawfully present and lawfully
used in connection with the Asset Base Property or vehicles thereon and provided
such use is consistent with the use contemplated in the Related Documents.
"Hazardous Substances" mean any substance or material, including asbestos,
defined or designated as a hazardous or toxic substance, material or waste by
any federal, state or local law or environmental statute, regulation or
ordinance presently in effect or as amended or promulgated in the future.
BORROWER or GUARANTOR has not received any notice of a violation of any law,
regulation or ordinance relating to hazardous or toxic substances nor incurred
any previous liability therefor and will not permit any lien relating to
hazardous or toxic substances to attach to the Asset Base Property.
5.7 Consents. No consent, license, permit, approval or authorization of,
exemption by, notice or report to, registration, filing or declaration with,
or other act by or in respect of, any Person (including, without limitation,
Governmental Authorities and creditors of BORROWER or any Guarantor) is
required in connection with the execution, delivery and performance by
BORROWER and each GUARANTOR of any Related Document, or with respect to the
enforceability or validity of any Related Document, other than filings or
recordings with Governmental Authorities required solely for the purpose of
perfecting any of CITIBANK'S liens in the Default Collateral which may arise
in accordance with section 3.1.
5.8 Debt. The financial statements provided by BORROWER and each GUARANTOR
contain a complete and correct list as of the date of such statement, of all
credit agreements in respect of which BORROWER or any GUARANTOR is in any
manner directly or contingently obligated, including indentures, bonds,
purchase agreements, guaranties, capital leases, agreements with investors
in or purchasers of securities issued by BORROWER, stock requiring mandatory
redemption, indemnity agreements and so called "take or pay" or "keep well"
agreements, and agreements and arrangements for the issuance of letters of
credit or for acceptance financing. The financial statements provided to
CITIBANK show the full amount of any debt on which the BORROWER and each
GUARANTOR has any contingent liability, even if the BORROWER or the
GUARANTOR is not liable for the full amount of the debt. The maximum
principal or face amounts of the credit in question, which are outstanding
and which can be outstanding, are correctly stated, and all liens of any
nature given or agreed to be given as security therefor are correctly
described or indicated in such financial statements.
5.9 Encumbrances. Neither the assets of BORROWER nor of any GUARANTOR is
subject to any mortgage, pledge, title retention lien, or other encumbrance
or security interest, except for current taxes and assessments not
delinquent, and such mortgages, security interests, and encumbrances as
disclosed on the financial statements provided to CITIBANK or Permitted
Liens as defined in the Indenture.
5.10 Labor Disputes and Acts of God. The business and properties of BORROWER
and each GUARANTOR is not affected by any fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo,
act of God or of the public enemy, or other casualty (whether or not covered
by insurance), materially and adversely affecting such business, properties
or operations of BORROWER or any GUARANTOR. Except as disclosed to CITIBANK
in writing there has been no union organizing activity within the past six
(6) months.
5.11 ERISA. The BORROWER to the best of their knowledge, is in compliance in
all material respects with all applicable provisions of ERISA. Neither a
"Reportable Event" nor a "Prohibited Transaction" has occurred and is
continuing with respect to any Plan; no notice of intent to terminate a Plan
has been filed, nor has any Plan been terminated; no circumstances exist
which constitute grounds under Section 4042 of ERISA entitling the Pension
Benefit Guaranty Corporation ("PBGC") to institute proceedings to terminate,
or appoint a trustee to administrate, a Plan, nor has the PBGC instituted
any such proceedings; neither BORROWER nor any ERISA Affiliate has
completely or partially withdrawn under Section 4201 or 4204 of ERISA from a
Multiemployer Plan; BORROWER and each ERISA Affiliate has met its minimum
funding requirements under ERISA with respect to all of its Plans and the
present value of all vested benefits under each Plan exceeds the fair market
value of all Plan assets allocable to such benefits, as determined on the
most recent valuation date of the Plan and in accordance with the provisions
of ERISA and the regulations thereunder for calculating the potential
liability of BORROWER or any ERISA Affiliate to the PBGC or the Plan under
Title IV of ERISA; and neither BORROWER nor any ERISA Affiliate has incurred
any liability to the PBGC under ERISA.
5.12 ERISA Compliance. BORROWER is in compliance in all material respects
with all applicable provisions of ERISA. Neither a "Reportable Event" nor a
"Prohibited Transaction" has occurred and is continuing with respect to any
defined benefit pension plan under ERISA for the "unfunded liabilities" of
which upon termination of the plan BORROWER (or its assets) could be held
liable by the Pension Benefit Guaranty Corporation ("PBGC"). The term
"unfunded liabilities" means the excess of the current value of the plan's
benefits guaranteed under ERISA over the current value of the plan's assets
allocable to such benefits. No notice of intent to terminate a plan has been
filed, nor has any plan been terminated. No circumstances exist which
constitute grounds under Section 4042 of ERISA entitling the PBGC to
institute proceedings to terminate, or appoint a trustee to administrate, a
Plan, nor has the PBGC instituted any such proceedings. Neither BORROWER nor
any ERISA affiliate has completely or partially withdrawn under Section 4201
or 4204 of ERISA from a Multiemployer Plan. BORROWER and each ERISA
affiliate has met its minimum funding requirements under ERISA with respect
to all of its plans and the present value of all vested benefits under each
plan exceeds the fair market value of all plan assets allocable to such
benefits, as determined on the most recent valuation date of the plan and in
accordance with the provisions of ERISA and the regulations thereunder for
calculating the potential liability of BORROWER or any ERISA Affiliate to
the PBGC or the plan under Title IV of ERISA. Neither BORROWER nor any ERISA
affiliate has incurred any liability to the PBGC under ERISA.
5.13 Financial Statements. The consolidated and consolidating balance sheets
of BORROWER and GUARANTOR and the related consolidated and consolidating
statements of income and retained earnings of BORROWER and GUARANTOR, copies
of which have been furnished to CITIBANK, are complete and correct and
fairly present the financial condition of BORROWER and GUARANTOR as at such
dates and the results of the operations of BORROWER and GUARANTOR for the
period covered by such statements, all in accordance with generally accepted
accounting principles in the United States ("GAAP") consistently applied
(subject to year- end adjustments in the case of the interim financial
statements). Since the period covered by such financial statements, there
has been no material adverse change (and BORROWER and GUARANTOR are unaware
of any facts or circumstances which are reasonably likely to give rise to
any material adverse change), in the condition (financial or otherwise),
business, or operations of BORROWER or GUARANTOR. There are no liabilities
of BORROWER or GUARANTOR, fixed or contingent, which are material but are
not reflected in the financial statements or in the notes thereto, other
than liabilities arising in the ordinary course of business. BORROWER shall
deliver a copy of BORROWER'S audited financial statements (together with the
audit report) directly to CITIBANK.
5.14 Governmental Consents. There are no governmental authorizations,
permits, certificates, licenses, filing, registrations, approvals or
consents which must be obtained, received, or made by BORROWER or any
subsidiary or GUARANTOR for BORROWER and GUARANTOR lawfully to: (i) make,
execute and deliver this Agreement or any other Loan Document; or (ii)
perform all of its obligations under this Agreement or any other Loan
Document.
5.15 Litigation and Judgments. Except for matters disclosed by BORROWER to
CITIBANK in writing, there are no outstanding unpaid judgments or
arbitration awards against BORROWER or any GUARANTOR, and no actions, suits
or proceedings (in any court of law or otherwise) pending or threatened
against BORROWER or any GUARANTOR, or affecting any of their assets or
property which, if determined adversely to BORROWER or any GUARANTOR, would
have a materially adverse effect as determined by BORROWER and/or GUARANTOR,
on the condition, affairs or prospects, financial of otherwise, of BORROWER
or any GUARANTOR. No judgment, award, action, suit or proceeding (whether in
a court of law or otherwise, and whether pending or threatened) materially
affects adversely the ability of BORROWER or any GUARANTOR to perform any of
their obligations under the Related Documents.
5.16 Nondefault of BORROWER and each GUARANTOR. Neither
BORROWER nor any GUARANTOR is in material default under or breach of any
agreement or instrument to which any of them is a party or by which any of
them may be bound, is in material Default with respect to any valid
regulation, order, writ, judgment or decree of any court or other
Governmental Authority. BORROWER and each GUARANTOR is in compliance with
all laws, ordinances, rules, regulations and all other legal requirements,
the violation of which would have a materially adverse effect on their
respective businesses or financial condition. BORROWER and GUARANTOR have
not received, nor do they have a reasonable basis to expect to receive, any
order or notice of violation or claim of violation of any law, ordinance,
rule or regulation, including ERISA, if applicable. The execution and
delivery of the Related Documents and the performance of the obligations and
acts required or contemplated thereby do not and will not conflict with or
result in the violation of any valid law, regulation, order, writ, judgment,
injunction, or decree of any court or Governmental Authority, or in the
breach of or default under any indenture, contract, agreement or other
instrument to which BORROWER, GUARANTOR, or any of them, is a party or by
which any of them or any of their respective property may be bound. The
execution and delivery of the Related Documents and the performance of the
obligations and acts required or contemplated thereby will not result in the
creation or imposition of, or be any cause for imposing, any lien, charge or
encumbrance of any nature whatsoever upon any of the Default Collateral
other than those created, imposed or required by the Related Documents.
There exists no material Default and there exists no potential Default under
any of the Related Documents.
5.17 Solvency. Neither BORROWER nor any GUARANTOR is "insolvent" within the
meaning of that term as defined in the Federal Bankruptcy Code, nor will any
of them be rendered insolvent by the performance of the Related Documents.
5.18 Survival of Representations and Warranties. All representations and
warranties made by BORROWER and each GUARANTOR under or in connection with
the Related Documents or in any other document delivered by BORROWER or any
GUARANTOR to CITIBANK shall be conclusively deemed to have been relied upon
by CITIBANK in making the Loan and shall survive the making of the Loan and
the execution, delivery and performance of the Related Documents
notwithstanding any investigation made by CITIBANK or on CITIBANK'S behalf.
All statements contained in any certificate or financial statement delivered
by BORROWER or any GUARANTOR to CITIBANK under this Agreement shall
constitute representations and warranties made by BORROWER and such
GUARANTOR, respectively, hereunder. The representations and warranties made
by BORROWER and each GUARANTOR shall be and remain true at all times in all
material respects with the same effect as though the representations and
warranties had been made at any and all times during the term of this
Agreement.
5.19 Title to Assets and Properties. BORROWER and/or each GUARANTOR and each
subsidiary and affiliate has good and marketable title to all of the
properties and assets as disclosed in the financial statements provided to
CITIBANK, except for such assets as have been disposed of since the date of
such statements in the ordinary course of business or as are no longer used
or useful in the conduct of its business.
5.20 Taxes. BORROWER and each GUARANTOR has filed all tax returns (federal,
state, and local) required to be filed and have paid all taxes, assessments,
and governmental charges and levies shown to be due, including interest and
penalties except where the same are being contested in good faith.
5.21 Use of Proceeds. The Loan is a business loan and the proceeds thereof
shall be used solely for commercial or business purposes or for carrying,
reducing or retiring any debt incurred for such purpose. BORROWER is not now
engaged principally or as one of its important activities, in the business
of extending credit for the purposes of purchasing or carrying any margin
stock (within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System). No part of the proceeds of the Loan hereunder has
been or will be used to purchase or carry any such margin stock or to extend
credit to others for the purpose of purchasing or carrying any such margin
stock or for carrying, reducing or retiring any debt incurred for such
purpose. If requested by CITIBANK, BORROWER will furnish to CITIBANK a
statement in conformity with the requirements of Federal Reserve Form U-1.
No part of the proceeds of the Loan have been or will be used for any
purpose that violates or which is inconsistent with the provisions of
Regulations G, U or X of said Board of Governors.
6. COVENANTS
6.1 Covenants Generally. During the term of this Agreement, and until the
Loan is paid in full, unless CITIBANK shall otherwise consent in writing,
BORROWER and GUARANTOR, as applicable, each covenants and agrees as to the
matters described in this Section 6.
6.2 Access to Premises and Records. At all reasonable times and as often as
CITIBANK may reasonably request, BORROWER shall permit and cause each of its
subsidiaries to permit authorized representatives designated by CITIBANK to:
(i) have access to the premises and properties of BORROWER and each
subsidiary and to the records relating to the operations of BORROWER and
each subsidiary; (ii) make copies of or excerpts from such records; and
(iii) discuss the affairs, finances and accounts of BORROWER and each of its
subsidiaries with and be advised as to the same by the chief executive and
financial officers thereof, all to the extent not inconsistent with
applicable law and as shall be relevant to the performance or observance of
the terms, covenants and conditions of this Agreement or the financial
condition of BORROWER or any subsidiary.
6.3 Adverse Conditions. BORROWER and each GUARANTOR will not permit any
change in the assets, business, financial condition, operations, or results
of operations of BORROWER or any GUARANTOR or any other event or condition
that in the reasonable opinion of CITIBANK (i) could affect the likelihood
of performance of any of the obligations hereunder or under the Related
Documents, (ii) could affect the ability of BORROWER or GUARANTOR to perform
any of the obligations hereunder or under the elated Documents, (iii) could
affect the legality, validity or binding nature of any of the obligations
hereunder or any lien or encumbrance which may secure the Loan, or (iv)
could affect the priority of any lien or encumbrance which may secure the
Loan.
6.4 Status of Title. During the term hereof BORROWER and GUARANTOR will
continue to have good fee simple, marketable title to the Asset Base
Property and all improvements thereon until such time as the asset is sold
during the ordinary course of doing business. The Asset Base Property is not
subject to any liens, charges, claims, options or encumbrances, except real
property taxes and assessments not yet due and payable and encumbrances that
will be fully paid and satisfied prior to the first disbursement of the Loan
proceeds, and such liens as are expressly approved in writing by CITIBANK.
6.5 Title to Assets and Properties. BORROWER and each GUARANTOR has good and
marketable title to all of their properties and assets as disclosed in the
financial statements provided to CITIBANK, except for such assets as have
been disposed of since the date of such statements in the ordinary course of
business or as are no longer used or useful in the conduct of its business.
6.6 Compliance with Laws. BORROWER shall: (i) comply with, conform to and
obey, and cause each subsidiary to comply with, conform to and obey all
material laws, ordinances, rules, regulations and all other legal
requirements applicable to BORROWER and each subsidiary, including, without
limitation, ERISA, insofar as such Act applies; (ii) not permit a condition
to exist in connection with any Plan, which might constitute grounds for the
PBGC to institute proceedings to have the Plan terminate or a trustee
appointed to administer the Plan; and (iii) not engage in, or permit to
exist or occur any other condition, event or transaction with respect to any
such Plan which could reasonably result in BORROWER incurring any material
liability, fine, or penalty.
6.7 Conduct of Business. BORROWER and each subsidiary shall continue, to
engage in a reasonably efficient and reasonably economical manner in a
business of the same general type as conducted by it on the date of this
Agreement.
6.8 Encumbrances. BORROWER, its subsidiaries, and each GUARANTOR, shall not
mortgage, pledge, assign, grant a security interest in or otherwise encumber
any BORROWER, subsidiary or GUARANTOR asset or upon any leasehold interest
now owned or hereafter acquired, or acquire or agree to acquire any kind of
property under conditional sales or other title retention agreements;
provided, however, the foregoing restrictions shall not prevent it from
permitting or incurring: (i) Liens on assets of BORROWER or any subsidiary
securing the Valley National Bank Credit facility provided that the liens
granted in respect of the Valley National Bank Credit facility shall not
extend to assets having a book value in the aggregate in excess of two times
the amount committed under the Loan; (ii) Liens securing the Warehouse
Facility, provided that such Liens shall not extend to any assets other than
the mortgages, promissory notes and other collateral that secures mortgage
loans made by AWMC; (iii) Liens securing Non-Recourse Debt incurred by the
Carlsbad subsidiary, provided that such Liens shall not extend to any assets
of the Trustor or any of its subsidiaries other than the Carlsbad
subsidiary; (iv) Liens for taxes, assessments or governmental charges or
claims that either (a) are not yet delinquent or (b) are being contested in
good faith by appropriate proceedings and as to which appropriate reserves
have been established or other provisions have been made in accordance with
generally accepted accounting principles; (v) statutory Liens of landlords
and carriers' warehousemen's, mechanics', suppliers', materialmen's,
repairmen's or other Liens imposed by law and arising in the ordinary course
of business; (vi) Liens (other than any Lien imposed by the Employee
Retirement Income Security Act of 1974, as amended) incurred or deposits
made in the ordinary course of business in connection with worker's
compensation, unemployment insurance and other types of social security;
(vii) Liens incurred or deposits made to secure the performance of tenders,
bids, leases, statutory obligations, surety and appeal bonds, progress
payments, government contracts and other obligations of like nature
(exclusive of obligations for the payment of borrowed money), in each case,
incurred in the ordinary course of business; (viii) attachment or judgment
Liens not giving rise to a Default or Event of Default; (ix) easements,
rights-of-way, restrictions and other similar charges or encumbrances not
materially interfering with the ordinary conduct of the business of the
BORROWER or any of its subsidiaries; (x) leases or subleases granted to
others not materially interfering with the ordinary conduct of the business
of BORROWER or any of its subsidiaries; (xi) Liens with respect to any asset
which Lien existed at the time such asset was acquired by BORROWER or any of
its subsidiaries; provided that such Liens only extend to assets that were
subject to such Liens prior to the acquisition of such assets; (xii) Liens
securing refinancing debt; provided that such Liens only extend to the
assets securing the debt being refinanced and such refinanced debt was
previously secured by such assets; (xiii) Liens securing Purchase Money
Obligations (including capitalized lease obligations); (xiv) Liens existing
on the date hereof; and (xv) any contract to sell an asset provided such
sale is otherwise permitted under the Indenture.
6.9 Financial Reporting. BORROWER and each GUARANTOR, as
applicable, will timely provide the following information:
6.9(a) Monthly Financial Statements and Quarterly Cash Flow Statements.
BORROWER will furnish to CITIBANK, as soon as available and in any event
within thirty (30) days after the end of each of the month of each fiscal
year of BORROWER and its subsidiaries, consolidated and consolidating
balance sheets, including all supporting schedules, for each reporting
company as at the end of such month, consolidated and consolidating
statements of income and retained earnings of BORROWER and its subsidiaries,
including all supporting schedules, for the period commencing at the end of
the previous fiscal year and ending with the end of such month, all in
reasonable detail and stating in comparative form the respective figures for
the corresponding date and period in the previous fiscal year and all
prepared in accordance with generally accepted accounting principles
("GAAP"), consistently applied and certified by the chief financial officer
of BORROWER (subject to year-end adjustments). BORROWER will furnish to
CITIBANK within forty five (45) days after the end of each fiscal quarter of
each fiscal year of BORROWER and its subsidiaries a statement of cash flow
of BORROWER and its subsidiaries for the portion of the fiscal year ended
with the last day of such quarter.
6.9(b) Annual Financial Statements . BORROWER will furnish to CITIBANK,
as soon as available and in any event within ninety (90) days after the end
of each fiscal year of BORROWER: (i) a consolidated and consolidating
balance sheet of BORROWER and its subsidiaries as of the end of such fiscal
year; (ii) a consolidated and consolidating statement of income and retained
earnings of BORROWER and its subsidiaries for such fiscal year; (iii) a
statement of cash flow of BORROWER and its subsidiaries for such fiscal
year. Financial statements shall be in reasonable detail and state in
comparative form the respective consolidated and consolidating figures for
the corresponding date and period in the prior fiscal year, and be prepared
in accordance with generally accepted accounting principles ("GAAP"),
consistently applied, and shall be audited by an independent certified
public accountant acceptable to CITIBANK.
6.9(c) Securities Reports. BORROWER shall provide copies of its Form 10-Q
report, within sixty (60) days of filing, and copies of its Form 10-K report
within ninety (90) days of filing, with the Securities and Exchange
Commission.
6.9 (d) Management Letters. BORROWER will furnish promptly upon receipt
thereof, copies of any reports submitted to BORROWER or any subsidiary or
GUARANTOR by independent certified public accountants in connection with
examination of the financial statements of BORROWER or any subsidiary or
GUARANTOR made by such accountants.
6.9(e) Accountant's Report. BORROWER will furnish simultaneously with
the delivery of the annual financial statements referred to in Section
6.10(b) herein, a certificate of the independent public accountants who
audited or prepared such statements to the effect that in preparing the
statements, they have obtained no knowledge of any condition or event which
constitutes a Default, or if such accountants shall have obtained knowledge
of any such condition or event, specify in such certificate each such
condition or event of which they have knowledge and the nature and status
thereof.
6.9(f) Notice of Litigation. BORROWER will furnish promptly after the
commencement thereof, notice of all actions, suits, and proceedings before
any court or governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting BORROWER or any subsidiary
or GUARANTOR, which, if determined adversely to BORROWER or such subsidiary
or GUARANTOR, as determined by BORROWER and/or GUARANTOR, could have a
material adverse effect on the financial condition, properties or operations
of BORROWER or such subsidiary or GUARANTOR.
6.9(g) Proxy Statements. BORROWER will furnish promptly after the
sending or filing thereof, copies of all proxy statements, financial
statements, and reports which BORROWER or any subsidiary sends to its
stockholders, and copies of all regular, periodic, and special reports, and
all registration statements which BORROWER or any subsidiary files with the
Securities and Exchange Commission or any governmental authority which may
be substituted therefor, or with any national securities exchange.
6.9(h) Compliance Certificate. BORROWER shall submit within thirty (30)
days after the end of each calendar month, a compliance statement certifying
compliance with the covenants of this Agreement, and covenants of other
pertinent agreements of BORROWER as set out in the certificate, that no
default exists and that, if a default exists, the nature of the default and
the BORROWER'S plan to correct it. The compliance statement shall be in a
form acceptable to CITIBANK and shall be delivered to CITIBANK with the
monthly financial statements required in section 6.10(a) above. With the
financial statements due to CITIBANK at the end of each fiscal quarter,
BORROWER shall provide a Compliance Certificate substantially in the form
attached as Exhibit A
6.10 Other Data. BORROWER and each GUARANTOR will furnish to CITIBANK such
other financial data as CITIBANK may request from time to time. Together
with each such financial statement required by this Agreement, BORROWER and
each GUARANTOR shall deliver to CITIBANK a certificate stating that there
exists no Default hereunder or, if any such Default exists, stating the
nature thereof, the period of existence thereof and what action is proposed
to be taken with respect thereto.
6.11 Insurance. BORROWER will keep its insurable property adequately insured
at all times by financially sound and reputable insurers, against fire,
flood, extended casualty and against such other risks as are customarily
insured against by companies in a similar business, as a prudent owner and
operator of the properties and business of BORROWER would maintain (the
"Hazard Insurance").
6.12 Environmental Matters. BORROWER and GUARANTOR agree to promptly notify
CITIBANK: (i) upon becoming aware of any use, storage or release of
Hazardous Substances under, from or about the Real Property (ii) of any
proceeding, inquiry or notice from any Governmental Authority with respect
to the use or presence of any Hazardous Substances on the Asset Base
Property or the migration thereof to or from other property, (iii) of all
claims made or threatened by any third party against BORROWER or GUARANTOR
or the Asset Base Property relating to loss or injury from any Hazardous
Substance, (iv) upon discovery of any occurrence or condition on any
property adjoining or in the immediate vicinity of the Asset Base Property
that would cause it to be subject to restrictions on ownership, occupancy,
transferability or use under any Environmental Law, and (v) upon obtaining
knowledge of any incurrence of expense by a Governmental Authority or others
in connection with the assessment, containment or removal of any Hazardous
Substances located on, under, from or about the Asset Base Property or any
property adjoining or in the immediate vicinity. During the term of the Loan
or extensions thereof, CITIBANK shall have the right to inspect the Asset
Base Property for the presence of Hazardous Substances, and shall have the
right, but not the obligation, to join in and participate in any legal
proceedings or actions initiated in connection therewith. If, during the
term of the Loan or extensions thereof, Hazardous Substances are discovered
to be present in violation of any hazardous or toxic waste law, regulation
or ordinance, BORROWER shall at its sole expense remove the same from the
Asset Base Property and underlying groundwater in accordance with the
requirements of the appropriate Governmental Authority. If the Hazardous
Substances are not removed within ninety (90) days of discovery, or such
earlier time as required by a Governmental Agency, then CITIBANK shall have
the right, but not the obligation, to do so or to declare a default
hereunder.
6.13 Liquidity. BORROWER shall maintain a minimum liquidity of Five Million
and No/100ths Dollars ($5,000,000.00). For the purposes of this Agreement,
"Liquidity" shall mean the amount of BORROWER'S unencumbered cash and
unencumbered cash equivalents (including amounts on deposit with CITIBANK
under section 6.19 BELOW) determined, each fiscal quarter, according to
GAAP, plus, (i) the portion of the Loan that is undisbursed and available
for disbursement at the time of each determination of Liquidity, and (ii)
the amount of the Valley National Bank credit facility undisbursed and
available for disbursement at the time of each determination of Liquidity
and (iii) the amount of the Valley National Bank warehouse facility that is
undisbursed and available for disbursement at the time of each determination
of Liquidity. Exhibit A of this Agreement states the components of the
calculation.
6.14 Limitation on Operating Losses. BORROWER shall not cause or permit (i)
BORROWER'S Consolidated Net Income to be less than zero in each of two
consecutive fiscal quarters, and (ii) BORROWER'S Consolidated Net Income to
be a loss of greater than Two Million Five Hundred Thousand and No/100ths
Dollars ($2,500,000.00) in any fiscal quarter. In determining Consolidated
Net Income BORROWER shall not be required to include losses to the extent
resulting from adjustments to the net realizable value of assets required
pursuant to GAAP. Exhibit A of this Agreement states the components of the
calculation of this ratio. For purposes of this Agreement, the term
Consolidated Net Income of any Person shall mean the income or loss of that
Person and its subsidiaries for any period determined on a consolidated
basis, according to GAAP, provided that, without duplication, (i) the net
income of any Person, other than a subsidiary which is consolidated with
such Person, in which such Person, or any of its subsidiaries, has a joint
interest with a third party, shall be included only to the extent of the
amount of dividends or distributions actually paid in cash to such Person or
a subsidiary during such period, (ii) the net income of any Person acquired
in a pooling of interests transaction for any period prior to the date of
such acquisition shall be excluded, (iii) the net income of any subsidiary
of such Person shall be excluded to the extent such subsidiary is
prohibited, directly or indirectly, from distributing such net income, or
any portion thereof, to such Person and (iv) all extraordinary gains and
losses (after taxes) that would be included on an income statement for such
Person on a consolidated basis for such period shall be excluded.
6.15 Debt Service Coverage Ratio. BORROWER shall not permit its ratio of
pretax cash flow available for debt service to actual required debt service
to be less than 1.75:1 for the four immediate preceding quarters. Exhibit A
of this Agreement states the components of the calculation of this ratio.
6.16 Net Worth. BORROWER shall not permit its tangible net worth to be less
than Forty Million and No/100ths Dollars ($40,000,000) for any fiscal
quarter, measured on the last day of the fiscal quarter. Exhibit A of this
Agreement states the components of the calculation of this amount.
6.17 Liabilities to Net Worth. BORROWER shall not permit the ratio of its
total liabilities to total net worth to exceed 3.25:1 for any fiscal
quarter, measured on the last day of the fiscal quarter. Exhibit A of this
Agreement states the components of the calculation of this ratio.
6.18 Compensating Balances. BORROWER shall at all times maintain on deposit
with CITIBANK an unencumbered, collected and noninterest bearing
compensating balance in an amount not less than Five Hundred Thousand and
No/100ths Dollars ($500,000.00)
6.19 Merger and Sale of Assets. BORROWER or GUARANTOR shall not, without the
written consent of CITIBANK: (i) merge or consolidate (whether in one
transaction or in a series of transactions) with or into any corporation or
other entity; (ii) sell, lease, transfer or otherwise dispose of all or a
substantial part of its assets except in the ordinary course of business;
(iii) enter into a dissolution or liquidation; (iv) sell, transfer, or
otherwise dispose of, any real or personal property to any person and
thereafter directly or indirectly lease back the same or similar property
except in the ordinary course of business; (v) acquire all or substantially
all of the assets or the business of any Person, or permit any subsidiary to
do so, except that any subsidiary may merge into or transfer assets to
BORROWER and any subsidiary may merge into or consolidate with or transfer
assets to any other subsidiary of BORROWER. The foregoing notwithstanding,
BORROWER may sell, lease, assign, transfer, or otherwise dispose of, and
permit any subsidiary to sell, lease, assign, transfer, or otherwise dispose
of inventory in the ordinary course of business, assets no longer used or
useful in the conduct of its business. BORROWER and each GUARANTOR agree
that CITIBANK shall be conclusively deemed to be reasonable in conditioning
any consent to the foregoing upon, among other things, the entity with or
into which BORROWER shall merge or consolidate or to which BORROWER'S stock
or other assets is transferred agreeing to guarantee or assume the Loan by
executing a guaranty or assumption in form and substance acceptable to
CITIBANK.
6.20 Name Change. BORROWER shall not fail to notify CITIBANK of any change
in BORROWER'S name or any name BORROWER begins to do business under or name
it assumes within thirty (30) days after the date of such change.
6.21 Notice of Default and Adverse Conditions. BORROWER and each GUARANTOR
shall give prompt written notice to CITIBANK (but in no event later than the
first Business Day after BORROWER or any GUARANTOR becomes aware of the
following) of: (i) the occurrence of any Default or potential Default, or
(ii) any facts or circumstances which reasonably likely give rise to a
material adverse change in the condition, affairs or prospects, financial or
other, of BORROWER or any GUARANTOR from that reflected in any financial
statement given to CITIBANK; (iii) any development, financial or otherwise,
which reasonably likely materially adversely affect its business,
properties, affairs, prospects or condition (financial or other) or the
ability of BORROWER or any GUARANTOR to perform hereunder or under the other
Related Documents.
6.22 Removal of Liens. In the event that any lien or encumbrance (other than
those pursuant hereto, mechanics' and materialmen's liens and liens
permitted hereunder or liens otherwise authorized by CITIBANK in writing) is
filed against any of the Asset Base Property, within ten (10) days of the
date that BORROWER, each GUARANTOR or CITIBANK receives notice or otherwise
becomes aware of the same, whichever occurs first, BORROWER shall have such
lien released; provided, however, that BORROWER or other owner thereof may
contest in good faith the validity or amount of any such lien or encumbrance
by appropriate proceedings provided by law, including payment thereof under
protest, if required, upon BORROWER furnishing to CITIBANK a cash deposit or
other security in an amount and form satisfactory to CITIBANK to indemnify
CITIBANK against the sale, forfeiture or loss of the Asset Base Property,
which deposit or other security shall be returned to BORROWER (or each
GUARANTOR, as applicable) upon final payment by BORROWER or other owner
thereof of the debt secured by said lien or encumbrance; provided further,
that upon final determination with respect to any such contested lien or
encumbrance, BORROWER will promptly pay or cause to be paid any sums found
to be due thereon. Nothing in this section shall be construed as permitting
BORROWER or each GUARANTOR to take any act prohibited by any other Section
of this Agreement.
7. DEFAULTS
7.1 Default in Performance or Other Breach. It is a Default if any of the
indebtedness of BORROWER or any term or covenant of the Related Documents is
not performed or paid as agreed, or there is a breach of any warranty or
representation contained in the Related Documents, or BORROWER fails to pay
and discharge any material indebtedness, liability or obligation to any
creditor specifically to include the indebtedness to VNB, the obligations
set forth under the Indenture when and as due, or by reason of a Default,
the holder of any indebtedness of BORROWER becomes entitled to accelerate
the stated maturity of such indebtedness or to exercise any other remedy.
Any breach or Default by BORROWER of any term or condition of any Related
Document shall constitute a Default under all other Related Documents.
7.2 Compliance with Laws and Governmental Authorities. It is a Default if
BORROWER: (i) fails to cure promptly any violation of any law or regulation
resulting from or related to any improvements on the Asset Base Property;
(ii) fails to comply promptly with any material provision of any notice,
issued by or filed in any department of any Governmental Authority having
jurisdiction over BORROWER or the Asset Base property, of any requirement of
any law or regulation having any effect on or relation to the Asset Base
Property; or (iii) fails to furnish to CITIBANK, immediately and without
demand, a true copy of any notice or other document received by or available
to BORROWER disclosing any requirement or violation of any such law or
regulation, or otherwise bearing upon the compliance of any improvements on
the Asset Base Property or the construction thereof with any applicable law
or regulation. In this regard, "promptly" shall be deemed to mean within ten
(10) days after the giving of written notification to BORROWER of the
existence of such violation or notice or other document or, where such cure
or compliance cannot be fully effected within ten (10) days, then the
commencement of action to cure or comply within the same ten (10) days.
7.3 Environmental Matters. It is a Default if Hazardous Substances are not
removed or remediated within one hundred and twenty (120) days of receipt of
a notice requiring such action, or such earlier time as required by a
Governmental Authority.
7.4 Transfer of Asset Base Property. It is a Default if there occurs a sale,
assignment, pledge, transfer, hypothecation, encumbrance or other
disposition of the Asset Base collateral or any portion thereof (or any
interest therein) other than in the ordinary course of business or in a
disposition of obsolete or retired property not used or useful in BORROWER'S
business.
8. REMEDIES
8.1 CITIBANK'S Remedies Upon Default. At any time when a Default shall
exist, in addition to all rights and remedies provided for under the Related
Documents, CITIBANK shall have all rights and remedies provided to it by
law, or any other document under which BORROWER shall be obligated to
CITIBANK and, without limiting the generality of the foregoing, CITIBANK may
do any one or more acts described in this Section, or under the other
Related Documents in any order it deems appropriate.
8.2 Grace Period Remedies Upon Default. At any time when a Default shall
exist and after the applicable Grace Period (as defined below), in addition
to all rights and remedies provided for under the Related Documents,
CITIBANK shall have all rights and remedies provided to it by law or any
other document under which BORROWER shall be obligated to CITIBANK and,
without limiting the generality of the foregoing, CITIBANK may do any one or
more acts described in this Section, or under the Related Documents in any
order it deems appropriate. Grace Period means the number of calendar days
after CITIBANK gives notice in accordance with Section 9.19. If a Default
involves BORROWER'S obligation to pay money or to discharge an indebtedness,
the applicable Grace Period shall be ten (10) days. If a Default involves
the performance or nonperformance of an act, or the occurrence or
nonoccurrence of an event or circumstance, the applicable Grace Period shall
be twenty (20) days. In the special circumstance when the Asset Base value
falls below $8,750,000.00, the applicable Grace Period shall be twenty (20)
days. Notwithstanding the foregoing, there shall be no Grace Period
applicable to a Default based upon a breach of a representation or warranty,
or a false statement in or material omission from any document forming part
of the transaction in respect of which this Agreement was made, and in the
breach of the covenant to maintain adequate insurance on the Asset Base
Property.
8.3 Advances to Protect CITIBANK'S Interests. Without notice to or consent
from BORROWER, CITIBANK shall have the right (whether or not set out in the
Related Documents) but not the obligation, at any time after the default to
advance to any Person any sum which CITIBANK in its sole discretion deems
necessary to protect or preserve the Asset Base Property or CITIBANK'S
assignment of or security interest in the Asset Base Property (or the
priority thereof), or to cure any Default which shall then exist. Each such
advance shall be secured by the Default Collateral, and, at CITIBANK'S
election, shall either be reimbursed to it by BORROWER immediately upon
demand or added to the Loan balance and bear Interest at the rate applicable
upon Default under the Note. It is understood and agreed that no provision
of any of the Related Documents shall obligate CITIBANK to make any such
advance, nor shall the making of one or more such advances constitute an
agreement by CITIBANK to make any further advance, or to be deemed a waiver
of any Default by BORROWER under the terms hereof or of any other Related
Document or to constitute a waiver by CITIBANK to exercise a default remedy.
8.4 Cease Funding. In the event of default, CITIBANK shall have the right to
cease making any disbursements hereunder or pursuant to any of the other
Related Documents.
8.5 Specific Performance. CITIBANK shall have the right to institute
appropriate proceedings to specifically enforce performance of the terms and
conditions of all or any of the Related Documents.
8.6 Recordation of Liens. If an event of default shall occur and any
applicable Grace Period shall have expired, CITIBANK may immediately without
notice to any Person, record the deeds of trust and UCC-1 financing
statements on the Default Collateral which CITIBANK has in its possession
and the liens shall at that time become valid and perfected liens.
8.7 Appraisal and Environmental Assessment. If an event of default shall
occur, CITIBANK may order, at BORROWER'S cost, an appraisal of the Asset
Base Property subdivisions owned by BORROWER or GUARANTOR and included in
the Asset Base for which CITIBANK shall hold deeds of trust, from an
appraiser acceptable to CITIBANK and evidencing an appraised value
acceptable to CITIBANK. In addition, CITIBANK may obtain, at BORROWER'S
cost, an environmental assessment report, from a consultant approved by
CITIBANK, on the Asset Base Property which shall show an environmental
condition acceptable to CITIBANK. The appraisal and environmental report
need not be obtained by CITIBANK prior to recordation of deeds of trust on
BORROWER'S default.
8.8 Insurance. In the event that a default shall occur and CITIBANK shall
record deeds of trust on the Default Collateral, BORROWER shall add CITIBANK
as an additional loss payee on the Hazard Insurance, and the Hazard
Insurance policy shall provide that CITIBANK must be given at least thirty
(30) days prior written notice of any cancellation or termination of the
policy, and must provide coverage for CITIBANK notwithstanding any act or
neglect of BORROWER. BORROWER will maintain a policy of comprehensive
general liability insurance (the "Liability Insurance") with limits of
liability of not less than One Million Dollars ($1,000,000.00) combined
single limit for bodily injury and property damage. Such policy shall
contain a broad form combined general liability endorsement (including
products and completed operations).
8.9 Other Remedies. CITIBANK shall have the right to exercise any other
right, privilege, or remedy available to CITIBANK under any of the Related
Documents, under any other agreement or instrument or as may be provided by
applicable law or in equity. CITIBANK shall have the right to enforce any
one or more of the remedies provided hereunder or by law or in equity either
successively or concurrently, and any such action by CITIBANK shall not be
deemed an election of remedies or otherwise prevent CITIBANK from pursuing
any further remedy it may have hereunder or at law or in equity.
9. GENERAL PROVISIONS
9.1 Accounting Terms. In the event of a change in generally accepted
accounting principles which would cause the accounting principles used in
preparing the financial statements referred to in Section 6.10 (Financial
Reporting) to not be generally accepted accounting principles, the financial
statements required to be delivered pursuant to this Agreement may
thereafter be prepared in accordance with generally accepted accounting
principles then in effect.
9.2 Acknowledgment . The undersigned BORROWER and each GUARANTOR acknowledge
that they have received a copy of this Agreement as executed.
9.3 Agreement Controls. The Related Documents shall be deemed to include
this Agreement. In the event of a conflict between any of the provisions of
this Agreement and any provisions of the other Related Documents, the
provisions of this Agreement shall control.
9.4 Assignability. BORROWER shall not assign this Agreement or any part of
any Advance to be made hereunder. The rights of CITIBANK under this
Agreement are assignable in part or in whole, and any assignee of CITIBANK
shall succeed to and be possessed of the rights of CITIBANK hereunder to the
extent of the assignment made, including the right to make Advances to
BORROWER or any approved assignee of BORROWER in accordance with this
Agreement.
9.5 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
9.6 CITIBANK'S Consent and Approval. In any instance where CITIBANK'S
approval or consent is required or the exercise of CITIBANK'S judgment is
required, the granting or denial of such approval or consent and the
exercise of such judgment shall be within the sole discretion of CITIBANK,
and CITIBANK shall not, for any reason or to any extent, be required to
grant such approval or consent or exercise such judgment in any particular
manner regardless of the reasonableness of either the request or CITIBANK'S
judgment except where this agreement specifically states otherwise.
9.7 Costs and Expenses. BORROWER shall pay CITIBANK upon demand any and all
costs, expenses and fees (including reasonable attorneys' fees) incurred in
connection with the Loan, including without limitation, CITIBANK'S expense
for travel, meals, and lodging for its auditors examining the records and
assets of BORROWER pursuant to the terms of this Agreement, and those
incurred in enforcing or attempting to recover payment of the amounts due
under the obligations secured, including negotiating, documenting and
otherwise pursuing or consummating modifications, extensions, compositions,
renewals or other similar transactions pertaining to this Agreement or the
Note, irrespective of the existence of a Default, and including costs,
expenses and fees incurred before, after or irrespective of whether suit is
commenced, and in the event suit is brought to enforce payment hereof, such
costs, expenses and fees and all other issues in such suit shall be
determined by a court sitting without a jury.
9.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered, shall be an
original, but all of which shall together constitute one and the same
instrument.
9.9 Governing Law. The laws of the State of Arizona shall govern the
interpretation and enforcement of this Agreement and all Related Documents.
9.10 General Immunity. CITIBANK shall not be responsible for: (i) any loss,
costs or expenses incurred by BORROWER in connection with any drafts,
documents or instruments delivered by BORROWER to CITIBANK in connection
herewith; (ii) any negligence, misfeasance, suspension, insolvency, or
bankruptcy of any correspondent or agent of CITIBANK to whom any such
drafts, documents or instruments may be entrusted, unless caused by such
correspondent's or agent's gross negligence or willful misconduct; (iii) any
loss or delay, in transmission or otherwise, of any such drafts, documents
or instruments or the proceeds thereof; or, (iv) any delay, interruption,
omission or error in transmission or delivery of any message.
9.11 General Indemnification. BORROWER indemnifies CITIBANK, its employees,
agents and officers from and against any and all losses, expenses, charges,
fees (including attorneys' fees) and liability and agrees to hold CITIBANK
and its employees, agents and officers harmless from any and all damages,
costs, expenses, claims, demands, and liabilities which may be asserted or
alleged in connection with or arising out of the Loan, the administration or
enforcement of the Related Documents or the exercise of any right under the
Related Documents (including, without limitation, in connection with or as a
result of any sale, use, operation, lease, disposition or consumption of any
of the Asset Base Property as long as such is done in a commercially
reasonable manner), whenever asserted, and for all reasonable expenses
(including attorneys' fees) and all costs of compromise or settlement which
may be incurred by CITIBANK on account of or arising out of or in connection
with any such claim, demand or obligation. The foregoing indemnity shall
extend to claims, demands or obligations, and expenses relating thereto and
costs of compromise or settlement thereof, but not to those resulting from
the negligence or misconduct of any indemnitee. In the event that any action
or proceeding is brought against CITIBANK, its employees, agents or officers
arising out of the Loan, the administration or enforcement of the Related
Documents or the exercise of any right under the Related Documents, BORROWER
shall, upon notice from CITIBANK, resist and defend such action or
proceeding on behalf of CITIBANK, its employees, agents and officers as
applicable; provided that failure of such party to give such notice shall
not relieve BORROWER from any of its obligations under this Section unless
such failure prejudices defense of such action or proceeding by BORROWER. At
its own expense, n indemnified party may employ separate counsel and
participate in the defense. If employment of separate counsel is required
because of a conflict of interest between BORROWER and the indemnified party
or between the indemnified parties, or the failure of BORROWER after receipt
of notice to assume the defense, then the indemnified parties may employ
separate counsel at BORROWER'S expense. BORROWER shall not be liable for any
settlement without its consent unless BORROWER shall have failed to perform
any of its obligations under this Section.
9.12 Environmental Indemnity. BORROWER agrees to indemnify and hold CITIBANK
harmless from and against, and shall reimburse CITIBANK for, any and all
losses, claims, liabilities, damages, injuries (to person, property, or
natural resources), costs, expenses, actions or causes of action, arising
from or in connection with the release or presence of any Hazardous
Substance upon the Asset Base Property now existing or hereafter occurring,
whether foreseeable or unforeseeable, including, without limitation, all
costs of removal and disposal of such Hazardous Substances, all costs of
determining whether the Asset Base Property is in compliance and causing the
Asset Base Property to be in compliance with all applicable Environmental
Laws, all costs associated with claims for damages to persons or property,
and CITIBANK's reasonable attorney's and consultants' fees and court costs.
The provisions of the foregoing indemnity shall survive foreclosure of the
Deed of Trust and satisfaction of the Note and Loan and shall be in addition
to any other rights and remedies of CITIBANK.
9.13 Survival of Indemnities. All agreements of indemnity made by BORROWER
and each GUARANTOR under or in connection with this Agreement or in any
other document delivered by BORROWER or any GUARANTOR to CITIBANK in
connection with this Agreement shall survive the making of the Loan and
issuance, delivery and performance of this Agreement to CITIBANK and the
satisfaction of the Note.
9.14 Governmental Regulation. Anything contained in this Agreement to the
contrary notwithstanding, CITIBANK shall not be obligated to extend credit
to BORROWER in an amount in violation of any limitation or prohibition
provided by any applicable statute or regulation.
9.15 Headings and Miscellaneous Definitions. All sections and descriptive
headings of subsections in this Agreement are inserted for convenience only,
and shall not affect the construction or interpretation hereof.
9.15(a) "Business Day" is a day other than a Saturday, Sunday or a public or
bank holiday under federal law or the laws of the State of Arizona.
9.15(b) "Governmental Authority" means any body politic, including without
limitation the United States of America, the State of Arizona, and any other
state, county, parish, city, town, township or municipality, and any subpart
thereof or any person(s) or entity deriving their authority from any such
body politic, including without limitation any department, agency,
commission, board, division, bureau or office, or any subpart thereof, of
any body politic.
9.15(c) "Person" means any individual, corporation, partnership,
association, trust or other entity or organization, including a government
or political subdivision or agency or instrumentality thereof.
9.15(d) "Related Documents" shall include this Agreement, the Note(s), Loan
Security Documents, Guarantees, and any other documents to be executed by
Borrower or Guarantor pursuant to this Agreement.
9.15(e) "Section" means a numbered paragraph or section of this Agreement,
unless another document is specifically referenced.
9.15(f) Capitalized terms in sections dealing with ERISA or the Internal
Revenue Code shall have the meanings ascribed to them under ERISA or the
Internal Revenue Code. All Capitalized terms in Section 6.9 herein (with the
exception of BORROWER) shall refer to the defined terms as set forth in the
Indenture dated as of August 1, 1992 between Continental Homes Holding
Corp., a Delaware corporation and Fidelity Bank, National Association, a
national banking association organized and existing under the laws of the
United State of America.
9.16 Modification and Waiver. No provision of this Agreement shall be
amended, waived or modified except by an instrument in writing signed by the
parties hereto.
9.17 No Agency or Partnership Relationship. BORROWER and each GUARANTOR
acknowledges and agrees that no agency, fiduciary, representative or
partnership relationship exists between or among BORROWER, any GUARANTOR and
CITIBANK.
9.18 No Other Parties to Benefit. The Related Documents are made for the
sole benefit of BORROWER, each GUARANTOR and CITIBANK and their respective
successors and assigns, and no other person or entity is intended to or
shall have any rights or benefits hereunder, whether as third-party
beneficiary or otherwise.
9.19 Notices. All notices and other communications provided for hereunder
shall be in writing (including telegraphic, telecopy or other facsimile
communication) and mailed, telegraphed, telexed, cabled, telecopied (or
communicated by other means of facsimile transmission) or delivered (by hand
or by courier service), to the parties at their respective addresses set
forth below or at such other address as shall be designated by such party in
a written notice to the other parties. All notices and communications shall,
when mailed by certified mail, telegraphed, telexed, cabled or telecopied,
be effective upon the earlier to occur of actual receipt or three (3)
Business Days after deposit in the mail (postage prepaid), or upon delivery
to the telegraph company, or upon confirmation by telex answerback, or upon
delivery to the cable company or upon confirmation at the established
confirmation number, respectively.
To BORROWER as follows:
Continental Homes Holding Corp.
7001 North Scottsdale Road, Suite 2050
Scottsdale, Arizona 85253
Attention: Kenda Gonzales
To each GUARANTOR as follows:
CHI Construction Company, Inc.
7001 North Scottsdale Road, Suite 2050
Scottsdale, Arizona 85253
Attention: Kenda Gonzales
Continental Homes, Inc.
7001 North Scottsdale Road, Suite 2050
Scottsdale, Arizona 85253
Attention: Kenda Gonzales
To CITIBANK as follows:
CITIBANK (Arizona)
3300 North Central Avenue, MC 592A
Phoenix, Arizona 85012
Attention: Kevin Kosan
9.20 Other Documents. BORROWER and each GUARANTOR hereby agree to provide
CITIBANK with all other documents reasonably required by CITIBANK to give
effect to this Agreement.
9.21 Voluntary Agreement. BORROWER and each GUARANTOR
acknowledges and agrees that this Agreement has been freely and voluntarily
entered into, and that no oral or written representations or promises of any
kind, unless specifically contained in this Agreement, have been made by
CITIBANK to induce or otherwise influence any of them to enter into this
Agreement. BORROWER and each GUARANTOR represent that they have had the
opportunity to seek, and have, in fact, sought the advice and benefit of
legal counsel prior to executing this Agreement.
9.22 Release. BORROWER and each GUARANTOR understands and
acknowledges that as part of this Agreement, they are each hereby giving a
general release of all Claims (as the terms is defined in this paragraph)
and defenses against CITIBANK, and it is their intention that CITIBANK have
no liability to BORROWER or GUARANTOR by reason of anything occurring prior
to the date of this Agreement relating to the Claims covered by this
Agreement. Accordingly, this Agreement is made to compromise, resolve,
settle, and terminate all actual and potential Claims by reason of anything
occurring prior to the date of this Agreement relating to the Claims covered
by this Agreement. The term "Claims" as used in this Agreement means all
claims, complaints, demands, causes of action, damages, costs, expenses,
fees, and all other debts, liabilities or obligations of every sort and
description, direct and indirect, fixed or contingent, known or unknown and
whether or not liquidated, arising out of, caused by, or otherwise related
in any way to events or transactions occurring prior to the date of this
Agreement between or affecting any of the parties hereto. BORROWER and each
GUARANTOR understands that this general release extends to Claims which the
BORROWER and each GUARANTOR may not know of or suspect to exist in their
favor at the time of executing this release, and BORROWER and each GUARANTOR
specifically waives the provisions of any Arizona law to the contrary.
9.23 Recourse Rights. BORROWER and each GUARANTOR agrees that if a claim is
made upon CITIBANK at any time for the repayment or recovery of any amount
or other value received by CITIBANK from any source in payment of or on
account of any indebtedness of BORROWER or any GUARANTOR, and CITIBANK
repays or otherwise becomes liable for all or any part of such claim by
reason of any administrative or judicial judgment, decree or order, or by
reason of any settlement or compromise of any such claim, BORROWER and each
GUARANTOR shall remain liable to CITIBANK hereunder for the amount so repaid
or for which CITIBANK is otherwise liable, to the same extent as if such
amount had never been received by CITIBANK notwithstanding any termination
hereof or the cancellation of any instrument or agreement evidencing any
indebtedness of BORROWER or any GUARANTOR.
9.24 Right of Setoff. Any and all deposits or other sums at any time
credited by or due from CITIBANK to BORROWER shall at all times constitute
security (as part of the Default Collateral) for any and all indebtedness of
BORROWER to CITIBANK. Upon the occurrence and during the continuance of a
Default, CITIBANK is hereby authorized at any time and from time to time,
without notice to BORROWER (any such notice being expressly waived by
BORROWER), to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other
indebtedness at any time owing by CITIBANK to or for the credit or the
account of BORROWER against any and all of the obligations of BORROWER now
or hereafter existing under this Agreement or any other Loan Document,
irrespective of whether or not CITIBANK shall have made any demand under
this Agreement or such other Loan Document and although such obligations may
be unmatured.
9.25 Right to Appear in Litigation. CITIBANK shall have the right to
commence, appear in or defend any action or proceeding which CITIBANK, in
good faith, believes may affect the rights or duties of any of the parties
hereunder or in connection herewith or in and to the Default Collateral. If
no Default shall exist hereunder, CITIBANK shall give notice to BORROWER of
its intent to exercise its rights hereunder, and, if BORROWER fails, within
five (5) business days, to diligently commence, appear in or defend any
action or proceeding which CITIBANK sets forth in its notice to BORROWER
then CITIBANK may commence such action or appear in or defend any action or
proceeding then pending. In the event CITIBANK exercises its rights
hereunder, then BORROWER agrees to pay all necessary and reasonable expenses
incurred by CITIBANK in connection therewith (including, but not limited to,
reasonable attorneys' fees).
9.26 Severability: Integration: Form and Substance of Documents: Time of the
Essence. Inapplicability or unenforceability of any provision of this
Agreement shall not limit or impair the operation or validity of any other
provision of this Agreement. The Related Documents constitute the entire
agreement between the parties with respect to the subject matter hereof.
Each of the Related Documents is intended to represent the mutual intent of
the parties thereto and no rule of strict construction shall be applied
against any party. Time is of the essence hereof.
9.27 Usury Provision. Notwithstanding anything herein or in any of the other
Related Documents to the contrary, if any charge or fee for which BORROWER
is or becomes obligated in connection with the Related Documents constitutes
interest and is not otherwise stated as a rate, such charge or fee shall be
deemed an additional rate of interest to which BORROWER agrees, computed by
dividing the amount of such charge or fee by the principal amount of the
Note. This provision shall control every agreement between BORROWER and
CITIBANK. In the event any amount determined to be excessive interest is
applied against the unpaid principal balance of the Loan, and thereafter the
rate of interest accruing under the Loan is less than the rate permitted by
law, the Loan shall thereafter accrue interest at such highest lawful rate
until such time as the amount accrued at the interest rate differential
equals the amount of excessive interest previously applied against
principal.
9.28 Venue. To induce CITIBANK to enter into this Agreement, BORROWER
irrevocably agrees that, subject to CITIBANK's sole discretion, all actions
and proceedings in any way, manner or respect, arising out of, from or
related to this Agreement, the Related Documents or the Default Collateral
shall be litigated in courts having situs within the city of Phoenix,
Arizona. BORROWER hereby consents and submits to the jurisdiction of any
local, state or federal court located within said city and state. BORROWER
hereby irrevocably appoints and designates [the Secretary of State of
Arizona whose address is Phoenix, Arizona, or] any other person having or
maintaining a place of business in such state, whom BORROWER may from time
to time designate having given ten days written notice thereof to CITIBANK
as BORROWER'S true and lawful attorney and duly authorized agent for the
acceptance of service of legal process. BORROWER agrees that service of such
process upon such person shall constitute personal service of such process
upon BORROWER. BORROWER hereby waives any right it may have to transfer or
change the venue of any litigation brought against BORROWER by CITIBANK in
accordance with this paragraph .
9.29 Waiver of Jury Trial. BORROWER HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY, WAIVES ANY RIGHTS IT MAY HAVE. TO REQUIRE A
TRIAL BY JURY IN ANY COURT ACTION PERTAINING TO THIS AGREEMENT.
9.30 Waivers Generally. CITIBANK shall not be deemed to have waived any
rights upon or under the obligations secured or the Asset Base Property
unless such waiver be in writing and signed by CITIBANK. No delay or
omission on the part of CITIBANK in exercising any right shall operate as a
waiver of such right or any other right. A waiver on any one occasion shall
not be construed as a bar to the exercise of any right on any future
occasion. All rights and remedies of CITIBANK as to the Loan, any other
obligations to CITIBANK or the Asset Base Property whether evidenced hereby
or by any other instrument or papers shall be cumulative and may be
exercised singularly or concurrently. The waiver by CITIBANK of any breach
or Default by BORROWER under any of the terms of any of the Related
Documents shall not be deemed to be a waiver of any subsequent breach or
Default on the part of BORROWER under the same or any other of the Related
Documents.
BORROWER:
CONTINENTAL HOMES HOLDING CORP.
By /s/Kenda B. Gonzales
--------------------
Its: Secretary and Treasurer
-------------------------
CHI CONSTRUCTION COMPANY, GUARANTOR
By /s/Kathleen R. Wade
-------------------
Its: Treasurer
-----------
CONTINENTAL HOMES, INC., GUARANTOR
By: /s/Kathleen R. Wade
-------------------
Its: Co. CEO
---------
CITIBANK (ARIZONA)
By: /s/Kevin Kosan
--------------
Its Vice President
----------------
Exhibit 10.8(b)
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT TO LOAN AGREEMENT (the "Amendment") is entered
into as of the ___ day of November, 1993, by and between NORWEST BANK
ARIZONA, NATIONAL ASSOCIATION, a national banking association ("Norwest"),
successor in interest to Citibank (Arizona), an Arizona banking corporation
("Citibank"), and CONTINENTAL HOMES HOLDING CORP., a Delaware corporation
(the "Borrower"), and is consented to by CHI CONSTRUCTION COMPANY, an
Arizona corporation, and CONTINENTAL HOMES, INC., a Delaware corporation
(collectively, "Guarantors").
Recitals:
A. Citibank and Borrower entered into a Loan Agreement (the
"Agreement"), dated as of April 5, 1993, pursuant to which
Citibank agreed to advance funds to Borrower on a revolving credit
basis in an aggregate amount not to exceed FIVE MILLION AND NO/100
DOLLARS ($5,000,000.00).
B. Repayment of amounts borrowed under the revolving credit was
guaranteed by the Guarantors.
C. Norwest is, by purchase of assets, successor in interest to
Citibank.
D. Borrower and Norwest desire to amend the Loan Agreement, and
Guarantors are agreeable to such amendment.
NOW, THEREFORE, in consideration of the foregoing and of the mutual benefit
to each, the parties hereto agree as follows:
1. Wherever the word "CITIBANK" appears in the Agreement, it shall be
replaced with "Norwest."
2. Paragraphs 2.5 and 2.6 of the Agreement are deleted in their
entirety, and paragraphs 2.7 and 2.8 are renumbered to 2.5 and
2.6, respectively.
3. Paragraph 3.1 of the Agreement is deleted in its entirety, and
replaced with the following:
3.1 Bank's Right to Demand Security. Upon the occurrence of any
Event of Default, Norwest shall have all of the rights and remedies
provided pursuant to the Note and the other Related Documents and
applicable law. Upon occurrence of an Event of Default resulting in
violation of the covenants set forth in Sections 6.11, 6.12, 6.13,
6.14, 6.15 and 6.16 hereof, Norwest may, in its sole and absolute
discretion, and in addition to its other rights and remedies, demand (a
"Security Demand") and accept Collateral (which means the property,
interests in property, and rights to property securing any or all
obligations of Borrower hereunder from time to time) as security for
the Loan, which security shall be on such terms and conditions as
Norwest may elect in its sole and absolute discretion, and Borrower
shall provide such security and comply with such requirements, subject
only to the limitation on such security set forth in the definition of
"Permitted Liens" in the that certain Indenture entered into as of
August 1, 1992 (the "Indenture"), by and between Borrower and Fidelity
Bank, National Association, as Trustee. Without limiting the
foregoing, the terms and conditions upon which Norwest will require and
accept such Collateral may include the following:
3.1(a) Type of Collateral. Any such Collateral shall consist of
real property and improvements owned by either Guarantor. Within five
(5) business days after the giving of a Security Demand, Borrower shall
provide Norwest with a listing of all such real property and
improvements and Norwest shall have the right to select the Collateral
from such list in the following order of preference (I) homes under
construction located in the metropolitan Phoenix, Arizona area, (ii)
improved single family lots located in the metropolitan Phoenix,
Arizona area, (iii) lots under development located in the metropolitan
Phoenix, Arizona area, (iv) vacant land located in the metropolitan
Phoenix, Arizona area, (v) real estate located elsewhere in Arizona,
(vi) real estate located in Colorado, and (vii) real estate located in
California. Except as set forth in Section 3.1, Norwest shall be
entitled to select the quantity of such property to be provided as
Collateral.
3.1(b) Appraisals. Norwest shall receive and approve such
appraisals or other evidence of the value of such property as Norwest
may require in its sole and absolute discretion.
3.1(c) Documents. Borrower and such Guarantors shall execute such
deeds of trust, security agreements and other documents and instruments
as Norwest may require in its sole and absolute discretion.
3.1(d) Title Insurance. Norwest shall receive such title insurance
policies and endorsements thereto with respect to such deeds of trust
as Norwest may require in its sole and absolute discretion, which title
insurance policies shall contain only those exceptions and limitations
as shall be acceptable to Norwest.
3.1(e) No Defaults. No other Event of Default or unmatured Event of
Default shall have occurred and be continuing.
3.1(f) Attorney Opinions. Norwest shall receive such opinions of
independent counsel for Borrower as Norwest may request in its sole and
absolute discretion, including, without limitation, opinions that the
execution and delivery of such deeds of trust and other security
documents does not conflict with, violate, or cause a default under,
the terms and conditions of any agreement, document, instrument, or
indenture to which Borrower or either Guarantor is a party or by which
it is bound or affect, and that the transfer of such security to
Norwest does not constitute a violable preference or fraudulent
conveyance under applicable state or federal law.
3.1(g) Costs and Expenses. Borrower shall pay all of Norwest's
costs and expenses in connection with the foregoing, including, without
limitation, appraisal fees, appraisal review fees, recording fees,
title insurance fees, escrow fees and attorneys' fees.
4. A new Paragraph 3.2 is added as follows:
3.2 Effect of Security. Borrower's compliance with Section
3.1 shall not waive any Event of Default or unmatured Event of
Default or otherwise be deemed to modify or release any of
Borrower's obligations hereunder, except to the extent such waiver,
release or modification is expressly set forth in a written
agreement signed by Norwest and in form and content satisfactory
to Norwest in its sole and absolute discretion.
5. Paragraphs 3.2 and 3.3 of the Agreement shall be renumbered 3.3
and 3.4 respectively, and the existing Paragraph 3.4 of
the Agreement is deleted in its entirety.
6. Paragraph 4.1(e) of the Agreement is deleted in its entirety, and
paragraphs 4.1(f) through 4.1(i) are renumbered 4.1(e)
through 4.1(h), respectively.
7. Paragraph 4.3 of the Agreement is deleted in its entirety, and
paragraph 4.4 is renumbered 4.3.
8. Paragraph 5.6 of the Agreement is deleted in its entirety and
replaced with the following:
5.6 Environmental Matters. To the best knowledge of
Borrower after due investigation, Borrower is in compliance
in all material respects with all environmental, all health,
and all safety laws, ordinances, regulations, and rules
(federal, state and local) applicable to the Borrower, the
as sets or property of the Borrower, the business or
operations of the Borrower, or the products or services of
the Borrower. Borrower does not have any material existing
or contingent liability in connection with any disposal,
generation, manufacture, processing, production, release,
storage, transportation, treatment or use of any hazardous or
toxic substance or waste.
9. Paragraph 5.7 of the Agreement is amended by striking the word
"Default" as it appears in the next to last line of the paragraph.
10. Paragraph 6.4 of the Agreement is amended by changing "the Asset
Base Property" the first time it appears in the paragraph to "its
respective properties," and by changing "The Asset Base Property"
the second time the phrase appears to "The property of Borrower
and Guarantor, respectively."
11. Paragraph 6.12 of the Agreement is deleted in its entirety, and
replaced with the following:
6.12 Environmental Laws. Borrower shall comply with all
environmental, all health, and all safety laws, ordinances,
regulations and rules (federal, state, local and foreign)
applicable to Borrower, the business or operations of
Borrower, the assets or property of Borrower, or the products
or services of Borrower. Borrower shall not dispose of,
generate, manufacture, process, produce, release, transport or
treat or otherwise store or use any hazardous or toxic
substances or wastes. Borrower shall notify Norwest
immediately of any environmental inquiry or claim from any
Governmental Authority or other person relating to Borrower or
any assets, property, business, operations, product or service
of Borrower.
12. Paragraph 6.22 of the Agreement is deleted in its entirety and
replaced with the following:
6.22 Appraisals. Norwest shall have the right, which
Norwest may exercise from time to time in its sole and
absolute discretion, to obtain appraisals of Borrower's real
estate assets. All such appraisals shall be in form and
reflect values satisfactory to Norwest. Borrower shall
cooperate in any such appraisals and Borrower shall pay all
costs and expenses, including appraisal and appraisal review
fees incurred or charged by Norwest in connection therewith;
provided that Borrower shall be obligated to pay such costs
and expenses only if an to the extent such appraisals are
required (I) by the consistent application of Norwest's
internal policies and procedures that are generally applicable
to secured or unsecured loans made by Norwest to entities
engaged in businesses similar to that of Borrower, (ii) by
applicable laws, regulations and rules or (iii) in connection
with exercise of Norwest's rights under Section 8 hereof.
13. A new Paragraph 6.23 is added to the Agreement as follows:
6.23 Limitations on Liens and Encumbrances. Borrower
and Guarantors will not, and will not permit any of their
respective subsidiaries to, directly or indirectly, create,
incur, assume or permit to exist any lien or encumbrance upon
or with respect to any assets of Borrower or Guarantor or
such subsidiary, whether now owned or hereafter acquired, or
on any income or profits therefrom; provided that the
foregoing shall not prohibit Permitted Liens, as defined in
the Indenture.
14. Paragraph 7.2 of the Agreement is amended by changing "the Asset
Base Property," wherever it appears in the paragraph, to
"Borrower's or Guarantors' property."
15. Paragraph 7.4 of the Agreement is amended by deleting "Asset Base"
from the paragraph title and by changing "the Asset Base
collateral" in the body of the paragraph to "Borrower's property."
16. In paragraph 8.2 of the Agreement, the following are deleted:
(i) "In the special circumstance when the Asset Base value falls
below $8,750,000.00, the applicable Grace Period shall be
twenty (20) days."; and
(ii) ", and in the breach of the covenant to maintain adequate
insurance on the Asset Base Property."
17. Paragraph 8.3 of the Agreement is amended by replacing "Asset Base
Property," wherever it appears, with "Collateral."
18. Paragraphs 8.6, 8.7 and the first sentence in paragraph 8.8 of the
Agreement are deleted in their entirety, and paragraphs 8.8 and
8.9 are renumbered 8.6 and 8.7, respectively.
19. In paragraph 9.11 of the Agreement, "Asset Base Property" is
replaced with "Collateral."
20. Paragraph 9.12 of the Agreement is amended by replacing "Asset
Base Property," wherever it appears, with "Collateral.".
21. Paragraph 9.30 is amended by replacing "Asset Base Property,"
wherever it appears, with "Collateral."
22. Except as expressly amended hereby the Agreement shall remain in
full force and effect.
Executed the date and year first above written.
NORWEST BANK ARIZONA, CONTINENTAL HOMES HOLDING CORP.
NATIONAL ASSOCIATION
By: /s/Kevin Kosan By: /s/Kenda B. Gonzales
---------------- ----------------------
Its: Vice President Its: Secretary and Treasurer
------------------ ---------------------------
And:
CHI CONSTRUCTION COMPANY, CONTINENTAL HOMES, INC.,
GUARANTOR GUARANTOR
By:/s/Kenda B. Gonzales By:/s/Kenda B. Gonzales
-------------------- --------------------
Its: Vice President Its: Vice President
---------------- ----------------
Exhibit 10.8(c)
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (the "Amendment")is entered into
this _____ day of April, 1994, by and between NORWEST BANK ARIZONA, NATIONAL
ASSOCIATION, a national banking association ("Norwest"), successor in
interest to Citibank (Arizona), an Arizona banking corporation ("Citibank"),
and CONTINENTAL HOMES HOLDING CORP., a Deleware corpoation ( the
"Borrower"), and is consented to by CHI CONSTRUCTION COMPANY, an Arizona
corporation, and CONTINENTAL HOMES, INC., a Deleware corporation
(collectively, "Guarantors").
RECITALS:
A. Citibank and Borrower entered into a Loan Agreement (the
"Agreement"), dated as of April 5, 1993 and modified by that
certain First Amendment to Loan Agreement dated November 15,
1993, pursuant to which Citibank agreed to advance funds to
Borrower on a revolving credit basis in an aggregate amount not
to exceed FIVE MILLION AND NO/100 DOLLARS ($5,000,000.00)
B. Repayment of amounts borrowed under the revolving credit was
guaranteed by the Guarantors,
C. Norwest is, by purchase of assets, successor in interest to
Citibank.
D. Borrower and Norwest desire to amend the Loan Agreement, and
Guarantors are agreeable to such amendment.
NOW, THEREFORE, in consideration of the foregoing and of the mutual benefit
to each, the parties hereto agree as follows:
1. Paragraph 6.18 is amended as follows: BORROWER shall at all
times maintain on deposit with NORWEST an unencumbered, collected and
noninterest bearing compensating balance in an amount not less than Two
Hundred Fifty Thousand and No/100ths Dollars ($250,000.00)
2. Except as expressly amended hereby the Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereby execute this amendment as of the day
and year first written above.
NORWEST:
NORWEST BANK ARIZONA,
NATIONAL ASSOCIATION
success in interest to Citibank (Arizona)
By: /s/Kevin Kosan
--------------
Kevin Kosan
Its: Vice President
---------------
BORROWER:
CONTINENTAL HOMES HOLDING CORP.
By: /s/Kenda B. Gonzales
--------------------
Its: Secretary and Treasurer
------------------------
GUARANTORS:
CHI CONSTRUCTION COMPANY
_________________________________________________
Its: ___________________________________________
CONTINENTAL HOMES, INC.
_________________________________________________
Its: ___________________________________________
Exhibit 10.8(d)
THIRD AMENDMENT TO LOAN AGREEMENT
THIS THIRD AMENDMENT TO LOAN AGREEMENT (the "Third Amendment") is entered
into as of the 7th day of July, 1994, by and between NORWEST BANK ARIZONA,
NATIONAL ASSOCIATION, a national banking association ("Norwest"), successor
in interest to Citibank (Arizona), and Arizona banking corporation
("Citibank"), and CONTINENTAL HOMES HOLDING CORP., a Delaware corporation
(the "Borrower", and is consented by CHI CONSTRUCTION COMPANY, an Arizona
corporation, and CONTINENTAL HOMES, INC., a Delaware corporation
(collectively, "Guarantors").
Recitals:
A. Citibank and Borrower entered into a Loan Agreement (the
"Agreement"), dated as of April 5, 1993, pursuant to which
Citibank agreed to advance funds to Borrower on a revolving
credit basis in an aggregate amount not to exceed FIVE MILLION
AND NO/100THS DOLLARS ($5,000,000.00) (the "Loan").
B. Repayment of amounts borrowed under the revolving credit was
guaranteed by the Guarantors, as defined in the Agreement.
C. Norwest is, by purchase of assets, successor in interest to
Citibank.
D. Borrower and Norwest amended the Loan Agreement by a First
Amendment to Loan Agreement, dated November 15, 1993 (the
"First Amendment"). Borrower and Norwest amended the Loan
Agreement by a Second Amendment to Loan Agreement dated April
1, 1994 (the "Second Amendment").
E. Borrower and Norwest now desire to further amend the Loan
Agreement, and Guarantors are agreeable to such amendment.
NOW, THEREFORE, in consideration of the foregoing and of the mutual benefit
to each, the parties hereto agree as follows:
1. Borrower acknowledges the accuracy of the Recitals.
2. A definition is added to the Agreement as follows:
"Net Worth" of any Person shall mean, at any date, the
aggregate of capital, surplus and retained earnings of such
Person as would be shown on a consolidated balance sheet of
such Person prepared in accordance with GAAP, adjusted to
exclude (to the extent included) investments by such Person and
its subsidiaries in joint ventures and the amount of equity
attributable to Affiliates other than Subsidiaries of such
Person.
3. In Paragraph 6.16 of the Agreement, "Net Worth" is deleted and
replaced with "Tangible Net Worth" and "Forty Million and
No/100ths Dollars ($40,000,000)" is changed to "Seventy Million
and No/100 Dollars ($70,000,000.00)".
4. In Exhibit A to the Agreement, paragraph 1. d) is amended to
change "6.18" to "6.17."
5. In Exhibit A to the Agreement, paragraph 1. c) is deleted in
its entirety and replaced with the following:
"d) Section 6.17 Adjusted Debt to Net Worth Ratio:
Reported Consolidated Debt $
_________________________________
Plus: All consolidated accounts payable $
_________________________________
Plus: Other consolidated accrued expenses $
_________________________________
Minus: Consolidated Mortgage and Title
Company Debt $
_________________________________
Total: Adjusted Debt $
_________________________________
Adjusted Debt divided by
Net Worth :1.0"
_________________________________
6. Paragraph 6.17 of the Agreement is deleted in its entirety and
replaced with the following:
6.17 Adjusted Debt to Net Worth. BORROWER shall not permit the
ratio of its Adjusted Debt to Net Worth to exceed 2.6 to 1.0 as
of March 31, 1994; 2.55 to 1.0 as of May 31, 1994; 2.5 to 1.0
as of August 30, 1994; 2.45 to 1.0 as of November 30, 1994; and
2.4 to 1.0 as of February 28, 1995, and thereafter.
7. A new paragraph 7.5 is added as follows:
7.5 Bank One - Milburn Investments. It is a default if there
occurs any condition or event that is a default or is
designated as a default, an event of default or an Event of
Default, in that certain Loan Agreement, dated July 28, 1993,
between Milburn Investments, Inc., a Texas corporation, and
Bank One Arizona, NA, in the maximum principal amount of
$25,000,000.00.
8. A new paragraph 7.6 is added as follows:
7.6 Senior Note Offering. It is a default if here occurs any
condition or event that is a default or is designated as a
default, an event of default or an Event or Default under any
future senior note offering. If requested by Bank, after
Borrower issues such Senior Notes, Borrower will sign a further
amendment confirming such cross-default.
9. The Loan Documents are ratified and affirmed by Borrower and
shall remain in full force and effect as modified herein. Any
property or rights to or interests in property granted as
security in the Loan Documents shall remain as security for the
Loan and the obligations of Borrower in the Loan Documents.
10. Borrower hereby acknowledges, affirms, and restates its
warranties and representations as made in paragraph 5 of the
Agreement.
11. Borrower shall execute, deliver, and provide to the Bank such
additional agreements, documents, and instruments as reasonably
required by the Bank to effectuate the intent of this Third
Amendment.
12. Borrower fully, finally and forever releases and discharges
Bank and its successors, assigns, directors, officers,
employees, agents, and representatives from any and all
actions, causes of action, claims, debts, demands, liabilities,
obligations and suits, of whatever kind or nature, in law or
equity of Borrower, whether now known or unknown to Borrower,
(i) in respect of the Loan, the Loan Documents or the actions
or omissions of Bank in respect of the Loan or Loan Documents,
and (ii) arising from events occurring prior to the date of
this Third Amendment.
13. The Loan Documents as modified herein shall be binding upon and
shall inure to the benefit of Borrower and Bank and their
successors and assigns and the executors, legal administrators,
personal representatives, heirs, devisees, and beneficiaries of
Borrower, provided, however, Borrower may not assign any of its
right or delegate any of its obligation under the Loan
Documents and any purported assignment or delegation shall be
void.
14. This Third Amendment shall be governed by and construed in
accordance with the laws of the State of Arizona, without
giving effect to conflicts of law principles.
15. This Third Amendment 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 Third Amendment to physically
form one document.
Executed the date and year first above written.
NORWEST BANK ARIZONA,
NATIONAL ASSOCIATION
By: /s/Kevin Kosan
---------------
Kevin Kosan
Its: Vice President
---------------
CONTINENTAL HOMES HOLDING CORP.
By: /s/Kenda B. Gonzales
---------------------
Its: Secretary and Treasurer
-----------------------
CHI CONSTRUCTION COMPANY,
GUARANTOR
By: /s/Kenda B. Gonzales
---------------------
Its: Vice President
--------------
CONTINENTAL HOMES, INC.,
GUARANTOR
By: /s/Kenda B. Gonzales
---------------------
Its: Financial Vice President
-------------------------
Exhibit 10.8(e)
FOURTH AMENDMENT TO LOAN AGREEMENT
THIS FOURTH AMENDMENT TO LOAN AGREEMENT (the "Fourth Amendment") is entered
into as of the 14th day of November, 1994, by and between NORWEST BANK ARIZONA,
NATIONAL ASSOCIATION, a national banking association ("Norwest"), successor in
interest to Citibank (Arizona), an Arizona banking corporation ("Citibank"), and
CONTINENTAL HOMES HOLDING CORP., a Delaware corporation (the "Borrower"), and is
consented by CHI CONSTRUCTION COMPANY, an Arizona corporation, and CONTINENTAL
HOMES, INC., a Delaware corporation (collectively, "Guarantors").
Recitals:
A. Citibank and Borrower entered into a Loan Agreement (the
"Agreement"), dated as of April 5, 1993, pursuant to which
Citibank agreed to advance funds to Borrower on a revolving
credit basis in an aggregate amount not to exceed FIVE MILLION
AND NO/100THS DOLLARS ($5,000,000.00) (the "Loan").
B. Repayment of amounts borrowed under the revolving credit was
guaranteed by the Guarantors, as defined in the Agreement.
C. Norwest is, by purchase of assets, successor in interest to
Citibank.
D. Borrower and Norwest amended the Loan Agreement by a First
Amendment to Loan Agreement, dated November 15, 1993 (the
"First Amendment"). Borrower and Norwest amended the Loan
Agreement by a Second Amendment to Loan Agreement dated April
1, 1994 (the "Second Amendment"). Borrower and Norwest amended
the Loan Agreement by a Third Amendment to Loan Amendment dated
July 7, 1994 (the "Third Amendment") (collectively, the
Agreement, the First Amendment, the Second Amendment and the
Third Amendment shall be referred to as the "Agreement").
E. Borrower and Norwest now desire to further amend the Loan
Agreement, and Guarantors are agreeable to such amendment.
NOW, THEREFORE, in consideration of the foregoing and of the mutual benefit
to each, the parties hereto agree as follows:
1. Borrower acknowledges the accuracy of the Recitals.
2. Norwest and Borrower have agreed to increase the loan amount to
Ten Million and NO/100 Dollars ($10,000,000.00).
3. The revolving credit line shall have a maturity date of
November 1, 1995.
4. Borrower shall pay to Norwest upon execution of this Amendment
a loan fee in the amount of $25,000.00.
5. Section 6.23, as added by the First Amendment, is deleted in
its entirety and replaced with the following:
6.23 Limitations on Liens and Encumbrances. Borrower and
Guarantors at all times will, and will cause their respective
subsidiaries to, maintain free of liens and encumbrances assets
owned by any or all of them in the Phoenix area valued at all
times at not less than FORTY MILLION AND NO/100THS DOLLARS
($40,000,000.00) at book value.
6. Section 6.17 is deleted in its entirety and replaced with the
following:
6.17 Adjusted Debt to Net Worth. BORROWER shall not permit
the ratio of its adjusted debt to net worth to exceed 2.70:1.0
as of November 30, 1994; 2.65:1.0 as of February 28, 1995;
2.60:1.0 as of May 31, 1995; 2.55:1.0 as of August 31, 1995 and
for any fiscal quarter thereafter, until maturity, as measured
on the last day of the fiscal quarter. Exhibit A of this
Agreement states the components of the calculation of this
ratio.
7. In paragraph 6.16 of the Agreement, Tangible Net Worth is
changed from "Seventy Million and NO/100ths Dollars
($70,000,000.00)" to "Ninety Million and NO/100ths Dollars
($90,000,000.00)".
8. Except as amended hereby, the Agreement will continue in full
force and effect.
9. This Fourth Amendment shall be governed by and interpreted in
accordance with the laws of the State of Arizona.
Executed the date and year first above written.
NORWEST BANK ARIZONA,
NATIONAL ASSOCIATION
By: /s/Kevin Kosan
--------------
Kevin Kosan
Its: Vice President
--------------
CONTINENTAL HOMES HOLDING CORP.
By: /s/Kenda B. Gonzales
--------------------
Its: Secretary and Treasurer
-----------------------
CHI CONSTRUCTION COMPANY, Guarantor
By: /s/Kenda B. Gonzales
--------------------
Its: Vice President
--------------
CONTINENTAL HOMES, INC., Guarantor
By: /s/Kenda B. Gonzales
--------------------
Its: Financial Vice President
------------------------
Exhibit 11
Continental Homes Holding Corp.
Computation of Earnings Per Share
(In thousands, except per share data)
Three months ended Six months ended
November 30, November 30,
------------ ------------
Fully diluted: 1994 1993 1994 1993
---- ---- ---- ----
Net income $3,092 $3,227 $7,608 $6,464
Interest expense on convertible
subordinated notes, net of
income taxes 401 401 802 802
------ ------ ------ ------
$3,493 $3,628 $8,410 $7,266
====== ====== ====== ======
Weighted average number of
shares outstanding 6,963 5,712 6,963 5,452
Conversion of convertible
subordinated notes (42.55 shares
per $1,000 principal amount of
notes) 1,489 1,489 1,489 1,489
Incremental shares relating to
stock options exercisable 59 120 54 126
------ ------ ------ ------
Weighted average number of shares
outstanding assuming full dilution 8,511 7,321 8,506 7,067
====== ====== ====== ======
Fully diluted net income per share $ .41 $ .50 $ .99 $ 1.03
======= ======= ======= =======
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
<MULTIPLIER> 1,000
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0
0
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