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, 1995
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 29, 1995
--------------------- -----------------
$.01 per value 6,958,910
- --------------------------------------------------------------------------------
<PAGE>
CONTINENTAL HOMES HOLDING CORP.
FORM 10-Q
FOR THE QUARTER ENDED
NOVEMBER 30, 1995
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements:
Consolidated Balance Sheets as of November 30, 1995
and May 31, 1995.................................................3
Consolidated Statements of Income for the three and
six months ended November 30, 1995 and 1994......................4
Consolidated Statements of Cash Flows for the six
months ended November 30, 1995 and 1994..........................5
Notes to unaudited Consolidated Financial
Statements.......................................................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............................9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K..................................14
2
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
November 30, May 31,
1995 1995
------------ -------
ASSETS (In thousands)
Homebuilding:
Cash and cash equivalents $ 18,745 $ 12,848
Receivables 8,674 10,108
Homes, lots and improvements in production 309,735 291,331
Property and equipment, net 2,472 2,456
Prepaid expenses and other assets 23,533 20,516
Excess of cost over related net
assets acquired 12,382 13,400
--------- ---------
375,541 350,659
--------- ---------
Mortgage banking:
Mortgage loans held for sale 17,756 17,593
Mortgage loans held for long-term
investment, net 17,066 17,783
Other assets 931 798
--------- ---------
35,753 36,174
--------- ---------
Total assets $ 411,294 $ 386,833
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Homebuilding:
Accounts payable and other liabilities $ 47,019 $ 39,405
Notes payable, senior and convertible debt 216,267 198,814
Deferred income taxes 2,742 2,048
--------- ---------
266,028 240,267
--------- ---------
Mortgage banking:
Notes payable 6,379 16,072
Bonds payable 17,217 17,939
Other 1,114 2,076
--------- ---------
24,710 36,087
--------- ---------
Total liabilities 290,738 276,354
--------- ---------
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 - 130,685 and
156,130 shares (361) (591)
Capital in excess of par value 59,610 59,610
Retained earnings 61,236 51,389
--------- ---------
Total stockholders' equity 120,556 110,479
--------- ---------
Total liabilities and stockholders'
equity $ 411,294 $ 386,833
========= =========
The accompanying notes to consolidated financial statements are an integral part
of these unaudited consolidated balance sheets.
3
<PAGE>
<TABLE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<CAPTION>
Three months ended Six months ended
November 30, November 30,
------------------ ----------------
1995 1994 1995 1994
---- ---- ---- ----
REVENUES
<S> <C> <C> <C> <C>
Home sales $ 135,384 $ 96,170 $ 268,330 $ 201,270
Land sales 506 -- 11,267 --
Mortgage banking and
title operations 2,481 1,617 4,946 3,483
Other income (loss), net (6) 155 106 232
----------- ----------- ----------- -----------
Total revenues 138,365 97,942 284,649 204,985
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Homebuilding:
Cost of home sales 110,431 79,027 218,857 164,644
Cost of land sales 498 75 11,329 150
Selling, general and
administrative expenses 15,072 10,687 30,028 21,805
Interest, net 1,305 1,308 2,454 2,246
Mortgage banking and title operations:
Selling, general and
administrative expenses 1,652 1,302 3,255 2,741
Interest, net (21) (116) 34 (289)
----------- ----------- ----------- -----------
Total costs and expenses 128,937 92,283 265,957 191,297
----------- ----------- ----------- -----------
Income before income taxes 9,428 5,659 18,692 13,688
Income taxes 4,113 2,567 8,153 6,080
----------- ----------- ----------- -----------
Net income $ 5,315 $ 3,092 $ 10,539 $ 7,608
=========== =========== =========== ===========
Earnings per common share $ .77 $ .44 $ 1.52 $ 1.09
Earnings per common share
assuming full dilution $ .64 $ .41 $ 1.30 $ .99
Cash dividends per share $ .05 $ .05 $ .10 $ .10
Weighted average number of
shares outstanding 6,946,666 6,963,341 6,937,117 6,963,054
=========== =========== =========== ===========
The accompanying notes to consolidated financial statements are an integral part
of these unaudited consolidated statements.
</TABLE>
4
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended
November 30,
-----------------
1995 1994
---- ----
(In thousands)
Cash flows from operating activities:
Net income $ 10,539 $ 7,608
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,649 1,325
Increase (decrease) in deferred income taxes 694 (637)
Decrease (increase) in assets
Homes, lots and improvements in production (18,404) (45,590)
Receivables 2,066 10,512
Prepaid expenses and other assets (894) (6,544)
Increase (decrease) in liabilities
Accounts payable and other liabilities 6,652 (2,006)
-------- --------
Net cash provided (used) by operating activities 2,302 (35,332)
-------- --------
Cash flows from investing activities:
Net additions of property and equipment (371) (310)
Cash paid for Heftler Realty Co.,
net of cash acquired -- (15,498)
-------- --------
Net cash used by investing activities (371) (15,808)
-------- --------
Cash flows from financing activities:
Increase (decrease) in notes payable to financial
institutions (34,008) 38,296
Retirement of bonds payable (789) (2,315)
Retirement of Convertible Subordinated Notes (33,250) --
Issuance of Convertible Subordinated Notes 72,475 --
Stock options exercised 230 46
Dividends paid (692) (701)
-------- --------
Net cash provided by financing activities 3,966 35,326
-------- --------
Net increase (decrease) in cash 5,897 (15,814)
Cash at beginning of period 12,848 28,809
-------- --------
Cash at end of period $ 18,745 $ 12,995
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 4,029 $ 3,502
Income taxes $ 6,495 $ 7,218
Supplemental schedule of non-cash investing and financing activities:
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.
5
<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, 1995, filed with the Securities and Exchange Commission.
The results of operations for the three and six months ended November
30, 1995 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 $8,101,000 and $6,211,000
and expensed as a component of cost of goods sold $7,594,000 and
$4,806,000 in the six months ended November 30, 1995 and 1994,
respectively.
6
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 3. Notes Payable, Senior and Convertible Subordinated Debt
Notes payable, senior and convertible subordinated debt for
homebuilding consist of:
November 30, May 31,
1995 1995
------------ -------
(In thousands)
12% senior notes, due 1999, net of
premium of $1,267 and $1,430 $ 111,267 $ 111,430
6-7/8% convertible subordinated notes,
due 2002, net of discount of $-0-
and $2,705 (1) 32,655
6-7/8% convertible subordinated notes,
due 2002 75,000 --
Notes payable 30,000 54,729
--------- ---------
$ 216,267 $ 198,814
========= =========
- -----------------
(1) On November 30, 1995 the Company deposited funds with the trustee in
satisfaction of the 6-7/8% convertible subordinated notes, due 2002. The notes
were redeemed on December 11, 1995. In connection with the redemption of the
notes, the Company will record, in the third quarter of fiscal 1996, an
extraordinary loss, net of taxes of approximately $859,000 due to the write-off
of unamortized discount and debt issuance costs.
Note 4. Interest, Net
The summary of the components of interest, net is as follows:
Three months ended Six months ended
November 30, November 30,
------------------- -----------------
1995 1994 1995 1994
---- ---- ---- ----
(In thousands)
Interest expense,
homebuilding ................. $ 1,427 $ 1,367 $ 2,661 $ 2,454
Interest income,
homebuilding ................. (122) (59) (207) (208)
------- ------- ------- -------
$ 1,305 $ 1,308 $ 2,454 $ 2,246
======= ======= ======= =======
Interest expense, mortgage
banking ...................... $ 644 $ 532 $ 1,368 $ 1,048
Interest income, mortgage
banking ...................... (665) (648) (1,334) (1,337)
------- ------- ------- -------
$ (21) $ (116) $ 34 $ (289)
======= ======= ======= =======
Note 5. Acquisition of Heftler Realty Co. (the "Acquisition")
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 $29.2 million in cash. The acquisition was accounted for by the
purchase method with the
7
<PAGE>
results of operations of Heftler included beginning November 1, 1994. The excess
of cost over related net assets acquired is being amortized over ten years using
the straight-line method.
The following unaudited pro forma combined financial data give effect
to the Aquisition as if it had occurred on the first day of the period. This pro
forma information has been prepared utilizing the historical consolidated
financial statements of the Company and Heftler. 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 Acquisition had been effected
during the period presented. The pro forma financial information is based on the
purchase method of accounting for the Acquisition and reflects adjustments to
record the profit of acquired inventories, amortize the excess purchase price
over the underlying value of net assets acquired, record the additional interest
on acquisition indebtedness assumed and adjust income taxes for the pro forma
adjustments.
Six months ended
November 30, 1994
-----------------
(In thousands,
except per share data)
Total revenues $219,263
Net income 7,283
Earnings per common share 1.05
Earnings per common share
assuming full dilution .95
8
<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,
--------------- ----------------
1995 1994 1995 1994
---- ---- ---- ----
Units delivered 1,028 734 2,057 1,560
Average sales price $ 131,696 $ 131,022 $ 130,447 $ 129,019
Revenue from homes
sales (000's) $ 135,384 $ 96,170 $ 268,330 $ 201,270
Percentage increase
from prior year 40.8% 9.7% 33.3% 22.3%
Change due to volume 40.1% (.5)% 31.9% 10.7%
Change due to average
sales price .7% 10.2% 1.4% 11.6%
The volume increase in the quarter and six months ended November 30,
1995 compared to the same periods during fiscal 1995 resulted from improved
sales in each market during the fourth quarter of fiscal 1995 and the first
quarter of fiscal 1996. The Company believes that relatively low interest rates
and the economic strength in certain of its markets contributed to improved
sales.
The following table summarizes information related to the Company's
backlog at the dates indicated:
November 30,
-------------------------------------------
(Dollars in thousands)
1995 1994
---- ----
Units Dollars Units Dollars
Phoenix 937 $117,972 617 $ 80,021
Texas 421 46,539 278 30,157
South Florida 116 16,738 109 14,991
Denver 130 27,284 91 16,644
Southern California 88 21,401 50 14,096
-------- -------- -------- --------
Total backlog 1,692 $229,934 1,145 $155,909
======== ======== ======== ========
Average price per unit $ 136 $ 136
======== ========
The increase in backlog at November 30, 1995 resulted from improved
sales in each individual market during the six months ended November 30, 1995.
The aggregate sales value of new contracts signed increased 56% in the six
months ended November 30, 1995 as a result of the aforementioned improved sales
to $294,769,000 representing 2,256 homes (including $14,317,000 in South Florida
representing 103 homes) as compared with $188,771,000 representing 1,437 homes
(including $1,133,000 in South Florida representing 7 homes) for the six months
ended November 30, 1994. Sales in South Florida were included from November 1,
1994.
9
<PAGE>
<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,
--------------------------- -----------------------------
1995 1994 1995 1994
---- ---- ---- ----
Dollars % Dollars % Dollars % Dollars %
------- ---- ------- ---- ------- ---- ------- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue from home sales $135,384 100.0% $ 96,170 100.0% $268,330 100.0% $201,270 100.0%
Cost of home sales 110,431 81.6 79,027 82.2 218,857 81.6 164,644 81.8
-------- ----- -------- ----- -------- ----- -------- -----
Gross profit from home
sales 24,953 18.4 17,143 17.8 49,473 18.4 36,626 18.2
SG&A expenses 15,072 11.1 10,687 11.1 30,028 11.2 21,805 10.8
-------- ----- -------- ----- -------- ----- -------- -----
Operating income
from homebuilding 9,881 7.3 6,456 6.7 19,445 7.2 14,821 7.4
Interest, net 1,305 1.0 1,308 1.4 2,454 .9 2,246 1.1
-------- ----- -------- ----- -------- ----- -------- -----
Pre-tax profit
from homebuilding $ 8,576 6.3% $ 5,148 5.3% $ 16,991 6.3% $ 12,575 6.3%
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
Gross profit from homes sales was 18.4% for the three months ended
November 30, 1995 compared to 17.8% for the corresponding fiscal 1995 period.
Gross profit from home sales was 18.4% for the six months ended November 30,
1995 compared to 18.2% for the six months ended November 30, 1994. In connection
with the acquisitions in Texas and South Florida, the Company capitalized a
portion of the purchase price and includes such capitalized purchase price in
the cost of homes sales when the related units are delivered (purchase
accounting adjustments). Gross profits from home sales, exclusive of purchase
accounting adjustments were 18.5% and 18.5% for the quarter and six months ended
November 30, 1995, respectively, compared to 18.4% and 18.7% for the quarter and
six months ended November 30, 1994, respectively.
The increase in total SG&A expense for the quarter and six months ended
November 30, 1995 compared to the quarter and six months ended November 30, 1994
was due to the addition of the South Florida operations during the second
quarter of fiscal 1995. The first six months of fiscal 1996 included $1,485,000
of SG&A expenses from South Florida compared with $362,000 during the first six
months of fiscal 1995. Additionally, the Company experienced higher variable
marketing costs (sales commissions, advertising and model furniture
amortization) due to the increase in the number of homes delivered, higher
salaries, and higher customer service costs. SG&A expenses for each home
delivered were $14,661 and $14,560 in the second quarter of fiscal 1996 and
1995, respectively and $14,598 and $13,978 in the first six months of fiscal
1996 and 1995, respectively. The Company capitalizes certain SG&A expenses for
homebuilding. Accordingly, total SG&A costs incurred for homebuilding were
$16,861,000 and $33,841,000 for the three and six months ended November 30, 1995
compared to $12,057,000 and $24,717,000 for the corresponding fiscal 1995
period.
10
<PAGE>
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 $5,447,000 and $10,762,000 for the three and six months ended November 30,
1995 respectively compared to $4,356,000 and $8,665,000 for the three and six
months ended November 30, 1994, respectively. Interest, net for homebuilding was
$1,305,000 and $1,308,000 for the three months ended November 30, 1995 and 1994,
respectively. For the six month period ended November 30, 1995, interest, net
for homebuilding was $2,454,000 compared with $2,246,000 for the six months
ended November 30, 1994. The increase in interest incurred for the quarter and
the six months ended November 30, 1995 compared to the same periods of the
previous year, was due to higher debt levels which resulted primarily from the
Heftler acquisition.
The Company's pre-tax profit from homebuilding for the six months ended
November 30, 1995 was $16,991,000 compared to $12,575,000 for the corresponding
period ended November 30, 1994. Pre-tax profit increased in the first six months
of fiscal 1996 due primarily to improved results in Texas and Southern
California partially offset by a decline in Phoenix results and the negative
impact from the inclusion of South Florida results. South Florida's pre-tax loss
was caused by weather related delays in the opening of a new subdivision and
delays in the municipalities issuing permits. These delays resulted in fewer
deliveries from South Florida through October 1995.
Mortgage Banking
The Company's mortgage banking operations are conducted through its
wholly-owned subsidiary CH Mortgage Company ("CHMC"). The following table
summarizes operating information for the Company's mortgage banking operations:
Quarters ended Six months ended
November 30, November 30,
-------------- ----------------
1995 1994 1995 1994
---- ---- ---- ----
(Dollars in thousands)
Number of loans originated 685 468 1,361 1,016
Loan origination fees $ 641 $ 448 $ 1,286 $ 965
Sale of servicing and
marketing gains 1,225 645 2,478 1,445
Other revenue 44 156 205 319
------- ------- ------- -------
Total revenues 1,910 1,249 3,969 2,729
General and administrative
expenses 1,261 1,090 2,696 2,291
------- ------- ------- -------
Operating income from
mortgage banking 649 159 1,273 438
Interest, net (21) (116) 38 (289)
------- ------- ------- -------
Pre-Tax profit from
mortgage banking $ 670 $ 275 $ 1,235 $ 727
======= ======= ======= =======
11
<PAGE>
Revenues and general and administrative expenses from mortgage banking increased
in the quarter and six months ended November 30, 1995 primarily as a result of
an increase in the percentage of Phoenix and Texas homebuyers utilizing the
Company's mortgage banking operations. Additionally, revenues increased due to
higher servicing release premiums received on the sale of servicing. The Company
sold approximately $47,705,000 in servicing rights from the servicing portfolio,
which amount represents the majority of the portfolio, in January 1996.
Consolidated Operations
Net income was $10,539,000 ($1.52 per share, $1.30 fully diluted) for
the six months ended November 30, 1995 compared to $7,608,000 ($1.09 per share,
$.99 fully diluted) for the period ended November 30, 1994.
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, 1995, the Company had unsecured lines of credit from
two lenders for aggregate borrowings (excluding mortgage warehouse lines) of up
to $20,000,000, guaranteed a $10,000,000 secured line of credit for one of its
subsidiaries and, subject to available collateral, a $5,000,000 revolving
purchase money line. Additionally, the Company assumed $55 million of credit
facilities ($15 million of which are unsecured) in connection with the Texas and
Florida acquisitions. At November 30, 1995, there was $30,000,000 outstanding in
the aggregate under these credit lines. The Company's revolving lines of credit
bear interest at rates ranging from LIBOR plus 2-1/4% 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.
CHMC has a warehouse line of credit for $25,000,000 which is guaranteed
by the Company. Pursuant to the warehouse line 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, 1995, the amount outstanding under the warehouse line of credit and
the amount of funding drafts that had not been presented for payment was
$6,379,000. The Company believes that this line is sufficient for its mortgage
banking operations.
On November 18, 1994, the Company acquired all of the outstanding
capital stock of Heftler for $29.2 million in cash.
12
<PAGE>
On September 19, 1995, the Company entered into an agreement with
Kathleen and Robert Wade (the "Wades"), former Co-Chief Executive Officer and
President, respectively, whereby the Company has a right to buy and the Wades
have the right to sell, from now until January 19, 1996, up to 488,000 shares of
the Wades' Continental Homes Holding Corp. Common Stock at $20.50 per share. In
January 1996, the Company agreed to allow the Wades to sell a portion of the
488,000 shares at a price per share above $20.50 and to cancel the Company's
rights to buy such shares. In consideration therefore, the Wades agreed to
cancel their right to sell such shares to the Company and to deliver to the
Company 50% of the excess over $20.50 received by the Wades for each share sold.
On November 10, 1995, the Company completed the sale of $75,000,000
principal amount of its 6-7/8% Convertible Subordinated Notes due November 2002.
On December 5, 1995 the Company sold an additional $11,250,000 of such notes.
The net proceeds were used as follows: (i) approximately $33,250,000 was used to
redeem the Company's 6-7/8% Convertible Subordinated Notes due March 2002, (ii)
approximately $33,156,000 was used to reduce temporarily outstanding amounts
under certain of the Company's revolving lines of credit which were incurred for
working capital purposes, and (iii) approximately $6,631,000 was used to reduce
temporarily outstanding amounts under the Company's warehouse line of credit. In
connection with the redemption of the notes, the Company will record, in the
third quarter of fiscal 1996, an extraordinary loss, net of taxes of
approximately $859,000 due to the write-off of unamortized discount and debt
issuance costs. The Convertible Notes are immediately convertible into shares of
the Company's common stock at a rate of 42.105 shares for each $1,000 principal
amount of Convertible Notes.
13
<PAGE>
CONTINENTAL HOMES HOLDING CORP. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
4.1 Indenture dated as of November 1, 1995 between the
Company and Manufacturers and Traders Trust
Company, as Trustee.
10.1 Modification Agreement dated as of December 1, 1995
between Bank One, Arizona NA ("BOAZ") and CHMC.
10.2 Amended and Restated Replacement Revolving Line of
Credit Promissory Note by CHMC in favor of BOAZ in
the principal amount of $25,000,000.
10.3 Sixth Modification Agreement dated November 26, 1995
between BOAZ and Milburn Investments, Inc.
10.4 Amended and Restated Loan Agreement dated November
30, 1995 between BOAZ and the Company.
10.5 Amended and Restated Promissory Note dated November
30, 1995 by the Company in favor of BOAZ in the
principal amount of $15,000,000.
11.0 Statement Re Computation of Per Share Earnings.
27.0 Financial Data Schedule.
(b) Reports on Form 8-K: There were no reports on Form 8-K
filed for the three months ended November 30, 1995.
14
<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 11, 1996 By: /s/ Kenda B. Gonzales
---------------------
KENDA B. GONZALES
Chief Financial Officer,
Secretary and Treasurer
Date: January 11, 1996 By: /s/ Donald R. Loback
--------------------
DONALD R. LOBACK
Chief Executive Officer
15
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Page
(a) Exhibits:
4.1 Indenture dated as of November 1,
1995 between the Company and
Manufacturers and Traders Trust
Company, as Trustee.
10.1 Modification Agreement dated as of
December 1, 1995 between Bank One,
Arizona NA ("BOAZ") and CHMC.
10.2 Amended and Restated Replacement
Revolving Line of Credit Promissory
Note by CHMC in favor of BOAZ in
the principal amount of
$25,000,000.
10.3 Sixth Modification Agreement dated
November 26, 1995 between BOAZ and
Milburn Investments, Inc.
10.4 Amended and Restated Loan Agreement
dated November 30, 1995 between
BOAZ and the Company.
10.5 Amended and Restated Promissory
Note dated November 30, 1995 by the
Company in favor of BOAZ in the
principal amount of $15,000,000.
11.0 Statement Re Computation of Per
Share Earnings.
27.0 Financial Data Schedule.
16
EXHIBIT 4.1
---------------------------------------------------------------
CONTINENTAL HOMES HOLDING CORP.
AND
MANUFACTURERS AND TRADERS TRUST COMPANY,
as
Trustee
------------
Indenture
Dated as of November 1, 1995
------------
$86,250,000
6 7/8% CONVERTIBLE SUBORDINATED NOTES DUE 2002
---------------------------------------------------------------
17
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CROSS-REFERENCE TABLE
TIA Indenture
Section Section
310(a)(1)....................................... 7.10
(a)(2)...................................... 7.10
(a)(3)...................................... N.A.
(a)(4)...................................... N.A.
(b) ...................................... 7.08; 7.10; 12.02
(c) ...................................... N.A.
311(a) ....................................... 7.11
(b) ...................................... 7.11
(c) ...................................... N.A.
312(a) ....................................... 2.05
(b) ...................................... 12.03
(c) ...................................... 12.03
313(a) ....................................... 7.06
(b)(1)...................................... N.A.
(b)(2)...................................... N.A.
(c) ...................................... 7.06; 12.02
(d) ...................................... 7.06
314(a) ....................................... 4.03; 12.02
(b) ...................................... N.A.
(c)(1)...................................... 12.04
(c)(2)...................................... 12.04
(c)(3)...................................... N.A.
(d) ...................................... N.A.
(e) ...................................... 12.05
(f) ...................................... N.A.
315(a) ....................................... 7.01(b)
(b) ...................................... 7.05; 12.02
(c) ...................................... 7.01(a)
(d) ...................................... 7.01(c)
(e) ...................................... 6.11
316(a)(last sentence)........................... 2.09
(a)(1)(A)................................... 6.05
(a)(1)(B)................................... 6.04
(a)(2)...................................... N.A.
(b) ...................................... 6.07
(c) ...................................... N.A.
317(a)(1)....................................... 6.08
(a)(2)...................................... 6.09
(b) ...................................... 2.04
318(a) ....................................... 12.01
- -------------
N.A. means Not Applicable.
This cross-reference table does not constitute a part of the Indenture.
TABLE OF CONTENTS
Section
Page
18
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ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
1.01. Definitions
............................................................................ 1
1.02. Other Definitions
............................................................................ 3
1.03. Incorporation by Reference of Trust
Indenture
Act......................................................................... 4
1.04. Rules of Construction
............................................................................ 5
ARTICLE 2
THE SECURITIES
2.01. Form and Dating
............................................................................ 5
2.02. Execution and Authentication
............................................................................ 6
2.03. Registrar, Paying Agent and Conversion
Agent
............................................................................ 7
2.04. Paying Agent to Hold Money in
Trust
............................................................................ 7
2.05. Securityholder Lists
............................................................................ 8
2.06. Transfer and Exchange
............................................................................ 8
2.07. Replacement Securities
............................................................................ 8
2.08. Outstanding Securities
............................................................................ 9
2.09. Securities Held by the Company or an
Affiliate
............................................................................ 9
2.10. Temporary Securities
............................................................................ 10
2.11. Cancellation
............................................................................ 10
2.12. Defaulted Interest
............................................................................ 10
ARTICLE 3
REDEMPTION
3.01. Notices to Trustee and DTC
............................................................................ 11
3.02. Selection of Securities to be Redeemed
............................................................................ 11
3.03. Notice of Redemption
............................................................................ 11
3.04. Effect of Notice of Redemption
............................................................................ 12
3.05. Deposit of Redemption Price
19
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............................................................................ 12
3.06. Securities Redeemed in Part
............................................................................ 13
ARTICLE 4
COVENANTS
4.01. Payment of Securities
............................................................................ 13
4.02. Maintenance of Office or Agency
............................................................................ 13
4.03. SEC Reports
............................................................................ 14
4.04. Compliance Certificate
............................................................................ 14
4.05. Stay, Extension and Usury Laws
............................................................................ 15
4.06. Corporate Existence
............................................................................ 15
4.07. Notice of Default
............................................................................ 15
4.08. Change in Control
............................................................................ 15
ARTICLE 5
SUCCESSORS
5.01. When Company May Merge, etc.
............................................................................ 19
5.02. Successor Substituted
............................................................................ 20
ARTICLE 6
DEFAULTS AND REMEDIES
6.01. Events of Default
............................................................................ 20
6.02. Acceleration
............................................................................ 22
6.03. Other Remedies
............................................................................ 23
6.04. Waiver of Past Defaults
............................................................................ 23
6.05. Control by Majority
............................................................................ 23
6.06. Limitation on Suits
............................................................................ 23
6.07. Rights of Holders to Receive Payment
............................................................................ 24
6.08. Collection Suit by Trustee
............................................................................ 24
6.09. Trustee May File Proofs of Claim
............................................................................ 24
6.10. Priorities
............................................................................ 25
20
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6.11. Undertaking for Costs
............................................................................ 25
ARTICLE 7
TRUSTEE
7.01. Duties of Trustee
............................................................................ 26
7.02. Rights of Trustee
............................................................................ 27
7.03. Individual Rights of Trustee
............................................................................ 27
7.04. Trustee's Disclaimer
............................................................................ 28
7.05. Notice of Defaults
............................................................................ 28
7.06. Reports by Trustee to Holders
............................................................................ 28
7.07. Compensation and Indemnity
............................................................................ 28
7.08. Replacement of Trustee
............................................................................ 29
7.09. Successor Trustee by Merger, etc.
............................................................................ 30
7.10. Eligibility; Disqualification
............................................................................ 30
7.11. Preferential Collection of Claims
Against Company
............................................................................ 31
ARTICLE 8
DISCHARGE OF INDENTURE
8.01. Termination of Company's
Obligations
............................................................................ 31
8.02. Application of Trust Money
............................................................................ 32
8.03. Repayment to Company
............................................................................ 32
8.04. Reinstatement
............................................................................ 33
ARTICLE 9
AMENDMENTS
9.01. Without Consent of Holders
............................................................................ 33
9.02. With Consent of Holders
............................................................................ 34
9.03. Compliance with Trust Indenture Act
............................................................................ 35
9.04. Revocation and Effect of Consents
............................................................................ 35
9.05. Notation on or Exchange of Securities
............................................................................ 35
21
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9.06. Trustee Protected
............................................................................ 36
ARTICLE 10
CONVERSION
10.01. Conversion Privilege
............................................................................ 36
10.02. Conversion Procedure
............................................................................ 36
10.03. Fractional Shares
............................................................................ 37
10.04. Taxes on Conversion
............................................................................ 38
10.05. Company to Provide Stock
............................................................................ 38
10.06. Adjustment for Change in Capital Stock
............................................................................ 38
10.07. Adjustment for Shares Issued Below
Market Price
............................................................................ 39
10.08. Adjustment for Other Distributions
............................................................................ 42
10.09. Adjustment for Cash Distributions
............................................................................ 43
10.10. Adjustment for Tender
Offers
............................................................................ 44
10.11. Voluntary Adjustment
............................................................................ 45
10.12. Current Market Price
............................................................................ 45
10.13. When Adjustment May be Deferred
............................................................................ 45
10.14. When No Adjustment Required
............................................................................ 45
10.15. Notice of Adjustment
............................................................................ 46
10.16. Notice of Certain Transactions
............................................................................ 46
10.17. Reorganization of the Company
............................................................................ 47
10.18. Rights and Warrants
............................................................................ 47
10.19. Company Determination Final
............................................................................ 48
10.20. Trustee's Disclaimer
............................................................................ 48
ARTICLE 11
SUBORDINATION
11.01. Agreement to Subordinate
............................................................................ 48
11.02. Certain Definitions
............................................................................ 49
22
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11.03. Liquidation; Dissolution; Bankruptcy
............................................................................ 49
11.04. Company Not to Make Payments with
Respect to Securities in Certain
Circumstances
............................................................................ 50
11.05. Acceleration of Securities
............................................................................ 51
11.06. When Distribution Must be Paid Over
............................................................................ 51
11.07. Notice by Company
............................................................................ 51
11.08. Subrogation
............................................................................ 52
11.09. Subordination May Not be Impaired by
Company
............................................................................ 52
11.10. Distribution or Notice to
Representative
............................................................................ 52
11.11. Rights of Trustee and Paying Agent
............................................................................ 52
11.12. Officers' Certificate
............................................................................ 53
11.13. Obligation of Company Unconditional
............................................................................ 53
ARTICLE 12
MISCELLANEOUS
12.01. Trust Indenture Act Controls
............................................................................ 54
12.02. Notices
............................................................................ 54
12.03. Communication by Holders with Other
Holders
............................................................................ 55
12.04. Certificate and Opinion as to Conditions
Precedent
............................................................................ 56
12.05. Statements Required in Certificate or
Opinion
............................................................................ 56
12.06. Rules by Trustee and Agents
............................................................................ 57
12.07. Legal Holidays
............................................................................ 57
12.08. No Recourse Against Others
............................................................................ 57
12.09. Duplicate Originals
............................................................................ 57
12.10. Governing Law
............................................................................ 57
12.11. No Adverse Interpretation of Other
Agreements
............................................................................ 57
12.12. Successors
23
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............................................................................ 58
12.13. Separability
............................................................................ 58
12.14. Table of Contents, Headings, etc.
............................................................................ 58
SIGNATURES
............................................................................ 59
EXHIBIT A-FORM OF SECURITY
............................................................................ A-1
24
<PAGE>
INDENTURE dated as of November 1, 1995, between CONTINENTAL HOMES
HOLDING CORP., a Delaware corporation (the "Company"), and MANUFACTURERS AND
TRADERS TRUST COMPANY, a duly organized and existing banking corporation
organized under the laws of the State of New York, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's 6 7/8%
Convertible Subordinated Notes
due 2002 (the "Securities").
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Affiliate" means any person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company. For
this purpose, "control" shall mean the power to direct the management and
policies of a person through the ownership of securities, by contract or
otherwise.
"Agent" means any Registrar, Paying Agent, Conversion
Agent or co-Registrar.
"Board of Directors" means the Board of Directors of the Company or
any committee of the Board authorized to act for it hereunder.
"Capital Stock" means any and all shares, interests, participations
or other equivalents (however designated) of capital stock of the Company and
all warrants or options to acquire such capital stock.
"Common Stock" means the Common Stock, par value $.01 per share, of
the Company or any security into which the Common Stock may be converted.
"Company" means the party named as such above and any other obligor
until a successor replaces it pursuant to the applicable provision hereof and
thereafter means such successor.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 12.02 or such other address as the Trustee may
give notice of to the Company.
"DTC" means The Depositary Trust Company.
"Default" means any event which is, or after notice or passage of
time or both would be, an Event of Default.
"High and Low Sale Prices" of the Common Stock on any trading day
means the average of the high and low sale price of the Common Stock as reported
on the Composite Tape for New York Stock Exchange-Listed Stocks (or if not
listed or admitted to trading on the New York Stock Exchange, then on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or, if not listed or admitted to trading on any national
securities exchange, then as reported by the National Association of Securities
Dealers, Inc., through NASDAQ or a similar organization if NASDAQ is no longer
reporting information) on such trading day or if no such sale takes place on
such day, the average of the highest bid and lowest asked prices regular way on
the New York Stock Exchange (or if not listed or admitted to trading on such
Exchange, on the principal national securities exchange on which the Common
Stock is listed or admitted to trading, or if not listed or admitted to trading
on any national securities exchange, the average of the highest bid and lowest
asked prices as reported by the National Association of Securities Dealers,
Inc., through NASDAQ or a similar organization if NASDAQ is no longer reporting
information) on such trading day. If on such trading day the Common Stock is not
quoted by any such organization, the fair market value of such Common Stock on
such day, as determined by the Board of Directors, shall be used.
"Holder" or "Securityholder" means a person in whose name a Security
is registered on the Registrar's books.
"Indenture" means this Indenture as amended from time
to time.
"Officer" means the Chief Executive Officer, the
President, the Chief Operating Officer, any Vice President, the
Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers
or by an Officer and an Assistant Treasurer or an Assistant Secretary of the
Company.
"Opinion of Counsel" means a written opinion from legal counsel who
may be an employee of or counsel for the Company or other counsel reasonably
acceptable to the Trustee.
"person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or other agency or political subdivision thereof.
"principal" of a debt security means the principal of the security
plus the premium, if any, on the security.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Securities described above
issued under this Indenture.
"subsidiary" means (i) a corporation a majority of whose capital
stock with voting power, under ordinary circumstances, to elect directors is at
the time, directly or indirectly, owned by the Company, by one or more
subsidiaries of the Company or by the Company and one or more subsidiaries
thereof or (ii) any other person (other than a corporation) in which the
Company, one or more subsidiaries thereof or the Company and one or more
subsidiaries thereof, directly or indirectly, at the date of determination
thereof have at least majority ownership interest.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.
Code {{ 77aaa-77bbbb), as in effect on the date of this Indenture, except as
provided in Section 9.03.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and thereafter means the successor.
"Trust Officer" means any officer of the Trustee assigned by the
Trustee to administer its corporate trust matters.
SECTION 1.02. Other Definitions.
Term Defined in Section
"Bankruptcy Law" ......................... 6.01
"business day" ........................... 12.07
"Change in Control" ...................... 4.08
"Conversion Agent" ....................... 2.03
"Conversion Price ........................ 4.08
"Conversion Shares" ...................... 10.18
"Custodian" .............................. 6.01
"Distribution Date" ...................... 10.18
"Event of Default" ....................... 6.01
"Exchange Act" ........................... 4.03
"Expiration Time" ........................ 10.10
"Legal Holiday ........................... 12.07
"Management Group" ....................... 4.08
"NASDAQ" ................................. 10.03
"NMS" .................................... 10.03
"Offer" .................................. 10.10
"Paying Agent" ........................... 2.03
"Purchased Shares" ....................... 10.10
"Registrar ............................... 2.03
"Representative" ......................... 11.02
"Repurchase Date" ........................ 4.08
"Repurchase Price" ....................... 4.08
"Repurchase Right" ....................... 4.08
"Repurchase Right Notice" ................ 4.08
"Senior Indebtedness" .................... 11.02
"U.S. Government Obligations" ............ 8.01
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act._____________________
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means
the Trustee.
"obligor" on the indenture securities means the
Company.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with generally accepted accounting principles
in effect on the date hereof;
(3) "or" is not exclusive;
(4) words in the singular include the plural
and in the plural include the singular;
(5) provisions apply to successive events
and transactions; and
(6) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other Subdivision.
ARTICLE 2
THE SECURITIES
SECTION 2.01. Form and Dating.
The Securities and the Trustee's certificate of authentication shall
be substantially in the form set forth in Exhibit A, which is incorporated in
and forms a part of this Indenture. The Securities may have notations, legends
or endorsements required by law, stock exchange rule or usage. Each Security
shall be dated the date of its authentication.
SECTION 2.02. Execution and Authentication.
Two Officers shall sign the Securities for the
Company by manual or facsimile signature. The Company's seal
shall be reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Security is authenticated, the Security shall
nevertheless be valid.
A Security shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Security has been authenticated under this Indenture.
The Trustee shall authenticate Securities for original issue in the
aggregate principal amount of up to $75,000,000, upon a written order of the
Company signed by two Officers or by an Officer and an Assistant Treasurer or
Assistant Secretary of the Company; provided that if such order directs the
issuance of $75,000,000 in aggregate principal amount of Securities, the Trustee
shall, upon a second written order dated not later than December 6, 1995,
authenticate additional Securities for original issue not to exceed $11,250,000
in aggregate principal amount as specified in the second order to cover
over-allotments, if any. Each order shall specify the amount of Securities to be
authenticated and the date on which the original issue of Securities is to be
authenticated. The aggregate principal amount of Securities outstanding at any
time may not exceed the amount of Securities issued pursuant to this paragraph
except as provided in Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. An authenticating agent may authenticate
Securities whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar, Paying Agent and
Conversion Agent.__________
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be presented for registration
of transfer or for exchange ("Registrar"), an office or agency where Securities
may be presented for payment ("Paying Agent") and an office or agency where
Securities may be presented for conversion ("Conversion Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may appoint or change one or more co-registrars, one or more additional
paying agents and one or more additional conversion agents without notice and
may act in any such capacity on its own behalf. The term "Paying Agent" includes
any additional paying agent; the term "Conversion Agent" includes any additional
conversion agent.
The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall notify
the Trustee of the name and address of any Agent not a party to this Indenture.
If the Company fails to maintain a Registrar, Paying Agent or Conversion Agent,
the Trustee shall act as such.
The Company initially appoints the Trustee as Paying Agent,
Registrar and Conversion Agent.
SECTION 2.04. Paying Agent to Hold Money in
Trust._______________________
Each Paying Agent shall hold in trust for the benefit of the
Securityholders or the Trustee all moneys held by such Paying Agent for the
payment of principal of or interest on the Securities, and shall notify the
Trustee of any default by the Company in making any such payment. While any such
default continues, the Trustee may require a Paying Agent to pay all money held
by it to the Trustee. The Company at any time may require a Paying Agent to pay
all money held by it to the Trustee. Upon payment over to the Trustee, such
Paying Agent shall have no further liability for the money. If the Company acts
as Paying Agent, it shall segregate and hold as a separate trust fund all money
held by it as Paying Agent.
SECTION 2.05. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee on or before each interest payment date and at such other times
as the Trustee may request in writing a list, in such form and as of such date
as the Trustee may reasonably require, of the names and addresses of
Securityholders.
SECTION 2.06. Transfer and Exchange.
Where Securities are presented to the Registrar or a co-Registrar
with a request to register the transfer or to exchange them for an equal
principal amount of Securities of other authorized denominations, the Registrar
shall register the transfer or make the exchange if the requirements of Section
8-401(1) of the New York Uniform Commercial Code are met. To permit
registrations of transfer and exchanges, the Trustee shall authenticate
Securities at the Registrar's request. The Company or the Trustee, as the case
may be, shall not be required (a) to issue, authenticate, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the mailing of a notice of redemption of the Securities selected
for redemption under Section 3.02 and ending at the close of business on the day
of such mailing, or (b) to register the transfer of or exchange any Security so
selected for redemption, in whole or in part, except the unredeemed portion of
Securities being redeemed in part.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any transfer, registration of transfer or exchange of Securities, other
than exchanges pursuant to Section 2.10, 3.06, 9.05 or 10.02 not involving any
transfer.
SECTION 2.07. Replacement Securities.
If the Holder of a Security claims that the Security has been
mutilated, lost, destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Security if the requirements of Section
8-405 of the New York Uniform Commercial Code are met and, in the case of a
mutilated Security, such mutilated Security is surrendered to the Trustee. If
required by the Trustee or the Company, an indemnity bond must be sufficient in
the judgment of both to protect the Company, the Trustee, or any Agent from any
loss which any of them may suffer if a Security is replaced. The Company or the
Trustee may charge for its expenses in replacing a Security.
In case any such mutilated, destroyed or wrongfully taken Security
has become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security when due.
Every replacement Security is an additional obligation of the
Company.
SECTION 2.08. Outstanding Securities.
Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those converted, those cancelled by it,
those delivered to it for cancellation and those described in this Section as
not outstanding. A Security does not cease to be outstanding because the Company
or one of its subsidiaries or Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it, or a court
holds, that the replaced Security is held by a bona fide purchaser.
If the Paying Agent (other than the Company) holds on a redemption
date, repurchase date or maturity date money sufficient to pay Securities
payable on that date, then on and after that date, such Securities shall be
deemed to be no longer outstanding and interest on them shall cease to accrue.
SECTION 2.09. Securities Held by the Company or an Affiliate.
In determining whether the Holders of the required principal amount
of Securities have concurred in any direction, waiver or consent, Securities
owned by the Company or a subsidiary or an Affiliate shall be disregarded,
except that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only Securities
which the Trustee actually knows are so owned shall be so disregarded.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Trustee shall
authenticate definitive Securities in exchange for temporary Securities.
SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar, Paying Agent and Conversion Agent shall forward to
the Trustee any Securities surrendered to them for registration of transfer,
exchange, payment or conversion. The Trustee shall cancel all Securities
surrendered for registration of transfer, exchange, payment, conversion or
cancellation and may destroy cancelled Securities and deliver a certificate of
any such destruction to the Company. The Company may not issue new Securities to
replace Securities that it has paid or delivered to the Trustee for cancellation
or that any Securityholder has converted pursuant to Article 10.
SECTION 2.12. Defaulted Interest.
If and to the extent the Company defaults in a payment of interest
on the Securities, it shall pay the defaulted interest in any lawful manner
plus, to the extent not prohibited by applicable statute or case law, interest
payable on the defaulted interest. It may pay the defaulted interest to the
persons who are Securityholders on a subsequent special record date. The Company
shall fix such record date and payment date. At least 15 days before the record
date, the Company shall mail to Securityholders a notice that states the record
date, payment date and amount of interest to be paid.
ARTICLE 3
REDEMPTION
SECTION 3.01. Notices to Trustee and DTC.
If the Company wants to redeem Securities pursuant to paragraph 5 of
the Securities, it shall notify the Trustee at least 20 days prior to the
redemption date (unless a shorter notice period shall be satisfactory to the
Trustee) of the redemption date and the principal amount of Securities to be
redeemed.
If the Company wants to redeem Securities pursuant to paragraph 5 of
the Securities and DTC is a Securityholder, the Company shall notify DTC at
least 30 days prior to the redemption date if the operational arrangements of
DTC in effect at the time of any such redemption require such notice period.
SECTION 3.02. Selection of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the Trustee
shall select the Securities to be redeemed on either a pro rata basis or by lot
or such other method as the Trustee shall deem fair and equitable, but in any
event, in such manner as complies with applicable legal and stock exchange
requirements. The Trustee shall make the selection from Securities outstanding
not previously called for redemption. The Trustee may select for redemption
portions of the principal of Securities that have denominations larger than
$1,000. Securities and portions of them it selects shall be in amounts of $1,000
or whole multiples of $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption.
SECTION 3.03. Notice of Redemption.
At least 15 days but not more than 60 days before a redemption date,
the Company shall mail by first-class mail a notice of redemption to each Holder
whose Securities are to be redeemed.
The notice shall identify the Securities and the principal amount
thereof to be redeemed and shall state:
(1) the redemption date;
(2) the redemption price (including the amount of accrued and unpaid
interest to be paid on the Securities called for redemption);
(3) the then current conversion rate;
(4) the name and address of the Paying Agent and Conversion Agent;
(5) that the right to convert Securities called for redemption shall
terminate at the close of business on the second business day before the
redemption date;
(6) that Holders who want to convert Securities must satisfy the
requirements in paragraph 8 of the Securities;
(7) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(8) that interest on Securities called for redemption ceases to
accrue on and after the redemption date; and
(9) the CUSIP number of the Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
SECTION 3.04. Effect of Notice of Redemption.
Once a notice of redemption is mailed, Securities called for
redemption become due and payable on the redemption date at the redemption price
and, on and after such date (unless the Company shall default in the payment of
the redemption price), such Securities shall cease to bear interest. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price plus accrued interest to the redemption date.
SECTION 3.05. Deposit of Redemption Price.
On or before 10:00 a.m. on the redemption date, the Company shall
deposit with the Paying Agent money in funds immediately available on the
redemption date sufficient to pay the redemption price of and accrued interest
on all Securities to be redeemed on that date. The Paying Agent shall return to
the Company, as soon as practicable, any money not required for that purpose
because of conversion of Securities.
SECTION 3.06. Securities Redeemed in Part.
Upon surrender of a Security that is redeemed in part, the Trustee
shall authenticate for the Holder a new Security equal in principal amount to
the unredeemed portion of the Security surrendered.
If any Security selected for partial redemption is converted in
part, the converted portion of such Security shall be deemed (so far as may be)
to be the portion selected for redemption.
ARTICLE 4
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the
Securities on the dates and in the manner provided in the Securities. Principal
and interest shall be considered paid on the date due if the Paying Agent holds
on that date money sufficient to pay all principal and interest then due.
The Company shall pay interest on overdue principal at the rate
borne by the Securities. The Company shall pay interest on overdue installments
of interest at the same rate to the extent not prohibited by applicable statute
or case law.
SECTION 4.02. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be surrendered for
registration of transfer or exchange or conversion and where notices and demands
to or upon the Company in respect of the Securities and this Indenture may be
served. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York for such purposes. The Company will
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee in the Borough of Manhattan, the City of New York, an agency of the
Company in accordance with Section 2.03.
SECTION 4.03. SEC Reports.
The Company shall file with the Trustee within 15 days after it
files them with the SEC copies of the annual reports and of the information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which the Company is required
to file with the SEC pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The Company also shall comply with
the other provisions of TIA { 314(a).
So long as the Securities remain outstanding, the Company shall
cause its annual reports to shareholders and any other financial reports
furnished by it to shareholders generally to be mailed to the Holders at their
addresses appearing in the register of Securities maintained by the Registrar.
SECTION 4.04. Compliance Certificate.
The Company shall deliver to the Trustee within 120 days after the
end of each fiscal year of the Company an Officers' Certificate stating whether
or not the signatories know of any Default by the Company in performing any of
its obligations under this Indenture or the Securities. If they do know of any
such Default, the certificate shall describe the Default and its status.
SECTION 4.05. Stay, Extension and Usury Laws.
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not, by resort to any such law, hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.06. Corporate Existence.
Subject to Article 5, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate existence of each subsidiary in accordance with the
respective organizational documents of each subsidiary and the rights (charter
and statutory), licenses and franchises to the Company and its subsidiaries;
provided, however, that the Company shall not be required to preserve any such
right, license or franchise, or the corporate existence of any subsidiary, if in
the judgment of the Board of Directors of the Company, (i) such preservation or
existence is not material to the conduct of business of the Company and (ii) the
loss of such right, license or franchise or the dissolution of such subsidiary
does not have a material adverse impact on the Holders.
SECTION 4.07. Notice of Default.
In the event that any Default under Section 6.01 hereof shall occur,
the Company will give prompt written notice of such Default to the Trustee.
SECTION 4.08. Change in Control.
(a) In the event that there shall occur a Change in Control (as
defined below) of the Company, each Holder of a Security shall have the right
(the "Repurchase Right") upon receipt of a Repurchase Right Notice (as defined
below), at such Holder's option, to require the Company to repurchase any
Security of such Holder or any portion of the principal amount thereof which is
$1,000 or an integral multiple of $1,000, on the date (the "Repurchase Date")
that is 45 days after the date of the Repurchase Right Notice, or, if such 45th
day is a Legal Holiday, the next subsequent day which is not a Legal Holiday,
unless otherwise required by applicable law, at a purchase price equal to 100%
of the principal amount thereof, plus accrued and unpaid interest to the
Repurchase Date (the "Repurchase Price"). The right to require the repurchase of
Securities shall not continue after a discharge of the Company from its
obligations with respect to the Securities in accordance with Article 8.
(b) Within 30 days after the occurrence of a Change in Control, the
Company, or, at the request of the Company, the Trustee, shall give notice of
the occurrence of the Change in Control and of the Repurchase Right set forth
herein to each Holder (the "Repurchase Right Notice"). The Company shall also
deliver a copy of the Repurchase Right Notice to the Trustee. Any such notice
shall contain all instructions and materials necessary to enable such Holders to
deliver Securities pursuant to the Repurchase Right including, without
limitation, the following:
(1) the Repurchase Date;
(2) the date by which the Repurchase Right must be exercised;
(3) the Repurchase Price;
(4) that Securities are to be surrendered for payment of the
Repurchase Price;
(5) that the exercise of the Repurchase Right is irrevocable, except
that Holders who elect to exercise the Repurchase Right will retain the
right to convert Securities submitted for repurchase until the close of
business on the second business day before the Repurchase Date; and
(6) the then existing Conversion Rate for conversion of Securities,
the date on which the right to convert the principal of the Securities to
be repurchased will terminate and the place or places where such
Securities may be surrendered for conversion.
(c) To exercise a Repurchase Right, a Holder shall deliver to the
Company (if it is acting as its own Paying Agent) or to a Paying Agent
designated by the Company for such purpose in the notice referred to above on or
before the 30th day after the date of the Repurchase Right Notice, or, if such
day is a Legal Holiday, the next subsequent day which is not a Legal Holiday,
(i) written notice of the Holder's exercise of such right, which notice shall
set forth the name of the Holder, the principal amount of Securities (or
portions thereof) to be repurchased, a statement that an election to exercise
the Repurchase Right is being made thereby and (ii) the Securities with respect
to which the Repurchase Right is being exercised, duly endorsed for transfer to
the Company, and the Holder of such Securities shall be entitled to receive from
the Company (if it is acting as its own Paying Agent) or such Paying Agent a
nontransferable receipt of deposit evidencing such deposit. Such written notice
shall be irrevocable, except as provided in Section 4.08(b) above. If the
Repurchase Date is between a regular record date for the payment of interest and
the next succeeding interest payment date, any Security to be repurchased must
be accompanied by funds equal to the interest payable on such succeeding
interest payment date on the principal amount to be repurchased (unless such
Security shall have been called for redemption, in which case no such payment
shall be required), and the interest on the principal amount of the Security
being repurchased will be paid on such next succeeding interest payment date to
the registered holder of such Security on the immediately preceding record date.
A Security repurchased on an interest payment date need not be accompanied by
any payment, and the interest on the principal amount of the Security being
repurchased will be paid on such interest payment date to the registered holder
of such Security on the immediately preceding record date.
(d) In the event a Repurchase Right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid the applicable
Repurchase Price with respect to the Securities as to which the Repurchase Right
shall have been exercised to the Holder on the Repurchase Date.
(e) Prior to a Repurchase Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust in accordance with Section 2.04) an amount of
money sufficient to pay the Repurchase Price payable in respect of all of the
Securities which are to be repurchased on that date. If any Security submitted
for repurchase is converted prior to the repurchase thereof, any money deposited
with the Trustee or with any Paying Agent or so segregated and held in trust for
the redemption of such Security shall be paid to the Company on its request, or,
if then held by the Company, shall be discharged from such trust.
(f) Both the notice of the Company and the notice of the Holder
having been given as specified in this Section 4.08, the Securities so to be
repurchased shall, on the Repurchase Date, become due and payable at the
Repurchase Price applicable thereto and from and after such date (unless the
Company shall default in the payment of the Repurchase Price) such Securities
shall cease to bear interest. Upon surrender of any such Security for repurchase
in accordance with said notice, such Security shall be paid by the Company at
the Repurchase Price. If any Security shall not be paid upon surrender thereof
for repurchase, the principal and premium, if any, shall, until paid, bear
interest from the Repurchase Date at the rate borne by such Security.
(g) Any Security which is to be submitted for repurchase only in
part shall be delivered pursuant to this Section 4.08 (with, if the Company or
the Trustee so requires, due endorsement by, or a written instrument of transfer
in form satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and make available for delivery to
the Holder of such Security without any service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder, of the
same tenor and in aggregate principal amount equal to and in exchange for the
portion of the principal of such Security not submitted for repurchase.
(h) If any repurchase pursuant to the foregoing provisions
constitutes an "issuer tender offer" as defined in Rule 13e-4 under the Exchange
Act, the Company will comply with the requirements of Rule 13e-4, Rule 14e-1 and
any other tender offer rules under the Exchange Act which then may be
applicable, including the filing of an Issuer Tender Offer Statement on Schedule
13E-4 with the SEC and the furnishing of certain information contained therein
to the Holders.
(i) As used in this Section 4.08:
A "Change in Control" of the Company shall be deemed to have
occurred at such time as any person, together with its affiliates or associates,
other than the Management Group (as defined below) is or becomes the beneficial
owner, directly or indirectly, through a purchase, merger or other acquisition
transaction, of shares of capital stock of the Company entitling such person to
exercise 50% or more of the total voting power of all shares of capital stock of
the Company entitled to vote in elections of directors; provided that a Change
in Control shall not be deemed to have occurred if either (i) the last sale
price of the Common Stock for any five trading days during the ten trading days
immediately preceding the Change in Control is at least equal to 105% of the
Conversion Price in effect on the day of the Change in Control or (ii) all of
the consideration (excluding cash payments for fractional shares) in the
transaction or transactions constituting the Change in Control consists of
shares of common stock traded on a national securities exchange or through
NASDAQ or another comparable quotation system. "Beneficial owner" shall be
determined in accordance with Rule 13d-3, as in effect on the date of the
execution of this Indenture, promulgated by the Securities and Exchange
Commission under the Exchange Act. The "Management Group" shall consist of the
executive officers of the Company as of the date hereof, members of their
immediate families, certain trusts for their benefit, and legal representatives
of, or heirs, beneficiaries or legatees receiving Common Stock under, any such
person's estate.
"Conversion Price" shall be deemed to equal $1,000 divided by the
conversion rate on the date of calculation.
ARTICLE 5
SUCCESSORS
SECTION 5.01. When Company May Merge, etc.
The Company shall not consolidate with or merge into, or directly or
indirectly transfer or lease all or substantially all of its assets to, any
person unless:
(1) the person formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale or conveyance
shall have been made, is a person organized and existing under the laws of
the United States, any State thereof or the District of Columbia;
(2) the person formed by or surviving any such consolidation or
merger (if other than the Company), or to which such sale or conveyance
shall have been made, assumes by supplemental indenture all the
obligations of the Company under the Securities and this Indenture; and
(3) immediately after giving effect to such transaction no Default
or Event of Default exists.
The Company shall deliver to the Trustee prior to the consummation
of the proposed transaction an Officers' Certificate to the foregoing effect and
an Opinion of Counsel stating that the proposed transaction and such
supplemental indenture comply with this Indenture.
SECTION 5.02. Successor Substituted.
Upon any consolidation or merger or transfer or lease of all or
substantially all of the assets of the Company in accordance with Section 5.01,
the successor person formed by such consolidation or into which the Company is
merged or to which such transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, and shall assume
every duty and obligation of, the Company under this Indenture with the same
effect as if such successor corporation had been named as the Company herein.
When the successor corporation assumes all obligations of the Company hereunder,
all obligations of the predecessor corporation shall terminate.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. Events of Default.
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any Security
when the same becomes due and payable and the default continues for a
period of 30 days, whether or not such payment shall be prohibited by the
provisions of Article 11 hereof;
(2) the Company defaults in the payment of the principal of any
Security when the same becomes due and payable at maturity, upon
acceleration or otherwise, whether or not such payment shall be prohibited
by the provisions of Article 11 hereof;
(3) the Company fails to comply with any of its other agreements in
the Securities or this Indenture and the default continues for the period
and after the notice specified below;
(4) an event of default shall have occurred and be continuing under
any security or other evidence of indebtedness of the Company or any of
its subsidiaries whether such indebtedness now exists or shall be created
hereafter, which event of default results in an acceleration of a
principal amount of such indebtedness which, together with any such other
indebtedness so accelerated, aggregates more than $10,000,000, and such
acceleration is not waived or rescinded or such indebtedness, paid or
discharged within a period and after the notice specified below;
(5) a final judgment or judgments for the payment of money in excess
of $10,000,000 in the aggregate are rendered against the Company and such
judgment or judgments remain unstayed, unsatisfied or undischarged for the
period and after the notice specified below;
(6) the Company pursuant to or within the meaning of any Bankruptcy
Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in
an involuntary case,
(C) consents to the appointment of a Custodian of it or for
all or substantially all of its property, or
(D) makes a general assignment for the benefit of its
creditors; or
<PAGE>
(7) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company in an involuntary case,
(B) appoints a Custodian of the Company for all or
substantially all of its property, or
(C) orders the liquidation of the Company, and the order or
decree remains unstayed and in effect for 90 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
A default under clause (3), (4) or (5) is not an Event of Default
until the Trustee or the Holders of at least 25% in principal amount of the
Securities notify the Company of the default and the Company does not cure the
default within 60 days with respect to clause (3) or (5), and within 30 days
with respect to clause (4), after receipt of the notice. The notice must specify
the default, demand that it be remedied and state that the notice is a "Notice
of Default". If the Holders of 25% in principal amount of the outstanding
Securities request the Trustee to give such notice on their behalf, the Trustee
shall do so.
The Trustee shall not be deemed to have notice of any Default
hereunder unless it shall have actual knowledge of such Default or it shall have
received written notice thereof making specific reference to such Default as a
Default.
SECTION 6.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
Section 6.01(6) or (7)) occurs and is continuing, the Trustee by notice to the
Company, or the Holders of at least 25% in principal amount of the Securities by
notice to the Company and the Trustee, may declare the principal of and accrued
interest on all the Securities to be due and payable. Upon such declaration such
principal and interest shall be due and payable immediately. If an Event of
Default specified in Section 6.01(6) or (7) occurs, all unpaid principal and
accrued interest on the Securities then outstanding shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Securityholder. The Holders of a majority in principal
amount of the Securities by notice to the Trustee may rescind an acceleration
and its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely because of the
acceleration.
SECTION 6.03. Other Remedies.
Notwithstanding any other provision of this Indenture, if an Event
of Default occurs and is continuing, the Trustee may pursue any available remedy
by proceeding at law or in equity to collect the payment of principal of or
interest on the Securities or to enforce the performance of any provision of the
Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative.
SECTION 6.04. Waiver of Past Defaults.
Subject to Sections 6.07 and 9.02, the Holders of a majority in
principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences. When a Default is waived, it is cured and
ceases.
SECTION 6.05. Control by Majority.
The Holders of a majority in principal amount of the Securities may
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on it.
However, the Trustee may refuse to follow any direction that conflicts with law
or this Indenture, is unduly prejudicial to the rights of other Securityholders
or would involve the Trustee in personal liability and the Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with such
direction.
SECTION 6.06. Limitation on Suits.
Except as provided in Section 6.07, a Securityholder may pursue a
remedy with respect to this Indenture or the Securities only if:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in principal amount of the
Securities make a written request to the Trustee to institute proceedings
in respect of such Event of Default;
(3) such Holder or Holders offer to the Trustee reasonable indemnity
against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holders of a majority in principal
amount of the Securities do not give the Trustee a direction inconsistent
with the request.
A Securityholder may not use this Indenture to prejudice the rights
of another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Security to receive payment of principal of and interest on the
Security, on or after the respective due dates expressed in the Security, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Security to bring suit for the enforcement of the right to
convert the Security shall not be impaired or affected without the consent of
the Holder.
SECTION 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(1) or (2) occurs
and is continuing, the Trustee may recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal and interest remaining unpaid.
SECTION 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee, any predecessor Trustee and the Securityholders allowed in any judicial
proceedings relative to the Company, its creditors or its property.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of the
Securities any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder of the Securities in
any such proceeding.
SECTION 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: to holders of Senior Indebtedness to the extent required by
Article 11;
Third: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
Fourth: to the Company.
The Trustee may fix a record date and payment date for any payment
by it to Securityholders pursuant to this Section.
SECTION 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit other than the Trustee of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section does not apply to a suit by the Trustee, a suit
by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in
principal amount of the Securities.
ARTICLE 7
TRUSTEE
SECTION 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are specifically
set forth in this Indenture and no others.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error ofjudgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01.
(e) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 7.02. Rights of Trustee.
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate and/or an Opinion of Counsel. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Certificate or Opinion.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers.
SECTION 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or an
Affiliate thereof with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights. The Trustee, however, must comply with
Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Securities; it shall not be accountable for the
Company's use of the proceeds from the Securities; and it shall not be
responsible for any statement in the Securities other than its certificate of
authentication.
SECTION 7.05. Notice of Defaults.
If a Default occurs and is continuing and if it is actually known to
the Trustee or the Trustee has received written notice thereof, the Trustee
shall mail to each Securityholder a notice of the Default within 90 days after
it occurs. Except in the case of a Default in payment of principal of or
interest on any Security, the Trustee may withhold the notice if and so long as
it in good faith determines that withholding the notice is in the interests of
Securityholders.
SECTION 7.06. Reports by Trustee to Holders.
If required by TIA { 313(a), within 60 days after each May 1
beginning with May 1, 1996, the Trustee shall mail to each Securityholder as
required by TIA { 313(c) a brief report dated as of such date that complies with
TIA { 313(a). The Trustee also shall comply with TIA { 313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed by the Trustee with the SEC and each stock exchange, if any, on
which the Securities are listed. The Company shall notify the Trustee when the
Securities are listed on any stock exchange.
SECTION 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time such
compensation for its services as shall be agreed upon in writing. The Trustee's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee upon request for all
reasonable out-of-pocket expenses incurred by it. Such expenses shall include
the reasonable compensation and out-of-pocket expenses of the Trustee's agents
and counsel.
The Company shall indemnify the Trustee against any loss or
liability (including the fees and expenses of counsel) incurred by it in
connection with the administration of this trust and the performance of its
duties hereunder. The Company need not pay for any settlement made without its
consent. The Trustee shall notify the Company promptly of any claim for which it
may seek indemnification. The Company need not reimburse any expense or
indemnify against any loss or liability incurred by the Trustee through the
Trustee's negligence or bad faith.
To secure the Company's payment obligations in this Section, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(6) or (7) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
SECTION 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the Securities may remove the Trustee by so
notifying the Trustee and the Company and may appoint a successor Trustee with
the Company's consent. The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee
or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
SECTION 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to another corporation,
the successor corporation without any further act shall be the successor
Trustee.
SECTION 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA { 310(a)(1). The Trustee shall always have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply with TIA {
310(b).
SECTION 7.11. Preferential Collection of Claims
Against Company.
The Trustee shall comply with TIA { 311(a), excluding any creditor
relationship listed in TIA { 311(b). A Trustee who has resigned or been removed
shall be subject to TIA { 311(a) to the extent indicated.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations.
The Company may terminate all of its obligations under this
Indenture if all Securities previously authenticated and delivered (other than
mutilated, destroyed, lost or stolen Securities which have been replaced or
paid) have been delivered to the Trustee for cancellation or if:
(1) the Securities mature within one year or all of them are to be
called for redemption within one year under arrangements satisfactory to
the Trustee for giving the notice of redemption;
(2) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations sufficient to pay principal of and interest
on the Securities to maturity or redemption, as the case may be.
Immediately after making the deposit, the Company shall give notice of
such event to the Securityholders;
(3) the Company has paid or caused to be paid all sums then payable
by the Company to the Trustee hereunder as of the date of such deposit;
and
(4) the Company has delivered to the Trustee an Officers'
Certificate stating that all conditions precedent provided for herein
relating to the satisfaction and discharge of this Indenture have been
complied with. The Company may make the deposit only during the one-year
period and only if Article 11 permits it.
However, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07,
4.01, 7.07, 7.08 and 8.03, and in Article 10, shall survive until the Securities
are no longer outstanding. Thereafter the Company's obligations in Sections 7.07
and 8.03 shall survive.
After a deposit pursuant to this Section 8.01, the Trustee upon
request shall acknowledge in writing the discharge of the Company's obligations
under the Securities and this Indenture except for those surviving obligations
specified above.
In order to have money available on a payment date to pay principal
or interest on the Securities, the U.S. Government Obligations shall be payable
as to principal or interest on or before such payment date in such amounts as
will provide the necessary money.
"U.S. Government Obligations" means direct non-
callable obligations of, or non-callable obligations guaranteed
by, the United States of America for the payment of which the
full faith and credit of the United States of America is
pledged.
SECTION 8.02. Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01. It shall apply the deposited money
and the money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of principal of and interest on
the Securities. Money and securities so held in trust are not subject to the
subordination provisions of Article 11.
SECTION 8.03. Repayment to Company.
The Trustee and the Paying Agent shall promptly pay to the Company
upon request any excess money or securities held by them at any time. The
Trustee and the Paying Agent shall pay to the Company upon request any money
held by them for the payment of principal or interest that remains unclaimed for
two years; provided, however, that the Trustee or such Paying Agent, before
being required to make any such repayment, may, at the expense of the Company,
cause to be published once in a newspaper of general circulation in The City of
New York or cause to be mailed to each Holder, notice stating that such money
remains and that, after a date specified therein, which shall not be less than
30 days form the date of such publication or mailing, any unclaimed balance of
such money then remaining will be repaid to the Company. After payment to the
Company, Securityholders entitled to the money must look to the Company for
payment as general creditors unless an applicable abandoned property law
designates another person.
SECTION 8.04. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 8.01 by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Securities shall be revived
and reinstated as though no deposit had occurred pursuant to Section 8.01 until
such time as the Trustee or Paying Agent is permitted to apply all such money or
U.S. Government Obligations in accordance with Section 8.01; provided, however,
that if the Company has made any payment of interest on or principal of any
Securities because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Securities to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.01. Without Consent of Holders.
The Company, with the consent of the Trustee, may amend or
supplement this Indenture or the Securities without notice to or the consent of
any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Sections 5.01 and 10.17;
(3) to provide for uncertificated Securities in addition to
certificated Securities; or
(4) to make any change that does not materially adversely affect the
rights of any Securityholder.
SECTION 9.02. With Consent of Holders.
The Company, with the consent of the Trustee, may amend or
supplement this Indenture or the Securities without notice to any Securityholder
but with the written consent of the Holders of at least a majority in principal
amount of the Securities then outstanding. Subject to Section 6.07, the Holders
of a majority in principal amount of the Securities then outstanding may waive
compliance by the Company with any provision of this Indenture or the Securities
without notice to any Securityholder. However, without the consent of each
Securityholder affected, an amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(2) reduce the rate of or change the time for payment of interest on
any Security;
(3) reduce the principal of or change the fixed maturity of any
Security (including, without limitation, the optional redemption
provisions, but excluding Section 4.08);
(4) waive a default in the payment of principal of or interest on
any Security;
(5) make any Security payable in money other than that stated in the
Security;
(6) make any change in Section 6.04, Section 6.07 or Section 9.02;
or
(7) make any change that adversely affects the right to convert any
Security, including decreasing the conversion rate of any Security (except
as such rate may be decreased pursuant to the provisions of Article Ten
hereof).
Promptly after an amendment under this Section becomes effective,
the Company shall mail to Securityholders a notice briefly describing the
amendment.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment or supplement,
but it shall be sufficient if such consent approves the substance thereof.
SECTION 9.03. Compliance with Trust Indenture Act.
Every amendment to this Indenture or the Securities shall comply
with the TIA as then in effect.
SECTION 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Security is a continuing consent by the Holder
and every subsequent Holder of a Security or portion of a Security that
evidences the same debt as the consenting Holder's Security, even if notation of
the consent is not made on any Security. However, any such Holder or subsequent
Holder may revoke the consent as to his Security or portion of a Security if the
Trustee receives the notice of revocation before the date the amendment,
supplement or waiver becomes effective. An amendment, supplement or waiver
becomes effective in accordance with its terms and thereafter binds every
Securityholder.
After an amendment, supplement or waiver becomes effective with
respect to the Securities, it shall bind every Securityholder unless it makes a
change described in any of clauses (1) through (7) of Section 9.02. In that case
the amendment, supplement or waiver shall bind each Holder of a Security who has
consented to it and, provided that notice of such amendment, supplement or
waiver is reflected on a Security that evidences the same debt as the consenting
Holder's Security, every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security.
SECTION 9.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a
Security, the Trustee may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the Security shall issue
and the Trustee shall authenticate a new Security that reflects the changed
terms.
SECTION 9.06. Trustee Protected.
The Trustee need not sign any amendment, supplement or waiver
authorized pursuant to this Article that adversely affects the Trustee's rights.
The Trustee shall be entitled to receive and rely upon an Opinion of Counsel and
an Officers' Certificate that any supplemental indenture complies with the
Indenture.
ARTICLE 10
CONVERSION
SECTION 10.01. Conversion Privilege.
A Holder of a Security may convert it into Common Stock at any time
during the period stated in paragraph 8 of the Securities.
The initial conversion rate is stated in paragraph 8 of the
Securities. The conversion rate is subject to adjustment in accordance with
Sections 10.06 through 10.14.
A Holder may convert a portion of a Security if the portion is
$1,000 or integral multiples thereof. Provisions of this Indenture that apply to
conversion of all of a Security also apply to conversion of a portion of it.
SECTION 10.02. Conversion Procedure.
To convert a Security a Holder must satisfy the requirements in
paragraph 8 of the Securities. The date on which the Holder satisfies all those
requirements is the conversion date. As soon as practicable, the Company shall
deliver to the Holder through the Conversion Agent a certificate for the number
of full shares of Common Stock issuable upon the conversion and a check in lieu
of any fractional share. The person in whose name the certificate is registered
shall be treated as a stockholder of record on and after the conversion date.
If any Security is converted between the record date for the payment
of interest and the next succeeding interest payment date, such Security must be
accompanied by funds equal to the interest payable on such succeeding interest
payment date on the principal amount so converted (unless such Security shall
have been called for redemption, in which case no such payment shall be
required). A Security converted on an interest payment date need not be
accompanied by any payment, and the interest on the principal amount of the
Security being converted will be paid on such interest payment date to the
registered Holder of such Security on the immediately preceding record date.
Subject to the aforesaid right of the registered Holder to receive interest, no
payment or adjustment will be made on conversion for interest accrued on the
converted Security or for dividends on the Common Stock issued upon conversion.
If a Holder converts more than one Security at the same time, the
number of full shares issuable upon the conversion shall be based on the total
principal amount of the Securities converted.
Upon surrender of a Security that is converted in part the Trustee
shall authenticate for the Holder a new Security equal in principal amount to
the unconverted portion of the Security surrendered.
If the last day on which a Security may be converted is a Legal
Holiday in a place where a Conversion Agent is located, the Security may be
surrendered to that Conversion Agent on the next succeeding day that is not a
Legal Holiday.
SECTION 10.03. Fractional Shares.
The Company will not issue a fractional share of Common Stock upon
conversion of a Security. Instead the Company will deliver its check for the
market value of a fractional share. The market value of a fraction of a share is
determined as follows: Multiply the market price of a full share by the fraction
and round the result to the nearest cent.
The market price of a share of Common Stock for the purposes of
Section 10.03 is the last reported sale price of a share of Common Stock on the
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading or on the National Association of Securities
Dealers National Market System ("NMS") on the business day next preceding the
date of conversion, or, if the Common Stock is not then listed on an exchange,
the closing sale price (or the quoted closing bid price if there were no sales)
as reported by the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") on the business day next preceding the date of
conversion. In the absence of one or more such quotations, the Board of
Directors shall determine the current market price on the basis of such
quotations as it considers appropriate.
SECTION 10.04. Taxes on Conversion.
If a Holder of a Security converts it, the Company shall pay any
documentary, stamp or similar issue or transfer tax due on the issue of shares
of Common Stock upon the conversion. However, the Holder shall pay any such tax
which is due because the shares are issued in a name other than the Holder's
name.
SECTION 10.05. Company to Provide Stock.
The Company shall reserve out of its authorized but unissued Common
Stock or its Common Stock held in treasury enough shares of Common Stock to
permit the conversion of all of the Securities.
All shares of Common Stock which may be issued upon conversion of
the Securities shall be validly issued, fully paid and non-assessable.
The Company will endeavor to comply with all securities laws
regulating the offer and delivery of shares of Common Stock upon conversion of
Securities and will endeavor to list such shares on each national securities
exchange on which the Common Stock is listed.
SECTION 10.06. Adjustment for Change in
Capital Stock.
If the Company:
(1) pays a dividend or makes a distribution on its Capital Stock in
shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a greater
number of shares;
(3) combines its outstanding shares of Common Stock into a smaller
number of shares; or
(4) issues by reclassification of its Common Stock any shares of its
Capital Stock,
then the conversion privilege and the conversion rate in effect immediately
prior to such action shall be adjusted so that the Holder of a Security
thereafter converted may receive the number of shares of Capital Stock of the
Company which he would have owned immediately following such action if he had
converted the Security immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If after an adjustment a Holder of a Security may, upon conversion,
receive shares of two or more classes of Capital Stock of the Company, the Board
of Directors shall determine the allocation of the adjusted conversion rate
between or among the classes of Capital Stock. After such allocation, the
conversion privilege and the conversion rate of each class of Capital Stock
shall thereafter be subject to adjustment on terms comparable to those
applicable to Common Stock in this Article 10.
SECTION 10.07. Adjustment for Shares Issued Below
Market Price.
If the Company issues to all holders of Common Stock shares of
Common Stock or rights, options or warrants to subscribe for or purchase shares
of Common Stock, or any securities convertible into or exchangeable for shares
of Common Stock, or rights, options or warrants to subscribe for or purchase
such convertible or exchangeable securities (excluding shares of Common Stock,
rights, options, warrants therefor or convertible or exchangeable securities or
rights, options, or warrants therefor issued in transactions described in
Section 10.06) at a Price Per Share (as defined and determined according to the
formula given below) lower than the current market price (see Section 10.12) on
the date of such issuance, the conversion rate shall be adjusted in accordance
with the following formula:
AC = CC x O + N______
O + (N x R)
M
where:
AC = the adjusted conversion rate.
CC = the then current conversion rate.
O = the number of shares of Common Stock outstanding immediately prior to such
issuance.
N = the "Number of Shares," which (i) in the case of shares of Common Stock is
the number of shares issued; (ii) in the case of rights, options or
warrants to subscribe for or purchase shares of Common Stock or of
securities convertible into or exchangeable for shares of Common Stock, is
the maximum number of shares of Common Stock initially issuable upon
exercise, conversion or exchange thereof; and (iii) in the case of rights,
options or warrants to subscribe for or purchase convertible or
exchangeable securities, is the maximum number of shares of Common Stock
initially issuable upon the conversion or exchange of the convertible or
exchangeable securities issuable upon the exercise of such rights, options
or warrants.
R = the proceeds received or receivable by the Company, which (i) in the case
of shares of Common Stock is the total amount received or receivable by
the Company in consideration for the sale and issuance of the shares; (ii)
in the case of rights, options or warrants to subscribe for or purchase
shares of Common Stock or of securities convertible into or exchangeable
for shares of Common Stock, is the total amount received or receivable by
the Company in consideration for the sale and issuance of such rights,
options, warrants or convertible or exchangeable securities, plus the
minimum aggregate amount of additional consideration, other than the
convertible or exchangeable securities, payable to the Company upon
exercise, conversion or exchange thereof; and (iii) in the case of rights,
options or warrants to subscribe for or purchase convertible or
exchangeable securities, is the total amount received or receivable by the
Company in consideration for the sale and issuance of such rights, options
or warrants, plus the minimum aggregate consideration payable to the
Company upon the exercise thereof, plus the minimum aggregate amount of
additional consideration, other than the convertible or exchangeable
securities, payable upon the conversion or exchange of the convertible or
exchangeable securities; provided that in each case the proceeds received
or receivable by the Company shall be deemed to be the amount of gross
cash proceeds without deducting therefrom any compensation paid or
discount allowed in the sale, underwriting or purchase thereof by
underwriters or dealers or others performing similar services or any
expenses incurred in connection therewith.
M = the current market price per share of Common Stock (see Section 10.12) on
the date of issue of the shares of Common Stock or the rights, options or
warrants to subscribe for or purchase shares of Common Stock or the
securities convertible into or exchangeable for shares of Common Stock or
the rights, options or warrants to subscribe for or purchase convertible
or exchangeable securities.
"Price Per Share" shall be defined and determined according to the
following formula:
P = R
N
where:
P = Price Per Share.
R and N have the meanings assigned above.
If the Company shall issue shares of Common Stock or rights,
options, warrants or convertible or exchangeable securities for a consideration
consisting, in whole or in part, of property other than cash, the amount of such
consideration shall be determined in good faith by the Board of Directors whose
determination shall be conclusive and evidenced by a resolution of the Board of
Directors filed with the Trustee.
The adjustment shall be made successively whenever any such
additional shares of Common Stock or such rights, options, warrants or
convertible or exchangeable securities are issued, and shall become effective
immediately after the date of issue of such shares, rights, options, warrants or
convertible or exchangeable securities; provided, however, that if any such
rights, options or warrants issued by the Company as described in this Section
10.07 are only exercisable upon the occurrence of certain triggering events,
then the conversion rate will not be adjusted as provided in this Section 10.07
until such triggering events occur.
To the extent that such rights, options or warrants expire
unexercised or to the extent any convertible or exchangeable securities are
redeemed by the Company or otherwise cease to be convertible or exchangeable
into shares of Common Stock, the conversion rate shall be readjusted to the
conversion rate which would be in effect had the adjustment made upon the date
of issuance of such rights, options, warrants or convertible or exchangeable
securities been made upon the basis of the issuance of rights, options or
warrants to subscribe for or purchase only the number of shares of Common Stock
as to which such rights, options or warrants were actually exercised and the
number of shares of Common Stock that were actually issued upon the conversion
or exchange of the convertible or exchangeable securities.
SECTION 10.08. Adjustment for Other Distributions.
If the Company distributes to all holders of Common Stock evidences
of indebtedness, shares of Capital Stock other than Common Stock, cash or other
assets (including securities, but other than (x) dividends or distributions
exclusively in cash or (y) any dividend or distribution for which an adjustment
is required to be made in accordance with Section 10.06 or 10.07), the
conversion rate shall be adjusted in accordance with the following formula:
AC = CC x __(O x M)__
(O x M) - F
where:
AC = the adjusted conversion rate.
CC = the then current conversion rate.
O = the number of shares of Common Stock outstanding on the record date
mentioned below.
M = the current market price per share of Common Stock (see Section 10.12) on
the record date mentioned below.
F = the fair market value on the record date mentioned below of the evidences
of indebtedness, assets, securities or cash distributed. The Board of
Directors shall determine the fair market value.
The adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
SECTION 10.09. Adjustment for Cash Distributions.
If the Company distributes to all holders of Common Stock cash
(excluding any cash portion of distributions for which an adjustment is required
to be made in accordance with Section 10.08) in an aggregate amount that,
combined together with (i) all other such all-cash distributions made within the
preceding 12 months for which no adjustment has been made and (ii) any cash and
the fair market value of other consideration paid or payable in respect of any
tender offer (as defined in Rule 13e-4 under the Exchange Act) by the Company or
any of its Subsidiaries for Common Stock concluded within the preceding 12
months for which no adjustment has been made, exceeds 20% of the Company's
market capitalization (the product of the then current market price per share of
the Common Stock (see Section 10.12) times the number of shares of Common Stock
then outstanding) on the record date mentioned below, the conversion rate shall
be adjusted in accordance with the following formula:
AC = CC x M
M - C
where:
AC = the adjusted conversion rate.
CC = the then current conversion rate.
M = the current market price per share of Common Stock (see Section 10.12) on
the record date mentioned below.
C = the amount of cash distributed applicable to one share
of Common Stock.
Notwithstanding the foregoing, in the event that the cash so
distributed applicable to one share of Common Stock equals or exceeds such
current market price per share of Common Stock, or such current market price per
share exceeds such amount of cash by less than $0.10 per share, the conversion
rate shall not be adjusted pursuant to this Section 10.09.
The adjustment shall become effective immediately after the record
date for the determination of the stockholders entitled to receive such
distribution.
SECTION 10.10. Adjustment for Tender Offers.
If the Company or any of its Subsidiaries completes a tender offer
(as defined in Rule 13e-4 under the Exchange Act) for all or any portion of the
Common Stock (any such tender offer being referred to as an "Offer") that
involves an aggregate consideration having a fair market value as of the
expiration of such Offer (the "Expiration Time") that, together with (i) any
cash and the fair market value of any other consideration payable in respect of
any other Offer which expired within the 12 months preceding the Expiration
Time, for which no conversion rate adjustment has been made, and (ii) the
aggregate amount of any all-cash distributions referred to in Section 10.09 to
all holders of Common Stock within the 12 months preceding the expiration of
such Offer for which no conversion rate adjustment pursuant to such Section
10.09 has been made, exceeds 20% of the Company's market capitalization (the
product of the then current market price per share (see Section 10.12) of the
Common Stock at the Expiration Time times the number of shares of Common Stock
outstanding (including any tendered shares) at the Expiration Time), the
conversion rate shall be increased in accordance with the following formula:
AC = CC x M x (O - P)
(M x O) - F
where:
AC = the adjusted conversion rate.
CC = the then current conversion rate.
M = the current market price per share of Common Stock (see Section 10.12) at
the Expiration Time.
O = the number of shares of Common Stock outstanding (including any tendered
shares) at the Expiration Time.
F = the fair market value of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the
terms of the Offer) of all shares validly tendered and not withdrawn as of
the Expiration Time (the shares deemed so accepted being referred to as
the "Purchased Shares"). The Board of Directors shall determine the fair
market value.
P = Purchased Shares.
The adjustment shall become effective immediately prior to the
opening of business on the day following the Expiration Time.
SECTION 10.11. Voluntary Adjustment.
The Company at any time may increase the conversion rate,
temporarily or otherwise, by any amount but in no event shall such conversion
rate result in the issuance of Common Stock at a price less than the par value
of the Common Stock at the time such increase is made.
SECTION 10.12. Current Market Price.
In Sections 10.07, 10.08, 10.09 and 10.10, the current market price
per share of Common Stock on any date is the average of the last reported sale
prices of a share of Common Stock on the principal national securities exchange
on which the shares of Common Stock are listed or admitted to trading or on the
NMS, or, if the Common Stock is not then listed on an exchange or on the NMS,
the closing sale prices (or the quoted closing bid prices if there were no
sales) as reported by NASDAQ for 30 consecutive trading days commencing 45
trading days before the date in question. In the absence of one or more such
quotations, the Board of Directors shall determine the current market price on
the basis of such quotations as it considers appropriate.
SECTION 10.13. When Adjustment May be Deferred.
No adjustment in the conversion rate need be made unless the
adjustment would require a change of at least 1% in the conversion rate. Any
adjustments that are not made due to the immediately preceding sentence shall be
carried forward and taken into account in any subsequent adjustment.
All calculations under this Article shall be made to the nearest
cent or to the nearest 1/100th of a share, as the case may be.
SECTION 10.14. When No Adjustment Required.
Except as set forth in Section 10.07, no adjustment in the
conversion rate shall be made because the Company issues, in exchange for cash,
property or services, shares of Common Stock, or any securities convertible into
shares of Common Stock, or securities carrying the right to purchase shares of
Common Stock or such convertible securities.
No adjustment in the conversion rate need be made for rights to
purchase or the sale of Common Stock pursuant to a Company plan providing for
reinvestment of dividends or interest.
No adjustment in the conversion rate need be made for a change in
the par value of the Common Stock.
No adjustment need be made for a transaction referred to in Section
10.06, 10.07, 10.08, 10.09 or 10.10 if Security- holders are to participate in
the transaction on a basis and with notice that the Board of Directors
determines to be fair and appropriate in light of the basis and notice on which
holders of Common Stock participate in such transaction.
SECTION 10.15. Notice of Adjustment.
Whenever the conversion rate is adjusted, the Company shall promptly
mail to Securityholders a notice of the adjustment. The Company shall file with
the Trustee an Officers' Certificate or a certificate from the Company's
independent public accountants briefly stating the facts requiring the
adjustment and the manner of computing it. The certificate shall be conclusive
evidence that the adjustment is correct, absent manifest error.
SECTION 10.16. Notice of Certain Transactions.
If:
(1) the Company proposes to take any action that would require an
adjustment in the conversion rate,
(2) the Company proposes to take any action that would require a
supplemental indenture pursuant to Section 10.17, or
(3) there is a proposed liquidation or dissolution of the Company,
the Company shall mail to Securityholders a notice stating the proposed record
date for a dividend or distribution or the proposed effective date of a
subdivision, combination, reclassification, consolidation, merger, transfer,
lease, liquidation or dissolution. The Company shall mail the notice at least 15
days before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
SECTION 10.17. Reorganization of the Company.
If the Company is a party to a transaction subject to Section 5.01
or a merger which reclassifies or changes its outstanding Common Stock, the
successor corporation shall enter into a supplemental indenture which shall
provide that the Holder of a Security may convert it into the kind and amount of
securities, cash or other assets which he would have owned immediately after the
consolidation, merger, transfer or lease if he had converted the Security
immediately before the effective date of the transaction. The supplemental
indenture shall provide for adjustments which shall be as nearly equivalent as
may be practical to the adjustments provided for in this Article 10. The
successor Company shall mail to Securityholders a notice briefly describing the
supplemental indenture.
If this Section applies, Sections 10.06, 10.07, 10.08, 10.09 and
10.10 do not apply.
SECTION 10.18. Rights and Warrants.
If the Company distributes pro rata to all holders of Common Stock
rights or warrants (other than those referred to in Section 10.07 above), so
long as any such rights or warrants have not expired or been redeemed by the
Company, the Company shall make proper provision so that the Holder of any
Security surrendered for conversion will be entitled to receive upon such
conversion, in addition to the shares of Common Stock issuable upon such
conversion (the "Conversion Shares"), a number of rights or warrants to be
determined as follows: (i) if such conversion occurs on or prior to the date for
the distribution to the holders of Common Stock of rights or warrants of
separate certificates evidencing such rights or warrants (the "Distribution
Date"), the same number of rights or warrants to which a holder of a number of
shares of Common Stock equal to the number of Conversion Shares is entitled at
the time of such conversion in accordance with the terms and provisions of and
applicable to the rights or warrants, and (ii) if such conversion occurs after
such Distribution Date, the same number of rights or warrants to which a holder
of the number of shares of Common Stock into which the principal amount of such
Security so converted was convertible immediately prior to such Distribution
Date would have been entitled on such Distribution Date in accordance with the
terms and provisions of and applicable to the rights or warrants.
SECTION 10.19. Company Determination Final.
Any determination that the Board of Directors must make pursuant to
this Article 10 is conclusive, absent manifest error.
SECTION 10.20. Trustee's Disclaimer.
The Trustee has no duty to determine when an adjustment under this
Article 10 or under the terms of the Securities should be made, how it should be
made or what it should be. The Trustee has no duty to determine whether any
provisions of a supplemental indenture under Section 10.17 are correct. The
Trustee makes no representation as to the validity or value of any securities or
assets issued upon conversion of Securities. The Trustee shall not be
responsible for the Company's failure to comply with this Article 10. Each
Conversion Agent other than the Company shall have the same protection under
this Section 10.20 as the Trustee.
ARTICLE 11
SUBORDINATION
SECTION 11.01. Agreement to Subordinate.
The Company agrees, and each Securityholder by accepting a Security
agrees, that the indebtedness evidenced by the Securities and the payment of
principal thereof and interest thereon are subordinated in right of payment, to
the extent and in the manner provided in this Article 11, to the prior payment
in full of all Senior Indebtedness and that the subordination is for the benefit
of the holders of Senior Indebtedness.
Money and securities held in trust pursuant to Article 8 are not
subject to the subordination provisions of this Article 11.
SECTION 11.02. Certain Definitions.
"Representative" means the indenture trustee or other trustee, agent
or representative for an issue of Senior Indebtedness.
"Senior Indebtedness" means the principal of (and premium, if any)
and interest on (a) any and all indebtedness and obligations of the Company
(including indebtedness of others guaranteed by the Company) other than the
Securities, whether or not contingent and whether outstanding on the date of
this Indenture or thereafter created, incurred or assumed, which (i) is for
money borrowed; (ii) is evidenced by any bond, note, debenture or similar
instrument; (iii) represents the unpaid balance on the purchase price of any
property, business or asset of any kind; (iv) is an obligation of the Company as
lessee under any and all leases of property, equipment or other assets required
to be capitalized on the balance sheet of the lessee under generally accepted
accounting principles; (v) is a reimbursement obligation of the Company with
respect to letters of credit; (vi) are obligations of the Company with respect
to interest swap obligations and foreign exchange agreements; or (vii) are
obligations of others secured by a lien to which any of the properties or assets
(including, without limitation, leasehold interests and any other tangible or
intangible property rights) of the Company are subject, whether or not the
obligations secured thereby shall have been assumed by the Company or shall
otherwise be the Company's legal liability and (b) any deferrals, amendments,
renewals, extensions, modifications and refundings of any indebtedness or
obligations of the types referred to above; provided that Senior Indebtedness
shall not include (i) the Securities; (ii) the Company's 6 7/8% Convertible
Subordinated Notes due 2002; (iii) any indebtedness or obligation of the Company
which, by its terms or the terms of the instrument creating or evidencing it, is
not superior in right of payment to the Securities; (iv) any indebtedness or
obligation of the Company to any of its subsidiaries and (v) any indebtedness or
obligation incurred by the Company in connection with the purchase of assets,
materials or services in the ordinary course of business and which constitutes a
trade payable.
SECTION 11.03. Liquidation; Dissolution; Bankruptcy.
Upon any distribution to creditors of the Company in a liquidation
or dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property:
(1) holders of Senior Indebtedness shall be entitled to receive
payment in full of the principal of and interest to the date of payment on
the Senior Indebtedness before Securityholders shall be entitled to
receive any payment of principal of or interest on Securities; and
(2) until the Senior Indebtedness is paid in full, any distribution
to which Securityholders would be entitled but for this Article 11 shall
be made to holders of Senior Indebtedness as their interests may appear,
except the Securityholders may receive securities that are subordinated to
Senior Indebtedness to at least the same extent as the Securities.
SECTION 11.04. Company Not to Make Payments
with Respect to Securities
in Certain Circumstances.
Except for payment in or distribution of securities that are
subordinated to Senior Indebtedness to at least the same extent as the
Securities, the Company shall not make any payment with respect to the principal
of or interest on any of the Securities, or make any other payment with respect
to the purchase or other acquisition of any of the Securities:
(a) if there shall have occurred a default in the payment of the
principal of or interest on any Senior Indebtedness; or
(b) if there shall exist at the time of such payment, or such
payment would create, an event of default (or an event which, with the
giving of notice or the passage of time or both, would become an event of
default) with respect to any Senior Indebtedness which would permit the
holders (or any specified proportion of such holders) of such Senior
Indebtedness to accelerate the maturity thereof, and if notification of
such default or event of default has been given to the Company by a holder
of such Senior Indebtedness or by a trustee, agent or Representative for
an issue of Senior Indebtedness;
unless and until, in each case, whether described in clause (a) or clause (b),
such default or event of default shall have been cured or waived in the manner
required by the instrument relating to such Senior Indebtedness or shall
otherwise have ceased to exist.
Regardless of anything to the contrary herein, nothing shall prevent
(a) any payment by the Trustee to the Securityholders of amounts deposited with
it pursuant to Article Eight or (b) any payment by the Trustee or the Paying
Agent as permitted by Section 11.11.
SECTION 11.05. Acceleration of Securities.
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Indebtedness of the
acceleration.
SECTION 11.06. When Distribution Must be Paid Over.
In the event that the Company shall make any payment to the Trustee
of the principal of or interest on the Securities at a time when such payment is
prohibited by Section 11.03 or 11.04, such payment shall be held by the Trustee,
in trust for the benefit of, and shall be paid forthwith over and delivered to,
the holders of Senior Indebtedness (pro rata as to each of such holders on the
basis of the respective amounts of Senior Indebtedness held by them) or their
Representative or the trustee under the indenture or other agreement (if any)
pursuant to which Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of all Senior Indebtedness
remaining unpaid to the extent necessary to pay all Senior Indebtedness in full
in accordance with its terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Indebtedness.
If a distribution is made to Securityholders that because of this
Article 11 should not have been made to them, the Securityholders who receive
the distribution shall hold it in trust for holders of Senior Indebtedness and
pay it over to them as their interests may appear.
SECTION 11.07. Notice by Company.
The Company shall promptly notify the Trustee and the Paying Agent
in writing of any facts known to the Company that would cause a payment of
principal of or interest on Securities to violate this Article 11.
SECTION 11.08. Subrogation.
After all Senior Indebtedness is paid in full and until the
Securities are paid in full, Securityholders shall be subrogated to the rights
of holders of Senior Indebtedness to receive distributions applicable to Senior
Indebtedness to the extent that distributions otherwise payable to the
Security-holders have been applied to the payment of Senior Indebtedness. A
distribution made under this Article 11 to holders of Senior Indebtedness which
otherwise would have been made to Securityholders is not, as between the Company
and Securityholders, a payment by the Company on Senior Indebtedness.
SECTION 11.09. Subordination May Not be
Impaired by Company.
No right of any holder of Senior Indebtedness to enforce the
subordination of the indebtedness evidenced by the Securities shall be impaired
by any act or failure to act by the Company or by its failure to comply with
this Indenture.
SECTION 11.10. Distribution or Notice
to Representative.
Whenever a distribution is to be made or a notice given to holders
of Senior Indebtedness, the distribution may be made and the notice given to
their Representative.
SECTION 11.11. Rights of Trustee and Paying Agent.
The Trustee or Paying Agent may continue to make payments on the
Securities until it receives written notice of facts that would cause a payment
of principal of or interest on the Securities to violate this Article 11. Only
the Company, a Representative or a holder of an issue of Senior Indebtedness
that has no Representative may give the notice.
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a person representing himself to be a holder of Senior
Indebtedness (or a Representative on behalf of such holder) to establish that
such notice has been given by a holder of Senior Indebtedness or a
Representative on behalf of any such holder. In the event that the Trustee
determines in good faith that further evidence is required with respect to the
right of any person who is a holder of Senior Indebtedness to participate in any
payment or distribution pursuant to this Article 11, the Trustee may request
such person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Indebtedness held by such person, the extent to which
such person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such person under this Article 11, and if
such evidence is not furnished the Trustee may defer any payment to such person
pending judicial determination as to the right of such person to receive such
payment or until such time as the Trustee shall be otherwise satisfied as to the
right of such person to receive such payment.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holder if it
shall mistakenly pay over or distribute to Securityholders or the Company or any
other person money or assets to which any holders of Senior Indebtedness shall
be entitled by virtue of this Article 11 or otherwise.
SECTION 11.12. Officers' Certificate.
If there occurs an event referred to in Section 11.03 or 11.04, the
Company shall promptly give to the Trustee an Officers' Certificate (on which
the Trustee may conclusively rely) identifying all holders of Senior
Indebtedness or their Representatives and the principal amount of Senior
Indebtedness then outstanding held by each such holder and stating the reasons
why such Officers' Certificate is being delivered to the Trustee.
SECTION 11.13. Obligation of Company Unconditional.
Nothing contained in this Article 11 or elsewhere in this Indenture
or in any Security is intended to or shall impair, as between the Company, its
creditors other than holders of Senior Indebtedness and the Holders of the
Securities, the obligation of the Company, which is absolute and unconditional,
to pay to the Holders of the Securities the principal of and interest on the
Securities as and when the same shall become due and payable in accordance with
their terms, or is intended to or shall affect the relative rights of the
Holders of the Securities and creditors of the Company other than the holders of
the Senior Indebtedness, nor shall anything herein or therein prevent the
Trustee or the Holder of any Security from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article 11 of the holders of Senior Indebtedness in
respect of cash, property or securities of the Company received upon the
exercise of any such remedy. Upon any distribution of assets of the Company
referred to in this Article 11, the Trustee, subject to the provisions of
Sections 7.01 and 7.02, and the Holders of the Securities shall be entitled to
rely upon any order or decree by any court of competent jurisdiction in which
such dissolution, winding up, liquidation or reorganization proceedings are
pending, or a certificate of the liquidating trustee or agent or other person
making any distribution to the Trustee or the Holders of the Securities, for the
purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
11. Nothing contained in this Article 11 or elsewhere in this Indenture or in
any Security is intended to or shall affect the obligation of the Company to
make, or prevent the Company from making, at ay time except during the pendency
of any dissolution, winding up, liquidation or reorganization proceeding, and
except during the continuance of any default specified in Section 11.04 (not
cured or waived), payments at any time of the principal or of interest on the
Securities.
ARTICLE 12
MISCELLANEOUS
SECTION 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
SECTION 12.02. Notices.
Any notice or communication by the Company or the Trustee to the
other is duly given if in writing and delivered in person, mailed by first-class
mail or by express delivery to the other's address stated in this Section 12.02.
The Company or the Trustee by notice to the other may designate additional or
different addresses for subsequent notices or communications.
Any notice or communication to a Securityholder shall be mailed by
first-class mail to his address shown on the register kept by the Registrar.
Failure to mail a notice or communication to a Securityholder or any defect in
it shall not affect its sufficiency with respect to other Securityholders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Securityholders,
it shall mail a copy to the Trustee and each Agent at the same time.
All notices or communications shall be in writing.
The Company's address is:
Continental Homes Holding Corp.
7001 N. Scottsdale Road
Suite 2050
Scottsdale, Arizona 85252
Attention: Corporate Secretary
The Trustee's address is:
Manufacturers and Traders Trust Company
One M&T Plaza
Buffalo, New York 14203
Attention: Corporate Trust Department
SECTION 12.03. Communication by Holders with
Other Holders.
Securityholders may communicate pursuant to TIA { 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA { 312(c).
SECTION 12.04. Certificate and Opinion as
to Conditions Precedent.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture the Company shall furnish to the Trustee:
(1) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Each signer of an Officers' Certificate or an Opinion of Counsel may
(if so stated) rely, effectively, upon an Opinion of Counsel as to legal matters
and an Officers' Certificate as to factual matters if such signer reasonably and
in good faith believes in the accuracy of the document relied upon.
SECTION 12.05. Statements Required in Certificate
or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
SECTION 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting
of Securityholders. The Registrar, Paying Agent or Conversion Agent may make
reasonable rules and set reasonable requirements for their respective functions.
SECTION 12.07. Legal Holidays.
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions are not required to be open in The City of New York, in the State
of New York or in the city in which the Trustee administers its corporate trust
business. If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue on that payment for the intervening
period.
A "business day" is a day other than a Legal Holiday.
SECTION 12.08. No Recourse Against Others.
All liability described in the Securities of any director, officer,
employee or stockholder, as such, of the Company is waived and released.
SECTION 12.09. Duplicate Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.10. Governing Law.
The laws of the State of New York, without regard to principles of
conflicts of law, shall govern this Indenture and the Securities.
SECTION 12.11. No Adverse Interpretation
of Other Agreements.
This Indenture may not be used to interpret another indenture, loan
or debt agreement of the Company or a subsidiary. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 12.12. Successors.
All agreements of the Company in this Indenture and the Securities
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 12.13. Separability.
In case any provision in this Indenture or in the Securities shall
be valid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby
and a Holder shall have no claim therefor against any party hereto.
SECTION 12.14. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the day and year first above written.
CONTINENTAL HOMES HOLDING CORP.
By: /s/ Donald R. Loback
-------------------------------------------
Donald R. Loback
Title: Chief Executive Officer
MANUFACTURERS AND TRADERS TRUST
COMPANY, as Trustee
By: /s/ Russell T. Whitley
--------------------------------------------
Russell T. Whitley
Title: Assistant Vice President
<PAGE>
EXHIBIT A
REGISTERED [Face of Security]
REGISTERED
NUMBER
DOLLARS
CONTINENTAL HOMES HOLDING CORP.
6 7/8% CONVERTIBLE SUBORDINATED NOTE DUE 2002
CONTINENTAL HOMES HOLDING CORP., a Delaware corporation (herein
called the "Company"), for value received, hereby promises to pay to or
registered assigns, the principal sum of Dollars on November 1, 2002, and to pay
interest thereon as provided on the reverse hereof, until the principal hereof
is paid or duly provided for.
Interest Payment Dates: May 1 and November 1
Record Dates: April 15 and October 15
The provisions on the back of this certificate are incorporated as
if set forth on the face hereof.
IN WITNESS WHEREOF, CONTINENTAL HOMES HOLDING CORP. has
caused this instrument to be duly signed under its corporate
seal.
[SEAL] CONTINENTAL HOMES HOLDING CORP.
By:
[Title]
By:
[Title]
TRUSTEES'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned Indenture.
Manufacturers and Traders Trust Company,
as Trustee
By: ______________________________
Signatory
Dated: ___________________
<PAGE>
[REVERSE OF SECURITY]
CONTINENTAL HOMES HOLDING CORP.
6 7/8% CONVERTIBLE SUBORDINATED NOTE DUE 2002
1. Interest. Continental Homes Holding Corp., a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this
Security at the rate per annum shown above. The Company will pay interest
semi-annually on May 1 and November 1 of each year, commencing May 1, 1996.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance of the Securities set forth on the face of this Security.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment. The Company will pay interest on the
Securities (except defaulted interest) to the persons who are registered Holders
of Securities at the close of business on the record date set forth on the face
of this Security next preceding the applicable interest payment date. Holders
must surrender Securities to a Paying Agent to collect principal payments. The
Company will pay principal, premium, if any, and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts. However, the Company must pay principal, premium, if any, and
interest by check payable in such money. It may mail an interest check to a
Holder's registered address.
3. Paying Agent, Registrar, Conversion Agent. Initially,
Manufacturers and Traders Trust Company (the "Trustee") will act as Paying
Agent, Registrar and Conversion Agent. The Company may change any Paying Agent,
Registrar, Conversion Agent or co-registrar without notice. The Company may act
in any such capacity.
4. Indenture. The Company issued the Securities under an Indenture
dated as of November 1, 1995 (the "Indenture") between the Company and the
Trustee. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (15 U.S. Code {{ 77aaa-77bbbb) (the "Act"), as in effect on the
date of the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
such terms. The Securities are general unsecured subordinated obligations of the
Company limited to $86,250,000 aggregate principal amount (except for Securities
issued in substitution for destroyed, mutilated, lost or stolen Securities).
Terms used herein which are defined in the Indenture have the meanings assigned
to them in the Indenture.
5. Optional Redemption. The Securities may be redeemed on at least
15 and not more than 60 days' notice at the option of the Company on or after
November 1, 1998, in whole at any time or in part from time to time, at the
redemption prices (expressed as a percentage of principal amount) set forth
below for the 12-month period beginning November 1 of the following years, in
each case together with accrued and unpaid interest to the redemption date:
Year Redemption Price
1998 103.438 %
1999 102.292 %
2000 101.146 %
2001 100.000 %
2002 100.000 %
6. Notice of Redemption. Notice of redemption will be mailed at
least 15 days but not more than 60 days before the redemption date to each
Holder of Securities to be redeemed at his registered address. Securities in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000. On and after the redemption date, interest ceases to accrue
on Securities or portions of them called for redemption.
7. Change in Control. In the event of a Change in Control (as
hereinafter defined) with respect to the Company, then each Holder of the
Securities shall have the right, at the Holder's option, to require the Company
to repurchase such Holder's Securities including any portion thereof which is
$1,000 or any integral multiple thereof on the date (the "Repurchase Date") that
is 45 days after the date of the Repurchase Right Notice at a purchase price
equal to 100% of the principal amount thereof, plus accrued and unpaid interest
to the Repurchase Date (the "Repurchase Price").
On or before the 30th day after the occurrence of a Change in
Control, the Company is obligated to give notice of the occurrence of such
Change in Control, and of the date before which a Holder must notify the Company
of such Holder's intention to exercise the redemption option, the procedure
which such Holder must follow to exercise such right. To exercise the redemption
option, the Holder of a Security must deliver on or before the 30th day after
the date of the Repurchase Right Notice, written notice to the Company of the
Holder's exercise of such option together with the Security or Securities with
respect to which the option is being exercised, duly endorsed for transfer.
Exercise of the redemption option by the Holder of a Security will be
irrevocable, except that a Holder who submits such Security will retain the
right to convert such Security into Common Stock until the close of business on
the second business day prior to the Repurchase Date. If the Repurchase Date
falls between any interest payment record date and the next succeeding interest
payment date, Securities must be accompanied by payment of an amount equal to
the interest thereon which the registered Holder is to receive on such interest
payment date.
If any repurchase pursuant to the foregoing provisions constitutes
an "issuer tender offer" as defined in Rule 13e-4 under the Exchange Act, the
Company will comply with the requirements of Rule 13e-4, Rule 14e-1 and any
other tender offer rules under the Exchange Act which then may be applicable,
including the filing of an Issuer Tender Offer Statement on Schedule 13E-4 with
the SEC and the furnishing of certain information contained therein to the
Holders.
A "Change in Control" of the Company shall be deemed to have
occurred at such time as any person, together with its affiliates or associates,
other than the Management Group (as defined in the Indenture) is or becomes the
beneficial owner, directly or indirectly, through a purchase, merger or other
acquisition transaction, of shares of capital stock of the Company entitling
such person to exercise 50% or more of the total voting power of all shares of
capital stock of the Company entitled to vote in elections of directors,
provided that a Change in Control shall not be deemed to have occurred if either
(i) the last sale price of the Common Stock for any five trading days during the
ten trading days immediately preceding the Change in Control is at least equal
to 105% of the Conversion Price (as defined in the Indenture) in effect on the
day of the Change in Control or (ii) all of the consideration (excluding cash
payments for fractional shares) in the transaction or transactions constituting
the Change in Control consists of shares of common stock traded on a national
securities exchange or through NASDAQ or another comparable quotation system.
8. Conversion. A Holder of a Security may convert it into Common
Stock of the Company at any time before the close of business on November 1,
2002, or, if the Security is called for redemption, the Holder may convert it at
any time before the close of business on the second business day before the date
fixed for redemption. The initial conversion rate is 42.105 shares of Common
Stock per $1,000 principal amount of the Securities, subject to adjustment under
certain circumstances. The Company will deliver a check in lieu of any
fractional share. On conversion no payment or adjustment for interest accrued on
the Securities will be made nor for dividends on the Common Stock issued on
conversion. If any Security is converted between the record date for the payment
of interest and the next succeeding interest payment date, such Security must be
accompanied by funds equal to the interest payable on such succeeding interest
payment date on the principal amount so converted (unless such Security shall
have been called for redemption, in which case no such payment shall be
required). A Security converted on an interest payment date need not be
accompanied by any payment, and the interest on the principal amount of the
Security being converted will be paid on such interest payment date to the
registered holder of such Security on the immediately preceding record date.
To convert a Security a Holder must (1) complete and sign the
conversion notice on the back of the Security, (2) surrender the Security to a
Conversion Agent, (3) furnish appropriate endorsements and transfer documents if
required by the Registrar or Conversion Agent and (4) pay any transfer or
similar tax if required. A Holder may convert a portion of a Security if the
portion is $1,000 or a whole multiple of $1,000.
9. Subordination. The Securities are subordinated in right of
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full of all Senior Indebtedness (as defined in the Indenture).
Each Holder by accepting a Security agrees to such subordination and authorizes
the Trustee to give it effect.
10. Denominations, Transfer, Exchange. The Securities are in
registered form without coupons in denominations of $1,000 and whole multiples
of $1,000. The transfer of Securities may be registered and Securities may be
exchanged as provided in the Indenture. The Registrar may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents.
No service charge shall be made for any such registration or transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. The Registrar
need not exchange or register the transfer of any Security selected for
redemption in whole or in part. Also, it need not exchange or register the
transfer of any Securities for a period of 15 days before a selection of
Securities to be redeemed.
11. Persons Deemed Owners. The registered Holder of a Security may
be treated as its owner for all purposes.
12. Merger or Consolidation. The Company may not consolidate with,
or merge into, or directly or indirectly transfer or lease all or substantially
all of its assets to, another person unless: the person is a corporation; such
corporation assumes by supplemental indenture all the obligations of the Company
under the Securities and the Indenture; and giving effect to the transaction, no
Default or Event of Default (as defined in the Indenture) shall exist.
13. Amendments and Waivers. Subject to certain exceptions, the
Indenture or the Securities may be amended with the consent of the Holders of at
least a majority in principal amount of the Securities outstanding; and any
existing default may be waived with the consent of the Holders of a majority in
principal amount of the Securities. Without the consent of any Securityholder,
the Indenture or the Securities may be amended to cure any ambiguity, omission,
defect or inconsistency or to provide for uncertificated Securities in addition
to certificated Securities, to comply with Sections 5.01 and 10.17 of the
Indenture or to make any change that does not materially adversely affect the
rights of any Securityholder.
14. Defaults and Remedies. An Event of Default is: default for 30
days in payment of interest on the Securities; default in payment of principal
on the Securities when due; failure by the Company for 60 days after notice to
it to comply with any of its other agreements in the Indenture or the
Securities; acceleration prior to maturity of other indebtedness in excess of an
aggregate of $10,000,000 which is not rescinded or annulled within 30 days after
notice; the rendering of a final judgment or judgments against the Company in
excess of $10,000,000, which is not discharged, satisfied or stayed within a
period of 60 days after notice; and certain events of bankruptcy or insolvency.
If any Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in principal amount of the Securities may declare all the
Securities to be due and payable immediately. The Holders of a majority in
principal amount of the Securities by notice to the Trustee may waive a Default
and its consequences. Securityholders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Securities.
Subject to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing default
(except a default in payment of principal or interest) if it determines that
withholding notice is in their interests. The Company must furnish an annual
compliance certificate to the Trustee.
15. Trustee Dealings with Company. Manufacturers and Traders Trust
Company, the Trustee under the Indenture, or any banking institution serving as
successor Trustee thereunder, in its individual or any other capacity, may make
loans to, accept deposits from, and perform services for the Company or its
Affiliates, and may otherwise deal with the Company or its Affiliates, as if it
were not Trustee.
16. No Recourse Against Others. A director, officer, employee or
stockholder, as such, of the Company shall not have any liability for any
obligations of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Securityholder by accepting a Security waives and releases all
such liability. The waiver and releases are part of the consideration for the
issue of the Securities.
17. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
18. Abbreviations. Customary abbreviations may be used in the name
of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenant by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO: Continental
Homes Holding Corp., 7001 N. Scottsdale Road, Suite 2050, Scottsdale, Arizona
85253, Attention: Corporate Secretary.
<PAGE>
ASSIGNMENT FORM CONVERSION NOTICE
To assign this Security, fill To convert this Security
in the form below: into Common Stock of the
Company, check the box:
I or we assign and transfer _____
this Security to: /____/
------------------
To convert only part of
this Security, state the
(Insert Assignee's Soc. amount (must be in
Sec. or Tax I.D. No.) multiples of $1,000):
$
__________________________ If you want the stock
certificate made out in
__________________________ another person's name,
fill in the form below:
__________________________
__________________________ (Insert other person's
(Print or type assignee's Soc. Sec. or Tax I.D.
name, address and zip code) no.)
and irrevocably appoint ___
___________________ agent
to transfer this Security
on the books of the
Company. The agent may
substitute another (Print or type other
to act for him. person's name, address
and zip code)
Date: __________________ Signature(s):_________________________
(Sign exactly as your
name(s) appear(s) on
the other side of this
Security)
Signature(s) guaranteed by:
(All signatures must be guaranteed by a member of a national securities exchange
or of the National Association of Securities Dealers, Inc. or by a commercial
bank or trust company located in the United States)
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security
repurchased by the Company pursuant to Section 4.08 of the
Indenture, check the box:
____
/___/
If you want to elect to have only part of this Security repurchased
by the Company pursuant to Section 4.08 of the Indenture, state the amount:
$ -----------------------------------
(in an integral multiple of $1,000)
Date: ______________________ Signature(s): _________________
- -------------------------------
(Sign exactly as your name(s)
appear(s) on the other side of
this Security)
Signature(s) guaranteed by: __________________________________
(All signatures must be
guaranteed
by a member of a national
securities exchange or of the
National Association of
Securities Dealers, Inc. or by a
commercial bank or trust company
located in the United States)
MODIFICATION AGREEMENT EXHIBIT 10.1
DATE: December 1, 1995
PARTIES: Borrower: CH MORTGAGE COMPANY,
a Colorado corporation formerly known as
American Western Mortgage Company.
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 Mortgage
Warehousing Credit and Security Agreement, dated July 1, 1995 ("Credit
Agreement"), and evidenced by the Replacement Revolving Line of Credit
Promissory Note, dated July 1, 1995 ("Note"). The unpaid principal of the Loan
as of the date hereof is $0.
B. The Loan is secured by, among other things, the collateral described
in the Credit Agreement (the agreements, documents, and instruments securing the
Loan and the Note are referred to individually and collectively as the "Security
Documents") (The Note, the Credit 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 are sometimes referred to individually and
collectively as the "Loan Documents").
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, effective as of December 1, 1995,
as follows:
2.1.1 The definition of Floating Rate, as set forth in Section 1.1
of the Credit Agreement, is hereby deleted
2.1.2 The "Maturity Date", as defined in Section 1.1 of the Credit
Agreement, is hereby changed from December 1, 1995 to December 1, 1996.
2.1.3 Section 2.4(d) of the Credit Agreement is hereby amended as
follows:
(a) The phrase "Floating Rate" is deleted and the
phrase "Prime Rate" is substituted therefor.
(b) The following sentences are hereby added thereto,
immediately after the first sentence:
Interest at the Default 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. The Default Rate will change on each
day that the Prime Rate changes.
2.1.4 Section 2.4(e)(ii) of the Credit Agreement is hereby
deleted.
2.1.5 Section 2.4(e)(iii) of the Credit Agreement is hereby
deleted.
2.1.6 The following phrase is hereby added at the end of the last
sentence of Paragraph 3.7 of the Credit Agreement: "except that Bank shall be
responsible to pay the cost of shipping the Collateral Documents from Bank to an
Approved Bailee pursuant to the terms of an Approved Bailee Agreement."
2.1.7 Section A(3) of Exhibit A to the Credit Agreement is hereby
modified by inserting the phrase "If required by Bank" at the beginning of each
of the first two (2) sentences thereof.
2.1.8 Exhibit B to the Credit Agreement is hereby amended in its
entirety to mean that document attached hereto as Exhibit B.
2.2 Each of the Loan Documents is modified to provide that it shall be
a default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of Borrower herein or if any representation or
warranty by Borrower herein or by any guarantor in any related Consent and
Agreement of Guarantor(s) is materially incomplete, incorrect, or misleading as
of the date hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents
shall be a reference to such document as modified herein.
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, processing, filing, and recording
costs, expenses, and fees).
5.3.3 A Commitment Fee of one-eighth of one percent (.125%)
per annum of the Commitment amount (i.e., $31,250.00).
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.
CH MORTGAGE COMPANY, a Colorado
corporation formerly known as American
Western Mortgage Company
By: /s/ Julie E. Collins
---------------------------------------
Name: Julie E. Collins
------------------------------------
Title: Vice President
-----------------------------------
BORROWER
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/ Rhonda R. Williams
--------------------------------------
Name: Rhonda R. Williams
------------------------------------
Title: Assistant Vice President
------------------------------------
BANK
EXHIBIT 10.2
AMENDED AND RESTATED REPLACEMENT REVOLVING LINE OF CREDIT
PROMISSORY NOTE
Phoenix, Arizona
$25,000,000.00 December 1, 1995
1. PROMISE TO PAY.
For value received, CH MORTGAGE COMPANY, a Colorado corporation formerly
known as American Western Mortgage Company ("Maker"), promises to pay to
the order of BANK ONE, ARIZONA, NA at its office at 241 North Central
Avenue, Phoenix, Arizona 85004, or at such other place as the holder hereof
may from time to time designate in writing, the principal sum of
TWENTY-FIVE MILLION AND NO/100 DOLLARS ($25,000,000.00), or so much thereof
as shall from time to time be disbursed and outstanding under that certain
Amended and Restated Mortgage Warehousing Credit and Security Agreement (as
it may be amended, modified, extended, and renewed and replaced from time
to time, the "Credit Agreement") dated July 1, 1995 herewith between Maker
and the payee named above, together with accrued interest from the date of
disbursement on the unpaid principal at the applicable rate as set forth in
Section 4. The payee named above shall have no obligation to make any
Advances hereunder except in accordance with the Credit Agreement. This
note (as it may be amended, modified, extended, and renewed from time to
time, the "Note") is issued pursuant to, entitled to the benefits of, and
referred to as the "Note" in the Credit Agreement. In the event of any
inconsistency between the provisions of this Note and the provisions of the
Credit Agreement, the Credit Agreement shall control. Capitalized terms
used herein without definition shall have the meanings set forth in the
Credit Agreement.
2. MATURITY DATE.
Absent the occurrence of an Event of Default hereunder or under any of the
Credit Agreement, this Note, and other documents evidencing or securing the
loans contemplated by the Credit Agreement (collectively the "Credit
Agreement Documents"), the unpaid principal balance hereof, together with
all unpaid interest accrued thereon, and all other amounts payable by Maker
under the terms of the Credit Agreement Documents, shall be due and payable
on December 1, 1996 (the "Maturity Date"). If the Maturity Date should fall
(whether by acceleration or otherwise) on a day that is not a Business Day,
payment of the outstanding principal shall be made on the next succeeding
Business Day and such extension of time shall be included in computing the
interest included in such payment.
3. PREPAYMENT.
PREPAYMENT. 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.
4. PAYMENTS.
(a) 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:
(i) 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.
(ii) Except to the extent that Advances bear interest at the Fixed
Rate, as defined herein, pursuant to this Note, interest shall
accrue on the unpaid principal of all Advances at the Average
Libor Rate, calculated during each calendar month (or partial
month). Interest at the Libor 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:
"Average Libor Rate" means the mathematical average of the Libor Rate
in effect during the applicable period of time to which the calculation
relates.
"Balance Calculation Period" means the period covered by Maker's
monthly account analysis statement prepared by the payee hereof and
used by the payee hereof to determine Maker's Compensating Balances.
"Balances Deficiency" has the meaning set forth in Section (f) below.
"Balances Deficiency Fee" has the meaning set forth in Section (f)
below.
"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
Libor Advance, a day on which dealings are carried on in the London
interbank market.
"Compensating Balances" means the value to the payee hereof (net of all
service charges, all reserve requirements, FDIC insurance assessments
and other costs, fees, expenses and amounts incurred by the payee
hereof on account of such balances) of Maker's average daily, free,
collected, non-interest bearing compensating balances maintained at
Bank One, Arizona, NA, as determined by the payee hereof and set forth
on Maker's monthly account analysis statement prepared by the payee
hereof. In determining free, collected, non-interest bearing
compensating balances, there shall be subtracted any uncollected or
returned checks, and there shall be no adjustment for reserve
requirements, FDIC insurance assessments or other costs incurred by the
payee hereof on account of such balances.
"Fixed Rate" means the rate of three percent (3%) per annum.
"Fixed Rate Advance" means an Advance that bears or is requested to
bear interest at the Fixed Rate.
"Libor Advance" means an Advance that bears or is requested to bear
interest at the Libor Rate.
"Libor Rate" means the rate per annum equal to the sum of (i) one and
three-quarters percent (1.75%) per annum, and (ii) the per annum 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, for a
30-day interest period.
"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.
(b) If Maker desires that any Advances are to bear interest at the
Fixed Rate, Maker shall deliver notice thereof to the holder at
least one (1) Business Day prior to the first day of the Balance
Calculation Period (i.e., the first day of a calendar month),
which notice shall specify the amount of Advances that are to bear
interest at the Fixed Rate. If Maker elects to have interest
accrue on any Advances at the Fixed Rate, then the unpaid amount
of such Advances shall bear interest from and including the first
day of such Balance Calculation Period.
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) on the first Business Day 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 to a Libor Advance shall only be made on the last day of the
applicable Balance Calculation Period. Each such notice of a conversion
shall specify the date of such conversion and the Advance(s) to be
converted, and any conversion of a Libor Advance to a Fixed Rate
Advance shall comply with subparagraph (b) above.
(c) 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.
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 Libor 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
Libor Rate, or to fund or maintain Libor Rate Advances, (i) the
obligations of the holder hereof to make Advances at the Libor Rate and
to convert Advances to the Libor 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 Libor Rate unlawful,
Maker shall forthwith prepay in full all 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, (i) converts all Libor Rate Advances then
outstanding into Fixed 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," and (ii) enters into an agreement with Holder
setting forth an alternative interest rate to be used pursuant to this
Note.
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 Libor 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
Libor Rate for such Interest Period in the manner prescribed above in
the definition of "Libor Rate," then the holder hereof shall promptly
give notice thereof to Maker, Maker shall forthwith prepay in full all
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, (i) converts all
Libor Rate Advances then outstanding into Fixed 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," and (ii) enters into an
agreement with Holder setting forth an alternative interest rate to be
used pursuant to this Note.
(d) During any Balance Calculation Period where interest is accruing
on any Advances at the Fixed Rate, if the average daily
Compensating Balances maintained by Maker with Bank One, Arizona,
NA are less than an amount equal to the average daily aggregate
unpaid principal balance of all Fixed Rate Advances during such
Balance Calculation Period (such deficiency being referred to
herein as the "Balances Deficiency"), Maker will pay to the payee
hereof a fee (the "Balances Deficiency Fee") for said Balance
Calculation Period on the Balances Deficiency at a per annum rate
equal to the Average Libor Rate during such Balance Calculation
Period minus one and one-quarter percent (1.25%) (computed on the
basis of a 360-day year and applied to the actual number of days
elapsed during the Balance Calculation Period). Any Balances
Deficiency Fee payable hereunder shall be due and payable monthly
after each Balance Calculation Period within two (2) Business Days
after receipt by Maker from the payee hereof of a statement
therefor containing the calculations made to determine such
Balances Deficiency Fee, which statement shall be conclusive
absent manifest error.
(e) All payments of principal and interest and other amounts due
hereunder shall be made (i) without deduction of any present and
future taxes, levies, imposts, deductions, charges or
withholdings, which amounts shall be paid by Maker, and (ii)
without any other set off. Maker will pay the amounts necessary
such that the gross amount of the principal and interest and other
amounts received by the holder hereof is not less than that
required by this Note.
(f) Interest hereunder shall be payable by Maker to the holder hereof
on the first (1st) day of each and every month during the term of
this Note commencing with the first (1st) day of the first month
following the date hereof. If any payment of interest to be made
by Maker hereunder shall become due on a day which is not a
Business Day, such payment shall be made on the next succeeding
Business Day and such extension of time shall be included in
computing the interest in such payment.
(g) Payments of principal shall be due as provided in the Credit
Agreement.
5. LAWFUL MONEY.
Principal and interest are payable in lawful money of the United States of
America.
6. APPLICATION OF PAYMENTS/LATE CHARGE.
(a) Absent the occurrence of an Event of Default hereunder or under
any of the other Credit Agreement Documents, any payments received
by the holder hereof pursuant to the terms hereof shall be applied
in the manner set forth in the Credit Agreement or, if not so set
forth, in such order as the holder hereof may, in its sole
discretion, elect. Any payments received by the holder hereof
after the occurrence of an Event of Default hereunder or under any
of the Credit Agreement Documents shall be applied in such order
as the holder hereof may, in its sole discretion, elect.
(b) If any payment of interest is not received by the holder hereof
within fifteen (15) days of the due date thereof, then in addition
to the remedies conferred upon the holder pursuant to Section 9
hereof and the other Credit Agreement Documents, a late charge of
four percent (4%) of the amount due and unpaid will be added to
the delinquent amount to compensate the holder hereof for the
expense of handling the delinquency for such payment; 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.
7. SECURITY AND GUARANTY.
This Note is secured by and is entitled to the benefits of the Credit
Agreement. The provisions of the Credit Agreement are incorporated herein
by reference as if set forth in full, and this Note is subject to all of
the covenants and conditions contained in the Credit Agreement. This Note
is guaranteed by the Guaranty.
8. EVENT OF DEFAULT.
The occurrence of any of the following shall be deemed to be an event of
default ("Event of Default") hereunder:
(a) Failure of Maker to make a payment of principal or interest within
fifteen (15) days of the due date thereof or failure of Maker to
make any other payment or perform any obligation hereunder; or
(b) The occurrence of an Event of Default under any of the other
Credit Agreement Documents.
9. REMEDIES.
Upon the occurrence of an Event of Default, the entire balance of principal
together with all accrued interest thereon, and all other amounts payable
by Maker under the Credit Agreement Documents shall, at the option of the
holder hereof and without demand or notice, immediately become due and
payable. Upon the occurrence of an Event of Default (and so long as such
Event of Default shall continue), the entire balance of principal hereof,
together with all accrued interest thereon, all other amounts due under the
Credit Agreement Documents, and any judgment for such principal, interest,
and other amounts, at the option of the holder hereof, shall bear interest
equal to the lesser of (i) the Default Rate; or (ii) the Maximum Rate. No
delay or omission on the part of the holder hereof in exercising any right
under this Note or under any of the other Credit Agreement Documents hereof
shall operate as a waiver of such right. The remedies of the holder hereof,
as provided in this Note and in the Credit Agreement or any other
instrument securing this Note, shall be cumulative and concurrent, and may
be pursued singularly, successively or together, at the sole discretion of
the holder hereof, and may be exercised as often as occasion therefor shall
arise.
10. WAIVER.
Maker, endorsers, guarantors, and sureties of this Note hereby waive
diligence, demand for payment, presentment for payment, protest, notice of
nonpayment, notice of protest, notice of intent to accelerate, notice of
acceleration, notice of dishonor, and notice of nonpayment, and all other
notices or demands of any kind and expressly agree that, without in any way
affecting the liability of Maker, endorsers, guarantors, or sureties, the
holder hereof may extend any maturity date or the time for payment of any
installment due hereunder, otherwise modify the Credit Agreement Documents,
accept additional security, release any Person liable, and release any
security or guaranty. Maker, endorsers, guarantors, and sureties waive, to
the full extent permitted by law, the right to plead any and all statutes
of limitations as a defense.
11. CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
No provision of this Note may be changed, discharged, terminated, or waived
except in a writing signed by the party against whom enforcement of the
change, discharge, termination, or waiver is sought. No failure on the part
of the holder hereof to exercise and no delay by the holder hereof in
exercising any right or remedy under this Note or under the law shall
operate as a waiver thereof.
12. ATTORNEYS' FEES.
If this Note is not paid when due or if any Event of Default occurs, Maker
promises to pay all costs of enforcement and collection and preparation
therefor, including but not limited to, reasonable attorneys' fees, whether
or not any action or proceeding is brought to enforce the provisions hereof
(including, without limitation, all such costs incurred in connection with
any bankruptcy, receivership, or other court proceedings (whether at the
trial or appellate level)).
13. SEVERABILITY.
If any provision of this Note is unenforceable, the enforceability of the
other provisions shall not be affected and they shall remain in full force
and effect.
14. INTEREST RATE LIMITATION.
Maker hereby agrees to pay an effective rate of interest that is the sum of
the interest rate provided for herein, together with any additional rate of
interest resulting from any other charges of interest or in the nature of
interest paid or to be paid in connection with the Credit Agreement,
including without limitation, any fees to be paid by Maker pursuant to the
provisions of the Credit Agreement Documents; provided, however, that in no
event shall the amounts payable herein exceed the Maximum Rate.
15. NUMBER AND GENDER.
In this Note the singular shall include the plural and the masculine shall
include the feminine and neuter gender, and vice versa.
16. HEADINGS.
Headings at the beginning of each numbered section of this Note are
intended solely for convenience and are not part of this Note.
17. CHOICE OF LAW.
This Note shall be governed by and construed in accordance with the laws of
the State of Arizona, without giving effect to conflict of laws principles.
18. INTEGRATION.
The Credit Agreement Documents contain the complete understanding and
agreement of the holder hereof and Maker and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations.
19. BINDING EFFECT.
The Credit Agreement Documents will be binding upon, and inure to the
benefit of, the holder hereof, Maker, and their respective successors and
assigns. Maker may not delegate its obligations under the Credit Agreement
Documents.
20. TIME OF THE ESSENCE.
Time is of the essence with regard to each provision of the Credit
Agreement Documents as to which time is a factor.
21. RELATIONSHIP.
The relationship of the parties hereto is that of borrower and lender and
it is expressly understood and agreed that nothing contained in this Note
or in the Credit Agreement shall be interpreted or construed to make Maker
and Payee partners, joint venturers or participants in any other legal
relationship except for borrower and lender.
22. SAVINGS CLAUSE.
This Note and all of the other Credit Agreement 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
Credit Agreement 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 Credit
Agreement Documents, or contracted for, charged, taken, reserved or
received with respect to the indebtedness evidence by this Note, or if the
holder's exercise of the option to accelerate the maturity of this Note, or
if any prepayment by Maker results in Maker having paid any interest in
excess of that permitted by law, then it is the express intent of Maker and
the holder hereof that all excess amount theretofore collected by Holder be
credited on the principal balance of this Note (or, if this Note and all
other indebtedness arising under or pursuant to the other Credit Agreement
Documents have been paid in full, refunded to Maker), and the provisions of
this Note and the other Credit Agreement 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 Maker for the use, forbearance, detention,
taking, charging, receiving or reserving of the indebtedness of Maker to
the holder hereof under this Note or arising under or pursuant to the other
Credit Agreement 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 the holder hereof to contract for, charge or receive a
greater amount of interest, the holder hereof 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 Credit Agreement
Documents, it is not the intention of the holder hereof 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 regulated
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.
23. NOTICES.
Notices under this Note will be given in the manner set forth in the Credit
Agreement.
24. REPLACEMENT NOTE.
This Note is a replacement of that Replacement Promissory Note dated July
1, 1995 in the principal amount of $25,000,000.00 made by Maker and payable
to the holder hereof.
CH MORTGAGE COMPANY, a Colorado corporation
formerly known as American Western Mortgage
Company
By: /s/ Julie E. Collins
--------------------------------------
Name: Julie E. Collins
------------------------------------
Title: Vice President
-----------------------------------
"Maker"
SIXTH MODIFICATION AGREEMENT EXHIBIT 10.3
DATE: November 26, 1995
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 $0.
B. The Loan is secured by, among other things, various Deeds of Trust,
Assignment of Leases and Rents, Security Agreement and Financing Statements
("Deeds of Trust"), by Borrower, as trustor, for the benefit of Bank, as
beneficiary, recorded in records of Bell, Travis, and Williamson Counties, Texas
(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: First Modification
Agreement, dated December 8, 1994, Second Modification Agreement, dated March
15, 1995, Third Modification Agreement, dated May 19, 1995, Fourth Modification
Agreement, dated July 28, 1995, and Fifth Modification Agreement, dated
September 26, 1995. (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", "Deed of Trusts" 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 Conversion Date of the Loan and the Note is changed
from November 26, 1995 to November 15, 1997.
2.1.2 Section 6.22.1 of the Loan Agreement is hereby modified
in its entirety to read as follows:
Tangible Net Worth in an amount not less than $23,000,000.00 as of May
31, 1995, and increasing thereafter during each fiscal quarter (with
the first such fiscal quarter commencing June 1, 1995) 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.
2.1.3 Section 6.22.2 of the Loan Agreement is hereby modified
in its entirety to read as follows:
A Debt to Tangible Net Worth Ratio of not more than 1.70 to 1.
2.1.4 Section 6.22.3 of the Loan Agreement is hereby modified
in its entirety to read as follows:
A Debt to Net Worth Ratio of not more than 1.25 to 1.
2.2 Each of the Loan Documents is modified to provide that it shall be
a default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of Borrower herein or if any representation or
warranty by Borrower herein or by any guarantor in any related Consent and
Agreement of Guarantor(s) is materially incomplete, incorrect, or misleading as
of the date hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents
shall be a reference to such document as modified herein.
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, appraisal, appraisal review,
processing, title, filing, and recording costs, expenses, and fees).
5.3.3 Loan commitment fees as follows:
(a) A commitment fee of one-half of one percent
(.5%) per annum of $15,000,000.00 of the Commitment Amount (i.e., $25,000.00),
for the time period from July 28, 1995 until November 26, 1995.
(b) A commitment fee of one-half of one percent
(.50%) per annum of the remaining $10,000,000.00 of the Commitment Amount (i.e.,
$16,666.00), for the time period from July 28, 1995 until November 26, 1995.
(c) A commitment fee of one-half of one percent
(.5%) per annum of $15,000,000.00 of the Commitment Amount (i.e., $71,875.00),
for the time period from November 26, 1995 until November 15, 1996. Borrower
shall pay a commitment fee in the amount of $75,000.00 on or before November 15,
1996.
(d) A commitment fee of one-quarter of one
percent (.25%) per annum of the remaining $10,000,000.00 of the Commitment
Amount (i.e., $23,959.00), for the time period from November 26, 1995 until
November 15, 1996. Borrower shall pay a commitment fee in the amount of
$25,000.00 on or before November 15, 1996.
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
-----------------------------------
BORROWER
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/ Rhonda R. Williams
--------------------------------------
Name: Rhonda R. Williams
------------------------------------
Title: Assistant Vice President
-----------------------------------
BANK
AMENDED AND RESTATED LOAN AGREEMENT EXHIBIT 10.4
-----------------------------------
DATE: November 30, 1995
PARTIES: Borrower: CONTINENTAL HOMES HOLDING CORP., a
Delaware corporation.
Borrower 7001 North Scottsdale Road
Address: Suite 2050
Scottsdale, Arizona 85253
Bank: BANK ONE, ARIZONA, NA, a national
banking association formerly known as
THE VALLEY NATIONAL BANK OF ARIZONA.
Bank Address: Western Region Real Estate
P.O. Box 29542
Phoenix, Arizona 85038
Attention: Dept. A-383
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: $15,000,000.00.
3.1.1.; 3.2 Commitment Expiration Date: November 30, 1996.
3.2 and 5.1.6 Purpose of Advances: Working capital and general corporate
purposes to be applied (i) to pay costs and expenses incurred in the ordinary
course of Borrower's primary lines of business consisting of the acquisition,
development and subdivision of land for residential purposes and the
construction and sale of residential dwellings to the general public; (ii) to
pay interest due under the Note, the Unused Commitment Fee and the Commitment
Fee; (iii) to pay amounts due under the Set Aside Agreement; or (iv) to pay
amounts due to be reimbursed to Bank for letters of credit issued pursuant to
this Agreement. Advances shall not be available for purposes not described
above.
3.6.1. Commitment Fee: $75,000.00.
3.6.2 Unused Commitment Fee Rate: 1/4% per annum.
2. DEFINITIONS. In this Agreement, the following terms shall have the following
meanings:
"Acquisition Debt" means (i) Debt or Preferred Stock of any Person existing
at the time such Person becomes a Subsidiary of Borrower, including but not
limited to Debt or Preferred Stock incurred or created in connection with, or in
contemplation of, such Person becoming a Subsidiary of Borrower (but excluding
Debt of such Person which is extinguished, retired or repaid in connection with
such Person becoming a Subsidiary of Borrower), (ii) Debt incurred or created by
any Subsidiary of Borrower in connection with the transaction or series of
transactions pursuant to which such Person became a Subsidiary of Borrower or
(iii) Debt incurred or created by any Subsidiary of Borrower in connection with
the acquisition of substantially all of the assets of an operating unit or
business of another Person, provided that, in the case of Debt incurred or
created pursuant to clause (ii) or (iii) hereof, such Subsidiary had no other
prior assets or operations prior to such acquisition, transaction or series of
transactions other than Credit Extensions/Contributions permitted by Section 7.9
or made by a Person other than Borrower or any of its Subsidiaries.
"Adjusted Debt" means all Debt of Borrower on a consolidated basis plus all
accounts payable and other accrued expenses of Borrower on a consolidated basis,
excluding Debt arising from "mortgage banking and title operations" of CHMC and
Travis Title, and excluding the indebtedness of Borrower evidenced by the
Convertible Notes and the Subordinated Notes, all as shown on a consolidated
balance sheet of Borrower prepared in accordance with GAAP and approved by Bank.
"Adjusted Debt to Net Worth Ratio" of any Person means the ratio of all of
such Person's then outstanding Adjusted Debt, on a consolidated basis, excluding
Mortgage Debt, to Net Worth at the end of the fiscal quarter ended immediately
preceding the date of determination.
"Advance" means an advance under the Commitment.
"Affiliate" of any Person means (i) any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person and (ii) any other Person that beneficially owns at least 10% of the
voting common stock of such Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"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 ownership or lease by Borrower
of its assets and property or for the conduct of the business and operations of
Borrower.
"Bank Facility" means, collectively, one or more commitments from one or
more banks or other lending institutions to lend funds together with any and all
agreements, documents and instruments from time to time delivered in connection
therewith as such commitment or any such agreements, documents or instruments
may be in effect or amended, amended and restated, renewed, extended,
restructured, supplemented or otherwise modified from time to time and any
credit agreement, loan agreement, note purchase agreement, indenture or other
agreement, document or instrument refinancing, refunding or otherwise replacing
such Bank Facility, whether or not with the same agent, trustee, representative
lenders or holders, and, subject to the proviso to the next succeeding sentence,
irrespective of any changes in the terms and conditions thereof. Without
limiting the generality of the foregoing, the term "Bank Facility" shall include
any amendment, amendment and restatement, renewal, extension, restructuring,
supplement or modification to any Bank Facility and all refundings, refinancings
and replacements of any Bank Facility, including any agreement (i) extending the
maturity of any Debt incurred thereunder or contemplated thereby, (ii) adding or
deleting borrowers or guarantors thereunder, provided that such borrowers and
issuers include one or more of Borrower and its Subsidiaries and their
respective successors and assigns, (iii) increasing the amount of Debt incurred
thereunder or available to be borrowed thereunder, provided that on the date
thereof such Debt would not be prohibited by clause (b) of the definition of
Permitted Debt, or (iv) otherwise altering the terms and conditions thereof in a
manner not prohibited by the terms of this Agreement.
"Beneficial Owner" means as defined in Rule 13d-3, as in effect on the date
of the execution of this Agreement, promulgated by the Commission under the
Exchange Act.
"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.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of capital stock of
such Person and all warrants or options to acquire such capital stock.
"Carlsbad Property" means the 417 acres owned by the Carlsbad Subsidiary in
Carlsbad, California, located in San Diego County.
"Carlsbad Subsidiary" means Rancho Carillo, Inc., a Delaware corporation and
a Subsidiary of Borrower.
"CHI" means Continental Homes, Inc., a Delaware corporation and a Subsidiary
of Borrower.
"CHICC" means CHI Construction Company, an Arizona corporation and a
Subsidiary of CHI.
"Change in Control" means that any Person, together with its Affiliates or
associates, is or becomes the Beneficial Owner, directly or indirectly, through
a purchase, merger or other acquisition transaction, of shares of capital stock
of Borrower entitling such person to exercise in excess of 50% of the total
voting power of all shares of capital stock of Borrower entitled to vote in
elections of directors.
"CHMC" means CH Mortgage Company, a Colorado corporation formerly known as
American Western Mortgage Company and a Subsidiary of CHI.
"Collateral" means the property, interests in property, and rights to
property securing any or all Obligations from time to time.
"Commission" means The Securities and Exchange Commission.
"Commitment" means the agreement of Bank in Sections 3.1 and 3.2 to issue
Letters of Credit and to make Advances pursuant to the terms and conditions in
the Letter of Credit Agreements and herein.
"Commitment Amount" has the meaning specified in Section 1.
"Consolidated Interest Expense" of any Person means, for any period, the
aggregate amount of interest which, in accordance with GAAP, would be included
on an income statement for such Person and its Subsidiaries on a consolidated
basis, whether expensed directly, or included as a component of cost of goods
sold, or allocated to joint ventures or otherwise (including, but not limited
to, imputed interest included on capitalized lease obligations, all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, the net costs associated with hedging
obligations, amortization of other financing fees and expenses, the interest
portion of any deferred payment obligation, amortization of discount or premium,
if any, and all other non-cash interest expense), excluding interest expense
related to such Person's mortgage banking operations, plus the product of (x)
the sum of (i) cash dividends paid on any Preferred Stock of such Person plus
(ii) cash dividends, the principal amount of any debt securities issued as a
dividend, the liquidation value of any Preferred Stock issued as a dividend and
the fair market value (as determined by such Person's board of directors in good
faith) of any other non-cash dividends, in each case, paid on any Preferred
Stock of any Subsidiary of such Person (other than a wholly-owned Subsidiary),
times (y) a fraction, the numerator of which is one and the denominator of which
is one minus the then current effective aggregate federal, state and local tax
rate of such Person, expressed as a decimal.
"Consolidated Interest Incurred" of any Person means, for any period, (a)
the aggregate amount of interest which, in accordance with GAAP, would be
included on an income statement for such Person and its Subsidiaries on a
consolidated basis, whether expensed directly, or included as a component of
cost of goods sold, or allocated to joint ventures or otherwise (including, but
not limited to, imputed interest included on capitalized lease obligations, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, the net costs associated with
hedging obligations, amortization of other financing fees and expenses, the
interest portion of any deferred payment obligation, amortization of discount or
premium, if any, and all other non-cash interest expense), excluding interest
expense related to such Person's mortgage banking operations, plus or minus,
without duplication, (b) the difference between capitalized interest for such
period and the interest component of cost of goods sold for such period, plus
(c) the product of (x) the sum of (i) cash dividends paid on any Preferred Stock
of such Person plus (ii) cash dividends, the principal amount of any debt
securities issued as a dividend, the liquidation value of any Preferred Stock
issued as a dividend and the fair market value (as determined by such Person's
board of directors in good faith) of any other non-cash dividends, in each case,
paid on any Preferred Stock of any Subsidiary of such Person (other than a
wholly-owned Subsidiary), times (y) a fraction, the numerator of which is one
and the denominator of which is one minus the then current effective aggregate
federal, state and local tax rate of such Person, expressed as a decimal.
"Consolidated Net Income" of any Person, for any period, means the net
income (loss) of such Person and its Subsidiaries for such period, determined on
a consolidated basis, in accordance with 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.
"Consolidated Non-cash Charges" of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges (other than
reserves or expenses established in anticipation of future cash requirements
such as reserves for taxes and uncollectible accounts) of such Person and its
Subsidiaries, on a consolidated basis, for such period, as determined in
accordance with GAAP, provided that Consolidated Non-cash Charges shall exclude
(i) any charges that are not included for the purpose of determining
Consolidated Net Income, (ii) any charges that are included for the purpose of
determining Consolidated Interest Expense or Consolidated Tax Expense and (iii)
any charges representing capitalized selling, general and administrative
expenses that are expensed during such period as cost of goods sold.
"Consolidated Tax Expense" of any Person means, for any period, the
aggregate of the tax expense of such Person and its Subsidiaries for such
period, determined on a consolidated basis, in accordance with GAAP.
"Convertible Notes" means Borrower's $35,000,000.00 6-7/8% Convertible
Subordinated Notes due 2002, issued in connection with the Convertible Notes
Indenture.
"Convertible Notes Indenture" means that certain Indenture, dated March 15,
1992, between Borrower and Manufacturers and Traders Trust Company, as trustee,
with respect to the Convertible Notes.
"Coverage Ratio" of any Person means the ratio of such Person's EBITDA to
its Consolidated Interest Incurred for the four fiscal quarters ending
immediately prior to the date of determination. Notwithstanding clause (ii) of
the definition of Consolidated Net Income, if the Debt which is being Incurred
is Acquisition Debt, the Coverage Ratio shall be determined after giving effect
to both the Consolidated Interest Incurred related to the Incurrence of such
Acquisition Debt and the EBITDA (x) of the Person becoming a Subsidiary of such
Person or (y) in the case of an acquisition of assets that constitute
substantially all of an operating unit or business, relating to the assets being
acquired by such Person.
"Credit Extensions/Contributions" means any direct or indirect advance, loan
or other extension of credit or capital contribution to, or any purchase or
acquisition of capital stock, bonds, notes, debentures or other securities
issued or owned by, any other Person, including, without limitation, payments by
Borrower or any of its Subsidiaries to a Person other than Borrower or any of
its Subsidiaries in connection with an acquisition in which Acquisition Debt is
Incurred.
"Debt" means, as to any Person, without duplication, (a) any indebtedness of
such Person for borrowed money, (b) all indebtedness of such Person evidenced by
bonds, debentures, notes, letters of credit, drafts or similar instruments, (c)
all indebtedness of such Person to pay the deferred purchase price of property
or services, but not including accounts payable and accrued expenses arising in
the ordinary course of business, (d) all capitalized lease obligations of such
Person, (e) 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,
(f) Redeemable Stock, and (g) all Debt of others guaranteed by such Person. The
amount of Debt of any Person at any date pursuant to clauses (a)-(d) and (f)
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.
"EBITDA" for any Person, for any period, means, without duplication, the
Consolidated Net Income of such Person plus, to the extent deducted in
calculating Consolidated Net Income, the sum of (a) Consolidated Tax Expense,
(b) Consolidated Interest Expense and (c) Consolidated Non-cash Charges.
"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" has the meaning specified in the Note and the other Loan
Documents.
"Exchange Act" means The Securities Exchange Act of 1934, as amended.
"Existing Debt" means all of the Debt of Borrower and its Subsidiaries that
is outstanding on the date of this Agreement and listed on Schedule I hereto.
"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.
"Guaranty" or "Guaranties" means individually and collectively, the payment
guaranties of Guarantors of even date herewith.
"Guarantors" means both of the following: CHICC and CHI.
"Incur," "Incurred," "Incurring," "Incurrence" means with respect to any
Person, that such Person has directly or indirectly created, incurred, assumed,
guaranteed, or otherwise become liable for any Debt or other obligation.
"Indenture" means that certain Indenture, dated as of August 1, 1992 between
Borrower and Fidelity Bank, National Association, as Trustee, with respect to
the Public Notes, as amended by that First Supplemental Indenture dated March
22, 1994.
"Intangible Assets" of any Person means such Person's goodwill, patents,
trademarks, copyrights, and all other items which would be treated as
intangibles on the consolidated balance sheet of Borrower and its Subsidiaries
prepared in accordance with GAAP.
"Letter of Credit Agreement" means Bank's standard form Application and
Agreement for Commercial Letter of Credit, Bank's standard form Application for
Standby Letter of Credit and Standby Letter of Credit Agreement, or other
standard application and agreement for letters of credit in use by Bank from
time to time.
"Letters of Credit" means the letters of credit in Bank's standard form from
time to time issued pursuant to Section 3.1.
"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, other right to acquire, or other interest or
right.
"Liquidity" means with respect to any Person, the amount of that Person's
unencumbered cash and unencumbered cash equivalents (including amounts on
deposit with Bank pursuant to Section 6.14 hereof) as determined in accordance
with GAAP, plus, in the case of Borrower, (i) the portion of the Commitment
Amount that is undisbursed and available for disbursement at the time of each
determination of Liquidity, (ii) the amount of the Warehouse Facility that is
undisbursed and available for disbursement at the time of each determination of
Liquidity, and (iii) the amount of other Bank Facilities that is undisbursed and
available for disbursement at the time of each determination of Liquidity.
"Loan Documents" means this Agreement, the Note, the Letter of Credit
Agreements executed and delivered by Borrower in connection with the Letters of
Credit from time to time, the Set Aside Agreement, and any other agreements,
documents, or instruments from time to time evidencing, guarantying, securing,
or otherwise relating to the Note, as they may be amended, modified, extended,
renewed, or supplemented from time to time.
"Loan Party" means Borrower, the Guarantors, and each other Person that from
time to time is or becomes obligated to Bank under any Loan Document or grants
any Collateral.
"Material Adverse Change" means any change in the assets, business,
financial condition, operations, prospects, or results of operations of any Loan
Party or any other event or condition that in the reasonable opinion of Bank (i)
could affect the likelihood of performance by any Loan Party of any of the
Obligations, (ii) could affect the ability of any Loan Party to perform any of
the Obligations, (iii) could affect the legality, validity, or binding nature of
any of the Obligations or any Lien or Encumbrance securing any of the
Obligations, or (iv) could affect the priority of any Lien or Encumbrance
securing any of the Obligations.
"Mortgage Debt" means such mortgage banking debt as would be listed on the
consolidated balance sheet of Borrower prepared in accordance with GAAP.
"Net Worth" of any Person means, 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, and, solely for purposes of determining Borrower's
compliance with the covenant set forth in Section 6.12.3, adjusted to include
(to the extent excluded), in Borrower's case, the indebtedness of Borrower
evidenced by the Convertible Notes and the Subordinated Notes.
"Non-Recourse Debt" means Debt or other obligations to the extent that the
liability for such Debt or other obligations does not extend to Borrower or any
of its Subsidiaries (other than the Subsidiary incurring such Debt or which
holds title to any property securing such Debt) for any deficiency, including
liability by reason of any agreement by Borrower or any of its Subsidiaries to
maintain the financial condition of, keep-well or otherwise support the credit
of the Subsidiary incurring such Debt.
"Note" means the Amended and Restated Promissory Note, dated of even date
herewith, of Borrower payable to Bank, as it may be amended, modified, extended,
renewed, restated, or supplemented from time to time.
"Obligations" means the obligations of the Loan Parties under the Loan
Documents (including, without limitation, the obligation to pay Reimbursement
Amounts and amounts under the Set Aside Agreement).
"Permitted Debt" means:
(a) Debt evidenced by the Public Notes;
(b) Debt Incurred under or in respect of this Agreement or any
other Bank Facility (including any guarantees related thereto) for
working capital or general corporate purposes, Debt evidenced by
letters of credit (including letters of credit issued pursuant to this
Agreement), and guarantees of Debt of the Great Singing Hills joint
venture in excess of amounts committed on the date of the Indenture and
which are Incurred after the date of the Indenture; provided that the
aggregate amount of all such Debt outstanding at any time pursuant to
this clause (b) may not exceed $30,000,000;
(c) Debt Incurred by CHMC under the Warehouse Facility;
(d) Debt of Borrower to any of its Subsidiaries or of any
Subsidiary of Borrower to Borrower or to any other Subsidiary of
Borrower, provided that such Debt is evidenced by a promissory note
that is not pledged to any Person (other than to secure the
Obligations);
(e) Existing Debt (without duplication of Debt indicated under
clauses (a)-(d) above) of Borrower and its Subsidiaries;
(f) Non-Recourse Debt Incurred by the Carlsbad Subsidiary in
an amount not to exceed $18,000,000 at any time outstanding;
(g) Debt in respect of performance, completion, guarantee,
surety and similar bonds or banker's acceptances provided by Borrower
or any of its Subsidiaries in the ordinary course of business;
(h) Purchase Money Obligations incurred in the ordinary course
of business in an amount not exceeding $5,000,000.00 at any time
outstanding;
(i) Acquisition Debt of a Subsidiary of Borrower which, if
Incurred by Borrower, would be permitted pursuant to Section 7.5.2
hereof;
(j) Refinancing Debt; and
(k) Debt evidenced by the Convertible Notes and the
Subordinated Notes.
"Permitted Exceptions" with respect to Borrower and its Subsidiaries means
(i) Liens and Encumbrances securing the Obligations; (ii) Liens and Encumbrances
securing the Warehouse Facility, provided that such Liens and Encumbrances shall
not extend to any assets other than the mortgages, promissory notes and other
collateral that secures mortgage loans made by CHMC; (iii) Liens and
Encumbrances on assets of Borrower or any Subsidiary of Borrower securing the
Bank Facility; provided that the Liens and Encumbrances granted in respect of
the Bank Facility shall not extend to assets having a book value in the
aggregate in excess of two times the amount committed under the Bank Facility;
(iv) Liens and Encumbrances securing Non-Recourse Debt incurred by the Carlsbad
Subsidiary; provided that such Liens shall not extend to any assets of Borrower
or any of its Subsidiaries other than the Carlsbad Subsidiary; (v) Liens and
Encumbrances 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 GAAP; (vi)
statutory Liens and Encumbrances of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other Liens and
Encumbrances imposed by law and arising in the ordinary course of business;
(vii) Liens and Encumbrances (other than any Lien or Encumbrance imposed by
ERISA) deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security; (viii) Liens and Encumbrances 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; (ix) attachment or judgment
Liens and Encumbrances not giving rise to an Event of Default or Unmatured Event
of Default; (x) easements, rights-of-way, restrictions and other similar charges
or encumbrances not materially interfering with the ordinary conduct of the
business of Borrower or any of its Subsidiaries; (xi) leases or subleases
granted to others not materially interfering with the ordinary conduct of the
business of Borrower or any of its Subsidiaries; (xii) Liens and Encumbrances
with respect to Acquisition Debt; provided that such Liens and Encumbrances do
not extend to any other assets of Borrower or the assets of any of Borrower's
other Subsidiaries; (xiii) 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 and such Liens and Encumbrances do not
extend to any other assets of Borrower or to the assets of Borrower's other
Subsidiaries; (xiv) Liens securing Purchase Money Obligations (including
capitalized lease obligations); (xv) Liens existing on the date of this
Agreement; and (xvi) any contract to sell an asset provided such sale is
otherwise permitted under this Agreement (and the foregoing shall not constitute
a consent of Bank to a sale or obligate Bank to consent to a sale).
"Permitted Payments" means, with respect to Borrower or any of its
Subsidiaries, (i) the redemption, repurchase or other acquisition or retirement
of any shares of any class of Capital Stock in exchange for (including any
exchange pursuant to the exercise of a conversion right or privilege in
connection with which cash is paid in lieu of the issuance of fractional
shares), or out of the proceeds of a substantially concurrent issue and sale
(other than to a Subsidiary) of, shares of Capital Stock (other than Redeemable
Stock) of Borrower, provided that the proceeds of any such issuance and sale of
shares of capital stock of Borrower shall not be included in determination of
amounts available for Restricted Payments, (ii) any dividend or other
distribution on any shares of its Capital Stock payable by a Subsidiary to
Borrower or another of its Subsidiaries, or (iii) any wages or other
compensation paid by Borrower or any of its Subsidiaries to their employees.
"Person" means any individual, corporation, partnership, association, trust
or other entity or organization, including a government or political subdivision
or agency or instrumentality thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding or issued after
the date of this Agreement, and including, without limitation, all classes and
series of preferred or preference stock.
"Public Notes" means Borrower's $110,000,000.00 12% Senior Notes due 1999.
"Purchase Money Obligations" means Debt of any Person secured by Liens (i)
on property purchased, acquired, or constructed by such Person or its
Subsidiaries after the date of the Indenture and used in the ordinary course of
business by such Person and (ii) securing the payment of all or any part of the
purchase price or construction cost of such assets and limited to the property
so acquired and improvements thereof; provided that such Debt is incurred no
later than 90 days after the acquisition of such property or completion of such
construction or improvements.
"Redeemable Stock" means, with respect to any Person, any class or series of
Capital Stock of such Person that is redeemable at the option of the holder
(except pursuant to a change in control provision that does not (i) cause such
Capital Stock to become redeemable in circumstances which would not constitute a
Change in Control and (ii) require Borrower to pay the redemption price therefor
prior to the repayment in full of all Obligations, the expiration of all Letters
of Credit, and the expiration of the Commitment), or is subject to mandatory
redemption or otherwise matures prior to the final stated maturity of the Public
Notes.
"Refinancing Debt" means Debt that refunds, refinances or extends the Public
Notes, Existing Debt (other than Existing Debt repaid with the net proceeds of
Advances pursuant to this Agreement) or other Debt incurred by Borrower or its
Subsidiaries pursuant to the terms of the Indenture and this Agreement, but only
to the extent that (i) the Refinancing Debt is subordinated to the Obligations
and the Public Notes to the same extent as the Debt being refunded, refinanced
or extended, if at all, (ii) the Refinancing Debt is scheduled to mature either
(a) no earlier than the Debt being refunded, refinanced or extended, or (b)
after the maturity date of the Public Notes, (iii) the portion, if any, of the
Refinancing Debt that is scheduled to mature on or prior to the maturity date of
the Public Notes has a Weighted Average Life to Maturity at the time such
Refinancing Debt is Incurred that is equal to or greater than the Weighted
Average Life to Maturity of the portion of the Debt being refunded, refinanced
or extended that is scheduled to mature on or prior to the maturity date of the
Public Notes, (iv) the obligor of such Refinancing Debt shall be Borrower or the
same obligor as the Debt being refunded, refinanced or extended, and (v) the
gross proceeds of such Refinancing Debt is an amount that is equal to or less
than the aggregate principal amount then outstanding under the Debt being
refunded, refinanced or extended.
"Reimbursement Amount" means the amount Borrower is obligated to pay to Bank
under a Letter of Credit Agreement in respect of a draft drawn or drawn and
accepted under the respective Letter of Credit, which amount shall be the amount
of the draft or acceptance and all costs, expenses, fees, and other amounts then
payable by Borrower to Bank under the Letter of Credit Agreements.
"Restricted Payments" means, with respect to any Person (i) any dividend or
other distribution on any shares of such Person's Capital Stock (except
dividends or distributions in additional shares of Capital Stock other than
Redeemable Stock), (ii) any payment on account of the purchase, redemption or
other acquisition of (a) any shares of such Person's Capital Stock or (b) any
option, warrant or other right to acquire shares of such Person's Capital Stock,
(iii) any Credit Extensions/Contributions to Affiliates Incurred after the date
of the Indenture; provided, that for purposes of this provision an individual
shall not be deemed to be an Affiliate of Borrower or any of its Subsidiaries
solely because such individual is employed by Borrower or any of its
Subsidiaries or, (iv) any principal payment, redemption, repurchase, defeasance
or other acquisition or retirement (other than the retirement of any
Subordinated Notes upon conversion of such of the Subordinated Notes pursuant to
the terms of the Subordinated Notes Indenture), prior to scheduled principal
payment or scheduled maturity, of Debt of Borrower or its Subsidiaries which is
subordinated in right of payment to the Public Notes and the Note, provided,
however, that with respect to Borrower and its Subsidiaries, Restricted Payments
shall not include (a) any payment described in clause (i), (ii) or (iii) above
made to Borrower or any of its Subsidiaries (other than the Carlsbad Subsidiary
(in the case of clause (iii)) or any of its Subsidiaries which has liability in
respect of Acquisition Debt) by Borrower or any of its Subsidiaries, or (b) any
underwritten call of the Subordinated Notes or other Debt of Borrower which is
convertible into Capital Stock (other than Redeemable Stock) but only to the
extent Borrower is not required to make any redemption or principal payments in
respect of Debt subject to such underwritten call (other than redemption and
principal payments which are covered by the net proceeds received by Borrower
from a concurrent sale of Capital Stock (other than Redeemable Stock) to the
underwriters effecting such underwritten call).
"Set Aside Agreement" has the meaning set forth in Section 3.5.
"Set Aside Amount" has the meaning set forth in Section 3.5.
"Standard Number of Days" means the standard number of days established by
Bank from time to time to allow for delivery to Bank of drafts drawn under
Letters of Credit presented to financial institutions other than Bank for
delivery to Bank. Bank may change such number of days at any time and from time
to time in its absolute and sole discretion without notice to Borrower and may
have a different number of days for commercial letters of credit and standby
letters of credit.
"Subordinated Notes" means Borrower's $86,250,000.00 6-7/8% Convertible
Subordinated Notes due 2002, issued in connection with the Subordinated Notes
Indenture.
"Subordinated Notes Indenture" means that certain Indenture dated November
1, 1995 between Borrower and Manufacturers and Traders Trust Company, as
trustee, with respect to the Subordinated Notes.
"Subsidiary" and "Subsidiaries" mean, with respect to any Person, (i) any
corporation of which a majority of the capital stock having ordinary voting
power to elect a majority of the board of directors or other Persons performing
similar functions is at the time directly or indirectly owned by such Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) any partnership or joint venture at least a majority of the voting power
of which is at the time directly or indirectly owned by such Person or one or
more of the other Subsidiaries of that Person or a combination or successor
thereof.
"Tangible Net Worth" of any Person means such Person's Net Worth less such
Person's Intangible Assets.
"Unmatured Event of Default" means any condition or event that with notice,
passage of time, or both would be an Event of Default.
"Warehouse Facility" means the Second Amended and Restated Warehousing
Credit and Security Agreement dated as of July 1, 1995 between Bank and CHMC, as
the same may be amended, modified, extended, renewed, restated and supplemented
from time to time.
"Weighted Average Life to Maturity" means, when applied to any Debt or
portion thereof, if applicable, at any date, the number of years obtained by
dividing (i) the then outstanding principal amount of such Debt or portion
thereof, if applicable, into (ii) the sum of the products obtained by
multiplying (a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including payment at
final maturity, in respect thereof, by (b) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment.
3. LETTERS OF CREDIT AND LOAN FACILITY.
3.1 Letters of Credit.
3.1.1 Issuance of Letters of Credit. Subject to the terms and
conditions of this Agreement and the 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
Commitment expiration date specified in Section 1, 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 the date that is the Standard
Number of Days after the last date for payment of drafts drawn or drawn and
accepted under a requested Letter of Credit is before the Commitment expiration
date specified in Section 1. 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.
3.1.2 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, Bank will issue the requested Letter of Credit;
provided, however, that unless otherwise agreed by Bank in its sole and absolute
discretion Borrower shall be entitled to request that Bank issue Letters of
Credit only in connection with, and as security for, the construction of offsite
improvements by Borrower for residential subdivisions being developed by
Borrower in the ordinary course of Borrower's business.
3.1.3 Reimbursement of Bank for Payment of Drafts Drawn or Drawn and
Accepted Under Letters 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 respective 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 respective 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 Business Days
after notification by Bank of payment of the draft or acceptance, 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. Each Advance to pay a 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 Interest 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 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.
3.2 Loan Facility. Subject to the terms and conditions of this Agreement,
Bank agrees to make Advances to Borrower from time to time on or before the
Commitment expiration date specified in Section 1. Proceeds of Advances may be
used only to pay Reimbursement Amounts due to Bank under Letter of Credit
Agreements, amounts due to Bank under the Set Aside Agreement, and for any other
purposes described in Section 1. Advances shall be on a revolving basis.
Advances prepaid may be re-borrowed subject to the terms and the conditions
herein. 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, all 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. Upon
occurrence of an Event of Default, an Unmatured Event of Default or the
violation of any of the financial covenants set forth in Section 6.12.1, 6.12.2
or 6.12.3 hereof (regardless of whether such violation otherwise is an Event of
Default or Unmatured Event of Default), Bank, in its absolute and sole
discretion and without notice, may suspend the commitment to make Advances. In
addition, upon the 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 Advances is evidenced by the Note.
3.3 Requests for Letters of Credit and Advances. Letters of Credit may be
issued and Advances may be made, in accordance with the terms hereof, by Bank at
the written request of the Person or Persons designated in a signature
authorization form delivered to Bank from time to time by Borrower. Such Person
or Persons are hereby authorized by Borrower to request Letters of Credit and
Advances, to execute and deliver Letter of Credit Agreements, and to direct
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 Letters of Credit or proceeds of
Advances. Advances shall be disbursed by Bank into an account of Borrower with
Bank, provided, however, that Advances to pay Reimbursement Amounts shall be
paid to Bank.
3.4 Limit on Letters of Credit and Advances. 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, (iv) the Set Aside
Amount less any portion of the Set Aside Amount that has been advanced by Bank
pursuant to this Agreement and thereafter repaid by Borrower, and (v) the amount
of outstanding and unpaid Advances shall not exceed the Commitment Amount. In
addition, anything in the Loan Documents to the contrary notwithstanding, the
sum from time to time of the amounts described in clauses (i), (ii), (iii) and
(iv) of the immediately preceding sentence shall not exceed ten percent (10%) of
the Commitment Amount.
3.5 Set Aside Agreement. Borrower and Bank have entered into (or may enter
into after execution hereof) a Set Aside Agreement (the "Set Aside Agreement")
in connection with a loan from Bank to Surprise Village North L.L.C. and
Continental Traditions L.L.C., which loan relates to certain real property
located in Surprise, Arizona. Pursuant to the terms of the Set Aside Agreement,
Borrower agreed to "set aside" a portion of the Commitment Amount in the sum of
$1,500,000.00 (the "Set Aside Amount") for purposes of paying certain release
prices as more fully described therein. Bank, from time to time in its sole and
absolute discretion and without notice to Borrower and regardless of whether the
terms and conditions in this Agreement for Advances are satisfied, may make an
Advance under this Agreement in the amount owed under the Set Aside Agreement
and apply the proceeds of such Advance to pay such amount.
3.6 Fees. As additional consideration for the Commitment, Borrower agrees to
pay to Bank the following fees, which shall be earned by Bank on the date due
under the Loan Documents and shall be non-refundable to Borrower:
3.6.1 Commitment Fee. A fee for the Commitment in the amount set forth
in Section 1, payable on or before the date hereof.
3.6.2 Unused Commitment Fee. An unused commitment fee computed at the
rate per annum set forth in Section 1 on the unused portion of the 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 (a) the
Commitment Amount minus (b) the "average monthly outstandings" for the month (or
portion thereof) with respect to which the unused commitment fee is being
computed, with the resulting number multiplied by (c) one-twelfth (1/12th) of
the annual fee. As used herein, "average monthly outstandings" means the sum of
the outstanding amount of the Advances on each day during the month (or portion
thereof for which the fee is being computed) with respect to which the unused
commitment fee is being computed, divided by the number of days in that month
(or portion thereof). If the Unused Commitment Fee is being computed for less
than a full month, the percentage used in clause (c) above shall be computed on
a daily basis for the number of days for which the fee is being computed.
3.6.3 Attorneys' Costs, Expenses, and Fees. Attorneys' costs, expenses,
and fees for Bank's counsel in the amount specified by Bank, payable on or
before the date hereof.
4. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT AND THE COMMITMENT.
4.1 Conditions Precedent to Closing and Commitment. This Agreement and the
Commitment shall become effective only upon satisfaction of the following
conditions precedent, 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 No Event of Default or Unmatured Event of Default. No condition
or event has occurred that is an Event of Default or an Unmatured Event of
Default.
4.1.3 No Material Adverse Change. No Material Adverse Change has
occurred.
4.1.4 Receipt of Documents. Bank has received the following duly
executed by the parties thereto and in form and substance satisfactory to Bank
in its absolute and sole discretion.
4.1.4.1 Loan Documents. The Loan Documents.
4.1.4.2 Corporate or Partnership Documents. If any Loan Party is a
corporation, limited liability company, or a partnership, certified copies of
(a) resolutions of its board of directors, members, or partners, as the case may
be, authorizing such Loan Party to execute, deliver, and perform pursuant to its
Loan Documents and to grant to Bank the Liens and Encumbrances provided in the
Loan Documents and certifying the names and signatures of the officers or
partners, as the case may be, of such Loan Party authorized to execute the Loan
Documents on behalf of such Loan Party, (b) the certificate of incorporation and
bylaws, articles of organization, limited liability company operating agreement,
or partnership agreement, as the case may be, of such Loan Party, (c) a
certificate of good standing as a corporation, limited liability company, or
limited partnership, as the case may be, from such Loan Party's State of
organization, and if not Arizona, a certificate of qualification as a foreign
corporation, limited liability company, or limited partnership, as the case may
be, authorized to transact business in the State of Arizona, from the State of
Arizona.
4.1.5 Completion of Filings. Bank has received evidence of the
completion of all filings to establish or maintain the perfection and the
priority of the Liens and Encumbrances granted in the Loan Documents.
4.1.6 Payment of Costs, Expenses, and Fees. All costs, expenses, and
fees to be paid by the Loan Parties on or before the effectiveness of this
Agreement shall have been paid in full.
4.1.7 Opinion Letter. Bank has received a favorable opinion from
Borrower's in-house counsel in form and substance satisfactory to Bank and its
counsel.
4.1.8 Financial Statements. Bank has received financial statements
including, without limitation, a balance sheet, cash flow statement and income
statement, of Borrower and each other Loan Party (or consolidated statements
reflecting such information with respect to Borrower and the other Loan
Parties), certified by Borrower and each other Loan Party.
4.1.9 Commitment Fee. Borrower has paid the Commitment Fee.
4.1.10 Other Items. Bank has received such other items or documents as
Bank may require.
4.2 Conditions Precedent to Advances and the Issuance of Letters of
Credit. Bank's obligation to make Advances or to issue Letters of Credit shall
become effective only upon satisfaction by Borrower, at Borrower's sole cost and
expense, of the conditions precedent set forth in Section 4.1 and the following
conditions precedent with respect to each Advance or Letter of Credit.
4.2.1 Representations and Warranties. The representations and
warranties by the Loan Parties in the Loan Documents are correct on and as of
the date of each Advance or the date of issuance of each Letter of Credit, as
applicable, as though made on and as of such date and after giving effect to
such Advance or issuance.
4.2.2 No Event of Default or Unmatured Event of Default:
Compliance with Certain Financial Covenants. No condition or event has occurred
that is an Event of Default or an Unmatured Event of Default both before and
after giving effect to such Advance or issuance. Borrower is in compliance with
the financial covenants set forth in Section 6.12.1, 6.12.2 and 6.12.3 hereof
both before and after giving effect to such Advance or issuance.
4.2.3 No Material Adverse Change. No Material Adverse Change has
occurred.
4.2.4 Draw Request. With respect to any Advance, Bank has received
a draw request in the form of Exhibit A hereto from Borrower, not less than one
(1) Business Day prior to the date for which such Advance is requested,
specifying the amount of the Advance requested and supported by such
documentation as Bank may require.
4.2.5 Letters of Credit. With respect to any Letter of Credit,
Borrower shall have complied with the terms and conditions of Section 3 hereof.
4.2.6 Other Items. Bank has received such other items or documents
as Bank may require.
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, the effectiveness of the Commitment, and/or as a requirement for a
particular Advance or Letter of Credit. Any such waiver shall be limited to the
condition(s) precedent specifically described therein and the requirements
therein. Delay or failure by Bank to insist on satisfaction of any condition of
an Advance or issuance of a Letter of Credit 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 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.
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 Borrower Loan Documents. The
execution, delivery, and performance by Borrower of 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. If
Borrower is not formed or organized under the laws of the State of Arizona,
Borrower is qualified to do business as a foreign corporation, limited liability
company, or partnership, as the case may be, and in the case of a corporation or
limited liability company is in good standing, under the law of the State of
Arizona.
5.1.2 No Approvals. 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 Borrower Loan Documents.
5.1.3 No Conflicts. The execution, delivery, and performance by
Borrower of 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 or 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 (including, without limitation, any
agreement, document or instrument in connection with the Public Notes, the
Convertible Notes, the Subordinated Notes, any Bank Facility and any other
Existing Indebtedness). This Agreement and the Commitment constitute a "Bank
Facility" as that term is defined in the Indenture; the Obligations constitute
"Permitted Debt" as that term is defined in the Indenture; the Obligations rank
pari passu with the Public Notes and are senior to the Convertible Notes and the
Subordinated Notes.
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 as to Borrower since the date
of such information. All financial statements heretofore delivered to Bank by
Borrower were prepared in accordance with the requirements set forth in this
Agreement and accurately present the financial condition and results of
operations of Borrower as at the dates thereof and for the periods covered
thereby.
5.1.6 Purpose of Advances. The purpose of the Advances is as set forth
in Section 1.
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.
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. No
event of default or event which with notice or lapse of time or both would
become an event of default has occurred or is continuing with respect to the
Public Notes, the Convertible Notes, the Subordinated Notes, any Bank Facility,
or any other Debt of Borrower.
5.1.9 Approvals and Permits: Assets and Property. Borrower has obtained
and there are in full force and effect all Approvals and Permits. 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 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 and 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 Guaranty 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 Environmental Matters. The information in any environmental
questionnaire delivered to Bank is accurate and complete with no material
omissions therefrom as of the date thereof. 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 Borrower, the assets or property
of Borrower, the business or operations of Borrower, or the products or services
of 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.
5.1.13 Investment Company Act. Borrower is not an "investment company"
or a company controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. Borrower is not a "holding company"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
5.1.14 Margin Securities. Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds of Advances will be used to purchase or carry
any margin stock or extend credit to others for the purpose of purchasing or
carrying margin stock or for any purpose that -violates or is inconsistent with
Regulation X of the Board of Governors.
5.2 Representations and Warranties Upon Requests for Advances or Letters of
Credit. Each request for an Advance or a Letter of Credit 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 of the
Advance or the issuance of the Letter of Credit and that the conditions
precedent in Section 4 are satisfied as of the date of the Advance or the
issuance of the Letter of Credit.
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 or Letter of Credit) 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,
until all Letters of Credit expire or are drawn in full until all drafts drawn
or drawn and accepted under Letters of Credit are paid in full, and until 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. If Borrower is not formed or
organized under the laws of the State of Arizona, Borrower shall continue to be
qualified to do business as a foreign corporation, limited liability company, or
partnership, as the case may be, and in the case of a corporation or limited
liability company to be in good standing, under the law of the State of Arizona.
6.2 Books and Records; Access By Bank. Borrower will maintain a single,
standard, modern system of accounting (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, books, documents,
property, and records of Borrower and will permit such representatives to
inspect such assets and property and to audit, copy, examine, and make excerpts
from such books, documents, and records.
6.3 Information and Statements. Borrower shall furnish to Bank:
6.3.1 Monthly Financial Statements. As soon as available and in any
event within thirty (30) days after the end of each calendar month, a balance
sheet, statements of income and, at Bank's request, reconciliation of net worth
of Borrower and each Guarantor for the immediately preceding month, all in
reasonable detail and certified by the chief financial officers of Borrower, and
each Guarantor, subject, however, to year-end audit adjustments.
6.3.2 Quarterly Financial Statements. As soon as available and in any
event within forty-five (45) days after the end of each of the first three
quarters in each fiscal year, unaudited consolidated financial statements of
Borrower and its Subsidiaries (including, without limitation, cash flow
reports), as contained in its Form 10-Q quarterly reports to the Commission for
the relevant three, six and nine month periods.
6.3.3 Annual Financial Statements. As soon as available and in any
event within ninety (90) days after the end of each fiscal year of Borrower, (i)
the consolidated (and, if required by Bank, the consolidating) financial
statements of Borrower and its Subsidiaries as contained in its Form 10-K annual
report to the Commission, and (ii) copies of the consolidated (and, if required
by Bank, the consolidating) balance sheet of Borrower and its Subsidiaries 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, prepared in accordance with GAAP, which financial
statements shall be audited by independent certified public accountants
satisfactory to Bank, and accompanied by an unqualified opinion of such
accountants with respect to such financial statements. As soon as available and
in any event within ten (10) days prior to the beginning of each fiscal year,
Borrower shall furnish to Bank a budget, and cash flow projection for that
fiscal year.
6.3.4 Officer's Certificate. Together with each delivery of financial
statements pursuant to Sections 6.3.1 through 6.3.3 above, an officer's
certificate of Borrower and each Guarantor stating that the signers have
reviewed the terms of this Agreement and have made, or caused to be made under
their supervision, a review in reasonable detail of the transactions and
conditions of Borrower and each Guarantor during the accounting period covered
by such financial statements, and that such review has not disclosed the
existence during or at the end of such accounting period, and that the signers
do not have knowledge of the existence as of the date of the officer's
certificate, of any Event of Default or Unmatured Event of Default or, if any
Event of Default or Unmatured Event of Default existed or exists, specifying the
nature and period of the existence thereof and what action Borrower has taken,
is taking, and proposes to take with respect thereto. Together with each
quarterly financial statement required pursuant to Section 6.3.2, Borrower shall
provide an officer's certificate in the form of Exhibit B hereto with respect to
compliance with the financial and other covenants set forth in any documents
relating to the Public Notes, any documents relating to any Bank Facility, or
this Agreement.
6.3.5 Filings, Etc. As and when filed, copies of all regular or
periodic financial and other reports, if any, which Borrower or any Guarantor
shall file with the Commission or any other Governmental Authority.
6.3.6 Sales Reports. As soon as available and in any event at least
once each month, sales, inventory and backlog reports on each homebuilding
Subsidiary of Borrower.
6.3.7 Required Backup. Upon request by Bank from time to time,
"consolidating" statements and other detail required by Bank with respect to any
of the financial statements described in Sections 6.3.1 through 6.3.3 above.
6.3.8 Other Information. Such other information concerning Borrower and
the assets, business, financial condition, operations, property, prospects, and
results of operations of Borrower as Bank reasonably requests from time to time.
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 Government Authority relating to
Borrower 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 or any of the
assets or property of Borrower is bound or affected. Borrower shall obtain and
maintain in full force and effect all Approvals and Permits and shall comply
with all conditions and requirements of all Approvals and Permits.
<PAGE>
6.5 Taxes and Other Indebtedness. Borrower will 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 of its assets or
property (except to the extent permitted to be contested pursuant to clause (v)
of the definition of Permitted Exceptions), (ii) when due all lawful claims
(including, without limitation, claims for labor, materials, and supplies),
that, if unpaid, might become a Lien or Encumbrance upon any of its assets or
property, and (iii) when due all its other Debt.
6.6 Assets and Property. Borrower will maintain, keep, and preserve all
of its assets and property (tangible and intangible) 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. In addition to any insurance required under any of the
other Loan Documents, Borrower shall maintain workmen's compensation insurance,
product and public liability insurance, insurance on its assets and property now
or hereafter owned, and such other forms of insurance as is customary in the
industry of Borrower, against such casualties, risks, and contingencies, in such
amounts, and with such insurance companies as are satisfactory to Bank, in its
reasonable discretion. Borrower shall deliver to Bank from time to time as Bank
may request, schedules setting forth all insurance then in effect and copies of
policies.
6.8 Environmental Laws. Without limiting the generality of Section 6.4,
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 Bank 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.
6.9 ERISA. Borrower will fund each Defined Benefit Plan and Defined
Contribution Plan (as such terms are defined in ERISA) 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 Further Assurances. Borrower shall promptly execute, acknowledge,
and deliver and, as appropriate, cause to be duly filed and recorded 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, perfect, preserve, and protect the interest of Bank in the Collateral
and the rights and remedies of Bank under the Loan Documents.
6.11 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.
6.12 Financial Covenants. Except as otherwise noted, all financial
computations shall be made in accordance with GAAP. Until the Commitment
terminates in full, until all Letters of Credit expire or are drawn in full,
until all drafts drawn or drawn and accepted under Letters of Credit are paid in
full, and until the Obligations are paid and performed in full, Borrower agrees
that, unless Bank otherwise agrees in writing in Bank's absolute and sole
discretion, as of the end of each quarterly fiscal period, Borrower shall
maintain:
6.12.1 Tangible Net Worth. A minimum Tangible Net Worth in the
amount of $90,000,000.00.
6.12.2 Liquidity. A minimum Liquidity of $5,000,000.00.
6.12.3 Adjusted Debt to Net Worth Ratio. An Adjusted Debt to Net
Worth Ratio of not more than 1.50 to 1.
6.13 Clean-Up. With respect to (i) the six-month period commencing on
November 30, 1995 and ending on May 31, 1996, Borrower shall not have any
Advances outstanding pursuant to this Agreement for a period of at least fifteen
(15) or thirty (30) consecutive days, (as elected by Borrower) and (ii) the
period commencing on June 1, 1996 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) or fifteen (15)
consecutive days (as elected by Borrower, such that the period elected by
Borrower in clause (ii) is different than the period elected by Borrower in
Clause (i)).
6.14 Compensating Balances. Borrower shall at all times maintain on
deposit with Bank (i) free, collected, non-interest-bearing compensating
balances in the amount of not less than $500,000.00 and (ii) such additional
compensating balance deposits (which may be interest bearing) as may be
necessary to cause the total deposits maintained at Bank (including amounts
maintained pursuant to clause (i) of this sentence) to be equal to or greater
than two-thirds of the total deposits maintained by Borrower with all financial
institutions.
6.15 Appraisals. Bank shall have the right, which Bank may exercise
from time to time, to obtain appraisals of Borrower's real estate assets. All
such appraisals shall be in form and reflect values satisfactory to Bank.
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 Bank in connection therewith; provided that Borrower shall be obligated to
pay such costs and expenses only if and to the extent such appraisals are
required (i) by the consistent application of Bank's internal policies and
procedures that are generally applicable to secured or unsecured loans made by
Bank to Persons engaged in businesses similar to that of Borrower, (ii) by
applicable laws, rules and regulations or (iii) in connection with the exercise
of Bank's rights under Section 8 hereof.
7. BORROWER NEGATIVE COVENANTS. Until the Commitment terminates in full, until
all Letters of Credit expire or are drawn in full, until all drafts drawn or
drawn and accepted under Letters of Credit are paid in full, and until the
Obligations are paid and performed in full, Borrower agrees that, unless Bank
otherwise agrees in Bank's absolute and sole discretion:
7.1 Corporate, Limited Liability Company, and Partnership Restrictions. If
Borrower, or any Subsidiary, is a corporation, a limited liability company, or a
partnership, Borrower shall not and, except for sales of stock in the Carlsbad
Subsidiary, shall not permit any Subsidiary to, issue any capital stock or other
securities of or any limited liability company interest or partnership interest
in Borrower, or any Subsidiary, or grant any option (except in connection with
employee stock option plans), 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 or any Subsidiary. Borrower
shall not be dissolved or liquidated and shall not permit any Subsidiary to be
dissolved or liquidated. Borrower shall not, and shall not permit any Subsidiary
to, 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. Borrower shall not, and shall not
permit any Subsidiary to, reorganize itself or consolidate with or merge into
any other corporation or permit any other corporation to be merged into
Borrower. Any provision of this Section 7.1 to the contrary notwithstanding,
this Section 7.1 shall not restrict or limit the issuance of Common Stock that
is authorized but unissued as of the date hereof or held in treasury as of the
date hereof if and to the extent such issuance is made in satisfaction of
Borrower's obligation to permit conversion of the Convertible Notes to Common
Stock pursuant to the terms of such notes. Provisions of this Agreement other
than this Section 7.1 that appear to contemplate or refer to sales or issuances
of capital stock or other securities, but do not expressly authorize such sales
or issuances, shall not be deemed to be consent of Bank to any such sales or
issuances.
7.2 Change in or Reacquisition of Ownership Interests in Borrower. 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 any Subsidiary (except for sales of
stock in the Carlsbad Subsidiary), without the prior written consent of Bank in
its absolute and sole discretion.
7.3 Name, Fiscal Year, Accounting Method, and Lines of Business. Borrower
shall not change its name, fiscal year, or method of accounting. Borrower shall
not directly or indirectly, engage in any business other than the line(s) of
business in which Borrower is engaged on the date of this Agreement, discontinue
any existing line(s) of business, or substantially alter its method of doing
business.
7.4 Acquisition of All or Substantially All Assets. Borrower shall not, and
shall not permit any Subsidiary to, acquire by purchase, lease, or otherwise all
or substantially all the assets of any other Person.
<PAGE>
7.5 Limitation on Debt.
7.5.1 General Prohibition. Borrower will not, and will not permit any
of its Subsidiaries to, directly or indirectly, Incur any Debt except Permitted
Debt. No Permitted Debt shall contain any terms or conditions that would
conflict with or be violated by any of Bank's rights hereunder, including
without limitations, Bank's rights pursuant to Section 8 hereof.
7.5.2 Additional Debt Allowed. Notwithstanding Section 7.5.1 hereof,
and subject to the immediately succeeding paragraph, Borrower may Incur Debt if,
at the time such Debt is so Incurred and after giving effect thereto and the
application of the proceeds therefrom, each of the following is true: (i)
Borrower has a Coverage Ratio of not less than 2.2 to 1.0; (ii) Borrower is in
compliance with Section 6.12 hereof and (iii) no Event of Default or Unmatured
Event of Default has occurred.
Borrower shall not Incur any Debt (other than the Obligations and
Permitted Debt) that is pari passu with the Public Notes or the Obligations or
requires any principal payment, redemption payment or sinking fund payment
thereon, in whole or in part, to be made prior to or at the final stated
maturity of the Public Notes or the Obligations; provided that entering into an
agreement that requires Borrower to make an offer to purchase outstanding Debt
upon the occurrence of certain specified events shall not be deemed to be
restricted by this paragraph.
For purposes of this Section 7.5, any waiver, extension or continuation
of any or all mandatory prepayments or installment payments or the maturity date
of any of the Debt Incurred pursuant to this Section 7.5 shall not be or be
deemed to be the Incurrence of Debt by Borrower.
7.6 Limitations on Liens and Encumbrances. Borrower will not, and will not
permit any of its 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 any such Subsidiary, whether now owned or hereafter acquired, or on
any income or profits therefrom; provided that the foregoing shall not prohibit
Permitted Exceptions.
7.7 Limitations on Sales, Transfers, etc. Borrower will not, directly or
indirectly, and will not permit any of its Subsidiaries to, sell, assign,
transfer or otherwise dispose of any Capital Stock of any Subsidiary or sell,
assign, transfer or otherwise dispose of any assets of Borrower or any
Subsidiary except for (i) sales or issuance of stock expressly permitted
pursuant to Section 7.1 hereof, (ii) sales of assets in the ordinary course of
business of any Subsidiary, and (iii) sales to Borrower or a wholly-owned
Subsidiary of Borrower (except as such sales may be prohibited by the next
sentence). Borrower will not, directly or indirectly, permit the Carlsbad
subsidiary to sell, assign, transfer or otherwise dispose of all or a portion of
the Carlsbad Property to Borrower or any of its Subsidiaries (other than the
Carlsbad Subsidiary).
7.8 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 $2,500,000 in any fiscal quarter. For the purpose of
determining Consolidated Net Income in this Section 7.8, 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.
7.9 Limitation on Restricted Payments. Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly, make any Restricted
Payment, if, after giving effect thereto:
(a) an Event of Default or an Unmatured Event of Default shall have
occurred and be continuing, or
(b) the aggregate amount of all Restricted Payments (giving effect to
Restricted Payments that are Credit Extensions/Contributions only to the
extent then outstanding) made by Borrower and its Subsidiaries (the amount
expended or distributed for such purposes, if other than in cash, to be
determined in good faith by the board of directors of Borrower) from and
after the date hereof shall exceed the sum of:
(i) the aggregate of 50% of the Consolidated Net Income of
Borrower accrued for the period (taken as one accounting period)
commencing with February 1, 1993 to and including the first full month
ended immediately prior to the date of such calculation (or, in the
event Consolidated Net Income is a deficit, then minus 100% of such
deficit),
(ii) the aggregate net cash proceeds received by Borrower for the
period (taken as one accounting period) commencing with February 1,
1993 to and including the first full month ended immediately prior to
the date of such calculation from the issuance or sale (other than to a
Subsidiary of Borrower) of its Capital Stock (other than Redeemable
Stock), including the principal amount of any Subordinated Notes or
other convertible securities issued for cash that are converted to
Capital Stock from and after the date of this Agreement, and options,
warrants and rights to purchase its Capital Stock (other than
Redeemable Stock),
(iii) amounts received by Borrower or any of its Subsidiaries
representing a return of capital or Credit Extensions/Contributions
made to the Great Singing Hills joint venture outstanding on the date
of the Indenture and
(iv) $8,780,953.
The foregoing clauses (a) and (b) will not prevent (i) Permitted Payments, (ii)
the payment of any dividend within 60 days after the date of its declaration if
such dividend could have been made on the date of its declaration in compliance
with the foregoing provisions, and (iii) the repurchase or redemption of shares
of Capital Stock from any officer, director or employee of Borrower or its
Subsidiaries whose employment has been terminated or who has died or become
disabled in an aggregate amount not to exceed $500,000 per annum; provided that
amounts paid pursuant to clause (iii) shall reduce amounts available for future
Restricted Payments.
8. SECURITY.
8.1 Bank's Right to Demand Security. Upon the occurrence of any Event of
Default, Bank shall have all of the rights and remedies provided pursuant to the
Note, the other Loan Documents and applicable law. Without limiting the
foregoing, upon the occurrence of an Event of Default resulting from a violation
of the covenants set forth in Sections 6.12.1. 6.12.2, 6.12.3, 6.13. 6.14 or 7.8
hereof or the Events of Default set forth in paragraphs 9 or 13 in the
definition of such term in the Note, Bank may, in its sole and absolute
discretion, and in addition to its other rights and remedies, demand (a
"Security Demand") and accept Collateral as security for the Obligations, which
security shall be on such terms and conditions as Bank 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 Indenture. Without limiting the
foregoing, the terms and conditions upon which Bank will require and accept such
Collateral may include the following:
8.1.1 Type of Collateral. Any such Collateral shall consist of real
property and improvements owned by Borrower or a Subsidiary of Borrower and not
subject to Liens and Encumbrances (except as approved by Bank). Within five (5)
Business Days after the giving of a Security Demand, Borrower shall provide Bank
with a listing of all such real property and improvements and Bank 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 8.1, Bank shall be entitled to select the quantity of such
property to be provided as Collateral.
8.1.2 Appraisals. Bank shall receive and approve such appraisals or
other evidence of the value of such property as Bank may require in its sole and
absolute discretion.
8.1.3 Environmental Questionnaire. An environmental questionnaire and
disclosure statement completed and signed by Borrower and CHI and/or CHICC
covering the current and former condition and uses of such property and adjacent
property, and, if required by Bank, followed by such environmental site
assessments and investigations that Bank my require, all of which shall be
acceptable to Bank in its sole and absolute discretion.
8.1.4 Security Documents. Borrower and such Subsidiaries shall execute
such deeds of trust, security agreements and other security documents and
instruments as Bank may require in its sole and absolute discretion.
8.1.5 Other Documents. Borrower and such Subsidiaries shall executed
and deliver such other documents and instruments, and perform such other acts,
as Bank may require in its sole and absolute discretion.
8.1.6 Title Insurance. Bank shall receive such title insurance policies
and endorsements thereto with respect to such deeds of trust as Bank may require
in its sole and absolute discretion, which title insurance policies shall
contain only those exceptions and limitations as shall be acceptable to Bank.
8.1.7 No Defaults. No other Event of Default or Unmatured Event of
Default shall have occurred and be continuing.
8.1.8 Attorney Opinions. Bank shall receive such opinions of in-house
counsel for Borrower as Bank 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 any Subsidiary is a party or by
which it is bound or affected, and that the transfer of such security to Bank
does not constitute a voidable preference or fraudulent conveyance under
applicable state or federal law.
8.1.9 Cost and Expenses. Borrower shall pay all of Bank'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.
8.2 Effect of Security. Borrower's compliance with Section 8.1 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 Bank and in form and content satisfactory to Bank in its
sole and absolute discretion.
9. BANK'S OBLIGATIONS TO BORROWER ONLY. The obligations of Bank under this
Agreement are for the benefit of Borrower only. No other Person shall have any
rights hereunder or be a third-party beneficiary hereof.
10. 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.
11. 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.
12. ARBITRATION.
(a) Binding Arbitration. Bank and Borrower hereby agree that all
controversies and claims arising directly or indirectly out of this
Agreement and the Loan Documents, shall at the written request of any party
be arbitrated pursuant to the applicable rules of the American Arbitration
Association. The arbitration shall occur in the State of Arizona. Judgment
upon any award rendered by the arbitrator(s) may be entered in any court
having jurisdiction. The Federal Arbitration Act shall apply to the
construction and interpretation of this arbitration agreement.
(b) Arbitration Panel. A single arbitrator shall have the power to
render a maximum award of one hundred thousand dollars. When any party files
a claim in excess of this amount, the arbitration decision shall be made by
the majority vote of three arbitrators. No arbitrator shall have the power
to restrain any act of any party.
(c) Provisional Remedies: Self Help And Foreclosure. No provision of
subparagraph (a) shall limit the right of any party to exercise self help
remedies, to foreclose against any real or personal property collateral, or
to obtain any provisional or ancillary remedies (including but not limited
to injunctive relief or the appointment off a receiver) from a court of
competent jurisdiction. At Bank's option, it may enforce its right under a
mortgage by judicial foreclosure, and under a deed of trust either by
exercise of power of sale or by judicial foreclosure. The institution and
maintenance of any remedy permitted above shall not constitute a waiver of
the rights to submit any controversy or claim to arbitration. The statute of
limitations, estoppel, waiver, laches, and similar doctrines which would
otherwise be applicable in an action brought by a party shall be applicable
in any arbitration proceeding.
13. AMENDED AND RESTATED. This Agreement amends and restates in its entirety
that Loan Agreement between Borrower and Bank dated February 25, 1993, as
thereafter amended, providing for a loan by Bank to Borrower in the amount of
$10,000,000.00. All outstanding advances under said loan agreement shall be
deemed outstanding Advances under this Agreement and the Note.
DATED as of the date first above stated.
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
------------------------------------
CONTINENTAL HOMES HOLDING CORP., a
Delaware corporation
By: /s/ Kenda B. Gonzales
--------------------------------------
Name: Kenda B. Gonzales
------------------------------------
Title: Senior Vice President
-----------------------------------
AMENDED AND RESTATED PROMISSORY NOTE EXHIBIT 10.5
------------------------------------
Principal Amount: $15,000,000.00 Date: November 30, 1995
Bank One Center, Phoenix , Arizona.
- ----------------------------------------------
(Office) (City)
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 FIFTEEN MILLION AND
NO/100 DOLLARS ($15,000,000.00), 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:
"Applicable Spread" means, on any date, the applicable spread
set forth below, based upon the ratings ("Ratings") issued by Standard & Poor's
(Claim Paying Ability) and Moody's (Financial Strength) and applicable on such
date to the Public Notes:
Rating Fixed Rate Variable
S&P/Moody's Spread Rate Spread
----------- ------ -----------
BBB- or above/Baa3 or above 1.25% 0%
BB+/Ba1 1.50% 0%
BB/Ba2 1.75% 0%
BB-/Ba3 2.00% .25%
B+/B1 2.25% .25%
B or below/B2 or below 2.50% .25%
The Applicable Spread shall be the amount set forth in the above table that is
opposite the lower of said Moody's and Standard & Poor's Ratings for the type of
Advance; provided, however, (i) if more than one rating level exists between the
Ratings of the two agencies on the date of determination, the Applicable Spread
shall be the number set forth above that is opposite the Rating that is one
level below the highest of the two Ratings; (ii) if either rating agency shall
not have in effect a Rating with respect to the Public Notes for a reason
related to the creditworthiness of Borrower or to any act or failure on the part
of Borrower, the Applicable Spread shall be determined by reference to the
single Rating that shall be in effect or, if no Rating shall be in effect from
either agency, by reference to the last category described in the foregoing
table; (iii) if any Rating shall be changed (other than as a result of a change
in the rating system of Moody's or S&P), such change shall be effective as of
the date on which it is first announced by the applicable rating agency. Each
change in the Applicable Spread shall apply during the period commencing on the
effective date of such change and ending on the date immediately preceding the
effective date of the next such change.
If the rating system of Moody's or S&P shall change, or if
either such rating agency shall no longer have in effect a rating for the Public
Notes and Clause (ii) above shall not be applicable, Borrower and Bank shall
negotiate in good faith to amend the references to specific ratings in this
definition to reflect such changed rating system or the non-availability of
ratings from such rating agency.
"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)
the Applicable Spread (on a per annum basis), 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) the Applicable Spread (on a per annum basis), 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.
If the rating system of Moody's or S&P shall change, or if
either such rating agency shall no longer have in effect a rating for the Public
Notes and Clause (ii) above shall not be applicable, Borrower and Bank shall
negotiate in good faith to amend the references to specific ratings in this
definition to reflect such changed rating system or the non-availability of
ratings from such rating agency.
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 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 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.
Interest shall be due and payable commencing on December 1,
1995, and continuing on the same day of each successive month thereafter until
November 30, 1996 ("Maturity Date"). No payments of principal shall be due and
payable until the Maturity Date.
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. "Loan Documents"
means this Note, the Amended and Restated Loan Agreement of even date herewith
(the "Loan Agreement") between Borrower and Bank, and any other agreements,
documents, and instruments evidencing, guarantying, securing, or otherwise
relating to this Note, as they may be amended, modified, extended, renewed,
restated, or supplemented from time to time.
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 (i) four
percent (4%) per annum and (ii) 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.
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 shall 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"):
13.1 Failure by any Loan Party to pay when due (i) any amount payable
by such Loan Party under any of the Loan Documents and the expiration of ten
(10) days after notice of such failure from Bank to Borrower, or (ii) any other
indebtedness of such Loan Party to Bank and the expiration of any notice and
grace periods with respect to such failure as provided din the documents
governing such other indebtedness. "Loan Party" means Borrower and any other
person that from time to time is obligated to Bank under any of the Loan
Documents or grants any property, interests in property, or rights to property
to secure any or all obligations of any person under the Loan Documents.
13.2 Failure by any Loan Party to perform any obligation not involving
the payment of money (other than those obligations referred to in paragraph 12
below, which shall be governed by such paragraph), or to comply with any other
term or condition applicable to such Loan Party, in any of the Loan Documents
and the expiration of twenty (20) days after notice of such failure from Bank to
Borrower.
13.3 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.
13.4 Bank in good faith deems itself insecure or 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, prospects, or results of
operations of any Loan Party or any other event or condition that in the
reasonable opinion of Bank (i) could affect the likelihood of performance by any
Loan Party of any of the obligations in the Loan Documents, (ii) could affect
the ability of any Loan Party to perform any of the obligations in any of the
Loan Documents, (iii) could affect the legality, validity, or binding nature of
any of the obligations in the Loan Documents or any lien or encumbrance securing
any of the obligations under the Loan Documents, or (iv) could affect the
priority of any lien, security interest, or other encumbrance securing any of
the obligations in the Loan Documents.
13.5 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.
13.6 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.
13.7 The death, incompetence, 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.
13.8 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.
13.9 The occurrence of (i) any of the events described in Section
6.01(1) through (7) inclusive of the Indenture (as defined in the Loan
Agreement) regardless of whether or not the trustee or holders of the Public
Notes (as defined in the Loan Agreement) have notified Borrower of such event or
exercised any of their rights and remedies with respect thereto, or (ii) any of
the events described in Section 6.01(1) through (7) inclusive of the
Subordinated Notes Indenture (as defined in the Loan Agreement) regardless of
whether or not the trustee or holders of the Subordinated Notes (as defined in
the Loan Agreement) have notified the Borrower of such event or exercised any of
their rights and remedies with respect thereto.
13.10 Failure of Borrower to pay the entire outstanding principal, all
accrued and unpaid interest, and all other amounts due under the Convertible
Notes Indenture and/or the Convertible Notes (as defined in the Loan Agreement)
on or before December 11, 1995.
13.11 The occurrence of any Change of Control (as defined
in the Loan Agreement).
13.12 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 to Bank or any indebtedness of any
Subsidiary to Bank, including, without limitation, the Warehousing Facility (as
defined in the Loan Agreement).
13.13 Borrower fails to comply with the financial covenants set forth
in Section 6.12.1, 6.12.2, or 6.12.3 of the Loan Agreement in each of two
consecutive quarterly fiscal periods and/or Borrower violates any of the
negative covenants set forth in Section 7 of the Loan Agreement.
13.14 The occurrence of any condition or event that is a default or
designated as a default, or event of default or other event or occurrence that
permits the exercise of rights and remedies in any agreement, document or
instrument relating to any Bank Facility (as defined in the Loan Agreement) or
any other Debt of any Loan Party.
13.15 Any 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.
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 OF 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 enforcement of the Loan Documents and exercise of the rights and remedies of
Bank, (iii) 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, (iv) in gaining possession
of, holding, repairing, maintaining, preserving, and protecting the property
("Collateral") securing the obligations in the Loan Documents, (v) in selling or
otherwise disposing of the Collateral, (vi) 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 (vii) 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 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.
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: 7001 North Scottsdale Road, Suite 2050,
Scottsdale, Arizona 85253, Attention: Kenda Gonzales, with a copy to Timothy
Westfall at the same address.
Address for Notices to Bank: Western Region Real Estate, P. O. Box 29542,
Phoenix, Arizona 85038, Attention: 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. In each Loan Document executed by more than one Loan Party,
each reference to Borrower, Obligor, or Trustor shall be a reference to each
person executing such Loan document individually and to 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.
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 (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.
SENIOR INDEBTEDNESS. The obligations evidenced by this Note constitute "Senior
Indebtedness" pursuant to the terms of the Subordinated Notes Indenture and Bank
is and shall be entitled to all of the rights and benefits accruing to the
holders of Senior Indebtedness pursuant to the Subordinated Notes Indenture.
REPLACEMENT NOTE. This Note is a replacement of that Promissory Note dated
February 25, 1993 in the principal amount of $10,000,000.00 made by Borrower and
payable to Bank.
CONTINENTAL HOMES HOLDING CORP., a
Delaware corporation
By: /s/ Kenda B. Gonzales
--------------------------------------
Name: Kenda B. Gonzales
------------------------------------
Title: Senior 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: 1995 1994 1995 1994
------- ------- ------- -------
Net income $ 5,315 $ 3,092 $10,539 $ 7,608
Interest expense on convertible
subordinated notes, net of
income taxes 585 401 994 802
------- ------- ------- -------
$ 5,900 $ 3,493 $11,533 $ 8,410
Weighted average number of
shares outstanding 6,947 6,963 6,937 6,963
Conversion of convertible
subordinated notes (42.55 shares
per $1,000 principal amount of
notes) 1,489 1,489 1,489 1,489
Conversion of convertible
subordinated notes (42.105
shares per $1,000 principal
amount of notes) 737 -- 368 --
Incremental shares relating to
stock options exercisable 86 59 90 54
------- ------- ------- -------
Weighted average number of shares
outstanding assuming
full dilution 9,259 8,511 8,884 8,506
======= ======= ======= =======
Fully diluted net income per share $ .64 $ .41 $ 1.30 $ .99
======= ======= ======= =======
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<ARTICLE> 5
<LEGEND>
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> NOV-30-1995
<EXCHANGE-RATE> 1
<CASH> 18,745
<SECURITIES> 0
<RECEIVABLES> 43,496
<ALLOWANCES> 0
<INVENTORY> 309,735
<CURRENT-ASSETS> 0
<PP&E> 2,472
<DEPRECIATION> 0
<TOTAL-ASSETS> 411,294
<CURRENT-LIABILITIES> 0
<BONDS> 239,683
<COMMON> 71
0
0
<OTHER-SE> 120,556
<TOTAL-LIABILITY-AND-EQUITY> 411,294
<SALES> 268,330
<TOTAL-REVENUES> 284,649
<CGS> 218,857
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,488
<INCOME-PRETAX> 18,692
<INCOME-TAX> 8,153
<INCOME-CONTINUING> 10,539
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 10,539
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 1.30
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