<PAGE> 1
UNITED STATES
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 March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _____ to _____
Commission file number 33-44914, 33-68564
M/I SCHOTTENSTEIN HOMES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Ohio 31-1210837
---- ----------
(State of incorporation) (I.R.S. Employer Identification No.)
41 S. High Street, Suite 2410, Columbus, Ohio 43215
- --------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
</TABLE>
(614) 221-5700
--------------
(Telephone number)
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.
Common stock, par value $.01 per share: 8,800,000 shares
outstanding as of May 10, 1996
1
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M/I SCHOTTENSTEIN HOMES, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION NUMBER
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 1996 and
December 31, 1995 3
Consolidated Statements of Income
for the Three Months Ended
March 31, 1996 and 1995 4
Consolidated Statements of Cash Flows
for the Three Months Ended
March 31, 1996 and 1995 5
Notes to Interim Consolidated Unaudited
Financial Statements 6
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial
Condition 8
PART II. OTHER INFORMATION
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
Exhibit Index 18
</TABLE>
2
<PAGE> 3
M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
MARCH 31 December 31
(Dollars in thousands) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash, including cash in escrow $ 8,356 $ 8,136
Receivables 17,963 23,612
Inventories:
Single-family lots, land and land development costs 117,291 120,806
Houses under construction 107,208 86,110
Model homes and furnishings (less accumulated depreciation:
March 31, 1996 - $837;
December 31, 1995 - $823) 20,316 20,971
Land purchase deposits 426 381
Office furnishings, transportation and construction equipment - at cost (less
accumulated depreciation:
March 31, 1996 - $6,405;
December 31, 1995 - $6,106) 2,103 2,392
Investment in unconsolidated joint ventures and limited partnerships 11,052 11,641
Other assets 7,305 7,094
- ------------------------------------------------------------------------------------------------------------------
TOTAL $292,020 $281,143
==================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable banks-home-building operations $103,500 $ 87,000
Note payable bank-financial operations 8,380 15,200
Mortgage notes payable 251 349
Subordinated notes 24,513 24,513
Accounts payable 34,548 29,219
Accrued compensation 1,853 7,336
Income taxes payable 464 2,771
Accrued interest, warranty and other 9,789 9,787
Customer deposits 7,903 5,472
- ------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 191,201 181,647
- ------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies
- ------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock - $.01 par value;
authorized 2,000,000 shares;
none outstanding - -
Common stock - $.01 par value;
authorized 38,000,000 shares;
issued and outstanding - 8,800,000 shares 88 88
Additional paid-in capital 50,573 50,573
Retained earnings 50,158 48,835
- ------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 100,819 99,496
- ------------------------------------------------------------------------------------------------------------------
TOTAL $292,020 $281,143
==================================================================================================================
</TABLE>
See Notes to Interim Consolidated Unaudited Financial Statements.
3
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M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Three-Months Ended
March 31
(Dollars in thousands, except per share information) 1996 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue $ 95,858 $ 95,576
- ---------------------------------------------------------------------------------------------------------------
Costs and expenses:
Land and housing 76,955 78,687
General and administrative 5,959 5,453
Selling 7,795 6,977
Interest 2,931 3,049
- ---------------------------------------------------------------------------------------------------------------
Total costs and expenses 93,640 94,166
- ---------------------------------------------------------------------------------------------------------------
Income before income taxes 2,218 1,410
- ---------------------------------------------------------------------------------------------------------------
Income taxes:
Current 308 613
Deferred 587 (45)
- ---------------------------------------------------------------------------------------------------------------
Total income taxes 895 568
- ---------------------------------------------------------------------------------------------------------------
Net income $ 1,323 $ 842
===============================================================================================================
Net income per common share $ 0.15 $ 0.10
===============================================================================================================
Weighted average common shares outstanding 8,800,000 8,800,000
===============================================================================================================
</TABLE>
See Notes to Interim Consolidated Unaudited Financial Statements.
4
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M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Three-Months Ended March 31
(Dollars in thousands) 1996 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,323 $ 842
Adjustments to reconcile net income to net cash
used by operating activities:
Depreciation and amortization 386 425
Deferred income taxes (credit) 587 (45)
Decrease in receivables 5,649 5,281
Increase in inventories (15,225) (16,743)
Decrease (increase) in other assets (843) 298
Increase in accounts payable 5,329 2,410
Decrease in income taxes payable (2,307) (451)
Decrease in accrued liabilities (5,481) (1,627)
Equity in undistributed loss (income) of
unconsolidated joint ventures and limited partnerships (32) 3
- -----------------------------------------------------------------------------------------------------------------
Net cash used by operating activities (10,614) ( 9,607)
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to model and office furnishings,
transportation and construction equipment (83) (172)
Proceeds from property disposals 45 8
Investment in unconsolidated joint ventures (1,470) (2,773)
Distributions from unconsolidated joint ventures
and limited partnerships 329 204
- -----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (1,179) (2,733)
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable banks:
Cash proceeds from borrowings 58,486 61,885
Principal repayments (48,806) (55,250)
Principal repayments of mortgage notes payable (98) (145)
Net increase in customer deposits 2,431 1,652
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 12,013 8,142
- -----------------------------------------------------------------------------------------------------------------
Net Increase (decrease) in cash 220 (4,198)
Cash balance at beginning of year 8,136 14,059
- -----------------------------------------------------------------------------------------------------------------
Cash balance at end of period $ 8,356 $ 9,861
=================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 2,214 $ (241)
Income taxes $ 2,630 $ 769
NON-CASH TRANSACTIONS DURING THE YEAR:
Land acquired with mortgage notes payable $ - $ 374
Single-family lots distributed from unconsolidated joint ventures $ 1,762 $ 1,282
=================================================================================================================
</TABLE>
See Notes to Interim Consolidated Unaudited Financial Statements.
5
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M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARY
NOTES TO INTERIM CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying consolidated financial statements and notes thereto have
been prepared in accordance with the rules and regulations of the Securities
and Exchange Commission for interim financial information. The results of
operations for the three months ended March 31, 1996 and 1995 are not
necessarily indicative of the results for the full year.
It is suggested that these financial statements be read in conjunction with
the financial statements, accounting policies and financial notes thereto
included in the Company's Annual Report to Shareholders for the year ended
December 31, 1995.
In the opinion of management, the accompanying unaudited financial
statements reflect all adjustments (consisting only of normal recurring
accruals) which are necessary for a fair presentation of financial results
for the interim periods presented.
NOTE 2. AMENDED LOAN AGREEMENTS
On May 7, 1996, the Company amended its bank loan agreement. The amended
loan agreement provides for interest on borrowings to be at the banks' prime
rates or, at the Company's option, LIBOR plus a margin of between 1.75% and
2.5% based on the Company's ratio of Earnings Before Interest, Taxes,
Depreciation and Amortization ("EBITDA") to consolidated interest incurred
(as defined in such amendment). The amended loan agreement contains an
additional restrictive covenant which requires the Company to maintain a
minimum ratio of EBITDA to consolidated interest incurred. The remaining
terms of the agreement remain substantially the same as those in the
agreement that it replaces.
In addition, on May 7, 1996, M/I Financial amended its bank loan agreement.
The amended loan agreement provides for interest on borrowings to be at the
banks' prime rate less 0.25%. The remaining terms of the agreement remain
substantially the same as those in the agreement that it replaces.
4NOTE 3. INTEREST
The Company capitalizes interest during development and construction.
Capitalized interest is charged to interest expense as the related inventory
is delivered. The summary of total interest for the three months ended March
31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
Three Months ended March 31,
(Dollars in Thousands) 1996 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest capitalized, beginning of year $ 7,560 $ 7,322
Interest incurred 3,019 3,425
Interest expensed 2,931 3,049
- ------------------------------------------------------------------------------------------------------------------
Interest capitalized, end of period $ 7,648 $ 7,698
==================================================================================================================
</TABLE>
6
<PAGE> 7
NOTE 4. IMPACT OF ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 121 (SFAS 121), "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of". SFAS 121 amends the impairment provisions of the existing
accounting literature which required the Company's home-building inventories
to be carried at the lower of cost or net realizable value. Under the new
provisions, if the Company's home-building inventories are determined to be
impaired, the impairment loss is measured based upon the difference between
the fair value of the asset and its carrying amount.
The Company adopted SFAS 121 during the first quarter of 1996. Based on the
Company's analysis of its home-building inventories, none were found to be
impaired and therefore, the implementation of this statement had no impact
on the financial condition or results of operations of the Company.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which the Company adopted during the first quarter of 1996.
Under SFAS 123, companies are encouraged, but not required, to adopt the
fair value method of accounting for employee stock-based transactions.
Companies are also permitted to continue to account for such transactions
under Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees, " but would be required to disclose in a note to the
annual financial statements pro forma net income and earnings per share, as
if the Company had applied the new method of accounting. The Company has
determined that it will not adopt the expense recognition provisions of this
standard; therefore, the new standard had no effect on the Company's
financial condition or results of operations.
NOTE 5. CONTINGENCIES
At March 31, 1996, the Company had options and contingent purchase contracts
to acquire land and developed lots with an aggregate purchase price of
approximately $153.1 million.
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<PAGE> 8
M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARY
FORM 10-Q PART I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
CONSOLIDATED
Total Revenue. Total revenue for the three-months ended March 31, 1996
were $95.9 million, a slight increase over the $95.6 million recorded for the
comparable period of 1995. Increases in housing revenue of approximately $1.5
million and other revenue of approximately $800,000 were partially offset by a
$2.0 million decrease in land revenue. The increase in housing revenue was
attributable to an increase in the average sales price of homes delivered as
the Company actually delivered two less homes for the first quarter of 1996 as
compared to the prior year. The increase in other income is primarily
attributable to M/I Financial where the number of loans originated increased
and the gains recognized from the sale of loans was also significantly higher
in the current year. The decrease in land revenue was primarily due to a
significant decrease in the number of lots sold during the first quarter of
1996 in comparison to the first quarter of 1995.
Income Before Income Taxes. Income before income taxes for the first
quarter of 1996 increased 57.3% from the comparable period of 1995. Income
before income taxes reached $2.2 million, a new record for the Company's first
quarter. The increase in income before income taxes primarily related to M/I
Financial, where income before income taxes increased from $350,000 to $1.0
million. This increase was primarily due to the significant increase in income
from the sale of servicing and marketing gains due to the favorable interest
rate environment during the last half of 1995 and the first quarter of 1996.
- 8 -
<PAGE> 9
HOME-BUILDING SEGMENT
The following table sets forth certain information related to the Company's
home-building segment:
<TABLE>
<CAPTION>
Three Months Ended March 31,
(Dollars in thousands) 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue:
Housing Sales $92,893 $91,434
Land and Lot Sales 1,105 3,054
Other Income 203 80
- --------------------------------------------------------------------------------------------------------------------
Total Revenue $94,201 $94,568
====================================================================================================================
Revenue:
Housing Sales 98.6 % 96.7%
Land and Lot Sales 1.2 3.2
Other Income 0.2 0.1
- --------------------------------------------------------------------------------------------------------------------
Total Revenue 100.0 100.0
Land and Housing Costs 82.1 83.5
- --------------------------------------------------------------------------------------------------------------------
Gross Margin 17.9 16.5
General and Administrative Expenses 3.2 3.1
Selling Expenses 8.3 7.4
- --------------------------------------------------------------------------------------------------------------------
Operating Income 6.4 6.0
====================================================================================================================
Unit Data:
New Contracts 956 743
Homes Delivered 547 549
Backlog at end of period 1,830 1,451
Average sales price of homes in backlog $173.0 $175.2
Aggregate sales value of homes in backlog $316,511 $254,279
Number of active subdivisions 150 140
====================================================================================================================
</TABLE>
A home is included in "New Contracts" when the Company's standard sales
contract, which requires a deposit and generally has no contingencies other
than for buyer financing, is executed. In the Midwest Region, contracts are
sometimes accepted contingent upon the sale of an existing home. "Homes
Delivered" represents units for which the closing of the sale has occurred and
title has transferred to the buyer. Revenue and cost of revenue for a home sale
are recognized at the time of such closing.
"Backlog" represents homes for which the Company's standard sales contract has
been executed, but which are not included in Homes Delivered because closings
for the sale of such homes have not yet occurred as of the end of the periods
specified. Most cancellations of contracts for homes in Backlog occur because
customers cannot qualify for financing. These cancellations usually occur prior
to the start of construction. Since the Company arranges financing with
guaranteed rates for many of its customers, the incidence of cancellations
after the start of construction is low. In the first three months of 1996, the
Company delivered 547 homes, most of which were homes under contract in Backlog
at December 31, 1995. Of the 1,421 contracts in Backlog at December 31, 1995,
10.3% have been canceled as of March 31, 1996. For homes in Backlog at December
31, 1994, 11.3% had been canceled as of March 31, 1995. For the homes in
Backlog at December 31, 1994, the final cancellation percentage was 15.6%.
Total Revenue. Total revenue for the three months ended March 31, 1996
was down slightly in relation to the comparable period in 1995. A significant
decline in land revenue was offset by a 1.6% increase in housing revenue. The
decrease in land revenue was primarily attributable to the Maryland division.
The Maryland division had significant lot sales to outside home-builders from
its Willows land
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<PAGE> 10
development project in the three months ended March 31, 1995 which did not
occur in the current year. The Company is developing additional sections of
this project and has entered into contracts to sell a portion of the lots
developed to these same builders. The increase in housing revenue was due to a
2.0% increase in the average sales price of Homes Delivered. The increase in
the average sales price of Homes Delivered was due to the Orlando, Charlotte
and Palm Beach County markets. In 1995, the Company introduced a more upscale
product line in the Orlando market in order to compete more effectively in this
segment of the market. As more of these higher-priced homes have begun to
close, the average sales price of Homes Delivered has increased. The increase
in the average sales price of Homes Delivered in both the Charlotte and Palm
Beach County divisions was due to the Company beginning to close homes in new
subdivisions in more upscale areas of these markets.
During the three months ended March 31, 1996, the Company delivered
547 homes, two fewer than it delivered during the comparable period of 1995.
The number of Homes Delivered in the Columbus market actually declined 17.3%
from the first quarter of 1995 to the first quarter of 1996 due to unusually
severe winter weather conditions in this market which caused construction
delays. This decline was offset by increases in the majority of the Company's
other divisions.
Home Sales and Backlog. The Company recorded a 28.7% increase in the
number of New Contracts recorded in the first quarter of 1996 as compared to
the corresponding period of 1995. The number of New Contracts recorded in the
current year was higher in all of the Company's regions, led by the Ohio and
Indiana Region where the number of New Contracts recorded increased 41.0%. The
Company believes the increase in the number of New Contracts recorded is
primarily attributable to the more favorable interest rate environment in the
current year as compared to the first quarter of 1995. The introduction of the
Company's lower priced Horizon product line into several new markets during
1995 also had a positive impact on the number of New Contracts recorded for the
current quarter. The number of New Contracts recorded in future periods will be
dependent on future economic conditions, consumer confidence and interest rates
available to potential home buyers.
At March 31, 1996, the total sales value of the Company's Backlog of
1,830 homes was approximately $316.5 million, representing a 24.5% increase in
sales value and a 26.1% increase in units from the levels reported at March 31,
1995. The average sales price of homes in Backlog decreased 1.3% from March 31,
1995 to March 31, 1996. This decline was primarily due to the introduction of
the Company's lower priced Horizon product line into several other markets in
1995. The decrease in the average sales price of homes in Backlog was partially
offset by increases in the Columbus, Charlotte and Raleigh divisions where the
Company is building in more upscale subdivisions and in the Orlando market
where the Company introduced one of its more upscale product lines in 1995 in
order to compete more effectively in this market.
Gross Margin. The overall gross margin for the home-building segment
was 17.9% for the three-month period ended March 31, 1996 compared to 16.5% for
the three-month period ended March 31, 1995. This increase was primarily due to
the increased emphasis placed on improving margins during 1995. Management
continues to focus on maintaining accurate, up-to-date costing information so
that sales prices can be set to achieve the desired margins. The Company has
also focused on acquiring or developing lots in premier locations so that it
can command higher margins. Gross margins during the first quarter of 1996 were
also higher due to the national accounts program which the Company has expanded
significantly in the past year. The Company has been able to lower costs on
many of the components used in building its homes through volume discounts and
other negotiated price reductions from its suppliers. The Company's ability to
maintain the levels of margins obtained during the first quarter of 1996 are
dependent on a number of factors, some of which are beyond the Company's
control. Due to the increased level of sales during the last quarter of 1995
and the first quarter of 1996, some of the Company's divisions are beginning to
experience shortages of qualified subcontractors in certain construction
trades. This could
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<PAGE> 11
negatively impact gross margins by requiring the Company to pay premiums to
expedite construction work or delaying construction, thus delaying revenue
recognition and increasing carrying costs.
General and Administrative Expenses. General and administrative
expenses as a percentage of total revenue increased from 3.1% for the three
months ended March 31, 1995 to 3.2% for the three months ended March 31, 1996.
This increase was primarily attributable to the increase in real estate tax
expense and homeowners association dues. These expenses increased in the
current year as the Company's investment in developed lots and raw land
awaiting development increased over prior year balances.
Selling Expenses. Selling Expenses as a percentage of total revenue
increased from 7.4% for the three months ended March 31, 1995 to 8.3% for the
three months ended March 31, 1996. This increase was primarily due to increases
in sales commissions paid, to both internal salespeople and outside Realtors.
Expenses related to model homes were also higher in the current year due to an
increase in the number of model homes, as well as an increase in the number of
model homes that have been sold and are being leased back to the Company. The
Company uses model sale/leasebacks to reduce its investment in model homes and
thus its interest expense; however, by doing so, selling expenses are increased
by the rental expense incurred under these leases.
FINANCIAL SERVICES SEGMENT
The following table sets forth certain information related to the Company's
financial services segment:
<TABLE>
<CAPTION>
Three Months Ended March 31,
(Dollars in thousands) 1996 1995
- --------------------------------------------------------------------------------------------------------------------
Number of Loans Originated 408 336
<S> <C> <C>
Revenue:
Loan Origination Fees $ 486 $ 390
Sale of Servicing and Marketing Gains 1,080 551
Other 505 381
- --------------------------------------------------------------------------------------------------------------------
Total Revenue 2,071 1,322
- --------------------------------------------------------------------------------------------------------------------
General and Administrative Expenses 1,051 950
- --------------------------------------------------------------------------------------------------------------------
Operating Income $1,020 $ 372
====================================================================================================================
</TABLE>
Total Revenue. Total revenue for the three months ended March 31, 1996
was $2.1 million, a 56.7% increase over the $1.3 million recorded for the
comparable period of the prior year. Loan origination fees increased 24.6% from
the first quarter of 1995 to the first quarter of 1996, primarily due to the
21.4% increase in the number of loans originated as well as a 9.2% increase in
the average loan amount. The increase in the number of loans originated was due
to an increase in the percentage of the parent company's home sales which were
financed through M/I Financial.
Revenue from sale of servicing and marketing gains nearly doubled from
$551,000 for the three months ended March 31, 1995 to $1.1 million for the
three months ended March 31, 1996. This increase was primarily due to the
falling interest rate environment during the last part of 1995 which increased
marketing gains on loans that closed during the first quarter of 1996. During
the second half of 1995, M/I Financial began using hedging methods whereby it
has the option, but is not required, to complete the hedging transaction. This
allowed the Company to record significant servicing and marketing gains during
the period of falling interest rates while limiting its risk of loss from a
rising interest rate market. Revenue from the sale of servicing and marketing
gains were also higher due to the increased volume of loans closed and sold
during the three months ended March 31, 1996 as compared to the comparable
period of 1995.
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<PAGE> 12
General and Administrative Expenses. General and administrative
expenses for the three months ended March 31, 1996 were $1.1 million, a 10.6%
increase over the comparable period of the prior year. This increase was
primarily attributable to personnel and other variable expenses which increased
due to the significantly higher volume of loans processed during the current
year.
OTHER OPERATING RESULTS
Corporate General and Administrative Expenses. Corporate general and
administrative expenses for the three months ended March 31, 1996 totaled $1.9
million, or 2.0% of total revenue, a 20.2% increase from the $1.6 million. or
1.7% of total revenue recorded for the comparable period of the prior year. This
increase is primarily due to higher amounts recorded for certain employee
related expenses in the current year. These expenses are generally based on
pre-tax net income of the Company which increased significantly in the current
quarter.
Interest Expense. Corporate and home-building interest expense for the
first quarter of 1996 totaled $2.9 million, a 3.9% decrease from the $3.0
million recorded for the comparable period of the prior year. Interest expense
was lower in the current year due to the decreases in the weighted average
interest rate and the average borrowings outstanding which was partially offset
by the decrease in the net amount of interest capitalized during the first
quarter of 1996 as compared to the first quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financing needs depend upon its sales volume, asset
turnover, land acquisition and inventory balances. The Company has incurred
substantial indebtedness, and expects to incur indebtedness in the future, to
fund the growth of its home-building activities. Historically, the Company's
principal source of funds for construction and development activities has been
from internally generated cash and from bank borrowings which are primarily
unsecured.
At March 31, 1996 the Company had bank borrowings outstanding of
$103.5 million under its loan agreement relating to its home-building
operations which permits aggregate borrowings not to exceed the lesser of:
$166.0 million in revolving credit loans, including $30.0 million of seasonal
loans which are available from March 1st through December 31st during each year
of the agreement and $25.0 million, including $4.0 million for joint ventures
in which the Company is a partner, in the form of letters of credit; or the
Company's borrowing base which is calculated based on specified percentages of
certain types of assets held by the Company as of each month end. The loan
agreement matures September 30, 2000, at which time the unpaid balance of the
revolving credit loans outstanding shall be due and payable. Under the terms of
the loan agreement, the banks make an annual determination as to whether or not
to extend the maturity date of the commitments by one year. At March 31, 1996,
borrowings under the loan agreement were at the banks' prime rate and were
primarily unsecured. The loan agreement contains restrictive covenants which
require the Company, among other things, to maintain minimum net worth and
working capital amounts and to maintain certain financial ratios. The loan
agreement also places limitations on the amount of additional indebtedness that
may be incurred by the Company, the acquisition of undeveloped land, on
dividends that may be paid and on the aggregate cost of certain types of
inventory the Company can hold at any one time.
On May 7, 1996, the Company amended its bank loan agreement. The
amended loan agreement provides for interest on borrowings to be at the banks'
prime rates or, at the Company's option, LIBOR plus a margin of between 1.75%
and 2.5% based on the Company's ratio of EBITDA to consolidated interest
incurred (as defined in such amendment). The amended loan agreement contains an
additional
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<PAGE> 13
restrictive covenant which requires the Company to maintain a minimum ratio of
EBITDA to consolidated interest incurred. The remaining terms of the agreement
remain substantially the same as those in the agreement that it replaces.
An additional $8.4 million was outstanding as of March 31, 1996 under
the M/I Financial loan agreement, which permitted borrowings of $25.0 million
to finance mortgage loans initially funded by M/I Financial for customers of
the Company and a limited amount for loans to others. This agreement limits the
borrowings to 95% of the aggregate face amount of the mortgages and contains
restrictive covenants requiring M/I Financial to maintain minimum net worth and
certain minimum financial ratios. At March 31, 1996, borrowings under this
agreement were at the bank's prime rate and were unsecured. The M/I Financial
Loan Agreement terminates on July 19, 1996 and the unpaid balance of such loans
are payable on this date.
On May 7, 1996, M/I Financial amended its bank loan agreement. The
amended loan agreement provides for interest on borrowings to be a the banks'
prime rate less 0.25%. The remaining terms of the agreement remain
substantially the same as those in the agreement that it replaces.
At March 31, 1996, the Company had $70.6 million of unused borrowing
availability under its loan agreements. At March 31, 1996, the Company had the
right to borrow up to $182.5 million under its credit facilities, including
$30.0 million of seasonal loans, available from March 1st through December 31
during each year of the loan agreement, and $16.5 million under the M/I
Financial Loan Agreement (95% of the aggregate face amount of eligible mortgage
loans). The Company may increase its borrowings under such agreements or
otherwise.
In addition, there were outstanding 14% Subordinated Notes in the
principal amount of $24.5 million at March 31, 1996. Annual sinking fund
payments for the Subordinated Notes of approximately $3.7 million commence
December 1, 1997 with the remaining balance due at maturity on December 1,
2001. The Notes are redeemable in whole or in part at the option of the
Company on or after December 1, 1996 at 106% of the principal amount until
December 1, 1997 and declining 1 1/2% annually through 2000. At March 31, 1996,
mortgage notes payable outstanding were $251,000 secured by lots and land with
a recorded book value of $827,000. The Company also had approximately $20.7
million of completion bonds and letters of credit outstanding at March 31,
1996.
The $9.7 million increase in notes payable to banks from December 31,
1995 to March 31, 1996 reflects increased borrowings primarily attributable to
the seasonal increase in homes under construction and a slight increase in
single-family lots, land and land development costs. It is expected that
borrowing needs will increase as the Company continues to increase its
investment in land under development and developed lots and as its investment
in houses under construction increases due to the higher backlog.
Net income from housing and lot and land sales are the Company's
primary sources of net cash provided by operating activities. Net cash used by
operating activities in the three months ended March 31, 1996 was $10.6 million
compared to $9.6 million for the comparable period of the prior year. The
increase in net cash used by operating activities was primarily due to larger
decreases in income taxes payable and accrued liabilities partially offset by a
larger increase in accounts payable.
The Company has reached agreement with certain unrelated parties for
the development and occupancy of an approximately 85,000 square foot building.
The four current office locations in Columbus, Ohio will be consolidated into
one building in an effort to improve operating efficiencies. The building will
be built, owned and operated, by a limited liability company in which the
Company has
- 13 -
<PAGE> 14
invested $1.1 million and holds a 1/3 interest (the "LLC"). The building will
be financed primarily through borrowings of the LLC. The LLC has obtained
financing for the construction of the building and also has obtained
commitments for the permanent financing. The construction financing has been
jointly and severally guaranteed by the members of the LLC. The Company has
entered into a long-term operating lease for the premises with the LLC.
Construction of the building has commenced and is expected to be completed by
the third quarter of 1996. The Company believes that any commitments arising
from this transaction would not significantly affect its liquidity or capital
resources.
Over the past several years, the Company's land development activities
and land holdings have increased significantly and the Company expects this
trend to continue into the foreseeable future. These increases are primarily
due to the shortage of qualified land developers in certain of the Company's
markets as well as the competitive advantages that can be achieved by
developing land internally rather than purchasing lots from developers or other
competing homebuilders. This is particularly true for the Company's Horizon
product line where, due to the price points the Company targets, lots are
generally not available from third party developers at economically feasible
prices. The Company continues to purchase lots from outside developers under
option contracts, when possible, to limit its risk; however, the Company will
continue to evaluate all of its alternatives to satisfy the Company's demand
for lots in the most cost effective manner.
In 1994, the Company entered into a land purchase contract which
required a greater investment than the Company normally commits and could
significantly impact the Company's liquidity. On January 31, 1994, the Company
closed on the first phase of a six phase land purchase contract in the
Washington, D.C. market. This first phase was purchased for $6.6 million and
was developed into 106 single family and townhouse lots. Based on the demand
for lots in this area and the strong sales in the first phase of this
development, the Company purchased the second phase of this development through
a series of three closings in May, June and July of 1995 and expects to
purchase the third phase in the third quarter of 1996. The total purchase price
for the second phase was approximately $6.4 million and this section was
developed into 122 single-family and townhouse lots. The Company sold a portion
of the developed lots from the first phase to outside homebuilders and has
entered into similar contracts to sell a portion of the lots in the second
phase to outside homebuilders. The Company has an option to purchase each of
the remaining phases. If the Company purchases all six phases, the total
purchase price will be approximately $38.9 million and the land will be
developed into approximately 710 lots.
As its capital requirements increase, the Company may increase its
borrowings under its bank line of credit. In addition, the Company continually
explores and evaluates alternative sources from which to obtain additional
capital. The Company believes that its currently available financial resources
are sufficient to meet its current and near-term capital requirements.
INTEREST RATES AND INFLATION
The Company's business is significantly affected by general economic
conditions of the United States and, particularly, by the impact of interest
rates. Higher interest rates may decrease the potential market by making it
more difficult for home buyers to qualify for mortgages or to obtain mortgages
at interest rates acceptable to them. Increases in interest rates also would
increase the Company's interest expense as the rate on the revolving loans is
based upon floating rates of interest. The weighted average interest rates on
the Company's outstanding debt for the three months ended March 31, 1996 was
10.0% as compared to 10.2% for the three months ended March 31, 1995.
- 14 -
<PAGE> 15
In conjunction with its mortgage banking operations, the Company uses
hedging methods to reduce its exposure to interest rate fluctuations between
the commitment date of the loan and the time the loan closes.
In recent years, the Company generally has been able to raise prices
by amounts at least equal to its cost increases and, accordingly, has not
experienced any detrimental effect from inflation. Where the Company develops
lots for its own use, inflation may increase the Company's profits because land
costs are fixed well in advance of sales efforts. The Company is generally able
to maintain costs with subcontractors from the date a home sales contract is
accepted; however, in certain situations, unanticipated costs may occur between
the time a sales contract is executed and the time a home is constructed, which
results in lower gross profit margins.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Except for the historical information contained herein, the matters
discussed in this quarterly report are forward-looking statements which involve
risks and uncertainties, including, but not limited to, economic, competitive
and governmental factors affecting the Company's markets, prices and other
facets of its operations. See the Company's Annual Report on Form 10-K for the
year ended December 31, 1995 for a further discussion of these and other risks
and uncertainties applicable to the Company's business.
- 15 -
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On May 8, 1996, the Company announced that Robert H. Schottenstein has
been named President and Steven Schottenstein has been named Senior Executive
Vice President. Irving E. Schottenstein will continue to serve as Chairman of
the Board and Chief Executive Officer. In addition, the Company has established
an Office of the Chairman consisting of Irving E. Schottenstein, Robert H.
Schottenstein and Steven Schottenstein. The Office of the Chairman will
formulate and review key policy of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The exhibits required to be filed herewith are set forth below. No
reports were filed on Form 8-K for the quarter for which this report is filed.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
10.1 First Amendment to restated revolving credit loan,
seasonal loan and standby letter of credit agreement by
and among the Company, Bank One, Columbus, N.A.; The
Huntington National Bank; The First National Bank of
Chicago; National City Bank of Columbus; The First
National Bank of Boston and Bank One, Columbus, N.A. as
agent for the banks, dated May 7, 1996.
10.2 First Amendment to revolving credit agreement by and among
the Company, M/I Financial Corp. and Bank One, Columbus,
N.A., dated May 7, 1996.
</TABLE>
- 16 -
<PAGE> 17
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.
<TABLE>
<S> <C>
M/I Schottenstein Homes, Inc.
(Registrant)
Date: May 10, 1996 by: /s/ Irving E. Schottenstein
-- ---------------------------
Irving E. Schottenstein
Chief Executive Officer
(Principal Executive Officer)
Date: May 10, 1996 by: /s/ Kerrii B. Anderson
-- ----------------------
Kerrii B. Anderson
Senior Vice President,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
</TABLE>
- 17 -
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION PAGE NO.
<S> <C> <C>
10.1 First Amendment to restated revolving credit loan,
seasonal loan and standby letter of credit agreement by
and among the Company, Bank One, Columbus, N.A.; The
Huntington National Bank; The First National Bank of
Chicago; National City Bank of Columbus; The First
National Bank of Boston and Bank One, Columbus, N.A. as
agent for the banks, dated May 7, 1996.
10.2 First Amendment to revolving credit agreement by and
among the Company, M/I Financial Corp. and Bank One,
Columbus, N.A., dated May 7, 1996.
</TABLE>
- 18 -
<PAGE> 1
1
FIRST AMENDMENT TO, AND CONSENT TO ASSIGNMENT TO
THE FIRST NATIONAL BANK OF CHICAGO BY NBD BANK OF
ITS RIGHTS AND INTERESTS UNDER, RESTATED REVOLVING CREDIT
LOAN, SEASONAL LOAN AND STANDBY LETTER OF CREDIT AGREEMENT
This First Amendment to, and Consent to Assignment to The First
National Bank of Chicago by NBD Bank of Its Rights and Interests Under, Restated
Revolving Credit Loan, Seasonal Loan and Standby Letter of Credit Agreement is
made to be effective as of May 7, 1996 ("this Amendment"), by and among M/I
SCHOTTENSTEIN HOMES, INC., an Ohio corporation ("Borrower"), BANK ONE, COLUMBUS,
N.A., a national banking association ("Bank One"), THE HUNTINGTON NATIONAL BANK,
a national banking association ("HNB"), NBD BANK, a Michigan banking
corporation, formerly known as NBD Bank N.A., a national banking association
("NBD"), THE FIRST NATIONAL BANK OF CHICAGO, a national banking association
("First Chicago"), NATIONAL CITY BANK OF COLUMBUS, a national banking
association, formerly known as National City Bank, Columbus, a national banking
association ("NCB"), THE FIRST NATIONAL BANK OF BOSTON, a national banking
association ("BOB") (Bank One, HNB, NBD, First Chicago, NCB and BOB is each a
"Bank" and collectively, "Banks", provided that NBD shall not be a "Bank" from
and after the effective date of this Amendment, and First Chicago is a "Bank"
only from and after the effective date of this Amendment), and BANK ONE,
COLUMBUS, N.A., as agent for Banks ("Agent"). For valuable consideration, the
receipt of which is hereby acknowledged, Borrower, Banks and Agent, intending to
be legally bound, hereby recite and agree as follows:
BACKGROUND INFORMATION
A. Borrower, the Banks (except for First Chicago) and the Agent are
parties to a Restated Revolving Credit Loan, Seasonal Loan and Standby Letter of
Credit Agreement made to be effective as of September 29, 1995 (the "Credit
Agreement").
B. NBD wishes to assign its rights and interests (including all of its
obligations and liabilities), and First Chicago wishes to assume NBD's rights
and interests (including all of NBD's obligations and liabilities), under the
Credit Agreement to First Chicago.
<PAGE> 2
C. The Credit Agreement requires the consent of each Bank and Borrower
for any Bank to assign its rights and interests under the Credit Agreement.
D. Borrower, the Banks and the Agent wish to amend the Credit Agreement
and to consent to the assignment by NBD, and the assumption by First Chicago, of
NBD's rights and interests (including all of its obligations and liabilities)
under the Credit Agreement as hereinafter stated.
AGREEMENT
1. NBD and First Chicago each represents to Agent, each of the other
Banks and Borrower that (a) all necessary corporate action on the part of each
of NBD and First Chicago has been taken, (b) all assignments and other
documentation between NBD and First Chicago, including without limitation the
Assignment Agreement as of even date herewith between NBD and First Chicago, a
copy of which is attached hereto as Exhibit J (the "Assignment Agreement"), have
been executed, to accomplish the assignment by NBD to First Chicago of all of
NBD's rights and interests, and First Chicago's assumption of such rights and
interests (including all of NBD's obligations and liabilities), under the Credit
Agreement, and (c) subject to the required consent of Agent, Banks and Borrower,
NBD has assigned to First Chicago, and First Chicago has assumed from NBD, all
of NBD's rights and interests (including all of its obligations and liabilities)
under the Credit Agreement.
2. First Chicago represents to Agent, NBD, each of the other Banks and
Borrower that (a) none of the Agent, NBD or any of the other Banks or any of
their respective officers, directors, employees, agents, attorneys-in-fact or
affiliates has made any representations or warranties to it concerning the
Credit Agreement, Borrower or Borrower's Subsidiaries, (b) it has, independently
and without reliance on Agent or any other Bank, and based on such documents,
including the Credit Agreement and information as it has deemed appropriate,
made its own appraisal and investigation into the business, operations,
property, financial and other condition and creditworthiness of Borrower and
Borrower's Subsidiaries and made its own decision to be the assignee of NBD, to
enter into this Amendment, to become a party to, and make extensions of credit
under, the Credit Agreement from and after the effective date of this Amendment,
and (c) it will, without reliance upon Agent or any other Bank, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under the Credit Agreement, the Notes and any Guaranties, and
to make such investigation as it deems necessary to inform itself as to the
business, operations,
2
<PAGE> 3
property, financial and other condition and creditworthiness of Borrower and
Borrower's Subsidiaries.
3. Subject to the other terms and conditions of this Amendment, Agent,
each Bank and Borrower each hereby consents to NBD's assignment of its rights
and interests (including all of its obligations and liabilities) under the
Credit Agreement to First Chicago and to the release of NBD from all of such
obligations and liabilities, effective as of the effective date of this
Amendment.
4. Agent, Banks and Borrower each agrees that, as of the effective date
of this Amendment and upon satisfaction of the conditions precedent set forth in
numbered paragraph 5 hereof, (a) NBD shall have no obligations or liabilities
under the Credit Agreement and (b) the definition of "Banks" shall not include
NBD, but shall include First Chicago.
5. The assignment by NBD of its rights and interests (including all of
its obligations and liabilities) under the Credit Agreement as amended by this
Amendment, and the consent of Agent, Banks and Borrower to such assignment, are
subject to the satisfaction of the following conditions precedent (in addition,
in the case of such assignment, to the conditions precedent set forth in the
Assignment Agreement, which conditions precedent, NBD and First Chicago hereby
represent and warrant to Borrower, Agent and the other Banks, have been
satisfied) not later than the effective date of this Amendment:
(a) Revolving Credit Notes. The Revolving Credit Note payable
to the order of NBD and evidencing the obligation of Borrower to pay
the unpaid principal amount of the Revolving Credit Loans made by NBD,
with interest thereon as prescribed in subsection 2.8 of the Credit
Agreement, shall be canceled and simultaneously therewith any such
Revolving Credit Loans made by NBD shall be evidenced instead by a
Revolving Credit Note prepared in accordance with subsection 2.2 of the
Credit Agreement and duly executed and delivered by Borrower to be
effective as of the effective date of this Amendment and payable to the
order of The First National Bank of Chicago.
(b) Seasonal Loan Notes. The Seasonal Loan Note payable to the
order of NBD and evidencing the obligation of Borrower to pay the
unpaid principal amount of the Seasonal Loans made by NBD, with
interest thereon as prescribed by subsection 2.8 of the Credit
Agreement, shall be canceled and simultaneously therewith any such
Seasonal Loans made by NBD shall be
3
<PAGE> 4
evidenced by a Seasonal Loan Note prepared in accordance with
subsection 2.4 of the Credit Agreement and duly executed and delivered
by Borrower to be effective as of the effective date of this Amendment
and payable to the order of The First National Bank of Chicago.
6. Subsection 1.1 (Defined Terms) of the Credit Agreement is hereby
amended by deleting the definitions of each of "Business Day," "Guaranties,"
"Interest Payment Date" and "M/I Financial Corp. Loan Agreement" in their
entireties and replacing them, respectively, with the following:
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in Columbus, Ohio are authorized or
required by law to close, except that when used in connection with
Eurodollar Rate Loans, "Business Day" shall mean any Business Day on
which dealings in Dollars between banks may be carried on in London,
England and Columbus, Ohio.
"Guaranties" (individually, "Guaranty") shall mean the guaranties of
the Indebtedness evidenced by this Agreement and by all documents
contemplated by this Agreement, including without limitation the Notes,
as this Agreement and such documents may be amended or restated from
time to time, which guaranties are substantially in the form of Exhibit
A attached to this Agreement, executed by M/I Financial Corp. (which as
of the date hereof is Borrower's only Subsidiary) in favor of the
respective Banks and to which Agent shall also be a party, and any
guaranties in favor of Agent and the respective Banks executed by (a)
each other permitted Subsidiary, if any, of Borrower and/or (b) the M/I
Ancillary Businesses that are wholly-owned by the Borrower or by any
Subsidiary.
"Interest Payment Date" shall mean, (a) with respect to any Prime Rate
loan, the last day of each March, June, September and December,
commencing on the first of such days to occur after the first Borrowing
Date, (b) with respect to any Eurodollar Rate Loan having an Interest
Period of three months or less, the last day of such Interest Period,
and (c) with
4
<PAGE> 5
respect to any Eurodollar Rate Loan having an Interest Period longer
than three months, (x) each day which is three months, or a whole
multiple thereof, after the first day of such Interest Period, and (y)
the last day of such Interest Period.
"M/I Financial Corp. Loan Agreement" shall mean the Revolving Credit
Agreement made to be effective as of August 8, 1995, by and among M/I
Financial Corp., Borrower and Bank One, as the same may be, in Bank
One's sole discretion, amended, extended, renewed or replaced from time
to time.
7. Subsection 1.1 (Defined Terms) of the Credit Agreement is hereby
further amended by adding the following definitions thereto:
"Adjustment Date" shall mean each date that is two Business Days after
February 15, May 15, August 15 and November 15 of each year of the
Commitment, subject to the provisions in the definition of "Applicable
Eurodollar Margin" for a later adjustment in certain circumstances.
"Applicable Eurodollar Margin" shall mean, during the period from May
7, 1996 until the first Adjustment Date, 2.25% per annum. Thereafter,
subject to the other terms and conditions of this Agreement (including
the limitations on the availability of Eurodollar Rate Loans and
including the termination of the Commitment as set forth in Section 8
hereof), the "Applicable Eurodollar Margin" will be adjusted on each
Adjustment Date to the applicable rate per annum that corresponds to
the ratio of EBITDA to Consolidated Interest Incurred, determined from
the financial statements and compliance certificate that relate to the
last month of the fiscal quarter immediately preceding such Adjustment
Date, as set forth below:
If the ratio of EBITDA Applicable Eurodollar
to Consolidated Interest Margin for Eurodollar
Incurred is: Rate Loans is:
- ------------------------ ---------------------
less than 1.75 to 1.0 Eurodollar Rate Loans are
5
<PAGE> 6
If the ratio of EBITDA Applicable Eurodollar
to Consolidated Interest Margin for Eurodollar
Incurred is: Rate Loans is:
- ------------------------ ---------------------
not available
equal to or greater
than 1.75 to 1.0 but
less than 2.0 to 1.0 2.50% per annum
equal to or greater
than 2.0 to 1.0 but
less than 2.50 to 1.0 2.25% per annum
equal to or greater
than 2.50 to 1.0 but
less than 3.0 to 1.0 2.00% per annum
equal to or greater
than 3.0 to 1.0 1.75% per annum
If, however, the financial statements required to be delivered pursuant
to subsection 5.1(b) and the related compliance certificate required to
be delivered pursuant to subsection 5.2(a) are not delivered when due,
then:
(a) if such financial statements and compliance certificate
are delivered after the date such financial statements and compliance
certificate were required to be delivered but before the expiration of
any applicable cure period and the Applicable Eurodollar Margin
increases from that previously in effect as a result of a change in the
ratio of EBITDA to Consolidated Interest Incurred as determined from
such financial statements and compliance certificate, then the
Applicable Eurodollar Margin during the period from the date upon which
such financial statements were required to be delivered but before the
expiration of any applicable cure period until the date upon which they
actually are delivered shall be the Applicable Eurodollar Margin as so
increased;
(b) if such financial statements and compliance certificate
are delivered after the date such financial statements and compliance
certificate were required to be delivered but before the expiration of
any applicable cure period and the Applicable Eurodollar Margin
decreases from that previously in effect as a result of a change in the
ratio of EBITDA to
6
<PAGE> 7
Consolidated Interest Incurred as determined from such financial
statements and compliance certificate, then such decrease in the
Applicable Eurodollar Margin shall not become applicable until the date
upon which the financial statements and compliance certificates are
actually delivered; and
(c) if such financial statements and certificate are not
delivered prior to the expiration of the applicable cure period, the
Applicable Eurodollar Margin for the period beginning as of the date
upon which such financial statements and compliance certificate were
required to be delivered without regard to any applicable cure period
until two Business Days following the date upon which they actually are
delivered shall be, per annum, one percent (1.0%) plus the Applicable
Eurodollar Margin that was in effect at the time of such expiration (it
being understood that the foregoing shall not limit the rights of the
Agent and the Banks set forth in Section 8).
"Consolidated Interest Expense" shall mean, for any period, interest
expense on Indebted ness of the Borrower and its Subsidiaries for such
period, in each case determined on a consolidated basis in accordance
with GAAP.
"Consolidated Interest Incurred" shall mean, for any rolling 12 month
period, all interest incurred during such period on outstanding
Indebtedness of Borrower and its Subsidiaries irrespective of whether
such interest is expensed or capitalized by Borrower or its
Subsidiaries, in each case determined on a consolidated basis.
"EBITDA" shall mean, for any rolling 12 month period, on a consolidated
basis for the Borrower and its Subsidiaries, the sum of the amounts for
such period of (a) Consolidated Earnings, plus (b) charges against
income for federal, state and local income taxes, plus (c) Consolidated
Interest Expense, plus (d) depreciation and amortization expense, plus
(e) extraordinary losses exclusive of any such
7
<PAGE> 8
losses that are attributable to the write-down or other downward
revaluation of assets (including the establishment of reserves), minus
(x) interest income, minus (y) all extraordinary gains.
"Eurocurrency Reserve Requirements" shall mean, for any day as applied
to a Eurodollar Rate Loan, the aggregate (without duplication) of the
rates (expressed as a decimal fraction) of reserve requirements in
effect on such day (including, without limitation, basic, supplemental,
marginal and emergency reserves under any regulations of the Board or
other Governmental Authority having jurisdiction with respect thereto)
dealing with reserve requirements prescribed for eurocurrency funding
(currently referred to as "Eurocurrency Liabilities" in Regulation D of
the Board) maintained by a member bank of the Federal Reserve System.
"Eurodollar Base Rate" shall mean, with respect to each day during each
Interest Period, the rate per annum equal to the rate at which Agent is
offered Dollar deposits at or about 10:00 A.M., Columbus, Ohio time,
two Business Days prior to the beginning of such Interest Period in the
interbank eurodollar market where the eurodollar and foreign currency
and exchange operations in respect of its Eurodollar Rate Loans are
then being conducted for delivery on the first day of such Interest
Period for the number of days comprised therein and in an amount
comparable to the amount of its Eurodollar Rate Loan to be outstanding
during such Interest Period.
"Eurodollar Rate Loans" shall mean Loans the rate of interest
applicable to which is based upon the Eurodollar Rate.
"Eurodollar Rate" shall mean with respect to each day during each
Interest Period pertaining to a Eurodollar Rate Loan, a rate per annum
determined for such day in accordance with the following formula
(rounded upward to the nearest 1/100th of 1%):
8
<PAGE> 9
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Interest Period" shall mean with respect to any Eurodollar Rate Loan:
(i) initially, the period commencing on the Borrowing Date or
conversion date, as the case may be, with respect to such Eurodollar
Rate Loan and ending one, two, three or six months thereafter, as
selected by the Borrower in its notice of borrowing or notice of
conversion, as the case may be, given with respect thereto; and
(ii) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Rate Loan
and ending one, two, three or six months thereafter, as selected by the
Borrower by irrevocable notice to the Agent not less than three
Business Days prior to the last day of the then current Interest Period
with respect thereto;
provided that all of the foregoing provisions relating to Interest
Periods are subject to the following:
(1) if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless the result of such extension would
be to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day;
(2) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(3) no Interest Period shall be for less than one month, and
the Borrower shall not select an Interest Period for a Eurodollar
9
<PAGE> 10
Rate Loan (a) as a Revolving Credit Loan if the last day of such
Interest Period would be after the last day of the Commitment Period,
or (b) as a Seasonal Loan if the last day of such Interest Period would
be after the earlier of (i) December 31 of the year in which such
Seasonal Loan is made and (ii) the last day of the Commitment Period.
"M/I Ancillary Businesses" shall mean businesses that are corporations,
limited partnerships, limited liability partnerships or limited
liability companies which are engaged solely in activities reasonably
related to the sale of single family housing and in which the Borrower
or any Subsidiary has an investment or other interest, provided that
such investment or other interest shall be as (a) a shareholder if the
business is a corporation, (b) a limited partner if the business is a
limited partnership, (c) a limited liability partner if the business is
a limited liability partnership, or (d) a limited liability member if
the business is a limited liability company.
"Prime Rate Loans" shall mean Loans the rate of interest applicable to
which is based on the Prime Rate.
"Tranche" shall mean the collective reference to those Eurodollar Rate
Loans (whether made as Revolving Credit Loans or Seasonal Loans), the
then current Interest Periods with respect to all of which begin on the
same date and end on the same date (whether or not such Loans shall
originally have been made on the same day).
8. Subsection 2.1 (Revolving Credit Loan Commitments) of the Credit
Agreement is hereby amended by deleting it in its entirety and replacing it with
the following:
2.1 Revolving Credit Loan Commitments. Subject to the terms and
conditions of this Agreement, each Bank severally agrees to make revolving
credit loans ("Revolving Credit Loans") to Borrower from time to time during the
Commitment Period in an aggregate principal amount at any one time outstanding
not to exceed that Bank's Revolving Credit Loan Commitment Percentage of
10
<PAGE> 11
the lesser of (a) the Borrowing Base (determined as of the most recent month end
or, if Borrower elects to provide an interim Borrowing Base Certificate pursuant
to subsection 5.4 hereof, as of the date stated in such Borrowing Base
Certificate) minus the sum of the (i) aggregate principal amount of undrawn and
drawn Standby L/Cs, exclusive of the amount of Standby L/Cs issued for the
purpose of satisfying bonding requirements, then outstanding, and (ii) the
aggregate principal amount of undrawn and drawn Guaranteed HNB Joint Ventures
Letters of Credit, exclusive of the amount of Guaranteed HNB Joint Ventures
Letters of Credit issued for the purpose of satisfying bonding requirements,
then outstanding, or (b) One Hundred Thirty-Six Million and 00/100 Dollars
($136,000,000.00). During the Commitment Period and as long as no Event of
Default exists, Borrower may use the Revolving Credit Loan Commitments by
borrowing, prepaying the Revolving Credit Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof; provided,
however, that Borrower may not prepay any Revolving Credit Loan while any
Seasonal Loan remains outstanding, i.e., any prepayments shall be applied first
to the Seasonal Loans until all Seasonal Loans are paid in full before any
prepayments will be applied to the Revolving Credit Loans.
Subject to the terms and conditions of this Agreement (including the
limitations on the availability of Eurodollar Rate Loans and including the
termination of the Commitment as set forth in Section 8 hereof), the Revolving
Credit Loans may from time to time be (i) Eurodollar Rate Loans, (ii) Prime Rate
Loans, or (iii) a combination thereof, as determined by Borrower and notified to
Agent in accordance with subsection 2.5 hereof, provided (a) that no Revolving
Credit Loan shall be made as a Eurodollar Rate Loan if the ratio of EBITDA to
Consolidated Interest Incurred as of the most recent Adjustment Date, determined
from the financial statements and compliance certificate that relate to the last
month of the fiscal quarter immediately preceding such Adjustment Date, is less
than 1.75 to 1.0, (b) that no Revolving Credit Loan shall be made as a
Eurodollar Rate Loan after the day that is one month prior to the last day of
the Commitment Period, and (c) that the maximum number of Tranches that may be
outstanding at any one time as Revolving Credit Loans and Seasonal Loans may not
exceed five in the aggregate.
9. Subsection 2.3 (Seasonal Loan Commitments) of the Credit Agreement
is hereby amended by deleting it in its entirety and replacing it with the
following:
2.3 Seasonal Loan Commitments. Subject to the terms and conditions of
this Agreement, each Seasonal Loan Bank severally agrees to make revolving
credit seasonal loans ("Seasonal Loans") to Borrower during the times more
particularly described in this
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subsection 2.3 during the Commitment Period in an aggregate principal amount at
any one time outstanding not to exceed that Bank's Seasonal Loan Commitment
Percentage of the lesser of (a) the Borrowing Base (determined as of the most
recent month end or, if Borrower elects to provide an interim Borrowing Base
Certificate pursuant to subsection 5.4 hereof, as of the date stated in such
Borrowing Base Certificate) minus the sum of (i) $136,000,000 and (ii) the
aggregate principal amount of undrawn and drawn (A) Standby L/Cs, exclusive of
the amount of Standby L/Cs issued for the purpose of satisfying bonding
requirements, then outstanding plus (B) Guaranteed HNB Joint Ventures Letters of
Credit, exclusive of the amount of Guaranteed HNB Joint Ventures Letters of
Credit issued for the purpose of satisfying bonding requirements, then
outstanding, or (b) $30,000,000. Subject to the terms and conditions of this
Agreement, Seasonal Loans shall be available: (a) in 1995, from the date of this
Agreement until December 31; in each year of the Commitment Period thereafter,
from March 1 until December 31 of such year, provided that in no event shall the
Seasonal Loans be available beyond the last day of the Commitment Period; and
(b) only if the entire $136,000,000 principal amount of the Revolving Credit
Loans has been advanced and no portion thereof has been repaid as of the time of
the request for any Seasonal Loan. All Seasonal Loans must be repaid by December
31 of each year during the Commitment Period, except if the Commitment Period
ends on a date other than December 31, all Seasonal Loans made during the last
year of the Commitment Period shall be due and payable on the last day of the
Commitment Period. In addition to the other requirements for Seasonal Loans, all
Seasonal Loans shall have a zero balance, and no Seasonal Loans shall be
available, from January 1 through and including February 28 (or February 29, if
appropriate) of any year during the Commitment Period. During the times when the
Seasonal Loans are available during the Commitment Period and as long as no
Event of Default exists, Borrower may use the Seasonal Loan Commitments by
borrowing, prepaying the Seasonal Loans in whole or in part, and reborrowing,
all in accordance with the terms and conditions hereof.
Subject to the terms and conditions of this Agreement (including the
limitations on the availability of Eurodollar Rate Loans and including the
termination of the Commitment as set forth in Section 8 hereof), the Seasonal
Loans may from time to time be (i) Eurodollar Rate Loans, (ii) Prime Rate Loans,
or (iii) a combination thereof, as determined by Borrower and notified to Agent
in accordance with subsection 2.5 hereof, provided (a) that no Seasonal Loan
shall be made as a Eurodollar Rate Loan if the ratio of EBITDA to Consolidated
Interest Incurred as of the most recent Adjustment Date, determined from the
financial statements and compliance certificate that relate to the last month of
the fiscal quarter immediately preceding such Adjustment Date, is less
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than 1.75 to 1.0, (b) that no Seasonal Loan shall be made as a Eurodollar Rate
Loan with an Interest Period that would end later than December 31 (or, if the
Commitment Period ends on a date other than December 31, the date during such
last year of the Commitment Period that is the last day of the Commitment
Period) of the year in which such Seasonal Loan is made, and (c) that the number
of Tranches that may be outstanding at any one time as Revolving Credit Loans
and Seasonal Loans may not exceed five in the aggregate.
10. Subsection 2.5 (Procedure for Borrowing) of the Credit Agreement is
hereby amended by deleting it in its entirety and replacing it with the
following:
2.5 Procedure for Borrowing. Borrower may borrow under the Revolving
Credit Loan Commitments and the Seasonal Loan Commitments (subject to the
limitations on the times Seasonal Loans are available during each year and to
the limitations on the availability of Eurodollar Rate Loans), during the
Commitment Period, provided Borrower shall give Agent telephonic or written
notice (the "Notice of Borrowing"), which Notice of Borrowing must be received
(a) prior to 12:00 Noon, Columbus, Ohio time, at least three Business Days prior
to the requested Borrowing Date for that part of the requested borrowing that is
to be Eurodollar Rate Loans, or (b) prior to 11:00 a.m., Columbus, Ohio time on
or before the requested Borrowing Date for that part of the requested borrowing
that is to be Prime Rate Loans which Notice of Borrowing, in the case of Prime
Rate Loan(s), shall be irrevocable. Each Notice of Borrowing shall specify (i)
the Borrowing Date (which shall be a Business Day), (ii) the amount of the
requested borrow ing, (iii) whether the borrowing is to be of Eurodollar Rate
Loans, Prime Rate Loans or a combination thereof and (iv) if the borrowing is to
be entirely or partly of Eurodollar Rate Loans, the amount of each Prime Rate
Loan, if any, and the respective amounts of each such Eurodollar Rate Loan and
the respective lengths of the initial Interest Periods therefor. Each borrowing
pursuant to the Revolving Credit Loan Commitments and the Seasonal Loan
Commitments, as appropriate, shall be in the principal amount (a) in the case of
Prime Rate Loans, of the lesser of (i) $1,000,000 or any larger amount which is
an even multiple of $100,000, and (ii) the then undrawn Revolving Credit Loan
Commitments or the Seasonal Loan Commitments, as appropriate, and (b) in the
case of Eurodollar Rate Loans, of $10,000,000 or any larger amount which is an
even multiple of $1,000,000 so long as the principal amount of the requested
borrowing is less than the then undrawn Revolving Credit Loan Commitments or the
Seasonal Loan Commitments, as appropriate.
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After the Borrower gives a Notice of Borrowing with respect to
Eurodollar Rate Loans, Agent, by 10:00 a.m., Columbus, Ohio time, two Business
Days prior to the requested Borrowing Date, shall advise the Borrower of the
applicable interest rate(s) (which is the sum of the applicable Eurodollar
Rate(s) and the Applicable Eurodollar Margin) for the Eurodollar Rate Loan(s)
and Interest Period(s) requested in the Notice of Borrowing. Not more than two
hours thereafter, the Borrower shall give Agent written irrevocable confirmation
of whether or not the Borrower wants Eurodollar Rate Loan(s) on such Borrowing
Date and, if so, the amount(s) and Interest Period(s) of such Eurodollar Rate
Loan(s).
If the Borrower's written confirmation is timely made, the Borrower
shall be deemed to be requesting borrowing(s) of Eurodollar Rate Loan(s) in the
amount(s) and for the Interest Period(s) stated in the confirmation. If the
Borrower's confirmation is not timely made, the Borrower shall be deemed to have
requested a borrowing entirely as a Prime Rate Loan in the aggregate amount and
on the Borrowing Date specified in the Notice of Borrowing.
By 2:00 p.m., Columbus, Ohio time, two Business Days prior to the
requested Borrowing Date, Agent shall give telephonic or written notice to each
Bank of such request, specifying (i) the Borrowing Date (which shall be a
Business Day), (ii) the amount of the requested borrowing, (iii) whether the
borrowing is to be of Eurodollar Rate Loans, Prime Rate Loans or a combination
thereof, and (iv) if the borrowing is to be entirely or partly of Eurodollar
Rate Loans, the amount of each Prime Rate Loan, if any, and the respective
amounts of each such Eurodollar Rate Loan, the applicable Eurodollar Rate for
each such Eurodollar Rate Loan and the respective lengths of the initial
Interest Periods therefor. Subject to satisfaction of the terms and conditions
of this Agreement, each Bank and/or Seasonal Loan Bank, as appropriate, shall
deposit funds with Agent for the account of Borrower by 2:00 p.m. on the
Borrowing Date by wire transfer or other immediately available funds equal to
its Revolving Credit Loan Commitment Percentage of the Revolving Credit Loans
and/or its Seasonal Loan Commitment Percentage of the Seasonal Loans, as
appropriate, to be made on the Borrowing Date. The Loan(s) will then be made
available to Borrower by Agent crediting the account of Borrower on the books of
Agent with the aggregate amounts made available to Agent by Banks and/or
Seasonal Loan Banks, as appropriate, and in like funds as received by Agent. The
provisions for conversion and continuation of the Loans are set forth in
subsection 2A.1.
11. Subsection 2.8 (Interest; Default Interest) of the Credit Agreement
is hereby amended by deleting it in its entirety and replacing it with the
following:
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2.8 Interest; Default Interest.
(a) Except as provided in subsection 2.8(b) hereof, the Revolving
Credit Loans and, if permitted to be outstanding, the Seasonal Loans shall bear
interest on the unpaid principal amount thereof at a rate per annum equal to (i)
in the case of Prime Rate Loans, the Prime Rate in effect from time to time and
(ii) in the case of Eurodollar Rate Loans, if permitted hereunder at such time,
the Eurodollar Rate determined for such day plus the Applicable Eurodollar
Margin in effect for such day.
(b) If all or a portion of the principal amount of any of the Revolving
Credit Loans or the Seasonal Loans made hereunder (whether as Prime Rate Loans
or Eurodollar Rate Loans or a combination thereof) shall not be paid when due
(whether at the stated maturity, by acceleration or otherwise), any such overdue
principal amount and, to the extent permitted by applicable law, any overdue
installment of interest on any Revolving Credit Loan or Seasonal Loan shall,
without limiting any other rights of Banks, bear interest at a rate per annum
which is the sum of one percent (1.0%) plus the Prime Rate in effect from time
to time from the date of such non-payment until paid in full (before, as well as
after, judgment); provided, however, if all or any portion of any principal on
any Revolving Credit Loan made as a Eurodollar Rate Loan hereunder or any
Seasonal Loan made as a Eurodollar Rate Loan hereunder shall not be paid when
due and the then current Interest Period for such Eurodollar Rate Loan has not
yet expired, the entire principal amount of such Eurodollar Rate Loan and, to
the extent permitted by applicable law, any overdue installment of interest on
such Eurodollar Rate Loan shall, without limiting any other rights of Banks,
bear interest at a rate per annum which is the sum of one percent (1.0%) plus
the applicable non-default interest rate (which is the sum of the applicable
Eurodollar Rate and the Applicable Eurodollar Margin) on such Eurodollar Rate
Loan then in effect from the date of such non-payment until the expiration of
the then current Interest Period with respect to such Eurodollar Rate Loan
(before, as well as after, judgment); thereafter, the entire principal amount of
such Eurodollar Rate Loan and, to the extent permitted by applicable law, any
overdue installment of interest on such Eurodollar Rate Loan shall, without
limiting any other rights of Banks, bear interest at a rate per annum which is
the sum of one percent (1.0%) plus the Prime Rate in effect from time to time
until paid in full (before, as well as after, judgment).
(c) Interest shall be payable in arrears and shall be due on each
Interest Payment Date.
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12. Subsection 2.9 (Termination or Reduction of Commitment) of the
Credit Agreement is hereby amended by deleting it in its entirety and replacing
it with the following:
2.9 Termination or Reduction of Commitment. (a) Provided that each Bank
consents in writing, Borrower shall have the right to terminate the Commitment
or, from time to time (and so long as no Default or Event of Default exists),
reduce the amount of the Commitment, upon not less than five Business Days'
written notice to each Bank specifying (i) either a reduction or termination,
(ii) whether any such reduction or termination is of Revolving Credit Loans,
Seasonal Loans or a combination thereof and (iii) in the case of a reduction,
whether any prepayment, if required by this Agreement, shall be of Prime Rate
Loans, Eurodollar Rate Loans or a combination thereof, and, in each case if a
combination thereof, the principal allocable to each.
(b) Any reduction of the Commitment shall be in the amount of
$1,000,000 or a whole multiple of $500,000 in excess thereof and shall reduce
permanently the amount of the Commitment then in effect. Any such reduction
shall be accompanied by prepayment of (i) the Revolving Credit Loans, if the
Revolving Credit Loan Commitments are being reduced, and any outstanding
Seasonal Loans, if the Seasonal Loan Commitments are being reduced, made
hereunder to the extent, if any, that the amount of such Revolving Credit Loans
and/or Seasonal Loans, as appropriate, then outstanding exceeds the amount of
the Revolving Credit Loan Commitments and/or the Seasonal Loan Commitments, as
appropriate, as then reduced, together with accrued interest on the amount so
prepaid to the date of such prepayment, and (ii) if a Revolving Credit Loan or a
Seasonal Loan is a Eurodollar Rate Loan that is prepaid other than at the end of
the Interest Period applicable thereto, by any amounts payable pursuant to
subsection 2A.5, Indemnity. Any such reduction of the L/C Commitment, if the L/C
Commitment is being reduced, shall be accompanied by either (A) return to Agent
of the outstanding Standby L/Cs or (B) payment by Borrower to Agent of cash to
fully collateralize outstanding Standby L/Cs, to the extent, if any, that the
amount of such Standby L/Cs then outstanding exceeds the L/C Commitment portion
of the Commitment as then reduced.
(c) Any such termination of the Commitment shall be accompanied (i) by
prepayment in full of the Revolving Credit Loans and the Seasonal Loans then
outstanding hereunder, together with accrued interest thereon to the date of
such prepayment, and the payment of any unpaid commitment fee then accrued
hereunder; (ii) with respect to Standby L/Cs, by Borrower's compliance with the
terms of subsection 2.16 (b) hereof; and (iii) if a Revolving Credit Loan or a
Seasonal Loan is a Eurodollar Rate Loan that is
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prepaid other than at the end of the Interest Period applicable thereto, by any
amounts payable pursuant to subsection 2A.5, Indemnity.
(d) Any such reduction or termination of the Revolving Credit Loan
Commitments, the Seasonal Loan Commitments and/or L/C Commitments portion(s) of
the Commitment shall be allocated to each Bank ratably in proportion to that
Bank's Revolving Credit Loan Commitment Percentage, Seasonal Loan Commitment
Percentage, and/or L/C Commitment Percentage, as appropriate.
13. Subsection 2.10 (Maturity Date of Commitment; Extension) is hereby
amended by deleting it in its entirety and replacing it with the following:
2.10 Maturity Date of Commitment; Extension. Unless earlier terminated
pursuant to the terms of this Agreement, the Commitment shall terminate on
September 30, 2000, and the unpaid balance of the Revolving Credit Loans and
Seasonal Loans outstanding shall be paid on said date; provided, however, that
once each year during each and every year of the Commitment Period (without
regard to whether or not all Banks elected to extend the Commitment Period in
any preceding year during the Commitment Period) all Banks shall make an
election whether or not, in all Banks' sole discretion, to extend the maturity
date of the Commitment by one year. If all Banks elect to extend the maturity
date of the Commitment by one year, such election shall be made on or before
September 30 of each year (or the first Business Day after September 30 if
September 30 is not a Business Day) by written notice from Agent to Borrower.
Each notice granting an extension shall be attached to each of the Notes and
shall constitute an amendment extending the maturity date of each Note by one
year. If all Banks do not unanimously elect to extend the maturity date of the
Commitment by one year, Agent shall not be required to give notice to Borrower
of such election not to extend. If Borrower has not received notice from Agent
as stated herein that all Banks have elected to extend the maturity date of the
Commitment by one year, the maturity date of the Commitment shall be deemed not
to have been extended.
14. Subsection 2.11 (Computation of Interest and Fees) of the Credit
Agreement is hereby amended by deleting it in its entirety and replacing it with
the following:
2.11 Computation of Interest and Fees. Commitment fees on the
Commitment and interest in respect of the Revolving Credit Loans and the
Seasonal Loans shall be calculated on the basis of a 360 day year for the actual
days elapsed. Any change in the interest rate on the Loans and the Notes
resulting from a change in
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the Prime Rate or the Eurocurrency Reserve Requirements shall become effective
as of the opening of business of the day on which such change in the Prime Rate
or the Eurocurrency Reserve Requirements shall become effective, without notice
to Banks or Borrower. However, Agent shall give Borrower and Banks prompt notice
of all changes in the Prime Rate or the Eurocurrency Reserve Requirements. Each
determination of an interest rate by Agent pursuant to any provision of this
Agreement shall be conclusive and binding on Banks and Borrower in the absence
of manifest error.
15. Subsection 2.12 (Increased Costs) of the Credit Agreement is hereby
amended by deleting it in its entirety and replacing it with the following:
2.12 Increased Costs. In the event that at any time after the date of
this Agreement any law, rule or regulation regarding capital adequacy, or any
change therein or in the interpretation or application thereof or compliance by
any Bank (including Agent) with any request or directive regarding capital
adequacy (whether or not having the force of law) from any central bank or other
Governmental Authority, agency or instrumentality, does or shall have, in the
opinion of such Bank, the effect of reducing the rate of return on the capital
of such Bank or any corporation controlling such Bank as a consequence of such
Bank's obligations hereunder to a level below that which such Bank or any
corporation controlling such Bank could have achieved but for its adoption,
change or compliance (taking into account such Bank's or such corporation's
policies, as the case may be, with respect to capital adequacy) by an amount
deemed by such Bank to be material, then, from time to time, after submission by
such Bank to Borrower of a written request therefor, Borrower shall pay to such
Bank additional amount or amounts as will compensate such Bank or such
corporation, as the case may be, for such reduction. Such Bank's written request
to Borrower for compensation shall set forth in reasonable detail the
computation of any additional amounts payable to such Bank by Borrower, and such
request and computation shall be conclusive in the absence of manifest error.
This provision shall remain in full force and effect, with respect to Revolving
Credit Loans and Seasonal Loans, until the later of (a) the termination of this
Agreement or (b) the payment in full of all Notes (provided that before
accepting final payment on the Notes, Bank shall calculate any amounts due in
accordance with this subsection 2.12 and give notice to Borrower of such amounts
as stated herein, and Borrower shall include such amounts in its final payment).
This provision shall survive the termination of all Standby L/Cs and, with
respect to Standby L/Cs, shall remain in full force and effect until there is no
existing or future obligation of Agent or any L/C Participant under any Standby
L/C. The provisions of this
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subsection 2.12 shall be supplemented by the provisions of Section 2A hereof.
16. Subsection 2.14 (Pro Rata Treatment and Payments), of the Credit
Agreement is hereby amended by deleting clause (a) thereof in its entirety and
replacing it with the following:
2.14 Pro Rata Treatment and Payments. (a) Each borrowing by Borrower
from Banks hereunder, each payment (including each prepayment) by Borrower on
account of principal of and interest on the Loans, each payment by Borrower on
account of any commitment fee hereunder and any reduction of the Revolving
Credit Loan Commitments, the Seasonal Loan Commitments and/or the L/C
Commitments shall be made pro rata according to the respective Revolving Credit
Loan Commitment Percentage, Seasonal Loan Commitment Percentage and/or L/C
Commitment Percentage, as appropriate, then held by Banks. All payments
(including prepayments) to be made by Borrower hereunder and under the Notes,
whether on account of principal, interest, fees or otherwise, shall be made
without set-off or counterclaim and shall be made prior to 12:00 Noon, Columbus,
Ohio time, on the due date thereof to Agent, for the account of Banks, at
Agent's 100 East Broad Street office in Columbus, Ohio, in Dollars and in
immediately available funds. Agent shall distribute such payments to Banks
promptly upon receipt in like funds as received. If any payment hereunder on a
Prime Rate Loan becomes due and payable on a day other than a Business Day, such
payment shall be extended to the next succeeding Business Day, and, with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension. If any payment hereunder on a Eurodollar
Rate Loan becomes due and payable on a day other than a Business Day, such
payment shall be extended to the next succeeding Business Day (and, with respect
to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension) unless the result of such extension would
be to extend such payment into another calendar month, in which event such
payment shall be made on the immediately preceding Business Day.
17. Subsection 2.18 (Standby L/C Participations) of the Credit
Agreement is hereby amended by deleting clause (b) thereof in its entirety and
replacing it with the following:
(b) If any amount required to be paid by any L/C Participant to Agent
in respect of any unreimbursed portion of any payment made by Agent under any
Standby L/C is not paid to Agent on the date such payment is due but is paid
within three Business Days after such payment is due, such L/C Participant shall
pay to Agent on demand an amount equal to the product of (i) such amount,
multiplied by (ii) the daily average Federal funds rate, as quoted
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by Agent, during the period from and including the date such payment is required
to the date on which such payment is immediately available to Agent, multiplied
by (iii) a fraction the numerator of which is the number of days that elapse
during such period and the denominator of which is 360. If any such amount
required to be paid by any L/C Participant pursuant to this subsection 2.18 is
not paid to Agent by such L/C Participant within three Business Days after the
date such payment is due, Agent shall be entitled to recover from such L/C
Participant, on demand, such amount with interest thereon calculated from the
fourth Business Day after such due date until paid at the rate per annum
applicable to Revolving Credit Loans made as Prime Rate Loans hereunder. A
certificate of Agent submitted to any L/C Participant with respect to any
amounts owing under this subsection 2.18 shall be conclusive in the absence of
manifest error.
18. Subsection 2.19 (Payments) of the Credit Agreement is hereby
amended by deleting it in its entirety and replacing it with the following:
2.19 Payments. Borrower agrees (a) to reimburse Agent, for the pro rata
benefit of the L/C Participants in accordance with each L/C Participant's
respective L/C Commitment Percentage, forthwith upon its demand and otherwise
in accordance with the terms of the Standby L/C Application relating thereto,
for any expenditure or payment made by Agent or L/C Participants under any
Standby L/C, and (b) to pay interest on any unreimbursed portion of any such
payments from the date of such payment until reimbursement in full thereof at a
rate per annum equal to (i) prior to the date which is (A) one Business Day
after the day on which Agent demands reimbursement from Borrower for such
payment if such demand is made prior to 11:00 a.m., Columbus, Ohio time or (B)
two Business Days after the day on which Agent demands reimbursement if such
demand is made at or after 11:00 a.m. Columbus, Ohio time, the rate which would
then be payable on any outstanding Revolving Credit Loan made as a Prime Rate
Loan which is not in default, and (ii) thereafter, the rate which would then be
payable on any outstanding Revolving Credit Loan made as a Prime Rate Loan which
is in default.
19. Subsection 2.21 (Letter of Credit Reserves) of the Credit Agreement
is hereby amended by deleting it in its entirety and replacing it with the
following:
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2.21 Letter of Credit Reserves. If any change in any law or regulation
or in the interpretation or application thereof by any court or other
governmental authority charged with the administration thereof shall either (a)
impose, modify, deem or make applicable any reserve, special deposit, assessment
or similar requirement against letters of credit issued by Agent, or (b) impose
on Agent or any L/C Participant any other condition regarding this Agreement or
any Standby L/C, and the result of any event referred to in clause (a) or (b)
above shall be to increase the cost to Agent or any L/C Participant of issuing
or maintaining any Standby L/C (which increase in cost shall be the result of
Agent's or any L/C Participant's reasonable allocation of the aggregate of such
cost increases resulting from such events), then, upon demand by Agent or any
L/C Participant, Borrower shall immediately pay to Agent, for the pro rata
benefit of such L/C Participant(s), from time to time as specified by Agent or
such L/C Participant(s), additional amounts which shall be sufficient to
compensate Agent or such L/C Participant(s) for such increased cost, together
with interest on each such amount from the date demanded until payment in full
thereof at a rate per annum equal to the then applicable interest rate on the
Revolving Credit Loans made as Prime Rate Loans. A certificate as to such
increased cost incurred by Agent or such L/C Participant(s), submitted by Agent
or such L/C Participant(s) to Borrower, shall be conclusive, absent manifest
error, as to the amount thereof. This provision shall survive the termination of
this Agreement and shall remain in full force and effect until there is no
existing or future obligation of Agent or any L/C Participant under any Standby
L/C.
20. The Credit Agreement is hereby amended by adding the following new
Section 2A:
SECTION 2A. GENERAL PROVISIONS APPLICABLE TO LOANS
2A.1 Conversion and Continuation Options. (a) The Borrower may
elect from time to time to convert outstanding Seasonal Loans and Revolving
Credit Loans from Eurodollar Rate Loans to Prime Rate Loans by giving the Agent
at least two Business Days' prior irrevocable notice of such election, provided
that any such conversion of Eurodollar Rate Loans may only be made on the last
day of an Interest Period with respect thereto. Subject to the limitations on
the availability of Eurodollar Rate Loans, the Borrower may elect from time to
time to convert outstanding Seasonal Loans and Revolving Credit Loans from Prime
Rate Loans to Eurodollar Rate Loans by giving the Agent telephonic or written
notice (the "Notice of Conversion"), which Notice of Conversion must be received
prior to 12:00 Noon, Columbus, Ohio time, at least three Business Days prior to
the requested date for the conversion,
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which Notice of Conversion shall specify (i) the date for the conversion; (ii)
the aggregate amount of Prime Rate Loans to be converted; and (iii) and for each
such Prime Rate Loan to be converted to a Eurodollar Rate Loan, the respective
amount and the respective length of the initial Interest Period. Each conversion
from Prime Rate Loans to Eurodollar Rate Loans shall be in the principal amount
of $10,000,000 or any larger amount which is an even multiple of $1,000,000.
After the Borrower gives a Notice of Conversion from Prime Rate Loans to
Eurodollar Rate Loans, Agent, by 10:00 a.m., Columbus, Ohio time, two Business
Days prior to the requested date for the conversion, shall advise the Borrower
of the applicable interest rate(s) (which is the sum of the applicable
Eurodollar Rate(s) and the Applicable Eurodollar Margin) for the Eurodollar Rate
Loan(s) and Interest Period(s) requested in the Notice of Conversion. Not more
than two hours thereafter, the Borrower shall give Agent written irrevocable
confirmation of whether or not the Borrower wants to convert the Prime Rate
Loans to Eurodollar Rate Loan(s) on such requested date and, if so, the amount
and the Interest Period for each such Eurodollar Rate Loan. If the Borrower's
confirmation is not timely made, the Borrower shall be deemed to have withdrawn
Borrower's Notice of Conversion and the Prime Rate Loans that were the subject
of such Notice of Conversion shall continue as Prime Rate Loans. If the
Borrower's written confirmation is timely made, the Borrower shall be deemed to
be requesting a conversion from Prime Rate Loans to Eurodollar Rate Loan(s) in
the amount(s) and for the Interest Period(s) stated in the confirmation. By 2:00
p.m., Columbus, Ohio time, two Business Days prior to the requested Borrowing
Date, Agent shall give telephonic or written notice to each Bank of Borrower's
request for conversion, specifying (i) the date for the conversion; (ii) the
aggregate amount of Prime Rate Loans to be converted; and (iii) and, for each
such Prime Rate Loan to be converted to a Eurodollar Rate Loan, the respective
amount, the respective Eurodollar Rate, and the respective length of the initial
Interest Period applicable thereto. All or any part of outstanding Eurodollar
Rate Loans and Prime Rate Loans may be converted as provided herein, provided
that (i) (unless the Required Banks otherwise consent) no Prime Rate Loan may be
converted into a Eurodollar Rate Loan when any Default or Event of Default has
occurred and is continuing and (ii) no Prime Rate Loan may be converted into a
Eurodollar Rate Loan (A) in the case of conversions of Revolving Credit Loans,
after the date that is one month prior to the last day of the Commitment Period,
and (B) in the case of conversions of Seasonal Loans, if the Interest Period for
such converted Seasonal Loan(s) would end after December 31 (or if the
Commitment Period ends on a date other than December 31, the last day of the
Commitment Period during the last year of the Commitment Period) of the year in
which such Seasonal Loan(s) are made.
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(b) Subject to the limitations on the availability of Eurodollar Rate
Loans, any Eurodollar Rate Loans may be continued as such upon the expiration of
the then current Interest Period with respect thereto by the Borrower giving
Agent telephonic or written notice, which notice must be received prior to 12:00
Noon, Columbus, Ohio time, at least three Business Days prior to such last day
of the then current Interest Period, and which notice shall specify the amount
of the Eurodollar Rate Loans to be continued as such and the respective amount
and the respective length of the Interest Period for each Eurodollar Rate Loan.
After the Borrower gives such notice, Agent, by 10:00 a.m. two Business Days
prior to the end of the Interest Period, shall advise the Borrower of the
applicable interest rate(s) (which is the sum of the applicable Eurodollar
Rate(s) and the Applicable Eurodollar Margin) for the Eurodollar Rate Loan(s)
and Interest Period(s) requested in such notice. Not more than two hours
thereafter, the Borrower shall give Agent written irrevocable confirmation of
whether or not the Borrower wants to continue the Eurodollar Rate Loan(s) as
such and, if so, the amount and the Interest Period for each such Eurodollar
Rate Loan. If the Borrower's confirmation is not timely made, the Borrower shall
be deemed to have withdrawn Borrower's notice for a continuation and the
Eurodollar Rate Loans that were the subject of such request shall convert
automatically to a Prime Rate Loan upon the expiration of the then current
Interest Period. If the Borrower's written confirmation is timely made, the
Borrower shall be deemed to be requesting a continuation of the Eurodollar Rate
Loan(s) in the amount(s) and for the Interest Period(s) stated in such notice.
Agent shall give prompt telephonic or written notice to each Bank of such
request for continuation, specifying the aggregate amount of the Eurodollar Rate
Loans to be continued as such and, for each such Eurodollar Rate Loan to be
continued, the respective amount, the respective Eurodollar Rate, and the
respective length of the Interest Period applicable thereto. All or any part of
outstanding Eurodollar Rate Loans may be continued as provided herein, provided
that (i) (unless the Required Banks otherwise consent) no Eurodollar Rate Loan
may be continued when any Default or Event of Default has occurred and is
continuing and (ii) no Eurodollar Rate Loan may be continued as a Eurodollar
Rate Loan (A) in the case of continuations of Revolving Credit Loans, after the
date that is one month prior to the last day of the Commitment Period, and (B)
in the case of continuations of Seasonal Loans, if the Interest Period for such
continued Seasonal Loan(s) would end after December 31 (or if the Commitment
Period ends on a date other than December 31, the last day of the Commitment
Period during the last year of the Commitment Period) of the year in which such
Seasonal Loan(s) are made.
23
<PAGE> 24
2A.2 Inability to Determine Interest Rate. If prior to the first day of
any Interest Period, the Agent or the Required Banks shall have determined
(which determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the relevant market, adequate and reasonable
means do not exist for ascertaining the Eurodollar Rate for such Interest
Period, the Agent shall give telecopy, telephonic or written notice thereof to
the Borrower and the Banks as soon as practicable thereafter. If such notice is
given (x) any Eurodollar Rate Loans requested to be made on the first day of
such Interest Period shall be made as Prime Rate Loans and (y) any Loans that
were to have been converted on the first day of such Interest Period to or
continued as Eurodollar Rate Loans shall be converted to or continued as Prime
Rate Loans. Until such notice has been withdrawn by the Agent, no further
Eurodollar Rate Loans shall be made or continued as such, nor shall the Borrower
have the right to convert Prime Rate Loans to Eurodollar Rate Loans.
2A.3 Illegality; Impracticability. Notwithstanding any other provision
herein, if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful, or if compliance
by any Bank or its applicable lending office, branch or any affiliate thereof
with any request or directive (whether or not having the force of law) from any
central bank or other Governmental Authority occurring after May 7, 1996 (or, if
later, the date on which such Bank becomes a Bank pursuant to any permitted
assignment) shall make it impracticable, for any Bank, or its applicable lending
office, branch or any affiliate thereof, to make or maintain Eurodollar Rate
Loans as contemplated by this Agreement, (a) such Bank shall promptly give
written notice of such circumstances to the Borrower and the Agent (which notice
shall be withdrawn whenever such circumstances no longer exist), (b) the
commitment of such Bank hereunder to make Eurodollar Rate Loans, continue
Eurodollar Rate Loans as such and convert Prime Rate Loans to Eurodollar Rate
Loans shall forthwith be canceled and, until such time as it shall no longer be
unlawful for such Bank to make or maintain Eurodollar Rate Loans, such Bank
shall then have a commitment only to make a Prime Rate Loan when a Eurodollar
Rate Loan is requested and (c) such Bank's Loans then outstanding as Eurodollar
Rate Loans, if any, shall be converted automatically to Prime Rate Loans on the
respective last days of the then current Interest Periods with respect to such
Loans or within such earlier period as required by law. If any such conversion
of a Eurodollar Rate Loan occurs on a day which is not the last day of the then
current Interest Period with respect thereto, the Borrower shall pay to such
Bank such amounts, if any, as may be required pursuant to subsection 2A.5,
Indemnity.
24
<PAGE> 25
2A.4 Requirements of Law. If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof applicable to
any Bank, or its applicable lending office, branch or any affiliate thereof, or
compliance by any Bank, or its applicable lending office, branch or any
affiliate thereof, with any request or directive (whether or not having the
force of law) from any central bank or other Governmental Authority, in each
case made subsequent to May 7, 1996 (or, if later, the date on which such Bank
becomes a Bank pursuant to any permitted assignment):
(a) shall subject such Bank, or its applicable lending office,
branch or any affiliate thereof, to any tax of any kind whatsoever with
respect to any Eurodollar Rate Loans made by it or its obligation to
make Eurodollar Rate Loans, or change the basis of taxation of payments
to such Bank in respect thereof and changes in taxes measured by or
imposed upon the overall net income, or franchise taxes, or taxes
measured by or imposed upon overall capital or net worth, or branch
taxes (in the case of such capital, net worth or branch taxes, imposed
in lieu of such net income tax), of such Bank or its applicable lending
office, branch, or any affiliate thereof;
(b) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Bank which is not otherwise
included in the determination of the Eurodollar Rate hereunder; or
(c) shall impose on such Bank, or its applicable lending
office, branch or any affiliate thereof, any other condition;
and the result of any of the foregoing is to increase the cost to such Bank, by
an amount which such Bank, or its applicable lending office, branch or any
affiliate thereof, deems to be material, of making, converting into, continuing
or maintaining Eurodollar Rate Loans or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, upon notice to the
Borrower from
25
<PAGE> 26
such Bank, through the Agent, in accordance herewith, the Borrower shall
promptly pay such Bank, upon its demand, any additional amounts necessary to
compensate such Bank for such increased cost or reduced amount receivable; in
addition, in any such case, the Borrower may elect to convert the Eurodollar
Rate Loans made by such Bank hereunder to Prime Rate Loans by giving the Agent
at least one Business Day's notice of such election, in which case the Borrower
shall promptly pay to such Bank, upon demand, without duplication, such amounts,
if any, as may be required pursuant to subsection 2A.5. If any Bank becomes
entitled to claim any additional amounts pursuant to this subsection, it shall
provide prompt notice thereof to the Borrower, through the Agent, certifying (x)
that one of the events described in this paragraph (a) has occurred and
describing in reasonable detail the nature of such event, (y) as to the
increased cost or reduced amount receivable hereunder resulting from such event
and (z) as to the additional amount demanded by such Bank and a reasonably
detailed explanation of the calculation thereof. Such a certificate as to any
additional amounts payable pursuant to this subsection submitted by such Bank,
through the Agent, to the Borrower shall be conclusive in the absence of
manifest error. This covenant shall survive the termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.
2A.5 Indemnity. The Borrower agrees to indemnify each Bank and to hold
each Bank harmless from any loss or expense which such Bank may sustain or incur
(other than through such Bank's gross negligence or willful misconduct) as a
consequence of (a) default by the Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Rate Loans after the Borrower has given Agent
written irrevocable confirmation that Borrower wants such Eurodollar Rate Loans
in accordance with subsection 2.5 or subsection 2A.1, as appropriate, of this
Agreement, (b) default by the Borrower in making any prepayment or conversion of
a Eurodollar Rate Loan after the Borrower has given a notice thereof in
accordance with the provisions of this Agreement or (c) the making of a
prepayment of Eurodollar Rate Loans on a day which is not the last day of an
Interest Period with respect thereto (whether by acceleration, demand or
otherwise). Such indemnification may include, without limitation, an amount
equal to the excess, if any, of (i) the amount of interest which would have
accrued on the amount so prepaid, or converted, or not so borrowed, converted or
continued, for the period from the date of such prepayment or conversion or of
such failure to borrow, convert or continue to the last day of the applicable
Interest Period (or, in the case of a failure to borrow, convert or continue,
the Interest Period that would have commenced on the date of such failure) in
each case at the applicable rate of interest for such Eurodollar Rate Loans
provided for herein over (ii) the amount of interest (as
26
<PAGE> 27
reasonably determined by such Bank) which would have accrued to such Bank on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. This covenant shall survive
the termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
21. Subsection 5.1 (Financial Statements) of the Credit Agreement is
hereby amended by deleting clause (b) thereof in its entirety and replacing it
with the following:
5.1 Financial Statements. Furnish to each Bank and Agent:
. . .
(b) as soon as available, but in any event not later than 45 days after
the end of each monthly accounting period (including the monthly
accounting period for the last month of each fiscal year of the
Commitment Period), the unaudited consolidated balance sheet of
Borrower and its consolidated Subsidiaries as of the end of each such
month and the related unaudited consolidated statements of income and
of stockholders' equity of Borrower and its consolidated Subsidiaries
for such month and the portion of the fiscal year through such date
setting forth in each case in comparative form the figures for the
previous year, and including in each case: (i) the relevant figures
broken down with respect to each division of Borrower and its
Subsidiaries, (ii) a listing of all residential and commercial lots,
land under development and unsold lots, and (iii) a statement of the
calculation of Borrower's ratio of Consolidated Unsubordinated
Liabilities to the sum of Consolidated Tangible Net Worth and
Subordinated Indebtedness as of the end of such month, all of the
foregoing certified by a Responsible Officer as being fairly stated in
all material respects, subject to year-end audit adjustments;
22. Subsection 5.2 (Certificates; Other Information) of the Credit
Agreement is hereby amended by deleting clause (a) thereof in its entirety and
replacing it with the following:
5.2 Certificates; Other Information. Furnish to each Bank and Agent:
27
<PAGE> 28
(a) concurrently with the delivery of each financial statement referred
to in subsection 5.1(a) above and each financial statement referred to in
subsection 5.1(b) above, a summary in form and substance satisfactory to the
Required Banks of the status of the hedging investments described in subsection
6.9(j) hereof, and a certificate of a Responsible Officer of Borrower (in the
form of Exhibit F attached hereto or such other form as shall be reasonably
acceptable to each Bank and Agent) stated to have been made after due
examination by such Responsible Officer (i) stating that, to the best of such
officer's knowledge, Borrower and each of its Subsidiaries during such period
has observed or performed in all material respects all of its covenants and
other agreements, and satisfied every condition contained in this Agreement and
the Notes to be observed, performed or satisfied by it, and that such officer
has obtained no knowledge of any Default or Event of Default except as specified
in such certificate, and (ii) showing in detail the calculations supporting such
statement in respect of subsections 5.11, 5.12, 5.13, 5.14, 5.15, 6.1(d), 6.3,
6.6, 6.7, 6.8, 6.9(e), 6.9(k), 6.9(l), 6.20 and 6.22 hereof;
23. The Credit Agreement is hereby amended by adding the following new
affirmative covenant as subsection 5.15 thereto:
5.15 Maintenance of EBITDA to Consolidated Interest Incurred Ratio.
Maintain at all times during the Commitment Period a ratio of EBITDA to
Consolidated Interest Incurred of not less than 1.65 to 1.0.
24. The Credit Agreement is hereby amended by adding the following new
affirmative covenant as subsection 5.16 thereto:
5.16 Guaranties of Wholly-Owned M/I Ancillary Businesses. Upon the
request of the Agent on behalf of the Required Banks, cause each of the M/I
Ancillary Businesses that is wholly-owned by the Borrower or by any Subsidiary
and which is not precluded by law from executing a Guaranty to execute a
Guaranty in favor of the Banks and the Agent with respect to the Indebtedness of
the Borrower hereunder.
25. The preamble of Section 6 is hereby amended by deleting it in its
entirety and replacing it with the following:
"Borrower hereby agrees that, from the date hereof and so long as the
Commitment remains in effect, any portion of any Note or Reimbursement
Obligation remains outstanding and unpaid, any Standby L/C remains outstanding
that is not fully collateralized with cash in a manner satisfactory to Agent, or
any other amount is owing to Agent or any Bank hereunder, Borrower shall not,
nor shall it permit any of its Subsidiaries or, in the
28
<PAGE> 29
case of subsections 6.1, 6.2, 6.3 and 6.21, permit any M/I Ancillary Business
that is wholly-owned by the Borrower or by any Subsidiary to, directly or
indirectly:"
26. Clause (e) of subsection 6.3 of the Credit Agreement is hereby
amended by deleting it in its entirety and replacing it with the following:
(e) other Contingent Obligations of Borrower which do not in the aggregate
at any one time outstanding exceed $2,000,000, subject to the
limitations of subsection 6.9(l) hereof.
27. Subsection 6.9 (Limitation on Investments) of the Credit Agreement
is hereby amended by deleting clauses (j) and (k) thereof in their entirety and
replacing them with the following and adding new clause (l) as follows:
6.9 Limitation on Investments. Make or commit to make any advance,
loan, extension of credit or capital contribution to, or purchase of any stock,
bonds, note, debenture or other security of, or make any other investment in,
any Person (all such transactions being herein called "investments"), except:
(j) investments by M/I Financial Corp. in the ordinary course of its
business in standard instruments hedging against interest rate risk incurred in
the origination and sale of mortgage loans, in each case matching a hedging
instrument or instruments to specific mortgages or specific groups of mortgages,
but in no event including investments in futures contracts, options contracts or
other derivative investment vehicles acquired as independent investments;
(k) investments in the Office Building Limited Liability Company
specifically for the purpose of constructing, owning and operating the Office
Building in an amount not to exceed $1,200,000 in the aggregate; and
(l) investments in, advances to, and Contingent Obligations related to
the obligations of, the M/I Ancillary Businesses in an amount not to exceed
$25,000 in the aggregate.
28. Subsection 6.10 (Limitation on Operating Leases) of the Credit
Agreement is hereby amended by deleting it in its entirety and replacing it with
the following:
6.10. Limitation on Operating Leases. Enter into or renew any Operating
Lease if as a result thereof: (a) the aggregate rentals payable by Borrower and
all of its Subsidiaries
29
<PAGE> 30
under all Operating Leases, except for any Operating Lease with respect to the
Office Building, would exceed in any period of 12 consecutive months the
aggregate amount of $4,200,000; or (b) the term of (i) any Operating Lease with
respect to Eligible Model Houses and furnishings for Eligible Model Houses would
exceed three years, and (ii) any other Operating Lease, except for any Operating
Lease with respect to the Office Building, would exceed five years, provided
that so long as the initial term or any renewal of an Operating Lease included
within this clause (b) does not exceed five years or three years, as
appropriate, the aggregate of the initial term and all renewals of such
Operating Lease may exceed five years or three years, as appropriate, if any
right of renewal is solely at the option of the Borrower or its Subsidiaries; or
(c) the aggregate rentals payable by Borrower and all of its Subsidiaries under
all Operating Leases with respect to the Office Building would exceed, for the
periods set forth below, the amounts that correspond to such periods, as set
forth below:
<TABLE>
<CAPTION>
Aggregate Rentals
Year of the Operating Lease Per Lease Year
- ----------------------------------- -----------------
<S> <C>
Beginning with Lease Year 1 $1,131,576.00
Through and including Lease Year 5
Beginning with Lease Year 6 $1,217,693.00
Through and including Lease Year 10
Beginning with Lease Year 11 $1,275,104.00
Through and including Lease Year 15
Beginning with Lease Year 16 $1,303,810.00
Through and including Lease Year 20
</TABLE>
29. Subsection 6.21 of the Credit Agreement is hereby amended by
deleting it in its entirety and replacing it with the following:
6.21 Limitation on Negative Pledges. Enter into any agreement other
than this Agreement which prohibits or limits the ability of Borrower, any of
its Subsidiaries or any of the M/I Ancillary Businesses that are wholly-owned by
the Borrower or by any Subsidiary to create, incur, assume or suffer to exist
any Lien upon any of its assets, rights, revenues or property, real,
30
<PAGE> 31
personal or mixed, tangible or intangible, whether now owned or hereafter
acquired.
30. Section 8 (Defaults, Events of Default; Distribution of Proceeds
after Event of Default) of the Credit Agreement is hereby amended by deleting
numbered paragraph (4) thereof in its entirety and replacing it with the
following:
"(4) Borrower shall default in the observance or performance of any
covenant or agreement contained in (a) subsection 5.3 hereof and such default
remains uncured for five days (notice to Borrower from Agent or any Bank of such
default is not required), (b) subsections 5.2(c), 5.2(d), 5.6, 5.10, 5.11, 5.12,
5.13, 5.14, 5.15, 5.16, 6.1, 6.2, 6.3, 6.6, 6.7, 6.8, 6.9 (other than failure to
comply with the limitations of 6.9(j)), 6.11, 6.15, 6.18, 6.19 or 6.20 hereof
and such default remains uncured ten days after Agent or any Bank notifies
Borrower that such default has occurred, (c) subsection 5.9 hereof and such
default remains uncured for ten days after Agent or any Bank notifies Borrower
that such default has occurred, provided, that for any default under subsection
5.9 for which cure cannot reasonably be accomplished within ten days, if cure is
commenced within such ten-day period, Borrower may have an additional period of
up to 30 days after notice to cure such default before it is an Event of
Default, (d) any one or more of subsections 5.1(b), 5.2(a) or 5.2(b) hereof and
such default remains uncured 15 days after Agent or any Bank notifies Borrower
that such default has occurred, or (e) any other provision of this Agreement
(including without limitation subsections 5.1(a), 5.2(e), 5.7 and 5.8 hereof)
which default shall remain uncured 30 days after Agent or any Bank notifies
Borrower that such a default has occurred, which notice shall specify the nature
of the default; or".
31
<PAGE> 32
31. Subsection 10.2 (Notices) of the Credit Agreement is hereby amended
by deleting the provisions with respect to HNB, NBD and NCB in their entirety
and replacing them with, and by adding with respect to First Chicago, the
following:
HNB: The Huntington National Bank
41 South High Street
8th Floor
Columbus, Ohio 43287
Attention: James R. Willet
Facsimile: (614) 480-3066
NBD: c/o The First National Bank of
Chicago
One First National Plaza
Mail Suite 0315
Chicago, Illinois 60670
Attention: Patricia Leung
Facsimile: (312) 732-1117
NCB: National City Bank of Columbus
155 East Broad Street
3rd Floor
Columbus, Ohio 43251
Attention: Ralph A. Kaparos
Facsimile: (614) 463-6770
First Chicago: The First National Bank of Chicago
One First National Plaza
Mail Suite 0315
Chicago, Illinois 60670
Attention: Patricia Leung
Facsimile: (312) 732-1117
32. The Credit Agreement is hereby amended by deleting the existing
Exhibit F (Certificate of Borrower's Responsible Officer as to Financial
Information) thereto in its entirety and replacing and fully incorporating by
reference therein amended Exhibit F thereto, which amended Exhibit F is attached
hereto.
33. The Borrower hereby represents and warrants to each Bank and the
Agent that it has the corporate power and authority to make, deliver and perform
this Amendment and to borrow under the Credit Agreement as amended by this
Amendment and has taken all corporate action necessary to be taken by it to
authorize the borrowings on the terms and conditions of the Credit Agreement as
amended by this Amendment and to authorize the execution, delivery
32
<PAGE> 33
and performance of the Credit Agreement as amended by this Amendment.
34. The Credit Agreement, including without limitation the Borrower's
representations, warranties and covenants, as amended by this Amendment shall
remain in full force and effect in accordance with its terms as amended hereby,
and upon the effective date of this Amendment, the terms "Agreement" and "this
Agreement" shall mean the Credit Agreement as amended by this Amendment.
35. The obligations of the Agent and the Banks pursuant to this
Amendment are subject to the satisfaction of the following conditions precedent
prior to the effective date of this Amendment:
(a) Notes. First Chicago shall have received its Revolving Credit
Note and its Seasonal Loan Note, conforming to the requirements of the
Credit Agreement and duly executed and delivered by a duly authorized
officer of Borrower.
(b) Guaranty. First Chicago shall have received its Guaranty, to
which Agent shall also be a party, conforming to the requirements of
the Credit Agreement and delivered by a duly authorized officer of
Borrower's Subsidiary.
(c) Corporate Proceedings of Borrower. Each Bank and Agent shall
have received a copy of the resolution (in form and substance
satisfactory to each Bank and Agent) of the Executive Committee of the
Board of Directors of Borrower authorizing the execution, delivery and
performance of this Amendment, the Revolving Credit Note and Seasonal
Loan Note payable to the order of First Chicago, certified by the
Secretary or the Assistant Secretary of Borrower as of the date hereof.
Such certificate shall state that the resolution set forth therein has
not been amended, modified, revoked or rescinded as of the effective
date of this Amendment.
(d) Corporate Proceedings of Subsidiary of Borrower. Each Bank and
Agent shall have received a copy of the resolution (in form and
substance satisfactory to each Bank and Agent) of the Sole Shareholder
of the Subsidiary of Borrower authorizing the execution, delivery and
performance of Guarantor's Consent and Reaffirmation of Guaranties and
of the Guaranty in favor of First Chicago and Agent certified by the
Secretary or Assistant Secretary of the
33
<PAGE> 34
Subsidiary of Borrower as of the date hereof. Such certificate shall
state that the resolution set forth therein has not been amended,
modified, revoked or rescinded as of the effective date of this
Amendment.
(e) No Default or Event of Default. No Default or Event of Default
shall have occurred and be continuing under the Credit Agreement as of
the effective date of this Amendment.
(f) No Material Adverse Change. There shall have been no material
adverse change in the consolidated financial condition or business or
operations of Borrower or its Subsidiary from the date of Borrower's
December 31, 1995 audited financial statements to the effective date of
this Amendment.
36. This Amendment may be executed by one or more of the parties to
this Amendment on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. This Amendment shall become effective upon receipt by Agent and each
Bank of executed counterparts of this Amendment by each of the parties hereto.
37. This Amendment shall be governed by, and construed in accordance
with, the local laws of the State of Ohio.
34
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
M/I SCHOTTENSTEIN HOMES, INC.
By
-------------------------------------
Irving E. Schottenstein
Title: President
BANK ONE, COLUMBUS, N.A.,
as Agent and as a Bank
By
-------------------------------------
Thomas D. Igoe
Title: Senior Vice President
THE HUNTINGTON NATIONAL BANK
By
-------------------------------------
James R. Willet
Title: Assistant Vice President
NBD BANK
By
-------------------------------------
Print Name:
----------------------------
Title:
---------------------------------
THE FIRST NATIONAL BANK OF CHICAGO
By
-------------------------------------
Patricia Leung
Title:
-------------------------------
35
<PAGE> 36
NATIONAL CITY BANK OF COLUMBUS
By
-------------------------------------
Ralph A. Kaparos
Title: Senior Vice President
THE FIRST NATIONAL BANK OF BOSTON
By
-------------------------------------
Kevin C. Hake
Title: Vice President
36
<PAGE> 37
GUARANTOR'S CONSENT AND REAFFIRMATION OF GUARANTIES
The undersigned Guarantor hereby (a) acknowledges that it has read the
foregoing First Amendment to, and Consent to Assignment to The First National
Bank of Chicago by NBD Bank of Its Rights and Interests Under, Restated
Revolving Credit Loan, Seasonal Loan and Standby Letter of Credit Agreement
effective as of May 7, 1996 (the "Amendment"), and (b) agrees that each of the
undersigned Guarantor's Guaranties dated as of September 29, 1995 of the
obligations of M/I Schottenstein Homes, Inc. pursuant to the Restated Revolving
Credit Loan, Seasonal Loan and Standby Letter of Credit Agreement, as amended by
the Amendment, including without limitation the substitution of The First
National Bank of Chicago for NBD Bank from and after the effective date of the
Amendment (the "Credit Agreement"), and all representations, warranties and
covenants in each of such Guaranties, continue in full force and effect
notwithstanding the Amendment; provided, that the undersigned's Guaranty in
favor of NBD Bank is replaced, as of the effective date of the Amendment, with
the undersigned's Guaranty in favor of The First National Bank of Chicago and
Agent of the obligations of M/I Schottenstein Homes, Inc. pursuant to the Credit
Agreement.
M/I FINANCIAL CORP.
By:
------------------------------------
Print Name:
-------------------------
Title:
------------------------------
Attachments (Amended Exhibit F; Exhibit J)
37
<PAGE> 1
FIRST AMENDMENT TO REVOLVING CREDIT AGREEMENT
This First Amendment to Revolving Credit Agreement is made to be
effective as of May 7, 1996 ("this Amendment"), by and among M/I FINANCIAL
CORP., an Ohio corporation ("Financial"), M/I SCHOTTENSTEIN HOMES, INC., an Ohio
corporation ("M/I Homes")(Financial and M/I Homes are hereinafter referred to
collectively as the "Borrowers"), and BANK ONE, COLUMBUS, N.A., a national
banking association (the "Bank"). For valuable consideration, the receipt of
which is hereby acknowledged, Borrowers and Banks, intending to be legally
bound, hereby recite and agree as follows:
RECITALS
A. Borrowers and the Bank are parties to a Revolving Credit Agreement
made to be effective as of August 8, 1995 (the "Credit Agreement").
B. Borrowers and Bank wish to amend the Credit Agreement as hereinafter
stated.
AGREEMENT
1. Subsection 2.2 of the Credit Agreement is hereby amended by deleting it
in its entirety and replacing it with the following:
2.2 Note. The Loans made by the Bank pursuant hereto shall be evidenced by
a promissory note of the Borrowers, dated as of the date hereof, substantially
in the form of Exhibit A attached hereto and made a part hereof, as replaced by
the promissory note of Borrowers to Bank dated as of May 7, 1996 in
substantially the form of Exhibit A-1 attached hereto (the "Replacement Note")
as the same may be further replaced or amended from time to time (collectively,
the "Note"), payable to the order of the Bank and evidencing the obligation of
the Borrowers to pay the aggregate unpaid principal amount of the Loans made by
the Bank, with interest thereon at a rate per annum equal to (a) through and
including May 7, 1996, the Prime Rate in effect from time to time and (b) from
and after May 7, 1996, the Prime Rate in effect from time to time minus
one-quarter of one percent (1/4%), in each case subject to the default interest
rate provisions of subsection 2.6(c) hereof. Interest shall be payable in
arrears and shall be due on the last day of each month, beginning with August
31, 1995, and continuing on the last day of each month thereafter, and on the
<PAGE> 2
last day of the Commitment Period. If not sooner paid, the entire principal
amount of the Loans outstanding and any remaining unpaid interest on the Loans
shall be due and payable on the last day of the Commitment Period. The Bank is
hereby authorized to record electronically or otherwise the date and amount of
each Loan disbursement made by the Bank and the date and amount of each payment
or prepayment of principal thereof, and any such recordation shall constitute
conclusive evidence, absent manifest error, of the accuracy of the information
so recorded; provided, however, the failure of the Bank to make any such
recordation(s) shall not affect the obligation of Borrowers to repay outstanding
principal, interest, or any other amount due hereunder or under the Note in
accordance with the terms hereof and thereof. The Note shall (x) be dated as of
the date hereof (provided that the Replacement Note shall be dated May 7, 1996),
(y) be stated to mature on the last day of the Commitment Period, and (z) bear
interest from and including the date thereof on the unpaid principal amount
thereof from time to time outstanding at a rate per annum equal to (i) through
and including May 7, 1996, the Prime Rate in effect from time to time and (ii)
from and after May 7, 1996, the Prime Rate in effect from time to time minus
one-quarter of one percent (1/4%), in each case subject to the default interest
rate provisions of subsection 2.6(c) hereof.
2. Each of the Borrowers hereby represents and warrants to Bank that it
has the corporate power and authority to make, deliver and perform this
Amendment and to borrow under the Credit Agreement as amended by this Amendment
and has taken all corporate action necessary to be taken by it to authorize the
borrowings on the terms and conditions of the Credit Agreement as amended by
this Amendment and to authorize the execution, delivery and performance of the
Credit Agreement as amended by this Amendment.
3. The Credit Agreement, including without limitation each Borrower's
representations, warranties and covenants, as amended by this Amendment shall
remain in full force and effect in accordance with its terms as amended hereby,
and upon the effective date of this Amendment, the terms "Agreement" and "this
Agreement" shall mean the Credit Agreement as amended by this Amendment.
4. The obligations of the Bank pursuant to this Amendment are subject to
the satisfaction of the following conditions precedent prior to the effective
date of this Amendment:
(a) Replacement Note. Each of the Borrowers shall have executed
and delivered to Bank the Replacement Note which Replacement
Note shall replace the revolving loan promissory note dated
August 8, 1995 from Borrowers to Bank.
2
<PAGE> 3
(b) Corporate Proceedings of Borrowers. Bank
shall have received a copy of the resolution (in form and
substance satisfactory to Bank) of (i) the Board of
Directors or the Executive Committee of the Board of
Directors of M/I Homes and (ii) the Sole Shareholder of
Financial, in each case authorizing the execution, delivery
and performance of this Amendment and the Replacement Note,
certified by the Secretary or the Assistant Secretary of
each Borrower as of the date hereof. Such certificate shall
state that the resolution set forth therein has not been
amended, modified, revoked or rescinded as of effective date
of this Amendment.
(c) No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing under the Credit
Agreement as of the effective date of this Amendment.
(d) No Material Adverse Change. There shall have been no
material adverse change in the consolidated financial condition or
business or operations of either Borrower from the date of Borrowers'
December 31, 1995 consolidated audited financial statements to the
effective date of this Amendment.
5. Upon the execution and delivery to Bank by each Borrower of the
Replacement Note, Bank shall cancel the Note dated August 8, 1995.
6. This Amendment may be executed by one or more of the parties to this
Amendment on any number of separate counterparts and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. This
Amendment shall become effective upon receipt by Bank of executed counterparts
of this Amendment by each of the parties hereto.
7. This Amendment shall be governed by, and construed in accordance with,
the local laws of the State of Ohio.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
BANK ONE, COLUMBUS, N.A. M/I FINANCIAL CORP.
By By
--------------------------------- ---------------------------------
Thomas D. Igoe Print Name:
Title: Senior Vice President -------------------------
Title:
-----------------------------
M/I SCHOTTENSTEIN HOMES, INC.
By
----------------------------------
Irving E. Schottenstein
Title: Chief Executive
Officer and President
Attachment (Exhibit A-1)
-4-
<PAGE> 5
EXHIBIT A-1
REPLACEMENT REVOLVING LOAN PROMISSORY NOTE
$25,000,000.00 Columbus, Ohio
May 7, 1996
FOR VALUE RECEIVED, the undersigned ("Borrowers"), jointly and
severally, promise to pay to the order of BANK ONE, COLUMBUS, N.A. ("Bank"), at
its principal office at 100 East Broad Street, Columbus, Ohio 43271, or at such
other place as the holder hereof may, from time to time, in writing designate,
the principal sum of Twenty-Five Million and 00/100 Dollars ($25,000,000.00), or
so much thereof as may be disbursed to, or for the benefit of, the Borrowers in
accordance with the terms of a Revolving Credit Agreement dated as of August 8,
1995 between Borrowers and Bank, as the same has been amended by a First
Amendment to Revolving Credit Agreement dated as of the date hereof and as the
same may hereinafter be further amended, modified or supplemented from time to
time (the "Loan Agreement") and remains unpaid, together with interest thereon
at a rate per annum equal to (a) the Prime Rate in effect from time to time
minus (b) one-quarter of one percent (1/4%). Interest shall be payable in
arrears and shall be due on the last day of each month, beginning with May 31,
1996, and continuing on the last day of each month thereafter and on the last
day of the Commitment Period. This Note is a replacement for the $25,000,000.00
Note dated August 8, 1995 from Borrowers to Bank (the "August 8, 1995 Note"),
and, in addition to the interest that is due and payable from and after the
effective date of this Note, accrued but unpaid interest on the August 8, 1995
Note shall also be due and payable on May 31, 1996.
Interest on this Note shall be calculated on the basis of a 360 day
year for the actual days elapsed. Any change in the interest rate resulting from
a change in the Prime Rate shall become effective as of the opening of business
on the day on which such change in the Prime Rate shall become effective,
without notice to the Borrowers. Each determination of an interest rate by the
Bank pursuant to the Loan Agreement shall be conclusive and binding on the
Borrowers in the absence of manifest error.
If all or a portion of the principal amount of any of the obligations
evidenced hereby shall not be paid when due (whether at stated maturity, by
acceleration or otherwise), any such overdue principal amount and, to the extent
permitted by applicable law, any overdue installment of any interest on any
<PAGE> 6
obligation evidenced hereby, shall, without limiting any other rights of the
Bank, bear interest at a rate per annum which is the sum of (i) one percent
(1.0%) and (ii) the rate which would otherwise be applicable hereto, from the
date of such non-payment until paid in full (before, as well as after,
judgment).
From and after the date hereof, this replacement revolving loan
promissory note is the Note identified in the Loan Agreement, and said Loan
Agreement is hereby incorporated into this Note and made a part hereof.
Capitalized terms used but not defined herein shall have the meanings set forth
in the Loan Agreement.
The Bank's records of the principal, accrued interest and other charges
due hereunder, as well as applicable interest rates and periods are, absent
manifest error, conclusive as to and binding upon all Persons.
The entire unpaid principal balance evidenced by this Note plus any
accrued but unpaid interest thereon and any other indebtedness owing by
Borrowers to Bank under the Loan Agreement shall be paid in full on or before
the last day of the Commitment Period, which, if it does not occur sooner
pursuant to the terms of the Loan Agreement, shall be July 19, 1996.
The indebtedness evidenced hereby may be prepaid in whole or in part
without penalty. All payments and prepayments received by Bank (a) shall, with
respect to scheduled payments, be applied, first, to accrued interest, and
second, to principal; (b) shall, with respect to prepayments be applied to
principal; (c) shall be in lawful money of the United States; and (d) shall be
credited as of the time received by Bank in cash or equivalent or when finally
collected. Pursuant to the terms of the Loan Agreement, repayments of principal
shall be eligible for reborrowing by Borrower. Bank shall not be obligated to
extend any credit after (1) the occurrence of an Event of a Default, which,
under the terms of the Loan Agreement, results in either an automatic
termination of the Commitment or an election to terminate the Commitment, or (2)
the expiration of the term of this Note. Any part of the indebtedness evidenced
by this Note outstanding on the last day of the Commitment Period shall be
repaid on that date.
Upon the occurrence of an Event of Default, the whole or any part of
the unpaid indebtedness evidenced hereby shall, at once or at any time
thereafter, at the option of the holder or holders hereof, become due and
payable without notice or demand therefor, the same being expressly waived. A
failure of the holder hereof to insist upon strict compliance with the terms
hereof or to assert any right hereunder shall not be a waiver of any default and
shall
2
<PAGE> 7
not be deemed to constitute a modification of the terms hereof or to establish
any claim or defense.
Any and all moneys now or at any time hereafter owing to either or both
of the Borrowers from the holder hereof may be paid and applied on this and all
other indebtedness from the undersigned to the legal holder hereof at any time
such indebtedness becomes due or is declared due and payable.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note. A waiver on any one occasion shall not be construed as a bar to or
waiver of any such right and/or remedy on any future occasion.
All persons now or hereafter liable, primarily or secondarily, for the
payment of the indebtedness evidenced hereby or any part thereof, do hereby
expressly waive presentment for payment, notice of dishonor, protest and notice
of protest, and agree that the time for payment or payments of any part of the
indebtedness evidenced hereby may be extended without releasing or otherwise
affecting their liability hereon.
Borrowers agree, jointly and severally, that the local laws of the
State of Ohio shall govern their respective rights and duties hereunder and the
construction and effect hereof. However, if any provision hereof is or becomes
invalid or unenforceable under any law of mandatory application, it is the
intent of Borrowers, the Bank and all parties primarily or secondarily liable
hereunder, that such provision will be deemed severed and omitted herefrom, the
remaining portions hereof to remain in full force and effect as written.
To the extent that the terms and provisions of this Note are
inconsistent with the terms and provisions of the Loan Agreement, the terms and
provisions of this Note shall control.
As a specifically bargained inducement for the Bank to extend credit
giving rise to the indebtedness evidenced hereby, the Borrowers and Bank agree
that: ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING FROM OR OUT OF
THIS NOTE, ITS MAKING, VALIDITY OR PERFORMANCE, AT THE SOLE OPTION OF THE BANK
OR LEGAL HOLDER HEREOF, SHALL BE PROSECUTED AS TO ALL PARTIES AND THEIR
SUCCESSORS AND ASSIGNS AT COLUMBUS, OHIO. EACH OF THE BORROWERS CONSENTS TO AND
SUBMITS TO THE EXERCISE OF JURISDICTION OVER ITS PERSON BY ANY COURT SITUATED AT
COLUMBUS, OHIO, AND HAVING JURISDICTION OVER THE SUBJECT MATTER.
3
<PAGE> 8
Each of the Borrowers authorizes any attorney at law to appear in any
court of record in the State of Ohio or any other State or Territory of the
United States, after the indebtedness evidenced hereby, or any part thereof,
becomes due and waive the issuance and service of process and confess judgment
against it in favor of the holder of this Note, for the amount then appearing
due, together with costs of suit and, thereupon, to release all errors and waive
all rights of appeal and stay of execution, but no such judgment or judgments
against only one of the undersigned shall be a bar to a subsequent judgment or
judgments against either of the undersigned against whom judgment has not been
obtained hereon. The foregoing warrant of attorney shall survive any judgment;
and if any judgment be vacated for any reason, the holder hereof nevertheless
may thereafter use the foregoing warrant of attorney to obtain an additional
judgment or judgments against one or both of the undersigned. Each of the
Borrowers hereby expressly consents to the confessing attorney's receipt of a
legal fee from the holder of this Note for confessing such judgment(s) against
one or both of the undersigned.
IN WITNESS WHEREOF, each of the Borrowers has executed this Note as of
the day and year first above written at Columbus, Franklin County, Ohio.
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR
PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY
OTHER CAUSE.
M/I FINANCIAL CORP. M/I SCHOTTENSTEIN HOMES, INC.
By: By:
------------------------------- ---------------------------------
Its: President Its: Chief Executive Officer
and President
4
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet as of March 31, 1996 and the consolidated statement
of income for the three months ended March 31, 1996 of M/I Schottenstein Homes,
Inc. and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 8,356
<SECURITIES> 0
<RECEIVABLES> 17,963
<ALLOWANCES> 0
<INVENTORY> 245,241
<CURRENT-ASSETS> 271,560
<PP&E> 8,508
<DEPRECIATION> 6,405
<TOTAL-ASSETS> 292,020
<CURRENT-LIABILITIES> 54,557
<BONDS> 24,764
<COMMON> 88
0
0
<OTHER-SE> 100,731
<TOTAL-LIABILITY-AND-EQUITY> 292,020
<SALES> 93,998
<TOTAL-REVENUES> 95,858
<CGS> 76,955
<TOTAL-COSTS> 76,955
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,931
<INCOME-PRETAX> 2,218
<INCOME-TAX> 895
<INCOME-CONTINUING> 1,323
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,323
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
</TABLE>
