<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 September 30, 1997
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 1-12434
M/I SCHOTTENSTEIN HOMES, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-1210837
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(State of incorporation) (I.R.S. Employer Identification No.)
3 Easton Oval, Suite 500, Columbus, Ohio 43219
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(Address of principal executive offices) (Zip Code)
(614) 418-8000
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(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: 7,597,561 shares
outstanding as of October 31, 1997
<PAGE> 2
M/I SCHOTTENSTEIN HOMES, INC.
FORM 10-Q
INDEX
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<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION NUMBER
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 1997 and
December 31, 1996 3
Consolidated Statements of Income
for the Three Months and Nine Months Ended
September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows
for the Nine Months Ended
September 30, 1997 and 1996 5
Notes to Interim Unaudited Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
Exhibit Index 21
</TABLE>
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<PAGE> 3
CONSOLIDATED BALANCE SHEETS
M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
SEPTEMBER 30, December 31,
(Dollars in thousands) 1997 1996
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<S> <C> <C>
ASSETS
Cash $ 5,850 $ 6,368
Cash held in escrow 324 393
Receivables 21,583 34,447
Inventories:
Single-family lots, land and land development costs 141,793 129,025
Houses under construction 131,238 89,696
Model homes and furnishings - at cost (less accumulated depreciation:
September 30, 1997 - $65;
December 31, 1996 - $56) 20,469 19,482
Land purchase deposits 502 716
Office furnishings, transportation and construction equipment - at cost (less
accumulated depreciation:
September 30, 1997 - $4,031;
December 31, 1996 - $6,668) 8,473 1,635
Investment in unconsolidated joint ventures and limited partnerships 13,731 12,998
Other assets 10,581 10,599
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TOTAL $ 354,544 $ 305,359
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LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable banks - home-building operations $ 102,000 $ 77,000
Note payable bank - financial operations 7,335 23,300
Subordinated notes 50,000 25,000
Accounts payable 52,087 32,016
Accrued compensation 8,609 11,802
Income taxes payable 1,106 1,502
Accrued interest, warranty and other 13,980 15,349
Customer deposits 9,063 7,071
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TOTAL LIABILITIES 244,180 193,040
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Commitments and contingencies
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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 8,800,000 shares, of which 1,202,439 shares at
September 30, 1997 and 0 at December 31, 1996 are held in Treasury 88 88
Additional paid-in capital 50,573 50,573
Retained earnings 73,953 61,658
Treasury stock - at cost (14,250) --
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TOTAL STOCKHOLDERS' EQUITY 110,364 112,319
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TOTAL $ 354,544 $ 305,359
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</TABLE>
See Notes to Interim Unaudited Consolidated Financial Statements.
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<PAGE> 4
CONSOLIDATED STATEMENTS OF INCOME
M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
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THREE MONTHS ENDED NINE MONTHS ENDED
(Dollars in thousands, SEPTEMBER 30, SEPTEMBER 30,
except per share information) 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $157,958 $156,932 $409,801 $390,147
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Costs and expenses:
Land and housing 127,179 127,241 328,711 315,171
General and administrative 9,818 8,973 24,616 22,491
Selling 10,220 10,192 27,757 26,935
Interest 3,012 3,590 8,073 9,618
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Total costs and expenses 150,229 149,996 389,157 374,215
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Income before income taxes 7,729 6,936 20,644 15,932
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Income taxes:
Current 3,335 2,971 7,699 7,096
Deferred (214) (425) 650 (813)
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Total income taxes 3,121 2,546 8,349 6,283
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Net income $ 4,608 $ 4,390 $ 12,295 $ 9,649
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Net income per common share $ .59 $ .50 $ 1.48 $ 1.10
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Weighted average common shares
outstanding 7,834,252 8,800,000 8,280,407 8,800,000
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</TABLE>
See Notes to Interim Unaudited Consolidated Financial Statements.
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<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
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NINE MONTHS ENDED SEPTEMBER 30,
(Dollars in thousands) 1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 12,295 $ 9,649
Adjustments to reconcile net income to net cash
used by operating activities:
Loss from property disposals 128 95
Depreciation and amortization 1,229 1,080
Decrease (increase) in deferred income taxes 650 (813)
Decrease in cash held in escrow 69 311
Decrease (increase) in receivables 12,864 (6)
Increase in inventories (47,199) (23,980)
Increase in other assets (847) (1,576)
Increase in accounts payable 20,071 6,590
Decrease in income taxes payable (396) (2,155)
Increase (decrease) in accrued liabilities (4,562) 3,404
Equity in undistributed income of
unconsolidated joint ventures and limited partnerships (180) (113)
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Net cash used by operating activities (5,878) (7,514)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to model and office furnishings,
transportation and construction equipment (7,974) (429)
Proceeds from property disposals -- 63
Investment in unconsolidated joint ventures and limited partnerships (9,141) (10,452)
Distributions from unconsolidated joint ventures and limited partnerships 698 671
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Net cash used in investing activities (16,417) (10,147)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable banks:
Cash proceeds from borrowings 202,530 229,376
Principal repayments (193,495) (218,201)
Subordinated notes:
Cash proceeds from borrowings 50,000 --
Principal repayments (25,000) --
Principal repayments of mortgage notes payable -- (404)
Increase in customer deposits 1,992 3,803
Payments to acquire treasury stock (14,250) --
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Net cash provided by financing activities 21,777 14,574
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Net decrease in cash (518) (3,087)
Cash balance at beginning of year 6,368 7,729
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Cash balance at end of period $ 5,850 $ 4,642
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SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 7,429 $ 7,925
Income taxes $ 7,098 $ 9,318
NON-CASH TRANSACTIONS DURING THE YEAR:
Single family lots distributed from unconsolidated joint ventures $ 7,890 $ 8,333
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</TABLE>
See Notes to Interim Unaudited Consolidated Financial Statements.
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<PAGE> 6
M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARIES
NOTES TO INTERIM UNAUDITED CONSOLIDATED 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 nine months ended September 30, 1997 and 1996 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, 1996.
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. NOTES PAYABLE BANKS
On July 18, 1997, the Company and M/I Financial entered into a new $30
million bank loan agreement with the existing lender, pursuant to which the
Company and M/I Financial have the ability to borrow at (a) the prime rate
less 0.25%, or (b) LIBOR plus 1.75% or (c) a combination of (a) and (b). The
agreement was previously amended on June 20, 1997 extending the maturity
date until July 20, 1997 through a short-term note. The new agreement
terminates on June 25, 1998 at which time the unpaid balance is due.
On September 29, 1997, the Company amended its bank loan agreement. The
amended loan agreement lowered the rate to LIBOR plus a margin of between
1.60% and 2.35%. Also, the maturity date of the agreement was extended until
September 30, 2002. The remaining terms of the agreement remain
substantially the same as those in the agreement that it replaces.
NOTE 3. SUBORDINATED DEBT
On August 29, 1997, the Company entered into a Credit Agreement (the
"Subordinated Debt Facility") for $50 million of Senior Subordinated Notes.
The proceeds were used to repay outstanding amounts under the Bank Credit
Facility and the previously outstanding $25 million Subordinated Note. The
notes under the Subordinated Debt Facility bear interest at a fixed rate of
9.51% and mature on August 29, 2004.
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<PAGE> 7
NOTE 4. 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 and nine months
ended September 30, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(Dollars in thousands) 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest capitalized, beginning of period $ 7,598 $ 7,734 $ 6,862 $ 7,560
Interest incurred 3,356 3,207 9,153 9,409
Interest expensed (3,012) (3,591) (8,073) (9,619)
- -------------------------------------------------------------------------------------------------------------
Interest capitalized, end of period $ 7,942 $ 7,350 $ 7,942 $ 7,350
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</TABLE>
NOTE 5. CONTINGENCIES
At September 30, 1997, the Company had options and contingent purchase
contracts to acquire land and developed lots with an aggregate purchase
price of approximately $156.7 million.
NOTE 6. PER SHARE DATA
Per share data for the three and nine months ended September 30, 1997 and
1996 was computed using the weighted average number of common shares
outstanding during those periods. The Company has no common stock
equivalents other than outstanding options, which have no significant effect
on the calculation.
NOTE 7. ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS 128), "Earnings
per Share". SFAS 128 replaces the presentation of primary EPS with a
presentation of basic EPS. This statement is effective for financial
statements for both interim and annual periods ending after December 15,
1997. The Company has determined that the new standard will have no material
impact on its EPS calculation.
In June 1997, FASB issued Statement of Financial Accounting Standards No.
131 (SFAS 131), "Disclosure about Segments of an Enterprise and Related
Information". SFAS 131 is required to be adopted for the Company's 1998
annual financial statements. The Company has not yet determined what, if
any, impact the adoption of this standard will have on its financial
statements.
NOTE 8. TREASURY STOCK
On March 15, 1997 and August 1, 1997, the Company purchased 500,000 and
702,439 shares, respectively, of the Company's common stock from the Melvin
L. Schottenstein family interests and trusts for their benefit at an average
per share price of $11.85. These shares are held as treasury shares by the
Company. The total purchase price was $14.3 million and was paid from the
Company's Bank Credit Facility.
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<PAGE> 8
M/I SCHOTTENSTEIN HOMES, INC. AND SUBSIDIARIES
FORM 10-Q - PART I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
CONSOLIDATED
Total Revenue. Total revenue for the three months ended September 30,
1997 increased $1.0 million and for the nine months ended September 30, 1997
increased $19.6 million from the comparable periods of 1996. Increases for the
three-month period in land revenue of $4.3 million and other revenue of $0.5
million was partially offset by a $3.8 million decrease in housing revenue. For
the nine-month period, housing revenue, land revenue and other revenue
increased $10.8 million, $7.2 million and $1.6 million, respectively. The
decrease in housing revenue for the three-month period was attributable to a
6.7% decrease in the number of Homes Delivered, partially offset by a 4.5%
increase in the average sales price of Homes Delivered. The increase in housing
revenue for the nine-month period was attributable to a 6.1% increase in the
average sales price of Homes Delivered, partially offset by a 3.1% decrease in
the number of Homes Delivered. For both periods, the increase in other revenue
is primarily attributable to financial services where the gains recognized from
the sale of loans increased in the current year. The increase in land revenue
for both the three and nine months ended September 30, 1997 was primarily due
to an increase in the number of lots sold to third parties in the Washington
D.C. market over the comparable periods of 1996.
Income Before Income Taxes. Income before income taxes for the three
months ended September 30, 1997 increased 11.4% and for the nine months ended
September 30, 1997 increased 29.6% from the comparable periods of 1996. The
increase for both the three- and nine-month periods related primarily to
housing and land. For the three months ended September 30, 1997, income before
income taxes increased from $5.7 million to $6.3 million. For the nine months
ended September 30, 1997, income before income taxes increased from $12.6
million to $16.0 million. A portion of the nine month increase was also due to
financial services, where income before income taxes increased from $3.3
million to $4.6 million. The increase in housing for the nine-month period was
primarily due to the increase in the average sales price of Homes Delivered.
The increase in land for both the three- and nine-month periods was primarily
due to a significant increase in the number of lots sold to third parties at
relatively high margins in the Washington D.C. market during both the three and
nine months ended September 30, 1997 in comparison to the comparable periods of
the prior year. The increase in financial services was primarily due to the
significant increase in income from the sale of servicing and marketing gains
due to increased loan volume and the favorable interest rate environment during
the last half of 1996 and the first nine months of 1997. Income before income
taxes also increased due to a decrease in interest expense from $3.6 and $9.6
million in the three and nine months ended September 30, 1996, respectively, to
$3.0 and $8.1 million in the comparable periods of 1997. These decreases were
primarily attributable to a decrease in the weighted average interest rate and
an increase in the net amount of interest capitalized. The weighted average
interest rate decreased due to more favorable terms on the Company's line of
credit facilities and retirement of the 14% Subordinated Notes and issuance of
a new Subordinated Note in December 1996 at a significantly lower rate.
Capitalized interest increased due to a significant increase in the Company's
land development activities.
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<PAGE> 9
HOMEBUILDING SEGMENT
The following table sets forth certain information related to the Company's
homebuilding segment:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(Dollars in thousands) 1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Revenue:
Housing sales $149,850 $153,614 $389,438 $378,607
Land and lot sales 5,935 1,624 13,330 6,099
Other income 346 124 1,050 552
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Total Revenue $156,131 $155,362 $403,818 $385,258
================================================================================================================================
Revenue:
Housing sales 96.0 % 98.9 % 96.4 % 98.3 %
Land and lot sales 3.8 1.0 3.3 1.6
Other income 0.2 0.1 0.3 0.1
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Total Revenue 100.0 100.0 100.0 100.0
Land and housing costs 81.9 82.4 81.9 82.2
- --------------------------------------------------------------------------------------------------------------------------------
Gross Margin 18.1 17.6 18.1 17.8
General and administrative expenses 2.8 2.6 3.0 2.7
Selling expenses 6.6 6.5 6.8 7.0
- --------------------------------------------------------------------------------------------------------------------------------
Operating Income 8.7 % 8.5 % 8.3 % 8.1 %
================================================================================================================================
MIDWEST REGION
Unit Data:
New contracts 513 441 1,542 1,487
Homes delivered 510 538 1,316 1,336
Backlog at end of period 1,134 1,088 1,134 1,088
Average sales price of homes in backlog $176 $173 $176 $173
Aggregate sales value of homes in backlog $200,000 $188,000 $200,000 $188,000
Number of active subdivisions 75 70 75 70
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FLORIDA REGION
Unit Data:
New contracts 164 142 529 483
Homes delivered 174 157 451 437
Backlog at end of period 299 271 299 271
Average sales price of homes in backlog $188 $167 $188 $167
Aggregate sales value of homes in backlog $56,000 $45,000 $56,000 $45,000
Number of active subdivisions 30 40 30 40
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NORTH CAROLINA, VIRGINIA AND MARYLAND, AND ARIZONA REGION
Unit Data:
New contracts 146 147 427 476
Homes delivered 144 192 394 456
Backlog at end of period 241 279 241 279
Average sales price of homes in backlog $290 $242 $290 $242
Aggregate sales value of homes in backlog $70,000 $68,000 $70,000 $68,000
Number of active subdivisions 35 40 35 40
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TOTAL
Unit Data:
New contracts 823 730 2,498 2,446
Homes delivered 828 887 2,161 2,229
Backlog at end of period 1,674 1,638 1,674 1,638
Average sales price of homes in backlog $194 $184 $194 $184
Aggregate sales value of homes in backlog $326,000 $301,000 $326,000 $301,000
Number of active subdivisions 140 150 140 150
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</TABLE>
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<PAGE> 10
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 nine months
of 1997, the Company delivered 2,161 homes. Of the 1,337 contracts in Backlog
at December 31, 1996, 14.1% have been canceled as of September 30, 1997. For
homes in Backlog at December 31, 1995, 14.4% had been canceled as of September
30, 1996 and the final cancellation percentage was 14.4%. Unsold speculative
homes, which are in various stages of construction, totaled 158 and 165 at
September 30, 1997 and 1996, respectively.
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996
Total Revenue. Total revenue for the three months ended September 30,
1997 increased 0.5% over the three months ended September 30, 1996. This
increase was due to a 265.5% increase in land revenue and was offset by a 2.5%
decrease in housing revenue. The increase in land revenue from $1.6 million to
$5.9 million was primarily attributable to the Virginia division. The Virginia
division had significant lot sales to outside homebuilders. It continues to be
the Company's strategy to sell to third parties in this division. The decrease
in housing revenue was due to a 6.7% decrease in the number of Homes Delivered.
This decrease was primarily due to a record number of Homes Delivered in the
three months ended September 30, 1996. The decrease in housing revenue was
partially offset by a 4.5% increase in the average sales price of Homes
Delivered. The average sales price increased in eight of the Company's twelve
divisions; however, the increase was primarily due to increases in the
Columbus, Orlando and Charlotte markets where the Company is building in more
upscale and certain niche subdivisions.
Home Sales and Backlog. The Company recorded a 12.7% increase in the
number of New Contracts in the three months ended September 30, 1997 as
compared to the same period of 1996. New Contracts in the third quarter of 1997
were higher in all divisions except Charlotte, Orlando and Virginia, led by the
Horizon division where the number of New Contracts increased 44.1%. The Company
believes the increase in New Contracts was partially due to a more favorable
interest rate environment in the third quarter of 1997 as compared to the same
period of 1996. The number of New Contracts recorded in future periods will be
dependent on numerous factors, including future economic conditions, timing of
land development, consumer confidence and interest rates available to potential
homebuyers.
At September 30, 1997, the total sales value of the Company's Backlog
of 1,674 homes was approximately $326.0 million, representing a 8.3% increase
in sales value and a 2.2% increase in units from the levels reported at
September 30, 1996. The increase in units at September 30, 1997 is a result of
a decrease in deliveries in the first nine months of 1997 and a record number
of New Contracts recorded in the first nine months of 1997. The average sales
price of homes in Backlog increased 5.4% from September 30, 1996 to September
30, 1997. This increase was primarily due to increases in the Columbus,
Cincinnati, Orlando and Maryland markets where the Company is building in more
upscale and certain
-10-
<PAGE> 11
niche subdivisions. The Chevy Chase subdivision in Maryland, where the Company
started selling in May of 1997, has an average selling price of over $700,000.
Gross Margin. The overall gross margin for the homebuilding segment
was 18.1% for the three months ended September 30, 1997 as compared to 17.6%
for the comparable period of 1996. The gross margin from housing sales
increased from 17.8% in the third quarter of 1996 to 18.2% in the third quarter
of 1997. This increase was due to the increased emphasis placed on improving
margins during 1997 and 1996. The increase in gross margin was partially offset
by a decrease in gross margin from lot and land sales where margins decreased
from 39.4% to 23.5%. The gross margin recorded in the current year is lower due
to the sale of a tract of commercial real estate in the third quarter of 1996
which produced a gross margin significantly higher than normal lot sales.
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 obtain higher margins. Gross margins were also higher due to the
national accounts program which the Company continues to expand. Through this
program, 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 these levels
of margins is dependent on a number of factors, some of which are beyond the
Company's control, including possible shortages of qualified subcontractors.
General and Administrative Expenses. General and administrative
expenses as a percentage of total revenue increased slightly from 2.6% for the
three months ended September 30, 1996 to 2.8% for the three months ended
September 30, 1997. This increase was primarily attributable to the increase in
real estate taxes recorded in the third quarter of 1997 as compared to the
third quarter of 1996 due to the increase in land development activities.
Additionally, the Company incurred general and administrative expenses of
approximately $200,000 in their newest market, Phoenix, Arizona.
Selling Expenses. Selling expenses as a percentage of total revenue
increased slightly to 6.6% for the three months ended September 30, 1997 from
6.5% for the comparable period of 1996. However, this increase resulted from a
minimal increase in total revenue.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
Total Revenue. Total revenue for the nine months ended September 30,
1997 increased 4.8% from the nine months ended September 30, 1996. This
increase was due to a 2.9% increase in housing revenue and a 118.6% increase in
land revenue. The increase in housing revenue was due to a 6.1% increase in the
average sales price of Homes Delivered. The average sales price of Homes
Delivered increased in nine of the Company's twelve divisions; however, the
increase was primarily due to increases in the Columbus and Charlotte markets
where the Company is building in more upscale and certain niche subdivisions.
The increase in land revenue from $6.1 million to $13.3 million was primarily
attributable to the Washington D.C. market. Both the Maryland and Virginia
divisions had significant lot sales to outside homebuilders. It continues to be
the Company's strategy to sell to third parties in these divisions.
Home Sales and Backlog. The Company recorded a 2.1% increase in the
number of New Contracts in the nine months ended September 30, 1997 as compared
to the same period of 1996. The increase in New Contracts in the first nine
months of 1997 was due mainly to the Horizon division where the number of New
Contracts increased 54.6%. The lower priced Horizon division continues to
expand into desirable locations in the Columbus market. The number of New
Contracts recorded in future periods will be
-11-
<PAGE> 12
dependent on numerous factors, including future economic conditions, timing of
land development, consumer confidence and interest rates available to potential
homebuyers.
Gross Margin. The overall gross margin for the homebuilding segment
was 18.1% for the nine months ended September 30, 1997 as compared to 17.8% for
the comparable period of 1996. The gross margin from housing sales remained
constant at 18.1% for both periods. The overall increase in gross margin was
mainly due to lot and land sales, where margins increased from 18.9% to 25.8%.
Both the Maryland and Virginia divisions had significant increases in the
number of lots sold to outside homebuilders. It continues to be the Company's
strategy to sell to third parties in these divisions. 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 obtain
higher margins. Gross margins were also higher due to the national accounts
program which the Company continues to expand. Through this program, 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 these levels of margins is
dependent on a number of factors, some of which are beyond the Company's
control, including possible shortages of qualified subcontractors.
General and Administrative Expenses. General and administrative
expenses as a percentage of total revenue increased from 2.7% for the nine
months ended September 30, 1996 to 3.0% for the comparable period in the
current year. This increase was primarily attributable to the increase in real
estate tax expense and bonuses. Real estate taxes increased in the current year
as the Company's investment in land development activities increased over prior
year balances. More bonuses were recorded in the first nine months of 1997 as
compared to the first nine months of 1996 due to the significant increase in
net income. Additionally, the Company incurred general and administrative
expenses of approximately $700,000 in their newest market, Phoenix, Arizona.
Selling Expenses. Selling expenses as a percentage of total revenue
decreased to 6.8% for the nine months ended September 30, 1997 from 7.0% for
the comparable period of 1996. The decrease in the nine-month period was
primarily due to decreases in sales commissions paid to outside Realtors.
FINANCIAL SERVICES SEGMENT - M/I FINANCIAL CORP.
The following table sets forth certain information related to the Company's
financial services segment:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(Dollars in thousands) 1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Number of Loans Originated 634 659 1,624 1,666
Revenue:
Loan origination fees $ 870 $ 852 $ 2,182 $ 2,075
Sale of servicing and marketing gains 944 815 3,665 2,857
Other 776 628 2,034 1,680
Total Revenue 2,590 2,295 7,881 6,612
- ----------------------------------------------------------------------------------------------------------
General and administrative expenses 1,115 1,101 3,274 3,327
- ----------------------------------------------------------------------------------------------------------
Operating Income $1,475 $ 1,194 $ 4,607 $ 3,285
- ----------------------------------------------------------------------------------------------------------
</TABLE>
-12-
<PAGE> 13
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996
Total Revenue. Total revenue for the three months ended September 30,
1997, was $2.6 million, a 12.8% increase over the $2.3 million recorded for the
comparable period of the prior year. Loan origination fees increased 2.1% for
the third quarter of 1997 from the comparable period of 1996, even though the
number of loans originated decreased 3.8%. The increase in loan origination
fees was primarily due to higher loan amounts, based on higher sales prices of
Homes Delivered.
Revenue from the sale of servicing and marketing gains increased 15.8%
over the comparable period of the prior year. The Company originated primarily
fixed rate mortgages due to low and stable interest rates. The Company earns
higher premiums on fixed rate mortgages as opposed to adjustable rate
mortgages. Mortgage amounts increased, based on higher home prices, which
generated higher service release premiums. The Company also negotiated more
favorable terms with investors which resulted in an increase in service release
premiums.
General and Administrative Expenses. General and administrative
expenses for the three months ended September 30, 1997 remained constant at
$1.1 million as compared to the three months ended September 30, 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
Total Revenue. Total revenue for the nine months ended September 30,
1997 was $7.9 million, a 19.2% increase over the $6.6 million recorded for the
comparable period of the prior year. Loan origination fees increased 5.2% in
the first nine months of 1997 over the comparable period of 1996, even though
the number of loans originated decreased 2.5%. The increase in loan origination
fees was due primarily to a higher capture rate of the Company's higher end
product lines and higher sales prices of Homes Delivered.
Revenue from the sale of servicing and marketing gains increased from
$2.9 million to $3.7 million for the nine months ended September 30, 1997. This
increase of 28.3% was primarily due to favorable market conditions during the
last part of 1996 and early part of 1997 which increased marketing gains on
loans that closed during the first quarter of 1997. M/I Financial used hedging
methods whereby it has the option, but is not required, to complete the hedging
transaction. The Company also negotiated more favorable terms with investors
which resulted in an increase in service release premiums.
Revenue from other sources increased to $2.0 million for the nine
months ended September 30, 1997 from $1.7 million for the comparable period of
1996. This increase was primarily due to earnings from the Company's 49.9%
interest in a title agency that started operations early in 1997.
General and Administrative Expenses. General and administrative
expenses for the nine months ended September 30, 1997 and 1996 were $3.3
million for both periods.
OTHER OPERATING RESULTS
Corporate General and Administrative Expenses. Corporate general and
administrative expenses for the three and nine months ended September 30, 1997
totaled $4.4 and $9.3 million, respectively, or 2.8% and 2.3% of total revenue.
This was an increase from the $4.0 and $8.9 million, or 2.5% and 2.3% of total
revenue recorded for the comparable periods of 1996. These increases are
primarily due to
-13-
<PAGE> 14
higher bonuses recorded in the three and nine months ended September 30, 1997
as compared to the comparable periods of the prior year due to the significant
increase in net income.
Interest Expense. Corporate and homebuilding interest expense for the
three and nine months ended September 30, 1997 decreased to $3.0 and $8.0
million, respectively, from $3.5 and $9.5 million recorded for the comparable
periods of the prior year. Interest expense was lower in the current year due
to a decrease in the weighted average interest rate and an increase in the net
amount of interest capitalized during the first nine months of 1997 as compared
to the first nine months of 1996. This was partially offset by an increase in
the average borrowings outstanding. The weighted average interest rate
decreased due to the Company replacing its 14% Subordinated Notes with a new
Subordinated Note at a significantly lower rate in December of 1996. In May of
1996, the Company switched its bank borrowings from prime to LIBOR plus a
margin which also reduced the interest rate. Capitalized interest increased due
to a significant increase in the Company's land development activities in the
first nine months of 1997.
Income Taxes. The effective tax rate for the three and nine months
ended September 30, 1997 increased to 40.4% for both periods from 36.7% and
39.4% for the comparable periods of 1996. In the third quarter of 1996, the
Company made a significant charitable contribution of commercial land, owned
since 1986, decreasing the effective rate.
LIQUIDITY AND CAPITAL RESOURCES
Notes Payable Banks. The Company's financing needs depend upon its
sales volume, asset turnover, land acquisition and inventory balances. The
Company has incurred substantial indebtedness, and may incur substantial
indebtedness in the future, to fund the growth of its homebuilding 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 September 30, 1997, the Company had bank borrowings outstanding of
$102.0 million under its Bank Credit Facility, which permits aggregate
borrowings, other than for the issuance of letters of credit, not to exceed the
lesser of: (i) $186.0 million and (ii) 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, less the sum of (A) outstanding letters of
credit issued for purposes other than to satisfy bonding requirements and (B)
the aggregate amount of outstanding letters of credit, other than letters of
credit issued for the purpose of satisfying bonding requirements, for joint
ventures in which the Company is a partner and which are guaranteed by the
Company. The Bank Credit Facility matures September 30, 2002, at which time the
unpaid balance of the revolving credit loans outstanding will be due and
payable. Under the terms of the Bank Credit Facility, the banks will determine
annually whether or not to extend the maturity date of the commitments by one
year. On September 29, 1997, the Company amended its Bank Credit Facility,
which lowered the borrowing rate. At September 30, 1997, borrowings under the
Bank Credit Facility were at the prime rate or, at the Company's option, at
LIBOR plus a margin of between 1.60% and 2.35% based on the Company's ratio of
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") to
consolidated interest incurred and were primarily unsecured. The Bank Credit
Facility contains restrictive covenants which require the Company, among other
things, to maintain minimum net worth and working capital amounts, to maintain
a minimum ratio of EBITDA to consolidated interest incurred and to maintain
certain other financial ratios. The Bank Credit Facility also places
limitations on the amount of additional indebtedness that may be incurred by
the Company, the acquisition of undeveloped land, dividends that may be paid
and the aggregate cost of certain types of inventory the Company can hold at
any one time.
-14-
<PAGE> 15
An additional $7.3 million was outstanding as of September 30, 1997
under the M/I Financial loan agreement, which permits borrowings of $30.0
million to finance mortgage loans initially funded by M/I Financial for
customers of the Company and a limited amount for loans to others. The Company
and M/I Financial are co-borrowers under the M/I Financial loan agreement. This
agreement limits the borrowings to 95% of the aggregate face amount of certain
qualified mortgages and contains restrictive covenants requiring M/I Financial
to maintain minimum net worth and certain minimum financial ratios. On July 18,
1997, the Company and M/I Financial entered into a new short-term $30.0 million
replacement credit facility with the existing lender, pursuant to which the
Company and M/I Financial have the ability to borrow at (a) the prime rate less
0.25%, or (b) LIBOR plus 1.75% or (c) a combination of (a) and (b). The new
agreement terminates on June 25, 1998, at which time the unpaid balance is due.
At September 30, 1997, the Company had the right to borrow up to
$205.3 million under its credit facilities, including $19.3 million under the
M/I Financial loan agreement (95% of the aggregate face amount of eligible
mortgage loans). At September 30, 1997, the Company had $96.0 million of unused
borrowing availability under its loan agreements. The Company also had
approximately $29.6 million of completion bonds and letters of credit
outstanding at September 30, 1997.
Subordinated Note/Subordinated Debt Facility. On August 29, 1997, the
Company entered into a Credit Agreement (the "Subordinated Debt Facility") for
$50 million of Senior Subordinated Notes. The proceeds were used to repay
outstanding amounts under the Bank Credit Facility and the existing $25 million
Subordinated Note due 2001. The new notes bear interest at a fixed rate of
9.51% and mature August 29, 2004.
Cash. Net income from housing and lot and land sales is the Company's
primary source of net cash provided by operating activities. Net cash used by
operating activities in the nine months ended September 30, 1997 was $5.9
million compared to $7.8 million for the prior year period. The decrease in net
cash used by operating activities was primarily due to a large increase in
accounts payable. This was partially offset by a decrease in inventories.
Land and Land Development. Over the past several years, the Company's
land development activities and land holdings have increased significantly, and
the Company expects this trend will continue in the foreseeable future.
Single-family lots, land and land development costs increased 9.9% from
December 31, 1996 to September 30, 1997. The Company anticipates that its land
holdings in the Columbus market will increase 50% in 1997. 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
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.
The $9.0 million increase in notes payable to banks, along with the
$25.0 million increase in subordinated notes, from December 31, 1996 to
September 30, 1997 reflects increased borrowings primarily attributable to the
seasonal increase in houses under construction, along with an increase in
single-family lots, land and land development costs. Houses under construction
increased $41.5 million from December 31, 1996 to September 30, 1997 while
single-family lots, land and land development costs increased $12.8 million. It
is expected that borrowing needs will increase as the Company continues to
increase its investment in land under development and developed lots.
-15-
<PAGE> 16
As of September 30, 1997, the Company has closed on the first four
phases of a six-phase land purchase contract in the Maryland division. This
contract was entered into in 1994 and required a greater investment than the
Company normally commits. The Company sold a portion of the developed lots from
the first and second phases to outside homebuilders and is currently selling a
portion of the lots in the third and fourth phases to outside homebuilders. The
Company has an option to purchase each of the remaining two phases. If the
Company purchases all six phases, the total purchase price will be
approximately $39.8 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.
Treasury Stock. On March 15, 1997 and August 1, 1997, the Company
purchased 500,000 and 702,439 shares, respectively, of the Company's common
stock from the Melvin L. Schottenstein family interests and trusts for their
benefit at an average per share price of $11.85. These shares are held as
treasury shares by the Company. The total purchase price was $14.3 million and
was paid from the Company's Bank Credit Facility.
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 homebuyers 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 rate on
the Company's outstanding debt for the nine months ended September 30, 1997 was
8.5% as compared to 9.7% for the nine months ended September 30, 1996.
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,
resulting in lower gross profit margins.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
The Company wishes to take advantage of the safe harbor provisions
included in the Private Securities Litigation Reform Act of 1995. Accordingly,
in addition to historical information, this Management's Discussion and
Analysis of Financial Condition and Results of Operations contains certain
forward-looking statements, including, but not limited to, statements regarding
the Company's future financial performance and financial condition. These
statements involve a number of risks and uncertainties. Any forward-looking
statements made by the Company herein and in future reports and
-16-
<PAGE> 17
statements are not guarantees of future performance, and actual results may
differ materially from those in such forward-looking statements as a result of
various factors including, but not limited to, those referred to below.
General Real Estate, Economic, Interest Rates and Other Conditions.
The homebuilding industry is significantly affected by changes in national and
local economic and other conditions, including employment levels, changing
demographic considerations, availability of financing, interest rates, consumer
confidence and housing demand. In addition, homebuilders are subject to various
risks, many of them outside the control of the homebuilder, including
competitive overbuilding, availability and cost of building lots, availability
of materials and labor, adverse weather conditions which can cause delays in
construction schedules, cost overruns, changes in government regulations, and
increases in real estate taxes and other local government fees. The Company
cannot predict whether interest rates will be at levels attractive to
prospective homebuyers. If interest rates increase, and in particular mortgage
interest rates, the Company's business could be adversely affected.
Land Development Activities. The Company develops the lots for a
majority of its subdivisions. Therefore, the medium- and long-term financial
success of the Company will be dependent on the Company's ability to develop
its subdivisions successfully. Acquiring land and committing the financial and
managerial resources to develop a subdivision involves significant risks.
Before a subdivision generates any revenue, material expenditures are required
for items such as acquiring land and constructing subdivision infrastructure
(such as roads and utilities).
The Company's Markets. The Company's operations are situated in the
Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Tampa, Orlando and Palm
Beach County, Florida; Charlotte and Raleigh, North Carolina; and Virginia and
Maryland metropolitan areas. Adverse general economic conditions in these
markets could have a material adverse impact on the operations of the Company.
For the year ended December 31, 1996, approximately 38% of the Company's
housing revenue and a significant portion of the Company's operating income
were derived from operations in its Columbus, Ohio market. The Company's
performance could be significantly affected by changes in this market. The
Company expanded into a new geographic market, Phoenix, Arizona, in late 1996.
A new market may prove to be less stable and may involve delays, problems and
expenses not typically found by the Company in the existing markets with which
it is familiar.
Competition. The homebuilding industry is highly competitive. The
Company competes in each of its local market areas with numerous national,
regional and local homebuilders, some of which have greater financial,
marketing, land acquisition, and sales resources than the Company. Builders of
new homes compete not only for homebuyers, but also for desirable properties,
financing, raw materials and skilled subcontractors. The Company also competes
with the resale market for existing homes which provides certain attraction for
homebuyers over building a new home.
Governmental Regulation and Environmental Considerations. The
homebuilding industry is subject to increasing local, state and Federal
statutes, ordinances, rules and regulations concerning zoning, resource
protection (preservation of woodlands and hillside areas), building design, and
construction and similar matters, including local regulations which impose
restrictive zoning and density requirements in order to limit the number of
homes that can eventually be built within the boundaries of a particular
location. Such regulation affects construction activities, including
construction materials which must be used in certain aspects of building
design, as well as sales activities and other dealings with homebuyers. The
Company must also obtain licenses, permits and approvals from various
governmental agencies for its development activities, the granting of which are
beyond the Company's control. Furthermore, increasingly
-17-
<PAGE> 18
stringent requirements may be imposed on homebuilders and developers in the
future. Although the Company cannot predict the impact on the Company of
compliance with any such requirements, such requirements could result in time
consuming and expensive compliance programs.
The Company is also subject to a variety of local, state and Federal
statutes, ordinances, rules and regulations concerning the protection of health
and the environment. The particular environmental laws which apply to any given
project vary greatly according to the project site and the present and former
uses of the property. These environmental laws may result in delays, cause the
Company to incur substantial compliance costs (including substantial
expenditures for pollution and water quality control) and prohibit or severely
restrict development in certain environmentally sensitive regions. Although
there can be no assurance that it will be successful in all cases, the Company
has a general practice of requiring an environmental audit and resolution of
environmental issues prior to purchasing land in an effort to avoid major
environmental issues in the Company's developments.
In addition, the Company has been, and in the future may be, subject
to periodic delays or may be precluded from developing certain projects due to
building moratoriums. These moratoriums generally relate to insufficient water
supplies or sewage facilities, delays in utility hook-ups or inadequate road
capacity within the specific market area or subdivision. These moratoriums can
occur prior to, or subsequent to, commencement of operations by the Company
without notice to, or recourse by, the Company.
Risk of Material and Labor Shortages. The Company is presently not
experiencing any serious material or labor shortages. However, the residential
construction industry in the past has, from time to time, experienced serious
material and labor shortages in insulation, drywall, certain carpentry and
framing work and cement, as well as fluctuating lumber prices and supplies.
Delays in construction of homes due to these shortages could adversely affect
the Company's business.
Significant Voting Control by Principal Shareholders. As of October
31, 1997, members of the Melvin L. Schottenstein and Irving E. Schottenstein
families owned approximately 53% of the outstanding Common Shares. In
particular, Irving E. Schottenstein, in his own name and as trustee of trusts
for his children, had the right to vote 2,761,800 Common Shares, or 36.4% of
the outstanding Common Shares, and Melvin L. Schottenstein's children had the
right to vote in the aggregate 1,243,000 Common Shares, or 16.4% of the
outstanding Common Shares. Therefore, members of the Irving E. Schottenstein
and Melvin L. Schottenstein families have significant voting power with
respect to the election of the Board of Directors of the Company and, in
general, the determination of the outcome of the various matters submitted to
the shareholders of the Company for approval.
Dependence on Key Executives. The Company is managed by a relatively
small number of executive officers. The loss of the services of one or more of
these executive officers could have an adverse effect on the Company's business
and operations.
-18-
<PAGE> 19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - none.
Item 2. Changes in Securities - none.
Item 3. Defaults Upon Senior Securities - none.
Item 4. Submission of Matters to a Vote of Security Holders - none.
Item 5. Other Information - none.
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.
Exhibit
Number Description
- ------ -----------
10.1 Third Amendment to second restated revolving credit loan and
standby letter of credit agreement by and among the Company, Bank
One, N.A.; The Huntington National Bank; The First National Bank of
Chicago; National City Bank of Columbus; BankBoston, N.A.; The
Fifth Third Bank of Columbus and Bank One, N.A. as agent for the
banks, dated September 29, 1997.
10.2 Credit Agreement between the Company and BankBoston, N.A., the
other parties which may become lenders and BankBoston, N.A. as
agent, dated August 29, 1997.
-19-
<PAGE> 20
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.
M/I Schottenstein Homes, Inc.
--------------------------------
(Registrant)
Date: October 31, 1997 by: /s/ Robert H. Schottenstein
-----------------------------
Robert H. Schottenstein
President
Date: October 31, 1997 by: /s/ Kerrii B. Anderson
--------------------------
Kerrii B. Anderson
Senior Vice President,
Chief Financial Officer
(Principal Financial and
Accounting Officer)
-20-
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description Page #
------ ----------- ------
<S> <C>
10.1 Third Amendment to second restated revolving credit loan and standby
letter of credit agreement by and among the Company, Bank One, N.A.;
The Huntington National Bank; The First National Bank of Chicago;
National City Bank of Columbus; BankBoston, N.A.; The Fifth Third Bank
of Columbus and Bank One, N.A. as agent for the banks, dated September
29, 1997.
10.2 Credit Agreement between the Company and BankBoston, N.A., the other
parties which may become lenders and BankBoston, N.A. as agent, dated
August 29, 1997.
</TABLE>
-21-
<PAGE> 1
Exhibit 10.1
THIRD AMENDMENT TO SECOND RESTATED REVOLVING CREDIT LOAN AND
STANDBY LETTER OF CREDIT AGREEMENT
This Third Amendment to Second Restated Revolving Credit Loan And
Standby Letter Of Credit Agreement (this "Amendment") is made to be effective
as of September 29, 1997, by and among M/I SCHOTTENSTEIN HOMES, INC., an Ohio
corporation ("Borrower"), BANK ONE, N.A., a national banking association,
formerly known as Bank One, Columbus, N.A., a national banking association
("Bank One"), THE HUNTINGTON NATIONAL BANK, a national banking association
("HNB"), THE FIRST NATIONAL BANK OF CHICAGO, a national banking association
("First Chicago"), NATIONAL CITY BANK OF COLUMBUS, a national banking
association ("NCB"), BANKBOSTON, N.A., a national banking association, formerly
known as The First National Bank of Boston, a national banking association
("BOB"), THE FIFTH THIRD BANK OF COLUMBUS, an Ohio banking corporation ("Fifth
Third") (Bank One, HNB, First Chicago, NCB, BOB and Fifth Third is each a
"Bank" and, collectively, "Banks"), and BANK ONE, N.A., formerly known as Bank
One, Columbus, N.A., a national banking association, as agent for Banks
("Agent"). For valuable consideration, the receipt of which is hereby
acknowledged, Borrower, Banks and Agent, each intending to be legally bound,
hereby recite and agree as follows:
BACKGROUND INFORMATION
A. Borrower, Bank One, HNB, First Chicago, NCB, BOB, Fifth Third and
Agent are parties to a certain Second Restated Revolving Credit Loan and
Standby Letter of Credit Agreement effective as of December 30, 1996, as
amended by the First Amendment thereto effective as of March 14, 1997 and by
the Second Amendment thereto effective as of May 7, 1997 (the "Credit
Agreement").
B. Borrower has redeemed certain Subordinated Indebtedness (as defined
in the Credit Agreement) in the principal amount of $25,000,000 created as a
result of the Note Purchase Agreement (as defined in the Credit Agreement), as
amended by the first amendment thereto effective as of March 14, 1997, and
replaced such Subordinated Indebtedness with certain
<PAGE> 2
other subordinated indebtedness from BankBoston, N.A. in the principal amount
of $50,000,000 issued pursuant to a credit agreement dated August 29, 1997
between Borrower and BankBoston, N.A. (the "BankBoston Agreement").
C. Borrower, Banks and Agent want to amend the Credit Agreement by
deleting therefrom references to the Note Purchase Agreement, by providing
therein for the BankBoston Agreement and by modifying (i) certain definitions
in Section 1, Definitions; (ii) certain obligations of Borrower set forth in
Section 6, Affirmative Covenants; and (iii) certain limitations on Borrower set
forth in Section 7, Negative Covenants.
AGREEMENT
1. Subsection 1.1 (Defined Terms) of the Credit Agreement is hereby
amended by deleting the definition of "Applicable Eurodollar Margin" in its
entirety and replacing it with the following definition:
"Applicable Eurodollar Margin" shall mean, during the period
from the date hereof until the first Adjustment Date, 1.60% 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 9 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 Margin for Eurodollar
Interest Incurred Rate Loans is:
is: ---------------------
----------------------
less than 1.75 to 1.0 Eurodollar Rate Loans are not
available
2
<PAGE> 3
If the ratio of EBITDA Applicable Eurodollar
to Consolidated Margin for Eurodollar
Interest Incurred Rate Loans is:
is: ---------------------
----------------------
equal to or greater
than 1.75 to 1.0 but
less than 2.0 to 1.0 2.35% per annum
equal to or greater
than 2.0 to 1.0 but
less than 2.50 to 1.0 2.10% per annum
equal to or greater
than 2.50 to 1.0 but
less than 3.0 to 1.0 1.85% per annum
equal to or greater
than 3.0 to 1.0 1.60% per annum
If, however, the financial statements required to be delivered
pursuant to subsection 6.1(b) and the related compliance certificate
required to be delivered pursuant to subsection 6.2(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
3
<PAGE> 4
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
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 9).
2. Subsection 1.1 (Defined Terms) of the Credit Agreement is hereby
amended by inserting immediately following the definition of "Applicable
Eurodollar Margin" the following definition of "BankBoston Agreement":
"BankBoston Agreement" shall mean the credit agreement dated
August 29, 1997 between Borrower and BankBoston, N.A., in its
capacities as lender and as agent, and any other parties which may
become lenders thereunder, and any subsequent successors or assigns,
which credit agreement governs certain subordinated indebtedness to
BankBoston, N.A. in the principal amount of $50,000,000.
4
<PAGE> 5
3. Subsection 1.1 (Defined Terms) of the Credit Agreement is hereby
amended by deleting therefrom the definition of "Note Purchase Agreement" in
its entirety.
4. Subsection 1.1 (Defined Terms) of the Credit Agreement is hereby
amended by deleting therefrom the definition of "Subordinated Indebtedness" in
its entirety and replacing it with the following definition:
"Subordinated Indebtedness" at any date shall mean (i) the
unsecured Indebtedness of Borrower created as a result of the
BankBoston Agreement, and (ii) all other future unsecured subordinated
Indebtedness of Borrower, the terms and manner (including without
limitation the terms and manner with respect to subordination) of
which are satisfactory to Required Banks in their sole discretion and
approved in writing by Required Banks and which is subordinate to (a)
Borrower's obligations to Banks and Agent under this Agreement and the
Notes and (b) Borrower's obligations, if any, as a guarantor or
otherwise of the obligations of M/I Financial Corp. (including without
limitation the obligations with respect to the M/I Financial Corp.
Loan Agreement).
5. Subsection 6.12 (Maintenance of Debt to Worth) of the Credit
Agreement is hereby amended by deleting it in its entirety and replacing it
with the following subsection 6.12:
6.12 Maintenance of Debt to Worth. Maintain at all times during
the Commitment Period a ratio of Consolidated Unsubordinated
Liabilities to the sum of Consolidated Tangible Net Worth and
Subordinated Indebtedness not in excess of 2.0 to 1.0.
6. Subsection 6.14 (Maintenance of Overall Leverage Ratio) of the
Credit Agreement is hereby amended by deleting it in its entirety and replacing
it with the following subsection 6.14:
6.14 Maintenance of Overall Leverage Ratio. Maintain at all times
during the Commitment Period (a) a ratio of Consolidated Tangible Net
Worth to Subordinated Indebtedness of not less than 1.0 to 1.0, and
(b) a ratio of Consolidated Liabilities to
5
<PAGE> 6
Consolidated Tangible Net Worth not in excess of 3.0 to 1.0.
7. Subsection 6.15 (Maintenance of EBITDA to Consolidated Interest
Incurred Ratio) of the Credit Agreement is hereby amended by deleting it in its
entirety and replacing it with the following subsection 6.15:
6.15 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 1.70 to 1.0.
8. Subsection 7.3 (Limitation on Contingent Obligations) of the Credit
Agreement is hereby amended by deleting it in its entirety and replacing it
with the following subsection 7.3:
7.3 Limitation on Contingent Obligations. Agree to or assume,
guarantee, indorse or otherwise in any way be or become responsible or
liable for, directly or indirectly, any Contingent Obligation,
including but not limited to Contingent Obligations incurred as a
general partner in any limited partnership or general partnership,
except:
(a)(i) reimbursement and other obligations under standby
letters of credit (including letters of credit issued for the
purpose of satisfying bonding requirements) issued by Persons
other than Banks; (ii) Contingent Obligations of Borrower as the
guarantor of letters of credit issued for the account of joint
ventures in which Borrower is a partner (including Guaranteed HNB
Joint Ventures Letters of Credit), provided that Borrower's
Contingent Obligation on any such guaranty shall be limited to a
percentage of the amount of that joint venture's letters of credit
equal to Borrower's pro rata equitable ownership interest in such
joint venture, provided further that the sum of the obligations
permitted by clauses (a)(i) and (a)(ii) shall not exceed the
aggregate amount of $7,000,000 at any one time outstanding on a
consolidated basis, which $7,000,000 limitation shall not include
any obligations
6
<PAGE> 7
in connection with Standby L/Cs; and (iii) reimbursement
obligations not in excess of $20,000,000 at any one time
outstanding on a consolidated basis under Construction Bonds;
(b) Contingent Obligations consisting of (i) guaranties by
Borrower of M/I Financial Corp.'s lease obligations in an amount
not to exceed $1,000,000 in any period of 12 consecutive
months,(ii) Borrower's obligations under the M/I Financial Corp.
Loan Agreement in a principal amount not to exceed $30,000,000,
and (iii) guaranties by any Subsidiary of the obligations of
Borrower (including without limitation any guaranty by M/I
Financial Corp. of any obligation of Borrower to Banks);
(c) Contingent Obligations related to Indebtedness of joint
ventures in which Borrower has made Investments in Joint Ventures
as permitted by subsection 7.9(e) hereof and in which Borrower is
a partner, member or shareholder; provided, however, that the
aggregate amount of such Contingent Obligations at any one time
outstanding pursuant to this subsection 7.3(c) shall not exceed
(i) $10,000,000 less (ii) the aggregate amount of secured and
unsecured Indebtedness then outstanding pursuant to subsection
7.1(d) hereof; and
(d) 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 7.9(l) hereof.
9. Subsection 7.13 (Limitation on Payments of Subordinated
Indebtedness and Modification of Subordination Agreements) of the Credit
Agreement is hereby amended by deleting it in its entirety and replacing it
with the following subsection 7.13:
7.13 Limitation on Payments of Subordinated Indebtedness and
Modification of Subordination Agreements.
Without the prior written consent of the Required Banks,
7
<PAGE> 8
(a) repay, prepay, purchase, redeem, or otherwise acquire any
of its Subordinated Indebtedness; or
(b) make any other payments, including without limitation
payment of interest, on any Subordinated Indebtedness if an Event
of Default exists or if such payment would cause an Event of
Default to occur; or
(c) permit the modification, waiver or amendment of any of
the terms of any Subordinated Indebtedness; or
(d) permit (whether or not within the control of Borrower or
any of its Subsidiaries) the modification, waiver, or amendment
of, or release of any parties to, any subordination agreement with
respect to any Subordinated Indebtedness;
provided, however, nothing contained in this subsection 7.13 shall
prevent Borrower from making regularly scheduled payments on any
Subordinated Indebtedness if no Event of Default exists and the
payment would not cause an Event of Default to occur. With respect
to the Subordinated Indebtedness pursuant to the BankBoston
Agreement, "regularly scheduled payments" shall mean only (i) on
August 29, 2004, the payment of the principal balance of the Fixed
Rate Senior Subordinated Note made by the Borrower to the order of
BankBoston, N.A. on August 29, 1997 in the principal face amount
of $50,000,000 and each other note executed and delivered by the
Borrower in exchange or replacement for such note pursuant to the
BankBoston Agreement (collectively, the "BankBoston Notes"); and
(ii) on each February 28, May 29, August 29 and November 29 (or
within any applicable cure period) during the term of the
BankBoston Notes beginning with November 29, 1997, interest on the
BankBoston Notes.
The parties hereby agree that this clarification regarding
what payments of Subordinated Indebtedness pursuant to the
8
<PAGE> 9
BankBoston Agreement constitute "regularly scheduled payments" is
not intended to modify the rights and obligations of BankBoston,
N.A. (including any of its successors and assigns) and the
Borrower, or the rights of the Banks and the Agent, pursuant to or
arising out of the Subordinated Indebtedness pursuant to the
BankBoston Agreement; provided that nothing herein shall be
construed to be a consent by the Banks (in their capacity as Banks
under this Agreement) and the Agent to any payment of any
Subordinated Indebtedness that is prohibited by this Agreement.
10. Subsection 7.20 (Limitation on Uncommitted Land) of the Credit
Agreement is hereby amended by deleting it in its entirety and replacing it
with the following subsection 7.20:
7.20 Limitation on Uncommitted Land. Permit the ratio of (a)
Uncommitted Land to (b) the sum of Borrower's (i) Shareholders Equity,
and (ii) Subordinated Indebtedness to exceed at any one time: (A) from
September 29, 1997 through and including December 31, 1998, 1.25 to
1.0; and (B) from January 1, 1999 and thereafter, 1.20 to 1.0.
11. Borrower hereby represents and warrants to each Bank and to 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 and performance of the
Credit Agreement as amended by this Amendment.
12. 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.
13. The obligations of Agent and Banks pursuant to this Amendment are
subject to the satisfaction of the following
9
<PAGE> 10
conditions precedent prior to the effective date of this Amendment:
(a) Guarantor's Consent and Reaffirmation of Guaranties. Each Bank
and Agent shall have received from each of the Subsidiaries of
Borrower (which as of the date of this Amendment are M/I Financial
Corp., 601RS, Inc., M/I Homes, Inc. and M/I Homes Construction, Inc.)
an executed copy of its respective
10
<PAGE> 11
Guarantor's Consent and Reaffirmation of Guaranties (in form and
substance satisfactory to Agent).
(b) Corporate Proceedings of Borrower. Each Bank and Agent shall
have received a copy of the resolutions (in form and substance
satisfactory to Agent) of the Executive Committee of the Board of
Directors of Borrower authorizing the execution, delivery and
performance of this Amendment, certified by the Secretary or the
Assistant Secretary of Borrower as of the date hereof. Such
certificate shall state that the resolutions set forth therein have
not been amended, modified, revoked or rescinded as of the effective
date of this Amendment.
(c) Corporate Proceedings of Subsidiaries of Borrower. Each Bank
and Agent shall have received a copy of the resolutions (in form and
substance satisfactory to Agent) of the Sole Shareholder of each the
Subsidiaries of Borrower (which as of the date of this Amendment are
M/I Financial Corp., 601RS, Inc., M/I Homes, Inc. and M/I Homes
Construction, Inc.) authorizing the execution, delivery and
performance of its respective Guarantor's Consent and Reaffirmation of
Guaranties, each certified by the Secretary or Assistant Secretary of
the respective Subsidiary of Borrower as of the date of this
Amendment. Such certificate shall state that the resolutions set
forth therein have not been amended, modified, revoked or rescinded as
of the effective date of this Amendment.
(d) 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.
14. 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 Borrower, Agent
and the Required Banks.
15. This Amendment shall be governed by, and construed in accordance
with, the local laws of the State of Ohio.
IN WITNESS WHEREOF, Borrower, Banks and Agent 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.
11
<PAGE> 12
M/I SCHOTTENSTEIN HOMES, INC.
By_________________________________
Robert H. Schottenstein
Title: President and Assistant Secretary
BANK ONE, 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: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By_________________________________
Gregory A. Gilbert
Title: Vice President
12
<PAGE> 13
NATIONAL CITY BANK OF COLUMBUS
By_________________________________
Ralph A. Kaparos
Title: Senior Vice President
BANKBOSTON, N.A.
By_________________________________
Kevin C. Hake
Title: Director
THE FIFTH THIRD BANK OF COLUMBUS
By_________________________________
Mark E. Ransom
Title: Vice President
13
<PAGE> 14
GUARANTOR'S CONSENT AND REAFFIRMATION OF GUARANTIES
The undersigned Guarantor hereby (a) acknowledges that it has read the
foregoing Third Amendment to Second Restated Revolving Credit Loan and Standby
Letter of Credit Agreement, effective as of September 29, 1997 (the "Third
Amendment"), and (b) agrees that each of the undersigned Guarantor's Guaranties
dated as of December 30, 1996 of the obligations of M/I Schottenstein Homes,
Inc. pursuant to the Second Restated Revolving Credit Loan and Standby Letter
of Credit Agreement, as amended by the First Amendment thereto effective as of
March 14, 1997, by the Second Amendment thereto effective as of May 7, 1997 and
by the Third Amendment, and all representations, warranties and covenants in
each of such Guaranties continue in full force and effect notwithstanding the
Third Amendment.
M/I FINANCIAL CORP.
By:________________________________
Print Name:_____________________
Title:__________________________
14
<PAGE> 15
GUARANTOR'S CONSENT AND REAFFIRMATION OF GUARANTIES
Each of the undersigned Guarantors hereby (a) acknowledges that it has
read the foregoing Third Amendment to Second Restated Revolving Credit Loan and
Standby Letter of Credit Agreement, effective as of September 29, 1997 (the
"Third Amendment"), and (b) agrees that each of the undersigned Guarantor's
Guaranties dated as of March 14, 1997 of the obligations of M/I Schottenstein
Homes, Inc. pursuant to the Second Restated Revolving Credit Loan and Standby
Letter of Credit Agreement, as amended by the First Amendment thereto effective
as of March 14, 1997, by the Second Amendment thereto effective as of May 7,
1997 and by the Third Amendment, and all representations, warranties and
covenants in each of such Guaranties continue in full force and effect
notwithstanding the Third Amendment.
601RS, INC.
M/I HOMES, INC.
M/I HOMES CONSTRUCTION, INC.
By:________________________________
Robert H. Schottenstein
President and Assistant Secretary of 601RS, Inc.;
Vice Chairman of M/I Homes, Inc.; and
Vice Chairman of M/I Homes Construction, Inc.
15
<PAGE> 16
September 30, 1997
M/I Schottenstein Homes, Inc.
3 Easton oval
Columbus, Ohio 43219
Attention: Irving E. Schottenstein
With a copy to: Phillip G. Creek
Paul S. Coppel, Esq.
Re: Second Restated Revolving Credit Loan and Standby
Letter of Credit Agreement - Extension of the
Maturity Date of the Commitment
-------------------------------
Pursuant to subsection 2.7 of the Second Restated Revolving Credit
Loan and Standby Letter of Credit Agreement effective as of December 30, 1996,
by and among Borrower, Bank One, HNB, First Chicago, NCB, BOB, Fifth Third and
Agent (each as defined in the Credit Agreement), as amended by the First
Amendment thereto effective as of March 14, 1997, the Second Amendment thereto
effective as of May 7, 1997 and the Third Amendment thereto effective as of
September 29, 1997 (together, the "Credit Agreement"), Bank One, N.A., as
Agent, hereby notifies Borrower that all of the Banks (as defined in the Credit
Agreement) have elected to extend (the "Extension") the maturity date of the
Commitment (as defined in the Credit Agreement) by one year, from September 30,
2001 to September 30, 2002.
Also pursuant to subsection 2.7 of the Credit Agreement, this notice
granting the Extension will be attached to each of the Notes (as defined in the
Credit Agreement) and will constitute an amendment extending the maturity date
of each Note by one year, from September 30, 2001 to September 30, 2002.
16
<PAGE> 17
September 30, 1997
Page 2
The Credit Agreement, including without limitation the Borrower's
representations, warranties and covenants, shall remain in full force and
effect in accordance with its terms as amended hereby, and upon September 30,
1997, the terms "Agreement" and "the Agreement" shall mean the Credit Agreement
as amended hereby.
Very truly yours,
/s/ Thomas D. Igoe
----------------------
Thomas D. Igoe
cc: James R. Willet, The Huntington National Bank
Gregory A. Gilbert, The First National Bank of Chicago
Ralph A. Kaparos, National City Bank of Columbus
Kevin C. Hake, BankBoston, N.A.
Mark E. Ransom, The Fifth Third Bank of Columbus
17
<PAGE> 1
Exhibit 10.2
CREDIT AGREEMENT
DATED AUGUST 29, 1997
between
M/I SCHOTTENSTEIN HOMES, INC.
and
BANKBOSTON, N.A.,
THE OTHER PARTIES WHICH MAY BECOME LENDERS
AND
BANKBOSTON, N.A.,
AS AGENT
$50,000,000.00 FIXED RATE SENIOR SUBORDINATED DEBT
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Section 1. DEFINITIONS AND RULES OF INTERPRETATION.....................................................1
---------------------------------------
Section 1.1 Definitions...................................................................1
Section 1.2 Rules of Interpretation......................................................15
Section 2. THE FACILITY...............................................................................16
------------
Section 2.1 Commitment to Lend...........................................................16
Section 2.2 Notes........................................................................16
Section 2.3 [Intentionally Omitted]......................................................16
Section 2.4 Commitment Fee...............................................................16
Section 2.5 Use of Proceeds..............................................................16
Section 3. PAYMENT OF THE NOTES........................................................................16
--------------------
Section 3.1 Stated Maturity..............................................................16
Section 3.2 Interest on Notes............................................................17
Section 3.3 Optional Prepayments.........................................................17
Section 3.4 Application of Payments......................................................19
Section 3.5 Prepayment Upon Change of Control............................................19
Section 4. CERTAIN GENERAL PROVISIONS.................................................................19
--------------------------
Section 4.1 Funds for Payments...........................................................19
Section 4.2 Computations.................................................................20
Section 4.3 Capital Adequacy.............................................................20
Section 4.4 Interest on Overdue Amounts; Late Charge.....................................21
Section 4.5 Certificate..................................................................21
Section 4.6 Limitation on Interest.......................................................21
Section 5. REPRESENTATIONS AND WARRANTIES..............................................................21
------------------------------
Section 5.1 Corporate Authority; Etc....................................................21
Section 5.2 Title to Properties.........................................................22
Section 5.3 Financial Statements........................................................23
Section 5.4 No Material Changes, Etc....................................................23
Section 5.5 Franchises, Patents, Copyrights, Etc........................................23
Section 5.6 Litigation..................................................................23
Section 5.7 No Materially Adverse Contracts, Etc........................................23
Section 5.8 Compliance with Other Instruments, Laws, Etc................................24
Section 5.9 Tax Status..................................................................24
Section 5.10 No Event of Default.........................................................24
Section 5.11 Holding Company and Investment Company Acts.................................24
Section 5.12 ERISA.......................................................................24
Section 5.13 Regulations U and X.........................................................25
Section 5.14 Full Disclosure.............................................................25
</TABLE>
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<TABLE>
<S> <C>
Section 5.15 Subsidiaries.................................................................25
Section 5.16 Brokers......................................................................25
Section 5.17 Other Debt...................................................................25
Section 5.18 Environmental Compliance.....................................................26
Section 5.19 Loan Documents...............................................................26
Section 5.20 Solvency.....................................................................26
Section 6. AFFIRMATIVE COVENANTS OF THE BORROWER.......................................................26
-------------------------------------
Section 6.1 Punctual Payment.............................................................26
Section 6.2 Maintenance of Office........................................................26
Section 6.3 Records and Accounts.........................................................26
Section 6.4 Financial Statements, Certificates and Information...........................27
Section 6.5 Notices......................................................................28
Section 6.6 Existence; Maintenance of Properties.........................................29
Section 6.7 Insurance....................................................................29
Section 6.8 Taxes........................................................................29
Section 6.9 Further Assurances...........................................................29
Section 6.10 Compliance with Laws, Contracts, Licenses, and Permits.......................30
Section 6.11 ERISA Compliances............................................................30
Section 6.12 Consolidated Tangible Net Worth..............................................30
Section 7. NEGATIVE COVENANTS OF THE BORROWER..........................................................30
----------------------------------
Section 7.1 Restrictions on Indebtedness.................................................30
Section 7.2 Restrictions on Liens, Etc...................................................32
Section 7.3 Restrictions on Contingent Obligations.......................................33
Section 7.4 Restrictions on Investments..................................................34
Section 7.5 Restrictions on Uncommitted Land.............................................35
Section 7.6 Restriction on Distributions.................................................35
Section 7.7 Maintenance of Leverage Ratio................................................35
Section 7.8 Restriction on Fundamental Changes...........................................35
Section 7.9 Transactions with Affiliates and Officers....................................36
Section 7.10 Restrictions on Negative Pledges.............................................36
Section 7.11 Purchase of Notes............................................................37
Section 8. CLOSING CONDITIONS..........................................................................37
------------------
Section 8.1 Execution of Loan Documents..................................................37
Section 8.2 Certified Copies of Organizational Documents.................................37
Section 8.3 Bylaws; Resolutions..........................................................37
Section 8.4 Incumbency Certificate; Authorized Signers...................................37
Section 8.5 Opinion of Counsel...........................................................38
Section 8.6 Payment of Fees..............................................................38
Section 8.7 Performance; No Default......................................................38
Section 8.8 Representations and Warranties...............................................38
Section 8.9 Proceedings and Documents....................................................38
</TABLE>
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<TABLE>
<S> <C>
Section 8.10 Compliance Certificate.......................................................38
Section 8.11 Senior Debt Consents.........................................................38
Section 8.12 Satisfaction of Existing Subordinated Note...................................38
Section 8.13 Material Adverse Effect......................................................39
Section 8.14 Capital Stock................................................................39
Section 8.15 No Legal Impediment..........................................................39
Section 8.16 Waiver of Conditions.........................................................39
Section 9. EVENTS OF DEFAULT; ACCELERATION; ETC........................................................39
-------------------------------------
Section 9.1 Events of Default and Acceleration...........................................39
Section 9.2 Cure Periods.................................................................42
Section 9.3 Remedies.....................................................................42
Section 10. SUBORDINATION OF THE NOTES.................................................................42
---------------------------
Section 10.1 Certain Definitions..........................................................42
(a) "Bankruptcy Code"...................................................42
(b) "Judicial Proceeding"...............................................42
(c) "Permissible Securities"............................................43
(d) "Subordinated Indebtedness".........................................43
(e) "Superior Indebtedness".............................................43
Section 10.2 Subordinated Indebtedness Subordinated to
Superior Indebtedness........................................................43
Section 10.3 Dissolution, Liquidation, Reorganization, Etc................................43
Section 10.4 No Payment With Respect to Subordinated
Indebtedness in Certain Circumstances........................................44
Section 10.5 Payments and Distributions Received..........................................46
Section 10.6 Subrogation..................................................................46
Section 10.7 Obligations Unimpaired.......................................................46
Section 10.8 Holders of Subordinated Indebtedness Entitled to
Assume Payments Not Prohibited in Absence of Notice..........................47
Section 10.9 Section 10 Not to Prevent Events of Default..................................48
Section 11. THE AGENT..................................................................................48
---------
Section 11.1 Authorization...............................................................48
Section 11.2 Employees and Agents........................................................48
Section 11.3 No Liability................................................................48
Section 11.4 No Representations..........................................................49
Section 11.5 Payments....................................................................49
Section 11.6 Holders of Notes............................................................50
Section 11.7 Indemnity...................................................................50
Section 11.8 Agent as Lender.............................................................50
Section 11.9 Resignation.................................................................50
Section 11.10 Duties in the Case of Enforcement...........................................50
</TABLE>
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<TABLE>
<S> <C>
Section 12. EXPENSES...................................................................................51
--------
Section 13. ASSIGNMENT AND PARTICIPATION...............................................................51
----------------------------
Section 13.1 Condition to Assignment by Lenders.........................................51
Section 13.2 Register...................................................................52
Section 13.3 New Notes..................................................................52
Section 13.4 Participations.............................................................53
Section 13.5 Pledge by Lender...........................................................53
Section 13.6 Cooperation; Disclosure....................................................53
Section 14. MISCELLANEOUS..............................................................................53
-------------
Section 14.1 Loss, Theft, Etc. of Notes..................................................53
Section 14.2 Survival of Covenants.......................................................53
Section 14.3 Waiver of Stay, Extension or Usury..........................................54
Section 14.4 Notices.....................................................................54
Section 14.5 Governing Law...............................................................55
Section 14.6 Headings....................................................................55
Section 14.7 Counterparts................................................................55
Section 14.8 Entire Agreement, Etc.......................................................55
Section 14.9 Consents, Amendments, Waivers, Etc..........................................56
Section 14.10 Severability................................................................56
Section 14.11 Successors and Assigns......................................................56
Section 14.12 Waiver of Jury Trial........................................................56
Section 14.13 Relationship................................................................57
Section 14.14 Dealings with the Borrower..................................................57
Section 14.15 Time of the Essence.........................................................57
SCHEDULE 1 - Lenders and Commitments
SCHEDULE 3.3 - Example of Calculation of Prepayment Fee
SCHEDULE 5.15(a) - Subsidiaries of the Borrower
SCHEDULE 5.15(b) - Schedule of Partnerships and Joint Ventures
SCHEDULE OF EXHIBITS:
Exhibit A - Fixed Rate Senior Subordinated Note
</TABLE>
<PAGE> 6
CREDIT AGREEMENT
----------------
THIS CREDIT AGREEMENT is made this 29th day of August, 1997, by and
between M/I SCHOTTENSTEIN HOMES, INC., an Ohio corporation having its principal
place of business at 3 Easton Oval, Columbus, Ohio 43219 (the "Borrower"),
BANKBOSTON, N.A., a national banking association ("BKB"), and the other parties
which may become a "Lender" hereunder, and BANKBOSTON, N.A., as Agent for the
Lenders ("Agent").
SECTION 1. DEFINITIONS AND RULES OF INTERPRETATION.
SECTION 1.1 Definitions. The following terms shall have the meanings
set forth in this Section l or elsewhere in the provisions of this Agreement
referred to below:
ADDITIONAL PERMITTED SENIOR DEBT. See Section 7.1(g).
AFFILIATE. Affiliate shall mean (a) any Person (other than a Subsidiary
of the Borrower) which, directly or indirectly, controls, is controlled by or is
under common control with the Borrower, or (b) any Person who is a director,
officer or key employee of Borrower, any Subsidiary of the Borrower or any
Person described in clause (a) of this definition. For purposes of this
definition, "control" of a Person means the power, direct or indirect, to vote
twenty percent (20%) or more of the securities having voting power for the
election of directors of such Person or otherwise to direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.
AGENT. BankBoston, N.A., acting as Agent for the Lenders, its
successors and assigns.
AGENT'S HEAD OFFICE. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time by written notice to the Borrower and the Lenders.
AGREEMENT. This Credit Agreement, including the SCHEDULES and EXHIBITS
hereto.
BALANCE SHEET DATE. June 30, 1997.
BANKRUPTCY CODE. See Section 10.1(a).
BKB. As defined in the preamble hereto.
BORROWER. As defined in the preamble hereto.
BUSINESS DAY. Any day on which banking institutions located in the same
city and State as Agent's Head Office is located are open for the transaction of
banking business.
<PAGE> 7
CAPITAL STOCK. Any shares, interests, participations or other
equivalents (however designated) in or of the equity of a Person (including,
without limitation, common stock, preferred stock, any other class of stock, and
joint venture and partnership interests).
CASH EQUIVALENTS. Securities with maturities of 180 days or less from
the date of acquisition issued or fully guaranteed or insured by the United
States Government or any agency thereof, certificates of deposit and bankers'
acceptances, each issued by any bank a party to the Senior Credit Agreement and
each with a maturity of 180 days or less from the date of acquisition, and
commercial paper of a domestic issuer rated at least A-1 by Standard & Poor's
Corporation or P-1 by Moody's Investors Service, Inc. with a maturity of not
more than 180 days.
CAPITALIZED LEASE. A lease under which a Person is the lessee or
obligor, the discounted future rental payment obligations under which are
required to be capitalized on the balance sheet of the lessee or obligor in
accordance with GAAP.
CHANGE OF CONTROL. A Change of Control shall be deemed to occur upon
the occurrence of any of the following events: (a) any Person or group of
related Persons (other than Irving E. Schottenstein and the immediate family of
Irving E. Schottenstein) owns or controls more than thirty-three and 1/3 percent
(33.33%) of the outstanding voting capital stock of the Borrower; or (b) the
aggregate amount of outstanding voting capital stock of the Borrower owned or
controlled by (i) Irving E. Schottenstein (including voting capital stock owned
or controlled by his spouse), (ii) Robert H. Schottenstein (including voting
capital stock owned or controlled by his spouse or his children), (iii) Steven
Schottenstein (including voting capital stock owned or controlled by his spouse
or his children), and (iv) trusts for the benefit of Robert H. Schottenstein or
Steven Schottenstein or the respective spouse, children or grandchildren of
Robert H. Schottenstein or Steven Schottenstein, shall be less than eighty
percent (80%) of the aggregate amount of the outstanding voting capital stock of
the Borrower owned or controlled by such Persons as of the Closing Date,
provided that any voting capital stock owned or controlled by Irving E.
Schottenstein or his spouse with respect to trusts for the benefit of Gary L.
Schottenstein or Linda S. Fisher or the respective spouse, children or
grandchildren of Gary L. Schottenstein or Linda S. Fisher shall be excluded from
any calculation of stock ownership or control for all purposes of this clause
(b); or (c) none of Irving E. Schottenstein, Robert Schottenstein or Steven
Schottenstein shall be Chairman of the Board or President of the Borrower.
CHANGE OF CONTROL OFFER. See Section 3.5.
CHANGE OF CONTROL PAYMENT DATE. See Section 3.5.
CLOSING DATE. The date on which all of the conditions set forth in
Section 8 shall have been satisfied by the
Borrower.
CODE. The Internal Revenue Code of 1986, as amended.
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<PAGE> 8
COMMITMENT. With respect to each Lender, the amount set forth on
SCHEDULE 1 hereto as the amount of such Lender's Commitment Percentage of the
aggregate principal amount of the Loans from time to time outstanding.
COMMITMENT PERCENTAGE. With respect to each Lender, the percentage set
forth on SCHEDULE 1 hereto as such Lender's percentage of the aggregate
Commitments of all of the Lenders.
COMMONLY CONTROLLED ENTITY. An entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of Section
414(b) or (c) of the Code.
CONSOLIDATED EARNINGS. At any date, the amount which would be set forth
opposite the caption "net income" (or any like caption) in a consolidated
statement of income or operations of the Borrower and its Subsidiaries at such
date prepared in accordance with GAAP.
CONSOLIDATED INTEREST EXPENSE. For any period, interest expense on
Indebtedness of the Borrower and its Subsidiaries for such period, in each case
determined on a consolidated basis in accordance with GAAP.
CONSOLIDATED INTEREST INCURRED. For any rolling 12 month period, all
interest incurred during such period on outstanding Indebtedness of the Borrower
and its Subsidiaries irrespective of whether such interest is expensed or
capitalized by the Borrower or its Subsidiaries, in each case determined on a
consolidated basis.
CONSOLIDATED LIABILITIES. At any date Consolidated Liabilities shall
mean the total of all amounts which would be properly classified as liabilities
in a consolidated balance sheet of the Borrower and its Subsidiaries at such
date prepared in accordance with GAAP, including without limitation deferred
income taxes and capital lease obligations, if any.
CONSOLIDATED TANGIBLE NET WORTH. At any date Consolidated Tangible Net
Worth shall be the excess, if any, of the total amount of assets over the total
amount of liabilities, deferred credits and minority interests, as the same
would appear in a consolidated balance sheet of the Borrower and its
Subsidiaries at such date prepared in accordance with GAAP, less the book value
of all intangible assets, determined in accordance with GAAP.
CONSTRUCTION BONDS. Bonds issued by surety bond companies for the
benefit of, and as required by, municipalities or other political subdivisions
to secure the performance by the Borrower, M/I Homes, Inc. or M/I Homes
Construction, Inc. of their respective obligations relating to lot improvements
and subdivision development and completion.
CONTINGENT OBLIGATION. As to any Person, any reimbursement obligation
(including obligations to reimburse the banks under the Senior Credit Agreement
for draws on letters of credit) of such Person in respect of drafts that may be
drawn under letters of credit, any reimbursement obligations of such Person in
respect of surety bonds (including reimbursement
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obligations in respect of Construction Bonds), and any obligation of such Person
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or
other obligations primarily to pay money ("primary obligations") of any other
Person (the "primary obligor") in any manner, whether directly or indirectly,
including without limitation any obligation of such Person, whether or not
contingent, (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or supply
funds (i) for the purchase or payment of any such primary obligation, or (ii) to
maintain working capital or equity capital of the primary obligor or otherwise
to maintain the net worth or solvency of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the
obligee under any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (d) otherwise to assure or hold
harmless the obligee under such primary obligation against loss in respect
thereof; provided, however, that the term "Contingent Obligation" shall not
include (A) endorsements of instruments for deposit or collection in the
ordinary course of business, (B) Mortgage Loan Repurchase Obligations, or (C)
obligations under lot purchase contracts entered into in the ordinary course of
business.
DEFAULT. See Section 9.1.
DEVELOPED LOTS. Developed Lots shall mean (a) all residential lots with
respect to which (i) development has been completed to such an extent that
permits that allow use and construction, including building, sanitary sewer and
water, could be obtained for a detached or attached single family house
(including a townhouse condominium building or condominium building) on each
such lot, and (ii) Start of Construction has not occurred; and (b) all lots
zoned for commercial use that have sewer and water available for use at such
lots. The value of Developed Lots shall be calculated in accordance with GAAP
and shall include all associated costs required to be capitalized under GAAP;
provided, however, that the total value (calculated in accordance with GAAP) of
commercial lots constituting Developed Lots shall not exceed $1,000,000 at any
one time.
DISTRIBUTION. With respect to any Person, the declaration or payment of
any cash, property securities, dividend or distribution on or in respect of any
Capital Stock or in respect of any warrants, options or other rights other than
dividends or distributions payable solely in common stock of such Person; the
purchase, redemption, exchange or other acquisition or retirement of any Capital
Stock, whether now or hereafter outstanding, directly or indirectly through a
Subsidiary or Affiliate of such Person or otherwise, whether in cash, property,
securities or in obligations of such Person; the return of capital by such
Person to its shareholders or partners as such; the setting aside of any of the
assets of a Person to accomplish any of the foregoing; or any other distribution
on or in respect of any shares of any Capital Stock.
DOLLARS or $. Dollars in lawful currency of the United States of
America.
EBITDA. 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
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Expense, PLUS (d) depreciation and amortization expense, PLUS (e) extraordinary
losses EXCLUSIVE of any such 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.
ELIGIBLE DEVELOPED LOTS SOLD. Eligible Developed Lots Sold shall mean
all Developed Lots which the Borrower, M/I Homes, Inc. or M/I Homes
Construction, Inc. has recorded as sold in accordance with its usual accounting
practices to any Person other than an Affiliate or Subsidiary of the Borrower.
The value of Eligible Developed Lots Sold shall be calculated in accordance with
GAAP and shall include all associated costs required to be capitalized under
GAAP, but shall be reduced by the then outstanding aggregate amount of
Indebtedness secured by Eligible Developed Lots Sold and which is Permitted
Secured Indebtedness.
ELIGIBLE DEVELOPED LOTS UNSOLD. Eligible Developed Lots Unsold shall
mean all Developed Lots which the Borrower has not recorded as sold in
accordance with its usual accounting practices, or which the Borrower, M/I
Homes, Inc. or M/I Homes Construction, Inc. has recorded as sold to an Affiliate
or Subsidiary of the Borrower. The value of Eligible Developed Lots Unsold shall
be calculated in accordance with GAAP and shall include all associated costs
required to be capitalized under GAAP, but shall be reduced by the then
outstanding aggregate amount of Indebtedness secured by Eligible Developed Lots
Unsold and which is Permitted Secured Indebtedness.
ELIGIBLE MODEL HOUSES. Eligible Model Houses shall mean (a) all
completed detached or attached single family houses (including townhouse
condominiums and condominiums) which are being used by the Borrower, M/I Homes,
Inc. or M/I Homes Construction, Inc. as sales models, and the lots on which such
houses are located, and (b) detached or attached (including townhouse
condominiums and condominiums) single family houses for which there has been a
Start of Construction which upon completion will be used by Borrower, M/I Homes,
Inc. or M/I Homes Construction, Inc. as sales models, and the lots on which such
houses are located. The value of Eligible Model Houses shall be calculated in
accordance with GAAP and shall include all associated costs required to be
capitalized under GAAP except for the costs of any furnishings, but shall be
reduced by the then outstanding aggregate amount of Indebtedness secured by any
Eligible Model Houses and which is Permitted Secured Indebtedness; provided,
however, that (x) the aggregate value of attached (including townhouse
condominiums and condominiums) single family homes constituting Eligible Model
Houses shall not exceed $8,000,000, and (y) the aggregate value of all Eligible
Model Houses shall not exceed $50,000,000.
ELIGIBLE MORTGAGE LOAN. At any date an original (not a rewritten or
renewed) loan evidenced by a note and secured by a first mortgage on residential
real property which (a) M/I Financial Corp. has made to enable a natural person
or persons to purchase a home from the Borrower, any Subsidiary of the Borrower
or another Person that is substantially completed, (b) is not more than 60 days
old as determined by the date of the note which evidences such loan, and (c) is
subject, or M/I Financial Corp. reasonably believes is subject, to a Purchase
Commitment; provided, however, that the amount of Eligible Mortgage Loans
consisting of loans made by M/I
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Financial Corp. for the purchase of homes from any Person other than the
Borrower or any Subsidiary of the Borrower shall not, in the aggregate at any
one time outstanding, exceed the amount of $7,000,000.00.
ELIGIBLE PRODUCTION INVENTORY. Eligible Production Inventory shall mean
all detached or attached (including townhouse condominiums and condominiums)
single family houses which are completed (including Speculative Houses but
excluding Eligible Model Houses and Rental Houses, if any) or for which there
has been a Start of Construction (including Speculative Houses but excluding
Eligible Model Houses and Rental Houses, if any), and the lots on which such
houses are located. The value of Eligible Production Inventory shall be
calculated in accordance with GAAP and shall include all associated costs
required to be capitalized under GAAP, but shall be reduced by the then
outstanding aggregate amount of Indebtedness secured by any Eligible Production
Inventory and which is Permitted Secured Indebtedness; provided that the cost of
obtaining commitments for financing terms to be provided to the buyers of
Eligible Production Inventory shall be excluded.
ELIGIBLE RAW LAND AND LAND UNDER DEVELOPMENT. Eligible Raw Land and
Land Under Development shall mean all land other than land included in the
definition of Eligible Model Houses, Rental Houses (if any), Eligible Production
Inventory, Eligible Developed Lots Sold or Eligible Developed Lots Unsold. The
value of Eligible Raw Land and Land Under Development shall be calculated in
accordance with GAAP and shall include all associated costs required to be
capitalized in accordance with GAAP, but shall be reduced by the then
outstanding aggregate amount of Indebtedness secured by any Eligible Raw Land
and Land Under Development and which is Permitted Secured Indebtedness.
ENVIRONMENTAL LAWS. At any date, all provisions of law, statutes,
ordinances, rules, regulations, judgments, writs, injunctions, decrees, orders,
awards and standards promulgated by the government of the United States of
America or by any state or municipality thereof or by any court, agency,
instrumentality, regulatory authority or commission of any of the foregoing
concerning the protection of the environment, the air, the waters and ground
water contamination.
ERISA. The Employee Retirement Income Security Act of 1974, as amended
and in effect from time to time.
EVENT OF DEFAULT. See Section 9.1.
EXISTING NOTE PURCHASE AGREEMENT. The Note Purchase Agreement dated
September 30, 1996 and amended as of March 14, 1997 between the Borrower and The
First National Bank of Boston (now known as BankBoston, N.A.), in its capacity
as note purchaser.
EXISTING SUBORDINATED NOTE. The "Note" issued pursuant to the Existing
Note Purchase Agreement.
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FAMILY OF MELVIN SCHOTTENSTEIN. Any one or more of Holly S. Kastan,
Julie B. Saar, Amy D. Schottenstein and Eric J. Schottenstein.
FANNIE MAE. The Federal National Mortgage Association, or any successor
thereto.
FEDERAL FUNDS EFFECTIVE RATE. For any day, the rate per annum equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from three
Federal funds brokers of recognized standing selected by the Agent.
GAAP. Generally accepted accounting principles in the United States of
America as in effect at the time any determination is made or financial
statement is required hereunder as promulgated by the American Institute of
Certified Public Accountants, the Accounting Principles Board, the Financial
Accounting Standards Board or any other body existing from time to time which is
authorized to establish or interpret such principles, applied on a consistent
basis throughout any applicable period, subject to any change required by a
change in GAAP; provided, however, that if any change in generally accepted
accounting principles from those applied in preparing the financial statements
referred to in Section 5.3 hereof affects the calculation of any financial
covenant contained herein, the Borrower, the Agent and the Lenders hereby agree
to amend this Agreement to the effect that each such financial covenant is not
more or less restrictive than such covenant as in effect on the date hereof
using generally accepted accounting principles consistent with those reflected
in such financial statements.
GUARANTEED HNB JOINT VENTURES LETTERS OF CREDIT. That portion of the
standby letters of credit (including joint venture letters of credit) issued by
The Huntington National Bank for the account of joint ventures of which the
Borrower is a partner pursuant to the HNB Joint Ventures Letter of Credit
Agreement that the Borrower has guaranteed in accordance with the terms of the
HNB Joint Ventures Letter of Credit Agreement.
HAZARDOUS SUBSTANCES. Hazardous Substances shall mean any hazardous
waste, hazardous substances, pollutant, contaminant, toxic substance, oil,
hazardous material or other chemical or substance regulated by any Environmental
Law.
HNB JOINT VENTURES LETTER OF CREDIT AGREEMENT. The Agreement to Issue
Letters of Credit dated as of June 8, 1994 between The Huntington National Bank
and the Borrower, as amended by that certain First Amendment to the Agreement to
Issue Letters of Credit dated September 29, 1995.
INDEBTEDNESS. As to any Person, at a particular time, (a) indebtedness
for borrowed money or for the deferred purchase price of property or services
(including without limitation any such indebtedness which is non-recourse to the
credit of such Person but is secured by assets of
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such Person) other than current (due and payable within 12 months or less),
unsecured obligations for operating expense items incurred in the ordinary
course of business, (b) any other indebtedness evidenced by promissory notes or
other debt instruments, (c) obligations under material leases which shall have
been or should be, in accordance with GAAP, recorded as capitalized leases, (d)
indebtedness arising under acceptance facilities, (e) indebtedness arising under
unpaid reimbursement obligations (including obligations to reimburse the banks
under the Senior Credit Agreement for draws made under letters of credit) in
respect of all drafts actually drawn under letters of credit (including letters
of credit issued pursuant to or contemplated by the Senior Credit Agreement)
issued for the account of such Person, (f) indebtedness arising under unpaid
reimbursement obligations in respect of all payments actually made under surety
bonds (including payments actually made under Construction Bonds), and (g) the
incurrence of withdrawal liability under Title IV of ERISA by such Person or a
Commonly Controlled Entity to a Plan.
INTEREST PAYMENT DATE. Each February 28, May 29, August 29 and November
29 during the term of the Notes, with the first Interest Payment Date being
November 29, 1997.
INVESTMENTS. With respect to any Person, all shares of Capital Stock,
evidences of Indebtedness and other securities issued by any other Person, all
loans, advances, or extensions of credit to, or contributions to the capital of,
any other Person, all purchases of the securities or business or integral part
of the business or assets of any other Person and commitments and options to
make such purchases, all interests in real property other than land and lots
acquired in the ordinary course of business, and all other investments;
PROVIDED, HOWEVER, that the term "Investment" shall not include (i) equipment,
inventory and other tangible personal property acquired in the ordinary course
of business, or (ii) current trade and customer accounts receivable for services
rendered in the ordinary course of business and payable in accordance with
customary trade terms. In determining the aggregate amount of Investments
outstanding at any particular time: (a) the amount of any investment represented
as a guaranty shall be taken at not less than the principal amount of the
obligations guaranteed and still outstanding; (b) there shall be included as an
Investment all interest accrued with respect to Indebtedness constituting an
Investment unless and until such interest is paid; (c) there shall be deducted
in respect of each such Investment any amount received as a return of capital
(but only by repurchase, redemption, retirement, repayment, liquidating dividend
or liquidating distribution); (d) there shall not be deducted in respect of any
Investment any amounts received as earnings on such Investment, whether as
dividends, interest or otherwise, except that accrued interest included as
provided in the foregoing clause (b) may be deducted when paid; and (e) there
shall not be deducted from the aggregate amount of Investments any decrease in
the value thereof.
INVESTMENTS IN JOINT VENTURES. Investments in Joint Ventures shall mean
Investments in joint ventures that are general partnerships, limited
partnerships, limited liability companies, corporations or any other business
association formed for the purpose of acquiring land, the majority of which land
is zoned residential and is to be developed into residential lots for attached
or detached single family housing (including a townhouse condominium building or
condominium
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<PAGE> 14
building), and/or performing such development. The value of Investments in Joint
Ventures shall be calculated in accordance with GAAP.
JUDICIAL PROCEEDINGS. See Section 10.1(b).
LENDERS. BKB and any other Person who becomes an assignee of any rights
of a Lender pursuant to Section 13.1 (but not including any participant
described in Section 13.4).
LIEN. Any mortgage, deed of trust, pledge, hypothecation, assignment,
deposit arrangement, charge, encumbrance, lien (statutory or other), preference,
priority or other security agreement or similar preferential arrangement of any
kind or nature whatsoever (including without limitation any conditional sale or
other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, and the authorized filing by or
against a Person of any financing statement as debtor under the Uniform
Commercial Code or comparable law of any jurisdiction). A restriction, covenant,
easement, right of way, or similar encumbrance affecting any interest in real
property owned by the Borrower and which does not secure an obligation to pay
money is not a Lien.
LOAN DOCUMENTS. This Agreement and the Notes.
LOANS. The aggregate Loans to be made by the Lenders hereunder.
LOCKOUT EXPIRATION DATE. August 29, 2001.
MAJORITY HOLDERS. As of any date, the Lender or Lenders whose aggregate
Commitment Percentage of the outstanding principal balance of the Notes is equal
to or greater than sixty-six and two-thirds percent (66.67%).
MATERIAL ADVERSE EFFECT. Material adverse effect on (a) the business,
properties, operations, income, assets or conditions, financial or otherwise, of
the Borrower and its Subsidiaries taken as a whole, or (b) the ability of the
Borrower to perform or (as a result of action taken by the Borrower or any
Subsidiary) the ability of the Agent or the Lenders to enforce any obligation or
liability under the Loan Documents or any of them.
MATURITY DATE. August 29, 2004.
M/I ANCILLARY BUSINESSES. Businesses that are corporations, limited
partnerships, limited liability partnerships or limited liability companies
which are engaged solely in activities reasonably related to the sale and
closing of single family housing and the residential mortgage banking business
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.
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M/I FINANCIAL CORP. M/I Financial Corp., an Ohio corporation.
M/I FINANCIAL CORP. LOAN AGREEMENT. The Revolving Credit Agreement
dated July 18, 1997, by and among M/I Financial Corp., the Borrower and Bank
One, Columbus, N.A., as the same may be extended, renewed or replaced from time
to time.
M/I HOMES, INC. M/I Homes, Inc., an Arizona corporation.
M/I HOMES CONSTRUCTION, INC. M/I Homes Construction, Inc., an Arizona
corporation.
MORTGAGE LOAN REPURCHASE OBLIGATIONS. Those obligations (as more
particularly described in this definition) of M/I Financial Corp. under a
Purchase Commitment to repurchase (a) Eligible Mortgage Loans, (b) first
mortgage loans that are not Eligible Mortgage Loans solely because either (i)
the mortgagor did not purchase from the Borrower the home subject to such
mortgage loan, or (ii) such mortgage loan is more than 60 days old as determined
by the date of the note which evidences such loan, (c) those second mortgage
loans permitted by paragraph (f) of the definition of Permitted Investments, and
(d) those first mortgage refinancing loans permitted by paragraph (g) of the
definition of Permitted Investments; provided, the obligations to repurchase the
mortgage loans described in clauses (a) through (d) of this definition shall
exist only if (A) such mortgage loans do not meet for any reason the investor
guidelines regarding loan origination, loan processing or loan closing and
underwriting criteria for such Purchase Commitment or defects are noted in
origination, processing or closing of Mortgage Loans by investor, (B) M/I
Financial Corp. or its employees engage in any fraudulent conduct or
misrepresentation, (C) the mortgagor fails to make timely payment of any of the
first, second, third or fourth installments due under such mortgage loan, and
such delinquency remains uncured for a period of more than 30 days or results in
a foreclosure action, (D) the mortgagor fails to make timely payment of two or
more monthly installments within six months from the date such mortgage loan is
purchased by such secondary market lender, (E) the mortgagor engages in
fraudulent conduct or misrepresentation, or (F) with respect to mortgage loans
issued pursuant to the North Carolina Housing Finance Authority bond programs,
the mortgagor fails to make timely payment of the first installment due under
such mortgage loans.
NOTE REGISTER. See Section 13.2.
NOTES. Collectively, the Fixed Rate Senior Subordinated Note, to be
dated the Closing Date, made by the Borrower to the order of BKB in the
principal face amount of $50,000,000.00, and each other Note executed and
delivered by the Borrower in exchange or replacement for such Note pursuant to
this Agreement.
OFFICE BUILDING. The office building constructed by the Office Building
Limited Liability Company on Morse Road in Columbus, Ohio in which the Borrower
is a tenant.
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<PAGE> 16
OFFICE BUILDING LIMITED LIABILITY COMPANY. Northeast Office Venture,
Limited Liability Company, formed under Delaware law, the ownership interest of
which is 33 1/3% in the Borrower, 33 1/3% in Limited Oval Office I, Inc., a
Delaware corporation, and 33 1/3% in The Georgetown Company, a New York general
partnership, the purpose of which limited liability company is for the
construction and operation of the Office Building.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.
PERMISSIBLE SECURITIES. See Section 10.1(c).
PERMITTED INVESTMENTS. The making or commitment to make any advance,
loan, extension of credit or capital contribution to, or purchase of stock,
bonds, note, debenture or other security of, or make any other Investment in,
any Person, in any or all of the following:
(a) Investments in Cash Equivalents;
(b) extensions of credit in connection with the sale of land,
secured by land sold, which do not exceed in the aggregate $10,000,000
at any one time outstanding and which have a maximum maturity of five
years;
(c) loans and advances to officers and employees of the
Borrower or its Subsidiaries, to other Persons in the ordinary course
of business or as permitted by the internal rules of the Borrower,
which do not exceed in the aggregate $2,000,000 at any one time
outstanding;
(d) any Investments in M/I Financial Corp. or any other
Subsidiary now in existence or hereafter created which is wholly-owned
and controlled by the Borrower;
(e) first mortgage loans made in the ordinary course of M/I
Financial Corp.'s business to natural persons for the purchase of
residential real property;
(f) second mortgage loans made in the ordinary course of M/I
Financial Corp.'s business to natural persons for the purchase of
residential real property, provided that such second mortgage loans
shall be made only in connection with a specific financing program to
natural persons who have a first mortgage loan from M/I Financial Corp.
with respect to the same real property;
(g) first mortgage loans made in the ordinary course of M/I
Financial Corp.'s business to natural persons for the purpose of
refinancing an existing first mortgage loan;
(h) Investments by M/I Financial Corp. made in the ordinary
course of business in the stock of Fannie Mae to the extent required
for M/I Financial Corp. to sell mortgages to Fannie Mae;
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<PAGE> 17
(i) 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 groups of mortgages, but in no event including investments in future
contracts, options contracts or other derivative investment vehicles
acquired as independent investments;
(j) Investments in the Office Building Limited Liability
Company specifically for the purpose of constructing, owning and
operating the Office Building;
(k) Investments in, advances to, and contingent obligations
related to the obligations of, the M/I Ancillary Businesses in an
amount not to exceed $500,000 in the aggregate; and
(l) Loans or advances to Borrower from any wholly-owned
Subsidiary.
PERMITTED SECURED INDEBTEDNESS. Secured Indebtedness in respect of
capitalized lease obligations and purchase money obligations, provided that (a)
the Liens securing such Indebtedness do not at any time encumber any property
other than the property financed by such secured Indebtedness, and (b) the
Indebtedness secured thereby shall not exceed the cost or fair market value,
whichever is lower, of the property being acquired on the date of acquisition;
and provided further that the aggregate amount of any such secured Indebtedness
at any one time outstanding by the Borrower and its Subsidiaries shall not
exceed $15,000,000.00 on a consolidated basis.
PERSON. Any individual, corporation, partnership, limited liability
company, trust, unincorporated association, business, or other legal entity, and
any government or any governmental agency or political subdivision thereof.
PLAN. Any pension plan which is covered by Title IV of ERISA and in
respect of which the Borrower or a Commonly Controlled Entity is an "employer"
as defined in Section 3(5) of ERISA.
PURCHASE COMMITMENT. A commitment from a secondary market lender,
pursuant to an agreement with M/I Financial Corp., either with respect to a
particular mortgage loan or with respect to mortgage loans meeting specified
criteria, to purchase such mortgage loan or loans without recourse (except for
Mortgage Loan Repurchase Obligations) for an amount not less than the difference
of (a) the face amount of the note evidencing such mortgage loan(s), minus (b)
the sum of (i) the points agreed upon between M/I Financial Corp. and such
secondary market lender, and (ii) the amount of funds (for example, without
limitation, escrow funds and origination fees), other than points received by
M/I Financial Corp. at the loan closing from the mortgagor.
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RECORD. The grid attached to any Note, or the continuation of such
grid, or any other similar record, including computer records, maintained by
Agent with respect to any Loan referred to in such Note.
RENTAL HOUSES. Rental Houses shall mean (a) all completed detached or
attached (including townhouse condominiums and condominiums) single family
houses which are rented to third parties or held for rental by the Borrower or
which were previously so held and are currently held for sale, and (b) detached
or attached (including townhouse condominiums and condominiums) single family
houses for which there as been a Start of Construction which upon completion
will be rented to third parties or will be held for rental by the Borrower. The
value of Rental Houses shall be calculated in accordance with GAAP and shall
include all associated costs required to be capitalized under GAAP.
REPORTABLE EVENT. Any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder.
SEC. The federal Securities and Exchange Commission.
SENIOR CREDIT AGREEMENT. The Second Restated Revolving Credit Loan and
Standby Letter of Credit Agreement effective as of December 30, 1996 by and
among the Borrower, Bank One, N.A., formerly known as Bank One, Columbus, N.A.,
individually and as agent, The Huntington National Bank, The First National Bank
of Chicago, National City Bank of Columbus, The First National Bank of Boston
(now known as BankBoston, N.A.), and The Fifth Third Bank of Columbus, as
amended by that certain First Amendment thereto effective as of March 14, 1997
and that certain Second Amendment thereto effective as of May 7, 1997, as the
same may be amended, modified, extended, renewed or replaced from time to time.
SENIOR DEBT. Senior Debt shall mean all Indebtedness for money borrowed
by the Borrower, before or after the date of the Notes, created or evidenced by
notes or similar instruments executed and delivered pursuant to (a) the Senior
Credit Agreement up to the sum of (i) an aggregate principal Indebtedness
thereunder, excluding reimbursement obligations relating to drawn letters of
credit issued or outstanding pursuant thereto (and excluding any obligations
with respect to letters of credit issued or outstanding pursuant thereto but
which are undrawn), not exceeding $200,000,000.00, plus (ii) an aggregate
principal Indebtedness thereunder arising solely from reimbursement obligations
relating to drawn letters of credit that were issued or outstanding pursuant to
the Senior Credit Agreement (but excluding any obligations with respect to
letters of credit issued or outstanding pursuant thereto but which are undrawn),
not exceeding $35,000,000.00, (b) the M/I Financial Corp. Loan Agreement up to
an aggregate principal Indebtedness thereunder not exceeding $40,000,000.00, (c)
Indebtedness incurred solely with respect to Construction Bonds or completion
guaranties delivered to municipalities or other political subdivisions to secure
the Borrower's performance of obligations related to lot improvements and
subdivision development and completion and which are not obligations for
borrowed money, and (d) any other Indebtedness for money borrowed by the
Borrower, before or after the date of the Notes, created or evidenced by notes,
bonds, debentures or other similar
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instruments or by loan agreement under which the Indebtedness is reflected in a
loan account (but excluding any trade debt) in an aggregate principal amount not
to exceed $15,000,000.00, and amendments, renewals, modifications, extensions
and refundings (but specifically excluding any increases over the limits set
forth above) of any such Indebtedness; provided, however, that in no event shall
any of such Indebtedness be considered as "Senior Debt" hereunder if in any
instrument or instruments evidencing or securing the same or pursuant to which
the same are outstanding, or under any such amendment, renewal, extension or
refunding, it is provided that such Indebtedness is not superior in right of
payment to the Notes or that such Indebtedness is PARI PASSU with or junior in
right of payment to the Notes. Senior Debt shall not include any Indebtedness
that is payable to any Subsidiary or Affiliate of the Borrower, any director,
officer or employee of any thereof, or pursuant to or in connection with any
Investments in Joint Ventures; provided that Senior Debt may, subject to the
limits set forth above, include Indebtedness of the Borrower to lenders that
have extended credit or financing to joint ventures, partnerships or other
permitted entities in which the Borrower has made Investments in Joint Ventures
as permitted by this Agreement (including Indebtedness with respect to
Guaranteed HNB Joint Ventures Letters of Credit).
SHAREHOLDER'S EQUITY. At any date, the amount which would be set forth
opposite the caption "Shareholders Equity" or "Stockholders Equity" (or any like
caption) in a consolidated balance sheet of the Borrower and its Subsidiaries at
any such date prepared in accordance with GAAP.
SINGLE EMPLOYER PLAN. Any Plan which is not a Multiemployer Plan (as
defined in ERISA).
SPECULATIVE HOUSES. The aggregate value (which value shall be reduced
by the then outstanding aggregate amount of Indebtedness secured by any
Speculative Houses and which is Permitted Secured Indebtedness) as determined in
accordance with GAAP of: (a) all uncompleted houses for which there has been a
Start of Construction except (i) Eligible Model Houses, (ii) Rental Houses, if
any, and (iii) those which are less than nine months old as measured from the
date on which construction was begun and are subject to valid noncontingent,
except for financing, contracts of sale (A) to persons who are not Affiliates or
Subsidiaries of the Borrower, and (B) that provide for closing within 30 days
after completion; and (b) all completed houses except (i) Eligible Model Houses,
(ii) Rental Houses, if any, and (iii) those subject to valid noncontingent,
except for financing, contracts of sale (A) to Persons who are not Affiliates or
Subsidiaries of the Borrower, and (B) that provide for closing on or before the
later of 60 days after the date of the contract or 30 days after completion of
construction.
START OF CONSTRUCTION. The commencement of the digging of the
foundation or footer for a detached or attached single family house (including a
townhouse condominium building or condominium building).
SUBORDINATED INDEBTEDNESS. See Section 10.1(d).
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<PAGE> 20
SUBSIDIARY. As to any Person, (a) a corporation of which shares of
stock having ordinary voting power (other than stock having such power only by
reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person, and with respect to the
Borrower shall include all Subsidiaries of Subsidiaries of the Borrower, and (b)
any other entity the accounts of which are consolidated with the accounts of the
Borrower.
SUPERIOR INDEBTEDNESS. See Section 10.1(e).
UNCOMMITTED LAND. The aggregate value as determined in accordance with
GAAP of: (a) Eligible Raw Land and Land Under Development, (b) Eligible
Developed Lots Unsold, (c) the Borrower's pro rata share of land that
constitutes part of Investments in Joint Ventures which is not subject to an
agreement for sale, and (d) deposits for land purchases and purchase options.
Section 1.2 RULES OF INTERPRETATION.
(a) A reference to any Note Document or agreement
shall include such document or agreement as amended, modified or supplemented
from time to time in accordance with its terms and the terms of this Agreement.
(b) The singular includes the plural and the plural
includes the singular.
(c) A reference to any law includes any amendment or
modification to such law.
(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms not otherwise defined herein
have the meanings assigned to them by GAAP.
(f) The words "include", "includes" and "including"
are not limiting.
(g) Reference to a particular "Section" refers to
that section of this Agreement unless otherwise indicated.
(h) The words "herein", "hereof", "hereunder" and
words of like import shall refer to this Agreement as a whole and not to any
particular section or subdivision of this Agreement.
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<PAGE> 21
SECTION 2. THE FACILITY
SECTION 2.1 COMMITMENT TO LEND. Subject to the terms and
conditions set forth in this Agreement, each of the Lenders severally agrees to
lend to the Borrower on the Closing Date the amount of its Commitment, which
Commitment in the aggregate totals $50,000,000.00.
SECTION 2.2 NOTES. The Loans shall be evidenced by separate
promissory notes of the Borrower in substantially the form of EXHIBIT A hereto
(collectively, the "Notes"), dated as of the Closing Date and completed with
appropriate insertions. One Note shall be payable to the order of each Lender in
the principal amount equal to such Lender's Commitment, plus interest accrued
thereon, as set forth below. The Borrower irrevocably authorizes the Agent to
make or cause to be made, at or about the time of receipt of any payment of
principal thereof, an appropriate notation on the Agent's Record reflecting the
receipt of such payment. The outstanding amount of the Loans set forth on the
Agent's Record shall be PRIMA FACIE evidence of the principal amount thereof
owing and unpaid to each Lender, but the failure to record, or any error in so
recording, any such amount on the Agent's Record shall not limit or otherwise
affect the obligations of the Borrower hereunder or under any Note to make
payments of principal of or interest on any Note when due.
SECTION 2.3 [INTENTIONALLY OMITTED].
SECTION 2.4 COMMITMENT FEE. In consideration of BKB entering
into this Agreement, the Borrower agrees to pay to BKB a commitment fee as set
forth in that certain Agreement Regarding Fees dated of even date herewith
between the Borrower and BKB, which fee shall be fully earned and nonrefundable
as provided therein.
SECTION 2.5 USE OF PROCEEDS. The Borrower will use the
proceeds of the Loans solely to satisfy the Indebtedness evidenced by the
Existing Subordinated Note and to repay amounts outstanding under the Senior
Credit Agreement. In the event that the proceeds of the Loans exceed the amount
necessary to satisfy the Indebtedness evidenced by the Existing Subordinated
Note or to repay amounts outstanding under the Senior Credit Agreement, then
such excess proceeds may be used by the Borrower for general working capital
purposes.
SECTION 3. PAYMENT OF THE NOTES
SECTION 3.1 STATED MATURITY. The Borrower promises to pay on the
Maturity Date and there shall become absolutely due and payable on the Maturity
Date all of the principal balance of the Notes, outstanding on such date,
together with any and all accrued and unpaid interest thereon.
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<PAGE> 22
SECTION 3.2 INTEREST ON NOTES.
(a) From and after the Closing Date, the outstanding
principal balance of the Notes shall bear interest at the rate of nine and
51/100ths percent (9.51%) per annum.
(b) The Borrower promises to pay interest on the
Notes in arrears on each Interest Payment Date with respect thereto.
SECTION 3.3 OPTIONAL PREPAYMENTS.
(a) The Borrower shall have the right, at its
election, to prepay the outstanding principal amount of the Notes, as a whole or
in part, at any time after the Lockout Expiration Date, provided (i) written
notice of such prepayment specifying the date of prepayment is received by Agent
not more than sixty (60) days and not less than twenty (20) days prior to the
date of such prepayment, (ii) such prepayment is received on an Interest Payment
Date and is accompanied by all interest accrued hereunder on the principal
amount prepaid and all other sums due hereunder or under the other Loan
Documents as of the date of such prepayment, and (iii) Agent is paid for the
account of the Lenders a prepayment fee in an amount calculated as follows:
(A) The "Rate Differential" shall be an
interest rate per annum equal to
the sum of (1) 9.51% MINUS (2) the
Treasury Constant Maturity Yield
Index published during the second
full week preceding the date on
which such premium is payable for
instruments having a maturity
coterminous with the Maturity Date,
plus (b) fifty (50) basis points
(but in no event shall the Rate
Differential be less than zero).
"Treasury Constant Maturity Yield
Index" shall mean the average yield
for "This Week" as reported by the
Federal Reserve Board in Federal
Reserve Statistical Release H.15
(519). If there is no Treasury
Constant Maturity Yield Index for
instruments having a maturity
coterminous with the Maturity Date,
then the index shall be equal to
the yield to maturity of the
Treasury Constant Maturity Yield
Indices with maturities next longer
and shorter than such remaining
average life to the Maturity Date,
calculated by interpolating along
the yield curve of such Treasury
Constant Maturity Yield Indices in
such manner as determined by the
Agent in good faith to arrive at a
Treasury Constant Maturity Yield
Index that would be payable on an
instrument having a maturity
coterminous with the Maturity Date
(and rounding upward to the nearest
whole multiple of 1/100 of 1% per
annum);
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<PAGE> 23
(B) The principal amount prepaid shall
be multiplied by the Rate
Differential, and such amount shall
be referred to as the "Annual
Breakage Amount", and the Annual
Breakage Amount shall be divided by
four (4), and such amount shall be
referred to as the "Quarterly
Breakage Amount"; and
(C) The prepayment fee shall be in an
amount equal to the present value of
the Quarterly Breakage Amount,
assuming such Quarterly Breakage
Amount is to be paid on each
Interest Payment Date through and
including the Maturity Date,
determined by discounting the same
at an interest rate per quarter
equal to 2.3775%.
An example of the calculation of the prepayment fee is set forth on SCHEDULE 3.3
hereof.
(b) In the event that any prepayment fee is due
hereunder, Agent shall deliver to the Borrower a statement not less than five
(5) days prior to the proposed date of prepayment setting forth the amount and
determination of the prepayment fee, and, provided that Agent shall have in good
faith applied the formula described above, the Borrower shall not have the right
to challenge the calculation or the method of calculation set forth in any such
statement in the absence of manifest error, which calculation may be made by
Agent on any day preceding the date of such prepayment and prior to the delivery
of such notice by Agent to the Borrower. No Lender shall be obligated or
required to have actually reinvested the prepaid principal amount at the
Treasury Constant Maturity Yield or otherwise as a condition to receiving the
prepayment fee.
(c) Each partial prepayment of the Notes shall
be in the amount of $10,000,000.00 or an integral multiple thereof.
(d) The prepayment fees provided above shall be due,
to the extent permitted by applicable law, under any and all circumstances where
all or any portion of the Notes is paid prior to the Maturity Date, whether such
prepayment is voluntary or involuntary, even if such prepayment results from
Lenders' exercise of its rights upon the occurrence of a Change of Control or an
Event of Default and acceleration of the Maturity Date of the Notes, and shall
be in addition to any other sums due hereunder or under any of the other Loan
Documents. No tender of a prepayment of the Notes with respect to which a
prepayment fee is due shall be effective unless such prepayment is accompanied
by the prepayment fee. If the indebtedness evidenced by the Notes shall have
been declared due and payable due to an Event of Default or the Lenders accept a
Change of Control Offer, then any tender of payment of such indebtedness made
prior to the Lockout Expiration Date must include a prepayment fee computed as
provided in Section 3.3(a) plus an additional prepayment fee of one percent
(1.0%) of the principal balance of the Notes.
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<PAGE> 24
SECTION 3.4 APPLICATION OF PAYMENTS. Except as otherwise
expressly provided herein, all payments shall first be applied to accrued but
unpaid interest, next to premium, if any, and then to principal.
SECTION 3.5 PREPAYMENT UPON CHANGE OF CONTROL.
(a) In the event that there shall occur a
Change of Control of the Borrower, the Borrower shall offer to prepay (a "Change
of Control Offer"), at the option of the Majority Holders, all of the Notes on
the date specified in such notice that is no earlier than fifteen (15) days and
no later than thirty (30) days after the date the notice pursuant to this
section is mailed to the Agent and the Lenders (such specified date is
hereinafter referred to as the "Change of Control Payment Date"), in an amount
equal to 100% of the principal amount of the Notes, plus accrued and unpaid
interest to the Change of Control Payment Date and any prepayment premium or fee
payable pursuant to Section 3.3. Such notice shall be provided to the Agent and
the Lenders no later than fifteen (15) days after the occurrence of a Change of
Control. The Borrower shall also deliver with the Change of Control Offer (i) a
statement that if the Notes are not prepaid the Notes will continue to accrue
interest, (ii) a statement that the Notes prepaid pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control Payment
Date, and (iii) the names of the Persons who have acquired an interest in the
Borrower or become directors of the Borrower which has caused the Change of
Control to occur, together with such further information concerning such Persons
or circumstances as may be reasonably requested by the Agent or the Lenders.
(b) To reject a Change of Control Offer, the Agent
shall on behalf of the Majority Holders deliver to the Borrower, on or before
the fifth (5th) calendar day prior to the Change of Control Payment Date,
written notice of the Majority Holder's rejection of such Change of Control
Offer. Such written notice from the Agent shall be irrevocable. A failure by the
Agent on behalf of the Majority Holders to reject the Change of Control Offer as
provided herein shall be deemed an acceptance of the Change of Control Offer. In
the event a Change of Control Offer shall be accepted in accordance with the
terms hereof, the Borrower shall pay to the Agent for the account of the Lenders
the prepayment amount payable with respect to the Notes on the applicable Change
of Control Payment Date. Upon any such prepayment, the Lenders shall return the
Notes to the Borrower.
(c) The provisions of this Section 3.5 shall apply
to each and every circumstance in which a Change of Control may occur within the
meaning of such term.
SECTION 4. CERTAIN GENERAL PROVISIONS
SECTION 4.1 FUNDS FOR PAYMENTS.
(a) All payments of principal, premium, if any,
interest, commitment fees, extension fees, prepayment fees, closing fees and any
other amounts due hereunder or under any of the other Loan Documents shall be
made to the Agent, for the respective accounts of the
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<PAGE> 25
Lenders and the Agent, as the case may be, at the Agent's Head Office, not later
than 12:00 p.m. (Boston time) on the day when due, in each case in immediately
available funds.
(b) All payments by the Borrower hereunder and
under any of the other Loan Documents shall be made without setoff or
counterclaim and free and clear of and without deduction for any taxes, levies,
imposts, duties, charges, fees, deductions, withholdings, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or levied by
any jurisdiction or any political subdivision thereof or taxing or other
authority therein unless the Borrower is compelled by law to make such deduction
or withholding. If any such obligation is imposed upon the Borrower with respect
to any amount payable by it hereunder or under any of the other Loan Documents,
the Borrower will pay to the Agent, for the account of the Lenders or (as the
case may be) the Agent, on the date on which such amount is due and payable
hereunder or under such other Loan Documents, such additional amount in Dollars
as shall be necessary to enable Agent or such Lender to receive the same net
amount which the Agent or such Lender would have received on such due date had
no such obligation been imposed upon the Borrower. The Borrower will deliver
promptly to the Agent certificates or other valid vouchers for all taxes or
other charges deducted from or paid with respect to payments made by the
Borrower hereunder or under such other Loan Documents.
SECTION 4.2 COMPUTATIONS. All computations of interest on the
Notes shall be based on a 360-day year and paid for the actual number of days
elapsed. Whenever a payment hereunder or under any of the other Loan Documents
becomes due on a day that is not a Business Day, the due date for such payment
shall be extended to the next succeeding Business Day, and interest shall accrue
during such extension.
SECTION 4.3 CAPITAL ADEQUACY. If after the date hereof any
Lender determines that (a) the adoption of or change in any law, rule,
regulation or guideline regarding capital requirements for such Lender or such
Lender's holding company or any change in the interpretation or application
thereof by any governmental authority charged with the administration thereof,
or (b) compliance by such Lender or its parent holding company with any
guideline, request or directive of any such entity regarding capital adequacy
(whether or not having the force of law), has the effect of reducing the return
on such Lender's or such holding company's capital as a consequence of such
Lender's commitment to make Loans hereunder to a level below that which such
Lender or its parent holding company could have achieved but for such adoption,
change or compliance (taking into consideration such Lender's or such holding
company's then existing policies with respect to capital adequacy and assuming
the full utilization of such entity's capital) by any amount deemed by such
Lender to be material, then such Lender may notify the Borrower thereof. The
Borrower agrees to pay to such Lender the amount of such reduction in the return
on capital as and when such reduction is determined, upon presentation by such
Lender of a statement of the amount setting forth such Lender's calculation
thereof. In determining such amount, such Lender may use any reasonable
averaging and attribution methods.
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<PAGE> 26
SECTION 4.4 INTEREST ON OVERDUE AMOUNTS; LATE CHARGE. Overdue
principal and (to the extent permitted by applicable law) interest on the
principal balance of the Notes and all other overdue amounts payable hereunder
or under any of the other Loan Documents shall bear interest payable on demand
at a rate per annum equal to five percent (5.0%) above the rate otherwise
payable on the Notes until such amount shall be paid in full (after as well as
before judgment). In addition, the Borrower shall pay a late charge equal to
three percent (3%) of any amount of interest and/or principal payable on the
principal balance of the Notes or any other amounts payable hereunder or under
the Loan Documents, which is not paid by such Borrower within ten days of the
date when due.
SECTION 4.5 CERTIFICATE. A certificate setting forth any
amounts payable pursuant to Section 4.3 or Section 4.4 and a brief explanation
of such amounts which are due, submitted by any Lender or Agent to the Borrower,
shall be conclusive in the absence of manifest error.
SECTION 4.6 LIMITATION ON INTEREST. Notwithstanding anything
in this Agreement or the other Loan Documents to the contrary, all agreements
between the Borrower and the Lenders and the Agent, whether now existing or
hereafter arising and whether written or oral, are hereby limited so that in no
contingency, whether by reason of acceleration of the maturity of the Notes or
otherwise, shall the interest contracted for, charged or received by the Lenders
exceed the maximum amount permissible under applicable law. If, from any
circumstance whatsoever, interest would otherwise be payable to the Lenders in
excess of the maximum lawful amount, the interest payable to the Lenders shall
be reduced to the maximum amount permitted under applicable law; and if from any
circumstance the Lenders shall ever receive anything of value deemed interest by
applicable law in excess of the maximum lawful amount, an amount equal to any
excessive interest shall be applied to the reduction of the principal balance of
the Notes and to the payment of interest or, if such excessive interest exceeds
the unpaid balance of principal of the Notes, such excess shall be refunded to
the Borrower. All interest paid or agreed to be paid to the Lenders shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full period until payment in full of the principal of the
Notes (including the period of any renewal or extension thereof) so that the
interest thereon for such full period shall not exceed the maximum amount
permitted by applicable law. This section shall control all agreements between
the Borrower and the Lenders and the Agent.
SECTION 5. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Agent and the Lenders as
follows:
SECTION 5.1 CORPORATE AUTHORITY; ETC.
(a) INCORPORATION; STANDING. The Borrower (i) is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Ohio, (ii) has all requisite power to own its properties
and conduct its business as now conducted and as presently contemplated and to
perform all of its obligations under agreements to which it is a party,
including this Agreement, and (iii) is in good standing as a foreign entity and
is duly authorized to
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<PAGE> 27
do business in each jurisdiction where such qualification is necessary except
where a failure to be so qualified in such jurisdiction would not have a
Material Adverse Effect.
(b) SUBSIDIARIES. Each of the Subsidiaries of
the Borrower (i) is a corporation, limited partnership, limited liability
company or trust duly organized under the laws of its State of organization and
is validly existing and in good standing under the laws thereof, (ii) has all
requisite power to own its property and conduct its business as now conducted
and as presently contemplated and (iii) is in good standing and is duly
authorized to do business in each jurisdiction where a failure to be so
qualified could have a Material Adverse Effect.
(c) AUTHORIZATION. The execution, delivery and
performance of the Loan Documents to which the Borrower is to become a party and
the transactions contemplated hereby and thereby (i) are within the authority of
the Borrower, (ii) have been duly authorized by all necessary proceedings on the
part of the Borrower, (iii) do not conflict with or result in any breach or
contravention of any provision of law, statute, rule or regulation to which the
Borrower is subject or any judgment, order, writ, injunction, license or permit
applicable to the Borrower, (iv) do not conflict with any provision of the
charter documents or code of regulations, of, or any agreement or other
instrument binding upon, the Borrower or any of its Subsidiaries, and (v) do not
and will not require the consent or approval of any person or entity or the
authorization, consent, approval of or any license or permit issued by, or any
filing or registration with or the giving of any notice to, or the withholding
of objection by, any court, agency, department, board, commission or other
governmental authority.
(d) ENFORCEABILITY. The execution and delivery
of this Agreement and the other Loan Documents to which the Borrower is to
become a party will result in valid and legally binding obligations of the
Borrower, enforceable against the Borrower in accordance with the respective
terms and provisions hereof and thereof, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors' rights and except to the
extent that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
therefor may be brought.
SECTION 5.2 TITLE TO PROPERTIES. The Borrower and its
Subsidiaries own all of the assets reflected in the consolidated balance sheet
of the Borrower as at the Balance Sheet Date or acquired since that date (except
property and assets sold or otherwise disposed of in the ordinary course of
business since that date), subject to no rights of others, including any
mortgages, leases, conditional sales agreements, title retention agreements,
liens or other encumbrances except as reflected on such balance sheet. Without
limiting the foregoing, each of the Borrower and its Subsidiaries have good
marketable fee simple title to all real property reasonably necessary for the
operation of its business, free from all liens or encumbrances of any nature
whatsoever except for Liens permitted by this Agreement. Notwithstanding the
foregoing, the Borrower may make investments in construction on real property
that is not then owned by the Borrower; provided, however, that the Borrower may
make investments in the construction on such real property only if the contract
price for the land plus the costs of investment of construction with respect to
all
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such real property does not in the aggregate exceed $1,000,000.00 at any one
time outstanding. Each of the Borrower or its Subsidiaries is the insured under
owner's policies of title insurance covering all real property owned by it, in
each case in an amount not less than the purchase price for such real property.
The Borrower is the legal and beneficial owner of all of the shares of stock it
purports to own of each Subsidiary, free and clear in each case of any Lien. All
such shares have been duly issued and are fully paid and non-assessable.
SECTION 5.3 FINANCIAL STATEMENTS. The Borrower has furnished
to the Agent the consolidated balance sheet of the Borrower and its Subsidiaries
as of the Balance Sheet Date and certain other financial information concerning
the Borrower and its consolidated Subsidiaries. Such balance sheet and
statements have been prepared in accordance with GAAP, are true, correct and
complete and fairly present in all material respects the financial condition of
the Borrower and its consolidated Subsidiaries as of such dates and the results
of the operations of the Borrower and its consolidated Subsidiaries for such
periods. There are no liabilities, contingent or otherwise, of the Borrower or
any of its Subsidiaries involving material amounts not disclosed in said
financial statements and the related notes thereto.
SECTION 5.4 NO MATERIAL CHANGES, ETC. Since the Balance Sheet
Date, there has occurred no material adverse change in the financial condition
or business of the Borrower or its Subsidiaries as shown on or reflected in the
consolidated balance sheet of the Borrower and its Subsidiaries as at the
Balance Sheet Date, or the statement of income for the fiscal year then ended,
other than changes in the ordinary course of business that have not had any
Material Adverse Effect.
SECTION 5.5 FRANCHISES, PATENTS, COPYRIGHTS, ETC. The Borrower
and its Subsidiaries possess all franchises, patents, copyrights, trademarks,
trade names, licenses and permits, and rights in respect of the foregoing,
adequate for the conduct of their business substantially as now conducted
without known conflict with any rights of others.
SECTION 5.6 LITIGATION. There are no actions, suits,
proceedings or investigations of any kind pending or threatened against the
Borrower or any of its Subsidiaries before any court, tribunal, administrative
agency, board or arbitration or other alternative dispute resolution forum that,
if adversely determined, is reasonably likely to, either in any case or in the
aggregate, have a Material Adverse Effect or materially impair the right of such
Person to carry on business substantially as now conducted by it, or result in
any substantial liability not adequately covered by insurance, or for which
adequate reserves are not maintained on the balance sheet of such Person, or
which question the validity of this Agreement or any of the other Loan
Documents, or any action taken or to be taken pursuant hereto or thereto.
SECTION 5.7 NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither the
Borrower nor any of its Subsidiaries is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation that
has or is reasonably expected in the future to have a Material Adverse Effect.
Neither the Borrower nor any of its Subsidiaries is a party to any contract or
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agreement that has or is reasonably expected, in the judgment of the officers,
partners or members of such Person, as applicable, to have any Material Adverse
Effect.
SECTION 5.8 COMPLIANCE WITH OTHER INSTRUMENTS, LAWS, ETC.
Neither the Borrower nor any of its Subsidiaries is in violation of any
provision of its by-laws or any agreement or instrument to which it may be
subject or by which it or any of its properties may be bound or any decree,
order, judgment, statute, license, rule or regulation, in any of the foregoing
cases in a manner that is reasonably likely to result in the imposition of
substantial penalties or is reasonably likely to have a Material Adverse Effect.
SECTION 5.9 TAX STATUS. The Borrower and its Subsidiaries (a)
have made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which each is subject,
(b) have paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and by appropriate proceedings, and (c) have set
aside on their respective books provisions reasonably adequate for the payment
of all taxes for periods subsequent to the periods to which such returns,
reports or declarations apply. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the officers,
partners and members, as applicable, of the Borrower and its Subsidiaries know
of no basis for any such claim. The Borrower shall not consent to, or permit the
filing of, or be a party to any consolidated tax return on behalf of itself and
its Subsidiaries with any other Person.
SECTION 5.10 NO EVENT OF DEFAULT. No Default or Event of
Default has occurred and is continuing.
SECTION 5.11 HOLDING COMPANY AND INVESTMENT COMPANY ACTS.
Neither the Borrower nor any of its Subsidiaries is a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act of
1935, nor is either of them an "investment company", or an "affiliated company"
or a "principal underwriter" of an "investment company" as such terms are
defined in the Investment Company Act of 1940.
SECTION 5.12 ERISA. The Borrower and its Subsidiaries are in
compliance in all material respects with ERISA. There has been no Reportable
Event with respect to any Plan. There has been no institution of proceedings or
any other action by PBGC or the Borrower or any Commonly Controlled Entity to
terminate or withdraw or partially withdraw from any Plan under any
circumstances which could lead to material liabilities to PBGC or, with respect
to a "Multiemployer Plan", the "Reorganization" or "Insolvency" (as each such
term is defined in ERISA) of any Plan. No "prohibited transaction" (within the
meaning of Section 406 of ERISA or Section 4975 of the Code) has occurred with
respect to any Plan, and the consummation of the transactions provided for in
this Agreement and compliance by the Borrower with the provisions hereof and the
Loans contemplated hereunder will not involve any prohibited transaction. No
Plan maintained by the Borrower or any Commonly Controlled Entity, nor any trust
created thereunder, have incurred any "accumulated funding deficiency" as
defined in ERISA, whether or
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not waived. Neither the Borrower nor any Commonly Controlled Entity has (a)
sought a waiver of the minimum funding standard under Section 412 of the Code in
respect of any Plan, or (b) failed to make any contribution or payment to any
Plan, or made any amendment to any Plan which has resulted or could result in
the imposition of a Lien or the posting of a bond or other security under ERISA
or the Code, or (c) incurred any liability under Title 4 of ERISA other than a
liability to the PBGC for premiums under Section 4007 of ERISA.
SECTION 5.13 REGULATIONS U AND X. Neither the Borrower nor its
Subsidiaries is engaged, nor will any of them engage, principally or as one of
their important activities, in the business of extending credit for the purpose
of "purchasing" or carrying any "margin security" or "margin stock" as such
terms are used in Regulations U and X of the Board of Governors of the Federal
Reserve System, 12 C.F.R. Parts 221 and 224. No part of the proceeds from the
Loans is to be used for the purpose of purchasing or carrying any "margin
security" or "margin stock". None of the proceeds of the Loans will be used to
purchase, or refinance any borrowing the proceeds of which were used to
purchase, any "security" within the meaning of the Securities Exchange Act of
1934, as amended.
SECTION 5.14 FULL DISCLOSURE. None of the representations and
warranties of the Borrower and its Subsidiaries made in this Agreement and the
other Loan Documents or any financial statement, document or instrument
delivered to the Agent pursuant to or in connection with any of such Loan
Documents contain any untrue statement of a material fact, nor will they omit to
state any fact necessary to make the statements herein or therein not
misleading. There is no agreement, restriction or other factual matter which the
Borrower has not disclosed to the Agent in writing which has had or could
reasonably be likely to have a Material Adverse Effect.
SECTION 5.15 SUBSIDIARIES. SCHEDULE 5.15(a) sets forth all of
the Subsidiaries of the Borrower, the form and jurisdiction of organization of
each of the Subsidiaries and the Borrower's ownership interest therein. Neither
the Borrower nor any of its Subsidiaries has any interest in any other
partnership, joint venture, corporation, limited liability company except as
set forth in SCHEDULE 5.15(b). No shares of Capital Stock of any Subsidiary,
whether issued and outstanding or authorized but unissued, or any treasury
shares, are subject to any subscription, warrant, option, call, commitment or
other agreement of any nature. There are no agreements regulating, controlling
or otherwise affecting the voting or other disposition of shares of the
Borrower's Subsidiaries or the management thereof.
SECTION 5.16 BROKERS. The Borrower has not engaged or
otherwise dealt with any broker, finder or similar entity in connection with
this Agreement or the Loans contemplated hereunder.
SECTION 5.17 OTHER DEBT. Neither the Borrower nor any of its
Subsidiaries is in default in the payment of any other Indebtedness or with
respect to any Contingent Obligation or under any agreement, mortgage, deed of
trust, security agreement, financing agreement, indenture, lease or other
agreement to which any of them is a party. The Borrower is not a party to or
bound by any agreement, instrument or indenture that may require the
subordination in right or time of
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payment of the Notes to any other Indebtedness or Contingent Indebtedness of the
Borrower, other than the agreements relating to the Senior Debt and the Existing
Subordinated Note.
SECTION 5.18 ENVIRONMENTAL COMPLIANCE. The Borrower and its
Subsidiaries are in compliance in all material respects with all Environmental
Laws. Neither the Borrower nor any of its Subsidiaries has received notice from
any Person that it has been identified as a potentially responsible party for
any Hazardous Substances, or that it is or shall be named a party to any claim,
action, cause of action, complaint, legal or administrative proceeding,
investigation or remediation action whatsoever in connection therewith. No
portion of the real property of the Borrower or its Subsidiaries is affected by
any Hazardous Substances in any manner which would have a Material Adverse
Effect.
SECTION 5.19 LOAN DOCUMENTS. The Borrower has delivered to the
Agent true, correct and complete copies of all indentures, loan agreements or
similar documents relating to the indebtedness evidenced by the Senior Debt and
the Existing Subordinated Note. As of the date hereof, the outstanding principal
balance of the Existing Subordinated Note is $25,000,000.00.
SECTION 5.20 SOLVENCY. As of the date hereof and after giving
effect to the transactions contemplated by this Agreement and the other Loan
Documents, including the making of the Loans, the Borrower is not insolvent on a
balance sheet basis such that the sum of the Borrower's assets exceeds the sum
of the Borrower's liabilities, the Borrower is able to pay its debts as they
become due, and the Borrower has sufficient capital to carry on its business.
SECTION 6. AFFIRMATIVE COVENANTS OF THE BORROWER
The Borrower covenants and agrees that, so long as the Notes are
outstanding or the Lenders have any obligation to make any Loans:
SECTION 6.1 PUNCTUAL PAYMENT. The Borrower will duly and
punctually pay or cause to be paid the principal, premium, if any, and interest
on the Notes and all interest and fees provided for in this Agreement, all in
accordance with the terms of this Agreement and the Notes as well as all other
sums owing pursuant to the Loan Documents.
SECTION 6.2 MAINTENANCE OF OFFICE. The Borrower will maintain
its chief executive offices at 3 Easton Oval, Columbus, Ohio 43219, or at such
other place in the United States of America as the Borrower shall designate upon
prior written notice to the Agent, where notices, presentations and demands to
or upon the Borrower in respect of the Loan Documents may be given or made.
SECTION 6.3 RECORDS AND ACCOUNTS. The Borrower will (a) keep,
and cause each of its Subsidiaries to keep, true and accurate records and books
of account in which full, true and correct entries will be made in accordance
with GAAP and (b) maintain adequate accounts and reserves for all taxes
(including income taxes), depreciation and amortization of its properties and
the properties of its Subsidiaries, contingencies and other reserves.
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SECTION 6.4 FINANCIAL STATEMENTS, CERTIFICATES AND
INFORMATION. The Borrower will deliver to the Agent:
(a) as soon as available, but in any event
within 90 days after the end of each fiscal year of the Borrower, a copy of the
audited consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as of the end of the year and the related audited consolidated
statements of income, of stockholders' equity and of cash flows for such year,
setting forth in each case in comparative form the figures for the previous
year, together with the opinion of independent certified public accountants of
nationally recognized standing, which opinion shall not contain a "going
concern" or like qualification or exception, or qualification arising out of the
scope of the audit or qualification which would affect the computation of
financial covenants contained herein other than a qualification of consistency
due to a change in the application of GAAP with which the Borrower's independent
certified public accountants concur;
(b) as soon as available but in any event not
later than 45 days after the end of each quarterly accounting period (including
the quarterly accounting period for the last quarter of each fiscal year), the
unaudited consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as of the end of each such quarter and the related unaudited
consolidated statements of income and of stockholders' equity of the Borrower
and its consolidated Subsidiaries for such quarter 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 the Borrower and its
Subsidiaries, and (ii) a listing of all residential and commercial lots, land
under development and unsold lots, all of the foregoing certified by the
principal financial or accounting officer of the Borrower being fairly stated in
all material respects, subject to year-end audit adjustments;
(c) concurrently with the delivery of each
financial statement referred to in Section 6.4(a) above and each financial
statement referred to in Section 6.4(b) above, a certificate of the principal
financial or accounting officer of the Borrower in form and substance reasonably
satisfactory to the Agent and stated to have been made after due examination by
such officer (i) stating that, to the best of such officer's knowledge, the
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, (ii) showing in detail the calculations supporting such statement
in respect of the covenants set forth in Section 6.12, Section 7.1, Section 7.3,
Section 7.4, Section 7.5, Section 7.6 and Section 7.7, and (iii) showing in
detail the outstanding voting capital stock of the Borrower owned or controlled
by the Persons described in clause (b) of the definition of the term "Change of
Control" as of the Closing Date and as of the date of such financial statement,
and indicating the percentage reduction, if any, in the amount of shares owned
or controlled by such Persons as of the date of such statement from the amount
of shares owned or controlled as of the Closing Date; and
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(d) promptly after the same are sent, copies of
all financial statements, reports and notices which the Borrower or any of its
Subsidiaries sends to its stockholders as stockholders and, so long as the
Borrower is a reporting company under the Securities Exchange Act of 1934,
promptly after the same are filed, copies of all financial statements which the
Borrower may make to, or file with, and copies of all material notices the
Borrower receives from, the SEC or any public body succeeding to any or all of
the functions of the SEC.
The financial statements described in Section 6.4(a) and (b) shall be
complete and correct in all material respects and prepared in reasonable detail
and in accordance with GAAP (except, in the case of the financial statements
referred to in Section 6.4(b), that such financial statements need not contain
footnotes and may be subject to year-end adjustments). The Borrower will permit
any person designated by the Agent, at the Lenders' expense, to visit and
inspect the properties and the books and records of the Borrower and its
Subsidiaries, to examine the Borrower's and its Subsidiaries' records (and to
make copies thereof and extracts therefrom), and to discuss the affairs and
finances of the Borrower and its Subsidiaries, all at such reasonable times and
intervals as the Agent or any Lender may reasonably request.
SECTION 6.5 NOTICES.
(a) DEFAULTS. The Borrower will promptly notify
the Agent in writing of the occurrence of any Default or Event of Default. If
any Person shall give any notice or take any other action in respect of a
claimed default (whether or not constituting an Event of Default) under this
Agreement or under any evidence of Indebtedness or Contingent Obligation to
which or with respect to which the Borrower or any of its Subsidiaries is a
party or obligor, whether as principal or surety, and such default would permit
the holder of such note or obligation or other evidence of Indebtedness or
Contingent Obligation to accelerate the maturity thereof, the Borrower shall
forthwith give written notice thereof to the Agent, describing the notice or
action and the nature of the claimed default.
(b) NOTICE OF LITIGATION AND JUDGMENTS. The
Borrower will give notice to the Agent in writing within fifteen (15) days of
becoming aware of any litigation or proceedings threatened in writing or any
pending litigation and proceedings affecting the Borrower or any of its
Subsidiaries or to which the Borrower or any of its Subsidiaries is or is to
become a party involving an uninsured claim against the Borrower or any of its
Subsidiaries that could reasonably be expected to have a Material Adverse Effect
and stating the nature and status of such litigation or proceedings. The
Borrower will give notice to the Agent, in writing, in form and detail
satisfactory to the Agent, within ten (10) days of any judgment not covered by
insurance, final or otherwise, against the Borrower or any of its Subsidiaries
in an amount in excess of $500,000.00.
(c) MATERIAL ADVERSE EFFECT. The Borrower will
promptly notify the Agent of the occurrence or existence of any fact,
circumstance or condition which might have a Material Adverse Effect.
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(d) NOTIFICATION OF LENDERS. Promptly after receiving
any notice under this Section 6.5, the Agent will forward a copy thereof to each
of the Lenders, together with copies of any certificates or other written
information that accompanied such notice.
SECTION 6.6 EXISTENCE; MAINTENANCE OF PROPERTIES.
(a) The Borrower and its Subsidiaries will do
or cause to be done all things necessary to preserve and keep in full force and
effect their respective existence as a corporation. The Borrower and its
Subsidiaries will do or cause to be done all things necessary to preserve and
keep in full force all of their respective rights and franchises. The Borrower
will, and will cause each of its Subsidiaries to, continue to engage primarily
in the businesses now conducted by it and in related businesses, unless
otherwise consented to by the Majority Holders.
(b) The Borrower (i) will cause all of its
properties and those of its Subsidiaries used or useful in the conduct of its
business or of its Subsidiaries to be maintained and kept in good condition,
repair and working order (ordinary wear and tear excepted) and supplied with all
necessary equipment, and (ii) will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof in all cases in
which the failure so to do would have a Material Adverse Effect.
SECTION 6.7 INSURANCE. The Borrower will, at its expense,
procure and maintain or cause to be procured and maintained insurance covering
the Borrower and its Subsidiaries and their respective properties in such
amounts and against such risks and casualties as are customary for properties of
similar character and location, due regard being given to the type of
improvements thereon, their construction, location, use and occupancy.
SECTION 6.8 TAXES. The Borrower and each Subsidiary will duly
pay and discharge, or cause to be paid and discharged, before the same shall
become overdue, all taxes, assessments and other governmental charges imposed
upon it and upon its assets, sales and activities, or any part thereof, or upon
the income or profits therefrom, as well as all claims for labor, materials or
supplies that if unpaid might by law become a lien or charge upon any of its
property; provided that any such tax, assessment, charge, levy or claim need not
be paid if the validity or amount thereof shall currently be contested in good
faith by appropriate proceedings and if the Borrower or such Subsidiary shall
set aside on its books reasonably adequate reserves with respect thereto; and
provided, further, that forthwith upon the commencement of proceedings to
foreclose any lien that may have attached as security therefor, the Borrower and
each Subsidiary (i) will provide a bond issued by a surety reasonably acceptable
to the Agent and sufficient to stay all such proceedings or (ii) if no such bond
is provided, will pay each such tax, assessment, charge, levy or claim.
SECTION 6.9 FURTHER ASSURANCES. The Borrower will cooperate
with, and will cause each of its Subsidiaries to cooperate with, the Agent and
the Lenders and execute such further instruments and documents as the Agent or
the Lenders shall reasonably request to carry out to its satisfaction the
transactions contemplated by this Agreement and the other Loan Documents.
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SECTION 6.10 COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND
PERMITS. The Borrower will comply with, and will cause each of its Subsidiaries
to comply in all respects with, (i) all applicable laws and regulations now or
hereafter in effect wherever its business is conducted, (ii) the provisions of
its corporate charter, partnership agreement or declaration of trust, as the
case may be, and other charter documents and code of regulations or bylaws, as
applicable, (iii) all agreements and instruments to which it is a party or by
which it or any of its properties may be bound, (iv) all applicable decrees,
orders, and judgments, and (v) all licenses and permits required by applicable
laws and regulations for the conduct of its business or the ownership, use or
operation of its properties. If at any time while the Notes are outstanding or
the Lenders have any obligation to make Loans hereunder, any authorization,
consent, approval, permit or license from any officer, agency or instrumentality
of any government shall become necessary or required in order that the Borrower
may fulfill any of its obligations hereunder, the Borrower will immediately take
or cause to be taken all steps necessary to obtain such authorization, consent,
approval, permit or license and furnish the Agent with evidence thereof.
SECTION 6.11 ERISA COMPLIANCES. The Borrower will not permit
the present value of all employee benefits vested in all Plans maintained by the
Borrower and any Commonly Controlled Entity to exceed the present value of the
assets allocable to such vested benefits by an amount greater than $500,000.00
in the aggregate. Neither the Borrower nor any Commonly Controlled Entity will
at any time permit any Plan maintained by it to engage in any "prohibited
transaction" as such term is defined in Section 4975 of the Code or Section 406
of ERISA, incur any "accumulated funding deficiency" as such term is defined in
Section 302 of ERISA, whether or not waived, or terminate any Plan in any manner
which could result in the imposition of a Lien on the property of the Borrower
or any of its Subsidiaries pursuant to Section 4068 of ERISA.
SECTION 6.12 CONSOLIDATED TANGIBLE NET WORTH. The Borrower
will not at any time permit its Consolidated Tangible Net Worth to be less than
$85,000,000.00.
SECTION 7. NEGATIVE COVENANTS OF THE BORROWER
The Borrower covenants and agrees that, so long as the Notes are
outstanding or the Lenders have any obligation to make any Loans:
SECTION 7.1 RESTRICTIONS ON INDEBTEDNESS. The Borrower will
not, and will not permit any of its Subsidiaries to, create, incur, assume,
guarantee or be or remain liable with respect to any Indebtedness other than:
(a) Indebtedness to the Lenders arising under
the Notes;
(b) Prior to the making of the Loans,
Indebtedness under the Existing Subordinated Note;
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(c) current liabilities (due and payable within
twelve months or less) of the Borrower or its Subsidiaries incurred in the
ordinary course of business but not incurred through (i) the borrowing of money,
or (ii) the obtaining of credit except for credit on an open account basis
customarily extended and in fact extended in connection with normal purchases of
goods and services;
(d) Indebtedness in respect of taxes,
assessments, governmental charges or levies and claims for labor, materials and
supplies to the extent that payment therefor shall not at the time be required
to be made in accordance with the provisions of Section 6.8;
(e) endorsements for collection, deposit or
negotiation and warranties of products or services, in each case incurred in the
ordinary course of business;
(f) Senior Debt of the Borrower;
(g) Other Indebtedness of the Borrower and its
Subsidiaries for borrowed money from an institutional lender or in connection
with a public or privately placed debt offering created or evidenced by notes,
bonds, indentures or similar agreements or by loan agreement under which the
Indebtedness is reflected in a loan account (it being agreed that such
Indebtedness may not include trade debt); PROVIDED that neither the Borrower nor
any of its Subsidiaries shall incur any such Indebtedness pursuant to this
Section 7.1(g) unless the ratio of the Borrower's EBITDA to Consolidated
Interest Incurred for the previous four (4) fiscal quarters of the Borrower is
greater than 2.0 to 1.0 (such permitted Indebtedness is hereafter referred to as
"Additional Permitted Senior Debt"). For the purposes of performing such test,
Consolidated Interest Incurred shall include the interest expense that would
have been incurred on such Indebtedness on a pro forma basis for a four (4)
quarter period. In no event shall any of such Indebtedness be considered as
Additional Permitted Senior Debt hereunder if in any instrument or instruments
evidencing or securing the same or pursuant to which the same are outstanding,
or under any amendment, renewal, extension or refunding thereof, it is provided
that such Indebtedness is not superior in right of payment to the Notes or that
such Indebtedness is PARI PASSU with or junior in right of payment to the Notes,
it being the intent of the parties that no other "subordinated debt" shall be
permitted. Notwithstanding the foregoing, neither the Borrower nor any of its
Subsidiaries shall incur any such Indebtedness pursuant to this Section 7.1(g)
unless the Borrower shall have provided the Agent a statement certified by the
principal financial or accounting officer of the Borrower that no Default or
Event of Default exists or will exist after the incurrence of such Indebtedness,
which statement shall include a calculation demonstrating that the Borrower will
be in compliance with the foregoing ratio after giving effect to such
incurrence. Additional Permitted Senior Debt shall not include any Indebtedness
that is payable to any Subsidiary or Affiliate of the Borrower, any director,
officer or employee of any thereof, or pursuant to or in connection with any
Investments in Joint Ventures; and
(h) Unsecured Indebtedness between the Borrower
and its wholly-owned Subsidiaries provided that the aggregate amount does not
exceed $7,500,000.00.
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SECTION 7.2 RESTRICTIONS ON LIENS, ETC. The Borrower will
not, and will not permit any of its Subsidiaries to create, incur, assume or
suffer to be created or incurred or to exist any Lien upon any of its property,
assets or revenues, whether now owned or hereafter acquired, except:
(a) Liens in favor of the agent under the Senior
Credit Agreement, for the ratable benefit of the banks thereunder, including
without limitation Liens in favor of such agent on the Borrower's real property
inventory situated in the State of Indiana to secure the Indebtedness to the
banks under the Senior Credit Agreement, which Liens secure Indebtedness under
the Senior Credit Agreement not in excess of the limits set forth in clause (a)
of the definition of the term "Senior Debt";
(b) Liens granted by M/I Financial Corp. on mortgage
note receivables, which Liens secure Indebtedness under the M/I Financial Corp.
Loan Agreement not in excess of $40,000,000;
(c) Liens securing any other permitted Senior Debt or
Additional Permitted Senior Debt; provided, however, that (i) such Liens do not
at any time encumber any property other than the property financed by such
secured Indebtedness, and (ii) the Indebtedness secured thereby shall not exceed
the cost or fair market value whichever is lower, of the property being acquired
on the date of acquisition, and (iii) the Indebtedness secured thereby shall not
exceed any limits in this Agreement on the amount of such Indebtedness
(including, without limitation, limits on Permitted Secured Indebtedness);
(d) Liens for taxes and special assessments not
yet due or which are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of the Borrower and its Subsidiaries in accordance with GAAP;
(e) carriers', warehousemen's, mechanics',
materialmen's, repairmen's, or other like Liens arising in the ordinary course
of business which are not overdue for a period of more than 30 days or which are
being contested in good faith and by appropriate proceedings if adequate
reserves with respect thereto are maintained on the books of the Borrower and
its Subsidiaries in accordance with GAAP;
(f) pledges or deposits in connection with workers'
compensation, unemployment insurance and other social security legislation;
(g) deposits to secure the performance of: bids;
trade contracts (other than for borrowed money or the purchase price of property
or services); leases; statutory and other obligations required by law; surety,
appeal and performance bonds (including Construction Bonds); and other
obligations of a like nature incurred in the ordinary course of business; and
(ii) Liens in favor of surety bond companies pursuant to indemnity agreements to
secure the reimbursement obligations of the Borrower, M/I Homes, Inc. or M/I
Homes Construction, Inc. on Construction Bonds, provided (A) the Liens securing
Construction Bonds shall be limited to the
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assets of, as appropriate, the Borrower, M/I Homes, Inc. or M/I Homes
Construction, Inc. at, and the rights of, as appropriate, the Borrower, M/I
Homes, Inc. or M/I Homes Construction, Inc. arising out of, the projects that
are the subject of the Construction Bonds, (B) the Liens shall not attach to any
real estate, and (C) the aggregate amount of such Liens at any time shall not
exceed the dollar amount of Construction Bonds then outstanding, and in any
event shall not exceed the amount of reimbursement obligations on Construction
Bonds;
(h) Liens of landlords, arising solely by
operation of law, on fixtures and moveable property located on premises leased
in the ordinary course of business; provided, however, that the rental payments
secured thereby are not yet due; and
(i) Liens arising as a result of a judgment or
judgments against the Borrower or any of its Subsidiaries which do not in the
aggregate exceed $1,000,000 at any one time outstanding, which are being
diligently contested in good faith, which are not the subject of any attachment,
levy or enforcement proceeding, and as to which appropriate reserves have been
established in accordance with GAAP.
SECTION 7.3 RESTRICTIONS ON CONTINGENT OBLIGATIONS.
(a) The Borrower will not, and will not permit
any of its Subsidiaries to, agree to or assume, guarantee, indorse or otherwise
in any way be or become responsible or liable for, directly or indirectly, any
Contingent Obligation, including but not limited to Contingent Obligations
incurred as a general partner in any limited partnership or general partnership,
except:
(i) (A) reimbursement and other obligations
under standby letters of credit (including letters of
credit issued for the purpose of satisfying bonding
requirements) issued by Persons other than the banks
under the Senior Credit Agreement; (B) Contingent
Obligations of the Borrower as the guarantor of
letters of credit issued for the account of joint
ventures in which the Borrower is a partner
(including Guaranteed HNB Joint Ventures Letters of
Credit), provided that the Borrower's Contingent
Obligation on any such guaranty shall be limited to a
percentage of the amount of that joint venture's
letters of credit equal to the Borrower's pro rata
equitable ownership interest in such joint venture,
provided further that the sum of the obligations
permitted by clauses (i)(A) and (i)(B) shall not
exceed the aggregate amount of $10,000,000.00 at any
one time outstanding on a consolidated basis, which
$10,000,000.00 limitation shall not include any
obligations in connection with letters of credit
issued pursuant to the Senior Credit Agreement; and
(C) reimbursement obligations under Construction
Bonds;
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(ii) Contingent Obligations consisting of
(A) guaranties by the Borrower of M/I Financial
Corp.'s lease obligations in an amount not to exceed
$1,000,000.00 in any period of 12 consecutive months,
(B) the Borrower's obligations under the M/I
Financial Corp. Loan Agreement in a principal amount
not to exceed $40,000,000.00, and (C) guaranties by
any Subsidiary of the obligations of the Borrower
(including without limitation any guaranty by M/I
Financial Corp. of any obligation of the Borrower to
the banks under the Senior Credit Agreement);
(iii) Contingent Obligations related to
Indebtedness of joint ventures in which the Borrower
has made Investments in Joint Ventures and in which
the Borrower is a partner, member or shareholder
(including obligations with respect to the Guaranteed
HNB Joint Venture Letters of Credit); provided,
however, that the aggregate amount of such Contingent
Obligations at any one time outstanding pursuant to
this Section 7.3(a)(iii) shall not exceed (A)
$15,000,000.00 less (B) the aggregate amount of
Permitted Secured Indebtedness;
(iv) other Contingent Obligations of the
Borrower which do not in the aggregate at any one
time outstanding exceed $3,000,000.00, subject to the
limitations of subparagraph (k) of the definition of
the term "Permitted Investments"; and
(v) Contingent Obligations with respect to
letters of credit issued or outstanding pursuant to
the Senior Credit Agreement but which are undrawn,
provided that the sum of (A) such letters of credit
issued or outstanding pursuant to the Senior Credit
Agreement but which are undrawn and (B) reimbursement
obligations relating to drawn letters of credit that
were issued or outstanding pursuant to the Senior
Credit Agreement, shall not exceed $35,000,000.00.
(b) Notwithstanding anything herein to the
contrary, nothing in this Section 7.3 is intended to, nor shall it be deemed to,
increase, alter or expand the Indebtedness permitted by Section 7.1 or the
definitions of the terms Senior Debt or Additional Permitted Senior Debt; it
being acknowledged and agreed that any Contingent Obligation that becomes
liquidated or is no longer contingent (including, without limitation, any
obligation to reimburse a draw actually made under a letter of credit or with
respect to a Construction Bond or pursuant to any claim which may be made
pursuant to a guaranty or indemnity), such obligation shall no longer be a
Contingent Obligation and must satisfy the requirements and/or limits of this
Agreement with respect to Indebtedness, Senior Debt and/or Additional Permitted
Senior Debt, as applicable.
SECTION 7.4 RESTRICTIONS ON INVESTMENTS. The Borrower will
not, and will not permit any of its Subsidiaries to, make or permit to exist or
to remain outstanding at any time any Investments, valued at book cost basis
(excluding Investments in Permitted Investments), that
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individually or in the aggregate exceed thirty percent (30%) of the Borrower's
Consolidated Tangible Net Worth.
SECTION 7.5 RESTRICTIONS ON UNCOMMITTED LAND. Neither the
Borrower nor its Subsidiaries will at any time purchase or own, directly or
indirectly, any Uncommitted Land if the value of such Uncommitted Land, when
added to the value of all other Uncommitted Land of the Borrower and its
Subsidiaries, would cause the ratio of (a) Uncommitted Land of the Borrower and
its Subsidiaries to (b) the sum of (i) the Borrower's Shareholder's Equity, and
(ii) the principal balance of the Notes to exceed 1.5 to 1.
SECTION 7.6 RESTRICTION ON DISTRIBUTIONS. The Borrower shall
not make any Distributions; provided that so long as no Default or Event of
Default has occurred, (a) the Borrower may make Distributions in an amount that,
when added to the amount of all other Distributions paid on or after June 30,
1997, does not exceed the sum of (i) $7,500,000.00 plus (ii) twenty-five percent
(25%) of the cumulative Consolidated Earnings of the Borrower subsequent to June
30, 1997, (b) the Borrower may make Distributions in the form of the repurchase
at fair value of capital stock from the Family of Melvin Schottenstein in an
amount not to exceed $2,500,000.00, and (c) the Borrower may make Distributions
in the form of the repurchase at fair value of capital stock from the Family of
Melvin Schottenstein from net proceeds of the issuance of any equity securities
of the Borrower in an amount not to exceed fifty percent (50%) of the net
proceeds from such equity offering. Notwithstanding the foregoing, the purchase
by the Borrower of 702,439 shares of stock from the Family of Melvin
Schottenstein on July 31, 1997 shall not be considered for the purposes of the
foregoing limits.
SECTION 7.7 MAINTENANCE OF LEVERAGE RATIO. The Borrower shall
not permit at any time the ratio of Consolidated Liabilities to Consolidated
Tangible Net Worth to be more than 3.25 to 1.0.
SECTION 7.8 RESTRICTION ON FUNDAMENTAL CHANGES.
(a) The Borrower will not, and will not permit
any of its Subsidiaries to, enter into any transaction of merger, consolidation,
amalgamation or reorganization (including without limitation any election to be
taxed as an S Corporation), or liquidate, wind up or dissolve itself (or suffer
any liquidation or dissolution), or, except for the sale of land, lots and
houses from inventory in the ordinary course of business, convey, sell, lease,
transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any part of such Person's business or assets, whether now
owned or hereafter acquired, or make any material change in the method by which
such Person conducts business. Notwithstanding the foregoing, the Borrower or
its Subsidiaries may transfer not more than twenty percent (20%) in the
aggregate (on a consolidated basis) of such assets (valued at net book value) in
a single transaction not in the ordinary course of business for fair value in a
cash transaction provided that no Default or Event of Default exists, or would
exist after the consummation of such transaction.
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(b) Any Subsidiary of the Borrower may be (i)
merged, amalgamated or consolidated with or into the Borrower or any
wholly-owned Subsidiary of the Borrower, or (ii) liquidated, wound up or
dissolved into, or all or substantially all of its business, property or assets
may be conveyed, sold, leased, transferred or other disposed of, in one
transaction or a series of transactions, to the Borrower or any wholly-owned
Subsidiary of the Borrower; provided, however, that in the case of such a
merger, amalgamation, liquidation or consolidation, the Borrower or such
wholly-owned Subsidiary, as the case may be, shall be the continuing or
surviving corporation.
(c) The Borrower shall not change its present
accounting principles or practices in any material respect, except as may be
required by GAAP or by law.
SECTION 7.9 TRANSACTIONS WITH AFFILIATES AND OFFICERS.
The Borrower will not, and will not permit any of its Subsidiaries to:
(a) Except for (i) any consulting agreements or
employment agreements to which the Borrower is a party and which were in effect
as of March 1, 1994, (ii) any agreements entered into in connection with the
construction of the Office Building by the Office Building Limited Liability
Company and/or with the Borrower's leasehold improvements to, the Office
Building, and (iii) compensation arrangements in the ordinary course of business
with the officers, directors, and employees of the Borrower and its
Subsidiaries, enter into any transaction, including without limitation the
purchase, sale or exchange of property or the rendering of any services, with
any Affiliate or any officer or director thereof, or enter into, assume or
suffer to exist any employment or consulting contract with any Affiliate or an
officer or director thereof, except any transaction or contract which is in the
ordinary course of the Borrower's or any of its Subsidiaries' business and which
is upon fair and reasonable terms no less favorable to the Borrower or its
Subsidiaries than it would obtain in a comparable arm's length transaction with
a Person not an Affiliate;
(b) make any advance or loan to any Affiliate
or any director or officer thereof or of the Borrower or to any trust of which
any of the foregoing is a beneficiary, or to any Person on the guarantee of any
of the foregoing, except as expressly permitted by paragraph (c) of the
definition of Permitted Investments; or
(c) pay any fees or expenses to, or reimburse
or assume any obligation for the reimbursement of any expenses incurred by, any
Affiliate or any officer or director thereof, except as may be permitted in
accordance with clauses (a) and (b) of this Section 7.9.
SECTION 7.10 RESTRICTIONS ON NEGATIVE PLEDGES. The Borrower
will not permit, and will not permit any of its Subsidiaries to, enter into any
agreement other than the Senior Credit Agreement or agreements evidencing other
Additional Permitted Senior Debt which prohibits or limits the ability of the
Borrower, any of its Subsidiaries or any of the M/I Ancillary Businesses to
create, incur, assume or suffer to exist any Lien upon any of its assets,
rights, revenues or property, real, personal or mixed, tangible or intangible,
whether now or hereafter acquired.
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SECTION 7.11 PURCHASE OF NOTES. Neither the Borrower nor any
Subsidiary or Affiliate, directly or indirectly, may purchase or make any offer
to purchase any Notes unless the offer has been made to purchase Notes, pro
rata, from all holders of the Notes at the same time and upon the same terms. In
case the Borrower purchases any Notes, such Notes shall thereafter be canceled
and no Notes shall be issued in substitution therefor.
SECTION 8. CLOSING CONDITIONS
The obligations of the Agent and the Lenders to enter into this
Agreement shall be subject to the satisfaction of the following conditions
precedent on or prior to August 29, 1997:
SECTION 8.1 EXECUTION OF LOAN DOCUMENTS. The Loan Documents
shall have been duly executed and delivered by the Borrower, shall be in full
force and effect and shall be in form and substance satisfactory to the Agent.
The Notes shall have been duly executed and delivered by the Borrower to the
Lenders.
SECTION 8.2 CERTIFIED COPIES OF ORGANIZATIONAL DOCUMENTS. The
Agent shall have received from the Borrower a copy, certified as of a recent
date by the appropriate officer of each State in which the Borrower and its
Subsidiaries is organized or is doing business, of the corporate charter of the
Borrower and its Subsidiaries, or its qualification to do business, as
applicable, as in effect on such date of certification.
SECTION 8.3 BYLAWS; RESOLUTIONS. All corporate action on the
part of the Borrower necessary for the valid execution, delivery and performance
of the Loan Documents to which the Borrower is or is to become a party shall
have been duly and effectively taken, and evidence thereof satisfactory to the
Agent shall have been provided to the Agent. The Agent shall have received from
the Borrower true copies of its code of regulations and the resolutions adopted
by its board of directors authorizing the transactions described herein, each
certified by its secretary as of a recent date to be true and complete.
SECTION 8.4 INCUMBENCY CERTIFICATE; AUTHORIZED SIGNERS. The
Agent shall have received from the Borrower an incumbency certificate, dated as
of the Closing Date, signed by a duly authorized officer of the Borrower and
giving the name and bearing a specimen signature of each individual who shall be
authorized to sign, in the name and on behalf of the Borrower, each of the Loan
Documents to which the Borrower is or is to become a party. The Agent shall have
also received from the Borrower a certificate, dated as of the Closing Date,
signed by a duly authorized officer of the Borrower and giving the name and
specimen signature of each individual who shall be authorized to give notices
and to take other action on behalf of the Borrower under the Loan Documents.
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SECTION 8.5 OPINION OF COUNSEL. The Agent shall have received
a favorable opinion addressed to the Lenders and the Agent and dated as of the
Closing Date, in form and substance satisfactory to the Agent from counsel to
the Borrower as to such matters as the Agent shall reasonably request.
SECTION 8.6 PAYMENT OF FEES. The Borrower shall have paid
to BKB the commitment fee pursuant to Section 2.4.
SECTION 8.7 PERFORMANCE; NO DEFAULT. The Borrower shall have
performed and complied with all terms and conditions herein required to be
performed or complied with by it on or prior to the Closing Date, and on the
Closing Date there shall exist no Default or Event of Default.
SECTION 8.8 REPRESENTATIONS AND WARRANTIES. The
representations and warranties made by the Borrower in the Loan Documents or
otherwise made by or on behalf of the Borrower or any Subsidiaries thereof in
connection therewith or after the date thereof shall have been true and correct
when made and shall also be true and correct on the Closing Date.
SECTION 8.9 PROCEEDINGS AND DOCUMENTS. All proceedings in
connection with the transactions contemplated by this Agreement and the other
Loan Documents shall be reasonably satisfactory to the Agent and the Agent's
counsel in form and substance, and the Agent shall have received all information
and such counterpart originals or certified copies of such documents and such
other certificates, opinions, documents, assurances, consents and approvals as
the Agent and the Agent's counsel may reasonably require.
SECTION 8.10 COMPLIANCE CERTIFICATE. A certificate dated as of
the Closing Date executed by the principal financial or accounting officer of
the Borrower demonstrating compliance with each of the covenants described in
Section 6.12, Section 7.1, Section 7.3, Section 7.4, Section 7.5, Section 7.6
and Section 7.7 as of the most recent fiscal quarter end for which the Borrower
has provided financial statements under Section 5.3 adjusted in the best good
faith estimate of the Borrower as of the date of the Closing Date shall have
been delivered to the Agent.
SECTION 8.11 SENIOR DEBT CONSENTS. The Agent shall have
received evidence satisfactory to the Agent that all necessary consents of the
holders of any portion of the Senior Debt required in connection with the
consummation and effectiveness of the transactions contemplated by the Loan
Documents have been obtained.
SECTION 8.12 SATISFACTION OF EXISTING SUBORDINATED NOTE. The
Borrower shall have delivered to the Agent such evidence as the Agent may
require that the Existing Subordinated Note has been or shall be
contemporaneously with the advance of the Loans paid in full and that all
obligations of the Borrower under the Existing Note Purchase Agreement have been
terminated.
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SECTION 8.13 MATERIAL ADVERSE EFFECT. No fact, circumstance or
condition shall have occurred or exist which may have a Material Adverse Effect.
SECTION 8.14 CAPITAL STOCK. The Borrower shall have delivered
to the Agent such evidence as the Agent may reasonably require of the amount of
outstanding voting capital stock of the Borrower owned or controlled by the
Persons described in clause (b) of the definition of the term "Change of
Control" as of the Closing Date.
SECTION 8.15 NO LEGAL IMPEDIMENT. The closing of the Loans by
the Lenders shall constitute a legal investment under the laws and regulations
of each jurisdiction to which the Lenders may be subject (without resort to any
"basket" or "leeway" provision which permits the making of an investment without
restriction as to the character of the particular investment being made), such
transaction shall not subject the Lenders to any tax, penalty, liability or
other onerous condition in or pursuant to any applicable law or governmental
regulation or order, and the execution and delivery of the Notes and the making
of the Loans under this Agreement shall comply with all applicable federal and
state laws and regulations; and the Lenders shall receive such certificates or
other evidence satisfactory to the Lenders of compliance with this condition.
SECTION 8.16 WAIVER OF CONDITIONS. If the Borrower fails to
deliver the Notes to the Lenders or the conditions specified in Section 8 have
not been fulfilled (the Borrower hereby agreeing to cause such conditions to be
satisfied), Lenders may thereupon elect to be relieved of all further
obligations under this Agreement. Nothing in this section shall operate to
relieve the Borrower from any of its obligations hereunder or to waive any of
the Lenders' rights against the Borrower. Any of the conditions in this Section
8 may be waived by the Lenders in their sole discretion.
SECTION 9. EVENTS OF DEFAULT; ACCELERATION; ETC.
SECTION 9.1 EVENTS OF DEFAULT AND ACCELERATION. If any of the
following events ("Events of Default" or, if the giving of notice or the lapse
of time or both is required, then, prior to such notice or lapse of time,
"Defaults") shall occur:
(a) the Borrower shall fall to pay any principal
of, or premium, if any, on the Notes when the same shall become due and payable,
whether at the stated date of maturity or any accelerated date of maturity or at
any other date fixed for payment; or
(b) the Borrower shall fail to pay any interest
on the Notes or any other sums due hereunder or under any of the other Loan
Documents when the same shall become due and payable, whether at the stated date
of maturity or any accelerated date of maturity or at any other date fixed for
payment; or
(c) the Borrower or any of its Subsidiaries
shall fail to comply with any of its other covenants contained in this Agreement
or any of the other Loan Documents; or
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(d) any representation or warranty of the
Borrower or its Subsidiaries in this Agreement or any of the other Loan
Documents or in any other document or instrument delivered pursuant to or in
connection with this Agreement shall prove to have been false in any respect
upon the date when made or deemed to have been made or repeated; or
(e) the Borrower or any of its Subsidiaries
shall fail (i) to pay at maturity, or within any applicable period of grace, any
obligation for borrowed money or credit received or other Indebtedness or
Contingent Obligations in an amount equal to or greater than $5,000,000.00 in
the aggregate for such period of time as would permit (assuming the giving of
appropriate notice if required) the holder or holders thereof or of any
obligations issued thereunder to accelerate the maturity thereof, or (ii) to
observe or perform any term, covenant or agreement contained in any agreement by
which it is bound, evidencing or securing borrowed money or credit received or
other Indebtedness or Contingent Obligations in an amount equal to or greater
than $5,000,000.00 in the aggregate and such failure shall have resulted in such
obligation becoming or being declared due and payable prior to the date on which
it would otherwise have become due and payable; or
(f) the Borrower or any of its Subsidiaries,
(1) shall make an assignment for the benefit of creditors, or admit in writing
its general inability to pay or generally fail to pay its debts as they mature
or become due, or shall petition or apply for the appointment of a trustee or
other custodian, liquidator or receiver of the Borrower or any of its
Subsidiaries or of any substantial part of the assets of any thereof, (2) shall
commence any case or other proceeding relating to the Borrower or any of its
Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation or similar law of any
jurisdiction, now or hereafter in effect, or (3) shall take any action to
authorize or in furtherance of any of the foregoing;
(g) a petition or application shall be filed
for the appointment of a trustee or other custodian, liquidator or receiver of
the Borrower or any of its Subsidiaries or any substantial part of the assets of
any thereof, or a case or other proceeding shall be commenced against the
Borrower or any of its Subsidiaries under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation or
similar law of any jurisdiction, now or hereafter in effect, and the Borrower or
any of its Subsidiaries shall indicate its approval thereof, consent thereto or
acquiescence therein or such petition, application, case or proceeding shall not
have been dismissed within 60 days following the filing or commencement thereof;
(h) a decree or order is entered appointing any
such trustee, custodian, liquidator or receiver or adjudicating the Borrower or
any of its Subsidiaries bankrupt or insolvent, or approving a petition in any
such case or other proceeding, or a decree or order for relief is entered in
respect of the Borrower or any of its Subsidiaries, in an involuntary case under
federal bankruptcy laws as now or hereafter constituted;
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(i) there shall remain in force, undischarged,
unsatisfied and unstayed, for more than thirty days, whether or not consecutive,
any uninsured final judgment against the Borrower or any of its Subsidiaries,
that, with other outstanding uninsured final judgments, undischarged, against
the Borrower or any of its Subsidiaries exceeds in the aggregate $2,000,000.00;
or
(j) except as permitted in this Agreement, any
dissolution, termination, partial or complete liquidation, merger or
consolidation of the Borrower or any of its Subsidiaries, or any sale, transfer
or other disposition of any of the assets of the Borrower or any of its
Subsidiaries; or
(k) (i) a Reportable Event shall occur with respect
to, or proceedings shall commence to have a trustee appointed, or a trustee
shall be appointed, to administer or to terminate, any Single Employer Plan,
which Reportable Event or institution of proceedings is, in the opinion of the
Majority Holders, likely to result in the termination of such Plan for purposes
of Title IV of ERISA, and, in the case of a Reportable Event, the continuance of
such Reportable Event unremedied for 30 days after notice of such Reportable
Event pursuant to Section 4043(a), (c) or (d) of ERISA is given or, in the case
of institution of proceedings, the continuance of such proceedings for 30 days
after commencement thereof, (ii) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA, or (iii) any other event or condition shall occur
or exist with respect to a Single Employer Plan and in each case in clauses (i)
through (iii) above, such event or condition, together with all other such
events or conditions, if any, could subject the Borrower or any of its
Subsidiaries to any tax, penalty or other liabilities in the aggregate material
in relation to the business, operations, property or financial or other
condition of the Borrower or of the Borrower and its Subsidiaries taken as a
whole; or
(l) any of the Loan Documents shall be canceled,
terminated, revoked or rescinded otherwise than in accordance with the terms
thereof or as permitted by this Agreement or with the express prior written
agreement, consent or approval of the Majority Holders, or any action at law,
suit or in equity or other legal proceeding to cancel, terminate, revoke or
rescind any of the Loan Documents shall be commenced by or on behalf of the
Borrower or any of its Subsidiaries or any of their respective stockholders,
partners or beneficiaries, or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall make a determination that,
or issue a judgment, order, decree or ruling to the effect that, any one or more
of the Loan Documents is illegal, invalid or unenforceable in accordance with
the terms thereof;
then, and in any such event, so long as the same may be continuing, the Agent
may, and upon the request of the Majority Holders shall, by notice in writing to
the Borrower declare all amounts owing with respect to this Agreement, the Notes
and the other Loan Documents to be, and they shall thereupon forthwith become,
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by the Borrower; PROVIDED
that in the event of any Event of Default specified in Section 9.1(f), Section
9.1(g) or Section 9.1(h), all such
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amounts shall become immediately due and payable automatically and without any
requirement of notice from the Agent or any Lenders.
SECTION 9.2 CURE PERIODS. Notwithstanding anything contained
in Section 9.1 to the contrary, (i) no Event of Default shall exist hereunder
upon the occurrence of any failure described in Section 9.1(a) or Section 9.1(b)
in the event that the Borrower cures such default within ten (10) days following
receipt of written notice of such default, provided, however, that Borrower
shall not be entitled to receive more than two (2) notices in the aggregate
pursuant to this clause (i) in any period of 365 days ending on the date of any
such occurrence of default, and provided further that no such cure period shall
apply to any payments due upon the maturity of the Notes, and (ii) no Event of
Default shall exist hereunder upon the occurrence of any failure described in
Section 9.1(c) in the event that the Borrower cures such default with thirty
(30) days following receipt of written notice of such default.
SECTION 9.3 REMEDIES. In case any one or more Events of
Default shall have occurred and whether or not the Agent or the Lenders shall
have accelerated the maturity of the Notes pursuant to Section 9.1, the
Agent on behalf of the Lenders may with the consent of the Majority Holders
proceed to protect and enforce their rights and remedies under this Agreement,
the Notes or any of the other Loan Documents by suit in equity, action at law
or other appropriate proceeding, whether for the specific performance of any
covenant or agreement contained in this Agreement, the Notes or any of the
other Loan Documents or otherwise and, if such amount shall have become due, by
declaration or otherwise, proceed to enforce the payment thereof or any other
legal or equitable right of the Agent or the Lenders. No remedy herein
conferred upon the Agent or the holder or any Notes is intended to be exclusive
of any other remedy and each and every remedy shall be cumulative and shall be
in addition to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute or any other provision of law.
Notwithstanding the provisions of this Agreement providing that there may be
multiple Notes in favor of the Lenders, the Lenders acknowledge and agree that
only the Agent may exercise any remedies arising by reason of a Default or
Event of Default.
SECTION 10. SUBORDINATION OF THE NOTES
SECTION 10.1 CERTAIN DEFINITIONS. As used in this Section 10,
the following terms have the following respective meanings:
(a) "BANKRUPTCY CODE" shall mean 11 U.S.C.
Section 101 et seq., as from time to time hereafter amended, and any successor
or similar statute.
(b) "JUDICIAL PROCEEDING" shall mean one or
more proceedings by one or more holders of Superior Indebtedness aggregating
not less than $15,000,000 before a state or federal court (having jurisdiction
with respect thereto) to collect the entire amount of such Superior
Indebtedness following an acceleration of the maturity thereof as a result of a
default.
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(c) "PERMISSIBLE SECURITIES" shall mean
securities of the Borrower as reorganized or readjusted, or securities of the
Borrower or any other corporation provided for by a plan of reorganization or
readjustment, the payment of which is subordinated, at least to the extent
provided in this Section 10 with respect to the Notes, to the payment of all
Superior Indebtedness at the time outstanding and all securities issued in
exchange therefor.
(d) "SUBORDINATED INDEBTEDNESS" shall mean the
principal amount of the indebtedness evidenced by the Notes, together with
interest and premium, if any, due thereon or payable with respect thereto.
(e) "SUPERIOR INDEBTEDNESS" shall mean the
principal amount of the Senior Debt and the Additional Permitted Senior Debt,
together with interest and premium, if any, due thereon or payable with respect
thereto.
SECTION 10.2 SUBORDINATED INDEBTEDNESS SUBORDINATED TO
SUPERIOR INDEBTEDNESS. The Borrower for itself and its successors and assigns,
and for its Subsidiaries and the successors and assigns of such Subsidiaries,
covenants and agrees, and each holder of any Subordinated Indebtedness, by its
acceptance thereof, shall be deemed to have agreed, notwithstanding anything to
the contrary in this Agreement, the Notes or the Loan Documents, that the
payment of the Subordinated Indebtedness shall be subordinated to the extent and
in the manner set forth in this Section 10, to the prior payment, or provision
for payment, in full, of all Superior Indebtedness, and that each holder of
Superior Indebtedness, whether now outstanding or hereafter created, incurred,
assumed or guaranteed, shall be deemed to have acquired Superior Indebtedness in
reliance upon the provisions contained in this Section 10.
SECTION 10.3 DISSOLUTION, LIQUIDATION, REORGANIZATION, ETC.
Upon any distribution of the assets of the Borrower (or any of its Subsidiaries)
upon any dissolution, winding-up, liquidation, reorganization, whether voluntary
or involuntary, or in bankruptcy, insolvency, reorganization, liquidation or
receivership proceedings, or any similar proceeding (hereinafter a "Proceeding")
relating to the Borrower or to its creditors, as such, then and in any such
event:
(a) the holders of the Superior Indebtedness
shall be entitled to receive payment in full of all amounts due or to become due
on or in respect of all Superior Indebtedness, before any payment, whether in
cash, property or securities (other than Permissible Securities), is made on
account of or applied to the Subordinated Indebtedness; and
(b) any payment, whether in cash, property or
securities (other than Permissible Securities), to which the holders of the
Subordinated Indebtedness would be entitled except for the provisions of this
Section 10, shall be paid or delivered, to the extent permitted by law, by any
debtor, custodian, liquidating trustee, agent or other person making such
payment, directly to the holders of the Superior Indebtedness, or their
representative or representatives, ratably according to the aggregate amounts
remaining unpaid on account of such Superior Indebtedness, for application to
the payment thereof, to the extent necessary to pay all such Superior
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Indebtedness in full, after giving effect to any concurrent payment or
distribution, or provision therefor, to the holders of such Superior
Indebtedness.
Upon any payment or distribution of assets referred to in this
Section 10, the holders of the Subordinated Indebtedness shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction in
which any Proceeding is pending, or a certificate of the debtor, custodian,
liquidating trustee, agent or other person making any such payment or
distribution to such holders, for the purpose of ascertaining the persons
entitled to participate therein, the holders of the Superior Indebtedness, the
then outstanding principal amount of the Superior Indebtedness, and any and all
amounts payable thereon, the amount or amounts paid or distributed thereon, and
all other facts pertinent thereto or to this Section 10.
In the event that payment or delivery by the Borrower of any
cash, property, stock or other obligations to the holders of the Subordinated
Indebtedness is authorized by an order or decree giving effect, and stating in
such order or decree that effect is given, to the provisions of this Section 10,
and made by a court of competent jurisdiction in any Proceeding, no payment or
delivery by the Borrower of such cash, property, stock, or other obligations
payable or deliverable with respect to the Subordinated Indebtedness shall be
made to the holders of the Superior Indebtedness.
SECTION 10.4 NO PAYMENT WITH RESPECT TO SUBORDINATED
INDEBTEDNESS IN CERTAIN CIRCUMSTANCES.
(a) The Borrower will not, and will not permit
any of its Subsidiaries to, directly or indirectly, make or agree to make, and
neither the holder nor any assignee or successor holder of any Subordinated
Indebtedness or agent for any of them will accept or receive any payment or
distribution in cash, property or securities (other than Permissible Securities)
by set-off or otherwise, direct or indirect, or by repurchase, redemption or
retirement, of or on account of all or any portion of any Subordinated
Indebtedness if, at the time of such payment or distribution or immediately
after giving effect thereto:
(i) all of the following three
conditions shall be satisfied:
(A) a default (a "Payment Default")
in the payment when due of all or any portion of the principal of or
premium, if any, or interest on any Superior Indebtedness shall have
occurred;
(B) such Payment Default shall not
have been cured within any applicable cure period or waived in writing
by the requisite holder or holders of such Superior Indebtedness; and
(C) less than 120 days shall have
elapsed after the date on which such Payment Default shall have
occurred or, if any Judicial Proceeding shall have been commenced with
respect to the Superior Indebtedness during said 120 day period,
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such Judicial Proceeding shall no longer be pending or shall no longer
be pursued diligently and in good faith (the period during which the
restrictions imposed by this subdivision (i) are in effect being
hereafter referred to as a "Payment Default Blockage Period"); or
(ii) all of the following four conditions
shall be satisfied:
(A) a default other than a Payment
Default shall have occurred with respect to any Superior Indebtedness
(a "Covenant Default") which permits the holder or holders thereof to
accelerate the maturity thereof;
(B) the Borrower and the holder or
holders of the Subordinated Indebtedness shall have received written
notice (given as provided in Section 14.4) (each a "Subordination
Notice") of such Covenant Default from any holder or holders of such
Superior Indebtedness, or their representative or representatives
(which notice shall state that it is a "Subordination Notice" and shall
make explicit reference to the provisions of this Section 10.4);
(C) such Covenant Default shall not
have been cured within any applicable cure period or waived in writing
by the requisite holder or holders of the Superior Indebtedness with
respect to which such Covenant Default shall have occurred; and
(D) less than 120 days shall have
elapsed after the date of receipt by the Borrower and the holders of
the Subordinated Indebtedness of such Subordination Notice, or if any
Judicial Proceeding shall have been commenced with respect to the
Superior Indebtedness during said 120 day period, any such Judicial
Proceeding shall no longer be pending or shall no longer be pursued
diligently and in good faith (the period during which the restrictions
imposed by this subdivision (ii) are in effect being hereinafter
referred to as a "Covenant Default Blockage Period") (Payment Default
Blockage Periods and Covenant Default Blockage Periods being
hereinafter collectively referred to as the "Blockage Periods" and each
as a "Blockage Period");
PROVIDED, however, that, for the purpose of this Section 10.4(a), (x) Blockage
Periods shall not be in effect for more than an aggregate of 120 days during any
period of 360 consecutive days, (y) Blockage Periods shall not be in effect on
more than three occasions, and (z) no facts or circumstances known to the
holders of Superior Indebtedness giving any Subordination Notice and
constituting a Covenant Default on the date any Subordination Notice is given
may be used as a basis for any subsequent Subordination Notice.
(b) The restrictions imposed by Section 10.4(a)
shall cease to apply and the Borrower may resume payments in respect of the
Subordinated Indebtedness (including any payments which shall not have been made
on account of the provisions of this Section 10, but excluding any payments
which may have become due upon any acceleration of the maturity of the
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Subordinated Indebtedness) or any judgment with respect thereto, and may
repurchase, prepay, redeem or retire the Notes:
(i) in the case of a Payment Default,
upon the earlier to occur of (A) the cure or written waiver thereof by the
requisite holder or holders of the Superior Indebtedness with respect to which
such Payment Default shall have occurred or (B) the expiration of the Payment
Default Blockage Period or the earlier termination of such Blockage Period by
such requisite holder or holders of such Superior Indebtedness; or
(ii) in the case of a Covenant Default, upon
the earlier to occur of (A) the cure or written waiver of such Covenant Default
by the requisite holder or holders of the Superior Indebtedness with respect to
which such Covenant Default shall have occurred or (B) the expiration of the
Covenant Default Blockage Period or the earlier termination of such Blockage
Period by such requisite holder or holders of such Superior Indebtedness.
SECTION 10.5 PAYMENTS AND DISTRIBUTIONS RECEIVED. If any
payment or distribution of any kind or character, whether in cash, property or
securities (other than Permissible Securities), shall be received by any holder
of any of the Subordinated Indebtedness or any agent for such persons in
contravention of this Section 10, such payment or distribution shall, to the
extent permitted by law, be held in trust for the benefit of, and shall be paid
over or delivered and transferred to, the holders of the Superior Indebtedness,
or their representative or representatives, ratably according to the aggregate
amount remaining unpaid on account of such Superior Indebtedness, for
application to the payment thereof, to the extent necessary to pay all such
Superior Indebtedness in full, after giving effect to any concurrent payment or
distribution, or provision therefor, to the holders of such Superior
Indebtedness.
SECTION 10.6 SUBROGATION. Subject to the payment in full of
all Superior Indebtedness, in case cash, property or securities otherwise
payable or deliverable to the holders of the Subordinated Indebtedness shall
have been applied pursuant to this Section 10 to the payment of Superior
Indebtedness, then and in each such case, the holders of the Subordinated
Indebtedness and the Agent on their behalf shall be subrogated to the rights of
each holder of Superior Indebtedness to receive any further payment or
distribution in respect of or applicable to the Superior Indebtedness; and, for
the purposes of such subrogation, no payment or distribution to the holders of
Superior Indebtedness of any cash, property or securities to which any holder of
Subordinated Indebtedness would be entitled except for the provisions of this
Section 10 shall, and no payment over pursuant to the provisions of this Section
10 to the holders of Superior Indebtedness by the holders of the Subordinated
Indebtedness shall as between the Borrower, its creditors other than the holders
of Superior Indebtedness and the holders of Subordinated Indebtedness, be deemed
to be a payment by the Borrower to or on account of Superior Indebtedness.
SECTION 10.7 OBLIGATIONS UNIMPAIRED. The provisions of this
Section 10 are solely for the purpose of defining the relative rights of the
holders of Superior Indebtedness on the one hand and the holders of Subordinated
Indebtedness on the other hand, and (a) subject to the rights, if any, under
this Section 10 of the holders of Superior Indebtedness, nothing in this Section
10 shall (i) impair as
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between the Borrower and the holder of any Subordinated Indebtedness and the
Agent the obligation of the Borrower, which is unconditional and absolute, to
pay to the Agent for the account of the holder thereof all amounts due thereon
in accordance with the terms thereof or (ii) prevent the Agent on behalf of the
holder of any Subordinated Indebtedness from exercising all remedies otherwise
available to the Agent or such holder, whether arising under the Notes, the Loan
Documents, applicable law or otherwise, or (iii) affect the relative rights of
the Agent or the holders of the Subordinated Indebtedness and creditors of the
Borrower other than the holders of the Superior Indebtedness, and (b) no Person
is entitled to any third party beneficiary rights or other similar rights on
account of or under this Section 10 other than the holders of the Superior
Indebtedness. The failure to make any payment due in respect of the Subordinated
Indebtedness or to comply with any of the terms and conditions of the Notes or
the Loan Documents by reason of any provision of this Section 10 shall not be
construed as preventing the occurrence of any Default or Event of Default with
respect to the Subordinated Indebtedness.
Nothing in this Section 10 or elsewhere in this Agreement, the Notes
or the other Loan Documents is intended to or shall affect the obligation of
the Borrower to make, or prevent the Borrower from making, at any time except
during the pendency of any Proceeding described in Section 10.3, and except
during the continuance of any Blockage Period specified in Section 10.4,
payments at any time of the principal of, interest on, or premium on, the Notes
or to repay, prepay or retire the Notes.
SECTION 10.8 HOLDERS OF SUBORDINATED INDEBTEDNESS ENTITLED TO
ASSUME PAYMENTS NOT PROHIBITED IN ABSENCE OF NOTICE. The Borrower shall give
prompt written notice to Agent and each holder of Subordinated Indebtedness of
any fact known to the Borrower which would prohibit the making of any payment in
respect of the Subordinated Indebtedness, and shall provide to Agent and each
such holder the names and addresses of the holders of the Superior Indebtedness,
or their representatives. The Agent and holders of the Subordinated Indebtedness
shall be entitled to rely on the foregoing list without independent
verification. Neither Agent nor any holder of Subordinated Indebtedness shall at
any time be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to it, unless and until Agent shall have
received written notice thereof (given as provided in Section 14.4) from the
Borrower or from any holder of Superior Indebtedness or any agent or
representative thereof. Prior to the receipt of any such notice, Agent and each
holder of Subordinated Indebtedness shall be entitled to assume conclusively
that no such facts exist, without, however, limiting any right of any holder of
Superior Indebtedness under this Section 10 to recover from any holder of the
Subordinated Indebtedness any payment made in contravention of this Section 10.
Each payment on the Subordinated Indebtedness or prepayment or retirement of the
Notes by the Borrower shall be deemed to constitute a representation by the
Borrower that such payment, prepayment or retirement is permitted to be paid or
made by the Borrower under this Section 10.
Agent and each holder of Subordinated Indebtedness shall be entitled to
rely on the delivery to it of a written notice by a person representing himself
to be a holder of Superior Indebtedness or to be the agent or representative of
any holder of Superior Indebtedness to establish that such notice has been given
by any such person. In the event that Agent or such
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holder of Subordinated Indebtedness determines in good faith that further
evidence is required with respect to the right of any such person to participate
in any payment or distribution pursuant to this Section 10, Agent or such holder
of Subordinated Indebtedness may request such person to furnish evidence to the
reasonable satisfaction of Agent or such holder of Subordinated Indebtedness as
to any fact pertinent to the rights of such person under this Section 10, and if
such evidence is not furnished, Agent or such holder of Subordinated
Indebtedness may defer any payment to such person pending judicial determination
as to the right of such person to receive such payment.
SECTION 10.9 SECTION 10 NOT TO PREVENT EVENTS OF DEFAULT. The
failure to make a payment on account of principal or interest, or premium, on
the Notes or to pay, retire or redeem the Notes by reason of any provision in
this Section 10 shall not be construed as preventing the occurrence of an Event
of Default under Section 9.1.
SECTION 11. THE AGENT.
SECTION 11.1 AUTHORIZATION. The Agent is authorized to take
such action on behalf of each of the Lenders and to exercise all such powers as
are hereunder and under any of the other Loan Documents and any related
documents delegated to the Agent, together with such powers as are reasonably
incident thereto, PROVIDED that no duties or responsibilities not expressly
assumed herein or therein shall be implied to have been assumed by the Agent.
The obligations of Agent hereunder are primarily administrative in nature, and
nothing contained in this Agreement or any of the other Loan Documents shall be
construed to constitute the Agent as a trustee for any Lender or to create any
agency or fiduciary relationship. The Borrower and any other Person shall be
entitled to conclusively rely on a statement from the Agent that it has the
authority to act for and bind the Lenders pursuant to this Agreement and the
other Loan Documents.
SECTION 11.2 EMPLOYEES AND AGENTS. The Agent may exercise its
powers and execute its duties by or through employees or agents and shall be
entitled to take, and to rely on, advice of counsel concerning all matters
pertaining to its rights and duties under this Agreement and the other Loan
Documents. The Agent may utilize the services of such Persons as the Agent may
reasonably determine, and all reasonable fees and expenses of any such Persons
shall be paid by the Borrower.
SECTION 11.3 NO LIABILITY. Neither the Agent nor any of its
shareholders, directors, officers or employees nor any other Person assisting
them in their duties nor any agent, or employee thereof, shall be liable for any
waiver, consent or approval given or any action taken, or omitted to be taken,
in good faith by it or them hereunder or under any of the other Loan Documents,
or in connection herewith or therewith, or be responsible for the consequences
of any oversight or error of judgment whatsoever, except that the Agent or such
other Person, as the case may be, shall be liable for losses due to its willful
misconduct or gross negligence.
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SECTION 11.4 NO REPRESENTATIONS. The Agent shall not be
responsible for the execution or validity or enforceability of this Agreement,
the Notes, any of the other Loan Documents or any instrument at any time
constituting, or intended to constitute, collateral security for the Notes, or
for the value of any such collateral security or other assets of the Borrower or
for the validity, enforceability or collectability of any such amounts owing
with respect to the Notes, or for any recitals or statements, warranties or
representations made herein, or any agreement, instrument or certificate
delivered in connection therewith or in any of the other Loan Documents or in
any certificate or instrument hereafter furnished to it by or on behalf of the
Borrower, or any of the Borrower's Subsidiaries, or be bound to ascertain or
inquire as to the performance or observance of any of the terms, conditions,
covenants or agreements herein or in any other of the Loan Documents. The Agent
shall not be bound to ascertain whether any notice, consent, waiver or request
delivered to it by the Borrower or any of its Subsidiaries or any holder of any
of the Notes shall have been duly authorized or is true, accurate and complete.
The Agent has not made nor does it now make any representations or warranties,
express or implied, nor does it assume any liability to the Lenders, with
respect to the creditworthiness or financial condition of the Borrower or any of
its Subsidiaries. Each Lender acknowledges that it has, independently and
without reliance upon the Agent or any other Lender, and based upon such
information and documents as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender, based upon such information and documents as it deems
appropriate at the time, continue to make its own credit analysis and decisions
in taking or not taking action under this Agreement and the other Loan
Documents.
SECTION 11.5 PAYMENTS.
(a) A payment by the Borrower to the Agent
hereunder or under any of the other Loan Documents for the account of any Lender
shall constitute a payment to such Lender. The Agent agrees to distribute to
each Lender not later than one Business Day after the Agent's receipt of good
funds, determined in accordance with the Agent's customary practices, such
Lender's PRO RATA share of payments received by the Agent for the account of the
Lenders except as otherwise expressly provided herein or in any of the other
Loan Documents. In the event that the Agent fails to distribute such amounts
within one Business Day as provided above, the Agent shall pay interest on such
amount at a rate per annum equal to the Federal Funds Effective Rate from time
to time in effect.
(b) If in the opinion of the Agent the
distribution of any amount received by it in such capacity hereunder, under the
Notes or under any of the other Loan Documents might involve it in liability, it
may refrain from making distribution until its right to make distribution shall
have been adjudicated by a court of competent jurisdiction. If a court of
competent jurisdiction shall adjudge that any amount received and distributed by
the Agent is to be repaid, each Person to whom any such distribution shall have
been made shall either repay to the Agent its proportionate share of the amount
so adjudged to be repaid or shall pay over the same in such manner and to such
Persons as shall be determined by such court.
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SECTION 11.6 HOLDERS OF NOTES. Subject to the terms of Section
13.1, the Agent may deem and treat the payee of any Note as the absolute owner
or purchaser thereof for all purposes hereof until it shall have been furnished
in writing with a different name by such payee or by a subsequent holder,
assignee or transferee.
SECTION 11.7 INDEMNITY. The Lenders ratably agree hereby to
indemnify and hold harmless the Agent from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent has not been reimbursed by
the Borrower as required by Section 12), and liabilities of every nature and
character arising out of or related to this Agreement, the Notes or any of the
other Loan Documents or the transactions contemplated or evidenced hereby or
thereby, or the Agent's actions taken hereunder or thereunder, except to the
extent that any of the same shall be directly caused by the Agent's willful
misconduct or gross negligence.
SECTION 11.8 AGENT AS LENDER. In its individual capacity, BKB
shall have the same obligations and the same rights, powers and privileges in
respect to its Commitment and its Note, and as the holder of any of the Notes as
it would have were it not also the Agent.
SECTION 11.9 RESIGNATION. The Agent may resign at any time by
giving 30 calendar days' prior written notice thereof to the Lenders and the
Borrower. Upon any such resignation, the Majority Holders shall have the right
to appoint as a successor Agent any Lender or any bank, life insurance company,
financial institution or other Person which performs similar functions whose
senior debt obligations are rated not less than "A" or its equivalent by Moody's
Investors Service, Inc. or not less than "A" or its equivalent by Standard &
Poor's corporation and which has a net worth of not less than $500,000,000. Any
such resignation shall be effective upon appointment and acceptance of a
successor agent selected by the Majority Holders. If no successor Agent shall
have been appointed and shall have accepted such appointment within fifteen (15)
days, then the retiring Agent may, on behalf of the Lenders, appoint a successor
Agent, which shall be a bank, life insurance company, financial institution or
other Person which performs similar functions whose debt obligations are rated
not less than "A" or its equivalent by Moody's Investors Service, Inc. or not
less than "A" or its equivalent by Standard & Poor's Corporation and which has a
net worth of not less than $500,000,000. Unless a Default or Event of Default
shall have occurred and be continuing, such successor Agent shall be reasonably
acceptable to the Borrower. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring or removed Agent, and the retiring Agent shall be discharged from its
duties and obligations hereunder as Agent. After any retiring Agent's
resignation, the provisions of this Agreement and the other Loan Documents shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Agent.
SECTION 11.10 DUTIES IN THE CASE OF ENFORCEMENT. In case one
or more Events of Default have occurred and shall be continuing, and whether or
not acceleration of the indebtedness evidenced by the Notes shall have occurred,
the Agent shall, if (a) so requested by the Majority Holders and (b) the Lenders
have provided to the Agent such additional indemnities and
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assurances against expenses and liabilities as the Agent may reasonably request,
proceed to exercise all or any legal and equitable and other rights or remedies
as it may have. The Majority Holders may direct the Agent in writing as to the
method and the extent of any such exercise, the Lenders hereby agreeing to
indemnify and hold the Agent harmless from all liabilities incurred in respect
of all actions taken or omitted in accordance with such directions, PROVIDED
that the Agent need not comply with any such direction to the extent that the
Agent reasonably believes the Agent's compliance with such direction to be
unlawful or commercially unreasonable in any applicable jurisdiction.
SECTION 12. EXPENSES
The Borrower agrees to pay (a) the reasonable costs of producing and
reproducing this Agreement, the other Loan Documents and the other agreements
and instruments mentioned herein, (b) any stamp or other taxes (including any
interest and penalties in respect thereto) which may be payable or be determined
to be in connection with the execution and delivery of this Agreement and the
Notes, whether or not the Notes are then outstanding (and the Borrower shall
indemnify and hold the Agent and the Lenders harmless against any liability in
respect to such taxes), (c) the reasonable fees, expenses and disbursements of
the Agent's counsel (including an allocation for any in-house counsel) incurred
in connection with the preparation, execution and delivery of this Agreement,
the Notes and the other Loan Documents and the transactions contemplated hereby,
and any amendments, modifications, approvals, consents or waivers hereto or
hereunder, (d) the cost of delivering to or from Agent's office, insured to
Agent's satisfaction, the Note payable to BKB on the Closing Date, any Note
surrendered by a Lender to the Borrower pursuant to this Agreement and any Note
issued to a Lender in substitution or replacement for a surrendered Note, (e)
all reasonable out-of-pocket expenses (including reasonable attorneys' fees and
costs, which attorneys may be employees of the Agent or any Lender) incurred by
the Agent or any Lender in connection with the enforcement of or preservation of
rights under any of the Loan Documents against the Borrower or the
administration thereof after the occurrence of a Default or Event of Default.
Each Lender shall pay its own legal fees and expenses incurred in connection
with a transfer of its Note or any portion thereof. The covenants of this
Section 12 shall survive payment or satisfaction of payment of amounts owing
with respect to the Notes.
SECTION 13. ASSIGNMENT AND PARTICIPATION
SECTION 13.1 CONDITION TO ASSIGNMENT BY LENDERS. Except as
provided herein, each Lender may assign to one or more banks or other entities
all or a portion of its interests, rights and obligations under this Agreement
(including all or a portion of its Commitment Percentage and Commitment and the
same portion of the Loans at the time owing to it, and the Notes held by it);
provided that (a) the Agent shall have given its prior written consent to such
assignment, which consent shall not be unreasonably withheld or delayed
(provided that such consent shall not be required for any assignment to another
Lender, to a Person which is under common control with the assigning Lender or
to a wholly-owned Subsidiary of such Lender provided that such assignee shall
remain a wholly-owned Subsidiary of such Lender), (b) each such assignment shall
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be of a constant, and not a varying, percentage of all the assigning Lender's
rights and obligations under this Agreement, (c) the parties to such assignment
shall execute and deliver to the Agent, for recording in the Register (as
hereinafter defined), a notice of such assignment, together with any Notes
subject to such assignment, (d) in no event shall any voting, consent or
approval rights of a Lender be assigned to any Person controlling, controlled by
or under common control with, or which is not otherwise free from influence or
control by, the Borrower which rights shall instead be allocated PRO RATA among
the other remaining Lenders, and (e) such assignee shall acquire an interest in
the Loans of not less than $2,500,000.00. It is BKB's current intent to hold at
least a $30,000,000.00 Commitment, although nothing herein shall be deemed a
covenant of BKB to hold any amount of the Loans. Upon such execution, delivery,
acceptance and recording, of such notice of assignment, (i) the assignee
thereunder shall be a party hereto and all other Loan Documents executed by the
Lenders and, to the extent provided in such assignment, have the rights and
obligations of a Lender hereunder, (ii) the assigning Lender shall, to the
extent provided in such assignment and upon payment to the Agent of the
registration fee referred to in Section 13.2, be released from its obligations
under this Agreement, and (iii) the Agent may unilaterally amend SCHEDULE 1 to
reflect such assignment. Notice of each assignment shall be promptly delivered
to Borrower. In connection with each assignment, the assignee shall represent
and warrant to the Agent, the assignor and each other Lender as to whether such
assignee is controlling, controlled by, under common control with or is not
otherwise free from influence or control by, the Borrower.
SECTION 13.2 REGISTER. The Agent shall maintain a copy of each
assignment delivered to it and a register or similar list (the "Note Register")
for the recordation of the names and addresses of the Lenders and the Commitment
Percentages of, and principal amount of the Loans owing to the Lenders from time
to time. The entries in the Note Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agent and the Lenders may treat each
Person whose name is recorded in the Note Register as a Lender hereunder for all
purposes of this Agreement. The Note Register shall be available for inspection
by the Borrower and the Lenders at any reasonable time and from time to time
upon reasonable prior notice. Upon each such recordation, the assigning Lender
agrees to pay to the Agent a registration fee in the sum of $2,000.
SECTION 13.3 NEW NOTES. Upon its receipt of an assignment
executed by the parties to such assignment, together with each Note subject to
such assignment, the Agent shall (a) record the information contained therein in
the Register, and (b) give prompt notice thereof to the Borrower and the Lenders
(other than the assigning Lender). Within five Business Days after receipt of
such notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for each surrendered Note, a new Note to the order of such
assignee in an amount equal to the amount assumed by such assignee pursuant to
such assignment and, if the assigning Lender has retained some portion of its
obligations hereunder. Such new Notes shall provide that they are replacements
for the surrendered Notes, shall be in an aggregate principal amount equal to
the aggregate principal amount of the surrendered Notes, shall be dated the
effective date of such assignment and shall otherwise be in substantially the
form of the assigned Notes. The surrendered Notes shall be canceled and returned
to the Borrower.
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SECTION 13.4 PARTICIPATIONS. Each Lender may sell
participations to one or more banks or other entities in all or a portion of
such Lender's rights and obligations under this Agreement and the other Loan
Documents; PROVIDED that (a) any such sale or participation shall not affect the
rights and duties of the selling Lender hereunder to the Borrower, (b) such sale
and participation shall not entitle such participant to any rights or privileges
under this Agreement or the Loan Documents (including, without limitation, the
right to approve waivers, amendments or modifications), (c) such participant
shall have no direct rights against the Borrower, (d) such sale is effected in
accordance with all applicable laws, and (e) such participant shall not be a
Person controlling, controlled by or under common control with, or which is not
otherwise free from influence or control by, the Borrower. Any Lender which
sells a participation shall promptly notify the Agent of such sale and the
identity of the purchaser of such interest.
SECTION 13.5 PLEDGE BY LENDER. Any Lender may at any time
pledge all or any portion of its interest and rights under this Agreement
(including all or any portion of its Note) to any of the twelve Federal Reserve
Banks organized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section
341. No such pledge or the enforcement thereof shall release the pledgor Lender
from its obligations hereunder or under any of the other Loan Documents.
SECTION 13.6 COOPERATION; DISCLOSURE. The Borrower agrees to
promptly cooperate with any Lender in connection with any proposed assignment or
participation of all or any portion of its Commitment. The Borrower agrees that
in addition to disclosures made in accordance with standard banking practices
any Lender may disclose information obtained by such Lender pursuant to this
Agreement to assignees or participants and potential assignees or participants
hereunder.
SECTION 14. MISCELLANEOUS
SECTION 14.1 LOSS, THEFT, ETC. OF NOTES. Upon receipt of
evidence satisfactory to the Borrower of the loss, theft, mutilation or
destruction of a Note, and in the case of any such loss, theft or destruction
upon delivery of a bond of indemnity in such form and amount as shall be
reasonably satisfactory to the Borrower, or in the event of such mutilation upon
surrender and cancellation of such Note, the Borrower will make and deliver
without expense to the applicable Lender a new Note, of the same form and tenor,
in lieu of such lost, stolen, destroyed or mutilated Note. If such Lender or any
subsequent institutional holder is the owner of any such lost, stolen or
destroyed Note, then the affidavit of an authorized officer of such owner,
setting forth the fact of lost, theft or destruction and of its ownership of
such Note at the time of such loss, theft or destruction shall be accepted as
satisfactory evidence thereof and nothing further shall be required as a
condition to the execution and delivery of a new Note.
SECTION 14.2 SURVIVAL OF COVENANTS. All covenants, agreements,
representations and warranties made herein, in the Notes, in any of the other
Loan Documents or in any documents or other papers delivered by or on behalf of
the Borrower pursuant hereto shall be deemed to have been relied upon by the
Lenders and the Agent, notwithstanding any investigation heretofore or hereafter
made by any of them, and shall survive the execution of this Agreement and the
making
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of the Loans by Lenders, as herein contemplated, and shall continue in full
force and effect so long as any amount due under this Agreement or the Notes or
any of the other Loan Documents remains outstanding. The indemnification
obligations of the Borrower provided herein shall survive the full repayment of
amounts due and the termination of the obligations of the Lenders hereunder and
thereunder to the extent provided herein and therein. All statements contained
in any certificate or other paper delivered to the Lenders or Agent at any time
by or on behalf of the Borrower or any of the Subsidiaries pursuant hereto or in
connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrower hereunder.
SECTION 14.3 WAIVER OF STAY, EXTENSION OR USURY. The Borrower
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, plead, or in any manner whatsoever claim or take the benefit
or advantage of, any stay or extension law or any usury law or other law which
would prohibit or forgive the Borrower from paying all or any portion of the
principal of, premium, if any, or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter enforced, or which may effect the
covenants or the performance of this Agreement or the Notes or the other Loan
Documents and (to the extent that it may lawfully do so), the Borrower hereby
expressly waives all benefit or advantage of any such law.
SECTION 14.4 NOTICES. Each notice, demand, election or request
provided for or permitted to be given pursuant to this Agreement or the Notes
(hereinafter in this Section 14.4 referred to as "Notice"), must be in writing
and shall be deemed to have been properly given or served by personal delivery
or by sending same by overnight courier or by depositing same in the United
States Mail, postage prepaid and registered or certified, return receipt
requested, as follows:
If to the Borrower: M/I Schottenstein Homes, Inc.
3 Easton Oval
Columbus, Ohio 43219
Attn: Ms. Kerrii B. Anderson
With a copy to: M/I Schottenstein Homes, Inc.
3 Easton Oval
Columbus, Ohio 43219
Attn: Paul S. Coppel, Esq.
If to the Agent or BKB: BankBoston, N.A.
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346
Attn: Mr. Daniel J. Sullivan
With a copy to: BankBoston, N.A.
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Department
-54-
<PAGE> 60
and to each other person or entity which may become a Lender hereunder at such
address as may be specified by such Lender. Each Notice shall be effective upon
being personally delivered or upon being sent by overnight courier or upon being
deposited in the United States Mail as aforesaid. The time period in which a
response to such Notice must be given or any action taken with respect thereto
(if any), however, shall commence to run from the date of receipt if personally
delivered or sent by overnight courier, or if so deposited in the United States
Mail, the earlier of three (3) Business Days following such deposit or the date
of receipt as disclosed on the return receipt. Rejection or other refusal to
accept or the inability to deliver because of changed address for which no
notice was given shall be deemed to be receipt of the Notice sent. By giving at
least fifteen (15) days prior Notice thereof, the Borrower, a Lender or Agent
shall have the right from time to time and at any time during the term of this
Agreement to change their respective addresses and each shall have the right to
specify as its address any other address within the United States of America.
SECTION 14.5 GOVERNING LAW. THIS AGREEMENT AND THE NOTES ARE
CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND SHALL FOR ALL
PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF SUCH
COMMONWEALTH (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). THE
BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE COMMONWEALTH OF
MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY SUCH
SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN SECTION
14.4 THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE
TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN
AN INCONVENIENT COURT.
SECTION 14.6 HEADINGS. The captions in this Agreement are for
convenience of reference only and shall not define or limit the provisions
hereof.
SECTION 14.7 COUNTERPARTS. This Agreement and any amendment
hereof may be executed in several counterparts and by each party on a separate
counterpart, each of which when so executed and delivered shall be an original,
and all of which together shall constitute one instrument. In proving this
Agreement it shall not be necessary to produce or account for more than one such
counterpart signed by the party against whom enforcement is sought.
SECTION 14.8 ENTIRE AGREEMENT, ETC. The Loan Documents and any
other documents executed in connection herewith or therewith express the entire
understanding of the parties with respect to the transactions contemplated
hereby. Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated, except as provided in Section 14.9.
-55-
<PAGE> 61
SECTION 14.9 CONSENTS, AMENDMENTS, WAIVERS, ETC. Except as
otherwise expressly provided in this Agreement, any consent or approval required
or permitted by this Agreement or the other Loan Documents may be given, and any
term of this Agreement or the other Loan Documents or of any other instrument
related hereto or mentioned herein may be amended, and the performance or
observance by the Borrower of any terms of this Agreement or the other Loan
Documents or such other instrument or the continuance of any Default or Event of
Default may be waived (either generally or in a particular instance and either
retroactively or prospectively) with, but only with, the written consent of the
Majority Holders. Notwithstanding the foregoing, none of the following may occur
without the written consent of each Lender: a change in the rate of interest on
and the term of the Notes; a change in the amount of the Commitments of the
Lenders; a change in the amount of the Notes or an individual Note; a
forgiveness, reduction or waiver of the principal of any unpaid Note or any
interest thereon or fee payable under the Loan Documents; the postponement of
any date fixed for any payment of principal of or interest on the Notes; an
extension of the Maturity Date; the release of the Borrower except as otherwise
provided herein; and amendment of the definition of Majority Holders or of any
requirement for consent by all of the Lenders; an amendment to this Section
14.9; or an amendment of any provision of this Agreement or the Loan Documents
which requires the approval of all of the Lenders or the Majority Holders to
require a lesser number of Lenders to approve such action. No waiver shall
extend to or affect any obligation not expressly waived or impair any right
consequent thereon. No course of dealing or delay or omission on the part of the
Agent or any Lender in exercising any right shall operate as a waiver thereof or
otherwise be prejudicial thereto. No notice to or demand upon the Borrower shall
entitle the Borrower to other or further notice or demand in similar or other
circumstances.
SECTION 14.10 SEVERABILITY. The provisions of this Agreement
and the other Loan Documents are severable, and if any one clause or provision
hereof shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
clause or provision, or part thereof, in such jurisdiction, and shall not in any
manner affect such clause or provision in any other jurisdiction, or any other
clause or provision of this Agreement and the other Loan Documents in any
jurisdiction.
SECTION 14.11 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon the Borrower and its successors and assigns and subject to the
terms of this Agreement shall inure to the benefit of the Lenders and Agent and
their successors and assigns, including each successive holder or holders of the
Notes. Notwithstanding the foregoing, the Borrower may not assign any of its
rights or obligations under the Loan Documents without the prior written consent
of the Lenders.
SECTION 14.12 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
AGENT AND THE LENDERS HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO
ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS
AGREEMENT, THE NOTES OR ANY OF THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR
OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND
OBLIGATIONS. THE BORROWER (A) CERTIFIES THAT NO
-56-
<PAGE> 62
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY LENDER OR AGENT HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH LENDER OR AGENT WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT THE
AGENT AND THE LENDERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THE WAIVER
AND CERTIFICATION CONTAINED IN THIS SECTION 14.12.
SECTION 14.13 RELATIONSHIP. The relationship between the
Lenders and the Borrower is solely that of a creditor and debtor, and nothing
contained herein in any of the other Loan Documents or elsewhere shall in any
manner be construed as making the parties hereto partners, shareholders, joint
venturers or any other relationship other than creditor and debtor, and neither
the Agent nor any Lender has any fiduciary relationship with or fiduciary duty
to the Borrower arising out of or in connection with this Agreement or the other
Loan Documents or the transactions contemplated hereunder or thereunder. In
addition, the Borrower agrees that notwithstanding BKB'S participation as a bank
under the Senior Credit Agreement or its capacity now or hereafter as a holder
of any other Senior Debt or Additional Permitted Senior Debt, in any proceeding
relating to the Borrower or any of its Subsidiaries under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution,
liquidation or similar proceeding, the Borrower will not challenge the Lenders'
right to receive payment of the Indebtedness evidenced by the Notes as a
creditor of the Borrower on the grounds of the equitable subordination
principles contained in Section 510 of Bankruptcy Code or any similar provision
under any applicable law. The covenants contained in this Section 14.13 are a
material consideration and inducement to the Lenders to making the Loans.
SECTION 14.14 DEALINGS WITH THE BORROWER. The Agent and the
Lenders and their affiliates may accept deposits from, extend credit to and
generally engage in any kind of banking, trust or other business with the
Borrower and its Subsidiaries, or any of their Affiliates regardless of the
capacity of the Agent or a Lender hereunder.
SECTION 14.15 TIME OF THE ESSENCE. Time is of the essence with
respect to each and every covenant, agreement and obligation of the Borrower
under this Agreement and the other Loan Documents.
-57-
<PAGE> 63
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement
as a sealed instrument as of the date first set forth above.
M/I SCHOTTENSTEIN HOMES, INC.,
an Ohio corporation
By: /s/ Robert H. Schottenstein
----------------------------------------
Name: Robert H. Schottenstein
--------------------------------
Title: President
--------------------------------
Attest: /s/ Paul S. Coppel
------------------------------------
Name: Paul S. Coppel
------------------------------
Title: Senior Vice President
------------------------------
BANKBOSTON, N.A., individually and as Agent
By: /s/ Daniel J. Sullivan
----------------------------------------
Daniel J. Sullivan, Vice President
-58-
<PAGE> 64
SCHEDULE 1
----------
LENDERS AND COMMITMENTS
Commitment
Commitment Percentage
---------- ----------
BankBoston, N.A. $ 50,000,000.00 100%
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
------------- -----
$ 50,000,000.00 100%
<PAGE> 65
SCHEDULE 3.3
------------
EXAMPLE OF CALCULATION OF PREPAYMENT FEE
<PAGE> 66
SCHEDULE 3.3
------------
Please note that the following are hypothetical examples of the prepayment fees
which would be due upon early prepayment of the loan (permitted after a four
year lockout). The Treasury rates which have been selected are hypothetical.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Prepayment Date: 8/29/2001 8/29/2002 8/29/2003 8/29/2003
Maturity Date: 8/29/2004 8/29/2004 8/29/2004 8/29/2004
Prepaid early by: 3 years 2 years 1 year 1 year
Coupon Rate: 9.51% 9.51% 9.51% 9.51%
Rate (on breakage date)
of a Treasury with a
maturity coterminus
with the Maturity Date:
add 50 bp: 4.01% 6.01% 8.01% 10.01%
.50% .50% .50% .50%
---- ---- ---- ----
4.51% 6.51% 8.51% 10.51%
Rate Differential: 5.0% 3.0% 1.0% -0-
Prepayment Amount: $50,000,000 $50,000,000 $50,000,000 $50,000,000
Annual Breakage: $ 2,500,000 $ 1,500,000 $ 500,000 -0-
Quarterly Breakage $ 625,000 $ 375,000 $ 125,000 -0-
Quarterly Disc Rate (1): 2.3775% 2.3775% 2.3775% 2,3775%
Number of Periods: 12 8 4 4
Payment Due
PV (Quarterly discounting): $ 6,458,915 $ 2,702,901 $ 471,637 $ -0-
<FN>
(1) Coupon rate divided by 4
</TABLE>
<PAGE> 67
SCHEDULE 5.15(a)
----------------
SUBSIDIARIES OF THE BORROWER
1. M/I Financial Corp., an Ohio corporation. M/I Financial Corp. is
wholly-owned by the Borrower.
2. 601RS, Inc., an Ohio corporation. 601RS, Inc. is wholly-owned by the
Borrower.
3. M/I Homes, Inc., an Arizona corporation. M/I Homes, Inc. is
wholly-owned by the Borrower.
4. M/I Homes Construction, Inc., an Arizona corporation. M/I Homes
Construction, Inc. is wholly-owned by the Borrower.
<PAGE> 68
SCHEDULE 5.15(b)
----------------
SCHEDULE OF PARTNERSHIPS AND JOINT VENTURES
<PAGE> 69
August 29, 1997
M/I SCHOTTENSTEIN HOMES, INC.
JOINT VENTURE LISTING
<TABLE>
<CAPTION>
JOINT % OF BANK YEAR
VENTURE NAME PARTNERS NAMES OWNERSHIP FEI# ACCOUNT # FORMED
- -------------- -------------- --------- ---- --------- ------
<S> <C> <C> <C> <C> <C>
COLUMBUS
JOINT VENTURES
- --------------
Taylor Road M/I Schottenstein Homes 33 1/3 31-1283250 82-7826281 1989
Associates Borrow Corporation 33 1/3
*Homewood Corporation 33 1/3
Maxtown Road M/I Schottenstein Homes 50 31-1283249 0189-1382017 1989
Associates *Homewood Corporation 50
Scioto Darby Ridge M/I Schottenstein Homes 50 31-1316123 0189-1131941 1991
Associates *Borror Corporation 50
(Darby Glen)
Feder Road M/I Schottenstein Homes 50 31-1356311 0189-1606654 1992
Associates *Borror Corporation 50
(Thornapple Grove)
(Wexford Green)
Appian Way M/I Schottenstein Homes 50 31-1360170 0189-1647901 1992
Associates Borror Corporation 50
(Brenthurst)
Oak Creek M/I Schottenstein Homes 50 31-1376227 0189-1681624 1993
*Borror Corporation 50
Liberty Road M/I Schottenstein Homes 50 31-1367814 0189-1647943 1993
Associates *Borror Corporation 50
Tussic Road *M/I Schottenstein Homes 33 1/3 31-1414827 0189-1064649 1994
Associates Borror Corporation 33 1/3
Homewood Corporation 33 1/3
Wynstone Associates M/I Schottenstein Homes 50 31-1412122 0189-1065059 1994
*Borror Corporation 50
Hampton Oaks *M/I Schottenstein Homes 50 31-1441977 0189-1912018 1995
Associates Borror Corporation 50
(Patch)
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
JOINT % OF BANK YEAR
VENTURE NAME PARTNER NAME OWNERSHIP FEI# ACCOUNT# FORMED
- ------------ ----------- --------- --- ------- ------
<S> <C> <C> <C> <C> <C>
COLUMBUS
JOINT VENTURES
- --------------
Lehman Road *M/I Schottenstein Homes 33 1/3 31-1441974 0189-1941996 1995
Associates Borror Corporation 33 1/3
Homewood Corporation 33 1/3
Oak Creek East, *M/I Schottenstein Homes 50 31-1502540 0139-1961043 1996
LLC Borror Corporation 50
Newport Village, M/I Schottenstein Homes 50 31-1482588 0189-1721898 1996
LLC *Homewood Corporation 50
Forest Creek, M/I Schottenstein Homes 50 31-1477632 0189-1722062 1996
LLC *Borror Homes 50
Powell Road, *M/I Schottenstein Homes 50 0189-1763610 1997
LLC Homewood Corporatin 50
King Farm, LLC M/I Schottenstein Homes 50 1997
*Homewood Corporation 50
HORIZON
JOINT VENTURES
Park Place *M/I Schottenstein Homes 50 31-1246919 0189-1331916 1988
Associates Borror Homes 50
Westchester M/I Schottenstein Homes 50 31-1332319 0189-1192757 1991
Associates *Borror Corporation 50
Winchester M/I Schottenstein Homes 50 31-1377321 0189-1681682 1993
Associates *Borror Corporation 50
Park Place M/I Schottenstein Homes 50 31-1414826 0189-1064733 1994
West Assoc. Borror Corporation 50
(Hines Road)
Woods of *M/I Schottenstein Homes 33 1/3 31-1502547 0189-1960730 1996
Jefferson, LLC Borror Corporation 33 1/3
Homewood Corporation 33 1/3
Hilliard Green, *M/I Schottenstein Homes 50 31-1502539 0189-1725755 1994
LLC Borror Corporation 50
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
JOINT % OF BANK YEAR
VENTURE NAME PARTNERS NAMES OWNERSHIP FEI# ACCOUNT # FORMED
- ------------ -------------- --------- ---- --------- ------
<S> <C> <C> <C> <C> <C>
HORIZON
JOINT VENTURES
- --------------
Clifton Chase, LLC *M/I Schottenstein Homes 50 0189-1746828 1997
Borror Corporation 50
Big Run, LLC M/I Schottenstein Homes 50 1997
*Borror Corporation 50
SHOWCASE
JOINT VENTURES
- --------------
Parkshore Associates *M/I Schottenstein Homes 50 31-1441975 0189-1912063 1995
(Rennob) Multicon Builders 50
CINCINNATI
LAND
JOINT VENTURES
- --------------
Lexington Park M/I Schottenstein Homes 33 1/3 31-1345695 0678-386 1992
Associates Williamsburg Properties, 33 1/3 840092495
Inc. 33 1/3
*Robert E. Rhein Interests,
Inc.
CHARLOTTE
LAND
JOINT VENTURES
- --------------
Glynwater Associates M/I Schottenstein Homes 50 56-1854704 550000195813 1993
*Squires Enterprises 50
LIMITED
LIABILITY
CORPS
-----
Northeast Office N/I Schottenstein Homes 33 1/3 31-1444839 6645280 1995
Venture, LLC *The Georgetown Co. 33 1/3
The Limited, Inc. 33 1/3
TransOhio M/I Schottenstein Homes 49.9% 31-1463608 1996
Residential *Lawyers' Title Insurance 50.1%
Title Agency, Inc. Corp.
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
LIMITED % OF BANK YEAR
PARTNERSHIP NAME PARTNER NAMES OWNERSHIP FEI # ACCOUNT # FORMED
- ---------------- ------------- --------- ----- --------- ------
<S> <C> <C> <C> <C> <C>
PL 1992 Limited M/I Schottenstein Homes 98.75 31-1346611 0189-1605590 1992
Partnership Fabulous Two, Inc. .25 31-1348281 0189-1605655
*Fabulous Eight, Inc. 1.00 31-1348280 0189-1605668
Cascades 1992 M/I Schottenstein Homes 98.75 31-1355368 0189-1606641 1992
Limited Partnership Fabulous Two, Inc. .25 31-1348281 0189-1605655
*Fabulous Eight, Inc. 1.00 31-1348280 0189-1605668
PARENT
CORPORATION
-----------
M/I Schottenstein 31-1210837
Homes, Inc.
% OF YEAR
SUBSIDIARY OWNERSHIP FEI# FORMED
---------- --------- ---- ------
M/I Financial
Corporation 100 31-1076317 10/12/??
M/I Homes, Inc. 100 86-0852319 12/27/9?
M/I Homes
Construction, Inc. 100 86-0852320 12/27/9?
60IRS, Inc. 100 31-1505044 1997
*Tax Managing
Partner
</TABLE>
<PAGE> 73
EXHIBIT A
---------
FIXED RATE SENIOR SUBORDINATED NOTE
$50,000,000.00 August 29, 1997
FOR VALUE RECEIVED, the undersigned M/I SCHOTTENSTEIN HOMES, INC., an
Ohio corporation, hereby promises to pay to ______________________________ or
order, in accordance with the terms of that certain Credit Agreement dated
August 29, 1997 (the "Credit Agreement"), as from time to time in effect, among
the undersigned and BankBoston, N.A., individually and as Agent, to the extent
not sooner paid, on or before the Maturity Date the principal sum of FIFTY
MILLION AND NO/100 DOLLARS ($50,000,000.00), with daily interest from the date
hereof, computed as provided in the Credit Agreement, on the principal amount
hereof from time to time unpaid, at a rate per annum on each portion of the
principal amount which shall at all times be equal to the rate of interest
applicable to such portion in accordance with the Credit Agreement, and with
interest on overdue principal and, to the extent permitted by applicable law, on
overdue installments of interest and late charges at the rates provided in the
Credit Agreement. Interest shall be payable on the dates specified in the Credit
Agreement, except that all accrued interest shall be paid at the stated or
accelerated maturity hereof or upon the prepayment in full hereof. Capitalized
terms used herein and not otherwise defined herein shall have the meanings set
forth in the Credit Agreement.
Payments hereunder shall be made to BankBoston, N.A., as Agent for the
payee hereof, at the Agent's Head Office or such other address as may be
specified by the holder hereof.
This Note is issued under and pursuant to and is entitled to the
benefits of and subject to the provisions of the Credit Agreement. The principal
of this Note may be due and payable in whole or in part prior to the maturity
date stated above and is subject to mandatory prepayment in the amounts and
under the circumstances set forth in the Credit Agreement, and may be prepaid in
whole or in part, all as set forth in the Credit Agreement
Notwithstanding anything in this Note to the contrary, all agreements
between the Borrower and the Lenders and the Agent, whether now existing or
hereafter arising and whether written or oral, are hereby limited so that in no
contingency, whether by reason of acceleration of the maturity of the Note or
otherwise, shall the interest contracted for, charged or received by the Lenders
exceed the maximum amount permissible under applicable law. If, from any
circumstance whatsoever, interest would otherwise be payable to the Lenders in
excess of the maximum lawful amount, the interest payable to the Lenders shall
be reduced to the maximum amount permitted under applicable law; and if from any
circumstance the Lenders shall ever receive anything of value deemed interest by
applicable law in excess of the maximum lawful
<PAGE> 74
amount, an amount equal to any excessive interest shall be applied to the
reduction of the principal balance of the Note and to the payment of interest
or, if such excessive interest exceeds the unpaid balance of principal of the
Note, such excess shall be refunded to the Borrower. All interest paid or agreed
to be paid to the Lenders shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full period until
payment in full of the principal of the Note (including the period of any
renewal or extension thereof) so that the interest thereon for such full period
shall not exceed the maximum amount permitted by applicable law. This paragraph
shall control all agreements between the Borrower and the Lenders and the Agent.
In case an Event of Default shall occur, the entire principal amount of
this Note may become or be declared due and payable in the manner and with the
effect provided in the Credit Agreement.
This Note shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts (without giving effect to the conflict
of laws rules of any jurisdiction).
The undersigned maker hereby waives presentment, demand, notice,
protest, notice of intention to accelerate the indebtedness evidenced hereby,
notice of acceleration of the indebtedness evidenced hereby and all other
demands and notices in connection with the delivery, acceptance, performance and
enforcement of this Note, except as specifically otherwise provided in the
Credit Agreement, and assents to extensions of time of payment or forbearance or
other indulgence without notice.
This Note and the indebtedness evidenced hereby, including principal,
interest and premium, if any, shall at all times be and remain subordinate to
any and all Superior Indebtedness, as defined in the Credit Agreement, all on
the terms and to the extent set forth in the Credit Agreement.
IN WITNESS WHEREOF the undersigned has executed this Note under seal as
of the day and year first above written.
M/I SCHOTTENSTEIN HOMES, INC.,
an Ohio corporation
By:__________________________________________
Name: ____________________________________
Title:____________________________________
Attest:______________________________________
Name: ____________________________________
Title:____________________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet as of September 30, 1997 and the consolidated
statement of income for the nine months ended September 30, 1997 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,850
<SECURITIES> 0
<RECEIVABLES> 21,583
<ALLOWANCES> 0
<INVENTORY> 294,002
<CURRENT-ASSETS> 321,759
<PP&E> 12,504
<DEPRECIATION> 4,031
<TOTAL-ASSETS> 354,544
<CURRENT-LIABILITIES> 84,845
<BONDS> 0
0
0
<COMMON> 88
<OTHER-SE> 110,276
<TOTAL-LIABILITY-AND-EQUITY> 354,544
<SALES> 402,768
<TOTAL-REVENUES> 409,801
<CGS> 328,711
<TOTAL-COSTS> 328,711
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,073
<INCOME-PRETAX> 20,644
<INCOME-TAX> 8,349
<INCOME-CONTINUING> 12,295
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,295
<EPS-PRIMARY> 1.48
<EPS-DILUTED> 1.48
</TABLE>
