<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998
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OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 1-10520
HEARTLAND PARTNERS, L.P.
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(Exact name of registrant as specified in its charter)
Delaware 36-3606475
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
547 West Jackson Boulevard, Chicago, Illinois 60661
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(Address of principal executive offices) (Zip Code)
312/294-0440
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HEARTLAND PARTNERS, L. P.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
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<S> <C> <C>
Assets:
Cash............................................................ $ 64 $ 1,890
Restricted cash................................................. 1,698 724
Marketable securities (at market)............................... 147 141
Accounts receivable (net)....................................... 852 251
Accrued interest receivable..................................... 0 3
Prepaid and other assets........................................ 431 355
Investment in joint venture..................................... 303 278
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Total........................................................ 3,495 3,642
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Property:
Buildings and other............................................. 2,040 2,003
Less Accumulated depreciation................................ (890) (807)
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Net buildings and other......................................... 1,150 1,196
Land held for sale.............................................. 1,107 1,163
Housing Inventories............................................. 6,255 4,815
Land held for development....................................... 8,748 8,829
Capitalized predevelopment costs................................ 8,100 7,193
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Net properties............................................... 25,360 23,196
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Total assets............................................... $28,855 $26,838
======= =======
Liabilities:
Notes payable................................................... $10,134 $ 3,750
Accounts payable and accrued expenses........................... 2,102 724
Management fee due affiliate.................................... 319 425
Accrued real estate taxes....................................... 1,088 1,092
Allowance for claims and liabilities............................ 2,668 2,169
Unearned rents and deferred income.............................. 1,910 1,200
Distribution Payable............................................ 0 1,631
Other liabilities............................................... 1,371 356
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Total liabilities............................................ 19,592 11,347
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Partners' Capital:
General Partner................................................. (43) 28
Class A Limited Partners - 2,142 units authorized, issued and
outstanding................................................... (225) 5,902
Class B Limited Partner......................................... 9,532 9,563
Unrealized holding loss on marketable securities................ (1) (2)
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Total partners' capital...................................... 9,263 15,491
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Total liabilities and partners' capital......................... $28,855 $26,838
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
HEARTLAND PARTNERS, L. P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS AND NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(dollars in thousands except per unit data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Revenues:
---------
Property sales.............................. $ 753 $4,068 $ 3,005 $ 4,309
Less: Cost of property sales................ 795 2,234 2,918 2,254
------- ------ ------- -------
Gross profit on property sale.......... (42) 1,834 87 2,055
Portfolio income............................ 27 15 46 47
Rental income............................... 220 207 695 889
Other revenue............................... 197 57 255 238
------- ------ ------- -------
Total net revenues..................... 402 2,113 1,083 3,229
------- ------ ------- -------
Operating expenses:
-------------------
Selling expenses............................ 634 448 2,089 1,095
General and administrative expenses......... 2,440 1,557 4,805 4,301
Depreciation and amortization............... 28 29 100 78
Management fee.............................. 107 106 318 318
------- ------ ------- -------
Total expenses......................... 3,209 2,140 7,312 5,792
------- ------ ------- -------
Net Loss............................... $(2,807) $ (27) $(6,229) $(2,563)
======= ====== ======= =======
Net Loss allocated to General Partner
and Class B Limited Partner.......... $ (42) $ 0 $ (93) $ (38)
======= ====== ======= =======
Net Loss allocated to Class A
Limited Partners..................... $(2,765) $ (27) $(6,136) $(2,525)
======= ====== ======= =======
Net Loss per Class A
Limited Partnership Unit............. $ (1.29) $ (.01) $ (2.86) $ (1.18)
======= ====== ======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
HEARTLAND PARTNERS, L. P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
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<S> <C> <C>
Cash Flow From Operating Activities:
Net (loss).......................................................... $(6,229) $(2,563)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization.................................... 100 78
Loss/ (Gain) on sales of properties.............................. (87) (2,055)
Loss/ (Gain) on sale of securities............................... 0 3
Proceeds from sales of properties................................ 3,005 4,309
Net change in assets and liabilities:
(Decrease) increase in allowance for claims & liabilities........ 499 (349)
(Increase) decrease in accounts and interest receivables......... (598) 96
Increase (decrease) in accounts payable and accrued liabilities.. 1,378 740
(Increase) in management fee due HTI............................. (106) (106)
Net change in other assets and liabilities....................... 1,772 173
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Net cash flow (used in) operating activities........................ (266) 326
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Cash Flow From Investing Activities:
Capital Expenditures for inventories................................ (4,479) 0
Capital expenditures including land and development costs........... (826) (3,304)
Write-off of capitalized costs...................................... 0 335
Addition to buildings, furniture & fixtures......................... (37) 0
Amortization of security premium/ discount.......................... 0 (20)
Net sales and maturities of marketable securities................... 3 4,637
Dividend paid....................................................... (1,631) (2,719)
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Net cash (used in) provided by investing activities................. (6,970) (1,071)
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Cash Flow From Financing Activities:
(Increase) in restricted cash....................................... (974) (310)
Advance on notes payable............................................ 6,384 4,116
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Net cash flow provided by financing activities...................... 5,410 3,806
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(Decrease) increase in cash......................................... (1,826) 3,061
Cash at December 31, 1997 and 1996.................................. 1,890 931
------- -------
Cash at September 30, 1998 and 1997................................. $ 64 $ 3,992
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
HEARTLAND PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 1998
1. Consolidation
Heartland Partners, L.P. ("Heartland") was organized to engage in the ownership,
purchasing, development, leasing, marketing, construction and sale of real
estate properties. CMC Heartland Partners ("CMC") is an operating general
partnership owned 99.99% by Heartland and .01% by Heartland Technology, Inc.
("HTI"), formerly known as Milwaukee Land Company ("MLC"). HTI is the general
partner of Heartland (in such capacity, the "General Partner"). In July 1993,
Heartland Development Corporation ("HDC"), a Delaware corporation, wholly-owned
by Heartland and CMC, formed CMC Heartland Partners I, Limited Partnership
("CMCI"), a Delaware limited partnership, to undertake a planned housing
development in Minnesota. CMC has a 100% membership interest in CMC Heartland
Partners II ("CMCII"), CMC Heartland Partners III ("CMCIII") and CMC Heartland
Partners V ("CMCV"). CMCII was formed to participate in the Goose Island
Industrial park joint venture. CMCIII was formed in 1997 to develop a portion
of the Kinzie Station property in Chicago, IL. CMCV was formed in 1996 to
construct houses in a master-planned residential community in St. Marys, GA.
CMC VII was formed in 1998 to acquire and engage in sales, marketing and
construction of homes in the Longleaf Country Club, Southern Pines, NC. CMCIV,
CMC VI and CMC VIII were formed at various times to acquire and hold properties
under various stages of negotiations. CMC also owns 100% of the common stock of
Lifestyle Communities, Ltd. ("LCL") which serves as the exclusive sales agent as
well as the general contractor in the St. Marys development and 100% of the
stock of Lifestyle Construction Company, Inc. ("LCC") which serves as the
general contractor in North Carolina. Except as otherwise noted herein,
references herein to "Heartland" or the "Company" include CMC, HDC, CMCI, CMCII,
CMCIII, CMCIV, CMCV, CMCVI, CMCVII, CMCVIII , LCL, and LCC.
All adjustments which are in the opinion of management necessary to fairly
present the financial statements have been made and are of a normal recurring
nature. The results of operations for the quarter and nine months ended
September 30, 1998 are not necessarily indicative of the results to be expected
for the full year.
Certain reclassifications have been made to the previously reported 1997
statements in order to provide comparability with the 1998 interim statements.
These reclassifications have not changed the 1997 results.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, the unaudited condensed
consolidated financial statements should be read in connection with Heartland's
audited consolidated financial statements for the fiscal year ended December 31,
1997, including the notes thereto.
2. Contingencies
It is Heartland's practice to evaluate environmental liabilities associated with
certain of its properties on a regular basis. An allowance is provided with
regard to potential environmental liabilities, including remediation, legal
fees, consulting fees, and government oversight costs, when it is probable that
a liability has been incurred and the amount of the liability can be reasonably
estimated. The amount of any liability is evaluated independently from any claim
for recovery from third parties with respect to the liability. If
<PAGE>
HEARTLAND PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 1998
the amount of the liability cannot be reasonably estimated but management is
able to determine that the amount of the liability is likely to fall within a
range, and no amount within that range can be determined to be the better
estimate, then an allowance in the minimum amount of the range is established.
Environmental costs which are incurred in connection with Heartland's
development activities are expensed or capitalized as appropriate.
Estimates which are used as the basis for allowances for the remediation of a
particular site are taken from evaluations of the range of potential costs for
that site made by independent consultants. These evaluations are estimates
based on professional experience but necessarily rely on certain significant
assumptions, including the specific remediation standards and technologies which
may be required by an environmental agency as well as the availability and cost
of subcontractors and disposal alternatives.
There is not sufficient information to reasonably estimate all the environmental
liabilities of which management is aware. Accordingly, management is unable to
determine whether environmental liabilities which management is unable to
reasonably estimate will or will not have a material effect on Heartland's
results of operations or financial condition.
At September 30, 1998, Heartland's allowance for claims and liabilities was
approximately $ 2.7 million of which $0.4 million was for the resolution of non-
environmental claims and $2.3 million was for environmental matters.
3. Restricted Cash
On May 14, 1997, CMC established a line of credit agreement in the amount of $5
million with LaSalle National Bank ("LNB") pursuant to which CMC pledged cash in
the amount of $500,000 as an interest reserve (See Note 4). On June 30, 1998,
this line of credit was increased to $8.5 million. The pledged cash for
interest reserve was increased to $850,000. On December 30, 1997, CMCV renewed a
line of credit agreement in the amount of $3 million with NationsBank ("NB")
pursuant to which CMCV pledged cash in the amount of $100,000 as an interest
reserve (see Note 4). This pledged cash of $100,000 was released in July 1998.
Restricted cash at September 30, 1998, also includes purchasers' earnest money
escrow deposits of $838,126 and a $10,525 construction improvement bond held by
the Osprey Cove Homeowners Association.
4. Short Term Loans
Advances against the LNB line of credit as described in Note 3 bear interest at
the prime rate of LNB plus 1.0% (9.25% at September 30, 1998). This loan is
collateralized by certain parcels of land in Chicago, IL which have a carrying
value of $6,995,000 as of September 30, 1998 . The agreement terminated on May
1, 1998, but was extended through June 30, 1998 for renewal negotiations, during
which the line was temporarily increased to $6 million. The company completed
negotiations with LNB, under which the maturity date of the loan has been
extended to April 30, 1999; the line was increased to $8.5 million from $5.0
million; and the net worth requirement was reduced to $12 million from $15
million. The company has subsequently pledged additional cash in the amount of
$350,000 bringing the total interest reserve to
<PAGE>
HEARTLAND PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 1998
$850,000. At September 30, 1998, $8,184,000 had been advanced to the company by
LNB against the line of credit. The company and LNB have entered into
negotiations which decreases the net worth requirement to $8,500,000 and
provides for a temporary increase in the line of credit of $1,000,000.
On December 30, 1996, CMCV signed a revolving line of credit agreement in the
amount of $3 million with NationsBank ("NB") to acquire lots and construct
houses in Osprey Cove subdivision, St. Marys, Georgia, pursuant to which CMC
granted a first mortgage to NB on specific lots in said subdivision with a
carrying value of $2,823,000 at September 30, 1998. Advances against the
revolving line of credit bear interest at the prime rate of NB plus 1.0% (9.50%
at September 30, 1998). The agreement was modified to extend its original
maturity date of December 30, 1997 to December 30, 1998. At that time, all
outstanding advances and any accrued interest must be paid. In the event the
loan is not renewed, it will be extended for a period of six months to allow for
the completion of homes then under construction, but no new construction shall
be commenced. Under the terms of the agreement, CMCV is required to maintain a
minimum net worth of $500,000 and a minimum leverage ratio not to exceed of 4:1.
At September 30, 1998, $1,950,000 had been advanced to CMCV by NB against the
revolving line of credit.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
Cash flow for operating activities has been derived primarily from proceeds of
property sales and rental income. Cash and marketable securities at amortized
cost were $1,909,000 (including $1,698,000 of restricted cash) at September 30,
1998 and $2,757,000 (including $724,000 of restricted cash) at December 31,
1997. The decrease of $848,000 from December 31, 1997 to September 30, 1998 is
mainly attributable to sales escrow receipts as offset by the cash distribution
of $1.6 million paid January 7, 1998 to unitholders of record on December 31,
1997; and also to capital expenditures for land development and construction
costs at Kinzie Station, Chicago, IL and Rosemount in Bloomfield, Minnesota.(see
the Consolidated Statement of Cash Flows).
Cash flow used for operations was $266,000 in the first nine months of 1998,
compared to $326,000 from operations in the first nine months of 1997. The
increase in cash used in operations between years is primarily due to the
increase in environmental claims.
At September 30, 1998, there were 14 homes under contract at Osprey Cove in St.
Marys, GA. Of those, 5 contracts are expected to close during the balance of
1998. To date, 12 contracts have closed; 10 in 1998 and 2 in the 4th quarter
1997.
The Company opened its sales office at Kinzie Station for the pre-sale of the
first phase of construction. Phase I consists of 163 units in a tower building,
24 units in a plaza building and 6 townhomes. As of September 30, contracts
have been accepted for approximately 40% of the Tower Units. Construction has
started in the third quarter of 1998. The first closings are expected to occur
in the fourth quarter of 1999.
<PAGE>
HEARTLAND PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 1998
Heartland, along with Colliers, Bennett and Kahnweiler, a Chicago based real
estate company, and Wooten Construction, have formed a joint venture to develop
approximately 265,000 square feet of industrial space in The Goose Industrial
Park over the next year. Leases for a 150,000 square foot distribution facility
and for 30,000 square feet of a 66,000 square foot building have been signed by
the joint venture.
Final approval for Phase I has been received by the Company on a 226 acre site
in Rosemount, MN. The development known as Bloomfield was approved for 226
attached units and 241 detached single family units on 192 acres, with the
remaining 34 acres reserved for future residential development. On July 27,
1998, the Rosemount City Council approved the final plat for Phase I, consisting
of 120 town homes, 27 single family homes and 10 twinhomes. The City of
Rosemount has started construction of the infrastructure and the Company intends
to commence construction of model homes by in the fourth quarter of 1998.
The Company has signed a contract for the Longleaf Country Club in Southern
Pines, North Carolina. Heartland will sell and build 244 homes on lots currently
owned by Longleaf Associates Limited Partnership, an affiliate of General
Investment & Development. Heartland took over the day to day operations on April
1, 1998. As of September 30, 1998, the Company has taken 10 contracts for units
owned by others and 2 contracts for homes to be built by the Company.
In addition, the Company has entered into a Letter of Agreement with The
Carolina Company, Inc. to become the exclusive sales, marketing and construction
company for The Carolina golf course community in Southern Pines, North
Carolina.
Heartland has filed for annexation of its property by Fife, Washington for the
purpose of obtaining residential zoning for the parcel.
Proceeds from property sales provided cash flow of $753,000 for the third
quarter of 1998 compared to $4,068,000 for the third quarter of 1997. The
decrease is primarily due to the sale of the Humboldt Yard property in
Milwaukee, WI for $3,000,000 in the third quarter of 1997.
As of September 30, 1998, Heartland had approximately $147,000 (fair value)
invested in marketable securities. All securities are invested in direct
obligations of the U.S. Government.
Heartland has approximately 200 active leases on its real estate properties,
which generated $220,000 of revenue in the third quarter of 1998, compared to
$207,000 in the third quarter of 1997. Rental income for 1998 is expected to
decrease as a result of two vacancies. In Milwaukee, new leasing activity is
pending finalization of the receipt of Federal and State grants, which proceeds
will be used for the modernization and restoration on the facility.
At September 30, 1998, Heartland had designated 17 sites, or approximately 938
acres with a book value
<PAGE>
HEARTLAND PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 1998
of $10,981,000, for development. Capitalized expenditures at these sites were
$3,497,000 for the nine months ended September 30, 1998 compared to $3,300,000
for the same period of 1997. At September 30, 1998, capitalized costs on
development properties totaled $8,100,000. Expenditures which significantly
increase the value and are directly identified with a specific project are
capitalized.
The Company performs annual reviews on major properties to determine that the
capitalized cost of development properties does not exceed the current fair
value without regard to the property's expected net realizable value from
development. If the capitalized cost of any property exceeds the current fair
value, then a loss is recognized and the capitalized cost is reduced in
accordance with FAS 121. No loss is included in the statement of operations for
the nine months ended September 30, 1998, and 1997.
At September 30, 1998, land held for sale consists of 15,844 acres with a book
value of $1,107,000. It will be disposed of in an orderly fashion. These
properties will not be disposed of until at least the end of the year 2001.
The cost of property sales for the third quarter ended September 30, 1998 was
$795,000 compared to $2,234,000 for the same period of 1997. This is primarily
due to the sale of the Humboldt Yard facility being included in 1997.
It is the Company's practice to evaluate environmental liabilities associated
with the Company's properties. Heartland monitors the potential exposure to
environmental costs on a regular basis and has recorded a liability in the
amount of $2.3 million at September 30, 1998 for possible environmental
liabilities, including remediation, legal and consulting fees. A reserve is
established with regard to potential environmental liabilities when it is
probable that a liability has been incurred and the amount of the liability can
be reasonably estimated. The amount of any liability is determined independently
from any claim for recovery. If the amount of the liability cannot be reasonably
estimated, but management is able to determine that the amount of the liability
is likely to fall within a range, and no amount within that range can be
determined to be the better estimate, then a reserve in the minimum amount of
the range is accrued.
On October 1, 1998, the Company entered into a Settlement Agreement with the
Port of Tacoma which calls for a monetary payment of $1.1 million or a mutually
agreed to land swap of a 15 acre parcel owned by the Company generally known as
the "Wapato Creek Oxbow".
In addition, Heartland has established an allowance for resolution of non-
environmental claims of $.4 million.
Heartland does not at this time anticipate that these claims or assessments will
have a material effect on the Company's liquidity, financial position and
results of operations beyond the reserve which the Company has established for
such claims and assessments. In making this evaluation, the Company has assumed
that the Company will continue to be able to assert the bankruptcy bar arising
from the reorganization of its predecessor and that resolution of current
pending and threatened claims and assessments will be consistent with the
Company's experience with similar previously asserted claims and assessments.
<PAGE>
HEARTLAND PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 1998
While the timing of the payment in respect of environmental claims has not
significantly adversely effected the Company's cash flow or liquidity in the
past, management is not able to reasonably anticipate whether future payments
may or may not have a significant adverse effect in the future.
Heartland's management believes it will have sufficient funds available for
operating expenses, but anticipates the necessity of utilizing outside financing
to fund development projects. In May 1997, CMC signed a line of credit agreement
in the amount of $5 million with La Salle National Bank ("LNB"), pursuant to
which CMC granted LNB a first lien on certain parcels of land in Chicago, IL and
pursuant to which CMC pledged cash in the amount of $500,000 as an interest
reserve. Advances against the line of credit bear interest at the prime rate of
LNB plus 1.0% (9.25% at September 30, 1998). The agreement terminated on May 1,
1998, but was extended through June 30, 1998 for renewal negotiations, during
which the line was temporarily increased to $6 million. The Company completed
negotiations with LNB, under which the maturity date of the loan has been
extended to April 30, 1999; the line was increased to $8.5 million from $5.0
million; and the net worth requirement was reduced to $12 million from $15
million. The Company has subsequently pledged additional cash in the amount of
$350,000 bringing the total interest reserve to $850,000. At September 30, 1998,
$8,184,000 had been advanced to the company by LNB against the line of credit.
The Company and LNB have entered into negotiations which decreases the net worth
requirement to $8,500,000 and provides for a temporary increase in the line of
credit of $1,000,000.
Results of Operations
Operations for the third quarter and nine months ended September 30, 1998
resulted in a net loss of $2,807,000 and $6,229,000, respectively, of which
$2,765,000 and $6,136,000 was allocated to the Class A limited Partners, or $
(1.29) and $(2.86) per Class A Unit. Operations for the same quarter and nine
months ended 1997 resulted in net loss of $27,000 and $2,563,000 respectively,
of which $27,000 and $2,525,000 was allocated to Class A limited partners or
$(.01) and $(1.18) per Class A Unit.
Property sales for the third quarter and first nine months of 1998 were $753,000
and $3,005,000 compared to $4,068,000 and $4,309,000 for the similar period of
1997. Third quarter 1998 sales included 3 units closed at Osprey Cove, St.
Marys, GA. During the first nine months of 1997, property sales included the
sale of the Humboldt Yard property in Milwaukee, WI for $3,000,000.
Portfolio income for the third quarter of 1998 was $27,000 compared to $15,000
for the third quarter of 1997. Portfolio income for the first nine months of
1998 was $ 46,000 compared to $47,000 for the similar period of 1997.
Rental income for the third quarter and first nine months of 1998 was $220,000
and $695,000 respectively compared to $207,000 and $889,000 for the similar
periods of 1997. The decrease in rental income between 1997 and 1998 is due to
two tenants who vacated their spaces in Milwaukee, WI. New leasing activity is
pending finalization of the receipt of Federal and State grant proceeds, which
will be used for the modernization and restoration of the facility.
Total expenses for the third quarter of 1998 were $3,209,000 compared to
$2,140,000 for the same period
<PAGE>
HEARTLAND PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 1998
of 1997. The increase of $1,069,000 is primarily due to an increase in sales
and marketing costs in connection with the Kinzie Station project and an
increase in the Environmental Reserve of $800,000.
Forward Looking Statements
Management's Discussion and Analysis of Financial Condition and Results of
Operations and other parts of this Form 10-Q contain certain statements which
may constitute "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other important factors that
could cause the actual results, performance or achievement of results to differ
materially from any future results, performance, or achievements expressed or
implied by such forward-looking statements. Such risks, uncertainties and other
important factors are discussed in this Form 10-Q and the Company's other
filings with the Securities and Exchange Commission, including its 10K and
annual report and include, among others:
Economic, and Other Conditions Generally.
The real estate industry is highly cyclical and is affected by changes in
national, global and local economic conditions and events, such as employment
levels, availability of financing, interest rates, consumer confidence and the
demand for housing and other types of construction. Real estate developers are
subject to various risks, many of which are outside the control of the
developer, including real estate market conditions, changing demographic
conditions, adverse weather conditions and natural disasters, such as
hurricanes, tornados, delays in construction schedules, cost overruns, changes
in government regulations or requirements, increases in real estate taxes and
other local government fees and availability and cost of land, materials and
labor. The occurrence of any of the foregoing could have a material adverse
effect on the financial conditions of Heartland, and in turn the Company.
Access to Financing.
The real estate business is capital intensive and requires expenditures for land
and infrastructure development, housing construction and working capital.
Accordingly, Heartland anticipates incurring additional indebtedness to fund
their real estate development activities. As of September 30, 1998 Heartland's
total consolidated indebtedness was $10,134,000. There can be no assurance that
the amounts available from internally generated funds, cash on hand, Heartland's
existing credit facilities and sale of non-strategic assets will be sufficient
to fund Heartland's anticipated operations. Heartland may be required to seek
additional capital in the form of equity or debt financing from a variety of
potential sources, including additional bank financing and sales of debt or
equity securities. No assurance can be given that such financing will be
available or, if available, will be on terms favorable to Heartland. If
Heartland is not successful in obtaining sufficient capital to fund the
implementation of its business strategy and other expenditures, development
projects may be delayed or abandoned. Any such delay or abandonment could
result in a reduction in sales and would adversely affect Heartland's future
results of operations.
<PAGE>
HEARTLAND PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 1998
Period-to-Period Fluctuations.
Heartland's real estate projects are long-term in nature. Sales activity varies
from period to period, and the ultimate success of any development cannot always
be determined from results in any particular period or periods. Thus, the
timing and amount of revenues arising from capital expenditures are subject to
considerable uncertainty. The inability of Heartland to manage effectively
their cash flows from operations would have an adverse effect on their ability
to service debt, and to meet working capital requirements.
Year 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs or hardware that have date-sensitive software or embedded
chips may recognize a date using "00" as the year 1900 rather than 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
Based on recent assessments, we have determined that we will be required to
modify or replace significant portions of our software and certain hardware so
that those systems will properly recognize dates beyond December 31, 1999. We
believe that with modifications or replacements of existing software and certain
hardware, the Year 2000 issue can be mitigated. However, if such modifications
and replacements are not made, or are not completed timely, the Year 2000 issue
could materially affect our operations.
Our plan to resolve the Year 2000 issue involves the following four phases:
assessment, remediation, testing and implementation. To date, we have fully
completed our assessment of all systems that could be significantly affected by
the Year 2000. The completed assessment indicated that most of the Company's
significant information technology systems could be affected, particularly the
general ledger, billing and inventory systems. Based on a review of our product
line, we have determined that most of the products we have sold and will
continue to sell do not require remediation to be Year 2000 compliant.
Accordingly, we do not believe that the Year 2000 presents a material exposure
as it relates to our products. In addition, we have gathered
information about the Year 2000 compliance status of our significant suppliers
and subcontractors and continue to monitor their compliance.
For its information technology exposures, to date the Company is substantially
complete on the remediation phase and we expect to complete software
reprogramming and replacement no later than December 31, 1998. Once software is
reprogrammed or replaced for a system, we will begin testing and implementation.
These phases run concurrently for different systems. We have begun the testing
and implementation of our remediated systems. Completion of the testing phase
for all significant systems is expected by December 31, 1998, with all
remediated systems fully tested and implemented by March 31, 1999, with 100%
completion targeted for June 30, 1999.
The remediation of operating equipment is significantly more difficult than the
remediation of the information technology systems because some of the
manufacturers of the equipment have not yet provided the necessary remediation
programming. Therefore, we are only 10% complete in the remediation phase of
our operating equipment. Testing of this equipment is also more difficult than
the testing of the information technology systems; as a result, the Company has
recently started with the testing of its
<PAGE>
HEARTLAND PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 1998
remediated operating equipment. Once testing is complete, the operating
equipment will be ready for immediate use. The Company expects to complete its
remediation efforts by March 31, 1999. Testing and implementation of affected
equipment is expected to be completed by June 30, 1999.
We have begun to query our significant suppliers and subcontractors that do not
share information systems with the Company (external agents). To date, we are
not aware of any external agent with a Year 2000 issue that would materially
impact our results of operations, liquidity, or capital resources. However, we
have no means of ensuring that external agents will be Year 2000 ready. The
inability of external agents to complete their Year 2000 resolution process in a
timely fashion could materially affect our business or financial results. The
effect of non-compliance by external agents is not determinable.
We will utilize both internal and external resources to reprogram, or replace,
test, and implement the software and operating equipment for Year 2000
modifications. The total cost of the Year 2000 project is estimated at $200,000
and is being funded through operating cash flows. To date, the Company has
incurred approximately $175,000 ($25,000 expensed and $150,000 capitalized for
new systems and equipment), related to all phases of the Year 2000 project. Of
the total remaining project costs, none of the remaining $25,000 relates to
repair of hardware and software and will be expensed as incurred.
We believe that we have an effective program in place to resolve the Year 2000
issue in a timely manner. As noted above, we have not yet completed all
necessary phases of the Year 2000 program. If we do not complete any additional
phases, the Company would be unable to take customer orders, manufacture
products, finance construction or collect payments. In addition, disruptions in
the economy generally resulting from Year 2000 issues could also materially
adversely affect the Company. The Company could be subject to litigation for
computer system product failure, for example, equipment shutdown or failure to
properly date business records. The amount of potential liability and lost
reserve cannot be reasonably estimated at this time.
We currently have no contingency plans in place if we do not complete all
phases of the Year 2000 program. We plan to evaluate the status of completion
in December 1998 and determine whether such a plan is necessary. If we are
unable to successfully implement any of the four phases of our Year 2000 plan
and we do not develop a contingency plan to address such problems, or if Year
2000 issues negatively affect our suppliers, our customers or the economy
generally, our business or financial results may be materially adversely
affected.
Environmental Liabilities
As described in Part II of this Form 10-Q, the Company's properties are subject
to various federal, state and local environmental laws. As a result of our
ownership of such properties, we may be subject to liability for violations of
environmental laws relating to the disposal or release of hazardous substances
on our properties, regardless of whether we owned the property when it was
contaminated. Violations or alleged violations of environmental laws may involve
a substantial amount of money to defend against and/or to clean up any of our
properties in accordance with applicable orders. Any liability imposed on us for
any violations of environmental laws may materially adversely affect our
business and results of operations.
<PAGE>
HEARTLAND PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 1998
PART II
OTHER INFORMATION
Item 1. Legal Proceedings and Contingencies
At September 30, 1998, Heartland's allowance for claims and liabilities was
approximately $ 2.7 million. During the quarter ended September 30, 1998, a net
$800,000 increase to the provision was recorded in respect to environmental
matters. Material legal matters are discussed below.
Soo Line Matters
The Soo Line Railroad Company (the "Soo") has asserted that the Company is
liable for certain occupational injury claims filed after the consummation of an
Asset Purchase Agreement and related agreements ("APA") by former employees now
employed by the Soo. The Company has denied liability for each of these claims
based on a prior settlement with the Soo. The Soo has also asserted that the
Company is liable for the remediation of releases of petroleum or other
regulated materials at six different sites acquired from the Company located in
Iowa, Minnesota and Wisconsin. The Company has denied liability based on the
APA.
The occupational and environmental claims are all currently being handled by the
Soo, and the Company understands the Soo has paid settlements on many of these
claims. As a result of Soo's exclusive handling of these matters, the Company
has made no determination as to the merits of the claims and is unable to
determine the materiality of these claims.
Tacoma, Washington
In June 1997, the Port of Tacoma ("Port") filed a complaint in the United States
District Court for the Western District of Washington alleging that the Company
was liable under Washington state law for the cost of the Port's remediation of
a railyard sold in 1980 by the bankruptcy trustee for the Company's predecessor
to the Port's predecessor in interest.A draft feasibility study dated November
1994, submitted to the Washington Department of Ecology on behalf of the Port
estimates that the selected remedial alternative for a portion of the site may
cost approximately $3.65 million.
On October 1, 1998, the Company entered into a Settlement Agreement with the
Port in which the Port released all claims and the Company agreed to either pay
$1.1 million or to convey real property to be agreed upon between the parties at
a later date.
The Company will not make a claim on its insurance carriers in this matter
because the settlement amount does not exceed the self insured retention under
the applicable insurance policies.
<PAGE>
HEARTLAND PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 1998
Wheeler Pit, Janesville, Wisconsin
In November 1995 the Company settled a claim with respect to the Wheeler Pit
site near Janesville, Wisconsin. The settlement calls for the Company to pay
General Motors $800,000 at $200,000 annually for four years, 32% of the
monitoring costs for twenty-five years beginning in 1997 and 32% of governmental
oversight costs; the oversight costs not to exceed $50,000. Payments of $200,000
were made in 1995, 1996, 1997 and 1998. A payment of $50,000 for past
government oversight costs was made in October 1998.
Miscellaneous Environmental Matters
Under environmental laws, liability for hazardous substance contamination is
imposed on the current owners and operators of the contaminated site, as well as
the owner or operator of the site at the time the hazardous substances were
disposed or otherwise released. In most cases, this liability is imposed without
regard to fault. Currently, the Company has known environmental liabilities
associated with certain of its properties arising out of the activities of its
predecessor or certain of its predecessor's lessees and may have further
material environmental liabilities as yet unknown. The majority of the Company's
known environmental liabilities stem from the use of petroleum products, such as
motor oil and diesel fuel, in the operation of a railroad or in operations
conducted by its predecessor's lessees. The following is a summary of material
known environmental matters, in addition to those described above.
The Montana Department of Environmental Quality ("DEQ") has asserted that the
Company is responsible for some or all of the liability to remediate certain
properties in Montana sold by its predecessor's reorganization trustee prior to
the consummation of its predecessor's reorganization. The Company has denied
liability at certain of these sites based on the reorganization bar of the
Company's predecessors. The Company's potential liability for the investigation
and remediation of these sites was discussed in detail at a meeting with DEQ in
April 1997. While DEQ has not formally changed its position, DEQ has not elected
to file suit. Management is not able to express an opinion at this time whether
the cost of the defense of this liability or the environmental exposure in the
event of the Company's liability will or will not be material.
At twelve separate sites, the Company has been notified that releases arising
out of the operations of a lessee, former lessee or other third party have been
reported to government agencies. At each of these sites, the third party is
voluntarily cooperating with the appropriate agency by investigating the extent
of any such contamination and performing the appropriate remediation, if any.
The Company has petroleum groundwater remediation projects or long term
monitoring programs at Austin, Minnesota, Farmington, Minnesota, Miles City,
Montana, and Milwaukee, Wisconsin.
In December 1989, the Minnesota Pollution Control Agency ("MPCA") added a site
which includes the Company's Pig's Eye Yard site in St. Paul, Minnesota to its
Permanent List of Priorities based on historical records and an initial
investigation of soil and groundwater conditions adjacent to Pig's Eye Yard.
Portions of this site had been leased to the City of St. Paul for a landfill and
to the Metropolitan Waste Control Commission for disposal of incinerator ash.
The site, which includes portions of the adjacent municipal waste water
treatment plant, was placed on the Superfund Accelerated Clean Up Model list in
1993. No potentially responsible parties ("PRPs") have been formally named at
this site.
The Company has an interest in property at Moses Lake, Washington previously
owned and used by the United States government as an Air Force base. Sampling by
the Army Corps of Engineers has indicated the presence of various regulated
materials, primarily in the groundwater, which were most likely released
<PAGE>
HEARTLAND PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 1998
as a result of military or other third party operations. A portion of the
Company's property is located over a well field which was placed on the national
priority list in October 1992. The Company has not been named as a PRP.
The Company is voluntarily investigating the environmental condition of a
property in Minneapolis, Minnesota in connection with a contract to sell the
property. The investigation has indicated certain metal impacts in the soil and
groundwater. The Company's estimate at this time is that the remediation
construction may cost between $425,000 and $881,000. The contract sale price is
$562,000.
In addition to the environmental matters set forth above, there may be other
properties, i), with environmental liabilities not yet known to the Company, or
ii), with potential environmental liabilities for which the Company has no
reasonable basis to estimate or, iii), which the Company believes the Company is
not reasonably likely to ultimately bear the liability, but the investigation or
remediation of which may require future expenditures. Management is not able to
express an opinion at this time whether the environmental expenditures for these
properties will or will not be material.
The Company has given notice to its insurers of certain of the Company's
environmental liabilities. Due to the high deductibles on these policies, the
Company has not yet demanded that any insurer indemnify or defend the Company.
Consequently, management has not formed an opinion regarding the legal
sufficiency of the Company's claims for insurance coverage.
The Company is also subject to other suits and claims which have arisen in the
ordinary course of business. In the opinion of management, reasonably possible
losses from these matters should not be material to the Company's results of
operations or financial condition.
<PAGE>
HEARTLAND PARTNERS, L.P.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 1998
<TABLE>
<CAPTION>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. Description
------------- --------------------------------------------------------------------------------
<C> <S>
10.1 Loan and Security Agreement dated March 15, 1996, between CMC Heartland Partners
and LaSalle National Bank (filed herewith)
10.2 Amendment to Loan and Security Agreement dated May 14, 1997, by and between
CMC Heartland Partners and LaSalle National Bank (filed herewith)
10.3 Amended and Restated Loan Security Agreement dated June 30, 1998 among
CMC Heartland Partners, L.P. and LaSalle National Bank (filed herewith)
10.4 Option, Management and Marketing Agreement dated September 9, 1998 between
CMC Heartland Partners VII, LLC and Longleaf Associates Limited Partnership.
(filed herewith)
10.5 Settlement Agreement by and between the Port of Tacoma, CMC Real Estate
Corporation, Chicago Milwaukee Corporation, CMC Heartland Partners, and
Heartland Partners, L.P. effective October 1, 1998. (filed herewith)
10.6 Amendment to Amended and Restated Loan and Security Agreement dated
October 23, 1998 among CMC Heartland Partners, Heartland Parnters, L.P. and
LaSalle National Bank. (filed herewith)
27 Financial Data Schedule (filed herewith).
</TABLE>
- - -----------------------------------------------
(b) Reports on Form 8-K:
No reports on Form 8-K have been filed during the quarter ended
September 30, 1998.
<PAGE>
HEARTLAND PARTNERS, L.P.
September 30, 1998
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.
HEARTLAND PARTNERS, L.P.
(Registrant)
Date: November 13, 1998 BY: /s/ Edwin Jacobson
----------------------------------
Edwin Jacobson
President and Chief Executive Officer
Heartland Technology, Inc.
the General Partner
Date: November 13, 1998 BY: /s/ Leon F. Fiorentino
----------------------------------
Leon F. Fiorentino
Vice-President, Secretary
and Treasurer of
Heartland Technology, Inc.
the General Partner
<PAGE>
Heartland Partners
September 30, 1998
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
- - ----------- -------------------------------------------------------------------------------------------------------
<S> <C>
10.1 Loan and Security Agreement dated March 15, 1996, between CMC Heartland Partners and LaSalle
National Bank (filed herewith)
10.2 Amendment to Loan and Security Agreement dated May 14, 1997, by and between CMC Heartland
Partners and LaSalle National Bank (filed herewith)
10.3 Amended and Restated Loan Security Agreement dated June 30, 1998 among CMC Heartland Partners,
L.P. and LaSalle National Bank (filed herewith)
10.4 Option, Management and Marketing Agreement dated September 9, 1998 between CMC Heartland
Partners VII, LLC and Longleaf Associates Limited Partnership. (filed herewith)
10.5 Settlement Agreement by and between the Port of Tacoma, CMC Real Estate Corporation, Chicago
Milwaukee Corporation, CMC Heartland Partners, and Heartland Partners, L.P. effective October 1, 1998.
(filed herewith)
10.6 Amendment to Amended and Restated Loan and Security Agreement dated October 23, 1998 among CMC
Heartland Partners, Heartland Partners and LaSalle National Bank. (filed herewith)
27 Financial Data Schedule (filed herewith).
</TABLE>
<PAGE>
EXHIBIT 10.1
LOAN AND SECURITY AGREEMENT
Dated as of March 15, 1996
between
CMC HEARTLAND PARTNERS
as Borrower,
and
LASALLE NATIONAL BANK
as Bank
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
1. DEFINITIONS AND TERMS....................................................................................... 1
1.1 Certain Definitions......................................................................... 1
-------------------
1.2 Certain UCC and Accounting Terms............................................................ 8
--------------------------------
2. REVOLVING LOANS: BANK'S COMMITMENT AND BORROWING PROCEDURES................................................ 9
2.1 Revolving Credit Commitment................................................................. 9
---------------------------
2.2 Borrowing Procedures........................................................................ 9
--------------------
2.3 All Revolving Loans to Constitute One Obligation............................................ 9
------------------------------------------------
3. REVOLVING LOANS: NOTE EVIDENCING REVOLVING LOANS........................................................... 10
3.1 Revolving Note.............................................................................. 10
--------------
3.2 Recordation................................................................................. 10
-----------
4. REVOLVING LOANS: AMOUNTS; INTEREST; BALANCES; ............................................................. 10
4.1 Interest Rate; Applicable Borrowing Amounts................................................. 10
-------------------------------------------
4.2 Computation of Interest..................................................................... 11
-----------------------
4.3 Interest Laws............................................................................... 11
-------------
4.4 Unused Portion Fee.......................................................................... 11
------------------
4.5 Revolving Loan Clean-Up Period.............................................................. 12
------------------------------
5. REVOLVING LOANS: GENERAL TERMS............................................................................. 12
5.1 Payments to Bank............................................................................ 12
----------------
5.2 Conditions Precedent Events................................................................. 12
---------------------------
5.3 Offset...................................................................................... 12
-------
5.4 Discretionary Disbursements................................................................. 13
---------------------------
5.5 Credit Termination Date; Continuance of Obligations, Etc.................................... 13
---------------------------------------------------------
5.6 Revolving Loan Evidence..................................................................... 13
-----------------------
6. REVOLVING LOANS: CONDITIONS TO LENDING..................................................................... 13
6.1 Initial Revolving Loan Conditions Precedent................................................. 13
-------------------------------------------
6.2 Accountant's Letter......................................................................... 15
-------------------
7. COLLATERAL: GENERAL TERMS.................................................................................. 15
7.1 Grant of Security Interest.................................................................. 15
--------------------------
7.2 Perfection of Security Interests............................................................ 15
--------------------------------
7.3 Inspection of Collateral.................................................................... 16
------------------------
7.4 First Lien and Locations of Collateral...................................................... 16
--------------------------------------
7.5 Constructive Trust.......................................................................... 16
------------------
7.6 Application of Proceeds of Collateral....................................................... 16
-------------------------------------
7.7 Third Party Collateral Claims............................................................... 17
-----------------------------
7.8 Additional Collateral....................................................................... 17
---------------------
7.9 No Custom or Waiver......................................................................... 17
-------------------
8. REPRESENTATIONS AND WARRANTIES; COVENANTS;
INDEMNIFICATION; CONTINUING OBLIGATION.................................... 17
8.1 Representations and Warranties of Borrower.................................................. 17
------------------------------------------
8.2 Affirmative Covenants....................................................................... 22
---------------------
8.3 Negative Covenants.......................................................................... 27
------------------
8.4 Maintenance of Accounts..................................................................... 29
-----------------------
9. DEFAULT..................................................................................................... 29
9.1 Events of Default........................................................................... 29
-----------------
9.2 Cumulative Remedies......................................................................... 30
-------------------
9.3 Acceleration and Termination of Revolving Loans............................................. 30
-----------------------------------------------
9.4 Rights of Secured Creditor.................................................................. 31
--------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10. GENERAL.................................................................................................... 31
10.1 Payment Application Date.................................................................... 31
------------------------
10.2 Statement of Account........................................................................ 31
--------------------
10.3 Manner of Application; Waiver of Setoff Prohibition......................................... 31
---------------------------------------------------
10.4 Survival of Representations and Warranties.................................................. 32
------------------------------------------
10.5 Integration; Amendment...................................................................... 32
----------------------
10.6 No Waiver................................................................................... 32
---------
10.7 Severability................................................................................ 32
------------
10.8 Successors and Assigns...................................................................... 32
----------------------
10.9 Conflict with Other Agreements.............................................................. 32
------------------------------
10.10 No Impairment by Termination............................................................... 33
----------------------------
10.11 Waivers......................................................................................... 33
-------
10.12 Costs, Fees and Expenses Related to Agreement and Other Agreements.............................. 33
------------------------------------------------------------------
10.13 Environmental Indemnity......................................................................... 33
-----------------------
10.14 Governing Law.............................................................................. 34
-------------
10.15 Notices.................................................................................... 35
-------
10.16 FORUM; BANK ; VENUE; JURY TRIAL WAIVER..................................................... 35
--------------------------------------
10.17 Other Costs, Fees and Expenses............................................................. 35
------------------------------
10.18 Revival.................................................................................... 36
-------
10.19 Acknowledgments............................................................................ 36
---------------
10.20 Section Headings........................................................................... 36
----------------
10.21 Counterparts............................................................................... 36
------------
10.22 Effectiveness.............................................................................. 37
-------------
</TABLE>
Exhibits
Schedules
<PAGE>
LOAN AND SECURITY AGREEMENT
---------------------------
THIS LOAN AND SECURITY AGREEMENT (this "Agreement") is made as of the 15th
day of March, 1996, by and between CMC HEARTLAND PARTNERS, a Delaware general
partnership ("Borrower"), and LASALLE NATIONAL BANK, a national banking
association (the "Bank").
W I T N E S S E T H:
WHEREAS, Borrower desires to borrow funds and obtain other financial
accommodation from Bank to fund Borrower's periodic working capital needs; and
WHEREAS, pursuant to Borrower's request, Bank is willing to lend to
Borrower pursuant hereto.
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements set forth herein, Borrower agrees to borrow from Bank, and Bank
agrees to lend to Borrower, subject to and upon the following terms and
conditions:
1. DEFINITIONS AND TERMS
1.1 Certain Definitions. The following words, terms and/or phrases shall
-------------------
have the meanings set forth thereafter and such meanings shall be applicable to
the singular and plural form thereof, giving effect to the numerical difference.
"Affiliate" means, with respect to any Person, any other Person
---------
directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. A Person shall be deemed to
control another Person if such first Person possesses, directly or
indirectly, the power to direct or cause the direction of the management
and policies of such other Person, whether through ownership of voting
securities, by contract or otherwise.
"Assignment of Rents" means the Assignment of Rents and Leases of
-------------------
even date herewith among Borrower and Bank.
"Authorized Agent" means Richard P. Brandstatter, the Authorized
----------------
Agent of the Borrower.
"Borrower's Liabilities" means all obligations and liabilities of
----------------------
Borrower in the aggregate to Bank (including, without limitation, all
debts, claims and indebtedness) whether primary, secondary, direct,
contingent, fixed or otherwise, heretofore, now and/or from time to time
hereafter owing, due or payable, however evidenced, created, incurred,
acquired or owing and however arising, whether under this Agreement or the
Other Agreements, or by oral agreement or operation of law or otherwise.
"Business Day" means any day on which Bank is open for the
------------
transaction of commercial banking business in Chicago, Illinois other than
a Saturday or Sunday.
"Charges" means all national, federal, state, county, city,
-------
municipal and/or other governmental (or any instrumentality, division,
agency, body or department thereof, including, without limitation, the
PBGC) taxes, levies, assessments, charges, liens, claims or encumbrances
upon and/or relating to Borrower's Liabilities, Borrower's business,
Borrower's ownership and/or use of the Collateral, income and/or gross
receipts.
"Closing Date" means March 15, 1996.
------------
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Collateral" shall have the meaning assigned to such term in
----------
Paragraph 7.1 hereof.
-------------
"Debt" means all of a Person's liabilities, obligations and
----
indebtedness to any Person of any and every kind and nature, whether
primary, secondary, direct, indirect, absolute, contingent, fixed or
otherwise, heretofore, now and/or from time to time hereafter owing, due or
payable, however evidenced, created, incurred, acquired or owing and
however arising, whether under written or oral agreement, by operation of
law or otherwise. Without in any way limiting the generality of the
foregoing, Debt specifically includes (i) indebtedness for borrowed money,
(ii) obligations evidenced by bonds, debentures, notes or other similar
instruments, (iii) obligations to pay the deferred purchase price
<PAGE>
of property or services, (iv) obligations as lessee under leases which
shall have been or should be, in accordance with generally accepted
accounting principles, recorded as capital leases, (v) obligations under
direct or indirect guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or obligations of others
of the kinds referred to in clauses (i) through (iv) above, and (vi)
liabilities in respect of unfunded vested benefits under Plans and
Multiemployer Plans covered by Title IV of ERISA.
"Default Rate" shall have the meaning assigned to such term in
------------
Paragraph 4.1(c) hereof.
----------------
"Disclosure Schedule" means a schedule, in form and substance
-------------------
satisfactory to Bank, which (i) has been certified as true and correct by
an Authorized Agent, (ii) has been delivered to Bank prior to the date
hereof, (iii) describes in reasonable detail, all exceptions to the
representations, warranties and covenants of Borrower herein, and (iv) is
clearly identified on its face as the Disclosure Schedule for purposes
hereof. Any reference herein to a "Schedule" shall be deemed to refer to a
part of the Disclosure Schedule.
"Early Termination Date" means the date, pursuant to Paragraph
---------------------- ---------
9.3, upon which, whether by notice or by right hereunder, Bank's obligation
---
to extend credit hereunder is terminated.
"Environmental Claim" means the following:
-------------------
(i) any notice of violation, complaint, claim, citation, demand,
inquiry, report, action, assertion of potential responsibility, lien,
encumbrance or proceeding regarding any Mortgaged Property or any use
thereof, whether formal or informal, absolute or contingent, matured or
unmatured, brought or issued by any governmental unit, agency or body, or
any person or entity respecting:
(A) Environmental Laws; or
(B) the environmental condition of a Mortgaged Property, or any
portion thereof, or any property near such Mortgaged Property, including,
without limitation, actual or alleged damage or injury to humans, public
health, wildlife, biota, air, surface or subsurface soil, minerals or
water, or other natural resources; or
(C) the use, exposure, release, emission, discharge,generation,
manufacture, sale, transport, handling, storage, treatment, reuse,
presence, disposal or recycling of Hazardous Material either on a Mortgaged
Property or off-site;
(ii) any lien for damages caused by, or the recovery of any costs
incurred by any person or governmental entity relating to the
investigation, remediation or cleanup of, any release or threatened release
of Hazardous Material at a Mortgaged Property; and
(iii) the destruction or loss of use of property, or the injury,
illness or death of any officer, director, employee, agent, representative,
tenant or invitee of Borrower or any other person directly caused by the
environmental condition of a Mortgaged Property or the release, emission or
discharge of Hazardous Materials from a Mortgaged Property.
"Environmental Laws" means all statutes, ordinances, orders,
------------------
rules, regulations, plans, policies, or decrees and the like relating to
(i) environmental matters, including, without limitation, those relating to
fines, injunctions, penalties, damages, contribution, cost recovery
compensation, losses or injuries resulting from the release (as such term
is defined in Paragraph 8.1(n)(ii)) or threatened release of Hazardous
--------------------
Materials, (ii) the generation, use, handling, transportation, storage,
treatment or disposal of Hazardous Materials or (iii) occupational safety
and health, industrial hygiene, land use or the protection of human, plant
or animal health or welfare related to Hazardous Materials, in any manner
applicable to Borrower and any of its Mortgaged Properties, including,
without limitation, the Comprehensive Environmental Response, Compensation,
and Liability Act (42 U.S.C. (S)9601 et seq.), the Hazardous Materials
-- ---
Transportation Act (49 U.S.C. (S)1801 et seq.), the Resource Conservation
-- ---
and Recovery Act (42 U.S.C. (S)6901 et seq.), the Federal Water Pollution
-- ---
Control Act (33 U.S.C. (S)1251 et seq.), the Clean Air Act (42 U.S.C.
-- ---
(S)7401 et seq.), the Toxic Substances Control Act (15 U.S.C. (S)2601 et
-- --- --
seq.), the Occupational Safety and Health Act (29 U.S.C. (S)651 et seq.)
--- -- ---
and the Emergency Planning and Community Right-To-Know Act (42 U.S.C.
(S)11001 et seq.), each as amended
<PAGE>
or supplemented, and any analogous present or future local, state and
federal statutes and regulations promulgated pursuant thereto, each as in
effect as of the date of determination.
"ERISA" means the Employee Retirement Income Security Act of
-----
1974, as the same may be amended from time to time and, unless the context
otherwise requires, the regulations promulgated thereunder and any
successor statute.
"ERISA Affiliate" means each trade or business (whether or not
---------------
incorporated) which together with Borrower or an Affiliate would be deemed
to be a "single employer" within the meaning of Section 4001(b) of ERISA
---------------
or, where applicable, would be treated as a "single employer" under Section
-------
412(c)(11) of the Code.
----------
"ERISA Termination Event" means (i) a "Reportable Event"
-----------------------
described in Section 4043 of ERISA (other than a "Reportable Event" not
------------
subject to the provision for 30-day notice to the PBGC under such
regulations), (ii) the withdrawal of Borrower or any Affiliate from a Plan
during a plan year in which it was a "substantial employer," as defined in
Section 4001(a) of ERISA, including a cessation of operations that is
---------------
treated as a withdrawal by a "substantial employer" under Section 4062(e)
---------------
of ERISA, (iii) the filing of a notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination under Section 4041 of ERISA,
------------
(iv) the institution of proceedings to terminate a Plan by the PBGC, (v)
any other event or condition which in the reasonable judgment of Borrower
is likely to constitute grounds under Section 4042 of ERISA for the
------------
termination of, or the appointment of a trustee to or any ERISA
administrator, any Plan, or (vi) the partial or complete withdrawal of
Borrower or any ERISA Affiliate from a Multiemployer Plan.
"Event of Default" shall have the meaning assigned to such term
----------------
in Paragraph 9.1 hereof.
-------------
"Excess Interest" shall have the meaning assigned to such term in
---------------
Paragraph 4.3 hereof.
-------------
"Financials" means those financial statements of Borrower
----------
heretofore or concurrently herewith delivered by or on behalf of Borrower
to Bank.
"GAAP" shall mean generally accepted accounting principles as in
----
effect from time to time.
"General Intangibles" means all choses in action, causes of
-------------------
action and all other intangible property of Borrower of every kind and
nature now owned or hereafter acquired by Borrower, including, without
limitation, corporate and other business records, deposit accounts,
inventions, designs, patents, patent and trademark registrations and
applications, trademarks, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, deferred tax benefits, tax refund
claims, prepaid expenses, computer programs, covenants not to compete,
customer lists and mailing lists, contract rights, indemnification rights,
causes of action and any letters of credit, guarantee claims, security
interests or other security held by or granted to Borrower.
"Governmental Authorization" means any permit, license,
--------------------------
authorization, plan, directive, consent order or consent decree of or from
any federal, state or local governmental authority, agency or court having
jurisdiction over Borrower or any Mortgaged Property.
"Hazardous Materials" means (i) any chemical, material or
-------------------
substance defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely
hazardous waste," "restricted hazardous waste," "infectious waste," "toxic
substances" or any other formulations intended to define, list or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity,
"TCLP toxicity" or "EP toxicity" or words of similar import under any
applicable Environmental Laws or publications promulgated pursuant thereto,
(ii) any oil, petroleum or petroleum derived substance, (iii) any drilling
fluids, produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal
resources, (iv) any flammable substances or explosives, (v) any radioactive
materials, (vi) asbestos in any form (which is or could become friable),
(vii) urea formaldehyde foam insulation, (viii) electrical equipment which
contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million, (ix) pesticides or (x) any
other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any governmental authority or which may or could
pose a hazard to health or safety.
<PAGE>
"Lien" means, with respect to the Collateral or any asset of
----
Borrower, any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any agreement to give any of the foregoing,
any conditional sale or other title retention agreement, any lease in the
nature thereof and the filing of or agreement to give any financing
statement under the Uniform Commercial Code in effect in any jurisdiction).
"Liquid Assets" means cash on hand or cash equivalents, including
-------------
certificates of deposits with a maturity less than 180 days, money market
deposits, U.S. treasury bills and readily-marketable securities.
"Maximum Rate" shall have the meaning assigned to such term in
------------
Paragraph 4.3 hereof.
-------------
"MLC" means Milwaukee Land Company, a Delaware corporation,
---
formerly an Iowa corporation, and an authorized general partner of
Borrower.
"Mortgage" means that certain Mortgage and Security Agreement of
--------
even date herewith made by Borrower in favor of Bank with respect to the
Mortgaged Properties.
"Mortgaged Properties" means certain parcels of vacant land
--------------------
located in Chicago, Illinois serving as Collateral hereunder and legally
described on Schedule 1.0 attached hereto and made a part hereof.
------------
"Multiemployer Plan" means a plan defined as such in Section
------------------ -------
4001(a)(3) of ERISA to which contributions have been made by Borrower or an
----------
ERISA Affiliate.
"Operating Account" shall have the meaning assigned to such term
-----------------
in Paragraph 8.4 hereof.
-------------
"Other Agreements" means all agreements, instruments and
----------------
documents, including, without limitation, guaranties, mortgages, deeds of
trust, pledges, powers of attorney, consents, assignments, contracts,
notices, security agreements, leases, financing statements and all other
written matter heretofore, now and/or from time to time hereafter executed
by and/or on behalf of Borrower in favor of Bank including, without
limitation, the Revolving Note, the Pledge Agreement, the Mortgage and the
Assignment of Rents.
"Partnership Agreement" means that certain Amended and Restated
---------------------
Partnership Agreement of Borrower, dated as of June 27, 1990, by and
between MLC and Heartland Partners, L.P., a Delaware limited partnership.
"PBGC" means the Pension Benefit Guaranty Corporation and any
----
entity succeeding to any or all of its functions under ERISA.
"Permitted Investments" shall have the meaning assigned to such
---------------------
term in Paragraph 8.3(e) hereof.
----------------
"Permitted Liens" shall have the meaning assigned to such term in
---------------
Paragraph 8.3(a) hereof.
----------------
"Person" means and includes an individual, a partnership, a joint
------
venture, a corporation (whether or not for profit), a trust, an
unincorporated organization, a government or any department or agency
thereof or any other entity or organization.
"Plan" means, at any time, any single-employer plan, as defined
----
in Section 4001(a) and subject to Title IV of ERISA, which is maintained,
---------------
or at any time during the five calendar years preceding the time in
question was maintained, for employees of Borrower or an Affiliate.
"Pledge Agreement" means that certain Pledge Agreement of even
----------------
date herewith made by Borrower in favor of the Bank pledging $300,000 in
cash or cash equivalents as an interest reserve pursuant to a certificate
of deposit having a rolling maturity of 180 days or less.
"Prime Rate" means the rate of interest (expressed as a
----------
percentage per annum) most recently announced or published publicly from
time to time by Bank as its Prime Rate of interest, which is not
necessarily the lowest or most favorable rate of interest charged by Bank
on commercial loans at any one time. The rate of interest shall change
automatically and immediately as and when the Prime Rate shall change,
without notice to Borrower, and any
<PAGE>
notice to which it may be entitled is hereby waived, and any such change in
Bank's Prime Rate shall not affect any of the terms and conditions of this
Agreement, all of which shall remain in full force and effect.
"Revolving Credit Commitment" shall have the meaning assigned to
---------------------------
such term in Paragraph 2.1 hereof.
-------------
"Revolving Credit Maturity Date" means March 15, 1997.
------------------------------
"Revolving Credit Termination Date" means the earliest to occur
---------------------------------
of (i) the Revolving Credit Maturity Date or (ii) the Early Termination
Date.
"Revolving Loan" means and includes all Revolving Loans made
--------------
under the Revolving Credit Commitment, unless the context in which such
term is used shall otherwise require.
"Revolving Margin" means one percent (1%).
----------------
"Revolving Note" means that certain Revolving Note of even date
--------------
herewith in the original maximum principal amount available of $3,000,000
as the same may be amended, modified or supplemented from time to time, and
together with any renewals thereof or exchanges or substitutes therefor.
"Stock" means all shares, interests, participation or other
-----
equivalents, however designated, of or in a corporation, whether or not
voting, including but not limited to common stock, warrants, preferred
stock, convertible debentures, and all agreements, instruments and
documents convertible, in whole or in part, into any one or more or all of
the foregoing.
"Subsidiary" means any corporation of which a Person owns,
----------
directly or indirectly through one or more intermediaries, more than 50% of
the voting stock at the time of determination.
"Tangible Net Worth" means, at any time, Borrower's net worth
------------------
after subtracting therefrom the amount of any General Intangibles, amounts
due from Affiliates and the amount of other assets classified as intangible
by Bank in the exercise of its reasonable discretion.
1.2 Certain UCC and Accounting Terms. Except as otherwise defined in this
--------------------------------
Agreement or the Other Agreements, all words, terms and/or phrases used herein
and therein shall be defined by the applicable definition therefor (if any) in
the Uniform Commercial Code as adopted by the State of Illinois.
Notwithstanding the foregoing, any accounting terms used in this Agreement which
are not specifically defined herein shall have the meaning customarily given to
them in accordance with GAAP. All financing computations hereunder shall be
computed, unless otherwise specifically provided herein, in accordance with GAAP
as consistently applied. No Accounting Changes (as defined below) shall affect
financial covenants, standards or terms in this Agreement; provided, that
Borrower shall prepare footnotes to the financial statements required to be
delivered hereunder that show the differences between the financial statements
delivered (which reflect such Accounting Changes) and the basis for calculating
financial covenant compliance (without reflecting such Accounting Changes).
"Accounting Changes" means changes in accounting principles required by GAAP and
implemented by Borrower.
2. REVOLVING LOANS: BANK'S COMMITMENT AND BORROWING PROCEDURES
2.1 Revolving Credit Commitment. On the terms and subject to the
---------------------------
conditions set forth in this Agreement, Bank agrees to make revolving credit
available to Borrower from time to time prior to the Revolving Credit
Termination Date in such aggregate amounts as Borrower may from time to time
request but in no event exceeding Three Million Dollars ($3,000,000) in the
aggregate (the "Revolving Credit Commitment"). The Revolving Credit Commitment
shall be available to Borrower by means of Revolving Loans, it being understood
that the Revolving Loans may be repaid and used again during the period from the
date hereof to and including the Revolving Credit Termination Date, at which
time the Revolving Credit Commitment shall expire.
2.2 Borrowing Procedures. Borrower shall give Bank irrevocable telephonic
--------------------
notice (which notice shall be promptly confirmed in writing) no later than 2:00
p.m., Chicago time, one (1) Business Day prior to the date that Borrower desires
disbursement of a Revolving Loan. Each such notice shall be effective upon
receipt by Bank and shall specify the date
<PAGE>
of the Revolving Loan (which shall be a Business Day) and the amount of such
Revolving Loan. Borrower agrees that Bank may rely on any notice given by
persons it reasonably believes to be the Authorized Agent of Borrower and either
Edwin Jacobson, President and Chief Executive Officer of Borrower, or Thomas F.
Redler, Assistant Secretary and Assistant Treasurer of MLC, without the
necessity of independent investigation. Subject to the terms and conditions of
this Agreement, the Revolving Loan shall be made available to Borrower by
depositing the same, in immediately available funds, in an account of Borrower
maintained with Bank.
2.3 All Revolving Loans to Constitute One Obligation. The Revolving Loans
------------------------------------------------
shall constitute one general obligation of Borrower, and shall be secured by
Bank's security interest in and Lien upon all of the Collateral and by all other
security interests, Liens, claims and encumbrances heretofore, now or at any
time or times hereafter granted by Borrower to Bank.
3. REVOLVING LOANS: NOTE EVIDENCING REVOLVING LOANS
3.1 Revolving Note. The Revolving Loans made by Bank under the Revolving
--------------
Credit Commitment shall be evidenced by the Revolving Note substantially in the
form set forth in Exhibit 3.1, with appropriate insertions, dated the date
-----------
hereof (or such other date prior thereto as shall be satisfactory to Bank),
payable to the order of the Bank. The unpaid principal amount of the Revolving
Loan shall bear interest and be due and payable as provided in this Agreement
and the Revolving Note. Payments to be made by Borrower under the Revolving
Note shall be made at the time, in the amounts and upon the terms set forth
herein and therein.
3.2 Recordation. The type, date and amount of each Revolving Loan made by
-----------
Bank, the interest rate, and the date and amount of each repayment of principal
received by Bank shall be recorded by Bank in its records. The aggregate unpaid
principal amount so recorded shall be prima facie evidence of the principal
amount owing and unpaid on the Revolving Note. The failure to so record any
such amount or any error in so recording any such amount shall not limit or
otherwise affect the obligations of Borrower hereunder or under the Revolving
Note to repay the principal amount of the Revolving Loans together with all
interest accrued thereon.
4. REVOLVING LOANS: AMOUNTS; INTEREST; BALANCES; FACILITY AMOUNT FEE
4.1 Interest Rate; Applicable Borrowing Amounts.
-------------------------------------------
(a) Borrower's Liabilities arising under Paragraph 2.1 hereof in
-------------
respect of each Revolving Loan shall bear interest at the fluctuating rate per
annum equal to the sum of the Prime Rate plus the Revolving Margin from time to
time in effect for the period commencing on the date of such Revolving Loan
until such Revolving Loan is paid in full.
(b) Accrued interest on the outstanding principal amount of Revolving
Loans shall be payable monthly in arrears on the first Business Day of each
calendar month commencing with the first Business Day of April, 1996. To the
extent funds are available, accrued interest shall be paid by automatic
withdrawals made by Bank from the Operating Account on or about the first
Business Day of each calendar month. Bank shall deliver to Borrower a monthly
statement with respect to the Operating Account, which statement shall show the
interest rate payable with respect to the Revolving Loan during the prior month,
the amount of interest accrued on the Revolving Loan during the prior month, and
the date of, and the amount of, each automatic withdrawal of accrued interest by
the Bank from the Operating Account during the prior month. After the Revolving
Credit Termination Date, accrued interest on such Revolving Loans shall be
payable on demand. Each Revolving Loan shall be in an aggregate minimum amount
of $10,000 and integral multiples of $25,000 in excess of that amount.
(c) If any payment of principal on any Revolving Loan is not made
when due, such Revolving Loan shall bear interest from the date such payment was
due until paid in full, payable on demand, at a rate per annum (the "Default
Rate") equal to the sum of 3% plus the applicable rate set forth in Paragraph
---------
4.1(a) from time to time in effect.
- - ------
4.2 Computation of Interest. Interest on each Revolving Loan shall be
-----------------------
computed for the actual number of days elapsed on the basis of a 360-day year.
The interest rate applicable to each Revolving Loan shall change simultaneously
with each change in the Prime Rate. In computing interest on any Revolving
Loan, (i) the date of funding of the Revolving Loan shall be included and (ii)
the date of payment of such Revolving Loan shall be excluded; provided that if a
Revolving Loan is repaid on the same day on which it is made, one day's interest
shall be paid on that Revolving Loan.
4.3 Interest Laws. Notwithstanding any provision to the contrary
-------------
contained in this Agreement or the Other Agreements, Borrower shall not be
required to pay, and Bank shall not be permitted to collect, any amount of
interest in excess
<PAGE>
of the maximum amount of interest permitted by law ("Excess Interest"). If any
Excess Interest is provided for or determined by a court of competent
jurisdiction to have been provided for in this Agreement or in any of the Other
Agreements, then in such event: (a) the provisions of this Paragraph shall
govern and control; (b) Borrower shall not be obligated to pay any Excess
Interest; (c) any Excess Interest that Bank may have received hereunder shall
be, at Bank's option, (i) applied as a credit against the outstanding principal
balance of Borrower's Liabilities or accrued and unpaid interest (not to exceed
the maximum amount permitted by law), (ii) refunded to the payor thereof, or
(iii) any combination of the foregoing; (d) the interest rate(s) provided for
herein shall be automatically reduced to the maximum lawful rate allowed from
time to time under applicable law (the "Maximum Rate"), and this Agreement and
the Other Agreements shall be deemed to have been and shall be reformed and
modified to reflect such reduction; and (e) Borrower shall not have any action
against Bank for any damages arising out of the payment or collection of any
Excess Interest. Notwithstanding the foregoing, if for any period of time
interest on any Borrower's Liabilities is calculated at the Maximum Rate rather
than the applicable rate under this Agreement, and thereafter such applicable
rate becomes less than the Maximum Rate, the rate of interest payable on such
Borrower's Liabilities shall remain at the Maximum Rate until Bank shall have
received the amount of interest which Bank would have received during such
period on such Borrower's Liabilities had the rate of interest not been limited
to the Maximum Rate during such period.
4.4 Unused Portion Fee. As additional consideration for issuing, or
------------------
causing to be issued, Revolving Loans for Borrower at Borrower's request
pursuant to Paragraph 2.1 hereof, from and after the Closing Date, Borrower
-------------
shall pay to Bank a fee in an amount equal to the Revolving Credit Commitment
less the average daily balance of the Revolving Loans during the preceding
quarter, multiplied by one-quarter of one percent (.25%) per annum, such fee to
be calculated on the basis of a 360-day year for the actual number of days
elapsed and to be payable quarterly in arrears on the first Business Day of
April 1996 and on the first Business Day of each calendar quarter thereafter.
4.5 Revolving Loan Clean-Up Period. Borrower agrees during each twelve-
------------------------------
month period during the effectiveness of this Agreement to reduce the principal
balance of the Revolving Loans outstanding hereunder and under the Revolving
Note to zero dollars ($0) for a period of at least thirty (30) consecutive days.
5. REVOLVING LOANS: GENERAL TERMS
5.1 Payments to Bank. That portion of Borrower's Liabilities consisting
----------------
of: (a) principal payable on account of the Revolving Loans made by Bank to
Borrower pursuant to this Agreement shall be payable by Borrower to Bank, as
provided in the Revolving Note or applicable instrument or document in respect
of the Revolving Loans; (b) costs, fees and expenses payable pursuant to this
Agreement shall be payable by Borrower to Bank, on demand (other than the unused
portion fee described in Paragraph 4.4 above, which shall be paid in accordance
-------------
with such paragraph); (c) interest payable pursuant to this Agreement shall be
payable by Borrower to Bank as provided in Paragraph 4.1; and (d) the balance of
-------------
Borrower's Liabilities, if any, shall be payable by Borrower to Bank as and when
provided in this Agreement or the Other Agreements.
5.2 Conditions Precedent Events. Each Revolving Loan made by Bank to
---------------------------
Borrower at the request of Borrower pursuant to this Agreement or the Other
Agreements shall in any event be subject to the following conditions precedent:
(a) there shall not then exist an Event of Default (as hereinafter defined) or
any event or condition which with notice, lapse of time and/or the making of
such Revolving Loan would constitute an Event of Default; (b) the
representations, warranties and covenants of Borrower contained in this
Agreement shall be true and correct as of the date of such Revolving Loan with
the same effect as though made on such date; (c) all of the covenants and
agreements of Borrower in this Agreement, and all of the requirements of this
Agreement with respect to such Revolving Loan, shall have been complied with;
and (d) there shall not have occurred, since the date of this Agreement, any
material adverse change in the financial condition, results of operations or
business of Borrower. Each borrowing by Borrower hereunder shall be deemed a
representation and warranty by Borrower that the foregoing conditions have been
fulfilled as of the date of such borrowing. Bank shall have received upon
request a certificate signed by the Authorized Agent of Borrower and either
Edwin Jacobson, the president and chief executive officer of Borrower, or Thomas
Redler, the assistant treasurer and assistant secretary of MLC, dated the date
of such requested Revolving Loan certifying satisfaction of the conditions
specified in clauses (a)-(d) of this Paragraph 5.2.
-------------
5.3 Offset. Borrower agrees that, in addition to (and without limitation
-------
of) any right of set-off, bankers' lien or counterclaim Bank may otherwise have,
Bank shall be entitled, at its option, to offset balances held by it for account
of Borrower at any of its offices, in United States Dollars or in any other
currency, against any principal of or interest on any of Bank's Revolving Loans,
or any other amount payable to Bank hereunder, which is not paid when due
(regardless of whether such balances are then due to Borrower), in which case it
shall promptly notify Borrower thereof, provided that Bank's failure to give
such notice shall not affect the validity thereof.
<PAGE>
5.4 Discretionary Disbursements. Bank, in its sole and absolute
---------------------------
discretion, may immediately upon notice to Borrower, disburse any or all
proceeds of Revolving Loans made or available to Borrower pursuant to this
Agreement and/or the Other Agreements to pay any fees, costs, expenses or other
amounts required to be paid by Borrower hereunder and not so paid. All monies
so disbursed shall be a part of Borrower's Liabilities, payable by Borrower on
demand.
5.5 Revolving Credit Termination Date; Continuance of Obligations, Etc.
-------------------------------------------------------------------
This Agreement, Bank's obligation to loan monies to Borrower, and Borrower's
ability to borrow monies from Bank shall be in effect until the Revolving Credit
Termination Date. Notwithstanding the foregoing and until such date when
Borrower's Liabilities shall be paid in full, Borrower's obligations hereunder
and under the Other Agreements shall continue, interest shall continue to be
paid in accordance with the foregoing, Bank shall be entitled to retain its
security interest in the Collateral and Bank shall retain all of its rights and
remedies under this Agreement.
5.6 Revolving Loan Evidence. Revolving Loans made by Bank to Borrower
-----------------------
pursuant to this Agreement may or may not (at Bank's sole and absolute
discretion) be evidenced by notes or other instruments issued or made by
Borrower to Bank. Where such loans are not so evidenced, such loans shall be
evidenced solely by entries upon the ledgers, books, records and/or computer
records of each Bank maintained for that purpose, which entries shall be
rebuttably presumptive evidence of such loans in the absence of manifest error.
6. REVOLVING LOANS: CONDITIONS TO LENDING
6.1 Initial Revolving Loan Conditions Precedent. In addition to those
-------------------------------------------
conditions set forth in Paragraph 5.2 above with respect to all Revolving Loans
-------------
and advances hereunder, prior to or contemporaneously with the making of the
initial advance of funds, Bank's obligation to make any Revolving Loan is
subject to the satisfaction of the following conditions precedent:
(a) Fees and Expenses. Borrower shall have paid all fees owed to
-----------------
Bank and reimbursed Bank for all expenses due and payable hereunder on or before
the date hereof including, but not limited to, counsel fees provided for in
Paragraph 10.12 hereof.
- - ---------------
(b) Documents. Bank shall have received the following documents, in
---------
form and substance satisfactory to Bank, and all of the transactions
contemplated by each such document shall have been consummated or each condition
contemplated by each such document shall have been satisfied:
(i) Related Documents. Copies of this Agreement and each Other
-----------------
Agreement as required by Bank, including one copy of the Revolving Note
payable to Bank conforming to the requirements hereof duly executed by
Borrower and copies of the Mortgage, Assignment of Rents and Pledge
Agreement duly executed by Borrower and satisfactory to Bank. The
applicable Forms UCC-1 and UCC-2 financing statements related to the
Collateral (as herein defined) shall have been filed in all jurisdictions
that Bank deems necessary or advisable.
(ii) Legal Opinion. The legal opinion of Borrower's in-house
-------------
counsel.
(iii) Authorized Agent's Certificate. A certificate executed by
------------------------------
the Authorized Agent of Borrower stating that (A) no default or Event of
Default has occurred and is continuing, (B) no material adverse change in
the financial condition or operations of the business of Borrower has
occurred since December 31, 1995, and (C) each condition precedent to the
consummation of the Revolving Loans contemplated hereby has been met or
satisfied.
(iv) Insurance Policies. Certificates from Borrower's insurance
------------------
carriers evidencing that all insurance policies and coverage required by
Paragraph 8.2(h) below is in effect.
----------------
(v) Partnership Agreement. A copy of Borrower's Partnership
---------------------
Agreement certified by the Authorized Agent of Borrower.
(vi) Borrower Resolutions. Certified copies of resolutions of
--------------------
the Borrower, its partners and authorized agents, as applicable,
authorizing the execution and delivery and the consummation of the
transactions contemplated by this Agreement and the Other Agreements and
all other documents or instruments to be executed and delivered in
conjunction herewith and therewith by Borrower.
<PAGE>
(vii) Incumbency Certificate. A certificate of a partner of
-----------------------
Borrower certifying the name of the Authorized Agent of Borrower authorized
to sign this Agreement and the Other Agreements together with a sample of
the true signature of the Authorized Agent.
(viii) Disclosure Schedule. The Disclosure Schedule executed by
-------------------
the Authorized Agent of the Borrower.
(ix) Title Policy. A loan policy issued by a title insurance
------------
company acceptable to Bank in the amount of $3,000,000, which policy shall
be in form and substance acceptable to Bank.
(x) Survey. Surveys for the Mortgaged Properties in form and
------
substance acceptable to Bank.
(xi) Environmental Reports. Appraisals and Phase One
---------------------
Environmental Report covering the Mortgaged Properties, satisfactory in
each case to Bank.
(c) Bank's Review. Bank's review of and satisfaction with the
-------------
ownership, capital, corporate, organizational and legal structure of Borrower
and its Affiliates.
6.2 Accountant's Letter. On or prior to the date hereof, Borrower agrees
-------------------
that it will deliver to Ernst & Young LLP, a letter (in form and substance
acceptable to Bank) authorizing such accountants to communicate with Bank and
acknowledging Bank's reliance on future financial statements audited by such
accountants, and Borrower shall use its best efforts to cause such accountants
to accept and agree to such letter.
7. COLLATERAL: GENERAL TERMS
7.1 Grant of Security Interest. To secure the prompt payment of
--------------------------
Borrower's Liabilities and the prompt, full and faithful performance by Borrower
of all of the provisions to be kept, observed or performed by Borrower under
this Agreement and/or the Other Agreements, Borrower does hereby pledge, assign,
transfer and deliver to Bank, for the benefit of Bank, and grant to Bank, for
the benefit of Bank, a security interest in and to and a first mortgage on the
Mortgaged Properties pursuant to the Mortgage and Assignment of Rents.
Additionally, Borrower will pledge $300,000 in cash or cash equivalents as an
interest reserve pursuant to the Pledge Agreement. (All of the foregoing
personal property and real property securing Borrower's Liabilities hereunder,
in addition to all rents and proceeds thereof including, without limitation,
proceeds of insurance policies insuring the same, is hereinafter sometimes
individually and sometimes collectively referred to as "Collateral"). Borrower
shall make appropriate entries upon its financial statements and books and
records disclosing Bank's security interest in the Collateral.
7.2 Perfection of Security Interests. Borrower shall execute and/or
--------------------------------
deliver to Bank, at any time and from time to time hereafter at the request of
Bank, all agreements, instruments, financing statements, documents and other
written matter (sometimes hereinafter individually and collectively referred to
as "Supplemental Documentation") that Bank reasonably may request, in form and
substance acceptable to Bank, to perfect and maintain perfected Bank's security
interest in the Collateral and to consummate the transactions contemplated in or
by this Agreement and the Other Agreements. After an Event of Default,
Borrower, irrevocably, hereby makes, constitutes and appoints Bank (and all
Persons designated by Bank for that purpose) as Borrower's true and lawful
attorney and agent-in-fact to sign the names of Borrower on the Supplemental
Documentation and to deliver the Supplemental Documentation to such Persons as
Bank may reasonably elect. Borrower agrees that a carbon, photographic or
photostatic copy or other reproduction of this Agreement or of any financing
statement shall be sufficient as a financing statement.
7.3 Inspection of Collateral. Bank (by any of its officers, employees
------------------------
and/or agents) shall have the right to inspect the Collateral and all related
records (and the premises upon which it is located) and to verify the amount and
condition of or any other matter relating to the Collateral. After an Event of
Default, all costs, fees and expenses incurred by Bank, or for which Bank has
become obligated, in connection with such inspection and/or verification shall
constitute part of Borrower's Liabilities, payable by Borrower to Bank on
demand. Notwithstanding any other provision hereof, the provisions of this
Paragraph 7.3 shall govern and control with respect to matters concerning
- - -------------
inspection and verification of the Collateral.
7.4 First Lien and Locations of Collateral. Borrower warrants and
--------------------------------------
represents to and covenants with Bank that: (a) as of the Closing Date, Bank's
security interest in the Collateral is and at all times hereafter shall be
perfected and have a first priority; (b) the offices and/or locations where
Borrower keeps the Collateral consisting of personal property, and the books and
records concerning the Collateral, consisting of books and records with respect
to both real and personal property, are at the
<PAGE>
locations specified on Schedule 7.4 and Borrower shall not remove such books and
------------
records and/or the Collateral therefrom and shall not keep any of such books and
records and/or the Collateral at any other office or location without the prior
written consent of Bank; and (c) the addresses specified on Schedule 7.4 include
------------
and designate Borrower's executive offices, chief place of business and other
offices and places of business and are Borrower's sole offices and places of
business. Borrower, by written notice delivered to Bank at least thirty (30)
days prior thereto, shall advise Bank of Borrower's opening of any new office or
place of business or its closing of any existing office or place of business and
any new office or place of business shall be within the continental United
States of America. There are no liens on the Collateral other than the lien of
Bank pursuant hereto and Permitted Liens.
7.5 Constructive Trust. Borrower shall receive, as the sole and exclusive
------------------
property of Bank, and as trustee for Bank, all monies, checks, notes, drafts and
all other payment for and/or proceeds of Collateral which come into the
possession or under the control of Borrower (or any of its partners, officers,
employees, agents or those Persons acting for or in concert with Borrower) and
immediately upon receipt thereof, Borrower shall remit the same (or cause the
same to be remitted), in kind, to Bank at the address described in Paragraph
---------
10.16 below.
- - -----
7.6 Application of Proceeds of Collateral. Bank, at any time or times in
-------------------------------------
its sole and absolute discretion, may take control of, in any manner, and may
endorse Borrower's name, as appropriate, to any of the items of payment or
proceeds described in Paragraph 7.5 above and, pursuant to the provisions of
-------------
this Agreement, Bank may, in its sole and absolute discretion, apply the same to
and on account of Borrower's Liabilities. For the purposes of this Paragraph,
Borrower, irrevocably, hereby makes, constitutes and appoints Bank (and all
persons designated by Bank for that purpose) as Borrower's true and lawful
attorney and agent-in-fact with power, without notice to Borrower, to take any
such actions.
7.7 Third Party Collateral Claims. Bank, in its sole and absolute
-----------------------------
discretion, without waiving or releasing any Event of Default or obligation,
liability, or duty of any Borrower under this Agreement or the Other Agreements,
may at any time or times hereafter, but shall be under no obligation to, pay,
acquire and/or accept an assignment of any security interest, lien, encumbrance,
or claim asserted by any Person against the Collateral. All sums paid by Bank in
respect thereof and all costs, fees and expenses, including reasonable
attorney's fees, court costs, expenses and other charges relating thereto that
are incurred by Bank on account thereof shall be part of Borrower's Liabilities
payable by Borrower to Bank on demand.
7.8 Additional Collateral. Bank may, in its sole and absolute discretion,
---------------------
retain as additional Collateral or release to Borrower, from time to time, such
portion of the monies, reserves and/or proceeds received by Bank with respect to
the Collateral as Bank may determine. All such monies, reserves, proceeds and
other property of Borrower in the possession of Bank at any time or times
hereafter are hereby pledged by Borrower to Bank as additional Collateral
hereunder and must be applied by Bank on account of Borrower's Liabilities.
7.9 No Custom or Waiver. No authorization given by Bank pursuant to this
-------------------
Agreement or the Other Agreements to sell any specified portion of Collateral or
any items thereof, and no waiver by Bank in connection therewith shall establish
a custom or constitute a waiver of the limitation contained in this Agreement
against such sales, with respect to any portion of the Collateral or any item
thereof not covered by said authorization.
8. REPRESENTATIONS AND WARRANTIES; COVENANTS;
INDEMNIFICATION; CONTINUING OBLIGATION
8.1 Representations and Warranties of Borrower. Borrower hereby
------------------------------------------
represents and warrants to Bank as of the date hereof and with respect to
subsections (a) through (d) and subsections (f) through (aa) below, the date of
disbursement of each Revolving Loan or advance hereunder, as follows:
(a) Partnership Existence and Authority. Borrower is a general
-----------------------------------
partnership duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified to do business and is in good
standing under the laws of each state in which the ownership of its properties
and the nature and extent of the activities transacted by it makes such
qualification necessary. Borrower has all requisite partnership power and
authority to conduct its activities as presently conducted, to own its
properties and to perform its obligations under this Agreement.
(b) Authorization; No Conflict. The execution, delivery and
--------------------------
performance by Borrower of this Agreement and the Other Agreements to which it
is a party are within Borrower's partnership powers, have been duly authorized
by all necessary partnership action and do not contravene (i) Borrower's
Partnership Agreement or (ii) any law or any contractual restriction binding on
or affecting Borrower or its properties, and do not result in or require the
creation of any Lien (except as
<PAGE>
may be created under this Agreement or the Other Agreements) upon or with
respect to any of its properties. The partners of Borrower are authorized to
enter into this Agreement and the Other Agreements on behalf of Borrower and the
persons entering into this Agreement and the other Agreements on behalf of said
partners are so authorized to do so on behalf of said partners.
(c) No Approval. No authorization or approval or other action by, and
-----------
no notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by Borrower of this
Agreement or any Other Agreement to which Borrower is a party.
(d) Validity and Binding Nature. This Agreement is, and the Other
---------------------------
Agreements to which Borrower is a party when delivered hereunder will be, legal,
valid and binding obligations of Borrower, enforceable against Borrower in
accordance with their respective terms.
(e) Financial Statements and Condition. The financial statements and
----------------------------------
balance sheet (including the notes thereto) of Borrower as at December 31, 1995,
and the related statements of income and equity and statements of cash flows of
Borrower for the fiscal year then ended, audited by independent certified public
accountants, are complete and correct and fairly present the financial condition
of Borrower as at such date and the results of the operations of Borrower for
the period ended on such date, in accordance with GAAP, and since December 31,
1995, there has been no material adverse change in Borrower's financial
condition, business, properties or operations. Except as set forth on Schedule
--------
8.1(e) hereto, Borrower has not on the date hereof, nor will have on the date of
- - ------
any Revolving Loan or advance made by Bank hereunder, any material contingent
obligations, long-term leases or material forward or long-term commitments,
which are not reflected in the foregoing statements (and the related notes
thereto).
(f) Litigation. Except as disclosed in Schedule 8.1(f) hereto, there
---------- ---------------
is no pending or, to the best knowledge of Borrower, threatened action, suit,
inquiry, investigation, or proceeding affecting, directly or indirectly,
Borrower before any court, governmental agency or arbitrator, which, in any
case, may (i) materially and adversely affect the financial condition or
operation of Borrower, (ii) which seeks to restrain or would otherwise have a
material adverse effect on the transactions contemplated herein, or (iii) which
would affect the validity or enforceability of this Agreement or the Other
Agreements.
(g) Securities Transaction. No proceeds of any Revolving Loan or
----------------------
advance made by Bank to Borrower hereunder will be used to acquire any security
in any transaction which is subject to Section 13 or 14 of the Securities
Exchange Act of 1934, as amended.
(h) Regulation U. Borrower is not engaged in the business of
------------
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds of any Revolving Loan or advance made by Bank
to Borrower hereunder will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock.
(i) ERISA Termination Event and Funding. No ERISA Termination Event
-----------------------------------
has occurred or is expected to occur with respect to any Plan and all Plans, to
the extent governed by ERISA, meet the minimum funding standards of Section 302
-----------
of ERISA.
(j) Withdrawal Liability and Reportable Events. Neither Borrower nor
------------------------------------------
any ERISA Affiliate has incurred, or expects to incur, any withdrawal liability
under Section 4201 of ERISA to any Multiemployer Plan. No Reportable Event (as
------------
defined in ERISA) has occurred with respect to any Plan.
(k) Taxes. Borrower and its partners have filed all tax returns
-----
(Federal, state and local) required to be filed and paid all taxes shown thereon
to be due, including interest and penalties, other than such taxes that Borrower
is contesting in good faith by appropriate legal proceedings and proper reserves
therefor have been established on the books of Borrower.
(l) Liens. There are no Liens upon or with respect to any of the
-----
Mortgaged Properties of Borrower or Collateral or any right to receive revenues
of Borrower or Collateral other than (i) Liens arising under this Agreement, and
(ii) other Liens permitted pursuant to Paragraph 8.3(a) hereof.
----------------
(m) Conflicts. Neither Borrower nor any Affiliate is a party to any
---------
indenture, loan or credit agreement or any lease or other agreement or
instrument (including corporate charters) which is likely to have a material
adverse effect on the ability of Borrower to perform its obligations under this
Agreement or the Other Agreements or which would restrict or otherwise limit the
incurring of the Debt represented by this Agreement and the Other Agreements.
<PAGE>
(n) Environmental Matters.
---------------------
(i) Compliance. Except as disclosed in Schedule 8.1(n) hereto,
---------- ---------------
to the best of Borrower's knowledge, no Mortgaged Property is listed on any
local, state and/or federal lists of potentially contaminated sites,
including, without limitation, the National Priorities List, CERCLIS or any
state or federal hazardous waste site or leaking underground storage tank
lists, and each Mortgaged Property and Borrower (with respect to each
Mortgaged Property) has been and is currently in compliance with all
applicable Environmental Laws. There have been no past, and there are no,
to the best of Borrower's knowledge, pending or threatened, Environmental
Actions to which Borrower is a party which relate to any Mortgaged
Property. All required governmental permits and licenses are in effect,
and Borrower is in compliance therewith. Borrower has not received any
notice of any Environmental Action respecting Borrower, any Mortgaged
Property or any off-site facility to which any Hazardous Material has been
sent for off-site treatment, recycling, reclamation, reuse, handling,
storage, sale or disposal.
(ii) Absence of Hazardous Material. Except as disclosed in
-----------------------------
Schedule 8.1(n) hereto, to the best of Borrower's knowledge, no use,
----------------
exposure, release, emission, discharge, generation, manufacture, sale,
handling, reuse, presence, storage, treatment, transport, recycling or
disposal of Hazardous Material has occurred or is occurring on or from any
Mortgaged Property which is in violation of any Environmental Laws. The
term "release" shall include, without limitation, any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing into the environment (including, without
limitation, the abandonment or discarding of barrels, containers and other
receptacles containing any Hazardous Material). To the best of Borrower's
knowledge, all Hazardous Materials used, treated, stored, transported to or
from, generated or handled on any Mortgaged Property have been disposed of
on or off such Mortgaged Property in a lawful manner. To the best of
Borrower's knowledge, no environmental, public health or safety hazards
currently exist with respect to any Mortgaged Property. To the best of
Borrower's knowledge, except as disclosed in Schedule 8.1(n) hereto, no
---------------
storage tanks (including, without limitation, petroleum or heating oil
storage tanks), underground or above-ground, are present on or under any
Mortgaged Property, or have been on or under any Mortgaged Property.
(iii) Waters of the United States. To the best of Borrower's
---------------------------
knowledge, no part of any Mortgaged Property contains "waters of the United
States", as defined in 33 CFR 328. Borrower shall not discharge dredged or
fill material into waters of the United States as such activity is
described and regulated by Section 404 of the Clean Water Act, 33 U.S.C.
1344.
(iv) Illinois Responsible Property Transfer Act. Neither any
------------------------------------------
portion of the Mortgaged Property nor the Revolving Loan is subject to the
Illinois Responsible Property Transfer Act.
(o) Investment Company Act. Borrower is not an "investment company"
----------------------
or a company "controlled by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
(p) Compliance with Laws. Borrower is in compliance with all laws,
--------------------
orders, regulations and ordinances of all federal, foreign, state and local
governmental authorities binding upon or affecting the business, operation or
assets of Borrower including, without limitation, zoning or other ordinances
relating to permissive non-conforming uses of property, except where the failure
to be in compliance would not have a material adverse effect on the business,
financial condition or operations of Borrower.
(q) Other Agreements. Borrower makes each of the representations and
----------------
warranties contained in the Other Agreements to which Borrower is a party
operative and applicable for the benefit of Bank as if the same were set forth
at length herein.
(r) True and Correct Nature of Other Representations and Warranties.
---------------------------------------------------------------
The representations and warranties of Borrower in the Other Agreements to which
Borrower is a party are true and correct.
(s) Affiliates. Except as disclosed on Schedule 8.1(s), Borrower has
---------- ---------------
no Affiliates.
(t) Subsidiaries. Borrower has no Subsidiaries, other than CMC
------------
Heartland Partners I, Limited Partnership, a Delaware limited partnership.
<PAGE>
(u) Solvency. Borrower has capital sufficient to carry on its
--------
business and transactions and all businesses and transactions in which it is
about to engage and is solvent and able to pay its debts as they mature and
Borrower owns property the fair saleable value of which is greater than the
amount required to pay Borrower's Debt. No transfer of property is being made
and no Debt is being incurred in connection with the transactions contemplated
by this Agreement with the intent to hinder, delay or defraud either present or
future creditors of Borrower or any Affiliate.
(v) Title. Borrower has good, indefeasible and merchantable title to
-----
and ownership of the Collateral, free and clear of all Liens, claims, security
interests and other encumbrances except for the Liens of Bank granted hereunder
and as permitted by Paragraph 8.3(a) hereof.
----------------
(w) Organizational Structure and Related Matters. The partnership
--------------------------------------------
structure of Borrower as of the Closing Date is described on Schedule 8.1(s).
---------------
(x) Options. No person, corporation, partnership, association or
-------
other entity has any option to acquire ownership of the Collateral or any
portion thereof.
(y) Debt. As of the date of this Agreement, Borrower has no Debt
----
except for the permitted Debt set forth in Schedule 8.3(d) hereof.
---------------
(z) Insurance. Schedule 8.1(z) sets forth a complete and accurate
--------- ---------------
description of all policies of insurance that will be in effect as of the
Closing Date for Borrower. Borrower is adequately insured under such policies,
no notice of cancellation has been received with respect to such policies and
Borrower is in compliance with all conditions contained in such policies.
(aa) Accuracy of Information. All factual information heretofore or
-----------------------
contemporaneously furnished by or on behalf of Borrower to Bank for purposes of
or in connection with this Agreement or any transaction contemplated hereby
(excluding projections referred to below in this Paragraph and factual
information superseded or replaced prior to the date hereof) is, and all other
factual information (taken as a whole) hereafter furnished by or on behalf of
Borrower to Bank will be, true and accurate in every material respect on the
date as of which such information is dated or certified, and Borrower has not
omitted and will not omit any material fact necessary to prevent such
information from being false or misleading.
8.2 Affirmative Covenants. At all times prior to the Revolving Credit
---------------------
Termination Date and thereafter for so long as any amounts are due or owing to
Bank hereunder, Borrower hereby covenants that it will, unless Bank otherwise
consents in writing:
(a) Existence, Etc. Do or cause to be done all things necessary to
--------------
preserve and keep in full force and effect Borrower's partnership existence in
good standing.
(b) Compliance with Laws, Etc. Comply with all applicable present and
-------------------------
future laws, rules, ordinances, regulations and orders including, without
limitation, laws, rules, ordinances, regulations and orders regarding the
operation and maintenance of Borrower's business.
(c) Payment of Taxes and Other Claims. Pay or discharge or cause to
---------------------------------
be paid or discharged, before the same shall become delinquent, (i) all Charges
levied or imposed upon Borrower or upon the income, profits or property of
Borrower, and (ii) all lawful claims for labor, materials and supplies which, if
unpaid, might by law become a Lien upon the property of Borrower; provided,
--------
however, that Borrower shall not be required to pay or discharge or cause to be
- - -------
paid or discharged any such Charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate proceedings to the
extent adequate reserves have been established on the books of Borrower.
(d) Reporting Requirements. Keep true books of record and account in
----------------------
which full, true and correct entries in accordance with GAAP consistently
applied will be made of all dealings or transactions in relation to its business
and activities, and shall furnish to Bank:
(i) as soon as possible and in any event within ten (10) days
after the occurrence of an Event of Default or any event which, with the
giving of notice, lapse of time, or both, would constitute an Event of
Default,
<PAGE>
the statement of an Authorized Agent setting forth details of such Event of
Default or event and the action which Borrower has taken or proposes to
take to cure the same;
(ii) as soon as available and in any event within thirty (30)
days after the end of each fiscal quarter beginning with the quarter ending
March 31, 1996, an internally prepared balance sheet of Borrower as at the
end of such quarter and the related statements of net earnings and
statements of cash flows of Borrower for such quarter and for the portion
of the fiscal year ended at the end of such quarter, setting forth in each
case in comparative form the figures for the corresponding quarter and the
corresponding portion of the previous fiscal year, all in reasonable detail
and certified (subject to normal year-end adjustments) as to fairness of
presentation, in accordance with GAAP, by the Authorized Agent;
(iii) as soon as available and in any event within ninety (90)
days after the close of each fiscal year of Borrower, a balance sheet and
the related consolidated statements of net earnings and partners' equity
and statements of cash flows of Borrower as of the end of such fiscal year,
fairly and accurately presenting the financial condition of Borrower and
its Affiliates as at such date and the results of operations of Borrower
and its Affiliates for such fiscal year and setting forth in each case in
comparative form the corresponding figures for the corresponding period of
the preceding fiscal year, all in reasonable detail, prepared in accordance
with GAAP consistently applied, and audited by Ernst & Young LLP or such
other independent certified public accountants acceptable to Bank;
(iv) together with each delivery of financial statements
required by subsection (iii) above, Borrower shall deliver to Bank (x) a
certificate of the accountants who performed the audit in connection with
such statements (A) containing or accompanied by an acknowledgement of such
accountant that Bank will be relying on the opinion of such accountants
stated in such audited financial statements and (B) stating that in making
the audit necessary to the issuance of a report on such financial
statements, they have obtained no knowledge that any Event of Default or
event which, with notice or a lapse of time or both, would constitute an
Event of Default, as it relates to accounting matters, has occurred and is
continuing or, if such accountants have obtained knowledge of an Event of
Default or such event, specifying the nature and period of existence
thereof and (y) a certificate of Borrower executed by the Authorized Agent
stating whether any Event of Default, or event which, with the passage of
time or giving of notice or both, would constitute, mature into or become
such an Event of Default, currently exists and is continuing and what
activities, if any, Borrower is taking or proposing to take with respect
thereto;
(v) (A) as soon as possible and in any event (i) within
thirty (30) days after Borrower or any ERISA Affiliate knows or has reason
to know that any ERISA Termination Event described in clause (i) of the
definition of ERISA Termination Event with respect to any Plan has occurred
and (ii) within ten (10) days after Borrower or any ERISA Affiliate knows
or has reason to know that any other ERISA Termination Event with respect
to any Plan has occurred, a statement of the Authorized Agent (or designee)
of Borrower describing such ERISA Termination Event and the action, if any,
which Borrower, or any such ERISA Affiliate proposes to take with respect
thereto;
(B) promptly and in any event within two (2) Business
Days after receipt thereof by Borrower or any ERISA Affiliate from the
PBGC, copies of each notice received of the PBGC's intention to terminate
any Plan or to have a trustee appointed to administer any Plan; and
(C) promptly and in any event within ten (10) Business
Days after receipt thereof by Borrower or any ERISA Affiliate from a
Multiemployer Plan sponsor, a copy of each notice received concerning the
imposition or amount of withdrawal liability pursuant to Section 4202 of
------------
ERISA;
(vi) immediately after notice to Borrower of the commencement
thereof, notice, in writing, of any action, suit, arbitration or other
proceeding instituted, commenced or threatened against or affecting
Borrower with an amount in controversy in excess of $25,000;
(vii) if requested by Bank , Borrower's federal, state and local
tax returns as soon as said returns are completed in the form said returns
will be filed with the Internal Revenue Service and any state or local
department of revenue or taxing authority; and
(viii) such other information respecting the condition or
operations, financial or otherwise, of Borrower or any Affiliate as Bank
may from time to time reasonably request.
<PAGE>
(e) Visitation Rights. At any time or times, permit Bank or any
-----------------
agents or representatives thereof, to examine and make copies of and abstracts
from the records and books of account of and visit the Mortgaged Properties of
Borrower and its offices, all as Bank shall reasonably request, and to discuss
the affairs and finances and Mortgaged Properties of Borrower with Borrower's
representatives. In furtherance and not in limitation of the foregoing,
Borrower agrees to bear all expenses of any visitation made by Bank for the
purposes set forth in this Paragraph 8.2(e).
----------------
(f) Environmental Matters.
---------------------
(i) Compliance. The Mortgaged Properties, the use thereof, and
----------
Borrower, with respect to the Mortgaged Properties, shall comply with all
Environmental Laws. All required governmental permits and licenses shall be
obtained and maintained, and Borrower shall comply therewith. All Hazardous
Material on the Mortgaged Properties will be disposed of in a lawful manner
without giving rise to liability under any Environmental Laws. Borrower
shall satisfy all requirements of applicable Environmental Laws for the
registration, operation, maintenance, closure and removal of all
underground and other storage tanks on the Mortgaged Properties, if any.
Without limiting the foregoing, all Hazardous Material shall be handled in
compliance with all applicable Environmental Laws.
(ii) Absence of Hazardous Material. No Hazardous Material shall
-----------------------------
be introduced to or used, exposed, released, emitted, discharged,
generated, manufactured, sold, transported, handled, stored, treated,
reused, presented, disposed of or recycled on the Mortgaged Properties,
except in compliance with Environmental Laws.
(iii) Environmental Actions and Right to Consent. Borrower shall
------------------------------------------
immediately notify Bank of all Environmental Claims and deliver to Bank
copies of all written notices, complaints, correspondence and other
documents relating thereto within five (5) Business Days after receipt, and
Borrower shall keep Bank immediately informed of all responses thereto.
Borrower shall promptly cure and have dismissed with prejudice all
Environmental Claims in a manner reasonably satisfactory to Bank, and
Borrower shall keep the Mortgaged Properties free of any encumbrance
arising from any judgment, liability or lien imposed pursuant to any
Environmental Claims. Notwithstanding the foregoing sentence, Borrower may,
diligently, in good faith and by appropriate legal proceedings, contest
such proceedings provided (i) Borrower first furnish to Bank such deposits
or other collateral as Bank, in its reasonable determination, deems
sufficient to adequately protect Bank's interests, (ii) such contest shall
have the effect of preventing any threatened or pending sale or forfeiture
of all or any portion of the Mortgaged Properties or the loss or impairment
of Bank's lien and security interests in and to the Mortgaged Properties,
and (iii) the matters that are subject of such contest will not cause Bank
to incur any liability, in Bank's sole judgment reasonably exercised. After
the occurrence and during the continuance of an Event of Default, Borrower
shall permit Bank, at Bank's option, to appear in and to be represented in
any such contest and shall pay upon demand all expenses incurred by Bank in
so doing, including, without limitation, reasonable attorneys' fees and
expenses.
(iv) Future Environmental Audits. Borrower shall provide such
---------------------------
information and certifications which Bank may reasonably request from time
to time to monitor Borrower's compliance with this Paragraph for the sole
purpose of protecting Bank's security interest. To protect its security
interest, Bank shall have the right, but not the obligation, at any time
after three (3) days' advance written notice to enter upon the Mortgaged
Properties, take samples, review Borrower's books and records, interview
Borrower's employees and officers, and conduct such other similar
activities as Bank, in its sole discretion, deems appropriate. Borrower
shall cooperate fully in the conduct of such an audit. If Bank decides to
conduct such an audit because of (i) an Environmental Claim, (ii) after an
Event of Default, the possibility that Bank may take possession of or title
to the Mortgaged Properties which, in Bank's sole judgment, increases the
risk to its security interest, or (iii) the introduction of Hazardous
Material other than disclosed material as set forth on Schedule 8.1(n), to
---------------
the Mortgaged Properties or in the ordinary course of business in
compliance with Environmental Laws, then Borrower shall pay upon written
demand all reasonable costs and expenses connected with such audit, which,
until paid, shall become part of Borrower's Liabilities, secured by this
Agreement and the Other Agreements, and shall bear interest at the Default
Rate.
(g) Financial Covenants.
-------------------
(i) Borrower must maintain, at all times, Tangible Net Worth in
excess of $17,000,000.
(ii) Borrower must maintain, at all times, Liquid Assets in
excess of $1,000,000.
(h) Insurance.
---------
<PAGE>
(i) At its sole cost and expense, keep and maintain public
liability insurance relating to its ownership and use of the Collateral.
All such policies of insurance shall be carried with companies with a
Best's rating of A-/XI or better or otherwise be approved in writing by
Bank and all such policies shall be in amounts no less than such policies
set forth on Schedule 8.1(z). All policies of insurance shall comply with
---------------
the requirements set forth in the Mortgage. Authorized Agent shall deliver
to Bank the original (or certified) copy of each policy of insurance for
Borrower or a certificate of insurance, and evidence of payment of all
premiums for each such policy on or prior to the date of this Agreement.
Such policies shall: (A) contain a lender's loss payable clause naming
Bank, for the benefit of Bank, as loss payee and additional insured as its
interest may appear; and (B) provide that the insurance companies will give
Bank written notice before any such policy or policies of insurance shall
be altered or cancelled.
(ii) In the event Borrower at any time or times hereafter shall
fail to obtain or maintain any of the policies of insurance required above
or to pay any premium in whole or in part relating thereto, then Bank after
giving five (5) days' prior written notice to Borrower, without waiving or
releasing any obligation or Event of Default by Borrower hereunder, may at
any time or times thereafter (but shall be under no obligation to) obtain
and maintain such policies of insurance and pay such premium and take any
other action with respect to thereto which Bank deems advisable. All sums
so disbursed by Bank, including reasonable attorneys fees, court costs,
expenses and other charges relating thereto, shall be part of Borrower's
Liabilities, payable by Borrower to Bank on demand. Borrower authorizes
Bank, in Bank's sole discretion, to cause such sums to be paid by making an
advance in the amount thereof to Borrower and paying the proceeds thereof
to Bank.
(i) Leases. Borrower shall maintain and comply with all leases
------
covering any Collateral used by Borrower in accordance with their terms so as to
prevent any default thereunder which may result in the exercise or enforcement
of any landlord's or other lien against Borrower.
8.3 Negative Covenants. Prior to the Revolving Credit Termination Date
------------------
and thereafter for so long as any amount is due or owing to Bank hereunder,
unless Bank shall otherwise consent in writing, Borrower shall not:
(a) Liens, Etc. Create or suffer to exist, any Lien, other charge or
-----------
encumbrance, or any other type of preferential arrangement, upon or with respect
to any of the Mortgaged Properties, or assign any right to receive income, in
each case to secure or provide for the payment of any Debt of any Person, except
for the permitted Liens set forth on Schedule 8.3(a) ("Permitted Liens").
---------------
(b) Maintain Existence, Merger, Etc. Except as disclosed on Schedule
-------------------------------- --------
8.3(b), (i) dissolve or amend or modify its Partnership Agreement; or (ii)
- - ------
except as specifically permitted by this Agreement, convey, transfer, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
any Collateral (whether now owned or hereafter acquired) to any Person; or (iii)
together with one or more Affiliates convey, transfer, lease or otherwise
dispose of (whether in one transaction or in a series of transactions) all or
substantially all of the assets of Borrower and such Affiliates (whether now
owned or hereafter acquired) to any Person; or (iv) purchase, lease or otherwise
acquire all or substantially all of the assets or properties of, or acquire any
capital stock, equity interests, debt or other securities of any Person, or
enter into any joint venture or become a partner in any partnership; or (v)
engage in any transaction out of the ordinary course of business; or (vi) merge
or consolidate with any Person.
(c) Sale and Lease-Back. Enter into any arrangement with any Person
-------------------
or to which such Person is a party providing for the leasing by Borrower of any
principal asset which has been or is to be sold or transferred by Borrower to
such Person or to any other Person to whom funds have been or are to be advanced
by such Person on the security of such property or rental obligations of
Borrower, other than sales or transfers between Borrower and any Affiliate or a
lease for a temporary period not to exceed 12 months.
(d) Debt. Incur, create, assume, become or be liable in any manner
----
with respect to or permit to exist, any Debt, obligations or indebtedness,
except for the permitted Debt set forth on Schedule 8.3(d).
---------------
(e) Investments or Revolving Loans. Make or permit to exist
------------------------------
investments or loans in or to any other Person, except for (i) salaries and
reasonable advances of money to its employees in payment of reasonable expenses
incurred by such employees in the ordinary course of business; (ii) investments
in certificates of deposits of a banking institution having a net worth in
excess of $100,000,000 or in securities of the United States of America or
commercial paper with a P1 rating (all of the foregoing maturing within one
year); or (iii) investments already under consideration as of the Closing Date
as set forth on Schedule 8.3(e) ("Permitted Investments").
---------------
<PAGE>
(f) Guaranties. Guaranty, endorse or otherwise in any way directly,
----------
indirectly or contingently become liable for the obligations or liabilities of
any other Person, except endorsements of negotiable instruments for collection
in the ordinary course of business.
(g) Partnership Interests. Redeem, retire, purchase or otherwise
---------------------
acquire, directly or indirectly, any partnership interests of Borrower or other
evidence of ownership interest, or declare or pay any capital distributions from
Borrower or make any distribution of Borrower's property or assets.
(h) Transactions with Affiliates or Insiders. Except for the
----------------------------------------
management agreement by and among Borrower, Heartland Partners, L.P. and
Milwaukee Land Company as in effect on the date hereof, enter into, or be a
party to, any transaction with any Affiliate or partner of Borrower, except in
the ordinary course of and pursuant to the reasonable requirements of Borrower's
business and upon fair and reasonable terms which are fully disclosed to Bank
and are no less favorable to Borrower than would obtain in a comparable arm's
length transaction with a Person not an Affiliate or partner of Borrower.
(i) Capital Structure and Line of Business. Make any change in its
--------------------------------------
capital structure or engage in any line of business materially different from
that previously engaged in by Borrower.
(j) Change of Control. Make or permit any sale or issuance of any
-----------------
partnership interests of Borrower immediately after which Heartland Partners,
L.P. no longer holds record and beneficial ownership of at least 50.1% of all of
the partnership interest of Borrower.
8.4 Maintenance of Accounts. Borrower agrees to maintain its primary
-----------------------
operational accounts with Bank and shall maintain at all times a balance of
collected, available funds in a non-interest bearing demand deposit account with
Bank (the "Operating Account") in an amount at least equal to that amount
required to compensate Bank for its services in maintaining such account.
Borrower acknowledges that Bank will charge Borrower standard service charges in
effect from time to time for various services performed by Bank in connection
with any aspect of the relationship between Borrower and Bank, and Borrower
hereby agrees that if such service charges exceed the credit to Borrower arising
from earnings attributable to funds on deposit with Bank in the applicable
Operating Account, such service charge deficiency shall be deducted by Bank from
the Borrower's Operating Account, monthly, in arrears, within ten (10) days
following the end of each month. Bank may cause interest and other amounts
payable on the obligations of Borrower to Bank hereunder to be paid by making a
direct charge to the applicable Operating Account in accordance with the terms
hereof.
9. DEFAULT
9.1 Events of Default. The occurrence of any one of the following events
-----------------
shall constitute a default ("Event of Default") by Borrower under this
Agreement: (a) if Borrower fails or neglects to perform, keep or observe any
covenant or agreement contained in this Agreement or in the Other Agreements
which is required to be performed, kept or observed by Borrower and, in the
event of such failure or neglect under Paragraphs 8.2 (b), (f), (h) and (i) and
Paragraphs 8.3(a) and (c), the same is not cured within thirty (30) days after
notice thereof from the Bank; (b) any representation or warranty made by
Borrower herein or in any Other Agreement is breached or is false or misleading
in any material respect, or any exhibit, schedule, certificate, financial
statement, report, notice or other writing furnished by Borrower or any of its
partners, officers, employees, or agents to Bank or any Bank is false or
misleading in any material respect on the date as of which the facts therein set
forth are stated or certified and same shall not be cured or corrected within
thirty (30) days following notice of such breach; (c) if Borrower fails to pay
Borrower's Liabilities when due and payable or declared due and payable; (d) if
any of the Collateral is attached, seized, subjected to a writ or distress
warrant or is levied upon, or comes within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors and the same is not
terminated or dismissed within twenty (20) days thereafter; (e) if a petition
under any section or chapter of Bankruptcy Reform Act of 1978, as amended, or
any similar law or regulation shall be filed by Borrower or if Borrower shall
make an assignment for the benefit of its creditors or if any case or proceeding
is filed by Borrower for its dissolution or liquidation; (f) if Borrower is
enjoined, restrained or in any way prevented by court order from conducting all
or any material part of its business affairs or if a petition under any section
or chapter of Bankruptcy Reform Act of 1978, as amended, or any similar law or
regulation is filed against Borrower or if any case or proceeding is filed
against Borrower for its dissolution or liquidation and such injunction,
restraint or petition is not dismissed or stayed within ninety (90) days after
the entry or filing thereof; (g) if an application is made by Borrower for the
appointment of a receiver, trustee or custodian for any of Borrower's assets;
(h) if an application is made by any Person other than Borrower for the
appointment of a receiver, trustee or custodian for the Collateral of Borrower
and the same is not dismissed within thirty (30) days after the application
therefor; (i) if a notice of lien, levy, or assessment is filed of record with
respect to all or any of the Collateral of
<PAGE>
Borrower by the United States or any department, agency or instrumentality
thereof or by any state, county, municipal or other governmental agency,
including without limitation the PBGC, or if any taxes or debts owing at any
time or times thereafter to any one of them becomes a lien or encumbrance upon
any of the Collateral of Borrower and the same is not released within thirty
(30) days after the same becomes a lien or encumbrance; (j) if Borrower becomes
insolvent or is unable generally to pay its debts as they become due; (k) if
Borrower is in default in the payment of Debt in an amount in excess of
$100,000; (l) the appointment of a conservator for all or any portion of the
Collateral; (m) the occurrence of a default or Event of Default under any
agreement, instrument and/or document executed and delivered by any Person to
Bank or Bank pursuant to which such Person has guaranteed to Bank the payment or
collection of Borrower's Liabilities and/or has granted to Bank a security
interest or lien in and to some or all of such Person's real and/or personal
property to secure the payment of Borrower's Liabilities; and (n) the occurrence
of a material breach, a default or an event of default by Borrower under any of
the Other Agreements after any cure period applicable to any such default or
event of default has expired.
9.2 Cumulative Remedies. All of Bank's rights and remedies under this
-------------------
Agreement and the Other Agreements are cumulative and non-exclusive.
9.3 Acceleration and Termination of Revolving Loans. Upon the occurrence
-----------------------------------------------
and during the continuance of an Event of Default, (a) upon notice by Bank to
Borrower, Borrower's Liabilities shall be immediately due and payable, unless
there shall have occurred an Event of Default under subparagraphs 9.1(d), (e),
(f), (g), (h), (i) or (j), in which case Borrower's Liabilities shall
automatically become due and payable without notice or demand, and (b) without
notice by Bank to or demand by Bank of Borrower, Bank shall have no further
obligation to and may then forthwith cease advancing monies or extending credit
to or for the benefit of Borrower under this Agreement and the Other Agreements.
9.4 Rights of Secured Creditor. Upon an Event of Default, Bank, in its
--------------------------
sole and absolute discretion, may: (a) exercise any one or more of the rights
and remedies accruing to a secured party under the Uniform Commercial Code of
the relevant state or states and any other applicable law upon default by a
debtor; and (b) exercise any one or more of the rights and remedies available to
it under the Mortgage, Assignment of Rents and Pledge Agreement.
10. GENERAL
10.1 Payment Application Date. Any check, draft, or similar item of
------------------------
payment by or for the account of Borrower delivered to Bank on account of
Borrower's Liabilities shall be applied by Bank on account of Borrower's
Liabilities on the date final settlement thereof is reflected by irrevocable
credit to Bank.
10.2 Statement of Account. Each statement of account by Bank delivered to
--------------------
Borrower relating to Borrower's Liabilities shall be presumed correct and
accurate, absent manifest error, and shall constitute an account stated between
Borrower and Bank unless, within ninety (90) days after Borrower's receipt of
said statement, Borrower delivers to Bank, by registered or certified mail
addressed to Bank at its Address for Notices specified on the signature pages
hereto, written objection thereto specifying the error or errors, if any,
contained in any such statement.
10.3 Manner of Application; Waiver of Setoff Prohibition. Borrower waives
---------------------------------------------------
the right to direct the application of any and all payments at any time or times
hereafter received by Bank on account of Borrower's Liabilities and Borrower
agrees that Bank shall have the right, in its absolute and sole discretion, to
apply and re-apply any and all such payments in such manner as Bank or such Bank
may deem advisable, notwithstanding any entry by Bank upon any of its books and
records. Borrower further waives any right under or benefit of any law that
would restrict or limit the right or ability of Bank to obtain payment of
Borrower's Liabilities, including any law that would restrict or limit Bank in
the exercise of its right to appropriate any indebtedness owing from Bank to
Borrower and any deposits or other property of Borrower in the possession or
control of Bank and apply the same toward or setoff the same against the payment
of Borrower's Liabilities.
10.4 Survival of Representations and Warranties. Borrower covenants,
------------------------------------------
warrants and represents to Bank that all representations and warranties of
Borrower contained in this Agreement and the Other Agreements shall be true at
the time of Borrower's execution of this Agreement and the Other Agreements and
shall survive the execution, delivery and acceptance thereof by the parties
thereto and the closing of the transactions described therein or related
thereto.
<PAGE>
10.5 Integration; Amendment. This Agreement and the Other Agreements
----------------------
constitute the entire agreement and understanding between the parties relating
to the subject matter hereof and supersede all prior agreements, whether oral or
written, including without limitation, that certain Commitment Letter of Bank
dated January 29, 1996. This Agreement and the Other Agreements may not be
modified, altered or amended except by an agreement in writing signed by
Borrower and Bank.
10.6 No Waiver. Bank's failure at any time or times hereafter to require
---------
strict performance by Borrower of any provision of this Agreement shall not
waive, affect or diminish any right of Bank thereafter to demand strict
compliance and performance therewith. Any suspension or waiver by Bank of an
Event of Default by Borrower under this Agreement or the Other Agreements shall
not suspend, waive or affect any other Event of Default by Borrower under this
Agreement or the Other Agreements, whether the same is prior or subsequent
thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants or representations of Borrower
contained in this Agreement or the Other Agreements and no Event of Default by
Borrower under this Agreement or the Other Agreements shall be deemed to have
been suspended or waived by Bank unless such suspension or waiver is by an
instrument in writing signed by Bank specifying such suspension or waiver.
10.7 Severability. If any provision of this Agreement or the Other
------------
Agreements or the application thereof to any Person or circumstance is held
invalid or unenforceable, the remainder of this Agreement and the Other
Agreements and the application of such provision to other Persons or
circumstances will not be affected thereby and the provisions of this Agreement
and the Other Agreements shall be severable in any such instance.
10.8 Successors and Assigns. This Agreement and the Other Agreements shall
----------------------
be binding upon and inure to the benefit of the permitted successors and assigns
of Borrower and Bank.
10.9 Conflict with Other Agreements. The provisions of the Other
------------------------------
Agreements are incorporated in this Agreement by this reference thereto. Except
as otherwise provided in the Other Agreements by specific reference to the
applicable provision of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in the Other
Agreements, the provision contained in this Agreement shall govern and control.
10.10 No Impairment by Termination. Except to the extent provided to the
----------------------------
contrary in this Agreement and in the Other Agreements, no termination or
cancellation (regardless of cause or procedure) of this Agreement or the Other
Agreements shall in any way affect or impair the powers, obligations, duties,
rights and liabilities of Borrower or Bank in any way or respect relating to (a)
any transaction or event occurring prior to such termination or cancellation,
(b) the Collateral and/or (c) any of the undertakings, agreements, covenants,
warranties and representations of Borrower contained in this Agreement or the
Other Agreements. All such undertakings, agreements, covenants, warranties and
representations shall survive such termination or cancellation.
10.11 Waivers. Except as otherwise specifically provided in this
-------
Agreement, Borrower waives any and all notice or demand which Borrower might be
entitled to receive with respect to this Agreement or the Other Agreements by
virtue of any applicable statute or law and waives presentment, demand and
protest and notice of presentment, protest, default, dishonor, non-payment,
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, contract rights, documents, instruments, chattel
paper and guaranties at any time held by Bank on which Borrower may in any way
be liable and hereby ratifies and confirms whatever Bank may do in this regard.
10.12 Costs, Fees and Expenses Related to Agreement and Other Agreements.
------------------------------------------------------------------
In accordance with this Agreement on or prior to the date hereof and thereafter
upon demand by Bank or any Bank therefor, Borrower shall pay or reimburse Bank
for all costs, fees and expenses incurred by Bank or for which Bank becomes
obligated, in connection with the negotiation, preparation and consummation of
this Agreement and the Other Agreements, including but not limited to,
attorneys' fees, plus costs and expenses of such attorneys or Bank; search fees,
costs and expenses; appraisal fees, costs and expenses; environmental fees,
costs and expenses; and all taxes payable in connection with this Agreement or
the Other Agreements. That portion of Borrower's Liabilities consisting of
costs, expenses or advances to be reimbursed by Borrower to Bank pursuant to
this Agreement or the Other Agreements which are not paid on or prior to the
date hereof shall be payable by Borrower to Bank on demand.
10.13 Environmental Indemnity. Borrower shall indemnify, defend and hold
-----------------------
Bank and its Affiliates (as hereinafter defined) harmless from and against any
and all losses, liabilities, obligations, penalties, claims, fines, lost
profits, demands, litigation, defenses, costs, judgments, suits, proceedings,
damages, disbursements or expense of any kind or nature whatsoever (including,
without limitation, reasonable attorneys' fees and expenses), consequential or
otherwise, which may at any time be
<PAGE>
either directly or indirectly imposed upon, incurred by or asserted or awarded
against Bank or any of Bank's parent and subsidiary corporations, and their
respective affiliates, shareholders, directors, officers, employees, and agents
(collectively, Bank's "Affiliate"), in connection with, arising from or relating
to (except in each instance due to gross negligence or willful misconduct of
Bank or any of Bank's Affiliates):
(i) any Hazardous Material located, used, exposed, emitted,
released, discharged, generated, manufactured, sold, transported, handled,
stored, treated, reused, presented, disposed of or recycled on, in or under
all or any portion of the Mortgaged Properties; or
(ii) any material misrepresentation, inaccuracy or breach of
any warranty, covenant or agreement contained or referred to in Paragraphs
----------
8.1(n) and 8.2(f); or
-----------------
(iii) any violation, liability or claim of violation or
liability, under any Environmental Laws with respect to all or any portion
of the Mortgaged Properties; or
(iv) the imposition of any lien for damages caused by, or the
recovery of any costs incurred for the cleanup of, any release or
threatened release of Hazardous Material with respect to all or any portion
of the Mortgaged Properties; or
(v) any Environment Claims with respect to all or any portion
of the Mortgaged Properties.
Borrower's foregoing indemnification obligations shall survive for any
applicable statute of limitations. Borrower's obligation to Bank under this
indemnity shall be without regard to fault on the part of Borrower or Bank with
respect to the violation or condition which results in liability to Bank, except
in each instance due to gross negligence or willful misconduct of Bank.
10.14 Governing Law. This Agreement and the Other Agreements are
-------------
submitted by Borrower to Bank (for Bank's acceptance or rejection thereof) at
Bank's principal place of business as an offer by Borrower to borrow monies from
Bank now and from time to time hereafter and shall not be binding upon Bank or
become effective until and unless accepted by Bank, in writing, at Bank's place
of business. If so accepted by Bank, this Agreement and the Other Agreements
shall be deemed to have been made at Bank's principal place of business. This
Agreement and the Other Agreements shall be governed and controlled by the laws
of the State of Illinois as to interpretation, enforcement, validity,
construction, effect, choice of law, and in all other respects including, but
not limited to, the legality of the interest rate and other charges.
10.15 Notices. All notices, consents, requests, demands and other
-------
communications hereunder shall be in writing and shall be deemed duly given to
any party or parties (a) upon delivery to the address of the party or parties as
specified in the "Address for Notices" below such party's or parties' name on
the signature pages hereof if delivered in person or by courier or if sent by
certified or registered mail (return receipt requested), or (b) upon dispatch if
transmitted by telecopy or other means of facsimile transmission, in any case to
the party or parties at the telecopy numbers specified on the same, or to such
other address or telecopy number as any party may hereafter designate by written
notice in the aforesaid manner.
10.16 FORUM; BANK ; VENUE; JURY TRIAL WAIVER. TO INDUCE BANK TO ACCEPT
--------------------------------------
THIS AGREEMENT AND THE OTHER AGREEMENTS, BORROWER IRREVOCABLY AGREES THAT,
SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY
WAY, MANNER, OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT OR
THE OTHER AGREEMENTS SHALL BE LITIGATED ONLY IN COURTS HAVING SITUS WITHIN
CHICAGO, ILLINOIS. BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF
ANY LOCAL, STATE, OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. BORROWER
HEREBY IRREVOCABLY APPOINTS AND DESIGNATES THE AUTHORIZED AGENT OF BORROWER,
WHOSE ADDRESS IS 547 WEST JACKSON BOULEVARD, SUITE 1510, CHICAGO, ILLINOIS
60661, OR ANY OTHER PERSON HAVING AND MAINTAINING A PLACE OF BUSINESS IN SUCH
STATE, WHOM BORROWER MAY FROM TIME TO TIME HEREAFTER DESIGNATE (HAVING GIVEN
FIVE (5) DAYS' WRITTEN NOTICE THEREOF TO BANK) AS BORROWER'S TRUE AND LAWFUL
ATTORNEY AND DULY AUTHORIZED BANK FOR ACCEPTANCE OF SERVICE OF LEGAL PROCESS.
BORROWER AGREES THAT SERVICE OF SUCH PROCESS UPON SUCH PERSON SHALL CONSTITUTE
PERSONAL SERVICE OF SUCH PROCESS UPON BORROWER. BORROWER HEREBY WAIVES ANY RIGHT
IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST
BORROWER BY BANK IN ACCORDANCE WITH THIS PARAGRAPH. BORROWER HEREBY IRREVOCABLY
WAIVES THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION IN WHICH BORROWER
IS A PARTY.
<PAGE>
10.17 Other Costs, Fees and Expenses. If at any time or times hereafter
------------------------------
Bank: (a) employs counsel for advice or other representation (i) with respect to
this Agreement or the Other Agreements including, without limitation, regarding
amendments or supplements hereto or thereto, (ii) to represent Bank in any
litigation, contest, dispute, suit or proceeding or to commence, defend, or
intervene or to take any other action in or with respect to any litigation,
contest, dispute, suit, or proceeding (whether instituted by Bank, Borrower, or
any other Person) in any way or respect relating to this Agreement, the Other
Agreements or Borrower's affairs, or (iii) to enforce any rights of such Bank
against Borrower or any other Person which may be obligated to such Bank by
virtue of this Agreement or the Other Agreements; (b) takes any action to
protect, collect, sell, liquidate, or otherwise dispose of any of the
Collateral; and/or (c) attempts to or enforces Bank's rights or remedies under
the Agreement or the Other Agreements, the reasonable costs and expenses
incurred by Bank in any manner or way with respect to the foregoing, shall be
part of Borrower's Liabilities, payable by Borrower to Bank on demand. Without
limiting the generality of the foregoing, such expenses, costs, charges and fees
include: (i) attorneys' fees, costs and expenses; (ii) accountants' fees, costs
and expenses; (iii) court costs and expenses; (iv) court reporter fees, costs
and expenses; (v) long distance telephone charges; (vi) telegram charges; (vii)
expenses for travel, lodging and food; and (viii) costs and expenses incurred
with respect to exercise or enforcement of Bank's rights in or against Accounts
and/or any Obligor, including expenses incurred in fulfilling, in whole or in
part, any order of any Obligor from which an Account has arisen or will arise.
10.18 Revival. To the extent Bank receives any payment on account of
-------
Borrower's Liabilities, or any proceeds of Collateral are applied on account of
Borrower's Liabilities and any such payment(s) and/or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, subordinated and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy act, state or federal law, common law or
equitable cause, then, to the extent of such payment(s) and/or proceeds
received, Borrower's Liabilities or part thereof intended to be satisfied shall
be revived and continue in full force and effect, as if such payment(s) and/or
proceeds had not been received by Bank and applied on account of Borrower's
Liabilities.
10.19 Acknowledgments. Borrower acknowledges that (i) it has been advised
---------------
by counsel of its choice with respect to this Agreement and the transactions
contemplated hereby, (ii) each of the waivers set forth herein was knowingly and
voluntarily made; and (iii) the obligations of Bank hereunder, including the
obligation to advance and lend funds to Borrower in accordance herewith, shall
be strictly construed and shall be expressly subject to Borrower's compliance in
all respects with the terms and conditions herein set forth.
10.20 Section Headings. Section headings used in this Agreement are for
----------------
convenience only and shall not effect the construction or interpretation of this
Agreement.
10.21 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute one and the same instrument.
10.22 Effectiveness. This Agreement shall become effective upon the
-------------
execution and delivery to Bank of counterparts of this Agreement by Borrower and
Bank.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year specified at the beginning hereof.
CMC HEARTLAND PARTNERS,
a Delaware general partnership
By: MILWAUKEE LAND COMPANY,
a Delaware corporation and an
authorized general partner
ATTEST: By:_________________________________________
Its:________________________________________
_____________________________
_____________________________
By: HEARTLAND PARTNERS, L.P.,
a Delaware limited partnership and an
authorized general partner
By: Milwaukee Land Company
Its: General Partner
ATTEST: By:_________________________________________
Its:________________________________________
_____________________________
_____________________________
Address for Notices:
CMC Heartland Partners
547 West Jackson Boulevard
Suite 1510
Chicago, Illinois 60661
Telecopier No.: (312) 663-9397
Telephone No.: (312) 294-0440
Attention: Richard P. Brandstatter
Vice President-Finance
Secretary and Treasurer
With a copy to:
CMC Heartland Partners
547 West Jackson Boulevard
Suite 1510
Chicago, Illinois 60661
Telecopier No.: (312) 663-9397
Telephone No.: (312) 294-0440
Attention: Lawrence S. Adelson, Esq.
LASALLE NATIONAL BANK
<PAGE>
By:_________________________________________
Title:____________________________________
Address for Notices:
120 South LaSalle Street
Chicago, Illinois 60603
Telecopier No.: (312) 904-4364
Telephone No.: (312) 904-5415
Attention: Charles E. Schroeder, Jr.
Vice President
With a copy to:
Michael A. Nemeroff, Esq.
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601-1003
Telecopier No.: (312) 609-5005
Telephone No.: (312) 609-7500
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit 3.1 Form of Revolving Note
Exhibit 6.1(b)(ii) Legal Opinion of Borrower's Counsel
<PAGE>
DISCLOSURE SCHEDULE
TO THE
LOAN AND SECURITY AGREEMENT
DATED AS OF MARCH 15, 1996
BETWEEN
CMC HEARTLAND PARTNERS
AND
LASALLE NATIONAL BANK
MARCH 15, 1996
<PAGE>
LIST OF
DISCLOSURE SCHEDULES
--------------------
Schedule 1.0 Legal Description of Mortgaged Properties
Schedule 7.4 Locations
Schedule 8.1(e) Certain Other Obligations
Schedule 8.1(f) Litigation
Schedule 8.1(n) Environmental Matters
Schedule 8.1(s) Affiliates
Schedule 8.1(y) Debt
Schedule 8.1(z) Insurance
Schedule 8.3(a) Permitted Liens
Schedule 8.3(b) Permitted Transactions
Schedule 8.3(d) Permitted Debt
Schedule 8.3(e) Investments Under Consideration
<PAGE>
CERTIFICATION
-------------
CMC Heartland Partners does hereby certify that the Disclosure Schedules
attached hereto have been delivered to LaSalle National Bank in connection with
that certain Loan and Security Agreement of even date herewith between CMC
Heartland Partners and LaSalle National Bank, and the information contained
thereon is true and correct.
Dated: March 15, 1996
CMC HEARTLAND PARTNERS,
a Delaware general partnership
By: MILWAUKEE LAND COMPANY,
a Delaware corporation and an
authorized general partner
By:_________________________________________
Its:________________________________________
By: HEARTLAND PARTNERS, L.P.,
a Delaware limited partnership and an
authorized general partner
By: Milwaukee Land Company
Its: General Partner
By:_________________________________________
Its:________________________________________
<PAGE>
EXHIBIT 3.1
-----------
to
--
Loan and Security Agreement
---------------------------
REVOLVING NOTE
--------------
$3,000,000 Chicago, Illinois
March __, 1996
FOR VALUE RECEIVED, on March __, 1997 (or, if such day is not a Business
Day, on the next following Business Day), the undersigned, CMC HEARTLAND
PARTNERS, a Delaware general partnership (herein, together with its successors
and assigns, called the "Borrower"), promises to pay to the order of LASALLE
NATIONAL BANK, a national banking association (herein, together with its
successors and assigns, called the "Bank"), the maximum principal sum of THREE
MILLION DOLLARS ($3,000,000.00) or, if less, the aggregate unpaid principal
amount of all Revolving Loans made by Bank to the undersigned pursuant to that
certain Revolving Loan and Security Agreement of even date herewith between the
Borrower and Bank (herein, as the same may be amended, modified or supplemented
from time to time, called the "Loan Agreement") as shown in Bank's records.
The Borrower further promises to pay to the order of Bank interest on the
aggregate unpaid principal amount hereof from time to time outstanding from the
date hereof until paid in full at such rates and at such times as shall be
determined in accordance with the provisions of the Loan Agreement. Accrued
interest shall be payable on the dates specified in the Loan Agreement.
Payments of both principal and interest are to be made in the lawful money
of the United States of America in immediately available funds at Bank's
principal office at 120 South LaSalle Street, Chicago, Illinois 60603, or at
such other place as may be designated by Bank to the Borrower in writing.
This Note is the Revolving Note referred to in, evidences indebtedness
incurred under, and is subject to the terms and provisions of, the Loan
Agreement. The Loan Agreement, to which reference is hereby made, sets forth
said terms and provisions, including those under which this Note may or must be
paid prior to its due date or may have its due date accelerated. Terms used but
not otherwise defined herein are used herein as defined in the Loan Agreement.
This Note is secured by the property described in and pursuant to the Loan
Agreement and various Other Agreements referred to therein, and reference is
made thereto for a statement of terms and provisions of such Collateral
security, a description of Collateral and the rights of Bank in respect thereof.
In addition to, and not in limitation of, the foregoing and the provisions
of the Loan Agreement hereinabove referred to, the Borrower further agrees,
subject only to any limitation imposed by applicable law, to pay all expenses,
including attorneys' fees and expenses, incurred by the holder of this Note in
seeking to collect any amounts payable hereunder which are not paid when due,
whether by acceleration or otherwise.
The Borrower shall have the right to prepay the outstanding principal and
interest on this Note at any time without penalty or notice to Bank.
All parties hereto, whether as makers, endorsers or otherwise, severally
waive presentment, demand, protest and notice of dishonor in connection with
this Note.
This Note is binding upon the undersigned and its successors and assigns,
and shall inure to the benefit of Bank and its successors and assigns. This Note
is made under and governed by the laws of the State of Illinois without regard
to conflict of laws principles.
CMC HEARTLAND PARTNERS,
a Delaware general partnership
By: MILWAUKEE LAND COMPANY,
<PAGE>
a Delaware corporation and an
authorized general partner
ATTEST: By:________________________________
Its:_______________________________
_________________________
_________________________
By: HEARTLAND PARTNERS, L.P.,
a Delaware limited
partnership and an
authorized general partner
By: Milwaukee Land Company
Its: General Partner
ATTEST: By:________________________________
Its:_______________________________
_________________________
_________________________
Borrower's Address:
547 West Jackson Boulevard
Suite 1510
Chicago, Illinois 60661
<PAGE>
EXHIBIT 10.2
AMENDMENT TO LOAN AND SECURITY AGREEMENT
----------------------------------------
THIS AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment") is entered
into as of the 14th day of May, 1997, by and between CMC HEARTLAND PARTNERS, a
Delaware general partnership ("Borrower"), and LASALLE NATIONAL BANK, a
national banking association ("Bank").
W I T N E S S E T H:
WHEREAS, Bank and Borrower entered into that certain Loan and Security
Agreement dated as of March 15, 1996 (the "Agreement"), and now desire to amend
such Agreement pursuant to this Amendment.
NOW, THEREFORE, for and in consideration of the premises and mutual
agreements herein contained and for the purposes of setting forth the terms and
conditions of this Amendment, the parties, intending to be bound, hereby agree
as follows:
23. Incorporation of the Agreement. All capitalized terms which are not
------------------------------
defined hereunder shall have the same meanings as set forth in the Agreement,
and the Agreement, to the extent not inconsistent with this Amendment, is
incorporated herein by this reference as though the same were set forth in its
entirety. To the extent any terms and provisions of the Agreement are
inconsistent with the amendments set forth in Paragraph 2 below, such terms and
-----------
provisions shall be deemed superseded hereby. Except as specifically set forth
herein, the Agreement shall remain in full force and effect and its provisions
shall be binding on the parties hereto.
24. Amendment of the Agreement. The Agreement is hereby amended as
--------------------------
follows:
(a) The definitions of the terms "Assignment of Rents", "Mortgage",
------------------- --------
"Pledge Agreement", "Revolving Credit Maturity Date" and "Revolving Note" set
- - ----------------- ------------------------------ --------------
forth in Paragraph 1.1 are hereby amended and restated to read in their entirety
-------------
as follows:
"Assignment of Rents" means that certain Assignment of Rents and
-------------------
Leases dated as of March 15, 1996 between Borrower and Bank, as amended by
that certain Amendment to Assignment of Rents and Leases dated as of May
14, 1997, as the same may be further amended, modified or supplemented from
time to time.
"Mortgage" means that certain Mortgage and Security Agreement
--------
dated as of March 15, 1996, made by Borrower in favor of Bank with respect
to the Mortgaged Properties, as amended by that certain Amendment to
Mortgage and Security Agreement dated as of May 14, 1997, as the same may
be further amended, modified or supplemented from time to time.
"Pledge Agreement" means that certain Pledge Agreement dated as
----------------
of March 15, 1996, as amended by that Amendment to Pledge Agreement dated
as of May 14, 1997, each made by Borrower in favor of the Bank pledging
$500,000 in cash or cash equivalents as an interest reserve pursuant to a
certificate of deposit having a rolling maturity of 180 days or less.
"Revolving Credit Maturity Date" means May 1, 1998.
------------------------------
"Revolving Note" means that certain Substitute Revolving Note
--------------
dated as of May 14, 1997 made by Borrower in favor of Bank, in the original
maximum principal amount available of Five Million Dollars ($5,000,000), as
the same may be amended, modified or supplemented from time to time, and
together with any renewals thereof or exchanges or substitutes therefor.
(b) Paragraph 2.1 is hereby amended by deleting the phrase "Three
-------------
Million Dollars ($3,000,000)" and replacing it with the phrase "Five Million
Dollars ($5,000,000)".
(c) Paragraph 7.1 is hereby amended by deleting the phrase "$300,000"
-------------
and replacing it with "$500,000".
(d) Paragraph 8.1(n)(i) is hereby amended and restated in its
-------------------
entirety to read as follows:
<PAGE>
(i) Compliance. Except as disclosed in Schedule 8.1(n) hereto,
---------- ---------------
to the best of Borrower's knowledge, no Mortgaged Property is listed
on any local, state and/or federal lists of potentially contaminated
sites, including, without limitation, the National Priorities List,
CERCLIS or any state or federal hazardous waste site or leaking
underground storage tank lists, and each Mortgaged Property and
Borrower (with respect to each Mortgaged Property) has been and is
currently in compliance with all applicable Environmental Laws.
Except as disclosed in Schedule 8.1(n) hereto, there has been no past,
---------------
and there are no, to the best of Borrower's knowledge, pending or
threatened Environmental Claims to which Borrower is a party which
relate to any Mortgaged Property. All required governmental permits
and licenses are in effect, and Borrower is in compliance therewith.
Except as disclosed in Schedule 8.1(f) hereto or Schedule 8.1(n)
--------------- ---------------
hereto, Borrower has not received any notice of any Environmental
Claims (A) respecting Borrower that materially affects Borrower's
financial condition, or (B) respecting any Mortgaged Property, or (C)
respecting any off-site facility to which any Hazardous Material has
been sent for off-site treatment, recycling, reclamation, reuse,
handling, storage, sale or disposal the eventual resolution of which
Borrower believes will materially affect Borrower's financial
condition.
(e) Paragraph 8.1(n)(ii) is hereby amended by inserting the phrase
--------------------
"except as disclosed in Schedule 8.1(n) hereto," immediately after the phrase
---------------
"To the best of Borrower's knowledge," appearing in the fourth to last line and
the last line of such paragraph appearing on page 20 of the Agreement.
(f) Paragraph 8.2(g)(i) is hereby amended and restated in its
-------------------
entirety to read as follows:
(i) Borrower must maintain, at all times, Tangible Net Worth in
excess of $15,000,000.
(g) Paragraph 8.3(d) is hereby amended and restated in its entirety
----------------
to read as follows:
(d) Debt. Incur, create, assume, become or be liable in any
----
manner with respect to or permit to exist, any Debt, obligations or
indebtedness in excess of $1,000,000 in the aggregate, except for the
permitted Debt set forth on Schedule 8.3(d).
---------------
(h) Paragraph 8.3(g) is hereby amended and restated in its entirety
----------------
to read as follows:
(g) Partnership Interests/Distributions. Redeem, retire,
-----------------------------------
purchase or otherwise acquire, directly or indirectly any partnership
interests of Borrower or other evidence of ownership interest, or declare
or pay any capital distributions from Borrower or make any distribution of
Borrower's property or assets; provided, however, that Borrower may make
distributions to its partners of an amount not to exceed One Million Eight
Hundred Thousand Dollars ($1,800,000) in the aggregate if, and only if, the
funds used to pay such distributions arise directly from the proceeds of
the sale of a portion of the 10.3 acre Goose Island Industrial Park in
Chicago, Illinois.
(i) The address for notices for the Bank appearing on the signature
page of the Agreement is hereby amended by deleting the words "120 South LaSalle
Street" and replacing it with the words "135 South LaSalle Street."
25. Representations and Warranties; Covenants. The representations and
-----------------------------------------
warranties set forth in Paragraph 8.1 and all covenants set forth in Paragraphs
------------- ----------
8.2 and 8.3 of the Agreement (other than representations, warranties and
- - -----------
covenants made as of a certain date and except as set forth on the schedules to
such representations, warranties and covenants attached hereto as Exhibit 1
---------
replacing (or, in the case of Schedule 8.1(e), supplementing) the schedules
---------------
delivered in connection with the Agreement on March 15, 1996) shall be deemed
remade and affirmed as of the date hereof by Borrower, except that any and all
references to the Agreement in such representations, warranties and covenants
shall be deemed to include this Amendment.
26. No Breach or Default. Borrower hereby represents and warrants that no
--------------------
Event of Default, breach or default has occurred under the Agreement. Borrower
further represents and affirms that there are no defenses, setoffs, claims or
counterclaims which could be asserted against Bank related to the Agreement.
27. Conditions Precedent.
--------------------
(i) Documentation. Prior to entering into this Amendment, Bank shall have
-------------
received the following documents, each in form and substance
satisfactory to it:
<PAGE>
(a) Substitute Term Note executed by Borrower;
(b) Amendment to Mortgage and Security Agreement executed by
Borrower;
(c) Amendment to Assignment of Rents and Leases executed by Borrower;
(d) Amendment to Environmental Indemnity Agreement executed by
Borrower;
(e) Amendment to Pledge Agreement executed by Borrower, together with
an additional deposit of $200,000 to Borrower's Certificate of Deposit Account;
(f) Secretary's/Partners' Certificate of Borrower regarding
authorization and incumbency;
(g) Date Down Endorsement to Loan Title policy amended to reflect the
new amount of the Substitute Term Note; and
(h) Closing Bring-Down Certificate of Borrower.
(ii) Fees and Expenses. Borrower shall have paid all fees owed to Bank and
-----------------
reimbursed Bank for all expenses due and payable hereunder on or
before the date hereof including, but not limited to, a 1/4 of 1%
closing fee on the $2,000,000 increase in Borrower's Revolving Credit
Commitment of $5,000 and counsel fees related to the preparation and
negotiation of this Amendment and the documents and instruments
delivered in connection herewith.
28. Counterparts. This Amendment may be executed in two or more
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
above written.
CMC HEARTLAND PARTNERS,
a Delaware general partnership
By: MILWAUKEE LAND COMPANY,
a Delaware corporation and an
authorized general partner
By:_________________________________________
Its:________________________________________
By: HEARTLAND PARTNERS, L.P.,
a Delaware limited partnership and an
authorized general partner
By: Milwaukee Land Company
Its: General Partner
By:_________________________________________
Its:________________________________________
LASALLE NATIONAL BANK
By:_________________________________________
Its:________________________________________
<PAGE>
EXHIBIT 1
---------
UPDATED DISCLOSURE SCHEDULES
----------------------------
Schedule 8.1(e) Certain Other Obligations
Schedule 8.1(f) Litigation
Schedule 8.1(n) Environmental Matters
Schedule 8.1(s) Affiliates
Schedule 8.1(z) Insurance
Schedule 8.3(b) Permitted Transactions
Schedule 8.3(d) Permitted Debt
Schedule 8.3(e) Permitted Investments
<PAGE>
Schedule 8.3(d)
---------------
Permitted Debt
--------------
Debt, obligations or indebtedness secured by the Mortgaged Properties pursuant
to that certain Loan and Security Agreement, dated March 16, 1996, between Bank
and Borrower, as amended by that certain Amendment to Loan and Security
Agreement, dated as of May 14, 1997, by and between Bank and Borrower.
<PAGE>
EXHIBIT 10.3
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Dated as of June 30, 1998
among
CMC HEARTLAND PARTNERS
and
HEARTLAND PARTNERS, L.P.
as Borrowers,
and
LASALLE NATIONAL BANK
as Bank
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS AND TERMS................................................................ 1
1.1 Certain Definitions........................................................ 1
1.2 Certain UCC and Accounting Terms........................................... 9
2. LOANS: BANK'S COMMITMENT AND BORROWING PROCEDURES................................... 10
2.1 Revolving Credit Commitment................................................ 10
2.2 Borrowing Procedures....................................................... 10
2.3 Letters of Credit.......................................................... 10
2.4 All Loans to Constitute One Obligation..................................... 11
3. LOANS: NOTE EVIDENCING LOANS........................................................ 11
3.1 Revolving Note............................................................. 11
3.2 Recordation................................................................ 11
4. LOANS: AMOUNTS; INTEREST; BALANCES; ................................................ 11
4.1 Interest Rate; Applicable Borrowing Amounts................................ 11
4.2 Computation of Interest.................................................... 12
4.3 Interest Laws.............................................................. 12
4.4 Unused Portion Fee......................................................... 13
4.5 Letter of Credit Fees...................................................... 13
4.6 Loan Clean-Up Period....................................................... 13
5. LOANS: GENERAL TERMS................................................................ 13
5.1 Payments to Bank........................................................... 13
5.2 Conditions Precedent Events................................................ 14
5.3 Offset..................................................................... 14
5.4 Discretionary Disbursements................................................ 14
5.5 Revolving Credit Termination Date; Continuance of Obligations, Etc......... 14
5.6 Loan Evidence.............................................................. 15
6. LOANS: CONDITIONS TO LENDING........................................................ 15
6.1 Initial Loan Conditions Precedent.......................................... 15
6.2 Accountant's Letter........................................................ 17
7. COLLATERAL: GENERAL TERMS........................................................... 17
7.1 Grant of Security Interest................................................. 17
7.2 Perfection of Security Interests........................................... 17
7.3 Inspection of Collateral................................................... 18
7.4 First Lien and Locations of Collateral..................................... 18
7.5 Constructive Trust......................................................... 18
7.6 Application of Proceeds of Collateral...................................... 18
7.7 Third Party Collateral Claims.............................................. 19
7.8 Additional Collateral...................................................... 19
7.9 No Custom or Waiver........................................................ 19
8. REPRESENTATIONS AND WARRANTIES; COVENANTS;
INDEMNIFICATION; CONTINUING OBLIGATION............................................ 19
8.1 Representations and Warranties of Borrower................................. 19
8.2 Affirmative Covenants...................................................... 24
8.3 Negative Covenants......................................................... 29
8.4 Maintenance of Accounts.................................................... 31
9. DEFAULT.............................................................................. 31
</TABLE>
<PAGE>
<TABLE>
<S> <C>
9.1 Events of Default.......................................................... 31
9.2 Cumulative Remedies........................................................ 33
9.3 Acceleration and Termination of Loans...................................... 33
9.4 Rights of Secured Creditor................................................. 33
10. GENERAL............................................................................... 33
10.1 Payment Application Date................................................... 33
10.2 Statement of Account....................................................... 33
10.3 Manner of Application; Waiver of Setoff Prohibition........................ 33
10.4 Survival of Representations and Warranties................................. 34
10.5 Integration; Amendment..................................................... 34
10.6 No Waiver.................................................................. 34
10.7 Severability............................................................... 34
10.8 Successors and Assigns..................................................... 34
10.9 Conflict with Other Agreements............................................. 34
10.10 No Impairment by Termination............................................... 35
10.11 Waivers.................................................................... 35
10.12 Costs, Fees and Expenses Related to Agreement and Other Agreements......... 35
10.13 Environmental Indemnity.................................................... 35
10.14 Governing Law.............................................................. 36
10.15 Notices.................................................................... 36
10.16 FORUM; BANK; VENUE; JURY TRIAL WAIVER...................................... 37
10.17 Other Costs, Fees and Expenses............................................. 37
10.18 Revival.................................................................... 38
10.19 Acknowledgments............................................................ 38
10.20 Section Headings........................................................... 38
10.21 Counterparts............................................................... 38
10.22 Effectiveness.............................................................. 38
10.23 Reimbursement Among Borrowers.............................................. 38
10.24 Joint and Several Liability................................................ 39
</TABLE>
Exhibits
Schedules
<PAGE>
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
------------------------------------------------
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "Agreement") is
made as of the 30th day of June, 1998, by and among CMC HEARTLAND PARTNERS, a
Delaware general partnership ("CMC") and HEARTLAND PARTNERS, L.P., a Delaware
limited partnership ("Heartland Partners"), jointly and severally (CMC and
Heartland Partners are referred to herein from time to time individually as a
"Borrower" and collectively as "Borrowers") and LASALLE NATIONAL BANK, a
national banking association (the "Bank").
W I T N E S S E T H:
WHEREAS, Bank and CMC entered into that certain Loan and Security Agreement
dated as of March 15, 1996, as amended by that certain Amendment to Loan and
Security Agreement dated as of May 14, 1997 and that certain Second Amendment to
Loan and Security Agreement dated as of April 30, 1998 (collectively the
"Agreement"), and now desire to amend and restate such Agreement to, among other
things, increase (i) the maximum amount of the Revolving Credit Commitment (as
defined herein) from $6,000,000 to $8,500,000 and (ii) add Heartland Partners as
a joint and several obligor under the Revolving Note (as defined herein).
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements set forth herein, Borrowers agree to borrow from Bank, and Bank
agrees to lend to Borrowers, subject to and upon the following terms and
conditions:
11. DEFINITIONS AND TERMS
11.1 Certain Definitions. The following words, terms and/or phrases shall
-------------------
have the meanings set forth thereafter and such meanings shall be applicable to
the singular and plural form thereof, giving effect to the numerical difference.
"Affiliate" means, with respect to any Person, any other Person
---------
directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. A Person shall be deemed to
control another Person if such first Person possesses, directly or
indirectly, the power to direct or cause the direction of the management
and policies of such other Person, whether through ownership of voting
securities, by contract or otherwise.
"Authorized Agent" means Richard P. Brandstatter, the Authorized Agent
----------------
of the Borrowers.
"Borrowers' Liabilities" means all obligations and liabilities of
----------------------
Borrowers in the aggregate to Bank (including, without limitation, all
debts, claims and indebtedness) whether primary, secondary, direct,
contingent, fixed or otherwise, heretofore, now and/or from time to time
hereafter owing, due or payable, however evidenced, created, incurred,
acquired or owing and however arising, whether under this Agreement or the
Other Agreements, or by oral agreement or operation of law or otherwise.
"Business Day" means any day on which Bank is open for the transaction
------------
of commercial banking business in Chicago, Illinois other than a Saturday
or Sunday.
"Charges" means all national, federal, state, county, city, municipal
-------
and/or other governmental (or any instrumentality, division, agency, body
or department thereof, including, without limitation, the PBGC) taxes,
levies, assessments, charges, liens, claims or encumbrances upon and/or
relating to Borrowers' Liabilities, each Borrower's business, and each
Borrower's ownership and/or use of the Collateral, income and/or gross
receipts.
"Closing Date" means June 30, 1998.
------------
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Collateral" shall have the meaning assigned to such term in Paragraph
---------- ---------
7.1 hereof.
---
"Debt" means all of a Person's liabilities, obligations and
----
indebtedness to any Person of any and every kind and nature, whether
primary, secondary, direct, indirect, absolute, contingent, fixed or
otherwise, heretofore, now and/or from time to time hereafter owing, due or
payable, however evidenced, created, incurred, acquired or owing and
however arising, whether under written or oral agreement, by operation of
law or otherwise. Without in any way
<PAGE>
limiting the generality of the foregoing, Debt specifically includes (i)
indebtedness for borrowed money, (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii) obligations to pay
the deferred purchase price of property or services, (iv) obligations as
lessee under leases which shall have been or should be, in accordance with
generally accepted accounting principles, recorded as capital leases, (v)
obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (i) through (iv)
above, and (vi) liabilities in respect of unfunded vested benefits under
Plans and Multiemployer Plans covered by Title IV of ERISA.
"Default Rate" shall have the meaning assigned to such term in
------------
Paragraph 4.1(c) hereof.
----------------
"Disclosure Schedule" means a schedule, in form and substance
-------------------
satisfactory to Bank, which (i) has been certified as true and correct by
an Authorized Agent, (ii) has been delivered to Bank prior to the date
hereof, (iii) describes in reasonable detail, all exceptions to the
representations, warranties and covenants of each Borrower herein, and (iv)
is clearly identified on its face as the Disclosure Schedule for purposes
hereof. Any reference herein to a "Schedule" shall be deemed to refer to a
part of the Disclosure Schedule.
"Early Termination Date" means the date, pursuant to Paragraph 9.3,
---------------------- -------------
upon which, whether by notice or by right hereunder, Bank's obligation to
extend credit hereunder is terminated.
"Environmental Claim" means the following:
-------------------
(i) any notice of violation, complaint, claim, citation, demand,
inquiry, report, action, assertion of potential responsibility, lien,
encumbrance or proceeding regarding any Mortgaged Property or any use
thereof, whether formal or informal, absolute or contingent, matured or
unmatured, brought or issued by any governmental unit, agency or body, or
any person or entity respecting:
(A) Environmental Laws; or
(B) the environmental condition of a Mortgaged Property, or any
portion thereof, or any property near such Mortgaged Property, including,
without limitation, actual or alleged damage or injury to humans, public
health, wildlife, biota, air, surface or subsurface soil, minerals or
water, or other natural resources; or
(C) the use, exposure, release, emission, discharge, generation,
manufacture, sale, transport, handling, storage, treatment, reuse,
presence, disposal or recycling of Hazardous Material either on a Mortgaged
Property or off-site;
(ii) any lien for damages caused by, or the recovery of any costs
incurred by any person or governmental entity relating to the
investigation, remediation or cleanup of, any release or threatened release
of Hazardous Material at a Mortgaged Property; and
(iii) the destruction or loss of use of property, or the injury,
illness or death of any officer, director, employee, agent, representative,
tenant or invitee of Borrower or any other person directly caused by the
environmental condition of a Mortgaged Property or the release, emission or
discharge of Hazardous Materials from a Mortgaged Property.
"Environmental Indemnity Agreement" means that certain Amended and
---------------------------------
Restated Environmental Indemnity Agreement of even date herewith made by
Borrowers in favor of the Bank.
"Environmental Laws" means all statutes, ordinances, orders, rules,
------------------
regulations, plans, policies, or decrees and the like relating to (i)
environmental matters, including, without limitation, those relating to
fines, injunctions, penalties, damages, contribution, cost recovery
compensation, losses or injuries resulting from the release (as such term
is defined in Paragraph 8.1(n)(ii)) or threatened release of Hazardous
--------------------
Materials, (ii) the generation, use, handling, transportation, storage,
treatment or disposal of Hazardous Materials or (iii) occupational safety
and health, industrial hygiene, land use or the protection of human, plant
or animal health or welfare related to Hazardous Materials,in any manner
<PAGE>
applicable to Borrower and any of its Mortgaged Properties, including,
without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. (S)9601 et seq.), the
-- ---
Hazardous Materials Transportation Act (49 U.S.C. (S)1801 et seq.), the
-- ---
Resource Conservation and Recovery Act (42 U.S.C. (S)6901 et seq.), the
-- ---
Federal Water Pollution Control Act (33 U.S.C. (S)1251 et seq.), the Clean
-- ---
Air Act (42 U.S.C. (S)7401 et seq.), the Toxic Substances Control Act (15
-- ---
U.S.C. (S)2601 et seq.), the Occupational Safety and Health Act (29 U.S.C.
-- ---
(S)651 et seq.) and the Emergency Planning and Community Right-To-Know Act
-- ---
(42 U.S.C. (S)11001 et seq.), each as amended or supplemented, and any
-- ---
analogous present or future local, state and federal statutes and
regulations promulgated pursuant thereto, each as in effect as of the date
of determination.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
the same may be amended from time to time and, unless the context otherwise
requires, the regulations promulgated thereunder and any successor statute.
"ERISA Affiliate" means each trade or business (whether or not
---------------
incorporated) which together with Borrower or an Affiliate would be deemed
to be a "single employer" within the meaning of Section 4001(b) of ERISA
---------------
or, where applicable, would be treated as a "single employer" under Section
-------
412(c)(11) of the Code.
----------
"ERISA Termination Event" means (i) a "Reportable Event" described in
-----------------------
Section 4043 of ERISA (other than a "Reportable Event" not subject to the
------------
provision for 30-day notice to the PBGC under such regulations), (ii) the
withdrawal of any Borrower or any Affiliate thereof from a Plan during a
plan year in which it was a "substantial employer," as defined in Section
-------
4001(a) of ERISA, including a cessation of operations that is treated as a
-------
withdrawal by a "substantial employer" under Section 4062(e) of ERISA,
---------------
(iii) the filing of a notice of intent to terminate a Plan or the treatment
of a Plan amendment as a termination under Section 4041 of ERISA, (iv) the
------------
institution of proceedings to terminate a Plan by the PBGC, (v) any other
event or condition which in the reasonable judgment of any Borrower is
likely to constitute grounds under Section 4042 of ERISA for the
------------
termination of, or the appointment of a trustee to or any ERISA
administrator, any Plan, or (vi) the partial or complete withdrawal of any
Borrower or any ERISA Affiliate thereof from a Multiemployer Plan.
"Event of Default" shall have the meaning assigned to such term in
----------------
Paragraph 9.1 hereof.
-------------
"Excess Interest" shall have the meaning assigned to such term in
---------------
Paragraph 4.3 hereof.
-------------
"Financials" means those financial statements of Borrowers heretofore
----------
or concurrently herewith delivered by or on behalf of Borrowers to Bank.
"GAAP" shall mean generally accepted accounting principles as in
----
effect from time to time.
"Galewood Assignment of Rents" means that certain Assignment of Rents
----------------------------
and Leases of even date herewith between CMC and Bank with respect to the
Galewood Mortgaged Property, as the same may be amended, modified or
supplemented from time to time.
"Galewood Mortgage" means that certain Mortgage and Security Agreement
-----------------
of even date herewith between CMC and Bank with respect to the Galewood
Mortgaged Property, as the same may be amended, modified or supplemented
from time to time.
"Galewood Mortgaged Property" means that certain parcel of vacant land
---------------------------
located in Chicago, Illinois and commonly known as the Galewood Railroad
Yards serving as Collateral hereunder and legally described on Schedule
--------
1.1A attached hereto and made a part hereof.
----
"General Intangibles" means all choses in action, causes of action and
-------------------
all other intangible property of each Borrower of every kind and nature now
owned or hereafter acquired by each Borrower, including, without
limitation, corporate and other business records, deposit accounts,
inventions, designs, patents, patent and trademark registrations and
applications, trademarks, trade names, trade secrets, goodwill, copyrights,
registrations, licenses, franchises, deferred tax benefits, tax refund
claims, prepaid expenses, computer programs, covenants not to compete,
customer lists and
<PAGE>
mailing lists, contract rights, indemnification rights, causes of action
and any letters of credit, guarantee claims, security interests or other
security held by or granted to each Borrower.
"Governmental Authorization" means any permit, license, authorization,
--------------------------
plan, directive, consent order or consent decree of or from any federal,
state or local governmental authority, agency or court having jurisdiction
over any Borrower or any Mortgaged Property.
"Hazardous Materials" means (i) any chemical, material or substance
-------------------
defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous waste,"
"restricted hazardous waste," "infectious waste," "toxic substances" or any
other formulations intended to define, list or classify substances by
reason of deleterious properties such as ignitability, corrosivity,
reactivity, carcinogenicity, toxicity, reproductive toxicity, "TCLP
toxicity" or "EP toxicity" or words of similar import under any applicable
Environmental Laws or publications promulgated pursuant thereto, (ii) any
oil, petroleum or petroleum derived substance, (iii) any drilling fluids,
produced waters and other wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal
resources, (iv) any flammable substances or explosives, (v) any radioactive
materials, (vi) asbestos in any form (which is or could become friable),
(vii) urea formaldehyde foam insulation, (viii) electrical equipment which
contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million, (ix) pesticides or (x) any
other chemical, material or substance, exposure to which is prohibited,
limited or regulated by any governmental authority or which may or could
pose a hazard to health or safety.
"HTI" means Heartland Technology, Inc., a Delaware corporation and an
---
authorized general partner of CMC and Heartland Partners.
"Kinzie Station Assignment of Rents" means that certain Assignment of
----------------------------------
Rents and Leases dated as of March 15, 1996 between CMC and Bank with
respect to the Kinzie Station Mortgaged Property, as amended by that
certain Amendment to Assignment of Rents and Leases dated as of May 14,
1997, that certain Second Amendment to Assignment of Rents and Leases dated
as of April 30, 1998 and that certain Third Amendment to Assignment of
Rents and Leases of even date herewith, as the same may be further amended,
modified or supplemented from time to time.
"Kinzie Station Mortgage" means that certain Mortgage and Security
-----------------------
Agreement dated as of March 15, 1996, made by CMC in favor of Bank with
respect to the Kinzie Station Mortgaged Property, as amended by that
certain Amendment to Mortgage and Security Agreement dated as of May 14,
1997, that certain Second Amendment to Mortgage and Security Agreement
dated as of April 30, 1998 and that certain Third Amendment to Mortgage and
Security Agreement of even date herewith, as the same may be further
amended, modified or supplemented from time to time.
"Kinzie Station Mortgaged Property" means certain parcels of vacant
---------------------------------
land located in Chicago, Illinois serving as Collateral hereunder and
legally described on Schedule 1.1B attached hereto and made a part hereof.
-------------
"Letter of Credit" means a standby, commercial import or other letter
----------------
of credit at any time issued by Bank for the account of any Borrower.
"Letter of Credit Limit" shall have the meaning assigned to such term
----------------------
in Paragraph 2.3 hereof.
-------------
"Letter of Credit Maturity Date" means April 29, 1999.
------------------------------
"Letter of Credit Termination Date" means the earliest to occur of (i)
---------------------------------
the Letter of Credit Maturity Date or (ii) the Early Termination Date.
"Lien" means, with respect to the Collateral or any asset of any
----
Borrower, any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any agreement to give any of the foregoing,
any conditional sale or other title retention agreement, any lease in the
nature thereof and the filing of or agreement to give any financing
statement under the Uniform Commercial Code in effect in any jurisdiction).
<PAGE>
"Limited Partnership Agreement" means that certain Amended and
-----------------------------
Restated Agreement of Limited Partnership of Heartland Partners, L.P., as
amended by that certain Amendment to Amended and Restated Agreement of
Limited Partnership of Heartland Partners, L.P. dated as of December 4,
1997 by and among HTI, as general partner, and the limited partners a party
thereto.
"Liquid Assets" means cash on hand or cash equivalents, including
-------------
certificates of deposits with a maturity less than 180 days, money market
deposits, U.S. treasury bills and readily-marketable securities.
"Loan" or "Loans" means and includes all Loans made under the
---- -----
Revolving Credit Commitment (including, but not limited to, any Letters of
Credit), unless the context in which such term is used shall otherwise
require.
"Maximum Rate" shall have the meaning assigned to such term in
------------
Paragraph 4.3 hereof.
-------------
"Mortgaged Properties" means the Galewood Mortgaged Property and the
--------------------
Kinzie Station Mortgaged Property.
"Multiemployer Plan" means a plan defined as such in Section
------------------ -------
4001(a)(3) of ERISA to which contributions have been made by any Borrower
----------
or an ERISA Affiliate thereof.
"Operating Account" shall have the meaning assigned to such term in
-----------------
Paragraph 8.4 hereof.
-------------
"Other Agreements" means all agreements, instruments and documents,
----------------
including, without limitation, Letters of Credit, guaranties, mortgages,
deeds of trust, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements and
all other written matter heretofore, now and/or from time to time hereafter
executed by and/or on behalf of Borrower in favor of Bank including,
without limitation, the Revolving Note, the Pledge Agreement, the Galewood
Mortgage, the Galewood Assignment of Rents, the Kinzie Station Mortgage,
the Kinzie Station Assignment of Rents and the Environmental Indemnity
Agreement.
"Partnership Agreement" means that certain Amended and Restated
---------------------
Partnership Agreement of CMC, dated as of June 27, 1990, by and between HTI
(as successor in interest to Milwaukee Land Company) and Heartland
Partners.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
----
succeeding to any or all of its functions under ERISA.
"Permitted Investments" shall have the meaning assigned to such term
---------------------
in Paragraph 8.3(e) hereof.
----------------
"Permitted Liens" shall have the meaning assigned to such term in
---------------
Paragraph 8.3(a) hereof.
----------------
"Person" means and includes an individual, a partnership, a joint
------
venture, a corporation (whether or not for profit), a trust, an
unincorporated organization, a government or any department or agency
thereof or any other entity or organization.
"Plan" means, at any time, any single-employer plan, as defined in
----
Section 4001(a) and subject to Title IV of ERISA, which is maintained, or
---------------
at any time during the five calendar years preceding the time in question
was maintained, for employees of Borrower or an Affiliate.
"Pledge Agreement" means that certain Amended and Restated Pledge
----------------
Agreement of even date herewith made by Borrowers in favor of Bank pledging
$850,000 in cash or cash equivalents as an interest reserve pursuant to a
certificate of deposit having a rolling maturity of 180 days or less.
"Prime Rate" means the rate of interest (expressed as a percentage per
----------
annum) most recently announced or published publicly from time to time by
Bank as its Prime Rate of interest, which is not necessarily the lowest or
most favorable rate of interest charged by Bank on commercial loans at any
one time. The rate of interest shall change automatically and immediately
as and when the Prime Rate shall change, without notice to Borrowers, and
any notice to which it may be entitled is hereby waived, and any such
change in Bank's Prime Rate shall not affect any of the terms and
conditions of this Agreement, all of which shall remain in full force and
effect.
<PAGE>
"Revolving Credit Commitment" shall have the meaning assigned to such
---------------------------
term in Paragraph 2.1 hereof.
-------------
"Revolving Credit Maturity Date" means April 29, 1999.
------------------------------
"Revolving Credit Termination Date" means the earliest to occur of (i)
---------------------------------
the Revolving Credit Maturity Date or (ii) the Early Termination Date.
"Revolving Margin" means one percent (1%).
----------------
"Revolving Note" means that certain Revolving Note of even date
--------------
herewith made by Borrowers, jointly and severally, in favor of Bank, in the
maximum principal amount available of Eight Million Five Hundred Thousand
Dollars ($8,500,000), as the same may be amended, modified or supplemented
from time to time, and together with any renewals thereof or exchanges or
substitutes therefor.
"Stock" means all shares, interests, participation or other
-----
equivalents, however designated, of or in a corporation, whether or not
voting, including but not limited to common stock, warrants, preferred
stock, convertible debentures, and all agreements, instruments and
documents convertible, in whole or in part, into any one or more or all of
the foregoing.
"Subsidiary" means any corporation of which a Person owns, directly or
----------
indirectly through one or more intermediaries, more than 50% of the voting
stock at the time of determination.
"Tangible Net Worth" means, at any time, Borrowers' aggregate net
------------------
worth after subtracting therefrom the amount of any General Intangibles,
amounts due from Affiliates and the amount of other assets classified as
intangible by Bank in the exercise of its reasonable discretion.
11.2 Certain UCC and Accounting Terms. Except as otherwise defined in this
--------------------------------
Agreement or the Other Agreements, all words, terms and/or phrases used herein
and therein shall be defined by the applicable definition therefor (if any) in
the Uniform Commercial Code as adopted by the State of Illinois. Notwithstanding
the foregoing, any accounting terms used in this Agreement which are not
specifically defined herein shall have the meaning customarily given to them in
accordance with GAAP. All financing computations hereunder shall be computed,
unless otherwise specifically provided herein, in accordance with GAAP as
consistently applied. No Accounting Changes (as defined below) shall affect
financial covenants, standards or terms in this Agreement; provided, that
Borrowers shall prepare footnotes to the financial statements required to be
delivered hereunder that show the differences between the financial statements
delivered (which reflect such Accounting Changes) and the basis for calculating
financial covenant compliance (without reflecting such Accounting Changes).
"Accounting Changes" means changes in accounting principles required by GAAP and
implemented by Borrowers.
12. LOANS: BANK'S COMMITMENT AND BORROWING PROCEDURES
12.1 Revolving Credit Commitment. On the terms and subject to the
---------------------------
conditions set forth in this Agreement, Bank agrees to make revolving credit
available and Letters of Credit available to Borrowers from time to time prior
to the Revolving Credit Termination Date with respect to revolving credit loans
and the Letter of Credit Termination Date with respect to Letters of Credit in
such aggregate amounts as Borrowers may from time to time request but in no
event exceeding Eight Million Five Hundred Thousand Dollars ($8,500,000) in the
aggregate (the "Revolving Credit Commitment"); provided, however, that in no
event shall the aggregate amount of Letters of Credit outstanding at any one
time exceed the Letter of Credit Limit. The Revolving Credit Commitment shall be
available to Borrowers by means of Loans, it being understood that the Loans may
be repaid and used again during the period from the date hereof to and including
the Revolving Credit Termination Date, at which time the Revolving Credit
Commitment shall expire.
12.2 Borrowing Procedures. Authorized Agent shall give Bank irrevocable
--------------------
telephonic notice (which notice shall be promptly confirmed in writing) no later
than 2:00 p.m., Chicago time, one (1) Business Day prior to the date that
Borrowers desire disbursement of a Loan. Each such notice shall be effective
upon receipt by Bank and shall specify the date of the Loan (which shall be a
Business Day) and the amount of such Loan. Borrowers agree that Bank may rely
on any notice given by persons it reasonably believes to be the Authorized Agent
of Borrowers and either Edwin Jacobson, President and Chief Executive Officer of
CMC, or Thomas F. Redler, Assistant Secretary and Assistant Treasurer of HTI,
without the necessity of
<PAGE>
independent investigation. Subject to the terms and conditions of this
Agreement, the Loan shall be made available to Borrowers by depositing the same,
in immediately available funds, in an account of one of the Borrowers maintained
with Bank as specified by the Authorized Agent.
12.3 Letters of Credit. (a) Subject to all of the terms and conditions of
-----------------
this Agreement, if requested to do so by any Borrower, Bank shall issue its, or
cause to be issued, Letters of Credit for the account of such Borrower; provided
--------
that the aggregate face amount of all Letters of Credit outstanding at any time
shall not exceed the lesser (A) $500,000 or (B) the maximum amount available for
drawing under the Revolving Credit Commitment at the time of the request of such
Letter of Credit (the "Letter of Credit Limit"). No Letter of Credit may have
an expiration date that is later than the Letter of Credit Termination Date.
Any amounts paid by Bank in connection with any Letter of Credit (i) shall
become part of Borrowers' Liabilities, (ii) shall be paid from the proceeds of a
Loan requested pursuant to Paragraph 2.1 above, to the extent Bank is required
-------------
to make a Loan pursuant to the terms hereof, and (iii) otherwise, shall be
payable on demand. In no event shall Bank be required to issue or cause to be
issued any Letter of Credit at any time there exists an Event of Default or an
event which with passage of time or giving of notice or both would mature into
an Event of Default.
(b) Each of CMC and Heartland Partners, jointly and severally, agree
to unconditionally, irrevocably and absolutely pay immediately to Bank the
amount drawn under a Letter of Credit. If any Borrower at any time fails to make
such payment, Borrowers shall be deemed to have elected to borrow from Bank on
such date Loans equal in an aggregate amount to the amount paid by Bank under
such Letter of Credit.
12.4 All Loans to Constitute One Obligation. The Loans shall constitute
--------------------------------------
one general obligation of Borrowers, and shall be secured by Bank's security
interest in and Lien upon all of the Collateral and by all other security
interests, Liens, claims and encumbrances heretofore, now or at any time or
times hereafter granted by Borrowers to Bank.
13. LOANS: NOTE EVIDENCING LOANS
13.1 Revolving Note. The Loans made by Bank under the Revolving Credit
--------------
Commitment shall be evidenced by the Revolving Note substantially in the form
set forth in Exhibit 3.1, with appropriate insertions, dated the date hereof (or
-----------
such other date prior thereto as shall be satisfactory to Bank), payable to the
order of the Bank. The unpaid principal amount of the Loan shall bear interest
and be due and payable as provided in this Agreement and the Revolving Note.
Payments to be made by Borrowers, jointly and severally, under the Revolving
Note shall be made at the time, in the amounts and upon the terms set forth
herein and therein.
13.2 Recordation. The type, date and amount of each Loan made by Bank, the
-----------
interest rate, and the date and amount of each repayment of principal received
by Bank shall be recorded by Bank in its records. The aggregate unpaid principal
amount so recorded shall be prima facie evidence of the principal amount owing
and unpaid on the Revolving Note. The failure to so record any such amount or
any error in so recording any such amount shall not limit or otherwise affect
the obligations of Borrowers hereunder or under the Revolving Note to repay the
principal amount of the Loans together with all interest accrued thereon.
14. LOANS: AMOUNTS; INTEREST; BALANCES; FACILITY AMOUNT FEE
14.1 Interest Rate; Applicable Borrowing Amounts.
-------------------------------------------
(a) Borrowers' Liabilities arising under Paragraph 2.1 hereof in
-------------
respect of each Loan shall bear interest at the fluctuating rate per annum equal
to the sum of the Prime Rate plus the Revolving Margin from time to time in
effect for the period commencing on the date of such Loan until such Loan is
paid in full.
(b) Accrued interest on the outstanding principal amount of Loans
shall be payable monthly in arrears on the first Business Day of each calendar
month commencing with the first Business Day of August, 1998. To the extent
funds are available, accrued interest shall be paid by automatic withdrawals
made by Bank from the Operating Account on or about the first Business Day of
each calendar month. Bank shall deliver to Authorized Agent a monthly statement
with respect to the Operating Account, which statement shall show the interest
rate payable with respect to the Loan during the prior month, the amount of
interest accrued on the Loan during the prior month, and the date of, and the
amount of, each automatic withdrawal of accrued interest by the Bank from the
Operating Account during the prior month. After the Revolving Credit Termination
<PAGE>
Date, accrued interest on such Loans shall be payable on demand. Each Loan shall
be in an aggregate minimum amount of $10,000 and integral multiples of $25,000
in excess of that amount.
(c) If any payment of principal on any Loan is not made when due,
such Loan shall bear interest from the date such payment was due until paid
in full, payable on demand, at a rate per annum (the "Default Rate") equal to
the sum of 3% plus the applicable rate set forth in Paragraph 4.1(a) from
----------------
time to time in effect.
14.2 Computation of Interest. Interest on each Loan shall be computed for
-----------------------
the actual number of days elapsed on the basis of a 360-day year. The interest
rate applicable to each Loan shall change simultaneously with each change in the
Prime Rate. In computing interest on any Loan, (i) the date of funding of the
Loan shall be included and (ii) the date of payment of such Loan shall be
excluded; provided that if a Loan is repaid on the same day on which it is made,
one day's interest shall be paid on that Loan.
14.3 Interest Laws. Notwithstanding any provision to the contrary
-------------
contained in this Agreement or the Other Agreements, Borrowers shall not be
required to pay, and Bank shall not be permitted to collect, any amount of
interest in excess of the maximum amount of interest permitted by law ("Excess
Interest"). If any Excess Interest is provided for or determined by a court of
competent jurisdiction to have been provided for in this Agreement or in any of
the Other Agreements, then in such event: (a) the provisions of this Paragraph
shall govern and control; (b) Borrowers shall not be obligated to pay any Excess
Interest; (c) any Excess Interest that Bank may have received hereunder shall
be, at Bank's option, (i) applied as a credit against the outstanding principal
balance of Borrowers' Liabilities or accrued and unpaid interest (not to exceed
the maximum amount permitted by law), (ii) refunded to the payor thereof, or
(iii) any combination of the foregoing; (d) the interest rate(s) provided for
herein shall be automatically reduced to the maximum lawful rate allowed from
time to time under applicable law (the "Maximum Rate"), and this Agreement and
the Other Agreements shall be deemed to have been and shall be reformed and
modified to reflect such reduction; and (e) Borrowers shall not have any action
against Bank for any damages arising out of the payment or collection of any
Excess Interest. Notwithstanding the foregoing, if for any period of time
interest on any Borrowers' Liabilities is calculated at the Maximum Rate rather
than the applicable rate under this Agreement, and thereafter such applicable
rate becomes less than the Maximum Rate, the rate of interest payable on such
Borrowers' Liabilities shall remain at the Maximum Rate until Bank shall have
received the amount of interest which Bank would have received during such
period on such Borrowers' Liabilities had the rate of interest not been limited
to the Maximum Rate during such period.
14.4 Unused Portion Fee. As additional consideration for issuing, or
------------------
causing to be issued, Loans for Borrowers at Borrowers' request pursuant
to Paragraph 2.1 hereof, from and after the Closing Date, Borrowers shall pay to
-------------
Bank a fee in an amount equal to the Revolving Credit Commitment less the
average daily balance of the Loans (including the aggregate amount of all
Letters of Credit) during the preceding quarter, multiplied by one-quarter of
one percent (.25%) per annum, such fee to be calculated on the basis of a 360-
day year for the actual number of days elapsed and to be payable quarterly in
arrears on the first Business Day of August, 1998 and on the first Business Day
of each calendar quarter thereafter.
14.5 Letter of Credit Fees. As additional consideration for issuing, or
---------------------
causing to be issued, Letters of Credit for Borrowers at Borrowers' request
pursuant to Paragraph 2.3 hereof, Borrower agrees to pay fees in respect to each
-------------
Letter of Credit so issued. Said fees shall be payable on the date which such
Letter of Credit is issued and (a) for "standby" Letters of Credit shall be in
an amount equal to one percent (1.0%) per annum of the amount of the Letter of
Credit multiplied by a fraction, the numerator of which is the number of days in
the term of the applicable Letter of Credit and the denominator of which is 360,
payable quarterly in advance, and (b) for "trade" or other Letters of Credit, in
accordance with Bank's published fee schedule then in effect. In the event a
Letter of Credit is renewed or extended, a fee calculated in the manner provided
above shall be payable for any such renewal or extended period. Further,
Borrowers shall pay and/or reimburse Bank for all fees and charges paid by Bank
on account of any Letter of Credit, and Borrowers shall pay to Bank its usual
and customary charges in respect to the issuance, or renewal, of Letters of
Credit.
14.6 Loan Clean-Up Period. Borrowers agree during each twelve-month period
--------------------
during the effectiveness of this Agreement to reduce the principal balance of
the Loans outstanding hereunder and under the Revolving Note to zero dollars
($0) for a period of at least thirty (30) consecutive days.
15. LOANS: GENERAL TERMS
<PAGE>
15.1 Payments to Bank. That portion of Borrowers' Liabilities consisting
----------------
of: (a) principal payable on account of the Loans made by Bank to Borrowers
pursuant to this Agreement shall be payable by Borrowers, jointly and severally,
to Bank, as provided in the Revolving Note, the applicable Letter of Credit or
corresponding Letter of Credit application or the applicable instrument or
document in respect of the Loans; (b) costs, fees and expenses payable pursuant
to this Agreement shall be payable by Borrowers to Bank, on demand (other than
the unused portion fee described in Paragraph 4.4 above, which shall be paid
-------------
in accordance with such paragraph); (c) interest payable pursuant to this
Agreement shall be payable by Borrowers to Bank as provided in Paragraph 4.1;
-------------
and (d) the balance of Borrowers' Liabilities, if any, shall be payable by
Borrowers to Bank as and when provided in this Agreement or the Other
Agreements.
15.2 Conditions Precedent Events. Each Loan made by Bank to Borrowers at
---------------------------
the request of Borrowers pursuant to this Agreement or the Other Agreements
shall in any event be subject to the following conditions precedent: (a) there
shall not then exist an Event of Default (as hereinafter defined) or any event
or condition which with notice, lapse of time and/or the making of such Loan
would constitute an Event of Default; (b) the representations, warranties and
covenants of each Borrower contained in this Agreement shall be true and correct
as of the date of such Loan with the same effect as though made on such date;
(c) all of the covenants and agreements of each Borrower in this Agreement, and
all of the requirements of this Agreement with respect to such Loan, shall have
been complied with; and (d) there shall not have occurred, since the date of
this Agreement, any material adverse change in the financial condition, results
of operations or business of any Borrower. Each borrowing by Borrowers hereunder
shall be deemed a representation and warranty by each Borrower that the
foregoing conditions have been fulfilled as of the date of such borrowing. Bank
shall have received upon request a certificate signed by the Authorized Agent of
Borrowers and either Edwin Jacobson, the president and chief executive officer
of CMC, or Thomas Redler, the assistant treasurer and assistant secretary of
HTI, dated the date of such requested Loan certifying satisfaction of the
conditions specified in clauses (a)-(d) of this Paragraph 5.2.
-------------
15.3 Offset. Each Borrower agrees that, in addition to (and without
-------
limitation of) any right of set-off, bankers' lien or counterclaim Bank may
otherwise have, Bank shall be entitled, at its option, to offset balances held
by it for account of Borrowers at any of its offices, in United States Dollars
or in any other currency, against any principal of or interest on any of Bank's
Loans, or any other amount payable to Bank hereunder, which is not paid when due
(regardless of whether such balances are then due to such Borrower), in which
case it shall promptly notify the Authorized Agent thereof, provided that Bank's
failure to give such notice shall not affect the validity thereof.
15.4 Discretionary Disbursements. Bank, in its sole and absolute
---------------------------
discretion, may immediately upon notice to the Authorized Agent, disburse any or
all proceeds of Loans made or available to Borrowers pursuant to this Agreement
and/or the Other Agreements to pay any fees, costs, expenses or other amounts
required to be paid by Borrowers hereunder and not so paid. All monies so
disbursed shall be a part of Borrowers' Liabilities, payable by Borrowers on
demand.
15.5 Revolving Credit Termination Date; Continuance of Obligations, Etc.
-------------------------------------------------------------------
This Agreement, Bank's obligation to loan monies to Borrowers, and each
Borrower's ability to borrow monies from Bank shall be in effect until the
Revolving Credit Termination Date. Notwithstanding the foregoing and until such
date when Borrowers' Liabilities shall be paid in full, each Borrower's
obligations hereunder and under the Other Agreements shall continue, interest
shall continue to be paid in accordance with the foregoing, Bank shall be
entitled to retain its security interest in the Collateral and Bank shall retain
all of its rights and remedies under this Agreement.
15.6 Loan Evidence. Loans made by Bank to Borrowers pursuant to this
-------------
Agreement may or may not (at Bank's sole and absolute discretion) be evidenced
by notes or other instruments issued or made by Borrowers to Bank. Where such
loans are not so evidenced, such loans shall be evidenced solely by entries upon
the ledgers, books, records and/or computer records of each Bank maintained for
that purpose, which entries shall be rebuttably presumptive evidence of such
loans in the absence of manifest error.
16. LOANS: CONDITIONS TO LENDING
16.1 Initial Loan Conditions Precedent. In addition to those conditions
set forth in Paragraph 5.2 above with respect to all Loans and advances
-------------
hereunder, prior to or contemporaneously with the making of any Loans hereunder
(including, but not limited to, the $6,000,000 in Loans previously advanced to
Borrower under the Agreement), Bank's obligation to make any Loan is subject to
the satisfaction of the following conditions precedent:
<PAGE>
(a) Fees and Expenses. Borrowers shall have paid all fees owed to Bank and
-----------------
reimbursed Bank for all expenses due and payable hereunder on or before the date
hereof including, but not limited to, a closing fee equal to one-quarter of one
percent ( 1/4%) of the $3,500,000 increase in the Revolving Credit Commitment
(i.e., $8,750) and counsel fees provided for in Paragraph 10.12 hereof.
- - ----- ---------------
(b) Documents. Bank shall have received the following documents, in form
---------
and substance satisfactory to Bank, and all of the transactions contemplated by
each such document shall have been consummated or each condition contemplated by
each such document shall have been satisfied:
(i) Related Documents. Copies of this Agreement and each Other
-----------------
Agreement as required by Bank, including one copy of the Revolving Note
payable to Bank conforming to the requirements hereof duly executed by
Borrower and copies of the Galewood Mortgage, the Amendment to Kinzie
Station Mortgage, the Galewood Assignment of Rents, the Amendment to Kinzie
Station Assignment of Rents, the Environmental Indemnity Agreement and the
Pledge Agreement duly executed by each Borrower which is a party thereto
and satisfactory to Bank. The applicable Forms UCC-1 and UCC-2 financing
statements related to the Collateral (as herein defined) shall have been
filed in all jurisdictions that Bank deems necessary or advisable.
(ii) Legal Opinion. The legal opinion of Borrowers' in-house
-------------
counsel.
(iii) Borrowers' Certificates. A certificate executed by each
-----------------------
Borrower stating that (A) no default or Event of Default has occurred and
is continuing, (B) no material adverse change in the financial condition or
operations of the business of any Borrower has occurred since December 31,
1997, and (C) each condition precedent to the consummation of the Loans
contemplated hereby has been met or satisfied.
(iv) Insurance Policies. Certificates from each Borrower's
------------------
insurance carriers evidencing that all insurance policies and coverage
required by Paragraph 8.2(h) below is in effect.
----------------
(v) Partnership Agreement. A copy of the Partnership Agreement
---------------------
and the Limited Partnership Agreement certified by the Authorized Agent of
such Borrower.
(vi) Borrower Resolutions. Certified copies of resolutions of
--------------------
each Borrower, its partners and authorized agents, as applicable,
authorizing the execution and delivery and the consummation of the
transactions contemplated by this Agreement and the Other Agreements and
all other documents or instruments to be executed and delivered in
conjunction herewith and therewith by each Borrower.
(vii) Incumbency Certificate. A certificate of a partner or
----------------------
general partner, as applicable, of each Borrower certifying the name of the
Authorized Agent of Borrowers authorized to sign this Agreement and the
Other Agreements together with a sample of the true signature of the
Authorized Agent.
(viii) Disclosure Schedule. The Disclosure Schedule executed by
-------------------
the Authorized Agent of the Borrowers.
(ix) Title Policy. A Date Down Endorsement to Title Policy for
------------
the Kinzie Station Mortgaged Property and a loan policy issued by a title
insurance company acceptable to Bank for the Galewood Mortgaged Property in
the aggregate amount of $8,500,000 in coverage, which policy and date down
endorsement shall be in form and substance acceptable to Bank.
(x) Survey. Survey for each parcel of Mortgaged Property in
------
form and substance acceptable to Bank.
(xi) Environmental Reports. Appraisals and Phase One
---------------------
Environmental Report covering the Galewood and Kinzie Station Mortgaged
Properties, satisfactory in each case to Bank. Bank acknowledges receipt
of the Appraisal and Phase One Environmental Report for the Kinzie Station
Mortgaged Property.
<PAGE>
(c) Bank's Review. Bank's review of and satisfaction with the
-------------
ownership, capital, corporate, organizational and legal structure of Borrowers
and their Affiliates.
16.2 Accountant's Letter. On or prior the date hereof, Borrowers agree
-------------------
that they will deliver to Ernst & Young LLP, a letter (in form and substance
acceptable to Bank) authorizing such accountants to communicate with Bank and
acknowledging Bank's reliance on future financial statements audited by such
accountants, and Borrowers shall use their best efforts to cause such
accountants to accept and agree to such letter.
17. COLLATERAL: GENERAL TERMS
17.1 Grant of Security Interest. To secure the prompt payment of
--------------------------
Borrowers' Liabilities and the prompt, full and faithful performance by each
Borrower of all provisions to be kept, observed or performed by each Borrower
under this Agreement and/or the Other Agreements, (i) CMC does hereby reaffirm
its pledge, assignment, transfer and delivery to Bank, for the benefit of Bank,
and grant to Bank, for the benefit of Bank, of a security interest in and to and
a first mortgage on the Kinzie Station Mortgaged Property pursuant to the Kinzie
Station Mortgage and the Kinzie Station Assignment of Rents and (ii) CMC does
hereby pledge, assign, transfer and deliver to Bank, for the benefit of Bank,
and grant to Bank, for the benefit of Bank, a security interest in and to and a
first mortgage on the Galewood Mortgaged Property pursuant to the Galewood
Mortgage and the Galewood Assignment of Rents. Additionally, Borrowers will
pledge $850,000 in cash or cash equivalents as an interest reserve pursuant to
the Pledge Agreement. (All of the foregoing personal property and real property
securing Borrowers' Liabilities hereunder, in addition to all rents and proceeds
thereof including, without limitation, proceeds of insurance policies insuring
the same, is hereinafter sometimes individually and sometimes collectively
referred to as "Collateral"). Each Borrower shall make appropriate entries upon
its financial statements and books and records disclosing Bank's security
interest in the Collateral.
17.2 Perfection of Security Interests. Each Borrower shall execute and/or
--------------------------------
deliver to Bank, at any time and from time to time hereafter at the request of
Bank, all agreements, instruments, financing statements, documents and other
written matter (sometimes hereinafter individually and collectively referred to
as "Supplemental Documentation") that Bank reasonably may request, in form and
substance acceptable to Bank, to perfect and maintain perfected Bank's security
interest in the Collateral and to consummate the transactions contemplated in or
by this Agreement and the Other Agreements. After an Event of Default, each
Borrower, irrevocably, hereby makes, constitutes and appoints Bank (and all
Persons designated by Bank for that purpose) as each Borrower's true and lawful
attorney and agent-in-fact to sign the names of each Borrower on the
Supplemental Documentation and to deliver the Supplemental Documentation to such
Persons as Bank may reasonably elect. Each Borrower agrees that a carbon,
photographic or photostatic copy or other reproduction of this Agreement or of
any financing statement shall be sufficient as a financing statement.
17.3 Inspection of Collateral. Bank (by any of its officers, employees
------------------------
and/or agents) shall have the right to inspect the Collateral and all related
records (and the premises upon which it is located) and to verify the amount and
condition of or any other matter relating to the Collateral. After an Event of
Default, all costs, fees and expenses incurred by Bank, or for which Bank has
become obligated, in connection with such inspection and/or verification shall
constitute part of Borrower's Liabilities, payable by Borrowers to Bank on
demand. Notwithstanding any other provision hereof, the provisions of this
Paragraph 7.3 shall govern and control with respect to matters concerning
- - -------------
inspection and verification of the Collateral.
17.4 First Lien and Locations of Collateral. Each Borrower warrants and
--------------------------------------
represents to and covenants with Bank that: (a) as of the Closing Date, Bank's
security interest in the Collateral is and at all times hereafter shall be
perfected and have a first priority; (b) the offices and/or locations where each
Borrower keeps the Collateral consisting of personal property, and the books and
records concerning the Collateral, consisting of books and records with respect
to both real and personal property, are at the locations specified on Schedule
--------
7.4 and no Borrower shall remove such books and records and/or the Collateral
- - ---
therefrom and shall not keep any of such books and records and/or the Collateral
at any other office or location without the prior written consent of Bank; and
(c) the addresses specified on Schedule 7.4 include and designate each
------------
Borrower's executive offices, chief place of business and other offices and
places of business and are Borrowers' sole offices and places of business.
Borrowers, by written notice delivered to Bank at least thirty (30) days prior
thereto, shall advise Bank of any Borrower's opening of any new office or place
of business or its closing of any existing office or place of business and any
new office or place of business shall be within the continental United States of
America. There are no liens on the Collateral other than the lien of Bank
pursuant hereto and Permitted Liens.
<PAGE>
17.5 Constructive Trust. Each Borrower shall receive, as the sole and
------------------
exclusive property of Bank, and as trustee for Bank, all monies, checks, notes,
drafts and all other payment for and/or proceeds of Collateral which come into
the possession or under the control of any Borrower (or any of its partners,
officers, employees, agents or those Persons acting for or in concert with such
Borrower) and immediately upon receipt thereof, Borrowers shall remit the same
(or cause the same to be remitted), in kind, to Bank at the address described in
Paragraph 10.16 below.
- - ---------------
17.6 Application of Proceeds of Collateral. Bank, at any time or times in
-------------------------------------
its sole and absolute discretion, may take control of, in any manner, and may
endorse each Borrower's name, as appropriate, to any of the items of payment or
proceeds described in Paragraph 7.5 above and, pursuant to the provisions of
-------------
this Agreement, Bank may, in its sole and absolute discretion, apply the same to
and on account of Borrowers' Liabilities. For the purposes of this Paragraph,
each Borrower, irrevocably, hereby makes, constitutes and appoints Bank (and all
persons designated by Bank for that purpose) as each Borrower's true and lawful
attorney and agent-in-fact with power, without notice to Borrowers, to take any
such actions.
17.7 Third Party Collateral Claims. Bank, in its sole and absolute
-----------------------------
discretion, without waiving or releasing any Event of Default or obligation,
liability, or duty of any Borrower under this Agreement or the Other Agreements,
may at any time or times hereafter, but shall be under no obligation to, pay,
acquire and/or accept an assignment of any security interest, lien, encumbrance,
or claim asserted by any Person against the Collateral. All sums paid by Bank
in respect thereof and all costs, fees and expenses, including reasonable
attorney's fees, court costs, expenses and other charges relating thereto that
are incurred by Bank on account thereof shall be part of Borrowers' Liabilities
payable by Borrowers to Bank on demand.
17.8 Additional Collateral. Bank may, in its sole and absolute
---------------------
discretion, retain as additional Collateral or release to Borrowers, from time
to time, such portion of the monies, reserves and/or proceeds received by Bank
with respect to the Collateral as Bank may determine. All such monies, reserves,
proceeds and other property of Borrowers in the possession of Bank at any time
or times hereafter are hereby pledged by Borrowers to Bank as additional
Collateral hereunder and must be applied by Bank on account of Borrowers'
Liabilities.
17.9 No Custom or Waiver. No authorization given by Bank pursuant to this
-------------------
Agreement or the Other Agreements to sell any specified portion of Collateral or
any items thereof, and no waiver by Bank in connection therewith shall establish
a custom or constitute a waiver of the limitation contained in this Agreement
against such sales, with respect to any portion of the Collateral or any item
thereof not covered by said authorization.
18. REPRESENTATIONS AND WARRANTIES; COVENANTS;
INDEMNIFICATION; CONTINUING OBLIGATION
18.1 Representations and Warranties of Borrower. Each Borrower hereby
------------------------------------------
represents and warrants to Bank as of the date hereof and with respect to
subsections (a) through (d) and subsections (f) through (aa) below, the date of
disbursement of each Loan or advance hereunder, as follows:
(a) Partnership Existence and Authority. CMC is a general partnership
-----------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified to do business and is in good standing
under the laws of each state in which the ownership of its properties and the
nature and extent of the activities transacted by it makes such qualification
necessary. Heartland Partners is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified to do business and is in good standing under the laws of each
state in which the ownership of its properties and the nature and extent of the
activities transacted by it makes such qualification necessary. Each Borrower
has all requisite partnership power and authority to conduct its activities as
presently conducted, to own its properties and to perform its obligations under
this Agreement.
(b) Authorization; No Conflict. The execution, delivery and
--------------------------
performance by each Borrower of this Agreement and the Other Agreements to which
each Borrower is a party are within each Borrower's partnership powers, have
been duly authorized by all necessary partnership action and do not contravene
(i) each Borrower's Partnership Agreement or Limited Partnership Agreement, as
applicable, or (ii) any law or any contractual restriction binding on or
affecting any Borrower or its respective properties, and do not result in or
require the creation of any Lien (except as may be created under this Agreement
or the Other Agreements) upon or with respect to any of its properties. The
partners of CMC and the general partner of Heartland Partners is authorized to
enter into this Agreement and the Other Agreements on behalf of such Borrower
and the
<PAGE>
persons entering into this Agreement and the other Agreements on behalf of said
partners or general partner, as applicable, are so authorized to do so on behalf
of said partners or limited partners, as applicable.
(c) No Approval. No authorization or approval or other action by,
-----------
and no notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by any Borrower of
this Agreement or any Other Agreement to which any Borrower is a party.
(d) Validity and Binding Nature. This Agreement is, and the Other
---------------------------
Agreements to which each Borrower is a party when delivered hereunder will be,
legal, valid and binding obligations of such Borrower, enforceable against such
Borrower in accordance with their respective terms.
(e) Financial Statements and Condition. The financial statements and
----------------------------------
balance sheet (including the notes thereto) of Borrowers as at December 31,
1997, and the related statements of income and equity and statements of cash
flows of Borrowers for the fiscal year then ended, audited by independent
certified public accountants, are complete and correct and fairly present the
financial condition of Borrowers as at such date and the results of the
operations of Borrowers for the period ended on such date, in accordance with
GAAP, and since December 31, 1997, there has been no material adverse change in
any Borrowers' financial condition, business, properties or operations. Except
as set forth on Schedule 8.1(e) hereto, no Borrower has on the date hereof, nor
---------------
will have on the date of any Loan or advance made by Bank hereunder, any
material contingent obligations, long-term leases or material forward or long-
term commitments, which are not reflected in the foregoing statements (and the
related notes thereto).
(f) Litigation. Except as disclosed in Schedule 8.1(f) hereto, there
---------- ---------------
is no pending or, to the best knowledge of each Borrower, threatened action,
suit, inquiry, investigation, or proceeding affecting, directly or indirectly,
any Borrower before any court, governmental agency or arbitrator, which, in any
case, may (i) materially and adversely affect the financial condition or
operation of any Borrower, (ii) which seeks to restrain or would otherwise have
a material adverse effect on the transactions contemplated herein, or (iii)
which would affect the validity or enforceability of this Agreement or the Other
Agreements.
(g) Securities Transaction. No proceeds of any Loan or advance made
----------------------
by Bank to any Borrower hereunder will be used to acquire any security in any
transaction which is subject to Section 13 or 14 of the Securities Exchange Act
of 1934, as amended.
(h) Regulation U. No Borrower is engaged in the business of
------------
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds of any Loan or advance made by Bank to any
Borrower hereunder will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock.
(i) ERISA Termination Event and Funding. No ERISA Termination Event
-----------------------------------
has occurred or is expected to occur with respect to any Plan and all Plans, to
the extent governed by ERISA, meet the minimum funding standards of Section 302
-----------
of ERISA.
(j) Withdrawal Liability and Reportable Events. No Borrower nor any
------------------------------------------
ERISA Affiliate thereof has incurred, or expects to incur, any withdrawal
liability under Section 4201 of ERISA to any Multiemployer Plan. No Reportable
------------
Event (as defined in ERISA) has occurred with respect to any Plan.
(k) Taxes. Each Borrower and, in the case of CMC, its partners, have
-----
filed all tax returns (Federal, state and local) required to be filed and paid
all taxes shown thereon to be due, including interest and penalties, other than
such taxes that Borrowers are contesting in good faith by appropriate legal
proceedings and proper reserves therefor have been established on the books of
Borrowers.
(l) Liens. There are no Liens upon or with respect to any of the
-----
Mortgaged Properties of any Borrower or Collateral or any right to receive
revenues of any Borrower or Collateral other than (i) Liens arising under this
Agreement, and (ii) other Liens permitted pursuant to Paragraph 8.3(a) hereof.
----------------
<PAGE>
(m) Conflicts. No Borrower nor any Affiliate thereof is a party to
---------
any indenture, loan or credit agreement or any lease or other agreement or
instrument (including corporate charters) which is likely to have a material
adverse effect on the ability of any Borrower to perform its obligations under
this Agreement or the Other Agreements or which would restrict or otherwise
limit the incurring of the Debt represented by this Agreement and the Other
Agreements.
(n) Environmental Matters.
---------------------
(i) Except as disclosed in Schedule 8.1(n) hereto, to the best
---------------
of each Borrower's knowledge, no Mortgaged Property is listed on any local,
state and/or federal lists of potentially contaminated sites, including,
without limitation, the National Priorities List, CERCLIS or any state or
federal hazardous waste site or leaking underground storage tank lists, and
each Mortgaged Property and each Borrower (with respect to each Mortgaged
Property) has been and is currently in compliance with all applicable
Environmental Laws. Except as disclosed in Schedule 8.1(n) hereto, there
---------------
has been no past, and there are no, to the best of each Borrower's
knowledge, pending or threatened Environmental Claims to which any Borrower
is a party which relate to any Mortgaged Property. Except as disclosed in
Schedule 8.1(n), all required governmental permits and licenses are in
---------------
effect, and each Borrower is in compliance therewith. Except as disclosed
in Schedule 8.1(f) hereto or Schedule 8.1(n) hereto, no Borrower has
--------------- ---------------
received any notice of any Environmental Claims (A) respecting any Borrower
that materially affects any Borrower's financial condition, or (B)
respecting any Mortgaged Property, or (C) respecting any off-site facility
to which any Hazardous Material has been sent for off-site treatment,
recycling, reclamation, reuse, handling, storage, sale or disposal, the
eventual resolution of which Borrowers believe will materially affect any
Borrower's financial condition.
(ii) Absence of Hazardous Material. Except as disclosed in
-----------------------------
Schedule 8.1(n) hereto, to the best of Borrowers' knowledge, no use,
---------------
exposure, release, emission, discharge, generation, manufacture, sale,
handling, reuse, presence, storage, treatment, transport, recycling or
disposal of Hazardous Material has occurred or is occurring on or from any
Mortgaged Property which is in violation of any Environmental Laws. The
term "release" shall include, without limitation, any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing into the environment (including, without
limitation, the abandonment or discarding of barrels, containers and other
receptacles containing any Hazardous Material). To the best of Borrowers'
knowledge, except as disclosed in Schedule 8.1(n) hereto, all Hazardous
---------------
Materials used, treated, stored, transported to or from, generated or
handled on any Mortgaged Property have been disposed of on or off such
Mortgaged Property in a lawful manner. To the best of Borrowers' knowledge,
except as disclosed in Schedule 8.1(n) hereto, no environmental, public
---------------
health or safety hazards currently exist with respect to any Mortgaged
Property. To the best of Borrowers' knowledge, except as disclosed in
Schedule 8.1(n) hereto, no storage tanks (including, without limitation,
---------------
petroleum or heating oil storage tanks), underground or above-ground, are
present on or under any Mortgaged Property, or have been on or under any
Mortgaged Property.
(iii) Waters of the United States. To the best of each
---------------------------
Borrower's knowledge, no part of any Mortgaged Property contains "waters of
the United States", as defined in 33 CFR 328. No Borrower shall discharge
dredged or fill material into waters of the United States as such activity
is described and regulated by Section 404 of the Clean Water Act, 33 U.S.C.
1344.
(iv) Illinois Responsible Property Transfer Act. Neither any
------------------------------------------
portion of the Mortgaged Property nor the Loan is subject to the Illinois
Responsible Property Transfer Act.
(o) Investment Company Act. No Borrower is an "investment company"
----------------------
or a company "controlled by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
(p) Compliance with Laws. Each Borrower is in compliance with all
--------------------
laws, orders, regulations and ordinances of all federal, foreign, state and
local governmental authorities binding upon or affecting the business, operation
or assets of each Borrower including, without limitation, zoning or other
ordinances relating to permissive non-conforming uses of property, except where
the failure to be in compliance would not have a material adverse effect on the
business, financial condition or operations of such Borrower.
<PAGE>
(q) Other Agreements. Each Borrower makes each of the
----------------
representations and warranties contained in the Other Agreements to which each
Borrower is a party operative and applicable for the benefit of Bank as if the
same were set forth at length herein.
(r) True and Correct Nature of Other Representations and Warranties.
---------------------------------------------------------------
The representations and warranties of each Borrower in the Other Agreements to
which each Borrower is a party are true and correct.
(s) Affiliates. Except as disclosed on Schedule 8.1(s), no Borrower
----------
has any Affiliates or Subsidiaries.
(t) Intentionally Omitted.
---------------------
(u) Solvency. Each Borrower has capital sufficient to carry on its
--------
business and transactions and all businesses and transactions in which it is
about to engage and is solvent and able to pay its debts as they mature and each
Borrower owns property the fair saleable value of which is greater than the
amount required to pay each Borrower's Debt. No transfer of property is being
made and no Debt is being incurred in connection with the transactions
contemplated by this Agreement with the intent to hinder, delay or defraud
either present or future creditors of any Borrower or any Affiliate.
(v) Title. Each Borrower has good, indefeasible and merchantable
-----
title to and ownership of the Collateral owned by such Borrower, free and clear
of all Liens, claims, security interests and other encumbrances except for the
Liens of Bank granted hereunder and as permitted by Paragraph 8.3(a) hereof.
----------------
(w) Organizational Structure and Related Matters. The partnership
--------------------------------------------
structure of each Borrower as of the Closing Date is described on Schedule
--------
8.1(s).
- - ------
(x) Options. No person, corporation, partnership, association or
-------
other entity has any option to acquire ownership of the Collateral or any
portion thereof.
(y) Debt. As of the date of this Agreement, no Borrower has any Debt
----
except for the permitted Debt set forth in Schedule 8.3(d) hereof.
---------------
(z) Insurance. Schedule 8.1(z) sets forth a complete and accurate
--------- ---------------
description of all policies of insurance that will be in effect as of the
Closing Date for each Borrower. Each Borrower is adequately insured under such
policies, no notice of cancellation has been received with respect to such
policies and each Borrower is in compliance with all conditions contained in
such policies.
(aa) Year 2000 Compliance. Each Borrower and their Subsidiaries have
--------------------
reviewed the areas within their business and operations which could be adversely
affected by, and have developed or are developing a program to address on a
timely basis, the "Year 2000 Problem" (that is, the risk that computer
applications used by each Borrower and their Subsidiaries may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date on or after December 31, 1999), and have made related
appropriate inquiry of material suppliers and vendors. Based on such review and
program, Borrowers believe that the "Year 2000 Problem" will not have a material
adverse effect on either Borrower. From time to time, at the request of the
Bank, each Borrower and their Subsidiaries shall provide to the Bank such
updated information or documentation as is requested regarding the status of
their efforts to address the Year 2000 problem.
(bb) Accuracy of Information. All factual information heretofore or
-----------------------
contemporaneously furnished by or on behalf of each Borrower to Bank for
purposes of or in connection with this Agreement or any transaction contemplated
hereby (excluding projections referred to below in this Paragraph and factual
information superseded or replaced prior to the date hereof) is, and all other
factual information (taken as a whole) hereafter furnished by or on behalf of
each Borrower to Bank will be, true and accurate in every material respect on
the date as of which such information is dated or certified, and no Borrower has
omitted or will omit any material fact necessary to prevent such information
from being false or misleading.
18.2 Affirmative Covenants. At all times prior to the Revolving Credit
---------------------
Termination Date and thereafter for so long as any amounts are due or owing to
Bank hereunder, each Borrower hereby covenants that it will, unless Bank
otherwise consents in writing:
<PAGE>
(a) Existence, Etc. Do or cause to be done all things necessary to
--------------
preserve and keep in full force and effect each Borrower's partnership or
limited partnership, as applicable, existence in good standing.
(b) Compliance with Laws, Etc. Comply with all applicable present
-------------------------
and future laws, rules, ordinances, regulations and orders including, without
limitation, laws, rules, ordinances, regulations and orders regarding the
operation and maintenance of each Borrower's business.
(c) Payment of Taxes and Other Claims. Pay or discharge or cause to
---------------------------------
be paid or discharged, before the same shall become delinquent, (i) all Charges
levied or imposed upon any Borrower or upon the income, profits or property of
any Borrower, and (ii) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a Lien upon the property of any Borrower;
provided, however, that no Borrower shall be required to pay or discharge or
- - -------- -------
cause to be paid or discharged any such Charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings to the extent adequate reserves have been established on the books
of Borrowers.
(d) Reporting Requirements. Keep true books of record and account in
----------------------
which full, true and correct entries in accordance with GAAP consistently
applied will be made of all dealings or transactions in relation to its business
and activities, and shall furnish to Bank:
(i) as soon as possible and in any event within ten (10) days
after the occurrence of an Event of Default or any event which, with the
giving of notice, lapse of time, or both, would constitute an Event of
Default, the statement of an Authorized Agent setting forth details of such
Event of Default or event and the action which such Borrower has taken or
proposes to take to cure the same;
(ii) as soon as available and in any event within thirty (30)
days after the end of each fiscal quarter beginning with the quarter ending
June 30, 1998, an internally prepared balance sheet of each Borrower as at
the end of such quarter and the related statements of net earnings and
statements of cash flows of each Borrower for such quarter and for the
portion of the fiscal year ended at the end of such quarter, setting forth
in each case in comparative form the figures for the corresponding quarter
and the corresponding portion of the previous fiscal year, all in
reasonable detail and certified (subject to normal year-end adjustments) as
to fairness of presentation, in accordance with GAAP, by the Authorized
Agent;
(iii) as soon as available and in any event within ninety (90)
days after the close of each fiscal year of Borrowers, a balance sheet and
the related consolidated statements of net earnings and partners' equity
and statements of cash flows of each Borrower as of the end of such fiscal
year, fairly and accurately presenting the financial condition of each
Borrower and its Affiliates as at such date and the results of operations
of each Borrower and its Affiliates for such fiscal year and setting forth
in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year, all in reasonable
detail, prepared in accordance with GAAP consistently applied, and audited
by Ernst & Young LLP or such other independent certified public accountants
acceptable to Bank;
(iv) together with each delivery of financial statements
required by subsection (iii) above, Borrowers shall deliver to Bank (x) a
certificate of the accountants who performed the audit in connection with
such statements (A) containing or accompanied by an acknowledgement of such
accountant that Bank will be relying on the opinion of such accountants
stated in such audited financial statements and (B) stating that in making
the audit necessary to the issuance of a report on such financial
statements, they have obtained no knowledge that any Event of Default or
event which, with notice or a lapse of time or both, would constitute an
Event of Default, as it relates to accounting matters, has occurred and is
continuing or, if such accountants have obtained knowledge of an Event of
Default or such event, specifying the nature and period of existence
thereof and (y) a certificate of Borrowers executed by the Authorized Agent
stating whether any Event of Default, or event which, with the passage of
time or giving of notice or both, would constitute, mature into or become
such an Event of Default, currently exists and is continuing and what
activities, if any, Borrowers are taking or proposing to take with respect
thereto;
(v) (A) as soon as possible and in any event (i) within thirty
(30) days after any Borrower or any ERISA Affiliate thereof knows or has
reason to know that any ERISA Termination Event described in clause (i) of
the definition of ERISA Termination Event with respect to any Plan has
occurred and (ii) within ten (10) days after
<PAGE>
any Borrower or any ERISA Affiliate thereof knows or has reason to know
that any other ERISA Termination Event with respect to any Plan has
occurred, a statement of the Authorized Agent (or designee) of Borrowers
describing such ERISA Termination Event and the action, if any, which
Borrowers, or any such ERISA Affiliate proposes to take with respect
thereto;
(B) promptly and in any event within two (2) Business
Days after receipt thereof by any Borrower or any ERISA Affiliate thereof
from the PBGC, copies of each notice received of the PBGC's intention to
terminate any Plan or to have a trustee appointed to administer any Plan;
and
(C) promptly and in any event within ten (10) Business
Days after receipt thereof by any Borrower or any ERISA Affiliate thereof
from a Multiemployer Plan sponsor, a copy of each notice received
concerning the imposition or amount of withdrawal liability pursuant to
Section 4202 of ERISA;
------------
(vi) immediately after notice to any Borrower of the
commencement thereof, notice, in writing, of any action, suit, arbitration
or other proceeding instituted, commenced or threatened against or
affecting any Borrower with an amount in controversy in excess of $25,000;
(vii) if requested by Bank, each Borrower's federal, state and
local tax returns as soon as said returns are completed in the form said
returns will be filed with the Internal Revenue Service and any state or
local department of revenue or taxing authority; and
(viii) such other information respecting the condition or
operations, financial or otherwise, of any Borrower or any Affiliate as
Bank may from time to time reasonably request.
(e) Visitation Rights. At any time or times, permit Bank or any
-----------------
agents or representatives thereof, to examine and make copies of and abstracts
from the records and books of account of and visit the Mortgaged Properties of
each Borrower and its offices, all as Bank shall reasonably request, and to
discuss the affairs and finances and Mortgaged Properties of each Borrower with
each Borrower's representatives. In furtherance and not in limitation of the
foregoing, each Borrower agrees to bear all expenses of any visitation made by
Bank for the purposes set forth in this Paragraph 8.2(e).
----------------
(f) Environmental Matters.
---------------------
(i) Compliance. Except as disclosed in Schedule 8.1(n), the
---------- ---------------
Mortgaged Properties, the use thereof, and each Borrower, with respect to
the Mortgaged Properties, shall comply with all Environmental Laws. All
required governmental permits and licenses shall be obtained and
maintained, and each Borrower shall comply therewith. All Hazardous
Material on the Mortgaged Properties will be disposed of in a lawful manner
without giving rise to liability under any Environmental Laws. Each
Borrower shall satisfy all requirements of applicable Environmental Laws
for the registration, operation, maintenance, closure and removal of all
underground and other storage tanks on the Mortgaged Properties, if any.
Without limiting the foregoing, all Hazardous Material shall be handled in
compliance with all applicable Environmental Laws.
(ii) Absence of Hazardous Material. Except as disclosed in
-----------------------------
Schedule 8.1(n), no Hazardous Material shall be introduced to or used,
---------------
exposed, released, emitted, discharged, generated, manufactured, sold,
transported, handled, stored, treated, reused, presented, disposed of or
recycled on the Mortgaged Properties, except in compliance with
Environmental Laws.
(iii) Environmental Actions and Right to Consent. Each Borrower
------------------------------------------
shall immediately notify Bank of all Environmental Claims and deliver to
Bank copies of all written notices, complaints, correspondence and other
documents relating thereto within five (5) Business Days after receipt, and
each Borrower shall keep Bank immediately informed of all responses
thereto. Each Borrower shall promptly cure and have dismissed with
prejudice all Environmental Claims in a manner reasonably satisfactory to
Bank, and each Borrower shall keep the Mortgaged Properties free of any
encumbrance arising from any judgment, liability or lien imposed pursuant
to any Environmental Claims. Notwithstanding the foregoing sentence,
Borrowers may, diligently, in good faith and by appropriate legal
proceedings, contest such proceedings provided (i) Borrowers first furnish
to Bank such deposits or other collateral as Bank, in its reasonable
determination, deems sufficient to adequately protect Bank's interests,
(ii) such contest shall have
<PAGE>
the effect of preventing any threatened or pending sale or forfeiture of
all or any portion of the Mortgaged Properties or the loss or impairment of
Bank's lien and security interests in and to the Mortgaged Properties, and
(iii) the matters that are subject of such contest will not cause Bank to
incur any liability, in Bank's sole judgment reasonably exercised. After
the occurrence and during the continuance of an Event of Default, each
Borrower shall permit Bank, at Bank's option, to appear in and to be
represented in any such contest and shall pay upon demand all expenses
incurred by Bank in so doing, including, without limitation, reasonable
attorneys' fees and expenses.
(iv) Future Environmental Audits. Each Borrower shall provide
---------------------------
such information and certifications which Bank may reasonably request from
time to time to monitor Borrowers' compliance with this Paragraph for the
sole purpose of protecting Bank's security interest. To protect its
security interest, Bank shall have the right, but not the obligation, at
any time after three (3) days' advance written notice to enter upon the
Mortgaged Properties, take samples, review each Borrower's books and
records, interview each Borrower's employees and officers, and conduct such
other similar activities as Bank, in its sole discretion, deems
appropriate. Each Borrower shall cooperate fully in the conduct of such an
audit. If Bank decides to conduct such an audit because of (i) an
Environmental Claim, (ii) after an Event of Default, the possibility that
Bank may take possession of or title to the Mortgaged Properties which, in
Bank's sole judgment, increases the risk to its security interest, or (iii)
the introduction of Hazardous Material other than disclosed material as set
forth on Schedule 8.1(n), to the Mortgaged Properties or in the ordinary
---------------
course of business in compliance with Environmental Laws, then Borrowers
shall pay upon written demand all reasonable costs and expenses connected
with such audit, which, until paid, shall become part of Borrowers'
Liabilities, secured by this Agreement and the Other Agreements, and shall
bear interest at the Default Rate.
(g) Financial Covenants. Borrowers must maintain, at all times,
-------------------
Tangible Net Worth in excess of $12,500,000.
(h) Insurance.
---------
(i) At its sole cost and expense, keep and maintain public
liability insurance relating to its ownership and use of the Collateral.
All such policies of insurance shall be carried with companies with a
Best's rating of A-/XI or better or otherwise be approved in writing by
Bank and all such policies shall be in amounts no less than such policies
set forth on Schedule 8.1(z). All policies of insurance shall comply with
---------------
the requirements set forth in the Mortgage. Authorized Agent shall deliver
to Bank the original (or certified) copy of each policy of insurance for
each Borrower or a certificate of insurance, and evidence of payment of all
premiums for each such policy on or prior to the date of this Agreement.
Such policies shall: (A) contain a lender's loss payable clause naming
Bank, for the benefit of Bank, as loss payee and additional insured as its
interest may appear; and (B) provide that the insurance companies will give
Bank written notice before any such policy or policies of insurance shall
be altered or cancelled.
(ii) In the event any Borrower at any time or times hereafter
shall fail to obtain or maintain any of the policies of insurance required
above or to pay any premium in whole or in part relating thereto, then Bank
after giving five (5) days' prior written notice to Authorized Agent,
without waiving or releasing any obligation or Event of Default by any
Borrower hereunder, may at any time or times thereafter (but shall be under
no obligation to) obtain and maintain such policies of insurance and pay
such premium and take any other action with respect to thereto which Bank
deems advisable. All sums so disbursed by Bank, including reasonable
attorneys fees, court costs, expenses and other charges relating thereto,
shall be part of Borrower's Liabilities, payable by Borrowers to Bank on
demand. Each Borrower authorizes Bank, in Bank's sole discretion, to cause
such sums to be paid by making an advance in the amount thereof to
Borrowers and paying the proceeds thereof to Bank.
(i) Leases. Each Borrower shall maintain and comply with all leases
------
covering any Collateral used by any Borrower in accordance with their terms so
as to prevent any default thereunder which may result in the exercise or
enforcement of any landlord's or other lien against any Borrower.
18.3 Negative Covenants. Prior to the Revolving Credit Termination Date
------------------
and thereafter for so long as any amount is due or owing to Bank hereunder,
unless Bank shall otherwise consent in writing, no Borrower shall:
(a) Liens, Etc. Create or suffer to exist, any Lien, other charge
----------
or encumbrance, or any other type of preferential arrangement, upon or with
respect to any of the Mortgaged Properties, or assign any right to receive
income, in each
<PAGE>
case to secure or provide for the payment of any Debt of any Person, except for
the permitted Liens set forth on Schedule 8.3(a) ("Permitted Liens").
---------------
(b) Maintain Existence, Merger, Etc. Except as disclosed on Schedule
-------------------------------- --------
8.3(b), (i) dissolve or amend or modify its Partnership Agreement or Limited
- - ------
Partnership Agreement, as applicable; or (ii) except as specifically permitted
by this Agreement, convey, transfer, lease or otherwise dispose of (whether in
one transaction or in a series of transactions) any Collateral (whether now
owned or hereafter acquired) to any Person; or (iii) together with one or more
Affiliates convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of the
assets of any Borrower and such Affiliates (whether now owned or hereafter
acquired) to any Person; or (iv) purchase, lease or otherwise acquire all or
substantially all of the assets or properties of, or acquire any capital stock,
equity interests, debt or other securities of any Person, or enter into any
joint venture or become a partner in any partnership; or (v) engage in any
transaction out of the ordinary course of business; or (vi) merge or consolidate
with any Person.
(c) Sale and Lease-Back. Enter into any arrangement with any Person
-------------------
or to which such Person is a party providing for the leasing by any Borrower of
any principal asset which has been or is to be sold or transferred by any
Borrower to such Person or to any other Person to whom funds have been or are to
be advanced by such Person on the security of such property or rental
obligations of such Borrower, other than sales or transfers between any Borrower
and any Affiliate or a lease for a temporary period not to exceed 12 months.
(d) Debt. Incur, create, assume, become or be liable in any manner
----
with respect to or permit to exist, any Debt, obligations or indebtedness in
excess of $1,000,000 in the aggregate, except for the permitted Debt set forth
on Schedule 8.3(d).
---------------
(e) Investments or Loans. Make or permit to exist investments or
--------------------
loans in or to any other Person, except for (i) salaries and reasonable advances
of money to its employees in payment of reasonable expenses incurred by such
employees in the ordinary course of business; (ii) investments in certificates
of deposits of a banking institution having a net worth in excess of
$100,000,000 or in securities of the United States of America or commercial
paper with a P1 rating (all of the foregoing maturing within one year); or (iii)
investments as set forth on Schedule 8.3(e) ("Permitted Investments").
---------------
(f) Guaranties. Guaranty, endorse or otherwise in any way directly,
----------
indirectly or contingently become liable for the obligations or liabilities of
any other Person, except endorsements of negotiable instruments for collection
in the ordinary course of business.
(g) Partnership Interests. Redeem, retire, purchase or otherwise
---------------------
acquire, directly or indirectly, any partnership or limited or general
partnership interests, as applicable, in any Borrower or other evidence of
ownership interest, or declare or pay any capital distributions from any
Borrower or make any distribution of any Borrower's property or assets.
(h) Transactions with Affiliates or Insiders. Except as set forth on
----------------------------------------
Schedule 8.3(h) hereto, enter into, or be a party to, any transaction with any
- - ---------------
Affiliate or partner of any Borrower, except in the ordinary course of and
pursuant to the reasonable requirements of such Borrower's business and upon
fair and reasonable terms which are fully disclosed to Bank and are no less
favorable to such Borrower than would obtain in a comparable arm's length
transaction with a Person not an Affiliate or partner of such Borrower.
(i) Capital Structure and Line of Business. Make any change in its
--------------------------------------
capital structure or engage in any line of business materially different from
that previously engaged in by Borrowers.
(j) Change of Control. Make or permit any sale or issuance of any
-----------------
partnership interests of (i) CMC immediately after which Heartland Partners no
longer holds record and beneficial ownership of at least 50.1% of all of the
partnership interest of CMC, and (ii) Heartland Partners immediately after which
HTI is no longer the general partner of Heartland Partners.
18.4 Maintenance of Accounts. Each Borrower agrees to maintain its
-----------------------
primary operational accounts with Bank and shall maintain at all times a balance
of collected, available funds in a non-interest bearing demand deposit account
with Bank (the "Operating Account") in an amount at least equal to that amount
required to compensate Bank for its services in maintaining such account. Each
Borrower acknowledges that Bank will charge each Borrower standard service
charges in effect from time
<PAGE>
to time for various services performed by Bank in connection with any aspect of
the relationship between each Borrower and Bank, and each Borrower hereby agrees
that if such service charges exceed the credit to each Borrower arising from
earnings attributable to funds on deposit with Bank in the applicable Operating
Account, such service charge deficiency shall be deducted by Bank from such
Borrower's Operating Account monthly, in arrears, within ten (10) days following
the end of each month. Bank may cause interest and other amounts payable on the
obligations of Borrowers to Bank hereunder to be paid by making a direct charge
to the applicable Operating Account in accordance with the terms hereof.
19. DEFAULT
19.1 Events of Default. The occurrence of any one of the following events
-----------------
shall constitute a default ("Event of Default") by Borrowers under this
Agreement: (a) if any Borrower fails or neglects to perform, keep or observe
any covenant or agreement contained in this Agreement or in the Other Agreements
which is required to be performed, kept or observed by any Borrower and, in the
event of such failure or neglect under Paragraphs 8.2 (b), (f), (h) and (i) and
Paragraphs 8.3(a) and (c), the same is not cured within thirty (30) days after
notice thereof from the Bank; (b) any representation or warranty made by any
Borrower herein or in any Other Agreement is breached or is false or misleading
in any material respect, or any exhibit, schedule, certificate, financial
statement, report, notice or other writing furnished by any Borrower or any of
its partners, officers, employees, or agents to Bank or any Bank is false or
misleading in any material respect on the date as of which the facts therein set
forth are stated or certified and same shall not be cured or corrected within
thirty (30) days following notice of such breach; (c) if Borrowers fail to pay
Borrowers' Liabilities when due and payable or declared due and payable; (d) if
any of the Collateral is attached, seized, subjected to a writ or distress
warrant or is levied upon, or comes within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors and the same is not
terminated or dismissed within twenty (20) days thereafter; (e) if a petition
under any section or chapter of Bankruptcy Reform Act of 1978, as amended, or
any similar law or regulation shall be filed by any Borrower or if any Borrower
shall make an assignment for the benefit of its creditors or if any case or
proceeding is filed by any Borrower for its dissolution or liquidation; (f) if
any Borrower is enjoined, restrained or in any way prevented by court order from
conducting all or any material part of its business affairs or if a petition
under any section or chapter of Bankruptcy Reform Act of 1978, as amended, or
any similar law or regulation is filed against any Borrower or if any case or
proceeding is filed against any Borrower for its dissolution or liquidation and
such injunction, restraint or petition is not dismissed or stayed within ninety
(90) days after the entry or filing thereof; (g) if an application is made by
any Borrower for the appointment of a receiver, trustee or custodian for any of
such Borrower's assets; (h) if an application is made by any Person other than
Borrowers for the appointment of a receiver, trustee or custodian for the
Collateral of any Borrower and the same is not dismissed within thirty (30) days
after the application therefor; (i) if a notice of lien, levy, or assessment is
filed of record with respect to all or any of the Collateral of any Borrower by
the United States or any department, agency or instrumentality thereof or by any
state, county, municipal or other governmental agency, including without
limitation the PBGC, or if any taxes or debts owing at any time or times
thereafter to any one of them becomes a lien or encumbrance upon any of the
Collateral of any Borrower and the same is not released within thirty (30) days
after the same becomes a lien or encumbrance; (j) if any Borrower becomes
insolvent or is unable generally to pay its debts as they become due; (k) if any
Borrower is in default in the payment of Debt in an amount in excess of
$100,000; (l) the appointment of a conservator for all or any portion of the
Collateral; (m) the occurrence of a default or Event of Default under any
agreement, instrument and/or document executed and delivered by any Person to
Bank or Bank pursuant to which such Person has guaranteed to Bank the payment or
collection of Borrowers' Liabilities and/or has granted to Bank a security
interest or lien in and to some or all of such Person's real and/or personal
property to secure the payment of Borrowers' Liabilities; and (n) the occurrence
of a material breach, a default or an event of default by any Borrower under any
of the Other Agreements after any cure period applicable to any such default or
event of default has expired.
19.2 Cumulative Remedies. All of Bank's rights and remedies under this
-------------------
Agreement and the Other Agreements are cumulative and non-exclusive.
19.3 Acceleration and Termination of Loans. Upon the occurrence and
-------------------------------------
during the continuance of an Event of Default, (a) upon notice by Bank to
Authorized Agent, Borrowers' Liabilities shall be immediately due and payable,
unless there shall have occurred an Event of Default under subparagraphs 9.1(d),
(e), (f), (g), (h), (i) or (j), in which case Borrowers' Liabilities shall
automatically become due and payable without notice or demand, and (b) without
notice by Bank to or demand by Bank of Borrowers, Bank shall have no further
obligation to and may then forthwith cease advancing monies or extending credit
to or for the benefit of Borrower under this Agreement and the Other Agreements.
<PAGE>
19.4 Rights of Secured Creditor. Upon an Event of Default, Bank, in its
--------------------------
sole and absolute discretion, may: (a) exercise any one or more of the rights
and remedies accruing to a secured party under the Uniform Commercial Code of
the relevant state or states and any other applicable law upon default by a
debtor; and (b) exercise any one or more of the rights and remedies available to
it under the Galewood and Kinzie Station Mortgages, the Galewood and Kinzie
Station Assignment of Rents and the Pledge Agreement.
20. GENERAL
20.1 Payment Application Date. Any check, draft, or similar item of
------------------------
payment by or for the account of Borrowers delivered to Bank on account of
Borrowers' Liabilities shall be applied by Bank on account of Borrowers'
Liabilities on the date final settlement thereof is reflected by irrevocable
credit to Bank.
20.2 Statement of Account. Each statement of account by Bank delivered to
--------------------
Borrowers relating to Borrowers' Liabilities shall be presumed correct and
accurate, absent manifest error, and shall constitute an account stated among
Borrowers and Bank unless, within ninety (90) days after Authorized Agent's
receipt of said statement, Borrowers deliver to Bank, by registered or certified
mail addressed to Bank at its Address for Notices specified on the signature
pages hereto, written objection thereto specifying the error or errors, if any,
contained in any such statement.
20.3 Manner of Application; Waiver of Setoff Prohibition. Each Borrower
---------------------------------------------------
waives the right to direct the application of any and all payments at any time
or times hereafter received by Bank on account of Borrowers' Liabilities and
each Borrower agrees that Bank shall have the right, in its absolute and sole
discretion, to apply and re-apply any and all such payments in such manner as
Bank or such Bank may deem advisable, notwithstanding any entry by Bank upon any
of its books and records. Each Borrower further waives any right under or
benefit of any law that would restrict or limit the right or ability of Bank to
obtain payment of Borrowers' Liabilities, including any law that would restrict
or limit Bank in the exercise of its right to appropriate any indebtedness owing
from Bank to any Borrower and any deposits or other property of any Borrower in
the possession or control of Bank and apply the same toward or setoff the same
against the payment of Borrowers' Liabilities.
20.4 Survival of Representations and Warranties. Each Borrower covenants,
------------------------------------------
warrants and represents to Bank that all representations and warranties of each
Borrower contained in this Agreement and the Other Agreements shall be true at
the time of each Borrower's execution of this Agreement and the Other Agreements
and shall survive the execution, delivery and acceptance thereof by the parties
thereto and the closing of the transactions described therein or related
thereto.
20.5 Integration; Amendment. This Agreement and the Other Agreements
----------------------
constitute the entire agreement and understanding between the parties relating
to the subject matter hereof and supersede all prior agreements, whether oral or
written. This Agreement and the Other Agreements may not be modified, altered
or amended except by an agreement in writing signed by Borrowers and Bank.
20.6 No Waiver. Bank's failure at any time or times hereafter to require
---------
strict performance by Borrowers of any provision of this Agreement shall not
waive, affect or diminish any right of Bank thereafter to demand strict
compliance and performance therewith. Any suspension or waiver by Bank of an
Event of Default by any Borrower under this Agreement or the Other Agreements
shall not suspend, waive or affect any other Event of Default by any Borrower
under this Agreement or the Other Agreements, whether the same is prior or
subsequent thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants or representations of any
Borrower contained in this Agreement or the Other Agreements and no Event of
Default by any Borrower under this Agreement or the Other Agreements shall be
deemed to have been suspended or waived by Bank unless such suspension or waiver
is by an instrument in writing signed by Bank specifying such suspension or
waiver.
20.7 Severability. If any provision of this Agreement or the Other
------------
Agreements or the application thereof to any Person or circumstance is held
invalid or unenforceable, the remainder of this Agreement and the Other
Agreements and the application of such provision to other Persons or
circumstances will not be affected thereby and the provisions of this Agreement
and the Other Agreements shall be severable in any such instance.
20.8 Successors and Assigns. This Agreement and the Other Agreements
----------------------
shall be binding upon and inure to the benefit of the permitted successors and
assigns of each Borrower and Bank.
<PAGE>
20.9 Conflict with Other Agreements. The provisions of the Other
------------------------------
Agreements are incorporated in this Agreement by this reference thereto. Except
as otherwise provided in the Other Agreements by specific reference to the
applicable provision of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in the Other
Agreements, the provision contained in this Agreement shall govern and control.
20.10 No Impairment by Termination. Except to the extent provided to the
----------------------------
contrary in this Agreement and in the Other Agreements, no termination or
cancellation (regardless of cause or procedure) of this Agreement or the Other
Agreements shall in any way affect or impair the powers, obligations, duties,
rights and liabilities of Borrowers or Bank in any way or respect relating to
(a) any transaction or event occurring prior to such termination or
cancellation, (b) the Collateral and/or (c) any of the undertakings, agreements,
covenants, warranties and representations of any Borrower contained in this
Agreement or the Other Agreements. All such undertakings, agreements,
covenants, warranties and representations shall survive such termination or
cancellation.
20.11 Waivers. Except as otherwise specifically provided in this Agreement
-------
Agreement, each Borrower waives any and all notice or demand which any Borrower
might be entitled be entitled to receive with respect to this Agreement or the
Other Agreements by virtue of any applicable statute or law and waives
presentment, demand and protest and notice of presentment, protest, default,
dishonor, non-payment, maturity, release, compromise, settlement, extension or
renewal of any or all commercial paper, accounts, contract rights, documents,
instruments, chattel paper and guaranties at any time held by Bank on which any
Borrower may in any way be liable and hereby ratifies and confirms whatever Bank
may do in this regard.
20.12 Costs, Fees and Expenses Related to Agreement and Other Agreements.
------------------------------------------------------------------
In accordance with this Agreement on or prior to the date hereof and thereafter
upon demand by Bank or any Bank therefor, Borrowers shall pay or reimburse Bank
for all costs, fees and expenses incurred by Bank or for which Bank becomes
obligated, in connection with the negotiation, preparation and consummation of
this Agreement and the Other Agreements, including but not limited to,
attorneys' fees, plus costs and expenses of such attorneys or Bank; search fees,
costs and expenses; appraisal fees, costs and expenses; environmental fees,
costs and expenses; and all taxes payable in connection with this Agreement or
the Other Agreements. That portion of Borrowers' Liabilities consisting of
costs, expenses or advances to be reimbursed by Borrowers to Bank pursuant to
this Agreement or the Other Agreements which are not paid on or prior to the
date hereof shall be payable by Borrowers to Bank on demand.
20.13 Environmental Indemnity. Borrowers, jointly and severally, shall
-----------------------
indemnify, defend and hold Bank and its Affiliates (as hereinafter defined)
harmless from and against any and all losses, liabilities, obligations,
penalties, claims, fines, lost profits, demands, litigation, defenses, costs,
judgments, suits, proceedings, damages, disbursements or expense of any kind or
nature whatsoever (including, without limitation, reasonable attorneys' fees and
expenses), consequential or otherwise, which may at any time be either directly
or indirectly imposed upon, incurred by or asserted or awarded against Bank or
any of Bank's parent and subsidiary corporations, and their respective
affiliates, shareholders, directors, officers, employees, and agents
(collectively, Bank's "Affiliate"), in connection with, arising from or relating
to (except in each instance due to gross negligence or willful misconduct of
Bank or any of Bank's Affiliates):
(i) any Hazardous Material located, used, exposed, emitted,
released, discharged, generated, manufactured, sold, transported, handled,
stored, treated, reused, presented, disposed of or recycled on, in or under
all or any portion of the Mortgaged Properties; or
(ii) any material misrepresentation, inaccuracy or breach of any
warranty, covenant or agreement contained or referred to in Paragraphs
----------
8.1(n) and 8.2(f); or
-----------------
(iii) any violation, liability or claim of violation or
liability, under any Environmental Laws with respect to all or any portion
of the Mortgaged Properties; or
(iv) the imposition of any lien for damages caused by, or the
recovery of any costs incurred for the cleanup of, any release or
threatened release of Hazardous Material with respect to all or any portion
of the Mortgaged Properties; or
(v) any Environment Claims with respect to all or any portion
of the Mortgaged Properties.
<PAGE>
Borrowers' foregoing indemnification obligations shall survive for any
applicable statute of limitations. Each Borrower's obligation to Bank under this
indemnity shall be without regard to fault on the part of any Borrower or Bank
with respect to the violation or condition which results in liability to Bank,
except in each instance due to gross negligence or willful misconduct of Bank.
20.14 Governing Law. This Agreement and the Other Agreements are submitted
-------------
by Borrowers to Bank (for Bank's acceptance or rejection thereof) at Bank's
principal place of business as an offer by Borrowers to borrow monies from Bank
now and from time to time hereafter and shall not be binding upon Bank or become
effective until and unless accepted by Bank, in writing, at Bank's place of
business. If so accepted by Bank, this Agreement and the Other Agreements shall
be deemed to have been made at Bank's principal place of business. This
Agreement and the Other Agreements shall be governed and controlled by the laws
of the State of Illinois as to interpretation, enforcement, validity,
construction, effect, choice of law, and in all other respects including, but
not limited to, the legality of the interest rate and other charges.
20.15 Notices. All notices, consents, requests, demands and other
-------
communications hereunder shall be in writing and shall be deemed duly given to
any party or parties (a) upon delivery to the address of the party or parties as
specified in the "Address for Notices" below such party's or parties' name on
the signature pages hereof if delivered in person or by courier or if sent by
certified or registered mail (return receipt requested), or (b) upon dispatch if
transmitted by telecopy or other means of facsimile transmission, in any case to
the party or parties at the telecopy numbers specified on the same, or to such
other address or telecopy number as any party may hereafter designate by written
notice in the aforesaid manner.
20.16 FORUM; BANK; VENUE; JURY TRIAL WAIVER. TO INDUCE BANK TO ACCEPT THIS
-------------------------------------
AGREEMENT AND THE OTHER AGREEMENTS, EACH BORROWER IRREVOCABLY AGREES THAT,
SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL ACTIONS OR PROCEEDINGS IN ANY
WAY, MANNER, OR RESPECT, ARISING OUT OF OR FROM OR RELATED TO THIS AGREEMENT OR
THE OTHER AGREEMENTS SHALL BE LITIGATED ONLY IN COURTS HAVING SITUS WITHIN
CHICAGO, ILLINOIS. EACH BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION
OF ANY LOCAL, STATE, OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE. EACH
BORROWER HEREBY IRREVOCABLY APPOINTS AND DESIGNATES THE AUTHORIZED AGENT OF
BORROWERS, WHOSE ADDRESS IS 547 WEST JACKSON BOULEVARD, SUITE 1510, CHICAGO,
ILLINOIS 60661, OR ANY OTHER PERSON HAVING AND MAINTAINING A PLACE OF BUSINESS
IN SUCH STATE, WHOM BORROWERS MAY FROM TIME TO TIME HEREAFTER DESIGNATE (HAVING
GIVEN FIVE (5) DAYS' WRITTEN NOTICE THEREOF TO BANK) AS EACH BORROWER'S TRUE AND
LAWFUL ATTORNEY AND DULY AUTHORIZED BANK FOR ACCEPTANCE OF SERVICE OF LEGAL
PROCESS. EACH BORROWER AGREES THAT SERVICE OF SUCH PROCESS UPON SUCH PERSON
SHALL CONSTITUTE PERSONAL SERVICE OF SUCH PROCESS UPON SUCH BORROWER. EACH
BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF
ANY LITIGATION BROUGHT AGAINST ANY BORROWER BY BANK IN ACCORDANCE WITH THIS
PARAGRAPH. EACH BORROWER HEREBY IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY
WITH RESPECT TO ANY ACTION IN WHICH BORROWER IS A PARTY.
20.17 Other Costs, Fees and Expenses. If at any time or times hereafter
------------------------------
Bank: (a) employs counsel for advice or other representation (i) with respect to
this Agreement or the Other Agreements including, without limitation, regarding
amendments or supplements hereto or thereto, (ii) to represent Bank in any
litigation, contest, dispute, suit or proceeding or to commence, defend, or
intervene or to take any other action in or with respect to any litigation,
contest, dispute, suit, or proceeding (whether instituted by Bank, any Borrower,
or any other Person) in any way or respect relating to this Agreement, the Other
Agreements or any Borrower's affairs, or (iii) to enforce any rights of such
Bank against any Borrower or any other Person which may be obligated to such
Bank by virtue of this Agreement or the Other Agreements; (b) takes any action
to protect, collect, sell, liquidate, or otherwise dispose of any of the
Collateral; and/or (c) attempts to or enforces Bank's rights or remedies under
the Agreement or the Other Agreements, the reasonable costs and expenses
incurred by Bank in any manner or way with respect to the foregoing, shall be
part of Borrowers' Liabilities, payable by Borrowers to Bank on demand. Without
limiting the generality of the foregoing, such expenses, costs, charges and fees
include: (i) attorneys' fees, costs and expenses; (ii) accountants' fees, costs
and expenses; (iii) court costs and expenses; (iv) court reporter fees, costs
and expenses; (v) long distance telephone charges; (vi) telegram charges; (vii)
expenses for travel, lodging and food; and (viii) costs and expenses incurred
with respect to exercise or enforcement of Bank's rights in or against Accounts
and/or any Obligor, including expenses incurred in fulfilling, in whole or in
part, any order of any Obligor from which an Account has arisen or will arise.
<PAGE>
20.18 Revival. To the extent Bank receives any payment on account of
-------
Borrowers' Liabilities, or any proceeds of Collateral are applied on account of
Borrowers' Liabilities and any such payment(s) and/or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, subordinated and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy act, state or federal law, common law or
equitable cause, then, to the extent of such payment(s) and/or proceeds
received, Borrowers' Liabilities or part thereof intended to be satisfied shall
be revived and continue in full force and effect, as if such payment(s) and/or
proceeds had not been received by Bank and applied on account of Borrowers'
Liabilities.
20.19 Acknowledgments. Each Borrower acknowledges that (i) it has been
---------------
advised by counsel of its choice with respect to this Agreement and the
transactions contemplated hereby, (ii) each of the waivers set forth herein was
knowingly and voluntarily made; and (iii) the obligations of Bank hereunder,
including the obligation to advance and lend funds to Borrowers in accordance
herewith, shall be strictly construed and shall be expressly subject to each
Borrower's compliance in all respects with the terms and conditions herein set
forth.
20.20 Section Headings. Section headings used in this Agreement are for
----------------
convenience only and shall not effect the construction or interpretation of this
Agreement.
20.21 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and all of which, taken
together, shall constitute one and the same instrument.
20.22 Effectiveness. This Agreement shall become effective upon the
-------------
execution and delivery to Bank of counterparts of this Agreement by each
Borrower and Bank.
20.23 Reimbursement Among Borrowers. To the extent that any Borrower shall
-----------------------------
be required to pay a portion of Borrowers' Liabilities which shall exceed the
amount of loans, advances or other extensions of credit received by any such
Borrower and all interest, costs, fees and expenses attributable to such loans,
advances or other extensions of credit, then such Borrower shall be reimbursed
by the other Borrower for the amount of such excess pro rata, based on their
--- ----
respective net worths as of the date hereof. This Paragraph 10.23 is intended
---------------
only to define the relative rights of the Borrowers between the Borrowers and
nothing set forth in this Paragraph 10.23 is intended to or shall impair the
---------------
obligations of Borrowers, jointly and severally, to pay Borrowers' Liabilities
to Bank as and when the same shall become due and payable in accordance with the
terms hereof.
20.24 Joint and Several Liability. The liability of each Borrower under
---------------------------
this Agreement and the Other Agreements in general shall be joint and several,
and each reference herein to the Borrowers shall be deemed to refer to each such
Borrower. In furtherance and not in limitation of Bank's rights and remedies
hereunder or at law, Bank may proceed under this Agreement and the Other
Agreements against any one or more of the Borrowers in its absolute and sole
discretion for any of Borrowers' Liabilities or any other liability or
obligation of the Borrowers arising hereunder.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year specified at the beginning hereof.
CMC HEARTLAND PARTNERS,
a Delaware general partnership
By: HEARTLAND TECHNOLOGY, INC., a Delaware
corporation and an authorized general partner
By:_______________________________________________
Its:______________________________________________
By: HEARTLAND PARTNERS, L.P.,
a Delaware limited partnership and an
authorized general partner
By: Heartland Technology, Inc.
Its: General Partner
By:_______________________________________________
Its:______________________________________________
HEARTLAND PARTNERS, L.P., a
Delaware limited partnership
By: Heartland Technology, Inc.
Its: General Partner
By:_______________________________________________
Its:______________________________________________
Address for Notices:
CMC Heartland Partners
547 West Jackson Boulevard
Suite 1510
Chicago, Illinois 60661
Telecopier No.: (312) 663-9397
Telephone No.: (312) 294-0440
Attention: Richard P. Brandstatter
Vice President-Finance
Secretary and Treasurer
With a copy to:
CMC Heartland Partners
547 West Jackson Boulevard
Suite 1510
Chicago, Illinois 60661
Telecopier No.: (312) 663-9397
<PAGE>
Telephone No.: (312) 294-0440
Attention: Lawrence S. Adelson, Esq.
LASALLE NATIONAL BANK
By:_______________________________________________
Title:__________________________________________
Address for Notices:
120 South LaSalle Street
Chicago, Illinois 60603
Telecopier No.: (312) 904-4364
Telephone No.: (312) 904-5415
Attention: Charles E. Schroeder, Jr.
Vice President
With a copy to:
Michael A. Nemeroff, Esq.
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601-1003
Telecopier No.: (312) 609-5005
Telephone No.: (312) 609-7500
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit 3.1 Form of Revolving Note
<PAGE>
DISCLOSURE SCHEDULE
TO THE
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
DATED AS OF JUNE 30, 1998
AMONG
CMC HEARTLAND PARTNERS,
HEARTLAND PARTNERS, L.P.
AND
LASALLE NATIONAL BANK
JUNE 30, 1998
<PAGE>
LIST OF
DISCLOSURE SCHEDULES
--------------------
Schedule 1.1A Legal Description of the Galewood Mortgaged Property
Schedule 1.1B Legal Description of the Kinzie Station Mortgaged Property
Schedule 7.4 Locations
Schedule 8.1(e) Certain Other Obligations
Schedule 8.1(f) Litigation
Schedule 8.1(n) Environmental Matters
Schedule 8.1(s) Affiliates and Subsidiaries
Schedule 8.1(y) Debt
Schedule 8.1(z) Insurance
Schedule 8.3(a) Permitted Liens
Schedule 8.3(b) Permitted Transactions
Schedule 8.3(d) Permitted Debt
Schedule 8.3(e) Investments
Schedule 8.3(h) Transactions with Affiliates
<PAGE>
CERTIFICATION
-------------
Each of CMC Heartland Partners and Heartland Partners, L.P. does hereby
certify that the Disclosure Schedules attached hereto have been delivered to
LaSalle National Bank in connection with that certain Loan and Security
Agreement of even date herewith among CMC Heartland Partners, Heartland
Partners, L.P. and LaSalle National Bank, and the information contained thereon
is true and correct.
Dated: June 30, 1998
CMC HEARTLAND PARTNERS,
a Delaware general partnership
By: HEARTLAND TECHNOLOGY, INC., a Delaware
corporation and an authorized general partner
By:______________________________________________
Its:_____________________________________________
By: HEARTLAND PARTNERS, L.P.,
a Delaware limited partnership and an
authorized general partner
By: Heartland Technology, Inc.
Its: General Partner
By:______________________________________________
Its:_____________________________________________
HEARTLAND PARTNERS, L.P.,
a Delaware limited partnership
By: Heartland Technology, Inc.
Its: General Partner
By:______________________________________________
Its:_____________________________________________
<PAGE>
EXHIBIT 3.1
-----------
to
--
Loan and Security Agreement
---------------------------
REVOLVING NOTE
--------------
$8,500,000 Chicago, Illinois
June 30, 1998
FOR VALUE RECEIVED, on April 29, 1999 (or, if such day is not a Business
Day, on the next following Business Day), the undersigned, CMC HEARTLAND
PARTNERS, a Delaware general partnership, and HEARTLAND PARTNERS, L.P., a
Delaware limited partnership, jointly and severally (herein, together with their
successors and assigns, called the "Borrowers"), promise to pay to the order of
LASALLE NATIONAL BANK, a national banking association (herein, together with its
successors and assigns, called the "Bank"), the maximum principal sum of EIGHT
MILLION FIVE HUNDRED THOUSAND DOLLARS ($8,500,000.00) or, if less, the aggregate
unpaid principal amount of all Loans made by Bank to each of the undersigned
pursuant to that certain Amended and Restated Loan and Security Agreement of
even date herewith among the Borrowers and Bank (herein, as the same may be
amended, modified or supplemented from time to time, called the "Loan
Agreement") as shown in Bank's records.
The Borrowers further promise to pay to the order of Bank interest on the
aggregate unpaid principal amount hereof from time to time outstanding from the
date hereof until paid in full at such rates and at such times as shall be
determined in accordance with the provisions of the Loan Agreement. Accrued
interest shall be payable on the dates specified in the Loan Agreement.
Payments of both principal and interest are to be made in the lawful money
of the United States of America in immediately available funds at Bank's
principal office at 135 South LaSalle Street, Chicago, Illinois 60603, or at
such other place as may be designated by Bank to the Borrower in writing.
This Note is the Revolving Note referred to in, evidences indebtedness
incurred under, and is subject to the terms and provisions of, the Loan
Agreement. The Loan Agreement, to which reference is hereby made, sets forth
said terms and provisions, including those under which this Note may or must be
paid prior to its due date or may have its due date accelerated. Terms used but
not otherwise defined herein are used herein as defined in the Loan Agreement.
This Note is secured by the property described in and pursuant to the Loan
Agreement and various Other Agreements referred to therein, and reference is
made thereto for a statement of terms and provisions of such Collateral
security, a description of Collateral and the rights of Bank in respect thereof.
In addition to, and not in limitation of, the foregoing and the provisions
of the Loan Agreement hereinabove referred to, each Borrower further agrees,
subject only to any limitation imposed by applicable law, to pay all expenses,
including attorneys' fees and expenses, incurred by the holder of this Note in
seeking to collect any amounts payable hereunder which are not paid when due,
whether by acceleration or otherwise.
The Borrowers shall have the right to prepay the outstanding principal and
interest on this Note at any time without penalty or notice to Bank.
All parties hereto, whether as makers, endorsers or otherwise, severally
waive presentment, demand, protest and notice of dishonor in connection with
this Note.
This Note, given in connection with the Loan Agreement, evidences all
indebtedness at any time in respect of the Loans arising under the Loan
Agreement and replaces in its entirety, is in substitution for and shall not
constitute a novation of that certain Substitute Revolving Note dated as of
April 30, 1998 (the "Prior Note"), made by Borrower in favor of the Bank in the
maximum principal amount available of $6,000,000, which Prior Note shall be of
no further force and effect upon the execution of this Note; provided, however,
that the outstanding amount of principal and interest under the Prior Note as of
the date hereof is hereby deemed indebtedness evidenced by this Note and
incorporated herein by this reference.
<PAGE>
The liability of each Borrower under this Note in general shall be joint
and several, and each reference herein to the Borrowers shall be deemed to refer
to each such Borrower. In furtherance and not in limitation of Bank's rights and
remedies hereunder or at law, Bank may proceed under this Note against any one
or more of the Borrowers in its absolute and sole discretion for any of
Borrowers' Liabilities or any other liability or obligation of the Borrowers
arising hereunder.
This Note is binding upon each of the undersigned and its successors and
assigns, and shall inure to the benefit of Bank and its successors and assigns.
This Note is made under and governed by the laws of the State of Illinois
without regard to conflict of laws principles.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this Note as of the
date first written above.
CMC HEARTLAND PARTNERS,
a Delaware general partnership
By: HEARTLAND TECHNOLOGY, INC., a Delaware
corporation and an authorized general partner
By:______________________________________________
Its:_____________________________________________
By: HEARTLAND PARTNERS, L.P.,
a Delaware limited partnership and an
authorized general partner
By: Heartland Technology, Inc.
Its: General Partner
By:______________________________________________
Its:_____________________________________________
HEARTLAND PARTNERS, L.P.,
a Delaware limited partnership
By: Heartland Technology, Inc.
Its: General Partner
By:______________________________________________
Its:_____________________________________________
Borrowers' Address:
547 West Jackson Boulevard
Suite 1510
Chicago, Illinois 60661
<PAGE>
EXHIBIT 10.4
Revised (9/9/98)
OPTION, MANAGEMENT AND MARKETING AGREEMENT
------------------------------------------
THIS OPTION, MANAGEMENT AND MARKETING AGREEMENT (this "Agreement") is made
by and between CMC HEARTLAND PARTNERS VII, LLC, a Delaware limited liability
company ("Purchaser"), and LONGLEAF ASSOCIATES LIMITED PARTNERSHIP, a North
Carolina limited partnership ("Seller").
WITNESSETH:
----------
WHEREAS, Seller is the owner in fee simple of the vacant lots (together the
"Existing Single-Family Lots" or individually an "Existing Single-Family Lot")
legally described in Exhibit A attached hereto and made a part hereof, and
---------
located in the Town of Southern Pines (the "Town"), in the County of Moore,
North Carolina;
WHEREAS, Seller is also the owner in fee simple of the vacant parcel of
real estate (the "Magnolia Drive Parcel") legally described in Exhibit B
---------
attached hereto and made a part hereof, located in the Town, and outlined on
Exhibit C attached hereto and made a part hereof;
- - ---------
WHEREAS, Seller is also the owner in fee simple of the vacant parcel of
real estate (the "Fifteenth Hole Parcel") legally described in Exhibit D
---------
attached hereto and made a part hereof, located in the Town, and outlined on
Exhibit E attached hereto and made a part hereof;
- - ---------
WHEREAS, Seller is also the owner in fee simple of the vacant parcel of
real estate (the "Meadow Parcel") legally described in Exhibit F attached hereto
--------
and made a part hereof, located in the Town, and outlined on Exhibit G-1
-----------
attached hereto and made a part hereof;
WHEREAS, Seller is also the owner in fee simple of the vacant parcel of
real estate (the "Area F Parcel") legally described in Exhibit H attached hereto
---------
and made a part hereof, located in the Town, and outlined on Exhibit I attached
---------
hereto and made a part hereof;
WHEREAS, Seller is also the owner in fee simple of the vacant parcel of
real estate (the "Club Cottages Parcel") legally described in Exhibit J attached
---------
hereto a and made a part hereof, located in the Town, and outlined on Exhibit K
---------
attached hereto and made a part hereof;
WHEREAS, the Meadow Parcel, the Area F Parcel and the Club Cottages Parcel
are herein together sometimes called the "Undeveloped Multi-Family Tracts" or
individually an "Undeveloped Multi-Family Tract;"
WHEREAS, the Magnolia Drive Parcel will be subdivided by Seller into the
Magnolia Drive Parcel Lots (hereinafter defined) and the Magnolia Drive Parcel
Accessways (hereinafter defined), as provided in this Agreement;
WHEREAS, the Fifteenth Hole Parcel will be subdivided by Seller into the
Fifteenth Hole Parcel Single-Family Lots (hereinafter defined) and the Fifteenth
Hole Parcel Accessways (as hereinafter defined), as provided in this Agreement;
WHEREAS, the Meadow Parcel will be subdivided by Seller into the Meadow
Parcel Lots (hereinafter defined) and the Meadow Parcel Accessways (hereinafter
defined), as provided in this Agreement;
WHEREAS, the Area F Parcel will be subdivided by Seller into the Area F
Parcel Lots (hereinafter defined) and the Area F Parcel Accessways (hereinafter
defined), as provided in this Agreement;
<PAGE>
WHEREAS, the Club Cottages Parcel will be subdivided by Seller into the
Club Cottages Parcel Lots (hereinafter defined) and the Club Cottages Parcel
Accessways (hereinafter defined), as provided in this Agreement;
WHEREAS, the Existing Single-Family Lots, the Magnolia Drive Parcel Lots,
and the Fifteenth Hole Parcel Single-Family Lots are herein together sometimes
called the "Single-Family Lots" or individually a "Single-Family Lot;"
WHEREAS, the Meadow Parcel Lots, the Area F Parcel Lots and the Club
Cottages Parcel Lots are herein together sometimes called the "Tract Lots" or
individually a "Tract Lot;"
WHEREAS, the Single-Family Lots and the Tract Lots are herein together
sometimes called the "Lots" or individually a "Lot";
WHEREAS, the Existing Single-Family Lots, the Magnolia Drive Parcel, the
Fifteenth Hole Parcel, the Meadow Parcel, the Area F Parcel and the Club
Cottages Parcel are herein together sometimes called the "Properties" or
individually a "Property;"
WHEREAS, the Properties are all part of a planned unit development commonly
known as "Longleaf," developed pursuant to a certain Conditional Use Permit Case
No. CU-04-88 (the "PUD Approval"), dated June 23, 1988, issued by the Town (the
Properties and the other portions of the Longleaf development approved for
residential development being herein together called the "Development");
WHEREAS, Seller desires that Purchaser construct detached single-family
residential dwelling units (together "Detached Units" or individually a
"Detached Unit") on the Single-Family Lots, and Purchaser desires to construct
Detached Units on the Single-Family Lots;
WHEREAS, Seller further desires that Purchaser market and sell the Single-
Family Lots and the Detached Units to be constructed by Purchaser on the Single-
Family Lots, and Purchaser desires to market and sell the Single-Family Lots and
the Detached Units to be constructed by Purchaser on the Single-Family Lots;
WHEREAS, Seller desires that Purchaser construct attached residential
dwelling units (together "Tract Units" or individually a "Tract Unit") on the
Tract Lots (it being contemplated by Seller that there will be more than one
Tract Unit on a Tract Lot), and Purchaser desires to construct Tract Units on
the Tract Lots;
WHEREAS, Seller further desires that Purchaser market and sell the Tract
Lots and the Tract Units to be constructed by Purchaser on the Tract Lots, and
Purchaser desires to market and sell the Tract Lots and the Tract Units to be
constructed by Purchaser on the Tract Lots;
WHEREAS, the Detached Units and the Tract Units are herein together
sometimes called the "Units" or individually a "Unit;"
WHEREAS, in order to induce Purchaser to construct Detached Units on the
Single-Family Lots, and to market and sell the Single-Family Lots and Detached
Units to be constructed by Purchaser on the Single-Family Lots, Seller (a) is
willing to sell to Purchaser such of the Single-Family Lots as Purchaser shall
request or is obligated to purchase hereunder, and (b) is further willing, prior
to the closing of the sale by Purchaser of any Single-Family Lot and the
Detached Unit located thereon to a third-party purchaser, to (i) grant a first
lien to secure any construction loan made to Purchaser with respect to any
Single-Family Lot, and (ii) take such steps as shall be necessary to cause any
permitted existing deeds of trust with respect to such Single-Family Lot to
either be released or to be subordinated to such construction loan deed of
trust;
WHEREAS, in order to induce Purchaser to construct Tract Units on the Tract
Lots, and to market and sell the Tract Units to be constructed by Purchaser on
the Tract Lots, Seller (a) is willing to sell to Purchaser such of the
<PAGE>
Tract Lots as Purchaser shall request or is obligated to purchase hereunder, and
(b) is further willing, prior to the closing of the sale by Purchaser of any
Tract Unit to a third-party purchaser, to (i) grant a first lien to secure any
construction loan made to Purchaser with respect to any Tract Lot (or portion
thereof) and any Tract Units to be constructed thereon, and (ii) take such steps
as shall be necessary to cause any permitted existing deeds of trust with
respect to such Tract Lot (or portion thereof) and Tract Unit to either be
released or to be subordinated to such construction loan deed of trust;
WHEREAS, Seller desires to grant to Purchaser, and Purchaser desires to
receive from Seller, options to purchase the Lots upon the terms and conditions
hereinafter set forth;
WHEREAS, Seller desires to establish certain minimum requirements for the
exercise by Purchaser of its options to purchase Lots; and
WHEREAS, Seller desires that Purchaser assume certain management duties
with respect to the Development, as hereinafter provided, and Purchaser is
willing to assume such management duties, upon the terms and conditions
hereinafter set forth;
NOW THEREFORE, for and in consideration of the mutual terms, covenants,
conditions and agreements hereinafter contained, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, it
is hereby agreed by and between the parties hereto as follows:
1. Options.
-------
(a) Intentionally Omitted
(b) Grants.
------
(i) (A) Seller hereby gives and grants to Purchaser and,
subject to the provisions of paragraph 22 of this Agreement, its successors and
assigns the exclusive right, privilege and continuing option (herein called the
"Existing Single-Family Lots Option"), upon the terms and conditions set forth
in this Agreement, to purchase, at any time and from time to time during the
term of the Existing Single-Family Lots Option, the Existing Single-Family Lots
or any of them, together with all improvements now or hereafter located on the
Existing Single-Family Lots, and together with all easements, appurtenances,
rights, privileges, reservations and hereditaments belonging to or pertaining to
the Existing Single-Family Lots, and all of the right, title and interest of
Seller in and to all streets, roads and rights-of-way adjacent to the Existing
Single-Family Lots.
(B) Seller hereby gives and grants to Purchaser and,
subject to the provisions of paragraph 22 of this Agreement, its successors and
assigns the exclusive right, privilege and continuing option (herein called the
"Magnolia Drive Parcel Lots Option"), upon the terms and conditions set forth in
this Agreement, to purchase, at any time and from time to time during the term
of the Magnolia Drive Parcel Lots Option, the Magnolia Drive Parcel Lots or any
of them, together with all improvements now or hereafter located on the Magnolia
Drive Parcel Lots, and together with all easements, appurtenances, rights,
privileges, reservations and hereditaments belonging to or pertaining to the
Magnolia Drive Parcel Lots, and all of the right, title and interest of Seller
in and to all streets, roads and rights-of-way adjacent to the Magnolia Drive
Parcel Lots.
(C) Seller hereby gives and grants to Purchaser and,
subject to the provisions of paragraph 22 of this Agreement, its successors and
assigns the exclusive right, privilege and continuing option (herein called the
"Fifteenth Hole Parcel Lots Option"), upon the terms and conditions set forth in
this Agreement, to purchase, at any time and from time to time during the term
of the Fifteenth Hole Parcel Lots Option, the Fifteenth Hole Parcel Single-
Family Lots or any of them, together with all improvements now or hereafter
located on the Fifteenth Hole Parcel Single-Family Lots, and together with all
easements, appurtenances, rights, privileges, reservations and hereditaments
belonging to or pertaining to the Fifteenth Hole Parcel Single-Family Lots, and
all
<PAGE>
of the right, title and interest of Seller in and to all streets, roads and
rights-of-way adjacent to the Fifteenth Hole Parcel Single-Family Lots.
(D) (I) Seller hereby gives and grants to Purchaser and,
subject to the provisions of paragraph 22 of this Agreement, its successors and
assigns the exclusive right, privilege and continuing option (herein called the
"Meadow Parcel-Phase II Lots Option"), upon the terms and conditions set forth
in this Agreement, to purchase, at any time and from time to time during the
term of the Meadow Parcel-Phase II Lots Option, the Meadow Parcel-Phase II Lots
(hereinafter defined) or any of them, together with all improvements now or
hereafter located on the Meadow Parcel-Phase II Lots, and together with all
easements, appurtenances, rights, privileges, reservations and hereditaments
belonging to or pertaining to the Meadow Parcel-Phase II Lots, and all of the
right, title and interest of Seller in and to all streets, roads and rights-of-
way adjacent to the Meadow Parcel-Phase II Lots.
(II) Seller hereby gives and grants to Purchaser and,
subject to the provisions of paragraph 22 of this Agreement, its successors and
assigns the exclusive right, privilege and continuing option (herein called the
"Meadow Parcel-Phase III Lots Option"), upon the terms and conditions set forth
in this Agreement, to purchase, at any time and from time to time during the
term of the Meadow Parcel-Phase III Lots Option, the Meadow Parcel-Phase III
Lots (hereinafter defined) or any of them, together with all improvements now or
hereafter located on the Meadow Parcel-Phase III Lots, and together with all
easements, appurtenances, rights, privileges, reservations and hereditaments
belonging to or pertaining to the Meadow Parcel-Phase III Lots, and all of the
right, title and interest of Seller in and to all streets, roads and rights-of-
way adjacent to the Meadow Parcel-Phase III Lots.
(III) Seller hereby gives and grants to Purchaser and,
subject to the provisions of paragraph 22 of this Agreement, its successors and
assigns the exclusive right, privilege and continuing option (herein called the
"Meadow Parcel-Phase IV Lots Option"), upon the terms and conditions set forth
in this Agreement, to purchase, at any time and from time to time during the
term of the Meadow Parcel-Phase IV Lots Option, the Meadow Parcel-Phase IV Lots
(hereinafter defined) or any of them, together with all improvements now or
hereafter located on the Meadow Parcel-Phase IV Lots, and together with all
easements, appurtenances, rights, privileges, reservations and hereditaments
belonging to or pertaining to the Meadow Parcel-Phase IV Lots, and all of the
right, title and interest of Seller in and to all streets, roads and rights-of-
way adjacent to the Meadow Parcel-Phase IV Lots.
(E) Seller hereby gives and grants to Purchaser and,
subject to the provisions of paragraph 22 of this Agreement, its successors and
assigns the exclusive right, privilege and continuing option (herein called the
"Area F Parcel Lots Option"), upon the terms and conditions set forth in this
Agreement, to purchase, at any time and from time to time during the term of the
Area F Parcel Lots Option, the Area F Parcel Lots or any of them, together with
all improvements now or hereafter located on the Area F Parcel Lots, and
together with all easements, appurtenances, rights, privileges, reservations and
hereditaments belonging to or pertaining to the Area F Parcel Lots, and all of
the right, title and interest of Seller in and to all streets, roads and rights-
of-way adjacent to the Area F Parcel Lots.
(F) Seller hereby gives and grants to Purchaser and,
subject to the provisions of paragraph 22 of this Agreement, its successors and
assigns the exclusive right, privilege and continuing option (herein called the
"Club Cottages Parcel Lots Option"), upon the terms and conditions set forth in
this Agreement, to purchase, at any time and from time to time during the term
of the Club Cottages Parcel Lots Option, the Club Cottages Parcel Lots or any of
them, together with all improvements now or hereafter located on the Club
Cottages Parcel Lots, and together with all easements, appurtenances, rights,
privileges, reservations and hereditaments belonging to or pertaining to the
Club Cottages Parcel Lots, and all of the right, title and interest of Seller in
and to all streets, roads and rights-of-way adjacent to the Club Cottages Parcel
Lots.
<PAGE>
(ii) The Existing Single-Family Lots Option, the Magnolia Drive
Parcel Lots Option, the Fifteenth Hole Parcel Lots Option, the Meadow Parcel-
Phase II Lots Option, the Meadow Parcel-Phase III Lots Option, the Meadow
Parcel-Phase IV Lots Option, the Area F Parcel Lots Option and the Club Cottages
Parcel Lots Option are herein together sometimes called the "Options" or
individually an "Option."
(iii) Each grant of the right, title and interest of Seller in
and to all streets, roads and rights-of-way adjacent to any Lot shall be non-
exclusive and subject to the rights of Seller and others to utilize same for
pedestrian and vehicular access and for the development of the Properties.
(c) Term.
----
(i) Subject to the terms of the following subparagraph (ii):
(A) The Existing Single-Family Lots Option may be exercised
with respect to any Existing Single-Family Lot at any time and from time to time
during the period (the "Existing Single-Family Lots Option Period") commencing
on the Closing Date and ending on the date which is two (2) years after the
Closing Date.
(B) The Magnolia Drive Parcel Lots Option may be exercised
with respect to any Magnolia Drive Parcel Lot at any time and from time to time
during the period (the "Magnolia Drive Parcel Lots Option Period") commencing on
the Magnolia Drive Parcel Completion Date (hereinafter defined) and ending on
the date which is two (2) years after the Magnolia Drive Parcel Completion Date;
provided, however, that if Purchaser shall fail to deliver the Magnolia Drive
Parcel Development Notice, as defined below, to Seller by August 31, 1999, the
Magnolia Drive Parcel Lots Option will terminate on August 31, 1999.
(C) The Fifteenth Hole Parcel Lots Option may be exercised
with respect to any Fifteenth Hole Parcel Single-Family Lot at any time and from
time to time during the period (the "Fifteenth Hole Parcel Lots Option Period")
commencing on the Fifteenth Hole Parcel Completion Date (hereinafter defined)
and ending on the date which is two (2) years after the Fifteenth Hole Parcel
Completion Date; provided, however, that if Purchaser shall fail to deliver the
Fifteenth Hole Parcel Development Notice, as defined below, to Seller by August
31, 1999, the Fifteenth Hole Parcel Lots Option will terminate on August 31,
1999.
(D) (I) The Meadow Parcel-Phase II Lots Option may be
exercised with respect to any Meadow Parcel-Phase II Lot at any time and from
time to time during the period (the "Meadow Parcel-Phase II Lots Option Period")
commencing on the Meadow Parcel-Phase II Completion Date (hereinafter defined)
and ending on the date which is two (2) years after the Meadow Parcel-Phase II
Completion Date; provided, however, that if Purchaser shall fail to deliver the
Meadow Parcel-Phase II Notice, as defined below, to Seller by August 31, 1999,
the Meadow Parcel-Phase II Lots Option, the Meadow Parcel-Phase III Lots Option
and the Meadow Parcel-Phase IV Lots Option will terminate on August 31, 1999.
(II) The Meadow Parcel-Phase III Lots Option may be
exercised with respect to any Meadow Parcel-Phase III Lot at any time and from
time to time during the period (the "Meadow Parcel-Phase III Lots Option
Period") commencing on the Meadow Parcel-Phase III Completion Date (hereinafter
defined) and ending on the date which is two (2) years after the Meadow Parcel-
Phase III Completion Date; provided, however, that if Purchaser shall fail to
deliver the Meadow Parcel-Phase III Notice, as defined below, to Seller within
six (6) months after the first day on which Purchaser shall be entitled to
deliver the Meadow Parcel-Phase III Notice pursuant to the provisions of
subparagraph 9(b)(iii) of this Agreement, the Meadow Parcel-Phase III Lots
Option and the Meadow Parcel-Phase IV Lots Option will terminate on the date
which is six months after the first day on which Purchaser shall be entitled to
deliver the Meadow Parcel-Phase III Notice.
(III) The Meadow Parcel-Phase IV Lots Option may be
exercised with respect to any Meadow Parcel-Phase IV Lot at any time and from
time to time during the period (the "Meadow
<PAGE>
Parcel-Phase IV Lots Option Period") commencing on the Meadow Parcel-Phase IV
Completion Date (hereinafter defined) and ending on the date which is two (2)
years after the Meadow Parcel-Phase IV Completion Date; provided, however, that
if Purchaser shall fail to deliver the Meadow Parcel-Phase IV Notice, as defined
below, to Seller within six (6) months after the first day on which Purchaser
shall be entitled to deliver the Meadow Parcel-Phase IV Notice pursuant to the
provisions of subparagraph 9(c)(iii) of this Agreement, the Meadow Parcel-Phase
IV Lots Option will terminate on the date which is six months after the first
day on which Purchaser shall be entitled to deliver the Meadow Parcel-Phase IV
Notice.
(E) The Area F Parcel Lots Option may be exercised with
respect to any Area F Parcel Lot at any time and from time to time during the
period (the "Area F Parcel Lots Option Period") commencing on the Area F Parcel
Completion Date (hereinafter defined) with respect to such Area F Parcel Lot and
ending on the date which is two (2) years after the Area F Parcel Completion
Date with respect to such Area F Parcel Lot; provided, however, that except for
the Area F Parcel Phase (hereinafter defined) in which is located the first Area
F Parcel Lot for which Purchaser exercises the Area F Parcel Lots Option, the
Area F Parcel Lots Option may be exercised in an Area F Parcel Phase only if at
least fifty percent (50%) of the Area F Parcel Lots located in each other Area F
Parcel Phase with respect to which Purchaser shall have exercised the Area F
Parcel Lots Option have been purchased by Purchaser; provided, however, that if
Purchaser shall fail to deliver the first Area F Parcel Notice, as defined
below, to Seller within six (6) months after the first day on which Purchaser
shall be entitled to deliver the first Area F Parcel Notice pursuant to the
provisions of subparagraph 9(d)(iii) of this Agreement, the Area F Parcel Lots
Option will terminate on the date which is six months after the first day on
which Purchaser shall be entitled to deliver the first Area F Parcel Notice.
(F) The Club Cottages Parcel Lots Option may be exercised
with respect to any Club Cottages Parcel Lot at any time and from time to time
during the period (the "Club Cottages Parcel Lots Option Period") commencing on
the Club Cottages Parcel Completion Date (hereinafter defined) with respect to
such Club Cottages Parcel Lot and ending on the date which is two (2) years
after the Club Cottages Parcel Completion Date with respect to such Club
Cottages Parcel Lot; provided, however, that if Purchaser shall fail to deliver
the first Club Cottages Parcel Notice, as defined below, to Seller by August 31,
2001, the Club Cottages Parcel Lots Option will terminate on August 31, 2001.
(ii) (A) Notwithstanding anything to the contrary contained in
the foregoing subparagraph 1(c)(i), in the event of the occurrence of a Non-
Monetary Termination Event (as hereinafter defined), Seller, at its option, may
elect to terminate the right of Purchaser to thereafter deliver any Development
Notice (hereinafter defined), it being understood and agreed that Seller, at its
option, may waive any Non-Monetary Termination Event; provided, that nothing in
this paragraph 1(c)(ii)(A) shall in any way modify, amend, void or terminate the
obligations of Seller and Purchaser pursuant to this Agreement with respect to a
Property or portion thereof with respect to which Purchaser shall have delivered
a Development Notice prior to a Non-Monetary Termination Event. A "Non-Monetary
Termination Event" shall mean a default by Purchaser in any of its obligations
under subparagraphs (a), (b), (c), (d) [unless such default shall have resulted
from Seller's failure or refusal to pay the amounts payable by Seller
thereunder], (e) [unless such default shall have resulted from Seller's failure
or refusal to pay the amounts payable by Seller thereunder], (f) [unless such
default shall have resulted from Seller's failure or refusal to pay the amounts
payable by Seller thereunder], (g) [unless such default shall have resulted from
Seller's failure or refusal to pay the amounts payable by Seller thereunder],
(h), (i), (j), (k) [other than a default in the payment of any sum, including
principal and interest, payable under the documents evidencing and securing the
Construction Loan, which payment default is a Monetary Termination Event under
subparagraph 1(c)(ii)(C) of this Agreement], (o), (p), (q), (r), (s), (t), (u)
or (v) of paragraph 15 of this Agreement, and the continuance of such default
for a period of thirty (30) days after the receipt by Purchaser of a written
notice from Seller setting forth such default; provided that if such default
cannot be cured within said 30-day period, but Purchaser has commenced to cure
such default and diligently prosecutes such cure to completion, Purchaser shall
have such additional time as shall be reasonably necessary to cure such default.
The rights of Seller under this paragraph 1(c)(i)(A) are in addition to and not
in limitation of any other right of Seller in this Agreement.
<PAGE>
(B) (I) Notwithstanding anything to the contrary contained
in subparagraph 1(c)(i) above, and subject to the provisions of the following
subparagraph 1(c)(ii)(B)(II), in the event of the occurrence of a Paragraph 15A
Termination Event (as hereinafter defined), Seller, at its option, may elect to
terminate the right of Purchaser to thereafter deliver any Exercise Notice
(hereinafter defined) and/or any Development Notice, and/or may cease to perform
any work that Seller shall have commenced pursuant to the delivery of any
previously-delivered Development Notice; it being understood and agreed that
Seller, at its option, may waive any Paragraph 15A Termination Event. A
"Paragraph 15A Termination Event" shall mean the occurrence of a default by
Purchaser of any of its obligations under paragraph 15A of this Agreement. The
rights of Seller under this paragraph 1(c)(i)(B)(I) are in addition to and not
in limitation of any other right of Seller in this Agreement.
(II) In the event that Seller shall elect to exercise its
rights pursuant to the preceding subparagraph 1(c)(ii)(B)(I), then:
(a) Purchaser's obligations under paragraph 15A of
this Agreement shall survive such election, and Seller and Purchaser shall
close, in accordance with the provisions of the following paragraph
1(c)(ii)(B)(II)(b) and paragraph 21 of this Agreement, the purchase of the
following number of Lots within thirty (30) days after receipt by Purchaser from
Seller of a notice in which Seller elects to exercise its termination rights
under subparagraph 1(c)(ii)(B)(I) of this Agreement:
(1) if the 15A Termination Event shall have
occurred during the first 365 days after the Closing Date, such number of Lots
which, when aggregated with the number of Lots for which Seller shall have
received, from and after the Closing Date, payment of the purchase price and the
Maples Fees in accordance with the provisions of paragraph 21 of this Agreement,
shall permit the construction by Purchaser of thirty (30) Units;
(2) if the 15A Termination Event shall have
occurred during the second 365 days after the Closing Date, such number of Lots
which, when aggregated with the number of Lots for which Seller shall have
received, from and after the Closing Date, payment of the purchase price and the
Maples Fees in accordance with the provisions of paragraph 21 of this Agreement,
shall permit the construction by Purchaser of sixty-five (65) Units.
(b) (1) Within ten (10) days after receipt by
Purchaser from Seller of a notice in which Seller elects to exercise its
termination rights under subparagraph 1(c)(ii)(B)(I) of this Agreement,
Purchaser shall present a list of the Lots that Purchaser proposes to purchase
in order to satisfy Purchaser's obligations under subparagraph
1(c)(ii)(B)(II)(a) above [which number is the same number of Lots that is set
forth in paragraph 15A(a) of this Agreement] (the "15A Purchase List"). Seller
shall have the right, by written notice to Purchaser within ten (10) days after
receipt of the 15A Purchase List, to object to such 15A Purchase List; provided,
that if Seller shall not so object to the 15A Purchase List within said 10-day
period, Seller shall be deemed to have waived its right to so object.
(2) If Seller objects to the 15A Purchase
List, Seller may add any Lot that Seller owns to the 15A Purchase List, which
modified list is hereinafter referred to as the "Modified 15A Purchase List."
From the Modified 15A Purchase List, Purchaser shall first select the Lot that
has the lowest minimum release price on Exhibit L attached hereto; provided,
---------
that if more than one Lot has the lowest minimum release price on Exhibit L,
---------
Purchaser may select any of the Lots with the lowest minimum release price. For
the next Lot, if any, that Purchaser is required to purchase, Purchaser shall
select from the Modified 15A Purchase List the Lot that has the highest
minimum release price on Exhibit L; provided, that if more than one Lot has
---------
the highest minimum release price on Exhibit L, Purchaser may select any of
---------
the Lots with the highest minimum release price. With respect to additional Lots
that must be purchased by Purchaser as required under paragraph 15A of this
Agreement, Purchaser shall alternate between purchasing a Lot with the lowest,
and a Lot with the highest minimum release prices on the Modified 15A Purchase
List.
<PAGE>
(3) Notwithstanding anything to the contrary
contained in this subparagraph 1(c)(ii)(B)(II), in no event shall Purchaser be
obligated to purchase any of the Existing Single-Family Lots listed on Exhibit
-------
GG attached hereto and made a part hereof.
- - ---
(c) Upon the consummation of the closings required
pursuant to subparagraph 1(c)(ii)(B)(II)(a)(1) or 1(c)(ii)(B)(II)(a)(2) above,
as the case may be, the 15A Termination Event shall be deemed to have been cured
in full, and the terms of this Agreement shall be reinstated and shall be in
full force and effect, and Purchaser shall have all of its rights under this
Agreement as if such 15A Termination Event shall not have occurred.
(C) (I) Notwithstanding anything to the contrary contained
in subparagraph 1(c)(i) above, and subject to the provisions of the following
subparagraph 1(c)(ii)(C)(II), in the event of the occurrence of a Monetary
Termination Event (as hereinafter defined), Seller, at its option, may elect to
terminate the right of Purchaser to thereafter deliver any Development Notice,
and may cease to perform any work that Seller shall have commenced pursuant to
the delivery of any previously-delivered Development Notice; it being understood
and agreed that Seller, at its option, may waive any Monetary Termination Event.
A "Monetary Termination Event" shall mean the occurrence of a default by
Purchaser in the payment of any money due to Seller or Maples pursuant to this
Agreement other than pursuant to paragraph 15A of this Agreement, and the
----- ----
continuance of such default for a period of thirty (30) days after the receipt
by Purchaser of a written notice from Seller specifying such default. The rights
of Seller under this paragraph 1(c)(i)(C)(I) are in addition to and not in
limitation of any other right of Seller in this Agreement.
(II) In the event that Seller shall exercise its rights
pursuant to the preceding subparagraph 1(c)(ii)(C)(I), then:
(a) Within ten days after the receipt by Purchaser
from Seller of a notice in which Seller elects to exercise its rights under
subparagraph 1(c)(ii)(C)(I) of this Agreement, Purchaser and Seller shall
prepare a list of all (1) Existing Single-Family Lots with respect to which
Purchaser shall not yet have exercised the Existing Single-Family Lots Option
and all (2) all Lots then zoned, platted and subdivided in accordance with
paragraphs 7, 8 and/or 9 of this Agreement (the "Finished Lots List").
(b) Purchaser may exercise Options and effect Lot
Closings with respect to Lots on the Finished Lots List within the Option
Periods (hereinafter defined) in accordance with the terms of this Agreement,
subject to the terms of paragraph 15A of this Agreement.
(iii) The Existing Single-Family Lots Option Period, the Magnolia
Drive Parcel Lots Option Period, the Fifteenth Hole Parcel Lots Option Period,
the Meadow Parcel Lots Option Period, the Area F Parcel Lots Option Period and
the Club Cottages Parcel Lots Option Period are herein together sometimes called
the "Option Periods" or individually an "Option Period."
(iv) The Magnolia Drive Parcel Development Notice (hereinafter
defined), the Fifteenth Hole Parcel Development Notice (hereinafter defined),
the Meadow Parcel-Phase II Notice (hereinafter defined), the Meadow Parcel-Phase
III Notice (hereinafter defined), the Meadow Parcel-Phase IV Notice (hereinafter
defined), the Area F Parcel Notice (hereinafter defined) and the Club Cottages
Parcel Notice (hereinafter defined) are herein together sometimes called the
"Development Notices" or individually a "Development Notice."
(d) Exercise. (i) In order to exercise an Option with respect to a Lot,
--------
Purchaser shall deliver a written notice (an "Exercise Notice") to Seller
during the Option Period relating to such Option, which Exercise Notice shall
identify the Lot with respect to which Purchaser is exercising an Option (an
"Exercised Lot").
(ii) An Option may be exercised and closed with
respect to any Lot without any requirement for the exercise and/or closing of
any Option with respect to any other Lot; and the expiration of
<PAGE>
an Option without the exercise or closing of such Option with respect to all of
the Lots which are subject to such Option shall have no effect whatsoever on all
prior exercises of such Option. Nothing in this subparagraph (d)(i) shall
relieve Purchaser of its obligations to exercise Options in accordance with
paragraph 15A of this Agreement.
(e) Lot Closings. The closing (a "Lot Closing") of the purchase by
------------
Purchaser of an Exercised Lot shall take place upon the date (a "Lot Closing
Date") which is the earliest to occur of (i) one year after the date of receipt
by Seller of an Exercise Notice with respect to such Exercised Lot, or (ii) one
year after the date of execution of a Sale Agreement with respect to a Unit on
such Exercised Lot, or (iii) such date as may be fixed by Purchaser in a written
notice (a "Closing Notice") from Purchaser to Seller, provided that the date
fixed by Purchaser in a Closing Notice shall be not less than five (5) business
days after receipt by Seller of such Closing Notice.
(f) Purchase Price of an Exercised Lot.
----------------------------------
(i) For purposes of this Agreement:
(A) The term "Detached Unit Sale Agreement" shall mean an
agreement between Purchaser and a bona fide third-party buyer (a "Third-Party
Buyer") for the purchase by such Third-Party Buyer of a Single-Family Lot and a
Detached Unit located on such Single-Family Lot.
(B) The term "Detached Unit Package Price" shall mean the
sum of (I) (a) the base price for a Single-Family Lot and a Detached Unit
located on such Single-Family Lot, as set forth in the Detached Unit Sale
Agreement with respect to such Single-Family Lot and Detached Unit, less (b)
$10,000 [being the amount that is payable or shall have been paid to Maples
(hereinafter defined) pursuant to the Maples Agreements (hereinafter defined),
and less (c) any lot premium [including, without limitation, the Applicable
Single-Family Lot Golf Premium (hereinafter defined)], plus (II) the price of
all extras, upgrades and options, if any, relating to such Detached Unit that
are set forth in such Detached Unit Sale Agreement.
(C) The term "Tract Unit Sale Agreement" shall mean an
agreement between Purchaser and a Third-Party Buyer for the purchase by such
Third-Party Buyer of a Tract Unit.
(D) The Detached Unit Sale Agreements and the Tract Unit
Sale Agreements are herein together sometimes called the "Sale Agreements" or
individually a "Sale Agreement."
(E) The term "Tract Unit Package Price" shall mean the sum
of (I) (a) the base price for a Tract Unit, as set forth in the Tract Unit Sale
Agreement with respect to such Tract Unit, less (b) $10,000 (being the amount
that is payable or shall have been paid to Maples pursuant to the Maples
Agreements), and less (c) any lot premium [including, without limitation, the
Applicable Tract Lot Golf Premium (hereinafter defined)], plus (II) the price of
all extras, upgrades and options, if any, relating to such Tract Unit that are
set forth in such Tract Unit Sale Agreement.
(ii) The purchase price payable by Purchaser to Seller for an
Exercised Lot shall be as follows:
(A) If such Exercised Lot is a Single-Family Lot, then the
purchase price for such Exercised Lot shall be the sum of (I) fourteen percent
(14%) of the Detached Unit Package Price of such Exercised Lot and the Detached
Unit located thereon, as set forth in the Detached Unit Sale Agreement, if any,
for such Exercised Lot, plus (II) if such Exercised Lot is located directly
adjacent to the Club at Longleaf golf course (such an Exercised Lot being herein
sometimes called a "Golf Course Lot"), twenty thousand dollars ($20,000) (the
"Applicable Single-Family Lot Golf Premium"); it being understood and agreed
that the lot premium, if any, in excess of twenty thousand dollars for a Golf
Course Lot shall be the sole and absolute property of Purchaser, and that
<PAGE>
all of the lot premium, if any, set forth in a Detached Unit Sale Agreement with
respect to a Single-Family Lot that is not a Golf Course Lot shall be the sole
and absolute property of Purchaser.
(B) If such Exercised Lot is a Tract Lot, then the purchase
price for such Exercised Lot shall be the sum of (I) fourteen percent (14%) of
the aggregate of the Tract Unit Package Prices of all of the Tract Units to be
constructed by Purchaser on such Exercised Lot, as set forth in the Tract Unit
Sale Agreements, if any, for the Tract Units to be constructed on such Exercised
Lot, plus (II) the Applicable Tract Lot Golf Premium (hereinafter defined), if
any, regarding such Tract Lot. For purposes of this Agreement, the term
"Applicable Tract Lot Golf Premium" shall mean such portion of the premiums, if
any, set forth in the Tract Unit Sale Agreements with respect to Tract Units to
be located on Meadow Parcel-Phase III Lots (hereinafter defined) that are
directly adjacent to the Club at Longleaf golf course or on Meadow Parcel-Phase
IV Lots (hereinafter defined) that are directly adjacent to the Club at Longleaf
golf course as shall be agreed upon by Seller and Purchaser, it being understood
and agreed that the lot premium, if any, in excess of the agreed-upon portion of
the premium for any of said Tract Units shall be the sole and absolute property
of Purchaser; provided that in any event, the Applicable Tract Lot Golf Premium
for a Tract Lot shall not exceed the product of five thousand dollars and the
number of Tract Units to be constructed on such Tract Lot.
(g) Maples Fees. (i) Subject to the provisions of the following
-----------
subparagraph (ii), at the Lot Closing of an Exercised Lot, Purchaser, in
addition to paying to Seller the purchase price for such Exercised Lot, shall
cause to be paid to Maples (or to Seller if Seller, pursuant to the terms of the
Maples Agreement, shall have already paid to Maples) the following amount,
unless said amount shall have already been paid by Purchaser:
(A) With respect to a Single-Family Lot, ten thousand
dollars ($10,000); and
(B) With respect to a Tract Lot, an amount equal to the
product of (I) ten thousand dollars ($10,000) and (II) the number of Tract Units
to be constructed by Purchaser on such Tract Lot.
(ii) Notwithstanding anything to the contrary contained in the
foregoing subparagraph (i), Seller will pay to Maples all amounts payable under
the Maples Agreements with respect to the Lots described in Exhibit M attached
---------
hereto and made a part hereof.
(h) Option Memorandum. At the Closing (hereinafter defined), Seller
-----------------
and Purchaser shall execute, deliver and record in the Office of the Register of
Deeds of Moore County, North Carolina (the "Recorder's Office") a memorandum of
the Option (the "Option Memorandum"), in the form attached hereto as Exhibit N.
---------
(i) Cost of the Options. In consideration of the Options, Purchaser,
-------------------
concurrently with the execution of this Agreement, has paid to Seller the sum of
one thousand dollars ($1,000), the receipt of which is hereby acknowledged by
Seller.
2. Sale and Encumbrance of a Lot, and Construction on a Lot, Prior to a
--------------------------------------------------------------------
Lot Closing. Notwithstanding anything to the contrary contained in this
- - -----------
Agreement:
(a) Purchaser's Rights.
------------------
(i) During the respective Option Periods relating to the Single-
Family Lots, Purchaser shall have the following rights with respect to each
Single-Family Lot:
(A) the right, whether or not Purchaser shall have
exercised its Option with respect to a Single-Family Lot, to enter into a
Detached Unit Sale Agreement with a Third-Party Buyer with respect to such
Single-Family Lot [a copy of which Detached Unit Sale Agreement shall be
delivered by Purchaser to Seller within ten (10) business days after the
execution of such Detached Unit Sale Agreement by both parties thereto], and
<PAGE>
receipt of such copy of such Detached Unit Sale Agreement by Seller shall be
deemed to be receipt of an Exercise Notice with respect to the Single-Family Lot
which is the subject of such Detached Unit Sale Agreement; and
(B) if Purchaser shall have exercised its Option with
respect to a Single-Family Lot, the right to (I) commence construction of a
Detached Unit on such Single-Family Lot, (II) borrow money for the construction
of a Detached Unit on such Single-Family Lot, (III) require Seller to (and
Seller agrees to) execute and deliver, and to cause to be executed and
delivered, such documents (including, without limitation, subordinations of
recorded deeds of trust affecting such Single-Family Lot) as shall be required
to cause such Single-Family Lot and the Detached Unit to be constructed on such
Single-Family Lot to be encumbered by a first lien to secure a loan made to
Purchaser pursuant to the Construction Loan, as defined below, to construct a
Detached Unit on such Single-Family Lot, and (IV) require Seller to (and Seller
agrees to) execute and deliver such documents as shall be required to subject
such Single-Family Lot and Detached Unit to mechanics' liens in favor of
Purchaser's contractors with respect to the construction by Purchaser of a
Detached Unit on such Single-Family Lot; provided, however, that Seller shall
not be required to incur any expense or personal liability with respect to the
matters described in the foregoing subparagraphs (I) through (IV).
(ii) During the respective Option Periods relating to the Tract
Lots, Purchaser shall have the following rights with respect to each Tract Lot:
(A) the right, whether or not Purchaser shall have
exercised its Option with respect to a Tract Lot, to enter into Tract Unit Sale
Agreements with Third-Party Buyers with respect to Tract Units on such Tract Lot
[a copy of which Tract Unit Sale Agreements shall be delivered by Purchaser to
Seller within ten (10) business days after the execution of such Tract Unit Sale
Agreements by both parties thereto], and receipt by Seller of a copy of the
first Tract Unit Sale Agreement received by Seller with respect to a Tract Lot
shall be deemed to be receipt of an Exercise Notice with respect to such Tract
Lot; and
(B) if Purchaser shall have exercised its Option with
respect to a Tract Lot, the right to (I) commence construction of Tract Units on
such Tract Lot, (II) borrow money for the construction of Tract Units on such
Tract Lot,(III) require Seller to (and Seller agrees to) execute and deliver,
and to cause to be executed and delivered, such documents (including, without
limitation, subordinations of recorded deeds of trust affecting such Tract Lot)
as shall be required to cause such Tract Lot and the Tract Units to be
constructed on such Tract Lot to be encumbered by a first lien to secure a loan
made to Purchaser pursuant to the Construction Loan to construct Tract Units on
such Tract Lot, and (IV) require Seller to (and Seller agrees to) execute and
deliver such documents as shall be required to subject such Tract Lot and Tract
Units to mechanics' liens in favor of Purchaser's contractors with respect to
the construction by Purchaser of Tract Units on such Tract Lot; provided,
however, that Seller shall not be required to incur any personal expense or
liability with respect to the matters described in the foregoing subparagraphs
(I) through (IV).
(b) No Interest. Except as specifically set forth in this Agreement
-----------
or as set forth in any construction or permanent loan document encumbering a
Unit, or in Seller's Subordinate Deed of Trust, as defined below, Seller shall
have no right, title or interest in any Unit, or any right to sell any Unit.
(c) Terms of Sale Agreements.
------------------------
(i) All terms and conditions of all Sale Agreements shall be
determined by Purchaser, in its sole and absolute discretion; provided that, all
Sale Agreements shall include a statement that Seller is not the seller under
such Sale Agreements, that Seller is not a member of Purchaser, that Seller does
not warrant the quality of Units constructed by Purchaser, and that Seller does
not bear any liability to any Third-Party Buyer in connection with the sale, use
or occupancy of any Unit.
(ii) Purchaser shall have the right, in its sole and absolute
discretion, for any reason whatsoever, to reject any offer of a third party to
purchase a Lot or a Lot and a Unit; provided, however, that in no
<PAGE>
event shall Purchaser violate any applicable federal, state, county or local
anti-discrimination law, ordinance, code, rule or regulation.
(iii) Seller shall not have the authority to enter into, and
shall not enter into, any agreement on behalf of Purchaser with respect to any
Lot or the construction of a Unit on any Lot; and no agreement which Seller
purports to execute on behalf of Purchaser shall be binding upon Purchaser.
(d) Terms of Construction Loan Made to Purchaser. The terms and
--------------------------------------------
provisions of the construction loan to be made to Purchaser in connection with
the construction of Units on the Properties (the "Construction Loan") shall be
in form and substance reasonably acceptable to Purchaser and Seller; provided
that, in any event, the terms and provisions of the Construction Loan shall,
inter alia, impose no personal liability upon Seller for the failure of
- - ----------
Purchaser to repay the Construction Loan or perform any obligations of Purchaser
with respect to the Construction Loan; impose no liability upon Seller to pay
any expenses with respect to the Construction Loan; require the lender under the
Construction Loan to give written notice to Seller of any default by Purchaser
under the Construction Loan; permit Seller to cure any defaults of Purchaser
under the Construction Loan; entitle Seller to purchase the Construction Loan
from the lender at par; and permit Seller to encumber Lots encumbered by the
Construction Loan with a junior deed of trust securing payment of the purchase
price for such Lots and the Maples Fees payable in connection with such Lots
("Seller's Subordinate Deed of Trust").
3. Conditions Precedent to Purchaser's Performance.
-----------------------------------------------
(a) In addition to any other conditions precedent set forth in this
Agreement to the obligations of Purchaser under this Agreement, the parties
hereto hereby agree that the obligations of Purchaser under the terms of this
Agreement are subject to the satisfaction of all of the following conditions
precedent as of one hundred twenty (120) days after the Closing Date
(hereinafter defined):
(i) the Construction Loan shall have closed, and the lender of
the Construction Loan shall be prepared to disburse the proceeds of the
Construction Loan to Purchaser;
(ii) all persons, including, without limitation, Seller, whose
approval, in the reasonable judgment of Purchaser shall be required, shall have
approved in writing of (A) the terms and conditions of the Construction Loan,
and (B) the documents evidencing and securing the Construction Loan;
(iii) all persons, including, without limitation, Seller, whose
approval, in the reasonable judgment of Purchaser shall be required, shall have
delivered written approvals of all items with respect to which such persons'
approval is required under the terms of the documents evidencing and securing
the Construction Loan; and
(iv) all persons, including, without limitation, Seller, all
homeowners' associations, all condominium associations, the declarants under all
recorded homeowners' and condominium declarations, and the owner of the private
roadways (the "Private Roadways") in the Development that provide access to and
from the Properties and dedicated public rights-of-way, whose authorization, in
the reasonable judgment of Purchaser, shall be required, shall have (A)
irrevocably authorized in writing the grant of an irrevocable easement (the
"Private Roadway Easement"), in form and substance reasonably acceptable to
Purchaser and Seller, for the benefit of Purchaser, over the Private Roadways
for the purposes of ingress and egress and movement of personnel, equipment, and
materials to and from any of the Properties during such times as Purchaser shall
engage in the development of any of the Properties, and (B) delivered the
Private Roadway Easement, in recordable form, to Purchaser; and, for purposes of
this Agreement, the Private Roadways shall include, without limitation, all of
the following roadways on the Development, unless such roadways shall have
become dedicated public rights-of-way: Meadow Parcel Roadway I (hereinafter
defined), and the roadways providing access to the existing improvements which
are subject to the Club Cottages Declaration (hereinafter defined.
<PAGE>
Purchaser shall use its best efforts to satisfy the conditions precedent in this
paragraph 3(a).
(b) In addition to any other conditions precedent set forth in this
Agreement to the obligations of Purchaser under this Agreement, the parties
hereto hereby agree that the obligations of Purchaser under the terms of this
Agreement are subject to the satisfaction of all of the following conditions
precedent as of the Closing Date:
(i) Intentionally Omitted
(ii) all persons, including, without limitation, Seller, all
homeowners' associations, all condominium associations, the declarants under all
recorded homeowners' and condominium declarations, and the owner of the Private
Roadways (hereinafter defined), whose authorization, in the reasonable judgment
of Purchaser, shall be required, shall have irrevocably, in writing, authorized
Purchaser and its agents, employees, affiliates, contractors and subcontractors
to construct, maintain and operate such facilities and structures, and to
conduct such activities, as Purchaser shall determine are necessary, convenient
or incidental to the construction, improvement, completion and sale of Units and
related improvements on the Properties, including, without limitation, the
construction, maintenance and operation of sales and construction trailers and
offices, signs and model units, and the right to use Units as model residences,
for offices for the sale of Units, and for related activities;
(iii) all persons, including, without limitation, Seller, all
homeowners' associations, all condominium associations, the declarants under all
recorded homeowners' and condominium declarations, and the owner of the Private
Roadways, whose approval, in the reasonable judgment of Purchaser, shall be
required, shall have irrevocably approved in writing (A) all sales and
construction activities of Purchaser and its agents, employees, affiliates,
representatives, contractors and subcontractors in connection with the
Properties; (B) all signs and advertising posters which Purchaser and its
agents, employees, affiliates, representatives, contractors and subcontractors
intend to use in connection with the development of the Properties; (C) the non-
exclusive use by Purchaser and its agents, employees, affiliates and
representatives of the names "Longleaf" and the "Club at Longleaf" in connection
with the marketing and sale by Purchaser of Units on the Properties; (D) the
recordation with respect to such portions of the Properties as Purchaser shall
desire of condominium declarations, homeowners' declarations, or declarations of
covenants, conditions and restrictions reasonably necessary to develop Units;
and (E) the placement and location within the Development of all utilities,
service lines and all appurtenances thereto necessary in order for Purchaser to
develop the Properties;
(iv) (A) Seller shall have obtained the Maples Amendment
(hereinafter defined);
(B) the following agreements (herein together sometimes
called the "Maples Agreements") shall be in full force and effect, and, except
as set forth in the Maples Amendment, shall not have been modified, amended or
changed in any way that is material and adverse to the rights of Purchaser under
this Agreement, or terminated, without the prior written consent of Purchaser:
(I) that certain Restated Contract (the "Restated
Contract"), dated March 23, 1990, between Seller and Maples Properties, Inc., a
North Carolina corporation ("Maples"), as amended by that certain First
Amendment to Restated Contract (the "Maples Modification"), dated January 1,
1991, between Seller and Maples (the Restated Contract, as amended by the Maples
Modification, being herein sometimes called the "Maples Contract");
(II) that certain Declaration (the "Golf Club
Declaration"), dated March 23, 1990, by and between Seller and Maples, recorded
with the Recorder's Office on May 8, 1990 in book 719 at page 30; and
(III) that certain Easement of Enjoyment (the "Easement
of Enjoyment"), dated March 23, 1990, between Seller and Maples, recorded with
the Recorder's Office on May 8, 1990 in book 719 at page 85; and
<PAGE>
(IV) the rules and regulations (the "Golf Club
Rules"), dated October 22, 1992, of the Club at Longleaf;
(C) no event of default shall exist under any of the Maples
Agreements, as modified by the Maples Amendment; and no event shall have
occurred which, with the passage of time or the giving of notice or both, would
constitute an event of default under any of the Maples Agreements, as modified
by the Maples Amendment;
(D) all rights of Seller under the Maples Agreements, as
modified by the Maples Amendment, shall be available to Purchaser;
(E) Purchaser shall have the right, under the Easement of
Enjoyment, to convey not less than three hundred nineteen (319) easements of
enjoyment to purchasers of Units in the Development; and
(v) the Properties shall be free and clear of any mortgages,
deeds of trust, liens or encumbrances other than the Acceptable Option Title
Exceptions.
(c) In addition to any other conditions precedent set forth in this
Agreement to the obligations of Purchaser under this Agreement, the parties
hereto hereby agree that the obligations of Purchaser under the terms of this
Agreement are subject to the satisfaction of the following condition precedent
as of forty-five days after the Closing Date: Provided that Purchaser shall have
delivered to Seller, not more than thirty (30) days after the Effective Date,
designs of the improvements (the "Proposed Improvements"), including Unit types,
which Purchaser desires to construct on the Lots, all persons, including,
without limitation, Seller, all homeowners' associations, all condominium
associations, the declarants under all recorded homeowners' and condominium
declarations, and all architectural review committees, whose approval is
required with respect to the Proposed Improvements shall have delivered to
Purchaser their irrevocable written approvals (other than building permits)
(together the "Design Approvals") of the Proposed Improvements.
(d) In addition to any other conditions precedent set forth in this
Agreement to the obligations of Purchaser under this Agreement, the parties
hereto hereby agree that the obligations of Purchaser under the terms of this
Agreement are subject to the satisfaction of the following condition precedent
within ten (10) days after the Closing Date: The owner of the Sales Center
(hereinafter defined), Seller and Purchaser shall have entered into a written
agreement (the "Sales Center Agreement"), in form and substance reasonably
acceptable to Seller and Purchaser, for the use by Purchaser of the Sales Center
in connection with the marketing and sale by Purchaser of Units and of the
Properties and of the Seller's Lots (hereinafter defined).
(e) In the event that any condition precedent to Purchaser's
obligations under this Agreement, including, without limitation, any condition
precedent set forth in the foregoing subparagraphs 3(a), 3(b), 3(c) or 3(d)
shall not be timely satisfied in accordance with the terms of this Agreement,
Purchaser shall give to Seller written notice reasonably describing the
condition precedent which shall not have been timely satisfied by Seller in
accordance with the terms of this Agreement. Seller shall have thirty (30) days
from the receipt of such written notice to satisfy any condition precedent not
satisfied. If, at the end of such thirty (30) day period, Seller shall have
failed to satisfy such condition precedent, Purchaser may, at its election,
either waive any such unsatisfied condition precedent, or terminate this
Agreement; and, in the event Purchaser elects to terminate this Agreement, this
Agreement shall become null and void, and the parties hereto shall have no
further rights, obligations or liabilities under this Agreement [other than the
obligations of Seller under subparagraphs 11(a), 18(b), 19(b) and 20(b) of this
Agreement and the obligations of Purchaser under subparagraphs 11(b), 12(b),
18(d) and 19(c) of this Agreement].
(f) Purchaser shall notify Seller in writing of the persons whose
approval or authorization, in the reasonable judgment of Purchaser, is required
under the provisions of subparagraphs 3(a) and 3(b) above. If
<PAGE>
Purchaser shall not so identify such persons, Seller shall reasonably determine
which persons' approvals and authorizations are required under said
subparagraphs.
4. Conditions Precedent to Seller's Performance.
--------------------------------------------
(a) In addition to any other conditions precedent set forth in this
Agreement to the obligations of Seller under this Agreement, the parties hereto
hereby agree that the obligations of Seller under the terms of this Agreement
are subject to the satisfaction of all of the following conditions precedent as
of the Closing Date:
(i) Seller shall have obtained from Maples an amendment to the
Maples Contract (the "Maples Amendment") mutually acceptable to Seller and
Purchaser clarifying that:
(A) No transfer fee is due to Maples in connection with the
sale of a Unit by Purchaser to a Third-Party Buyer if a deed for such Unit
and/or the property upon which such Unit is located shall have been previously
delivered by Seller to Purchaser;
(B) No dues or fees are payable by Purchaser to Maples with
respect to a Unit during the period that Purchaser owns such Unit if Purchaser
shall relinquish its rights, as the owner of such Unit (but not of any other
Unit), to use the Golf Course Facilities during such time as Purchaser owns such
Unit; and
(ii) Purchaser shall have performed all of its obligations under
the terms of the Interim Agreement, dated April 2, 1998, by and between Seller
and Purchaser, as amended, a copy of which Interim Agreement is attached hereto
as Exhibit O and made a part hereof.
---------
(b) In addition to any other conditions precedent set forth in this
Agreement to the obligations of Seller under this Agreement, the parties hereto
hereby agree that the obligations of Seller under the terms of this Agreement
are subject to the satisfaction of the following condition precedent: Whichever
affiliate of Purchaser will act as the general contractor for Purchaser in
connection with the construction of the Units shall be duly licensed and in good
standing under the laws of the State of North Carolina at the time of
performance of its duties as such general contractor.
(c) In the event that any condition precedent to Seller"s obligations
under this Agreement, including, without limitation, any condition precedent set
forth in the foregoing subparagraph 4(a), shall not be timely satisfied in
accordance with the terms of this Agreement, Seller shall give to Purchaser
written notice reasonably describing the condition precedent which shall not
have been timely satisfied by Purchaser in accordance with the terms of this
Agreement. Purchaser shall have thirty (30) days from the receipt of such
written notice to satisfy any condition precedent not satisfied. If, at the end
of such thirty (30) day period, Purchaser shall have failed to satisfy such
condition precedent, Seller may, at its election, either waive any such
unsatisfied condition precedent, or terminate this Agreement; and, in the event
Seller elects to terminate this Agreement, this Agreement shall become null and
void, and the parties hereto shall have no further rights, obligations or
liabilities under this Agreement [other than the obligations of Seller under
paragraphs 11(a), 18(b), 19(b) and 20(b) of this Agreement and the obligations
of Purchaser under paragraphs 11(b), 12(b), 18(d) and 19(c) of this Agreement].
5. Title Insurance at Closing.
--------------------------
(a) (i) At the Closing, Seller, at its sole cost and expense, shall
deliver to Purchaser an owner's ALTA form B title insurance policy (the "Option
Policy"), issued by Chicago Title Insurance Company (the "Title Insurer"), in
the amount of Seven Million Two Hundred Seventy-Five Thousand dollars
($7,275,000), covering title to the Properties, showing Purchaser as the insured
under the Options, showing title to the Properties in Seller subject only to the
title exceptions shown on Exhibit P attached hereto and made a part hereof
---------
(together the "Acceptable Option Title Exceptions") and the Option Memorandum;
containing extended coverage over general exceptions 1 through 5 contained
therein; containing an endorsement that each of the Existing Single-Family Lots
has been legally
<PAGE>
subdivided and platted; containing an ALTA 3.0 zoning endorsement insuring that
a Detached Unit can be constructed on each of the Existing Single-Family Lots;
containing an endorsement that each of the Existing Single-Family Lots has
unrestricted access to and from dedicated public rights-of-way; and containing
an ALTA 3.0 zoning endorsement that each of the Magnolia Drive Parcel, the
Fifteenth Hole Parcel, and each of the Undeveloped Multi-Family Tracts is zoned
for residential use for single-family dwellings and/or multi-family dwellings;
and containing an endorsement that the Magnolia Drive Parcel has unrestricted
access to and from, and unrestricted use for pedestrian and vehicular ingress
and egress of, dedicated public rights-of way; and containing an endorsement
that the Fifteenth Hole Parcel and each of the Undeveloped Multi-Family Tracts
has unrestricted access to and from dedicated public rights-of way; and
containing an endorsement that any conveyance, sale, assignment, transfer, lien,
pledge, mortgage, security interest or other encumbrance or alienation by Seller
of any of the Properties or any part thereof or any interest therein to any
person other than Purchaser will be subject and subordinate to the right, title
and interest of Purchaser under the Options; and containing an endorsement that
each owner of a Unit shall have an easement of enjoyment under the Easement of
Enjoyment to use the Golf Course Facilities (hereinafter defined) so long as
such owner is a member in good standing of the golf club provided for in the
Golf Club Declaration; and containing an endorsement that neither of the Golf
Club Declaration nor the Easement of Enjoyment can be unilaterally modified,
amended or revoked by Maples; and containing an endorsement that the Golf Course
Facilities must be used in perpetuity as a golf club with related amenities.
(ii) For purposes of this Agreement, where an endorsement to a
title policy insures that a Lot has unrestricted access to and from a dedicated
right-of-way or a Private Roadway, such access shall be deemed to be for
vehicular and pedestrian access normally associated with the uses contemplated
under this Agreement, including, but not limited to, access for construction and
maintenance purposes.
(iii) Whenever in this Agreement Seller is obligated to deliver
any form of title policy deleting general exceptions 1 through 5, Seller shall
not be obligated to obtain a new survey to remove a survey exception, whether as
a general exception or otherwise.
(b) If, on the Closing Date, the Title Insurer shall not be prepared
to deliver to Purchaser the Option Policy, then Seller shall have a period of
thirty (30) days after the Closing Date to cause Seller to issue the Option
Policy, and the Closing Date shall be extended for such period; and if, at the
end of such 30-day period, the Title Insurer shall not be prepared to issue the
Option Policy, Purchaser shall have the right to terminate this Agreement, in
which case the parties hereto shall have no further rights, obligations or
liabilities under this Agreement [other than the obligations of Seller under
paragraphs 11(a), 18(b) and 19(b) and 20(b) of this Agreement and the
obligations of Purchaser under paragraphs 11(b), 12(b) and 18(d) and 19(c) of
this Agreement].
6. Conveyance. Seller shall convey the Lots to Purchaser by special
----------
warranty deeds in the form attached hereto as Exhibit Q and made a part hereof,
---------
which deed shall contain, inter alia, a grant of an easement of enjoyment in
----- ----
favor of the Lots pursuant to the Easement of Enjoyment with respect to the Golf
Course Facilities.
7. Zoning, Platting and Subdivision of the Magnolia Drive Parcel.
-------------------------------------------------------------
(a) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "Magnolia Drive Parcel Development Notice" shall mean a
written notice from Purchaser to Seller requesting the subdivision and platting
by Seller of the Magnolia Drive Parcel.
(ii) "Magnolia Drive Parcel Lots" shall mean the lots to be
created by the subdivision and platting of the Magnolia Drive Parcel in
accordance with the Magnolia Drive Parcel Site Plan (hereinafter defined).
(iii) "Magnolia Park Declaration" shall mean that certain Longleaf
Magnolia Park Declaration of Covenants, Conditions and Restrictions, dated
January 9, 1995, made by Seller, recorded with the
<PAGE>
Recorder's Office in book 1059 at page 186, as amended by the First Amendment
Longleaf Magnolia Park Declaration of Covenants, Conditions and Restrictions,
dated October 1, 1996, made by Seller, recorded with the Recorder's Office in
book 1248 at page 328.
(iv) "Magnolia Drive Parcel Development Notice Date" shall mean
the date of the giving of the Magnolia Drive Parcel Development Notice.
(b) Within fifteen (15) days after the Magnolia Drive Parcel
Development Notice Date, Purchaser and Seller shall agree upon a final site plan
(the "Magnolia Drive Parcel Site Plan") for the Magnolia Drive Parcel. The date
of agreement by Purchaser and Seller to the Magnolia Drive Parcel Site Plan is
herein sometimes called the "Magnolia Drive Parcel Site Plan Date."
(c) Within sixty (60) days after the Magnolia Drive Parcel Site Plan
Date, Seller will deliver to Purchaser plans and plats (together the "Magnolia
Drive Parcel Plans") for the development of the Magnolia Drive Parcel in
accordance with the Magnolia Drive Parcel Site Plan; provided, that in the
event, within forty-five (45) days after the Magnolia Drive Parcel Site Plan
Date, Seller shall deliver written notice to Purchaser requesting additional
time to prepare the Magnolia Drive Parcel Plans, Seller shall be entitled to
extend the delivery period by thirty (30) days. The period within which the
Magnolia Drive Parcel Plans must be delivered to Purchaser is herein called the
"Magnolia Drive Parcel Plan Delivery Period."
(d) (i) For purposes of this Agreement, the "Magnolia Drive Parcel
Completion Date" shall mean the earliest to occur of (A) one hundred twenty
(120) days after the date of delivery of the Magnolia Drive Parcel Plans, or (B)
one hundred twenty (120) days after the expiration of the Magnolia Drive Parcel
Plan Delivery Period, or (C) the date of completion of all of the conditions set
forth in the following subparagraph (ii).
(ii) Within one hundred twenty (120) days after the earlier to
occur of the date of delivery of the Magnolia Drive Parcel Plans or the
expiration of the Magnolia Drive Parcel Plan Delivery Period, Seller, at its
sole cost and expense, shall cause:
(A) all governmental authorities having jurisdiction over the
development of the Magnolia Drive Parcel to approve the Magnolia Drive Parcel
Site Plan;
(B) the Magnolia Drive Parcel to be subdivided and platted
in accordance with the Magnolia Drive Parcel Site Plan;
(C) the zoning of the Magnolia Drive Parcel to permit the
construction on each of the Magnolia Drive Parcel Lots of a detached single-
family dwelling unit of a size at least as large as the minimum size permitted
by the Magnolia Park Declaration;
(D) the amendment of the Magnolia Park Declaration by an
amendment, in form and substance reasonably acceptable to Purchaser and Seller,
that submits the Magnolia Drive Parcel Lots to the provisions of the Magnolia
Park Declaration, and that ensures that the owners of the Magnolia Drive Parcel
Lots have the same rights and obligations as the owners of all of the other lots
which are subject to the Magnolia Park Declaration;
(E) the taking of such actions, in addition to those
described in the preceding subparagraph (D), as shall be necessary to grant to
the owners of the Magnolia Drive Parcel Lots unrestricted access to and from,
and unrestricted use for pedestrian and vehicular ingress and egress of, the
Private Roadways (including, without limitation, Magnolia Drive), and
unrestricted access to and from the Private Roadways (including, without
limitation, Magnolia Drive) and dedicated public rights-of-way (including,
without limitation, Knoll Road);
<PAGE>
(F) the delivery to Purchaser of (I) a copy of the recorded
plat of subdivision of the Magnolia Drive Parcel into the Magnolia Drive Parcel
Lots, and (II) copies of all approvals, consents and authorizations of all
governmental entities having jurisdiction over the Magnolia Drive Parcel to (a)
the subdivision of the Magnolia Drive Parcel into the Magnolia Drive Parcel Lots
and (b) the Magnolia Drive Parcel Site Plan;
(G) the delivery to Purchaser of a copy of all ordinances,
approvals, consents and authorizations of all governmental entities having
jurisdiction over the Magnolia Drive Parcel to the zoning of each of the
Magnolia Drive Parcel Lots for the construction thereon of a detached single-
family dwelling unit of a size at least as large as the minimum size permitted
by the Magnolia Park Declaration; and
(H) the delivery to Purchaser of an endorsement (the
"Magnolia Drive Parcel Endorsement") to the Option Policy, later-dating the
Option Policy to a date after the effectuation of the subdivision, platting and
zoning requirements with respect to the Magnolia Drive Parcel set forth above in
this paragraph 7, and containing no changes to the Option Policy other than (I)
the substitution of the Magnolia Drive Parcel Lots for the Magnolia Drive Parcel
on Schedule A of the Option Policy, (II) the changes permitted by the Fifteenth
Hole Parcel Endorsement (hereinafter defined), (III) the changes permitted by
the Meadow Parcel-Phase II Endorsement (hereinafter defined), (IV) the changes
permitted by the Meadow Parcel-Phase III Endorsement (hereinafter defined), (V)
the changes permitted by the Meadow Parcel-Phase IV Endorsement (hereinafter
defined), (VI) the changes permitted by the Area F Parcel Endorsements
(hereinafter defined), (VI) the changes permitted by the Club Cottages Parcel
Endorsements (hereinafter defined), (VIII) the deletion from Schedule A of the
Option Policy of any Lots which have been conveyed to Purchaser, (IX) the
addition of an endorsement insuring that each of the Magnolia Drive Parcel Lots
has been legally subdivided and platted, (X) the addition of an ALTA 3.0 zoning
endorsement insuring that a detached single-family dwelling unit of a size at
least as large as the minimum size permitted by the Magnolia Park Declaration
can be constructed on each of the Magnolia Drive Parcel Lots, and (XI) the
addition of an endorsement insuring that each of the Magnolia Drive Parcel Lots
has unrestricted access to and from, and unrestricted use for pedestrian and
vehicular ingress and egress of, dedicated public rights-of-way (including,
without limitation, Magnolia Drive and Knoll Road).
(e) Within seventy-five (75) days after the Magnolia Drive Parcel
Completion Date, Seller shall commence, and within one hundred twenty (120) days
after the date of such commencement, Seller, at its sole cost and expense, shall
complete, all such actions as shall be necessary to make sanitary sewer, storm
sewer, water, electrical, gas, telephone and cable television systems and
facilities available at the boundary of each of the Magnolia Drive Parcel Lots.
8. Zoning, Platting and Subdivision of the Fifteenth Hole Parcel.
-------------------------------------------------------------
(a) For purposes of this Agreement, the following terms shall have the
following meanings:
(i) "Fifteenth Hole Parcel Development Notice" shall mean a
written notice from Purchaser to Seller requesting the subdivision and platting
by Seller of the Fifteenth Hole Parcel, which notice may request that Seller
submit the Fifteenth Hole Single-Family Lots (hereinafter defined), if any,
requested in the notice to the terms and provisions of the Patio Homes "G"
Declaration (hereinafter defined).
(ii) "Fifteenth Hole Parcel Single-Family Lots" shall mean the
single-family residential lots to be created by the subdivision and platting of
the Fifteenth Hole Parcel in accordance with the Fifteenth Hole Parcel Site Plan
(hereinafter defined).
(iii) "Fifteenth Hole Parcel Accessways" shall mean the roadways
to be created by the subdivision and platting of the Fifteenth Hole Parcel in
accordance with the Fifteenth Hole Parcel Site Plan.
(iv) "Patio Homes 'G' Declaration" shall mean that certain
Longleaf Patio Homes "G" Declaration of Covenants, Conditions and Restrictions,
dated January 24, 1994, made by Seller, recorded in the
<PAGE>
Recorder's Office on February 3, 1994 in book 977 at page 318, as amended by the
First Amendment to Declaration of Covenants, Conditions and Restrictions of
Longleaf Patio Homes 'G,' dated May 31, 1994, made by Seller, recorded in the
Recorder's Office on July 15, 1994 in book 1017 at page 20.
(v) "Fifteenth Hole Parcel Development Notice Date" shall mean
the date of the giving of the Fifteenth Hole Parcel Development Notice.
(b) Within fifteen (15) days after the Fifteenth Hole Parcel
Development Notice Date, Purchaser and Seller shall agree upon a final site plan
(the "Fifteenth Hole Parcel Site Plan") for the Fifteenth Hole Parcel. The date
of agreement by Purchaser and Seller to the Fifteenth Hole Parcel Site Plan is
herein sometimes called the "Fifteenth Hole Parcel Site Plan Date."
(c) Within sixty (60) days after the Fifteenth Hole Parcel Site Plan
Date, Seller will deliver to Purchaser plans and plats (together the "Fifteenth
Hole Parcel Plans") for the development of the Fifteenth Hole Parcel in
accordance with the Fifteenth Hole Parcel Site Plan; provided, that in the
event, within forty-five (45) days after the Fifteenth Hole Parcel Site Plan
Date, Seller shall deliver written notice to Purchaser requesting additional
time to prepare the Fifteenth Hole Parcel Plans, Seller shall be entitled to
extend the delivery period by thirty (30) days. The period within which the
Fifteenth Hole Parcel Plans must be delivered to Purchaser is herein called the
"Fifteenth Hole Parcel Plan Delivery Period."
(d) (i) For purposes of this Agreement, the "Fifteenth Hole Parcel
Completion Date" shall mean the earliest to occur of (A) one hundred twenty
(120) days after the delivery of the Fifteenth Hole Parcel Plans, or (B) one
hundred twenty (120) days after the expiration of the Fifteenth Hole Parcel
Plan Delivery Period, or (C) the date of completion of all of the conditions set
forth in the following subparagraph (ii).
(ii) Within one hundred twenty (120) days after the earlier to
occur of the date of delivery of the Fifteenth Hole Parcel Plans or the
expiration of the Fifteenth Hole Parcel Plan Delivery Period, Seller, at its
sole cost and expense, shall cause:
(A) all governmental authorities having jurisdiction over
the development of the Fifteenth Hole Parcel to approve the Fifteenth Hole
Parcel Site Plan;
(B) the Fifteenth Hole Parcel to be subdivided and platted
in accordance with the Fifteenth Hole Parcel Site Plan;
(C) the zoning of the Fifteenth Hole Parcel to permit the
construction on each of the Fifteenth Hole Parcel Single-Family Lots of a
detached single-family dwelling unit of a size at least as large as the minimum
size permitted by the Patio Homes 'G' Declaration;
(D) if Purchaser shall have requested that Seller submit the
Fifteenth Hole Parcel Single-Family Lots to the terms and provisions of the
Patio Homes "G" Declaration, the amendment of the Patio Homes "G" Declaration by
an amendment, in form and substance reasonably acceptable to Purchaser, that
submits the Fifteenth Hole Parcel Single-Family Lots and the Fifteenth Hole
Parcel Accessways to the provisions of the Patio Homes "G" Declaration, and that
ensures the owners of the Fifteenth Hole Parcel Single-Family Lots have the same
rights and obligations as the owners of all of the other lots which are subject
to the Patio Homes 'G' Declaration;
(E) the taking of such actions, in addition to those
described in the preceding subparagraph (D), as shall be necessary to grant to
the owners of the Fifteenth Hole Parcel Single-Family Lots unrestricted access
to and from, and unrestricted use for pedestrian and vehicular ingress and
egress of, the Fifteenth Hole Parcel Accessways, and unrestricted access to and
from the Fifteenth Hole Parcel Accessways and Knoll Road, and unrestricted
access to and from, and unrestricted use for pedestrian and vehicular ingress
and egress of, the Private Roadways;
<PAGE>
(F) the amendment, in form and substance reasonably
acceptable to Purchaser, of the Private Roadway Easement to extend the easements
granted in the Private Roadway Easement to the Fifteenth Hole Parcel
Accesssways;
(G) the delivery to Purchaser of (I) a copy of the recorded
plat of subdivision of the Fifteenth Hole Parcel into the Fifteenth Hole Parcel
Single-Family Lots and the Fifteenth Hole Parcel Accessways, and (II) copies of
all approvals, consents and authorizations of all governmental entities having
jurisdiction over the Fifteenth Hole Parcel to (a) the subdivision of the
Fifteenth Hole Parcel into the Fifteenth Hole Parcel Single-Family Lots and the
Fifteenth Hole Parcel Accessways and (b) the Fifteenth Hole Parcel Site Plan;
(H) the delivery to Purchaser of a copy of all ordinances,
approvals, consents and authorizations of all governmental entities having
jurisdiction over the Fifteenth Hole Parcel to the zoning of the Fifteenth Hole
Parcel Single-Family Lots for the construction thereon of dwelling units at
least as large as the minimum size permitted by the Patio Home 'G' Declaration;
and
(I) the delivery to Purchaser of an endorsement (the
"Fifteenth Hole Parcel Endorsement") to the Option Policy, later-dating the
Option Policy to a date after the effectuation of the subdivision, platting and
zoning requirements with respect to the Fifteenth Hole Parcel set forth above in
this paragraph 8, and containing no changes to the Option Policy other than (I)
the substitution of the Fifteenth Hole Parcel Single-Family Lots for the
Fifteenth Parcel on Schedule A of the Option Policy, (II) the changes permitted
by the Magnolia Drive Parcel Endorsement, (III) the changes permitted by the
Meadow Parcel-Phase II Endorsement, (IV) the changes permitted by the Meadow
Parcel-Phase III Endorsement, (V) the changes permitted by the Meadow Parcel-
Phase IV Endorsement, (VI) the changes permitted by the Area F Parcel
Endorsements, (VII) the changes permitted by the Club Cottages Parcel
Endorsements, (VIII) the deletion from Schedule A of the Option Policy of any
Lots which have been conveyed to Purchaser, (IX) the addition of an endorsement
insuring that each of the Fifteenth Hole Parcel Lots has been legally subdivided
and platted, (X) the addition of an ALTA 3.0 zoning endorsement insuring that a
detached single-family dwelling unit of a size at least as large as the minimum
size permitted by the Patio Homes 'G' Declaration can be constructed on each of
the Fifteenth Hole Parcel Single-Family Lots, (XI) the addition of an
endorsement insuring that each of the Fifteenth Hole Parcel Single-Family Lots
has unrestricted access to and from, and unrestricted use for pedestrian and
vehicular ingress and egress of, the Fifteenth Hole Parcel Accessways, and
unrestricted access to and from the Fifteenth Hole Parcel Accessways and Knoll
Road, and unrestricted access to and from, and unrestricted use for pedestrian
and vehicular ingress and egress of, the Private Roadways, and (XII) the
addition of an endorsement insuring the rights of Purchaser under the Private
Roadway Easement with respect to the Fifteenth Hole Parcel Accessways.
(e) Within seventy-five (75) days after the Fifteenth Hole Parcel
Completion Date, Seller shall commence, and within one hundred twenty (120) days
after the date of such commencement, Seller, at its sole cost and expense, shall
complete, the following:
(i) all such actions as shall be necessary to make sanitary
sewer, storm sewer, water, electrical, gas, telephone and cable television
systems and facilities available at the boundary of each of the Fifteenth Hole
Parcel Single-Family Lots; and
(ii) the construction of the Fifteenth Hole Parcel Accessways,
which shall be of the same quality and type as the Private Roadways.
9. Zoning, Platting and Subdivision of the Undeveloped Multi-Family
----------------------------------------------------------------
Tracts.
------
(a) Meadow Parcel-Phase II.
----------------------
(i) For purposes of this Agreement, the following terms shall
have the following meanings:
<PAGE>
(A) "Meadow Parcel-Phase II" shall mean the real estate
outlined on Exhibit G-2 attached hereto and made a part hereof.
-----------
(B) "Meadow Parcel-Phase II Plan A" shall mean a site plan
which shows Meadow Parcel-Phase II subdivided into five multi-family lots that
substantially reflect the proposed location of buildings as shown on Exhibit G-2
-----------
attached hereto.
(C) "Meadow Parcel-Phase II Notice" shall mean a written
notice from Purchaser to Seller requesting the subdivision and platting by
Seller of Meadow Parcel-Phase II, which notice shall indicate whether or not
Purchaser desires that Meadow Parcel-Phase II be subdivided in accordance with
Meadow Parcel-Phase II Plan A.
(D) "Meadow Parcel-Phase II Notice Date" shall mean the
date of the giving of the Meadow Parcel-Phase II Notice.
(E) "Meadow Parcel-Phase II Lots" shall mean the lots to be
created by the subdivision and platting of Meadow Parcel-Phase II in accordance
with the Meadow Parcel-Phase II Site Plan (hereinafter defined).
(F) "Meadow Parcel-Phase II Site Plan" shall mean the
following:
(I) If the Meadow Parcel-Phase II Notice shall
request the subdivision and platting of Meadow Parcel-Phase II substantially in
accordance with Meadow Parcel-Phase II Plan A, the "Meadow Parcel-Phase II Site
Plan" shall mean a site plan substantially in accordance with Meadow Parcel-
Phase II Plan A.
(II) If the Meadow Parcel-Phase II Notice shall
request the subdivision and platting of Meadow Parcel-Phase II other than
substantially in accordance with Meadow Parcel-Phase II Plan A, the "Meadow
Parcel-Phase II Site Plan" shall mean the Alternate Meadow Parcel-Phase II Site
Plan (hereinafter defined).
(G) "Meadow Villas Declaration" shall mean that certain
Meadow Villas Declaration of Condominium, dated September 11, 1997, made by
Seller, recorded with the Recorder's Office in book 1322 at page 381.
(H) "Meadow Parcel-Phase II Completion Date" shall mean the
following:
(I) If the Meadow Parcel-Phase II Notice shall request
the subdivision and platting of Meadow Parcel-Phase II substantially in
accordance with Meadow Parcel-Phase II Plan A, the "Meadow Parcel-Phase II
Completion Date" shall be thirty (30) days after the Meadow Parcel-Phase II
Notice Date.
(II) If the Meadow Parcel-Phase II Notice shall request
the subdivision and platting of Meadow Parcel-Phase II other than in accordance
with Meadow Parcel-Phase II Plan A, the "Meadow Parcel-Phase II Completion Date"
shall be the earliest to occur of (a) one hundred fifty (150) days after the
date of delivery of the Alternate Meadow Parcel-Phase II Plans (hereinafter
defined), or (b) one hundred fifty (150) days after the expiration of the
Alternate Meadow Parcel-Phase II Plan Delivery Period (hereinafter defined), or
(c) the date of completion of all of the conditions set forth in subparagraph
9(a)(iii) of this Agreement.
(ii) If the Meadow Parcel-Phase II Notice shall request the
subdivision and platting of Meadow Parcel-Phase II other than in accordance with
Meadow Parcel-Phase II Plan A, then:
<PAGE>
(A) within fifteen (15) days after the Meadow Parcel-Phase
II Notice Date, Seller and Purchaser shall agree upon a final site plan (the
"Alternate Meadow Parcel-Phase II Site Plan") for Meadow Parcel-Phase II (the
date of agreement by Purchaser and Seller to the Alternate Meadow Parcel-Phase
II Site Plan being herein sometimes called the "Alternate Meadow Parcel-Phase II
Site Plan Date"); and
(B) within sixty (60) days after the Alternative Meadow
Parcel-Phase II Site Plan Date, Seller will deliver to Purchaser plans and plats
(the "Alternate Meadow Parcel-Phase II Plans") for the development of Meadow
Parcel-Phase II in accordance with the Alternative Meadow Parcel-Phase II Site
Plan; provided, that in the event, within forty-five (45) days after the
Alternate Meadow Parcel-Phase II Site Plan Date, Seller shall deliver written
notice to Purchaser requesting additional time to prepare the Alternate Meadow
Parcel-Phase II Plans, Seller shall be entitled to extend the delivery period by
thirty (30) days (the period within which the Alternate Meadow Parcel-Phase II
Plans must be delivered to Purchaser being herein called the "Alternate Meadow
Parcel-Phase II Plan Delivery Period").
(iii) On or before the Meadow Parcel-Phase II Completion Date,
Seller, at its sole cost and expense, shall cause:
(A) Meadow Parcel-Phase II to be subdivided and platted in
accordance with the Meadow Parcel-Phase II Site Plan;
(B) the zoning of Meadow Parcel-Phase II to permit the
construction on each of the Meadow Parcel-Phase II Lots of attached residential
dwelling units of a number and size set forth in the Meadow Parcel-Phase II Site
Plan;
(C) sanitary sewer, storm sewer, water, electrical, gas,
telephone and cable television systems and facilities to be available at the
boundary of each of the Meadow Parcel-Phase II Lots;
(D) the amendment of the Meadow Villas Declaration by an
amendment, in form and substance reasonably acceptable to Purchaser, that
submits the Meadow Parcel-Phase II Lots to the provisions of the Meadow Villas
Declaration, and that ensures that the owners of the Meadow Parcel-Phase II Lots
have the same rights and obligations as the owners of all of the other lots
which are subject to the Meadow Villas Declaration;
(E) the taking of such actions, in addition to those
described in the preceding subparagraph (D), as shall be necessary to grant to
the owners of the Meadow Parcel-Phase II Lots unrestricted access to and from,
and unrestricted use for pedestrian and vehicular ingress and egress of, the
roadway ("Meadow Parcel Roadway I") outlined on Exhibit G-3 attached hereto and
-----------
made a part hereof, and unrestricted access to and from Meadow Parcel Roadway I
and Knoll Road, and unrestricted use of the Private Roadways for pedestrian and
vehicular ingress and egress, and unrestricted access to and from the Private
Roadways and dedicated public rights-of-way;
(F) the amendment, in form and substance reasonably
acceptable to Purchaser, of the Private Roadway Easement to extend the easements
granted in the Private Roadway Easement to Meadow Parcel Roadway I;
(G) the delivery to Purchaser of (I) a copy of the recorded
plat of subdivision of Meadow Parcel-Phase II showing the subdivision of Meadow
Parcel-Phase II into the Meadow Parcel-Phase II Lots, and (II) copies of all
approvals, consents and authorizations of all governmental entities having
jurisdiction over the Meadow Parcel to the subdivision of Meadow Parcel-Phase II
into the Meadow Parcel-Phase II Lots;
(H) the delivery to Purchaser of a copy of all ordinances,
approvals, consents and authorizations of all governmental entities having
jurisdiction over the Meadow Parcel to the zoning of each of the
<PAGE>
Meadow Parcel Lots for the construction thereon of attached residential dwelling
units of the number and size set forth in the Meadow Parcel-Phase II Site Plan;
and
(I) the delivery to Purchaser of an endorsement (the
"Meadow Parcel-Phase II Endorsement") to the Option Policy, later-dating the
Option Policy to a date after the effectuation of the subdivision, platting and
zoning requirements with respect to Meadow Parcel-Phase II set forth above in
this subparagraph 8(a), and containing no changes to the Option Policy other
than (I) the substitution of the Meadow Parcel-Phase II Lots for Meadow Parcel-
Phase II on Schedule A of the Option Policy, (II) the changes permitted by all
Area F Parcel Endorsements, (III) the changes permitted by the Club Cottages
Parcel Endorsements, (IV) the changes permitted by the Magnolia Drive Parcel
Endorsement, (V) the changes permitted by the Fifteenth Hole Parcel Endorsement,
(VI) the changes permitted by the Meadow Parcel-Phase III Endorsement
(hereinafter defined), (VII) the changes permitted by the Meadow Parcel-Phase IV
Endorsement (hereinafter defined), (VIII) the deletion from Schedule A of the
Option Policy of any Lots which have been conveyed to Purchaser, (IX) the
addition of an endorsement insuring that each of the Meadow Parcel-Phase II Lots
has been legally subdivided and platted, (X) the addition of an ALTA 3.0 zoning
endorsement insuring that attached residential dwelling units of the number and
size set forth in the Meadow Parcel-Phase II Site Plan can be constructed on
each of the Meadow Parcel-Phase II Lots, (XI) the addition of an endorsement
insuring that each of the Meadow Parcel-Phase II Lots has unrestricted access to
and from, and unrestricted use for pedestrian and vehicular ingress and egress
of, Meadow Parcel Roadway I, and unrestricted access to and from Meadow Parcel
Roadway I and Knoll Road, and unrestricted use of the Private Roadways for
pedestrian and vehicular ingress and egress, and unrestricted access to and from
the Private Roadways and dedicated public rights-of-way, and (XII) the addition
of an endorsement insuring the rights of Purchaser under the Private Roadway
Easement with respect to Meadow Parcel Roadway I; and
(J) all governmental authorities having jurisdiction over
the development of the Meadow Parcel-Phase III to approve the Meadow Parcel-
Phase III Site Plan.
(b) Meadow Parcel-Phase III.
-----------------------
(i) For purposes of this Agreement, the following terms shall
have the following meanings:
(A) "Meadow Parcel-Phase III" shall mean the real estate
outlined on Exhibit G-4 attached hereto and made a part hereof.
-----------
(B) "Meadow Parcel-Phase III Notice" shall mean a written
notice from Purchaser to Seller requesting the subdivision and platting by
Seller of Meadow Parcel-Phase III.
(C) "Meadow Parcel-Phase III Notice Date" shall mean the
date of the giving of the Meadow Parcel-Phase III Notice.
(D) "Meadow Parcel-Phase III Lots" shall mean the lots to be
created by the subdivision and platting of Meadow Parcel-Phase III in accordance
with the Meadow Parcel-Phase III Site Plan (hereinafter defined).
(E) "Meadow Parcel-Phase III Accessways" shall mean the
roadways to be created by the subdivision and platting of Meadow Parcel-Phase
III in accordance with the Meadow Parcel-Phase III Site Plan, which roadways
shall provide access to and from the Meadow Parcel-Phase III Lots and Meadow
Parcel Roadway I.
(ii) Within fifteen (15) days after the Meadow Parcel-Phase III
Notice Date, Seller and Purchaser shall agree upon a final site plan (the
"Meadow Parcel-Phase III Site Plan") for Meadow Parcel-Phase III (the date of
agreement by Purchaser and Seller to the Meadow Parcel-Phase III Site Plan being
herein called the "Meadow Parcel-Phase III Site Plan Date").
<PAGE>
(iii) Within sixty (60) days after the Meadow Parcel-Phase III
Site Plan Date, Seller will deliver to Purchaser plans and plats (together the
"Meadow Parcel-Phase III Plans") for the development of Meadow Parcel-Phase III
in accordance with the Meadow Parcel-Phase III Site Plan; provided, that in the
event, within the first forty-five (45) days of such sixty-day period, Seller
shall deliver written notice to Purchaser requesting additional time to prepare
the Meadow Parcel-Phase III Plans, Seller shall be entitled to extend the 60-day
delivery period for the Meadow Parcel-Phase III Plans by thirty (30) days;
further provided, that Purchaser may not deliver the Meadow Parcel-Phase III
Notice until Purchaser shall have closed the purchase from Seller of at least
fifty percent (50%) of the Meadow Parcel-Phase II Lots and Seller shall have
received the purchase price therefor, and all sums due to Maples or Seller with
respect to such Meadow Parcel-Phase II Lots under subparagraph 1(g) of this
Agreement shall have been paid. The period within which the Meadow Parcel-Phase
III Plans must be delivered to Purchaser is herein called the "Meadow Parcel-
Phase III Plan Delivery Period."
(iv) (A) For purposes of this Agreement, the "Meadow Parcel-
Phase III Completion Date" shall mean the earliest to occur of (I) one hundred
twenty (120) days after the delivery of the Meadow Parcel-Phase III Plans, or
(II) one hundred twenty (120) days after the expiration of the Meadow Parcel-
Phase III Plan Delivery Period, or (III) the date of completion of all of the
conditions set forth in the following subparagraph (B).
(B) Within one hundred twenty (120) days after the
earlier to occur of the date of delivery of the Meadow Parcel-Phase III Plans or
the expiration of the Meadow Parcel-Phase III Plan Delivery Period, Seller, at
its sole cost and expense shall cause:
(I) all governmental authorities having jurisdiction
over the development of Meadow Parcel-Phase III to approve the Meadow Parcel-
Phase III Site Plan;
(II) Meadow Parcel-Phase III to be subdivided and
platted in accordance with the Meadow Parcel-Phase III Site Plan;
(III) the zoning of Meadow Parcel-Phase III to permit
the construction on each of the Meadow Parcel-Phase III Lots of attached
residential dwelling units of a number and size set forth in the Meadow Parcel-
Phase III Site Plan;
(IV) the amendment of the Meadow Villas Declaration
by an amendment, in form and substance reasonably acceptable to Purchaser, that
submits the Meadow Parcel-Phase III Lots and the Meadow Parcel-Phase III
Accessways to the provisions of the Meadow Villas Declaration, and ensures that
the owners of the Meadow Parcel-Phase III Lots have the same rights and
obligations as the owners of all of the other lots which are subject to the
Meadow Villas Declaration;
(V) the taking of such actions, in addition to those
described in the preceding subparagraph (IV), as shall be necessary to grant to
the owners of the Meadow Parcel-Phase III Lots unrestricted access to and from
the Meadow Parcel-Phase III Lots and the Meadow Parcel-Phase III Accessways, and
unrestricted use of the Meadow Parcel-Phase III Accessways for pedestrian and
vehicular ingress and egress, and unrestricted access to and from the Meadow
Parcel-Phase III Accessways and Meadow Parcel Roadway I, and unrestricted use of
Meadow Parcel Roadway I for pedestrian and vehicular ingress and egress, and
unrestricted access to and from Meadow Parcel Roadway I and Knoll Road, and
unrestricted use of the Private Roadways for pedestrian and vehicular ingress
and egress, and unrestricted access to and from the Private Roadways and
dedicated public rights-of-way;
(VI) the amendment, in form and substance reasonably
acceptable to Purchaser, of the Private Roadway Easement to extend the easements
granted in the Private Roadway Easement to the Meadow Parcel-Phase III
Accessways;
<PAGE>
(VII) the delivery to Purchaser of (a) a copy of the
recorded plat of subdivision of Meadow Parcel-Phase III showing the subdivision
of Meadow Parcel-Phase III in accordance with the Meadow Parcel-Phase III Site
Plan, and (b) copies of all approvals, consents and authorizations of all
governmental entities having jurisdiction over the Meadow Parcel to (1) the
subdivision of Meadow Parcel-Phase III in accordance with the Meadow Parcel-
Phase III Site Plan, and (2) the Meadow Parcel-Phase III Site Plan;
(VIII) the delivery to Purchaser of a copy of all
ordinances, approvals, consents and authorizations of all governmental entities
having jurisdiction over the Meadow Parcel to the zoning of each of the Meadow
Parcel-Phase III Lots for the construction thereon of attached residential
dwelling units of a number and size set forth in the Meadow Parcel-Phase III
Site Plan; and
(IX) the delivery to Purchaser of an endorsement (the
"Meadow Parcel-Phase III Endorsement") to the Option Policy, later-dating the
Option Policy to a date after the effectuation of the subdivision, platting and
zoning requirements with respect to Meadow Parcel-Phase III set forth above in
this subparagraph 8(b), and containing no changes to the Option Policy other
than (a) the substitution of the Meadow Parcel-Phase III Lots for Meadow Parcel-
Phase III on Schedule A of the Option Policy, (b) the changes permitted by the
Area F Parcel Endorsements, (c) the changes permitted by the Club Cottages
Parcel Endorsements, (d) the changes permitted by the Magnolia Drive Parcel
Endorsement, (e) the changes permitted by the Fifteenth Hole Parcel Endorsement,
(f) the changes permitted by the Meadow Parcel-Phase II Endorsement, (g) the
changes permitted by the Meadow Parcel-Phase IV Endorsement, (h) the deletion
from Schedule A of the Option Policy of any Lots which have been conveyed to
Purchaser, (i) the addition of an endorsement insuring that each of the Meadow
Parcel-Phase III Lots has been legally subdivided and platted, (j) the addition
of an ALTA 3.0 zoning endorsement insuring that attached residential dwelling
units of a number and size set forth in the Meadow Parcel-Phase III Site Plan
can be constructed on each of the Meadow Parcel-Phase III Lots, (k) the addition
of an endorsement insuring that each of the Meadow Parcel-Phase III Lots has
unrestricted access to and from the Meadow Parcel-Phase III Accessways, and
unrestricted use of the Meadow Parcel-Phase III Accessways for pedestrian and
vehicular ingress and egress, and unrestricted access to and from, and
unrestricted use for pedestrian and vehicular ingress and egress of, Meadow
Parcel Roadway I, and unrestricted access to and from Meadow Parcel Roadway I
and Knoll Road, and unrestricted use of the Private Roadways for pedestrian and
vehicular ingress and egress, and unrestricted access to and from the Private
Roadways and dedicated public rights-of-way, and (l) the addition of an
endorsement insuring that the rights of Purchaser under the Private Roadway
Easement extend to the Meadow Parcel-Phase III Accessways.
(v) Within seventy-five (75) days after the Meadow Parcel-Phase
III Completion Date, Seller shall commence, and within one hundred twenty (120)
days after the date of such commencement, Seller, at its sole cost and expense,
shall complete, the following:
(A) all actions as shall be necessary to make sanitary
sewer, storm sewer, water, electrical, gas, telephone and cable television
systems and facilities available at the boundary of each of the Meadow Parcel-
Phase III Lots; and
(B) the construction of the Meadow Parcel-Phase III
Accessways, which shall be of the same quality and type as the Private Roadways.
(c) Meadow Parcel-Phase IV.
----------------------
(i) For purposes of this Agreement, the following terms shall
have the following meanings:
(A) "Meadow Parcel-Phase IV" shall mean the real estate
outlined on Exhibit G-5 attached hereto and made a part hereof.
-----------
<PAGE>
(B) "Meadow Parcel-Phase IV Notice" shall mean a written
notice from Purchaser to Seller requesting the subdivision and platting by
Seller of Meadow Parcel-Phase IV.
(C) "Meadow Parcel-Phase IV Notice Date" shall mean the
date of the giving of the Meadow Parcel-Phase IV Notice.
(D) "Meadow Parcel-Phase IV Lots" shall mean the lots to
be created by the subdivision and platting of Meadow Parcel-Phase IV in
accordance with the Meadow Parcel-Phase IV Site Plan (hereinafter defined).
(E) "Meadow Parcel-Phase IV Accessways" shall mean the
roadways to be created by the subdivision and platting of Meadow Parcel-Phase IV
in accordance with the Meadow Parcel-Phase IV Site Plan, which roadways shall
provide access to and from the Meadow Parcel-Phase IV Lots and the Meadow
Parcel-Phase III Accessways.
(G) Meadow Parcel-Phase II, Meadow Parcel-Phase III and
Meadow Parcel-Phase IV are herein together sometimes called the "Meadow Parcel
Phases" or individually a "Meadow Parcel Phase."
(H) The Meadow Parcel-Phase II Lots, the Meadow Parcel-
Phase III Lots and the Meadow Parcel-Phase IV Lots are herein together sometimes
called the "Meadow Parcel Lots" or individually a "Meadow Parcel Lot."
(I) The Meadow Parcel-Phase III Accessways and the Meadow
Parcel-Phase IV Accessways are herein together sometimes called the "Meadow
Parcel Accessways" or individually a "Meadow Parcel Accessway."
(ii) Within fifteen (15) days after the Meadow Parcel-Phase IV
Notice Date, Seller and Purchaser shall agree upon a final site plan (the
"Meadow Parcel-Phase IV Site Plan") for Meadow Parcel-Phase IV (the date of
agreement by Purchaser and Seller to the Meadow Parcel-Phase IV Site Plan being
herein called the "Meadow Parcel-Phase IV Site Plan Date").
(iii) Within sixty (60) days after the Meadow Parcel-Phase IV
Site Plan Date, Seller will deliver to Purchaser plans and plats (together the
"Meadow Parcel-Phase IV Plans") for the development of Meadow Parcel-Phase IV in
accordance with the Meadow Parcel-Phase IV Site Plan; provided, that in the
event, within the first forty-five (45) days of such sixty-day period, Seller
shall deliver written notice to Purchaser requesting additional time to prepare
the Meadow Parcel-Phase IV Plans, Seller shall be entitled to extend the 60-day
delivery period for the Meadow Parcel-Phase IV Plans by thirty (30) days;
further provided, that Purchaser may not deliver the Meadow Parcel-Phase IV
Notice until Purchaser shall have (A) closed the purchase from Seller of at
least fifty percent (50%) of the Meadow Parcel-Phase II Lots and Seller shall
have received the purchase price therefor, and all sums due to Maples or Seller
with respect to such Meadow Parcel-Phase II Lots under subparagraph 1(g) of this
Agreement shall have been paid, and (B) closed the purchase from Seller of at
least fifty percent (50%) of the Meadow Parcel-Phase III Lots and Seller shall
have received the purchase price therefor, and all sums due to Maples or Seller
with respect to such Meadow Parcel-Phase III Lots under subparagraph 1(g) of
this Agreement shall have been paid. The period within which the Meadow Parcel-
Phase IV Plans must be delivered to Purchaser is herein called the "Meadow
Parcel-Phase IV Plan Delivery Period."
(iv) (A) For purposes of this Agreement, the "Meadow Parcel-
Phase IV Completion Date" shall mean the earliest to occur of (I) one hundred
twenty (120) days after the delivery of the Meadow Parcel-Phase IV Plans, or
(II) one hundred twenty (120) days after the expiration of the Meadow Parcel-
Phase IV Plan Delivery Period, or (III) the date of completion of all of the
conditions set forth in the following subparagraph (B).
<PAGE>
(B) Within one hundred twenty (120) days after the earlier
to occur of the date of delivery of the Meadow Parcel-Phase IV Plans or the
expiration of the Meadow Parcel-Phase IV Plan Delivery Period, Seller, at its
sole cost and expense, shall cause:
(I) all governmental authorities having jurisdiction
over the development of Meadow Parcel-Phase IV to approve the Meadow Parcel-
Phase IV Site Plan;
(II) Meadow Parcel-Phase IV to be subdivided and
platted in accordance with the Meadow Parcel-Phase IV Site Plan;
(III) the zoning of Meadow Parcel-Phase IV to permit
the construction on each of the Meadow Parcel-Phase IV Lots of attached
residential dwelling units of a number and size set forth in the Meadow Parcel-
Phase IV Site Plan;
(IV) the amendment of the Meadow Villas Declaration
by an amendment, in form and substance reasonably acceptable to Purchaser, that
submits the Meadow Parcel-Phase IV Lots and the Meadow Parcel-Phase IV
Accessways to the provisions of the Meadow Villas Declaration, and that ensures
that the owners of the Meadow Parcel-Phase IV Lots have the same rights and
obligations as the owners of all of the other lots which are subject to the
Meadow Villas Declaration;
(V) the taking of such actions, in addition to those
described in the preceding subparagraph (IV), as shall be necessary to grant to
the owners of the Meadow Parcel-Phase IV Lots unrestricted access to and from
the Meadow Parcel-Phase IV Lots and the Meadow Parcel-Phase IV Accessways, and
unrestricted use of the Meadow Parcel-Phase IV Accessways for pedestrian and
vehicular ingress and egress, and unrestricted access to and from the Meadow
Parcel-IV Accessways and the Meadow Parcel-III Accessways, and unrestricted use
of the Meadow Parcel-Phase III Accessways for pedestrian and vehicular ingress
and egress, and unrestricted access to and from the Meadow Parcel-Phase III
Accessways and Meadow Parcel Roadway I, and unrestricted use of Meadow Parcel
Roadway I for pedestrian and vehicular ingress and egress, and unrestricted
access to and from Meadow Parcel Roadway I and Knoll Road, and unrestricted use
of the Private Roadways for pedestrian and vehicular ingress and egress, and
unrestricted access to and from the Private Roadways and dedicated public
rights-of-way;
(VI) the amendment, in form and substance reasonably
acceptable to Purchaser, of the Private Roadway Easement to extend the easements
granted in the Private Roadway Easement to the Meadow Parcel-Phase IV
Accessways;
(VII) the delivery to Purchaser of (a) a copy of the
recorded plat of subdivision of Meadow Parcel-Phase IV showing the subdivision
of Meadow Parcel-Phase IV in accordance with the Meadow Parcel-Phase IV Site
Plan, and (b) copies of all approvals, consents and authorizations of all
governmental entities having jurisdiction over the Meadow Parcel to (1) the
subdivision of Meadow Parcel-Phase IV in accordance with the Meadow Parcel-Phase
IV Site Plan, and (2) the Meadow Parcel-Phase IV Site Plan;
(VIII) the delivery to Purchaser a copy of all
ordinances, approvals, consents and authorizations of all governmental entities
having jurisdiction over the Meadow Parcel to the zoning of each of the Meadow
Parcel-Phase IV Lots for the construction thereon of attached residential
dwelling units of a number and size set forth in the Meadow Parcel-Phase IV Site
Plan; and
(IX) the delivery to Purchaser of an endorsement (the
"Meadow Parcel-Phase IV Endorsement") to the Option Policy, later-dating the
Option Policy to a date after the effectuation of the subdivision, platting and
zoning requirements with respect to Meadow Parcel-Phase IV set forth above in
this subparagraph 8(c), and containing no changes to the Option Policy other
than (a) the substitution of the Meadow Parcel-Phase IV Lots for Meadow Parcel-
Phase IV on Schedule A of the Option Policy, (b) the changes permitted
<PAGE>
by the Area F Parcel Endorsements, (c) the changes permitted by the Club
Cottages Parcel Endorsements, (d) the changes permitted by the Magnolia Drive
Parcel Endorsement, (e) the changes permitted by the Fifteenth Hole Parcel
Endorsement, (f) the changes permitted by the Meadow Parcel-Phase II
Endorsement, (g) the changes permitted by the Meadow Parcel-Phase III
Endorsement, (h) the deletion from Schedule A of the Option Policy of any Lots
which have been conveyed to Purchaser, (i) the addition of an endorsement
insuring that each of the Meadow Parcel-Phase IV Lots has been legally
subdivided and platted, (j) the addition of an ALTA 3.0 zoning endorsement
insuring that attached residential dwelling units of a number and size set forth
in the Meadow Parcel-Phase IV Site Plan can be constructed on each of the Meadow
Parcel-Phase IV Lots, (k) the addition of an endorsement insuring that each of
the Meadow Parcel-Phase IV Lots has unrestricted access to and from the Meadow
Parcel-Phase IV Accessways, and unrestricted use of the Meadow Parcel-Phase IV
Accessways for pedestrian and vehicular ingress and egress, and unrestricted
access to and from the Meadow Parcel IV Accessways and the Meadow Parcel-Phase
III Accessways, and unrestricted use of the Meadow Parcel-Phase III Accessways
for pedestrian and vehicular ingress and egress, and unrestricted access to and
from, and unrestricted use for pedestrian and vehicular ingress and egress of,
Meadow Parcel Roadway I, and unrestricted access to and from Meadow Parcel
Roadway I and Knoll Road, and unrestricted use of the Private Roadways for
pedestrian and vehicular ingress and egress, and unrestricted access to and from
the Private Roadways and dedicated public rights-of-way, and (l) the addition of
an endorsement insuring that the rights of Purchaser under the Private Roadway
Easement extend to the Meadow Parcel-Phase IV Accessways.
(v) Within seventy-five (75) days after the Meadow Parcel-Phase
IV Completion Date, Seller shall commence, and within one hundred twenty (120)
days after the date of such commencement, Seller, at its sole cost and expense,
shall complete, the following:
(A) all actions as shall be necessary to make sanitary
sewer, storm sewer, water, electrical, gas, telephone and cable television
systems and facilities available at the boundary of each of the Meadow Parcel-
Phase IV Lots; and
(B) the construction of the Meadow Parcel-Phase IV
Accessways, which shall be of the same quality and type as the Private Roadways.
(d) Area F Parcel
-------------
(i) For purposes of this Agreement, the following terms shall
have the following meanings:
(A) "Area F Parcel Notice" shall mean a written notice from
Purchaser to Seller setting forth the uses and site plan desired by Purchaser
with respect to a portion of the Area F Parcel. Any Area F Parcel Notice may
include a request that the Area F Parcel Lots and the Area F Parcel Accessways
in the portion of the Area F Parcel described in such Area F Parcel Notice be
submitted to the Single-Family Declaration.
(B) "Area F Parcel Notice Date" shall mean the date of the
giving of an Area F Parcel Notice.
(C) "Area F Parcel Lots" shall mean the lots to be created
by the subdivision and platting of the Area F Parcel in accordance with the Area
F Parcel Site Plans (hereinafter defined).
(D) "Area F Parcel Accessways" shall mean the roadways to
be created by the subdivision and platting of the Area F Parcel in accordance
with the Area F Parcel Site Plans, which roadways shall provide access to and
from the Area F Parcel Lots and Knoll Road, a dedicated public right-of-way.
(E) "Area F Parcel Phase" shall mean a portion of the Area
F Parcel with respect to which Seller and Purchaser shall agree upon an Area F
Parcel Site Plan.
<PAGE>
(F) "Single-Family Declaration" shall mean that certain
Longleaf Single-Family Declaration of Covenants, Conditions and Restrictions,
dated March 1, 1991, made by Seller, and recorded with the Recorder's Office in
book 767 at page 296, as amended by that certain First Amendment Longleaf
Single-Family Declaration of Covenants, Conditions and Restrictions, dated April
16, 1993, and recorded in the Recorder's Office in book 905 at page 481, and as
amended by that certain Second Amendment to Declaration - Longleaf Single-
Family, dated June 1, 1994, and recorded in the Recorder's Office in book 1017
at page 22, and as amended by that certain Third Amendment Longleaf Single
Family Declaration of Covenants, Conditions and Restrictions, dated August 28,
1995, and recorded in the Recorder's Office in book 1110 at page 319.
(ii) It is contemplated that the Area F Parcel will be
developed in phases. Within fifteen (15) days after an Area F Parcel Notice
Date, Purchaser and Seller shall agree upon a final site plan (an "Area F Parcel
Site Plan") for the portion of the Area F Parcel described in the subject Area F
Parcel Notice (or such adjusted portion of the Area F Parcel as Purchaser and
Seller shall agree), and shall agree upon the Minimum Release Price with respect
to each of the Lots shown on such Area F Site Plan. The date of agreement by
Purchaser and Seller to an Area F Parcel Site Plan is herein sometimes called an
"Area F Parcel Site Plan Date. "
(iii) Within sixty (60) days after an Area F Parcel Site Plan
Date, Seller will deliver to Purchaser plans and plats (together the "Area F
Parcel Plans") for the development of the subject Area F Parcel Phase in
accordance with the Area F Parcel Site Plan for such Area F Parcel Phase;
provided, that in the event, within the first forty-five (45) days of such
sixty-day period, Seller shall deliver written notice to Purchaser requesting
additional time to prepare such Area F Parcel Plans, Seller shall be entitled to
extend the 60-day delivery period for such Area F Parcel Plans by thirty (30)
days; further provided, that Purchaser may not deliver the first Area F Parcel
Notice until the earlier to occur of the following: (A) Purchaser shall have
closed the purchase from Seller of sixty percent (60%) of the Existing Single-
Family Lots, and Seller shall have received the purchase price for such Existing
Single-Family Lots, and all sums payable to Maples or Seller pursuant to
subparagraph 1(g) of this Agreement with respect to such Existing Single-Family
Lots shall have been paid, or (B) Purchaser shall be entitled to deliver the
Meadow Parcel-Phase III Notice. The period within which Area F Parcel Plans must
be delivered to Purchaser is herein called an "Area F Parcel Plan Delivery
Period."
(iv) (A) For purposes of this Agreement, an "Area F Parcel
Completion Date" shall mean the earliest to occur of (I) one hundred twenty
(120) days after the date of delivery of the Area F Parcel Plans for an Area F
Parcel Phase, or (II) one hundred twenty (120) days after the expiration of the
Area F Parcel Plan Delivery Period for such Area F Parcel Phase, or (III) the
date of completion of all of the conditions set forth in the following
subparagraph (B) with respect to such Area F Parcel Phase.
(B) Within one hundred twenty (120) days after the
earlier to occur of the date of delivery of the Area F Parcel Plans for an Area
F Parcel Phase or the expiration of the Area F Parcel Plan Delivery Period for
such Area F Parcel Phase, Seller, at its sole cost and expense, shall cause:
(I) all governmental authorities having
jurisdiction over the development of such Area F Parcel Phase to approve the
Area F Parcel Site Plan for such Area F Parcel Phase;
(II) such Area F Parcel Phase to be subdivided and
platted in accordance with the Area F Parcel Site Plan for such Area F Parcel
Phase;
(III) the zoning of such Area F Parcel to permit the
construction on each of the Area F Parcel Lots on such Area F Parcel Phase of
residential dwelling units of a type, number and size set forth in the Area F
Parcel Site Plan for such Area F Parcel Phase;
(IV) if Purchaser shall have so requested in the
Area F Parcel Notice for such Area F Parcel Phase, the amendment of the Single-
Family Declaration by an amendment, in form and substance reasonably acceptable
to Purchaser, that submits the Area F Parcel Lots and the Area F Parcel
Accessways on such
<PAGE>
Area F Parcel Phase to the provisions of the Single-Family Declaration, and that
ensures that the owners of such Area F Parcel Lots have the same rights and
obligations as the owners of all of the lots which are subject to the Single-
Family Declaration;
(V) the taking of such actions, in addition to those
described in the preceding subparagraph (IV), as shall be necessary to grant to
the owners of the Area F Parcel Lots on such Area F Parcel Phase unrestricted
access to and from, and unrestricted use for pedestrian and vehicular ingress
and egress of, the Area F Parcel Accessways, and unrestricted access to and from
the Area F Parcel Accessways and Knoll Road, and unrestricted access to and
from, and unrestricted use for pedestrian and vehicular ingress of, the Private
Roadways;
(VI) the amendment, in form and substance reasonably
acceptable to Purchaser, of the Private Roadway Easement to extend the easements
granted in the Private Roadway Easement to the Area F Parcel Accessways;
(VII) the delivery to Purchaser of (a) a copy of the
recorded plat of subdivision of such Area F Parcel Phase showing the subdivision
of such Area F Parcel Phase in accordance with the Area F Parcel Site Plan for
such Area F Parcel Phase, and (b) copies of all approvals, consents and
authorizations of all governmental entities having jurisdiction over such Area F
Parcel Phase to (1) the subdivision of such Area F Parcel Phase in accordance
with the Area F Parcel Site Plan for such Area F Parcel Phase and (2) the Area F
Parcel Site Plan for such Area F Parcel Phase;
(VIII) the delivery to Purchaser of a copy of all
ordinances, approvals, consents and authorizations of all governmental entities
having jurisdiction over such Area F Parcel Phase to the zoning of each of the
Area F Parcel Lots on such Area F Parcel Phase for the construction thereon of
residential dwelling units of a type, number and size set forth in the Area F
Parcel Site Plan for such Area F Parcel Phase; and
(IX) the delivery to Purchaser of an endorsement (an
"Area F Parcel Endorsement") to the Option Policy, later-dating the Option
Policy to a date after the effectuation of the subdivision, platting and zoning
requirements with respect to an Area F Parcel Phase set forth above in this
subparagraph 8(d), and containing no changes to the Option Policy other than (a)
the substitution of Area F Parcel Lots for such Area F Parcel Phase on Schedule
A of the Option Policy, (b) the changes permitted by the Meadow Parcel-Phase II
Endorsement, (c) the changes permitted by the Meadow Parcel-Phase III
Endorsement, (d) the changes permitted by the Meadow Parcel-Phase IV
Endorsement, (e) the changes permitted by the Club Cottages Parcel Endorsements,
(f) the changes permitted by the Magnolia Drive Parcel Endorsement, (g) the
changes permitted by the Fifteenth Hole Parcel Endorsement, (h) the deletion
from Schedule A of the Option Policy of any Lots which have been conveyed to
Purchaser, (i) the addition of an endorsement insuring that each of the Area F
Parcel Lots on such Area F Parcel Phase has been legally subdivided and platted,
(j) the addition of an ALTA 3.0 zoning endorsement insuring that residential
dwelling units of a type, number and size set forth in the Area F Parcel Site
Plan for such Area F Parcel Phase can be constructed on each of the Area F
Parcel Lots on such Area F Parcel Phase, (k) the addition of an endorsement
insuring that each of the Area F Parcel Lots on such Area F Parcel Phase has
unrestricted access to and from, and unrestricted use for pedestrian and
vehicular ingress and egress of, the Area F Parcel Accessways, and has
unrestricted access to and from the Area F Parcel Accessways and Knoll Road, and
has unrestricted access to and from, and unrestricted use for pedestrian and
vehicular ingress and egress of, the Private Roadways, and (l) the addition of
an endorsement insuring the rights of Purchaser under the Private Roadway
Easement with respect to the Area F Parcel Accessways on such Area F Parcel
Phase.
(v) Within seventy-five (75) days after the Area F Parcel
Completion Date for an Area F Parcel Phase, Seller shall commence, and within
one hundred twenty (120) days after the date of such commencement, Seller, at
its sole cost and expense, shall complete, the following:
<PAGE>
(A) all such actions as shall be necessary to make sanitary
sewer, storm sewer, water, electrical, gas, telephone and cable television
systems and facilities available at the boundary of each of the Area F Parcel
Lots on such Area F Parcel Phase; and
(B) the construction of the Area F Parcel Accessways on
such Area F Parcel Phase, which Area F Parcel Accessways shall be of the same
quality and type as the Private Roadways.
(e) Club Cottages Parcel
--------------------
(i) For purposes of this Agreement, the following terms shall
have the following meanings:
(A) "Club Cottages Parcel Notice" shall mean a written
notice from Purchaser to Seller setting forth the site plan desired by Purchaser
with respect to a portion of the Club Cottages Parcel.
(B) "Club Cottages Parcel Notice Date" shall mean the date
of delivery of a Club Cottages Parcel Notice.
(C) "Club Cottages Parcel Lots" shall mean the lots to be
created by the subdivision and platting of the Club Cottages Parcel in
accordance with the Club Cottages Parcel Site Plans (hereinafter defined).
(D) "Club Cottages Parcel Accessways" shall mean the
roadways to be created by the subdivision and platting of the Club Cottages
Parcel in accordance with the Club Cottages Parcel Site Plans, which roadways
shall provide access to and from the Club Cottages Parcel Lots and Knoll Road, a
dedicated public right-of-way.
(E) "Club Cottages Parcel Phase" shall mean a portion of
the Club Cottages Parcel with respect to which Seller and Purchaser shall agree
upon a Club Cottages Parcel Site Plan.
(F) "Club Cottages Declaration" shall mean that certain
Longleaf Club Cottages Declaration of Condominium, dated August 31, 1989, made
by Seller, and recorded with the Recorder's Office in book 680 at page 517, as
amended by that certain Amendment to Declaration of Condominium - Longleaf Club
Cottages, dated February 27, 1990, and recorded in the Recorder's Office in book
707 at page 447.
(ii) It is contemplated that the Club Cottages Parcel will be
developed in phases. Within fifteen (15) days after a Club Cottages Parcel
Notice Date, Purchaser and Seller shall agree upon a final site plan (a "Club
Cottages Parcel Site Plan") for the portion of the Club Cottages Parcel
described in the subject Club Cottages Parcel Notice (or such adjusted portion
of the Club Cottages Parcel as Purchaser and Seller shall agree), and shall
agree upon the Minimum Release Price with respect to each of the Lots shown on
such Club Cottages Site Plan. The date of agreement by Purchaser and Seller to
a Club Cottages Parcel Site Plan is herein sometimes called a "Club Cottages
Parcel Site Plan Date."
(iii) Within sixty (60) days after a Club Cottages Parcel Site
Plan Date, Seller will deliver to Purchaser plans and plats (together the "Club
Cottages Parcel Plans") for the development of the subject Club Cottages Parcel
in accordance with the Club Cottages Parcel Site Plan for such Club Cottages
Parcel Phase; provided, that in the event, within the first forty-five (45) days
of such sixty-day period, Seller shall deliver written notice to Purchaser
requesting additional time to prepare such Club Cottages Parcel Plans, Seller
shall be entitled to extend the 60-day delivery period for such Club Cottages
Parcel Plans by thirty (30) days; provided, however, that Purchaser may not
deliver the first Club Cottages Parcel Notice for a period of two (2) years
after the Effective Date. The period within which Club Cottages Parcel Plans
must be delivered to Purchaser is herein called a "Club Cottages Parcel Plan
Delivery Period."
<PAGE>
(iv) (A) For purposes of this Agreement, a "Club Cottages Parcel
Completion Date" shall mean the earliest to occur of (I) one hundred twenty
(120) days after the date of delivery of the Club Cottages Parcel Plans for a
Club Cottages Parcel Phase, or (II) one hundred twenty (120) days after the
expiration of the Club Cottages Parcel Plan Delivery Period for such Club
Cottages Parcel Phase, or (III) the date of completion of all of the conditions
set forth in the following subparagraph (B) with respect to such Club Cottages
Parcel Phase.
(B) Within one hundred twenty (120) days after the earlier
to occur of the date of delivery of the Club Cottages Parcel Plans for a Club
Cottages Parcel Phase or the expiration of the Club Cottages Parcel Plan
Delivery Period for such Club Cottages Parcel Phase, Seller, at its sole cost
and expense, shall cause:
(I) all governmental authorities having jurisdiction
over the development of such Club Cottages Parcel Phase to approve the Club
Cottages Parcel Site Plan for such Club Cottages Parcel Phase;
(II) such Club Cottages Parcel Phase to be subdivided
and platted in accordance with the Club Cottages Parcel Site Plan for such Club
Cottages Parcel Phase;
(III) such Club Cottages Parcel Phase to be zoned to
permit the construction on each of the Club Cottages Parcel Lots on such Club
Cottages Parcel Phase of attached residential dwelling units of a number and
size set forth in the Club Cottages Parcel Site Plan for such Club Cottages
Parcel Phase;
(IV) the taking of such actions as shall be necessary
to grant to the owners of the Club Cottages Parcel Lots on such Club Cottages
Parcel Phase unrestricted access to and from, and unrestricted use for
pedestrian and vehicular ingress and egress of, the Private Roadways, and
unrestricted access to and from the Private Roadways and dedicated public
rights-of-way;
(V) the taking of such actions, in addition to those
described in the preceding subparagraph (IV), as shall be necessary to grant to
the owners of the Club Cottages Parcel Lots on such Club Cottages Parcel Phase
unrestricted pedestrian and vehicular access to and from the Club Cottages
Parcel Lots and Knoll Road, a dedicated public right-of-way, including
unrestricted access to and from, and unrestricted use for pedestrian and
vehicular ingress and egress of, the Club Cottages Parcel Accessways;
(VI) the amendment, in form and substance reasonably
acceptable to Purchaser, of the Private Roadway Easement to extend the easements
granted in the Private Roadway Easement to the Club Cottages Parcel Accessways;
(VII) the delivery to Purchaser of (a) a copy of the
recorded plat of subdivision of such Club Cottages Parcel Phase showing the
subdivision of such Club Cottages Parcel Phase in accordance with the Club
Cottages Site Plan for such Club Cottages Parcel Phase, and (b) copies of all
approvals, consents and authorizations of all governmental entities having
jurisdiction over such Club Cottages Parcel Phase to (1) the subdivision of such
Club Cottages Parcel Phase in accordance with the Club Cottages Parcel Site Plan
for such Club Cottages Parcel Phase and (2) the Club Cottages Parcel Site Plan
for such Club Cottages Parcel Phase;
(VIII) the delivery to Purchaser of a copy of all
ordinances, approvals, consents and authorizations of all governmental entities
having jurisdiction over such Club Cottages Parcel Phase to the zoning of each
of the Club Cottages Parcel Lots on such Club Cottages Parcel Phase for the
construction thereon of attached residential dwelling units of a number and size
in accordance with the Club Cottages Parcel Site Plan for such Club Cottages
Parcel Phase; and
(IX) the delivery to Purchaser of an endorsement (a
"Club Cottages Parcel Endorsement") to the Option Policy, later-dating the
Option Policy to a date after the effectuation of the subdivision, platting and
zoning requirements with respect to a Club Cottages Parcel Phase set forth above
in this subparagraph
<PAGE>
8(e), and containing no changes to the Option Policy other than (a) the
substitution of Club Cottages Parcel Lots for such Club Cottages Parcel Phase on
Schedule A of the Option Policy, (b) the changes permitted by the Meadow Parcel-
Phase II Endorsement, (c) the changes permitted by the Meadow Parcel-Phase III
Endorsement, (d) the changes permitted by the Meadow Parcel-Phase IV
Endorsement, (e) the changes permitted by the Area F Parcel Endorsements, (f)
the changes permitted by the Magnolia Drive Parcel Endorsement, (g) the changes
permitted by the Fifteenth Hole Parcel Endorsement, (h) the deletion from
Schedule A of the Option Policy of any Lots which have been conveyed to
Purchaser, (i) the addition of an endorsement insuring that each of the Club
Cottages Parcel Lots on such Club Cottages Parcel Phase has been legally
subdivided and platted, (j) the addition of an ALTA 3.0 zoning endorsement
insuring that attached residential dwelling units of a number and size in
accordance with the Club Cottages Parcel Site Plan for such Club Cottages Parcel
Phase can be constructed on each of the Club Cottages Parcel Lots on such Club
Cottages Parcel Phase, (k) the addition of an endorsement insuring that each of
the Club Cottages Parcel Lots on such Club Cottages Parcel Phase has
unrestricted access to and from, and unrestricted use for pedestrian and
vehicular ingress and egress of, the Club Cottages Parcel Accessways, and
unrestricted access to and from the Club Cottages Parcel Accessways and Private
Roadways providing access to and from Knoll Road, a dedicated public right-of-
way, and unrestricted use for pedestrian and vehicular ingress and egress of
such Private Roadways, and unrestricted use of all other Private Roadways for
pedestrian and vehicular ingress and egress, and unrestricted access to and from
all other Private Roadways and dedicated public rights-of-way, and (l) the
addition of an endorsement insuring the rights of Purchaser under the Private
Roadway Easement with respect to the Club Cottages Parcel Accessways on such
Club Cottages Parcel Phase.
(v) Within seventy-five (75) days after the Club Cottages Parcel
Completion Date for a Club Cottages Parcel Phase, Seller shall commence, and
within one hundred twenty (120) days after the date of such commencement,
Seller, at its sole cost and expense, shall complete the following:
(A) all actions as shall be necessary to make sanitary
sewer, storm sewer, water, electrical, gas, telephone and cable television
systems and facilities available at the boundary of each of the Club Cottages
Parcel Lots on such Club Cottages Parcel Phase; and
(B) the construction of the Club Cottages Parcel Accessways
on such Club Cottages Parcel Phase, which Club Cottages Parcel Accessways shall
be of the same quality and type as the Private Roadways.
10. Construction Agreement. The obligations of Seller under subparagraphs
----------------------
7(e), 8(e), 9(a)(iii)(C), 9(b)(v), 9(c)(v), 9(d)(v) and 9(e)(v) of this
Agreement (collectively the "Work") shall be performed on behalf of Seller, at
Seller's sole cost and expense, by a site contractor ("Site Contractor")
designated by Purchaser, pursuant to an agreement in form and substance
reasonably acceptable to Purchaser and Seller, by and between Seller and Site
Contractor. The Work shall be supervised by LCCI (hereinafter defined) after
LCCI shall have been duly licensed as a general contractor in the State of North
Carolina. If the supervisory activities of LCCI with respect to the Work
require any time in excess of nominal time periods, the parties shall engage in
good faith negotiations to determine the reasonable value of the supervisory
services of LCCI in excess of nominal time.
11. Indemnifications.
----------------
(a) Seller agrees to indemnify, defend and hold harmless the
Purchaser Group (hereinafter defined), LCL (hereinafter defined) and LCCI from
and against any and all claims, damages, demands, judgments, orders, decrees,
losses, costs, expenses (including consultants' and attorneys' fees and
expenses), forfeitures, charges, liabilities, amounts paid in settlement, fines,
penalties and other sanctions, of any nature whatsoever, which the Purchaser
Group, LCL, LCCI or any of them may suffer or incur by reason of the acts or
omissions or violations of law (including, without limitation, acts or omissions
or violations of law resulting in injury to or death of, or loss or damage to
the property of, any person or persons whomsoever), whether negligent or
willful, of the Seller Group (hereinafter defined) or any of them, including,
without limitation, act or omissions or violations of law of the Seller Group or
any of them occurring after the expiration or earlier termination of this
Agreement.
<PAGE>
(b) Purchaser agrees to indemnify, defend and hold harmless the
Seller Group from and against any and all claims, damages, demands, judgments,
orders, decrees, losses, costs, expenses (including consultants' and attorneys'
fees and expenses), forfeitures, charges, liabilities, amounts paid in
settlement, fines, penalties and other sanctions, of any nature whatsoever,
which the Seller Group or any of them may suffer or incur by reason of the acts
or omissions or violations of law (including, without limitation, acts or
omissions or violations of law resulting in injury to or death of, or loss or
damage to the property of, any person or persons whomsoever), whether negligent
or willful, of the Purchaser Group or any of them, including, without
limitation, acts or omissions or violations of law of any of the Purchaser Group
after the expiration or earlier termination of this Agreement.
(c) The terms and provisions of this paragraph 11 shall survive the
expiration or the earlier termination of this Agreement.
(d) Either party's rights to recover damages under (a) and (b) above
shall be limited to the recovery of direct and actual damages and shall exclude
any right to recover indirect, consequential or incidental damages.
12. Land Evaluations.
----------------
(a) Seller hereby grants to Purchaser and its agents, employees,
representatives, contractors and potential lenders a license during the period
commencing April 1, 1998 and terminating upon the earlier to occur of the
expiration of the last of the Option Periods to expire or the termination of
this Agreement to enter upon the Properties at any time and from time to time
for the purposes of making such inspections, tests, observations, surveys,
analyses and studies and investigations (together "Land Evaluations") as
Purchaser may reasonably desire.
(b) In connection with the exercise of the rights set forth in the
preceding subparagraph (a), Purchaser will (i) use its best efforts to minimize
any interference with the residents of the Properties and other persons with
rights to utilize the Development; (ii) indemnify, defend and hold harmless
Seller from and against any and all claims, causes of action or liabilities for
personal injury or property damage suffered or incurred by Seller by reason of
the activities of Purchaser or others acting on Purchaser's behalf on the
Properties; (iii) repair any damage to the Properties caused by activities of
Purchaser or others acting on Purchaser's behalf in connection with the Land
Evaluations; and (iv) restore the Properties to substantially the same condition
they were in prior to the Land Evaluations.
13. Representations and Warranties of Seller. The parties hereto hereby
----------------------------------------
agree as follows:
(a) Seller hereby represents and warrants to Purchaser, as of the
date of this Agreement and as of the Closing Date, as follows:
(i) The preambles to this Agreement are hereby incorporated in
this Agreement as the representations and warranties of Seller, and are made a
part hereof.
(ii) (A) Seller is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of North
Carolina, with full power to conduct its business as presently conducted and to
execute, deliver, and perform the terms and provisions of this Agreement.
(B) The sole general partner in Seller is Longleaf
Investors Corporation ("General Partner"), a North Carolina corporation. General
Partner is duly organized, validly existing and in good standing under the laws
of the State of North Carolina.
(C) All requisite actions on the part of Seller, General
Partner and the limited partners in Seller to authorize the execution, delivery
and performance by Seller of this Agreement have been duly and validly taken;
and this Agreement was duly executed and delivered by Seller, and constitutes
the legal, valid and
<PAGE>
binding obligation of Seller, and is enforceable in accordance with its terms;
and the execution, delivery and performance by Seller of this Agreement do not
contravene any provision of existing law or regulation, and do not and will not
conflict with or result in any breach of the terms, conditions or provisions of,
or constitute a default under, the limited partnership agreement creating
Seller, or any resolutions of Seller, or any other agreement binding upon
Seller, or any order, writ, injunction, decree or demand of any court or any
governmental authority affecting Seller or General Partner; and no further
approval, consent, order or authorization of, or designation, registration,
declaration or filing with, any governmental authority is required in connection
with the valid execution and delivery by Seller of this Agreement or the
carrying out by Seller of the transactions contemplated by this Agreement; and
except for the approvals, consents and authorizations contemplated herein, all
approvals, consents and authorizations required in connection with the valid
execution and delivery of this Agreement by Seller or the carrying out by Seller
of the transactions contemplated by this Agreement have been obtained by Seller
and are in full force and effect; and except for the approvals, consents and
authorizations contemplated herein, no further approval, consent or
authorization of any other person is required in connection with the valid
execution and delivery of this Agreement by Seller or the carrying out by Seller
of the transactions contemplated by this Agreement.
(iii) Seller has dealt with no broker, finder or other
intermediary other than Ralph S. Bowden ("Seller's Broker") in connection with
the transactions which are the subject of this Agreement; and there are no, and
there will be no, claims by any broker, finder or other person for any
commission, compensation or remuneration arising out of, or in any way related
to, this Agreement or the conveyance of the Properties other than amounts
payable by Seller to Seller's Broker, which amounts shall be the sole and
absolute obligations of Seller, and which amounts shall be paid by Seller when
due and payable.
(iv) To the best of Seller's knowledge, after reasonable
inquiry, there is no existing, proposed or contemplated public plan, public
project or public work affecting the Development or any part thereof that would
materially and adversely affect the use of the Properties contemplated under
this Agreement or the zoning of the Properties.
(v) To the best of Seller's knowledge, after reasonable
inquiry, there is no condemnation proceeding or eminent domain proceeding of any
kind pending, proposed or contemplated against the Development or any part
thereof.
(vi) Except as set forth in Exhibit R attached hereto and made
---------
a part hereof, there is no lease in effect with respect to any of the
Properties.
(vii) Except as set forth in Exhibit S attached hereto and made
---------
a part hereof, there is no party in possession of any portion of the Properties
as lessee, tenant at sufferance or trespasser.
(viii) There is no litigation or proceeding pending or, to the
best of Seller's knowledge, contemplated or threatened against or affecting the
Properties or any portion thereof or Seller or General Partner that, if
adversely determined, would have a material adverse effect on the Properties or
any portion thereof or on Seller or General Partner.
(ix) (A) Pursuant to the terms of the PUD Approval, all of the
Properties are zoned to permit the use of the Properties for residential
purposes.
(B) Each of the Existing Single-Family Lots is zoned for
the construction thereon of a detached single-family dwelling unit.
(C) Seller has no actual knowledge of any fact, or any
action or proceeding, whether pending or threatened, which could result in a
modification of the PUD Approval or of the zoning of the Properties or any
portion thereof that would materially and adversely interfere with the uses of
the Properties contemplated under this Agreement.
<PAGE>
(x) Except for this Agreement and any documents listed in this
Agreement or in any exhibit to this Agreement as being documents to which Seller
is a party, the PUD Approval, the matters set forth in the Option Policy to be
delivered pursuant to this Agreement, and the documents listed in Exhibit T
---------
attached hereto and made a part hereof, there is no agreement of any kind
whatsoever in effect with respect to any of the Properties.
(xi) No person has (A) any right now or at any time in the
future to purchase the Properties or any portion thereof, or (B) any option,
exercisable now or at any time in the future, to purchase the Properties or any
portion thereof, or (C) any right of first refusal, exercisable now or at any
time in the future, to purchase the Properties or any portion thereof.
(xii) Except as set forth in Exhibit U attached hereto and made
---------
a part hereof, there is no judgment, writ, injunction, decree or order
outstanding with respect to the Properties or any portion thereof or Seller or
General Partner.
(xiii) Seller has received no written notice of any violation of,
and, to the best of Seller's knowledge, Seller has not materially or adversely
violated, any applicable federal, state, county, water district, conservation
district, municipal utility district, river authority or local statutes, laws,
regulations, rules ordinances, codes, licenses or permits, including, without
limitation, statutes, laws, regulations, rules, ordinances, codes, licenses or
permits regarding health, safety or environmental matters.
(xiv) Except for wetlands located on those portions of the Area
F Parcel outlined on Exhibit I attached hereto and made a part hereof, and
---------
except for that certain Red Cockaded Woodpecker Habitat Improvement Cooperative
Agreement (the "Woodpecker Agreement"), dated September 15, 1995, between the
United States Fish and Wildlife Service and Seller, Seller has no actual
knowledge of any material adverse fact relating to the physical condition of the
Properties, including, without limitation, (A) adverse soil, groundwater or
surface conditions, (B) the location of any portion of the Properties in a flood
plain or flood-prone area within the meaning of the Flood Disaster Protection
Act of 1973, (C) the presence of wetlands within the confines of any of the
Properties, (D) the presence in, on or about any portion of the Properties of
any threatened or endangered species, (E) any portion of the Properties being
subject to historical preservation, (F) the presence of any above-ground storage
tanks or underground storage tanks within the confines of any of the Properties,
or (G) except for materials normally associated with the construction of
residential housing, the maintenance and repair of such housing and the normal
operation of a golf course, the discharge, disposal, deposit, injection,
dumping, spilling, leaking, leaching, placing, presence, pumping, pouring,
emitting, emptying, escaping or release on or at any of the Properties of any
hazardous material, including, without limitation, radioactive materials,
asbestos and asbestos-containing materials (whether or not friable), urea-
formaldehyde in any of its forms, polychlorinated biphenyls, oil, used oil,
petroleum products and their by-products, lead-based paint, radon, or any
substances defined as "hazardous substances", "hazardous materials", "hazardous
wastes", "toxic substances", "solid waste", "hazardous chemicals", "hazardous
air pollutants", "pollutants", "contaminants", or "toxic chemicals" under any
federal, state or local law, ordinance, regulation or rule regarding the
environment .
(xv) Except as set forth in Exhibit V attached hereto and made
---------
a part hereof, to the best of Seller's knowledge, after reasonable inquiry, no
current or future owner of any of the Properties has any obligation to any
governmental agency, utility company, school board, church or other religious
body, homeowner, homeowners' association or any other person to make any
contribution of money or dedication of land, or to construct, install or
maintain any improvements of a public or private nature on or off the
Properties; and no governmental authority has imposed any requirement that the
owner of all or any part of the Properties pay, directly or indirectly, any
special fees or contributions, or incur any expenses or obligations, in
connection with any construction on the Properties or any part thereof.
(xvi) To the best of Seller's knowledge, after diligent inquiry,
there is no easement, claim of easement, actual or contemplated mechanic's lien
or materialmen's lien, or tax or special assessment relating to any of the
Properties that is not shown of public record except for potential mechanics' or
materialmen's liens in
<PAGE>
connection with Seller's construction of residential dwellings, which potential
liens Seller promptly will cause to be discharged if recorded.
(xvii) (A) Sanitary sewer, storm sewer, water, electrical, gas,
telephone and cable television systems and facilities are available at the
boundary of each of the Existing Single-Family Lots, all of which systems and
facilities are operational and in good working order, and all of which systems
and facilities are publicly owned; and the owners of such systems and facilities
are required by law to provide sanitary sewer, storm sewer, water, electrical,
gas, telephone and cable television services to the Units located at any time
and from time to time on each of the Existing Single-Family Lots; and all of
such systems and facilities have adequate capacity to provide sanitary sewer,
storm sewer, water, electrical, gas, telephone and cable television services to
the Units located at any time and from time to time on the each of the Existing
Lots.
(B) Sanitary sewer, storm sewer, water, electrical, gas,
telephone and cable television systems and facilities adequate to service not
less than eleven (11) Detached Units on the Magnolia Drive Parcel are available
at the boundary of the Magnolia Drive Parcel, all of which systems and
facilities are operational and in good working order, and all of which systems
and facilities are publicly owned; and the owners of such systems and facilities
are required by law to provide sanitary sewer, storm sewer, water, electrical,
gas, telephone and cable television services to not less than 11 Detached Units
located at any time and from time to time on the Magnolia Drive Parcel; and all
of such systems and facilities have adequate capacity to provide sanitary sewer,
storm sewer, water, electrical, gas, telephone and cable television services to
not less than 11 Detached Units located at any time and from time to time on the
Magnolia Drive Parcel.
(C) Sanitary sewer, storm sewer, water, electrical, gas,
telephone and cable television systems and facilities adequate to service not
less than four (4) Units on the Fifteenth Hole Parcel are available at the
boundary of the Fifteenth Hole Parcel, all of which systems and facilities are
operational and in good working order, and all of which systems and facilities
are publicly owned; and the owners of such systems and facilities are required
by law to provide sanitary sewer, storm sewer, water, electrical, gas, telephone
and cable television services to not less than 4 Units located at any time and
from time to time on the Fifteenth Hole Parcel; and all of such systems and
facilities have adequate capacity to provide sanitary sewer, storm sewer, water,
electrical, gas, telephone and cable television services to not less than 4
Units located at any time and from time to time on the Fifteenth Hole Parcel.
(D) Sanitary sewer, storm sewer, water, electrical, gas,
telephone and cable television systems and facilities adequate to service not
less than seventy-one (71) Units on the Meadow Parcel are available at the
boundary of the Meadow Parcel, all of which systems and facilities are
operational and in good working order, and all of which systems and facilities
are publicly owned; and the owners of such systems and facilities are required
by law to provide sanitary sewer, storm sewer, water, electrical, gas, telephone
and cable television services to not less than 71 Units located at any time and
from time to time on the Meadow Parcel; and all of such systems and facilities
have adequate capacity to provide sanitary sewer, storm sewer, water,
electrical, gas, telephone and cable television services to not less than 71
Units located at any time and from time to time on the Meadow Parcel.
(E) Sanitary sewer, storm sewer, water, electrical, gas,
telephone and cable television systems and facilities adequate to service not
less than fifty-seven (57) Units on the Area F Parcel are available at the
boundary of the Area F Parcel, all of which systems and facilities are
operational and in good working order, and all of which systems and facilities
are publicly owned; and the owners of such systems and facilities are required
by law to provide sanitary sewer, storm sewer, water, electrical, gas, telephone
and cable television services to not less than 57 Units located at any time and
from time to time on the Area F Parcel; and all of such systems and facilities
have adequate capacity to provide sanitary sewer, storm sewer, water,
electrical, gas, telephone and cable television services to not less than 57
Units located at any time and from time to time on The Area F Parcel.
<PAGE>
(F) Sanitary sewer, storm sewer, water, electrical,
gas, telephone and cable television systems and facilities adequate to service
not less than forty-two (42) Units on the Club Cottages Parcel are available at
the boundary of the Club Cottages Parcel, all of which systems and facilities
are operational and in good working order, and all of which systems and
facilities are publicly owned; and the owners of such systems and facilities are
required by law to provide sanitary sewer, storm sewer, water, electrical, gas,
telephone and cable television services to not less than 42 Units located at any
time and from time to time on the Club Cottages Parcel; and all of such systems
and facilities have adequate capacity to provide sanitary sewer, storm sewer,
water, electrical, gas, telephone and cable television services to not less than
42 Units located at any time and from time to time on the Club Cottages Parcel.
(xviii) All permits, approvals, authorizations and licenses
(herein together called the "Permits") required for the development of the
Properties for residential purposes, other than building permits, have been
issued or will be issued by all governmental authorities having jurisdiction
over the Properties, and all such existing Permits are in full force and effect,
and have not been modified, amended or changed in any manner whatsoever; and
there are no defaults under such Permits, nor has any event occurred which, with
the passage of time or the giving of notice or both, would constitute a default
under such Permits; and all of the existing Permits are issued to, held by, and
assignable by Seller; and to the extent required by law to effect the
transactions contemplated under this Agreement all of the issuers of the Permits
have consented or will consent if required by law to the assignment by Seller to
Purchaser of all of Seller's right, title and interest in, to and under the
Permits.
(xix) All of the Existing Single-Family Lots have been
properly registered pursuant to the Interstate Land Sales Act and any comparable
state act in effect in North Carolina. Purchaser shall be entitled to amend any
of such registrations to the extent necessary to cover the sale by Purchaser of
Lots and Units; provided, however, (A) Purchaser shall pay for any and all
costs, including but not limited to attorneys' fees, associated with the
amendment or updating by Purchaser of any of Seller's existing registrations or
any of Seller's new registrations that are required in order to cover the sale
by Purchaser of Lot/Unit packages (it being understood and agreed that Purchaser
shall have no obligations whatsoever with respect to any existing registrations
or any new registrations of Seller relating solely to the sale by Seller of
lots) and (B) such amendments and updates shall be true and accurate. Purchaser
shall indemnify and hold Seller harmless against any violation by Purchaser of
any state or federal law requiring the registration by Purchaser of the sale by
Purchaser of Lot/Unit packages, including payment of attorneys' fees and fines
or penalties suffered or incurred by Seller by reason of such violation.
(xx) No governmental authority or agency having jurisdiction
over the Properties has declared or effected any moratorium on (A) the issuance
of permits for the construction of Units on the Properties, or (B) the issuance
of certificates of occupancy for Units on the Properties, or (C) the purchase of
sewer and/or water taps for Units on the Properties.
(xxi) To the best of Seller's knowledge, after diligent
inquiry, there are no water wells located on or under any of the Properties.
(xxii) The Development is located entirely within the
boundaries of the Town.
(xxiii) (A) (I) For purposes of this Agreement, the "Hunter
Trail Declaration" shall mean the Longleaf Hunter Trail Declaration of
Covenants, Conditions and Restrictions, dated March 11, 1991, made by Seller,
recorded with the Recorder's Office on March 19, 1991 in book 767 at page 99; as
amended by the First Amendment Longleaf Hunter Trail Declaration of Covenants,
Conditions and Restrictions, dated October 23, 1991, made by Seller, recorded
with the Recorder's Office on December 9, 1991 in book 806 at page 509; as
amended by the Second Amendment Longleaf Hunter Trail Declaration of Covenants,
Conditions and Restrictions, dated April 26, 1992, made by Seller, recorded with
the Recorder's Office on June 5, 1992 in book 842 at page 26; as amended by the
Third Amendment Longleaf Hunter Trail Declaration of Covenants, Conditions and
Restrictions, dated April 16, 1993, made by Seller, recorded with the Recorder's
Office on April 22, 1993 in book 905 at page 49; and as
<PAGE>
amended by the Fourth Amendment Longleaf Hunter Trail Declaration of Covenants,
Conditions and Restrictions, dated June 1, 1994, made by Seller, recorded with
the Recorder's Office on July 15, 1994 in book 1017 at page 25.
(II) For purposes of this Agreement, the "Single-
Family Declaration" shall mean the Longleaf Single-Family Declaration of
Covenants, Conditions and Restrictions, dated March 1, 1991, made by Seller,
recorded with the Recorder's Office on March 22, 1991 in book 767 at page 296;
as amended by the First Amendment Longleaf Single-Family Declaration of
Covenants, Conditions and Restrictions, dated April 16, 1993, made by Seller,
recorded with the Recorder's Office on April 22, 1993 in book 905 at page 481;
as amended by the Second Amendment to Declaration - Longleaf Single-Family,
dated June 1, 1994, made by Seller, recorded with the Recorder's Office on July
15, 1994 in book 1017 at page 22; and as amended by the Third Amendment Longleaf
Single-Family Declaration of Covenants, Conditions and Restrictions, dated
August 28, 1995, made by Seller, recorded with the Recorder's Office on August
30, 1995 in book 1110 at page 319.
(III) For purposes of this Agreement, the "Master
Declaration" shall mean the Articles of Incorporation of Longleaf Master
Homeowners Association, Inc., dated September 15, 1989, recorded with the
Recorder's Office on September 25, 1989 in book 681 at page 514; as amended by
Statement of Change of Registered Office or Registered Agent of Longleaf Master
Homeowners Association, Inc., dated June 1, 1990, recorded with the Recorder's
Office on August 27, 1990 in book 737 at page 443; as amended by Amended and
Restated Charter of Longleaf Master Homeowners Association, Inc., dated May 31,
1991, made by Seller, recorded with the Recorder's Office on June 19, 1991 in
book 781 at page 339; and as amended by the Third Amendment Longleaf Single-
Family Declaration of Covenants, Conditions and Restrictions, dated August 28,
1995, made by Seller, recorded with the Recorder's Office on August 30, 1995 in
book 1110 at page 319.
(IV) For purposes of this Agreement, the "Lakeside
Villas Declaration" shall mean The Longleaf Lakeside Villas Declaration of
Condominium, dated August 31, 1989, made by Seller, recorded in the Recorder's
Office on September 27, 1989 in book 681 at page 1; as amended by an Amendment
to Declaration of Condominium - Longleaf Lakeside Villas, dated April 19, 1990,
made by Seller, recorded in the Recorder's Office on April 26, 1990 in book 716
at page 366; and as amended by Amendment to Declaration of Condominium -
Longleaf Lakeside Villas, dated January 29, 1991, made by Seller, recorded in
the Recorder's Office on February 14, 1991 in book 762 at page 507; and as
amended by Amendment to Declaration of Condominium - Longleaf Lakeside, dated
June 7, 1993, made by Seller, recorded in the Recorder's Office on June 9, 1993
in book 917 at page 12; and as amended by Amendment to Declaration of
Condominium - Longleaf Lakeside Villas, dated November 19, 1993, made by Seller,
recorded in the Recorder's Office on December 2, 1993 in book 961 at page 274;
and as amended by Longleaf Lakeside Villas Amended Declaration of Condominium,
dated April 14, 1994, made by Seller, recorded in the Recorder's Office on April
29, 1994 in book 998 at page 370; and as amended by Longleaf Lakeside Villas
Amended Declaration of Condominium, dated June 22, 1995, made by Seller,
recorded in the Recorder's Office on June 22, 1995 in book 1093 at page 425; and
as amended by Longleaf Lakeside Villas Amended Declaration of Condominium, dated
February 29, 1996, made by Seller, recorded in the Recorder's Office on March 4,
1996 in book 1155 at page 21; and as amended by Longleaf Lakeside Villas Amended
Declaration of Condominium, dated March 1, 1996, made by Seller, recorded in the
Recorder's Office on March 26, 1996 in book 1160 at page 517; and as amended by
Longleaf Lakeside Villas Amended Declaration of Condominium, dated November 15,
1996, made by Seller, recorded in the Recorder's Office on November 26, 1996 in
book 1224 at page 416; and as amended by Longleaf Lakeside Villas Amended
Declaration of Condominium, dated February 29, 1996, made by Seller, recorded in
the Recorder's Office on May 21, 1997 in book 1270 at page 74; and as amended by
Longleaf Lakeside Villas Amended Declaration of Condominium, dated August 27,
1997, made by Seller, recorded in the Recorder's Office on August 29, 1997 in
book 1299 at page 132.
(IV) For purposes of this Agreement, the "Master
Declaration By-Laws" shall mean the Restated By-Laws of Longleaf Master
Homeowners Association, dated March 1, 1991.
(V) The Hunter Trail Declaration, the Single-Family
Declaration, the Patio Homes 'G' Declaration, the Lakeside Villas Declaration,
the Magnolia Park Declaration, the Meadow Villas
<PAGE>
Declaration, the Club Cottages Declaration and the Master Declaration are herein
together sometimes called the "Declarations" or individually a "Declaration."
(B) Each of the Declarations is in full force and effect,
and has not been modified or amended in any way.
(C) The Master Declaration By-Laws are in full force and
effect, and have not been modified or amended in any way.
(D) Seller is the declarant (the "Declarant") under each of
the Declarations, and owns, holds and is entitled to exercise all of the right,
title, interest, and privileges of the Declarant under the Declarations.
(E) Seller is the owner of the Private Roadways; and none
of the Private Roadways has been dedicated or transferred to any other person.
(F) The roadways in the Development that are known as Knoll
Road, Steeplechase Way, Steeplechase Court, Paddock Lane, Preakness Court,
Belmont Court, Triple Crown Circle, Hunter Trail, Hunter Court and Magnolia
Drive (herein together called the "Dedicated Roadways") are all dedicated public
rights-of-way which have been accepted by, and are owned and maintained by, the
Town; and Knoll Road has direct access to and from Airport Road and Midland
Road, both of which are dedicated public rights-of-way.
(G) The Private Roadways have been completely installed,
are in good condition, and are open and available for use by vehicular and
pedestrian traffic; and all of the Private Roadways are and will be available
for use by all of the owners of Units constructed on the Properties for
vehicular and pedestrian use; and the Private Roadways have direct access to
Knoll Road.
(H) Pursuant to the terms of the Master Declaration,
Longleaf Master Homeowners Association, Inc. (the "Master Association") has the
power to directly or indirectly administer and enforce the covenants,
conditions, restrictions, charges and liens of the Declarations; and the Master
Association is a corporation duly organized, validly existing and in good
standing under the laws of the State of North Carolina.
(I) The Master Association is currently exercising all of
the rights and duties of the associations (herein together sometimes called the
"Individual Associations" or individually an "Individual Association") created
by the Hunter Trail Declaration, the Single-Family Declaration, the Patio Homes
'G' Declaration, the Lakeside Villas Declaration, the Magnolia Park Declaration,
the Meadow Villas Declaration and the Club Cottages Declaration other than the
rights and duties set forth in Exhibit W attached hereto and made a part hereof.
---------
(J) Seller currently controls the Master Association and
each of the Individual Associations except for the Individual Associations known
as Longleaf Lakeside Villas Homeowners Association, Inc. and Longleaf Club
Cottage Homeowners Association, Inc. Seller has turned over control of the
Longleaf Lakeside Villas Homeowners Association, Inc. and of the Longleaf Club
Cottages Homeowners Association, Inc. to the Longleaf Lakeside Villas Homeowners
Association, Inc. and the Club Cottage Homeowners Association, Inc.,
respectively, subject to the provisions of their by-laws and the by-laws of the
Master Association.
(K) Seller will retain control of each of the Individual
Associations referenced in the Hunter Trail Declaration, the Patio Homes 'G'
Declaration and the Magnolia Park Declaration until such time as a total of four
hundred fifty dwelling units that are subject to any of the Hunter Trail
Declaration, the Patio Homes 'G' Declaration and the Magnolia Park Declaration
shall have been conveyed to third-party purchasers; and, as of the Closing Date,
the units that are subject to said three Individual Declarations that have been
conveyed to third-
<PAGE>
party purchasers, and the units that are subject to any of said three
Individual Declarations that are subject to contracts for sale with third-party
purchasers, are as set forth in Exhibit X attached hereto and made a part
---------
hereof.
(L) The rights of Seller, as Declarant under each of the Declarations,
are and will be available to Purchaser to the extent necessary to effect the
terms of this Agreement.
(M) The assessments and reserves currently payable under the
Declarations are set forth on Exhibit Y attached hereto and made a part hereof.
---------
(N) No assessments and reserves relating to each of the Hunter Trail
Declaration, the Patio Homes 'G' Declaration and the Magnolia Park Declaration
are held by The Longleaf Hunter Trail Homeowners' Association, Inc.
(O) Exhibit Z attached hereto and made a part hereof sets forth the
---------
portions of the common areas created by the Declarations that have been
transferred, and the name of the transferees.
(P) All casualty insurance, public liability insurance, fidelity
insurance and other insurance required to be maintained pursuant to the terms of
the Declarations is in full force and effect.
(Q) The only architectural guidelines and standards that have been
adopted pursuant to the Declarations are the Longleaf Architectural Guidelines
and Review Procedures for Custom Built Single-Family Homes (the "Single-Family
Architectural Guidelines"), dated September, 1990, adopted by the Longleaf
Architectural Review Board; which Single-Family Architectural Guidelines were
approved by the Master Association; and which Single-Family Architectural
Guidelines are in full force and effect, and have not been modified or amended.
(R) There are no rules and regulations governing the day-to-day
operation of the Properties other than the rules and regulations contained in
the Declarations.
(S) Any portion of any of the Properties can be made subject to any of
the Declarations other than the Club Cottages Declaration and the Lakeside
Villas Declaration.
(T) The definition of "Living Area" in the Patio Homes 'G' Declaration
is the same as the definition of "Living Area" that is contained in the Hunter
Trail Declaration.
(U) No consent, approval, authorization or permission is required from
Seller, as Declarant under the Master Declaration, or the Master Association in
order to subdivide and plat the Properties.
(V) Attached hereto as Exhibit AA and made a part hereof is a list of
----------
the members of the boards of directors of the Master Association and each of the
Individual Associations, together with a list of the officers of each of the
Master Association and the Individual Associations.
(W) On the Closing Date, the members of the Architectural Review
Committee will be the following persons: Mitchell K. Adams, Robert S.
Farrington, Jr. and Robert T. Karp.
(X) So long as Seller controls the Master Association, Seller will
have the power to appoint the members of the Architectural Review Committee.
(xxiv)(A) Fire protection is provided to the Development by the Town.
(B) Police protection is provided to the Development by the Town.
<PAGE>
(C) Educational services and facilities are provided to the
Development by the Town.
(xxv) Seller is the fee simple owner of the sales center (the "Sales
Center") for the Properties, which Sales Center is located near the intersection
of Knoll Road and Magnolia Drive in the Development; which Sales Center is
subject to no lien or encumbrance of any nature whatsoever other than a first
mortgage and a second mortgage, recorded in the Recorder's Office in book 656 at
page 1, and in book 447 at page 72, respectively, made by Seller to respectively
NationsBank, N.A. and O. Tracy Parks, Trustee (as assigned to John D. Cooper,
Jr.) (which mortgages, as amended, are herein together sometimes called the
"Sales Center Mortgages"); which Sales Center is subject to no lease of any
kind; and which Sales Center is used by Seller for the purpose of marketing the
sale of Lots in the Properties.
(xxvi)(A) To the best of Seller's knowledge, Maples is the sole owner
in fee simple of all of the following (herein together called the "Golf Course
Facilities"):
(I) the eighteen-hole golf course located on the
Development and known as "The Club at Longleaf";
(II) the golf course clubhouse and surrounding facilities,
including, without limitation, the parking areas and practice putting green,
located on the Development;
(III) the driving range located on the Development;
(IV) the tennis and swimming facilities located on the
Development; and
(V) the golf maintenance center located on the
Development.
(B) The use of the Golf Course Facilities, including the use of the
Golf Course Facilities by members of The Club at Longleaf (the "Club"), are
governed by the Maples Agreements.
(C) Notwithstanding anything to the contrary contained in the Golf
Club Rules, the number of residential lots and condominium units in the
Development with respect to which Seller is entitled to grant easements of
enjoyment under the Easement of Enjoyment is five hundred nine (509), three
hundred nineteen (319) of which easements of enjoyment are available for
conveyance to purchasers of Units.
(D) (I) Each owner of a Unit who purchases a membership in the Club
and remains a member in good standing of the Club under the Golf Club Rules is
entitled to a membership in the Club upon payment of the applicable membership
fees and dues. The membership fees and dues payable with respect to the Club as
of the Closing Date, and the recipient of such fees and dues, are set forth in
Exhibit BB attached hereto and made a part hereof.
- - ----------
(II) Pursuant to the Restated Contract, Seller has contracted with
Maples to purchase six hundred eighteen memberships in the Club. Purchaser does
not have, and shall at no time have, any personal obligation to purchase any
memberships in the Club other than with respect to those Lots which are conveyed
by Seller to Purchaser. Purchaser shall have no obligation to make any payments
of any amounts under the Maples Agreements except for the amounts payable
pursuant to subparagraph 1(g) of this Agreement.
(E) The swimming pool, bathhouse and tennis courts comprising part of
the Golf Course Facilities were completed in accordance with the Maples
Contract, and the $300,000 letter of credit delivered to Seller by Maples to
ensure such completion was returned to Maples.
<PAGE>
(xxvii) (A) The only real estate that is currently subject to the terms
of the Meadow Villas Declaration is the real estate outlined on Exhibit G-6
-----------
attached hereto and made a part hereof ("Meadow Parcel-Phase I"), which includes
ten condominium units located in three separate buildings (the "Meadow Parcel-
Phase I Buildings"), as shown on Exhibit G-6.
-----------
(B) (I) Pursuant to that plat recorded at Plat Cabinet 6,
Page 686 at the Recorder's Office (the "Meadow Parcel Roadway Agreement"),
condominium units in the Meadow Parcel-Phase I Buildings have unrestricted
access to and from the Meadow Parcel-Phase I Buildings and Meadow Parcel Roadway
I, and have unrestricted use of Meadow Parcel Roadway I for pedestrian and
vehicular ingress and egress, and have unrestricted access to and from Meadow
Parcel Roadway I and Knoll Road, a dedicated public right-of-way.
(II) Meadow Parcel Roadway I is owned by The Meadows
Condominium, subject to the terms of the Meadow Parcel Roadway Agreement.
(III) Meadow Parcel Roadway I has been completely
installed; is of the same quality and type and the Private Roadways; is in good
condition; and is open and available for use by vehicular and pedestrian
traffic.
(IV) Complete engineering plans ("Existing Meadow
Parcel-Phase II Plans") exist for the development of Meadow Parcel-Phase II with
five separate buildings as shown on Exhibit G-2 attached hereto.
-----------
(b) Purchaser acknowledges that Seller has made no representations and
warranties other than the representations contained in this Agreement. All of
the representations and warranties made by Seller in this Agreement shall be
deemed to be remade on the Closing Date and shall survive the Closing.
(c) If any of the representations and warranties made by Seller in
this Agreement are not materially true as of the date of execution of this
Agreement or any time thereafter prior to the Closing Date, such falsity shall
constitute a default by Seller under this Agreement, and Seller shall have
thirty (30) days from the receipt of written notice thereof to cure such
default. If, at the end of such thirty (30) day period, Seller shall have
failed to cure such default, Purchaser shall have the right to terminate this
Agreement. If Purchaser shall so elect to terminate this Agreement, then the
parties hereto shall have no further rights, obligations or liabilities under
this Agreement [other than the obligations of Seller under subparagraphs 11(a),
18(b), 19(b) and 20(b) of this Agreement and the obligations of Purchaser under
subparagraphs 11(b), 12(b), 18(d) and 19(c) of this Agreement].
(d) When a representation or warranty is made "to the actual knowledge
of Seller" or "to the best of Seller's knowledge," such term shall mean the
current actual knowledge of Robert T. Karp or Robert S. Farrington, Jr.
(e) Seller will include a grant of the Easement of Enjoyment in each
special warranty deed delivered to Purchaser conveying a Lot, and will not cause
a termination of its right to grant such Easements of Enjoyment.
14. Representations and Warranties of Purchaser. The parties hereto
-------------------------------------------
hereby agree as follows:
(a) Purchaser hereby represents and warrants to Seller, as of the date
of execution of this Agreement and as of the Closing Date, as follows:
(i) (A) Purchaser is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and duly qualified and in good standing under the laws of the State of North
Carolina, with full power to conduct its business as presently conducted and to
execute, deliver, and perform the terms and provisions of this Agreement.
<PAGE>
(B) The sole member of Purchaser is CMC. CMC is duly
organized, validly existing and in good standing under the laws of the State of
Delaware.
(C) All requisite actions on the part of Purchaser and CMC to
authorize the execution, delivery and performance by Purchaser of this Agreement
have been duly and validly taken; and this Agreement was duly executed and
delivered by Purchaser, and constitutes the legal, valid and binding obligation
of Purchaser, and is enforceable in accordance with its terms; and the
execution, delivery and performance by Purchaser of this Agreement do not
contravene any provision of existing law or regulation, and do not and will not
conflict with or result in any breach of the terms, conditions or provisions of,
or constitute a default under, the limited liability company agreement creating
Purchaser, or any resolutions of Purchaser, or any other agreement binding upon
Purchaser, or any order, writ, injunction, decree or demand of any court or any
governmental authority affecting Purchaser or CMC; and no further approval,
consent, order or authorization of, or designation, registration, declaration or
filing with, any governmental authority is required in connection with the valid
execution and delivery by Purchaser of this Agreement or the carrying out by
Purchaser of the transactions contemplated by this Agreement; and all approvals,
consents and authorizations required in connection with the valid execution and
delivery of this Agreement by Purchaser or the carrying out by Purchaser of the
transactions contemplated by this Agreement have been obtained by Purchaser and
are in full force and effect; and no further approval, consent or authorization
of any other person is required in connection with the valid execution and
delivery of this Agreement by Purchaser or the carrying out by Purchaser of the
transactions contemplated by this Agreement.
(ii) Purchaser has dealt with no broker, finder or other
intermediary in connection with the transactions which are the subject of this
Agreement other than Seller's Broker; and there are no, and there will be no,
claims by any broker, finder or other person against Purchaser for any
commission, compensation or remuneration arising out of, or in any way related
to, this Agreement or the conveyance of the Properties.
(iii) Purchaser has received a copy of, and has reviewed, each of
(A) that certain Property Report, dated May 2, 1997, prepared by Seller with
respect to the Development, and (B) the Woodpecker Agreement.
(b) Seller acknowledges that Purchaser has made no representations and
warranties other than the representations contained in this Agreement. All of
the representations and warranties made by Purchaser in this Agreement shall be
deemed to be remade on the Closing Date and shall survive the Closing.
(c) If any of the representations and warranties made by Purchaser in
this Agreement are not true as of the date of execution of this Agreement or any
time thereafter prior to the Closing Date, such falsity shall constitute a
default by Purchaser under this Agreement, and Purchaser shall have thirty (30)
days from the receipt of written notice thereof to cure such default. If, at
the end of such thirty (30) day period, Purchaser shall failed to cure such
default, Seller shall have the right to terminate this Agreement. If Seller
shall so elect to terminate this Agreement, then the parties hereto shall have
no further rights, obligations or liabilities under this Agreement [other than
the obligations of Seller under paragraphs 11(a), 18(b), 19(b) and 20(b) of this
Agreement and the obligations of Purchaser under paragraphs 11(b), 12(b), 18(d)
and 19(c) of this Agreement].
15. Covenants of Purchaser; Purchaser's Obligations During the Option
-----------------------------------------------------------------
Periods. Until the expiration of the last of the Option Periods to expire or the
- - -------
earlier termination of this Agreement, Purchaser shall do the following:
(a) Cause the Detached Units, if any, that may be built by
Purchaser on Single-Family Lots to be constructed in conformance with the
Single-Family Architectural Guidelines;
(b) Comply with the applicable registration requirements with
respect to the sale by Purchaser of Units and/or Lots under federal law, and
comply with the applicable registration requirements under the laws of all
states in which Purchaser is offering Units and/or Lots for sale, provided,
however, that Purchaser shall pay for any and all costs, including but not
limited to attorneys' fees, associated with the amendment or updating by
<PAGE>
Purchaser of any of Seller's existing registrations or any of Seller's new
registrations that are required in order to cover the sale by Purchaser of
Lot/Unit packages (it being understood and agreed that Purchaser shall have no
obligations whatsoever with respect to any existing registrations or any new
registrations of Seller relating solely to the sale by Seller of lots;
(c) Comply with all applicable federal and state laws regarding
the solicitation of purchasers for Units, including, without limitation, all
applicable federal and state laws regarding advertising;
(d) Manage, at the sole cost and expense of Seller, the twelve
(12) existing condominium units governed by the Club Cottages Declaration
pursuant to the Management Agreement attached hereto as Exhibit CC and made a
----------
part hereof,and manage the Club Cottage Rental Program pursuant to the
checklist set forth on Exhibit DD attached hereto and made a part hereof, for
----------
which services Seller shall pay to Purchaser a fee in an amount to be
agreed upon by Seller and Purchaser by December 1, 1998;
(e) Maintain, at the sole cost and expense of Seller, the
Properties, for which service Seller shall pay to Purchaser a fee in an amount
to be agreed upon by Seller and Purchaser by December 1, 1998;
(f) Maintain, with funds collected pursuant to the Declarations,
the common areas, if any, of the Master Association and of the Individual
Associations that are set forth on Exhibit Z; provided that any amounts in
---------
excess of those collected pursuant to the Declarations that are required to
maintain such common areas shall be the sole responsibility of, and shall be
promptly paid to Purchaser by, Seller; further provided, that Seller shall pay
to Purchaser a fee for such service in an amount to be agreed upon by Seller and
Purchaser by December 1, 1998;
(g) Beginning January 1, 1999, conduct, for a fee in an amount to
be agreed upon by Seller and Purchaser by December 1, 1998, the administrative
services of the Master Association and Individual Associations, including but
not limited to setting budgets and collecting fees and dues, all as set forth on
Exhibit EE, Schedule of Administrative Services, attached hereto and made a part
- - ----------
hereof, the cost of the provision of which administrative services shall be paid
to Purchaser from the amounts collected pursuant to the Declarations, provided
that any amounts in excess of those collected pursuant to the Declarations that
are required to conduct such administrative services shall be the sole
responsibility of, and shall be promptly paid to Purchaser by, Seller;
(h) Meet with Seller on a weekly basis utilizing an agenda
reasonably acceptable to both Seller and Purchaser;
(i) Provide Seller with copies of Sales Agreements and of the
RESPA statements provided to Third-Party Buyers in connection with the closings
of Units;
(j) Continue to be a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and duly qualified and in good standing under the laws of the State of North
Carolina, with full power to conduct its business as presently conducted, the
controlling member of which shall be CMC Heartland Partners, a Delaware general
partnership;
(k) Perform all of its obligations under the documents evidencing
and securing the Construction Loan;
(l) During the term of the Sales Center Agreement, pay the
interest payable with respect to the Sales Center Mortgages not in excess of
$1,546.00 per month, and the real estate taxes payable with respect to the Sales
Center not in excess of $2,659.00 per year;
<PAGE>
(m) From and after Purchaser shall have exercised an Option with
respect to a Lot to and including the Lot Closing with respect to such Lot, pay
the real estate taxes payable with respect to the improvements constructed by
Purchaser on such Lot (but not with respect to such Lot);
(n) Pay the costs of all utilities services used by Purchaser in
connection with the construction of Units;
(o) maintain general liability insurance, in a reasonable amount,
with respect to the improvements constructed on the Properties (so long as the
portions of the Properties on which such improvements are located shall be owned
by Seller), and name Seller as an additional insured under the insurance policy
providing such general liability insurance;
(p) maintain automobile liability insurance, in reasonable
amounts, with respect to such of the Properties as are owned by Seller, and name
Seller as an additional insured under the insurance policy providing such
automobile liability insurance;
(q) maintain workmen's compensation insurance, in the statutorily-
required amount, with respect to such of the Properties as are owned by Seller;
(r) cause the Facilitating Broker (hereinafter defined) to keep
its North Carolina real estate broker's license in full force and effect;
(s) cause each such person who shall be acting as a general
contractor for Purchaser with respect to the construction of improvements on the
Properties to keep its North Carolina general contractor's license in full force
and effect;
(t) cause the Tract Units, if any, constructed by Purchaser on
Meadow Parcel-Phase II to be of generally the same exterior architectural
design, and the same general quality in terms of materials and labor, as the
tract units constructed by Seller on Meadow Parcel-Phase I;
(u) cause the Tract Units, if any, constructed by Purchaser on
Meadow Parcel-Phase III, Meadow Parcel-Phase IV and the Club Cottages Parcel to
be submitted to Seller for approval, which approval shall not be unreasonably
withheld provided that such Tract Units are generally consistent with the
exterior design of, and have the same general quality in terms of materials and
labor as, other units in the Development; and
(v) cause the Tract Units, if any, constructed by Purchaser on any
Property other than the Meadow Parcel or the Club Cottages Parcel to be
submitted to Seller for approval, which approval shall not be unreasonably
withheld provided that such Tract Units are generally consistent with the
exterior design of, and have the same general quality in terms of materials and
labor as, other units in the Development;
(w) comply with the terms and conditions of this Agreement; and
(x) pay all sums due to Seller and Maples pursuant to the terms
of this Agreement.
In addition to any other right of Seller in this Agreement, if Purchaser shall
default in any of its covenants or obligations set forth in this paragraph 15,
and such default shall continue for a period of thirty (30) days after receipt
by Purchaser of a written notice from Seller reasonably describing such default
(of if such default cannot be cured within said 30-day period, but Purchaser has
commenced to cure such default and diligently prosecutes such cure to
completion, such additional time as shall be reasonably necessary to cure such
default), Seller may, at its election, do the following: (A)(i) exercise such,
if any, of Seller's rights as Seller may then be entitled to exercise under the
provisions of subparagraphs 1(c)(ii)(A), 1(c)(ii)(B) or 1(c)(ii)(C) of this
Agreement, as the case may be, and/or (ii) enforce specific performance of this
Agreement against Purchaser (unless Purchaser's default is due to a change in
<PAGE>
the law), and (B) in either event, unless Purchaser's default is due to a change
in the law, recover damages from Purchaser for Purchaser's failure to comply
with the covenants and obligations set forth in this paragraph 15 (including,
without limitation, attorneys' fees and expenses). Notwithstanding anything to
the contrary contained in this Agreement, in the event of such default, Seller's
recovery of damages shall be limited to direct and actual damages, and shall
exclude any right to recover indirect, consequential or incidental damages.
In addition to any other right or obligations of the parties that survive a
termination of this Agreement, the covenants of Purchaser under subparagraphs
(a), (b), (c), (j), (k), (m), (n), (o), (p), (s), (t), (u), (v), (w) and (x) of
paragraph 15 of this Agreement shall survive.
15A. Minimum Lot Closings. Notwithstanding anything to the contrary
--------------------
contained in this Agreement, Purchaser shall be obligated as follows:
(a) First Two 365-Day Periods After Closing Date.
--------------------------------------------
(i) During the period between the date of this Agreement and
September 1, 1999, Purchaser shall purchase from Seller Lots on which at least
thirty (30) Units will be constructed.
(ii) During the period between September 2, 1999 and September 1,
2000, Purchaser shall purchase from Seller additional Lots on which at least
thirty-five (35) Units will be constructed.
(b) Area F Parcel Lots. During the Area F Parcel Lots Option
------------------
Period with respect to an Area F Parcel Phase, Purchaser shall purchase from
Seller at least thirty-three percent (33%) of the total number of Area F Parcel
Lots in such Area F Parcel Phase.
(c) Applicability of Purchases Regarding Area F Parcel Lots. Each
-------------------------------------------------------
purchase by Purchaser of an Area F Parcel Lot during the first two 365-day
periods after the Closing Date shall be applied to satisfy both (i) Purchaser's
obligations pursuant to paragraph 15A (b) and (ii) Purchaser's obligations
---
pursuant to subparagraphs 15A(a)(i) or 15A(a)(ii), as the case may be.
16. Default By Seller under Paragraphs 7 Through 9. In the event of a
----------------------------------------------
default by Seller of any of its obligations under paragraphs 7, 8 or 9 of this
Agreement, Purchaser shall give to Seller written notice reasonably describing
the default. Seller shall have thirty (30) days from the receipt of such written
notice to cure such default. If, at the end of such thirty (30)-day period,
Seller shall have failed to cure such default, Purchaser may, at its election,
do the following: (A) either (i) terminate this Agreement [in which case this
Agreement shall become null and void, and the parties hereto shall have no
further rights, obligations or labilities under this Agreement other than the
obligations of Seller under subparagraphs 11(b), 12(b), 18(d) and 19(c) of this
Agreement and the obligations of Purchaser under subparagraphs 11(b), 12(b),
18(d) and 19(c) of this Agreement], or (ii) enforce specific performance of this
Agreement against Seller, and in either event (B) recover damages from Seller
for Seller's failure to comply with its obligations under paragraphs 7, 8 or 9
of this Agreement (including, without limitation, attorneys' fees and expenses).
Notwithstanding anything to the contrary contained in this Agreement,
Purchaser's recovery of damages under this paragraph 16 shall be limited to
direct and actual damages, and shall exclude any right to recover indirect,
consequential or incidental damages.
17. Closing. The parties hereto hereby agree as follows:
-------
(a) Closing Date. The closing (the "Closing") of this Agreement
------------
shall take place on September ___, 1998 (the "Closing Date") at the offices of
Robbins May & Rich, 10 Turnberry Wood, Pinehurst, North Carolina 28374, or at
such other time and place as the parties hereto shall agree in writing.
<PAGE>
(b) Seller's Documents. At the Closing, and as a condition precedent
------------------
to Purchaser's obligations under this Agreement, Seller, in addition to
delivering all other items required under this Agreement to be delivered by
Seller, shall deliver to Purchaser the following documents:
(i) documents, in form and substance reasonably acceptable to
Purchaser and Seller, (A) authorizing the execution and delivery by Seller of
this Agreement and of the documents required to be executed and delivered by
Seller pursuant to this Agreement, and (B) evidencing the authority of the
persons signing this Agreement and the documents to be executed and delivered by
Seller pursuant to this Agreement; and
(ii) an executed assignment, in form and substance reasonably
acceptable to Purchaser and Seller, of all of the right, title and interest of
Seller in, to and under all agreements with, and all Permits issued by, all
governmental authorities having jurisdiction over the Properties, together with
the written consents by all such governmental authorities to such assignments by
Seller, and together with a fully-executed original (or a copy certified as true
and correct by Seller) of each of the agreements and Permits with respect to
which Seller is assigning its rights;
(iii) the Option Policy;
(iv) Intentionally Omitted
(v) the Private Roadway Easement, in form and substance
reasonably acceptable to Purchaser and Seller;
(vi) the authorizations that are described in paragraph
3(b)(ii) of this Agreement, in form and substance reasonably acceptable to
Purchaser and Seller;
(vii) the approvals that are described in paragraph 3(b)(iii) of
this Agreement, in form and substance reasonably acceptable to Purchaser and
Seller;
(viii) a copy of the fully-executed Maples Amendment, certified
as true and correct by Seller;
(ix) the Sales Center Agreement, in form and substance
reasonably acceptable to Purchaser and Seller, in duplicate;
(x) the Attornment Agreement, in form and substance reasonably
acceptable to Purchaser and Seller, in duplicate; and
(xi) such other documents, instruments, certifications,
confirmations, ALTA statements, gap undertakings and assignments as may be
reasonably required to fully effect and consummate the transactions contemplated
by this Agreement.
(c) Purchaser's Documents. At the Closing, and as a condition
---------------------
precedent to Seller's obligations under this Agreement, Purchaser, in addition
to delivering all other items required under this Agreement to be delivered by
Purchaser, shall deliver to Seller documents, in form and substance reasonably
acceptable to Purchaser and Seller, (i) authorizing the execution and delivery
by Purchaser of this Agreement and of the documents required to be executed and
delivered by Purchaser pursuant to this Agreement, and (ii) evidencing the
authority of the persons signing this Agreement and the documents to be executed
and delivered by Purchaser pursuant to this Agreement.
(d) Joint Documents. On the Closing Date, Seller and Purchaser shall
---------------
execute triplicate originals of the Option Memorandum, one of which fully-
executed originals shall be delivered to Seller, the second
<PAGE>
of which fully-executed originals shall be delivered to Purchaser, and the third
of which fully-executed originals shall be delivered to Escrowee in connection
with the Closing Escrow (hereinafter defined).
(e) Escrow Closing. The closing and consummation of the transaction
--------------
contemplated by this Agreement shall be effected through an escrow (the "Closing
Escrow") with the Title Insurer, pursuant to which the Title Insurer shall act
as the escrowee ("Escrowee"). Delivery of the Option Memorandum, the Option
Policy and the other closing documents shall be made through the Closing Escrow.
Each party shall have the right to review and approve all documents prior to
their deposit into the Closing Escrow. In the event of conflict between the
terms of this Agreement and the Closing Escrow, the terms of this Agreement
shall control as between the parties hereto.
(f) Transfer Taxes. Seller shall pay any transfer taxes, if any,
--------------
with respect to the Option. Seller shall pay all recording fees with respect to
the Option Memorandum.
(g) Other Documents. The parties hereto hereby agree to deliver to
---------------
each other such additional documents as may be necessary to in order to close
the transactions contemplated in this Agreement.
(h) Waiver. Either party, at its option, may waive, in whole or in
------
part, any unsatisfied condition precedent to its obligations under this
Agreement, or may elect to extend the time within which any such unfulfilled
condition precedent may be satisfied.
18. Broker's Commissions and Fees.
-----------------------------
(a) For purposes of this Agreement, the term "Purchaser Group" shall
mean collectively Purchaser, Heartland Technology, Inc., a Delaware corporation
("HTI"), Heartland Partners, L.P., a Delaware limited partnership ("HPLP"), CMC
Heartland Partners, a Delaware general partnership ("CMC"), and all of the
shareholders, partners, unit owners, directors, officers, affiliates, agents,
employees, representatives, contractors, attorneys, successors and assigns of
each of Purchaser, HTI, HPLP and CMC.
(b) Seller, on its own behalf and on behalf of its successors and
assigns, hereby agrees to indemnify, defend and hold harmless the Purchaser
Group and each of them from and against any and all claims, demands, causes of
action, damages, fines, costs, forfeitures, amounts paid in settlement,
judgments, expenses (including reasonable attorneys' fees and expenses),
charges, liabilities, penalties, and losses of any nature whatsoever which the
Purchaser Group or any of them may suffer or incur by reason of, or in
connection with, all claims for brokerage commissions, fees or other
compensation by all brokers (including, without limitation, the Seller's
Broker), finders or intermediaries with whom Seller has dealt in connection with
the transactions contemplated by this Agreement.
(c) For purposes of this Agreement, the term "Seller Group" shall mean
collectively Seller, General Partner, General Investment & Development Co.
("GID") and all of the shareholders, partners, directors, officers, trustees,
affiliates, agents, employees, representatives, contractors, attorneys,
successors and assigns of each of Seller, General Partner and GID.
(d) Purchaser, on its own behalf and on behalf of its successors and
assigns, hereby agrees to indemnify, defend and hold harmless the Seller Group
and each of them from and against any and all claims, demands, causes of action,
damages, fines, costs, forfeitures, amounts paid in settlement, judgments,
expenses (including reasonable attorneys' fees and expenses), charges,
liabilities, penalties, and losses of any nature whatsoever which the Seller
Group or any of them may suffer or incur by reason of, or in connection with,
all claims for brokerage commissions, fees or other compensation by all brokers,
finders or intermediaries with whom Purchaser has dealt in connection with the
transactions contemplated by this Agreement excluding fees payable to Seller's
Broker.
<PAGE>
(e) The obligations set forth in this paragraph 18 shall survive the
Closing or earlier termination of this Agreement.
19. Environmental Matters.
---------------------
(a) For purposes of this Agreement, the following terms shall have
the following meanings:
(i) The term "Environmental Laws" shall mean all federal, state
and local laws, ordinances, permits and regulations, and any common laws,
regarding health, safety, radioactive materials or the environment [including,
without limitation, the Clean Air Act (42 U.S.C. (S)(S) 7401 et seq.)("CAA"),
the Clean Water Act (33 U.S.C. (S)(S) 1251 et seq.)("CWA"), the Resource
Conservation and Recovery Act (42 U.S.C. (S)(S) 6901 et seq.)("RCRA"), the
Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C.
(S)(S) 9601 et seq.)("CERCLA"), the Emergency Planning and Community Right-to-
Know Act (42 U.S.C. (S)(S) 11001 et seq.)("EPCRA"), the Safe Drinking Water Act
(42 U.S.C. (S)(S) 300f et seq.)("SDWA"), the Toxic Substances Control Act (15
U.S.C. (S)(S) 2601 et seq.)("TSCA"), the Endangered Species Act of 1973 (16
U.S.C. (S)(S) 1531 et seq.)("ESA"), the Federal Insecticide, Fungicide and
Rodenticide Act (7 U.S.C. (S)(S) 136 et seq.)("FIFRA"), the Occupational Safety
and Health Act (29 U.S.C. (S)(S) 651 et seq.)("OSHA")], each as amended, and all
regulations promulgated thereunder, all guidances and directives issued with
respect thereto, and all policies adopted by authority thereunder.
(ii) The term "Release" shall mean the discharge, disposal,
deposit, injection, dumping, spilling, leaking, leaching, placing, presence,
pumping, pouring, emitting, emptying, escaping, or other release of any
Hazardous Material.
(iii) The term "Hazardous Material" shall mean (A) any
radioactive material; (B) any substance or material the transportation, storage,
treatment, handling, use, removal or Release of which is subject to any
Environmental Law; or (C) any substance or material for which standards of
conduct are imposed under any Environmental Law. Without limiting the generality
of the foregoing, "Hazardous Materials" shall include asbestos and asbestos-
containing materials (whether or not friable); urea-formaldehyde in any of its
forms; polychlorinated biphenyls; oil; used oil; petroleum products and their
by-products; lead-based paint; radon; and any substances defined as "hazardous
substances", "hazardous materials", "hazardous waste", "toxic substances",
"solid waste" "hazardous chemicals", "hazardous air pollutants", "pollutants",
"contaminants", "toxic chemicals" or any other formulations intended to define,
list or classify substances by reason of deleterious properties such as
ignitability, corrosovity, reactivity, carcinogenicity, toxicity, reproductive
toxicity, "TLP toxicity" or "EP toxicity" or words of similar import under any
of the CAA, CWA, RCRA, CERCLA, EPCRA, SDWA, TSCA, OSHA or other Environmental
Laws. The term "Hazardous Material" shall exclude any materials normally found
on, or used in, the operation of a residential community or the Golf Course
Facilities.
(iv) The term "Environmental Matter" shall mean any of the
following: (A) any Release on or at any of the Properties; (B) the migration of
any Hazardous Material onto or from any of the Properties; (C) the
environmental, health, or safety aspects of the transportation, storage,
treatment, handling, use or Release, whether any of the foregoing occurs on or
off any of the Properties, of any Hazardous Material in connection with the
operation or past operation of any of the Properties; (D) the violation, or
alleged violation, with respect to any of the Properties of any Environmental
Law, order, permit or license of or from any governmental authority, agency or
court relating to environmental, health or safety matters; (E) the presence of
any above-ground storage tanks or any underground storage tanks within the
confines of any of the Properties; (F) the presence of wetlands within the
confines of any of the Properties except as disclosed in writing to Purchaser;
(G) the presence of any endangered species on, in or around any of the
Properties; (H) the characterization of any of the Properties as historical in
nature in any way; or (I) soil, groundwater and surface conditions on, in or
around any of the Properties which may have an adverse effect upon the use or
value of any of the Properties.
(b) Effective as of the Closing, Seller, on its own behalf and on
behalf of its successors and assigns, hereby agrees to indemnify, defend and
hold harmless the Purchaser Group and each of them from and
<PAGE>
against any and all claims, damages, fines, costs, forfeitures, amounts paid in
settlement, judgments, expenses (including attorneys' fees and expenses),
charges, liabilities, penalties, and losses of any nature whatsoever, now
existing or hereafter arising, which the Purchaser Group or any of them may
suffer or incur by reason of, or in connection with, any Environmental Matter
that occurred prior to, or was in existence at time of, the Closing Date and was
not caused by Purchaser or its employees, contractors or agents, or that was
subsequently caused by the Seller Group or any of them.
(c) Effective as of the Closing, Purchaser, on its own behalf and on
behalf of its successors and assigns, hereby agrees to indemnify, defend and
hold harmless the Seller Group and each of them from and against any and all
claims, damages, fines, costs, forfeitures, amounts paid in settlement,
judgments, expenses (including attorneys' fees and expenses), charges,
liabilities, penalties, and losses of any nature whatsoever, now Existing or
hereafter arising, which the Seller Group or any of them may suffer or incur by
reason of, or in connection with, any Environmental Matter relating to a Lot
that was caused by Purchaser or its employees, contractors or agents.
(d) Seller hereby acknowledges and agrees that the provisions
contained in subparagraph 19(b) of this Agreement were essential components of
the consideration for the agreement of Purchaser to enter into this Agreement.
(e) Purchaser hereby acknowledges and agrees that the provisions
contained in subparagraph 19(c) of this Agreement were essential components of
the consideration for the agreement of Seller to enter into this Agreement.
(f) The terms and provisions of this paragraph 19 shall survive the
Closing and shall not be merged into the deeds for the Properties to be
delivered by Seller to Purchaser or to Third-Party Buyers pursuant to the terms
of this Agreement.
20. Marketing.
---------
(a) Lots and Units.
--------------
(i) From and after the Closing Date to and including one
(1) year after the expiration of an Option or the earlier termination of this
Agreement, Purchaser shall have the sole and exclusive right to (A) market and
sell the Lots which are the subject of such Option and the Units to be
constructed by Purchaser on such Lots, and (B) subject to the terms and
conditions of this Agreement, construct residential dwellings and related
improvements on such Lots .
(ii) From and after the Closing Date to and including one
(1) year after the expiration of an Option, subject to the terms and conditions
of this Agreement, Seller shall not, except as provided in this Agreement,
create, effect, contract for, commit to, consent to, or suffer or permit any
conveyance, sale, assignment, transfer, lien, pledge, mortgage, security
interest or other encumbrance or alienation of any portion of the Parcel which
is the subject of such Option.
(iii) Except as specifically set forth herein, no commission
or other sum shall be due and payable by Purchaser to Seller in connection with
the sale of any Lot with the Unit thereon.
(iv) From and after the Closing Date to and including one
(1) year after the expiration of an Option, Seller shall refrain from (A)
performing any grading, excavation or construction on or about the Parcel which
is the subject of such Option except to maintain or improve previously-sold lots
in a manner that does not materially and adversely affect such Parcel, and (B)
committing any waste, nuisance or dumping on or about such Parcel.
<PAGE>
(v) If, after the occurrence of a Paragraph 15A Termination
Event or a Monetary Termination Event, Purchaser shall not consummate the
closings required pursuant to subparagraph 1(c)(ii) of this Agreement, then, in
addition to any other rights of Seller under this Agreement, Seller may market
and sell such of the Properties as shall be owned by Seller.
(b) Remaining Seller's Lots in the Development.
------------------------------------------
(i) Seller hereby represents and warrants that Seller is the
owner in fee simple of the lots in the Development that are listed in Exhibit FF
----------
attached hereto and made a part hereof; that Seller has either completed, or is
in the process of completing, the construction of a dwelling on each of the said
lots; and that none of said Lots or any improvement thereon is subject to any
sale contract, any option to purchase or any right of first refusal. Said lots
and the improvements constructed by Seller thereon are herein together sometimes
called the "Seller's Lots" or individually a "Seller's Lot."
(ii) Seller hereby grants to Lifestyle Communities, Ltd., a
Delaware corporation ("LCL"), a wholly-owned subsidiary of CMC, or such other
person as Purchaser shall designate in writing to Seller (which other person
shall be subject to Seller's prior written approval, which approval shall not be
unreasonably withheld or delayed) (LCL or such other person being herein called
the "Facilitating Broker"), the sole and exclusive right, during the term of
this Agreement, to cause Seller's Lots to be sold.
(iii)(A) Seller hereby represents and warrants that (I) Longleaf
Contracting, Inc., a North Carolina corporation ("LCI"), is a corporation duly
organized, validly existing and in good standing under the laws of the State of
North Carolina; (II) LCI is a duly licensed general contractor under the laws of
the State of North Carolina; (III) LCI's general contracting license (the "LCI
License") under the laws of the State of North Carolina (a) is an unlimited
license, (b) is in full force and effect, and (c) has not been modified, amended
or changed in any manner; (III) LCI is not in default of any of its obligations
under the LCI License; (IV) certain work required to be performed by LCI has not
been completed; and (V) Seller and LCI desire that LCI subcontract with LCCI for
the completion by LCCI of such uncompleted work. LCCI will not perform any
general contracting activities in North Carolina until it has qualified to do
business in North Carolina and has received its general contractor's license
from North Carolina.
(B) Purchaser hereby represents and warrants that
Lifestyle Construction Company, Inc., a Delaware corporation ("LCCI"), an
affiliate of Purchaser, is in the process of qualifying to transact business in
the State of North Carolina and of applying for a general contractor's license
from the State of North Carolina.
(iv) Upon the closing of a Seller's Lot pursuant to a
contract executed during the term of this Agreement, and the receipt by Seller
of the proceeds of such sale, Seller shall pay to LCL a commission in the amount
of six percent (6%) of the sale price of such Seller's Lot.
(v) (A) For purposes of this paragraph 20(b), a "Protected
Prospect" shall mean a prospective purchaser of a Seller's Lot with whom the
Facilitating Broker has either met in person, spoken to by telephone, or
corresponded with during the term of this Agreement, and who is listed as a
prospective purchaser by the Facilitating Broker on a written list delivered by
the Facilitating Broker to Seller on or before thirty (30) days after the
expiration of the Option.
(B) If, on or before six (6) months after the expiration
of the Option, Seller enters into a contract with a Protected Prospect for the
sale of a Seller's Lot, then, upon the closing of the sale of such Seller's Lot,
and the receipt by Seller of the proceeds of such sale, Seller shall pay to the
Facilitating Broker a commission in the amount of six percent of the sale price
of such Seller's Lot .
21. Closing of an Exercised Lot.
---------------------------
<PAGE>
(a) Purchaser's Conditions Precedent.
--------------------------------
(i) In addition to any other conditions precedent set forth in
this Agreement to the obligation of Purchaser to consummate the purchase of any
Exercised Lot, the parties hereto hereby agree that the obligation of Purchaser
to consummate the purchase of an Exercised Lot is subject to the satisfaction of
all of the following conditions precedent as of the Lot Closing of such
Exercised Lot:
(A) Purchaser shall have received the Design Approvals for
such Exercised Lot, and all such Design Approvals shall be in full force and
effect, and shall not have been modified, amended or changed in any way without
the prior consent of Purchaser;
(B) the Private Roadway Easement shall have been recorded,
and shall be in full force and effect, and shall not have been modified, amended
or changed in any way without the prior consent of Purchaser; and no event of
default shall exist under the Private Roadway Easement; and no event shall have
occurred which, with the passage of time or the giving of notice or both, would
constitute an event of default under the Private Roadway Easement;
(C) all of the authorizations described in subparagraph
3(b)(i) of this Agreement shall have been issued and shall be in full force and
effect, and shall not have been modified, amended or changed in any way without
the prior consent of Purchaser;
(D) all of the approvals described in subparagraph 3(b)(iii)
of this Agreement shall have been issued and shall be in full force and effect,
and shall not have been modified, amended or changed in any way without the
prior consent of Purchaser;
(E) the Maples Agreements, as amended by the Maples
Amendment, shall be in full force and effect, and shall not have been modified,
amended or changed in any way without the prior consent of Purchaser; and no
event of default shall exist under any of the Maples Agreements, as amended by
the Maples Amendment; and no event shall have occurred which, with the passage
of time or the giving of notice or both, would constitute an event of default
under any of the Maples Agreements, as modified by the Maples Amendment; and
there shall be available for conveyance to purchasers of Units easements of
enjoyment of a number equal to (I) three hundred nineteen (319) less (II) the
number of easements of enjoyment as shall have been previously conveyed by
Seller to Purchaser;
(F) the Sales Center Agreement shall have been fully
executed and delivered; and the Sales Center Agreement shall be in full force
and effect, and shall not have been modified, amended or changed in any way
without the prior consent of Purchaser; and no event of default shall exist
under the Sales Center Agreement; and no event shall have occurred which, with
the passage of time or the giving of notice or both, would constitute an event
of default under the Sales Center Agreement;
(G) the Attornment Agreements shall have been fully executed
and delivered; and the Attornment Agreements shall be in full force and effect,
and shall not have been modified, amended or changed in any way without the
prior consent of Purchaser; and no event of default shall exist under any of the
Attornment Agreements; and no event shall have occurred which, with the passage
of time or the giving of notice or both, would constitute an event of default
under any of the Attornment Agreements;
(H) all of the representations and warranties of Seller
contained in paragraph 13 of this Agreement shall be true and correct;
(I) Seller shall have completed the performance of all of
its obligations with respect to the Exercised Lot under paragraph 7, paragraph 8
or paragraph 9 of this Agreement, as the case may be; provided, that if Seller
shall have failed to satisfy any of its obligations under paragraph 7, paragraph
8 or paragraph 9 of this Agreement, as the case may be, solely by reason of the
failure of LCCI to adequately supervise the Work of the Site Contractor, then,
provided that the failure of LCCI to adequately supervise
<PAGE>
the Work of the Site Contractor shall not have been caused by a default by
Seller under this Agreement or under the agreement between Seller and the Site
Contractor, and provided that Seller shall not then be in default of any of its
obligations under the agreement between Seller and the Site Contractor,
Purchaser shall not be entitled to refuse to close its purchase of an Exercised
Lot because of the failure of Seller to satisfy such obligation under paragraph
7, paragraph 8 or paragraph 9, as the case may be, of this Agreement;
(J) The sanitary sewer, storm sewer, water, electrical, gas,
telephone and cable television systems and facilities adequate to service the
Units at any time and from time to time located on the Exercised Lot which is
the subject of such Lot Closing shall be operational and in good working order;
and the owners of such systems and facilities shall be required by law, and
shall have agreed, to provide sanitary sewer, storm sewer, water, electrical,
gas, telephone and cable television services to the Units located at any time
and from time to time on such Exercised Lot; and
(L) if the Construction Loan shall have closed, all of the
approvals described in subparagraphs 3(a)(ii) and 3(a)(iii) shall have been
issued and shall be in full force and effect, and shall not have been modified,
amended or changed in any way without the prior written consent of Purchaser.
(ii) In the event that any condition precedent to Purchaser's
obligations under this paragraph 21, including, without limitation, any
condition precedent set forth in the foregoing subparagraph 21(a)(i), shall not
be timely satisfied in accordance with the terms of this Agreement, Purchaser
shall give to Seller written notice reasonably describing the condition
precedent which shall not have been timely satisfied in accordance with the
terms of this Agreement. Seller shall have ten days from the receipt of such
written notice to cure or satisfy any condition precedent not satisfied. If, at
the end of such ten-day period, Seller shall have failed to satisfy such
condition precedent, Purchaser may, at its election, do the following: (A)
either (I) terminate Purchaser's obligations to purchase such Exercised Lot, or
(II) enforce specific performance of this Agreement against Seller unless
Seller's failure is due to a change in the law, and (B) in either event, unless
Seller's failure is due to a change in the law, recover damages from Seller for
failure to perform this Agreement (including, without limitation, attorneys'
fees and expenses). The termination by Purchaser of its obligation to purchase
an Exercised Lot shall not terminate the rights and obligations of the parties
hereto under this Agreement with respect to any other Property.
(iii) Notwithstanding any other term to the contrary in this
Agreement, in the event of a failure of any condition precedent to Purchaser's
obligations under this Agreement, any right by Purchaser to recover damages from
Seller shall be limited to direct and actual damages and shall exclude any right
to claim or recover indirect, consequential or incidental damages.
(b) Seller's Conditions Precedent.
-----------------------------
(i) In addition to any other conditions precedent set forth in this
Agreement to the obligation of Seller to consummate the sale of any Exercised
Lot, the parties hereto hereby agree that the obligation of Seller to consummate
the sale of an Exercised Lot is subject to Purchaser not then being in breach or
default of any of the terms or conditions of this Agreement.
(ii) In the event that any condition precedent to Seller's obligations
under this paragraph 21, including, without limitation, any condition precedent
set forth in the foregoing subparagraph 21(b)(i), shall not be timely satisfied
in accordance with the terms of this Agreement, Seller shall give to Purchaser
written notice reasonably describing the condition precedent which shall not
have been timely satisfied in accordance with the terms of this Agreement.
Purchaser shall have ten days from the receipt of such written notice to cure or
satisfy any condition precedent not satisfied. If, at the end of such ten-day
period, Purchaser shall have failed to satisfy such condition precedent, Seller
may, at its election, do the following: (A) either (I) terminate Seller's
obligations to sell such Exercised Lot, or (II) enforce specific performance of
this Agreement against Purchaser (unless Purchaser's failure is due to a change
in the law), and (B) in either event, unless Purchaser's failure is due to a
change in the law,
<PAGE>
recover damages from Purchaser for failure to perform this Agreement (including,
without limitation, attorneys' fees and expenses). The termination by Seller of
its obligation to sell an Exercised Lot shall not terminate the rights and
obligations of the parties hereto under this Agreement with respect to any other
Property.
(iii) Notwithstanding any other term to the contrary in this
Agreement, in the event of a failure of any condition precedent to Seller's
obligations under this Agreement, any right by Seller to recover damages from
Purchaser shall be limited to direct and actual damages and shall exclude any
right to claim or recover indirect, consequential or incidental damages.
(c) Terms.
-----
(i) Conveyance. At a Lot Closing, Seller shall convey to
----------
Purchaser the Exercised Lot which is the subject of such Lot Closing, together
with all improvements located thereon, and together with all easements,
appurtenances, rights, privileges, reservations and hereditaments belonging to
or pertaining thereto, and together with all of the right, title and interest of
Seller in and to all streets, roads and rights-of-way adjacent to such Exercised
Lot, and together with an easement of enjoyment pursuant to the Easement of
Enjoyment, all upon the terms and conditions set forth in this Agreement. The
grant of the right, title and interest of Seller in and to all streets, roads
and rights-of-way adjacent to such Lot shall be non-exclusive and subject to the
rights of Seller and others to utilize same for pedestrian and vehicular access
and for the development of the Properties.
(ii) Payment of Purchase Price. (A) Subject to the provisions of
-------------------------
the following subparagraph (B), at a Lot Closing, Purchaser shall pay or shall
cause to be paid to Seller the purchase price payable under this Agreement for
the Exercised Lot which is the subject of such Lot Closing, together with the
$10,000 Maples Fee payable with respect to the Exercised Lot (and the Units
thereon) which is the subject of said Lot Closing, by wired funds or by a
cashier's or certified check, which amount may be paid with the proceeds of the
sale of such Exercised Lot and Units thereon pursuant to one or more Sale
Agreements with respect to such Exercised Lot provided such proceeds are in the
form of wired funds or a cashier's or certified check.
(B) Notwithstanding anything to the contrary contained in the
foregoing subparagraph (A), if, at the time of a Lot Closing, Sale Agreements
shall not have been executed with respect to all of the Units to be constructed
on the Exercised Lot which is the subject of such Lot Closing, the purchase
price for the Exercised Lot which is the subject of such Lot Closing and the
Maples Fee payable with respect to the Exercised Lot which is the subject of
such Lot Closing shall be paid as follows:
(I) Purchaser shall pay to Seller, by wired funds or by a
cashier's or certified check, an amount equal to the Minimum Release Price for
such Exercised Lot (the "Minimum Release Price", as set forth on Exhibit L
---------
attached hereto and made a part hereof), plus or minus prorations, plus
the Maples Fee payable with respect to all units to be built on such Exercised
Lot; and
(II) Seller and Purchaser shall execute, deliver and
record an agreement (a "Lot Adjustment Agreement"), in form and substance
reasonably acceptable to Seller and Purchaser, with respect to such Exercised
Lot, which Lot Adjustment Agreement shall provide, inter alia, as follows:
----- ----
(a) upon the earlier to occur of the closing of all
of the Sale Agreements with respect to Units on such Exercised Lot or twelve
months after the Lot Closing Date of such Exercised Lot, the purchase price for
such Exercised Lot shall be adjusted as follows:
(1) if Sale Agreements with respect to all of
the Units on such Exercised Lot shall have closed, then the purchase price for
such Exercised Lot shall be determined in accordance with the terms of
subparagraph 1(f) of this Agreement, and if the purchase price for such
Exercised Lot is greater than the Minimum Release Price for such Exercised Lot,
Purchaser shall pay to Seller the amount by
<PAGE>
which the purchase price for such Exercised Lot exceeds the amounts previously
paid by Purchaser for such Exercised Lot; and
(2) if Sale Agreements with respect to all of the
Units on such Exercised Lot shall not have closed, then:
(A) if such Exercised Lot is a Single-Family
Lot, the purchase price for such Exercised Lot shall be determined as follows:
(I) if there is a Detached Unit Sale
Agreement for such Exercised Lot that shall not yet have closed, the Detached
Unit Package Price of such Exercised Lot shall be deemed to be the Detached Unit
Package Price set forth in such Detached Unit Sale Agreement;
(II) if there is no Detached Unit Sale
Agreement with respect to such Exercised Lot, the Detached Unit Package Price of
such Exercised Lot shall be deemed to be Purchaser's then-current listed sale
price for such Exercised Lot and a Detached Unit located thereon less $10,000
and less any lot premium (including any Applicable Single-Family Lot Golf
Premium) with respect to such Exercised Lot;
(III) the purchase price for such Exercised
Lot shall be determined in accordance with the provisions of subparagraph
1(f)(ii)(A) of this Agreement and the preceding subparagraphs (I) and (II), and
if the purchase price for such Exercised Lot is greater than the Minimum Release
Price for such Exercised Lot, Purchaser shall pay to Seller the amount by which
the purchase price for such Exercised Lot exceeds the amounts previously paid by
Purchaser for such Exercised Lot; and
(B) if such Exercised Lot is a Tract Lot, the
purchase price for such Exercised Lot shall be determined as follows:
(I) if there is no Tract Unit Sale Agreement
for any Tract Unit on such Exercised Lot, the Tract Unit Package Prices of all
of the Tract Units to be constructed by Purchaser on such Exercised Lot shall be
deemed to be the product of (a)(1) the average of Purchaser's then-current
listed sale prices [excluding the $10,000 per Tract Unit Maples Fees, and
excluding any lot premiums (including any Applicable Tract Lot Golf Premiums)
with respect to such Tract Units] for the Tract Units on such Exercised Lot, and
(b) the number of Tract Units to be constructed by Purchaser on such Exercised
Lot (as reflected on the Site Plan for such Exercised Lot);
(II) if there is a Tract Unit Sale Agreement
for at least one, but not each, Tract Unit to be constructed by Purchaser on
such Exercised Lot (as reflected on the Site Plan for such Exercised Lot), the
Tract Unit Package Prices of all of the Tract Units to be constructed by
Purchaser on such Exercised Lot (as reflected on the Site Plan for such
Exercised Lot) shall be deemed to be the sum of (a) the Tract Unit Package
Prices of the Tract Units on such Exercised Tract that are the subject of Tract
Unit Sale Agreements, and (b) the product of (i) the average of the Tract Unit
Package Prices of all of the Tract Units to be constructed by Purchaser on such
Exercised Lot (as reflected on the Site Plan for such Exercised Lot) that are
the subject of Tract Unit Sale Agreements and (ii) the number of Tract Units on
such Exercised Lot that are not subject to Tract Unit Sale Agreements;
(III) the purchase price for such Exercised
Lot shall be determined in accordance with the provisions of subparagraph
1(f)(ii)(B) of this Agreement and the preceding subparagraphs (I) and (II), and
if the purchase price for such Exercised Lot is greater than the Minimum Release
Price for such Exercised Lot, Purchaser shall pay to Seller the amount by which
the purchase price for such Exercised Lot exceeds the amounts previously paid by
Purchaser for such Exercised Lot; and
<PAGE>
(b) concurrently with the recording of such Lot
Adjustment Agreement, Seller shall execute and deliver to an escrowee mutually
acceptable to Seller and Purchaser a release, in recordable form, of all right,
title and interest of Seller under such Lot Adjustment Agreement, which release
shall be deliverable by such escrowee to Purchaser upon the deposit with such
escrowee of either (1) the amount by which the purchase price for such Exercised
Lot exceeds the amounts previously paid by Purchaser for such Exercised Lot or
(2) a written confirmation that the Minimum Release Price is the purchase price
for such Exercised Lot.
(iii) Title and Survey Matters. The parties hereto hereby agree
------------------------
as follows:
(A) At a Lot Closing, Seller, at its sole cost and
expense, shall deliver to Purchaser an owner's ALTA form B title insurance
policy (an "Exercised Lot Title Policy"), issued by the Title Insurer, in the
amount of the purchase price payable by Purchaser under the terms of this
Agreement for the Exercised Lot which is the subject of such Lot Closing,
insuring title to such Exercised Lot in Purchaser subject only to the Acceptable
Option Title Exceptions that relate to such Exercised Lot; containing extended
coverage over general exceptions 1 through 5 contained therein; containing an
endorsement that such Exercised Lot has been legally subdivided and platted; in
the event the Exercised Lot is a Single-Family Lot, containing an ALTA 3.0
zoning endorsement insuring that a detached single-family dwelling unit can be
constructed on said Exercised Lot; in the event the Exercised Lot is a Tract
Lot, containing an ALTA 3.0 zoning endorsement insuring that attached
residential dwelling units of a number, type and size required by the terms of
this Agreement can be constructed on said Exercised Lot; and containing an
endorsement that such Exercised Lot has unrestricted access to and from, and
unrestricted use of, the Private Roadways, and has unrestricted access to and
from the Private Roadways and dedicated public rights-of-way; and insuring the
rights of Seller to use the Golf Facilities pursuant to the Easement of
Enjoyment.
(B) If, on a Lot Closing Date [as same may be extended
pursuant to the provisions of this Agreement], the Title Insurer shall not be
prepared to deliver to Purchaser the Exercised Lot Title Policy with respect to
the Exercised Lot which is the subject of a Lot Closing on such Lot Closing
Date, then Purchaser shall have the right to either terminate its obligation to
purchase such Exercised Lot, in which case the parties hereto shall have no
further rights, obligations or liabilities under this Agreement with respect to
such Exercised Lot [other than the obligations of Seller under subparagraphs
11(a), 18(b), 19(b) and 20(b) of this Agreement and the obligations of Purchaser
under subparagraphs 11(b), 12(b), 19(c) and 18(d) of this Agreement] or elect to
take title to such Exercised Lot as it then is with the right to deduct from the
Purchase Price the cost required by the Title Insurer to issue a waiver of any
lien or encumbrance of an unascertainable amount, and the premium payable on a
surety bond required by the Title Insurer to insure over any lien or encumbrance
of an unascertainable amount.
(iv) Conveyance. Seller shall convey each Exercised Lot by a
----------
warranty deed in the form of deed attached hereto as Exhibit Q.
---------
(v) Delivery of Documents. The parties hereto hereby agree as
---------------------
follows:
(A) Seller's Documents. At a Lot Closing, as a condition
------------------
precedent to Purchaser's obligations to purchase the Exercised Lot which is the
subject of such Lot Closing, Seller, in addition to delivering all other items
required by this Agreement to be delivered by Seller, shall deliver to Purchaser
the following documents, all of which shall be in form and substance acceptable
to Purchaser:
(I) an executed, stamped, recordable special
warranty deed in the form attached hereto as Exhibit Q and made a part hereof,
---------
with release of dower and homestead rights, if any, if required under local
practice, conveying to Purchaser good and merchantable title in fee simple
absolute to the Exercised Lot which is the subject of such Lot Closing, subject
only to the Acceptable Option Tract Title Exceptions relating to such Exercised
Lot, and a Lot Adjustment Agreement, if applicable, and conveying to Purchaser
an easement of enjoyment pursuant to the Easement of Enjoyment;
<PAGE>
(II) an executed affidavit of title with respect to
the Exercised Lot which is the subject of such Lot Closing, covering the Lot
Closing Date [as same may be extended pursuant to the provisions of this
Agreement] for such Exercised Lot, and showing title in Seller subject only to
the Acceptable Option Tract Title Exceptions relating to such Exercised Lot, and
a Lot Adjustment Agreement, if applicable;
(III) an executed certification from Seller with
respect to Seller's non-foreign status sufficient to comply with the
requirements of section 1445 of the Internal Revenue Code of the United States
of America and all regulations applicable thereto; and
(IV) documents (a) authorizing the execution and
delivery by Seller of the documents required to be executed and delivered by
Seller at such Lot Closing, and (b) evidencing the authority of the persons
signing the documents to be executed and delivered by Seller at such Lot Closing
pursuant to this Agreement; and
(V) the Exercised Lot Title Policy with respect to
the Exercised Lot which is the subject of such Lot Closing; and
(VI) such other documents, instruments,
certifications, confirmations, ALTA statements, gap undertakings and assignments
as may be reasonably required to fully effect and consummate the consummation of
the exercise by Purchaser of its Option to purchase such Exercised Lot.
(B) Joint Documents. At a Lot Closing, Seller and
---------------
Purchaser shall execute triplicate originals of each of the following documents,
one of which fully-executed originals shall be delivered to Seller, the second
of which fully-executed originals shall be delivered to Purchaser, and the third
of which fully-executed originals shall be delivered to Escrowee in connection
with the Lot Closing Escrow (hereinafter defined):
(I) a closing statement; and
(II) all transfer tax declarations required by law
to be executed and delivered in connection with the conveyance of the Exercised
Lot which is the subject of such Lot Closing.
(C) Lot Closing Escrow. The closing of the sale of an
------------------
Exercised Lot shall be effected through a "New York-style" escrow (a "Lot
Closing Escrow") with Escrowee in accordance with the usual form of deed and
money escrow agreement than in use by Escrowee, with such changes and additions
as may be necessary to conform to the terms of this Agreement. One-half of the
cost of each Lot Closing Escrow shall be paid by Seller, and one-half of the
cost of each Lot Closing Escrow shall be paid by Purchaser. The agreement for a
Lot Closing Escrow shall provide, among other things, that all prorations shall
be computed as of the date Escrowee is prepared to record all of the documents.
Delivery of the deed for the Exercised Lot which is the subject of such Lot
Closing Escrow, and the other closing documents, shall be made through such Lot
Closing Escrow. Each party shall have the right to inspect all documents two
(2) business days prior to or at the time of their deposit into a Lot Closing
Escrow. In the event of conflict between the terms of this Agreement and a Lot
Closing Escrow, the terms of this Agreement shall control as between the parties
hereto.
(D) Transfer Taxes. Seller shall pay all transfer taxes
--------------
with respect to an Exercised Lot (other than transfer taxes attributable to the
improvements, if any, constructed by Purchaser on such Exercised Lot).
Purchaser shall pay or cause to be paid all recording fees with respect to the
deed for an Exercised Lot.
<PAGE>
(E) Prorations.
----------
(I) As applicable, general real estate taxes,
assessments, homeowner's association dues, condominium association dues,
condominium fees, utility payments and other items that are customarily prorated
shall be prorated with respect to an Exercised Lot as of the time of the Lot
Closing regarding such Exercised Lot.
(II) All prorations are final unless otherwise
indicated in this Agreement.
(III) If the amount of the current real estate taxes
and assessments is not then ascertainable, said taxes and assessments shall be
prorated on the basis of the most recent ascertainable real estate taxes and
assessments, and the parties shall reprorate the taxes and assessments when the
actual bills therefor shall be issued; provided, however, that if an Exercised
Lot is not assessed as a separate parcel for tax purposes, then (a) taxes and
assessments attributable to such Exercised Lot shall be based upon an amount
equal to the most recent ascertainable taxes and assessments for the tax parcel
of which such Exercised Lot is a part multiplied by a fraction the denominator
of which shall be the total number of square feet in the tax parcel of which
such Exercised Lot is a part and the numerator of which shall be the number of
square feet in such Exercised Lot, and (b) said taxes and assessments shall be
reprorated when the actual separate bills for such Exercised Lot shall be
issued.
(IV) If, at the time of a Lot Closing, the Exercised
Lot which is the subject of such Lot Closing is not being treated as a separate
tax parcel, then, within thirty days after such Lot Closing, the parties shall
file the necessary petitions and applications to have said Exercised Lot
assessed as a separate tax parcel.
(V) The obligations set forth in this subparagraph
(E) shall survive the Closing.
(F) Other Documents. The parties hereto hereby agree to
---------------
deliver to each other such additional documents as may be reasonably necessary
to in order to close the sale of an Exercised Lot pursuant to this Agreement.
(G) Possession. At a Lot Closing, Seller shall deliver
----------
to Purchaser possession of the Exercised Lot that is the subject of such Lot
Closing.
(H) Waiver. Purchaser, at its option, may waive, in
------
whole or in part, any unsatisfied condition precedent to Purchaser's obligations
to purchase an Exercised Lot, or may elect to extend the time within which any
such unfulfilled condition precedent may be satisfied. Seller, at its option,
may waive, in whole or in part, any unsatisfied condition precedent to Seller's
obligations to sell an Exercised Lot, or may elect to extend the time within
which any such unfulfilled condition precedent may be satisfied.
(I) Condemnation. The parties hereto hereby agree as
------------
follows:
(I) If, prior to a Lot Closing, any portion of the
Exercised Lot which is the subject of such Lot Closing is taken by condemnation
or eminent domain proceedings, or condemnation or eminent domain proceedings are
commenced to take any portion of such Exercised Lot, then Seller shall give
immediate notice to Purchaser prior to such Lot Closing of such taking or
commencement of proceedings, as the case may be, and Purchaser shall have thirty
days after receipt of notice from Seller of such taking or commencement of such
proceedings to elect in writing to terminate Purchaser's obligation to purchase
such Exercised Lot. In the event that said 30-day election period shall extend
beyond the Lot Closing Date, the Lot Closing Date shall be automatically
extended to the last day of such 30-day period.
<PAGE>
(II) In the event Purchaser shall timely elect to
terminate its obligations in accordance with the preceding subparagraph
21(b)(v)(I)(I), Purchaser and Seller shall have no further rights, obligations
or liabilities to each other with respect to such Exercised Lot
[other than the obligations of Seller under subparagraphs 11(a), 18(b), 19(b)
and 20(b) of this Agreement and the obligations of Purchaser under subparagraphs
11(b), 12(b), 18(d) and 19(c) of this Agreement].
(III) In the event that Purchaser shall not timely
elect to terminate its obligations in accordance with subparagraph
21(b)(v)(I)(I) above, then Purchaser shall be deemed to have waived its right to
terminate said obligations by reason of such taking or commencement of taking
proceedings, and the parties shall proceed to close the conveyance of the
Exercised Lot; and, at the Lot Closing, (a) the awards or other proceeds, if
any, actually received by Seller for any such taking shall be paid to Purchaser,
and (ii) Seller shall assign to Purchaser all of Seller's right, title and
interest in and to any proceeds of awards not yet received by Seller and to all
future awards by reason of such taking.
22. Assignment. Without the consent of Seller, Purchaser may not sell,
----------
assign, transfer, or convey its rights under this Agreement to any person other
than CMC or a wholly-owned subsidiary of CMC. Any sale, assignment, transfer or
conveyance by Purchaser of its rights under this Agreement in violation of the
foregoing sentence shall be void, and shall be a material breach of this
Agreement, and such assignee shall acquire no rights hereunder. The provisions
of this paragraph 22 shall survive the Closing.
23. Survival. The terms, covenants, conditions, indemnities,
--------
representations, warranties, disclaimers and agreements of the parties hereto
under this Agreement shall survive, and remain enforceable after, the Closing
and each Lot Closing, except as expressly provided herein, and shall survive the
recording of the deeds and shall not be merged therein.
24. Notices. Any notice, demand, request, election or other
-------
communication required or permitted to be given under this Agreement shall be in
writing, and shall be given (and shall be deemed to have been given by) (a) the
deposit of same in the United States mail, postage prepaid, registered or
certified, with return receipt requested, or (b) the delivery of same in person
to the intended recipient or to his agent, or (c) the deposit of same into the
custody of a nationally-recognized overnight delivery service such as Federal
Express Corporation, Airborne Express, Emery, or Purolator, or (d) the sending
of same by facsimile, telegram or telex, evidenced by a confirmed receipt; in
each case properly addressed as follows:
In the case of notices directed to Purchasers:
CMC Heartland Partners VII, LLC
c/o CMC Heartland Partners
547 W. Jackson Boulevard
Chicago, Illinois 60661
Attention: Lawrence S. Adelson, General Counsel
Telephone No.: 312/294-0440
Fax No.: 312/663-9397
In the case of notices directed to Seller:
Longleaf Associates Limited Partnership
c/o General Investment & Development Co.
Suite 2000
600 Atlantic Avenue
Boston, MA 02210
Attention: Robert T. Karp
<PAGE>
Telephone No.: 617/973-9680, X202
Fax No.: 617/367-3417
With a copy directed to:
General Investment & Development Co.
Suite 2000
600 Atlantic Avenue
Boston, MA 02210
Attention: Robert S. Farrington, Jr.
Telephone No.: 617/973-9680 X209
Fax No.: 617/367-3417
Each such notice, demand, request, election or other communication shall be
deemed to have been given to the intended recipient upon the deposit or delivery
of same in the manner provided above. Any party hereto may change its address
for the service of notice hereunder by delivering written notice of said change
to the other parties hereunder, in the manner specified above, ten (10) days
prior to the effective date of said change.
25. Automatic Extensions. If the day on which any action must be taken
--------------------
under the terms of this Agreement or on which any period expires shall be a
Saturday, Sunday or legal holiday, such action shall be due or such period shall
expire on the next regular business day.
26. Headings. The paragraph headings or captions appearing in this
--------
Agreement are for convenience only, are not part of this Agreement, and are not
to be considered in interpreting this Agreement.
27. Entire Contract; Modification. This Agreement constitutes the entire
-----------------------------
and complete agreement between the parties hereto and supersedes any prior oral
or written agreements between the parties. The parties hereto expressly agree
that there are no verbal understandings or agreements which in any way change
the terms, covenants, and conditions herein set forth. No modification of this
Agreement, and no waiver of any of the terms and conditions of this Agreement,
shall be effective unless made in writing and duly executed by the parties
hereto.
28. Binding Effect. All covenants, agreements, warranties,
--------------
representations and provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
29. Form of Offer. Delivery of an unexecuted copy of this Agreement by
-------------
Purchaser shall not constitute an offer by Purchaser, and Seller acknowledges
that this Agreement shall not be deemed to be a binding contract unless and
until it is fully executed by Purchaser and Seller.
30. Time. Time is of the essence of this Agreement and the performance of
----
the terms and conditions hereof.
31. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, and all of which
taken together shall be deemed to constitute one and the same instrument.
32. Interpretation. The provisions of this Agreement shall not be
--------------
construed against or in favor of either party on the basis of which party
drafted this Agreement.
33. Miscellaneous. All days are calendar days.
-------------
<PAGE>
34. Applicable Law. This Agreement shall be governed by the laws of the
--------------
State of North Carolina.
35. Covenants of Seller Regarding the Maples Agreements. During the term
---------------------------------------------------
of this Agreement, Seller shall not, without the prior written consent of
Purchaser, modify or amend, or agree to the modification or amendment of, any of
the Maples Contract, the Golf Club Declaration or the Easement of Enjoyment; and
any such modification or amendment without Purchaser's prior written consent
shall be null and void and of no force or effect. Seller shall take not action
which shall prevent, obstruct or jeopardize the granting of easements of
enjoyment under the Easement of Enjoyment with respect to each Exercised Lot
which Seller shall be obligated under this Agreement to convey to Purchaser.
IN WITNESS WHEREOF, the parties hereto have executed this Option,
Management and Marketing Agreement.
CMC HEARTLAND PARTNERS VII, LLC, a LONGLEAF ASSOCIATES LIMITED
Delaware limited liability company PARTNERSHIP, a North Carolina
limited partnership
By: CMC Heartland Partners, a Delaware By: Longleaf Investors Corporation,
general partnership, its sole member a North Carolina corporation
By:_____________________________ By: ____________________________
Name:___________________________ Name:___________________________
Title:__________________________ Title:__________________________
Date of execution of this Agreement Date of execution of this Agreement
by Purchaser: by Seller:
__________________, 1998 _________________, 1998
<PAGE>
STATE OF _______________________ )
)SS
COUNTY OF ______________________ )
I, ______________________, a Notary Public in and for the County and
State aforesaid, do hereby certify that ______________________________________,
the ______________ of Longleaf Investors Corporation, a North Carolina
corporation, who is personally known to me to be the same person whose name is
subscribed to the foregoing instrument, appeared before me this day in person
and acknowledged he signed and delivered said instrument as his own free and
voluntary act and as the free and voluntary act of said corporation, as the
general partner in LONGLEAF ASSOCIATES LIMITED PARTNERSHIP, a North Carolina
limited partnership, for the uses and purposes therein set forth.
Given under my hand and notarial seal this _____ day of _____, 199__.
__________________________________
Notary Public
My Commission Expires:
________________, _____
<PAGE>
STATE OF ILLINOIS )
)SS
COUNTY OF COOK )
I, ______________________, a Notary Public in and for the County and
State aforesaid, do hereby certify that Richard P. Brandstatter, the vice
president of CMC HEARTLAND PARTNERS, a Delaware general partnership (the
"Partnership"), the sole member of CMC HEARTLAND PARTNERS VII, LLC, a Delaware
limited liability company (the "Company"), who is personally known to me to be
the same person whose name is subscribed to the foregoing instrument as such
officer of the Partnership, appeared before me this day in person and
acknowledged that he signed and delivered said instrument as his own free and
voluntary act and as the free and voluntary act of the Partnership, as the sole
member of the Company, for the uses and purposes therein set forth.
Given under my hand and notarial seal this 9th day of September, 1998.
___________________________
Notary Public
My Commission Expires:
________________, ______
<PAGE>
EXHIBIT B
---------
LEGAL DESCRIPTION OF MAGNOLIA DRIVE PARCEL
------------------------------------------
<PAGE>
EXHIBIT D
--------
LEGAL DESCRIPTION OF FIFTEENTH HOLE PARCEL
------------------------------------------
<PAGE>
EXHIBIT F
--------
LEGAL DESCRIPTION OF THE MEADOW PARCEL
--------------------------------------
<PAGE>
EXHIBIT G-1
-----------
DRAWING OF THE MEADOW PARCEL
----------------------------
<PAGE>
EXHIBIT G-2
-----------
DRAWING OF MEADOW PARCEL-PHASE II
---------------------------------
<PAGE>
EXHIBIT G-3
-----------
DRAWING OF MEADOW PARCEL-PHASE III
----------------------------------
<PAGE>
EXHIBIT G-4
-----------
DRAWING OF MEADOW PARCEL-PHASE IV
---------------------------------
<PAGE>
EXHIBIT G-5
-----------
DRAWING OF MEADOW PARCEL ROADWAY I
----------------------------------
<PAGE>
EXHIBIT G-6
-----------
DRAWING OF MEADOW PARCEL-PHASE I
--------------------------------
<PAGE>
EXHIBIT H
---------
LEGAL DESCRIPTION OF THE AREA F PARCEL
--------------------------------------
<PAGE>
EXHIBIT J
---------
LEGAL DESCRIPTION OF THE CLUB COTTAGES PARCEL
---------------------------------------------
<PAGE>
EXHIBIT L
---------
SCHEDULE OF MINIMUM EXERCISES OF OPTIONS
----------------------------------------
<PAGE>
EXHIBIT M
---------
LOTS WITH RESPECT TO WHICH SELLER WILL PAY TO MAPLES ALL AMOUNTS PAYABLE
-------------------------------------------------------------------------
UNDER THE MAPLES AGREEMENTS
---------------------------
<PAGE>
EXHIBIT N
---------
FORM OF OPTION MEMORANDUM
-------------------------
<PAGE>
EXHIBIT O
---------
COPY OF INTERIM AGREEMENT, AS AMENDED
-------------------------------------
<PAGE>
EXHIBIT P
---------
ACCEPTABLE OPTION TITLE EXCEPTIONS
----------------------------------
<PAGE>
EXHIBIT Q
---------
FORM OF DEED
------------
<PAGE>
EXHIBIT R
---------
EXISTING LEASES
---------------
<PAGE>
EXHIBIT S
---------
PARTIES IN POSSESSION
---------------------
<PAGE>
EXHIBIT T
---------
ADDITIONAL EXISTING DOCUMENTS
-----------------------------
<PAGE>
EXHIBIT U
---------
JUDGMENTS, WRITS, INJUNCTIONS, DECREES AND ORDERS
-------------------------------------------------
<PAGE>
EXHIBIT V
---------
DRAWING OF WETLANDS ON THE AREA F PARCEL
----------------------------------------
<PAGE>
EXHIBIT W
---------
OBLIGATIONS TO DONATE MONEY OR LAND
-----------------------------------
<PAGE>
EXHIBIT X
---------
RIGHTS AND DUTIES NOT BEING EXERCISED BY MASTER ASSOCIATION
-----------------------------------------------------------
<PAGE>
EXHIBIT Y
---------
CONVEYANCES OF CERTAIN UNITS
----------------------------
1. Units Subject to the Hunter Trail Declaration, the Patio Homes 'G'
Declaration or the Magnolia Park Declaration That Have Been Conveyed to
-----------
Third Parties:
-------------
2. Units Subject to the Hunter Trail Declaration, the Patio Homes 'G'
Declaration or the Magnolia Park Declaration That Are Subject to Contracts
---------
for Sale with Third Parties:
---------------------------
<PAGE>
EXHIBIT Z
---------
CURRENT ASSESSMENTS AND RESERVES PAYABLE UNDER THE DECLARATIONS
---------------------------------------------------------------
<PAGE>
EXHIBIT AA
----------
TRANSFERRED COMMON AREAS
------------------------
<PAGE>
EXHIBIT BB
----------
OFFICERS AND DIRECTORS OF THE MASTER ASSOCIATION AND THE INDIVIDUAL
--------------------------------------------------------------------
ASSOCIATIONS
------------
<PAGE>
EXHIBIT CC
----------
SCHEDULE OF CLUB MEMBERSHIP FEES AND DUES
-----------------------------------------
<PAGE>
EXHIBIT DD
----------
MINIMUM MARKETING SCHEDULE
--------------------------
<PAGE>
EXHIBIT EE
----------
CLUB COTTAGES MANAGEMENT AGREEMENT
----------------------------------
<PAGE>
EXHIBIT FF
----------
CLUB COTTAGES RENTAL PROGRAM CHECKLIST
--------------------------------------
<PAGE>
EXHIBIT GG
----------
SCHEDULE OF ADMINISTRATIVE SERVICES
-----------------------------------
<PAGE>
EXHIBIT HH
----------
SELLER'S LOTS
-------------
<PAGE>
EXHIBIT JJ
----------
SCHEDULE OF MINIMUM RELEASE PRICES
----------------------------------
<PAGE>
EXHIBIT KK
----------
FORM OF DEED
------------
<PAGE>
EXHIBIT 10.5
SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement") is made and entered into by and
between the Port of Tacoma, a Washington municipal entity, hereinafter referred
to as the "Port"; and CMC Real Estate Corporation, a Wisconsin Corporation,
Chicago Milwaukee Corporation, a Delaware Corporation, and CMC Heartland
Partners, a Delaware General Partnership with Heartland Technology, Inc., a
Delaware corporation, and Heartland Partners, LP, a Delaware limited
partnership, as its general partners, hereinafter collectively referred to as
"CMC". The above are collectively referred to herein as the "parties".
WHEREAS, the Port is the owner of approximately 52.5 acres of real property
located in the Tacoma tideflats area and commonly known as the former Milwaukee
Road tideflats railyard.
WHEREAS, the Milwaukee Road tideflats railyard property was purchased,
developed, owned, and operated by the Chicago, Milwaukee, St. Paul & Pacific
Railroad Company ("Milwaukee Road") from 1905 to 1980, and was the Milwaukee
Road's primary west coast facility for train maintenance and repair from 1909 to
1980.
WHEREAS, CMC is the successor in interest to the Milwaukee Road and its
assets and liabilities.
WHEREAS, the railyard operations conducted by the Milwaukee Road at the
tideflats railyard property gave rise to releases of petroleum hydrocarbon on
the property, resulting in contamination of the soil and groundwater of the
property.
WHEREAS, an action was commenced in the United States District Court for
the Western District of Washington at Tacoma under Case No. C91-5488(RJB)JKA,
hereinafter referred to as the "Lawsuit", in which the Port is the plaintiff and
CMC Real Estate Corporation, Chicago Milwaukee Corporation, and CMC Heartland
Partners are defendants, and in which the Port sought to recover the remedial
action costs incurred with respect to the environmental contamination of the
tideflats railyard site, pursuant to the Washington Model Toxics Control Act
("MTCA"), RCW 70.10SD.
WHEREAS, CMC has denied that it should be required to pay any amount on the
claims in the Lawsuit.
WHEREAS, without admitting or acknowledging any liability, the Port and CMC
desire to settle all claims between them arising out of the environmental
contamination of the tideflats railyard property, including but not limited to
those claims that were or could have been stated in the Lawsuit, in accordance
with the terms set forth hereinafter.
WHEREAS, CMC desires to satisfy its obligation under this Agreement by a
transfer of real property, and the Port agrees to consider offers by CMC for
such transfer of real property, all in accordance with the terms set forth
hereinafter,
<PAGE>
nevertheless the parties agree that the settlement amount shall be for a sum
certain to be paid in cash on a date certain in the absence of the parties'
ability to reach an agreement regarding a transfer of real property.
NOW, THEREFORE, for and in consideration of the mutual promises and
covenants set forth herein, the legal sufficiency of which is acknowledged, the
parties agree as follows:
1. Settlement Amount. CMC shall pay $1,100,000.00 to the Port in exchange
-----------------
for the releases and other consideration described herein.
2. Payment of Settlement Amount.
----------------------------
a. The unpaid balance of the Settlement Amount shall accrue interest at
6.5% per year beginning on January 1, 1999 and continuing thereafter or until
the Settlement Amount is paid in full, whichever occurs first.
b. The Port shall take no collection action with respect to the
Settlement Amount until after June 30, 1999.
c. To accommodate CMC's desire to satisfy the Settlement Amount by
the transfer of real property to the Port, the Port shall consider offers by CMC
to transfer to the Port real property with a value at least equal to the
Settlement Amount. The real property identified at this time to be considered by
the Port is the approximately 15 acres of land owned by CMC Heartland Partners
located in Fife, Washington, generally known as the "Wapato Creek Oxbow"
property, depicted on Exhibit A hereto. Other properties may also be considered
instead of or in addition to the Wapato Creek Oxbow property. If the parties are
unable to reach agreement regarding a property transfer by April 15, 1999, then
the issues involved in the property transfer shall be submitted to non-binding
mediation in accordance with the mediation rules of Local Rule 39.1(c) of the
Rules of Civil Procedure for the United States District Court for the Western
District of Washington. Notwithstanding any other provision of this Agreement,
the final decision whether to accept any of the property offered by CMC in
satisfaction of the Settlement Amount shall be made exclusively by the Port, in
its sole discretion. Upon the Port's decision not to accept the property offered
by CMC in full satisfaction of the Settlement Amount, the unsatisfied portion of
the Settlement Amount and all interest accrued thereon shall be paid in cash in
full on July 1, 1999.
3. Stay of Lawsuit. The Lawsuit shall be stayed from the execution of
---------------
this Agreement through June 30, 1999 or payment by CMC of the Settlement Amount,
whichever occurs first.
4. Stipulated Judgment. Contemporaneously with the execution of this
-------------------
Agreement, CMC shall execute a Stipulated Judgment in this case for the
Settlement Amount plus interest as set forth in paragraph 2.a. above. The
<PAGE>
Stipulated Judgment shall be held by attorneys for the Port through June 30,
1999 or payment by CMC of the Settlement Amount together with all accrued
interest, whichever occurs first. Upon satisfaction or payment by CMC of the
Settlement Amount together with all accrued interest on or before June 30, 1999,
the Stipulated Judgment shall be returned to CMC. Upon CMC's failure to pay the
Settlement Amount together with all accrued interest on or before June 30, 1999,
attorneys for the Port may enter the Stipulated Judgment with the court.
5. Stipulation and Order of Dismissal. Contemporaneously with the
----------------------------------
execution of this Agreement, the parties shall execute a Stipulation And Order
of Dismissal of the Lawsuit with prejudice and without costs or attorney fees to
any party. The Stipulation and Order shall be held by attorneys for the Port
until payment of the Settlement Amount by CMC, and shall be entered with the
court upon satisfaction or payment of the Settlement Amount by CMC as required
by this Agreement. The Port shall provide proof to CMC that the stipilation and
order has been filed with the court.
6. Release of CMC. Subject to satisfaction or payment of the Settlement
--------------
Amount as described in paragraphs 1 and 2 above, the Port , its successors and
assigns, hereby releases, acquits, and forever discharges CMC from any and all
claims, demands, liability, damages, costs, and causes of action arising out of
or related to the discovery or presence of petroleum hydrocarbon contamination
relating to the former Milwaukee Road tideflats railyard property and all other
contaminants present on the subject property, including any contamination
contained thereon from the abandoned landfill operated in the City of Tacoma in
the past years.
7. Compromise. This Agreement is a settlement of claims which are denied
----------
by CMC, and the consideration for this Agreement shall not be construed by as an
admission of liability by CMC, or as an admission of the value of the claim by
the Port.
8. Modification. This Agreement represents the full and complete
------------
agreement of the parties hereto, superseding all previous communications,
representations or agreements, whether written or oral, and may not be modified
without the written agreement of all parties hereto.
9. Warranty Against Assignment. The parties warrant and represent to each
---------------------------
other that no claim, cause of action, demand, or any part thereof that is part
of this Lawsuit has been assigned, granted or transferred to any other person,
firm, corporation, or entity.
10. Warranty of Authority. Each person signing this Agreement represents
---------------------
and warrants that he or she has been duly authorized to enter into this
Agreement by the party on whose behalf it is indicated that the person is
signing.
<PAGE>
11. Opportunity to Confer with Counsel. The Port represents that Robert I.
----------------------------------
Goodstein and Ralph U. Klose of Eisenhower & Carlson PLLC are the attorneys
employed to represent it with respect to this Agreement and all matters covered
herein. CMC represents that Albert R. Malanca and Bradley D. Jones of Gordon
Thomas Honeywell Malanca Peterson & Daheim PLLC are the attorneys employed to
represent it with respect to this Agreement and all matters covered herein. All
parties represent that their respective attorneys have fully advised them
concerning their rights with respect to the execution of the Agreement and
releases contained herein and that each party fully understands the same; that
the named attorneys are authorized to and are directed to take all necessary
action to carry out the terms of this Agreement.
12. Voluntary Execution. The parties represent and warrant that they
-------------------
understand and agree that this Agreement is made and entered into as their free
and voluntary act.
13. Binding Effect. Unless otherwise provided, this Agreement and the
--------------
terms, covenants, conditions, provision, obligations, undertakings, rights and
benefits hereto shall be binding upon and shall inure to the benefit of the Port
and CMC and their respective heirs, executors, administrators, representatives,
successors, and assigns.
14. Governing Law. This Agreement shall be interpreted, construed, and
-------------
enforced in accordance with Washington law.
15. Captions. The captions in this Agreement are for convenience of
--------
reference only and do not in any way limit, expand, or modify the terms or
provisions of this Agreement.
16. Interpretation. This Agreement shall not be interpreted or construed
--------------
for or against any party.
17. Counterparts. This Agreement may be executed in multiple counterparts,
------------
all such counterparts once executed shall be deemed to constitute one final
agreement, and each such counterpart upon execution and delivery shall be deemed
a complete original, binding on all parties to the Agreement.
18. Effective Date of Settlement Agreement. The effective date of this
--------------------------------------
Agreement shall be on or after October 1, 1998.
Dated: September ___, 1998. CMC Real Estate Corporation,
Chicago Milwaukee Corporation, and
CMC Heartland Partners
By:____________________________
Dated: September ___, 1998. PORT OF TACOMA
<PAGE>
By:_____________________________
<PAGE>
STATE OF ILLINOIS )
) ss.
County of Cook )
I certify that I know or have satisfactory evidence that ____________________
is the person who appeared before me, and said person acknowledged that he
signed this instrument, on oath stated that he was authorized to execute the
instrument and acknowledge it as the ___________________ of
_________________________ to be the free and voluntary act of such party for the
uses and purposes mentioned in the instrument.
DATED this ___ day of September, 1998.
_______________________________
Signature of Notary Public
Printed Name___________________
NOTARY PUBLIC
My Appointment Expires_________
STATE OF WASHINGTON )
) ss.
County of Pierce )
I certify that I know or have satisfactory evidence that ____________________
is the person who appeared before me, and said person acknowledged that he
signed this instrument, on oath stated that he was authorized to execute the
instrument and acknowledge it as the ___________________ of
_________________________ to be the free and voluntary act of such party for the
uses and purposes mentioned in the instrument.
DATED this ___ day of September, 1998.
_______________________________
Signature of Notary Public
Printed Name___________________
NOTARY PUBLIC
My Appointment Expires_________
<PAGE>
Exhibit 10.4
AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
---------------------------
THIS AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Amendment") is entered into as of the 23rd day of October, 1998 by and among
CMC HEARTLAND PARTNERS, a Delaware general partnership ("CMC") and HEARTLAND
PARTNERS, L.P., a Delaware limited partnership ("Heartland"), jointly and
severally (CMC and Heartland are referred to herein from time to time
individually as a "Borrower" and collectively as "Borrowers"); and LASALLE
NATIONAL BANK, a national banking association ("Bank").
W I T N E S S E T H:
WHEREAS, Bank and Borrowers entered into that certain Amended and Restated
Loan and Security Agreement dated as of June 30, 1998 (the "Agreement"), and now
desire to amend the Agreement to, among other things, temporarily increase
Bank's commitment to Borrowers and make a certain term loan as further set forth
in this Amendment.
NOW, THEREFORE, for and in consideration of the premises and mutual
agreements herein contained and for the purposes of setting forth the terms and
conditions of this Amendment, the parties, intending to be bound, hereby agree
as follows:
21. Incorporation of the Agreement. All capitalized terms which are not
------------------------------
defined hereunder shall have the same meanings as set forth in the Agreement,
and the Agreement to the extent not inconsistent with this Amendment is
incorporated herein by this reference as though the same were set forth in its
entirety. To the extent any terms and provisions of the Agreement are
inconsistent with the amendments set forth in paragraph 2 below, such terms and
provisions shall be deemed superseded hereby. Except as specifically set forth
herein, the Agreement shall remain in full force and effect and its provisions
shall be binding on the parties hereto.
22. Amendment of the Agreement. The Agreement is hereby amended as
--------------------------
follows:
a. Any and all references to the Agreement shall be deemed to refer
to and include this Amendment, as the same may be further amended, modified or
supplemented from time to time.
b. The definition of the term "Galewood Assignment of Rents" in
Paragraph 1.1 is hereby amended and restated to read in its entirety as follows:
- - -------------
"Galewood Assignment of Rents" means that certain Assignment of Rents
----------------------------
and Leases dated as of June 30, 1998 between CMC and Bank with respect
to the Galewood Mortgaged Property, as amended by that certain
Amendment to Assignment of Rents and Leases dated as of October 23,
1998, as the same may be amended, modified or supplemented from time
to time.
c. The definition of the term "Galewood Mortgage" in Paragraph 1.1
-------------
is hereby amended and restated to read in its entirety as follows:
"Galewood Mortgage" means that certain Mortgage and Security Agreement
-----------------
dated June 30, 1998 between CMC and Bank with respect to the Galewood
Mortgaged Property, as amended by that certain Amendment to Mortgage
and Security Agreement dated as of October 23, 1998, as the same may
be amended, modified or supplemented from time to time.
d. The definition of the term "Kinzie Station Assignment of Rents"
in Paragraph 1.1 is hereby amended and restated to read in its entirety as
follows:
"Kinzie Station Assignment of Rents" means that certain Assignment of
----------------------------------
Rents and Leases dated as of March 15, 1996 between CMC and Bank with
respect to the Kinzie Station Mortgaged Property, as amended by that
certain Amendment to Assignment of Rents and Leases dated as
<PAGE>
of May 14, 1997, that certain Second Amendment to Assignment of Rents
and Leases dated as of April 30, 1998, that certain Third Amendment to
Assignment of Rents and Leases dated as of June 30, 1998 and that
certain Fourth Amendment to Assignment of Rents and Leases dated as of
October 23, 1998, as the same may be further amended, modified or
supplemented from time to time.
e. The definition of the term "Kinzie Station Mortgage" in Paragraph
---------
1.1 is hereby amended and restated in its entirety to read as follows:
- - ---
"Kinzie Station Mortgage" means that certain Mortgage and Security
-----------------------
Agreement dated as of March 15, 1996, made by CMC in favor of Bank
with respect to the Kinzie Station Mortgaged Property, as amended by
that certain Amendment to Mortgage and Security Agreement dated as of
May 14, 1997, that certain Second Amendment to Mortgage and Security
Agreement dated as of April 30, 1998, that certain Third Amendment to
Mortgage and Security Agreement dated as of June 30, 1998 and that
certain Fourth Amendment to Mortgage and Security Agreement dated as
of October 23, 1998, as the same may be further amended, modified or
supplemented from time to time.
f. The definition of the term "Loan" or "Loans" in Paragraph 1.1 is
-------------
hereby amended and restated to read in its entirety as follows:
"Loan" or "Loans" means and includes all Loans made under the
---- -----
Revolving Credit Commitment (including, but not limited to, any
Letters of Credit) and the Term Credit Commitment, unless the context
in which such term is used shall otherwise require.
g. The definition of the term "Other Agreements" in Paragraph 1.1 is
-------------
hereby amended and restated to read in its entirety as follows:
"Other Agreements" means all agreements, instruments and documents,
----------------
including, without limitation, Letters of Credit, guaranties,
mortgages, deeds of trust, pledges, powers of attorney, consents,
assignments, contracts, notices, security agreements, leases,
financing statements and all other written matter heretofore, now
and/or from time to time hereafter executed by and/or on behalf of
Borrower in favor of Bank including, without limitation, the Revolving
Note, the Term Note, the Pledge Agreement, the Galewood Mortgage, the
Galewood Assignment of Rents, the Kinzie Station Mortgage, the Kinzie
Station Assignment of Rents and the Environmental Indemnity Agreement,
all as may be modified, amended or supplemented from time to time.
h. The following definitions are added to Paragraph 1.1 in their
-------------
entirety as follows:
"Term Credit Commitment" shall have the meaning assigned to such term
----------------------
in Paragraph 2.5 hereof.
"Term Credit Maturity Date" means January 29, 1999.
-------------------------
"Term Credit Termination Date" means the earliest to occur of (i) the
----------------------------
Term Credit Maturity Date or (ii) the Early Termination Date.
"Term Note" means that certain Secured Term Note dated as of October
---------
23, 1998 made by Borrowers, jointly and severally, in favor of Bank in
the original principal amount of Five Hundred Thousand Dollars
($500,000), as the same may be amended, modified or supplemented from
time to time including, without limitation, pursuant to that certain
Substitute Secured Term Note to be made by Borrowers in accordance
with Paragraphs 2. 5 and 3.3 below in favor of Bank in the original
-----------------------
principal amount of One Million Dollars ($1,000,000).
i. Paragraph 2.5 is hereby appended to the Agreement and shall read
-------------
as follows:
<PAGE>
Term Credit Commitment. On the terms and subject to the conditions
----------------------
set forth in the Agreement, Bank agrees to make term credit available
to Borrower in the amount of Five Hundred Thousand Dollars ($500,000).
In the event (a) BankOne issues a commitment letter to finance the
Rosemount, Minnesota transaction, in form and substance acceptable to
Bank, or (b) Corus Bank issues a commitment letter to finance the
Kinzie Station Mortgaged property, in form and substance acceptable to
Bank, and (in either case of clause (a) or (b) above) no Event of
Default shall then exist, upon request of Borrowers the original
principal amount of such Term Credit Commitment shall be increased
from Five Hundred Thousand Dollars ($500,000) to One Million Dollars
($1,000,000) and such increased amount of Five Hundred Thousand
Dollars ($500,000) shall be funded pursuant to the Substitute Secured
Term Note described in Paragraph 3.3 below. Any and all Loans and
-------------
advances made by Bank pursuant to the Term Credit Commitment shall be
payable on January 29, 1999.
j. Paragraph 3.2 is hereby amended and restated to read in its entirety
as follows:
Recordation. The type, date and amount of each Loan made by Bank, the
-----------
interest rate, and the date and amount of each repayment of principal
received by Bank shall be recorded by Bank in its records. The
aggregate unpaid principal amount so recorded shall be prima facie
evidence of the principal amount owing and unpaid on the Revolving
Note and the Term Note. The failure to so record any such amount or
any error in so recording any such amount shall not limit or otherwise
affect the obligations of Borrowers hereunder or under the Revolving
Note or the Term Note to repay the principal amount of the Loans
together with all interest accrued thereon.
k. Paragraph 3.3 is hereby appended to the Agreement and shall read as
-------------
follows:
Secured Term Note. The Loan made by Bank under the Term Credit
-----------------
Commitment shall be evidenced by the Term Note substantially in the
form set forth in Exhibit A, attached hereto, payable to the order of
---------
Bank. The unpaid principal amount of the Loan shall bear interest and
be due and payable as provided herein and in the Term Note. In the
event that the Term Credit Commitment shall be increased pursuant to
the circumstances described in Paragraph 2.5 above, Borrowers shall,
-------------
as a condition precedent to Bank having the obligation to so increase
the Term Credit Commitment, execute and deliver to Bank a Substitute
Secured Term Note substantially in the form set forth in Exhibit B
---------
attached hereto. Payments to be made by Borrowers, jointly and
severally, under the Term Note shall be made at the time, in the
amounts and upon the terms set forth herein and therein.
l. Paragraph 4.1(a) is hereby amended and restated to read in its
entirety as follows:
Interest Rate; Applicable Borrowing Amounts.
-------------------------------------------
(a) Borrowers' Liabilities arising under Paragraphs 2.1 and 2.5 hereof
----------------------
in respect of each Loan shall bear interest at the fluctuating rate
per annum equal to the sum of the Prime Rate plus the Revolving Margin
from time to time in effect for the period commencing on the date of
such Loan until such Loan is paid in full.
m. Paragraph 4.7 is hereby appended to the Agreement and shall read as
follows:
Accommodation Fee. As additional consideration for Bank extending
-----------------
additional credit and other accommodations as set forth in Paragraph
---------
2.5 hereof and the Term Note, Borrower shall pay to Bank, payable at
---
execution of the Term Note, a fee equal to Ten Thousand Dollars
($10,000).
n. Paragraph 5.1(a) is hereby amended and restated to read in its
----------------
entirety as follows:
<PAGE>
Payments to Bank. That portion of Borrowers' Liabilities consisting
----------------
of: (a) principal payable on account of the Loans made by Bank to
Borrowers pursuant to this Agreement shall be payable by Borrowers,
jointly and severally, to Bank, as provided in the Revolving Note, the
Term Note, the applicable Letter of Credit or corresponding Letter of
Credit application or the applicable instrument or document in respect
of the Loans, as applicable;
o. The first sentence of Paragraph 5.5 is hereby amended and restated
-------------
to read in its entirety as follows:
This Agreement, Bank's obligation to loan monies to Borrowers, and
each Borrower's ability to borrow monies from Bank shall be in effect
with respect to the Revolving Credit Commitment until the Revolving
Credit Termination Date.
p. Paragraph 8.2(g) is hereby amended and restated to read in its
----------------
entirety as follows:
Financial Covenants. Borrower must maintain at all times Tangible Net
-------------------
Worth in excess of $8,500,000.
23. Closing Documents. All the documents on the Closing Checklist (attached
-----------------
hereto as Exhibit C) shall be delivered concurrently with this Amendment, each
---------
in form and substance satisfactory to Bank, except that Borrowers shall have ten
(10) Business Days after the date hereof to deliver to Bank, in form and
substance acceptable to Bank, the date down endorsements to the title policies
listed on such Closing Checklist.
24. Representations and Warranties; No Event of Default; Schedules. The
--------------------------------------------------------------
representations and warranties set forth in Paragraph 8.1 are deemed remade as
-------------
of the date hereof and Borrower represents that such representations and
warranties are true and correct as of the date hereof. No Event of Default
exists nor does there exist any event or condition which with notice, lapse of
time and/or the consummation of the transactions contemplated hereby would
constitute an Event of Default. The following schedules to the Agreement,
attached hereto as Exhibit D, are hereby deemed amended and restated: Schedule
---------
8.1(e), Schedule 8.1(f), Schedule 8.1(s), Schedule 8.1(z), Schedule 8.3(b),
Schedule 8.3(e) and Schedule 8.3(h).
25. Effectuation. The amendments to the Agreement contemplated by this
------------
Amendment shall be deemed effective immediately upon the full execution of this
Amendment and without any further action required by the parties hereto. There
are no conditions precedent or subsequent to the effectiveness of this
Amendment.
26. Counterparts. This Amendment may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of
the date first above written.
CMC HEARTLAND PARTNERS, a
Delaware general partnership
By: HEARTLAND TECHNOLOGY, INC., a
Delaware corporation and an authorized
general partner
By: ________________________________
Its President
By: HEARTLAND PARTNERS, L.P., a
Delaware limited partnership and an
authorized general partner
By: Heartland Technology, Inc.,
Its: General Partner
By: ________________________________
Its President
HEARTLAND PARTNERS, L.P.,
a Delaware limited partnership
By: Heartland Technology, Inc.
Its: General Partner
By: ________________________________
Its President
LASALLE NATIONAL BANK, a
national banking association
By: ________________________________
Its Vice President
<PAGE>
EXHIBIT A
---------
[Secured Term Note Attached]
<PAGE>
EXHIBIT B
---------
[Substitute Secured Term Note Attached]
<PAGE>
EXHIBIT C
---------
[Closing Checklist Attached]
<PAGE>
EXHIBIT D
---------
[See Attached Amended and Restated Schedules]
<PAGE>
Exhibit 10.4
AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
---------------------------
THIS AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Amendment") is entered into as of the 23rd day of October, 1998 by and among
CMC HEARTLAND PARTNERS, a Delaware general partnership ("CMC") and HEARTLAND
PARTNERS, L.P., a Delaware limited partnership ("Heartland"), jointly and
severally (CMC and Heartland are referred to herein from time to time
individually as a "Borrower" and collectively as "Borrowers"); and LASALLE
NATIONAL BANK, a national banking association ("Bank").
W I T N E S S E T H:
WHEREAS, Bank and Borrowers entered into that certain Amended and Restated
Loan and Security Agreement dated as of June 30, 1998 (the "Agreement"), and now
desire to amend the Agreement to, among other things, temporarily increase
Bank's commitment to Borrowers and make a certain term loan as further set forth
in this Amendment.
NOW, THEREFORE, for and in consideration of the premises and mutual agreements
herein contained and for the purposes of setting forth the terms and conditions
of this Amendment, the parties, intending to be bound, hereby agree as follows:
27. Incorporation of the Agreement. All capitalized terms which are not
------------------------------
defined hereunder shall have the same meanings as set forth in the Agreement,
and the Agreement to the extent not inconsistent with this Amendment is
incorporated herein by this reference as though the same were set forth in its
entirety. To the extent any terms and provisions of the Agreement are
inconsistent with the amendments set forth in paragraph 2 below, such terms and
provisions shall be deemed superseded hereby. Except as specifically set forth
herein, the Agreement shall remain in full force and effect and its provisions
shall be binding on the parties hereto.
28. Amendment of the Agreement. The Agreement is hereby amended as follows:
--------------------------
a. Any and all references to the Agreement shall be deemed to refer to
and include this Amendment, as the same may be further amended, modified or
supplemented from time to time.
b. The definition of the term "Galewood Assignment of Rents" in
Paragraph 1.1 is hereby amended and restated to read in its entirety as follows:
- - -------------
"Galewood Assignment of Rents" means that certain Assignment of Rents
----------------------------
and Leases dated as of June 30, 1998 between CMC and Bank with respect to
the Galewood Mortgaged Property, as amended by that certain Amendment to
Assignment of Rents and Leases dated as of October 23, 1998, as the same
may be amended, modified or supplemented from time to time.
c. The definition of the term "Galewood Mortgage" in Paragraph 1.1 is
-------------
hereby amended and restated to read in its entirety as follows:
"Galewood Mortgage" means that certain Mortgage and Security Agreement
-----------------
dated June 30, 1998 between CMC and Bank with respect to the Galewood
Mortgaged Property, as amended by that certain Amendment to Mortgage and
Security Agreement dated as of October 23, 1998, as the same may be
amended, modified or supplemented from time to time.
d. The definition of the term "Kinzie Station Assignment of Rents" in
Paragraph 1.1 is hereby amended and restated to read in its entirety as follows:
- - -------------
"Kinzie Station Assignment of Rents" means that certain Assignment of
----------------------------------
Rents and Leases dated as of March 15, 1996 between CMC and Bank with
respect to the Kinzie Station Mortgaged Property, as amended by that
certain Amendment to Assignment of Rents and Leases dated as
<PAGE>
of May 14, 1997, that certain Second Amendment to Assignment of Rents and
Leases dated as of April 30, 1998, that certain Third Amendment to
Assignment of Rents and Leases dated as of June 30, 1998 and that certain
Fourth Amendment to Assignment of Rents and Leases dated as of October
23, 1998, as the same may be further amended, modified or supplemented
from time to time.
e. The definition of the term "Kinzie Station Mortgage" in Paragraph
---------
1.1 is hereby amended and restated in its entirety to read as follows:
- - ---
"Kinzie Station Mortgage" means that certain Mortgage and Security
-----------------------
Agreement dated as of March 15, 1996, made by CMC in favor of Bank with
respect to the Kinzie Station Mortgaged Property, as amended by that
certain Amendment to Mortgage and Security Agreement dated as of May 14,
1997, that certain Second Amendment to Mortgage and Security Agreement
dated as of April 30, 1998, that certain Third Amendment to Mortgage and
Security Agreement dated as of June 30, 1998 and that certain Fourth
Amendment to Mortgage and Security Agreement dated as of October 23,
1998, as the same may be further amended, modified or supplemented from
time to time.
f. The definition of the term "Loan" or "Loans" in Paragraph 1.1 is
-------------
hereby amended and restated to read in its entirety as follows:
"Loan" or "Loans" means and includes all Loans made under the Revolving
---- -----
Credit Commitment (including, but not limited to, any Letters of Credit)
and the Term Credit Commitment, unless the context in which such term is
used shall otherwise require.
g. The definition of the term "Other Agreements" in Paragraph 1.1 is
-------------
hereby amended and restated to read in its entirety as follows:
"Other Agreements" means all agreements, instruments and documents,
----------------
including, without limitation, Letters of Credit, guaranties, mortgages,
deeds of trust, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements and
all other written matter heretofore, now and/or from time to time
hereafter executed by and/or on behalf of Borrower in favor of Bank
including, without limitation, the Revolving Note, the Term Note, the
Pledge Agreement, the Galewood Mortgage, the Galewood Assignment of
Rents, the Kinzie Station Mortgage, the Kinzie Station Assignment of
Rents and the Environmental Indemnity Agreement, all as may be modified,
amended or supplemented from time to time.
h. The following definitions are added to Paragraph 1.1 in their
-------------
entirety as follows:
"Term Credit Commitment" shall have the meaning assigned to such term in
----------------------
Paragraph 2.5 hereof.
-------------
"Term Credit Maturity Date" means January 29, 1999.
-------------------------
"Term Credit Termination Date" means the earliest to occur of (i) the
----------------------------
Term Credit Maturity Date or (ii) the Early Termination Date.
"Term Note" means that certain Secured Term Note dated as of October 23,
---------
1998 made by Borrowers, jointly and severally, in favor of Bank in the
original principal amount of Five Hundred Thousand Dollars ($500,000), as
the same may be amended, modified or supplemented from time to time
including, without limitation, pursuant to that certain Substitute
Secured Term Note to be made by Borrowers in accordance with Paragraphs
----------
2.5 and 3.3 below in favor of Bank in the original principal amount of
-----------
One Million Dollars ($1,000,000).
i. Paragraph 2.5 is hereby appended to the Agreement and shall read as
-------------
follows:
<PAGE>
Term Credit Commitment. On the terms and subject to the conditions
----------------------
set forth in the Agreement, Bank agrees to make term credit available
to Borrower in the amount of Five Hundred Thousand Dollars ($500,000).
In the event (a) BankOne issues a commitment letter to finance the
Rosemount, Minnesota transaction, in form and substance acceptable to
Bank, or (b) Corus Bank issues a commitment letter to finance the
Kinzie Station Mortgaged property, in form and substance acceptable to
Bank, and (in either case of clause (a) or (b) above) no Event of
Default shall then exist, upon request of Borrowers the original
principal amount of such Term Credit Commitment shall be increased
from Five Hundred Thousand Dollars ($500,000) to One Million Dollars
($1,000,000) and such increased amount of Five Hundred Thousand
Dollars ($500,000) shall be funded pursuant to the Substitute Secured
Term Note described in Paragraph 3.3 below. Any and all Loans and
-------------
advances made by Bank pursuant to the Term Credit Commitment shall be
payable on January 29, 1999.
j. Paragraph 3.2 is hereby amended and restated to read in its entirety
as follows:
Recordation. The type, date and amount of each Loan made by Bank, the
-----------
interest rate, and the date and amount of each repayment of principal
received by Bank shall be recorded by Bank in its records. The
aggregate unpaid principal amount so recorded shall be prima facie
evidence of the principal amount owing and unpaid on the Revolving
Note and the Term Note. The failure to so record any such amount or
any error in so recording any such amount shall not limit or otherwise
affect the obligations of Borrowers hereunder or under the Revolving
Note or the Term Note to repay the principal amount of the Loans
together with all interest accrued thereon.
k. Paragraph 3.3 is hereby appended to the Agreement and shall read as
-------------
follows:
Secured Term Note. The Loan made by Bank under the Term Credit
-----------------
Commitment shall be evidenced by the Term Note substantially in the
form set forth in Exhibit A, attached hereto, payable to the order of
---------
Bank. The unpaid principal amount of the Loan shall bear interest and
be due and payable as provided herein and in the Term Note. In the
event that the Term Credit Commitment shall be increased pursuant to
the circumstances described in Paragraph 2.5 above, Borrowers shall,
-------------
as a condition precedent to Bank having the obligation to so increase
the Term Credit Commitment, execute and deliver to Bank a Substitute
Secured Term Note substantially in the form set forth in Exhibit B
---------
attached hereto. Payments to be made by Borrowers, jointly and
severally, under the Term Note shall be made at the time, in the
amounts and upon the terms set forth herein and therein.
l. Paragraph 4.1(a) is hereby amended and restated to read in its
entirety as follows:
Interest Rate; Applicable Borrowing Amounts.
-------------------------------------------
(a) Borrowers' Liabilities arising under Paragraphs 2.1 and 2.5 hereof
----------------------
in respect of each Loan shall bear interest at the fluctuating rate
per annum equal to the sum of the Prime Rate plus the Revolving Margin
from time to time in effect for the period commencing on the date of
such Loan until such Loan is paid in full.
m. Paragraph 4.7 is hereby appended to the Agreement and shall read as
follows:
Accommodation Fee. As additional consideration for Bank extending
-----------------
additional credit and other accommodations as set forth in Paragraph
---------
2.5 hereof and the Term Note, Borrower shall pay to Bank, payable at
---
execution of the Term Note, a fee equal to Ten Thousand Dollars
($10,000).
n. Paragraph 5.1(a) is hereby amended and restated to read in its
----------------
entirety as follows:
<PAGE>
Payments to Bank. That portion of Borrowers' Liabilities consisting
----------------
of: (a) principal payable on account of the Loans made by Bank to
Borrowers pursuant to this Agreement shall be payable by Borrowers,
jointly and severally, to Bank, as provided in the Revolving Note, the
Term Note, the applicable Letter of Credit or corresponding Letter of
Credit application or the applicable instrument or document in respect
of the Loans, as applicable;
o. The first sentence of Paragraph 5.5 is hereby amended and restated
-------------
to read in its entirety as follows:
This Agreement, Bank's obligation to loan monies to Borrowers, and
each Borrower's ability to borrow monies from Bank shall be in effect
with respect to the Revolving Credit Commitment until the Revolving
Credit Termination Date.
p. Paragraph 8.2(g) is hereby amended and restated to read in its
----------------
entirety as follows:
Financial Covenants. Borrower must maintain at all times Tangible Net
-------------------
Worth in excess of $8,500,000.
29. Closing Documents. All the documents on the Closing Checklist (attached
-----------------
hereto as Exhibit C) shall be delivered concurrently with this Amendment, each
---------
in form and substance satisfactory to Bank, except that Borrowers shall have ten
(10) Business Days after the date hereof to deliver to Bank, in form and
substance acceptable to Bank, the date down endorsements to the title policies
listed on such Closing Checklist.
30. Representations and Warranties; No Event of Default; Schedules. The
--------------------------------------------------------------
representations and warranties set forth in Paragraph 8.1 are deemed remade as
-------------
of the date hereof and Borrower represents that such representations and
warranties are true and correct as of the date hereof. No Event of Default
exists nor does there exist any event or condition which with notice, lapse of
time and/or the consummation of the transactions contemplated hereby would
constitute an Event of Default. The following schedules to the Agreement,
attached hereto as Exhibit D, are hereby deemed amended and restated: Schedule
---------
8.1(e), Schedule 8.1(f), Schedule 8.1(s), Schedule 8.1(z), Schedule 8.3(b),
Schedule 8.3(e) and Schedule 8.3(h).
31. Effectuation. The amendments to the Agreement contemplated by this
------------
Amendment shall be deemed effective immediately upon the full execution of this
Amendment and without any further action required by the parties hereto. There
are no conditions precedent or subsequent to the effectiveness of this
Amendment.
32. Counterparts. This Amendment may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of
the date first above written.
CMC HEARTLAND PARTNERS, a
Delaware general partnership
By: HEARTLAND TECHNOLOGY, INC., a
Delaware corporation and an authorized
general partner
By: _____________________________
Its President
By: HEARTLAND PARTNERS, L.P., a
Delaware limited partnership and an
authorized general partner
By: Heartland Technology, Inc.,
Its: General Partner
By: _____________________________
Its President
HEARTLAND PARTNERS, L.P.,
a Delaware limited partnership
By: Heartland Technology, Inc.
Its: General Partner
By: _____________________________
Its President
LASALLE NATIONAL BANK, a
national banking association
By: _____________________________
Its Vice President
<PAGE>
EXHIBIT A
---------
[Secured Term Note Attached]
<PAGE>
EXHIBIT B
---------
[Substitute Secured Term Note Attached]
<PAGE>
EXHIBIT C
---------
[Closing Checklist Attached]
<PAGE>
EXHIBIT D
---------
[See Attached Amended and Restated Schedules]
<PAGE>
EXHIBIT 10.6
AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
---------------------------
THIS AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Amendment") is entered into as of the 23rd day of October, 1998 by and among
CMC HEARTLAND PARTNERS, a Delaware general partnership ("CMC") and HEARTLAND
PARTNERS, L.P., a Delaware limited partnership ("Heartland"), jointly and
severally (CMC and Heartland are referred to herein from time to time
individually as a "Borrower" and collectively as "Borrowers"); and LASALLE
NATIONAL BANK, a national banking association ("Bank").
W I T N E S S E T H:
WHEREAS, Bank and Borrowers entered into that certain Amended and Restated
Loan and Security Agreement dated as of June 30, 1998 (the "Agreement"), and now
desire to amend the Agreement to, among other things, temporarily increase
Bank's commitment to Borrowers and make a certain term loan as further set forth
in this Amendment.
NOW, THEREFORE, for and in consideration of the premises and mutual
agreements herein contained and for the purposes of setting forth the terms and
conditions of this Amendment, the parties, intending to be bound, hereby agree
as follows:
33. Incorporation of the Agreement. All capitalized terms which are not
------------------------------
defined hereunder shall have the same meanings as set forth in the Agreement,
and the Agreement to the extent not inconsistent with this Amendment is
incorporated herein by this reference as though the same were set forth in its
entirety. To the extent any terms and provisions of the Agreement are
inconsistent with the amendments set forth in paragraph 2 below, such terms and
provisions shall be deemed superseded hereby. Except as specifically set forth
herein, the Agreement shall remain in full force and effect and its provisions
shall be binding on the parties hereto.
34. Amendment of the Agreement. The Agreement is hereby amended as
--------------------------
follows:
a. Any and all references to the Agreement shall be deemed to refer
to and include this Amendment, as the same may be further amended, modified or
supplemented from time to time.
b. The definition of the term "Galewood Assignment of Rents" in
Paragraph 1.1 is hereby amended and restated to read in its entirety as follows:
- - -------------
"Galewood Assignment of Rents" means that certain Assignment of Rents
----------------------------
and Leases dated as of June 30, 1998 between CMC and Bank with respect
to the Galewood Mortgaged Property, as amended by that certain
Amendment to Assignment of Rents and Leases dated as of October 23,
1998, as the same may be amended, modified or supplemented from time
to time.
c. The definition of the term "Galewood Mortgage" in Paragraph 1.1
-------------
is hereby amended and restated to read in its entirety as follows:
"Galewood Mortgage" means that certain Mortgage and Security Agreement
-----------------
dated June 30, 1998 between CMC and Bank with respect to the Galewood
Mortgaged Property, as amended by that certain Amendment to Mortgage
and Security Agreement dated as of October 23, 1998, as the same may
be amended, modified or supplemented from time to time.
d. The definition of the term "Kinzie Station Assignment of Rents"
in Paragraph 1.1 is hereby amended and restated to read in its entirety as
-------------
follows:
"Kinzie Station Assignment of Rents" means that certain Assignment of
----------------------------------
Rents and Leases dated as of March 15, 1996 between CMC and Bank with
respect to the Kinzie Station Mortgaged Property, as amended by that
certain Amendment to Assignment of Rents and Leases dated as
<PAGE>
of May 14, 1997, that certain Second Amendment to Assignment of Rents
and Leases dated as of April 30, 1998, that certain Third Amendment to
Assignment of Rents and Leases dated as of June 30, 1998 and that
certain Fourth Amendment to Assignment of Rents and Leases dated as of
October 23, 1998, as the same may be further amended, modified or
supplemented from time to time.
e. The definition of the term "Kinzie Station Mortgage" in Paragraph
---------
1.1 is hereby amended and restated in its entirety to read as follows:
- - ---
"Kinzie Station Mortgage" means that certain Mortgage and Security
-----------------------
Agreement dated as of March 15, 1996, made by CMC in favor of Bank
with respect to the Kinzie Station Mortgaged Property, as amended by
that certain Amendment to Mortgage and Security Agreement dated as of
May 14, 1997, that certain Second Amendment to Mortgage and Security
Agreement dated as of April 30, 1998, that certain Third Amendment to
Mortgage and Security Agreement dated as of June 30, 1998 and that
certain Fourth Amendment to Mortgage and Security Agreement dated as
of October 23, 1998, as the same may be further amended, modified or
supplemented from time to time.
f. The definition of the term "Loan" or "Loans" in Paragraph 1.1 is
-------------
hereby amended and restated to read in its entirety as follows:
"Loan" or "Loans" means and includes all Loans made under the
---- -----
Revolving Credit Commitment (including, but not limited to, any
Letters of Credit) and the Term Credit Commitment, unless the context
in which such term is used shall otherwise require.
g. The definition of the term "Other Agreements" in Paragraph 1.1 is
-------------
hereby amended and restated to read in its entirety as follows:
"Other Agreements" means all agreements, instruments and documents,
----------------
including, without limitation, Letters of Credit, guaranties,
mortgages, deeds of trust, pledges, powers of attorney, consents,
assignments, contracts, notices, security agreements, leases,
financing statements and all other written matter heretofore, now
and/or from time to time hereafter executed by and/or on behalf of
Borrower in favor of Bank including, without limitation, the Revolving
Note, the Term Note, the Pledge Agreement, the Galewood Mortgage, the
Galewood Assignment of Rents, the Kinzie Station Mortgage, the Kinzie
Station Assignment of Rents and the Environmental Indemnity Agreement,
all as may be modified, amended or supplemented from time to time.
h. The following definitions are added to Paragraph 1.1 in their
-------------
entirety as follows:
"Term Credit Commitment" shall have the meaning assigned to such term
in Paragraph 2.5 hereof.
-------------
"Term Credit Maturity Date" means January 29, 1999.
-------------------------
"Term Credit Termination Date" means the earliest to occur of (i) the
----------------------------
Term Credit Maturity Date or (ii) the Early Termination Date.
"Term Note" means that certain Secured Term Note dated as of October
---------
23, 1998 made by Borrowers, jointly and severally, in favor of Bank in
the original principal amount of Five Hundred Thousand Dollars
($500,000), as the same may be amended, modified or supplemented from
time to time including, without limitation, pursuant to that certain
Substitute Secured Term Note to be made by Borrowers in accordance
with Paragraphs 2.5 and 3.3 below in favor of Bank in the original
----------------------
principal amount of One Million Dollars ($1,000,000).
i. Paragraph 2.5 is hereby appended to the Agreement and shall read
-------------
as follows:
<PAGE>
Term Credit Commitment. On the terms and subject to the conditions
----------------------
set forth in the Agreement, Bank agrees to make term credit available
to Borrower in the amount of Five Hundred Thousand Dollars ($500,000).
In the event (a) BankOne issues a commitment letter to finance the
Rosemount, Minnesota transaction, in form and substance acceptable to
Bank, or (b) Corus Bank issues a commitment letter to finance the
Kinzie Station Mortgaged property, in form and substance acceptable to
Bank, and (in either case of clause (a) or (b) above) no Event of
Default shall then exist, upon request of Borrowers the original
principal amount of such Term Credit Commitment shall be increased
from Five Hundred Thousand Dollars ($500,000) to One Million Dollars
($1,000,000) and such increased amount of Five Hundred Thousand
Dollars ($500,000) shall be funded pursuant to the Substitute Secured
Term Note described in Paragraph 3.3 below. Any and all Loans and
-------------
advances made by Bank pursuant to the Term Credit Commitment shall be
payable on January 29, 1999.
j. Paragraph 3.2 is hereby amended and restated to read in its entirety
as follows:
Recordation. The type, date and amount of each Loan made by Bank, the
-----------
interest rate, and the date and amount of each repayment of principal
received by Bank shall be recorded by Bank in its records. The
aggregate unpaid principal amount so recorded shall be prima facie
evidence of the principal amount owing and unpaid on the Revolving
Note and the Term Note. The failure to so record any such amount or
any error in so recording any such amount shall not limit or otherwise
affect the obligations of Borrowers hereunder or under the Revolving
Note or the Term Note to repay the principal amount of the Loans
together with all interest accrued thereon.
k. Paragraph 3.3 is hereby appended to the Agreement and shall read as
-------------
follows:
Secured Term Note. The Loan made by Bank under the Term Credit
-----------------
Commitment shall be evidenced by the Term Note substantially in the
form set forth in Exhibit A, attached hereto, payable to the order of
---------
Bank. The unpaid principal amount of the Loan shall bear interest and
be due and payable as provided herein and in the Term Note. In the
event that the Term Credit Commitment shall be increased pursuant to
the circumstances described in Paragraph 2.5 above, Borrowers shall,
-------------
as a condition precedent to Bank having the obligation to so increase
the Term Credit Commitment, execute and deliver to Bank a Substitute
Secured Term Note substantially in the form set forth in Exhibit B
---------
attached hereto. Payments to be made by Borrowers, jointly and
severally, under the Term Note shall be made at the time, in the
amounts and upon the terms set forth herein and therein.
l. Paragraph 4.1(a) is hereby amended and restated to read in its
entirety as follows:
Interest Rate; Applicable Borrowing Amounts.
-------------------------------------------
(a) Borrowers' Liabilities arising under Paragraphs 2.1 and 2.5
----------------------
hereof in respect of each Loan shall bear interest at the fluctuating
rate per annum equal to the sum of the Prime Rate plus the Revolving
Margin from time to time in effect for the period commencing on the
date of such Loan until such Loan is paid in full.
m. Paragraph 4.7 is hereby appended to the Agreement and shall read as
follows:
Accommodation Fee. As additional consideration for Bank extending
-----------------
additional credit and other accommodations as set forth in Paragraph
---------
2.5 hereof and the Term Note, Borrower shall pay to Bank, payable at
---
execution of the Term Note, a fee equal to Ten Thousand Dollars
($10,000).
n. Paragraph 5.1(a) is hereby amended and restated to read in its
----------------
entirety as follows:
<PAGE>
Payments to Bank. That portion of Borrowers' Liabilities consisting
----------------
of: (a) principal payable on account of the Loans made by Bank to
Borrowers pursuant to this Agreement shall be payable by Borrowers,
jointly and severally, to Bank, as provided in the Revolving Note, the
Term Note, the applicable Letter of Credit or corresponding Letter of
Credit application or the applicable instrument or document in respect
of the Loans, as applicable;
o. The first sentence of Paragraph 5.5 is hereby amended and restated
-------------
to read in its entirety as follows:
This Agreement, Bank's obligation to loan monies to Borrowers, and
each Borrower's ability to borrow monies from Bank shall be in effect
with respect to the Revolving Credit Commitment until the Revolving
Credit Termination Date.
p. Paragraph 8.2(g) is hereby amended and restated to read in its
----------------
entirety as follows:
Financial Covenants. Borrower must maintain at all times Tangible Net
-------------------
Worth in excess of $8,500,000.
35. Closing Documents. All the documents on the Closing Checklist
-----------------
(attached hereto as Exhibit C) shall be delivered concurrently with this
Amendment, each in form and substance satisfactory to Bank, except that
Borrowers shall have ten (10) Business Days after the date hereof to deliver to
Bank, in form and substance acceptable to Bank, the date down endorsements to
the title policies listed on such Closing Checklist.
36. Representations and Warranties; No Event of Default; Schedules. The
--------------------------------------------------------------
representations and warranties set forth in Paragraph 8.1 are deemed remade as
-------------
of the date hereof and Borrower represents that such representations and
warranties are true and correct as of the date hereof. No Event of Default
exists nor does there exist any event or condition which with notice, lapse of
time and/or the consummation of the transactions contemplated hereby would
constitute an Event of Default. The following schedules to the Agreement,
attached hereto as Exhibit D, are hereby deemed amended and restated: Schedule
---------
8.1(e), Schedule 8.1(f), Schedule 8.1(s), Schedule 8.1(z), Schedule 8.3(b),
Schedule 8.3(e) and Schedule 8.3(h).
37. Effectuation. The amendments to the Agreement contemplated by this
------------
Amendment shall be deemed effective immediately upon the full execution of this
Amendment and without any further action required by the parties hereto. There
are no conditions precedent or subsequent to the effectiveness of this
Amendment.
38. Counterparts. This Amendment may be executed in two or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as
of the date first above written.
CMC HEARTLAND PARTNERS, a
Delaware general partnership
By: HEARTLAND TECHNOLOGY, INC., a
Delaware corporation and an authorized
general partner
By: _______________________________
Its President
By: HEARTLAND PARTNERS, L.P., a
Delaware limited partnership and an
authorized general partner
By: Heartland Technology, Inc.,
Its: General Partner
By: _______________________________
Its President
HEARTLAND PARTNERS, L.P.,
a Delaware limited partnership
By: Heartland Technology, Inc.
Its: General Partner
By: _______________________________
Its President
LASALLE NATIONAL BANK, a
national banking association
By: _______________________________
Its Vice President
<PAGE>
EXHIBIT A
---------
[Secured Term Note Attached]
<PAGE>
EXHIBIT B
---------
[Substitute Secured Term Note Attached]
<PAGE>
EXHIBIT C
---------
[Closing Checklist Attached]
<PAGE>
EXHIBIT D
---------
[See Attached Amended and Restated Schedules]
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997
<CASH> 64 1,890
<SECURITIES> 147 141
<RECEIVABLES> 1,057 459
<ALLOWANCES> 205 205
<INVENTORY> 6,255 4,815
<CURRENT-ASSETS> 3,495 3,642
<PP&E> 26,250 24,003
<DEPRECIATION> 890 807
<TOTAL-ASSETS> 28,855 26,838
<CURRENT-LIABILITIES> 15,014 7,978
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 9,263 15,491
<TOTAL-LIABILITY-AND-EQUITY> 28,855 26,838
<SALES> 3,005 4,309
<TOTAL-REVENUES> 4,001 5,483
<CGS> 2,918 2,254
<TOTAL-COSTS> 2,918 2,254
<OTHER-EXPENSES> 7,312 5,792
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (6,229) (2,563)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (6,229) (2,563)
<EPS-PRIMARY> (2.86) (1.18)<F1>
<EPS-DILUTED> 0 0
<FN>
<F1> PRIMARY EPS REPRESENTS THE PER-UNIT CLASS A LIMITED PARTNERS' INCOME
ALLOCATION, AND EXCLUDES THAT OF THE GENERAL PARTNER AND CLASS B LIMITED
PARTNER.
</FN>
</TABLE>
