<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1993
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 [No Fee Required]
Commission File Number 1-8029
THE RYLAND GROUP, INC.
----------------------
(Exact name of registrant as specified in its charter)
Maryland 52-0849948
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
11000 Broken Land Parkway
Columbia, Maryland 21044
(Address of principal executive offices)
Registrant's telephone number, including area code: (410)715-7000
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, (Par Value $1.00) New York Stock Exchange
Common Share Purchase Rights New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
The aggregate market value of the Common Stock of The Ryland Group, Inc. held by
non-affiliates of the registrant (14,998,904 shares) as of March 7, 1993 was
$326,226,162. The number of shares of common stock of The Ryland Group, Inc.,
outstanding on March 7, 1993 was 15,365,111.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Name of Document Location in Report
---------------- ------------------
Proxy Statement for 1994 Annual
Meeting of Stockholders Parts I, III
Annual Report to Shareholders for the
year ended December 31, 1993 Parts II, IV
Form 10-K for the year ended December 31, 1989 Part IV
Form 10-Q for the quarter ended June 30, 1990 Part IV
Form 8 filed October 25, 1990 Part IV
Form 8-K filed September 12, 1989 Part IV
Registration Statement on Form S-3,
Registration 33-28692 Part IV
Form 8-K filed December 31, 1990 Part IV
Form 8-K filed August 6, 1992 Part IV
Form 10-K for the year ended December 31, 1990 Part IV
Form 10-Q for the quarter ended June 30, 1992 Part IV
Registration Statement on Form S-3,
Registration 33-48071 Part IV
Form 8-K filed October 28, 1993 Part IV
2
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THE RYLAND GROUP, INC.
FORM 10-K
INDEX
Page Number
PART I.
Item 1. Business 4
Item 2. Properties 10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security
Holders 10
PART II.
Item 5. Market for the Company's Common Stock
and Related Stockholder Matters 13
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 13
Item 8. Financial Statements and Supplementary Data 13
Item 9. Changes In and Disagreements with
Accountants on Accounting and Financial
Disclosure 13
PART III.
Item 10. Directors and Executive Officers of the
Company 14
Item 11. Executive Compensation 14
Item 12. Security Ownership of Certain Beneficial
Owners and Management 14
Item 13. Certain Relationships and Related
Transactions 14
PART IV.
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 15
SIGNATURES 22
INDEX OF EXHIBITS 23
3
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PART I
ITEM 1. BUSINESS.
The Ryland Group, Inc. (the "company") is a leading national homebuilder and a
mortgage-related financial services firm. Established in 1967, the company
currently builds homes and provides mortgage services in 48 markets in 18
states. The company was the third largest single-family on-site homebuilder in
the United States in 1993 based upon homes delivered. The company's homebuilding
segment specializes in the sale and construction of single-family attached and
detached housing and condominiums. The financial services segment provides
mortgage-related products and services for retail and institutional customers
and conducts investment activities. The company facilitates the issuance of
mortgage-backed securities and mortgage-participation securities through its
limited-purpose subsidiaries.
HOMEBUILDING
MARKETS The homebuilding segment builds and sells homes that are constructed
on-site in five regions which comprise the following areas at December 31,
1993:
<TABLE>
<CAPTION>
Region Areas Served
------ ------------
<S> <C>
Mid-Atlantic Baltimore, Delaware Valley, Philadelphia, Washington, D.C.
Midwest Chicago, Cincinnati, Columbus, Dayton, Indianapolis
Southeast Atlanta, Charleston, Charlotte, Orlando
Southwest Austin, Dallas, Denver, Houston, San Antonio
West Los Angeles, Phoenix, Sacramento, San Diego
</TABLE>
In January 1994, to address the distinct characteristics of the California
market and the opportunities available there, management elected to form a
California Region, comprised of the Los Angeles, Sacramento and San Diego
markets. Furthermore, the Denver and Phoenix markets were combined to create a
newly-defined West Region.
The homebuilding segment sells under the name of Larchmont Homes in Northern
California, Brock Homes in Southern California, Scott Felder Homes in certain
Texas markets and Ryland Homes in all other areas.
The company's operations in each of its homebuilding markets differ based on a
number of market-specific factors. These factors include regional economic
conditions and job growth, land availability and the local land development
process, consumer tastes, competition from other builders of new homes and home
resale activity. The company considers each of these factors when entering into
new markets or determining the extent of its operations in existing markets. In
1993, the company entered into the Austin and San Antonio, Texas markets
through its acquisition of an interest in a joint venture with Scott Felder
Homes. Furthermore, the Company entered into the Chicago market during the
year.
4
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The company offers a range of different home styles in each of its geographic
regions which are tailored to the styles and consumer tastes of the particular
region. Optional interior and exterior features allow the customer to enhance
the basic styles. The company's homes vary in size and price range, but are
generally marketed to customers purchasing their first home or their first move-
up home. The company's average settlement price was $148,400 in 1993.
LAND PURCHASES. The company must, in the ordinary course of its business,
continuously seek and make acquisitions of land for replacement and expansion
of land inventory within its current markets and for expansion into new
markets. Where possible, options or contracts with cash deposit requirements
are used to acquire rights to developed lots that the company intends to use
for the sale and construction of homes. Generally, the company will complete
the purchase of the lots under such option agreements as sales contracts are
executed by home buyers; however, under certain circumstances, developed lots
are acquired before sales contracts are executed by home buyers. The company
also purchases developed land and land for development into finished lots. As
of December 31, 1993, the company had deposits and letters of credit
outstanding of $26.0 million for options and commitments to purchase land.
These options and commitments expire at various dates through 1997.
MATERIALS COSTS Substantially all materials used in the construction of homes
are available from a number of sources, but may fluctuate in price due to
various factors. To increase purchasing efficiencies, the company uses
standardized building materials and products in its homes. In addition, the
company operates plants in Maryland, North Carolina, Ohio, and Texas that
produce and ship rough lumber packages and trim materials to building sites. The
company utilizes these plants to control production, improve on-site building
times and control the cost and quality of materials.
SUPPLIERS AND SUBCONTRACTORS Substantially all on-site construction work is
performed by subcontractors monitored by the company's production supervisors.
The company has, on occasion, experienced shortages of building materials and of
skilled labor in certain markets. Such shortages in the future could result in
longer construction times and higher costs than those experienced in the past.
MARKETING Homes are sold by employees and independent real estate brokers
showing furnished model homes. The company reports a sale when a customer's
sales contract is approved, and records revenue from a sale upon settlement of
the new home. The company normally commences construction of homes when a
customer has selected a lot and model and has received preliminary mortgage
approval. However, construction of homes may begin prior to a sale to satisfy
market demand for completed homes and to ease construction scheduling.
5
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FINANCIAL SERVICES
Through its financial services segment, the company provides various mortgage-
related products and services for retail and institutional customers and
conducts investment activities. Retail operations include mortgage origination
and settlement of residential loans for approximately 72% of the customers of
the company's homebuilding segment. The company's financial services segment
also has a growing spot and wholesale loan business and is engaged in loan
administration, title and escrow services. Institutional operations include
securities administration and securities issuance activities. The investment
operation holds certain assets related to the company's operations, primarily
mortgage-backed securities held for sale that were previously issued by the
company's limited-purpose subsidiaries.
RETAIL OPERATIONS
The retail operations provide loan production, loan servicing and title and
escrow services for retail customers.
LOAN PRODUCTION. The company's mortgage origination operations have a
centralized management structure, with 31 retail loan processing offices which
process the company's builder and spot loans, and eight wholesale offices. For
the twelve months ended December 31, 1993, the company originated 27,872
mortgage loans totaling $3.6 billion, of which 80 percent were for buyers of
homes other than those built by the company and those seeking refinancing of
existing mortgage loans.
The company's mortgage loan originations can be split into three segments:
builder loans, spot loans (together, retail loans), and wholesale loans. Builder
loans are loans that the company originates in connection with its home sales.
Spot loans are mortgage loans that are originated primarily by loan officers
through contacts with realtors and home owners. Spot loans are not related to
the financing of homes built by the company. Wholesale loans are originated by
outside brokers but underwritten and closed by the company. The wholesale
offices work with a network of loan brokers and lenders to source loans.
The company arranges various types of mortgage financing including conventional,
Federal Housing Administration and Veterans Administration mortgages with
various fixed- and adjustable-rate structures. The company's mortgage
operations are approved by Federal Home Loan Mortgage Corporation, Federal
National Mortgage Association and Government National Mortgage Association. The
mortgage origination operation has loan production offices in Arizona,
California, Colorado, Florida, Georgia, Illinois, Indiana, Maryland, New Jersey,
North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia and
Washington.
6
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LOAN SERVICING The company services loans that it originates as well as loans
originated by others. As of December 31, 1993, the company's loan servicing
portfolio was $9.8 billion. The company services loans in all 50 states, with
the highest concentrations in Alabama, Arizona, California, Florida, Georgia,
Maryland, North Carolina, Texas, Virginia and Washington.
TITLE AND ESCROW SERVICES The company entered the title business in 1989
through the formation of Cornerstone Title Company for the initial purpose of
providing title services to the company's customers. As of December 31, 1993
Cornerstone had two offices in Maryland and one office each in Florida, Indiana,
Texas and Delaware. The company also operates two escrow companies in
California that perform the escrow and loan closing functions primarily on homes
built by the company.
INSTITUTIONAL OPERATIONS
Institutional financial services consist of securities issuance and securities
administration. The company began issuing and administering securities in 1982
through wholly-owned subsidiaries. These services have expanded to include
builder and multi-builder bonds, multi-class CMO and REMIC structures and pass-
through securities.
SECURITIES ISSUANCE. In 1982, the company began to provide access to capital
markets for itself and other homebuilders, mortgage bankers and thrifts to
support loan production. Through various limited-purpose subsidiaries and shelf
registration statements, the company has the ability to issue securities in
either debt or pass-through form. The company's expertise includes structures
utilizing subordination, mezzanine classes, pool insurance, modified pool
insurance, reserve funds, limited guarantees and full guarantees from
third-party bond guarantors as well as various combinations of these features.
Eligible collateral includes single-family and multi-family mortgage loans,
manufactured housing contracts, agency certificates and private label mortgage
securities.
SECURITIES ADMINISTRATION. The securities administration business includes
trustee monitoring and reporting, financial and compliance reporting, tax
administration and master servicing. The company has been able to capitalize on
the growth in the securities industry by the establishment of the administration
business for third party issuers. At December 31, 1993, the company provided
administration services for nearly 50 different issuers which have created
approximately 500 series of securities aggregating over $123 billion in issuance
balances.
7
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INVESTMENT OPERATIONS
The company's investment operations hold certain assets, primarily mortgage-
backed securities held for sale, which were obtained as a result of the early
redemption of various mortgage-backed bonds previously issued by the limited-
purpose subsidiaries of the company. The limited-purpose subsidiaries were
formed to facilitate the long-term financing of mortgage loans through the
issuance and sale of mortgage-backed bonds.
The company earns an interest spread on the portfolio equal to the difference
between the interest rate on the called mortgage collateral and the related
borrowing rate. The company may periodically realize gains from the sale of
mortgage-backed securities from the portfolio.
LIMITED-PURPOSE SUBSIDIARIES
The company's limited-purpose subsidiaries facilitate the financing of long-term
mortgage loans and securities through the issuance of mortgage-backed bonds.
These bond series represent obligations solely of the limited-purpose
subsidiaries and are not guaranteed or insured by The Ryland Group, Inc. Under
the provisions of applicable trust indentures, the bonds are fully
collateralized by mortgage loans, mortgage-backed securities, notes receivable
and certain funds held by trustees.
The company's limited-purpose subsidiaries were established to provide conduits
for the issuance and sale of mortgage-backed securities and mortgage
participation certificates in the secondary market. Although the limited-purpose
subsidiaries may continue to issue securities on behalf of others, due to
changes in the tax laws the number of new securities in which the company has
retained a residual interest has decreased substantially in recent years, and
since 1991 no residual interests have been retained by the company.
ECONOMIC CONDITIONS
The company's business is affected by general economic conditions in the United
States and by the level of interest rates and consumer confidence in the
economy. The company cannot predict whether interest rates will be at levels
attractive to prospective home buyers. In addition, the company's business is
affected by local economic conditions, such as unemployment rates and housing
demand in the markets in which it builds homes.
The company's financial services operations are affected by changes in interest
rates which may affect the level of origination activity, mortgage-backed
security issuance activity, and prepayments. Prepayments reduce the value of
loan servicing rights and securities administration rights.
8
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COMPETITION
The company competes with other homebuilders in its markets. Competition ranges
from local custom builders who may build only a few homes each year to other
large national homebuilding companies. In addition, the company competes with
consumer alternatives such as existing homes and rental housing. Principal
competitive factors in homebuilding are design, quality, reputation,
relationship with developers, availability and location of lots, and price and
availability of customer financing.
The financial services segment competes with other mortgage bankers to arrange
financing for home buying customers. Principal competitive factors include
interest rates and various other features of mortgage loan products available to
the home buyer. The loan servicing operations of the financial services segment
competes with other national loan servicers for loan servicing rights. This
segment also competes in the securities markets with investment bankers, issuers
and servicers for the business of issuing, administering and managing mortgage-
backed bonds and other securities.
REGULATORY AND ENVIRONMENTAL MATTERS
The company is subject to various local, state and federal statutes, ordinances,
rules and regulations concerning zoning, building design, construction and
similar matters, including local regulations which impose restrictive zoning and
density requirements in order to limit the number of homes that can eventually
be built within the boundaries of a particular locality. The company may also
be subject to periodic delays in homebuilding projects due to building moratoria
in any of the states in which it operates. Generally, such moratoria relate to
insufficient water or sewage facilities, or inadequate roads, or local services.
The company is subject to various local, state and federal statutes, ordinances,
rules and regulations concerning the protection of health and the environment.
The company is also subject to a variety of environmental conditions that can
affect its business and its homebuilding projects. The particular environmental
laws which apply to any given homebuilding site vary greatly according to the
site's location, its environmental condition and the present and former uses of
the site. Environmental laws and conditions may result in delays, may cause the
company to incur substantial compliance and other costs, and can prohibit or
severely restrict homebuilding activity in certain environmentally sensitive
areas.
9
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The company's financial services segment is subject to the rules and regulations
of FHA, VA, FNMA, FHLMC, and GNMA ("regulatory agencies") with respect to
originating, processing, selling and servicing mortgage loans. As a FHA lender,
the company is required to file its audited financial statements with these
various regulatory agencies. Additionally, the company is required to maintain a
minimum net worth level as specified by HUD, GNMA, and FNMA. Mortgage
origination activities are subject to the Equal Credit Opportunity Act, Federal
Truth-in-Lending Act and the Real Estate Settlement Procedures Act and the
regulations promulgated thereunder which prohibit discrimination and require the
disclosure of certain information to mortgagors concerning credit and settlement
costs.
EMPLOYEES
At December 31, 1993 the company employed 3,326 people. The company considers
its employee relations to be good. No employees are represented by a collective
bargaining agent.
ITEM 2. PROPERTIES
The company leases office space for its corporate headquarters in Columbia,
Maryland, and for various operating offices. The company operates building
component plants in Houston, Texas, New Windsor, Maryland, and Harrison, Ohio,
and leases a building component plant in Shelby, North Carolina.
ITEM 3. LEGAL PROCEEDINGS
The company believes that approximately 6,400 townhomes and condominiums
constructed from the mid-1970s through 1988 contain fire-retardant treated
plywood used as roof sheathing that has been observed to fail over a relatively
short period of time after installation. The company is in the process of
inspecting and repairing the roofs of these homes. The cost of repairing these
roofs, net of settlements from third parties, has been provided for by the
company. As a result, it is the opinion of management that the costs to repair
the remaining roofs will not adversely impact results of operations in future
periods.
Contingent liabilities may arise from the obligations incurred in the ordinary
course of business. The company is also party to various legal
proceedings generally incidental to its businesses. Based on evaluation of the
above matters and discussions with counsel, management believes that liabilities
to the company arising from these matters will not have a material adverse
effect on the financial condition of the company.
ITEM 4. SUBMISSION TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1993.
10
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SEPARATE ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Name Age Position (date elected to position)
- --------------------------------------------------------------------------------
<S> <C> <C>
R. Chad Dreier 46 Director/President and Chief Executive Officer
(November 1993)
Alan P. Hoblitzell, Jr. 62 Director/Executive Vice President, Chief
Financial Officer (February 1991).
Robert J. Gaw 60 Director/Executive Vice President and President
of Ryland Mortgage Company (April 1979).
Thurman W. Bretz 59 Secretary (April 1991). Senior Vice President
(October 1983).
J. Sidney Davenport 52 Senior Vice President of Ryland Mortgage
Company (November 1988).
Stewart M. Cline 48 President of Southwest Region (June 1992).
Executive Vice President of Ryland Homes
(October 1991 to June 1992). President of
Ryland Homes (January 1989 to October 1991).
President, Central Area (October 1982 to
December 1988).
Timothy R. Doyle 43 President of Midwest Region (December 1991).
Vice President-Operations of the Maryland
Region (July 1976 to December 1991).
Thomas C. Krobot 47 President of Southeast Region (October 1991).
Senior Vice President, Ryland Homes (January
1988 to October 1991).
John D. Napolitan 49 President of West Region (October 1991).
Senior Vice President, Ryland Homes
(January 1988 to October 1991).
Frank J. Scardina 45 President of California Region (January 1994).
Vice President, Ryland Homes (March 1993 to
January 1994).
Arthur L. Titus 49 President of Mid-Atlantic Region
(October 1991). Senior Vice President, Ryland
Homes (August 1990 to October 1991).
Stephen B. Cook 46 Vice President and Corporate Controller
(October 1992).
</TABLE>
All officers are elected by the board of directors.
There are no family relationships nor arrangements or understandings pursuant to
which any of the officers listed were elected. For a description of employment
and severance arrangements with certain executive officers of the company, see
page 18 of the Proxy Statement for the 1994 Annual Meeting of Stockholders.
11
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BUSINESS EXPERIENCE
All of the executive officers listed above have served in various capacities
with The Ryland Group, Inc. over the past five years, with the exception of
Messrs. R. Chad Dreier, Alan P. Hoblitzell, Jr., Frank J. Scardina, Arthur L.
Titus and Stephen B. Cook.
Prior to joining the company in 1993, Mr. Dreier was executive vice president
and chief financial officer of Kaufman and Broad Home Corporation and chairman
of Kaufman and Broad Mortgage Company. Prior to joining the company in 1991,
Mr. Hoblitzell was chairman and chief executive officer of MNC Financial, Inc.
Prior to joining the Company in 1993, Mr. Scardina was president of Birtcher
Real Estate Ltd. Prior to joining the company in 1990, Mr. Titus was a region
president of NVR L.P. Prior to joining the company in 1992, Mr. Cook was vice
president and controller of United States Fidelity and Guaranty Company.
12
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PART II
Item 5. Market for the Company's Common Stock and Related Stockholder Matters.
The information required by this item is incorporated by reference from the
section entitled "Common Stock Prices and Dividends" appearing on page 46 of the
Annual Report to Shareholders for the year ended December 31, 1993.
Item 6. Selected Financial Data.
The information required by this item is incorporated by reference from the
sections entitled "Financial Highlights" appearing on page 1 and "Selected
Financial Data" appearing on pages 18 and 19 of the Annual Report to
Shareholders for the year ended December 31, 1993.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The information required by this item is incorporated by reference from the
section entitled "Management's Discussion and Analysis of Results of Operations
and Financial Condition" appearing on pages 20 through 26 of the Annual Report
to Shareholders for the year ended December 31, 1993.
Item 8. Financial Statements and Supplementary Data.
The information required by this item is incorporated by reference from the
information appearing on pages 27 through 43 and from the section entitled
"Quarterly Financial Data (unaudited)" appearing on page 45 of the Annual Report
to Shareholders for the year ended December 31, 1993.
Item 9. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure.
During the fiscal years ended December 31, 1993 and 1992, there have been no
disagreements between the company and its accountants on any matter of
accounting principle or financial statement disclosure.
13
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PART III
Item 10. Directors and Executive Officers of the Registrant.
Information as to the company's Directors is incorporated by reference from
pages 3, 4, 9 and 10 of the company's Proxy Statement for its 1994 Annual
Meeting of Stockholders. Information as to the company's executive officers
is shown under Part I as a separate item.
Item 11. Executive Compensation.
The information required by this item is incorporated by reference from pages
10-18 of the company's Proxy Statement for its 1994 Annual Meeting of
Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is incorporated by reference from pages 8
and 9 of the company's Proxy Statement for its 1994 Annual Meeting of
Stockholders.
Item 13. Certain Relationships and Related Transactions.
There are no transactions, business relationships, or indebtedness required to
be reported by the company pursuant to this Item.
14
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) 1. Financial Statements.
The following consolidated financial statements of
The Ryland Group, Inc. and Subsidiaries, included in the Annual Report
to Shareholders for the year ended December 31, 1993, are incorporated
by reference in Item 8:
Consolidated Statements of Earnings -
years ended December 31, 1993, 1992, and 1991.
Consolidated Balance Sheets -
December 31, 1993 and 1992.
Consolidated Statements of Stockholders' Equity -
years ended December 31, 1993, 1992 and 1991.
Consolidated Statements of Cash Flows -
years ended December 31, 1993, 1992 and 1991.
Notes to Consolidated Financial Statements.
(a) 2. Financial Statement Schedules. (filed herewith) PAGE NO.
Schedule VIII - Valuation and Qualifying Accounts. 19
Schedule IX - Short-Term Borrowings. 20
Schedule X - Supplementary Income
Statement Information. 21
Schedules not listed above have been omitted because they areeither
inapplicable or the required information has been given in the
financial statements or notes thereto.
15
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(a) 3. Exhibits
EXHIBIT NO.
3.1 Charter of The Ryland Group, Inc., as amended.
(Incorporated by reference from Form 10-K for the
year ended December 31, 1989)
3.2 By-Laws of The Ryland Group, Inc., as amended.
(Incorporated by reference from Form 10-Q for the
quarter ended June 30, 1990)
4.1 Rights Agreement dated as of December 17, 1986
between The Ryland Group, Inc. and Maryland National
Bank as amended by The First Amendment of Rights
Agreement dated as of October 17, 1990.
(Incorporated by reference from Form 8 filed
October 25,1990)
4.2 Articles Supplementary dated as of August 31, 1989.
(Incorporated by reference from Form 8-K filed
September 12, 1989)
4.3 Indenture dated as of November 2, 1989 between
The Ryland Group, Inc. and Manufacturers Hanover Trust
Company, as Trustee.
(Incorporated by reference from Exhibits to Registration
Statement on Form S-3, Registration No. 33-28692)
4.4 First Supplemental Indenture dated as of December 28, 1990
between The Ryland Group, Inc. and Manufacturers Hanover
Trust company, as Trustee.
(Incorporated by reference from Form 8-K filed
December 31, 1990)
4.5 Senior Subordinated Notes dated as of July 23, 1992.
(Incorporated by reference from Form 8-K filed
August 6, 1992)
4.6 Senior Subordinated Notes dated as of November 4, 1993.
(Incorporated by reference from Registration Statement
on Form S-3, Registration No. 33-48071)
4.7 Indenture dated as of July 15, 1992 between The Ryland
Group, Inc. and Security Trust Company, N.A., as Trustee.
(Incorporated by reference from Form 8-K filed August 6,
1992)
10.1 Form of Senior Executive Severance Agreement between
The Ryland Group, Inc., and certain of its executive
officers.
(Incorporated by reference from Form 10-K for the
year ended December 31, 1989)
16
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(a) 3. Exhibits, continued
EXHIBIT NO.
10.2 Lease Agreement between Seventy Corporate Center
Limited Partnership and The Ryland Group, Inc. dated
April 17, 1990.
(Incorporated by reference from Form 10-K for the
year ended December 31, 1990)
10.3 1992 Equity Incentive Plan of The Ryland Group, Inc.
(Incorporated by reference from Form 10-Q for the
quarter ended June 30, 1992)
10.4 Alan P. Hoblitzell, Jr. Employment Agreement dated as of
September 30, 1993 between Alan P. Hoblitzell, Jr. and
The Ryland Group, Inc.
(Filed Herewith)
10.5 1992 Non-Employee Director Equity Plan of The Ryland
Group, Inc.
(Incorporated by reference from Form 10-Q for the quarter
ended June 30, 1992)
10.6 Credit Agreement dated as of July 29, 1993 between The
Ryland Group, Inc. and certain banks a party thereto.
(Filed Herewith)
10.7 Restated Loan Agreement dated as of May 28, 1993, between
Ryland Mortgage Company, Associates Mortgage Funding
Corporation, BankOne, Texas, N.A., and certain lenders
a party thereto.
(Filed Herewith)
11. Statement Re Computation of Per Share Earnings.
(Filed Herewith)
13. Annual Report to Shareholders for the year ended
December 31,1993.
(Filed Herewith)
22. Subsidiaries of the Company.
(Filed Herewith)
24. Consent of Ernst & Young.
(Filed Herewith)
25. Power of Attorney.
(Filed Herewith)
17
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Executive Compensation Plans and Arrangements:
10.1 Form of Senior Executive Severance Agreement between The
Ryland Group, Inc., and certain of its executive officers.
(Incorporated by reference from Form 10-K for the year
ended December 31, 1989)
10.3 1992 Equity Incentive Plan of The Ryland Group, Inc.
(Incorporated by reference from Form 10-Q for the quarter
ended June 30, 1992)
10.4 Alan P. Hoblitzell, Jr. Employment Agreement dated as of
September 30, 1993 between Alan P. Hoblitzell, Jr. and
The Ryland Group, Inc.
(Filed Herewith)
10.5 1992 Non-Employee Director Equity Plan of The Ryland
Group, Inc.
(Incorporated by reference from Form 10-Q for the quarter
ended June 30, 1992)
(b) Reports on Form 8-K filed in the fourth quarter of 1993:
Form 8-K dated October 28, 1993
Item 5. Other Events - Third Quarter Inventory Provision
18
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<TABLE>
<CAPTION>
The Ryland Group, Inc. and Subsidiaries
Schedule VIII--Valuation and Qualifying Accounts
(dollar amounts in thousands)
Balance at Charged to Charged to Balance
Beginning Costs and Other Deductions & at end
Description of Period Expenses Accounts(1) Transfers (2) of Period
- -------------------------------------------------------------------------
Qualifying account:
Discounts on mortgages
and mortgage-backed
securities held for sale
<S> <C> <C> <C> <C> <C>
1993.... $ 8,839 $ 0 $ 209 $ 0 $ 9,048
1992.... 4,990 0 3,849 0 8,839
1991.... 4,231 0 759 0 4,990
Valuation allowance:
Homebuilding inventory
1993.... $ 20,422 $ 43,000 $ 0 $ (10,089) $ 53,333
1992.... 3,650 3,191 0 13,581 20,422
1991.... 6,124 5,309 0 (7,783) 3,650
Valuation allowance:
Investment and advances
to joint ventures
1993.... $ 1,180 $ 2,680 $ 0 $ (2,191) $ 1,669
1992.... 14,400 902 0 (14,122) 1,180
1991.... 1,400 13,000 0 0 14,400
<FN>
(1) Additions charged to other accounts for mortgages and mortgage-backed
securities held for sale are generally the result of the origination or
purchase of mortgage loans and the early redemption of mortgage-backed
bonds previously owned by the limited-purpose subsidiaries segment.
(2) Deductions for homebuilding inventory are generally the result of
normal inventory turnover or land sales. In 1992, there was a
transfer from investment in and advances to joint ventures to
homebuilding inventory as the result of the acquisition of joint
ventures which were previously unconsolidated.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Ryland Group, Inc. and Subsidiaries
Schedule IX--Short-Term Borrowings
(dollar amounts in thousands)
During the period
-----------------------------
Balance Weighted average
Category of at interest rate Maximum Average Weighted
aggregate short- end of at end Amount Amount Average
term borrowings(1) period of period Outstanding Outstanding Int rate
- --------------------------------------------------------------------------------------
Financial Services:
<S> <C> <C> <C> <C> <C>
December 31, 1993
Notes payable
to banks $ 716,933 3.1% $ 825,246 $ 627,848 3.1%
December 31, 1992
Notes payable
to banks 587,872 3.3% 821,724 510,013 3.3%
December 31, 1991 348,403 4.8% 348,403 247,069 4.8%
Notes payable
to banks
<FN>
(1) See Note F to the financial statements of The Ryland Group, Inc. and
subsidiaries, on page 37 of the company's 1993 Annual Report to
Shareholders, included as Exhibit 13.
(2) Computed by dividing interest paid by the daily average bank borrowing.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
The Ryland Group, Inc. and Subsidiaries
Schedule X--Supplementary Income Statement Information
(dollar amounts in thousands)
Charged to costs and expenses
Year ended December 31,
--------------------------------------------
<S> <C> <C> <C>
Item 1993 1992 1991
---- ---- ---- ----
Advertising costs $ 13,346 $ 13,423 $ 13,725
</TABLE>
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
THE RYLAND GROUP, INC.
By: /s/ Alan P. Hoblitzell, Jr. March 25,1994
-----------------------------------
Alan P. Hoblitzell, Jr.
Director, Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Principal Executive Officer:
/s/ R. Chad Dreier March 25, 1994
- ---------------------------------------------
R. Chad Dreier
Chief Executive Officer
Principal Financial Officer:
/s/ Alan P. Hoblitzell, Jr. March 25, 1994
- ---------------------------------------------
Alan P. Hoblitzell, Jr.
Chief Financial Officer
Principal Accounting Officer:
/s/ Stephen B. Cook March 25, 1994
- ---------------------------------------------
Stephen B. Cook
Vice President and Corporate Controller
A Majority of the Board of Directors: Andre W. Brewster,
James A. Flick, Jr., R. Chad Dreier, Robert J. Gaw, Leonard M. Harlan,
L. C. Heist, William G. Kagler, John H. Mullin, III
By: /s/ Alan P. Holbitzell, Jr. March 25,1994
-------------------------------------
Alan P. Hoblitzell, Jr.
For Himself and as Attorney-in-Fact
22
<PAGE>
Page Of
Sequentially
Numbered Pages
--------------
INDEX OF EXHIBITS:
10.4 Alan P. Hoblitzell, Jr. Employment Agreement 24 - 30
dated as of September 30, 1993 between Alan P.
Hoblitzell, Jr. and The Ryland Group, Inc.
10.6 Credit Agreement dated as of July 29, 1993 31 - 131
between The Ryland Group, Inc. and certain
banks a party thereto.
10.7 Restated Loan Agreement dated as of May 28, 132 - 198
1993 between Ryland Mortgage Company,
Associates Mortgage Funding Corporation,
BankOne, Texas, N.A., and certain lenders
a party thereto.
11 Statement Re Computation of Per Share Earnings 199
13 Annual Report to Shareholders for the year ended 200 - 228
December 31, 1993
22 Subsidiaries of the Company 229
24 Consent of Ernst & Young, Independent Auditors 230
25 Power of Attorney 231
23
<PAGE>
THE RYLAND GROUP, INC.
EMPLOYMENT AGREEMENT
This AGREEMENT is made as of this 30th day of September, 1993, between THE
RYLAND GROUP, INC., a Maryland corporation (the "Corporation"), and ALAN P.
HOBLITZELL, JR. (the "Executive").
The Executive has served the Corporate as Executive Vice President, Chief
Administrative Officer, and Chief Financial Officer since February, 1991. On
August 2, 1993, the Executive was named Acting Chief Operating Officer to serve
at the pleasure of the Board of Directors of the Corporation (the "Board")
pending selection of a Chief Executive Officer. The parties wish to confirm
their arrangements regarding these matters, and in consideration of the
following covenants and representations agree as follows:
1. FULL-TIME EMPLOYMENT OF EXECUTIVE.
a. DUTIES AND STATUS.
(1) At the pleasure of the Board, the Executive shall continue to
serve as Executive Vice President, Chief Administrative Officer, and Chief
Financial Officer for the employment period as defined in paragraph 3a and the
Executive accepts such continued employment on the terms and conditions set
forth in the Agreement. In addition, the Executive shall continue to service as
Acting Chief Operating Officer at the pleasure of the Board.
(2) During the employment period, the Executive shall devote his
full time efforts to the business of the Corporation.
<PAGE>
b. COMPENSATION AND GENERAL BENEFITS.
(1) From August 1, 1993 through December 31, 1994 the Corporation
shall pay the Executive an annual base salary of $420,000 payable periodically
based upon current corporate policy. From January 1, 1995 until June 30, 1996
the Corporation will pay the Executive a base salary commensurate with the job
that he is performing but no less than $300,000 annually. The base salary shall
be reviewed (but not necessarily increased) based on corporate policy and the
Executive's contributions to the enterprise.
(2) In addition to the salary provided by subparagraph (1) of this
paragraph b, the Corporation shall provide the benefits and perquisites
generally provided by the Corporation to officers of his rank and salary grade.
2. COMPETITION; CONFIDENTIAL INFORMATION.
The Executive and the Corporation recognize that, due to the nature of his
engagements hereunder and the relationship of the Executive to the Corporation,
the Executive will have access to, and may assist in developing, confidential
and proprietary information relating to the business and operations of the
Corporation and its affiliates. The Executive acknowledges that disclosure of
such information or its use by others could cause substantial loss to the
Corporation. The Executive and the Corporation also recognize that an important
part of the Executive's duties will be to develop good will for the Corporation
through his personal contact with others having business
- 2 -
<PAGE>
relationships with the Corporation and its affiliates, and that there is a
danger that this good will, a proprietary asset of the Corporation and its
affiliates, may follow the Executive if and when his relationship with the
Corporation is terminated. The Executive accordingly agrees as follows:
a. NON-COMPETITION. During the employment period, as defined in Section
3a, the Executive will not, directly or indirectly, either individually or as
owner, partner, agent, employee, consultant or otherwise, except for the account
of and on behalf of the Corporation or its affiliates, engage in any activity
competitive with the business of the Corporation or its affiliates, interfere
with the Corporation's business or relations with its employees, customers or
accounts, nor will he, in competition with the Corporation or its affiliates,
solicit or otherwise attempt to establish any business relationships with any
person, firm or corporation which was, at any time during the employment period,
a customer or supplier of the Corporation. However, nothing in this Section 2
shall be construed to prevent the Executive from owning, as an investment, not
more than 5% of a class of equity securities issued by any competitor of the
Corporation and publicly traded and registered under Section 12 of the
Securities Exchange Act of 1934.
b. CONFIDENTIAL INFORMATION. During and at all times after the expiration
of the employment period, the Executive (1) will not disclose any trade secrets,
customer lists, production processes, or other information that is treated as
confidential or proprietary by the Corporation or its affiliates and that is now
- 3 -
<PAGE>
known to him or that hereafter may become known to him as a result of his
employment or association with the Corporation and (2) will not at any time,
directly or indirectly, disclose any such information to any person, firm,
partnership, corporation or other entity, or use, reproduce, copy or disclose
the same in any way other than in connection with the business of the
Corporation or its affiliates.
c. CORPORATION'S REMEDIES FOR BREACH. It is recognized that damages in
the event of breach of this Section 2 by the Executive would be difficult, if
not impossible, to ascertain, and its is, therefore, agreed that the
Corporation, in addition to and without limiting any other remedy or right it
may have, shall have the right to an injunction or other equitable relief in any
court of competent jurisdiction, enjoying any such breach. The existence of
this right shall not preclude any other rights and remedies at law or in equity
that the Corporation may have.
3. EMPLOYMENT PERIOD.
a. DURATION. The employment period shall continue until June 30, 1996
unless this Agreement is previously terminated by (1) the death or substantially
total disability of the Executive, (2) mutual agreement, (3) action of the
Corporation for justifiable cause as provided in paragraph 3b, (4) action of the
Corporation or notice by the Executive as provided in paragraph 3c, or (5) the
voluntary resignation of the Executive upon 30 days prior written notice.
- 4 -
<PAGE>
b. PERFORMANCE AND TERMINATION - EMPLOYMENT PERIOD. Subject to the
performance of the covenants and agreements made by the Corporation herein, the
Executive will perform his duties during the employment period in good faith and
will observe faithfully the covenants and agreements made by him herein. The
Corporation shall not terminate the employment of the Executive during the
employment period except for substantial and serious cause involving dishonesty,
violation of any Corporation rule, regulation, or policy, gross negligence,
failure or inability of the Executive to perform his duties hereunder, or breach
of express obligations of this Agreement. The termination of the Executive's
employment for reasons other than those specified in the preceding sentence
shall be deemed to be a termination of employment without justifiable cause.
After such termination without cause, the Executive shall be immediately
entitled to the severance pay and benefits provided in Section 3c of this
Agreement. A "material breach of express obligations of this Agreement" by the
Executive shall not be deemed to have occurred hereunder unless written notice
thereof shall have been given by the Corporation to the Executive and the
Executive shall have failed to cure such breach or default within 30 days after
he received the notice.
c. EXECUTIVE'S REMEDIES FOR BREACH.
(1) This Agreement shall be immediately terminated without further
notice if the Corporation terminates the employment of the Executive without
justifiable cause. This Agreement may also be terminated upon written notice
from the Executive to the
- 5 -
<PAGE>
Chairman of the Board if: (i) the Corporation shall fail to observe or perform
any covenant to be observed or performed by the Corporation, or (ii) the
Corporation shall materially change the Executive's duties so that he is no
longer performing the functions of Executive Vice President, Chief
Administrative Officer, or (iii) the Corporation shall otherwise materially
breach this Agreement.
(2) If this Agreement is terminated for any reason identified in this
subsection, all rights, duties and obligations of both parties shall cease
except that the provisions of Section 2b of this Agreement shall remain in force
and except that the Corporation shall be obligated to (i) provide severance pay
to the Executive in an amount equal to his base salary through June 30, 1996
payable, at the option of the Executive, in a lump sum or in installments over a
period of time to be designated by the Executive, and (ii) continue all insured
benefits for the Executive and his dependents for a period of one year or until
the Executive obtains substantially equivalent employment, whichever occurs
first, but in no event beyond June 30, 1996. The parties agree that, because
there can be no exact measure of the damage which would occur to the Executive
as a result of a breach by the Corporation, the payments and benefits shall be
deemed to constitute liquidated damages and not a penalty for the Corporation's
breach, and the Corporation agrees that the Executive shall not be required to
mitigate his damages. However, in the event the Executive does mitigate his
damages, the amount of such
- 6 -
<PAGE>
mitigation shall reduce the amount of payments and benefits receivable by the
Executive pursuant to this Agreement.
4. WAIVERS.
The waiver by the Corporation of a breach by the Executive of any provision
of this Agreement shall not operate or be constructed as a waiver of any
subsequent breach by him.
5. BINDING EFFECT.
The rights and obligations of the Corporation under this Agreement shall
inure to the benefit of and shall be binding upon the successors and assigns of
the Corporation.
6. ENTIRE AGREEMENT.
Except as otherwise herein provided, this Agreement constitutes the entire
understanding of the Executive and the Corporation with respect to the subject
matter hereof and supersedes any and all prior understandings, written or oral.
This Agreement may not be changed or canceled orally, but only by an instrument
in writing signed by the parties. This Agreement shall be governed by the laws
of the State of Maryland and the invalidity or unenforceability of any
provisions hereof shall in no way affect the validity or enforceability of any
other provision.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as
of the date first above written.
ATTEST: THE RYLAND GROUP, INC.
/s/ Veronica Gambel By: /s/ Andre Brewster
- ------------------------ -------------------------
Andre Brewster, Chairman
WITNESS:
/s/ Robert M. Paul /s/ Alan P. Hoblitzell, Jr. (SEAL)
- ------------------------ ----------------------------
Alan P. Hoblitzell, Jr.
- 7 -
<PAGE>
CONFORMED COPY
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
among
THE RYLAND GROUP, INC.
CERTAIN LENDERS
CHEMICAL BANK
BANK OF AMERICA, N.T. AND S.A.
NATIONSBANK OF NORTH CAROLINA, N.A.
as Co-Agents
and
PNC BANK, N.A.
as Co-Manager
and
CHEMICAL BANK
as Administrative Agent
Dated as of July 29, 1993
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions . . . . . . . . . . . 23
1.3 Accounting Principles . . . . . . . . . . . . . . . 24
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS . . . . . . . . . . 24
2.1A Revolving Credit Commitments . . . . . . . . . . . 24
2.1B Overline Commitments . . . . . . . . . . . . . . . 24
2.2A Revolving Credit Notes . . . . . . . . . . . . . . 25
2.2B Overline Notes . . . . . . . . . . . . . . . . . . 25
2.3A Procedure for Revolving Credit Borrowing . . . . . 26
2.3B Procedure for Overline Borrowing . . . . . . . . . 27
2.4 The Swing Line Loans . . . . . . . . . . . . . . . 27
2.5 Fees . . . . . . . . . . . . . . . . . . . . . . . 30
2.6 Optional Termination and Reduction of Commitments . 31
2.7 Optional Prepayments; Mandatory Prepayments . . . . 32
2.8 Conversion and Continuation Options . . . . . . . . 33
2.9 Minimum Amounts of Tranches . . . . . . . . . . . . 34
2.10 Interest Rates and Payment Dates . . . . . . . . . 34
2.11 Repayment of Loans . . . . . . . . . . . . . . . . 35
2.12 Computation of Interest and Fees . . . . . . . . . 36
2.13 Inability to Determine Interest Rate . . . . . . . 36
2.14 Pro Rata Treatment and Payments . . . . . . . . . . 37
2.15 Illegality . . . . . . . . . . . . . . . . . . . . 39
2.16 Eurocurrency Reserve Costs; Requirements of Law . . 39
2.17 Taxes . . . . . . . . . . . . . . . . . . . . . . . 42
2.18 Indemnity . . . . . . . . . . . . . . . . . . . . . 43
SECTION 3. LETTERS OF CREDIT . . . . . . . . . . . . . . . . . 44
3.1 L/C Commitment . . . . . . . . . . . . . . . . . . 44
3.2 Procedure for Issuance of Letters of Credit . . . . 45
3.3 Fees, Commissions and Other Charges . . . . . . . . 45
3.4 L/C Participations . . . . . . . . . . . . . . . . 46
3.5 Reimbursement Obligation of the Company . . . . . . 48
3.6 Obligations Absolute . . . . . . . . . . . . . . . 48
3.7 Letter of Credit Payments . . . . . . . . . . . . . 49
3.8 Application . . . . . . . . . . . . . . . . . . . . 49
SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . 50
4.1 Financial Condition . . . . . . . . . . . . . . . . 50
4.2 No Change . . . . . . . . . . . . . . . . . . . . . 50
4.3 Corporate Existence; Compliance with Law . . . . . 51
-i-
<PAGE>
PAGE
4.4 Corporate Power; Authorization; Enforceable
Obligations . . . . . . . . . . . . . . . . . . . 51
4.5 No Legal Bar . . . . . . . . . . . . . . . . . . . 52
4.6 No Material Litigation . . . . . . . . . . . . . . 52
4.7 No Default . . . . . . . . . . . . . . . . . . . . 52
4.8 Ownership of Property; Liens . . . . . . . . . . . 52
4.9 Intellectual Property . . . . . . . . . . . . . . . 52
4.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . 53
4.11 Federal Regulations . . . . . . . . . . . . . . . . 53
4.12 ERISA . . . . . . . . . . . . . . . . . . . . . . . 53
4.13 Investment Company Act; Other Regulations . . . . . 54
4.14 Subsidiaries . . . . . . . . . . . . . . . . . . . 54
4.15 Accuracy and Completeness of Information . . . . . 54
4.16 Environmental Matters . . . . . . . . . . . . . . . 55
4.17 Status of the Notes . . . . . . . . . . . . . . . . 56
4.18 Purpose of Loans . . . . . . . . . . . . . . . . . 56
SECTION 5. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . 56
5.1 Conditions to Initial Extensions of Credit . . . . 56
5.2 Conditions to Each Extension of Credit . . . . . . 58
SECTION 6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . 59
6.1 Financial Statements . . . . . . . . . . . . . . . 59
6.2 Certificates; Other Information . . . . . . . . . . 60
6.3 Payment of Obligations . . . . . . . . . . . . . . 61
6.4 Conduct of Business and Maintenance of
Existence . . . . . . . . . . . . . . . . . . . . . 61
6.5 Maintenance of Property; Insurance . . . . . . . . 62
6.6 Inspection of Property; Books and Records;
Discussions . . . . . . . . . . . . . . . . . . . . 62
6.7 Notices . . . . . . . . . . . . . . . . . . . . . . 62
6.8 Environmental Laws . . . . . . . . . . . . . . . . 63
6.9 Guarantees from Future Subsidiaries . . . . . . . . 64
SECTION 7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . 64
7.1 Financial Condition Covenants . . . . . . . . . . . 64
7.2 Limitation on Indebtedness . . . . . . . . . . . . 65
7.3 Limitation on Liens . . . . . . . . . . . . . . . . 68
7.4 Limitation on Guarantee Obligations . . . . . . . . 69
7.5 Limitations of Fundamental Changes . . . . . . . . 70
7.6 Limitation on Sale of Assets . . . . . . . . . . . 71
7.7 Limitation on Dividends . . . . . . . . . . . . . . 72
7.8 Limitation on Investments . . . . . . . . . . . . . 72
7.9 Limitation on Optional Payments and
Modification of Debt Instruments . . . . . . . . . 74
7.10 Transactions with Affiliates . . . . . . . . . . . 75
7.11 Limitation on Inventory . . . . . . . . . . . . . . 75
7.12 Fiscal Year . . . . . . . . . . . . . . . . . . . . 76
7.13 Compliance with ERISA . . . . . . . . . . . . . . . 76
7.14 Preferred Stock . . . . . . . . . . . . . . . . . . 76
-ii-
<PAGE>
PAGE
7.15 Limitation on Indebtedness of New Subsidiaries . . 76
7.16 Limitation on Indebtedness of Joint Ventures . . . 76
SECTION 8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . 76
SECTION 9. THE AGENTS . . . . . . . . . . . . . . . . . . . . 80
9.1 Appointment . . . . . . . . . . . . . . . . . . . . 80
9.2 Delegation of Duties . . . . . . . . . . . . . . . 81
9.3 Exculpatory Provisions . . . . . . . . . . . . . . 81
9.4 Reliance by Administrative Agent . . . . . . . . . 81
9.5 Notice of Default . . . . . . . . . . . . . . . . . 82
9.6 Non-Reliance on Administrative Agent and
Other Lenders . . . . . . . . . . . . . . . . . . . 82
9.7 Indemnification . . . . . . . . . . . . . . . . . . 83
9.8 Administrative Agent in Its Individual Capacity . . 83
9.9 Successor Administrative Agent . . . . . . . . . . 84
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . 84
10.1 Amendments and Waivers . . . . . . . . . . . . . . 84
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . 85
10.3 No Waiver; Cumulative Remedies . . . . . . . . . . 86
10.4 Survival of Representations and Warranties . . . . 86
10.5 Payment of Expenses and Taxes . . . . . . . . . . . 86
10.6 Successors and Assigns; Participations and
Assignments . . . . . . . . . . . . . . . . . . . . 87
10.7 Adjustments; Set-off . . . . . . . . . . . . . . . 90
10.8 New Lenders . . . . . . . . . . . . . . . . . . . . 91
10.9 Counterparts . . . . . . . . . . . . . . . . . . . 92
10.10 Severability . . . . . . . . . . . . . . . . . . . 92
10.11 Integration . . . . . . . . . . . . . . . . . . . . 92
10.12 GOVERNING LAW . . . . . . . . . . . . . . . . . . . 92
10.13 Submission To Jurisdiction . . . . . . . . . . . . 93
10.14 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . 94
10.15 Confidentiality . . . . . . . . . . . . . . . . . . 94
SCHEDULES
Schedule 1.1(b) Lenders, Addresses and Commitments
Schedule 1.1(a) Significant Homebuilding Subsidiaries
Schedule 4.6 Litigation
Schedule 4.14 List of Subsidiaries
Schedule 6.2(g) Financial Information
Schedule 7.2(f) Existing IRB Indebtedness
Schedule 7.3(f) Existing Liens
-iii-
<PAGE>
EXHIBITS
Exhibit A-1 Form of Revolving Credit Note
Exhibit A-2 Form of Overline Note
Exhibit B Form of Swing Line Note
Exhibit C Form of Borrowing Base Certificate
Exhibit D Form of Guarantee
Exhibit E-1 Form of Legal Opinion of Timothy J. Geckle,Esq.
Exhibit E-2 Form of Legal Opinion of Piper & Marbury, counsel for the
Company and the Guarantors
Exhibit F Form of Assignment and Acceptance
Exhibit G Form of Compliance Certificate
Exhibit H Form of New Lender Supplement
-iv-
<PAGE>
CREDIT AGREEMENT, dated as of July 29, 1993, among THE RYLAND GROUP, INC.,
a Maryland corporation (the "COMPANY"), the several lenders from time to time
parties to this Agreement (the "LENDERS"), CHEMICAL BANK, a New York banking
corporation ("CHEMICAL"), BANK OF AMERICA N.T. AND S.A., a national trust and
savings association ("BANK OF AMERICA"), and NATIONSBANK OF NORTH CAROLINA,
N.A., a national banking association ("NATIONSBANK"), as Co-Agents (Chemical,
Bank of America and NationsBank, in such capacity, the "CO-AGENTS"), PNC BANK,
N.A., a national banking association, as Co-Manager (in such capacity, the
"CO-MANAGER") and Chemical, as Administrative Agent (in such capacity, the
"ADMINISTRATIVE AGENT").
W I T N E S S E T H :
WHEREAS, the Company has requested the Lenders to make certain extensions
of credit to it; and
WHEREAS, the Lenders are willing to make such extensions of credit on the
terms and conditions contained herein;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms shall
have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if necessary, to
the next 1/16 of 1%) equal to the greater of (a) the Prime Rate in effect on
such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2
of 1%. For purposes hereof: "PRIME RATE" shall mean the rate of interest per
annum publicly announced from time to time by Chemical as its prime rate in
effect at its principal office in New York City (the Prime Rate not being
intended to be the lowest rate of interest charged by Chemical in connection
with extensions of credit to debtors); and "FEDERAL FUNDS EFFECTIVE RATE" shall
mean, for any day, the rate set forth for such date opposite the caption
"Federal Funds (Effective)" in the weekly statistical release designated "H.15
(510)", or any successor publication, published by the Board of Governors of the
Federal Reserve System, or, if such rate is not so published for
<PAGE>
2
any day which is a Business Day, the average of the quotations for the day of
such transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by it. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including the inability or failure of the
Administrative Agent to obtain sufficient quotations in accordance with the
terms thereof, the ABR shall be determined without regard to clause (b) of the
first sentence of this definition until the circumstances giving rise to such
inability no longer exist. Any change in the ABR due to a change in the Prime
Rate or the Federal Funds Effective Rate shall be effective as of the opening of
business on the effective day of such change in the Prime Rate or the Federal
Funds Effective Rate, respectively.
"ABR LOANS": Revolving Credit Loans or Overline Loans the rate of
interest applicable to which is based upon the ABR.
"ADJUSTED CONSOLIDATED NET INCOME": with respect to a Person for any
period, the Consolidated Net Income of such Person and its Subsidiaries for such
period plus, to the extent reflected as a charge in the statement of such
Consolidated Net Income, total income tax expense minus any extraordinary income
or gains, determined in accordance with GAAP.
"ADJUSTED CONSOLIDATED TANGIBLE NET WORTH": with respect to the Company
at any date, Consolidated Net Worth of the Company as at such date, less,
without duplication, (a) Consolidated Intangibles, (b) the amount of such
Consolidated Net Worth attributable to the Ryland Financial Division and (c) the
amount of such Consolidated Net Worth attributable to equity investments in and
Advances to any unconsolidated joint venture the Indebtedness of which
(excluding Advances from the Company or any Subsidiary to such joint venture)
exceeds 25% of its total assets, determined in accordance with GAAP.
"ADJUSTED REVOLVING CREDIT COMMITMENT": with respect to any Lender at any
date, an amount equal to such Lender's Revolving Credit Commitment MINUS such
Lender's Revolving Credit Commitment Percentage of the excess of (i) Permitted
Senior Indebtedness on such date over (ii) $187,476,000.
"ADVANCE": means any advance, loan or extension of credit to any Person
or the purchase of any bonds,
<PAGE>
3
notes, debentures or other debt securities of any Person.
"AFFILIATE": as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (i) vote 10% or more of the securities
having ordinary voting power for the election of directors of such Person or
(ii) direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"AGENTS": the collective reference to the Co-Agents and the
Administrative Agent; individually, an "AGENT".
"AGGREGATE OUTSTANDING REVOLVING EXTENSIONS OF CREDIT": on any date, an
amount equal to the sum of (a) the aggregate principal amount of all Revolving
Credit Loans and Swing Line Loans then outstanding and (b) the L/C Obligations
then outstanding.
"AGREEMENT": this Credit Agreement, as amended, supplemented or otherwise
modified from time to time.
"APPLICABLE MARGIN": for each Type of Loan, (a) at any time when both (x)
the Company's long term senior unsecured debt is not rated by Moody's Investors
Services, Inc. or is rated lower than Baa3 by such rating agency and (y) the
Company's long term senior unsecured debt is not rated by Standard & Poors'
Corporation or is rated lower than BBB- by such rating agency, the rate per
annum set forth under the relevant column heading below:
Eurodollar C/D
ABR Loans Loans Rate Loans
--------- ---------- ----------
0% 1.75% 1.90%
and (b) at any time when either (x) the Company's long term senior unsecured
debt is rated at least Baa3 by Moody's Investors Services, Inc. or (y) the
Company's long term senior unsecured debt is rated at least BBB- by Standard &
Poors' Corporation, the rate per annum set forth under the relevant column
heading below:
Eurodollar C/D
ABR Loans Loans Rate Loans
--------- ---------- ----------
0% 1.50% 1.65%
<PAGE>
4
"APPLICATION": an application, in such form as the Issuing Bank may
specify from time to time, requesting the Issuing Bank to open a Letter of
Credit.
"ASSIGNEE": as defined in subsection 10.6(c).
"ASSOCIATES MORTGAGE FUNDING CORPORATION": Associates Mortgage Funding
Corporation, a Delaware corporation.
"AVAILABLE COMMITMENTS": on any date, the excess, if any, of (a) the
amount of the aggregate Adjusted Revolving Credit Commitments on such date over
(b) the Aggregate Outstanding Revolving Extensions of Credit on such date.
"AVAILABLE OVERLINE COMMITMENTS": on any date, the excess, if any, of (a)
the amount of the aggregate Overline Commitments on such date over (b) the
aggregate Overline Loans outstanding on such date.
"BORROWING BASE": as of any date of determination, an amount equal to the
sum of (i) 25% of Unsold Land Under Development, (ii) 75% of Unsold Housing
Inventory, (iii) Sold Housing Inventory and (iv) Working Capital (if greater
than zero). The Borrowing Base shall be determined as of the last Business Day
of each calendar month and shall be certified pursuant to Borrowing Base
Certificates delivered pursuant to subsection 6.2(f); the Borrowing Base set
forth in any such Borrowing Base Certificate shall be in effect from the date of
delivery of such Borrowing Base Certificate until the date of delivery of the
Borrowing Base Certificate for the succeeding calendar month.
"BORROWING BASE CERTIFICATE": a certificate substantially in the form of
Exhibit C, with such changes as the Administrative Agent may from time to time
reasonably request for the purpose of monitoring the Borrowing Base.
"BORROWING DATE": any day specified in a notice pursuant to subsection
2.3A, 2.3B or 2.4 as a date on which the Company requests that Loans be made
hereunder.
"BUSINESS DAY": a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by law to close;
PROVIDED, HOWEVER, that when used in connection with a Eurodollar Loan, the term
"Business Day" shall also exclude any day on which commercial banks are not open
for dealings in Dollar deposits in the London interbank market.
<PAGE>
5
"CASH EQUIVALENTS": (a) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than 90 days from the date
of acquisition, (b) time deposits and certificates of deposit of any of the
Lenders, or of any domestic or foreign commercial bank which has capital and
surplus in excess of $500,000,000 or which has a commercial paper rating meeting
the requirements specified in clause (d) below, having maturities of not more
than 90 days from the date of acquisition, (c) repurchase obligations with a
term of not more than 30 days for underlying securities of the types described
in clauses (a) and (b) entered into with any bank meeting the qualifications
specified in clause (b) above and (d) commercial paper of any Person rated at
least A-2 or the equivalent thereof by Standard & Poor's Corporation or P-2 or
the equivalent thereof by Moody's Investors Service, Inc. and in either case
maturing within 90 days after the date of acquisition.
"C/D ASSESSMENT RATE": for any day as applied to any C/D Rate Loan or any
ABR Loan, the annual assessment rate in effect on such day which is payable by a
member of the Bank Insurance Fund classified as well-capitalized and within
supervisory subgroup "B" (or a comparable successor assessment risk
classification) within the meaning of 12 C.F.R. SECTION 327.3(d) (or any
successor provision) to the Federal Deposit Insurance Corporation (or any
successor) for such Corporation's (or such successor's) insuring time deposits
at offices of such institution in the United States.
"C/D BASE RATE": with respect to each day during each Interest Period
pertaining to a C/D Rate Loan, the rate of interest per annum determined by the
Administrative Agent to be the arithmetic average (rounded upward to the nearest
1/16th of 1%) of the respective rates notified to the Administrative Agent by
each of the Reference Lenders as the average rate bid at 9:00 A.M., New York
City time, or as soon thereafter as practicable, on the first day of such
Interest Period by a total of three certificate of deposit dealers of recognized
standing selected by such Reference Lender for the purchase at face value from
such Reference Lender of its certificates of deposit in an amount comparable to
the C/D Rate Loan of such Reference Lender to which such Interest Period applies
and having a maturity comparable to such Interest Period.
"C/D RATE": with respect to each day during each Interest Period
pertaining to a C/D Rate Loan, a rate per annum determined for such day in
accordance with the
<PAGE>
6
following formula (rounded upward to the nearest 1/100th of 1%):
C/D Base Rate + C/D Assessment Rate
-----------------------------
1.00 - C/D Reserve Percentage
"C/D RATE LOANS": Revolving Credit Loans the rate of interest applicable
to which is based upon the C/D Rate.
"C/D RESERVE PERCENTAGE": for any day as applied to any C/D Rate Loan or
any ABR Loan, that percentage (expressed as a decimal) which is in effect on
such day, as prescribed by the Board of Governors of the Federal Reserve System
(or any successor) (the "BOARD"), for determining the maximum reserve
requirement for a Depositary Institution (as defined in Regulation D of the
Board) in respect of new non-personal time deposits in Dollars having a maturity
comparable to the Interest Period for such C/D Rate Loan.
"CLOSING DATE": the date on which the conditions specified in Section 5
are satisfied in full, which shall be a Business Day on or before July 21, 1993.
"CODE": the Internal Revenue Code of 1986, as amended from time to time.
"COMBINED NET INCOME": with respect to a Person or segment for any
period, the combined net income (or loss) of such Person and its Subsidiaries
and Existing Consolidated Joint Ventures or such segment for such period (taken
as a cumulative whole), determined on a combined basis in accordance with GAAP.
"COMBINED TOTAL LIABILITIES": with respect to a Person or segment at a
particular date, all amounts which would, in conformity with GAAP, be included
under total liabilities on a combined balance sheet of such Person and its
Subsidiaries and Existing Consolidated Joint Ventures or such segment as at such
date.
"COMMITMENT PERCENTAGE": as to any Lender at any time, the percentage of
the sum of the aggregate Revolving Credit Commitments and the Overline
Commitments then constituted by the sum of such Lender's Revolving Credit
Commitment and such Lender's Overline Commitment.
"COMMITMENT PERIOD": the period from and including the date hereof to but
not including the Termination Date or such earlier date on which the Revolving
Credit Commitments shall terminate as provided herein.
<PAGE>
7
"COMMITMENTS": the Revolving Credit Commitments, the Swing Line
Commitment, the Overline Commitments and the L/C Commitment.
"COMMON STOCK": the Company's Common Stock, par value $1.00 per share, as
the same exists on the date hereof or any other class of stock of the Company
the right of which to share in distributions of earnings or assets of the
Company is without limit as to amount or percentage.
"COMMONLY CONTROLLED ENTITY": an entity, whether or not incorporated,
which is under common control with the Company within the meaning of Section
4001 of ERISA or is part of a group which includes the Company and which is
treated as a single employer under Section 414 of the Code.
"CONSOLIDATED ADJUSTED NET WORTH": at a particular date, (a) Consolidated
Net Worth of the Financial Services Segment at such date PLUS (b) the amount of
long-term subordinated debt of the Financial Services Segment the maturity of
which is no less than two years from May 28, 1993 PLUS (c) an amount equal to 1%
of the Financial Services Segment's Servicing Portfolio, if any, MINUS (d) the
amount of purchased Servicing Rights that are capitalized on the combined
balance sheets of the Financial Services Segment, MINUS (e) the book value of
any other assets reflected on the then-most-current combined balance sheets of
the Financial Services Segment that should be properly treated under GAAP as
intangible assets, including, without limitation, goodwill, trademarks, trade
names, service marks, copyrights, patents, licenses, rights with respect to the
foregoing, and the excess of the purchase price over the net assets of
businesses acquired by entities in the Financial Services Segment.
"CONSOLIDATED INTANGIBLES": with respect to any Person at any date, all
amounts, determined in accordance with GAAP, included in the Consolidated Net
Worth of such Person and attributable to (a) goodwill, including any amounts
(however designated on the balance sheet) representing the cost of acquisitions
of Subsidiaries in excess of underlying tangible assets or (b) patents,
trademarks and copyrights.
"CONSOLIDATED NET INCOME": with respect to a Person for any period, the
consolidated net income (or loss) of such Person and its Subsidiaries and
Existing Consolidated Joint Ventures for such period (taken as a cumulative
whole), determined in accordance with GAAP.
<PAGE>
8
"CONSOLIDATED NET WORTH": with respect to any Person at any date, all
amounts which would, in conformity with GAAP, be included under shareholders'
equity on a consolidated balance sheet of such Person and its consolidated
Subsidiaries and Existing Consolidated Joint Ventures at such date.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or other undertaking to
which such Person is a party or by which it or any of its property is bound.
"CURRENT MARKET PRICE": with respect to shares of Common Stock or any
other class of capital stock or other security of the Company or any other
issuer, the last reported sales price, regular way, or, in the event that no
sale takes place on such day, the average of the reported closing bid and asked
prices, regular way, in either case as reported on the New York Stock Exchange
Composite Tape or, if such security is not listed or admitted to trading on the
New York Stock Exchange, on the principal national securities exchange on which
such security is listed or admitted to trading or, if not listed or admitted to
trading on any national securities exchange, by NASDAQ National Market System
or, if such security is not quoted on such National Market System, the average
of the closing bid and asked prices on each such day in the over-the-counter
market as reported by NASDAQ or, if bid and asked prices for such security on
each such day shall not have been reported through NASDAQ, the average of the
bid and asked prices on such day as furnished by any New York Stock Exchange
member firm regularly making a market in such security selected for such purpose
by the Board of Directors of the Company or a committee thereof, in each case,
on each trading day during the applicable period.
"DEFAULT": any of the events specified in Section 8, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
"DESIGNATED EVENT": the occurrence of any of the following: (i) whether
or not approved by the Board of Directors of the Company, any person, entity or
"group" within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act
is or becomes the beneficial owner, directly or indirectly, of securities having
30% or more of the voting power of the Voting Stock; (ii) the Company shall
engage in a Stock Repurchase or Stock Distribution where the sum of the
aggregate Fair Market Value of such Stock Repurchase and Stock Distribution and
all other such Stock Repurchases and Stock
<PAGE>
9
Distributions effected during the 12-month period ending on the date on which
such Stock Repurchase or Stock Distribution is effected exceeds 20% of the Fair
Market Value of the Common Stock of the Company as of the date such Stock
Repurchase or Stock Distribution is effected; (iii) there shall occur any
consolidation of the Company with, or merger of the Company into, any other
entity, any merger of another entity into the Company, or any sale or transfer
of all or substantially all of the assets of the Company (other than any such
sale or transfer to one or more wholly-owned subsidiaries of the Company), in
one transaction or a series of related transactions, to one or more persons or
entities (other than (w) a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company, or (x) a merger which is effected solely to change the jurisdiction
of incorporation of the Company, or (y) the sale or transfer of any of the stock
or assets of the Limited-Purpose Subsidiaries, or (z) a merger pursuant to which
the holders of Voting Stock of the Company prior to the effective date of such
merger hold immediately after such effective date 70% or more of the class of
stock of the surviving entity or its parent corporation that is entitled to vote
generally for the election of directors); or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the Company's Board of Directors (together with any new director whose election
by the Company's Board of Directors or whose nomination for election by the
Company's stockholders was approved by a vote of at least a majority of the
directors then still in office who either were directors of the Company at the
beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
directors of the Company then in office.
"DOLLARS" and "$": dollars in lawful currency of the United States of
America.
"DOMESTIC DOLLAR LOANS": the collective reference to C/D Rate Loans and
ABR Loans.
"ENVIRONMENTAL LAWS": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning pollution or protection of the environment, as
now or may at any time hereafter be in effect.
<PAGE>
10
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
from time to time.
"EURODOLLAR LOANS": Revolving Credit Loans the rate of interest
applicable to which is based upon the Eurodollar Rate.
"EURODOLLAR RATE": with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, the rate per annum equal to the average
(rounded upward to the nearest 1/16th of 1%) of the respective rates notified to
the Administrative Agent by each of the Reference Lenders as the rate at which
such Reference Lender is offered Dollar deposits at or about 10:00 A.M., New
York City time, two Business Days prior to the beginning of such Interest Period
in the interbank eurodollar market where the eurodollar and foreign currency and
exchange operations in respect of its Eurodollar Loans are then being conducted
for delivery on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of its Eurodollar
Loan to be outstanding during such Interest Period.
"EVENT OF DEFAULT": any of the events specified in Section 8, provided
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"EXCHANGE ACT": the Securities Exchange Act of 1934, as amended.
"EXISTING CONSOLIDATED JOINT VENTURES": real estate joint ventures in
which the Company or any of its Subsidiaries has an investment and which are
being consolidated in the Company's consolidated financial statements as of the
Closing Date.
"EXISTING CREDIT AGREEMENT": the Credit Agreement, dated as of June 27,
1990, among the Company, certain lenders parties thereto, Chemical Bank, as
successor to Manufacturers Hanover Trust Company, as General Agent, Bid Agent
and Co-Agent and Maryland National Bank, as Co-Agent, as amended.
"FAIR MARKET VALUE": with respect to shares of Common Stock or any other
class of capital stock or securities of the Company which are publicly traded,
the average of the Current Market Prices of such shares or securities for the
five (5) consecutive trading days ending with the fifth (5th) Business Day
preceding the date on which the Stock Repurchase or Stock Distribution is
effected. Fair Market Value of any security not publicly traded or any other
property constituting a
<PAGE>
11
part of a Stock Repurchase or Stock Distribution shall be the value thereof as
determined in good faith by the Board of Directors of the Company or any
designated committee of the Board of Directors of the Company after giving
consideration to such market prices, opinions and valuations as such Board of
Directors or committee may deem necessary or appropriate.
"FHLMC SECURITIES": participation certificates representing undivided
interests in mortgage loans purchased by the Federal Home Loan Mortgage
Corporation or its successor pursuant to the Emergency Home Finance Act of 1970,
as amended.
"FINANCIAL SERVICES SEGMENT": the business segment of the Company and its
Subsidiaries engaged in the mortgage banking (including the title and escrow
businesses), securities issuance, bond administration and management services
and related activities, which segment on the date of this Agreement consists
principally of the activities of Ryland Mortgage Company and its Subsidiaries
but excludes the Limited-Purpose Subsidiaries.
"FINANCIAL SERVICES SEGMENT COMBINED TOTAL LIABILITIES": at any time, all
amounts which would, in accordance with GAAP, be included as liabilities on a
combined balance sheet of the Financial Services Segment as at such date;
PROVIDED, that reverse repurchase agreements secured by FHLMC Securities, FNMA
Securities and GNMA Securities, whether such securities are issued in
certificated form or book entry form, arising from the call of bonds issued by
Affiliates of Ryland Mortgage Company may be excluded from those liabilities so
long as (a) the underlying collateral value is at least 100.5% of the
obligations of Ryland Mortgage Company and/or Associates Mortgage Funding
Corporation under those agreements or (b) the underlying collateral is subject
to a hedging agreement.
"FINANCING LEASE": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"FIXED CHARGE COVERAGE": for any fiscal period of the Company, the ratio
of (a) the sum for such fiscal period of the following items: (i) Combined Net
Income of the Homebuilding Segment, plus (ii) income taxes, depreciation and
amortization deducted from combined revenues in determining such Combined Net
Income, plus (iii) interest expense deducted from combined revenues in
determining such Combined Net Income, including, without duplication, previously
capitalized interest
<PAGE>
12
expense which would be included in "Cost of Goods Sold" and deducted from
combined revenues in determining such Combined Net Income on a combined balance
sheet of the Homebuilding Segment determined in accordance with GAAP, plus (iv)
the greater of (A) cash dividends received by the Company from the Financial
Services Segment, determined in accordance with GAAP, and (B) 50% of combined
net income of the Financial Services Segment plus income tax expense deducted in
determining such net income, determined in accordance with GAAP, plus (v) cash
distributions received by the Company from all unconsolidated joint ventures in
which the Company or any of its Subsidiaries within the Homebuilding Segment is
a participant, less (vi) the amount of the Company's equity interest in the
earnings of such joint ventures, determined in accordance with GAAP, to (b) the
amount of cash interest expense deducted from combined revenues in determining
such Combined Net Income, and including, without duplication, such cash interest
expense constituting capitalized interest for such period determined in
accordance with GAAP.
"FNMA SECURITIES": modified pass-through mortgage-backed certificates
guaranteed by the Federal National Mortgage Association or its successor
pursuant to the National Housing Act, as amended.
"GAAP": generally accepted accounting principles in the United States of
America in effect from time to time.
"GNMA SECURITIES": modified pass-through mortgage-backed certificates
guaranteed by the Government National Mortgage Association or its successor
pursuant to Section 306(g) of the National Housing Act, as amended.
"GOVERNMENTAL AUTHORITY": any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"GUARANTEE": the Guarantee executed and delivered by the Guarantors,
substantially in the form of Exhibit D, as the same may from time to time be
amended or otherwise modified.
"GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING PERSON"), any
obligation of (a) the guaranteeing person or (b) another Person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counterindemnity or
similar
<PAGE>
13
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "PRIMARY OBLIGATIONS")
of any other third Person (the "PRIMARY OBLIGOR") in any manner, whether
directly or indirectly, including, without limitation, any obligation of the
guaranteeing person, whether or not contingent, (i) to purchase any such primary
obligation or any property constituting direct or indirect security therefor,
(ii) to advance or supply funds (1) for the purchase or payment of any such
primary obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation or
(iv) otherwise to assure or hold harmless the owner of any such primary
obligation against loss in respect thereof; PROVIDED, HOWEVER, that the term
Guarantee Obligation shall not include endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lower of (a) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (b) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by the Company in good faith.
"GUARANTORS": at any time, each of the Significant Subsidiaries of the
Company which are included in the Homebuilding Segment, including, without
limitation, the Subsidiaries listed on Schedule 1.1(a) hereto.
"HAZARDOUS MATERIALS": any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances, petroleum products
(including crude oil or any fraction thereof), defined or regulated as such in
or under any Environmental Law.
"HOMEBUILDING SEGMENT": the business segment of the Company and its
Subsidiaries and Existing Consolidated Joint Ventures engaged in the
construction and sale of single family attached and unattached dwellings and
related activities, which segment on the date of this Agreement consists
principally of the
<PAGE>
14
activities of the Ryland Homes Division of the Company, Ryland Trading, Ltd. and
M. J. Brock & Sons, Inc.
"INDEBTEDNESS": of any Person at any date, (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (other than current trade liabilities incurred in the ordinary course
of business and payable in accordance with customary practices), (b) any other
indebtedness of such Person which is evidenced by a note, bond, debenture or
similar instrument, (c) all obligations of such Person under Financing Leases,
(d) all obligations of such Person in respect of acceptances issued or created
for the account of such Person and (e) all liabilities secured by any Lien on
any property owned by such Person even though such Person has not assumed or
otherwise become liable for the payment thereof.
"INSOLVENCY": with respect to any Multiemployer Plan, the condition that
such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTEREST PAYMENT DATE": (a) as to any ABR Loan, the last day of each
March, June, September and December to occur while such Loan is outstanding, (b)
as to any Eurodollar Loan having an Interest Period of three months or less and
any C/D Rate Loan having an Interest Period of 90 days or less, the last day of
such Interest Period, (c) as to any Eurodollar Loan or C/D Rate Loan having an
Interest Period longer than three months or 90 days, respectively, each day
which is three months or 90 days, respectively, or a whole multiple thereof,
after the first day of such Interest Period and the last day of such Interest
Period and (d) as to any Swing Line Loan, the date which is the last day of each
calendar quarter.
"INTEREST PERIOD": (a) with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar Loan
and ending one, two, three or six months thereafter, as selected by the
Company in its notice of borrowing or notice of conversion, as the case
may be, given with respect thereto; and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Eurodollar Loan and
ending one,
<PAGE>
15
two, three or six months thereafter, as selected by the Company by
irrevocable notice to the Administrative Agent not less than three
Business Days prior to the last day of the then current Interest
Period with respect thereto;
and (b) with respect to any C/D Rate Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such C/D Rate
Loan and ending 30, 60, 90 or 180 days thereafter, as selected by
the Company in its notice of borrowing or notice of conversion, as
the case may be, given with respect thereto; and
(ii) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such C/D Rate Loan and
ending 30, 60, 90 or 180 days thereafter, as selected by the Company
by irrevocable notice to the Administrative Agent not less than two
Business Days prior to the last day of the then current Interest
Period with respect thereto;
PROVIDED that, all of the foregoing provisions relating to Interest Periods are
subject to the following:
(1) if any Interest Period pertaining to a Eurodollar Loan
would otherwise end on a day that is not a Business Day, such
Interest Period shall be extended to the next succeeding Business
Day unless the result of such extension would be to carry such
Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(2) if any Interest Period pertaining to a C/D Rate Loan would
otherwise end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day;
(3) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date;
(4) any Interest Period pertaining to a Eurodollar Loan that
begins on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end on the last
Business Day of a calendar month; and
<PAGE>
16
(5) the Company shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan or C/D Rate
Loan during an Interest Period for such Loan.
"INVESTMENTS": any Advance to, or any contribution to or purchase of
stock or other equity securities of, or any purchase of assets constituting a
business unit of, any Person, excluding investments in stock or other equity
securities existing on the date of this Agreement and any investment
representing any interest of the Company or any Subsidiary in the retained or
undistributed earnings of any Person.
"ISSUING BANK": Chemical Bank or an Affiliate thereof, in its capacity as
issuer of any Letter of Credit, or such other Lender as the Administrative Agent
and the Company shall agree upon.
"L/C COMMITMENT": $40,000,000.
"L/C FEE PAYMENT DATE": the last day of each March, June, September and
December.
"L/C OBLIGATIONS": at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters of
Credit and (b) the aggregate amount of drawings under Letters of Credit which
have not then been reimbursed pursuant to subsection 3.5.
"L/C PARTICIPANTS": the collective reference to all the Lenders other
than the Issuing Bank.
"LETTERS OF CREDIT": as defined in subsection 3.1(a) and including any
letters of credit outstanding on the Closing Date issued by Chemical for the
account of the Company or any of its Subsidiaries prior to the Closing Date.
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any Financing Lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction in respect of
any of the foregoing).
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17
"LIMITED-PURPOSE SUBSIDIARIES": Subsidiaries included within the
Limited-Purpose Subsidiaries Segment.
"LIMITED-PURPOSE SUBSIDIARIES SEGMENT": the business segment of the
Company and its Subsidiaries which facilitates, through special-purpose entities
created or existing solely for such purpose, the financing of mortgage loans and
mortgage backed securities and the securitization of mortgage loans and other
related activities.
"LOAN": any loan made by any Lender pursuant to this Agreement.
"LOAN DOCUMENTS": this Agreement, the Notes, the Applications and the
Guarantee.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
operations or financial condition of the Company and its Restricted Subsidiaries
taken as a whole, (b) the ability of the Company to perform its obligations
under this Agreement or the Notes, or (c) the validity or enforceability of this
Agreement or any of the Notes or the rights or remedies of the Agents or the
Lenders hereunder or thereunder.
"MATERIALS OF ENVIRONMENTAL CONCERN": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"1992 SUBORDINATED DEBT INDENTURE": the Indenture, dated as of July 15,
1992, between the Company and Security Trust Company, N.A., as Trustee, pursuant
to which the Company's 10-1/2% Senior Subordinated Notes due July 15, 2002 were
issued.
"NON-EXCLUDED TAXES": as defined in subsection 2.17.
"NOTES": the collective reference to the Revolving Credit Notes, the
Overline Notes and the Swing Line Notes.
"OVERLINE COMMITMENT": as to any Overline Lender, the lesser of (i) the
amount set forth opposite such
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18
Overline Lender's name in the column headed "Overline Commitment" on Schedule
1.1(b) hereto and (ii) such Overline Lender's Overline Commitment Percentage of
the excess of $250,000,000 over the aggregate Revolving Credit Commitments then
in effect, after giving effect to any increase in the aggregate Revolving Credit
Commitments as a result of the addition of any New Lender pursuant to subsection
10.8 hereof.
"OVERLINE COMMITMENT PERCENTAGE": as to any Overline Lender at any time,
the percentage of the aggregate Overline Commitments then constituted by such
Overline Lender's Overline Commitment.
"OVERLINE COMMITMENT PERIOD": the period from and including the date
hereof to but not including the Overline Termination Date or such earlier date
on which the Commitments or Overline Commitments shall terminate as provided
herein.
"OVERLINE LENDER": each Lender having an Overline Commitment.
"OVERLINE LOANS": as defined in subsection 2.1B.
"OVERLINE NOTE": as defined in subsection 2.2B.
"OVERLINE TERMINATION DATE": November 30, 1993.
"PARTICIPANTS": as defined in subsection 10.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA.
"PERMITTED IRB LETTERS OF CREDIT": letters of credit and other credit
enhancement instruments issued for the account of the Company or any of its
Subsidiaries which at any time support industrial revenue bonds issued for the
benefit of the Company or any of its Subsidiaries, which are outstanding on the
date of this Agreement and are shown on Schedule 7.2(f).
"PERMITTED SENIOR INDEBTEDNESS": at any date, the aggregate unpaid
principal amount of Indebtedness outstanding on such date permitted under,
without duplication, (i) subsection 7.2(c), (e), (f), (h) and (k), (ii)
subsection 7.2(g), other than such Indebtedness permitted thereunder by
reference to subsection 7.4(c), (iii) subsection 7.2(i), other than such
Indebtedness permitted thereunder in connection with acquisitions or mergers by
any Subsidiary in the Ryland Financial Division and (iv) subsection 7.2(j), but
only such Indebtedness permitted thereunder relating to refinancings of
Indebtedness included in this
<PAGE>
19
definition of Permitted Senior Indebtedness pursuant to clauses (i), (ii) and
(iii) above.
"PERSON": an individual, partnership, corporation, business trust, joint
stock company, trust, unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.
"PLAN": at a particular time, any employee benefit plan which is covered
by ERISA and in respect of which the Company or a Commonly Controlled Entity is
(or, if such plan were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"REFERENCE LENDERS": Chemical, NationsBank and Bank of America.
"REGISTER": as defined in subsection 10.6(d).
"REGULATION U": Regulation U of the Board of Governors of the Federal
Reserve System.
"REIMBURSEMENT OBLIGATION": the obligation of the Company to reimburse
the Issuing Bank pursuant to subsection 3.5 for amounts drawn under Letters of
Credit.
"REORGANIZATION": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
SECTION 2615.
"REQUIRED LENDERS": at any time, Lenders the Commitment Percentages of
which aggregate at least 66-2/3%.
"REQUIREMENT OF LAW": as to any Person, the Charter and By-Laws or other
organizational or governing documents of such Person, and any law, treaty, rule
or regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"RESPONSIBLE OFFICER": the chief executive officer and the president of
the Company or, with respect to
<PAGE>
20
financial matters, the chief financial officer or the chief accounting officer
of the Company.
"RESTRICTED SUBSIDIARY": any Subsidiary of the Company OTHER THAN the
Limited-Purpose Subsidiaries and any Subsidiary that the Required Lenders agree
in writing is not to be treated hereunder as a Restricted Subsidiary.
"REVOLVING CREDIT COMMITMENT": as to any Lender, the amount set forth
opposite such Lender's name on Schedule 1.1(b) under the caption "Revolving
Credit Commitments".
"REVOLVING CREDIT COMMITMENT PERCENTAGE": as to any Lender at any time,
the percentage of the aggregate Revolving Credit Commitments then constituted by
such Lender's Revolving Credit Commitment.
"REVOLVING CREDIT LOANS": as defined in subsection 2.1A.
"REVOLVING CREDIT NOTE": as defined in subsection 2.2A.
"RYLAND FINANCIAL DIVISION": all subsidiaries and operations of the
Company and its Subsidiaries other than the Homebuilding Segment.
"RYLAND MORTGAGE COMPANY": Ryland Mortgage Company, an Ohio corporation.
"SERVICING PORTFOLIO": for Ryland Mortgage Company, at any time, an
amount equal to the aggregate unpaid principal amount of all loans with respect
to which Ryland Mortgage Company owns Servicing Rights, other than loans
serviced on behalf of the Resolution Trust Corporation.
"SERVICING RIGHTS": all of Ryland Mortgage Company's right, title and
interest in agreements between Ryland Mortgage Company and Persons other than
Ryland Mortgage Company and Associates Mortgage Funding Corporation pursuant to
which Ryland Mortgage Company undertakes to service one-to-four family and
multifamily dwelling mortgage loans and pools of one-to-four family and
multifamily dwelling mortgage loans for such Persons.
"SIGNIFICANT SUBSIDIARY": a Subsidiary satisfying the requirements of
Rule 1-02(v) of Regulation S-X as adopted by the Securities and Exchange
Commission under
<PAGE>
21
the provisions of the Securities Act of 1933 and the Exchange Act as in force on
the date of this Agreement.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
"SOLD HOUSING INVENTORY": at any date, an amount equal to the aggregate
contract price with respect to homes and lots under construction for which final
contracts of sale have been entered into on or prior to such date, and are still
in effect on such date, but with respect to which settlement under such
contracts has not occurred.
"SPECIFIED DEBT": the Company's Senior Debt Securities issued pursuant to
the Company's Registration Statement on Form S-3 (Registration No. 33-28692) or
any successor registration statement and outstanding on the Closing Date.
"STOCK DISTRIBUTION": any dividend or other distribution to holders of
Common Stock of cash, property or securities (excluding however any dividends or
distributions of Common Stock or rights to purchase Common Stock).
"STOCK REPURCHASE": any purchase of shares of Common Stock by the Company
or any Subsidiary, whether for cash, shares of capital stock of the Company,
other securities of the Company, evidences of indebtedness of the Company or any
other person or any other property (including shares of a Subsidiary of the
Company), or any combination thereof.
"SUBORDINATED DEBT": (i) Indebtedness of the Company outstanding on the
date hereof issued pursuant to the 1992 Subordinated Debt Indenture and (ii) any
other unsecured Indebtedness of the Company no part of the principal of which is
required to be paid (whether by way of mandatory sinking fund, mandatory
redemption, mandatory prepayment or otherwise) prior to December 31, 1998, and
the payment of the principal of and interest on which and other obligations of
the Company in respect thereof are subordinated to the prior payment in full of
the principal of and interest (including post-petition interest) on the Notes
and all other obligations and liabilities of the Company to the Administrative
Agent and the Lenders hereunder on terms and conditions approved in writing by
the Required Lenders.
"SUBSIDIARY": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having ordinary
voting power
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22
(other than stock or such other ownership interests having such power only by
reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or other entity are
at the time owned directly or indirectly through one or more intermediaries, or
both, by such Person. Unless otherwise qualified, all references to a
"Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a Subsidiary
or Subsidiaries of the Company and shall exclude any real estate joint venture
which the Company or any Subsidiary within the Homebuilding Segment either
directly or indirectly participates in or controls.
"SWING LINE LENDER": Chemical, in its capacity as the Swing Line Lender.
"SWING LINE COMMITMENT": $20,000,000.
"SWING LINE LOAN": as defined in subsection 2.4.
"SWING LINE NOTE": as defined in subsection 2.4.
"TERMINATION DATE": July 29, 1996.
"TOTAL HOUSING INVENTORY": at any date, the amount which would be
included under "Housing inventories" on a combined balance sheet of the
Homebuilding Segment determined on a combined basis in accordance with GAAP as
at such date.
"TRANCHE": the collective reference to Eurodollar Loans or C/D Rate Loans
the Interest Periods with respect to all of which begin on the same date and end
on the same later date (whether or not such Loans shall originally have been
made on the same day); Tranches may be identified as "EURODOLLAR TRANCHES" or
"C/D RATE TRANCHES", as applicable.
"TYPE": as to any Loan, its nature as an ABR Loan, a Eurodollar Loan or a
C/D Rate Loan.
"UNIFORM CUSTOMS": the Uniform Customs and Practice for Documentary
Credits (1983 Revision), International Chamber of Commerce Publication No. 400,
as the same may be amended from time to time.
"UNSOLD HOUSING INVENTORY": at any date, an amount equal to (i) the
amount which would be included under "Housing inventories: Unsold" less (ii)
the amounts which would be included under the definitions of "Unsold Land Held"
and "Unsold Land Under Development" in this Agreement, determined on a combined
basis in accordance with GAAP as at such date.
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23
"UNSOLD LAND HELD": at any date, the amount which would be included under
"Housing inventories: Unsold: Land held for future development or resale" on a
combined balance sheet of the Homebuilding Segment determined on a combined
basis in accordance with GAAP as at such date.
"UNSOLD LAND UNDER DEVELOPMENT": at any date, an amount equal to (i) the
amount which would be included under "Housing inventories: Unsold: Homes and
lots under construction" on a combined balance sheet of the Homebuilding Segment
determined on a combined basis in accordance with GAAP as at such date less (ii)
the portion of such amount attributable to lots on which construction of a
foundation or slab has been commenced, determined on a combined basis in
accordance with GAAP as at such date less.
"VOTING STOCK": shares of stock of the Company entitling the holder
thereof to vote generally for the election of directors of the Company.
"WORKING CAPITAL": at any date, an amount equal to (i) cash and Cash
Equivalents PLUS (ii) accounts and notes receivable PLUS (iii) prepaid expenses
and deposits (iv) LESS accounts payable LESS (v) accrued expenses LESS (vi)
customer deposits, in each case as such amounts would be determined with respect
to the Homebuilding Segment on a consolidated basis in accordance with GAAP as
at such date.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Company and its Subsidiaries not defined in subsection 1.1 and accounting terms
partly defined in subsection 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
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24
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
1.3 ACCOUNTING PRINCIPLES. Unless otherwise defined or specified herein,
all accounting terms used in this Agreement shall be construed herein, and all
accounting determinations hereunder shall be made, in accordance with GAAP,
applied on a basis consistent with the most recent audited consolidated
financial statements of the Company and its Subsidiaries delivered to the
Lenders; provided, however, that if there shall occur any change after the date
hereof in GAAP and such change affects the method of calculating any of the
factors that go into any component of the financial covenants and ratios set
forth in this Agreement, the Required Lenders will, upon request of the Company,
and the Company will, upon request of the Required Lenders, make adjustments to
such covenants and ratios as reasonably required so that they are consistent
with the financial covenants and ratios made as of the date hereof,
notwithstanding such change.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1A REVOLVING CREDIT COMMITMENTS. (a) Subject to the terms and
conditions hereof, each Lender severally agrees to make revolving credit loans
("REVOLVING CREDIT LOANS") to the Company from time to time during the
Commitment Period in an aggregate principal amount at any one time outstanding,
when added to such Lender's Revolving Credit Commitment Percentage of the then
Aggregate Outstanding Revolving Extensions of Credit, not to exceed the lesser
of (i) the amount of such Lender's Adjusted Revolving Credit Commitment then in
effect and (ii) such Lender's Commitment Percentage of the excess of the
Borrowing Base then in effect over Permitted Senior Indebtedness then
outstanding. During the Commitment Period the Company may use the Revolving
Credit Commitments by borrowing, prepaying the Revolving Credit Loans in whole
or in part, and reborrowing, all in accordance with the terms and conditions
hereof.
(b) The Revolving Credit Loans may from time to time be (i) Eurodollar
Loans, (ii) ABR Loans, (iii) C/D Rate Loans or (iv) a combination thereof, as
determined by the Company and notified to the Administrative Agent in accordance
with subsections 2.3A and 2.8, PROVIDED that no Revolving Credit Loan shall be
made as a Eurodollar Loan or a C/D Rate Loan after the day that is one month or
30 days, respectively, prior to the Termination Date.
2.1B OVERLINE COMMITMENTS. Subject to the terms and conditions hereof,
each Overline Lender severally agrees
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25
to make overline revolving credit loans ("OVERLINE LOANS") to the Company from
time to time during the Overline Commitment Period in an aggregate principal
amount at any one time outstanding not to exceed the lesser of (i) such Overline
Lender's Overline Commitment and (ii) such Overline Lender's Overline Commitment
Percentage of the excess of the Borrowing Base then in effect over the sum of
(A) Permitted Senior Indebtedness then outstanding and (B) the Aggregate
Outstanding Revolving Extensions of Credit then outstanding, PROVIDED, that no
Overline Lender shall have any obligation to make any Overline Loan if, on the
Borrowing Date with respect to such Overline Loan, the amount of the Aggregate
Outstanding Revolving Extensions of Credit is less than the aggregate Adjusted
Revolving Credit Commitments in effect on such date. During the Overline
Commitment Period the Company may use the Overline Commitments by borrowing,
prepaying the Overline Loans in whole or in part, and reborrowing, all in
accordance with the terms and conditions hereof. All Overline Loans shall bear
interest as set forth in subsection 2.10(g) and shall not be entitled to be
converted into Eurodollar Loans or C/D Rate Loans.
2.2A REVOLVING CREDIT NOTES. The Revolving Credit Loans made by each
Lender shall be evidenced by a promissory note of the Company, substantially in
the form of Exhibit A-1, with appropriate insertions as to payee, date and
principal amount (a "REVOLVING CREDIT NOTE"), payable to the order of such
Lender and in a principal amount equal to the lesser of (a) the amount of the
Revolving Credit Commitment of such Lender and (b) the aggregate unpaid
principal amount of all Revolving Credit Loans made by such Lender. Each Lender
is hereby authorized to record the date, Type and amount of each Revolving
Credit Loan made by such Lender, each continuation thereof, each conversion of
all or a portion thereof to another Type, the date and amount of each payment or
prepayment of principal thereof and, in the case of Eurodollar Loans and C/D
Rate Loans, the length of each Interest Period with respect thereto, on the
schedule annexed to and constituting a part of its Revolving Credit Note, and
any such recordation shall constitute PRIMA FACIE evidence of the accuracy of
the information so recorded. Each Revolving Credit Note shall (x) be dated the
Closing Date, (y) be stated to mature on the Termination Date and (z) provide
for the payment of interest in accordance with subsection 2.10.
2.2B OVERLINE NOTES. The Overline Loans made by each Overline Lender
shall be evidenced by a promissory note of the Company, substantially in the
form of Exhibit A-2, with appropriate insertions as to payee, date and principal
amount (a "OVERLINE NOTE"), payable to the order of such Overline Lender and in
a principal amount equal to the lesser of (a) the amount set forth opposite such
Overline Lender's name in the column headed "Overline Commitment" on Schedule
1.1(b) hereto and (b) the aggregate unpaid principal amount
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26
of all Overline Loans made by such Overline Lender. Each Overline Lender is
hereby authorized to record the date and amount of each Overline Loan made by
such Overline Lender and the date and amount of each payment or prepayment of
principal thereof, on the schedule annexed to and constituting a part of its
Overline Note, and any such recordation shall constitute PRIMA FACIE evidence of
the accuracy of the information so recorded. Each Overline Note shall (x) be
dated the Closing Date, (y) be stated to mature on the Overline Termination Date
and (z) provide for the payment of interest in accordance with subsection 2.10.
2.3A PROCEDURE FOR REVOLVING CREDIT BORROWING. The Company may borrow
under the Revolving Credit Commitments during the Commitment Period on any
Business Day, PROVIDED that the Company shall give the Administrative Agent
irrevocable notice (which notice must be received by the Administrative Agent
prior to 10:30 A.M., New York City time, (a) three Business Days prior to the
requested Borrowing Date, if all or any part of the requested Revolving Credit
Loans are to be initially Eurodollar Loans, (b) two Business Days prior to the
requested Borrowing Date, if all or any part of the requested Revolving Credit
Loans are to be initially C/D Rate Loans, or (c) on the requested Borrowing
Date, otherwise), specifying (i) the amount to be borrowed, (ii) the requested
Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR
Loans, C/D Rate Loans or a combination thereof and (iv) if the borrowing is to
be entirely or partly of Eurodollar Loans or C/D Rate Loans, the respective
amounts of each such Type of Loan and the respective lengths of the initial
Interest Periods therefor. Each borrowing under the Revolving Credit
Commitments shall be in an amount equal to (x) in the case of ABR Loans,
$10,000,000 or a whole multiple of $1,000,000 in excess thereof (or, if the then
Available Commitments are less than $10,000,000, such lesser amount) and (y) in
the case of Eurodollar Loans or C/D Rate Loans, $10,000,000 or a whole multiple
of $1,000,000 in excess thereof. Upon receipt of any such notice from the
Company, the Administrative Agent shall promptly notify each Lender thereof.
Each Lender will make the amount of its pro rata share of each borrowing
available to the Administrative Agent for the account of the Company at the
office of the Administrative Agent specified in subsection 10.2 prior to 12:00
noon, New York City time, on the Borrowing Date requested by the Company in
funds immediately available to the Administrative Agent. Such borrowing will
then be made available to the Company by the Administrative Agent crediting the
account of the Company on the books of such office with the aggregate of the
amounts made available to the Administrative Agent by the Lenders and in like
funds as received by the Administrative Agent. With respect to any Revolving
Credit Loans to be made on the Closing Date, if the principal amount of the
Revolving Credit Loan to be made by a Lender on the Closing Date is equal to
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27
or less than the aggregate principal amount of loans outstanding on the Closing
Date made by such Lender to the Company under the Existing Credit Agreement, the
Revolving Credit Loan to be made by such Lender on the Closing Date shall be
made without any payments being made by such Lender. If the principal amount of
the Revolving Credit Loan to be made by a Lender on the Closing Date is greater
than the aggregate principal amount of loans outstanding on the Closing Date
made by such Lender to the Company under the Existing Credit Agreement, then not
later than 11:00 A.M., New York City time, on the Closing Date such Lender shall
make available to the Administrative Agent at its office specified in subsection
10.2 an amount in immediately available funds equal to the excess of the
Revolving Credit Loan to be made by such Lender over such principal amount of
loans outstanding owing to such Lender under the Existing Credit Agreement.
Such borrowing will then be made available to the Company by the Administrative
Agent crediting the account of the Company on the books of such office with the
aggregate of the amounts made available to the Administrative Agent by the
Lenders and in like funds as received by the Administrative Agent.
2.3B PROCEDURE FOR OVERLINE BORROWING. The Company may borrow under the
Overline Commitments during the Overline Commitment Period on any Business Day,
PROVIDED that the Company shall give the Administrative Agent irrevocable notice
(which notice must be received by the Administrative Agent prior to 10:30 A.M.,
New York City time, on the requested Borrowing Date), specifying (i) the amount
to be borrowed and (ii) the requested Borrowing Date. Each borrowing under the
Overline Commitments shall be in an amount equal to $5,000,000 or a whole
multiple of $1,000,000 in excess thereof (or, if the Available Overline
Commitments are less than $5,000,000, such lesser amount). Upon receipt of any
such notice from the Company, the Administrative Agent shall promptly notify
each Overline Lender thereof. Each Overline Lender will make the amount of its
pro rata share of each borrowing available to the Administrative Agent for the
account of the Company at the office of the Administrative Agent specified in
subsection 10.2 prior to 2:00 P.M., New York City time, on the Borrowing Date
requested by the Company in funds immediately available to the Administrative
Agent. Such borrowing will then be made available to the Company by the
Administrative Agent crediting the account of the Company on the books of such
office with the aggregate of the amounts made available to the Administrative
Agent by the Overline Lenders and in like funds as received by the
Administrative Agent.
2.4 THE SWING LINE LOANS. (a) Subject to the terms and conditions
hereof, the Swing Line Lender agrees to make swing line loans (individually, a
"SWING LINE LOAN"; collectively, the "SWING LINE LOANS") to the Company from
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28
time to time during the Commitment Period in an aggregate principal amount at
any one time outstanding not to exceed the Swing Line Commitment, PROVIDED that
at no time shall the aggregate principal amount of Swing Line Loans outstanding,
when added to the then outstanding Aggregate Outstanding Revolving Extensions of
Credit other than Swing Line Loans, exceed the lesser of (x) the aggregate
Adjusted Revolving Credit Commitments then in effect and (y) the excess of the
Borrowing Base then in effect over Permitted Senior Indebtedness. Amounts
borrowed by the Company under this subsection 2.4 may be repaid and, through but
excluding the Termination Date, reborrowed. All Swing Line Loans shall bear
interest as set forth in subsection 2.10(d) and shall not be entitled to be
converted into Eurodollar Loans or C/D Rate Loans. Each borrowing of Swing Line
Loans shall be in an amount equal to $500,000 or a whole multiple thereof (or,
if the then Available Commitments are less than $500,000, such lesser amount).
The Company shall give the Swing Line Lender irrevocable notice (which notice
must be received by the Swing Line Lender prior to 2:00 P.M., New York City
time) on the requested Borrowing Date specifying the amount of the requested
Swing Line Loan. The proceeds of the Swing Line Loan will be made available by
the Swing Line Lender to the Company at the office of the Administrative Agent
by crediting the account of the Company at such office with such proceeds.
(b) The Swing Line Loans shall be evidenced by a promissory note of the
Company substantially in the form of Exhibit B, with appropriate insertions (the
"SWING LINE NOTE"), payable to the order of the Swing Line Lender and
representing the obligation of the Company to pay the unpaid principal amount of
the Swing Line Loans, with interest thereon as prescribed in subsection 2.10.
The Swing Line Lender is hereby authorized to record the Borrowing Date, the
amount of each Swing Line Loan and the date and amount of each payment or
prepayment of principal thereof, on the schedule annexed to and constituting a
part of the Swing Line Note and any such recordation shall constitute PRIMA
FACIE evidence of the accuracy of the information so recorded. The Swing Line
Note shall (a) be dated the Closing Date, (b) be stated to mature on the
Termination Date and (c) bear interest for the period from the date thereof to
the Termination Date on the unpaid principal amount thereof from time to time
outstanding at the applicable interest rate per annum determined as provided in,
and payable as specified in, subsection 2.10.
(c) The Swing Line Lender at any time in its sole and absolute
discretion, may, and, with respect to each Swing Line Loan which has not been
repaid by the Company in immediately available funds prior to 10:30 A.M. on the
day which is the third Business Day after the Borrowing Date with respect to
such Swing Line Loan shall, on behalf of the
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29
Company (which hereby irrevocably directs the Swing Line Lender to act on its
behalf) request prior to 12:00 Noon (New York City time) each Lender on such
third Business Day after the Borrowing Date with respect to such Swing Line
Loan, including the Swing Line Lender, to make a Revolving Credit Loan in an
amount equal to such Lender's Revolving Credit Commitment Percentage of the
amount of the Swing Line Loan (the "REFUNDED SWING LINE LOANS") outstanding on
the date such notice is given. Unless any of the events described in paragraph
(f) of Section 8 shall have occurred (in which event the procedures of paragraph
(d) of this subsection 2.4 shall apply) each Lender shall make the proceeds of
its Revolving Credit Loan available to the Swing Line Lender for the account of
the Swing Line Lender at the office of the Administrative Agent specified in
subsection 10.2 prior to 2:00 P.M. (New York City time) in funds immediately
available on the date such notice is given. The proceeds of such Revolving
Credit Loans shall be immediately applied to repay the Refunded Swing Line
Loans. Each Revolving Credit Loan made pursuant to this subsection 2.4(c) shall
be an ABR Loan.
(d) If prior to the making of a Revolving Credit Loan pursuant to
paragraph (c) of this subsection 2.4 one of the events described in paragraph
(f) of Section 8 shall have occurred, each Lender will on the date such
Revolving Credit Loan was to have been made, purchase an undivided participating
interest in the Refunded Swing Line Loan in an amount equal to its Revolving
Credit Commitment Percentage of such Refunded Swing Line Loan. Each Lender will
immediately transfer to the Swing Line Lender, in immediately available funds,
the amount of its participation and upon receipt thereof the Swing Line Lender
will deliver to such Lender a Swing Line Loan participation certificate dated
the date of receipt of such funds and in such amount.
(e) Whenever, at any time after the Swing Line Lender has received from
any Lender such Lender's participating interest in a Refunded Swing Line Loan,
the Swing Line Lender receives any payment on account thereof, the Swing Line
Lender will distribute to such Lender its participating interest in such amount
(appropriately adjusted in the case of interest payments, to reflect the period
of time during which such Lender's participating interest was outstanding and
funded); PROVIDED, HOWEVER, that in the event that such payment received by the
Swing Line Lender is required to be returned, such Lender will return to the
Swing Line Lender any portion thereof previously distributed by the Swing Line
Lender to it.
(f) Each Lender's obligation to purchase participating interests pursuant
to this subsection 2.4 shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i) any set-off,
counterclaim, recoupment, defense or other right which
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30
such Lender or the Company may have against the Swing Line Lender, the Company
or anyone else for any reason whatsoever; (ii) the occurrence or continuance of
an Event of Default; (iii) any adverse change in the condition (financial or
otherwise) of the Company; (iv) any breach of this Agreement by the Company or
any other Lender; or (v) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
.
2.5 FEES. (a) The Company agrees to pay to the Administrative Agent for
the account of each Lender a commitment fee for the period from and including
the Closing Date to the Termination Date, computed at the rate of 3/8th of 1%
per annum on such Lender's Revolving Credit Commitment Percentage of the average
daily amount of the Available Commitments during the period for which payment is
made, payable quarterly in arrears on the last day of each March, June,
September and December and on the Termination Date or such earlier date on which
the Commitments shall terminate as provided herein, commencing on the first of
such dates to occur after the Closing Date; PROVIDED, that if both (x) the
Company's long term senior unsecured debt shall cease to be rated by Moody's
Investors Services, Inc. or shall be rated lower than Baa3 by such rating
agency, and (y) the Company's long term senior unsecured debt shall cease to be
rated by Standard & Poors' Corporation or shall be rated lower than BBB- by such
rating agency, then, from the date on which the first such lower rating or
cessation of rating becomes effective until the ratings at the level of Baa3 or
BBB-, respectively, or better, are once again in effect, the commitment fee
payable pursuant to this subsection 2.5(a) shall be calculated at the rate of
1/2 of 1% per annum.
(b) The Company agrees to pay to the Administrative Agent on the Closing
Date for the account of each Lender a facility fee equal to (i) in the case of
any Lender having a Revolving Credit Commitment on the Closing Date of less than
$20,000,000, 1/8 of 1% of such Lender's Revolving Credit Commitment on the
Closing Date, (ii) in the case of any Lender having a Revolving Credit
Commitment on the Closing Date of $20,000,000 or greater but less than
$30,000,000, 1/4 of 1% of such Lender's Revolving Credit Commitment on the
Closing Date and (iii) in the case of any Lender having a Revolving Credit
Commitment on the Closing Date of at least $30,000,000, 3/8 of 1% of such
Lender's Revolving Credit Commitment on the Closing Date.
(c) The Company agrees to pay to the Administrative Agent and any Lender
the fees in the amounts and on the dates agreed by the Company in writing with
the Administrative Agent or such Lender, as the case may be.
(d) The Company agrees to pay to the Administrative Agent for the account
of each Overline Lender
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31
a commitment fee for the period from and including the Closing Date to the
Overline Termination Date, computed at the rate of 3/8th of 1% per annum on such
Overline Lender's Overline Commitment Percentage of the average daily amount of
the Available Overline Commitments during the Overline Commitment Period,
payable in arrears on the Overline Termination Date or such earlier date on
which the Commitments or the Overline Commitments shall terminate as provided
herein; PROVIDED, that if both (x) the Company's long term senior unsecured debt
shall cease to be rated by Moody's Investors Services, Inc. or shall be rated
lower than Baa3 by such rating agency, and (y) the Company's long term senior
unsecured debt shall cease to be rated by Standard & Poors' Corporation or shall
be rated lower than BBB- by such rating agency, then, from the date on which the
first such lower rating or cessation of rating becomes effective until the
ratings at the level of Baa3 or BBB-, respectively, or better, are once again in
effect, the commitment fee payable pursuant to this subsection 2.5(d) shall be
calculated at the rate of 1/2 of 1% per annum.
(e) The Company agrees to pay to the Administrative Agent on the Closing
Date (i) for the account of each Overline Lender which also has a Revolving
Credit Commitment hereunder on the Closing Date, an overline facility fee equal
to 1/2 of 1% of such Overline Lender's Overline Commitment on the Closing Date
and (ii) for the account of each Overline Lender which does not have a Revolving
Credit Commitment hereunder on the Closing Date, an overline facility fee equal
to (x) in the case of any such Overline Lender having an Overline Commitment on
the Closing Date of less than $20,000,000, 1/8 of 1% of such Overline Lender's
Overline Commitment on the Closing Date, (y) in the case of any such Overline
Lender having a Overline Commitment on the Closing Date of $20,000,000 or
greater but less than $30,000,000, 1/4 of 1% of such Overline Lender's Overline
Commitment on the Closing Date and (z) in the case of any such Overline Lender
having a Overline Commitment on the Closing Date of at least $30,000,000, 3/8 of
1% of such Overline Lender's Overline Commitment on the Closing Date.
2.6 OPTIONAL TERMINATION AND REDUCTION OF COMMITMENTS. (a) The Company
shall have the right, upon not less than five Business Days' notice to the
Administrative Agent, to terminate the Revolving Credit Commitments or, from
time to time, to reduce the amount of the Revolving Credit Commitments, PROVIDED
that no such termination or reduction shall be permitted if, after giving effect
thereto and to any prepayments or repayments of the Revolving Credit Loans and
the Swing Line Loans made on the effective date thereof, the Aggregate
Outstanding Revolving Extensions of Credit would exceed the Adjusted Revolving
Credit Commitments then in effect, and PROVIDED, FURTHER, that no such
termination or reduction shall be permitted if the Overline Commitments are
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32
then in effect. Any such reduction shall be in an amount equal to $10,000,000
or a whole multiple of $1,000,000 in excess thereof and shall reduce permanently
the Revolving Credit Commitments then in effect.
(b) The Company shall have the right, upon not less than five Business
Days' notice to the Administrative Agent, to terminate the Overline Commitments
or, from time to time, to reduce the amount of the Overline Commitments,
PROVIDED that no such termination or reduction shall be permitted if, after
giving effect thereto and to any prepayments or repayments of the Overline Loans
made on the effective date thereof, the aggregate amount of Overline Loans then
outstanding would exceed the Overline Commitments then in effect. Any such
reduction shall be in an amount equal to $5,000,000 or a whole multiple of
$1,000,000 in excess thereof and shall reduce permanently the Overline
Commitments then in effect.
2.7 OPTIONAL PREPAYMENTS; MANDATORY PREPAYMENTS. (a) The Company may on
the last day of any Interest Period with respect thereto, in the case of
Eurodollar Loans or C/D Rate Loans, or at any time and from time to time, in the
case of ABR Loans and Swing Line Loans, prepay the Revolving Credit Loans and
the Swing Line Loans, in whole or in part, without premium or penalty, upon (i)
at least two Business Days' irrevocable notice, which must be received prior to
10:30 A.M. on the day of such notice, to the Administrative Agent with respect
to Eurodollar Loans or C/D Rate Loans, and (ii) upon irrevocable notice received
prior to 10:30 A.M. on the date of such prepayment with respect to ABR Loans, in
each case specifying the date and amount of prepayment and whether the
prepayment is of Eurodollar Loans, C/D Rate Loans, ABR Loans or a combination
thereof, and, if of a combination thereof, the amount allocable to each. Upon
receipt of any such notice the Administrative Agent shall promptly notify each
Lender thereof. If any such notice is given, the amount specified in such
notice shall be due and payable on the date specified therein. No notice shall
be required for prepayments of the Swing Line Loans. Partial prepayments shall
be in an aggregate principal amount of $10,000,000 in the case of the Revolving
Credit Loans, or $1,000,000, in the case of the Swing Line Loans, or, in each
case, a whole multiple of $1,000,000 in excess thereof.
(b) If on any date (including any date on which a Borrowing Base
Certificate is delivered pursuant to Section 6.2(f)) (i) the sum of (A) the
Aggregate Outstanding Revolving Extensions of Credit as of such date and (B)
Permitted Senior Indebtedness as of such date exceeds the then applicable
Borrowing Base or (ii) the Aggregate Outstanding Revolving Extensions of Credit
exceeds the aggregate Adjusted Revolving Credit Commitments then in effect,
then, without notice or demand, the Company shall, on
<PAGE>
33
such date, prepay the Loans in an amount equal to such excess, together with
interest on the amount paid or prepaid accrued to the date of such payment or
prepayment and any amounts payable pursuant to subsection 2.8 in connection
therewith; PROVIDED, that if the aggregate principal amount of Loans then
outstanding is less than the amount of such excess (because L/C Obligations
constitute a portion thereof), the Company shall, to the extent of the balance
of such excess, replace outstanding Letters of Credit and/or deposit an amount
in cash in a cash collateral account established with the Administrative Agent
for the benefit of the Lenders. The Company may, subject to the terms and
conditions of this Agreement, reborrow the amount of any prepayment made under
this subsection 2.7.
(c) If on any date on which any Overline Loan is outstanding the amount
of the Aggregate Outstanding Revolving Extensions of Credit is less than the
aggregate Adjusted Revolving Credit Commitments then in effect, then, without
notice or demand, the Company shall, on such date, prepay the in full all
Overline Loans then outstanding, together with interest on the amount paid or
prepaid accrued to the date of such payment or prepayment.
(d) If on any date on which any Overline Loan is outstanding (including
any date on which a Borrowing Base Certificate is delivered pursuant to Section
6.2(f)) the sum of (A) the Aggregate Outstanding Revolving Extensions of Credit
as of such date, (B) Permitted Senior Indebtedness as of such date and (C) the
aggregate principal amount of Overline Loans then outstanding exceeds the then
applicable Borrowing Base, then, without notice or demand, the Company shall, on
such date, prepay the Overline Loans in an amount equal to the lesser of such
excess and the aggregate principal amount of Overline Loans then outstanding,
together with interest on the amount paid or prepaid accrued to the date of such
payment or prepayment.
(e) If on any date on which any Overline Loan is outstanding the
aggregate principal amount of the Overline Loans outstanding exceeds the
aggregate Overline Commitments then in effect, then, without notice or demand,
the Company shall, on such date, prepay the Overline Loans in an amount equal to
such excess, together with interest on the amount paid or prepaid accrued to the
date of such payment or prepayment.
2.8 CONVERSION AND CONTINUATION OPTIONS. (a) The Company may elect from
time to time to convert Eurodollar Loans or C/D Rate Loans to ABR Loans, and/or
to convert Eurodollar Loans or ABR Loans to C/D Rate Loans, by giving the
Administrative Agent at least two Business Days' prior irrevocable notice of
such election, PROVIDED that any such conversion of Eurodollar Loans or C/D Rate
Loans may only be
<PAGE>
34
made on the last day of an Interest Period with respect thereto. The Company
may elect from time to time to convert ABR Loans other than Overline Loans or
C/D Rate Loans to Eurodollar Loans by giving the Administrative Agent at least
three Business Days' prior irrevocable notice of such election, PROVIDED that
any such conversion of C/D Rate Loans may, subject to the third succeeding
sentence, only be made on the last day of an Interest Period with respect
thereto. Any such notice of conversion to Eurodollar Loans or C/D Rate Loans
shall specify the length of the initial Interest Period or Interest Periods
therefor. Upon receipt of any such notice the Administrative Agent shall
promptly notify each Lender thereof. If the last day of the then current
Interest Period with respect to C/D Rate Loans that are to be converted to
Eurodollar Loans is not a Business Day, such conversion shall be made on the
next succeeding Business Day, and during the period from such last day to such
succeeding Business Day such Loans shall bear interest as if they were ABR
Loans. All or any part of outstanding Eurodollar Loans, ABR Loans (other than
Overline Loans) and C/D Rate Loans may be converted as provided herein, PROVIDED
that (i) no Loan may be converted into a Eurodollar Loan or a C/D Rate Loan when
any Event of Default has occurred and is continuing and the Administrative Agent
has or the Required Lenders have determined that such a conversion is not
appropriate and (ii) no Loan may be converted into a Eurodollar Loan or a C/D
Rate Loan after the date that is one month or 30 days, respectively, prior to
the Termination Date (in the case of conversions of Revolving Credit Loans).
(b) Any Eurodollar Loans or C/D Rate Loans may be continued as such upon
the expiration of the then current Interest Period with respect thereto by the
Company giving notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in subsection 1.1,
of the length of the next Interest Period to be applicable to such Loans,
PROVIDED that no Eurodollar Loan or C/D Rate Loan may be continued as such (i)
when any Event of Default has occurred and is continuing and the Administrative
Agent has or the Required Lenders have determined that such a continuation is
not appropriate or (ii) after the date that is one month or 30 days prior to,
respectively, the Termination Date (in the case of continuations of Revolving
Credit Loans); and PROVIDED, FURTHER, that if the Company shall fail to give any
required notice as described above in this paragraph or if such continuation is
not permitted pursuant to the preceding proviso such Loans shall be
automatically converted to ABR Loans on the last day of such then expiring
Interest Period.
2.9 MINIMUM AMOUNTS OF TRANCHES. All borrowings, conversions and
continuations of Loans hereunder and all selections of Interest Periods
hereunder shall be in such amounts and be made pursuant to such elections so
that, after
<PAGE>
35
giving effect thereto, the aggregate principal amount of the Loans comprising
(i) each Eurodollar Tranche shall be equal to $10,000,000 or a whole multiple of
$1,000,000 in excess thereof and (ii) each C/D Rate Tranche shall be equal to
$10,000,000 or a whole multiple of $1,000,000 in excess thereof.
2.10 INTEREST RATES AND PAYMENT DATES. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to the
ABR plus the Applicable Margin.
(c) Each C/D Rate Loan shall bear interest for each day during each
Interest Period with respect thereto at a rate per annum equal to the C/D Rate
determined for such day plus the Applicable Margin.
(d) Each Swing Line Loan made by the Swing Line Lender shall bear
interest for each day during which such Swing Line Loan is outstanding at the
rate per annum determined by the Swing Line Lender to be the rate at which the
Swing Line Lender is able to obtain funds for such day in the federal funds
market in which the Swing Line Lender customarily acquires federal funds plus
(i) a Lender margin of (A) 1.375% per annum with respect to any day when either
(x) the Company's long term senior unsecured debt is rated at least Baa3 by
Moody's Investors Services, Inc. or (y) the Company's long term senior unsecured
debt is rated at least BBB- by Standard & Poors' Corporation and (B) 1.625% per
annum with respect to any day when both (x) the Company's long term senior
unsecured debt is not rated by Moody's Investors Services, Inc. or is rated
lower than Baa3 by such rating agency and (y) the Company's long term senior
unsecured debt is not rated by Standard & Poors' Corporation or is rated lower
than BBB- by such rating agency, in each case payable for the account of each
Lender (including the Swing Line Lender in its capacity as a Lender), pro rata
according to their respective Revolving Credit Commitment Percentages and (ii) a
Swing Line Lender margin of 1/8 of 1% per annum, payable to the Swing Line
Lender in its capacity as such. The Swing Line Lender shall, upon request,
quote to the Company the interest rate in effect for Swing Line Loans on the
date of quotation.
(e) If all or a portion of (i) the principal amount of any Revolving
Credit Loan, Overline Loan or Swing Line Loan, (ii) any interest payable thereon
or (iii) any other amount payable hereunder shall not be paid when due (whether
at the stated maturity, by acceleration or otherwise), such overdue amount shall
bear interest at a rate
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36
per annum which is (x) in the case of overdue principal, 2% above the rate that
would otherwise be applicable thereto pursuant to the foregoing provisions of
this subsection until the earlier of the date such amount is paid in full or the
last day of the Interest Period applicable to such overdue amount, and then 2%
above the rate described in paragraph (b) of this subsection or (y) in the case
of overdue interest and any other amount payable hereunder, 2% above the rate
described in paragraph (b) of this subsection, in each case from the date of
such non-payment up to but not including the date of actual payment in full (as
well after as before judgment).
(f) Interest on Revolving Credit Loans and Swing Line Loans shall be
payable in arrears on each Interest Payment Date, PROVIDED that interest
accruing pursuant to paragraph (e) of this subsection shall be payable on
demand.
(g) Each Overline Loan shall bear interest for each day during which such
Overline Loan is outstanding at the rate per annum equal to the ABR plus the
Applicable Margin.
2.11 REPAYMENT OF LOANS. (a) On the Termination Date, the Company will
pay to the Administrative Agent for the account of each Lender the unpaid
principal amount of each Revolving Credit Loan made by such Lender.
(b) The Company will repay to the Swing Line Lender the unpaid principal
amount of each Swing Line Loan in accordance with subsection 2.4(c), and in any
event not later than the Termination Date.
(c) On the Overline Termination Date, the Company will pay to the
Administrative Agent for the account of each Overline Lender the unpaid
principal amount of each Overline Loan made by such Lender.
2.12 COMPUTATION OF INTEREST AND FEES. (a) Commitment fees and, whenever
it is calculated on the basis of the Prime Rate, interest shall be calculated on
the basis of a 365- (or 366-, as the case may be) day year for the actual days
elapsed; and, otherwise, interest shall be calculated on the basis of a 360-day
year for the actual days elapsed. The Administrative Agent shall as soon as
practicable notify the Company and the Lenders of each determination of a
Eurodollar Rate or of a C/D Rate. Any change in the interest rate on a Loan
resulting from a change in the ABR, the Eurocurrency Reserve Requirements, the
C/D Assessment Rate or the C/D Reserve Percentage shall become effective as of
the opening of business on the day on which such change becomes effective. The
Administrative Agent shall as soon as practicable notify the Company and the
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37
Lenders of the effective date and the amount of each such change in interest
rate.
(b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Company and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Company, deliver to the
Company a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to this Section 2.12.
(c) If any Reference Lender shall for any reason no longer have a
Revolving Credit Commitment or any Loans outstanding, such Reference Lender
shall thereupon cease to be a Reference Lender, and if, as a result, there shall
only be one Reference Lender remaining, the Administrative Agent (after
consultation with the Company and with the consent of the Required Lenders)
shall, by notice to the Company and the Lenders, designate another Lender as a
Reference Lender so that there shall at all times be at least two Reference
Lenders.
(d) Each Reference Lender shall use its best efforts to furnish
quotations of rates to the Administrative Agent as contemplated hereby. If any
of the Reference Lenders shall be unable or shall otherwise fail to supply such
rates to the Administrative Agent upon its request, the rate of interest shall,
subject to the provisions of subsection 2.13, be determined on the basis of the
quotations of the remaining Reference Lenders or Reference Lender.
2.13 INABILITY TO DETERMINE INTEREST RATE. If prior to the first day of
any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Company) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate or the C/D
Rate for such Interest Period, or
(b) the Administrative Agent shall have received notice from the
Required Lenders that the Eurodollar Rate or the C/D Rate determined or to be
determined for such Interest Period will not adequately and fairly reflect
the cost to such Lenders (as conclusively certified by such Lenders) of
making or maintaining their affected Loans during such Interest Period,
the Administrative Agent shall give telecopy or telephonic notice thereof to the
Company and the Lenders as soon as practicable thereafter. If such notice is
given (x) any Eurodollar Loans or C/D Rate Loans, as the case may be,
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38
requested to be made on the first day of such Interest Period shall be made as
ABR Loans, (y) any Loans that were to have been converted on the first day of
such Interest Period to Eurodollar Loans or C/D Rate Loans, as the case may be,
shall be converted to or continued as ABR Loans and (z) any outstanding
Eurodollar Loans or C/D Rate Loans, as the case may be, shall be converted, on
the first day of such Interest Period, to ABR Loans. Until such notice has been
withdrawn by the Administrative Agent, no further Eurodollar Loans or C/D Rate
Loans, as the case may be, shall be made or continued as such, nor shall the
Company have the right to convert Loans to Eurodollar Loans or C/D Rate Loans,
as the case may be.
2.14 PRO RATA TREATMENT AND PAYMENTS. (a) Each borrowing by the Company
from the Lenders hereunder (other than Swing Line Loans and Overline Loans),
each payment by the Company on account of any commitment fee hereunder (other
than pursuant to subsection 2.5(d)) and any reduction of the Revolving Credit
Commitments of the Lenders shall be made pro rata according to the respective
Revolving Credit Commitment Percentages of the Lenders. Each borrowing by the
Company from the Overline Lenders hereunder in the form of an Overline Loan,
each payment by the Company on account of any commitment fee pursuant to
subsection 2.5(d) and any reduction of the Overline Commitments of the Overline
Lenders shall be made pro rata according to the respective Overline Commitment
Percentages of the Overline Lenders. Each payment (including each prepayment)
by the Company on account of the principal of and interest on the Overline Loans
shall be made PRO RATA according to the respective outstanding principal of the
Overline Loans, respectively, then held by the Overline Lenders. Each payment
(including each prepayment) by the Company on account of the principal of and
interest on the Revolving Credit Loans shall be made pro rata according to the
respective outstanding principal of the Revolving Credit Loans, respectively,
then held by the Lenders, subject to the provisions of subsection 2.7(c).
Notwithstanding any other provision of this Agreement that requires payments
hereunder to be allocated to any particular category of obligations hereunder,
if at any time (i) the Administrative Agent shall have received insufficient
funds to pay all amounts then due and payable hereunder or (ii) the
Administrative Agent shall have received written notice from the Company or any
Lender than an Event of Default has occurred and is continuing, the amount of
funds received shall be applied FIRST to the payment of commitment fees and
other amounts then due and payable hereunder other than fees in respect of
Letters of Credit, principal and interest, and Reimbursement Obligations, PRO
RATA in respect of all such amounts owing to each Lender, SECOND to the payment
of fees in respect of Letters of Credit and interest then due and payable
hereunder, PRO RATA in respect of all such amounts owing to each Lender, and
THEN to the payment of Reimbursement
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39
Obligations and all principal amounts then outstanding (whether of not due and
payable) hereunder, PRO RATA in respect of all such amounts owing to each
Lender. All payments (including prepayments) to be made by the Company
hereunder and under the Notes, whether on account of principal, interest, fees
or otherwise, shall be made without set off or counterclaim and shall be made
prior to 12:30 P.M., New York City time, on the due date thereof to the
Administrative Agent, for the account of the Lenders, at the Administrative
Agent's office specified in subsection 10.2, in Dollars and in immediately
available funds. The Administrative Agent shall distribute such payments to the
Lenders promptly upon receipt in like funds as received. If any payment
hereunder (other than payments on the Eurodollar Loans) becomes due and payable
on a day other than a Business Day, such payment shall be extended to the next
succeeding Business Day, and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension. If
any payment on a Eurodollar Loan becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day unless the result of such extension would be to extend such payment
into another calendar month, in which event such payment shall be made on the
immediately preceding Business Day.
(b) Unless the Administrative Agent shall have been notified in writing
by any Lender prior to a borrowing that such Lender will not make the amount
that would constitute its Revolving Credit Commitment Percentage, with respect
to Revolving Credit Loans, or its Overline Commitment Percentage, with respect
to Overline Loans, of such borrowing available to the Administrative Agent, the
Administrative Agent may assume that such Lender is making such amount available
to the Administrative Agent, and the Administrative Agent may, in reliance upon
such assumption, make available to the Company a corresponding amount. If such
amount is not made available to the Administrative Agent by the required time on
the Borrowing Date therefor, such Lender shall pay to the Administrative Agent,
on demand, such amount with interest thereon at a rate equal to the daily
average Federal Funds Effective Rate for the period until such Lender makes such
amount immediately available to the Administrative Agent. A certificate of the
Administrative Agent submitted to any Lender with respect to any amounts owing
under this subsection shall be conclusive in the absence of manifest error. If
such Lender's Revolving Credit Commitment Percentage or Overline Commitment
Percentage, as the case may be, of such borrowing is not made available to the
Administrative Agent by such Lender within three Business Days of such Borrowing
Date, the Administrative Agent shall also be entitled to recover such amount
with interest thereon at the rate per annum applicable to ABR Loans hereunder,
on demand, from the Company. Nothing contained in this
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40
subsection 2.14(b) shall relieve any Lender that has failed to make available
its Revolving Credit Commitment Percentage or its Overline Commitment
Percentage, as the case may be, of any borrowing hereunder from its obligation
to do so in accordance with the terms hereof.
2.15 ILLEGALITY. Notwithstanding any other provision herein, if the
adoption of or any change in any Requirement of Law or in the interpretation or
application thereof shall make it unlawful for any Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, (a) the commitment of such
Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert Domestic Dollar Loans to Eurodollar Loans shall forthwith be cancelled
and (b) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall
be converted automatically to ABR Loans on the respective last days of the then
current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such conversion of a Eurodollar Loan occurs
on a day which is not the last day of the then current Interest Period with
respect thereto, the Company shall pay to such Lender such amounts, if any, as
may be required pursuant to subsection 2.18.
2.16 EUROCURRENCY RESERVE COSTS; REQUIREMENTS OF LAW. (a) The Company
agrees to pay to each Lender which requests compensation under this subsection
2.16(a) (by notice to the Company), on the last day of each Interest Period with
respect to any Eurodollar Loan made by such Lender, so long as such Lender shall
be required to maintain reserves against "Eurocurrency liabilities" under
Regulation D of the Board of Governors of the Federal Reserve System (or, so
long as such Lender may be required by such Board of Governors or by any other
Governmental Authority to maintain reserves against any other category of
liabilities which includes deposits by reference to which the interest rate on
Eurodollar Loans is determined as provided in this Agreement or against any
category of extensions of credit or other assets of such Lender which includes
any Eurodollar Loans), an additional amount (determined by such Lender and
notified to the Company) representing such Lender's calculation or, if an
accurate calculation is impracticable, reasonable estimate (using such
reasonable means of allocation as such Lender shall determine) of the actual
costs, if any, incurred by such Lender during such Interest Period as a result
of the applicability of the foregoing reserves to such Eurodollar Loans, which
amount in any event shall not exceed the product of the following for each day
of such Interest Period:
(i) the principal amount of the Eurodollar Loans made by such Lender to
which such Interest Period relates outstanding on such day; and
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(ii) the difference between (x) a fraction the numerator of which is the
Eurodollar Rate (expressed as a decimal) applicable to such Eurodollar Loan
and the denominator of which is one minus the maximum rate (expressed as a
decimal) at which such reserve requirements are imposed by such Board of
Governors or other Governmental Authority on such date minus (y) such
numerator; and
(iii) a fraction the numerator of which is one and the denominator of
which is 360.
(b) If the adoption of or any change in any Requirement of Law or
in the interpretation or application thereof or compliance by any Lender with
any request or directive (whether or not having the force of law) from any
central bank or other Governmental Authority made subsequent to the date
hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note, any Letter of Credit, any
Application or any Eurodollar Loan or C/D Rate Loan made by it, or
change the basis of taxation of payments to such Lender in respect
thereof (except for Non-Excluded Taxes covered by subsection 2.17 and
changes in the rate of tax on the overall net income of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of Eurocurrency Reserve Costs
pursuant to paragraph (a) above or the C/D Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such
Lender, by an amount which such Lender in good faith deems to be material, of
making, converting into, continuing or maintaining Eurodollar Loans or C/D
Rate Loans or issuing or participating in Letters of Credit, or to reduce any
amount receivable hereunder in respect thereof, then, in any such case, the
Company shall promptly pay such Lender, upon its demand, any additional
amounts necessary to compensate such Lender for such increased cost or
reduced amount receivable. If any Lender becomes entitled to claim any
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42
additional amounts pursuant to this subsection, it shall promptly notify the
Company, through the Administrative Agent, of the event by reason of which it
has become so entitled. This covenant shall survive the termination of this
Agreement and the payment of the Notes and all other amounts payable
hereunder.
(c) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any
Governmental Authority made subsequent to the date hereof does or shall have
the effect of reducing the rate of return on such Lender's or such
corporation's capital as a consequence of its obligations hereunder or under
any Letter of Credit to a level below that which such Lender or such
corporation could have achieved but for such change or compliance (taking
into consideration such Lender's or such corporation's policies with respect
to capital adequacy) by an amount deemed by such Lender in good faith to be
material, then from time to time, after submission by such Lender to the
Company (with a copy to the Administrative Agent) of a written request
therefore, the Company shall pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction.
(d) A certificate of each Lender setting forth such amount or amounts
as shall be necessary to compensate such Lender as specified in paragraph
(a), (b) or (c) of this subsection 2.16, as the case may be, shall be
delivered to the Company and shall, if submitted in good faith, be conclusive
absent manifest error; provided that any certificate delivered by a Lender
pursuant to this subsection 2.16(d) shall (i) in the case of a certificate in
respect of amounts payable pursuant to paragraph (a) or (b) of this
subsection 2.16, set forth in reasonable detail the basis for and the
calculation of such amounts, and (ii) in the case of a certificate in respect
of amounts payable pursuant to paragraph (c) of this Section 2.16, (A) set
forth at least the same amount of detail in respect of the calculation of
such amount as such Lender provides in similar circumstances to other
similarly situated borrowers from such Lender, and (B) include a statement by
such Lender that it has allocated to its Revolving Credit Commitment or
outstanding Loans no greater than a proportionately equal amount of any
reduction of the rate of return on such Lender's capital due to the adoption
or change in any Requirement of Law regarding capital adequacy as it has
allocated to each of its
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43
other commitments to lend or other outstanding loans to similarly situated
borrowers that are affected similarly by such adoption or change.
2.17 TAXES. (a) All payments made by the Company under this Agreement
and the Notes shall be made free and clear of, and without deduction or
withholding for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding net income taxes and franchise taxes (imposed
in lieu of net income taxes) imposed on the Administrative Agent or any Lender
as a result of a present or former connection between the Administrative Agent
or such Lender and the jurisdiction of the Governmental Authority imposing such
tax or any political subdivision or taxing authority thereof or therein (other
than any such connection arising solely from the Administrative Agent or such
Lender having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or the Notes). If any such
non-excluded taxes, levies, imposts, duties, charges, fees deductions or
withholdings ("NON-EXCLUDED TAXES") are required to be withheld from any amounts
payable to the Administrative Agent or any Lender hereunder or under the Notes,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement and the Notes, PROVIDED, HOWEVER, that the Company shall not be
required to increase any such amounts payable to any Lender that is not
organized under the laws of the United States of America or a state thereof if
(i) such Lender fails to comply with the requirements of paragraph (b) of this
subsection or (ii) either of the certifications made by such Lender as set forth
in such paragraph is not true and correct with respect to such Lender. Whenever
any Non-Excluded Taxes are payable by the Company, as promptly as possible
thereafter the Company shall send to the Administrative Agent for its own
account or for the account of such Lender, as the case may be, a certified copy
of an original official receipt received by the Company showing payment thereof.
If the Company fails to pay any Non-Excluded Taxes when due to the appropriate
taxing authority or fails to remit to the Administrative Agent the required
receipts or other required documentary evidence, the Company shall indemnify the
Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender as a
result of any such failure. The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Notes and all other amounts
payable hereunder.
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44
(b) Each Lender that is not incorporated under the laws of the United
States of America or a state thereof shall:
(i) deliver to the Company and the Administrative Agent (A) two
duly completed copies of United States Internal Revenue Service Form 1001 or
4224, or successor applicable form, as the case may be, and (B) an Internal
Revenue Service Form W-8 or W-9, or successor applicable form, as the case
may be;
(ii) deliver to the Company and the Administrative Agent two
further copies of any such form or certification on or before the date that
any such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form previously
delivered by it to the Company; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Company or the
Administrative Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender so advises the Company and the
Administrative Agent. Such Lender shall certify (i) in the case of a Form 1001
or 4224, that it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes and (ii) in
the case of a Form W-8 or W-9, that it is entitled to an exemption from United
States backup withholding tax. Each Person that shall become a Lender or a
Participant pursuant to subsection 10.6 shall, upon the effectiveness of the
related transfer, be required to provide all of the forms and statements
required pursuant to this subsection, provided that in the case of a Participant
such Participant shall furnish all such required forms and statements to the
Lender from which the related participation shall have been purchased.
2.18 INDEMNITY. The Company agrees to indemnify each Lender and to hold
each Lender harmless from any loss or expense which such Lender may sustain or
incur as a consequence of (a) default by the Company in making a borrowing of,
conversion into or continuation of Eurodollar Loans or C/D Rate Loans after the
Company has given a notice requesting the same in accordance with the provisions
of this Agreement, (b) default by the Company in making any prepayment after the
Company has given a notice thereof in
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45
accordance with the provisions of this Agreement or (c) the making of a
prepayment of Eurodollar Loans or C/D Rate Loans on a day which is not the last
day of an Interest Period with respect thereto. Such indemnification may
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the amount so prepaid, or not so borrowed, converted
or continued, for the period from the date of such prepayment or of such failure
to borrow, convert or continue to the last day of such Interest Period (or, in
the case of a failure to borrow, convert or continue, the Interest Period that
would have commenced on the date of such failure) in each case at the applicable
rate of interest for such Loans provided for herein (excluding, however, the
Applicable Margin included therein, if any) over (ii) the amount of interest (as
reasonably determined by such Lender) which would have accrued to such Lender on
such amount by placing such amount on deposit for a comparable period with
leading banks in the interbank eurodollar market. This covenant shall survive
the termination of this Agreement and the payment of the Notes and all other
amounts payable hereunder. A certificate of any Lender setting forth any amount
or amounts which such Lender is entitled to receive pursuant to this Section
shall be delivered to the Company and shall be conclusive absent manifest error.
SECTION 3. LETTERS OF CREDIT
3.1 L/C COMMITMENT. (a) Subject to the terms and conditions hereof,
the Issuing Bank, in reliance on the agreements of the other Lenders set forth
in subsection 3.4(a), agrees to issue letters of credit ("LETTERS OF CREDIT")
for the account of the Company on any Business Day during the Commitment Period
in such form as may be approved from time to time by the Issuing Bank; PROVIDED
that the Issuing Bank shall have no obligation to issue any Letter of Credit if,
after giving effect to such issuance, (i) the L/C Obligations would exceed the
L/C Commitment or (ii) the Aggregate Outstanding Revolving Extensions of Credit
would exceed the lesser of (A) the aggregate Adjusted Revolving Credit
Commitments then in effect and (B) the excess of the Borrowing Base then in
effect over Permitted Senior Indebtedness. Each Letter of Credit shall (i) be
denominated in Dollars and shall be either (x) a standby letter of credit issued
to support obligations of the Company and its Subsidiaries, contingent or
otherwise, arising in the ordinary course of business or (y) a documentary
letter of credit in respect of the purchase of goods or services by the Company
and its Subsidiaries in the ordinary course of business and (ii) expire no later
than the Termination Date.
(b) Each Letter of Credit shall be subject to the Uniform Customs and, to
the extent not inconsistent therewith, the laws of the State of New York.
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46
(c) Letters of credit outstanding on the Closing Date issued by Chemical
under the Existing Credit Agreement for the account of the Company or any of its
Subsidiaries prior to the Closing Date shall be deemed to be Letters of Credit
hereunder.
(d) The Issuing Bank shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause the
Issuing Bank or any L/C Participant to exceed any limits imposed by, any
applicable Requirement of Law.
3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT. The Company may from
time to time request that the Issuing Bank issue a Letter of Credit by
delivering to the Issuing Bank at its address for notices specified herein an
Application therefor, completed to the satisfaction of the Issuing Bank, and
such other certificates, documents and other papers and information as the
Issuing Bank may reasonably request in accordance with its customary procedures.
Upon receipt of any Application, the Issuing Bank will process such Application
and the certificates, documents and other papers and information delivered to it
in connection therewith in accordance with its customary procedures and shall
promptly issue the Letter of Credit requested thereby (but in no event shall the
Issuing Bank be required to issue any Letter of Credit earlier than three
Business Days after its receipt of the Application therefor and all such other
certificates, documents and other papers and information relating thereto) by
issuing the original of such Letter of Credit to the beneficiary thereof or as
otherwise may be agreed by the Issuing Bank and the Company. The Issuing Bank
shall furnish a copy of such Letter of Credit to the Company promptly following
the issuance thereof.
3.3 FEES, COMMISSIONS AND OTHER CHARGES.
(a) The Company shall pay (i) to the Administrative Agent, for the
account of the Issuing Bank and the L/C Participants in accordance with their
respective Revolving Credit Commitment Percentages, a letter of credit
commission with respect to each Letter of Credit, computed for the period from
the Closing Date (in the case of the first such payment) or the date on which
the last such payment was due (in all other cases) to the date upon which such
payment is due hereunder at the rate of (A) 1.375% per annum of the average
daily aggregate amount available to be drawn under such Letter of Credit during
the period for which such fee is calculated with respect to any day when either
(x) the Company's long term senior unsecured debt is rated at least Baa3 by
Moody's Investors Services, Inc. or (y) the Company's long term senior unsecured
debt is rated at least BBB- by Standard & Poors' Corporation and (B) 1.625% per
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47
annum of the average daily aggregate amount available to be drawn under such
Letter of Credit during the period for which such fee is calculated with respect
to any day when both (x) the Company's long term senior unsecured debt is not
rated by Moody's Investors Services, Inc. or is rated lower than Baa3 by such
rating agency and (y) the Company's long term senior unsecured debt is not rated
by Standard & Poors' Corporation or is rated lower than BBB- by such rating
agency and (ii) to the Issuing Bank for its own account, a letter of credit
commission with respect to each Letter of Credit, computed for the period from
the Closing Date (in the case of the first such payment) or the date on which
the last such payment was due (in all other cases) to the date upon which such
payment is due hereunder at the rate of 1/8% per annum of the average daily
aggregate amount available to be drawn under such Letter of Credit during the
period for which such fee is calculated. Such commissions shall be payable in
arrears on each L/C Fee Payment Date and shall be nonrefundable.
(b) In addition to the foregoing fees and commissions, the Company shall
pay or reimburse the Issuing Bank for such normal and customary costs and
expenses as are incurred or charged by the Issuing Bank in issuing, effecting
payment under, amending or otherwise administering any Letter of Credit.
(c) The Administrative Agent shall, promptly following its receipt
thereof, distribute to the Issuing Bank and the L/C Participants all fees and
commissions received by the Administrative Agent for their respective accounts
pursuant to this subsection.
3.4 L/C PARTICIPATIONS. (a) The Issuing Bank irrevocably agrees to
grant and hereby grants to each L/C Participant, and, to induce the Issuing Bank
to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to
accept and purchase and hereby accepts and purchases from the Issuing Bank, on
the terms and conditions hereinafter stated, for such L/C Participant's own
account and risk an undivided interest equal to such L/C Participant's Revolving
Credit Commitment Percentage in the Issuing Bank's obligations and rights under
each Letter of Credit issued hereunder and the amount of each draft paid by the
Issuing Bank thereunder. Each L/C Participant unconditionally and irrevocably
agrees with the Issuing Bank that, if a draft is paid under any Letter of Credit
for which the Issuing Bank is not reimbursed in full by the Company in
accordance with the terms of this Agreement, such L/C Participant shall pay to
the Issuing Bank upon demand at the Issuing Bank's address for notices specified
herein an amount equal to such L/C Participant's Revolving Credit Commitment
Percentage of the amount of such draft, or any part thereof, which is not so
reimbursed; PROVIDED, that no L/C Participant shall be
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48
obligated to make such payment to the extent that, after giving effect to such
payment, the sum of (i) such payment, (ii) such Lender's Revolving Credit
Commitment Percentage of the L/C Obligations on the date of such payment other
than that with respect to which such payment would be made and (iii) such
Lender's Revolving Credit Commitment Percentage of the Aggregate Outstanding
Revolving Extensions of Credit on such date other than the L/C Obligations
exceeds such Lender's Revolving Credit Commitment. Each L/C Participant's
obligation to purchase its participating interest in each Letter of Credit
pursuant to this subsection 3.4(a) shall not be affected by any circumstance,
including, without limitation, (i) any set-off, counterclaim, recoupment,
defense or other right which such L/C Participant may have against the Issuing
Bank, the Company, any direct or indirect beneficiary of any Letter of Credit,
the Administrative Agent or any other Person whatsoever, (ii) the occurrence or
continuance of a Default or an Event of Default; (iii) any adverse change in the
condition (financial or otherwise) of the Company; (iv) any breach of this
Agreement by the Company, the Administrative Agent or any other Lender; or (v)
any other circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing; and such obligation shall continue to be effective, or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
any reimbursement obligation of the Company is rescinded or must otherwise be
restored or returned by the Issuing Bank upon the insolvency, bankruptcy,
dissolution, liquidation or reorganization of the Company or upon or as a result
of the appointment of a receiver, intervenor or conservator of, or trustee or
similar officer for, the Company or any substantial part of its property, or
otherwise, all as though such payment had not been made.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Bank pursuant to subsection 3.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Bank under any Letter of Credit is
paid to the Issuing Bank within three Business Days after the date such payment
is due, such L/C Participant shall pay to the Issuing Bank on demand an amount
equal to the product of (i) such amount, times (ii) the daily average federal
funds rate, as quoted by the Issuing Bank, during the period from and including
the date such payment is required to the date on which such payment is
immediately available to the Issuing Bank, times (iii) a fraction the numerator
of which is the number of days that elapse during such period and the
denominator of which is 360. If any such amount required to be paid by any L/C
Participant pursuant to subsection 3.4(a) is not in fact made available to the
Issuing Bank by such L/C Participant within three Business Days after the date
such payment is due, the Issuing Bank shall be entitled to recover from such L/C
Participant, on demand, such amount with interest thereon calculated from such
due date at the rate
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49
per annum applicable to ABR Loans hereunder. A certificate of the Issuing Bank
submitted to any L/C Participant with respect to any amounts owing under this
subsection shall be conclusive in the absence of manifest error.
(c) Whenever, at any time after the Issuing Bank has made payment under
any Letter of Credit and has received from any L/C Participant its PRO RATA
share of such payment in accordance with subsection 3.4(a), the Issuing Bank
receives any payment related to such Letter of Credit (whether directly from the
Company or otherwise, including proceeds of collateral applied thereto by the
Issuing Bank), or any payment of interest on account thereof, the Issuing Bank
will distribute to such L/C Participant its pro rata share thereof; PROVIDED,
HOWEVER, that in the event that any such payment received by the Issuing Bank
shall be required to be returned by the Issuing Bank, such L/C Participant shall
return to the Issuing Bank the portion thereof previously distributed by the
Issuing Bank to it.
3.5 REIMBURSEMENT OBLIGATION OF THE COMPANY. The Company agrees to
reimburse the Issuing Bank on each date on which the Issuing Bank notifies the
Company of the date and amount of a draft presented under any Letter of Credit
and paid by the Issuing Bank for the amount of (a) such draft so paid and (b)
any taxes, fees, charges or other costs or expenses incurred by the Issuing Bank
in connection with such payment, PROVIDED, that the failure of the Company to so
reimburse the Issuing Bank on such date shall not be deemed to be an Event of
Default if (i) the Company receives notice of such draft after 1:30 P.M. on such
date and (ii) the Company makes such reimbursement in full no later than the
first Business Day following such date. Each such payment shall be made to the
Issuing Bank at its address for notices specified herein in lawful money of the
United States of America and in immediately available funds. Interest shall be
payable on any and all amounts remaining unpaid by the Company under this
subsection from the date such amounts become payable (whether at stated
maturity, by acceleration or otherwise) to but not including the date of payment
in full at the rate which would be payable on any outstanding ABR Loans which
were then overdue.
3.6 OBLIGATIONS ABSOLUTE. The Company's obligations under this Section
3 shall be absolute and unconditional under any and all circumstances and
irrespective of any set-off, counterclaim or defense to payment which the
Company may have or have had against the Issuing Bank or any beneficiary of a
Letter of Credit. The Company also agrees with the Issuing Bank that the
Issuing Bank shall not be responsible for, and the Company's Reimbursement
Obligations under subsection 3.5 shall not be affected by, among other things,
the validity or genuineness of documents or of any endorsements thereon, even
though such
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documents shall in fact prove to be invalid, fraudulent or forged, or any
dispute between or among the Company and any beneficiary of any Letter of Credit
or any other party to which such Letter of Credit may be transferred or any
claims whatsoever of the Company against any beneficiary of such Letter of
Credit or any such transferee, PROVIDED, that payment by the Issuing Bank under
such Letters of Credit against presentation of such documents shall not have
been determined by a final judgement of a court of competent jurisdiction to
have constituted gross negligence or willful misconduct by the Issuing Bank.
The Issuing Bank shall not be liable for any error, omission, interruption or
delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit, except for errors or
omissions caused by the Issuing Bank's gross negligence or willful misconduct.
The Company agrees that any action taken or omitted by the Issuing Bank under or
in connection with any Letter of Credit or the related drafts or documents, if
done in the absence of gross negligence or willful misconduct and in accordance
with the standards or care specified in the Uniform Commercial Code of the State
of New York and the Uniform Customs, shall be binding on the Company and shall
not result in any liability of the Issuing Bank to the Company.
3.7 LETTER OF CREDIT PAYMENTS. If any draft shall be presented for
payment under any Letter of Credit, the Issuing Bank shall promptly notify the
Company of the date and amount thereof. The responsibility of the Issuing Bank
to the Company in connection with any draft presented for payment under any
Letter of Credit shall, in addition to any payment obligation expressly provided
for in such Letter of Credit, be limited to determining that the documents
(including each draft) delivered under such Letter of Credit in connection with
such presentment appear on their face to be in conformity with such Letter of
Credit.
3.8 APPLICATION. To the extent that any provision of any Application
related to any Letter of Credit is inconsistent with the provisions of this
Section 3, the provisions of this Section 3 shall apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the Loans
and issue or participate in the Letters of Credit the Company hereby represents
and warrants to the Agents and each Lender that:
4.1 FINANCIAL CONDITION. The consolidated balance sheets of the Company
and its consolidated Subsidiaries as at December 31, 1992 and the related
consolidated statements of income and of cash flows for the fiscal year ended on
such
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51
date, reported on by Ernst & Young, copies of which have heretofore been
furnished to each Lender, present fairly the consolidated financial condition of
the Company and its consolidated Subsidiaries as at such dates, and the
consolidated results of their operations and changes in cash flows for the
fiscal year then ended. The unaudited consolidated balance sheet of the Company
and its consolidated Subsidiaries as at March 31, 1993 and the related unaudited
consolidated statements of income and of cash flows for the three-month period
ended on such date, certified by a Responsible Officer, copies of which have
heretofore been furnished to each Lender, present fairly the consolidated
financial condition of the Company and its consolidated Subsidiaries as at such
date, and the consolidated results of their operations and changes in cash flows
for the three-month period then ended (subject to normal year-end audit
adjustments). All such financial statements, including the related schedules
and notes thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved (except as approved by such
accountants or Responsible Officer, as the case may be, and as disclosed therein
and except the quarterly statements are unaudited and do not include footnotes
as would be required for audited financial statements). Neither the Company nor
any of its Restricted Subsidiaries had, at the date of the most recent balance
sheet referred to above, any Guarantee Obligation, contingent liability or
liability for taxes, or any long-term lease or any interest rate or foreign
currency swap or exchange transaction, which is not reflected in the foregoing
statements or in the notes thereto and which, in the aggregate, would be
material to the Company and its Subsidiaries taken as a whole, except as set
forth on Schedule 4.6.
4.2 NO CHANGE. Since December 31, 1992, no development or event has
occurred which has had or could reasonably be expected to have a Material
Adverse Effect except as otherwise disclosed in the Company's audited or
unaudited financial statements including the periodic quarterly reports on Form
10-Q, in each case delivered to the Lenders prior to the Closing Date. Between
December 31, 1992 and the Closing Date, no dividends or other distributions have
been declared, paid or made upon the capital stock of the Company nor has any of
the capital stock of the Company been redeemed, retired, purchased or otherwise
acquired for value by the Company or any of its Subsidiaries, except for payment
of regular quarterly dividends of not more than $0.17 per share per quarter,
payment of the dividend on the Series A ESOP Convertible Preferred Stock and
except as otherwise disclosed in the Company's audited or unaudited financial
statements including the periodic quarterly reports on Form 10-Q delivered to
the Lenders prior to the Closing Date.
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4.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the Company and
its Restricted Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (b) has the
corporate power and authority, and the legal right, to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently engaged, (c) is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership, lease or operation of property or the conduct of its business
requires such qualification and (d) is in compliance with all Requirements of
Law, except in the case of the foregoing clauses (c) and (d) to the extent that
the failure to be so qualified or to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
4.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The Company
has the corporate power and authority, and the legal right, to make, deliver and
perform this Agreement and the Notes and to borrow hereunder and has taken all
necessary corporate action to authorize the borrowings on the terms and
conditions of this Agreement and the Notes and to authorize the execution,
delivery and performance of this Agreement and the Notes. No consent or
authorization of, filing with or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the borrowings
hereunder or with the execution, delivery, performance, validity or
enforceability of this Agreement or any other Loan Document. This Agreement has
been, and, as of the Closing Date, the Notes will be, duly executed and
delivered on behalf of the Company. This Agreement constitutes, and each other
Loan Document when executed and delivered by the Company for value received will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles (whether enforcement is sought by proceedings in
equity or at law).
4.5 NO LEGAL BAR. The execution, delivery and performance of this
Agreement and the Notes, the borrowings hereunder and the use of the proceeds
thereof will not violate any Requirement of Law or Contractual Obligation of the
Company or of any of its Subsidiaries and will not result in, or require, the
creation or imposition of any Lien on any of its or their respective properties
or revenues pursuant to any such Requirement of Law or Contractual Obligation.
4.6 NO MATERIAL LITIGATION. Schedule 4.6 sets forth information with
respect to certain litigation,
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53
investigations, or proceedings pending against the Company and its Subsidiaries.
Subject to the matters set forth on such Schedule, no litigation, investigation
or proceeding of or before any arbitrator or Governmental Authority is pending
or, to the knowledge of the Company, threatened by or against the Company or any
of its Restricted Subsidiaries or against any of its or their respective
properties or revenues (a) with respect to this Agreement or the Notes or any of
the transactions contemplated hereby, or (b) which could reasonably be expected
to have a Material Adverse Effect.
4.7 NO DEFAULT. Neither the Company nor any of its Restricted
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect which could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
4.8 OWNERSHIP OF PROPERTY; LIENS. Each of the Company and its Restricted
Subsidiaries has good record and marketable title in fee simple to, or a valid
leasehold interest in, all its real property, and good title to all its other
property, except for defects in title that do not interfere in any material
respect with its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes, and none of such property
is subject to any Lien except as permitted by subsection 7.3.
4.9 INTELLECTUAL PROPERTY. The Company and each of its Restricted
Subsidiaries owns, or is licensed to use, all trademarks, tradenames,
copyrights, technology, know-how and processes necessary for the conduct of its
business as currently conducted except for those the failure to own or license
which could not reasonably be expected to have a Material Adverse Effect (the
"INTELLECTUAL PROPERTY"). No claim has been asserted and is pending by any
Person challenging or questioning the use of any such Intellectual Property or
the validity or effectiveness of any such Intellectual Property, which could
reasonably be expected to have a Material Adverse Effect nor does the Company
know of any valid basis for any such claim. The use of such Intellectual
Property by the Company and its Restricted Subsidiaries does not infringe on the
rights of any Person, except for such claims and infringements that, in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
4.10 TAXES. Each of the Company and its Restricted Subsidiaries has
filed or caused to be filed all tax returns which, to the knowledge of the
Company, are required to be filed and which if not so filed could reasonably be
expected to have a Material Adverse Effect, and has paid all taxes shown to be
due and payable on said
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54
returns or on any assessments made against it or any of its property and all
other taxes, fees or other charges of a material nature imposed on it or any of
its property by any Governmental Authority (other than any the amount or
validity of which are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided on the books of the Company or its Subsidiaries, as the case may be);
no tax Lien has been filed, and, to the knowledge of the Company, no claim is
being asserted, with respect to any such tax, fee or other charge which
reasonably could be expected to have a Material Adverse Effect.
4.11 FEDERAL REGULATIONS. No part of the proceeds of any Loans will be
used for "purchasing" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms under Regulation U of the Board of
Governors of the Federal Reserve System as now and from time to time hereafter
in effect or for any purpose which violates the provisions of the Regulations of
such Board of Governors. If requested by any Lender or the Administrative
Agent, the Company will furnish to the Administrative Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of FR Form
U-1 referred to in said Regulation U.
4.12 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no
Lien in favor of the PBGC or a Plan has arisen, during such five-year period.
The present value of all accrued benefits under each Single Employer Plan (based
on those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits to an extent which could reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any Commonly Controlled Entity has had
a complete or partial withdrawal from any Multiemployer Plan which could
reasonably be expected to have a Material Adverse Effect, and neither the
Company nor any Commonly Controlled Entity would become subject to any liability
under ERISA in an amount which could reasonably be expected to have a Material
Adverse Effect if the Company or any such Commonly Controlled Entity were to
withdraw completely from all Multiemployer Plans as of the valuation date most
closely preceding the date on which this representation is made or deemed made.
To the knowledge of the Company or any Commonly Controlled Entity, no such
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55
Multiemployer Plan for which the Company or any Subsidiary could reasonably be
expected to have a material liability is in Reorganization or Insolvent. The
present value (determined using actuarial and other assumptions which are
reasonable in respect of the benefits provided and the employees participating)
of the liability of the Company and each Commonly Controlled Entity for post
retirement benefits to be provided to their current and former employees under
Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA) does
not, in the aggregate, exceed the assets under all such Plans allocable to such
benefits by an amount in excess of $5,000,000.
4.13 INVESTMENT COMPANY ACT; OTHER REGULATIONS. The Company 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. The
Company is not subject to regulation under any Federal or State statute or
regulation which limits its ability to incur Indebtedness.
4.14 SUBSIDIARIES. All the Subsidiaries of the Company at the date of
this Agreement are listed on Schedule 4.14 and the Subsidiaries that, as of the
date of this Agreement, are Significant Subsidiaries of the Company are
designated as such on Schedule 4.14.
4.15 ACCURACY AND COMPLETENESS OF INFORMATION. The written information,
reports and other papers and data with respect to the Company (other than
projections and estimates) furnished to the Administrative Agent or the Lenders
in connection with this Agreement or the obtaining of the commitments of the
Lenders hereunder was, at the time so furnished and when considered as a whole,
complete and correct in all material respects, or has been subsequently
supplemented by other information, reports or other papers or data, to the
extent necessary to give in all material respects a true and accurate knowledge
of the subject matter in all material respects. All projections and estimates
with respect to the Company and its Subsidiaries so furnished by the Company
were prepared and presented in good faith, it being recognized by the
Administrative Agent and the Lenders that such projections as to future events
are not to be viewed as facts and that actual results during the period or
periods covered by any such projections may differ from the projected results
and that such differences may be material; except as set forth and required
within this Agreement, the Company shall not be required to update such
projections.
4.16 ENVIRONMENTAL MATTERS. Except to the extent that all of the
following, in the aggregate, would not reasonably be expected to have a Material
Adverse Effect:
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56
(a) To the knowledge of the Company, the facilities and properties owned,
leased or operated by the Company or any of its Subsidiaries (the "PROPERTIES")
do not contain, and have not previously contained, any Materials of
Environmental Concern in amounts or concentrations which (i) constitute or
constituted a violation of, or (ii) could reasonably be expected to give rise to
liability under, any Environmental Law.
(b) To the knowledge of the Company, the Properties and all operations at
the Properties are in compliance, and, to the extent of the Company's and its
Subsidiaries' involvement with the Properties, have in the last five years been
in compliance, in all material respects with all applicable Environmental Laws,
and there is no contamination at, under or about the Properties or violation of
any Environmental Law with respect to the Properties or the business operated by
the Company or any of its Subsidiaries (the "BUSINESS").
(c) Neither the Company nor any of its Subsidiaries has received any
notice of violation, alleged violation, non-compliance, liability or potential
liability regarding environmental matters or compliance with Environmental Laws
with regard to any of the Properties or the Business, nor does the Company have
knowledge or reason to believe that any such notice will be received or is being
threatened.
(d) To the knowledge of the Company, Materials of Environmental Concern
have not been transported or disposed of from the Properties while owned or
operated by the Company or any of its Subsidiaries in violation of, or in a
manner or to a location which could reasonably be expected to give rise to
liability under, any Environmental Law, nor have any Materials of Environmental
Concern been generated, treated, stored or disposed of at, on or under any of
the Properties in violation of, or in a manner that could reasonably be expected
to give rise to liability under, any applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of the Company, threatened, under any Environmental
Law to which the Company or any Subsidiary is or will be named as a party with
respect to the Properties or the Business, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any Environmental Law
with respect to the Properties or the Business.
(f) To the knowledge of the Company, there has been no release or threat
of release of Materials of
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57
Environmental Concern at or from the Properties, or arising from or related to
the operations of the Borrower or any Subsidiary in connection with the
Properties or otherwise in connection with the Business, in violation of or in
amounts or in a manner that could reasonably give rise to liability under
Environmental Laws.
4.17 STATUS OF THE NOTES. All indebtedness of the Company under this
Agreement, the Notes and the Applications (including, without limitation
principal, interest (including interest accruing after the occurrence of any
event described in Section 8(f), whether or not such interest constitutes an
allowed claim in any proceeding referred to in Section 8(f)), fees, expenses and
indemnities) constitutes, and the Company hereby expressly agrees that all such
indebtedness shall constitute, "Senior Debt" as such term is used in the 1992
Subordinated Debt Indenture.
4.18 PURPOSE OF LOANS. The proceeds of the Loans shall be used by the
Company for working capital purposes in the ordinary course of business and to
make the purchases and investments permitted by Section 7.
SECTION 5. CONDITIONS PRECEDENT
5.1 CONDITIONS TO INITIAL EXTENSIONS OF CREDIT. The agreement of each
Lender to make the initial extensions of credit requested to be made by it is
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions precedent:
(a) LOAN DOCUMENTS. The Administrative Agent shall have received (i)
this Agreement, executed and delivered by a duly authorized officer of the
Company and each Agent, with a counterpart for each Lender, (ii) for the
account of each Lender, a Revolving Credit Note, conforming to the
requirements hereof and executed by a duly authorized officer of the
Company, (iii) for the account of the Swing Line Lender, a Swing Line Note
conforming to the requirements hereof and executed by a duly authorized
officer of the Company and (iv) the Guarantee, executed by a duly
authorized officer of each Guarantor.
(b) CORPORATE PROCEEDINGS. The Administrative Agent shall have
received, with a counterpart for each Lender, (i) a copy of the
resolutions, in form and substance reasonably satisfactory to the
Administrative Agent, of the Board of Directors of the Company and each
Guarantor authorizing (x) in the case of the Company, the execution,
delivery and performance of this Agreement, the Notes and the other Loan
Documents to which it is a party, and the borrowings contemplated
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58
hereunder, and (y) in the case of each Guarantor, the execution, delivery
and performance of the Guarantee, in each case, certified by the Secretary
or an Assistant Secretary of the Company or such Guarantor, as the case
may be, as of the Closing Date, which certificate shall state that the
resolutions thereby certified have not been amended, modified, revoked or
rescinded and shall be in form and substance satisfactory to the
Administrative Agent and (ii) an incumbency certificate of the Company and
each Guarantor, satisfactory in form and substance to the Administrative
Agent, with appropriate insertions and attachments.
(c) CORPORATE DOCUMENTS. The Administrative Agent shall have
received, with a counterpart for each Lender, true and complete copies of
the Charter and By-laws of the Company and each Guarantor, certified as of
the Closing Date as complete and correct copies thereof by the Secretary
or an Assistant Secretary of the Company or such Guarantor, as the case
may be.
(d) NO VIOLATION. The consummation of the transactions contemplated
hereby shall not contravene, violate or conflict with, nor involve the
Administrative Agent or any Lender in any violation of, any Requirement of
Law.
(e) FEES. The Administrative Agent shall have received the fees to
be received on the Closing Date referred to in subsection 2.5.
(f) LEGAL OPINIONS. The Administrative Agent shall have received,
with a counterpart for each Lender, the executed legal opinions of (i)
Timothy J. Geckle, Corporate Counsel to the Company, substantially in the
form of Exhibit E-1 hereto, and (ii) Piper & Marbury, counsel to the
Company and the Guarantors, substantially in the form of Exhibit E-2.
Such legal opinions shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent
may reasonably require.
(g) BORROWING BASE CERTIFICATE. The Administrative Agent shall have
received a Borrowing Base Certificate, dated the Closing Date and setting
forth a calculation of the Borrowing Base as of May 31, 1993, showing that
the Aggregate Outstanding Revolving Extensions of Credit on the Closing
Date (after giving effect to the extension of credit hereunder on the
Closing Date), when added to the Permitted Senior Indebtedness on the
Closing Date, shall not exceed the Borrowing Base as set forth therein.
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59
(h) EXISTING CREDIT AGREEMENT. The Administrative Agent shall have
received evidence satisfactory to it that the Commitments under the
Existing Credit Agreement have been terminated.
5.2 CONDITIONS TO EACH EXTENSION OF CREDIT. The agreement of each Lender
to make any extension of credit requested to be made by it on any date
(including, without limitation, its initial extension of credit) is subject to
the satisfaction of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by the Company or any Guarantor in or pursuant to the Loan
Documents shall be true and correct in all material respects on and as of
such date as if made on and as of such date.
(b) NO DEFAULT. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the Loans
requested to be made on such date.
(c) ADDITIONAL DOCUMENTS. The Administrative Agent shall have
received each additional document, instrument, legal opinion or item of
information reasonably requested by it, including, without limitation, a
copy of any debt instrument, security agreement or other material contract
to which the Company may be a party.
(d) ADDITIONAL MATTERS. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement shall be satisfactory in form
and substance to the Administrative Agent, and the Administrative Agent
shall have received such other documents and legal opinions in respect of
any aspect or consequence of the transactions contemplated hereby or
thereby as it shall reasonably request.
Each borrowing by and Letter of Credit issued on behalf of the Company hereunder
shall constitute a representation and warranty by the Company as of the date of
such Loan that the conditions contained in subsection 5.2(a) and (b) have been
satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Company hereby agrees as follows for so long as any of the Commitments
remain in effect, any Note or any Letter of Credit remains outstanding and
unpaid or any other amount is owing to any Lender or the Administrative Agent
hereunder:
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60
6.1 FINANCIAL STATEMENTS. The Company will furnish to each Lender:
(a) as soon as available, but in any event within 100 days after the
end of each fiscal year of the Company, copies of the consolidated balance
sheets of the Company and its consolidated Subsidiaries as at the end of
such year and the related consolidated statements of income and retained
earnings and changes in cash flows for such year, setting forth in each
case in comparative form the figures for the previous year, reported on
without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit (other than
qualifications related to the incorporation of reports by other
independent certified public accountants), by Ernst & Young or other
independent certified public accountants of nationally recognized standing
not unacceptable to the Required Lenders; and
(b) as soon as available, but in any event not later than 55 days
after the end of each of the first three quarterly periods of each fiscal
year of the Company, the unaudited consolidated balance sheets of the
Company and its consolidated Subsidiaries as at the end of such quarter
and the related unaudited consolidated statements of income and retained
earnings and changes in cash flows of the Company and its consolidated
Subsidiaries for such quarter and the portion of the fiscal year through
the end of such quarter, setting forth in each case in comparative form
the figures for the previous year, certified by a Responsible Officer as
being fairly stated in all material respects when considered in relation
to the consolidated financial position of the Company and its consolidated
Subsidiaries (subject to normal year-end audit adjustments);
all such financial statements to be prepared in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods
(except as approved by such accountants or officer, as the case may be, and
disclosed therein).
6.2 CERTIFICATES; OTHER INFORMATION. The Company will furnish to each
Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 6.1(a), a certificate of the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary therefor no knowledge was
obtained of any Default or
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61
Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and 6.1(b), a compliance certificate of
a Responsible Officer, substantially in the form of Exhibit G, stating
that, to the best of such officer's knowledge, the Company during such
period has observed or performed all of its covenants and other
agreements, and satisfied every condition, contained in this Agreement and
in the Notes to be observed, performed or satisfied by it (and containing
calculations demonstrating compliance with subsections 7.1 and 7.11 and
such other financial information as requested by the Administrative
Agent), and that such officer has obtained no knowledge of any Default or
Event of Default except as specified in such certificate;
(c) not later than 65 days after the end of each fiscal year of the
Company, a copy of the projections by the Company of the operating budget
and cash flow budget of the Company and its Subsidiaries for the
succeeding fiscal year, such projections to be accompanied by a
certificate of a Responsible Officer to the effect that while such officer
has no reason to believe such projections are incorrect or misleading in
any material respect, such projections are based upon assumptions that may
not materialize or may change adversely due to factors related to the
Company's business or industry, and unanticipated events and circumstances
may occur subsequent to the date of such projections, such that the actual
results achieved may vary from such projections, and such variations may
be material, and that the Company is under no obligation to update such
projections;
(d) promptly upon their becoming available, but in any event no later
than ten days after the same are sent, copies of all financial statements,
reports, notices and proxy statements sent or made available generally by
the Company to its stockholders, or by any Restricted Subsidiary of the
Company to its stockholders (other than the Company), of all regular and
periodic reports and all registration statements (excluding exhibits
thereto and Registration Statements on Form S-8) and prospectuses, if any,
filed by the Company or any of its Restricted Subsidiaries with any
securities exchange or with the Securities and Exchange Commission or any
successor or analogous Governmental Authority; and all of press releases
and other statements made available generally by the Company or any of its
Restricted Subsidiaries to the public concerning
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62
material developments in the business of the Company and any of its Restricted
Subsidiaries;
(e) promptly, such additional financial and other information as any
Lender may from time to time reasonably request;
(f) as soon as practicable, but in no event later than 25 days after
the end of each month, a Borrowing Base Certificate certifying in
reasonable detail the Borrowing Base as of the last day of such month,
which certificate shall be complete and correct as of the date thereof;
and
(g) concurrently with the delivery of the financial statements
referred to in subsections 6.1(a) and 6.1(b), the financial information
set forth on Schedule 6.2(g) hereto.
6.3 PAYMENT OF OBLIGATIONS. The Company and each Restricted Subsidiary
will pay, discharge or otherwise satisfy at or before maturity or before they
become delinquent, as the case may be, all obligations of whatever nature which
if not so paid could reasonably be expected to have a Material Adverse Effect,
except where the amount or validity thereof is currently being contested in good
faith by appropriate proceedings and reserves in conformity with GAAP with
respect thereto have been provided on the books of the Company or its
Subsidiaries, as the case may be.
6.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Company and
the Restricted Subsidiaries, taken as a whole, will at all times remain
principally engaged in the business currently being conducted by the Company and
the Restricted Subsidiaries, and in all respects material to the business of the
Company and the Restricted Subsidiaries taken as a whole, the Company shall, and
will cause each of the Restricted Subsidiaries to, preserve, renew and keep in
full force and effect its corporate existence and take all reasonable action to
maintain all rights, privileges and franchises required for the normal conduct
of such business, except (i) as otherwise permitted pursuant to subsection 7.5
and (ii) the Company shall not be required to preserve any such right, privilege
or franchise if the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company or any Subsidiary
and that the loss thereof could not reasonably be expected to have a Material
Adverse Effect. The Company shall, and will cause each Restricted Subsidiary
to, comply with all Contractual Obligations and Requirements of Law except to
the extent that failure to comply therewith could not reasonably be expected to
have a Material Adverse Effect.
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63
6.5 MAINTENANCE OF PROPERTY; INSURANCE. The Company and each Restricted
Subsidiary will keep in all material respects all property useful and necessary
in its business in good working order and condition (PROVIDED, HOWEVER, that
nothing in this subsection 6.5 shall prevent the Company from discontinuing the
operation or maintenance, or both the operation and maintenance, of any of such
properties if such discontinuance is, in the judgment of the Company, desirable
in the conduct of its business or the business of any Subsidiary and could not
reasonably be expected to have a Material Adverse Effect); maintain with
financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks (but including
in any event public liability, product liability and business interruption) as
are usually insured against in the same general area by companies engaged in the
same or a similar business; and furnish to each Lender, upon written request,
reasonable information as to the insurance carried.
6.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. The Company
and each Restricted Subsidiary will keep proper books of records and account in
which full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and transactions in relation
to its business and activities; and permit representatives of any Lender, at
such Lender's expense, to visit and inspect as reasonably requested any of its
properties and the properties of the real estate joint ventures in which the
Company or any Subsidiary within the Homebuilding Segment participates or
manages and examine and make abstracts from any of its books and records at any
reasonable time and as often as may reasonably be desired and to discuss the
business, operations, properties and financial and other condition of the
Company and its Subsidiaries and such real estate joint ventures in which the
Company or any Subsidiary within the Homebuilding Segment participates or
manages, as reasonably requested with officers and employees of the Company and
its Subsidiaries and with its independent certified public accountants.
6.7 NOTICES. The Company will promptly give notice to the Administrative
Agent and each Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Company or any of its Restricted Subsidiaries or (ii)
litigation, investigation or proceeding which may exist at any time
between the Company or any of its Restricted Subsidiaries and any
Governmental Authority, which, in
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64
either case, reasonably could be expected to have a Material Adverse
Effect;
(c) any litigation or proceeding affecting the Company or any of its
Restricted Subsidiaries (i) in which the amount involved and not covered
by insurance is $10,000,000 or more or (ii) in which injunctive or similar
relief is sought which reasonably could be expected to have a Material
Adverse Effect;
(d) the following events, as soon as possible and in any event within
30 days after the Company knows or has reason to know thereof: (i) the
occurrence of any Reportable Event with respect to any Plan, or any
withdrawal from, or the termination, Reorganization or Insolvency of any
Multiemployer Plan or (ii) the institution of proceedings or the taking of
any other action by the PBGC or the Company or any Commonly Controlled
Entity or any Multiemployer Plan with respect to the withdrawal from, or
the terminating, Reorganization or Insolvency of, any Plan;
(e) any change in the rating by Moody's Investors Services, Inc. or
Standard & Poors' Corporation of the Company's long term senior unsecured
debt; and
(f) any event or occurrence which has a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Company proposes to take with respect thereto.
6.8 ENVIRONMENTAL LAWS. (a) The Company, each Restricted Subsidiary and
each joint venture in which the Company or any Restricted Subsidiary
participates or manages will comply with and insure compliance by all tenants
and subtenants, if any, with all Environmental Laws and obtain and comply in all
material respects with and maintain, and insure that all tenants and subtenants
obtain and comply with and maintain, any and all licenses, approvals,
registrations or permits required by Environmental Laws, except in each case to
the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect; and
(b) The Company, each Restricted Subsidiary and each such joint venture
will conduct and complete all investigations, studies, sampling and testing, and
all remedial, removal and other actions required under Environmental Laws and
promptly comply in all material respects with all lawful orders and directives
of all Governmental Authorities respecting Environmental Laws, except to the
extent that the same are being contested in
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65
good faith by appropriate proceedings and the pendency of such proceedings could
not reasonably be expected to have a Material Adverse Effect; and
(c) The Company will defend, indemnify and hold harmless the
Administrative Agent and the Lenders, and their respective employees, agents,
officers and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or nature
known or unknown, contingent or otherwise, arising out of, or in any way
relating to the violation of or noncompliance with any Environmental Laws, or
any orders, requirements or demand of Governmental Authorities related thereto,
including without limitation reasonable attorney and consultant fees,
investigation and laboratory fees, court costs and litigation expenses, except
to the extent that any of the foregoing arise out of the gross negligence or
willful misconduct of the party seeking indemnification therefor. The
agreements contained in this paragraph (c) shall survive the termination of this
Agreement and the payment of the Notes and all other amounts payable hereunder.
6.9 GUARANTEES FROM FUTURE SUBSIDIARIES. The Company will promptly
secure the execution and delivery of the Guarantee to the Administrative Agent
on behalf of the Lenders from each Significant Subsidiary formed and organized
after the Closing Date, if such Significant Subsidiary is included in the
Homebuilding Segment.
SECTION 7. NEGATIVE COVENANTS
The Company hereby agrees as follows for so long as any of the Commitments
remain in effect, any Note or any Letter of Credit remains outstanding and
unpaid or any other amount is owing to any Lender or any Agent hereunder:
7.1 FINANCIAL CONDITION COVENANTS. The Company shall not:
(a) MAINTENANCE OF CONSOLIDATED NET WORTH OF THE COMPANY. Permit the
Consolidated Net Worth of the Company (i) on June 30, 1993, to be less
than $275,000,000 or (ii) on the last day of any fiscal quarter ending
after June 30, 1993, to be less than $275,000,000 plus the sum of (A) 50%
of Consolidated Net Income of the Company for the period from July 1, 1993
through such date plus (B) the aggregate amount of net proceeds received
by the Company from all registered public offerings of securities of the
Company characterized as capital stock in accordance with GAAP after July
1, 1993 through such date.
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(b) MAINTENANCE OF TOTAL LIABILITIES IN RELATION TO ADJUSTED
CONSOLIDATED TANGIBLE NET WORTH. Permit Combined Total Liabilities of the
Homebuilding Segment on the last day of any fiscal quarter of the Company
to be greater than the sum of (i) 2.75 multiplied by that portion of
Adjusted Consolidated Tangible Net Worth on such day which is less than or
equal to $185,000,000 plus (ii) 2.0 multiplied by that portion of Adjusted
Consolidated Tangible Net Worth on such day which is greater than
$185,000,000; PROVIDED, that in the event that Fixed Charge Coverage is
less than 1.75 for any two consecutive fiscal quarters of the Company, the
multipliers specified in clauses (i) and (ii) of this subsection (i.e.
2.75 and 2.0) shall each be reduced by 0.25, effective as of the last day
of the second of such two consecutive fiscal quarters of the Company, and
such multipliers shall be further reduced by 0.1 on and as of the last day
of each subsequent fiscal quarter of the Company unless Fixed Charge
Coverage for such subsequent fiscal quarter is equal to or greater than
1.75, in which case such multipliers shall be as set forth in clauses (i)
and (ii) of this subsection effective as of such day.
(c) MAINTENANCE OF FIXED CHARGE COVERAGE. Permit Fixed Charge
Coverage to be less than 1.50 for any three consecutive fiscal quarters of
the Company.
(d) MAINTENANCE OF NET WORTH RATIO OF THE FINANCIAL SERVICES SEGMENT.
Permit the ratio of Financial Services Segment Combined Total Liabilities
to the Consolidated Adjusted Net Worth of the Financial Services Segment
to be greater than 8.0 to 1.0 as of the end of any quarter in Ryland
Mortgage Company's fiscal year.
7.2 LIMITATION ON INDEBTEDNESS. Neither the Company nor any Restricted
Subsidiary will create, incur, assume or suffer to exist any Indebtedness,
except:
(a) Indebtedness in respect of the Loans, the Notes, and the other
obligations of the Company under this Agreement;
(b) Indebtedness of the Company to any Subsidiary and of any
Subsidiary to the Company or any other Subsidiary; PROVIDED, in each case,
that such Indebtedness be permitted as an Investment pursuant to
subsection 7.8;
(c) Indebtedness of the Company or any of its Subsidiaries in respect
of purchase money mortgage financing in an aggregate amount at any time
outstanding not to exceed the sum of (i) $75,000,000 and (ii) 25% of
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the amount equal to the excess of Adjusted Consolidated Tangible Net Worth
over $185,000,000, PROVIDED, that the holder of such Indebtedness shall
have no recourse against the Company or any Subsidiary in respect of such
Indebtedness, such recourse being limited solely to the assets financed
with the proceeds of such Indebtedness, and PROVIDED, FURTHER, that the
aggregate value of all assets pledged in respect of or otherwise securing
such Indebtedness shall not at any time exceed the lesser of (x) an amount
equal to 200% of aggregate amount of such Indebtedness and (y)
$150,000,000;
(d) Subordinated Debt in an aggregate principal amount not exceeding
$200,000,000 at any time outstanding;
(e) Specified Debt;
(f) Indebtedness in respect of industrial revenue bonds outstanding
on the Closing Date and listed on Schedule 7.2(f) hereto;
(g) Indebtedness constituting, or constituting the primary
obligations guaranteed by, the Guarantee Obligations permitted pursuant to
subsection 7.4(a), (b) or (c);
(h) Indebtedness of the Company or any other entity in the
Homebuilding Segment in the form of reimbursement obligations in respect
of letters of credit issued for the account of the Company or such other
entity other than Letters of Credit issued hereunder and other than
Permitted IRB Letters of Credit, PROVIDED, that the aggregate amount of
all such Indebtedness shall not exceed $35,000,000 at any one time
outstanding, and PROVIDED, FURTHER, that such Indebtedness shall not
include any letters of credit supporting obligations under any
Indebtedness having a final maturity of more than one year from the date
of incurrence of such Indebtedness, and PROVIDED, FURTHER, that
Indebtedness permitted pursuant to subsection 7.2(o) hereof shall not be
included under this paragraph (h);
(i) Indebtedness of a corporation which becomes a Subsidiary or which
is merged into the Company or any Subsidiary after the date hereof,
PROVIDED that (i) such Indebtedness existed at the time such corporation
became a Subsidiary or was so merged and was not created in anticipation
thereof and (ii) immediately after giving effect to the acquisition of
such corporation by the Company no Default or Event of Default shall have
occurred and be continuing;
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(j) refinancing of existing Indebtedness of the Company or any
Restricted Subsidiary or other Indebtedness permitted under this
subsection 7.2 (a), (b), (c), (d), (e), (f), (g), (h), (k), (l), (m), (n)
and (o) on terms no less favorable to the Company and not resulting in an
Event of Default or Default hereunder, PROVIDED, that the principal amount
of any such Indebtedness shall not be increased pursuant to any such
refinancing;
(k) subject to subsection 7.15 hereof, additional Indebtedness of the
Company or any of its Subsidiaries in the Homebuilding Segment (other than
the Indebtedness described in the paragraphs of this subsection 7.2 other
than this paragraph) (i) having restrictive covenants no more restrictive
or less favorable to the Company than the terms and provisions hereof,
(ii) having a final maturity of greater than one year from the date of
incurrence of such Indebtedness and (iii) having no revolving credit or
other provisions for short-term repayment and reborrowing, PROVIDED, that
no more than an aggregate of $20,000,000 in principal of such Indebtedness
matures prior to the Termination Date;
(l) Indebtedness of any entity within the Ryland Financial Division
so long as there is no recourse in respect thereof to the Company or any
entity in the Homebuilding Segment or so long as any such recourse to the
Company or any entity within the Homebuilding Segment is permitted
pursuant to subsection 7.4;
(m) Indebtedness of the Company and any of its Subsidiaries incurred
to finance the acquisition of fixed or capital assets (whether pursuant to
a loan, a Financing Lease or otherwise) in an aggregate amount at any time
outstanding not to exceed $7,500,000; PROVIDED, that such Indebtedness
shall be secured solely by the assets financed with the proceeds of such
Indebtedness;
(n) Indebtedness of the Company or any other entity in the
Homebuilding Segment in the form of reimbursement obligations in respect
of completion bonds issued for the account of the Company or such other
entity in the ordinary course of business of the Homebuilding Segment in
respect of construction projects undertaken by it; and
(o) Indebtedness of the Company or any other entity in the
Homebuilding Segment in the form of reimbursement obligations in respect
of letters of credit issued for the account of the Company or such other
entity for the benefit of employee benefit or employee insurance programs
of the Company or any of its Subsidiaries.
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7.3 LIMITATION ON LIENS. Neither the Company nor any Restricted
Subsidiary will create, incur, assume or suffer to exist any Lien upon any of
its property, assets or revenues, whether now owned or hereafter acquired,
except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the Company or its
Subsidiaries, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 60 days or which are being contested
in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(d) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(e) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the
Company or such Subsidiary;
(f) Liens in existence on the Closing Date listed on Schedule 7.3(f),
securing Indebtedness permitted by subsection 7.2(f), a refinancing
thereof pursuant to subsection 7.2(j) or any extensions, renewals or
replacements thereof, PROVIDED that no such Lien is spread to cover any
additional property after the Closing Date and that the amount of
Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of the Company and its Subsidiaries
permitted by subsection 7.2(c) or 7.2(m) incurred to finance the
acquisition of fixed or capital assets or a refinancing thereof pursuant
to subsection 7.2(j), PROVIDED that (i) such Liens shall be
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created substantially simultaneously with the acquisition of such fixed or
capital assets (or, in the case of a refinancing pursuant to subsection
7.2(j), such Liens shall be renewals or replacements of Liens created
substantially simultaneously with the acquisition of such fixed or capital
assets) and (ii) such Liens do not at any time encumber any property other
than the property financed by such Indebtedness;
(h) Liens on the property or assets of a corporation which becomes a
Subsidiary or which is merged into the Company or a Subsidiary after the
date hereof securing Indebtedness permitted by subsection 7.2(i), PROVIDED
that (i) such Liens existed at the time such corporation became a
Subsidiary or was so merged and were not created in anticipation thereof,
(ii) any such Lien is not spread to cover any additional property or
assets of such corporation after the time such corporation becomes a
Subsidiary or is so merged, and (iii) the amount of Indebtedness secured
thereby is not increased;
(i) Liens on assets of the Financial Services Segment securing
Indebtedness of the Financial Services Segment permitted by subsection
7.2(g) or 7.2(l); and
(j) judgment and other similar Liens arising in connection with court
proceedings; PROVIDED (i) the execution or other enforcement thereof is
effectively stayed and the claims secured thereby are being actively
contested in good faith by appropriate proceedings and (ii) no Default or
Event of Default shall have occurred and be continuing.
7.4 LIMITATION ON GUARANTEE OBLIGATIONS. Neither the Company nor any
Restricted Subsidiary will create, incur, assume or suffer to exist any
Guarantee Obligation except:
(a) the Company and other entities within the Homebuilding Segment
may incur Guarantee Obligations for the benefit of the Ryland Financial
Division if the aggregate amount of such Guarantee Obligations, plus the
net amount of Investments by the Homebuilding Segment in the Financial
Services Segment, does not exceed $50,000,000 at any time outstanding;
(b) subject to subsection 7.15 hereof, the Company and other entities
within the Homebuilding Segment may incur Guarantee Obligations other than
those described in paragraphs (a) and (e) of this subsection 7.4 in an
aggregate amount at any time outstanding not exceeding 25% of Adjusted
Consolidated Tangible Net Worth at such time, PROVIDED, that Guarantee
Obligations of the Company and other entities within the Homebuilding
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Segment for the benefit of unconsolidated joint ventures permitted under
subsection 7.8(e) hereof shall not at any time exceed an aggregate amount
equal to 15% of Adjusted Consolidated Tangible Net Worth at such time;
(c) the Company and its Restricted Subsidiaries may incur Guarantee
Obligations in respect of Permitted IRB Letters of Credit;
(d) the entities within the Financial Services Segment may incur
other Guarantee Obligations; and
(e) the Company and other entities within the Homebuilding Segment
may incur Guarantee Obligations in respect of letters of credit and
completion bonds permitted pursuant to subsection 7.2(h), (n) or (o).
7.5 LIMITATIONS OF FUNDAMENTAL CHANGES. Neither the Company nor any
Restricted Subsidiary will enter into any merger, consolidation or amalgamation,
or liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, assign, transfer or otherwise dispose of,
all or substantially all of its property, business or assets except:
(a) any Restricted Subsidiary of the Company may be merged or
consolidated with or into the Company PROVIDED that the Company shall be
the continuing or surviving corporation, or with or into any one or more
wholly owned Restricted Subsidiaries of the Company PROVIDED that the
wholly owned Restricted Subsidiary or Subsidiaries shall be the continuing
or surviving corporation;
(b) any wholly owned Restricted Subsidiary may sell, lease, transfer
or otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to the Company or any other wholly owned
Restricted Subsidiary of the Company;
(c) the Company or any Restricted Subsidiary may sell, lease, transfer
or otherwise dispose of any or all of its assets to the Company or any
Restricted Subsidiary of the Company, whether existing on or created after
the date of this Agreement; provided, that if the transferor is the
Company or a Guarantor, the transferee shall be the Company or a
Guarantor; and
(d) sales, conveyances, leases, assignments, transfers or other
dispositions of property, business or assets permitted under subsection
7.6.
7.6 LIMITATION ON SALE OF ASSETS. Neither the Company nor any Restricted
Subsidiary will convey, sell,
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72
lease, assign, transfer or otherwise dispose of any of its property, business or
assets (including, without limitation, stock of Subsidiaries, receivables and
leasehold interests and, with respect to the Financial Services Segment, its
loan servicing, master servicing and bond administration portfolios), whether
now owned or hereafter acquired, except:
(a) obsolete or worn out property disposed of in the ordinary course
of business;
(b) the sale of inventory in the ordinary course of business;
(c) the sale or discount of accounts receivable arising in the
ordinary course of business in connection with the compromise or
collection thereof;
(d) the sale or discount without recourse of mortgage loan
receivables;
(e) the sale by the Financial Services Segment in the ordinary course
of its business of its rights under loan servicing, master servicing or
bond administration portfolios owned on the Closing Date;
(f) as permitted by subsection 7.5 (other than pursuant to subsection
7.5(d));
(g) the sale of mortgages and mortgage-backed or other securities by
the Financial Services Segment in the ordinary course of business;
(h) the sale, transfer or other disposition of any stock, property or
assets of the Limited-Purpose Subsidiaries;
(i) the sale, transfer or other disposition of Cash Equivalents; and
(j) the sale or other disposition of any other property or assets
(including stock or assets of Subsidiaries), PROVIDED that the aggregate
book value of all assets so sold or disposed of in any period of twelve
consecutive months shall not exceed 10% of consolidated total assets of
the Company (excluding the assets of the Limited Purpose Subsidiaries) as
at the beginning of such twelve-month period.
7.7 LIMITATION ON DIVIDENDS. The Company will not declare or pay any
dividend (other than dividends payable solely in common stock of the Company)
on, or make any payment on account of, or set apart assets for a sinking or
other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of, any shares of
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73
any class of stock of the Company or any warrants or options to purchase any
such stock, whether now or hereafter outstanding, or make any other distribution
in respect thereof, either directly or indirectly, whether in cash or property
or in obligations of the Company or any Subsidiary (such declarations, payments,
setting apart, purchases, redemptions, defeasances, retirements, acquisitions
and distributions being herein called "RESTRICTED PAYMENTS"), except that (i)
the Company may make any Restricted Payment so long as, after giving effect
thereto, no Default or Event of Default will be in existence and (ii) the
Company may in any event pay dividends in respect of the Company's Series A ESOP
Convertible Preferred Stock for any period in any amount not exceeding the
amount of principal and interest payable to the Company for such period by the
recipient of such dividends.
7.8 LIMITATION ON INVESTMENTS. Neither the Company nor any Restricted
Subsidiary will make any Investments, except:
(a) extensions of trade credit and other payables in the ordinary
course of business;
(b) Investments in Cash Equivalents;
(c) acquisitions by the Company or any of its Restricted Subsidiaries
within the Homebuilding Segment of assets constituting a business unit or
the capital stock of any Person; PROVIDED, that such business unit or
Person is engaged in the same general type of business as conducted by the
Company or one of its Restricted Subsidiaries; PROVIDED, FURTHER, that the
aggregate amount of consideration paid by the Company and its Restricted
Subsidiaries for all such acquisitions of assets or capital stock
(including as a part of such consideration any Indebtedness assumed as a
part thereof) does not exceed (i) during the period from and including
July 1, 1993, to and including December 31, 1993, an amount equal to 25%
of Adjusted Consolidated Tangible Net Worth as at the end of the fiscal
year of the Company ended December 31, 1992, (ii) in any fiscal year after
the fiscal year ending December 31, 1993, an amount equal to 25% of
Adjusted Consolidated Tangible Net Worth as at the end of the immediately
prior fiscal year of the Company or (iii) since the Closing Date, an
aggregate amount equal to $100,000,000; and PROVIDED, FINALLY, that after
giving effect thereto, no Default or Event of Default shall be in
existence;
(d) acquisitions by the Company or any of its Restricted Subsidiaries
other than acquisitions permitted under subsection 7.8(c) or (h) of, or
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investments in, assets constituting a business unit or the capital stock
of any Person; PROVIDED, that the aggregate amount of consideration paid
by the Company and its Restricted Subsidiaries for all such acquisitions
of assets or capital stock (including as a part of such consideration any
Indebtedness assumed as a part thereof) does not exceed an aggregate
amount equal to $25,000,000; and PROVIDED, FURTHER, that after giving
effect thereto, no Default or Event of Default shall be in existence;
(e) Investments made after July 1, 1993 by the Company or any of its
Subsidiaries within the Homebuilding Segment in joint ventures in which
neither the Company nor any of its Subsidiaries has an equity interest on
the Closing Date, in an aggregate amount for all such Investments not
exceeding at any date the sum of (i) $20,000,000, (ii) an amount equal to
the aggregate value of all cash distributions attributable to such
Investments received by the Company from all joint ventures in which the
Company or any of its Subsidiaries within the Homebuilding Segment is a
participant, determined in accordance with GAAP, during the period from
July 1, 1993 to and including such date and (iii) 15% of cumulative
Adjusted Consolidated Net Income of the Company for the period from and
including July 1, 1993 to and including the last day of the fiscal quarter
of the Company ending immediately prior to such date;
(f) Investments by the Company in any Subsidiary within the
Homebuilding Segment or in any Existing Consolidated Joint Venture or by
any Subsidiary within the Homebuilding Segment in the Company, in any
other Subsidiary within the Homebuilding Segment or in any Existing
Consolidated Joint Venture;
(g) Investments by the Company or any other entity within the
Homebuilding Segment in the Financial Services Segment if the aggregate
amount of such Investments outstanding on any date, plus the aggregate
amount of all Guarantee Obligations incurred by the Homebuilding Segment
for the benefit of the Ryland Financial Division outstanding on such date,
does not exceed the sum of (i) $50,000,000 and (ii) an amount equal to the
aggregate value of all cash dividends received by the Company from the
Financial Services Segment, determined in accordance with GAAP, during the
period from July 1, 1993 to and including such date;
(h) Investments by entities within the Financial Services Segment in
any Person and acquisitions of assets constituting a business unit or the
capital stock
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of any Person by entities within the Financial Services Segment;
(i) loans and advances to employees of the Company or its
Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business;
(j) other loans and advances to employees of the Company in
connection with incentive or stock purchase plans or arrangements in an
aggregate amount not to exceed $1,000,000 at any time outstanding; and
(k) Investments in joint ventures, other than Existing Consolidated Joint
Ventures, existing on the Closing Date, PROVIDED, that the aggregate
amount of all such Investments shall not exceed at any date an amount
equal to the aggregate amount of all such Investments as at the end of the
fiscal year of the Company ended December 31, 1992.
7.9 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATION OF DEBT INSTRUMENTS.
(a) Neither the Company nor any Restricted Subsidiary will (i) make any optional
payment or prepayment on or redemption of any Subordinated Debt or (ii) amend,
modify or change, or consent or agree to any amendment, modification or change
to any of the terms (including, without limitation, the subordination terms) of
any Subordinated Debt (other than any such amendment, modification or change
which would extend the maturity or reduce the amount of any payment of principal
thereof or which would reduce the rate or extend the date for payment of
interest thereon or would otherwise make the terms of the Subordinated Debt more
favorable to the Company and no less favorable to the holders of the senior debt
to which such Subordinated Debt is subordinated).
(b) No Restricted Subsidiary within the Financial Services Segment will
amend, modify or change, or consent or agree to any amendment, modification or
change to any of the terms of any debt instrument to which it is a party the
effect of which would be to (i) impose restrictions on the payment of dividends,
directly or indirectly, to or for the benefit of the Company which would limit
such dividends to an aggregate amount for all Restricted Subsidiaries in the
Financial Services Segment in any fiscal year which is less than the Combined
Net Income of the Financial Services Segment for the current fiscal year or (ii)
impose restrictions on the making by such Restricted Subsidiaries of Advances,
directly or indirectly, to or for the benefit of the Company which would limit
such Advances to an aggregate amount for all Restricted Subsidiaries in the
Financial Services Segment which is less than $25,000,000 at any time
outstanding, PROVIDED, that provisions which by their terms would impose such
restrictions only in the event of a default
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under such debt instrument and solely as a result of such default shall not be
deemed to be included in the restrictions described in the foregoing clauses (i)
or (ii).
7.10 TRANSACTIONS WITH AFFILIATES. Neither the Company nor any
Restricted Subsidiary will enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of property or the rendering
of any service, with any Affiliate unless such transaction is otherwise
permitted under this Agreement, or is upon fair and reasonable terms no less
favorable to the Company or such Subsidiary, as the case may be, than it would
obtain in a comparable arm's length transaction with a Person not an Affiliate.
7.11 LIMITATION ON INVENTORY. The Company will not permit (a) Unsold
Land Held at the end of any month to exceed 20% of Adjusted Consolidated
Tangible Net Worth of the Company at such date, or (b) Unsold Land Under
Development to exceed an amount equal to 150% of Adjusted Consolidated Tangible
Net Worth or (c) the ratio of (i) the sum of (A) the average Unsold Land Held on
the last day of each month during the six-month period ending on such date plus
(B) the average Unsold Land Under Development on the last day of each month
during the six-month period ending on such date plus (C) the average Unsold
Housing Inventory on the last day of each month during the six-month period
ending on such date to (ii) the average Total Housing Inventory on the last day
of each month during the six-month period ending on such date to exceed .75 to
1. Notwithstanding any of the foregoing to the contrary, in the event that Fixed
Charge Coverage is less than 1.20 for any two consecutive fiscal quarters of the
Company, then for each fiscal quarter of the Company subsequent to the second
such consecutive fiscal quarter, the aggregate amount of purchases of land
which, immediately after such purchase, would be included under the definition
herein of "Unsold Land Held" during such subsequent quarter shall be limited to
an amount equal to 50% of the average quarterly amount attributable to the
purchase cost of land which would be included in "Cost of Goods Sold" on a
combined balance sheet of the Homebuilding Segment determined in accordance with
GAAP for the four fiscal quarters of the Company immediately prior to such
subsequent quarter, effective until the fiscal quarter of the Company
immediately following the first subsequent fiscal quarter of the Company for
which Fixed Charge Coverage is 1.20 or greater.
7.12 FISCAL YEAR. The Company will not permit the fiscal year of the
Company to end on a day other than December 31.
7.13 COMPLIANCE WITH ERISA. Neither the Company nor any Restricted
Subsidiary will (a) terminate any Plan so as to result in any material liability
to PBGC, (b) engage in
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any "prohibited transaction" (as defined in Section 4975 of the Code or Section
406 of ERISA) involving any Plan which would result in a material liability for
an excise tax or civil penalty in connection therewith, (c) incur or suffer to
exist any material "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, involving any Plan, or (d) allow or suffer to
exist any event or condition which presents a material risk of incurring a
material liability to PBGC by reason of termination of any such Plan.
7.14 PREFERRED STOCK. The Company will not permit any Restricted
Subsidiary within the Homebuilding Segment to issue preferred stock to any
Person other than the Company.
7.15 LIMITATION ON INDEBTEDNESS OF NEW SUBSIDIARIES. Notwithstanding
anything to the contrary in subsection 7.2 or subsection 7.4 hereof, the Company
shall not permit any Subsidiary of the Company in the Homebuilding Segment
created or acquired after the Closing Date to create, incur, assume or suffer to
exist any Indebtedness which otherwise would be permitted under subsection
7.2(k) or subsection 7.4(b) hereof.
7.16 LIMITATION ON INDEBTEDNESS OF JOINT VENTURES. The Company shall not
permit the aggregate principal amount at any one time outstanding of its
proportionate share of Indebtedness of unconsolidated joint ventures to exceed
an amount equal to 25% of Adjusted Consolidated Tangible Net Worth. For the
purposes hereof, the Company's proportionate share of the Indebtedness of each
unconsolidated joint venture shall be equal to the total Indebtedness of such
unconsolidated joint venture multiplied by the Company's percentage equity
investment in such unconsolidated joint venture.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Company shall fail to pay any principal of any Note or any
Reimbursement Obligation when due in accordance with the terms thereof or
hereof; or the Company shall fail to pay any interest on any Note, or any
other amount payable hereunder, within 2 days after any such interest or
other amount becomes due in accordance with the terms thereof or hereof;
or
(b) Any representation or warranty made or deemed made by the Company or
any Guarantor herein or in any other Loan Document or which is contained
in any certificate or document furnished at any time under or
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in connection with this Agreement shall prove to have been incorrect in
any material respect on or as of the date made or deemed made; or
(c) The Company shall default in the observance or performance of any
agreement contained in Section 7 (other than subsection 7.11); or
(d) The Company shall default in the observance or performance of any
other agreement contained in this Agreement (other than as provided in
paragraphs (a) through (c) of this Section 8), and such default shall
continue unremedied (i) for a period of 90 days, in the case of subsection
7.11, or (ii) for a period of 30 days, in the case of any other such
provision; or
(e) The Company or any of its Restricted Subsidiaries shall (i) default
in any payment of principal of or interest of any Indebtedness having a
principal balance of $10,000,000 or more (other than the Notes) or in the
payment of any Guarantee Obligation of $10,000,000 or more, beyond the
period of grace (not to exceed 15 days), if any, provided in the
instrument or agreement under which such Indebtedness or Guarantee
Obligation was created; or (ii) default in the observance or performance
of any other agreement or condition relating to any such Indebtedness or
Guarantee Obligation or contained in any instrument or agreement
evidencing, securing or relating thereto, or any other event shall occur
or condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee Obligation
(or a trustee or agent on behalf of such holder or holders or beneficiary
or beneficiaries) to cause, with the giving of notice if required, such
Indebtedness to become due prior to its stated maturity or such Guarantee
Obligation to become payable; provided that the failure by Ryland Mortgage
Company or any of its Subsidiaries to pay any such Indebtedness or
Guarantee Obligation in the form of reimbursement obligations in respect
of letters of credit issued for the account of Ryland Mortgage Company or
any of its Subsidiaries backing obligations under master servicing
agreements shall not constitute an Event of Default under this paragraph
(e) until the date which is 90 days after the date on which such
reimbursement obligations become due and payable; or
(f) (i) The Company or any of its Restricted Subsidiaries shall commence
any case, proceeding or other action (A) under any existing or future law
of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of
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debtors, seeking to have an order for relief entered with respect to it,
or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian, conservator
or other similar official for it or for all or any substantial part of its
assets, or the Company or any of its Restricted Subsidiaries shall make a
general assignment for the benefit of its creditors; or (ii) there shall
be commenced against the Company or any of its Restricted Subsidiaries any
case, proceeding or other action of a nature referred to in clause (i)
above which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced
against the Company or any of its Restricted Subsidiaries any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial
part of its assets which results in the entry of an order for any such
relief which shall not have been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry thereof; or (iv) the Company
or any of its Restricted Subsidiaries shall take any action in furtherance
of, or indicating its consent to, approval of, or acquiescence in, any of
the acts set forth in clause (i), (ii), or (iii) above; or (v) the Company
or any of its Restricted Subsidiaries shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as
they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Company or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Company or any
Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection with a
withdrawal
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from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi)
any other event or condition shall occur or exist with respect to a Plan;
and in each case in clauses (i) through (vi) above, such event or
condition, together with all other such events or conditions, if any,
could reasonably be expected to have a Material Adverse Effect; or
(h) One or more judgments or decrees shall be entered against the Company
or any of its Restricted Subsidiaries involving in the aggregate a
liability (not paid or fully covered by insurance) of $10,000,000 or more
and all such judgments or decrees shall not have been vacated, discharged,
stayed or bonded pending appeal within 60 days from the entry thereof; or
(i) If a Designated Event shall occur;
(j) The Company shall cease to own, directly or indirectly and free and
clear of any Lien, 100% of the issued and outstanding capital stock of
M.J. Brock & Sons, Inc. and Ryland Mortgage Company; or
(k) The Guarantee shall cease, for any reason, to be in full force and
effect, or the Company or any Guarantor shall so assert in writing;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Company,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the Notes (including, without limitation, all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) shall immediately
become due and payable, and (B) if such event is any other Event of Default,
either or both of the following actions may be taken: (i) with the consent of
the Required Lenders, the Administrative Agent may, or upon the request of the
Required Lenders, the Administrative Agent shall, by notice to the Company
declare the Commitments to be terminated forthwith, whereupon the Commitments
shall immediately terminate; and (ii) with the consent of the Required Lenders,
the Administrative Agent may, or upon the request of the Required Lenders, the
Administrative Agent shall, by notice of default to the Company, declare the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement and the Notes (including, without limitation, all amounts
of L/C Obligations, whether or not the beneficiaries of the then outstanding
Letters of Credit shall have presented the documents required thereunder) to be
due and payable forthwith, whereupon the same shall immediately become due and
payable.
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With respect to all Letters of Credit with respect to which presentment
for honor shall not have occurred at the time of an acceleration pursuant to the
preceding paragraph, the Company shall at such time deposit in a cash collateral
account opened by the Administrative Agent an amount equal to the aggregate then
undrawn and unexpired amount of such Letters of Credit. Amounts held in such
cash collateral account shall be applied by the Administrative Agent to the
payment of drafts drawn under such Letters of Credit, and the unused portion
thereof after all such Letters of Credit shall have expired or been fully drawn
upon, if any, shall be applied to repay other obligations of the Company
hereunder and under the Notes. After all such Letters of Credit shall have
expired or been fully drawn upon, all Reimbursement Obligations shall have been
satisfied and all other obligations of the Company hereunder and under the Notes
shall have been paid in full, the balance, if any, in such cash collateral
account shall be returned to the Company.
Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 9. THE AGENTS
9.1 APPOINTMENT. Each Lender hereby irrevocably designates and appoints
Chemical Bank as the Administrative Agent of such Lender under this Agreement
and the other Loan Documents, and each Lender irrevocably authorizes Chemical
Bank, as the Administrative Agent for such Lender, to take such action on its
behalf under the provisions of this Agreement and the other Loan Documents and
to exercise such powers and perform such duties as are expressly delegated to
the Administrative Agent by the terms of this Agreement and the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Administrative Agent. Neither the Co-Agents nor the
Co-Manager, in such capacities, shall have any duties, responsibilities,
obligations, liabilities or functions under this Agreement or the other Loan
Documents.
9.2 DELEGATION OF DUTIES. The Administrative Agent may execute any of
its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The
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Administrative Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys in-fact selected by it with reasonable care.
9.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates
shall be (i) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or any other Loan
Document (except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by the Company or any
officer thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the Notes or any
other Loan Document or for any failure of the Company to perform its obligations
hereunder or thereunder. The Administrative Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of the Company.
9.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be
entitled to rely, and shall be fully protected in relying, upon any Note,
writing, resolution, notice, consent, certificate, affidavit, letter, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Company), independent accountants
and other experts selected by the Administrative Agent. The Administrative
Agent may deem and treat the payee of any Note as the owner thereof for all
purposes unless a written notice of assignment, negotiation or transfer thereof
shall have been filed with the Administrative Agent. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Required Lenders as it deems appropriate or it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Administrative Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement and the
Notes and the other Loan Documents in accordance with a request of the Required
Lenders, and such request and any
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action taken or failure to act pursuant thereto shall be binding upon all the
Lenders and all future holders of the Notes.
9.5 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or
the Company referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event
that the Administrative Agent receives such a notice, the Administrative Agent
shall give notice thereof to the Lenders. The Administrative Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; PROVIDED that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
9.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each Lender
expressly acknowledges that neither the Administrative Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates has made
any representations or warranties to it and that no act by the Administrative
Agent hereinafter taken, including any review of the affairs of the Company,
shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Company and made its own decision to make
its Loans hereunder and enter into this Agreement. Each Lender also represents
that it will, independently and without reliance upon the Administrative Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Company. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations,
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property, condition (financial or otherwise), prospects or creditworthiness of
the Company which may come into the possession of the Administrative Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
9.7 INDEMNIFICATION. The Lenders agree to indemnify the Administrative
Agent in its capacity as such (to the extent not reimbursed by the Company and
without limiting the obligation of the Company to do so), ratably according to
their respective Commitment Percentages in effect on the date on which
indemnification is sought under this subsection (or, if indemnification is
sought after the date upon which the Commitments shall have terminated and the
Loans shall have been paid in full, ratably in accordance with their Commitment
Percentages immediately prior to such date), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Administrative Agent in any
way relating to or arising out of this Agreement, any of the other Loan
Documents or any documents contemplated by or referred to herein or therein or
the transactions contemplated hereby or thereby or any action taken or omitted
by the Administrative Agent under or in connection with any of the foregoing;
PROVIDED that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's gross negligence or willful misconduct. The agreements in this
subsection shall survive the payment of the Notes and all other amounts payable
hereunder.
9.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The Administrative
Agent and its Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with the Company as though the Administrative
Agent were not the Administrative Agent hereunder and under the other Loan
Documents. With respect to its Loans made or renewed by it and any Note issued
to it, the Administrative Agent shall have the same rights and powers under this
Agreement and the other Loan Documents as any Lender and may exercise the same
as though it were not the Administrative Agent, and the terms "Lender" and
"Lenders" shall include the Administrative Agent in its individual capacity.
9.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign
as Administrative Agent upon 30 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and
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85
the other Loan Documents, then the Required Lenders shall appoint from among the
Lenders a successor agent for the Lenders, which successor agent shall be
approved by the Company, whereupon such successor agent shall succeed to the
rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall mean such successor agent effective upon such
appointment and approval, and the former Administrative Agent's rights, powers
and duties as Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Notes. After any retiring
Administrative Agent's resignation as Administrative Agent, the provisions of
this subsection shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Administrative Agent under this Agreement and the
other Loan Documents.
SECTION 10. MISCELLANEOUS
10.1 AMENDMENTS AND WAIVERS. Neither this Agreement, any Note, any other
Loan Document, nor any terms hereof of thereof may be amended, supplemented or
modified except in accordance with the provisions of this subsection. With the
written consent of the Required Lenders, the Administrative Agent and the
Company may, from time to time, enter into written amendments, supplements or
modifications hereto and to the Notes and the other Loan Documents for the
purpose of adding any provisions to this Agreement or the Notes or the other
Loan Documents or changing in any manner the rights of the Lenders or of the
Company hereunder or thereunder or waiving, on such terms and conditions as the
Administrative Agent may specify in such instrument, any of the requirements of
this Agreement or the Notes or the other Loan Documents or any Default or Event
of Default and its consequences; PROVIDED, HOWEVER, that no such waiver and no
such amendment, supplement or modification shall (a) reduce the amount or extend
the maturity of any Note or any installment thereof, or reduce the rate or
extend the time of payment of interest thereon, or reduce any fee payable to any
Lender hereunder, in each case without the consent of the Lender affected
thereby, (b) change the amount of any Lender's Revolving Credit Commitment
without the consent of the Lender affected thereby and the Issuing Bank, (c)
change the amount of any Overline Lender's Overline Commitment without the
consent of the Overline Lender affected thereby, (d) amend, modify or waive any
provision of this subsection or reduce the percentage specified in the
definition of Required Lenders, or consent to the assignment or transfer by the
Company of any of its rights and obligations under this Agreement and the other
Loan Documents, in each case without the written consent of all the Lenders, (e)
amend, modify or waive any provision of Section 9 without the written consent
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of the then Administrative Agent, (d) amend, modify or waive any provision of
subsection 2.1B, 2.2B, 2.3B, 2.7(c), 2.14 or any other provision or definition
affecting the rights and obligations of the Overline Lenders, in each case the
without the written consent of each Overline Lender, (f) amend, modify or waive
any provision of subsection 2.4 without the written consent of Swing Line
Lender, (g) amend, modify or waive any provision of Section 3 without the
written consent of the then Issuing Bank or (h) release the obligation of any
Guarantor under the Guarantee without the written consent of all the Lenders.
Any such waiver and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the Company, the
Lenders, the Agents and all future holders of the Notes. In the case of any
waiver, the Company, the Lenders and the Agents shall be restored to their
former position and rights hereunder and under the outstanding Notes and any
other Loan Documents, and any Default or Event of Default waived shall be deemed
to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default, or impair any right consequent
thereon.
10.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy, telegraph or telex), and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or 5
days after being deposited in the mail, postage prepaid, or, in the case of
telecopy notice, when received, or, in the case of telegraphic notice, when
delivered to the telegraph company, or, in the case of telex notice, when sent,
answerback received, addressed as follows in the case of the Company and the
Administrative Agent, and as set forth in Schedule 1.1 in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto and any future holders of the Notes:
The Company: The Ryland Group, Inc.
11000 Broken Land Parkway
Columbia, Maryland 21044-3562
Attention: Stephen B. Cook
Telecopy: 410-715-7195
The Administrative Agent:
Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Steven Edwards
Telecopy: 212-697-2877
PROVIDED that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection
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2.3A, 2.3B, 2.4, 2.6, 2.7 or 2.8 shall not be effective until received.
10.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay
in exercising, on the part of the Administrative Agent or any Lender, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement and the Notes.
10.5 PAYMENT OF EXPENSES AND TAXES. The Company agrees (a) to pay or
reimburse the Administrative Agent for all its reasonable out-of-pocket costs
and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and the Notes and the other Loan Documents and any other documents prepared in
connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including, without limitation, the reasonable
fees and disbursements of counsel to the Administrative Agent, (b) to pay or
reimburse each Lender and each Agent for all its costs and expenses incurred in
connection with the enforcement or preservation of any rights under this
Agreement, the Notes, the other Loan Documents and any such other documents,
including, without limitation, reasonable fees and disbursements of counsel to
such Agent and to the several Lenders, and (c) to pay, indemnify, and hold each
Lender and each Agent harmless from, any and all recording and filing fees and
any and all liabilities with respect to, or resulting from any delay in paying,
stamp, excise and other taxes, if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation of any
of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this
Agreement, the Notes, the other Loan Documents and any such other documents, and
(d) to pay, indemnify, and hold each Lender and each Agent harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the Notes, the other Loan
Documents or the use of
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the proceeds of the Loans (all the foregoing, collectively, the "indemnified
liabilities"), PROVIDED, that the Company shall have no obligation hereunder to
any Agent or any Lender with respect to indemnified liabilities arising from (i)
the gross negligence or willful misconduct of such Agent or any such Lender,
(ii) legal proceedings commenced against any Agent or any such Lender by any
security holder or creditor thereof arising out of and based upon rights
afforded any such security holder or creditor in its capacity as such, or (iii)
legal proceedings commenced against any Agent or any such Lender by any other
Lender or by any Transferee (as defined in subsection 10.6). Any person which
may seek indemnification under this subsection 10.5 will promptly notify the
Company of any claim, litigation, investigation or proceeding of which it shall
receive notice which may give rise to any liability subject to indemnification
under this subsection 10.5 and shall permit the Company to participate, at the
Company's expense, in the defense of such claim, litigation, investigation or
proceeding unless such person seeking indemnification shall have determined, in
its sole discretion, that such participation by the Company would be
disadvantageous to such person; PROVIDED, HOWEVER, that the failure so to notify
the Company will not relieve it of its indemnification obligations under this
subsection 10.5, except to the extent of any damages directly suffered by the
Company as a result of such failure to notify. The agreements in this
subsection shall survive repayment of the Notes and all other amounts payable
hereunder.
10.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS. (a) This
Agreement shall be binding upon and inure to the benefit of the Company, the
Lenders, the Administrative Agent, all future holders of the Notes and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to one or more
banks or other financial institutions ("PARTICIPANTS") participating interests
in any Loan owing to such Lender, any Note held by such Lender, any Commitment
of such Lender or any other interest of such Lender hereunder and under the
other Loan Documents. In the event of any such sale by a Lender of a
participating interest to a Participant, such Lender's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance thereof, such Lender
shall remain the holder of any such Note for all purposes under this Agreement
and the other Loan Documents, such Lender shall retain the sole right to enforce
against the Company the Obligations of the Company relating to the Loans and to
approve any
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amendment, modification or waiver of any provision of this Agreement (other than
amendments, modifications or waivers decreasing any fees payable hereunder or
changing the amount of principal of or the rate at which interest is payable on
the Loans, extending any scheduled principal payment date or date fixed for the
payment of interest on the Loans), and the Company and the Administrative Agent
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and the other Loan
Documents. The Company agrees that if amounts outstanding under this Agreement
and the Notes are due or unpaid, or shall have been declared or shall have
become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement and any Note to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under this Agreement or any Note, PROVIDED that, in purchasing
such participating interest, such Participant shall be deemed to have agreed to
share with the Lenders the proceeds thereof as provided in subsection 10.7(a) as
fully as if it were a Lender hereunder. The Company also agrees that each
Participant shall be entitled to the benefits of subsections 2.16, 2.17, 2.18
with respect to its participation in the Commitments and the Loans outstanding
from time to time as if it were a Lender; PROVIDED that, in the case of
subsection 2.18, such Participant shall have complied with the requirements of
said subsection and PROVIDED, FURTHER, that no Participant shall be entitled to
receive any greater amount pursuant to any such subsection than the transferor
Lender would have been entitled to receive in respect of the amount of the
participation transferred by such transferor Lender to such Participant had no
such transfer occurred.
(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time and from time to
time assign to any Lender or any Affiliate thereof or, with the consent of the
Company and the Administrative Agent (which in each case shall not be
unreasonably withheld), to an additional bank or financial institution ("an
ASSIGNEE") all or any part of its rights and obligations under this Agreement
and the Notes pursuant to an Assignment and Acceptance, substantially in the
form of Exhibit F, executed by such Assignee, such assigning Lender (and, in the
case of an Assignee that is not then a Lender or an Affiliate thereof, by the
Administrative Agent and the Company) and delivered to the Administrative Agent
for its acceptance and recording in the Register. Upon such execution,
delivery, acceptance and recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) the Assignee thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Lender
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hereunder with a Commitment as set forth therein, (y) the assigning Lender
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such assigning Lender
shall cease to be a party hereto) and (z) after giving effect to each such
assignment, each of the assigning Lender (unless such assigning Lender shall
have assigned its entire Commitment pursuant to such assignment) and each
assignee shall have a Commitment in an amount not less than $5,000,000.
(d) The Administrative Agent shall maintain at its address referred to in
subsection 10.2 a copy of each Assignment and Acceptance delivered to it and a
register (the "REGISTER") for the recordation of the names and addresses of the
Lenders and the Commitment of, and principal amount of the Loans owing to, each
Lender from time to time. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Company, the Administrative Agent and the
Lenders may treat each Person whose name is recorded in the Register as the
owner of the Loan recorded therein for all purposes of this Agreement. The
Register shall be available for inspection by the Company or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an Affiliate thereof, by the Company and the Administrative
Agent) together with payment to the Administrative Agent of a registration and
processing fee of $2,500, the Administrative Agent shall (i) promptly accept
such Assignment and Acceptance and (ii) on the effective date determined
pursuant thereto record the information contained therein in the Register and
give notice of such acceptance and recordation to the Lenders and the Company.
On or prior to such effective date, the Company, at its own expense, shall
execute and deliver to the Administrative Agent (in exchange for the Revolving
Credit Note of the assigning Lender, which such Note shall be returned to the
Company marked "Cancelled") a new Revolving Credit Note to the order of such
Assignee in an amount equal to the Revolving Credit Commitment assumed by it
pursuant to such Assignment and Acceptance and, if the assigning Lender has
retained a Revolving Credit Commitment hereunder, a new Revolving Credit Note to
the order of the assigning Lender in an amount equal to the Revolving Credit
Commitment retained by it hereunder. Such new Notes shall be dated the Closing
Date and shall otherwise be in the form of the Note replaced thereby.
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(f) The Company authorizes each Lender to disclose to any Participant or
Assignee (each, a "TRANSFEREE") and any prospective Transferee any and all
financial information in such Lender's possession concerning the Company and its
Affiliates which has been delivered to such Lender by or on behalf of the
Company pursuant to this Agreement or which has been delivered to such Lender by
or on behalf of the Company in connection with such Lender's credit evaluation
of the Company and its Affiliates prior to becoming a party to this Agreement,
PROVIDED that, prior to any such disclosure of nonpublic information, each such
assignee or participant or proposed assignee or participant shall execute an
agreement whereby such assignee or participant shall agree to be bound by the
provisions contained in Section 10.15 hereof.
(g) Nothing herein shall prohibit any Lender from pledging or assigning
any Note to any Federal Reserve Bank in accordance with applicable law.
10.7 ADJUSTMENTS; SET-OFF. (a) If any Lender (a "BENEFITTED LENDER")
shall at any time receive any payment of all or part of its Loans or
Reimbursement Obligations owing to it, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by set-off,
pursuant to events or proceedings of the nature referred to in Section 8(f), or
otherwise), other than in respect of Swing Line Loans or Overline Loans pursuant
to the provisions of this Agreement, in a greater proportion than any such
payment to or collateral received by any other Lender, if any, in respect of
such other Lender's Loans or the Reimbursements Obligations owing to it, or
interest thereon, such Benefitted Lender shall purchase for cash from the other
Lenders such portion of each such other Lender's Loan or the Reimbursement
Obligations owing to it, or shall provide such other Lenders with the benefits
of any such collateral, or the proceeds thereof, as shall be necessary to cause
such Benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; PROVIDED, HOWEVER, that
if all or any portion of such excess payment or benefits is thereafter recovered
from such Benefitted Lender, such purchase shall be rescinded, and the purchase
price and benefits returned, to the extent of such recovery, but without
interest. The Company agrees that each Lender so purchasing a portion of
another Lender's Loan may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
(b) If an Event of Default shall occur and be continuing, in addition to
any rights and remedies of the Lenders provided by law, each Lender shall have
the right, without prior notice to the Company, any such notice being expressly
waived by the Company to the extent permitted by
<PAGE>
92
applicable law, to set-off and appropriate and apply against any amount becoming
due and payable by the Company hereunder or under the Notes (whether at the
stated maturity, by acceleration or otherwise)any and all deposits (general or
special, time or demand, provisional or final), in any currency, and any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender to or for the credit or the account of the Company. Each
Lender agrees promptly to notify the Company and the Administrative Agent after
any such set-off and application made by such Lender, PROVIDED that the failure
to give such notice shall not affect the validity of such set-off and
application.
10.8 NEW LENDERS. With the consent of the Company, the Issuing Bank, the
Swing Line Lender and the Administrative Agent, one or more commercial banks
(each, a "NEW LENDER") may become Lenders parties to this Agreement, and provide
Revolving Credit Commitments aggregating up to $35,000,000, pursuant to New
Lender Supplements, substantially in the form of Exhibit H hereto, entered into
by such New Lender, the Company and the Administrative Agent. Upon execution
and delivery of a New Lender Supplement by the Company, the Administrative Agent
and the New Lender party thereto, and effective on the Effective Date set forth
therein, such New Lender shall become a Lender party to this Agreement with the
Revolving Credit Commitment set forth therein. On such Effective Date (i) this
Agreement shall be deemed amended to the extent, and only to the extent,
necessary to reflect the addition of such New Lender and its Revolving Credit
Commitment and the resulting changes in the Revolving Credit Commitment
Percentages and Commitment Percentages of all the Lenders, (ii) the Company
shall cause to be delivered to such New Lender a conformed copy of this
Agreement, of all documents delivered as conditions precedent to the Closing
Date pursuant to Section 5 and of all amendments, supplements and modifications
hereto, and a duly executed Revolving Credit Note for such New Lender conforming
to the requirements of this Agreement and (iii) if any Revolving Credit Loans
shall be outstanding on such Effective Date, such New Lender shall make
Revolving Credit Loans in an aggregate principal amount such that, after giving
effect to such Revolving Credit Loans and to the changes in Revolving Credit
Commitment Percentages effected by such New Lender Supplement, the aggregate
outstanding principal amount of Revolving Credit Loans of each Lender will equal
its Revolving Credit Commitment Percentage of all outstanding Revolving Credit
Loans. Notwithstanding the foregoing, if on the Effective Date of any New
Lender Supplement there are Revolving Credit Loans outstanding as Eurodollar
Loans or C/D Rate Loans, the Company, the Administrative Agent and the New
Lender party thereto may, in their discretion, make appropriate arrangements
such that such New Lender is not
<PAGE>
93
required to fund Eurodollar Loans or C/D Rate Loans on a day other than the
first day of the Interest Period applicable thereto; such arrangements may
include, without limitation, permitting such New Lender to fund its Revolving
Credit Loans as ABR Loans or upon another interest rate basis for the remainder
of any then current Interest Periods or other arrangements deemed fair and
equitable by the Company, the Administrative Agent and such New Lender.
10.9 COUNTERPARTS. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Company and the Administrative Agent.
10.10 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.11 INTEGRATION. This Agreement represents the agreement of the
Company, the Agents and the Lenders with respect to the subject matter hereof,
and there are no promises or representations by any Agent or any Lender relative
to subject matter hereof not reflected herein.
10.12 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
10.13 SUBMISSION TO JURISDICTION. The Company hereby irrevocably and
unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgement
in respect thereof, to the non-exclusive general jurisdiction of the
Courts of the State of New York, the courts of the United States of
America for the Southern District of New York, and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any
<PAGE>
94
such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or
claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Company at its address set forth in subsection 9.2 or at such other
address of which the Administrative Agent shall have been notified
pursuant thereto; and
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction.
10.14 WAIVER OF JURY TRIAL. THE COMPANY, THE AGENTS AND THE LENDERS
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR THE NOTES OR ANY OTHER LOAN DOCUMENT
AND FOR ANY COUNTERCLAIM THEREIN.
10.15 CONFIDENTIALITY. Each Lender agrees to take normal and reasonable
precautions to maintain the confidentiality of information designated in writing
as confidential and provided to it by the Company or any Subsidiary in
connection with this Agreement or any other Loan Document; PROVIDED, HOWEVER,
that any Lender may disclose such information (a) at the request of any
regulatory authority or in connection with an examination of such Lender by any
such authority, (b) pursuant to subpoena or other court process, (c) when
required to do so in accordance with the provisions of any applicable law, (d)
at the direction of any other Governmental Authority, (e) to such Lender's
independent auditors and other professional advisors, (f) to any Transferee or
potential Transferee or (g) to the extent such information is public when
received by such Lender or becomes public thereafter due to the act or omission
of any person other than such Lender or its advisors, agents, employees or
representatives; PROVIDED that such Transferee agrees to comply with the
provisions of this subsection 10.15.
<PAGE>
95
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
THE RYLAND GROUP, INC.
By: /s/ Stephen B. Cook
------------------------------------
Title: Vice President
CHEMICAL BANK, as Administrative Agent,
as a Co-Agent and as a Lender
By: /s/ Steven T. Edwards
------------------------------------
Title: Assistant Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a
Co-Agent and as a Lender
By: /s/ Douglas Dickinson
------------------------------------
Title: Vice President
NATIONSBANK OF NORTH CAROLINA,
N.A., as a Co-Agent and as a Lender
By: /s/ Randy K. Farrell
------------------------------------
Title: Senior Vice President
PNC BANK, NATIONAL ASSOCIATION,
as a Co-Manager and as a Lender
By: /s/ Dale R. Mason
------------------------------------
Title: Assistant Vice President
<PAGE>
96
THE FIFTH THIRD BANK
By: /s/ Andrew K. Hauck
------------------------------------
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN
TRUST COMPANY
By: /s/ Takeshi Kawano
------------------------------------
Title: Senior Vice President &
Senior Manager
Corporate Finance USA
NBD BANK, N.A.
By: /s/ Carolann M. Morykwas
------------------------------------
Title: Vice President
MARYLAND NATIONAL BANK
By: /s/ Charles A. Rudolphi
------------------------------------
Title: Vice President
TRUST COMPANY BANK
By: /s/ Hollis Linginfeller
------------------------------------
Title: Vice President
By: /s/ Elizabeth A. Muse
------------------------------------
Title: Assistant Vice President
<PAGE>
CONFORMED*
RESTATED LOAN AGREEMENT
between
ASSOCIATES MORTGAGE FUNDING CORPORATION,
BORROWER,
RYLAND MORTGAGE COMPANY,
GUARANTOR,
BANK ONE, TEXAS, N.A.,
AGENT,
and
CERTAIN LENDERS,
LENDERS
May 28, 1993
Amended through November 23, 1993
- ------------------------------
* Conformed to incorporate amendments dated as of September 30, 1993,
November 10, 1993, November 22, 1993, and November 23, 1993.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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SECTION 1. GENERAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Number and Gender of Words. . . . . . . . . . . . . . . . . . . . . . 13
1.3. Other References. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.4. Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2. COMMITMENT AND TERMS OF BORROWING AND PAYMENT . . . . . . . . . . . . 13
2.1. Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2. Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.3. Wet Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.4. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.5. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.6. Payment Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.7. Interest and Principal Payments . . . . . . . . . . . . . . . . . . . 17
2.8. Adjustments and Sharing of Payments, Etc. . . . . . . . . . . . . . . 18
2.9. Interest Options. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.10. Quotation of Rates. . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.11. Default Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.12. Interest Calculations . . . . . . . . . . . . . . . . . . . . . . . . 20
2.13. Maximum Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.14. Interest Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.15. Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.16. Booking Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.17. Basis Unavailable or Inadequate for LIBOR Rate. . . . . . . . . . . . 21
2.18. Additional Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.19. Change in Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.20. Foreign Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.21. Funding Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.22. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3. GUARANTY AND COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . 24
3.1. Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.2. Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.3. Delivery to Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.4. Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.5. Redemption of Mortgage Collateral . . . . . . . . . . . . . . . . . . 29
3.6. Correction of Mortgage Notes. . . . . . . . . . . . . . . . . . . . . 30
3.7. Collateral Value. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.8. Agent to Provide Collateral Report. . . . . . . . . . . . . . . . . . 30
3.9 Trust Receipt and Security Agreement Letters. . . . . . . . . . . . . 31
SECTION 4. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . 31
4.1. Initial Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.2. All Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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SECTION 5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 32
5.1. Organization and Good Standing. . . . . . . . . . . . . . . . . . . . 32
5.2. Authorization and Power . . . . . . . . . . . . . . . . . . . . . . . 32
5.3. No Conflicts or Consents. . . . . . . . . . . . . . . . . . . . . . . 32
5.4. Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . . 32
5.5. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.6. Priority of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.7. No Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.8. Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.9. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.10. No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.11. No Material Litigation. . . . . . . . . . . . . . . . . . . . . . . . 33
5.12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.13. Principal Office, etc . . . . . . . . . . . . . . . . . . . . . . . . 34
5.14. Employee Benefits Plans . . . . . . . . . . . . . . . . . . . . . . . 34
5.15. No Approvals Required . . . . . . . . . . . . . . . . . . . . . . . . 34
5.16. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.17. Investment Company. . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.18. Government Approvals. . . . . . . . . . . . . . . . . . . . . . . . . 35
5.19. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.20. Appraisals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 35
6.1. Financial Statements and Reports. . . . . . . . . . . . . . . . . . . 35
6.2. Taxes and Other Liens . . . . . . . . . . . . . . . . . . . . . . . . 36
6.3. Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.4. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.5. Reimbursement of Expenses . . . . . . . . . . . . . . . . . . . . . . 36
6.6. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.7. Accounts and Records. . . . . . . . . . . . . . . . . . . . . . . . . 37
6.8. Right of Inspection . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.9. Notice of Certain Events. . . . . . . . . . . . . . . . . . . . . . . 37
6.10. Performance of Certain Obligations. . . . . . . . . . . . . . . . . . 38
6.11. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.12. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.13. Compliance with Agreements. . . . . . . . . . . . . . . . . . . . . . 38
6.14. Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . 38
6.15. Benefit Plan Obligations. . . . . . . . . . . . . . . . . . . . . . . 39
6.16. Appraisals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.1. No Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.2. Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.3. Fiscal Year Accounting. . . . . . . . . . . . . . . . . . . . . . . . 40
7.4. Liquidations, Consolidations and Dispositions of Substantial Assets . 40
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7.5. Loans, Advances, and Investments. . . . . . . . . . . . . . . . . . . 40
7.6. Use of Proceeds; Margin Stock . . . . . . . . . . . . . . . . . . . . 42
7.7. Collateral Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.8. Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.9. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.10. Related Party Transaction . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 8. FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.1. Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.2. Adjusted Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . 44
8.3. Total Liabilities to Adjusted Tangible Net Worth Ratio. . . . . . . . 44
8.4. Minimum Servicing Portfolio . . . . . . . . . . . . . . . . . . . . . 44
8.5. Minimum Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.6. Net Income Plus Non-Cash Charges. . . . . . . . . . . . . . . . . . . 44
8.7. Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9. DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . 44
9.1. Nature of Event . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.2. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.3. Right of Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.4. Private Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.5. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.6. Performance by Agent. . . . . . . . . . . . . . . . . . . . . . . . . 49
9.7. No Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.8. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.9. Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.10. Application of Payments and Proceeds. . . . . . . . . . . . . . . . . 49
9.11. Rights of Individual Lenders. . . . . . . . . . . . . . . . . . . . . 50
9.12. Notice to Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.13. Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 10. AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.1. Authorization and Action. . . . . . . . . . . . . . . . . . . . . . . 51
10.2. Agent's Reliance, Etc . . . . . . . . . . . . . . . . . . . . . . . . 52
10.3. Agent and Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . 53
10.4. Lender Credit Decision. . . . . . . . . . . . . . . . . . . . . . . . 53
10.5. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.6. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.7. Agent as Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
12.1. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
12.2. Nonbusiness Days; Time. . . . . . . . . . . . . . . . . . . . . . . . 55
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12.3. Communications. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
12.4. Form and Number of Documents. . . . . . . . . . . . . . . . . . . . . 55
12.5. Exceptions to Covenants . . . . . . . . . . . . . . . . . . . . . . . 56
12.6. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.8. Invalid Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.9. Amendments, Waivers, Etc., and Conflicts. . . . . . . . . . . . . . . 56
12.10. Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 57
12.11. Special Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.12. Successors and Assigns; Participation; Novation . . . . . . . . . . . 57
12.13. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.14. Renewal, Extension, or Rearrangement. . . . . . . . . . . . . . . . . 59
12.15. Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . . 59
</TABLE>
SECOND AMENDED SCHEDULE 2.1 LENDERS AND COMMITMENTS
Schedule 2.2 Wiring Instructions
Schedule 3.2 Certain Existing Loan Documents
Schedule 4.1 Closing Documents
Schedule 5.16 Subsidiaries of Guarantor
Exhibit A Promissory Note
Exhibit B Intercompany Note
Exhibit C-1 Credit Request
Exhibit C-2 Conversion Request
Exhibit C-3 Collateral Delivery Notification
Exhibit C-4 Payment Direction
Exhibit C-5 Collateral Report
Exhibit D-1 Trust Receipt and Security Agreement Letter
(Shipment to Direct Investors)
Exhibit D-2 Trust Receipt and Security Agreement Letter
(Shipment to Certificating Custodian)
Exhibit E Officer's Certificate
Exhibit F Management Report
Exhibit G-1 Opinion of Piper & Marbury
Exhibit G-2 Opinion of General Counsel for the Companies
Exhibit H Form of Amendment
(iv)
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RESTATED LOAN AGREEMENT
THIS AGREEMENT is entered into as of May 28, 1993, between ASSOCIATES
MORTGAGE FUNDING CORPORATION, a Delaware corporation ("BORROWER"), RYLAND
MORTGAGE COMPANY, an Ohio corporation ("GUARANTOR"), the Lenders described
below, and BANK ONE, TEXAS, N.A., as agent for itself and the other Lenders
(sometimes referred to as Bank One, Texas, National Association, "AGENT").
RECITALS
A. Borrower, Guarantor, Lenders, and Agent have entered into the Loan
Agreement dated as of January 31, 1991 (as amended 16 times through the
amendment dated as of February 1, 1993, the "EXISTING LOAN AGREEMENT"),
providing for extensions of credit by Lenders to Borrower on a revolving basis.
B. Guarantor is the direct or indirect legal and beneficial owner of all
of Borrower's issued and outstanding shares of capital stock. The proceeds of
the extensions of credit under the Existing Loan Agreement were -- and under
this agreement are to be -- simultaneously advanced by Borrower to Guarantor
under the Intercompany Note described below and used by Guarantor in the
ordinary course of its business for funding and acquiring, as applicable,
Mortgage Notes and Mortgage-Backed Securities described below. Therefore,
Guarantor and Borrower each derive substantial direct and indirect benefit and
value from the extensions of credit under this agreement.
C. Borrower and Guarantor have requested Lenders and Agent -- and subject
to this agreement they have agreed -- to amend and restate entirely the Existing
Loan Agreement in order, among other things, to incorporate all the amendments
to it, to provide for a larger syndicate of Lenders than originally party to the
Existing Loan Agreement, to provide procedures and mechanics for terminating,
reducing, or increasing certain Lenders' commitments to lend and for adding new
Lenders from time to time, and to amend certain other provisions of the Existing
Loan Agreement.
AGREEMENTS
Accordingly, in consideration of valuable and acknowledged consideration,
Borrower, Guarantor, Lenders, and Agent agree that the Existing Loan Agreement
is entirely amended and restated as follows:
SECTION 1. GENERAL TERMS
1.1 DEFINED TERMS. As used in this agreement and -- unless otherwise
specified -- in each schedule to this agreement and each Loan Document,
certificate, report, or other writings delivered in connection with this
agreement:
ADJUSTED TANGIBLE NET WORTH of a Person means, at any time, the SUM of (a)
the Net Worth of that Person PLUS (b) the amount of long-term debt of that
Person, the maturity of which is no less than two years from the date of this
agreement, and the payment of which is subordinated to the satisfaction of
Determining Lenders to the payment of all of the Senior Obligations owed by that
Person (whether that Person is primarily or secondarily liable therefor), PLUS
(c) an amount equal to 1% of that Person's Servicing Portfolio, if any, MINUS
(d) the amount of purchased and deferred excess Servicing Rights that
<PAGE>
are capitalized on that Person's balance sheet, MINUS (e) the book value of any
other assets reflected on that Person's then-most-current consolidated balance
sheet that should be properly treated under GAAP as intangible assets --
including, without limitation, goodwill, trademarks, trade names, service marks,
copyrights, patents, licenses, rights with respect to the foregoing, and the
excess of the purchase price over the net assets of businesses acquired by that
Person.
ADVANCE means an amount or amounts loaned to Borrower by a Lender under
this agreement or the Existing Loan Agreement.
AFFILIATE of a Person means any other individual or entity who (directly or
indirectly through ownership, voting securities, contract, or otherwise)
controls, is controlled by, or under common control with that Person, and, for
purposes of this definition (a) "CONTROL" or similar terms mean the (i) power to
direct or cause the direction of management or policies of that Person or (ii)
ownership or voting control of 10% or more of the Voting Shares of that Person,
and (b) Borrower and Guarantor are "AFFILIATES" of each other.
AGENT means, at any time, Bank One, Texas, N.A., as AGENT for Lenders under
this agreement or its successor appointed under SECTION 10.6 acting as Agent
under this agreement.
ARM LOAN means (a) an adjustable-rate loan represented by a Mortgage Note
that complies with all applicable requirements for purchase under either the
FNMA or FHLMC standard form of conventional mortgage purchase contract and any
supplement to it then in effect, (b) an adjustable-rate Jumbo Loan, or (c) an
adjustable-rate FHA Loan.
BANK ONE INVESTMENT FACILITY means the Loan and Security Agreement dated as
of June 10, 1992, between Borrower, Guarantor, and Bank One, Texas, N.A. as
renewed, extended, amended, and replaced but not increased to more than
$40,000,000 principal amount.
BASE RATE means the floating base rate of annual interest established by
Agent from time to time as its corporate-base-rate of interest, which may not be
the lowest rate of interest charged by Agent on loans similar to Borrowings.
BASE-RATE BORROWING means a Borrowing bearing interest at the Base Rate.
BORROWER is defined in the preamble of this agreement.
BORROWING means a borrowing consisting of Advances made on the same day by
one or more Lenders.
BORROWING DATE is defined in SECTION 2.2(a).
BUSINESS DAY means (a) for all purposes, any day OTHER THAN Saturday,
Sunday, and any other day that commercial banks are authorized by Requirement of
Law to be closed in Texas, New York, or any other city in the United States
where any Lender has its principal lending office and (b) for purposes of any
LIBOR-Rate Borrowing, a day when commercial banks are open for international
business in London.
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CODE means the INTERNAL REVENUE CODE OF 1986, as amended.
COLLATERAL means all property of Guarantor or Borrower in which Guarantor
or Borrower grants a Lien to Agent for the benefit of Lenders, either under
SECTION 2.3 or 3.2, or under the Security Instruments, or otherwise.
COLLATERAL DELIVERY NOTIFICATION means a notification, in substantially the
form of the attached EXHIBIT C-3, to be delivered by Guarantor with a Credit
Request.
COLLATERAL VALUE means, for Eligible Collateral, a percentage -- which for
Wet Borrowing is 95% and otherwise is 98% -- of the LESSER of (i) the
outstanding principal amount of the Mortgage Note therefor AND (ii) the Market
Value thereof, provided that (for purposes of SECTION 2.1 only):
(a) the total Collateral Value attributed to all Mortgage Notes of
the type described in CLAUSE (k)(ii) of the definition of Eligible
Collateral may never exceed $5,000,000;
(b) the total Collateral Value attributed to all Mortgage Notes that
constitute ARM Loans that have been converted to Conforming Conventional
Loans, FHA Loans, or VA Loans may never exceed $25,000,000;
(c) the total Collateral Value attributed to all Jumbo Loans may
never exceed 33% of the total Commitments;
(d) the total Collateral Value attributed to all Jumbo Loans in
original amounts of (i) more than $500,000 but less than $850,000 each may
never exceed $25,000,000, and (ii) more than $850,000 may never exceed
$5,000,000;
(e) the total Collateral Value attributed to all Eligible Collateral
that RAC Income Fund, Inc. has an outstanding commitment to purchase
pursuant to a Take-Out Commitment shall never exceed $1,000,000; and
(f) the total Collateral Value attributed to all Eligible Collateral
(determined as of the date such Eligible Collateral was first delivered to
Agent by Guarantor or Borrower) delivered by Agent to any Investor and
outstanding at any one time under SECTION 3.5(b) (excluding Eligible
Collateral arising out of or forming, or being delivered in order to form a
part of, pools of Mortgages for GNMA, FNMA, FHLMC, or any other Investors
approved by Agent) shall never exceed either (i) for all Investors, a total
of 20% of the total Commitments or (ii) $20,000,000 for any one Investor
(other than GNMA, FNMA, and FHLMC).
COMMITMENT means, for any Lender, the amount stated beside its name on the
attached SCHEDULE 2.1 or any amended SCHEDULE 2.1 provided for in this
agreement.
COMMITMENT PERCENTAGE means, at any time for any Lender, the proportion --
stated as a percentage -- that its Commitment bears to the total Commitments.
COMPANIES means Borrower and Guarantor.
3
<PAGE>
CONFORMING CONVENTIONAL LOAN means a conforming loan represented by a
Mortgage Note, excluding FHA Loans, VA Loans, and ARM Loans, which complies with
all applicable requirements for purchase under (a) the FNMA or FHLMC standard
form of conventional mortgage purchase contract and any supplement to either
thereof then in effect or (b) such other standard form of conventional mortgage
purchase contract acceptable to Lenders.
CONVERSION DATE is defined in SECTION 2.15.
CONVERSION REQUEST means a notice, substantially in the form of the
attached EXHIBIT C-2.
CREDIT REQUEST means a request, in substantially the form of the attached
EXHIBIT C-1, delivered by Borrower for a Borrowing.
CUSTODIAN means the Person holding custody of the Collateral to perfect the
Lien in favor of Agent (for the benefit of Lenders) as such Collateral is
delivered under SECTION 3.3.
DEBTOR LAWS means all applicable liquidation, conservatorship, bankruptcy,
moratorium, arrangement, receivership, insolvency, reorganization, or similar
laws from time to time in effect affecting the rights of creditors generally.
DEFAULT is defined in SECTION 9.
DEFAULT RATE means, for any day, an annual rate of interest equal from day
to day to the LESSER of (a) the Federal-Funds Rate PLUS 4.5% AND (b) the Maximum
Rate.
DETERMINING LENDERS means, at any time, any combination of Lenders whose
(a) Loan Percentages total at least 66 2/3% at any time on or after the
Termination Date, (b) Interim Percentages total at least 66 2/3% at any time
before the Termination Date but while any Lender is a Terminating Lender, and
(c) Commitment Percentages total at least 66 2/3% at all other times.
DIVIDENDS means, for any corporation or association: (a) Cash
distributions or any other distributions on, or in respect of, any class of
equity security of such corporation or association, except for distributions
made solely in shares of securities of the same class; and (b) any and all
funds, cash or other payments made in respect of the redemption, repurchase, or
acquisition of such securities.
ELIGIBLE COLLATERAL means, subject to the provisions of SECTIONS 3.5(b) and
3.7, all Mortgage Collateral:
(a) for which (in the case of Mortgage Notes) Guarantor holds a Take-
Out Commitment;
(b) in which Agent has been granted (pursuant to SECTION 3.2 or
otherwise) and continues to hold a perfected first-priority Lien for the
benefit of Lenders;
(c) which are in form and substance acceptable to Agent in its
reasonable discretion;
4
<PAGE>
(d) which are delivered to Agent or its designee not more than 30
days after the date of such Mortgage Note or Mortgage Backed Security;
(e) which (in the case of Mortgage Notes), together with all related
Mortgages, conform in all respects with all the requirements of any Take-
Out Commitments to purchase such Mortgage Notes and are valid and
enforceable in accordance with their respective terms;
(f) which (in the case of Mortgage Notes) are made payable to the
order of Guarantor or have been endorsed (without restriction or
limitation) payable to the order of Guarantor;
(g) with respect to which (in the case of Mortgage Notes), there has
been no default as to the payment of any installment of principal or
interest or any other default which has continued uncured for a period of
60 days, and no foreclosure or other similar proceedings shall have been
commenced with respect thereto;
(h) with respect to which (in the case of Mortgage Notes), there
shall be no pending claim for any credit, allowance, or adjustment, and
which Mortgage Notes are enforceable without offset, counterclaim, or
defense of any kind;
(i) which has been held by Agent for the benefit of Lenders as
Eligible Collateral for less than 180 days;
(j) which (in the case of each Jumbo Loan in the original amount of
$500,000 or more) has been held by Agent for the benefit of Lenders as
Eligible Collateral for less than 90 days; and
(k) which otherwise meet requirements of clauses (a) through (j)
above but which are either (i) held by Guarantor as bailee of Agent in
connection with any Wet Borrowing, PROVIDED THAT such Mortgage Notes shall
cease to be Eligible Collateral if any of the Principal Collateral
Documents set forth in SECTION 3.3(c), (d), and (e) have not been delivered
to Agent within five Business Days of the date of such Wet Borrowing or
(ii) secured by a Mortgage which is second in priority, to the extent that
Guarantor holds a Take-out Commitment for such Mortgage Note from either
FNMA or FHLMC.
ERISA means the EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, as
amended, together with all regulations issued pursuant thereto.
ERISA AFFILIATE means, for Borrower, any trade or business (whether or not
incorporated) which, together with Borrower, would be treated as a single
employer under SECTION 4001 of ERISA.
FEDERAL-FUNDS RATE means, for any day, the annual rate of interest equal to
the SUM of (a) an annual rate of interest (rounded upwards, if necessary, to the
nearest 0.01%) determined by Agent to be equal to either (i) the weighted
average of the rates on overnight federal funds transactions with member banks
of the Federal Reserve System arranged by federal funds brokers for such day
(or, if not a Business Day, for the preceding Business Day) as published by the
Federal Reserve Bank of New York on the succeeding Business Day, or (ii) if not
so published for any day, the average of the quotations for such
5
<PAGE>
day on such transactions received by Agent from three federal funds brokers of
recognized standing selected by it, PLUS (b) 1.5%.
FEDERAL-FUNDS-RATE BORROWING means a Borrowing bearing interest at the
Federal-Funds Rate.
FHA LOAN means a loan represented by a Mortgage Note (a) payment of which
is partially or completely insured by the Federal Housing Administration ("FHA")
under the NATIONAL HOUSING ACT, as amended, or TITLE V of the HOUSING ACT OF
1949, as amended, or (b) with respect to which there is a current, binding and
enforceable commitment for such insurance issued by the FHA, or (c) which is
eligible for direct endorsement under the FHA DIRECT ENDORSEMENT PROGRAM (other
than loans for mobile homes).
FHLMC means the Federal Home Loan Mortgage Corporation or its successor.
FHLMC SECURITIES means participation certificates representing undivided
interests in mortgage loans purchased by FHLMC pursuant to the EMERGENCY HOME
FINANCE ACT OF 1970, as amended.
FINANCIAL STATEMENTS means balance sheets, profit and loss statements,
statements of cash flow and any other financial statements, reports or
information specified by any Lender.
FNMA means the Federal National Mortgage Association or its successor.
FNMA SECURITIES means modified pass-through mortgage-backed certificates
guaranteed by FNMA pursuant to the NATIONAL HOUSING ACT, as amended.
FUNDING ACCOUNT means the non-interest bearing demand checking account
established by Borrower with Agent to be used for (a) the deposit of proceeds of
Advances and payments constituting the proceeds of Collateral (other than
principal and interest payments on the Mortgage Collateral), (b) the funding of
advances under the Intercompany Note by Borrower, and (c) the payment of the
Obligations.
FUNDING LOSS means any reasonable, out-of-pocket loss or expense that any
Lender incurs because (a) Borrower fails or refuses (for any reason whatsoever
OTHER THAN a default by either Agent or the Lender claiming such loss or
expense) to take any LIBOR-Rate Borrowing that it has requested under this
agreement, or (b) Borrower prepays or pays any LIBOR-Rate Borrowing or converts
any LIBOR-Rate Borrowing to another Type of Borrowing in each case, at any time
other than the last day of the applicable Interest Period.
GAAP means generally accepted accounting principles consistently applied as
set forth in Opinions of the Accounting Principles Board of the American
Institute of Certified Public Accountants or in statements of the Financial
Accounting Standards Board and as in effect at the time of application of the
provisions hereof so as to properly reflect the financial condition, and the
results of operation and changes in cash flow, of Borrower or such other Person
as may be applicable; PROVIDED THAT wherever in this agreement principles of
accounting different from those required by GAAP are specified, the principles
of accounting specified in this agreement shall govern.
GNMA means the Government National Mortgage Association or its successor.
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<PAGE>
GNMA SECURITIES means modified pass-through mortgage-backed certificates
guaranteed by GNMA pursuant to SECTION 306(g) of the NATIONAL HOUSING ACT, as
amended.
GOVERNMENTAL AUTHORITY means any nation or government, any agency,
department, state or other political subdivision thereof, and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
GUARANTOR is defined in the preamble hereof.
INDEBTEDNESS of any Person means, at any time, the SUM (without
duplication) of (i) all indebtedness of that Person for borrowed money or for
the deferred purchase price of Property or services or which is evidenced by a
bond, debenture, note or other instrument, (ii) all obligations of that Person
under any capitalized lease, (iii) all obligations of that Person in respect of
letters of credit, acceptances, or similar obligations issued or created for the
account of that Person, (iv) all of that Person's direct and indirect guaranties
of indebtedness of others, (v) all liabilities secured by any Lien existing on
Property owned by that Person, including liabilities so secured which have not
been assumed by such Person or with respect to which that Person is not
personally liable, and (vi) all liabilities of that Person in respect of
unfunded vested benefits under Plans.
INTERCOMPANY NOTE means the promissory note, substantially in the form of
the attached EXHIBIT B, executed by Guarantor, payable to the order of Borrower,
and endorsed to the order of Agent.
INTEREST PERIOD is determined in accordance with SECTION 2.14.
INTERIM PERCENTAGE means, for any Lender, the proportion -- stated as a
percentage -- that (a) its portion of the Loan (if it is a Terminating Lender)
or its Commitment (if it is not a Terminating Lender) bears to (b) the SUM of
the Loan owed to all Terminating Lenders PLUS the Commitments of all the other
Lenders.
11/22/93
INVESTMENT FACILITIES MEANS ANY CREDIT FACILITY (AS ANY OF THOSE FACILITIES
MAY BE RENEWED, EXTENDED, AMENDED, OR RESTATED) NOW OR IN THE FUTURE ENTERED
INTO -- BETWEEN EITHER COMPANY AND ANY COMMERCIAL OR SAVINGS BANK ORGANIZED
UNDER THE LAWS OF THE UNITED STATES OF AMERICA WITH A COMBINED CAPITAL AND
UNIMPAIRED SURPLUS OF AT LEAST $250,000,000, AND A RATING OF C OR BETTER BY
THOMPSON BANK WATCH, INC., OR AN IDC FINANCIAL PUBLISHING RATING OF AT LEAST 75
- -- TO ENABLE THAT COMPANY TO MAKE INVESTMENTS HAVING A MAXIMUM MATURITY OF 31
DAYS IN (A) COMMERCIAL PAPER GIVEN THE HIGHEST RATING (AT LEAST A-1 OR P-1 OR
THE EQUIVALENT) BY A NATIONALLY RECOGNIZED CREDIT RATING AGENCY, (B) UNITED
STATES GOVERNMENTAL OBLIGATIONS, OR (C) CERTIFICATES OF DEPOSIT, BANKERS
ACCEPTANCES, AND REPURCHASE AGREEMENTS -- ISSUED BY THE COMMERCIAL BANK
PROVIDING THE "INVESTMENT FACILITY" MEETING THE REQUIREMENTS ABOVE -- IN
CONNECTION WITH WHICH THERE EXISTS MUTUAL RIGHTS OF OFFSET.
INVESTOR means GNMA, FNMA, FHLMC, Resource Mortgage Capital, Inc.,
Residential Funding Corporation, RAC Income Fund, Inc., or any other Person
approved by Agent who agrees to purchase Eligible Collateral pursuant to a Take-
Out Commitment.
JUMBO LOAN means a loan represented by a Mortgage Note, excluding FHA Loans
and VA Loans, which complies with all applicable requirements for purchase under
the FNMA or FHLMC
7
<PAGE>
standard form of conventional mortgage purchase contract and any supplement to
either thereof then in effect, except that the amount of such loan exceeds the
maximum loan amount under such requirements.
LENDERS means the financial institutions named on the attached SCHEDULE 2.1
or on the most recently amended SCHEDULE 2.1, if any, prepared by Agent under
this agreement, and, subject to this agreement, their respective successors and
assigns (but not any Participant who is not otherwise a party to this
agreement).
LIBOR RATE means, for a LIBOR-Rate Borrowing, an annual interest rate equal
to the SUM of (a) an annual interest rate (rounded upward, if necessary, to the
nearest 0.01%) equal to the LESSER of (i) the rate determined by Agent -- at
approximately 10:00 a.m. Dallas, Texas, time on the second Business Day before
the applicable Interest Period -- as the rate reported by Telerate Mortgage
Services for deposits in United States dollars in the London interbank market
that are comparable in amount and maturity of that Borrowing, AND (ii) the rate
that deposits in United States dollars are offered to the Lender of that LIBOR-
Rate Borrowing in the London interbank market -- at approximately 11:00 a.m.,
London time on the third Business Day before the applicable Interest Period --
for deposits comparable in amount and maturity of that Borrowing, PLUS (b)
1.25%.
LIBOR-RATE BORROWING means a Borrowing bearing interest at the LIBOR Rate
and which must be an integral multiple of $100,000 and a minimum of $1,000,000.
LIEN means any lien, mortgage, security interest, pledge or encumbrance,
conditional sale or title retention agreement, any lease in the nature thereof,
or any other interest in Property designed to secure the repayment of
Indebtedness, whether arising by agreement or under any statute or law, or
otherwise.
LOAN means, as of the date of any determination thereof, the aggregate
outstanding principal amount of all Advances made hereunder.
LOAN DOCUMENTS means (a) this agreement, the Notes, the Security
Instruments, (b) all other agreements (including, but not limited to, Pricing
Agreements), documents, or instruments ever executed and delivered by Borrower
or any other Person in connection with, or as security for the payment or
performance of, any or all of the Obligations, and (c) all renewals, extensions,
amendments, and restatements of or to any of the foregoing.
LOAN PERCENTAGE means, at any time for any Lender, the proportion -- stated
as a percentage -- that the portion of the Loan owed to that Lender bears to the
Loan owed to all Lenders.
MARKET VALUE means:
(a) For any Mortgage Note, at any time, either (i) the weighted average of
the commitment prices of all Take-Out Commitments relating to such Mortgage
Note, or (ii) at Agent's sole discretion (or if Determining Lenders object, as
determined by Determining Lenders) the market value thereof determined upon the
then-most recent posted net yield furnished by FNMA and published and
distributed by Telerate Mortgage Services, or, if such posted net yield is not
available from Telerate Mortgage Services, upon the posted net yield stated by
FNMA as determined by Agent, or, for any Mortgage Note not eligible for purchase
by FNMA, upon the posted net yield as reasonably established by Agent; and
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<PAGE>
(b) For any Mortgage Backed Security, the PRODUCT of (i) either (A) the
most recent percentage published and distributed by Telerate Mortgage Services
as the bid price for mandatory delivery within thirty days for securities
bearing interest at the same rate and of the same type as the subject security,
or (B) if no such bid price can be obtained from Telerate Mortgage Services, the
average of the percentages obtained from three brokerage firms selected in good
faith by Agent (or if Determining Lenders object, as selected in good faith by
Determining Lenders) as the bid price for mandatory delivery within thirty days
for such GNMA Securities, FNMA Securities, or FHLMC Securities, as the case may
be, bearing interest at the same rate and of the same type as the subject
security, TIMES (ii) the PRODUCT of (A) the factor obtained from Telerate
Mortgage Service representing the percentage of the principal balance
outstanding on the subject security, TIMES (B) the face amount of the subject
security; PROVIDED THAT, if such factor is not available from Telerate Mortgage
Services, Agent will obtain such information from GNMA, FNMA, or FHLMC, as is
applicable.
If Agent is unable to obtain any yield, price, or factor from the source or
alternative source called for under this definition, such yield, price or factor
shall be that established in good faith by Agent (or if Determining Lenders
object, as established in good faith by Determining Lenders).
MATERIAL ADVERSE EFFECT means any material adverse effect on (i) the
validity or enforceability of this agreement, any Note, Pricing Agreement, or
any Security Instrument, (ii) the operations or consolidated financial condition
of Borrower and Guarantor, (iii) the Collateral (or its value), taken as a
whole, or (iv) the ability of Borrower or Guarantor to fulfill its obligations
under this agreement, any Note or any Security Instrument.
MAXIMUM RATE means, for a Lender, the maximum non-usurious interest rate
and the maximum non-usurious amount that, at any time, a Lender may contract
for, take, charge, reserve, or receive on the Obligation under the applicable
laws of the United States and the State of Texas.
MORTGAGE means a mortgage or deed of trust, in compliance with FNMA or
FHLMC guidelines (except, in the case of mortgages or deeds of trust securing
Jumbo Loans, that the amount of such loans exceeds the maximum loan amount under
such requirements) and otherwise in form and substance satisfactory to Agent,
securing a Mortgage Note and granting a perfected first-priority Lien (subject
to the Permitted Exception) on residential real property consisting of land and
a one to four family dwelling thereon, or consisting of a condominium unit, that
is completed and ready for occupancy and specifically excluding multi-family
dwellings for more than four families.
MORTGAGE-BACKED SECURITIES means FHLMC Securities, FNMA Securities and GNMA
Securities, whether such securities are issued in certificated form or book
entry form.
MORTGAGE COLLATERAL means all Mortgage Notes, Mortgage-Backed Securities,
and related Principal Collateral Documents offered as Collateral under SECTION
3.3.
MORTGAGE NOTE means a promissory note representing a Conforming
Conventional Loan, a Jumbo Loan, an ARM Loan, an FHA Loan, or a VA Loan
(including FHA graduated payment mortgage loans and VA graduated payment
Mortgage loans) in each case secured by a Mortgage that is (subject to the
Permitted Exception) a first priority Lien; PROVIDED THAT in no event shall
Mortgage Note mean a promissory note representing a construction loan or
commercial loan.
<PAGE>
NATIONSBANK AGREEMENT means the Credit Agreement among NationsBank of
North Carolina, N.A., as agent, and other banks, Ryland Group, Guarantor, and
RMC Asset Management Company, dated June 26, 1992, as renewed, extended,
amended, and replaced but not increased to more than $60,000,000 principal
amount.
NET INCOME for any Person means, for any period, the net income or loss
of that Person for such period, determined in accordance with GAAP.
NET WORTH for any Person means, at any date, the SUM of (a) total
shareholder's equity (including capital stock, additional paid-in capital and
retained earnings after deducting treasury stock) which would appear on a
balance sheet of that Person prepared as of such date in accordance with GAAP
MINUS (b) any amount to be deducted therefrom in accordance with SECTION
7.5(G).
NOTES means the promissory notes, in substantially the form of the
attached EXHIBIT A, and all renewals, extensions, amendments, increases,
decreases, and replacements of, to, or for any of them.
OBLIGATIONS means all present and future indebtedness, obligations, and
liabilities of Borrower or Guarantor to Agent or any Lender before or after
the date of this agreement and related to any Loan Document -- whether
principal, interest, fees, costs, attorneys' fees, or otherwise -- and all
renewals, extensions, and modifications of any of the foregoing.
PARTICIPANT is defined in SECTION 12.12(B).
PAYMENT DIRECTION means a written direction from Borrower, substantially
in the form of the attached EXHIBIT C-4, delivered by Borrower to the Agent
as provided in SECTION 2.6(A) or (B).
PBGC means the Pension Benefit Guaranty Corporation and any successor to
any or all of the Pension Benefit Guaranty Corporation's functions under
ERISA.
PERMITTED EXCEPTION means Mortgage Collateral for which the Mortgage is
of the type described in CLAUSE (K)(II) of the definition of Eligible
Collateral.
PERSON means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization,
Governmental Authority or any other form of entity.
PLAN means any employee benefit plan or other plan which is subject to
the provisions of TITLE IV of ERISA or to the minimum funding standards under
SECTION 412 of the Code and which is maintained for employees of Borrower or
Guarantor.
POTENTIAL DEFAULT means the occurrence of any event or existence of any
circumstances that would, upon notice or lapse of time or both, become a
Default.
PRICING AGREEMENT means a separate written agreement (effective only
while a Default does not exist) between Borrower, Guarantor, and a Lender,
which is substantially similar in form to -- and does not provide for an
interest rate different from that provided in -- the pricing agreement
executed by Borrower, Guarantor, and Agent, dated as of the date of this
agreement, but which may contain different payment terms.
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PRINCIPAL COLLATERAL DOCUMENTS is defined in SECTION 3.3.
PROHIBITED TRANSACTION means any transaction described in SECTION 406 of
ERISA which is not exempt under SECTION 408 of ERISA, and any transaction
described in SECTION 4975(C) of the Code which is not exempt under SEC-
TION 4975(C)(2) or 4975(D) of the Code or by the transitional rules of
SECTIONS 414(C) and 2003(C) of ERISA.
PROPERTY means any interest of Borrower or Guarantor in any kind of
property or asset, whether real, personal or mixed, or tangible or
intangible, including, without limitation, the Collateral.
PURCHASER is defined in SECTION 12.12(C).
REGULATION U means REGULATION U promulgated by the Board of Governors of
the Federal Reserve System, 12 C.F.R. PART 221, or any other regulation when
promulgated by said Board to replace the prior Regulation U and having
substantially the same function.
REGULATION X means REGULATION X promulgated by the Board of Governors of
the Federal Reserve System, 12 C.F.R. PART 224, or any other regulation when
promulgated by said Board to replace the prior Regulation X and having
substantially the same function.
RELATED PERSON means any Person that is a member of the same controlled
group of corporations (within the meaning of SECTION 414(B) of the Code) as
Borrower or Guarantor or is under common control (within the meaning of
SECTION 414(C) of the Code or SECTION 4001 of ERISA) with Borrower or
Guarantor or is a member of any affiliated service group (within the meaning
of SECTION 414(M) of the Code) which includes Borrower or Guarantor or is
otherwise treated as part of the controlled group which includes Borrower or
Guarantor (within the meaning of SECTION 414(O) of the Code).
REPORTABLE EVENT means a reportable event described in SECTION 4043 of
ERISA or the regulations thereunder for which the 30-day notice is not waived
by such regulations, a withdrawal from a Plan described in SECTION 4063 or
4064 of ERISA, or a cessation of operations described in SECTION 4062(F) of
ERISA.
REQUIREMENT OF LAW means, for any Person, the articles of incorporation
and bylaws or other organizational or governing documents of that Person, and
any law, statute, code, ordinance, order, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or other
determination, direction or requirement (including, without limitation, any
of the foregoing which relate to environmental standards or controls, energy
regulations and occupational, safety and health standards or controls) of any
(domestic or foreign) arbitrator, court or other Governmental Authority, in
each case applicable to or binding upon that Person or any of its Property or
to which that Person or any of its Property is subject.
RYLAND GROUP means The Ryland Group, Inc., a Maryland corporation and
Guarantor's parent corporation.
SECURITY INSTRUMENTS means any and all agreements, documents, and
instruments now or hereafter executed and delivered by Borrower, Guarantor,
or any other Person in connection with, or as security for the payment or
performance of, the Obligations, as those agreements, documents, and
instruments
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may be renewed, extended, amended, or substituted from time to time,
including, without limitation, the agreements, documents, and instruments
described on SCHEDULE 3.2.
SENIOR OBLIGATIONS means (a) the Obligations, (b) the obligations of the
Companies under the NationsBank Agreement and (c) the obligations of the
Companies under the Bank One Investment Facility.
SERVICING PORTFOLIO means, for Guarantor, at any time, an amount equal
to the aggregate unpaid principal amount of all loans with respect to which
Guarantor owns Servicing Rights, OTHER THAN loans serviced on behalf of the
Resolution Trust Corporation.
SERVICING RIGHTS means all of Guarantor's right, title and interest in
agreements between Guarantor and Persons other than Guarantor and Borrower
pursuant to which Guarantor undertakes to service one to four family dwelling
mortgage loans and pools of one to four family dwelling mortgage loans for
such Persons.
SPECIAL PURPOSE SUBSIDIARY means each Subsidiary of Ryland Group and
Guarantor which facilitates the financing of mortgage loans and mortgage
backed securities and the securitization of mortgage loans and other related
activities.
SUBORDINATED DEBT is defined in SECTION 3.1(E).
SUBSIDIARY of a Person means, at any time, any corporation more than 50%
of the Voting Shares of which is owned, directly or indirectly, by that
Person.
TAKE-OUT COMMITMENT means a written and binding commitment (with respect
to which there shall be no condition which cannot be reasonably anticipated
to be satisfied or complied with prior to its expiration) from an Investor to
purchase (i) Mortgage-Backed Securities or (ii) Mortgage Notes within a
period of not more than twelve months from the date of such Mortgage Notes.
TERMINATION DATE means the earlier of (a) May 27, 1994 and (b) the date
all commitments or obligations of all Lenders to make Advances under this
agreement have terminated or been cancelled.
TERMINATING LENDER means a Lender that has terminated its Commitment
before the Termination Date under SECTION 9.2(B).
TOTAL LIABILITIES of a Person means, at any time, all amounts which
would, in accordance with GAAP, be included as liabilities on a balance sheet
of that Person; PROVIDED THAT reverse repurchase agreements secured by
Mortgage-Backed Securities arising from the call of bonds issued by
Affiliates of Guarantor may be excluded from those liabilities so long as,
(a) the underlying collateral value is at least 100.5% of the obligations of
the Companies under those agreements, or (b) the Companies have provided
evidence satisfactory to Agent that the underlying collateral is subject to a
hedging agreement.
TYPE means any type of Borrowing determined with respect to the
applicable interest option.
UCC means the Uniform Commercial Code or similar laws of the applicable
jurisdiction, as amended from time to time.
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VA LOAN means a loan represented by a Mortgage Note, payment of which is
partially or completely guaranteed by the Department of Veterans Affairs
("VA") under the SERVICEMEN'S READJUSTMENT ACT OF 1944, as amended, or
CHAPTER 37 of TITLE 38 OF THE UNITED STATES CODE or with respect to which
there is a current binding and enforceable commitment for such a guaranty
issued by the VA or which is subject to automatic guarantee by the VA, the
applicable guaranty or commitment to guarantee being in the maximum amount
permitted by applicable law.
VOTING SHARES means, for any corporation, shares of any class or classes
(however designated) having ordinary voting power for the election of at
least a majority of the board of directors (or other governing body) of that
corporation, OTHER THAN shares having such power only by reason of the
happening of a contingency.
WET BORROWING means a Borrowing provided for under SECTION 2.3.
WET-BORROWING SUBLIMIT means, at any time, the maximum total outstanding
Wet Borrowings permitted under SECTION 2.3(B).
1.2. NUMBER AND GENDER OF WORDS. The singular number includes the
plural where appropriate and VICE VERSA, and words of any gender include each
other gender where appropriate.
1.3. OTHER REFERENCES. The words "HEREOF," "HEREIN," "HEREUNDER," and
similar terms when used in this agreement shall refer to this agreement as a
whole and not to any particular provision of this agreement, and section,
schedule, and exhibit references are to this agreement unless otherwise
specified.
1.4. ACCOUNTING PRINCIPLES. Under the Loan Documents -- unless
otherwise stated -- (a) GAAP determines all accounting and financial terms
and compliance with financial reporting covenants, (b) GAAP in effect on the
date of this agreement determines compliance with financial covenants, and
(c) otherwise, all accounting principles applied in a current period must be
comparable in all material respects to those applied during the preceding
comparable period OTHER THAN changes concurred in by the Companies'
independent public accountants.
SECTION 2. COMMITMENT AND TERMS OF BORROWING AND PAYMENT.
2.1. COMMITMENT. Subject to the provisions in the Loan Documents
(including, without limitation, the conditions set forth in SECTION 4), each
Lender severally and not jointly agrees to make Advances as requested by
Borrower under SECTION 2.2 SO LONG AS:
(a) The portion of the Loan owed to that Lender never exceeds the
LESSER of (i) its Commitment AND (ii) its Loan Percentage of the
Collateral Value for all Eligible Collateral.
(b) The Loan never exceeds the LESSER of (i) the total Commitments
AND (ii) the Collateral Value for all Eligible Collateral.
(c) Advances which are part of Wet Borrowings and outstanding for
that Lender never exceed its Commitment Percentage of the Wet-Borrowings
Sublimit.
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(d) The total Wet Borrowings outstanding never exceeds the Wet-
Borrowings Sublimit.
(e) Advances may be made only on Business Days before the
Termination Date.
The outstanding Advances owed to any Lender under the Existing Loan Agreement
are deemed to be Advances by that Lender -- and are renewed and extended --
under this agreement. All accrued and unpaid interest owed to any Lender
under the Existing Loan Agreement is renewed and extended under this
agreement and payable in accordance with the Loan Documents. As provided in
this agreement, Borrower may borrow, repay, and reborrow Advances.
2.2. BORROWING PROCEDURE. The following conditions and procedures apply
to all Borrowings:
(a) A Borrowing may be requested by Borrower by its delivery to
Agent and to the Lender from which the Borrowing is being requested of a
Credit Request -- which is irrevocable and binding on Borrower -- and
Guarantor's delivery to Agent and each Lender of a Collateral Delivery
Notification. Agent and each Lender from which the Borrowing is being
requested must receive a (i) Credit Request by no later than 1:30 p.m.,
Dallas, Texas time and (ii) Collateral Delivery Notification by no later
than 10:30 a.m. Dallas, Texas time, for both cases, on either (x) the
third Business Day before the date on which funds are requested (the
"BORROWING DATE") for any LIBOR-Rate Borrowing or (y) the Borrowing Date
for any Federal-Funds-Rate Borrowing or Base-Rate Borrowing.
(b) Except as permitted for Wet Borrowings, Agent must
concurrently receive, along with a Collateral Delivery Notification, all
of the Principal Collateral Documents for each Mortgage Note or
Mortgage-Backed Security offered in it as Collateral.
(c) Each Lender shall remit its Advance requested in any Credit
Request to Agent's principal office in Dallas, Texas, by wire transfer
into the Funding Account according to Agent's wiring instructions on the
attached SCHEDULE 2.2, in funds that are available for immediate use by
Agent by 2:30 p.m. Dallas, Texas time on the applicable Borrowing Date.
Subject to receipt of those funds, Agent shall (unless to its actual
knowledge any of the applicable conditions precedent have not been
satisfied by Borrower or waived by Determining Lenders) make such funds
available to Borrower as directed in that Credit Request.
(d) Absent contrary written notice from a Lender received by Agent
by 2:30 p.m. Dallas, Texas time on the applicable Borrowing Date, Agent
may assume that each Lender has made its Advance part of a requested
Borrowing available to Agent on the applicable Borrowing Date, and Agent
may, in reliance upon such assumption (but shall not be required to),
make available to Borrower a corresponding amount. If a Lender fails to
make its Advance available to Agent on the applicable Borrowing Date,
then Agent may recover the applicable amount on demand (i) from that
Lender, TOGETHER WITH interest (so long as Borrower's Credit Request was
timely made) at an annual rate of interest equal to the SUM of the
Federal-Funds Rate MINUS 1.5%, during the period commencing on the date
the amount was made available to Borrower by Agent and ending on (but
excluding) the date Agent recovers the amount from that Lender -- which
payment is then deemed to be that Lender's Advance part of that
Borrowing-- or (ii), if that Lender fails to pay its amount upon demand,
then from Borrower , TOGETHER WITH interest at an annual interest rate
equal to the rate applicable to the requested Borrowing during the
period
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commencing on the Borrowing Date and ending on (but excluding)
the date Agent recovers the amount from Borrower.
(e) Although no Lender is responsible for the failure of any other
Lender to make its Advance part of any Borrowing, the failure of any
Lender to make its Advance part of any Borrowing does not excuse any
other Lender from making its requested Advance part of that Borrowing.
2.3. WET BORROWINGS. Borrower may from time to time request that
certain Borrowings be funded before delivery to Agent of the applicable
Principal Collateral Documents. The following conditions and procedures
apply to those Borrowings:
(a) All conditions and procedures for Borrowings under SECTION 2.2
must be complied with OTHER THAN in SECTION 2.2(B).
(b) No Wet Borrowing may be made at any time if, after it were
funded, the total outstanding principal amount of all Wet Borrowings --
for which the applicable Principal Collateral Documents have not yet
been delivered to Agent -- would exceed 20% -- or, only on the first
three and last two Business Days of any calendar month, 25% -- of the
total Commitments.
(c) Guarantor hereby grants to Agent, from the Borrowing Date for
each Wet Borrowing, a first-priority Lien in the Mortgage Notes (and
related Take-Out Commitments) offered as Collateral in the Collateral
Delivery Notification delivered to Agent for that Wet Borrowing that is
perfected subject to the delivery of the Mortgage Notes to Agent or its
bailee.
(d) The Collateral Delivery Notification delivered by Guarantor to
Agent for a Wet Borrowing must identify and describe the Collateral
Value of each Mortgage Note described in SCHEDULE II to it.
2.4. TERMINATION. Upon giving at least three Business Days prior
written and irrevocable notice to Agent and each Lender, Borrower may
terminate any Lender's Commitment in full, whereupon the obligation to make
the mandatory prepayment under SECTION 2.7(C) becomes absolute and
irrevocable. If not terminated earlier by Borrower, the total Commitments
automatically terminate on the stated Termination Date. Once terminated, no
Commitment may be reinstated except by an amendment to this agreement under
SECTION 12.9.
2.5. NOTES. The Loan shall be evidenced by the Notes, one payable to
each Lender in the stated principal amount of its Commitment.
2.6. PAYMENT PROCEDURES.
(a) While no Default exists, Borrower shall pay principal of and
interest on the Loan in immediately available funds as follows:
(i) Borrower shall pay each principal payment to Agent for
the account of the one or more specific Lenders designated in the
Payment Direction that accompanies
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the payment, which designation need not be on the basis of
Lenders' Loan Percentages. When received, Agent shall distribute
that payment by wire transfer to those Lenders in accordance with
that Payment Direction reasonably
promptly after receipt but by no later than 3:00 p.m. on the
Business Day that payment is deemed to be received by Agent under
CLAUSE (C) below. If a Payment Direction does not accompany a
payment, then that amount is not deemed a payment in reduction of
the Loan and Agent shall not distribute the amount thereof to any
Lender but shall deposit that amount into the Funding Account, and
interest shall continue to accrue on the entire balance of the Loan
without taking that amount into consideration at the applicable
rates until Agent receives a Payment Direction applicable to that
amount which directs that payment in accordance with this clause be
made.
(ii) Borrower shall pay each interest payment directly to each
Lender in immediately available funds pursuant to each Lender's
Note and Pricing Agreement, which payment need not be on the basis
of Lenders Loan Percentages.
(b) While a Default exists, Borrower shall pay all principal and
interest payments to Agent in immediately available funds for Lenders'
accounts in accordance with the provisions of SECTION 9.10 and the
following provisions:
(i) When received, Agent shall distribute each principal
payment by wire transfer to each appropriate Lender, in accordance
with each Lender's share under SECTION 9.10, reasonably promptly
after receipt but by no later than 3:00 p.m. on the Business Day
the payment is deemed to be received by Agent under CLAUSE (C)
below.
(ii) Borrower shall deliver a Payment Direction with each
interest payment as to the amount of interest owed to each Lender
(OTHER THAN at the Default Rate). When received, Agent shall
distribute each interest payment by wire transfer to each Lender,
in accordance with each Lender's share under SECTION 9.10,
reasonably promptly after receipt but by no later than 3:00 p.m. on
the Business Day the payment is deemed to be received by Agent
under CLAUSE (C) below.
(c) Borrower shall make all payments under CLAUSES (A)(I), (B)(I),
and (B)(II) above to Agent by wire transfer in immediately available
funds. Payments under those clauses that are received by Agent,
together with any applicable Payment Direction (i) by 1:30 p.m. on a
Business Day shall be deemed to be received on that Business Day, or
(ii) after 1:30 p.m. on a Business Day shall be deemed to be received on
the next Business Day. Interest shall continue to accrue for the
benefit of the applicable Lender through the Business Day immediately
before the Business Day on which the payment is deemed to be received by
Agent under this clause.
(d) If Agent fails to transfer any payment to any Lender as
required by CLAUSES (A) or (B) above, then Agent shall pay to that
Lender on demand interest on that payment, from the date due until paid,
at an annual rate of interest equal to the SUM of the Federal-Funds Rate
MINUS 1.5%
(e) Each payment received by Agent or any Lender, as the case may
be, in accordance with this agreement is valid and effective to satisfy
and discharge the Companies'
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liability under the Loan Documents to the extent of that payment. Agent
shall have no liability whatsoever for any payments so received
(including, without limitation, the accuracy of any amounts stated in any
Payment Direction), except as provided in this agreement.
(f) Agent shall maintain a daily record of (i) the total unpaid
Advances owed to each Lender and (ii) the Loan balance.
(g) Notwithstanding any sale by any Lender of participating
interests in its portion of the Obligations under SECTION 12.12 (i) the
Companies and Agent may deem and treat each Lender as the absolute owner
of its respective Note (whether or not that Note is overdue) for all
purposes, and (ii) Borrower and Agent shall not be affected by any
notice to the contrary.
2.7. INTEREST AND PRINCIPAL PAYMENTS.
(a) Except where specifically provided differently in this
agreement or -- only if no Default exists -- in a Lender's Pricing
Agreement, accrued interest is due and payable:
(i) For each LIBOR-Rate Borrowing, as it accrues on its
Interest Period's last day and -- if the Interest Period is longer
than three months -- 90 days after its Interest Period's first day
and each 90 days thereafter;
(ii) For each Base-Rate Borrowing and Federal-Funds-Rate
Borrowing, and for interest at the rate provided in a Pricing
Agreement, as it accrues (A) through the last day of the calendar
month preceding the payment date, on the 15th day of each calendar
month beginning June 15, 1993, and (B) on the Termination Date --
except that any payment under this CLAUSE (II) may be deferred
until three days after the applicable Lender notifies Borrower of
the amount accrued for Base-Rate Borrowings and Federal-Funds-Rate
Borrowings; and
(iii) For interest at the Default Rate, on demand as it
accrues.
(b) Borrower shall repay the Loan on the Termination Date.
(c) Borrower shall -- on the date that termination of a Lender's
Commitment becomes effective under SECTION 2.4 -- pay to that Lender the
full Obligations owed to it.
(d) If at any time any of the limitations of SECTION 2.1(A)
through (D) are exceeded, Borrower shall, prior to the close of business
on the third succeeding Business Day after Borrower receives written
notice from Agent of the amount of the excess take any combination of
the actions that are applicable under CLAUSES (I) through (III) below
that will eliminate that excess except that the actions under
CLAUSE (III) below are not available to Borrower to the extent that an
excess would continue under SECTION 2.1(A) or (B) as to a Lender's
Commitment or the total Commitments:
(i) For an excess under either SECTION 2.1(A) or (C), repay
Advances to the appropriate Lender in a total amount at least equal
to that excess (TOGETHER WITH any related Funding Loss);
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(ii) For an excess under either SECTION 2.1(B) or (D) repay
Advances to Lenders as Borrower may select in a total amount at
least equal to that excess (TOGETHER WITH any related Funding
Loss); or
(iii) For an excess under either SECTION 2.1(A), (B), (C), or
(D) either (A) deliver to Agent, in accordance with this agreement,
Eligible Collateral (and the relevant Principal Collateral
Documents) with a Collateral Value at least equal to that excess,
(B) deposit into the Funding Account an amount at least equal to
that excess, or (C) any combination of the actions under
CLAUSES (A) or (B) at least equal to that excess.
e. Borrower may voluntarily prepay all or any part of any Advance
at any time without premium or penalty, but with any applicable Funding
Loss.
2.8. ADJUSTMENTS AND SHARING OF PAYMENTS, ETC.
(a) If (i) EITHER Borrower does not repay any portion of the Loan
remaining on the Business Day after the Termination Date OR any Lender gives
notice that it is terminating its Commitment in accordance with SECTION
9.2(B), then (ii) Agent shall promptly calculate (which calculations shall be
binding absent manifest error) and notify Lenders about the adjustment
payments owing between Lenders in accordance with the following provisions,
and (iii) on the Business Day after Agent gives that notice to Lenders, each
Lender (including the Lender giving the notice of termination, if applicable)
shall purchase from the other appropriate Lenders by paying to Agent -- and,
when received, Agent shall distribute to each appropriate Lender -- amounts
that are necessary to conform to the following provisions:
- each Lender's portion of the Loan is to be adjusted to the
PROPORTION that (A) its daily-average portion of the Loan from the
date of this agreement through the date of that purchase BEARS to
(B) the daily-average amount of the Loan for that same period; but
- if immediately after that adjustment (A) any Lender's Commitment
Percentage of the Collateral Value attributable to all Eligible
Collateral that is of the type subject to the sublimits stated in
CLAUSES (A) through (F) of the definition of Collateral Value and
the Wet-Borrowing Sublimit to the extent that such Eligible
Collateral must be included in the determination of Collateral
Value for purposes of complying with SECTIONS 2.1(B) and (D) WOULD
EXCEED (B) its portion of the Loan; then
- that Lender's adjustment payments shall be increased or its
adjustment receipts shall be reduced, as the case may be, by the
total amount of the excess determined under the immediately
preceding provision, and all other Lender's adjustment receipts
shall be increased proportionately based upon the ratio that each
such other Lender's portion of the Loan bears to all such other
Lenders' portions of the Loan; PROVIDED THAT
- no Lender is required to make any payments under this section that
would exceed the limits applicable to it under SECTION 2.1 above,
and Agent shall then calculate all other Lenders' payments to
include a ratable portion of that Lender's payments that would have
exceeded its Commitment; and FURTHER PROVIDED THAT
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- no Terminating Lender in respect of which an adjustment has already
been made under this section because of its termination of its
Commitment is required to make any payments or is entitled to
receive any payments in connection with any other adjustment under
this section, and its portion of the Loan is excluded from
calculation of any other such adjustment.
(b) If while a Default exists any Lender obtains any payment --
whether voluntary, involuntary, through the exercise of any right of
set-off or other right, realization against any Collateral, or otherwise
-- of the Obligations owed to it that exceeds the amount it should have
otherwise received under SECTION 9.10 below (an "EXCESS PAYMENT"), then
that Lender (the "PURCHASING LENDER") shall purchase from each other
Lender a participation in the Obligations then owed to that other Lender
as is necessary to cause each Lender to receive its share of that excess
payment in accordance with SECTION 9.10 below. The Companies agree that
any Lender that purchases a participation from another Lender may, to
the fullest extent permitted by law, exercise all its rights of payment
(including, without limitation, the right of set-off) with respect to
that participation as fully as if that Lender were the direct creditor
of the Companies in the amount of that participation.
(c) If any part of an excess payment is recovered from the
purchasing Lender under CLAUSE (B) above, then (i) each purchase of a
participation in respect of the received portion of the excess payment
shall be rescinded -- and the Lender from whom that purchase was made
shall repay to the purchasing Lender the purchase price -- to the extent
of that recovery from the purchasing Lender, and (ii) that Lender shall
also pay to the purchasing Lender an amount equal to that Lender's
ratable share -- according to the proportion that (A) the amount of that
Lender's required repayment to the purchasing Lender bears to (B) the
total amount so recovered from the purchasing Lender -- of any interest
or other amount paid or payable by the purchasing Lender in respect of
the total amount so recovered from it.
2.9. INTEREST OPTIONS.
(a) Borrower, Guarantor, and a Lender may from time to time enter
into a Pricing Agreement. A LIBOR-Rate Borrowing is never subject to
the pricing terms of any Pricing Agreement. No Pricing Agreement (i)
may alter the relative Rights of Agent and Lenders in this agreement, or
(ii) is binding on Agent or the other Lenders not party to it. Agent
may, without any investigation, rely that all Payment Directions and all
notices from Lenders about interest owed to them before a Default are in
compliance with each applicable Pricing Agreement. The Companies may
not enter into any agreement with any Lender regarding pricing terms
other than this agreement or a Pricing Agreement.
(b) Except where specifically otherwise provided in this agreement
or a Pricing Agreement, Borrowings bear interest at an annual rate equal
to the LESSER OF (i) the Base Rate, the Federal-Funds Rate, or the LIBOR
Rate -- as designated by Borrower in a Credit Request or a Conversion
Request or otherwise designated according to this agreement -- AND (ii)
the Maximum Rate. Each change in the Base Rate, the Federal-Funds Rate,
and the Maximum Rate is effective, without notice to Borrower,
Guarantor, or any other Person, upon the effective date of change.
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(c) No Lender is required to make an Advance at the Federal-Funds
Rate if that Lender is unable to borrow through overnight federal-funds-
transactions with member banks of the Federal Reserve System.
2.10. QUOTATION OF RATES. Borrower may call Agent or any Lender from
which Borrower is considering requesting an Advance before delivering a
Credit Request or Conversion Request to receive an indication of the interest
rates then in effect, but the indicated rates do not bind Agent or Lenders or
affect the interest rate that is actually in effect on the applicable
Borrowing Date or Conversion Date.
2.11. DEFAULT RATE. To the extent permitted by applicable law, all past-
due principal of the Loan and accrued interest on it bears interest from
maturity (stated or by acceleration) at the Default Rate until paid,
regardless whether payment is made before or after entry of a judgment.
2.12. INTEREST CALCULATIONS.
(a) Interest is to be calculated on the basis of actual number of
days (including the first day but excluding the last day) elapsed but
computed as if each calendar year consisted of 360 days for LIBOR-Rate
Borrowings (unless the calculation would result in an interest rate
greater than the Maximum Rate, in which event interest will be
calculated on the basis of a year of 365 or 366 days, as the case may
be), and 365 or 366 days, as the case may be, for all other Borrowings.
All interest rate determinations and calculations by Agent or any Lender
shall be presumed correct.
(b) The provisions of this agreement relating to calculation of
the Base Rate, the Federal-Funds Rate, and the LIBOR Rate are included
only for the purpose of determining the rate of interest or other
amounts to be paid under this agreement that are based upon those rates.
Each Lender may fund and maintain its funding of all or any part of each
Borrowing as it selects.
2.13. MAXIMUM RATE. Regardless of any provision contained in any Loan
Document, no Lender is entitled to contract for, charge, take, reserve,
receive, or apply, as interest on all or any part of the Obligations any
amount in excess of the Maximum Rate, and, if Lender ever does so, then any
excess shall be treated as a partial prepayment of principal and any
remaining excess shall be refunded to Borrower. In determining if the
interest paid or payable exceeds the Maximum Rate, the Companies and Lenders
shall, to the maximum extent permitted under applicable law, (a) treat all
Borrowings as but a single extension of credit (and Lenders and the Companies
agree that this is the case and that provision in this agreement for multiple
Borrowings is for convenience only), (b) characterize any nonprincipal
payment as an expense, fee, or premium rather than as interest, (c) exclude
voluntary prepayments and their effects, and (d) amortize, prorate, allocate,
and spread the total amount of interest throughout the entire contemplated
term of the Obligations. However, if the Obligations are paid in full before
the end of the full contemplated term, and if the interest received for its
actual period of existence exceeds the Maximum Amount, Lenders shall refund
any excess (and Lenders may not, to the extent permitted by applicable law,
be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount). If the laws of the State of Texas are applicable for purposes of
determining the "MAXIMUM RATE" or the "MAXIMUM AMOUNT," then those terms mean
the "INDICATED RATE CEILING" from time to time in effect under ARTICLE 1.04,
TITLE 79, REVISED CIVIL STATUTES OF TEXAS, as amended. The Companies agree
that CHAPTER 15, SUBTITLE 79, REVISED CIVIL STATUTES OF TEXAS, 1925, as
amended (which regulates certain revolving credit loan accounts and revolving
triparty accounts), does not apply to the Obligations.
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2.14. INTEREST PERIODS. When Borrower requests any LIBOR-Rate Borrowing,
Borrower may elect the applicable interest period (each an "INTEREST PERIOD")
- -- which may be either one, two, three, or six months at Borrower's option or
such other period agreed upon by Borrower and the Lender from which Borrower
has requested a LIBOR Rate Borrowing -- subject to the following conditions:
(a) The initial Interest Period commences on the applicable Borrowing Date or
Conversion Date, and each subsequent applicable Interest Period commences on
the day when the next preceding applicable Interest Period expires; (b) if
any Interest Period begins on a day for which no numerically corresponding
Business Day in the calendar month at the end of the Interest Period exists,
then the Interest Period ends on the last Business Day of that calendar
month; (c) no Interest Period for any portion of the Loan may extend beyond
the scheduled repayment date for that portion of the Loan; and (d) no more
than five Interest Periods may be in effect for any one Lender at any time,
unless otherwise agreed by that Lender.
2.15. CONVERSIONS. Borrower may (a) convert a LIBOR-Rate Borrowing on
the last day of the applicable Interest Period to another Type of Borrowing,
(b) convert another Type of Borrowing (subject to SECTION 2.14) at any time
to a LIBOR-Rate Borrowing, and (c) elect a new Interest Period for a LIBOR-
Rate Borrowing, by giving a Conversion Request to Agent and each Lender no
later than 10:00 a.m. Dallas, Texas time on the day (the "CONVERSION DATE")
that is the third Business Day before the last day of the applicable Interest
Period. Absent Borrower's timely Conversion Request, a LIBOR-Rate Borrowing
shall be deemed converted to a Federal-Funds-Rate Borrowing effective when
the applicable Interest Period expires unless that Borrowing is from a Lender
that is subject to SECTION 2.9(C), in which case a LIBOR-Rate Borrowing shall
be deemed converted to a LIBOR-Rate Borrowing with an Interest Period of one
month.
2.16. BOOKING BORROWINGS. To the extent permitted by applicable law, any
Lender may make, carry, or transfer its Advances at, to, or for the account
of any of its branch offices or the office of any of its Affiliates.
However, no Affiliate of any Lender is entitled to receive any greater
payment under SECTION 2.18 than the transferor Lender would have been
entitled to receive with respect to those Advances, and no Lender is entitled
to receive any greater payment under SECTION 2.18 on account of a transfer of
an Advance to or for the account of a branch office other than the one
specified on SCHEDULE 2.1, than it would have been entitled to receive with
respect to those Advances if such transfer had not been made. Each Lender
agrees that it will use its reasonable efforts (consistent with its internal
policies and applicable law) to make, carry, maintain, or transfer its part
of any Advances with its Affiliates or branch offices in an effort to
eliminate or reduce to the extent possible the aggregate amounts due to it
under SECTIONS 2.18 and 2.19 if, in its reasonable judgment, those efforts
will not be disadvantageous to it.
2.17. BASIS UNAVAILABLE OR INADEQUATE FOR LIBOR RATE. If, on or before
any date when a LIBOR Rate is to be determined for a Borrowing, the Lender in
respect of that Borrowing determines that the basis for determining the
applicable rate is not available or that the resulting rate does not
accurately reflect the cost to that Lender of making or converting Borrowings
at that rate for the applicable Interest Period, then that Lender shall
promptly notify the Companies of that determination (which is conclusive and
binding on the Companies absent manifest error) and that Borrowing shall be
at the Federal-Funds Rate. Until that Lender notifies the Companies that
those circumstances no longer exist, that Lender's commitment under this
agreement to make or convert to LIBOR-Rate Borrowings is suspended.
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2.18. ADDITIONAL COSTS.
(a) With respect to any LIBOR-Rate Borrowing, (i) if any change
after the date of this agreement in any present Requirement of Law (and
for purposes of this SECTION 2.18, Requirement of Law includes
interpretations and guidelines of any central bank or similar authority
whether or not having the force of law) or any future Requirement of Law
imposes, modifies, or deems applicable (or if compliance by any Lender
with any requirement of any Governmental Authority results in) any
requirement that any reserves (including, without limitation, any
marginal, emergency, supplemental, or special reserves) be maintained,
and if (ii) those reserves reduce any sums receivable by that Lender
under this agreement or increase the costs incurred by that Lender in
advancing or maintaining any portion of any LIBOR-Rate Borrowing and
(iii) that Lender determines that the reduction or increase is material
(and it may, in determining the material nature of the reduction or
increase, utilize reasonable assumptions and allocations of costs and
expenses and use any reasonable averaging or attribution method), then
that Lender (through Agent) shall deliver to Borrower a certificate
setting forth in reasonable detail the calculation of the amount
necessary to compensate it for its reduction or increase (which
certificate is conclusive and binding absent manifest error), and
Borrower shall pay that amount to that Lender within ten days after
demand. The provisions of and undertakings and indemnification set
forth in this CLAUSE (A) shall survive the satisfaction and payment of
the Obligations and termination of this agreement.
(b) With respect to any Borrowing, if any change after the date of
this agreement in any present Requirement of Law or any future
Requirement of Law regarding capital adequacy or compliance by any
Lender with any request, directive, or requirement now existing or
hereafter imposed by any Governmental Authority regarding capital
adequacy, or any change in its written policies or in the risk category
of this transaction, reduces the rate of return on its capital as a
consequence of its obligations under this agreement to a level below
that which it otherwise could have achieved (taking into consideration
its policies with respect to capital adequacy) by an amount deemed by it
to be material (and it may, in determining the amount, utilize
reasonable assumptions and allocations of costs and expenses and use any
reasonable averaging or attribution method), then (unless the effect is
already reflected in the rate of interest then applicable under this
agreement) that Lender (through Agent) shall notify Borrower and deliver
to Borrower a certificate setting forth in reasonable detail the
calculation of the amount necessary to compensate it (which certificate
shall be presumed correct), and Borrower shall pay that amount to Lender
within ten days after demand. The provisions of and undertakings and
indemnification set forth in this CLAUSE (B) shall survive the
satisfaction and payment of the Obligations and termination of this
agreement.
(c) Any taxes payable by Agent or any Lender or ruled (by a
Governmental Authority) payable by Agent or any Lender in respect of
this agreement or any other Loan Document shall -- if permitted by
applicable law and if deemed material by Agent or that Lender (who may,
in determining the material nature of the amount payable, utilize
reasonable assumptions and allocations of costs and expenses and use any
reasonable averaging or attribution method) -- be paid by Borrower,
together with interest and penalties, if any (except for taxes payable
on the overall net income of Agent or that Lender and except for
interest and penalties incurred as a result of the gross negligence or
willful misconduct of Agent or any Lender). Agent or that Lender
(through Agent) shall notify Borrower and deliver to Borrower a
certificate setting forth in reasonable detail the calculation of the
amount of payable taxes, which certificate
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is conclusive and binding (absent manifest error), and Borrower shall
pay that amount to Agent for the account of Agent or that Lender, as the
case may be, within ten days after demand. If Agent or that Lender
subsequently receives a refund of the taxes paid to it by Borrower, then
the recipient shall promptly pay the refund to Borrower.
2.19. CHANGE IN LAWS. If any change after the date of this
agreement in any present Requirement of Law or any future Requirement of Law
makes it unlawful for any Lender to make or maintain LIBOR-Rate Borrowings,
then that Lender shall promptly notify Borrower and Agent, and (a) as to
undisbursed funds, any requested Borrowing shall be made as a Federal-Funds
Rate Borrowing, (b) as to any outstanding Borrowing (i) if maintaining the
Borrowing until the last day of the applicable Interest Period is unlawful,
the Borrowing shall be converted to a Federal-Funds-Rate Borrowing as of the
date of notice, but Borrower shall not be obligated to pay any related
Funding Loss, or (ii) if not prohibited by law, the Borrowing shall be
converted to an Federal-Funds-Rate Borrowing as of the last day of the
applicable Interest Period, or (iii) if any conversion will not resolve the
unlawfulness, Borrower shall promptly prepay the Borrowing, without penalty,
and without payment of any related Funding Loss. No Conversion Request is
required to be delivered in connection with any conversion under this SECTION
2.19.
2.20. FOREIGN LENDERS. Each Lender that is organized under the laws
of any jurisdiction OTHER THAN the United States of America or any State
thereof (a) represents to Agent and Borrower that (i) no taxes are required
to be withheld by Agent or Borrower with respect to any payments to be made
to it in respect of the Obligations and (ii) it has furnished to Agent and
Borrower two duly completed copies of either U.S. Internal Revenue Service
FORM 4224 or FORM 1001 (wherein it claims entitlement to complete exemption
from U.S. federal withholding tax on all interest payments under the Loan
Documents), and (b) covenants to (i) provide Agent and Borrower a new FORM
4224 or FORM 1001 upon the expiration or obsolescence of any previously
delivered form according to law, duly executed and completed by it, and (ii)
comply from time to time with all laws with regard to the withholding tax
exemption. If any of the foregoing is not true or the applicable forms are
not provided, then Borrower and Agent (without duplication) may deduct and
withhold from interest payments under the Loan Documents United States
federal income tax at the full rate applicable under the Code.
2.21. FUNDING LOSS. The Companies jointly and severally agree to
indemnify each Lender against, and pay to it upon demand, any Funding Loss of
that Lender. When any Lender demands that the Companies pay any Funding
Loss, that Lender shall deliver to the Companies and Agent a certificate
setting forth in reasonable detail the basis for imposing Funding Loss and
the calculation of the amount, which calculation shall be presumed correct.
The provisions of and undertakings and indemnification set forth in this
SECTION 2.21 shall survive the satisfaction and payment of the Obligations
and termination of this agreement.
2.22. FEES. The following fees are not compensation for the use,
detention, or forbearance of money, are in addition to, and not in lieu of,
interest and expenses otherwise described in this agreement, are non-
refundable, to the fullest extent permitted by applicable law, bear interest,
if not paid when due, at the Default Rate, and are calculated on the basis of
actual number of days (including the first day but excluding the last day)
elapsed, but computed as if each calendar year consisted of 360 days, unless
computation would result in an interest rate in excess of the Maximum Rate in
which event the computation is made on the basis of a year of 365 or 366
days, as the case may be:
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(a) Borrower shall pay to Agent -- for its sole account -- an
annual administrative fee and a custodial fee in an amount and on such
payment terms as may be agreed upon by Borrower and Agent in writing.
(b) Borrower shall pay to each Lender a commitment fee, payable as
it accrues on the last day of each August, November, February, and May -
- beginning August 31, 1993 -- and on the Termination Date, equal to
0.18% per annum of that Lender's daily average Commitment during the
period that (i) begins with the date of this agreement or the preceding
commitment fee payment date, as the case may be, and (ii) ends with and
includes the day before the applicable commitment fee payment date.
SECTION 3. GUARANTY AND COLLATERAL
3.1. GUARANTY.
(a) Guarantor hereby unconditionally and irrevocably guarantees to
each Lender for good and valuable consideration (including, but not
limited to, the facts stated in the recitals to this agreement) (i) the
due and punctual payment in full (and not merely the collectibility) of
the principal of each Lender's Note and the interest thereon, in each
case when due and payable, whether on any installment payment date or at
the stated or accelerated maturity, all according to the terms of the
Notes, Pricing Agreement, and this agreement; (ii) the due and punctual
payment in full (and not merely the collectibility) of all other sums
and charges which may at any time be due and payable in accordance with
the Loan Documents; and (iii) the due and punctual performance of all of
the other terms, covenants and conditions contained in the Loan
Documents.
(b) The obligations and liabilities of Guarantor under this
SECTION 3.1 shall be absolute and unconditional, irrespective of the
genuineness, validity, priority, regularity or enforceability of the
Notes or the other Loan Documents or any other circumstance which might
otherwise constitute a legal or equitable discharge of a surety or
guarantor. Guarantor expressly agrees that any Lender (and when
authorized pursuant to SECTION 10.1(A), Agent on behalf of any Lender)
may, in its sole and absolute discretion, intentionally or
unintentionally, without notice to or further assent of Guarantor and
without in any way releasing, affecting or in any way impairing the
obligations and liabilities of Guarantor hereunder: (i) waive
compliance with, or any defaults under, or grant or permit any other
indulgences under or with respect to that Lender's Note or the other
Loan Documents; (ii) modify, amend, change or terminate any provisions
of that Lender's Note or the other Loan Documents; (iii) grant
extensions or renewals of or with respect to that Lender's Note or the
other Loan Documents; (iv) effect any release, subordination, compromise
or settlement in connection with that Lender's Note or the other Loan
Documents; (v) permit the substitution, exchange, release, loss,
impairment or other disposition of the Collateral or any part of the
Collateral, or the subordination of any Lien or security interest
therein; (vi) make advances for the purpose of performing any term,
provision or covenant contained in that Lender's Note or the other Loan
Documents with respect to which Borrower or Guarantor shall then be in
default; (vii) assign, pledge, hypothecate or otherwise transfer that
Lender's Note or any other Loan Document or any interest therein; and
(viii) deal in all respects with Borrower as if this SECTION 3.1 were
not in effect.
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(c) The obligations and liabilities of Guarantor under this
SECTION 3.1 shall be primary, direct and immediate, shall not be subject
to any counterclaim, recoupment, set off, reduction or defense based
upon any claim that Guarantor may have against Borrower or any Lender
and shall not be conditional or contingent upon pursuit or enforcement
by Agent or Lenders of any remedies they may have against Borrower with
respect to the Notes or the other Loan Documents, whether pursuant to
the terms thereof or by operation of law. Without limiting the
generality of the foregoing, neither Agent nor any Lender shall be
required to make any demand upon Borrower, or to sell the Collateral or
otherwise pursue, enforce or exhaust its remedies against Borrower or
the Collateral either before, concurrently with or after pursuing or
enforcing its rights and remedies under this SECTION 3.1. Any one or
more successive or concurrent actions or proceedings may be brought
against Guarantor under this SECTION 3.1, either in the same action, if
any, brought against Borrower or in separate actions or proceedings, as
often as Agent or any Lender may deem expedient or advisable. Without
limiting the foregoing, it is specifically understood that any
modification, limitation, or discharge of any of the Obligations arising
out of, or by virtue of, any bankruptcy, arrangement, reorganization, or
similar proceeding for relief of debtors under any Debtor Laws initiated
by or against Borrower shall not modify, limit, lessen, reduce, impair,
discharge, or otherwise affect the liability of Guarantor hereunder in
any manner whatsoever, and this SECTION 3.1 shall remain and continue in
full force and effect. It is the intent and purpose of this SECTION 3.1
that Guarantor shall and does hereby waive all rights and benefits which
might accrue to Guarantor by reason of any such proceeding, and
Guarantor agrees that it shall be liable for the full amount of the
Obligations, regardless of, and irrespective to, any modification,
limitation, or discharge of the liability of Borrower that may result
from any such proceedings.
(d) Guarantor hereby unconditionally, irrevocably and expressly
waives (i) presentment and demand for payment of the principal of or
interest on any Note, protest of non-payment, notice of intent to
accelerate any Note and notice of acceleration thereof; (ii) notice of
acceptance of the guaranty set forth in this SECTION 3.1 and of
presentment, demand, and protest thereof; (iii) notice of any Default or
Potential Default hereunder (except as otherwise set forth herein) and
notice of all indulgences; (iv) demand for observance, performance, or
enforcement of any of the terms or provisions of the Loan Documents;
(v) any right or claim of right to cause a marshalling of the assets of
Borrower; and (vi) all other notices and demands otherwise required by
law which Guarantor may lawfully waive.
(e) In the event Guarantor shall advance any sums to Borrower, or
in the event Borrower has heretofore or shall hereafter become indebted
to Guarantor before the Obligations have been paid in full and the
Commitments of Lenders shall have terminated, repayment of any and all
such Indebtedness (the "SUBORDINATED DEBT") shall be subordinate in all
respects to repayment of the Obligations. Any payment to Guarantor on
account of the Subordinated Debt shall be collected and received by
Guarantor in trust for Lenders and shall be paid over to Agent for the
benefit of Lenders on account of the Obligations without impairing or
releasing the obligations of Guarantor under this SECTION 3.1. It is
the intention of the parties hereto that Guarantor shall not be deemed
to be a "CREDITOR" (as defined in SECTION 101 of the FEDERAL BANKRUPTCY
CODE) of Borrower by reason of the existence of the guaranty in this
SECTION 3.1 in the event that Borrower becomes a debtor in any
proceeding under the Federal Bankruptcy Code. Guarantor hereby
irrevocably waives any and all rights it may now or hereafter have under
any agreement at law or in equity (including, without limitation, any
law subrogating Guarantor to
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the rights of Lenders) to assert any claim against or seek contribution,
indemnification, or any other form of reimbursement from Borrower for
any payment made by Guarantor under or in connection with this
agreement.
(f) Without the prior written consent of Determining Lenders,
Guarantor shall not ask, demand, receive, accept, sue for, set off,
collect or enforce any Subordinated Debt or any collateral and security
therefor. Guarantor represents and warrants to Lenders that the
Subordinated Debt is unsecured and agrees not to receive or accept any
collateral or security for any Subordinated Debt without the prior
written permission of Determining Lenders. Guarantor shall not assign,
transfer, hypothecate, or dispose of any Subordinated Debt while this
guaranty under this SECTION 3.1 is in effect. In the event of any sale,
receivership, insolvency, or bankruptcy proceeding, or assignment for
the benefit of creditors, or any proceeding by or against Borrower for
any relief under any Debtor Law, then and in any such event any payment
or distribution of any kind or character, either in cash, securities or
other property, which shall be payable or deliverable upon, or with
respect to, all or any part of the Subordinated Debt or otherwise shall
be paid or delivered directly to Agent for application to the
Obligations (whether due or not due and in such order and manner as
Lenders may determine in the exercise of their sole discretion) until
the Obligations shall have been fully paid and satisfied. Guarantor
hereby irrevocably authorizes and empowers Agent, upon the occurrence
and continuance of a Default, to demand, sue for, collect and receive
every such payment or distribution and give acquittance therefor and to
file claims and take such other proceedings in Agent's own name or in
the name of Guarantor or otherwise, as Determining Lenders may deem
necessary or advisable to carry out the provisions of this SECTION 3.1.
Guarantor hereby agrees to execute and deliver to Agent such powers of
attorney, assignments, endorsements, or other instruments as may be
requested by Agent in order to enable Agent to enforce any and all
claims upon, or with respect to, the Subordinated Debt, and to collect
and receive any and all payments or distributions which may be payable
or deliverable at any time upon or with respect thereto.
(g) Upon the occurrence and continuance of a Default and upon the
request of Agent, Guarantor shall endorse, assign and deliver to Agent
all notes, instruments and agreements evidencing, securing, guarantying
or made in connection with the Subordinated Debt.
(h) If at any time any payment, or portion thereof, made by, or
for the account of, Borrower or Guarantor on account of the Obligations
is set aside by any court or trustee having jurisdiction as a voidable
preference or fraudulent conveyance or must otherwise be restored or
returned by Agent or Lenders under any Debtor Law or as a result of any
dissolution, liquidation or reorganization of Borrower or upon, or as a
result of, the appointment of any receiver, intervenor or conservator
of, or trustee or similar officer for, Borrower or any substantial part
of its properties or assets, Guarantor hereby agrees that the guaranty
set forth in this SECTION 3.1 shall continue and remain in full force
and effect or be reinstated, as the case may be, all as though such
payment(s) had not been made.
3.2. COLLATERAL.
(a) As security for the Obligations and the performance by the
Companies of their respective obligations under this agreement and under
the other Loan Documents, Guarantor grants and conveys a first and prior
security interest and collaterally assigns to Agent, on behalf of
Lenders, any and all right, title, interest, security interest, power
and privilege which
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Guarantor may now or hereafter have in and to any of
the following property: (i) All Mortgage Notes and Mortgages securing
those Mortgage Notes delivered to, or held by or for Agent from time to
time under this agreement; (ii) all Mortgage-Backed Securities delivered
to, or registered by book-entry in the name of, Agent from time to time
under this agreement; (iii) all other promissory notes or other
instruments which are executed and delivered to or for the benefit of or
payable to Guarantor and which are in the possession of, required to be
delivered to, in transit to or are held by or for Agent for the benefit
of Lenders, and all collateral and security for any such notes and
instruments and all mortgages, security agreements and other documents
granting a lien on or interest in any collateral or security for any
such notes or instruments, (iv) all payments and prepayments of
principal, interest, penalties and other income or payments due or to
become due with respect to any of the foregoing, (v) all Take-Out
Commitments covering any of the foregoing, (vi) all files, documents,
instruments, surveys, certificates, correspondence, appraisals, tapes,
discs, cards, accounting records and other records, information and data
of Guarantor relating to any of the foregoing, (vii) all guaranty or
insurance proceeds of any nature whatsoever paid or payable to Guarantor
with respect to any of the foregoing or with respect to any mortgaged
property securing payment thereof, and (viii) all other proceeds of any
of the foregoing, including all accounts, general intangibles,
instruments, real or personal property, documents, chattel paper and
proceeds arising from or by virtue of or collections with respect to, or
comprising part of, any of the foregoing.
(b) As security for the Obligations and the performance by
Borrower and Guarantor of their respective obligations hereunder and
under the other Loan Documents, Borrower grants and conveys a first and
prior security interest and collaterally assigns to Agent, on behalf of
Lenders, the following Property: (i) any and all right, title,
interest, security interest, power and privilege which Borrower may now
or hereafter have in and to the Funding Account and any funds ever
deposited therein; (ii) any and all right, title, interest, power and
privilege which Borrower may now or hereafter have in and to the
Intercompany Note and any payments or proceeds thereon; and (iii) all
proceeds of any Collateral, including all accounts, general intangibles,
instruments, real or personal property, documents, chattel paper and
proceeds arising from or by virtue of or collections with respect to, or
comprising part of, any of the foregoing.
(c) In furtherance of the foregoing, the Companies (i) hereby
ratify and confirm that all liens and security interests heretofore or
concurrently herewith granted or conveyed to Agent or Lenders by the
Companies in connection with the Existing Loan Documents, this
agreement, or otherwise (as any thereof have been renewed, extended,
amended, or supplemented), whether or not described on SCHEDULE 3.2,
were intended to, did, do, and shall continue to secure the full and
complete payment and performance of the Obligations (including, without
limitation, all amounts now or hereafter evidenced by the Notes),
(ii) agree that the financing statements described on SCHEDULE 3.2 shall
continue in full force and effect, (iii) shall perform such acts and
duly authorize, execute, acknowledge, deliver, file, and record such
additional assignments, security agreements, deeds of trust, mortgages,
modifications or amendments to any of the foregoing, and such other
agreements, documents, and instruments as Agent or any Lender may
reasonably request in order to perfect and protect such liens and
security interests and preserve and protect the rights of Agent and
Lenders in respect of all present and future collateral for the
Obligations.
3.3. DELIVERY TO AGENT. Each Collateral Delivery Notification shall
include a schedule that identifies the Mortgage Notes and Mortgage-Backed
Securities offered as security for the Obligations and
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states the Collateral Value attributed to each such item. Except as
otherwise set forth in SECTION 2.3 with regard to Wet Borrowings, no later
than 10:30 a.m. Dallas, Texas time on the date of the requested Borrowing,
the following items shall be delivered to Agent (collectively, the
"PRINCIPAL COLLATERAL DOCUMENTS") with respect to each Mortgage Note or
Mortgage Backed Security offered as security:
(a) in the case of Mortgage-Backed Securities, the original of
each certificated form Mortgage Backed Security, accompanied by
appropriate instruments of transfer duly executed in blank;
(b) in the case of Mortgage-Backed Securities, with respect to
each Mortgage Backed Security in book entry form, confirmation
satisfactory to Agent that such Mortgage Backed Security has been
transferred to the account of Agent and that it is not subject to any
lien, encumbrance or adverse claim or any right of transfer in any
Person other than Agent;
(c) in the case of Mortgage Notes, the original of each Mortgage
Note endorsed in blank (without restriction or limitation);
(d) in the case of Mortgage Notes, an original executed assignment
in blank for each Mortgage Note and the Mortgage securing such Mortgage
Note, in recordable form, and otherwise in form satisfactory to Agent;
(e) in the case of Mortgage Notes, to the extent applicable and
requested by Agent, the original executed Take-Out Commitment relating
to each Mortgage Note or a schedule which designates the Take-Out
Commitment relating to such Mortgage Note; and
(f) to the extent a Mortgage Note is not originated by Guarantor,
original executed copies of all intervening assignments to Guarantor.
Guarantor shall hold in trust for Agent the original recorded copy of the
Mortgage relating to each Mortgage Note, a mortgagee policy of title
insurance (or binding unexpired and unconditional commitment to issue such
insurance if the policy has not yet been delivered to Borrower) insuring
Guarantor's perfected, first priority Lien (subject to the Permitted
Exception) created by such Mortgage securing such Mortgage Note, the original
insurance policies referred to in SECTION 6.6, and all other original
documents, including any undelivered Take-Out Commitments, Mortgage Notes,
and Mortgage-Backed Securities, and Guarantor shall specifically identify
such items in the Collateral Delivery Notification. Guarantor must deliver
to Agent any of the foregoing items as soon as reasonably practicable upon
Agent's request. For purposes of SECTION 4.2(B), Guarantor shall be deemed
an approved bailee of Agent to the extent it holds Collateral which
constitutes Eligible Collateral within the meaning of CLAUSE (K)(I) of the
definition of Eligible Collateral.
3.4. POWER OF ATTORNEY. Borrower and Guarantor each hereby irrevocably
appoints Agent, acting on behalf of Lenders, its attorney in fact, with full
power of substitution, for and on behalf and in the name of Borrower or
Guarantor, as the case may be, to (i) endorse and deliver to any Person any
check, instrument or other paper coming into Agent's or any Lender's
possession and representing payment made in respect of any Mortgage Note or
Mortgage Backed Security included in the Collateral or in respect of any
other Collateral or Take-Out Commitment; (ii) prepare, complete, execute,
deliver and record any assignment of any Mortgage relating to any Mortgage
Note, or Mortgage Backed Security
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to Agent or to any other Person; (iii) endorse and deliver or otherwise
transfer any Mortgage Note or Mortgage Backed Security, and do every other
thing necessary or desirable to effect transfer of all or any part of the
Mortgage Collateral to Agent or to any other Person; (iv) take all necessary
and appropriate action with respect to all Obligations and the Mortgage
Collateral to be delivered to Agent or held by Borrower in trust for Agent;
(v) commence, prosecute, settle, discontinue, defend, or otherwise dispose
of any claim relating to any Take-Out Commitment or any part of the Mortgage
Collateral; and (vi) sign Borrower's or Guarantor's name wherever appropriate
to effect the performance of this agreement. This section shall be liberally,
not restrictively, construed so to give the greatest latitude to Agent's power,
as Borrower's or Guarantor's attorney in fact, to collect, sell, and deliver
any of the Mortgage Collateral and all other documents relating thereto. The
powers and authorities herein conferred on Agent may be exercised by Agent
through any Person who, at the time of the execution of a particular
instrument, is an officer of Agent. The power of attorney conferred by this
SECTION 3.4 shall not be exercised by Agent prior to the occurrence of a
Default and is granted for a valuable consideration and is coupled with an
interest and irrevocable so long as the Obligations, or any part thereof, shall
remain unpaid or any Commitment is outstanding. All Persons dealing with
Agent, or any officer thereof acting pursuant hereto, or any substitute, shall
be fully protected in treating the powers and authorities conferred by this
SECTION 3.4 as existing and continuing in full force and effect until advised
by Agent that the Obligations have been fully and finally paid and satisfied
and all Commitments have been terminated.
3.5. Redemption of Mortgage Collateral.
(a) GENERALLY. So long as no Default or Potential Default shall
be in existence, Borrower or Guarantor may obtain the release of Agent's
security interest in all or any part of the Mortgage Collateral at any
time, and from time to time, by paying to Agent, as a repayment
hereunder, the Collateral Value of the Mortgage Collateral to be so
released (such Collateral Value being determined as of the date such
Mortgage Collateral was first delivered to Agent). Promptly upon
receipt of any such repayment, Agent shall distribute same in accordance
with SECTION 2.6.
(b) REDEMPTION PURSUANT TO SALE. Borrower or Guarantor may from
time to time request that Agent permit the sale of Mortgage Collateral.
Upon the receipt by Agent of such a request from Borrower or Guarantor,
and so long as no Default shall be in existence, Agent shall deliver to
the Investor, under Agent's Trust Receipt and Security Agreement Letter,
in the form of EXHIBIT D-1 or EXHIBIT D-2, as applicable, the items of
Mortgage Collateral being sold which are held by Agent, with the release
of Agent's security interest in those items being conditioned upon
delivery to Agent, within 45 days after delivery by Agent of those items
of Mortgage Collateral, by that Investor of an amount equal to the
Collateral Value of those items of Mortgage Collateral (determined as of
the date such Mortgage Collateral was first delivered by Guarantor or
Borrower to Agent), or, in the case of Mortgage Notes being sold or
exchanged for Mortgage-Backed Securities, Mortgage-Backed Securities
with a Collateral Value (determined as of the date of delivery to Agent)
equal to the Collateral Value of the released Mortgage Notes (determined
as of the date such Mortgage Notes were first delivered by Guarantor or
Borrower to Agent). The delivery of Mortgage-Backed Securities and all
payments made in relation to such Mortgage Collateral by Investors shall
be made directly to Agent, and Guarantor or Borrower shall, as agent for
Agent and only upon the express prior written request of Agent, deliver
to that Investor the items held by Guarantor or Borrower under SECTION
3.3. Items of Mortgage Collateral delivered by Agent to any Investor
under this SECTION 3.5(B) shall cease to be Eligible
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Collateral upon the EARLIER to occur of (i) the delivery to Agent by that
Investor of either an amount equal to, or Mortgage-Backed Securities with
a Collateral Value (determined as of the date of such delivery) equal to,
the Collateral Value of such Mortgage Collateral (determined as set forth
above), AND (ii) the expiration of 45 days after delivery by Agent of
those items of Mortgage Collateral.
(c) CONTINUATION OF LIEN; APPLICATION OF PROCEEDS. Agent's Liens
in all Mortgage Collateral transmitted to any Investor under SECTION
3.5(B) shall continue in effect until Agent shall have received the
payments or Mortgage-Backed Securities as provided therein. Promptly
upon receipt of any such payment, Agent shall distribute such payments
in accordance with SECTION 2.6. If Agent shall receive Mortgage-Backed
Securities as provided in SECTION 3.5(B), those Mortgage-Backed
Securities shall be Collateral as provided in this agreement.
(d) CERTAIN CREDITS. No Lender shall be under any duty at any
time to credit Borrower for any amounts due from any Investor in respect
of any purchase of any Mortgage Collateral contemplated under SECTION
3.5(B) above, until that Lender has actually received immediately
available funds for such Mortgage Collateral in the amount required
pursuant thereto, and neither Agent nor any Lender shall be under any
duty at any time to collect any amounts or otherwise enforce any
obligations due from any Investor in respect of any such purchase.
3.6. CORRECTION OF MORTGAGE NOTES. The Borrower may from time to time
request that the Agent deliver a Mortgage Note that constitutes Collateral so
that such Mortgage Note may be replaced by a corrected Mortgage Note. Upon
receipt by the Agent of such a request from the Borrower, and so long as no
Default shall be in existence, the Agent shall deliver to the Borrower, under
the Agent's Trust Receipt and Security Agreement Letter, the Mortgage Note to
be corrected, upon the express condition of receipt by Agent of a corrected
Mortgage Note that conforms to the requirements of this agreement; PROVIDED,
that (i) at no time shall more than $2,000,000 of Mortgage Notes (such amount
being the aggregate outstanding principal balances of the Mortgage Notes) be
so delivered and not have been replaced with corrected Mortgage Notes
hereunder, (ii) the corrected Mortgage Note must be delivered to Agent
endorsed in blank (without restriction or limitation) within 21 days of the
release by Agent of the Mortgage Note to be replaced, and (iii) until the
corrected Mortgage Note has been delivered to Agent, the Collateral Value
attributed to the corresponding Mortgage Note that is to be replaced shall be
the lesser of (x) the Collateral Value of the Mortgage Note to be replaced
without giving effect to this proviso and (y) 98% of the principal balance of
the corrected Mortgage Note.
3.7. COLLATERAL VALUE. If at any time any item of Collateral shall
cease to meet any of the requirements for Eligible Collateral or otherwise
ceases to be Eligible Collateral under this agreement, then that item will be
excluded from Eligible Collateral for purposes of determining the aggregate
Collateral Value of all Eligible Collateral, and Agent will notify Borrower
and Guarantor that that item no longer constitutes Eligible Collateral.
3.8. AGENT TO PROVIDE COLLATERAL REPORT. Agent shall send to Guarantor
and each Lender a Collateral Report in the form attached as EXHIBIT C-5 on
each Business Day. Agent shall send the Collateral Report by telecopy by
11:30 a.m. Dallas time.
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3.9. TRUST RECEIPT AND SECURITY AGREEMENT LETTERS. Agent and the
Companies agree that all Trust Receipt and Security Agreement Letters Agent
receives in connection with this agreement are received in its capacity as
Agent for the benefit of Lenders to secure the Obligations.
SECTION 4. CONDITIONS PRECEDENT. Each Lender's commitment to make
Advances is subject to fulfillment of the following conditions:
4.1. INITIAL BORROWING. Each Lender's commitment to make Advances to
fund the initial Borrowing is subject to, in addition to the conditions
precedent specified in SECTION 4.2, delivery to Agent of all of the
agreements, documents, instruments, and other items described on
SCHEDULE 4.1.
4.2. ALL BORROWINGS. Each Lender's commitment to make any Advance to
fund any Borrowing is subject to the following further conditions precedent:
(a) Borrower has delivered to Agent and Lenders a Credit Request
completed and executed by Borrower, and Guarantor delivered to Agent and
Lenders a Collateral Delivery Notification, all within the applicable
time period set forth in SECTION 2.2.
(b) All Principal Collateral Documents with respect to each
Mortgage Note or Mortgage Backed Security in which Borrower or Guarantor
has granted a Lien to Agent, on behalf of Lenders, has been physically
delivered to the possession of Agent in accordance with SECTION 3.3.
(c) The representations and warranties by the Companies in the
Loan Documents are true and correct in all material respects on and as
of the date of that Borrowing and after giving effect to that Borrowing
EXCEPT to the extent that (i) a representation or warranty speaks to a
specific date or (ii) the facts on which a representation or warranty is
based have changed by transactions or conditions contemplated or
expressly permitted by the Loan Documents.
(d) No Default or Potential Default is continuing as of the date
of any Borrowing and after giving effect to that Borrowing.
(e) The Funding Account is established and in existence.
(f) No limitation set forth in SECTIONS 2.1(A) through (D) is
exceeded as of the date of any Borrowing and after giving effect to that
Borrowing.
(g) Delivery to Agent of the Intercompany Note endorsed to the
order of Agent.
(h) Delivery to Agent of executed financing statements as required
by Agent in order to perfect or maintain the priority of any Lien
granted under this agreement.
(i) Delivery to Agent in sufficient copies for each Lender of any
other documents and opinions of counsel, including any documents as may
be necessary or desirable to perfect or maintain the priority of any
Lien granted or intended to be granted under this agreement whether due
to any change in any Requirement of Law (including any change in the
Requirements of Law
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applicable to Mortgage-Backed Securities) or otherwise and including
favorable written opinions of counsel as to the perfection, maintenance
and priority of any such Lien, as any Lender through Agent may reasonably
request.
Each Credit Request constitutes a representation and warranty by Borrower on
the date of the requested Borrowing as to the facts specified in CLAUSES (C),
(D), and (F) of this SECTION 4.2.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Companies jointly and
severally represent and warrant to Agent and Lender as follows:
5.1. ORGANIZATION AND GOOD STANDING. Each Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, is duly qualified as a foreign corporation
and in good standing in all jurisdictions in which its failure to be so
qualified could have a Material Adverse Effect and has the corporate power
and authority to own its properties and assets and to transact the business
in which it is engaged and will be so qualified in those states wherein it
transacts business in the future, except where the failure to be so qualified
would not result in a Material Adverse Effect.
5.2. AUTHORIZATION AND POWER. Each Company has the corporate power and
requisite authority to execute, deliver and perform this agreement, the Notes
and other Loan Documents to which it is a party.
5.3. NO CONFLICTS OR CONSENTS. Neither the execution and delivery of
this agreement, the Notes or the other Loan Documents to which it is a party,
nor the consummation of any of the transactions herein or therein
contemplated, nor compliance with the terms and provisions hereof or with the
terms and provisions thereof, will materially contravene or conflict with any
Requirement of Law to which either Company is subject or any indenture,
mortgage, deed of trust, or other agreement or instrument of which either
Company is a party or by which either Company or any of their respective
Property may be bound, or to which either Company or any of their respective
Property may be subject.
5.4. ENFORCEABLE OBLIGATIONS. This agreement, the Notes and the other
Loan Documents to which it is a party are the legal, valid and binding
obligations of each Company, enforceable in accordance with their respective
terms, except as limited by Debtor Laws and general principles of equity.
5.5. USE OF PROCEEDS. Neither the proceeds of any Advance nor the
proceeds of the intercompany loans under the Intercompany Note has previously
been or is to be used for any purpose other than as described in the recitals
to this agreement.
5.6. PRIORITY OF LIENS. Upon delivery to Agent of each Mortgage Note,
Agent, on behalf of Lenders, shall have valid, enforceable, perfected, first
priority Liens and security interests therein. Upon delivery to Agent or its
bailee of each Mortgage Backed Security in certificated form, Agent, on
behalf of Lenders, shall have valid, enforceable, perfected, first priority
Liens and security interests therein. Upon notice of the Lien of Agent in
each Mortgage Backed Security in book entry form to the financial institution
in whose favor such securities have been issued, and confirmation thereof by
such financial institution, Agent, on behalf of Lenders, shall have valid,
enforceable, perfected, first priority Liens and security interests therein.
Agent, on behalf of Lenders, shall have valid, enforceable, perfected, first
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priority Liens (a) for a period of 21 days, upon the funding of each Wet
Borrowing, in each corresponding Mortgage Note and related Take-Out
Commitment in accordance with SECTION 2.3, and (b) in all Mortgage Collateral
transmitted to any Investor under SECTION 3.5(B) which shall continue
uninterrupted and in full force in effect until Agent shall have received the
payments or Mortgage-Backed Securities as provided in SECTION 3.5(B).
5.7. NO LIENS. Guarantor has good and indefeasible title to the
Mortgage Collateral and all the Mortgage Collateral is free and clear of all
Liens and other adverse claims of any nature, other than the Liens of Agent
on behalf of Lenders.
5.8. FINANCIAL CONDITION. Each Company has delivered to Lenders copies
of its balance sheet as of December 31, 1992, and the related statements of
income and cash flows for the period ended on such date; such financial
statements are complete and correct in all material respects and fairly
present its financial condition as of such date and its results of operations
for the period ended on such date, and have been prepared in accordance with
GAAP, subject to normal year-end adjustments; as of the date thereof, there
were no obligations, liabilities or Indebtedness (including material
contingent and indirect liabilities and obligations or unusual forward or
long-term commitments) of Borrower or of Guarantor, respectively, which are
not reflected in such financial statements and are required to be reflected
based upon GAAP; and no change having a Material Adverse Effect has occurred
since the date of such financial statements. Each Company has also delivered
to Lenders a management report for the month ended February 28, 1993; such
report fairly and accurately in all material respects presents its commitment
position, pipeline position, mortgage servicing and production, balance
sheet, and income statement as of the end of that month.
5.9. FULL DISCLOSURE. There is no material fact that either Company has
not disclosed to Lenders which could reasonably be expected to have a
Material Adverse Effect, except that no warranty is made regarding general
economic conditions. To the best of each of Company's knowledge, neither the
financial statements referred to in SECTION 5.8, nor any Credit Request or
Collateral Delivery Notification, officer's certificate or written statement
(other than any financial projections) authored by either Company and
delivered by either Company to Agent or any Lender in connection with this
agreement, contains any untrue statement of material fact.
5.10. No DEFAULT. Neither Company is in default under any material loan
agreement, mortgage, security agreement or other material agreement to which
it is a party or by which any of its Property is bound, which default could
reasonably be expected to have a Material Adverse Effect.
5.11. NO MATERIAL LITIGATION. There are no material actions, suits or
legal, equitable, arbitration or administrative proceedings against either
Company or any of their respective Property the adverse determination of
which, in either Company's opinion, will constitute a Material Adverse Effect
and which are (a) pending, or (b) to the knowledge of either Company on the
date of this agreement, threatened.
5.12. TAXES. All tax returns required to be filed by Companies in any
jurisdiction have been filed and all taxes, assessments, fees and other
governmental charges upon either Company or upon any of their respective
Property, income or franchises have been paid prior to the time that such
taxes could give rise to a Lien thereon, unless protested in good faith by
appropriate proceedings and such Lien has been stayed and continues to be
stayed, or unless the failure to have filed such tax returns or to have made
such payment could not reasonably be expected to have a Material Adverse
Effect. Neither
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Company has any knowledge of any proposed tax assessment against either
Company in a material amount.
5.13. PRINCIPAL OFFICE, ETC. The principal office, chief executive
office and principal place of business of Borrower is at 1201 Market Street,
Wilmington, Delaware 19801, and of Guarantor is at 11000 Broken Land
Parkway, Columbia, Maryland 21044.
5.14. EMPLOYEE BENEFITS PLANS.
(a) Neither Company nor any of their ERISA Affiliates, nor any
Plan, is in material violation of any provision of ERISA or any other
applicable state or federal law, including the Code.
(b) No Prohibited Transaction or Reportable Event has occurred
with respect to any Plan.
(c) No notice of intent to terminate a Plan has been filed, nor
has any Plan been terminated under SECTION 4041(C) of ERISA since
September 2, 1974.
(d) To the best of the Companies' knowledge, the PBGC has not
instituted proceedings to terminate, or appoint a trustee to administer,
any Plan, and no event or condition has occurred or exists which might
constitute grounds under SECTION 4042 of ERISA for the termination of,
or the appointment of a trustee to administer, any Plan.
(e) Neither Company, nor any of their respective ERISA Affiliates
has incurred or expects to incur any withdrawal liability to any
multiemployer plan within the meaning of SECTION 4001(A)(3) of ERISA.
(f) Each Plan meets the minimum funding requirements of
SECTION 412 of the Code and no waiver from such minimum funding
requirements has been applied for or approved pursuant to SECTION 412(D)
of the Code.
5.15. NO APPROVALS REQUIRED. Other than consents and approvals
previously obtained and actions previously taken, neither the execution and
delivery of this agreement, the Notes and the other Loan Documents, nor the
consummation of any of the transactions contemplated by any of the foregoing
requires the consent or approval of, the giving of notice to, or the
registration, recording or filing of any document with (except as necessary
to perfect the Liens granted to Agent for the benefit of Lenders), or the
taking of any other action in respect of, any Governmental Authority which
exercises jurisdiction over either Company or any of their respective
Property.
5.16. SUBSIDIARIES. As of the date of this agreement, other than the
Subsidiaries of Guarantor listed on SCHEDULE 5.16, neither Company has any
Subsidiaries.
5.17. INVESTMENT COMPANY. Neither Company is an "INVESTMENT COMPANY"
within the meaning of the INVESTMENT COMPANY ACT OF 1940, as amended.
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5.18. GOVERNMENT APPROVALS. Guarantor is approved and qualified and in
good standing as an issuer, mortgagee, or seller/servicer, as set forth
below, and meets all requirements applicable to its status as such:
(a) GNMA approved issuer of Mortgage-Backed Securities guaranteed
by GNMA;
(b) FNMA approved seller/servicer of Mortgage Loans, eligible to
originate, purchase, hold, sell, and service Mortgage Loans to
be sold to FNMA;
(c) FHLMC approved seller/servicer of Mortgage Loans, eligible to
originate, purchase, hold, sell, and service Mortgage Loans to
be sold to FHLMC;
(d) FHA approved mortgagee, eligible to originate, purchase, hold,
sell, and service FHA Loans; and
(e) VA approved mortgagee, eligible to originate, purchase, hold,
sell, and service VA Loans.
5.19. SURVIVAL. All representations and warranties by the Companies
herein shall survive delivery of the Notes and the making of the Loan, and
any investigation at any time made by or on behalf of Agent or Lenders shall
not diminish Agent's and Lenders' right to rely thereon.
5.20 APPRAISALS. With respect to the property encumbered by any
Mortgage securing part of the Mortgage Collateral, the Companies have
obtained appraisals or other evaluations of that property, as agent for
Lenders, in compliance with CHAPTER 34A of TITLE 12 of the UNITED STATES
CODE, as hereafter amended, and any regulations promulgated thereunder.
SECTION 6. AFFIRMATIVE COVENANTS. Until the Commitments are all
terminated and the Obligations are paid and performed in full, the Companies
shall comply with the following:
6.1 FINANCIAL STATEMENTS AND REPORTS. The Companies shall furnish to
Lenders the following, all in form and detail reasonably satisfactory to
Lenders:
(a) Promptly when available but at least within 92 days after each
fiscal-year end of Ryland Group, consolidated Financial Statements of
Ryland Group and of Guarantor (including consolidation with -- and
consolidating at least as to -- Borrower) as of that year end, each
reflecting the corresponding figures for the preceding fiscal year in
comparative form, accompanied by the related report prepared by
independent certified public accountants acceptable to Agent and stating
that the consolidated portion of those statements were prepared in
accordance with GAAP applied on a basis consistent with prior periods
except for such changes in GAAP concurred in by the Companies'
independent public accountants;
(b) Promptly when available but at least within 47 days after each
fiscal quarter of Guarantor, consolidated Financial Statements of
Guarantor (including consolidation with -- and consolidating at least as
to -- Borrower) as of that quarter end, each accompanied by (i) a
certificate of the applicable Company's principal financial officer
stating that those statements were prepared in accordance with GAAP,
subject to normal year-end adjustments, and (ii) a
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completed Officer's Certificate substantially in the form of EXHIBIT E,
executed by the President or any Vice President of the Companies;
(c) Promptly and in any event within 30 days after the end of each
month, a management report substantially in the form of EXHIBIT F
regarding Guarantor's commitment position, pipeline position, mortgage
servicing/delinquency, balance sheet, and income statement prepared as
of the end of such month; and
(d) Such other information concerning the Collateral, the
business, properties or financial condition or operations of the
Companies and Ryland, or otherwise relating to this agreement, as any
Lender may reasonably request.
6.2. TAXES AND OTHER LIENS. Each Company shall pay and discharge
promptly all taxes, assessments and governmental charges or levies imposed
upon either of them or any of their respective Property and all claims of any
kind (including claims for labor, materials, supplies and rent) which, if
unpaid, might become a Lien upon any of their respective Property and which,
if unpaid, could reasonably be expected to have a Material Adverse Effect,
PROVIDED THAT neither Company shall be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate proceedings
diligently conducted by or on behalf of either Company, that Lien is stayed
and continues to be stayed and each Company shall have set up reserves
therefor adequate under GAAP.
6.3. MAINTENANCE. Each Company shall (a) except as permitted by SECTION
7.1, maintain its corporate existence in good standing and all of its rights,
privileges, licenses and franchises necessary or desirable in the normal
conduct of its business, including, without limitation, Guarantor's
eligibility as lender, seller/servicer and issuer under SECTION 5.18,
(b) observe and comply with all governmental regulations and other
Requirements of Law if the failure to so observe or comply would result in a
Material Adverse Effect, and (c) provide to Agent copies of all audits
conducted by GNMA, FNMA, or FHLMC.
6.4. FURTHER ASSURANCES. Each Company shall promptly, and in any event
within three Business Days after Agent's request, or such longer period as
permitted under SECTION 3.6, cure any defects in the execution and delivery
of the Notes, this agreement and the other Loan Documents and each Company
shall, at their expense, promptly execute and deliver to Agent upon request
all such other and further documents, agreements and instruments in
compliance with or accomplishment of the covenants and agreements of the
Companies in this agreement and in the other Loan Documents or to further
evidence and more fully describe the Collateral intended as security for the
Notes, or to correct any omissions in this agreement or the other Loan
Documents, or more fully to state the security obligations set out herein or
in any of the other Loan Documents, or to perfect, protect or preserve any
Liens created (or intended to be created) pursuant hereto or to any of the
other Loan Documents, or to make any recordings, to file any notices, or
obtain any consents.
6.5. REIMBURSEMENT OF EXPENSES. The Companies jointly and severally
agree to pay (a) all reasonable legal fees incurred by Agent and all
reasonable legal fees in an amount not exceeding $2,500 for each other Lender
in connection with the preparation, negotiation, or execution of this
agreement, the Notes and the other Loan Documents, (b) all reasonable legal
fees in an amount not exceeding $5,000 incurred by Agent and all reasonable
legal fees in an amount not exceeding $1,200 incurred by each other
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Lender in connection with each separate future amendment, consent, waiver, or
approval executed in connection with this agreement, (c) all fees, charges or
taxes for the recording or filing of the Security Instruments, (d) all other
reasonable out-of-pocket expenses of Agent or any Lender in connection with
the preparation, negotiation, execution or administration of this agreement,
the Notes and the other Loan Documents, including courier expenses incurred
in connection with the Mortgage Collateral, and (e) all amounts expended,
advanced or incurred by Agent or any Lender to satisfy any obligation of
either Company under this agreement or any of the other Loan Documents or to
collect Notes, or to enforce the rights of Agent or any Lender under this
agreement or any of the other Loan Documents, which amounts shall include all
court costs, attorneys' fees (including, without limitation, for trial,
appeal or other proceedings), fees of auditors and accountants, and
investigation expenses reasonably incurred by Agent or any Lender in
connection with any such matters, together with interest at the post-maturity
rate specified in each Note on each item specified in CLAUSES (A) through (E)
from 30 days after the date of written demand or request for reimbursement
until the date of reimbursement. In addition, the Companies jointly and
severally agree to pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of
this agreement, the Notes and the other Loan Documents, and agrees to save
Agent and each Lender harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such
taxes.
6.6. INSURANCE. Each Company shall maintain with financially sound and
reputable insurers, insurance with respect to their respective Properties and
business against such liabilities, casualties, risks and contingencies and in
such types and amounts as satisfy prevailing FNMA, FHLMC, and GNMA
requirements applicable to a qualified mortgage institution and otherwise as
is customary in the case of Persons engaged in the same or similar businesses
and similarly situated. Such insurance shall include, without limitation, a
fidelity bond or bonds in form and with coverage, with a company, and with
respect to such individuals or groups of individuals as satisfy prevailing
FNMA, FHLMC, and GNMA requirements applicable to a qualified mortgage
institution. Upon request of Agent, each Company shall furnish or cause to
be furnished to Agent from time to time a summary of their respective
insurance coverage, in form and substance satisfactory to Agent, and if
requested shall furnish Agent originals or copies of the applicable policies.
6.7. ACCOUNTS AND RECORDS. Each Company shall keep books of record and
account in which full, true and correct entries will be made of all dealings
or transactions in relation to their respective business and activities, in
accordance with GAAP.
6.8. RIGHT OF INSPECTION. Each Company shall permit any officer,
employee or agent of any Lender, during regular business hours and upon three
days prior notice, to visit and inspect any of their respective Property,
examine their respective books of record and accounts, take copies and
extracts therefrom, and discuss their respective affairs, finances and
accounts with their respective officers, accountants and auditors, all as
often as any Lender may desire.
6.9. NOTICE OF CERTAIN EVENTS. Each Company agrees to promptly notify
each Lender upon obtaining knowledge of (a) any notice from, or the taking of
any other action by, the holder of any promissory note, debenture or other
evidence of Indebtedness of either Company (but only if such Indebtedness is
in the amount specified in SECTION 9.1(D)) with respect to a claimed default,
together with a detailed statement by a responsible officer of each Company,
as applicable, specifying the notice given or other action taken by such
holder and the nature of the claimed default and what action each Company, as
applicable, is taking or proposes to take with respect thereto; (b) the
commencement of, or any determination in, any legal, judicial or regulatory
proceedings which, if adversely determined, could
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reasonably be expected to result in a Material Adverse Effect; or (c) any
dispute between either Company, as applicable, and any Governmental Authority
or any other Person which, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect.
6.10. PERFORMANCE OF CERTAIN OBLIGATIONS. Each Company shall
perform and observe in all material respects each of the provisions of each
Take-Out Commitment and each of its mortgage servicing contracts on its part
to be performed or observed and will cause all things to be done which are
necessary to have each item of Mortgage Collateral and Principal Collateral
Documents covered by a Take-Out Commitment comply with the requirements of
that Take-Out Commitment.
6.11. USE OF PROCEEDS. The proceeds of Advances shall be used by
Borrower solely as represented in this agreement and for no other purposes.
6.12. NOTICE OF DEFAULT. Each Company agrees to furnish to Agent
and to each Lender immediately upon becoming aware of the existence of any
Default or Potential Default (other than any Potential Default with respect
to any payment obligations hereunder), a written notice specifying the nature
and period of existence thereof and the action which Borrower or Guarantor,
as applicable, is taking or proposes to take with respect thereto.
6.13. COMPLIANCE WITH AGREEMENTS. Each Company shall comply with
all agreements, indentures, mortgages or documents binding on it or affecting
its Property or business, except where the failure to so comply would not
result in a Material Adverse Effect.
6.14. EMPLOYEE BENEFIT PLANS. The Companies agree to promptly
furnish to Agent and to each Lender:
(a) Within 10 Business Days after the occurrence of a Reportable
Event with respect to any Plan, a copy of any materials required to be
filed with the PBGC with respect to such Reportable Event;
(b) A copy of any notice of intent to terminate a Plan, no later
than the date such notice is required to be provided to participants of
such Plan under SECTION 4041(A)(2) of ERISA, and copies of any notices
of noncompliance received from the PBGC under SECTION 4041(B)(2)(C) of
ERISA, within 10 Business Days after the receipt by Borrower of such
notice;
(c) Not later than 10 Business Days after the receipt thereof by
either Company, any ERISA Affiliate of either Company, or the
administrator of any Plan, a copy of any notice to either Company or
such ERISA Affiliate that the PBGC has instituted proceedings to
terminate such Plan or to appoint a trustee to administer such Plan;
(d) A statement from the chief financial officer of either
Company, as applicable, describing any event or condition which might
constitute grounds under SECTION 4042 of ERISA for the termination of
any Plan or for the appointment of a trustee to administer any Plan,
within 10 Business Days after either Company knows or has reason to know
such event or condition exists; and
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(e) Within 10 Business Days after receipt thereof by either
Company or any ERISA Affiliate of either Company, a copy of any notice
concerning the imposition of any withdrawal liability under SECTION 4202
of ERISA.
6.15. BENEFIT PLAN OBLIGATIONS. Each Company shall reduce future
contributions or benefits to each Plan if and to the extent necessary to
avoid the occurrence of a Default under this agreement, to the extent that
reduction may be effected without causing a default under such Plan or a
"PARTIAL TERMINATION", as that term is used in SECTION 411(D) of the Code and
the regulations promulgated pursuant thereto, and without causing the Plan to
become disqualified or violating the provisions of ERISA.
6.16. APPRAISALS. Each Company shall promptly (i) permit any
Lender's authorized representatives to discuss with Borrower's officers or
with the appraisers furnishing appraisals concerning Mortgage Collateral the
procedures for preparation, review, and retention of -- and to review and
obtain copies of -- the appraisals, and (ii) upon any Lender's request,
cooperate with it to ascertain that the appraisals comply with CHAPTER 34A of
TITLE 12 of the UNITED STATES CODE, as hereafter amended, and any regulations
promulgated thereunder.
SECTION 7. NEGATIVE COVENANTS. Until the Commitments are all terminated
and the obligations are paid and performed in full, the Companies shall
comply with the following:
7.1. NO MERGER. (a) Neither Company may merge or consolidate with or
into any corporation except as follows:
(i) any merger solely for the purpose of accomplishing a re-
incorporation in another jurisdiction;
(ii) either Company may merge into the other;
(iii) any subsidiary of either Company may merge into either
Company.
7.2. INDEBTEDNESS. Neither Company may directly or indirectly create,
incur, or suffer to exist any Indebtedness EXCEPT present and future
Indebtedness that is or arises under:
(a) The Senior Obligations;
(b) The Intercompany Note;
(c) Indebtedness owed by Guarantor to Ryland Group that never
exceeds $50,000,000 principal amount, is unsecured, and is subordinated
to the Senior Obligations pursuant to the terms of the Demand Promissory
Note, dated November 25, 1992, executed by Guarantor and payable to the
order of Ryland Group, in form and substance satisfactory to Agent;
(d) Guaranties of an Affiliate's Indebtedness so long as, if the
guaranty is for more than $2,500,000 of Indebtedness, the Company to be
obligated first gives to Agent at least ten days notice of the proposed
guaranty;
(e) Repurchase and reverse repurchase agreements;
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(f) Letters of credit never in total face amount of more than
$15,000,000 used solely either to (i) replace cash on deposit with any
bond trustee or (ii) support master servicing agreements;
(g) Indebtedness -- used solely to fund on an overnight basis
either Company's California wholesale operations -- that is unsecured
and never exceeds $5,000,000 principal amount;
(h) Other Indebtedness of Guarantor that (i) is unsecured, (ii)
never exceeds $100,000,000, (iii) is subordinated to the Senior
Obligations upon terms satisfactory to Determining Lenders, and (iv) may
not have a maturity (or sinking fund provision) earlier than the
Termination Date;
(i) Other Indebtedness of the Companies incurred after the date of
this agreement that never exceeds $5,000,000 for both of them together;
(j) Other Indebtedness if first approved in writing by all
Lenders; and
09/30/93
(K) INDEBTEDNESS OWED BY GUARANTOR (I) TO A PERSON APPROVED BY
AGENT (II) FOR THE PURPOSE OF FINANCING THE REDEMPTION OF BONDS ISSUED
BY A SPECIAL PURPOSE SUBSIDIARY OF RYLAND GROUP, (III) THAT NEVER
EXCEEDS $60,000,000 PRINCIPAL AMOUNT AT ANY ONE TIME, AND (IV) WHICH
SHALL NOT BE OUTSTANDING FOR MORE THAN 21 CONSECUTIVE BUSINESS DAYS AT
ANY ONE TIME; AND
11/22/93
(L) INVESTMENT FACILITIES.
7.3. FISCAL YEAR ACCOUNTING. Neither Company may change its fiscal year
nor use any accounting method other than GAAP.
7.4. LIQUIDATIONS, CONSOLIDATIONS AND DISPOSITIONS OF SUBSTANTIAL
ASSETS. Neither Company may dissolve or liquidate or sell, transfer, lease
or otherwise dispose of any material portion of its Property or business,
EXCEPT sales or other dispositions by Guarantor, in the ordinary course of
its business, of (a) subject to SECTION 8.4, part of its Servicing Portfolio,
or (b) subject to SECTION 3.5(B), Mortgage Notes or Mortgage-Backed
Securities that are Collateral, or (c) Mortgage Notes or Mortgage-Backed
Securities that are not Collateral.
7.5. LOANS, ADVANCES, AND INVESTMENTS. Neither Company may make or hold
any loan (other than loans made in the ordinary course of its business as a
mortgage company), advance, or capital contribution to, or investment in
(including any investment in any Subsidiary) or purchase or otherwise acquire
any of the capital stock, securities, or evidences of indebtedness of, any
Person (collectively, "INVESTMENTS"), or otherwise acquire any interest in,
or control of, another Person, except for the following:
(a) Investments having a maturity of one year or less in
commercial paper given the highest rating by a nationally recognized
credit rating agency; United States governmental obligations having
maturities of one year or less; certificates of deposit, bankers
acceptances and repurchase agreements issued by a Lender or any
commercial bank having a combined capital and surplus in excess of
$250,000,000, and a rating of C or better by Thompson Bank Watch, Inc.;
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(b) Any acquisition of securities or evidences of indebtedness of
others when acquired by either Company in settlement of accounts
receivable or other debts arising in the ordinary course of business, so
long as the aggregate amount of any such securities or evidences of
indebtedness is not material to the Companies' financial condition taken
as a whole;
(c) The acquisition of Servicing Rights (including rights to
service multi-family dwelling mortgage loans and pools of multi-family
dwelling mortgage loans for purposes of this SECTION 7.5 only),
Mortgage-Backed Securities, and Mortgage Notes in the ordinary course of
business, and purchases of the stock, or assets of any persons
conducting a mortgage servicing business;
(d) Eurodollar Investments with any Lender or financial
institutions that have (i) combined capital, surplus, and undivided
profits of not less than U.S. $100,000,000, and (ii) a Moody's Investors
Service, Inc. or Standard & Poor's Corporation commercial paper rating
of at least P-1 or A-1 or (if it does not have a commercial paper
rating) a bond rating of at least A-1 or A-, respectively;
(e) Investments in joint ventures by Guarantor with homebuilders
and realtors, for the purpose of originating residential mortgage loans
which do not in the aggregate exceed $5,000,000 at any one time;
(f) Advances or loans by either Company, other than in the
ordinary course of business, to its officers or employees in an
aggregate principal amount outstanding at any one time not in excess of
$500,000;
(g) Loans or advances to Ryland Group up to $50,000,000; PROVIDED
THAT:
(i) no Default may exist at the time of, or as a result of,
any such loan or advance;
(ii) no default by Ryland Group in respect of any material
indebtedness may exist at the time of, or would occur as a result
of, any such loan or advance;
(iii) if the total of those loans and advances in any fiscal
quarter ending after the date of this agreement exceeds 50% of
Guarantor's Net Worth for then-preceding fiscal quarter, then that
excess (A) is deducted from Guarantor's Net Worth for purposes of
this agreement, and (B) must be repaid upon the EARLIER of three
Business Days from the date of that loan or advance AND the last
Business Day of the fiscal quarter;
(h) Extensions of trade credit and other payables in the ordinary
course of business;
(i) Loans and advances to employees of Guarantor or its
Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business;
(j) Investments by Guarantor in any of its present or future
Subsidiaries or investments by any such Subsidiary in Guarantor or in
any other such Subsidiary;
(k) Extensions of credit under the Intercompany Note; and
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(l) Acquisitions by Guarantor of Mortgage-Backed Securities and
mortgage-backed securities issued by any Subsidiary of Guarantor
resulting from Guarantor's exercise of call rights with respect to such
Mortgage-Backed Securities or mortgage-backed securities.
7.6. USE OF PROCEEDS; MARGIN STOCK. Neither Company may permit the
proceeds of the Advances to be used for any purpose other than those
permitted by SECTION 6.11. Neither the proceeds of any Advance nor the
proceeds of the intercompany loans evidenced by the Intercompany Note shall
be used (a) for the funding or acquisition of construction or commercial
loans, or (b) for the purpose of purchasing or carrying any "MARGIN STOCK" as
defined in Regulation U, or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry margin stock
or for any other purpose which might constitute this transaction a "PURPOSE
CREDIT" within the meaning of Regulation U. Neither the Companies, nor any
Person acting on behalf of the Companies shall take any action in violation
of Regulation U or Regulation X or shall violate SECTION 7 of the SECURITIES
EXCHANGE ACT OF 1934 or any rule or regulation thereunder, in each case as
now in effect or as the same may hereinafter be in effect.
7.7. COLLATERAL MATTERS. Neither Company may:
(a) Relocate its principal office, chief executive office, or
principal place of business or change its corporate name or name under
which its is doing business without first (i) giving Agent 30 days prior
written notice of the proposed relocation or change and (ii) executing
and delivering all additional documents and performing all additional
acts as Agent, in its sole discretion, may request in order to continue
or maintain the existence and priority of the Liens intended to be
created under the Loan Documents in favor of Agent for the benefit of
Lenders.
(b) Compromise, extend, release, or adjust payments on any
Mortgage Collateral, accept a conveyance of mortgaged property in full
or partial satisfaction of any Mortgage Collateral, or release any
Mortgage securing or underlying any Mortgage Collateral;
(c) Agree to the amendment or termination of any Take-Out
Commitment in which Agent has a Lien or to the substitution of a Take-
Out Commitment for a Take-Out Commitment in which Agent has a Lien
hereunder, if that amendment, termination or substitution may reasonably
be expected (as determined by Agent in its discretion) to have a
Material Adverse Effect;
(d) Transfer, sell, assign, or deliver any Mortgage Collateral
pledged to Agent to any Person other than Agent, except pursuant to SEC-
TION 3.5; or
(e) Grant, create, incur, assume, permit, or suffer to exist any
Lien upon any Collateral except for Liens granted to Agent to secure the
Notes and Obligations and any non-consensual Liens as may be deemed to
arise as a matter of law pursuant to any Take-Out Commitment.
7.8. DIVIDENDS. Neither Company may pay or declare any Dividend on its
capital stock during any fiscal year if, immediately after giving effect to
it, the total Dividends paid and Dividends declared but not paid during that
year exceed the SUM of (a) its Net Income for the portion of that fiscal year
through the date that the Dividend is paid or declared, as the case may be,
plus the amount of any cash
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or cash-equivalent capital contribution made to such Company in such
portion of that fiscal year, plus (b) the remainder of its Net Income
for the preceding fiscal year plus the amount of any cash or
cash-equivalent capital contributions made to such Company in the
preceding fiscal year minus Dividends paid and Dividends declared but not
paid during that fiscal year (OTHER THAN Dividends paid and Dividends
declared but not paid during that preceding fiscal year, as permitted under
this section because of its remaining Net Income for the fiscal year before
that fiscal year).
7.9. LIENS. Neither Company may directly or indirectly create, incur,
or suffer to exist any Lien on any of its Property EXCEPT:
(a) Present and future Liens securing the Obligations;
(b) Present and future Liens on the stock of RMC Asset Management
Company arising under the NationsBank Agreement;
(c) Present and future Liens granted on, or in the nature of a
sale subject to, an obligation to repurchase Mortgage-Backed Securities;
(d) Present and future Liens on all but at least $1,000,000,000 of
unpaid principal balance of Guarantor's Servicing Portfolio;
(e) Present and future Liens securing the Indebtedness under the
NationsBank Agreement but covering only the present and future
collateral that is described in that agreement as of the date of this
agreement and not covering any of the Collateral;
(f) Present and future Liens securing the Indebtedness under the
Bank One Investment Facility but covering only the present and future
collateral described in that agreement as of the date of this agreement
and not covering any of the Collateral;
09/30/93
(G) PRESENT AND FUTURE LIENS SECURING THE INDEBTEDNESS PERMITTED
UNDER SECTION 7.2(E), (F), (I), AND (K); THAT DO NOT COVER ANY OF THE
COLLATERAL; AND
(h) Other present and future Liens that secure Indebtedness that
never exceeds $10,000,000 total in principal amount and do not cover any
of the Collateral.
7.10. RELATED PARTY TRANSACTION. Neither Company may enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate
unless such transaction is otherwise permitted under this agreement, or is in
the ordinary course of the Company's business, or is upon fair and reasonable
terms no less favorable to the Company than it would obtain in a comparable
arms- length transaction with a Person not an Affiliate.
SECTION 8. FINANCIAL COVENANTS. The Companies jointly and severally
agree to comply with the covenants contained in this SECTION 8, from the date
of this agreement and for so long as any part of the Obligations or any
Commitment is outstanding:
8.1. NET WORTH. Borrower's Net Worth may not be less than $1,000,000 as
of the end of any quarter in Borrower's fiscal year.
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8.2. ADJUSTED TANGIBLE NET WORTH. Guarantor's Adjusted Tangible Net
Worth may not be less than $70,000,000 as of the end of any quarter in
Guarantor's fiscal year.
8.3. TOTAL LIABILITIES TO ADJUSTED TANGIBLE NET WORTH RATIO. The ratio
of Guarantor's Total Liabilities to Guarantor's Adjusted Tangible Net Worth
may not be more than 8.0 to 1.0 as of the end of any quarter in Guarantor's
fiscal year.
8.4. MINIMUM SERVICING PORTFOLIO. The unpaid principal balance of
Guarantor's Servicing Portfolio shall not be less than $2,500,000,000 at any
time, PROVIDED THAT Guarantor may be permitted to sell portions of its
Servicing Portfolio and thereby reduce the unpaid principal balance of its
Servicing Portfolio to an amount less than $2,500,000,000 (but in no event
less than $1,500,000,000), if (a) Guarantor has given Agent and Lenders
15 days prior written notice of its intent to sell such portion and (b) the
proceeds of that sale are necessary to allow Guarantor to make payments under
the NationsBank Agreement.
8.5. MINIMUM NET WORTH. Guarantor's Net Worth may not be less than
$50,000,000 as of the end of any quarter in Guarantor's fiscal year.
8.6. NET INCOME PLUS NON-CASH CHARGES. The SUM of Guarantor's Net
Income PLUS all non-cash charges (including depreciation and amortization)
must be greater than $1.00 for Guarantor's current fiscal year and for each
fiscal year of Guarantor thereafter.
8.7. NET INCOME. Borrower's Net Income must be greater than $1.00 for
Borrower's current fiscal year and for each fiscal year of Borrower
thereafter.
SECTION 9. DEFAULTS AND REMEDIES.
9.1. NATURE OF EVENT. As used in this agreement, "DEFAULT" means the
occurrence of any one or more of the following:
(a) Borrower fails to make any payment of principal on any Note
within one Business Day of the date that payment is due, or Borrower
fails to make any payment of interest on any Note or any fee, expense,
or other amount due under this agreement, under any Note or Pricing
Agreement, or under any Security Instrument within three Business Days
of the date that payment is due;
(b) Either Company fails to duly observe and perform any of the
other covenants or agreements contained in this agreement or any of the
other Loan Documents, and that failure continues for a period of 15 days
after either Company first knows of that failure;
(c) Any material statement, warranty, or representation by or on
behalf of either Company or Ryland Group contained in this agreement,
the Notes, or any other Loan Document or any Credit Request or
Collateral Delivery Notification, officer's certificate or other writing
(other than financial projections) authored by either Company or Ryland
Group and furnished in connection with this agreement, proves to have
been incorrect or misleading in any material respect as of the date made
or deemed made;
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(d) Borrower, Guarantor, or Ryland Group fails to make within any
applicable grace period any payment on any other Indebtedness with an
unpaid principal balance of over $500,000 in the case of Borrower,
$1,000,000 in the case of Guarantor, or $20,000,000 in the case of
Ryland Group (and, in the case of any such Indebtedness arising with
respect to a letter of credit issued for the account of Guarantor or
Borrower, such failure continues for a period of 90 days from the date
such payment is due); or any event or condition occurs under any
provision contained in any document or agreement evidencing, governing,
securing, or relating to any such Indebtedness (or any other material
breach or default under any such document or agreement occurs) if as a
result thereof, any such Indebtedness becomes due (other than by
regularly scheduled payments) prior to its stated maturity; or any of
the foregoing occurs with respect to any Indebtedness of Borrower,
Guarantor, or Ryland Group with unpaid principal balances exceeding, in
the aggregate, $2,500,000 in the case of Borrower, $5,000,000 in the
case of Guarantor, or $20,000,000 in the case of Ryland Group; PROVIDED,
however, that the cure of any such default under any such other
Indebtedness, or the waiver of any such default by the holder of such
Indebtedness, shall cure or constitute a waiver of the Default under
this agreement, and provided further that the provisions of this SECTION
9.1(D) do not apply to any Indebtedness which is nonrecourse to
Borrower, Guarantor, or Ryland Group;
(e) Either Company or Ryland Group shall generally not pay its
debts as they become due or shall admit in writing its inability to pay
its debts, or shall make a general assignment for the benefit of
creditors (other than non-recourse debt obligations);
(f) Either Company or Ryland Group shall (i) apply for or consent
to the appointment of a receiver, trustee, custodian, intervenor, or
liquidator of it or of all or a substantial part of its assets,
(ii) file a voluntary petition in bankruptcy, (iii) file a petition or
answer seeking reorganization or an arrangement with creditors or to
take advantage of any Debtor Laws, (iv) file an answer admitting the
material allegations of, or consent to, or default in answering, a
petition filed against it in any bankruptcy, reorganization, or
insolvency proceeding, or (v) take any action for the purpose of
effecting any of the foregoing;
(g) An involuntary petition or complaint shall be filed against
either Company or Ryland Group seeking bankruptcy or reorganization of
that Person or the appointment of a receiver, custodian, trustee,
intervenor, or liquidator of that Person or all or substantially all of
its assets, and such petition or complaint shall not have been
dismissed, within sixty days of the filing thereof; or an order, order
for relief, judgment or decree shall be entered by any court of
competent jurisdiction or other competent authority approving a petition
or complaint seeking reorganization of that Person or appointing a
receiver, custodian, trustee, intervenor, or liquidator of, that Person
or of all or substantially all of its assets;
(h) Either Company or Ryland Group shall fail within 30 days to
appeal, pay, bond, or otherwise discharge any final judgments or orders
for payment of money which (after subtracting from the amount of such
judgment or order the amount of any insurance coverage) exceed
$1,000,000 in the case of Borrower or Guarantor, or $5,000,000
individually in the case of Ryland Group, or $5,000,000 in the aggregate
in the case of Borrower or Guarantor, or $15,000,000 in the aggregate in
the case of Ryland Group;
(i) Any Person shall levy on, seize, or attach all or any material
portion of the assets of either Company or Ryland Group and within 30
days thereafter neither Company shall have
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dissolved such levy or attachment, as the case may be, and, if
applicable, regained possession of such seized assets;
(j) A Reportable Event or Prohibited Transaction shall have
occurred with respect to a Plan resulting in a liability which has a
Material Adverse Effect;
(k) A notice of intent to terminate a Plan under a "DISTRESS
TERMINATION" as described in SECTION 4041(C) of ERISA shall be filed
resulting in a liability which has a Material Adverse Effect;
(l) The Plan administrator or either Company shall receive a
notice that the PBGC has instituted proceedings to terminate a Plan or
appoint a trustee to administer a Plan, which is reasonably likely to
result in a liability which has a Material Adverse Effect;
(m) Either Company or any of their ERISA Affiliates shall withdraw
from a multiemployer Plan, which withdrawal is reasonably likely to
result in a liability which has a Material Adverse Effect;
(n) Any material provision of this agreement, any Note, or any
other Loan Document shall for any reason cease to be in full force and
effect, or be declared null and void or unenforceable in whole or in
part, or the validity or enforceability of any such document shall be
challenged or denied by either Company;
(o) Any change in the ownership of either Company shall occur, the
result of which is that Borrower ceases to be directly or indirectly
wholly beneficially owned by Guarantor, or Guarantor ceases to be
directly or indirectly wholly beneficially owned by Ryland Group;
(p) Guarantor shall fail to meet any GNMA seller or servicing
standard or requirement which results in a Material Adverse Effect, or
GNMA shall revoke or terminate Guarantor's right to service for GNMA, or
GNMA shall issue a letter of extinguishment under any GNMA guaranty
agreement; or
(q) Guarantor shall cease to be an eligible issuer or servicer
under any FNMA or FHLMC guide, or FNMA or FHLMC shall impose any
sanctions upon Guarantor resulting in a Material Adverse Effect, or FNMA
or FHLMC shall terminate or revoke Guarantor's right to service for FNMA
or FHLMC, or FNMA or FHLMC shall initiate any transfer of servicing from
Guarantor to another Person other than in the ordinary course of
business.
9.2. REMEDIES.
(a) Upon the occurrence of a Default described in SECTION 9.1(E),
(F), (G), or (O), the commitments of Lenders to lend hereunder shall be
terminated and the outstanding Loan, and the accrued and unpaid interest
thereon, and the other Obligations shall automatically become due and
payable, without presentment, demand, notice of default, notice of
acceleration, or other requirements of any kind, all of which are
expressly waived by the Companies.
(b) While a Default exists -- other than those described in
SECTION 9.1(E), (F), (G), or (O) -- and regardless of whether any one or
more Lenders have waived that Default as to
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themselves, upon prior written notice to Agent, Lenders, and the
Companies, any Lender may terminate its Commitment as of the date
provided in that notice. No termination by any Lender shall be
effective unless and until Lenders have complied with the provisions of
SECTION 2.8(A). Upon that Lender's termination, it may reduce any claim
in respect of its Note to judgment and the outstanding portion of the
Loan owed to that Lender and the accrued and unpaid interest thereon
shall automatically become due and payable, without presentment, demand,
notice of default, notice of acceleration, or other requirements of any
kind, all of which are expressly waived by the Companies.
(c) While a Default exists (other than those described in SECTION
9.1(E), (F), (G), or (O)), Agent shall, upon the direction of
Determining Lenders, declare the Loan, the accrued and unpaid interest
thereon, and all other Obligations, or any part thereof, to be
immediately due and payable, whereupon they shall be due and payable,
and the commitments of Lenders to lend under this agreement shall be
automatically terminated.
(d) Following the termination of the commitments of Lenders to
lend under this agreement, and upon the acceleration of the Obligations,
Agent may, and at the direction of Determining Lenders shall, do any one
or more of the following:
(i) Reduce any claim to judgment;
(ii) Foreclose upon or otherwise enforce any Liens on
Collateral in favor of Agent for the benefit of Lenders;
(iii) Notify all obligors of Collateral serviced by either
Company and all servicers of other Collateral that the Collateral
has been assigned to Agent and that all payments thereon are to be
made directly to Agent or any other party as may be designated by
Agent; settle, compromise, or release, in whole or in part, any
amounts owing on the Collateral by any obligor, servicer or any
Investor of any portion of the Collateral, on terms acceptable to
Agent; enforce payment and prosecute any action or proceeding with
respect to any and all Collateral and where any such Collateral is
in default, foreclose on and enforce liens in such Collateral by
any available judicial procedure or without judicial process and
sell property acquired as a result of any such foreclosure;
(iv) Act, or contract with a third party to act, as servicer
of each item of Collateral serviced by either Company and perform
all obligations required in connection with Take-Out Commitments;
(v) Exercise all rights and remedies of a secured creditor
under the TEXAS BUSINESS & COMMERCE CODE, including without
limitation selling the Collateral at public or private sale,
including sale pursuant to any applicable Take-Out Commitment. To
the extent that applicable law requires that either Company receive
notice of or prior to any such sale (or any other disposition of
Collateral) the Companies agree that 10 days notice shall be
reasonable notice. At any sale or other disposition, the
Collateral may be sold or disposed of as an entirety or in separate
parts, as Agent may determine. Agent may, without notice or
publication, adjourn any public or private sale or cause the same
to be adjourned from time to time by announcement at the time and
place fixed for the sale,
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and that sale may be made at any time or place to which the same
may be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold
may be retained by Agent until the selling price is paid by the
purchaser thereof, but Agent shall not incur any liability in case
of the failure of that purchaser to take up and pay for the
Collateral so sold and, in case of any such failure, that
Collateral may again be sold upon like notice. Agent may, however,
instead of exercising the power of sale herein conferred upon it,
proceed by a suit or suits at law or in equity to collect all
amounts due upon the Collateral or to foreclose on and sell the
Collateral or any portion of the Collateral under a judgment or
decree of a court or courts of competent jurisdiction, or both; and
(vi) Exercise, any other rights, remedies, and privileges in
this agreement or provided at law or otherwise that Determining
Lenders may direct.
Should any Default be continuing which, in Agent's opinion, materially
and adversely affects the Collateral or the interests of the Lenders under
this agreement, Agent may, in a notice to the Lenders of that Default set
forth one or more actions that Agent, in its opinion, believes should be
taken. Unless otherwise directed by Determining Lenders (excluding the
Lender serving as agent hereunder) within ten days following the date of the
notice setting forth the proposed action or actions, Agent may, but shall not
be obligated to, take the action or actions set forth in that notice.
9.3. RIGHT OF OFFSET. The Companies hereby grant to Agent and to each
Lender a right of offset, to secure the repayment of the Obligations, upon
any and all monies, securities, or other property of the Companies, and the
proceeds therefrom now or hereafter held or received by or in transit to
Agent or such Lender from or for the account of the Companies, whether for
safekeeping, custody, pledge, transmission, collection, or otherwise, and
also upon any and all deposits (general or special, time or demand,
provisional, or final) and credits of the Companies, and any and all claims
of the Companies against Agent or such Lender, at any time existing. Upon
the occurrence of any Default, Agent and each Lender is hereby authorized at
any time and from time to time, without notice to either Company, to offset,
appropriate, and apply any and all items hereinabove referred to against the
Obligations, subject to SECTION 2.8. Notwithstanding anything in this
section or elsewhere in this agreement to the contrary, neither Agent nor any
other Lender shall have any right to offset, appropriate, or apply any
accounts of the Companies which consist of escrowed funds (except and to the
extent of any beneficial interest which the Companies have in such escrowed
funds) which have been so identified by either Company in writing at the time
of deposit thereof.
9.4. PRIVATE SALES. Agent shall incur no liability as a result of the
sale of the Collateral, or any part of the Collateral, at any private sale
made in a commercially reasonable manner. The Companies hereby waive any
claims either of them may have against Agent arising because the price at
which the Collateral may have been sold at that private sale was less than
the price which might have been obtained at a public sale or was less than
the Obligations.
9.5. WAIVERS. The Companies waive any right to require Agent to (a)
proceed against any Person, (b) proceed against or exhaust any of the
Collateral or pursue its rights and remedies as against the Collateral in any
particular order, or (c) pursue any other remedy in its power. Agent shall
not be required to take any steps necessary to preserve any rights of either
Company against any Person from which either Company purchased any Mortgages,
Mortgage Notes, or Mortgage-Backed Securities, or to preserve rights against
prior parties. The Companies and each surety, endorser, guarantor, pledgor,
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and other party ever liable or whose Property is ever liable for payment of
any of the Obligations jointly and severally waive presentment and demand for
payment, protest, notice of intention to accelerate, notice of acceleration,
and notice of protest and nonpayment, and agree that their or their
Property's liability with respect to the Obligations, or any part thereof,
shall not be affected by any renewal or extension in the time of payment of
the Obligations, by any indulgence, or by any release or change in any
security for the payment of the Obligations, and hereby consent to any and
all renewals, extensions, indulgences, releases, or changes, regardless of
the number thereof.
9.6 PERFORMANCE BY AGENT. Should any covenant, duty, or agreement of
either Company fail to be performed in accordance with the terms of this
agreement or of any document delivered under this agreement, Agent may, at
its option, after notice to Borrower or Guarantor, as the case may be,
perform, or attempt to perform, such covenant, duty, or agreement on behalf
of that Company and shall notify each Lender that it has done so. In such
event, the Companies shall jointly and severally, at the request of Agent,
promptly pay any amount expended by Agent in such performance or attempted
performance to Agent at its principal place of business, together with
interest thereon at the Maximum Rate from the date of such expenditure by
Agent until paid. Notwithstanding the foregoing, it is expressly understood
that Agent does not assume and shall never have, except by express written
consent of Agent, any liability or responsibility for the performance of any
duties of either Company under this agreement or under any other document
delivered under this agreement.
9.7. NO RESPONSIBILITY. Except in the case of fraud, gross negligence,
or willful misconduct, Agent nor any of its officers, directors, employees,
or attorneys shall assume, and shall ever have any liability or
responsibility for, any diminution in the value of the Collateral or any part
of the Collateral.
9.8. NO WAIVER. The acceptance by Agent or any Lender at any time and
from time to time of partial payment or performance by either Company of any
of their respective obligations under this agreement or under any Loan
Document shall not be deemed to be a waiver of any Default then existing. No
waiver by Agent or any Lender shall be deemed to be a waiver of any other
then existing or subsequent Default. No delay or omission by Agent or any
Lender in exercising any right under this agreement or under any other
document required to be executed under or in connection with this agreement
shall impair such right or be construed as a waiver thereof or any
acquiescence therein, nor shall any single or partial exercise of any such
right preclude other or further exercise thereof, or the exercise of any
other right under this agreement or otherwise.
9.9. CUMULATIVE RIGHTS. All rights available to Agent and the Lenders
under this agreement or under any other document delivered under this
agreement shall be cumulative of and in addition to all other rights granted
to Agent and the Lenders at law or in equity, whether or not the Notes be due
and payable and whether or not Agent shall have instituted any suit for
collection, foreclosure, or other action in connection with this agreement or
any other document delivered under this agreement.
9.10. APPLICATION OF PAYMENTS AND PROCEEDS.
(a) While a Default exists, all payments and proceeds -- whether
voluntary, involuntary, through the exercise of any right of set-off or
other right, realization against any Collateral, or otherwise -- shall
be applied in the following order:
(i) All costs and expenses incurred by Agent in connection
with its duties under the Loan Documents, including, without
limitation, fees and expenses paid by
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Agent to any servicing companies retained by Agent to assist it in
servicing any Collateral required to be serviced, to any attorneys,
or to any agents.
(ii) Accrued and unpaid interest on the Loan, to be applied in
the proportion that the amount of interest owed to each Lender
bears to the total of all interest owed to all Lenders.
(iii) If all the Commitments are not then terminated, the
portion of the Loan owed to each Terminating Lender, to be applied
in the proportion that each Terminating Lender's portion of the
Loan bears to the total portions of the Loan owed to all
Terminating Lenders.
(iv) The Loan, to be applied based upon each Lender's Loan
Percentage.
(v) All costs and expenses incurred by any Lender in
connection with the Loan Documents, to be applied in the proportion
that each Lender's share of those costs and expenses bears to the
total of those costs and expenses for all Lenders.
(vi) All other portions of the Obligations, to be applied in
the proportion that each Lender's share of those amounts bears to
the total of those amounts for all Lenders.
(vii) Either (A) to Guarantor or to its successors or assigns,
or (B) as a court of competent jurisdiction may direct.
(b) Upon Agent's request, each Lender shall provide to Agent that
Lender's certificate as to any amounts owed to it under (i) CLAUSE
(A)(II) above, OTHER THAN interest payments accompanied by a Payment
Direction and interest at the Default Rate, and (ii) CLAUSES (A)(V), and
(VI) above -- which certificate shall be conclusive absent manifest
error. Agent shall distribute payments and proceeds to Lenders under
those clauses based upon the certificates it receives. If a Lender
fails to provide to Agent any certificate within three Business Days
after the request, Agent may continue to distribute payments and
proceeds in the order in SECTION 9.10(A) above without regard to amounts
that may be owed to that Lender for which that certificate was requested
until Agent receives that certificate.
(c) If the proceeds of any sale or exercise of any rights are
insufficient to satisfy the full Obligations, then the Companies shall
remain liable jointly and severally for any deficiency.
9.11. RIGHTS OF INDIVIDUAL LENDERS. No Lender shall have any right
by virtue, or by availing itself, of any provision of this agreement to
institute any action or proceedings at law or in equity or otherwise
(excluding any actions in bankruptcy and any actions authorized by SECTION
9.2(B)), upon or under or with respect to this agreement, or for the
appointment of a receiver, or for any other remedy under this agreement,
unless the Determining Lenders previously shall have given to Agent written
notice of a Default and of the continuance thereof and made written request
upon Agent to institute such action or proceedings in its own name as Agent
and shall have offered to Agent reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or
thereby, and Agent, for 10 business days after its receipt of such notice,
request and offer of indemnity, shall have failed to institute any such
action or proceeding and no direction inconsistent with such written request
shall have been
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given to Agent by Determining Lenders; it being understood and intended, and
being expressly covenanted by the taker and holder of every Note with every
other taker and holder and Agent, that no one or more holders of Notes shall
have any right in any manner whatever by virtue, or by availing itself, of
any provision of this agreement to affect, disturb or prejudice the rights of
any other Lenders, or to obtain or seek to obtain priority over or preference
to any other such Lender, or to enforce any right under this agreement,
except in the manner herein provided and for the equal, ratable and common
benefit of all Lenders. For the protection and enforcement of the provisions
of this SECTION 9.11, each and every Lender and Agent shall be entitled to
such relief as can be given either at law or in equity.
9.12. NOTICE TO AGENT. Should any Default or Potential Default
occur and be continuing, any Lender having actual knowledge thereof shall
notify Agent and the Companies of the existence thereof, but the failure of
any Lender to provide that notice shall not prejudice that Lender's rights
under this agreement.
9.13. COSTS. All court costs, reasonable attorneys' fees, other
costs of collection, and other sums spent by Agent or any Lender in the
exercise of any right or remedy (including, without limitation, any effort to
collect or enforce any Note) provided in this agreement shall be payable to
Agent or such Lender, as the case may be, on demand, shall become part of the
Obligations, and shall bear interest, at a rate equal to the LESSER of the
Maximum Rate AND the Federal Funds Rate (as defined in the Notes) plus 6%,
from the date paid by Agent or any Lender until the date repaid by either
Company.
SECTION 10. AGENT.
10.1. AUTHORIZATION AND ACTION.
(a) Each Lender hereby appoints Bank One, Texas, N.A., as Agent,
in its name and on its behalf, to (i) receive all documents and items to
be furnished to it under this agreement; (ii) act as Agent for and on
its behalf in and under all of the Loan Documents (other than the
Notes); (iii) arrange the means of distributing the funds to be provided
to Borrower and to each Lender; (iv) distribute to Lenders information,
requests, payments, prepayments, documents, and items received from
Borrower, Guarantor and others under this agreement; and (v) deliver to
the Companies and others (as is appropriate) requests, demands,
approvals, and consents received from each Lender; PROVIDED THAT the
Companies shall forward directly to each Lender all reports (financial
or otherwise) required to be furnished to each Lender by the Companies,
under this agreement. Each Lender recognizes and understands that, if
Agent exercises the remedies provided under SECTION 9 and Agent does not
have adequate facilities (and Agent shall have no obligation to develop
adequate facilities) to service any Collateral required to be serviced,
it will be necessary for Agent to contract with a third party to service
such Collateral, and the fees paid for such services will be a prior
charge against the Collateral pursuant to SECTION 9.10(A)(I). As to any
matter not expressly provided for by this agreement (including, without
limitation, enforcement or collection of the Notes), Agent shall not be
required to exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of
Determining Lenders; PROVIDED, HOWEVER, that Agent shall not be required
to take any action which exposes Agent to liability or which is contrary
to this agreement or applicable law. Agent agrees to give to each
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Lender prompt notice of (a) each notice given to it by either Company
under this agreement, and (b) its approval of any Person as an Investor.
(b) In conjunction with SECTION 10.1(A), Agent shall collect, as
agent for each of the Lenders, (i) all principal payments of or on
account of the aggregate outstanding Advances owing to such Lender and
(ii) after a Default, all interest on the Note held by such Lender plus
all other amounts due to such Lender on account of the Obligations under
this agreement. After a Default, each of the Lenders shall advise Agent
upon the request of Agent of the rate of interest such Lender is
charging Borrower pursuant to each Lender's Note and Pricing Agreement.
To the extent any Lender charges interest in excess of the Maximum Rate,
that Lender hereby indemnifies Agent and holds it harmless from and
against any and all liabilities, losses, damages, penalties, actions,
judgments, suits, costs, expenses, and disbursements of any kind or
nature whatsoever which may be imposed on, asserted against, or incurred
by Agent in any way relating thereto.
10.2. AGENT'S RELIANCE, ETC. Neither Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken
or omitted to be taken by it or them under or in connection with this
agreement, except for its or their own gross negligence or willful
misconduct, except as otherwise set forth in SECTION 10.7 when acting in its
capacity as Custodian. Without limitation of the generality of the
foregoing, Agent (a) may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (b) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for
any statements, warranties or representations made in or in connection with
this agreement; (c) shall not have any duty to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or conditions of
this agreement on the part of the Companies or to inspect the Property
(including the books and records) of the Companies (except as specifically
set forth in SECTION 10.7); (d) shall not be responsible to any Lender for
the due execution (by any party hereto other than Agent), legality, validity,
enforceability, genuineness, sufficiency or value of this agreement or any
other instrument or document furnished pursuant hereto (except as
specifically set forth in SECTION 10.7); and (e) shall incur no liability
under or in respect of this agreement by acting in accordance with this
agreement upon any notice, consent, certificate or other instrument or
writing (which may be by telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties. Agent shall not
be compelled to do any act or to take any action toward the execution or
enforcement of the powers hereby created, or to prosecute or defend any suit
in respect hereof, unless indemnified to its satisfaction against any and all
loss, cost, liability, and expense it may incur. Subject to the foregoing
limitations and to any direction of the Determining Lenders to take action in
accordance with SECTION 9, Agent shall perform the duties imposed upon it
under this agreement with respect to the Collateral with the same amount of
diligence and using the same amount of judgment and discretion as if Agent
were acting solely for its own account, and, in connection therewith, Agent
is hereby authorized (a) to settle, compromise, and release claims against
the makers of, and any Person obligated with respect to, any Collateral, (b)
to foreclose on, and enforce security interests in, any Collateral or
Property secured thereby, (c) to sell Collateral and Property acquired as the
result of foreclosure under this agreement and the Security Instruments, and
(d) to do all other acts and things as Agent, in its sole discretion, may
deem necessary or appropriate to protect the rights and interests of itself
and the Lenders and to realize the benefits of the Collateral.
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10.3. AGENT AND AFFILIATES. With respect to its Commitment, the
Advances made by it and the Note issued to it, Bank One, Texas, N.A. shall
have the same rights and power under this agreement as any other Lender and
may exercise the same as though it were not Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include Bank One,
Texas, N.A. in its individual capacity. Bank One, Texas, N.A. and its
Affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, the
Companies or any of their respective Subsidiaries and any Person who may do
business with or own securities of Borrower or any such Subsidiary, all as if
Bank One, Texas, N.A. were not Agent and without any duty to account therefor
to Lenders. Each Lender and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any
kind of business with, the Companies or any of their respective Subsidiaries
and any Person who may do business with or own securities of Borrower or any
such Subsidiary, all as if each Lender were not a Lender under this agreement
and without any duty to account therefor to any other Lender.
10.4. LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based
on the financial statements referred to in SECTION 5.8 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this agreement. Each Lender also
acknowledges that it will, independently and without reliance upon Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking
or not taking action under this agreement.
10.5. INDEMNIFICATION. Lenders agree to indemnify Agent severally
and not jointly (to the extent not reimbursed by Borrower or Guarantor),
ratably according to their Loan Percentages (or if no Notes are at the time
outstanding, ratably according to the ratio of each Lender's Commitment to
the total Commitments), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any or nature whatsoever which may be imposed
on, incurred by, or asserted against Agent in any way relating to or arising
out of this agreement or any action taken or omitted by Agent under this
agreement, PROVIDED THAT no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent's gross
negligence or willful misconduct (or, with respect to Agent's duties as
Custodian, such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from
Custodian's negligence or willful misconduct). Without limitation of the
foregoing, each Lender agrees to reimburse Agent promptly upon demand its
ratable share of any out-of-pocket expenses (including counsel fees) incurred
by Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect
of rights or responsibilities under, this agreement, to the extent that Agent
is not reimbursed for such expenses by the Companies. After such amounts
have been imposed upon or incurred by any Lender, such amounts shall be
payable upon demand and shall bear interest, from the date of demand until
paid, at a fluctuating interest rate per annum equal for each day during such
period to the Federal-Funds Rate.
10.6. SUCCESSOR AGENT. Agent may resign at any time by giving
written notice to Lenders and the Companies and may be removed at any time
with or without cause by Determining Lenders other than Agent. Any
resignation of Agent will become effective upon the appointment of a
successor. Upon any such resignation or removal, Determining Lenders shall
have the right to appoint a successor Agent. If no successor Agent shall
have been so appointed by Lenders, and shall have accepted that appointment,
within 30 days after the retiring Agent's giving of notice of resignation or
Lenders' removal of the
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retiring Agent, then the retiring Agent may, on behalf of Lenders, appoint a
successor Agent, which shall be a commercial or savings bank organized under
the laws of the United States of America or of any State thereof and having a
combined capital and surplus of at least $250,000,000. No resignation or
removal of Agent shall become effective until a successor agent is appointed
pursuant to the provisions of, and has accepted the appointment as provided
in, this SECTION 10.6. Any successor agent appointed as provided in this
SECTION 10.6 shall execute and deliver to the Companies and their predecessor
agent an instrument accepting such appointment, and thereupon the resignation
or removal of the predecessor agent shall become effective and that successor
agent, without any further act, deed or conveyance, shall become vested with
all the rights and obligations of its predecessor under this agreement, with
like effect as if originally named as Agent; but, nevertheless, on the
written request of Borrower or of the successor agent, Agent ceasing to act
shall execute and deliver an instrument transferring to that successor agent
all the rights of Agent so ceasing to act and shall execute and deliver to
that successor agent such instruments as are necessary (including assignments
of all Collateral and Security Instruments) to transfer the Collateral to
that successor agent. Upon request of any successor agent, the Companies
shall execute any and all instruments in writing for more fully and certainly
vesting in and confirming to that successor agent all such rights. No
successor agent shall accept appointment as provided in this section unless
at the time of such acceptance that successor agent shall be eligible under
the provisions of this SECTION 10.6. Any Person into which Agent may be
merged or converted or with which it may be consolidated, or any Person
surviving or resulting from any merger, conversion, or consolidation to which
Agent shall be a party, or any Person succeeding to the corporate trust
business of Agent, shall be the successor Agent under this agreement without
the execution or filing of any paper or any further act on the part of any of
the parties hereto. After any retiring Agent's resignation or removal as
Agent, the provisions of this SECTION 10 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
agreement.
10.7. AGENT AS CUSTODIAN. Each Lender hereby appoints Agent to act
as Custodian to take such action as Custodian on its behalf and to exercise
such powers under this agreement as are delegated to the Custodian by the
terms hereof, together with such powers as are reasonably incidental thereto.
Custodian's duties hereunder shall include (a) review of the Collateral
delivered to Custodian and verification that such Collateral meets the
definitional requirements for such Collateral set forth in this agreement and
that such Collateral meets the requirements of SECTION 3.3, (b) storage of
such Collateral in an area standard in the industry or other area as
requested by Lenders, (c) determination of the value of such Collateral, on a
daily basis, (d) preparation of periodic reports whenever required by any
Lender regarding the status of such Collateral, and (e) release of such
Collateral in accordance with the terms of SECTION 3.5 or SECTION 3.6.
Neither Agent acting in its capacity as Custodian nor any of its directors,
officers, agents or employees shall be liable for any action taken or omitted
to be taken by it or them under or in connection with this agreement, except
for its or their own negligence or willful misconduct. Custodian shall incur
no liability under or in respect of this agreement by acting in accordance
with this agreement upon any notice, consent, certificate or other instrument
or writing (which may be by telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
SECTION 11. INDEMNIFICATION. In consideration of Lender's Commitments, the
Companies jointly and severally agree to indemnify and defend each Lender and
any Person deemed to control any Lender and their respective directors,
officers, agents, and employees from, and hold each of them harmless against,
any and all losses, liabilities, claims, damages, deficiencies, interest,
judgments, costs, or expenses (including but not limited to reasonable
attorneys' fees) incurred by any of them -- including,
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without limitation, those resulting from or based upon ORDINARY NEGLIGENCE of
any of them -- arising from or because of (a) any investigation, litigation,
or other proceeding brought or threatened in connection with any Loan Document
or the transactions contemplated by the Loan Documents, including, without
limitation, any use by Borrower of the proceeds of Borrowings or by Guarantor
of the proceeds of advances under the Intercompany Note, (b) any impoundment,
attachment, or retention of any Mortgage Collateral or any failure of any
Investor to pay the entire purchase price of any Mortgage Collateral under
any Take-Out Commitment, (c) any alleged violation of any federal or state
law relating to usury in connection with any Mortgage Collateral, and (d) any
representation made by either Company under any Loan Document; PROVIDED THAT
this section may not be construed to apply to any indemnitee's own gross
negligence, willful misconduct, or fraud. The Companies shall provide
indemnification and defense under this section upon written request by Agent
or any Lender.
SECTION 12. MISCELLANEOUS.
12.1. HEADINGS. The headings, captions, and arrangements used in
any of the Loan Documents are, unless specified otherwise, for convenience
only and shall not be deemed to limit, amplify, or modify the terms of the
Loan Documents, nor affect the meaning thereof.
12.2. NONBUSINESS DAYS; TIME. Any payment or action that is due
under any Loan Document on a non-Business Day may be delayed until the next-
succeeding Business Day (but interest shall continue to accrue on any
applicable payment until payment is in fact made) unless the payment concerns
a LIBOR-Rate Borrowing, in which case if the next-succeeding Business Day is
in the next calendar month, then such payment shall be made on the next-
preceding Business Day. Unless otherwise indicated, all time references
(E.G., 10:00 a.m.) are to Dallas, Texas, time.
12.3. COMMUNICATIONS. Unless otherwise stated, when a Loan Document
requires or permits any consent, approval, notice, request, objection, or
demand from one party to another, it must be written and is deemed given:
- for Credit Requests, Conversion Requests, Collateral Delivery
Notifications, and Payment Directions, only when actually received
by Agent;
- otherwise, if by telecopy, when transmitted to the appropriate
telecopy number (but, without affecting the date deemed given, a
telecopy communication must be promptly confirmed by telephone);
- otherwise, if by mail, on the third Business Day after enclosed in
a properly addressed, stamped, and sealed envelope deposited in the
appropriate official postal service; and
- otherwise if by other means, when actually delivered.
Until changed by notice, the address and telecopy number are stated for (a)
the Companies and Agent, beside their names on the signature pages below, and
(b) each Lender, beside its name on SCHEDULE 2.1.
12.4. FORM AND NUMBER OF DOCUMENTS. The form, substance, and number
of counterparts of each writing to be furnished under this agreement must be
satisfactory to Agent and its counsel.
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12.5. EXCEPTIONS TO COVENANTS. No party to a Loan Document may take
or fail to take any action that is permitted as an exception to any of the
covenants contained in any Loan Document if that action or omission would
result in the breach of any other covenant contained in any Loan Document.
12.6. SURVIVAL. All covenants, agreements, undertakings,
representations, and warranties made in any of the Loan Documents (a) survive
all closings under the Loan Documents until the total Commitments have been
terminated and the Obligations have been paid in full, and (b) except as
otherwise indicated, are not affected by any investigation made by any party.
12.7. GOVERNING LAW. The laws (OTHER THAN conflict-of-laws
provisions) of the State of Texas and of the United States of America govern
the rights and duties of the parties to the Loan Documents and the validity,
construction, enforcement, and interpretation of the Loan Documents.
12.8. INVALID PROVISIONS. Any provision in any Loan Document held
to be illegal, invalid, or unenforceable is fully severable; the appropriate
Loan Document shall be construed and enforced as if that provision had never
been included; and the remaining provisions shall remain in full force and
effect and shall not be affected by the severed provision. Agent, Lenders,
the Companies, and each other party to the affected Loan Document shall
negotiate, in good faith, the terms of a replacement provision as similar to
the severed provision as may be possible and be legal, valid, and enforce-
able.
12.9. AMENDMENTS, WAIVERS, ETC., AND CONFLICTS. An amendment of --
or an approval, consent, or waiver by one or more Lenders under -- any Loan
Document must be in writing and must be:
(a) Executed by the Companies and Agent if it purports to remove
as a party to this agreement any Lender whose Commitment has been
terminated in accordance with SECTION 2.4.
(b) Executed by the Companies, Agent, and the particular Lender if
it purports to (i) reduce or increase that Lender's Commitment and is
accompanied by any prepayment to that Lender due because of that
reduction and by a replacement Note payable to that Lender in the amount
of its reduced or increased Commitment or (ii) change the payment terms
of a Lender's Pricing Agreement.
(c) Executed by the Companies, Agent, and any financial
institution becoming a Lender under this agreement if it purports only
to add that Lender and its Commitment to this agreement and is
accompanied by a Note payable to that new Lender in the amount of its
Commitment.
(d) Executed by the Companies and Agent if it purports to reduce
or increase any fees payable to Agent by the Companies.
(e) Executed by the Companies and Agent and executed or approved
in writing by all Lenders if it purports to (i) extend the due date,
decrease the amount of any scheduled payment (except in respect of a
particular Lender, under that Lender's Pricing Agreement), change any
rate or amount of interest, decrease fees, or decrease other amounts
payable to Agent or any Lender under the Loan Documents (OTHER THAN fees
payable only to Agent), (ii) change the definition of "COMMITMENT
PERCENTAGE," "COLLATERAL VALUE," "DETERMINING LENDERS," "ELIGIBLE
COLLATERAL," "LOAN PERCENTAGE," "MARKET VALUE," or "TERMINATION DATE,"
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(iii) partially or fully release any guaranty or any Collateral (OTHER
THAN releases of Collateral contemplated in this agreement), or
(iv) change SECTION 2.6, 2.8, 3.5, 3.6, 3.7, 4.2, 8, 9.1, 9.2, 9.9,
9.10, 12.2, OR 12.9 or any other matter specifically requiring action by
all Lenders under the Loan Documents.
(f) Otherwise (i) for this agreement, executed by the Companies,
Agent, and Determining Lenders or (ii) for other Loan Documents,
approved in writing by Determining Lenders and executed by the
Companies, Agent, and any other party to that Loan Document.
Amendments under CLAUSES (A), (B)(I), and (C) above shall be substantially in
the form of the attached EXHIBIT H and under CLAUSE (D) above shall be in the
form acceptable to the Companies and Agent. Upon any amendment or change
under CLAUSES (A), (B)(I), or (C) that results in the change of Lenders under
this agreement or any of their Commitments, SCHEDULE 2.1 is deemed
automatically to be amended to reflect those changes, and Agent shall
circulate to the parties to this agreement an amended SCHEDULE 2.1 reflecting
those changes. Agent's and Lender's Rights under the Loan Documents may not
be waived by course of dealing or failure or delay in the exercise of those
Rights. An approval, consent, or waiver is only effective for the specific
instance and purpose for which it is given. The Loan Documents may only be
supplemented by agreements, documents, and instruments delivered according to
their respective express terms. Any conflict or ambiguity between this
agreement's provisions and any other Loan Document's provisions must be
resolved in favor of this agreement's provisions.
12.10. MULTIPLE COUNTERPARTS. Any Loan Document may be executed in a
number of identical counterparts, each of which shall be deemed an original
for all purposes and all of which constitute, collectively, one agreement;
but, in making proof of any Loan Document, it shall not be necessary to
produce or account for more than one counterpart. Each initial Lender need
not execute the same counterpart of this agreement so long as identical
counterparts are executed by the Companies, each initial Lender, and Agent.
This agreement shall become effective when counterparts of this agreement
have been executed and delivered to Agent by each initial Lender, Agent, and
the Companies, or, in the case only of those Lenders, when Agent has received
telecopied or other evidence satisfactory to it that each Lender has executed
and is delivering to Agent a counterpart of this agreement.
12.11. SPECIAL AGENT. Each Lender appoints Borrower and Guarantor as
its special agent for the sole and limited purpose of obtaining and
maintaining appraisals in respect of Mortgage Collateral otherwise required
in this agreement.
12.12. SUCCESSORS AND ASSIGNS; PARTICIPATION; NOVATION.
(a) This agreement binds and inures to the Companies, Agent, and
Lenders and their respective successors and assigns, EXCEPT THAT
(i) neither Company may, directly or indirectly, assign or transfer (or
attempt to do so) any of its Rights, duties, or obligations under any
Loan Document without the express written consent of all Lenders, and
(ii) except as permitted in this SECTION 12.12, no Lender may transfer,
pledge, assign, sell any participation in, or otherwise encumber its
Commitment or portion of the Obligations:
(b) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell
to one or more Persons (each a "PARTICIPANT") participating interests in
its Commitment and its portion of the Obligations so long as: (i) the
57
<PAGE>
selling Lender must remain -- and the Participant does not become -- a
"LENDER" under this agreement, (ii) the selling Lender's obligations
under the Loan Documents remain unchanged, (iii) the selling Lender
remains solely responsible for the performance of those obligations,
(iv) the selling Lender remains the holder of its share of the Loan for
all purposes under the Loan Documents, and (v) the Companies and Agent
may continue to deal solely and directly with the selling Lender in
connection with those Rights and obligations. Participants have no
Rights under the Loan Documents except certain voting Rights provided
below. Subject to the following, each Lender may obtain (on behalf of
its Participants) the benefits of the Loan Documents with respect to all
participations in its part of the Obligations so long as Borrower is
never obligated to pay any amount in excess of the amount that would be
due to the selling Lender under the Loan Documents calculated as though
no participation had been made. No Lender may sell any participating
interest under which the Participant has any Rights to approve any
amendment of or approval, consent, or waiver under any Loan Document,
EXCEPT to the extent such amendment, consent, approval, or waiver
extends the due date for payment of any principal, interest, or fees due
to that Lender, reduces the amount or rate of interest payable to that
Lender, or releases any guaranty or Collateral (OTHER THAN releases of
Collateral contemplated in this agreement). In those cases where a
Participant is entitled to the benefits of this agreement or entitled to
vote upon certain matters, that Lender must include a voting mechanism
in the relevant participation agreement providing that a majority of
that Lender's portion of the Loan (whether held by that Lender or
participated) controls the vote for all of that Lender's Commitment
Percentage or Loan Percentage, as the case may be. Except in the case
of the sale of a participating interest to a Lender, the relevant
participation agreement must not permit the Participant to transfer,
pledge, assign, sell participation in, or otherwise encumber its portion
of the Obligations.
(c) Subject to the provisions of this section, if no Default is
continuing, and upon the prior written consent of Borrower (which will
not be unreasonably withheld) and Agent, and except that the aggregate
Commitment for Bank One, Texas, N.A., and its Affiliates must at all
times be at least $25,000,000 unless reduced by a reduction in the total
Commitments, then any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable law, sell
to one or more financial institutions (each a "PURCHASER") a
proportionate part (not less than $15,000,000) of all or any part of its
Rights and obligations under the Loan Documents. That Purchaser shall
assume such rights and obligations, pursuant to an assignment agreement
reasonably acceptable to Agent and Borrower. Upon (i) delivery of an
executed copy of the assignment agreement to Borrower and Agent and
(ii) payment of a fee of $1,000 from such transferor to Agent, from and
after the assignment's effective date (which must be after the date of
such delivery): (A) That Purchaser is for all purposes a Lender party
to -- with all the Rights and obligations of a Lender under -- this
agreement, with a Commitment as stated in the assignment agreement; (B)
the transferor Lender is released from its obligations under the Loan
Documents to a corresponding extent (which may be 100% if it has sold
100% of its interest in the Obligations and Loan Documents); (C)
SCHEDULE 2.1 is automatically deemed to reflect the name, address, and
Commitment of that Purchaser, and Agent shall deliver to the Companies
and Lenders an amended SCHEDULE 2.1 reflecting those changes; (D)
Borrower shall execute and deliver to each of the transferor Lender and
such Purchaser a Note in the face amount of its Commitment following
such transfer, and, upon receipt of such Note, such transferor Lender
shall return to Borrower the Note previously delivered to such Lender
under this agreement; and (E) a Purchaser is subject to all the
provisions in this agreement, the same as if it were a Lender that
executed this agreement on its original date.
58
<PAGE>
(d) Any Lender may at any time, without the consent of either
Company, Agent, or any other Lenders, assign all or any part of its
Rights under the Loan Documents to a Federal Reserve Bank, but no such
assignment releases the transferor Lender from its obligations under the
Loan Documents.
(e) Notwithstanding anything to the contrary contained herein, a
Lender may not sell or participate any of its interests for a purchase
price which, directly or indirectly, reflects a discount from face
value, without first offering such sale or participation to the other
Lenders on ratable basis according to their Commitment Percentages.
(f) Any purported assignment, transfer, or sale in contravention
of the foregoing provisions is void from beginning and not effective.
(g) Neither the Companies nor Agent shall be required to incur any
cost or expense incident to any sale to a Participant or Purchaser of
any interest in the Obligations, and all such costs and expenses shall
be for the account of Lender selling its rights in the Obligations to
such Participant.
(h) If pursuant to CLAUSE (B) above any interest in the
Obligations is transferred to any Participant or Purchaser which is
organized under the laws of any jurisdiction other than the United
States of America or any state thereof, the transferor Lender shall
cause such Participant, concurrently with the effectiveness of such
transfer, (i) to represent to the transferor Lender (for the benefit of
the transferor Lender, Agent, and Borrower) that under applicable laws
no taxes will be required to be withheld by Agent, Borrower, or the
transferor Lender with respect to any payments to be made to such
Participant in respect of the Obligations, (ii) to furnish to each of
the transferor Lender, Agent, and Borrower two duly completed copies of
either U.S. INTERNAL REVENUE SERVICE FORM 4224 or U.S. INTERNAL REVENUE
SERVICE FORM 1001 (wherein such Participant claims entitlement to
complete exemption from U.S. federal withholding tax on all interest
payments hereunder), and (iii) to agree (for the benefit of the
transferor Lender, Agent, and Borrower) to provide the transferor
Lender, Agent, and Borrower a new FORM 4224 or FORM 1001 upon the
obsolescence of any previously delivered form and comparable statements
in accordance with applicable United States laws and regulations and
amendments duly executed and completed by such Participant, and to
comply from time to time with all applicable laws with regard to such
withholding tax exemption.
12.13. ENTIRE AGREEMENT. THE NOTES, THIS AGREEMENT, AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS AMONG THE
PARTIES.
12.14. RENEWAL, EXTENSION, OR REARRANGEMENT. All provisions of this
agreement and of the other Loan Documents shall apply with equal force and
effect to each and all Notes hereby executed which in whole or in part
represent a renewal or extension for any period, increase or rearrangement of
any part of the Obligations originally represented by the Notes or of any
part of such other Obligations.
12.15. WAIVER OF JURY TRIAL. Each Company and each Lender hereby
knowingly and voluntarily waive any and all rights it may have to a trial by
jury with respect to any litigation based on, or arising
59
<PAGE>
out of, under, or in connection with, the Loan Documents. Each Lender is
hereby authorized to submit, as conclusive evidence of such waiver of jury
trial, this agreement to a court that has jurisdiction over the subject
matter of such litigation and the parties to this agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
60
<PAGE>
ASSOCIATES MORTGAGE FUNDING RYLAND MORTGAGE COMPANY,
CORPORATION, BORROWER GUARANTOR
Associates Mortgage Funding Ryland Mortgage Company
Corporation 11000 Broken Land Parkway
1201 Market Street Columbia, Maryland 21044
Wilmington, Delaware 19801 Attention: President
Attention: President Telecopy No. (410) 715-7195
By /S/ ALEXANDER J. STAVROLAKIS By /S/ ROBERT J. GAW
---------------------------- --------------------------
Alexander J. Stavrolakis, Robert J. Gaw,
Assistant Treasurer President
BANK ONE, TEXAS, NATIONAL FIRST UNION NATIONAL BANK OF
ASSOCIATION, a LENDER and NORTH CAROLINA, a LENDER
AGENT
Bank One, Texas, National
Association
1717 Main Street By /S/ JOSEPH A. MATYSEK
Dallas, Texas 75201 ---------------------
Telecopy No. (214) 290-2275 Jospeh A. Matysek,
Attention: Ms. Pamela E. Skinner Vice President
Vice President
By /S/ PAMELA E. SKINNER
----------------------
Pamela E. Skinner,
Vice President
TEXAS COMMERCE BANK NATIONAL DRESDNER BANK AG, NEW YORK
ASSOCIATION, a LENDER BRANCH, a LENDER
By /S/ WILLIAM J. CLARK By /S/ CHARLES H. HILL
-------------------- -------------------
William J. Clark, Charles H. Hill,
Vice President Vice President
By /S/ PETER BECKER
----------------
Peter Becker,
Vice President
61
<PAGE>
GUARANTY FEDERAL BANK, F.S.B., THE BANK OF TOKYO TRUST
a LENDER COMPANY, a LENDER
By /S/ JAMES E. ROBERTSON By /S/ J.J. WALLACE, JR.
---------------------- ---------------------
James E. Robertson, J.J. Wallace, Jr.,
Vice President Executive Vice President
THE INDUSTRIAL BANK OF JAPAN THE FIRST NATIONAL BANK OF
TRUST COMPANY, a LENDER MARYLAND,
a LENDER
By /S/ TAKESHI KAWANO By /S/ F. WINFIELD TRICE, JR.
------------------ --------------------------
Takeshi Kawano, F. Winfield Trice, Jr.,
Senior Vice President Vice President
and Senior Manager
KLEINWORT BENSON LIMITED, a NBD BANK, N.A., a LENDER
LENDER
By /S/ PATRICK F. DONELAN By /S/ ANDREW HEINECKE
---------------------- -------------------
Patrick F. Donelan, Andrew H. Heinecke,
Director First Vice President
TRUST COMPANY BANK, a LENDER
By /S/ JOHN H. VINCENT
-------------------
John H. Vincent,
Banking Officer
By /S/ HOLLIS LINGINFELTER
-----------------------
Hollis Linginfelter,
Vice President
62
<PAGE>
EXHIBIT 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS:
<TABLE>
<CAPTION>
December 31, December 31, December 31,
PRIMARY: 1993 1992 1991
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Net (loss) earnings ($000's) ($2,656) $27,520 $9,451
Adjustment for dividends on
convertible preferred shares (2,589) (2,677) (2,757)
------------ ------------- ------------
Adjusted net (loss) earnings ($5,245) $24,843 $6,694
============ ============= ============
Weighted average common shares
outstanding 15,326,748 14,687,003 12,252,457
Common stock equivalents (1):
Stock options 0 129,104 114,998
Compensation unit plan 0 126,497 168,078
Restricted stock 0 23,154 16,564
------------ ------------- ------------
Total 15,326,748 14,965,758 12,552,097
============ ============= ============
Primary earnings per share ($0.34) $1.66 $0.53
FULLY-DILUTED:
Net (loss) earnings ($000's) ($2,656) $27,520 $9,451
Adjustment for dividends on
convertible preferred shares (2) (2,589)
Adjustment for incremental dividends
on convertible preferred shares (2,210) (2,266)
------------ ------------- ------------
Adjusted net earnings ($5,245) $25,310 $7,185
============ ============= ============
Weighted average common shares
outstanding 15,326,748 14,687,003 12,252,457
Common stock equivalents (1):
Stock options 0 129,104 189,636
Compensation unit plan 0 126,497 168,078
Restricted stock 0 35,997 40,432
Convertible preferred stock 0 1,216,482 1,251,091
------------ ------------- ------------
Total 15,326,748 16,195,083 13,901,694
============ ============= ============
Fully diluted earnings per share ($0.34) $1.56 $0.52
============ ============= ============
<FN>
(1) For 1993, average shares outstanding have not been increased by the common
stock equivalents relating to the employee stock option and employee
incentive plans as the effect would be anti-dilutive.
(2) For 1993, the net loss was adjusted for dividends on convertible preferred
shares as the adjustment for incremental dividends on convertible preferred
shares would be anti-dilutive.
</TABLE>
23
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
- ----------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Homebuilding $ 1,203,563 $ 1,077,475 $ 859,200
Financial services 160,474 141,934 74,318
Limited-purpose subsidiaries 110,392 222,912 277,066
---------------------------------------------------
Total $ 1,474,429 $ 1,442,321 $ 1,210,584
---------------------------------------------------
PRETAX (LOSS) EARNINGS:
Homebuilding $ (45,930) $ 11,048 $ (3,305)
Financial services 55,269 43,930 26,856
Limited-purpose subsidiaries 158 3,856 2,330
Corporate (14,240) (16,496) (11,561)
---------------------------------------------------
Total $ (4,743) $ 42,338 $ 14,320
---------------------------------------------------
---------------------------------------------------
NET (LOSS) EARNINGS:
Total $ (2,656) $ 27,520 $ 9,451
Per common share $ (0.34) $ 1.66 $ 0.53
Dividends per common share $ 0.60 $ 0.60 $ 0.60
STOCKHOLDERS' EQUITY:
Total $ 293,247 $ 305,689 $ 218,600
Per common share (1) $ 18.61 $ 19.43 $ 17.34
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) CALCULATION MODIFIED TO INCLUDE RSOP RELEASED PREFERRED SHARES WHICH ARE CONVERTIBLE INTO COMMON SHARES.
</TABLE>
1
-
RYLAND
------
<PAGE>
SELECTED FINANCIAL DATA
-----------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT UNIT AND PER SHARE DATA) UNAUDITED
- ----------------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- ----------------------------------------------------------------------------------------------------------------------------------
ANNUAL RESULTS:
<S> <C> <C> <C>
Revenues
Homebuilding $ 1,204 $ 1,077 $ 859
Financial services 160 142 74
Limited-purpose subsidiaries 110 223 277
--------------------------------------------------
Total 1,474 1,442 1,210
Cost of sales - homebuilding (1,102) (938) (741)
Interest expense (162) (249) (302)
Selling, general and administrative expenses (213) (211) (137)
Equity in (losses) earnings of joint ventures (2) (2) (16)
--------------------------------------------------
(Loss) earnings before taxes (5) 42 14
Tax (benefit) expense (2) 14 5
(Loss) earnings before accounting change (1) (3) 28 9
Cumulative effect of accounting change (1) - - -
--------------------------------------------------
Net (loss) earnings $ (3) $ 28 $ 9
--------------------------------------------------
--------------------------------------------------
YEAR-END POSITION:
Assets
Housing inventories $ 490 $ 485 $ 355
Mortgage loans and mortgage-backed securities held for sale, net 728 634 352
Other assets 290 197 161
--------------------------------------------------
Assets excluding limited-purpose subsidiaries 1,508 1,316 868
Assets of limited-purpose subsidiaries (2) 808 1,581 2,691
--------------------------------------------------
Total assets $ 2,316 $ 2,897 $ 3,559
--------------------------------------------------
--------------------------------------------------
Long-term debt $ 352 $ 171 $ 205
Bonds payable, net (2) $ 778 $ 1,533 $ 2,617
Stockholders' equity $ 293 $ 306 $ 219
FINANCIAL SERVICES PORTFOLIOS:
Number of mortgage loans originated (in units) 27,872 20,184 6,851
Loan servicing portfolio balance $ 9,800 $ 9,100 $ 7,190
Securities administration portfolio balance $ 52,700 $ 63,300 $ 69,500
PER COMMON SHARE DATA: (3)
Primary (loss) earnings (before accounting change) $ (0.34) $ 1.66 $ 0.53
Dividends declared $ 0.60 $ 0.60 $ 0.60
Stockholders' equity (4) $ 18.61 $ 19.43 $ 17.34
- ---------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) THE COMPANY ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARD 96 - ACCOUNTING FOR INCOME TAXES IN 1989.
(2) THE ASSETS OF THE LIMITED-PURPOSE SUBSIDIARIES SEGMENT ARE PLEDGED AS COLLATERAL FOR THE SEGMENT'S BONDS. THE BONDS REPRESENT
OBLIGATIONS SOLELY OF THE LIMITED-PURPOSE SUBSIDIARIES, WHICH ARE SECURED BY MORTGAGES OR MORTGAGE CERTIFICATES. THE BONDS ARE
NOT GUARANTEED OR INSURED BY THE RYLAND GROUP, INC. OR ANY OF ITS SUBSIDIARIES.
(3) ADJUSTED FOR STOCK SPLIT IN 1986.
(4) CALCULATION MODIFIED TO INCLUDE RSOP RELEASED PREFERRED SHARES WHICH ARE CONVERTIBLE INTO COMMON SHARES.
</TABLE>
18
--
RYLAND
------
<PAGE>
SELECTED FINANCIAL DATA
-----------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(DOLLAR AMOUNTS IN MILLIONS, EXCEPT UNIT AND PER SHARE DATA) UNAUDITED
- ---------------------------------------------------------------------------------------------------------------------------------
1990 1989 1988 1987 1986 1985 1984
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 951 $ 1,016 $ 890 $ 854 $ 662 $ 497 $ 405
48 43 42 38 25 16 10
311 340 345 384 280 101 36
- ---------------------------------------------------------------------------------------------------------------------------------
1,310 1,399 1,277 1,276 967 614 451
(804) (848) (743) (710) (560) (419) (348)
(334) (362) (357) (391) (268) (114) (46)
(147) (137) (127) (123) (90) (46) (38)
9 19 17 5 0 0 0
- ---------------------------------------------------------------------------------------------------------------------------------
34 71 67 57 49 35 19
12 27 26 25 23 19 10
22 44 41 32 26 16 9
- 14 - - - - -
- ---------------------------------------------------------------------------------------------------------------------------------
$ 22 $ 58 $ 41 $ 32 $ 26 $ 16 $ 9
- ---------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
$ 328 $ 362 $ 303 $ 207 $ 225 $ 107 $ 74
186 218 136 124 200 43 85
168 168 148 154 122 54 43
- ---------------------------------------------------------------------------------------------------------------------------------
682 748 587 485 547 204 202
3,178 3,464 3,659 4,265 3,894 1,535 458
- ---------------------------------------------------------------------------------------------------------------------------------
$ 3,860 $ 4,212 $ 4,246 $ 4,750 $ 4,441 $ 1,739 $ 660
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
$ 188 $ 103 $ 111 $ 99 $ 134 $ 15 $ 15
$ 3,082 $ 3,363 $ 3,544 $ 4,116 $ 3,754 $ 1,486 $ 438
$ 212 $ 207 $ 169 $ 133 $ 104 $ 81 $ 67
5,958 6,094 5,277 5,023 6,301 4,145 3,373
$ 3,201 $ 2,047 $ 1,664 $ 1,491 $ 1,004 $ 635 $ 321
$ 55,900 $ 38,075 $ 20,585 $ 7,752 $ 3,752 $ 1,496 $ 438
$ 1.53 $ 3.25 $ 3.10 $ 2.46 $ 2.02 $ 1.27 $ 0.76
$ 0.60 $ 0.60 $ 0.53 $ 0.40 $ 0.38 $ 0.32 $ 0.30
$ 17.28 $ 16.62 $ 13.16 $ 10.50 $ 8.30 $ 6.42 $ 5.39
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
19
--
RYLAND
------
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
----------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
THE COMPANY
Operations of The Ryland Group, Inc. and subsidiaries (the company) consist of
three businesses: homebuilding, financial services and limited-purpose
subsidiaries.
RESULTS OF OPERATIONS
CONSOLIDATED
The company reported a consolidated net loss of $2.7 million, or ($.34) per
share, for 1993, compared with net earnings of $27.5 million, or $1.66 per
share, for the same period of 1992 and $9.5 million, or $.53 per share, for
1991.
Total revenues for 1993 increased 2.2 percent to $1.47 billion compared with
$1.44 billion in 1992 and $1.21 billion in 1991. The revenue increases in both
years were due to record dollar volumes in homebuilding and financial services
operations partially offset by declining revenues from the limited-purpose
subsidiaries. The increases in homebuilding revenues resulted from higher
volumes of settlements as well as increases in average settlement prices. The
higher revenues in financial services operations primarily resulted
from increased mortgage production and a larger loan servicing portfolio.
The decline in consolidated earnings for 1993 compared with 1992 was primarily
due to the third quarter pretax provision of $45 million for homebuilding
inventories and investments in unconsolidated joint ventures. For the year 1993,
homebuilding operations resulted in a pretax loss of $45.9 million compared with
pretax earnings of $11.0 million for 1992.
The financial services segment reported a pretax earnings increase of 25.8
percent to $55.3 million for 1993 compared with $43.9 million a year earlier.
The record earnings for the financial services segment in 1993 resulted from
improvements in retail, institutional and investment operations. The limited-
purpose subsidiaries, whose operations continue to decline as the mortgage
collateral and related bonds payable decrease, reported pretax earnings of $158
thousand compared with $3.9 million for 1992. Corporate expenses totaling $14.2
million for 1993 were down $2.3 million from 1992 primarily as a result of
decreases in the costs of incentive plans based on corporate performance.
The 191 percent increase in 1992 consolidated net earnings to $27.5 million as
compared with 1991 was primarily due to significant growth in profits of the
financial services segment as well as improved results in the homebuilding
segment. The financial services segment's pretax earnings increased 63.6 percent
to $43.9 million from $26.9 million in 1991. Homebuilding operations reported
pretax earnings of $11.0 million compared with 1991 losses of $3.3 million. The
limited-purpose subsidiaries achieved a $1.5 million increase in pretax earnings
in 1992. Corporate expenses increased $4.9 million in 1992 due to expansion of
corporate staff to support growth in operations, higher facility costs and
increases in other expenses such as employee benefits and incentive plans.
HOMEBUILDING SEGMENT
The homebuilding segment constructs and sells single-family attached and
detached homes. Operations of the company's homebuilding segment are summarized
as follows (dollar amounts in thousands, except average settlement price):
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 1,203,563 $ 1,077,475 $ 859,200
Gross profit 101,674 139,410 118,106
Selling, general
and administrative
expenses 119,546 109,374 91,560
Interest expense 26,118 17,157 13,743
Equity in losses
of unconsolidated
joint ventures (1,940) (1,831) (16,108)
--------------------------------------------------------
Homebuilding pretax
(loss) earnings $ (45,930) $ 11,048 $ (3,305)
--------------------------------------------------------
Average
settlement price(1) $ 148,400 $ 141,000 $ 133,900
- -------------------------------------------------------------------------------
<FN>
(1) EXCLUDES UNCONSOLIDATED JOINT VENTURES
</TABLE>
20
--
RYLAND
------
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
----------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
HOMEBUILDING OPERATIONS
The company's homebuilding segment reported a pretax loss of $45.9 million in
1993 compared with pretax earnings of $11.0 million in 1992 and a pretax loss of
$3.3 million for 1991. The 1993 loss was primarily due to the third quarter
pretax provision of $45 million in reserves for homebuilding inventories and
investment in unconsolidated joint ventures. Increased sales volume led to
profitable results in 1992, while the $3.3 million loss in 1991 reflected a
$13.0 million charge related to joint venture developments in Southern
California.
Homebuilding revenues increased 11.7 percent in 1993 compared with 1992 due to a
6.2 percent increase in wholly-owned settlements and a $7,400 increase in
average settlement price. The increased volume was in large part due to the
company's acquisition of an interest in a joint venture with Scott Felder Homes
in Austin, Texas. Homebuilding revenues increased 25.4 percent in 1992 compared
with 1991, due to a 22.5 percent increase in wholly-owned settlement units. Each
of the company's regional markets reported increases in settlements in 1992,
indicative of an overall economic recovery from depressed levels in 1991.
Gross profit margins decreased to 8.4 percent in 1993 from 12.9 percent in 1992
reflecting the impact of the $43.0 million inventory provision discussed below.
Excluding the $43.0 million inventory provision, gross margins for 1993 were
12.0 percent, a decline of .9 percent from 1992. Margins were lower in 1993
primarily due to higher construction costs and high-cost land positions combined
with competitive pricing concessions necessary in the Southern California and
Mid-Atlantic markets. Gross profit margins decreased to 12.9 percent in 1992
from 13.7 percent in 1991 as a result of competitive pricing pressures and
increased lumber prices.
The third-quarter pretax provision of $45 million in homebuilding reserves
amounted to $40 million for California and $5 million for the Mid-Atlantic
region. Of the total provision, $43 million related to inventory and was charged
to cost of sales, and $2 million was charged to equity in losses of
unconsolidated joint ventures. In California, the company changed its strategy
with respect to the sale of inventories negatively affected by the high cost of
land purchased in the late 1980s. The company bulk sold certain properties in
the fourth quarter and plans to bulk sell additional properties in 1994. The
company will also build-out housing projects that were previously inactivated
and accelerate the completion of other projects. The California reserve taken in
the third quarter reflected the impact on inventory values arising from the
changes in strategy under market conditions at the time. While the company
believes that these changes in strategy and related reserves should allow it to
reduce unsold inventory in Southern California more rapidly, the company does
not expect an immediate return to profitability in that market. The reserve for
the Mid-Atlantic region reflected the company's strategy to accelerate the
completion of, or withdrawal from, certain housing projects which were also
negatively impacted by high land costs.
Selling, general and administrative expenses decreased to 9.9 percent of
revenues in 1993 from 10.2 percent in 1992 and 10.7 percent in 1991, primarily
as a result of the higher revenue base in both years over which general and
administrative costs were spread. Expenses in 1993 have also been favorably
impacted by the restructuring of the homebuilding operations that occurred in
1992 which has helped offset some of the costs of entering new markets. The
dollar increase in overall selling, general and administrative costs included
$5.0 million in 1992 related to restructuring of the company's homebuilding
operations.
Interest expense increased in 1993 and 1992 due to an increase in the average
homebuilding debt outstanding to support higher average levels of inventory. In
addition, the company's senior subordinated debt issuances in July 1992 and
December 1993 increased the company's cost of funds and the company also
capitalized less interest in 1993.
21
--
RYLAND
------
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
----------------------------------
THE RYLAND GROUP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
HOMEBUILDING OPERATIONAL DATA
Outstanding Contracts
Three Months ended December 31, Year ended December 31, as of December 31,
------------------------------------- ------------------------------------ ------------------------------------
New New Dollars
Settlements % Orders % Settlements % Orders % % in Average
(Units) Change (Units) Change (Units) Change (Units) Change (Units) Change Millions Price
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993
Mid-Atlantic 843 5 619 32 2,816 (4) 2,777 (4) 1,062 (4) $177 $166,264
Midwest 240 8 174 (5) 899 (1) 999 8 352 40 54 152,414
Southeast 383 4 296 (18) 1,426 (2) 1,365 (10) 370 (14) 49 133,422
Southwest 565 53 469 92 1,843 45 1,869 40 539 60 89 165,753
West 301 6 323 60 1,066 6 1,189 14 349 65 62 177,175
Unconsolidated
Joint Ventures 72 (35) 44 (40) 269 (33) 234 (34) 47 (51) 10 217,241
----------------------------------------------------------------------------------------------
Total 2,404 11 1,925 26 8,319 4 8,433 5 2,719 12 $441
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
1992
Mid-Atlantic 802 468 2,929 2,883 1,101 $181 $164,892
Midwest 222 183 912 924 252 34 136,414
Southeast 370 363 1,455 1,511 431 55 127,032
Southwest 369 244 1,275 1,338 337 47 140,485
West 285 202 1,009 1,042 212 36 167,978
Unconsolidated
Joint Ventures 110 73 399 353 96 20 207,029
----------------------------------------------------------------------------------------------
Total 2,158 1,533 7,979 8,051 2,429 $373
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</TABLE>
During 1993 new orders increased 4.7 percent compared with 1992, with gains in
the Southwest, West and Midwest regions offsetting lower sales in the Southeast
and Mid-Atlantic regions and a decline in operations of unconsolidated joint
ventures. The increase in new orders in the Southwest region is due to the
company's acquisition in March 1993 of an interest in a joint venture with Scott
Felder Homes which has operations in Austin, Dallas and San Antonio. The decline
in the Southeast was due to the company's withdrawal from the Jacksonville,
Florida market. Outstanding contracts for the homebuilding operations at
December 31, 1993 were up 12 percent, resulting from an increase in fourth
quarter 1993 new orders of 26 percent. Outstanding contracts represent the
company's backlog of new homes which generally are built and settled, subject to
cancellations, over the next two quarters. The $441 million value of outstanding
contracts, which increased 18 percent over year-end 1992, is the highest
year-end level in the company's history.
22
--
RYLAND
------
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
----------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
FINANCIAL SERVICES SEGMENT
The company's financial services segment provides various mortgage-related
products and services for retail and institutional customers and conducts
investment activities. The financial services segment reported pretax earnings
of $55.3 million in 1993, compared with $43.9 million in 1992 and $26.9 million
in 1991.
Revenues increased 13.1 percent in 1993 over 1992 in large part due to the
significant increase in mortgage production. The 91.0 percent growth in revenues
in 1992 was primarily due to substantial growth in mortgage production and loan
servicing operations. In 1993 and 1992, there was a favorable interest rate
environment, resulting in a high level of refinancing activity. The increase in
general and administrative expenses in 1993 was related to the overall growth in
retail operations. The increase in these expenses in 1992 was related to growth
in originations, servicing and investment operations. The increases in interest
expense for 1993 and 1992 were directly related to increased borrowings needed
to fund the higher volumes.
RETAIL OPERATIONS
The operations for retail customers include mortgage origination, loan servicing
and title/escrow services. In addition, the retail operations earn interest on
mortgages held for sale.
Revenues for retail operations were as follows (in thousands):
<TABLE>
<CAPTION>
1993 1992 1991
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Mortgage production $ 56,643 $ 40,181 $ 14,558
Loan servicing 43,635 38,061 16,601
Title/escrow 3,610 2,700 1,522
---------------------------------------------
Total revenues $ 103,888 $ 80,942 $ 32,681
---------------------------------------------
---------------------------------------------
</TABLE>
The increases in total retail revenues for 1993 and 1992 were the result of
growth in mortgage origination activity, higher fees earned on the loan
servicing portfolio and growth in the title company. The increase in the
mortgage origination activity is attributable to the favorable interest rate
environment in the past two years, coupled with the company's expansion of spot
loan and wholesale mortgage origination activities.
Mortgage production revenue includes retail and wholesale origination revenues,
interest earned on mortgages held in inventory, gains or losses on sales of
mortgages into the secondary market and revenues from the sale of servicing
rights. The financial services segment seeks to manage the net interest spread
and the sales of mortgages and servicing rights to offset the costs of
origination and marketing.
A summary of origination activities is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Dollar volume of
mortgages originated
(in millions) $ 3,596 $ 2,624 $ 806
Number of mortgages
originated 27,872 20,184 6,851
Percentage of total
originations not
related to Ryland
home settlements 80% 71% 27%
</TABLE>
The company holds mortgage loans and mortgage-backed securities (collectively,
mortgages) in inventory after their origination and prior to their sale to
investors. The value of mortgages held for sale fluctuates with changes in long-
term interest rates. The company reduces its exposure to interest rate changes
by hedging its unsold mortgages, pricing its current loan products at market
rates and quickly turning over its mortgage inventory held for sale. Based upon
long-term interest rate movements and the mix of hedging contracts utilized to
cover the inventory, the company may generate a gain or loss when the mortgages
are sold. The company earns interest on mortgages held for sale and pays
interest on borrowings secured by mortgages. Significant data from these
operations were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Interest spread
(in thousands) $12,159 $12,932 $ 5,506
Average balance of
mortgages held for sale
(in millions) $ 418 $ 341 $ 110
Interest spread rate 2.9% 3.8% 5.0%
</TABLE>
23
--
RYLAND
------
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
----------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
The interest spread decreased in 1993 primarily due to a decrease in the
mortgage interest rates on mortgages held for sale without a corresponding
decrease in the company's net cost of funds. The increase in 1992 was
primarily due to an increase in the average balance of mortgages held for sale,
partially offset by a decrease in the interest spread rate.
The company services loans that it originates as well as loans originated by
others. Loan servicing revenues increased 15 percent in 1993 compared with 1992
due to an increase in the fees earned per loan. The 129 percent increase in loan
servicing revenues in 1992 compared with 1991 was primarily due to portfolio
growth in 1992. Loan servicing portfolio balances were as follows at December 31
(in billions):
<TABLE>
<CAPTION>
1993 1992 1991
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Originated $ 4.0 $ 3.5 $ 2.4
Acquired 4.6 5.2 2.4
Subserviced for others 1.2 .4 .2
Subserviced by others - - 2.2
-----------------------------------------
Total serviced $ 9.8 $ 9.1 $ 7.2
-----------------------------------------
-----------------------------------------
</TABLE>
Growth in the portfolio since 1991 was largely due to increased originations
despite the high level of prepayments experienced during 1993 and 1992, and
acquisitions of Resolution Trust Corporation ("RTC") related servicing rights in
1991 and the first quarter of 1992. During 1992, the company transferred $2.2
billion of RTC loans to its acquired loan servicing portfolio, that in 1991 had
been sub-serviced by others. The 1993 increase in loans sub-serviced for others
principally relates to interim servicing of loans for which the servicing had
been bulk sold in the fourth quarter of 1993.
INSTITUTIONAL OPERATIONS
The institutional operations encompass securities issuance and securities
administration services. Within securities administration, the company performs
a number of functions including a master servicing function for a portion of the
total portfolio. As master servicer, the company has the obligation to be the
back-up servicer upon the failure of the primary servicer to perform under its
servicing agreement.
Significant data for these operations were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Securities administration
and issuance revenues
(in thousands) $23,945 $ 18,364 $ 16,698
Total securities admini-
stration (in billions) $ 52.7 $ 63.3 $ 69.5
Number of series in the
administration portfolio 526 490 461
</TABLE>
The company experienced an increase in net revenues in 1993 and 1992, despite a
decline in the overall portfolio balance, due to the improved quality of
business in the administration portfolio. The decline in the portfolio balance
is attributable to significantly higher mortgage prepayment activity during 1993
and 1992 as compared to previous years.
INVESTMENT OPERATIONS
The company's investment operations hold certain assets, primarily
mortgage-backed securities held for sale, which were obtained as a result of the
exercise of redemption rights that were held on various mortgage-backed bonds
previously owned by the company's limited-purpose subsidiaries. Redemptions of
mortgage-backed bonds are expected to continue in 1994. The company earns a net
interest spread on this portfolio from the difference between the interest rates
on the mortgage-backed securities held for sale and the related borrowing rates.
Significant data from these operations were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest spread earned
(in thousands) $13,413 $ 8,441 $ 4,977
Average balance
outstanding
(in millions) $ 207 $ 154 $ 112
Interest spread rate 6.5% 5.5% 4.5%
</TABLE>
24
--
RYLAND
------
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
----------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
The increases in interest spread earned were related to the higher portfolio
balances outstanding and to the increase in the interest spread rate.
The company also realizes gains from the sale of these mortgage-backed
securities, which are partially offset by the accelerated amortization of
deferred expenses in connection with the retirement of the related bonds. These
net gains amounted to $5.7 million, $5.3 million and $2.0 million in 1993, 1992
and 1991, respectively.
Pretax earnings from investment operations for both 1993 and 1992 were affected
by sales of stock or options in Resource Mortgage Capital, Inc., formerly RAC
Mortgage Investment Corporation, a real estate investment trust that specializes
in purchasing, securitizing and investing in mortgage loans. In 1993 and 1992,
the company had pretax gains of $5.3 million and $4.7 million, respectively,
from the sale of options and stock of Resource Mortgage Capital, Inc. The
company has no remaining investment in Resource Mortgage Capital, Inc.
Net investment advisory fee and administrative fee income for 1993 was $.9
million compared to $8.1 million for 1992 and $9.3 million for 1991. The
advisory services operations previously provided fund management and
administrative services to Resource Mortgage Capital, Inc. and RAC Income Fund,
Inc. The decline in advisory and administrative fee income in 1993 was
attributable to the termination of an advisory agreement with Resource Mortgage
Capital, Inc. in 1992 and the sale of Ryland Capital Management in 1993. The
company no longer provides investment advisory services.
LIMITED-PURPOSE SUBSIDIARIES
Activity in the limited-purpose subsidiaries continues to decline as the
mortgage collateral pledged to secure the bonds decreases due to scheduled
principal payments, increased prepayments and exercises of early redemption
provisions. The limited-purpose subsidiaries reported pretax earnings for 1993
of $158 thousand compared with $3.9 million in 1992 and $2.3 million in 1991.
The lower level of earnings for this segment as compared to prior years is
expected to continue in the future. The increase in earnings in 1992 compared
with 1991 was primarily due to the exercise of certain early redemption
provisions which accelerated the recognition of deferred income items, partially
offset by the impact of prepayments.
Revenues of the limited-purpose subsidiaries consist primarily of interest on
mortgage collateral subject to bond indebtedness. Expenses consist primarily of
interest on the outstanding bonds and amortization of deferred costs. The
significant increase in other expenses in 1992 was due to accelerated
amortization of deferred costs caused by early redemption of bonds.
Although the limited-purpose subsidiaries may continue to issue securities on
behalf of others, due to changes in the tax laws, the company has not retained
any further residual interests in new securities since 1991. Therefore, the
limited-purpose subsidiaries' revenues and expenses are expected to decline
further in future years as this portfolio continues to run-off.
25
--
RYLAND
------
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPREATIONS AND FINANCIAL CONDITION
----------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
FINANCIAL CONDITION AND LIQUIDITY
The company generally provides for its cash requirements for the homebuilding
and financial services businesses from internally generated funds and outside
borrowings. The company believes that its current sources of cash are sufficient
to finance its expected requirements.
The homebuilding segment borrowings include a revolving credit agreement, senior
notes, senior subordinated notes and land purchase notes. In December 1993, the
company completed an offering of $100 million in 9.625 percent senior
subordinated notes, due 2004. The proceeds were used to reduce bank debt
outstanding under the company's revolving credit facility. With the issuance of
the senior subordinated notes the company extended the maturity of its financing
structure and increased availability under its revolving credit agreement.
The company primarily uses its unsecured revolving credit agreement to finance
its sold inventory. This agreement, which was renewed in July 1993, allows the
company to borrow up to $215 million for a three year period. As of December 31,
1993, the company had borrowed $90 million under this agreement, compared with
$105 million as of December 31, 1992. In addition, the company had letters of
credit outstanding under this credit facility totaling $7.4 million and $10.8
million at December 31, 1993 and 1992, respectively.
Housing inventories increased slightly to $490 million as of December 31, 1993,
from $485 million as of the end of 1992. The increased investment in
inventories, after considering reserve increases, was $37 million. This increase
was primarily the result of the company's expansion into new and existing
markets, and to a lesser degree, the acquisition of its partner's equity
interest in three joint venture projects which resulted in the consolidation of
these joint ventures for financial reporting purposes.
To finance land purchases, the company may use seller-financed, non-recourse
secured notes payable. At December 31, 1993 and 1992, these notes payable
outstanding amounted to $30.9 million and $44.3 million, respectively. The
decrease in notes payable is primarily attributable to the payment of debt which
had been acquired in connection with various joint ventures.
The financial services segment uses cash generated from operations and borrowing
arrangements to finance operations. Borrowing arrangements as of year-end 1993
included a $365 million mortgage warehouse funding agreement, repurchase
agreement facilities aggregating $800 million and a $50 million revolving credit
agreement. In addition, in January 1994 the company entered into a secured $35
million credit agreement to be used for the short-term financing of optional
bond redemptions. At December 31, 1993 and 1992, the balances of mortgage loans
and mortgage-backed securities held for sale were $728.1 million and $633.6
million, respectively. At December 31, 1993 and 1992, the borrowings under the
mortgage warehouse funding agreement, the repurchase agreements and the
revolving credit agreement were $716.9 million and $587.9 million, respectively.
Mortgage loans and mortgage-backed securities held by the limited-purpose
subsidiaries are pledged as collateral for the issued bonds, the terms of which
provide for the retirement of all bonds from the proceeds of the collateral. The
source of cash for the segment's bond payments is cash received from the
segment's mortgage loans receivable and mortgage-backed securities.
The Ryland Group, Inc. has not guaranteed the debt of the financial services
segment or the limited-purpose subsidiaries.
26
--
RYLAND
------
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
-----------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
- ----------------------------------------------------------------------------------------------
Year ended December 31, 1993 1992 1991
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Homebuilding $1,203,563 $1,077,475 $ 859,200
Financial services 160,474 141,934 74,318
Limited-purpose subsidiaries 110,392 222,912 277,066
--------------------------------------
Total revenues 1,474,429 1,442,321 1,210,584
--------------------------------------
EXPENSES:
Homebuilding:
Cost of sales 1,101,889 938,065 741,094
Interest expense 26,118 17,157 13,743
Selling, general and administrative expenses 119,546 109,374 91,560
--------------------------------------
Total homebuilding expenses 1,247,553 1,064,596 846,397
Financial services:
Interest expense 30,750 28,211 14,592
General and administrative expenses 74,455 69,793 32,870
--------------------------------------
Total financial services expenses 105,205 98,004 47,462
Limited-purpose subsidiaries:
Interest expense 104,851 203,336 273,856
Other expenses 5,383 15,720 880
--------------------------------------
Total limited-purpose subsidiaries expenses 110,234 219,056 274,736
Corporate expenses 14,240 16,496 11,561
--------------------------------------
Total expenses 1,477,232 1,398,152 1,180,156
--------------------------------------
Equity in losses of unconsolidated joint ventures (1,940) (1,831) (16,108)
--------------------------------------
(LOSS) EARNINGS BEFORE TAXES (4,743) 42,338 14,320
Tax (benefit) expense (2,087) 14,818 4,869
--------------------------------------
NET (LOSS) EARNINGS $ (2,656) $ 27,520 $ 9,451
--------------------------------------
--------------------------------------
Preferred dividends $ 2,589 $ 2,677 $ 2,757
Net (loss) earnings applicable to common stockholders $ (5,245) $ 24,843 $ 6,694
NET (LOSS) EARNINGS PER COMMON SHARE:
Primary $ (0.34) $ 1.66 $ 0.53
Fully diluted $ (0.34) $ 1.56 $ 0.52
Dividends per common share $ 0.60 $ 0.60 $ 0.60
Dividends per preferred share $ 2.21 $ 2.21 $ 2.21
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
27
--
RYLAND
------
<PAGE>
CONSOLIDATED BALANCE SHEETS
---------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
----------------------------------------------------------------------------------------------
December 31, 1993 1992
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
HOMEBUILDING:
Cash $ 44,251 $ 10,413
Housing inventories: (Note A)
Sold homes and lots 173,367 148,846
Unsold homes and lots 308,358 320,263
Land held for future development or resale 7,821 16,075
------------------------
Total inventories 489,546 485,184
Investment in/advances to unconsolidated joint ventures (Note C) 23,066 34,962
Property, plant and equipment 13,999 13,865
Purchase price in excess of net assets acquired 23,639 24,671
Other assets 43,976 32,194
------------------------
638,477 601,289
------------------------
FINANCIAL SERVICES: (NOTE D)
Mortgage loans held for sale, net 535,679 392,533
Mortgage-backed securities held for sale, net 192,417 241,102
Purchased servicing and administration rights, net 14,446 19,056
Other assets 78,389 47,023
------------------------
820,931 699,714
------------------------
LIMITED-PURPOSE SUBSIDIARIES:
Collateral for bonds payable, net (Note E) 798,074 1,559,661
Other assets 9,882 20,981
------------------------
807,956 1,580,642
------------------------
Net deferred taxes 32,010 3,267
Other assets 16,319 11,769
------------------------
TOTAL ASSETS $2,315,693 $2,896,681
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
28
--
RYLAND
------
<PAGE>
CONSOLIDATED BALANCE SHEETS
---------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
- -------------------------------------------------------------------------------
December 31, 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES
HOMEBUILDING:
Accounts payable and other liabilities $ 59,082 $ 55,837
Current portion of long-term debt 29,316 146,668
Long-term debt (Note G) 351,724 170,899
------------------------
440,122 373,404
------------------------
FINANCIAL SERVICES:
Accounts payable and other liabilities 34,453 31,145
Short-term notes payable (Note F) 716,933 587,872
------------------------
751,386 619,017
------------------------
LIMITED-PURPOSE SUBSIDIARIES:
Accounts payable and other liabilities 22,591 37,928
Bonds payable, net (Note E) 778,428 1,533,237
------------------------
801,019 1,571,165
------------------------
Other liabilities 29,919 27,406
------------------------
Total liabilities 2,022,446 2,590,992
------------------------
STOCKHOLDERS' EQUITY (NOTES J AND K)
Convertible preferred stock, $1 par value:
Authorized - 1,400,000 shares
Issued - 1,153,652 shares (1,198,533 for 1992) 1,154 1,199
Common stock, $1 par value:
Authorized - 78,600,000 shares
Issued - 15,342,624 shares (15,390,314 for 1992) 15,343 15,390
Paid-in capital 116,386 119,100
Retained earnings 180,351 196,203
Other (19,987) (26,203)
------------------------
Total stockholders' equity 293,247 305,689
------------------------
Total liabilities and stockholders' equity $2,315,693 $2,896,681
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
29
--
RYLAND
------
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
- ----------------------------------------------------------------------------------------------------------------------------
OTHER
------------------------ TOTAL
PREFERRED COMMON PAID-IN RETAINED DUE FROM DEFERRED STOCKHOLDERS'
STOCK STOCK CAPITAL EARNINGS RSOP TRUST COMPENSATION EQUITY
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1991 $ 1,262 $ 12,112 $ 44,624 $182,644 $(25,361) $(2,938) $212,343
Net earnings 9,451 9,451
Preferred stock dividends (2,757) (2,757)
Common stock dividends (7,384) (7,384)
Conversion of preferred stock (25) 25 (166) (166)
Reclassification of preferred stock,
less related note 4,716 (4,509) 207
RSOP debt payments 2,182 2,182
Restricted stock 403 403
Marketable securities adjustment 1,067 1,067
Employee common stock plans
(207,342 shares) 207 3,047 3,254
-------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1991 1,237 12,344 52,221 183,021 (27,688) (2,535) 218,600
-------------------------------------------------------------------------------
Net earnings 27,520 27,520
Preferred stock dividends (2,677) (2,677)
Common stock dividends (9,253) (9,253)
Common stock repurchased
and retired (119) (2,408) (2,527)
Common stock issuance 2,875 63,981 66,856
Conversion of preferred stock (38) 38 (206) (206)
Reclassification of preferred stock,
less related note (1,583) 1,010 (573)
RSOP debt payments 2,620 2,620
Restricted stock 390 390
Employee common stock plans
(252,064 shares) 252 4,687 4,939
-------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1992 1,199 15,390 119,100 196,203 (24,058) (2,145) 305,689
-------------------------------------------------------------------------------
Net loss (2,656) (2,656)
Preferred stock dividends (2,589) (2,589)
Common stock dividends (9,196) (9,196)
Common stock repurchased
and retired (99) (2,115) (2,214)
Conversion of preferred stock (45) 45 (415) (415)
Reclassification of preferred stock,
less related note (1,987) 1,114 (873)
RSOP debt payments 2,957 2,957
Restricted stock (110) (2,145) 2,145 (110)
Employee common stock plans
(116,529 shares) 117 1,833 704 2,654
-------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993 $ 1,154 $ 15,343 $116,386 $180,351 $(19,987) $ 0 $293,247
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
30
--
RYLAND
------
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------
Year ended December 31, 1993 1992 1991
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings $ (2,656) $ 27,520 $ 9,451
Adjustments to reconcile net (loss) earnings to net cash used for
operating activities:
Depreciation and amortization 26,091 30,617 20,531
Gain on sale of investment (5,322) (4,668) 0
Increase in inventories (4,362) (129,955) (27,039)
Net change in other assets, payables and other liabilities (79,811) (23,681) (16,981)
Equity in losses of unconsolidated joint ventures 1,940 1,831 16,108
Decrease (increase) in investment in/advances to
unconsolidated joint ventures 9,683 1,202 (21,669)
Increase in mortgage loans and mortgage-backed securities
held for sale, net (94,461) (281,570) (166,196)
------------------------------------
Net cash used for operating activities (148,898) (378,704) (185,795)
------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net additions to property, plant and equipment (12,641) (13,967) (3,686)
Principal reduction of mortgage collateral 768,703 1,098,283 498,177
Other investing activities, net 6,710 (2,862) (13,214)
------------------------------------
Net cash provided by investing activities 762,772 1,081,454 481,277
------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in short-term notes payable 129,061 239,469 158,512
Cash proceeds of long-term debt 114,858 165,463 35,199
Reduction of long-term debt (51,384) (67,751) (13,283)
Bond principal payments (763,357) (1,093,602) (484,199)
Common stock issuance 0 66,856 0
Common and preferred stock dividends (11,785) (11,930) (10,141)
Other financing activities, net 2,571 6,157 20,450
------------------------------------
Net cash used for financing activities (580,036) (695,338) (293,462)
------------------------------------
Net increase in cash 33,838 7,412 2,020
Cash at beginning of year 10,413 3,001 981
------------------------------------
Cash at end of year $ 44,251 $ 10,413 $ 3,001
------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest $ 168,761 $ 303,613 $ 319,849
Cash paid for income taxes $ 26,540 $ 26,081 $ 13,321
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
31
--
RYLAND
------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA, IN ALL NOTES)
NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of The Ryland Group,
Inc., and its wholly owned subsidiaries (the company). Intercompany transactions
have been eliminated in consolidation. Certain investments in joint ventures
(see Note C) are accounted for by the equity method. Certain amounts in the
consolidated statements of prior years have been reclassified to conform to the
1993 presentation.
PER SHARE DATA
Net (loss) earnings per common share are computed by dividing net (loss)
earnings by the weighted average number of common and common equivalent shares
outstanding. Common equivalent shares, which are computed using the treasury
stock method, include shares that relate to the employee stock option and
deferred compensation plans. In calculating primary (loss) earnings per common
share applicable to stockholders, the dividend requirements of the preferred
shares held by The Ryland Group, Inc. Retirement and Stock Ownership Plan Trust
(the RSOP Trust) have been added to net loss or deducted from net earnings as
appropriate. For the years ended December 31, 1992 and 1991, the average shares
outstanding have been increased by the common stock equivalents relating to the
employee stock option and employee incentive plans. For the year ended
December 31, 1993, these common stock equivalents were not considered as the
effect would be anti-dilutive.
Fully diluted earnings per common share for the years ended December 31, 1992
and 1991 give effect to the common stock equivalents and the assumed conversion
of the preferred stock held by the RSOP Trust into 1,216,482 and 1,251,091
shares, respectively, of common stock. In computing fully diluted loss per
common share for the year ended December 31, 1993, average shares outstanding
have not been increased by the common stock equivalents relating to the employee
stock option plan, employee incentive plan, and the assumed conversion of the
preferred stock held by the RSOP Trust as the effect would be anti-dilutive.
Net earnings used in calculating fully diluted earnings per common share for the
years ended December 31, 1992 and 1991 were decreased by the amount of the
additional RSOP contribution required to fund the difference between the RSOP's
earnings from preferred stock dividends and the RSOP's potential earnings from
common stock dividends after an assumed conversion. Net loss used in calculating
fully diluted loss per common share for the year ended December 31, 1993
excluded this adjustment as the effect would be anti-dilutive.
INCOME TAXES
The company files a consolidated federal income tax return. The company adopted
Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting for
Income Taxes," effective January 1, 1993. Prior to the adoption of SFAS 109, the
company accounted for its income taxes under SFAS 96. The impact of the adoption
of SFAS 109 was not material. Certain items of income and expense are included
in one period for financial reporting purposes and another for income tax
purposes. Deferred income taxes are provided in recognition of these
differences.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is carried at cost, less accumulated depreciation.
Depreciation is provided for, principally, by the straight-line method over
their estimated useful lives.
HOMEBUILDING REVENUES
Homebuilding revenues are recognized when home sales are completed and title
passes to the customer at settlement.
SERVICE LIABILITIES
Service and warranty costs are estimated and accrued for at the time of
settlement of a home.
HOUSING INVENTORIES
Housing inventories consist principally of homes under construction, model
homes, developed lots and land held for future development or resale. Sold
inventory represents inventory for which contracts have been accepted.
Inventories are stated at the lower of cost or net realizable value for each
parcel or subdivision and are reported net of valuation reserves. Net realizable
value is the estimated selling price in the ordinary course of business less
estimated costs of completion, holding and disposal. Inventory valuation
reserves were $53.3 million and $20.4 million at December 31, 1993 and 1992,
respectively. Estimates of net realizable value are reviewed periodically and
valuation reserve adjustments, if appropriate, are reflected in results of
operations in the period in which such estimates change. The increase in the
reserve during 1993 is attributable to the provision taken in the third quarter
primarily related to inventories in Southern California. For further discussion
regarding the third quarter provision, see "Management's Discussion and
Analysis" on page 21.
32
--
RYLAND
------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THE RYLAND GROUP, INC., AND SUBSIDIARIES
Costs of inventory include direct costs of land, material acquisition, home
construction and related direct overhead expenses. Real estate taxes, insurance
and interest are capitalized only during the land development stage. The company
capitalized $5,327 and $10,787 of interest during the years ended December
31,1993 and 1992, respectively. The balances of capitalized interest were
$25,539 and $25,097 at December 31, 1993 and 1992, respectively. The costs of
acquiring and developing land and constructing certain related amenities are
allocated to the parcels to which these costs relate.
PURCHASE PRICE IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets of acquired businesses (goodwill) is being
amortized on a straight-line basis over 30 years.
LOAN ORIGINATION FEES, COSTS, AND MORTGAGE DISCOUNTS
Loan origination fees and loan discount points, net of the related direct
origination costs, are deferred as an adjustment to the carrying value of the
related mortgage loans or mortgage-backed securities, and are recognized into
income upon the sale of the mortgage loans or mortgage-backed securities.
Discounts on mortgage collateral for the bonds of the limited-purpose
subsidiaries primarily represent loan origination discount points and purchase
price discounts. These discounts are deferred as an adjustment to the recorded
book value of the related mortgage loans. They are amortized into interest
income over their respective lives using the interest method, which is adjusted
for the effect of prepayments.
HEDGING ACTIVITIES
The company enters into forward delivery contracts, options on forward delivery
contracts and options on futures contracts (collectively referred to as hedging
contracts) for the purpose of minimizing its exposure to movements in interest
rates on mortgage loans and mortgage-backed securities prior to closing and
while held for sale. These contracts primarily represent commitments or options
to purchase or sell mortgages or securities at a future date and at a specified
price or yield. Changes in the market value of hedging contracts applicable to
loans and securities held for sale are generally deferred and recognized when
loans or securities are sold. Option premiums are deferred and recognized over
the lives of the options on a straight-line basis.
DEFERRED FINANCING COSTS
Financing costs incurred in connection with the issuance of bonds are
capitalized and amortized over the respective lives of the bonds using the
interest method. These costs are included in other assets of the limited-purpose
subsidiaries in the accompanying financial statements.
PURCHASED SERVICING AND ADMINISTRATION RIGHTS
Purchased servicing and administration rights are capitalized and amortized in
proportion to and over the period of estimated net servicing and net
administration revenue.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," (SFAS 107) requires disclosure of fair value
financial information about financial instruments, whether or not recognized in
the balance sheet. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation techniques.
Those fair values are significantly affected by the assumptions used, including
the discount rate and estimates of cash flow. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent markets
and, in many cases, could not be realized in immediate settlement of the
instrument.
SFAS 107 excludes certain financial instruments and all non-financial
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the company.
NEW ACCOUNTING PRONOUNCEMENTS
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" which is effective for fiscal years beginning after
December 15, 1993. The Statement requires that upon acquisition, the company
will classify debt and equity securities into one of three categories:
held-to-maturity, available-for-sale, or trading, based on management's intent
and ability to hold such securities. Securities which are classified as
held-to-maturity will continue to be accounted for at amortized cost. Securities
which are classified as available-for-sale will be measured at fair market value
with market value changes reflected as a component of stockholders' equity.
Finally, securities classified as trading will be measured at fair market value
with market value changes flowing through the income statement. The company may
at times have investments in each category and will adopt this Statement on
January 1, 1994. The results of implementation are estimated to have a positive
impact on the financial position of the company.
33
--
RYLAND
------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
NOTE B: SEGMENT INFORMATION
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Homebuilding $ 1,203,563 $ 1,077,475 $ 859,200
Financial services 160,474 141,934 74,318
Limited-purpose subsidiaries 110,392 222,912 277,066
---------------------------------------
Total $ 1,474,429 $ 1,442,321 $ 1,210,584
---------------------------------------
---------------------------------------
PRETAX (LOSS) EARNINGS:
Homebuilding $ (45,930) $ 11,048 $ (3,305)
Financial services 55,269 43,930 26,856
Limited-purpose subsidiaries 158 3,856 2,330
Corporate (14,240) (16,496) (11,561)
---------------------------------------
Total $ (4,743) $ 42,338 $ 14,320
---------------------------------------
---------------------------------------
DEPRECIATION AND AMORTIZATION:
Homebuilding $ 8,743 $ 7,356 $ 9,613
Financial services 7,132 7,018 5,874
Limited-purpose subsidiaries 7,535 14,351 3,190
Corporate 2,681 1,892 1,854
---------------------------------------
Total $ 26,091 $ 30,617 $ 20,531
---------------------------------------
---------------------------------------
IDENTIFIABLE ASSETS:
Homebuilding $ 638,477 $ 601,289 $ 467,043
Financial services 820,931 699,714 393,948
Limited-purpose subsidiaries 807,956 1,580,642 2,691,568
Corporate 48,329 15,036 6,710
---------------------------------------
Total $ 2,315,693 $ 2,896,681 $ 3,559,269
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
34
--
RYLAND
------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
NOTE C: INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES
The company participates in homebuilding joint ventures primarily in California
and Maryland. Summarized financial information for all joint venture entities
accounted for under the equity method is as follows:
STATEMENTS OF EARNINGS (LOSSES)
<TABLE>
<CAPTION>
Year Ended December 31, 1993 1992 1991
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 72,527 $ 112,453 $ 126,018
Cost of sales 67,912 120,063 114,577
Expenses 3,930 8,829 17,117
-----------------------------------
Pretax earnings (losses) $ 685 $ (16,439) $ ( 5,676)
-----------------------------------
-----------------------------------
The company's
share of pretax
earnings (losses) $ (1,940) $ ( 1,831) $ ( 16,108)
-----------------------------------
-----------------------------------
BALANCE SHEETS
December 31, 1993 1992
- ------------------------------------------------------------------
Assets:
Housing inventories $ 52,058 $ 98,033
Other assets 13,544 13,494
---------------------
Total assets $ 65,602 $ 111,527
---------------------
Liabilities and Partners' Equity:
Debt $ 19,100 $ 38,329
Other liabilities 7,999 11,706
Due to the company 12,407 15,071
---------------------
Total liabilities 39,506 65,106
---------------------
The company's equity 10,659 19,891
Other partners' equity 15,437 26,530
---------------------
Total equity 26,096 46,421
---------------------
Total liabilities and equity $ 65,602 $ 111,527
---------------------
</TABLE>
The company generally has a 50 percent interest in these joint ventures and
records its interest in their operating results using the equity method. The
company's share of operating results is not always in proportion to its
ownership interest. The company's share of pretax earnings/(losses) included
charges to earnings of $2,400 in 1993, due to joint venture developments in the
Mid-Atlantic region, and $13,000 in 1991, due to joint venture developments in
Southern California.
Some joint ventures issue performance or development bonds to municipalities to
insure completion of public facilities such as roads and sewers. Performance and
development bonds were $9,977 and $16,622 at December 31, 1993 and 1992,
respectively.
The joint ventures primarily use non-recourse financing arrangements
collateralized by joint venture land and improvements. The company had
guaranteed $3,301 and $7,206 of joint venture debt at December 31, 1993 and
1992, respectively.
NOTE D: FINANCIAL SERVICES SEGMENT ASSETS
Mortgage loans held for sale consist of loans collateralized by first mortgages
or first deeds of trust on single family attached or detached houses.
Mortgage-backed securities held for sale consist of GNMA certificates, FNMA
mortgage pass-through certificates, FHLMC participation certificates, and notes
receivable secured by mortgage-backed securities. The notes receivable have been
obtained from various participants upon an early redemption of certain bond
series issued by the limited-purpose subsidiaries. Principal payments received
on the underlying mortgage securities are applied to the outstanding balance of
the note.
Mortgage loans and mortgage-backed securities are generally held for sale and
are valued at the lower of cost or market determined on an aggregate basis. Any
gain or loss on the sale of the loans or securities is recognized at the time of
sale. Mortgage loans and mortgage-backed securities held for sale are reported
net of mortgage discounts, which as of December 31, 1993 and 1992, were $9,048
and $8,839, respectively. These mortgage loans and mortgage-backed securities
are pledged as collateral for certain short-term notes payable (see Note F).
35
--
RYLAND
------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
The fair values for mortgage loans and mortgage-backed securities as of
December 31, 1993 and 1992, were estimated based on quoted market prices for
similar loans and securities. The fair values are as follows:
<TABLE>
<CAPTION>
1993 1992
- ------------------------------------------------------------------
<S> <C> <C>
Mortgage loans $ 542,272 $ 397,439
Mortgage-backed securities 215,327 259,550
</TABLE>
The company manages its interest rate risk through various hedging techniques
and regularly enters into various hedging contracts. At December 31, 1993 and
1992, there were $411,650 and $263,510 in forward delivery contracts, $1,000 and
$28,000 in futures contracts, and $55,000 and $15,000 in options on forward
delivery contracts outstanding, respectively. The company's exposure to credit
risk in the event of nonperformance by the other party to the agreements would
be considerably less than the contract amounts.
Fair values (liabilities) for the various hedging contracts, if settled on
December 31, 1993 and 1992, were estimated based upon quoted market prices and
are as follows:
<TABLE>
<CAPTION>
1993 1992
- ------------------------------------------------------------------
<S> <C> <C>
Forward delivery contracts $ (874) $(3,033)
Futures and options contracts 9 (303)
</TABLE>
The financial services segment serviced 106,000 and 96,000 loans with principal
balances totaling $9.8 and $9.1 billion at December 31, 1993 and 1992,
respectively. As a mortgage servicer, the company may incur risk with respect to
mortgages that are delinquent or in foreclosure, to the extent that losses are
not covered by a mortgage insurer or guarantor. At December 31, 1993 and 1992,
$1,540 and $1,388 was reserved for potential losses on the servicing portfolio,
respectively. The reserves are established based on the current economic
environment and historical experience for foreclosures and delinquencies.
NOTE E: LIMITED-PURPOSE SUBSIDIARIES
Mortgage-backed bonds are issued by the limited-purpose subsidiaries. Payments
are made on the bonds on a periodic basis as a result of, and in amounts related
to, corresponding payments received on the underlying mortgage collateral.
Collateral for bonds payable consists of fixed-rate mortgage loans and
mortgage-backed securities secured by first liens on single family residential
housing. Mortgage-backed securities consist of GNMA certificates, FNMA mortgage
pass-through certificates, FHLMC participation certificates, and notes
receivable secured by mortgage-backed securities. All principal and interest on
the collateral is remitted directly to a trustee and is available for payment on
the bonds.
Cash reserves totaling $2,247 and $3,016 as of December 31, 1993 and 1992,
respectively, provide additional security for the bonds and will be available
for payment on the bonds in the event of certain cir-cumstances as described in
the trust indentures. Neither The Ryland Group, Inc., nor its homebuilding and
financial services subsidiaries, have guaranteed or otherwise are obligated with
respect to these bond issues.
The following table sets forth information with respect to the limited-purpose
subsidiaries' bonds payable outstanding at December 31:
<TABLE>
<CAPTION>
1993 1992
- -------------------------------------------------------------------------
<S> <C> <C>
Bonds payable, net of
discounts: 1993-$11,459 $ 778,428 $ 1,533,237
1992-$20,006
Range of interest rates 7.25%-12.625% 7.25%-12.625%
Stated maturities 2004-2021 2001-2021
</TABLE>
The fair values of the limited-purpose subsidiaries' bonds payable at
December 31, 1993 and 1992 were $850,153 and $1,625,000, respectively. The fair
values were estimated using quoted market prices of comparable securities.
The components of collateral for bonds payable at December 31, are summarized as
follows:
<TABLE>
<CAPTION>
1993 1992
- ------------------------------------------------------------------
<S> <C> <C>
Mortgage loans $ 110,128 $ 226,441
Mortgage-backed securities 599,180 1,186,880
Funds held by trustee 104,908 178,796
Mortgage discounts (16,142) (32,456)
----------------------
Total $ 798,074 $1,559,661
----------------------
----------------------
</TABLE>
36
--
RYLAND
------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
The fair values of the collateral for bonds payable at December 31, 1993 and
1992 were $866,669 and $1,658,544, respectively. The fair values of the mortgage
loans and mortgage-backed securities were estimated using quoted market prices
of comparable loans and securities. The fair values of notes receivable were
estimated using quoted market prices for comparable GNMA certificates which
collateralize the notes receivable. The fair values of funds held by trustee
approximate the carrying values.
Because the bond indentures prohibit liquidation of the collateral for bonds
payable, fair values cannot be realized unless the corresponding bonds payable
are redeemed. The bonds can be redeemed before maturity by the company only
under certain prescribed conditions. If those conditions are met, and the
company chooses to redeem the bonds, the bonds would be redeemed at par and any
market appreciation or depreciation on the related collateral would accrue to
the company.
The limited-purpose subsidiaries have issued on behalf of other companies,
securities with initial principal amounts of $5.7 billion in 1993 and $5.1
billion in 1992. The limited-purpose subsidiaries have relinquished all risks
and rewards relating to these series and the associated mortgage collateral and,
as a result, they are excluded from the consolidated balance sheets in
accordance with generally accepted accounting principles.
NOTE F: FINANCIAL SERVICES SEGMENT SHORT-TERM NOTES PAYABLE
The financial services segment had outstanding borrowings at December 31 as
follows:
<TABLE>
<CAPTION>
1993 1992
- ------------------------------------------------------------------
<S> <C> <C>
Mortgage warehouse agreement $ 291,558 $ 187,895
Repurchase agreements 375,375 349,977
Revolving credit agreement 50,000 50,000
----------------------
Total outstanding borrowings $ 716,933 $ 587,872
----------------------
</TABLE>
At December 31, 1993 and 1992, the financial services segment had a mortgage
warehouse agreement with a consortium of banks in the amount of $365,000 and
$285,000, respectively. The agreement expires in May 1994, and has historically
been renewed on an annual basis. The effective interest rates on these
borrowings were 2.4 percent, 2.4 percent and 2.8 percent for 1993, 1992 and
1991, respectively.
The outstanding borrowings at December 31, 1993 and 1992 were collateralized by
mortgage loans held for sale with outstanding principal balances of $327,524 and
$218,391, respectively.
The repurchase agreements represent short-term borrowings that are
collateralized by mortgage loans and mortgage-backed securities held for sale
with outstanding balances on December 31, 1993 and 1992 of $385,366 and
$358,019, respectively. The effective interest rates were 3.7 percent, 4.0
percent and 5.9 percent for 1993, 1992 and 1991, respectively.
The following table provides additional information relating to the mortgage
loans and mortgage-backed securities collateralizing the repurchase agreements
at December 31, 1993.
<TABLE>
<CAPTION>
Assets
--------------------------------
Carrying Accrued Fair Repurchase Interest
Maturity Value Interest Value Liability Rate
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Up to 30 days $ 190,305 $ 836 $ 194,584 $ 176,651 5.0%
31 to 90 days 91,109 791 97,038 92,601 3.8%
Demand 103,952 848 111,837 106,123 3.1%
---------------------------------------------
Total $ 385,366 $ 2,475 $ 403,459 $ 375,375
---------------------------------------------
</TABLE>
At December 31, 1993 and 1992, the financial services segment had borrowed
$50,000 under a $50,000 revolving credit agreement that expires in May 1994. The
common stock of one of the company's subsidiaries within the financial services
segment and certain other assets are pledged as collateral for the revolving
credit agreement. The effective interest rates for borrowings under the
revolving credit agreement were 2.3 percent, 3.1 percent, and 3.7 percent for
1993, 1992 and 1991, respectively.
All short-term notes payable have rates indexed to various short-term interest
rate indices. Therefore, the carrying amounts of the outstanding borrowings at
December 31, 1993 approximate their fair values. The mortgage warehouse
agreement and revolving credit agreement contain certain financial covenants
which the company met at December 31, 1993.
In January 1994, the company entered into a secured $35 million credit agreement
to be used for the short-term financing of optional bond redemptions. The
agreement carries a one year term and bears interest at market rates.
37
--
RYLAND
------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
NOTE G: LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31, 1993 1992
- -----------------------------------------------------------
<S> <C> <C>
Industrial revenue bonds $ 4,159 $ 7,284
Secured notes payable 30,881 44,283
Bank credit agreement 90,000 105,000
Senior notes 56,000 61,000
Senior subordinated notes 200,000 100,000
--------------------------
381,040 317,567
Less current portion (29,316) (146,668)
--------------------------
$ 351,724 $ 170,899
--------------------------
</TABLE>
Industrial revenue bonds (IRBs), due in 1999, were issued in connection with the
construction of manufacturing plants and bear interest at rates approximating
short-term, tax-exempt rates. The combined effective interest rates for 1993,
1992, and 1991 were 3.1 percent, 3.1 percent and 5.0 percent, respectively. The
IRBs are collateralized with a first lien on all real and personal property at
the respective sites, having a net carrying value on December 31, 1993 and 1992
of $7,841 and $10,570, respectively.
The company's secured notes payable bear interest at 6.4 to 11.0 percent and are
secured by land included in inventories with a carrying value of approximately
$47,000 and $54,000 as of December 31, 1993 and 1992, respectively. The notes
are payable ranging from 1994 to 1997.
The company has an unsecured credit agreement with a group of banks which was
renewed in July 1993. This agreement allows the company to borrow up to $215,000
for a three-year period. Borrowings under the credit agreement bear interest at
variable short-term rates. The effective interest rates for 1993, 1992 and 1991
were 5.0 percent, 4.4 percent, and 6.8 percent, respectively.
At December 31, 1993 the company had four senior notes outstanding. The notes
bear fixed interest rates ranging from 9.45 percent to 10.5 percent and mature
in the years 1994 through 2000.
In December 1993, the company completed an offering of $100,000 of 9.625 percent
senior subordinated notes, due 2004, with interest payable semi-annually. The
notes are subordinated to all existing and future senior debt of the company and
may be redeemed at the option of the company, in whole or in part, at any time
on or after December 1, 2000. In July 1992, the company completed an offering of
$100,000 of 10.5 percent senior subordinated notes, due July 15, 2002, with
interest payable semi-annually. The notes are subordinated to all existing and
future senior debt of the company and may be redeemed at the option of the
company, in whole or in part, at any time on or after July 15, 1997.
The fair values of the company's variable rate borrowings under the bank credit
agreement and industrial revenue bonds approximate their carrying values. The
fair values of the company's secured notes payable and senior notes are
estimated using discounted cash flow analyses, based on the company's current
incremental borrowing rates for similar types of borrowing arrangements. The
fair values of the company's senior subordinated notes are estimated based on
quoted market prices.
The fair values of long-term debt at December 31, 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
1993 1992
- -----------------------------------------------------------
<S> <C> <C>
Industrial revenue bonds $ 4,159 $ 7,284
Secured notes payable 30,881 44,709
Bank credit agreement 90,000 105,000
Senior notes 61,419 63,000
Senior subordinated notes 211,510 103,000
</TABLE>
Maturities of long-term debt for each of the next five years are as follows:
1994 $ 29,316
1995 5,388
1996 90,920
1997 45,800
1998 875
The IRB loan agreements, the bank credit agreement, senior note agreements and
senior subordinated indenture agreements contain certain financial covenants.
Under the loan covenants the company has $25,722 of retained earnings available
for dividends at December 31, 1993. At December 31, 1993, the company is in
compliance with its covenants.
38
--
RYLAND
------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
NOTE H: INCOME TAXES
The company accounts for its income taxes under the liability method in
accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109),
"Accounting for Income Taxes," effective January 1, 1993. Prior to the adoption
of SFAS 109, the company accounted for income taxes under SFAS 96. As both SFAS
96 and 109 required the liability method, the adoption of SFAS 109 did not have
a material impact on the company's financial statements.
Under the liability method, the deferred tax asset (liability) is determined
based on the enacted tax rates and is subsequently adjusted for changes in tax
rates. A change in the deferred tax asset (liability) results in a charge or
credit to deferred tax expense. The company's (benefit) expense for income taxes
for the years ended December 31, is summarized as follows:
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $ 21,938 $ 20,428 $ 14,915
State 4,718 4,177 3,050
--------------------------------------------
Total current 26,656 24,605 17,965
--------------------------------------------
Deferred:
Federal (23,656) (8,125) (10,873)
State (5,087) (1,662) (2,223)
--------------------------------------------
Total deferred (28,743) (9,787) (13,096)
--------------------------------------------
Total (benefit)/provision $ (2,087) $ 14,818 $ 4,869
--------------------------------------------
--------------------------------------------
</TABLE>
A reconciliation between the total income tax (benefit) expense and the income
tax (benefit) expense computed by applying the statutory Federal income tax rate
to earnings before income taxes is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Computed income taxes
at statutory rate (35%
for 1993, 34% for 1992
and 1991) $ (1,660) $14,395 $ 4,869
Applicable state taxes (215) 1,816 614
Goodwill amortization 408 395 395
RSOP dividend (328) (1,025) (1,034)
Other, net (292) (763) 25
--------------------------------------------
Total actual income
tax (benefit) expense $ (2,087) $14,818 $ 4,869
--------------------------------------------
--------------------------------------------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Significant components of the company's deferred tax liabilities and assets as
of December 31 are as follows:
<TABLE>
<CAPTION>
1993 1992
- ----------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities:
Gross profit from sales reported
on the installment method $ (8,097) $(12,559)
Amortization of servicing and
administration rights (620) ( 3,353)
Recognition of fees, discounts
and hedging - ( 1,575)
Other, net - ( 3,428)
-----------------------
Total deferred tax liabilities $ (8,717) $(20,915)
-----------------------
Deferred tax assets:
Operational reserves $ 28,974 $ 12,436
Employee benefit plans 3,916 3,543
Capitalization of costs
to inventory 3,761 6,036
Recognition of joint
venture income 4,076 2,167
-----------------------
Total deferred tax assets $ 40,727 $ 24,182
-----------------------
Net deferred tax asset $ 32,010 $ 3,267
-----------------------
</TABLE>
The company has determined that no valuation allowance for the deferred tax
asset is required. Current tax liabilities amounted to $1,413 and $2,600 as of
December 31, 1993 and 1992, respectively.
NOTE I: COMMITMENTS AND CONTINGENCIES
In order to assure the future availability of land for homebuilding, the company
had deposits and letters of credit outstanding on option contracts and land
purchase commitments of $26,049 and $28,643, as of December 31, 1993 and 1992,
respectively. These commitments expire at various dates through 1997.
Some municipalities require the company to issue development bonds to assure
completion of public facilities within a project. Total development bonds at
December 31, 1993 and 1992, were $66,659 and $80,864, respectively.
39
--
RYLAND
------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
Total rent expense, primarily relating to office facilities, model home
furniture and equipment, was $11,893, $10,325 and $10,212 for the years ended
December 31, 1993, 1992 and 1991, respectively. Future minimum rental
commitments under non-cancelable leases with remaining terms in excess of one
year are as follows:
<TABLE>
<CAPTION>
<S> <C>
1994 $ 7,440
1995 6,710
1996 5,417
1997 5,070
1998 3,614
After 1998 9,065
--------
Total lease commitments $ 37,316
--------
--------
</TABLE>
The financial services segment may enter into loan commitments with its
customers at current market rates up to 120 days before settlement. These
commitments expose the company to market risk as a result of potential increases
in mortgage interest rates. This risk is minimized by fees collected from the
customer and by the company's hedging activities. Loan commitments at December
31, 1993 and 1992 were $242,944 and $101,974, respectively, with interest rates
ranging from 4.4 percent to 8.9 percent in 1993 and 6.5 percent to 9.4 percent
in 1992. The estimated fair value (liability) of these mortgage commitments is
$(45) and $(988), as of December 31, 1993 and 1992, respectively, and is based
on current interest rates for similar contracts.
In addition, the financial services segment uses bank letters of credit and cash
to provide for additional security under certain of its securities
administration agreements. At December 31, 1993 and 1992, $8,782 and $11,700,
respectively, was outstanding under these arrangements.
Contingent liabilities may arise from the obligations incurred in the ordinary
course of business, or from the usual obligations of on-site housing producers
for the completion of contracts. The company is also party to various legal
proceedings generally incidental to its businesses. Based on evaluation of the
above matters and discussions with counsel, management believes that liabilities
to the company arising from these matters will not have a material adverse
effect on the financial condition of the company.
NOTE J: STOCKHOLDERS' EQUITY
PREFERRED STOCK
On August 31, 1989, the company sold 1,267,327 shares of non-transferable
convertible preferred stock, par value $1.00, to The Ryland Group, Inc.
Retirement and Stock Ownership Trust (the RSOP Trust) for $31.5625 per share, or
an aggregate purchase price of approximately $40,000 (see Note K).
Each share of preferred stock pays an annual cumulative dividend of $2.21.
During 1993, 1992 and 1991, the company paid $2,589, $2,677 and $2,757,
respectively, in dividends on the preferred stock. Each share of preferred stock
is entitled to a number of votes equal to the shares into which it is
convertible, and the holders of the preferred stock generally vote together with
the common stockholders on all matters.
Under the RSOP Trust, at the option of the trustee, the company may be obligated
to redeem the preferred stock to satisfy distribution obligations to or
investment elections of participants. For purposes of these redemptions, the
value of each share of preferred stock is determined at least annually by an
independent appraiser, with a minimum guaranteed value of $25.25 per share. The
company may issue common stock to satisfy this redemption obligation, with any
excess redemption price to be paid in cash. At December 31, 1993 and 1992, the
maximum cash obligation for such redemptions was shown outside of stockholders'
equity, as part of other liabilities. This obligation is calculated assuming
that all preferred shares issued were submitted for redemption.
Based upon the appraised value of each share of preferred stock ($29.125,
$27.875 and $28.875), and the market value of each share of common stock
($20.00, $20.75 and $23.25), at December 31, 1993, 1992 and 1991, respectively,
and the application of a proportionate amount of the note due from the RSOP
Trust, the net amount of this obligation at December 31, 1993, 1992 and 1991 is
$2,398, $1,525 and $952, respectively. During 1993 and 1992, 44,881 and 38,235
shares of preferred stock were converted into shares of common stock.
40
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RYLAND
------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
COMMON STOCK OFFERING
During the first quarter of 1992, the company completed an offering of 2,875,000
shares of common stock. Proceeds of $66,900 were intended for the expansion of
business.
COMMON SHARE PURCHASE RIGHTS
On December 17, 1986, the company declared a dividend of one common share
purchase right for each share of common stock outstanding on February 9, 1987.
Each right entitles the holder to purchase one share of common stock at an
exercise price of $70. The rights become exercisable 20 business days after any
party acquires or announces an offer to acquire 20 percent or more of the
company's common stock. The rights expire January 11, 1997, and are redeemable
at $0.05 per right at any time before 20 business days following the time that
any party acquires 20 percent or more of the company's common stock.
In the event the company enters into a merger or other business combination, or
if a substantial amount of its assets are sold after the time that the rights
become exercisable, the rights provide that the holder will receive upon
exercise, shares of the common stock of the surviving or acquiring company
having a market value of twice the exercise price. Until the earlier of the time
that the rights become exercisable, are redeemed or expire, the company will
issue one right with each new share of common stock issued.
NOTE K: EMPLOYEE INCENTIVE AND STOCK PLANS
The company's employee incentive and stock plans are as follows:
(1) RETIREMENT AND STOCK OWNERSHIP PLAN:
On August 16, 1989, the company established an employee stock ownership plan,
known as The Ryland Group, Inc. Retirement and Stock Ownership Plan (RSOP).
The RSOP's purchase of shares of preferred stock was financed by a loan to the
RSOP from the company in an amount of $40,000. The loan bears interest at the
rate of 10.0 percent and is expected to be repaid over nine years by the RSOP
through dividends received on the preferred stock and company contributions. The
RSOP incurred interest on this loan in 1993, 1992 and 1991 of $3,045, $3,322 and
$3,568, respectively. Preferred shares are collateral for the loan and are
released to the RSOP trust as debt payments are made.
There are two components within the RSOP, a 401(k) plan and a profit sharing
plan. All full-time employees with one year of service are eligible to
participate in the RSOP. Pursuant to Section 401(k) of the Internal Revenue
Code, the plan permits deferral of a portion of participant's income into
trusteed investments in stock, bonds or money market funds. Compensation expense
reflects the company's matching contributions of the employee 401(k)
contributions and the discretionary profit sharing contribution. Total
compensation expense amounted to $5,042, $4,255 and $3,404 in 1993, 1992 and
1991, respectively.
(2) EQUITY INCENTIVE PLAN AND OTHER RELATED PLANS:
The company's 1992 Equity Incentive Plan permits the company to provide equity
incentives in the form of stock options, stock appreciation rights, performance
shares, restricted stock and other stock-based awards to employees. Under the
company's 1992 Equity Incentive Plan, options were granted to purchase shares at
prices not less than the fair market value of the shares at the date of grant.
The options are exercisable at various dates over one to ten year periods.
Pursuant to the Equity Incentive Plan, the Board of Directors adopted a long
term incentive plan for officers and key employees. After each fiscal year,
shares of the company's common stock and cash are credited to the accounts of
the participants according to a prescribed formula. Due to a net loss in 1993,
there was no compensation expense relating to this plan in 1993. Total
compensation expense relating to this plan amounted to $2,987 in 1992.
Under the company's Non-employee Director Equity Plan, stock options are granted
to purchase shares at prices not less than the fair market value of the shares
at the date of grant. Stock options become fully vested and exercisable on the
fifth anniversary of the date of grant. A maximum of 100,000 shares of common
stock has been reserved for issuance under this plan.
On November 29, 1993 the company entered into a Stock Unit Agreement with an
officer, pursuant to the Equity Incentive Plan. The company granted to the
officer 75,000 stock units. Each stock unit is payable in one share of the
company's common stock. The units vest in increments of 15,000 units for each of
the next five years beginning November 1, 1994. The company will recognize
compensation expense over the vesting period, valued at the market price of the
company's common stock at the vesting dates.
41
--
RYLAND
------
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
The following is a summary of the transactions relating to all stock option
plans for each year ended December 31:
<TABLE>
<CAPTION>
1993 1992 1991
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding,
beginning of year 1,034,792 1,199,002 1,311,762
Granted 240,800 90,100 230,300
Exercised (94,622) (195,250) (163,300)
Canceled (140,440) (59,060) (179,760)
-------------------------------------------
Options outstanding
end of year 1,040,530 1,034,792 1,199,002
Available for
future grant 737,351 703,963 809,495
-------------------------------------------
Total shares reserved 1,777,881 1,738,755 2,008,497
-------------------------------------------
-------------------------------------------
Options exercisable
at December 31 600,500 506,452 527,912
-------------------------------------------
-------------------------------------------
Prices related to
options exercised
during the year $10.13-$23.25 $2.81-$26.00 $2.81-$27.88
</TABLE>
Prices related to options outstanding on December 31, 1993 ranged from $10.13 to
$27.88.
(3) COMPENSATION UNIT PLANS:
The company had various compensation unit plans. As a result of the adoption of
the Equity Incentive Plan, no additional awards will be made to participants in
those plans. Due to a decline in the market value of the company's common stock,
no expense was incurred under these plans in 1993. Under the plans, $775 and
$2,164 was expensed in 1992 and 1991, respectively. The company awarded 3,456,
72,987 and 23,976 shares of common stock in 1993, 1992 and 1991, respectively.
(4) RESTRICTED STOCK:
The company terminated a restricted stock agreement with an officer upon the
officer's resignation on July 31, 1993. The company had previously released
40,000 of the 150,000 shares of restricted stock sold to the officer in
consideration for the officer's employment.
42
--
RYLAND
------
<PAGE>
QUARTERLY FINANCIAL DATA
------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) UNAUDITED
- ----------------------------------------------------------------------------------------------------------------------------------
1993 1992
---------------------------------------------------- ------------------------------------------
Quarter Ended Dec. 31 Sept. 30(1) June 30 March 31 Dec. 31 Sept. 30 June 30 March 31
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED RESULTS:
Revenues $430,225 $376,659(2) $371,993(2) $295,552(2) $395,848 $389,816 $366,022 $290,635
Pretax earnings (loss) 11,676 (36,570) 9,408 10,743 11,145 14,706 12,529 3,958
Income tax expense
(benefit) 4,069 (14,014) 3,668 4,190 4,214 5,000 4,260 1,344
-------------------------------------------------------------------------------------------------------
Net earnings (loss) $ 7,607 $(22,556) $ 5,740 $ 6,553 $ 6,931 $ 9,706 $ 8,269 $ 2,614
Net earnings (loss)
per common share
(primary) $ 0.45 $ (1.52) $ 0.33 $ 0.38 $ 0.40 $ 0.58 $ 0.48 $ 0.15
Weighted average
common shares
outstanding 15,480 15,310 15,555 15,575 15,668 15,689 15,699 13,074
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Reflects the $45 million pretax provision related to homebuilding
inventories and investment in unconsolidated joint ventures.
(2) The revenues for these periods reflect certain reclassifications to provide
consistency with other periods presented.
</TABLE>
45
--
RYLAND
------
<PAGE>
COMMON STOCK PRICES AND DIVIDENDS
---------------------------------
THE RYLAND GROUP, INC. AND SUBSIDIARIES
The Ryland Group, Inc. lists its common shares on the New York Stock Exchange,
trading under the symbol RYL. The table below presents the high and low market
prices and dividend information for the company. The number of common
stockholders of record as of February 18, 1994 was 2,752. (See Note G for
dividend restrictions).
<TABLE>
<CAPTION>
Dividends Dividends
Declared Declared
1993 High Low Per Share 1992 High Low Per Share
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
First Quarter $24 1/2 $18 $0.15 First Quarter $28 $22 1/4 $0.15
Second Quarter 21 7/8 18 1/4 0.15 Second Quarter 24 1/8 19 7/8 0.15
Third Quarter 19 3/4 15 7/8 0.15 Third Quarter 24 1/8 19 1/2 0.15
Fourth Quarter 20 5/8 18 1/2 0.15 Fourth Quarter 25 18 1/2 0.15
</TABLE>
46
--
RYLAND
------
<PAGE>
Report of Ernst & Young, Independent Auditors
---------------------------------------------
THE RYLAND GROUP INC. AND SUBSIDIARIES
BOARD OF DIRECTORS AND STOCKHOLDERS
THE RYLAND GROUP, INC.
We have audited the accompanying consolidated balance sheets of The Ryland
Group, Inc. and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1993. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material aspects, the consolidated financial position of The Ryland Group,
Inc. and subsidiaries at December 31,1993 and 1992. And the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1993 in conformity with generally accepted
accounting principles.
/s/ Ernst & Young
Baltimore, Maryland
February 16,1994
43
--
RYLAND
------
<PAGE>
Exhibit 22 List of Subsidiaries of Registrant:
Ryland Mortgage Company (an Ohio Corporation)
M.J. Brock & Sons, Inc. (a Delaware Corporation)
LPS Holdings Corporation (a Maryland Corporation)
24
<PAGE>
Exhibit 24 Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of The Ryland Group, Inc. of our report dated February 16, 1994, included in the
1993 Annual Report to Shareholders of the Ryland Group, Inc.
Our audit also included the financial statement schedules of The Ryland Group,
Inc. listed in Item 14(a). These schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-16774, Form S-3 No. 33-28692, Form S-8 No. 33-32431, Form S-3
No. 33-48071, and Form S-3 No. 33-50933) of the Ryland Group, Inc. and in the
related Prospectuses of our report dated February 16, 1994, with respect to the
consolidated financial statements and schedules of The Ryland Group, Inc.
included and incorporated herein by reference in this Annual Report (Form 10-K)
for the year ended December 31, 1993.
Baltimore, Maryland
March 22, 1994
25
<PAGE>
The Ryland Group, Inc.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned directors and officers of
The Ryland Group, Inc., a Maryland corporation, constitute and appoint Andre W.
Brewster and Alan P. Hoblitzell, Jr., and either of them, the true and lawful
agents and attorneys-in-fact, and in either of them, to sign for the undersigned
in their respective names as directors and officers of The Ryland Group, Inc.,
the Annual Report on Form 10-K of The Ryland Group, Inc., for the fiscal year
ended December 31, 1993, to be filed with the Securities and Exchange Commission
under the Securities Exchange Act of 1934. We hereby confirm all acts taken by
such agents and attorneys-in-fact, or either of them, as herein authorized.
DATED: February 16, 1994 /s/ Andre W. Brewster
-------------------------------------
Andre W. Brewster, Director,
Chairman of the Board
/s/ James A. Flick, Jr.
-------------------------------------
James A. Flick, Jr., Director
/s/ R. Chad Dreier
-------------------------------------
R. Chad Dreier, Director
Chief Executive Officer
(Principal Executive Officer)
/s/ Robert J. Gaw
-------------------------------------
Robert J. Gaw, Director
/s/ Leonard M. Harlan
-------------------------------------
Leonard M. Harlan, Director
/s/ L.C. Heist
-------------------------------------
L.C. Heist, Director
/s/ Alan P. Hoblitzell, Jr.
-------------------------------------
Alan P. Hoblitzell, Jr., Director,
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ William G. Kagler
-------------------------------------
William G. Kagler, Director
/s/ John H. Mullin, III
-------------------------------------
John H. Mullin, III, Director
/s/ John O. Wilson
-------------------------------------
John O. Wilson, Director
26
