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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) April 1, 1997
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D.R. HORTON, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 1-14112 75-2386963
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(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
1901 Ascension Boulevard, Suite 100, Arlington, Texas 76006
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(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code (817) 856-8200
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS
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Exhibit 1.1 hereto is the Underwriting Agreement, dated June 4, 1997, among
D.R. Horton, Inc., the Guarantors named therein and Donaldson, Lufkin & Jenrette
Securities Corporation.
Exhibit 10.1 hereto is the Amended and Restated Master Loan and
Inter-Creditor Agreement dated as of April 1, 1997, among D.R. Horton, Inc., as
Borrower, NationsBank, N.A. (South), Bank of America National Trust and Savings
Association, First American Bank Texas, SSB, South Trust Bank of Alabama,
National Association, Comerica Bank, The First National Bank of Chicago, Bank
One, Arizona, NA, Sanwa Bank California, Amsouth Bank of Alabama, Fleet National
Bank, PNC Bank National Association, Societe Generale, Southwest Agency as
Banks, Bank of America National Trust and Savings Association, as Documentation
Agent, and NationsBank, N.A. (South), as Administrative Agent.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
D.R. HORTON, INC.
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Registrant
June 6, 1997 /s/ Charles N. Warren, General Counsel
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Date Signature
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
EXHIBITS
1.1 Underwriting Agreement, dated June 4, 1997, among D.R. Horton, Inc., the
Guarantors named therein and Donaldson, Lufkin & Jenrette Securities
Corporation.
10.1 Amended and Restated Master Loan and Inter-Creditor Agreement dated as of
April 1, 1997, among D.R. Horton, Inc., as Borrower, NationsBank, N.A.
(South), Bank of America National Trust and Savings Association, First
American Bank Texas, SSB, South Trust Bank of Alabama, National
Association, Comerica Bank, The First National Bank of Chicago, Bank One,
Arizona, NA, Sanwa Bank California, Amsouth Bank of Alabama, Fleet
National Bank, PNC Bank National Association, Societe Generale, Southwest
Agency as Banks, Bank of America National Trust and Savings Association,
as Documentation Agent, and NationsBank, N.A. (South), as Administrative
Agent.
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EXHIBIT 1.1
$150,000,000
D.R. HORTON, INC.
8 3/8% Senior Notes due 2004
UNDERWRITING AGREEMENT
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June 4, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
D.R. Horton, Inc., a Delaware corporation (the "Company"), proposes to
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issue and sell $150,000,000 aggregate principal amount of its 8 3/8% Senior
Notes due 2004 (the "Notes") Donaldson, Lufkin & Jenrette Securities
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Corporation(the "Underwriter"). The Notes are to be issued pursuant to the
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provisions of an Indenture to be dated as of June 9, 1997, as amended and
supplemented by a First Supplemental Indenture dated as of June 9, 1997 (the
"Indenture"), among the Company, the subsidiaries of the Company listed on the
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signature pages hereof (the "Guarantors") and the American Stock Transfer and
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Trust Company, as Trustee (the "Trustee"). The Company's obligations under the
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Indenture and the Notes will be unconditionally guaranteed (the "Guarantees"),
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jointly and severally, by each of the Guarantors. The Company and the
Guarantors are collectively referred to herein as the "Issuers," and the Notes
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and the Guarantees are collectively referred to herein as the "Securities."
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1. Registration Statement and Prospectus. The Company has prepared and
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filed with the Securities and Exchange Commission (the "Commission") in
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accordance with the provisions of the Securities Act of 1933, as amended, and
the published rules and regulations of the Commission thereunder (collectively,
the "Act"), a registration statement on Form S-3 (No.333-27521), including a
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base prospectus relating to the Securities. The registration statement as
amended at the time it became effective on June 3, 1997, including information
(if any) deemed to be part of the registration statement at the
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time of effectiveness pursuant to Rule 430A under the Act, is hereinafter
referred to as the "Registration Statement"; and the base prospectus dated June
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3, 1997 (the "Base Prospectus"), as supplemented by the prospectus supplement
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relating to the Securities in the form first used to confirm sales of Notes (the
"Prospectus Supplement"), is hereinafter referred to as the "Prospectus." Any
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reference herein to the Registration Statement, a preliminary prospectus or the
Prospectus shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Act, as of the
effective date of the Registration Statement or the date of such preliminary
prospectus or the Prospectus (the "Incorporated Documents"), and, except as
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otherwise indicated, when reference is made to information "in" (including by
use of the terms "set forth in," "described in" and similar terms) the
Prospectus or the Registration Statement, such reference shall be deemed to
include information incorporated by reference in the Prospectus or the
Registration Statement, as the case may be.
2. Agreements to Sell and Purchase. The Company agrees to issue and
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sell, and, on the basis of the representations and warranties contained in this
Underwriting Agreement (the "Agreement") and subject to its terms and
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conditions, the Underwriter agrees to purchase from the Company, all of the
Notes at 98.419% of the principal amount thereof (the "Purchase Price"), plus
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accrued interest thereon, if any, from June 9,1997 to the date of payment and
delivery.
3. Terms of Public Offering. The Issuers are advised by you that you
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propose to offer the Securities from time to time after the execution and
delivery of this Agreement for sale in one or more negotiated transactions or
otherwise, at market prices prevailing at the time of sale, at prices related to
such market prices or at negotiated prices, as set forth in the Prospectus.
4. Delivery and Payment. Delivery to the Underwriter of and payment for
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the Notes shall be made at 9:00 A.M., New York City time, on June 9, 1997 (the
"Closing Date"), at such place as you shall designate. The Closing Date and the
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location of delivery of and the form of payment for the Notes may be varied by
agreement between you and the Company.
Certificates for the Notes shall be registered in such names and
issued in such denominations as you shall request in writing not later than two
full business days prior to the Closing Date. Such certificates shall be made
available to
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you for inspection not later than 9:30 A.M., New York City time, on
the business day next preceding the Closing Date. Certificates in definitive
form evidencing the Notes shall be delivered to you on the Closing Date with any
transfer taxes thereon duly paid by the Company, for the account of the
Underwriter, against payment of the Purchase Price therefor by wire or certified
or official bank checks payable in Federal funds to the order of the Company.
If the Notes will be issued in book-entry form, the Company shall deposit the
global certificate(s) representing the Notes with the Depository Trust Company
("DTC"), or its designated custodian, at the Closing Date, and the Company will
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deliver such global certificate(s) to the Underwriter by causing DTC to credit
the Notes to the account of the Underwriter at DTC against payment therefor as
set forth above.
5. Agreements of the Issuers. The Issuers, jointly and severally,
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agree with the Underwriter as follows:
(a) The Issuers will, if necessary or required by law, file an
amendment to the Registration Statement or, if necessary pursuant to
Rule 430A under the Act, a post-effective amendment to the Registration
Statement, as soon as practicable after the execution and delivery of this
Agreement, and will use their best efforts to cause the Registration
Statement or such post-effective amendment to become effective at the
earliest possible time. The Company will comply fully and in a timely
manner with the applicable provisions of Rule 424 and Rule 430A under the
Act.
(b) The Issuers will advise you promptly and, if requested by you, will
confirm such advice in writing: (i) of the effectiveness of any amendment
to the Registration Statement; (ii) of the transmission to the Commission
for filing of any supplement to the Prospectus (including any document that
would as a result of such filing become an Incorporated Document) and to
furnish you with copies thereof; (iii) of the receipt of any comments from
the Commission that relate to the Registration Statement or of any request
by the Commission for amendment of or a supplement to the Registration
Statement or the Prospectus or for additional information; (iv) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or any order preventing or suspending the use
of the Prospectus or of the suspension of qualification of the Securities
for offering or sale in any jurisdiction or the initiation or the
threatening of
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any proceeding for such purpose; and (v) within the period of time referred
to in paragraph (e) below, of any change in the Company's condition
(financial or other), business, prospects, properties, net worth or results
of operations, or of the happening of any event, which makes any statement
of a material fact made in the Registration Statement or the Prospectus (as
then amended or supplemented) untrue or which requires the making of any
additions to or changes in the Registration Statement or the Prospectus (as
then amended or supplemented) in order to state a material fact required to
be stated therein or necessary in order to make the statements therein not
misleading, or of the necessity to amend or supplement the Prospectus (as
then amended or supplemented) to comply with the Act or any other law. If
at any time any stop order suspending the effectiveness of the Registration
Statement or any order preventing or suspending the use of the Prospectus
or suspending any such qualification shall be issued, the Issuers will
promptly use their best efforts to obtain the withdrawal of such order at
the earliest possible time.
(c) The Issuers will furnish to you, without charge, (i) five copies of
the registration statement as originally filed with the Commission and of
each amendment thereto, including all exhibits thereto, (ii) the Prospectus
and any amendment or supplement thereto, (iii) such number of copies of the
registration statement as originally filed and of each amendment thereto,
but without exhibits, as you may request, (iv) such number of copies of the
Incorporated Documents, without exhibits, as you may request, and (v) five
copies of the exhibits to the Incorporated Documents.
(d) The Issuers will not file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus or, prior
to the end of the period of time referred to in paragraph (e) below, file
any document which, upon filing becomes an Incorporated Document, of which
you shall not previously have been advised or to which, after you shall
have received a copy of the document proposed to be filed, you shall
reasonably object.
(e) As soon after the execution and delivery of this Agreement as
possible and thereafter from time to time for such period as in the opinion
of counsel for the Underwriter a prospectus is required by the Act to be
delivered in connection with sales by the Underwriter or any dealer, the
Issuers will expeditiously deliver to the Underwriter
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and each dealer, without charge, as many copies of the Prospectus (and of
any amendment or supplement thereto) as you may reasonably request. The
Issuers consent to the use of the Prospectus (and of any amendment or
supplement thereto) in accordance with the provisions of the Act and with
the securities or Blue Sky laws of the jurisdictions in which the
Securities are offered by the Underwriter and by all dealers to whom
Securities may be sold, both in connection with the offering and sale of
the Securities and for such period of time thereafter as the Prospectus is
required by the Act to be delivered in connection with sales by the
Underwriter or any dealer.
(f) If during the period of time referred to in paragraph (e) above any
event shall occur as a result of which, in the judgment of the Issuers or
in the opinion of counsel for the Underwriter, it becomes necessary to
amend or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if it is necessary to amend or supplement the
Prospectus to comply with the Act or any other law, the Issuers will
forthwith prepare and, subject to the provisions of paragraph (d) above,
file with the Commission an appropriate amendment or supplement to the
Prospectus so that the statements in the Prospectus, as so amended or
supplemented, will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with law,
and to furnish to the Underwriter and to such dealers as you shall specify
such number of copies thereof as the Underwriter or such dealers may
reasonably request. In the event that the Issuers and you agree that the
Prospectus should be amended or supplemented, the Issuers, if requested by
you, will promptly issue a press release announcing or disclosing the
matters to be covered by the proposed amendment or supplement.
(g) The Issuers will cooperate with you and with counsel for the
Underwriter in connection with the registration or qualification of the
Securities for offering and sale by the Underwriter and by dealers under
the securities or Blue Sky laws of such jurisdictions as you may designate
and will file such consents to service of process or other documents
necessary or appropriate in order to effect such registration or
qualification; provided, however, that in no event shall any Issuer be
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obligated to qualify to do business in any jurisdiction where it is not now
so qualified or to take any action which would subject
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it to service of process in suits, other than those arising out of the
offering or sale of the Securities, in any jurisdiction where it is not now
so subject.
(h) The Issuers will make generally available to its security holders a
consolidated earnings statement, which need not be audited, covering a
twelve-month period commencing after the date the Registration Statement is
declared effective by the Commission (the "Effective Date") and ending not
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later than 15 months thereafter, as soon as practicable after the end of
such period, which consolidated earnings statement shall satisfy the
provisions of Section ll(a) of the Act and Rule 158 thereunder, and to
advise you in writing when such statement has been made available.
(i) During the period of five years hereafter, the Issuers will furnish
to you as soon as available, a copy of all public materials furnished by
the Company to its stockholders and all public reports and financial
statements furnished by the Company to the principal national securities
exchange upon which the Common Stock may be listed pursuant to requirements
of or agreements with such exchange or to the Commission.
(j) The Company will apply the net proceeds from the sale of the Notes
in accordance with the description set forth in the Prospectus under the
caption "Use of Proceeds."
(k) Neither the Company nor any of its subsidiaries has taken, or will
take, directly or indirectly, any action designed to or that might
reasonably be expected to cause or result in stabilization or manipulation
of the price of the Notes to facilitate the sale or resale of the Notes.
(l) The Issuers will pay all costs, expenses, fees and taxes incident
to (i) the preparation, printing, filing and distribution under the Act of
the Registration Statement (including financial statements and exhibits),
and all amendments and supplements thereto prior to or during the period
specified in paragraph (e) above, (ii) the printing and delivery of the
Prospectus and all amendments or supplements thereto during the period
specified in paragraph (e) above, (iii) the printing and delivery of this
Agreement, the Preliminary and Supplemental Blue Sky Memoranda and all
other agreements, memoranda, correspon-
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dence and other documents printed and delivered in connection with the
offering of the Securities (including in each case any disbursements of
counsel for the Underwriter relating to such printing and delivery), (iv)
the registration or qualification of the Securities for offer and sale
under the securities or Blue Sky laws of the several states (including in
each case the reasonable fees and disbursements of counsel for the
Underwriter relating to such registration or qualification and memoranda
relating thereto), (v) filings and clearance with the National Association
of Securities Dealers, Inc. in connection with the offering, (vi) the
listing, if any, of the Securities on any national securities exchange, and
(vii) furnishing such copies of the Registration Statement, the Prospectus
and all amendments and supplements thereto as may be requested for use in
connection with the offering or sale of the Securities by the Underwriter
or by dealers to whom Securities may be sold.
(m) The Issuers will not during the period beginning on the date hereof
and continuing to and including the Closing Date, offer, sell, contract to
sell or otherwise dispose of any debt securities of the Company or any
warrants, options or other rights to purchase or acquire debt securities of
the Company or any securities convertible into or exchangeable for debt
securities of the Company (other than (i) the Securities and (ii)
commercial paper issued in the ordinary course of business), without the
prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation.
(n) The Issuers will use their best efforts to do and perform all
things required or necessary to be done and performed under this Agreement
by the Issuers prior to the Closing Date and to satisfy all conditions
precedent to the delivery of the Notes.
6. Representations and Warranties of the Issuers. The Issuers, jointly
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and severally, represent and warrant to the Underwriter that:
(a) Each preliminary prospectus included as part of the registration
statement as originally filed or as part of any amendment or supplement
thereto, or filed pursuant to Rule 424 under the Act, complied when so
filed in all material respects with the provisions of the Act. The
Commission has not issued any order preventing or suspending the use of any
preliminary prospectus.
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(b) The Registration Statement has become effective and at the date of
the Prospectus (if different), including at the date of any post-effective
amendment or supplement, the Registration Statement will comply in all
material respects with the provisions of the Act, and will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading; the Prospectus (and any supplements or amendments thereto)
will at all such times comply in all material respects with the provisions
of the Act and will not at any such time contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that no representation or
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warranty is made as to information contained in or omitted from the
Registration Statement or the Prospectus in reliance upon and in conformity
with written information furnished to the Issuers with respect to the
Underwriter specifically for inclusion therein.
(c) The Incorporated Documents, at the time they were filed with the
Commission or, to the extent such documents were subsequently amended prior
to the date hereof, at the time so amended, complied in all material
respects with the requirements of the Act or the Securities Exchange Act of
1934, as amended, and the published rules and regulations of the Commission
thereunder (collectively, the "Exchange Act"), as applicable, and such
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documents do not on the date hereof and will not on the Closing Date
contain an untrue statement of a material fact and do not on the date
hereof and will not on the Closing Date omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading.
(d) The financial statements (including the related notes and
supporting schedules) in the Registration Statement or the Prospectus
present fairly the consolidated financial position and results of
operations of the entities purported to be shown thereby, at the dates and
for the periods indicated, and have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved.
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(e) Ernst & Young, LLP, who have reported on the financial statements
of the Company, are independent public accountants with respect to the
Company and its subsidiaries as required by the Act. Wittington, McLemore,
Land, Davis & White, P.C., who have reported on the financial statements of
S.C. Torrey Atlanta, Ltd. and Affiliates, are independent public
accountants with respect to the Company and its subsidiaries as required by
the Act.
(f) The pro forma financial statements and other pro forma financial
information (including the notes thereto) in the Prospectus have been
prepared in all material respects in accordance with applicable
requirements of Regulation S-X promulgated under the Exchange Act and have
been properly computed on the bases described therein. The material
assumptions used in the preparation of the pro forma financial statements
and other pro forma information in the Prospectus are set forth therein and
were reasonable when made, and the adjustments used therein are appropriate
to give pro forma effect to the transactions or circumstances referred to
therein.
(g) The Company and each of its subsidiaries have been duly formed and
are validly existing in good standing under the laws of their respective
jurisdictions of organization, are duly qualified to do business and are in
good standing in each jurisdiction in which their respective ownership or
lease of property or the conduct of their respective businesses requires
such qualification except where the failure to so qualify, singly or in the
aggregate, would not have a material adverse effect on the financial
condition, results of operations, business or prospects of the Company and
its subsidiaries taken as a whole (a "Material Adverse Effect"), and have
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all power and authority necessary to own or hold their respective
properties and to conduct the businesses in which they are engaged.
(h) The Company has an authorized capitalization as set forth in the
Prospectus; and all of the issued equity interests of each subsidiary of
the Company have been duly authorized and validly issued and, as to shares
of capital stock of any corporation constituting a subsidiary, are fully
paid and non-assessable and (except for directors' qualifying shares) are
owned directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims other than restrictions on transfer
imposed by applicable securities laws.
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(i) The execution, delivery and performance of this Agreement, the
Indenture and the Securities by the Issuers, compliance by the Issuers of
all the provisions hereof and thereof and the consummation of the
transactions contemplated hereby will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or
other material agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries
is bound or to which any of the property or assets of the Company or any of
its subsidiaries is subject, nor will such actions result in any violation
of the provisions of the organizational documents of the Company or any of
its subsidiaries or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the Company
or any of its subsidiaries or any of their property or assets; and except
for such consents, approvals, authorizations, registrations or
qualifications as may be required under the Act or applicable state or
foreign securities laws in connection with the purchase and distribution of
the Securities by the Underwriter, no consent, approval, authorization or
order of, or filing or registration with, any such court or governmental
agency or body is required for the execution, delivery and performance of
this Agreement, the Indenture and the Securities by the Issuers, compliance
by the Issuers of all the provisions hereof and thereof and the
consummation of the transactions contemplated hereby.
(j) This Agreement has been duly authorized, executed and delivered by
the Issuers and is a valid and binding agreement of the Issuers enforceable
in accordance with its terms (except as rights to indemnity and
contribution hereunder may be limited by applicable law).
(k) The Indenture has been duly qualified under the Trust Indenture Act
of 1939, as amended (the "TIA"), and has been duly authorized, executed and
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delivered by the Issuers and is a valid and binding agreement of the
Issuers, enforceable in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability.
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(l) The Notes have been duly authorized and, when executed and
authenticated in accordance with the provisions of the Indenture and
delivered to the Underwriter against payment therefor as provided by this
Agreement, will be entitled to the benefits of the Indenture, and will be
valid and binding obligations of the Company, enforceable in accordance
with their terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability.
(m) The Guarantees have been duly authorized and, upon endorsement on
the Notes by the Guarantors, execution and authentication of the Notes in
accordance with the provisions of the Indenture and delivery of the Notes
to the Underwriter against payment therefor as provided by this Agreement,
will be entitled to the benefits of the Indenture, and will be valid and
binding obligations of the Guarantors, enforceable in accordance with their
terms except as (i) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability.
(n) The Securities and the Indenture conform to the description thereof
in the Prospectus.
(o) Neither the Company nor any of its subsidiaries has sustained,
since the date of the latest audited financial statements in the
Prospectus, any loss or interference with the business of the Company and
its subsidiaries taken as a whole from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus, resulting in a Material Adverse Effect;
and, since such date, there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any material
adverse change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and
its subsidiaries taken as a whole, otherwise than as set forth or
contemplated in the Prospectus.
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(p) Other than as granted to the former stockholders of The Torrey
Group of Companies and which are not applicable to the offering of the
Securities, there are no contracts, agreements or understandings between
the Company and any person granting such person the right to require the
Company to file a registration statement under the Act with respect to any
securities of the Company owned or to be owned by such person or to require
the Company to include such securities in the securities registered
pursuant to the Registration Statement or in any securities being
registered pursuant to any other registration statement filed by the
Company under the Act.
(q) The Company and its subsidiaries own the items of real property and
personal property purported to be owned by them which are material to the
conduct of the business of the Company and its subsidiaries taken as a
whole, free and clear of all liens, encumbrances and defects, except such
as are described in the Prospectus or such as would not have a Material
Adverse Effect. All real property held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable
leases, with such exceptions as are described in the Prospectus or such as
would not have a Material Adverse Effect.
(r) Except as described in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property or assets of the Company
or any of its subsidiaries is the subject which are reasonably likely to
have a Material Adverse Effect; and to the Issuers' knowledge, no such
proceedings are threatened by governmental authorities or by others.
(s) The conditions for use of Form S-3, as set forth in the General
Instructions thereto, have been satisfied.
(t) To the Issuers' knowledge, all real property owned (either
presently or at any time in the past) or presently leased by the Company
and its subsidiaries in connection with the operation of their business,
including, without limitation, any subsurface soils and ground water
(collectively, the "Realty"), is free of contamination from any substance
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or material presently known to be toxic or hazardous, including, without
limitation, any radioactive substance, methane, volatile hydrocarbons or
industrial solvents (each a "Hazardous Substance"), which
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could reasonably be expected to materially impair the beneficial use
thereof by the Company and its subsidiaries or constitute or cause a
significant health, safety or other environmental hazard to occupants or
users (except for contaminations which would not have a Material Adverse
Effect); and to the Issuers' knowledge, the Realty does not contain any
underground storage or treatment tanks, active or abandoned water, gas or
oil wells, or any other underground improvements or structures, other than
the foundations, footings or other supports for the improvements located
thereon, the presence of which would have a Material Adverse Effect.
Notwithstanding the foregoing, Hazardous Substances shall be deemed not to
include any supplies or substances maintained, used, stored or held on the
Realty which are (i) naturally occurring, (ii) installed by public
utilities or (iii) used in the ordinary course of the Company's or its
subsidiaries' business, provided that such supplies or substances are
stored, used, maintained and held in all material respects in accordance
with any applicable governmental requirements and with restrictions,
conditions and standards suggested by the manufacturer and the Company's
insurance carriers.
(u) The Company and its subsidiaries carry, or are covered by,
insurance in such amounts and covering such risks as is adequate for the
conduct of their respective businesses.
(v) The Company and its subsidiaries own or possess adequate rights to
use all material patents, patent applications, trademarks, service marks,
trade names, trademark registrations, service mark registrations,
copyrights and licenses necessary for the conduct of their respective
businesses the absence of which would have a Material Adverse Effect and
have no reason to believe that the conduct of their respective businesses
will conflict with, and have not received any notice of any claim of
conflict with, any such rights of others.
(w) There are no contracts or other documents which are required to be
described in the Prospectus or filed as exhibits to the Registration
Statement by the Act which have not been described in the Prospectus or
filed as exhibits to the Registration Statement or incorporated therein by
reference as permitted by the Act.
(x) No labor disturbance by the employees of the Company or any of its
subsidiaries exists or, to the Issuers' knowledge, is imminent which could
reasonably be expected to have a Material Adverse Effect.
<PAGE>
-14-
(y) The Company and its subsidiaries have filed all federal, state and
local income and franchise tax returns required to be filed through the
date hereof and has paid all taxes due thereon, and no tax deficiency has
been determined adversely to the Company or any of its subsidiaries which
has had (nor does any Issuer have any knowledge of any tax deficiency which
would reasonably likely have) a Material Adverse Effect.
(z) Since the date as of which information is given in the Prospectus,
and except as may otherwise be disclosed in the Prospectus, neither the
Company nor any of its subsidiaries has (i) entered into any material
transaction not in the ordinary course of business or (ii) declared or paid
any dividend on its capital stock, and, from the date of the Prospectus,
neither the Company nor any of its subsidiaries has incurred any material
liability other than in the ordinary course of business.
(aa) The Company is in full compliance with Section 13(b)(2) of the
Exchange Act.
(bb) Neither the Company nor any of its subsidiaries (i) is in
violation of its organizational documents, (ii) is in default in any
material respect, and no event has occurred which, with notice or lapse of
time or both, would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which it is a party or by which it is bound or to which any
of its properties or assets is subject as a result of which default there
would be a Material Adverse Effect or (iii) is in violation of any law,
ordinance, governmental rule, regulation or court decree to which it or its
property or assets may be subject or has failed to obtain any license,
permit, certificate, franchise or other governmental authorization or
permit necessary to the ownership of its property or to the conduct of its
business which violation or failure would have a Material Adverse Effect.
(cc) Neither the Company nor any of its subsidiaries is an "investment
company" or an entity "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, and the rules
and regulations of the Commission thereunder.
<PAGE>
-15-
7. Indemnification. (a) The Issuers, jointly and severally, agree to
---------------
indemnify and hold harmless the Underwriter and each person, if any, who
controls the Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, from and against any and all losses, claims, damages,
liabilities and judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement or the
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) or any preliminary prospectus, or caused by
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to the Underwriter furnished in writing
to the Issuers by or on behalf of the Underwriter expressly for use therein;
provided, however, that the foregoing indemnity agreement with respect to any
- -------- -------
preliminary prospectus shall not inure to the benefit of the Underwriter or any
person controlling such Underwriter asserted by a person with respect to any
such losses, claims, damages and liabilities and judgments, if a copy of the
Prospectus (as then amended or supplemented if the Issuers shall have furnished
such amendment or supplement thereto in the requisite quantity on a timely basis
to permit such sending or giving) was not sent or given by or on behalf of the
Underwriter to such person, if required by law so to have been delivered, at or
prior to the written confirmation of the sale of Notes to such person, and if
the Prospectus (as so amended and supplemented) would have cured the defect
giving rise to such loss, claim, damage, liability or judgment. Notwithstanding
anything to the contrary herein, the Underwriter shall not be obligated to send
or give any Incorporated Document, or any amendment or supplement thereto, to
any person in order to benefit from the indemnity provisions herein or
otherwise. The foregoing indemnity agreement shall be in addition to any
liability that the Issuers may otherwise have.
(b) In case any action shall be brought against the Underwriter or any
person controlling the Underwriter, based upon any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment or supplement thereto
and with respect to which indemnity may be sought against the Issuers, the
Underwriter shall promptly notify the Issuers in writing
<PAGE>
-16-
and the Issuers shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such indemnified party and payment of all
fees and expenses. The Underwriter or any such controlling person shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of the Underwriter or such controlling person unless (i) the employment
of such counsel shall have been specifically authorized in writing by the
Issuers, (ii) the Issuers shall have failed to assume the defense and employ
counsel or (iii) the named parties to any such action (including any impleaded
parties) include both the Underwriter or such controlling person and the Issuers
and the Underwriter or such controlling person shall have been advised by such
counsel that there may be one or more legal defenses available to it which are
different from or additional to those available to the Issuers (in which case
the Issuers shall not have the right to assume the defense of such action on
behalf of the Underwriter or such controlling person, it being understood,
however, that the Issuers shall not, in connection with any one such action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) for the Underwriter and all such controlling persons, which
firm shall be designated in writing by Donaldson, Lufkin & Jenrette Securities
Corporation and that all such fees and expenses shall be reimbursed as they are
incurred). The Issuers shall not be liable for any settlement of any such action
effected without the Company's written consent but if settled with the written
consent of the Company, the Issuers agree to indemnify and hold harmless the
Underwriter and any such controlling person from and against any loss or
liability by reason of such settlement. No indemnifying party shall, without the
prior written consent of the indemnified party, effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(c) The Underwriter agrees to indemnify and hold harmless the Issuers,
their directors, their officers who sign the Registration Statement and any
person controlling the Issuers within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, to the same extent as the foregoing indem-
<PAGE>
-17-
nity from the Issuers to the Underwriter but only with reference to information
relating to the Underwriter furnished in writing by or on behalf of the
Underwriter expressly for use in the Registration Statement, the Prospectus or
any preliminary prospectus. In case any action shall be brought against the
Issuers, any of its directors, any such officer or any person controlling the
Issuers based on the Registration Statement, the Prospectus or any preliminary
prospectus and in respect of which indemnity may be sought against the
Underwriter, the Underwriter shall have the rights and duties given to the
Issuers (except that if the Issuers shall have assumed the defense thereof, the
Underwriter shall not be required to do so, but may employ separate counsel
therein and participate in the defense thereof but the fees and expenses of such
counsel shall be at the expense of the Underwriter), and the Issuers, their
directors, any such officers and any person controlling the Issuers shall have
the rights and duties given to the Underwriter, by Section 7(b) hereof.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Issuers on the one hand and the
Underwriter on the other hand from the offering of the Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Issuers and
the Underwriter in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative benefits received by the Issuers
and the Underwriter shall be deemed to be in the same proportion as the total
net proceeds from the offering (before deducting expenses) received by the
Company, and the compensation received by the Underwriter (based on discount to
investors on resale), bear to the sum of such total net proceeds and such
compensation. The relative fault of the Issuers and the Underwriter shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Issuers or the Underwriter and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
<PAGE>
-18-
The Issuers and the Underwriter agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of
the losses, claims, damages, liabilities or judgments referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, the
Underwriter shall not be required to contribute any amount in excess of the
amount by which the total price at which the Notes underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(e) The Underwriter confirms and the Issuers acknowledge that the
statements with respect to the public offering of the Securities by the
Underwriter set forth in the last two paragraphs of the cover page of the
Prospectus Supplement are correct and constitute the only information concerning
such Underwriter furnished in writing to the Issuers by or on behalf of the
Underwriter specifically for inclusion in the Registration Statement and the
Prospectus.
8. Conditions of Underwriter's Obligation. The obligation of the
--------------------------------------
Underwriter to purchase the Securities under this Agreement is subject to the
satisfaction of each of the following conditions:
(a) All the representations and warranties of the Issuers contained in
this Agreement shall be true and correct on the Closing Date with the same
force and effect as if made on and as of the Closing Date. The Issuers
shall have performed or complied with all of their agreements herein
contained and required to be performed or complied with by them at or prior
to the Closing Date.
<PAGE>
-19-
(b) (i) No stop order suspending the effectiveness of the Registration
Statement shall have been issued and no proceedings for that purpose shall
have been commenced or shall be pending before or threatened by the
Commission, (ii) every request for additional information on the part of
the Commission shall have been complied with in all material respects, and
(iii) no stop order suspending the sale of the Securities in any
jurisdiction referred to in Section 6(g) shall have been issued and no
proceeding for that purpose shall have been commenced or shall be pending
or threatened which would, in your reasonable judgment, make it
impracticable or inadvisable to market the Securities or to enforce
contracts for the sale of the Securities.
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have been any downgrading, nor
shall any notice have been given of any intended or potential downgrading
or of any review for a possible change that does not indicate the direction
of the possible change, in the rating accorded any Issuer's debt by any
"nationally recognized statistical rating organization," as such term is
defined for purposes of Rule 436(g)(2) under the Act.
(d) (i) Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, there shall not have been any
material adverse change, or any development involving a prospective
material adverse change, in the condition, financial or otherwise, or in
the earnings, affairs or business prospects, whether or not arising in the
ordinary course of business, of the Company and its subsidiaries taken as a
whole, (ii) since the date of the latest balance sheet included in the
Registration Statement and the Prospectus there shall not have been any
change, or any development involving a prospective material adverse change,
in the capital stock or in the long-term debt of the Company or any of its
subsidiaries from that set forth in the Registration Statement and
Prospectus and (iii) the Company and its subsidiaries shall have no
liability or obligation, direct or contingent, which is material to the
Company and its subsidiaries, taken as a whole, other than those reflected
in the Registration Statement and the Prospectus.
(e) You shall have received on the Closing Date a certificate dated
the Closing Date, signed by Donald R. Horton and David S. Keller, in their
capacities as the
<PAGE>
-20-
Chairman of the Board and Chief Financial Officer of the Company,
respectively, confirming the matters set forth in paragraphs (a), (b), (c)
and (d) of this Section 8.
(f) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Under-writer), dated the Closing
Date, of Gibson Dunn & Crutcher LLP, special counsel for the Company, to
the effect that:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which its ownership or
lease of property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not
have a material adverse effect on the business, operations or
financial condition of the Company and its subsidiaries taken as a
whole, and has all corporate power and authority necessary to own or
hold its properties and conduct its business as described in the
Prospectus.
(ii) To such counsel's knowledge and other than as described in
the Prospectus, there are no legal or governmental proceedings pending
to which the Company or any of its subsidiaries is a party or of which
any property or assets of the Company or any of its subsidiaries is
the subject which is of a character which is required to be disclosed
in the Prospectus; and, to such counsel's knowledge, no such
proceedings are threatened by governmental authorities or by others.
(iii) The Registration Statement was declared effective under the
Act as of the date and time specified in such opinion, the Prospectus
was filed with the Commission pursuant to the subparagraph of Rule
424(b) under the Act on the date specified therein, and, to such
counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that
purpose is pending or threatened by the Commission.
(iv) The Registration Statement and the Prospectus and any further
amendments or supplements thereto made by the Company prior to the
Closing Date (other than the financial and pro forma data (and the
re-
<PAGE>
-21-
lated notes thereto) and statistical data and the financial
statements and related schedules therein, as to which such counsel
need express no opinion) appear on their face to comply as to form in
all material respects with the requirements of the Act; the documents
incorporated by reference in the Prospectus and any further amendment
or supplement to any such incorporated document made by the Company
prior to the Closing Date (other than the financial and pro forma data
(and the related notes thereto) and statistical data and the financial
statements, and related schedules therein, as to which such counsel
need express no opinion), when they were filed with the Commission
appear on their face to have been appropriately responsive in all
material respects to the requirements of the Act and the Exchange Act.
(v) To such counsel's knowledge, there are no contracts or other
documents of a character which are required to be described in the
Prospectus or filed as exhibits to the Registration Statement by the
Act which have not been described or filed as exhibits to the
Registration Statement or incorporated therein by reference as
permitted by the Act.
(vi) This Agreement has been duly authorized, executed and
delivered by the Company.
(vii) The execution, delivery and performance of this Agreement,
the Indenture and the Securities by the Issuers and the compliance by
the Issuers with all of the provisions of this Agreement and the
consummation by the Issuers of the transactions contemplated hereby
and thereby will not, to such counsel's knowledge, conflict with or
result in a material breach or violation of any of the terms or
provisions of, or constitute a material default under, any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument filed (including by incorporation by reference) by the
Company as an Exhibit to its Annual Report on Form 10-K for the fiscal
year ended September 30, 1996 or to any Quarterly Report on Form 10-Q
or any Current Report on Form 8-K filed since September 30, 1996, nor
will such actions result in any violation of the provisions of the
charter or by-laws of any Issuer or any statute or, to such counsel's
knowledge, any order, rule or regulation known to such counsel of any
<PAGE>
-22-
court or governmental agency or body having jurisdiction over any
Issuer or any of their property or assets; and, except for such
consents, approvals, authorizations, registrations or qualifications
as may be required under the Act and applicable state or foreign
securities laws in connection with the purchase and distribution of
the Securities by the Underwriter, no consent, approval, authorization
or order of, or filing or registration with, any such court or
governmental agency or body is required for the execution, delivery
and performance of this Agreement, the Indenture and the Securities by
the Issuers and the valid issuance and sale of the Securities by the
Issuers.
(viii) The Indenture has been duly qualified under the TIA and has
been duly authorized, executed and delivered by the Issuers and is a
valid and binding agreement of the Issuers, enforceable in accordance
with its terms except as (a) the enforceability thereof may be limited
by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (b) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability.
(ix) The Notes have been duly authorized and executed by the
Company and, when authenticated in accordance with the provisions of
the Indenture and delivered to the Underwriter against payment
therefor as provided by this Agreement, will be entitled to the
benefits of the Indenture, and will be valid and binding obligations
of the Company, enforceable in accordance with their terms except as
(i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and
(ii) rights of acceleration and the availability of equitable remedies
may be limited by equitable principles of general applicability.
(x) The Guarantees have been duly authorized and endorsed on the
Notes by the Guarantors, and, upon execution and authentication of the
Notes in accordance with the provisions of the Indenture and delivery
thereof to the Underwriter against payment therefor as provided by
this Agreement, will be entitled to the benefits of the Indenture, and
will be valid and binding obligations of the Guarantors, enforce-
<PAGE>
-23-
able in accordance with their terms except as (i) the enforceability
thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability.
(xi) The Securities and the Indenture conform in all material
respects to the descriptions thereof in the Prospectus.
In rendering such opinion, such counsel may state that its opinion is
limited to the Federal laws of the United States of America, the laws of the
States of Texas and New York and the General Corporation Law of the State of
Delaware. Such counsel shall also have furnished to the Underwriter a written
statement, addressed to the Underwriter and dated the Closing Date, in form and
substance satisfactory to the Underwriter and counsel for the Underwriter, to
the effect that (x) such counsel has acted as special counsel to the Company in
connection with the preparation of the Registration Statement and during the
course of the preparation of the Registration Statement and Prospectus, such
counsel participated in conferences with representatives of the Company, the
Company's internal counsel, and its accountants and the representatives of the
Underwriter and at which conferences the contents of the Registration Statement
and the Prospectus and related matters were discussed, and (y) based on the
foregoing, no facts have come to the attention of such counsel which lead it to
believe that (I) the Registration Statement (except as to financial and pro
forma data (and related notes thereto) and statistical data and the financial
statements and related schedules contained or incorporated by reference
therein), as of the date the Registration Statement became effective, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading, or that the Prospectus (except as to financial and pro
forma data (and related notes thereto) and statistical data and the financial
statements and related schedules contained or incorporated by reference therein)
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading or (II) any Incorporated Document or any amendment or supplement
thereto made by the Company prior to such Closing Date, when they were filed
with the Commission, as the case may be, contained (except as to financial and
pro forma data (and related notes
<PAGE>
-24-
thereto) and statistical data and the financial statements and related schedules
contained or incorporated by reference therein) an untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The foregoing opinion and statement may be qualified by a
statement to the effect that such counsel has not independently verified the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or Prospectus or incorporated by reference therein, and
such counsel is not passing upon and such counsel does not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus.
(g) You shall have received on the Closing Date, an opinion of Charles
N. Warren, Esq., General Counsel of the Company, dated the Closing Date and
addressed to you, to the effect that:
(i) The issue and sale of the Securities by the Issuers and the
compliance by the Issuers with all of the provisions of this Agreement
and the consummation by the Issuers of the transactions contemplated
hereby will not, to such counsel's knowledge, conflict with or result
in a material breach or violation of any of the terms or provisions
of, or constitute a material default under, any indenture, mortgage,
deed or trust, loan agreement or other material agreement or
instrument known to such counsel to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the
Company or any of its subsidiaries is subject, nor will such actions
result in any violation of the provisions of the charter or by-laws of
any Issuer or any order, rule or regulation known to such counsel of
any court or governmental agency or body having jurisdiction over any
Issuer or any of their property or assets.
(ii) Each Guarantor that is a corporation has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its state of incorporation, is duly qualified to do
business and is in good standing as a foreign corporation in each
jurisdiction in which its ownership or lease of its property or the
conduct of its business re-
<PAGE>
-25-
quires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the business,
operations or financial condition of the Company and its subsidiaries
taken as a whole, and has all corporate power and authority necessary
to own or hold its properties and conduct its business as described in
the Prospectus. The outstanding shares of capital stock of each such
Guarantor is duly authorized, validly issued, fully paid and
nonassessable and (except for directors' qualifying shares) are owned
of record, directly or indirectly by the Company. Each Guarantor that
is a limited partnership has been duly formed and is validly existing
as a limited partnership in good standing under the laws of the state
of its organization, is duly qualified to do business and is in good
standing as a foreign limited partnership in each jurisdiction in
which its ownership or lease of its property or the conduct of its
business requires such qualification, except where the failure to be
so qualified would not have a material adverse effect on the business,
operation or financial condition of the Company and its subsidiaries
taken as a whole, and has all partnership power and authority
necessary to own or hold its properties and conduct its business as
described in the Prospectus.
(h) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Cahill Gordon and Reindel, counsel for the Underwriter, in
form and substance satisfactory to the Underwriter.
(i) You shall have received a letter on and as of the Closing Date, in
form and substance satisfactory to you, from Ernst & Young, LLP,
independent public accountants, with respect to the financial statements
and certain financial information contained in the Registration Statement
and the Prospectus and substantially in the form and substance of the
letter delivered to you by Ernst & Young, LLP, on the date of this
Agreement.
(j) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements in the
Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contem-
<PAGE>
-26-
plated in the Prospectus or (ii) since such date there shall not have been
any change in the capital stock, net revenues, per share or total amounts
of income before extraordinary income or of net income or long-term debt of
the Company or any of its subsidiaries or any change, or any development
involving a prospective change, in or affecting the general affairs,
management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, otherwise than as set forth
or contemplated in the Prospectus, the effect of which, in any such case
described in clause (i) or (ii), is, in the judgment of the Underwriter, so
material and adverse as to make it impracticable or inadvisable to proceed
with the public offering or the delivery of the Securities being delivered
on the Closing Date on the terms and in the manner contemplated in the
Prospectus.
(k) The Issuers shall have furnished to you such other documents and
certificates as to the accuracy and completeness of any statement in the
Registration Statement or the Prospectus as you reasonably may request.
(l) You shall have been furnished with such additional documents and
certificates as you or counsel for the Underwriter may reasonably request.
All such opinions, certificates, letters and other documents will be
in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to you and your counsel.
Any certificate or document signed by any officer of the Issuers and
delivered to you or to your counsel shall be deemed a representation and
warranty by the Issuers to each Underwriter as to the statements made therein.
9. Termination.
-----------
This Agreement may be terminated at any time prior to the Closing Date
by you by written notice to the Issuers if any of the following has occurred:
(i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or
development involving a prospective material adverse change in the condition,
financial or otherwise, of the Issuers and its subsidiaries or the earnings,
affairs, or business prospects of the Issuers or any of its subsidiaries taken
as a whole, whether or not arising in the ordinary course of business, which
would, in
<PAGE>
-27-
your judgment, make it impracticable to market the Securities on the
terms and in the manner contemplated in the Prospectus, (ii) any outbreak or
escalation of hostilities or other national or international calamity or crisis
or change in economic conditions or in the financial markets of the United
States or elsewhere that, in your judgment, is material and adverse and would,
in your judgment, make it impracticable to market the Shares on the terms and in
the manner contemplated in the Prospectus, (iii) the suspension or material
limitation of trading in securities on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market or limitation on prices for
securities on any such exchange or National Market System, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which in
your opinion materially and adversely affects, or will materially and adversely
affect, the business or operations of the Company and its subsidiaries taken as
a whole, (v) the declaration of a banking moratorium by either federal or New
York State authorities or (vi) the taking of any action by any federal, state or
local government or agency in respect of its monetary or fiscal affairs which in
your opinion has a material adverse effect on the financial markets in the
United States.
10. Miscellaneous. Notices given pursuant to any provision of this
-------------
Agreement shall be addressed as follows: (a) if to the Issuers, to D.R. Horton,
1901 Ascension Blvd., Suite 100 Arlington, Texas 76006, and (b) if to the
Underwriter, to Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park
Avenue, New York, New York 10172, Attention: Syndicate Department, or in any
case to such other address as the person to be notified may have requested in
writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company, its officers and directors (in
their capacities as such) and of the Underwriter set forth in or made pursuant
to this Agreement shall remain operative and in full force and effect, and will
survive delivery of and payment for the Notes, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
the Underwriter or by or on behalf of the Company, the officers or directors of
the Company or any controlling person of the Company (in their capacities as
such), (ii) acceptance of the Notes and payment for them hereunder and (iii)
termination of this Agreement.
<PAGE>
-28-
If this Agreement shall be terminated by the Underwriter because of
any failure or refusal on the part of any Issuer to perform any of its
agreements in this Agreement or to fulfill any of the conditions of Section 8 of
this Agreement, the Issuers, jointly and severally, agree to reimburse the
Underwriter for all out-of-pocket expenses (including the fees and disbursements
of counsel) reasonably incurred by it.
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Issuers, the
Underwriter, any controlling persons referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" shall not include a purchaser of
any of the Notes from the Underwriter merely because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
<PAGE>
-29-
Please confirm that the foregoing correctly sets forth the agreement
between the Issuers and the Underwriter.
Very truly yours,
D.R. HORTON, INC.
By: /s/David J. Keller
------------------
Name: David J. Keller
Title: Treasurer
GUARANTORS:
DRHI, Inc.
DRH Construction, Inc.
DRH New Mexico Construction, Inc.,
D.R. Horton Denver Management Company, Inc.
D.R. Horton Denver No. 10, Inc.
D.R. Horton Denver No. 11, Inc.
D.R. Horton Denver No. 12, Inc.
D.R. Horton Denver No. 13, Inc.
D.R. Horton Denver No. 14, Inc.
D.R. Horton Denver No. 15, Inc.
D.R. Horton Denver No. 16, Inc.
D.R. Horton Denver No. 17, Inc.
D.R. Horton Denver No. 18, Inc.
D.R. Horton, Inc.-Albuquerque
D.R. Horton, Inc.- Denver
D.R. Horton, Inc.-Minnesota
D.R. Horton, Inc.-New Jersey
Meadows I, Ltd.
Meadows II, Ltd.
Meadows III, Ltd.
Meadows IX, Inc.
Meadows X, Inc.
D.R. Horton Los Angeles Holding Company,
Inc.
D.R. Horton Los Angeles Management
Company, Inc.
D.R. Horton Los Angeles No. 9, Inc.
D.R. Horton Los Angeles No. 10, Inc.
D.R. Horton Los Angeles No. 11, Inc.
D.R. Horton Los Angeles No. 12, Inc.
D.R. Horton Los Angeles No. 13, Inc.
D.R. Horton Los Angeles No. 14, Inc.
<PAGE>
-30-
D.R. Horton Los Angeles No. 16, Inc.
D.R. Horton Los Angeles No. 17, Inc.
D.R. Horton, Inc. - Birmingham
D.R. Horton, Inc. - Greensboro
D.R. Horton San Diego Holding Company, Inc.
D.R. Horton San Diego Management Company,
Inc.
D.R. Horton San Diego No. 9, Inc.
D.R. Horton San Diego No. 10, Inc.
D.R. Horton San Diego No. 11, Inc.
D.R. Horton San Diego No. 12, Inc.
D.R. Horton San Diego No. 13, Inc.
D.R. Horton San Diego No. 14, Inc.
D.R. Horton San Diego No. 15, Inc.
D.R. Horton San Diego No. 16, Inc.
D.R. Horton San Diego No. 17, Inc.
D.R. Horton San Diego No. 18, Inc.
D.R. Horton San Diego No. 19, Inc.
D.R. Horton San Diego No. 20, Inc.
D.R. Horton San Diego No. 21, Inc.
D.R. Horton, Inc. - Torrey
S. G. Torrey Atlanta, Ltd.
By: /s/David J. Keller
------------------
Name: David J. Keller
Title: Treasurer
<PAGE>
-31-
SGS COMMUNITIES AT GRANDE QUAY, LLC
By Meadows IX, Inc., a member
By: /s/David J. Keller
------------------
Name: David J. Keller
Title: Treasurer
and
By Meadows X, Inc., a member
By: /s/David J. Keller
------------------
Name: David J. Keller
Title: Treasurer
D.R. HORTON MANAGEMENT COMPANY, LTD.
By Meadows I, Ltd., its general partner
By: /s/David J. Keller
------------------
Name: David J. Keller
Title: Treasurer
<PAGE>
-32-
D.R. HORTON - TEXAS, LTD.
By Meadows I, Ltd., its general partner
By: /s/David J. Keller
------------------
Name: David J. Keller
Title: Treasurer
D.R. HORTON - ROYALTY, LTD.
By Meadows I, Ltd., its general partner
By: /s/David J. Keller
------------------
Name: David J. Keller
Title: Treasurer
<PAGE>
-33-
Agreed and accepted as of the
date first written above:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/Eric Anderson
-------------------
Name: Eric Anderson
Title: Managing Director
<PAGE>
EXHIBIT 10.1
AMENDED AND RESTATED
MASTER LOAN AND INTER-CREDITOR AGREEMENT
among
D. R. HORTON, INC., as Borrower,
NATIONSBANK, N.A. (SOUTH),
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
FIRST AMERICAN BANK TEXAS, SSB,
SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION,
COMERICA BANK,
THE FIRST NATIONAL BANK OF CHICAGO,
BANK ONE, ARIZONA, NA,
SANWA BANK CALIFORNIA,
AMSOUTH BANK OF ALABAMA,
FLEET NATIONAL BANK,
PNC BANK NATIONAL ASSOCIATION
SOCIETE GENERALE, SOUTHWEST AGENCY
as Banks,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
as Documentation Agent
and
NATIONSBANK, N.A. (SOUTH),
as Administrative Agent
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
ARTICLE 1 DEFINITIONS.......................................................................... 1
ARTICLE 2 LOANS AND LETTERS OF CREDIT.......................................................... 17
2.1 Extension of Credit.................................................................. 17
2.2 Manner of Borrowing and Disbursement Under Loans..................................... 17
2.3 Interest on Loans.................................................................... 19
2.4 Issuance and Administration of Letters of Credit..................................... 20
2.5 Fees and Commissions on Loans and Letters of Credit.................................. 24
2.6 Notes, Loan and Letters of Credit Accounts........................................... 25
2.7 Repayment of Loans and Letters of Credit............................................. 26
2.8 Manner of Payment.................................................................... 27
2.9 Application of Payments.............................................................. 27
ARTICLE 3 INVENTORY AND FUNDING AVAILABILITY .................................................. 29
3.1 Loan Funding Availability............................................................ 29
ARTICLE 4 LOAN DISBURSEMENTS................................................................... 31
4.1 Prior to the First Disbursement or Letter of Credit.................................. 31
4.2 Subsequent Disbursements............................................................. 31
ARTICLE 5 BORROWER'S COVENANTS, AGREEMENTS, REPRESENTATIONS AND WARRANTIES..................... 32
5.1 Payment.............................................................................. 32
5.2 Performance.......................................................................... 32
5.3 Additional Information............................................................... 32
5.4 Quarterly Financial Statements and Other Information................................. 32
5.5 Compliance Certificates.............................................................. 32
5.6 Annual Financial Statements and Information; Certificate of No Default............... 33
5.7 Financial and Inventory Covenants.................................................... 33
5.8 Other Financial Documentation........................................................ 34
5.9 Reserved............................................................................. 34
5.10 Payment of Contractors............................................................... 34
5.11 Inspection and Appraisal............................................................. 35
5.12 Fees and Expenses.................................................................... 35
5.13 Hazardous Substances................................................................. 35
5.14 Insurance............................................................................ 36
5.15 Litigation........................................................................... 36
5.16 Reportable Event..................................................................... 36
5.17 Secured Indebtedness................................................................. 36
5.18 Interest Rate Hedging................................................................ 37
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 6 DEFAULT AND REMEDIES................................................................. 37
6.1 Defaults............................................................................. 37
6.2 Remedies............................................................................. 40
6.3 Waivers.............................................................................. 41
6.4 Cross-Default........................................................................ 41
6.5 No Liability of the Banks............................................................ 41
ARTICLE 7 THE ADMINISTRATIVE AGENT............................................................. 42
7.1 Appointment and Authorization........................................................ 42
7.2 Delegation of Duties................................................................. 42
7.3 Interest Holders..................................................................... 42
7.4 Consultation with Counsel............................................................ 43
7.5 Documents............................................................................ 43
7.6 Administrative Agent and Affiliates.................................................. 43
7.7 Responsibility of the Administrative Agent........................................... 43
7.8 Action by Administrative Agent....................................................... 43
7.9 Notice of Default or Event of Default................................................ 44
7.10 Responsibility Disclaimed............................................................ 44
7.11 Indemnification...................................................................... 45
7.12 Credit Decision...................................................................... 45
7.13 Successor Administrative Agent....................................................... 45
7.14 Documentation Agent.................................................................. 46
ARTICLE 8 GENERAL CONDITIONS................................................................... 46
8.1 Benefit.............................................................................. 46
8.2 Assignment........................................................................... 46
8.3 Amendment and Waiver................................................................. 47
8.4 Additional Obligations and Amendments................................................ 48
8.5 Consideration of Renewal............................................................. 48
8.6 Terms................................................................................ 48
8.7 Governing Law and Jurisdiction....................................................... 49
8.8 Publicity............................................................................ 49
8.9 Attorneys' Fees...................................................................... 49
8.10 Mandatory Arbitration................................................................ 50
8.11 Invalidation of Provisions........................................................... 51
8.12 Execution in Counterparts............................................................ 51
8.13 Captions............................................................................. 51
8.14 Notices.............................................................................. 51
8.15 Final Agreement...................................................................... 54
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C>
Exhibit A - Commitment Ratios
Exhibit B - Form of Inventory Quarterly Report
Exhibit C - Form of Inventory Summary Report
Exhibit D - Form of Request for Advance
Exhibit E - Form of Request for Issuance of Letter of Credit
Exhibit F - Form of Letter of Credit Application
Exhibit G - Form of Quarterly Compliance Certificate
Exhibit H - Form of Assignment and Assumption Agreement
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE
--------
<S> <C>
Schedule 1.59 - Prior Letters of Credit
Schedule 1.88 - Subsidiaries of the Borrower
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED
MASTER LOAN AND INTER-CREDITOR AGREEMENT
----------------------------------------
THIS AMENDED AND RESTATED MASTER LOAN AND INTER-CREDITOR AGREEMENT
(this "Agreement") dated as of the 1st day of April, 1997, is by and among D.R.
HORTON, INC., a Delaware corporation (the "Borrower"); NATIONSBANK, N.A.
(SOUTH); BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, FIRST AMERICAN
BANK TEXAS, SSB, SOUTHTRUST BANK OF ALABAMA, NATIONAL ASSOCIATION, COMERICA
BANK, THE FIRST NATIONAL BANK OF CHICAGO, BANK ONE, ARIZONA, NA, SANWA BANK
CALIFORNIA, AMSOUTH BANK OF ALABAMA, FLEET NATIONAL BANK, PNC BANK, NATIONAL
ASSOCIATION, SOCIETE GENERALE, SOUTHWEST AGENCY (collectively, the "Banks");
NATIONSBANK, N.A. (SOUTH), as issuing bank for letters of credit (in such
capacity, the "Issuing Bank"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as documentation agent for the Banks (in such capacity, the
"Documentation Agent"), and NATIONSBANK, N.A. (SOUTH), as administrative agent
for the Banks and the Issuing Bank (in such capacity, the "Administrative
Agent").
IN CONSIDERATION of the sum of TEN AND NO/100 DOLLARS ($10.00) in hand
paid by each party to the other and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by each of the
undersigned, the undersigned hereby amend and restate that certain Master Loan
and Inter-Creditor Agreement dated as of February 14, 1997 among the Borrower,
the Banks, the Issuing Bank, the Documentation Agent and the Administrative
Agent and covenant and agree as follows:
ARTICLE 1
DEFINITIONS
-----------
For the purposes of this Agreement, the words and phrases set forth
below shall have the following meanings:
1.1 Acquisition Cost. If the subject Developed Lot or Land Parcel
----------------
was purchased individually, the Acquisition Cost for such Developed Lot or Land
Parcel shall be the actual purchase price and closing costs approved by the
Administrative Agent and paid by the Borrower or its Restricted Subsidiaries for
the acquisition of such individual Developed Lot or Land Parcel excluding
Administrative Costs, together with all applicable Development Costs. If the
subject Developed Lot or Land Parcel was part of a larger group of Developed
Lots or Land Parcels, the Acquisition Cost for such Developed Lot or Land Parcel
shall be the pro rata portion of the overall actual purchase price and closing
costs approved by the Administrative Agent and paid by the Borrower and its
Restricted Subsidiaries for the acquisition of such larger group of Developed
Lots or Land Parcels allocable to the subject Developed Lot or Land Parcel
excluding Administrative Costs, together with a pro rata portion of all
applicable Development Costs.
<PAGE>
1.2 Administrative Agent. NationsBank, N.A. (South), in its
--------------------
capacity as Administrative Agent hereunder.
1.3 Administrative Costs. Costs and expenses incurred by the
--------------------
Borrower or its Restricted Subsidiaries in connection with (a) the marketing and
selling of Inventory which is part of the Loan Inventory and (b) the
administration, management and operation of the Borrower's and its Restricted
Subsidiaries' businesses (excluding, without limitation, Interest Expense and
fees payable hereunder).
1.4 Advance or Advances. Amounts advanced by the Banks to the
------- --------
Borrower pursuant to Article 2 hereof on the occasion of any borrowing or in
connection with draws under Letters of Credit.
1.5 Affiliate. Any Person (other than a Person whose sole
---------
relationship with the Borrower is as an employee) directly or indirectly
controlling, controlled by, or under common control with the Borrower. For
purposes of this definition, "control" when used with respect to any Person
means the direct or indirect beneficial ownership of more than twenty percent
(20%) of the voting securities or voting equity or partnership interests, of
such Person or the power to direct or cause the direction of the management and
policies of such Person, whether by control or otherwise.
1.6 Agreement. This Amended and Restated Master Loan and
---------
Inter-Creditor Agreement.
1.7 Agreement Date. The date as of which the Borrower, the
--------------
Administrative Agent, the Issuing Bank and the Banks execute this Agreement.
1.8 Applicable Law. In respect of any Person, all provisions of
--------------
constitutions, statutes, rules, regulations, and orders of governmental bodies
or regulatory agencies applicable to such Person, including, without limitation,
all orders and decrees of all courts and arbitrators in proceedings or actions
to which the Person in question is a party or by which it is bound.
1.9 Authorized Signatory. With respect to the Borrower, such
--------------------
personnel of the Borrower as set forth in an incumbency certificate of the
Borrower delivered to the Administrative Agent on the Agreement Date (or any
duly executed incumbency certificate delivered after the Agreement Date) and
certified therein as being duly authorized by the Borrower to execute documents,
agreements, and instruments on behalf of the Borrower.
1.10 Available Letter of Credit Commitment. As of any date of
-------------------------------------
determination, the Letter of Credit Commitment less all then outstanding Letter
----
of Credit Obligations.
1.11 Available Revolving Loan Commitment. As of any date of
-----------------------------------
determination, an amount equal to the lesser of (a) the Revolving Loan
Commitment or (b) (i) the Loan Funding Availability less (ii) the sum of (A) the
principal amount of the Term Loan then outstanding,
-2-
<PAGE>
(B) the principal amount of the Revolving Loans then outstanding, (C)
unreimbursed draws under any Letter of Credit, and (D) the outstanding principal
balances of all Unsecured Indebtedness.
1.12 Banks. NationsBank, N.A. (South); Bank of America National
-----
Trust and Savings Association; First American Bank Texas, SSB; SouthTrust Bank
of Alabama, National Association; Comerica Bank; The First National Bank of
Chicago; Bank One, Arizona, NA; Sanwa Bank California; AmSouth Bank of Alabama;
Fleet National Bank; PNC Bank, National Association; and Societe Generale,
Southwest Agency. An individual Bank is sometimes referred to as a "Bank."
1.13 Borrower. D.R. Horton, Inc., a Delaware corporation.
--------
1.14 Business Day. A day on which none of the Banks are authorized
------------
or required to be closed and foreign exchange markets are open for the
transaction of business required for this Agreement in Atlanta, Georgia.
1.15 Change of Control. Either (i) any sale, lease or other transfer
-----------------
(in one transaction or a series of transactions) of all or substantially all of
the consolidated assets of the Borrower and its Restricted Subsidiaries to any
Person (other than a Restricted Subsidiary of the Borrower), provided that a
transaction where the holders of all classes of Common Equity of the Borrower
immediately prior to such transaction own, directly or indirectly, 50% or more
of all classes of Common Equity of such Person immediately after such
transaction shall not be a Change of Control; (ii) a "person" or "group" within
the meaning of Section 13(d) of the Exchange Act (other than the Borrower or
Donald R. Horton, his wife, children or grandchildren, or Terrill J. Horton, or
any trust or other entity formed or controlled by Donald R. Horton, his wife,
children or grandchildren, or Terrill J. Horton)) becomes the "beneficial owner"
(as defined in Rule 13d-8 under the Exchange Act) of Common Equity of the
Borrower representing more than 50% of the voting power of the Common Equity of
the Borrower; (iii) Continuing Directors cease to constitute at least a majority
of the Board of Directors of the Borrower; or (iv) the stockholders of the
Borrower approve any plan or proposal for the liquidation or dissolution of the
Borrower, provided that a liquidation or dissolution of the Borrower which is
part of a transaction that does not constitute a Change of Control under the
proviso contained in clause (i) above shall not constitute a Change of Control.
1.16 Change of Management. Donald R. Horton shall cease to serve
--------------------
either as Chairman of the Board of Directors of the Borrower or as President of
the Borrower.
1.17 Closed Sales. For any calculation period, sales of Developed
------------
Lots containing Dwellings which have been closed by the Borrower and all
Restricted Subsidiaries. Closed Sales shall include Developed Lots containing
Dwellings owned by any Person which became a Restricted Subsidiary after the
Agreement Date for which sales have closed during the applicable calculation
period.
1.18 Code. The Internal Revenue Code of 1986, as amended.
----
-3-
<PAGE>
1.19 Commitment. The aggregate amount of the Revolving Loan
----------
Commitment, the Letter of Credit Commitment and the Term Loan Commitment.
1.20 Commitment Ratios. The percentages in which the Banks are
-----------------
severally bound to satisfy any of the Revolving Loan Commitment, the Term Loan
Commitment, the Letter of Credit Commitment or the Commitment as set forth on
Exhibit A attached hereto and incorporated herein.
- ---------
1.21 Common Equity. With respect to any Person, capital stock of
-------------
such Person that is generally entitled to (i) vote in the election of directors
of such Person, or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management or policies of such Person.
1.22 Construction Costs. All costs accepted by the Administrative
------------------
Agent actually incurred by the Borrower or its Restricted Subsidiaries with
respect to the construction of a Dwelling as of the date of determination by the
Administrative Agent, excluding (a) projected costs and costs for materials or
labor not yet delivered to, provided to or incorporated into such Dwelling and
(b) Administrative Costs.
1.23 Continuing Director. A director who either was a member of the
-------------------
board of directors of the Borrower on the Agreement Date or who became a
director of the Borrower subsequent to such date and whose election, or
nomination for election by the Borrower's stockholders, was duly approved by a
majority of the Continuing Directors on the board of directors of the Borrower
at the time of such approval, either by a specific vote or by approval of the
proxy statement issued by the Borrower on behalf of the entire board of
directors of the Borrower in which such individual is named as nominee for a
director.
1.24 Default. Any of the events specified in Section 6.1 hereof,
-------
provided that any requirement for notice or lapse of time, or both, has been
satisfied.
1.25 Default Rate. A simple per annum interest rate equal to the sum
------------
of (a) the Term Loan Base Rate or the Revolving Loan Base Rate, as the case may
be, plus (b) two hundred basis points (2%).
----
1.26 Developed Lots. Subdivision lots owned by the Borrower or its
--------------
Restricted Subsidiaries, subject to a recorded plat, which the Borrower has
designated and the Administrative Agent has accepted to be included and are
included as "Developed Lots" in the calculation of the Loan Funding Availability
(exclusive of any Dwelling Lot). An individual Developed Lot is sometimes
referred to herein as a "Developed Lot."
1.27 Development Costs. All costs accepted by the Administrative
-----------------
Agent actually incurred by the Borrower and its Restricted Subsidiaries with
respect to the development of a Land Parcel into a Developed Lot or Developed
Lots as of the date of determination by the
-4-
<PAGE>
Administrative Agent, excluding (a) projected costs and costs for materials or
labor not yet delivered to, provided to or incorporated into such parcel of land
and (b) Administrative Costs.
1.28 Dwelling. A house which the Borrower or any Restricted
--------
Subsidiary has constructed or is constructing on a Developed Lot which has been
designated as a Dwelling Lot.
1.29 Dwelling Lots. Developed Lots with Dwellings which the Borrower
-------------
or any Restricted Subsidiary has designated and the Administrative Agent has
accepted to be included and are included as "Dwelling Lots" in the calculation
of the Loan Funding Availability. The term "Dwelling Lot" includes the Dwelling
located thereon. An individual Dwelling Lot is sometimes referred to herein as
a "Dwelling Lot."
1.30 EBITDA. With respect to the Borrower and all Restricted
------
Subsidiaries, earnings for the preceding twelve (12) calendar months (including
without limitation dividends from Unrestricted Subsidiaries including, without
limitation, net income (or loss) of any Person that accrued prior to the date
that such Person becomes a Restricted Subsidiary or is merged with or into or
consolidated with the Borrower or any of its Restricted Subsidiaries) before
interest incurred, state and federal income taxes paid, franchise taxes paid and
depreciation and amortization, all in accordance with GAAP.
1.31 ERISA. The Employee Retirement Income Security Act of 1974, as
-----
in effect on the Agreement Date and as such Act may be amended thereafter from
time to time.
1.32 ERISA Affiliate. (a) Any corporation which is a member of the
---------------
same controlled group of corporations (within the meaning of Code Section
414(b)) as is the Borrower, (b) any other trade or business (whether or not
incorporated) under common control (within the meaning of Code Section 414(c))
with the Borrower, (c) any other corporation, partnership or other organization
which is a member of an affiliated service group (within the meaning of Code
Section 414(m)) with the Borrower, or (d) any other entity required to be
aggregated with the Borrower pursuant to regulations under Code Section 414(o).
1.33 Event of Default. Any event specified in Section 6.1 hereof and
----------------
any other event which with any passage of time or giving of notice (or both)
would constitute such event a Default.
1.34 Exchange Act. The Securities Exchange Act of 1934, as amended.
------------
1.35 Federal Funds Effective Rate. As of any date, the "Federal
----------------------------
Funds Effective Rate" for each relevant month as published in the Federal
Reserve Statistical Release H.15 (519), as published by the Board of Governors
of the Federal Reserve System, or any successor publication published by the
Board of Governors of the Federal Reserve System.
1.36 Financial Covenant Carve Out. Any acquisition of Inventory,
----------------------------
which the Borrower has elected to exclude from the calculation of the covenants
set forth in Sections 5.7(a),
-5-
<PAGE>
(b), (h)(ii) and (i) hereof; provided, however, that no acquisition may qualify
-------- -------
as a "Financial Covenant Carve Out" if (a) the Borrower has elected to have an
acquisition designated as a "Financial Covenant Carve Out" in the preceding
twelve (12) calendar month period; (b) such acquisition has already been
designated as a "Financial Covenant Carve Out" on the last day of each of the
two (2) fiscal quarter ends immediately following the date of such acquisition;
(c) contemporaneously with delivery by the Borrower of the notice of designation
of an acquisition as a "Financial Covenant Carve Out", the Borrower fails to
deliver to the Administrative Agent and the Documentation Agent a plan of action
reflecting that the Borrower will be in compliance (after giving effect to such
acquisition) with the covenants in Sections 5.7(a), (b), (h)(ii) and (i) hereof
on or prior to the last day of the third fiscal quarter following the date of
such acquisition; and (d) the acquisition in question would, if it were included
in the compliance calculations, cause (1) the ratio of Notes Payable to Tangible
Net Worth to exceed (A) as of the last day of each fiscal quarter of the
Borrower in 1997, 2.1 to 1, (B) as of the last day of each fiscal quarter of the
Borrower in 1998, 2.2 to 1, or (C) as of the last day of each fiscal quarter of
the Borrower in 1999, 2.2 to 1, or (2) the ratio of Total Liabilities to
Tangible Net Worth to exceed (A) as of the last day of each fiscal quarter of
the Borrower in 1997, 2.5 to 1, or (B) as of the last day of each fiscal quarter
of the Borrower in 1998, 2.6 to 1, or (C) as of the last day of each fiscal
quarter of the Borrower in 1999, 2.6 to 1.
1.37 Fixed Charges. The aggregate consolidated interest incurred of
-------------
the Borrower and its Restricted Subsidiaries for the most recently completed
four (4) fiscal quarters for which results have been reported to the Banks.
1.38 Fixed Charges Coverage Ratio. The ratio of the Borrower's
----------------------------
EBITDA to Fixed Charges.
1.39 Force Majeure Delay. A delay to the development of a Lot Under
-------------------
Development or a delay to the construction of a Dwelling which is caused by
fire, earthquake or other Acts of God, strike, lockout, acts of public enemy,
riot, insurrection, or governmental regulation of the sale or transportation of
materials, supplies or labor, provided that the Borrower furnishes the
Administrative Agent with written notice of any such delay within ten (10) days
from the commencement of any such delay and provided that the period of the
Force Majeure Delay shall not exceed the period of delay caused by such event.
1.40 Funding Period. A period commencing on the day immediately
--------------
following the date that the Loan Funding Availability is established pursuant to
Section 3.1(c) hereof by the Administrative Agent and ending on the date that
the Loan Funding Availability next is established pursuant to Section 3.1(c)
hereof by the Administrative Agent.
1.41 GAAP. As in effect as of the Agreement Date, generally
----
accepted accounting principles consistently applied.
-6-
<PAGE>
1.42 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.
1.43 Guaranty or Guaranteed. As applied to an obligation (each a
-------- ----------
"primary obligation"), shall mean and include (a) any guaranty, direct or
indirect, in any manner, of any part or all of such primary obligation, and (b)
any agreement, direct or indirect, contingent or otherwise, the practical effect
of which is to assure in any way the payment or performance (or payment of
damages in the event of non-performance) of any part or all of such primary
obligation, including, without limiting the foregoing, any reimbursement
obligations as to amounts drawn down by beneficiaries of outstanding letters of
credit, and any obligation of such Person (the "primary obligor"), whether or
not contingent, (i) to purchase any such primary obligation or any property or
asset constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of such primary obligation or (2)
to maintain working capital, equity capital or the net worth, cash flow,
solvency or other balance sheet or income statement condition of any other
Person, (iii) to purchase property, assets, securities or services primarily for
the purpose of assuring the owner or holder of any primary obligation of the
ability of the primary obligor with respect to such primary obligation to make
payment thereof or (iv) otherwise to assure or hold harmless the owner or holder
of such primary obligation against loss in respect thereof.
1.44 Guarantors.
----------
DRH Construction, Inc., a Delaware corporation
DRH New Mexico Construction, Inc., a Delaware corporation
D.R. Horton Denver Management Company, Inc., a Colorado corporation
D.R. Horton Denver No. 10, Inc., a Colorado corporation
D.R. Horton Denver No. 11, Inc., a Colorado corporation
D.R. Horton Denver No. 12, Inc., a Colorado corporation
D.R. Horton Denver No. 13, Inc., a Colorado corporation
D.R. Horton Denver No. 14, Inc., a Colorado corporation
D.R. Horton Denver No. 15, Inc., a Colorado corporation
D.R. Horton Denver No. 16, Inc., a Colorado corporation
D.R. Horton Denver No. 17, Inc., a Colorado corporation
D.R. Horton Denver No. 18, Inc., a Colorado corporation
D.R. Horton, Inc. - Albuquerque, a Delaware corporation
D.R. Horton, Inc. - Denver, a Delaware corporation
D.R. Horton, Inc. - Minnesota, a Delaware corporation
D.R. Horton, Inc. - New Jersey, a New Jersey corporation
Meadows IX, Inc., a New Jersey corporation
Meadows X, Inc., a New Jersey corporation
SGS Communities at Grande Quay, L.L.C., a New Jersey limited liability
company
D.R. Horton Los Angeles Holding Company, Inc., a California
corporation
-7-
<PAGE>
D.R. Horton Los Angeles Management Company, Inc., a California
corporation
D.R. Horton Los Angeles No. 9, Inc., a California corporation
D.R. Horton Los Angeles No. 10, Inc., a California corporation
D.R. Horton Los Angeles No. 11, Inc., a California corporation
D.R. Horton Los Angeles No. 12, Inc., a California corporation
D.R. Horton Los Angeles No. 13, Inc., a California corporation
D.R. Horton Los Angeles No. 14, Inc., a California corporation
D.R. Horton Los Angeles No. 16, Inc., a California corporation
D.R. Horton, Inc. - Birmingham, a Delaware corporation
D.R. Horton, Inc. - Greensboro, a Delaware corporation
D.R. Horton San Diego Holding Company, Inc., a California corporation
D.R. Horton San Diego Management Company, Inc., a California
corporation
D.R. Horton San Diego No. 9, Inc., a California corporation
D.R. Horton San Diego No. 10, Inc., a California corporation
D.R. Horton San Diego No. 11, Inc., a California corporation
D.R. Horton San Diego No. 12, Inc., a California corporation
D.R. Horton San Diego No. 13, Inc., a California corporation
D.R. Horton San Diego No. 14, Inc., a California corporation
D.R. Horton San Diego No. 15, Inc., a California corporation
D.R. Horton San Diego No. 16, Inc., a California corporation
D.R. Horton San Diego No. 17, Inc., a California corporation
D.R. Horton San Diego No. 18, Inc., a California corporation
D.R. Horton San Diego No. 19, Inc., a California corporation
D.R. Horton San Diego No. 20, Inc., a California corporation
D.R. Horton San Diego No. 21, Inc., a California corporation
D.R. Horton - Texas, Ltd., a Texas limited partnership
D.R. Horton, Inc. - Torrey, a Delaware corporation
Together with each additional Restricted Subsidiary of Borrower as may
from time to time deliver a Guaranty of the Loans and Letters of Credit which
Guaranty is accepted by Administrative Agent.
1.45 Indebtedness. With respect to any specified Person, (a) all items,
------------
except items of (i) shareholders' and partners' equity, (ii) capital stock,
(iii) surplus, (iv) general contingency or deferred tax reserves, (v)
liabilities for deposits and (vi) deferred income, which in accordance with GAAP
would be included in determining total liabilities as shown on the liability
side of a balance sheet of such Person, (b) all direct or indirect obligations
secured by any Lien to which any property or asset owned by such Person is
subject, whether or not the obligation secured thereby shall have been assumed,
and (c) all reimbursement obligations with respect to outstanding letters of
credit.
1.46 Indebtedness for Money Borrowed. With respect to any specified
-------------------------------
Person, all money borrowed by such Person and Indebtedness represented by notes
payable by such Person and drafts accepted representing extensions of credit to
such Person, all obligations of such Person evidenced by bonds, debentures,
notes, or other similar instruments, all Indebtedness of such Person upon which
interest charges are customarily paid, and all Indebtedness of such Person
issued or assumed as full or partial payment for property or services, whether
or not any
-8-
<PAGE>
notes, drafts, obligations, or Indebtedness represent Indebtedness for money
borrowed. For purposes of this definition, interest which is accrued but not
paid on the original due date or within any applicable cure or grace period as
provided by the underlying contract for such interest shall be deemed
Indebtedness for Money Borrowed.
1.47 Interest Expense. In respect of any period, an amount equal to the
----------------
sum of the interest incurred during such period based on a stated interest rate
with respect to Indebtedness for Money Borrowed of the Borrower and its
Restricted Subsidiaries on a consolidated basis.
1.48 Inventory. All real and personal property, improvements and fixtures
---------
owned by the Borrower or the Restricted Subsidiaries, including but not limited
to all Land Parcels, Lots Under Development, Development Lots and Dwelling Lots.
1.49 Inventory Quarterly Report. The detailed quarterly written report
--------------------------
with respect to the Loan Inventory, in substantially the form of Exhibit B
---------
attached hereto, to be prepared by the Borrower and submitted to the
Administrative Agent in accordance with Section 3.1(c) hereof.
1.50 Inventory Summary Report. The monthly written summary of the Loan
------------------------
Inventory, in substantially the form of Exhibit C attached hereto, to be
---------
prepared by the Borrower and submitted to the Administrative Agent in accordance
with Section 3.1(c) hereof.
1.51 Issuing Bank. NationsBank, N.A. (South) (or any successor Issuing
------------
Bank appointed in accordance with the provisions of this Agreement), as issuer
of the Letters of Credit.
1.52 Land Parcels. Parcels of land owned by the Borrower or any of its
------------
Restricted Subsidiaries which are, as of the date of determination, not
scheduled for commencement of development into Developed Lots during the twelve
(12) calendar months immediately following such date of determination and which
the Borrower has designated as "Land Parcels". An individual Land Parcel is
sometimes referred to as a "Land Parcel."
1.53 Letter of Credit Banks. NationsBank, N.A. (South) and Bank of America
----------------------
National Trust and Savings Association.
1.54 Letter of Credit Commitment. The Obligation of the Issuing Bank to
---------------------------
issue Letters of Credit hereunder pursuant to the terms hereof in an aggregate
face amount not to exceed $25,000,000 at any time outstanding.
1.55 Letter of Credit Bank Commitment Ratio. The percentages in which the
--------------------------------------
Letter of Credit Banks are severally bound to reimburse the Issuing Bank for
draws under Letters of Credit pursuant to the terms hereof, as set forth on
Exhibit A attached hereto and incorporated herein.
- ---------
1.56 Letter of Credit Maturity Date. April 16, 2000, or such earlier date
------------------------------
as payment of the Letter of Credit Obligations shall be due (whether by
acceleration or otherwise).
-9-
<PAGE>
1.57 Letter of Credit Obligations. At any time, the sum of (a) an amount
----------------------------
equal to the aggregate undrawn and unexpired amount (including the amount to
which any such Letter of Credit can be reinstated pursuant to the terms hereof)
of the then outstanding Letters of Credit and (b) an amount equal to the
aggregate drawn, but unreimbursed, drawings on any Letters of Credit.
1.58 Letter of Credit Reserve Account. An interest bearing account
--------------------------------
maintained by the Administrative Agent for the benefit of the Issuing Bank, the
proceeds of which are maintained as cash collateral for the Letter of Credit
Obligations. The amount of funds in the Letter of Credit Reserve Account shall
not exceed the then outstanding Letter of Credit Obligations, and any excess
shall be applied as set forth in Section 2.9 hereof. All funds in the Letter of
Credit Reserve Account shall be invested in such investments as the
Administrative Agent, in its sole and absolute discretion, deems appropriate.
The Borrower hereby acknowledges and agrees that any interest earned on such
funds shall be retained by the Administrative Agent as additional collateral for
the Letter of Credit Obligations. Upon satisfaction in full of all Letter of
Credit Obligations, the Administrative Agent shall pay any amounts then held in
such account to the Borrower.
1.59 Letters of Credit. Letters of credit issued for the account of the
-----------------
Borrower to support obligations of the Borrower or any of its Affiliates,
including but not limited to earnest money payments under option contracts,
project completion performance or project maintenance (but not credit
enhancement), including, without limitation, those Letters of Credit issued by
the Issuing Bank prior to the Agreement Date and more fully described on
Schedule 1.59 attached hereto. An individual Letter of Credit is sometimes
- -------------
referred to as a "Letter of Credit."
1.60 Lien. With respect to any property, any mortgage, lien, pledge,
----
assignment, charge, security interest, title retention agreement, levy,
execution, seizure, attachment, garnishment, or other encumbrance of any kind in
the nature of any of the foregoing in respect of such property, whether or not
choate, vested, or perfected.
1.61 Loan Documents. This Agreement, the Notes and any and all other
--------------
documents evidencing the Notes or the Letters of Credit as the same may be
amended, substituted, replaced, extended or renewed from time to time.
1.62 Loan Funding Availability. The amount of Unsecured Indebtedness and
-------------------------
unreimbursed draws under Letters of Credit which the Borrower may incur as
established pursuant to Section 3.1 hereof, at any applicable time, by the
Administrative Agent based on the Loan Inventory.
1.63 Loan Inventory. Lots Under Development, Developed Lots and Dwelling
--------------
Lots which are not encumbered by a Lien or Liens (other than any Permitted
Encumbrance) and which have been designated by the Borrower and accepted by the
Administrative Agent as "Loan Inventory" to be utilized for the purpose of
calculating the Loan Funding Availability.
1.64 Loans. Collectively, amounts advanced by the Banks to the Borrower
-----
under the Revolving Loan Commitment and the Term Loan Commitment and evidenced
by the Notes.
-10-
<PAGE>
1.65 Lots Under Development. Land Parcels which are, as of the date of
----------------------
determination, being developed into Developed Lots or which are scheduled for
the commencement of development into Developed Lots within twelve (12) calendar
months after the date of determination, and which the Borrower has designated
and the Administrative Agent has accepted to be included and are included as
"Lots Under Development" in the calculation of the Loan Funding Availability.
An individual Lot Under Development is sometimes referred to as a "Lot Under
Development."
1.66 Majority Banks. At any time, Banks the total of whose Commitment
--------------
Ratios with respect to the Commitment exceeds fifty percent (50%) of the
aggregate Commitment Ratios with respect to the Commitment of Banks entitled to
vote hereunder.
1.67 Models. A Dwelling Lot containing a dwelling unit which is designated
------
by the Borrower as a model unit for use in marketing and promoting the sale of
Dwelling Lots.
1.68 Multi-Level Pricing Grid. An interest rate margin pricing grid as may
------------------------
be agreed to from time to time by the Borrower and the Banks which will be
attached hereto as Schedule 1.68 and shall include any successor Schedule 1.68.
-------------
1.69 New York Federal Funds Rate. For any day, the rate per annum (rounded
---------------------------
upward, if necessary, to the nearest 1/16th of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve Bank of New York on the Business Day next succeeding such
day.
1.70 Notes. The Amended and Restated Term Loan Notes and the Amended and
-----
Restated Revolving Loan Notes.
1.71 Notes Payable. With respect to the Borrower and all Restricted
-------------
Subsidiaries, all Indebtedness for Money Borrowed other than promissory notes
issued as earnest money for contracts, non-recourse promissory notes for seller
financing and notes payable for insurance premiums and capitalized lease
obligations.
1.72 Obligations. (a) All payment and performance obligations of the
-----------
Borrower and all other obligors to the Banks, the Issuing Bank and the
Administrative Agent under this Agreement and the other Loan Documents, as they
may be amended from time to time, or as a result of making the Loans, and (b)
the obligation to pay an amount equal to the amount of any and all damages which
the Borrower is obligated to pay pursuant to the Loan Documents to, or on behalf
of, the Banks, the Issuing Bank and the Administrative Agent, or any of them,
which they may suffer by reason of a breach by any of the Borrower or any other
obligor of any obligation, covenant, or undertaking with respect to this
Agreement or any other Loan Document.
-11-
<PAGE>
1.73 Overnight Federal Funds Rate. The rate on overnight Federal funds
----------------------------
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day by the Federal Reserve Bank of New
York.
1.74 Permitted Encumbrances. Liens, encumbrances, easements and other
----------------------
matters which (a) are in favor of the Administrative Agent, the Documentation
Agent, the Banks and the Issuing Bank to secure the Obligations, (b) are on real
estate for real estate taxes not yet delinquent, (c) are for taxes, assessments,
judgments, governmental charges or levies or claims the non-payment of which is
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves have been set aside on the Borrower's books (but only so
long as no foreclosure, distraint sale or similar proceedings have been
commenced with respect thereto and remain unstayed for a period of thirty (30)
days after their commencement), (d) are in favor of carriers, warehousemen,
mechanics, laborers and materialmen incurred in the ordinary course of business
for sums not yet past due or being diligently contested in good faith (if
adequate reserves are being maintained by the Borrower with respect thereto),
(e) are incurred in the ordinary course of business in connection with worker's
compensation and unemployment insurance, or (f) are easements, rights-of-way,
restrictions or similar encumbrances on the use of real property which does not
interfere with the ordinary conduct of business of the Borrower or materially
detract from the value of such real property.
1.75 Person. An individual, corporation, partnership, limited liability
------
company, trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
1.76 Plan. An employee benefit plan within the meaning of Section 3(3) of
----
ERISA maintained by or contributed to by the Borrower or any ERISA Affiliate.
1.77 Reconciliation Date. Two (2) Business Days after the Borrower's
-------------------
receipt of notice from the Administrative Agent pursuant to Section 3.1(d)
hereof that the outstanding principal balance of the Unsecured Indebtedness plus
unpaid draws under Letters of Credit exceeds the Loan Funding Availability.
1.78 Reportable Event. Shall have the meaning set forth in Section 4043(b)
----------------
of ERISA.
1.79 Request for Advance. Any certificate signed by an Authorized
-------------------
Signatory of the Borrower requesting an Advance hereunder which will increase
the aggregate amount of the Loans outstanding, which certificate shall be
denominated a "Request for Advance," and shall be in substantially the form of
Exhibit D attached hereto. Each Request for Advance shall, among other things,
- ---------
(a) specify the date of the Advance, which shall be a Business Day, (b) specify
the amount of the Advance, (c) state that there shall not exist, on the date of
the requested Advance and after giving effect thereto, a Default or an Event of
Default, and (d) state that all conditions precedent to the making of the
Advance have been satisfied.
1.80 Request for Issuance of Letter of Credit. Any certificate signed by
----------------------------------------
an Authorized Signatory of the Borrower requesting that the Issuing Bank issue a
Letter of Credit
-12-
<PAGE>
hereunder, which certificate shall be in substantially the form of Exhibit E
---------
attached hereto, and shall, among other things, (a) specify the stated amount of
the Letter of Credit, (b) specify the effective date for the issuance of the
Letter of Credit (which shall be a Business Day), (c) specify the date on which
the Letter of Credit is to expire (which shall be a Business Day), (d) specify
the Person for whose benefit such Letter of Credit is to be issued, (e) specify
other relevant terms of such Letter of Credit, (f) be accompanied by a completed
letter of credit application substantially similar to Exhibit F attached hereto
---------
or otherwise in form and substance satisfactory to the Issuing Bank, and (g)
state that there shall not exist, on the date of issuance of the requested
Letter of Credit and after giving effect thereto, a Default or an Event of
Default.
1.81 Restricted Subsidiary. Any Subsidiary of the Borrower which has been
---------------------
designated as a Restricted Subsidiary by the Borrower and from which the
Administrative Agent is required to receive a duly executed Subsidiary Guaranty,
including, without limitation, the Guarantors.
1.82 Revolving Loans. Revolving lines of credit to be advanced by the
---------------
Banks pursuant to the terms of this Agreement and evidenced by the Revolving
Loan Notes.
1.83 Revolving Loan Base Rate. At any time, the lesser of (a) the New York
------------------------
Federal Funds Rate plus one hundred twenty-nine basis points (1.29%) or (b) the
----
Three-Month LIBOR plus one hundred twenty basis points (1.20%), provided,
---- --------
however, that (i) if a Multi-Level Pricing Grid is not established and in full
- -------
force and effect on or prior to December 31, 1997, then commencing on January 1,
1998 and for all times thereafter, the Revolving Loan Base Rate shall be the
lesser of (y) the New York Federal Funds Rate plus one hundred thirty-four basis
----
points (1.34%) or (z) the Three-Month LIBOR plus one hundred twenty-five basis
----
points (1.25%), or (ii) if a Multi-Level Pricing Grid is established and in full
force and effect on or prior to December 31, 1997, then commencing on the date
on which such Multi-Level Pricing Grid is established and agreed to, the
Revolving Loan Base Rate shall be the rate applicable from time to time as set
forth on such Multi-Level Pricing Grid.
1.84 Revolving Loan Commitment. The several obligations of the Banks to
-------------------------
advance funds in the aggregate sum of up to $275,000,000 to the Borrower
pursuant to the terms hereof as such obligations may be reduced from time to
time pursuant to the terms hereof.
1.85 Revolving Loan Maturity Date. April 16, 2000, or such earlier date as
----------------------------
payment of the Revolving Loans shall be due (whether by acceleration or
otherwise).
1.86 Revolving Loan Notes. The promissory notes by the Borrower one each
--------------------
in favor of each of the Banks evidencing such Bank's pro rata share of the
Revolving Loans, as well as any promissory note or notes issued by the Borrower
in substitution, replacement, extension, amendment or renewal of any such
promissory note or notes. An individual Revolving Loan Note held by a Bank is
sometimes referred to as a "Revolving Loan Note." The combined face amount of
the Revolving Loan Notes may not exceed TWO HUNDRED SEVENTY-FIVE MILLION AND
NO/100 DOLLARS ($275,000,000.00).
-13-
<PAGE>
1.87 Speculative Lot. Any Dwelling Lots having a fully or partially
---------------
constructed dwelling unit thereon which Dwelling Lot is not subject to a bona
fide contract for the sale of such Dwelling Lot to a third party, excluding
Developed Lots containing Dwellings used as Models.
1.88 Subsidiary. As applied to any Person, (a) any corporation of which
----------
fifty percent (50%) or more of the outstanding stock (other than directors'
qualifying shares) having ordinary voting power to elect a majority of its board
of directors, regardless of the existence at the time of a right of the holders
of any class or classes of securities of such corporation to exercise such
voting power by reason of the happening of any contingency, or any partnership
of which fifty percent (50%) or more of the outstanding partnership interests,
is at the time owned by such Person, or by one or more Subsidiaries of such
Person, or by such Person and one or more Subsidiaries of such Person, and (b)
any other entity which is controlled or susceptible to being controlled by such
Person, or by one or more Subsidiaries of such Person, or by such Person and one
or more Subsidiaries of such Person; provided, however, that for purposes of
-------- -------
this Agreement and the other Loan Documents the term "Subsidiary" shall not
----------
include DRH Mortgage Company, Ltd., a Texas limited partnership, SGS Communities
at West Windsor, L.L.C., a New Jersey limited liability company, and SGS
Communities at Battleground, L.L.C., a New Jersey limited liability company.
Unless the context otherwise requires, "Subsidiaries" as used herein shall mean
------------
the Subsidiaries of the Borrower. The Subsidiaries of the Borrower as of the
Closing Date are set forth on Schedule 1.87 attached hereto.
-------------
1.89 Subsidiary Guaranty. A guaranty agreement in form and substance
-------------------
satisfactory to the Administrative Agent whereunder a Restricted Subsidiary
guarantees the full and faithful payment and performance of all of the
Obligations of the Borrower hereunder and under the other Loan Documents.
1.90 Super-Majority Banks. At any time, Banks the total of whose
--------------------
Commitment Ratios with respect to the Commitment exceeds sixty-six and two
thirds percent (66-2/3%) of the aggregate Commitment Ratios with respect to the
Commitment of Banks entitled to vote hereunder.
1.91 Tangible Assets. The difference between total assets of the Borrower
---------------
and its Restricted Subsidiaries and all intangible assets of the Borrower and
its Restricted Subsidiaries, all as determined in accordance with GAAP.
1.92 Tangible Net Worth. With respect to the Borrower and its Restricted
------------------
Subsidiaries, stockholder's equity on a consolidated basis less all "intangible
assets" as defined under GAAP and amounts invested in Unrestricted Subsidiaries
of such Person.
1.93 Term Loan. Amounts advanced by the Banks on the Agreement Date under
---------
the Term Loan Commitment pursuant to the terms of this Agreement and evidenced
by the Term Loan Notes.
-14-
<PAGE>
1.94 Term Loan Base Rate. The Three-Month LIBOR plus one hundred eighty-
------------------- ----
five basis points (1.85%), provided, however, that (a) if a Multi-Level Pricing
-------- -------
Grid is not established and in full force and effect on or prior to December 31,
1997, then commencing on January 1, 1998 and for all times thereafter, the Term
Loan Base Rate shall be the Three-Month LIBOR plus two hundred basis points
----
(2.00%), or (b) if a Multi-Level Pricing Grid is established and in full force
and effect on or prior to December 31, 1997, then commencing on the date on
which such Multi-Level Pricing Grid is established and agreed to, the Term Loan
Base Rate shall be the rate applicable from time to time as set forth on such
Multi-Level Pricing Grid.
1.95 Term Loan Commitment. The several obligations of the Banks to advance
--------------------
on the Agreement Date funds in the aggregate sum of $100,000,000 to the Borrower
pursuant to the terms hereof.
1.96 Term Loan Maturity Date. April 16, 2001, or such earlier date as
-----------------------
payment of the Term Loan shall be due (whether by acceleration or otherwise).
1.97 Term Loan Notes. The promissory notes by the Borrower one each in
---------------
favor of each of the Banks evidencing such Bank's pro rata share of the Term
Loan, as well as any promissory note or notes issued by the Borrower in
substitution, replacement, extension, amendment or renewal of any such
promissory note or notes. An individual Term Loan Note held by a Bank is
sometimes referred to as a "Term Loan Note." The combined face amount of the
Term Loan Notes may not exceed ONE HUNDRED MILLION AND NO/100s DOLLARS
($100,000,000).
1.98 Third Party Notes Payable. With respect to the Borrower and its
-------------------------
Restricted Subsidiaries, all Indebtedness for Money Borrowed other than (a)
publicly issued Indebtedness for Money Borrowed which is pari passu with the
---- -----
Obligations, (b) non-recourse Indebtedness, (c) Indebtedness owed to the seller
of any Inventory acquired by the Borrower or its Restricted Subsidiaries, (d)
Indebtedness which is structurally subordinate to the Obligations or which is
convertible into equity at the option of the Borrower, (e) Indebtedness for
earnest money and (f) notes payable for insurance premiums and capitalized lease
obligations.
1.99 Three-Month LIBOR. As of any date of determination, a rate of interest
-----------------
per annum equal to the three (3) month London Interbank Offered Rate for
deposits in United States dollars (rounded to two decimal places) in amounts
comparable to the outstanding principal amount of the Loans then outstanding,
which interest rate is set forth in the Wall Street Journal
(Eastern Edition) on the next Business Day; provided, however, if more than one
-------- -------
such offered rate appears in the Wall Street Journal (Eastern Edition), the
applicable rate shall be the highest thereof.
1.100 Total Capital. The sum of the Tangible Net Worth of the Borrower
-------------
and its Restricted Subsidiaries plus Notes Payable of the Borrower and its
Restricted Subsidiaries.
-15-
<PAGE>
1.101 Total Liabilities. All items required by GAAP to be set forth as
-----------------
"liabilities" on the Borrower's and its Restricted Subsidiaries' consolidated
balance sheet.
1.102 Unrestricted Subsidiaries. Subsidiaries of the Borrower which are
-------------------------
not Restricted Subsidiaries.
1.103 Unsecured Indebtedness. Indebtedness for Money Borrowed of the
----------------------
Borrower and its Restricted Subsidiaries which is not secured in whole or in
part by any Lien except Permitted Encumbrances (excluding capitalized lease
obligations, notes payable for insurance premiums, non-recourse promissory notes
for seller financing and promissory notes issued as earnest money for
contracts).
1.104 Working Capital. The total of the Borrower's and its Restricted
---------------
Subsidiaries' assets minus the sum of the Borrower's and Restricted
Subsidiaries' fixed assets, intangible assets, earnest monies for lot and land
option contracts represented by promissory notes payable by the Borrower and
Restricted Subsidiaries and the total of the Borrower's and Restricted
Subsidiaries' liabilities. [Total Assets - (Fixed Assets + Intangible Assets +
Earnest Monies Represented by Promissory Notes + Total Liabilities).]
Each definition of an agreement in this Article 1 shall include such
agreement as modified, amended, or supplemented from time to time with the prior
written consent of the Majority Banks, except as provided in Section 8.3 hereof,
and except where the context otherwise requires, definitions imparting the
singular shall include the plural and vice versa. Except where otherwise
specifically restricted, reference to a party to a Loan Document includes that
party and its successors and assigns. All terms used herein which are defined
in Article 9 of the Uniform Commercial Code in effect in the State of Georgia on
the date hereof and which are not otherwise defined herein shall have the same
meanings herein as set forth therein.
All accounting terms used herein without definition shall be used as
defined under GAAP as of the Agreement Date.
ARTICLE 2
LOANS AND LETTERS OF CREDIT
---------------------------
2.1 Extension of Credit. Subject to the terms and conditions of, and
-------------------
in reliance upon the representations and warranties made in this Agreement and
the other Loan Documents, the Banks agree, severally in accordance with their
respective Commitment Ratios, and not jointly, to extend credit to the Borrower
in an aggregate principal amount not to exceed $375,000,000 and the Issuing Bank
agrees to issue Letters of Credit on behalf of the Borrower in an aggregate face
amount not to exceed $25,000,000, all as provided below:
-16-
<PAGE>
(a) The Term Loan. Subject to the terms and conditions of this
-------------
Agreement and provided that there is no Default or Event of Default, the Banks
agree, severally in accordance with their Commitment Ratios with respect to the
Term Loan Commitment, and not jointly, upon the terms and subject to the
conditions of this Agreement, to lend to the Borrower, on the Agreement Date,
amounts which in the aggregate do not exceed the Term Loan Commitment. Advances
under the Term Loan Commitment which are repaid may not be reborrowed.
(b) The Revolving Loans. Subject to the terms and conditions of this
-------------------
Agreement and provided that there is no Default or Event of Default, the Banks
agree, severally in accordance with their Commitment Ratios with respect to the
Revolving Loan Commitment, and not jointly, upon the terms and subject to the
conditions of this Agreement, to lend and relend to the Borrower, prior to the
Revolving Loan Maturity Date, amounts which in the aggregate at any one time
outstanding do not exceed the Available Revolving Loan Commitment. Advances
under the Revolving Loan Commitment may be repaid and reborrowed from time to
time on a revolving basis as set forth herein.
(c) The Letters of Credit. Subject to the terms and conditions of
---------------------
this Agreement and provided that there is no Default or Event of Default, the
Issuing Bank agrees to issue Letters of Credit for the account of the Borrower
pursuant to Section 2.4 hereof in an aggregate amount for the Borrower at any
one time not to exceed the Available Letter of Credit Commitment.
(d) Use of Loan Proceeds. The Administrative Agent, the Banks and the
--------------------
Borrower agree that the proceeds of the Loans shall be used for general
corporate purposes, including, without limitation, working capital support, home
construction, lot acquisition, lot development, land acquisition, asset
acquisitions and stock acquisitions.
2.2 Manner of Borrowing and Disbursement Under Loans.
------------------------------------------------
(a) Advances. The Borrower shall give the Administrative Agent
--------
irrevocable written notice for Advances under the Loans not later than 12:00
noon (Eastern time) on the day immediately preceding the date of the requested
Advance in the form of a Request for Advance, or notice by telephone or telecopy
followed immediately by a Request for Advance; provided, however, that the
-------- -------
failure by the Borrower to confirm any notice by telephone or telecopy with a
Request for Advance shall not invalidate any notice so given. Each Advance
hereunder shall be in principal amounts of not less than $100,000 and in
integral multiples of $100,000. Subsequent to the initial Advance(s) of the
Loans made on the Agreement Date, the Borrower may not request, in the
aggregate, more than (i) two (2) Advances in any calendar month plus (ii) four
(4) additional Advances in any twelve (12) calendar month period. In any event,
the Borrower may not request, in the aggregate, more than twenty-eight (28)
Advances in any twelve (12) calendar month period.
(b) Notification of Banks. Upon receipt of a Request for Advance or
---------------------
notice by telephone or telecopy, the Administrative Agent shall promptly notify
each Bank by telephone or
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<PAGE>
telecopy of the requested Advance, the date on which the Advance is to be made,
the amount of the Advance and the amount of such Bank's portion of the
applicable Advance based upon such Bank's Commitment Ratio in respect to such
Loan. Each Bank shall, not later than 12:00 noon (Eastern time) on the date
specified in such notice, make available to the Administrative Agent at the
Administrative Agent's office, or at such account as the Administrative Agent
shall designate, the amount of its portion of the applicable Advance in
immediately available funds.
(c) Disbursement. Prior to 2:00 p.m. (Eastern time) on the date of an
------------
Advance hereunder, the Administrative Agent shall, subject to the satisfaction
of the conditions set forth in this Agreement, disburse the amounts made
available to the Administrative Agent by the Banks in immediately available
funds by (i) transferring the amounts so made available by wire transfer
pursuant to the instructions of the Borrower, or (ii) in the absence of such
instructions, crediting the amounts so made available to the account of the
Borrower maintained with the Administrative Agent or an affiliate of the
Administrative Agent. Unless the Administrative Agent shall have received
notice from a Bank prior to the date of any Advance that such Bank will not make
available to the Administrative Agent such Bank's ratable portion of such
Advance, and so long as notice has been given as provided in Section 2.2(b)
hereof, the Administrative Agent may assume that such Bank has made such portion
available to the Administrative Agent on the date of such Advance and the
Administrative Agent may, in its sole discretion and in reliance upon such
assumption, without any obligation hereunder to do so, make available to the
Borrower on such date a corresponding amount. If and to the extent such Bank
shall not have so made such ratable portion available to the Administrative
Agent, such Bank agrees to repay to the Administrative Agent forthwith on demand
such corresponding amount together with interest thereon, for each day from the
date such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent for the first two (2) days that such amount
is not repaid, at the Overnight Federal Funds Rate, and, thereafter, at the
Overnight Federal Funds Rate plus four percent (4%) per annum. If such Bank
----
shall repay to the Administrative Agent such corresponding amount, such amount
so repaid shall constitute such Bank's portion of the applicable Advance for
purposes of this Agreement. If such Bank does not repay such corresponding
amount immediately upon the Administrative Agent's demand therefor, the
Administrative Agent may notify the Borrower, and the Borrower
shall immediately pay such corresponding amount to the Administrative Agent,
together with all interest accrued thereon and on the same terms and conditions
that would have applied to such Advance had such Bank funded its portion
thereof. Any payments received by the Administrative Agent following such
demand shall be applied in repayment of amounts owed to the Administrative Agent
hereunder prior to any other application. The failure of any Bank to fund its
portion of any Advance shall not relieve any other Bank of its obligation, if
any, hereunder to fund its respective portion of the Advance on the date of such
borrowing, but no Bank shall be responsible for any such failure of any other
Bank. In the event that, at any time when this Agreement is not in Default, a
Bank for any reason fails or refuses to fund its portion of an Advance, then,
until such time as such Bank has funded its portion of such Advance, or all
other Banks have received payment in full (whether by repayment or prepayment)
of the principal and interest due in respect of such Advance, such non-funding
Bank shall (i) be automatically deemed to have transferred to the Bank serving
as
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<PAGE>
Administrative Agent all of such non-funding Bank's right to vote regarding
any issue on which voting is required or advisable under this Agreement or any
other Loan Document, and (ii) not be entitled to receive payments of principal,
interest or fees from the Borrower in respect of such Advances which such Bank
failed to make.
2.3 Interest on Loans.
-----------------
(a) Revolving Loans. Interest on Revolving Loans shall be computed on
---------------
the basis of a hypothetical year of 360 days for the actual number of days
elapsed during each calendar month and shall be payable at a simple interest
rate equal to the Revolving Loan Base Rate times the principal balance
outstanding from time to time under the Revolving Loan Notes for the number of
days such principal amounts are outstanding during such calendar month.
Interest then outstanding shall be due and payable in arrears as provided in
Section 2.7 hereof.
(b) Term Loan. Interest on the Term Loan shall be computed on the
---------
basis of a hypothetical year of 360 days for the actual number of days elapsed
during each calendar month and shall be payable at a simple interest rate equal
to the Term Loan Base Rate times the principal balance outstanding from time to
time under the Term Loan Notes for the number of days such principal amounts are
outstanding during such calendar month. Interest then outstanding shall be due
and payable in arrears as provided in Section 2.7 hereof.
(c) Upon Default. Upon the occurrence and during the continuance of a
------------
Default, the Super-Majority Banks shall have the option (but shall not be
required to give prior notice thereof to the Borrower to accelerate the maturity
of the Loans or to exercise any other rights or remedies hereunder in connection
with the exercise of this right) to charge interest on the outstanding principal
balance of the Loans at the Default Rate from the date of such Default. Such
interest shall be payable on the earliest of demand, the first (1st) Business
Day of the next calendar month or the Revolving Loan Maturity Date or the Term
Loan Maturity Date, as applicable, and shall accrue until the earlier of (i)
waiver or cure (to the satisfaction of the Super-Majority Banks) of the
applicable Default, (ii) agreement by the Super-Majority Banks to rescind the
charging of interest at the Default Rate, or (iii) payment in full of the
Obligations.
2.4 Issuance and Administration of Letters of Credit.
------------------------------------------------
(a) Subject to the terms and conditions hereof, the Issuing Bank, on
behalf of the Letter of Credit Banks, and in reliance on the agreements of the
Letter of Credit Banks set forth in subsection (d) below, hereby agrees to issue
one or more Letters of Credit up to an aggregate face amount equal to the
Available Letter of Credit Commitment, provided, however, that the Issuing Bank
-------- -------
shall have no obligation to issue any Letter of Credit if a Default or Event of
Default would be caused thereby; and provided further, however, that at no time
-------- -------
shall the total Letter of Credit Obligations outstanding hereunder exceed
$25,000,000. Each Letter of Credit shall (1) be denominated in U.S. dollars,
and (2) expire no later than the Letter of Credit Maturity Date. A Letter of
Credit may contain provisions for automatic renewal provided that no Default or
Event of Default exists on the renewal date or would be caused by such renewal
and provided
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<PAGE>
further that the new expiration date does not extend beyond the Letter of Credit
Maturity Date. Each Letter of Credit shall be subject to the Uniform Customs and
Practices for Documentary Credits and, to the extent not inconsistent therewith,
the laws of the State of Georgia and shall be in a form reasonably acceptable to
the Issuing Bank. The Issuing Bank shall not at any time be obligated to issue,
or cause to be issued, any Letter of Credit if such issuance would conflict
with, or cause the Issuing Bank to exceed any limits imposed by, any Applicable
Law. If a Letter of Credit provides that it is automatically renewable unless
notice is given by the Issuing Bank that it will not be renewed, the Issuing
Bank shall not be bound to give a notice of non-renewal unless directed to do so
by the Letter of Credit Banks at least thirty (30) days prior to the date on
which such notice of non-renewal is required to be delivered to the beneficiary
of the applicable Letter of Credit pursuant to the terms thereof. The Borrower
hereby agrees that upon the Letter of Credit Maturity Date (whether by reason of
acceleration or otherwise) at the request of the Administrative Agent, the
Borrower shall deposit in an interest bearing account with the Administrative
Agent, as cash collateral for the Obligations, an amount equal to the maximum
amount currently or at any time thereafter available to be drawn on all
outstanding Letters of Credit, and the Borrower hereby grants to the
Administrative Agent (for itself and on behalf of the Issuing Bank) a security
interest in all such cash. Upon receipt of the cash collateral referred to in
the preceding sentence, the obligations of the Letter of Credit Banks under this
Section 2.4 shall cease; provided that, if for any reason, all or any part of
such cash collateral must be surrendered or disgorged by the Administrative
Agent, then such obligations shall be automatically reinstated. The terms hereof
shall govern the reimbursement obligation of the Borrower with respect to the
Letters of Credit.
(b) The Borrower may from time to time request that the Issuing Bank
issue a Letter of Credit. The Borrower shall execute and deliver to the
Administrative Agent and the Issuing Bank a Request for Issuance of Letter of
Credit for each Letter of Credit to be issued by the Issuing Bank, not later
than 12:00 noon (Eastern time) on the fifth (5th) Business Day preceding the
date on which the requested Letter of Credit is to be issued, or such shorter
notice as may be acceptable to the Issuing Bank and the Administrative Agent.
Upon receipt of any such Request for Issuance of Letter of Credit, subject to
satisfaction of all conditions precedent thereto as set forth in Article 4
hereof, the Issuing Bank shall process such Request for Issuance of Letter of
Credit 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. The
Issuing Bank shall furnish a copy of such Letter of Credit to the Borrower and
the Administrative Agent following the issuance thereof. The Borrower shall pay
or reimburse the Issuing Bank on demand for normal and customary costs and
expenses incurred by the Issuing Bank in effecting payment under, amending or
otherwise administering the Letters of Credit.
(c) At such time as the Administrative Agent shall be notified by the
Issuing Bank that the beneficiary under any Letter of Credit has drawn on the
same, the Administrative Agent shall promptly notify the Borrower and each
Letter of Credit Bank, by telephone or telecopy, of the amount of the draw and,
in the case of each Letter of Credit Bank, such Letter
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<PAGE>
of Credit Bank's portion of such draw amount as calculated in accordance with
its Letter of Credit Bank Commitment Ratio.
(d) The Borrower hereby agrees to immediately reimburse the Issuing
Bank for amounts paid by the Issuing Bank in respect of draws under a Letter of
Credit issued at the Borrower's request. In order to facilitate such repayment,
the Borrower hereby irrevocably requests the Letter of Credit Banks, and the
Letter of Credit Banks hereby severally agree, on the terms and conditions of
this Agreement (other than as provided in Article 2 hereof with respect to the
amounts of, the timing of requests for, and the repayment of Advances
hereunder), with respect to any drawing under a Letter of Credit prior to the
occurrence of an event described in clauses (e) or (f) of Section 6.1 hereof, to
make an Advance hereunder on each day on which a draw is made under any Letter
of Credit and in the amount of such draw, and to pay the proceeds of such
Advance directly to the Issuing Bank to reimburse the Issuing Bank for the
amount paid by it upon such draw. Each Letter of Credit Bank shall pay its
share of such Advance by paying its portion of such Advance to the
Administrative Agent in accordance with Section 2.2(c) hereof and its Letter of
Credit Bank Commitment Ratio, without reduction for any set-off or counterclaim
of any nature whatsoever and regardless of whether any Default or Event of
Default (other than with respect to an event described in clauses (e) or (f) of
Section 6.1 hereof) then exists or would be caused thereby. If at any time that
any Letters of Credit are outstanding, any of the events described in clauses
(e) or (f) of Section 6.1 hereof shall have occurred, then each Letter of Credit
Bank shall, automatically upon the occurrence of any such event and without any
action on the part of the Issuing Bank, the Borrower, the Administrative Agent,
the Banks or the Letter of Credit Banks, be deemed to have purchased an
undivided participation in the face amount of all Letters of Credit then
outstanding in an amount equal to such Letter of Credit Bank's Letter of Credit
Bank Commitment Ratio, and each Letter of Credit Bank shall, notwithstanding
such Default, upon a drawing under any Letter of Credit, immediately pay to the
Administrative Agent for the account of the Issuing Bank, in immediately
available funds, the amount of such Letter of Credit Bank's participation (and
the Issuing Bank shall deliver to such Letter of Credit Bank a loan
participation certificate dated the date of the occurrence of such event and in
the amount of such Letter of Credit Bank's Letter of Credit Bank Commitment
Ratio). The disbursement of funds in connection with a draw under a Letter of
Credit pursuant to this Section shall be subject to the terms and conditions of
Section 2.2(c) hereof. The obligation of each Letter of Credit Bank to make
payments to the Administrative Agent, for the account of the Issuing Bank, in
accordance with this Section 2.4 shall be absolute and unconditional and no
Letter of Credit Bank shall be relieved of its obligations to make such payments
by reason of noncompliance by any other Person with the terms of the Letter of
Credit or for any other reason. The Administrative Agent shall promptly remit to
the Issuing Bank the amounts so received from the Letter of Credit Banks. Any
overdue amounts payable by any of the Letter of Credit Banks to the Issuing Bank
in respect of a draw under any Letter of Credit shall bear interest, payable on
demand, for the first two (2) days of such non-payment, at the Overnight Federal
Funds Rate, and, thereafter,at the Overnight Federal Funds Rate plus four
----
percent (4%).
(e) The obligation of the Borrower to reimburse the Letter of Credit
Banks for Advances made to reimburse the Issuing Bank for draws under any
Letters of Credit shall be
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<PAGE>
absolute, unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement under all circumstances whatsoever,
including, without limitation, the following circumstances:
(i) Any lack of validity or enforceability of any Loan
Document;
(ii) Any amendment or waiver of or consent to any departure
from any or all of the Loan Documents;
(iii) Any improper use which may be made of any Letter of
Credit or any improper acts or omissions of any beneficiary or transferee
of any Letter of Credit in connection therewith;
(iv) The existence of any claim, set-off, defense or any right
which the Borrower may have at any time against any beneficiary or any
transferee of any Letter of Credit (or Persons for whom any such
beneficiary or any such transferee may be acting) or any Bank or Letter of
Credit Bank (other than the defense of payment to such Bank or Letter of
Credit Bank in accordance with the terms of this Agreement) or any other
Person (other than the Issuing Bank), whether in connection with any Letter
of Credit, any transaction contemplated by any Letter of Credit, this
Agreement, any other Loan Document, or any unrelated transaction;
(v) Any statement or any other documents presented under any
Letter of Credit proving to be insufficient, forged, fraudulent or invalid
in any respect or any statement therein being untrue or inaccurate in any
respect whatsoever, provided that such payment shall not have constituted
gross negligence or willful misconduct of the Issuing Bank;
(vi) The insolvency of any Person issuing any documents in
connection with any Letter of Credit;
(vii) Any breach of any agreement between the Borrower and any
beneficiary or transferee of any Letter of Credit;
(viii) Any irregularity in the underlying transaction with
respect to which any Letter of Credit is issued, including any fraud by the
beneficiary or any transferee of such Letter of Credit; or
(ix) Any other circumstances arising from causes beyond the
control of the Issuing Bank.
(f) Each Letter of Credit Bank shall be responsible for its pro rata
share (based on such Letter of Credit Bank's Letter of Credit Bank Commitment
Ratio) of any and all reasonable out-of-pocket costs, expenses (including
reasonable legal fees) and disbursements
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<PAGE>
which may be incurred or made by the Issuing Bank in connection with the
collection of any amounts due under, the administration of, or the presentation
or enforcement of any rights conferred by any Letter of Credit, the Borrower's
or any guarantor's obligations to reimburse or otherwise, excluding, however,
any such expenses incurred by the Issuing Bank as a result of the willful
misconduct or gross negligence of the Issuing Bank in determining whether a
request presented under a Letter of Credit complies with the terms of the Letter
of Credit. In the event the Borrower shall fail to pay such expenses of the
Issuing Bank within ten (10) days after demand for payment by the Issuing Bank,
each Letter of Credit Bank shall thereupon pay to the Issuing Bank its pro rata
share (based on such Letter of Credit Bank's Letter of Credit Bank Commitment
Ratio) of such expenses within five (5) days from the date of the Issuing Bank's
notice to the Letter of Credit Banks of the Borrower's failure to pay; provided,
--------
however, that if the Borrower or any guarantor shall thereafter pay such
- -------
expense, the Issuing Bank will repay to each Letter of Credit Bank the amounts
received from such Letter of Credit Bank hereunder. The Borrower hereby
irrevocably requests the Letter of Credit Banks and the Letter of Credit Banks
hereby severally agree subject to compliance with the terms and conditions
hereof (other than as provided in Article 2 hereof with respect to the amounts
of and the timing of requests for Advances hereunder), to make an Advance to the
Issuing Bank, on behalf of the Borrower for reimbursement of expenses under this
Section 2.4(f).
(g) The Borrower agrees that each Advance by the Letter of Credit
Banks to reimburse the Issuing Bank for draws under any Letter of Credit or for
expenses as provided in Section 2.4(f) hereof, shall be payable immediately on
the date of such Advance and shall bear interest at the Base Rate until paid in
full or at the Default Rate following the occurrence of a Default.
(h) The Borrower agrees that it will indemnify and hold harmless the
Administrative Agent, the Issuing Bank, each Letter of Credit Bank and each
other Bank and each of their respective employees, representatives, officers and
directors from and against any and all claims, liabilities, obligations, losses
(other than loss of profits), damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever (including
reasonable attorneys' fees, but excluding taxes) which may be imposed on,
incurred by or asserted against the Administrative Agent, the Issuing Bank, any
such Letter of Credit Bank or any such Bank in any way relating to or arising
out of the issuance of a Letter of Credit, except that the Borrower shall not be
liable to the Administrative Agent, the Issuing Bank, any such Letter of Credit
Bank or any such Bank for any portion of such claims, liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses, or
disbursements resulting from the gross negligence or willful misconduct of the
Administrative Agent, the Issuing Bank, any such Letter of Credit Bank or such
Bank, as the case may be, or any such claims, liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
arising solely out of a controversy among the Administrative Agent, the Issuing
Bank, the Letter of Credit Banks and the Banks, or any of them. This Section
2.4(h) shall survive termination of this Agreement.
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<PAGE>
2.5 Fees and Commissions on Loans and Letters of Credit.
---------------------------------------------------
(a) Administration Fee. The Borrower agrees to pay to the
------------------
Administrative Agent, for its administrative services as administrative agent
for the Banks and the Issuing Bank hereunder, a fee of $50,000.00 per annum.
Such fee shall be due and payable on the Agreement Date and on each anniversary
of the Agreement Date, and shall be fully earned when due and non-refundable
when paid. In the event that following the payment of an annual administration
fee, all obligations of the Borrower hereunder shall be fully and finally
performed and this Agreement shall be terminated prior to the next anniversary
of the Agreement Date, a pro rata portion of such fee shall be refunded to the
Borrower, based upon the time remaining to the next anniversary of the Agreement
Date.
(b) Renewal Fee. In the event that the Revolving Loan Maturity Date
-----------
shall be extended, the Borrower agrees to pay to the Administrative Agent for
distribution to each of the Banks which elects to renew this Agreement in
accordance with Section 8.5 hereof, on a pro rata basis in accordance with their
respective Commitment Ratios, an annual renewal fee in consideration of the
agreement of such Banks to extend the Revolving Loan Maturity Date of this
Agreement in the amount of five one hundredths of one percent (.05%) of the
amount of the Revolving Loan Commitment (as of the effective date of such
renewal). Such fee shall be due and payable on the effective date of the
renewal, and shall be fully earned when due and non-refundable when paid. In
the event that following the payment of an annual renewal fee, all Obligations
of the Borrower hereunder shall be fully and finally performed and this
Agreement shall be terminated prior to the extended Revolving Loan Maturity
Date, a pro rata portion of such annual renewal fee most recently paid shall be
refunded to the Borrower, based upon the time remaining to the extended
Revolving Loan Maturity Date.
(c) Unused Fee on Revolving Loans. The Borrower agrees to pay to the
-----------------------------
Administrative Agent for the benefit of the Banks, in accordance with their
respective Commitment Ratios for the Revolving Loan Commitment, an unused fee
for each calendar year on the difference between (i) the Revolving Loan
Commitment and (ii) the daily sum of the outstanding Revolving Loans for each
day during the applicable period, in each case at the rate of (A) if the average
difference between clauses (i) and (ii) for the period is less than $75,000,000,
15 basis points (.15%), (B) if the average difference between clauses (i) and
(ii) for the period is less than $150,000,000, but greater than or equal to
$75,000,000, 22.5 basis points (.225%), and (C) if the average difference
between clauses (i) and (ii) is greater than or equal to $150,000,000, 30 basis
points (.30%). Such unused fee shall be computed on the basis of a hypothetical
year of 360 days for the actual number of days elapsed, shall be due and payable
quarterly in arrears on the eighteenth (18th) day of each January, April, July,
and October for the immediately preceding calendar quarter, commencing on April
18, 1997 (for the period from the Agreement Date through March 31, 1997), and on
the Revolving Loan Maturity Date, and shall be fully earned when due and non-
refundable when paid.
(d) Letter of Credit Fees. The Borrower agrees to pay to the
---------------------
Administrative Agent (i) for the benefit of the Issuing Bank and the Letter of
Credit Banks, a fee on the stated
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<PAGE>
amount of any outstanding Letters of Credit from the date of issuance through
the expiration date of each such Letter of Credit in an amount equal to one
percent (1%) per annum (the "Letter of Credit Fees") and (ii) for the benefit of
the Issuing Bank, an issuing fee in the amount of $100 for each Letter of Credit
(which additional amount shall be due and payable on the date of issuance and
renewal). The Letter of Credit Fees shall be calculated on the basis of a
hypothetical year of 360 days for the actual number of days elapsed, shall be
due and payable on the date of issuance and renewal of each Letter of Credit,
and shall be fully earned when due and non-refundable when paid. The
Administrative Agent shall, promptly after receipt of the Letter of Credit Fees,
distribute to the Letter of Credit Banks in accordance with their respective
Letter of Credit Bank Commitment Ratios.
2.6 Notes, Loan and Letters of Credit Accounts.
------------------------------------------
(a) The Loans shall be repayable in accordance with the terms and
provisions set forth herein, and shall be evidenced by the Notes. One of the
Term Loan Notes and one of the Revolving Loan Notes shall be payable to the
order of each Bank in accordance with the respective Commitment Ratio for such
Loans of such Bank. The Notes shall be issued by the Borrower to each of the
Banks and shall be duly executed and delivered by Authorized Signatories.
(b) Each Bank and each Letter of Credit Bank, as the case may be, may
open and maintain on its books in the name of the Borrower a loan account with
respect to the Loans and interest thereon and a letter of credit account with
respect to its obligations pursuant to Letters of Credit. Each Bank which opens
such accounts in respect of the Loans shall debit the applicable loan account
for the principal amount of each Advance made by it and accrued interest
thereon, and shall credit such loan account for each payment on account of
principal of or interest on the Loans. Each Letter of Credit Bank which opens
such accounts in respect of the Letters of Credit shall debit the applicable
account for the amount of each Advance made by it and accrued interest thereon,
and shall credit such account for each payment on account of principal and
interest of Letter of Credit Advances. The records of each Bank and each Letter
of Credit Bank, as the case may be, with respect to the accounts maintained by
it shall be prima facie evidence of the Loans and Letter of Credit Obligations
and accrued interest thereon, but the failure to maintain such records shall not
impair the obligation of the Borrower to repay Indebtedness hereunder.
(c) The Administrative Agent and Issuing Bank may maintain in
accordance with their usual practice records of account evidencing the
Indebtedness of the Borrower resulting from Advances under the Loans and each
drawing under a Letter of Credit. In any legal action or proceeding in respect
of this Agreement, the entries made in such record shall be prima facie
evidence, absent manifest error, of the existence and amounts of the obligations
of the Borrower therein recorded. Failure of the Issuing Bank to maintain any
such record shall not excuse the Borrower from the obligation to pay such
Indebtedness. To the extent that the records of the Administrative Agent or
Issuing Bank conflict with the records of the Banks maintained pursuant
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<PAGE>
to Section 2.6(b) above, absent manifest error, the records of the
Administrative Agent or Issuing Bank, as the case may be, shall control.
(d) Each Advance from the Banks under this Agreement shall be made pro
rata on the basis of their respective applicable Commitment Ratios.
(e) Each Advance made on account of drawing under Letters of Credit
shall be made pro rata by the Letter of Credit Banks on the basis of their
respective Letter of Credit Bank Commitment Ratios.
2.7 Repayment of Loans and Letters of Credit.
----------------------------------------
(a) Interest. The Borrower shall pay, on the eighteenth (18th)
--------
calendar day of each month, all interest on the Term Loan and the Revolving
Loans which has accrued as of the first (1st) calendar day of such month,
commencing on the eighteenth (18th) calendar day of the first (1st) full
calendar month following the Agreement Date.
(b) Letters of Credit. The Borrower shall repay all draws upon the
-----------------
Letters of Credit immediately upon the Issuing Bank's demand therefor. The
Borrower shall make certain other payments in respect of the Letter of Credit
Obligations as provided in Sections 2.4(a), 2.4(g) and 3.1 hereof.
(c) Reconciliation of Loan Inventory. The Borrower shall repay
--------------------------------
certain portions of the outstanding principal of the Loans and accrued and
unpaid interest thereon upon the reconciliation of the Loan Funding Availability
against the outstanding principal balance under the Notes as provided in Section
3.1 hereof.
(d) Maturity. In addition to the foregoing, a final payment of all
--------
Obligations then outstanding shall be due and payable by the Borrower on the
Revolving Loan Maturity Date, the Term Loan Maturity Date or the Letter of
Credit Maturity Date, as applicable.
2.8 Manner of Payment.
-----------------
(a) Each payment (including any prepayment) by the Borrower on account
of the principal of or interest on the Loans, fees, and any other amount owed to
the Banks or the Administrative Agent under this Agreement, the Notes, or the
other Loan Documents shall be made not later than 1:00 p.m. (Eastern time) on
the date specified for payment under this Agreement or such other Loan Document
to the Administrative Agent to an account designated by the Administrative
Agent, for the account of the Banks, the Issuing Bank or the Administrative
Agent, as the case may be, in lawful money of the United States of America in
immediately available funds. Any payment received by the Administrative Agent
after 12:00 noon (Eastern time) shall be deemed received on the next Business
Day for purposes of interest accrual. In the case of a payment for the account
of a Bank or the Issuing Bank, then, subject to the provisions
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of Section 2.9 of this Agreement, the Administrative Agent will promptly
thereafter distribute the amount so received in like funds to such Bank or the
Issuing Bank. If the Administrative Agent shall not have received any payment
from the Borrower as and when due, the Administrative Agent will promptly notify
the Banks and, if appropriate, the Issuing Bank, accordingly, and the
Administrative Agent shall not be obligated to make any distributions under this
Section 2.8.
(b) If any payment under this Agreement or any of the Notes shall
be specified to be made upon a day which is not a Business Day, it shall be made
on the next succeeding day which is a Business Day, and such extension of time
shall in such case be included in computing interest and fees, if any, in
connection with such payment.
(c) The Borrower may not make payments, in the aggregate, under this
Agreement (excluding any payments specifically required pursuant to the terms of
this Agreement) more than (i) two (2) times in any calendar month plus (ii) four
(4) additional times in any twelve (12) calendar month period. In any event,
the Borrower may not make, in the aggregate, more than twenty-eight (28)
payments (excluding any payments specifically required pursuant to the terms of
this Agreement) under this Agreement in any twelve (12) calendar month period.
(d) The Borrower agrees to pay principal, interest, fees, and all
other amounts due hereunder or under the Notes and Letter of Credit Obligations
without set-off or counterclaim or any deduction whatsoever.
2.9 Application of Payments. Unless otherwise specifically provided in
-----------------------
this Agreement or the other Loan Documents, payments made to the Administrative
Agent, the Letter of Credit Banks or the Banks, or any of them, or otherwise
received by the Administrative Agent, the Letter of Credit Banks or the Banks,
or any of them (from realization on collateral for the Obligations or
otherwise), shall be applied (subject to Section 2.2(c) hereof) in the following
order to the extent such Obligations are then due and payable hereunder: First,
-----
to the costs and expenses, if any, incurred by the Administrative Agent or the
Banks, or any of them, in the collection of such amounts under this Agreement or
any of the other Loan Documents, including, without limitation, any reasonable
costs incurred in connection with the sale or disposition of any collateral for
the Obligations; Second, pro rata among the Administrative Agent, the Issuing
------
Bank and the Banks based on the total amount of fees then due and payable
hereunder or under any other Loan Document and to any other fees and commissions
then due and payable by the Borrower to the Banks, the Issuing Bank and the
Administrative Agent under this Agreement or any Loan Document; Third, to any
-----
due and unpaid interest which may have accrued on the Term Loan and the
Revolving Loans, pro rata among the Banks based on the outstanding principal
amount of the Term Loan and the Revolving Loans as the case may be, outstanding
immediately prior to such payment; Fourth, to any amounts outstanding with
------
respect to draws under Letters of Credit; Fifth, to any unpaid principal of the
-----
Revolving Loans, pro rata among the Banks based on the principal amount of the
Revolving Loans outstanding immediately prior to such payment; Sixth, to any
-----
unpaid principal of the Term Loan, pro rata among the Banks based on the
outstanding principal amount of the Term Loan outstanding immediately prior to
such payment; Seventh, to the extent any Letters of Credit are then outstanding,
-------
for deposit into the Letter of
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<PAGE>
Credit Reserve Account; Eighth, to any other Obligations not otherwise referred
------
to in this Section 2.9 until all such Obligations are paid in full; Ninth, to
-----
actual damages incurred by the Administrative Agent, the Issuing Bank or the
Banks, or any of them, by reason of any breach hereof or of any other Loan
Documents by the Borrower or a Restricted Subsidiary; and Tenth, upon
-----
satisfaction in full of all Obligations, to the Borrower or as otherwise
required by law. Notwithstanding the foregoing, (a) in the case of any voluntary
prepayment hereunder at a time when there does not exist an Event of Default or
Default, the Borrower may designate the order of application of such payments
with respect to items Fifth and Sixth in the immediately preceding sentence, and
----- -----
(b) after the occurrence and during the continuance of a Default or an Event of
Default, payments with respect to items Fourth, Fifth and Sixth in the
------ ----- -----
immediately preceding sentence shall be applied to such items based upon the
ratio of the Obligations under each of such items to the aggregate Obligations
under all of such items. If any Bank shall obtain any payment (whether
involuntary or otherwise) on account of the Loans made by it in excess of its
ratable share of the Loans then outstanding and such Bank's share of any
expenses, fees and other items due and payable to it hereunder, such Bank shall
forthwith purchase a participation in the Loans from the other Banks as shall be
necessary to cause such purchasing Bank to share the excess payment ratably
based on the applicable Commitment Ratios with each of them; provided, however,
-------- -------
that if all or any portion of such excess payment is thereafter recovered from
such purchasing Bank, such purchase from each Bank shall be rescinded and such
Bank shall repay to the purchasing Bank the purchase price to the extent of such
recovery. The Borrower agrees that any Bank so purchasing a participation from
another Bank pursuant to this Section may, to the fullest extent permitted by
law, exercise all its rights of payment with respect to such participation as
fully as if such Bank were the direct creditor of the Borrower in the amount of
such participation so long as the Obligations are not increased.
ARTICLE 3
INVENTORY AND FUNDING AVAILABILITY
----------------------------------
3.1 Loan Funding Availability. At the designated times set forth herein,
-------------------------
the Administrative Agent shall establish a Loan Funding Availability for the
Loan Inventory and other Unsecured Indebtedness.
(a) Calculation of Loan Funding Availability. The Loan Funding
----------------------------------------
Availability shall be equal to the sum of "A" plus "B" plus "C"; provided, that
--------
at no time may the sum of "A" and "B" exceed thirty percent (30%) of Loan
Funding Availability.
A = seventy-five percent (75%) of the sum of all Acquisition Costs
for all Lots Under Development which are included in the Loan Inventory. If,
after a parcel of land is designated a Lot Under Development, development of
such parcel ceases for thirty (30) calendar days or more (other than by reason
of a Force Majeure Delay), at the discretion of the Administrative Agent, the
Loan Funding Availability for such parcel may be reduced to an amount
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<PAGE>
determined by the Administrative Agent (which amount can be zero) until
development of such Lot Under Development is resumed to the satisfaction of the
Administration Agent.
B = seventy-five percent (75%) of the sum of all Acquisition Costs
for all Developed Lots included in the Loan Inventory.
C = one hundred percent (100%) of the sum of all Acquisition Costs
and Construction Costs for all Dwelling Lots included in the Loan Inventory.
(b) Designation of Land Parcels, Lots Under Development, Developed
--------------------------------------------------------------
Lots and Dwelling Lots. On or before the fifteenth (15th) calendar day of each
- ----------------------
calendar month (other than a month following the end of a calendar quarter), the
Borrower shall deliver to the Administrative Agent an Inventory Summary Report
in the form attached hereto as Exhibit C and incorporated herein. On or before
---------
the fifteenth (15th) calendar day of each month following the end of a calendar
quarter, the Borrower shall deliver to the Administrative Agent an Inventory
Quarterly Report in the form attached hereto as Exhibit B and incorporated
---------
herein which form shall have been completed and signed by the Borrower. The
Inventory Summary Report and Inventory Quarterly Report shall reflect Inventory
that the Borrower desires to have designated as Loan Inventory. Upon the
Administrative Agent's receipt of the Inventory Summary Report or Inventory
Quarterly Report, as the case may be, the Administrative Agent may conduct
inspections or reviews of the subject Inventory that the Administrative Agent
deems appropriate, at the expense of the Administrative Agent except as
hereinafter expressly provided. Based upon the information in the Inventory
Summary Report or Inventory Quarterly Report, as the case may be, and the other
information compiled by the Administrative Agent, the Administrative Agent shall
determine, in its discretion, whether a Lot Under Development, Developed Lot or
Dwelling Lot not previously designated as part of the Loan Inventory shall be
designated part of the Loan Inventory and, if so, whether such Lot Under
Development, Developed Lot or Dwelling Lot shall be designated a Lot Under
Development, Developed Lot or Dwelling Lot.
(c) Periodic Establishment of Loan Funding Availability. Within two
---------------------------------------------------
(2) business days of the Administrative Agent's receipt of an Inventory Summary
Report or Inventory Quarterly Report, as the case may be, the Administrative
Agent shall establish the Loan Funding Availability based on the Report
delivered to the Administrative Agent and information compiled by the
Administrative Agent. In the event the Borrower does not submit the Inventory
Summary Report or Inventory Quarterly Report in the time and manner set forth
above or furnish sufficient information to the Administrative Agent to enable
the Administrative Agent to establish a new Loan Funding Availability, the
Administrative Agent will establish a Loan Funding Availability based on some or
all of the previous information submitted to the Administrative Agent by the
Borrower in the immediately preceding Inventory Summary Report or Inventory
Quarterly Report and the information compiled by the Administrative Agent, as
required hereunder, in connection therewith, as the case may be, or other
information available to the Administrative Agent.
(d) Reconciliation. In the event that the Loan Funding Availability
--------------
for a particular Funding Period is less than the then outstanding principal
amount of all Unsecured
-29-
<PAGE>
Indebtedness and unpaid draws under Letters of Credit, the Administrative Agent
shall notify the Borrower thereof. On or before the Reconciliation Date, the
Borrower shall (i) (A) pay to the Administrative Agent a principal payment to be
applied to the Loans and unpaid draws under Letters of Credit and/or (B) provide
to the Administrative Agent evidence that the principal amount of other
Unsecured Indebtedness has been reduced in an aggregate amount sufficient to
eliminate the excess of the outstanding principal amount of the Unsecured
Indebtedness and unpaid draws under Letters of Credit over the Loan Funding
Availability, together with any accrued and unpaid interest on such excess or
(ii) provide a revised Inventory Summary Report or Inventory Quarterly Report
designating sufficient additional Inventory (which shall be acceptable to the
Administrative Agent, in its discretion) as Loan Inventory to cause the Loan
Funding Availability to equal or exceed the outstanding principal of all
Unsecured Indebtedness and unpaid draws under Letters of Credit.
(e) Removal/Disapproval of Inventory for Loan Funding Availability.
--------------------------------------------------------------
If, at any time, the Administrative Agent determines, in its reasonable
discretion, that any part of the Loan Inventory is not acceptable for inclusion
in the calculation of the Loan Funding Availability as a result of an unforeseen
material adverse change in the condition of such portion of the Loan Inventory
or as a result of the existence of hazardous wastes or materials in or on any
Inventory which are in violation of any warranty, representation or covenant of
the Loan Documents regarding such hazardous wastes or materials, the
Administrative Agent may exclude such portion of the Loan Inventory from the
calculation of the Loan Funding Availability. If, after such exclusion, the
then outstanding principal amount under Unsecured Indebtedness (and unpaid draws
under Letters of Credit) would exceed the Loan Funding Availability, the
Borrower shall pay to the Administrative Agent on the Reconciliation Date
immediately following the exclusion of such Loan Inventory, a principal payment
on the Loans (or provide to the Administrative Agent evidence satisfactory to
the Administrative Agent that other Unsecured Indebtedness has been reduced) or
unpaid draws under Letters of Credit in an amount sufficient to eliminate such
excess of the aggregate outstanding principal balance of the Unsecured
Indebtedness (and unpaid draws under Letters of Credit) over the Loan Funding
Availability, together with accrued and unpaid interest on such excess.
(f) Release of Guaranties. Contemporaneously with the delivery of an
---------------------
Inventory Summary Report (or an Inventory Quarterly Report), the Borrower may
request the release of any Restricted Subsidiary from the Subsidiary Guaranty.
In the event that the Loan Funding Availability established by the
Administrative Agent pursuant to Section 3.1(e) hereof, without consideration of
any Inventory owned by such Restricted Subsidiary, is equal to or greater than
the amount otherwise required pursuant to Section 3.1(d) hereof, then the
Administrative Agent shall, upon receipt of a certificate from the Borrower that
no Default exists before and after giving effect to such release, release such
Restricted Subsidiary from the Subsidiary Guaranty.
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<PAGE>
ARTICLE 4
LOAN DISBURSEMENTS AND LETTERS OF CREDIT
----------------------------------------
4.1 Prior to the First Disbursement or Letter of Credit. Prior to
---------------------------------------------------
requesting the first disbursement under the Loans or Letter of Credit hereunder,
the Borrower shall deliver all of the following items to the Administrative
Agent, in form and substance satisfactory to the Administrative Agent. The
Administrative Agent and the Banks shall have no obligation to make the first
disbursement hereunder and the Issuing Bank shall have no obligation to issue
the first Letter of Credit hereunder until all of these items have been so
executed and/or delivered to the Administrative Agent. The Administrative Agent
shall have received an Amended and Restated Revolving Loan Note and an Amended
and Restated Term Loan Note by the Borrower payable to the order of each Bank
and a Certificate of Acknowledgement from each Guarantor acknowledging that the
Guaranty dated as of February 14, 1997 in favor of the Administrative Agent and
each Bank continues in full force and effect.
4.2 Subsequent Disbursements and Letters of Credit. Prior to requesting
----------------------------------------------
subsequent disbursements under the Revolving Loans (subsequent to the first
disbursement) or Letters of Credit hereunder (subsequent to the first Letter of
Credit), the Borrower shall execute and deliver to the Administrative Agent all
of the following items, in form and substance satisfactory to the Administrative
Agent. The Administrative Agent and the Banks shall have no obligation to make
further disbursements or issue additional Letters of Credit until all of these
items have been properly executed and delivered to the Administrative Agent.
There shall be no disbursement of the Term Loan after the first disbursement.
(a) Inventory Summary Report. The Inventory Summary Report that the
------------------------
Borrower is required to deliver pursuant to Section 3.1(b) hereof.
(b) Inventory Quarterly Report. The Inventory Quarterly Report that
--------------------------
the Borrower is required to deliver pursuant to Section 3.1(b) hereof.
(c) Request for Advance. The Request for Advance that the Borrower is
-------------------
required to deliver pursuant to Section 2.2 hereof or the Request for
Issuance of Letter of Credit that the Borrower is required to deliver in
connection with any issuance of a Letter of Credit hereunder, as the case
may be.
(d) Other Documents. Such other documents that the Administrative
---------------
Agent may reasonably require.
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<PAGE>
ARTICLE 5
BORROWER'S COVENANTS, AGREEMENTS,
---------------------------------
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower makes the following covenants, agreements, representations and
warranties with respect to the Loan Documents and the obligations thereunder to
the Banks:
5.1 Payment. The Borrower shall pay when due all sums owing under this
-------
Agreement, the Notes and the other Loan Documents executed by the Borrower.
5.2 Performance. The Borrower shall perform all Obligations under this
-----------
Agreement, the Notes and the other Loan Documents executed by the Borrower.
5.3 Additional Information. On request of the Administrative Agent, the
----------------------
Borrower shall deliver to the Administrative Agent and/or the Issuing Bank any
documents or information with respect to the Inventory that the Administrative
Agent and/or the Issuing Bank may reasonably require including, without
limitation, surveys and acquisition closing documentation.
5.4 Quarterly Financial Statements and Other Information. Within forty-
----------------------------------------------------
five (45) days after the last day of each quarter in each fiscal year of the
Borrower, except the last quarter in each such fiscal year of the Borrower, the
Borrower shall deliver to the Administrative Agent the Form 10-Q of the Borrower
as filed with the Securities and Exchange Commission. Within ten (10) days from
the date of filing, the Borrower shall provide to the Administrative Agent a
copy of every other report filed by the Borrower with the Securities and
Exchange Commission under the Exchange Act and a copy of each registration
statement filed by the Borrower with the Securities and Exchange Commission
pursuant to the Securities Act of 1933.
5.5 Compliance Certificates. Within forty-five (45) days from the end of
-----------------------
each fiscal quarter of the Borrower, the Borrower shall provide to the
Administrative Agent a certificate signed by an Authorized Signatory of the
Borrower in the form attached hereto as Exhibit G setting forth such
---------
calculations required to establish whether the Borrower was in compliance with
Section 5.7 hereof.
5.6 Annual Financial Statements and Information; Certificate of No
--------------------------------------------------------------
Default. Within one hundred (100) days after the end of each fiscal year of the
- -------
Borrower, the Borrower shall deliver to the Administrative Agent the Form 10-K
of the Borrower as filed with the Securities and Exchange Commission, together
with the audited consolidated financial statements of the Borrower (which shall
be prepared by an independent accounting firm of recognized standing).
5.7 Financial and Inventory Covenants. Until the Obligations are repaid
---------------------------------
in full, the Borrower shall adhere to the following financial covenants (after
giving effect to any Financial
-32-
<PAGE>
Covenant Carve Out), all on a consolidated basis with the Restricted
Subsidiaries and determined as of the last day of each fiscal quarter of the
Borrower:
(a) The Borrower shall maintain at all times a ratio of Notes Payable
to Tangible Net Worth of not greater than 1.75 to 1.0 on a consolidated
basis.
(b) The Borrower shall maintain at all times a ratio of Total
Liabilities to Tangible Net Worth of not more than 2.25 to 1.
(c) The Borrower shall maintain at all times a ratio of (i) EBITDA to
(ii) Fixed Charges of not less than 3.0 to 1.0.
(d) The Borrower shall maintain at all times Working Capital of
$100,000,000 on a consolidated basis.
(e) The Borrower shall maintain at all times a minimum Tangible Net
Worth of one hundred thirty million and no/100 dollars ($130,000,000.00),
plus fifty percent (50%) of annual net profits for such fiscal year, plus
---- ----
fifty percent (50%) of any capital paid into the Borrower (other than stock
issued in connection with an employee stock ownership plan, an employee
stock option plan, an employee stock purchase plan or for an acquisition),
plus one hundred percent (100%) of net losses with absolute minimum
----
Tangible Net Worth of not less than one hundred thirty million and no/100
dollars ($130,000,000.00), on a consolidated basis.
(f) The Borrower shall not at any time permit Third Party Notes
Payable to be greater than thirteen percent (13%) of Tangible Assets on a
consolidated basis.
(g) The total number of Speculative Lots owned by the Borrower and its
Restricted Subsidiaries at any given time shall not exceed fifty percent
(50%) of all Closed Sales during the immediately preceding twelve (12)
calendar months. Models shall not be considered "Speculative Lots" for
purposes of this Section 5.7(g).
(h) (i) The Borrower shall not permit the total number of Developed
Lots and Lots Under Development, in each case, then owned by the Borrower
and all Restricted Subsidiaries, at any given time to exceed two and one-
half (2 1/2) times the number of Closed Sales during the immediately
preceding twelve (12) calendar months.
(ii) The Borrower shall not permit the aggregate cost of all
Developed Lots and Lots Under Development, in each case, then owned by the
Borrower and all Restricted Subsidiaries, at any given time to exceed forty
percent (40%) of all Tangible Assets of the Borrower on a consolidated
basis.
(i) The cost of the land owned by Borrower and all Restricted
Subsidiaries at any given time which has not been developed into Developed
Lots and is not scheduled
-33-
<PAGE>
for commencement of development into Developed Lots within twelve (12)
calendar months from the date of determination shall not exceed ten percent
(10%) of all Tangible Assets of the Borrower and its Restricted
Subsidiaries on a consolidated basis. In the event that the Borrower or any
Restricted Subsidiary classifies certain undeveloped land as being
scheduled for development within twelve (12) calendar months for the
purpose of this provision and, as of the last day of such twelve (12)
calendar month period, development of such land has not commenced, such
land shall not be classified as scheduled for development within twelve
(12) calendar months until such development is commenced.
5.8 Other Financial Documentation. The Borrower shall provide to the
-----------------------------
Administrative Agent such other financial information as the Administrative
Agent may reasonably request from time to time to clarify or amplify the
information required to be furnished to the Administrative Agent under this
Agreement.
5.9 Reserved.
--------
5.10 Payment of Contractors. The Borrower shall pay in a timely manner,
----------------------
and shall cause its Subsidiaries to pay in a timely manner, any and all
contractors and subcontractors who conduct work in or on the Inventory, subject
to the right of the Borrower to contest any amount in dispute, so long as the
contesting of such amount is pursued diligently and in good faith. The Borrower
will advise the Administrative Agent in writing immediately if the Borrower or
any of its Subsidiaries receives any written notice from any contractor(s),
subcontractor(s) or material furnisher(s) to the effect that said contractor(s)
or material furnisher(s) have not been paid for any labor or materials furnished
to or in the Inventory and such outstanding payment or payments are individually
or collectively equal to or greater than five hundred thousand and no/100
dollars ($500,000.00) per subdivision or seven million and no/100 dollars
($7,000,000.00) in the aggregate. The Borrower will further make available to
the Administrative Agent, for inspection and copying, on demand, any contracts,
bills of sale, statements, receipted vouchers or agreements, under which the
Borrower claims title to any materials, fixtures or articles used in the
development of the Loan Inventory or construction of improvements on the Loan
Inventory including, without limitation, the Dwellings.
5.11 Inspection and Appraisal. The Borrower shall permit the
------------------------
Administrative Agent and the Banks and their authorized agents to enter upon the
Inventory during normal working hours and as often as they desire, for the
purpose of inspecting or appraising the Loan Inventory or the construction of
the Dwellings.
5.12 Fees and Expenses. The Borrower shall pay when due all commitment and
-----------------
renewal fees and external legal fees incurred by the Administrative Agent in
connection with the making of the Loans.
5.13 Hazardous Substances. The Borrower warrants and represents to the
--------------------
Administrative Agent, Issuing Bank and the Banks that to the best of their
knowledge and belief
-34-
<PAGE>
and based on environmental assessments of the Inventory commissioned by the
Borrower, except to the extent disclosed to the Administrative Agent in
environmental assessments or other writings or to the extent that it would not
materially and adversely affect the use and marketability of any Inventory, the
Inventory has not been and is not now being used in violation of any federal,
state or local environmental law, ordinance or regulation, that no proceedings
have been commenced, or notice(s) received, concerning any alleged violation of
any such environmental law, ordinance or regulation, and that the Inventory is
free of hazardous or toxic substances and wastes, contaminants, oil, radioactive
or other materials the removal of which is required or the maintenance of which
is restricted, prohibited or penalized by any federal, state or local agency,
authority or governmental unit except as set forth in the site assessments. The
Borrower covenants that it shall neither permit any such materials to be brought
on to the Inventory, nor shall it acquire real property to be added to the Loan
Inventory upon which any such materials exist, except to the extent disclosed to
the Administrative Agent in environmental assessments or other writings or to
the extent that it would not materially and adversely affect the use and
marketability of any Inventory; and if such materials are so brought or found
located thereon, such materials shall be immediately removed, with proper
disposal, to the extent required by applicable environmental laws, ordinances
and regulations, and all required environmental cleanup procedures shall be
diligently undertaken pursuant to all such laws, ordinances and regulations. The
Borrower further represents and warrants that the Borrower will promptly
transmit to the Administrative Agent and the Banks copies of any citations,
orders, notices or other material governmental or other communications received
with respect to any hazardous materials, substances, wastes or other
environmentally regulated substances affecting the Inventory. Notwithstanding
the foregoing, there shall not be a default of this provision should the
Borrower store or use minimal quantities of the aforesaid materials, provided
that: such substances are of a type and are held only in a quantity normally
used in connection with the construction, occupancy or operation of comparable
buildings or residential developments (such as cleaning fluids and supplies
normally used in the day to day operation of residential developments), such
substances are being held, stored and used in complete and strict compliance
with all applicable laws, regulations, ordinances and requirements, and the
indemnity set forth below shall always apply to such substances, and it shall
continue to be the responsibility of the Borrower to take all remedial actions
required under and in accordance with this Agreement in the event of any
unlawful release of any such substance.
5.14 Insurance. The Borrower shall keep the Inventory comprising the Loan
---------
Inventory insured by responsible insurance companies in such amounts and against
such risks as is customary for owners of similar businesses and properties in
the same general areas in which the Borrower and its Restricted Subsidiaries
operate or, to the customary extent (and in a manner approved by the
Administrative Agent) the Borrower may be self insured. All insurance herein
provided for shall be in form and with companies reasonably approved by the
Administrative Agent. The Borrower shall also maintain general liability
insurance, workman's compensation insurance, automobile insurance for all
vehicles owned by them and any other insurance reasonably required by the
Administrative Agent, to the extent commercially available at a reasonable cost.
On the Agreement Date, the Borrower shall deliver to the Administrative Agent a
copy of a certificate of insurance evidencing the insurance required hereunder.
In addition, on
-35-
<PAGE>
the date of delivery of each report required by Section 3.1(b) hereof, the
Borrower shall certify to the Administrative Agent that all insurance policies
required to be maintained hereunder remain in full force and effect.
5.15 Litigation. The Borrower warrants and represents to the
----------
Administrative Agent, the Issuing Bank and the Banks that as of the Agreement
Date, neither the Borrower nor any Restricted Subsidiary is a party to any
litigation having a reasonable probability of being adversely determined to the
Borrower or any Restricted Subsidiary which, if adversely determined, would
impair the ability of the Borrower to carry on its business substantially as now
conducted or contemplated or would materially adversely affect the financial
condition, business or operations of the Borrower.
5.16 Reportable Event. Promptly after Borrower receives notice or
----------------
otherwise becomes aware thereof, the Borrower shall notify the Administrative
Agent of the occurrence of any Reportable Event with respect to any Plan as to
which the Pension Benefit Guaranty Corporation has not by regulation waived the
requirement of Section 4043(a) of ERISA that it be notified within thirty (30)
days of the occurrence of such event (provided that the Borrower shall give the
Administrative Agent notice of any failure to meet the minimum funding standards
of Section 412 of the Code or Section 302 of ERISA, regardless of the issuance
of any waivers in accordance with Section 412(d) of the Code.
5.17 Secured Indebtedness. The Borrower shall not, and shall not permit
--------------------
any of its Restricted Subsidiaries to, incur or permit to exist any Indebtedness
which (a) is secured in whole or in part by any of the Inventory (other than
Permitted Encumbrances) or (b) contains any provision requiring the Borrower or
any Restricted Subsidiary to grant to the lender thereunder any Lien at a future
date or upon the occurrence of any subsequent event; except that the Borrower
and its Restricted Subsidiaries may incur (i) Indebtedness in favor of a seller
of Inventory to the Borrower which is secured solely by the Inventory
contemporaneously acquired from such seller, (ii) Indebtedness secured solely by
the Borrower's headquarters building located in Arlington, Texas or any other
office building owned by the Borrower or any Restricted Subsidiary, and (iii)
Indebtedness secured by any clubhouse located in any development of the Borrower
or any Restricted Subsidiary.
5.18 Interest Rate Hedging. At all times during the term hereof, the
---------------------
Borrower shall enter into and maintain one or more interest hedge agreements
having a notional amount equal to $100,000,000 such that the weighted average
term of all such interest hedge agreements is not less than three (3) years from
the Agreement Date. Any such interest hedge agreement shall provide such
interest rate protection in conformity with International Swap Dealers
Association standards on terms reasonably acceptable to the Administrative
Agent, such terms to include consideration of the creditworthiness of the other
party to such interest rate hedge agreements. For purposes hereof, indebtedness
having a fixed rate of interest shall be deemed subject to an interest rate
hedge agreement having a notional amount equal to the principal amount thereon
and having an interest rate equal to the interest rate thereon.
-36-
<PAGE>
ARTICLE 6
DEFAULT AND REMEDIES
--------------------
6.1 Defaults. Each of the following shall constitute a Default, whatever
--------
the reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment or order of any court
or any order, rule, or regulation of any governmental or non-governmental body:
(a) Any representation or warranty made under this Agreement shall
prove incorrect or misleading in any material respect when made or deemed to
have been made;
(b) The Borrower shall default in the payment of any principal,
interest or other monetary amounts payable hereunder or under the Notes, or any
of them, or under the other Loan Documents (other than payments due on the
Revolving Loan Maturity Date or the Term Loan Maturity Date, as the case may be)
which payment default is not cured within thirty (30) calendar days of
Borrower's receipt of notice from the Administrative Agent;
(c) The Borrower shall default in the performance or observance of any
other agreement or covenant contained in this Agreement not specifically
referred to elsewhere in this Section 6.1, and such Event of Default shall not
be cured to the Majority Banks' satisfaction within a period of ninety (90) days
from the date the Borrower receives notice from the Administrative Agent with
respect thereto;
(d) There shall occur any Event of Default in the performance or
observance of any agreement or covenant or breach of any representation or
warranty contained in any of the Loan Documents (other than this Agreement or as
otherwise provided in this Section 6.1 of this Agreement) or any Subsidiary
Guaranty, which shall not be cured to the Majority Banks' satisfaction within
the applicable cure period, if any, provided for in such Loan Document or ninety
(90) days from the date the Borrower receives notice from the Administrative
Agent with respect thereto if no cure period is provided in such Loan Document;
(e) There shall be entered a decree or order for relief in respect of
the Borrower or any of its Restricted Subsidiaries under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other applicable
federal or state bankruptcy law or other similar law, or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator, or similar official of
the Borrower or any of its Restricted Subsidiaries, or of any substantial part
of their respective properties, or ordering the winding-up or liquidation of the
affairs of the Borrower or any of its Restricted Subsidiaries, or an involuntary
petition shall be filed against the Borrower or any of its Restricted
Subsidiaries, and a temporary stay entered, and (i) such petition and stay shall
not be diligently contested, or (ii) any such petition and stay shall continue
undismissed for a period of thirty (30) consecutive days;
-37-
<PAGE>
(f) The Borrower or any of its Restricted Subsidiaries shall file a
petition, answer, or consent seeking relief under Title 11 of the United States
Code, as now constituted or hereafter amended, or any other applicable federal
or state bankruptcy law or other similar law, or the Borrower or any of its
Restricted Subsidiaries shall consent to the institution of proceedings
thereunder or to the filing of any such petition or to the appointment or taking
of possession of a receiver, liquidator, assignee, trustee, custodian,
sequestrator, or other similar official of the Borrower or any of its Restricted
Subsidiaries, or of any substantial part of their respective properties, or the
Borrower or any of its Restricted Subsidiaries shall fail generally to pay their
respective debts as they become due, or the Borrower or any of its Restricted
Subsidiaries shall take any corporate or partnership action to authorize any
such action;
(g) A final judgment shall be entered by any court against the
Borrower or any of its Restricted Subsidiaries for the payment of money which
exceeds $500,000.00, which judgment is not covered by insurance or a warrant of
attachment or execution or similar process shall be issued or levied against
property of the Borrower or any of its Restricted Subsidiaries which, together
with all other such property of the Borrower or any of its Restricted
Subsidiaries subject to other such process, exceeds in value $500,000.00 in the
aggregate, and if, within thirty (30) days after the entry, issue, or levy
thereof, such judgment, warrant, or process shall not have been paid or
discharged or bonded or stayed pending appeal, or if, after the expiration of
any such stay, such judgment, warrant, or process shall not have been paid or
discharged;
(h) (1) There shall be at any time any "accumulated funding
deficiency," as defined in ERISA or in Section 412 of the Code, with respect to
any Plan; or (2) a trustee shall be appointed by a United States District Court
to administer any Plan; or the Pension Benefit Guaranty Corporation shall
institute proceedings to terminate any Plan; or (3) any of the Borrower and its
ERISA Affiliates shall incur any liability to the Pension Benefit Guaranty
Corporation in connection with the termination of any Plan; or (4) any Plan or
trust created under any Plan of any of the Borrower and its ERISA Affiliates
shall engage in a non-exempt "prohibited transaction" (as such term is defined
in Section 406 of ERISA or Section 4975 of the Code) which would subject the
Borrower or any ERISA Affiliate to the tax or penalty on "prohibited
transactions" imposed by Section 502 of ERISA or Section 4975 of the Code; and
by reason of any or all of the events described in clauses (1) through (4), as
applicable, the Borrower shall have incurred or is likely to incur liability in
excess of $1,000,000.00 in the aggregate;
(i) All or any portion of any Loan Document shall at any time and for
any reason be declared by a court of competent jurisdiction in a suit with
respect to such Loan Document to be null and void, or a proceeding shall be
commenced by any governmental authority involving a legitimate dispute or by the
Borrower or any of its Restricted Subsidiaries, having jurisdiction over the
Borrower or any of its Restricted Subsidiaries, seeking to establish the
invalidity or unenforceability thereof (exclusive of questions of interpretation
of any provision thereof), or the Borrower or any of its Restricted Subsidiaries
shall deny that it has any liability or obligation for the payment of principal
or interest purported to be created under any Loan Document;
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<PAGE>
(j) There shall occur any Change of Control;
(k) Except for conveyances of all or any part of the Loan Inventory
between the Borrower and the Guarantors there occurs any sale, lease,
conveyance, assignment, pledge, encumbrance, or transfer of all or any part of
the Loan Inventory or any interest therein, voluntarily or involuntarily,
whether by operation of law or otherwise, except (i) in accordance with the
terms of this Agreement, (ii) for execution of contracts with prospective
purchasers, (iii) for Permitted Encumbrances, and (iv) in the ordinary course of
business;
(l) Except in the normal course of Borrower's development of inventory
into Developed Lots and construction of Dwellings thereon, without the prior
written consent of Administrative Agent, Borrower grants any easement or
dedication, files any plat, condominium declaration, or restriction or otherwise
encumbers all or any portion of the Loan Inventory, or seeks or permits any
zoning reclassification or variance, unless such action is expressly permitted
by the Loan Documents or does not affect any Inventory which is part of the Loan
Inventory; or
Notwithstanding anything contained herein to the contrary, the occurrence of any
of the foregoing shall not be a Default or an Event of Default hereunder if: (i)
the occurrence pertains only to specific parcel(s) within the Loan Inventory;
and (ii) the affected parcel(s) is (are) removed from the Loan Inventory on or
before ten (10) days in the case of a monetary occurrence and thirty (30) days
in the case of a non-monetary occurrence after the occurrence or, if the
Borrower is entitled to notice and cure, within the applicable notice and cure
period. In the event that any such parcel is a Lot Under Development, Developed
Lot or Dwelling Lot, then the Loan Funding Availability shall be immediately
calculated excluding such parcel. If, as the result of such removal, the
outstanding principal balance under all Unsecured Indebtedness together with any
unreimbursed draws under Letters of Credit would exceed the Loan Funding
Availability, the Borrower shall pay (X) to the Administrative Agent on the
Reconciliation Date immediately following the removal of such Inventory from the
Loan Inventory, a principal payment on the Loans in an amount sufficient to
eliminate such excess of the aggregate outstanding principal balance of all
Unsecured Indebtedness and unreimbursed draws under Letters of Credit over the
Loan Funding Availability, together with any due and unpaid interest on such
excess or (Y) add additional Inventory to the Loan Inventory (which is
acceptable to the Administrative Agent) in an amount sufficient to cause the
Loan Funding Availability to equal or exceed the Loans and unreimbursed draws
under Letters of Credit.
6.2 Remedies. If a Default shall have occurred and shall be continuing:
--------
(a) With the exception of a Default specified in Sections 6.1(e), (f)
or (g) hereof, the Administrative Agent shall at the request, or may with the
consent, of the Super-Majority Banks, by notice to the Borrower (i) declare the
Notes, all interest thereon and all other amounts payable under this Agreement
and the other Loan Documents to be forthwith due and payable, whereupon the
Notes, all such interest and all such amounts shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Borrower, (ii) terminate the
Revolving Loan
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<PAGE>
Commitment and the Letter of Credit Commitment, and (iii) require the Borrower
to, and the Borrower shall thereupon, deposit in the Letter of Credit Reserve
Account, an amount equal to the maximum amount currently or at any time
thereafter to be drawn on all outstanding Letters of Credit, and the Borrower
hereby pledges to the Administrative Agent, the Letter of Credit Banks and the
Issuing Bank and grants to them a security interest in, all such cash as
security for the Obligations.
(b) Upon the occurrence of a Default under Sections 6.1(e), (f) or (g)
hereof, the Revolving Loan Commitment and the Letter of Credit Commitment shall
automatically terminate and such principal, interest (including without
limitation, interest which would have accrued but for the commencement of a case
or proceeding under the federal bankruptcy laws), Letter of Credit Obligations
and other amounts payable under this Agreement or the Notes shall thereupon and
concurrently therewith become due and payable, all without any action by the
Administrative Agent, the Issuing Bank or the Banks or the holders of the Notes,
and the Borrower shall thereupon forthwith deposit in the Letter of Credit
Reserve Account an amount equal to all outstanding Letter of Credit Obligations,
all without presentment, demand, protest or other notice of any kind, all of
which are expressly waived, anything in this Agreement or in the Notes to the
contrary notwithstanding, and the Borrower hereby pledges to the Administrative
Agent, the Letter of Credit Banks and the Issuing Bank, and grants to the
Administrative Agent, the Letter of Credit Banks and the Issuing Bank a security
interest in, all such cash as security for the Obligations.
(c) [Reserved]
(d) The Administrative Agent, with the concurrence of the Super-
Majority Banks, shall exercise all of the post-default rights granted to it and
to them under the Loan Documents or under Applicable Law.
(e) The rights and remedies of the Administrative Agent, the Issuing
Bank and the Banks hereunder shall be cumulative, and not exclusive.
6.3 Waivers. Neither a waiver of any Default or Event of Default by the
-------
Borrower hereunder nor any representation by a Bank or Banks as to the
nonoccurrence or nonexistence thereof shall be implied from any delay or
omission by any one or all of the Banks to notify the Borrower thereof or to
take action on account of such Default or Event of Default, and no express
waiver shall affect any Default or Event of Default other than the matter
specified in the waiver and it shall be operative only for the time and to the
extent therein stated. Waivers of any covenants, terms or conditions contained
herein must be in writing and shall not be construed as a waiver of any
subsequent breach of the same covenant, term or condition. Any one or all of
the Banks' consent or approval to or of any act by the Borrower requiring
further consent or approval shall not be deemed to waive or render unnecessary
the consent or approval to or of any subsequent or similar act. Any one or all
of the Banks' exercise of any right or remedy or hereunder shall not in any way
constitute a cure or waiver of a Default or an Event of Default, or invalidate
any act done pursuant to any notice of the occurrence of a Default or an Event
of
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<PAGE>
Default, or prejudice the Banks in the exercise of any of their rights hereunder
or under the Notes or any other Loan Documents, unless, in the exercise of said
rights, the Banks realize all amounts owed to them under the Notes and other
Loan Documents.
6.4 Cross-Default. All of the Notes and other Loan Documents are "cross
-------------
defaulted" such that (a) the occurrence of an Event of Default under any one of
the Loan Documents shall constitute an Event of Default under this Agreement and
all of the Loan Documents and (b) the occurrence of a Default under any one of
the Loan Documents shall constitute a Default under this Agreement and all of
the other Loan Documents.
6.5 No Liability of the Banks.
-------------------------
(a) Construction and/or Development. None of the Banks, the
-------------------------------
Administrative Agent or the Issuing Bank shall be liable to any party for (i)
the development of or construction upon any of the Inventory, (ii) the failure
to develop or construct or protect improvements on the Inventory, (iii) the
payment of any expense incurred in connection with the development of or
construction upon the Inventory, (iv) the performance or nonperformance of any
other obligation of the Borrower, or (v) the Banks' or the Administrative
Agent's exercise of any remedy available to them. In addition, the Banks shall
not be liable to the Borrower or any third party for the failure of the Banks or
their authorized agents to discover or to reject materials or workmanship during
the course of the Banks' inspections of the Inventory.
(b) Dwelling Lots. In addition to 6.5(a) above, none of the Banks,
-------------
the Administrative Agent or the Issuing Bank shall be liable to any party for
(i) the construction or completion of the Dwellings, (ii) the failure to
construct, complete or protect the Dwellings, (iii) the payment of any expense
incurred in connection with the construction of the Dwellings, (iv) the
performance or nonperformance of any other obligation of the Borrower, or (v)
the Banks' or the Administrative Agent's exercise of any remedy available to
them. In addition, the Banks shall not be liable to the Borrower or any third
party for the failure of the Banks or their authorized agents to discover or to
reject materials or workmanship during the course of the Banks' inspections of
the Dwelling Lots.
(c) Other Banks. The obligations of each Bank under this Agreement
-----------
are separate and independent such that no action, inaction or responsibility of
one Bank shall be imputed to the remaining Banks. The Borrower hereby waives
any claim or demand against each Bank as to the action, inaction or
responsibility of another.
ARTICLE 7
THE ADMINISTRATIVE AGENT.
------------------------
7.1 Appointment and Authorization. Each Bank hereby irrevocably appoints
-----------------------------
and authorizes, and hereby agrees that it will require any transferee of any of
its interest in its Loans
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<PAGE>
and in its Notes irrevocably to appoint and authorize, the Administrative Agent
to take such actions as its agent on its behalf and to exercise such powers
hereunder as are delegated by the terms hereof, together with such powers as are
reasonably incidental thereto. Neither the Administrative Agent nor any of its
directors, officers, employees, or agents shall be liable to any Bank (or any
transferee thereof) for any action taken or omitted to be taken by it or them
hereunder or in connection herewith (including, without limitation, the granting
or withholding of approval of any matter), except for its or their own gross
negligence or willful misconduct. The Banks hereby each acknowledge and agree
that the Administrative Agent may, absent actual knowledge to the contrary, rely
upon certifications of the Borrower with respect to Inventory, financial
covenant compliance, covenant compliance and all matters related thereto. The
Administrative Agent shall endeavor to exercise its rights and responsibilities
under this Agreement in accordance with its usual practices for borrowers
similar to the Borrower, but the Administrative Agent shall not be liable to the
Banks with respect to errors or omissions with respect to the foregoing unless
they are the result of the gross negligence or willful misconduct of the
Administrative Agent.
7.2 Delegation of Duties. The Administrative Agent may execute any of its
--------------------
duties under the Loan Documents by or through agents or attorneys selected by it
using reasonable care and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent shall not be
responsible to any Bank for the negligence or misconduct of any agents or
attorneys selected by it with reasonable care.
7.3 Interest Holders. The Administrative Agent may treat each Bank, or
----------------
the Person designated in the last notice filed with the Administrative Agent
under this Section 7.3, as the holder of all of the interests of such Bank in
its Loans and in its Notes until written notice of transfer, signed by such Bank
(or the Person designated in the last notice filed with the Administrative
Agent) and by the Person designated in such written notice of transfer, in form
and substance satisfactory to the Administrative Agent, shall have been filed
with the Administrative Agent.
7.4 Consultation with Counsel. The Administrative Agent may consult with
-------------------------
legal counsel selected by it and shall not be liable to any Bank (or transferee
thereof) for any action taken or suffered by it in good faith in reliance
thereon.
7.5 Documents. The Administrative Agent shall be under no duty to
---------
examine, inquire into, or pass upon the validity, effectiveness, or genuineness
of this Agreement, any Note, or any instrument, document, or communication
furnished pursuant hereto or in connection herewith, and the Administrative
Agent shall be entitled to assume that they are valid, effective, and genuine,
have been signed or sent by the proper parties, and are what they purport to be.
7.6 Administrative Agent and Affiliates. The Administrative Agent and its
-----------------------------------
affiliates may accept deposits from, administer depository accounts for and
generally engage in any kind of business with the Borrower or any Affiliates of,
or Persons doing business with, the Borrower, without any obligation to account
to any Bank (or any transferee thereof) therefor.
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<PAGE>
7.7 Responsibility of the Administrative Agent. The duties and
------------------------------------------
obligations of the Administrative Agent under this Agreement are only those
expressly set forth in this Agreement. The Administrative Agent shall be
entitled to assume that no Default or Event of Default has occurred and is
continuing unless it has actual knowledge, or has been notified by the Borrower,
of such fact and has either determined that a Default or an Event of Default has
occurred or has been notified by a Bank that such Bank considers that a Default
or an Event of Default has occurred and is continuing, and such Bank shall
specify in detail the nature thereof in writing. The Administrative Agent shall
not be liable hereunder to any Bank (or any transferee thereof) for any action
taken or omitted to be taken except for its own gross negligence or willful
misconduct. The Administrative Agent shall provide each Bank with copies of
such documents received from the Borrower as such Bank may reasonably request.
7.8 Action by Administrative Agent.
------------------------------
(a) Except for action requiring the approval of the Majority Banks,
the Super-Majority Banks or all Banks, the Administrative Agent shall be
entitled to use its discretion with respect to exercising or refraining from
exercising any rights which may be vested in it by, and with respect to taking
or refraining from taking any action or actions which it may be able to take
under or in respect of, this Agreement, unless the Administrative Agent shall
have been instructed by the Majority Banks or the Super-Majority Banks, as the
case may be, to exercise or refrain from exercising such rights or to take or
refrain from taking such action, provided that the Administrative Agent shall
not exercise any rights under Section 6.2(a) of this Agreement without the
request of the Majority Banks or the Super-Majority Banks, as the case may be.
The Administrative Agent shall incur no liability to any Bank (or any transferee
thereof) under or in respect of this Agreement with respect to anything which it
may do or refrain from doing in the reasonable exercise of its judgment or which
may seem to it to be necessary or desirable in the circumstances, except for its
gross negligence or willful misconduct.
(b) The Administrative Agent shall not be liable to the Banks or to
any Bank in acting or refraining from acting under this Agreement in accordance
with the instructions of the Majority Banks or the Super-Majority Banks, as the
case may be, and any action taken or failure to act pursuant to such
instructions shall be binding on all Banks.
(c) The Borrower shall have the right to rely upon actions and
representations of the Administrative Agent in the performance of its duties
hereunder (including, without limitation, representations with respect to
amendments or waivers pursuant to Section 8.3 hereof), without regard to whether
such actions or representations are actually authorized by the Banks or any of
them and without seeking confirmation or ratification of such actions or
representations.
7.9 Notice of Default or Event of Default. In the event that the
-------------------------------------
Administrative Agent or any Bank shall acquire actual knowledge, or shall have
been notified in writing, of any Default or Event of Default, the Administrative
Agent or such Bank shall promptly notify the Banks and the Administrative Agent,
and the Administrative Agent shall take such action and assert such rights under
this Agreement as the Majority Banks or Super-Majority Banks (as applicable)
shall
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<PAGE>
request in writing, and the Administrative Agent shall not be subject to any
liability by reason of its acting pursuant to any such request. If the Majority
Banks or Super-Majority Banks (as applicable) shall fail to request the
Administrative Agent to take action or to assert rights under this Agreement in
respect of any Default or Event of Default within ten (10) days (or shorter
period as set forth in such notice) after their receipt of the notice of any
Default or Event of Default from the Administrative Agent, or shall request
inconsistent action with respect to such Default or Event of Default, the
Administrative Agent may, but shall not be required to, take such action and
assert such rights (other than rights under Article 6 hereof) as it deems in its
discretion to be advisable for the protection of the Banks, except that, if the
Majority Banks or Super-Majority Banks (as applicable) have instructed the
Administrative Agent not to take such action or assert such right, in no event
shall the Administrative Agent act contrary to such instructions.
7.10 Responsibility Disclaimed. The Administrative Agent, in its capacity
-------------------------
as Administrative Agent, shall be under no liability or responsibility
whatsoever as Administrative Agent:
(a) To the Borrower or any other Person or entity as a consequence of
any failure or delay in performance by or any breach by, any Bank or Banks of
any of its or their obligations under this Agreement;
(b) To any Bank or Banks, as a consequence of any failure or delay in
performance by, or any breach by, the Borrower or any other obligor of any of
its obligations under this Agreement or the Notes or any other Loan Document; or
(c) To any Bank or Banks for any statements, representations, or
warranties in this Agreement, or any other document contemplated by this
Agreement or any information provided pursuant to this Agreement, any other Loan
Document, or any other document contemplated by this Agreement, or for the
validity, effectiveness, enforceability, or sufficiency of this Agreement, the
Notes, any other Loan Document, or any other document contemplated by this
Agreement.
7.11 Indemnification. The Banks agree to indemnify the Administrative
---------------
Agent (to the extent not reimbursed by the Borrower) pro rata according to their
respective Commitment Ratios, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including fees and expenses of experts, agents, consultants, and
counsel), or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against the Administrative Agent in any way
relating to or arising out of this Agreement, any other Loan Document, or any
other document contemplated by this Agreement or any action taken or omitted by
the Administrative Agent under this Agreement, any other Loan Document, or any
other document contemplated by this Agreement, except that no Bank shall be
liable to the Administrative Agent for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, or disbursements resulting from the gross negligence or willful
misconduct of the Administrative Agent. The provisions of this Section 7.11
shall survive the termination of this Agreement.
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<PAGE>
7.12 Credit Decision. Each Bank represents and warrants to each other and
---------------
to the Administrative Agent that:
(a) In making its decision to enter into this Agreement and to make
Advances it has independently taken whatever steps it considers necessary to
evaluate the financial condition and affairs of the Borrower and that it has
made an independent credit judgment, and that it has not relied upon information
provided by the Administrative Agent; and
(b) So long as any portion of the Loans or Letter of Credit
Obligations remains outstanding, it will continue to make its own independent
evaluation of the financial condition and affairs of the Borrower.
7.13 Successor Administrative Agent. Subject to the appointment and
------------------------------
acceptance of a successor Administrative Agent (which shall be any Bank or a
commercial Issuing Bank organized under the laws of the United States of America
or any political subdivision thereof which has combined capital and reserves in
excess of $250,000,000) as provided below, the Administrative Agent may resign
at any time by giving written notice thereof to the Banks and the Borrower and
may be removed at any time for cause by the Majority Banks. Upon any such
resignation or removal, the Majority Banks shall have the right to appoint a
successor Administrative Agent. If no successor Administrative Agent shall have
been so appointed by the Majority Banks, and shall have accepted such
appointment within thirty (30) days after the retiring Administrative Agent's
giving of notice of resignation or the Majority Banks' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Banks, appoint a successor Administrative Agent which shall be any Issuing
Bank or a commercial bank organized under the laws of the United States of
America or any political subdivision thereof which has combined capital and
reserves in excess of $250,000,000. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor Administrative Agent, such
successor Administrative Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges, duties, and obligations of the retiring
Administrative Agent, and, after fully performing its obligations pursuant to
Section 2.8 hereof as to all payments received by it, the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. After any retiring Administrative Agent's resignation or removal
hereunder as Administrative Agent, the provisions of this Section 7.13 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as the Administrative Agent.
7.14 Documentation Agent. The Documentation Agent shall have no duties or
-------------------
obligations under this Agreement or the other Loan Documents in its capacity as
Documentation Agent.
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<PAGE>
ARTICLE 8
GENERAL CONDITIONS
------------------
8.1 Benefit. This Agreement is made and entered into for the sole
-------
protection and benefit of the Administrative Agent, the Issuing Bank and the
Banks and the Borrower, their successors and assigns, and no other person or
persons other than the Borrower shall have any right of action hereon or rights
to the Loan proceeds at any time. None of the Administrative Agent, the Issuing
Bank or the Banks shall (a) owe any duty whatsoever to any claimant for labor
performed or material furnished in connection with the construction of any
Dwelling or improvement on any Inventory, or (b) owe any duty to apply any
undisbursed portion of the Loan to the payment of any claim, or (c) owe any duty
to exercise any right or power of the Banks hereunder or arising from any
Default by the Borrower.
8.2 Assignment. The terms hereof shall be binding upon and inure to the
----------
benefit of the heirs, successors, assigns, and personal representatives of the
parties hereto; provided, however, that the Borrower shall not assign this
Agreement or any of its rights, interests, duties or obligations hereunder or
any Loan proceeds or other monies to be advanced hereunder in whole or in part
without the prior written consent of the Banks and any such assignment (whether
voluntary or by operation law) without said consent shall be void and render
automatically terminated any obligation of any Bank hereunder to advance any
further monies pursuant to this Agreement or any other Loan Document. Any Bank
may assign its rights and obligations under this Agreement, the Notes and any
other Loan Documents, in whole or in part, to any other Person, provided that
all of the provisions hereof shall continue in full force and effect and, in the
event of such assignment, such Bank shall thereafter be relieved of all
liability hereunder with respect to actions or omissions of such Bank occurring
thereafter, but only to the extent of the interest so assigned and any Loan
disbursements made by any assignee(s) shall be deemed made in pursuance and not
in modification hereof and shall be evidenced by the applicable Note and any
other Loan Documents. Notwithstanding the foregoing, (i) with the prior written
consent of the Administrative Agent only, a Bank may assign not less than one
hundred percent (100%) of its interest, rights and obligations hereunder, and
(ii) without the prior written consent of all of the other Banks, no Bank shall
have the right to assign any portion of its interest, rights or obligations
hereunder to any other Person unless (a) such assignment is in compliance with
clause (i) of this sentence, or (b) in all other cases, (1) the assignee shall
assume all of the obligations of the assigning Bank under this Agreement, to the
extent of the interest so assigned, and (2) following such assignment, each of
the assigning Bank and the assignee shall maintain a Commitment Ratio of not
less than five percent (5%). Notwithstanding anything in this Section 8.2 to the
contrary, any Bank may enter into participation agreements with any other
Person, so long as such agreement does not confer any rights under this
Agreement, any other Loan Document or the Subsidiary Guaranty to any purchaser
thereof, or relieve such Bank from any of its Obligations under this Agreement
(it being understood that all actions hereunder shall be conducted as if no such
participation had been granted). All assignments permitted hereunder shall be
made pursuant to an Assignment and Assumption Agreement in substantially the
form of Exhibit H attached hereto.
---------
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<PAGE>
8.3 Amendment and Waiver. Neither this Agreement nor any term hereof may
--------------------
be amended orally, nor may any provision hereof be waived orally but only by an
instrument in writing signed by the Majority Banks and, in the case of an
amendment, also by the Borrower, except that in the event of:
(a) any (i) amendment or waiver having a duration of more than ninety
(90) days or (ii) direction to the Administrative Agent regarding
termination of the Commitments, acceleration, or exercise of remedies, any
action may be made only by an instrument in writing signed by the Super-
Majority Banks;
(b) (i) any change in the timing of, or the amount of, payments of
fees due hereunder or in the method of calculating funding availability,
(ii) any waiver of any Event of Default due to the failure by the Borrower
to pay any sum due hereunder, (iii) any amendment of this Section 8.3 or of
the definitions of Majority Banks or Super-Majority Banks, or (iv) the
release of any Guarantor other than in connection with the conversion of
such Guarantor to an Unrestricted Subsidiary or in accordance with Section
3.1(f) hereof, any amendment or waiver may be made only by an instrument in
writing signed by each of the Banks;
(c) (i) any change in the Amount of the Revolving Loan Commitment,
(ii) any change in the timing of or the amount of payments of principal,
interest or fees due with respect to the Revolving Loans or any change in
the rate of interest applied thereto, any change may be made only by an
instrument signed by each of the Banks holding Revolving Loan Commitments;
and
(d) (i) any change in the Amount of the Term Loan Commitment, (ii)
any change in the timing of or the amount of payments of principal,
interest or fees due with respect to the Term Loans or any change in the
rate of interest applied thereto may be made only by an instrument signed
by each of the Banks holding Term Loan Commitments.
Any amendment to accomplish any of the foregoing must also be signed by the
Borrower. Each Bank hereby acknowledges and agrees that a response to any
request for action by the Administrative Agent shall be made within ten (10)
days from the receipt of such request and that the failure to respond within
such period shall be deemed to be an acceptance by such Bank of the course of
action recommended by the Administrative Agent.
8.4 Additional Obligations and Amendments. The Banks shall be under no
-------------------------------------
obligation to extend any loans to the Borrower other than as specifically set
forth in this Agreement. This Agreement shall not be amended except by a
written instrument signed by all parties hereto which instrument contains a
specific reference to this Agreement. Each Bank agrees that it will not enter
into any financing agreement with the Borrower or any of its Restricted
Subsidiaries without the consent of all of the Banks.
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<PAGE>
8.5 Consideration of Renewal. The Banks agree that no later than thirty
------------------------
(30) calendar days prior to each anniversary of the Agreement Date,
representatives of the Banks will consult with each other to determine whether
the Banks are willing, in their sole and absolute discretion, to extend the
Revolving Loan Maturity Date and/or the Letter of Credit Maturity Date for a
period of not more than one (1) calendar year from the then current Revolving
Loan Maturity Date or Letter of Credit Maturity Date, as the case may be.
Notwithstanding the foregoing, if there has occurred a Change of Management, the
Banks shall not have any obligation to consult, as to any proposed extension of
either the Revolving Loan Maturity Date or the Letter of Credit Maturity Date,
with any Bank which has not approved, in writing, such Change of Management.
The Administrative Agent shall, within a reasonable period of time thereafter,
advise the Borrower whether the Banks are willing to so extend the Revolving
Loan Maturity Date or the Letter of Credit Maturity Date. If the Banks and the
Borrower agree to so extend the Revolving Loan Maturity Date or the Letter of
Credit Maturity Date, such agreement shall be evidenced by appropriate
amendments to the Loan Documents, executed by all applicable parties. In the
event that any Bank does not agree to extend the Revolving Loan Maturity Date
and/or the Letter of Credit Maturity Date, the Revolving Loan Maturity Date then
in effect with respect to such Bank's Revolving Loans shall remain unchanged,
and the Borrower in its sole discretion may (a) repay in full (together with all
accrued interest and fees with respect thereto) such Bank's Term Loan, without
respect to any other provisions herein, or (b) may require such Bank to assign
without recourse or warranty one-hundred percent (100%) of its Term Loan (and
such Bank hereby agrees to so assign) to a replacement bank designated by the
Borrower (and acceptable to the Administrative Agent) which assignment shall be
effective upon receipt by such Bank of payment in full of all Obligations then
outstanding to such Bank.
8.6 Terms. Whenever the context and construction require, all words used
-----
in the singular number herein shall be deemed to have been used in the plural,
and vice versa, and the masculine gender shall include the feminine and neuter
and the neuter shall include the masculine and feminine.
8.7 Governing Law and Jurisdiction. This Agreement shall be construed in
------------------------------
accordance with the laws of the State of Georgia, and such laws shall govern the
interpretation, construction and enforcement hereof. For the purposes of any
legal action or proceeding brought by the Administrative Agent or the Banks with
respect to this Agreement or the Loan Documents, the Borrower hereby irrevocably
submits to the jurisdiction and venue of the Superior Court of Fulton County,
Georgia, and hereby irrevocably designates and appoints CT Corporate System,
1201 Peachtree Street, N.E., Atlanta, Georgia 30361, as its authorized agent for
service of process in the State of Georgia. The Borrower also hereby submits to
the non-exclusive jurisdiction and venue of the United States District Court for
the Northern District of Georgia for any action, suit or proceeding arising out
of or relating to this Agreement or the Loan Documents. The Administrative
Agent and the Banks shall for all purposes be entitled to treat such designee of
Borrower as the authorized agent to receive for or on its behalf service of
writs or summons or other legal process in Georgia; delivery of such service to
such authorized agent shall be deemed to be made when delivered or mailed by
certified mail addressed to such authorized agent, with a copy to the Borrower
at the address of the Borrower last known to the Administrative
-48-
<PAGE>
Agent, sent by overnight delivery service. In the event that, for any reason,
such agent or its successor shall no longer serve as agent of the Borrower to
receive service of process in the State of Georgia, the Borrower shall establish
a successor so to serve, and shall advise the Administrative Agent thereof, so
that at all times Borrower will maintain an agent to receive service of process
in the State of Georgia on its behalf with respect to this Agreement and the
Loan Documents. In the event that, for any reason, service of legal process
cannot be made in the manner described above, such service may be made in such
other manner permitted by law. The Borrower hereby irrevocably waives any
objection it might now or hereafter be entitled to make with respect to the
venue of any suit, action or proceeding arising out of or relating to this
Agreement and the Loan Documents which is brought in the Superior Court of
Fulton County, Georgia or, at the election of the Administrative Agent, in the
United States District Court for the Northern District of Georgia, and the
Borrower hereby irrevocably waives any right to claim that any such suit, action
or proceeding brought in any such court has been brought in an incorrect forum.
8.8 Publicity. Subject to the Borrower's approval, the Administrative
---------
Agent shall have the right to incorporate the names of the Banks into signage
placed upon the Loan Inventory. Each Bank shall have the right to secure
printed publicity through newspaper and other media concerning the Inventory and
source of financing.
8.9 Attorneys' Fees. The Borrower shall pay on demand all attorneys' fees
---------------
and other costs and expenses actually incurred by the Administrative Agent, the
Documentation Agent, the Issuing Bank and the Banks, or any of them, in the
enforcement of or preservation of the Banks', the Administrative Agent's or the
Issuing Bank's rights under this Agreement and the other Loan Documents. To the
full extent permitted by applicable law, the Borrower agrees to pay interest on
any fees, costs or expenses due to the Administrative Agent, the Issuing Bank
and the Banks, or any of them, under this Section 8.9 which are not paid when
due at the Default Rate. In the event that any Loan Document contains a
provision regarding enforcement or preservation of rights which is different
from this Section 8.9, this Section 8.9 shall control.
8.10 Mandatory Arbitration. Any controversy or claim between or among the
---------------------
parties hereto arising out of or relating to this Agreement, the Loan Documents
or any related instruments including any claim based on or arising from an
alleged tort, shall be determined by binding arbitration in accordance with the
Federal Arbitration Act (or, if not applicable, the applicable state law), the
Rules of Practice and Procedure for the Arbitration of Commercial Disputes of
Endispute, Inc., doing business as J.A.M.S./Endispute ("J.A.M.S."), as amended
--------
from time to time, and the "Special Rules" set forth below. In the event of any
inconsistency, the Special Rules shall control. Judgment upon any arbitration
award may be entered in any court having jurisdiction. Any party to this
Agreement may bring an action, including a summary judgment or expedited
proceeding, to compel arbitration of any controversy or claim to which this
provision applies in any court having jurisdiction over such action.
(a) Special Rules. The arbitration shall be conducted in the City of
-------------
Atlanta, Georgia and administered by J.A.M.S. who will appoint an
arbitrator; if J.A.M.S. is
-49-
<PAGE>
unable or legally precluded from administering the arbitration, then the
American Arbitration Association will serve. All arbitration hearings will
be commenced within ninety (90) days of the demand for arbitration;
further, the arbitrator shall only, upon a showing of cause, be permitted
to extend the commencement of such hearing for up to an additional sixty
(60) days.
(b) Reservation of Rights. Nothing in this Loan Agreement shall be
---------------------
deemed to (i) limit the applicability of any otherwise applicable statutes
of limitation or repose and any waivers contained in this Loan Agreement;
or (ii) be a waiver by a Bank or Banks of the protection afforded to it or
them by 12 U.S.C. Sec. 91 or any substantially equivalent state law; or
(iii) limit the right of a Bank or Banks (A) to exercise self help remedies
such as (but not limited to) setoff, or (B) to obtain from a court
provisional or ancillary remedies such as injunctive relief or the
appointment of a receiver. The Administrative Agent may (or at the
direction of the Majority Banks) exercise such self help remedies
(including, without limitation, remedies under Section 6.2 hereof), or
obtain such provisional or ancillary remedies before, during or after the
pendency of any arbitration proceeding brought pursuant to this Loan
Agreement. Neither the exercise of self help remedies nor the institution
or maintenance of provisional or ancillary remedies shall constitute a
waiver of the right of any party, including the claimant in any such action
to arbitrate the merits of the controversy or claim occasioning resort to
such remedies.
No provision in this Agreement or any Loan Documents regarding submission
to jurisdiction and/or venue in any court is intended or shall be construed to
be in derogation of the provisions in this Agreement.
8.11 Invalidation of Provisions. In the event that any one or more of the
--------------------------
provisions of this Agreement is deemed invalid by a court having jurisdiction
over this Agreement or other similar authority, the Administrative Agent, the
Issuing Bank and the Banks may, in their sole discretion, terminate this
Agreement in whole or in part.
8.12 Execution in Counterparts. This Agreement may be executed in multiple
-------------------------
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument.
8.13 Captions. The captions herein are inserted only as a matter of
--------
convenience and for reference and in no way define, limit or describe the scope
of this Agreement or the intent of any provision hereof.
8.14 Notices. All notices, requests, consents, demands and other
-------
communications required or which any party desires to give hereunder or under
any other Loan Document shall, unless other specifically provided in such other
Loan Document, be deemed sufficiently given or furnished if (a) in writing and
delivered by personal delivery, by courier, or by registered or certified United
States mail, postage prepaid, addressed to the party to whom directed at the
addresses specified below (unless changed by similar notice in writing given by
the particular
-50-
<PAGE>
party whose address is to be changed), (b) by telex with confirmation thereof in
writing by sender pursuant to subsection (a) above, (c) facsimile to the
facsimile number specified below with confirmation thereof in writing by sender
pursuant to subsection (a) above, or (d) by oral communication with confirmation
thereof in writing by the notifying party pursuant to subsection (a) above
within three (3) business days after such oral communication. Any such notice or
communication shall be deemed to have been given and to be effective either at
the time of personal delivery or, in the case of courier or mail, as of the date
of first attempted delivery at the address and in the manner provided herein,
or, in the case of telex, when transmitted (answerback confirmed), or, in the
case of facsimile, upon receipt or, in the case of oral communication, upon the
effectiveness of written confirmation as hereinabove provided. Notwithstanding
the foregoing, no notice of change of address shall be effective except upon
receipt. This Section shall not be construed in any way to affect or impair any
waiver of notice or demand provided in any Loan Document or to require giving of
notice or demand to or upon any person in any situation or for any reason.
BORROWER:
--------
D. R. Horton, Inc.
1901 Ascension Boulevard
Suite 100
Arlington, Texas 76006
Attn: David J. Keller
and
Ted I. Harbour
Facsimile No.: (817) 856-8249
Telephone No.: (817) 856-8200
-51-
<PAGE>
ADMINISTRATIVE AGENT, AS ISSUING BANK AND AS A BANK:
---------------------------------------------------
NationsBank, N.A. (South)
70 Mansell Court
Roswell, Georgia 30076
Attn: Henry A. Dyer
Facsimile No.: (770) 642-1261
Telephone No.: (770) 552-3559
With copy to:
Powell, Goldstein, Frazer & Murphy
16th Floor
191 Peachtree St. N.E.
Atlanta, Georgia 30303
Attn: W. Joseph Thompson
Facsimile No.: (404) 572-6999
Telephone No.: (404) 572-6600
DOCUMENTATION AGENT AND AS A BANK:
---------------------------------
Bank of America National Trust and Savings Association
5 Park Plaza
Suite 500
Irvine, California 92714-8525
Attn: William D. Balfour, III, Vice President
Facsimile No.: (714) 260-5639
Telephone No.: (714) 260-5698
BANKS:
-----
First American Bank Texas, SSB
The Princeton Tower
14651 Dallas Parkway
Suite 400
Dallas, Texas 75240
Attn: Brady Hutka
Facsimile No.: (972) 419-3394
Telephone No.: (972) 419-3407
-52-
<PAGE>
SouthTrust Bank of Alabama, National Association
420 North 20th Street
Birmingham, Alabama 35203
Attn: Jordy Henson
Facsimile No.: (205) 254-4879
Telephone No.: (205) 254-5004
Comerica Bank
1 Detroit Center
500 Woodward Avenue
Detroit, Michigan 48226-3256
Attn: Kurt Strehlke
Facsimile No.: (313) 222-9295
Telephone No.: (313) 222-9291
The First National Bank of Chicago
Real Estate Finance
One First National Plaza
Suite 0151
Chicago, Illinois 60670-0151
Attn: Gregory A. Gilbert, Vice President
Facsimile No.: (312) 732-1117
Telephone No.: (312) 732-2107
Bank One, Arizona, NA
201 N. Central
19th Floor
Phoenix, Arizona 85004
Attn: Jennifer Pescatore
Facsimile No.: (602) 221-4435
Telephone No.: (602) 221-2402
Sanwa Bank California
Real Estate Industries
4041 MacArthur Boulevard
Suite 100
Newport Beach, California 92660
Attn: Russ Wakeham
Facsimile No.: (714) 852-1510
Telephone No.: (714) 662-6007
-53-
<PAGE>
AmSouth Bank of Alabama
Commercial Real Estate, 9th Floor
1900 5th Avenue North
Birmingham, Alabama 35203
Attn: Ronny Hudspeth
Facsimile No.: (205) 326-4075
Telephone No.: (205) 307-4227
Fleet National Bank
111 Westminster Street
Suite 800
Providence, Rhode Island 02903
Attn: Michael A. Cope
Facsimile No.: (401) 278-5166
Telephone No.: (401) 278-5914
PNC Bank, National Association
Two Tower Center
18th Floor
East Brunswick, New Jersey 08816
Attn: Douglas G. Paul
Facsimile No.: (908) 220-3755
Telephone No.: (908) 220-3566
Societe Generale, Southwest Agency
2001 Ross Avenue
Suite 4800
Dallas, Texas 75201
Attn: Louis P. Laville, III
Facsimile No.: (214) 979-1104
Telephone No.: (214) 979-2762
8.15 Final Agreement. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL
--------------- ----------------------------------------------
AGREEMENT BETWEEN THE PARTIES HERETO AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
- -------------------------------------------------------------------------------
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES HERETO.
- --------------------------------------------------------------------------
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-54-
<PAGE>
IN WITNESS WHEREOF, the Borrower and the Banks have caused this Agreement
to be executed by their duly authorized officers as of the day and year set
forth above.
<TABLE>
<S> <C>
BORROWER: D.R. HORTON, INC., a Delaware corporation
Date of Execution:
By: /s/
- ------------------ --------------------------------------
Title:
-----------------------------------
[CORPORATE SEAL]
ADMINISTRATIVE AGENT, NATIONSBANK, N.A. (SOUTH), a national
DOCUMENTATION AGENT, banking association, as Administrative
ISSUING BANK AND BANKS: Agent, Issuing Bank and as a Bank
Date of Execution:
By: /s/
- ------------------ --------------------------------------
Title:
-----------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national banking
association, as Documentation Agent and
as a Bank
Date of Execution:
By: /s/
- ------------------ --------------------------------------
Title:
-----------------------------------
FIRST AMERICAN BANK TEXAS, SSB, a Texas
state savings bank, as a Bank
Date of Execution:
By: /s/
- ------------------ --------------------------------------
Title:
-----------------------------------
</TABLE>
D.R. HORTON, INC.
MASTER LOAN AND
INTER-CREDITOR AGREEMENT
Signature Page 1
<PAGE>
<TABLE>
<S> <C>
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION, a national banking
association, as a Bank
Date of Execution:
By: /s/
- ------------------ --------------------------------------
Title:
-----------------------------------
COMERICA BANK, a Michigan banking
corporation, as a Bank
Date of Execution:
By: /s/
- ------------------ --------------------------------------
Title:
-----------------------------------
THE FIRST NATIONAL BANK OF CHICAGO, a
national banking association, as a Bank
Date of Execution:
By: /s/
- ------------------ --------------------------------------
Title:
-----------------------------------
BANK ONE, ARIZONA, NA, a national banking
association, as a Bank
Date of Execution:
By: /s/
- ------------------ --------------------------------------
Title:
-----------------------------------
SANWA BANK CALIFORNIA, a California
corporation, as a Bank
Date of Execution:
By: /s/
- ------------------ --------------------------------------
Title:
-----------------------------------
</TABLE>
D.R. HORTON, INC.
MASTER LOAN AND
INTER-CREDITOR AGREEMENT
Signature Page 2
<PAGE>
<TABLE>
<S> <C>
AMSOUTH BANK OF ALABAMA, an Alabama
banking corporation, as a Bank
Date of Execution:
By: /s/
- ------------------ --------------------------------------
Title:
-----------------------------------
FLEET NATIONAL BANK, a national banking
association, as a Bank
Date of Execution:
By: /s/
- ------------------ --------------------------------------
Title:
-----------------------------------
PNC BANK, NATIONAL ASSOCIATION, a
national banking association, as a Bank
Date of Execution:
By: /s/
- ------------------ --------------------------------------
Title:
-----------------------------------
SOCIETE GENERALE, SOUTHWEST AGENCY, as
a Bank
Date of Execution:
By: /s/
- ------------------ --------------------------------------
Title:
-----------------------------------
</TABLE>
D.R. HORTON, INC.
MASTER LOAN AND
INTER-CREDITOR AGREEMENT
Signature Page 3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT A
Bank Commitments
----------------
Bank Revolving Loan Term Loan Letter of
---- Revolving Loan Dollar Term Loan Dollar Credit
Total Percentage* Commitment Percentage* Commitment Percentage*
----- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NationsBank, N.A. (South) 31.5/275 $ 31,500,000 21/100 $ 21,000,000 12.5/25
Bank of America National
Trust and Savings Association 31.5/275 $ 31,500,000 21/100 $ 21,000,000 12.5/25
First American Bank Texas,
SSB 15/275 $ 15,000,000 10/100 $ 10,000,000
SouthTrust Bank of Alabama,
National Association 15/275 $ 15,000,000 10/100 $ 10,000,000
Comerica Bank 25/275 $ 25,000,000 10/100 $ 10,000,000
The First National Bank
of Chicago 16/275 $ 16,000,000 6/100 $ 6,000,000
Bank One, Arizona, NA 20/275 $ 20,000,000 10/100 $ 10,000,000
Sanwa Bank California 18/275 $ 18,000,000 12/100 $ 12,000,000
AmSouth Bank of Alabama 25/275 $ 25,000,000 0/100 $ -0-
Fleet National Bank 33/275 $ 33,000,000 0/100 $ -0-
PNC Bank, National
Association 25/275 $ 25,000,000 0/100 $ -0-
Societe Generale,
Southwest Agency 20/275 $ 20,000,000 0/100 $ -0-
TOTALS: 100% $ 275,000,000 100% $ 100,000,000 100%
<CAPTION>
EXHIBIT A
Bank Commitments
----------------
Bank Letter of
---- Credit Percent of
Total Commitment Total*
----- ---------- -----
<S> <C> <C> <C>
NationsBank, N.A. (South) $ 12,500,000 65/400 $65,000,000
Bank of America National
Trust and Savings Association $ 12,500,000 65/400 $65,000,000
First American Bank Texas,
SSB 25/400 $25,000,000
SouthTrust Bank of Alabama,
National Association 25/400 $25,000,000
Comerica Bank 35/400 $35,000,000
The First National Bank
of Chicago 22/400 $22,000,000
Bank One, Arizona, NA 30/400 $30,000,000
Sanwa Bank California 30/400 $30,000,000
AmSouth Bank of Alabama 25/400 $25,000,000
Fleet National Bank 33/400 $33,000,000
PNC Bank, National
Association 25/400 $25,000,000
Societe Generale,
Southwest Agency 20/400 $20,000,000
TOTALS: $ 25,000,000 100% $ 400,000,000
</TABLE>
- --------------------------------
* For dollar commitments, each fractional percentage should be multiplied by
100,000,000.
<PAGE>
SCHEDULE 1.88
Subsidiaries of Borrower
DRHI, Inc., a Delaware corporation
D.R. Horton, Inc. - Minnesota, a Delaware corporation
Meadows I, Ltd., a Delaware corporation
Meadows II, Ltd., a Delaware corporation
Meadows III, Ltd., a Delaware corporation
Meadows IV, Inc., a Texas corporation
Meadows V, Ltd., a Delaware corporation
Meadows VII Ltd., a Delaware corporation
Meadows VIII Ltd., a Delaware corporation
Meadows IX Ltd., a New Jersey corporation
Meadows X Ltd., a New Jersey corporation
D.R. Horton Denver Management Company, Inc., a Colorado corporation
D.R. Horton Denver No. 10, Inc., a Colorado corporation
D.R. Horton Denver No. 11, Inc., a Colorado corporation
D.R. Horton Denver No. 12, Inc., a Colorado corporation
D.R. Horton Denver No. 13, Inc., a Colorado corporation
D.R. Horton Denver No. 14, Inc., a Colorado corporation
D.R. Horton Denver No. 15, Inc., a Colorado corporation
D.R. Horton Denver No. 16, Inc., a Colorado corporation
D.R. Horton Denver No. 17, Inc., a Colorado corporation
D.R. Horton Denver No. 18, Inc., a Colorado corporation
D.R. Horton Management Company, Ltd., a Texas limited partnership
D.R. Horton - Royalty, Ltd., a Texas limited partnership
D.R. Horton, Inc. - Sacramento, a California corporation
D.R. Horton Sacramento Management Company, Inc., a California corporation
D.R. Horton Los Angeles Holding Company, Inc., a California corporation
D.R. Horton, Inc. - Albuquerque, a Delaware corporation
D.R. Horton, Inc. - Birmingham, a Delaware corporation
D.R. Horton, Inc. - Denver, a Delaware corporation
D.R. Horton, Inc. - Greensboro, a Delaware corporation
D.R. Horton, Inc. - Los Angeles, a Delaware corporation
D.R. Horton, Inc. - New Jersey, a New Jersey corporation
D.R. Horton Los Angeles Management Company, Inc., a California corporation
D.R. Horton Los Angeles No. 9, Inc., a California corporation
D.R. Horton Los Angeles No. 10, Inc., a California corporation
D.R. Horton Los Angeles No. 11, Inc., a California corporation
D.R. Horton Los Angeles No. 12, Inc., a California corporation
D.R. Horton Los Angeles No. 13, Inc., a California corporation
D.R. Horton Los Angeles No. 14, Inc., a California corporation
D.R. Horton Los Angeles No. 16, Inc., a California corporation
D.R. Horton San Diego Holding Company, Inc., a California corporation
D.R. Horton, Inc. - San Diego, a Delaware corporation
D.R. Horton San Diego Management Company, Inc., a California corporation
D.R. Horton San Diego No. 9, Inc., a California corporation
D.R. Horton San Diego No. 10, Inc., a California corporation
D.R. Horton San Diego No. 11, Inc., a California corporation
D.R. Horton San Diego No. 12, Inc., a California corporation
D.R. Horton San Diego No. 13, Inc., a California corporation
D.R. Horton San Diego No. 14, Inc., a California corporation
D.R. Horton San Diego No. 15, Inc., a California corporation
D.R. Horton San Diego No. 16, Inc., a California corporation
D.R. Horton San Diego No. 17, Inc., a California corporation
D.R. Horton San Diego No. 18, Inc., a California corporation
D.R. Horton San Diego No. 19, Inc., a California corporation
D.R. Horton San Diego No. 20, Inc., a California corporation
<PAGE>
D.R. Horton San Diego No. 21, Inc., a California corporation
D.R. Horton-Texas, Ltd., a Texas limited partnership
DRH Construction, Inc., a Delaware corporation
DRH Land Company, Inc., a California corporation
DRH New Mexico Construction, Inc., a Delaware corporation
DRH Title Company of Texas, Ltd., a Texas limited partnership
Opus Landscapes, L.L.C., a New Jersey limited liability company
Grande Realty, Inc., a New Jersey corporation
SGS Communities at Grande Quay, L.L.C., a New Jersey limited liability company
D.R. Horton, Inc. - Torrey, a Delaware corporation
<PAGE>
ACKNOWLEDGEMENT OF GUARANTORS
The undersigned Guarantors (each a "Guarantor" and collectively, the
"Guarantors")) hereby acknowledge that the Master Loan and Inter-Creditor
Agreement dated as of February 14, 1997 among D.R. Horton, Inc., a Delaware
corporation (the "Borrower"), the financial institutions parties thereto
(collectively, the "Banks"); NationsBank, N.A. (South), as issuing bank for
letters of credit (in such capacity, the "Issuing Bank"); Bank of America
National Trust and Savings Association, as documentation agent (in such
capacity, the "Documentation Agent"); and NationsBank, N.A. (South), as
administrative agent (in such capacity, the "Administrative Agent") is amended
and restated pursuant to that certain Amended and Restated Master Loan and
Inter-Creditor Agreement dated as of even date herewith (as amended and
restated, the "New Loan Agreement") by and among the Borrower, the Banks, the
Issuing Bank, the Documentation Agent and the Administrative Agent and further
certify that the Guaranty dated as of February 14, 1997 (the "Guaranty") made by
each Guarantor in favor of the Administrative Agent and each Bank continues in
full force and effect and further acknowledge and agree that the Obligations
guaranteed by the Guaranty are the Obligations as defined in the New Loan
Agreement.
IN WITNESS WHEREOF, the Guarantors have duly executed and sealed this
Acknowledgement as of the 1st day of April, 1997.
<TABLE>
<S> <C>
GUARANTORS: DRH CONSTRUCTION, INC.
DRH NEW MEXICO CONSTRUCTION, INC.
D.R. HORTON DENVER MANAGEMENT COMPANY, INC.
D.R. HORTON DENVER NO. 10, INC.
D.R. HORTON DENVER NO. 11, INC.
D.R. HORTON DENVER NO. 12, INC.
D.R. HORTON DENVER NO. 13, INC.
D.R. HORTON DENVER NO. 14, INC.
D.R. HORTON DENVER NO. 15, INC.
D.R. HORTON DENVER NO. 16, INC.
D.R. HORTON DENVER NO. 17, INC.
D.R. HORTON DENVER NO. 18, INC.
D.R. HORTON, INC. - ALBUQUERQUE
D.R. HORTON, INC. - DENVER
D.R. HORTON, INC. - MINNESOTA
D.R. HORTON, INC. - NEW JERSEY
MEADOWS IX, INC., individually and as a member
of SGS Communities at Grande Quay,L.L.C.
MEADOWS X, INC., individually and as a member
of SGS Communities at Grande Quay, L.L.C.
SGS COMMUNITIES AT GRANDE QUAY, L.L.C.
D.R. HORTON LOS ANGELES HOLDING COMPANY, INC.
D.R. HORTON LOS ANGELES MANAGEMENT
COMPANY, INC.
D.R. HORTON LOS ANGELES NO. 9, INC.
D.R. HORTON LOS ANGELES NO. 10, INC.
GUARANTORS: D.R. HORTON LOS ANGELES NO. 11, INC.
(continued) D.R. HORTON LOS ANGELES NO. 12, INC.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
D.R. HORTON LOS ANGELES NO. 13, INC.
D.R. HORTON LOS ANGELES NO. 14, INC.
D.R. HORTON LOS ANGELES NO. 16, INC.
D.R. HORTON, INC. - BIRMINGHAM
D.R. HORTON, INC. - GREENSBORO
D.R. HORTON SAN DIEGO HOLDING COMPANY, INC.
D.R. HORTON SAN DIEGO MANAGEMENT COMPANY, INC.
D.R. HORTON SAN DIEGO NO. 9, INC.
D.R. HORTON SAN DIEGO NO. 10, INC.
D.R. HORTON SAN DIEGO NO. 11, INC.
D.R. HORTON SAN DIEGO NO. 12, INC.
D.R. HORTON SAN DIEGO NO. 13, INC.
D.R. HORTON SAN DIEGO NO. 14, INC.
D.R. HORTON SAN DIEGO NO. 15, INC.
D.R. HORTON SAN DIEGO NO. 16, INC.
D.R. HORTON SAN DIEGO NO. 17, INC.
D.R. HORTON SAN DIEGO NO. 18, INC.
D.R. HORTON SAN DIEGO NO. 19, INC.
D.R. HORTON SAN DIEGO NO. 20, INC.
D.R. HORTON SAN DIEGO NO. 21, INC.
D.R. HORTON - TEXAS, LTD., by Meadows I, Inc.
a Delaware corporation
D.R. HORTON, INC. - TORREY
By:
-------------------------------------------
David J. Keller
Title: as Treasurer or another officer of
the Guarantors set forth above
</TABLE>
