<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): July 12, 1999
---------------
Sundance Homes, Inc.
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Illinois 0-21900 36-3111764
- ---------------------------- ------------ -------------------
(State or Other Jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
70 E. Lake Street, Suite 1600, Chicago, Illinois, 60601
------------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (312) 782-7100
--------------
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Item 2. Acquisition or Disposition of Assets.
Sundance Homes, Inc. ("Sundance") and certain of its subsidiaries entered
into a Sale and Purchase Agreement dated April 2, 1999 (as amended, the
"Agreement") with Centex Homes, a Nevada general partnership and a wholly owned
subsidiary of Centex Corporation, a Nevada corporation. The Agreement provided
for the sale of substantially all of the assets relating to Sundance's suburban
home building operations. The sale closed on July 12, 1999.
The consideration Sundance received consisted of cash and the assumption by
Centex Homes of certain of Sundance's liabilities under various contracts and
agreements relating to the suburban operations. The cash portion of the purchase
price, net of prorations and deductions, was approximately $51,300,000, of which
$2 million was held back by Centex Homes to pay for any indemnified liabilities
which Centex Homes might incur. The hold back will earn interest at a rate of 8%
per year. $1 million of the hold back, plus any interest earned, less amounts
which may be owed to Centex Homes, will be paid to Sundance on the first
anniversary of the closing of the transaction and the remaining $1 million, plus
any interest earned, less amounts which may be owed to Centex Homes, will be
paid to Sundance on the second anniversary of the closing. It is estimated that
the total expenses for the transaction will be approximately $835,000. The
components of the purchase price included (i) an agreed value per lot for the
land being sold, which approximates the costs incurred by Sundance in acquiring,
developing, and carrying the land, minus the costs to complete the development
of the land as of the closing date, less an aggregate of $1.6 million: (ii) the
book value of construction work-in-process, including finished model homes and
work completed; (iii) the book value of certain fixed assets and vehicles
relating to the suburban operations; and (iv) advertising expenses of $150,000
incurred by Sundance during the period between February 1, 1999 and the closing
date of the transaction. The Agreement also provides for Sundance to receive
additional consideration based on the average profit margin earned on homes in
backlog on May 1, 1999 and any additional homes in backlog on the date of the
closing. The earnback will be calculated as of December 31, 1999.
Item 5. Other Events.
In connection with the sale described above, on July 12, 1999, Sundance,
through certain wholly owned subsidiaries, entered into two new credit
agreements. One of the credit agreements is with Corus Bank, N.A. (the "New
Revolving Credit Agreement"). The other new credit agreement is with LaSalle
National Bank (the "Line of Credit"). In addition, Sundance's existing credit
agreement, dated April 30, 1998, by and among LaSalle National Bank, American
National Bank an Trust Company of Chicago and BankBoston, NA (the "Old Revolving
Credit Agreement") was terminated. In order to terminate the Old Revolving
Credit Agreement, Sundance applied approximately $37,300,000 of the proceeds
from the sale and approximately $19,300,000 and $1,200,000 from the New
Revolving Credit Agreement and the Line of Credit, respectively.
The New Revolving Credit Agreement provides for a $25,500,000 line of
credit which bears interest at the rate of prime plus 1% and matures on June 30,
2001. The total amount of
2
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disbursements which can be made under the loan is $60,100,000. The proceeds may
be used for the four urban building projects operated by the subsidiaries, who
are the "Borrowers" under the New Revolving Credit Agreement, and will be
secured by the assets of these projects. The New Revolving Credit Agreement
includes certain customary representations and covenants, including certain
restrictions on Sundance's ability to pay dividends and maintenance of certain
financial ratios. Sundance has guaranteed the obligation of the borrowers under
the New Revolving Credit Agreement. As of July 23, 1999, approximately
$22,000,000 had been borrowed under the New Revolving Credit Agreement.
The Line of Credit provides for $5,000,000 which bears interest at the rate
of LIBOR plus 250 basis points or, at the choice of Sundance, the prime rate
plus 1/2% and it matures on July 7, 2001. However, the Line of Credit may be
limited by as much as $850,000 in letters of credit. The borrowings may be used
for any general corporate purpose and are secured by a variety of inventory and
assets of the subsidiaries who have entered into the agreement as the
"Borrowers." This agreement includes certain customary representations and
covenants, including certain restrictions on Sundance's ability to pay dividends
and maintenance of certain financial ratios. Sundance and Maurice Sanderman have
guaranteed the obligation of the Borrowers under the Line of Credit. As of July
23, 1999, $4 million had been borrowed under the Line of Credit and
approximately $500,000 in letters of credit were outstanding.
3
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Item 7. Financial Statements and Exhibits.
(a) Not Applicable.
(b) The pro forma financial information required by Item 7(b) is included on
pages F-1 through F- 3.
(c) Exhibits.
2.1 Sale and Purchase Agreement dated as of April 2, 1999 by and among
Sundance, Sundance Suburban Properties, Inc., Rembrandt Homes, Inc.,
Lockport Development, Inc., McCarty's Mill Development, Inc., Sutton
Development, Inc., SAR Development, Inc., Matteson Development, Inc.,
Walnut Pointe Development, Inc. and Centex Homes, as amended.
10.1 Construction Loan Agreement dated as of June 30, 1999 by and among
Erie Center Lofts, Inc., Capitol Hill Lofts, Inc., Sangomon Lofts,
Inc., Marathon Center Inc. and Corus Bank, N.A.
10.2 Loan Agreement dated as of July 8, 1999 by and among Sundance Custom
Homes, Inc., Other Subsidiary Holdings, Inc. and LaSalle Bank National
Association.
4
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SUNDANCE HOMES, INC.
By: /s/ Joseph R. Atkin
-------------------
Name: Joseph R. Atkin
Title: Vice President and
Chief Financial Officer
Dated: July 26, 1999
5
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PRO FORMA FINANCIAL DATA
The unaudited pro forma consolidated balance sheet as of March 31, 1999
reflects the sale of assets to Centex Homes as of that date. The related
unaudited pro forma consolidated statements of operations for the year ended
September 30, 1998 and the three months ended March 31, 1999 reflect the sale of
the suburban assets to Centex Homes as of the first day of each period
presented, respectively. The column "Less: Suburban Net Assets Sold" in the
accompanying unaudited pro forma financial statements reflects direct amounts
associated with those operations.
SUNDANCE HOMES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
March 31, 1999
(Unaudited, In Thousands)
<TABLE>
<CAPTION>
Less:
Suburban
March 31, Net Assets Pro Forma Pro
1999 Sold Adjustments Forma
--------- ---------- ----------- -------
ASSETS
------ (a)
<S> <C> <C> <C> <C>
Cash and cash equivalents........... $ 2,131 $ -- $ 56,428 (b) $ 3,809
(12,000)(c)
(2,000)(d)
(40,750)(e)
Real estate inventories............. 39,578 -- -- 39,578
Assets held for sale, net of
reserve............................ 58,392 (58,392) --
Prepaid expenses and other assets... 2,099 2,000 (d) 4,099
Property and equipment, net......... 1,866 -- 1,866
-------- -------- -------- -------
$104,066 $(58,392) $ 3,678 $49,352
======== ======== ======== =======
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
<S> <C> <C> <C> <C>
Accounts payable and accrued
construction liabilities........... $ 16,705 -- $(12,000)(c) $ 4,705
Other accrued expenses.............. 2,679 -- -- 2,679
Customer deposits................... 3,115 (1,000) -- 2,115
Notes payable....................... 64,787 (964) (40,750)(e) 23,073
Secured subordinated notes payable
to Principal Shareholder........... 2,500 -- -- 2,500
Unsecured subordinated notes payable
to Principal Shareholder........... 4,498 -- -- 4,498
Equity.............................. 9,782 -- -- (f) 9,782
-------- -------- -------- -------
$104,066 $ (1,964) $(52,750) $49,352
======== ======== ======== =======
Pro Forma Net Book Value per share.. $ 1.25
=======
</TABLE>
- --------
Adjustments to the pro forma consolidated balance sheet consist of:
(a) Net suburban assets purchased by buyer.
(b) Net proceeds received from sale of suburban assets.
(c) Payoff of accounts payable on Work In Process Inventory related to the
suburban assets being sold.
(d) Holdback established with buyer as security for Sundance's indemnification
obligation.
(e) Partial paydown of outstanding line of credit.
(f) Included in the results of operation for the quarter ended March 31, 1999
was a reserve in the amount of $6,362, representing the estimated loss on
sale of suburban assets after estimated transaction costs of $835. This
loss could change due to changes in the number of lots to be sold, margin
variances on the units sold up to the date of closing, additional interest
costs and increased transaction costs incurred should the date of closing
be extended and the result of the potential earnback provision detailed in
the proxy.
F-1
<PAGE>
SUNDANCE HOMES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended September 30, 1998
(Unaudited, In Thousands)
<TABLE>
<CAPTION>
Year ended Less:
September 30, Suburban Net Pro Forma
1998 Assets Sold (a) Adjustments Pro Forma (c)
------------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Residential sales....... $122,906 $63,319 $59,587
Land and building sales. 8,650 1,700 6,950
-------- ------- ----- -------
Total sales............. 131,556 65,019 -- 66,537
Cost of residential
sales.................. 113,065 56,051 (665)(b) 56,349
Cost of land sales...... 7,069 1,190 5,879
-------- ------- ----- -------
Total cost of sales..... 120,134 57,241 (665) 62,228
-------- ------- ----- -------
Gross profit............ 11,422 7,778 665 4,309
Selling expenses........ 12,227 6,070 6,157
General and
administrative
expenses............... 4,871 -- 4,871
Other (income) expense,
net.................... (196) 22 (218)
-------- ------- ----- -------
Income (loss) before
minority interest and
provision (benefit) for
income taxes........... (5,480) 1,686 665 (6,501)
Minority interest....... (3) -- (3)
-------- ------- ----- -------
Income (loss) before
provision (benefit) for
income taxes........... (5,477) 1,686 665 (6,498)
Provision (benefit) for
income taxes........... (97) -- (97)
-------- ------- ----- -------
Net income (loss)....... $ (5,380) $ 1,686 $ 665 $(6,401)
======== ======= ===== =======
Per share loss.......... $ (0.69) $ (0.82)
Weighted average number
of shares outstanding.. 7,808 7,808
</TABLE>
- --------
Adjustments to the pro forma consolidated statement of operations:
(a) Reflects the direct results of only those operations related to the
subdivisions being sold to Centex; specifically, Bellchase, Sutton on the
Lake, The Preserves at Hearthside, Gregg's Landing, Sterling Manor, Walnut
Pointe, Cedar Creek, McCarty's Mill and Arrowhead. No allocation of
corporate costs has been reflected in these results or as a pro forma
adjustment.
(b) Estimated reduction of interest expense due to lower debt levels.
(c) Pro forma results consist of all residential, land and building sales
except those associated with the subdivisions being sold to Centex Homes.
F-2
<PAGE>
SUNDANCE HOMES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months ended March 31, 1999
(Unaudited, In Thousands)
<TABLE>
<CAPTION>
Less:
March 31, Suburban Net Pro Forma
1999 Assets Sold (a) Adjustments Pro Forma (c)
--------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
Residential sales......... $ 56,245 $33,332 $22,913
Land and building sales... 1,300 1,300 --
--------- ------- ----- -------
Total sales............... 57,545 34,632 -- 22,913
Cost of residential sales. 53,599 31,793 (229) 21,577
Cost of land sales........ 622 622 --
--------- ------- ----- -------
Total cost of sales....... 54,221 32,415 (229) 21,577
--------- ------- ----- -------
Gross profit.............. 3,324 2,217 229 1,336
Reduction in carrying
value of assets held for
sale..................... 6,362 6,362 --
Selling expenses.......... 5,321 3,019 2,302
General and administrative
expenses................. 2,420 -- 2,420
Other (income) expense,
net...................... (115) (86) (29)
--------- ------- ----- -------
Net income (loss)......... $ (10,664) $(7,078) $ 229 $(3,357)
========= ======= ===== =======
Per share loss............ $ (1.36) $ (0.43)
Weighted average number of
shares outstanding....... 7,816 7,816
</TABLE>
- --------
Adjustments to the pro forma consolidated statement of operations:
(a) Reflects the direct results of only those operations related to the
subdivisions being sold to Centex Homes; specifically, Bellchase, Sutton on
the Lake, The Preserves at Hearthside, Gregg's Landing, Sterling Manor,
Walnut Pointe, Cedar Creek, McCarty's Mill and Arrowhead. No allocation of
corporate costs have been reflected in these results or as a pro forma
adjustment.
(b) Estimated reduction of interest expense due to lower debt levels.
(c) Pro forma results consist of all residential, land and building sales
except those associated with the subdivisions being sold to Centex Homes.
F-3
<PAGE>
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit # Description
- --------- ---------------------------------------------------------------------------
<C> <S>
2.1 Sale and Purchase Agreement dated as of April 2, 1998 by and among
Sundance, Sundance Suburban Properties, Inc., Rembrandt Homes, Inc.,
Lockport Development, Inc., McCarty's Mill Development, Inc., Sutton
Development, Inc., SAR Development, Inc., Matteson Development, Inc.,
Walnut Pointe Development, Inc. and Centex Homes, as amended.*
10.1 Construction Loan Agreement dated as of June 30, 1999 by and among
Erie Center Lofts, Inc., Capitol Hill Lofts, Inc., Sangomon Lofts, Inc.,
Marathon Center Inc. and Corus Bank, N.A.*
10.2 Loan Agreement dated as of July 8, 1999 by and among Sundance Custom
Homes, Inc., Other Subsidiary Holdings, Inc. and LaSalle Bank National
Association.*
</TABLE>
______________
* Filed herewith.
<PAGE>
Exhibit 2.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SALE AND PURCHASE AGREEMENT
by and among
SUNDANCE HOMES, INC.,
SUNDANCE SUBURBAN PROPERTIES, INC.,
REMBRANDT HOMES, INC.,
LOCKPORT DEVELOPMENT, INC.,
MCCARTY'S MILL DEVELOPMENT, INC.,
SUTTON DEVELOPMENT, INC.,
SAR DEVELOPMENT, INC.,
MATTESON DEVELOPMENT, INC.,
WALNUT POINTE DEVELOPMENT, INC.,
and
CENTEX HOMES
April 2, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I--TERMS OF THE TRANSACTION....................................... 1
1.1 Sale of Assets...................................................... 1
1.2 Excluded Assets..................................................... 2
1.3Consideration........................................................ 2
1.4Holdback............................................................. 3
1.5Earnest Money........................................................ 3
1.6Tax Allocation....................................................... 3
1.7Assumed Liabilities.................................................. 3
1.8Excluded Liabilities................................................. 4
ARTICLE II--THE CLOSING................................................... 5
2.1Time and Place of Closing............................................ 5
2.2Deliveries of the Selling Parties at the Closing..................... 5
2.3Deliveries of Buyer at the Closing................................... 6
ARTICLE III--REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES............ 6
3.1Organization......................................................... 6
3.2Qualification........................................................ 7
3.3Power and Authority.................................................. 7
3.4Subsidiaries......................................................... 7
3.5Organizational Documents of the Company and its Subsidiaries......... 8
3.6No Default Resulting from Agreement.................................. 8
3.7Required Consents and Approvals...................................... 8
3.8Financial Statements/SEC Filings..................................... 8
3.9Undisclosed Liabilities.............................................. 9
3.10 Reserved........................................................... 9
3.11 Reserved........................................................... 9
3.12 Real Property...................................................... 9
3.13 Leases............................................................. 12
3.14 Health and Safety.................................................. 12
3.15 Legal Proceedings.................................................. 12
3.16 Tax Matters........................................................ 13
3.17 Permits............................................................ 14
3.18 Personal Property.................................................. 14
3.19 Contracts.......................................................... 14
3.20 Conduct in the Ordinary Course; Absence of Certain Changes, Events
and Conditions......................................................... 16
3.21 Insurance.......................................................... 17
3.22 Environmental Matters.............................................. 17
3.23 Intellectual Property Rights....................................... 19
3.24 Employee Benefit Plans............................................. 19
3.25 Labor Relations.................................................... 19
3.26 Reserved........................................................... 20
3.27 Transactions with Affiliates....................................... 20
3.28 Brokerage Fees..................................................... 20
3.29 Representations and Warranties..................................... 20
ARTICLE IV--REPRESENTATIONS AND WARRANTIES OF BUYER....................... 21
4.1 Existence........................................................... 21
4.2 Power; No Conflict.................................................. 21
</TABLE>
i
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<TABLE>
<S> <C>
4.3 Director Approval.................................................... 21
4.4 No Consents Necessary................................................ 21
4.5 No Default Resulting from Agreement.................................. 21
4.6 Brokers or Finders................................................... 21
ARTICLE V--ACTIONS OF THE SELLING PARTIES BEFORE THE CLOSING DATE.......... 21
5.1 Conduct of Business.................................................. 21
5.2 Restrictions on Certain Actions Before Closing....................... 21
ARTICLE VI--ADDITIONAL AGREEMENTS.......................................... 23
6.1 Access to Information................................................ 23
6.2 Notification of Certain Matters...................................... 23
6.3 Acquisition Proposals................................................ 23
6.4 Schedules............................................................ 25
6.5 Reasonable Best Efforts.............................................. 25
6.6 Solicitation of Shareholder Approval by the Company.................. 25
6.7 Public Announcements................................................. 25
6.8 Indemnification of Claims of Brokers................................. 25
6.9 Fees and Expenses.................................................... 25
6.10 Tax Matters......................................................... 26
6.11 Nondisclosure....................................................... 26
6.12 Non-Competition..................................................... 27
6.13 Employees and Employee Benefits..................................... 27
6.14 Good Title: Title Insurance......................................... 28
6.15 Further Assurances.................................................. 30
6.16 Selling Parties' Name............................................... 30
6.17 Release of Bonds.................................................... 30
6.18 Kaco Partnership.................................................... 30
6.19 Illinois Income Tax Withholding..................................... 31
6.20 Compliance with Illinois Responsible Transfer Act of 1988........... 31
6.21 Design Center....................................................... 31
6.22 Work-in Progress.................................................... 31
6.23 Warranty and Winter Work Agreement.................................. 31
6.24 Fairness Opinion.................................................... 31
6.25 Assignment of Remedies Against Subcontractors....................... 32
ARTICLE VII--CONDITIONS TO OBLIGATIONS OF SELLING PARTIES.................. 32
7.1Covenants and Agreements Performed.................................... 32
7.2Representations and Warranties True................................... 32
7.3Reserved.............................................................. 32
7.4Reserved.............................................................. 32
7.5Board and Shareholder Approval........................................ 32
ARTICLE VIII--CONDITIONS TO OBLIGATIONS OF BUYER........................... 33
8.1Feasibility Period.................................................... 33
8.2Covenants and Agreements Performed.................................... 33
8.3Default............................................................... 33
8.4Representations and Warranties True................................... 33
8.5No Material Adverse Change............................................ 33
8.6Consents.............................................................. 33
8.7RPTA.................................................................. 33
8.8Closing Deliveries.................................................... 33
8.9Litigation............................................................ 34
</TABLE>
ii
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<TABLE>
<S> <C>
8.10 Environmental Audit................................................. 34
8.11 Reserved............................................................ 34
8.12 Selling Parties Board of Directors and Shareholder Approval......... 34
ARTICLE IX--TERMINATION.................................................... 34
9.1Termination........................................................... 34
9.2Effect of Termination................................................. 36
ARTICLE X--TERMINATION PAYMENTS............................................ 36
10.1 Termination Fee Deposit............................................. 36
10.2 Delivery of Earnest Money Deposit................................... 37
10.3 Judicial Enforcement................................................ 37
ARTICLE XI--INDEMNIFICATION................................................ 37
11.1 Indemnification by the Selling Parties.............................. 37
11.2 Indemnification by Buyer............................................ 38
11.3 Third-Party Claims.................................................. 38
11.4 Notice.............................................................. 38
11.5 Right of Set Off.................................................... 38
11.6 Good Faith Exercise; No Breach...................................... 40
11.7 Indemnity Basket and Maximum Recovery............................... 40
ARTICLE XII--SURVIVAL...................................................... 40
12.1 Survival of Representations and Warranties.......................... 40
12.2 Survival of Agreements and Covenants................................ 40
ARTICLE XIII--MISCELLANEOUS................................................ 41
13.1Predecessors Included................................................ 41
13.2Notices.............................................................. 41
13.3Bulk Sales Law....................................................... 42
13.4No Obligation of Buyer Before the Closing............................ 42
13.5Entire Agreement..................................................... 42
13.6Binding Effect; Assignment; No Third Party Benefit................... 42
13.7Reserved............................................................. 42
13.8Governing Law........................................................ 42
13.9Descriptive Headings................................................. 42
13.10 Gender............................................................. 42
13.11 References......................................................... 42
13.12 Counterparts....................................................... 43
13.13 Construction....................................................... 43
13.14 Reserved........................................................... 43
13.15 Waiver of Jury Trial............................................... 43
ARTICLE XIV--DEFINITIONS................................................... 43
14.1Certain Defined Terms................................................ 43
14.2Certain Additional Defined Terms..................................... 46
</TABLE>
iii
<PAGE>
SCHEDULE OF EXHIBITS
Exhibit A--Earnest Money Escrow Agreement
Exhibit B--Legal Opinion for Selling Parties
Exhibit C--Form of Bill of Sale
Exhibit D--Form of Special Warranty Deed
Exhibit E--Noncompetition Agreement of Maurice Sanderman
Exhibit F--Legal Opinion of Buyer
Exhibit G--Voting Agreement
Exhibit H--Termination Fee Promissory Note
Exhibit I-- Performance Guarantee Agreement
iv
<PAGE>
SCHEDULES
Schedule 1.1--Assets
Schedule 1.2--Excluded Assets
Schedule 1.3--Purchase Price
Schedule 1.7--Assumed Liabilities
Schedule 2.2--Liens
Schedule 3.2--Qualification
Schedule 3.4--Subsidiaries
Schedule 3.6--No Default Resulting from Agreement
Schedule 3.7--Required Consents and Approvals
Schedule 3.8--Financial Statements
Schedule 3.12--Real Property
Schedule 3.13--Leases
Schedule 3.14--Health and Safety
Schedule 3.15--Legal Proceedings
Schedule 3.16--Tax Matters
Schedule 3.17--Permits
Schedule 3.19--Contracts
Schedule 3.20--Conduct in the Ordinary Course
Schedule 3.21--Insurance
Schedule 3.22--Environmental Matters
Schedule 3.23--Intellectual Property Rights
Schedule 3.25--Labor Relations
Schedule 3.27--Transactions with Affiliates
Schedule 6.17--Release of Bonds
v
<PAGE>
SALE AND PURCHASE AGREEMENT
This SALE AND PURCHASE AGREEMENT (this "Agreement") is made and entered
into effective as of April 2, 1999 (the "Effective Date"), by and among
SUNDANCE HOMES, INC., an Illinois corporation ("Seller" or the "Company"),
SUNDANCE SUBURBAN PROPERTIES, INC., an Illinois corporation ("SSPI"),
REMBRANDT HOMES, INC., an Illinois corporation ("Rembrandt"), LOCKPORT
DEVELOPMENT, INC., an Illinois corporation ("Lockport", MCCARTY'S MILL
DEVELOPMENT, INC., an Illinois corporation ("MMDI"), SUTTON DEVELOPMENT, INC.,
an Illinois corporation ("Sutton"), SAR DEVELOPMENT, INC., an Illinois
corporation ("SAR"), MATTESON DEVELOPMENT, INC., an Illinois corporation
("Matteson"), WALNUT POINTE DEVELOPMENT, INC., an Illinois corporation
("Walnut," along with SSPI, Rembrandt, Lockport, MMDI, Sutton, SAR and
Matteson are collectively referred to as the "Subsidiaries"), and CENTEX
HOMES, a Nevada general partnership ("Buyer").
WITNESSETH:
WHEREAS, the Company and the Subsidiaries (collectively, the "Selling
Parties") own certain assets, including real property, used in the business of
constructing and marketing single-family detached residential homes, townhomes
and duplexes in the greater Chicago, Illinois suburban area, as more
particularly described in this Agreement (the "Business"). It is understood
and agreed that "Business" as used herein shall not include certain assets
listed on Schedule 1.2(i) relating to certain discontinued projects in the
Selling Parties' suburban operations.
WHEREAS, Buyer has agreed to purchase from the Selling Parties, and the
Selling Parties have agreed to sell to Buyer, certain properties and assets,
including, but not limited to, the properties and assets which are described
on Schedule 1.1 and used in the Business.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the parties hereby agree as follows:
ARTICLE I
TERMS OF THE TRANSACTION
1.1 Sale of Assets. At the Closing (as defined below) and on the terms and
subject to the conditions set forth in this Agreement, the Selling Parties
shall sell, assign, transfer, deliver and convey (collectively, "transfer"),
or cause to be transferred, to Buyer, and Buyer shall purchase from the
Selling Parties, all of the following assets and properties of the Selling
Parties existing on the Closing Date (as defined below):
(i) All right, title and interest of the Selling Parties in and to any
parcels of land owned in fee and any improvements thereon located in the
Chicago, Illinois suburban area (including developed land and lots,
undeveloped land and parcels of land included in ongoing development
projects, model homes (the "Owned Model Homes") and houses under
construction) listed and described in Schedule 1.1(i) attached hereto and
all rights and appurtenances incidental thereto, including all right, title
and interest in and to water rights, mineral rights and adjacent easements,
streets, alleys and rights-of-way (collectively, the "Housing Property");
(ii) All right, title and interest of the Selling Parties in and to any
of the following properties and assets associated with the Business
(collectively, the "Personal Property"): (a) furnishings located in the
Model Homes (as defined below), furniture, fixtures, equipment, computers
and machinery, (b) earnest money deposits under Land Purchase Agreements
(as defined below), deposits and all other claims and rights of action of
any kind now or hereafter existing or arising which relate to the
ownership, operation, development or construction of the Housing Property
or other tangible and intangible personal property of
1
<PAGE>
the Selling Parties, including rights to recapture refunds due to the
Selling Parties from municipalities, towns and cities, or from other third
parties, for improvements to land adjacent to any of the Housing Property,
(c) documents evidencing the Selling Parties' right or entitlement to
acquire water service or sewer service, (d) the name "Rembrandt Homes" and
any derivatives or designs thereof, either in word form or as a design, and
any other names, trademarks, service marks, trade names, brand names, logos
or slogans or any other Intellectual Property (as defined below) used or
available for use by the Selling Parties in the Business (except for the
name "Sundance" and derivatives or designs thereof), together with all
goodwill associated therewith and all rights to sue for and receive damages
or other relief in respect of any past infringement or other violation of
any rights thereto, (e) all governmental approvals, licenses, permits,
rights and other kinds of entitlement relating to the Housing Property, and
(f) site plans, subdivision plans, development plans, soil and substrata
surveys, studies, architectural renderings, plans and specifications,
engineering plans and studies, house plans, floor plans, landscape plans
and all other plans, diagrams or studies of any kind relating to the
Housing Property, including, but not limited to, the Personal Property
listed and described on Schedule 1.1(ii);
(iii) All rights and interests of the Selling Parties under or in
respect of (a) any written contracts or agreements for the purchase of lots
and/or parcels of land located in the Chicago, Illinois suburban area (the
"Land Purchase Agreements"), including, but not limited to, the Land
Purchase Agreements listed or described in Schedule 1.1(iii)(a), subject,
however, to the Selling Parties obtaining the consents necessary to assign
the rights with respect thereto, (b) any written contracts or agreements
for the sale of completed homes located in the Chicago, Illinois suburban
area (the "Sales Contracts") that are listed and described on Schedule
3.12(iii), (c) any other written or oral contracts, commitments and
agreements of the Selling Parties related to the Business, including sales
contracts, subcontracts, leases of personal property, executory agreements
to option or buy land, and guaranties and warranties issued to the Selling
Parties, relating to the Housing Property or the Personal Property listed
or described in Schedule 1.1(iii)(c) (the "Contracts"), subject, however,
to the Selling Parties obtaining the consents necessary to assign the
rights with respect thereto, (d) any written contracts or agreements for
the lease of model homes located in the Chicago, Illinois suburban area
listed or described on Schedule 1.1(iii)(d) (the "Leased Model Homes" and,
together with the Owned Model Homes, the "Model Homes"), and (e) the
Sundance-Kaco Limited Partnership, an Illinois limited partnership (the
"Kaco Partnership"); and
(iv) All other properties, assets, claims, rights and entitlements of
the Selling Parties of any kind, character and description whatsoever
(whether or not reflected on the books of the Selling Parties and whether
real, personal or mixed, tangible or intangible, contingent or otherwise)
used, or available for use, in the Business or necessary for the
continuation of the Business or operations consistent with past practice
(the "Miscellaneous Property").
The Housing Property, the Personal Property, the Land Purchase Agreements,
the Sales Contracts, the Contracts, the Leased Model Homes, the Kaco
Partnership and the Miscellaneous Property are hereinafter collectively
referred to as the "Assets." The Assets shall be sold to Buyer free and clear
of all Liens (as defined below), except for the Permitted Encumbrances (as
defined below) or, as necessary, assigned to Buyer.
1.2 Excluded Assets. Notwithstanding any provision contained in this
Agreement to the contrary, the assets relating to certain discontinued
projects in the Selling Parties' suburban operations not used in the Business
and described in Schedule 1.2(i) and the other assets and properties of the
Selling Parties used in the Selling Parties' Chicago, Illinois urban
homebuilding operations described on Schedule 1.2(ii) shall be excluded from
the Assets to be transferred to Buyer (the "Excluded Assets").
1.3 Consideration. Buyer shall pay to the Selling Parties at the Closing
the aggregate purchase price calculated in the manner set forth on Schedule
1.3 (the "Purchase Price") less the Holdback (as defined below). The Purchase
Price, less the Holdback, shall be paid to the Selling Parties in immediately
available funds by confirmed wire transfer to a bank account designated by the
Selling Parties.
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1.4 Holdback. In order to secure the indemnity obligation of the Selling
Parties under Article XI, and without limiting any other rights which Buyer
may have pursuant to this Agreement or otherwise, Buyer shall be entitled to
withhold from the Purchase Price payable to the Selling Parties at the Closing
the amount of Two Million Dollars ($2,000,000) (the "Holdback"), which amount
shall accrue interest at the rate of 8% per year and be held by Buyer for two
years following the Closing Date in accordance with the terms and conditions
set forth in Section 11.5. On the first anniversary of the Closing Date, One
Million Dollars ($1,000,000) of the Holdback, less any amounts paid to Buyer
pursuant to Section 11.5 as Liquidated Losses or withheld as a Setoff Reserve,
shall be paid to the Selling Parties. On the second anniversary of the Closing
Date, the amount, if any, including interest accrued thereon, remaining in
such Holdback (other than amounts reserved by Buyer pursuant to Section
11.5(ii)) shall be promptly distributed to the Selling Parties.
1.5 Earnest Money. Buyer shall, within two (2) Business Days of the
execution of the escrow agreement (the "Earnest Money Escrow Agreement")
attached hereto as Exhibit A, cause to be deposited with TICOR Title Insurance
Company, as escrow agent selected by the parties, earnest money in the amount
of One Million Five Hundred Thousand Dollars ($1,500,000) (the "Earnest Money
Deposit") in accordance with the Earnest Money Escrow Agreement. The Earnest
Money Deposit shall either be applied to the Purchase Price at Closing,
returned to Buyer in accordance with Section 10.2(i), or delivered to Seller
as liquidated damages in accordance with Section 10.2(ii).
1.6 Tax Allocation. The Purchase Price shall be allocated among the Assets
in the manner set forth in a schedule that shall be prepared by the parties
within five days prior to the Closing Date (the "Purchase Price Allocation
Schedule"). The parties shall use the allocations contained in the Purchase
Price Allocation Schedule for purposes of any required tax returns or other
filings made with the Internal Revenue Service pursuant to Section 1060 of the
Internal Revenue Code of 1986, as amended. In addition, the parties shall
determine the value of the agreement of the Selling Parties not to compete
with Buyer as set forth in Section 6.12 of this Agreement.
1.7 Assumed Liabilities. Buyer agrees to assume, upon the terms and subject
to the conditions set forth herein, at the Closing, and thereafter to pay,
perform and discharge, the following liabilities and obligations of the
Selling Parties (but only such liabilities and obligations) (the "Assumed
Liabilities"):
(i) All obligations of the Selling Parties accruing after the Closing
Date under the Land Purchase Agreements, the Contracts, the Sales Contracts
and the Leased Property leases identified in Schedules 1.1(iii)(a),
1.1(iii)(c), 3.12(iii) and 1.1(iii)(d) hereto, respectively.
(ii) All obligations of the Selling Parties accruing after the Closing
Date under the Permits (as defined below) included in the Assets, but only
to the extent that such obligations arise from the operation of the Assets
after the Closing Date.
(iii) All obligations of the Selling Parties to perform warranty repairs
pursuant to the express terms of the Selling Parties' warranty, a copy of
which is attached hereto as Schedule 1.7(iii)(a), to residential homes that
are located in those neighborhoods listed on Schedule 1.7(iii)(b) and the
sales of which were closed by any of the Selling Parties in the twelve (12)
months immediately preceding the Closing Date, except that Buyer shall not
be responsible in any way for such warranty repairs with respect to such
residential homes to the extent such repairs (including the costs of
material and labor) either (a) exceed One Thousand Dollars ($1,000) in
direct costs per residential home or an average of Three Hundred Dollars
($300) per residential home or (b) are not within the scope of the express
warranty attached on Schedule 1.7(iii)(a).
(iv) All other obligations of the Selling Parties related solely to the
Assets (other than the Land Purchase Agreements, the Contracts, the Sales
Contracts, the Leased Property leases and the Permits, which obligations
are being assumed pursuant to Sections 1.7(i) and (ii) above) accruing
after the Closing Date in the ordinary course of business.
(v) All amounts to be paid for work-in-progress performed in the
ordinary course for which an invoice is delivered to the Selling Parties
after the date of the Pre-Closing Balance Sheet (as defined in Schedule
1.3) for work performed on any of the Developed Property (regardless of
whether such work is performed before the Closing Date). As used in this
provision, work-in-progress is performed "in the ordinary course" if it is
work done on a home included in the Assets that adds value to the home
commensurate with (and at) the price specified in the applicable Contract.
The liability assumed in this provision is the full price stated in the
Contract, less any increment already paid, but does not include any
additional charges and/or rework necessary to correct construction defects.
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(vi) All ad valorem property Taxes with respect to the Assets for the
period applicable to 1998 and 1999 not yet due and payable prior to the
Closing Date, to the extent that Buyer has received a proration credit as
calculated pursuant to Section 6.10(iv).
(vii) The liabilities for retention payments securing performance of
subcontractor work that are set forth on Schedule 1.7(vii).
(viii) The obligations of the Selling Parties related to the Kaco
Partnership accruing after the Closing Date, to the extent the Selling
Parties' interest in the Kaco Partnership is assigned, transferred or
conveyed to Buyer.
1.8 Excluded Liabilities. Buyer shall not be obligated to pay, assume,
perform or discharge any liability or obligation of the Selling Parties other
than the Assumed Liabilities. In addition, except as expressly otherwise
provided in this Agreement, Buyer shall not pay, assume, perform or discharge
any of the following debts, liabilities or obligations of the Selling Parties
(the "Excluded Liabilities"):
(i) Liabilities in respect of any claims or Proceedings (as defined
below) related to the Assets accruing before or on the Closing Date.
(ii) Any liability or obligation of the Selling Parties resulting from
or relating to the employment relationship between the Selling Parties and
any of the Selling Parties' present or former employees or the termination
of any such employment relationship, including without limitation severance
pay and other similar benefits, if any, and any claims filed on or before
the Closing Date or which may thereafter be filed by or on behalf of any
such present or former employee relating to the employment or termination
of employment of any such employee by a Selling Party, including without
limitation any claim for wrongful discharge, breach of contract, unfair
labor practice, employment discrimination, unemployment compensation, or
workers' compensation.
(iii) Liabilities or obligations of the Selling Parties arising from
conditions existing on or before the Closing Date under Environmental Laws
(as defined below).
(iv) Liabilities or obligations the existence of which causes (alone or
together with other facts) a representation or warranty of the Selling
Parties contained in this Agreement to be untrue or which causes any
covenant of the Selling Parties contained herein to be breached.
(v) Liabilities or obligations of the Selling Parties under the Land
Purchase Agreements, the Sales Contracts, the Contracts, the Leased
Property leases and the Permits to the extent that such liabilities or
obligations accrue or arise on or before the Closing Date.
(vi) Liabilities or obligations of the Selling Parties existing at or
arising after the Closing Date under the Sales Contracts, the Contracts,
the Land Purchase Agreements, the Leased Property leases, the Permits or
any other leases, contracts or agreements included in the Assets which
results from the breach, default, or wrongful action or inaction of the
Selling Parties before the close of business on the Closing Date.
(vii) Any liabilities or obligations of the Selling Parties relating to
the Excluded Assets.
(viii) Except as set forth in Section 1.7 (iii) above, any liability or
obligation of the Selling Parties in respect of any express or implied
representation, warranty, agreement or guaranty made (or claimed to have
been made) by the Selling Parties, or imposed (or asserted to be imposed)
by operation of law, in respect of any products produced, distributed, or
sold by the Selling Parties or services performed in connection with the
Business or the Assets on or before the Closing Date.
(ix) Any income Tax (as defined below) liabilities or deficiencies
arising from the Assets, whether federal, state, or local Taxes, in each
such case to the extent applicable to periods ending on or before the
Closing Date.
(x) Expenditures and obligations necessary to complete the construction
of or landscaping surrounding residential homes that the Selling Parties
have constructed and closed on or before the Closing Date (the "Winter
Work").
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ARTICLE II
THE CLOSING
2.1 Time and Place of Closing. The sale and purchase of the Assets shall be
consummated at a closing (the "Closing") to be held at the offices of Katten
Muchin & Zavis in Chicago, Illinois on or before April 30, 1999, or on such
other date as the parties may mutually agree upon in writing; provided,
however, that Buyer or the Company may extend the Closing as necessary to
fulfill any closing condition that this Agreement requires such party to
perform on or prior to the Closing Date; provided, further, however, that in
no event shall any party extend the Closing past July 30, 1999. The date and
time of the Closing is hereinafter referred to as the "Closing Date." All
Closing transactions shall be deemed to have occurred simultaneously.
2.2 Deliveries of the Selling Parties at the Closing. At the Closing, the
Selling Parties will deliver to Buyer the following:
(i) A copy of the Articles of Incorporation of each of the Selling
Parties certified by the appropriate authority of the State of Illinois
dated no earlier than five (5) days before the Closing Date.
(ii) One or more certificates of the appropriate authority of the State
of Illinois, dated no earlier than fifteen (15) days before the Closing
Date, with respect to the payment of all franchise taxes by each of the
Selling Parties and the corporate existence of each of the Selling Parties
in the State of Illinois.
(iii) A certified copy of corporate resolutions duly adopted by the
Board of Directors of each of the Selling Parties authorizing the
consummation of the transactions contemplated hereby, duly executed by
their respective Secretaries.
(iv) A certificate from the Secretary of each of the Selling Parties
that the shareholders of each of the Selling Parties have authorized the
consummation of the transactions contemplated by this Agreement.
(v) Subject to the receipt by the Selling Parties of the necessary
consents (as listed on Schedule 3.7), the assignment of the Kaco
Partnership interest and the profit participation agreement, if applicable,
the Contracts, the Sales Contracts, the Land Purchase Agreements and the
Leased Property leases.
(vi) The certificates to be delivered by each of the Selling Parties in
accordance with Sections 8.2 through 8.5.
(vii) The opinion of Katten Muchin & Zavis, counsel to the Selling
Parties, in the form attached hereto as Exhibit B.
(viii) A Bill of Sale (the "Bill of Sale"), dated the Closing Date, in
the form attached hereto as Exhibit C, whereby the Assets (other than the
Housing Property, the Land Purchase Agreements and the Kaco Partnership)
are to be conveyed and assigned by the Selling Parties to Buyer, duly
executed by each of the Selling Parties, as applicable.
(ix) One or more special warranty deeds ("Special Warranty Deeds"), all
dated the Closing Date, in the form attached hereto as Exhibit D, as shall
be effective to vest in Buyer title to the Housing Property.
(x) The owner's policies of title insurance required under Section 6.14.
(xi) Originals or, to the extent originals are not available, copies as
listed on Schedule 2.2(xi), of all the Sales Contracts, the Contracts, the
Land Purchase Agreements and the Selling Parties' records related to the
Kaco Partnership, and copies of all of the Selling Parties' records, files
and other data relating to the Assets, which documents the Selling Parties
represent and warrant are in the Selling Parties' office in Schaumburg,
Illinois.
(xii) All consents or approvals of any third party which are necessary
in order for the assignment, conveyance or transfer of any part of the
Assets to be valid and effective.
(xiii) A Certificate of Non-Foreign Status duly executed by each of the
Selling Parties pursuant to Section 1445 of the Code and the regulations
promulgated thereunder.
(xiv) All instruments and documents required by Buyer from the Selling
Parties in order to assign to Buyer all of the right, title and interest of
the Selling Parties in and to all protective covenants, conditions and
restrictions and similar documents relative to the Housing Property.
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(xv) Except as set forth in Schedule 3.17(v), all instruments and
documents required by Buyer from the Selling Parties in order to assign to
Buyer all of the right, title and interest of the Selling Parties in and to
the Permits.
(xvi) Current UCC search reports showing no Liens as to the Personal
Property other than the Liens listed in Schedule 2.2(xvi).
(xvii) All such duly authorized and executed documents as may be
required to change the name or the assumed name of any Selling Party, if
applicable, as of the date hereof to another name bearing no similarity to
"Rembrandt Homes," including without limitation, an amendment to the
articles of incorporation of such Selling Party or Parties, as the case may
be, providing for such change of name and appropriate name change notices
for each state in which such Selling Party or Parties, as the case may be,
are qualified to do business.
(xviii) A noncompetition agreement executed by Maurice Sanderman, in the
form provided in Exhibit E (the "Noncompetition Agreement").
(xix) Assignment of the Selling Parties' rights under existing
Homeowners' Associations related to any of the Housing Property.
(xx) All other instruments and documents required to be executed and
delivered by the Selling Parties to Buyer at the Closing pursuant to the
provisions of this Agreement.
2.3 Deliveries of Buyer at the Closing. At the Closing, Buyer shall deliver
to the Selling Parties the following, in form and content reasonably
satisfactory to the Selling Parties:
(i) A copy of the general partnership agreement of Buyer, certified by
an assistant secretary of the general partner of Buyer.
(ii) A copy of the Articles of Incorporation of the managing general
partner of Buyer, certified by the Secretary of the State of Nevada no
earlier than thirty (30) days before the Closing Date.
(iii) A certificate of the Secretary of State of Nevada, dated no
earlier than thirty (30) days before the Closing Date, with respect to the
corporate existence of the managing general partner of Buyer in the State
of Nevada.
(iv) A certificate of the Secretary of the State of Illinois, dated no
earlier than thirty (30) days before the Closing Date, with respect to the
qualification of Buyer to transact business in the State of Illinois.
(v) A certified copy of corporate resolutions duly adopted by the Board
of Directors of the managing general partner of Buyer authorizing the
consummation of the transactions contemplated hereby by Buyer, duly
executed by the Secretary or an Assistant Secretary of the managing general
partner of Buyer.
(vi) The opinion of Brian J. Woram, counsel for the managing general
partner of Buyer, in the form attached hereto as Exhibit F.
(vii) The Purchase Price in immediately available funds by wire
transfer.
(viii) Instruments of assumption in form and substance reasonably
satisfactory to the Selling Parties pursuant to which Buyer shall assume,
at the Closing, and thereafter pay, perform and discharge, the Assumed
Liabilities.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES
As an inducement to execute this Agreement and to consummate the
transactions contemplated hereby, the Company represents and warrants, and
each Selling Party jointly and severally represents and warrants to Buyer as
follows:
3.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Illinois. No
Proceedings to dissolve the Company are pending or threatened.
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3.2 Qualification. Each of the Company and the Subsidiaries is duly
qualified or licensed to do business and each of the Company and the
Subsidiaries is in good standing in each of the jurisdictions set forth
opposite its name on Schedule 3.2, which are all the jurisdictions in which it
owns, leases, or operates property or in which such qualification or licensing
is required for the conduct of its business.
3.3 Power and Authority. The Company has all requisite corporate power and
authority to own or lease its assets and properties and to conduct its
business as and in the places where such assets and properties are now owned,
leased or operated, and such business is now conducted, and the Company has
complied in all material respects with all federal, state, local and foreign
laws with respect to its operations and the conduct of its business. The
Company has all requisite corporate power and authority to make, execute and
perform this Agreement and the transactions contemplated hereby and the
execution, delivery and performance of this Agreement have been duly and
validly authorized by all necessary corporate action of the Company. This
Agreement has been duly and validly executed and delivered by the Company and
each of the Subsidiaries and is a valid and binding obligation of the Company
and each of the Subsidiaries, enforceable in accordance with its terms except
that enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws and judicial decisions affecting
creditors' rights generally and (ii) equitable principles which may limit the
availability of certain equitable remedies (such as specific performance) in
certain instances.
3.4 Subsidiaries.
(i) The Company does not own, directly or indirectly, any capital stock
of any corporation or have any direct or indirect equity or ownership
interest in any other person (as defined below) involved in the activities
of the Business, other than the Subsidiaries. Schedule 3.4(i) lists each
Subsidiary, the jurisdiction of incorporation of each Subsidiary, and the
authorized and outstanding capital stock of each Subsidiary. Each
Subsidiary is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. Each
Subsidiary has all requisite corporate power and corporate authority to
own, lease, and operate its properties and to carry on its business as now
being conducted and the Subsidiaries have complied in all material respects
with all federal, state, local and foreign laws with respect to their
respective operations and the conduct of the Business. No Proceedings to
dissolve any Subsidiary are pending.
(ii) Except as otherwise indicated on Schedule 3.4(ii), all the
outstanding capital stock of each Subsidiary is owned directly or
indirectly by the Company, free and clear of all Encumbrances (as defined
below) and on Closing Date the Company will be the record and beneficial
owner and holder of all of the outstanding capital stock of each Subsidiary
and will have good, valid and marketable title to all of the issued and
outstanding capital stock of each Subsidiary. All outstanding shares of
capital stock of each Subsidiary have been validly issued and are fully
paid and nonassessable. No shares of capital stock of any Subsidiary are
subject to, nor have any been issued in violation of, preemptive or similar
rights.
(iii) Except as set forth on Schedule 3.4(iii), there are (and as of the
Closing Date there will be) outstanding (a) no shares of capital stock or
other voting securities of any Subsidiary, (b) no securities of the Company
or any Subsidiary convertible into or exchangeable for shares of capital
stock or other voting securities of any Subsidiary, (c) no options or other
rights to acquire from the Company or any Subsidiary, and no obligation of
the Company or any Subsidiary to issue or sell, any shares of capital stock
or other voting securities of any Subsidiary or any securities convertible
into or exchangeable for such capital stock or voting securities, and (d)
no equity equivalents, interests in the ownership or earnings, or other
similar rights of or with respect to any Subsidiary. There are (and as of
the Closing Date there will be) no outstanding obligations of the Company
or any Subsidiary to repurchase, redeem, or otherwise acquire any of the
foregoing shares, securities, options, equity equivalents, interests, or
rights. There are no voting trusts, stockholder agreements, proxies or
other agreements or understandings in effect with respect to the voting or
transfer of any Subsidiary's capital stock.
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3.5 Organizational Documents of the Company and its Subsidiaries. The
Company has delivered to Buyer accurate and complete copies of (i) the charter
and bylaws of each of the Company and the Subsidiaries as currently in effect,
(ii) the stock records of each of the Subsidiaries, and (iii) the minutes of
all meetings of the respective Boards of Directors of the Company and the
Subsidiaries, any committees of such Boards, and the shareholders of the
Company and the Subsidiaries (and all consents in lieu of such meetings). Such
records, minutes, and consents accurately reflect the stock ownership of the
Subsidiaries and all actions taken by such Boards of Directors, committees,
and shareholders. Neither the Company nor any Subsidiary is in violation of
any provision of its charter or bylaws, other than violations which,
individually or in the aggregate, do not and will not have a material adverse
effect on the Business, Assets, results of operations, condition (financial or
otherwise), or prospects of the Company and the Subsidiaries considered as a
whole.
3.6 No Default Resulting from Agreement. Neither the execution and delivery
of this Agreement nor the performance of its terms will result in any breach
of the terms and conditions of, or constitute a default under or result in the
acceleration, modification or cancellation of, the charter or bylaws of the
Company or any Subsidiary or, except as set forth in Schedule 3.6, any
agreement, lease, mortgage, note, instrument, undertaking, judgment, decree,
governmental order or other restriction or obligation to which a Selling Party
is a party or by which a Selling Party or any of the Assets may be bound or
affected.
3.7 Required Consents and Approvals. Except as set forth on Schedule 3.7,
no consent, application, registration, qualification, authorization or other
action is required to be filed, given, obtained or taken by virtue of the
execution, delivery and performance of this Agreement or the consummation of
the transactions contemplated hereby in order to avoid (x) the loss of any
Permit or other governmental authorization or (y) the violation or breach of,
or the default under, any regulation, order, decree or award of any court or
Governmental Authority (as defined below) or any Contract, Sales Contract,
Land Purchase Agreement, lease, mortgage, note or any other instrument to
which a Selling Party is a party and which relates to the Business or to which
it or any of the Assets are subject, except for such losses of Permits or
other governmental authorization, violations or defaults as would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect (as
defined below).
3.8 Financial Statements/SEC Filings.
(i) The Company has delivered to Buyer accurate and complete copies of
(a) the Company's consolidated balance sheets as of September 30, 1997 and
1998, and the related consolidated statements of income for each of the
years then ended (the "Year-End Financial Statements"), and (b) the
Company's unaudited consolidated balance sheet as of December 31, 1998 (the
"Latest Balance Sheet"), and the related unaudited consolidated statement
of income for the three-month period then ended (the "Latest Financial
Statements"), in each case certified by the Chief Financial Officer of the
Company (the Year-End Financial Statements and the Latest Financial
Statements and the notes thereto being herein collectively referred to as
the "Financial Statements"). Except as set forth on Schedule 3.8(i), the
Financial Statements (a) have been prepared from the books and records of
the Company in conformity with GAAP (as defined below) applied on a basis
consistent with preceding years throughout the periods involved, and (b)
accurately and fairly present the Company's financial position as of the
respective dates thereof and its results of operations for the periods then
ended. Except as disclosed on Schedule 3.8(ii), since December 31, 1998,
the Company has not discharged any liabilities or obligations involving the
payment of an amount in excess of the amount reflected or reserved for such
liability or obligation on the Latest Balance Sheet.
(ii) The Company has filed with the Securities and Exchange Commission
all forms, reports, schedules, statements, and other documents required to
be filed by it since January 1, 1997 under the Securities Act (as defined
below), the Exchange Act (as defined below), and all other federal
securities laws (as such documents have been amended since the time of
their filing, collectively, the "SEC Filings"). The Company has delivered
to Buyer accurate and complete copies of all the SEC Filings in the form
filed by the Company with the Securities and Exchange Commission. The SEC
Filings, at the time filed, complied in all material respects with all
applicable requirements of federal securities laws. To the knowledge of the
Company, none of the SEC Filings, including, without limitation, any
financial statements or schedules
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included therein, at the time filed, contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading.
3.9 Undisclosed Liabilities. Except (i) liabilities fully reflected or
provided for on the Latest Balance Sheet or (ii) current liabilities that have
arisen since the date of the Latest Balance Sheet in the ordinary course of
business (none of which is a liability for a breach of contract, breach of
warranty, tort or infringement), to the knowledge of the Company, neither the
Company nor any Subsidiary has, individually or in the aggregate, any material
debt, liability or obligation of any kind, whether accrued, absolute,
contingent or otherwise, including, without limitation, any liability or
obligation on account of taxes or any governmental charges or penalty,
interest or fines, required to be reflected in the Financial Statements in
accordance with GAAP (as defined below) which are not contained therein.
3.10 Reserved
3.11 Reserved
3.12 Real Property
(i) Schedule 3.12(i) identifies and contains a full, complete and
accurate description by lot and block and street address, if applicable, or
otherwise by metes and bounds, of each lot, parcel and tract of land owned
by the Selling Parties and held, used or usable in the Business that is
related to the Housing Property (the "Real Property").
(ii) Schedule 3.12(ii) identifies the real property, whether or not
owned in fee simple, upon which the Selling Parties have begun development
or constructed or begun construction of a residential home (the "Developed
Property") and contains (a) a description of the status of completion of
the development of each such lot, parcel and tract, including the status of
construction of the Improvements (as defined below), if any, being
constructed thereon, (b) the budgeted current estimate of costs of the
Selling Parties for the completion of the development of the Developed
Property and the construction of the Improvements, if any, being
constructed thereon, and (c) every material obligation or commitment of the
Selling Parties to construct, maintain, repair, or pay for the
construction, maintenance or repair of the developments or Improvements
located on or associated with properties sold, conveyed, dedicated or
otherwise transferred by the Selling Parties before the date hereof,
whether arising by contract, assessment, governmental action or otherwise
related to the Business.
(iii) Set forth on Schedule 3.12(iii) is (a) a list of each Sales
Contract, (b) a brief description of each such contract, including the
purchase price and date of sale, and (c) a brief description of the status
of the payment performance of each buyer. Except as noted in Schedule
3.12(iii), (d) no buyer is in arrears in any material payment for more than
thirty (30) days, (e) all Sales Contracts are in full force and effect, and
are binding and enforceable in accordance with their terms and (f) all
Sales Contracts are fully assignable to Buyer. Except as set forth on
Schedule 3.12(iii)(g), no buyer under any Sales Contract is entitled to
receive any monetary concession or other form of compensation from the
Selling Parties in connection with its purchase of a residential home.
Neither the Company or any Subsidiary, as applicable, nor, to the knowledge
of the Selling Parties, any buyer of a residential home, is in default in
any material way under any of the Sales Contracts.
(iv) Except for the Permitted Encumbrances and except as set forth in
Schedule 3.12(iv) hereto, no Real Property or Developed Property (a) serves
any adjoining property to any extent (except for normal utility or drainage
easements which could not reasonably be expected to affect in any material
respect the use, occupancy, value or marketability of any such lot, parcel
or tract of land) or (b) is located in any area determined by the
Department of Housing and Urban Development to be flood prone under the
Federal Flood Protection Act of 1973 or otherwise constituting a flood
plain.
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(v) Except as set forth in Schedule 3.12(v), the Real Property and the
Developed Property adjoins and has full, free and adequate access to and
from public highways and roads, and the Selling Parties have no knowledge
of any fact, event or development which would likely result in the
termination of such access.
(vi) There is (a) to the knowledge of the Selling Parties, no proposed
public improvement which may involve the creation or imposition of any
Encumbrance on the Real Property or Developed Property, (b) no existing or,
to the knowledge of the Selling Parties, proposed plan to modify or realign
any street or highway or existing, proposed or overtly threatened eminent
domain, condemnation or similar proceeding which could result in the taking
of all or any part of the Real Property or Developed Property or which
could affect the current or planned use of the Real Property or Developed
Property, (c) no proposed termination or impairment of any parking at any
such Real Property or Developed Property, (d) no contemplated sale of any
Real Property or Developed Property in lieu of condemnation, (e) no pending
or, to the knowledge of the Selling Parties, threatened federal forfeiture
proceeding with respect to the Real Property or Developed Property and (f)
no other action, suit or proceeding pending or, to the knowledge of the
Selling Parties, threatened before any federal or state court or other
Governmental Authority relating to or affecting the use, occupancy, value
or marketability of the Real Property or Developed Property.
(vii) Except as set forth in Schedule 3.12(vii), the buildings,
improvements and other facilities located within the boundary lines of any
Real Property or Developed Property and the Leased Model Homes
(collectively, the "Improvements"), other than those owned and used
exclusively by any public utility, (a) are not in violation of any
applicable setback requirements or zoning laws or ordinances, (b) are not
subject to any "permitted non-conforming use" or "permitted non-conforming
structure" classifications or any similar classifications under any
applicable setback requirements or zoning laws or ordinances, (c) do not
violate any agreements, restrictions or easements affecting any applicable
portion of the Real Property or Developed Property where the same would
have a Material Adverse Effect and (d) do not encroach on any easements
affecting the Real Property or Developed Property.
(viii) All Improvements, other than those owned and used exclusively by
any public utility, (a) to the knowledge of the Selling Parties, are being
occupied, operated and maintained in accordance with all applicable laws,
ordinances, statutes, rules and regulations (including but not limited to,
Environmental Laws) of any Governmental Authority, except for such
violations that, in the aggregate, would not have a Material Adverse
Effect, and (b) except to the extent set forth on Schedule 3.12(viii), are
supplied with all utilities and other services necessary for the use
thereof at full capacity for purposes of the operations currently conducted
therein or contemplated therefor and the Selling Parties have no knowledge
of any fact or condition that could reasonably be expected to result in the
termination or material impairment of such utilities or other services. No
Improvement or portion thereof is dependent for its access on any land not
included on the lot upon which it is situated. No Improvement has suffered
any damage by fire or other casualty loss which has not heretofore been
completely repaired and restored to its original condition.
(ix) Except as set forth in Schedule 3.12(ix), the Selling Parties have
no knowledge of any fact, condition or impediment which would or could
reasonably be expected to prevent the owner of the Real Property or
Developed Property from obtaining, without incurring any unusual cost or
expense (any expenses routinely incurred by the Selling Parties in the
ordinary course of business shall not be deemed to be an unusual cost or
expense), all necessary building permits for the construction of the
Improvements upon such Real Property or Developed Property, as the case may
be, other than normal and customary conditions imposed by Governmental
Entities or recorded restrictive covenants or agreements in favor of
property owner associations or other third parties.
(x) Except as set forth in Schedule 3.12(x), no commitments have been
made by the Selling Parties and, to the knowledge of the Selling Parties,
by any predecessor-in-interest of the Selling Parties, to any Governmental
Authority or to any other person or group which would impose an obligation
upon any owner of the Real Property or Developed Property to make any
contribution or dedication of money or land (including but not limited to
any rights of access or reciprocal easement agreements) or to construct,
install or maintain any improvements upon or in the vicinity of such Real
Property or Developed Property, and no Governmental Authority has imposed
any requirement that any developer or owner of such Real Property
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or Developed Property pay directly or indirectly any special fees or
contributions or incur any expenses or obligations whatsoever in connection
with any development or ownership thereof.
(xi) Except as set forth in Schedule 3.12(xi) there are no leases,
subleases, licenses, concessions or other agreements, whether written or
oral, made by the Selling Parties, or to the knowledge of the Selling
Parties, by any predecessor-in-interest of the Selling Parties, granting to
any person any right to use or occupy any portion of the Real Property or
Developed Property.
(xii) Schedule 3.12(xii) is a complete listing of any and all contracts
or agreements entered into by the Selling Parties or, to the knowledge of
the Selling Parties, by the Selling Parties' predecessors-in-interest
currently affecting all or any portion of the Real Property and the
Developed Property (other than the Sales Contracts, the Contracts, the Land
Purchase Agreements and the Kaco Partnership), including, without
limitation, construction contracts, contracts of sale and/or purchase,
brokerage agreements, service contracts, landscape contracts, utility
contracts and all other agreements that affect or relate to the use,
ownership, construction, service, management, development or sale of all or
any portion of the Real Property or Developed Property (collectively, the
"Property Agreements"), other than Property Agreements which (i) provide
for aggregate payments of less than Twenty Five Thousand Dollars ($25,000)
in any year, (ii) are terminable by the Selling Parties without penalty on
not more than ninety (90) days' notice and (iii) could not reasonably be
expected to impair in any material respect the use, occupancy, value or
marketability of the Real Property or Developed Property. Copies of all of
the Property Agreements have been provided or made available to Buyer. The
Selling Parties have complied in all material respects with each and every
undertaking, covenant and obligation under the Property Agreements and no
state of facts exist that constitute or, with the passage of time or the
giving of notice or both, would constitute a breach or default by the
Selling Parties or, to the knowledge of the Selling Parties, the other
party thereto under the Property Agreements. Except for the Contracts and
the Land Purchase Agreements and except as set forth on Schedule 3.12(xii),
there are no contracts of sale or outstanding options, rights of first
refusal or similar rights to purchase any part of the Real Property, the
Developed Property or any interest therein. Except as set forth in Schedule
3.12(xii), all of the Property Agreements are fully assignable to the
Buyer.
(xiii) Except as set forth on Schedule 3.12(xiii) hereto, there are no
persons (other than the Company or a Subsidiary) in possession of any
portion of the Real Property or Developed Property, whether as lessees,
tenants at will or at sufferance, trespassers or otherwise.
(xiv) Except as set forth in Schedule 3.12(xiv) hereto, to the knowledge
of the Selling Parties, no Real Property or Developed Property is currently
classified or regulated (or is under investigation by any Governmental
Authority) as wetlands or an endangered habitat or is currently affected by
endangered species under federal, state, local or foreign laws (including
common law), statutes, codes, ordinances, rules or regulations.
(xv) Attached to Schedule 3.12(xv) is a copy of each form of warranty
presently offered along with a copy of each form of warranty offered within
the previous 10 years by the Selling Parties in connection with the Sales
Contracts related to the Business. There are no outstanding agreements or
warranties between the Selling Parties or their predecessors and any
customer related to the Business which materially deviates from these
standard forms. The transactions contemplated by this Agreement will not
entitle a customer under a Sales Contract to cancel its Sales Contract.
(xvi) Except for bills and charges that are outstanding in the ordinary
course and except as set forth on Schedule 3.12(xvi), there has been no
material or labor furnished to or on the Real Property or Developed
Property for which payment has not been made, there are no mechanic's or
materialman's liens or claims filed against the Real Property or Developed
Property and the Selling Parties have not received a notice of any claims
of non-payment or claims of liens by any contractors, subcontractors,
suppliers, mechanics, materialmen or artisans with respect to any work
performed on or materials furnished to the Real Property or Developed
Property.
(xvii) Except as set forth in Schedule 3.12(xvii) hereto, the Selling
Parties have no knowledge of any proposed or contemplated change in any
applicable laws, ordinances or restrictions, or any judicial or
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administrative action, or any action by adjacent landowners, affecting the
Real Property or Developed Property which is not specifically addressed in
this Article III and which will or could reasonably be expected to impair
in any material respect the use, occupancy, value or marketability or
prevent or impede the development of the Real Property or Developed
Property.
(xviii) Except as set forth in Schedule 3.12(xviii), all Housing
Property and Developed Property have been developed; and all components of
the Improvements, including without limitation the roofs and structural
elements thereof and the heating, ventilation, air conditioning, plumbing,
electrical, sewer and storm water systems and facilities included therein,
have been built to code and substantially in accordance with all applicable
plans and specifications, and none of the Developed Property or the
Improvements contains any latent defects that would have, individually or
in the aggregate, a Material Adverse Effect. The rights and obligations of
the Parties with respect to this Section 3.12(xviii) are subject to Section
6.25 hereof.
(xix) To the knowledge of the Selling Parties, neither the Selling
Parties nor any of their predecessors-in-interest have incorporated into
the homes built by them any construction products that are or have been the
subject of any class action litigation.
(xx) Schedule 3.12(xx) identifies in detail for each lot, parcel and
tract of land constituting the Real Property or Developed Property, the
results of any soil tests or environmental and other reports concerning the
Real Property or Developed Property that is or has been in the possession
and control of the Selling Parties.
3.13 Leases. Set forth on Schedule 3.13(i) is a listing of all leasehold
real properties held by the Selling Parties related to the Business (the
"Leased Property"). The Selling Parties have valid leasehold interests in all
Leased Property under valid lease agreements and, except as noted on Schedule
3.13(ii), there is no default on the part of the Selling Parties or, to the
knowledge of the Selling Parties, the lessor of such leased property under any
such lease agreements. To the knowledge of the Selling Parties, the present
use of all such Leased Property conforms in all material respects to
Applicable Law, and all necessary occupancy and other certificates and permits
for the occupancy and lawful use thereof have been issued to the Selling
Parties and are presently in full force and effect. Except as set forth in
Schedule 3.13(iv), all contracts and agreements relating to the Leased
Property are fully assignable to Buyer.
3.14 Health and Safety. To the knowledge of the Selling Parties, the
properties of the Selling Parties have been and are being operated in
compliance in all material respects with all Applicable Laws designed to
protect safety or health, or both ("Health and Safety Laws"), including,
without limitation, the Occupational Safety and Health Act, 29 U.S.C.A.
(S) 651 et seq. ("OSHA"). Except as shown on Schedule 3.14, neither the
Company nor any Subsidiary has received any written notice of any violation,
deficiency, inspection, investigation or inquiry from any Governmental Entity
(as defined below), employee or third party under any Health and Safety Law,
and, to the knowledge of the Selling Parties, no such inspection,
investigation or inquiry is planned or threatened.
3.15 Legal Proceedings. Except as disclosed on Schedule 3.15(i)-(iii), (i)
there are no Proceedings (as defined below) that are related to the Business
pending or, to the knowledge of the Selling Parties, threatened against or
involving the Selling Parties or any of the Assets, including Proceedings
related to allegedly defective products or workmanship, (ii) the Selling
Parties are not subject to any judgment, order, writ, injunction, civil
investigative demand or decree of any Governmental Entity, and (iii) there are
no Proceedings pending or, to the knowledge of the Selling Parties, threatened
against any Selling Party seeking to restrain, prohibit or obtain damages or
other relief in connection with this Agreement or the transactions
contemplated by this Agreement. Except as disclosed on Schedule 3.15(iv), the
Selling Parties are not aware of any fact or circumstance that could
reasonably be expected to give rise to any such Proceeding. Except as
disclosed on Schedule 3.15(v), there is no action or suit brought or to be
brought by the Selling Parties pending or threatened against others.
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3.16 Tax Matters.
Except as disclosed on Schedule 3.16(i)-(xiii):
(i) For the years ended December 31, 1995 and 1996, the stub period
ended September 30, 1997 and the year ended September 30, 1998, the Company
and each Subsidiary have (and as of the Closing Date will have) duly filed
all federal, state, local and foreign Tax Returns (as defined below)
required to be filed with the IRS (as defined below) or other applicable
taxing authority, and no extensions of the applicable statute of
limitations with respect to any such Tax Return has (or as of the Closing
Date will have) been requested or granted.
(ii) The Company and each Subsidiary have (and as of the Closing Date
will have) fully and timely paid all Taxes (as defined below) due and
payable by them and have paid or accrued all Taxes for all periods ending
on or before the Closing Date (and the portion of any Straddle Period (as
defined below) ending on the Closing Date) for which Tax Returns are not
yet due.
(iii) There has been no issue raised or adjustment proposed (and none is
pending) by the IRS or any other taxing authority in connection with any
Tax Return of the Company or any Subsidiary which has not been settled or
paid nor, to the knowledge of the Company and the directors and officers
(and any employee responsible for tax matters), is there any basis for any
such issue to be raised or adjustment to be proposed.
(iv) The Company and each Subsidiary have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder, or
other third party.
(v) There is no Tax audit pending with respect to the Company or any
Subsidiary.
(vi) Neither a director nor officer (or employee responsible for Tax
matters) of the Company or any Subsidiary expects any authority to assess
any additional Taxes as to the Company or any Subsidiary for any period for
which Tax Returns have been filed. There is no dispute or claim concerning
any Tax liability of the Company or any Subsidiary either (A) claimed or
raised by any authority in writing or (B) as to which any of the directors
and officers (and employees responsible for Tax matters) of the Company or
any Subsidiary has knowledge based upon personal contact with any agent of
such authority. Schedule 3.16(vi) lists all federal, state, local, and
foreign income Tax Returns filed with respect to the Company and each
Subsidiary for all taxable periods for which the applicable statutes of
limitations have not expired, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject of
audit.
(vii) The Company and each Subsidiary has (and as of the Closing Date
will have) made all deposits required with respect to Taxes due and payable
by the Company or any Subsidiary, respectively.
(viii) No waiver or extension of any statute of limitations as to any
federal, state, local or foreign Tax matter has been given by or requested
from the Company or any Subsidiary.
(ix) None of the Company and its Subsidiaries has filed a consent under
Code (S)341(f) concerning collapsible corporations. None of the Company and
its Subsidiaries has made any payments, is obligated to make any payments,
or is a party to any agreement that under certain circumstances could
obligate it to make any payments that will not be deductible under Code
(S)280G. The Company and each Subsidiary have disclosed on their federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code
(S)6662. None of the Company and its Subsidiaries is a party to any Tax
allocation or sharing agreement. None of the Company and its Subsidiaries
has been a member of an affiliated group filing a consolidated federal
income Tax Return (other than a group the common parent of which is the
Company), or has any liability for the Taxes of any Person (other than any
of the Company and its Subsidiaries) under Treas. Reg. (S)1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(x) Under separate cover, the Company has delivered to Buyer a schedule
which sets forth the following information with respect to each of the
Company and its Subsidiaries as of the most recent
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practicable date (as well as on an estimated pro forma basis as of the
Closing giving effect to the consummation of the transactions contemplated
hereby): the tax basis of the Company and the Subsidiaries in their assets
(including stock of a Subsidiary) and the amount of any net operating loss,
net capital loss, unused investment or other credit, unused foreign tax, or
excess charitable contribution allocable to the Company or any Subsidiary.
(xi) None of the Selling Parties is a foreign person within the
meaning of Section 1445(b)(2) of the Code and the Treasury Regulations
thereunder.
(xii) Except for the Kaco Partnership, neither the Company nor any
Subsidiary has any relationship with any other person which constitutes a
partnership for federal income tax purposes.
(xiii) To the knowledge of the Selling Parties, there are no Taxes,
assessments or levies of any type whatsoever that will be or are
contemplated to be imposed upon and collected from the Real Property or
Developed Property arising out of or in connection with the present
ownership and operation or development of the Real Property or Developed
Property, as the case may be, or any public improvements in the general
vicinity of the Real Property or Developed Property, other than Permitted
Encumbrances or ad valorem taxes, standby fees, front foot benefit charges,
unitary assessments or other fees or assessments imposed by Governmental
Entities, quasi-governmental agencies or property owners' associations for
provision of utility services applicable to the Real Property or Developed
Property, as the case may be, for the fiscal year in which the Closing
occurs payable to the state, county, school district and city in which the
Real Property or Developed Property is situated.
3.17 Permits. Schedule 3.17(i) sets forth a list of all Permits held by, or
applicable to, the Selling Parties related to the Business other than building
permits and waivers obtained in the ordinary course of business. A true copy
of each Permit, or an acceptable representative sampling, has been furnished
to Buyer for examination. To the knowledge of the Selling Parties, each of
such Permits is in full force and effect and the Selling Parties are not in
violation of or in default with respect to any applicable law or any
applicable rule, regulation, order, writ or decree of any court or any
governmental commission, board, bureau, agency or instrumentality (including
but not limited to those relating to environmental matters) or delinquent with
respect to any report required to be filed with any governmental commission,
board, bureau, agency or instrumentality except where such violation, default
or failure to timely file would not have a Material Adverse Effect. Except as
disclosed on Schedule 3.17(ii), no notice has been issued by any Governmental
Entity and received by the Selling Parties and no Proceeding is pending or, to
the knowledge of the Selling Parties, threatened with respect to the validity
or enforceability of any Permit, any alleged failure by the Selling Parties to
have any Permit or not to be in compliance therewith. Except as set forth on
Schedule 3.17(iii), the Selling Parties have all Permits used or required by
the Selling Parties in the operation of the Business or for the ownership of
its properties and assets, including routine building permits and waivers.
Except as set forth on Schedule 3.17(iv), the consummation of the transaction
contemplated hereby will not extinguish or adversely affect any such Permit
which the Selling Parties have on the date of this Agreement and, except as
set forth on Schedule 3.17(v), each Permit listed on Schedule 3.17(i) is fully
assignable to Buyer.
3.18 Personal Property. The books and records of the Selling Parties that
are related to the Business properly include and reflect all of the properties
of the Selling Parties that are related to the Business. Set forth on Schedule
3.18(iii) is a list, as of the Effective Date, of all furniture, equipment,
machinery, computer hardware, materials, rolling stock, apparatus, tools,
implements, appliances, and other tangible personal property owned, leased, or
used or held for use by the Selling Parties related to the Business. All such
properties owned or leased by the Selling Parties are in good condition, order
and repair, subject to ordinary wear and tear, and are suitable and sufficient
for the purposes for which they are presently being used.
3.19 Contracts. As used in this Agreement, the term "Company Agreements"
shall mean all mortgages, indentures, notes, agreements, contracts, leases,
licenses, franchises, obligations, instruments or other commitments,
arrangements or understandings of any kind related to the Business or the
Assets, whether written or oral, binding or nonbinding, to which any of the
Selling Parties is a party or by which any of the Selling
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Parties or any of their properties may be bound or affected and which are not
described in Schedules 1.1(iii)(a) and (c), Schedules 3.12(iii), (v) and (xii)
and Schedule 3.13. Set forth on Schedule 3.19(i)-(xxi) is a list of (a) each
Company Agreement that is material to the business, operations, assets or
financial condition of the Selling Parties and (b) without regard to
materiality, each of the following Company Agreements (the Company Agreements
described in clauses (a) and (b) above are collectively called the "Material
Contracts"):
(i) Any Company Agreement for or relating to any Debt (as defined below)
of the Company;
(ii) Any guaranty, direct or indirect, by the any of the Selling Parties
of any obligation for borrowings, advances, goods or services purchased or
otherwise, excluding endorsements made for collection in the ordinary
course of business;
(iii) Any Company Agreement made other than in the ordinary course of
business and calling for future payments in the aggregate in excess of
Twenty Five Thousand Dollars ($25,000);
(iv) Any Company Agreement relating to the acquisition or disposition of
the Assets by any of the Selling Parties having a fair market value in
excess of Twenty Five Thousand Dollars ($25,000) in the aggregate;
(v) Any obligation to make future payments, contingent or otherwise,
arising out of or relating to the acquisition by any of the Selling Parties
of any business, assets or stock or other interests of other companies;
(vi) Any Company Agreement, including any employment, compensation, loan
or severance arrangements, with any current or former shareholder,
director, manager, officer, employee or agent of any of the Selling
Parties;
(vii) Any Company Agreement with a sales representative, sales
consultant or distributor (all of such agreements are terminable at any
time by any of the Selling Parties without penalty on not more than 90 days
notice, except as otherwise disclosed on Schedule 3.19(viii);
(viii) Any Company Agreement with any consultant or advisor of the
Selling Parties calling for future payments in the aggregate in excess of
Fifteen Thousand Dollars ($15,000);
(ix) Any Company Agreement to which any Selling Party and any other
Selling Party or Affiliate (as defined below) of any Selling Party is a
party;
(x) Any Company Agreement with a term in excess of one year and
providing for future payments aggregating in excess of Fifteen Thousand
Dollars ($15,000) that is not terminable (without penalty) on not more than
thirty (30) days notice;
(xi) Any Company Agreement containing limitations restricting the
conduct of the Business of the Selling Parties or the use of any of their
properties, or containing limitations on the disclosure of confidential or
proprietary information or containing limitations on the hiring of
employees, agents or representatives by the Selling Parties;
(xii) Any Company Agreement relating to Intellectual Property;
(xiii) Any Company Agreement that forms or purports to form a
partnership, joint venture or similar entity;
(xiv) Any Company Agreement relating to the transport, storage, release
or disposal of Hazardous Materials (as defined below) or Hazardous Waste
(as defined below);
(xv) Any Company Agreement with any Governmental Entity that currently
is binding on, or restricts the actions of the Selling Parties;
(xvi) Letters of credit, bid and performance bonds, hedge, swap,
futures, options or other derivatives and similar contracts;
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(xvii) Any Company Agreement in the nature of a settlement or a
conciliation agreement arising out of any claim asserted by any person;
(xviii) Any rebate, volume discount, price reduction or similar right
given by any of the Selling Parties;
(xix) Any Company Agreement that by its terms provides for the creation,
existence or maintenance of a Lien or other Encumbrances on any properties
or assets of the Selling Parties;
(xx) Any Company Agreement that contains any "change of control"
provision or agreement; and
(xxi) All other contracts that are material to the Selling Parties or
that could prevent, impede or otherwise affect in any material respect the
consummation of the transactions contemplated by this Agreement.
The Selling Parties have delivered to Buyer accurate and complete copies of
all written Material Contracts listed on Schedule 3.19(i) - (xxi) as well as
Contracts and Land Purchase Agreements and have provided Buyer with written
summaries of the same that are unwritten (if any). Each Material Contract,
Contract and Land Purchase Agreement is in full force and effect and is a
legal, binding and enforceable obligation of the Selling Parties and, to the
knowledge of the Selling Parties, each of the other parties thereto, and no
notices of termination or cancellation thereof have been given or received by
the Selling Parties. The Selling Parties, nor, to the knowledge of the Selling
Parties, any other party thereto is in breach of or default under any Material
Contract, Contract or Land Purchase Agreement, and no event has occurred that
(after notice or lapse of time or both) would become a breach or default
under, or would permit modification, cancellation, acceleration or termination
of, any Material Contract, Contract or Land Purchase Agreement or result in
the creation of any Encumbrance upon, or any person obtaining any right to
acquire, any properties, assets or rights of the Company. Except as disclosed
on Schedule 3.19(xxii), there are no material unresolved disputes involving
the Selling Parties under any Material Contract. Except as disclosed on
Schedule 3.19(xxiii), the Contracts and the Land Purchase Agreements are fully
assignable to Buyer.
3.20 Conduct in the Ordinary Course; Absence of Certain Changes, Events and
Conditions. Since January 28, 1999, the Business has been conducted in the
ordinary course and consistent with past practice in all material respects.
With respect to the Business and except as set forth in Schedule 3.20(i) -
(xii), since January 28, 1999:
(i) There has not been any Material Adverse Effect in the Business,
Assets, liabilities, results of operations or financial condition of the
Selling Parties or in their relationships with material lenders, suppliers,
customers, employees, or others, whether such changes have occurred in the
ordinary course of business or otherwise;
(ii) There has not been any declaration, setting aside, or payment of
any dividend or other distribution on or in respect of the outstanding
capital stock of any Subsidiary, nor has there been any direct or indirect
redemption, retirement, purchase or other acquisition of any of the
outstanding capital stock of any Subsidiary, or any issuance of any shares
of outstanding capital stock of any Subsidiary;
(iii) There has not been any increase in the compensation, the rate of
compensation, commissions, severance or termination pay payable or to
become payable by any of the Selling Parties to any director, officer or
salaried employee, or any payment of or commitment to pay any bonus,
profit-sharing or other extraordinary compensation to any employee not
consistent with past practices;
(iv) There has not been any damage, destruction or loss which had a
Material Adverse Effect with respect to the Assets or the Business;
(v) There has not been any disposition of or encumbrance, or any pledge
or grant of a security interest in any of the Assets of the Selling
Parties, or any increase in any indebtedness of the Selling Parties other
than in the ordinary course of business;
(vi) There has not been any merger, consolidation or other business
combination involving the Selling Parties, nor has there been any
acquisition of any stock, business, property or assets of any other person,
firm, association, corporation or other business organization;
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(vii) There has not been any settlement in respect of any Proceedings at
law or in equity involving any payment by the Selling Parties;
(viii) There has not been any sale or grant to any party or parties of
any license, franchise, option or other right of any nature whatsoever to
sell, distribute, or otherwise deal in or with the property of the Selling
Parties, other than in the ordinary course of business, or any sale or
grant to any party or parties of any license, franchise, option or other
right of any nature to use any patent, trade name, trademark, service mark,
copyright, pending applications therefor, trade secrets or other
proprietary rights of the Selling Parties;
(ix) There has not been any change in the accounting methods or
practices of the Selling Parties;
(x) There has not been any contract entered into for services or
otherwise with any of the officers, directors or shareholders of the
Selling Parties, or members of their families;
(xi) There has not been any contract or agreement entered into, or any
business transaction engaged in, with any Affiliate of the Selling Parties;
(xii) There has not been any theft, loss of or damage to any of the
furnishings located in the Model Homes, except for instances of theft, loss
or damage that, in the aggregate, have not had a Material Adverse Effect;
and
(xiii) There has not been any agreement or commitment by the Selling
Parties, to do or take any of the actions referred to in this Section 3.20.
3.21 Insurance Schedule 3.21(i) sets forth true and correct summaries of
all policies of fire, liability, casualty, life and other insurance currently
in force with respect to the Selling Parties' or their properties' liability,
and accurately states the coverages, deductible amounts and carriers of each
such insurance policy. All such insurance policies are in full force and
effect and no notice of cancellation or termination has been received with
respect to any such policy. There are no circumstances known to the Selling
Parties that would enable any insurance company or association to avoid
liability under any of the insurance policies maintained by the Selling
Parties, other than pursuant to express exclusions and limitations of such
policies. Except as set forth in Schedule 3.21(ii), the coverage provided by
such insurance policies with respect to events occurring before the Closing
Date will not be affected in any manner by, and will not terminate or lapse by
reason of, any of the transactions contemplated by this Agreement. At no time
since January 1, 1999 has any insurance company or association canceled or
reduced any coverage maintained by the Selling Parties, or given any notice or
other indication of its intention to cancel or reduce any such coverage. The
loss, damage or destruction of any properties and assets of the Company which
are not fully covered by insurance would not have a Material Adverse Effect.
The Company agrees to keep the policies listed on Schedule 3.21(i) in full
force and effect through the Closing Date. In addition, Schedule 3.21(iii)
contains a list of all pending claims against the Selling Parties of which the
Selling Parties are aware which may be covered by insurance, and the Selling
Parties have given timely notice to the appropriate insurance carrier with
respect to each such claim.
3.22 Environmental Matters. Except as disclosed on Schedule 3.22:
(i) The Company has not received any written notice of any violation,
investigation or inquiry from any Governmental Entity regarding a purported
violation of any Environmental Law (as defined below) and, to the knowledge
of the Selling Parties, no such investigation or inquiry is planned or
threatened. To the knowledge of the Selling Parties, the Selling Parties
have not failed to file any reports or notices concerning the release of
any Hazardous Material (as defined below) as required by Environmental Law,
and, to the knowledge of the Selling Parties, the Selling Parties have not
been named or listed, and they have no reason to believe that any such
naming or listing is likely, by any Governmental Entity or potentially
responsible party group, as a potentially responsible party under CERCLA
(as defined below) or any similar state statute. To the knowledge of the
Selling Parties, none of the Real Property, the Developed Property or
Leased Property has been listed on the Comprehensive Environmental
Response, Compensation and Liability Information System or the National
Priorities List under CERCLA or similar lists under state statutes. To the
knowledge of the Selling Parties, there have been no environmental
investigations, studies, reviews or audits conducted by or on behalf of the
Selling Parties or any other party or any other
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environmental records, documents, or correspondence which are in the
possession of the Selling Parties relating to the Selling Parties or their
properties that have not been delivered to Buyer before the Effective Date
and Schedule 3.22(i) sets forth the documentation delivered to Buyer.
(ii) None of the Real Property, the Developed Property or the Leased
Property has been used during the period of such ownership or leasing by
the Selling Parties or to the Selling Parties' knowledge before such
ownership or leasing (a) for the storage or disposal of a Hazardous
Material or Hazardous Waste (as defined below) or (b) as a landfill, solid
waste management unit (as defined in RCRA (as defined below)) or other
waste disposal site.
(iii) The Selling Parties have not entered into any agreement, consent
order, decree, license or permit condition, settlement, judgment or other
directive of or by any Governmental Entity that is based on any
Environmental Law and that relates to the future use of any Real Property,
Developed Property or Leased Property or requires any remediation actions
or changes in the present conditions of any of such properties. There are
no Proceedings seeking money damages, injunctive relief, fines or
penalties, remedial action or other remedy, pending or, to the knowledge of
the Selling Parties, threatened, against the Real Property, Developed
Property or Leased Property relating to (a) the violation of, or
noncompliance with, any Environmental Law, (b) the disposal, discharge,
transportation or release of any Hazardous Material or (c) the exposure of
any person to any other solid waste, pollutant or chemical substance.
(iv) To the knowledge of the Selling Parties, the Real Property,
Developed Property and Leased Property (as to all periods of time of
ownership by it) have not been contaminated with Hazardous Materials
affecting the groundwater, surface water or soil at, on, in, under or about
such properties other than as is not in violation of and would not likely
result in a remediation obligation under Environmental Law. No Hazardous
Material or Hazardous Waste has been disposed of, transferred, removed,
released or transported from any property owned or leased by the Selling
Parties during the period such property was owned or leased by the Selling
Parties or to the knowledge of the Selling Parties' before such ownership
or leasing other than as is not in violation of and would not likely result
in a remediation obligation or other claims under Environmental Law.
(v) To the knowledge of the Selling Parties, there are none of the
following at, on, in, under or immediately about any of the Real Property,
Developed Property or Leased Property or any home, building, or structure
on or at the Real Property, Developed Property or Leased Property:
(a) tanks, storage vessels, drums or containers of any kind located
underground or above ground, or any piping associated therewith;
(b) any landfills or former landfills;
(c) except as set forth on Schedule 3.22(v)(c), wetlands or former
wetlands that have been filled;
(d) asbestos-containing materials;
(e) polychloride biphenyls ("PCBs") or PCB-containing equipment;
(f) pipelines not listed as Encumbrances and not ordinarily found on
residential property;
(g) current or former oil or gas production or storage facilities,
wells, pits, or other related operations;
(h) formaldehyde-containing material; or
(i) lead-based or lead-containing paint.
(vi) To the knowledge of the Selling Parties, there are no violations of
or remedial obligations arising under, and the Selling Parties are in
compliance with, Environmental Laws arising from or in connection with any
event, condition, circumstance, activity, practice, incident, action or
plan existing or occurring before the Closing Date relating to the Business
or Assets of the Selling Parties (including without limitation the presence
of any underground storage tanks or Hazardous Materials or Hazardous Wastes
on, in, under or affecting any of the Selling Parties' properties or
surrounding areas or any release thereof, or the storage, disposal or
treatment, or transportation for storage, disposal or treatment, of
Hazardous Materials or Hazardous Wastes).
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3.23 Intellectual Property Rights
(i) Schedule 3.23(i) contains a true, correct and complete list of all
registered and unregistered Intellectual Property owned or used by the
Selling Parties in the Business other than the "Sundance" name and all
derivatives thereof, and other Intellectual Property relating to the
Excluded Assets. The Selling Parties own all right, title and interest to,
or has the right to use pursuant to a valid license, all Intellectual
Property identified on such schedule. Except as set forth on Schedule
3.23(i) the interests of the Selling Parties in the Intellectual Property
listed on Schedule 3.23(i) are free and clear of all claims of others and
of all Encumbrances whatsoever.
(ii) Schedule 3.23(ii) contains a true, correct and complete list of all
licenses granted by any third party to the Selling Parties with respect to
any Intellectual Property (other than standard form licenses with respect
to commercial software that is generally available from third parties), in
each case, identifying the Intellectual Property covered thereby.
(iii) Except as set forth on Schedule 3.23(iii), (a) the Selling Parties
have not received any notices of any infringement or misappropriation by,
or conflict with, any third party with respect to such Intellectual
Property (including, but not limited to, any demand or request that the
Selling Parties license any rights from a third party), (b) the conduct of
the Selling Parties does not infringe or misappropriate in any material
respect, any Intellectual Property of other persons, and (c) to the
knowledge of the Selling Parties, the Intellectual Property owned by or
licensed to the Selling Parties is not being infringed or misappropriated
in any material respect by any other persons.
(iv) The Selling Parties have experienced certain problems or
malfunctions related to the computer systems, operating systems and other
systems of the Selling Parties as described on Schedule 3.23(iv). Schedule
3.23(iv) sets forth all remedial actions the Selling Parties have
undertaken to solve such problems or malfunctions.
3.24 Employee Benefit Plans. During the past six years, neither the Selling
Parties nor any affiliate of the Selling Parties have made or been required to
make contributions to any "multiemployer plan," as defined in Section 3(37) of
ERISA. The Selling Parties and all affiliates of the Selling Parties have paid
and discharged promptly when due all liabilities and obligations arising under
ERISA or the Code of a character which if unpaid or unperformed might result
in the imposition of a lien against any of the Assets. For purposes of this
Section 3.24 only, an "affiliate" of any person means any other person which,
together with such person, would be treated as a single employer under Section
414 of the Code. With respect to each employee benefit plan, program or
arrangement sponsored, administered or contributed to by the Selling Parties
or their affiliates for employees of the Business, all employee and employer
contributions for all periods ending prior to the Closing Date have been made
in full.
3.25 Labor Relations.
(i) Except as set forth on Schedule 3.25(i), the Selling Parties are in
compliance in all material respects with all Applicable Laws pertaining to
employment and employment practices and wages, hours and other terms and
conditions of employment in respect of their employees with respect to the
Business.
(ii) Except as set forth in Schedule 3.25(ii), with respect to the
Business: (a) the Selling Parties are not parties to any outstanding
employment, consulting or management agreements or contracts with officers
or employees that are not terminable at will, or that provide for the
payment of any bonus or commission following termination of such agreement
or contract; (b) the Selling Parties are not parties to any agreement,
policy or practice that requires it to pay termination or severance pay to
salaried, non-exempt or hourly employees (other than as required by law);
(c) the Selling Parties have not been the subject of any representational
campaign by any union or other organization or group seeking to become the
collective bargaining representative of any of its employees or been
subject to or, to the knowledge of the Selling Parties, threatened with any
strike or other concerted labor activity or dispute and (d) the Selling
Parties are
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not obligated to bargain collectively with respect to wages, hours and
other terms and conditions of employment with any recognized or certified
labor organization, collective bargaining representative or group of
employees. The Selling Parties have furnished to Buyer complete and correct
copies of all such agreements ("Employment and Labor Agreements"). The
Selling Parties have not breached or otherwise failed to comply with any
provisions of any Employment and Labor Agreement, and is in full compliance
with all terms of any collective bargaining agreement and there are no
grievances outstanding thereunder.
(iii) Except as set forth in Schedule 3.25(iii), with respect to the
Business: (a) there is no unfair labor practice charge or complaint pending
before the National Labor Relations Board ("NLRB"); (b) there is no labor
strike, material slowdown or material work stoppage or lockout actually
pending or to the Selling Parties' knowledge threatened against or
affecting the Selling Parties, and the Selling Parties have not at any time
experienced any strike, material slow down or material work stoppage,
lockout or other collective labor action by or with respect to employees of
the Selling Parties; (c) there is no representation claim or petition
pending before the NLRB or any similar foreign agency and no question
concerning representation exists relating to the employees of the Selling
Parties; (d) there is no pending or, to the knowledge of the Selling
Parties, threatened Proceeding by or before, and the Selling Parties are
not subject to any judgment, order, writ, injunction or decree of or
inquiry from, the NLRB, the Equal Employment Opportunity Commission, the
Department of Labor, Department of Justice, the Office of Federal Contract
Compliance Programs or any other Governmental Entity in connection with any
current, former or prospective employee of any of the Selling Parties or
with respect to any employment practice; and (e) the Selling Parties have
no notice from any federal, state, local or foreign agency responsible for
the enforcement of labor or employment laws of an intention to conduct an
investigation of the Selling Parties and no such investigation is in
progress.
(iv) The Selling Parties will deliver to the Buyer, within seven days
from the date hereof, a true and complete list of each employee of the
Selling Parties involved in the Business as of the date hereof, including
their names and current annual compensation (e.g., salary, bonus plans and
other perquisites or compensation paid).
3.26 Reserved.
3.27 Transactions with Affiliates. Except as set forth on Schedule 3.27,
the Selling Parties have not purchased, acquired or leased any property or
services from, or sold, transferred or leased any property or services to, or
loaned or advanced any money to, or borrowed any money from, or guaranteed or
otherwise become liable for any indebtedness or other obligations of, or
acquired any capital stock, obligations or securities of, or made any
management, consulting or similar fee arrangement with, or entered into or
consummated any other material transaction, agreement or arrangement with or
for the benefit of, any officer, director or employee of the Selling Parties
or any of its Affiliates, other than compensation and benefits provided to any
such officer, director or employee in the ordinary course of business and
consistent with past practice.
3.28 Brokerage Fees. The Selling Parties and their Affiliates have not
retained any financial advisor, broker, agent or finder or paid or agreed to
pay any financial advisor, broker, agent or finder on account of this
Agreement or any transaction contemplated by this Agreement.
3.29 Representations and Warranties. No representation, warranty or
covenant contained in this Agreement or the exhibits or schedules hereto, or
any documents to be delivered at the Closing contains or shall contain any
untrue material statement or omit to state a material fact necessary in order
to make the statements therein not misleading. Copies of all documents
furnished to Buyer in connection with this Agreement are true and complete.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Selling Parties that:
4.1 Existence. Buyer is a partnership duly formed and validly existing and
in good standing under the laws of the State of Nevada.
4.2 Power; No Conflict. Buyer has all requisite power, in accordance with
law, to execute, deliver and perform this Agreement, and such execution,
delivery and performance does not conflict with any partnership provision of
Buyer or with any contract to which Buyer is a party or to which it is
subject. This Agreement has been duly and validly executed and delivered by
Buyer and is a valid and binding obligation of Buyer, enforceable in
accordance with its terms except that enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
and judicial decisions affecting creditors' rights generally and (ii)
equitable principles which may limit the availability of certain equitable
remedies (such as specific performances in certain circumstances).
4.3 Director Approval. The Board of Directors of the managing partner of
Buyer has authorized this Agreement, the transactions contemplated herein, the
execution and delivery hereof by Buyer and the performance by Buyer of all of
its obligations hereunder.
4.4 No Consents Necessary. No authorization, approval or consent of any
Governmental Authority or any third party is necessary to be obtained by Buyer
in connection with the purchase of the Assets. No authorization, approval or
consent of any partner of Buyer, other than Centex Real Estate Corporation, as
managing general partner, is necessary to be obtained by Buyer in connection
with the execution, delivery and performance of this Agreement and the
transactions contemplated hereby.
4.5 No Default Resulting from Agreement. Neither the execution and delivery
of this Agreement nor the performance hereof by Buyer in compliance with its
terms will result in any breach of the terms and conditions of, or constitute
a default under, the partnership documents of Buyer or any agreement, lease,
mortgage, note, instrument, undertaking, judgment, decree or governmental
order or other restriction or obligation to which Buyer is a party or by which
Buyer or any of its properties or assets may be bound or affected.
4.6 Brokers or Finders. No broker or finder has acted on behalf of Buyer in
connection with this Agreement or the transactions contemplated hereby.
ARTICLE V
ACTIONS OF THE SELLING PARTIES BEFORE THE CLOSING DATE
5.1 Conduct of Business. From the date hereof until the Closing Date, the
Selling Parties shall conduct the Business in the ordinary and regular course
of business and consistent with past practice and shall use their reasonable
best efforts to preserve intact their business organization, to keep available
the services of its present officers and employees, and maintain their present
relationships with property developers, suppliers, insurers, lessors and
licensees and with the Governmental Authorities and other persons having
business relationships with the Selling Parties, except to the extent that the
Selling Parties may change present relationships with any of such parties and
substitute therefor a relationship or relationships with new parties which
will provide to the Selling Parties no less than the benefits presently being
derived from the existing relationship(s).
5.2 Restrictions on Certain Actions Before Closing. Without limiting the
generality of Section 5.1, and except as otherwise expressly provided in this
Agreement, from the date hereof until the Closing Date, none of the Selling
Parties will, with respect to the Business, except with the prior written
consent of Buyer:
(i) Lease, sell, transfer or otherwise dispose of the ownership or
possession of any Asset (except in the ordinary course of business) or
divest itself of custody and control of any Books or Records related to the
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Business of any nature which, in accordance with sound business practice,
are retained for a period of time after their use, creation or receipts.
(ii) Enter into any agreement, arrangement or understanding with any
director, officer or key employee of any of the Selling Parties providing
for the employment of any such director, officer or key employee or any
increase in the compensation, severance or termination benefits payable or
to become payable by any of the Selling Parties to any such director,
officer or key employee or make any loan to or enter into any other
material transaction or arrangement with any such director, officer or key
employee.
(iii) Increase the benefits payable by any of the Selling Parties under
any bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option, stock purchase or other employee
benefit plan, program or arrangement made to, for or with any of the
directors, officers or employees of the Selling Parties.
(iv) Increase in any material way the general administrative and selling
expenses out of the ordinary course of business of any of the Selling
Parties.
(v) Fail to keep all of the Assets insured to the extent set forth on
Schedule 3.21 hereto, except where such failure could not reasonably be
expected to have a Material Adverse Effect.
(vi) Merge or consolidate with any other person.
(vii) Mortgage or pledge any of the Assets or create or suffer to exist
any Lien (other than insured mechanic's liens) or Encumbrance thereupon,
other than the Permitted Encumbrances.
(viii) Except in the ordinary course of business consistent with past
practices, enter into, modify or terminate any Land Purchase Agreement,
Contract, Sales Contract or other material lease, contract or agreement,
including the Kaco Partnership or enter into any transaction.
(ix) Change the accounting principles or methods of any of the Selling
Parties, except as required by law or as a result of any mandatory change
in accounting standards.
(x) Grant or agree to grant any preferential right to purchase the
Assets.
(xi) Cancel, release, waive or transfer any claims or rights of
substantial value related to the Assets.
(xii) Engage in any transactions with any Affiliate, except on terms and
conditions at least as favorable to the Selling Parties as those that would
apply in the case of a similar arms length transaction.
(xiii) Except in the ordinary course of business, take any action that
would cause any representation or warranty of any of the Selling Parties
contained in this Agreement to be untrue or incorrect at any time after the
date of this Agreement to the Closing or would or might result in any of
the conditions set forth in this Agreement not being satisfied.
(xiv) Delay payment of any account payable or other liability of the
Selling Parties relating to the Business beyond its due date or the date
when such liability would have been paid in the ordinary course of the
business consistent with past practice.
(xv) Allow the levels of work-in-process, finished homes, supplies, and
other materials included in the inventory of the Business to vary in any
material respect from the levels customarily maintained by Seller in the
ordinary course of the business consistent with past practice.
(xvi) Accelerate the construction of residential homes to exceed that
number planned for in the Selling Parties' current business plan.
(xvii) Acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other Person or division thereof.
(xviii) Fail to maintain the books and records of the Selling Parties in
the usual, regular and ordinary manner.
(xix) Make any Tax elections or settle or compromise any income tax
liability, except in the ordinary and regular course of business and
consistent with past practice.
(xx) Agree or commit to do any of the foregoing.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access to Information. The Selling Parties shall afford to the
officers, attorneys, accountants and other authorized representatives of Buyer
free and full access during normal business hours and upon reasonable prior
notice to copies of the books and records of the Selling Parties (including,
but not limited to, employment records) in order that Buyer may have full
opportunity to make a complete inventory and such investigation as it shall
desire of the Assets and the Business and of the affairs of the Selling
Parties relating thereto, provided that the investigation shall not
unreasonably interfere with the operations of the Selling Parties. In
addition, for a period commencing on March 16, 1999 and ending at 11:59 p.m.,
Chicago, Illinois time on the date that is the later to occur of (i) seven (7)
Business Days after the Selling Parties have delivered all schedules required
by this Agreement and (ii) April 6, 1999 (the "Feasibility Period"), Buyer
shall conduct a feasibility study of the structure of the transactions set
forth in this Agreement as well as the advisability of Buyer completing the
transactions set forth in this Agreement. If Buyer and the Company determine
on or before the expiration of the Feasibility Period that this transaction is
better suited as a stock purchase or asset and stock purchase, the parties
agree to use their reasonable best efforts to amend this Agreement to reflect
such new structure no later than 10 days after the completion of the
Feasibility Period and upon failure thereof this Agreement shall survive and
remain in full force and effect. If Buyer, in its sole discretion, determines
that it is not in its best interests to complete the transactions set forth in
this Agreement, then Buyer shall have the unilateral right to terminate this
Agreement as set forth in Article IX and shall give notice to the Selling
Parties no later than 6:00 p.m. on the Business Day (as defined below)
following the last day of the Feasibility Period. If Buyer fails to give the
required termination notice as provided in this Section 6.1, Buyer shall waive
its right to terminate this Agreement as provided in this Section 6.1 and
Section 9.1 (iii)(j). Upon Buyer's election to terminate this Agreement as
provided in this Section 6.1, neither party shall have any further obligation
under this Agreement, except that the agreements contained in Article X and in
Sections 6.7, 6.8, 6.9 and 6.11 hereof shall survive any such termination of
this Agreement. No investigation pursuant to this Section 6.1 shall affect any
representations or warranties made by the Selling Parties in this Agreement
or, except as set forth in this Section 6.1, the conditions to the obligations
of any party hereto to consummate the transactions contemplated hereby.
6.2 Notification of Certain Matters. The Selling Parties shall give prompt
notice to Buyer of (i) the discovery of any fact or circumstance or the
occurrence or nonoccurrence of any event which would be likely to cause any
representation or warranty contained in Article III to be untrue or inaccurate
at or before the Closing Date, and (ii) any failure of the Selling Parties to
comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by them hereunder. Buyer shall give prompt notice to the
Company of (i) the discovery of any fact or circumstance or the occurrence or
nonoccurrence of any event which would be likely to cause any representation
or warranty contained in Article IV to be untrue or inaccurate at or before
the Closing Date and (ii) any failure of Buyer to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by Buyer
hereunder. The delivery of any notice pursuant to this Section 6.2 shall not
be deemed to (i) modify the representations or warranties hereunder of the
party delivering such notice, (ii) modify the conditions set forth in Article
VII and VIII or (iii) limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
6.3 Acquisition Proposals.
(i) From the date hereof until the Closing Date, the Selling Parties
shall not, and shall use their best efforts not to permit their respective
Affiliates, directors, officers, agents or other representatives
(including, but not limited to, any investment banker, financial advisor,
attorney or accountant) to, initiate any contact with, solicit, encourage
or enter into or continue any negotiations, understandings or agreements
with any Third Party (as defined below) with respect to, or furnish or
disclose any non-public information regarding the Selling Parties, the
Assets or the Business to any Third Party in connection with, any
Acquisition Proposal (as defined below). Notwithstanding the foregoing, to
the extent required by the fiduciary obligations of the Board of Directors
of the Company based on the advice of counsel, (a) the Selling Parties
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may, in response to an unsolicited request therefor, furnish non-public
information with respect to the Selling Parties, the Assets or the Business
to any Qualified Third Party (as defined below) pursuant to a customary
confidentiality agreement and discuss such information (but not any
Acquisition Proposal and not any non-public information relating to the
structure of the transactions contemplated hereby, other than any
information which the Company can demonstrate was independently developed
by it or its advisors) with such Qualified Third Party and (b) upon receipt
by the Company of an Acquisition Proposal from a Qualified Third Party, if
(1) the Company has complied fully and in a timely manner with its
obligations to notify Buyer of the receipt of such Acquisition Proposal
(and the identity of the offeror and the material terms of such proposal)
in accordance with Section 6.3(iii) hereof, (2) the Board of Directors of
the Company has reasonably determined that such Acquisition Proposal, if
consummated, would constitute an Overbid Transaction (as defined below) and
(3) the Company has delivered a written notice to Buyer (an "Overbid
Notice") advising it of the foregoing determination by its Board of
Directors (which notice shall be accompanied by copies of the form of
definitive agreement or other documentation proposed to be entered into in
connection with the Acquisition Proposal), the Company may participate in
discussions and negotiations with such Qualified Third Party regarding such
Acquisition Proposal (after compliance in full with each of the conditions
precedent to the delivery of such notice).
(ii) Furthermore, if (a) the Company has delivered an Overbid Notice to
Buyer, (b) Buyer shall not have delivered to the Company within five (5)
Business Days after receipt of such Overbid Notice a written offer (a
"Topping Offer") to amend the terms of this Agreement in order to provide
for consideration attributable to the Assets having a value greater than
the value of the consideration provided for under the Acquisition Proposal
to which such Overbid Notice relates, which offer shall state that it may
not be withdrawn or revoked by Buyer unless the Company and Buyer do not
enter into an amendment to this Agreement to reflect the acceptance of the
Topping Offer within five (5) Business Days after receipt thereof by the
Company (it being understood and agreed that, if Buyer does deliver a
Topping Offer to the Company, the Company then shall immediately cease to
participate in discussions or negotiations with such Qualified Third Party
regarding such Acquisition Proposal), (c) the terms of the Acquisition
Proposal shall not have been modified in a manner adverse to the Company or
its existing stockholders after the date of the Overbid Notice (it being
understood and agreed that the Company shall promptly advise Buyer in
writing of the nature of any change in the terms thereof), (d) the Selling
Parties shall have taken all action on their part required in order to
cause the Termination Fee Note (as defined below) to be fully funded
(either by the Company or the Qualified Third Party whose Acquisition
Proposal is accepted) and the proceeds delivered to Buyer, and (e) the
Selling Parties shall have taken all action on their part required to cause
the Escrow Agent to deliver the Earnest Money Deposit to Buyer (the
conditions set forth in clauses (a), (b), (c), (d) and (e) above being
hereinafter collectively referred to as the "Overbid Termination
Conditions"), the Company may enter into an agreement with a Qualified
Third Party with respect to an Overbid Transaction. It is expressly
understood and agreed that, if any Affiliates, directors, officers, agents
or other representatives (including, but not limited to, any investment
banker, financial advisor, attorney or accountant) of any of the Selling
Parties, whether or not such persons are purporting to act on behalf of the
Company, engage in any conduct involving the furnishing of information to,
the solicitation of, or participation in discussions or negotiations with,
a Third Party which, if performed by any of the Selling Parties, would
constitute a breach of the provisions of this Section 6.3(ii), then,
notwithstanding anything to the contrary contained herein, such Third Party
shall not be deemed a Qualified Third Party for purposes of this Agreement.
(iii) If any of the Selling Parties shall directly or indirectly receive
any offer, proposal or inquiry regarding an Acquisition Proposal, the
Company shall notify Buyer within two (2) Business Days after the receipt
of such offer, proposal or inquiry and shall, in any such notice to Buyer,
indicate the identity of the offeror and all of the material terms of such
offer, proposal or inquiry.
(iv) The Company shall not modify, or release any Third Party from, any
confidentiality or standstill agreement to which it is a party (exclusive
of those in which it is solely the recipient rather than the provider of
confidential information).
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6.4 Schedules and Exhibits. Within twenty (20) Business Days after the
Effective Date, the Selling Parties shall deliver to Buyer a full and complete
set of the Schedules to this Agreement and the parties shall attach any
exhibits not attached hereto as of the date hereof.
6.5 Reasonable Best Efforts. Each party agrees that it will not voluntarily
undertake any course of action inconsistent with the provisions or intent of
this Agreement and will use its reasonable best efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things reasonably
necessary, proper or advisable under Applicable Laws to consummate the
transactions contemplated by this Agreement, including, without limitation,
(i) cooperation in determining whether any consents, approvals, orders,
authorizations, waivers, declarations, filings or registrations of or with any
Governmental Entity or third party are required in connection with the
consummation of the transactions contemplated by this Agreement, (ii)
obtaining any such consents, approvals, orders, authorizations and waivers and
to effect any such declarations, filings and registrations, (iii) causing to
be lifted or rescinded any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated by this Agreement, (iv) cooperating in the defense of all
lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions contemplated by this Agreement, (v) the
execution of any additional instruments necessary to consummate the
transactions contemplated by this Agreement and (vi) the assignment of the
Selling Parties' interest in the Kaco Partnership to Buyer.
6.6 Solicitation of Shareholder Approval by the Company. The consummation
of the transactions contemplated by this Agreement is conditioned upon the
Company procuring approval of the same by the requisite vote of its
shareholders, pursuant to and in accordance with all state and federal
securities laws governing proxy solicitation. The Company will exercise its
best efforts to procure such approval before the Closing Date.
6.7 Public Announcements. Except for the press releases made by the Company
and Buyer on February 25, 1998, no party nor any of their Affiliates or
representatives will issue or permit or cause the issuance of any press
release or otherwise make any public statement with respect to this Agreement
or the transactions contemplated by this Agreement, without the prior written
consent of Buyer (in the case of the Selling Parties) and the Company (in the
case of Buyer); provided, however, that Buyer, the Company and their
respective Affiliates may make any public disclosure they believe in good
faith is required by Applicable Law or any listing or trading agreement
concerning any of their publicly-traded securities, in which case such party
shall use its reasonable best efforts to advise the other party before making
the disclosure. In addition, except as may be required by Applicable Law, no
party nor any of their Affiliates or representatives shall disclose or provide
to any third party any confidential or proprietary information pertaining to
the transactions contemplated by this Agreement (including any internal
analysis thereof) without the prior written consent of Buyer (in the case of
the Selling Parties) and the Company (in the case of Buyer).
6.8 Indemnification of Claims of Brokers. Buyer shall indemnify and hold
harmless the Selling Parties from and against any claim or demand for
commission or other compensation by any broker, finder, agent or similar
intermediary claiming to have been employed by or on behalf of Buyer, and
Buyer shall bear the cost of legal fees and expenses incurred in defending
against any such claim. The Selling Parties shall, jointly and severally,
indemnify and hold harmless Buyer from and against any claim or demand for
commission or other compensation by any broker, finder, agent or similar
intermediary claiming to have been employed by or on behalf of any of any
Selling Parties, and they shall bear the cost of legal fees and expenses
incurred in defending against any such claim.
6.9 Fees and Expenses. Except as otherwise herein provided, the Selling
Parties and Buyer shall pay their own expenses and costs in connection with
this Agreement and the transactions contemplated hereby, and none of such
costs and expenses of the Selling Parties shall be paid from the Assets.
Without limitation of the foregoing, Buyer and the Selling Parties shall share
in equal portion all recording and transfer taxes assessed in connection with
the closing of the transaction contemplated by this Agreement by the State of
Illinois, any applicable county or applicable municipality to the extent
recordation or transfer taxes are required to be paid under Applicable Law.
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6.10 Tax Matters.
(i) Except as set forth in Sections 6.10(iii) and (iv) below, the
Selling Parties shall be solely responsible for all Taxes relating to the
Assets for all periods ending on or before the Closing Date (and the
portion of any Straddle Period ending on the Closing Date) and shall
indemnify and hold harmless Buyer and the Company with respect thereto.
(ii) Any income tax (federal, state and foreign) consequences to any
Selling Parties arising from the consummation of the transactions
contemplated by this Agreement are for the sole benefit or account of such
Selling Parties.
(iii) All transfer, documentary, sales, use, stamp, registration and
other such Taxes and fees (including any penalties and interest) incurred
in connection with the transactions contemplated by this Agreement shall be
paid in equal parts by Buyer and the Selling Parties when due, and the
Selling Parties will, at their own expense, file all necessary Tax Returns
and other documentation with respect to all such Taxes and fees, and, if
required by Applicable Law, Buyer will join in the execution of any such
Tax Returns or other documentation.
(iv) All 1998 and 1999 real and personal property Taxes as well as all
homeowner association dues imposed on or with respect to the Assets (other
than on or with respect to the Excluded Assets, which real and personal
property Taxes shall be the sole responsibility of the Selling Parties)
shall be prorated based on the number of days in such period before and
after the Closing Date and the Selling Parties shall be responsible, for
purposes of such proration for those days from January 1, 1998 through the
Closing Date.
6.11 Nondisclosure.
(i) The Selling Parties agree that from and after the Closing Date (and
without limitation of time), they shall (and shall cause their Affiliates
to) hold in confidence, and shall use all reasonable best efforts to cause
all present and former directors, officers and employees of the Selling
Parties and their Affiliates to hold in confidence, any and all
proprietary, confidential or secret information or data of or in respect of
the Assets or Business and shall not disclose, publish or intentionally use
such information or data for any purpose other than as provided in this
Agreement (a) without the prior written consent of Buyer, (b) until such
information or data has been publicly disclosed by Buyer or otherwise
ceased to be secret or confidential as evidenced by general public
knowledge through no fault of any of the Selling Parties; provided,
however, that any of the Selling Parties shall have the right to disclose
such information or data, without consent, to the extent that, in the
opinion of their counsel, which counsel and opinion shall be reasonably
satisfactory to Buyer, such disclosure is compelled by any Governmental
Entity, audit, defense or prosecution of a Proceeding; provided further,
however, that if any of the Selling Parties proposes to make such
disclosure based upon such opinion of counsel, it shall advise and consult
with Buyer before such disclosure concerning the information or data it
proposes to disclose and shall give Buyer an opportunity to seek a
protective order or other appropriate remedy to foreclose such disclosure
without penalty to any of the Selling Parties.
(ii) Except as and to the extent required by Applicable Law and except
in connection with the exercise of their rights or the performance of their
obligations under this Agreement or any other agreement entered into
pursuant hereto or in connection herewith, Buyer and its Affiliates shall
not disclose or use, and shall direct its representatives not to disclose
or use, to the detriment of a Selling Party, any Confidential Information
(as defined below) that is furnished, or is to be furnished, by a Selling
Party or their representatives to Buyer or its Affiliates or their
representatives at any time or in any manner. For purposes of this Section
6.11(ii), "Confidential Information" means any information about a Selling
Party that a Selling Party treats as and advises Buyer in writing is
confidential, unless: (a) such information is already known to Buyer or its
Affiliates or representatives, or to others not bound by a duty of
confidentiality, before the date of disclosure by a Selling Party, or such
information becomes publicly available through no fault of Buyer or its
Affiliates or representatives; (b) the use of such information is necessary
or appropriate in making any filing or obtaining any consent or approval
required for the consummation of the transactions contemplated by this
Agreement; or (c) the furnishing or use of such information is required by
or necessary
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or appropriate in connection with any Proceedings. If this Agreement is
terminated for any reason, upon the written request of a Selling Party,
Buyer and its Affiliates and representatives shall promptly return to such
Selling Party or destroy any Confidential Information in their possession
and shall certify in writing to such Selling Party that they have done so.
6.12 Non-Competition.
(i) In order to induce Buyer to enter into this Agreement and to
consummate the transactions contemplated by this Agreement, and as
additional consideration for the Purchase Price to be paid by Buyer for the
Assets, for a period commencing on the Closing Date and ending on the third
anniversary of the Closing Date (the "Non-Compete Period"), each of the
Selling Parties agree and shall cause their Affiliates (so long as such
Affiliates are under the control of the Selling Parties) to agree that they
will not, except as set forth below, directly or indirectly, either as an
employee, employer, consultant, agent, principal, partner, member,
stockholder, officer, director, or in any other individual or
representative capacity, engage or participate in any business or activity
involving the construction or sale of residential homes in Cook (other than
the City of Chicago), McHenry, Lake, DuPage, Will, Kendall and Kane
Counties in the State of Illinois, except with respect to the liquidation
of those suburban subdivisions described in Schedule 1.2 hereto; provided
that nothing in this Section 6.12 shall prevent the Selling Parties from
owning beneficially, as an investment, up to an aggregate of one percent of
a class of equity securities that is publicly traded and registered under
Section 12 of the Exchange Act. The Selling Parties represent to Buyer that
the enforcement of the restriction contained in this Section 6.12 would not
be unduly burdensome to them.
(ii) During the Non-Compete Period, the Selling Parties will not,
directly or indirectly, (1) hire any person as an employee, representative,
agent, consultant, independent contractor, or other service provider who
was, at any time from and after the date which is six months prior to the
Closing Date, an employee of the Selling Parties and at Closing became an
employee of Buyer unless such person's employment was terminated on or
after the Closing Date (including termination by reason of such person's
resignation unsolicited by the Selling Parties), or (2) solicit or
otherwise induce any of the employees of Buyer to leave the employment of
Buyer.
(iii) The Selling Parties agree that a breach or violation of the
covenants contained in this Section 6.12 shall entitle Buyer, as a matter
of right, to an injunction issued by any court of competent jurisdiction,
restraining any further or continued breach or violation of these covenant.
Such right to an injunction shall be cumulative and in addition to, and not
in lieu of, any other remedies to which Buyer may show itself justly
entitled. Further, during any period in which any Selling Party is in
breach of the covenants contained in this Section 6.12, the time period of
the covenants shall be extended for an amount of time that any Selling
Party is in breach hereof.
(iv) The representations and covenants contained in this Section 6.12 on
the part of the Selling Parties will be construed as ancillary to and
independent of any other provisions of this Agreement, and the existence of
any claim or cause of action of the Selling Parties against Buyer or any
officer, director, or shareholder of Buyer, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement
by Buyer of the covenants of the Selling Parties contained in this Section
6.12.
(v) The parties to this Agreement agree that the limitations contained
in this Section 6.12 with respect to time, geographical area, and scope of
activity are reasonable. However, if any court shall determine that the
time, geographical area, or scope of activity of any restriction contained
in this Section 6.12 is unenforceable, it is the intention of the parties
that such restrictive covenant set forth herein shall not thereby be
terminated but shall be deemed amended to the extent required to render it
valid and enforceable.
6.13 Employees and Employee Benefits.
(i) Before the end of the Feasibility Period, Buyer shall deliver to the
Company a list of, and the personnel records related to, each employee of
the Company or Subsidiary, as appropriate, that Buyer has identified as
integral to Buyer's operation of the Business. The Selling Parties shall
cause the termination of each such employee on the last Business Day
immediately preceding the Closing Date. The Selling Parties
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will assist Buyer in offering employment to and hiring those employees of
the Selling Parties engaged in the Business designated by Buyer on such
terms and conditions as designated by Buyer. Buyer is not hereby, and at no
time hereafter will be, adopting, accepting, or assuming any employee
benefit plan or collective bargaining agreement of the Selling Parties
relating to any of their employees or any other agreement, trust, plan,
fund, or other arrangement of the Selling Parties (including, but not
limited to flexible contribution plans) that provides for employee benefits
or perquisites (collectively, "Employment Arrangements"), and Buyer shall
have no liability or obligation whatsoever under any Employment Arrangement
to the Selling Parties or to any employees of the Selling Parties, whether
or not any of such employees are offered employment by or become employees
of Buyer. Buyer is not obligated to replace any of the Employment
Arrangements for any employees of the Selling Parties who become employees
of Buyer, nor is Buyer obligated to provide such persons with any similar
agreements, plans, or arrangements. The Selling Parties are responsible for
and shall timely pay all wages, salaries, employment benefits of any kind
or nature, arising out of service performed prior to the Closing Date
including, without limitation, retirement, health and other benefits,
vacation pay and any termination or severance pay, whether due immediately
or at some future date, whether or not required under any collective
bargaining agreement. All wages, salaries, vacation and sick pay,
termination or severance pay and any other employment benefit or other
compensation earned with respect to or arising out of service performed
prior to the Closing Date shall be paid, or caused to be paid, by the
Selling Parties within the time limits permitted by law. In connection with
all matters related to this Section 6.13, the Selling Parties agree to
comply with all Applicable Laws, including without limitation the Worker
Adjustment and Retraining Notification Act or any similar law or
regulation, and the Selling Parties agree to indemnify, defend and hold
harmless Buyer from any and all liability related to such matters. All
employees of the Selling Parties who become employees of Buyer following
the Closing Date will receive service credit for eligibility and vesting
purposes for periods of service with the Selling Parties under Buyer's
employee benefit plans and with respect to similar matters, including the
severance and vacation plans, if any, of Buyer in which such employees are
eligible to participate.
(ii) Buyer shall deliver to the Selling Parties a copy of an offer of
employment to Tom Small within five (5) Business Days after the expiration
of the Feasibility Period. If Tom Small accepts such offer of employment,
Buyer agrees that after the Closing Date it shall allow Tom Small a
reasonable amount of time to assist the Selling Parties in the defense of
the Parkside Condominium Association litigation.
(iii) The parties acknowledge that certain employees of the Selling
Parties owe to the Selling Parties amounts representing draws taken by such
employees in the course of their employment against future commissions in
accordance with written sales agreements between such persons and the
Selling Parties. Seller hereby acknowledges that Buyer will in no way be
responsible for such amounts owed by the employees to the Selling Parties;
provided, however, Buyer shall withhold, pursuant to the terms and
conditions of such sales agreements, such amounts from the proceeds from
the close of the Sales Contracts, less any commission payable to other
employees, as are owed to the Selling Parties and shall pay such amounts to
the appropriate Selling Parties.
(iv) The Selling Parties will comply after the Closing Date with the
requirements of Sections 601 through 608 of ERISA and Section 4980B of the
Code with respect to any employee or former employee of the Selling Parties
(and any qualified beneficiary thereof) who experiences a qualifying event
(as defined in Section 4980B of the Code or Section 603 of ERISA) on or
before the Closing Date under any group health plan maintained by a Selling
Party. For purposes of the preceding sentence, the Closing Date shall be
considered a qualifying event with respect to those employees of the
Selling Parties who become employees of Buyer in connection with Buyer's
purchase of the Assets.
6.14 Good Title: Title Insurance. At least ten (10) days prior to the
Closing Date the Selling Parties shall deliver to Buyer preliminary title
commitments issued by TICOR Title Insurance Company showing title to the Real
Property and Developed Property being subject only to Permitted Encumbrances
and any other title exceptions pertaining to liens or encumbrances of a
definite or ascertainable amount which may and shall, at the option of Buyer,
either: (x) be removed by the payment of money by any Selling Party at the
Closing, or (y) be insured over by a title company in a manner reasonably
satisfactory to Buyer; provided, however, if such title
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exception(s) pertains to mechanics liens, the Selling Parties may, at their
option, cause the exception(s) either to (a) be removed by the payment of
money by any Selling Party at the Closing, or (b) be insured over by the title
company. Each title commitment shall contain an agreement by the title company
stating that the title policy which, subject to the mechanic's lien exception
definition set forth as the last two paragraphs of this Section 6.14, shall
result in the deletion of the general exceptions, and which agreement shall
confirm that the title policy for the Real Property shall contain the
following affirmative endorsements or disclose and insure over known
violations of the same:
(i) An endorsement insuring Buyer that, except for Permitted
Encumbrances, there are no violations of any restrictive covenants,
conditions or restrictions affecting the Real Property, that there are no
encroachments by any building onto any easements or any building lines or
setbacks affecting the Real Property, or onto any adjacent property, or any
encroachments onto the parcel of existing improvements located on adjoining
land.
(ii) An access endorsement insuring that the streets and roads adjacent
to the Real Property are public streets and that there is direct and
unencumbered access to the same from each parcel of the Real Property.
(iii) A survey endorsement insuring that all the improved property
insured is legally described on a specifically mentioned survey and
foundations in place as of the date of such policy are within the lot lines
and applicable setback lines, that no building encroaches onto adjoining
land or onto any easements, and that there are no encroachments of
improvements from adjoining land onto any parcel of the Real Property or
any part thereof.
(iv) An endorsement insuring that all the unimproved property insured is
legally described on a specifically mentioned plat of subdivision, and that
there are no encroachments of improvements from adjoining land onto any
parcel of the Real Property or any part thereof.
(v) As to vacant lots, an ALTA 3.0 zoning endorsement insuring that each
parcel of the Real Property is zoned for single family residential use and
insuring against loss or damage arising due to a prohibition of said use
and as to lots under construction, an ALTA 3.1 zoning endorsement insuring
that each parcel of the Real Property is zoned for single family
residential use and insuring against loss or damage arising due to a
prohibition of said use or requiring removal of the Improvements existing
or under construction due to a violation of applicable ordinances and
amendments relating to area of the parcel, floor area of any building,
setbacks, height and number of parking spaces.
(vi) A contiguity endorsement insuring that the land comprising the
original subdivision did not contain any gaps.
(vii) An endorsement insuring that all parcels of the Real Property are
covered by one (1) or more permanent index numbers which do not cover other
property, where available.
(viii) An endorsement deleting the creditors' rights exception, if
available.
(ix) A utility facility endorsement.
(x) As to the Developed Property, in addition to the foregoing
endorsements in Sections (i)-(ix) above, the preliminary title commitments
shall insure the contract interest of the Selling Parties in such Developed
Property in a form reasonably acceptable to Buyer and the Selling Parties.
The title company shall also undertake to obtain reinsurance policies with
"Right of Direct Access" in such amounts and with such companies as may be
reasonably satisfactory to Buyer.
Set forth below is the form of mechanic's and materialmen's lien
endorsement that is acceptable to Buyer (it being understood by the parties
hereto that if the endorsement is different than as set forth below such
modified or revised endorsement shall be subject to Buyer's review and
approval):
The Company insures Buyer against loss or damage arising out of any lien
or right to a lien for services, labor or material furnished or delivered
except as set forth below:
(a) Any lien or right to a lien for services, labor or material
furnished or delivered after the Closing Date; and
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(b) Any lien or right to a lien for services, labor or material that
Buyer is obligated to assume or pay under the terms of the
Agreement.
The endorsement will specifically provide that: Buyer agrees that it will
not present a claim for a lien arising out of services, labor or material
furnished on or before the Closing Date until it has either (a) obtained a
court determination that the Selling Parties are liable for said lien under
the terms of this Agreement or (b) unless and until the Selling Parties agree
in writing that they are liable for the specific lien under the terms of this
Agreement. TICOR Title Company shall be bound by either a settlement or a
court adjudication where the Selling Parties, or in lieu thereof, TICOR Title
Company (on behalf of the Selling Parties), has contested whether Buyer is
liable under this Agreement. If Buyer is unable for any reason to obtain a
court adjudication of the Selling Parties' liability under this Agreement, the
issue of the Selling Parties' liability under this Agreement shall be
arbitrated by Buyer and TICOR Title Company pursuant to "Conditions and
Stipulations 14" in the title commitment.
6.15 Further Assurances. Following the Closing the Selling Parties will (a)
at their expense take any action which may be reasonably necessary in order to
put Buyer in actual possession and operating control of the Assets, and (b)
from time to time at the request of Buyer and without further consideration,
execute and deliver such other instruments of assignment, transfer and
conveyance and take such other action as Buyer reasonably may require to more
effectively assign (provided, however, that no such documents shall expand the
Selling Parties' economic obligation or materially increase Selling Parties'
liability hereunder), convey and transfer to, and vest in Buyer, and to put
Buyer in possession of, all of the Assets. In addition, the Selling Parties
will make its Books and Records regarding the Assets available to Buyer and
its representatives, upon reasonable prior notice, to inspect and copy during
normal business hours. The Selling Parties, at its cost and expense, shall
preserve the Books and Records for a period of at least five years after the
Closing Date.
6.16 Selling Parties' Name. The Selling Parties at Closing shall transfer
to Buyer the exclusive (as to the Selling Parties), unlimited and permanent
right to the use of the name "Rembrandt Homes" and all names similar thereto,
and the Selling Parties shall furnish such written consents as Buyer shall
reasonably request to the use by Buyer of such names. As soon as practicable
after the Closing the Selling Parties will change their corporate names, if
applicable, and execute and file withdrawal notices for any assumed name
certificates bearing the name "Rembrandt Homes" or any derivative thereof.
From and after the Closing, the Selling Parties agree that none of Selling
Parties nor any of their Affiliates shall use or employ in any manner,
directly or indirectly, the name "Rembrandt Homes" or any derivatives thereof
or any names deceptively or confusingly similar thereto in any of its present
or future business operations or for any other purpose.
6.17 Release of Bonds. Buyer will take all reasonable steps to procure the
release of the Selling Parties and their Affiliates, and any officers or
directors of the Selling Parties or any such Affiliates who are personally
obligated, from any financial responsibility to the issuer(s) of the
subdivision improvement bonds or other financial securities listed on Schedule
6.17 with respect to any of the Assets; provided, however, that with respect
to such releases, Buyer shall only be responsible for those subdivision
improvement bonds or other financial securities that relate to the current and
future phases of development of the Developed Property. Further, following
Closing Buyer will continue to use its good faith efforts to procure any such
release not obtained by Closing. Buyer will reimburse the Company for (i) the
servicing fees and costs, if any, necessary to maintain such improvement bonds
or other financial securities of the Selling Parties that remain outstanding
and (ii) amounts, if any, drawn under such outstanding improvement bonds and
charged to the Selling Parties or against their financial security in
connection with development of the Housing Property that occurs after Closing.
With respect to subdivision improvement bonds that remain outstanding and as
to which the beneficiary will not accept a substitute bond or security from
Buyer, the Selling Parties may require Buyer to issue a bond or letter of
credit to the benefit of the Selling Parties as backup collateral for Buyer's
responsibility under this Section 6.17, but in that case, Buyer will not have
any obligation to reimburse the Company for servicing fees and costs on the
outstanding bond as provided in clause (i) above.
6.18 Kaco Partnership. Before the last day of the Feasibility Period, Buyer
shall deliver written notice to the Selling Parties disclosing whether Buyer
wishes to be assigned the interests of the Selling Parties in the Kaco
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Partnership and the profit participation agreement. If Buyer notifies the
Selling Parties that it does wish to be assigned such interests, then the
Selling Parties shall take all reasonable steps necessary to restructure or
amend the Kaco Partnership and the profit participation agreement such that at
the Closing, Buyer shall be substituted for the Selling Parties in such
partnership and the profit participation agreement with all of the rights,
interests and obligations of the Selling Parties in such partnership and the
profit participation agreement; provided, however, that the failure of the
Selling Parties to restructure or amend the Kaco Partnership and the profit
participation agreement (after using all of their reasonable efforts) so as to
permit the substitution of Buyer shall not constitute a default under this
Agreement or excuse Buyer from any obligation hereunder other than its
obligation to purchase the Selling Parties' interest in the Kaco Partnership
and the profit participation agreement.
6.19 Illinois Income Tax Withholding. At least five days prior to the
Closing Date, the Selling Parties shall deliver to Buyer evidence that the
sale of the Assets to Buyer is not subject to, and does not subject Buyer to
liability under 35 ILCS 5/902 or 35 ILCS 120/5j (the "Act") and that at least
fifteen (15) days prior to the Closing, the Selling Parties shall have
notified the Illinois Department of Revenue (the "Department") of the intended
sale of the Assets pursuant to this Agreement and requested that the
Department make a determination as to whether the Selling Parties have an
assessed, but unpaid, amount of tax, penalties, or interest under the Act. The
Selling Parties agree that, unless the Selling Parties deliver to Buyer a
waiver from the Illinois Department of Revenue, Buyer may, at the Closing,
deduct and withhold from the proceeds that are due to the Selling Parties the
amount necessary to comply with the withholding requirements imposed by the
Act. Buyer shall deposit the amount so withheld in a separate escrow with
TICOR Title Insurance Company pursuant to the terms and conditions acceptable
to Buyer and the Selling Parties, but in any event, complying with the Act.
6.20 Compliance with Illinois Responsible Transfer Act of 1988.
(i) Within thirty (30) days after the Effective Date, Buyer shall
deliver to the Selling Parties either (a) an affidavit (the "Affidavit") by
which the Selling Parties shall represent and warrant to Buyer that neither
the Assets nor the transfer of the Assets as set forth in this Agreement is
subject to the Illinois Responsible Property Transfer Act of 1988, 765 ILCS
90/5 ("RPTA") or (b) a fully completed and executed RPTA disclosure form
for each Asset as required by RPTA (the "Disclosure Document"). Nothing
contained in this Section 6.20 shall limit any obligation of the Selling
Parties or any right of Buyer pursuant to RPTA.
(ii) At the Closing, if appropriate, the Disclosure Document shall be
recorded (along with the applicable deeds) in the applicable recorders'
offices, and Buyer shall file a copy of such deeds with the Environmental
Protection Agency not later than thirty (30) days after the Closing. The
Selling Parties shall pay all charges and take all responsibility with
respect to the recording and filing of the Disclosure Document.
6.21 Design Center. Buyer shall allow the Selling Parties non-exclusive use
of the Design Center located at 150 West Center Court, Schaumburg, Illinois on
terms and conditions satisfactory to Buyer in its sole and absolute
discretion.
6.22 Work-in Progress. The parties acknowledge that at the Closing, Buyer
will pay to the Selling Parties as a portion of the Purchase Price an amount
representing work-in-progress on the Assets (see Schedule 1.3(b)(iv)) for
which an invoice has been delivered to the Selling Parties up to and including
the date of the Pre-Closing Balance Sheet (the "Closing Invoices").
Thereafter, pursuant to Section 1.7(v) of this Agreement, Buyer will pay all
amounts due under new invoices delivered to the Selling Parties and Buyer
after the date of the Pre-Closing Balance Sheet for work-in-progress on the
Assets (the "Post-Closing Invoices"). In order to facilitate the payment of
the Post-Closing Invoices, the Selling Parties hereby agree to deliver to
Buyer no later than the tenth (10) Business Day after the Closing Date and
again thereafter every tenth (10) Business Day (until such time as the Selling
Parties no longer receive Post-Closing Invoices), the Post-Closing Invoices.
Furthermore, the Selling Parties acknowledge that they are solely responsible
for the payment to the vendors of the Closing Invoices and agree to timely pay
all Closing Invoices.
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6.23 Warranty and Winter Work Agreement. The parties shall enter into a
Warranty and Winter Work Agreement pursuant to which Buyer shall, at the
Company's sole expense, (i) perform warranty work with a direct cost in excess
of One Thousand Dollars ($1,000) per residential home or an average of Three
Hundred Dollars ($300) per residential home, (ii) complete punch list work on
certain residential homes sold by the Selling Parties in the preceding twelve
(12) months and (iii) perform Winter Work on certain residential homes sold by
the Selling Parties in the preceding twelve (12) months.
6.24 Fairness Opinion. Within two (2) Business Days following the Effective
Date, the Company shall request from an investment banking firm or other
financial advisor an opinion that the transactions contemplated by the
Agreement are fair to the common shareholders of the Company (a "Fairness
Opinion").
6.25 Assignment of Remedies Against Subcontractors. If any of the Selling
Parties breaches the representation and warranty set forth in Section
3.12(xviii) with respect to any Housing Property or Improvement, then Buyer
shall first exhaust any contingency reserves related to such Housing Property
or Improvement contained in the applicable cost-to-complete budget referenced
on Exhibit A to Schedule 1.3, if any, and use its reasonable efforts to
enforce any legal remedies available to Buyer against any subcontractors
responsible for such breach before exercising its indemnification rights under
Section 11.1 against the Selling Parties. If, however, in any particular
situation Buyer elects not to pursue a subcontractor or subcontractors because
Buyer is unable to enforce any legal remedies it may have against the
subcontractors responsible for the breach, or concludes that recovery from the
subcontractor(s) will be slow or unlikely, Buyer's indemnification rights
against the Selling Parties will not be prejudiced but Buyer shall assign any
rights it may have to collect such losses from any such subcontractors to the
Selling Parties.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF SELLING PARTIES
The obligations of the Selling Parties to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment on or
before the Closing Date of each of the following conditions:
7.1 Covenants and Agreements Performed. Buyer shall have performed and
complied with in all material respects all covenants and agreements required
by this Agreement to be performed or complied with by it on or before the
Closing Date and the Selling Parties shall have received the certification of
Buyer to such effect.
7.2 Representations and Warranties True. The representations and warranties
of Buyer contained in this Agreement, and in any agreement, instrument, or
document delivered pursuant hereto or in connection herewith on or before the
Closing Date shall be true and correct in all material respects on and as of
the Closing Date with the same force and effect as if such representations and
warranties had been made on and as of the Closing Date. The President or any
Vice President of the managing general partner of Buyer shall certify at
Closing that all such representations and warranties are true on and as of the
Closing Date.
7.3 Reserved.
7.4 Reserved.
7.5 Board of Directors of Each Selling Party and Shareholder Approval. The
Company shall have received the necessary shareholder approval of this
Agreement and the transactions contemplated by this Agreement. In addition,
the Board of Directors of the Company shall have approved this Agreement and
the transactions contemplated by this Agreement no later than six days after
the Effective Date which approval may be conditioned on the receipt of a
fairness opinion; provided, however, that if the Board of Directors of the
Company shall not have approved this Agreement and the transactions
contemplated by this Agreement within the proscribed six day period, such
approval shall no longer be a condition to closing.
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ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment on or before the Closing
Date of each of the following conditions:
8.1 Feasibility Period. During the Feasibility Period, Buyer shall not have
become aware of any facts relating to the Business or Assets, or prospects of
the Business or Assets which, in Buyer's sole discretion, makes it inadvisable
for Buyer to proceed with the consummation of the transactions contemplated by
this Agreement.
8.2 Covenants and Agreements Performed. The Selling Parties shall have
performed or complied with in all material respects, all covenants and
agreements required by this Agreement to be performed or complied with by them
on or before the Closing Date and Buyer shall have received the certificate of
the Selling Parties to such effect.
8.3 Default. The Selling Parties shall not be in default in any material
respect under this Agreement and no event shall have occurred which, with
notice or lapse of time or both, will constitute such a default under this
Agreement, and Buyer shall have received the certificate of the Selling
Parties to such effect.
8.4 Representations and Warranties True. The representations and warranties
of the Selling Parties contained in this Agreement, and in any agreement,
instrument, or document delivered pursuant hereto or in connection herewith on
or before the Closing Date, shall be true and correct in all material respects
on and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of the Closing Date,
except for changes resulting from the Selling Parties having done business in
the ordinary course. Buyer shall have received the certificate of the Selling
Parties at Closing that all such representations and warranties are true on
and as of the Closing Date, except for changes resulting from the Selling
Parties having done business in the ordinary course (for example, the closing
of the sale of homes pursuant to Sales Contracts listed on Schedule 3.12(iii))
and except for other changes as may be listed on an exhibit to such
certificate; provided, however, that this procedure for the listing of
extraordinary changes does not constitute the waiver by Buyer of any condition
to Buyer's obligation to close the transactions contemplated by this
Agreement.
8.5 No Material Adverse Change. Subsequent to the Effective Date and prior
to the Closing Date, there shall have been no material adverse change in the
Business, Assets or Gross Profit Margin (calculated as defined in Schedule
1.3) of the backlog of sold but unclosed homes of the Selling Parties that has
an impact on the value of the Business, Assets or backlog, as the case may be,
that exceeds the Termination Threshold, and Buyer shall also receive the
certificate of the Selling Parties to such effect; provided, however, if a
casualty loss has occurred with respect to the Assets, then Buyer shall
consider the availability of insurance related to such casualty in determining
whether the casualty is a material adverse change that has an impact on the
value of the Business, Assets or backlog, as the case may be, exceeds the
Termination Threshold.
8.6 Consents. Except for consents that the Selling Parties cannot obtain
and the delivery of which Buyer has agreed in writing to waive, all consents
or approvals of any third party set forth on Schedule 3.7 shall have been
given, including (without limitation) any necessary consents to the assignment
of the Intellectual Property, and shall be in full force and effect at the
time of Closing.
8.7 RPTA. The Selling Parties shall have delivered the Disclosure Document
or Buyer shall have determined that RPTA is applicable, notwithstanding the
Selling Parties' delivery of the Affidavit.
8.8 Closing Deliveries. The Selling Parties shall have delivered all of the
documents required by this Agreement to be delivered by it on or prior to the
Closing Date.
8.9 Litigation. No Proceeding before any federal or state court or other
Government Authority shall be instituted or threatened which, in the
reasonable judgment of Buyer, shall have the effect or be expected to have
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the effect of (i) making illegal, impeding or otherwise restraining or
prohibiting any of the transactions contemplated by this Agreement, (ii)
resulting in the payment of damages in excess of Five Hundred Thousand Dollars
($500,000) by the Selling Parties or Buyer as a result of or in connection
with the transactions contemplated by this Agreement, (iii) imposing any
material limitations on the ownership or operation by Buyer of any substantial
portion of the Assets, or compelling Buyer or the Selling Parties to dispose
of or hold separate any substantial portion of the Assets, as a result of or
in connection within any such transactions or (iv) imposing any material
limitations on the ability of Buyer to exercise full rights of ownership with
respect to the Assets or compelling Buyer to dispose of any of the Assets.
8.10 Environmental Audit. Buyer shall have received, at Buyer's expense, an
environmental review report on those properties reasonably identified to the
Selling Parties by Buyer during the Feasibility Period and acceptable in scope
and content, and from a person satisfactory to Buyer, as to the absence of any
evidence of material noncompliance with, or reclamation or remediation
obligations under, applicable Environmental Laws that could materially affect
the Assets.
8.11 Reserved.
8.12 Board of Directors of Each of the Selling Parties and Shareholder
Approval. The Selling Parties shall have received the necessary shareholder
approval of this Agreement and the transactions contemplated by this
Agreement. In addition, the Board of Directors of the Company shall have
approved this Agreement and the transactions contemplated by this Agreement no
later than six days after the Effective Date which approval may be conditioned
on the receipt of a fairness opinion.
ARTICLE IX
TERMINATION
9.1 Termination. At any time before Closing (except where a shorter time
period is indicated below), this Agreement may be terminated:
(i) By mutual written consent of the parties hereto;
(ii) By either Buyer or the Company, provided that the party terminating
has diligently and in good faith performed or complied in all material
respects with the agreements and covenants required to be performed by it
hereunder, if any federal or state court or other Governmental Authority
shall have issued an order, writ, injunction, judgment or decree which
shall have the effect of making illegal, impeding or otherwise restraining
or prohibiting any of the transactions contemplated by this Agreement and
such order, writ, injunction, judgment or decree shall have become final
and nonappealable or any material Proceeding shall have been instituted,
and not dismissed, or threatened by any creditor of any of the Selling
Parties against any of the Assets (other than the filing of a mechanic's
lien against any of the Assets against which Buyer will receive adequate
title insurance coverage at the Closing);
(iii) By Buyer if:
(a) Buyer shall have determined, in its reasonable discretion, that
the condition set forth in Section 8.12 hereof is unlikely to be
fulfilled within a reasonable period of time; provided, however, that
Buyer shall only be entitled to terminate this Agreement pursuant to
this clause (a) if it delivers a written notice of termination to the
Company before the Closing Date but subsequent to the later of that
date which is (x) forty (40) days following the commencement of the
solicitation of approval of this Agreement by the Company from its
shareholders, all in accordance with the Securities and Exchange
Commission rules and regulations or (y) thirty (30) days following the
date of the commencement of resolicitation of such shareholders by the
Company, again in accordance with the rules and regulation of the
Securities and Exchange Commission, and the Company has not satisfied
Section 8.12 before delivery of such notice;
(b) Reserved.
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(c) the shareholders of the Company shall not have approved this
Agreement and the transactions contemplated by this Agreement or the
Closing shall not have occurred on or before June 30, 1999 for any
reason;
(d) ten (10) calendar days shall have elapsed after the delivery by
the Company of an Overbid Notice to Buyer, unless the Company shall
have notified Buyer in writing before such time that it has irrevocably
determined not to participate in any further discussions or
negotiations with any Third Party with respect to the Acquisition
Proposal that was the subject of such notice;
(e) any of the Selling Parties shall have become a proponent, co-
proponent or the subject of any voluntary or involuntary plan of
reorganization under the Bankruptcy Code;
(f) there shall have been any violation or breach on the part of the
Selling Parties of any covenant or agreement contained in Section 6.3
hereof, and such violation or breach has not been waived by Buyer;
(g) there shall have been any violation or breach on the part of the
Selling Parties of any covenant or agreement contained in Article III
hereof or Sections 6.1 or 6.5 hereof which shall not have been cured
within five days after receipt of notice of such violation or breach
from Buyer;
(h) there shall have been any material violation or breach by any of
the Selling Parties of any covenant or agreement (other than the
covenants and agreements referred to in Sections 9.1(iii)(f) and (g)
above) contained in this Agreement which shall not have been cured
within twenty (20) days after receipt of notice of such violation or
breach from Buyer;
(i) there shall have been any violation or breach by any of the
Selling Parties of any representation or warranty contained in this
Agreement or a Proceeding shall have been instituted or threatened,
which in the reasonable judgment of Buyer, has resulted or is
reasonably expected to result in any claims by Buyer or against the
Assets or the Business in an aggregate amount exceeding the Termination
Threshold (as defined below) (it being understood and agreed that for
purposes of this clause all such representations and warranties shall
be construed as if they were not qualified in any manner as to
knowledge or materiality);
(j) Buyer determines during the Feasibility Period, in its sole
discretion, that it is not in its best interest to complete the
transactions set forth in this Agreement and provides to the Selling
Parties the required notice;
Provided, however, that, in the case of any termination pursuant to Section
9.1(iii)(c), (f), (g), (h) or (i) above, Buyer has diligently and in good
faith performed or complied in all material respects with the agreements and
covenants required to be performed by it hereunder.
(iv) By the Selling Parties if:
(a) All of the Overbid Termination Conditions shall have been
satisfied;
(b) There shall have been any material violation or breach by Buyer
of any covenant or agreement contained in this Agreement which shall
not have been cured within twenty (20) days after receipt of notice of
such violation or breach from the Company;
(c) There shall have been any violation or breach by Buyer of any
representation or warranty contained in this Agreement which, in the
reasonable judgment of the Company, has resulted or is reasonably
expected to cause the Selling Parties to incur or be subject to claims
or liabilities in an aggregate amount exceeding the Termination
Threshold (it being understood and agreed that for purposes of this
clause (c) all such representations and warranties shall be construed
as if they were not qualified in any manner as to knowledge or
materiality);
(d) Notwithstanding good faith efforts on the part of the Selling
Parties, Section 8.12 of this Agreement is not satisfied as of June 30,
1999;
(e) The Closing shall not have occurred on or before July 30, 1999
for any reason;
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(f) The Company shall have requested and not received a Fairness
Opinion. This termination right expires twelve (12) days after the
Effective Date.
provided, however, that, in the case of any termination pursuant to
Sections 9.1(iv)(b), (c), (d) or (e) above, the Selling Parties have
diligently and in good faith performed or complied in all material respects
with the agreements and covenants required to be performed by them
hereunder.
9.2 Effect of Termination.
(i) In the event of the termination of this Agreement pursuant to
Section 9.1 by Buyer, on the one hand, or the Selling Parties, on the
other, written notice thereof shall forthwith be given to the other party
specifying the provision of this Agreement pursuant to which such
termination is made and describing the facts or circumstances supporting
such termination, and, except as provided in this Section 9.2, this
Agreement shall become void and have no effect, except that the agreements
contained in this Section 9.2, in Article X and in Sections 6.7, 6.8, 6.9
and 6.11 hereof shall survive any termination of this Agreement.
(ii) Nothing contained in this Section 9.2 shall relieve any party from
liability for damages incurred as a result of any breach of this Agreement.
Each of the Selling Parties and Buyer hereby stipulate that the Business is
a unique business opportunity. Therefore, for that and other reasons, the
remedy of specific performance of the Selling Parties' obligations under
this Agreement is hereby expressly granted to Buyer by the Selling Parties.
If the Selling Parties fail or refuse to consummate the transaction
contemplated by this Agreement, other than as a result of termination by
mutual written consent under Section 9.1(i) hereof, by either party under
Section 9.1(ii), by Buyer under Section 9.1(iii) or by the Selling Parties
pursuant to Section 9.1(iv) hereof, then Buyer shall have the right to
bring an action in a court of proper jurisdiction to compel the Selling
Parties to specifically perform the transaction contemplated by this
Agreement in accordance with the terms set forth in this Agreement. The
Selling Parties' sole remedy against Buyer shall be a claim against Buyer
for liquidation damages in an amount not to exceed the Earnest Money
Deposit as set forth in Article X hereof.
ARTICLE X
TERMINATION PAYMENTS
10.1 Termination Fee Deposit. (a) Within five (5) Business Days of the
execution of this Agreement (i) the Company shall deliver a promissory note
payable to the order of Buyer in the form attached hereto as Exhibit H in the
aggregate principal amount of One Million Five Hundred Thousand Dollars
($1,500,000) (the "Termination Fee Note") to Buyer. If this Agreement is
terminated (whether automatically or by Buyer or any of the Selling Parties)
for any reason, the Termination Fee Note shall be handled, as follows:
(i) kept by Buyer, if this Agreement is terminated (whether
automatically or by Buyer or any of the Selling Parties) for any reason
other than as specified in clause (ii) below; or
(ii) returned to the Selling Parties, if this Agreement is terminated by
mutual written consent under Section 9.1(i) hereof, by either party under
Section 9.1(ii), by Buyer under Section 9.1(iii) or by the Selling Parties
pursuant to Section 9.1(iv)(b), (c), (d), (e) or (f) hereof.
(b) Within two Business Days after the execution of this Agreement, Buyer
and Maurice Sanderman shall enter into the Performance Guaranty Agreement
attached hereto as Exhibit I, pursuant to which Maurice Sanderman will
guarantee that either (i) any Qualified Third Party whose Acquisition Proposal
is accepted will fund the payment of the Termination Fee Note on behalf of the
Company or (ii) the Company will fund the payment of the Termination Fee Note.
10.2 Delivery of Earnest Money Deposit. If this Agreement is terminated for
any reason, the parties shall take all action necessary in order to cause the
Escrow Agent promptly to deliver the Earnest Money Deposit as follows:
(i) to Buyer, if this Agreement is terminated (whether automatically or
by Buyer or any of the Selling Parties) for any reason other than as
specified in clause (ii) below; or
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(ii) to the Selling Parties, if this Agreement is terminated by the
Selling Parties pursuant to Section 9.1(iv)(b) or (c) hereof, and payment
of the Earnest Money Deposit to the Selling Parties will constitute the
payment of liquidated damages as the Selling Parties' sole and exclusive
remedy under such circumstances; provided, however, that in the event that
the Selling Parties terminate this Agreement pursuant to Section
9.1(iv)(c), they shall only be entitled to actual damages up to but not
exceeding the Earnest Money Deposit and the balance of the Earnest Money
Deposit, if any, shall be promptly delivered to Buyer.
10.3 Judicial Enforcement. If Buyer or any of the Selling Parties is
required for any reason to seek judicial enforcement of any of the obligations
of the other party hereto under this Article X, such other party shall pay to,
or reimburse such party for, all costs and expenses (including fees and
disbursements of counsel) that are incurred by such party in enforcing the
provisions of this Article X.
Any amounts paid pursuant to this Article X shall be paid without set-off
or deduction.
ARTICLE XI
INDEMNIFICATION
11.1 Indemnification by the Selling Parties. The Selling Parties shall
defend at their cost, indemnify and hold harmless Buyer, its Affiliates and
their respective shareholders, directors, officers, employees, agents and
representatives from any and all liabilities (except the Assumed Liabilities),
obligations, claims (including third party claims), contingencies, damages,
losses, fines, penalties, interest, costs and expenses (including all court
costs, costs of investigation and reasonable attorneys' fees) (collectively,
"Losses") that Buyer or any such person may suffer or incur as a result of or
relating to:
(i) The breach or inaccuracy of any of the representations, warranties,
covenants or agreements made by any of the Selling Parties herein,
including, without limitation, the representations and warranties relating
to the physical condition of the Assets;
(ii) Any transaction, activity, liability or obligation, except for the
Assumed Liabilities and except to the extent such transaction, activity,
liability or obligation relates to the physical condition of the Assets for
which the Selling Parties have made representations and warranties (and as
to which indemnification is provided pursuant to Section 11.1(i) above), of
any of the Selling Parties that occurs or arises out of actions or events
occurring before the Closing Date, including, without limitation, the
claims and litigation set forth on Schedule 3.15;
(iii) Any and all Taxes arising out of the transactions contemplated by
this Agreement, except as expressly provided otherwise in this Agreement;
(iv) Any earnest money deposit paid by a Selling Party to the seller of
real property (and not placed in escrow), before the Closing Date, under a
contract for the purchase of the real property relating to the Business,
that is not returned to the Buyer because such seller wrongfully withholds
such deposit and refuses to return it to the Buyer in violation of the
terms of the purchase contract;
(v) Any violation of the Bulk Sales Laws of the State of Illinois or any
other similar state laws to which the Assets are subject; or
(vi) An adjustment of the Purchase Price as determined in accordance
with Schedule 1.3 that results in an additional amount owing by the Selling
Parties to Buyer because of an overpayment to the Selling Parties of the
Purchase Price paid to the Selling Parties at the Closing that is not
timely paid as provided in Schedule 1.3.
11.2 Indemnification by Buyer. Except as otherwise provided in this
Agreement, Buyer shall defend at its cost, indemnify and hold harmless the
Selling Parties and their Affiliates, and their respective shareholders,
directors, officers, employees, agents and representatives from any and all
Losses that the Selling Parties or any such person may suffer or incur as a
result of or relating to:
(i) the breach or inaccuracy of any of the representations, warranties,
covenants or agreements made by Buyer herein including, without limitation,
Buyer's agreement to assume responsbility for the Assumed Liabilities; and
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(ii) any transaction, activity, liability or obligation relating to the
Assets arising after the Closing Date, excluding however any liability,
cost or expense incurred by the Selling Parties as a result of actions
taken by Buyer or the Selling Parties to enforce their rights under this
Agreement.
For purposes of this Article XI, the party(ies) seeking indemnification
pursuant to this Article XI shall be referred to as "Indemnitee" and the
party(ies) from whom Indemnitee seeks indemnification shall be referred to as
"Indemnitor."
11.3 Third-Party Claims. If any claim for indemnification by the Indemnitee
arises out of a third-party claim (i.e., out of a claim made by or an action
of a person or entity other than Indemnitee), the Indemnitor may, by written
notice to Indemnitee, undertake to conduct the defense thereof and to take all
other steps or proceedings to defeat or compromise any such action or claim,
including the employment of counsel reasonably satisfactory to Indemnitee;
provided that Indemnitor shall reasonably consider the advice of Indemnitee as
to the defense or compromise of such actions and claims, and Indemnitee shall
have the right to participate in such proceedings (at the sole cost and
expense of Indemnitee), but control of such proceedings shall remain
exclusively with Indemnitor. Indemnitee shall provide all reasonable
cooperation to Indemnitor in connection with such proceedings. Counsel and
auditor costs and expenses and court costs and fees of all proceedings with
respect to any such action or claim shall be borne by Indemnitor. If any such
claim is made hereunder and Indemnitor does not elect to undertake the defense
thereof by written notice to Indemnitee, then Indemnitee shall be entitled to
control such proceedings and shall be entitled to indemnity with respect
thereto pursuant to the terms of Section 11.3 of this Agreement. If the
Indemnitor shall assume the defense of such claim, it shall not settle such
claim unless such settlement includes as an unconditional term thereof the
giving by the claimant or the plaintiff of a release of the Indemnitee,
satisfactory to the Indemnitee, from all liability with respect to such claim.
11.4 Notice. Within fifteen (15) days after notice of any action, receipt
of any claim in writing or similar form of actual notice of any claim as to
which it asserts a right to indemnification, Indemnitee shall notify the
Indemnitor. The failure of Indemnitee to give the notification to Indemnitor
shall not relieve Indemnitor from any liability or obligation that it may have
pursuant to this Agreement unless the failure to give such notice within such
time shall have been materially damaging or prejudicial to Indemnitor, and in
no event shall the failure to give such notification relieve Indemnitor from
any liability it may have other than pursuant to this Agreement.
11.5 Right of Set Off. Buyer shall be entitled to setoff or recoupment as
set forth in this Section 11.5.
(i) Liquidated Losses; Set Off. Subject to the Selling Parties' right to
object to any set off or recoupment of any Loss as provided below, Buyer
shall be entitled to set off or recoup any Loss (a "Liquidated Loss") that
has been actually incurred by or imposed upon Buyer or any other entity or
person entitled to indemnification pursuant to Section 11.1 herein (a
"Buyer Indemnitee") against the Holdback (a "Set Off") as provided in
Section 1.4 of this Agreement. Before or concurrently with each exercise by
Buyer of its right of Set Off, Buyer shall deliver a written notice to the
Selling Parties (the "Set Off Notice"), which notice shall set forth the
amount of the Liquidated Loss, together with a reasonably detailed
statement of the circumstances under which such Liquidated Loss was
incurred by or imposed upon the applicable Buyer Indemnitee and the total
of all Liquidated Losses that have been Set Off by Buyer through the date
of the Set Off Notice.
(ii) Unliquidated Losses; Set Off Reserves.
(a) Establishment of Set Off Reserves. Subject to the Selling
Parties' right to object to any set off or recoupment of any Loss as
provided below, at any time before the second anniversary of the
Closing Date, if and to the extent that Buyer reasonably determines
that it is reasonably likely that any Loss that has not yet become a
Liquidated Loss (an "Unliquidated Loss") will be incurred by or imposed
upon a Buyer Indemnitee at any time in the future with respect to any
claim that has arisen, Buyer shall be entitled to establish a
reasonable reserve (a "Set Off Reserve") against the Holdback in
respect of such Unliquidated Loss. Buyer shall take into consideration
the availability of insurance coverage for any Unliquidated Loss in
establishing any Set Off Reserve.
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(b) Set Off Reserve Notice. Before or concurrently with the
establishment of a Set Off Reserve, Buyer shall deliver a written
notice to the Selling Parties (the "Set Off Reserve Notice"), which
notice shall set forth the amount of the Unliquidated Loss, together
with a reasonably detailed statement of the basis for Buyer's
determination that such Unliquidated Loss is reasonably likely to be
incurred by or imposed upon the applicable Buyer Indemnitee and the
total of all Unliquidated Losses that have been reserved by Buyer
through the date of the Set Off Reserve Notice.
(c) Suspension of Obligations. The obligation of Buyer to pay the
Holdback to the Selling Parties shall be suspended (but not the accrual
of interest) to the extent of the aggregate amount of Set Off Reserves
not settled pursuant to Section 11.5(ii)(f) hereof at the time of such
payment.
(d) Settlement of Set Off Reserves. If at any time it is determined
(either pursuant to the dispute resolution procedures set forth in
Section 11.5(ii)(e) and (f) hereof, or as a result of a judicial
determination of the Final Loss Amount (as defined below) that any Set
Off Reserve exceeds the aggregate amount of the Losses ultimately
incurred by or imposed upon Buyer Indemnitees as a result of or based
upon the events or conditions to which the Set Off Reserve relates (the
"Final Loss Amount"), the amount of such Set Off Reserve in excess of
such Final Loss Amount shall be retained by Buyer, or if the Holdback
period shall have terminated, shall be returned to the Selling Parties.
(e) Objection Procedure. If a Selling Party disputes any exercise by
Buyer of its right to make a Set Off or a Set Off Reserve, then such
Selling Party shall deliver a written notice to Buyer ("Objection
Notice") on or before ten (10) days following receipt of a Set Off
Notice or a Set Off Reserve Notice. Any Objection Notice delivered
after such ten (10) day period shall be null, void and without effect.
The Objection Notice shall state the portion of the applicable Loss to
which such Selling Party objects and a reasonably detailed description
of the basis of such objection. Such Selling Party and Buyer shall
negotiate in good faith to resolve any dispute with respect to the
matters set forth in the Objection Notice for a period of twenty (20)
days following receipt of such Objection Notice by Buyer.
(f) Arbitration. If such Selling Party and Buyer are not able to
resolve any dispute set forth in an Objection Notice on a mutually
acceptable basis during the dispute resolution period provided above,
either Buyer or such Selling Party may submit the dispute described in
such Objection Notice to the American Arbitration Association for
arbitration under the commercial arbitration rules of that institution
within twenty (20) days following the expiration of the dispute
resolution period provided above. The arbitration will be conducted in
Chicago, Illinois and the finding of the arbitrators will be binding on
all parties for all purposes.
The cost of arbitration will be borne fifty-percent (50%) by the Selling
Parties and fifty-percent (50%) by Buyer unless otherwise determined by the
arbitrator. At any time after ten (10) days following the issuance of the
final arbitration ruling, the party entitled to an award in said proceeding
may, at its election and at the expense of the non-prevailing party, provide
for the entry of the award for enforcement purposes in any court of competent
jurisdiction.
It is the intent of the parties that the arbitration procedure set forth
herein shall be the sole and exclusive remedy available to resolve any
disputes arising under Section 11.5 hereof that cannot be resolved pursuant
to Section 11.5(ii)(e) hereof, and neither Buyer nor any Selling Party
shall have any right to file a lawsuit in connection with any dispute
arising under Section 11.5 hereof except for claims based on fraud or
intentional misrepresentation or to enforce the arbitration decision.
11.6 Good Faith Exercise; No Breach. Buyer shall act in good faith in the
exercise of its rights under Section 11.5 hereof. It is expressly agreed that
the exercise in good faith by Buyer of the right to Set Off and to make Set
Off Reserves and the other rights and remedies granted to it pursuant to
Section 11.5 hereof shall in no event be deemed to constitute or give rise to
a violation or breach of, or a default under, this Agreement.
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11.7 Indemnity Basket and Maximum Recovery.
(i) Except for claims based on fraud, Indemnitee shall not have any
rights of indemnification, set off or recoupment under this Agreement
against the other party for breaches of representations or warranties until
the aggregate amount of all Losses subject to indemnification, set off or
recoupment for such claims shall exceed a Fifty Thousand Dollar ($50,000)
threshold (the "Basket"). After the aggregate amount of all such Losses
exceeds the Basket, indemnification shall be paid for the full amount of
all Losses from and relating back to the first dollar of Loss without
regard to the Basket (and without deduction for tax benefits). With respect
to claims for indemnification asserted by Buyer, Buyer will first assert
such claims as rights of setoff against the Holdback and only after the
entire Holdback has been paid out or claimed (either through Liquidation
Losses or Setoff Reserves) will Buyer make claims for indemnification
unrelated to the Holdback. Both types of claims those made against the
Holdback and those made otherwise, will count toward the limits on
indemnification described in Section 11.7 (ii) below.
(ii) Except for claims based on fraud, the maximum amount of claims for
indemnification which may be made by Indemnitee for breaches of
representations or warranties shall not exceed (a) Four Million Dollars
($4,000,000) for the period beginning as of the Closing Date and ending on
the date that is one year after the Closing Date, (b) the lesser of (i)
Three Million Dollars ($3,000,000) or (ii) $4,000,000 less the sum of all
amounts that have been paid (or are unpaid, but still subject to claims
from the previous year) during the period beginning one year and one day
after the Closing Date and ending on the date that is two years after the
Closing Date; and (c) the lesser of (i) Two Million Dollars ($2,000,000) or
(ii) $4,000,000 less the sum of all amounts claimed in the previous two (2)
years during the period beginning two years and one day after the Closing
Date and ending on the date that is three years after the Closing Date.
(iii) The indemnification provided for in this Article XI shall be
subject to the limitations that Indemnitor shall not be obligated to pay
any amount for indemnification hereunder relating to a claim to the extent
of any indemnity, insurance, contribution or similar payment paid to the
Indemnitee from any third party with respect thereto (excluding the cost of
such insurance coverage to and the deductible paid by the Indemnitee).
ARTICLE XII
SURVIVAL
12.1 Survival of Representations and Warranties. The representations and
warranties of the parties to this Agreement contained in this Agreement, or in
any certificate, instrument or document delivered pursuant to this Agreement,
shall survive the Closing, regardless of any investigation made by or on
behalf of any party to this Agreement until the third anniversary of the
Closing Date (such anniversary, a "Survival Date"). The above time limitations
shall not apply to instances of fraud, intentional misrepresentations or
breaches of representations and warranties set forth in Sections 3.16 and
3.28, which shall survive the Closing, regardless of any investigation made by
or on behalf of any party to this Agreement until the expiration of the
limitation period under the applicable statute of limitations.
12.2 Survival of Agreements and Covenants. Except as expressly set forth in
Section 12.1, the parties' obligations to perform their respective agreements
and covenants set forth in this Agreement shall not be limited or
extinguished.
ARTICLE XIII
MISCELLANEOUS
13.1 Predecessors Included. Each representation, warranty, covenant and
indemnification made by the Selling Parties that relates or could relate to
the conduct of any predecessor of the Selling Parties that is or was an
Affiliate of the Selling Parties, or relates or could relate to a time during
which the Selling Parties did not
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exist but such predecessors did, is made by the Selling Parties not just on
its own behalf but also on behalf of each such predecessor and as if the
Selling Parties were in existence at such time.
13.2 Notices. Any notice, request, instructions or other document to be
given hereunder to any party shall be in writing delivered personally or sent
by mail, facsimile or bonded air courier, confirmed in writing, as follows:
If to the Selling Parties: Sundance Homes, Inc.
30 East Lake Street, Suite
Chicago, Illinois
Attention: Maurice Sanderman
Telephone: (312) 782-7100
Facsimile: (312) 793-9933
With copy to:Katten Muchin & Zavis
525 West Monroe Street
Chicago, Illinois 60661-3693
Attention: Gerald Penner, Esq.
Telephone: (312) 902-5245
Facsimile: (312) 577-8863
If to Buyer:Centex Homes
12400 Whitewater Dr., Suite 120
Minnetonka, Minnesota 55343
Attention: Tom Boyce
Telephone: (612) 988-8230
Facsimile: (612) 936-0486
With copy to:
Centex Homes
12400 Whitewater Dr., Suite 120
Minnetonka, Minnesota 55343
Attention: Tim Hoyt
Telephone: (612) 988-8234
Facsimile: (612) 936-0486
and to: Brian J. Woram
Centex Homes
2728 N. Harwood, 8th Floor
Dallas, Texas 75201
Telephone: (214) 981-6544
Facsimile: (214) 981-6002
Any party may change its address for purposes of this Article XIII by
giving notice of such change of address to the other party in the manner
herein provided for giving notice. Any notice to be given or served upon any
party hereto in connection with this contract must be in writing, and shall be
delivered in person to the other party, shall be given by certified mail,
return receipt requested, shall be given by facsimile or shall be given by
bonded air courier and shall be deemed to have been given when received by the
addressee; provided, however, that notice delivered by facsimile mail with the
original sent by overnight delivery shall be deemed to have been received on
the day it is faxed to the addressee.
13.3 Bulk Sales Law. The Selling Parties hereby agrees to indemnify Buyer
from any liability which may arise by virtue of the failure of the Selling
Parties to comply with any of the provisions of the Bulk Sales Law of the
State of Illinois or any other similar state laws.
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13.4 No Obligation of Buyer Before the Closing. Notwithstanding anything
contained in this Agreement or any other instrument or agreement to the
contrary, in no event shall Buyer have any obligation or liability of any kind
or character whatsoever with respect to the Assumed Liabilities or the Assets
before the Closing hereunder, except only the obligation to purchase the
Assets in accordance with the terms and provisions of this Agreement.
Following the Closing, Buyer will have all obligations and liabilities with
respect to the Assumed Liabilities and Assets as are contemplated under this
Agreement.
13.5 Entire Agreement. This Agreement, together with the Schedules,
Exhibits and other writings delivered pursuant to this Agreement, constitute
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter of this
Agreement. This Agreement may not be amended except by an instrument in
writing executed by all the parties hereto.
13.6 Binding Effect; Assignment; No Third Party Benefit. This Agreement
shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns; provided, however, that neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties (by operation of law or otherwise) without
the prior written consent of the other parties, except that Buyer may assign
this Agreement and all of its rights, interests, and obligations under this
Agreement to an Affiliate upon notice to the Company, provided that Buyer
shall remain liable under this Agreement if such Affiliate fails to perform
its obligations under this Agreement as so assigned.
13.7 Reserved.
13.8 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Illinois without
references to the choice of laws principles of the State of Illinois.
13.9 Descriptive Headings. The descriptive headings in this Agreement are
inserted for convenience of reference only, do not constitute a part of this
Agreement and shall not affect in any manner the meaning or interpretation of
this Agreement.
13.10 Gender. Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
13.11 References. All references in this Agreement to Articles, Sections
and other subdivisions refer to the Articles, Sections and other subdivisions
of this Agreement unless expressly provided otherwise. The words "this
Agreement", "herein", "hereof", "hereby", "hereunder" and words of similar
import refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited. Whenever the words "include",
"includes" and "including" are used in this Agreement, such words shall be
deemed to be followed by the words "without limitation". Each reference in
this Agreement to a Schedule or Exhibit refers to the item identified
separately in writing by the parties as the described Schedule or Exhibit to
this Agreement. All Schedules and Exhibits are hereby incorporated in and made
a part of this Agreement as if set forth in full in this Agreement.
13.12 Counterparts. This Agreement may be executed by the parties in any
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same agreement. Each counterpart may
consist of a number of copies of this Agreement each signed by less than all,
but together signed by all, the parties.
13.13 Construction. This Agreement shall be interpreted without regard to
any presumption or rule requiring construction against the party causing this
Agreement to be drafted.
13.14 Reserved.
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13.15 Waiver of Jury Trial. THE PARTIES IRREVOCABLY WAIVE ANY RIGHT TO TRIAL
BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT,
THE DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTIONS
RELATING TO THIS AGREEMENT.
ARTICLE XIV
DEFINITIONS
14.1. Certain Defined Terms. As used above, the terms set forth below shall
have the following meanings:
"Applicable Law" shall mean any statue, law, rule or regulation or any
judgment, order, writ, injunction or decree of any Governmental Entity to which
a specified person or property is subject, including, without limitation, all
Environmental Laws and Health and Safety Laws.
"Acquisition Proposal" means any bona fide proposal relating to an
acquisition of all or any substantial part of the Selling Parties, the Business
or the Assets (whether by merger, consolidation, purchase of assets or purchase
of stock) or any other transaction of a similar nature; provided, however, that
no proposal relating to a transaction that would be in the ordinary course of
business shall constitute an "Acquisition Proposal."
"Affiliate" means, with respect to any person, any other person who,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such person. As used in this definition, the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a person, whether by contract or
otherwise.
"Business Day" means any day except a Saturday, Sunday or federal holiday.
"CERCLA" shall mean the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Debt" shall mean, with respect to any person, without duplication, (a)
indebtedness of such person for borrowed money, (b) obligations of such person
evidenced by bonds, debentures, notes, or other similar instruments, (c)
obligations of such person to pay the deferred purchase price of property or
services (other than trade debt and normal operating liabilities incurred in
the ordinary course of business), (d) obligations of such person as lessee
under capital leases, (e) obligations of such person under or relating to
letters of credit, guaranties, purchase agreements, or other creditor
assurances assuring a creditor against loss in respect of indebtedness or
obligations of others of the kinds referred to in clauses (a) through (d) of
this definition, and (f) nonrecourse indebtedness or obligations of others of
the kinds referred to in clauses (a) through (e) of this definition secured by
any Encumbrance on or in respect of any property of such person. For the
purposes of determining the amount of any Debt, the amount of any Debt
described in clause (e) of the definition of Debt shall be valued at the
maximum amount of the contingent liability thereunder.
"Encumbrances" shall mean liens, charges, pledges, options, mortgages, deeds
of trust, security interests, restrictions (whether on voting, sale, transfer,
disposition or otherwise), easements and other encumbrances of every type and
description, whether imposed by Applicable Law, agreement, understanding or
otherwise.
"Environmental Laws" shall mean all federal, state, local and foreign laws
(including common law), statutes, codes, ordinances, rules and regulations
relating to pollution or protection of human health or the environment
(including, but not limited to, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws, statutes,
codes, ordinances, rules and regulations relating to emissions, discharges,
releases or threatened releases of Hazardous Materials, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
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"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended.
"GAAP" shall mean generally accepted accounting principles in the United
States of America from time to time as used by the Buyer.
"Governmental Entity" shall mean any court or tribunal in any jurisdiction
(domestic or foreign) or any public, governmental, or regulatory body, agency,
department, commission, board, bureau or other authority or instrumentality
(domestic or foreign).
"Governmental Authority" shall mean any nation or government, any state or
political subdivision thereof, any federal or state court and any other agency
or authority exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hazardous Materials" shall mean (i) any substance, material or waste
defined or characterized as hazardous, extremely hazardous, toxic or dangerous
within the meaning of any Environmental Law, (ii) any substance, material or
waste classified as a contaminant or pollutant under any Environmental Law or
(iii) any other substance (including, but not limited to, petroleum), material
or waste, the manufacture, processing, distribution, use, treatment, storage,
placement, disposal, removal or transportation of which is subject to
regulation under any Environmental Law.
"Hazardous Waste" means any waste listed, defined, designated or regulated
to be a "hazardous waste" under any Environmental Law by any Governmental
Entity having jurisdiction over the Selling Parties or any of their Real
Property, Developed Property or Leased Property, including any such waste
determined as such pursuant to Section 1004(5) of the Resource Conservation
and Recovery Act, 42 U.S.C.A. (S) 6901, et seq. ("RCRA").
"HSR Act" means Section 7A of the Clayton Act (Title II of the Hart-Scott-
Rodino Antitrust Improvement Act of 1976), as amended (included any successor
statute).
"Intellectual Property" shall mean any patents, copyrights, trade secrets,
trademarks (registered or unregistered), trade names, service marks, logos or
other marks or labels, computer software, pending applications for any of the
foregoing, and other intellectual and proprietary rights, whether or not
subject to statutory registration or protection that is used in the Business.
"Lien" means (i) any mortgage, pledge, hypothecation, assignment, security
interest, option, lien or any preference, priority or other right or interest
granted pursuant to a security agreement or preferential arrangement of any
kind or character whatsoever (including, but not limited to, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction), and (ii) any other lien, charge,
levy or encumbrance, whether arising by operation of law or otherwise.
"Material Adverse Effect" shall mean any change or changes in, or effect or
effects on, the Company or the Subsidiaries or the Business, operations,
Assets or condition (financial or otherwise) of the Company or the
Subsidiaries, the individual or aggregate liability, damage, loss, penalty,
cost or expense (including reasonable attorneys fees and costs of
investigating and defending against lawsuits, complaints, actions or other
pending or threatened litigation) of which could be reasonably expected to
exceed Twenty Five Thousand Dollars ($25,000.00).
"Overbid Transaction" means an Acquisition Proposal made in writing by a
Qualified Third Party (i) which would provide for consideration attributable
to the Assets subject to the Acquisition Proposal having a fair market value,
as determined by an investment banking firm of national standing selected by
the Selling Parties
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and reasonably acceptable to Buyer, which exceeds the aggregate Purchase Price
(or, if Buyer has delivered a Topping Offer to the Company, the amount of the
Topping Offer) by at least One Million Dollars ($1,000,000) and (ii) the terms
and conditions of which (including the amount and value of the consideration
attributable to the stock or the assets subject to the Acquisition Proposal)
are reasonably determined by the Board of Directors of the Company to be, when
taken in their entirety, no less favorable to the Selling Parties than the
terms and conditions set forth in this Agreement. Notwithstanding anything to
the contrary contained in the preceding sentence, if the Acquisition Proposal
relates to the assets of the Company and its subsidiaries (and includes any
part of the Assets), or fails to include all of the Assets, then for such
Acquisition Proposal to qualify as an Overbid Transaction, the Acquisition
Proposal must provide for consideration attributable to the Assets having a
fair market value, as determined by an investment banking firm of national
standing selected by the Selling Parties and reasonably acceptable to Buyer,
which exceeds the aggregate Purchase Price (or, if Buyer has delivered a
Topping Offer to the Company, the amount of the Topping Offer) by at least One
Million Dollars ($1,000,000).
"Permits" shall mean federal, state and local franchises, permits,
licenses, approvals, consents, waivers and other authorizations (including but
not limited to those relating to real property and environmental matters).
"Permitted Encumbrances" shall mean, with respect to property owned or
leased by the Selling Parties, (i) liens of landlords, carriers, warehousemen,
mechanics, materialmen and the like arising in the ordinary course of business
for sums not yet due and payable, and (ii) with respect to the Real Property
and the Developed Property, recorded easements, covenants, conditions and
restrictions which are not violated by existing uses or improvements and do
not unreasonably interfere with the use of such property.
"person" shall mean any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
enterprise, unincorporated organization or Governmental Entity.
"Proceeding" shall mean all proceedings, actions, claims, suits, charges,
petitions, investigations and inquiries by or before any mediator, arbitrator
or Governmental Entity.
"Qualified Third Party" means (subject to the last sentence of Section
6.3(ii)) a Third Party who the Board of Directors of the Company has
reasonably determined is financially able to consummate an Overbid
Transaction.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Straddle Period" shall mean any Tax period beginning before the Closing
Date and ending after the Closing Date.
"Tax" shall include but not be limited to any income taxes or similar
assessments or any sales, use, gross receipt, excise, goods and services,
occupation, ad valorem, property, production, severance, transportation,
employment, payroll, franchise, dividend, state profit share, export, import,
customs duty, capital, branch or other tax imposed by any United States
federal, state, local or foreign taxing authority, including any interest,
penalties or additions attributable thereto.
"Tax Return" shall mean any return or report, including any related or
supporting information, with respect to Taxes.
"Termination Threshold"means Five Hundred Thousand Dollars ($500,000).
"Third Party" means any person other than the Selling Parties or Buyer or
any of their respective Affiliates.
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14.2 Certain Additional Defined Terms. In addition to such terms as are
defined in Section 14.1 the following terms are used in this Agreement as
defined in the Section set forth opposite such terms.
Defined Term Section Reference
Act 6.19
Affidavit 6.20(i)
Agreement Introduction
Assets 1.1
Assumed Liabilities 1.7
Basket 11.7(i)
Bill of Sale 2.2(viii)
Business Recitals
Buyer Introduction
Buyer Indemnitee 11.5(i)
Closing 2.1
Closing Date 2.1
Closing Invoices 6.22
Company Introduction
Company Agreements 3.19
Confidential Information 6.11(ii)
Contracts 1.1(iii)
Department 6.19
Design Center Lease Agreement 6.21
Developed Property 3.12(ii)
Disclosure Document 6.20(i)
Earnest Money Deposit 1.5
Earnest Money Escrow Agreement 1.5
Effective Date Introduction
Employment and Labor Agreements 3.25(ii)
Employment Arrangements 6.13(i)
Excluded Assets 1.2
Excluded Liabilities 1.8
Fairness Opinion 7.3
Feasibility Period 6.1
Final Loss Amount 11.5(ii)(d)
Financial Statements 3.8(i)
Health and Safety Laws 3.14
Holdback 1.4
Housing Property 1.1(i)
Improvements 3.12(vii)
Indemnitee 11.2
Indemnitor 11.2
Kaco Partnership 1.1(iii)
Land Purchase Agreement 1.1(iii)
Latest Balance Sheet 3.8(i)
Latest Financial Statements 3.8(i)
Leased Model Homes 1.1(iii)
Leased Property 3.13
Liquidated Loss 11.5(i)
Lockport Introduction
Losses 11.1
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Defined Term Section Reference
Material Contracts 3.19
Matteson Introduction
Miscellaneous Property 1.1(iv)
MMDI Introduction
Model Homes 1.1(iii)
NLRB 3.25(iii)
Non-Compete Period 6.12(i)
Noncompetition Agreement 2.2(xviii)
Objection Notice 11.5(ii)(e)
OSHA 3.14
Overbid Notice 6.3(i)
Overbid Termination Conditions 6.3(ii)
Owned Model Homes 1.1(i)
PCB's 3.22(v)(e)
Personal Property 1.1(ii)
Post-Closing Invoices 6.22
Property Agreements 3.12 (xii)
Purchase Price 1.3
Purchase Price Allocation Schedule 1.6
RCRA 14.1
Real Property 3.12(i)
Rembrandt Introduction
RPTA 6.20(i)
Sales Contracts 1.1(iii)
SAR Introduction
SEC Filings 3.8(ii)
Selling Parties Recitals
Set Off 11.5(i)
Set Off Notice 11.5(i)
Set Off Reserve 11.5(ii)(a)
Set Off Reserve Notice 11.5(ii)(b)
SLRB Introduction
Special Warranty Deeds 2.2(ix)
SSPI Introduction
Subsidiaries Introduction
Sutton Introduction
Survival Date 12.1
Termination Fee Note 10.1
Topping Offer 6.3(ii)
transfer 1.1
Unliquidated Loss 11.5(ii)(a)
Walnut Introduction
Winter Work 1.8(x)
Year-End Financial Statements 3.8(i)
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the dates set forth by their signatures below, to be effective as
of the Effective Date.
Sundance Homes, Inc.
By: /s/ Maurice Sanderman
---------------------------------
Name: Maurice Sanderman
Title: Chairman
Date: April 2, 1999
Sundance Suburban Properties, Inc.
By: /s/ Maurice Sanderman
---------------------------------
Name: Maurice Sanderman
Title: Chairman
Date: April 2, 1999
Rembrandt Homes, Inc.
By: /s/ Maurice Sanderman
---------------------------------
Name: Maurice Sanderman
Title: Chairman
Date: April 2, 1999
Lockport Development, Inc.
By: /s/ Maurice Sanderman
---------------------------------
Name: Maurice Sanderman
Title: Chairman
Date: April 2, 1999
McCarty's Mill Development, Inc.
By: /s/ Maurice Sanderman
---------------------------------
Name: Maurice Sanderman
Title: Chairman
Date: April 2, 1999
Sutton Development, Inc.
By: /s/ Maurice Sanderman
---------------------------------
Name: Maurice Sanderman
Title: Chairman
Date: April 2, 1999
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<PAGE>
SAR Development, Inc.
By: /s/ Maurice Sanderman
---------------------------------
Name: Maurice Sanderman
Title: Chairman
Date: April 2, 1999
Matteson Development, Inc.
By: /s/ Maurice Sanderman
---------------------------------
Name: Maurice Sanderman
Title: Chairman
Date: April 2, 1999
Walnut Pointe Development, Inc.
By: /s/ Maurice Sanderman
---------------------------------
Name: Maurice Sanderman
Title: Chairman
Date: April 2, 1999
Centex Homes
By: Centex Real Estate Corporation,
its managing partner
By: /s/ Andrew J. Hannigan
---------------------------------
Name: Andrew J. Hannigan
Title: President
Date: April 2, 1999
49
<PAGE>
AMENDMENT NO. 1 TO SALE AND PURCHASE AGREEMENT
This AMENDMENT NO. 1 TO SALE AND PURCHASE AGREEMENT (this "Amendment") is
made and entered into this 21st day of April 1999 between Sundance Homes,
Inc., Sundance Suburban Properties, Inc., Rembrandt Homes, Inc., Lockport
Development, Inc., McCarty's Mill Development, Inc., Sutton Development, Inc.,
SAR Development, Inc., Matteson Development, Inc. and Walnut Pointe
Development, Inc. (collectively, the "Selling Parties") and Centex Homes
("Centex").
In consideration of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree to amend that certain Sale and Purchase
Agreement, dated April 2, 1999 (the "Agreement"), among the Selling Parties
and Centex.
Section 1. Defined Terms. All capitalized terms used but not defined in
this Amendment have the respective meanings ascribed to such terms in the
Agreement.
Section 2. Feasibility Period. The second sentence of Section 6.01 of the
Agreement is hereby deleted and replaced in its entirety by the following:
"In addition, for a period commencing on March 16, 1999 and ending at
11:59 p.m., Chicago, Illinois time on April 23, 1999 (the "Feasibility
Period"), Buyer shall conduct a feasibility study of the structure of
the transactions set forth in this Agreement."
Section 3. Effect. Except as amended by this Amendment, the Agreement
remains in full force and effect and nothing herein shall affect, or be deemed
to be a waiver of, the other terms and provisions of the Agreement.
Section 4. Counterpart Originals. This Amendment may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument. This Amendment shall be
effective when it has been executed by each of the parties either in person or
by facsimile.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first written above.
Sundance Homes, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Sundance Suburban Properties, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Rembrandt Homes, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Lockport Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
McCarty's Mill Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
2
<PAGE>
Sutton Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
SAR Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Matteson Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Walnut Pointe Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Centex Homes
By: Centex Real Estate Corporation,
its managing partner
/s/ Stewart M. Bitting
By: _________________________________
Stewart M. Bitting
Name: ____________________________
Vice President--Operations
Finance
Title: ___________________________
3
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AMENDMENT NO. 2 TO SALE AND PURCHASE AGREEMENT
This AMENDMENT NO. 2 TO SALE AND PURCHASE AGREEMENT (this "Amendment") is
made and entered into this 28th day of April 1999 between Sundance Homes,
Inc., Sundance Suburban Properties, Inc., Rembrandt Homes, Inc., Lockport
Development, Inc., McCarty's Mill Development, Inc., Sutton Development, Inc.,
SAR Development, Inc., Matteson Development, Inc. and Walnut Pointe
Development, Inc. (collectively, the "Selling Parties") and Centex Homes
("Centex").
In consideration of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree to amend that certain Sale and Purchase
Agreement, dated April 2, 1999, as amended by Amendment No. 1 to Sale and
Purchase Agreement, dated April 21, 1999 (as amended, the "Agreement"), among
the Selling Parties and Centex.
Section 1. Defined Terms. All capitalized terms used but not defined in
this Amendment have the respective meanings ascribed to such terms in the
Agreement.
Section 2. Feasibility Period. The second sentence of Section 6.01 of the
Agreement is hereby deleted and replaced in its entirety by the following:
"In addition, for a period commencing on March 16, 1999 and ending at
11:59 p.m., Chicago, Illinois time on April 30, 1999 (the "Feasibility
Period"), Buyer shall conduct a feasibility study of the structure of
the transactions set forth in this Agreement."
Section 3. Effect. Except as amended by this Amendment, the Agreement
remains in full force and effect and nothing herein shall affect, or be deemed
to be a waiver of, the other terms and provisions of the Agreement.
Section 4. Counterpart Originals. This Amendment may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument. This Amendment shall be
effective when it has been executed by each of the parties either in person or
by facsimile.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first written above.
Sundance Homes, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Sundance Suburban Properties, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Rembrandt Homes, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Lockport Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
McCarty's Mill Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
2
<PAGE>
Sutton Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
SAR Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Matteson Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Walnut Pointe Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Centex Homes
By: Centex Real Estate Corporation,
its managing partner
/s/ Daniel L. Star
By: _________________________________
Daniel L. Star
Name: ____________________________
President, Illinois Division
Title: ___________________________
3
<PAGE>
AMENDMENT NO. 3 TO SALE AND PURCHASE AGREEMENT
This AMENDMENT NO. 3 TO SALE AND PURCHASE AGREEMENT (this "Amendment") is
made and entered into this 30th day of April 1999 between Sundance Homes,
Inc., Sundance Suburban Properties, Inc., Rembrandt Homes, Inc., Lockport
Development, Inc., McCarty's Mill Development, Inc., Sutton Development, Inc.,
SAR Development, Inc., Matteson Development, Inc. and Walnut Pointe
Development, Inc. (collectively, the "Selling Parties") and Centex Homes
("Centex").
In consideration of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree to amend that certain Sale and Purchase
Agreement, dated April 2, 1999, as amended by Amendment No. 1 to Sale and
Purchase Agreement, dated April 21, 1999, and as further amended by Amendment
No. 2 to Sale and Purchase Agreement dated April 28, 1999 (as amended, the
"Agreement"), among the Selling Parties and Centex.
Section 1. Defined Terms. All capitalized terms used but not defined in
this Amendment have the respective meanings ascribed to such terms in the
Agreement.
Section 2. Feasibility Period. The second sentence of Section 6.01 of the
Agreement is hereby deleted and replaced in its entirety by the following:
"In addition, for a period commencing on March 16, 1999 and ending at
11:59 p.m., Chicago, Illinois time on May 4, 1999 (the "Feasibility
Period"), Buyer shall conduct a feasibility study of the structure of
the transactions set forth in this Agreement."
Section 3. Effect. Except as amended by this Amendment, the Agreement
remains in full force and effect and nothing herein shall affect, or be deemed
to be a waiver of, the other terms and provisions of the Agreement.
Section 4. Counterpart Originals. This Amendment may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument. This Amendment shall be
effective when it has been executed by each of the parties either in person or
by facsimile.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first written above.
Sundance Homes, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Sundance Suburban Properties, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Rembrandt Homes, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Lockport Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
McCarty's Mill Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
2
<PAGE>
Sutton Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
SAR Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Matteson Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Walnut Pointe Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Centex Homes
By: Centex Real Estate Corporation,
its managing partner
/s/ Thomas M. Boyce
By: _________________________________
Thomas M. Boyce
Name: ____________________________
Executive Vice President
Title: ___________________________
3
<PAGE>
AMENDMENT NO. 4 TO SALE AND PURCHASE AGREEMENT
This AMENDMENT NO. 4 TO SALE AND PURCHASE AGREEMENT (this "Amendment") is
made and entered into this 4th day of May 1999 between Sundance Homes, Inc.,
Sundance Suburban Properties, Inc., Rembrandt Homes, Inc., Lockport
Development, Inc., McCarty's Mill Development, Inc., Sutton Development, Inc.,
SAR Development, Inc., Matteson Development, Inc. and Walnut Pointe
Development, Inc. (collectively, the "Selling Parties") and Centex Homes
("Centex").
In consideration of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree to amend that certain Sale and Purchase
Agreement, dated April 2, 1999, as amended by Amendment No. 1 to Sale and
Purchase Agreement, dated April 21, 1999, as further amended by Amendment No.
2 to Sale and Purchase Agreement dated April 28, 1999 and as further amended
by Amendment No. 3 to Sale and Purchase Agreement dated April 30, 1999 (as
amended, the "Agreement"), among the Selling Parties and Centex.
Section 1. Defined Terms. All capitalized terms used but not defined in
this Amendment have the respective meanings ascribed to such terms in the
Agreement.
Section 2. Feasibility Period. The second sentence of Section 6.1 of the
Agreement is hereby deleted and replaced in its entirety by the following:
"In addition, for a period commencing on March 16, 1999 and ending at
11:59 p.m., Chicago, Illinois time on the day that is the later of May
10, 1999 or two (2) Business Days after the Selling Parties have
delivered complete and accurate schedules as required to be delivered
by this Agreement (the "Feasibility Period"), Buyer shall conduct a
feasibility study of the structure of the transactions set forth in
this Agreement."
Section 3. Effect. Except as amended by this Amendment, the Agreement
remains in full force and effect and nothing herein shall affect, or be deemed
to be a waiver of, the other terms and provisions of the Agreement.
Section 4. Counterpart Originals. This Amendment may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument. This Amendment shall be
effective when it has been executed by each of the parties either in person or
by facsimile.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first written above.
Sundance Homes, Inc.
By: /s/ Joseph Atkin
---------------------------------
Name: Joseph Atkin
Title: Vice President
Sundance Suburban Properties, Inc.
By: /s/ Joseph Atkin
---------------------------------
Name: Joseph Atkin
Title: Vice President
Rembrandt Homes, Inc.
By: /s/ Joseph Atkin
---------------------------------
Name: Joseph Atkin
Title: Vice President
Lockport Development, Inc.
By: /s/ Joseph Atkin
---------------------------------
Name: Joseph Atkin
Title: Vice President
McCarty's Mill Development, Inc.
By: /s/ Joseph Atkin
---------------------------------
Name: Joseph Atkin
Title: Vice President
2
<PAGE>
Sutton Development, Inc.
By: /s/ Joseph Atkin
---------------------------------
Name: Joseph Atkin
Title: Vice President
SAR Development, Inc.
By: /s/ Joseph Atkin
---------------------------------
Name: Joseph Atkin
Title: Vice President
Matteson Development, Inc.
By: /s/ Joseph Atkin
---------------------------------
Name: Joseph Atkin
Title: Vice President
Walnut Pointe Development, Inc.
By: /s/ Joseph Atkin
---------------------------------
Name: Joseph Atkin
Title: Vice President
Centex Homes
By: Centex Real Estate Corporation,
its managing partner
By: /s/ Daniel L. Star
---------------------------------
Name: Daniel L. Star
Title: President, Illinois Division
3
<PAGE>
AMENDMENT NO. 5 TO SALE AND PURCHASE AGREEMENT
This AMENDMENT NO. 5 TO SALE AND PURCHASE AGREEMENT (this "Amendment") is
made and entered into this 11th day of May 1999 between Sundance Homes, Inc.,
Sundance Suburban Properties, Inc., Rembrandt Homes, Inc., Lockport
Development, Inc., McCarty's Mill Development, Inc., Sutton Development, Inc.,
SAR Development, Inc., Matteson Development, Inc. and Walnut Pointe
Development, Inc. (collectively, the "Selling Parties") and Centex Homes
("Centex").
In consideration of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree to amend that certain Sale and Purchase
Agreement, dated April 2, 1999, as amended by Amendment No. 1 to Sale and
Purchase Agreement, dated April 21, 1999, as further amended by Amendment No.
2 to Sale and Purchase Agreement, dated April 28, 1999, as further amended by
Amendment No. 3 to Sale and Purchase Agreement dated April 30, 1999 and as
further amended by Amendment No. 4 to Sale and Purchase Agreement dated May 4,
1999 (as amended, the "Agreement"), among the Selling Parties and Centex.
Section 1. Defined Terms. All capitalized terms used but not defined in
this Amendment shall have the respective meanings ascribed to such terms in
the Agreement.
Section 2. Purchase Price. Schedule 1.3 to the Agreement is hereby deleted
and replaced in its entirety by Schedule 1.3 attached hereto.
Section 3. Assumed Liabilities. Subsection (iii) of Section 1.7 of the
Agreement is hereby deleted and replaced in its entirety by the following:
"(iii) All obligations of the Selling Parties to perform warranty
repairs under the first year of coverage in the express terms of the
Selling Parties' warranties, copies of which are attached hereto as
Schedule 1.7(iii)(a), to residential homes that are located in those
neighborhoods listed on Schedule 1.7(iii)(b) and the sales of which were
closed by any of the Selling Parties in the twelve (12) months immediately
preceding the Closing Date, except that Buyer shall not be responsible in
any way for such warranty repairs with respect to such residential homes to
the extent such repairs (including the costs of material and labor) either
(a) exceed One Thousand Dollars ($1,000) in direct costs per residential
home or an average of Three Hundred Dollars ($300) per residential home,
(b) constitute Major Structural Defects (as defined in the applicable
homeowner's warranty) or (c) are not within the scope of the express
warranty attached on Schedule 1.7(iii)(a)."
Section 4. Deliveries of the Selling Parties at the Closing. (a) Subsection
(xii) of Section 2.2 of the Agreement is hereby deleted and replaced in its
entirety by the following:
"(xii) All consents and approvals of any third party which are necessary
in order for the assignment, conveyance or transfer of any part of the
Assets to be valid and effective, and to provide assurance Buyer can
continue to utilize the Assets in the ordinary course of Business,
including, but not limited to, the estoppel letters listed on Schedule
2.2(xii)."
(b) Section 2.2 of the Agreement is hereby further amended by the addition
of the following:
"(xxi) All instruments and documents required to evidence the conveyance
by the Selling Parties of all right, title and interest of the Selling
Parties in and to all open space, common elements and other outlots owned
by the Selling Parties required to be conveyed, pursuant to the development
plans for each subdivision, to either (i) the applicable municipality,
Governmental Authority or Homeowner's Association or (ii) Buyer.
<PAGE>
(xxii) A schedule listing, for each of the homeowners that closed on the
purchase of a home from a Selling Party in one of the neighborhoods
identified on Schedule 1.7(iii)(b) in the twelve (12) months immediately
preceding the Closing Date, the name, address and telephone number, if
available, of such homeowner and the closing date, type of homeowner's
warranty received by such homeowner and the version of such homeowner's
warranty."
Section 5. Real Property. Subsection (i) of Section 3.12 is hereby deleted
and replaced in its entirety by "(i) Reserved."
Section 6. Cedar Creek. Section 3.26 of the Agreement is hereby deleted and
replaced in its entirety by the following:
"3.26 Cedar Creek. The Selling Parties have not received a request from
any Governmental Authority to install a traffic light in the Cedar Creek
subdivision."
Section 7. Schedules and Exhibits. Section 6.4 of the Agreement is hereby
deleted and replaced in its entirety by the following:
"6.4 Schedules and Exhibits. The Schedules and Exhibits to this
Agreement are amended and restated in their entirety in the form attached
to this Amendment."
Section 8. Tax Matters. Subsection (iv) of Section 6.10 is hereby amended
by the addition of the following as the last four sentences of Subsection
(iv):
"Upon receipt by Buyer of the invoice for 1998 real estate taxes due and
payable in 1999 and upon receipt by Buyer of the invoice for 1999 real
estate taxes due and payable in 2000, Seller and Buyer shall reprorate the
1998 or 1999 real estate tax liability, as the case may be, based on the
actual real estate tax assessment and the amount due shall be paid on
demand. If such amount is not paid within 30 days of demand, such amount
shall accrue interest at 8% per annum until paid in full. This obligation
to reprorate shall not be included in or limited by Section 11.7 hereof."
Section 9. Employees and Employee Benefits. Subsection (ii) of Section 6.13
of the Agreement is hereby deleted and replaced in its entirety by "(ii)
Reserved."
Section 10. Good Title: Title Insurance. Subsection (viii) of Section 6.14
of the Agreement is hereby deleted and replaced in its entirety by the
following:
"(viii) An endorsement deleting the creditors' rights exception."
Section 11. Release of Bonds. Section 6.17 of the Agreement is hereby
amended by deleting Schedule 6.17 thereto and replacing it in its entirety
with the attached Schedule 6.17.
Section 12. Kaco Partnership. Section 6.18 of the Agreement is hereby
deleted and replaced in its entirety by the following:
"6.18 Kaco Partnership. The Selling Parties shall take all reasonable
steps necessary to cause the Kaco Partnership to grant to Buyer an option
to purchase approximately 200 acres of undeveloped land owned by the Kaco
Partnership; provided, however, that the failure of the Selling Parties to
cause the Kaco Partnership (after using all of their reasonable efforts) to
grant such option to Buyer shall not constitute a default under this
Agreement or excuse Buyer from any obligation hereunder.
2
<PAGE>
Section 13. Sundance Warranty. Article VI of the Agreement is hereby
amended by the addition of the following:
"6.26 Sundance Homes Warranty. Following the Closing, Seller shall allow
Buyer to deliver a Sundance Homes home warranty to any buyer of a new home
pursuant to a purchase contract entered into between such buyer and any of
the Selling Parties before the Effective Date that is closed following the
Closing Date. Seller has given this right to Buyer on the condition that it
be used only to deliver a Sundance Homes' warranty to a buyer meeting the
description in the preceding sentence that has refused to accept a Centex
Homes' warranty and insists on receiving a Sundance Homes' warranty. In the
event Buyer offers such a warranty to any buyer, Buyer shall indemnify
Seller for any expense incurred by the Selling Parties pursuant to such
warranty.
6.27 Conveyance of Open Space. On or before the Closing Date, the
Selling Parties shall convey to either the applicable municipality,
Governmental Authority or Homeowner's Association all right, title and
interest in and to all open space, common elements and other outlots owned
by the Selling Parties required to be conveyed to such municipality,
Governmental Authority or Homeowner's Association pursuant to the
development plans for each subdivision. If any municipality, Governmental
Authority or Homeowner's Association does not accept any such conveyance
prior to Closing or if the Selling Parties are unable to complete any such
conveyance prior to Closing, the Selling Parties shall convey such property
to Buyer at no cost to Buyer at Closing. In addition, the Selling Parties
shall convey Lot 213 at Sutton on the Lake to Buyer at Closing at no cost
to Buyer."
Section 14. Environmental Audit. Section 8.10 of the Agreement is hereby
deleted and replaced in its entirety by the following:
"8.10 Environmental Audit. Buyer shall have received, at Buyer's
expense, an environmental review report on those properties identified on
Schedule 8.10 hereto that is acceptable in scope and content, and from a
person satisfactory to Buyer, as to the absence of any evidence of material
noncompliance with, or reclamation or remediation obligations under,
applicable Environmental Laws that could materially affect the Assets."
Section 15. Preserve of Orland Park. Section 8.11 of the Agreement is
hereby deleted and replaced in its entirety by the following:
"8.11 Preserve of Orland Park. Buyer shall have received either (a) a
direct agreement, satisfactory to Buyer, with the owner of the lots at the
Preserve of Orland Park to acquire the balance of the Preserve of Orland
Park lots to be acquired under the terms and conditions of that certain
Agreement dated April 21, 1998 or (b) the delivery to Buyer at Closing of
all recorded plats of subdivision for all lots and fee simple title to such
lots free and clear of all liens and encumbrances, but subject to the
Permitted Encumbrances, together with the owner's written confirmation of
the owner's obligation to, no later than September 1, 1999, (i) complete,
repair and reshape the existing building pads relating to such lots,
including eliminating the detention pond encroachments (ii) relocate the
existing sewer line affecting Lot 226 and (iii) complete the required dirt
balance by the removal of excess dirt."
Section 16. Arrowhead. Article VIII of the Agreement is hereby amended by
the addition of the following:
"8.13 Arrowhead. Buyer shall have received from Homer Associates (i) fee
simple title to the remaining 67 lots to be acquired under the Selling
Parties' existing commitment to acquire Arrowhead Townhouse lots free and
clear of all liens and encumbrances, except for Permitted Encumbrances and
that certain purchase money mortgage in the aggregate principal amount of
approximately $450,000 to be
3
<PAGE>
entered into between Seller and Homer Associates as of June 1, 1999, from
the Selling Parties, and (ii) confirmation, satisfactory to Buyer, that all
approvals for the continuation of construction of the existing home line
products and any proposed modifications or different home line products in
the Arrowhead Single Family subdivision under the applicable document
recorded with the applicable County Recorder of Deeds have been received.
8.14 Master Lease Agreement. The Selling Parties shall have amended that
certain Master Lease Agreement dated July 27, 1998 (as amended) between
Seller and National Model Homes, Inc. to exclude the three lots located in
the Oswego development (which lots have been excluded from this
transaction).
8.15 Office Lease. The Selling Parties shall have caused that certain
Lease Agreement, dated January 23, 1998 between Seller and La Salle
National Bank, as Trustee, under Trust No. 108650, to be assigned to Buyer
at Closing.
8.16 Kaco Mortgage. Buyer shall have received from Kaco, Inc.
confirmation of Kaco's acceptance of full prepayment of the existing
purchase money mortgage relating to lots acquired pursuant to a purchase
and sales agreement dated as of July 28, 1994 together with an additional
$1,000 per lot which is to be purchased by Buyer and releasing Buyer from
any direct or indirect obligation under the Profit Sharing Agreement dated
as of July 28, 1994, as amended, or any other obligation, other than
Buyer's agreement to deliver to the Selling Parties information on the
profits made by Buyer on homes closed by Buyer in that neighborhood.
8.17 Closing and Post Closing Title Matters. Buyer shall have received
from the Selling Parties one or more quitclaim deeds ("Quitclaim Deeds"),
all dated as of the Closing Date, in the form attached hereto as Exhibit J,
as shall be effective to convey to Buyer all right, title and interest of
the Selling Parties in each legal subdivision constituting part of the
Housing Property. To the extent that it is subsequently determined that
such Quitclaim Deed resulted in the acquisition by Buyer of an Asset for
which the Selling Parties were not paid, Buyer shall pay for such Asset
based on the computation of the Purchase Price in accordance with Schedule
1.3. To the extent it is subsequently determined that the Assets conveyed
by the Selling Parties to Buyer included an Asset not owned by the Selling
Parties (such as a lot that has already been conveyed to a homebuyer), the
Selling Parties shall pay to Buyer the portion of the Purchase Price
attributable to such Asset and absent such payment, Buyer may pursue its
rights under any existing title insurance policies. The obligation set
forth in this Section 8.17 shall not be limited by Section 11.7 hereto.
8.18 CC&R's and Homeowner's Association. Buyer shall have received
evidence satisfactory to it that (i) each of the lots intended to be
covered by CC&R's or homeowner's associations are covered by such CC&R's or
homeowner's associations, as the case may be, and (ii) the Selling Parties
have caused Buyer to become the Declarant in any CC&R's or homeowner's
association documents for communities identified and specifically requested
by Buyer prior to Closing.
8.19 Flood Zones. Buyer shall have received evidence satisfactory to it
that none of the lots included in the Assets are within any designated
flood zone.
8.20 Homeowner's Association Officers and Directors. At or prior to
Closing, the Selling Parties shall have caused each of their designees that
serve as officers or directors of any homeowner's association covering any
of the Assets to be replaced by designees of Buyer."
Section 17. Definitions. Article XIV of the Agreement is hereby amended by
the addition of the following in alphabetical order:
"Books and Records" shall mean all records (financial or other), files,
books of account, financial statements, accounting schedules, ledgers, bank
statements, agreements and commitments, record books and stock books of the
Selling Parties, whether in electronic or printed format.
"Real Property" shall mean all lots, parcels and tracts of land owned by
the Selling Parties and held, used or usable in the Business that is
related to the Housing Property."
4
<PAGE>
Section 18. Gross Profit Margin. For purposes of comparisons to be made
under Section 8.5 of the Agreement, the Gross Profit Margin of the Backlog for
any period in the comparison shall be calculated in accordance with the Books
and Records of the Selling Parties.
Section 19. Employees and Employee Benefits. Buyer and Seller agree that
Buyer has delivered to Seller the list of employees contemplated by Section
6.13 of the Agreement.
Section 20. Effect. Except as amended by this Amendment, the Agreement
remains in full force and effect and nothing herein shall affect, or be deemed
to be a waiver of, the other terms and provisions of the Agreement.
Section 21. Counterpart Originals. This Amendment may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument. This Amendment shall be
effective when it has been executed by each of the parties either in person or
by facsimile.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first written above.
Sundance Homes, Inc.
By: /s/ Maurice Sanderman
---------------------------------
Name: Maurice Sanderman
Title: Chairman
Sundance Suburban Properties, Inc.
By: /s/ Maurice Sanderman
---------------------------------
Name: Maurice Sanderman
Title: Chairman
Rembrandt Homes, Inc.
By: /s/ Maurice Sanderman
---------------------------------
Name: Maurice Sanderman
Title: Chairman
Lockport Development, Inc.
By: /s/ Maurice Sanderman
---------------------------------
Name: Maurice Sanderman
Title: Chairman
McCarty's Mill Development, Inc.
By: /s/ Maurice Sanderman
---------------------------------
Name: Maurice Sanderman
Title: Chairman
6
<PAGE>
Sutton Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
SAR Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Matteson Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Walnut Pointe Development, Inc.
/s/ Maurice Sanderman
By: _________________________________
Maurice Sanderman
Name: ____________________________
Chairman
Title: ___________________________
Centex Homes
By: Centex Real Estate Corporation,
its managing partner
/s/ Daniel L. Star
By: _________________________________
Daniel L. Star
Name: ____________________________
Div. Pres.
Title: ___________________________
7
<PAGE>
SCHEDULE 1.3
Purchase Price
(a) The portion of the Purchase Price to be paid at the Closing will be
based upon an estimate made by Buyer and the Selling Parties in accordance
with this Schedule 1.3. The estimated Purchase Price that is paid at the
Closing will be adjusted by the parties after the Closing Date in the manner
described in paragraph (f) of this Schedule 1.3 to determine the final
Purchase Price. Also, on or before January 31, 2000, and in addition to the
Purchase Price, Buyer will pay to the Selling Parties the "Closed Home Gross
Income Participation" described in paragraph (g) below. This payment, if any,
will be additional consideration above and beyond the Purchase Price.
No later than five (5) Business Days before the Closing Date, the Company
will deliver to Buyer for its review and approval a draft consolidated balance
sheet of the Selling Parties, relating only to the Assets, as of a date that
is seven (7) days before the Closing Date. The draft balance sheet will be
prepared in accordance with GAAP (to the extent applicable) and will identify
the Assets in the detail required by this Schedule 1.3 (the "Pre-Closing
Balance Sheet"). The Pre-Closing Balance Sheet will project the book value of
the Assets to the Closing Date, but only to reflect the reduction in Assets
that will result from home sale closings occurring through the Closing Date,
and will reflect the liabilities as of the date of the Pre-Closing Balance
Sheet. Based on the Pre-Closing Balance Sheet, and where appropriate, the
books and records of the Selling Parties, the parties will estimate the
components of the Purchase Price listed in paragraph (b) below.
(b) The Purchase Price is the sum of the amounts described in this
paragraph (b), as well as paragraph (d), as applicable, less the sum of One
Million Six Hundred Thousand Dollars ($1,600,000) and the amounts described in
paragraph (c) below:
(i) For each neighborhood listed on Exhibit 1 to this Schedule 1.3, the
difference between (x) the product of (1) the number of lots in that
neighborhood owned by the Selling Parties on the Closing Date (including
those lots on which the Model Homes are situated) and (2) the per-lot price
specified in the applicable column of Exhibit 1, and (y) the remaining
total cost-to-complete for such neighborhood, if any, specified in the
applicable column of Exhibit 1, reduced by the sum of any specifically
identifiable costs listed as "committed" in the cost to complete budgets
that the Selling Parties can demonstrate at Closing were paid between the
date of preparation of the applicable cost to complete budget and the
Closing Date. This total figure will be the "Land Price". The cost to
complete budgets described in clause (y) above are the following Sundance
Homes documents: for the Stirling Manor neighborhood, the Land Development
Budget and Commitment Analysis dated April 5, 1999; and for all other
neighborhoods, the applicable Land Development Budgets and Commitment
Analysis dated March 5, 1999.
(ii) The sum of the Improvement Prices for Model Homes listed in Exhibit
2 to this Schedule 1.3 (the "Model WIP");
(iii) Advertising expenses of the Selling Parties, not to exceed
$150,000.00, incurred between February 1, 1999 and the Closing Date
determined from the books and records of the Selling Parties;
(iv) Book value of homebuilding work-in-progress ("WIP") on the
Developed Property as set out on the Pre-Closing Balance Sheet, including
work completed, invoiced and recorded as accounts payable, but not yet paid
(as adjusted only to reflect the reduction in WIP due to home sales
closings through the Closing Date); and
(v) Book value of the Assets as listed on Schedule 1.1 to the Agreement
that are not otherwise described in this paragraph (b).
(c) Buyer will receive a credit against the Purchase Price for the
aggregate amount of the contractual retention obligations listed on Schedule
1.7(vii) to the Agreement, for which Buyer will assume the payment
responsibility.
<PAGE>
(d) If the Closing does not occur by the close of business on April 30,
1999, the Purchase Price will be adjusted as follows:
(i) Increased by the product of (i) the sum of the Land Price, the WIP
and the Model WIP at the Closing Date, and (ii) a multiplier derived from a
4% annualized interest rate, which rate of interest will accrue for the
period beginning on, and including, May 1, 1999 through, but not including,
the Closing Date (the "Pre-Closing Period"); and
(ii) Reduced by the Pre-Tax Net Income (as defined below), if any, from
the Assets for the Pre-Closing Period.
This adjustment will not be made at Closing but rather will be made at the
same time as the adjustment described in paragraph (f), and will be one of the
"Closing Adjustments" governed by paragraph (f).
(e) Definitions:
"Arbitrating Firm" means one of the following independent public accounting
firms: PricewaterhouseCoopers LLP, Arthur Andersen LLP, Ernst & Young LLP and
Deloitte & Touche LLP.
"Backlog" means, for any point in time, all of the fully signed and
effective contracts for sale of completed homes that have not yet closed.
"Expected Overhead" means $ 21,500.00 per day.
"Model Homes" means those 11 model homes described on Schedule1.1 to the
Agreement.
"Pre-Tax Gross Income" means, for any period, the gross proceeds received
by the Company from closings of homes in the period in question, minus the sum
of (i) the cost of the lots under such homes (as specified in Exhibit 1), (ii)
the associated direct construction cost, and (iii) 3% of gross proceeds as an
agreed approximation of field overhead.
"Pre-Tax Net Income" means, for any period, the positive number (if any)
that results from the following calculation: Pre-Tax Gross Income, minus the
sum of (i) the Expected Overhead multiplied by the number of days in the
period in question, (ii) interest at the Prime Rate on the land and direct
construction costs of the homes closed during the period in question, and
(iii) sales commissions and closing costs incurred for the sales closed during
the period in question.
"Prime Rate" means the prime rate in effect from time to time as published
in The Wall Street Journal under the caption "Money Rates"; provided, however,
that (i) if The Wall Street Journal publishes a split prime rate, the lower of
such prime rates will apply, and (ii) if The Wall Street Journal ceases
publishing a prime rate, "Prime Rate" means the prime rate or base rate in
effect from time to time at The Chase Manhattan Bank.
(f) Within fifteen (15) Business Days after the Closing Date, the Company
will deliver to Buyer a final consolidated balance sheet as of the Closing
Date, which will identify the Assets of the Selling Parties in the detail
required by this Schedule 1.3 and will (to the extent applicable) be prepared
in accordance with GAAP (the "Final Closing Balance Sheet") and the home sales
closing records for the period up to and including the Closing Date. Within
ten (10) Business Days of receipt of the Final Closing Balance Sheet and the
home sales closing records, Buyer will deliver to the Company a schedule
("Buyer Schedule") setting forth in reasonable detail the computation of the
adjustments to the Purchase Price (the "Closing Adjustments") as determined
from the Final Closing Balance Sheet and the home sales closing records.
Buyer's computation of the Closing Adjustments set forth in the Buyer Schedule
will be conclusive and binding on all parties to this Agreement and will be
the basis for the final determination of the Purchase Price, unless, within
twenty-five (25) days following the Selling Parties' receipt of the Buyer
Schedule, the Selling Parties notify Buyer in writing that they disagree with
Buyer's computation of the Closing Adjustments. If the Selling Parties
disagree with Buyer's computation of the Closing Adjustments, Buyer and the
Selling Parties will use all reasonable efforts to resolve such
<PAGE>
disagreement, but if such disagreement cannot be resolved by the parties
within forty (40) days following Buyer's receipt of the Selling Parties'
notice of disagreement, Buyer and the Selling Parties will request an
Arbitrating Firm mutually agreeable to Buyer and the Selling Parties to
compute the Closing Adjustments as promptly as possible, which computation
will be conclusive and binding on all parties to this Agreement. If Buyer and
the Selling Parties cannot agree on an Arbitrating Firm, then an Arbitrating
Firm will be selected by lottery until one such Arbitrating Firm is willing to
compute the disputed Closing Adjustments for purposes of this Agreement. The
fees and expenses of the Arbitrating Firm selected to resolve computational
disputes hereunder will be borne equally by Buyer and the Selling Parties.
Following the computation and any recomputations of the Closing Adjustments in
accordance with the provisions of this paragraph (f), any adjustment to the
Purchase Price resulting from such computation or recomputations, as finally
and conclusively determined pursuant to this paragraph (f), will:
(i) in the case of an adjustment that results in an additional amount
owing by Buyer to the Selling Parties because of an underpayment to the
Selling Parties of the Purchase Price paid to the Selling Parties at the
Closing, be paid by Buyer to the Selling Parties within 10 days after the
date such computation or recomputation of the Closing Adjustments becomes
conclusive and binding on the parties; and
(ii) in the case of an adjustment that results in an amount owing by the
Selling Parties to Buyer because of an overpayment to the Selling Parties
of the Purchase Price paid to the Selling Parties at the Closing, be paid
by the Selling Parties to Buyer within 10 days after the date such
computation or recomputation of the Closing Adjustments becomes conclusive
and binding on the parties.
(g) On or before January 31, 2000, and as additional consideration above
and beyond the Purchase Price, Buyer will pay to the Selling Parties a "Closed
Home Gross Income Participation" as defined in this paragraph, which will be
calculated based on the Backlog of homes existing as of May 1, 1999, plus any
additional Backlog of homes that was created between May 2, 1999 and the
Closing Date and is still existing on the Closing Date (collectively, the
"Closing Backlog"). Buyer will calculate the Pre-Tax Gross Income realized
from all of the closings of the Closing Backlog during the period beginning on
May 1, 1999 through and including December 31, 1999, and express it as a
percentage of Revenue for that period, with "Revenue" being the gross proceeds
derived from the closings of the Closing Backlog during the period, which
percentage rate will be the "Closed Home Gross Profit Margin." If the Closed
Home Gross Profit Margin is greater than 13.3%, then the Selling Parties will
be entitled to receive a payment equal to the dollars of Pre-Tax Gross Income
that make up the excess of the Closed Home Gross Profit Margin over 13.3%, but
only up to a ceiling of 15.3%. The Selling Parties will have no right to
receive any portion of the Pre-Tax Gross Income that causes the Closed Home
Gross Profit Margin to exceed 15.3%, and will have no right to receive any
portion of the Pre-Tax Gross Income up to the 13.3% Gross Profit Margin. To
illustrate the application of this paragraph, assume that the Closed Home
Gross Profit Margin is 14.0%. In this case the Selling Parties would be
entitled to receive 0.7% of the Revenue realized from the closings of the
Closing Backlog.
Any amount payable by Buyer or the Selling Parties, as applicable, except
the Closed Home Gross Income Participation, will be accompanied by cash equal
to interest on such amount from and including the Closing Date to but
excluding the date of payment at a rate per annum equal to the Prime Rate in
effect from time to time during such period. Any amounts so payable will be
paid by wire transfer in immediately available funds.
<PAGE>
Exhibit 1 to Schedule 1.3
SUMMARY OF LAND AND LOTS
FOR SUNDANCE HOMES--SUBURBAN DIVISIONS
As of May 10, 1999 (Revised)
<TABLE>
<CAPTION>
Estimated Cost to Complete
Price ------------------------------------------------------
Projected per lot Total Lot
Lots fully improved Develop- Purchase Land Net Models
Subdivision 5/10/99 improved Cost ment Costs Price Debt Total Proceeds owned Leased
----------- --------- -------- ----------- ---------- ---------- -------- ----------- ----------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Arrowhead TH I..... 34 $32,300 $ 1,098,200 $ 0 $ 0 $ 0 $ 0 $ 1,098,200 3 0
Arrowhead TH II.... 139 28,800 4,003,200 781,000 1,092,492 0 1,873,492 2,129,708 0 0
Arrowhead SF....... 76 44,000 3,344,000 0 0 0 0 3,344,000 3 0
Arrowhead SF
(Rembrandt)....... 7 60,000 420,000 0 0 0 0 420,000 0 0
Preserve TH........ 104 58,000 6,032,000 0 5,215,000 0 5,215,000 817,000 4 0
Sutton SF 0 9
Premier........... 75 38,000 2,850,000 800,000 0 0 800,000 2,050,000
Freedom........... 135 31,000 4,185,000 800,000 0 0 800,000 3,385,000
Bellchase 0 10
Single Family..... 108 46,000 4,968,000 202,000 0 480,000 682,000 4,286,000
Townhomes......... 99 36,000 3,564,000 202,000 0 480,000 682,000 2,882,000
St Andrews 0 2
Golf.............. 22 123,000 2,706,000 75,000 0 0 75,000 2,631,000
Regular........... 42 108,000 4,536,000 75,000 0 0 75,000 4,461,000
McCarty............ 66 42,000 2,772,000 488,000 0 0 488,000 2,284,000 0 2
Walnut Pointe...... 120 36,000 4,320,000 802,000 0 0 802,000 3,518,000 1 2
Cedar Creek........ 105 38,000 3,990,000 547,000 0 0 547,000 3,443,000 0 4
Turtle Bay......... 12 144,000 1,728,000 140,000 0 0 140,000 1,588,000 0 0
Stirling Manor..... 13 182,538 2,372,994 765,000 0 0 765,000 1,607,994 0 0
----- ----------- ---------- ---------- -------- ----------- ----------- --- ---
Total.............. 1,157 $52,889,394 $5,677,000 $6,307,492 $960,000 $12,944,492 $39,944,902 11 29
===== =========== ========== ========== ======== =========== =========== === ===
</TABLE>
<PAGE>
Exhibit 2 to Schedule 1.3
Model Home Costs
<TABLE>
<CAPTION>
Location of Model Home Improvement Price
- ---------------------- -----------------
<S> <C>
Arrowhead:
9640A #8-1.................................................. $ 108,385
9841A #8-2.................................................. 90,103
96422C #8-3................................................. 82,653
M21D Alcott 158............................................. 191,420
94056 Oakridge 157.......................................... 104,785
M62 Redwood 156............................................. 109,534
Preserve:
Easton #3-1................................................. 163,937
Laurel #3-2................................................. 168,636
Hampton #3-3................................................ 155,532
Savannah #3-4............................................... 162,024
Walnut Pointe:
M21A Alcott................................................. 146,553
----------
Total..................................................... $1,483,562
==========
</TABLE>
<PAGE>
AMENDMENT NO. 6 TO SALE AND PURCHASE AGREEMENT
This AMENDMENT NO. 6 TO SALE AND PURCHASE AGREEMENT (this "Amendment") is
made and entered into this 15th day of June, 1999, among Sundance Homes, Inc.,
Sundance Suburban Properties, Inc., an Illinois Corporation, Rembrandt Homes,
Inc., an Illinois corporation, Lockport Development, Inc., an Illinois
corporation, McCarty's Mill Development, Inc., an Illinois corporation, Sutton
Development, Inc., an Illinois corporation, SAR Development, Inc., an Illinois
corporation, Matteson Development, Inc., an Illinois corporation, and Walnut
Pointe Development, Inc., an Illinois corporation (together with the
Corporation, the "Selling Parties") and Centex Homes, a Nevada general
partnership ("Centex").
In consideration of the mutual covenants and agreements set forth herein
and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree to amend that certain Sale and Purchase
Agreement dated April 2, 1999, as amended by Amendment No. 1 to Sale and
Purchase Agreement, dated April 21, 1999, as further amended by Amendment No. 2
to Sale and Purchase Agreement, dated April 28, 1999, as further amended by
Amendment No. 3 to Sale and Purchase Agreement, dated April 30, 1999, as further
amended by Amendment No. 4 to Sale and Purchase Agreement, dated May 4, 1999,
and as further amended by Amendment No. 5 to Sale and Purchase Agreement, dated
May 11, 1999 (as amended, the "Agreement"), among the Selling Parties and
Centex.
Section 1. Defined Terms. All capitalized terms used but not defined in
-------------
this Amendment shall have the respective meanings ascribed to such terms in the
Agreement.
Section 2. Termination.
-----------
(a) Subsection (iii)(c) of Section 9.1 of the Agreement is hereby deleted
and replaced in its entirety by the following:
"(c) the shareholders of the Company shall not have approved this
Agreement and the transactions contemplated by this Agreement or the
Closing shall not have occurred on or before July 15, 1999, for any
reason;"
(b) Subsection (iv)(d) of Section 9.1 of the Agreement is hereby deleted
and replaced in its entirety by the following:
"(d) notwithstanding good faith efforts on the part of the Selling
Parties, Section 8.12 of this Agreement is not satisfied as of July 15,
1999, for any reason;"
Section 3. Effect. Except as amended by this Amendment, the Agreement
------
remains in full force and effect and nothing herein shall affect, or be deemed
to be a waiver of, the other terms and provisions of the Agreement.
<PAGE>
Section 4. Counterpart Originals. This Amendment may be executed in any
---------------------
number of counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument. This Amendment shall be
effective when it is executed by each of the parties either in person or by
facsimile.
[remainder of page intentionally left blank;
signature page follows]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused the Amendment No. 6 to
be duly executed as of the date first written above.
SUNDANCE HOMES, INC.
By: /s/ Joseph R. Atkin
--------------------------
Name: Joseph R. Atkin
------------------------
Its: Vice President
-------------------------
REMBRANDT HOMES, INC.
By: /s/ Joseph R. Atkin
--------------------------
Name: Joseph R. Atkin
------------------------
Its: Vice President
-------------------------
LOCKPORT DEVELOPMENT, INC.
By: /s/ Joseph R. Atkin
--------------------------
Name: Joseph R. Atkin
------------------------
Its: Vice President
-------------------------
McCARTY'S MILL DEVELOPMENT, INC.
By: /s/ Joseph R. Atkin
--------------------------
Name: Joseph R. Atkin
------------------------
Its: Vice President
-------------------------
SUTTON DEVELOPMENT, INC.
By: /s/ Joseph R. Atkin
--------------------------
Name: Joseph R. Atkin
------------------------
Its: Vice President
-------------------------
SAR DEVELOPMENT, INC.
By: /s/ Joseph R. Atkin
--------------------------
Name: Joseph R. Atkin
------------------------
Its: Vice President
-------------------------
-3-
<PAGE>
MATTESON DEVELOPMENT, INC.
By: /s/ Joseph R. Atkin
--------------------------
Name: Joseph R. Atkin
------------------------
Its: Vice President
-------------------------
WALNUT POINTE DEVELOPMENT, INC.
By: /s/ Joseph R. Atkin
--------------------------
Name: Joseph R. Atkin
------------------------
Its: Vice President
-------------------------
CENTEX HOMES
By: Centex Real Estate Corporation
its managing partner
By: /s/ Brian J. Woram
--------------------------
Name: Brian J. Woram
------------------------
Its: Senior Vice President
-------------------------
-4-
<PAGE>
EXHIBIT 10.1
CONSTRUCTION LOAN AGREEMENT
---------------------------
THIS CONSTRUCTION LOAN AGREEMENT (this "Agreement") is made as of June 30,
1999, by and among ERIE CENTER LOFTS, INC., an Illinois corporation ("Erie"),
CAPITOL HILL LOFTS, INC., an Illinois corporation ("Capitol"), SANGAMON LOFTS,
INC., an Illinois corporation ("Sangamon"), MARATHON CENTER, INC., an Illinois
corporation ("Marathon"; Erie, Capitol, Sangamon and Marathon are sometimes
hereinafter individually referred to as "Borrower" and are sometimes hereinafter
collectively referred to as "Borrowers"), each with a mailing address c/o
Sundance Homes, Inc., 70 East Lake Street, Suite 1600, Chicago, Illinois 60601,
Attention: Maurice Sanderman (Fax No.: 312-793-9933), and CORUS BANK, N.A.,
whose address is 3959 North Lincoln Avenue, Chicago, Illinois 60613, Attention:
Michael G. Stein (Fax No.: 773-832-3540) (hereinafter referred to as "Lender").
R E C I T A L S
A. Erie is the owner of fee simple title to the real estate commonly
known as 435 West Erie, Chicago, Illinois, and legally described on Exhibit
"A-1" attached hereto (the "Erie Tower Land"). The Erie Tower Land is improved
with a partially completed twenty-four (24) story residential development
consisting of, or to consist of, one hundred twenty-four (124) residential
condominium units, two (2) retail condominium units, and two hundred twenty-six
(226) indoor parking spaces (the "Erie Tower Building"). The Erie Tower Land,
the Erie Tower Building, the Work (as hereinafter defined) related thereto and
all other Improvements (as hereinafter defined) heretofore and hereafter
constructed on the Erie Tower Land, together with all systems, fixtures and
equipment located on the Erie Tower Land or the Erie Tower Building to be
constructed and completed in accordance with the Approved Plans, is hereinafter
collectively referred to as the "Erie Tower Project").
B. Capitol is the owner of fee simple title to the real estate commonly
known as 625 West Jackson, Chicago, Illinois, and legally described on Exhibit
"A-2" attached hereto (the "Capitol Land"). The Capitol Land is improved with a
partially completed eight (8) story residential development consisting of, or to
consist of, ninety (90) residential condominium units, two (2) retail
condominium units, and thirty-seven (37) indoor parking spaces and fifty-five
(55) outdoor parking spaces (the "Capitol Building"). The Capitol Land, the
Capitol Building, the Work related thereto and all other Improvements heretofore
and hereafter constructed on the Capitol Land, together with all systems,
fixtures and equipment located on the Capitol Land or the Capitol Building to be
constructed and completed in accordance with the Approved Plans, is hereinafter
collectively referred to as the "Capitol Project").
C. Sangamon is the owner of fee simple title to the real estate commonly
known as 942 West Madison, Chicago, Illinois, and legally described on Exhibit
"A-3" attached hereto (the "Arthouse Land"). A portion of the Arthouse Land is
improved with a partially completed four (4) story residential development
consisting of twenty-six (26) residential condominium units, two (2) retail
condominium units, and nineteen (19) parking spaces (the "Arthouse I Building").
A portion of the Arthouse Land, legally described on Exhibit "A-3-a"attached
hereto (the "Arthouse II Parcel") is unimproved and may be used for a future
residential development. The Arthouse Land, the Arthouse I Building, the Work
related thereto and all
<PAGE>
other Improvements heretofore and hereafter constructed on the Arthouse Land,
together with all systems, fixtures and equipment located on the Arthouse Land
or the Arthouse I Building to be constructed and completed in accordance with
the Approved Plans, is hereinafter collectively referred to as the "Arthouse I
Project").
D. Marathon is the owner of fee simple title to the real estate commonly
known as 3232 North Halsted, Chicago, Illinois, and legally described on Exhibit
"A-4" attached hereto (the "Plaza 32 Land"). Marathon is proposing to construct
a residential/retail development consisting of (i) a five (5) story and (ii) a
nine (9) story building, containing in the aggregate (a) one hundred thirty
(130) residential condominium units with one hundred forty-nine (149) indoor
parking spaces allocated to the residential condominium units, and (b) an
approximately thirty-one thousand four hundred (31,400) square foot retail
development with eighty-one (81) indoor parking spaces allocated to the retail
development (the "Plaza 32 Building"). The Plaza 32 Land, the Plaza 32 Building,
the Work related thereto and all other Improvements heretofore and hereafter
constructed on the Plaza 32 Land, together with all systems, fixtures and
equipment located on the Plaza 32 Land or the Plaza 32 Building to be
constructed and completed in accordance with the Approved Plans, is hereinafter
collectively referred to as the "Plaza 32 Project").
E. The estimated cost of completing the Erie Tower Project is
approximately One Million Seven Hundred Seventy-Six Thousand Two Hundred
Seventy-One and 31/100 Dollars ($1,776,271.31).
F. The estimated cost of completing the Capitol Project is approximately
Eight Million Two Hundred Twenty-Seven Thousand Seven Hundred Sixty-Four Dollars
($8,227,764).
G. The estimated cost of completing the Arthouse I Project is
approximately One Million Seven Hundred Forty-Eight Thousand Three Hundred
Seventy-Seven and 87/100 Dollars ($1,748,377.87).
H. The estimated cost of constructing the Plaza 32 Project is
approximately Thirty-Four Million Two Hundred Ninety-Three Thousand Seventy-Four
Dollars ($34,293,074), of which Twenty-Eight Million Four Hundred Forty-Two
Thousand Dollars ($28,442,000) shall be funded out of the Tranche B Loan
proceeds.
I. Subject to the terms and conditions set forth herein, Lender has
agreed to make the Loan (as hereinafter defined).
NOW, THEREFORE, in consideration of the mutual covenants made herein, and
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender hereby agree as follows:
2
<PAGE>
SECTION 1
RECITALS AND EXHIBITS
---------------------
1.1 Incorporation of Recitals. The Recitals and preamble are hereby
incorporated in and expressly made a part of this Agreement.
1.2 Incorporation of Exhibits. All Exhibits are incorporated in and
expressly made a part of this Agreement.
SECTION 2
DEFINITIONS
-----------
2.1 Affiliates: With respect to an individual, any relative of such
individual; and with respect to any Person, any other Person: (i) directly or
indirectly controlling, controlled by or under direct or indirect common control
with, such Person or (ii) that directly or indirectly owns any of the voting
securities or capital stock of such person. A Person shall be deemed to control
another Person, if such Person possesses, directly or indirectly, the power to
direct or cause the direction of the management and policies of such other
Person, whether through the ownership of voting securities by contract or
otherwise.
2.2 Appraisals: As defined in Section 6.20 hereof.
2.3 Approved Budgets: The Tranche A Approved Project Budget and the
Tranche B Approved Project Budget.
2.4 Approved Leases: Any lease pertaining to any of the Projects which has
been approved by Lender in its reasonable discretion. Lease approval by Lender
shall be predicated upon, among other things: (i) current tenant financial
information in sufficient detail to assess experience and creditworthiness of
the tenant, (ii) creditworthiness of the tenant, (iii) form and content of the
lease agreement including, among other things, a tenant's obligation to provide,
at least annually, financial information on the condition of the tenant to
Borrower, (iv) a lease term of not less than five (5) years without any right
for the tenant to cancel such lease prior to the end of the fifth (5th) lease
year, and (v) a minimum triple net rent or gross rent acceptable to Lender in
its sole and absolute discretion.
2.5 Approved Plans: The Tranche A Approved Plans and the Tranche B
Approved Plans.
2.6 Approved Sales Contract: Any sales contract for any Unit shall be
deemed an Approved Sales Contract provided all of the following conditions are
met: (i) the sales contract used in the sale of the condominium unit must be the
form which has been approved by the Lender; (ii) the contract price is no less
than ninety percent (90%) of the applicable Pro Forma List Price herein; (iii)
sales commissions and other deductions from the sale price, including but not
limited to real estate tax prorations, shall not exceed eight percent (8%) of
the sale price; (iv) the sales contract must require a non-refundable earnest
money deposit of at least five percent (5%) of the sale price (or such lesser
percentage with respect to sales involving FHA/VHA or other applicable
government sponsored financing, as approved by Lender in its reasonable
discretion), and such deposit shall be either: (a) held in an account at Lender,
or (b) be evidenced
3
<PAGE>
by a copy of the associated check, and by written confirmation from the real
estate agent who holds the earnest money deposit in escrow; (v) all condominium
unit buyers' contingencies in the sales contract must be waived in writing by
the buyer; (vi) the sales contract (if it relates to a Unit in the Plaza 32
Project) must require a delivery date no sooner than the expected completion
date of the Plaza 32 Project as determined by Lender in its sole but reasonable
discretion, with a minimum ninety (90) day grace period before the Borrower is
in default of such contract; and (vii) the purchaser under the sales contract
must be a bona fide independent third party purchaser.
2.7 Architects: (a) Pappageorge Haymes, Ltd. for the Erie Tower Project
and the Plaza 32 Project; (b) Booth/Hansen & Associates, Ltd. for the Capitol
Project; and (c) Fitzgerald Associates Architects for the Arthouse I Project.
2.8 Architect's Contracts: The Erie Tower Architect's Contract, the
Capitol Architect's Contract, the Arthouse I Architect's Contract and the Plaza
32 Architect's Contract.
2.9 Arthouse I Architect's Contract: Agreement between Owner and
Architect dated October 10, 1997 between Sangamon, as assignee of Chicago Urban
Properties, Inc. and Fitzgerald Associates Architects.
2.10 Arthouse I Building: As defined in the Recitals.
2.11 Arthouse I Construction Contract: None.
2.12 Arthouse Land: As defined in the Recitals.
2.13 Arthouse I Project: As defined in the Recitals.
2.14 Arthouse II Parcel: As defined in the Recitals.
2.15 Blocked Account(s): An Operating Account of any Borrower established
with Lender.
2.16 Buildings: The Erie Tower Building, the Capitol Building, the
Arthouse I Building and the Plaza 32 Building.
2.17 Capitol Architect's Contract: Standard Form of Agreement between
Owner and Architect dated August 21, 1997 between Capitol, as assignee of
Chicago Urban Properties, Inc. and Booth/Hansen & Associates, Ltd.
2.18 Capitol Building: As defined in the Recitals.
2.19 Capitol Construction Contract: None.
2.20 Capitol Land: As defined in the Recitals.
2.21 Capitol Project: As defined in the Recitals.
4
<PAGE>
2.22 Collateral: The Projects, the Collateral CD, and any and all other
property (real, personal, or intangible) in which a security interest has been
granted to secure the Secured Obligations.
2.23 Collateral CD: That certain certificate of deposit in the principal
amount of Eight Hundred Thousand Dollars ($800,000) which has been pledged to
and for the benefit of Lender pursuant to the terms of the Pledge Agreement,
which Collateral CD may be released from such pledge in accordance with the
terms of the Pledge Agreement.
2.24 Commitment Letter: That certain loan commitment letter dated June 7,
1999, executed by Borrowers and Lender.
2.25 Completion Date: The Maturity Date.
2.26 Construction: As defined in Section 6.16 hereof.
2.27 Construction Contracts: The Erie Tower Construction Contract, the
Capitol Construction Contract, the Arthouse I Construction Contract and the
Plaza 32 Construction Contract.
2.28 Construction Disbursement: Disbursements made by Lender to Borrowers
to pay Hard Costs and Soft Costs, excluding the Initial Disbursement.
2.29 Construction Escrow Agreement: The Construction Escrow Agreement
described in Section 5.1(p).
2.30 Consultant: LM Consultants, Inc., who shall act solely as an advisor
to Lender with respect to the Projects. Lender may elect to consider the
assessments and/or opinions of Consultant, or may disregard such information.
2.31 Contractors: The contractors under the Construction Contracts. The
Contractors may not be Affiliates of Borrowers, prior to or during the term of
the Loan.
2.32 Costs: Any and all reasonable costs and expenses (including, without
limitation, the reasonable fees and expenses of any in-house/outside counsel,
accountants, appraisers or other professionals) incurred by Lender at any time,
in connection with: (i) the preparation, negotiation, execution and
administration of this Agreement and all other Loan Documents and any agreement
with any participant, including but not limited to reasonable fees of Lender's
attorneys (for the purposes of this Agreement, attorney's fees shall include the
fees of in-house counsel based upon an hourly rate competitive with mid-sized
law firms); (ii) the preparation, negotiation and execution of any amendment or
modification of this Agreement or the other Loan Documents; (iii) the custody,
preservation, use or operation of, or the sale of, collection from or other
realization upon the Collateral; (iv) the exercise or enforcement of any of the
rights of Lender hereunder or under any other Loan Document; (v) any failure or
alleged failure by Borrowers to perform or observe any of the provisions of this
Agreement or any other Loan Document; (vi) any litigation, contest, dispute,
suit, proceeding or action (whether instituted by Lender, Borrowers or any other
Person) in any way relating to this Agreement, the other Loan Documents, the
Secured Obligations, the Collateral, Borrowers' affairs or any Affiliate's
affairs;
5
<PAGE>
(vii) any reasonable consultation between Lender and its accountants, attorneys
or agents relating to the provisions of this Agreement or any other Loan
Document and the performance by Borrowers under this Agreement or any other Loan
Document; (viii) any evaluation or appraisal of the Collateral after the
occurrence of an Unmatured Default, whether or not declared or thereafter cured;
(ix) any attempt to enforce any rights of Lender against Borrowers or any other
Person which may be obligated to Lender by virtue of this Agreement or any other
Loan Document; (x) performing any of the obligations (to the extent authorized
under the Loan Documents) relating to or payment of any of Borrowers'
obligations; (xi) amounts necessary or appropriate to protect the lien or
priority of the Mortgages or of any of the other Loan Documents or to pay,
settle, compromise or contest any lien or claim of lien against the Collateral
or any part thereof (to the extent authorized under the Loan Documents), and
(xii) the payment or performance of any of the obligations of Borrowers set
forth in this Agreement or any of the other Loan Documents, including without
limitation all amounts necessary or appropriate to complete the construction of
the Projects in accordance with the applicable Plans and Specifications (to the
extent authorized under the Loan Documents).
2.33 Default Interest Rate: An annual rate of interest equal to four
percent (4%) above the Interest Rate then in effect under the Note.
2.34 Disbursement: Any advance or disbursement of Loan proceeds made
pursuant to this Agreement, as defined in Section 4.2.
2.35 Environmental Laws: The definition ascribed to this term in the
Environmental Indemnity Agreements (identified in Section 6.5), which definition
is incorporated herein by reference.
2.36 Erie Tower Architect's Contract: Standard Form of Agreement between
Owner and Architect dated August 1, 1996 between Erie, as assignee of Chicago
Urban Properties, Inc. and Pappageorge Haymes, Ltd.
2.37 Erie Tower Building: As defined in the Recitals.
2.38 Erie Tower Construction Contract: None.
2.39 Erie Tower Land: As defined in the Recitals.
2.40 Erie Tower Project: As defined in the Recitals.
2.41 Event of Default: As defined in Section 13 hereof.
2.42 Extras: Any labor, material, change in the Approved Plans or other
item which will result in an increase in the applicable line item set forth in
the applicable Approved Budget, excluding changes deemed to be Upgrades.
2.43 Gross Sales Proceeds: The total purchase price for an individual
Unit and any parking spaces sold appurtenant thereto, including Extras and
Upgrades (less the actual costs of such Extras and Upgrades).
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2.44 Guarantors: Sundance Homes, Inc., an Illinois corporation, and
Maurice Sanderman, together with any other Person who has agreed to guaranty
payment or performance of the Secured Obligations.
2.45 Guaranty Agreements: The Guaranty Agreements described in Section 6.4
hereof.
2.46 Hard Costs: Any and all costs directly related to and incurred in
connection with the construction of the Projects in accordance with the Approved
Plans, including, without limitation, the cost of acquisition of the Land and
the cost of all labor, materials and equipment incurred pursuant to the
Construction Contracts and any subcontract, but excluding any fees for
architectural and engineering services.
2.47 Improvements: The Buildings including the improvements for the
Buildings on site in accordance with the Approved Plans.
2.48 Inconsequential Variances: As defined in Section 6.16(c) hereof.
2.49 Initial Disbursement: The initial disbursement of Loan proceeds, to
be made in accordance with Section 4.4, and which shall be made to pay certain
Soft Costs, including, without limitation, Costs and Loan Expenses and such Hard
Costs permitted hereunder.
2.50 Initial Disbursement Date: The date of the Initial Disbursement of
Loan proceeds, whether into an escrow at the direction of Borrowers or to any
other Person, including, but not limited to Disbursements by Lender to itself to
pay Costs or Loan Expenses.
2.51 Insignificant Setback: As defined in Section 6.16 hereof.
2.52 Interest Reserve: As defined in Section 4.3(a) hereof.
2.53 Inventory: All Units which have not yet been conveyed to purchasers
thereof, plus available parking spaces.
2.54 Land: The Erie Tower Land, the Capitol Land, the Arthouse Land and
the Plaza 32 Land.
2.55 Laws: All laws, statutes, ordinances, rules, decrees, judgments,
orders, and/or regulations of any kind whatsoever (including without limitation
those relating to building, zoning, health, safety, life code, environmental
protection, access, environmental barriers, public highway and public access)
and specifically including without limitation all Environmental Laws, the
Americans with Disabilities Act and similar state and local laws.
2.56 Loan: The Tranche A Loan and the Tranche B Loan.
2.57 Loan Documents: All documents now or hereafter executed by Borrowers
evidencing or securing all or any part of the indebtedness evidenced by the
Note, including, without limitation, the Commitment Letter, the Note, the
Mortgages and the Guaranty
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Agreements, the Pledge Agreements, and all renewals, modifications, amendments
and supplements of the foregoing.
2.58 Loan Expenses: The Loan Expenses as defined in Section 11 hereof.
2.59 Maturity Date: The Maturity Date as defined in the Note.
2.60 Maximum Disbursement Amount: Sixty-One Million One Thousand One
Hundred Eighty-Nine Dollars ($61,001,189).
2.61 Maximum Outstanding Balance: Twenty-Five Million Five Hundred
Thousand Dollars ($25,500,000).
2.62 Modifications: Any extension, renewal, substitution, replacement,
supplement, amendment or modification of any agreement, document or instrument,
whether or not contemplated in the original agreement, document or instrument.
2.63 Mortgages: The Mortgages described in Section 6.2 hereof.
2.64 Net Sales Proceeds: The total purchase price for an individual Unit
and any parking spaces sold appurtenant thereto, including Extras and Upgrades
(less the actual costs of such Extras and Upgrades), less customary independent
third party broker's fees, real estate tax prorations, title and escrow charges,
transfer taxes and reasonable attorneys' fees.
2.65 Note: The Promissory Note described in Section 6.1 hereof.
2.66 Operating Accounts: As defined in Section 10.21 hereof.
2.67 Organizational Documents: Of any Person shall mean its articles of
incorporation, by-laws, certificate of existence, operating agreement,
shareholders' agreement, certificate of partnership, certificate of limited
partnership, partnership agreement, articles of organization, or similar
documents or agreements governing its management and the rights, duties and
privileges of its equity owners.
2.68 Pending Contract Price: The pending contract price for any Unit as
set forth in Exhibit "E" attached hereto.
2.69 Permits: All building, zoning, safety, health, fire, water district,
sewage and environmental protection agency permits and all other permits or
licenses or appraisals which are required at any time and from time to time, by
any governmental authority having jurisdiction over Borrowers, the construction
of the Improvements and the use, occupancy, management and/or operation of the
Projects as residential and/or retail buildings.
2.70 Permitted Exceptions: Those exceptions to title listed on Exhibit
"B" attached hereto.
2.71 Person: Any individual, sole proprietorship, partnership, limited
liability company, joint venture, trust, unincorporated organization,
association, corporation, institution,
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entity, party or government (whether national, federal, state, county, city,
municipal or otherwise, including without limitation any instrumentality,
division, agency, body, or department thereof).
2.72 Plans and Specifications: With respect to the Tranche A Projects,
the Tranche A Approved Plans, and with respect to the Tranche B Project, the
Preliminary Plans, if Lender has not yet accepted the Tranche B Approved Plans,
and the Tranche B Approved Plans after such acceptance.
2.73 Plaza 32 Architect's Contract: Standard Form of Agreement between
Owner and Architect dated February 10, 1997 between Marathon, as assignee of
Chicago Urban Properties, Inc. and Pappageorge Haymes, Ltd., as amended by
Amendment to Agreement between Owner and Architect dated November 11, 1997.
2.75 Plaza 32 Building: As defined in the Recitals.
2.76 Plaza 32 Construction Contract: Agreement between Owner and
Contractor dated September 5, 1998 between Marathon and Paul H. Schwendener,
Inc.
2.77 Plaza 32 Land: As defined in the Recitals.
2.78 Plaza 32 Project: As defined in the Recitals.
2.79 Pledge Agreements: Those certain Pledge Agreements of even date
herewith from Maurice Sanderman in favor of Lender and from each Borrower with
respect to such Borrower's Operating Accounts.
2.80 Preliminary Plans: The Preliminary Plans as defined in Section 6.18
hereof.
2.81 Prior Covered Cost Overruns: As defined in Section 7.6 hereof.
2.82 Pro Forma List Prices: The pro forma list prices for the Units as
set forth in Exhibit "E" attached hereto.
2.83 Projects: The Tranche A Projects and the Tranche B Project.
2.84 Residential Units: Any condominium unit contained within the
Projects which has been designated for use as a residential condominium unit.
2.85 Retail Units: Any condominium unit contained within the Projects
which has been designated for use as a retail condominium unit.
2.86 Retainage(s): As defined in Section 7.2 hereof.
2.87 Schedule: As defined in Section 6.16 hereof.
2.88 Secured Obligations: The indebtedness evidenced by the Note and/or
this Agreement, together with all obligations, liabilities, covenants and
agreements of Borrowers and/or Guarantors to Lender arising under or relating to
this Agreement and/or all other Loan
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Documents, whether now existing or hereafter arising, absolute or contingent,
whether contemplated herein, or in any other Loan Document or any Modification
thereto or thereof.
2.89 Soft Costs: All costs incurred or to be incurred in connection with
the Projects other than Hard Costs, including, without limitation, interest on
the Loan, all fees incurred in connection with the Loan and payable to Lender,
commissions, appraisal fees, architectural and engineering fees, title and
recording charges, special counsel fees, real estate tax and Interest Reserves,
real estate taxes and special assessments becoming due and payable during the
period of construction, the Loan Expenses and those costs (other than Hard
Costs) set forth on the Approved Budgets.
2.90 Subcontract(s): All written agreements pursuant to which
subcontractors agree to perform various services in connection with the
construction of the Improvements.
2.91 Subordinated Debt: As defined in Section 4.3 hereof.
2.92 Surveys: As defined in Section 6.10 hereof.
2.93 Title Company: Ticor Title Insurance Corporation.
2.94 Title Policy: Collectively, the title policies and endorsements to
be delivered pursuant to Section 6.10 hereof.
2.95 Tranche A Approved Plans: The Tranche A Approved Plans as defined in
Section 6.18 hereof.
2.96 Tranche B Approved Plans: The Tranche B Approved Plans as defined in
Section 6.18 hereof.
2.97 Tranche A Approved Project Budget: The Tranche A Approved Project
Budget defined in Section 6.19 hereof.
2.98 Tranche B Approved Project Budget: The Tranche B Approved Project
Budget defined in Section 6.19 hereof.
2.99 Tranche A Loan: As defined in Section 4.3(a) hereof.
2.100 Tranche B Loan: As defined in Section 4.3(b) hereof.
2.101 Tranche A Preliminary Budget: The Tranche A Preliminary Budget as
defined in Section 6.19 hereof.
2.102 Tranche B Preliminary Budget: The Tranche B Preliminary Budget as
defined in Section 6.19 hereof.
2.103 Tranche A Projects: The Erie Tower Project, the Capitol Project and
the Arthouse I Project.
2.104 Tranche B Project: The Plaza 32 Project.
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2.105 Units: The Residential Units and the Retail Units.
2.106 Unmatured Default: Any event which with the passage of time, the
giving of notice or both would be an Event of Default hereunder or under any
other Loan Document.
2.107 Upgrades: Any special feature required by a purchaser of a Unit in
excess of Borrower's standard unit specifications/sales package.
2.108 Work: The labor and materials to be furnished for the construction
of the Improvements.
SECTION 3
REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Lender to execute this Agreement and to make the Loan (as more
fully described in Section 4 below), Borrower represents and warrants as
follows:
3.1 Title.
(a) Erie has good, marketable and indefeasible fee simple title to the
Erie Tower Project free of all liens, claims and encumbrances, except the
Permitted Exceptions applicable thereto.
(b) Capitol has good, marketable and indefeasible fee simple title to
the Capitol Project free of all liens, claims and encumbrances, except the
Permitted Exceptions applicable thereto.
(c) Sangamon has good, marketable and indefeasible fee simple title to
the Arthouse I Project (including the Arthouse II Parcel) free of all
liens, claims and encumbrances, except the Permitted Exceptions applicable
thereto.
(d) Marathon has good, marketable and indefeasible fee simple title to
the Plaza 32 Project free of all liens, claims and encumbrances, except the
Permitted Exceptions applicable thereto.
3.2 Organization. Each Borrower (i) is an Illinois corporation, duly
organized, validly existing and in good standing under the laws of the State of
Illinois and has complied with all conditions prerequisite to its doing business
in the State of Illinois; (ii) has the power and authority to own its properties
and to carry on its business as now being conducted; (iii) is qualified to do
business in every jurisdiction in which the nature of its business or its
properties makes such qualification necessary; and (iv) is in compliance with
all Laws applicable to it. The Organizational Documents of each Borrower, copies
of which have been furnished to Lender, are in full force and effect, have not
been amended since the date of delivery to Lender, and are true, correct and
complete copies of all documents relating to such Borrower's creation and
governance.
3.3 Projects. Subject to the terms and conditions contained in this
Agreement, Borrowers intend to cause the construction of the Improvements on the
Land.
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3.4 Buildings. The Buildings are or shall be as depicted on the
applicable Approved Plans.
3.5 Authority. Borrowers have full power and authority to execute and
deliver this Agreement and the other Loan Documents to be executed and delivered
by Borrowers pursuant to this Agreement, and to perform its obligations
hereunder and thereunder. Upon the execution and delivery hereof and thereof,
this Agreement and all such Loan Documents will be valid, binding upon and
enforceable against Borrowers in accordance with their respective terms. The
execution and delivery by Borrowers of this Agreement and the other Loan
Documents to be executed and delivered by Borrowers do not and will not
contravene, conflict with, violate or constitute a default under the
Organizational Documents of Borrowers or any applicable Law, or the material
provisions of any agreement, indenture or instrument to which any Borrower is a
party, by which any Borrower or any of its property is bound, or which is
binding upon or applicable to the Projects or any portion thereof.
3.6 Litigation. There is no condition, event or circumstance existing, or
any litigation, arbitration, governmental or administrative proceedings,
actions, examinations, claims or demands pending nor, to Borrowers' knowledge,
threatened: (i) materially and adversely affecting any Borrower, any Project or
the use or operation thereof, or (ii) which would prevent any Borrower from
complying with or performing its respective obligations under this Agreement,
the Note or any of the other Loan Documents within the time limits set forth
therein for such compliance or performance, and no basis for any such matter
exists, or (iii) which would prevent any Borrower from owning, managing, or
leasing its Project as a residential and/or retail building.
3.7 Utilities. The Buildings have, or upon completion of the Work, will
have all utilities necessary for the construction, use, and occupancy thereof as
the Buildings described in the Plans and Specifications. All requirements for
unrestricted use of all such utilities have been (or upon completion shall be)
fulfilled.
3.8 Permits and Licenses. All Permits which are required by any
governmental authority for the construction of the Improvements and the use,
occupancy and operation of the Projects as residential and/or retail projects
will be obtained and maintained in full force and effect by Borrowers when and
as required by such governmental authority.
3.9 Financial Statements. All financial statements submitted to Lender
relating to Borrowers, the Projects and Guarantors, are true and correct in all
material respects, fairly present the financial condition of the person or
entity to which they pertain and the other information therein described, and do
not contain any untrue statement of a material fact or omit to state a fact
material to the financial statement submitted or this Agreement. No adverse
change has occurred in the financial condition of Borrowers, the Projects or, to
Borrowers' knowledge, Guarantors, since the dates of said financial statements.
3.10 Compliance with Laws. The Projects do not, and upon completion of
the construction of the Improvements the use, occupancy and operation thereof
will not, violate (a) any Laws applicable to the Projects, the Projects'
construction, use, occupancy or operation, or (b) any material provisions of
contractual arrangements with third parties or any covenants,
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conditions, easements, rights of way or restrictions of record. Neither
Borrowers nor any agent of Borrowers has received any notice, written or
otherwise, alleging any such violation. Upon completion of the construction of
the Improvements in accordance with the Plans and Specifications, the Projects
will be in full compliance with all then applicable zoning requirements,
including, without limitation, those relating to setbacks, height, parking,
floor area ratio and percentage of land coverage and will be in accordance with
any and all Permits. Except to the extent provided in the Permitted Exceptions,
no right to any off-site facilities is necessary to insure compliance by the
Projects with all environmental protection, public highway, water use, zoning,
building, fire, health, safety or similar statutes, laws, ordinances, codes,
rules, regulations, orders and decrees.
3.11 Construction Contracts.
(a) With respect to the Tranche A Projects, each Borrower, as owner,
and the applicable Contractor have entered into a Construction Contract
pursuant to which such Contractor will construct the applicable Project.
Borrowers have delivered to Lender, and Lender has approved, true, complete
and correct certified copies of the Construction Contracts related to the
Tranche A Projects. The Construction Contracts related to the Tranche A
Projects are in full force and effect, have not been amended and no default
exists thereunder by any party thereto.
(b) With respect to the Tranche B Project, Marathon, as owner, and the
Contractor for the Plaza 32 Project have entered into the Plaza 32
Construction Contract pursuant to which such Contractor will construct the
Plaza 32 Project. Marathon has delivered to Lender for its review and
approval, a true, complete and correct certified copy of the Plaza 32
Construction Contract. The Plaza 32 Construction Contract is in full force
and effect, has not been amended and no default exists thereunder by any
party thereto. If Lender elects, in its sole discretion, to make the
Initial Disbursement without approving and accepting the final Plaza 32
Construction Contact, then, prior to any Construction Disbursement related
to the Plaza 32 Project or additional Disbursements hereunder related to
the Plaza 32 Project, Marathon shall cause to be prepared and delivered to
Lender for Lender's review and approval, which approval may be withheld in
Lender's sole discretion, a guaranteed maximum or fixed price construction
contract with an independent third party Contractor in form and amount
acceptable to Lender in its sole and absolute discretion, with the
applicable Contractor. Lender's approval of the Plaza 32 Construction
Contract shall be evidenced by a letter from Lender to Borrowers.
(c) The Construction Contracts (including the Plaza 32 Construction
Contract once it has been approved by Lender) will not be amended or
modified in any material respect without the prior written consent of
Lender, which consent may be withheld in Lender's sole discretion.
3.12 Architect's Contracts.
(a) With respect to the Tranche A Projects, each Borrower, as owner,
and the applicable Architect have entered into an Architect's Contract
pursuant to which such Architect has agreed to perform architectural
services in connection with the design and
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construction of the Improvements related to the Tranche A Projects.
Borrowers have delivered to Lender, and Lender has approved, true, complete
and correct certified copies of the Architect's Contracts related to the
Tranche A Projects. The Architect's Contracts related to the Tranche A
Projects are in full force and effect, have not been amended and no default
exists thereunder by any party thereto.
(b) With respect to the Tranche B Project, Marathon, as owner, and
the Architect for the Plaza 32 Project have entered into an Architect's
Contract pursuant to which such Architect has agreed to perform
architectural services in connection with the design and construction of
the Improvements related to the Tranche B Project. Marathon has delivered
to Lender for its approval, a true, complete and correct certified copy of
the Plaza 32 Architect's Contract. The Plaza 32 Architect's Contract is in
full force and effect, has not been amended and no default exists
thereunder by any party thereto. If Lender elects, in its sole discretion,
to make the Initial Disbursement without approving and accepting the final
Plaza 32 Architect's Contract, then, prior to any Construction Disbursement
related to the Plaza 32 Project or additional Disbursements hereunder
related to the Plaza 32 Project, Marathon shall cause to be prepared and
delivered to Lender for Lender's review and approval, which approval may be
withheld in Lender's sole discretion, an architect's contract with
applicable Architect. Lender's approval of the Plaza 32 Architect's
Contract shall be evidenced by a letter from Lender to Borrowers.
(c) The Architect's Contracts (including the Plaza 32 Architect's
Contract once it has been approved by Lender) will not be amended or
modified in any material respect without the prior written consent of
Lender, which consent may be withheld in Lender's sole discretion.
3.13 Subcontracts.
(a) Borrowers shall provide Lender with a schedule setting forth all
contracts, purchase orders or agreements entered into by any Borrower
(other than the Architects' Contracts and the Construction Contracts) with
respect to the Land, the Improvements, the Projects (or any portion
thereof) and the development, construction, operation, maintenance,
management, leasing or transfer thereof. Such schedule may be in the form
of a Sworn Owner's Statement, if such form accurately sets forth the
information required pursuant to this Section 3.13(a). Except as disclosed
in Sections 3.11 and 3.12 and as set forth on any schedule submitted
pursuant to this subsection, Borrowers have not entered as of the date
hereof, and will not enter, into any contracts with Contractors, Architects
or any other contractors, subcontractors or other parties for the
performance of services in connection with the construction of, or with
respect to, the Projects or for the operation, maintenance, management,
leasing or transfer of the Projects or any portion thereof.
(b) The Contractors will enter into the Subcontracts using their form
contracts, which form contracts shall provide that the subcontractors will
recognize and perform under such Subcontracts for Borrowers, as owner, and
their successors and assigns in the event of default by the Contractor
under the Subcontract or the applicable
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Construction Contract. All subcontractors and materialmen shall be
acceptable to Lender in Lender's sole discretion. Borrowers will provide
trade references and current financial information for each and every
subcontractor or materialman, if requested by Lender.
(c) Upon Lender's request, Borrowers shall provide Lender with a
complete schedule of: (i) all contracts, purchase orders, Subcontracts and
agreements entered into by Contractors in connection with the Land, the
Improvements and the Projects, (ii) the amount of the contract, (iii) a
detailed description of the Work to be performed, (iv) any contract amount
paid prior to the Initial Disbursement Date, (v) the name of all
materialmen by whom materials will be furnished to the Contractors, (vi)
the amounts due or to become due for each materialman, (vii) information
identifying the performance bond obtained or to be obtained by such
Subcontractor, and (viii) a description of all Work or materials for which
Subcontracts have not yet been let. Such schedule may be in the form of the
Contractor's Sworn Statement, if such form accurately sets forth the
information required pursuant to this Section 3.13.
3.14 UCC Financing Statements. There shall be no UCC financing statements
in effect which pertain to any rights in any personal property or fixtures now
or hereafter situated on the Projects, as to any personal property or fixtures
owned by Borrowers, other than those filed and recorded or to be filed or
recorded by Lender.
3.15 Single Purpose Entity. At all times during the term of this
Agreement, Borrowers represent, warrant, covenant and agree to ensure at all
times that each Borrower operates and maintains its status as an independent
entity, separate and distinct from all other entities, that:
(a) each Borrower shall own no property or assets, other than the
portion of the Land owned by such Borrower, the Improvements thereon,
leases thereof, contract rights relating thereto, and other personal and
intangible property used or useful solely in connection with the portion of
the Project owned by such Borrower;
(b) Borrowers shall not enter into any agreement to provide services
to any third party;
(c) Borrowers' Organizational Documents shall limit its purpose to
owning, operating, managing, improving, leasing, selling, mortgaging,
financing, refinancing and maintaining the Projects and other lawful
activities incidental thereto; provided that in the event Borrowers'
Organizational Documents do not so provide, Borrowers shall have thirty
(30) days following the Initial Disbursement to so modify Borrowers'
Organizational Documents;
(d) Borrowers shall not engage in any business or activity other than
the acquisition, construction, ownership, operation or maintenance of the
Projects, and other lawful activities incidental thereto;
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(e) Borrowers shall not acquire or own any material asset other than
the Projects and incidental personal property as may be necessary for the
operation of the Projects;
(f) Borrowers shall not merge into or consolidate with any Person or
dissolve, terminate or liquidate, in whole or in part, transfer or
otherwise dispose of all or substantially all of its assets or change its
legal structure, without in each case Lender's consent;
(g) Borrowers shall not own any subsidiary or make any investment in
or acquire the obligations or securities of any other Person;
(h) Borrowers shall not co-mingle its assets with the assets of any
other Person;
(i) Borrowers shall not fail to pay its debts and liabilities from its
own assets or funds available from the Loan;
(j) Borrowers shall not fail to correct any known misunderstandings
regarding the separate identity of its member or managers;
(k) Borrowers shall not hold itself out to be responsible for the
debts of another Person;
(l) Borrowers shall maintain books and records and bank accounts
separate from those of any other Person;
(m) Borrowers shall maintain its assets in such a manner that is not
costly or difficult to segregate, identify or ascertain such assets;
(n) Borrowers shall hold regular entity meetings, as appropriate, to
conduct its business and observe all other appropriate entity formalities;
(o) Borrowers shall hold itself out to creditors and the public as a
legal entity separate and distinct from any other Person;
(p) Borrowers shall prepare separate tax returns and financial
statements, or if part of a consolidated group, then it will be shown as a
separate member of such group;
(q) Borrowers shall allocate and charge fairly and reasonably any
common employee or overhead shared with Affiliates; and
(r) Borrowers shall not assume, guarantee, or pay the debts or
obligations of any other Person.
3.16 Hazardous Material. Borrowers represent, warrant and covenant that,
to the best of their knowledge and after due inquiry, the Projects are in
compliance with all Environmental
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Laws; that there are no conditions existing currently during the term of the
Note that require or are likely to require cleanup, removal or other remedial
action pursuant to any Environmental Laws; that Borrowers are not a party to any
litigation or administrative proceeding contemplated or threatened which would
assert or allege any violation of any Environmental Laws; that neither the
Projects nor Borrowers are subject to any judgment, decree, order or citation
related to or arising out of any Environmental Laws; and that no permits or
licenses are required under any Environmental Laws regarding the Projects.
Borrowers covenant and agree to comply with all applicable Environmental Laws;
to provide to Lender immediately upon receipt copies of any correspondence,
notice, pleading, citation, indictment, complaint, order or other document
received by any Borrower asserting or alleging a circumstance or condition that
requires or may require a cleanup, removal or other remedial action under any
Environmental Laws, or that seeks criminal or punitive penalties for an alleged
violation of any Environmental Laws; and to advise Lender in writing as soon as
such Borrower becomes aware of any condition or circumstance which makes any of
the representations or statements contained in this Section 3.16 incomplete or
inaccurate. In the event Lender determines in its reasonable discretion that
there is any evidence that any such circumstance might exist, whether or not
described in any communication or notice to either Borrowers or Lender,
Borrowers agree, at their own expense and at the request of Lender, to permit an
environmental audit to be conducted by Lender or an independent agent selected
by Lender. This provision shall not relieve Borrowers from conducting their own
environmental audits or taking any other steps necessary to comply with any
Environmental Laws. If, in the reasonable opinion of Lender, there exists any
uncorrected violation by any Borrower of an Environmental Law or any condition
which requires or may require any cleanup, removal or other remedial action
under any Environmental Laws, and such cleanup, removal or other remedial action
is not completed within sixty (60) days from the date of written notice from
Lender to Borrowers, the same shall, at the option of Lender, constitute a
default hereunder, without further notice or cure period.
3.17 Continuation of Representations and Warranties. All representations
and warranties which have been made by Borrowers shall be true at and as of the
time of each Disbursement of the Loan except as Borrowers may advise Lender in
writing from time to time and as may be acceptable to Lender.
SECTION 4
AGREEMENT TO LOAN
------------------
4.1 Agreement to Make Loan. Lender agrees to lend to Borrowers and
Borrowers agree to borrow from Lender the Loan, to be used only for the
refinance of existing third party indebtedness, and for the construction of the
Improvements, upon the terms and provisions and subject to the conditions
contained in this Agreement and the Note.
4.2 Loan Disbursement. Lender's agreement to make the Loan is made by
Lender in reliance upon the representations, warranties and agreements contained
herein and upon the documents, exhibits, schedules and other information
furnished by Borrowers to Lender in connection with this Agreement. Subject to
and upon the terms and conditions set forth in this Agreement, Lender agrees to
lend to Borrowers, from time to time such sums as may be requested by Borrowers,
the total of which shall neither exceed at any one time the Maximum Outstanding
Balance of Twenty-Five Million Five Hundred Thousand Dollars ($25,500,000) nor
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shall the total amount disbursed under the Loan exceed the Maximum Disbursement
Amount of Sixty-One Million One Thousand One Hundred Eighty-Nine Dollars
($61,001,189). In this Agreement, all loans and disbursements made by Lender
pursuant to this Agreement are collectively called the Loan, and each
disbursement made by Lender is herein called a "Disbursement". It is
contemplated that the Loan will be disbursed in a series of Disbursements as
construction progresses in compliance with the terms and conditions set forth
below.
4.3 Allocation of Loan Proceeds. The Proceeds of the Loan shall be
disbursed as follows:
(a) Tranche A Loan. The Tranche A Loan (the "Tranche A Loan") shall
include a portion of the Maximum Disbursement Amount of Thirty-One Million
Six Hundred Twenty-Three Thousand Dollars ($31,623,000), to be disbursed as
follows:
(i) Nineteen Million Two Hundred Seven Thousand Eight
Hundred Fifty Dollars ($19,207,850): to payoff all remaining
debt to LaSalle National Bank (after the sale of Sundance Homes,
Inc.'s suburban assets to Centex Homes, a Nevada general
partnership, with the remainder (up to a maximum amount of Five
Million Dollars ($5,000,000)) available to pay down a portion of
the approximately Six Million Six Hundred Ninety-Three Thousand
Dollars ($6,693,000) in subordinated debt (the "Subordinated
Debt") owed by Borrowers to Maurice Sanderman.
(ii) One Million Seven Hundred Seventy-Six Thousand Two Hundred
Seventy-One and 31/100 Dollars ($1,776,271.31): to fund all remaining
actually incurred hard and Soft Costs of the Erie Tower Project as
approved by Lender from time to time in accordance with the Tranche A
Approved Project Budget.
(iii) One Million Seven Hundred Forty-Eight Thousand Three
Hundred Seventy-Seven and 87/100 Dollars ($1,748,377.87): to fund all
remaining actually incurred hard and Soft Costs of the Arthouse I
Project as approved by Lender from time to time in accordance with the
Tranche A Approved Project Budget.
(iv) Eight Million Two Hundred Twenty-Seven Thousand Seven
Hundred Sixty-Four Dollars ($8,227,764): to be used to fund all
remaining actually incurred Hard and Soft Costs of the Capitol Hill
Project as approved by Lender from time to time in accordance with the
Tranche A Approved Project Budget.
(v) One Million Seven Hundred Fifty Thousand Dollars
($1,750,000): to be used to fund the commitment fee and closing fee
specified in Section 11 hereof, and the interest reserve for the
Tranche A Loan and the Tranche B Loan (the "Interest Reserve").
(b) Tranche B Loan. The Tranche B Loan (the "Tranche B Loan") shall
include a portion of the Maximum Disbursement Amount of Twenty-Eight
Million Four Hundred Forty-Two Thousand Dollars ($28,442,000): to be used
to completely fund the
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actually incurred Hard and Soft Costs of the Tranche B Project as approved
by Lender from time to time in accordance with the Tranche B Approved
Project Budget.
(c) The proceeds of the Tranche A Loan allocated to the Tranche A
Projects, as further specified in the Tranche A Approved Project Budget,
shall be reduced accordingly if project costs for a Project are less than
those estimated in the Tranche A Approved Project Budget. The Tranche B
Loan shall be reduced accordingly if the Tranche B Project costs are less
than those estimated in the Tranche B Approved Project Budget. Any
reductions pursuant to the preceding sentences resulting from cost savings
in hard cost line items for any of the Tranche A Projects may be
reallocated to fund hard costs line items for any of the other Tranche A
Projects.
(d) Notwithstanding the allocations set forth above, it is expressly
understood that the Loan is a revolving credit facility which shall not
exceed at any one time, the Maximum Outstanding Balance of Twenty-Five
Million Five Hundred Thousand Dollars ($25,500,000).
4.4 Initial Disbursement. In Lender's sole discretion, the Initial
Disbursement may be made on the date hereof to be utilized by Borrowers solely
for the purpose of paying certain Loan Expenses, Costs and to pay off the
outstanding portion of Borrowers' existing third party indebtedness related to
the Projects, all as more fully described in the Tranche A Approved Project
Budget and the Tranche B Approved Project Budget. Further, a portion of the
Initial Disbursement in the amount of Eight Hundred Thousand Dollars ($800,000)
may be used by Borrowers for the purpose of paying to Maurice Sanderman a
portion of the Subordinated Debt owed by Borrowers to Maurice Sanderman,
provided no further portion of the Subordinated Debt may be repaid to Maurice
Sanderman until Lender has released its security interest in the Collateral CD
in accordance with the terms of the Pledge Agreement. The balance of the Loan
will be available for disbursement from time to time upon completion of each
portion of the construction in accordance with the terms of this Agreement.
Unless otherwise determined by Lender in Lender's sole discretion, all
subsequent Disbursements will be made through an escrow account established with
the Title Company pursuant to the Construction Escrow Agreement or other
documentation satisfactory in form and substance to Lender, all of the expenses
of which will be paid by Borrowers.
4.5 Subsequent Disbursements. Disbursements of the Loan after the Initial
Disbursement will be made periodically by Lender upon satisfaction of the
conditions precedent set forth in Section 5.1 and in accordance with the
provisions of this Agreement. Borrowers hereby covenant that all conditions
precedent to the first Construction Disbursement for the Plaza 32 Project shall
be satisfied and first Construction Disbursement for the Plaza 32 Project shall
occur on or before October 1, 1999.
4.6 Loan Purpose. Borrowers acknowledge and agree that the Loan is a
business loan and is extended solely and exclusively for the purposes of
providing financing for the Projects, subject to the terms and conditions of
this Agreement and for no other purpose whatsoever.
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SECTION 5
CONDITIONS PRECEDENT TO DISBURSEMENT
------------------------------------
5.1 Conditions to Disbursement. The obligation of Lender to make the
Initial Disbursement and each subsequent Disbursement of proceeds of the Loan
shall be conditioned upon and subject to the payment to Lender of all amounts
owed to Lender hereunder and the satisfaction of all of the conditions set forth
in this Section 5.1 on or before the Initial Disbursement and on the date of
each subsequent Disbursement. Lender may temporarily waive one or more of the
following conditions precedent. Notwithstanding such waiver, Lender may require
that all applicable conditions be complied with prior to any Construction
Disbursement or additional Disbursements, as well as the continuing satisfaction
of all requirements hereunder at all times thereafter.
a. The Loan shall not be "Out of Balance", as determined under
Section 7.3 below.
b. All representations and warranties of Borrowers contained in this
Agreement and in all of the other Loan Documents shall be true in all
material respects as of the date of such Disbursement.
c. Borrowers shall have performed all of its material obligations
under all Loan Documents (including, without limitation, the Commitment
Letter) which are required to be performed on or prior to the date of such
Disbursement.
d. No Event of Default or Unmatured Default shall have occurred and
be continuing.
e. There shall be no material adverse change in the financial
condition of Borrowers, the Projects or Guarantors from that reflected in
the financial statements of Borrowers, the Projects or Guarantors,
respectively, heretofore furnished to Lender or furnished to Lender from
time to time in accordance with Section 10.10.
f. There shall be no material adverse change in the condition of any
of the Projects.
g. There shall be no pending or threatened litigation known to
Borrowers, or their counsel, against any Borrower, any Guarantor or any
Project, the determination of which shall have a material adverse effect on
any Borrower, Guarantor or any Project.
h. Neither the Projects nor any part thereof shall have suffered any
casualty or be subject to any existing or threatened condemnation or taking
by eminent domain proceeding or otherwise.
i. Lender shall have received evidence satisfactory to it that the
Projects are in compliance with all Laws (including Environmental Laws and
the Americans with Disabilities Act, as amended), and that there are no
conditions existing currently or likely to exist during the term of the
Loan that require or are likely to require clean-up, removal
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or other remedial action pursuant to any Environmental Laws which are not
the subject of costs contained in the Approved Budgets.
j. Lender shall have received an inspection report from the
Consultant certifying as to the percentages of completion of the components
of the Work and setting forth the amount authorized for disbursement and
such other matters as Lender may require (including compliance with the
Approved Plans). Notwithstanding anything contained in this Agreement to
the contrary, it is understood and agreed that any and all inspections of
the Work made by Lender, the Consultant or their respective agents and
employees shall be solely for Lender's own information and shall not be
deemed to have been made for or on account of Borrowers or any other party.
Borrowers hereby relieve Lender of any and all liability or responsibility
relating in any way whatsoever to the construction of the Projects,
including, without limitation, the Work and any errors, inconsistencies or
other defects in the Plans and Specifications.
k. Borrowers shall have delivered to Lender evidence reasonably
satisfactory to Lender: (i) that each Project, when completed substantially
in accordance with the Plans and Specifications applicable to such Project,
and the intended use of the applicable Project shall be in full compliance
with all applicable Laws; and (ii) that all Permits necessary for
construction and completion of that portion of the Work the payment for
which such Disbursement is being requested have been issued and are in full
force and effect.
l. Lender shall have received from each of the Architects a
certificate stating that the applicable Project, when completed in
accordance with the Plans and Specifications, and the contemplated use
thereof will be in full compliance with all applicable zoning laws and
ordinances. Borrowers shall also provide Lender with such other evidence,
satisfactory to Lender in its sole discretion, that the applicable
Project, when completed, will be in compliance with all zoning
requirements and that all required zoning approvals have been obtained.
m. Borrowers shall have provided Lender with evidence that the
Projects will have an adequate water supply, fire protection, storm and
sanitary sewage disposal, gas and electricity and that agreements have been
made with local authorities for the installation and construction of the
aforesaid utilities.
n. (i) With respect to the initial disbursement of the Tranche A
Loan, Lender shall have accepted the Tranche A Approved Plans and the
Tranche A Approved Project Budget; provided, however, that after
Lender's acceptance of the Tranche A Approved Plans and the Tranche A
Approved Project Budget, Lender shall only require delivery to and
approval by Lender of (A) Borrowers' certification that the Tranche A
Approved Plans and the Tranche A Approved Project Budget remain
unmodified, unamended and in full force and effect, other than change
orders either previously approved by Lender or those then being
submitted to Lender for approval pursuant to this Section 5.1(n),
and/or (B) any proposed changes in the Tranche A Approved Plans. The
parties hereto acknowledge and agree that the decision of Lender with
respect to any requested
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changes therein shall be final and binding upon all parties hereto.
Except as expressly permitted hereunder, Borrowers shall not amend or
modify the Tranche A Approved Plans, or the Tranche A Approved Project
Budget, without the prior written consent of Lender, which consent may
be withheld in Lender's sole and exclusive discretion.
(ii) With respect to the initial disbursement of the Tranche B
Loan, Lender shall have accepted the Tranche B Approved Plans and the
Tranche B Approved Project Budget; provided, however, that after
Lender's acceptance of the Tranche B Approved Plans and the Tranche B
Approved Project Budget, Lender shall only require delivery to and
approval by Lender of (A) Borrowers' certification that the Tranche B
Approved Plans and the Tranche B Approved Project Budget remain
unmodified, unamended and in full force and effect, other than change
orders either previously approved by Lender or those then being
submitted to Lender for approval pursuant to this Section 5.1(n),
and/or (B) any proposed changes in the Tranche B Approved Plans. The
parties hereto acknowledge and agree that the decision of Lender with
respect to any requested changes therein shall be final and binding
upon all parties hereto. Except as expressly permitted hereunder,
Borrowers shall not amend or modify the Tranche B Approved Plans, or
the Tranche B Approved Project Budget, without the prior written
consent of Lender, which consent may be withheld in Lender's sole and
exclusive discretion.
o. With respect to the initial disbursement of the Tranche B Loan,
Lender shall have received and approved a fully executed copy of the Plaza
32 Construction Contract and the Plaza 32 Architect's Contract and all
Subcontracts in accordance with the provisions of Sections 3.11, 3.12 and
3.13. No changes may be made in any of the Construction Contracts,
including, without limitation, changes in the amount of money to be
expended during the construction of the Projects, without Lender's prior
written approval. Any Contractor's fee specified in the Construction
Contract related to the Tranche B Project shall be disbursed in accordance
with the terms of such Construction Contract, subject to Lender's
reasonable approval of such fees.
p. Borrowers, Contractor, Lender and Title Company shall have
executed a construction escrow agreement (the "Construction Escrow
Agreement") pursuant to which all Disbursements shall be funded directly to
the Architect, Contractor or Subcontractors (if applicable) in form and
content acceptable to Lender. Lender, at its sole option, may require
Borrowers to execute four (4) separate Construction Escrow Agreements to be
executed, one such Construction Escrow Agreement for each of the Projects.
q. Borrowers shall deliver to the Lender, prior to the disbursement
of any monies, copies of an executed AIA Standard Contract for each
subcontractor along with a Sworn Contractor's Statement which discloses the
names of each subcontractor and the amount of their contract along with a
description of the Work to be performed as well as any contract amounts
previously paid, the name of all materialmen by whom materials will be
furnished to Contractors along with amounts due for each materialman and a
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description of the amounts to be provided. At the Lender's request,
Borrowers shall furnish trade references and current financial information
for each subcontractor.
r. With respect to disbursements of proceeds of the Tranche A Loan,
all of the Tranche A Projects must be free and clear of all liens; and with
respect to disbursements of proceeds of the Tranche B Loan, the Tranche B
Project must be free and clear of all liens and Borrowers shall have
invested no less than Five Million Seven Hundred Thousand Dollars
($5,700,000) of Borrowers' equity into the acquisition or construction of
the Plaza 32 Project, which investment shall not be reimbursed out of Loan
proceeds. Borrowers' equity contribution with respect to the Tranche B
Project shall be contributed prior to the initial disbursement of proceeds
of the Tranche B Loan. Loan proceeds shall in no event be used to reduce
Borrowers' or Guarantors' cash equity contribution.
s. Sundance Homes, Inc., an Illinois corporation, has sold all of its
suburban assets to Centex Homes, a Nevada general partnership, and after
such date its post-sale balance sheet shall conform, in all material
respects, with the balance sheet attached to the Commitment Letter as
Exhibit D.
t. With respect to the initial disbursement of the Tranche B Loan,
construction of the Plaza 32 Project shall have commenced on or before the
date ninety (90) days following the date hereof.
5.2 Commencement Date of Construction. Borrower's acknowledge that the
Tranche A Projects are currently under construction. The obligation of Lender
to make any Disbursement under the Tranche B Loan, of proceeds of the Loan shall
be conditioned upon and subject to Borrowers satisfying all conditions precedent
to the initial Construction Disbursement related to the Plaza 32 Project on or
before October 1, 1999.
5.3 Completion Date of Construction. Borrowers shall complete the Projects
according to the Approved Plans no later than the Completion Date. If the
Projects are not completed according to the terms of this Section 5.3, Lender
may declare an Event of Default hereunder.
5.4 Lender's Verification. Lender may at any time take such action as it
reasonably deems appropriate to verify that the conditions precedent to each
Disbursement have been satisfied, including, without limitation, verification of
the amounts due under each Subcontract. Borrowers agree to cooperate with
Lender in any such action. If, in the course of any such verification, any
amount shown on any Subcontract, application for payment, sworn statement or
waiver of lien is subject to possible discrepancy, such discrepancy shall be
resolved by Borrowers to Lender's satisfaction.
5.5 Continuing Compliance with Conditions. In the event any of the
conditions set forth in Section 5.1 are not satisfied in a manner acceptable to
Lender on or prior to the dates set forth for the satisfaction thereof in said
Section or in the event Lender reasonably determines that the condition set
forth in Section 5.3 will not be satisfied, and after the expiration of any
applicable cure periods, at the option of Lender, the obligation of Lender to
make any further
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Disbursements of proceeds of the Loan shall terminate. In the event Lender
exercises its right to terminate its obligations to make Disbursements of
proceeds of the Loan in accordance with this Section 5.5, any and all of the
outstanding principal balance of the Loan previously disbursed, together with
all accrued and unpaid interest thereon, shall become immediately due and
payable to Lender, Lender shall not be required to refund any Loan fees
previously paid, and, in addition thereto, upon demand by Lender, Borrowers
shall reimburse Lender for the Costs and Loan Expenses which Borrowers are
required to pay pursuant to the terms hereof. The foregoing shall in no way
limit any other remedies which Lender may have against Borrowers for damages
incurred by Lender.
SECTION 6
LOAN DOCUMENTS
--------------
Unless waived in writing by Lender, Borrowers shall execute and deliver to
Lender prior to the Initial Disbursement (or at such other time as may be set
forth in this Section 6) the following documents required to be executed by
Borrowers, and will cause to be executed and delivered to Lender the following
documents required to be executed by others, all of which documents shall
contain such provisions as shall be required to conform to this Agreement and
otherwise shall be satisfactory in form and substance to Lender.
6.1 Note. A Promissory Note (the "Note") executed by Borrowers payable to
the order of Lender in the principal amount of Twenty-Five Million Five Hundred
Thousand Dollars ($25,500,000).
6.2 Mortgages. A Construction Mortgage, Assignment of Rents and Leases,
Security Agreement and Fixture Financing Statement from each of the Borrowers
(collectively, the "Mortgages"), creating a first lien on the portion of the
Projects owned by such Borrower in favor of Lender, executed by the applicable
Borrower and securing the payment of the Note and the satisfaction of all of the
obligations of Borrowers in connection therewith and subject only to the
applicable Permitted Exceptions.
6.3 Security Agreements. A Security Agreement, together with the Uniform
Commercial Code Financing Statement to be filed with the Secretary of State of
Illinois (collectively, the "Security Agreements") executed by each Borrower
granting a security interest in the Collateral (as such term is defined in the
Security Agreements) owned by each such Borrower and all of Borrowers' present
and hereafter-acquired right, title and interest in and to the Collateral, as
further described in the Security Agreements.
6.4 Guaranty Agreements. Guaranty Agreement and Completion Guaranty and
Agreement executed by Sundance Homes, Inc., an Illinois corporation, and Limited
Guaranty Agreement executed by Maurice Sanderman (collectively, the "Guaranty
Agreements"), guarantying all amounts owed to Lender under the Note and the
completion of the Projects (except as expressly limited therein), this Agreement
and the other Loan Documents, as further described in the Guaranty Agreements.
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6.5 Environmental Indemnity Agreements. Environmental Indemnity
Agreements pertaining to the Projects from each of the Borrowers and Guarantors
in form and substance satisfactory to Lender.
6.6 Blocked Account Pledge Agreements. Blocked Account Pledge Agreements
from each of the Borrowers in form and substance satisfactory to Lender.
6.7 Pledge Agreement. Pledge Agreement from Maurice Sanderman in form and
substance satisfactory to Lender.
6.8 Building Permits. All Permits relating to construction of the
Projects which are necessary to have been issued prior to or on the date of the
applicable Disbursement or which relate to Work to be paid for from such
Disbursement. Borrowers shall provide Lender with copies of all Permits within
five (5) days after the issuance thereof.
6.9 Collateral Assignments of Construction Documents. First collateral
assignments of the Construction Contracts, Architect's Contracts, the
Subcontracts, the Plans and Specifications and all permits, licenses, consents,
authorizations and utility installation and service agreements required for the
construction, use and operation of the Projects, executed by each of the
Borrowers, together with consent by the Contractors and Architects, as
applicable, to said collateral assignments.
6.10 Surveys. Existing ALTA plats of survey of the Land comprising each
of the Projects (the "Surveys") certified to Lender and the Title Company,
including, without limitation, (i) the legal description of the applicable
Project; (ii) dimensions and locations of buildings, fences, and other
improvements; (iii) locations of all visible or recorded easements (and
recording numbers, to the extent recorded) water courses, drains, sewers,
utility lines, public and private roads (including the names and widths thereof
and recording numbers for the dedications thereof); (iv) if the applicable Land
comprises more than one parcel, interior lines and other data sufficient to
insure contiguity; (v) if the applicable Land is located in a flood plain; (vi)
the locations of all adjoining streets and parking areas, and (vii) such
additional information which may be reasonably required by Lender or the Title
Insurer. The Surveys shall be certified to Borrowers, Lender and the Title
Company.
6.11 Insurance Policies. Borrowers shall deliver evidence of insurance to
Lender at least four business days prior to the Initial Disbursement, and
maintain in full force for the duration of the Loan term, appropriate insurance
policies from an insurance company acceptable to Lender. All property
certificates and policies shall name Corus Bank, N.A., its successors and/or
assigns as Mortgagee and Loss Payee, and the Title Holders of record, as Named
Insured. All liability certificates and policies shall name Corus Bank, N.A.,
its successors and/or assigns as Additional Insured. Insurance coverages for
the Projects shall include, but not be limited to:
(a) Builder's risk maintenance covering the full insurable value of
the Work in place on the Improvements from time to time during all states
of construction. Prior to the Initial Disbursement, a certificate of
insurance must be provided to Lender in an amount not less than the full
insurable value of the Work in place on the Improvements as of said date,
and coverage for delayed income. Thereafter Borrowers shall deliver to
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Lender every three (3) months, insurance policies, or certificates of
insurance, evidencing increases in the total dollar coverage based upon
additional Work in place on the Improvements.
(b) Worker's Compensation and General Liability Insurance (including
contractual liability) carried during the course of construction, with
liability limits for death or injury to persons of not less than Five
Million Dollars ($5,000,000) and to property of not less than Five Million
Dollars ($5,000,000).
(c) Each Contractor will maintain insurance for casualty losses
concerning the Land including Worker's Compensation, Structural Work Act
and General Liability Insurance with coverage in amounts acceptable to
Lender.
(d) Such other insurance Lender reasonably requires covering the
Projects and the Land.
Upon completion of construction of each of the Projects, Borrowers must
provide Lender with an all risks and extended coverage policy in the amount
equal to the full replacement value of all Improvements or the amount of the
loan, whichever is greater, with liability coverage of at least Five Million
Dollars ($5,000,000), in addition to such other terms and coverages required by
Lender in its sole but reasonable discretion.
Each policy shall state that no cancellation thereof shall be effective
without thirty (30) days prior written notice to Lender. Borrowers shall provide
original, certified copies of corresponding insurance policies within sixty (60)
days of the Initial Disbursement. Borrowers' failure to provide copies of
policies as aforesaid shall be considered an Event of Default hereunder.
Notwithstanding the provisions of Section 15.21 below, Borrower and Lender
agree that with respect to this Section 6.11, in the event of any inconsistency
between the terms of this Agreement and the terms of the Commitment Letter, the
terms of the Commitment Letter shall control.
6.12 Title Insurance. ALTA Form Construction Loan Policies of Title
Insurance issued by the Title Company in the aggregate amount of Twenty-Five
Million Five Hundred Thousand Dollars ($25,500,000) covering the Projects and
insuring that the Mortgage related to the applicable Project will be a first
priority lien upon fee simple title to the applicable Project to the extent of
advances made from time to time hereunder or under the Note or any of the other
Loan Documents, subject to no liens, claims, exceptions or encumbrances except
the Permitted Exceptions, and containing such endorsements as may be reasonably
required by Lender.
6.13 Title Clearance Documents. Upon Lender's request, copies of such
documents, if any, as Borrowers have provided the Title Company in connection
with the issuance of the Title Policy.
6.14 Recorded Documents. Copies of all recorded documents described in
the Title Policy.
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6.15 Construction Documents. Copies of the Construction Contracts, any
Subcontracts requested in accordance with Section 3.13, the form of Subcontract
to be used by each Contractor, and all Permits necessary for construction,
completion and operation of the Projects (except those Permits which by their
nature cannot be obtained until further completion of the Work), all of which
Permits shall be unconditional.
6.16 Construction Schedules. Borrowers shall submit a detailed schedule
for the completion of the construction of the Projects, including, without
limitation, a trade-by-trade breakdown of the estimated periods of commencement
and completion of the Work, a copy of which is attached hereto as Exhibit "F".
Lender's approval of the preliminary schedule shall not be unreasonably withheld
and shall be evidenced by Lender's execution of Exhibit "F". The schedule, as
approved by Lender (as the same may be modified from time to time in accordance
with this Agreement) is referred to herein as the "Schedule". The Schedule
provides that the Work will be fully completed on or before the Completion Date.
In the event that Work on the Projects is not proceeding in accordance with and
is behind the Schedule, Borrowers shall immediately submit to Lender for its
approval or disapproval a revised Schedule; provided that so long as the
Projects are less than thirty (30) days behind schedule and Borrowers reasonably
anticipate that the Projects will nevertheless be completed by the Completion
Date (an "Insignificant Setback"), Borrowers shall so inform Lender in writing,
in which event Lender's approval of the revised Schedule shall not be required.
The revised Schedule shall identify with specificity Borrowers' requested
changes and shall be accompanied by Borrowers' written statement of the reason
for each change. If Lender's approval of the revised Schedule is required
pursuant to this Section 6.16, Lender need make no further Disbursements unless
and until Lender approves the revised Schedule. If Lender's approval of the
revised Schedule is required pursuant to this Section 6.16, Lender may approve
or disapprove the revised Schedule in its sole but reasonable discretion.
Borrowers shall conduct the construction of any and all site and building
improvements which are part of the Improvements (all collectively, the
"Construction"), which, as to buildings, shall consist of the structural
components, operating systems, tenant improvements and all other elements of
such buildings, all in accordance with the Plans and Specifications, the Tranche
A Approved Project Budget, the Tranche B Approved Project Budget, the Schedule
and the other requirements of this Agreement, including, without limitation, the
other requirements, subject only to Inconsequential Variances (as hereinafter
defined) and Insignificant Setbacks. Borrowers shall complete the Construction
on or before the Completion Date.
6.17 Contractors/Architect Certificate. A certificate executed by
Borrowers, the applicable Contractors, the applicable Architects or an engineer,
as appropriate, containing the following: (i) a detailed list of the applicable
Approved Plans; (ii) a statement that the applicable Approved Plans are complete
in all material respects and that all Work and materials required for
construction and completion of the Improvements, completed in accordance
therewith, shall render the applicable Building ready for use and occupancy for
its intended purposes in compliance with all applicable zoning laws, regulations
and ordinances; (iii) a statement that the applicable Approved Plans were
prepared in a manner consistent with accepted architectural practices and in
full compliance with all applicable zoning, building, environmental protection,
safety and health laws, ordinances and regulations applicable to the
construction, use and operation of the applicable Project; (iv) a statement of
all certificates, permits, licenses, consents and authorizations of governmental
authorities which will be required for the performance of the
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Work, and a statement that all such certificates, permits, licenses and other
authorizations of governmental authorities which are necessary to permit the
commencement of the Work have been obtained and are in full force and effect;
and (v) a statement that to best knowledge and belief adequate sewer, water,
electrical, power and other public and private utilities are available to the
applicable Land in such capacities as to adequately service the applicable
Project after the completion of the Improvements located thereon.
6.18 Plans and Specifications/Approved Plans.
(a) With respect to the Tranche A Projects, Borrowers have caused the
applicable Architects to prepare working drawings, plans and
specifications, design specifications, a construction schedule, and a site
plan for the construction of the Tranche A Projects as dated and referenced
on Exhibit "D-1" attached hereto and incorporated herein (the "Tranche A
Approved Plans"). With respect to the Tranche B Project, Borrowers have
caused the applicable Architect to prepare working drawings, plans and
specifications, design specifications, a construction schedule, and a site
plan for the construction of the Tranche B Project (collectively, the
"Preliminary Plans"). Borrowers shall submit the Preliminary Plans to
Lender for review and approval by Lender. Lender's approval of the
Preliminary Plans may be withheld in Lender's sole discretion. Lender shall
review the Preliminary Plans and thereafter notify Borrowers of Lender's
approval or disapproval. Lender's approval of the Preliminary Plans shall
be evidenced by its execution of Exhibit "D-2". The Tranche A Approved
Plans and the working drawings, plans and specifications, design
specifications, construction schedule and site plan for the Tranche B
Project as approved by Lender (the "Tranche B Approved Plans"), in Lender's
sole discretion, are collectively referred to herein as the "Approved
Plans".
(b) Notwithstanding anything contained herein: (i) any Disbursement
prior to Lender's acceptance of the Approved Plans shall not be deemed to
be a waiver of any requirement herein, and (ii) any Disbursement prior to
Lender's acceptance of the Approved Plans shall not be deemed to require
Lender to make any additional advance of Loan proceeds.
(c) No changes shall be made to the Approved Plans without Lender's
prior written consent, subject to (i) Extras and Upgrades pursuant to
Approved Sales Contracts and (ii) inconsequential deviations from the Plans
and Specifications in the nature of "field changes" that are not
customarily the subjects of formal change orders in the commercial real
estate development industry, and which do not, in Lender's reasonable
judgment, impair the value of the Projects; such deviations being referred
to herein as "Inconsequential Variances".
6.19 Approved Budget(s).
(a) With respect to the Tranche A Loan, Borrowers shall submit a
detailed budget(s) for all Hard Costs and Soft Costs of the Tranche A
Projects for Lender's approval ("Tranche A Preliminary Budget"), a copy of
which is attached hereto as Exhibit "C-1" and made a part hereof. Lender's
approval of the Tranche A Preliminary
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Budget will be predicated on, among other things, Lender's evaluation and
opinion, in its sole discretion, of the adequacy, for each of the Tranche A
Projects, of each of the individual line items comprising the Tranche A
Preliminary Budget, including, but not limited to, an accounting and
analysis of the line items previously paid and the amounts necessary to
complete each of the Tranche A Projects. Among other considerations, Lender
shall determine, in its sole discretion, that (i) the interest reserve line
item(s) in the Tranche A Preliminary Budget will be adequate to cover
anticipated interest costs for both the Tranche A Loan and the Tranche B
Loan, and (ii) the hard cost contingency line item in the Tranche A
Preliminary Budget will be adequate. Once the Tranche A Preliminary Budget
is approved ("Tranche A Approved Budget"), which approval shall be
evidenced by Lender's execution of Exhibit "C-1", subject to the provisions
of Section 7.3 hereof, Borrowers must obtain Lender's additional prior
written approval before any amendments are to be made to the Tranche A
Approved Project Budget, unless a reallocation is allowed pursuant to
Section 7.3(b) hereof. In no event shall the Tranche A Approved Project
Budget contain any line items payable to Borrowers. In the event the total
actual costs for any of the Tranche A Projects are less than the amount
shown in the Tranche A Approved Project Budget for any such Tranche A
Project, the Loan shall be reduced by the amount of such savings.
(b) With respect to the Tranche B Loan, Borrowers shall submit a
detailed budget for all Hard Costs and Soft Costs of the Tranche B Project
for Lender's Approval ("Tranche B Preliminary Budget"), a copy of which is
attached hereto as Exhibit "C-2" and made a part hereof. Lender's approval
of the Tranche B Preliminary Budget will be predicated on, among other
things, Lender's evaluation and opinion, in its sole discretion, of the
adequacy, for the Tranche B Project, of each of the individual line items
comprising the Tranche B Preliminary Budget. Among other considerations,
Lender shall determine, in its sole discretion, that (i) the interest
reserve line item in the Tranche A Preliminary Budget will be adequate to
cover anticipated interest costs for the Tranche B Loan, and (ii) the hard
cost contingency line item equals at least five percent (5%) of the hard
construction costs line item in such budget. Once the Tranche B Preliminary
Budget is approved ("Tranche B Approved Budget"), which approval shall be
evidenced by Lender's execution of Exhibit "C-2", subject to the provisions
of Section 7.3 hereof, Borrowers must obtain Lender's additional prior
written approval before any amendments are to be made to the Tranche B
Approved Project Budget, unless a reallocation is allowed pursuant to
Section 7.3(b) hereof. In no event shall the Tranche B Approved Project
Budget contain any line items payable to Borrowers. In the event the total
actual costs for the Plaza 32 Project are less than the amount shown in the
Tranche B Approved Project Budget, the Loan shall be reduced by the amount
of such savings.
6.20 Appraisals. Lender has received appraisals of each of the Projects
in form and content acceptable to Lender (collectively, the "Appraisals"). The
cost of said Appraisals shall be paid by Borrowers.
6.21 Leases. In the event that any of the Buildings is occupied by
tenants during the term of the Loan, all such tenancies shall be under the
Approved Leases.
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6.22 Flood Hazards. Evidence satisfactory to Lender that the Projects are
not located in an area designated as having special flood hazards, or if it is
so located, satisfactory evidence that flood insurance, in form and amount
acceptable to Lender, is in effect.
6.23 Environmental Audit. Borrowers have has delivered to Lender Phase I
Environmental Assessments of the Projects prepared by environmental counseling
firms acceptable to Lender, which assessments are in form and substance
acceptable to Lender. Borrowers shall pay the cost of such assessments. In
connection with the review by Lender of evidence required under this Section
6.23, Lender shall have the right to independently hire consultants to perform
tests and physical inspections of the Projects, order reports on the history of
the Projects and do whatever else Lender deems necessary to determine whether
the Projects are free from Hazardous Materials and whether, in Lender's sole and
absolute discretion, there is an unacceptable risk of liability to Lender in
connection with the past, present or future existence on or under the surface of
the Projects of Hazardous Material, all at Borrowers' cost.
6.24 Real Estate Tax Bills. A copy of the most recent real estate tax
bills covering the Projects and Improvements currently thereon.
6.25 Borrowers' Certificate. Borrowers' certificate that the
representations and warranties made by Borrowers in this Agreement are true on
and as of the date of each Disbursement.
6.26 Construction Escrow Agreement. A copy of the executed Construction
Escrow Agreement by and between the Title Company, Borrowers, Lender and the
Contractors.
6.27 Form of Sales Contract. A certified copy of the form of Unit sales
contracts to be utilized by Borrowers.
6.28 Form of Condominium Declaration For Units. A copy of the proposed
form of condominium declaration for each of the Projects.
6.29 Other Documents. Such other documents, assignments, certificates and
opinions as shall be reasonably required by Lender or Lender's counsel.
SECTION 7
DISBURSEMENT OF THE LOAN
------------------------
7.1 Disbursements. Lender shall disburse the Loan proceeds through the
Title Company, pursuant to the Construction Escrow Agreement, based on a
percentage of the Work completed in accordance with this Loan Agreement and the
other Loan Documents. Borrowers shall not request and, subject to the
provisions hereof, Lender shall not be required to make a Disbursement either
directly or through the Title Company more frequently than once each calendar
month for each Project. Lender may at any time take such action as it deems
appropriate to verify that the conditions precedent to each Disbursement have
been satisfied, including, but not limited to, verification of the amounts due
under any construction contract relative to the Work. Borrowers agree to
cooperate with Lender in any such action. If, in the course of any such
verification, any amount shown on any construction contract, application for
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payment, sworn statement or waiver of lien is subject to a possible discrepancy,
such discrepancy shall be resolved by Borrowers to Lender's satisfaction.
Lender shall not be obligated to disburse Loan proceeds following any Event of
Default or Unmatured Default under this Agreement, any other Loan Document, or
the Construction Escrow Agreement. Each request for Disbursement, excluding the
Initial Disbursement or a Construction Disbursement made simultaneously to the
Initial Disbursement, shall be made by a notice from Borrowers and addressed to
Lender or its agent delivered at least ten (10) business days prior to the date
of the requested Disbursement specifying in detail the amount and mode of each
Disbursement and accompanied by the following, all in form and substance
satisfactory to Lender, as appropriate, in its sole but reasonable discretion:
a. Duplicate originals of an Owner's Sworn Statement and disbursement
request in the form prescribed by Lender (which form shall also be
acceptable to the Title Company);
b. Duplicate originals of Contractors' Application and Certificate
for Payment and Sworn Contractor's Statements in the form prescribed by
Lender (which form shall also be acceptable to the Title Company), executed
by each applicable Contractor and each subcontractor, and a statement of
each applicable Contractor and each subcontractor that all items of
construction cost have been incorporated into the Projects, in accordance
with the Approved Plans;
c. Waivers of lien with respect to all previous Disbursements and the
current Disbursement from each applicable Contractor, each subcontractor
and each materialman to whom payment is to be made; provided such waivers
may be provided on a thirty (30) day delay basis if the Title Company
agrees to issue the endorsement for the Title Policy required pursuant to
subsection (g) hereof;
d. If not previously delivered, evidence that all Permits required to
perform such Work for which a Disbursement is being requested have been
issued;
e. Evidence (including invoices and contracts) satisfactory to Lender
showing the propriety of each nonconstruction cost item for which payment
is requested and such supporting data as Lender may require to enable
Lender to verify the correctness of the items described in subsections (a)
and (b) above;
f. Duplicate originals of certificates of both the Architects, as
applicable, and Consultant, in form and substance satisfactory to Lender,
to the effect that each of them has made diligent investigation and that,
based on such investigation, all construction to the date of the request
for Disbursement has been completed and to the extent applicable in
accordance with the Approved Plans, the Approved Budgets and the Sworn
Statements, and certifying both the Architects' and the Consultant's
approval of the request for Disbursement;
g. The Title Company has issued an endorsement to the Title Policy
extending and increasing the coverage to include the date and the amount of
the requested Disbursement, insuring that the Mortgages are first and prior
liens on the Projects, as
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applicable, subject only to the Permitted Exceptions with mechanic's lien
coverage through the date that Work was last performed at the applicable
Project pursuant to the Sworn Contractor's Statement; and
h. Such other documentation as Lender or the Title Company requires.
Each request for Disbursement by Borrowers shall constitute (i) Borrowers'
certification that the representations and warranties contained in Section 3
hereof are true and correct in all material respects as of the date of such
request, except as Borrowers may have advised Lender in writing prior to such
request, (ii) Borrowers' certification that Borrowers are in compliance with the
conditions contained in Section 5, and (iii) Borrowers' representation and
warranty to Lender that the Work and other items for which payment is requested
have been incorporated into the Projects free of all liens and encumbrances
other than Lender's first priority lien, and the value thereof is as estimated
therein; to the best of Borrowers' knowledge, such Work and materials other than
tenant improvements conform to the Approved Plans, this Agreement and all
applicable Laws; and the requisitioned value of such Work and materials and the
amounts of all other items of cost for which payment is requested by Borrowers
have theretofore been in fact paid for in cash by Borrowers or the same are then
due and owing by Borrowers. Approval by Lender of requests for advances shall
not constitute an acceptance by Lender of the Work, materials or other items of
cost for which payment is requested by Borrowers.
Provided Lender receives complete and orderly draw requests, together with
the appropriate lien waivers, Lender shall fund such requests within ten (10)
business days; provided, absent Lender's gross negligence or willful misconduct,
Lender shall not be liable for any losses due to its failure to fund draw
requests within ten (10) business days. All disbursements shall be made by the
Title Company directly to the applicable subcontractors, except for
disbursements related to the Tranche B Loan which shall be disbursed directly to
Paul H. Schwendener, Inc.
Loan proceeds may be disbursed to pay incurred Hard Costs, including
general contractor's overhead and profit, and developer's fee on a pro rata
basis according to the percentage of the applicable Project complete or as
otherwise required under the Plaza 32 Construction Contract. Contingency funds
for each Project may be reallocated on a pro rata basis according to the
percentage of the applicable Project complete. Loan proceeds may be disbursed
to pay Soft Costs as they are incurred.
7.2 Retainage.
(a) Retainage Requirement. The amount of each Disbursement shall be
the amount requested by Borrowers; provided, however, that Lender shall
have the right to retain ten percent (10%) of each Hard Cost line item of
each of the Approved Budgets (the "Retainage") until each such line item is
completed. In addition, with respect to the Plaza 32 Project, Lender shall
retain ten percent (10%) of the draw request for each Hard Cost line item
in the Tranche B Approved Project Budget (the "Plaza 32 Project Retainage")
until each line item is completed, provided that the aggregate amount of
the Plaza 32 Project Retainage shall not exceed One Million One Hundred
Thousand Dollars ($1,100,000); and provided further, that such Plaza 32
Project Retainage shall be subject
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to the progress release payments to be made pursuant to Section 5.7.1 of
the Plaza 32 Construction Contract.
(b) Release of Retainage. All Retainages held by Lender shall be
released as follows:
(i) Upon application by Borrowers, together with (1) a
certificate in writing signed by Borrowers and the Contractors, as
applicable, certifying that all Work to be performed in a Hard Cost
line item category has been fully performed, and (2) the written
approval of the Consultant, Lender shall, in Lender's sole but
reasonable discretion, release the Retainage for such Hard Cost line
item.
(ii) Final disbursement of all Retainages not previously released
shall be made upon satisfaction of the following conditions, in
addition to satisfaction of all other conditions precedent for
disbursement set forth in this Agreement:
(1) Borrowers have delivered to Lender (A) a certificate in
writing signed by Borrowers and the Contractors, as applicable,
certifying that all obligations of the Contractors, as
applicable, and all subcontractors have been fully performed,
including all punch-list items, and (B) a certificate in writing
signed by Borrowers, as applicable, certifying that the
construction of the Improvements have been completed in all
respects and to the extent applicable in accordance with the
Approved Plans and the use and occupancy of the Building is
permitted under all applicable Laws;
(2) Lender has received a certificate in writing signed by
the Consultant certifying that the construction of the
Improvements has been completed and to the extent applicable in
accordance with the Approved Plans and use and occupancy of the
Buildings is permitted under all applicable Laws;
(3) Borrowers have delivered to Lender all Permits necessary
for the use of the Projects as planned;
(4) Borrowers have delivered to Lender evidence that all
equipment owned by Borrowers and required for the use and
operation of the Buildings as intended has been installed free
and clear of all liens and security interests except those
granted to Lender or approved by Lender in writing;
(5) The Title Company is prepared to issue the final
endorsement to the Title Policy;
(6) Borrowers have delivered to Lender final and
unconditional waivers of lien from the Contractors and all
subcontractors and materialmen who have supplied labor or
material for the construction of the Projects.
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(d) Notwithstanding anything contained in this Section 7.2 to the
contrary, in the event Lender elects in its sole and exclusive discretion
to release the Retainage prior to completion of all punch-list items,
Lender shall have the right, at its option, to retain an amount equal to
one hundred twenty-five percent (125%) of the cost of punch-list items
reasonably estimated by Lender until such time as such items are fully
completed to the reasonable satisfaction of Lender.
7.3 Balancing Requirement.
(a) Balancing Determination. The Loan shall be deemed to be "Out of
Balance" if (at any time during the term hereof) Lender determines, in Lender's
sole but reasonable discretion, that the remaining amount available under the
Loan is not or will not be sufficient to complete the Projects in accordance
with the Approved Plans, pay interest on the Loan through completion of the
Project, and to pay all costs and expenses set forth in the Approved Budgets,
plus such additional amounts as Lender, in its sole and exclusive discretion
deems necessary or reasonable to complete the Projects, including, without
limitation, insufficient funds in the Interest Reserve(s) contained in the
Approved Budgets, pay all liabilities and perform all obligations of Borrower
hereunder. It is agreed that if, with respect to the Tranche A Approved Project
Budget, the specific funds allocated to complete any of the Erie Tower Project,
the Capitol Project or the Arthouse I Project are deemed by Lender, in its sole
and absolute discretion, to be insufficient to complete said Projects, then the
entire Loan shall be deemed to be Out of Balance, and/or if the Tranche B Loan
is deemed to be Out of Balance, then the entire Loan shall be deemed to be Out
of Balance. In the event Lender determines that the Loan is Out of Balance,
then within ten (10) days after written notice thereof from Lender to Borrower,
Borrower shall either provide Lender with a letter of credit in an amount and
with terms satisfactory to Lender in its sole and absolute discretion, or
deposit with Lender funds equal to the amount that Lender estimates that the
Loan is or will be Out of Balance. The funds deposited by Borrower with Lender
will be disbursed by Lender under the Loan through the construction escrow prior
to any further Disbursements of the Loan proceeds. Any such amounts deposited
with Lender shall be added to and made a part of the equity of Borrower in the
Projects, and shall earn interest at Lender's ultimate money market account
rate.
(b) Changes Orders and Changes to Approved Budgets.
(i) Borrowers agree to provide Lender with copies of all change
orders, together with all additional documents that Lender may require,
including, without limitation: (i) plans and specifications indicating the
proposed change; (ii) a written description of the proposed change and
related working drawings; (iii) a written estimate to the cost of the
proposed change and the time necessary to complete it, including all
changes to the Approved Budgets and the Schedule likely to result
therefrom, and (iv) certificate of the applicable Architect with each
request for change order to the effect that such change order is in
compliance with all Laws.
(ii) Without limitation of any other requirement for Lender's approval
set forth in this Agreement, Borrowers shall obtain Lender's prior written
approval or disapproval of any change in the Plans and Specifications
(except for Inconsequential
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Variances), the Approved Budgets, the Schedule (except for Insignificant
Setbacks) or any other requirements which:
(1) could adversely affect the value of Lender's security; or
(2) regardless of cost, involves a change in structure, design,
function or exterior appearance of the Improvements (other than
Inconsequential Variances); or
(3) requires the approval of a Person other than Lender;
(4) could delay completion of the Work beyond the Completion
Date; or
(5) would result in a net increase in the total amount of the
Approved Budgets.
(iii) (1) Tranche A Loan Reallocation: Borrowers shall have the
right to reasonably reallocate sums between line items of the Tranche
A Approved Project Budgets, provided that Lender is advised of such
reallocation in a timely manner, the total amount of the Tranche A
Approved Project Budget is not increased and the overall quality and
functionality of any of the Tranche A Projects is not diminished;
provided, however, that no reallocation from the interest reserve line
item amount stated in the Tranche A Approved Project Budget shall be
permitted without Lender's prior written approval; the contingency may
only be reallocated as a percentage of total Hard Costs and Soft Costs
expended, excluding the cost of Land acquisition; provided, further,
that any cost savings in hard cost line items for any Tranche A
Project may be reallocated to fund hard cost line items for any of the
other Tranche A Projects.
(2) Tranche B Loan Reallocation: Borrowers shall have the right
to reasonably reallocate sums between line items of the Tranche B
Approved Project Budget, provided that Lender is advised of such
reallocation in a timely manner, the total amount of the Tranche B
Approved Project Budget is not increased and the overall quality and
functionality of the Tranche B Project is not diminished; the
contingency may only be reallocated as a percentage of total Hard
Costs and Soft Costs expended, excluding the cost of Land acquisition.
(iv) Notwithstanding anything to the contrary contained in Section
7.3(b)(iii), no reallocation among line items in any of the Approved
Budgets, other than the contingency line item, which exceeds One Hundred
Thousand Dollars ($100,000) individually, or Five Hundred Thousand Dollars
($500,000) in aggregate, shall be permitted without Lender's prior written
approval. For the purpose of the limits set forth in the proceeding
sentence, a change in a line item shall only be counted once. For example,
a decrease in the marketing/advertising line item of Seventy-Five Thousand
Dollars ($75,000) and a corresponding increase in the architect/engineer
line item shall be deemed to be an aggregate change of Seventy-Five
Thousand Dollars ($75,000).
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7.5 Construction Escrow. Lender shall make Disbursements of the Loan
through the Title Company in accordance with the provisions of the Construction
Escrow Agreement. Notwithstanding the foregoing, Lender shall not be liable or
obligated to Architects, Contractors, or any contractors, subcontractors,
suppliers, materialmen, laborers, architects, engineers or any other parties for
services or Work performed or for goods delivered in and upon the Land or
employed directly or indirectly in the construction of the Improvements, or for
any debts or claims whatsoever accruing in favor of any such parties and against
Borrowers or others or against the Projects. It is expressly understood and
agreed that Borrowers are not and shall not be agents of Lender for any purpose
whatsoever. Without limiting the generality of the foregoing, although advances
must be made by the Title Company directly to any contractor, subcontractor or
supplier of labor and/or materials or any other party, such Disbursements shall
not be deemed a recognition by Lender of any third party beneficiary status of
any such person or entity. After the date of Initial Disbursement, all Project
costs funded by Borrowers' equity contribution (as discussed above), or any
other sources shall be disbursed through the Construction Escrow Agreement.
7.6 Cost Overrun Recoupment. Notwithstanding anything herein to the
contrary, provided that: (a) the Loan is not Out of Balance, including adequate
funds remaining in the Interest Reserve to pay interest for the remaining term
of the Loan; (b) there are no Events of Default or Unmatured Defaults then in
existence under the Loan; and (c) there were cost overruns pertaining to the
Projects which were paid for by Borrower ("Prior Covered Cost Overruns"), then
Borrower may draw on the Loan to recoup Prior Covered Cost Overruns provided
that the outstanding principal balance of the Loan, after such Disbursement and
during the remaining term of the Loan, will not, in Lender's estimation and in
its sole discretion, exceed the sum of (i) costs spent through that date on the
Plaza 32 Project, less (ii) Nine Million Eight Hundred Thousand Dollars
($9,800,000), less (iii) Prior Covered Cost Overruns pertaining to the Plaza 32
Project, plus (iv) eighty percent (80%) of the value of the remaining Inventory
in the Tranche A Projects, using the lesser of Pending Contract Prices or Pro
Forma List Prices detailed in the pro-formas attached hereto as Exhibit "E";
provided further, the value of the remaining Inventory for the Tranche A
Projects shall be less than Two Million Dollars ($2,000,000).
Furthermore, if the budgeted amount for Extras and Upgrades for any Tranche
A Project is exhausted, additional Extras and Upgrades shall be paid for by
Borrower due to the resulting loan imbalance; provided, however Lender will fund
the costs of such Extras and Upgrades to the extent the expected aggregate sale
proceeds from the Tranche A Project in question, as estimated by Lender, in its
sole but reasonable opinion, exceed the pro forma aggregate proceeds for such
Project as detailed in Exhibit "E".
If the budgeted amount for Extras and Upgrades for the Tranche B Project is
exhausted, additional Extras and Upgrades shall be paid for by Borrower due to
the resulting loan imbalance; provided, however Lender will fund the costs of
such Extras and Upgrades to the extent the expected aggregate sale proceeds from
the Tranche B Project, as estimated by Lender, in its sole but reasonable
opinion, exceed the pro forma aggregate proceeds for the Tranche B Project as
detailed in Exhibit "E".
7.7 Material Storage. No Disbursement for material purchased by Borrowers
but not yet installed or incorporated into the Projects shall be made without
Lender's prior approval
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of the conditions under which such materials are purchased and stored. In no
event shall any Disbursement be made unless the materials involved have been
delivered to the Land or stored with a bonded warehouseman, with satisfactory
evidence of security, insurance and suitable storage. In connection with such
materials, Borrowers shall provide to Lender a copy of the bill of sale or other
evidence of title in Borrowers, together with a copy of UCC searches against
Borrowers and the warehouseman, if applicable, indicating no liens or claims
which may affect such materials.
7.8 Lender's Right to Reimbursement. Borrowers hereby authorize Lender to
make advances of proceeds of the Loan directly to Lender for payment and
reimbursement of all interest due hereunder and under the Note and all other
charges, Costs and expenses (including, without limitation, Loan Expenses)
required to be paid by Borrowers under this Agreement or any other Loan
Document. Lender shall notify Borrowers in writing of each such Disbursement of
proceeds; provided that Lender's failure to so notify Borrowers shall not be
deemed a default by Lender hereunder or modify Lender's right to reimbursement
hereunder.
SECTION 8
INTEREST
--------
8.1 Interest Rate. The principal balance of the Loan from time to time
outstanding will bear interest at an annual rate equal to one percent (1%) above
the Prime Rate (as defined in the Note) and adjusted from time to time as
provided in the Note.
8.2 Payments.
(a) Principal and interest payments shall be due and payable at the
times set forth in the Note, with a final payment of all principal and
unpaid interest on the Maturity Date. Subject to the terms and provisions
hereof and of the Note, interest payments may be made through periodic
draws of Loan proceeds (which payments may be made by Lender outside of the
Construction Escrow Agreement, provided that the Interest Reserve (as
provided for in the Approved Budgets) is not exhausted.
(b) Payments Related to Sales of Units: Provided that there is not
then existing any Event of Default or any Unmatured Default, Lender agrees
to release individual Units from the lien of the applicable Mortgage
pursuant to the following terms and provisions:
(i) Release of Residential Units and any parking spaces
appurtenant thereto:
(A) That at the time of such partial release, there shall be
no Event of Default or any Unmatured Default under the Note, the
Mortgage, this Agreement or any of the other Loan Documents;
(B) The sale of the Residential Unit is subject to and
closed in accordance with the terms of an Approved Sales
Contract;
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(C) Borrowers shall deliver to Lender a payment in the
amount of the greater of (i) ninety-five percent (95%) of the
Gross Sales Proceeds for such Residential Unit and any parking
spaces appurtenant thereto; or (ii) ninety-five percent (95%) of
the Pending Contract Price or Pro Forma List Price for such
Residential Unit and any parking spaces appurtenant thereto; as
the release price for each such Residential Unit and any parking
spaces appurtenant thereto to be so released, which amounts shall
be applied in accordance with the terms of the Note; provided if
such amounts exceed an amount which would reduce the principal
balance of the Loan to zero, such excess amounts after the
principal balance of the Loan has been so reduced to zero shall
be deposited into a strict joint order escrow with the Title
Company to be disbursed to pay costs of construction under the
Approved Budgets prior to the disbursement of additional funds
under the Loan; and
(D) That any and all documents and agreements used in
connection with any partial release pursuant to this Section
8.2(b) shall be in form and substance reasonably satisfactory to
provide for the release of the appropriate portion of the
Projects.
(ii) Release of Retail Units:
(A) That at the time of such partial release, there shall
be no Event of Default or Unmatured Default under the Note, the
Mortgage, this Agreement or any of the other Loan Documents;
(B) The sale of the Retail Unit is subject to and closed
in accordance with the terms of an Approved Sales Contract;
(C) Borrowers shall deliver to Lender a payment in the
amount of the greater of (i) ninety-two percent (92%) of the
Gross Sales Proceeds for such Retail Unit; or (ii) one hundred
percent (100%) of the Net Sales Proceeds for such Retail Unit; as
the release price for each such Retail Unit to be so released,
which amounts shall be applied in accordance with the terms of
the Note; provided if such amounts exceed an amount which would
reduce the principal balance of the Loan to zero, such excess
amounts after the principal balance of the Loan has been so
reduced to zero shall be deposited into a strict joint order
escrow with the Title Company to be disbursed to pay costs of
construction under the Approved Budgets prior to the disbursement
of additional funds under the Loan; and
(D) That any and all documents and agreements used in
connection with any partial release pursuant to this Section
8.2(b) shall be in form and substance reasonably satisfactory to
provide for the release of the appropriate portion of the
Projects.
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(iii) Release of Arthouse II Parcel:
(A) That at the time of such partial release, there shall
be no Event of Default or Unmatured Default under the Note, the
Mortgage, this Agreement or any of the other Loan Documents;
(B) Not less than twenty-four (24) of the Residential
Units in the Arthouse I Project have been sold and closed
pursuant to Approved Sales Contracts for sales prices equal to or
greater than the Pro Forma List Prices set forth in Exhibit "E".
8.3 Invalidated Payments. To the extent that Lender receives any payment
on account of the Secured Obligations, and any such payment(s) and/or proceeds
or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, subordinated and/or required to be repaid to a trustee,
receiver or any other Person under any bankruptcy act, state or federal law,
common law or equitable cause, then, to the extent of such payment(s) or
proceeds received, the Secured Obligations or part thereof intended to be
satisfied shall be revived and continue in full force and effect, as if such
payment(s) and/or proceeds had not been received by Lender and applied on
account of the Secured Obligations.
8.4 Default Interest Rate. At any time following an Event of Default and
until such Event of Default is cured, the principal amount of the Loan shall
bear interest at the Default Interest Rate. In addition to the foregoing,
Borrower shall pay to Lender a "late charge" as set forth in the Note.
SECTION 9
REPAYMENT OF THE LOAN
---------------------
The Loan shall be paid in accordance with the terms and conditions of this
Agreement, the Note and the other Loan Documents.
SECTION 10
BORROWER'S COVENANTS
--------------------
10.1 Construction. Borrowers shall cause the construction of the Projects
to be diligently and expeditiously carried out in a good and workmanlike manner,
and to the extent applicable substantially in accordance with the Approved
Plans, and in accordance with all Laws. Without limiting the generality of the
foregoing, Borrowers shall cause construction of the Improvements related to the
Plaza 32 Project to be commenced on or before the date specified in Section 5.2,
to continue without interruption until completion and to be completed in
accordance with the Approved Plans on or before the Completion Date, without any
further notice or opportunity to cure. Construction of the Projects shall not be
deemed to be complete until Lender has verified in its sole but reasonable
discretion that all space located within the Buildings can be used and occupied
in accordance with all applicable Laws and is ready to be owned by unit owners
or leased to tenants.
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10.2 Completion of Projects. As provided in Section 7.2, Borrowers shall
deliver to Lender a certificate of each applicable Architect stating that the
Projects have been completed in accordance with the Approved Plans and in
accordance with all Laws.
10.3 Change Orders. Borrowers shall not, without the prior written
approval or disapproval of Lender, make or permit any changes in the Approved
Plans and/or the Approved Budgets, except as reallocations in the Approved
Budgets are expressly permitted pursuant to Section 7.3 hereof. Borrowers
acknowledge that Lender may, at Lender's option, require the consent of the
Consultant prior to approving any such change orders. Borrowers shall furnish
Lender with a certificate of the Architect with each request for change order to
the effect that such change order is in compliance with all applicable Laws.
Borrowers shall also provide Lender with a copy of the change orders and such
other information as Lender may require.
10.4 Extras. No Extras shall be allowed to the Contractor or any
subcontractor without the prior written consent of Lender which shall not be
unreasonably withheld or delayed and the prior deposit by Borrowers with Lender
of one hundred percent (100%) of the amount of such Extras, which amount shall
be disbursed by Lender in payment for said Extras in the same manner as
hereinbefore provided for the disbursement of the proceeds of the Loan.
10.5 Amendments to Contracts. After approval by Lender in accordance with
Sections 3.11, 3.12, and 3.13, neither Borrowers nor Contractors shall, without
the prior written approval or disapproval of Lender, amend, modify or in any way
change the Construction Contracts, Architect's Contracts, or any Subcontract.
10.6 Inspection of the Projects. Borrowers shall permit at any reasonable
time and from time to time inspection of the Projects by Lender or its agents.
10.7 Mechanic's Lien Claims. Borrowers will not suffer or permit any
mechanic's lien claims to be filed or otherwise asserted against the Projects or
against any funds due any contractor or subcontractor, and Borrowers will
promptly, and in any event within fifteen (15) days after receipt of notice of
filing, discharge or cause to be discharged, the same in case of the filing of
any claims for lien or proceedings for the enforcement thereof; provided that in
connection with any such lien or claim which Borrowers may in good faith desire
to contest, Borrowers may contest the same by appropriate legal proceedings
diligently prosecuted, but only if Borrowers shall furnish to Lender such
security or indemnity as Lender requires to induce the Title Company to issue an
endorsement to the Title Policy insuring over the exception created by such
lien. Lender shall not be required to make any further Disbursements of the Loan
until any mechanic's lien claims shown by the commitment for or any endorsement
to the Title Policy furnished pursuant to this Agreement have been so insured
against by the Title Company.
10.8 Lender's Right to Discharge Lien Claims. With respect to the matters
set forth in Section 10.7, if Borrowers shall (a) fail within said fifteen (15)
days to discharge any asserted liens or claims, or (b) fail within said fifteen
(15) days to contest asserted liens or claims and to give security or indemnity
in the manner provided in Section 10.7, or (c) having commenced to contest the
same, and having given such security or indemnity, fail to prosecute such
contest with diligence, or to maintain such indemnity or security so required by
the Title Company for its full amount, or (d) upon adverse conclusion of any
such contest, fail within fifteen (15) days
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after the date of any such adverse conclusion of judgment to cause any judgment
or decree to be satisfied and lien to be released, then Lender may, at its
election, but shall not be required to, procure the release and discharge of any
such claim and any judgment or decree thereon and, further, may, in its sole
discretion, effect any settlement or compromise of the same, or may furnish such
security or indemnity to any title company, and any amounts so expended by
Lender, including premiums paid or security furnished in connection with the
issuance of any surety company bonds, shall be deemed to constitute
Disbursements of the proceeds of the Loan hereunder and shall bear interest from
the date so disbursed until paid at the Default Interest Rate. In settling,
compromising or discharging any claims for lien, Lender shall not be required to
inquire into the validity or amount of any such claim.
10.9 Insurance Premiums. Borrowers shall pay all premiums on all insurance
policies required from time to time during the progress of construction, and
shall furnish to Lender with premiums prepaid, additional and renewal insurance
policies, premiums prepaid, in form and with companies, coverage, deductibles
and amounts satisfactory to Lender not less than thirty (30) days before the
expiration of any such policies. In the event of failure by Borrowers to provide
such insurance, Lender may obtain such insurance policies on behalf of Borrowers
and treat the amounts expended therefor as disbursements of Loan proceeds, and
such amounts from the date so expended until paid shall bear interest at the
Default Interest Rate.
10.10 Financial Statements. Borrowers shall deliver, or cause to be
delivered, to Lender a detailed monthly report showing the progress of
construction of the Building, as well as Improvements. In addition, Borrowers
shall deliver or cause to be delivered to Lender on at least an annual basis and
at such other times as Lender may request financial information including but
not limited to: (a) current financial statements of Borrowers and Guarantors
within ninety (90) days after the end of each fiscal year on Lender's standard
form or on such other form as Lender shall approve, setting forth the
information therein required as of the immediately preceding fiscal year,
containing income and expense statements and a balance sheet, prepared by
Borrowers or a certified public accountant or accounting firm acceptable to
Lender; (b) within ten (10) days of the filing thereof, federal income tax
returns of Borrowers and Guarantors, all certified to be true, complete and
correct by an authorized representative of Borrowers and Guarantors, as
appropriate; (c) statements of revenues, expenses and cash flows relating to the
Projects, and the most recent federal income tax return; and (d) such other
information and reports, financial and otherwise, concerning Borrowers,
Guarantors and the construction and operation of the Projects as Lender may
reasonably request. Borrowers shall also deliver to Lender, within ten (10) days
after the end of each calendar month, (x) current sales and closing status
reports for the Projects in detail acceptable to Lender, (y) copies of any and
all new Approved Sales Contracts, all as verified by Lender, and (z) a detailed
schedule for the completion of the construction and leasing, if any, of the
Projects, including, without limitation, a trade-by-trade breakdown of the
estimated periods of commencement and completion of the specific Work to be
completed on the Projects, all certified by Borrowers to be true, complete and
correct.
10.11 Notice of Material Adverse Change. Borrowers shall promptly deliver
to Lender notice of the occurrence of any Event of Default or Unmatured Default,
or any event which might have any material adverse effect on any security for
the Loan or on Borrowers' ability to perform their obligations under this
Agreement or any of the other Loan Documents.
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10.12 Liens. Except for (a) the Mortgages and other Loan Documents, (b)
mechanic's liens which are bonded against to the satisfaction of Lender, (c) the
Permitted Exceptions, (d) such other liens, claims or encumbrances reviewed and
approved by Lender in writing, (e) Units released pursuant to the terms of the
Loan Documents, Borrowers shall at all times own fee simple title to the Project
free of all liens, claims and encumbrances, whether senior or junior to the
Mortgages, other than the lien created by the Mortgages and the Permitted
Exceptions.
10.13 Borrowers' Obligation to Contest Liens. If any proceedings are filed
seeking to enjoin or otherwise prevent or declare invalid or unlawful the
construction, occupancy, maintenance or operation of the Projects or any portion
thereof, Borrowers will cause such proceedings to be vigorously contested in
good faith, and in the event of an adverse ruling or decision shall prosecute
all allowable appeals therefrom, and will, without limiting the generality of
the foregoing, resist the entry or seek the stay of any temporary or permanent
injunction that may be entered and use its best efforts to bring about a
favorable and speedy disposition of all such proceedings. All such proceedings,
and all of Lender's costs and reasonable fees and disbursements of Lender's
counsel in connection with any such proceedings, whether or not Lender is a
party thereto, shall be at Borrowers' expense, and all such costs and reasonable
fees and disbursements incurred by Lender shall be deemed to be additional
indebtedness due and payable hereunder, shall bear interest from the date so
incurred until paid at the Default Interest Rate and shall be payable to Lender
on demand.
10.14 Prohibition of Transfer. Except for the sale of Residential Units,
associated parking spaces and Retail Units, sold in the ordinary course of
business as authorized under the Mortgages, Borrowers shall not, without
Lender's prior written consent, suffer, permit or enter into any agreement for
any sale or transfer, or in any way encumber or dispose of or grant or suffer
any security or other assignment (collateral or otherwise) of or in all or any
portion of the Project or permit any events prohibited under Section 3.09 of the
Mortgages. Borrowers shall not enter any agreement to lease all or any portion
of the Project, without Lender's prior written consent, which consent may be
withheld in Lender's sole and absolute discretion. Any consent by Lender, or any
waiver of an Event of Default under this Section 10.14, or of any other
requirement contained in this Agreement or any of the other Loan Documents,
shall not constitute a consent to or waiver of any right, remedy or power of
Lender with respect to any subsequent Event of Default.
10.15 Subcontracts. Upon Lender's request, Borrowers shall deliver to
Lender a copy of each Subcontract entered into by the Contractor within five (5)
days after the execution thereof.
10.16 Real Estate Tax Escrow. In the event either (i) Borrowers are ever
delinquent or late in making any required real estate tax payment related to the
Projects when said taxes are due and payable, or (ii) there is an Event of
Default hereunder, Borrowers, to provide for the payment of real estate taxes
and assessments pertaining to the Project and to the extent permitted by
applicable law, promise to pay monthly, in addition to the above payments, one-
twelfth (1/12th) of One Hundred Ten Percent (110%) of the amount of the last
ascertainable annual real estate taxes in such manner as Lender may prescribe,
so as to provide for the current year's tax obligation. If the amount estimated
to pay said taxes, assessments and other charges is not sufficient, Borrowers
promise to pay the difference within ten (10) days following Lender's
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demand therefor. It shall not be obligatory upon Lender to inquire into the
validity or accuracy of any of said items before making payments of the same and
nothing herein contained shall be construed as requiring Lender to advance other
monies for said purposes nor shall Lender incur any personal liability for
anything it may do or omit to do hereunder. It is agreed that all such payments
made, at the option of Lender, and subject to the provision of applicable law,
shall: (a) be held in trust by it without earnings for the payment of such
items; (b) be carried in a tax account for the benefit of Borrowers and
withdrawn by Lender to pay such items; or (c) be credited to the unpaid balance
of the indebtedness evidenced hereby as received, provided that Lender advances
upon this obligation sums sufficient to pay said items as the same accrue and
become payable. If such items are held in trust or carried in a tax account for
Borrowers, the same are hereby pledged together with any other account of
Borrowers or any Guarantor hereof held by Lender to further secure the
indebtedness evidenced by this Note and any officer of Lender is authorized to
withdraw the same and apply said sums as aforesaid. After full payment of all
indebtedness owed hereunder and under the Mortgages, all amounts remaining in
the escrow accounts, if any, shall be returned to Borrowers.
10.17 Modification to By-Laws. Each Borrower shall not, without the prior
written consent of Lender, amend or modify its by-laws.
10.18 Signage and Advertising. Lender may, at Lender's sole option and
expense, construct and maintain, in accordance with all applicable legal
requirements, a sign at the Projects designating Lender as having provided
financing for the Projects. Lender may also issue such press releases and
otherwise publicize the financing described herein as Lender may elect, in its
sole discretion.
10.19 Approved Leases. Borrowers shall not execute any lease without
written acknowledgment of Lender that the lease is an Approved Lease. Borrowers
shall provide Lender with a copy of each proposed lease for all or a portion of
the Projects, as well as any and all other information related thereto as
requested by Lender. Lender shall endeavor to provide preliminary approval or
disapproval of any proposed lease within three (3) business days of the receipt
of all pertinent information needed for approval. Lender shall endeavor to
provide final approval or disapproval of any proposed lease transaction within
ten (10) business days of the receipt of final proposed lease documentation and
any other information needed for its decision. Failure to disapprove any
proposed lease within ten (10) business days shall be deemed an approval of such
proposed lease by Lender.
10.20 All contracts for the sale of Units which are or will be furnished
to Lender qualify or will qualify as Approved Sales Contracts and to the best of
Borrowers' knowledge, the Approved Sales Contracts are in full force and effect
and are the legal and binding obligation of purchasers, enforceable in
accordance with their terms.
10.21 To induce Lender to execute and perform this Agreement, each
Borrower hereby covenants, at all time from and after the date hereof and until
all obligations of Borrowers have been paid in full, to maintain all of its
operating accounts for the Projects with Lender (the "Operating Accounts"), to
deposit any and all revenue associated with the Projects in such Operating
Accounts (including, without limitation, all earnest money (subject to Section
2.6(iv) hereof) and/or advances against Extras) and to utilize such amounts to
pay any and all operating
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expenses of the Projects and/or distributions related to the Projects from such
Operating Accounts. Each such Operating Account shall be pledged to and for the
benefit of Lender.
SECTION 11
LOAN FEES; LOAN EXPENSES
------------------------
Borrowers acknowledge that Lender has fully earned a loan application fee
of Fifty Thousand Dollars ($50,000). Said loan application fee has been paid and
is non-refundable. In addition to the foregoing, Borrowers agree to pay (a) a
commitment fee of One Hundred Thousand Dollars ($100,000) concurrent with the
Initial Disbursement, such commitment fee is deemed paid and non-refundable, (b)
a closing fee of One Hundred Thousand Dollars ($100,000) concurrent with the
Initial Disbursement, such closing fee to be deemed paid and non-refundable upon
disbursement, and (c) all expenses, charges, costs and fees of the Loan or
relating to the performance of the Work and the development of the Project,
including, without limitation, negotiation, documentation and Lender's
attorneys' fees and expenses and court costs incurred in connection with the
enforcement of the terms of the Loan Documents, consulting architect fees,
appraisal fees, environmental assessment fees, insurance review fees, standard
flood hazard determinations, travel expenses, processing fees, broker's fees,
the fees charged by the Title Company and all costs of the Title Company, all
recording fees and charges, title insurance charges and premiums, escrow fees,
costs of surveys and of other bonds required by the Title Company in connection
with clearing title to the Projects or the issuance of title reports, binders,
policies and the like, and all other costs, expenses, charges and fees referred
to in or necessitated by the terms of this Agreement or any of the other Loan
Documents or otherwise related to the Loan (collectively, the "Loan Expenses").
In the event that the Loan Expenses are not paid to Lender within five (5) days
after deemed therefor, the Loan Expenses shall bear interest from the date so
incurred until paid at the Default Interest Rate then in effect under the Note
and shall be paid by Borrowers to Lender upon demand, or may be paid by Lender
at any time by disbursement of proceeds of the Loan. All Loan Expenses shall be
payable by Borrowers regardless of whether there shall be any Disbursements of
the Loan.
SECTION 12
LENDER'S REPRESENTATIVES
------------------------
12.1 Consultant and Attorneys. Lender shall have the right to engage
personnel in connection with negotiation, documentation, administration,
servicing and enforcement of the Loan, including, without limitation, the
Consultant, to (i) review and approve the Plans and Specifications, (ii) review
and approve Borrowers' final construction budgets and perform cost analyses,
(iii) conduct monthly compliance inspections of the Improvements and report on
the progress of construction thereof, (iv) inspect the structural, mechanical,
electrical, plumbing, HVAC and roof systems comprising the Work, (v) review and
approve applications for Disbursements and accompanying documents, (vi) review
and approve all change orders, (vii) determine whether the Work has been
completed substantially in accordance with the Approved Plans, (viii) issue
reports and certificates to Lender, and (ix) perform tests and inspections and
order reports on the Land in order to determine whether the Land is free from
Hazardous Material, and (x) provide other reasonable services as requested by
Lender. Any reasonable expense incurred by Lender pursuant to this Section 12.1
shall be Costs hereunder, shall be part of the Secured Obligations, shall be
secured by the Collateral, and shall be payable on demand.
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Borrowers shall pay all expenses incurred by Lender in connection with
inspecting the Projects, including, without limitation, all reasonable fees and
expenses charged by the Consultant, and shall cooperate with such personnel in
all reasonable respects. Any amount not paid within ten (10) days after demand
therefor shall bear interest at the Default Interest Rate.
12.2 Waiver of Reliance by Borrowers. The authority herein conferred upon
Lender, and any action taken by Lender, to inspect the Projects, to procure
waivers or sworn statements, to approve contracts, Subcontracts and purchase
orders, and to approve Plans and Specifications, will be exercised and taken by
Lender and by Consultant for Lender's protection only and may not be relied upon
by Borrowers for any purposes whatever; and neither Lender nor Consultant shall
be deemed to have assumed any responsibility to Borrowers with respect to any
such action herein authorized or taken by Lender or Consultant or with respect
to the proper construction of improvements on the Projects, performance of
contracts, Subcontracts or purchase orders by any contractor, subcontractor or
material supplier, or prevention of mechanics' liens from being claimed or
asserted against the Projects. Any review, investigation or inspection conducted
by Lender, Lender's Consultant or any other architectural or engineering
consultants retained by Lender or any agent or representative of Lender to
verify independently Borrowers' satisfaction of any conditions precedent to
Disbursements under this Agreement, Borrowers' performance of any of the
covenants, agreements and obligations of Borrowers under this Agreement, or the
validity of any representations and warranties made by Borrowers hereunder
(regardless of whether the party conducting such review, investigation or
inspection shall have discovered that any of such conditions precedent were not
satisfied or that any such covenants, agreements or obligations were not
performed or that any such representations or warranties were not true), shall
not affect (or constitute a waiver by Lender of) (a) any of Borrowers'
representations and warranties under this Agreement or Lender's reliance
thereon, or (b) Lender's reliance upon any certifications of Borrowers, the
Contractors or the Architects required under this Agreement or any other facts,
information or reports furnished to Lender by Borrowers hereunder.
SECTION 13
EVENT OF DEFAULT
----------------
The occurrence of any one or more of the following shall constitute an
"Event of Default" for purposes of this Agreement:
(a) Failure by Borrowers to pay any installment of principal or
interest or any other amount payable pursuant to this Agreement (including,
without limitation, any shortfall resulting from insufficient funds in the
real estate tax reserve as stated in the Approved Budgets), the Note, the
Mortgages, or any of the other Loan Documents after ten (10) days written
notice from Lender any amount after the same becomes due and payable
hereunder.
(b) Failure by Borrowers after thirty (30) days written notice from
Lender to promptly perform any other obligation or observe any other
condition, covenant, term, agreement or provision required to be performed
or observed by Borrowers under this Agreement which is not covered by any
of the other provisions of this Section 13; provided that this period may
be extended in the reasonable discretion of Lender for a maximum period of
an additional thirty (30) days, provided Borrowers cannot cure the
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default within said original thirty (30) day period and Borrowers are
diligently seeking to cure the item set forth in the notice.
(c) If the Loan is deemed to be "Out of Balance" as determined in
accordance with Section 7.3 hereof and Borrowers do not deposit funds with
Lender in accordance with Section 7.3.
(d) Any material inaccuracy or untruth in any representation,
covenant or warranty contained in this Agreement or any of the other Loan
Documents, or of any statement or certification as to facts delivered to
Lender pursuant to any Loan Document.
(e) A discontinuance of the construction of Improvements for a period
of twenty (20) consecutive days regardless of cause, or any material delays
from the Schedule, the result of which may be, in Lender's sole reasonable
judgment, that the construction of the Buildings or such other Improvements
will not be completed by the Completion Date.
(f) If the Projects are not completed on or before the Completion
Date, in accordance with Section 5.3 hereof.
(g) Borrowers, any shareholder of Borrowers or any Guarantor files a
bankruptcy petition, or is adjudicated a bankrupt or insolvent, or
institutes as debtor (by petition, application, answer, consent or
otherwise) any bankruptcy, insolvency, reorganization, arrangement,
composition, readjustment, dissolution, liquidation or similar proceedings
under any present or future federal, state or other statute or law, or
admits in writing his or its inability to pay his or its debts as they
mature, or makes arrangement, composition, readjustment, dissolution,
liquidation or similar proceedings under any present or future federal,
state or other statute or law, or the appointment of a receiver, trustee or
other officer for all or any substantial part of the property of Borrowers,
any shareholder of Borrowers, or any Guarantor which shall remain
undismissed or undischarged for a period of sixty (60) days.
(h) The bankruptcy or insolvency of any Contractor, any general
contractor who is a substitute for any Contractor or any subcontractor who
performs services in connection with the Projects under a Subcontract, the
contract price of which exceeds $50,000, or the withdrawal of any of the
foregoing from proceeding with the Work, and failure of Borrowers to
procure a contract with a new general contractor or subcontractor
satisfactory to Lender within sixty (60) days from the occurrence of such
bankruptcy, insolvency or withdrawal.
(i) A material adverse change in the financial condition of any
Borrower or any Guarantor, or a material adverse change in the value of any
Project and the failure of Borrowers to deliver to Lender other collateral
satisfactory to Lender within twenty (20) days following written notice by
Lender to Borrowers of such adverse change.
(j) The written disapproval by Lender at any time of any Work for
failure to comply with this Agreement or substantially to comply with the
Approved Plans, and
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failure to cause the same to be corrected to the satisfaction of Lender
within ten (10) days after the date of such disapproval.
(k) A sale, transfer, lease, assignment, conveyance, lien or
encumbrance made in violation of Section 10.14.
(l) If the initial Construction Disbursement for the Plaza 32 Project
has not been effected on or before October 1, 1999.
(m) Failure of Borrowers for a period of thirty (30) days after
Lender's written demand to procure the dismissal or disposition to Lender's
satisfaction or in the manner otherwise permitted herein of any proceedings
seeking to enjoin or otherwise prevent or declare invalid or unlawful the
construction, occupancy, maintenance or operation of any of the Projects,
or any material portion thereof, as called for by the terms of this
Agreement, or of any proceedings which could or might affect the validity
or priority of the lien of the Mortgages or other security for the Loan or
which could materially affect Borrowers' ability to perform its obligations
under this Agreement.
(n) The attachment, seizure, levy upon or taking of possession by any
receiver, custodian or assignee for the benefit of creditors or all or a
substantial part of the property of Borrowers; provided, however, that if
Borrowers are taking steps to cure said default, same shall not be an Event
of Default unless, in Lender's sole judgment, any of the Projects shall be
threatened as security for the Loan.
(o) The filing or threatened filing of any condemnation or
administrative proceeding or litigation against any of the Projects or any
casualty thereto which would in any way impair the completion of the Work
or the full utilization of the Projects once completed; provided, however,
that if Borrowers are taking steps to cure said default, same shall not be
an Event of Default unless, in Lender's sole judgment, any of the Projects
shall be threatened as security for the Loan.
(p) The occurrence of any Default or Event of Default under any of
the Note, the Mortgages or any of the other Loan Documents.
(q) The termination of any Borrower as a corporation, whether
voluntary, by operation of law, or otherwise, without Lender's prior
written consent.
(r) The death, bankruptcy, dissolution or adjudicated incompetency of
any Guarantor. Borrowers and Lender hereby expressly agreeing that Lender
would not make the Loan to Borrowers absent such guaranty, that such
guaranty is a material inducement to Lender, and that such death,
bankruptcy, dissolution or adjudication would be a material default
hereunder, notwithstanding the adequacy of the Collateral.
(s) In the event Sundance Homes, Inc. pays any dividends to its
shareholders during the term of the Loan.
(t) In the event Maurice Sanderman's total compensation from all
sources in any calendar year during the term of the Loan exceeds One
Million Dollars ($1,000,000).
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(u) In the event Sundance Homes, Inc. repays any portion of the
Subordinated Debt in excess of the Eight Hundred Thousand Dollars
($800,000) repayment allowed under the terms of the Loan Documents.
SECTION 14
REMEDIES
--------
Upon the occurrence of any Event of Default, Lender, in addition to
availing itself of any remedies conferred upon it by law and by the terms of the
Note, the Mortgages and the other Loan Documents, may pursue any one or more of
the following remedies first, concurrently or successively with each other and
with any other available remedies, it being the intent hereof that none of such
remedies shall be to the exclusion of any others:
a. Take possession of the Projects and do anything necessary or
desirable in its sole judgment to complete the construction of the Work and
equipping of the Buildings, including the right either to avail itself of
and procure performance of any Subcontract or to let new or additional
contracts with the same contractors or subcontractors or others, and to
employ watchmen to protect the Projects from injury. Without restricting
the generality of the foregoing, Borrowers hereby appoint and constitute
Lender their lawful attorney-in-fact with full power of substitution in the
premises (i) to complete construction of the Work and furnishing and
equipping of the Buildings in the name of Borrowers; (ii) to use portions
of the Loan or other funds which may be reserved, escrowed or set aside for
any purposes hereunder at any time to complete the Projects; (iii) to make
changes in the Plans and Specifications which shall be necessary to
complete the Work; (iv) to retain or employ new general contractors,
subcontractors, architects and inspectors as shall be required for said
purposes; (v) to pay, settle or compromise all existing bills and claims,
which may be liens or security interests or to avoid such bills and claims
becoming liens against the Projects or security interests against any
personal property located thereon, or as may be necessary or desirable for
the completion of the construction of the Work and equipping of the
Buildings or for the clearance of title; (vi) to execute all applications
and certificates in the name of Borrowers which may be required by any of
the Loan Documents; (vii) to prosecute and defend all actions or
proceedings in connection with the Projects; (viii) to take such action and
require such performance as it deems necessary under any of the bonds, to
be furnished hereunder and to make settlements and compromises with the
surety or sureties thereunder, and in connection therewith to execute
instruments of release and satisfaction, it being understood that this
power of attorney shall be a power coupled with an interest and cannot be
revoked.
b. Withhold further Disbursements of proceeds of the Loan.
c. Declare the unpaid indebtedness evidenced by the Note to be
immediately due and payable.
d. Foreclose the Mortgages and exercise any of the rights and
remedies contained in this Agreement, the Note or any of the other Loan
Documents or exercise any other rights and remedies that Lender may have at
law or in equity.
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e. Apply the balance of any deposits made with Lender in the same
manner as provided for payments under the Note, if applicable.
SECTION 15
MISCELLANEOUS
-------------
15.1 Form of Payments. All payments of principal and interest on the Loan
shall be made to Lender in immediately available funds not later than noon
Chicago time on the date such payments are to be made.
15.2 Advances by Lender. If any advances or payments made by Lender
pursuant to this Agreement or any other Loan Document, together with
Disbursements of the Loan, shall exceed the aggregate face amount of the Note,
all such advances and payments shall constitute additional indebtedness secured
by the Mortgages and all other security for the Loan, and shall, after notice of
said advance to Borrowers, bear interest at the Default Interest Rate.
15.3 Documents of Further Assurance. Borrowers shall, upon request of
Lender, execute and deliver such further instruments and documents and do such
further acts and things as may be reasonably required to provide to Lender the
evidence of, and security for, the Loan.
15.4 Incorporation of Other Agreements. The provisions of the other Loan
Documents are incorporated in this Agreement by this reference thereto. Except
as otherwise provided in this Agreement and except as otherwise provided in the
other Loan Documents by specific reference to the applicable provision of this
Agreement, if any provision contained in this Agreement is in conflict with, or
inconsistent with, any provision in the other Loan Documents, Lender shall have
the right to elect, in its sole and absolute discretion, which provision shall
govern and control. Except to the extent provided to the contrary in this
Agreement and in the other Loan Documents, no termination or cancellation
(regardless of cause or procedure) of this Agreement or the other Loan Documents
shall in any way affect or impair the powers, obligations, duties, rights and
liabilities of Borrowers or Lender in any way or respect relating to (a) any
transaction or event occurring prior to such termination or cancellation, and/or
(b) any of the undertakings, agreements, covenants, warranties and
representations of Borrowers contained in this Agreement or the other Loan
Documents. All such undertakings, agreements, covenants, warranties and
representations shall survive such termination or cancellation.
15.5 Lender's Right to Cure Defaults. If Borrowers fail to perform any of
their obligations under this Agreement or any other Loan Document, or if any
Event of Default shall occur hereunder, Lender may, but shall not be obligated
to, perform such obligation or cure such Event of Default, and all amounts
expended in so doing, as well as all Loan Expenses and other amounts paid or
advanced by Lender, pursuant to the Loan Documents, shall constitute additional
advances of the Loan, shall be secured by the Mortgages and all of the other
Loan Documents, and shall bear interest at the Default Interest Rate.
15.6 Amendments and Modifications. This Agreement shall not be amended,
modified or supplemented without the written agreement of Borrowers and Lender
at the time of such amendment, modification or supplement. No waiver of any
provision of this Agreement or
49
<PAGE>
any other Loan Documents shall be effective unless set forth in writing signed
by Lender, and any such waiver shall be effective only to the extent therein set
forth. Failure by Lender to insist upon full and prompt performance of any
provisions of this Agreement or any other Loan Documents, or to take action in
the event of any breach of any such provision or Event of Default, shall not
constitute a waiver of any rights of Lender, and Lender may at any time
thereafter exercise all rights specified herein or provided by applicable law
with respect to such breach or Event of Default. Receipt by Lender of any
instrument or document shall not constitute or be deemed to be an approval
thereof. Any approval required under any of the Loan Documents must be in
writing signed by Lender and directed to Borrowers. Borrowers expressly agree
that for the purposes of this Agreement and each and every other Loan Document;
(i) this Agreement and each and every Loan Document shall be a "credit
agreement" under the Illinois Credit Agreements Act, 815 ILCS 160/1 et.seq. (the
"Act"); (ii) the Act applies to this transaction including, but not limited to,
the execution of this Agreement and each and every other Loan Document; and
(iii) any action on or in any way related to this Agreement and each and every
other Loan Document shall be governed by the Act.
15.7 Notices. Any notice which any party hereto gives to any other party
hereunder shall be in writing and shall be mailed or delivered to the intended
recipient thereof at its address set forth below or at such other address as
such intended recipient, from time to time, by notice in writing, designates to
sender pursuant hereto. Any such notice shall be deemed to have been delivered
two (2) business days after mailing by United States certified mail, return
receipt requested, or when delivered in person, and receipted for, or upon
receipt if sent by a nationally recognized overnight air courier.
To Borrowers: At the address set forth in the first paragraph of this
Agreement
with a copy to: Meltzer, Purtill & Stelle
1515 East Woodfield Road
Suite 250
Schaumburg, Illinois 60173
Attention: William J. Mitchell, Esq.
Fax: 847-330-1231
To Lender: At the address set forth in the first paragraph of this
Agreement
with a copy to: Holleb & Coff
55 East Monroe Street
Suite 4100
Chicago, Illinois 60603
Attention: Daniel Kohn, Esq.
Fax: 312-807-3900
Unless specifically required herein, notice of the exercise of any option
granted to Lender by this Agreement is not required to be given.
15.8 Successors and Assigns. The rights, powers and remedies of Lender
under this Agreement shall inure to the benefit of Lender, its successors and
assigns. The rights and
50
<PAGE>
obligations of Borrowers under this Agreement may not be assigned without the
prior written consent of Lender, and any such purported assignment by Borrowers
shall be null and void.
15.9 GOVERNING LAW; LITIGATION. THE VALIDITY OF THIS AGREEMENT, ITS
CONSTRUCTION, INTERPRETATION AND ENFORCEMENT, AND THE RIGHTS OF BORROWERS AND
LENDER SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. TO THE MAXIMUM EXTENT PERMITTED BY LAW, BORROWERS AND LENDER
EACH HEREBY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH
THIS AGREEMENT SHALL BE TRIED AND DETERMINED ONLY IN THE FEDERAL COURT LOCATED
IN THE NORTHERN DISTRICT OF ILLINOIS, OR THE STATE COURT LOCATED IN THE COUNTY
OF COOK, STATE OF ILLINOIS, OR, AT THE SOLE OPTION OF LENDER IN ANY OTHER COURT
IN WHICH LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS
SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY. TO THE MAXIMUM
EXTENT PERMITTED BY LAW, BORROWERS AND LENDER EACH HEREBY EXPRESSLY WAIVES ANY
RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
15.9.
15.10 Indemnification. Borrowers agree to indemnify, defend and hold
Lender, its successors, assigns, and participants (if any), harmless from and
against any and all liabilities, obligations, losses, damages, claims, costs and
expenses (including reasonable attorneys' fees, and expenses, and court costs)
of whatever kind or nature which may be suffered, incurred or imposed on Lender
by virtue of this Agreement (except for any of the aforementioned which arise
solely out of Lender's gross negligence or willful misconduct), including,
without limitation, any liability resulting from the release of any Hazardous
Material from the Land into the environment or resulting from any other
violation or alleged violations of law with respect to any Hazardous Materials
at the Land; any brokerage commissions or finder's fees asserted against Lender
with respect to the making of the Loan; any loss or damage incurred by Lender by
reason of the construction of Borrowers and Lender as having the relationship of
joint venturer or partners or Borrowers or Lender being deemed to have acted as
agent for the other; and any loss or damages incurred by Lender as a result of
the breach by Borrowers of any of their agreements, covenants, warranties or
representations contained herein.
15.11 Headings. The titles and headings of the sections and paragraphs of
this Agreement have been inserted as a matter of convenience of reference only
and shall not control or affect the meaning or construction of any of the terms
or provisions of this Agreement.
15.12 No Joint Venture. Lender, by executing and performing this
Agreement, does not become a partner or joint venturer with Borrowers. All
inspections of the Projects herein provided for are for the sole benefit of
Lender.
51
<PAGE>
15.13 Time of Essence. Time is of the essence with respect to the payment
of all amounts due Lender under this Agreement and performance and observance by
Borrowers of each covenant, agreement, provision and term of this Agreement.
15.14 Invalidity. In the event any one or more of the provisions
contained in this Agreement or in any of the Loan Documents shall for any reason
be held to be invalid, illegal or unenforceable in any respect by a court of
competent jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision of this Agreement or any such Loan Document, and
this Agreement and any such Loan Document shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein or therein.
15.15 Violation of Laws. Notwithstanding anything herein contained to the
contrary, Lender will not be required to make any Disbursement or perform any
other act under this Agreement if, as a result thereof, Lender will violate any
law, statute, ordinance, rule, regulation or judicial decision applicable
thereto.
15.16 Representation by Counsel. Borrowers hereby represent that they
have been represented by competent counsel of its choice in the negotiation and
execution of this Agreement and the other Loan Documents; that it has read and
fully understood the terms hereof; that Borrowers and their counsel have been
afforded an opportunity to review, negotiate and modify the terms of this
Agreement, and that they intend to be bound hereby. In accordance with the
foregoing, the general rule of construction to the effect that any ambiguities
in a contract are to be resolved against the party drafting the contract shall
not be employed in the construction and interpretation of this Agreement or any
other Loan Document.
15.17 FAX Delivery. For purposes of negotiating and finalizing this
Agreement (including any subsequent amendments thereto), any signed document
transmitted by facsimile machine ("FAX") shall be treated in all manner and
respects as an original document. The signature of any party by FAX shall be
considered for these purposes as an original signature. Any such FAX document
shall be considered to have the same binding legal effect as an original
document, provided that an original of the faxed document was mailed by first
class U.S. mail or personally delivered to the recipient, on the date of its
transmission with proof of the fax transmission. At the request of either party,
any FAX document subject to this Agreement shall be re-executed by both parties
in an original form. The undersigned parties hereby agree that neither shall
raise the use of the FAX or the fact that any signature or document was
transmitted or communicated through the use of a FAX as a defense to the
formation of this Agreement.
15.18 Counterparts. This Agreement may be executed in counterparts, and
all said counterparts when taken together shall constitute one and the same
Agreement.
15.19 Jury Waiver. TO THE MAXIMUM EXTENT PERMITTED BY LAW, BORROWERS AND
LENDER HEREBY EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY ACTION, CAUSE OF
ACTION, CLAIM, DEMAND OR PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS
AGREEMENT, OR IN ANY WAY CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
DEALINGS OF BORROWERS AND LENDER WITH RESPECT TO THIS AGREEMENT, OR THE
TRANSACTIONS RELATED HERETO, IN EACH CASE
52
<PAGE>
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE. TO THE MAXIMUM EXTENT PERMITTED BY LAW, BORROWERS AND LENDER
HEREBY AGREE THAT ANY SUCH ACTION, CAUSE OF ACTION, CLAIM, DEMAND OR PROCEEDING
SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT BORROWERS OR LENDER
MAY FILE AN EXECUTED COPY OF THIS AGREEMENT WITH ANY COURT OR OTHER TRIBUNAL AS
WRITTEN EVIDENCE OF THE CONSENT OF BORROWERS AND LENDER TO THE WAIVER OF ITS
RIGHT TO TRIAL BY JURY.
15.20 No Third Party Beneficiaries. This Agreement is solely for the
benefit of Lender, Borrowers and their respective permitted successors and
assigns and nothing contained herein shall be deemed to confer upon any Person
any right to insist on or to enforce the performance or observance of any of the
obligations contained herein. All conditions to the obligations of Lender to
make the Loan hereunder are imposed solely and exclusively for the benefit of
Lender and its respective successors and assigns and no other Person shall have
standing to require satisfaction of such conditions in accordance with their
terms and no other Persons shall under any circumstances be deemed to be a
beneficiary of such conditions.
15.21 Survival of Commitment Letter. The Commitment Letter and the terms
therein, shall survive closing; provided, however, in the event of a conflict
between the terms of the Commitment Letter and the Loan Documents, the terms of
the Loan Documents shall control.
[SIGNATURES ON FOLLOWING PAGE]
53
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement as
of the day and year first above written.
BORROWERS:
ERIE CENTER LOFTS, INC.,
an Illinois corporation
By: /s/ Joseph R. Atkin
--------------------------
Joseph R. Atkin
Its Vice President and
Chief Financial
Officer
CAPITOL HILL LOFTS, INC.,
an Illinois corporation
By: /s/ Joseph R. Atkin
--------------------------
Joseph R. Atkin
Its Vice President and
Chief Financial
Officer
SANGAMON LOFTS, INC.,
an Illinois corporation
By: /s/ Joseph R. Atkin
--------------------------
Joseph R. Atkin
Its Vice President and
Chief Financial
Officer
MARATHON CENTER, INC.,
an Illinois corporation
By: /s/ Joseph R. Atkin
--------------------------
Joseph R. Atkin
Its Vice President and
Chief Financial
Officer
LENDER:
CORUS BANK, N.A.
By: /s/ Peter R. Freund
-------------------------
Its Vice President
-------------------
54
<PAGE>
EXHIBIT "A-1"
The Erie Tower Land
-------------------
P.I.N.
Commonly known as
55
<PAGE>
EXHIBIT "A-2"
The Capitol Land
----------------
P.I.N.
Commonly known as
56
<PAGE>
EXHIBIT "A-3"
The Arthouse Land
-----------------
P.I.N.
Commonly known as
57
<PAGE>
EXHIBIT "A-3-a"
The Arthouse II Parcel
----------------------
P.I.N.
Commonly known as
58
<PAGE>
EXHIBIT "A-4"
The Plaza 32 Land
-----------------
P.I.N.
Commonly known as
59
<PAGE>
EXHIBIT "B"
The Permitted Exceptions
------------------------
The following exceptions delineated on Schedule B of Title Commitment No.
_________________ issued by _______________ Title Company :____________________.
60
<PAGE>
EXHIBIT "C-1"
The Tranche A Project Budget
----------------------------
By its signature below, Lender has accepted and approved the above-referenced
Tranche A Preliminary Budget as the "Tranche A Approved Project Budget".
CORUS BANK, N.A.
By__________________________
Its____________________
61
<PAGE>
EXHIBIT "C-2"
The Tranche B Project Budget
----------------------------
By its signature below, Lender has accepted and approved the above-referenced
Tranche B Preliminary Budget as the "Tranche B Approved Project Budget".
CORUS BANK, N.A.
By___________________________
Its_____________________
62
<PAGE>
EXHIBIT "D-1"
The Tranche A Approved Plans and Specifications
-----------------------------------------------
The Plans and Specifications prepared by _________________________ for the
Project titled ______________________________ Project No. _____ are hereby
incorporated by reference.
By its signature below, Lender has accepted and approved the above referenced
Preliminary Plans as the "Approved Plans".
CORUS BANK, N.A.
By__________________________
Its____________________
63
<PAGE>
EXHIBIT "D-2"
The Tranche B Plans and Specifications
--------------------------------------
The Plans and Specifications prepared by _________________________ for the
Project titled ______________________________ Project No. _____ are hereby
incorporated by reference.
By its signature below, Lender has accepted and approved the above referenced
Preliminary Plans as the "Approved Plans".
CORUS BANK, N.A.
By__________________________
Its____________________
64
<PAGE>
EXHIBIT "E"
Pending Contract Prices and Pro Forma List Prices
-------------------------------------------------
65
<PAGE>
EXHIBIT "F"
-----------
Schedule
--------
66
<PAGE>
EXHIBIT 10.2
LOAN AGREEMENT
AMONG
SUNDANCE CUSTOM HOMES, INC.
AND
OTHER SUBSIDIARY HOLDINGS, INC.,
AS BORROWERS,
AND
LASALLE BANK NATIONAL ASSOCIATION, a national
banking association, as Lender
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page No.
- ------- --------
<S> <C>
1. RECITALS........................................................... 1
2. DEFINITIONS ....................................................... 1
3. COMMITMENT TO LEND; COMMITMENT FEE................................. 5
3.1 Maximum Loan Amount ....................................... 5
3.2 Loan Advances Evidenced by Note ........................... 5
3.3 Payment of Interest and Principal ......................... 5
3.4 Default Rate .............................................. 5
3.5 Late Charge ............................................... 5
3.6 Fees ...................................................... 5
4. LOAN DOCUMENTS..................................................... 5
5. DISBURSEMENT OF THE LOAN........................................... 8
5.1 Conditions Precedent ...................................... 8
5.2 Disbursement Requests ..................................... 8
5.3 Certifications, Representations and Warranties ............ 9
6. REPRESENTATIONS AND WARRANTIES..................................... 9
6.1 Borrower................................................... 9
6.2 Guarantors ................................................ 9
6.3 Title ..................................................... 9
6.4 Validity and Enforceability of Documents .................. 10
6.5 Litigation ................................................ 10
6.6 Utilities; Authorities .................................... 10
6.7 Solvency .................................................. 10
6.8 Financial Statements ...................................... 11
6.9 Compliance with Laws ...................................... 11
6.10 Financing Statements ...................................... 11
6.11 Event of Default .......................................... 11
6.12 Lease Agreements .......................................... 11
6.13 Responsible Property Transfer Act ......................... 12
6.14 No Defects ................................................ 12
6.15 Additional Agreements ..................................... 12
7. BORROWER'S COVENANTS............................................... 12
7.1 Compliance with Laws ...................................... 13
7.2 Inspection ................................................ 13
</TABLE>
<PAGE>
<TABLE>
<S> <C>
7.3 Mechanics'Liens ........................................... 13
7.4 Release by Lender.......................................... 13
7.5 Financial Statements; Reports ............................. 14
7.6 Affirmation of Representations and Warranties ............. 15
7.7 Title ..................................................... 15
7.8 Proceedings Affecting Property ............................ 15
7.9 Disposal and Encumbrance of Property ...................... 15
7.10 Insurance ................................................. 15
7.11 Performance of Obligations; Notice of Default ............. 16
7.12 Restrictions Affecting Borrower ........................... 16
7.13 Use of Receipts ........................................... 16
7.14 Management and Leasing Agreements; Subordination .......... 16
7.15 Additional Documents ...................................... 17
7.16 Borrower's Accounts ....................................... 17
8. LOAN EXPENSES...................................................... 17
9. LENDER'S REPRESENTATIVES........................................... 17
10. EVENTS OF DEFAULT.................................................. 17
11. REMEDIES .......................................................... 19
12. MISCELLANEOUS ..................................................... 19
12.1 Additional Indebtedness ................................... 19
12.2 Additional Acts ........................................... 19
12.3 Loan Agreement Governs .................................... 20
12.4 Additional Advances ....................................... 20
12.5 Amendment; Waiver; Approval ............................... 20
12.6 Notice .................................................... 20
12.7 Benefit; Assignment ....................................... 21
12.8 Governing Law ............................................. 21
12.9 Indemnity ................................................. 21
12.10 Headings................................................... 21
12.11 No Partnership or Joint Venture ........................... 22
12.12 Time is of the Essence .................................... 22
12.13 Invalid Provisions ........................................ 22
12.14 Offset .................................................... 22
12.15 Acts by Lender ............................................ 22
12.16 Binding Provisions ........................................ 22
12.17 Counterparts .............................................. 22
12.18 No Third Party Beneficiary ................................ 22
12.19 Publicity ................................................. 23
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
12.20 JURISDICTION AND VENUE .................................... 23
12.21 WAIVER OF RIGHT TO JURY TRIAL ............................. 23
</TABLE>
iii
<PAGE>
LOAN AGREEMENT
--------------
This Loan Agreement ("Agreement") is dated as of July 8th, 1999, by and
between SUNDANCE CUSTOM HOMES, INC., an Illinois corporation and OTHER
SUBSIDIARY HOLDINGS, INC. , an Illinois corporation (collectively, "Borrowers"),
and LASALLE BANK NATIONAL ASSOCIATION, a national banking association
("Lender").
1. RECITALS.
--------
1.1 The Borrowers are engaged in the businesses of land acquisition,
land development and the construction and sale of attached and detached
single-family homes, including condominiums, and residential loft
condominiums, and commercial development incidental thereto.
1.2 The Borrowers have requested that Lender make a loan to the
Borrowers in the maximum principal amount of $5,000,000 to provide letters
of credit and working capital and other amounts necessary for them to
operate their respective businesses. Lender has agreed to make said loan
subject to the terms and conditions set forth herein.
1.3 In consideration of the mutual agreements set forth herein and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Borrowers and Lender agree as follows:
2. DEFINITIONS. As used in this Agreement, the following terms shall
-----------
have the following meanings:
2.1 "Applicable Laws" shall mean all laws, statutes, ordinances,
rules, regulations, judgments, decrees or orders of any state, federal or
local government or agency which are applicable to the Obligors and/or the
Property.
2.2 "Assignment of Rents" shall mean the Assignment of Rents and
Leases of even date herewith to be made by Borrowers to Lender to secure
the Loan, as the same may be hereafter amended or otherwise modified from
time to time.
2.3 "Buildings" shall mean any building located on the Land.
2.4 "Business Day" shall mean each day excluding Saturdays, Sundays
and any other day on which Lender is closed for business to the public.
2.5 "Default Rate" shall mean the Interest Rate plus five percent
(5%) per annum.
2.6 "Event of Default" shall have the meaning ascribed to it in
Section 10 of this Agreement.
<PAGE>
2.7 "Fixed Rate" shall mean, for any Interest Period, a fixed
interest rate per annum, which rate shall be equal to the LIBOR Rate
applicable to such Interest Period plus 2.5%.
2.8 "Floating Rate" shall mean 1/2% plus the Prime Rate in effect
from time to time.
2.9 "Guarantors" shall mean Maurice Sanderman and Sundance Homes,
Inc., an Illinois corporation.
2.10 "Guaranty" shall mean the guaranties to be made by the
Guarantors in favor of Lender, guaranteeing the repayment of the Loan and
performance of the Borrowers' other obligations under the Loan Documents,
as the same may be hereafter amended or otherwise modified from time to
time.
2.11 "Hazardous Materials" shall mean and include any and all
hazardous, toxic or dangerous substances, wastes and materials and other
pollutants and contaminants as defined or described in any or all
applicable federal, state or local statutes, laws, ordinances, codes,
rules, regulations, orders or decrees now or hereafter regulating, relating
to or imposing liability or standards of conduct with respect to
environmental matters, including, without limitation the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended
by the Superfund Amendments and Reauthorization Act of 1986 (42 U.S.C. (S)
9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C.
(S)1801 et seq.), the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976, as amended by the Solid and
Hazardous Waste Amendments of 1984 (42 U.S.C. (S)6901 et seq.), the Federal
Water Pollution Control Act, as amended by the Clean Water Act of 1977 and
the Water Quality Act of 1987 (33 U.S.C. (S)1251 et seq.), the Toxic
Substances Control Act of 1976 (15 U.S.C. (S)2601 et seq.), the Emergency
Planning and Community Right-to-Know Act of 1986 (42 U.S.C. (S)11001 et
seq.), the Clear Air Act of 1966, as amended (42 U.S.C. (S)7401 et seq.),
the National Environmental Policy Act of 1970 (42 U.S.C. (S)4321 et seq.),
the Rivers and Harbours Act of 1899 (33 U.S.C. (S)401 et seq.), the
Endangered Species Act of 1973, as amended (16 U.S.C. (S)1531 et seq.), the
Safe Drinking Water Act of 1974, as amended (42 U.S.C. (S)300(f) et seq.),
and the Occupational Safety and Health Act of 1970, as amended (29 U.S.C.
(S)651 et seq.) and all rules, regulations and guidance documents
promulgated or published thereunder, all as amended or hereinafter amended.
Without intending to limit the scope or breadth of the foregoing
definition, the term Hazardous Materials shall include asbestos, urea
formaldehyde, polychlorinated biphenyls, crude oil, radioactive materials
and underground storage tanks.
2.12 "Improvements" shall mean the Buildings and other structures and
all paving, lighting, landscaping, utility lines and equipment and all
other site improvements and all other improvements on the Land or hereafter
constructed thereon.
2
<PAGE>
2.13 "Indemnity Agreement" shall mean the Environmental Indemnity
Agreement of even date herewith made by Borrowers and the Guarantors in
favor of Lender, as the same may be hereafter amended or otherwise modified
from time to time.
2.14 "Interest Period" shall have the meaning ascribed to such term
in Section 3.8 below.
2.15 "Interest Rate Determination Date" shall mean the date on which
Lender determines the Fixed Rate applicable to a requested LIBOR Loan or
the continuation thereof. The Interest Rate Determination Date shall be
the second Business Day prior to the first day of the Interest Period
applicable to such LIBOR Loan.
2.16 "Interest Rate" shall mean either the Fixed Rate or the Floating
Rate, as applicable.
2.17 "Land" shall mean the real property legally described on Exhibit
A attached hereto.
2.18 "Letter of Credit" shall have the meaning given to such term in
Section 3.7 below.
2.19 "Letter of Credit Liability" means, at any time, the sum of (i)
the aggregate amount then available to be drawn or that may thereafter be
drawn under then outstanding Letters of Credit, and (ii) all amounts that
have theretofore been drawn on a Letter of Credit and that have not been
reimbursed or repaid to Lender.
2.20 "LIBOR Loan" shall mean each portion of the Loan that is bearing
interest at an applicable Fixed Rate.
2.21 "LIBOR Rate" shall mean,with respect to any LIBOR Loan for the
applicable Interest Period, the per annum rate of interest equal to the
quotient obtained by dividing (i) the rate of interest determined by Lender
to be the average per annum rate at which deposits in United States dollars
are generally offered in the London Interbank Market at 11:00 a.m. London,
England, time, two Business Days before the first day of such Interest
Period, for a period equal to such Interest Period and in the amount of
such LIBOR Loan, by (ii) the difference between 100% and any applicable
reserve requirements (rounded upward to the nearest whole multiple of
1/100th of one percent per annum (including, without limitation, any
applicable maximum reserve requirements for "Eurocurrency Liabilities"
under Regulation D of the Board of Governors of the Federal Reserve System
(or any similar reserves under any successor regulations).
2.22 "LIBOR Rate Taxes" shall have the meaning ascribed to such term
in Section 3.8 below.
3
<PAGE>
2.23 "Loan" shall mean the loan from Lender to Borrowers in an amount
not to exceed $5,000,000 in the aggregate which is to be disbursed pursuant
to this Agreement and which loan shall otherwise be governed by the
provisions hereof.
2.24 "Loan Advance" shall mean a disbursement of all or any portion
of the Loan.
2.25 "Loan Documents" shall mean this Agreement, the Assignment of
Rents, the Mortgage, the Note, the Security Agreement, the Guaranty, the
Indemnity Agreement, and every other document now or hereafter evidencing,
securing or otherwise executed in conjunction with the Loan, together with
all amendments and modifications thereof.
2.26 "Loan Expenses" shall mean the expenses, charges, costs
(including both hard costs and soft costs) and fees relating to the making,
administration, negotiation, documentation or any other aspect of the Loan,
including, without limitation, Lender's reasonable attorneys' fees and
costs in connection with the negotiation, documentation and enforcement of
the Loan, all recording fees and charges, title insurance charges and
premiums, escrow fees, fees of insurance consultants, costs of surveys and
of other bonds required by the Title Company in connection with clearing
title to the Real Property or the issuance of title reports, binders,
policies and the like, and all other costs, expenses, charges and fees
referred to in or necessitated by the terms of this Agreement or any of the
other Loan Documents.
2.27 "Material Adverse Effect" means that any one or more of the
following could occur (i) a material adverse effect on the business
operations, properties, assets or condition (financial or otherwise) of the
Borrowers individually or taken as a whole, (ii) any event or condition
which could materially adversely affect any Borrower=s ability to perform
under the terms of any of the Loan Documents, or (iii) any material adverse
effect on the ability of Lender to enforce the terms of any of the Loan
Documents.
2.28 "Maturity Date" shall mean July 7, 2001.
2.29 "Mortgage" shall mean the Mortgage of even date herewith
encumbering the Real Property to be made by Borrowers to Lender to secure
the Loan, as the same may be hereafter amended or otherwise modified from
time to time.
2.30 "Note" shall mean the note evidencing the Loan to be made by
Borrowers payable to the order of Lender in the original principal amount
of $5,000,000, as the same may be hereafter amended or otherwise modified
from time to time.
2.31 "Obligations" means all Loans, advances, debts, reimbursement
obligations, liabilities, and obligations, for monetary amounts (whether or
not such
4
<PAGE>
amounts are liquidated or determinable) owing at any time by one or more of
the Borrowers to Lender, and all covenants and duties regarding such
amounts, of any kind or nature, present or future, whether or not evidenced
by any note, agreement or other instrument, arising under any of the Loan
Documents. This term includes, without limitation, all interest, prepayment
fees, charges, expenses, attorneys' fees and any other sum chargeable to
one or more of the Borrowers under any of the Loan Documents.
2.32 "Obligors" shall mean Borrowers and the Guarantors
2.33 "Official Body" means any government or political subdivision or
any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or
arbitrator, in each case whether foreign or domestic.
2.34 "Permitted Exceptions" shall mean the exceptions to the title of
the Real Property set forth in the Title Policies and reasonably approved
by Lender .
2.35 "Person" shall mean any individual, firm, corporation, business
enterprise, trust, association, joint venture, partnership, governmental
body or other entity, whether acting in an individual, fiduciary or other
capacity.
2.36 "Personal Property" shall mean and include any and all
furniture, furnishings, appliances, equipment and all fixtures (to the
extent such fixtures are attached in a manner so as not to be deemed to be
part of the Real Property) to be located at the Land which will be used or
usable in connection with the ownership, development or operation of the
Real Property and which will be owned, leased or otherwise possessed by
Borrowers or any of their affiliates.
2.37 "Prime Rate" shall mean the per annum rate of interest announced
or published publicly from time to time by Lender at its principal place of
business in Chicago, Illinois, as its prime or equivalent rate of interest,
which rate is not necessarily the lowest rate of interest charged by Lender
with respect to commercial loans.
2.38 "Principal Balance" shall mean the unpaid principal balance of
the Loan outstanding from time to time.
2.39 "Property" shall mean the Real Property and the Personal
Property and all other tangible and intangible assets benefiting or
otherwise appertaining to the Real Property, including, without limitation,
all of the collateral for the Loan described in the Loan Documents.
2.40 "Real Property" shall mean the Land, the Improvements and all
easements and appurtenants thereto.
5
<PAGE>
2.41 "Security Agreement" shall mean the security agreement
encumbering the Personal Property to be made by the Borrowers to Lender to
secure the Loan, as the same may be hereafter amended or otherwise modified
from time to time..
2.42 "Survey" shall mean the plat of surveys of the Real Property as
described in Section 4.4 below.
2.43 "Title Company" shall mean Ticor Title Insurance Company.
2.44 "Title Policies" shall mean the title insurance policies
described in Section 4.4 below.
2.45 "Unit" means an attached or detached single family residential
dwelling, including a townhome or condominium or loft unit, that is a part
of the Real Property.
2.46 "Unmatured Default" shall mean an event or circumstance that
with the giving of notice, the passage of time, or both, would constitute
an Event of Default.
3. COMMITMENT TO LEND; COMMITMENT FEE.
----------------------------------
3.1 Maximum Loan Amount. Lender agrees to lend to Borrowers, and
-------------------
Borrowers agree to borrow from Lender, an amount not to exceed $5,000,000
in the aggregate for the purposes, upon the terms and subject to the
conditions contained in this Agreement. Notwithstanding anything contained
in this Article to the contrary, Loan Advances shall be limited to such
amounts as Borrowers are eligible to receive pursuant to, and upon
compliance with, the conditions of Article 5 hereof. Borrowers may prepay
all or any part of the Loan at any time and from time to time upon five
days prior written notice to Lender without cost or penalty. Borrowers
shall not be entitled to reborrow portions of the Loan that are repaid or
prepaid pursuant to.
3.2 Loan Advances Evidenced by Note. All Loan Advances hereunder
-------------------------------
shall be evidenced by the Note, which shall be executed and delivered by
Borrowers simultaneously with the execution of this Agreement.
3.3 Partial Releases/Interest Rate and Payment of Interest and
----------------------------------------------------------
Principal.
---------
(a) Notwithstanding anything contained herein to the contrary,
the Borrowers shall have the right to enter into and perform sales
contracts with creditworthy third party purchasers of the Units on a
form contract submitted to and approved in writing by Lender, provided
that (i) no Unmatured Default or Event of Default then exists, and
(ii) the gross sales price for the Unit being sold is not less than
95% of the minimum sales price therefor previously agreed upon in
writing by Lender. The Borrowers shall deliver to Lender a copy of
each fully
6
<PAGE>
signed contract within five days after Lender's request therefor.
Concurrently with the closing of the sale of each Unit, Borrowers
shall pay to Lender an amount equal to the greater of (i) fifty two
percent (52%) of the gross sales price of such Unit or (ii) fifty two
percent (52%) of the appraised value of such Unit as determined by
Lender, whereupon Lender will issue a partial release of the lien of
the Loan Documents covering such Unit.
(b) Except as set forth to the contrary in Section 3.8 below,
the principal balance of the Loan shall bear interest at the Floating
Rate. Commencing on August 1, 1999, and on the first day of each month
thereafter through and including the month in which the Maturity Date
occurs, installments of accrued and unpaid interest shall be due and
payable. The unpaid principal balance of the Loan, if not sooner
declared to be due in accordance with the terms of the Loan Documents,
together with all accrued and unpaid interest thereon and any other
amount due Lender pursuant to this Agreement and the Loan Documents,
shall be due and payable in full on the Maturity Date.
3.4 Default Rate. At any time after the Maturity Date or otherwise
------------
when an Event of Default exists under this Agreement or any of the other
Loan Documents, the Principal Balance and any other amounts then owing by
Borrowers to Lender shall bear interest at the Default Rate.
3.5 Late Charge. If any payment of interest or principal due under
-----------
the Note is not made within five days after such payment is due, then, in
addition to the payment of the amount so due, Borrowers shall pay to Lender
a "late charge" of five cents for each whole dollar so overdue to defray
part of the cost of collecting and handling such late payment.
3.6 Fees. Lender has fully earned a non-refundable loan and
----
administration fee in the amount of $50,000, and, concurrently with the
execution of this Agreement, the unpaid balance of such fee shall be due
and payable by Borrowers, together with an additional $500 closing charges
fee which shall be used by Lender to pay certain costs incurred in
connection with the closing of the Loan.
3.7 Letters of Credit. Provided that no Event of Default or
-----------------
Unmatured Default then exists, Lender agrees, subject to the following
additional conditions, to issue from time to time one or more Letters of
Credit on Lender's standard form and otherwise in form and substance
acceptable to Lender in an aggregate amount not to exceed $850,000;
provided, however, that prior to and as a condition to Lender being
obligated to issue any Letter of Credit, Borrowers shall pay to Lender an
issuance fee equal to 1% of the amount thereof and such issuance fee shall
be deemed to be fully earned upon the payment thereof. Any amounts
disbursed by Lender under a Letter of Credit at any time and from time to
time shall be deemed disbursements of proceeds of the Loan and shall
7
<PAGE>
be due and payable by Borrowers to Lender upon written demand from Lender,
together with interest thereon until paid at the Default Rate. If any
Letter of Credit is outstanding on the Business Day immediately preceding
the Maturity Date of the Loan (or if an amount has then been drawn on a
Letter of Credit which has not been reimbursed or repaid), Lender may
demand delivery of cash collateral in an amount equal to the then
outstanding Letter of Credit Liability, and such cash collateral may be
retained by Lender until such time as the Letter of Credit Liability is
reduced to $0. Lender may apply such cash collateral to the payment of any
amounts thereafter drawn on the Letters of Credit which have not been
reimbursed or repaid to Lender by Borrowers. The failure to deliver such
cash collateral upon demand shall constitute an immediate Event of Default
under the Loan Documents. So long as any Letter of Credit is outstanding,
Lender shall not be required to issue a full release of any of the Loan
Documents. Notwithstanding anything contained herein to the contrary, if
and to the extent any outstanding Letters of Credit are reduced or released
without having been drawn upon, Borrowers shall have the right to borrow
the amount of any such reduction or release, provided that the principal
amount of the Loan outstanding at such time is not greater than 52% of the
appraised value of the Real Property then subject to the lien of the Loan
Documents, as determined by Lender.
3.8 LIBOR Option. Notwithstanding anything to the contrary set forth
------------
in the Amended Revolving Note, Borrowers shall have the option to elect to
have all or a portion of the Loan bear interest at the Fixed Rate, in
accordance with the terms and conditions hereof.
(a) Conversion or Continuation.
--------------------------
(i) Subject to the provisions of Subparagraphs 3.8 (c) and
3.8 (d), Borrowers shall have the option (i) to request that a Loan
Advance be made at the Fixed Rate rather than the Floating Rate, (ii)
to convert at any time the interest rate charged on all or any part of
the Principal Balance of the Loan from the Floating Rate to a Fixed
Rate; or (iii) upon the expiration of any Interest Period applicable
to a LIBOR Loan, to continue all or any portion of the same as a LIBOR
Loan, and the succeeding Interest Period of such continued LIBOR Loan
shall commence on the expiration date of the Interest Period
applicable thereto; provided, that no portion of the outstanding Loan
--------
may be continued as, or be converted into, a LIBOR Loan when any Event
of Default has occurred and is continuing. Any Loan Advance to be
made at a Fixed Rate and any partial conversion or continuation of the
Loan under this Section shall be in a minimum amount of $50,000, and
in integral multiples of $50,000 in excess of that amount.
(ii) If Borrowers request that a Loan Advance bear interest
at the Fixed Rate or if Borrowers desire to convert all or a portion
of the Loan to a LIBOR Loan or to continue all or any portion of a
LIBOR Loan as the same,
8
<PAGE>
Borrowers shall notify Lender no later than 10:00 a.m. (Chicago time)
on the second Business Day prior to the aforementioned request or the
proposed conversion or continuation date. Each notice shall specify
(i) the proposed Loan Advance disbursement date or the conversion or
continuation date (which shall be a Business Day), as applicable, (ii)
the principal amount of the applicable Loan Advance or the principal
amount of the Loan to be converted to or continued as a LIBOR Loan, as
applicable, and (iii) the requested Interest Period. In lieu of
delivering the above-described notice, Borrowers may give Lender
notice by telephone of any proposed LIBOR Loan or the conversion or
continuation of a LIBOR Loan by the time required under this Section,
provided that such notice is confirmed in writing by delivery or fax
to Lender of such notice in no event later than 4:00 p.m. (Chicago
time) on the date of such notice.
(iii) Notice of any proposed LIBOR Loan or of conversion to
or continuation of a LIBOR Loan (or notice by telephone in lieu
thereof) shall be irrevocable and Borrowers shall be bound in
accordance with the terms of such notice.
(iv) If notice of the continuation of a LIBOR Loan is not
delivered by Borrowers in a timely manner, the amount of such LIBOR
Loan shall bear interest at the Floating Rate as of the termination
date of the applicable Interest Period and shall no longer bear
interest at the Fixed Rate unless it is thereafter converted to a new
LIBOR Loan in the manner described above.
(b) Interest Periods. By giving notice as required hereunder,
----------------
Borrowers shall have the option, subject to the other provisions of
this Section, to specify an interest period equal to or less than
ninety (90) days (each an "Interest Period") during which all or a
portion of the Loan shall bear (or, if already a LIBOR Loan, continue
to bear) interest at the LIBOR Rate. The determination of Interest
Periods shall be subject to the following provisions:
(i) In the case of immediately successive Interest
Periods, each successive Interest Period shall commence on the day on
which the immediately preceding Interest Period expires;
(ii) If any Interest Period would otherwise expire on a day
which is not a Business Day, the Interest Period shall be extended to
expire on the next succeeding Business Day (unless the next succeeding
Business Day is in the next calendar month, in which event the
Interest Period shall expire on the immediately preceding Business
Day);
(iii) Borrowers may not select an Interest Period which
terminates later than the maturity date of the Loan;
9
<PAGE>
(iv) There shall be no more than five separate Interest
Periods (and, therefore, no more than five separated LIBOR Loans) in
effect at any one time.
(c) Special Provisions Governing LIBOR Loans.
----------------------------------------
(i) Determination of Interest Rate. On the Interest Rate
------------------------------
Determination Date, Lender shall determine (which determination shall,
absent manifest error, be presumptively correct) the Fixed Rate that
shall apply to the requested LIBOR Loan and shall promptly give notice
thereof to Borrowers. If on any Interest Rate Determination Date
Lender is unable to obtain the applicable LIBOR Rate quotations,
Lender shall give Borrowers prompt notice thereof and the LIBOR Loan
requested shall continue to bear interest (or, in the case of a
requested continuation of a LIBOR Loan, shall commence bearing
interest at the end of the then current Interest Period therefor) at
the Floating Rate.
(ii) Interest Rate Unascertainable, Inadequate or Unfair.
---------------------------------------------------
If, with respect to any Interest Period, (i) any change occurs in any
applicable law or governmental rule, regulation or order (or any
interpretation thereof and including the introduction of any new law
or governmental rule, legislation or order) affecting the interbank
Eurodollar market for such Interest Period, or (ii) other
circumstances affecting the interbank Eurodollar market for such
Interest Period results in the then applicable Fixed Rates not
adequately reflecting the cost to Lender of making or funding the
LIBOR Loans, Lender shall give notice thereof to Borrowers, whereupon
until Lender has determined that the circumstances giving rise to such
inadequacy no longer exist, (A) the right of Borrowers to elect to
have any portion of the Loan bear interest based upon the Fixed Rate
shall be suspended for such Interest Period, and (B) each outstanding
LIBOR Loan shall bear interest at the Floating Rate commencing on the
last day of the then current Interest Period therefor, notwithstanding
any prior election by Borrowers to the contrary.
(d) Illegality. In the event that on any date Lender shall have
----------
reasonably determined that the making or continuation of any LIBOR
Loan has become unlawful by compliance by Lender in good faith with
any law, governmental rule, regulation or order of any governmental
body or authority, then Lender shall promptly give notice to Borrowers
of that determination. Upon the giving of such notice, Borrowers'
right to request of Lender and Lender's obligation to make LIBOR Loans
shall be immediately suspended to the extent specified in such notice,
and if any LIBOR Loans are then outstanding, each such LIBOR Loan
shall immediately commence bearing interest at the Floating Rate. If
Lender determines at any time following its giving of the
aforementioned notice that Lender may lawfully make LIBOR Loans of the
type(s) referred to in
10
<PAGE>
such notice, Lender shall promptly give notice to Borrowers of such
determination, whereupon Borrowers' right to request of Lender and
Lender's obligation to make LIBOR Loans of such type(s) shall be
restored..
(e) Compensation. Borrowers shall compensate Lender, within
------------
three Business Days following Borrowers' receipt of the written
statement described below, for all losses, expenses and liabilities
(including, without limitation, any loss or expense incurred by reason
of liquidation or reemployment of deposits or other funds acquired by
Lender to fund or maintain Lender's LIBOR Loans to Borrowers) which
Lender may sustain in connection with the funding or maintenance of
LIBOR Loans, including, without limitation, expenses and liabilities
incurred (i) if such LIBOR Loans are not made when requested due to
Borrowers' actions or inactions, (ii) if any prepayment of any LIBOR
Loan occurs for any reason on a date which is not the last day of the
applicable Interest Period, (iii) as a consequence of any required
conversion of the interest rate applicable to a LIBOR Loan to a
Floating Rate, or (iv) as a consequence of any other failure by
Borrowers to repay the Loan when required. Lender shall promptly
deliver to Borrowers a written statement as to such losses, expenses
and liabilities, which statement shall be rebuttably presumed correct.
(f) LIBOR Rate Taxes. Borrowers agrees that:
----------------
(i) Additional Payments. Borrowers shall pay, prior to the
-------------------
date on which penalties attach thereto, all present and future stamp
and other taxes, levies, or costs and charges whatsoever imposed,
assessed, levied or collected on or in respect of the Loan solely as a
result of the interest rate being determined by reference to the LIBOR
Rate or any payments of principal, interest or other amounts made on
or in respect of a Loan made to Borrowers when the interest rate is
determined by reference to the LIBOR Rate (all such taxes, levies,
costs and charges being herein collectively called "LIBOR Rate
Taxes"); provided however, that LIBOR Rate Taxes shall not include
-------- -------
income or franchise taxes imposed by any jurisdiction (except that
Borrowers shall be liable for the payment of the amount of any
additional net income or franchise taxes attributable to payments made
by Borrowers pursuant to this Section).
(ii) Indemnity. Borrowers shall indemnify Lender against,
---------
and reimburse Lender on demand for, any LIBOR Rate Taxes paid by
Lender. Lender shall provide Borrowers with appropriate receipts for
any payments or reimbursements made by Borrowers pursuant to this
Section.
4. LOAN DOCUMENTS. Prior to the disbursement of the Loan, each Borrower
--------------
shall execute and/or deliver to Lender those of the following documents and
other items required
11
<PAGE>
to be executed and/or delivered by such Borrower, and shall cause to be executed
and/or delivered to Lender those of the following documents and other items
required to be executed and/or delivered by others, all of which documents and
other items shall contain such provisions as shall be required to conform to
this Agreement and otherwise shall be satisfactory in form and substance to
Lender:
4.1 The Loan Documents.
4.2 UCC financing statements perfecting the security interests
created by the Security Agreement.
4.3 Such insurance policies and certificates (with premiums prepaid)
evidencing builder's risk insurance, all-risk, fire and extended coverage,
hazard and comprehensive liability insurance, including contractual
liability, workmen's compensation insurance, rental loss insurance for not
less than one year, and such other insurance as Lender reasonably requires
covering the Property, in such form, with such endorsements, in such
amounts, with deductibles and with such carriers as shall be acceptable to
Lender, and naming Lender as an additional insured party on all liability
policies and as mortgagee/additional loss payee on the builder's risk and
other property damage policies and containing a prohibition against
cancellation for nonpayment of premiums or any other reason or modification
without thirty days prior written notice to Lender. Any provision of this
Section to the contrary notwithstanding, all insurance policies required to
be carried under this Agreement shall provide expressly that they shall not
be rendered invalid by a waiver of the right of subrogation by any insured
and that the insurer shall have no right to be subrogated to Lender.
Borrowers shall deliver (or cause to be delivered) to Lender either (i) an
original of each such insurance policy, or (ii) a copy of each such policy
certified by the issuing agent as being a true, correct and complete copy
of the original.
4.4 Surveys of the Real Property (the "Surveys") in form and
substance reasonably acceptable to Lender.
4.5 ALTA Loan Policies of Title Insurance (the "Title Policies")
issued by the Title Company in the full amount of the Note insuring that
the Mortgage will be a first priority lien upon the fee simple title to the
Real Property to the extent of advances made by Lender from time to time
under this Agreement, subject to no liens, claims, exceptions or
encumbrances except the Permitted Exceptions and containing the following
endorsements:
(a) ALTA Form 3.0 Zoning Endorsement;
(b) Comprehensive Endorsement No. 1 (ALTA Form 9)
12
<PAGE>
(c) Access Endorsement;
(d) Survey Endorsement;
(e) Contiguity Endorsement, if applicable;
(f) Restrictions Endorsement No. 1, if applicable;
(g) Tie-In Endorsement;
(h) Condominium (or PUD) Endorsement No. 4 (or 5), if
applicable;
(i) Letter of Credit Endorsement;
(j) Mechanics' Lien Endorsement;
(k) Utility Facility Endorsement;
(l) Endorsement deleting the creditors' rights exception;
(m) Usury Endorsement; and
(n) Such additional endorsements as may be reasonably required
by Lender based upon its review of the Title Policies and Surveys.
4.6 Copies of such documents, if any, as Borrowers have provided the
Title Company in connection with the issuance and underwriting of the Title
Policy.
4.7 Copies of all recorded documents described in the Title Policy.
4.8 Current Uniform Commercial Code, federal and state tax lien and
judgment searches, pending suit and litigation searches and bankruptcy
court filings searches covering each Obligor and disclosing no matters
objectionable to Lender.
4.9 Opinion letter from legal counsel for Borrowers and the
Guarantors (which counsel must be approved by Lender with respect to the
issuance of such opinion) opining to the authority of said parties to
execute, deliver and perform their respective obligations under the Loan
Documents, to the validity and binding effect of the Loan Documents and to
such other matters as Lender and its counsel shall require.
4.10 Evidence that (i) no portion of the Real Property is located in
an area designated by the Secretary of Housing and Urban Development as
having special flood hazards, or if any portion of the Real Property is so
located, evidence that flood insurance
13
<PAGE>
is in effect; and (ii) no portion of the Real Property is located in a
federally, state or locally designated wetland or other type of government
protected area.
4.11 Certified copies of the By-Laws and Articles of Incorporation of
each Borrower, together with all amendments thereto, and such resolutions
and other documents as Lender deems appropriate evidencing the authority of
each Borrower and the Guarantors to execute and deliver the Loan Documents
to which such Persons are a party and to perform the obligations
contemplated hereby and thereby.
4.12 Certified copies of all service contracts, development
agreements and other agreements affecting the use, development or operation
of the Property, if any.
4.13 Evidence that the environmental condition of the Property is
satisfactory to Lender. Such evidence shall include, but shall not be
limited to, a Phase I Environmental Audit certified to Borrowers and Lender
and setting forth an asbestos evaluation and other environmental
investigations of the Property and the areas surrounding the Property.
Such testing and investigation shall be performed by an environmental
professional acceptable to Lender in a manner satisfactory to Lender.
4.14 Evidence that, as of the date of the initial Loan Advance, there
has been no material adverse change in the financial or other projections
for the Property, the physical condition of the Property or the financial
condition of the Guarantors since the date of the most recent financial
statements or projections delivered to Lender or the most recent
inspections of the condition of the Property made by Lender, as the case
may be.
4.15 Such other assignments, certificates, opinions and other
documents, instruments and information affecting or relating to Lender's
interest in the Property or the use, operation or development of the
Property as Lender may reasonably require.
5. DISBURSEMENT OF THE LOAN.
------------------------
5.1 Conditions Precedent. In addition to the other conditions set
--------------------
forth herein, the obligation of Lender to make the initial and any
subsequent disbursement of the Loan under this Agreement shall be
conditioned upon and subject to the payment to Lender of all loan fees then
owing from Borrowers to Lender and to satisfaction of all of the following
conditions:
(a) All representations and warranties contained in this
Agreement and in the other Loan Documents shall be true in all
material respects on and as of the date of such disbursement.
14
<PAGE>
(b) Each Borrower shall have performed all of its obligations
under all Loan Documents which are required to be performed on or
prior to the date of such disbursement.
(c) To the extent that any disbursement is to pay for any item
covered by a Letter of Credit, Lender shall have received a
certificate from a duly authorized representative of the beneficiary
of such Letter of Credit approving the request for the disbursement
and amending the Letters of Credit to decrease the amount thereof by
the amount of such disbursement.
(d) No Event of Default shall have occurred that has not been
waived in writing by Lender, and no Unmatured Default shall then
exist.
5.2 Disbursement Requests.
---------------------
(a) Borrowers shall request and Lender shall be required to make
disbursement of the Loan not more frequently than once each calendar
month.
(b) Notwithstanding anything contained herein to the contrary,
Lender shall not be required to make any disbursement of the Loan if
the aggregate amount of the Loan previously disbursed by Lender,
together with the disbursement of the Loan requested by Borrowers and
the then outstanding Letter of Credit Liability, would exceed
$5,000,000.
5.3 Certifications, Representations and Warranties. Each request for
----------------------------------------------
disbursement by Borrowers shall constitute (a) Borrowers' certification
that the representations and warranties contained in Article 6 below are
true and correct in all material respects as of the date of such request,
and (b) Borrowers' certification that Borrowers are in compliance with the
conditions contained in this Article 5.
6. REPRESENTATIONS AND WARRANTIES. In order to induce Lender to execute
------------------------------
this Agreement and to make the Loan, each Borrower represents and warrants to
Lender as follows:
6.1 Borrower. Each Borrower is a corporation duly organized, validly
--------
existing and in good standing under the laws of its jurisdiction of
incorporation and has full corporate power to own, operate and lease its
properties and to carry on its business as now conducted. Each Borrower is
duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which such qualification is required for
the conduct of such Person's business.
15
<PAGE>
6.2 Guarantors. Guarantors have full power and authority to execute
----------
the Loan Documents to which they are a party.
6.3 Title. Each Borrower has good, indefeasible and merchantable
-----
title to and ownership, free and clear of all liens other than Permitted
Encumbrances, of all the assets and properties of every kind and nature
(tangible and intangible, real and personal) required to carry on its
business as presently conducted.
6.4 Corporate Power; Authorization. The execution and delivery by
------------------------------
each Borrower of the Loan Documents (to the extent they are parties
thereto), and the performance of the obligations required thereby, (i) are
within such Person's corporate power; (ii) have been duly authorized by all
necessary or proper corporate action; (iii) are not in contravention of any
provision of such Person's respective certificates or articles of
incorporation or by-laws; (iv) will not, to the best knowledge of the
Borrowers, violate any law or regulation, or any order or decree of any
court or governmental instrumentality; (v) will not conflict with or result
in the breach or termination of, constitute a default under or accelerate
any performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which any Borrower or any subsidiary of
any Borrower is a party or by which any Borrower or any subsidiary of any
Borrower or any of their property is bound; (vi) will not result in the
creation or imposition of any lien upon any of the property of any
Borrower; and (vii) do not require the consent or approval of any Person.
6.5 Execution and Binding Effect. This Agreement and the other Loan
----------------------------
Documents have been duly and validly executed and delivered by each
Borrower and constitute the legal, valid and binding obligation of the
Borrowers, enforceable in accordance with the terms hereof and thereof,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights and
except as may be limited by the exercise of judicial discretion in applying
general principles of equity (regardless of whether considered in a
proceeding in equity or at law).
6.6 Authorizations and Filings. No authorization, consent, approval,
--------------------------
license, exemption or other action by, and no registration, qualification,
designation, declaration or filing with, any Official Body is or will be
necessary in connection with the execution, performance and delivery of
this Agreement, the Notes, any other Loan Document, consummation of the
transactions herein or therein contemplated, performance of or compliance
with the terms and conditions hereof or thereof or to ensure the legality,
validity, and enforceability hereof or thereof.
6.7 Litigation. There is not any condition, event or circumstance
----------
existing, or any litigation, arbitration, governmental or administrative
proceeding, action, examination, claims or demand pending or, to the best
of each Borrower's knowledge
16
<PAGE>
after due inquiry, threatened affecting any Borrower or the Guarantors or
the Property, or involving the validity or enforceability of the Loan
Documents or involving any risk of a judgment or liability which, if
satisfied, would have an adverse effect on the financial condition,
business or properties of each Borrower, the Guarantors or the priority of
the lien of the Mortgage, or which would prevent any Borrower or the
Guarantors from complying with or performing his or its obligations under
this Agreement, the Note, the Guaranty or any of the other Loan Documents
within the time limits set forth therein for such compliance or performance
and no basis for any such matter exists.
6.8 Utilities; Authorities. All utilities necessary for use,
----------------------
operation and occupancy of the Property (including, without limitation,
water, storm sewer, sanitary sewer and drainage, electric, gas and
telephone facilities) are available at the boundaries of the Land (or in
the streets adjoining the Land), and all requirements for the use of such
utilities have been fulfilled. All building, zoning, safety, disabled
persons, health, fire, water district, sewerage and environmental
protection agency permits and other licenses and permits which are required
by any governmental authority for the use, occupancy and operation of the
Property have been obtained by or furnished to the respective Borrower and
are in full force and effect or will be obtained by and maintained in full
force and effect by such Borrower when and as required by any governmental
authority.
6.9 Solvency. Each Obligor is solvent and able to pay such Obligor's
--------
debts as such debts become due, and has capital sufficient to carry on such
Obligor's present business transactions. The value of each Obligor's
property, at a fair valuation, is greater than the sum of such Obligor's
debts. No Obligor is bankrupt or insolvent, nor has any Obligor made an
assignment for the benefit of such Obligor's creditors, nor has there been
a trustee or receiver appointed for the benefit of such Obligor's
creditors, nor has there been any bankruptcy, reorganization or insolvency
proceedings instituted by or against any Obligor, nor will any Obligor be
rendered insolvent by such Obligor's execution, delivery or performance of
the Loan Documents or by the transactions contemplated thereunder.
6.10 Financial Statements. All financial statements submitted to
--------------------
Lender relating to the Borrowers, the Guarantors and the Property are true,
complete and correct, and have been prepared in accordance with sound
accounting principles consistently applied and fairly present the financial
condition of the Person to which they pertain and the other information
therein described and do not contain any untrue statement of a material
fact or omit to state a fact material to the financial statement submitted
or this Agreement. No material adverse change has occurred in the
financial condition of each Borrower, the Guarantors or the Property since
the dates of each such financial statements.
6.11 Compliance with Laws. The use, occupancy and operation of the
--------------------
Property for its intended purposes is not in violatation any Applicable
Laws, any
17
<PAGE>
contractual arrangements with third parties or any covenants, conditions,
easements, rights of way or restrictions of record. Neither Borrowers nor
any agent thereof has received any notice, written or otherwise, alleging
any such violation, which violation has not previously been cured. The
Property is in full compliance and conformity with all zoning requirements,
including without limitation, those relating to setbacks, height, parking,
floor area ratio, fire lanes and percentage of land coverage, and will not
be a non-conforming or special use. No right to any off-site facilities
will be necessary to insure compliance by the Property with all Applicable
Laws.
6.12 Financing Statements. There are no UCC financing statements in
--------------------
effect other than those to be filed and/or recorded by Lender which name
Borrowers as debtor and pertaining to any rights in any of the Personal
Property.
6.13 Lease Agreements. Each Borrower has delivered to Lender true,
----------------
complete and correct copies of each lease and all amendments thereto
(collectively, the "Leases") and a certified rent roll, in effect as of the
date hereof. The Leases are in full force and effect, unamended. The
tenants under each of the Leases are legally required to pay all sums and
perform all obligations set forth in the Leases, without concessions,
abatements or offsets. None of the tenants under the Leases have asserted
any offsets, defenses or claims against rent payable by them or other
performance or obligations otherwise due from them under any of the Leases.
None of the tenants under the Leases are in default in the payment of any
sums or to any Borrower's knowledge, in the performance of any other
obligations required of them under their Leases, nor does any Unmatured
Default then exist. No Borrower is in default in the performance of any of
its obligations under the Leases. Each tenant under the Leases is in full
and complete possession of the premises demised under the Lease, such
possession having been delivered by a Borrower pursuant to the Lease and
having been accepted by the tenant. The improvements to any premises that
any Borrower is required to furnish under a Lease have been completed in
all respects in accordance with the requirements under the Leases, and the
premises demised under each Lease are open for the use of the tenant, its
customers, employees and invitees. All contributions required to be paid
by any Borrower to any tenant in connection with improvements required
under any Lease have been paid in full. All duties or obligations of any
Borrower required under any Lease which were an inducement to such tenant
to enter into such Lease have been fully performed. No tenant is entitled
to any further rent credit, rental abatement, rebate, allowance or other
inducement or concession under or with respect to any Lease. Each Lease
constitutes the entire rental agreement between the appropriate Borrower
and said tenant with respect to the premises demised under said lease and
no Lease has been amended, modified, supplemented or superseded, except as
disclosed to Lender. No rent under any Lease has been prepaid, except the
current month's rent. Except as expressly set forth in the Leases, no
tenant has any outstanding options or rights of first refusal to purchase
all or any portion of the Property or to purchase or lease any other part
of the Property, nor does any tenant have any options or rights to
terminate any Lease. To the best
18
<PAGE>
knowledge of each Borrower, no actions, whether voluntary or involuntary,
are pending against any tenant or any guarantor of any Lease under any
bankruptcy, insolvency or similar laws of the United States or any state
thereof. Each tenant is current with respect to, and is paying the full
rent and other charges stipulated in the Leases (including, without
limitation, required operating and tax payments).
6.14 Responsible Property Transfer Act. There are no facilities on
---------------------------------
the Real Estate that are subject to reporting under (S)312 of the federal
Emergency Planning and Community Right-To-Know Act of 1986, 43 U.S.C.
(S)11022, and federal regulations promulgated thereunder. The Real Estate
does not contain any underground storage tanks.
6.15 No Defects. There are no defects in the design or construction
----------
of any Building which would have a material adverse affect on its value,
safety or intended use.
6.16 Additional Agreements. There are no management, leasing,
---------------------
development or other agreements in existence that affect the Property.
6.17 Year 2000. The Borrowers have reviewed the areas within their
---------
business and operations which could be adversely affected by, and have
developed or are developing a program to address on a timely basis, the
"Year 2000 Problem" (that is, the risk that computer applications used by
the Borrowers may be unable to recognize and perform properly date-
sensitive functions involving certain dates prior to and any date on or
after December 31, 1999), and have made related appropriate inquiry of
material suppliers and vendors. Based on such review and program, each
Borrower believes that the "Year 2000 Problem" will not have a material
adverse effect on such Borrower or its operations or business. From time to
time, at the request of Lender, Borrowers shall provide to the Lender such
updated information or documentation as is requested regarding the status
of their efforts to address the Year 2000 problem
7. BORROWERS' COVENANTS.
--------------------
7.1 Compliance with Laws. Each Borrower shall comply or cause
--------------------
compliance with all Applicable Laws governing the development, use and
operation of the Property. Evidence of such compliance shall be submitted
to Lender on request.
7.2 Preservation of Existence and Franchises. Each Borrower shall
----------------------------------------
maintain its corporate existence, rights and franchises in full force and
effect in its jurisdiction of incorporation. Each Borrower shall qualify
and remain qualified as a foreign corporation in each jurisdiction where
required by the nature of such entity's business.
7.3 Inspection. Upon reasonable prior written or oral notice (which
----------
shall not be required in the event of an emergency), Borrowers shall permit
inspection of the
19
<PAGE>
Property by Lender and any other agent or designee of Lender. In addition,
upon reasonable prior written or oral notice (which shall not be required
in the event of an emergency), Borrowers shall permit Lender and/or its
agents and designees access to and the right to inspect, audit and copy all
books, records, contracts and other documents and information relating to
any Borrower, the Guarantors or the Property. Lender shall use reasonable
efforts to keep confidential all information and documentation obtained by
Lender in connection with such audits and inspections, except to the extent
that Lender determines, in its reasonable discretion, a need to disclose
same; provided, however, under no circumstances shall Lender have any
liability to Borrowers in the event of an unintentional disclosure or
disclosure deemed necessary by Lender. All such books, records and accounts
of operations relating to the Property shall be kept in accordance with
sound accounting practices consistently applied. Borrowers shall promptly
respond to any inquiry from Lender for information with respect to the
Property, which information may be verified by Lender at Borrowers'
expense; provided, however, that Lender shall at all times be entitled to
rely upon any statements or representations made by any Borrower or any
agent thereof.
7.4 Mechanics' Liens. Borrowers shall not permit any mechanics' lien
----------------
claims to be filed or otherwise asserted against the Property or against
any funds due any contractor or subcontractor, and Borrowers shall promptly
(and in any event within fifteen days after any Borrower has received
notice of such filing) discharge or cause to be discharged the same in case
of the filing of any claims for lien or proceedings for the enforcement
thereof; provided that in connection with any such lien or claim which
Borrowers may in good faith desire to contest, Borrowers may contest the
same by appropriate legal proceedings diligently prosecuted, but only if
Borrowers shall furnish to the Title Company such security or indemnity as
the Title Company requires to induce the Title Company to issue an
endorsement to the Title Policy insuring over the exception created by such
lien, and provided further, that Lender shall not be required to make any
further disbursements of the Loan until any mechanics' lien claims have
been so insured against by the Title Company.
7.5 Financial Accounting Practices. Each Borrower shall make and
------------------------------
keep books, records and accounts which, in reasonable detail, accurately
and fairly reflect its transactions and dispositions of its assets and
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that (a) transactions are executed in accordance with
management's general or specific authorization, (b) transactions are
recorded as necessary (i) to permit preparation of financial statements
(other than monthly financial statements) in conformity with GAAP and (ii)
to maintain accountability for assets, (c) access to assets is permitted
only in accordance with management's general or specific authorization and
(d) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect
to any differences.
20
<PAGE>
7.6 Government Authorizations. Each Borrower shall at all times
-------------------------
obtain and maintain in force all authorizations, consents, approvals,
licenses, exemptions and other actions by, and all registrations,
qualifications, designations, declarations and other filings with, any
Official Body necessary in connection with (i) the execution and delivery
of this Agreement, the Notes and/or the other Loan Documents, consummation
of the transactions herein or therein contemplated, performance of or
compliance with the terms and conditions hereof or thereof or to ensure the
legality, validity and enforceability hereof or thereof or (ii) the
ownership and operation of the properties of any Borrower and the conduct
of their respective business.
7.7 Closings through Title Insurer. Each Borrower shall close the
------------------------------
sale of any home, condominium, townhome or Unit owned by such Borrower only
through the Title Insurer acting as disbursing agent or escrow agent in
connection with such sale in accordance with the terms of the Disbursement
Agreement.
7.8 Appraisals. Appraisals on each parcel of real property
----------
constituting Property may be obtained by Lender at the Borrowers' sole cost
and expense at any time that Lender reasonably believes a material
financial change has occurred with respect to the Borrowers or such
Property.
7.9 Release by Lender. With respect to the matters set forth in
-----------------
Section 7.4 above, if any Borrower shall (a) fail promptly to discharge any
asserted liens or claims, or (b) fail promptly to contest asserted liens or
claims or to give security or indemnity in the manner provided in Section
7.3 above, or (c) having commenced to contest the same, and having given
such security or indemnity, fail to prosecute such contest with diligence,
or to maintain such indemnity or security so required by the Title Company
for its full amount, or (d) upon adverse conclusion of any such contest,
fail promptly to cause any judgment or decree to be satisfied and lien to
be released, then Lender may, but shall not be required to, procure the
release and discharge of any such claim and any judgment or decree thereon
and, further, may, in its sole discretion, effect any settlement or
compromise of the same, or may furnish such security or indemnity to the
Title Company, and any amounts so expended by Lender, including premiums
paid or security furnished in connection with the issuance of any surety
company bonds, shall be deemed to constitute disbursements of the proceeds
of the Loan hereunder and shall bear interest from the date so disbursed
until paid at the Default Rate. In settling, compromising or discharging
any claims for lien, Lender shall not be required to inquire into the
validity or amount of any such claim.
7.10 Financial Statements; Reports. Borrowers will from time to time
-----------------------------
furnish to Lender such information and reports, financial and otherwise,
concerning each Obligor and the operation of the Property as Lender
reasonably requires, including, without limitation, the following:
21
<PAGE>
(a) Within ninety days after the end of each fiscal year,
compiled financial statements of the Property on a form acceptable to
Lender, setting forth the information therein required as of December
31 of the immediately preceding year, containing income and expense
statements and a balance sheet. The financial statements shall be
prepared by an independent accounting firm in accordance with
generally accepted accounting principles consistently applied and
shall be certified by the chief financial officer of Borrowers as
fairly and accurately presenting the information contained therein.
(b) Within ninety days after the end of each fiscal year,
financial statements and the federal and state income tax returns for
each Obligor, such financial statements to be on Lender's standard
form or another form acceptable to Lender, setting forth the
information therein required as of December 31 of the immediately
preceding year, and certified by such Obligor as fairly and accurately
presenting the information contained therein.
(c) Within thirty days after requested by Lender, a rent roll
covering all leases of space in the Property, on a form acceptable to
Lender, and certified by the chief financial officer of Borrowers as
fairly and accurately presenting the information contained therein,
together with conformed copies of all leases of space in the Property
not previously delivered to Lender.
7.11 Affirmation of Representations and Warranties. Each Borrower
---------------------------------------------
agrees that all representations and warranties of Borrower contained in
Article 6 hereof shall remain true in all material respects at all times
until the Loan is repaid in full.
7.12 Title. Except for (i) the Mortgage and other security for the
-----
Loan, (ii) the lien of general real estate taxes payment of which is not
yet due, (iii) mechanics' liens which are contested in the manner permitted
in Paragraphs 7.4 above, and (iv) any other Permitted Exceptions, each
Borrower shall keep its fee simple title in the Property free and clear of
all liens, claims and encumbrances, whether senior or junior to or at
parity with the Mortgage.
7.13 Proceedings Affecting Property. If any proceedings are filed
------------------------------
seeking to enjoin or otherwise prevent or declare invalid or unlawful the
occupancy, use, maintenance or operation of the Property, or any portion
thereof, Borrowers shall cause such proceedings to be vigorously contested
in good faith, and in the event of an adverse ruling or decision, prosecute
all allowable appeals therefrom, and shall, without limiting the generality
of the foregoing, resist the entry or seek the stay of any temporary or
permanent injunction that may be entered, and use its best efforts to bring
about a favorable and speedy disposition of all such proceedings. All such
proceedings, including without limitation, all of Lender's costs, and fees
and disbursements of Lender's counsel in connection with any such
proceedings, whether or not Lender is a
22
<PAGE>
party thereto, shall be at Borrowers' expense. To the extent that Lender
incurs any such expenses, including attorneys' fees and fees and charges
for court costs, bonds and the like, Borrowers shall reimburse Lender for
such expenses and the amount due Lender shall bear interest from the date
so incurred by Lender until repaid to Lender at the Default Rate and shall
be payable to Lender on demand. The foregoing provisions of this Section
shall not limit or affect the provisions of Section 9(i) below.
7.14 Disposal and Encumbrance of Property. Except as expressly
------------------------------------
permitted pursuant to Section 3.3 above, Borrowers shall not, without
Lender's prior written consent, suffer, permit or enter into any agreement
for any sale, lease, transfer, or in any way encumber or dispose of or
grant or suffer any security or other assignment (collateral or otherwise)
of or in all or any portion of the Property. Any consent given by Lender
or any waiver of default under this Section, shall not constitute a consent
to, or waiver of any right, remedy or power of Lender under any subsequent
default hereunder.
7.15 Insurance. Borrowers shall pay all premiums on all insurance
---------
policies required from time to time under this Agreement, and thirty days
prior to expiration of any such policies, Borrowers shall furnish to
Lender, with premiums prepaid, additional and renewal policies in form, and
with companies, coverage, deductibles and amounts satisfactory to Lender.
In the event of failure by Borrowers to provide such insurance, Lender may,
but shall not be required to, place insurance and treat the amounts
expended therefor as disbursements of Loan proceeds and such amounts from
the date so expended by Lender until repaid to Lender shall bear interest
at the Default Rate.
7.16 Performance of Obligations; Notice of Default. Each Borrower
---------------------------------------------
shall promptly and fully perform and comply in all respects with the
obligations, terms, agreements, provisions and requirements of this
Agreement and the other Loan Documents and all other documents and
instruments relating thereto and will not permit to occur any default or
breach hereunder or thereunder. Borrowers shall promptly give to Lender
notice of the occurrence of any Unmatured Default or of any event that
could have a Material Adverse Effect on any security for the Loan or on any
Borrower's ability to perform its obligations under this Agreement or any
of the other Loan Documents or on the Guarantors' ability to perform their
obligations under the Guaranty and the other Loan Documents to which they
are a party.
7.17 Restrictions Affecting Borrowers. Each Borrower covenants and
--------------------------------
agrees that, without the prior written consent of Lender, there shall not
occur: (i) any amendment or modification of the by-laws or articles of
incorporation of any Borrower. At all times prior to the repayment of the
Loan, (A) Borrowers shall not make or permit any distributions of cash flow
or cash proceeds to any partner, subpartner, member, shareholder, officer,
director or affiliate of any member of any Borrower and all excess cash
flow from the Property shall be paid to Lender and applied to the repayment
of the Principal Balance; (C) Borrowers shall not enter into any contract
or agreement for the
23
<PAGE>
provision of services or otherwise with respect to the Property with any
partner, subpartner, member, shareholder, officer, director or affiliate of
any member of a Borrower unless such contract or agreement is an arms-
length, market rate agreement and is cancelable upon thirty days written
notice from any owner of the Property; and (D) Borrowers shall not be
dissolved or its existence terminated.
7.18 Use of Receipts. Borrowers shall cause all rents and other
---------------
income and receipts realized and received by any Borrower, if any, from and
in connection with the Property to be used for the purpose of paying the
actual costs and expenses incurred by Borrowers in connection with the
ownership, operation, management and repair of the Property, including
without limitation, operating expenses, real estate taxes, insurance
premiums and interest on the Loan.
7.19 Management and Leasing Agreements; Subordination. Borrowers
------------------------------------------------
shall not amend, extend, substitute or enter into any new management or
leasing agreement covering all or any portion of the Property without
Lender's prior written consent. In the event that Lender grants such
consent, Borrowers shall cause the manager or leasing broker under said
agreement to enter into an agreement with Lender, acceptable in form and
substance to Lender, pursuant to which said manager or broker subordinates
its liens for unpaid fees to the liens of the Mortgage and the other Loan
Documents.
7.20 Additional Documents. Borrowers shall not execute or record any
--------------------
document pertaining to, affecting or running with all or any portion of the
Property without the prior written approval of Lender of the form and
substance of such documents, which approval shall not be unreasonably
withheld.
7.21 Borrowers' Accounts. Each Borrower shall maintain the
-------------------
operating, security deposit and reserve accounts for the Property with
Lender and pledge the same to Lender as security for the Loan.
8. LOAN EXPENSES. Borrowers agree to pay all of the Loan Expenses. Any
-------------
Loan Expenses paid by Lender shall bear interest commencing on the date demand
for repayment thereof is made by Lender until repaid to Lender at the Default
Rate and shall be paid by Borrowers upon demand, or may be paid by Lender at any
time by disbursement of proceeds of the Loan. Any Loan Expenses paid by Lender
shall be reimbursed to Lender by Borrowers regardless of whether there shall be
any disbursements of the Loan.
9. LENDER'S REPRESENTATIVES. Lender, at Borrowers' expense, shall have
------------------------
the right to engage personnel in connection with negotiation, documentation,
administration and servicing of the Loan.
24
<PAGE>
10. EVENTS OF DEFAULT. An Event of Default shall mean the occurrence or
-----------------
existence of one or more of the following events or conditions (whatever the
reason for such Event of Default and whether voluntary, involuntary or effected
by operation of Law):
(a) Payment. The Borrowers shall fail to pay (i) any interest on the
-------
Loan or principal when due (whether resulting from maturity, declaration or
otherwise), (ii) any Obligation payable on demand within five days after
such demand, and/or (iii) any other Obligation within ten days after
written receipt of notice thereof; or
(b) Misrepresentation. Any representation or warranty made by a
-----------------
Borrower under this Agreement or any Loan Document or any statement made by
a Borrower in any financial statement, certificate, report, exhibit or
document furnished to Lender pursuant to this Agreement or any other Loan
Document shall prove to be false or misleading in any material respect; or
(c) General Covenant Default. Any Borrower shall breach any other
------------------------
covenant, condition or provision hereof or of any other Loan Document and
such breach shall not have been remedied for a period of thirty days after
the earlier of a Borrower's knowledge or notice thereof to such Borrower
from Lender; provided, however, that if such breach by its nature cannot
reasonably be cured within such thirty days, then no Event of Default shall
exist hereunder if such Borrower diligently commences and continues to
pursue such remedy, provided that (i) such breach is capable of being
cured, (ii) such breach does not cause any Material Adverse Effect, and
(iii) in no event shall the period within which such Borrower may attempt
to remedy such breach extend beyond ninety days from the date of the notice
relating thereto, or such Borrower's knowledge thereof. The foregoing cure
period is intended only to apply in circumstances not referred to in any of
the other paragraphs of this Section, and a Borrower's right to a grace or
cure period, if any, with respect to such other circumstances are to be
governed by the provisions of such other paragraphs; or
(d) Judgments. One or more final judgments for the payment of money
---------
shall have been entered against any Borrower or the Borrowers, which
judgment or judgments exceed $250,000 in the aggregate (exclusive of those
judgments for which the Borrowers' insurer has acknowledged coverage), and
such judgment or judgments shall have remained undischarged and unstayed
for a period of sixty consecutive days; or
(e) Garnishment or Attachment against Assets. A writ or warrant of
----------------------------------------
attachment, garnishment, execution, distraint or similar process shall have
been issued against any of the assets of any Borrower which shall have
remained undischarged and unstayed for a period of sixty consecutive days;
or
25
<PAGE>
(f) Failure to Obtain Consents or Approvals. Any authorization,
---------------------------------------
consent, approval, license, exemption, registration, qualification,
designation, declaration, filing or other action or undertaking now or
hereafter made by or with any Official Body in connection with this
Agreement, a Note or any other Loan Document or any such action or
undertaking now or hereafter necessary to make this Agreement, a Note or
any other Loan Document legal, valid, enforceable and admissible in
evidence is not obtained or shall have ceased to be in full force and
effect or shall have been modified or amended or shall have been held to be
illegal or invalid; or
(g) Involuntary Bankruptcy. A proceeding shall have been instituted
----------------------
in respect of a Borrower:
(i) seeking to have an order for relief entered in respect of
such Person, or seeking a declaration or entailing a finding that such
Person is insolvent or a similar declaration or finding, or seeking
dissolution, winding-up, charter revocation or forfeiture,
liquidation, reorganization, arrangement, adjustment, composition or
other similar relief with respect to such Person, its assets or its
debts under any law relating to bankruptcy, insolvency, relief of
debtors or protection of creditors, termination of legal entities or
any other similar law now or hereafter in effect, or
(ii) seeking appointment of a receiver, trustee, custodian,
liquidator, assignee, sequestrator or other similar official for such
Person or for all or any substantial part of its property,
and such proceeding shall result in the entry, making or grant of any such
order for relief, declaration, finding, relief or appointment, or such
proceeding shall remain undismissed and unstayed for a period of sixty
consecutive days; or
(h) Insolvency; Voluntary Bankruptcy. Any Borrower shall become
--------------------------------
insolvent or admit in writing its inability to pay its debts as they
mature, or otherwise become generally unable to pay its debts as they
become due, or voluntarily suspend transaction of business or cease to
conduct its business as now conducted (whether voluntarily or
involuntarily), or make a general assignment for the benefit of creditors,
or consent to any such order for relief, declaration, finding or relief
described therein, or consent to any such appointment or to the taking of
possession by any such official of all or any substantial part of its
property whether or not any such proceeding is instituted, or dissolve,
windup or liquidate itself or any substantial part of its property, or take
any action in furtherance of any of the foregoing; or
(i) Loss of Permit. Any permit material to the business, operations
--------------
or financial condition of any Borrower shall be terminated, suspended or
revoked; or
26
<PAGE>
(j) Uninsured Loss. There shall occur any uninsured damage to, or
--------------
loss, theft, or destruction of, any of the properties or assets of any
Borrower in excess of $250,000; or
(k) Government Liens. A notice of lien or assessment is filed or
----------------
recorded with respect to all or any of any Borrower's assets by the United
States, or any department, agency or instrumentality thereof, or by any
state, county, municipal or other governmental agency, including, without
limitation, or if any taxes or debts owing at any times hereafter to any
one of these becomes a lien or encumbrance upon any such Person's assets
and the same is not released within thirty days after the same becomes a
lien or encumbrance; provided that such Person shall have the right to
contest by appropriate proceedings any such lien, levy or assessment if
such Person provides Lender with a bond or indemnity satisfactory to Lender
assuring the payment of such lien, levy or assessment; or
(l) Unreimbursed Letter of Credit Draw. Lender is not reimbursed by
----------------------------------
the Borrowers for a draft drawn under a Letter of Credit issued hereunder
on the date demand is made for such reimbursement by Lender;
(m) Loss of Priority. The Loan Documents after delivery thereof shall
----------------
for any reason (other than pursuant to the terms thereof) cease to create a
valid and perfected first priority lien on the Property (subject to
Permitted Encumbrances) purported to be covered hereby or thereby.
11. REMEDIES. Upon the occurrence of any Event of Default, Lender, in
--------
addition to availing itself of any remedies conferred upon it at law or in
equity and by the terms of the Note, the Mortgage and the other Loan Documents,
may pursue any one or more of the following remedies first, concurrently or
successively with each other and with any other available remedies, it being the
intent hereof that none of such remedies shall be to the exclusion of any
others:
(a) Take possession of all or a portion of the Property and do
anything necessary or desirable in Lender's sole judgment to fulfill the
obligations of Borrowers hereunder. All sums expended by Lender pursuant
to this Article 11 shall be deemed to have been paid to Borrowers and
secured by the Mortgage and the other Loan Documents, and shall bear
interest at the Default Rate until repaid to Lender.
(b) Withhold further disbursements of proceeds of the Loan.
(c) Declare the unpaid indebtedness evidenced by the Note to be
immediately due and payable.
27
<PAGE>
(d) Apply the balance of any deposits made with Lender toward the
repayment of the Loan.
12. MISCELLANEOUS.
-------------
12.1 Additional Indebtedness. If any advances or payments made by
-----------------------
Lender pursuant to this Agreement or any other Loan Document, together with
disbursements of the Loan, shall exceed the aggregate face amount of the
Note, all such advances and payments shall constitute additional
indebtedness secured by the Mortgage and all other security for the Loan,
and shall bear interest at the Default Rate from the date advanced until
paid.
12.2 Additional Acts. Borrowers shall, upon request, execute and
---------------
deliver such further instruments and documents and do such further acts and
things as may be reasonably required to provide to Lender the evidence of
and security for the Loan contemplated by this Agreement.
12.3 Loan Agreement Governs. In the event of any inconsistency
----------------------
between any provision of this Agreement and any provision of any other Loan
Document, the provision of this Agreement shall govern; provided, however,
that the provisions of all of the Loan Documents shall be construed as an
integrated set of provisions governing the Loan and, accordingly, shall be
interpreted and construed liberally to give the maximum validity,
enforceability and effect to all of such provisions.
12.4 Additional Advances. If an Event of Default shall occur, Lender
-------------------
may, but shall not be obligated to, take any and all actions to cure such
default, and all amounts expended in so doing, all Loan Expenses and all
other amounts paid or advanced by Lender pursuant to the Loan Documents,
and all other amounts advanced by Lender in connection with preserving any
security for the Loan, shall constitute additional advances of the Loan,
shall be secured by the Mortgage and all other security for the Loan, and
shall bear interest at the Default Rate from the date advanced until paid.
12.5 Amendment; Waiver; Approval. This Agreement shall not be
---------------------------
amended, modified or supplemented without the written agreement of each
Borrower and Lender at the time of such amendment, modification or
supplement. No waiver of any provision of this Agreement or any of the
other Loan Documents shall be effective unless set forth in writing signed
by the party making such waiver, and any such waiver shall be effective
only to the extent therein set forth. Failure by Lender to insist upon
full and prompt performance of any provisions of this Agreement or any of
the other Loan Documents, or to take action in the event of any breach of
any such provision or upon the occurrence of any Event of Default, shall
not constitute a waiver of any rights of Lender, and Lender may at any time
thereafter exercise all available rights and remedies with respect to such
breach or Event of Default. Receipt by Lender of any instrument or
document shall not
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constitute or be deemed to be an approval thereof. Any approvals required
under any of the other Loan Documents must be in writing, signed by Lender
and directed to a Borrower.
12.6 Notice. All notices, communications and waivers under this Loan
------
Agreement shall be in writing and shall be (i) delivered in person or (ii)
mailed, postage prepaid, either by registered or certified mail, return
receipt requested, or (iii) sent by overnight express carrier, addressed in
each case as follows:
To Lender: LaSalle Bank National Association
135 South LaSalle Street
Chicago, Illinois 60603
Attn: Mr. Jason Costello
With copy to: Schwartz, Cooper, Greenberger & Krauss, Chtd.
180 North LaSalle Street, Suite 2700
Chicago, Illinois 60601
Attn: Martin Behn, Esq.
To Borrower: c/o Sundance Homes, Inc.
70 East Lake Street, Suite 1600
Chicago, Illinois 60601
Attn: Mr. Joseph R. Atkin
With copy to: Meltzer, Purtill & Stelle
1515 East Woodfield Road, Suite 250
Schaumburg, Illinois 60173
Attn: William J. Mitchell, Esq.
or to any other address as to either of the parties hereto, as such party
shall designate in a written notice to the other party hereto. All notices
sent pursuant to the terms of this Section shall be deemed received (i) if
personally delivered, then on the date of delivery, (ii) if sent by
overnight, express carrier, then on the next Business Day immediately
following the day sent, or (iii) if sent by registered or certified mail,
then on the earlier of the third Business Day following the day sent or
when actually received.
12.7 Benefit; Assignment. The rights, powers and remedies of Lender
-------------------
under this Agreement shall inure to the benefit of Lender and its
successors and assigns. The rights and obligations of Borrowers under this
Agreement may not be assigned and any purported assignment by Borrowers
shall be null and void.
12.8 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Illinois.
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12.9 Indemnity. Each Borrower agrees to indemnify, defend and hold
---------
Lender harmless from and against any and all liabilities, obligations,
losses, damages, claims, costs and expenses (including reasonable
attorneys' fees and court costs) of whatever kind or nature which may be
imposed on, incurred by or asserted against Lender at any time which relate
to or arise from the offer for sale or sale of any interest in any
Borrower, the acquisition or sale or offer for sale of all or any portion
of the Property and/or the ownership, use, operation or maintenance of the
Property, including, without limitation, any brokerage commissions or
finder's fees asserted against Lender with respect to the making of the
Loan or the acquisition of the Property; provided, however, that the
foregoing indemnity shall not extend to any liabilities, obligations,
claims, losses, costs, damages or expenses resulting from the gross
negligence or willful misconduct of Lender.
12.10 Headings. The titles and headings of the articles, sections
--------
and paragraphs of this Agreement have been inserted as a matter of
convenience of reference only and shall not control or affect the meaning
or construction of any of the terms or provisions of this Agreement.
12.11 No Partnership or Joint Venture. Lender, by executing and
-------------------------------
performing this Agreement shall not become a partner or joint venturer with
Borrowers or any member of Borrowers or any of their respective associates
or affiliates and all inspections of the Property herein provided for are
for the sole benefit of Lender.
12.12 Time is of the Essence. Time is of the essence of the payment
----------------------
of all amounts due Lender under the Loan Documents and performance and
observance by Borrowers of each covenant, agreement, provision and term of
this Agreement and the other Loan Documents.
12.13 Invalid Provisions. In the event that any provision of this
------------------
Agreement is deemed to be invalid by reason of the operation of law, or by
reason of the interpretation placed thereon by any administrative agency or
any court, Borrowers and Lender shall negotiate an equitable adjustment in
the provisions of the same in order to effect, to the maximum extent
permitted by law, the purpose of this Agreement and the validity and
enforceability of the remaining provisions, or portions or applications
thereof, shall not be affected thereby and shall remain in full force and
effect.
12.14 Offset. Without limitation of any other right or remedy of
------
Lender hereunder or provided by law, any indebtedness relating to the
Property or its operation and now or hereafter owing to Borrowers by Lender
(including, without limitation, any amounts on deposit in any demand, time,
savings, passbook or like account maintained by Borrowers with Lender) may
be offset and applied by Lender hereunder, or under the Note, the Mortgage
or any of the other Loan Documents.
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12.15 Acts by Lender. Notwithstanding anything herein contained to
--------------
the contrary, Lender will not be required to make any disbursement or
perform any other act under this Agreement if, as a result thereof, Lender
will violate any law, statute, ordinance, rule, regulation or judicial
decision applicable thereto.
12.16 Binding Provisions. The covenants, warranties, agreements,
------------------
obligations, liabilities and responsibilities of Borrowers under this
Agreement shall be binding upon and enforceable against each Borrowers and
its legal representatives, administrators, successors and permitted
assigns.
12.17 Counterparts. This Agreement may be executed in counterparts,
------------
and all said counterparts when taken together shall constitute one and the
same Agreement.
12.18 No Third Party Beneficiary. This Agreement is only for the
---------------------------
benefit of the parties hereto and their permitted successors and assigns.
No other person or entity shall be entitled to rely on any matter set forth
herein without the prior written consent of such parties.
12.19 Publicity. Subject to compliance with Applicable Laws, Lender
---------
reserves the right to publicize the making of the Loan in any manner it
deems appropriate, including, without limitation, advertisements in trade
journals and newspapers.
12.20 JURISDICTION AND VENUE. EACH BORROWER HEREBY AGREES THAT ALL
----------------------
ACTIONS OR PROCEEDINGS INITIATED BY ANY BORROWER AND ARISING DIRECTLY OR
INDIRECTLY OUT OF THIS LOAN AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL BE
LITIGATED IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS, OR THE UNITED
STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS OR, IF LENDER
INITIATES SUCH ACTION, ANY COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION
AND WHICH HAS JURISDICTION. EACH BORROWER HEREBY EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING
COMMENCED BY LENDER IN ANY OF SUCH COURTS, AND HEREBY WAIVES PERSONAL
SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED
THEREIN, AND AGREES THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER
PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO
A BORROWER AT THE ADDRESS TO WHICH NOTICES ARE TO BE SENT PURSUANT TO THIS
LOAN AGREEMENT. EACH BORROWER WAIVES ANY CLAIM THAT CHICAGO, ILLINOIS OR
THE NORTHERN DISTRICT OF ILLINOIS IS AN INCONVENIENT FORUM OR AN IMPROPER
FORUM BASED ON LACK OF VENUE. SHOULD ANY BORROWER, AFTER BEING SO SERVED,
FAIL TO
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APPEAR OR ANSWER TO ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED
WITHIN THE NUMBER OF DAYS PRESCRIBED BY LAW AFTER THE MAILING THEREOF, SUCH
BORROWER SHALL BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE
ENTERED BY LENDER AGAINST SUCH BORROWER AS DEMANDED OR PRAYED FOR IN SUCH
SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE EXCLUSIVE CHOICE OF FORUM FOR
EACH BORROWER SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE
ENFORCEMENT BY LENDER OF ANY JUDGMENT OBTAINED IN ANY OTHER FORUM OR THE
TAKING BY LENDER OF ANY ACTION TO ENFORCE THE SAME IN ANY OTHER APPROPRIATE
JURISDICTION, AND EACH BORROWER HEREBY WAIVES THE RIGHT, IF ANY, TO
COLLATERALLY ATTACK ANY SUCH JUDGMENT OR ACTION.
12.21 WAIVER OF RIGHT TO JURY TRIAL. LENDER AND EACH BORROWER
-----------------------------
ACKNOWLEDGE AND AGREE THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS LOAN
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR WITH RESPECT TO THE TRANSACTIONS
CONTEMPLATED HEREIN AND THEREIN WOULD BE BASED UPON DIFFICULT AND COMPLEX
ISSUES AND, THEREFORE, THE PARTIES AGREE THAT ANY COURT PROCEEDING ARISING
OUT OF ANY SUCH CONTROVERSY WILL BE TRIED IN A COURT OF COMPETENT
JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
SUNDANCE CUSTOM HOMES, INC., an LASALLE BANK NATIONAL ASSOCIATION, a
Illinois corporation national banking association
By: /s/ Joseph R. Atkin By: /s/ Jason Costello
-------------------------------- --------------------------------
Title: Vice President and Title: Commercial Banking Officer
Chief Financial Officer -----------------------------
-----------------------------
OTHER SUBSIDIARY HOLDINGS, INC.,
an Illinois corporation
By: /s/ Joseph R. Atkin
--------------------------------
Title: Vice President and
Chief Financial Officer
-----------------------------
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Exhibit A
---------
Legal Descriptions of the Land
------------------------------
