WORKING CAPITAL LINE OF CREDIT AGREEMENT
among
▇.▇. ▇▇▇▇▇▇, INC., as Borrower
and
▇▇▇▇▇▇▇ BANK, N.A., as Lender
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 1
ARTICLE II AMOUNT AND TERMS OF LOAN 15
Section 2.1 Line of Credit 15
Section 2.2 Promissory Note 15
Section 2.3 Application of Funds 16
Section 2.4 Taxes and Assessments on Note 16
Section 2.5 Extension of Credit 16
Section 2.6 Manner of Borrowing and Disbursement Under L 16
Section 2.7 Interest on Loan 17
Section 2.8 Fees on Loan 17
Section 2.9 Repayment of Loan 17
Section 2.10 Manner of Payment 18
ARTICLE III BORROWER'S REPRESENTATIONS AND WARRANTIES 18
Section 3.1 Organization and Standing 19
Section 3.2 Power and Authority 19
Section 3.3 Valid and Binding Obligations 19
Section 3.4 Title of Collateral 19
Section 3.5 Financial Statements and Other Information 19
Section 3.6 Litigation 20
Section 3.7 Consent or Filing 20
ARTICLE IV CONDITIONS PRECEDENT 20
Section 4.1 Opinion of Counsel 20
Section 4.2 Documents and Instruments 20
Section 4.3 Correctness of Warranties 21
Section 4.4 Certificate of Resolution 21
Section 4.5 Borrowing Base Report 21
Section 4.6 Insurance Certificate 21
Section 4.7 Guarantors 21
Section 4.8 Other Documents 22
Section 4.9 Subsequent Disbursements 22
(i)
ARTICLE V DISBURSEMENT AMOUNT AND PROCEDURE 22
Section 5.1 Loan Funding Availability 22
Section 5.2 Inspections/Valuations 24
Section 5.3 Lender Counsel Approval 25
Section 5.4 Liability of Lender 25
ARTICLE VI BORROWER'S AFFIRMATIVE COVENANTS 25
Section 6.1 Corporate Existence and Qualification 26
Section 6.2 Financial Statments/Status Reports 26
Section 6.3 Taxes and Claims 26
Section 6.4 Pay Indebtedness to Lender and Perform Other 27
Section 6.5 Litigation 27
Section 6.6 Defaults 27
Section 6.7 Further Assurances 27
Section 6.8 Funds Not Assignable 28
Section 6.9 Financial Covenants 28
Section 6.10 Inventory Covenants 29
Section 6.11 Additional Information 30
Section 6.12 Compliance Certificates 30
Section 6.13 Payment of Contractors 30
Section 6.14 Bank Group Line 30
Section 6.15 Hazardous Substances 31
Section 6.16 Insurance 32
Section 6.17 Reportable Event 33
Section 6.18 Secured Indebtedness 33
ARTICLE VII DEFAULT AND REMEDIES 33
Section 7.1 Defaults 33
Section 7.2 Remedies 37
Section 7.3 Cross Default 38
Section 7.4 Waiver of Default 38
Section 7.5 Rights and Remedies Not Waived 38
ARTICLE VIII MISCELLANEOUS 38
Section 8.1 Lien: Setoff By Lender 38
Section 8.2 Waivers 39
Section 8.3 Benefit 39
Section 8.4 Assignment 39
Section 8.5 Amendment and Waiver 40
(ii)
Section 8.6 Terms 40
Section 8.7 Governing law and Jurisdiction 40
Section 8.8 Publicity 40
Section 8.9 Expenses of Lender 40
Section 8.10 Invalidation of Provisions 41
Section 8.11 Notices 41
Section 8.12 Termination by the Borrower 42
Section 8.13 Controlling Agreement 42
Section 8.14 Titles 42
Section 8.15 Counterparts 43
Section 8.16 Time is of the Essence 43
Section 8.17 Waiver of Trail by Jury 43
EXHIBITS
Exhibit A Request for Advance
Exhibit B Summary Borrowing Base Report
Exhibit C Detailed Borrowing Base Report
Exhibit D Quarterly Compliance Certificate
(iii)
WORKING CAPITAL LINE OF CREDIT AGREEMENT
THIS WORKING CAPITAL LINE OF CREDIT AGREEMENT dated the 31st day of
July, 1996, by and between ▇. ▇. ▇▇▇▇▇▇, INC., a Delaware corporation, whose
address is ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and
▇▇▇▇▇▇▇ BANK, N.A., a national banking association, whose address is ▇.▇. ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: Closing Department Manager.
R E C I T A L S
A. The Borrower has requested the Lender to lend to the Borrower up to
the sum of SEVENTEEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($17,500,000.00)
under a revolving line of credit; and
B. The Lender is willing to make such loan upon the terms and
conditions set forth in the Loan Documents (as that term is hereinafter
defined).
NOW, THEREFORE, in consideration of the mutual promises, conditions,
represen tations and warranties hereinafter set forth and for other good and
valuable consideration, the receipt and sufficiency whereof is hereby
acknowledged, the parties covenant and agree as follows:
ARTICLE I
DEFINITIONS
In addition to the terms as may be defined throughout this Agreement,
or in any Loan Document, the following terms shall be defined for use throughout
this Agreement as follows:
Section 1.1. Acquisition Cost.
1.1(1) Developed Lots. If the subject is a Developed Lot(s), costs
shall include the purchase price plus the amount paid for any impact fees paid
by the Borrower and its Restricted Subsidiaries with respect to such Developed
Lot(s). If the Developed Lot(s) was developed by the Borrower or its Restricted
Subsidiaries, costs shall also include land costs, site development and soft
costs (engineering, interest, etc.) paid by Borrower and its Restricted
Subsidiaries, associated with the development of such lots.
1.1(2) Lots Under Development. Costs in connection with Lots Under
Development shall include land costs, site development and soft costs
(engineering, interest, etc.) paid by Borrower and its Restricted Subsidiaries,
associated with the development of such lots.
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Administrative Costs shall be excluded from Acquisition Costs of both
Developed Lots or Lots Under Development.
Section 1.2. Administrative Agent.
NationsBank, N.A. (South)
Section 1.3. Administrative Costs.
Costs and expenses incurred by the Borrower or its Restricted
Subsidiaries in connection with (a) the marketing and selling of Inventory which
is part of the Loan Inventory and (b) the administration, management and
operation of the Borrower's and its Restricted Subsidiaries' businesses
(excluding, without limitation, Interest Expense and fees payable hereunder).
Section 1.4. Advance or Advances.
Amounts advanced by the Lender to the Borrower pursuant to this
Agreement.
Section 1.5. Agreement.
This Working Capital Line of Credit Agreement.
Section 1.6. Agreement Date.
The date as of which the Borrower and the Lender execute this
Agreement.
Section 1.7. Applicable Law.
In respect of any Person, all provisions of constitutions, statutes,
rules, regulations, and orders of governmental bodies or regulatory agencies
applicable to such Persons including, without limitation, all orders and decrees
of all courts and arbitrators in proceedings or actions to which the Person in
question is a party or by which it is bound.
Section 1.8. Authorized Signatory.
With respect to the Borrower, such personnel of the Borrower as set
forth in an incumbency certificate of the Borrower delivered to the Lender on
the Agreement Date (or any duly executed incumbency certificate delivered after
the Agreement Date) and certified therein as being duly authorized by the
Borrower to execute documents, agreements, and instruments on behalf of the
Borrower.
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Section 1.9. Bank Group Line.
The credit accommodations described in and evidenced by that certain
Master Loan and Inter-Creditor Agreement among ▇. ▇. ▇▇▇▇▇▇, Inc., as
"Borrower", NationsBank, N.A. (South), Bank of America National Trust and
Savings Association, Sanwa Bank California, First American Bank, SSB, Comerica
Bank, SouthTrust Bank of Alabama, National Association, Bank One Texas, NA and
First National Bank of Chicago, as "Banks", Bank of America National Trust and
Savings Association, as "Co-Agent for the Banks", and NationsBank, N.A. (South)
as Administrative Agent for the Banks, and as Issuing Bank dated April 16, 1996.
Section 1.10. Borrower.
▇.▇. ▇▇▇▇▇▇, INC., a Delaware corporation
Section 1.11. Borrowing Base Report.
Consists of the Summary Borrowing Base Report and Detailed Borrowing
Base Report which reflect inventory that the Borrower desires to have designated
as Loan Inventory.
Section 1.12. Change of Control.
Either (i) any sale, lease or other transfer (in one transaction or a
series of transactions) of all or substantially all of the consolidated assets
of the Borrower and its Restricted Subsidiaries to any Person (other than a
Restricted Subsidiary of the Borrower), provided that a transaction where the
holders of all classes of Common Equity of the Borrower immediately prior to
such transaction own, directly or indirectly, 50% or more of all classes of
Common Equity of such Person immediately after such transaction shall not be a
Change of Control; (ii) a "person" or "group" within the meaning of Section
13(d) of the Exchange Act (other than the Borrower or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, his
wife, children or grandchildren, or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, or any trust or other
entity formed or controlled by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, his wife, children or
grandchildren, or ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇)) becomes the "beneficial owner" (as defined
in Rule 13d-8 under the Exchange Act) of Common Equity of the Borrower
representing more than 50% of the voting power of the Common Equity of the
Borrower; (iii) Continuing Directors cease to constitute at least a majority of
the Board of Directors of the Borrower; or (iv) the stockholders of the Borrower
approve any plan or proposal for the liquidation or dissolution of the Borrower,
provided that a liquidation or dissolution of the Borrower which is part of a
transaction that does not constitute a Change of Control under the proviso
contained in clause (i) above shall not constitute a Change of Control.
Section 1.13. Closing Date.
The date contained in the first paragraph of this Agreement.
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Section 1.14. Code.
The Internal Revenue Code of 1986, as amended.
Section 1.15. Common Equity.
With respect to any Person, capital stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person, or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management or policies of such Person.
Section 1.16. Construction Costs.
All costs accepted by the Lender actually incurred by the Borrower or
its Restricted Subsidiaries with respect to the construction of a Dwelling as of
the date of determination by the Lender, which shall include direct costs
associated with a given Dwelling's construction (including Lot) plus indirect
costs such as real estate taxes and interest costs allocated to the Dwelling
during the construction phase. Direct cost is defined as costs for which a
"hard" charge has been allocated (to the Dwelling being constructed) without
consideration for any allocable soft costs (promotional materials, sales effort
costs, overhead, supervision, etc.). Excluded from Construction Costs are (a)
projected costs and costs for materials or labor not yet delivered to, provided
to or incorporated into such Dwelling and (b) Administrative Costs.
Section 1.17. Continuing Director.
A director who either was a member of the board of directors of the
Borrower on the Agreement Date or who became a director of the Borrower
subsequent to such date and whose election, or nomination for election by the
Borrower's stockholders, was duly approved by a majority of the Continuing
Directors on the board of directors of the Borrower at the time of such
approval, either by a specific vote or by approval of the proxy statement issued
by the Borrower on behalf of the entire board of directors of the Borrower in
which such individual is named as nominee for a director.
Section 1.18. Default.
Any of the events specified in Article VI hereof, provided that any
requirement for notice or lapse of time, or both, has been satisfied.
Section 1.19. Default Rate.
The Default Rate as defined in the Note.
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Section 1.20. Detailed Borrowing Base Report.
A unit-by-unit inventory summary of the Loan Inventory in form
acceptable to Lender and certified as true and correct by an Executive Officer
of the Borrower containing, at a minimum, the cost funded to date for each
Dwelling Lot, each Development Lot and each Lot Under Development including, but
not limited to those elements of cost set forth in Sections 1.1, 1.3 and 1.16
hereof.
Section 1.21. Developed Lots.
Subdivision lots owned by the Borrower or its Restricted Subsidiaries
located in the State of Florida, subject to a recorded plat, which the Borrower
has designated and Lender has accepted to be included and are included as
"Developed Lots" in the calculation of the Loan Funding Availability (exclusive
of any Dwelling Lot). An individual Developed Lot is sometimes referred to
herein as a "Developed Lot."
Section 1.22. Dwelling.
A house which the Borrower or any Restricted Subsidiary has constructed
or is constructing on a Developed Lot which has been designated as a Dwelling
Lot.
Section 1.23. Dwelling Lots.
Lots with Dwellings which the Borrower or any Restricted Subsidiary
located in the State of Florida has designated and Lender has accepted to be
included and are included as "Dwelling Lots" in the calculation of the Loan
Funding Availability. The term "Dwelling Lot" includes the Dwelling located
thereon. An individual Dwelling Lot is sometimes referred to herein as a
"Dwelling Lot."
Section 1.24. EBITDA.
With respect to the Borrower and all Restricted Subsidiaries, earnings
for the preceding twelve (12) months (including, without limitation, dividends
from Unrestricted Subsidiaries including, without limitation, net income (or
loss) of any Person that accrued prior to the date that such Person becomes a
Restricted Subsidiary or is merged with or into or consolidated with the
Borrower or any of its Restricted Subsidiaries) before interest incurred, state
and federal income taxes paid, franchise taxes paid and depreciation and
amortization, all in accordance with GAAP.
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Section 1.25. ERISA.
The Employee Retirement Income Security Act of 1974, as in effect on
the Agreement Date and as such Act may be amended thereafter from time to time.
Section 1.26. ERISA Affiliate.
(a) Any corporation which is a member of the same controlled group of
corporations (within the meaning of Code Section 414(b)) as is the Borrower, (b)
any other trade or business (whether or not incorporated) under common control
(within the meaning of Code Section 414(c)) with the Borrower, (c) any other
corporation, partnership or other organization which is a member of an
affiliated service group (within the meaning of Code Section 414(m)) with the
Borrower, or (d) any other entity required to be aggregated with the Borrower
pursuant to regulations under Code Section 414(o).
Section 1.27. Event of Default.
Any event specified in Article VI hereof and any other event which with
any passage of time or giving of notice (or both) would constitute such event a
Default.
Section 1.28. Exchange Act.
The Securities Exchange Act of 1934, as amended.
Section 1.29. Executive Officer.
The President, any Executive Vice President, Vice President, Assistant
Vice President, Secretary, Assistant Secretary or Treasurer of the Borrower.
Section 1.30. Financial Covenant Carve Out.
Any acquisition of Inventory, which the Borrower has elected to exclude
from the calculation of the covenants set forth in Sections 6.9(1), 6.9(2),
6.10(1), 6.10(2) and 6.10(3) hereof; provided, however, that no acquisition may
qualify as a "Financial Covenant Carve Out" if (a) the Borrower has elected to
have an acquisition designated as a "Financial Covenant Carve Out" in the
preceding twelve (12) calendar month period; (b) such acquisition has already
been designated as a "Financial Covenant Carve Out" on the last day of each of
the two (2) fiscal quarter ends immediately following the date of such
acquisition; (c) contemporaneously with delivery by the Borrower of the notice
of designation of an acquisition as a "Financial Covenant Carve Out", the
Borrower fails to deliver to the Lender a plan of action reflecting that the
Borrower will be in compliance (after giving effect to such acquisition) with
the covenants in Sections 6.9(1), 6.9(2), 6.10(1), 6.10(2) and 6.10(3) hereof on
or prior to the last day of the third fiscal quarter following the date of such
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acquisition; and (d) the acquisition in question would, if it were included in
the compliance calculations, cause (1) the ratio of Notes Payable to Tangible
Net Worth to exceed (A) as of the last day of each fiscal quarter of the
Borrower in 1996, 1.9 to 1, (B) as of the last day of each fiscal quarter of the
Borrower in 1997, 2.1 to 1, (C) as of the last day of each fiscal quarter of the
Borrower in 1998, 2.2 to 1, or (2) the ratio of Total Liabilities to Tangible
Net Worth to exceed (A) as of the last day of each fiscal quarter of the
Borrower in 1996, 2.25 to 1, (B) as of the last day of each fiscal quarter of
the Borrower in 1997, 2.5 to 1, or (C) as of the last day of each fiscal quarter
of the Borrower in 1998, 2.6 to 1.
Section 1.31. Fixed Charges.
The aggregate consolidated interest incurred of the Borrower and its
Restricted Subsidiaries for the most recently completed four (4) fiscal quarters
for which results have been reported to Lender.
Section 1.32. Force Majeure.
An occurrence outside the control of the Borrower which cannot be
avoided by the exercise of due care by the Borrower which delays performance by
the Borrower in the nature of and including but not limited to strikes,
lockouts, unavailability of materials, power failure, riots, war or destructive
natural causes. The phrase "subject to Force Majeure" as used herein shall mean
that the time period for the Borrower's performance shall be extended by a
length of time equivalent to the period during which the occurrence constituting
Force Majeure shall exist. Notwithstanding the foregoing, in no event shall the
Borrower's obligations to make payments under the Note be delayed or extended.
Section 1.33. Funding Period.
A period commencing on the day immediately following the date that the
Loan Funding Availability is established pursuant to Section 5.1(c) hereof by
the Lender and ending on the date that the Loan Funding Availability next is
established pursuant to Section 5.1(c) hereof by the Lender.
Section 1.34. GAAP.
As in effect as of the Agreement Date, generally accepted accounting
principles consistently applied.
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Section 1.35. Guaranty or Guaranteed.
As applied to an obligation (each a "primary obligation"), shall mean
and include (a) any guaranty, direct or indirect, in any manner, of any part or
all of such primary obligation, and (b) any agreement, direct or indirect,
contingent or otherwise, the practical effect of which is to assure in any way
the payment or performance (or payment of damages in the event of
non-performance) of any part or all of such primary obligation, including,
without limiting the foregoing, and any obligation of such Person (the Primary
obligor"), whether or not contingent, (i) to purchase any such primary
obligation or any property or asset constituting direct or indirect security
therefor, (ii) to advance or supply funds (1) for the purchase or-payment of
such primary obligation or (2) to maintain working capital, equity capital or
the net worth, cash flow, solvency or other balance sheet or income statement
condition of any other Person, (iii) to purchase property, assets, securities or
services primarily for the purpose of assuring the owner or holder of any
primary obligation of the ability of the primary obligor with respect to such
primary obligation to make payment thereof or (iv) otherwise to assure or hold
harmless the owner or holder of such primary obligation against loss in respect
thereof.
Section 1.36. Guarantors.
DRH CONSTRUCTION, INC., a Delaware corporation
DRH NEW MEXICO CONSTRUCTION, INC., a Delaware corporation
▇.▇. ▇▇▇▇▇▇, INC. - ALBUQUERQUE, a Delaware corporation
▇.▇. ▇▇▇▇▇▇, INC. - MINNESOTA, a Delaware corporation
▇.▇. ▇▇▇▇▇▇ LOS ANGELES HOLDING COMPANY, INC., a California corporation
▇.▇. ▇▇▇▇▇▇ LOS ANGELES MANAGEMENT COMPANY, INC., a California
corporation
▇.▇. ▇▇▇▇▇▇ LOS ANGELES NO. 9, INC., a California corporation
▇.▇. ▇▇▇▇▇▇ LOS ANGELES NO. 10, INC., a California corporation
▇.▇. ▇▇▇▇▇▇ LOS ANGELES NO. 11, INC., a California corporation
▇.▇. ▇▇▇▇▇▇, INC. - BIRMINGHAM, a Delaware corporation
▇.▇. ▇▇▇▇▇▇, INC. - GREENSBORO, a Delaware corporation
▇.▇. ▇▇▇▇▇▇ SAN DIEGO HOLDING COMPANY, INC., a California corporation
▇.▇. ▇▇▇▇▇▇ SAN DIEGO MANAGEMENT COMPANY, INC., a California
corporation
▇.▇. ▇▇▇▇▇▇ SAN DIEGO NO. 9, INC., a California corporation
▇.▇. ▇▇▇▇▇▇ SAN DIEGO NO. 10, INC., a California corporation
▇.▇. ▇▇▇▇▇▇ SAN DIEGO NO. 11, INC., a California corporation
▇.▇. ▇▇▇▇▇▇ SAN DIEGO NO. 12, INC., a California corporation
▇.▇. ▇▇▇▇▇▇ SAN DIEGO NO. 13, INC., a California corporation
▇.▇. ▇▇▇▇▇▇ SAN DIEGO NO. 14, INC., a California corporation
▇.▇. ▇▇▇▇▇▇ SAN DIEGO NO. 15, INC., a California corporation
▇.▇. ▇▇▇▇▇▇ SAN DIEGO NO. 16, INC., a California corporation
▇.▇. ▇▇▇▇▇▇ SAN DIEGO NO. 17, INC., a California corporation
▇.▇. ▇▇▇▇▇▇ - TEXAS, LTD., a Texas limited partnership
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Together with each additional Restricted Subsidiary of Borrower as may
from time to time deliver a Guaranty of the Loan which Guaranty is accepted by
Lender.
Section 1.37. Indebtedness.
With respect to any specified Person, (a) all items, except items of
(i) shareholders' and partners' equity, (ii) capital stock, (iii) surplus, (iv)
general contingency or deferred tax reserves, (v) liabilities for deposits and
(vi) deferred income, which in accordance with GAAP would be included in
determining total liabilities as shown on the liability side of a balance sheet
of such Person, (b) all direct or indirect obligations secured by any Lien to
which any property or asset owned by such Person is subject, whether or not the
obligation secured thereby shall have been assumed, and (c) all reimbursement
obligations with respect to outstanding letters of credit.
Section 1.38. Indebtedness for Money Borrowed.
With respect to any specified Person, all money borrowed by such Person
and Indebtedness represented by notes payable by such Person and drafts accepted
representing extensions of credit to such Person, all obligations of such Person
evidenced by bonds, debentures, notes, or other similar instruments, all
Indebtedness of such Person upon which interest charges are customarily paid,
and all Indebtedness of such Person issued or assumed as full or partial payment
for property or services, whether or not any such notes, drafts, obligations, or
Indebtedness represent Indebtedness for money borrowed. For purposes of this
definition, interest which is accrued but not paid on the original due date or
within any applicable cure or grace period as provided by the underlying
contract for such interest shall be deemed Indebtedness for Money Borrowed.
Section 1.39. Interest Expense.
In respect of any period, an amount equal to the sum of the interest
incurred during such period based on a stated interest rate with respect to
Indebtedness for Money Borrowed of the Borrower and its Restricted Subsidiaries
on a consolidated basis.
Section 1.40. Inventory.
All real and personal property, improvements and fixtures owned by the
Borrower or the Restricted Subsidiaries, including but not limited to all Land
Parcels, Lots Under Development, Developed Lots and Dwelling Lots.
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Section 1.41. Land Parcels.
Parcels of land owned by the Borrower or any of its Restricted
Subsidiaries which are, as of the date of determination, not scheduled for
commencement of development into Developed Lots during the twelve (12) calendar
months immediately following such date of determination and which the Borrower
has designated as "Land Parcels." An individual Land Parcel is sometimes
referred to as a "Land Parcel."
Section 1.42. Lender.
▇▇▇▇▇▇▇ Bank, N.A.
Section 1.43. Lien.
With respect to any property, any mortgage, lien, pledge, assignment,
charge, security interest, title retention agreement, levy, execution, seizure,
attachment, garnishment, or other encumbrance of any kind in the nature of any
of the foregoing in respect of such property, whether or not ▇▇▇▇▇▇, vested, or
perfected.
Section 1.44. Loan Amount.
SEVENTEEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($17,500,000.00).
Section 1.45. Loan Documents.
This Agreement, the Note and any and all other documents evidencing the
Note as the same may be amended, substituted, replaced, extended or renewed from
time to time.
Section 1.46. Loan Funding Availability.
The amount available for advancement under the Note to the Borrower
established pursuant to Section 5.1 hereof, at any applicable time, by the
Lender based on the Loan Inventory.
Section 1.47. Loan Inventory.
Shall consist of Lots Under Development, Developed Lots, and Dwelling
Lots which are not encumbered by a lien or liens (other than any Permitted
Encumbrance) and which have been designated as Loan Inventory to be utilized for
the purpose of calculating Funding Availability under this Agreement.
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Section 1.48. Loan.
Collectively, amounts advanced by the Lender to the Borrower under the
Loan Documents evidenced by the Note.
Section 1.49. Lots Under Development.
Land Parcels located in the State of Florida which are, as of the date
of determination, being developed into Developed Lots or which are scheduled for
the commencement of development into Developed Lots within twelve (12) calendar
months after the date of determination, and which the Borrower has designated
and the Lender has accepted to be included and are included as "Lots Under
Development" in the calculation of the Funding Availability. An individual Lot
Under Development is sometimes referred to as a "Lot Under Development."
Section 1.50. Maturity Date.
The date when the Loan is due and payable as defined in the Note.
Section 1.51. Models.
A Dwelling Lot containing a dwelling unit which is designated by the
Borrower as a model unit for use in marketing and promoting the sale of Dwelling
Lots.
Section 1.52. Note.
Promissory Note in the principal amount of SEVENTEEN MILLION FIVE
HUNDRED THOUSAND DOLLARS ($17,500,000.00) of even date herewith.
Section 1.53. Notes Payable.
With respect to the Borrower and all Restricted Subsidiaries, all
Indebtedness for money borrowed other than promissory notes issued as ▇▇▇▇▇▇▇
money for contracts, non-recourse promissory notes for seller financing and
notes payable for insurance premiums and capitalized lease obligations.
Section 1.54. Note Rate.
The interest rate established in the Note.
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Section 1.55. Obligations.
(a) All payment and performance obligations of the Borrower and all
other obligors to the Lender under the Loan Documents, as they may be amended
from time to time, or as a result of making the Loan, and (b) the obligation to
pay an amount equal to the amount of any and all damages which the Borrower is
obligated to pay pursuant to the Loan Documents to, or on behalf of, the Lender,
which they may suffer by reason of a breach by any of the Borrower or any other
obligor of any obligation, covenant, or undertaking with respect to this
Agreement or any other Loan Document.
Section 1.56. Permitted Encumbrances.
Liens, encumbrances, easements and other matters which (a) are in favor
of Lender to secure the subject facility, (b) are on real estate for real estate
taxes not yet delinquent, (c) are for taxes, assessments, judgments,
governmental charges or levies or claims the non-payment of which is being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves have been set aside on the Borrower's books (but only so long
as no foreclosure, distraint sale or similar proceedings have been commenced
with respect thereto and remain unstayed for a period for thirty (30) days after
their commencement), (d) are in favor of carriers, warehousemen, mechanics,
laborers and materialmen incurred in the ordinary course of business for sums
not yet past due or being diligently contested in good faith (if adequate
reserves are being maintained by the Borrower with respect thereto), (e) are
incurred in the ordinary course of business in connection with worker's
compensation and unemployment insurance, or (f) are easements, rights-of-way,
restrictions or similar encumbrances on the use of real property which does not
interfere with the ordinary conduct of business of the Borrower or materially
detract from the value of such real property.
Section 1.57. Person.
An individual, corporation, partnership, limited liability company,
trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
Section 1.58. Plan.
An employee benefit plan within the meaning of Section 3(3) of ERISA
maintained by or contributed to by the Borrower or any ERISA Affiliate.
Section 1.59. Reconciliation Date.
Two (2) Business Days after the Borrower's receipt of notice from the
Lender pursuant to Section 5.1(4) hereof that the outstanding principal balance
of the Loan exceeds the Loan Funding Availability.
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Section 1.60. Reportable Event.
Shall have the meaning set forth in Section 4043(b) of ERISA.
Section 1.61. Request for Advance.
Any certificate signed by an Authorized Signatory of the Borrower
requesting an Advance hereunder which will increase the aggregate amount of the
Loan outstanding, which certificate shall be denominated a "Request for
Advance," and shall be in substantially the form of Exhibit A attached hereto.
Each Request for Advance shall, among other things, (a) specify the date of the
Advance, which shall be a Business Day, (b) specify the amount of the Advance,
(c) state that there shall not exist, on the date of the requested Advance and
after giving effect thereto, a Default or an Event of Default, and (d) state
that all conditions precedent to the making of the Advance have been satisfied.
Section 1.62. Restricted Subsidiaries.
Affiliated or wholly owned companies of ▇.▇. ▇▇▇▇▇▇, Inc. which provide
guarantees.
Section 1.63. Speculative Lot.
Any Dwelling Lots having a fully or partially constructed dwelling unit
thereon which Dwelling Lot is not subject to a bona fide contract for the sale
of such Dwelling Lot to a third party, excluding Developed Lots containing
Dwellings used as Models.
Section 1.64. Subsidiary.
As applied to any Person, (a) any corporation of which fifty percent
(50%) or more of the outstanding stock (other than directors' qualifying shares)
having ordinary voting power to elect a majority of its board of directors,
regardless of the existence at the time of a right of the holders of any class
or classes of securities of such corporation to exercise such voting power by
reason of the happening of any contingency, or any partnership of which fifty
percent (50%) or more of the outstanding partnership interests, is at the time
owned by such Persons or by one or more Subsidiaries of such Person, or by such
Person and one or more Subsidiaries of such Person, and (b) any other entity
which is controlled or susceptible to being controlled by such Person, or by one
or more Subsidiaries of such Person, or by such Person and one or more
Subsidiaries of such Person; provided, however, that for purposes of this
Agreement and the other Loan Documents the term "Subsidiary" shall not include
DRH Mortgage Company, Ltd., a Texas limited partnership. Unless the context
otherwise requires, "Subsidiaries as used herein shall mean the Subsidiaries of
the Borrower.
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Section 1.65. Subsidiary Guaranty.
A guaranty agreement in form and substance satisfactory to the Lender
whereunder a Restricted Subsidiary guarantees the full and faithful payment and
performance of all of the Obligations of the Borrower hereunder and under the
other Loan Documents.
Section 1.66. Summary Borrowing Base Report.
An aggregate inventory summary of the Loan Inventory in form acceptable
to Lender and certified as true and correct by an Executive Officer of the
Borrower containing, at a minimum, the cost funded to date for all Dwelling
Lots, Developed Lots and Lots Under Development including those elements of cost
set forth in Sections 1.1, 1.3 and 1.16 hereof.
Section 1.67. Tangible Assets.
The difference between total assets of the Borrower and its Restricted
Subsidiaries and all intangible assets of the Borrower and its Restricted
Subsidiaries, all as determined in accordance with GAAP.
Section 1.68. Tangible Net Worth:
With respect to the Borrower and its Restricted Subsidiaries,
stockholder's equity on a consolidated basis less all "intangible assets" as
defined under GAAP and amounts invested in Unrestricted Subsidiaries of such
Person.
Section 1.69. Total Liabilities.
All items required by GAAP to be set forth as "liabilities" on the
Borrower's and its Restricted Subsidiaries' consolidated balance sheet.
Section 1.70. Unrestricted Subsidiaries.
Affiliated or wholly owned companies of ▇.▇. ▇▇▇▇▇▇, Inc. not providing
guarantees.
Section 1.71. Working Capital.
The total of the Borrower's and its Restricted Subsidiaries' assets
minus the sum of the Borrower's and Restricted Subsidiaries' fixed assets,
intangible assets, ▇▇▇▇▇▇▇ monies for lot and land option contracts represented
by promissory notes payable by the Borrower and Restricted Subsidiaries and the
total of the Borrower's and Restricted Subsidiaries' liabilities. [Total Assets
- (Fixed Assets + Intangible Assets + ▇▇▇▇▇▇▇ Monies Represented by Promissory
Note + Total Liabilities).]
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Each definition of an agreement in this Article I shall include such
agreement as modified, amended, or supplemented from time to time with the prior
written consent of the Lender, and except where the context otherwise requires,
definitions imparting the singular shall include the plural and vice versa.
Except where otherwise specifically restricted, reference to a party to a Loan
Document includes that party and its successors and assigns. All terms used
herein which are defined in Article 9 of the Uniform Commercial Code in effect
in the State of Florida on the date hereof and which are not otherwise defined
herein shall have the same meanings herein as set forth therein.
All accounting terms used herein without definition shall be used as
defined under GAAP as of the Agreement Date.
ARTICLE II
AMOUNT AND TERMS OF LOAN
Section 2.1. Line of Credit.
The Lender hereby grants to the Borrower a revolving line of credit not
to exceed the sum of SEVENTEEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($17,500,000.00) to be funded and disbursed only in accordance with the terms
and conditions contained herein. Subject to the terms, conditions and collateral
requirements hereinafter set forth in this Agreement, at any time and from time
to time, the Borrower may borrow from and repay to and reborrow from the Lender
at such time and in such amounts not exceeding the maximum amount of SEVENTEEN
MILLION FIVE HUNDRED THOUSAND DOLLARS ($17,500,000.00) in effect under this
Agreement.
Section 2.2. Promissory Note.
2.2(1) Execution of Note.
Under the terms of this Agreement, the Borrower shall execute and
deliver to the Lender Note.
2.2(2) Due Date of Note. The Note is due on demand.
2.2(3) Grace Period for Payment.
Notwithstanding the foregoing, in the event Lender shall demand
repayment of the amounts disbursed pursuant to the Note, for reasons other than
the monetary and/or non-monetary default by the Borrower, Borrower shall have
six (6) months from the date demand is made by the Lender in which to repay such
amounts and any amounts thereafter disbursed. During the first ninety (90) days
of such six (6) month period, the Lender shall continue to disburse funds
pursuant to this Agreement.
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Section 2.3. Application of Funds.
The Lender and the Borrower agree that all funds received from the
Lender under this Agreement are to be used as working capital. Nothing herein
shall impose upon the Lender any obligation to see to the proper application of
any Advance.
Section 2.4. Taxes and Assessments on Note.
The Borrower shall promptly pay all taxes and assessments assessed or
levied, under and by virtue of any State, Federal or Municipal law or regulation
now in existence or hereinafter passed, to Lender as a result of its ownership
of the Note.
Section 2.5. Extension of Credit.
Subject to the terms and conditions of this Agreement, and in reliance
upon the representations and warranties made in this Agreement and the other
Loan Documents, and provided that there is no Default or Event of Default, the
Lender agrees to lend and relend to the Borrower amounts which in the aggregate
at any one time outstanding do not exceed the Loan Amount.
Section 2.6. Manner of Borrowing and Disbursement Under Loan.
2.6(1) Request for Advance. The Borrower shall give the Lender
irrevocable written notice for Advances under the Loan not later than 12:00 noon
(Eastern time) on the day immediately preceding the date of the requested
Advance in the form of a Request for Advance, or notice by telephone or telecopy
followed immediately by a Request for Advance; provided, however, that the
failure by the Borrower to confirm any notice by telephone or telecopy with a
Request for Advance shall not invalidate any notice so given. Subsequent to the
initial Advance(s) of the Loan made on the Agreement Date, the Borrower may not
request, in the aggregate, more than two (2) Advances in any calendar month. No
disbursements shall be made more than thirty (30) days after the submission of a
Summary Borrowing Base Report or Detailed Borrowing Base Report, whichever is
applicable.
2.6(2) Disbursement. Prior to 2:00 p.m. (Eastern time) on the date of
an Advance hereunder, the Lender shall, subject to the satisfaction of the
conditions set forth in this Agreement, disburse the amount requested by (i)
transferring the amounts by wire transfer pursuant to the instructions of the
Borrower, or (ii) in the absence of such instructions, crediting the amounts so
made available to the account of the Borrower maintained with the Lender.
2.6(3) No Default. Prior to making any advance under the Loan
Documents, the Lender, in its sole discretion, may verify that the Borrower is
not in default under the Loan Documents and the Lender shall not be obligated to
make any advance unless and until it is reasonably satisfied as to the accuracy
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of such information. The Lender shall not be obligated to make any Advances
hereunder: (a) upon this Agreement being deemed to expire as a result of any
law, regulation or regulatory action now or hereafter enacted or adopted; or (b)
upon the making of any such Advance becoming prohibited by any law, regulation
or regulatory action now or hereafter enacted or adopted.
Section 2.7. Interest on Loan.
2.7(1) Loan. Interest shall be computed on the basis of a hypothetical
year of 360 days for the actual number of days elapsed during each calendar
month and shall be payable at a simple interest rate equal to the Note Rate
times the principal balance outstanding from time to time under the Note for the
number of days such principal amounts are outstanding during such calendar
month.
2.7(2) Upon Default. Upon the occurrence and during the continuance of
a Default, the Lender shall have the option (but shall not be required to give
prior notice thereof to the Borrower to accelerate the maturity of the Loan or
to exercise any other rights or remedies hereunder in connection with the
exercise of this right) to charge interest on the outstanding principal balance
of the Loan at the Default Rate from the date of such Default. Such interest
shall be payable on the earliest of demand or the next interest payment date
established in the Note, as applicable, and shall accrue until the earlier of
(i) waiver or cure (to the satisfaction of the Lender) of the applicable
Default, (ii) agreement by the Lender to rescind the charging of interest at the
Default Rate, or (iii) payment in full of the Obligations.
Section 2.8. Fees on Loan.
The Borrower agrees to pay to the Lender an unused fee for each
calendar year on the difference between (i) the Loan Amount and (ii) the average
daily outstanding balance of the Loan during the applicable period, at the rate
of 15 basis points (.15 %). Such unused fee shall be computed on the basis of a
hypothetical year of 360 days for the actual number of days elapsed, shall be
due and payable quarterly in arrears on the twenty-fifth (25th) day of each
January, April, July, and October for the immediately preceding calendar
quarter, commencing on October 25, 1996 (for the period from the Agreement Date
through September 30, 1996), and on the Maturity Date, and shall be fully earned
when due and non-refundable when paid.
Section 2.9. Repayment of Loan.
2.9(1) Interest. The Borrower shall pay interest on the Loan as set
forth in the Note.
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2.9(2) Reconciliation of Loan Inventory. The Borrower shall repay
certain portions of the outstanding principal of the Loan and accrued and unpaid
interest thereon upon the reconciliation of the Loan Funding Availability
against the outstanding principal balance under the Note as provided in Section
5.1 hereof.
2.9(3) Maturity. In addition to the foregoing, a final payment of all
Obligations then outstanding shall be due and payable by the Borrower on
Maturity Date.
Section 2.10. Manner of Payment.
2.10(1) Time. Each payment (including any prepayment) by the Borrower
on account of the principal of or interest on the Loan, fees, and any other
amount owed to the Lender under this Agreement, the Note, or the other Loan
Documents shall be made not later than 1:00 p.m. (Eastern time) on the date
specified for payment under this Agreement or such other Loan Document in lawful
money of the United States of America in immediately available funds. Any
payment received by the Lender after 1:00 p.m. (Eastern time) shall be deemed
received on the next Business Day for purposes of interest accrual.
2.10(2) Date. If any payment under this Agreement or any of the Note
shall be specified to be made upon a day which is not a Business Day, it shall
be made on the next succeeding day which is a Business Day, and such extension
of time shall in such case be included in computing interest and fees, if any,
in connection with such payment.
2.10(3) Amount. The Borrower may not make payments, in the aggregate,
under this Agreement (excluding any payments specifically required pursuant to
the terms of this Agreement) more than two (2) times in any calendar month.
2.10(4) No Set Off. The Borrower agrees to pay principal, interest,
fees, and all other amounts due hereunder or under the Note without set-off or
counterclaim or any deduction whatsoever.
ARTICLE III
BORROWER'S REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement, the Borrower makes
the following representations and warranties which shall be deemed to be
continuous representations and warranties so long as any credit hereunder
remains available or any indebtedness of the Borrower to the Lender remains
unpaid:
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Section 3.1. Organization and Standing.
The Borrower is a corporation duly organized and existing under the
laws of the State of Delaware and is duly qualified to do business in each
jurisdiction in which the conduct of its business requires such qualification,
including the State of Florida. To the best of the Borrower's knowledge and
belief, the Borrower is in compliance with all applicable laws and regulations
governing the conduct of its business and governing consummation of the
transactions.
Section 3.2. Power and Authority.
The execution, delivery and performance hereof by the Borrower are
within its corporate powers and have been duly authorized by all necessary
corporate and shareholder action, are not in contravention of law or the terms
of its Articles of Incorporation or By-Laws or any amend ment thereto, or any
indenture, agreement or undertaking to which it is a party or by which it is
bound.
Section 3.3. Valid and Binding Obligations.
The Loan Documents constitute the legal, valid and binding respective
obligations of the Borrower subject to applicable bankruptcy and insolvency laws
and laws affecting creditors' rights and the enforcement thereof generally.
Section 3.4. Title to Collateral.
The Borrower has, or will have, good and marketable title to all
property from time to time listed in the Summary Borrowing Base Report free and
clear of all mortgages, pledges, liens, security interests or other
encumbrances. The Borrower will warrant and defend the Collateral against the
claims and demands of all persons except for claims and demands arising from the
title exceptions referenced in the preceding sentence.
Section 3.5. Financial Statements and Other Information.
Subject to any limitation stated therein or in connection therewith by
the Borrower in writing, all balance sheets, earnings statements and other
financial data which have been or shall hereafter be furnished to the Lender to
induce it to enter into this Agreement or otherwise in connection herewith do or
will fairly represent the financial condition of the Borrower as of the dates
and the results of its operations for the period for which the same are
furnished to the Lender and have been or will be prepared in accordance with
GAAP and all other information, reports and other papers and data furnished to
the Lender are and or will be, at the time the same are so furnished, accurate
and correct in all material respects and complete insofar as complete ness may
be necessary to give the Lender a true and accurate knowledge of the subject
matter. There are no material liabilities of any kind of the Borrower as of the
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date of the most recent financial statements which are not reflected therein.
There have been no materially adverse changes in the financial condition or
operation of the Borrower since the date of such financial statements.
Section 3.6. Litigation.
The Borrower warrants and represents to the Lender that as of the
Agreement Date, none of the Borrower nor any Restricted Subsidiary is a party to
any litigation having a reasonable probability of being adversely determined to
the Borrower or any Restricted Subsidiary which, if adversely determined, would
impair the ability of the Borrower to carry on its business substantially as now
conducted or contemplated or would materially adversely affect the financial
condition, business or operations of the Borrower.
Section 3.7. Consent or Filing.
No consent, approval or authorization of, or registration, declaration
or filing with any court, any governmental body or authority or other person or
entity is required in connection with the valid execution, delivery or
performance of this Agreement or any document required by this Agreement or in
connection with any of the transactions contemplated thereby, except the filing
of any financing statements contemplated hereunder.
ARTICLE IV
CONDITIONS PRECEDENT
The effectiveness of this Agreement and the obligations of the Lender
to consummate any of the transactions contemplated hereby shall be subject to
the satisfaction of the following conditions precedent, at or prior to the
Closing Date:
Section 4.1. Opinion of Counsel.
Borrower shall cause to be delivered to Lender an opinion from counsel
to the Borrower addressed to and in form satisfactory to the Lender regarding
the legal matters set forth in Sections 3.1, 3.2, 3.3, 3.6 and 3.7 hereof.
Section 4.2. Documents and Instruments.
The Lender shall have received all the instruments and documents
contemplated to be delivered by the Borrower hereunder, and the same shall be in
full force and effect. This Agreement and all of the instruments and documents
executed in connection therewith are herein after referred to as the "Loan
Documents".
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Section 4.3. Correctness of Warranties.
All representations and warranties contained herein or otherwise made
to the Lender in connection herewith shall be true and correct.
Section 4.4. Certificate of Resolution.
The Board of Directors, or the Executive Committee thereof, and, if
stockholder approval is necessary, the stockholders of Borrower shall have
passed specific resolutions authorizing the execution and delivery of all
documents and the taking of all actions called for by this Agree ment, and the
Borrower shall have furnished to the Lender copies of such resolutions,
certified by the Secretary.
Section 4.5. Borrowing Base Report.
The Borrower shall have delivered to the Lender the appropriate
Borrowing Base Report as required by Section 5.1(2) of this Agreement. Both the
Summary Borrowing Base Report and the Detailed Borrowing Base Report shall
contain a sworn certificate attesting to the accuracy of the representations
contained in said reports.
Section 4.6. Insurance Certificate.
Certificate(s) of insurance required pursuant to Section 6.16 hereof.
Section 4.7. Guarantors.
4.7(1) Authorization. The Board of Directors and, if stockholder
approval is necessary, the stockholders of each of the Guarantors shall have
passed specific resolutions authorizing execution and delivery of the Guarantys
and the Borrower shall have furnished to the Lender copies of such resolutions,
certified by the Secretary of the respective corporations. With respect to the
Guaranty by the limited partnership, the Borrower shall provide the Lender with
a certificate of limited partnership evidencing the approval of the execution of
the Guaranty by the general partner.
4.7(2) Withdrawal/Adding of Guarantors. Provided there is no Default
under any Loan Document, the Guaranty of any Restricted Subsidiary may be
released by the Lender upon the written request of the Borrower. The withdrawal
of any Restricted Subsidiary shall be effective upon the written consent of the
Lender. A Guaranty of any Restricted Subsidiary may be added at any time by the
Borrower delivering to the Lender a continuing and unconditional guaranty in the
form and content of the Guaranty executed by Restricted Subsidiaries
simultaneous with the execution of this Agreement.
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Section 4.8. Other Documents.
Such other documents as the Lender may reasonably from time to time
require in order to verify compliance with the Loan Documents.
Section 4.9. Subsequent Disbursements.
Prior to requesting subsequent disbursements under the Loan,
(subsequent to the first disbursement) the Borrower shall execute and deliver to
the Lender all of the following items, in form and substance satisfactory to the
Lender. The Lender shall have no further obligation to make further
disbursements until all such items have been properly executed and delivered to
the Lender.
(a) The Summary Borrowing Base Report or the Detailed Borrowing Base
Report as required pursuant to this Agreement for all previous periods of time.
(b) The Request for Advance that the Borrower is required to deliver in
connection with the request of an Advance.
(c) Such other documents as the Lender may reasonably require to insure
compliance with the Loan Documents.
ARTICLE V
DISBURSEMENT AMOUNT AND PROCEDURE
5.1 Loan Funding Availability. At the designated times set forth
herein, the Lender shall establish a Loan Funding Availability for the Loan
Inventory.
5.1(1) Calculation of Loan Funding Availability. The Loan Funding
Availability shall be equal to the sum of "A" plus "B" plus "C"; provided, that
at no time may the sum of "A" and "B" exceed thirty percent (30%) of Loan
Funding Availability.
A = seventy-five percent (75%) of the sum of all Acquisition Costs for
all Lots Under Development which are included in the Loan Inventory. If, after a
parcel of land is designated a Lot Under Development, development of such parcel
ceases for thirty (30) calendar days or more (other than by reason of a Force
Majeure), at the discretion of the Lender, the Loan Funding Availability for
such parcel may be reduced to an amount determined by the Lender (which amount
can be zero) until development of such Lot Under Development is resumed to the
satisfaction of the Lender.
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B = seventy-five percent (75%) of the sum of all Acquisition Costs for
all Developed Lots included in the Loan Inventory.
C = one hundred percent (100%) of the sum of all Acquisition Costs and
Construction Costs for all Dwelling Lots included in the Loan Inventory.
5.1(2) Designation of Land Parcels. Lots Under Development. Developed
Lots and Dwelling Lots. On or before the fifteenth (15th) calendar day of each
calendar month (other than a month following the end of a calendar quarter), the
Borrower shall deliver to the Lender a Summary Borrowing Base Report in the form
attached hereto as Exhibit B and incorporated herein. On or before the fifteenth
(15th) calendar day of each month following the end of a calendar quarter, the
Borrower shall deliver to the Lender a Detailed Borrowing Base Report in the
form attached hereto as Exhibit C and incorporated herein which form shall have
been completed and signed by the Borrower. The Summary Borrowing Base Report and
Detailed Borrowing Base Report shall reflect Inventory that the Borrower desires
to have designated as Loan Inventory. Upon the Lender's receipt of the Summary
Borrowing Base Report or Detailed Borrowing Base Report, as the case may be, the
Lender may conduct inspections or reviews of the subject Inventory that the
Lender deems appropriate, at the expense of the Lender except as hereinafter
expressly provided. Based upon the information in the Summary Borrowing Base
Report or Detailed Borrowing Base Report, as the case may be, and the other
information compiled by the Lender, the Lender shall determine, in its
discretion, whether a Lot Under Development, Developed Lot or Dwelling Lot not
previously designated as part of the Loan Inventory shall be designated part of
the Loan Inventory and, if so, whether such Lot Under Development, Developed Lot
or Dwelling Lot shall be designated a Lot Under Development, Developed Lot or
Dwelling Lot.
5.1(3) Periodic Establishment of Loan Funding Availability. Within two
(2) business days of the Lender's receipt of an Summary Borrowing Base Report or
Detailed Borrowing Base Report, as the case may be, the Lender shall establish
the Loan Funding Availability based on the Report delivered to the Lender and
information compiled by the Lender. In the event the Borrower does not submit
the Summary Borrowing Base Report or Detailed Borrowing Base Report in the time
and manner set forth above or furnish sufficient information to the Lender to
enable the Lender to establish a new Loan Funding Availability, the Lender will
establish a Loan Funding Availability based on some or all of the previous
information submitted to the Lender by the Borrower in the immediately preceding
Summary Borrowing Base Report or Detailed Borrowing Base Report and the
information compiled by the Lender, as required hereunder, in connection
therewith, as the case may be, or other information available to the Lender.
5.1(4) Reconciliation. In the event that the Loan Funding Availability
for a particular Funding Period is less than the then outstanding principal
amount under the Loan, the Lender shall notify the Borrower thereof. On or
before the Reconciliation Date, the Borrower shall (i) pay to the Lender a
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principal payment to be applied to the Loan; or (ii) provide a revised Summary
Borrowing Base Report or Detailed Borrowing Base Report designating sufficient
additional Inventory (which shall be acceptable to the Lender, in its
discretion) as Loan Inventory to cause the Loan Funding Availability to equal or
exceed the outstanding principal of the Loan.
5.1(5) Removal/Disapproval of Inventory for Loan Funding Availability.
If, at any time, the Lender determines, in its reasonable discretion, that any
part of the Loan Inventory is not acceptable for inclusion in the calculation of
the Loan Funding Availability as a result of an unforeseen material adverse
change in the condition of such portion of the Loan Inventory or as a result of
the existence of hazardous wastes or materials in or on any Inventory which are
in violation of any warranty, representation or covenant of the Loan Documents
regarding such hazardous wastes or materials, the Lender may exclude such
portion of the Loan Inventory from the calculation of the Loan Funding
Availability. If, after such exclusion, the then outstanding principal amount
under the Note would exceed the Loan Funding Availability, the Borrower shall
pay to the Lender on the Reconciliation Date immediately following the exclusion
of such Loan Inventory, a principal payment on the Loan in an amount sufficient
to eliminate such excess of the aggregate outstanding principal balance of the
Loan over the Loan Funding Availability, together with accrued and unpaid
interest on such excess.
Section 5.2. Inspections/Valuations.
The Lender and/or any inspection agent employed by the Lender shall
have the right, during the term of this Agreement to inspect the Property at any
reasonable time to confirm the accuracy of the Borrowing Base Report and to
independently evaluate the units, lots and projects comprising the Loan
Inventory. In the event that the Borrowing Base Report is deemed inaccurate or
in the event that the value of the Loan Inventory in the reasonable
determination of the Lender exceeds the outstanding principal balance of the
Loan, the Loan Funding Availability may be adjusted by the Lender or the
affected portions of the Loan Inventory may be excluded from the Loan Inventory.
In addition, the Lender shall have the right, with reasonable notice to
Borrower, to examine the books of account and other records and files of the
Borrower, and to discuss the affairs, business, finances and accounts of the
Borrower with their respective officers and employees, all at such reasonable
time and as often as the Lender may request provided that Lender shall not
unreasonably interfere or disrupt the conduct of the Borrower's business. It is
agreed that all inspection and valuation services rendered by or for Lender's
officers or agents shall be rendered solely for the protection and benefit of
the Lender and at the Lender's expense.
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Section 5.3. Lender Counsel Approval.
At the option and request of the Lender, the Lender may require that
counsel for the Lender review any of the documents or instruments required,
executed or provided in connection with this Agreement to confirm compliance
with the terms and conditions of this Agreement; or to otherwise advise the
Lender in its duties and responsibilities hereunder. The Borrower hereby agrees
to reimburse the Lender for the reasonable fees (based on time spent) and costs
associated therewith.
Section 5.4. Liability of Lender.
5.4(1) To Third Parties. The Lender shall in no event be responsible or
liable to any person other than the Borrower for its disbursement of or failure
to disburse the funds or any part thereof, and neither the contractor nor any
subcontractor nor materialmen or craftsmen nor laborers nor others shall have
any claim or right against the Lender under this Agreement or the Lender's
administration thereof. The Lender shall not be liable to any materialmen,
contractors, craftsmen, laborers or others for goods or services delivered by
them in or upon the Property, nor for debts or claims accruing to any such
parties against the Borrower. Nor shall the Lender be liable for the manner in
which any disbursements under this Agreement may be applied by the Borrower and
the contractor or either of them or for any compliance with the Florida
Construction Lien Law. The Borrower is not and shall not be an agent for Lender
for any purpose.
5.4(2) To the Borrower. The Borrower has accepted and does accept, the
full responsibility for the selection of its own contractor and subcontractors
and all materials, supplies and equipment to be used in the construction of the
improvements contemplated by this Agree ment, and the Lender assumes no
responsibility for the completion of the improvements contemplated herein.
Further, the Borrower has accepted and does accept full responsibility for
compliance with the Florida Construction Lien Law and relieves the Lender of any
and all liability with respect to that law and agrees to indemnify and hold the
Lender harmless from any and all liability under it of any nature whatsoever.
ARTICLE VI
BORROWER'S AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that until the Note, together with
interest and all other indebtedness to the Lender under the terms of this
Agreement, are paid in full, unless specifically waived by the Lender in
writing:
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Section 6.1. Corporate Existence and Qualification.
The Borrower will do, or cause to be done, all things necessary to
preserve, renew and keep in full force and effect its corporate existence,
rights, licenses and permits and comply with all laws applicable to it, operate
its business in a proper and efficient manner and substantially as presently
operated or proposed to be operated; and at all times maintain, preserve and
protect all franchises and trade names and preserve all property used or useful
in the conduct of its business, and keep the same in good repair, working order
and condition, and from time to time make, or cause to be made, all needful and
proper repairs, renewals, replacements, betterments and improvements thereto, so
that the business carried on in connection therewith may be properly and
advantageously conducted at all times.
Section 6.2. Financial Statements/Status Reports.
The Borrower will keep its books of accounts in accordance with GAAP
and will furnish to the Lender:
6.2(1) 10-K. Within one hundred twenty (120) days after the close of
Borrower's fiscal year the Form 10-K of the Borrower filed with the Securities
and Exchange Commission, together with the audited, consolidated financial
statements of the Borrower prepared by an independent accounting firm of
recognized standing.
6.2(2) 10-Q. Within sixty (60) days after the last day of each quarter
in each fiscal year of the Borrower, except the last quarter of such fiscal year
of the Borrower, the Form 10-Q of the Borrower filed with the Securities and
Exchange Commission containing financial statements of the Borrower and all
entities related to and divisions of the Borrower, on a consolidated basis.
6.2(3) Sales Report. Within sixty (60) days of the end of the previous
fiscal quarter, quarterly sales and inventory status reports showing units
closed, units in backlog and income summary for all operations in the State of
Florida of the Borrower and its Restricted Subsidiaries.
6.2(4) Other Financial Documentation. The Borrower shall provide to the
Lender such other financial information as the Lender may reasonably request
from time to time to clarify or amplify the information required to be furnished
to the Lender under this Agreement.
Section 6.3. Taxes and Claims.
The Borrower shall properly pay and discharge: (a) all taxes,
assessments and govern mental charges upon or against the Borrower or its assets
prior to the date on which penalties attach thereto, unless and to the extent
that such taxes are being diligently contested in good faith and by appropriate
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proceedings and appropriate reserves therefor have been established; and (b) all
lawful claims, whether for labor, materials, supplies, services or anything else
which might or could, if unpaid, become a lien or charge upon the properties or
assets of the Borrower, unless and to the extent only that the same are being
diligently contested in good faith and by appro priate proceedings and
appropriate reserves therefor have been established.
Section 6.4. Pay Indebtedness to Lender and Perform Other Covenants.
The Borrower shall: (a) make full and timely payments of the principal
of and interest, and premium, if any, on the Note and all other indebtedness of
the Borrower to the Lender, whether now existing or hereafter arising and (b)
duly comply with all the terms and covenants contained in each of the
instruments and documents given to the Lender pursuant to this Agree ment at the
times and places and in the manner set forth herein.
Section 6.5. Litigation.
The Borrower will promptly notify the Lender upon the commencement of
any action, suit, claim, counterclaim or proceeding against or investigation of
the Borrower (except when the alleged liability is fully covered by insurance):
(a) which has the reasonable possibility of being concluded adversely to the
Borrower the result of which, in the reasonable opinion of the Borrower, could
materially adversely affect the business of the Borrower; or (b) which questions
the validity of this Agreement or any other document executed in connection
herewith or any action taken or to be taken pursuant to any of the foregoing.
Section 6.6. Defaults.
The Borrower will promptly notify the Lender in writing of: (a) any
material assessment by any taxing authority for unpaid taxes as soon as the
Borrower has knowledge thereof; (b) the existence of any declared default in the
payment or performance of any indebtedness (excluding non recourse indebtedness
and excluding indebtedness incurred in lieu of contract deposits pursuant to
contracts for the acquisition of buildable lots or land) owed by the Borrower to
any other lender within ten (10) days of the declaration of such default which
would materially and adversely affect the Borrower's assets or business.
Section 6.7. Further Assurances.
The Borrower shall, at its sole cost and expense, upon the request of
the Lender, duly execute and deliver or cause to be duly executed and delivered
to the Lender such further instruments and do and cause to be done such further
acts that may be necessary or proper in the opinion of the Lender to carry out
more effectively the intent and purpose of this Agreement.
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Section 6.8. Funds Not Assignable.
The proceeds of the Loan shall not be assigned by the Borrower nor
subject to the process of any court upon legal action by or against the Borrower
or by or against anyone claiming under or through Borrower, and for the purpose
of this Agreement, the funds shall remain and be considered the money and
property of the Lender until the Borrower is entitled to have them disbursed as
provided herein. Nothing herein contained shall be considered as in anywise
modifying, or subordinating the obligations previously given or to be given by
the Borrower as security for the loan and such obligations shall be and remain
in full force and effect, this Agreement being intended only as additional
security for the loan and to insure its use for the purposes intended by the
Lender and Borrower.
Section 6.9. Financial Covenants.
Until the obligations are repaid in full, the Borrower shall adhere to
and certify quarterly as correct, the following financial covenants (after
giving effect to any Financial Covenant Carve Out), all on a consolidated basis
with the Restricted Subsidiaries and determined as of the last day of each
fiscal quarter of the Borrower:
6.9(1) Ratio of Notes Payable. The Borrower shall maintain at all times
a ratio of Notes Payable to Tangible Net Worth of not greater than 1.75 to 1.0 .
6.9(2) Ratio of Total Liabilities. The Borrower shall maintain at all
times a ratio of Total Liabilities to Tangible Net Worth of not more than 2.25
to 1.
6.9(3) Ratio of EBITDA. The Borrower shall maintain at all times a
ratio of (i) EBITDA to (ii) Fixed Charges of not less than 3.0 to 1.0.
6.9(4) Working Capital. The Borrower shall maintain at all times
Working Capital of $100,000,000
6.9(5) Minimum Tangible Net Worth. The Borrower shall maintain at all
times a minimum Tangible Net Worth of one hundred ten million and no/100 dollars
($110,000,000.00), plus fifty percent (50%) of annual net profits for such
fiscal year, plus fifty percent (50%) of any capital paid into the Borrower
(other than stock issued in connection with an employee stock ownership plan, an
employee stock option plan, an employee stock purchase plan or for an
acquisition), plus one hundred percent (100%) of net losses with absolute
minimum Tangible Net Worth of not less than one hundred ten million and no/100
dollars ($110,000,000.00).
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6.9(6) Compliance. Compliance with the financial covenants set forth in
this Section 6.10. shall be tested quarterly based on either the Borrower's Form
10-Q or Form 10-K, as appropriate.
Section 6.10. Inventory Covenants.
During the term of this Agreement, the Borrower shall adhere to the
following Inventory covenants which will be tested by the Lender as of the last
day of each fiscal quarter of the Borrower:
6.10(1) Speculative Lots. The total number of Speculative Lots owned by
the Borrower and its Restricted Subsidiaries at any given time shall not exceed
sixty percent (60%) of all Dwelling Lots (completely or partially constructed)
then owned by the Borrower and its Restricted Subsidiaries. Models shall not be
considered "Speculative Lots" for purposes of this Section 6.10(1).
6.10(2) Developed Lots/Lots Under Development. The Borrower shall not
permit the total number of Developed Lots and Lots Under Development, in each
case, then owned by the Borrower and all Restricted Subsidiaries, at any given
time to exceed two and one-half (2 1/2) times the number of Developed Lots
containing Dwellings closed by the Borrower and all Restricted Subsidiaries
during the immediately preceding twelve (12) calendar months. The Borrower shall
not permit the aggregate cost of all Developed Lots and Lots Under Development,
in each case, then owned by the Borrower and all Restricted Subsidiaries, at any
given time to exceed forty percent (40%) of all Tangible Assets of the Borrower
on a consolidated basis.
6.10(3) Land Cost. The cost of the land owned by Borrower and all
Restricted Subsidiaries at any given time which has not been developed into
Developed Lots and is not scheduled for commencement of development into
Developed Lots within twelve (12) calendar months from the date of determination
shall not exceed ten percent (10%) of all Tangible Assets of the Borrower and
its Restricted Subsidiaries on a consolidated basis. In the event that the
Borrower or any Restricted Subsidiary classifies certain undeveloped land as
being scheduled for development within twelve (12) calendar months for the
purpose of this provision and, as of the last day of such twelve (12) calendar
month period, development of such land has not commenced, such land shall not be
classified as scheduled for development within twelve (12) calendar months until
such development is commenced.
For purposes of Section 6.10(1), 6.10(2) and 6.10(3) only, the terms
"Speculative Lots", "Dwelling Lot", "Models", "Developed Lots", "Lots Under
Development" and "Dwellings" will include all properties of Borrower and
Restricted Subsidiaries that are situated either within or without the State of
Florida.
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Section 6.11. Additional Information.
Upon the request of the Lender, the Borrower shall deliver to Lender
any documents or information with respect to the Inventory that the Lender may
reasonably require including, without limitation, and acquisition closing
documentation.
Section 6.12. Compliance Certificates.
Within forty-five (45) days from the end of each fiscal quarter of the
Borrower, the Borrower shall provide to the Lender a certificate signed by an
Authorized Signatory of the Borrower in the form attached hereto as Exhibit D
setting forth such calculations required to establish whether the Borrower was
in compliance with Section 6.10 hereof.
Section 6.13. Payment of Contractors.
The Borrower shall pay in a timely manner, and shall cause its
Subsidiaries to pay in a timely manner, any and all contractors and
subcontractors who conduct work in or on the Inventory, subject to the right of
the Borrower to contest any amount in dispute, so long as the contesting of such
amount is pursued diligently and in good faith. The Borrower will advise the
Lender in writing immediately if the Borrower or any of its Subsidiaries
receives any written notice from any contractor(s), subcontractor(s) or material
furnisher(s) to the effect that said contractor(s) or material furnisher(s) have
not been paid for any labor or materials furnished to or in the Inventory and
such outstanding payment or payments are individually or collectively equal to
or greater than two hundred thousand and no/ 100 dollars ($200,000.00) per
subdivision or seven million and no/100 dollars ($7,000,000.00) in the
aggregate. The Borrower will further make available to the Lender, for
inspection and copying, on demand, any contracts, bills of sale, statements,
receipted vouchers or agreements, under which the Borrower claims title to any
materials, fixtures or articles used in the development of the Loan Inventory or
construction of improvements on the Loan Inventory including, without
limitation, the Dwellings.
Section 6.14. Bank Group Line.
6.14(1) Default. Borrower shall provide immediate notice to Lender of
any declared default under the Bank Group Line or under any other loan agreement
or creditor agreement with any financial institution.
6.14(2) Notice of Change. Should the Borrower agree to any change or
amendment to the Bank Group Line, it shall give notice to the Lender of such
change prior to making the change, if time permits, and if not within two (2)
business days after the making of such change.
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Section 6.15. Hazardous Substances.
The Borrower warrants and represents to the Lender that to the best of
their knowledge and belief and based on environmental assessments of the
Inventory commissioned by the Borrower, except to the extent disclosed to the
Lender in environmental assessments or other writings or to the extent that it
would not materially and adversely affect the use and marketability of any
Inventory, the Inventory has not been and is not now being used as a storage
facility for any "Hazardous Substances", nor has it been used in violation of
any federal, state or local environmental law, ordinance or regulation, that no
proceedings have been commenced, or notice(s) received, concerning any alleged
violation of any such environmental law, ordinance or regulation, and that the
Inventory is free of hazardous or toxic substances and wastes, contaminants,
oil, radioactive or other materials the removal of which is required or the
maintenance of which is restricted, prohibited or penalized by any federal,
state or local agency, authority or governmental unit except as set forth in the
Site Assessments. The Borrower covenants that it shall neither permit any such
materials to be brought on to the Inventory, nor shall it acquire real property
to be added to the Loan Inventory upon which any such materials exist, except to
the extent disclosed to the Lender in environmental assessments or other
writings or to the extent that it would not materially and adversely affect the
use and marketability of any Inventory; and if such materials are so brought or
found located thereon, such materials shall be immediately removed, with proper
disposal, to the extent required by applicable environmental laws, ordinances
and regulations, and all required environmental cleanup procedures shall be
diligently undertaken pursuant to all such laws, ordinances and regulations. The
Borrower further represents and warrants that the Borrower will promptly
transmit to the Lender copies of any citations, orders, notices or other
material governmental or other communications received with respect to any
hazardous materials, substances, wastes or other environmentally regulated
substances affecting the Inventory. Notwithstanding the foregoing, there shall
not be a default of this provision should the Borrower store or use minimal
quantities of the aforesaid materials, provided that: such substances are of a
type and are held only in a quantity normally used in connection with the
construction, occupancy or operation of comparable buildings or residential
developments (such as cleaning fluids and supplies normally used in the day to
day operation of residential developments), such substances are being held,
stored and used in complete and strict compliance with all applicable laws,
regulations, ordinances and requirements, and the indemnity set forth below
shall always apply to such substances, and it shall continue to be the
responsibility of the Borrower to take all remedial actions required under and
in accordance with this Agreement in the event of any unlawful release of any
such substance.
Borrower hereby agrees to indemnify Lender and hold Lender harmless
from and against any and all losses, liabilities, including strict liability,
damages, injuries, expenses, including reasonable attorneys' fees, costs of any
settlement or judgment and claims of any and every kind whatsoever paid incurred
or suffered by, or asserted against, Lender by any person or entity or
governmental agency for, with respect to, or as a direct or indirect result of,
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the presence on or under, or the escape, seepage, leakage, spillage, discharge,
emission, discharging or release from the Inventory of any Hazardous Substance
(including, without limitation, any losses, liabili ties, including strict
liability, damages, injuries, expenses, including reasonable attorneys' fees,
costs of any settlement or judgment or claims asserted or arising under the
Comprehensive Environmental Response, Compensation and Liability Act, any so
called federal, state or local "Superfund" "Superlien" laws, statutes, law
ordinance, code, rule, regulation, order or decree regulating, with respect to
or imposing liability, including strict liability, substances or standards of
conduct concerning any Hazardous Substance), regardless of whether within the
control of Lender.
For purposes of this Agreement, "Hazardous Substances" shall mean and
include those elements or compounds which are contained in the list of hazardous
substances adopted by the United States Environmental Protection Agency ("EPA")
and the list of toxic pollutants designated by Congress or the EPA or defined by
any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree regulating, relating to, or imposing liability or
standards of conduct concerning, any hazardous, toxic or dangerous waste,
substance or material as now or at any time hereafter in effect.
If Borrower receives any notice of (i) the happening of any material
event involving the spill, release, leak, seepage, discharge or clean-up of any
Hazardous Substance on any of the Inventory or in connection with Borrower's
operations thereon or (ii) any complaint, order, citation or material notice
with regard to air emissions, water discharges, or any other environ mental,
health or safety matter affecting Borrower (an "Environmental Complaint") from
any person or entity (including without limitation the EPA) then Borrower shall
immediately notify Lender orally and in writing of said notice.
Lender shall have the right but not the obligation, and without
limitation of Lender's rights under this Agreement, to enter onto the Inventory
or to take such other actions as it deems necessary or advisable to clean up,
remove, resolve or minimize the impact of, or otherwise deal with, any such
Hazardous Substance or Environmental Complaint following receipt of any notice
from any person or entity (including, without limitation, the EPA) asserting the
existence of any Hazardous Substance or an Environmental Complaint pertaining to
the Inventory or any part thereof which, if true, could result in an order, suit
or other action against Borrower, which would have a material adverse effect on
the Borrower, and/or which, in the sole opinion of Lender, could jeopardize its
security under this Agreement. All reasonable costs and expenses incurred by
Lender in the exercise of any such rights shall be secured by this Agreement and
shall be payable by Borrower upon demand.
Section 6.16. Insurance.
The Borrower shall keep the Inventory comprising the Loan Inventory
insured by responsible insurance companies in such amounts and against such
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risks as is customary for owners of similar businesses and properties in the
same general areas in which the Borrower and its Restricted Subsidiaries operate
or, to the customary extent (and in a manner approved by the Lender) the
Borrower may be self insured. All insurance herein provided for shall be in form
and with companies reasonably approved by the Lender. The Borrower shall also
maintain general liability insurance, ▇▇▇▇▇▇▇'▇ compensation insurance,
automobile insurance for all vehicles owned by them and any other insurance
reasonably required by the Lender, to the extent commercially available at a
reasonable cost. On the Agreement Date, the Borrower shall deliver to the Lender
a copy of a certificate of insurance evidencing the insurance required
hereunder. In addition, on the date of delivery of each report required by
Section 4.6 hereof, the Borrower shall certify to the Lender that all insurance
policies required to be maintained hereunder remain in full force and effect.
Section 6.17. Reportable Event.
Promptly after Borrower receives notice or otherwise becomes aware
thereof, the Borrower shall notify the Lender of the occurrence of any
Reportable Event with respect to any Plan as to which the Pension Benefit
Guaranty Corporation has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within thirty (30) days of the occurrence
of such event (provided that the Borrower shall give the Lender notice of any
failure to meet the minimum funding standards of Section 412 of the Code or
Section 302 of ERISA, regardless of the issuance of any waivers in accordance
with Section 412(d) of the Code.
Section 6.18. Secured Indebtedness.
The Borrower shall not, and shall not permit any of its Restricted
Subsidiaries to, incur or permit to exist any Indebtedness which is (a) secured
in whole or in part by any of the Inventory (other than Permitted Encumbrances);
or (b) contains any provision requiring the Borrower or any Restricted
Subsidiary to grant to the lender thereunder any Lien at a future date or upon
the occurrence of any subsequent event; except that the Borrower and its
Restricted Subsidiaries may incur Indebtedness in favor of a seller of Inventory
to the Borrower which is secured solely by the Inventory contemporaneously
acquired from such seller and Indebtedness secured solely by the Borrower's
headquarters building located in Arlington, Texas.
ARTICLE VII
DEFAULT AND REMEDIES
Section 7.1. Defaults.
Subsequent to any applicable notice and/or cure rights afforded by the
Loan Documents, each of the following shall constitute a Default, whatever the
reason for such event and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any judgment or order of any court
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or any order, rule, or regulation of any governmental or non-governmental body:
7.1(1) Payment. Default by the Borrower in the payment of any principal,
interest or payment due to the Lender under the Note or under any of the Loan
Documents;
7.1(2) Performance. Default in the payment or performance of any other
liability, obligation or covenant of the Borrower to the Lender under the Loan
Documents, for a period of ten (10) days after written notice; provided (i) if
Borrower reasonably cannot perform within such (10) day period and, in Lender's
reasonable judgment, Lender's security will not be impaired, Borrower may have
such additional time to perform as Borrower reasonably may require, provided and
for so long as Borrower proceeds with due diligence to cure said default; and
(ii) if Lender's security reasonably will be materially impaired if Borrower
does not perform in less than ten (10) days, Borrower will have only such period
following written notice in which to perform as Lender may reasonably specify.
7.1(3) Representation. Any representation, warranty, statement,
certificate, schedule or report made or furnished by the Borrower that proves to
have been false or erroneous in any material respect at the time of the making
thereof, or to have omitted any substantial liability or claim against the
Borrower, or if on the date of execution of this Agreement there shall have been
any materially adverse change in any of the facts disclosed therein, which
change shall not have been disclosed to the Lender at or prior to the time of
such execution;
7.1(4) Litigation. Any litigation or any proceedings which are pending
against the Borrower or Restricted Subsidiaries, the outcome of which would in
Lender's reasonable determination materially adversely affect the continued
operation of the Borrower, and the Borrower failing to take corrective measures
reasonably satisfactory to the Lender within ten (10) days;
7.1(5) Obligations to Others. The failure of the Borrower to pay, when
due, any other indebtedness for borrowed money owed by the Borrower to the
Lender, or default by the Borrower in the performance of the terms of any loan
agreement or indenture relating to such indebtedness, which failure or default
would materially adversely affect the business, operations or financial
condition of the Borrower, and any such default shall not have been remedied
within thirty (30) days thereafter;
7.1(6) Obligations to Lender. Any default by Borrower on any other
direct obliga tion that Borrower may have to the Lender which continues uncured
for thirty (30) days after notice from Lender;
7.1(7) Other Default. There shall occur any Event of Default in the
performance or observance of any agreement or covenant or breach of any
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representation or warranty contained in any of the Loan Documents (other than
this Agreement or as otherwise provided in this Section 7.1 of this Agreement)
or any Subsidiary Guaranty, which shall not be cured to the Lender's
satisfaction within the applicable cure period, if any, provided for in such
Loan Document or ninety (90) days from the date the Borrower receives notice
from the Lender with respect thereto if no cure period is provided in such Loan
Document;
7.1(8) Title 11 Relief. There shall be entered a decree or order for
relief in respect of the Borrower or any of its Restricted Subsidiaries under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other applicable federal or state bankruptcy law or other similar law, or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator,
or similar official of the Borrower or any of its Restricted Subsidiaries, or of
any substantial part of their respective properties, or ordering the winding-up
or liquidation of the affairs of the Borrower or any of its Restricted
Subsidiaries, or an involuntary petition shall be filed against the Borrower or
any of its Restricted Subsidiaries, and a temporary stay entered, and (i) such
petition and stay shall not be diligently contested, or (ii) any such petition
and stay shall continue undismissed for a period of thirty (30) consecutive
days;
7.1(9) Title 11 Petition. The Borrower or any of its Restricted
Subsidiaries shall file a petition, answer, or consent seeking relief under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other applicable federal or state bankruptcy law or other similar law, or
the Borrower or any of its Restricted Subsidiaries shall consent to the
institution of proceedings thereunder or to the filing of any such petition or
to the appointment or taking of possession of a receiver, liquidator, assignee,
trustee, custodian, sequestrator, or other similar official of the Borrower or
any of its Restricted Subsidiaries, or of any substantial part of their
respective properties, or the Borrower or any of its Restricted Subsidiaries
shall fail generally to pay their respective debts as they become due, or the
Borrower or any of its Restricted Subsidiaries shall take any corporate or
partnership action to authorize any such action;
7.1(10) Judgment. A final judgment shall be entered by any court
against the Borrower or any of its Restricted Subsidiaries for the payment of
money which exceeds $500,000.00, which judgment is not covered by insurance or a
warrant of attachment or execution or similar process shall be issued or levied
against property of the Borrower or any of its Restricted Subsidiaries which,
together with all other such property of the Borrower or any of its Restricted
Subsidiaries subject to other such process, exceeds in value $500,000.00 in the
aggregate, and if, within thirty (30) days after the entry, issue, or levy
thereof, such judgment, warrant, or process shall not have been paid or
discharged or bonded or stayed pending appeal, or if, after the expiration of
any such stay, such judgment, warrant, or process shall not have been paid or
discharged;
7.1(11) ERISA Funding. (1) There shall be at any time any "accumulated
funding deficiency," as defined in ERISA or in Section 412 of the Code, with
respect to any Plan; or (2) a trustee shall be appointed by a United States
District Court to administer any Plan; or the Pension Benefit Guaranty
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Corporation shall institute proceedings to terminate any Plan; or (3) any of the
Borrower and its ERISA Affiliates shall incur any liability to the Pension
Benefit Guaranty Corporation in connection with the termination of any Plan; or
(4) any Plan or trust created under any Plan of any of the Borrower and its
ERISA Affiliates shall engage in a non-exempt "prohibited transactions (as such
term is defined in Section 406 of ERISA or Section 4975 of the Code) which would
subject the Borrower or any ERISA Affiliate to the tax or penalty on "prohibited
transactions" imposed by Section 502 of ERISA or Section 4975 of the Code; and
by reason of any or all of the events described in clauses (1) through (4), as
applicable, the Borrower shall have waived (and/or is likely to incur) and/or
incurred liability in excess of $1,000,000.00 in the aggregate;
7.1(12) Invalidity of Documents. All or any portion of any Loan
Document shall at any time and for any reason be declared by a court of
competent jurisdiction in a suit with respect to such Loan Document to be null
and void, or a proceeding shall be commenced by any governmental authority
involving a legitimate dispute or by the Borrower or any of its Restricted
Subsidiaries, having jurisdiction over the Borrower or any of its Restricted
Subsidiaries, seeking to establish the invalidity or unenforceability thereof
(exclusive of questions of interpretation of any provision thereof), or the
Borrower or any of its Restricted Subsidiaries shall deny that it has any
liability or obligation for the payment of principal or interest purported to be
created under any Loan Document;
7.1(13) Change of Control. There shall occur any Change of Control;
7.1(14) Transfer of Property. Except for conveyances of all or any part
of the Loan Inventory between the Borrower and the Guarantors there occurs any
sale, lease, conveyance, assignment, pledge, encumbrance, or transfer of all or
any part of the Loan Inventory or any interest therein, voluntarily or
involuntarily, whether by operation of law or otherwise, except (i) in
accordance with the terms of this Agreement, (ii) for execution of contracts
with prospective purchasers, (iii) for Permitted Encumbrances, and (iv) in the
ordinary course of business;
7.1(15) Property Change. Except in the normal course of Borrower's
development of inventory into Developed Lots and construction of Dwellings
thereon, without the prior written consent of Lender, Borrower grants any
easement or dedication, files any plat, condominium declaration, or restriction
or otherwise encumbers all or any portion of the Loan Inventory, or seeks or
permits any zoning reclassification or variance, unless such action is expressly
permitted by the Loan Documents or does not affect any Inventory which is part
of the Loan Inventory; or
Notwithstanding anything contained herein to the contrary, the occurrence of any
of the foregoing shall not be a Default or an Event of Default hereunder if: (i)
the occurrence pertains only to specific parcel(s) within the Loan Inventory;
and (ii) the affected parcel(s) is (are) removed from the Loan Inventory on
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or before ten (10) days in the case of a monetary occurrence and thirty (30)
days in the case of a non-monetary occurrence after the occurrence or, if the
Borrower is entitled to notice and cure, within the applicable notice and cure
period.
In the event that any such parcel is a Lot Under Development, Developed Lot or
Dwelling Lot, then the Loan Funding Availability shall be immediately calculated
excluding such parcel. If, as the result of such removal, the outstanding
principal balance under the Loan would exceed the Loan Funding Availability, the
Borrower shall pay (X) to the Lender on the Reconciliation Date immediately
following the removal of such Inventory from the Loan Inventory, a principal
payment on the Loan in an amount sufficient to eliminate such excess of the
aggregate outstanding principal balance of the Loan over the Loan Funding
Availability, together with any due and unpaid interest on such excess or (Y)
add additional Inventory to the Loan Inventory (which is acceptable to the
Lender) in an amount sufficient to cause the Loan Funding Availability to equal
or exceed the Loan.
Section 7.2. Remedies.
If a Default shall have occurred and shall be continuing:
7.2(1) Optional Acceleration. With the exception of a Default specified
in Sections 7.1(8), 7.1(9) and 7.1(10), Lender may, by notice to the Borrower
(i) declare the Note, all interest thereon and all other amounts payable under
this Agreement and the other Loan Documents to be forthwith due and payable,
whereupon the Note, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower,
and (ii) terminate this Agreement.
7.2(2) Immediate Acceleration. Upon the occurrence of a Default under
Sections 7. l(8), 7.1(9) or 7.1(10) hereof, this Agreement shall automatically
terminate and such principal, interest (including without limitation, interest
which would have accrued but for the commencement of a case or proceeding under
the federal bankruptcy laws), and other amounts payable under this Agreement or
the Note shall thereupon and concurrently therewith become due and payable, all
without any action by the Lender, all without presentment, demand, protest or
other notice of any kind, all of which are expressly waived, anything in this
Agreement or in the Note to the contrary notwithstanding.
7.2(3) Loan Document Rights. The Lender shall exercise all of the
post-default rights granted to it and to them under the Loan Documents or under
Applicable Law.
7.2(4) Cumulative Rights. The rights and remedies of the Lender
hereunder shall be cumulative, and not exclusive.
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Section 7.3. Cross Default.
All of the Note and other Loan Documents are "cross defaulted such that
(a) the occurrence of an Event of Default under any one of the Loan Documents
shall constitute an Event of Default under this Agreement and all of the Loan
Documents and (b) the occurrence of a Default under any one of the Loan
Documents shall constitute a Default under this Agreement and all of the other
Loan Documents.
Section 7.4. Waiver of Default.
The Lender at any time may waive any default or any event of default
which shall have occurred and any of its consequences, in which case the parties
hereto shall be restored to their former positions and rights and obligations
hereunder, respectively; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon, and no such waiver shall
be effective unless it is in a written document executed by a duly authorized
officer.
Section 7.5. Rights and Remedies Not Waived.
No course of dealing between the Borrower and the Lender or any failure
or delay on the part of the Lender in exercising any rights or remedies
hereunder shall operate as a waiver of any rights or remedies of the Lender and
no single or partial exercise of any rights or remedies hereunder shall operate
as a waiver or preclude the exercise of any other rights or remedies hereunder.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Lien; Setoff By Lender.
The Borrower hereby grants to the Lender a continuing lien for all
indebtedness and other liabilities of the Borrower to the Lender upon any and
all moneys, securities, and other property of the Borrower and the proceeds
thereof, now or hereafter held or received by or in transit to, the Lender from
or to the Borrower, whether for safekeeping, custody, pledge, transmission,
collection or otherwise, and also upon any and all deposits (general or special)
and credits of the Borrower with, and any and all claims of the Borrower against
the Lender at any time existing. Upon the occurrence of any Event of Default,
the Lender is hereby authorized at any time and from time to time, without
notice to the Borrower setoff, appropriate, and apply any or all items
hereinabove referred to against all indebtedness and other liabilities of the
Borrower to the Lender, whether under this Agreement, the Loan Documents or
otherwise, and whether now existing or hereafter arising.
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Section 8.2. Waivers.
The Borrower waives presentment, demand, protest, notice of default,
nonpayment, partial payments and all other notices and formalities relating to
this Agreement other than notices speci fically required hereunder. The Borrower
consents to and waives notice of the granting of indulgences or extensions of
time of payment, the taking or releasing of security, the addition or release of
persons primarily or secondarily liable on or with respect to liabilities of the
Borrower to the Lender, all in such manner and at such time or times as the
Lender may deem advisable. No act or omission of the Lender shall in any way
impair or affect any of the indebtedness or liabilities of the Borrower to the
Lender or rights of the Lender in any security. No delay by the Lender to
exercise any right, power or remedy hereunder or under any security agreement,
and no indulgence given to the Borrower in case of any default, shall impair any
such right, power or remedy or be construed as having created a course of
dealing or performance contrary to the specific provisions of this Agreement or
as a waiver of any default by the Borrower or any acquiescence therein or as a
violation of any of the terms or provisions of this Agreement. The Lender shall
have the right at all times to enforce the provisions of this Agreement and all
other documents executed in connection herewith in strict accordance with their
terms, notwithstanding any course of dealing or performance by the Lender in
refraining from so doing at any time and notwithstanding any custom in the
banking trade. No course of dealing between the Borrower and the Lender shall
operate as a waiver of any of the Lender's rights.
Section 8.3. Benefit.
This Agreement is made and entered into for the sole protection and
benefit of the Lender and the Borrower, their successors and assigns, and no
other person or persons other than the Borrower shall have any right of action
hereon or rights to the Loan proceeds at any time. Lender shall not (a) owe any
duty whatsoever to any claimant for labor performed or material furnished in
connection with the construction of any Dwelling or improvement on any
Inventory, or (b) owe any duty to apply any undisbursed portion of the Loan to
the payment of any claim, or (c) owe any duty to exercise any right or power of
the Lender hereunder or arising from any Default by the Borrower.
Section 8.4. Assignment.
The terms hereof shall be binding upon and inure to the benefit of the
heirs, successors, assigns, and personal representatives of the parties hereto;
provided, however, that the Borrower shall not assign this Agreement or any of
its rights, interests, duties or obligations hereunder or any Loan proceeds or
other monies to be advanced hereunder in whole or in part without the prior
written consent of the Lender and any such assignment (whether voluntary or by
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operation law) without said consent shall be void and render automatically
terminated any obligation of Lender to advance any further monies pursuant to
this Agreement or any other Loan Document.
Section 8.5. Amendment and Waiver.
This Agreement and the other Loan Documents represent the final
agreement between the Lender and the Borrower and may not be contradicted by
evidence of prior, contemporaneous or subsequent oral or written agreements of
the Borrower and the Lender. Neither this Agreement nor any of the Loan
Documents may be amended orally, nor may any provision hereof be waived orally
but only by an instrument in writing signed by the Lender and the Borrower.
Section 8.6. Terms.
Whenever the context and construction require, all words used in the
singular number herein shall be deemed to have been used in the plural, and vice
versa, and the masculine gender shall include the feminine and neuter and the
neuter shall include the masculine and feminine.
Section 8.7. Governing Law and Jurisdiction.
This Agreement shall be construed in accordance with the laws of the
State of Florida, and such laws shall govern the interpretation, construction
and enforcement hereof.
Section 8.8. Publicity.
Subject-to the Borrower's approval, the Lender shall have the right to
incorporate its name into signage placed upon the Loan Inventory situated in
Florida. Lender shall have the right to secure printed publicity through
newspaper and other media concerning the Inventory and source of financing.
Section 8.9. Expenses of Lender.
The Borrower promises to reimburse the Lender promptly for all
reasonable out-of-pocket expenses of every nature which the Lender may incur in
connection with the Loan Documents, the making of any loans provided for herein
or the collection of the Borrower's indebtedness, including, but not limited to,
reasonable attorneys' fees of Lender's counsel relating to the preparation of
the Loan Documents, all recording fees, and documentary stamps. Such expenses
shall be paid at closing or in a reasonable time thereafter upon receipt of
written invoices. The Borrower shall also pay reasonable post-closing expenses
incurred by the Lender on behalf of the Borrower. Furthermore, the Borrower
shall be liable for post-closing collection expenses, including, but not limited
to the collection of obligations of the Borrower hereunder, including reasonable
attorneys' fees, including appellate proceedings, post-judgment proceedings and
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bankruptcy proceedings. In the event the Borrower fails to pay such expenses
within a reasonable time, the Lender may either (a) disburse to itself under the
terms of the Note any sums payable to Lender and such disbursement shall be
considered with like effect as if same had been made to Borrower, or (b) pay
such expenses on the Borrower's behalf and charge the Borrower's account.
Section 8.10. Invalidation of Provisions.
In the event that any one or more of the provisions of this Agreement
is deemed invalid by a court having jurisdiction over this Agreement or other
similar authority, Lender may, in its sole discretion, terminate this Agreement
in whole or in part.
Section 8.11. Notices.
All notices, requests, consents, demands and other communications
required or which any party desires to give hereunder or under any other Loan
Document shall, unless other specifically provided in such other Loan Document,
be deemed sufficiently given or furnished if (a) in writing and delivered by
personal delivery, by courier, or by registered or certified United States mail,
postage prepaid, addressed to the party to whom directed at the addresses
specified below (unless changed by similar notice in writing given by the
particular party whose address is to be changed), (b) by telex with confirmation
thereof in writing by sender pursuant to subsection (a) above, (c) facsimile to
the facsimile number specified below with confirmation thereof in writing by
sender pursuant to subsection (a) above, or (d) by oral communication with
confirmation thereof in writing by the notifying party pursuant to subsection
(a) above within three (3) business days after such oral communication. Any such
notice or communication shall be deemed to have been given and to be effective
either at the time of personal delivery or, in the case of courier or mail, as
of the date of first attempted delivery at the address and in the manner
provided herein, or, in the case of telex, when transmitted (answer back
confirmed), or, in the case of facsimile, upon receipt or, in the case of oral
communication, upon the effectiveness of written confirmation as hereinabove
provided. Notwithstanding the foregoing, no notice of change of address shall be
effective except upon receipt. This Section shall not be construed in any way to
affect or impair any waiver of notice or demand provided in any Loan Document or
to require giving of notice or demand to or upon any person in any situation or
for any reason.
BORROWER:
▇. ▇. ▇▇▇▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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and
▇▇▇ ▇. Harbour
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
LENDER:
▇▇▇▇▇▇▇ Bank, N.A.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Post Office Box 678267
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: Closing Department Manager
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Winderweedle, Haines, ▇▇▇▇ & ▇▇▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
Post ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Section 8.12. Termination by the Borrower.
The Borrower may terminate this Agreement in its entirety by giving at
least ten (10) days prior written notice of its intention to terminate and by
payment in full of all Obligations. Upon the date of termination, the Borrower's
obligation for the payment of the fee provided for in Section 2.8 hereof shall
terminate.
Section 8.13. Controlling Agreement.
In the event any provision of this Agreement is inconsistent with any
provision of any other document, whether heretofore executed, required or
executed pursuant to this Agreement or otherwise, the provisions of this
Agreement shall be controlling.
Section 8.14. Titles.
Titles to the sections of this Agreement are solely for the convenience
of the parties hereto and are not an aid in the interpretation of this Agreement
or any part thereof.
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Section 8.15. Counterparts.
This Agreement may be executed in any number of counterparts and by the
parties hereto on separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together constitute one
and the same Agreement.
Section 8.16. Time is of the Essence.
The parties agree that time shall be of the essence in interpreting
each and every term and condition contained herein.
Section 8.17. Waiver of Trial by Jury.
The Borrower and the Lender knowingly, voluntarily and intentionally
waive the right either may have to a trial by jury in respect of any litigation
based hereon, or arising out of, under or in connection with the Loan Documents
and any agreement contemplated to be executed in conjunction therewith, or any
course of conduct, course of dealing, statements (whether verbal or written) or
actions of either party. This provision is a material inducement for the Lender
entering into the loan evidenced by the Loan Documents.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
Signed, sealed and delivered
in the presence of:
▇. ▇. ▇▇▇▇▇▇, INC., a Delaware
Corporation
____________________________________ By:__/s/ ▇▇▇▇▇ ▇. Keller_____
▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Executive Vice President
------------------------------------
"Borrower"
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▇▇▇▇▇▇▇ BANK, N.A., a national
banking association
____________________________________ By:__/s/ ▇▇▇▇▇▇ ▇. Markowkia
▇▇▇▇▇▇ ▇. MARKOWSKIA
Its: Vice President
------------------------------------
"Lender"
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