AMENDED AND RESTATED LOAN AGREEMENT EXHIBIT 10.4
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DATE: November 30, 1995
PARTIES: Borrower: CONTINENTAL HOMES HOLDING CORP., a
Delaware corporation.
Borrower 0000 Xxxxx Xxxxxxxxxx Xxxx
Address: Suite 2050
Xxxxxxxxxx, Xxxxxxx 00000
Bank: BANK ONE, ARIZONA, NA, a national
banking association formerly known as
THE VALLEY NATIONAL BANK OF ARIZONA.
Bank Address: Western Region Real Estate
X.X. Xxx 00000
Xxxxxxx, Xxxxxxx 00000
Attention: Dept. A-383
AGREEMENT: For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Borrower and Bank agree as follows:
1. SCHEDULE OF TERMS.
2. Commitment Amount: $15,000,000.00.
3.1.1.; 3.2 Commitment Expiration Date: November 30, 1996.
3.2 and 5.1.6 Purpose of Advances: Working capital and general corporate
purposes to be applied (i) to pay costs and expenses incurred in the ordinary
course of Borrower's primary lines of business consisting of the acquisition,
development and subdivision of land for residential purposes and the
construction and sale of residential dwellings to the general public; (ii) to
pay interest due under the Note, the Unused Commitment Fee and the Commitment
Fee; (iii) to pay amounts due under the Set Aside Agreement; or (iv) to pay
amounts due to be reimbursed to Bank for letters of credit issued pursuant to
this Agreement. Advances shall not be available for purposes not described
above.
3.6.1. Commitment Fee: $75,000.00.
3.6.2 Unused Commitment Fee Rate: 1/4% per annum.
2. DEFINITIONS. In this Agreement, the following terms shall have the following
meanings:
"Acquisition Debt" means (i) Debt or Preferred Stock of any Person existing
at the time such Person becomes a Subsidiary of Borrower, including but not
limited to Debt or Preferred Stock incurred or created in connection with, or in
contemplation of, such Person becoming a Subsidiary of Borrower (but excluding
Debt of such Person which is extinguished, retired or repaid in connection with
such Person becoming a Subsidiary of Borrower), (ii) Debt incurred or created by
any Subsidiary of Borrower in connection with the transaction or series of
transactions pursuant to which such Person became a Subsidiary of Borrower or
(iii) Debt incurred or created by any Subsidiary of Borrower in connection with
the acquisition of substantially all of the assets of an operating unit or
business of another Person, provided that, in the case of Debt incurred or
created pursuant to clause (ii) or (iii) hereof, such Subsidiary had no other
prior assets or operations prior to such acquisition, transaction or series of
transactions other than Credit Extensions/Contributions permitted by Section 7.9
or made by a Person other than Borrower or any of its Subsidiaries.
"Adjusted Debt" means all Debt of Borrower on a consolidated basis plus all
accounts payable and other accrued expenses of Borrower on a consolidated basis,
excluding Debt arising from "mortgage banking and title operations" of CHMC and
Xxxxxx Title, and excluding the indebtedness of Borrower evidenced by the
Convertible Notes and the Subordinated Notes, all as shown on a consolidated
balance sheet of Borrower prepared in accordance with GAAP and approved by Bank.
"Adjusted Debt to Net Worth Ratio" of any Person means the ratio of all of
such Person's then outstanding Adjusted Debt, on a consolidated basis, excluding
Mortgage Debt, to Net Worth at the end of the fiscal quarter ended immediately
preceding the date of determination.
"Advance" means an advance under the Commitment.
"Affiliate" of any Person means (i) any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person and (ii) any other Person that beneficially owns at least 10% of the
voting common stock of such Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agreement" means this Loan Agreement as it may be amended, modified,
extended, renewed, restated, or supplemented from time to time.
"Approvals and Permits" means each and all approvals, authorizations, bonds,
consents, certificates, franchises, licenses, permits, registrations,
qualifications, and other actions and rights granted by or filings with any
Persons necessary, appropriate, or desirable for ownership or lease by Borrower
of its assets and property or for the conduct of the business and operations of
Borrower.
"Bank Facility" means, collectively, one or more commitments from one or
more banks or other lending institutions to lend funds together with any and all
agreements, documents and instruments from time to time delivered in connection
therewith as such commitment or any such agreements, documents or instruments
may be in effect or amended, amended and restated, renewed, extended,
restructured, supplemented or otherwise modified from time to time and any
credit agreement, loan agreement, note purchase agreement, indenture or other
agreement, document or instrument refinancing, refunding or otherwise replacing
such Bank Facility, whether or not with the same agent, trustee, representative
lenders or holders, and, subject to the proviso to the next succeeding sentence,
irrespective of any changes in the terms and conditions thereof. Without
limiting the generality of the foregoing, the term "Bank Facility" shall include
any amendment, amendment and restatement, renewal, extension, restructuring,
supplement or modification to any Bank Facility and all refundings, refinancings
and replacements of any Bank Facility, including any agreement (i) extending the
maturity of any Debt incurred thereunder or contemplated thereby, (ii) adding or
deleting borrowers or guarantors thereunder, provided that such borrowers and
issuers include one or more of Borrower and its Subsidiaries and their
respective successors and assigns, (iii) increasing the amount of Debt incurred
thereunder or available to be borrowed thereunder, provided that on the date
thereof such Debt would not be prohibited by clause (b) of the definition of
Permitted Debt, or (iv) otherwise altering the terms and conditions thereof in a
manner not prohibited by the terms of this Agreement.
"Beneficial Owner" means as defined in Rule 13d-3, as in effect on the date
of the execution of this Agreement, promulgated by the Commission under the
Exchange Act.
"Borrower Loan Documents" means the Loan Documents executed or delivered by
Borrower from time to time.
"Business Day" means a day of the year on which banks are not required or
authorized to close in Phoenix, Arizona.
"Capital Stock" of any Person means any and all shares, interests,
participations or other equivalents (however designated) of capital stock of
such Person and all warrants or options to acquire such capital stock.
"Carlsbad Property" means the 417 acres owned by the Carlsbad Subsidiary in
Carlsbad, California, located in San Diego County.
"Carlsbad Subsidiary" means Rancho Xxxxxxx, Inc., a Delaware corporation and
a Subsidiary of Borrower.
"CHI" means Continental Homes, Inc., a Delaware corporation and a Subsidiary
of Borrower.
"CHICC" means CHI Construction Company, an Arizona corporation and a
Subsidiary of CHI.
"Change in Control" means that any Person, together with its Affiliates or
associates, is or becomes the Beneficial Owner, directly or indirectly, through
a purchase, merger or other acquisition transaction, of shares of capital stock
of Borrower entitling such person to exercise in excess of 50% of the total
voting power of all shares of capital stock of Borrower entitled to vote in
elections of directors.
"CHMC" means CH Mortgage Company, a Colorado corporation formerly known as
American Western Mortgage Company and a Subsidiary of CHI.
"Collateral" means the property, interests in property, and rights to
property securing any or all Obligations from time to time.
"Commission" means The Securities and Exchange Commission.
"Commitment" means the agreement of Bank in Sections 3.1 and 3.2 to issue
Letters of Credit and to make Advances pursuant to the terms and conditions in
the Letter of Credit Agreements and herein.
"Commitment Amount" has the meaning specified in Section 1.
"Consolidated Interest Expense" of any Person means, for any period, the
aggregate amount of interest which, in accordance with GAAP, would be included
on an income statement for such Person and its Subsidiaries on a consolidated
basis, whether expensed directly, or included as a component of cost of goods
sold, or allocated to joint ventures or otherwise (including, but not limited
to, imputed interest included on capitalized lease obligations, all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, the net costs associated with hedging
obligations, amortization of other financing fees and expenses, the interest
portion of any deferred payment obligation, amortization of discount or premium,
if any, and all other non-cash interest expense), excluding interest expense
related to such Person's mortgage banking operations, plus the product of (x)
the sum of (i) cash dividends paid on any Preferred Stock of such Person plus
(ii) cash dividends, the principal amount of any debt securities issued as a
dividend, the liquidation value of any Preferred Stock issued as a dividend and
the fair market value (as determined by such Person's board of directors in good
faith) of any other non-cash dividends, in each case, paid on any Preferred
Stock of any Subsidiary of such Person (other than a wholly-owned Subsidiary),
times (y) a fraction, the numerator of which is one and the denominator of which
is one minus the then current effective aggregate federal, state and local tax
rate of such Person, expressed as a decimal.
"Consolidated Interest Incurred" of any Person means, for any period, (a)
the aggregate amount of interest which, in accordance with GAAP, would be
included on an income statement for such Person and its Subsidiaries on a
consolidated basis, whether expensed directly, or included as a component of
cost of goods sold, or allocated to joint ventures or otherwise (including, but
not limited to, imputed interest included on capitalized lease obligations, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, the net costs associated with
hedging obligations, amortization of other financing fees and expenses, the
interest portion of any deferred payment obligation, amortization of discount or
premium, if any, and all other non-cash interest expense), excluding interest
expense related to such Person's mortgage banking operations, plus or minus,
without duplication, (b) the difference between capitalized interest for such
period and the interest component of cost of goods sold for such period, plus
(c) the product of (x) the sum of (i) cash dividends paid on any Preferred Stock
of such Person plus (ii) cash dividends, the principal amount of any debt
securities issued as a dividend, the liquidation value of any Preferred Stock
issued as a dividend and the fair market value (as determined by such Person's
board of directors in good faith) of any other non-cash dividends, in each case,
paid on any Preferred Stock of any Subsidiary of such Person (other than a
wholly-owned Subsidiary), times (y) a fraction, the numerator of which is one
and the denominator of which is one minus the then current effective aggregate
federal, state and local tax rate of such Person, expressed as a decimal.
"Consolidated Net Income" of any Person, for any period, means the net
income (loss) of such Person and its Subsidiaries for such period, determined on
a consolidated basis, in accordance with GAAP, provided that, without
duplication, (i) the net income of any Person, other than a Subsidiary which is
consolidated with such Person, in which such Person or any of its Subsidiaries
has a joint interest with a third party shall be included only to the extent of
the amount of dividends or distributions actually paid in cash to such Person or
a Subsidiary during such period, (ii) the net income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iii) the net income of any Subsidiary of such
Person shall be excluded to the extent such Subsidiary is prohibited, directly
or indirectly, from distributing such net income or any portion thereof to such
Person and (iv) all extraordinary gains and losses (after taxes) that would be
included on an income statement for such Person on a consolidated basis for such
period shall be excluded.
"Consolidated Non-cash Charges" of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges (other than
reserves or expenses established in anticipation of future cash requirements
such as reserves for taxes and uncollectible accounts) of such Person and its
Subsidiaries, on a consolidated basis, for such period, as determined in
accordance with GAAP, provided that Consolidated Non-cash Charges shall exclude
(i) any charges that are not included for the purpose of determining
Consolidated Net Income, (ii) any charges that are included for the purpose of
determining Consolidated Interest Expense or Consolidated Tax Expense and (iii)
any charges representing capitalized selling, general and administrative
expenses that are expensed during such period as cost of goods sold.
"Consolidated Tax Expense" of any Person means, for any period, the
aggregate of the tax expense of such Person and its Subsidiaries for such
period, determined on a consolidated basis, in accordance with GAAP.
"Convertible Notes" means Borrower's $35,000,000.00 6-7/8% Convertible
Subordinated Notes due 2002, issued in connection with the Convertible Notes
Indenture.
"Convertible Notes Indenture" means that certain Indenture, dated March 15,
1992, between Borrower and Manufacturers and Traders Trust Company, as trustee,
with respect to the Convertible Notes.
"Coverage Ratio" of any Person means the ratio of such Person's EBITDA to
its Consolidated Interest Incurred for the four fiscal quarters ending
immediately prior to the date of determination. Notwithstanding clause (ii) of
the definition of Consolidated Net Income, if the Debt which is being Incurred
is Acquisition Debt, the Coverage Ratio shall be determined after giving effect
to both the Consolidated Interest Incurred related to the Incurrence of such
Acquisition Debt and the EBITDA (x) of the Person becoming a Subsidiary of such
Person or (y) in the case of an acquisition of assets that constitute
substantially all of an operating unit or business, relating to the assets being
acquired by such Person.
"Credit Extensions/Contributions" means any direct or indirect advance, loan
or other extension of credit or capital contribution to, or any purchase or
acquisition of capital stock, bonds, notes, debentures or other securities
issued or owned by, any other Person, including, without limitation, payments by
Borrower or any of its Subsidiaries to a Person other than Borrower or any of
its Subsidiaries in connection with an acquisition in which Acquisition Debt is
Incurred.
"Debt" means, as to any Person, without duplication, (a) any indebtedness of
such Person for borrowed money, (b) all indebtedness of such Person evidenced by
bonds, debentures, notes, letters of credit, drafts or similar instruments, (c)
all indebtedness of such Person to pay the deferred purchase price of property
or services, but not including accounts payable and accrued expenses arising in
the ordinary course of business, (d) all capitalized lease obligations of such
Person, (e) all Debt of others secured by a Lien on any asset of such Person,
whether or not such Debt is assumed by such Person or guaranteed by such Person,
(f) Redeemable Stock, and (g) all Debt of others guaranteed by such Person. The
amount of Debt of any Person at any date pursuant to clauses (a)-(d) and (f)
above shall be as would appear as a liability upon a balance sheet of such
Person prepared on a consolidated basis in accordance with GAAP.
"EBITDA" for any Person, for any period, means, without duplication, the
Consolidated Net Income of such Person plus, to the extent deducted in
calculating Consolidated Net Income, the sum of (a) Consolidated Tax Expense,
(b) Consolidated Interest Expense and (c) Consolidated Non-cash Charges.
"ERISA" means the Employee Retirement Income Security Act of 1974 and the
regulations and published interpretations thereunder, as in effect from time to
time.
"Event of Default" has the meaning specified in the Note and the other Loan
Documents.
"Exchange Act" means The Securities Exchange Act of 1934, as amended.
"Existing Debt" means all of the Debt of Borrower and its Subsidiaries that
is outstanding on the date of this Agreement and listed on Schedule I hereto.
"GAAP" means generally accepted accounting principles consistently applied.
"Governmental Authority" means any government, any court, and any agency,
authority, body, bureau, department, or instrumentality of any government.
"Guaranty" or "Guaranties" means individually and collectively, the payment
guaranties of Guarantors of even date herewith.
"Guarantors" means both of the following: CHICC and CHI.
"Incur," "Incurred," "Incurring," "Incurrence" means with respect to any
Person, that such Person has directly or indirectly created, incurred, assumed,
guaranteed, or otherwise become liable for any Debt or other obligation.
"Indenture" means that certain Indenture, dated as of August 1, 1992 between
Borrower and Fidelity Bank, National Association, as Trustee, with respect to
the Public Notes, as amended by that First Supplemental Indenture dated March
22, 1994.
"Intangible Assets" of any Person means such Person's goodwill, patents,
trademarks, copyrights, and all other items which would be treated as
intangibles on the consolidated balance sheet of Borrower and its Subsidiaries
prepared in accordance with GAAP.
"Letter of Credit Agreement" means Bank's standard form Application and
Agreement for Commercial Letter of Credit, Bank's standard form Application for
Standby Letter of Credit and Standby Letter of Credit Agreement, or other
standard application and agreement for letters of credit in use by Bank from
time to time.
"Letters of Credit" means the letters of credit in Bank's standard form from
time to time issued pursuant to Section 3.1.
"Lien or Encumbrance" and "Liens and Encumbrances" mean, respectively, each
and all of the following: (i) any lease or other right to use; (ii) any
assignment as security, conditional sale, grant in trust, lien, mortgage,
pledge, security interest, title retention arrangement, other encumbrance, or
other interest or right securing the payment of money or the performance of any
other liability or obligation, whether voluntarily or involuntarily created and
whether arising by agreement, document, or instrument, under any law, ordinance,
regulation, or rule (federal, state, or local), or otherwise; and (iii) any
option, right of first refusal, other right to acquire, or other interest or
right.
"Liquidity" means with respect to any Person, the amount of that Person's
unencumbered cash and unencumbered cash equivalents (including amounts on
deposit with Bank pursuant to Section 6.14 hereof) as determined in accordance
with GAAP, plus, in the case of Borrower, (i) the portion of the Commitment
Amount that is undisbursed and available for disbursement at the time of each
determination of Liquidity, (ii) the amount of the Warehouse Facility that is
undisbursed and available for disbursement at the time of each determination of
Liquidity, and (iii) the amount of other Bank Facilities that is undisbursed and
available for disbursement at the time of each determination of Liquidity.
"Loan Documents" means this Agreement, the Note, the Letter of Credit
Agreements executed and delivered by Borrower in connection with the Letters of
Credit from time to time, the Set Aside Agreement, and any other agreements,
documents, or instruments from time to time evidencing, guarantying, securing,
or otherwise relating to the Note, as they may be amended, modified, extended,
renewed, or supplemented from time to time.
"Loan Party" means Borrower, the Guarantors, and each other Person that from
time to time is or becomes obligated to Bank under any Loan Document or grants
any Collateral.
"Material Adverse Change" means any change in the assets, business,
financial condition, operations, prospects, or results of operations of any Loan
Party or any other event or condition that in the reasonable opinion of Bank (i)
could affect the likelihood of performance by any Loan Party of any of the
Obligations, (ii) could affect the ability of any Loan Party to perform any of
the Obligations, (iii) could affect the legality, validity, or binding nature of
any of the Obligations or any Lien or Encumbrance securing any of the
Obligations, or (iv) could affect the priority of any Lien or Encumbrance
securing any of the Obligations.
"Mortgage Debt" means such mortgage banking debt as would be listed on the
consolidated balance sheet of Borrower prepared in accordance with GAAP.
"Net Worth" of any Person means, at any date, the aggregate of capital,
surplus and retained earnings of such Person as would be shown on a consolidated
balance sheet of such Person prepared in accordance with GAAP, adjusted to
exclude (to the extent included) investments by such Person and its Subsidiaries
in joint ventures and the amount of equity attributable to Affiliates other than
Subsidiaries of such Person, and, solely for purposes of determining Borrower's
compliance with the covenant set forth in Section 6.12.3, adjusted to include
(to the extent excluded), in Borrower's case, the indebtedness of Borrower
evidenced by the Convertible Notes and the Subordinated Notes.
"Non-Recourse Debt" means Debt or other obligations to the extent that the
liability for such Debt or other obligations does not extend to Borrower or any
of its Subsidiaries (other than the Subsidiary incurring such Debt or which
holds title to any property securing such Debt) for any deficiency, including
liability by reason of any agreement by Borrower or any of its Subsidiaries to
maintain the financial condition of, keep-well or otherwise support the credit
of the Subsidiary incurring such Debt.
"Note" means the Amended and Restated Promissory Note, dated of even date
herewith, of Borrower payable to Bank, as it may be amended, modified, extended,
renewed, restated, or supplemented from time to time.
"Obligations" means the obligations of the Loan Parties under the Loan
Documents (including, without limitation, the obligation to pay Reimbursement
Amounts and amounts under the Set Aside Agreement).
"Permitted Debt" means:
(a) Debt evidenced by the Public Notes;
(b) Debt Incurred under or in respect of this Agreement or any
other Bank Facility (including any guarantees related thereto) for
working capital or general corporate purposes, Debt evidenced by
letters of credit (including letters of credit issued pursuant to this
Agreement), and guarantees of Debt of the Great Singing Hills joint
venture in excess of amounts committed on the date of the Indenture and
which are Incurred after the date of the Indenture; provided that the
aggregate amount of all such Debt outstanding at any time pursuant to
this clause (b) may not exceed $30,000,000;
(c) Debt Incurred by CHMC under the Warehouse Facility;
(d) Debt of Borrower to any of its Subsidiaries or of any
Subsidiary of Borrower to Borrower or to any other Subsidiary of
Borrower, provided that such Debt is evidenced by a promissory note
that is not pledged to any Person (other than to secure the
Obligations);
(e) Existing Debt (without duplication of Debt indicated under
clauses (a)-(d) above) of Borrower and its Subsidiaries;
(f) Non-Recourse Debt Incurred by the Carlsbad Subsidiary in
an amount not to exceed $18,000,000 at any time outstanding;
(g) Debt in respect of performance, completion, guarantee,
surety and similar bonds or banker's acceptances provided by Borrower
or any of its Subsidiaries in the ordinary course of business;
(h) Purchase Money Obligations incurred in the ordinary course
of business in an amount not exceeding $5,000,000.00 at any time
outstanding;
(i) Acquisition Debt of a Subsidiary of Borrower which, if
Incurred by Borrower, would be permitted pursuant to Section 7.5.2
hereof;
(j) Refinancing Debt; and
(k) Debt evidenced by the Convertible Notes and the
Subordinated Notes.
"Permitted Exceptions" with respect to Borrower and its Subsidiaries means
(i) Liens and Encumbrances securing the Obligations; (ii) Liens and Encumbrances
securing the Warehouse Facility, provided that such Liens and Encumbrances shall
not extend to any assets other than the mortgages, promissory notes and other
collateral that secures mortgage loans made by CHMC; (iii) Liens and
Encumbrances on assets of Borrower or any Subsidiary of Borrower securing the
Bank Facility; provided that the Liens and Encumbrances granted in respect of
the Bank Facility shall not extend to assets having a book value in the
aggregate in excess of two times the amount committed under the Bank Facility;
(iv) Liens and Encumbrances securing Non-Recourse Debt incurred by the Carlsbad
Subsidiary; provided that such Liens shall not extend to any assets of Borrower
or any of its Subsidiaries other than the Carlsbad Subsidiary; (v) Liens and
Encumbrances for taxes, assessments or governmental charges or claims that
either (a) are not yet delinquent or (b) are being contested in good faith by
appropriate proceedings and as to which appropriate reserves have been
established or other provisions have been made in accordance with GAAP; (vi)
statutory Liens and Encumbrances of landlords and carriers', warehousemen's,
mechanics', suppliers', materialmen's, repairmen's or other Liens and
Encumbrances imposed by law and arising in the ordinary course of business;
(vii) Liens and Encumbrances (other than any Lien or Encumbrance imposed by
ERISA) deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security; (viii) Liens and Encumbrances incurred or deposits made to secure the
performance of tenders, bids, leases, statutory obligations, surety and appeal
bonds, progress payments, government contracts and other obligations of like
nature (exclusive of obligations for the payment of borrowed money), in each
case, incurred in the ordinary course of business; (ix) attachment or judgment
Liens and Encumbrances not giving rise to an Event of Default or Unmatured Event
of Default; (x) easements, rights-of-way, restrictions and other similar charges
or encumbrances not materially interfering with the ordinary conduct of the
business of Borrower or any of its Subsidiaries; (xi) leases or subleases
granted to others not materially interfering with the ordinary conduct of the
business of Borrower or any of its Subsidiaries; (xii) Liens and Encumbrances
with respect to Acquisition Debt; provided that such Liens and Encumbrances do
not extend to any other assets of Borrower or the assets of any of Borrower's
other Subsidiaries; (xiii) Liens securing Refinancing Debt; provided that such
Liens only extend to the assets securing the Debt being refinanced, and such
refinanced Debt was previously secured and such Liens and Encumbrances do not
extend to any other assets of Borrower or to the assets of Borrower's other
Subsidiaries; (xiv) Liens securing Purchase Money Obligations (including
capitalized lease obligations); (xv) Liens existing on the date of this
Agreement; and (xvi) any contract to sell an asset provided such sale is
otherwise permitted under this Agreement (and the foregoing shall not constitute
a consent of Bank to a sale or obligate Bank to consent to a sale).
"Permitted Payments" means, with respect to Borrower or any of its
Subsidiaries, (i) the redemption, repurchase or other acquisition or retirement
of any shares of any class of Capital Stock in exchange for (including any
exchange pursuant to the exercise of a conversion right or privilege in
connection with which cash is paid in lieu of the issuance of fractional
shares), or out of the proceeds of a substantially concurrent issue and sale
(other than to a Subsidiary) of, shares of Capital Stock (other than Redeemable
Stock) of Borrower, provided that the proceeds of any such issuance and sale of
shares of capital stock of Borrower shall not be included in determination of
amounts available for Restricted Payments, (ii) any dividend or other
distribution on any shares of its Capital Stock payable by a Subsidiary to
Borrower or another of its Subsidiaries, or (iii) any wages or other
compensation paid by Borrower or any of its Subsidiaries to their employees.
"Person" means any individual, corporation, partnership, association, trust
or other entity or organization, including a government or political subdivision
or agency or instrumentality thereof.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated) of such
Person's preferred or preference stock whether now outstanding or issued after
the date of this Agreement, and including, without limitation, all classes and
series of preferred or preference stock.
"Public Notes" means Borrower's $110,000,000.00 12% Senior Notes due 1999.
"Purchase Money Obligations" means Debt of any Person secured by Liens (i)
on property purchased, acquired, or constructed by such Person or its
Subsidiaries after the date of the Indenture and used in the ordinary course of
business by such Person and (ii) securing the payment of all or any part of the
purchase price or construction cost of such assets and limited to the property
so acquired and improvements thereof; provided that such Debt is incurred no
later than 90 days after the acquisition of such property or completion of such
construction or improvements.
"Redeemable Stock" means, with respect to any Person, any class or series of
Capital Stock of such Person that is redeemable at the option of the holder
(except pursuant to a change in control provision that does not (i) cause such
Capital Stock to become redeemable in circumstances which would not constitute a
Change in Control and (ii) require Borrower to pay the redemption price therefor
prior to the repayment in full of all Obligations, the expiration of all Letters
of Credit, and the expiration of the Commitment), or is subject to mandatory
redemption or otherwise matures prior to the final stated maturity of the Public
Notes.
"Refinancing Debt" means Debt that refunds, refinances or extends the Public
Notes, Existing Debt (other than Existing Debt repaid with the net proceeds of
Advances pursuant to this Agreement) or other Debt incurred by Borrower or its
Subsidiaries pursuant to the terms of the Indenture and this Agreement, but only
to the extent that (i) the Refinancing Debt is subordinated to the Obligations
and the Public Notes to the same extent as the Debt being refunded, refinanced
or extended, if at all, (ii) the Refinancing Debt is scheduled to mature either
(a) no earlier than the Debt being refunded, refinanced or extended, or (b)
after the maturity date of the Public Notes, (iii) the portion, if any, of the
Refinancing Debt that is scheduled to mature on or prior to the maturity date of
the Public Notes has a Weighted Average Life to Maturity at the time such
Refinancing Debt is Incurred that is equal to or greater than the Weighted
Average Life to Maturity of the portion of the Debt being refunded, refinanced
or extended that is scheduled to mature on or prior to the maturity date of the
Public Notes, (iv) the obligor of such Refinancing Debt shall be Borrower or the
same obligor as the Debt being refunded, refinanced or extended, and (v) the
gross proceeds of such Refinancing Debt is an amount that is equal to or less
than the aggregate principal amount then outstanding under the Debt being
refunded, refinanced or extended.
"Reimbursement Amount" means the amount Borrower is obligated to pay to Bank
under a Letter of Credit Agreement in respect of a draft drawn or drawn and
accepted under the respective Letter of Credit, which amount shall be the amount
of the draft or acceptance and all costs, expenses, fees, and other amounts then
payable by Borrower to Bank under the Letter of Credit Agreements.
"Restricted Payments" means, with respect to any Person (i) any dividend or
other distribution on any shares of such Person's Capital Stock (except
dividends or distributions in additional shares of Capital Stock other than
Redeemable Stock), (ii) any payment on account of the purchase, redemption or
other acquisition of (a) any shares of such Person's Capital Stock or (b) any
option, warrant or other right to acquire shares of such Person's Capital Stock,
(iii) any Credit Extensions/Contributions to Affiliates Incurred after the date
of the Indenture; provided, that for purposes of this provision an individual
shall not be deemed to be an Affiliate of Borrower or any of its Subsidiaries
solely because such individual is employed by Borrower or any of its
Subsidiaries or, (iv) any principal payment, redemption, repurchase, defeasance
or other acquisition or retirement (other than the retirement of any
Subordinated Notes upon conversion of such of the Subordinated Notes pursuant to
the terms of the Subordinated Notes Indenture), prior to scheduled principal
payment or scheduled maturity, of Debt of Borrower or its Subsidiaries which is
subordinated in right of payment to the Public Notes and the Note, provided,
however, that with respect to Borrower and its Subsidiaries, Restricted Payments
shall not include (a) any payment described in clause (i), (ii) or (iii) above
made to Borrower or any of its Subsidiaries (other than the Carlsbad Subsidiary
(in the case of clause (iii)) or any of its Subsidiaries which has liability in
respect of Acquisition Debt) by Borrower or any of its Subsidiaries, or (b) any
underwritten call of the Subordinated Notes or other Debt of Borrower which is
convertible into Capital Stock (other than Redeemable Stock) but only to the
extent Borrower is not required to make any redemption or principal payments in
respect of Debt subject to such underwritten call (other than redemption and
principal payments which are covered by the net proceeds received by Borrower
from a concurrent sale of Capital Stock (other than Redeemable Stock) to the
underwriters effecting such underwritten call).
"Set Aside Agreement" has the meaning set forth in Section 3.5.
"Set Aside Amount" has the meaning set forth in Section 3.5.
"Standard Number of Days" means the standard number of days established by
Bank from time to time to allow for delivery to Bank of drafts drawn under
Letters of Credit presented to financial institutions other than Bank for
delivery to Bank. Bank may change such number of days at any time and from time
to time in its absolute and sole discretion without notice to Borrower and may
have a different number of days for commercial letters of credit and standby
letters of credit.
"Subordinated Notes" means Borrower's $86,250,000.00 6-7/8% Convertible
Subordinated Notes due 2002, issued in connection with the Subordinated Notes
Indenture.
"Subordinated Notes Indenture" means that certain Indenture dated November
1, 1995 between Borrower and Manufacturers and Traders Trust Company, as
trustee, with respect to the Subordinated Notes.
"Subsidiary" and "Subsidiaries" mean, with respect to any Person, (i) any
corporation of which a majority of the capital stock having ordinary voting
power to elect a majority of the board of directors or other Persons performing
similar functions is at the time directly or indirectly owned by such Person or
one or more of the other Subsidiaries of that Person or a combination thereof,
or (ii) any partnership or joint venture at least a majority of the voting power
of which is at the time directly or indirectly owned by such Person or one or
more of the other Subsidiaries of that Person or a combination or successor
thereof.
"Tangible Net Worth" of any Person means such Person's Net Worth less such
Person's Intangible Assets.
"Unmatured Event of Default" means any condition or event that with notice,
passage of time, or both would be an Event of Default.
"Warehouse Facility" means the Second Amended and Restated Warehousing
Credit and Security Agreement dated as of July 1, 1995 between Bank and CHMC, as
the same may be amended, modified, extended, renewed, restated and supplemented
from time to time.
"Weighted Average Life to Maturity" means, when applied to any Debt or
portion thereof, if applicable, at any date, the number of years obtained by
dividing (i) the then outstanding principal amount of such Debt or portion
thereof, if applicable, into (ii) the sum of the products obtained by
multiplying (a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payment of principal, including payment at
final maturity, in respect thereof, by (b) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment.
3. LETTERS OF CREDIT AND LOAN FACILITY.
3.1 Letters of Credit.
3.1.1 Issuance of Letters of Credit. Subject to the terms and
conditions of this Agreement and the Letter of Credit Agreements and subject to
the policies, procedures, and requirements of Bank in effect from time to time
for issuance of Letters of Credit (including, without limitation, payment of
letter of credit fees), Bank agrees to issue, from time to time on or before the
Commitment expiration date specified in Section 1, Letters of Credit upon
request by and for the account of Borrower, provided that as to each requested
Letter of Credit Borrower has delivered to Bank a completed and executed Letter
of Credit Agreement, and provided further that the date that is the Standard
Number of Days after the last date for payment of drafts drawn or drawn and
accepted under a requested Letter of Credit is before the Commitment expiration
date specified in Section 1. Each reference in this Agreement to "issue" or
"issuance" or other forms of such words in relation to Letters of Credit shall
also include any extension or renewal of a Letter of Credit. Upon occurrence of
an Event of Default or an Unmatured Event of Default, Bank, in its absolute and
sole discretion and without notice, may suspend the commitment to issue Letters
of Credit. In addition, upon occurrence of an Event of Default, Bank, in its
absolute and sole discretion and without notice, may terminate the commitment to
issue Letters of Credit.
3.1.2 Issuance Procedure. To obtain a Letter of Credit, Borrower shall
complete and execute a Letter of Credit Agreement and submit it to the letter of
credit department of Bank and to the address of Bank specified on the first page
of this Agreement. In no event shall Bank have any obligation to act upon an
oral request for a Letter of Credit or any request that otherwise does not
conform to Bank's policies and procedures. Upon receipt of a completed and
executed Letter of Credit Agreement, Bank will process the application in
accordance with the policies, procedures, and requirements of Bank then in
effect. If the application meets the requirements of Bank and is within the
policies of Bank then in effect, Bank will issue the requested Letter of Credit;
provided, however, that unless otherwise agreed by Bank in its sole and absolute
discretion Borrower shall be entitled to request that Bank issue Letters of
Credit only in connection with, and as security for, the construction of offsite
improvements by Borrower for residential subdivisions being developed by
Borrower in the ordinary course of Borrower's business.
3.1.3 Reimbursement of Bank for Payment of Drafts Drawn or Drawn and
Accepted Under Letters of Credit. The obligation of Borrower to reimburse Bank
for payment by Bank of drafts drawn or drawn and accepted under a Letter of
Credit shall be as provided in the respective Letter of Credit Agreement. Bank
will notify Borrower of payment by Bank of a draft drawn or drawn and accepted
under a Letter of Credit and of the respective Reimbursement Amount and will
give Borrower the election (i) to pay the Reimbursement Amount pursuant to the
respective Letter of Credit Agreement or (ii) to pay the Reimbursement Amount by
Bank making an Advance subject to the terms and conditions of this Agreement and
applying the proceeds of the Advance to pay the Reimbursement Amount. If
Borrower does not communicate to Bank its election within two Business Days
after notification by Bank of payment of the draft or acceptance, Borrower shall
be deemed to have elected to pay the Reimbursement Amount by Bank making an
Advance hereunder, provided that if the terms and conditions in this Agreement
for an Advance hereunder are not satisfied, Borrower shall be deemed to have
elected to pay the Reimbursement Amount pursuant to the Letter of Credit
Agreement. Each Advance to pay a Reimbursement Amount will be dated the date
that Bank pays the respective draft or acceptance and will accrue interest from
and after such date. If Borrower is to pay the Reimbursement Amount pursuant to
the Letter of Credit Agreement, Borrower shall also pay to Bank interest on the
Reimbursement Amount from and including the date Bank pays the respective draft
or acceptance at the Interest Rate (as defined in the Note) until the
Reimbursement Amount and such interest are paid in full, provided that if
Borrower fails to pay the Reimbursement Amount and accrued interest thereon
within five (5) days after notification by Bank to Borrower of payment of the
respective draft or acceptance, interest thereafter will accrue at the Default
Rate (as such term is defined in the Note). Such interest shall be computed on
the basis of a 360-day year and accrue on a daily basis for the actual number of
days elapsed. Notwithstanding the above, if Borrower elects or is deemed to have
elected to pay the Reimbursement Amount pursuant to the Letter of Credit
Agreement and fails to pay the Reimbursement Amount and interest thereon within
five (5) days after notification by Bank to Borrower, Bank, in its absolute and
sole discretion and without notice to Borrower and regardless of whether the
terms and conditions in this Agreement for Advances are satisfied, may make an
Advance under this Agreement in the amount of the Reimbursement Amount and
accrued interest thereon and apply the proceeds of such Advance to pay the
Reimbursement Amount and accrued interest.
3.2 Loan Facility. Subject to the terms and conditions of this Agreement,
Bank agrees to make Advances to Borrower from time to time on or before the
Commitment expiration date specified in Section 1. Proceeds of Advances may be
used only to pay Reimbursement Amounts due to Bank under Letter of Credit
Agreements, amounts due to Bank under the Set Aside Agreement, and for any other
purposes described in Section 1. Advances shall be on a revolving basis.
Advances prepaid may be re-borrowed subject to the terms and the conditions
herein. Although the outstanding principal of the Note may be zero from time to
time, the Loan Documents shall remain in full force and effect until the
Commitment terminates, all Letters of Credit have expired or are drawn in full,
all drafts drawn or drawn and accepted under all Letters of Credit have been
paid in full, and all Obligations are paid and performed in full. Upon
occurrence of an Event of Default, an Unmatured Event of Default or the
violation of any of the financial covenants set forth in Section 6.12.1, 6.12.2
or 6.12.3 hereof (regardless of whether such violation otherwise is an Event of
Default or Unmatured Event of Default), Bank, in its absolute and sole
discretion and without notice, may suspend the commitment to make Advances. In
addition, upon the occurrence of an Event of Default, Bank, in its absolute and
sole discretion and without notice, may terminate the commitment to make
Advances. The obligation of Borrower to repay Advances is evidenced by the Note.
3.3 Requests for Letters of Credit and Advances. Letters of Credit may be
issued and Advances may be made, in accordance with the terms hereof, by Bank at
the written request of the Person or Persons designated in a signature
authorization form delivered to Bank from time to time by Borrower. Such Person
or Persons are hereby authorized by Borrower to request Letters of Credit and
Advances, to execute and deliver Letter of Credit Agreements, and to direct
disposition of the proceeds of Advances until written notice of the revocation
of such authority is received from Borrower by Bank and Bank has had a
reasonable time to act upon such notice. Bank shall have no duty to monitor for
Borrower or to report to Borrower the use of Letters of Credit or proceeds of
Advances. Advances shall be disbursed by Bank into an account of Borrower with
Bank, provided, however, that Advances to pay Reimbursement Amounts shall be
paid to Bank.
3.4 Limit on Letters of Credit and Advances. Anything in the Loan Documents
to the contrary notwithstanding, the sum from time to time of (i) the aggregate
amount of outstanding and undrawn Letters of Credit, (ii) the aggregate amount
of outstanding and unpaid drafts drawn and accepted under Letters of Credit,
(iii) the aggregate amount of unpaid Reimbursement Amounts, (iv) the Set Aside
Amount less any portion of the Set Aside Amount that has been advanced by Bank
pursuant to this Agreement and thereafter repaid by Borrower, and (v) the amount
of outstanding and unpaid Advances shall not exceed the Commitment Amount. In
addition, anything in the Loan Documents to the contrary notwithstanding, the
sum from time to time of the amounts described in clauses (i), (ii), (iii) and
(iv) of the immediately preceding sentence shall not exceed ten percent (10%) of
the Commitment Amount.
3.5 Set Aside Agreement. Borrower and Bank have entered into (or may enter
into after execution hereof) a Set Aside Agreement (the "Set Aside Agreement")
in connection with a loan from Bank to Surprise Village North L.L.C. and
Continental Traditions L.L.C., which loan relates to certain real property
located in Surprise, Arizona. Pursuant to the terms of the Set Aside Agreement,
Borrower agreed to "set aside" a portion of the Commitment Amount in the sum of
$1,500,000.00 (the "Set Aside Amount") for purposes of paying certain release
prices as more fully described therein. Bank, from time to time in its sole and
absolute discretion and without notice to Borrower and regardless of whether the
terms and conditions in this Agreement for Advances are satisfied, may make an
Advance under this Agreement in the amount owed under the Set Aside Agreement
and apply the proceeds of such Advance to pay such amount.
3.6 Fees. As additional consideration for the Commitment, Borrower agrees to
pay to Bank the following fees, which shall be earned by Bank on the date due
under the Loan Documents and shall be non-refundable to Borrower:
3.6.1 Commitment Fee. A fee for the Commitment in the amount set forth
in Section 1, payable on or before the date hereof.
3.6.2 Unused Commitment Fee. An unused commitment fee computed at the
rate per annum set forth in Section 1 on the unused portion of the Commitment
Amount, calculated from the date hereof and payable monthly in arrears. For each
month (or portion thereof), the unused commitment fee shall be equal to (a) the
Commitment Amount minus (b) the "average monthly outstandings" for the month (or
portion thereof) with respect to which the unused commitment fee is being
computed, with the resulting number multiplied by (c) one-twelfth (1/12th) of
the annual fee. As used herein, "average monthly outstandings" means the sum of
the outstanding amount of the Advances on each day during the month (or portion
thereof for which the fee is being computed) with respect to which the unused
commitment fee is being computed, divided by the number of days in that month
(or portion thereof). If the Unused Commitment Fee is being computed for less
than a full month, the percentage used in clause (c) above shall be computed on
a daily basis for the number of days for which the fee is being computed.
3.6.3 Attorneys' Costs, Expenses, and Fees. Attorneys' costs, expenses,
and fees for Bank's counsel in the amount specified by Bank, payable on or
before the date hereof.
4. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT AND THE COMMITMENT.
4.1 Conditions Precedent to Closing and Commitment. This Agreement and the
Commitment shall become effective only upon satisfaction of the following
conditions precedent, as determined by Bank in its absolute and sole discretion:
4.1.1 Representations and Warranties Accurate. The representations and
warranties by each Loan Party in the Loan Documents are correct on and as of the
date of this Agreement as though made on and as of such date.
4.1.2 No Event of Default or Unmatured Event of Default. No condition
or event has occurred that is an Event of Default or an Unmatured Event of
Default.
4.1.3 No Material Adverse Change. No Material Adverse Change has
occurred.
4.1.4 Receipt of Documents. Bank has received the following duly
executed by the parties thereto and in form and substance satisfactory to Bank
in its absolute and sole discretion.
4.1.4.1 Loan Documents. The Loan Documents.
4.1.4.2 Corporate or Partnership Documents. If any Loan Party is a
corporation, limited liability company, or a partnership, certified copies of
(a) resolutions of its board of directors, members, or partners, as the case may
be, authorizing such Loan Party to execute, deliver, and perform pursuant to its
Loan Documents and to grant to Bank the Liens and Encumbrances provided in the
Loan Documents and certifying the names and signatures of the officers or
partners, as the case may be, of such Loan Party authorized to execute the Loan
Documents on behalf of such Loan Party, (b) the certificate of incorporation and
bylaws, articles of organization, limited liability company operating agreement,
or partnership agreement, as the case may be, of such Loan Party, (c) a
certificate of good standing as a corporation, limited liability company, or
limited partnership, as the case may be, from such Loan Party's State of
organization, and if not Arizona, a certificate of qualification as a foreign
corporation, limited liability company, or limited partnership, as the case may
be, authorized to transact business in the State of Arizona, from the State of
Arizona.
4.1.5 Completion of Filings. Bank has received evidence of the
completion of all filings to establish or maintain the perfection and the
priority of the Liens and Encumbrances granted in the Loan Documents.
4.1.6 Payment of Costs, Expenses, and Fees. All costs, expenses, and
fees to be paid by the Loan Parties on or before the effectiveness of this
Agreement shall have been paid in full.
4.1.7 Opinion Letter. Bank has received a favorable opinion from
Borrower's in-house counsel in form and substance satisfactory to Bank and its
counsel.
4.1.8 Financial Statements. Bank has received financial statements
including, without limitation, a balance sheet, cash flow statement and income
statement, of Borrower and each other Loan Party (or consolidated statements
reflecting such information with respect to Borrower and the other Loan
Parties), certified by Borrower and each other Loan Party.
4.1.9 Commitment Fee. Borrower has paid the Commitment Fee.
4.1.10 Other Items. Bank has received such other items or documents as
Bank may require.
4.2 Conditions Precedent to Advances and the Issuance of Letters of
Credit. Bank's obligation to make Advances or to issue Letters of Credit shall
become effective only upon satisfaction by Borrower, at Borrower's sole cost and
expense, of the conditions precedent set forth in Section 4.1 and the following
conditions precedent with respect to each Advance or Letter of Credit.
4.2.1 Representations and Warranties. The representations and
warranties by the Loan Parties in the Loan Documents are correct on and as of
the date of each Advance or the date of issuance of each Letter of Credit, as
applicable, as though made on and as of such date and after giving effect to
such Advance or issuance.
4.2.2 No Event of Default or Unmatured Event of Default:
Compliance with Certain Financial Covenants. No condition or event has occurred
that is an Event of Default or an Unmatured Event of Default both before and
after giving effect to such Advance or issuance. Borrower is in compliance with
the financial covenants set forth in Section 6.12.1, 6.12.2 and 6.12.3 hereof
both before and after giving effect to such Advance or issuance.
4.2.3 No Material Adverse Change. No Material Adverse Change has
occurred.
4.2.4 Draw Request. With respect to any Advance, Bank has received
a draw request in the form of Exhibit A hereto from Borrower, not less than one
(1) Business Day prior to the date for which such Advance is requested,
specifying the amount of the Advance requested and supported by such
documentation as Bank may require.
4.2.5 Letters of Credit. With respect to any Letter of Credit,
Borrower shall have complied with the terms and conditions of Section 3 hereof.
4.2.6 Other Items. Bank has received such other items or documents
as Bank may require.
Borrower hereby authorizes Bank, and Bank reserves the right in its absolute and
sole discretion, to verify any documents and information submitted to Bank in
connection with this Agreement. Bank may elect, in its absolute and sole
discretion, to waive any of the foregoing conditions precedent. Any such waiver
shall be effective only if (i) it is in writing executed by Bank, (ii) it
specifically identifies the condition precedent, and (iii) it states whether the
condition precedent is waived as a requirement of the effectiveness of this
Agreement, the effectiveness of the Commitment, and/or as a requirement for a
particular Advance or Letter of Credit. Any such waiver shall be limited to the
condition(s) precedent specifically described therein and the requirements
therein. Delay or failure by Bank to insist on satisfaction of any condition of
an Advance or issuance of a Letter of Credit shall not be a waiver of such
condition precedent or any other .condition precedent. If Borrower is unable to
satisfy any condition precedent of an Advance or a Letter of Credit, the making
of the Advance or issuance of the Letter of Credit shall not preclude Bank from
thereafter declaring the condition or event causing such inability to be an
Event of Default.
5. BORROWER REPRESENTATIONS AND WARRANTIES.
5.1 Closing Representations and Warranties. Borrower represents and warrants
to Bank as of the date of this Agreement:
5.1.1 Corporate, Limited Liability Company, or Partnership Existence
and Authorization. If Borrower is a corporation, a limited liability company, or
a partnership, Borrower is validly existing, and in the case of a corporation or
limited liability company is in good standing, under the laws of the
jurisdiction of its formation or organization and has the requisite power and
authority to execute, deliver, and perform Borrower Loan Documents. The
execution, delivery, and performance by Borrower of Borrower Loan Documents have
been duly authorized by all requisite action by or on behalf of Borrower and
will not conflict with, or result in a violation of or a default under, the
certificate of incorporation and bylaws, the limited liability company operating
agreement, or the partnership agreement of Borrower, as the case may be. If
Borrower is not formed or organized under the laws of the State of Arizona,
Borrower is qualified to do business as a foreign corporation, limited liability
company, or partnership, as the case may be, and in the case of a corporation or
limited liability company is in good standing, under the law of the State of
Arizona.
5.1.2 No Approvals. No approval, authorization, bond, consent,
certificate, franchise, license, permit, registration, qualification, or other
action or grant by or filing with any Person is required in connection with the
execution, delivery, or performance by Borrower of Borrower Loan Documents.
5.1.3 No Conflicts. The execution, delivery, and performance by
Borrower of Borrower Loan Documents will not conflict with, or result in a
violation of or a default under: any applicable law, ordinance, regulation, or
rule (federal, state, or local); any judgment, order, or decree of any
arbitrator, other private adjudicator, or Governmental Authority to which
Borrower is a party or by which Borrower or any of the assets or property of
Borrower is bound; any of the Approvals or Permits; or any agreement, document,
or instrument to which Borrower is a party or by which Borrower or any of the
assets or property of Borrower is bound (including, without limitation, any
agreement, document or instrument in connection with the Public Notes, the
Convertible Notes, the Subordinated Notes, any Bank Facility and any other
Existing Indebtedness). This Agreement and the Commitment constitute a "Bank
Facility" as that term is defined in the Indenture; the Obligations constitute
"Permitted Debt" as that term is defined in the Indenture; the Obligations rank
pari passu with the Public Notes and are senior to the Convertible Notes and the
Subordinated Notes.
5.1.4 Execution and Delivery and Binding Nature of Borrower Loan
Documents. The Borrower Loan Documents have been duly executed and delivered by
or on behalf of Borrower. The Borrower Loan Documents are legal, valid, and
binding obligations of Borrower, enforceable in accordance with their terms
against Borrower, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization, or similar laws and by equitable
principles of general application.
5.1.5 Accurate Information. All information in any loan application,
financial statement, certificate, or other document and all other information
delivered by or on behalf of Borrower to Bank in obtaining the Commitment is
correct and complete, and there are no omissions therefrom that result in any
such information being incomplete, incorrect, or misleading as of the date
thereof. There has been no Material Adverse Change as to Borrower since the date
of such information. All financial statements heretofore delivered to Bank by
Borrower were prepared in accordance with the requirements set forth in this
Agreement and accurately present the financial condition and results of
operations of Borrower as at the dates thereof and for the periods covered
thereby.
5.1.6 Purpose of Advances. The purpose of the Advances is as set forth
in Section 1.
5.1.7 Legal Proceedings: Hearings, Inquiries, and Investigations.
Except as disclosed to Bank in writing prior to the date of this Agreement, (i)
no legal proceeding is pending or, to best knowledge of Borrower, threatened
before any arbitrator, other private adjudicator, or Governmental Authority to
which Borrower is a party or by which Borrower or any assets or property of
Borrower may be bound or affected that if resolved adversely to Borrower could
result in a Material Adverse Change, and to the best knowledge of Borrower,
there exist no facts that would form any basis for any of the foregoing, and
(ii) no hearing, inquiry, or investigation relating to Borrower or any assets or
property of Borrower is pending or, to the best knowledge of Borrower,
threatened by any Governmental Authority.
5.1.8 No Event of Default or Unmatured Event of Default. No Event of
Default and no Unmatured Event of Default has occurred and is continuing. No
event of default or event which with notice or lapse of time or both would
become an event of default has occurred or is continuing with respect to the
Public Notes, the Convertible Notes, the Subordinated Notes, any Bank Facility,
or any other Debt of Borrower.
5.1.9 Approvals and Permits: Assets and Property. Borrower has obtained
and there are in full force and effect all Approvals and Permits. Borrower owns
or leases all assets and property necessary for conduct of the business and
operations of Borrower. Such assets and property are not subject to any Liens
and Encumbrances, other than Permitted Exceptions.
5.1.10 Taxes. Borrower has filed or caused to be filed all tax returns
(federal, state, and local) required to be filed by Borrower and has paid all
taxes and other amounts shown thereon to be due (including, without limitation,
any interest and penalties).
5.1.11 ERISA. Borrower is in compliance with ERISA. No Reportable Event
or Prohibited Transaction (as defined in ERISA) or termination of any plan has
occurred and no notice of termination has been filed with respect to any plan
established or maintained by Borrower and subject to ERISA. Borrower has not
incurred any material funding deficiency within the meaning of ERISA or any
material liability to the Pension Benefit Guaranty Corporation in connection
with any such plan established or maintained by Borrower. Borrower is not a
party to any Multiemployer Plan (as defined in ERISA).
5.1.12 Environmental Matters. The information in any environmental
questionnaire delivered to Bank is accurate and complete with no material
omissions therefrom as of the date thereof. To the best knowledge of Borrower
after due investigation, Borrower is in compliance in all material respects with
all environmental, all health, and all safety laws, ordinances, regulations, and
rules (federal, state, and local) applicable to Borrower, the assets or property
of Borrower, the business or operations of Borrower, or the products or services
of Borrower. Borrower does not have any material existing or contingent
liability in connection with any disposal, generation, manufacture, processing,
production, release, storage, transportation, treatment, or use of any hazardous
or toxic substance or waste.
5.1.13 Investment Company Act. Borrower is not an "investment company"
or a company controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. Borrower is not a "holding company"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
5.1.14 Margin Securities. Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System), and no proceeds of Advances will be used to purchase or carry
any margin stock or extend credit to others for the purpose of purchasing or
carrying margin stock or for any purpose that -violates or is inconsistent with
Regulation X of the Board of Governors.
5.2 Representations and Warranties Upon Requests for Advances or Letters of
Credit. Each request for an Advance or a Letter of Credit shall be a
representation and warranty by Borrower to Bank that the representations and
warranties in this Section 5 are correct and complete as of the date of the
Advance or the issuance of the Letter of Credit and that the conditions
precedent in Section 4 are satisfied as of the date of the Advance or the
issuance of the Letter of Credit.
5.3 Representations and Warranties Upon Delivery of Financial Statements,
Documents and Other Information. Each delivery by Borrower to Bank of financial
statements, other documents, or information after the date of this Agreement
(including, without limitation, documents and information delivered in obtaining
an Advance or Letter of Credit) shall be a representation and warranty that such
financial statements, other documents, or information is correct and complete,
that there are no omissions therefrom that result in such financial statements,
other documents, or information being incomplete, incorrect, or misleading as of
the date thereof, and that such financial statements accurately present the
financial condition and results of operations of Borrower as at the dates
thereof and for the periods covered thereby.
6. BORROWER AFFIRMATIVE COVENANTS. Until the Commitment terminates in full,
until all Letters of Credit expire or are drawn in full until all drafts drawn
or drawn and accepted under Letters of Credit are paid in full, and until the
Obligations are paid and performed in full, Borrower agrees that, unless Bank
otherwise agrees in writing in Bank's absolute and sole discretion:
6.1 Corporate, Limited Liability Company, or Partnership Existence. If
Borrower is a corporation, a limited liability company, or a partnership,
Borrower shall continue to be validly existing, and in the case of a corporation
or a limited liability company in good standing, under the law of the
jurisdiction of its organization or formation. If Borrower is not formed or
organized under the laws of the State of Arizona, Borrower shall continue to be
qualified to do business as a foreign corporation, limited liability company, or
partnership, as the case may be, and in the case of a corporation or limited
liability company to be in good standing, under the law of the State of Arizona.
6.2 Books and Records; Access By Bank. Borrower will maintain a single,
standard, modern system of accounting (including, without limitation, a single,
complete, and accurate set of books and records of its assets, business,
financial condition, operations, property, prospects, and results of operations)
in accordance with good accounting practices. During business hours Borrower
will give representatives of Bank access to all assets, books, documents,
property, and records of Borrower and will permit such representatives to
inspect such assets and property and to audit, copy, examine, and make excerpts
from such books, documents, and records.
6.3 Information and Statements. Borrower shall furnish to Bank:
6.3.1 Monthly Financial Statements. As soon as available and in any
event within thirty (30) days after the end of each calendar month, a balance
sheet, statements of income and, at Bank's request, reconciliation of net worth
of Borrower and each Guarantor for the immediately preceding month, all in
reasonable detail and certified by the chief financial officers of Borrower, and
each Guarantor, subject, however, to year-end audit adjustments.
6.3.2 Quarterly Financial Statements. As soon as available and in any
event within forty-five (45) days after the end of each of the first three
quarters in each fiscal year, unaudited consolidated financial statements of
Borrower and its Subsidiaries (including, without limitation, cash flow
reports), as contained in its Form 10-Q quarterly reports to the Commission for
the relevant three, six and nine month periods.
6.3.3 Annual Financial Statements. As soon as available and in any
event within ninety (90) days after the end of each fiscal year of Borrower, (i)
the consolidated (and, if required by Bank, the consolidating) financial
statements of Borrower and its Subsidiaries as contained in its Form 10-K annual
report to the Commission, and (ii) copies of the consolidated (and, if required
by Bank, the consolidating) balance sheet of Borrower and its Subsidiaries as of
the end of such fiscal year, and statements of income and retained earnings and
a statement of cash flow of Borrower for such fiscal year, in each case setting
forth in comparative form the figures for the preceding fiscal year of Borrower,
all in reasonable detail, prepared in accordance with GAAP, which financial
statements shall be audited by independent certified public accountants
satisfactory to Bank, and accompanied by an unqualified opinion of such
accountants with respect to such financial statements. As soon as available and
in any event within ten (10) days prior to the beginning of each fiscal year,
Borrower shall furnish to Bank a budget, and cash flow projection for that
fiscal year.
6.3.4 Officer's Certificate. Together with each delivery of financial
statements pursuant to Sections 6.3.1 through 6.3.3 above, an officer's
certificate of Borrower and each Guarantor stating that the signers have
reviewed the terms of this Agreement and have made, or caused to be made under
their supervision, a review in reasonable detail of the transactions and
conditions of Borrower and each Guarantor during the accounting period covered
by such financial statements, and that such review has not disclosed the
existence during or at the end of such accounting period, and that the signers
do not have knowledge of the existence as of the date of the officer's
certificate, of any Event of Default or Unmatured Event of Default or, if any
Event of Default or Unmatured Event of Default existed or exists, specifying the
nature and period of the existence thereof and what action Borrower has taken,
is taking, and proposes to take with respect thereto. Together with each
quarterly financial statement required pursuant to Section 6.3.2, Borrower shall
provide an officer's certificate in the form of Exhibit B hereto with respect to
compliance with the financial and other covenants set forth in any documents
relating to the Public Notes, any documents relating to any Bank Facility, or
this Agreement.
6.3.5 Filings, Etc. As and when filed, copies of all regular or
periodic financial and other reports, if any, which Borrower or any Guarantor
shall file with the Commission or any other Governmental Authority.
6.3.6 Sales Reports. As soon as available and in any event at least
once each month, sales, inventory and backlog reports on each homebuilding
Subsidiary of Borrower.
6.3.7 Required Backup. Upon request by Bank from time to time,
"consolidating" statements and other detail required by Bank with respect to any
of the financial statements described in Sections 6.3.1 through 6.3.3 above.
6.3.8 Other Information. Such other information concerning Borrower and
the assets, business, financial condition, operations, property, prospects, and
results of operations of Borrower as Bank reasonably requests from time to time.
6.4 Law; Judgments; Material Agreements; Approvals and Permits.
Borrower shall comply with all laws, ordinances, regulations, and rules
(federal, state, and local) and all judgments, orders, and decrees of any
arbitrator, other private adjudicator, or Government Authority relating to
Borrower or the assets, business, operations, or property of Borrower. Borrower
shall comply in all material respects with all material agreements, documents,
and instruments to which Borrower is a party or by which Borrower or any of the
assets or property of Borrower is bound or affected. Borrower shall obtain and
maintain in full force and effect all Approvals and Permits and shall comply
with all conditions and requirements of all Approvals and Permits.
6.5 Taxes and Other Indebtedness. Borrower will pay and discharge (i)
before delinquency all taxes, assessments, and governmental charges or levies
imposed upon it, upon its income or profits, or upon any of its assets or
property (except to the extent permitted to be contested pursuant to clause (v)
of the definition of Permitted Exceptions), (ii) when due all lawful claims
(including, without limitation, claims for labor, materials, and supplies),
that, if unpaid, might become a Lien or Encumbrance upon any of its assets or
property, and (iii) when due all its other Debt.
6.6 Assets and Property. Borrower will maintain, keep, and preserve all
of its assets and property (tangible and intangible) necessary or useful in the
proper conduct of its business and operations in good working order and
condition, ordinary wear and tear excepted.
6.7 Insurance. In addition to any insurance required under any of the
other Loan Documents, Borrower shall maintain workmen's compensation insurance,
product and public liability insurance, insurance on its assets and property now
or hereafter owned, and such other forms of insurance as is customary in the
industry of Borrower, against such casualties, risks, and contingencies, in such
amounts, and with such insurance companies as are satisfactory to Bank, in its
reasonable discretion. Borrower shall deliver to Bank from time to time as Bank
may request, schedules setting forth all insurance then in effect and copies of
policies.
6.8 Environmental Laws. Without limiting the generality of Section 6.4,
Borrower shall comply with all environmental, all health, and all safety laws,
ordinances, regulations, and rules (federal, state, local, and foreign)
applicable to Borrower, the business or operations of Borrower, the assets or
property of Borrower, or the products or services of Borrower. Borrower shall
not dispose of, generate, manufacture, process, produce, release, transport, or
treat or otherwise store or use any hazardous or toxic substances or wastes.
Borrower shall notify Bank immediately of any environmental inquiry or claim
from any Governmental Authority or other Person relating to Borrower or any
assets, property, business, operations, product, or service of Borrower.
6.9 ERISA. Borrower will fund each Defined Benefit Plan and Defined
Contribution Plan (as such terms are defined in ERISA) so that there is never an
Accumulated Funding Deficiency (as defined in Section 412 of the Internal
Revenue Code of 1986, as amended).
6.10 Further Assurances. Borrower shall promptly execute, acknowledge,
and deliver and, as appropriate, cause to be duly filed and recorded such
additional agreements, documents, and instruments and do or cause to be done
such other acts as Bank may reasonably request from time to time to better
assure, perfect, preserve, and protect the interest of Bank in the Collateral
and the rights and remedies of Bank under the Loan Documents.
6.11 Costs and Expenses of Borrower's Performance of Covenants and
Satisfaction of Conditions. Borrower will perform all of its obligations and
satisfy all conditions under the Loan Documents at its sole cost and expense.
6.12 Financial Covenants. Except as otherwise noted, all financial
computations shall be made in accordance with GAAP. Until the Commitment
terminates in full, until all Letters of Credit expire or are drawn in full,
until all drafts drawn or drawn and accepted under Letters of Credit are paid in
full, and until the Obligations are paid and performed in full, Borrower agrees
that, unless Bank otherwise agrees in writing in Bank's absolute and sole
discretion, as of the end of each quarterly fiscal period, Borrower shall
maintain:
6.12.1 Tangible Net Worth. A minimum Tangible Net Worth in the
amount of $90,000,000.00.
6.12.2 Liquidity. A minimum Liquidity of $5,000,000.00.
6.12.3 Adjusted Debt to Net Worth Ratio. An Adjusted Debt to Net
Worth Ratio of not more than 1.50 to 1.
6.13 Clean-Up. With respect to (i) the six-month period commencing on
November 30, 1995 and ending on May 31, 1996, Borrower shall not have any
Advances outstanding pursuant to this Agreement for a period of at least fifteen
(15) or thirty (30) consecutive days, (as elected by Borrower) and (ii) the
period commencing on June 1, 1996 and ending on the Commitment expiration date
specified in Section 1, Borrower shall not have any Advances outstanding
pursuant to this Agreement for a period of at least thirty (30) or fifteen (15)
consecutive days (as elected by Borrower, such that the period elected by
Borrower in clause (ii) is different than the period elected by Borrower in
Clause (i)).
6.14 Compensating Balances. Borrower shall at all times maintain on
deposit with Bank (i) free, collected, non-interest-bearing compensating
balances in the amount of not less than $500,000.00 and (ii) such additional
compensating balance deposits (which may be interest bearing) as may be
necessary to cause the total deposits maintained at Bank (including amounts
maintained pursuant to clause (i) of this sentence) to be equal to or greater
than two-thirds of the total deposits maintained by Borrower with all financial
institutions.
6.15 Appraisals. Bank shall have the right, which Bank may exercise
from time to time, to obtain appraisals of Borrower's real estate assets. All
such appraisals shall be in form and reflect values satisfactory to Bank.
Borrower shall cooperate in any such appraisals and Borrower shall pay all costs
and expenses, including appraisal and appraisal review fees incurred or charged
by Bank in connection therewith; provided that Borrower shall be obligated to
pay such costs and expenses only if and to the extent such appraisals are
required (i) by the consistent application of Bank's internal policies and
procedures that are generally applicable to secured or unsecured loans made by
Bank to Persons engaged in businesses similar to that of Borrower, (ii) by
applicable laws, rules and regulations or (iii) in connection with the exercise
of Bank's rights under Section 8 hereof.
7. BORROWER NEGATIVE COVENANTS. Until the Commitment terminates in full, until
all Letters of Credit expire or are drawn in full, until all drafts drawn or
drawn and accepted under Letters of Credit are paid in full, and until the
Obligations are paid and performed in full, Borrower agrees that, unless Bank
otherwise agrees in Bank's absolute and sole discretion:
7.1 Corporate, Limited Liability Company, and Partnership Restrictions. If
Borrower, or any Subsidiary, is a corporation, a limited liability company, or a
partnership, Borrower shall not and, except for sales of stock in the Carlsbad
Subsidiary, shall not permit any Subsidiary to, issue any capital stock or other
securities of or any limited liability company interest or partnership interest
in Borrower, or any Subsidiary, or grant any option (except in connection with
employee stock option plans), right-of-first-refusal, warrant, or other right to
purchase any capital stock or other securities of or any limited liability
company interest or partnership interest in Borrower or any Subsidiary. Borrower
shall not be dissolved or liquidated and shall not permit any Subsidiary to be
dissolved or liquidated. Borrower shall not, and shall not permit any Subsidiary
to, amend, modify, restate, supplement, or terminate its certificate of
incorporation or bylaws, its limited liability company operating agreement, or
its partnership agreement, as the case may be. Borrower shall not, and shall not
permit any Subsidiary to, reorganize itself or consolidate with or merge into
any other corporation or permit any other corporation to be merged into
Borrower. Any provision of this Section 7.1 to the contrary notwithstanding,
this Section 7.1 shall not restrict or limit the issuance of Common Stock that
is authorized but unissued as of the date hereof or held in treasury as of the
date hereof if and to the extent such issuance is made in satisfaction of
Borrower's obligation to permit conversion of the Convertible Notes to Common
Stock pursuant to the terms of such notes. Provisions of this Agreement other
than this Section 7.1 that appear to contemplate or refer to sales or issuances
of capital stock or other securities, but do not expressly authorize such sales
or issuances, shall not be deemed to be consent of Bank to any such sales or
issuances.
7.2 Change in or Reacquisition of Ownership Interests in Borrower. Borrower
will not suffer to occur or exist, whether occurring voluntarily or
involuntarily, after the date of this Agreement any change in the legal or
beneficial ownership of any capital stock of any Subsidiary (except for sales of
stock in the Carlsbad Subsidiary), without the prior written consent of Bank in
its absolute and sole discretion.
7.3 Name, Fiscal Year, Accounting Method, and Lines of Business. Borrower
shall not change its name, fiscal year, or method of accounting. Borrower shall
not directly or indirectly, engage in any business other than the line(s) of
business in which Borrower is engaged on the date of this Agreement, discontinue
any existing line(s) of business, or substantially alter its method of doing
business.
7.4 Acquisition of All or Substantially All Assets. Borrower shall not, and
shall not permit any Subsidiary to, acquire by purchase, lease, or otherwise all
or substantially all the assets of any other Person.
7.5 Limitation on Debt.
7.5.1 General Prohibition. Borrower will not, and will not permit any
of its Subsidiaries to, directly or indirectly, Incur any Debt except Permitted
Debt. No Permitted Debt shall contain any terms or conditions that would
conflict with or be violated by any of Bank's rights hereunder, including
without limitations, Bank's rights pursuant to Section 8 hereof.
7.5.2 Additional Debt Allowed. Notwithstanding Section 7.5.1 hereof,
and subject to the immediately succeeding paragraph, Borrower may Incur Debt if,
at the time such Debt is so Incurred and after giving effect thereto and the
application of the proceeds therefrom, each of the following is true: (i)
Borrower has a Coverage Ratio of not less than 2.2 to 1.0; (ii) Borrower is in
compliance with Section 6.12 hereof and (iii) no Event of Default or Unmatured
Event of Default has occurred.
Borrower shall not Incur any Debt (other than the Obligations and
Permitted Debt) that is pari passu with the Public Notes or the Obligations or
requires any principal payment, redemption payment or sinking fund payment
thereon, in whole or in part, to be made prior to or at the final stated
maturity of the Public Notes or the Obligations; provided that entering into an
agreement that requires Borrower to make an offer to purchase outstanding Debt
upon the occurrence of certain specified events shall not be deemed to be
restricted by this paragraph.
For purposes of this Section 7.5, any waiver, extension or continuation
of any or all mandatory prepayments or installment payments or the maturity date
of any of the Debt Incurred pursuant to this Section 7.5 shall not be or be
deemed to be the Incurrence of Debt by Borrower.
7.6 Limitations on Liens and Encumbrances. Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly, create, incur, assume
or permit to exist any Lien or Encumbrance upon or with respect to any assets of
Borrower or any such Subsidiary, whether now owned or hereafter acquired, or on
any income or profits therefrom; provided that the foregoing shall not prohibit
Permitted Exceptions.
7.7 Limitations on Sales, Transfers, etc. Borrower will not, directly or
indirectly, and will not permit any of its Subsidiaries to, sell, assign,
transfer or otherwise dispose of any Capital Stock of any Subsidiary or sell,
assign, transfer or otherwise dispose of any assets of Borrower or any
Subsidiary except for (i) sales or issuance of stock expressly permitted
pursuant to Section 7.1 hereof, (ii) sales of assets in the ordinary course of
business of any Subsidiary, and (iii) sales to Borrower or a wholly-owned
Subsidiary of Borrower (except as such sales may be prohibited by the next
sentence). Borrower will not, directly or indirectly, permit the Carlsbad
subsidiary to sell, assign, transfer or otherwise dispose of all or a portion of
the Carlsbad Property to Borrower or any of its Subsidiaries (other than the
Carlsbad Subsidiary).
7.8 Limitation on Operating Losses. Borrower shall not cause or permit
(i) Borrower's Consolidated Net Income to be less than zero in each of two
consecutive fiscal quarters, and (ii) Borrower's Consolidated Net Income to be a
loss of greater than $2,500,000 in any fiscal quarter. For the purpose of
determining Consolidated Net Income in this Section 7.8, Borrower shall not be
required to include losses to the extent resulting from adjustments to the net
realizable value of assets required pursuant to GAAP.
7.9 Limitation on Restricted Payments. Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly, make any Restricted
Payment, if, after giving effect thereto:
(a) an Event of Default or an Unmatured Event of Default shall have
occurred and be continuing, or
(b) the aggregate amount of all Restricted Payments (giving effect to
Restricted Payments that are Credit Extensions/Contributions only to the
extent then outstanding) made by Borrower and its Subsidiaries (the amount
expended or distributed for such purposes, if other than in cash, to be
determined in good faith by the board of directors of Borrower) from and
after the date hereof shall exceed the sum of:
(i) the aggregate of 50% of the Consolidated Net Income of
Borrower accrued for the period (taken as one accounting period)
commencing with February 1, 1993 to and including the first full month
ended immediately prior to the date of such calculation (or, in the
event Consolidated Net Income is a deficit, then minus 100% of such
deficit),
(ii) the aggregate net cash proceeds received by Borrower for the
period (taken as one accounting period) commencing with February 1,
1993 to and including the first full month ended immediately prior to
the date of such calculation from the issuance or sale (other than to a
Subsidiary of Borrower) of its Capital Stock (other than Redeemable
Stock), including the principal amount of any Subordinated Notes or
other convertible securities issued for cash that are converted to
Capital Stock from and after the date of this Agreement, and options,
warrants and rights to purchase its Capital Stock (other than
Redeemable Stock),
(iii) amounts received by Borrower or any of its Subsidiaries
representing a return of capital or Credit Extensions/Contributions
made to the Great Singing Hills joint venture outstanding on the date
of the Indenture and
(iv) $8,780,953.
The foregoing clauses (a) and (b) will not prevent (i) Permitted Payments, (ii)
the payment of any dividend within 60 days after the date of its declaration if
such dividend could have been made on the date of its declaration in compliance
with the foregoing provisions, and (iii) the repurchase or redemption of shares
of Capital Stock from any officer, director or employee of Borrower or its
Subsidiaries whose employment has been terminated or who has died or become
disabled in an aggregate amount not to exceed $500,000 per annum; provided that
amounts paid pursuant to clause (iii) shall reduce amounts available for future
Restricted Payments.
8. SECURITY.
8.1 Bank's Right to Demand Security. Upon the occurrence of any Event of
Default, Bank shall have all of the rights and remedies provided pursuant to the
Note, the other Loan Documents and applicable law. Without limiting the
foregoing, upon the occurrence of an Event of Default resulting from a violation
of the covenants set forth in Sections 6.12.1. 6.12.2, 6.12.3, 6.13. 6.14 or 7.8
hereof or the Events of Default set forth in paragraphs 9 or 13 in the
definition of such term in the Note, Bank may, in its sole and absolute
discretion, and in addition to its other rights and remedies, demand (a
"Security Demand") and accept Collateral as security for the Obligations, which
security shall be on such terms and conditions as Bank may elect in its sole and
absolute discretion, and Borrower shall provide such security and comply with
such requirements, subject only to the limitation on such security set forth in
the definition of "Permitted Liens" in the Indenture. Without limiting the
foregoing, the terms and conditions upon which Bank will require and accept such
Collateral may include the following:
8.1.1 Type of Collateral. Any such Collateral shall consist of real
property and improvements owned by Borrower or a Subsidiary of Borrower and not
subject to Liens and Encumbrances (except as approved by Bank). Within five (5)
Business Days after the giving of a Security Demand, Borrower shall provide Bank
with a listing of all such real property and improvements and Bank shall have
the right to select the Collateral from such list in the following order of
preference (i) homes under construction located in the metropolitan Phoenix,
Arizona area, (ii) improved single family lots located in the metropolitan
Phoenix, Arizona area, (iii) lots under development located in the metropolitan
Phoenix, Arizona area, (iv) vacant land located in the metropolitan Phoenix,
Arizona area, (v) real estate located elsewhere in Arizona, (vi) real estate
located in Colorado, and (vii) real estate located in California. Except as set
forth in Section 8.1, Bank shall be entitled to select the quantity of such
property to be provided as Collateral.
8.1.2 Appraisals. Bank shall receive and approve such appraisals or
other evidence of the value of such property as Bank may require in its sole and
absolute discretion.
8.1.3 Environmental Questionnaire. An environmental questionnaire and
disclosure statement completed and signed by Borrower and CHI and/or CHICC
covering the current and former condition and uses of such property and adjacent
property, and, if required by Bank, followed by such environmental site
assessments and investigations that Bank my require, all of which shall be
acceptable to Bank in its sole and absolute discretion.
8.1.4 Security Documents. Borrower and such Subsidiaries shall execute
such deeds of trust, security agreements and other security documents and
instruments as Bank may require in its sole and absolute discretion.
8.1.5 Other Documents. Borrower and such Subsidiaries shall executed
and deliver such other documents and instruments, and perform such other acts,
as Bank may require in its sole and absolute discretion.
8.1.6 Title Insurance. Bank shall receive such title insurance policies
and endorsements thereto with respect to such deeds of trust as Bank may require
in its sole and absolute discretion, which title insurance policies shall
contain only those exceptions and limitations as shall be acceptable to Bank.
8.1.7 No Defaults. No other Event of Default or Unmatured Event of
Default shall have occurred and be continuing.
8.1.8 Attorney Opinions. Bank shall receive such opinions of in-house
counsel for Borrower as Bank may request in its sole and absolute discretion,
including, without limitation, opinions that the execution and delivery of such
deeds of trust and other security documents does not conflict with, violate, or
cause a default under, the terms and conditions of any agreement, document,
instrument, or indenture to which Borrower or any Subsidiary is a party or by
which it is bound or affected, and that the transfer of such security to Bank
does not constitute a voidable preference or fraudulent conveyance under
applicable state or federal law.
8.1.9 Cost and Expenses. Borrower shall pay all of Bank's costs and
expenses in connection with the foregoing including, without limitation,
appraisal fees, appraisal review fees, recording fees, title insurance fees,
escrow fees, and attorneys' fees.
8.2 Effect of Security. Borrower's compliance with Section 8.1 shall not
waive any Event of Default or Unmatured Event of Default or otherwise be deemed
to modify or release any of Borrower's obligations hereunder, except to the
extent such waiver, release or modification is expressly set forth in a written
agreement signed by Bank and in form and content satisfactory to Bank in its
sole and absolute discretion.
9. BANK'S OBLIGATIONS TO BORROWER ONLY. The obligations of Bank under this
Agreement are for the benefit of Borrower only. No other Person shall have any
rights hereunder or be a third-party beneficiary hereof.
10. PROVISIONS IN THE NOTE GOVERN THIS AGREEMENT. This Agreement is subject to
certain terms and provisions in the Note, to which reference is made for a
statement of such terms and provisions.
11. COUNTERPART EXECUTION. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same document. Signature pages may be
detached from the counterparts and attached to a single copy of this Agreement
to physically form one document.
12. ARBITRATION.
(a) Binding Arbitration. Bank and Borrower hereby agree that all
controversies and claims arising directly or indirectly out of this
Agreement and the Loan Documents, shall at the written request of any party
be arbitrated pursuant to the applicable rules of the American Arbitration
Association. The arbitration shall occur in the State of Arizona. Judgment
upon any award rendered by the arbitrator(s) may be entered in any court
having jurisdiction. The Federal Arbitration Act shall apply to the
construction and interpretation of this arbitration agreement.
(b) Arbitration Panel. A single arbitrator shall have the power to
render a maximum award of one hundred thousand dollars. When any party files
a claim in excess of this amount, the arbitration decision shall be made by
the majority vote of three arbitrators. No arbitrator shall have the power
to restrain any act of any party.
(c) Provisional Remedies: Self Help And Foreclosure. No provision of
subparagraph (a) shall limit the right of any party to exercise self help
remedies, to foreclose against any real or personal property collateral, or
to obtain any provisional or ancillary remedies (including but not limited
to injunctive relief or the appointment off a receiver) from a court of
competent jurisdiction. At Bank's option, it may enforce its right under a
mortgage by judicial foreclosure, and under a deed of trust either by
exercise of power of sale or by judicial foreclosure. The institution and
maintenance of any remedy permitted above shall not constitute a waiver of
the rights to submit any controversy or claim to arbitration. The statute of
limitations, estoppel, waiver, laches, and similar doctrines which would
otherwise be applicable in an action brought by a party shall be applicable
in any arbitration proceeding.
13. AMENDED AND RESTATED. This Agreement amends and restates in its entirety
that Loan Agreement between Borrower and Bank dated February 25, 1993, as
thereafter amended, providing for a loan by Bank to Borrower in the amount of
$10,000,000.00. All outstanding advances under said loan agreement shall be
deemed outstanding Advances under this Agreement and the Note.
DATED as of the date first above stated.
BANK ONE, ARIZONA, NA, a national
banking association formerly known
as THE VALLEY NATIONAL BANK OF
ARIZONA
By: /s/ Xxxxxx X. Xxxxxxxx
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Name: Xxxxxx X. Xxxxxxxx
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Title: Assistant Vice President
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CONTINENTAL HOMES HOLDING CORP., a
Delaware corporation
By: /s/ Xxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxx X. Xxxxxxxx
------------------------------------
Title: Senior Vice President
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