EXHIBIT 10.11
SECOND MODIFICATION AGREEMENT
THIS SECOND MODIFICATION AGREEMENT ("Agreement") is entered into as of
October 9, 1997, among CONTINENTAL HOMES HOLDING CORP., a Delaware corporation
("Borrower"), the Banks listed on the signature pages of this Agreement, and
BANK ONE, ARIZONA, NA, a national banking association, as Agent. The parties
hereto agree as follows:
RECITALS:
---------
A. Agent, Banks and Borrower entered into a Credit Agreement dated as
of June 27, 1996, as amended by that First Modification Agreement dated as of
April 11, 1997 (the "Credit Agreement") pursuant to which the banks named
therein (the "Banks"), among other things, established a credit facility
("Credit Facility") for Borrower, which is evidenced by the Notes. Capitalized
terms not otherwise defined herein shall have the same meanings ascribed to such
terms in the Credit Agreement.
B. Borrower has requested that Banks decrease the interest rate payable
by Borrower under the Credit Facility. Additionally, Borrower has requested that
Banks add certain subsidiaries of Borrower as guarantors under the Credit
Facility. Banks have agreed to so modify the Credit Facility and to amend the
Credit Agreement and other Loan Documents on the terms and subject to the
conditions set forth in this Agreement.
AGREEMENTS:
-----------
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Borrower, Banks and Agent agree as follows:
SECTION 1. ACCURACY OF RECITALS.
--------------------
The parties acknowledge the accuracy of the Recitals.
SECTION 2. MODIFICATION OF CREDIT AGREEMENT.
--------------------------------
Effective as of the Effective Date (as hereafter defined), the Credit
Agreement shall be modified as follows:
2.1 Subject to the provisions of Section 4.3 of this Agreement, the
definition of "Guarantors" in Article I of the Credit Agreement is hereby
modified in its entirety to read as follows:
"Guarantors" means ACHETER, INC., a Texas corporation, CH
MORTGAGE COMPANY, a Colorado corporation, CHI CONSTRUCTION COMPANY, an
Arizona corporation, CONTINENTAL HOMES, INC., a
Delaware corporation, CONTINENTAL HOMES OF AUSTIN, L.P., a Texas
limited partnership, CONTINENTAL HOMES OF DALLAS, L.P., a Texas limited
partnership, CONTINENTAL HOMES OF FLORIDA, INC., a Florida corporation,
CONTINENTAL HOMES OF SAN ANTONIO, L.P., a Texas limited partnership,
CONTINENTAL HOMES OF TEXAS, INC., a Texas corporation, CONTINENTAL
RANCH, INC., a Delaware corporation formerly known as RANCHO XXXXXXX,
INC., KDB HOMES, INC., a Delaware corporation, L & W INVESTMENTS INC.,
a California corporation, XXXXXXX INVESTMENTS, INC., a Texas
corporation, MILTEX MANAGEMENT, INC., a Texas corporation, MILTEX
MORTGAGE OF TEXAS LIMITED PARTNERSHIP, a Texas limited partnership,
R.O.S. CORPORATION, a Texas corporation, SETTLEMENT CORPORATION, a
Texas corporation, XXXXXX COUNTY TITLE COMPANY, a Texas corporation,
and their successors and assigns, and any Subsidiary that shall
hereafter become a Guarantor in accordance with Section 11.4 hereof,
and any successors and assigns of any of the foregoing. "Guarantor"
means any one of the Guarantors.
2.2 Section 2.11(a) of the Credit Agreement is hereby modified in its
entirety to read as follows:
(a) Senior Debt Rating. The Applicable Margins shall be
determined by reference to the Senior Debt Rating, in accordance with
the following table:
Applicable Applicable
Senior Debt LIBOR Rate Floating Rate
Rating Margin (%) Margin (%)
----------- ---------- -------------
BBB-/Baa3 or .75 0
higher
BB+/Ba1 .95 0
BB/Ba2 1.15 0
BB-/Ba3 1.35 0.10
B+/B1 or lower 1.55 0.20
or no rating
2.3 The references to "Applicable Unused Commitment Rate" in Sections
2.11(b) and (c) of the Credit Agreement are hereby deleted.
2.4 The following Section 2.11(d) is hereby added to the Credit
Agreement:
(d) Applicable Unused Commitment Rate. The Applicable Unused
Commitment Rate shall be determined by reference to aggregate
Commitments and the aggregate "average daily outstandings" for the
month (or portion thereof) with
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respect to which the Unused Commitment Fee is being computed, in
accordance with the following table:
Aggregate of each Bank's Applicable Unused
Average Daily Outstandings Commitment Rate (%)
-------------------------- -------------------
66% or more of the aggregate Commitments 0.15
More than 33%, but less than 66%, of the 0.20
aggregate Commitments
33% or less of the aggregate Commitments 0.275
2.5 The number "$10,000,000.00", as it appears in Section 4.2(ii) of
the Credit Agreement, is hereby amended to be "$15,000,000.00."
2.6 Section 4.7(b) of the Credit Agreement is hereby amended in its
entirety to read as follows:
(b) Calculation of Fee. The Facility Letter of Credit Fee
shall be determined by reference to the Senior Debt Rating, in
accordance with the following table:
Applicable
Senior Debt Letter of Credit
Rating Rate (%)
----------- ----------------
BBB-/Baa3 or higher .75
BB+/Ba1 .85
BB/Ba2 .90
BB-/Ba3 1.10
B+/B1or lower 1.30
or no rating
2.7 The number "$6,000,000.00", as it appears in Section 8.5(v) of the
Credit Agreement, is hereby amended to be "$15,000,000.00."
2.8 The following Section 8.12 is hereby added to the Credit Agreement:
8.12 Negative Pledge. Borrower will not, nor will it permit
any Guarantor to, directly or indirectly enter into any agreement
(other than this Agreement and the Indenture) with any Person that
prohibits or restricts or limits the ability of Borrower or any
Guarantor to create, incur, pledge or suffer to exist any Lien upon any
assets of Borrower or any Guarantor (except that agreements
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creating Liens permitted under Sections 8.6(ii), (iii), (vi), (vii),
(viii) and (xiii) may prohibit, restrict or limit other Liens on those
assets encumbered by the Liens created by such agreements).
2.9 Exhibit J to the Credit Agreement is hereby modified in its
entirety to mean that document attached hereto as Exhibit J.
SECTION 3. OTHER MODIFICATIONS; RATIFICATION OF LOAN DOCUMENTS.
---------------------------------------------------
3.1 As of the Effective Date, each reference in the Loan Documents to
any of the Loan Documents is hereby amended to be a reference to such document
as modified herein.
3.2 The Loan Documents are ratified and affirmed by Borrower and shall
remain in full force and effect as modified herein.
SECTION 4. CONSENT OF BANKS.
----------------
4.1 Consent to Assumption by New Guarantors. Banks hereby consent to
Borrower's formation and capitalization of
(a) Continental Homes of Dallas, L.P., a Texas limited
partnership ("CHD"), and its constituent partners CHTEX of Dallas, Inc., a
Delaware corporation, and CH Investments of Texas, Inc., a Delaware corporation;
(b) Continental Homes of San Antonio, L.P., a Texas limited
partnership ("CHS"), and its constituent partners CHTEX of San Antonio, Inc., a
Delaware corporation, and CH Investments of Texas III, Inc., a Delaware
corporation; and
(c) Continental Homes of Austin, L.P., a Texas limited
partnership ("CHA") and its constituent partners CHTEX of Austin, Inc., a
Delaware corporation, and CH Investments of Texas II, Inc., a Delaware
corporation.
Banks hereby consent to the addition of CHD, CHS and CHA as Guarantors under the
Credit Facility, and the assumption by CHD, CHS and CHA of the obligations of a
Guarantor as set forth in the attached Consent and Agreement of Guarantor.
4.2 Consent to Transfer of Assets. Banks hereby consent to the transfer
(pursuant to a multi-survivor merger) of all, or substantially all, of the
assets of Xxxxxxx Investments, Inc., a Texas corporation, to CHA. Banks hereby
consent to the transfer (pursuant to a multi-survivor merger) of all, or
substantially all, of the assets of Continental Homes of Texas, Inc., a Texas
corporation, to CHS. Such consent shall not constitute a consent to the transfer
of any other assets of Borrower or any other Guarantor except as may be
specifically permitted under the Credit Agreement.
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4.3 Consent to Dissolution. Banks hereby consent to the dissolution of
CHI Finance Corp., an Arizona corporation, as described in Section 5.1(a).
Contemporaneously herewith, Borrower is dissolving the following Guarantors, and
Banks hereby consent to the dissolution of such Guarantors in accordance with
the dissolution documents approved by Agent pursuant to Section 8.7 of this
Agreement: Acheter, Inc., a Texas corporation, Continental Homes of Texas, Inc.,
a Texas corporation, Xxxxxxx Investments, Inc., a Texas corporation, Miltex
Management, Inc., a Texas corporation, Miltex Mortgage of Texas Limited
Partnership, a Texas limited partnership, R.O.S. Corporation, a Texas
corporation, and Settlement Corporation, a Texas corporation. Such consent shall
not constitute a consent to any dissolution of any other entity except as may be
specifically permitted under the Credit Agreement. Upon the dissolution of each
such Guarantor, such Guarantor shall be deleted automatically from the
definition of "Guarantors" in Article I of the Credit Agreement.
4.4 No Other Consent. The consents granted by Banks herein shall in no
way affect the liability or obligations of Borrower or any Guarantor under the
Loan Documents. Such consent shall not constitute a consent to any other
matters, similar or dissimilar, other than those specifically enumerated above.
SECTION 5. WAIVER OF VARIANCES.
-------------------
5.1 Waiver. Banks hereby waive the following variances with the Credit
Agreement by Borrower:
(a) Non-Compliance with under Section 10.12 as a result of the
dissolution of CHI Finance Corp., an Arizona corporation, pursuant to Articles
of Dissolution filed with the Arizona Secretary of State on May 2, 1997;
(b) Non-compliance with Section 8.4 as a result of the
transfer of substantially all of the assets of Xxxxxxx Investments, Inc., a
Texas corporation, to CHA pursuant to the Articles of Merger filed with the
Texas Secretary of State on July 25, 1996;
(c) Non-compliance with Section 8.4 as a result of the
transfer of substantially all of the assets of Continental Homes of Texas, Inc.,
a Texas corporation, to CHS pursuant to the Articles of Merger filed with the
Texas Secretary of State on July 25, 1996;
(d) Non-compliance with Section 6.10 as a result of the
submission of Borrowing Base Certificates from July 1996 through August 1997
which did not reflect the transfer of assets described in subparagraphs (b) and
(c) above, and which showed Borrowing Base assets not owned by a Guarantor;
(e) Non-compliance with Section 11.4 as a result of the
addition of CHS, CHA and CHD as a "Guarantor" (as defined therein) under the
Indenture pursuant to that First Supplemental Indenture dated February 4, 1997,
and the subsequent failure to add CHS, CHA and CHD as Guarantors under the
Credit Agreement; and
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(f) Non-compliance with Section 8.5(v) as a result of Borrower
permitting Continental Homes, Inc., a Delaware corporation, to extend loans in
1997 to the Surprise Entities in excess of $6 million.
5.2 Effect of Waiver. The waivers of Borrower's non-compliance with the
covenants specified in Section 5.1 hereof are specific in time and intent and
are granted only with respect to the specific matters and covenants specified in
Section 5.1 hereof and for the times stated in Section 5.1 hereof. These waivers
shall not be construed as a waiver of any other provisions of the Credit
Agreement. These waivers do not constitute an agreement or obligation of Agent
or Banks to waive any other existing or future event that would, absent consent
or waiver, constitute non-compliance with the terms of the Credit Agreement.
Except for the waivers specifically set forth herein, Agent and Banks do not in
any way waive or relinquish any rights they have or may have under the Credit
Agreement or otherwise, nor do the waivers herein in any way affect or impair
the terms of, or the rights of Agent or Banks under, the Credit Agreement.
SECTION 6. BORROWER REPRESENTATIONS AND WARRANTIES.
---------------------------------------
Borrower represents and warrants to Banks and Agent:
6.1 As of October 6, 1997, the outstanding principal balance of the
Notes is $20,000,000.00; interest has been paid through the due date.
6.2 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
6.3 There has been no material adverse change in the financial
condition of Borrower or any Guarantor or any other person whose financial
statement has been delivered to Agent in connection with the Credit Facility
from the most recent financial statement received by Agent.
6.4 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
6.5 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Credit Facility or the Loan Documents as modified herein.
6.6 The Loan Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance with
their terms.
6.7 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly
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authorized by all requisite action by or on behalf of Borrower. This Agreement
has been duly executed and delivered on behalf of Borrower.
6.8 CHD, CHS and CHA are each (a) a Wholly-Owned Subsidiary of
Borrower, (b) a Restricted Subsidiary, as defined in the Indenture, and (c) a
"Guarantor" (as defined therein) under the Indenture. The addition of CHD, CHS
and CHA as a Guarantor shall not cause an Event of Default or an Unmatured Event
of Default to occur.
SECTION 7. BORROWER COVENANTS.
------------------
Borrower covenants with Agent and Banks:
7.1 Borrower shall execute, deliver, and provide to Agent such
additional agreements, documents, and instruments as reasonably required by
Agent to effectuate the intent of this Agreement.
7.2 Borrower fully, finally, and absolutely and forever releases and
discharges Agent and Banks and their present and former directors, shareholders,
officers, employees, agents, representatives, successors and assigns, and their
separate and respective heirs, personal representatives, successors and assigns,
from any and all actions, causes of action, claims, debts, damages, demands,
liabilities, obligations, and suits, of whatever kind or nature, in law or
equity that Borrower has or in the future may have, (i) in respect of the Credit
Facility, the Loan Documents, or the actions or omissions of Agent or any Bank
in respect of the Credit Facility or the Loan Documents and (ii) arising from
events occurring prior to the date of this Agreement, and which are known to
Borrower.
SECTION 8. CONDITIONS PRECEDENT.
--------------------
The agreements of Banks and Agent and the modifications contained
herein shall not be binding upon Banks and Agent until Borrower has executed and
delivered this Agreement and Agent has received, at Borrower's expense, all of
the following on or before October 9, 1997 (the "Effective Date"), and each
of which shall be in form and content satisfactory to Agent and shall be subject
to prior approval by Agent:
8.1 An original of this Agreement fully executed by Borrower and
Guarantors;
8.2 With respect to CHD, CHA and CHS and their respective constituent
partners:
(i) Copies of its partnership agreement, certificate of
incorporation, and articles of merger, together with all amendments,
and a certificate of good standing, all certified by the appropriate
governmental officer in the jurisdiction of incorporation or formation.
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(ii) Copies, certified by the Secretary or Assistant
Secretary, of the respective corporations, of its by-laws and with
respect to the general partners, of its Board of Directors' resolutions
(and resolutions of other bodies, if any are deemed necessary by
counsel for any Bank) authorizing the assumption of the Guarantors'
obligations under the Guaranty and any Loan Documents obligating
Guarantors and the execution of the attached Consent and Agreement of
Guarantor, all in its capacity as general partner of CHS, CHA or CHD,
as applicable.
(iii) Incumbency certificates, executed by the Secretary or
Assistant Secretary of the respective general partner of CHS, CHA or
CHD, which shall identify by name and title and bear the signature of
the officers of the such corporation authorized to sign the attached
Consent and Agreement of Guarantor, upon which certificates Agent and
Banks shall be entitled to rely until informed of any change in writing
by the applicable Guarantor.
8.3 Such resolutions or authorizations and such other documents as
Agent may require relating to the existence and good standing of Borrower and
each Guarantor, and the authority of any person executing this Agreement or
other documents on behalf of Borrower and each Guarantor.
8.4 A written opinion of Xxxxxxx X. Xxxxxxxx, general counsel to
Borrower and Guarantors, addressed to Agent and Banks in substantially the form
of Exhibit A hereto.
8.5 A written opinion of Xxxxx Xxxxxxxx, Texas counsel to Borrower and
Guarantors, addressed to Agent and Banks in substantially the form of Exhibit B
hereto.
8.6 A written opinion of Xxxxxx, Xxxxxx & Xxxxxxx, counsel to Borrower
and Guarantors, addressed to Agent and Banks in substantially the form of
Exhibit C hereto.
8.7 Articles of Dissolution and such other documents as Agent may
require relating to the dissolutions described in Section 4.3 of this Agreement.
8.8 True and correct Borrowing Base Certificates for the periods
described in Section 5.1(d) of this Agreement, together with payment of any sums
owing under Section 2.2 of the Credit Agreement as a result of any previously
submitted Borrowing Base Certificates.
8.9 Payment of all external costs and expenses incurred by Agent in
connection with this Agreement (including, without limitation, attorneys' and
processing costs, expenses, and fees).
SECTION 9. GENERAL.
-------
9.1 The Loan Documents as modified herein contain the complete
understanding and agreement of Borrower, Banks and Agent in respect of the
Credit Facility and supersede all prior
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representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Loan Documents as modified herein may be
changed, discharged, supplemented, terminated, or waived except in a writing
signed by the parties thereto.
9.2 The Loan Documents as modified herein shall be binding upon and
shall inure to the benefit of Borrower, Banks and Agent and their successors and
assigns; provided, however, Borrower may not assign any of its rights or
delegate any of its obligations under the Loan Documents and any purported
assignment or delegation shall be void.
9.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of Arizona, without giving effect to conflicts of law
principles.
9.4 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.
IN WITNESS WHEREOF, Borrower, Banks, and Agent have executed this
Agreement as of the date set forth above.
BORROWER:
CONTINENTAL HOMES HOLDING CORP., a
Delaware corporation
By: /s/ W. Xxxxxx Xxxxxxx
---------------------------------------
Name: W. Xxxxxx Xxxxxxx
Title: Chief Executive Officer, President
and Chief Operating Officer
BANKS AND AGENT:
BANK ONE, ARIZONA, NA, a national banking
association, Individually and as Agent
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Vice President
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THE FIRST NATIONAL BANK OF BOSTON
By: /s/ Xxxx Xxxxxxx
---------------------------------------
Name: Xxxx Xxxxxxx
Title: Vice President
NORWEST BANK ARIZONA, N.A., a national
banking association
By: /s/ E. Xxxxx Xxxxx
---------------------------------------
Name: E. Xxxxx Xxxxx
Title: Vice President
GUARANTY FEDERAL BANK, FSB
By: /s/ Xxxxxxx X. Xxxx
---------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Vice President
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CONSENT AND AGREEMENT OF GUARANTOR
----------------------------------
With respect to the Second Modification Agreement, dated October 9,
1997 ("Agreement"), among CONTINENTAL HOMES HOLDING CORP., a Delaware
corporation ("Borrower"), the Banks listed on the signature pages of the
Agreement, and BANK ONE, ARIZONA, NA, a national banking association, as Agent,
the undersigned (severally and collectively, "Guarantor") agree for the benefit
of Agent and Banks as follows:
1. Guarantor acknowledges (i) receiving a copy of and reading the
Agreement, (ii) the accuracy of the Recitals in the Agreement, and (iii) the
effectiveness of (A) the Guaranty dated June 27, 1996 executed by the
undersigned for the benefit of Agent and Banks, as modified pursuant to the
Consent and Agreement of Guarantors executed in connection with the First
Modification Agreement, and as modified herein (the "Guaranty"), and (B) any
other agreements, documents, or instruments securing or otherwise relating to
the Guaranty, as modified herein. The Guaranty and such other agreements,
documents, and instruments, as modified herein, are referred to individually and
collectively as the "Guarantor Documents."
2. Guarantor consents to the modification of the Loan Documents and all
other matters in the Agreement.
3. Guarantor fully, finally, and absolutely and forever releases and
discharges Agent and Banks and their present and former directors, shareholders,
officers, employees, agents, representatives, successors and assigns, and their
separate and respective heirs, personal representatives, successors and assigns,
from any and all actions, causes of action, claims, debts, damages, demands,
liabilities, obligations, and suits, of whatever kind or nature, in law or
equity that Guarantor has or in the future may have, (i) in respect of the
Credit Facility, the Loan Documents, the Guarantor Documents, or the actions or
omissions of Agent or any Bank in respect of the Credit Facility, the Loan
Documents, or the Guarantor Documents and (ii) arising from events occurring
prior to the date hereof and which are known to Guarantor.
4. Guarantor agrees that all references, if any, to the Notes, the
Credit Agreement, and any other Loan Documents in the Guarantor Documents shall
be deemed to refer to such agreements, documents, and instruments as modified by
the Agreement.
5. Guarantor reaffirms the Guarantor Documents and agrees that the
Guarantor Documents continue in full force and effect and remain unchanged,
except as specifically modified by this Consent and Agreement of Guarantors. Any
property or rights to or interests in property granted as security in the
Guarantor Documents shall remain as security for the Guaranty and the
obligations of Guarantor in the Guaranty.
6. Guarantor agrees that the Loan Documents, as modified by the
Agreement, and the Guarantor Documents, as modified by this Consent and
Agreement of Guarantors, are the legal,
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valid, and binding obligations of Borrower and the undersigned, respectively,
enforceable in accordance with their terms against Borrower and the undersigned,
respectively.
7. Guarantor agrees that Guarantor has no claims, counterclaims,
defenses, or offsets with respect to the enforcement against Guarantor of the
Guarantor Documents.
8. Guarantor represents and warrants that there has been no material
adverse change in the financial condition of any Guarantor from the most recent
financial statement received by Agent.
9. Guarantor is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Guarantor Documents as modified
herein. The execution and delivery of this Agreement and the performance of the
Guarantor Documents as modified herein have been duly authorized by all
requisite action by or on behalf of Guarantor. This Agreement has been duly
executed and delivered on behalf of Guarantor.
10. CHD, CHS and CHA each hereby assume the obligations for payment and
performance of all covenants, conditions, provisions and agreements under the
Guaranty and the Loan Documents to be performed by Guarantors, all as modified
by this Agreement. This assumption has been agreed to by and between Borrower,
the other Guarantors and CHD, CHS and CHA. CHD, CHS and CHA shall each be deemed
to be one of the Guarantors for purposes of the Credit Agreement, the Guaranty,
and the other Loan Documents. CHD, CHS and CHA each hereby covenant, promise and
agree (i) to pay the indebtedness under the Guaranty and the Loan Documents to
be paid by Guarantors at the times, in the manner and in all other respects as
therein provided or as it may be modified in writing from time to time; (ii) to
perform each and all of the covenants, conditions, provisions and agreements in
the Guaranty and the Loan Documents to be performed by Guarantors, at the time,
in the manner and in all other respects as therein provided; and (iii) to be
bound by each and every term, condition and provision of the Guaranty and the
Loan Documents as though such documents and instruments had originally been
made, executed and delivered by CHD, CHS and CHA as Guarantors.
DATED as of the date of the Agreement.
GUARANTORS:
-----------
ACHETER, INC., a Texas corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Secretary
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CH MORTGAGE COMPANY, a Colorado
corporation
By: /s/ Xxxxxxx X. Present
--------------------------------------
Name: Xxxxxxx X. Present
------------------------------------
Title: Chairman and President
------------------------------------
CHI CONSTRUCTION COMPANY, an Arizona
corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
------------------------------------
Title: Vice President
------------------------------------
CONTINENTAL HOMES, INC., a Delaware
corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
------------------------------------
Title: Vice President, General Counsel
------------------------------------
and Assistant Secretary
CONTINENTAL HOMES OF AUSTIN, L.P., a
Texas limited partnership
BY: CHTEX OF AUSTIN, INC., a Delaware
corporation, General Partner
By: /s/ Xxxxxxx X. Xxxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxxx
-----------------------------
Title: Vice President and
-----------------------------
Assistant Secretary
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CONTINENTAL HOMES OF DALLAS, L.P., a
Texas limited partnership
BY: CHTEX OF DALLAS, INC., a Delaware
corporation, General Partner
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President and Secretary
CONTINENTAL HOMES OF FLORIDA, INC., a
Florida corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title:Vice President and Secretary
CONTINENTAL HOMES OF SAN ANTONIO,
L.P., a Texas limited partnership
BY: CHTEX OF SAN ANTONIO, INC., a
Delaware corporation, General Partner
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President and
Assistant Secretary
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CONTINENTAL HOMES OF TEXAS, INC., a
Texas corporation
By: /s/ W. Xxxxxx Xxxxxxx
----------------------------------------
Name: W. Xxxxxx Xxxxxxx
Title: Vice President
CONTINENTAL RANCH, INC., a Delaware
corporation formerly known as RANCHO
XXXXXXX, INC.
By: /s/ W. Xxxxxx Xxxxxxx
----------------------------------------
Name: W. Xxxxxx Xxxxxxx
Title: Vice President
KDB HOMES, INC., a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President
L & W INVESTMENTS INC., a California
corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President
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XXXXXXX INVESTMENTS, INC., a Texas
corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President
MILTEX MANAGEMENT, INC., a Texas
corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Secretary
MILTEX MORTGAGE OF TEXAS LIMITED
PARTNERSHIP, a Texas limited partnership
BY: MILTEX MANAGEMENT, INC., a Texas
corporation, General Partner
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Secretary
R.O.S. CORPORATION, a Texas corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Secretary
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SETTLEMENT CORPORATION, a Texas
corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Secretary
XXXXXX COUNTY TITLE COMPANY, a Texas
corporation
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President
GUARANTOR
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EXHIBIT A
---------
October 9, 1997
Bank One, Arizona, NA,
in its capacity as Agent
and in its individual capacity
Western Region Real Estate
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx, Vice President
Norwest Bank Arizona, N.A.
0000 Xxxxx Xxxxxxx Xxxxxx, XX-0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxx Xxxxx, Vice President
BankBoston, N.A., formerly known as
-----------------------------------
The First National Bank of Boston
---------------------------------
000 Xxxxxxxxx Xxxxxx Xxxxx, X.X., Xxx. 0000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx, Vice President
Guaranty Federal Bank, FSB
0000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
Re: Unsecured Revolving Line of Credit in the amount of
$140,000,000.00 ("Loan") made by Bank One, Arizona, NA, a
national banking association, Norwest Bank Arizona, N.A. and
BankBoston, N.A., formerly known as The First National Bank of
Boston, and Guaranty Federal Bank, FSB (collectively, the
"Banks"), to Continental Homes Holding Corp., a Delaware
corporation ("Borrower"), and guaranteed by the guarantors
listed on Schedule "1" hereto ("Guarantors"), with Bank One,
Arizona, NA acting as agent for the Banks ("Agent"); Second
Modification Agreement dated October ___, 1997 ("Modification
Agreement)
Ladies & Gentlemen:
I am general counsel of Borrower and Guarantors. Each capitalized term
used and not otherwise defined in this letter shall have the meaning ascribed to
such term in the Modification Agreement. In addition, as used in this letter,
the phrase "consummation of the modification", means the closing of the loan
modification contemplated in the
Bank One, Arizona, NA
Norwest Bank Arizona, N.A.
The First National Bank of Boston
Guaranty Federal Bank, FSB
October 9, 1997
Page 2
Modification Agreement and the performance of the obligations to be performed by
Borrower and Guarantors prior to the closing of the loan modification but does
not include performance of obligations or compliance with terms and conditions
of the Modification Agreement after the closing of the loan modification.
For purposes of this letter, I have examined such questions of law and
fact and such documentation as I have determined to be necessary or appropriate.
Based on the foregoing and subject to the assumptions, qualifications,
and limitations set forth below, it is my opinion that:
1. Borrower has the requisite corporate power and corporate authority
to carry out the terms and conditions applicable to it under the Modification
Agreement. The execution, delivery and performance of the Modification Agreement
by Borrower has been duly authorized by all requisite corporate action on the
part of Borrower and the consent or approval of shareholders of Borrower is not
required. The Modification Agreement has been duly executed and delivered on
behalf of Borrower.
2. Each Guarantor has the requisite corporate (or partnership, as
applicable) power and corporate authority to carry out the terms and conditions
applicable to it under the Modification Agreement. The execution, delivery, and
performance of the Modification Agreement by each Guarantor has been duly
authorized by all requisite corporate or partnership action on the part of each
such Guarantor and the consent or approval of shareholders or partners, as
applicable, of such Guarantor is not required. The Modification Agreement has
been duly executed and delivered on behalf of each such Guarantor.
3. The execution and delivery of the Modification Agreement and
consummation of the modification by Borrower will not conflict with, or result
in violation of, any applicable law, ordinance, regulation or rule (federal,
state or local) affecting Borrower of which I am aware, except for such
conflicts or violations which would not be reasonably likely to result in a
Material Adverse Effect. By the foregoing opinion, I do not intend to express,
and you agree that I do not express, any opinion concerning any securities law,
regulation or rule or any law, regulation, or rule regulating the making of
secured loans by banks or non-banking subsidiaries of bank holding companies.
Bank One, Arizona, NA
Norwest Bank Arizona, N.A.
The First National Bank of Boston
Guaranty Federal Bank, FSB
October 9, 1997
Page 3
4. The execution and delivery of the Modification Agreement and
consummation of the modification by each Guarantor will not conflict with, or
result in a violation of, any applicable law, ordinance, regulation or rule
(federal, state or local) affecting any Guarantor of which I am aware, except
for such conflicts or violations which would not be reasonably likely to result
in a Material Adverse Effect. By the foregoing opinion, I do not intend to
express, and you agree that I do not express, any opinion concerning any
securities law, regulation, or rule or any law, regulation or rule regulating
the making of secured loans by banks or non-banking subsidiaries of bank holding
companies.
5. No consent, approval, authorization, or other action by, or filing
with, any federal, state, or local governmental authority is required in
connection with the execution and delivery by Borrower of the Modification
Agreement and the consummation of the modification, other than those which have
been obtained prior to the consummation of the modification.
6. No consent, approval, authorization, or other action by, or filing
with, any federal, state, or local governmental authority is required in
connection with the execution and delivery by any Guarantor of the Modification
Agreement and the consummation of the modification, other than those which have
been obtained prior to the consummation of the modification.
7. The execution and delivery of the Modification Agreement and
consummation of the modification by Borrower will not conflict with or result in
a violation of the Articles of Incorporation and Bylaws of Borrower.
8. The execution and delivery of the Modification Agreement and
consummation of the modification by each Guarantor will not conflict with or
result in a violation of the Articles of Incorporation and Bylaws or the
Partnership Agreement, as applicable, of any such Guarantor.
9. The Modification Agreement constitute legal, valid, and binding
obligations of Borrower, enforceable in accordance with their terms against
Borrower.
10. The Modification Agreement constitutes legal, valid, and binding
obligations of each Guarantor, enforceable in accordance with their terms
against each Guarantor.
Bank One, Arizona, NA
Norwest Bank Arizona, N.A.
The First National Bank of Boston
Guaranty Federal Bank, FSB
October 9, 1997
Page 4
11. The execution and delivery of the Modification Agreement and
consummation of the modification by Borrower will not conflict with, or result
in a violation of, any judgments, orders, or decrees of any arbitrator, other
private adjudicator, court, or governmental authority (federal, state, or local)
to which Borrower is a party or by which Borrower or the property of Borrower is
bound, except for such conflicts or violations which, in the aggregate, would
not be reasonably likely to result in a Material Adverse Effect.
12. The execution and delivery of the Modification Agreement by each
Guarantor and consummation of the modification by each Guarantor will not
conflict with, or result in a violation of, any judgments, orders, or decrees of
any arbitrator, other private adjudicator, court, or governmental authority
(federal, state, or local) to which any such Guarantor is a party or by which
such Guarantor or the property of such Guarantor is bound, except for such
conflicts or violations which, in the aggregate, would not be reasonably likely
to result in a Material Adverse Effect.
13. The execution and delivery of the Modification Agreement and
consummation of the modification by Borrower will not conflict with, or result
in a violation of, any contract, or any other agreement to which Borrower is
currently a party or by which it is currently bound (except for the Indenture,
the Old Indenture and the Convertible Notes Indenture as to which I express no
opinion).
14. The execution and delivery of the Modification Agreement and
consummation of the modification by each Guarantor will not conflict with, or
result in a violation of, any contract, or any other agreement to which such
Guarantor is currently a party or by which it is currently bound (except for the
Indenture, the Old Indenture and the Convertible Notes Indenture as to which I
express no opinion).
15. I have no actual knowledge of any pending or overtly threatened
litigation or other proceeding before any arbitrator, other private adjudicator,
court, or governmental agency (federal, state or local) against Borrower which,
in the aggregate, would be reasonably likely to result in a Material Adverse
Effect .
16. I have no actual knowledge of any pending or overtly threatened
litigation or other proceeding before any arbitrator, other private adjudicator,
court, or governmental agency (federal, state or local) against any Guarantor
which, in the aggregate, would be reasonably likely to result in a Material
Adverse Effect.
Bank One, Arizona, NA
Norwest Bank Arizona, N.A.
The First National Bank of Boston
Guaranty Federal Bank, FSB
October 9, 1997
Page 5
17. CHI Finance Corporation, an Arizona corporation, was dissolved in
accordance with applicable law upon filing of Articles of Dissolution with the
Arizona Corporation Commission on May 2, 1997.
18. The formation and capitalization of new entities, as described in
Section 4.1 of the Modification Agreement; (i) did not conflict with, or result
in a violation of, any judgments, orders, or decrees of any arbitrator, other
private adjudicator, court, or governmental authority (federal, state, or local)
to which Borrower or any Guarantor is a party or any of their respective
properties is bound, and (ii) did not conflict with, or result in a violation
of, any contract, or any other agreement to which Borrower or any Guarantor is
currently a party or by which it is currently bound, except for such conflicts
or violations, if any, as have been corrected or consented to by the Banks in
the Modification Agreement and except for the Indenture, the Old Indenture and
the Convertible Notes Indenture as to which I express no opinion.
19. The transfer of assets described in Section 4.2 of the Modification
Agreement: (i) did not conflict with, or result in a violation of, any
judgments, orders, or decrees of any arbitrator, other private adjudicator,
court, or governmental authority (federal, state, or local) to which Borrower or
any Guarantor is a party or by which Borrower or any Guarantor or any of their
respective properties is bound, and (ii) did not conflict with, or result in a
violation of, any contract, or any other agreement to which Borrower or any
Guarantor is currently a party or by which it is currently bound, except for
such conflicts or violations, if any, as have been corrected or consented to by
the Banks in the Modification Agreement and except for the Indenture, the Old
Indenture and the Convertible Notes Indenture as to which I express no opinion.
20. The dissolution of CHI Finance Corporation, an Arizona corporation
(i) did not conflict with, or result in a violation of, any judgments, orders,
or decrees of any arbitrator, other private adjudicator, court, or governmental
authority (federal, state, or local) to which Borrower or any Guarantor is a
party or by which Borrower or any Guarantor or any of their respective
properties is bound, and (ii) did not conflict with, or result in a violation
of, any contract, or any other agreement to which Borrower or any Guarantor is
currently a party or by which it is currently bound (except for the Indenture,
the Old Indenture and the Convertible Notes Indenture as to which I express no
opinion), and the dissolution of the remaining entities described in Section 4.3
of the Modification Agreement; (i) will not conflict with, or result in a
violation of, any judgments, orders, or decrees of any arbitrator, other private
adjudicator, court, or governmental authority (federal, state, or local)
Bank One, Arizona, NA
Norwest Bank Arizona, N.A.
The First National Bank of Boston
Guaranty Federal Bank, FSB
October 9, 1997
Page 6
to which Borrower or any Guarantor is a party or by which Borrower or any
Guarantor or any of their respective properties is bound, and (ii) will not
conflict with, or result in a violation of, any contract, or any other agreement
to which Borrower or any Guarantor is currently a party or by which it is
currently bound (except for the Indenture, the Old Indenture and the Convertible
Notes Indenture as to which I express no opinion).
21. Borrower's non-compliance with the terms of the Credit Agreement,
as identified and described in Section 5.1 of the Modification Agreement: (i)
did not conflict with, or result in a violation of, any judgments, orders, or
decrees of any arbitrator, other private adjudicator, court, or governmental
authority (federal, state or local) to which Borrower or any Guarantor is a
party or by which Borrower or any Guarantor or any of their respective
properties is bound, and (ii) did not conflict with, or result in a violation
of, any contract, or any other agreement to which Borrower or any Guarantor is
currently a party or by which it is currently bound (except for the Indenture,
the Old Indenture and the Convertible Notes Indenture as to which I express no
opinion).
In rendering the foregoing opinions I have assumed with your
permission and without investigation:
(i) The genuineness of the signatures not witnessed, the
authenticity of documents submitted as originals, and the conformity to
originals of documents submitted as copies;
(ii) The legal capacity of all natural persons executing the
Modification Agreement;
(iii) The Modification Agreement accurately describes and
contains your understanding, and there are no oral or written
statements or agreements by you, that modify, amend, or vary, or
purport to modify, amend, or vary, any of the terms of the Modification
Agreement;
(iv) Borrower owns all property, interests in property, and
rights purported to be owned by it;
(v) Each Bank is a national banking association or a federal
savings bank validly existing under the law of the United States of
America;
Bank One, Arizona, NA
Norwest Bank Arizona, N.A.
The First National Bank of Boston
Guaranty Federal Bank, FSB
October 9, 1997
Page 7
(vi) Agent and each Bank have the requisite corporate power
and corporate authority to carry out the terms and conditions
applicable to them under the Modification Agreement;
(vii) The execution, delivery and performance of the
Modification Agreement by Agent and each Bank have been duly authorized
by all requisite corporate action on their part; and
(viii) The Modification Agreement is the legal, valid and
binding obligation of Banks and Agent and is enforceable in accordance
with its terms against Banks and Agent.
The opinions set forth above are subject to the following
qualifications and limitations:
(a) The validity and enforceability of the Modification
Agreement may be subject to, or limited by, (i) any applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium, or
fraudulent transfer laws (including without limitation, Section 548 of
the Federal Bankruptcy Code) or any other laws or judicial decisions
affecting creditors' rights and remedies generally; (ii) general
principles of equity; (iii) forfeiture or similar laws (including court
decisions) of the State of Arizona or of the United States; and (iv)
the rights and remedies of the Pension Benefits Guaranty Corporation
under the Employee Retirement Income Security Act of 1974, or of the
United States under the Federal Tax Lien Act of 1966.
(b) The enforceability of the Modification Agreement is
further subject to the qualification that certain waivers, procedures,
remedies and other provisions of the Modification Agreement may be
unenforceable under, or limited by, the law of the State of Arizona.
However, such limitations do not, in my opinion, interfere (i) with
practical enforcement by you of the obligation of Borrower under the
Modification Agreement to pay to you the principal amount of the Loan
and interest thereon as provided in the Notes, or (ii) with practical
enforcement by you of the obligation of each Guarantor under the
Guaranty to pay to you the unpaid principal amount of the Loan and
interest thereon as provided in the Notes upon failure by Borrower to
pay such principal amount and interest when due, except (A) with
respect to (i) and (ii) for the economic consequences of any procedural
delays that may result from such limitations, and (B) with respect to
(ii), on the basis of events, actions, or circumstances that may occur
or arise after consummation of the Loan, the law of guaranty and
suretyship may prevent the enforcement of the Guaranty.
Bank One, Arizona, NA
Norwest Bank Arizona, N.A.
The First National Bank of Boston
Guaranty Federal Bank, FSB
October 9, 1997
Page 8
(c) I express no opinion with respect to your ability to
enforce the Modification Agreement against Borrower or any Guarantor if
the Loan fails to comply with any statutory, regulatory or other loan
limits applicable to you, or if the Loan fails to comply with any other
state or federal law (including court decisions), rule or regulation
which prescribes permissible and lawful investments for you (either as
to type, amount, percentage of total investments, or otherwise).
I am qualified to practice law in the State of Arizona. The opinions
expressed in this letter are based upon the presently effective laws of the
State of Arizona only, and I assume no obligation to revise or supplement this
opinion should such law be changed by legislative action, judicial decision, or
otherwise. I express no opinion with respect to the laws of any other
jurisdiction. The opinions expressed herein are limited to the matters stated
herein and no opinion is implied or may be inferred beyond the matters expressly
stated.
This opinion is rendered solely to you and solely in connection with
the Loan and may not be relied upon by you or by any other person for any other
purpose, provided, however, that this opinion may be relied upon by any person
to which all or a part of the Loan, or a participation therein, may be
transferred, provided that such reliance is only in connection with the Loan and
that this opinion remains effective only as of the date hereof and will not be
considered to be effective or restated as of any other date. This opinion is not
to be referred to, or quoted, in any document, report, or financial statement or
filed with, or delivered to, any governmental agency or other person or entity
without my prior written consent, provided, however, this opinion may be
delivered to your auditors, governmental regulators, transferees and
participants of any person entitled to rely on this opinion.
Very truly yours,
/s/Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
SCHEDULE 1
----------
("Guarantors")
Acheter, Inc.
CH Mortgage Company
CHI Construction Company
Continental Homes, Inc.
Continental Homes of Austin, L.P.
Continental Homes of Dallas, L.P.
Continental Homes of Florida, Inc.
Continental Homes of San Antonio, L.P.
Continental Homes of Texas, Inc.
Continental Ranch, Inc. (formerly known as Rancho Xxxxxxxx, Inc.)
KDB Homes, Inc.
L & W Investments Inc.
Xxxxxxx Investments, Inc.
Miltex Management, Inc.
Miltex Mortgage of Texas Limited Partnership
R.O.S. Corporation
Settlement Corporation
Xxxxxx County Title Company
EXHIBIT A
SCHEDULE 2
----------
List of Modification Agreement
1. First Modification Agreement, dated October ____, 1997, between
Borrower, Banks and Agent, with Consent and Agreement of Guarantors,
dated October ____, 1997, by Guarantors for the benefit of Banks and
Agent ("Modification Agreement").
2. Promissory Note, dated October ____, 1997, in the principal amount of
$30,000,000 executed by Borrower payable to Guaranty Federal Bank, FSB.
3. Letter Agreement dated October ____, 1997 between Borrower and Bank
One, Arizona, NA.
(The Modification Agreement identified above are hereinafter
collectively referred to as the "Modification Agreement".)
A-10
EXHIBIT B
---------
Xxxxxxx
Welcome Home
October 9, 1997
Bank One, Arizona, NA,
in its capacity as Agent
and in its individual capacity
Western Region Real Estate
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Vice President
Norwest Bank Arizona, N.A.
0000 Xxxxx Xxxxxxx Xxxxxx, XX-0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxx Xxxxx, Vice President
BankBoston, N.A.
000 Xxxxxxxxx Xxxxxx Xxxxx, X.X., Xxx. 0000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx, Vice President
Guaranty Federal Bank, FSB
0000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
RE: Unsecured Revolving Line of Credit in the amount of
$140,000,000.00 ("Loan") made by Bank One, Arizona, NA, a
national banking association, Norwest Bank Arizona, NA, N.A.
and BankBoston, N.A., formerly known as The First National
Bank of Boston, and Guaranty Federal Bank, FSB (collectively,
the "Banks"), to Continental Homes Holding Corp., a Delaware
corporation ("Borrower"), and guaranteed by the guarantors
listed on Schedule "1" hereto ("Guarantors"), with Bank One,
Arizona, NA acting as agent for the Banks ("Agent"); Second
Modification Agreement dated October 9, 1997 ("Modification
Agreement")
Ladies & Gentlemen:
I am general counsel of certain Guarantors. Each capitalized term used
and not otherwise defined in this letter shall have the meaning ascribed to such
term in the Modification Agreement. In addition, as used in this letter, the
phrase "consummation of the modification", means the closing of the loan
modification contemplated in the Modification Agreement and the performance of
the obligations to be performed by Borrower and Guarantors prior to the closing
of the loan modification but does not include performance of obligations or
compliance with terms and conditions of the Modification Agreement after the
closing of the loan modification.
B-1
EXHIBIT B
Bank One, Arizona, NA
Norwest Bank Arizona, N.A.
BankBoston, N.A.
Guaranty Federal Bank, FSB
October 9, 1997
Page 2
For purposes of this letter, I have examined such questions of law and
fact and such documentation as I have determined to be necessary or appropriate.
Based on the foregoing and subject to the assumptions, qualifications,
and limitations set forth below, it is my opinion that:
1. Continental Homes of Austin, L.P. ("CHA"), Continental Homes of
Dallas, L.P. ("CHD") and Continental Homes of San Antonio, L.P. ("CHS") are each
a limited partnership duly organized, validly existing, and in good standing
under the laws of the State of Texas.
2. Each of CHA, CHD and CHS has the requisite power and authority (I)
to own and operate its properties and assets, and (ii) to carry out its business
as such business is currently being conducted.
3. CHTEX of Austin, Inc., CHTEX of Dallas, Inc. and CHTEX of San
Antonio, Inc. are each a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware and each has the requisite
corporate power and corporate authority (I) to own and operate its properties
and assets, and (ii) to carry out its business as such business is currently
being conducted.
4. All actions necessary to dissolve R.O.S. Corporation, a Texas
corporation, have been taken except the filing of the Articles of Dissolution
thereof with the Texas Secretary of State. Upon such filing, R.O.S. Corporation
will be dissolved in accordance with applicable law.
5. All actions necessary to dissolve Acheter, Inc., a Texas
corporation, have been taken except the filing of the Articles of Dissolution
thereof with the Texas Secretary of State. Upon such filing, Acheter, Inc. will
be dissolved in accordance with applicable law.
6. All actions necessary to dissolve Xxxxxxx Investments, Inc., a Texas
corporation, have been taken except the filing of the Articles of Dissolution
thereof with the Texas Secretary of State. Upon such filing, Xxxxxxx
Investments, Inc. will be dissolved in accordance with applicable law.
7. All actions necessary to dissolve Continental Homes of Texas, Inc. a
Texas corporation, have been taken except the filing of the Articles of
Dissolution thereof with the Texas Secretary of State. Upon such filing,
Continental Homes of Texas, Inc. will be dissolved in accordance with applicable
law.
8. All actions necessary to dissolve Miltex Management, Inc., a Texas
corporation, have been taken except the filing of the Articles of Dissolution
thereof with the Texas Secretary of State. Upon such filing, Miltex Management,
Inc. will be dissolved in accordance with applicable law.
9. All actions necessary to dissolve Miltex Mortgage of Texas Limited
Partnerships, a Texas limited partnership, have been taken except the filing of
the Certificate of Cancellation thereof with the Texas Secretary of State. Upon
such filing, Miltex Mortgage of Texas Limited Partnership will be dissolved in
accordance with applicable law.
B-2
EXHIBIT B
Bank One, Arizona, NA
Norwest Bank Arizona, N.A.
BankBoston, N.A.
Guaranty Federal Bank, FSB
October 9, 1997
Page 3
In rendering the foregoing opinions I have assumed with your permission
and without investigation:
(i) The genuineness of the signatures not witnessed, the
authenticity of documents submitted as originals, and the conformity to
originals of documents submitted as copies;
(ii) The legal capacity of all natural persons executing the
documents.
I am qualified to practice law in the State of Texas. The opinions
expressed in this letter are based upon the presently effective laws of the
State of Texas only and, for purposes of this opinion, in Paragraph 3 on Page 2,
the laws of the State of Delaware, and I assume no obligation to revise or
supplement this opinion should such law be changed by legislative action,
judicial decision, or otherwise. I express no opinion with respect to the laws
of any other jurisdiction. The opinions expressed herein are limited to the
matters stated herein and no opinion is implied or may be inferred beyond the
matters expressly stated.
This opinion is rendered solely to you and solely in connection with
the Loan and may not be relied upon by you or by any other person for any other
purpose, provided, however, that this opinion may be relied upon by any person
to which all or a part of the Loan, or a participation therein, may be
transferred, provided that such reliance is only in connection with the Loan and
that this opinion remains effective only as of the date hereof and will not be
considered to be effective or restated as of any other date. This opinion is not
to be referred to, or quoted, in any document, report, or financial statement or
filed with, or delivered to, any governmental agency or other person or entity
without my prior written consent, provided, however, this opinion may be
delivered to your auditors, governmental regulators, transferees and
participants of nay person entitled to rely on this opinion.
Very truly yours,
/s/Xxxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxxx
B-3
EXHIBIT B
Bank One, Arizona, NA
Norwest Bank Arizona, N.A.
BankBoston, N.A.
Guaranty Federal Bank, FSB
October 9, 1997
Page 4
SCHEDULE 1
----------
("Guarantors")
Acheter, Inc.
CH Mortgage Company
CHI Construction Company
Continental Homes, Inc.
Continental Homes of Austin, L.P.
Continental Homes of Dallas, L.P.
Continental Homes of Florida, Inc.
Continental Homes of San Antonio, L.P.
Continental Homes of Texas, Inc.
Continental Ranch, Inc. (formerly known as Rancho Xxxxxxxx, Inc.)
KDB Homes, Inc.
L & W Investments Inc.
Xxxxxxx Investments, Inc.
Miltex Management, Inc.
Miltex Mortgage of Texas Limited Partnership
R.O.S. Corporation
Settlement Corporation
Xxxxxx County Title Company
B-4
EXHIBIT C
---------
XXXXXX XXXXXX & XXXXXXX
EIGHTY PINE STREET
NEW YORK, N.Y. 10005-1702
October 9, 1997
RE: Unsecured Revolving Line of Credit in the amount of
$140,000,000.00 (`Loan") made by Bank One, Arizona, NA, a
national banking association, Norwest Bank Arizona, N.A.,
BankBoston, N.A., a national banking association formerly known
as The First National Bank of Boston, and Guaranty Federal Bank,
FSB (collectively, the "Banks"), to Continental Homes Holding
Corp., a Delaware corporation ("Borrower"), and guaranteed by the
guarantors listed on Schedule 1 hereto ("Guarantors"), with Bank
One, Arizona, NA acting as agent for the Banks ("Agent"); Second
Modification Agreement dated October 9, 1997 ("Modification
Agreement")
Ladies & Gentlemen:
We have acted as special counsel to the Borrower and the Guarantors in
connection with the Loan Modification for purposes of rendering this opinion.
You have requested our opinion on certain matters pursuant to Section 8.6 of the
Modification Agreement. Each capitalized term used and not otherwise defined in
this letter shall have the meaning ascribed to such term in the Modification
Agreement or the Credit Agreement.
XXXXXX XXXXXX & XXXXXXX
-2-
We have examined the originals, photocopies or conformed copies of all
such records of the borrower and the guarantors and all such agreements,
certificates of public officials, certificates of officers and representatives
of the Borrower and the Guarantors and such other documents as we have deemed
relevant and necessary as a basis for the opinions hereinafter expressed. In
such examinations, we have assumed the genuineness of all signature on original
documents and the conformity to the originals of all copies submitted to us as
conformed or photocopies. Based on the foregoing, it is our opinion that:
1. The execution and delivery of the Modification Agreement by the
Borrower and each Guarantor will not conflict with, or result in a violation of,
the Indenture, or the Convertible Notes Indenture.
2. With respect to the Indenture:
(a) The execution and delivery of the Modification Agreement by the
Borrower and each Guarantor will not constitute a "Default" or "Event of
Default", as said terms are defined in the Indenture; provided that any
debt incurred under the amended Credit Agreement in excess of $10,000,000
may only be incurred when the Borrower's Coverage Ratio (as defined in the
Indenture) is not less than 2.0 to 1.0.
(b) The formation and capitalization of new entities, at described in
Section 4.1 of the Modification Agreement, did not conflict with, or result
in a violation of the Indenture.
(c) The transfer of assets described in Section 4.2 of the
Modification Agreement did not conflict with the Indenture and did not
constitute a "Default" or an "Event of Default", as said terms are defined
in the Indenture.
(d) The dissolution of CH Finance Corp., an Arizona corporation, did
not, and the dissolution of the remaining entities described in Section 4.3
of the Modification Agreement, will not, conflict with the Indenture and
did not and will not constitute a "Default" or an "Event of Default", as
said terms are defined in the Indenture.
(e) Borrower's non-compliance with the terms of the Credit Agreement,
as identified and described in Section 5.1 of the Modification Agreement
did not conflict with, or cause a default or an Event of Default under, the
Indenture.
3. With respect to the Convertible Notes Indenture:
XXXXXX XXXXXX & XXXXXXX
-3-
(a) The execution and delivery of the Modification Agreement by the
Borrower and each Guarantor will not constitute a "Default" or "Event of
Default", as said terms are defined in the Convertible Notes Indenture.
(b) The formation and capitalization of new entities, as described in
Section 4.1 of the Modification Agreement, did not conflict with, or result
in a violation of the Convertible Notes Indenture.
(c) The transfer of assets described in Section 4.2 of the
Modification Agreement did not conflict with the Convertible Notes
Indenture and did not constitute a "Default" or and "Event of Default", as
said terms are defined in the Convertible Notes Indenture.
(d) The dissolution of CH Finance Corp., an Arizona corporation, did
not, and the dissolution of the remaining entities described in Section 4.3
of the Modification Agreement, will not, conflict with the Convertible
Notes Indenture and did not and will not constitute a "Default" or an
"Event of Default", as said terms are defined in the Convertible Notes
Indenture.
(e) Borrower's non-compliance with the terms of the Credit Agreement,
as identified and described in Section 5.1 of the Modification Agreement
did not conflict with, or cause a Default or and Event of Default under,
the Convertible Notes Indenture.
We are members of the bar of the State of New York and do not purport
to be experts in, or to express any opinion concerning, the laws of any
jurisdiction other than the law of the State of New York, the General
Corporation law of the State of Delaware ant the federal law of the United
States.
This opinion is being furnished solely to you and may not be
distributed or relied upon by any other person without our prior written
consent, provided, however, that this opinion may be relied upon by any person
to which all or a part of the Loan, or a participation therein, may be
transferred, provided that such reliance is only in connection with the Loan and
that this opinion remains effective only as of the date hereof and will not be
considered to be effective or restated as of any other date. This opinion is not
to be referred to, or quoted, in any document, report, or financial statement or
filed with, or delivered to, any governmental agency or other person or entity
without our prior written consent, provided, however, that this opinion may be
delivered to your auditors, government regulators,
XXXXXX XXXXXX & XXXXXXX
-4-
transferees and participants of any person entitled to rely on this opinion.
/s/ Xxxxxx Xxxxxx & Xxxxxxx
XXXXXX XXXXXX & XXXXXXX
Bank One, Arizona, NA,
in its capacity as Agent
and in its individual capacity
Western Region Real Estate
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxx, Vice President
Norwest Bank Arizona, N.A.
0000 Xxxxx Xxxxxxx Xxxxxx, XX-0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxx Xxxxx, Vice President
BankBoston, N.A.
115 perimeter Center Place, N.E., Ste. 1500
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx, Vice President
Guaranty Federal Bank, FSB
0000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
SCHEDULE I
----------
("Guarantors")
Acheter, Inc.
CH Mortgage Company
CHI Construction Company
Continental Homes, Inc.
Continental Homes of Austin, L.P.
Continental Homes of Dallas, L.P.
Continental Homes of Florida, Inc.
Continental Homes of San Antonio, L.P.
Continental Homes of Texas, Inc.
Continental Ranch, Inc. (formerly known as Rancho Xxxxxxxx, Inc.)
KDB Homes, Inc.
L & W Investments Inc.
Xxxxxxx Investments, Inc.
Miltex Management, Inc.
Miltex Mortgage of Texas Limited Partnership
R.O.S. Corporation
Settlement Corporation
Xxxxxx County Title Company
EXHIBIT "J"
COMPLIANCE CERTIFICATE
TO: THE BANK PARTIES TO THE CREDIT AGREEMENT DESCRIBED BELOW
SCHEDULE OF COMPLIANCE AS OF _______________
This Compliance Certificate is furnished pursuant to that certain
Credit Agreement dated as of June 27, 1996 (as amended, modified, renewed or
extended from time to time, the "Agreement") among CONTINENTAL HOMES HOLDING
CORP., a Delaware corporation and the Banks party thereto and BANK ONE, ARIZONA,
NA, as Agent for the Banks. Unless otherwise defined herein, capitalized terms
used in this Compliance Certificate have the meanings ascribed thereto in the
Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
I. I am the duly elected officer of Borrower, as indicated;
1. I have reviewed the terms of the Agreement and I have made,
or have caused to be made under our supervision, a detailed review of the
transactions and conditions of Borrower and its Subsidiaries during the
accounting period covered by the attached financial statements;
2. The examinations described in paragraph 2 did not disclose,
and I have no knowledge of, the existence of any condition or event which
constitutes an Event of Default or Unmatured Event of Default during or at the
end of the accounting period covered by the attached financial statements or as
of the date of this Certificate, except as set forth below; and
3. Schedules I and II attached hereto sets forth financial
data and computations evidencing compliance with the Financial Covenant Tests
and certain covenants in Article VIII of the Agreement, respectively, all of
which data and computations are true, complete and correct in all material
respects.
Described below are the exceptions, if any, to paragraph 3 by
listing, in detail, the nature of the condition or event, the period during
which it has existed and the action which Borrower has taken, is taking, or
proposes to take with respect to each such condition or event:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
The foregoing certifications, together with the computations
set forth in Schedule I and Schedule II hereto and the financial statements
delivered with this Certificate in support hereof, are made and delivered this
_____ day of ___________________, 19___.
CONTINENTAL HOMES HOLDING CORP., a
Delaware corporation
By:_____________________________________
Name:___________________________________
Title:__________________________________
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[SAMPLE]
SCHEDULE I TO COMPLIANCE CERTIFICATE
Schedule of Compliance as of _______________________________
with the Financial Covenant Tests set forth in Article IX of the Agreement.
1. Consolidated Tangible Net Worth Test (Section 9.1)
Consolidated Tangible Net Worth:
Capital Accounts $__________
Less Intangible Assets $__________
Less Net loans and advances to directors,
officers and employees (excluding mortgage
loans) $__________
Equals Consolidated Tangible Net Worth $__________
Minimum Consolidated Tangible Net Worth required:
$96,000,000 $96,000,000
Plus 50% of Consolidated Net Income
earned after March 1, 1996 $__________
Plus 100% of net proceeds of capital
stock issued after March 1, 1996 $__________
Equals Minimum Consolidated Tangible
Net Worth required $________
Actual Minimum Consolidated Tangible
Net Worth per above calculation $________
Surplus (or deficit) Minimum Consolidated
Tangible Net Worth $________
or
($________)
2. Leverage Test (Section 9.2(a))
Consolidated Indebtedness:
Total Indebtedness $________
Less Indebtedness of
non-homebuilding Subsidiaries $________
Less Indebtedness under Convertible
Notes maturing after Facility Termination Date $________
Less other Public Indebtedness
constituting similar convertible
subordinated notes maturing after
Facility Termination Date $________
Equals Consolidated Indebtedness $________
Adjusted Consolidated Tangible
Net Worth:
Consolidated Tangible Net Worth $________
Plus Indebtedness under Convertible
Notes maturing after Facility Termination Date $________
Plus other Public Indebtedness
constituting similar convertible
subordinated notes maturing after
Facility Termination Date $________
Less Net Worth of mortgage lending and
title insurance Subsidiaries:
GAAP Net Worth $________
less advances paid and
outstanding from Subsidiary
to Borrower $________
Equals Net Worth $________
Equals Adjusted Consolidated Tangible
Net Worth $________
Times Applicable Leverage Multiplier _________
Equals Maximum Consolidated Indebtedness
Permitted $________
Actual Consolidated Indebtedness per
calculation above $________
-2-
Excess (or deficit) Consolidated Indebtedness $________
or
($________)
3. Interest Coverage Test (Section 9.2(b))
EBITDA:
Consolidated Net Income $________
Plus Consolidated Interest Expense:
Total Interest Expense (per $________
definition)
less interest expense
for mortgage lending and
title insurance Subsidiaries $________
Equals Consolidated Interest
Expense $________
Plus taxes $________
Plus depreciation expense $________
Plus amortization expense $________
Plus other non-cash charges $________
Plus extraordinary losses $________
Less extraordinary gains $________
Equals EBITDA $________
Consolidated Interest Incurred:
Interest expense $________
Plus capitalized interest $________
Plus other items per definition
(if applicable) $________
-3-
Less interest expense for mortgage
lending and title insurance
Subsidiaries $________
Equals Consolidated Interest Incurred $________
Ratio of EBITDA to Consolidated
Interest Incurred: _____________
Minimum Ratio Required: 2.0 to 1
4. Spec Unit Inventory (Section 9.3)
a) Total Spec Units Owned by Guarantors ________
b) Plus Total Model Units Owned by Guarantors ________
c) Total Spec and Model Units ________
d) Total Housing Unit Closing
during preceding 12 months _________
Times 50% ________
e) Total Housing Closings during
preceding 6 months _________
Times 110% ________
f) Amount in (c) less the greater
of amount in (d) or (e) ________
or
(________)
g) Total Spec Units where certificate
of occupancy was issued more than
6 months ago (should be zero) ________
5. Land Owned (Section 9.4)
Book value of Finished Lots $________
-4-
Plus book value of Land
under development $________
Plus book value of vacant land $________
Equals total book values $________
Consolidated Tangible Net Worth $________
Plus Indebtedness under Convertible
Notes maturing after Facility
Termination Date $________
Plus other Public Indebtedness
constituting similar convertible
subordinated notes maturing
after Facility Termination Date $________
Equals total net worth/equity $________
Times 150% $________
Excess (or deficit) of total
book values $________
or
($________)
-5-
[SAMPLE]
SCHEDULE II TO COMPLIANCE CERTIFICATE
Schedule of Compliance as of _______________ with certain covenants set
forth in Article VIII of the Agreement.
Section 8.2
Indebtedness
------------
(iii) Warehouse Facility Debt [$30 mil. max.] $_________________
(viii) Letters of Credit [$20 mil. max.] $_________________
(ix) Non-Recourse Debt [$25 mil. max.] $_________________
(xii) Other Debt [$35 mil. max.] $_________________
Section 8.3
Merger
------
(v)(b) Net Worth in last 24 months of Non-Related Business $_________________
[$10 mil. max. net worth in 24 months]
Section 8.5
Investments and Acquisitions
----------------------------
(iv) Investments in Mortgage Lending and Title Insurance $_________________
Subsidiaries [$15 mil. max.]
(v) Future Investments in Surprise Entities [$15 mil. max.] $_________________
(vi) Investments in Joint Ventures [$15 mil. max.] $_________________
(vii) Investments in Subsidiaries in a Non-Related Business $_________________
[$10 mil. max.]
(xiv) Other Investments [$5 mil. max.] $_________________
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Section 8.6
Liens
-----
(iv) Liens in ordinary course of business [$25 mil. max.] $_________________
Section 8.7
Redemption
----------
(ii) Aggregate Redemption for consideration other than $__________________________
CHHC stock after 6/27/96 [$5 mil. max.]
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