AMENDED AND RESTATED
UDC MASTER REVOLVING LINE OF CREDIT
LOAN AGREEMENT
(BORROWING BASE)
By and Between
UDC HOMES, INC.
("Borrower")
BANK ONE, ARIZONA, NA
("Agent")
GUARANTY FEDERAL BANK, F.S.B.
("Co-Agent")
And
BANK ONE, ARIZONA, ▇▇
▇▇▇▇▇ FARGO BANK, NATIONAL ASSOCIATION
GUARANTY FEDERAL BANK, F.S.B.
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
And
NORWEST BANK ARIZONA, NATIONAL ASSOCIATION
("Banks")
Dated: April 30, 1997
TABLE OF CONTENTS
Page
----
RECITALS .............................................................................................1
AGREEMENT.............................................................................................2
ARTICLE 1 DEFINITIONS.........................................................................2
1.1 Definitions.........................................................................2
ARTICLE 2 LOAN FACILITY......................................................................26
2.1 Loan Facility......................................................................26
(a) Commitment to Make Advances and Issue Letters of Credit...................26
(b) Revolving Nature of Loan Facility.........................................26
(c) Extension of Conversion Date..............................................26
(d) Term Out..................................................................26
2.2 Advances...........................................................................27
(a) Method for Advances.......................................................27
(b) Use of Advances...........................................................27
(c) Funding of Advances and Protective Advances and Settlement of Payments....28
(d) Borrower Equity Requirements..............................................28
2.3 Interest Rate Provisions...........................................................28
(a) Pricing Matrix............................................................28
(b) Application of Tests......................................................28
(c) Pricing...................................................................29
(d) Default Interest Rate.....................................................29
(e) Method of Selecting Types and Interest Periods for Advances
of the Revolving Loan.....................................................30
(f) Conversion of Variable Rate Advances; Expiration of Interest Period.......30
(g) Maintenance of Funds......................................................31
(h) Increased Costs; Capital Adequacy; Taxes..................................31
(i) Illegality................................................................32
(j) Effective Rate............................................................33
2.4 Payments...........................................................................33
(a) Required Payments.........................................................33
(b) Making Payments...........................................................33
(c) Payment of Net Sales Proceeds.............................................33
(d) Application of Payments...................................................34
(e) Business Days.............................................................34
(f) Late Charges..............................................................34
(g) Payment at Maturity.......................................................34
2.5 Prepayments........................................................................34
(a) Prepayments; Breakage.....................................................34
(b) Fee.......................................................................35
2.6 Fees...............................................................................35
(a) Commitment Fee............................................................36
(b) Unused Commitment Fee.....................................................36
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(c) Letter of Credit Fees.....................................................37
(d) Syndication Fees, Administrative Fees and Letter of Credit Issuance Fees..37
(e) Costs and Expenses........................................................37
(i) Costs and Expenses--Generally....................................37
(ii) Costs and Expenses--After Default................................38
(f) Failure to Pay............................................................38
2.7 Security...........................................................................39
2.8 Releases of Collateral.............................................................39
(a) Releases of Units and A&D Projects........................................39
(i) Generally........................................................39
(A) Notification to the Agent................................39
(B) Remargining Payments Required............................39
(C) No Default...............................................39
(D) Endorsements.............................................39
(E) Processing/Release Fees..................................39
(F) Escrow Arrangements......................................39
(ii) Releases of Units................................................40
(A) Releases in the Ordinary Course of Business..............40
(B) Payment of Release Price.................................40
(C) Restrictions on Release of Model Units...................40
(iii) Releases of Finished Lots........................................40
(A) Releases for Bulk Sale...................................40
(B) Payment of Release Price.................................40
(iv) Releases of Model Units for Sale and Leaseback Transactions......40
(A) Releases for Sale and Leaseback Transactions.............40
(B) Deed of Trust and Title Policy...........................41
(C) Payment of Release Price.................................41
(D) Compliance with Model Unit Requirements..................41
(v) Releases of Land Projects or Development Projects................41
(b) Releases for Dedications and Similar Purposes.............................42
(c) Adjustment to Borrowing Base..............................................42
2.9 Remargining; Principal Payments....................................................42
ARTICLE 3 LETTERS OF CREDIT..................................................................42
3.1 Issuance of Letters of Credit......................................................42
3.2 Issuance Procedures................................................................43
3.3 Collateralization of Letters of Credit.............................................43
3.4 Reimbursement for Payment of Drafts Drawn or Drawn and
Accepted Under Letters of Credit...................................................43
3.5 Reimbursement Obligations..........................................................44
3.6 Nature of Reimbursement Obligations................................................44
3.7 LC Bank Reporting Requirements.....................................................44
ARTICLE 4 BORROWING BASE.....................................................................45
4.1 Determination of Eligible Collateral/Borrowing Base................................45
4.2 Unit Term Limits...................................................................45
(a) Presold Units.............................................................45
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(b) Spec Units................................................................45
(c) Model Units...............................................................45
(d) Conversion of Presold Units...............................................45
(e) Conversion of Spec Units..................................................46
(f) Conversion of Model Units.................................................46
(g) Unit Ineligibility........................................................46
4.3 A&D Project Term Limits............................................................46
(a) Failure to Commence Construction..........................................46
(b) Failure to Complete Construction..........................................46
(c) Term Limitations with respect to Finished Lots; Take-Down Requirements....47
(d) A&D Project Ineligibility.................................................47
4.4 Transfer of Finished Lots for Unit Construction....................................47
4.5 Additional Limitations on Eligible Collateral......................................48
(a) Limitation on Spec Units by State.........................................48
(b) Limitation on Model Units by State........................................48
(c) Classification and Reclassification of Units; Adjustment
of Borrowing Base.........................................................48
(d) Events Affecting Units and A&D Projects; Exclusions
from Eligible Collateral..................................................48
4.6 Limitations on Collateral Values...................................................48
(a) A&D Project Limitations...................................................48
(b) Further Limitations on Collateral Values..................................49
(i) Overall Limit on Construction Line Availability Based
on Spec Units....................................................50
(ii) Limit on Availability Based on Presold Units and Model Units.....50
(iii) Limit on Availability for Model Units............................50
(iv) Limit on Availability for Land Projects..........................50
(v) Limitation on Availability for all A&D Projects..................50
(vi) Limitation on Availability for Development Projects
and Finished Lot Projects........................................50
(vii) State Limitations for A&D Projects...............................50
(viii) State Limitations on Collateral Value............................50
4.7 Collateral Inventory Report, Collateral Certificate, and Borrowing Base Report.....51
(a) Collateral Inventory Report...............................................51
(b) Collateral Certificate....................................................51
(c) Form of Report and Certificate............................................52
(d) Borrowing Base Report.....................................................52
4.8 General............................................................................52
4.9 Appraisals.........................................................................52
(a) Appraisal Requirements....................................................52
(b) Appraiser Engagement......................................................53
(c) Appraisal Evaluation......................................................53
(d) Bank Review...............................................................53
(e) Additional Appraisals.....................................................53
(f) Appraisal Policy Modifications............................................54
(g) Expenses..................................................................54
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ARTICLE 5 CONDITIONS PRECEDENT...............................................................54
5.1 Conditions Precedent to Effectiveness of this Agreement............................54
(a) Representations and Warranties Accurate...................................54
(b) No Defaults...............................................................54
(c) Borrower's Financial Condition............................................54
(d) Qualifying Subordinated Indebtedness......................................55
(e) No Material Adverse Change................................................55
(f) Documents.................................................................55
(i) Loan Documents...................................................55
(ii) Corporation Documents............................................55
(iii) Opinion Letters..................................................55
(g) Other Items or Actions by Borrower........................................55
(h) Payment of Costs, Expenses and Fees.......................................55
5.2 Approval of Subdivisions...........................................................55
(a) Request...................................................................56
(b) Representations and Warranties Accurate...................................56
(c) No Defaults...............................................................56
(d) Size of Subdivisions......................................................56
(e) Subdivisions in the Same Location.........................................56
(f) Ownership.................................................................56
(g) Proposed Development......................................................56
(h) Plat......................................................................56
(i) Zoning Approvals..........................................................56
(j) Preliminary Title Commitment..............................................56
(k) Environmental Assessment..................................................56
(l) Environmental Questionnaire...............................................57
(m) Soils Tests...............................................................57
(n) Preliminary Budget........................................................57
(o) Land Purchase Documents...................................................57
(p) Marketing Information.....................................................57
(q) Types of Units; Budgets...................................................57
(r) Appraisal.................................................................57
(s) Other.....................................................................57
5.3 Qualification of Land Projects as Eligible Collateral..............................57
(a) Located in Approved Subdivision...........................................58
(b) Survey....................................................................58
(c) Deed of Trust/Title Policy................................................58
(d) Environmental Agreement...................................................58
(e) Drainage; Flood Zone......................................................58
(f) Impositions, Assessments, and Charges.....................................58
(g) Limitations...............................................................59
(h) Other Items...............................................................59
Other Actions...............................................................................59
5.4 Qualification of Development Projects as Eligible Collateral.......................59
(a) Qualification for Inclusion as Entitled Land..............................59
(b) Construction Contracts....................................................59
(c) Plans and Specifications..................................................59
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(d) Permits...................................................................59
(e) Construction Schedule.....................................................60
(f) Budget....................................................................60
(g) Final Subdivision Map or Plat.............................................60
(h) Restrictive Covenants.....................................................60
(i) Utilities.................................................................60
(j) Limitations...............................................................60
(k) Other.....................................................................61
5.5 Qualification of Finished Lot Projects as Eligible Collateral......................61
(a) Finished Lots from Development Projects...................................61
(b) Finished Lots in Option/Purchase Subdivisions.............................62
(c) Limitations...............................................................62
5.6 Qualification of Units as Eligible Collateral......................................63
(a) Inclusion in an Approved Subdivision......................................63
(b) Documents.................................................................63
(i) Approvals........................................................63
(ii) Contracts for Unit Construction..................................63
(iii) Final CC&Rs......................................................63
(iv) Purchase Contract................................................63
(v) Unit Appraisal...................................................63
(vi) Unit Budget......................................................63
(vii) Unit Plans and Specifications....................................64
(viii) Deed of Trust....................................................64
(ix) Impositions, Assessments, and Charges............................64
(x) Completion of Filings and Recordings.............................64
(xi) Title Insurance..................................................64
(c) Start of Construction.....................................................64
(d) Distressed Improvement Districts..........................................64
(e) Limitations...............................................................64
(f) Other Items...............................................................64
(g) Other Actions.............................................................65
5.7 Additional Conditions Precedent to All Advances Against Eligible Collateral........65
(a) Representations and Warranties Accurate...................................65
(b) Defaults..................................................................65
(c) Other Conditions Precedent................................................65
(d) Inspection Report.........................................................65
(e) Lien Waivers..............................................................65
(f) Approvals and Inspections by Governmental Authorities.....................65
(g) Payment of Costs, Expenses, and Fees......................................66
(h) Draw Request..............................................................66
(i) Limit on Total Outstanding................................................66
5.8 Special Conditions to Funding; Funding Procedures..................................66
(a) Special Conditions Precedent..............................................66
(b) Funding Procedures........................................................66
5.9 Verification and Other Matters Relating to Conditions Precedent ...................67
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ARTICLE 6 BORROWER REPRESENTATIONS AND WARRANTIES............................................67
6.1 Representations and Warranties.....................................................67
(a) Corporate Authorization...................................................67
(b) No Approvals, etc.........................................................67
(c) No Conflicts..............................................................67
(d) Execution and Delivery and Binding Nature of Borrower Loan Documents......68
(e) Accurate Information......................................................68
(f) Purpose of Advances.......................................................69
(g) Legal Proceedings, Hearings, Inquiries, and Investigations................69
(h) No Event of Default or Unmatured Event of Default;
Financial Covenant Compliance.............................................69
(i) Approvals and Permits; Assets and Property................................69
(j) Impositions...............................................................70
(k) ERISA.....................................................................70
(l) Compliance with Law.......................................................71
(m) Unit Budgets, Unit Plans and Specifications, and Construction Contracts...71
(n) A&D Project Budgets, A&D Project Plans and Specifications,
and Construction Contract(s)..............................................71
(o) Environmental Matters.....................................................71
(p) Special Representations and Agreements Relating to Collateral.............72
(i) Ownership........................................................72
(ii) Authority to Encumber............................................72
(iii) Condominium......................................................72
(iv) Validity of the Lien and Encumbrance Created by each
Deed of Trust....................................................72
(q) Full Disclosure...........................................................72
(r) Use of Proceeds; Margin Stock.............................................72
(s) Governmental Regulation...................................................73
6.2 Representations and Warranties Upon Requests for Advances..........................73
6.3 Representations and Warranties Upon Delivery of Financial Statements,
Documents, and Other Information...................................................73
ARTICLE 7 BORROWER AFFIRMATIVE COVENANTS.....................................................73
7.1 Corporate Existence................................................................74
7.2 Books and Records; Access..........................................................74
7.3 Special Covenants Relating to Collateral...........................................74
(a) Defense of Title..........................................................74
(b) No Encumbrances...........................................................75
(c) Further Assurances........................................................75
(d) Utilities.................................................................75
(e) Contracts.................................................................75
(f) No Residential Use........................................................75
(g) Flood Insurance...........................................................76
(h) Compliance with Permitted Exceptions......................................76
(i) Model Complexes...........................................................76
(j) Title Policy Endorsements.................................................76
(k) Improvement Districts.....................................................76
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7.4 Information and Statements.........................................................77
(a) Annual Reports............................................................77
(i) Annual Statements of Borrower....................................77
(ii) Forecasts, Business Plans, and Projections.......................77
(iii) Annual Variance Analysis.........................................77
(iv) Other Reports....................................................77
(b) Quarterly Reports.........................................................77
(i) Quarterly Financial Statements...................................77
(ii) Quarterly Variance Analysis......................................78
(iii) Quarterly Inventory Report.......................................78
(iv) Other Reports....................................................78
(c) Monthly Reports...........................................................78
(i) Monthly Financial Statements.....................................78
(ii) Monthly Sales, Closings, and Backlog Report......................78
(iii) Gross Profit Analysis............................................78
(iv) Inventory Report.................................................78
(v) Monthly Variance Analysis........................................78
(vi) Other Reports....................................................78
(d) Semi-Monthly Reports......................................................79
(e) Notice of Certain Events..................................................79
(f) Environmental Incident Reports............................................79
(g) Financial Covenant Compliance Information.................................79
(h) SEC Filings...............................................................79
(i) Absorption Reports........................................................79
(j) Other Items and Information...............................................79
7.5 Law; Judgments; Material Agreements; Approvals and Permits.........................80
7.6 Impositions and Other Indebtedness.................................................80
7.7 Assets and Property................................................................80
7.8 Insurance..........................................................................80
(a) Property..................................................................80
(b) Liability.................................................................80
(c) Flood.....................................................................81
(d) Worker's Compensation.....................................................81
(e) Contractors...............................................................81
(i) Worker's Compensation............................................81
(ii) Liability........................................................81
(f) Earthquake................................................................81
(g) Additional Insurance......................................................81
7.9 ERISA..............................................................................82
7.10 Special Covenants Relating to A&D Projects.........................................83
(a) Commencement and Completion of Off-Site Improvements......................83
(b) A&D Project Change Orders.................................................83
(c) Certain Information Relating to Development Projects......................83
7.11 Commencement and Completion of Units...............................................84
7.12 Title Insurance; Title Insurance Claims............................................84
7.13 Rights of Inspection; Correction of Defects........................................85
(a) Generally.................................................................85
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(b) Inspector(s)..............................................................85
(c) Miscellaneous.............................................................85
7.14 Verification of Costs..............................................................85
7.15 Use of Proceeds of Advances........................................................86
7.16 Further Assurances.................................................................86
7.17 Costs and Expenses of Borrower's Performance of Covenants and
Satisfaction of Conditions.........................................................86
7.18 Notification of Certain Matters....................................................86
7.19 Environmental Reports..............................................................86
ARTICLE 8 FINANCIAL COVENANTS................................................................87
8.1 Minimum Tangible Net Worth Covenant................................................87
8.2 Maximum Total Debt to Tangible Net Worth Covenant..................................87
8.3 Minimum Interest Coverage Covenant.................................................87
8.4 Quarterly Minimum Available Liquidity Covenant.....................................87
8.5 Minimum Available Liquidity Covenant...............................................87
8.6 Maximum Deficit Cash Flow..........................................................88
8.7 Restrictions on Inventory..........................................................88
8.8 Restrictions on Dividends..........................................................88
8.9 Conformance to GAAP; Consolidation.................................................88
ARTICLE 9 BORROWER NEGATIVE COVENANTS........................................................88
9.1 Fundamental Changes................................................................89
9.2 Prohibition on Sales of Assets.....................................................89
9.3 Prohibition on Amendments to Organic Agreements....................................89
9.4 Lines of Business..................................................................89
9.5 No Development Projects Outside the Ordinary Course of Business....................89
9.6 Issuance of Additional Securities..................................................89
9.7 Loans..............................................................................90
9.8 Other Financing....................................................................90
9.9 No Further Indebtedness............................................................90
9.10 Transactions with Affiliates.......................................................90
9.11 Investments........................................................................90
9.12 Restriction on Certain Payments....................................................90
9.13 Negative Pledge....................................................................90
9.14 No Modifications to Indentures.....................................................91
ARTICLE 10 EVENTS OF DEFAULT..................................................................91
10.1 Events of Default..................................................................91
(a) Payments..................................................................91
(b) Specified Defaults........................................................91
(c) Other Defaults............................................................91
(d) Representations and Warranties............................................91
(e) Insolvency................................................................92
(f) Bankruptcy................................................................92
(g) Dissolution, etc..........................................................92
ix
(h) Transfer of Ownership Interests by DMB; Change of
Control or Transfers of Beneficial Ownership within DMB...................92
(i) Equity Transfers by AEW...................................................93
(j) Material Adverse Change...................................................93
(k) Claims....................................................................93
(l) Cross Default.............................................................93
(m) Failure to Maintain Insurance.............................................93
(n) Default Under Leases......................................................94
(o) Default Under Other Indebtedness..........................................94
(p) Judgments.................................................................94
(q) Foreclosure Proceedings...................................................94
(r) RICO......................................................................95
(s) Certain Redemptions.......................................................95
10.2 Remedies...........................................................................95
(a) Suspension and Termination of Commitments.................................95
(b) Acceleration..............................................................95
(c) Delivery of Contracts, Etc................................................96
(d) Enforcement of Rights.....................................................96
(e) Receivers.................................................................96
(f) Payments..................................................................96
10.3 Protective Advances................................................................96
10.4 Completion of Construction.........................................................96
10.5 Multiple Real and Personal Property Security.......................................97
ARTICLE 11 THE AGENT; ADMINISTRATION OF THE LOAN..............................................97
11.1 Appointment of Agent...............................................................97
(a) Appointment of Agent......................................................97
(b) Appointment of Co-Agent; Duties; and Fees.................................98
11.2 Ownership and Possession of Loan Documents; Information............................98
(a) Ownership and Possession; Access to Agent Files...........................98
(b) Information...............................................................98
11.3 Resignation and Removal of Agent; Successor Agent..................................99
(a) Resignation Upon Notice...................................................99
(b) Removal of the Agent......................................................99
(c) Successor Agents; Change in Funding Procedure.............................99
(d) Cooperation..............................................................100
11.4 Sharing of Payments...............................................................100
(a) Generally................................................................100
(b) Certain Other Payments...................................................100
11.5 Administration....................................................................101
11.6 Reliance..........................................................................101
11.7 Powers of the Agent...............................................................101
11.8 Limitations on the Agent..........................................................101
(a) General Limitations and Residual Rights..................................101
(b) Matters Requiring Unanimous Bank Approval................................102
(c) Matters Requiring Bank Supermajority Approval............................103
11.9 Approval of Banks.................................................................104
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11.10 Advances, Protective Advances, and Payments.......................................104
(a) General Funding Procedures...............................................104
(b) Funding Procedures for Protective Advances...............................105
(c) Change in Funding Procedures.............................................105
(d) Absolute Nature of Funding Obligations...................................106
(e) Reimbursements under Letters of Credit...................................106
(f) Distribution of Interest Payments and Commitment Fees....................106
(g) Late Payments by the Agent...............................................106
(h) Late Payments by the Banks...............................................106
(i) Funds Transfer Instructions..............................................107
11.11 Application of Payments...........................................................107
(a) Application of Principal to Advances.....................................107
(b) Application of all Other Moneys..........................................107
11.12 Letter of Credit Participations...................................................107
(a) Transfers to the Other Banks.............................................107
(b) Obligations of the LC Bank...............................................108
(c) Reimbursements...........................................................108
11.13 Reimbursement Obligations.........................................................108
11.14 Taxes.............................................................................109
11.15 Excess Payments...................................................................109
11.16 Return of Payments................................................................109
11.17 Permitted Transactions with Borrower..............................................110
11.18 Default by a Bank.................................................................110
(a) Defaulting Banks.........................................................110
(b) Certain Remedies with Respect to Defaulting Banks........................111
11.19 Purchase of Defaulting Bank's Interest After Default..............................112
(a) Right to Purchase........................................................112
(b) Purchase Price and Payment...............................................113
11.20 Indemnification of the Agent......................................................113
11.21 Indemnification Among the Banks...................................................113
11.22 Examination of Loan...............................................................113
(a) Acknowledgment of Examination and Investigation..........................113
(b) No Representations or Warranties.........................................113
11.23 Participations....................................................................114
11.24 Assignments.......................................................................114
11.25 Further Assurances................................................................114
11.26 No Partnership or Joint Venture...................................................115
11.27 Miscellaneous.....................................................................115
(a) Several and Not Joint Nature of Obligations..............................115
(b) Information..............................................................115
(c) Borrower Requests for Approvals and Determinations.......................115
(d) Form of Request..........................................................115
(e) Time for Response........................................................115
ARTICLE 12 MISCELLANEOUS.....................................................................116
12.1 The Banks' Obligations to Borrower Only and Disclaimer by Banks...................116
12.2 Survival..........................................................................116
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12.3 Integration.......................................................................116
12.4 Effect of Certain Actions.........................................................116
12.5 Binding Effect....................................................................116
12.6 Severability......................................................................116
12.7 CHOICE OF LAW.....................................................................116
12.8 Time of Essence; Time for Performance.............................................117
12.9 Notices and Demands...............................................................117
12.10 The Banks' Right of Set-Off.......................................................117
12.11 Indemnification of the Banks......................................................117
12.12 Rescission or Return of Payments..................................................118
12.13 Headings; References..............................................................118
12.14 Number and Gender.................................................................118
12.15 Waiver of Statute of Limitations..................................................118
12.16 Waivers by Borrower...............................................................118
12.17 No Brokers........................................................................118
12.18 Counterpart Execution.............................................................118
12.19 Duty to Act in Good Faith.........................................................118
ARTICLE 13 POWER OF ATTORNEY.................................................................119
13.1 Power of Attorney Granted.........................................................119
ARTICLE 14 INDUCEMENTS.......................................................................119
14.1 Inducements to the Banks..........................................................119
(a) Representations, Warranties, and Covenants...............................119
(b) Releases.................................................................120
(c) Waiver...................................................................120
ARTICLE 15 MANDATORY ARBITRATION.............................................................121
15.1 Mandatory Arbitration.............................................................121
15.2 Provisional Remedies, Self-Help and Foreclosure...................................121
15.3 Special Dispute Resolution Provisions.............................................122
(a) Negotiation Between Executives...........................................122
(b) Appointment of Neutral...................................................122
(c) Selection of Procedure...................................................122
(d) Termination of Procedure.................................................122
(e) Provisional Remedies.....................................................123
(f) Secrecy of ADR Proceedings...............................................123
ARTICLE 16 LIST OF EXHIBITS AND SCHEDULES....................................................123
16.1 List of Exhibits..................................................................123
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AMENDED AND RESTATED
UDC MASTER REVOLVING LINE OF CREDIT
LOAN AGREEMENT
(BORROWING BASE)
This AMENDED AND RESTATED UDC MASTER REVOLVING LINE OF CREDIT LOAN
AGREEMENT (BORROWING BASE), dated as of April 30, 1997, is made and entered into
by and between UDC HOMES, INC., a Delaware corporation ("Borrower"), BANK ONE,
ARIZONA, NA ("BOAZ"), as the "Agent", and each of the Banks (including BOAZ, as
a Bank) whose signatures appear on the signature pages to this Agreement, in the
capacities there designated.
RECITALS:
▇. ▇▇▇▇, Bankers Trust Company ("Bankers Trust"), ▇▇▇▇▇ Fargo Bank,
National Association ("▇▇▇▇▇ Fargo"); ▇▇▇▇▇ Fargo Realty Advisors Funding,
Incorporated ("WF Realty"), Guaranty Federal Bank, F.S.B. ("Guaranty Federal"),
The First National Bank of Boston ("BkB"), and Borrower are parties to the UDC
Master Revolving Line of Credit (Borrowing Base) Loan Agreement, dated November
8, 1995, as amended (as amended, the "Original Loan Agreement").
▇. ▇▇▇▇, Bankers Trust, BkB, ▇▇▇▇▇ Fargo, WF Realty, and Guaranty
Federal are parties to the Agency/Participation Agreement for UDC Revolving Loan
Facility, dated as of November 8, 1995, as amended (as amended, the
"Agency/Participation Agreement").
▇. ▇▇▇▇▇ Fargo has succeeded to the interests of WF Realty in the
Original Loan Agreement. Bank of America National Trust and Savings Association
("BOA") and Norwest Bank Arizona, National Association ("Norwest") have become
Banks, with the rights, privileges, obligations and liabilities as set forth in
this Agreement. Bankers Trust and BkB are no longer Banks under the Original
Loan Agreement.
▇. ▇▇▇▇ is the Administrative Agent (the "Administrative Agent") and
the remaining Co-Agent (the "Retiring Co-Agent") under the Original Loan
Agreement.
E. Borrower has requested certain modifications to the terms of the
Original Loan Agreement, including, but not limited to, an increase in the
Commitment Amount and an extension of the Maturity Date, and the Banks are
willing to make those modifications in accordance with the terms and conditions
set forth in this Agreement.
F. In connection with the modification of the Original Loan Agreement,
Borrower, the Banks, the Administrative Agent, and the Retiring Co-Agent wish to
amend and restate the Original Loan Agreement in its entirety, on the terms and
conditions set forth in this Agreement. The Banks, the Administrative Agent, and
the Retiring Co-Agent also wish to incorporate into this Agreement the
provisions that will govern the relationships of the Banks among themselves,
with the intent that the Agency/Participation Agreement will be superseded and
replaced in its entirety by this Agreement.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Borrower, the Administrative Agent, the Retiring
Co-Agent, and the Banks agree that:
A. Amendment and Restatement of Original Loan Agreement. The
Original Loan Agreement is amended and restated in its entirety by this
Agreement. The rights and duties of the parties with respect to all
matters relating to time periods prior to the Effective Date will be
determined in accordance with the terms of the Original Loan Agreement,
and the rights and duties of the parties with respect to all matters
relating to time periods from and after the Effective Date will be
determined in accordance with the provisions of this Agreement.
B. Elimination of the Agency/Participation Agreement. The
Agency/Participation Agreement is superseded and replaced in its
entirety by this Agreement.
C. Elimination of Retiring Co-Agent; Designation of Agent and
Co-Agent. As of the Effective Date, the Retiring Co-Agent hereby
resigns and will cease to serve as such and the Administrative Agent
will be and is designated and appointed as the Agent, with the rights
and duties set forth in this Agreement for the Agent. Guaranty Federal
is designated and appointed as the new Co-Agent, with the rights and
duties set forth in this Agreement for the Co-Agent.
D. Ratification. As amended and modified in its entirety by
this Agreement, the Obligations are ratified and confirmed and continue
in full force and effect.
The parties to this Agreement further agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. In this Agreement, the following capitalized terms
have the following meanings:
"A&D Commitment Sublimit" means the lesser of (a) 37.5% of the
Commitment Amount or (b) $63,750,000. The A&D Commitment Sublimit is
broken down further into the Development and Finished Lot Sublimit and
the Land Project Sublimit.
"A&D Eligibility Date" means, for a Land Project, the date on
which the Entitled Land is first included as a Land Project in a
Borrowing Base Report; for a Development Project, the date on which the
Entitled Land is first included as a Development Project in a Borrowing
Base Report; and for a Finished Lot Project, the date on which the Lots
in such Finished Lot Project are first included as a Finished Lot
Project in a Borrowing Base Report.
"A&D Project" means, generically, a Land Project, a
Development Project, or a Finished Lot Project.
"A&D Project Appraisal" means an Appraisal of an A&D Project.
2
"A&D Project Appraised Value" means:
(a) With respect to a particular Land Project, the
market value for the Entitled Land in the Land Project, "AS
IS" at the time of the A&D Project Appraisal, on a bulk
wholesale discounted value basis, as determined by the Agent
in accordance with the Appraisal Policy after its review of
the A&D Project Appraisal for the Land Project.
(b) With respect to a particular Development Project,
the market value for such Development Project upon completion
of the Off-Site Improvements, on a bulk wholesale discounted
value basis, as determined by the Agent in accordance with the
Appraisal Policy after its review of the A&D Project Appraisal
for the Development Project.
(c) With respect to a particular Finished Lot
Project, the market value for such Finished Lot Project, as if
complete, on a bulk wholesale discounted value basis, as
determined by the Agent in accordance with the Appraisal
Policy after its review of the A&D Project Appraisal for the
Finished Lot Project.
"A&D Project Budget" means the budget for an A&D Project
approved by the Agent in its reasonable discretion, as amended and
modified from time to time, with any aggregate change in the total A&D
Project Budget for a particular A&D Project in excess of 10% of the
total A&D Project Budget for the particular A&D Project to require
advance approval of the Agent.
"A&D Project Collateral Value" means, for a particular A&D
Project, a valuation of such A&D Project based on the stage of
construction, determined on a cumulative basis as follows:
(a) With respect to a Land Project, an amount equal
to the Maximum Allowed Advance for such Land Project.
(b) With respect to a Development Project (subject to
Section 4.6(a)(ii)), the sum of:
(i) An amount equal to the lesser of (A) 70%
of the A&D Project Appraised Value of the Entitled
Land included in the Development Project (determined
without regard to any Off-Site Improvements
constructed or to be constructed on such Entitled
Land) or (B) 70% of the Acquisition Cost of the
applicable Entitled Land (such amount, the "Land
Allocation"); and
(ii) The result obtained by subtracting the
Land Allocation described in clause (i) immediately
above from the Maximum Allowed Advance for the
Development Project and then multiplying the
difference by the Development Completion Percentage.
(c) With respect to each Finished Lot Project, an
amount equal to the sum of the Maximum Allowed Advance with
respect to all Lots in such Project that constitute Finished
Lots and are not included in the Eligible Collateral as Units.
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"A&D Project Plans and Specifications" means the plans and
specifications for an A&D Project that have been prepared by an
engineer, together with any amendments or modifications to those plans
and specifications.
"Acquisition Cost" means the actual purchase price paid by
Borrower to acquire the Land and/or Lots in question.
"Adjusted Net Increase" means the sum of:
(a) 50% of the cumulative Net Income of Borrower, if
any, for the fiscal quarters ending after September 30, 1996
(with any period in which Borrower incurs a loss counted as
zero for the purpose of such computation); and
(b) 100% of any new stated capital or paid-in capital
acquired by Borrower during the fiscal quarters ending after
September 30, 1996, excluding, however, the $10,000,000 in new
equity contributed to Borrower at December 31, 1996,
$10,000,000 face amount of additional Series D Notes issued at
March 31, 1997, $10,000,000 face amount of additional Series D
Notes issued at April 15, 1997, and up to $15,000,000 face
amount of new Series D Notes issued on or before the Effective
Date, and also excluding any interest on the Series C Notes or
the Series D Notes paid in kind by the issuance of additional
Qualifying Subordinated Indebtedness from October 1, 1996
through September 30, 1997; provided further, that new stated
capital or paid in capital obtained by Borrower in order to
cure a default under a Financial Covenant shall not be
included in the Adjusted Net Increase so long as the form of
any new equity investment has received advance approval by all
of the Banks and such investment is made within any cure
period applicable to such Financial Covenant breach.
"Advance" means an advance of Loan proceeds, other than a
Protective Advance, by the Banks, through the Agent, to Borrower
hereunder.
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect
common control with 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.
"Agent" means BOAZ, and its permitted successors and assigns,
solely in its capacity as the agent for and on behalf of the Banks
pursuant to this Agreement and other applicable provisions of the Loan
Documents.
"Agreement" means this Amended and Restated UDC Master
Revolving Line of Credit Loan Agreement (Borrowing Base), as it may be
amended, modified, extended, renewed, restated, or supplemented from
time to time.
"Appraisal" means, as the context requires, a Unit Appraisal,
an A&D Project Appraisal, or any other appraisal undertaken pursuant to
the provisions of this Agreement.
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"Appraisal Policy" means the Bank One Western Region Appraisal
Policy for UDC Credit Facility, dated November 1995, as amended and
supplemented from time to time pursuant to Section 11.8(b)(xvi).
"Approvals and Permits" means each and all approvals,
authorizations, bonds, consents, certificates, franchises, licenses,
permits, registrations, qualifications, entitlements and other actions
and rights granted by or filings with any Person necessary, or
appropriate for acquisition and development of A&D Projects, for
construction of Units and Off-Site Improvements, for the sale of Units
and Finished Lots, for occupancy, ownership, and use by Borrower and
other Persons of the Units and A&D Projects, or otherwise for the
conduct of, or in connection with, the business and operations of
Borrower.
"Approved Subdivision" means a Subdivision that has been
approved as provided in Section 5.2.
"Available Commitment" means, at any time, the lower of:
(a) The Commitment Amount; or
(b) The Collateral Value of the Borrowing Base, as
reflected in the most recent Borrowing Base Report,
less in either case any remargining payment required pursuant to
Section 2.9 but not yet paid.
"Available Liquidity" means an amount equal to:
(a) The sum of Borrower's aggregate unpledged and
unrestricted cash and unpledged and unrestricted Cash
Equivalents, plus
(b) The amounts immediately available to be drawn,
but which are not yet drawn, pursuant to this Agreement as of
the time of determination.
"Bank Majority" means those Current Banks (as defined in
Section 11.19) (a) which, in the aggregate, at the time of
determination, hold at least 51% of the Pro Rata Interests of all
Current Banks, and (b) which constitute at least a simple majority of
the Current Banks, at the time of determination, regardless of the Pro
Rata Interests of those Current Banks.
"Bank Supermajority" means (a) those Current Banks, which, at
the time of determination, in the aggregate, hold at least 66 2/3% of
the Pro Rata Interests of all Current Banks or (b) all of the Banks,
other than the Agent.
"Bankruptcy Order" means the order of the U.S. Bankruptcy
Court for the District of Delaware, dated October 3, 1995, confirming
the Bankruptcy Plan in the Chapter 11 bankruptcy proceeding commenced
by Borrower in that court.
5
"Bankruptcy Plan" means the Second Amended Reorganization
Plan of Borrower, dated August 3, 1995, as modified by an Addendum to
Second Amended Reorganization Plan of Borrower, dated August 31, 1995,
as modified by Paragraph 35 of the Bankruptcy Order.
"Banks" means each of the financial institutions whose name
appears on the signature pages of this Agreement, their successors and
assigns, including any Person who becomes a "Bank" pursuant to any of
the provisions of this Agreement.
"BOAZ Deficit Amount" means, at any time, the amount by which
the aggregate outstanding Advances held by BOAZ are less than the Pro
Rata Interest of BOAZ in all outstanding Advances.
"BOAZ Excess Amount" means at any time, the amount by which
the aggregate outstanding Advances held by BOAZ exceed the Pro Rata
Interest of BOAZ in all outstanding Advances.
"Borrower Equity Requirement" means:
(a) With respect to a Unit, that Borrower has
incurred and paid for (or concurrently with the first Advance
for construction of the Unit will have paid, not counting such
Advance) at least 10% of the total Unit Cost;
(b) With respect to a Land Project, that Borrower has
incurred and paid for (or concurrently with the first Advance
with respect to the Land Project will have paid, not counting
such Advance) at least 50% of the Acquisition Cost for that
Land Project;
(c) With respect to a Development Project, that
Borrower has incurred and paid for (or concurrently with the
first Advance with respect to the Development Project will
have paid, not counting such Advance) at least 30% of the
Total Cost for that Development Project; and
(d) With respect to a Finished Lot Project, that
Borrower has incurred and paid for (or concurrently with the
first Advance with respect to the Finished Lot Project will
have paid, not counting such Advance) at least 25% of the
Total Cost for that Finished Lot Project (with Total Cost for
Finished Lot Projects or Option/Purchase Subdivisions being
computed as set forth in the definition of Unit Lot Cost).
"Borrowing Base" consists of the Eligible Collateral from time
to time prior to the Maturity Date and as reflected in the most current
Borrowing Base Report.
"Borrowing Base Report" means a report prepared by the Agent
setting forth the Eligible Collateral then constituting the Borrowing
Base, the Collateral Value of the Borrowing Base, and certain other
information, in the format prescribed by the Agent from time to time.
"Builder Bonds and Mortgage Operations" means any asset or
liability set forth on Borrower's balance sheet under the heading
"Builder Bonds and Mortgage Operations" consisting
6
generally of mortgage-backed securities and residential mortgages,
collateralized mortgage obligations and mortgage warehousing lines of
credit.
"Business Day" means a day of the year on which banks are not
required or authorized to close in Phoenix, Arizona or Los Angeles,
California and, with respect to a Fixed Rate Advance, a day on which
dealings are also carried on in the London interbank market.
"Business Plan" means an annually updated 2-year GAAP budget
and business plan prepared by Borrower which will include such
information as the Agent may require, including, without limitation,
information regarding capital structure and any changes therein, new
acquisitions and proposed markets, and a breakdown of Borrower's plans
with respect to its inventory of unsold Lots along with backlog and
projected sales and closings, and projected margins for such Lots. The
Business Plan shall also contain a 5-year narrative mission statement
with respect to Borrower's prospective business plans.
"Bulk Sale of Finished Lots" means a sale of multiple Finished
Lots in an Approved Subdivision not in the ordinary course of business.
"Calendar Month" means any of the 12 calendar months of the
year.
"Capital Stock" of any Person means any and all shares, rights
to purchase, warrants or options (whether or not currently
exercisable), participations, or other equivalents of or interests in
(however designated) the equity (which includes, but is not limited to,
common stock, preferred stock and partnership and joint venture
interests) of such Person (excluding any debt securities that are
convertible into, or exchangeable for, such equity).
"Capitalized Lease Obligations" of a Person means the amount
of the obligations of such Person under capitalized leases which would
be shown as a liability on a balance sheet of such Person prepared in
accordance with GAAP.
"Cash Collateral Account" means the deposit account
established pursuant to the Cash Collateral Agreement. The Cash
Collateral Account shall be an interest-bearing account selected and
approved by Borrower and Agent in their reasonable discretion.
"Cash Collateral Agreement" means the cash collateral
agreement by and between Borrower and the Agent (as agent for each of
the Banks), which governs the use of moneys held in the Cash Collateral
Account and grants a security interest in such moneys, as the same may
be amended, modified, supplemented, renewed, restated or otherwise
changed from time to time.
"Cash Equivalents" means:
(a) Direct obligations of the United States or any
agency thereof or obligations guaranteed by the United States
or any agency thereof, in each case maturing within 180 days
after the date of acquisition thereof;
(b) Certificates of deposit maturing within 180 days
after the date of acquisition thereof issued by a bank, trust
company or savings and loan association which is organized
7
under the laws of the United States or any state thereof,
having capital, surplus and undivided profits aggregating in
excess of $250 million and a ▇▇▇▇▇ Bank Watch Rating of C or
better;
(c) Certificates of deposit maturing within 180 days
after the date of acquisition thereof issued by a bank, trust
company or savings and loan association organized under the
laws of the United States or any state thereof, other than
banks, trust companies or savings and loan associations
satisfying the criteria in clause (b) above; provided that the
aggregate amount of all certificates of deposit issued to
Borrower at any one time by such bank, trust company or
savings and loan association will not exceed $100,000.00;
(d) Commercial paper given the highest rating by 2
established national credit rating agencies and maturing not
more than 180 days after the date of the acquisition thereof;
and
(e) Repurchase agreements or money market accounts
which are fully secured by direct obligations of the United
States or any agency thereof.
"CC&Rs" means and includes restrictive covenants, conditions,
restrictions, easements, and other rights that exist or are
contemplated with respect to a Subdivision.
"Co-Agent" means Guaranty Federal, and its successors and
assigns, solely in its capacity as the Co-Agent for the Banks pursuant
to this Agreement.
"Code" means the United States Internal Revenue Code of 1986,
as amended from time to time.
"Collateral" means the property, interests in property, and
rights to property securing any or all Obligations from time to time.
"Collateral Certificate" means the certificate of Borrower, in
form and substance satisfactory to the Agent and containing such
certifications as the Agent may require, setting forth the information
required by Section 4.7.
"Collateral Inventory Report" means the report prepared by
Borrower as required by Section 4.7.
"Collateral Value" means, from time to time, the aggregate
total of:
(a) The Unit Collateral Values for all Units included
in Eligible Collateral at the time the Collateral Value of the
Borrowing Base is determined; and
(b) The A&D Project Collateral Values for all A&D
Projects included in Eligible Collateral at the time the
Collateral Value of the Borrowing Base is determined.
"Commitment" means the agreement of each Bank, severally and
not jointly, in Section 2.1 to make Advances pursuant to the terms and
conditions of this Agreement.
8
"Commitment Amount" means the total maximum amount that the
Banks are obligated to fund, and that is available at any particular
time, under this Agreement. The total Commitment Amount is
$170,000,000, decreasing, however, from time to time pursuant to
Section 2.1(d).
"Contingent Liabilities" of any Person means all
"contingencies" of such Person in accordance with Financial Accounting
Standards Board Statement of Financial Accounting Standards Number 5
(or any successor thereto) as in existence as of any date of
determination.
"Conversion Date" means March 31, 1998, unless pursuant to
Section 2.1(c), the Conversion Date is extended on one or more
occasions, in which case, "Conversion Date" means the date to which the
previously established Conversion Date has been extended.
"Cut-Off Date" means the earliest of:
(a) The 2nd Business Day of every week;
(b) Any date on which the BOAZ Excess Amount equals
or exceeds $10,000,000; or
(c) Any date upon which the BOAZ Deficit Amount
equals or exceeds $10,000,000.
"Deed of Trust" and "Deeds of Trust" mean each and all deeds
of trust, mortgages, assignments of leases and rents, fixture filings,
and security agreements, securing the Notes and the Obligations,
granted from time to time by Borrower, as mortgagor, trustor, or
assignor, to the Agent (as agent for the Banks), as mortgagee,
beneficiary and trustee (unless the Agent consents to the transfer to
another Person to act as trustee under a deed of trust), or assignee,
each being substantially in the form required by the Agent from time to
time, as the same may be amended, modified, supplemented, extended,
restated, or renewed from time to time.
"Default Interest Rate" shall mean a rate of interest equal to
(a) with respect to Advances at the Variable Rate, the aggregate of 4%
per annum plus the Variable Rate; (b) with respect to Advances at a
Fixed Rate, a fixed rate of 4% per annum in excess of the Fixed Rate in
effect thereon at the time of the Event of Default until the expiration
of the current Interest Period therefor and, thereafter, the aggregate
of 4% per annum plus the Variable Rate; and (c) in all other cases, the
aggregate of 4% per annum plus the Variable Rate. When the Default
Interest Rate is determined with reference to the Prime Rate, the
Default Interest Rate shall change as and when the Prime Rate changes.
"Development and Finished Lot Sublimit" means the lesser of
(a) 27.5% of the Commitment Amount or (b) $46,750,000; provided,
however, that Borrower may elect to increase the Development and
Finished Lot Sublimit from time to time up to the A&D Commitment
Sublimit then in effect, with any increase in the Development and
Finished Lot Sublimit in accordance with this proviso decreasing,
dollar for dollar, the Land Project Sublimit; and Borrower may also
elect to decrease the Development and Finished Lot Sublimit from time
to time, with such decreases resulting in a dollar for dollar increase
in the Land Project Sublimit, provided, however, that in no event will
the Land Project Sublimit exceed the lesser of (c) 10% of the
Commitment Amount or
9
(d) $17,000,000. Adjustments in the Land Project Sublimit and the
Development and Finished Lot Sublimit will be set forth in a Collateral
Inventory Report submitted by Borrower and will become effective with
the Borrowing Base Report prepared from that Collateral Inventory
Report and will remain in effect until such time as Borrower elects, in
a subsequent Collateral Inventory Report, to make another adjustment in
such sublimits.
"Development Completion Percentage" means, for a Development
Project, the current percentage of completion of Off-Site Improvements
in an Approved Subdivision as determined by the Agent based on its
review of the current Collateral Certificate and inspections of the
Collateral made pursuant to this Agreement.
"Development Project" means Entitled Land that Borrower
intends to develop with Off-Site Improvements.
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event,
matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder
thereof, prior to the Maturity Date.
"Dividends" means any of the following (but excluding
dividends paid solely in Capital Stock of Borrower other than
Disqualified Stock):
(a) Any dividend, distribution or advance paid or
declared by Borrower to its shareholders in respect of any
Capital Stock in or of Borrower;
(b) Any payment or distribution on any Qualifying
Subordinated Indebtedness of Borrower other than payments made
solely in additional Qualifying Subordinated Indebtedness;
(c) Any purchase, redemption, retirement or other
acquisition by Borrower for value, of any of the ownership
interests or Capital Stock of Borrower now or hereafter
outstanding, or any interest therein;
(d) Any return of any capital of Borrower to its
shareholders; and
(e) Any distribution of the assets, properties, cash,
rights, obligations or securities of Borrower to its
shareholders.
"Draw Request" means a completed, written request in form and
substance satisfactory to the Agent, from Borrower to the Agent
requesting an Advance, together with such other documents and
information as the Agent may require from time to time.
"EBITDA" means, with respect to any fiscal period, the sum of
the following, other than any of the following that relate to Builder
Bonds and Mortgage Operations:
(a) Net Income for that period, plus
10
(b) Any extraordinary loss reflected in such Net
Income, minus
(c) Any extraordinary gain reflected in such Net
Income, plus
(d) Interest Expense for that period, plus
(e) The aggregate amount of federal and state taxes,
if any, of Borrower on or measured by income for that period
(whether or not payable during that period), plus
(f) Non-cash Charges for that period, in each case as
determined in accordance with GAAP.
"Effective Date" means the date on which all of the conditions
precedent in Section 5.1 have first been satisfied.
"Eligible Collateral" means the Units and A&D Projects that
meet the requirements of this Agreement for inclusion as Eligible
Collateral and that are included in a Borrowing Base Report.
"Entitled Land" means Raw Land with respect to which all of
the following is correct:
(a) Borrower has received a vested zoning
classification that is consistent with Borrower's actual and
proposed use of such Raw Land; and
(b) A preliminary subdivision plat or tentative map
has been completed and has been approved by all applicable
Governmental Authorities.
"Environmental Agreement" means each environmental indemnity
or similar agreement, executed by Borrower for the benefit of the Agent
and the Banks, as any such agreement may be amended, modified,
extended, renewed, restated, or supplemented from time to time. Each
Environmental Agreement shall comply in all material respects with the
Environmental Policy.
"Environmental Policy" means the Bank One Arizona
Environmental Policy, Procedure No. 28.00, dated January 25, 1994, as
amended and supplemented from time to time by BOAZ upon notice to the
other Banks; provided, however that if any such amendment or supplement
would have the effect of making the Environmental Policy less
restrictive, such amendment or supplement shall be subject to approval
pursuant to Section 11.8(b)(xvi).
"ERISA" means the Employee Retirement Income Security Act of
1974 and the regulations and published interpretations thereunder, as
in effect from time to time.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"Eurodollar Rate Reserve Percentage" for the Interest Period
for each Fixed Rate Advance means the reserve percentage applicable 1
Business Day before the first day of such Interest Period under
regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including,
11
but not limited to, any emergency, supplemental, or other marginal
reserve requirement) for a member bank of the Federal Reserve System in
San Francisco with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (or with respect to any other
category of liabilities which includes deposits by reference to which
the interest rate on Fixed Rate Advances is determined) having a term
equal to such Interest Period.
"Event of Default" means as defined in Section 10.1.
"Financial Covenant Default" means any Event of Default that
occurs by reason of a breach by Borrower with respect to any of the
Financial Covenants.
"Financial Covenants" means the covenants set forth in Article
8.
"Finished Lot Project" means Lots in an Approved Subdivision
that have satisfied the requirements in Section 5.5 for inclusion in
Eligible Collateral as a Finished Lot Project.
"Finished Lots" means Lots in a Finished Lot Project.
"Fixed Rate" means an interest rate established from time to
time based on the LIBOR Rate.
"Fixed Rate Advance" means an outstanding Advance that bears
interest at a Fixed Rate.
"GAAP" means generally accepted accounting principles
consistently applied.
"Governmental Authority" or "Governmental Authorities" means
any and all governments or courts and/or any and all agencies,
authorities, bodies, bureaus, departments, or instrumentalities of any
government.
"Grandfathered Collateral" means Eligible Collateral included
in the Borrowing Base as of November 1, 1996. A list of the
Grandfathered Collateral is attached as Exhibit A.
"Impositions" means any and all of the following:
(a) Real property taxes and assessments (general and
special) assessed against or imposed upon or in respect of any
of the Collateral or the Obligations;
(b) Personal property taxes assessed against or
imposed upon or in respect of any of the Collateral or the
Obligations;
(c) Other taxes and assessments of any kind or nature
that are assessed or imposed upon or in respect of the
Collateral or the Obligations or that may result in a Lien or
Encumbrance upon any of the Collateral (including, without
limitation, non-governmental assessments, levies, maintenance
and other charges whether resulting from covenants,
conditions, and restrictions or otherwise, water and sewer
rents and charges, assessments on any water stock, utility
charges and assessments, and owner association dues, fees, and
levies);
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(d) Taxes or assessments on any of the Collateral in
lieu of or in addition to any of the foregoing;
(e) Taxes on income, revenues, rents, issues, and
profits, and franchise taxes;
(f) Costs, expenses, and fees arising from or related
to any of the Approvals and Permits or the Requirements; and
(g) Assessment, documentary, indebtedness, license,
stamp, and revenue charges, fees, and taxes and any other fees
or taxes imposed on the Agent or the Banks and measured by or
based in whole or in part upon ownership of any Deed of Trust,
interest in Collateral, or any promissory note, guaranty, or
indebtedness secured by any Deed of Trust or upon the nature
or amount of the Obligations,
excluding, however, from all of the foregoing any estate, excess
profits, franchise, income, inheritance, or similar tax levied on the
Agent or the Banks, or any of them.
"Indebtedness" means, as to any Person:
(a) Indebtedness created, issued, incurred or assumed
by such Person for borrowed money or evidenced by bonds,
debentures, notes or similar instruments, including the Senior
Notes, the Series C Notes (as defined in the definition of
Qualifying Subordinated Indebtedness), the Series D Notes (as
defined in the definition of Qualifying Subordinated
Indebtedness), and notes representing interest paid in kind
with respect to the Series C Notes and the Series D Notes by
issuance of additional subordinated indebtedness;
(b) All obligations of such Person to pay the
deferred purchase price of property or services;
(c) All indebtedness secured by a lien on any asset
of such Person whether or not such indebtedness is assumed by
such Person;
(d) All obligations, contingent or otherwise, of such
Person directly or indirectly guaranteeing any indebtedness or
other obligation of any other Person or in any manner
providing for the payment of any indebtedness or other
obligation of any other Person or otherwise protecting the
holder of such indebtedness against loss (excluding
endorsements for collection or deposit in the ordinary course
of business);
(e) The amount of all reimbursement obligations and
other obligations of such Person (whether due or to become
due, contingent or otherwise) in respect of letters of credit,
bankers' acceptances, surety or other bonds (but excluding
surety or other bonds in favor of Governmental Authorities
obtained by Borrower in connection with the development of
subdivisions in the ordinary course of Borrower's business)
and similar instruments;
(f) All Capitalized Lease Obligations;
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(g) All other obligations (including contingent
obligations, trade payables and accrued expenses) that would
be included as liabilities on a balance sheet prepared in
accordance with GAAP; and
(h) All Disqualified Stock of such Person.
"Intangible Assets" means all intangible assets under GAAP,
including, without limitation, copyrights, franchises, goodwill,
licenses, non-competition covenants, organization or formation
expenses, patents, service marks, service names, trademarks, trade
names, write-up in the book value of any asset in excess of the
acquisition cost of the asset, any amount, however designated on the
balance sheet, representing the excess of the purchase price paid for
assets or stock acquired over the value assigned thereto on the books
of Borrower, loans and advances to partners and officers, employees, or
directors of Borrower (or members of their immediate families),
unamortized leasehold improvement expense not recoverable at the end of
the lease term, unamortized debt discount, and deferred discount.
"Interest Expense" means for any period, without duplication,
the aggregate amount of interest which, in conformity with GAAP, would
be set opposite the caption "Interest Expense" or any like caption on a
income statement for Borrower for such period, including, without
limitation, imputed interest included in Capitalized Lease Obligations,
all commissions, discounts and other fees and charges owed with respect
to letters of credit, the net cost associated with rate hedging
obligations, the interest portion of any deferred payment obligation,
amortization of discount or premiums, if any, and all other non-cash
interest expense. Interest Expense includes interest on the Qualifying
Subordinated Indebtedness, to the extent actually paid in cash or Cash
Equivalents and also includes interest payments actually made on such
Qualifying Subordinated Indebtedness by the issuance of additional
Qualifying Subordinated Indebtedness. Interest Expense does not include
any of the foregoing, to the extent related to Builder Bonds and
Mortgage Operations, if such Interest Expense related to Builder Bonds
and Mortgage Operations would otherwise be included in Interest Expense
because of a consolidation of the Builder Bonds and Mortgage Operations
with Borrower under GAAP.
"Interest Incurred" means, for any period, without
duplication, the aggregate amount of interest which, in conformity with
GAAP, would be set opposite the caption "Interest Expense" or any like
caption on an income statement for Borrower for such period, including,
without limitation, imputed interest included in Capitalized Lease
Obligations, all commissions, discounts and other fees and charges owed
with respect to letters of credit, the net cost associated with rate
hedging obligations, the interest portion of any deferred payment
obligation, amortization of discounts or premiums, if any, all other
non-cash interest expense and all capitalized interest. Interest
Incurred includes interest on the Qualifying Subordinated Indebtedness,
to the extent actually paid in cash or Cash Equivalents but does not
include interest payments actually made on such Qualifying Subordinated
Indebtedness by the issuance of additional Qualifying Subordinated
Indebtedness. Interest Incurred does not include any of the foregoing,
to the extent related to Builder Bonds and Mortgage Operations, if such
Interest Incurred related to Builder Bonds and Mortgage Operations
would otherwise be included in Interest Incurred because of a
consolidation of the Builder Bonds and Mortgage Operations with
Borrower under GAAP.
14
"Interest Period" means, for each Fixed Rate Advance, the
period commencing on the date of such Fixed Rate Advance and ending on
the last day of the period selected by Borrower pursuant to the
provisions of this Agreement, and, thereafter, each subsequent period
commencing on the last day of the immediately preceding Interest Period
and ending on the last day of the period selected by Borrower pursuant
to the provisions herein. The duration of each Interest Period will be
30, 60 or 90 days, as selected by Borrower in the request for a Fixed
Rate Advance, provided, however, that:
(a) Whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period will be extended to occur on
the next succeeding Business Day;
(b) No Interest Period with respect to any Advance
will extend beyond the Maturity Date; and
(c) Borrower will select Interest Periods such that
the aggregate outstanding amount of all Fixed Rate Advances on
the date a Commitment Amount reduction becomes effective
pursuant to Section 2.1(d) will not exceed the reduced
Commitment Amount.
"Interest Rate" means the Variable Rate or the Fixed Rate, as
applicable.
"Investment" means, with respect to any Person, any loan or
advance made by such Person to any other Person; any contingent
liabilities of such Person undertaken with respect to Indebtedness of
any other Person; and any ownership or similar interest held by such
Person in any other Person.
"Involuntary Lien" means any Lien or Encumbrance securing the
payment of money or the performance of any other obligation created
involuntarily under any law, ordinance, regulation, or rule, or
otherwise and any claim of any such Lien or Encumbrance. For purposes
of the Loan Documents and the rights and remedies thereunder, "stop
notices" or similar notices and demands from Persons performing work or
supplying materials with respect to any Collateral and who are
asserting lien rights, shall be considered as Involuntary Liens.
"Late Charges" means the charges described in Section 2.4(f).
"Land Project" means Entitled Land that has satisfied the
requirements in Section 5.3, prior to the inclusion of such land in
Eligible Collateral as a Development Project .
"Land Project Sublimit" means the lesser of (a) 10% of the
Commitment Amount or (b) $17,000,000; provided, however, that the Land
Project Sublimit is subject to reduction and increase pursuant to the
provisos in the definition of Development and Finished Lot Sublimit.
"LC Bank" means BOAZ or such other Bank as Borrower, Agent and
such other Bank may agree upon from time to time to issue Letters of
Credit; provided, however, that if an Event of Default or Unmatured
Event of Default has occurred and is continuing, the consent of
Borrower shall not be required.
15
"Letter of Credit Agreement" means the LC 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 the LC Bank from time to time.
"Letters of Credit" means the letters of credit issued from
time to time pursuant to Article 3.
"LIBOR Rate" means the rate per annum equal to the rate per
annum obtained by dividing:
(a) The rate of interest determined by the Agent,
based on Telerate System reports or such other source as may
be selected by the Agent, to be the "London Interbank Offered
Rate" at which deposits in United States dollars are offered
by major banks in London, England, 2 Business Days before the
first day of the respective Interest Period, by
(b) A percentage equal to 100% minus the Eurodollar
Rate Reserve Percentage for the period equal to such Interest
Period.
"Lien or Encumbrance" and "Liens and Encumbrances" mean,
respectively, each and all of the following:
(a) Any lease or other right to use;
(b) 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 (including, without
limitation, Involuntary Liens) and whether arising by
agreement, document, or instrument, under any law, ordinance,
regulation, or rule (federal, state, or local), or otherwise;
and
(c) Any option, right of first refusal, or other
interest or right.
"Loan" means the credit facility made available to Borrower in
accordance with this Agreement.
"Loan Documents" means this Agreement, the Notes, the Deeds of
Trust, the Environmental Agreements, and any other guaranties,
agreements, documents, or instruments now or hereafter evidencing,
guarantying or securing the Obligations and any and all Advances and
Protective Advances made hereunder, as this Agreement, the Notes, the
Deeds of Trust, the Environmental Agreements, and such other
agreements, documents, and instruments may be amended, modified,
extended, renewed, restated, or supplemented from time to time.
"Lot" means an individual lot or condominium unit designated
as such on a final subdivision plat or map, subdivision filing, or
condominium declaration or plan.
"Lot Allocation" means, with respect to each Unit included in
Eligible Collateral, the Maximum Allowed Advance for the Unit less an
allocation of $2000 for soft costs of construction
16
of the Unit and less the hard costs of construction of the Unit as set
forth in the applicable Unit Budget.
"Material Adverse Change" means any change in the assets,
liabilities, financial condition, or results of operations of Borrower
or any other event or condition with respect to Borrower that
materially and adversely affects the likelihood of performance by
Borrower of any of the Obligations, the ability of Borrower to perform
any of the Obligations, the legality, validity, or binding nature of
any of the Obligations, or any Lien or Encumbrance securing any of the
Obligations or the priority of any Lien or Encumbrance securing any of
the Obligations, except that such change, event, or condition with
respect to a Lien or Encumbrance will not be a Material Adverse Change
if it affects Collateral other than Eligible Collateral, or, if it
affects Eligible Collateral, if within 1 Business Day after notice from
the Agent to the Borrower of the occurrence of such change, event, or
condition, Borrower removes the affected item from Eligible Collateral.
"Maturity Date" means September 30, 1999 (unless extended in
connection with an extension of the Conversion Date).
"Maximum Allowed Advance" means the following, provided,
however, that in no event will the Maximum Allowed Advance for any Unit
exceed 90% of the Unit Cost for that Unit:
(a) With respect to each Presold Unit, the lesser of
80% of the Unit Appraised Value for that Unit or 80% of the
price at which the Unit is to be sold to a purchaser under the
applicable Purchase Contract for that Unit.
(b) With respect to each Spec Unit, the Unit
Appraised Value for that Unit multiplied by 75%.
(c) With respect to each Model Unit, the Unit
Appraised Value for that Unit multiplied by 75% for a Model
Unit during the first 24-Calendar Month period after its Unit
Eligibility Date, 65% for the next 6 Calendar Months (Calendar
Months 25 through 30) after its Unit Eligibility Date, 60% for
the next 6 Calendar Months (Calendar Months 31 through 36)
after its Unit Eligibility Date, and 0% after 36 Calendar
Months after its Unit Eligibility Date; provided, however,
that if the Unit is entitled to remain in Eligible Collateral
as a Model Unit pursuant to Section 4.2(c) beyond the
36-Calendar Month period, the Maximum Allowed Advance will be
computed by multiplying the Unit Appraised Value for that Unit
by 55% during such time period as the Agent agrees that the
Unit may remain as Eligible Collateral.
(d) With respect to each Land Project, the lesser of
50% of the A&D Project Appraised Value for that Land Project,
or 50% of the Acquisition Cost for that Land Project.
(e) With respect to each Development Project, the
lesser of 70% of the A&D Project Appraised Value for that
Development Project, or 70% of the Total Cost for that
Development Project.
(f) With respect to each Finished Lot Project, the
lesser of 75% of the A&D Project Appraised Value for that
Finished Lot Project, or 75% of the Total Cost for that
17
Finished Lot Project; provided, however, that with respect to
Finished Lot Projects in Option/Purchase Subdivisions, the
Total Cost for Lots in such Finished Lot Projects will be
computed as set forth in the definition of Unit Lot Cost.
"Model Unit" means a Unit constructed initially for inspection
by prospective purchasers that is intended for use as such and is
actually used as such (other than during any period in which such Unit
is under construction).
"Model Unit Sublimit" means the lesser of (a) 20% of the
Commitment Amount or (b) $34,000,000.
"Monetary Default" means any Event of Default under Section
10.1(a).
"Net Income" means, for any fiscal year or other fiscal
period, the net income of Borrower for such fiscal year or other fiscal
period, determined in accordance with GAAP.
"Net Sales Proceeds" means in the case of a Unit, the gross
sales price of the Unit (including, without limitation, all options and
upgrades) set forth in the Purchase Contract for such Unit (expressed
in U.S. dollars), less customary tax and assessment prorations;
reasonable and customary real estate brokerage commissions paid to
third party brokers unaffiliated with Borrower; reasonable and
customary closing costs; and any amounts in the nature of profit splits
or premiums payable to third parties, such as land bankers, in
accordance with an option or purchase agreement pursuant to which
Borrower is purchasing or has purchased the Lot on which the Unit is
constructed.
"Non-cash Charges" 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 Impositions and uncollectible
accounts) for such period, as determined in accordance with GAAP,
provided that Non-cash Charges will exclude any charges that are not
included for the purpose of determining Net Income; any charges that
are included for the purpose of determining Interest Expense; and any
charges representing capitalized selling, general and administrative
expenses that are expensed during such period as cost of goods sold.
"Notes" means the promissory notes executed by Borrower and
payable to each of the Banks in the amount of their respective Pro Rata
Interest in the maximum Commitment Amount, evidencing Borrower's
indebtedness hereunder, as such notes may be amended, modified,
extended, renewed, supplemented or restated from time to time,
including, without limitation, such promissory notes as may be issued
to Banks after the date of this Agreement.
"Obligations" means the obligations of Borrower under the Loan
Documents.
"Off-Site Improvement Construction Costs" means the aggregate
"hard" and "soft" costs to plan, design, and construct the applicable
Off-Site Improvements as set forth in the applicable A&D Project
Budget; provided, however, that with respect to Finished Lots, the
Off-Site Improvement Construction Costs shall be the lesser of (a) the
amount of "hard" costs and "soft" costs to plan, design, and construct
the Improvements as set forth in the applicable A&D Project Budget
18
or (b) the amount of such costs actually incurred by Borrower to plan,
design, and construct such Off-Site Improvements.
"Off-Site Improvements" means offsite improvements which may
exist or which are to be constructed (including, without limitation,
curbs, grading, landscape, sprinklers, storm and sanitary sewers,
paving, sidewalks, and utilities) necessary to make the land suitable
for the construction of single family homes or condominiums, and any
common area improvements which may exist or which are to be
constructed, together with the associated fixtures and other tangible
personal property located or used in or on land on which such
improvements are constructed.
"Option/Purchase Agreement" means a fully executed option or
purchase agreement between Borrower and the seller of any Lots
providing for periodic purchases of Lots.
"Option/Purchase Subdivision" means a Subdivision that (a) has
been approved as provided in Section 5.2, (b) has not been a Land
Project or a Development Project, and (c) is owned by Borrower or, if
not owned by Borrower, is a Subdivision in which Borrower is entitled
from time to time to purchase Lots pursuant to an Option/Purchase
Agreement.
"Other Amounts" means all amounts, other than principal and
interest, payable by Borrower under any of the Loan Documents to or for
the benefit of the Agent and/or any of the Banks, including, without
limitation, fees and expenses pursuant to Section 2.6, late charges
pursuant to Section 2.4(f), and payments pursuant to Sections 2.3(h),
2.3(i), and 2.5.
"Other Default" means any Event of Default under this
Agreement or any of the other Loan Documents, other than a Monetary
Default or a Financial Covenant Default.
"Outstanding Borrowings", at any time, means the sum of:
(a) The aggregate amount of then outstanding Advances
and Protective Advances;
(b) The aggregate amount of then outstanding and
undrawn Letters of Credit less the amount of cash, if any,
deposited in the Cash Collateral Account pursuant to Section
3.3 in respect of, and specifically allocated to, such Letters
of Credit; and
(c) The aggregate amount of then outstanding
Reimbursement Amounts that have not been paid by Advances or
otherwise.
"Permitted Exceptions" means:
(a) Involuntary Liens for Impositions that are not
delinquent;
(b) Involuntary Liens (other than for Impositions)
with respect to which Borrower satisfies each of the following
requirements: (i) Borrower contests the validity of such
Involuntary Lien in good faith by appropriate legal
proceedings; (ii) Borrower gives written notice to the Agent
of Borrower's intent to contest or object to the same; (iii)
Borrower demonstrates to the Agent's satisfaction that the
procedures will conclusively
19
operate to prevent the sale of any part of the property
subject to the applicable Deed of Trust to satisfy the
Involuntary Lien prior to final determination of such
proceedings; (iv) the aggregate amount of such Involuntary
Liens does not exceed $1,000,000 (unless otherwise approved by
a Bank Supermajority); and (v) Borrower takes any and all
other actions (including, without limitation, obtaining bonds,
title insurance endorsements, or other security) as the Agent
may deem necessary or appropriate in order to prevent the sale
of any Collateral to satisfy the Involuntary Lien and prevent
any impairment of any such Collateral or, if such Collateral
is Eligible Collateral, Borrower removes the affected
Collateral from the Eligible Collateral;
(c) All items, except Impositions and Liens and
Encumbrances (other than Impositions and Liens and
Encumbrances referenced in and permitted by the other
subsections of this definition), in Schedule B to any Title
Policy that have been approved by the Agent;
(d) Sale and Leaseback Transactions with respect to
Model Units; and
(e) Liens and Encumbrances permitted pursuant to
Section 9.13.
"Person" means a natural person, a partnership, a joint
venture, an unincorporated association, a limited liability company, a
corporation, a trust, any other legal entity, or any Governmental
Authority.
"Presold Unit" means a Unit that is subject to a Purchase
Contract.
"Prime Rate" means the rate per annum most recently announced
by BOAZ or its successors, in Phoenix, Arizona, as its "prime rate," as
in effect from time to time. The Prime Rate (and the Variable Rate)
will change on each day that the announced prime rate changes. The
prime rate is not necessarily the best or lowest rate offered by BOAZ,
and BOAZ may lend to its customers at rates that are at, above, or
below its "prime rate."
"Product Line" means a group of Units which, in the ordinary
course of Borrower's business, are marketed together under a common
plan based upon the type of Unit constructed and the price of such
Units.
"Pro Rata Interest", with respect to any individual Bank, or
Pro Rata Interests, with respect to all of the Banks, as the case may
be, means the applicable percentage or percentages of the Commitment
Amount assigned to each of the Banks as set forth on the signature
pages to this Agreement, as such percentages may change from time to
time pursuant to Article 11.
"Protective Advance" means amounts advanced by the Agent, on
behalf of the Banks, to pay the following amounts:
(a) All amounts that are necessary to protect the
validity, priority and enforceability of the liens,
encumbrances and security interests in favor of Agent and the
Banks arising pursuant to the Loan Documents (such amounts to
include, without limitation,
20
taxes, assessments and other Liens and Encumbrances that may
have a priority superior to the priority of the Liens and
Encumbrances of the Banks on the Collateral); and
(b) All insurance premiums that are necessary to
insure the Collateral against loss, damage or destruction
pursuant to the requirements of the Loan Documents.
"Purchase Contract" means a bona fide written agreement
between Borrower and a purchaser who is not an Affiliate of Borrower
entered into in the ordinary course of Borrower's business and pursuant
to which such purchaser has agreed to purchase a Unit, which agreement
must be accompanied by a ▇▇▇▇ ▇▇▇▇▇▇▇ money deposit or down payment of
at least $1,000 which is nonrefundable except in the event of a default
by the Borrower, as seller under the agreement.
"Qualifying Subordinated Indebtedness" means:
(a) Borrower's 14 1/2% Series C Subordinated Notes,
due November 1, 2000, in the aggregate face amount of
$35,000,000 (the "Series C Notes"), plus the amount of all
interest accrued on such subordinated indebtedness and
including interest paid by the issuance of additional
subordinated indebtedness; and
(b) Borrower's 14 1/2% Series D Subordinated Notes,
due November 1, 2000, in the aggregate face amount of
$45,000,000 (the "Series D Notes"), plus the amount of all
interest accrued on such subordinated indebtedness and
including interest paid by the issuance of additional
subordinated indebtedness;
provided, however, that in order to be considered as Qualifying
Subordinated Indebtedness, the Series C Notes and the Series D Notes
(and any additional subordinated indebtedness issued as payment in kind
for accrued interest) must be in form satisfactory to the Agent, be
fully subordinated to the Obligations with no payments (other than
interest paid in kind by the issuance of additional subordinated
indebtedness) until November 14, 1997, and have a maturity date after
the Maturity Date under this Agreement. Thereafter, only interest on
the Series C Notes, the Series D Notes, and any other Qualifying
Subordinated Indebtedness will be payable and then only to the extent
that the making of such interest payment would not, after giving effect
to such payment, cause or contribute to a violation of any of the
Financial Covenants or otherwise cause or contribute to an Event of
Default or Unmatured Event of Default, except that no such interest
payment shall be made (i) if the cumulative Dividends paid (taking into
account the interest proposed to be paid) in any fiscal quarter and in
the immediately preceding 3 fiscal quarters, taken as a whole, are
greater than 25% of cumulative consolidated Net Income (after payment
of income, franchise and other taxes) of Borrower for such fiscal
quarter and the immediately preceding 3 fiscal quarters, taken as a
whole, computed according to GAAP; or (ii) the effect thereof is to
cause the ratio of (1) EBITDA for the fiscal quarter in which the
interest payment is proposed to be made and for the immediately
preceding 3 fiscal quarters, taken as a whole, to (2) the sum of (A)
Interest Incurred for that same period and (B) the Dividends declared,
made, paid and proposed to be declared, made or paid with respect to
the same period (taking into account the interest proposed to be paid),
to be less than 2.0 to 1. Upon the occurrence of an Event of Default or
an Unmatured Event of Default, no payments of principal or interest
will be payable on the Series C Notes, the Series D Notes, or any other
Qualifying Subordinated Indebtedness. If, at any time, the Series C
Notes, the Series D Notes, or any other notes representing Qualifying
Subordinated Indebtedness fail to satisfy the requirements
21
set forth in this provision for Qualifying Subordinated Indebtedness,
such Series C Notes, Series D Notes, or other notes, as the case may
be, will no longer be Qualifying Subordinated Indebtedness.
"Raw Land" means unimproved land owned and held by Borrower
for development into Subdivisions but which is not yet Entitled Land.
"Reclassification Adjustment" means, for any Unit reclassified
as to type pursuant to any provision of this Agreement, a change in the
Maximum Allowed Advance for such Unit to that applicable to the type of
Unit as so reclassified.
"Regulatory Change" means any change effective after the date
of this Agreement in United States federal, state, or foreign law,
regulations, or rules or the adoption or making after such date of any
interpretation, directive, or request applying to a class of banks,
including any of the Banks, of or under any United States federal,
state, or foreign law, regulation, or rule (whether or not having the
force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
"Reimbursement Amount" means the amount Borrower is obligated
to pay to the LC 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 will be the amount of the draft or acceptance and
all costs, expenses, fees, and other amounts then payable by Borrower
to the LC Bank under the Letter of Credit Agreement.
"Reimbursement Obligation" means Borrower's obligations under
Section 3.4 and each Letter of Credit Agreement to reimburse the LC
Bank with respect to drawings under any Letter of Credit and to repay
each Bank with respect to any Advances to pay a Reimbursement Amount.
"Requirements" means any and all obligations, other terms and
conditions, requirements, and restrictions in effect now or in the
future by which Borrower or any or all of the Collateral are bound or
which are otherwise applicable to any or all of the Collateral,
construction of any Units or Off-Site Improvements, or occupancy,
operation, ownership, or use of Lots, Units, Off-Site Improvements, or
A&D Projects, including, without limitation, such obligations; other
terms and conditions, restrictions, and requirements imposed by any
law, ordinance, regulation, or rule (federal, state, or local); any
Approvals and Permits; any Permitted Exceptions; any condition,
covenant, restriction, easement, right-of-way, or reservation
applicable to such Collateral; any insurance policies; any other
agreement, document, or instrument to which Borrower is a party or by
which Borrower or any of the Collateral or the business or operations
of Borrower is bound; or 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 Collateral
is bound.
"RICO Related Law" means the Racketeer Influenced and Corrupt
Organizations Act of 1970 and any other federal or state law, for which
forfeiture of assets is a potential penalty.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party,
providing for the leasing to Borrower of any property, whether owned at
the date of this Agreement or thereafter acquired, which has been or is
to be sold or transferred by Borrower to such Person or to any other
Person to whom funds have been or are
22
to be advanced by such Person on the security of such Property if,
after giving effect to such arrangement, Borrower operates the business
or otherwise utilizes such Property.
"Senior Notes" means Borrower's 12 1/2% Series A Senior Notes,
due May 1, 2000, in the original aggregate amount of $60,000,000 and
Borrower's 12 1/2% Series B Senior Notes, due May 1, 2000, in the
original aggregate amount of $10,000,000.
"Settlement Date" means the second Business Day after each
Cut-Off Date.
"Spec Unit" means a Unit constructed for the purpose of
addition to Borrower's inventory of Units and which is not subject to a
Purchase Contract and is not a Model Unit.
"Subdivision" means a group of Lots that are intended to be
marketed and sold as a single Product Line or otherwise marketed and
sold together regardless of whether dwellings in such group of Lots are
to be constructed at the same time or in phases.
"Subdivision Documents" means a plat map or similar document
covering a Subdivision and dividing the Subdivision into lots in
accordance with the Requirements of the applicable Governmental
Authorities, or in the case of lots consisting of condominium spaces,
the condominium declaration, condominium plan or equivalent document or
the documents annexing the lots to an existing condominium declaration.
"Tangible Net Worth" means, as to Borrower, at any date, (a)
the sum of all capital accounts determined in conformity with GAAP,
plus (b) the total amount of Qualifying Subordinated Indebtedness, less
(c) Intangible Assets.
"Term Out Period" means the period commencing on the first day
of the Calendar Month following the Calendar Month in which the
Conversion Date occurs and ending on the Maturity Date.
"Test Date" means the last day of each of Borrower's fiscal
quarters.
"Title Company" means a title insurance company that issues a
Title Policy.
"Title Policy" and "Title Policies" mean, respectively, each
and all title insurance policies and endorsements thereto issued
pursuant to the requirements of this Agreement and any reinsurance or
co-insurance agreements and endorsements. Each Title Policy shall be an
American Land Title Association loan policy of title insurance (1990
form) with the creditor's rights exception and arbitration provisions
deleted and with a revolving credit endorsement and such other
endorsements as the Agent may require.
"Total Cost" means the sum of the Acquisition Cost and the
Off-Site Improvement Construction Costs.
"Total Debt" means, at the applicable date of determination,
all Indebtedness and Contingent Liabilities of Borrower, excluding,
however, Qualifying Subordinated Indebtedness, any liabilities included
in Builder Bonds and Mortgage Operations, and the amount of
reimbursement
23
obligations of Borrower arising under letters of credit, to the extent
that such letters of credit have not been drawn upon and provide
security for other unpaid obligations of Borrower that are included as
Indebtedness.
"Type" means, with respect to any Advance of the Loan, its
nature as a Fixed Rate Advance or a Variable Rate Advance.
"UDC Mortgage" means UDC Mortgage Corporation, an Arizona
corporation.
"Unit" means a residential dwelling constructed or to be
constructed on a Lot, together with the associated Lot.
"Unit Appraisal" means a FNMA base plan type Appraisal of a
Unit.
"Unit Appraised Value" means the value of the Unit (including
the associated Lot) as determined by the Agent in accordance with the
Appraisal Policy after its review of the applicable Unit Appraisal.
Unit Appraised Value will be based on the standard Unit Plans and
Specifications, without any value added for Lot premiums, purchaser
options, and upgrades; provided, however, that to the extent that the
Unit Appraised Value for any Unit included in Grandfathered Collateral
includes any value for Lot premiums, purchaser options, and upgrades,
the Unit Appraised Value for such Unit shall continue to be calculated
to include the value added for such Lot premiums, purchaser options,
and upgrades; and provided further, the Unit Appraised Value for Model
Units will not include any value for furniture or other furnishings or
for fixtures and equipment added to the Unit to prepare it for use as a
Model Unit.
"Unit Budget" means the amount allocated by Borrower to the
hard and soft costs associated with the construction of each Unit
included as Eligible Collateral, as set forth in budgets and cost
breakdowns delivered to Agent. The Unit Budget will specifically set
forth the building permit fees, tap fees, impact fees, development
fees, and other municipal, county, school district, and special
district fees and assessments required prior to the start of
construction, and the amount of each Unit Budget will be set forth in
the Borrowing Base Report. The Unit Budget will not include the Unit
Lot Cost. The Unit Budget will be subject to review and approval by the
Agent.
"Unit Collateral Value" means a valuation of each Unit based
upon the Unit's stage of construction. The Unit Collateral Value for a
particular Unit equals the sum of (a) the Lot Allocation for the Unit
and (b) the result obtained by subtracting the Lot Allocation for the
Unit from the Maximum Allowed Advance (taking into account any
applicable Reclassification Adjustment) for the Unit and then
multiplying the difference by the Unit Completion Percentage.
"Unit Completion Percentage" means, for any Unit, the current
percentage of construction completed as reflected in each Borrowing
Base Report, based upon the ratio of:
(a) Costs for material and labor incurred and
actually incorporated into such Unit (other than the Unit Lot
Cost) determined based on the stage of construction of the
Unit, to
24
(b) The Unit Budget,
with such percentage then being rounded down to the nearest 5%.
"Unit Construction Threshold" means, with respect to a Unit, a
Unit Completion Percentage of at least 5%.
"Unit Cost" for a particular Unit means the sum of the Unit
Lot Cost for the Unit, the hard costs for material and labor to
construct the Unit, and $2000 as an allocation for allowable soft
costs.
"Unit Eligibility Date" means, with respect to each Unit, the
date on which that Unit is first included in Eligible Collateral as a
Unit pursuant to this Agreement, as reflected on the Borrowing Base
Report, and regardless of whether periods exist during which such Unit
is not included as Eligible Collateral.
"Unit Lot Cost" means, with respect to each Lot included in
Eligible Collateral, the cost of such Lot as determined in accordance
with GAAP; provided, however, that if the Agent, in its sole and
absolute discretion, at any time disapproves Borrower's "capitalization
policy" as it affects the determination of such Unit Lot Cost, then the
Unit Lot Cost shall be the actual acquisition cost to Borrower for such
Lot, but excluding capitalized interest, property maintenance expenses,
Impositions, and similar items even though such items may be
capitalized by Borrower. In determining Unit Lot Cost, Borrower may not
include amounts paid by Borrower for such Lot that represent
acceleration of the prorated aggregate purchase price payable for all
Lots in the applicable Approved Subdivision under an Option/Purchase
Agreement.
"Unit Plans and Specifications" means plans and specifications
for construction of a particular type of Unit that have been prepared
by an architect, together with any amendments or modifications to those
plans and specifications.
"Unmatured Event of Default" means any failure by Borrower to
observe or perform any of Borrower's obligations under any of the Loan
Documents or any other violation by Borrower of any of the terms and
conditions of any of the Loan Documents that with notice, passage of
time, or both would be an Event of Default.
"Variable Rate" means an interest rate established from time
to time based on the Prime Rate.
"Variable Rate Advance" means an outstanding Advance that
bears interest at a Variable Rate.
25
ARTICLE 2
LOAN FACILITY
2.1 Loan Facility.
(a) Commitment to Make Advances and Issue Letters of Credit.
Subject to the terms and conditions of this Agreement and from time to
time prior to the Maturity Date, the Banks agree, severally and not
jointly, to make Advances to Borrower in accordance with their
respective Pro Rata Interests, and the LC Bank agrees to issue Letters
of Credit, up to in all cases, in the aggregate as to both Letters of
Credit and Advances, the current Available Commitment as determined
pursuant to the most current Borrowing Base Report.
(b) Revolving Nature of Loan Facility. Advances repaid may be
re-borrowed on a revolving basis through the Maturity Date. Although
the outstanding principal of the Notes may be zero from time to time,
the Loan Documents will remain in full force and effect until the
Commitment terminates and all Obligations are paid and performed in
full. Upon the occurrence of an Event of Default or an Unmatured Event
of Default, the Agent may suspend or terminate the Commitment and the
LC Bank may suspend or terminate the obligation to issue Letters of
Credit, all as provided in Section 10.2. The obligation of Borrower to
repay Advances will be evidenced by the Notes.
(c) Extension of Conversion Date. Borrower may request
extensions of the Conversion Date by making such request in writing not
more than 180 days and not less than 120 days prior to the Conversion
Date in effect prior to the extension request. The Agent and the Banks
have no obligation to extend the Conversion Date, and the Conversion
Date shall not be extended unless all of the Banks and the Agent have
agreed to do so in writing in their sole and absolute discretion. If
Borrower's request for extension is approved, then the extension of the
Conversion Date shall be for a period of 1 year. If certain of the
Banks ("Non-Consenting Banks") decline to extend the Conversion Date,
then with the approval of the other Banks (the "Consenting Banks") in
their sole and absolute discretion:
(i) The Consenting Banks may purchase the interests
of the Non-Consenting Banks on such terms and conditions as
the Consenting Banks and Non-Consenting Banks may agree upon,
in their sole discretion;
(ii) Borrower may arrange for another financial
institution acceptable to the Agent in its sole and absolute
discretion, to purchase the interest of the Non-Consenting
Banks on such terms and conditions as are acceptable to the
Non-Consenting Banks, in their sole discretion; or
(iii) Borrower may consent to a reduction in the Pro
Rata Interest of the NonConsenting Banks, if after giving
effect to such reduction, the Non-Consenting Banks agree, in
their sole and absolute discretion, to become Consenting Banks
and the other Consenting Banks approve such reduction in their
sole and absolute discretion.
(d) Term Out. From and after the Conversion Date, the
Commitment Amount will be automatically reduced on the last day of the
3rd Calendar Month in the Term Out Period and on the
26
last day of each third Calendar Month thereafter (each, a "Reduction
Date"), with the amount of each such reduction to be equal to one-sixth
of the Commitment Amount in effect as of the day prior to commencement
of the Term Out Period.
2.2 Advances.
(a) Method for Advances. Advances may be made by the Agent on
behalf of the Banks at the written request of the Person or Persons
designated by Borrower from time to time on the Agent's form of
signature authorization; provided, however, that the Agent shall have
acknowledged receipt of any changes in the Person or Persons designated
by Borrower, and such Person or Persons designated by Borrower will
have executed a new signature authorization form. Subject to Section
2.1 and the other terms and conditions of this Agreement (including
those hereinafter set forth), such Person or Persons are hereby
authorized by Borrower to request Advances up to the amount of the
Available Commitment less Outstanding Borrowings at the time the
Advance is requested (determined pursuant to the most recent Borrowing
Base Report) not more frequently than 1 time per Business Day (except
as otherwise provided in Section 11.3(c)) in amounts of not less than
$250,000 per request (subject to the minimum size of Fixed Rate
Advances, as set forth in Section 2.3(e)), and to direct the
disposition of the proceeds of Advances until written notice of the
revocation of such authority is received from Borrower by the Agent and
the Agent has had a reasonable time to act upon such notice. The Agent
has no duty to monitor for Borrower or to report to Borrower the use of
proceeds of Advances. Subject to the satisfaction of all applicable
terms and conditions, including the timely giving by Borrower of a
Borrowing Notice under Section 2.3(e), the Agent will make the
requested advance on or before noon on the borrowing date specified in
the Borrowing Notice.
(b) Use of Advances. Advances may be used only to pay or
reimburse Borrower for:
(i) Costs, expenses, and fees actually incurred and
paid (or to be paid from the requested Advance) by Borrower in
connection with the construction of Units that constitute
Eligible Collateral, to the extent included in the Unit Budget
for a particular Unit, and Lot Allocation amounts, to the
extent included in Unit Collateral Value;
(ii) A&D Project costs, expenses, and fees actually
incurred and paid (or to be paid from the requested Advance)
by Borrower for A&D Projects that constitute Eligible
Collateral to the extent included in the A&D Project Budget
for a particular A&D Project;
(iii) Monthly interest payments payable pursuant to
Section 2.4(a);
(iv) Working capital purposes; provided, however,
that the maximum amount of Advances that Borrower is entitled
to have outstanding at any time under this Section 2.2(b)(iv)
is equal to the excess of the Collateral Value of the
Borrowing Base over the Outstanding Borrowings at the time of
the Advance; and
(v) Amounts for which Borrower is permitted or
required to request Advances pursuant to Section 3.4;
27
provided, however, that the provisions of this Section 2.2(b) do not
restrict the Agent from making Protective Advances or the Banks from
making Advances upon the direction of the Agent as otherwise permitted
by this Agreement (such as pursuant to Section 3.3 or Section 2.6(e)).
In addition, the Banks may, but have absolutely no obligation to, make
Advances under this Commitment for other purposes and on such terms and
conditions as the Banks, in their sole and absolute discretion,
determine.
(c) Funding of Advances and Protective Advances and Settlement
of Payments. Funding of Advances and Protective Advances by the Banks
and settlement of payments received from Borrower will be settled
between the Banks in accordance with the provisions of Article 11.
Except to the extent set forth in Article 11, the Agent has no
obligation to fund Advances or Protective Advances except to the extent
of immediately available funds actually received by the Agent from the
Banks.
(d) Borrower Equity Requirements. Any other provision of this
Agreement to the contrary notwithstanding, Borrower will not be
entitled to an Advance until Borrower has established to the
satisfaction of the Agent that Borrower has first satisfied the
Borrower Equity Requirement for the A&D Project or Unit for which the
Advance is requested. If the Agent determines, at any time, that the
total cost to complete an A& D Project exceeds the A&D Project Budget
for that A&D Project, Borrower will not be entitled to any further
Advances until Borrower has first expended the amount of such excess.
2.3 Interest Rate Provisions.
(a) Pricing Matrix. All Advances will bear interest from the
date advanced at a per annum interest rate determined in accordance
with the following pricing matrix (the "Matrix") and the provisions of
this Section 2.3:
▇▇▇▇▇ ▇ ▇▇▇▇▇ ▇ ▇▇▇▇▇ ▇
========================= ================================== ================================= ==================================
Rate (P = Prime Rate) P + 1.0% P + .75% P + .50%
(L = LIBOR Rate) L + 325bp L + 300bp L + 275bp
------------------------- ---------------------------------- --------------------------------- ----------------------------------
Commitment Fee 1.0% .75% .50%
(Annualized)
------------------------- ---------------------------------- --------------------------------- ----------------------------------
Debt to Tangible Worth greater than or equal to 2.0:1 less than 2.0:1 less than or equal to 1.75:1
------------------------- ---------------------------------- --------------------------------- ----------------------------------
Interest Coverage less than or equal to 1.75:1 greater than 1.75:1 greater than or equal to 2.25:1
------------------------- ---------------------------------- --------------------------------- ----------------------------------
Available Liquidity greater than or equal to $15,000M greater than or equal to $20,000M greater than or equal to $25,000M
========================= ================================== ================================= ==================================
(b) Application of Tests. For purposes of the tests set forth
in the Matrix, within 60 days following the occurrence of each Test
Date (other than any Test Date that is a fiscal year end) and within
105 days following the occurrence of a Test Date that is a fiscal year
end, Borrower will compute the "Debt to Tangible Worth" calculation
according to the methodology specified in Section 8.2, the "Interest
Coverage" calculation according to the methodology specified in Section
8.3, and the "Available Liquidity" calculation according to the
methodology specified in Section 8.4,
28
each as of the Test Date, and will provide such computations to the
Agent, accompanied by the quarterly financial reports and records of
Borrower on which such computations are based (or annual financial
reports and records for computations relating to a Test Date that is a
fiscal year end) and by the certifications required by Section 7.4(g).
The Agent has the right to review and approve all of such computations
and make appropriate adjustments thereto, based on the information and
reports available to the Agent, and the Agent's decisions with respect
thereto will be final and conclusive, absent gross negligence, wilful
misconduct, or manifest error.
(c) Pricing. Through June 30, 1997, all Advances will bear
interest at the Level 1 rates set forth in the Matrix. Commencing July
1, 1997 and on the first day of each succeeding fiscal quarter
thereafter (each, a "Repricing Date"), the applicable Interest Rate
will be "re-priced", and, subject to the provisions of Section 2.5
relating to Fixed Rate Advances, Advances will bear interest from the
Repricing Date for the ensuing quarter to the next Repricing Date at
the level set forth in the Matrix corresponding to the results of the
Debt to Tangible Worth, Available Liquidity, and Interest Coverage
computations for the Test Date as indicated in the following table:
REPRICING DATE TEST DATE
-------------- ---------
January 1 Prior September 30
April 1 Prior December 31
July 1 Prior March 31
October 1 Prior June 30
Even though the financial reports necessary to calculate the financial
tests in the Matrix may not be available until after Repricing Dates
occurring on January 1, any re-pricing on such Repricing Dates will be
effective as of January 1, even though the computations may not have
been completed by January 1. In order to qualify for a reduction in
pricing, all three of the Debt to Tangible Net Worth, Available
Liquidity, and Interest Coverage tests for the appropriate level of
pricing must be met as of the relevant Test Date. Pricing shall be
increased, as of the next Repricing Date, if any of the Debt to
Tangible Net Worth, Available Liquidity, and Interest Coverage tests
are not met, with the pricing to increase to the pricing level in the
Matrix for which all of the three tests are met. Interest shall be
calculated on a 360-day year for all Advances, but, in any case, shall
be computed for the actual number of days in the period for which
interest is charged, which period shall consist of a 365- or 366-day
period, as applicable, on an annual basis.
(d) Default Interest Rate. Principal will bear interest at the
Interest Rate from the date of disbursement until the due date thereof,
whether due by acceleration or otherwise. Principal, interest, and
Other Amounts not paid when due and any judgment therefor will bear
interest from the due date or the judgment date, as applicable, until
paid at the Default Interest Rate, and such interest will be
immediately due and payable. In addition, from and after the occurrence
and during the continuance of an Event of Default, all principal,
interest and Other Amounts shall bear interest at the Default Interest
Rate, unless a Bank Supermajority elects otherwise, and such interest
will be immediately due and payable upon demand.
29
(e) Method of Selecting Types and Interest Periods for
Advances of the Revolving Loan. Borrower, when requesting an Advance,
shall designate the Type of Advance as either a Variable Rate Advance
or a Fixed Rate Advance. Borrower shall give the Agent irrevocable
notice (a "Borrowing Notice") in form satisfactory to the Agent no
later than (1) 10:00 a.m., Phoenix time 2 Business Days before the date
of the Advance for each Variable Rate Advance, and (2) 10:00 a.m.,
Phoenix time, 3 Business Days before the date of the Advance of each
Fixed Rate Advance, specifying:
(i) The borrowing date, which shall be a Business
Day, of such Advance;
(ii) The aggregate amount of such Advance; provided
that the amount of each Fixed Rate Advance shall be at least
$2,000,000 with integral multiples of $1,000,000 in excess
thereof;
(iii) The Type of Advance selected; provided,
however, that the aggregate number of Fixed Rate Advances
outstanding at any time shall not exceed 5; and
(iv) In the case of each Fixed Rate Advance, the
Interest Period applicable thereto.
(f) Conversion of Variable Rate Advances; Expiration of
Interest Period. Variable Rate Advances shall continue as Variable Rate
Advances unless and until such Variable Rate Advances are converted by
Borrower into Fixed Rate Advances. Each Fixed Rate Advance shall
continue as a Fixed Rate Advance until the end of the then applicable
Interest Period therefor, at which time such Fixed Rate Advance shall
be automatically converted into a Variable Rate Advance unless the
Borrower shall have given to the Agent a Conversion/Continuation Notice
(defined below) requesting that, at the end of such Interest Period,
such Fixed Rate Advance either continue as a Fixed Rate Advance for the
same or another Interest Period or be repaid. Subject to the terms of
this Section, Borrower may elect from time to time to convert all or
any part of an Advance of any Type to another Type or Types of Advance;
provided, however, that any conversion of any Fixed Rate Advance shall
be made on, and only on, the last day of the Interest Period applicable
thereto, and further provided that the aggregate number of Fixed Rate
Advance Interest Periods outstanding at any one time shall not exceed
5. Borrower shall give the Agent irrevocable notice in form
satisfactory to the Agent (a "Conversion/Continuation Notice") of each
conversion or continuation not later than 10:00 a.m., Phoenix time, at
least 2 Business Days, in the case of the conversion into a Variable
Rate Advance, or 3 Business Days, in the case of a conversion into or
continuation of a Fixed Rate Advance, prior to the date of the
requested conversion or continuation, specifying:
(i) The requested date, which shall be a Business
Day, of such conversion or continuation;
(ii) The aggregate amount and Type of the Advance
which is to be converted or continued; provided, that the
amount of Advances converted to Fixed Rate Advances shall be
at least $2,000,000 with integral multiples of $1,000,000 in
excess thereof; and
30
(iii) The amount and Types of Advances into which
such Advance is to be converted or continued and, in the case
of a conversion into or continuation of a Fixed Rate Advance,
the Interest Period applicable thereto.
(g) Maintenance of Funds. Notwithstanding any provision of the
Loan Documents to the contrary, each Bank is entitled to fund and
maintain its funding of all or any part of any Advance in any manner it
sees fit; provided, however, that for the purposes of this Agreement,
except as otherwise provided in Section 2.5, all determinations
hereunder will be made as if such Bank had actually funded and
maintained each Fixed Rate Advance during the Interest Period therefor
through the purchase of deposits having a maturity corresponding to the
last day of the Interest Period and bearing an interest rate equal to
the Fixed Rate for such Interest Period.
(h) Increased Costs; Capital Adequacy; Taxes.
(i) If the effect of any Regulatory Change will
either (A) impose, modify or deem applicable any reserve,
special deposit or similar requirement against Letters of
Credit issued by the LC Bank under this Agreement, (B) impose
on the Banks or any of them any other or similar condition
regarding Letters of Credit or the Commitment hereunder, or
(C) impose on the Banks any other or similar condition
regarding Fixed Rate Advances (other than the Eurodollar Rate
Reserve Percentage) and the result of any event referred to in
clauses (A), (B) or (C) of this Section 2.3(h)(i) will be to
increase the cost to the Agent or any or all of the Banks of
maintaining or participating in Letters of Credit or the
Commitment or the cost of making Fixed Rate Advances, then,
upon demand by the affected Person made through the Agent,
Borrower will, within 15 days of demand, pay to such Person,
from time to time as specified by or through the Agent,
additional amounts which are sufficient to compensate such
Person for such increased costs, together with interest on
each such amount from the date demanded to the 15th day
following the date of demand at the Variable Rate, and at the
Default Interest Rate thereafter. The affected Person will
furnish to Borrower a certificate setting forth in reasonable
detail the basis for the amount of each request for
compensation under this Section. Determinations by each Person
of the amounts required to compensate such Person will be
conclusive, absent manifest error. Each such Person will be
entitled to compensation pursuant to this Section 2.3(h)(i)
only for costs actually incurred. If such Person does not
provide notice of such increased costs pursuant to this
Section 2.3(h)(i) within 90 days after the occurrence giving
rise to such costs, such Person will only be entitled to
compensation for costs incurred from and after the date such
notice is given.
(ii) If any Bank reasonably determines that the
application or adoption of any Regulatory Change regarding
capital adequacy increases the capital required or expected to
be maintained by any Bank or any entity controlling a Bank,
and such increase is based upon the existence of such Bank's
obligations hereunder, then, upon demand by the affected Bank
or Banks made through the Agent, Borrower will pay to such
Bank or Banks, from time to time as specified by or through
the Agent and within 15 days of demand, additional amounts
which are sufficient to compensate such Bank or Banks for such
increased capital requirements, together with interest on each
such amount from the date demanded to the 15th day following
the date of demand at the Variable Rate, and at the Default
Interest Rate thereafter. The determination of any amount to
be paid by Borrower pursuant to this
31
Section will take into consideration the policies of the
affected Bank or any Person controlling the affected Bank with
respect to capital adequacy and will be based upon any
reasonable averaging, attribution and allocation methods. The
affected Bank or Banks will furnish to Borrower a certificate
setting forth in reasonable detail the basis for the amount of
each request for compensation pursuant to this Section.
Determinations by each Bank of the amounts required to
compensate such Bank will be conclusive, absent manifest
error.
(iii) Any and all payments made by Borrower under
this Agreement shall be made free and clear of, and without
deduction for, any and all Impositions. If Borrower shall be
required by law to deduct any Imposition from or in respect of
any sum payable hereunder to the Agent or any Bank, (A) the
sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions
applicable to additional sums payable under this Section
2.3(h)(iii)) the Agent or such Bank receives an amount equal
to the sum it would have received had no such deductions been
made, (B) Borrower shall make such deductions, and (C)
Borrower shall pay the full amount deducted to the relevant
taxing authority or other authority in accordance with
applicable law.
(iv) Borrower shall indemnify the Agent and each Bank
for, from and against the full amount of any and all
Impositions paid by the Agent or any Bank or any liability
(including penalties and interest) arising therefrom or with
respect thereto, whether or not such Impositions were
correctly or illegally asserted. This indemnification shall be
made within 15 days from the date the Agent or a Bank makes
written demand therefor.
(v) Each of the Agent and the Banks agrees to use
good faith effort to carry out its obligations under this
Agreement in such a way as to reduce the amount of Impositions
attributable to the Advances, as long as such actions would
not adversely affect such Person.
(vi) Without prejudice to the survival of any other
agreement of Borrower pursuant to this Agreement or the Loan
Documents, the agreements and obligations of Borrower
contained in this Section 2.3(h) shall survive the payment in
full of the Obligations.
(i) Illegality. Notwithstanding any provision of the Loan
Documents to the contrary, if the Agent notifies Borrower that as a
result of a Regulatory Change it is unlawful for any of the Banks to
make Advances at the Fixed Rate or to fund or maintain Fixed Rate
Advances, (i) the obligations of the Banks to make Advances at the
Fixed Rate, to continue Advances at a Fixed Rate, and to convert
Advances to the Fixed Rate will be suspended until the circumstances
causing such suspension no longer exist; and (ii) if such Regulatory
Change makes the maintenance of Advances at the Fixed Rate unlawful,
all Fixed Rate Advances will be converted to Variable Rate Advances and
if such conversion occurs prior to the end of any applicable Interest
Period, Borrower will pay all amounts required pursuant to Section 2.5.
Notwithstanding any other provision of the Loan Documents, if prior to
the commencement of any Interest Period, the Agent determines (A) that
United States dollar deposits in the amount of any Fixed Rate Advance
to be outstanding during such Interest Period are not readily available
to the Banks in the London interbank market, or (B) by reason of
circumstances affecting the London interbank market, adequate and
reasonable means do not exist for ascertaining the LIBOR Rate, then the
Agent will promptly give notice thereof to Borrower and the obligation
of the Banks to create, continue, or effect by conversion any Fixed
Rate
32
Advance in such amount and for such Interest Period will terminate
until United States dollar deposits in such amount and for the Interest
Period are again readily available in the London interbank market and
adequate and reasonable means exist for ascertaining the LIBOR Rate.
(j) Effective Rate. Borrower agrees to pay an effective rate
of interest that is the sum of (i) the interest rate provided in this
Agreement and (ii) any additional rate of interest resulting from any
other charges or fees paid or to be paid in connection herewith that
are determined to be interest or in the nature of interest.
2.4 Payments.
(a) Required Payments. Accrued and unpaid interest will be
calculated as of the first day of each Calendar Month, and shall be due
and payable monthly by Borrower to the Agent, as agent for and on
behalf of the Banks, in arrears within 5 days after the Agent gives
notice to Borrower of the interest due (which notice may be given
telephonically to the chief financial officer or treasurer of Borrower,
by facsimile or in writing). If any such interest payment is not made
within the 5-day period, in addition to any other rights or remedies
available to the Agent or the Banks, Borrower hereby irrevocably
authorizes and directs the Agent at its absolute and sole discretion to
(i) cause an Advance to be made to pay any such interest payment; or
(ii) withdraw from any deposit account of Borrower maintained at the
Agent amounts sufficient to make such interest payment. Payments of
principal will be due as provided in the Loan Documents, including,
without limitation, Sections 2.4(c), 2.8, and 2.9.
(b) Making Payments. Borrower will make each payment hereunder
and under the Notes, whether on account of principal, interest, fees or
otherwise, without set-off or counterclaim, not later than 11:00 a.m.
(Phoenix, Arizona time) on the day when due, and in each case such
payments will be in U.S. dollars to the Agent and will be made by
wiring such funds to the Agent as follows: Bank One, Arizona, NA,
Phoenix, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇-▇▇▇▇, Account No. 1548- 1011, Account
846-8492, ABA No. ▇▇▇▇-▇▇▇▇-▇ (referencing Lot number(s), Approved
Subdivision(s), A&D Lot number(s) and A&D Project(s) in the case of
payments made pursuant to Section 2.4(c)), or according to such other
wiring instructions as may be given to Borrower by the Agent from time
to time. Payments received after the required time on a Business Day
will be deemed to have been received on the next succeeding Business
Day and will bear interest accordingly.
(c) Payment of Net Sales Proceeds. Within 1 Business Day
following the closing of a sale of a Unit, within 1 Business Day
following the closing of a Bulk Sale of Finished Lots, or within 1
Business Day following the closing of any other transaction in which
Borrower is required to pay a release price to the Agent pursuant to
Section 2.8, Borrower will pay or cause to be paid to the Agent, as
agent for and on behalf of the Banks, for application pursuant to
Section 2.4(d), the amount required pursuant to Section 2.8. If any Net
Sales Proceeds or other amounts payable to the Agent pursuant to
Section 2.8 are held by any Title Company, escrow agent, or any other
Person, Borrower will direct such Title Company, escrow agent and other
Persons to pay all such amounts directly to the Agent, as agent for and
on behalf of the Banks, and to take all other action required by the
Agent to cause such amounts to be paid to the Agent, as agent for and
on behalf of the Banks. If Borrower collects or receives any such
amounts, Borrower will forthwith, upon receipt, transmit and deliver to
the Agent, as agent for and on behalf of the Banks, in the form
received, all cash,
33
checks, drafts, chattel paper, and other instruments or writings for
the payment of money (endorsed without recourse, where required, so
that such items may be collected by the Agent). Any such items which
may be so received by Borrower will not be commingled with any other of
Borrower's funds or property, but will be held separate and apart from
Borrower's own funds or property and upon express trust for the Agent
until delivery is made to the Agent.
(d) Application of Payments. Payments will be applied by the
Agent to principal, interest, and Other Amounts in the manner specified
in Section 11.11(b); provided, however, that prior to the occurrence of
an Event of Default, amounts paid to the Agent pursuant to Section
2.4(c) will be applied by the Agent to the principal amount of
outstanding Advances prior to application to interest and Other
Amounts.
(e) Business Days. Whenever any payment hereunder or under the
Notes is due on a day other than a Business Day, such payment will be
made on the next succeeding Business Day, and such extension of time
will in such case be included in the computation of interest or fees,
as the case may be.
(f) Late Charges. If any payment of interest, principal, or
Other Amount required pursuant to any provision of this Agreement is
not received by the Agent within 15 days after its due date, then, in
addition to the other rights and remedies of the Agent or the Banks, a
late charge of 4% of the amount due and unpaid will be charged to
Borrower without notice to Borrower. Such late charge will be
immediately due and payable and is in addition to any other costs,
fees, and expenses that Borrower may owe as a result of such late
payment.
(g) Payment at Maturity. On the Maturity Date, Borrower will
pay to the Agent, as agent for and on behalf of the Banks, the unpaid
principal, all accrued and unpaid interest, and all Other Amounts that
are due and unpaid.
2.5 Prepayments.
(a) Prepayments; Breakage. Except as to payments made under
this Section with respect to payment or conversion of a Fixed Rate
Advance on a day other than the last Business Day in the Interest
Period for such Fixed Rate Advance, Borrower may prepay the outstanding
principal balance hereof in whole or in part at any time prior to the
Maturity Date without penalty or premium (and any such prepayment will
be applied to Variable Rate Advances, to the extent of such Variable
Rate Advances before applying such prepayments to Fixed Rate Advances);
provided, however, that, in any case, if any payment of all or any
portion of a Fixed Rate Advance is made other than on the last day of
the Interest Period for such Fixed Rate Advance for any reason
(including, without limitation, any optional or required prepayment and
any acceleration of the Maturity Date) then, anything in the Loan
Documents to the contrary notwithstanding, Borrower will pay to the
Agent (for the benefit of the Bank(s) entitled to such payment) within
15 days of written demand by the Agent the greater of (i) a Breakage
Fee computed as provided in Section 2.5(b) or (ii) the actual amount of
any loss, cost or expense incurred by such Bank(s) resulting therefrom,
including, without limitation, any loss or cost in liquidating or
employing deposits acquired to fund or maintain the Fixed Rate Advance.
Borrower agrees to also make a payment under the immediately preceding
sentence upon each conversion of a Fixed Rate Advance to a Variable
Rate Advance on a date other than the last Business Day of the Interest
Period for such Fixed Rate Advance, to be determined as
34
if the amount so converted had been prepaid on the date of conversion.
The obligations of Borrower and the rights of the Agent and the Banks
under this Section will survive payment and performance of the
Obligations and will remain in full force and effect without
termination. The Agent will furnish to Borrower a certificate setting
forth in reasonable detail the basis for the amount of each request by
the Agent for payment under this Section. The determination by the
Agent of amounts due under this Section will be conclusive, absent
manifest error.
(b) Fee. As used in this Section 2.5:
(i) "Breakage Fee", for a particular Bank, means a
prepayment premium, if any, equal to the product of (A) the
Average Lost Monthly Interest Income and (B) the number of
months from the date of prepayment to the Interest Period
termination date (with any fraction of a month counted as a
month), discounted to present value at the Discount Rate over
a period equal to one-half of the number of months in clause
(B) of this subsection (i).
(ii) "Average Lost Monthly Interest Income" means the
amount determined by dividing (A) the product of the Average
Principal and the Lost Rate by (B) 12.
(iii) "Average Principal" means the amount equal to
either (A) one-half the sum of (1) the Pro Rata Interest of a
Bank in the amount of principal being prepaid and (2) the Pro
Rata Interest of such Bank in the amount of principal that is
scheduled to be due on the Interest Period termination date
("Balloon Amount"), or (B) the Pro Rata Interest of such Bank
in the amount of principal being prepaid, if such amount is
less than the Balloon Amount.
(iv) "Lost Rate" means the rate per annum equal to
the percentage, if any, by which (A) the yield to maturity of
United States Treasury debt obligations having a maturity date
nearest to the Interest Period Termination Date ("Treasury
Obligations") determined as of the first day of the respective
Interest Period exceeds (B) the yield to maturity of Treasury
Obligations determined on the date of prepayment.
(v) "Discount Rate" means the rate per annum equal to
the yield to maturity of Treasury Obligations determined on
the date of prepayment.
The maturity date and yield to maturity of Treasury Obligations shall
be determined by BOAZ, in its absolute and sole discretion, on the
basis of quotations published in The Wall Street Journal or other
comparable sources. An example of the computation of the Breakage Fee
is set forth on Exhibit B.
2.6 Fees. As additional consideration for the Commitment, Borrower
agrees to pay the following fees to the Agent for the benefit of the Banks
(which amounts shall be disbursed by the Agent to the Banks promptly upon
receipt thereof as more particularly provided in Section 11.4), which fees are
earned by the Banks on the date due under the Loan Documents, are non-refundable
to Borrower, and, in the case of payments with respect to the fees described in
subsections (a), (b), and (c), shall be calculated on a pro rata basis for the
period to which such payment relates, for actual days elapsed (or to elapse)
during such period on the basis of a 360-day year and shall be paid by Borrower
to the Agent, on behalf of the
35
Banks, within 5 days after the Agent gives notice to Borrower of the amount of
fees due (which notice may be given telephonically to the chief financial
officer or treasurer of Borrower, by facsimile or in writing):
(a) Commitment Fee. A quarterly "commitment fee", payable
quarterly in advance, calculated as of the first day of each January,
April, July, and October prior to the Maturity Date, equal to a
percentage of the Commitment Amount as of the first day of each fiscal
quarter of Borrower, with such percentage to be (i) 1 % per annum
through June 30, 1997; and (ii) the per annum percentage determined
pursuant to the Matrix and this Section as of each July 1, October 1,
January 1, and April 1 thereafter (each also a "Repricing Date"). As of
the first Repricing Date after the date of this Agreement and
continuing on each subsequent Repricing Date, the commitment fee will
be "re-priced" for the quarter commencing on the Repricing Date at the
Level set forth in the Matrix corresponding to the results of the Debt
to Tangible Worth, Available Liquidity, and Interest Coverage
computations determined for the Test Date as indicated in the following
table:
REPRICING DATE TEST DATE
-------------- ---------
January 1 Prior September 30
April 1 Prior December 31
July 1 Prior March 31
October 1 Prior June 30
Even though the financial reports necessary to calculate the financial
tests in the Matrix may not be available until after Repricing Dates
occurring on January 1, any re-pricing on such Repricing Dates will be
effective as of January 1, even though the computations may not have
been completed by January 1. However, Borrower will pay the quarterly
commitment fee for the quarter commencing on January 1 based on the
pricing in effect for the prior quarter and, upon determination of the
appropriate commitment fee pricing for the fiscal quarter beginning on
such January 1, Borrower will, within 15 days of such determination,
pay any shortfall to the Agent; provided, however, that if Borrower has
paid more than the re-priced commitment fee amount, the Agent will
credit the excess against future installments on account of the
commitment fee. In order to qualify for a reduction in commitment fee
pricing, all three of the Debt to Tangible Net Worth, Available
Liquidity, and Interest Coverage tests for the appropriate level of
pricing must be met as of the relevant Test Date. Commitment fee
pricing shall be increased, as of the next Repricing Date, if any of
the Debt to Tangible Net Worth, Available Liquidity, and Interest
Coverage tests are not met, with the pricing to increase to the pricing
level in the Matrix for which all of the three tests are met.
Commitment fee installments are fully earned as the installments fall
due.
(b) Unused Commitment Fee. An "unused commitment fee" based on
an annual rate of 0.25%, but calculated on a quarterly basis in arrears
as of the first day of each January, April, July, and October and on
the Maturity Date or the date upon which the Commitment is terminated
or expires, such unused commitment fee to be payable quarterly. For
each quarter (or portion thereof), the unused commitment fee is equal
to (i) the Commitment Amount as in effect at the beginning of such
quarter; minus (ii) the Average Quarterly Outstanding for such quarter
(or portion thereof) with respect to which the unused commitment fee is
being computed; with (iii) the resulting number being multiplied by
0.000625 (that is, one-quarter of the annual unused commitment fee
36
rate). As used herein, "Average Quarterly Outstanding" means the sum of
the Outstanding Borrowings on each day during the quarter (or portion
thereof) with respect to which the unused commitment fee is being
computed, divided by the number of days in that quarter (or portion
thereof). If the unused commitment fee is being computed for less than
a full quarter, the percentage used in clause (c) above will be
computed on a daily basis for the number of days for which the fee is
being computed.
(c) Letter of Credit Fees. In the case of each outstanding
Letter of Credit, the Letter of Credit Fee therefor, in quarterly
installments in advance, calculated as of the issuance date of the
Letter of Credit and as of the first day of each January, April, July
and October after the issuance date (which installment shall be a pro
rata portion of the annual Letter of Credit Fee for the 3-month period
in which such payment date occurs); provided, however, that if the
issuance date is a date other than the first day of January, April,
July or October, then the first quarterly installment of the Letter of
Credit Fee shall be payable in arrears, following the first day of
January, April, July, or October, as applicable, next following the
Issuance Date. Such initial installment shall be a pro rata portion of
the Letter of Credit Fee for the period commencing on the issuance date
and ending on the day preceding such payment date. As used herein,
"Letter of Credit Fee" means the greater of (i) 1.25% per annum of the
face amount of the Letter of Credit, or (ii) $375 per annum.
(d) Syndication Fees, Administrative Fees and Letter of Credit
Issuance Fees. Borrower agrees to pay such syndication, administration,
and letter of credit issuance fees to BOAZ as may separately be agreed
upon between Borrower and BOAZ. Upon resignation or removal of an
Agent, the Agent shall thereupon disclose to the Banks the arrangement
with respect to the payment by Borrower of syndication and
administration fees that the Agent then has with the Borrower.
(e) Costs and Expenses.
(i) Costs and Expenses--Generally. Borrower agrees to
pay on demand all reasonable costs, expenses, and fees of the
Agent (including, without limitation, reasonable fees and
expenses for outside attorneys, consultants and other
professional advisers, paralegals, document clerks and
specialists, the allocated costs of in-house legal counsel and
other staff, and costs and expenses of market studies,
absorption studies, appraisals, appraisal review, title
review, title insurance, surveys, environmental assessments,
environmental testing, environmental cleanup, other
inspection, processing, title, filing, and recording costs,
expenses, and fees):
(A) In the negotiation, execution,
delivery, administration and modification of the Loan
Documents, including this Agreement;
(B) In inspecting the Eligible Collateral;
(C) In the syndication of the Loan and the
sale, assignment and transfer of Pro Rata Interests
in the Commitment; and
(D) Otherwise in relation to the Loan
Documents.
37
(ii) Costs and Expenses--After Default. In addition,
after the occurrence and during the continuation of an Event
of Default, Borrower agrees to pay on demand all costs,
expenses, and fees of the Agent and the Banks (including,
without limitation, fees and expenses for attorneys,
consultants and other professional advisors, paralegals,
documents clerks and specialists, the allocated costs of
in-house legal counsel and other staff, and costs and expenses
of market studies, absorption studies, appraisals, appraisal
review, title review, title insurance, surveys, environmental
assessments, environmental testing, environmental clean-up,
and other inspection, processing, title, filing and recording
costs, expenses, and fees):
(A) In enforcement of the Loan Documents
and exercise of the rights and remedies of the Agent
and the Banks;
(B) In defense of the legality, validity,
binding nature, and enforceability of the Loan
Documents and the perfection and priority of the
Liens and Encumbrances granted in the Loan Documents;
(C) In gaining possession of, holding,
repairing, maintaining, preserving, and protecting
any Collateral;
(D) In selling or otherwise disposing of
the Collateral;
(E) Otherwise in relation to the Loan
Documents, the Collateral, or the rights and remedies
of the Agent and the Banks under the Loan Documents
or relating to the Collateral after the occurrence
and during the continuation of an Event of Default;
and
(F) In preparing for the foregoing, whether
or not any legal proceeding is brought or other
action is taken.
Such costs, expenses, and fees will include, without
limitation, all such costs, expenses, and fees incurred in
connection with any court proceedings (whether at the trial or
appellate level).
(iii) Certain Other Fees. The costs and expenses of
the Banks, other than the Bank serving as Agent, in connection
with the negotiation and execution of this Agreement and the
other Loan Documents being executed contemporaneously with
this Agreement shall be paid by Borrower.
(f) Failure to Pay. If any costs, expenses and fees from time
to time due under the Loan Documents are not paid when due (or if no
time is specified, then within 5 days after demand by the Agent),
Borrower agrees to pay interest on such costs, expenses, and fees at
the Default Interest Rate from the date incurred until paid in full. In
addition, if such costs, expenses and fees are not paid when due (or
within such 5-day period, if applicable), the Agent shall, to the
extent that such Advance will not cause the Available Commitment to be
exceeded, cause an Advance to be made to pay such costs, expenses and
fees, whether or not such Advance has been requested by Borrower and
whether or not the conditions precedent to an Advance have been
satisfied. If an Advance is
38
made pursuant to the immediately preceding sentence, such costs,
expenses and fees shall be included in such Advance and shall accrue
interest at the rates from time to time applicable pursuant to this
Agreement.
2.7 Security. Payment of the Notes, all indebtedness and liabilities of
Borrower to the Agent and the Banks, and performance of all Obligations, due or
to become due, under this Agreement and the other Loan Documents shall be
secured by the following:
(a) The Deeds of Trust;
(b) The Cash Collateral Agreement; and
(c) Such other assignments and security interests as may be
required or granted pursuant to the terms of the Loan Documents.
2.8 Releases of Collateral.
(a) Releases of Units and A&D Projects. Borrower may request
releases of Land Projects, Development Projects, Finished Lots and
Units from the lien and encumbrance of a Deed of Trust from time to
time; provided, however, the Agent has no obligation to release any
Land Project, Development Project, Finished Lot or Unit unless each of
the following conditions precedent is satisfied:
(i) Generally.
(A) Notification to the Agent. Borrower or
the closing agent handling the sale will have
notified the Agent in writing of the requested
release;
(B) Remargining Payments Required. Borrower
will have made all payments required to be made
pursuant to Section 2.9 after giving effect to such
Release;
(C) No Default. Except in the case of
releases of Units under Section 2.8(a)(ii), no Event
of Default and no Unmatured Event of Default shall
have occurred and be continuing;
(D) Endorsements. Borrower shall provide
the Agent with such endorsements to the Title Policy
as the Agent may reasonably request in connection
with each release;
(E) Processing/Release Fees. Borrower shall
pay the standard processing/release fees of the Agent
and the trustee under the Deed of Trust, in
connection with such release; and
(F) Escrow Arrangements. Each release shall
be made by the Agent on behalf of the Banks by
delivery of the release documents to a title company
or other escrow agent satisfactory to the Agent on
such conditions as shall assure the
39
Agent that all conditions precedent to such release
have been satisfied and that the applicable
transaction will be completed.
(ii) Releases of Units.
(A) Releases in the Ordinary Course of
Business. With respect to any release of Units, the
requested release is for the purpose of sale in the
ordinary course of Borrower's business pursuant to a
Purchase Contract;
(B) Payment of Release Price. Borrower will
have paid to the Agent, as agent for and on behalf of
the Banks, the greater of (1) the Unit Collateral
Value for the Unit, as reflected in the most recent
Borrowing Base Report or (2) the Net Sales Proceeds;
provided, however, that if a Funding Procedure Change
Event (as defined in Section 11.3(c)(ii) has
occurred, then so long as the provisions of Section
11.10(c) remain in effect, the release price will be
the Unit Collateral Value for the Unit; and
(C) Restrictions on Release of Model Units.
Any release of a Model Unit (other than pursuant to
Section 2.8(a)(iv)) is subject to Section 7.3(i).
(iii) Releases of Finished Lots.
(A) Releases for Bulk Sale. With respect to
any release of Finished Lots, the requested release
is for the purpose of a Bulk Sale of Finished Lots;
and
(B) Payment of Release Price. In connection
with a Bulk Sale of Finished Lots, Borrower will have
paid to the Agent, as agent for and on behalf of the
Banks, a release price equal to the greater of (1)
the aggregate Maximum Allowed Advance for the
Finished Lots to be released multiplied by either (I)
135%, if the Bulk Sale of Finished Lots is of 150 or
more Finished Lots, or by (II) 125%, if the Bulk Sale
of Finished Lots is of fewer than 150 Finished Lots,
or (2) the Net Sales Proceeds; provided, however,
that if a Funding Procedure Change Event (as defined
in Section 11.3(c)(ii) has occurred, then so long as
the provisions of Section 11.10(c) remain in effect,
the release price will be the amount determined
pursuant to clause (1) above.
(iv) Releases of Model Units for Sale and Leaseback
Transactions.
(A) Releases for Sale and Leaseback
Transactions. With respect to the release of Model
Units for the purpose of selling the Model Unit in a
Sale and Leaseback Transaction, the Agent, in its
sole and absolute discretion, will have approved the
terms of the lease, with such lease to provide, among
other things, that (1) Borrower is entitled to use
the Model Unit as a Model Unit in accordance with the
requirements of Section 7.3(i), including the time
period specified in that Section; (2) copies of all
notices to Borrower, as tenant under such lease, will
be given concurrently to the Agent; (3) the Agent,
acting for the Banks, will have the right to cure any
default by Borrower under such lease within an
additional 30 days
40
following the default and expiration of any cure
period available to Borrower under the lease, so long
as such Model Unit is being used as a Model Unit in
connection with Eligible Collateral; (4) if Borrower
defaults under the lease and that default is not
curable, the lessor will not terminate the lease if
the Agent, acting for the Banks, pays all monetary
obligations under the lease as they become due and
proceeds to foreclose on Borrower's interest in the
lease, with the Agent being entitled to take
possession of the Model Unit in such circumstances
and to acquire the leasehold interest of Borrower in
the Model Unit through foreclosure or by deed in lieu
of foreclosure and with the lease to continue
thereafter for the remaining lease term; (5) if the
Agent acquires the leasehold interest of Borrower in
the Model Unit, the Agent may transfer the leasehold
interest without the consent of the lessor; (6) if
for any reason, the existing lease is terminated or
avoided prior to expiration of its term, the lessor
will grant a new lease to the Agent for the remainder
of the term of the terminated or avoided lease, at
the same rent and on the same terms and conditions as
the terminated or avoided lease; and (7) if the Agent
takes possession of the leasehold interest in the
Model Unit, the Agent will only be liable for the
obligations under the lease during the period that
the Agent is in possession of the leasehold;
(B) Deed of Trust and Title Policy.
Concurrently with the release of the Model Unit, the
Agent, as agent for and on behalf of the Banks, shall
have received as Collateral a first lien Deed of
Trust encumbering the leasehold interest of Borrower
in the Model Unit and a Title Policy insuring the
first lien position of the Deed of Trust on the
leasehold interest, subject only to Permitted
Exceptions;
(C) Payment of Release Price. Borrower will
have paid to the Agent, as agent for and on behalf of
the Banks, a release price equal to the greater of
(1) the Maximum Allowed Advance for the Model Unit,
as reflected in the most recent Borrowing Base Report
or (2) the Net Sales Proceeds; provided, however,
that if a Funding Procedure Change Event (as defined
in Section 11.3(c)(ii) has occurred, then so long as
the provisions of Section 11.10(c) remain in effect,
the release price will be the amount determined
pursuant to clause (1) above; and
(D) Compliance with Model Unit Requirements.
The released Model Unit will continue to be used as a
Model Unit in compliance with Section 7.3(i), with
the request by Borrower for a release pursuant to
this Section 2.8(a)(iv) being deemed to constitute a
covenant by Borrower to so use such Model Unit.
(v) Releases of Land Projects or Development
Projects. Borrower will have paid to the Agent, as agent for
and on behalf of the Banks, the greater of (A) the Maximum
Allowed Advance for the Land Project or Development Project to
be released multiplied by either (1) 135%, if the release is
of a Land Project or Development Project of 150 or more
proposed Lots, or by (2) 125%, if the release is of a Land
Project or Development Project of fewer than 150 proposed
Lots, or (B) the Net Sales Proceeds; provided, however, that
if a Funding Procedure Change Event (as defined in Section
11.3(c)(ii) has occurred, then so long as the provisions of
Section 11.10(c) remain in effect, the release price will be
the amount determined pursuant to clause (A) above.
41
(b) Releases for Dedications and Similar Purposes. Upon
written request of Borrower and so long as no Event of Default or
Unmatured Event of Default has occurred and is continuing and provided
the Agent shall have approved the request, in the Agent's reasonable
discretion, Borrower may release from the lien and encumbrance of a
Deed of Trust such portions of the Collateral as Borrower (i) is
required to convey to a Governmental Authority or a bona fide public
utility in connection with the development of an A&D Project (such as
roads, drainage easements, and utility easements) and for which
Borrower receives no monetary compensation; or (ii) proposes to convey
to a homeowners' association or similar Person in connection with the
development of an A&D Project (such as common areas) and for which
Borrower receives no monetary compensation. Releases that satisfy the
requirements of this Section do not require the payment of any release
price.
(c) Adjustment to Borrowing Base. Any Collateral released
shall no longer be Eligible Collateral and the Collateral Value of
Eligible Collateral shall be immediately and automatically adjusted to
reflect such release. Even though an item of Collateral is not included
as Eligible Collateral, all conditions precedent to release will
continue to apply (including payment of any required sale proceeds and
release prices).
2.9 Remargining; Principal Payments. Anything in the Loan Documents to
the contrary notwithstanding, the total of Outstanding Borrowings may not at any
time exceed the Available Commitment, and Borrower shall not be entitled to any
Advances or the issuance of any Letters of Credit if the effect thereof would be
to cause the Outstanding Borrowings to exceed the Available Commitment. If for
any reason at any time the total of Outstanding Borrowings exceeds the Available
Commitment (including, without limitation, by reason of Commitment Amount
reductions, changes in Unit Appraised Values or A&D Project Appraised Values,
adjustments to the Borrowing Base or Collateral Value, or otherwise), Borrower
will make a principal payment to the Agent, as agent for and on behalf of the
Banks, in an amount equal to such excess amount. Each payment pursuant to this
Section 2.9 will be due no later than 11:00 a.m. (Phoenix, Arizona time) on the
1st Business Day after the day upon which the Agent notifies Borrower (which
notice may be given telephonically to the chief financial officer or treasurer
of Borrower, by facsimile or in writing) that such payment is required.
ARTICLE 3
LETTERS OF CREDIT
3.1 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 the LC Bank in effect from time to
time for issuance of Letters of Credit (including, without limitation, payment
of letter of credit issuance fees), and so long as no Event of Default or
Unmatured Event of Default has occurred and is continuing, the LC Bank agrees to
issue, from time to time on or before the Maturity Date, Letters of Credit upon
request by and for the account of Borrower, to be issued to Government
Authorities in connection with the development of Lots and the construction of
A&D Projects or to be issued to Persons in connection with the normal and
customary business operations of Borrower; provided that as to each requested
Letter of Credit Borrower has delivered to the Agent a completed and executed
Letter of Credit Agreement, and provided further that (a) all Letters of Credit
will expire on the earlier of (i) 1 year from the date of issuance (unless
Borrower requests a shorter period); or (ii) the Maturity Date; (b) no Letter of
Credit
42
will have any "evergreen" or similar provisions requiring renewal thereof; (c)
the Letters of Credit will constitute standby letters of credit issued in
connection with Borrower's residential development and homebuilding operations;
and (d) the aggregate stated amount of all Letters of Credit and Reimbursement
Amounts will not exceed $5,000,000. Each reference in this Agreement to "issue"
or "issuance" or other forms of such words in relation to Letters of Credit will
also include any extension or renewal of a Letter of Credit. Letters of Credit
will only be issued, from time to time, to the extent that the Available
Commitment exceeds the amount of Outstanding Borrowings.
3.2 Issuance Procedures. To obtain a Letter of Credit, Borrower must
complete and execute a Letter of Credit Agreement and submit it to the Agent.
Upon receipt of a completed and executed Letter of Credit Agreement and a
determination by the Agent that Borrower has met the requirements in this
Agreement for issuance of a Letter of Credit, the Agent will deliver the Letter
of Credit Agreement to the LC Bank and the LC Bank will process the application
in accordance with the policies, procedures, and requirements of the LC Bank
then in effect. If the application meets the requirements of the LC Bank and is
within the policies of the LC Bank then in effect, the Agent will obtain the
requested Letter of Credit from the LC Bank and deliver the Letter of Credit to
Borrower.
3.3 Collateralization of Letters of Credit. Upon demand by the LC Bank
in its absolute and sole discretion after the occurrence of an Event of Default,
and regardless of whether the conditions precedent in this Agreement for
Advances have been satisfied, the Agent will cause an Advance to be made in the
undrawn amount of all Letters of Credit. The proceeds of any such Advance will
be pledged to and held by the Agent pursuant to the Cash Collateral Agreement as
security for any amounts that become payable under the Letters of Credit. Upon
any draws under Letters of Credit and upon demand by the LC Bank, the Agent will
apply any such amounts in the Cash Collateral Account to the payment of
Reimbursement Amounts and upon the expiration of the Letters of Credit any
remaining amounts in the Cash Collateral Account will be applied to the
repayment of outstanding Advances or if the outstanding Advances have been paid
in full, such proceeds will be released to Borrower. In the alternative, if
demanded by the LC Bank in its absolute and sole discretion after the occurrence
of an Event of Default, Borrower will deposit in the Cash Collateral Account and
pledge to the Agent, as agent for and on behalf of the Banks, cash in an amount
equal to the amount of all undrawn Letters of Credit. Such amounts will be
pledged to and held by the Agent pursuant to the Cash Collateral Agreement as
security for any amounts that become payable under the Letters of Credit. Upon
any draws under Letters of Credit, upon demand by the LC Bank, the Agent will
apply any such amounts in the Cash Collateral Account to the repayment of
Reimbursement Amounts and upon the expiration of the Letters of Credit any
remaining amounts in the Cash Collateral Account will be applied to the
repayment of outstanding Advances or if the outstanding Advances have been paid
in full, such proceeds will be released to Borrower.
3.4 Reimbursement for Payment of Drafts Drawn or Drawn and Accepted
Under Letters of Credit. The obligation of Borrower to reimburse the LC Bank for
payment by the LC Bank of drafts drawn or drawn and accepted under a Letter of
Credit is as provided in the respective Letter of Credit Agreement and in this
Section. The Agent will notify Borrower of payment by the LC Bank of a draft
drawn or drawn and accepted under a Letter of Credit and of the respective
Reimbursement Amount and, so long as all conditions precedent to Advances have
been satisfied, Borrower will either request an Advance subject to the terms and
conditions of this Agreement or request application of funds in the Cash
Collateral Account (only to the extent of moneys held in such account that are
specifically allocated to payment of Reimbursement Amounts arising from such
Letter of Credit) and the Agent will apply the proceeds of the Advance (or Cash
Collateral Account, as applicable) to pay the Reimbursement Amount. If Borrower
does
43
not request such Advance within 1 Business Day after notification by the LC Bank
of payment of the draft or acceptance, the Agent, upon request by the LC Bank in
the LC Bank's absolute and sole discretion and without notice to Borrower and
regardless of whether the terms and conditions in this Agreement for Advances
are satisfied, will make an Advance under this Agreement in the amount of the
Reimbursement Amount and accrued interest thereon and the LC Bank will apply the
proceeds of such Advance to pay the Reimbursement Amount and accrued interest.
3.5 Reimbursement Obligations. Borrower's Reimbursement Obligations are
absolute and unconditional under any and all circumstances and irrespective of
any setoff, counterclaim, or defense to payment which Borrower may have or have
had against the LC Bank or any beneficiary of the Letter of Credit, including
any defense based upon (a) the occurrence of any Event of Default or Unmatured
Event of Default, (b) the fact that any draft, demand, certificate or other
document presented under the Letter of Credit is proven to be forged,
fraudulent, invalid or insufficient, (c) the failure of any payment by the LC
Bank to conform to the terms of the Letter of Credit (if, in the LC Bank's good
faith opinion, such payment is determined to be appropriate), (d) any
non-application or misapplication by the beneficiary of the Letter of Credit of
the proceeds of such payment, or (e) the legality, validity, form, regularity or
enforceability of the Letter of Credit; provided, however, that nothing herein
will adversely affect the right of Borrower to commence a proceeding against the
LC Bank for any wrongful payment under a Letter of Credit made by the LC Bank as
the result of acts or omissions constituting gross negligence or willful
misconduct on the part of the LC Bank.
3.6 Nature of Reimbursement Obligations. Borrower assumes all risks of
the acts, omissions, or misuse of any Letter of Credit by the beneficiary
thereof. Neither the Agent, the LC Bank nor any of the Banks (except to the
extent of their own gross negligence or willful misconduct) will be responsible
for (a) the form, validity, sufficiency, accuracy, genuineness or legal effect
of any Letter of Credit or any document submitted by any party in connection
with the issuance of any Letter of Credit, even if such document should in fact
prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent
or forged; (b) the form, validity, sufficiency, accuracy, genuineness or legal
effect of any instrument transferring or assigning or purporting to transfer or
assign any Letter of Credit or the rights or benefits thereunder or proceeds
thereof in whole or in part, which may prove to be invalid or ineffective for
any reason; (c) failure of any beneficiary of any Letter of Credit to comply
fully with the conditions required in order to demand payment under a Letter of
Credit; (d) errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise; or (e)
any loss or delay in the transmission or otherwise of any document or draft
required by or from a beneficiary in order to make a disbursement under a Letter
of Credit or the proceeds thereof. None of the foregoing will affect, impair or
prevent the vesting of any of the rights or powers granted to the Agent, the LC
Bank or the Banks hereunder. In furtherance and extension and not in limitation
or derogation of any of the foregoing, any act taken or omitted to be taken by
the Agent, the LC Bank or the Banks in good faith will be binding on Borrower
and will not put the Agent, the LC Bank or the Banks under any resulting
liability to Borrower.
3.7 LC Bank Reporting Requirements. Each LC Bank shall, no later than
the 10th day following the last day of each month, provide to the Agent a
schedule of the Letters of Credit issued by it, in form and substance reasonably
satisfactory to the Agent, showing the issuance date, account party, original
face amount, amount (if any) paid thereunder, expiration date and the reference
number of each Letter of Credit outstanding at any time during such month and
the aggregate amount (if any) payable by Borrower to such LC Bank during the
month pursuant to Section 3.3. Copies of such reports shall be provided promptly
to each Bank and Borrower by the Agent.
44
ARTICLE 4
BORROWING BASE
4.1 Determination of Eligible Collateral/Borrowing Base. Eligible
Collateral in the Borrowing Base will be determined by the Agent from time to
time as set forth in this Article 4.
4.2 Unit Term Limits.
(a) Presold Units. Each Presold Unit may be included in
Eligible Collateral for not more than 12 Calendar Months from the Unit
Eligibility Date for such Unit, subject, however, to the provisions of
Section 4.2(e) and Section 4.2(f). A Presold Unit no longer subject to
a Purchase Contract will be deemed to be a Spec Unit as of the date the
Unit is no longer subject to a Purchase Contract; subject, however, to
the provisions of Section 4.2(d). A Unit will not be considered to be a
Presold Unit unless and until a final public report (if a public report
is required by applicable Requirements) has been obtained by Borrower
and delivered to the purchaser of such Unit and all cancellation
periods in favor of such purchaser with respect to such public report
have expired; provided, however, that with respect to Units in Arizona,
any such Unit may be included in Eligible Collateral as a Presold Unit
if it is subject to a Purchase Contract executed prior to issuance of a
final public report, if such sale is authorized pursuant to a Special
Order of Exemption issued by the Arizona Commissioner of Real Estate
pursuant to ARS Section 32-2181.01, permitting conditional sales of
Units in that Subdivision prior to issuance of a final public report,
but any such Unit is only entitled to be included in Eligible
Collateral as a Presold Unit so long as such Special Order of Exemption
is in effect, unless prior to expiration of the Special Order of
Exemption, a final public report is issued. Once a final public report
is issued, any such Unit may remain in Eligible Collateral as a Presold
Unit only if the purchaser does not cancel the Purchase Agreement
within any applicable cancellation period.
(b) Spec Units. Each Spec Unit may be included in Eligible
Collateral for not more than 12 Calendar Months from the Unit
Eligibility Date for such Unit. In no event may a Spec Unit be included
in Eligible Collateral for more than 12 Calendar Months from the
original Unit Eligibility Date for such Unit.
(c) Model Units. Each Model Unit may be included in Eligible
Collateral for not more than 36 Calendar Months from the Unit
Eligibility Date for such Unit, except that if, at the end of the
36-Calendar Month period, Borrower is still using the Unit as a Model
Unit for a subsequent phase of the same development and if Borrower
certifies to the Agent that such Unit continues to be actively used as
a Model Unit (such certification to be included in each Collateral
Inventory Report), then so long as the Unit is being so used as a Model
Unit, the Unit may be included as a Model Unit in Eligible Collateral
for a period approved by the Agent. Any other provision of this
Agreement to the contrary notwithstanding, a Model Unit released
pursuant to Section 2.8(a)(iv) will no longer constitute Eligible
Collateral.
(d) Conversion of Presold Units. If a Presold Unit is
reclassified as a Spec Unit, such Spec Unit may be included in Eligible
Collateral for not more than 12 Calendar Months from the Unit's
original Unit Eligibility Date as a Unit and, on reclassification, such
Spec Unit will be subject
45
to a Reclassification Adjustment; provided; however, that no such Spec
Unit will be entitled to be included in Eligible Collateral if the
effect of inclusion would be to cause the limitations of Section 4.5(a)
to be exceeded.
(e) Conversion of Spec Units. If a Spec Unit is reclassified
as a Presold Unit (by reason of the execution and delivery of a
Purchase Contract), such Unit may be included in Eligible Collateral as
a Presold Unit for not more than 12 Calendar Months from the original
Unit Eligibility Date of such Unit as a Spec Unit and, on
reclassification, such Presold Unit will be subject to a
Reclassification Adjustment.
(f) Conversion of Model Units. If a Model Unit is reclassified
as a Presold Unit (by reason of the execution and delivery of a
Purchase Contract) while there is at least 90 days remaining in the
eligibility period for such Model Unit as a Model Unit, such Unit may
be included in Eligible Collateral as a Presold Unit for not more than
90 days after reclassification as a Presold Unit; provided, however,
that the Maximum Allowed Advance for such Presold Unit shall continue
to be determined as if the Presold Unit were a Model Unit. Model Units
reclassified as Spec Units will not constitute Eligible Collateral.
(g) Unit Ineligibility. Units that are sold, that have been
included as Eligible Collateral for the maximum term determined in
accordance with the provisions of this Section 4.2, or that are
otherwise not eligible to be Eligible Collateral pursuant to any
provision of this Agreement will no longer be Eligible Collateral upon
sale and release in compliance with the provisions of this Agreement,
upon expiration of such term, or upon such Units becoming ineligible,
as the case may be. However, a Unit that is no longer Eligible
Collateral because of expiration of the term during which such Unit was
entitled to be Eligible Collateral or because of its becoming
ineligible pursuant to any provision of this Agreement will
nevertheless remain part of the Collateral until released as permitted
by this Agreement.
4.3 A&D Project Term Limits.
(a) Failure to Commence Construction. Any Land Project where
90 days have lapsed since the A&D Eligibility Date for that Land
Project without such Land Project qualifying as a Development Project
may no longer be included as Eligible Collateral; provided, however,
that with respect to the Villages-▇▇▇▇▇▇▇ project and the Villages-Del
Lago project, those projects are entitled to remain in Eligible
Collateral as Land Projects through August 31, 1997.
(b) Failure to Complete Construction. A Development Project
shall no longer be included as Eligible Collateral where (i) 30 days
have elapsed since the A&D Eligibility Date for the Development Project
without work on the Off-Site Improvements having commenced (with
construction only being deemed to have commenced upon completion of
staking and rough grading for the Off-Site Improvements); (ii) in the
case of Development Projects located in the State of Arizona, 12
Calendar Months have lapsed since the A&D Eligibility Date for the
Development Project, without completion of construction of the Off-Site
Improvements; or (iii) in the case of Development Projects located in
the State of California, 15 Calendar Months have lapsed since the A&D
Eligibility Date for the Development Project, without completion of
construction of the Off- Site Improvements.
46
(c) Term Limitations with respect to Finished Lots; Take-Down
Requirements. A Finished Lot Project (and the Finished Lots in that A&D
Project) may no longer be included as Eligible Collateral upon
expiration of the 24th Calendar Month following the A&D Eligibility
Date for such Finished Lot Project. In addition, on the first day of
the 4th Calendar Month following the A&D Eligibility Date for each such
Finished Lot Project and on the first day of each 3rd Calendar Month
thereafter, the number of Finished Lots in such Finished Lot Project
entitled to be included in Eligible Collateral commencing on that date
will be reduced by the greater of 9 or the number of Finished Lots in
such Finished Lot Project divided by 8 (the "Quarterly Take Down
Requirement"), with any Finished Lots transferred pursuant to Section
4.4 or released pursuant to Section 2.8 prior to the end of such
quarter counting as part of the Finished Lots excluded at the end of
the quarter and with any Finished Lots otherwise excluded no longer
being considered to be Eligible Collateral as Finished Lots. Borrower's
compliance with the Quarterly Takedown Requirement will be determined
on a cumulative basis and, accordingly, if the Quarterly Takedown
Requirement is exceeded in any applicable period, such excess may be
carried forward and used to satisfy the Quarterly Takedown Requirement
in succeeding three-month periods. If the Quarterly Takedown
Requirement is not satisfied at any time, the Agent will exclude from
Eligible Collateral a number of Lots sufficient to cause such Quarterly
Takedown Requirement to be met based on the remaining Eligible
Collateral in the Approved Subdivision and such Lots shall continue to
be excluded from Eligible Collateral until the Quarterly Takedown
Requirement is again met. Even though Lots may be excluded from
Eligible Collateral by reason of the Quarterly Takedown Requirement,
such Lots shall continue to be part of the Collateral until released as
permitted by this Agreement.
(d) A&D Project Ineligibility. A&D Projects (or portions
thereof, such as Finished Lots in a Finished Lot Project) that are
sold, that have been included as Eligible Collateral for the maximum
term determined in accordance with the provisions of this Section 4.3,
or that are otherwise not eligible to be Eligible Collateral pursuant
to any provision of this Agreement will no longer be Eligible
Collateral upon sale and release in compliance with the provisions of
this Agreement, upon expiration of such term, or upon such A&D Projects
(or portion thereof) becoming ineligible, as the case may be. However,
an A&D Project (or portion thereof) that is no longer Eligible
Collateral because of expiration of the term during which such A&D
Project was entitled to be Eligible Collateral or because of its
becoming ineligible pursuant to any provision of this Agreement will
nevertheless remain part of the Collateral until released as permitted
by this Agreement.
4.4 Transfer of Finished Lots for Unit Construction. Borrower may
transfer a Finished Lot for Unit construction upon inclusion of the Finished Lot
in the Unit Cost component of a Borrowing Base Report, identifying the specific
Finished Lot that is being converted, with such converted Finished Lot
thereafter to be classified as a Spec Unit, Presold Unit, or Model Unit, as
appropriate and to be subject to the provisions of this Agreement relating to
Units; provided, however, that before any Finished Lot is included in Eligible
Collateral as a Unit, the conditions precedent set forth in Section 5.6 must
have been satisfied with respect to such Finished Lot, including, without
limitation, the provisions of Section 5.6(c) imposing the requirement that the
Unit Construction Threshold must be met. Effective upon such a transfer, there
will be deducted from the Collateral Value that portion of the A&D Project
Collateral Value allocated to the Finished Lot and the Finished Lot will
continue in the Borrowing Base as a Unit having an initial Unit Collateral Value
equal to the Lot Allocation applicable to such Unit.
47
4.5 Additional Limitations on Eligible Collateral.
(a) Limitation on Spec Units by State. Borrower may not
include in Eligible Collateral more than 6 Spec Units in any single
Approved Subdivision in Arizona or more than 10 Spec Units in any
single Approved Subdivision in California.
(b) Limitation on Model Units by State. Borrower may not
include in Eligible Collateral more than 4 Model Units in any single
Approved Subdivision in Arizona or more than 4 Model Units in any
single Approved Subdivision in California.
(c) Classification and Reclassification of Units; Adjustment
of Borrowing Base. The Agent may classify or reclassify Units as to
type from time to time, or change Borrower's proposed classification of
any and all Units, provided that such reclassified Unit meets the
requirements set forth herein for that type of Unit. Effective as of
the date that a Unit is reclassified as to type, such reclassification
will give rise to a Reclassification Adjustment, except as otherwise
provided in Section 4.2(f).
(d) Events Affecting Units and A&D Projects; Exclusions from
Eligible Collateral. If any Unit or A&D Project included in Eligible
Collateral is materially damaged, destroyed, or becomes subject to any
condemnation proceeding, such item may be declared by the Agent to no
longer be Eligible Collateral. In addition, if any such item does not
continue to meet all the requirements applicable to Eligible
Collateral, such item will no longer constitute Eligible Collateral.
Any determination by the Agent, in the reasonable judgment of the
Agent, as to whether Units or any A&D Project constitutes Eligible
Collateral will be final, conclusive, binding and effective
immediately.
4.6 Limitations on Collateral Values.
(a) A&D Project Limitations.
(i) Once the Maximum Allowed Advance is initially
established for a particular A&D Project, that Maximum Allowed
Advance is not subject to increase, notwithstanding any
subsequent A&D Project Appraisal of the A&D Project and
notwithstanding any increase in an A&D Project Budget;
however, the Maximum Allowed Advance is subject to decrease
based on subsequent events, such as updated Appraisals. The
portion of A&D Project Collateral Value attributable to "soft
costs" and "hard costs" line items in the A&D Project Budget
will be limited to the lesser of (A) the actual costs,
expenses, and fees incurred by Borrower as indicated by bills,
invoices, receipts, statements, vouchers, or other written
evidence satisfactory to the Agent showing the costs,
expenses, and fees incurred; or (B) the amounts allocated for
such costs, expenses, and fees in the line items in the A&D
Project Budget.
(ii) Until such time as the conditions set forth in
this Section 4.6(a)(ii) have been satisfied, the A&D Project
Collateral Value for a Development Project will equal the sum
of (A) the Land Allocation and (B) ninety five percent (95%)
of the amount determined pursuant to clause (b)(ii) in the
definition of A&D Project Collateral Value. The conditions
48
to be satisfied in order for the A&D Project Collateral Value
for a Development Project to equal 100% of the amount
otherwise calculated are as follows:
(A) The Agent has inspected the Development
Project and determined that the Development Project
is complete, subject only to the correction of minor
punch list items, and, if requested by Agent, a
notice of completion on the Agent's approved form
executed by Borrower has been duly recorded in the
county recorder's office where the A&D Project is
located.
(B) The Agent has received such additional
endorsements to the Title Policy or such additional
policies of title insurance with endorsements thereto
as the Agent may require, issued by Title Company and
with coverage and in form satisfactory to the Agent
in its absolute and sole discretion, insuring the
Agent's interest under the Deed of Trust as a valid
first lien on the A&D Project, excepting only the
Permitted Exceptions and such other items as the
Agent approves in writing and providing affirmative
insurance therein against mechanics' liens,
materialmen's liens, and claims or liens in the
nature thereof on account of construction of the
Off-Site Improvements.
(C) The Agent has received the following, if
requested by the Agent:
(1) Final "As-built" plans and
specifications of the Off-Site Improvements;
(2) A letter of acceptance or its
equivalent from each applicable Governmental
Authority regarding completion of the
Off-Site Improvements;
(3) Completed and executed copies of
AIA Form G706 (Contractor's Affidavit of
Payment of Debts and Claims), AIA Form G706A
(Contractor's Affidavit of Release of
Liens), and AIA Form G707 (Consent of Surety
to Final Payment);
(4) Unconditional lien waivers on
the Agent's approved form from each Person
that has recorded a preliminary notice of
lien against the A&D Project and from each
other Person that has supplied labor,
materials, or services for the A&D Project;
provided; however, that conditional lien
waivers are acceptable so long as the only
condition is payment and the lien waiver is
accompanied by a copy of the payment check
or other evidence of payment; and
(5) A certificate of completion or
other evidence from the engineer/architect
for the Development Project that the
Development Project is substantially
complete.
(b) Further Limitations on Collateral Values. Any
other provision of the Loan Documents to the contrary
notwithstanding, in determining Collateral Values, the
following
49
additional restrictions shall apply and such restrictions
shall be computed and reflected in each Collateral Inventory
Report and Borrowing Base Report:
(i) Overall Limit on Construction Line
Availability Based on Spec Units. The aggregate
Collateral Value attributed to Spec Units included as
Eligible Collateral shall not at any time exceed 35%
of the Collateral Value of all Units included as
Eligible Collateral; provided, however, that so long
as no Event of Default or Unmatured Event of Default
has occurred and is continuing, the Agent will not
make an adjustment to Collateral Values as a result
of Borrower failing to meet the provisions of this
subsection until 30 days after the Borrowing Base
Report on which such failure first appears.
(ii) Limit on Availability Based on Presold
Units and Model Units. The aggregate Collateral Value
with respect to Spec Units, and A&D Projects may not
at any time exceed the aggregate Collateral Value of
all Presold Units and Model Units.
(iii) Limit on Availability for Model Units.
The aggregate Collateral Value with respect to all
Eligible Collateral consisting of Model Units may not
at any time exceed the Model Unit Sublimit then in
effect.
(iv) Limit on Availability for Land
Projects. The aggregate Collateral Value with respect
to all Land Projects included in Eligible Collateral
shall not at any time exceed the Land Project
Sublimit then in effect.
(v) Limitation on Availability for all A&D
Projects. The aggregate Collateral Value with respect
to all A&D Projects included in Eligible Collateral
shall not exceed the A&D Commitment Sublimit then in
effect.
(vi) Limitation on Availability for
Development Projects and Finished Lot Projects. The
aggregate of the Collateral Value for all Development
Projects and Finished Lot Projects shall not at any
time exceed (A) the A&D Commitment Sublimit then in
effect, minus (B) the aggregate Collateral Value of
all Land Projects then included in Eligible
Collateral.
(vii) State Limitations for A&D Projects.
The aggregate Collateral Value with respect to all
A&D Projects in Arizona shall not at any time exceed
the lesser of (A) 30% of the Commitment Amount or (B)
$51,000,000, and the aggregate Collateral Value with
respect to all A&D Projects in California shall not
at any time exceed the lesser of (C) 27.5% of the
Commitment Amount or (D) $46,750,000.
(viii) State Limitations on Collateral
Value. The aggregate Collateral Value of all Eligible
Collateral in Arizona shall not exceed the lesser of
(A) 90% of the Commitment Amount or (B) $153,000,000,
and the aggregate Collateral Value of all Eligible
Collateral in California shall not exceed the lesser
of (C) 60% of the Commitment Amount or (D)
$102,000,000.
50
If any of the limitations on Eligible Collateral, Collateral Value,
Outstanding Borrowings, or outstanding Advances set forth in this
Section 4.6 or elsewhere in this Agreement are exceeded, the Agent may
at its option either delete Units and A&D Projects from Eligible
Collateral until such requirements are met or require Borrower to make
a remargining payment pursuant to Section 2.9.
4.7 Collateral Inventory Report, Collateral Certificate, and Borrowing
Base Report.
(a) Collateral Inventory Report. On or before the day that is
at least 3 Business Days prior to the first and third Wednesdays of
each Calendar Month, Borrower will prepare and submit to the Agent a
Collateral Inventory Report for all of the Collateral, including for
each Unit in Eligible Collateral, among other things that Agent may
require from time to time, the following: (i) the total number, and a
description of, the Presold Units, Spec Units, Model Units, and A&D
Projects that constitute Eligible Collateral; (ii) the name of the
Approved Subdivision; (iii) the Lot number as indicated on the recorded
plat of the Approved Subdivision; (iv) the Unit plan type; (v) whether
the Unit is a Presold Unit, a Spec Unit, a Model Unit, or ineligible
collateral; (vi) the Unit Lot Cost; (vii) the Unit Budget; (viii)
percentage of completion up to the date of the report and the hard
construction costs to complete the Unit; (ix) the Unit Appraised Value;
(x) the listing price of the Unit or the amount of the Purchase
Contract, as applicable; (xi) the date of the first Advance against the
Unit in Eligible Collateral and the applicable Unit Eligibility Date
for each Unit; (xii) the Unit Collateral Value and the Maximum Allowed
Advance for the Unit; (xiii) the amount of Loan proceeds that are
available for Advances against each item of Eligible Collateral based
on the terms of this Agreement; and (xiv) a list of all Collateral that
is not Eligible Collateral. With respect to A&D Projects, the
Collateral Inventory Report will show whether the A&D Project is a Land
Project, a Development Project, or a Finished Lot Project and will also
set forth such information concerning construction of the Off-Site
Improvements as the Agent may require, including, without limitation,
the status of construction of the Off-Site Improvements in Development
Projects, a detailed breakdown of the costs of the various phases of
construction of the Off-Site Improvements showing the amounts expended
to date for such construction, the Maximum Allowed Advance for the A&D
Project, and an itemized estimate of the amount necessary to complete
construction of the Off-Site Improvements in their entirety.
(b) Collateral Certificate. Each Collateral Inventory Report
will be accompanied by a Collateral Certificate signed by an executive
officer of Borrower. As the Agent may from time to time request, each
Collateral Inventory Report shall also be accompanied by such
certificates, "check runs" and other evidence as the Agent may require
to assist the Agent in verifying the information therein. Units and A&D
Projects may be added as Eligible Collateral only upon receipt of the
Collateral Inventory Report and Collateral Certificate which include
such Unit or A&D Project and upon satisfaction of all other provisions
of this Agreement. Each Collateral Certificate shall be in form and
substance satisfactory to the Agent, shall contain such certifications
as the Agent may require, and shall set forth the following:
(i) The total amount of Letters of Credit
outstanding;
(ii) The A&D Project Collateral Value for each A&D
Project that constitutes Eligible Collateral;
51
(iii) The total Collateral Value for the Borrowing
Base;
(iv) The calculated amount of Collateral Value and
usage for all types of Eligible Collateral and a calculation
of all applicable limitations; and
(v) A statement that Borrower is in compliance with
the terms and conditions of the Loan Documents.
(c) Form of Report and Certificate. The Collateral Inventory
Report and the Collateral Certificate will be in written form and on
computer disk formatted to the Agent's specifications.
(d) Borrowing Base Report. The Agent will prepare the
Borrowing Base Report and determine the Borrowing Base, Eligible
Collateral, and the Collateral Value of the Borrowing Base (and all
other amounts and items relating thereto) based upon (i) the Collateral
Inventory Report and Collateral Certificate most recently submitted by
Borrower; (ii) the Agent's inspections made pursuant to Section 7.13
(as such inspections may result in any adjustments to reflect any
variance between the Borrowing Base Report and/or the Collateral
Inventory Report and the results of such inspections by the Agent); and
(iii) such other information as the Agent may reasonably require in
order to verify the Borrowing Base, Eligible Collateral, the Collateral
Value of the Borrowing Base, and all other amounts and items relating
thereto. The Borrowing Base Report will also take into account the sale
of Units and all other adjustments and limitations permitted or
required by this Agreement. Each determination by the Agent, in its
reasonable judgment, of the Borrowing Base, Eligible Collateral and the
Collateral Value of the Borrowing Base, and each determination by the
Agent, in its reasonable judgment, as to the amount of any Advance to
which Borrower is entitled, based on the information in the Borrowing
Base Report (and all other amounts and items entering into such
determinations), will be final, conclusive and binding upon Borrower.
The Agent will provide a copy of each Borrowing Base Report to Borrower
and each of the Banks within 3 Business Days of receipt of the
Collateral Inventory Report and accompanying Collateral Certificate.
4.8 General. Anything in this Article 4 or the Loan Documents to the
contrary notwithstanding, Borrower agrees that no limitation on any Advances
will limit or otherwise change Borrower's obligations and liabilities under this
Agreement, that Borrower will remain obligated to pay all costs, expenses, and
fees required to be paid by Borrower pursuant to this Agreement and the other
Loan Documents, and that Borrower will remain obligated to pay all costs,
expenses, and fees now or hereafter arising in connection with acquisition,
development, maintenance, occupancy, operation, and use of the Collateral.
4.9 Appraisals.
(a) Appraisal Requirements. The form and substance of each
Appraisal must be satisfactory to the Agent. Each Unit Appraisal must
include, without limitation, the following information: (i) a base plan
type value for each type of Unit in each Approved Subdivision; (ii) a
lot premium value, if any, for each Lot that is Grandfathered
Collateral; and (iii) the standard value of upgrades and purchaser
options to Units that constitute Grandfathered Collateral for each
Approved Subdivision. All Appraisals must comply with the Appraisal
Policy and with all applicable laws, rules, and regulations, including,
without limitation, the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, as amended.
52
(b) Appraiser Engagement. Each Appraisal must be prepared by
an appraiser selected and engaged by the Agent. Borrower will notify
the Agent in writing that Borrower desires to obtain approval of a
Subdivision or include a Unit or an A&D Project in Eligible Collateral
for which no Appraisal then exists and will provide to the Agent all
information (including lot premiums and upgrades, if the Appraisal will
be a Unit Appraisal of Grandfathered Collateral) necessary to allow an
Appraisal to be ordered by the Agent. The Agent will engage an
appraiser to perform an Appraisal only when it receives all information
deemed necessary by the Agent and the appraiser for preparation of such
Appraisal. Neither the Agent nor any Bank will have any liability to
Borrower or any other Person with respect to delays in the Appraisal
process. Borrower and its Affiliates will not employ any appraiser that
prepares an Appraisal for any of the Collateral unless specifically
requested to do so by the Agent. The Agent may employ a staff appraiser
or a fee appraiser and Borrower will reimburse the Agent at the Agent's
reasonable cost therefor.
(c) Appraisal Evaluation. Upon receipt of an Appraisal, the
Agent will review the Appraisal in accordance with the Appraisal Policy
and establish a Unit Appraised Value or an A&D Project Appraised Value,
as applicable. The Agent will notify Borrower of such Unit Appraised
Value or A&D Appraised Value and deliver to Borrower a copy of each
Appraisal upon receipt.
(d) Bank Review. Each Bank may review Appraisals from time to
time by such Bank's internal appraisal staff; provided, however, that
any Bank review under this Section shall be at the expense of the Bank
unless undertaken by the Agent in its capacity as such; and provided,
further, that if any Bank determines that (i) the Appraisal does not
materially comply with the Appraisal Policy and (ii) the deficiency has
a material adverse effect on the determination of Collateral Value,
such Bank will notify the Agent in writing as to the deficiencies, and
Borrower will be obligated to reimburse the Bank for its reasonable
expenses in undertaking such review. The Agent will report such
deficiencies to the applicable appraiser and request that the appraiser
remedy such deficiencies at the expense of Borrower (or if such
deficiencies may only be remedied by a new Appraisal, the Agent may
cause, at Borrower's expense, a reappraisal by that appraiser or a
substitute appraiser). If the noted deficiencies are not corrected by
an appraiser through appropriate Appraisal revisions or supplements
satisfactory to such Bank and the Agent, the Appraisal will be deemed
unsatisfactory and notice of such conclusion will be communicated by
written notice from the Agent to Borrower. If an initial Appraisal is
unsatisfactory and relates to Collateral proposed for Eligible
Collateral, the Collateral will not be admitted as Eligible Collateral
until the Agent has received a satisfactory Appraisal. If the
unsatisfactory Appraisal relates to Eligible Collateral already in the
Borrowing Base, the Eligible Collateral will no longer be Eligible
Collateral until a satisfactory Appraisal has been obtained, whereupon
the Agent may make adjustments to Unit Appraised Values and A&D Project
Appraised Values.
(e) Additional Appraisals. Notwithstanding anything in this
Section 4.9 to the contrary, the Agent may order updated Appraisals at
the sole cost and expense of Borrower (i) if such Appraisals are
required by any laws, rules, regulations, or generally applicable
lending procedures; (ii) with respect to Unit Appraisals, if the Agent
determines that the aggregate sales price of Units in an Approved
Subdivision is more than 5% less than the aggregate appraised values of
such Units in such Approved Subdivision; (iii) if the Agent determines
in its absolute and sole discretion that there has occurred or is
occurring a general deterioration in market conditions affecting any
Approved Subdivision or A&D Project; (iv) upon the failure of Borrower
to meet the absorption assumptions in an existing Appraisal; or (v)
with respect to Eligible Collateral, annually after receipt
53
of the original Appraisal, in the sole and absolute discretion of the
Agent. Any required adjustments to the Unit Collateral Value or the A&D
Project Collateral Value as a result of such updated Appraisals will be
made effective upon 30 days written notice from the Agent to Borrower
setting forth the adjusted Unit Appraised Values or A&D Project
Appraised Values based on the Agent's review of such reappraisals or
valuations. Updated Appraisals must comply with the Appraisal Policy.
(f) Appraisal Policy Modifications. The appraisal process must
conform to the Appraisal Policy as in effect from time to time.
Borrower acknowledges and agrees that modification to the Appraisal
Policy may result in requirements to modify the Unit Appraisals, Unit
Appraised Values, Unit Collateral Values, Maximum Allowed Advances, A&D
Project Appraisals, A&D Project Appraised Values, A&D Project
Collateral Values, and appraisers. Any such modification will be
effective 30 days after written notice from the Agent to Borrower of
the changes required by reason of a modification or amendment to the
Appraisal Policy. The Agent will endeavor to deliver a courtesy copy of
any modification of the Appraisal Policy to Borrower solely for
informational purposes, but such delivery will be without obligation by
the Agent and the Banks to Borrower and will not create any express or
implied rights of Borrower.
(g) Expenses. Borrower will reimburse the Agent for all costs
and expenses incurred in the appraisal process and in establishing and
monitoring appraised values. All reimbursement of Borrower to the Agent
required by this Section 4.9 will be paid to the Agent within 15 days
after notice from the Agent to Borrower.
ARTICLE 5
CONDITIONS PRECEDENT
5.1 Conditions Precedent to Effectiveness of this Agreement. This
Agreement will become effective only upon satisfaction of the following
conditions precedent on or before May 2, 1997, in each case as determined by the
Banks in their sole and absolute discretion. If the conditions precedent are not
satisfied (or waived by the Banks) on or before such deadline, the Agent and the
Banks may cancel this Agreement upon written notice to Borrower; whereupon the
Original Loan Agreement and the Agency/Participation Agreement shall be deemed
reinstated. The conditions precedent to be satisfied are as follows:
(a) Representations and Warranties Accurate. The
representations and warranties by Borrower in the Loan Documents are
correct on and as of the date of this Agreement and as of the Effective
Date, as though made on and as of each such date.
(b) No Defaults. No Event of Default or Unmatured Event of
Default will have occurred and be continuing, and Borrower will be in
compliance with the Financial Covenants set forth in this Agreement.
(c) Borrower's Financial Condition. The Banks will be
satisfied, in their sole and absolute discretion, with their review and
analysis of the financial condition of Borrower as of the Effective
Date.
54
(d) Qualifying Subordinated Indebtedness. Borrower shall have
issued and sold a total of $15,000,000 in new Series D Notes (for a
total outstanding face amount of Series D Notes as of the Effective
Date equal to $45,000,000), and all of the Series D Notes and the
Series C Notes will meet the requirements of Qualifying Subordinated
Indebtedness.
(e) No Material Adverse Change. The Banks will have determined
that no Material Adverse Change has occurred with respect to Borrower
since the most recent financial statement and reports provided to the
Banks.
(f) Documents. The Agent will have received the following
agreements, documents, and instruments, each duly executed by the
parties thereto and in form and substance satisfactory to the Banks and
their legal counsel, in their absolute and sole discretion:
(i) Loan Documents. This Agreement and such
amendments, ratifications, and confirmations of the other Loan
Documents as the Banks may require in their sole discretion.
(ii) Corporation Documents. Certified copies of
resolutions of Borrower's board of directors authorizing
Borrower to execute, deliver, and perform its obligations
under this Agreement and the other documents to be executed
and delivered by Borrower in connection herewith and ratifying
and confirming the Liens and Encumbrances of the Banks on the
Collateral and certifying the names and signatures of the
officers authorized to execute this Agreement and to request
Advances on behalf of Borrower.
(iii) Opinion Letters. A favorable opinion from one
or more law firms representing Borrower covering such matters
as the Banks may require, including such matters of Delaware,
California, and Arizona law as the Banks may require and
including ERISA compliance.
(g) Other Items or Actions by Borrower. The Banks will have
received such other agreements, documents, certificates (including
bring-down certificates), and instruments, and Borrower will have
performed such other actions, as the Banks may reasonably require.
(h) Payment of Costs, Expenses and Fees. All costs, expenses
and fees to be paid by Borrower under the Loan Documents on or before
the Effective Date will have been paid in full, including, without
limitation, the applicable fees set forth or referenced in Section 2.6.
5.2 Approval of Subdivisions. Borrower may, from time to time prior to
commencement of the Term Out Period, request Agent and the Co-Agent
(collectively, the "Agents") to approve Subdivisions pursuant to this Section
5.2. Approval of new Subdivisions shall be at the sole and absolute discretion
of the Agents, and the Agents shall have no obligation to approve such
Subdivisions. In any event, the Agents will only consider approval of
Subdivisions located in the States of Arizona and California. When requesting
consideration of a new Subdivision, Borrower, at Borrower's sole cost and
expense, shall deliver to the Agent each of the following items, unless
otherwise directed by all of the Banks, and shall satisfy the following
conditions precedent, unless otherwise waived by all of the Banks (each of which
items must be satisfactory to the Agents in their sole and absolute discretion
and each of which conditions precedent must be satisfied, as determined by the
Agents in their sole and absolute discretion, at all times that such Subdivision
is
55
considered an Approved Subdivision), with the Agent being responsible to provide
any such items to the Co-Agent, as applicable:
(a) Request. Borrower shall have submitted to the Agent a
request in form satisfactory to the Agent for approval of such
Subdivision.
(b) Representations and Warranties Accurate. The
representations and warranties by Borrower in the Loan Documents are
correct in all material respects.
(c) No Defaults. No Event of Default or Unmatured Event of
Default shall have occurred and be continuing.
(d) Size of Subdivisions. With respect to any one Subdivision,
the maximum number of Lots may not exceed 150 unless otherwise approved
by a Bank Supermajority.
(e) Subdivisions in the Same Location. No more than 3
Subdivisions in a particular location that is being developed as a
master plan or similar project will be permitted unless otherwise
approved by a Bank Supermajority.
(f) Ownership. Except to the extent permitted by Section
7.3(b), Borrower shall either be the owner of the Subdivision, subject
only to Permitted Exceptions, or shall be entitled under an
Option/Purchase Agreement to purchase Lots in the Subdivision from time
to time.
(g) Proposed Development. To the extent not included in the
other items to be provided pursuant to this Section 5.2, Borrower shall
have submitted to the Agent budgets, feasibility studies (if
available), environmental and engineering reports and studies, proforma
financial statements, income projections, development schedules and
other information as the Agent may require to establish that the
development of Lots and/or the construction and sale of Units on Lots
in the Subdivision and the estimated costs, expenses and profits in
connection therewith are consistent with the Business Plan and are
otherwise acceptable to the Agents in their sole and absolute
discretion.
(h) Plat. Borrower shall have delivered to the Agent a
preliminary parcel map, preliminary plat or survey of the Subdivision.
(i) Zoning Approvals. Borrower shall have provided to the
Agent evidence that the Subdivision is subject to vested zoning
consistent with its proposed uses.
(j) Preliminary Title Commitment. Borrower shall have provided
to the Agent a preliminary title commitment for the Subdivision,
prepared by the Title Company, together with a legible copy of each
Schedule B item.
(k) Environmental Assessment. Borrower shall have delivered to
the Agent a report of an environmental assessment for the Subdivision
addressed to the Agent, as agent for the Banks, by an environmental
engineer acceptable to the Agent containing such information, results,
and certifications as are required by the Environmental Policy.
Depending upon the results of the environmental assessment, Borrower
will also provide such follow up testing, reports, and other
56
actions as may be required by the Agent. The contents of the
environmental assessment report and any follow up must be satisfactory
to the Agents, in their sole and absolute discretion.
(l) Environmental Questionnaire. Borrower shall have delivered
to the Agent, an environmental questionnaire (in substantially the form
required by the Environmental Policy) with respect to the Subdivision,
fully completed and duly executed by Borrower.
(m) Soils Tests. Borrower shall have provided the Agent a
soils test report for the Subdivision prepared by a licensed soils
engineer satisfactory to the Agent showing the locations of, and
containing boring logs for, all borings.
(n) Preliminary Budget. Borrower shall have provided the Agent
a preliminary A&D Project Budget for the proposed Land Project and for
the related Development Project to be undertaken with respect to the
Subdivision.
(o) Land Purchase Documents. Borrower shall have provided the
Agent copies of the purchase agreement, settlement statement and other
documentation relating to Borrower's purchase of the Entitled Land.
(p) Marketing Information. Borrower shall have provided the
Agent marketing information with respect to the Lots and Units to be
developed in the Subdivision, including, to the extent available, floor
plans, square footage, anticipated absorption, estimated Unit mix, Unit
cost breakdowns, subdivision pro formas, anticipated gross margins,
number of Model Units, and plans for Model Units, all of which must be
consistent with the Business Plan.
(q) Types of Units; Budgets. Borrower shall have provided the
Agent a budget and pro forma cash flow for the Subdivision consistent
with Borrower's then current Business Plan and providing detail
regarding projected sales revenues (by type of Unit), hard and soft
costs of construction (by type of Unit), pricing for options and
upgrades, allocated overhead, and projected gross profit margins, with
the budget, projected sales revenues, profit margins, and other
financial and economic aspects of the proposed Development Project to
be consistent, at a minimum, with the Business Plan.
(r) Appraisal. The Agent shall have received a current A&D
Project Appraisal for the Land Project and the proposed Development
Project to be developed, and the A&D Project Appraised Value, as
established pursuant to the A&D Project Appraisal and the Appraisal
Policy, shall be satisfactory to the Agents.
(s) Other. Borrower shall have provided the Agent such other
documents and information as the Agent may reasonably request.
5.3 Qualification of Land Projects as Eligible Collateral. Borrower
may, from time to time, request the Agent to approve a Land Project to be
included as Eligible Collateral; provided, however, that the Agent will not
consider or approve any new Land Projects during the Term Out Period. Prior to
the Term Out Period, approval of new Land Projects as Eligible Collateral will
be at the Agent's absolute and sole discretion. In any event, the Agent will
only consider approval of Land Projects located in Arizona and California. Agent
is also under no obligation to accept into Eligible Collateral any Land Project
proposed
57
by Borrower more frequently than twice in each Calendar Month. When requesting
consideration of a new Land Project, Borrower, at Borrower's sole cost and
expense, shall deliver to the Agent each of the following items, unless
otherwise directed by all of the Banks. However, with respect to items specified
as only being required if requested by the Agent, the Agent may determine in its
discretion as to whether or not to require such items, and Borrower shall only
be required to provide such items if so requested. Borrower, at Borrower's sole
cost and expense, shall also satisfy the following conditions precedent, unless
otherwise waived by all of the Banks. Each of the items required by this Section
must be satisfactory to the Agent in its sole and absolute discretion and each
of the conditions precedent required to be satisfied pursuant to this Section
must be satisfied, as determined by the Agent in its sole and absolute
discretion, at all times that such Land Project is included in Eligible
Collateral:
(a) Located in Approved Subdivision. The Entitled Land
consists of a single Approved Subdivision.
(b) Survey. Borrower shall have delivered to the Agent a
current survey of the Land Project by a surveyor or civil engineer
licensed in the state in which the Land Project is located satisfactory
to the Agent stamped with the professional seal of the surveyor or
civil engineer, satisfying the requirements for an American Land Title
Association survey and such additional requirements as the Agent may
prescribe. In lieu of such a survey, the Borrower may provide a final
recorded plat or subdivision map, provided such plat or map is
acceptable to the Agent and the Title Company and the Title Company
agrees that it will issue its Title Policy for the Entitled Land
without any exception for matters which an accurate survey of the
Entitled Land would disclose.
(c) Deed of Trust/Title Policy. Borrower shall have provided
to the Agent (i) a first lien Deed of Trust on the Land Project subject
only to Permitted Exceptions, duly executed by Borrower, acknowledged,
delivered and recorded; and (ii) a new Title Policy or an endorsement
to an existing Title Policy issued by a Title Company and in form
satisfactory to the Agent. Such policy or endorsement will provide
coverage (including without limitation, mechanic's lien coverage)
satisfactory to the Agent and insure the Agent's interest (as agent for
and on behalf of the Banks) under the applicable Deed of Trust as a
valid first lien on the property encumbered by the Deed of Trust,
subject only to Permitted Exceptions.
(d) Environmental Agreement. Borrower shall have provided to
the Agent an Environmental Agreement with respect to the Entitled Land
included in the Land Project.
(e) Drainage; Flood Zone. Borrower shall have provided to the
Agent, if requested by the Agent, a drainage report for the Land
Project by an engineer acceptable to the Agent containing such
information, results and certifications as the Agent may require. If
requested by the Agent, Borrower shall have provided to the Agent
evidence satisfactory to the Agent, as to whether (i) the Land Project
is located in an area designated by the United States Department of
Housing and Urban Development as having special flood or mudslide
hazards, and (ii) the community in which the Land Project is located is
participating in the National Flood Insurance Program.
(f) Impositions, Assessments, and Charges. Borrower shall have
provided the Agent with evidence that all Impositions and water, sewer,
and other charges assessed against the Land Project which are then due
and payable have been paid in the amount required unless the Agent is
able to verify such information from other sources of information
reasonably available to the Agent.
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(g) Limitations. After giving effect to the addition of such
Land Project to Eligible Collateral, the limitations and restrictions
on Eligible Collateral in Article 4 are not violated.
(h) Other Items. Borrower shall have provided the Agent such
other agreements, documents, and instruments as the Agent may
reasonably request.
(i) Other Actions. Borrower shall have performed such other
actions as the Agent may reasonably request.
5.4 Qualification of Development Projects as Eligible Collateral.
Borrower may, from time to time, request the Agent to approve a Development
Project as Eligible Collateral; provided, however, that the Agent will not
consider or approve any new Development Projects during the Term Out Period.
Agent is also under no obligation to accept into Eligible Collateral any
Development Project proposed by Borrower more frequently than twice in each
Calendar Month. When requesting consideration of a new Development Project,
Borrower, at Borrower's sole cost and expense, shall deliver to the Agent each
of the following items, unless otherwise directed by all of the Banks. However,
with respect to items specified as only being required if requested by the
Agent, the Agent may determine in its discretion as to whether or not to require
such items, and Borrower shall only be required to provide such items if so
requested. Borrower, at Borrower's sole cost and expense, shall also satisfy the
following conditions precedent, unless otherwise waived by all of the Banks.
Each of the items required by this Section must be satisfactory to the Agent in
its sole and absolute discretion and each of the conditions precedent required
to be satisfied pursuant to this Section must be satisfied, as determined by the
Agent in its sole and absolute discretion, at all times that such Development
Project is included in Eligible Collateral:
(a) Qualification for Inclusion as Entitled Land. All of the
conditions precedent in Section 5.3 for the inclusion of the Entitled
Land as a single Land Project in Eligible Collateral have been and
continue to be satisfied.
(b) Construction Contracts. If requested by the Agent,
Borrower shall have provided the Agent an executed contract for
construction of the Off-Site Improvements between Borrower and the
licensed contractor(s) retained by Borrower to construct the Off-Site
Improvements. Also, if requested by the Agent, Borrower shall have
provided to the Agent a copy of each construction subcontract,
architectural agreement, engineering agreement, and other agreements,
documents, and instruments relating to construction of the Off-Site
Improvements. The contract price in each such agreement, document, and
instrument must be within the budgeted amount in the A&D Project Budget
for the Development Project.
(c) Plans and Specifications. Borrower shall have provided the
Agent the final A&D Project Plans and Specifications.
(d) Permits. If requested by the Agent, Borrower shall have
provided evidence that Borrower has obtained all Approvals and Permits
necessary to permit the construction of the Off- Site Improvements and
the construction and sale of Units in the Subdivision to be developed
from the Development Project, provided that Borrower may not have
obtained all of the Approvals and Permits necessary for construction of
the Off-Site Improvements or the construction and sale of Units to the
extent such Approvals and Permits are not yet necessary.
59
(e) Construction Schedule. Borrower shall have provided the
Agent the construction schedule for the completion of the Off-Site
Improvements.
(f) Budget. Borrower shall have provided the Agent a final A&D
Project Budget for the Development Project.
(g) Final Subdivision Map or Plat. Borrower shall have
delivered to the Agent the final Subdivision Documents for the
Subdivision, and such final Subdivision Documents shall have been
recorded or filed with the appropriate Governmental Authorities, except
with respect to Units in a condominium which pursuant to applicable
Requirements of any Governmental Authority may not be annexed into the
condominium declaration and such other instruments until the
commencement of construction or the sale of Units, in which case each
such Unit will be so annexed as soon as permitted pursuant to such
applicable Requirements; provided, however, that upon written request
by Borrower to the Agent, the Agent may, for good cause, extend the
time for providing the final Subdivision Documents by a period not to
exceed 45 days (unless all of the Banks agree to a longer period). Each
map or plat for subdivided Lots must contain a legal description of the
Subdivision covered by the map, must describe and show all boundaries
of and lot lines within such Subdivision, all streets and other
dedications, and all easements affecting such Subdivision, and each
condominium declaration, condominium plan, or other similar document
must contain such information as the Agent may reasonably request. In
connection with the approval of plat and/or subdivision maps and
condominium declarations pursuant to this subsection, Borrower will
also deliver to the Agent such title endorsements insuring the
continued priority of the Deed of Trust after recording of the plat
and/or subdivision maps and condominium declarations as the Agent may
require. Borrower agrees to take such steps as the Agent may require in
(i) either re-recording the Deed of Trust or amending the Deed of Trust
to reflect the new legal description, and (ii) obtaining an endorsement
to the Title Policy to amend the legal description therein.
(h) Restrictive Covenants. When available, Borrower shall have
delivered to the Agent the final CC&Rs for the Subdivision.
(i) Utilities. If the Agent shall not have received the final
Subdivision Documents at the time of approval of the Development
Project, Borrower shall have delivered to the Agent, evidence, which
may be in the form of "will serve" letters from local utility companies
or local authorities, that (i) telephone service, electric power, storm
sewer (if applicable), sanitary sewer (if applicable) and water
facilities will be available to each Lot in the Subdivision; (ii) such
utilities will be adequate to serve the Lots in the Subdivision; and
(iii) upon completion of the Off-Site improvements, no conditions will
exist to affect Borrower's right to connect into and have adequate use
of such utilities except for the payment of a normal connection charge
or tap charges and except for the payment of subsequent charges for
such services to the utility supplier.
(j) Limitations. After giving effect to the addition of such
Development Project to Eligible Collateral, the limitations and
restrictions on Eligible Collateral in Article 4 are not violated.
60
(k) Other. Borrower will provide such other documents and
information to the extent that the Agent notifies Borrower that such
documents and information are required pursuant to laws, rules or
regulations applicable to the Agent or the Banks or otherwise by the
internal policies and procedures of the Agent or a Bank.
Following approval of a Development Project pursuant to this Section and
inclusion of the Development Project in Eligible Collateral as a Development
Project, Borrower may develop such Development Project in different phases (a
"Development Phase"), with Borrower's determination as to what portion of the
Development Project is to be included in a particular Development Phase to be
subject to the approval of the Agent; provided, however, that in no event will a
Development Phase consist of fewer than 20 Lots. For purposes of Section 4.3(b)
only, each Development Phase shall be considered as a separate Development
Project; however, all of the Development Phases within the a particular
Development Project will nevertheless constitute only one Approved Subdivision.
Development Phases are only permitted in Development Projects and are not
permitted in Land Projects and the requirements of Section 4.3(a) shall be
applied to the entirety of a Land Project.
5.5 Qualification of Finished Lot Projects as Eligible Collateral.
Borrower may, from time to time, request the Agent to approve a Finished Lot
Project as Eligible Collateral; provided, however, that the Agent will not
consider or approve any new Finished Lot Projects during the Term Out Period.
Agent is also under no obligation to accept into Eligible Collateral any
Finished Lot Project proposed by Borrower more frequently than twice in each
Calendar Month. When requesting consideration of a new Finished Lot Project,
Borrower, at Borrower's sole cost and expense, shall deliver to the Agent each
of the following items, unless otherwise directed by all of the Banks. However,
with respect to items specified as only being required if requested by the
Agent, the Agent may determine in its discretion as to whether or not to require
such items, and Borrower shall only be required to provide such items if so
requested. Borrower, at Borrower's sole cost and expense, shall also satisfy the
following conditions precedent, unless otherwise waived by all of the Banks.
Each of the items required by this Section must be satisfactory to the Agent in
its sole and absolute discretion and each of the conditions precedent required
to be satisfied pursuant to this Section must be satisfied, as determined by the
Agent in its sole and absolute discretion, at all times that such Finished Lot
Project is included in Eligible Collateral:
(a) Finished Lots from Development Projects.
(i) If the Finished Lot Project consists of Lots from
a Development Project, all of the conditions precedent in
Sections 5.2, 5.3, and 5.4, as applicable, have been and
continue to be satisfied.
(ii) Either (A) all Off-Site Improvements in the
Subdivision are fully and finally completed, all dedications
have occurred, all governmental acceptances and approvals have
been obtained and are in full force and effect in order to
permit the immediate construction and sale of Units within the
Subdivision; or (B) to the extent that such Off-Site
Improvements have not been completed within the Subdivision,
the Agent will have approved the stage of completion of the
remaining work (which must be at least 95%) and will have
received such assurances as the Agent reasonably requests with
respect to the completion of such offsite improvements (which
may include without limitation, payment and performance bonds
covering such completion).
61
(b) Finished Lots in Option/Purchase Subdivisions. If the Lots
are in an Option/Purchase Subdivision:
(i) All of the conditions precedent in Section 5.2,
as applicable, qualifying the Option/Purchase Subdivision as
an Approved Subdivision have been and continue to be
satisfied.
(ii) The conditions precedent in Sections 5.3 and
5.4, as applicable, will have been satisfied and the
deliveries contemplated in those Sections shall have been made
to the Agent with respect to the Option/Purchase Subdivision,
as if such Option/Purchase Subdivision were a Land Project and
then a Development Project.
(iii) Borrower shall have provided the Agent
documentation relating to Borrower's proposed acquisition of
Lots within the Option/Purchase Subdivision, including,
without limitation, any Option/Purchase Agreements and the
identity of the seller of such Lots. Borrower also will have
provided to the Agent documentation establishing the
acquisition price of such Lots. If any Lots in the
Option/Purchase Subdivision have been sold, Borrower will have
provided to the Agent the date of the first sale and the
number of sales to date.
(iv) The Finished Lots in the Finished Lot Project
are owned by Borrower subject only to the Permitted
Encumbrances.
(v) The Agent shall have received a current Appraisal
on the Finished Lot Project consisting of Lots from an
Option/Purchase Subdivision, and the A&D Project Appraisal
Value, as established pursuant to the A&D Project Appraisal
and the Appraisal Policy, is satisfactory to the Agent in its
sole and absolute discretion.
(vi) Either (A) all Off-Site improvements in the
Option/Purchase Subdivision, comparable to Off-Site
Improvements in a Development Project, are fully and finally
completed, all dedications have occurred, all governmental
acceptances and approvals have been obtained and are in full
force and effect in order to permit the immediate construction
and sale of Units within the Option/Purchase Subdivision; or
(B) to the extent that such Off- Site Improvements have not
been completed within the Option/Purchase Subdivision, the
Agent will have approved the stage of completion of the
remaining work and will have received such assurances as the
Agent reasonably requests with respect to the completion of
such Off-Site Improvements (which may include without
limitation, payment and performance bonds covering such
completion).
(vii) Since Borrower may purchase Lots one at a time
in an Option/Purchase Subdivision pursuant to an
Option/Purchase Agreement, a Finished Lot Project consisting
of Lots in an Option/Purchase Subdivision may consist of as
few as 1 Lot.
(c) Limitations. After giving effect to the addition of such
Finished Lots to Eligible Collateral as a Finished Lot Project, the
limitations and restrictions on Eligible Collateral in Article 4 are
not violated.
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5.6 Qualification of Units as Eligible Collateral. Borrower may, from
time to time, request the Agent to approve a Unit as Eligible Collateral;
provided, however, that, following the end of the 12th Calendar Month of the
Term Out Period, no Unit will be included in Eligible Collateral for the first
time. Agent is also under no obligation to accept into Eligible Collateral any
Units proposed by Borrower more frequently than twice in each Calendar Month.
When requesting consideration of a new Unit, Borrower, at Borrower's sole cost
and expense, shall deliver to the Agent each of the following items, unless
otherwise directed by all of the Banks. However, with respect to items specified
as only being required if requested by the Agent, the Agent may determine in its
discretion as to whether or not to require such items, and Borrower shall only
be required to provide such items if so requested. Borrower, at Borrower's sole
cost and expense, shall also satisfy the following conditions precedent, unless
otherwise waived by all of the Banks. Each of the items required by this Section
must be satisfactory to the Agent in its sole and absolute discretion and each
of the conditions precedent required to be satisfied pursuant to this Section
must be satisfied, as determined by the Agent in its sole and absolute
discretion, at all times that such Unit is included in Eligible Collateral:
(a) Inclusion in an Approved Subdivision. Such Lot is legally
described as a Lot on a final subdivision plat or map, subdivision
filing, or, if applicable, a condominium declaration or plan and is in
an Approved Subdivision.
(b) Documents. Except with respect to those items required to
be provided only upon the request of the Agent (with Borrower
nevertheless being required to obtain and retain copies of such items)
and except to the extent already provided in the information submitted
to and approved by the Agent (or the Agents) pursuant to Sections 5.2,
5.3, 5.4, or 5.5, to the extent applicable (unless there has been a
material change in such information), Agent shall have received the
following agreements, documents, and instruments, each duly executed by
the parties thereto:
(i) Approvals. If requested by the Agent, evidence of
all approvals of Governmental Authorities and other third
parties necessary to permit the construction and sale of the
Unit, including, without limitation, all applicable public
reports, architectural committee approvals, and any other
approvals required under the CC&Rs.
(ii) Contracts for Unit Construction. If requested by
the Agent, copies of all executed contracts between Borrower
and any other Person (including, without limitation, the
architect and each contractor or subcontractor for labor,
materials, or services) relating to design and construction of
Units within the Subdivision.
(iii) Final CC&Rs. Copies of the final CC&Rs for the
Approved Subdivision.
(iv) Purchase Contract. If such Unit is a Presold
Unit and if requested by the Agent, a copy of the fully
executed Purchase Contract for such Unit.
(v) Unit Appraisal. A Unit Appraisal for the type of
Unit in question. The Appraised Value for the type of Unit
will have been approved by the Agent.
(vi) Unit Budget. A Unit Budget for the type of Unit
in question.
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(vii) Unit Plans and Specifications. Unit Plans and
Specifications for the type of Unit in question.
(viii) Deed of Trust. If the Lot on which the Unit is
to be constructed has not previously been encumbered by a Deed
of Trust, a first lien Deed of Trust, subject only to
Permitted Exceptions, duly executed, acknowledged, delivered
and recorded.
(ix) Impositions, Assessments, and Charges. Borrower
shall have provided the Agent with evidence that all
Impositions and water, sewer, and other charges assessed
against the Unit which are then due and payable have been paid
in the amount required unless the Agent is able to verify such
information from other sources of information reasonably
available to the Agent.
(x) Completion of Filings and Recordings. Evidence of
the completion of all recordings and filings to establish or
maintain the perfection and priority of the Liens and
Encumbrances on such Unit granted in the Loan Documents.
(xi) Title Insurance. If the Unit has not previously
been encumbered by a Deed of Trust, (A) a new Title Policy or
(B) an endorsement to an existing Title Policy issued by a
Title Company and in form satisfactory to the Agent. Such
policy or endorsement will provide coverage (including without
limitation, mechanic's lien coverage) satisfactory to the
Agent and insure the Agent's interest (as agent for and on
behalf of the Banks) under the applicable Deed of Trust as a
valid first lien on the property encumbered by the Deed of
Trust, subject only to Permitted Exceptions. If the Unit has
previously been encumbered by an insured Deed of Trust,
Borrower will have provided an endorsement to such Title
Policy, in form satisfactory to the Agent, eliminating any
Schedule B items that are not Permitted Exceptions with
respect to Units included in Eligible Collateral.
(c) Start of Construction. Construction of the Unit has
commenced at least to the Unit Construction Threshold.
(d) Distressed Improvement Districts. Any improvement or
assessment district in which the Unit is located is not insolvent under
applicable law or subject to any bankruptcy or similar proceedings if
such situation, in the reasonable opinion of the Agent, would have a
material adverse impact on development of Units or directly or
indirectly cause the Approved Subdivision in which the Unit is to be
built to be subject to any suspension, disqualification, or disapproval
by FHA, FNMA, VA, FHLMC, or any similar governmental or
quasi-governmental agency that originates, purchases, insures or
guarantees home mortgage loans, if the Approved Subdivision has been
qualified with any such agency and Units in the Approved Subdivision
are proposed to be sold with the benefits of such qualification.
(e) Limitations. After giving effect to the addition of such
Unit to Eligible Collateral, the limitations and restrictions on
Eligible Collateral in Article 4 are not violated.
(f) Other Items. Borrower shall have provided to the Agent
such other agreements, documents, and instruments as the Agent may
reasonably request.
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(g) Other Actions. Borrower shall have performed such other
actions as the Agent may reasonably request.
5.7 Additional Conditions Precedent to All Advances Against Eligible
Collateral. Notwithstanding the other provisions of this Article 5, the Banks
will only be obligated to make Advances against Eligible Collateral if Borrower,
at Borrower's sole cost and expense, shall have delivered to the Agent each of
the following items, unless otherwise directed by all of the Banks. However,
with respect to items specified as only being required if requested by the
Agent, the Agent may determine in its discretion as to whether or not to require
such items, and Borrower shall only be required to provide such items if so
requested. Borrower, at Borrower's sole cost and expense, shall also have
satisfied the following conditions precedent, unless otherwise waived by all of
the Banks. Each of the items required by this Section must be satisfactory to
the Agent in its sole and absolute discretion and each of the conditions
precedent required to be satisfied pursuant to this Section must be satisfied,
as determined by the Agent in its sole and absolute discretion:
(a) Representations and Warranties Accurate. The
representations and warranties by Borrower to any of the Banks shall be
correct in all material respects on and as of the date of such Advance,
both before and after giving effect to such Advance, other than matters
disclosed by Borrower to the Agent and the Banks and approved by all of
the Banks in their absolute and sole discretion.
(b) Defaults. No Event of Default or Unmatured Event of
Default shall have occurred and be continuing on the date of such
Advance, both before and after giving effect thereto.
(c) Other Conditions Precedent. Borrower shall have satisfied
all conditions precedent in Sections 5.1, 5.2, 5.3, 5.4, 5.5, and 5.6,
as applicable.
(d) Inspection Report. The Agent shall not have received
written evidence from the Agent's inspectors or from the Agent's
employees performing inspections for the Agent (i) that construction of
any Unit constituting Eligible Collateral does not comply with the
respective Unit Plans and Specifications in all material respects; and
(ii) that Borrower has not completed each such Unit to the stage
reported on the most recent Borrowing Base Report received by the
Agent.
(e) Lien Waivers. If requested by the Agent, Borrower shall
have provided the Agent with invoices and vouchers for the work for
which the Advance is requested and lien waivers for all work covered by
prior Advances. Such lien waivers may be conditional, so long as the
only condition is receipt of payment for the work and Borrower includes
with the conditional lien waiver a copy of the canceled check for
payment or other evidence of payment.
(f) Approvals and Inspections by Governmental Authorities. If
requested by the Agent, all inspections and approvals by Governmental
Authorities required for the stage of completion of each Unit shall
have been obtained and the Agent shall have received satisfactory
evidence thereof or will have been provided access thereto satisfactory
to the Agent, or shall have obtained such evidence upon inspection of
the Approved Subdivision.
65
(g) Payment of Costs, Expenses, and Fees. All costs, expenses,
and fees due to be paid by Borrower on or before the date of the
Advance under the Loan Documents shall have been paid in full.
(h) Draw Request. Borrower shall have delivered to the Agent a
Draw Request for such Advance.
(i) Limit on Total Outstanding. After giving effect to the
requested Advance, the Outstanding Borrowings shall not exceed the
Available Commitment and no remargining payment shall be required under
Section 2.9.
5.8 Special Conditions to Funding; Funding Procedures. Any other
provision of this Agreement to the contrary notwithstanding:
(a) Special Conditions Precedent. Borrower shall not be
entitled to any Advance under this Agreement, if the effect of the
Advance would cause the Outstanding Borrowings to exceed $150,000,000,
unless and until each of the following conditions precedent has been
satisfied, as determined by the Agent:
(i) Deeds of Trust (or amendments to existing Deeds
of Trust) will have been recorded, and the Agent will have
received evidence of the completion of all such recordings as
are necessary or appropriate to establish and confirm the
perfection and continuing first lien priority position of the
Deeds of Trust on the Collateral as security for the full
amount of the Commitment, subject only to Permitted
Exceptions.
(ii) The Agent will have received the following: (A)
irrevocable commitments of Title Companies approved by the
Agent to issue ALTA Extended Lenders' Coverage Title Insurance
Policies (or to issue endorsements to existing Title Policies)
with respect to all of the Collateral in such form, in such
amounts, and with such endorsements as the Agent may require,
insuring that the Liens and Encumbrances of the Banks on the
Collateral are and continue in first lien position subject
only to Permitted Exceptions; and (B) aggregation and other
agreements from such Title Companies with respect to future
policies of title insurance, as the Agent may require.
(iii) The Agent will have received evidence that the
security interests of the Agent and the Banks in all personal
property Collateral of Borrower are and continue to be of
first priority, except as otherwise permitted by this
Agreement.
Borrower agrees to cause each of the conditions precedent in this
Section 5.8 to be fully satisfied as soon as reasonably possible
following the Effective Date but in any event within 30 days following
the Effective Date (or such longer period not to exceed 90 days
following the Effective Date, as the Agent may, in its reasonable
discretion permit), and a breach of this covenant shall be deemed to be
an Event of Default.
(b) Funding Procedures. Until such time as the conditions
precedent in Section 5.8(a) have been fully satisfied (unless waived by
all of the Banks), those items of Collateral that are entitled to be
included in the Borrowing Base as Eligible Collateral and the
Collateral Value of the
66
Borrowing Base (and thus the amount of the Available Commitment) shall
be determined in accordance with the terms and conditions of the
Original Loan Agreement (with, however, the percentages in Section
3.7.5(e)(v) of the Original Loan Agreement for determining the Maximum
Allowed Advance for Land Projects being 50% not 60%). Borrower
understands and confirms that all of the provisions of this Agreement,
including the Financial Covenants, other than provisions relating to
funding that are directly affected by the preceding sentence, are fully
effective as of the Effective Date.
Upon satisfaction of the conditions precedent in this Section 5.8, as determined
by the Agent in its sole and absolute discretion, the provisions of this Section
5.8 shall no longer be applicable.
5.9 Verification and Other Matters Relating to Conditions Precedent .
Borrower authorizes the Agent and the Agent reserves the right, in its absolute
and sole discretion, to verify any documents and information submitted to it in
connection with this Agreement. Delay or failure by the Agent, or the Agents, as
the case may be, to insist on satisfaction of any condition precedent will not
be a waiver of such condition precedent or any other condition precedent. The
making of an Advance by the Agent will not be deemed a waiver by the Agent or
any Bank of the occurrence of an Event of Default or an Unmatured Event of
Default.
ARTICLE 6
BORROWER REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties. Borrower represents and warrants to
the Agent and the Banks as of the Effective Date and as of the various other
dates specified in this Agreement on which such representations and warranties
are to be accurate, complete, and correct the following:
(a) Corporate Authorization. Borrower is a Delaware
corporation validly existing and in good standing under the laws of
Delaware, Arizona, California, and each other state in which Borrower
conducts business, and Borrower has the requisite power and authority
to execute, deliver, and perform the Loan Documents. The execution,
delivery, and performance by Borrower of the Loan Documents have been
duly authorized by all requisite action by Borrower and do not conflict
with, or result in a violation of or a default under the certificate of
incorporation and bylaws of Borrower. Borrower's headquarters and
principal place of business is presently located in Scottsdale,
Arizona. Borrower has all requisite power and authority to own its
assets and to carry on its business.
(b) No Approvals, etc. No approval, authorization, bond,
consent, certificate, franchise, license, permit, registration,
qualification, or other action or grant by or filing with any
Governmental Authority or other Person (including pursuant to or in
connection with the Bankruptcy Plan or the Bankruptcy Order) is
required in connection with the execution, delivery, or performance
(other than performance which is not yet due) by Borrower of the Loan
Documents.
(c) No Conflicts. The execution, delivery, and performance by
Borrower of the Loan Documents will not conflict with, or result in a
violation of or a default under, (I) any applicable law, ordinance,
regulation, or rule (federal, state, or local); (ii) any judgment,
order, or decree of any arbitrator, other private adjudicator, or
Governmental Authority to which Borrower is a party or by
67
which Borrower or any of the assets of Borrower is bound, including the
Bankruptcy Plan or the Bankruptcy Order; (iii) any of the Approvals and
Permits; or (iv) any agreement, document, or instrument to which
Borrower is a party or by which Borrower or any of the assets of
Borrower is bound. Borrower has reviewed all of the provisions of the
Indebtedness of Borrower which may affect Borrower's ability to enter
into this Agreement, incur the Obligations and obtain Advances or
Letters of Credit hereunder, and none of the terms and conditions of
such existing Indebtedness will be violated by Borrower entering into
this Agreement, incurring indebtedness hereunder, and performing its
obligations under the Loan Documents. Neither the Senior Notes nor the
Qualifying Subordinated Indebtedness is secured by any of the
Collateral. Both before and after giving effect to the changes provided
for in this Agreement, all Qualifying Subordinated Indebtedness is
fully subordinated to the Obligations in right of payment, and no
principal or interest is payable on such Qualifying Subordinated
Indebtedness except as permitted by this Agreement. This Agreement
constitutes "Exit Financing" for purposes of the Qualifying
Subordinated Indebtedness. To the extent of the increase in the
Commitment Amount hereunder from $150,000,000 to $170,000,000, this
Agreement constitutes a "replacement"of the Master Revolving Line of
Credit Construction Loan Agreement, dated November 6, 1995, between
Borrower and Bank of America Arizona for purposes of the definition of
"Exit Financing" in the Qualifying Subordinated Indebtedness. If
requested by the Agent, Borrower will promptly obtain written
confirmations from the trustees and holders of Qualifying Subordinated
Indebtedness, to the extent held by either DMB (as defined in Section
10.1(h)) or AEW (as defined in Section 10.1(i)), of the foregoing
representations and warranties. If requested by the Agent, Borrower
will also promptly obtain written confirmations from the trustees and
holders of any other Qualifying Subordinated Indebtedness of the
foregoing representations and warranties; provided, however, that if
Borrower is not able to obtain such confirmations from such other
holders and trustees (or if Borrower elects not to request such
confirmations from the holders and trustees notwithstanding that such
confirmations have been requested by the Agent), Borrower shall not be
in default; however, the Qualifying Subordinated Indebtedness as to
which the confirmations have not been obtained will no longer be
considered as Qualifying Subordinated Indebtedness. Borrower has made
all mathematical computations and other determinations pursuant to all
Indebtedness of Borrower with respect to the incurrence by Borrower of
the Obligations, and such incurrence of the Obligations does not
violate any terms, conditions, or covenants with respect to any such
other Indebtedness.
(d) Execution and Delivery and Binding Nature of Borrower Loan
Documents. The Loan Documents have been duly executed and delivered by
or on behalf of Borrower. The 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.
(e) Accurate Information. All information in any loan
application, financial statement (other than financial projections),
certificate, or other document, and all other information delivered by
or on behalf of Borrower to the Agent or any of the Banks in connection
with this transaction is correct and complete in all material respects
as of the date thereof, and there are no omissions from any such
information that result in any such information being materially
incomplete, incorrect, or misleading as of the date thereof. Borrower
has no knowledge of any material change in any such information. All
financial statements (other than financial projections) heretofore
delivered to the Agent and/or the Banks by Borrower were prepared in
accordance with the requirements in
68
Section 7.4 and accurately present the financial conditions and results
of operations as at the dates thereof and for the periods covered
thereby in all material respects. All financial projections have been
and will be prepared in accordance with the requirements of this
Agreement, will be complete in all material respects as of the date
thereof, and will be based on Borrower's best good faith estimates,
compiled and prepared with due diligence, of the matters set forth
therein. Since the Effective Date, no Material Adverse Change has
occurred.
(f) Purpose of Advances. The purpose of each Advance is as set
forth in Section 2.2(b). The purpose of Advances is a business purpose
and not a personal, family, or household purpose.
(g) Legal Proceedings, Hearings, Inquiries, and
Investigations. Except as disclosed to the Agent in writing prior to
the date of this Agreement:
(i) No legal proceeding, individually or in the
aggregate with related proceedings, involving a sum of
$500,000 or more, 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 of Borrower may be
bound or affected that if resolved adversely to Borrower could
result in a Material Adverse Change;
(ii) No hearing, inquiry, or investigation relating
to Borrower or any assets of Borrower is pending or, to the
best knowledge of Borrower, threatened by any Governmental
Authority that if resolved adversely to Borrower could result
in a Material Adverse Change; and
(iii) There are no suits, actions or proceedings
pending or threatened against Borrower or Affiliates of
Borrower under any RICO Related Law.
(h) No Event of Default or Unmatured Event of Default;
Financial Covenant Compliance. No Event of Default and no Unmatured
Event of Default has occurred and is continuing. Borrower is in
compliance with each of the Financial Covenants as set forth in this
Agreement.
(i) Approvals and Permits; Assets and Property. Borrower has
obtained and there are in full force and effect all Approvals and
Permits presently necessary for the conduct of the business of
Borrower, and Borrower owns, leases, or licenses all assets necessary
for conduct of the business and operations of Borrower (including,
without limitation, any Option/Purchase Agreement), except as otherwise
permitted pursuant to this Agreement, except for any failure to obtain
and maintain in full force and effect any Approval or Permit or any
failure to own, lease or license such assets that would not,
individually or in the aggregate, (i) be materially adverse to the
business, properties, assets, operations or condition (financial or
otherwise) of Borrower or (ii) materially and adversely affect any A&D
Projects, Units, Lots or other property that is at any time included as
Eligible Collateral. The assets of Borrower are not subject to any
Liens and Encumbrances, other than (A) the Liens and Encumbrances
created pursuant to this Agreement; (B) the Permitted Exceptions with
respect to property encumbered by a Deed of Trust; and (C) with respect
to other assets of Borrower that are not encumbered by a Deed of Trust,
Liens and Encumbrances that have been taken into
69
account in the preparation of financial statements and reports of
Borrower delivered to the Agent. To the extent Borrower makes or
intends to make sales of Units prior to the issuance of any applicable
public reports, Borrower has, and will at all times maintain, all
special exemption orders and other approvals and permits that are
necessary or appropriate.
(j) Impositions. Except as otherwise permitted pursuant to
Section 7.6, 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 Impositions and other amounts shown thereon to be due
(including, without limitation, any interest or penalties) except for
any failure to so file or to so pay that would not, individually or in
the aggregate, be materially adverse to the business properties,
assets, operations or condition (financial or otherwise) of Borrower.
(k) ERISA.
(i) Neither the execution and delivery of this
Agreement by Borrower, the borrowings hereunder, the
performance by Borrower of the Obligations nor the
consummation of any of the other transactions contemplated by
this Agreement constitutes or will constitute a "prohibited
transaction" within the meaning of Section 4975 of the Code or
Section 406 of ERISA. Borrower has delivered to the Agent a
complete and correct list of any "employee benefit plan"
(within the meaning of Section 3(3) of ERISA) with respect to
which Borrower or any Person which is under "common control"
with Borrower (within the meaning of Section 414(b) or (c) of
the Code or Section 4001(b) of ERISA) (an "ERISA Affiliate")
is a "party in interest" (a "Plan").
(ii) Each Plan is in compliance in all respects with
applicable provisions of ERISA, the Code and applicable
foreign law. The Borrower and each ERISA Affiliate have made
all contributions to the Plans required to be made by it.
(iii) Except for liabilities to make contributions
and to pay Pension Benefit Guaranty Corporation (or any
successor thereto) ("PBGC") premiums and administrative costs,
neither Borrower nor any ERISA Affiliate of Borrower has
incurred any material liability to or on account of any Plan
under applicable provisions of ERISA, the Code or applicable
foreign law, and no condition exists which presents a material
risk to Borrower or any ERISA Affiliate of Borrower of
incurring any such liability. No domestic Plan has an
"accumulated funding deficiency" (within the meaning of
Section 412 of the Code), whether or not waived, and no
foreign Plan is in violation of any funding requirements
imposed by applicable foreign law. None of Borrower, any ERISA
Affiliate of Borrower, the PBGC or any other Person has
instituted any proceedings or taken any other action to
terminate any Plan.
(iv) The actuarial present value of all accrued
benefit liabilities under each domestic Plan and under each
foreign Plan (based on the assumptions used in the funding of
such Plan, which assumptions are reasonable, and determined as
of the last day of the most recent plan year of such domestic
Plan for which an annual report has been filed with the
Internal Revenue Service or of such foreign Plan for which
year-end actuarial information is available) did not exceed
the current fair market value of the assets of such Plan as of
such last day.
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(v) None of the Plans is a "Multiemployer Plan" (as
defined in ERISA), and neither Borrower nor any ERISA
Affiliate of Borrower has contributed or been obligated to
contribute to any Multiemployer Plan at any time within the
preceding six years.
(vi) Borrower qualifies as an "operating company"
within the meaning of United States Department of Labor
Regulations ss.2510.3-101(c). Pursuant to such regulations,
the assets of Borrower are not "plan assets" of any employee
benefit plan subject to the fiduciary responsibility
requirements of ERISA. Accordingly, a loan to, or other
financial transaction with, Borrower will not be deemed to be
a prohibited loan or transaction under Section 406 of ERISA
between any plans subject to the restrictions set forth in
Section 406 of ERISA and a party in interest with respect to
such plan.
(l) Compliance with Law. Other than noncompliance with
applicable building codes which is not material, is not unusual in the
ordinary course of business, and is correctable (and is in the process
of being corrected) by Borrower, none of Borrower, the Approved
Subdivisions, the Units, the A&D Projects, the Off-Site Improvements,
or the Finished Lots is in violation of any law, ordinance, regulation,
or rule (federal, state, or local).
(m) Unit Budgets, Unit Plans and Specifications, and
Construction Contracts. Each Unit Budget (as updated from time to time)
contains all costs, expenses, and fees anticipated to be incurred by
Borrower in connection with the respective type of Unit. The Unit Plans
and Specifications and related working drawings are an accurate and
complete description of the Unit. The construction contracts relating
to the construction of the Unit provide for all work and materials
anticipated to be necessary to construct and all payments necessary to
pay for the construction of the Unit.
(n) A&D Project Budgets, A&D Project Plans and Specifications,
and Construction Contract(s). Each A&D Project Budget (as updated from
time to time) contains all costs, expenses, and fees anticipated to be
incurred by Borrower in connection with acquisition of the A&D Project
and, if applicable, construction of the Off-Site Improvements. The A&D
Project Plans and Specifications and related working drawings for each
Development Project are and will be an accurate and complete
description, in all material respects, of the Off-Site Improvements in
that Development Project. The construction contracts relating to the
construction of the Off-Site Improvements provide for all work and
materials anticipated to be necessary to construct and all payments
necessary to pay for the construction of the Off-Site Improvements.
(o) Environmental Matters. To the best of Borrower's knowledge
and except for matters (i) disclosed to the Agent in writing pursuant
to the questionnaires, information, reports, and certificates delivered
pursuant to this Agreement and the Environmental Policy and (ii)
consented to by the Agent in accordance with the Environmental Policy,
and except for matters otherwise disclosed by Borrower to the Agent in
writing prior to the Effective Date and approved by the Agent in
accordance with the Environmental Policy, neither Borrower nor any of
the Collateral is in violation of any Environmental Laws (as defined in
the Environmental Agreement), or subject to any existing, pending, or
to Borrower's knowledge, any threatened investigation by any
Governmental Agency under any Environmental Laws. Borrower hereby
acknowledges that the Agent has made a written request of Borrower for
information concerning the environmental
71
condition of the Collateral, including, without limitation, (A) the
presence, alleged presence or threatened presence of Hazardous
Substances (as defined in the Environmental Agreement) on, under, in,
or about any of the Collateral or property adjacent to the Collateral;
(B) the release, alleged release or threatened release of Hazardous
Substances on, under, in, from, or about any of the Collateral or
property adjacent to the Collateral; or (C) the presence of any
underground storage tank on any real property constituting Collateral.
Borrower has no actual knowledge or notice of the presence, alleged
presence, threatened presence, release, alleged release, or threatened
release of Hazardous Substances on, under, in, from, or about the
Collateral or property adjacent to any of the Collateral, except as has
been disclosed to the Agent in writing. As used herein, the term
"release" has the meaning assigned to such term in any applicable state
or federal law.
(p) Special Representations and Agreements Relating to
Collateral.
(i) Ownership. Except as permitted pursuant to
Section 7.3(b), Borrower is and will at all times be the legal
and equitable owner of the Collateral, free and clear of all
Liens and Encumbrances, except for Deeds of Trust encumbering
such Collateral and the Permitted Exceptions.
(ii) Authority to Encumber. Borrower has, and will
continue to have, the full right and authority to encumber all
of the Collateral, including each of the Units and A&D
Projects included or to be included in Eligible Collateral.
(iii) Condominium. Each condominium Unit encumbered
by a Deed of Trust and included in Eligible Collateral has
been properly annexed into the declaration and all other
instruments creating and governing the condominium project,
except with respect to Units which, pursuant to applicable
Requirements of any Governmental Authority, may not be annexed
into the declaration and such other instruments until the
commencement of construction or the sale of Units, in which
case each such Unit will be so annexed as soon as permitted
pursuant to such applicable Requirements.
(iv) Validity of the Lien and Encumbrance Created by
each Deed of Trust. The Lien and Encumbrance created by each
Deed of Trust is (A) legal, valid, binding and enforceable and
(B) is first priority except for Permitted Exceptions.
(q) Full Disclosure. There is no material fact that Borrower
has not disclosed to the Agent and the Banks which could cause a
Material Adverse Change with respect to Borrower or any subsidiaries of
Borrower. Neither the financial statements nor any other certificate or
document delivered herewith or heretofore by Borrower to the Agent or
any of the Banks in connection with negotiations of this Agreement and
the Loan Documents contains any untrue statement of material fact or
omits to state any material fact necessary to keep the statements
contained herein and therein from being untrue or misleading.
(r) Use of Proceeds; Margin Stock. The proceeds of the
Advances will be used by Borrower solely for the purposes specified in
this Agreement. None of such proceeds will be used for the purpose of
purchasing or carrying any "margin stock" as defined in Regulation U or
G of the Board of Governors of the Federal Reserve System (12 C.F.R.
Part 221 and 207), or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry margin
72
stock or for any other purpose which might constitute this transaction
a "purpose credit" within the meaning of such Regulation U or G.
Borrower is not engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock. Neither Borrower nor
any Person acting on behalf of Borrower has taken or will take any
action which might cause any Loan Documents to violate Regulation U or
G or any other regulations of the Board of Governors of the Federal
Reserve System or to violate Section 7 of the Securities Exchange Act
of 1934, or any rule or regulation thereunder, in each case as now in
effect or as the same may hereafter be in effect. Borrower and
Borrower's subsidiaries own no "margin stock".
(s) Governmental Regulation. Borrower is not subject to
regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Investment Company Act of 1940, the Interstate
Commerce Act (as any of the preceding have been amended), or any other
law which regulates the incurring by Borrower of indebtedness,
including but not limited to laws relating to common or contract
carriers or the sale of electricity, gas, steam, water, or other public
utility services.
6.2 Representations and Warranties Upon Requests for Advances. Each
request for an Advance will be a representation and warranty by Borrower to the
Agent and the Banks that the representations and warranties of Borrower in this
Article 6 and elsewhere in the Loan Documents are correct and complete as of the
date of the Advance request and as of the date that the Advance is made, except
as otherwise disclosed to the Agent and the Banks and approved by all of the
Banks, in their sole and absolute discretion, and that the conditions precedent
in Article 5 are satisfied as of the date of the Advance.
6.3 Representations and Warranties Upon Delivery of Financial
Statements, Documents, and Other Information. Each delivery by Borrower of
financial statements, other documents, or information after the date of this
Agreement (including, without limitation, documents and information delivered in
obtaining an Advance) will be a representation and warranty to the Agent and the
Banks that such financial statements, other documents, or information (other
than financial projections) are correct and complete in all material respects,
that there are no material omissions therefrom that result in such financial
statements, other documents, or information being materially incomplete,
incorrect, or misleading as of the date thereof, and that such financial
statements accurately present the financial condition and results of operations
of the subject thereof as at the dates thereof and for the periods covered
thereby. Each delivery by Borrower of financial projections is a representation
and warranty to the Agent and the Banks that such financial projections have
been prepared in accordance with the requirements in this Agreement, are
complete in all material respects as of the date thereof, and are based on
Borrower's best good faith estimates, compiled and prepared with due diligence,
of the matters set forth therein.
ARTICLE 7
BORROWER AFFIRMATIVE COVENANTS
Until the Commitment terminates in full, all Letters of Credit expire,
all Reimbursement Amounts are paid, and the Obligations are otherwise paid and
performed in full, Borrower agrees to be bound by and to perform each of the
covenants in this Article 7 unless all of the Banks otherwise agree in writing
in their absolute and sole discretion (except to the extent discretion is given
in this Article 7 to the Agent, a Bank Majority, or a Bank Supermajority with
respect to a particular matter, in which case the Agent, a Bank
73
Majority, or a Bank Supermajority, as the case may be, may determine whether or
not to require compliance with such matter).
7.1 Corporate Existence. Borrower will continue to be validly existing,
and in good standing as a corporation under the law of the State of Delaware.
Borrower will continue to be qualified to do business as a foreign corporation,
in good standing, under the laws of Arizona, California, and each other state in
which the nature of the activities of Borrower requires such qualification.
7.2 Books and Records; Access. Borrower will maintain a 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, prospects, and results of operations) in accordance with
GAAP. Borrower will also maintain complete and accurate records regarding the
acquisition, development and construction of Units and A&D Projects, including,
without limitation, all construction contracts, architectural contracts,
engineering contracts, field and inspection reports, applications for payment,
estimates and analyses regarding construction costs, names and addresses of all
contractors and subcontractors performing work or providing materials or
supplies with respect to the development and construction of Units and A&D
Projects, invoices and bills of sale for all costs and expenses incurred by
contractors and subcontractors in connection with the development and
construction of Units and A&D Projects, payment, performance and other surety
bonds (if applicable), releases and waivers of lien for all such work performed
and materials supplied, evidence of completion of all inspections required by
any Governmental Authority, certificates of substantial completion, notices of
completion, surveys, as-built plans, Approvals and Permits, Purchase Contracts,
escrow instructions, records regarding all sales of Units and Finished Lots, and
all other documents and instruments relating to the acquisition, development,
construction and/or sale of Units and of A&D Projects. Books and records
required to be maintained by Borrower pursuant to this Section shall be
maintained for a period of time following payment in full of the Obligations at
least equal to the statute of limitations period within which the Agent and/or
the Banks would be entitled to commence an action with respect to the
Obligations, except that books and records with respect to Collateral that has
been released need only be retained for a period of 2 years following the date
of release. During business hours Borrower will give representatives of the
Agent and the Banks access to all assets, property, books, records, and
documents of Borrower and will permit such representatives to inspect such
assets and property and to audit, copy, examine, and make excerpts from such
books, records, and documents. Upon request by the Agent, Borrower will provide
the Agent with copies of the reports, documents, agreements, and other
instruments described in this Section. Borrower will also provide any Bank with
copies of the reports, documents, agreements, and other instruments described in
this Section, as reasonably requested by such Bank.
7.3 Special Covenants Relating to Collateral.
(a) Defense of Title. Borrower will defend the Collateral, the
title and interest therein of Borrower represented and warranted in
each Deed of Trust, and the legality, validity, binding nature, and
enforceability of each Lien and Encumbrance contained in each Deed of
Trust and the first priority of each Deed of Trust against all matters,
including, without limitation, (i) any attachment, levy, or other
seizure by legal process or otherwise of any or all Collateral; (ii)
except for Permitted Exceptions, any Lien or Encumbrance or claim
thereof on any or all Collateral; (iii) any attempt to foreclose,
conduct a trustee's sale, or otherwise realize upon any or all
Collateral under any Lien or Encumbrance, regardless of whether a
Permitted Exception and regardless of whether junior or senior to the
Deed of Trust; and (iv) any claim questioning the legality, validity,
74
binding nature, enforceability, or priority of any Deed of Trust.
Borrower will notify the Agent and the Banks promptly in writing of any
of the foregoing and will provide such information with respect thereto
as the Agent or any of the Banks may from time to time request.
(b) No Encumbrances. Borrower will not sell, assign, transfer
or otherwise dispose of, or grant any option with respect to, or pledge
or otherwise encumber, any of the Collateral covered by the Deeds of
Trust or any interest therein or any fixtures thereof or proceeds
thereof, except for (i) the Permitted Exceptions; (ii) sales and
transfers in connection with releases permitted pursuant to Section
2.8; and (iii) with respect to Units and Finished Lots located in
Arizona, a transfer of legal title to such Units or Finished Lots to a
title company pursuant to a single beneficiary trust wherein such title
company holds bare legal title and Borrower, as sole beneficiary, holds
all equitable title subject to the Lien and Encumbrance of the
applicable Deed of Trust.
(c) Further Assurances. Borrower will execute and deliver such
further instruments and will do and perform all matters and things
necessary or expedient to be done or performed for the purpose of
effectively creating, maintaining and preserving the Collateral and the
Liens and Encumbrances of the Banks on such Collateral.
(d) Utilities. Borrower will provide or cause to be provided
all telephone service, electric power, storm sewer (if required),
sanitary sewer (if required) and water facilities for each Finished Lot
and each Unit included in Eligible Collateral, and such utilities will
be adequate to serve such Units and Finished Lots. No condition will
exist to affect Borrower's right to connect into and have adequate use
of such utilities, except for the payment of normal connection charges
or tap charges and except for the payment of subsequent charges for
such services to the utility supplier.
(e) Contracts. Borrower will perform all of Borrower's
obligations under any contracts and agreements relating to the
construction of Units and Off-Site Improvements and will pay all
amounts thereunder as and when due, except to the extent such amounts
are contested in accordance with the definition of "Permitted
Exceptions". Borrower will be the sole owner of all Unit Plans and
Specifications or, to the extent that Borrower is not the sole owner of
such Unit Plans and Specifications, Borrower will have the
unconditional right to use such Unit Plans and Specifications in
connection with the construction of Units. The Agent and the Banks will
not be restricted in any way in use of such Unit Plans and
Specifications in connection with the construction of any Units, and
Borrower will obtain all consents and authorizations necessary for the
use of such Unit Plans and Specifications by the Agent and/or the
Banks. Borrower will be the sole owner of all A&D Project Plans and
Specifications or, to the extent that Borrower is not the sole owner of
such A&D Project Plans and Specifications, Borrower will have the
unconditional right to use such A&D Project Plans and Specifications in
connection with the construction of A&D Projects. The Agent and the
Banks will not be restricted in any way in use of such A&D Project
Plans and Specifications in connection with the construction of any
Off-Site Improvements, and Borrower will obtain all consents and
authorizations necessary for the use of such A&D Project Plans and
Specifications by the Agent and the Banks.
(f) No Residential Use. Approved Subdivisions and all Units
from time to time encumbered by a Deed of Trust are held only for
construction and eventual sale to its first occupant upon or after
release from the lien of the applicable Deed of Trust. Borrower (i)
represents and warrants that Borrower has no intent to ever occupy any
Unit as a residence or to lease or otherwise
75
permit such occupancy of a Unit, and (ii) agrees that Borrower will
never so occupy, lease or permit occupancy of any Unit by Borrower;
provided, however, that Borrower may use and occupy Model Units solely
for the purpose of maintaining a sales office and displaying such Units
to prospective purchasers of Units, and provided, further, that on a
limited and occasional basis, in the ordinary course of Borrower's
business, Borrower may permit the purchaser under a Purchase Contract
to occupy the Unit for not more than 15 days prior to closing.
(g) Flood Insurance. Unless insurance in accordance with
Section 7.8(c) will first have been obtained, no Unit in an Approved
Subdivision will be located in an area that has been identified by the
Secretary of Housing and Urban Development as an area having special
flood hazards and in which flood insurance has been made available
under the National Flood Insurance Act of 1968.
(h) Compliance with Permitted Exceptions. Borrower will keep
and maintain in full force and effect all restrictive covenants,
development agreements, easements and other agreements with
Governmental Authorities and other Persons that are necessary or
desirable for the use and occupancy of each Approved Subdivision and
A&D Project and the sale of Units and Finished Lots therein. Borrower
will not default in any material respect under any such covenants,
development agreements, easements and other agreements and will
diligently enforce its rights thereunder.
(i) Model Complexes. With respect to each Approved Subdivision
in which Borrower is constructing or marketing Units, unless otherwise
agreed by the Agent, Borrower will maintain an active complex of Model
Units representing some of the Unit type(s) available for sale in such
Approved Subdivision and, except for Sale and Leaseback Transactions
involving Model Units, as to which the provisions of Section 2.8(a)(iv)
apply, will grant to the Agent, as agent for the Banks, a first
priority Deed of Trust covering such Model Units which will not be
subject to release until such time as there are less than 10 unsold
Lots remaining in such Approved Subdivision that are owned by Borrower
or which Borrower is entitled to acquire pursuant to an Option/Purchase
Agreement.
(j) Title Policy Endorsements. If required by the Agent in its
reasonable discretion, Borrower will have provided (i) such
continuation endorsements and date down endorsements to the Title
Policies, in form and substance satisfactory to the Agent in its
absolute and sole discretion, as the Agent determines necessary to
insure the priority of the Deeds of Trust as valid first liens on the
Collateral; or (ii) an unconditional and irrevocable written commitment
by the Title Company to issue such endorsements. Borrower agrees to
furnish to the Title Company such surveys and other documents and
information as the Agent or the Title Company may require for the Title
Company to issue such endorsements.
(k) Improvement Districts. Without obtaining the prior written
consent of the Agent, Borrower will not consent to, or vote in favor
of, the inclusion of all or any part of the Collateral in any community
facilities district formed pursuant to the Community Facilities
District Act, ARS Section 48-701, et seq., as amended from time to
time, or any other improvement district. Borrower will give immediate
notice to the Agent of any notification or advice that Borrower may
receive from any municipality or other third party of any intent or
proposal to include all or any part of the Collateral in a community
facilities district or other improvement district. Upon prior written
notice to Borrower, the Agent shall have the right to file a written
objection to the inclusion of all or any part of the Collateral in a
community facilities district or other improvement district, either in
its
76
own name or in the name of Borrower, and to appear at, and participate
in, any hearing with respect to the formation of any such district.
7.4 Information and Statements. Borrower will furnish to the Agent and
the Banks:
(a) Annual Reports. Within 105 days after the close of each
fiscal year of Borrower (unless a different time is specified) the
following:
(i) Annual Statements of Borrower. (A) an
unqualified, audited financial statement of Borrower certified
by one of the "Big Six" accounting firms or other nationally
recognized independent certified public accountants,
reasonably acceptable to the Agent, prepared in accordance
with GAAP on a consolidated basis, including balance sheets as
of the end of such fiscal year and statements of income and
retained earnings and a statement of cash flows, and setting
forth in comparative form the balance sheet, income statement,
retained earnings and cash flow figures for the preceding
fiscal year, and (B) unaudited financial statements, prepared
in accordance with GAAP (excluding footnotes) on a
consolidating basis for Borrower, including balance sheets as
of the end of such fiscal year and statements of income.
Borrower shall also provide to the Agent and the Banks, when
available, the management letter for Borrower prepared by the
accounting firm in connection with such audit and Borrower's
response thereto, if any.
(ii) Forecasts, Business Plans, and Projections. By
October 30 of each year, Borrower's Business Plan, including a
consolidated balance sheet, statement of income and projection
of cash flows.
(iii) Annual Variance Analysis. A variance analysis
comparing actual annual results versus the Business Plan for
the fiscal year most recently ended, including an analysis of
revenues, Unit closings and operating profits (by operating
division) for such period, and such other items as are
reasonably requested by Agent, together with a written
explanation of material variances.
(iv) Other Reports. Such other annual reports,
documents, and schedules as the Agent or any of the Banks may
reasonably request from time to time.
(b) Quarterly Reports. The following quarterly reports, each
within 60 days after the close of the first 3 quarterly periods of each
fiscal year, each of which (except for the reports referred to in
clauses (ii) and (iv)) shall be certified true, complete, and
materially correct to the Banks by an authorized officer of Borrower:
(i) Quarterly Financial Statements. Unaudited
financial statements for Borrower, on a consolidated and a
consolidating basis, including balance sheets as of the end of
such period, statements of income and, with respect to the
consolidated financial statements only, a statement of cash
flows, in each case for the portion of the fiscal year ending
with such fiscal period. All consolidated balance sheets shall
set forth in comparative form figures for the preceding year
end. All such income statements shall reflect current period
and year-to-date figures.
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(ii) Quarterly Variance Analysis. A quarterly
variance analysis comparing actual quarterly results versus
projected quarterly results for the fiscal quarter most
recently ended, including an analysis of revenues, Unit
closings and operating profits (by operating division) for
such period, and such other items as are reasonably requested
by the Agent, together with a written explanation of material
variances.
(iii) Quarterly Inventory Report. A report
identifying Borrower's inventory of real estate operations,
including A&D Projects and Units; such summary to include a
delineation of sold or unsold items in each category.
(iv) Other Reports. Such other quarterly reports,
documents, and schedules as the Agent or any of the Banks may
reasonably request from time to time.
(c) Monthly Reports. Within 30 days following the end of each
Calendar Month, the following, each of which (except for the reports
referred to in clauses (v) and (vi)) shall be certified true, complete,
and materially correct to the Banks by an authorized officer of
Borrower:
(i) Monthly Financial Statements. Unaudited financial
statements for Borrower, on a consolidated and a consolidating
basis, including a balance sheet and income statement, in each
case for the portion of the fiscal year ending with such
fiscal period. All consolidated balance sheets shall set forth
in comparative form figures for the preceding year end. All
such income statements shall reflect current period and
year-to-date figures.
(ii) Monthly Sales, Closings, and Backlog Report. A
sales, closings, and backlog report, effective as of the end
of such Calendar Month, reflecting the number of Units then
under construction pursuant to contracts for sale and the
aggregate sales value of such Units upon completion thereof
and showing sales and cancellation of sales of Units during
the preceding Calendar Month and Units in progress as of the
end of the preceding Calendar Month. Such report will contain
such detailed information as the Agent may reasonably require.
(iii) Gross Profit Analysis. An analysis of gross
profit for each Approved Subdivision as of the end of such
Calendar Month, and cumulatively for the fiscal year.
(iv) Inventory Report. A report identifying
Borrower's inventory of real estate operations, including A&D
Projects and Units; such summary to include a delineation of
sold or unsold items in each category.
(v) Monthly Variance Analysis. A monthly variance
analysis, comparing actual monthly results versus projected
monthly results for the month most recently ended, including
an analysis of revenues, Unit closings and operating profits
(by operating division) for such period, and such other items
as are reasonably requested by the Agent, together with a
written explanation of material variances.
(vi) Other Reports. Such other monthly reports,
documents, and schedules as the Agent or any of the Banks may
reasonably request from time to time.
78
(d) Semi-Monthly Reports. The Collateral Inventory Report and
the Collateral Certificate when required by this Agreement.
(e) Notice of Certain Events. Promptly after the commencement
thereof, notice of all actions, suits and proceedings before any court
or governmental department, commission, board, bureau, agency, or
instrumentality, domestic or foreign, affecting Borrower (i) which, if
determined adversely to Borrower, could reasonably be expected to have
a Material Adverse Change or (ii) in which liability in excess of
$2,500,000.00 (in the aggregate with respect to any action, suit or
proceeding) is claimed and alleged against Borrower.
(f) Environmental Incident Reports. As soon as possible and in
any event within 10 days after receipt by Borrower, a copy of (i) any
written notice or claim to the effect that Borrower is or may be liable
to any Person as a result of the release of any toxic or hazardous
waste or substance into the environment, and (ii) any notice alleging
any violation of any federal, state or local environmental, health or
safety law or regulation by Borrower which, in the case of either (i)
or (ii), could reasonably be expected to cause a Material Adverse
Change or could result in liability to Borrower or any guarantor in
excess of $2,500,000.00 (in the aggregate with respect to any notice or
claim).
(g) Financial Covenant Compliance Information. All annual
financial reports pursuant to Section 7.4(a)(i) and all quarterly
financial reports pursuant to Section 7.4(b)(i) will also be
accompanied by a Compliance Certificate in the form of Exhibit C signed
by an authorized officer of Borrower. Notwithstanding anything in this
Agreement to the contrary, Borrower will be required to timely deliver
such financial information as may be necessary to promptly and
accurately calculate any financial ratio or covenant required under
this Agreement even if such information is not specifically enumerated
herein. Any review of any financial statements provided by Borrower
used to test any financial ratio or covenant will not waive the Agent's
rights to require further review or audit of such information or any
rights if such further review or audit indicates financial information
contrary to the financial statements provided by Borrower.
(h) SEC Filings. Promptly after the sending or filing thereof,
copies of all proxy statements, financial statements (including Form
10-K and Form 10-Q, exclusive of exhibits unless otherwise requested by
the Agent), and reports which Borrower is required by applicable law to
send to its stockholders, and copies of all regular (except form S-8),
periodic, and special reports, and all registration statements
(exclusive of exhibits unless otherwise requested by the Agent) which
Borrower is required to file with the Securities and Exchange
Commission or any governmental authority which may be substituted
therefor, or with any national securities exchange.
(i) Absorption Reports. At least twice in each calendar year,
on dates specified by the Agent, an analysis by Approved Subdivision of
the sales of Units in the Approved Subdivision during the immediately
preceding six-month period and comparing those actual sales to the
"absorption" used in the applicable existing Unit Appraisals for Units
in each such Approved Subdivision. Upon receipt of the analysis from
Borrower, the Agent shall prepare and promptly deliver to each of the
Banks an absorption analysis in accordance with the Appraisal Policy.
(j) Other Items and Information. Such other information
concerning Borrower, the Approved Subdivisions, Units and A&D Projects
and the assets, business, financial condition,
79
operations, prospects, and results of operations of Borrower as the
Agent or any of the Banks reasonably requests from time to time.
7.5 Law; Judgments; Material Agreements; Approvals and Permits. Except
for normal construction corrections occasioning temporary noncompliance which
are corrected by Borrower with diligence and without substantial expense,
Borrower will 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 Governmental Authority relating to Borrower, any
A&D Projects, any Approved Subdivisions, any Finished Lots, or any Units or the
other assets, business, or operations of Borrower. Borrower will comply in all
material respects with all material agreements, documents, and instruments to
which Borrower is a party or by which Borrower, any A&D Projects, any Approved
Subdivisions, any Finished Lots or any Units, or any of the other assets of
Borrower are bound or affected. Borrower will comply with all Requirements
(including, without limitation, as applicable, requirements of the Federal
Housing Administration and the Veterans Administration) and all conditions and
requirements of all Approvals and Permits. Borrower, at Borrower's expense, will
obtain and maintain in effect from time to time all Approvals and Permits
required for the business activities and operations then being conducted by
Borrower and as may be required to enable it to comply with its obligations
hereunder and under the other Loan Documents.
7.6 Impositions and Other Indebtedness. Except for amounts being
contested as provided in clause (b) of the definition of Permitted Exceptions,
Borrower will pay and discharge (a) before delinquency all Impositions; (b) when
due all lawful claims (including, without limitation, claims for labor,
materials, and supplies), which, if unpaid, might become a Lien or Encumbrance
upon any of its assets; and (c) all its other Indebtedness, when due (except as
prohibited hereunder).
7.7 Assets and Property. Borrower will maintain, keep, and preserve all
of its assets (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.
7.8 Insurance. Borrower will obtain and maintain the following
insurance and will pay all related premiums as they become due:
(a) Property. Insurance of all Collateral against damage or
loss by fire, lightning, and other perils, on an all-risks basis, such
coverage to be in an amount not less than the full insurable value of
such Collateral on a replacement cost basis. Such policy will be
written on an all-risks basis, with no coinsurance requirement, and
will contain a provision granting the insured permission to complete
and/or occupy the Units or A&D Projects, as applicable.
(b) Liability. Commercial general liability insurance
protecting Borrower, the Agent and the Banks against loss or losses
from liability imposed by law or assumed in any agreement, document, or
instrument and arising from bodily injury, death, or property damage
with a limit of liability of not less than $1,000,000 per occurrence
and $2,000,000 general aggregate. Also, "umbrella" excess liability
insurance in an amount not less than $10,000,000 or such greater amount
as the Agent may reasonably require. Such policies must be written on
an occurrence basis so as to provide blanket contractual liability,
broad form property damage coverage, and coverage for products and
completed operations. Borrower shall also obtain and maintain business
motor vehicle liability insurance protecting Borrower, the Agent and
the Banks against loss or losses from liability
80
relating to motor vehicles owned, non-owned, or hired and used by
Borrower or its agents and employees, with a limit of liability of not
less than $1,000,000 (combined single limit for personal injury
(including bodily injury and death) and property damage).
(c) Flood. A policy or policies of flood insurance in the
maximum amount of not less than $2,500,000 in the aggregate with
respect to each Unit in an Approved Subdivision under the Flood
Disaster Protection Act of 1973, as amended. This requirement will be
waived with respect to Units in an Approved Subdivision upon
presentation of evidence satisfactory to the Agent that no portion of
the Unit in question is or will be located within an area identified by
the U.S. Department of Housing and Urban Development as having special
flood hazards.
(d) Worker's Compensation. Worker's compensation insurance
disability benefits insurance and such other forms of insurance as
required by law covering loss resulting from injury, sickness,
disability, or death of employees of Borrower.
(e) Contractors. During the construction of any Unit or any
Off-Site Improvements, any and all contractors and subcontractors will
be required to carry liability insurance of the type and providing the
minimum limits set forth below:
(i) Worker's Compensation. Worker's compensation
insurance, disability benefits insurance and each other form
of insurance which such contractor is required by law to
provide, covering loss resulting from injury, sickness,
disability or death of employees of the contractor who are
located on or assigned to the construction of any Unit or
Off-Site Improvements.
(ii) Liability. Comprehensive general liability
insurance coverage for:
Property and Operations
Products and Completed Operations
Contractual Liability
Personal Injury Liability
Broad Form Property Damage (including
completed operations)
Explosion Hazard
Collapse Hazard
Underground Property Damage Hazard
Such policy will have a limit of liability of not less than
$1,000,000 (combined single limit for personal injury,
including bodily injury or death, and property damage).
(f) Earthquake. Insurance of not less than $2,500,000 in the
aggregate against loss or damage by earthquake, if any Collateral is
now, or at any time while the Obligations remain outstanding will be,
situated in any area which is classified as a Major Damage ▇▇▇▇, ▇▇▇▇▇
▇ and 4, by the International Conference of Building Officials or, with
respect to Collateral located in California, situated in a "special
geologic study area" as defined in the ▇▇▇▇▇▇▇-▇▇▇▇▇▇ Act.
(g) Additional Insurance. Such other policies of insurance as
the Agent may reasonably request in writing.
81
All policies for required insurance will be in form and substance satisfactory
to the Agent in its absolute and sole discretion. Such insurance may be carried
under blanket policies, so long as such policy provides the coverage for each
Unit as provided in this Section 7.8 and otherwise complies with this Section
7.8. All required insurance will be procured and maintained in financially sound
and generally recognized responsible insurance companies selected by Borrower
and approved by the Agent. Deductibles under insurance policies required
pursuant to this Section 7.8 will not exceed the amounts approved from time to
time by the Agent. Such companies must be authorized to write such insurance in
the states in which Collateral is located. Each company will be rated "A" or
better by A.M. Best Co., in Bests' Key Guide, or such other rating acceptable to
the Agent in the Agent's absolute and sole discretion. All property policies
evidencing required insurance will name the Agent, as agent for the Banks, as
first mortgagee and loss payee. All liability policies evidencing required
insurance will name the Agent, as agent for the Banks, as additional insureds.
The policies will not be cancelable as to the interests of the Agent due to the
acts of Borrower. The policies will provide for at least 30 days prior written
notice of the cancellation or modification thereof to be given to the Agent. A
certified copy of each insurance policy or, if acceptable to the Agent in its
absolute and sole discretion, certificates of insurance evidencing that such
insurance is in full force and effect, will be delivered to the Agent, together
with proof of the payment of the premiums thereof. Prior to the expiration of
each such policy, Borrower will furnish the Agent evidence that such policy has
been renewed or replaced in the form of the original or a certified copy of the
renewal or replacement policy or, if acceptable to the Agent in its absolute and
sole discretion, a certificate reciting that there is in full force and effect,
with a term covering at least the next succeeding calendar year, insurance of
the types and in the amounts required in this Section 7.8.
7.9 ERISA.
(a) Borrower and the ERISA Affiliates each will take all
actions and fulfill all conditions necessary to maintain any and all
Plans in substantial compliance with applicable requirements of ERISA,
the Code and applicable foreign law until such Plans are terminated,
and the liabilities thereof discharged, in accordance with applicable
law.
(b) No Plan will have any "accumulated funding deficiency"
(within the meaning of Section 412 of the Code), which deficiency could
materially adversely affect the business, earnings, prospects,
properties or condition (financial or otherwise) of Borrower.
(c) Borrower and the ERISA Affiliates each will take and
fulfill all actions and conditions necessary to maintain, and will
maintain, substantial compliance of any and all employee benefit plans
established or maintained, or to which contributions are made, by
Borrower and the ERISA Affiliates with the requirements of ERISA and
the rules and regulations adopted thereunder, in each case as in effect
at the time.
(d) Borrower shall qualify at all times as an "operating
company" pursuant to United States Department of Labor Regulation ss.
2510.3-101(c). Borrower shall act to ensure that the assets of Borrower
are not "plan assets" of any employee benefit plan subject to the
fiduciary responsibility requirements of ERISA, or, subject to receipt
of prior notice by the Agent and the Agent's consent thereto, Borrower
shall ensure that an exemption from Section 406 of ERISA is available
to cover the loan transaction with respect to each portion thereof.
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7.10 Special Covenants Relating to A&D Projects.
(a) Commencement and Completion of Off-Site Improvements.
Borrower will cause construction of the Off-Site Improvements in a
Development Project to be prosecuted and completed in good faith, with
due diligence, and without delay, subject to acts of God, labor strikes
and other force majeure events beyond the reasonable control of
Borrower. The construction of the Off-Site Improvements in a
Development Project will be commenced no later than the commencement
date set forth in the construction schedule provided to the Agent in
accordance with Section 5.4, and will be fully completed on or before
the completion date set forth in such construction schedule, except for
correction of minor punch list items. If requested by the Agent,
Borrower will obtain the issuance of a letter of acceptance or other
equivalent document from each applicable Governmental Authority
regarding completion of the Off-Site Improvements and deliver a copy
thereof to the Agent within a reasonable time after the completion
date. Borrower will cause the Off-Site Improvements to be constructed
(i) in a good and workmanlike manner; (ii) in compliance with all
applicable Requirements; and (iii) unless otherwise consented to by the
Agent in advance in writing in the absolute and sole discretion of the
Agent, in accordance with the A&D Project Plans and Specifications
without material deviation and within the limitations of the A&D
Project Budget as modified from time to time. Upon demand by the Agent,
Borrower will correct any defect in the Off-Site Improvements or any
material departure from any applicable Requirements or, to the extent
not theretofore approved in writing by the Agent, the A&D Project Plans
and Specifications. Borrower understands and agrees that the inspection
of the Off-Site Improvements on behalf of the Banks, the review by the
Agent or others acting on behalf of the Banks of Draw Requests and
related documents and information, the making of Advances by the Agent,
any actions by the Agent under Section 7.13, and any other actions by
the Agent will not be a waiver of the right to require compliance with
this Section 7.10.
(b) A&D Project Change Orders. Without the Agent's prior
written consent in its absolute and sole discretion, Borrower may not
(i) amend or modify the A&D Project Budget, or (ii) make or permit any
material amendments or modifications of the construction contracts for
construction of the A&D Project, the A&D Project Plans and
Specifications, or any other agreements, documents, or instruments
relating to construction of an A&D Project. Notwithstanding the
provisions of this Section 7.10, Borrower is not required to obtain the
Agent's consent to any individual amendment or modification of such
construction contract(s), the A&D Project Plans and Specifications, or
any other agreements, documents, or instruments relating to
construction of the A&D Project if the result (when aggregated with all
other increases) is an increase of the A&D Project Budget equal to or
less than 10% of the total A&D Project Budget for the particular A&D
Project.
(c) Certain Information Relating to Development Projects. In
connection with each Development Project, Borrower will provide to the
Agent, upon the Agent's request (i) the actual costs, expenses, and
fees incurred by Borrower for labor and other work performed on the
Off-Site Improvements and for materials incorporated in the Off-Site
Improvements or suitably stored onsite as indicated by bills, invoices,
receipts, statements, vouchers, or other written evidence satisfactory
to the Agent showing the costs, expenses, and fees incurred; and (ii)
the amounts allocated to such labor, work, and materials in the line
items in the A&D Project Budget multiplied by the percentage of
completion of such labor, work, and materials. Materials will be
"suitably" stored onsite only if they are adequately stored and
safeguarded to protect against theft and damage and, if required by
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the Agent, are insured against loss, theft, and damage under insurance
policies naming the Agent and the Banks as loss payees and complying
with the requirements of Section 7.8. The Agent will not be required to
include in the calculation of A&D Project Collateral Value the cost of
materials stored offsite. However, the Agent, in its absolute and sole
discretion, may permit to be included in the A&D Project Collateral
Value a portion of the costs of such materials if the Agent has been
provided with a perfected, first-priority security interest in such
materials, has received evidence satisfactory to the Agent that such
materials are adequately stored at a suitable location agreed to by the
Agent and Borrower and that all such materials are inventoried, clearly
segregated from materials not to be used for the Improvements,
identified, safeguarded, and, if required by the Agent, insured against
loss, damage, and theft (including, without limitation, while in
transit) under insurance policies naming the Agent and the Banks as
loss payees and complying with the requirements in Section 7.8.
7.11 Commencement and Completion of Units. Borrower will cause
construction of Units to be prosecuted and completed in good faith, with due
diligence and in accordance with industry standards, and without delay subject
to acts of God, labor strikes and other force majeure events beyond the
reasonable control of Borrower. Borrower may commence construction of Units at
any time prior to the end of the 12th Calendar Month of the Term Out Period.
Borrower will cause Units to be constructed in a good and workmanlike manner; in
compliance with all applicable Requirements; and, unless otherwise consented to
by the Agent in advance in writing in the absolute and sole discretion of the
Agent, in substantial accordance with the respective Unit Plans and
Specifications. Upon demand by the Agent, Borrower will correct any defect in
its respective Units or any material departure from any applicable Requirements
or, to the extent not theretofore approved in writing by the Agent, the
respective Unit Plans and Specifications. Borrower understands and agrees that
the inspection of the Units by or on behalf of the Banks, the review by the
Agent or others acting on behalf of the Banks of Draw Requests and related
documents and information, the making of Advances by the Agent, any actions by
the Agent under Section 7.13, and any other actions by the Agent will not be a
waiver of the right to require compliance with this Section 7.11.
7.12 Title Insurance; Title Insurance Claims. The Agent may determine
from time to time the allocation of title insurance between parcels of
Collateral, and the amount of title insurance coverage that Borrower is required
to provide pursuant to all Title Policies (provided that the aggregate amount of
title insurance shall not be required to exceed the Commitment Amount) and the
Agent may enter into such agreements with each Title Company as the Agent
reasonably deems appropriate including, without limitation, aggregation
agreements, which shall contain such terms and conditions as the Agent may
reasonably require. The Agent may, from time to time, in its reasonable
discretion, (a) require endorsements to Title Policies including, without
limitation, endorsements insuring against any mechanics', materialmen's, or
other Liens and Encumbrances affecting the Collateral; (b) require co-insurance
with respect to the Title Policies; and/or (c) disapprove title insurance
companies and require that Borrower obtain Title Policies from other title
insurers acceptable to the Agent. The Agent may require separate Title Policies
with respect to each Subdivision or groupings of Subdivisions. Borrower
acknowledges that pursuant to aggregation agreements, Title Policies issued by
the same Title Company may be grouped together to create a single insurance
coverage amount that applies to all collateral covered by such Title Policies.
If a Title Company pays any claims under any Title Policies and if the Agent
advises Borrower that the Agent has determined that the remaining coverage is
insufficient, in the sole and absolute discretion of the Agent, Borrower will
take any and all action necessary to cause the total liability under the Title
Policies to remain at or to be increased to the original liability
notwithstanding the payment of such claim or claims, including without
limitation, providing any supplemental Title Policies or endorsements or
reinsurance agreements if requested by the Agent, the cost of which will be paid
by Borrower. Upon payment of any such claims, Borrower will
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obtain and provide to the Agent any and all documentation reasonably requested
by the Agent to ensure that the maximum coverage provided for hereunder will not
have been diminished as a result of the payment of such claims.
7.13 Rights of Inspection; Correction of Defects.
(a) Generally. The Agent and its respective agents, employees,
and representatives will have the right at any time and from time to
time to enter upon the Collateral in order to inspect the Collateral
and all aspects thereof; provided, however, any Person entering upon
the Collateral will observe and comply with Borrower's safety
requirements. Units and A&D Projects will be inspected quarterly unless
the Agent reasonably determines that monthly inspections are necessary.
The Agent will not make inspections more frequently than once a month
unless an Event of Default has occurred and is continuing. If the
Agent, in its reasonable judgment, determines that any materials or
work do not conform with the respective Unit Plans and Specifications
or the A&D Project Plans and Specifications, as applicable, in all
material respects or with any applicable Requirements or are otherwise
not in conformity with sound building practice, the Agent will have the
right to stop the work (unless, with respect to any Unit, such Unit is
removed from Eligible Collateral) and to order replacement or
correction of any such materials or work regardless of whether or not
such materials or work have theretofore been incorporated in the Unit,
regardless of whether the Agent's representatives have previously
inspected such work or materials, and regardless of whether the Agent
has previously made Advances to pay for such work or materials.
Borrower will promptly make such replacement or correction. All
inspections by the Agent are for the sole purpose of protecting the
security of the Banks and are not to be construed as a representation
by the Agent that there has been compliance with the Unit Plans and
Specifications or the A&D Project Plans and Specifications, the
applicable Requirements, or that the Units or A&D Projects are free of
defects in materials or workmanship. Borrower may make or cause to be
made such other independent inspections as Borrower may desire for its
own protection. Based on such inspections, the Agent may adjust the
Eligible Collateral, Unit Collateral Values, A&D Project Collateral
Values, Maximum Allowed Advances and other calculations pursuant to
this Agreement.
(b) Inspector(s). The Agent may employ outside inspectors to
perform some or all of the inspection duties set forth in this Section
7.13 and may also elect to have its own employees perform some or all
of such inspection duties and review the reports of outside inspectors.
(c) Miscellaneous. Any inspections or determinations made by
the Agent or lien waivers, receipts, or other agreements, documents,
and instruments obtained by the Agent are made or obtained solely for
the Agent's and the Banks' own benefit and not in any way for the
benefit or protection of Borrower. The Agent may accept and rely on any
information from an architect, any other Person providing labor,
materials, or services for Units or A&D Projects, Borrower, or any
other Person as to labor or materials furnished or incorporated in the
Units or the A&D Projects and the cost and payment therefor and as to
all other matters relating to construction of the Units and the
Off-Site Improvements without the necessity of verifying such
information. The Agent will not have any obligation to Borrower to
ensure compliance by contractor, engineer, or any other Person in
carrying out construction of the Units or Off-Site Improvements.
7.14 Verification of Costs. The Agent will have the right at any time
and from time to time to review and verify all costs, expenses, and fees in each
Unit Budget and each A&D Project Budget. Based
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on its review and verification of costs, expenses, and fees in each Unit Budget
and each A&D Project Budget, the Agent will have the right to (a) adjust any and
all such budgeted amounts and (b) reduce or increase the applicable Collateral
Values; provided, however, that once the Maximum Allowed Advance for an item of
Eligible Collateral has been determined, that Maximum Allowed Advance amount is
not subject to increase, notwithstanding any subsequent Appraisal and
notwithstanding any increase in an A&D Project Budget or Unit Budget; however,
the Maximum Allowed Advance amount is subject to decrease based on subsequent
events, such as updated Appraisals
7.15 Use of Proceeds of Advances. Borrower will use proceeds of
Advances only for the purposes described in Section 2.2(b).
7.16 Further Assurances. Borrower will promptly execute, acknowledge,
and deliver such additional agreements, documents, and instruments and do or
cause to be done such other acts as the Agent may reasonably request from time
to time to better assure, preserve, protect, and perfect the interest of the
Agent and the Banks in the Collateral and the rights and remedies of the Agent
and the Banks under the Loan Documents. Without limiting the foregoing, to the
extent that the Agent determines from time to time that additional Deeds of
Trust, amendments to Deeds of Trust, financing statements, subordinations, and
other documents are required in order to perfect all Liens and Encumbrances in
favor of the Agent (as agent for and on behalf of the Banks), and cause all
Collateral encumbered by any of the Deeds of Trust to be subject only to
Permitted Exceptions, Borrower will execute and deliver such documents,
instruments and other agreements as the Agent may request.
7.17 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.
7.18 Notification of Certain Matters. Borrower will promptly disclose
to the Agent the occurrence of (a) any default by Borrower under or pursuant to
the terms and conditions of any Indebtedness for borrowed money in excess of
$250,000 (or $1,000,000 in the aggregate) owed by Borrower to any Person,
whether now existing or hereafter arising; (b) any default by Borrower under or
pursuant to the terms and conditions of any lease or similar agreement of
Borrower with aggregate unpaid rental obligations in excess of $500,000; (c) the
occurrence of any event or other circumstance of which Borrower has knowledge
and that with the giving of notice or the passage of time would constitute a
default referred to in clause (a) or clause (b) above; (d) any Material Adverse
Change; and (e) any change in the Requirements of any Governmental Authority
that would materially and adversely affect Borrower's ability to develop A&D
Projects and Units or sell Units or Finished Lots or the cost of construction
thereof.
7.19 Environmental Reports. With respect to each Approved Subdivision
and each A&D Project, Borrower will complete and submit to the Agent, if
requested by the Agent, an updated environmental questionnaire (substantially in
the form required by the Environmental Policy) every year after the initial Unit
Eligibility Date of the first Unit in such Approved Subdivision and every year
after the A&D Eligibility Date, with respect to such A&D Project. If such
questionnaires contain any information deemed significant by the Agent, in its
sole discretion, the Agent may require that Borrower obtain or conduct further
studies and reports from independent environmental engineers regarding such
matters, all in accordance with the Environmental Policy.
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ARTICLE 8
FINANCIAL COVENANTS
8.1 Minimum Tangible Net Worth Covenant. As of March 31, 1997, Borrower
will have minimum Tangible Net Worth, computed in accordance with the provisions
of this Agreement, equal to or greater than $95,000,000. On each Test Date,
commencing with the June 30, 1997 Test Date, Borrower will have minimum Tangible
Net Worth equal to or greater than $95,000,000 plus the cumulative Adjusted Net
Increase.
8.2 Maximum Total Debt to Tangible Net Worth Covenant. Borrower will
have a ratio of (a) the Total Debt of Borrower (computed in accordance with the
provisions of this Agreement) as of March 31, 1997 and as of each Test Date
thereafter, to (b) the Tangible Net Worth of Borrower (computed in accordance
with the provisions of this Agreement but excluding from Tangible Net Worth for
this purpose any portion of Tangible Net Worth as otherwise computed that
relates to Builder Bonds and Mortgage Operations), as of March 31, 1997 and as
of each Test Date thereafter, that is equal to or less than 3.00 to 1.
8.3 Minimum Interest Coverage Covenant. As of each Test Date,
commencing September 30, 1997, the ratio of (1) the aggregate total EBITDA of
Borrower for the fiscal quarter ending on the Test Date and for all Qualifying
Preceding Fiscal Quarters up to a maximum of 3 Qualifying Preceding Fiscal
Quarters (with the term "Qualifying Preceding Fiscal Quarters" to mean those
fiscal quarters of Borrower ending on and after September 30, 1997), taken as a
whole; to (2) the aggregate total Interest Incurred of Borrower for the same
period taken as a whole, will not be less than the following amounts:
(a) With respect to the Test Dates occurring through June 30,
1998: 1.00 to 1; and
(b) With respect to the Test Date occurring on September 30,
1998 and each Test Date thereafter: 1.30 to 1.
8.4 Quarterly Minimum Available Liquidity Covenant. In addition to
satisfying the requirements of Section 8.5 on an ongoing basis, Borrower will
have Available Liquidity on March 31, 1997 and as of each Test Date thereafter
of at least the following amounts:
Date Required Available Liquidity
---- ----------------------------
On the Effective Date, and
on each Test Date thereafter,
through September 30, 1997 $15,000,000
On December 31, 1997
and each Test Date
end thereafter, through
the Maturity Date $20,000,000
8.5 Minimum Available Liquidity Covenant. Borrower will have and
maintain at all times through the following dates Available Liquidity in the
following amounts:
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Date Required Available Liquidity
---- ----------------------------
From the Effective Date
through September 30, 1997 $10,000,000
On October 1, 1997
and thereafter $15,000,000
8.6 Maximum Deficit Cash Flow. As of each Test Date commencing with
March 31, 1997 through June 30, 1997, (a) the EBITDA of Borrower for the fiscal
quarter ending on the Test Date, less (b) the total Interest Incurred of
Borrower for the same fiscal quarter, will be equal to or less than a loss of
$10,000,000.
8.7 Restrictions on Inventory. At no time will Borrower's "Lot and Land
Inventory" exceed 3 times the number of Units closed during the 4 full fiscal
quarters immediately preceding any determination of Borrower's Lot and Land
Inventory. As used in this Agreement, "Lot and Land Inventory" means the
aggregate total of all of the Lots owned by Borrower at any time (whether or not
such Lots are Collateral), as reflected in Borrower's balance sheet as of the
time of determination, including without limitation Lots into which Land
Projects and Development Projects will be divided (if not currently so divided),
and Finished Lot Projects but excluding Lots on which a Unit has been or is then
being constructed.
8.8 Restrictions on Dividends. Borrower shall not declare, make or pay
any Dividend (a) if after giving effect to such Dividend, Borrower would be in
violation of any of the other Financial Covenants in this Article 8; (b) if the
Dividend would otherwise cause or contribute to any Event of Default or
Unmatured Event of Default; (c) if the cumulative Dividends paid in any fiscal
quarter and in the immediately preceding 3 fiscal quarters, taken as a whole,
are greater than 25% of cumulative consolidated Net Income (after payment of
income, franchise and other taxes) of Borrower for such fiscal quarter and the
immediately preceding 3 fiscal quarters, taken as a whole, computed according to
GAAP; or (d) if the effect thereof is to cause the ratio of (i) EBITDA for the
fiscal quarter with respect to which a Dividend is to be declared, made or paid
and for the immediately preceding 3 fiscal quarters, taken as a whole, to (ii)
the sum of (A) Interest Incurred for that same period and (B) the Dividends
declared, made, paid and proposed to be declared, made or paid with respect to
the same period, to be less than 2.0 to 1.
8.9 Conformance to GAAP; Consolidation. Except to the extent
specifically provided otherwise, all determinations to be made pursuant to this
Article 8 will be made in conformance to GAAP. Any other provision of this
Agreement to the contrary notwithstanding, all Financial Covenant tests will be
measured and determined on a consolidated basis.
ARTICLE 9
BORROWER NEGATIVE COVENANTS
Until the Commitment terminates in full, all Letters of Credit expire,
all Reimbursement Amounts are paid, and the Obligations are otherwise paid and
performed in full, Borrower agrees to be bound by and to comply with each of the
covenants in this Article 9 unless all of the Banks otherwise agree in writing
in their absolute and sole discretion (except to the extent discretion is given
in this Article 9 to the Agent, a Bank Majority, or a Bank Supermajority with
respect to a particular matter, in which case the Agent, a Bank
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Majority, or a Bank Supermajority, as the case may be, may determine whether or
not to require compliance with such matter).:
9.1 Fundamental Changes. Borrower will not dissolve or liquidate, or
become a party to any merger or consolidation, or acquire by purchase, lease or
otherwise all or substantially all of the assets or capital stock of any Person;
provided, however, that the foregoing shall not operate to prevent: (a) mergers
or consolidations of any subsidiary of Borrower into Borrower or a sale,
transfer or lease of assets by any such subsidiary to Borrower; or (b) a
transaction otherwise prohibited pursuant to this Section 9.1 but that results
in the Obligations being paid and performed in full and the termination of the
Commitment.
9.2 Prohibition on Sales of Assets. Except for encumbrances permitted
pursuant to Section 9.13, Borrower will not convey, sell, lease, encumber,
transfer or otherwise dispose of to any Person, in one transaction or a series
of transactions, all or substantially all of Borrower's business or property. In
addition, Borrower will not convey, sell, lease, encumber, transfer or otherwise
dispose of to any Affiliate of Borrower, in one transaction or a series of
transactions, any property of Borrower. However, the restrictions in this
Section 9.2 do not preclude the Liens and Encumbrances created pursuant to the
Loan Documents or the sale of Finished Lots and Units in the ordinary course of
Borrower's business and in compliance with the requirements of this Agreement,
including Section 2.8. In addition, Borrower is not prohibited from dissolving
and liquidating any of its investments in Affiliates listed on Exhibit E so long
as, concurrently with the dissolution and liquidation, any assets of such
Affiliate are transferred in such dissolution and liquidation to the owners of
the Affiliate, pro rata in accordance with their interests in the Affiliate
immediately prior to the liquidation. Upon a dissolution and liquidation of any
such Affiliate in accordance with the foregoing requirements, such Affiliate
shall be deemed to be released from any guaranty of the Obligations given by
that Affiliate.
9.3 Prohibition on Amendments to Organic Agreements. Borrower will not
amend, modify, restate, supplement, or terminate its certificate of
incorporation or bylaws in any manner that would materially affect the validity
and enforceability of the Obligations or Borrower's ability to borrow hereunder,
or that would materially impair any security for the Obligations.
9.4 Lines of Business. Borrower (directly or through any subsidiaries
or other Persons) will not engage to any substantial extent in any line or lines
of business activity other than (a) the business of developing residential real
property, and constructing Units and Off-Site Improvements and selling Units and
Finished Lots; (b) business directly related thereto; (c) the business of
originating home mortgage loans; (d) other lines of business actively engaged in
as of the date hereof; and (e) other lines of business related to homebuilding
that are approved by a Bank Supermajority in their reasonable discretion.
Borrower will not cease to engage in the business of developing residential real
property and constructing and selling Units.
9.5 No Development Projects Outside the Ordinary Course of Business.
Borrower will not undertake any development project outside the ordinary course
of business without the prior written consent of a Bank Supermajority in their
sole and absolute discretion.
9.6 Issuance of Additional Securities. Borrower will not issue any new
Capital Stock or any debt securities that are convertible into, or exchangeable
for, Capital Stock, except pursuant to normal and customary employee stock
options pursuant to employee stock option plans that have been approved in
advance by the Agent in its reasonable discretion.
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9.7 Loans. Except for (a) residential mortgage loans made by UDC
Mortgage in the ordinary course of business; and (b) loans to Persons in
Borrower's ordinary course of business as a homebuilder, Borrower will not make
or allow loans to Borrower's Affiliates or to any other Person.
9.8 Other Financing. Borrower will not finance the housing construction
in any Approved Subdivision that contains Finished Lots or Units that are
included in Eligible Collateral with lenders other than the Banks.
9.9 No Further Indebtedness. Borrower will not incur any Indebtedness
to any Person other than (a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness incurred pursuant to the Senior Notes and the Qualifying
Subordinated Indebtedness; (c) Trade payables and accruals incurred in the
ordinary course of Borrower's business as now conducted and other Indebtedness
incurred in the ordinary course of Borrower's business as now conducted,
provided, however, that the aggregate Indebtedness pursuant to this clause (c)
(other than with respect to trade payables and accruals) will not at any time
exceed $1,000,000; (d) the existing Indebtedness listed on Exhibit D; (e)
non-recourse Indebtedness in principal amounts not to exceed $10,000,000 in the
aggregate at any time; (f) Indebtedness represented by Sale and Leaseback
Transactions involving Model Units that have been released in accordance with
the requirements of Section 2.8(a)(iv); (g) Indebtedness arising in connection
with payment and performance bonds obtained by Borrower in the ordinary course
of business; and (h) sales and options back that, under GAAP, must be treated as
Indebtedness. Notwithstanding the foregoing, Borrower may not incur any
Indebtedness if the effect of incurring such Indebtedness would be to cause or
contribute to a breach of the Financial Covenants (on a pro forma basis).
9.10 Transactions with Affiliates. Borrower will not enter into, or
cause, suffer, or permit to exist, any arrangement or contract with any of its
Affiliates, including, without limitation, any management contract, unless such
transaction is on terms that are no less favorable to Borrower than those that
could have been obtained in a comparable transaction on an arms' length basis
from a Person that is not an Affiliate.
9.11 Investments. Except as expressly permitted by the Loan Documents
and except for the Norwest Mortgage joint venture and the investments in
Affiliates listed on Exhibit E, Borrower will not make any Investment in any
Person (including, without limitation, entering into any joint venture,
partnership, or similar arrangement) without prior written approval of a Bank
Supermajority in its sole and absolute discretion.
9.12 Restriction on Certain Payments. Borrower will not make any
payment of principal with respect to Qualifying Subordinated Indebtedness prior
to the payment in full of the Obligations. Borrower will not make any payment of
interest with respect to Qualifying Subordinated Indebtedness even if otherwise
permissible, if the effect of the payment would be to cause one or more of the
Financial Covenants to be violated.
9.13 Negative Pledge. With the exception of Liens and Encumbrances on
collateral (other than the Collateral) granted to a particular lender to secure
Indebtedness from that lender permitted pursuant to Section 9.9, including the
existing Indebtedness disclosed on Exhibit D (with no other lender being granted
any Liens or Encumbrances with respect to such collateral without the prior
written consent of the Agent, in its absolute discretion) no asset of Borrower
will be pledged or otherwise become subject to any Lien or Encumbrance to any
Person without the prior written approval of all of the Banks in their sole and
absolute discretion, which consent may include, without limitation, the
requirement that the Agent (as agent for and
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on behalf of the Banks) be granted a security interest in such assets on an
equal and ratable basis with the obligations being so secured.
9.14 No Modifications to Indentures. Borrower will not enter into or
consent to any material amendments, supplements or other modifications to the
terms, conditions, or provisions of the indentures pursuant to which the Senior
Notes and the Qualifying Subordinated Indebtedness are issued, nor will Borrower
enter into or consent to any agreement that would have the effect of modifying
in any way the terms and conditions of the Senior Notes and the Qualifying
Subordinated Indebtedness.
ARTICLE 10
EVENTS OF DEFAULT
10.1 Events of Default. Each of the following will be an event of
default (an "Event of Default"):
(a) Payments. Failure by Borrower (i) to pay any payment of
interest within the time period required pursuant to Section 2.4(a);
(ii) to pay, within 1 Business Day of the due date, any principal,
including without limitation pursuant to Section 2.9; (iii) to pay and
perform all of the Obligations on the Maturity Date; (iv) to pay when
due any other amount pursuant to the Loan Documents and the expiration
of 5 Business Days after notice of such failure is given by the Agent
to Borrower without such failure being cured; or (v) to cause Net Sales
Proceeds or other amounts payable under Section 2.4(c) to be paid to
the Agent in accordance with Section 2.4(c) by 11:00 a.m. (Phoenix,
Arizona time) on the first Business Day after the day the Agent
notifies Borrower of failure by the Agent to receive any such amounts
(which notice may be given telephonically to the chief financial
officer or treasurer of Borrower or by facsimile).
(b) Specified Defaults. Failure of Borrower to comply with any
of Sections 7.1, 7.3(a), 7.3(b), 7.3(d), 7.3(f), 7.3(k), 7.15, or
Article 9, or with any of the Financial Covenants, provided, however,
that with respect to the failure of Borrower to comply with the
covenants set forth in Sections 7.3(a), 7.3(b), 7.3(d), 7.3(f), or
7.3(k) that refer to Units or A&D Projects included in Eligible
Collateral, an Event of Default will not occur pursuant to this Section
10.1(b) if within 1 Business Day after notice of such failure from the
Agent, Borrower removes the affected Units or A&D Projects from
Eligible Collateral and, after giving effect to such removal, Borrower
is not in breach of any other obligation pursuant to the Loan
Documents.
(c) Other Defaults. Except as otherwise provided in this
Section 10.1, failure of Borrower to perform any other obligation not
involving the payment of money, or to comply with any other term or
condition applicable in any of the Loan Documents, and the expiration
of 20 days after notice of such failure is given by the Agent to
Borrower without such failure being cured.
(d) Representations and Warranties. Any representation or
warranty made by Borrower in any of the Loan Documents or otherwise
with respect to any information now or hereafter delivered by Borrower
to the Agent or the Banks in obtaining the Commitment, in negotiating
and entering into this Agreement, in obtaining each Advance or
otherwise in connection with the Obligations is materially incomplete,
incorrect, or misleading as of the date made or renewed; provided,
however, that with respect to the breach of any representation and
warranty set forth in
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Section 6.1(p) that refers to Units or A&D Projects included in
Eligible Collateral, an Event of Default will not occur pursuant to
this Section 10.1(d) if within 1 Business Day after notice from the
Agent of such breach, Borrower removes the affected Units or A&D
Projects from Eligible Collateral and after giving effect to such
removal all representations and warranties are complete, true and
accurate in all material respects.
(e) Insolvency. Borrower (i) is unable or admits in writing
Borrower's inability to pay Borrower's monetary obligations as they
become due; (ii) makes a general assignment for the benefit of
creditors; or (iii) applies for, consents to, or acquiesces in, the
appointment of a trustee (other than a trustee under a deed of trust),
receiver, or other custodian for Borrower or any material portion or
all of the property of Borrower, or in the absence of such application,
consent, or acquiescence by Borrower a trustee, receiver, or other
custodian is appointed for Borrower or any or all of the property of
Borrower.
(f) Bankruptcy.
(i) Commencement of any case under the Bankruptcy
Code (Title 11 of the United States Code) or commencement of
any other bankruptcy, arrangement, reorganization,
receivership, custodianship, or similar proceeding under any
federal, state, or foreign law by or against Borrower;
provided, however, with respect to any involuntary proceeding
not initiated by any Person affiliated directly or indirectly
with Borrower, including, without limitation, any Affiliate of
Borrower, such commencement will not be an Event of Default so
long as Borrower is in good faith contesting such involuntary
proceeding, and such proceeding is dismissed within 60 days
after the commencement thereof; or
(ii) Any breach by Borrower, or any modification, of
any of the terms or conditions of the Bankruptcy Plan or the
Bankruptcy Order.
(g) Dissolution, etc. The dissolution, or liquidation of
Borrower; the consolidation or merger of Borrower with any other Person
where Borrower is not the surviving entity; or the taking of any action
by Borrower toward a dissolution, liquidation, consolidation or merger
where Borrower is not the surviving entity (other than in connection
with a transaction that results in the Obligations being paid and
performed in full and the termination of the Commitment).
(h) Transfer of Ownership Interests by DMB; Change of Control
or Transfers of Beneficial Ownership within DMB.
(i) If DMB Residential L.L.C. ("DMB") directly or
indirectly transfers, sells, pledges, hypothecates, or
otherwise disposes of any of its ownership interest in
Borrower or in any of the subordinated indebtedness of
Borrower held by DMB ("DMB's Ownership Interests"), with the
exception of (A) the transfer of all of DMB's Ownership
Interest to AEW, (B) the pledge or collateral assignment of
all or any part of DMB's Ownership Interests as security for
one or more loans made to DMB by a lending group comprised of
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇"), Family Members (hereinafter
defined) of ▇▇▇▇▇▇▇▇, or trusts established for the benefit of
any such persons; and (C) the foreclosure on or transfer of
all or any part of DMB's Ownership Interests under any pledge
or collateral assignment
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described in clause (B) immediately above, so long as ▇▇▇▇▇▇▇▇
and his Family Members retain both (1) effective control and
beneficial ownership of DMB's Ownership Interests following
such foreclosure or transfer and (2) at least 50% of the
capital stock of Borrower and the other DMB Ownership
Interests. For purposes of this Agreement, the "Family
Members" of any person shall include that person's parents,
any lineal descendant of that person's parents, and the spouse
of any such lineal descendant.
(ii) If prior to foreclosure on or transfer of all of
DMB's Ownership Interests pursuant to Section 10.1(h)(i)(C),
any person directly or indirectly holding an ownership
interest in DMB (a "DMB Interest") directly or indirectly
transfers, sells, pledges, hypothecates, or otherwise disposes
of any of its DMB Interest, and as a result of such transfer,
sale, pledge, hypothecation or other disposition, ▇▇▇▇▇▇▇▇ and
his Family Members either (1) cease to hold in the aggregate
at least 51% of the capital and profits interests in DMB or
(2) cease to have control and beneficial ownership in DMB.
(i) Equity Transfers by AEW. If at any time AEW Partners LP
("AEW") directly or indirectly transfers, sells, pledges, hypothecates,
or otherwise disposes of any of its ownership interest in Borrower or
in any of the subordinated indebtedness of Borrower held by AEW ("AEW's
Ownership Interests"), other than transfers of all of AEW's Ownership
Interests to DMB. Transfers of any general partnership interests in AEW
will be deemed a prohibited disposition by AEW of an interest in
Borrower and an Event of Default; however, transfers of limited
partnership interests in AEW are not prohibited.
(j) Material Adverse Change. The Agent and the Banks believe
in good faith that a Material Adverse Change has occurred after the
date of the financial statements and other information provided by
Borrower in obtaining the credit evidenced by this Agreement and the
events or conditions giving rise to such Material Adverse Change are
not cured within 20 days after notice thereof from the Agent; provided,
however, that if such event is not reasonably capable of being cured
within the 20-day period, the Agent will not unreasonably withhold its
consent to an extension of the 20-day period for up to a total of 90
days so long as Borrower (i) provides evidence reasonably satisfactory
to the Agent that such cure can be completed in such 90 day period,
(ii) immediately commences such cure, and (iii) at all times diligently
pursues such cure to completion.
(k) Claims. Borrower or any other Person on behalf of Borrower
claims that any Loan Document to which it is a party is not legal,
valid, binding, and enforceable against Borrower, that any lien,
security interest, or other encumbrance securing any of the obligations
under the Loan Documents is not legal, valid, binding, and enforceable,
or that the priority of any lien, security interest, or other
encumbrance securing any of the obligations in the Loan Documents is
different than the priority represented and warranted in the Loan
Documents.
(l) Cross Default. The occurrence of any condition or event
that is a default under, or is designated as a default, an event of
default, or an Event of Default in, any other Loan Document, or any
lease described in Section 2.8(a)(iv), and which is not cured within
any applicable cure period.
(m) Failure to Maintain Insurance. Any of the insurance
coverages required pursuant to Section 7.8 actually lapses or expires
without being replaced by other insurance policies that
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comply with Section 7.8 prior to such lapse or expiration (as opposed
to the failure to provide evidence of insurance coverage as required by
Section 7.8, which failure is within the coverage of Section 10.1(c)
above); provided, however, that the lapse or expiration of the casualty
insurance required pursuant to Section 7.8(a) with respect to Units or
A&D Projects that are not included in Eligible Collateral will not
constitute an Event of Default if such insurance is obtained within 15
days after the lapse or expiration thereof and in any event prior to
inclusion of such Units in Eligible Collateral.
(n) Default Under Leases. Other than as provided in Section
10.1(l) with respect to leases described in Section 2.8(a)(iv), (i) A
default occurs in the payment when due (after giving effect to any
applicable notice and grace periods) under any lease of real or
personal property pursuant to which Borrower is lessee and with respect
to which the aggregate remaining rent payable over the term of such
lease exceeds $500,000 or (ii) a default occurs in the performance or
observance of any other obligation or condition with respect to any
such lease described in clause (i) and to the extent required under the
terms of such lease, notice of such default described in this clause
(ii) has been given and any applicable grace period has expired, if the
effect of such default described in this clause (ii) is to permit the
lessor under such lease to terminate the lease or seek remedies for
damages against Borrower.
(o) Default Under Other Indebtedness. (i) A default occurs in
the payment when due (after giving effect to any applicable notice and
grace periods), whether by acceleration or otherwise, of any
Indebtedness of Borrower in an aggregate amount exceeding $500,000 or
of any of the Senior Notes or Qualifying Subordinated Indebtedness, or
(ii) a default occurs in the performance or observance of any other
obligation or condition with respect to any such Indebtedness in an
aggregate amount exceeding $500,000 or with respect to any of the
Senior Notes or the Qualifying Subordinated Indebtedness, and to the
extent required under the terms of such Indebtedness, notice of such
default described in this clause (ii) has been given and any applicable
grace period has expired, if the effect of such default described in
this clause (ii) is to accelerate the maturity of any such Indebtedness
or to permit the holder or holders thereof, or any trustee or agent for
such holders, to cause such Indebtedness to become due and payable
prior to its expressed maturity.
(p) Judgments. Any judgment or order for the payment of money
in excess of $500,000 (not covered by insurance subject to customary
deductibles) is rendered against Borrower and either (i) enforcement
proceedings are commenced by any creditor upon such judgment or order;
or (ii) such judgment or order is not vacated, stayed, satisfied,
discharged or bonded pending appeal within 60 days from the entry
thereof.
(q) Foreclosure Proceedings. Filing of any foreclosure
proceeding, giving notice of a trustee's sale, or any other action by
any Person, other than the Agent and the Banks, to realize upon any of
the Collateral under any Lien or Encumbrance on any or all of the
Collateral, regardless of whether such Lien or Encumbrance is a
Permitted Exception and regardless of whether junior or senior to the
Deed of Trust, unless such matters relate only to specific Units or
Finished Lots and within 2 Business Days after the occurrence of such
an event, the Units or Finished Lots affected thereby are removed from
Eligible Collateral.
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(r) RICO. The filing of formal charges by any Governmental
Authority, including, without limitation, the issuance of any
indictment, under any RICO Related Law against Borrower or any
Affiliate of Borrower.
(s) Certain Redemptions. If Borrower is required to purchase
or redeem any of the Senior Notes or Qualifying Subordinated
Indebtedness pursuant to a "Net Worth Offer" or "Change in Control
Offer" made pursuant to the indentures for such Indebtedness.
10.2 Remedies. Upon the occurrence of any Event of Default and at any
time thereafter, for so long as such Event of Default is continuing:
(a) Suspension and Termination of Commitments.
(i) Upon the occurrence and during the continuance of
an Unmatured Event of Default that may become either a
Monetary Default or a Financial Covenant Default, the Agent
shall, unless otherwise directed by all of the Banks, declare
any commitment of the Banks to make Advances or to issue
Letters of Credit to be suspended (subject to automatic
reinstatement upon cure in accordance with the provisions of
this Agreement), whereupon any obligation to make further
Advances or issue Letters of Credit will immediately be
suspended.
(ii) Upon the occurrence and during the continuance
of an Unmatured Event of Default that may become any Other
Default, the Agent may (or if directed by a Bank
Supermajority, shall) declare any commitment of the Banks to
make Advances or to issue Letters of Credit to be to be
suspended (subject to automatic reinstatement upon cure in
accordance with the provisions of this Agreement), whereupon
any obligation to make further Advances or issue Letters of
Credit will immediately be suspended.
(iii) Upon the occurrence of either a Monetary
Default or a Financial Covenant Default, the Agent shall,
unless otherwise directed by all of the Banks, declare any
commitment of the Banks to make Advances or to issue Letters
of Credit to be terminated, whereupon any obligation to make
further Advances or issue Letters of Credit will immediately
be terminated.
(iv) Upon the occurrence of any Other Default, the
Agent shall, within 30 days following occurrence of such Other
Default and unless otherwise directed by a Bank Supermajority,
declare any commitment of the Banks to make Advances or to
issue Letters of Credit to be terminated, whereupon any
obligation to make further Advances or issue Letters of Credit
will immediately be terminated.
(b) Acceleration. Upon the occurrence of a Monetary Default or
a Financial Covenant Default, the Agent shall, unless otherwise
directed by all of the Banks, declare the Obligations to be immediately
due and payable in full, whereupon all of the principal, interest and
other Obligations will forthwith become due and payable in full without
presentment, demand, protest or notice of any kind, all of which are
hereby expressly waived. Upon the occurrence of any Other Default, the
Agent may (or if directed by a Bank Supermajority, shall) declare the
Obligations to be immediately due and payable in full, whereupon all of
the principal, interest and other Obligations
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will forthwith become due and payable in full without presentment,
demand, protest or notice of any kind, all of which are hereby
expressly waived.
(c) Delivery of Contracts, Etc. Borrower will, upon request of
the Agent, deliver to the Agent all surveys, plans and specifications,
building permits, construction contracts and subcontracts, plats and
other maps, lien releases, subdivision reports, annexation documents,
declarant's rights, marketing material and other documents, permits,
licenses and contracts which are necessary to complete construction and
marketing of the Units and A&D Projects, and Borrower will, on request
of the Agent, assign to the Agent such of Borrower's rights thereunder
as the Agent may request.
(d) Enforcement of Rights. The Agent shall enforce any and all
rights and remedies under the Loan Documents, the Deeds of Trust and
all other documents delivered in connection therewith and against any
or all Collateral and shall pursue all rights and remedies available at
law or in equity unless otherwise directed by all of the Banks
(e) Receivers. Without limiting any other rights and remedies
to which it is entitled, the Agent may, at its option, without notice
to Borrower or without regard to the adequacy of the Collateral for the
payment of the Obligations, have appointed one or more receivers of the
Collateral, and Borrower does hereby irrevocably consent to such
appointment, with such receivers having all the usual powers and duties
of receivers in similar cases, including the full power to maintain,
sell, dispose and otherwise operate the Collateral upon such terms that
may be approved by a court of competent jurisdiction.
(f) Payments. The Agent may direct all escrow companies and
closing agents to pay over to the Agent directly all moneys to which
Borrower is entitled and held by such parties in pending escrows.
10.3 Protective Advances. The Agent, at any time following the
occurrence and during the continuance of an Event of Default or an Unmatured
Event of Default, may, but will not be obligated to, make Protective Advances,
subject to the restrictions in Section 11.8. All Protective Advances are an
obligation of the Borrower and will be due and payable by Borrower within 5 days
of written demand. Unless otherwise directed by a Bank Supermajority, Protective
Advances will be at the sole discretion of the Agent. Any Protective Advance
will only occur through the Agent or at the Agent's direction and will not be
funded directly to Borrower or any of its Affiliates. Neither the Agent nor the
Banks will have any duty to account to Borrower for any such expenditures. All
Protective Advances shall bear interest at the Default Interest Rate, from the
date advanced until repaid by Borrower. All Protective Advances will be secured
by the Deeds of Trust and the Collateral. The making of a Protective Advance by
the Agent will not be deemed a waiver by the Agent or any Bank of the occurrence
of an Event of Default or an Unmatured Event of Default.
10.4 Completion of Construction. The Agent may take all action
necessary to complete the construction of any Off-Site Improvements or Units and
expend all sums necessary therefor. The Agent may, but will not be obligated to,
make Advances from time to time to pay all costs and expenses of such completion
and such amounts will be due and payable within 5 days of written demand and
will be added to the outstanding principal amount of all Advances. Neither the
Agent nor the Banks will have any duty to account to Borrower for any such
expenditures. All amounts advanced by the Agent or any Bank, and all
96
other charges, costs and expenses, including reasonable attorneys' fees,
incurred or paid by the Agent or any Bank, in exercising any right, power or
remedy conferred by this Agreement, the Deeds of Trust or any other Loan
Document, or in the enforcement hereof, or in the protection of the Collateral
or the completion of the Collateral, are an obligation of Borrower and shall
bear interest at the Variable Rate, prior to the occurrence of an Event of
Default or Unmatured Event of Default, and at the Default Interest Rate
thereafter, from the date advanced, paid or incurred until repaid by Borrower.
All such amounts so advanced, incurred or paid will be secured by the Deeds of
Trust and the Collateral.
10.5 Multiple Real and Personal Property Security. Borrower hereby
acknowledges that the Banks are extending credit based upon both the financial
statements of Borrower and the aggregate values of the Collateral and that the
Collateral is located in different jurisdictions. Accordingly, Borrower hereby
agrees that, from and after any Event of Default, the Agent and the Banks will
be allowed, to the greatest extent permitted by applicable law, including the
laws of whichever jurisdictions the Agent may choose as most facilitating for
the exercise of the rights of the Agent and the Banks (and which may be
applicable), to pursue and realize upon all of the remedies available to them
under any of the Loan Documents, at law, in equity, or otherwise, and
simultaneously or consecutively, in the discretion of the Agent, including,
without limitation, commencement of one or more actions in one or more
jurisdictions for repayment of all or portions of the Obligations, for the
separate or simultaneous sale or foreclosure of the Collateral or portions
thereof, for the obtaining of judgments and/or deficiency judgments, for the
seeking of injunctive relief and receiverships, and for maximum access to and
realization from the Obligations and Collateral or portions thereof in such
manner as the Agent may deem in the interest of the Agent and the Banks, and
Borrower hereby waives any requirement that any deficiency judgment proceeding
be initiated or completed with respect to any other property constituting
Collateral as a condition to commencing any enforcement proceeding against any
party or any particular item of Collateral. Borrower hereby expressly
acknowledges and agrees that various consents, waivers and agreements set forth
in any of the Loan Documents, including the Deeds of Trust, were granted in
recognition of the foregoing, and that all such waivers, consents and agreements
will apply to each other Loan Document as though set forth therein. In addition
to any other consents, waivers and agreements set forth in any of the Loan
Documents, and without limiting the foregoing, Borrower agrees that, to the
maximum extent permitted by applicable law, the Agent may foreclose on and/or
sell all properties located in the same state in any one or more counties where
any of the properties in that state are located; any personal property located
on real property encumbered by a Deed of Trust may be foreclosed upon in the
manner provided for, simultaneously with, and as a part of the proceeding for,
foreclosure of the real property; and Borrower hereby waives the benefits of any
"one-action rule" of any state which may be applicable to it or to any of the
Collateral and waives marshaling of assets for itself and all other parties
claiming by, through or under it.
ARTICLE 11
THE AGENT; ADMINISTRATION OF THE LOAN
11.1 Appointment of Agent.
(a) Appointment of Agent. The Banks hereby confirm the
appointment of BOAZ as the Agent to administer the Loan, and BOAZ
hereby confirms its acceptance of such appointment. The Agent shall
carry out its administrative duties to the Banks in accordance with the
applicable terms of this Agreement. Borrower consents to the Agent
serving as the Agent in accordance with this Agreement.
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(b) Appointment of Co-Agent; Duties; and Fees. The Banks
hereby confirm the appointment of Guaranty Federal as the Co-Agent with
the limited rights and duties set forth in Section 5.2 of this
Agreement. The Co-Agent shall carry out its administrative duties to
the Banks in accordance with the applicable terms of this Agreement.
Borrower consents to the Co-Agent serving as the Co-Agent in accordance
with this Agreement. In its capacity as the Co-Agent with respect to
its duties under Section 5.2, the Co-Agent shall have the rights and
responsibilities of the "Agent" as set forth in this Section 11.1(b)
and in Sections 11.3, 11.5, 11.6, 11.7, 11.17, 11.20, and 11.26 (the
"Co-Agent Sections"), in addition to the Co-Agent's rights as a Bank
under this Article 11 and the other provisions of the Loan Documents.
The Co-Agent will receive a fee for its services as the Co-Agent
pursuant to the terms of a separate letter agreement between the
Co-Agent and Borrower, and the Co-Agent shall have no right to any
other fees under this Agreement except in its capacity as one of the
Banks or pursuant to one of the Co-Agent Sections.
11.2 Ownership and Possession of Loan Documents; Information.
(a) Ownership and Possession; Access to Agent Files. Each of
the Banks shall own an undivided interest in the Loan and the Loan
Documents equal to its Pro Rata Interest. The Agent shall hold in its
possession, as agent, at its office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇., ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other location as the Agent
shall designate in writing to the Banks, the Loan Documents, for the
pro rata benefit of itself as one of the Banks and each of the other
Banks; provided, however, that the Agent shall deliver to each of the
Banks an original promissory note executed by Borrower and evidencing
such Bank's maximum Pro Rata Interest in the Obligations and the
Commitment Amount. The Agent shall keep and maintain complete and
accurate files and records of all matters pertaining to the Loan. Upon
reasonable prior notice to the Agent by a Bank, the files and records
shall be made available to such Bank and its representatives and agents
for inspection and copying during normal business hours.
(b) Information. In addition to any other information that the
Agent is specifically obligated to deliver to each of the Banks
pursuant to the Loan Documents, the Agent shall promptly deliver to the
Banks copies of all notices (including, without limitation, notices of
default) and other communications of a material nature relating to the
Obligations which are sent or received by the Agent; provided, however,
the Agent shall not be required to deliver to the Banks copies of title
reports, title insurance policies, Deeds of Trust, other materials
affecting or relating to title to any of the Collateral or other
information, soils test reports, plats, surveys, or other materials
relating to the Collateral unless specifically requested in writing by
a Bank. If any Bank or the Co-Agent receives any notices,
communications, or other information of a material nature relating to
the Obligations, such Bank or Co-Agent shall promptly give copies of
all such items to the Agent. All such notices and other communications
sent to one Bank shall be sent concurrently to all of the Banks.
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11.3 Resignation and Removal of Agent; Successor Agent.
(a) Resignation Upon Notice. The Agent may resign as agent in
its sole discretion, without the consent of the Banks at any time by
giving written notice thereof to the Banks and Borrower, such
resignation to be effective on the earlier of (i) 60 days following
designation of a successor Agent pursuant to Section 11.3(c) or (ii)
120 days after the retiring Agent gives notice of its intention to
resign unless, in either case, the Agent is prohibited by law, rule,
regulation, or order of any Governmental Authority from continuing to
serve for such period, in which case Agent shall only be required to
continue to serve for the maximum period of time, if any, as is
permissible under such law, rule, regulation, or order.
(b) Removal of the Agent. The Agent may be removed at any time
with or without cause by written notice received by the Agent from a
Bank Majority, such removal to be effective on the date specified by
the Bank Majority, which date shall not be more than 120 days following
the date of such written notice to the Agent. The consent of Borrower
shall be required prior to any removal of Agent without cause becoming
effective (with the determination by a Bank Majority of cause being
conclusive for purposes of determining whether Borrower's consent is
required); provided, however, that if an Event of Default or Unmatured
Event of Default has occurred and is continuing, the consent of
Borrower shall not be required.
(c) Successor Agents; Change in Funding Procedure.
(i) Upon any resignation or removal of the Agent, a
Bank Majority shall have the right to appoint, on behalf of
Borrower and the Banks, a successor Agent. Any Bank can be a
successor Agent upon the approval of a Bank Majority. Any
other successor Agent shall be appointed only with the prior
reasonable consent of Borrower; provided, however, that if an
Event of Default or Unmatured Event of Default has occurred
and is continuing, the consent of Borrower shall not be
required; provided, further, that unless otherwise agreed by
all of the Banks, the Agent must, at all times while serving
as the Agent, have an aggregate unparticipated interest in the
Commitment of at least $10,000,000. If the Agent has resigned
or been removed and no successor Agent has been appointed, the
Banks may perform all the duties of the Agent under this
Agreement, and Borrower shall make all payments in respect of
the Obligations to the applicable Bank and for all other
purposes shall deal directly with the Banks. No successor
Agent shall be deemed to be appointed until such successor
Agent has accepted the appointment. Any successor Agent must
be a banking institution with sophisticated experience and
expertise in the operation and administration of revolving
borrowing base credits for production home builders held for
its own account and have net assets of at least
$20,000,000,000 ($7,000,000,000 in the case of Guaranty
Federal) or be a member of a group of banking institutions
under a common bank holding company having consolidated net
assets of at least $20,000,000,000. Upon the acceptance of any
appointment as the Agent by a successor Agent, such successor
Agent shall thereupon succeed to and become vested with all
the rights, powers, privileges and duties of the resigning or
removed Agent.
(ii) As of the date that the removal or resignation
of BOAZ as the Agent becomes effective, BOAZ will no longer
have the obligations under Sections 11.10 and 11.11 with
respect to the funding and settlement of Advances, and the
funding procedures
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set forth in Section 11.10(c) will become effective and remain
in effect until such time as the new Agent (or a successor
Agent), in its sole discretion, agrees to the daily funding of
Advances and subsequent settlements among the Banks as
otherwise provided in this Agreement. A change in funding
procedures pursuant to this Section 11.3(c)(ii) is referred to
in this Agreement as a "Funding Procedure Change Event". In
selecting a successor Agent, the Banks shall use reasonable
efforts to find and appoint a successor Agent that will assume
the responsibilities of BOAZ with respect to the daily funding
of Advances and subsequent settlements among the Banks, as
contemplated by Sections 2.2(a), 11.10, and 11.11.
(d) Cooperation. Notwithstanding the resignation or removal of
an Agent, the Agent resigning or being removed will cooperate with the
other Banks in obtaining a new Agent. Such cooperation shall include
providing all procedures, manuals, computer software and other systems
(other than such procedures, manuals, computer software and other
systems that may be proprietary, contain or constitute trade or similar
secrets, or be subject to any applicable privileges or confidentiality
obligations) used by such Agent in performing the duties and
obligations pursuant to this Agreement to the extent that such Agent
may legally do so. In addition, if the Agent is forced to resign as the
Agent by reason of law, rule, regulation, or order of any Governmental
Authority, the Agent agrees, as an independent contractor, upon request
of all of the Banks, and upon payment to the Agent of a reasonable fee
for such services as may then be agreed upon by the Agent and the
Banks, to continue to prepare the Borrowing Base Report for the Banks
for a period of time not to exceed 120 days less the number of days
that the Agent continued to serve as the Agent after notifying the
Banks of the necessity to resign as Agent by reason of law, rule,
regulation, or order of any Governmental Authority.
11.4 Sharing of Payments.
(a) Generally. The Banks shall be entitled to their respective
Pro Rata Interests in all interest payments, principal payments and
Late Charges, to the extent actually collected from Borrower,
appropriately prorated among the Banks, as determined by the Agent, to
reflect the period of time that any Bank has been a Bank and to reflect
any increase or decrease in Pro Rata Interests that may have occurred.
(b) Certain Other Payments. Amounts paid by Borrower with
respect to Other Amounts or pursuant to any other provision of the Loan
Documents providing for payment, compensation, or reimbursement to one
or more, but not necessarily all, of the Agent and/or the Banks shall
be paid to the Agent, the Bank, or Banks incurring such expenses or
otherwise entitled to compensation under any of those Sections or other
provisions, with each Bank entitled to receive any payment,
reimbursement, or compensation pursuant to any of such Sections or
other provisions being obligated to provide to the Agent and Borrower a
certificate setting forth in reasonable detail the basis for the amount
of any request for compensation, payment or reimbursement under any of
those Sections or other provisions. Amounts payable pursuant to
Sections 2.6(a), (b), and (c) shall be prorated among the Banks on the
basis of their respective Pro Rata Interests, taking into consideration
the period of time that any Bank has been a Bank and any increase or
decrease in Pro Rata Interests that may have occurred.
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11.5 Administration. The Agent shall administer this Agreement and the
other Loan Documents and service the Loan in accordance with the terms and
conditions of this Agreement and with the same degree of care as a reasonably
prudent lender would use in servicing a loan of similar size and type held for
its own account. The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and the other Loan Documents. Except in
connection with the receipt and transmittal of funds as provided for in this
Agreement, the Agent shall not have a fiduciary relationship in respect of
Borrower, any Bank, or the LC Bank by reason of this Agreement.
11.6 Reliance. Subject to the standard of care described in Section
11.5, neither the Agent nor any of its directors, officers, agents or employees
shall be liable to the Borrower or any of the Banks for any error in judgment or
for any action taken or omitted to be taken by them, except the Agent (but not
any of its directors, officers, agents or employees) shall be liable to the
Banks, but not the Borrower, for its own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent, as agent: (a)
may consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (b) shall not be responsible for the performance or
observance by Borrower or any guarantor of any of the terms, covenants or
conditions of the Loan Documents; (c) shall not have any duty to inspect the
Collateral (including the books and records of Borrower or any guarantor) except
as may be specifically provided herein; and (d) shall incur no liability under
or with respect to the Loan or under the Loan Documents or with respect to any
Collateral by acting in good faith upon any notice, consent, certificate or
other instrument or writing (which may be by telegram, telecopy, cable or telex)
believed by it to be genuine and signed or sent by the proper party or parties
or by acting in good faith upon any representation or warranty of Borrower or
any guarantor made or deemed to be made under any Loan Document.
11.7 Powers of the Agent. Subject to the provisions of Section 11.8 and
the requirements of this Agreement, including conforming to the standard of care
specified in Section 11.5, the Agent shall have and may exercise such powers
under the Loan Documents as are specifically delegated to the Agent by the terms
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties to the Banks, or any obligation to the Banks
to take any action thereunder except any action specifically provided by the
Loan Documents to be taken by the Agent.
11.8 Limitations on the Agent.
(a) General Limitations and Residual Rights.
(i) As to any matters which, by express provision of
this Agreement, are subject to the consent or direction of all
of the Banks, a Bank Supermajority, or a Bank Majority, Agent
shall not be permitted or required to exercise any discretion
or take any action except upon the instructions of all of the
Banks, a Bank Supermajority, or a Bank Majority, as the case
may be, which instructions shall be binding upon all of the
Banks. The Agent and its directors, officers, agents and
employees shall be fully protected in acting or in refraining
from action upon such instructions, but in no event shall the
Agent be required to take any action which exposes the Agent
or any of its directors, officers, agents or employees to
personal liability or which is contrary to this Agreement, the
other Loan Documents or applicable law.
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(ii) As to any matters for which the Agent is granted
discretion under this Agreement, including the day-to-day
administration of the Loan, the Agent may exercise its
discretion and take such action (or refrain from taking
action); however, the Agent shall not be required to exercise
any discretion or take any action, unless inaction on the part
of the Agent exposes the Agent or its directors, officers,
agents or employees to personal liability or is contrary to
applicable law, and the Agent may request a determination or
decision in such matters from a Bank Majority, a Bank
Supermajority, or all of the Banks (as elected by the Agent)
pursuant to the procedures set forth in Section 11.9. In
acting hereunder as agent (including without limitation the
taking and holding of Collateral), the Agent shall be acting
for its own account as one of the Banks, and for the account
of and as agent for the Banks, to the extent of their
respective Pro Rata Interests in the Loan, including the Agent
in its capacity as a Bank.
(iii) Unless the authority to act with respect to a
particular matter is expressly delegated to the Agent, a Bank
Majority, or a Bank Supermajority, approvals and other
decisions with respect to such matter shall require the
consent of all of the Banks.
(b) Matters Requiring Unanimous Bank Approval. In addition to
any other matters specified in this Agreement as requiring the consent
or direction of all of the Banks, the following require the approval of
all of the Banks:
(i) Protective Advances in excess of $2,000,000 in
the aggregate at any time outstanding (with Protective
Advances of up to $2,000,000 in the aggregate at any time
outstanding to be within the scope of authority of the Agent)
or Protective Advances and Advances pursuant to Section 10.4
aggregating in excess of $3,000,000 at any time outstanding;
(ii) Any Advance following the Maturity Date,
following the occurrence of a Monetary Default or a Financial
Covenant Default, or following suspension of funding pursuant
to Section 10.2(a)(i) (subject to resumption of funding upon
reinstatement in the case of a cure);
(iii) Approval of any new Subdivision following
commencement of the Term Out Period;
(iv) Inclusion of any new A&D Project as Eligible
Collateral following commencement of the Term Out Period;
(v) Inclusion for the first time of any Unit in
Eligible Collateral following the end of the 12th Calendar
Month of the Term Out Period;
(vi) The release of any Person from any of its
Obligations under the Loan Documents;
(vii) The release of any Collateral other than as
permitted in Section 2.8;
(viii) Any change in the definitions of Bank Majority
or Bank Supermajority;
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(ix) Any increase or decrease in the Commitment
Amount (except for Protective Advances and except as otherwise
expressly permitted by this Agreement), or the approval for
Borrower to assign any of its rights under this Agreement;
(x) Any amendment to the Commitment reduction and
term out provisions of Section 2.1(d);
(xi) Any amendment to the A&D Commitment Sublimit,
the Development and Finished Lot Sublimit, the Land Project
Sublimit, the Model Unit Sublimit, or the Letter of Credit
sublimit in Section 3.1;
(xii) Any amendment to or waiver of any of the
Financial Covenants or of any of the definitional provisions
relating to the Financial Covenants;
(xiii) Any extension of the Conversion Date;
(xiv) Any extension of the Maturity Date (except in
connection with an approved extension of the Conversion Date);
(xv) Forgiveness of all or any portion of the
principal amount of the Obligations, interest or Other
Amounts, or a reduction in the rate of, or an extension of the
time of payment of, principal, interest, or Other Amounts;
(xvi) Any material amendment to the Environmental
Policy (to the extent required pursuant to the definition of
Environmental Policy in Section 1.1) or to the Appraisal
Policy;
(xvii) Any amendment to or waiver of the provisions
of Section 2.6 or with respect to the payment by Borrower of
any Other Amounts;
(xviii) Any amendment of the provisions of Section
2.2(d) or the definition of "Borrower Equity Requirement"; and
(xix) Any amendment to the terms of Articles 4, 5, 7,
9, 10, and 11 or any amendment to the definition of
"Collateral Value" or to any of the definitions and provisions
used in determining Collateral Value, such as the definition
of "Maximum Allowed Advance".
(c) Matters Requiring Bank Supermajority Approval. In addition
to any other matters specified in this Agreement as requiring the
consent or direction of a Bank Supermajority, the following require the
approval of a Bank Supermajority:
(i) Except to the extent that unanimous Bank approval
is required pursuant to Section 11.8(b), the approval of any
amendment of any of the provisions of any of the Loan
Documents; provided, however, that in no event (A) will any of
the provisions of the Loan Documents relating to ▇▇ ▇▇▇▇▇ be
amended without the consent of the LC Bank; (B) will
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any of the provisions of Sections 11.3, 11.10 or 11.11 (and
provisions of the Loan Documents related thereto) be amended
without the consent of BOAZ; (C) will any of the provisions of
the Loan Documents relating to the Agent be amended without
the consent of the Agent; or (D) will any of the provisions of
the Loan Documents relating to the Co- Agent be amended
without the consent of the Co-Agent; and
(ii) Any Advance following the occurrence of any
Other Default, where a Bank Supermajority has elected either
to suspend or terminate the obligation to fund pursuant to
Section 10.2(a)(ii) or Section 10.2(a)(iv).
11.9 Approval of Banks. All communications from the Agent to the Banks
requesting the Banks' determination, consent, approval or disapproval (a) shall
be given in the form of a written notice to each of the Banks, (b) shall be
accompanied by a description of the matter or thing as to which such
determination, approval, consent or disapproval is requested, and (c) shall
include the course of action or determination recommended by the Agent in
respect thereof. The Banks shall reply within 15 Business Days after such
written notice is given by Agent and if a Bank does not reply within that
period, such course of action or other matter shall be deemed to have been
disapproved by that Bank; provided, however, that if Agent notifies the Banks
that, pursuant to the Loan Documents, the matter with respect to which such
consent, approval or disapproval is sought by Agent requires that Agent respond
within a certain time period and/or provides that if a response is not given
within a certain time period such approval or consent shall be deemed given, the
Banks shall reply by the later of (i) 3 Business Days before such time period
expires (as designated by Agent) or (ii) 5 Business Days after such written
notice is given by Agent, and if a Bank does not reply within such time period,
then such Bank shall be deemed to have disapproved the matter.
11.10 Advances, Protective Advances, and Payments.
(a) General Funding Procedures. Except to the extent otherwise
provided in Section 11.10(c), Advances shall be funded by BOAZ and the
other Banks in accordance with the following provisions:
(i) The Pro Rata Interest of each Bank in the
outstanding Advances made pursuant to Section 2.2(a) shall be
funded and settled on each Settlement Date based on the
outstanding Advances as of 5:00 p.m. (Phoenix, Arizona time)
on each Cut-Off Date. From each Cut-Off Date until the
immediately following Cut-Off Date, following a determination
by the Agent that Borrower is entitled to the requested
Advance, BOAZ shall fund all Advances requested pursuant to
Section 2.2(a).
(ii) As of 5:00 p.m. (Phoenix, Arizona time) on each
Cut-Off Date, the Agent shall notify each Bank of the
following (which notice may be given telephonically and
confirmed in writing by way of facsimile transmission):
(A) The total principal amount of all
outstanding Advances as of 5:00 p.m. (Phoenix,
Arizona time) on the Cut-Off Date;
(B) The actual amount of Advances held by
each Bank as of 5:00 p.m. (Phoenix, Arizona time) on
the Cut-Off Date; and
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(C) Each Bank's Pro Rata Interest in the
outstanding Advances as of 5:00 p.m. (Phoenix,
Arizona time) on the Cut-Off Date.
(iii) On each Settlement Date, if, as of 5:00 p.m.
(Phoenix, Arizona time) on the immediately preceding Cut-Off
Date, (A) a BOAZ Deficit Amount exists, then before 11:00 a.m.
(Phoenix, Arizona time) on such Settlement Date, BOAZ shall
make available to the Banks, in same day funds, an amount
sufficient to cause the principal amount of outstanding
Advances made pursuant to Section 2.2(a) as of 5:00 p.m.
(Phoenix, Arizona time) on such Cut-Off Date held by each Bank
to equal such Bank's Pro Rata Interest in all outstanding
Advances of the Banks; and (B) if a BOAZ Excess Amount exists,
then prior to 11:00 a.m. (Phoenix, Arizona time) on such
Settlement Date, each Bank shall make available to the Agent,
in same day funds, an amount sufficient to cause the principal
amount of outstanding Advances held by each Bank to equal such
Bank's Pro Rata Interest in all outstanding Advances of the
Banks. Such funds shall be made available to the Agent in an
account to be designated by the Agent at BOAZ, in Phoenix,
Arizona.
(b) Funding Procedures for Protective Advances.
(i) Each Bank shall, before 11:00 a.m. (Phoenix,
Arizona time) on the date a Protective Advance is to be made
(as designated in the notice given to the Banks pursuant to
Section 11.10(b)(ii)), make available to the Agent in an
account to be designated by the Agent at BOAZ, in Phoenix,
Arizona, in same day funds, an amount equal to such Bank's Pro
Rata Interest of the Protective Advance.
(ii) With respect to Protective Advances to be made
pursuant to this Section 11.10(b), the Agent shall notify each
Bank by 2:00 p.m. (Phoenix, Arizona time) 2 Business Days
before the Protective Advance is to be made that the Agent, a
Bank Supermajority, or all of the Banks, as applicable, has
determined that a Protective Advance is to be made, stating in
reasonable detail the reasons therefor (in the case of a
Protective Advance being made other than at the direction of a
Bank Supermajority) and advising the Bank of the portion of
the Protective Advance to be funded by such Bank.
(c) Change in Funding Procedures.
(i) From and after the occurrence of a Funding
Procedure Change Event and continuing until the new Agent (or
a successor Agent), in its sole discretion, agrees to the
daily funding of Advances and subsequent settlements among the
Banks as otherwise provided in this Agreement, each Bank
shall, before 11:00 a.m. (Phoenix, Arizona time) on the date
an Advance is to be made pursuant to the Loan Agreement (as
designated in the notice given to the Banks pursuant to
Section 11.10(c)(ii) below), make available to the Agent in an
account to be designated by the Agent in Phoenix, Arizona, in
same day funds, such Bank's Pro Rata Interest in the Advance.
(ii) With respect to Advances to be made pursuant to
this Section 11.10(c), the Agent shall notify each Bank by
2:00 p.m. (Phoenix, Arizona time) 2 Business Days before the
Advance is to be funded that an Advance has been requested and
that the Agent has determined that the Borrower is entitled to
the requested Advance and shall advise the Bank
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of the portion of the Advance to be funded by such Bank. The
Agent shall not give such notices more frequently than once in
any given calendar week.
(d) Absolute Nature of Funding Obligations. The obligations of
the Banks to make payments of their Pro Rata Interests in Advances and
Protective Advances, as provided in this Section are, as between the
Agent and the Banks, absolute and irrevocable and not subject to any
counterclaim, setoff, or other defense or any qualification or
exception whatsoever, and such payments shall be made in accordance
with the terms and conditions of this Agreement under all
circumstances. Nothing in this Section 11.10(d), however, will preclude
a Bank, after making such payments, from separately alleging that an
Advance or Protective Advance was improper and seeking to exercise its
right and remedies available under this Agreement and pursuant to
applicable law.
(e) Reimbursements under Letters of Credit. Notwithstanding
the other provisions of this Section 11.10, reimbursements for drawings
under letters of credit will be made in accordance with Section 11.12.
(f) Distribution of Interest Payments and Commitment Fees.
Regular monthly payments of interest and any other payments by Borrower
to the Agent on behalf of the Banks or the Agent (other than payments
to be applied to the outstanding principal amount of Advances or
Protective Advances, which payments will be applied as provided in
Section 11.11), received by the Agent before 11:00 a.m. (Phoenix,
Arizona time) on any Business Day shall be made available to the Banks
and/or the Agent entitled thereto on or before 2:00 p.m. (Phoenix,
Arizona time) on the same Business Day. Any such payments received
after 11:00 a.m. (Phoenix, Arizona time) on any Business Day shall be
made available to the Banks and/or the Agent on or before 11:00 a.m.
(Phoenix, Arizona time) on the immediately following Business Day.
(g) Late Payments by the Agent. If and to the extent that the
Agent shall not have made any payment required pursuant to this Section
11.10, the Agent agrees to pay the Banks, forthwith on demand, such
amount, together with interest thereon, for each day from such date
until the date such amount is paid to the Banks at the overnight rate
for federal fund transactions between member banks of the Federal
Reserve System, as published by the Federal Reserve Bank of New York.
(h) Late Payments by the Banks. If and to the extent any Bank
shall not have made any payment required pursuant to this Section
11.10, such Bank agrees to pay the Agent, for the account of BOAZ,
forthwith on demand, such amount, together with interest thereon, for
each day from such date until the date such amount is paid to the Agent
at the overnight rate for federal funds transactions between member
banks of the Federal Reserve System, as published by the Federal
Reserve Bank of New York. Notwithstanding anything to the contrary in
this Agreement, the failure of any Bank to make available to the Agent
any amount required pursuant to this Section 11.10(h) shall not relieve
any other Bank of its obligation hereunder to make available as
aforesaid such payment, as specified above, unless a Non-Defaulting
Bank funds the requirements of a Defaulting Bank pursuant to Section
11.18, nor shall any Bank be relieved of its obligations to make such
payments for any other reason.
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(i) Funds Transfer Instructions. Funds shall be transferred to
the Banks in accordance with the funds transfer instructions given to
the Agent and by the Agent to the Banks from time to time.
11.11 Application of Payments.
(a) Application of Principal to Advances. All amounts which
pursuant to the Loan Documents are to be applied to the outstanding
principal amount of Advances shall be applied to the outstanding
principal amount of Advances held by BOAZ, subject to settlement among
the Banks in accordance with Section 11.10.
(b) Application of all Other Moneys. All other moneys
collected or received by the Agent on account of the Obligations or in
respect of security for the Obligations, directly or indirectly, shall
be applied in the following order of priority, except to the extent
otherwise required by Section 2.4(d)):
(i) To the payment of all costs and expenses due to
the Agent and/or the Banks pursuant to the Loan Documents,
including costs incurred in collection of such monies,
including, without limitation, the payment to the Banks of the
Late Charges and amounts described in Section 11.4(b);
(ii) To the reimbursement of any Protective Advances,
in proportion to the amount of the Protective Advances held by
each of the Banks;
(iii) To outstanding interest on the Advances and
Protective Advances, which amount shall be allocated between
the Banks in accordance with the actual principal amount of
Advances and Protective Advances held by each Bank throughout
the period in question as determined by the Agent on a daily
basis; provided, however, that if amounts received by the
Agent are not sufficient to pay in full all such outstanding
interest on the Advances and Protective Advances, such amounts
shall be allocated among the Banks pro rata in accordance with
the amount of Advances and Protective Advances held by each
Bank during the period in question; and
(iv) To the payment of principal on the Advances in
accordance with the principal amount of Advances held by each
Bank.
11.12 Letter of Credit Participations.
(a) Transfers to the Other Banks. Immediately upon the
issuance by the LC Bank of any Letter of Credit, the LC Bank shall be
deemed to have sold and transferred to each Bank and each Bank shall be
deemed irrevocably and unconditionally to have purchased and received
from the LC Bank, without recourse or warranty, an undivided interest
and participation, to the extent of such Bank's Pro Rata Interest, in
such Letter of Credit, each drawing made thereunder and the obligations
of Borrower under this Agreement with respect thereto and any security
therefor or guaranty pertaining thereto. This Agreement is intended by
the parties to effect an immediate purchase by each Bank and sale by
the LC Bank of such Bank's Pro Rata Interest of such rights and
obligations and each Letter of Credit issued hereunder and it is not to
be construed as a loan or a
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commitment to make a loan by such Bank to the LC Bank, and the
relationship between such Bank and the LC Bank shall not be a
debtor/creditor relationship. Each Bank hereby absolutely and
unconditionally assumes and agrees to pay and discharge when due,
ratably in accordance with its Pro Rata Interest, the obligations of
the LC Bank under the Letters of Credit issued by it, by paying to the
Agent for the account of the LC Bank in accordance with and to the
extent provided by this Section, its Pro Rata Interest of all amounts
advanced by the LC Bank in connection with any Letter of Credit issued
by it. Upon any change in the Pro Rata Interest of a Bank, it is hereby
agreed, with respect to all outstanding Letters of Credit and
Reimbursement Amounts, there shall be an automatic adjustment to the
participations pursuant to this Section to reflect the new Pro Rata
Interest of the assignor and assignee Bank or of all of the Banks, as
the case may be.
(b) Obligations of the LC Bank. In determining whether to pay
under any Letter of Credit, the LC Bank shall have no obligation
relative to the other Banks other than to confirm that any documents
required to be delivered under such Letter of Credit have been
delivered and that they comply on their face with the requirements of
such Letter of Credit. Any action taken or omitted to be taken by the
LC Bank under or in connection with any Letter of Credit, if taken or
omitted in good faith and in the absence of gross negligence or willful
misconduct, shall not create for the LC Bank any resulting liability to
any other Bank.
(c) Reimbursements to the LC Bank. If the LC Bank makes any
payment under any Letter of Credit and Borrower shall not have
reimbursed such amount in full to the Agent for the account of the LC
Bank pursuant to Article 3, the Agent shall promptly notify each Bank
of such failure and each Bank shall absolutely and unconditionally pay
to the Agent for the account of the LC Bank the amount of such Bank's
Pro Rata Interest in such payment. Each Bank required to fund a payment
pursuant to the preceding sentence shall do so in same day funds,
without reduction for any setoff or counterclaim of any nature
whatsoever, on the Business Day upon which the Agent so notified each
such Bank if such notice was given before 11:00 a.m. (Phoenix time) or
if such notice was not given by the applicable time, on the Business
Day next following such notice. If and to the extent any Bank shall not
have so made the payment of its Pro Rata Interest of the amount of each
Letter of Credit payment available as aforesaid, such Bank agrees to
pay the Agent for the account of the LC Bank, forthwith on demand, such
amount, together with interest thereon, for each day from such date
until the date such amount is paid to the Agent at the overnight rate
for federal funds transactions between member banks of the Federal
Reserve System, as published by the Federal Reserve Bank of New York.
The failure of any Bank to make available to the Agent for the account
of the LC Bank its Pro Rata Interest of any payment under any Letter of
Credit shall not relieve any other Bank of its obligation hereunder to
make available as aforesaid, its Pro Rata Interest of any Letter of
Credit on the date required, as specified above, nor shall any Bank be
relieved of its obligations to make such payments for any other reason.
The obligation of each Bank to so pay its participation in each Letter
of Credit shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense
to payment which such Bank may have or have had against the Agent,
including, without limitation, any defense based on the failure of the
demand for payment under such Letter of Credit to conform to the terms
of such Letter of Credit, or the legality, validity, regularity or
enforceability of such Letter of Credit.
11.13 Reimbursement Obligations. The Banks agree to reimburse the Agent
promptly upon demand for their respective Pro Rata Interests in any and all
out-of-pocket costs, disbursements and expenses (to the extent reasonable and
customary) (including counsel fees) incurred or made by the Agent in
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connection with the preparation, execution, delivery, modification, amendment,
administration, collection or enforcement (whether through negotiations, legal
proceedings, foreclosure or otherwise) of, or legal advice in respect of rights
or responsibilities under, this Agreement or the other Loan Documents if either
(a) Borrower has no obligation under the Loan Documents to pay such expenses;
provided, however, that the maximum amount of expenses under this clause (a)
does not exceed $250,000; or (b) Borrower is obligated to pay such amounts and
the Agent is not reimbursed for such expenses by Borrower; provided, however,
that if the Agent reasonably anticipates that such expenses under this clause
(b) will exceed $250,000, before incurring amounts in excess of $250,000, the
Agent shall provide to the Banks a summary of amounts expended to date as well
as a projected budget for future expenses. The Agent shall be entitled to deduct
from any payments to be made to the Banks under this Agreement, and to retain,
amounts due the Agent as reimbursement under this Section, provided that the
Agent shall have first delivered to the Banks 30 days prior written notice of
such amounts and the circumstances giving rise thereto, and the Banks have not
paid such amounts. To the extent not funded by an Advance, the Agent shall make
reasonable attempts to collect all such amounts from Borrower to the extent
Borrower is obligated to pay such amounts. If the Agent receives payment of any
amount referred to in this Section from Borrower or any third party after the
Banks have reimbursed the Agent for such amount, the Agent shall promptly return
the amount of the reimbursement to the Banks.
11.14 Taxes. All taxes due and payable on any payments to be made to
the Banks with respect to the Obligations or under this Agreement shall be each
Bank's sole responsibility. All payments payable to the Banks hereunder or with
respect to the Obligations shall be made to the Banks without deduction for any
taxes, charges, levies or withholdings except to the extent, if any, that such
amounts are required to be withheld by the Agent under the laws, rules and
regulations of the United States of America and any other applicable taxing
authority. If any Bank is organized or is existing under the laws of another
jurisdiction outside the United States, such Bank shall provide to the Agent
upon the execution of this Agreement and, from time to time thereafter,
completed and signed copies of any form that may be required by the United
States Internal Revenue Service in order to certify such Bank's exemptions from
United States withholding taxes with respect to payments to be made to such Bank
in respect of the Obligations or under this Agreement or such other documents as
are necessary to indicate that all such payments are exempt from or subject to
such taxes at a rate reduced by an applicable tax treaty.
11.15 Excess Payments. If the Banks or any Agent in its capacity as a
Bank shall obtain any payment (whether voluntary, involuntary, through the
exercise of any right of setoff or otherwise) on account of its interest in the
Obligations in excess of its Pro Rata Interest in the Obligations (except with
respect to BOAZ pursuant to Section 11.10 and Section 11.11(a) and except for
payments to a particular Bank or one of the Agents pursuant to Section 11.4(b)),
such excess shall be shared among all of the Banks in accordance with their
respective Pro Rata Interests. However, if all or any portion of such excess
payment received by a Bank is thereafter recovered by Borrower or other party
entitled thereto through legal action or otherwise, each Bank shall reimburse
the party required to refund such payment to Borrower or other party entitled
thereto in an amount equal to such Bank's Pro Rata Interest in the amount of the
excess required to be refunded. Within 3 Business Days of obtaining any such
payment, the Banks agree to notify the Agent of such excess payment. Nothing in
this Section, however, shall be construed as authorizing any Bank to receive or
collect any amounts with respect to the Obligations directly from Borrower, it
being the intent of this Agreement that all payments will be made by Borrower to
the Agent, for disbursement by the Agent.
11.16 Return of Payments. If, for any reason, the Agent makes any
payment to the Banks before the Agent has received or applied that corresponding
payment on the Obligations (it being understood that
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the Agent is under no obligation to do so), and, thereafter, the Agent does not
receive the corresponding payment within 5 Business Days of the date the Agent
made such payment to the Banks, the Banks shall, at the Agent's request,
promptly return that payment to the Agent. In addition, the Banks shall
simultaneously remit interest on that payment at the overnight rate for federal
funds transactions between member banks of the Federal Reserve System, as
published by the Federal Reserve Bank of New York, for each day from the making
of that payment to the Banks until its return to the Agent. If the Agent has
received or applied any payment in respect of the Obligations and has paid the
Banks their respective Pro Rata Interest in such payment and, thereafter, that
payment or application is rescinded or must otherwise be returned or paid over
by the Agent, whether or not required pursuant to any bankruptcy or insolvency
law, the sharing of payments clause of any loan agreement or otherwise, the
Banks will, at the Agent's request, promptly return their respective Pro Rata
Interest in that payment or application to the Agent. In addition, the Banks
shall simultaneously remit the Bank's Pro Rata Interest in any interest or other
amount required to be paid by the Agent with respect to that payment or
application. All requests pursuant to this Section shall be promptly confirmed
in writing, and such confirmation shall include an explanation of the
circumstances giving rise to such request.
11.17 Permitted Transactions with Borrower. The Agent, the Banks and
their Affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with Borrower or any
principal or partner of Borrower, and any person or entity who may do business
with or own securities of Borrower or of any principal or partner of Borrower,
all as if the Banks were not acting as lenders and the Agent were not acting as
an agent in respect of the Obligations, and without any duty to account
therefor, provided in each instance (a) the Agent or a Bank, as the case may be,
gives written notice of any such transaction to the Agent prior to closing the
transaction, and (b) the transaction is otherwise permissible for Borrower
pursuant to the terms of the Loan Documents and will not result in the
occurrence of either an Event of Default or an Unmatured Event of Default under
any of the Loan Documents. Notwithstanding the preceding sentence, the Agent and
the Banks each agree in their respective capacities hereunder to act fairly and
without discrimination with respect to the Obligations notwithstanding any other
transactions or business each may have with Borrower, or any principal or
partner of Borrower, and any person or entity who may do business with or own
securities of Borrower or any guarantor or of any principal or partner of
Borrower or any guarantor; provided, however, nothing herein shall limit the
rights of either the Banks or the Agent to declare any default or to enforce any
remedies with respect to such other transactions or to enforce the priority of
its liens in such other transactions. If any property of Borrower is collateral
for any loan to Borrower by any Bank, other than this Loan, and that property,
or the proceeds thereof, becomes available (as collateral or otherwise) for
payment of the Obligations, the other Banks shall have no interest in that
property unless the property is applied (at the sole option of the Bank entitled
to make such application and with no obligation to do so) in reduction of
amounts owing under the Obligations, then subject to Section 11.15, each other
Bank shall be entitled to its Pro Rata Interest therein.
11.18 Default by a Bank
(a) Defaulting Banks. If for any reason any of the Banks shall
fail or refuse to abide by its obligations under this Agreement (each a
"Defaulting Bank"), then, in addition to the rights and remedies that
may be available to the Agent and the other Banks at law and in equity,
but subject to the notice and cure periods hereinafter set forth, such
Defaulting Bank's right to participate in the administration of the
Obligations and the Loan Documents, including without limitation, any
rights to consent to or direct any action or inaction of the Agent or
all of the Banks, or to be taken into
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account in the calculation of a Bank Majority or a Bank Supermajority,
shall be suspended during the pendency of such failure or refusal. A
Bank shall be deemed to be a Defaulting Bank if:
(i) Such Bank shall have failed to pay to the Agent
any amount due pursuant to this Agreement within 5 Business
Days after written notice by the Agent to such Bank stating
such payment is due from such Bank to the Agent;
(ii) Such Bank shall have failed to perform any of
its other obligations under this Agreement or the Loan
Documents in any material respect, and such failure shall not
have been cured within 30 days after written notice by the
Agent to such Bank of such failure, or if such failure cannot
reasonably be cured within such 30 day period, within such
longer period of time as may be necessary to complete such
cure, so long as such Bank commences such cure within such
30-day period and thereafter diligently pursues such cure to
completion within not more than 120 days after such written
notice; or
(iii) Such Bank shall institute or be subject to any
bankruptcy, insolvency, receivership, conservatorship,
reorganization, liquidation or similar proceedings under state
or federal law;
provided, however, in the case of a failure described in clause (i) or
clause (ii) above, if within the 5-Business Day period described in
clause (i) or the 30 day period described in clause (ii), as
applicable, the Bank in question in good faith disputes such default
and commences a dispute resolution procedure pursuant to Article 15
asserting that such default has not occurred (and provided that such
Bank has satisfied its funding obligations pursuant to the provisions
of Section 11.10), such Bank shall not be deemed to be a Defaulting
Bank until such Bank is found to be in default pursuant to a binding
resolution of such procedure (which may include a final determination
in an arbitration proceeding under Section 15.1) and such Bank does not
thereafter take the action necessary to cure the default (including,
without limitation, paying any interest due pursuant to Section
11.10(h)) within the time specified for compliance in the arbitrator's
order, or if no time for compliance is specified, within 10 Business
Days following the date of the final determination.
(b) Certain Remedies with Respect to Defaulting Banks. With
respect to each Defaulting Bank, any Current Bank shall, in addition to
any other rights or remedies available at law or equity, be entitled,
at its option, to do either or both of the following:
(i) In the case of the failure of a Defaulting Bank
to pay its Pro Rata Interest (the "Defaulting Bank's Share")
in an Advance or a Protective Advance made pursuant to
Sections 11.10(a) or 11.10(b), to pay to the Agent the
Defaulting Bank's Share (pro rata if made by more than one
Current Bank, based on the Pro Rata Interests of the Current
Banks making the payment). If one or more of the Current Banks
pays the Defaulting Bank's Share, in addition to any other
rights and remedies available to the Banks, each Current Bank
making such payment may elect to do either of the following
with respect to the payment made by such Current Bank:
(A) Notify the Agent to adjust the Pro Rata
Interests of the Defaulting Bank and the Current Bank
making payment of the Defaulting Bank's Share,
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allocating the Defaulting Bank's Share to the Current
Bank as of the date the Advance or Protective Advance
was made; or
(B) Receive all amounts which the Defaulting
Bank would otherwise be entitled to receive pursuant
to this Article 11 or any other provision of this
Agreement with respect to the Defaulting Bank's Share
(including interest accruing under the Loan Documents
on the Advance or Protective Advance, to the extent
of the Defaulting Bank's Share of such Advance or
Protective Advance), pro rata according to the
portion of the Defaulting Bank's Share paid by such
Current Bank, until such Current Bank has been repaid
the full amount of the Defaulting Bank's Share.
If none of the Current Banks elects to fund the Advance or
Protective Advance for the Defaulting Bank, the Agent shall be
entitled to collect interest from the Defaulting Bank pursuant
to Section 11.10(h) for the period from the date on which the
payment was due (which in the case of a Bank which disputes an
alleged default pursuant to Section 11.18(a)(i) shall be the
date the payment was originally due notwithstanding the fact
that the Bank was later determined to be in default and is
granted a period of time in which to cure the default) until
the date on which the payment is made and to withhold or set
off, and to apply to the payment of the defaulted amount and
any related interest, any amounts to be paid to the Defaulting
Bank under this Agreement. If one or more Current Banks funds
the Advance or Protective Advance for the Defaulting Bank and
if the Agent has previously advanced funds pursuant to Section
11.10 on behalf of the Defaulting Bank, the Agent shall be
entitled to collect from the Defaulting Bank any interest due
pursuant to Section 11.10(h) from the date of the advance by
the Agent until the Current Bank(s) fund the Advance or
Protective Advance to the Agent.
(ii) Except to the extent arbitration may be required
pursuant to this Article 11 and Article 15, to bring an action
or suit against the Defaulting Bank in a court of competent
jurisdiction to recover the defaulted amount and any related
interest and otherwise exercise any available rights and
remedies.
11.19 Purchase of Defaulting Bank's Interest After Default.
(a) Right to Purchase. If a Bank becomes a Defaulting Bank
under Section 11.18(a), in addition to all other rights and remedies
(including, without limitation, those specified in Section 11.18(b)),
within 30 days after such Bank becomes a Defaulting Bank, then each of
Banks which is not a Defaulting Bank (a "Current Bank") shall have the
right, but not the obligation, in their sole discretion, but subject in
each instance to the approval of the Agent, in its reasonable
discretion, to acquire (or if more than one Current Bank exercises such
right, each such Current Bank shall have the right to acquire, pro rata
according to their Pro Rata Interests, or in such other proportions as
they may mutually agree), the interest in the Commitment and the
Obligations of a Defaulting Bank. Upon any such purchase, the
Defaulting Bank's interest in the Commitment and the Obligations and
its rights hereunder as a Bank (but not its liability in respect
thereof or under the Loan Documents or this Agreement for events
occurring prior to such purchase) shall terminate at the date of
purchase, and the Defaulting Bank shall promptly execute all documents
reasonably requested to surrender and transfer such interest, including
an assignment and acceptance agreement.
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(b) Purchase Price and Payment. The purchase price for the
interest in the Commitment and the Obligations of a Defaulting Bank
shall be equal to the total outstanding amount owed by the Borrower to
the Defaulting Bank as of the date of such purchase, including without
limitation any outstanding interest related thereto up to the date of
such purchase. Payment of the purchase price for the Defaulting Bank's
interest in the Loan so acquired shall be made on the date of such
purchase.
11.20 Indemnification of the Agent. The Banks agree severally, in
accordance with their respective Pro Rata interests, to indemnify, defend,
reimburse and hold the Agent and its respective officers, directors, agents and
employees harmless for, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements which may be imposed on, incurred by, or asserted against the
Agent, as agent (or such officers, directors, agents and employees), in any way
relating to or arising out of the Obligations, or any action taken or omitted by
the Agent under this Agreement or the other Loan Documents, provided that the
Banks shall not be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the gross negligence or wilful misconduct of the
Agent, the failure of the Agent to act in good faith, the failure of the Agent
to perform its duties and obligations, or to act in accordance with the
requirements and standards set forth in this Agreement and the other Loan
Documents, as determined by a final judgment of a court of competent
jurisdiction (if applicable) or an arbitrator pursuant to Article 15.
11.21 Indemnification Among the Banks. Any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements occasioned solely by the gross negligence or wilful
misconduct of any one of Banks, as determined by a final judgment of a court of
competent jurisdiction (if applicable) or an arbitrator pursuant to Article 15,
shall be borne solely by such party causing such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements and such party shall indemnify, defend and hold the other Banks
and the Agent harmless for, from, and against any and all such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements (including, but not limited to, reasonable attorneys'
fees) sustained or incurred by the other Banks as a result thereof.
11.22 Examination of Loan.
(a) Acknowledgment of Examination and Investigation. Each Bank
hereby acknowledges that the Agent has furnished such Bank with copies
of the Loan Documents and financial statements, certificates,
instruments, documents, affidavits, resolutions and agreements as such
Bank deemed necessary to make its own credit analysis and decision in
respect of the Loan. Each Bank acknowledges that it has, independently
and without reliance upon the Agent and based on such other documents
and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and to extend credit
to Borrower. Each Bank also acknowledges to the Agent that it will,
independently and without reliance upon the Agent and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking
action in respect of the Loan.
(b) No Representations or Warranties. Each Bank hereby
acknowledges that, except as specifically set forth herein or in any
applicable Assignment and Acceptance, the Agent (i) makes no warranty
or representation to such Bank and shall not be responsible to such
Bank for any
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statements, warranties or representations (written or otherwise) made
in or in connection with the Loan or the Loan Documents or for the
financial condition of Borrower or any guarantor or for the title or
the value of any of the Collateral; and (ii) shall not be responsible
to such Bank for the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectibility of any of the Loan Documents
or any other instrument or document furnished pursuant thereto or in
connection with the Loan or the legality, validity, enforceability,
genuineness, sufficiency, perfection or priority of any rights in all
or any portion of the Collateral; provided, however, that this
provision shall not be construed to excuse any breach by the Agent of
its duties under this Agreement.
11.23 Participations. Each Bank may transfer portions of its interest
in the Commitment and the Obligations by way of participation, provided (a) each
participation shall be at least $5,000,000 in principal amount; (b) the
obligations of the Bank granting such participation pursuant to this Agreement
and the Loan Documents shall remain unchanged; (c) the Bank granting such
participation shall remain solely responsible to the other parties hereto for
the performance of such obligations; (d) such Bank shall remain a Bank for all
purposes of this Agreement and the Loan Documents; (e) such Bank shall retain
the sole right to approve, and/or grant its consent to, without the consent of
any participant, any amendment, modification or waiver or other matter relating
to any provision of the Loan Documents; (f) the other Banks and other parties to
this Agreement and the Loan Documents shall be entitled to continue to deal
solely and directly with the Bank granting such participation in connection with
such Bank's and any participant's rights and obligations under this Agreement
and the Loan Documents; (g) the participant is not, and is not an Affiliate of,
a Person in the home building business; and (h) BOAZ, at all time while acting
as the Agent shall retain an aggregate unparticipated interest in the Commitment
of at least $10,000,000. If requested to do so, each Bank shall disclose to the
Agent and the other Banks the identity and address of all participants.
11.24 Assignments. Any Bank may, in the ordinary course of its business
and in accordance with applicable law, at any time assign to one or more banks
or other financial institutions that are not, and that are not Affiliates of, a
Person in the home building business all or any part of its rights and
obligations under the Loan Documents in the amount of not less than $10,000,000,
provided that each such assignment shall be of a constant, and not a varying,
percentage of the assigning Bank's rights and obligations under the Loan
Documents; and provided further, that immediately following such assignment, the
assigning Bank either (a) shall retain a Pro Rata Interest in the Commitment of
not less than $10,000,000 or, if the assigning Bank is BOAZ, not less than the
interest in the Commitment and the Obligation held by that Bank having the next
largest interest in the Commitment and the Obligations or (b) unless the
assigning Bank is BOAZ, shall have assigned all of its Commitment and have no
remaining interest in the Obligations. Such assignment shall be substantially in
the form of Exhibit F or in such other form as may be agreed to by the parties
thereto. The consent of Borrower and the Agent shall be required prior to an
assignment becoming effective, such consent not to be unreasonably withheld or
delayed; provided, however, that if an Event of Default or Unmatured Event of
Default has occurred and is continuing, the consent of Borrower shall not be
required. Upon execution, delivery and acceptance by the Agent of such
assignment and acceptance, from and after the effective date specified therein,
the assignee thereunder shall be a Bank and a party to this Agreement to the
extent of its interest and, to the extent that rights and obligations under this
Agreement and the Loan Documents have been assigned to it pursuant to such
assignment and acceptance, have the rights and obligations of a Bank and secured
party hereunder and under the Loan Documents.
11.25 Further Assurances. The Agent and the Banks shall cooperate fully
with each other in order to carry out promptly and fully the terms and
provisions of this Agreement and shall from time to time
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execute and deliver such other agreements, documents or instruments and take
such other actions as may be reasonably necessary or desirable to effectuate the
terms of this Agreement.
11.26 No Partnership or Joint Venture. Neither the execution of this
Agreement nor the purchase of the Pro Rata Interest in the Loan or in the Loan
Documents, or any agreement to share in profits or losses arising out of this
transaction, is intended to be, nor shall it be construed to be, the formation
of a partnership or joint venture among the Banks and the Agent, and neither the
Agent nor any Bank shall be liable to any other person or entity for the
liability in tort or contract of the Agent or any other Bank arising in
connection with the Loan or any transaction connected herewith or therewith nor
shall the Agent have any fiduciary obligations to any Bank.
11.27 Miscellaneous.
(a) Several and Not Joint Nature of Obligations. Any other
provision of this Agreement or any other Loan Document to the contrary
notwithstanding, Borrower acknowledges and agrees that all obligations
of the Banks pursuant to the Loan Documents will be several and not
joint.
(b) Information. A Bank may share with any of its Affiliates,
with its accountants, attorneys, and other advisers, and with any
Governmental Authority regulating such Bank all information related to
the Borrower and/or the transactions contemplated by the Loan
Documents.
(c) Borrower Requests for Approvals and Determinations.
Borrower will direct all requests for approvals and consents from, and
determinations to be made by, the Agent or the Banks to the Agent.
(d) Form of Request. With respect to matters under the Loan
Documents for which approval, consent, or determination of the Agent or
the Agent is required, Borrower's request will:
(i) Be given in the form of a written request to the
Agent;
(ii) Be accompanied by a reasonably detailed
description of the matter as to which such determination,
approval or consent is requested;
(iii) Include, to the extent not previously provided
to the Agent, all written materials required to be provided by
the Loan Documents and as may be necessary or appropriate to
enable the Agent to make an informed decision; and
(iv) Include such other information as the Agent may
reasonably deem appropriate.
(e) Time for Response. The Agent will respond to any request
from Borrower within 20 Business Days after such written request
satisfying the requirements of this Section has been given to the
Agent, unless a shorter period is expressly provided in the Loan
Documents for responding with respect to a particular matter, in which
case the Agent will respond within such shorter period; provided,
however, that if the Agent does not respond within the time periods
specified above, such failure to respond will conclusively be deemed to
constitute disapproval of the matter.
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ARTICLE 12
MISCELLANEOUS
12.1 The Banks' Obligations to Borrower Only and Disclaimer by Banks.
No Person, other than Borrower, the Agent, and the Banks, will have any rights
hereunder or be a third-party beneficiary hereof. The Agent and the Banks are
not a joint venturer or a partner with Borrower.
12.2 Survival. The representations, warranties, and covenants of
Borrower in the Loan Documents will survive the execution and delivery of the
Loan Documents and the making of Advances to Borrower.
12.3 Integration. The Loan Documents contain the complete understanding
and agreement of Borrower, the Agent and the Banks with respect to the
transactions contemplated by this Agreement and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. If there is any conflict between the provisions of this Agreement
and the provisions of any of the other Loan Documents, the provisions of this
Agreement will control.
12.4 Effect of Certain Actions. Delay or failure by the Agent or the
Banks to insist on performance of any obligation when due or compliance with any
other term or condition in the Loan Documents will not operate as a waiver
thereof or of any other obligation, term or condition or of the time of the
essence provision. Acceptance of late payments will not be a waiver of the time
of the essence provision, the right of the Agent or the Banks to require that
subsequent payments be made when due, or the right of the Agent or the Banks to
declare an Event of Default if subsequent payments are not made when due.
12.5 Binding Effect. The Loan Documents will be binding upon and will
inure to the benefit of the Agent, the Banks and Borrower and their respective
successors and assigns; provided, however, that Borrower may not assign any of
its rights or delegate any of its obligations under the Loan Documents and any
purported assignment or delegation will be void.
12.6 Severability. If any provision or any part of any provision of the
Loan Documents is unenforceable, the enforceability of the other provisions and
the remainder of the subject provision, respectively, will not be affected and
they will remain in full force and effect.
12.7 CHOICE OF LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER WILL, EXCEPT TO
THE LIMITED EXTENT PROVIDED IN CERTAIN OF THE DEEDS OF TRUST, BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF ARIZONA, WITHOUT GIVING EFFECT TO
THE CHOICE OF LAW RULES OF ARIZONA. EXCEPT WITH RESPECT TO ACTIONS TO REALIZE
UPON SECURITY WHICH MAY BE BROUGHT IN THE STATE IN WHICH SUCH SECURITY IS
LOCATED, ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE STATE COURTS OF ARIZONA OR IN THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, GENERALLY AND
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UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. BORROWER HEREBY
IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY OF THE SAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT BROUGHT IN THE COURTS
REFERRED TO ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
12.8 Time of Essence; Time for Performance. Time is of the essence with
regard to each provision of the Loan Documents as to which time is a factor.
Whenever any performance under the Loan Documents is stated to be due on a day
other than a Business Day or whenever the time for taking any action under the
Loan Documents would fall on a day other than a Business Day, then unless
otherwise specifically provided in the Loan Documents the due date for such
performance or the time for taking such action, as the case may be, will be
extended to the next succeeding Business Day, and such extension of time will be
included in the computation of interest or fees, as the case may be.
12.9 Notices and Demands. Except to the extent that telephonic or
facsimile notice by the Agent to Borrower may be permitted pursuant to Sections
2.4(a), 2.6, or 2.9 of this Agreement, all demands or notices under the Loan
Documents will be in writing and mailed or hand-delivered to the respective
party hereto at the address specified in Schedule A or such other address as
will have been specified in a written notice. Any demand or notice mailed will
be mailed first-class mail, postage-prepaid, return-receipt- requested and will
be effective upon the earlier of (a) actual receipt by the addressee, and (b)
the date shown on the return-receipt. Any demand or notice not mailed will be
effective upon actual receipt by the addressee.
12.10 The Banks' Right of Set-Off. Borrower grants to the Banks,
proportionately in accordance with their respective Pro Rata Interests (a) the
right at any time and from time to time, in the absolute and sole discretion of
the Banks and without demand or notice to Borrower, to set-off and apply
deposits (whether certificates of deposit, demand, general, savings, special,
time, or other, and whether provisional or final) held by any Bank for Borrower
and any other liabilities or other obligations of any Bank to Borrower
("Deposits, Liabilities, and Obligations") against or to the Obligations,
regardless of whether the Deposits, Liabilities, and Obligations are contingent,
matured, or unmatured; and (b) a security interest in the Deposits, Liabilities,
and Obligations to secure the Obligations of Borrower under the Loan Documents.
Notwithstanding the foregoing, no Bank will exercise its rights under this
Section without approval of all of the other Banks unless such Bank has first
provided the other Banks with reasonable assurances (which may include the
requirement that such Bank provide opinions of legal counsel acceptable to the
other Banks) that exercise of such rights will not impair the rights of the
Banks in any of the Collateral under any so-called "one action rule" or any
similar rule.
12.11 Indemnification of the Banks. Borrower agrees to indemnify, hold
harmless, and on demand defend the Agent and the Banks and their respective
stockholders, directors, officers, employees, agents, and representatives for,
from, and against any and all damages, losses, liabilities, costs, and expenses
(including, without limitation, costs and expenses of litigation and reasonable
attorneys' fees) arising from any claim or demand in respect of the Loan
Documents, the Collateral, or the transactions described in the Loan Documents
and arising at any time, whether before or after payment and performance of the
Obligations in full, excepting any such matters arising solely from the gross
negligence or willful misconduct of the
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indemnitee. The obligations of Borrower and the rights of the Agent and the
Banks under this Section will survive payment and performance of the Obligations
in full and will remain in full force and effect without termination.
12.12 Rescission or Return of Payments. If at any time or from time to
time, whether before or after payment and performance of the obligations of
Borrower under the Loan Documents in full, all or any part of any amount
received by any Bank in payment of, or on account of, any Obligation is or must
be, or is claimed to be, avoided, rescinded, or returned by such Bank to
Borrower or any other Person for any reason whatsoever (including, without
limitation, bankruptcy, insolvency, or reorganization of Borrower or any other
Person), such obligation and any liens, security interests, and other
encumbrances that secured such obligations at the time such avoided, rescinded,
or returned payment was received by the Agent or the Banks will be deemed to
have continued in existence or will be reinstated, as the case may be, all as
though such payment had not been received.
12.13 Headings; References. The headings at the beginning of each
section of the Loan Documents are solely for convenience and are not part of the
Loan Documents. References in this Agreement to "Sections", "Articles", and
"Exhibits" refer to the Sections and Articles in this Agreement and the Exhibits
to this Agreement, unless otherwise noted.
12.14 Number and Gender. In the Loan Documents the singular will
include the plural and vice versa and each gender will include the other
genders.
12.15 Waiver of Statute of Limitations. BORROWER WAIVES, TO THE FULL
EXTENT PERMITTED BY LAW, THE RIGHT TO PLEAD ANY STATUTES OF LIMITATIONS AS A
DEFENSE TO PAYMENT OR PERFORMANCE OF ANY OR ALL OF THE OBLIGATIONS.
12.16 Waivers by Borrower. Borrower (a) waives, to the full extent
permitted by law, presentment, notice of dishonor, protest, notice of protest,
notice of intent to accelerate, notice of acceleration, and all other notices or
demand of any kind (except notices specifically provided for in the Loan
Documents); and (b) agrees that the Agent and the Banks may enforce the Loan
Documents against Borrower without first having sought enforcement against any
Collateral.
12.17 No Brokers. Except as disclosed by Borrower to the Banks in
writing prior to the date of this Agreement, Borrower represents and warrants
that it knows of no broker's or finder's fee due in respect of the transaction
described in this Agreement and that it has not used the services of a broker or
a finder in connection with this transaction.
12.18 Counterpart Execution. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original and all of which
together will 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. Telecopied signature pages will be acceptable,
provided originally signed signature pages are provided to each of the other
parties by overnight courier.
12.19 Duty to Act in Good Faith. To the extent required by applicable
law, each of the parties to this Agreement agrees to act in good faith with
respect to all of its rights, privileges, duties, and obligations under this
Agreement.
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ARTICLE 13
POWER OF ATTORNEY
13.1 Power of Attorney Granted. Borrower hereby irrevocably appoints
the Agent, acting for all of the Banks, as the true and lawful attorney of
Borrower with full power of substitution for and on behalf of Borrower, and in
its name, upon the request and instruction of Borrower prior to the occurrence
of an Event of Default, and irrespective of any such request or instruction
after the occurrence of an Event of Default, to take any action to preserve,
maintain, protect or enforce the rights and interests of Borrower with respect
to the Collateral, including, without limitation, to (a) enforce, cure any
default or otherwise act with respect to any construction contracts, management
or marketing contracts or any other agreements pertaining to or affecting any of
the Collateral; (b) take all such action and to execute all such documents as
the Agent deems necessary or desirable to operate or preserve or protect the
Collateral; and (c) ▇▇▇ for, demand or collect any sums owing to Borrower under
escrows or other agreements affecting the Collateral. The power so vested in the
Agent is one coupled with an interest and will be irrevocable, except by written
instrument executed jointly by Borrower and the Agent. Notwithstanding the
foregoing, the Agent and the Banks are under no obligation to exercise any of
the foregoing rights or take any action necessary to preserve any right in any
Collateral against any other Person, and the Agent and the Banks, to the extent
permitted herein or by applicable law, may exercise any of the foregoing rights
without incurring any responsibility or liability to Borrower or any other
Person and without in any way affecting the Loan Documents or any other
obligations of Borrower to any Bank. Borrower will reimburse the Agent within 15
days following demand for any costs and expenses, including, without limitation,
attorneys fees and collection costs (including the allocated costs of in-house
counsel), that the Agent may incur while acting as the attorney-in-fact of
Borrower as provided hereunder.
ARTICLE 14
INDUCEMENTS
14.1 Inducements to the Banks. As additional consideration and
inducement to the Agent, the Retiring Co-Agent, the Administrative Agent, and
the Banks to agree to the terms of this Agreement, with knowledge that the
Administrative Agent, the Retiring Co-Agent, the Agent, and the Banks would not
enter into this Agreement but for the provisions of this Article 14:
(a) Representations, Warranties, and Covenants. Borrower
represents and warrants to the Administrative Agent, the Retiring
Co-Agent, the Agent, and the Banks, and agrees that:
(i) All Obligations under the Original Loan Agreement
(as amended by this Agreement) and the Loan Documents are and
continue to be valid, binding and enforceable obligations of
Borrower, enforceable in accordance with their terms, and are
and continue to be secured by first priority liens on the
Collateral;
(ii) All of the representations and warranties set
forth in the Original Loan Agreement and the other Loan
Documents continue to be true and correct as of the date of
this Agreement and as of the Effective Date;
(iii) All property and interests (including, without
limitation, property and interests that constitute Eligible
Collateral and property and interests that are not included
119
in the Eligible Collateral) encumbered under any Deeds of
Trust constitute, and shall continue to be, first priority
liens and collateral security for all of the Obligations, and
the value of such Collateral is and has at all times been, in
the aggregate, greater than the amount of the Obligations; and
(iv) Borrower has no defense, setoff, claim or
counterclaim against the Administrative Agent, the Retiring
Co-Agent, the Agent, or the Banks in regard to its obligations
under the Original Loan Agreement, this Agreement, any other
Loan Document, any document, instrument, transaction, act or
omission arising out of or related to the Obligations, the
Original Loan Agreement, or this Agreement, or any other
obligation to the Banks, the Agent, the Administrative Agent
or the Retiring Co-Agent, or any of them.
(b) Releases. Borrower and all guarantors fully, finally, and
forever release and discharge the Administrative Agent, the Retiring
Co-Agent, the Agent, and the Banks, and their respective successors,
assigns, directors, officers, employees, agents, and representatives
from any and all actions, causes of action, claims, debts, demands,
liabilities, obligations, and suits, of whatever kind or nature, in law
or equity of Borrower or any of the guarantors whether now known or
unknown: (i) in respect of the loans made pursuant to the Original Loan
Agreement (as amended by this Agreement), or the acts or omissions of
the Administrative Agent, the Retiring Co-Agent, and/or the Banks, or
any of them, in respect thereto and (ii) arising from events or other
circumstances relating thereto and occurring prior to the execution and
delivery of this Agreement.
(c) Waiver. In connection with the releases and waivers
contained herein, Borrower and each guarantor hereby expressly waive
any and all rights and benefits conferred upon it by the provisions of
Section 1542 of the California Civil Code (or similar provisions of any
other applicable law) which provides:
"A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the
time of executing the release, which if known by him must have
materially affected his settlement with the debtor."
Borrower and each guarantor have been advised by their legal counsel,
or Borrower and each guarantor have made a reasoned and fully informed
decision not to be so represented by counsel, and understand and
acknowledge the significance and consequences of this release and of
this specific waiver of Section 1542, and Borrower and each guarantor
expressly consent that the releases contained herein shall be given
full force and effect according to each and all of their express terms
and provisions including those relating to unknown and unsuspected
claims, demands and causes of action, if any, as well as those relating
to any other claims, demands and causes of action hereinabove
specified. The foregoing shall not be deemed to be an agreement by the
parties that California law is the governing law under the Loan
Documents, the parties reaffirming the choice of law provisions in
Section 12.6 in favor of the laws of the State of Arizona.
120
ARTICLE 15
MANDATORY ARBITRATION
15.1 Mandatory Arbitration. Any controversy or claim between Borrower
on the one hand and the Agent or any Banks on the other hand, or, subject to the
requirements of Section 15.3, between the Agent and/or any Bank or between any
of the Banks (including, without limitation, those arising out of or relating to
this Agreement, the Notes or other Loan Documents) (collectively, the "Claim"),
including any Claim based on or arising from an alleged tort, will at the
request of Borrower, the Agent, or any Bank be determined by arbitration. The
arbitration will be conducted in accordance with the Federal Arbitration Act
(Title 9 of the United States Code), notwithstanding any choice of law provision
in the Loan Documents, under the Commercial Rules of the American Arbitration
Association ("AAA") and administered by the AAA, unless otherwise agreed to in
writing by all parties. With respect to a Claim in which the amounts in
controversy do not exceed $100,000, a single arbitrator will be chosen and will
resolve the Claim. The arbitrator will have authority to render an award up to
but not to exceed $100,000, including all damages of any kind whatsoever,
including costs, fees and expenses. A Claim involving amounts in controversy
exceeding $100,000 will be decided by a majority vote of a panel of three
arbitrators (an "Arbitration Panel"), the determination of any two of the three
arbitrators constituting the determination of the Arbitration Panel; provided,
however, that all three arbitrators on the Arbitration Panel must actively
participate in all hearings and deliberations. Arbitrators, including any
Arbitration Panel, may grant any remedy or relief deemed just and equitable and
within the scope of this Article 15 and may also grant such ancillary relief as
is necessary to make effective any award. The arbitrator(s) will resolve all
Claims in accordance with applicable law, including, without limitation thereto,
all statutes of limitation. Any controversy concerning whether an issue is
arbitrable will be determined by the arbitrator(s). Judgment upon the
arbitration award may be entered in any court having jurisdiction; provided,
however, that nothing contained herein will be deemed to be a waiver by any
party that is a bank of the protections afforded to it under 12 U.S.C. ss.91 or
similar state laws. The institution and maintenance of any action for judicial
relief or pursuit of provisional or ancillary remedies will not constitute a
waiver of the right of any party, including the plaintiff, to submit the Claim
to arbitration if any other party contests such action for judicial relief.
Determinations and awards by an arbitrator or Arbitration Panel will be binding
on all parties. Any arbitration will be conducted in the city in Arizona which
has a regional AAA office and which is nearest the Agent's main office, unless
otherwise agreed to by all parties. To the maximum extent practicable, the
parties will take any action necessary to require that an arbitration proceeding
hereunder be concluded within 180 days of the selection of the arbitrator or
Arbitration Panel. The arbitrator or Arbitration Panel will be empowered to
impose sanctions for any party's failure to proceed within the times established
herein.
15.2 Provisional Remedies, Self-Help and Foreclosure. No provision of
this Article 15 will limit the right of any party to this Agreement to exercise
self-help remedies such as foreclosure against or sale of any real or personal
property collateral or security, or obtaining provisional or ancillary remedies
from a court of competent jurisdiction before, after, or during the pendency of
any arbitration or other proceeding. The exercise of such a remedy does not
waive the right of any party to resort to arbitration. At the Agent's option,
foreclosure under a deed of trust or mortgage may be accomplished either by
exercise of power of sale under the deed of trust or mortgage or by judicial
foreclosure.
121
15.3 Special Dispute Resolution Provisions Relating to the Banks and
the Agent.
(a) Negotiation Between Executives. If the Banks and the Agent
or any of them have a dispute arising out of or relating to this
Agreement which otherwise would be subject to the arbitration
provisions of this Article 15, before resorting to arbitration under
Section 15.1, such parties shall attempt to resolve the dispute in
accordance with the procedures set forth in this Section 15.3. Borrower
will not be considered a party for purposes of this Section 15.3. The
parties shall first attempt to resolve the dispute by negotiations
between executives including in-house counsel who have authority to
settle the controversy (subject to board of directors or other Bank
approval procedures, if required). Each party shall promptly give the
other parties written notice of any dispute not resolved in the normal
course of business (the "Dispute Notice"). Within 10 Business Days
after delivery of the Dispute Notice, executives of each of the parties
shall meet at a mutually acceptable time and place, and thereafter as
often as they reasonably deem necessary, to exchange relevant
information and to attempt to resolve the dispute. If the matter has
not been resolved within 20 Business Days of the Dispute Notice, or if
the parties fail to meet within 10 Business Days, any of the parties
may initiate further dispute resolution procedures as provided
hereinafter. If a party intends to be accompanied at a meeting by an
attorney other than in-house counsel, the other party shall be given at
least 3 Business Days' notice of such intention and may also be
accompanied by an attorney. All negotiations pursuant to this Section
15.3(a) are confidential and shall be treated as compromise and
settlement negotiations for purposes of the Federal Rules of Evidence
and state rules of evidence.
(b) Appointment of Neutral. If, within 20 Business Days after
the Dispute Notice, the parties have not succeeded in negotiating a
written resolution of the dispute (or if the parties fail to meet
within 10 Business Days after the Dispute Notice), upon written request
by any party to the other parties, the parties will promptly negotiate
in good faith to jointly appoint a mutually acceptable neutral person
not affiliated with any of the parties (the "Neutral"). If all parties
so agree in writing, a panel of two or more individuals (such panel
also being referred to as the "Neutral") may be selected by the
parties, or in the absence of an agreement in selecting the Neutral
within 10 Business Days of the written request for a Neutral, the
Neutral shall be an individual selected by the parties with the
assistance of a dispute resolution service. The fees and costs of the
Neutral and of any such assistance shall be shared equally between the
parties.
(c) Selection of Procedure. In consultation with the Neutral,
the parties will negotiate in good faith to select or devise a
nonbinding, or, if the parties agree, a binding, alternative dispute
resolution procedure ("ADR") by which they will attempt to resolve the
dispute, and a time and place for the ADR to be held, with the Neutral
making the decision as to the procedure (including allowable discovery
procedures, if any) and/or place and time if the parties have been
unable to agree on any of such matters in writing within 10 Business
Days after selection of the Neutral.
(d) Termination of Procedure. The parties agree to participate
in good faith in the ADR to its conclusion; provided, however, that no
party shall be obligated to continue to participate in the ADR if the
parties have not resolved the dispute in writing within 45 Business
Days after the Dispute Notice and any party shall have terminated the
ADR by delivery of written notice of termination to the other parties
following expiration of said 45-day period. Following any such
termination notice after the expiration of the 45-day period, and if
any party so requests in writing to the Neutral (with a copy to the
other parties), then the Neutral shall make a recommended resolution of
the dispute
122
in writing to each party, which recommendation shall not be binding
upon the parties (unless otherwise agreed by the parties); provided,
however, that the parties shall give good faith consideration to the
settlement of the dispute on the basis of such recommendation, and if
any party thereafter pursues any other judicial or non-judicial remedy
to conclusion, such party shall pay the reasonable attorneys' fees,
costs and other expenses (including expert witness fees) of the other
parties incurred in connection with the pursuit and achievement of (and
defense against) such remedy, if any, if the result thereof is less
favorable to such pursing party than the recommendation of the Neutral.
(e) Provisional Remedies. Notwithstanding anything herein to
the contrary, any party may seek a temporary restraining order,
preliminary injunction or other interim or provisional judicial relief
if, in its judgment, such action is necessary to avoid irreparable
damage or to preserve the status quo. Despite such action the parties
will continue to participate in good faith in the procedures specified
in this Section. The provisions of this Section shall be specifically
enforceable.
(f) Secrecy of ADR Proceedings. At the request of any party,
ADR proceedings shall be conducted in the utmost secrecy. In such case,
all documents, testimony and records shall be received, heard and
maintained by the parties and the Neutral in secrecy.
ARTICLE 16
LIST OF EXHIBITS AND SCHEDULES
16.1 List of Exhibits The following Exhibits are incorporated into this
Agreement as if set forth fully in the body of this Agreement:
Exhibit A Grandfathered Collateral
Exhibit B Sample Computation of Breakage Fee
Exhibit C Compliance Certificate
Exhibit D Existing Indebtedness
Exhibit E Existing Investments in Affiliates
Exhibit F Assignment and Acceptance Form
Schedule A Addresses for Notices
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first above written.
BORROWER: UDC HOMES, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Executive Vice President
Witnessed by:
-------------------------
123
BOAZ: BANK ONE, ARIZONA, NA, a national
banking association, individually as a
Bank and in its capacity as the Agent,
as resigning Co-Agent, and as the
Administrative Agent under the
Original Loan Agreement
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
Pro Rata Interest: $60,000,000
35.2941177%
Witnessed by:
-------------------------
▇▇▇▇▇ FARGO ▇▇▇▇▇ FARGO BANK, NATIONAL
ASSOCIATION, a national banking
association, as one of the Banks
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
Pro Rata Interest: $40,000,000
23.5294118%
Witnessed by:
-------------------------
GUARANTY FEDERAL: GUARANTY FEDERAL BANK, F.S.B., a
federal savings bank, as one of the
Banks and as the Co-Agent
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
Pro Rata Interest: $30,000,000
17.6470588%
Witnessed by:
-------------------------
124
BOA: BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, a national
banking association, as one of the
Banks
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
Pro Rata Interest: $30,000,000
17.6470588%
Witnessed by:
-------------------------
NORWEST: NORWEST BANK ARIZONA, NATIONAL
ASSOCIATION, a national banking
association, as one of the Banks
By: /s/ E. ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------
Name: E. ▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
Pro Rata Interest: $10,000,000
5.8823529%
Witnessed by:
-------------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 30th day of
April, 1997, by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, the Senior Executive Vice President of UDC
HOMES, INC., a Delaware corporation, on behalf of the corporation.
---------------------------
My Commission Expires: NOTARY PUBLIC
Residing at
------------------------- ----------------
125
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 30th day of
April, 1997, by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President of BANK ONE, ARIZONA, NA, a
national banking association, on behalf of the association.
---------------------------
My Commission Expires: NOTARY PUBLIC
Residing at
-------------------------- ----------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 30th day of
April, 1997, by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President of ▇▇▇▇▇ FARGO BANK, NATIONAL
ASSOCIATION, a national banking association, on behalf of the association.
---------------------------
My Commission Expires: NOTARY PUBLIC
Residing at
-------------------------- ----------------
STATE OF TEXAS )
) ss.
County of __________ )
The foregoing instrument was acknowledged before me this 30th day of
April, 1997, by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President of GUARANTY FEDERAL BANK,
F.S.B., a federal savings bank, on behalf of the bank.
---------------------------
My Commission Expires: NOTARY PUBLIC
Residing at
-------------------------- ----------------
126
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 30th day of
April, 1997, by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice President of BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, a national banking association, on behalf of the
association.
---------------------------
My Commission Expires: NOTARY PUBLIC
Residing at
-------------------------- ----------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 30th day of
April, 1997, by E. ▇▇▇▇▇ ▇▇▇▇▇, Vice President of NORWEST BANK ARIZONA, NATIONAL
ASSOCIATION, a national banking association, on behalf of the association.
---------------------------
My Commission Expires: NOTARY PUBLIC
Residing at
-------------------------- ----------------
127
EXHIBIT A
LIST OF GRANDFATHERED COLLATERAL
EXHIBIT B
SAMPLE BREAKAGE FEE COMPUTATION
EXHIBIT C
COMPLIANCE CERTIFICATE
TO: THE BANK PARTIES TO THE LOAN AGREEMENT DESCRIBED BELOW
This Compliance Certificate is furnished pursuant to that certain
Amended and Restated Revolving Line of Credit Loan Agreement (Borrowing Base)
dated as of ________, 1997 (as amended, modified, renewed or extended from time
to time, the "Loan Agreement") among UDC HOMES, INC., as Borrower, BANK ONE,
ARIZONA, NA, as Agent, and the various Banks party thereto. Unless otherwise
defined in this Compliance Certificate, capitalized terms used in this
Compliance Certificate have the meanings ascribed thereto in the Loan Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THE FOLLOWING TO THE AGENT AND THE
BANKS:
1. I am the duly elected officer of Borrower, as indicated below and am
authorized to execute and deliver this Compliance Certificate.
2. Attached to this Compliance Certificate are the financial statements
(the "Financial Statements") of the Company as of _____________, 199__ (the
"Compliance Date"). The Financial Statements are being provided pursuant to
(check one):
______ Section 7.4(a)(i) of the Loan Agreement (annual audited)
______ Section 7.4(b)(i) of the Loan Agreement (quarterly
unaudited),
and have been prepared in accordance with the requirements of the applicable
Section of the Loan Agreement.
3. I have reviewed the terms of the Loan Agreement and I have made, or
have caused to be made under my supervision, a detailed review of the
transactions and conditions of Borrower during the accounting period covered by
the attached Financial Statements.
4. The examinations described in Paragraph 3 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 the accounting period
covered by the attached Financial Statements, as of the Compliance Date, or as
of the date of this Compliance Certificate, except as follows (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):
[INSERT RELEVANT INFORMATION, IF ANY]
5. Schedule 1 to this Compliance Certificate sets forth financial data
and computations evidencing compliance with each of the Financial Covenants as
of the Compliance Date, all of which data and computations are true, complete
and correct in all material respects.
6. The foregoing certifications, together with the computations set
forth in Schedule 1 and the Financial Statements delivered with this Certificate
in support hereof, are made and delivered this _____ day of ___________________,
199__.
UDC HOMES, INC., a Delaware corporation
By: __________________________________
Name: _______________________________
Title: ________________________________
SCHEDULE 1
TO
COMPLIANCE CERTIFICATE
MINIMUM TANGIBLE NET WORTH COVENANT
-----------------------------------
(SECTION 8.1)
-------------
Required Minimum Tangible Net Worth:
------------------------------------
Opening amount: $95,000,000
plus: 50% of the cumulative Net Income of
Borrower earned after Sept. 30, 19961: $_______________
plus: 100% of any new equity/paid-in
capital after Sept. 30, 19962: $_______________
equals: Minimum Tangible Net Worth Required: $_______________
Actual Tangible Net Worth:
--------------------------
Capital accounts: $_______________
less: Intangible Assets: $_______________
plus: Qualifying Subordinated Indebtedness: $_______________
equals: Actual Tangible Net Worth: $_______________
Minimum Tangible Net Worth Required
(from above) $_______________
Surplus (or deficit) Tangible Net Worth $_______________
or
$--------------)
COMPLIANCE YES/NO
--------
(1) Any fiscal period in which Borrower incurred a net loss is to be counted as
zero.
(2) Exclude the $10,000,000 in new equity contributed to Borrower at December
31, 1996, the $10,000,000 principal amount of additional Series D Notes
issued at March 31, 1997, the $10,000,000 principal amount of additional
Series D Notes issued at April 15, 1997 and up to $15,000,000 principal
amount of new Series D Notes issued on or before the Effective Date. Also
exclude any interest on the Series C Notes or the Series D Notes paid in
kind by the issuance of additional Qualifying Subordinated Indebtedness
from October 1, 1996 through September 30, 1997.
SCHEDULE 1
TO
COMPLIANCE CERTIFICATE
(continued)
MAXIMUM TOTAL DEBT TO TANGIBLE NET WORTH COVENANT
-------------------------------------------------
(SECTION 8.2)
-------------
Permissible Ratio of Maximum Total Debt to
------------------------------------------
Tangible Net Worth: Less than or equal to 3.00 to 1
-------------------
Total Debt (as defined): $_______________
------------------------
Tangible Net Worth
-------------------
Actual Tangible Net Worth (from the Minimum
Tangible Net Worth computation on
previous page): $_______________
less: The portion, if any, of Actual Tangible Net
Net Worth relating to Builder Bonds and
Mortgage Operations: $_______________
equals: Tangible Net Worth for Section 8.2 test: $_______________
Ratio:
Total Debt: $_______________
divided by:
Tangible Net Worth: $_______________
equals: _______________
COMPLIANCE YES/NO
2
SCHEDULE 1
TO
COMPLIANCE CERTIFICATE
(continued)
MINIMUM INTEREST COVERAGE COVENANT
----------------------------------
(SECTION 8.3)
-------------
(For Certificate Compliance Dates commencing Sept. 30, 1997)
Required Minimum Interest Coverage (for Certificate
---------------------------------------------------
Compliance Dates through June 30, 1998): Greater than or equal to 1.00 to 1
---------------------------------------
Required Minimum Interest Coverage (for Certificate
---------------------------------------------------
Compliance Dates commencing Sept. 30, 1998): Greater than or equal to 1.30 to 1
-------------------------------------------
EBITDA Computation(3):
----------------------
Net Income: $_______________
plus: Extraordinary losses: $_______________
less: Extraordinary gains: $_______________
plus: Interest Expense (as defined): $_______________
plus: federal and state taxes: $_______________
plus: Non-cash Charges (as defined): $_______________
equals: EBITDA $_______________
Interest Incurred (as defined) for the same period: $_______________
------------------------------
Ratio:
------
EBITDA (from calculation above): $_______________
divided by:
Interest Incurred (as defined): $_______________
equals: _______________
COMPLIANCE YES/NO
--------
(3) EBITDA is to be reported for the fiscal quarter ending on the Certificate
Compliance Date and for the Qualifying Preceding Fiscal Quarters (as
defined) up to a maximum of 3 Qualifying Preceding Fiscal Quarters. To the
extent that any item entering into the computation of EBITDA otherwise
would contain amounts relating to Builder Bonds and Mortgage Operations,
those amounts are to be excluded.
3
SCHEDULE 1
TO
COMPLIANCE CERTIFICATE
(continued)
QUARTERLY MINIMUM AVAILABLE LIQUIDITY COVENANT
----------------------------------------------
(SECTION 8.4)
-------------
Required Minimum Available Liquidity for Certificate
----------------------------------------------------
Compliance Dates through Sept. 30, 1997: $15,000,000
---------------------------------------
Required Minimum Available Liquidity for Certificate
----------------------------------------------------
Compliance Dates commencing Dec. 31, 1997: $20,000,000
------------------------------------------
Available Liquidity Computation:
--------------------------------
Total cash: $_______________
plus: Total Cash Equivalents $_______________
plus: Amounts that are available to be drawn but
have not yet been drawn under the Commitment: $_______________
equals: Available Liquidity: $_______________
Required Available Liquidity from above: $_______________
Surplus (or deficit)Available Liquidity: $_______________
or
($______________)
COMPLIANCE YES/NO
4
SCHEDULE 1
TO
COMPLIANCE CERTIFICATE
(continued)
MINIMUM AVAILABLE LIQUIDITY COVENANT
------------------------------------
(SECTION 8.5)
-------------
Required Minimum Available Liquidity, at all times
--------------------------------------------------
through Sept. 30, 1997: $10,000,000
-----------------------
Required Minimum Available Liquidity, at all times
--------------------------------------------------
commencing Oct. 1, 1997: $15,000,000
------------------------
COMPLIANCE YES/NO
5
SCHEDULE 1
TO
COMPLIANCE CERTIFICATE
(continued)
MAXIMUM DEFICIT CASH FLOW COVENANT
----------------------------------
(FOR CERTIFICATE COMPLIANCE DATES
---------------------------------
COMMENCING MARCH 31, 1997, THROUGH JUNE 30, 1997)
-------------------------------------------------
(SECTION 8.6)
-------------
Maximum Permissible Deficit Cash Flow pursuant
----------------------------------------------
to Section 8.6: Greater than or equal to a loss of $10,000,000
--------------
Actual Deficit Cash Flow:
-------------------------
EBITDA Computation(4):
----------------------
Net Income: $_______________
plus: Extraordinary losses: $_______________
less: Extraordinary gains: $_______________
plus: Interest Expense (as defined): $_______________
plus: federal and state taxes: $_______________
plus: Non-cash Charges (as defined): $_______________
equals: EBITDA $_______________
Interest Incurred (as defined) for the same period: $_______________
--------------------------------------------------
Total EBITDA (as calculated above): $_______________
less: Interest Incurred (as defined): $_______________
equals: Deficit Cash Flow: $_______________
Surplus (or deficit) Deficit Cash Flow $_______________
or
($_____________)
COMPLIANCE YES/NO
--------
(4) EBITDA is to be reported for the fiscal quarter ending on the Certificate
Compliance Date only. To the extent that any item entering into the
computation of EBITDA otherwise would contain amounts relating to Builder
Bonds and Mortgage Operations, those amounts are to be excluded.
6
SCHEDULE 1
TO
COMPLIANCE CERTIFICATE
(continued)
RESTRICTIONS ON INVENTORY
-------------------------
(SECTION 8.7)
-------------
Maximum Permissible Inventory:
------------------------------
Number of Units closed in the fiscal quarter ending
on the Certificate Compliance Date and in the immediately
preceding 3 fiscal quarters: ____________
Multiplied by 3, equals:
Maximum Permissible Inventory: ____________
Total Lot and Land Inventory (as defined), as of the Certificate
Compliance Date: ____________
Permissible inventory surplus (or deficit) ____________
or
(-----------)
COMPLIANCE YES/NO
7
EXHIBIT D
EXISTING INDEBTEDNESS
EXHIBIT E
EXISTING INVESTMENTS IN AFFILIATES
Borrower owns 100% of the outstanding capital stock of the following:
Aberdeen Services, Inc., a Florida corporation
MountainBrook Village Company, an Arizona corporation ("MBV Co.")
UDC Advisory Services, Inc., an Illinois corporation ("Advisory")
UDC Corporation, a Delaware corporation ("UDCC")
UDC Homes Construction, Inc., an Arizona corporation
UDC Homes of Georgia, Inc., a Georgia Corporation
Borrower holds 75% of the partnership interest in ▇▇▇▇▇▇▇▇▇ Village Venture
MBV Co. holds 99% of the partnership interest of MountainBrook Village Joint
Venture ("MBV JV")
MBV JV holds 100% of the outstanding capital stock of Gold Canyon Sewer Company
UDCC holds 100% of the outstanding capital stock of the following
UDC Mortgage Corporation, an Arizona corporation
MBV Golf Course, Inc., an Illinois corporation
Advisory holds a percentage of the partnership interests in the following:
Sunrise Limited Partnership
Terra California Limited Partnership
Sunbelt Properties, Ltd.
EXHIBIT F
ASSIGNMENT AND ACCEPTANCE
UDC REVOLVING LOAN FACILITY
This ASSIGNMENT AND ACCEPTANCE (the "Assignment and Acceptance") is
made as of the Effective Date stated below, between __________________________,
a ______________ (the "Assignor") and __________________________________, a
_____________ (the "Assignee").
Reference is made to the Amended and Restated UDC Master Revolving Line
of Credit Loan Agreement (Borrowing Base), dated _________, 1997 (the "Loan
Agreement"), between UDC Homes Inc. (the "Borrower") and the Banks named
therein. This Assignment and Acceptance is executed and delivered pursuant to,
and as contemplated in, Article 11 of the Loan Agreement. Capitalized terms used
but not defined herein shall have the meanings assigned thereto in the Loan
Agreement.
Immediately prior to the Effective Date, Assignor in its capacity as a
Bank owns ___________% of the right, title and interest in the credit facility
made available to the Borrower pursuant to the Loan Agreement (the "Loan"),
including, without limitation, the Commitment. Assignor, in its capacity as a
Bank, desires to sell and Assignee desires to purchase an interest in the Loan
such that upon the Effective Date, Assignor will be a Bank with a _____________%
interest in the right, title and interest in the Loan, including, without
limitation, the Commitment (aggregating $_____________ of the Loan and the
Commitment Amount) and Assignee will be a Bank with a _____________% interest in
the right, title and interest in the Loan, including, without limitation, the
Commitment (aggregating $_______________ of the Loan and the Commitment Amount).
The Assignor and the Assignee hereby covenant and agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, a _____________%
individual ownership interest in and to all of the right, title and interest in
and to the Loan and the Commitment and the rights and obligations under, in and
to the Loan Agreement and the Loan Documents as of the Effective Date.
2. The Assignor hereby represents and warrants to the Assignee as
follows: that (a) as of the date hereof the aggregate outstanding principal
amount of the Loan is $_________________; and (b) Assignor is the legal and
beneficial owner of the interest being assigned by it hereunder and such
interest is free and clear of any adverse claim.
3. The Assignee hereby confirms and acknowledges that, except as
specifically set forth herein or in the Loan Agreement, the Assignor: (a) makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the Loan
Agreement or any Loan Document, or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Loan Agreement or any
Loan Document or any other instrument or document furnished pursuant thereto;
(b) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower, any partner or shareholder
of the Borrower, any guarantor or any other person or entity which is a party to
any Loan Document (collectively, with the Borrower, an "Other Party"); and (c)
makes no representation or warranty and assumes no responsibility with respect
to
the performance or observance by any Other Party of any of its obligations under
the Loan Agreement, any Loan Document or any other instrument or document
furnished pursuant thereto.
4. The Assignee hereby: (a) confirms that it has received a copy of the
Loan Agreement and the Loan Documents, together with such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance; and (b) agrees that it
will, independently and without reliance upon the Assignor or any other Bank and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Loan Agreement or any other Loan Document.
5. The Assignee hereby: (a) appoints and authorizes the Agent and the
Co-Agent to take such actions as agent(s) on its behalf and to exercise such
powers under the Loan Agreement and the Loan Documents as are delegated to the
Agent and the Co-Agent by the terms thereof; and (b) agrees with the Assignor
for the benefit of the Agent, the Co-Agent, each other Bank, the Borrower and
each Other Party that it will perform all of the obligations which by the terms
of the Loan Agreement and the Loan Documents are required to be performed by it
as a Bank (including, without limitation, the obligation to make Advances and
Protective Advances) and that it shall be liable directly to the Assignor, the
Agent, the Co-Agent, the Borrower, each Other Party, and to each other Bank for
the performance of such obligations, all as provided in the Loan Documents.
6. If the Assignee is organized under the laws of a jurisdiction
outside the United States, it hereby represents that it has delivered to the
Assignor and the Agent completed and signed copies of any forms that may be
required by the United States Internal Revenue Service in order to certify the
Assignee's exemption from United States withholding taxes with respect to any
payments or distributions made or to be made to the Assignee with respect to the
Loan or under the Loan Agreement or such other documents as are necessary to
indicate that all such payments or distributions are subject to such taxes at a
rate reduced by an applicable tax treaty.
7. The effective date for this Assignment and Acceptance shall be
_______________, 199__ (the "Effective Date"). On the Effective Date, Assignee
shall pay to Assignor the sum of $_______________ representing Assignee's Pro
Rata Interest in amounts then outstanding under the Loan Agreement.
8. As of the Effective Date and upon payment of the amount provided
above, (i) the Assignee shall be a party to the Loan Agreement and the other
Loan Documents and have the rights and obligations of a Bank thereunder and (ii)
the Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Loan
Agreement and the other Loan Documents. By acceptance of this Assignment and
Acceptance, Assignee agrees to fund its Pro Rata Interest in loans, Advances,
Protective Advances, letters of credit, and other amounts as provided in the
Loan Agreement to the Agent for the benefit of the Borrower.
9. From and after the Effective Date, the Agent shall, to the extent
received from the Borrower, make all payments under the Loan Agreement in
respect of the interest assigned hereby (including, without limitation, all
payments of principal and interest with respect thereto) to the Assignee as
provided in the Loan Agreement. The Assignor and the Assignee shall make all
appropriate adjustments in payments under the Loan Agreement for periods prior
to the Effective Date directly between themselves.
2
10. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the laws of the State of Arizona.
11. This Assignment and Acceptance may be executed in one or more
counterparts, each of which will be deemed an original and all of which together
will constitute one and the same document. Signature pages may be detached from
the counterparts and attached to a single copy of this Assignment and Acceptance
to physically form one document. Telecopied signature pages will be acceptable,
provided originally signed signature pages are provided to each of the other
parties by overnight courier.
ASSIGNOR:
---------------------------,
a __________________________
By___________________________
Name_________________________
Title________________________
ASSIGNEE:
---------------------------,
a __________________________
By___________________________
Name_________________________
Title________________________
APPROVED:
AGENT:
---------------------------,
a __________________________
By_________________________________________
Name______________________________________
Title_______________________________________
3
SCHEDULE A
ADDRESSES FOR NOTICES
PARTY NOTICE ADDRESS COPY TO:
----- -------------- --------
Borrower UDC Homes, Inc. None
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Agent Bank One, Arizona, NA ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Real Estate Division ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
241 North Central ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Dept. AZ1-1321
Co-Agent Guaranty Federal Bank, F.S.B. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, 10th Floor ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
BOAZ Bank One, Arizona, NA ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Real Estate Division ▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
241 North Central ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Dept. AZ1-1321
▇▇▇▇▇ Fargo ▇▇▇▇▇ Fargo Bank, National None
Association
Real Estate Division
11th Floor (MAC 4101-115)
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Guaranty Federal Guaranty Federal Bank, F.S.B. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, 10th Floor ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
BOA Bank of America NT and SA ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Phoenix Legal Department, Unit 5798
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Norwest Norwest Bank Arizona, N.A. None
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇.▇. ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇