0000950147-95-000132.txt : 19950828
0000950147-95-000132.hdr.sgml : 19950828
ACCESSION NUMBER: 0000950147-95-000132
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 17
CONFORMED PERIOD OF REPORT: 19950531
FILED AS OF DATE: 19950825
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: CONTINENTAL HOMES HOLDING CORP
CENTRAL INDEX KEY: 0000796122
STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531]
IRS NUMBER: 860554624
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0531
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-10700
FILM NUMBER: 95566979
BUSINESS ADDRESS:
STREET 1: 7001 N SCOTTSDALE RD STE 2050
CITY: SCOTTSDALE
STATE: AZ
ZIP: 85253
BUSINESS PHONE: 6024830006
MAIL ADDRESS:
STREET 1: 7001 N SCOTTSDALE ROAD
STREET 2: SUITE 2050
CITY: SCOTTSDALE
STATE: AZ
ZIP: 85253
10-K405
1
FORM 10-K405
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended May 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-14830
CONTINENTAL HOMES HOLDING CORP.
(Exact name of registrant as specified in its charter)
-------------------
Delaware 86-0554624
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
7001 North Scottsdale Road, Suite 2050
Scottsdale, Arizona 85253
(Address of principal executive offices)
Registrant's telephone number, including area code: (602) 483-0006
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
Common Stock, par value $.01 per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of July 28, 1995 was $102,667,392. (This calculation
assumes that all officers and directors of the Company are affiliates.)
The number of shares of Common Stock outstanding as of July 28, 1995
was 6,928,270.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Stockholders for the year
ended May 31, 1995 are incorporated herein by reference into Part II and
portions of the registrant's Proxy Statement for the Annual Meeting of
Stockholders to be held August 30, 1995 are incorporated herein by reference
into Part III.
CONTINENTAL HOMES HOLDING CORP.
FORM 10-K ANNUAL REPORT
For the Fiscal Year Ended
May 31, 1995
TABLE OF CONTENTS
PART I
Page
Item 1. Business
General......................................................1
Land Acquisition and Development.............................1
Product Lines................................................2
Contract Backlog.............................................4
Marketing....................................................4
Construction and Customer Service............................4
Mortgage Banking.............................................5
Competition..................................................6
Regulation...................................................6
Employees....................................................7
Item 2. Properties...................................................7
Item 3. Legal Proceedings............................................7
Item 4. Submission of Matters to a Vote of
Security Holders.............................................7
Part II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters..............................8
Item 6. Selected Financial Data......................................8
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations................8
Item 8. Financial Statements and Supplementary Data..................9
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.......................9
PART III
Item 10. Directors and Executive Officers of the Registrant..........10
Item 11. Executive Compensation......................................10
Item 12. Security Ownership of Certain Beneficial
Owners and Management.......................................10
Item 13. Certain Relationships and Related Transactions..............10
PART IV
Item 14. Exhibits and Reports on Form 8-K............................11
Part I
Item 1. Business
GENERAL
Continental Homes Holding Corp. (the "Company"), a Delaware corporation, was
formed in June 1986. The Company designs, constructs and sells single-family
homes in Phoenix, Arizona; Austin and San Antonio, Texas; Denver, Colorado;
Miami, Florida and Southern California. The Company entered the Miami, Florida
market in November 1994 through the acquisition of Heftler Realty Co., a Florida
Corporation ("Heftler"). The Company entered the Austin, Texas market in July
1993 through the acquisition of Milburn Investments, Inc., a Texas Corporation,
and its related entities (collectively, "Milburn"). In January 1994, the Company
acquired the operations of Aspen Homes ("Aspen"), a single family homebuilder in
San Antonio, Texas. The Company also offers mortgage banking services in Arizona
to its homebuyers and in Texas to its homebuyers and to third parties.
LAND ACQUISITION AND DEVELOPMENT
As of May 31, 1995, the Company operated 20 subdivisions in Phoenix, 16
subdivisions in Austin, six subdivisions in Denver, six subdivisions in San
Antonio, three subdivisions in Miami and three subdivisions in Southern
California. The following table summarizes the Company's available lot inventory
at May 31, 1995 by location:
AVAILABLE LOT INVENTORY
Sites
Available
Homes Under for Future
Construction Construction
Total Lots ------------------------ --------------
Available Sold Specs(1) Models Unsold Sold
---------- ---- ----- ------ ------ ----
Phoenix .................. 4,335 657 167 57 3,290 164
Texas..................... 4,767 339 202 31 4,138 57
Denver.................... 1,434 87 57 16 1,263 11
Miami..................... 1,339 37 17 15 1,221 49
California................ 392 79 51 11 238 13
------ ----- ----- --- ------ ---
Total........... 12,267 1,199 494 130 10,150 294
====== ===== ===== === ====== ===
(1) Speculative units are unsold homes under construction.
The Company's objective is to maintain a supply of land to meet anticipated
homebuilding requirements for approximately two to three years.
At May 31, 1994 and 1995, the Company had an aggregate of 6,807 and 10,150
unsold lots, respectively, which represents an average of approximately a
thirty-eight month inventory based on actual deliveries in fiscal 1995. The
current inventory levels exceed the Company's objective as a result of the
expansion into the Miami, Florida market and the Company's expansion of its
Denver operations. The Company believes that an adequate supply of undeveloped
land is available in its markets to maintain current levels of homebuilding. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Liquidity and Capital Resources."
As of May 31, 1995, the Company also owned 417 acres in Carlsbad, California,
located in San Diego County. Discretionary city entitlements for this project,
which will result in approximately 760 dwelling units, was approved by the
Carlsbad City Council in March 1995. The Company is currently working with state
and federal governmental agencies regarding environmental issues with regard to
the property and is preparing final improvement plans for the project. The
Company is unable to predict the date on which all additional approvals
necessary to commence development will be received, but it is currently actively
seeking these additional approvals and will commence development as soon as the
aforementioned approvals are received and financing is obtained.
PRODUCT LINES
As of May 31, 1995 the Company had active sales programs in 20 subdivisions in
Phoenix, in 16 subdivisions in Austin, in six subdivisions in Denver, in six
subdivisions in San Antonio, in three subdivisions in Miami and in three
subdivisions in Southern California. The product line constructed by the Company
in a particular subdivision is dependent upon many factors, including the
housing generally available in the area, the needs of the particular market and
the Company's cost of lots in the subdivision. The Company typically offers
between three and sixteen floorplans within the same product line in each
subdivision and often offers the same models in similar subdivisions. Models are
periodically reviewed and updated to reflect changing homebuyer preferences.
Both new models and design modifications are generally developed by Company
employees.
Homes sold by the Company typically have three to five bedrooms, two or more
bathrooms and at least a two car garage. The Company offers a variety of options
and upgrades, including the placement of certain walls, the style of kitchen and
bathroom cabinetry, a selection of floor coverings and light fixtures, patios,
decks, french doors and fireplaces, which allow homebuyers to customize their
homes. Options and upgrades are generally priced to have a positive effect on
profit margins.
PRODUCT LINES
Living Area Base Price Range
(Square Feet) at May 31, 1995
------------- -----------------
Phoenix
Move-up
single-family......................... 1,636-3,761 $ 99,900-$182,300
Entry-level
single-family......................... 1,287-2,484 $ 79,900-$157,400
Texas
Move-up
single-family......................... 1,799-3,230 $121,300-$164,400
Entry-level
single-family ........................ 924-2,630 $ 58,950-$132,400
Denver
Move-up
single-family......................... 1,820-3,096 $150,800-$232,900
Miami
Move-up
single-family......................... 1,615-2,511 $131,900-$166,900
Entry-level
Single-family......................... 1,445-2,012 $111,900-$139,900
California
Move-up
single-family......................... 2,833-4,021 $336,000-$417,000
Entry-level
single-family......................... 1,803-3,165 $147,900-$199,900
HOMES DELIVERED
Years ended May 31,
-------------------------------
1995 1994 1993
---- ---- ----
Move-up single-family
Revenues (000's)............................ $208,026 $128,494 $ 56,293
Units ...................................... 1,281 811 350
Average sales price......................... $162,400 $158,400 $160,800
Entry-level single-family
Revenues (000's)............................ $206,692 $206,615 $143,719
Units ...................................... 1,921 1,976 1,419
Average sales price......................... $107,600 $104,600 $101,300
Townhomes and duplex homes
Revenues (000's) ........................... -- $ 4,922 --
Units ...................................... -- 44 --
Average sales price ........................ -- $111,900 --
Total
Revenues (000's)............................ $414,718 $340,031 $200,012
Units ...................................... 3,202 2,831 1,769
Average sale price.......................... $129,500 $120,100 $113,100
Fluctuations in the number of homes delivered by product type are generally
related to product availability, market conditions or the introduction of a new
product.
CONTRACT BACKLOG
Sales of the Company's homes are made pursuant to standard sales contracts which
require a $500 to $2,500 deposit upon signing. The contract is generally
cancelable if the customer is unable to obtain a mortgage commitment, usually
within 60 days. A sale becomes part of backlog only upon receipt of a signed
contract and a deposit. See "Business -- Construction and Customer Service."
As of May 31, 1995, the Company's contract backlog had an aggregate sales value
of $198,126,000 and consisted of 1,493 homes. The contract backlog as of May 31,
1994 had an aggregate sales value of $147,242,000 and consisted of 1,136 homes.
The Company anticipates that substantially all of the homes in backlog at May
31, 1995 will close by the end of calendar 1995.
MARKETING
The Company markets its homes to first-time and move-up buyers. Although the
Company utilizes the services of independent brokers, approximately 39% of its
homes sold in fiscal 1995 were sold by Company commissioned personnel (without
the assistance of independent brokers) from sales offices located in furnished
model homes in the subdivisions. Sales personnel are trained by the Company and
attend weekly meetings to be updated on financing availability, construction
schedules and marketing and advertising plans. Company sales personnel and
independent brokers are generally paid a commission at the time of closing of
between 1% and 2% (depending on the market) and 3%, respectively, of the sales
price of the home. The Company uses radio, newspaper, magazine, billboard
displays, special promotional events and, occasionally, television in its
marketing program.
The Company builds its homes under the guidelines and specifications of the
Federal Housing Administration ("FHA") and the Veterans Administration ("VA"),
thereby providing prospective buyers the added benefits of FHA-insured and
VA-guaranteed mortgages.
CONSTRUCTION AND CUSTOMER SERVICE
The Company designs and supervises the development and building of its projects.
The construction period for the Company's homes during fiscal 1995 ranged from
100 to 180 days in Phoenix, from 75 to 120 days in Texas, from 120 to 180 days
in Denver, from 90 to 120 days in Miami and from 100 to 150 days in Southern
California.
The actual construction is performed for a fixed price by independent
subcontractors, who are generally selected on a competitive basis. All stages of
construction are supervised by the Company's on-site superintendents who
coordinate the activities of subcontractors, subject their work to quality and
cost controls and monitor compliance with zoning and building codes. The
Company's management information systems also assist the Company in controlling
the costs of construction by making information available which allows the
Company to monitor subcontractor performance and expenditures. The Company
believes its relationships with its subcontractors are good. The Company is not,
and does not anticipate, experiencing a significant shortage of either
subcontractors or building materials.
The Company provides homebuyers with a one-year warranty on its homes for
non-structural defects and a two-year warranty with respect to structural
defects. In addition, the Company purchases, in certain locations, builder's
liability insurance protection for major structural defects in the third through
tenth year.
In Phoenix, Denver, Miami and Southern California, the Company constructs homes
principally against orders which are evidenced by written contracts and modest
escrow deposits. In fiscal 1995, approximately 16% of such contracts have been
cancelled, a majority of such cancellations being attributable to the inability
of the prospective purchaser to qualify for financing. The Company attempts to
limit cancellations by training its sales force to determine the qualification
of potential homebuyers at the sales office. The Company classifies a unit as
speculative when construction commences on a unit that does not have a written
contract. The Company may construct speculative units in order to maintain an
inventory for quick delivery or to continue the construction sequence. The
majority of the Company's speculative units are less than 50% complete.
Historically, the Texas market constructs a proportionately larger number of
speculative units than the Company's other markets. As a result of such
cancellations and construction procedures, at May 31, 1994 and May 31, 1995, the
Company had respectively, 503 and 494 (including 219 and 202, respectively in
Texas) speculative units under construction.
MORTGAGE BANKING
The Company commenced mortgage banking operations in 1986 and all mortgage
operations of the Company have been conducted by American Western Mortgage
Company ("AWMC") and Miltex Management, Inc. ("MMI"), which are approved by the
FHA and VA as qualified mortgage lenders. As of July 1, 1995 all mortgage
operations of the Company are being conducted by AWMC which has changed its name
to CH Mortgage Company ("CHMC"). For the year ended May 31, 1995, AWMC and MMI
provided mortgage financing for more than 51% and 61% of the Company's customers
in Phoenix and Austin, respectively.
As a mortgage banker, CHMC completes the processing of loan applications,
performs credit checks, submits applications to mortgage lenders for approval,
and originates and sells mortgage loans. CHMC has a $25,000,000 warehouse line
of credit to fund the mortgage loans on an interim basis. CHMC bears the
interest expense and receives the interest income while mortgages are
warehoused. Accordingly, depending upon the relative interest rates of such
loans and the related mortgages and the extent to which mortgages are financed,
CHMC may have net interest income or expense during the warehouse period.
CHMC establishes its interest rates and terms to facilitate the sale of the
Company's homes through the origination of first mortgage loans utilizing
programs established by the FHA, VA, GNMA and FNMA. Interest rates are generally
established by prevailing market rates, although lower rates may be offered from
time to time to remain competitive in certain markets.
Each mortgage originated by CHMC contains the provision for a servicing fee
(which is included as a part of the monthly payment made by the mortgagor) to be
paid for the collection of, and accounting for, mortgage payments. This
servicing fee provision is a separate interest in the mortgage that may be sold
independently of, or together with, the mortgage itself. CHMC began retaining a
portion of the servicing portfolio in fiscal 1991 and from time to time may
continued to do so, although this is not expected to become a material part of
the Company's business. During fiscal 1995, the Company sold significantly all
of the servicing rights that were originated.
COMPETITION
The single-family residential housing industry is highly competitive, and the
Company competes in each of its markets with numerous other national, regional
and local homebuilders, some of which have greater resources than the Company.
The Company's homes compete on the basis of quality, price, design, mortgage
financing terms and location. The Company also competes with developers of
rental housing units and, to a lesser extent, condominiums.
REGULATION
The housing and mortgage banking industries are subject to extensive and complex
regulations. The Company and its subcontractors must comply with various
federal, state and local laws and regulations including zoning and density
requirements, building, environmental, advertising and consumer credit rules and
regulations as well as other rules and regulations in connection with its
homebuilding and sales activities. These include requirements as to building
materials to be used, building designs and minimum elevation of properties. The
Company's homes are inspected by local authorities where required, and homes
eligible for insurance or guarantees provided by the FHA and VA, respectively,
are subject to inspection by the FHA or VA.
The Company is also subject to a variety of local, state and federal statutes,
ordinances, rules and regulations concerning protection of health and the
environment ("environmental laws"), as well as effects of environmental factors.
The particular environmental laws which apply to any given homebuilding site
vary greatly according to the site's location, the site's environmental
conditions and the present and former uses of the site. These environmental laws
may result in delays, may cause the Company to incur substantial compliance and
other costs, and can prohibit or severely restrict homebuilding activity in
certain environmentally sensitive regions or areas.
The Company's mortgage banking subsidiary must also comply with various federal
and state laws and consumer credit rules and regulations as well as rules and
regulations in connection with its mortgage lending activities. Additionally,
mortgage loans originated under the FHA, VA, FNMA and GNMA are subject to rules
and regulations imposed by such agencies.
EMPLOYEES
At May 31, 1995, the Company and its subsidiaries employed approximately 441
persons, including corporate staff, sales personnel, construction personnel and
mortgage and title staff. None of the Company's employees is covered by any
collective bargaining agreement. The Company believes that its relations with
its employees are good.
Item 2. PROPERTIES
The Company's principal offices are located at 7001 North Scottsdale,
Road, Suite 2050, Scottsdale, Arizona 85253. The offices, which include
approximately 22,000 square feet, are
leased for a term expiring March 2001.
Item 3. LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings which it believes
would have a material effect on the Company's financial position or
operating results. The Company has filed suit against William O.
Milburn and Ernst & Young seeking reimbursement for the payments made
to the Internal Revenue Service in excess of the tax liability recorded
at the time Milburn was acquired.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
Since December 15, 1993 the Company's Common Stock has traded on the New York
Stock Exchange (Symbol: CON). Prior to that date, the Company's Common Stock was
traded on the American Stock Exchange. The following table sets forth for each
period indicated the high and low closing sales prices of the Company's Common
Stock and cash dividends paid:
Dividends
High Low Per Share
---- --- ---------
Year Ended May 31, 1994:
First Quarter............ $22.50 $13.38 $.05
Second Quarter........... 23.75 20.63 .05
Third Quarter............ 23.88 18.50 .05
Fourth Quarter........... 21.38 13.88 .05
Year Ended May 31, 1995:
First Quarter............ $15.75 $13.38 $.05
Second Quarter........... 17.25 13.50 .05
Third Quarter............ 14.13 11.63 .05
Fourth Quarter........... 15.88 11.00 .05
DIVIDEND POLICY
Declarations of dividends are within the discretion of the Board of Directors
and are dependent upon various factors, including the earnings, cash flow,
capital requirements and operating and financial condition of the Company. In
addition, the Company's ability to pay dividends in excess of current levels is
restricted by certain of its loan agreements and its 12% Senior Notes. See Note
E of "Notes to Consolidated Financial Statements" of the Company. At August 15,
1995, there were 144 holders of record of the Company's Common Stock.
Item 6. SELECTED FINANCIAL DATA
Information relating to this item appears under the caption "Financial
Highlights" on the inside cover page of the Annual Report, and such
information is incorporated herein by reference in accordance with
General Instruction G(2) of Form 10-K. This information should be read
in conjunction with "Management's Discussion and Analysis of Results of
Operations and Financial Condition" and the Company's Consolidated
Financial Statements and the Notes thereto.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Information relating to this item appears under the caption
"Management's Discussion and Analysis of Results of Operations and
Financial Condition" on pages 14 through 17 of the Annual Report, and
such information is incorporated herein by reference in accordance with
General Instruction G(2) of Form 10-K.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information relating to this item appears on pages 19 through 31 of the
Annual Report, and such information is incorporated herein by reference
in accordance with General Instruction G(2) of Form 10-K. Other
financial statements and schedules required under Regulation S-X
promulgated under the Securities Act of 1933 are identified in Item 14
hereof and are incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to this item appears in the definitive Proxy
Statement for the Company's Annual Meeting of Stockholders to be held
on August 30, 1995, and such information is incorporated herein by
reference in accordance with General Instruction G(3) of Form 10-K.
Item 11. EXECUTIVE COMPENSATION
Information relating to this item is contained in the definitive Proxy
Statement referred to above in "Item 10. Directors and Executive
Officers of the Registrant," and such information is incorporated
herein by reference in accordance with General Instruction G(3) of Form
10-K.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information relating to this item is contained in the definitive Proxy
Statement referred to above in "Item 10. Directors and Executive
Officers of the Registrant," and such information is incorporated
herein by reference in accordance with General Instruction G(3) of Form
10-K.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to this item is contained in the definitive Proxy
Statement referred to above in "Item 10. Directors and Officers of the
Registrant," and such information is incorporated herein by reference
in accordance with General Instruction G(3) of Form 10-K.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements of Continental Homes
Holding Corp. and Subsidiaries, included in the Annual Report to
Shareholders for the year ended May 31, 1995, are incorporated by
reference in Item 8:
Report of Independent Public Accountants.
Consolidated Balance Sheets - May 31, 1995 and 1994.
Consolidated Statements of Income - years ended May 31, 1995, 1994 and
1993.
Consolidated Statements of Stockholders' Equity - years ended May 31,
1995, 1994 and 1993.
Consolidated Statements of Cash Flows - years ended May 31, 1995, 1994
and 1993.
Notes to Consolidated Financial Statements.
(a) 2. Financial Statement Schedules
Not applicable.
(a) 3. Exhibits
2.1 Stock Purchase Agreement between William O. Milburn and
the Company dated July 28, 1993. Incorporated by
reference to Exhibit 2.1 to the Company's report on Form
8-K dated July 29, 1993.
2.2(a) Stock Purchase Agreement between Seller and the Company
dated November 3, 1994. Incorporated by reference to
Exhibit 2.1 to the Company's report on Form 8-K dated
November 18, 1994.
2.2(b)* Amendment to Stock Purchase Agreement between Seller and
the Company dated November 18, 1994.
2.2(c)* Second Amendment to Stock Purchase Agreement between Seller
and the Company dated November 18, 1994.
2.2(d)* Third Amendment to Stock Purchase Agreement between Seller and
the Company dated July 12, 1995.
3.1(a) Certificate of Incorporation of the Company.
Incorporated by reference to Exhibit 3.1(a) to
Registration Statement No. 33-6797, as filed on June 25,
1986.
3.1(b) Amendment to Certificate of Incorporation of the Company.
Incorporated by reference to Exhibit 3.1(b) to Amendment
No. 2 to Registration Statement No. 33-6797, as filed on
January 30, 1987.
3.1(c) Certificate of Second Amendment of the Certificate of
Incorporation. Incorporated by reference to Exhibit 3 to
the Company's report on Form 10-Q for the quarter ended
August 31, 1993.
3.2 By-laws of the Company. Incorporated by reference to
Exhibit 3.2 to Registration Statement No. 33-6797, as
filed on June 25, 1986.
4.1 Indenture dated as of March 15, 1992 between the Company
and Manufacturers and Traders Trust Company, as Trustee.
Incorporated by reference to Exhibit 4.1 to the Company's
report on Form 10-K for the year ended May 31, 1992.
4.2(a) Indenture dated as of August 1, 1992 between the Company
and Fidelity Bank, National Association, as Trustee.
Incorporated by reference to Exhibit 4.1 to the Company's
report on Form 10-Q for the quarter ended August 31,
1992.
4.2(b) First Supplemental Indenture dated as of March 22, 1994
to the Indenture dated August 1, 1992, between CHHC and
First Fidelity Bank, National Association, (formerly
Fidelity Bank, National Association), as Trustee.
Incorporated by reference to Exhibit 4.1 to the Company's
report on Form 10-Q for the quarter ended February 28,
1994.
10.1(a) Lease Agreement dated August 1, 1990, as amended, for the
Company's principal office located at 7001 N. Scottsdale
Road, Suite 2050, Scottsdale, Arizona. Incorporated by
reference to Exhibit 10.1 to the Company's report on Form
10-K for the year ended May 31, 1991.
10.1(b) Third Amendment to Lease Agreement dated June 27, 1994
for the Company's principal office located at 7001 N.
Scottsdale Road, Suite 2050, Scottsdale, Arizona.
Incorporated by reference to Exhibit 10.1(b) to the
Company's report on Form 10-K for the year ended May 31,
1994.
10.2(a)+ The Company's Restated 1986 Stock Incentive Plan.
Incorporated by reference to Exhibit 10.3 to Amendment
No. 2 to Registration Statement No. 33-6797, as filed on
January 30, 1987.
10.2(b)+ The Company's 1988 Stock Incentive Plan (As amended and
restated July 23, 1992). Incorporated by reference to
Exhibit A to the Company's Notice of Annual Meeting and
Proxy Statement dated August 3, 1992.
10.3* Amended and Restated Mortgage Warehousing Credit and
Security Agreement dated as of July 1, 1995 between Bank
One, Arizona, NA ("BOAZ") and CHMC.
10.4* Replacement Revolving Line of Credit Promissory Note
dated July 1, 1995 by CHMC in favor of BOAZ in the
principal amount of up to $25,000,000.
10.5(a) Loan Agreement dated as of February 25, 1993 between
Valley National Bank of Arizona ("VNB") and the Company.
Incorporated by reference to Exhibit 10.1 to the
Company's report on Form 10-Q for the quarter ended
February 28, 1993.
10.5(b) First Modification Agreement dated as of February 25,
1994 between BOAZ (formerly VNB) and CHHC. Incorporated
by reference to Exhibit 10.1 to the Company's report on
Form 10-Q for the quarter ended February 28, 1994.
10.5(c) Second Modification Agreement dated as of March 31, 1994
between BOAZ (formerly VNB) and CHHC. Incorporated by
reference to Exhibit 10.5(c) to the Company's report on
Form 10-K for the year ended May 31, 1994.
10.5(d) Third Modification Agreement dated as of November 17,
1994 between BOAZ (formerly VNB) and CHHC. Incorporated
by reference to Exhibit 10.1 (a) to the Company's report
on Form 10-Q for the quarter ended November 30, 1994.
10.5(e) Fourth Modification Agreement dated as of November 22,
1994 between BOAZ (formerly VNB) and CHHC. Incorporated
by reference to Exhibit 10.1 (b) to the Company's report
on Form 10-Q for the quarter ended November 30, 1994.
10.5(f) Fifth Modification Agreement dated as of March 14, 1995
between BOAZ (formerly VNB) and CHHC. Incorporated by
reference to Exhibit 10.1 (a) to the Company's report on
Form 10-Q for the quarter ended February 28, 1995.
10.5(g)* Sixth Modification Agreement dated as of May 17, 1995
between BOAZ (formerly VNB) and CHHC.
10.6 Promissory Note dated February 25, 1993 by the Company in
favor of VNB in the principal amount of $10,000,000.
Incorporated by reference to Exhibit 10.2 to the Company's
report on Form 10-Q for the quarter ended February 28, 1993.
10.7(a) Amended and Restated Loan Agreement dated as of October
28, 1994 between BOAZ and Milburn Investments, Inc.
("MII"). Incorporated by reference to Exhibit 10.2 (a)
to the Company's report on Form 10-Q for the quarter
ended November 30, 1994.
10.7(b) First Modification Agreement dated as of December 8, 1994
between BOAZ and MII. Incorporated by reference to
Exhibit 10.2 (b) to the Company's report on Form 10-Q for
the quarter ended November 30, 1994.
10.7(c) Second Modification Agreement dated as of March 15, 1995
between BOAZ and MII. Incorporated by reference to
Exhibit 10.2 (a) to the Company's report on Form 10-Q for
the quarter ended February 28, 1995.
10.7(d)* Third Modification Agreement dated as of May 19, 1995
between BOAZ and MII.
10.7(e)* Fourth Modification Agreement dated as of July 28, 1995
between BOAZ and MII.
10.8 Replacement Promissory Note dated October 28, 1994 by MII in
favor of BOAZ in the principal amount of $25,000,000.
Incorporated by reference to Exhibit 10.3 to the Company's
report on Form 10-Q for the quarter ended November 30, 1994.
10.9(a) Loan Agreement dated November 17, 1994 between BOAZ and
Heftler Realty Co. ("Heftler"). Incorporated by
reference to Exhibit 10.1 to the Company's report on Form
8-K dated November 18, 1994.
10.9(b) First Modification Agreement dated as of November 22,
1994 between BOAZ and Heftler. Incorporated by reference
to Exhibit 10.4 to the Company's report on Form 10-Q for
the quarter ended November 30, 1994.
10.9(c)* Second Modification Agreement dated as of May 19, 1995
between BOAZ and Heftler.
10.10 Promissory Note dated November 17, 1994 by Heftler in
favor of BOAZ in the principal amount of $10,000,000.
Incorporated by reference to Exhibit 10.2 to the
Company's report on Form 8-K dated November 18, 1994.
10.11(a) Master Loan Agreement dated August 29, 1994 between
NationsBank of Florida, N.A. ("Nations") and Heftler.
Incorporated by reference to Exhibit 10.3 to the
Company's report on Form 8-K dated November 18, 1994.
10.11(b) First Amendment to Loan Agreement dated November 16, 1994
between Nations and Heftler. Incorporated by reference
to Exhibit 10.4 to the Company's report on Form 8-K dated
November 18, 1994.
10.12 Consolidated Promissory Note dated November 16, 1994 by
Heftler in favor of Nations in the principal amount of
$20,000,000. Incorporated by reference to Exhibit 10.5
to the Company's report on Form 8-K dated November 18,
1994.
10.13(a) Loan Agreement dated as of November 17, 1994 between BOAZ
and KDB Homes, Inc. ("KDB"). Incorporated by reference
to Exhibit 10.5 to the Company's report on Form 10-Q for
the quarter ended November 30, 1994.
10.13(b)* First Modification Agreement dated as of January 20, 1995
between BOAZ and KDB.
10.13(c)* Second Modification Agreement dated as of May 19, 1995
between BOAZ and KDB.
10.14 Promissory Note dated November 17, 1994 by KDB in favor
of BOAZ in the principal amount of $10,000,000.
Incorporated by reference to Exhibit 10.6 to the
Company's report on Form 10-Q for the quarter ended
November 30, 1994.
10.15(a) Loan Agreement dated as of April 5, 1993 between Norwest
Bank Arizona, National Association ("Norwest") and CHHC.
Incorporated by reference to Exhibit 10.8(a) to the
Company's report on Form 10-Q for the quarter ended
November 30, 1994.
10.15(b) First Amendment to Loan Agreement dated as of November,
1993 between Norwest and CHHC. Incorporated by reference
to Exhibit 10.8(b) to the Company's report on Form 10-Q
for the quarter ended November 30, 1994.
10.15(c) Second Amendment to Loan Agreement dated as of April 1,
1994 between Norwest and CHHC. Incorporated by reference
to Exhibit 10.8(c) to the Company's report on Form 10-Q
for the quarter ended November 30, 1994.
10.15(d) Third Amendment to Loan Agreement dated as of July 7,
1994 between Norwest and CHHC. Incorporated by reference
to Exhibit 10.8(d) to the Company's report on Form 10-Q
for the quarter ended November 30, 1994.
10.15(e) Fourth Amendment to Loan Agreement dated as of November
14, 1994 between Norwest and CHHC. Incorporated by
reference to Exhibit 10.8(c) to the Company's report on
Form 10-Q for the quarter ended November 30, 1994.
11.* Statement Re Computation of Per Share Earnings.
13.* Inside cover page and pages 14 through 31 of the Annual Report to
Stockholders for the year ended May 31, 1995.
21.* Subsidiaries of the Company.
23.* Consent of Independent Public Accountants.
27.* Financial Data Schedule.
------------------------
+ Denotes a compensatory plan or agreement.
* Filed herewith.
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the last
quarter of the year ended May 31, 1995. The Company filed a
report on Form 8-K dated November 18, 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: August 25, 1995 CONTINENTAL HOMES HOLDING CORP.
By: /s/ Kathleen R. Wade
------------------------------------
Kathleen R. Wade
Co-Chief Executive Officer
By: /s/ Donald R. Loback
------------------------------------
Donald R. Loback
Co-Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
/s/ Donald R. Loback August 25, 1995
---------------------------- ----------------
Donald R. Loback Date
Co-Chief Executive
Officer and Director
/s/ Kathleen R. Wade August 25, 1995
---------------------------- ----------------
Kathleen R. Wade Date
Co-Chief Executive
Officer and Director
/s/ Robert J. Wade August 25, 1995
---------------------------- ----------------
Robert J. Wade Date
President and Director
/s/ Kenda B. Gonzales August 25, 1995
---------------------------- ----------------
Kenda B. Gonzales Date
Secretary and Treasurer
Principal Financial
and Accounting Officer
/s/ W. Thomas Hickcox August 25, 1995
---------------------------- ----------------
W. Thomas Hickcox Date
Director
/s/ Bradley S. Anderson August 25, 1995
---------------------------- ----------------
Bradley S. Anderson Date
Director
/s/ Jo Ann Rudd August 25, 1995
---------------------------- ----------------
Jo Ann Rudd Date
Director
/s/ William Steinberg August 25, 1995
---------------------------- ----------------
William Steinberg Date
Director
INDEX OF EXHIBITS
Page Number
2.2(b) Amendment to Stock Purchase Agreement
between Seller and the Company dated
November 18, 1994.
2.2(c) Second Amendment to Stock Purchase
Agreement between Seller and the
Company dated November 18, 1994.
2.2(d) Third Amendment to Stock Purchase
Agreement between Seller and the
Company dated July 12, 1995.
10.3 Amended and Restated Mortgage
Warehousing Credit and Security
Agreement dated as of July 1, 1995
between Bank One, Arizona, NA
("BOAZ") and CHMC.
10.4 Replacement Revolving Line of Credit
Promissory Note dated
July 1, 1995 by CHMC in favor of
BOAZ in the principal amount of
up to $25,000,000.
10.5(g) Sixth Modification Agreement
dated as of May 17, 1995 between
BOAZ (formerly VNB) and CHHC.
10.7(d) Third Modification Agreement dated
as of May 19, 1995 between BOAZ and MII.
10.7(e) Fourth Modification Agreement dated
as of July 28, 1995 between BOAZ and MII.
10.9(c) Second Modification Agreement dated
as of May 19, 1995 between BOAZ
and Heftler.
10.13(b) First Modification Agreement dated
as of January 20, 1995 between
BOAZ and KDB.
10.13(c) Second Modification Agreement dated
as of May 19, 1995 between BOAZ and KDB.
11. Statement Re Computation of Per E-2
Share Earnings.
13. Inside cover page and pages 14 through
31 of the Annual Report to Stockholders
for the year ended May 31, 1995.
21. Subsidiaries of the Company. E-3
23. Consent of Independent Public Accountants E-4
EX-2.2.B
2
AMENDMENT TO STOCK PURCHASE AGREEMENT
EXHIBIT 2.2(b)
AMENDMENT TO STOCK PURCHASE AGREEMENT
This Amendment to Stock Purchase Agreement ("Amendment"), is entered
into as of November 18, 1994, by and between Continental Homes Holding Corp., a
Delaware corporation ("Buyer") and those persons set forth on Exhibit A hereto
(collectively and severally, "Seller").
RECITALS:
A. Pursuant to that Stock Purchase Agreement, dated as of November 2,
1994, by and between Buyer and Seller, Buyer agreed to buy, and Seller agreed to
sell, all of the issued and outstanding capital stock of Heftler Realty Co., a
Florida corporation ("Company"), on the terms and subject to the conditions set
forth therein (the "Stock Purchase Agreement"). Capitalized terms used herein
which are defined in the Stock Purchase Agreement shall have the respective
meanings set forth in the Stock Purchase Agreement, unless otherwise defined
herein.
B. Buyer and Seller each desire to amend the Stock Purchase Agreement
as hereinafter set forth.
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Amendments to Stock Purchase Agreement. As of the date on which this
Amendment is executed by all parties hereto, the Stock Purchase Agreement is
hereby amended as follows:
1.1 Section 2(g) is amended by deleting the third line thereof
the terms "Closing Date" and by substituting therefor the terms "October 31,
1994".
1.2 Section 2 is amended by inserting after Section 2(g) the
following:
(h) Tax and Accounting Effective Date. For income tax
and accounting purposes only, the transactions
contemplated by this Agreement shall be deemed to
have been completed as of October 31, 1994. All book
income before tax of the Company earned by Seller
from and after November 1, 1994, shall be deemed
earned by Buyer, and Buyer shall be entitled and
required to include such income on its books and
records and to report such income on its tax return.
Buyer hereby indemnifies and holds harmless Seller
from and against any liability or obligation for any
tax imposed on Seller for the book income before tax
for the Company from and after November 1, 1994.
1.3 Section 4(i)(xiii) is amended by deleting in the sixth
line thereof the terms "Closing Date" and by substituting therefor the terms
"October 31, 1994".
1.4 Section 8(c) is amended by deleting the periods at the end
of the first and second sentences thereof and by inserting at the end of each
such sentence the following:
; except for any Tax imposed on Seller for the book
income before tax for the Company from and after
November 1, 1994.
1.5 Exhibit A is amended by deleting "Herbert Heftler" from
the column captioned "Name of Shareholder" and substituting therefor "Herbert
Heftler, Trustee, U/D/T July 8, 1987" as the owner of 550 shares of stock of the
Company as indicated under the column captioned "Number of Shares".
2. Miscellaneous Except as amended above, the Stock Purchase Agreement
shall remain in full force and effect. This Amendment shall be binding upon, and
inure to the benefit of Buyer and Seller and their respective successors and
assigns. This Amendment may be executed in any number of counterparts and all
such counterparts taken together shall constitute one and the same instrument.
3. Governing Law This Amendment shall be governed by and construed in
accordance with the domestic laws of the State of Florida without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Florida or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Florida.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered as of the date first above written.
BUYER:
CONTINENTAL HOMES HOLDING CORP.
By:/s/ Timothy C. Westfall
-----------------------------------
Title: Vice President
--------------------------------
SELLER SIGNATURES ARE SET FORTH
ON FOLLOWING PAGE
SELLER
/s/ Herbert Heftler, Trustee
-----------------------------------
/s/ Monica A. Heftler
-----------------------------------
/s/ Roger Heftler
-----------------------------------
/s/ Thomas Iglasias
-----------------------------------
/s/ Joel B. Kovin
-----------------------------------
/s/ Candace Sharpsteen
-----------------------------------
/s/ Jack Shell
-----------------------------------
EX-2.2.C
3
SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT
EXHIBIT 2.2(c)
SECOND AMENDMENT TO STOCK PURCHASE AGREEMENT
This Second Amendment to Stock Purchase Agreement ("Second Amendment")
is entered into as of November 18, 1994, by and between Continental Homes
Holding Corp., a Delaware corporation ("Buyer") and the individuals set forth in
Exhibit "A" hereto (collectively and severally "Seller").
RECITALS:
A. Pursuant to that Stock Purchase Agreement dated as of November 2,
1994, by and between Buyer and Seller, Buyer agreed to buy, and Seller agree to
sell, all of the issued and outstanding capital stock of Heftler Realty Co., a
Florida corporation ("Company"), under the terms and subject to the conditions
set forth therein (the "Stock Purchase Agreement") as amended by Amendment to
Stock Purchase Agreement dated November 18, 1994 (the "Amendment"). Capitalized
terms used therein which are defined in the Stock Purchase Agreement shall have
the respective meaning set forth in the Stock Purchase Agreement, unless
otherwise defined herein.
B. Buyer and Seller each desire to further amend the Stock Purchase
Agreement as hereinafter set forth.
Now, Therefore, in consideration of the premises and for other good and
valuable considerations, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Amendments to Stock Purchase Agreement As of November 18, 1994, the
Stock Purchase Agreement is hereby amended as follows:
1.1 Section 8(f) of the Stock Purchase Agreement is amended to
add the following:
Notwithstanding any other provision contained in this
Agreement, if Buyer does not maintain the insurance coverage
in the name of the Company in place on November 17, 1994, for
any reason other than as provided herein, Seller shall only
indemnify Buyer for those amounts exceeding the amounts
covered by the Company's insurance policies in place on
November 17, 1994, and for losses suffered by the Company to
the extent of the amounts of insurance provided by the Buyer
for the Company on which the insurance carrier has denied
coverage for the claim for reasons other than that the
aggregate amount of coverage has been reached under Buyer's
master and umbrella policies listing the Company as an
insured.
2. Miscellaneous Except as amended above, the Stock Purchase Agreement
as amended by the Amendment shall remain in full force and effect. This Second
Amendment shall be binding upon, and inure to the benefit of, Buyer and Seller
and their respective successors and assigns. This Second Amendment may be
executed in any number of counterparts and all such counterparts taken together
shall constitute one and the same instrument.
3. Governing Law This Second Amendment shall be governed by and
construed in accordance with the domestic laws of the State of Florida without
giving effect to any choice or conflict of law provision on rule (whether the
State of Florida or any other jurisdiction) that would cause the application of
the laws of the jurisdiction other than the State of Florida.
In Witness Whereof, the parties have caused this Second Amendment to be
executed and delivered as of the date first above written.
BUYER:
Continental Homes Holding Corp.
a Delaware corporation
By: /s/ Kathleen R. Wade
-------------------------------
SELLER:
/s/ Herbert Heftler, Trustee
-------------------------------
U/D/T July 8, 1987
/s/ Monica A. Heftler
-------------------------------
/s/ Roger Heftler
-------------------------------
/s/ Joel B. Kovin
-------------------------------
/s/ Thomas Iglesias
-------------------------------
/s/ Jack Shell
-------------------------------
/s/ Candace Sharpsteen
-------------------------------
EX-2.2.D
4
THIRD AMENDMENT TO STOCK PURCHASE AGREEMENT
Exhibit 2.2(d)
THIRD AMENDMENT
TO
STOCK PURCHASE AGREEMENT
This Third Amendment to Stock Purchase Agreement ("Third Amendment"),
is entered into as of July 12, 1995, by and between Continental Homes Holding
Corp., a Delaware corporation ("Buyer") and those persons set forth on Exhibit A
hereto (collectively and severally, "Seller").
A. Pursuant to that Stock Purchase Agreement dated as of November 2,
1994 and the Amendment to Stock Purchase Agreement and Second Amendment to Stock
Purchase Agreement, both dated as of November 18, 1994, (together, the "Stock
Purchase Agreement") by and between Buyer and Seller, Buyer agreed to buy, and
Seller agreed to sell, all of the issued and outstanding capital stock of
Heftler Realty Co., a Florida corporation ("Company"), on the terms and subject
to the conditions set forth therein. Capitalized terms used herein which are
defined in the Stock Purchase Agreement shall have the respective meanings set
forth in the Stock Purchase Agreement, unless otherwise defined herein.
B. Buyer and Seller each desire to further amend the Stock Purchase
Agreement as hereinafter set forth.
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Amendments to Stock Purchase Agreement. Buyer and Seller hereby
agree to amend the Stock Purchase Agreement to become effective at "Closing" (as
defined herein) as follows:
A. The transaction evidenced by the Stock Purchase Agreement
shall be treated as an "asset sale" instead of a "stock sale" for
federal and state income tax purposes only, pursuant to Federal Income
Tax Code section 338(h)(10) and the parties agree to make a
timely-filed election on Federal Income Tax Form 8023-A and take all
other steps as required by the federal tax regulations to effectuate
said election ("the Tax Election"). For all other purposes, the
transaction shall remain unchanged.
B. The Purchase Price shall be increased by $300,000 ("the
$300,000 Payment") plus the Additional Tax Liability as defined in
paragraph 1(c) (collectively, "the Additional Purchase Price") and
shall be paid to Vincent E. Damian, Jr., of the law firm Salomon,
Kanner, Damian & Rodriguez, P.A., as attorney for Seller on or before
July 17, 1995.
C. Buyer agrees to pay Seller as part of the Additional
Purchase Price any tax liability resulting from the Tax Election,
reflected as the difference between line 53 on each Seller's Amended
Form 1040, versus line 53 on each Seller's Original Form 1040,
including interest and penalties, if any (but Buyer shall not be
responsible for any amount shown on line 53 not relating to the Tax
Election or for any penalties assessed against Seller resulting from a
failure of any of the individuals constituting Seller to file his/her
amended 1994 Federal income tax returns on or before July 17, 1995)
thereon ("Additional Tax Liability") but not resulting from the
$300,000 Payment. Additionally, Buyer agrees to indemnify and hold
harmless Seller against any additional tax liability including interest
and penalties, if any (but Buyer shall not be responsible for any
penalties assessed against Seller resulting from a failure of any of
the individuals constituting Seller to file his/her amended 1994
Federal income tax returns on or before July 17, 1995) assessed against
Seller in the future resulting solely from the Tax Election but not
resulting from the $300,000 Payment.
D. Buyer agrees to waive and release Herbert Heftler and
Monica A. Heftler from paragraph 1, subpart (i) of their
Non-Competition Agreement dated November 2, 1994; such waiver and
release to be effective December 31, 1995 (though this shall not
prohibit Herbert Heftler and/or Monica A. Heftler from engaging in any
and all activities prior to December 31, 1995, preparatory to carrying
on any home building business which would otherwise have been
prohibited by the Non-Competition Agreement). The provisions of this
paragraph 1.D. shall become effective only from and after Closing of
this transaction.
E. The Purchase Price, as increased hereby, shall be allocated
at Closing among the assets of the Company, according to Exhibit B
attached hereto.
2. Representations and covenants of Buyer and Seller.
A. Each individual constituting Seller represents to Buyer
that he/she will amend and file prior to July 17, 1995 (and provide a
copy to Buyer) his/her individual Federal Income Tax Return for the
year 1994, to the extent such tax returns have been previously filed,
to reflect the consequences of the Tax Election. The parties further
agree to cooperate in amending the October 31, 1994 federal tax return
for the Company and filing the amended return no later than July 17,
1995.
B. Buyer grants to Herbert Heftler ("Heftler"), effective at
Closing of this transaction, the exclusive right to use the name
Heftler Homes and its related trademarks, including but not limited to
the unregistered trademark characterized as the Block "H", as his
marketing name or for marketing and sales purposes, but not in any way
as his corporate name, it being understood and agreed that Buyer shall
continue to use and have the prior right to the use of the name
"Heftler Realty Co." as its corporate name. Heftler shall use (or have
the right to use) the name "Heftler Homes" and its related trademarks
in such a way that it does not interfere with or cause undue confusion
over or related to the use of the name "Heftler Realty Co." by Buyer.
In the event that there is any attempt by any governmental or other
regulatory agency or body to require Buyer to cease using the name
"Heftler Realty Co." by reason of Heftler's use of the name "Heftler
Homes" or its related trademarks, Heftler shall, at Buyer's written
request, resolve such conflict, but if it cannot resolve such conflict,
then at Buyer's written request Heftler shall discontinue, as soon as
is practicable the use of the name "Heftler Homes" and its related
trademarks, but in any event all of the same shall be accomplished as
soon as is necessary to allow Buyer to continue using the name "Heftler
Realty Co." as its corporate name.
Heftler intends to assign the rights contained under this
paragraph to an existing corporation, HH Homes, Inc., or to Heftler
Holdings, Inc., a corporation about to be formed (or being the
successor to HH Homes, Inc.). Such corporation or corporations will
agree to comply with this paragraph 2.B. in the use of the names and
trademarks licensed by this paragraph. Buyer agrees to allow such
corporation(s) to use the names and trademarks licensed to Heftler by
this paragraph. Buyer agrees to assign to Heftler or to Heftler's
designated corporation the right to the fictitious name "Heftler Homes"
as registered with the Florida Department of State, Registration No.
G91113000168. Buyer will execute such documents as may be required by
Heftler to accomplish the same. Heftler or Heftler's corporation may
further assign these rights, but only on the condition that assignee
agrees, in writing, to comply with the provisions of this Paragraph B.
No assignment by Heftler hereunder shall be effective until such time
as the assignee has agreed in a writing addressed to Buyer to be bound
by the provisions of this paragraph 2.B.
Buyer agrees to discontinue from and after Closing the use of
the aforesaid names except as may be necessary in the present and
continuing sales projects presently being carried on by Heftler Realty
Co. and except for the use of "Heftler Realty Co." as its corporate
name and where appropriate to carry on business in the corporate name.
Buyer agrees to cooperate with Heftler and/or Joel Kovin from and after
Closing to allow them to use the name "Heftler Homes" and related
trademarks in accordance with this agreement.
3. Conditions of Closing. Buyer's obligation to close this transaction
is conditioned upon the portion of the Additional Purchase Price attributable to
the Additional Tax Liability as defined in paragraph 1.C. hereof not exceeding
$420,000, which condition may be waived by Buyer, in its sole discretion and
election. Buyer shall, prior to closing, make a determination as to whether to
close. The election by the Buyer to close shall be a waiver by the Buyer of the
condition respecting the additional tax liability not exceeding $420,000. After
the closing the limitation upon the Additional Tax Liability shall end and Buyer
shall be fully responsible and liable to the Seller for all of the liabilities
under paragraph 1.A., B. and C. hereof, excluding any tax liability assessed to
Seller (or any individual constituting Seller) on account of the $300,000
Payment. In the event Buyer fails or refuses to close this transaction, Buyer
agrees to pay Sellers' collective legal and tax advice expenses (including
billing by Joel Kovin) all of which shall not exceed $15,000 in the aggregate,
which amount, if payable by Buyer, shall be paid to Vincent E. Damian, Jr., as
attorney for Sellers not later than July 20, 1995.
4. Closing. Closing of this transaction shall take place at the offices
of Vincent E. Damian, Jr. on or before July 17, 1995. "Closing" shall occur upon
receipt by a bank or other depository designated by Seller of the Additional
Purchase Price.
5. Miscellaneous. Except as amended above, the Stock Purchase Agreement
shall remain in full force and effect. This Amendment shall be binding upon, and
inure to the benefit of, Buyer and Seller and their respective successors and
assigns. This Amendment may be executed in any number of counterparts and all
such counterparts taken together shall constitute one and the same instrument.
6. Governing Law. This Third Amendment shall be governed by and
construed in accordance with the domestic laws of the State of Florida without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Florida or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Florida.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed and delivered as of the date first above written.
BUYER
CONTINENTAL HOMES HOLDING CORP.
By /s/Kenda B. Gonzales
-----------------------------------
Its Secretary and Treasurer
-----------------------------------
SELLER SIGNATURES ARE SET FORTH ON
FOLLOWING PAGE
SELLER
/s/ Herbert Heftler
-----------------------------------
Herbert Heftler, Trustee, U/D/T,
July 8, 1987
/s/ Monica A. Heftler
-----------------------------------
Monica A. Heftler
/s/ Roger Heftler
-----------------------------------
Roger Heftler
/s/ Thomas Iglesias
-----------------------------------
Thomas Iglesias
/s/ Joel B. Kovin
-----------------------------------
Joel B. Kovin
/s/ Candace Sharpsteen
-----------------------------------
Candace Sharpsteen
/s/ Jack Shell
-----------------------------------
Jack Shell
EX-10.3
5
AMENDED AND RESTATED MORTGAGE AGREEMENT
Exhibit 10.3
AMENDED AND RESTATED
MORTGAGE WAREHOUSING CREDIT
AND SECURITY AGREEMENT
BANK: BANK ONE, ARIZONA, NA, a national banking
association formerly known as The Valley National
Bank of Arizona
Mailing Address of Bank:
Real Estate Finance Division
Mortgage Finance Department
Post Office Box 29542
Phoenix, Arizona 85038
Attention: Dept. A-581
BORROWER: CH MORTGAGE COMPANY, a Colorado corporation
formerly known as American Western Mortgage Company
Mailing Address of Borrower:
7001 North Scottsdale Road
Suite 2050
Scottsdale, Arizona 85250
DATE: July 1, 1995
Background
----------
A. Bank and Borrower are currently parties to that Amended and Restated
Warehousing Credit and Security Agreement dated September 26, 1991, as
thereafter amended (the "Original Credit Agreement"), pursuant to which Bank
agreed to make available to Borrower a warehousing line of credit in the amount
of $15,000,000.00 to finance the making of certain mortgage loans originated by
Borrower, as more specifically set forth therein. The indebtedness of Borrower
under the Original Credit Agreement is guaranteed by Continental Homes, Inc., a
Delaware corporation ("CHI"), and by Continental Homes Holding Corp., a Delaware
corporation ("CHHC").
B. At the time of execution of the Original Credit Agreement, (i) CHHC
owned one hundred percent (100%) of the outstanding capital stock of CHI, and
(ii) CHI owned one hundred percent (100%) of the outstanding capital stock of
Borrower.
C. Bank and Miltex Mortgage of Texas Limited Partnership, a Texas
limited partnership dba Miltex Mortgage Company ("Miltex") are currently parties
to that Mortgage Warehousing Credit and Security Agreement dated May 27, 1994,
as thereafter amended (the "Miltex Credit Agreement"), pursuant to which Bank
agreed to make available to Miltex a warehousing line of credit in the amount of
$10,000,000.00 to finance the making of certain mortgage loans originated by
Miltex, as more specifically set forth therein. The indebtedness of Miltex under
the Miltex Credit Agreement is guaranteed by Milburn Investments, Inc., a Texas
corporation ("Milburn").
D. At the time of execution of the Miltex Credit Agreement, (i) CHHC
owned one hundred percent (100%) of the outstanding capital stock of Milburn,
and (ii) Milburn owned one hundred percent (100%) of the general and limited
partnership interests in Miltex.
E. Pursuant to a corporate reorganization (the "Reorganization")
contemplated to be undertaken, Borrower will be purchasing certain assets of
Miltex. The remaining assets of Miltex will be liquidated, and the partnership
agreement of Miltex will be terminated. After the purchase of the assets
Borrower will change its name to CH Mortgage Company. The Reorganization is more
particularly described in that certain Asset Purchase Agreement dated July 1,
1995 (the "Plan") between Borrower, Milburn and Miltex.
F. Subsequent to the Reorganization, one hundred percent (100%) of the
outstanding capital stock of Borrower shall continue to be owned by CHI, and one
hundred percent (100%) of the outstanding capital stock of CHI shall continue to
be owned by CHHC.
G. Pursuant to Section 6.6 of the Original Credit Agreement, Borrower
agreed that without the consent of Bank, Borrower would not, among other things,
consolidate with or merge into any other person. Pursuant to Section 6.5 of the
Miltex Credit Agreement, Miltex agreed that without the consent of Bank, Miltex
would not, among other things transfer all of its assets or consolidate with or
merge into any other person.
H. Borrower and Miltex have requested that (i) Bank consent to the
Reorganization, (ii) Bank consolidate the loan evidenced by the Original Credit
Agreement and the loan evidenced by the Miltex Credit Agreement into a single
loan, and (iii) Bank consolidate, amend and restate the Original Credit
Agreement and the Miltex Credit Agreement.
I. Bank is willing to give such consent and to enter into such
consolidated, amended and restated agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
I. DEFINITIONS.
1.1 Defined Terms. Capitalized terms defined below or
elsewhere in this Agreement (including the Exhibits hereto) shall have the
following meanings (defined terms may be used in the singular or the plural, as
the context requires):
"Advance" means a disbursement by Bank under the Commitment,
including readvances of funds previously advanced to Borrower and
repaid to Bank.
"Advance Request" means a request for Advance in such form as
Bank may require from time to time.
"Agreement" means this Amended and Restated Mortgage
Warehousing Credit and Security Agreement, either as originally
executed or as it may from time to time be supplemented, modified or
amended.
"Approved Bailee Agreement" means each bailee agreement
approved by Bank pursuant to Section 2.2.
"Approved Investor" means FNMA, FHLMC, GNMA or each other
private investor approved by Bank pursuant to Section 4.2.
"Approved Purchase Commitment" means each purchase commitment
approved by Bank pursuant to Section 2.2(a)(vi).
"Approved States" means the states of Arizona, Colorado,
Florida and Texas.
"Attached Housing" means residential housing units intended
for occupancy by a single family that are joined by common walls but
are separately owned, including without limitation, condominiums,
townhouses and patio homes.
"Attached Housing Mortgages" means all Pledged Mortgages
secured by Attached Housing.
"Bank" means Bank One, Arizona, NA, a national banking
association.
"Borrower" means CH Mortgage Company, a Colorado corporation,
formerly known as American Western Mortgage Company.
"Business Day" means any day excluding Saturday, Sunday and
any day on which national banks are authorized or required to be
closed.
"CHHC" has the meaning set forth in Recital A.
"CHI" has the meaning set forth in Recital A.
"Collateral" has the meaning set forth in Section 3.1.
"Collateral Documents" means the documents and instruments
required to be delivered by Borrower pursuant to Section 2.2(a)(v).
"Collateral to Come Advances" means those Advances made by
Bank hereunder where Bank has accepted a telecopy of the Advance
Request in lieu of the Collateral Documents, as provided in Section
2.2(a)(v). When Bank receives the Collateral Documents, such Advances
will no longer be Collateral to Come Advances.
"Collateral Value" has the meaning set forth in Section
2.1(d).
"Commitment" has the meaning set forth in Section 2.1(b).
"Committed Mortgage Loan" means an Eligible Mortgage Loan that
is subject to an Approved Purchase Commitment.
"Conventional Loan" means a Mortgage Loan satisfying the
requirements for sale to an Approved Investor, FNMA or FHLMC and which
otherwise meets the requirements of an Approved Investor, FNMA or FHLMC
standard program as certified in writing by an officer of Borrower
(which certificate shall also include a copy of such program's or
Approved Investor's guidelines if requested by Bank); and with respect
to which amounts in excess of 80% of the appraised value of the real
property collateral for such Mortgage Loan (or such other percentage,
whether higher or lower, as may be required by applicable laws, rules
and regulations or Approved Investors) are insured by private mortgage
insurers acceptable to the Approved Investors.
"Credit Agreement Documents" shall mean this Agreement, the
Note, the Guaranty, and all other documents and instruments executed
and delivered in connection with the Loan.
"Current Market Value" has the meaning set forth in Section
3.2.
"Default Rate" has the meaning set forth in Section 2.4(d).
"Effective Date" means the date upon which (i) this Agreement
has been duly executed and delivered by Borrower and (ii) all
conditions precedent to the effectiveness hereof pursuant to Article IV
have been satisfied.
"Eligible Mortgage Loan" means a permanent Mortgage Loan which
(i) is secured by a Mortgage constituting a first lien on single family
residential property located in an Approved State, (ii) is a
Conventional Mortgage Loan, Jumbo Loan, FHA Loan or VA Loan, (iii)
closed and funded not more than one hundred twenty (120) days prior to
the earlier of (A) the date on which Bank receives a telecopy of the
Advance Request, if applicable, pursuant to Section 2.2(a)(v), or (B)
the date on which the Collateral Documents for such loan are delivered
to Bank pursuant to Section 2.2(a)(v) hereof, (iv) provides for a fixed
or variable rate of interest, (v) provides for regular monthly payments
(that may change in the case of variable rate loans) in an amount
sufficient to pay all accrued interest each month and fully amortize
the loan in not more than thirty (30) years with no negative
amortization, and (vi) otherwise complies with the terms and conditions
of this Agreement.
"Event of Default" means any of the conditions or events set
forth in Section 7.1 hereof.
"FHA" means the Federal Housing Administration and any
successor thereto.
"FHA Loan" means a Mortgage Loan for which an FHA Certificate
of Insurance has been issued.
"FHA Certificate of Insurance" means a certificate of
insurance or any similar certificate or instrument issued by FHA
evidencing that FHA has insured the payment of a portion of the
principal and interest on an Eligible Mortgage Loan, or if such
certificate has not been issued, the originally executed form
HUD-92900-A (or successor form) relating to such Mortgage Loan.
"FHLMC" means the Federal Home Loan Mortgage Corporation or
any successor thereto.
"FNMA" means the Federal National Mortgage Association or any
successor thereto.
"Floating Rate" has the meaning set forth in the Note.
"Funding Date" means with respect to each Advance against a
specific Eligible Mortgage Loan, the date of the making of such
Advance.
"GAAP" means generally accepted accounting principles
consistently applied.
"GNMA" means the Government National Mortgage Association or
any successor thereto.
"Guarantor" or "Guarantors" means CHI and CHHC.
"Guaranty" has the meaning set forth in Section 4.1(b).
"Indemnified Liabilities" has the meaning set forth in Article
IX.
"Interest Credit" has the meaning set forth in Section 2.4(e).
"Jumbo Loan" means a Mortgage Loan that (i) is in excess of
the ceiling amount for Conventional Mortgage Loans pursuant to
applicable laws, rules and regulations, (ii) is not in excess of the
principal amount of $500,000, and (iii) except with respect to amount,
satisfies all of the other requirements for Conventional Loans.
"Late Fee" has the meaning set forth in Section 2.4(c).
"Lien" means any lien, mortgage, deed of trust, pledge,
security interest, charge or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in the
nature thereof, and any agreement to give any security interest).
"Loan" means the loans and Advances from time to time made by
Bank to Borrower pursuant to this Agreement.
"Margin Call" has the meaning set forth in Section 3.3.
"Margin Credit" has the meaning set forth in Section 3.4.
"Maturity Date" means December 1, 1995.
"Maximum Rate" has the meaning set fort in the Note.
"Miltex" has the meaning set forth in Recital C.
"Miltex Credit Agreement" has the meaning set forth in Recital
C.
"Mortgage" means a mortgage or deed of trust on improved real
property.
"Mortgage Loan" means any loan evidenced by a Mortgage Note
and secured by a Mortgage.
"Mortgage Note" means a note secured by a Mortgage.
"Note" has the meaning set forth in Section 2.3.
"Notices" has the meaning set forth in Article VIII.
"Obligations" has the meaning set forth in Section 3.1.
"Officer's Certificate" means a certificate executed on behalf
of Borrower by the chief financial officer or such other officer of
Borrower approved by Bank.
"Original Credit Agreement" has the meaning set forth in
Recital A.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies,
joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether
or not legal entities, and governments and agencies and political
subdivisions thereof.
"Plan" has the meaning set forth in Recital E.
"Pledged Mortgages" means all promissory notes and mortgages
or deeds of trust or security deeds and other documents and instruments
evidencing or securing the Eligible Mortgage Loans with respect to
which Bank has made an Advance hereunder.
"Prime Rate" means the rate of interest established and
publicly announced from time to time by Bank One, Arizona, NA or its
successors, as its "Prime Rate" or "Reference Rate," whether or not
such rate actually is the lowest rate available to commercial borrowers
or other customers of such bank.
"Reorganization" has the meaning set forth in Recital E.
"Uncommitted Mortgage Loan" means an Eligible Mortgage Loan
that is not subject to an Approved Purchase Commitment.
"Unmatured Event of Default" means the occurrence of any event
or existence of any condition which, but for the giving of notice, the
lapse of time, or both, would constitute an Event of Default.
"Unused Commitment Fee" has the meaning set forth in Section
2.4(f)(iii).
"VA" means Veterans Administration or any successor thereto.
"VA Guarantee Certificate" means a guarantee or any similar
instrument issued by VA evidencing that VA has guaranteed the payment
of a portion of principal and interest on an Eligible Mortgage Loan, or
if such guarantee has not been issued, the originally executed Form VA
26-1802a (or successor form) relating to such Mortgage Loan.
"VA Loan" means a mortgage loan for which a VA Guarantee
Certificate has been issued.
II. THE CREDIT.
2.1 Agreements of Bank and the Commitment.
(a)Consent to Reorganization. From and after the
Effective Date, Bank (i) consents to the Reorganization and agrees that the
Reorganization does not constitute a default or an Event of Default under the
Original Credit Agreement, the Miltex Credit Agreement or this Agreement; and
(ii) agrees that all of the loans and advances then outstanding under the
Original Credit Agreement (which advances, as of June 28, 1995, are in the
principal amount of $4,463,963.00) and under the Miltex Agreement (which
advances, as of June 28, 1995, are in the principal amount of $6,449,012.00)
(collectively, the "Existing Advances") shall be deemed to be outstanding
Advances under this Agreement. The parties hereto agree that all existing
collateral security granted pursuant to the Original Credit Agreement and the
Miltex Credit Agreement shall be deemed to constitute collateral security under
this Agreement and shall be appropriately classified under the terms of this
Agreement. Borrower hereby reaffirms, ratifies and confirms the granting of the
security interest in and the liens and encumbrances on all such collateral for
the purpose of securing the revolving line of credit pursuant to this Agreement,
the Note and the obligations contained herein. Borrower shall execute and
deliver such further instruments and shall do and perform all matters and things
necessary to maintain Bank's security and benefits in such collateral. Borrower
represents, warrants and affirms to Bank that it has no defense, setoff or
counterclaim against Bank in regard to Borrower's obligations under the Original
Credit Agreement or any other documents executed in connection therewith. The
parties hereto agree that this Agreement, the Note, the Guaranty and all other
documents executed pursuant hereto shall amend, supersede and replace in their
entirety, the Original Credit Agreement, the Miltex Credit Agreement, and all
promissory notes, guaranties and other documents executed pursuant thereto.
(b)Agreement of Bank. Subject to the terms and
conditions of this Agreement, Bank agrees, from time to time from and after the
Effective Date, to make Advances to Borrower, so long as the total aggregate
principal amount outstanding at any one time of all Advances shall not exceed
$25,000,000.00 (the "Commitment"). Within the Commitment, Borrower may borrow,
repay and reborrow.
(c)Use of Advances; Request for Advances. Advances
shall be used by Borrower solely for the purpose of reimbursing Borrower for the
origination by Borrower of Eligible Mortgage Loans. Advances shall be made at
the request of Borrower, in the manner hereinafter provided in Section 2.2
hereof, against the pledge of such Eligible Mortgage Loans as Collateral
therefor.
(d)Maximum Amount of Advances. The aggregate amount
of all Advances made against an Eligible Mortgage Loan shall not exceed the
following amount (the "Collateral Value") applicable to the type of Collateral
at the time it is pledged:
(i)with respect to a Committed Mortgage Loan, the
lesser of (a) ninety-eight percent (98%) of the committed
purchase price thereof set forth in the Approved Purchase
Commitment for such Eligible Mortgage Loan, or (b) the face
amount of the Mortgage Loan; or (c) the funds actually
advanced by Borrower in extending the Mortgage Loan; and
(ii)with respect to an Uncommitted Mortgage Loan, the
lesser of (A) ninety-six percent (96%) of the Current Market
Value, or (B) the face amount of the Mortgage Loan, or (C) the
funds actually advanced by Borrower in extending the Mortgage
Loan.
(e)Limitation on Advances. Notwithstanding the
foregoing, Bank's obligation to make Advances shall be subject to the following
limitations:
(i)Bank shall not be obligated to make Advances with
respect to any Attached Housing Mortgages if the aggregate number of all Pledged
Mortgages that are Attached Housing Mortgages at any time exceeds or would
exceed ten percent (10%) of the aggregate number of all Pledged Mortgages.
(ii)Bank shall not be obligated to make Advances with
respect to a Jumbo Loan if the aggregate number of all Pledged Mortgages
constituting Jumbo Loans at any time exceeds or would exceed ten percent (10%)
of the aggregate number of all Pledged Mortgages.
(iii)Bank shall not be obligated to make Advances
that are Collateral to Come Advances (A) during the first five (5) Business Days
of each calendar month or during the last five (5) Business Days of each
calendar month if the aggregate principal amount of all Advances that are
Collateral to Come Advances during such time exceeds or would exceed thirty
percent (30%) of the Commitment amount; or (B) during all other times if the
aggregate principal amount of all Advances that are Collateral to Come Advances
during such time exceeds or would exceed twenty percent (20%) of the Commitment
amount.
(iv)Bank shall not be obligated to make Advances with
respect to an Uncommitted Mortgage Loan if the aggregate principal amount of all
Advances outstanding against Uncommitted Mortgage Loans at any time exceeds or
would exceed fifteen percent (15%) of the aggregate principal amount of all
Advances outstanding under the Loan.
2.2 Conditions Precedent to Advances and Procedure for
Obtaining Advances.
(a)Conditions Precedent. The obligation of Bank to
make any Advances is subject to the satisfaction, in the sole discretion of
Bank, on or before each Funding Date, of the following conditions precedent:
(i)Effective Date. All of the conditions precedent
set forth in Section 4.1 shall have been satisfied and the Effective Date shall
have occurred.
(ii)No Defaults. No Default or Event of Default shall
have occurred and be continuing.
(iii)Accuracy of Representations and Warranties. All
representations and warranties made herein or in any other Loan Document shall
be true and correct as of the date of each such Advance as if made on and as of
such date.
(iv)Advance Request. Borrower shall have executed and
delivered to Bank a properly completed and duly executed Advance Request.
(v)Collateral Documents. Borrower shall have
delivered to Bank the documents required in Exhibit A hereto (the "Collateral
Documents"). Bank shall have the right, on three (3) Business Days prior notice
to Borrower, to include different or additional items than those which are
listed in Exhibit A hereto to conform to current legal requirements or Bank's
practices. Bank shall accept a telecopy of the Advance Request described in
subparagraph 2.2(a)(iv), in lieu of the Collateral Documents; provided, however,
that Borrower will provide to Bank all Collateral Documents within five (5)
Business Days thereafter.
(vi)Approval of Purchase Commitment and Bailee
Agreement. With respect to Committed Mortgage Loans, Borrower shall have
delivered to Bank and Bank shall have approved, in its reasonable discretion (A)
Borrower's written confirmation of an oral commitment and, if requested by Bank
in its sole and absolute discretion a written, master purchase commitment/sales
contract from an Approved Investor setting forth the terms pursuant to which
such Approved Investor agrees to purchase Mortgage Loans from Borrower (an
"Approved Purchase Commitment"), and (B) if requested by Bank within two (2)
Business Days after the above-described written confirmation, a specific
commitment issued pursuant to the Approved Purchase Commitment to purchase the
Eligible Mortgage Loan for which the Advance Request is made, and (C) a bailee
agreement pursuant to which such Approved Investor has agreed to hold Mortgage
Loans as Bank's bailee to perfect Bank's security interest therein (an "Approved
Bailee Agreement").
(vii)Continuing Effectiveness of Approved Purchase
Commitment and Bailee Agreement. With respect to Committed Mortgage Loans, the
applicable Approved Purchase Commitment and Approved Bailee Agreement shall be
in full force and effect and not subject to any claims or defenses.
(b)Timing of Advance. So long as all conditions
precedent to an Advance have been satisfied prior to (i) 10:00 A.M., Phoenix,
Arizona time, on any Business Day if Bank will be wiring the Advance or (ii)
1:00 P.M., Phoenix, Arizona time, on any Business Day that Advances are made in
any method other than wiring, Bank shall use reasonable efforts to make the
Advance prior to 5:00 P.M., Phoenix, Arizona time, on the same Business Day, and
in any event not later than 5:00 P.M., Phoenix, Arizona time, on the second
Business Day thereafter. If the conditions precedent to an Advance are satisfied
after 10:00 A.M. or 1:00 P.M., as applicable, Phoenix, Arizona, time on any
Business Day, Bank will use reasonable efforts to make the Advance by 5:00 P.M.,
Phoenix, Arizona, time on the next Business Day, and in any event not later than
5:00 P.M., Phoenix, Arizona, time on the second Business Day thereafter.
(c)Single Indebtedness. All Advances under this
Agreement shall constitute a single indebtedness and all of the Collateral shall
be security for the Note and for the performance of all obligations of Borrower
to Bank.
(d)Bank's Option. At Bank's option, Advances may be
made (i) by wire transfer to the applicable title companies, or (ii) by payment
directly to Borrower (provided that Bank will not make Advances directly to
Borrower in any case where Bank has permitted Borrower to retain possession of
the Mortgage Note in question), or (iii) by deposit to Borrower's zero balance
account maintained by Borrower at Bank (which deposit will be applied to pay
drafts drawn by title companies or other persons conducting the closing of the
related Eligible Mortgage Loan). As a further condition to Advances, Borrower
shall present to Bank appropriate wiring instructions, as required by Bank.
(e)Zero Balance Account. From time to time in the
sole and absolute discretion of Bank, Borrower may be permitted to cause drafts
drawn on Borrower's zero balance account maintained at Bank to be presented to
Bank for payment in connection with the funding of Eligible Mortgage Loans,
notwithstanding that Borrower has not made an Advance Request or submitted
Collateral Documents in connection with such Mortgage Loan. Bank may pay any
such drafts without any further consent of or notice to Borrower and shall be
entitled to assume that each draft is proper, duly authorized, and validly
presented. Any payment by Bank of such draft shall be deemed to be an Advance,
notwithstanding that the conditions precedent to Advances have not been
satisfied. Any such Advance for which an Advance Request or Collateral Documents
have not been submitted shall be due and payable in full prior to 1:00 p.m.,
Phoenix, Arizona time on the first Business Day after the date the related draft
was presented to Bank. Notwithstanding any other provision of the Credit
Agreement Documents to the contrary, Borrower (and each Guarantor by executing
the Guaranty) hereby irrevocably authorizes Bank to withdraw from and set off
against any deposit accounts maintained by Borrower or any Guarantor with Bank
the amount of any such Advances as due and payable; provided, however, that such
right of set-off shall not apply to any deposits of escrow monies being held on
behalf of mortgagors under Mortgage loans or other third parties or accounts
containing only principal and interest payments by borrowers under Mortgage
Loans that are maintained in connection with Borrower's servicing of Mortgage
Loans. If at any time, Bank elects, in its sole and absolute discretion, not to
permit further Advances pursuant to this Section 2.2(e), Borrower shall
immediately cease allowing title companies or other persons to submit such
drafts except in connection with Advances for which all the conditions precedent
set forth herein have been satisfied.
2.3 Note. Borrower's obligation to pay the principal of, and
interest on, all Advances made by Bank shall be evidenced by the promissory note
(the "Note") dated as of the date hereof substantially in the form of Exhibit B
attached hereto. The Note shall supersede and replace the existing promissory
notes executed pursuant to the Original Credit Agreement and the Miltex Credit
Agreement. Upon execution of the Note by Borrower, the amounts outstanding under
such existing promissory notes shall be deemed to be disbursed pursuant to the
Note and presently outstanding thereunder. The term "Note" shall include all
extensions, renewals and modifications of the Note and all substitutions or
replacements therefor. All terms and provisions of the Note are incorporated
herein.
2.4 Interest.
(a)Interest Rate. Subject to the provisions in the
Note, the unpaid amount of each Advance shall bear interest from and including
the date of such Advance until paid in full at the applicable rate of interest
set forth in the Note.
(b)Interest Payments. Interest shall be payable
monthly in arrears, on the first (1st) day of each month, commencing with the
first day of the first month following the date hereof, and on the Maturity
Date.
(c)Late Fee. Subject to the provisions in the Note,
Borrower shall pay to Bank a late fee ("Late Fee") of four percent (4%) of the
amount of any interest payment past due in excess of fifteen (15) days.
(d)Default Rate. Subject to the provisions in the
Note, upon and after an Event of Default hereunder, at the option of Bank, the
outstanding principal amount of all Advances shall bear interest, payable on
demand, at a rate per annum equal to the sum of the Floating Rate plus four
percent (4%) (the "Default Rate"). The application of the Default Rate shall not
be interpreted or deemed to extend any cure period set forth in this Agreement
or otherwise to limit any of Bank's remedies under this Agreement.
(e)Fees and Expenses. In addition to all interest and
other fees payable pursuant to the Credit Agreement Documents and this
Agreement, Borrower agrees to pay:
(i)Commitment Fee. A commitment fee of one-quarter of
one percent (.25%) per annum of the Commitment amount, payable upon execution of
this Agreement; provided, however, that Borrower shall be entitled to a credit
against such commitment fee in an amount equal to the commitment fees paid under
the Original Credit Agreement and the Miltex Credit Agreement that relate to the
period from the Effective Date until the Maturity Date.
(ii)Package Fee. A fee of $15.00 per Pledged Mortgage
to cover the costs of Bank's reviewing the Collateral Package of such Pledged
Mortgage. All such fees accumulated in each month shall be payable on the first
day of the following month and so long as such fees are paid on such first day,
Bank will not charge interest on the accrued fees. No package fees will be
charged for those Pledged Mortgages that are simultaneously paid in full from
funds in Borrower's account maintained at Bank.
(iii)Unused Commitment Fee. An Unused Commitment Fee
computed at the rate of one-fourth of one percent (.25%) per annum on the unused
portion of the Commitment amount of $25,000,000.00, calculated from the date
hereof and payable monthly in arrears. For each month (or portion thereof), the
Unused Commitment Fee shall be equal to (A) $25,000,000.00 minus (B) the
"average monthly outstandings" for the month (or portion thereof) with respect
to which the Unused Commitment Fee is being computed, with the resulting number
multiplied by (C) one-twelfth (1/12th) of the rate of one-fourth of one percent
(.25%) per annum. As used herein, "average monthly outstandings" means the sum
of the outstanding amount of the Advances on each day during the month (or
portion thereof for which the fee is being computed) with respect to which the
Unused Commitment Fee is being computed, divided by the number of days in that
month (or portion thereof). If the Unused Commitment Fee is being computed for
less than a full month, the percentage used in clause (C) above shall be
computed on a daily basis for the number of days for which the fee is being
computed.
(iv)Wire Transfer Fees. Such wire transfer fees as
shall be charged by Bank from time to time to its customers. All such fees
accumulated in each month shall be payable on the first day of the following
month and so long as such fees are paid on such first day, Bank will not charge
interest on the accrued fees.
(v)Other Fees. All fees and expenses described in
Article IX.
2.5 Principal Payments.
(a)Maturity Date. The outstanding principal amount of
all Advances and all other amounts outstanding hereunder shall be payable in
full on the Maturity Date or upon the earlier expiration or termination of the
Commitment.
(b)Prepayment. Borrower shall have the right to
prepay the outstanding Advances in whole or in part, from time to time, in
accordance with the provisions of the Note.
(c)Other Mandatory Principal Payments. In addition,
Borrower shall be obligated to pay to Bank, without the necessity of prior
demand or notice from Bank, the amount of any outstanding Advance against a
specific Eligible Mortgage Loan as shown on Bank's records, upon the occurrence
of any of the following events:
(i)Maximum Period after Funding Date. One hundred
eighty (180) days have elapsed from the initial Funding Date for such Eligible
Mortgage;
(ii)No Approved Purchase Commitment. Seven (7)
Business Days have elapsed from the initial Funding Date for an Uncommitted
Mortgage Loan without such Mortgage Loan being reclassified as a Committed
Mortgage Loan;
(iii)Ineligible Mortgage Loans. Any Mortgage Loan
with respect to which Bank has made an Advance is found not to constitute an
Eligible Mortgage Loan upon examination by Bank of the Collateral Documents with
respect thereto or other information received by Bank;
(iv)Failure to Deliver Collateral Documents. With
respect to Collateral to Come Fundings, five (5) Business Days have elapsed from
the date the Advance Request was telecopied to Bank without Borrower providing
the Collateral Documents;
(v)Rejection by Purchaser. Two (2) Business Days have
elapsed after the Collateral Documents for such Eligible Mortgage are rejected
by the Approved Investor as unsatisfactory;
(vi)Failure to Purchase. Forty (40) calendar days
have elapsed from the delivery of an Eligible Mortgage Loan to an Approved
Investor for purchase without the purchase being made;
(vii)Inaccuracy of Representations and Warranties. If
any of the representations and warranties set forth in Sections 5.7, 5.13, 6.6
or 6.17 with respect to an Eligible Mortgage Loan are untrue or incorrect in any
material respect;
(viii)Commitment Exceeded. If the aggregate amount of
all Advances exceeds the available Commitment;
(ix)Attached Housing Loans Exceeded. If the aggregate
number of Attached Housing Mortgage Loans exceeds the limitation established in
Section 2.1(e)(i);
(x)Jumbo Loans Exceeded. If the aggregate number of
Jumbo Loans exceeds the limitations established in Section 2.1(e)(ii);
(xi)Collateral to Come Advances Exceeded. If the
aggregate principal amount of Advances constituting Collateral to Come Advances
exceeds the respective limitations established in Section 2.1(e)(iii);
(xii)Uncommitted Mortgage Loans Exceeded. If the
aggregate principal amount of Advances outstanding against Uncommitted Mortgage
Loans exceeds the limitations established in Section 2.1(e)(iv);
(xiii)Correction of Documents. Ten (10) Business Days
have elapsed from the date the Collateral Document was delivered to Borrower for
correction or completion, without being returned to Bank;
(xiv)Defaults. Such Eligible Mortgage Loan is
defaulted and remains in default for sixty (60) days; or
(xv)Sale. Upon consummation of the sale of such
Eligible Mortgage Loan.
III. COLLATERAL.
3.1 Grant of Security Interest. As security for the payment of
all present and future Advances made or to be made by Bank to Borrower under
this Agreement and as security for the performance of the Note, and all
obligations, indebtedness and liabilities of Borrower to Bank, due or to become
due, joint or several, absolute or contingent, now existing or hereafter
created, arising pursuant to, or in connection with, this Agreement
(collectively, the "Obligations"), Borrower hereby grants to Bank, a security
interest in and lien upon and pledge to Bank all of Borrower's right, title and
interest in the following described property (collectively, the "Collateral"):
(a)Pledged Mortgages. All Pledged Mortgages;
(b)Payments, etc. All cash, payments and prepayments
of principal, interest, penalties and other income due or to become due in
respect of the Pledged Mortgages;
(c)Other Property. All of the right, title and
interest of every nature whatsoever of Borrower in and to the following:
(i)All rights, liens and security interests existing
with respect to, or as security for, the Pledged Mortgages or any part thereof;
(ii)All hazard and liability insurance policies,
title insurance policies, (or any binders or commitments to issue any of such
policies) and all condemnation proceeds and insurance proceeds with respect to
or relating to any of the Pledged Mortgages;
(iii)All insurance and guarantees with respect to the
Pledged Mortgages, or any binders or commitments or agreements to issue any such
insurance or guarantees, and all insurance proceeds, with respect to any of the
Pledged Mortgages;
(iv)All private mortgage insurance policies or any
binders or commitments to issue any such policies with respect to any of the
Pledged Mortgages;
(v)All securities issued with respect to any of the
Pledged Mortgages;
(vi)All other rights and interests of Borrower in
respect of the Pledged Mortgages;
(d)Files, etc. All files, surveys, certificates,
correspondence, appraisals, computer programs, tapes, discs, cards, accounting
records, and other records, information, and data of Borrower relating to the
Pledged Mortgages, including all information, records, data, programs, tapes,
discs and cards necessary to administer and service such Collateral;
(e)Approved Purchase Commitments and Other
Agreements. All rights of Borrower under all oral and written purchase
commitments, sales contracts, bailee agreements and other agreements and
commitments covering the Pledged Mortgages (including without limitation all
Approved Purchase Commitments and Approved Bailee Agreements);
(f)Other Rights. All personal property, contract
rights, accounts and general intangibles of whatsoever kind relating to the
Pledged Mortgages, and all oral and written purchase commitments, sales
contracts and other agreements and commitments covering the Pledged Mortgages
(including without limitation all Approved Purchase Commitments) and all other
documents or instruments delivered to Bank in respect of the Pledged Mortgages,
including, without limitation, the right to receive all insurance proceeds and
condemnation awards which may be payable in respect of the premises encumbered
by any Pledged Mortgage; and
(g)Proceeds. All products and proceeds of any of the
foregoing.
3.2 Valuation of Collateral. The Collateral shall be valued as
set forth below at least weekly and more often at Bank's sole discretion. For
purposes hereof, "Current Market Value" shall mean the current price reported to
Bank on "Telerate Systems Reports" or other source acceptable to Bank in its
sole discretion.
3.3 Margin Call. The parties intend that the amount advanced
and outstanding under this Agreement with respect to an Uncommitted Mortgage
Loan shall at no time exceed ninety-six percent (96%) of its then Current Market
Value. If, at any time, the amount advanced with respect to an Uncommitted
Mortgage Loan is greater than ninety-six percent (96%) of its then Current
Market Value, as determined in accordance with Section 3.2 hereof, then Borrower
shall be required to make the payments set forth in this Section 3.3 ("Margin
Call"). A Margin Call shall require Borrower to pay to Bank an amount equal to
the difference between ninety-six percent (96%) of the then Current Market Value
and the amount advanced with respect to such Uncommitted Mortgage Loan. Payment
for each Margin Call due to Bank pursuant to this Section 3.3 shall be made by
Borrower in immediately available funds within one (1) Business Day following
the occurrence of such event, provided, however, if the outstanding aggregate
amount of all Margin Calls is equal to or less than $25,000.00, then Borrower
shall not be obligated to make payment for such Margin Calls unless and until
the aggregate amount of all Margin Calls is greater than $25,000.00, at which
time Borrower shall be obligated to immediately pay the entire amount of all
outstanding Margin Calls. Such amounts paid by Borrower shall reduce, by a
corresponding amount, the amount outstanding under the Note.
3.4 Margin Credit. If it is determined from any valuation that
ninety-six percent (96%) of the Current Market Value of any Uncommitted Mortgage
Loan, as determined in accordance with Section 3.2 hereof, exceeds the amount of
the Advances against such Uncommitted Mortgage Loan, such amount in excess of
the Collateral Value (the "Margin Credit") shall, upon the written request of
Borrower submitted pursuant to the terms of this Agreement for an Advance, be
payable to Borrower as an additional Advance against such Uncommitted Mortgage
Loan, but only (i) if all obligations to be observed or performed by Borrower
under this Agreement are complied with and (ii) there is not a Margin Call then
outstanding and no other required principal payments then due pursuant to the
terms of this Agreement.
3.5 Release of Collateral; Bailee Agreements.
(a)Releases. Provided no Event of Default has
occurred and is continuing, Bank will release a Pledged Mortgage from the pledge
created hereby, upon receipt by Bank of the amount advanced by Bank under this
Agreement with respect to such Pledged Mortgage as shown on Bank's records.
(b)Transmittal of Mortgages. Bank will, upon request
of Borrower, transmit original Mortgage Notes held by Bank in connection with
Pledged Mortgages to Approved Investors or other responsible third parties (as
determined by Bank) for the purpose of sale. Borrower may transmit other
documents and instruments related to Pledged Mortgages to such Approved
Investors or other responsible third parties. Such transmission or delivery by
Bank or Borrower to an Approved Investor or other third party shall be made
pursuant to and shall be subject to the terms of an Approved Bailee Agreement or
otherwise upon such terms and conditions reasonably satisfactory to Bank.
(c)Proceeds of Sale. All proceeds from the sale or
other disposition of Collateral shall be paid directly to Bank for application
to the release payment described in Section 3.5(a). If the proceeds from the
sale or disposition of any such Collateral are insufficient to pay Bank an
amount equal to the amount advanced by Bank under this Agreement with respect to
such Pledged Mortgage, Borrower agrees to immediately after demand by Bank pay
the amount of any such insufficiency. If such proceeds from the sale or
disposition of such Collateral are in excess of the amount advanced by Bank
under this Agreement with respect to such Pledged Mortgage, so long as no
Unmatured Event of Default or Event of Default has occurred and is continuing,
Bank will release such excess to Borrower.
3.6 Return of Collateral at End of Commitment. If (i) the
Commitment shall have expired or been terminated and (ii) no Advances, interest
or other amounts evidenced by the Note or due under this Agreement shall be
outstanding and unpaid, Bank shall deliver or release all Collateral in its
possession to Borrower or as directed in writing by Borrower. The receipt by
Borrower of any Collateral released or delivered to Borrower pursuant to any
provision of this Agreement shall be a complete and full acquittance for the
Collateral so returned, and Bank shall thereafter be discharged from any
liability or responsibility therefor.
3.7 No Duty to Protect Collateral. Bank shall have no duty to
Borrower or any other Person as to the collection or protection of Collateral
held hereunder or any income thereon, nor as to the preservation of any rights
pertaining thereto, beyond the reasonable care thereof during the time the
Collateral is in the actual possession of Bank. Such care as Bank gives to the
safekeeping of its own property of like kind shall constitute reasonable care of
Collateral when in Bank's actual possession; but Bank is not required to make
presentment, demand or protest, or give notice, and need not take action to
preserve any rights against prior parties, obligors, account debtors, or others,
in connection with any obligation or evidence of indebtedness held as Collateral
or in connection with Borrower's obligations. Notwithstanding any provision
hereof or of any Approved Bailee Agreement to the contrary, the transmittal and
delivery of any Pledged Mortgages, Collateral Documents and other documents or
instruments shall be at the sole risk and expense of Borrower and Bank shall not
be liable or obligated in any respect in the event of the loss, damage, or
destruction of any Collateral Documents, Pledged Mortgages and other documents
or instruments or any delay in the transmission or delivery thereof.
IV. CONDITIONS PRECEDENT.
4.1 Closing. The obligation of Bank to make Advances and the
other provisions of this Agreement that are binding upon Bank shall become
effective upon the receipt by Bank of the following, all of which must be
satisfactory in form and content to Bank, in its sole discretion:
(a)Note. The Note in the form attached hereto as
Exhibit B, duly executed by Borrower;
(b)Guaranty. The Guaranty in the form attached as
Exhibit C, duly executed by Guarantors;
(c)Articles, Bylaws and Good Standing. Certified
copies of articles of incorporation and bylaws of Borrower and each Guarantor,
and a current certificate of good standing for Borrower for each Approved State
(which certificate shall be required only at such time as Borrower requests an
Advance with respect to a Pledged Mortgage encumbering property located in such
state);
(d)Resolutions. A resolution of the board of
directors of Borrower and each Guarantor, certified as of the date thereof by
its corporate secretary or assistant secretary, authorizing the execution,
delivery and performance of this Agreement and the Note and the Guaranty, as
applicable, and all other instruments or documents to be delivered by Borrower
and Guarantor pursuant to this Agreement;
(e)Incumbency Certificate. A certificate of the
corporate secretary or assistant secretary of Borrower and each Guarantor as to
the incumbency and authenticity of the signatures of the officers of such
corporation executing this Agreement and the Note and the Guaranty and each
Advance Request and all other instruments or documents to be delivered pursuant
hereto (Bank being entitled to rely thereon until a new such certificate has
been furnished to Bank);
(f)Financial Statements. Financial statements of
Borrower and each Guarantor for the period which ended on February 28, 1995;
(g)Licenses and Approvals. Evidence satisfactory to
Bank that Borrower (i) is a licensed mortgage banker under the laws of the State
of Arizona and Texas, if required by Arizona and Texas law, respectively; (ii)
has all necessary permits, licenses and approvals necessary to conduct its
business in Arizona and Texas; and (iii) has all other necessary licenses and
approvals to conduct its business and engage in the activities contemplated
hereby;
(h)Closing Letters. If requested by Bank, an insured
closing letter from each title insurance company from which mortgagee title
insurance is procured, in form satisfactory to Bank, indemnifying and holding
Borrower harmless from and against the failure of the agents of such title
insurance companies to comply with the written closing instructions of Borrower
as to Pledged Mortgages;
(i)Form Documents. Forms of the Mortgages, Mortgage
Notes and other Mortgage Loan documents used by Borrower in Arizona and Texas;
(j)Opinion of Counsel. An opinion of counsel for
Borrower and Guarantor, from an attorney reasonably satisfactory to Bank, as to
such matters as Bank may request, including without limitation, matters relating
to the completion of the Reorganization and the liquidation and merger
contemplated in connection therewith;
(k)Payment of Commitment Fee. Borrower shall have
paid to Bank the commitment fee required in Section 2.4(e)(i).
4.2 Approved Investors. As of the date of this Agreement, Bank
has approved the proposed purchasers of Eligible Mortgage Loans listed on
Exhibit D hereto as Approved Investors hereunder and (unless otherwise indicated
on Exhibit D) the bailee agreements with such Approved Investors as Approved
Bailee Agreements hereunder. Borrower may, from time to time, request Bank to
approve (i) other proposed purchasers of Eligible Mortgage Loans as Approved
Investors hereunder and (ii) the purchase agreements and Bailee Agreements with
such additional investors as Approved Purchase Commitments and Approved Bailee
Agreements, as applicable, hereunder. Any such request shall be made in writing
and shall include such information as Bank may request, including, without
limitation, financial statements and other financial information with respect to
the proposed investor, credit and other references with respect to the proposed
investor, a description of the experience of the proposed investor and a copy of
all purchase agreements and any proposed bailee agreement with respect to such
Investor. Any such approval of a proposed investor and such agreements may be
granted or withheld in the reasonable discretion of Bank.
4.3 Approved States. As of the date of this Agreement, the
Approved States are as designated in Section 1.1. If Borrower desires to include
additional states of the United States as Approved States, Borrower shall so
notify Bank in writing designating each state to be so included and, with such
notification, Borrower shall deliver to Bank (i) a copy of all licenses and
approvals necessary to conduct Borrower's business in such state, (ii) evidence
satisfactory to Bank that Borrower has all licenses, approvals and
authorizations necessary to make residential mortgage loans in such state and
that the loan documents proposed to be used by Borrower in such state comply
with all laws, rules and regulations, (iii) copies of all loan documents to be
used by Borrower to originate Mortgage Loans in such state, (iv) certificates of
good standing of Borrower for such state, and (v) UCC-1 financing statements
executed by Borrower, in a form acceptable to Bank and suitable for recording or
filing in such state. Bank may approve or disapprove the addition of such state
as an Approved State in its reasonable discretion.
V. REPRESENTATIONS.
Borrower hereby represents and warrants to Bank, as of the
date of this Agreement and as of the date of each Advance Request, that:
5.1 Organization and Good Standing. Borrower and each
Guarantor are each a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of their formation or incorporation,
have the full legal power and authority to own their respective properties and
to carry on their respective businesses as currently conducted and are duly
qualified as a foreign partnership or corporation to do business and are in good
standing in each jurisdiction in which the transaction of their business makes
such qualification necessary, except in jurisdictions, if any, where a failure
to be in good standing has no material adverse effect on the business
operations, assets or financial condition of Borrower or such Guarantor.
5.2 Borrower's Ownership. One hundred percent (100%) of the
issued and outstanding shares of stock in Borrower is owned directly or
indirectly by CHI. One hundred percent (100%) of the issued and outstanding
shares of stock in CHI is owned by CHHC. None of the stock of Borrower or of any
Guarantor has been pledged, assigned, transferred nor does a Lien exist against
or with respect to such stock.
5.3 Authorization and Enforceability. Borrower has the power
and authority to execute, deliver and perform this Agreement, the Note and all
other documents contemplated hereby or thereby. Each Guarantor has the power and
authority to execute, deliver and perform the Guaranty. The execution, delivery
and performance by Borrower of this Agreement, and all other documents
contemplated hereby and the borrowing hereunder and thereunder, have been duly
and validly authorized by all necessary partnership action on the part of
Borrower (none of which actions have been modified or rescinded, and all of
which actions are in full force and effect) and do not and will not conflict
with or violate any provision of law or of the partnership agreement of
Borrower, conflict with or result in a breach of or constitute a default or
require any consent under, or result in the creation of any Lien upon any
property or assets of Borrower, or result in or require the acceleration of any
indebtedness of Borrower pursuant to, any agreement, instrument or indenture to
which Borrower is a party or by which Borrower or its property may be bound or
affected. The execution, delivery and performance by each Guarantor of the
Guaranty has been duly and validly authorized by all necessary corporate action
on the part of each Guarantor (none of which actions have been modified or
rescinded, and all of which actions remain in full force and effect) and do not
and will not conflict with or violate any provision of law or of the articles of
incorporation or bylaws of each Guarantor, conflict with or result in a breach
of or constitute a default or require any consent under, or result in the
creation of any lien upon any property or assets of each Guarantor pursuant to
any agreement, instrument or indenture to which each Guarantor is a party or by
which either Guarantor or its property may be bound or affected. This Agreement,
the Note and all other documents contemplated hereby or thereby and the Guaranty
constitute legal, valid, and binding obligations of Borrower and each Guarantor,
as applicable, enforceable in accordance with their respective terms.
5.4 Approvals. The execution and delivery of this Agreement,
the Note, the Guaranty and all other documents contemplated hereby or thereby
and the performance of Borrower's and Guarantors' respective obligations
hereunder and thereunder do not require any license, consent, approval or other
action of any state or federal agency or governmental or regulatory authority.
5.5 Financial Condition. The financial statements of Borrower
and each Guarantor furnished to Bank are complete and accurate and fairly
present the financial condition of Borrower and each Guarantor in accordance
with GAAP as of the date of such financial statements. Since the date of such
financial statements, there has been no material adverse change in the financial
condition of Borrower or either Guarantor.
5.6 Litigation. There are no actions, claims, suits or
proceedings pending, or to the knowledge of Borrower, threatened or reasonably
anticipated against or affecting Borrower or either Guarantor in any court or
before any arbitrator or before any government commission, board, bureau or
other administrative agency which, if adversely determined, may reasonably be
expected to result in any material and adverse change in the business,
operations, assets or financial condition of Borrower or either Guarantor.
5.7 Licenses and Approvals. Borrower (i) is, or will be prior
to the time that Borrower requests an Advance with respect to a Pledged Mortgage
encumbering property located in such state, a licensed mortgage banker under the
laws of each Approved State, if required by the law of each Approved State,
respectively, (ii) has, or will have prior to the time that Borrower requests an
Advance with respect to a Pledged Mortgage encumbering property located in such
state, all permits, licenses and approvals necessary to conduct its business in
each Approved State and is an approved FHA/VA/FNMA/FHLMC/GNMA lender, issuer,
seller, and/or servicer, as applicable, and (iii) has all other necessary
licenses and approvals to conduct its business and engage in the activities
contemplated hereby.
5.8 Compliance with Laws. Borrower and each Guarantor are not
in violation of any provision of any law, or of any judgment, award, rule,
regulation, order, decree, writ or injunction of any court or public regulatory
body or authority which might have a material adverse effect on the business,
operations, assets or financial condition of Borrower or either Guarantor.
5.9 Regulation U. Borrower is not engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System), and no part of the proceeds of any Advances will be used to purchase or
carry any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock. If requested by Bank, Borrower shall
furnish to Bank a statement in conformity with the requirements of Federal
Reserve Form U-1 referred to in said Regulation U.
5.10 Investment Company Act. Borrower is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
5.11 Payment of Taxes. Borrower and each Guarantor have filed
or caused to be filed all federal, state and local income, excise, property and
other tax returns which are required to be filed, all such returns are true and
correct, and Borrower and each Guarantor have paid or caused to be paid all
taxes as shown on such returns or on any assessment, to the extent that such
taxes have become due.
5.12 Agreements. Neither Borrower nor any Guarantor is a party
to any agreement, instrument or indenture or subject to any restriction
materially and adversely affecting its business, operations, assets or financial
condition, except as disclosed to Bank. Neither Borrower nor any Guarantor is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement, instrument, or indenture
which default could have a material adverse effect on the business, operations,
properties or financial condition of Borrower or either Guarantor. No holder of
any indebtedness of Borrower or either Guarantor has given notice of any
asserted default thereunder, and no liquidation or dissolution of Borrower or
either Guarantor, and no receivership, insolvency, bankruptcy, reorganization or
other similar proceedings relative to Borrower or either Guarantor or any of its
properties is pending, or to the knowledge of Borrower, threatened.
5.13 Special Representations Concerning Collateral. Borrower
hereby represents and warrants to Bank, as of the date of this Agreement and as
of the date of each Advance Request, that:
(a)Ownership. Borrower is the legal and equitable
owner and holder, free and clear of all Liens, of the Pledged Mortgages. All
Pledged Mortgages have been and will continue to be validly pledged or assigned
to Bank, subject to no other Liens.
(b)Borrower's Authority. Borrower has, and will
continue to have, the full right, power and authority to pledge the Collateral
pledged and to be pledged by it hereunder.
(c)Mortgage Loans. All Mortgage Loans and related
documents included in the Pledged Mortgages (including without limitation
Purchase Commitments and Approved Bailee Agreements, as applicable), (i) as of
any date of determination, have been duly executed and delivered by the parties
thereto at a closing held not more than 120 days prior to such date, (ii) have
been made in compliance with all applicable requirements, if any, of the Real
Estate Settlement Procedures Act, Equal Credit Opportunity Act, the federal
Truth-In-Lending Act and all other applicable laws and regulations (including,
without limitation, laws, rules and regulations of each Approved State), (iii)
are and will continue to be valid and enforceable in accordance with their
terms, without defense or offset, (iv) have not been modified or amended nor
have any requirements thereof waived, (v) satisfy all requirements of the
applicable Approved Purchase Commitment and any issuing and selling guides from
time to time issued in connection therewith, (vi) comply and will continue to
comply with the terms of this Agreement, (vii) have been fully advanced by
Borrower in the face amount thereof, (viii) are first Liens on the premises
described therein, and (ix) are not in default beyond the time period provided
in Section 2.5(c)(xiii).
(d)Compliance with FHA Rules, etc. Borrower has
complied with and will continue to comply with all laws, rules and regulations
in respect of the FHA insurance of each Mortgage Loan included in the Pledged
Mortgages designated by Borrower as an FHA Loan, and such insurance is and will
continue to be in full force and effect.
(e)Compliance with VA Rules, etc. Borrower has
complied with and will continue to comply with all laws, rules and regulations
in respect of the VA guaranty of each Mortgage Loan included in the Pledged
Mortgages designated by Borrower as a VA Loan, and such guaranty is and will
continue to be in full force and effect.
(f)Compliance with FHLMC, FNMA Rules, etc. Borrower
has complied with and will continue to comply with all rules and regulations of
FHLMC, FNMA and GNMA, all requirements of the issuers of Approved Purchase
Commitments, and all private Mortgage insurer requirements that are applicable
to the Pledged Mortgages and all Eligible Mortgage Loans, and all Eligible
Mortgage Loans that are not FHA Loans or VA Loans are and will continue to be
eligible for purchase by FHLMC, FNMA and/or GNMA.
(g)Insurance Policies. All fire and casualty policies
covering the premises encumbered by each Mortgage included in the Pledged
Mortgages (1) name and will continue to name Borrower as the insured under a
standard mortgagee clause, (2) are and will continue to be in full force and
effect, and (3) afford and will continue to afford insurance against fire and
such other risks as are usually insured against in the broad form of extended
coverage insurance from time to time available.
(h)Flood Insurance. Pledged Mortgages secured by
premises located in a special flood hazard area where special flood insurance is
required by an Approved Investor (or, if applicable, by a private insurer
acceptable to the Approved Investors) are and shall continue to be covered by
special flood insurance under the National Flood Insurance Program.
5.14 Special Representations Concerning Reorganization.
(a)The Reorganization has occurred substantially in
the manner described in the Recitals hereto with the result that Borrower has
acquired certain assets of Miltex.
(b)The description of the Reorganization contained in
this Agreement and the Plan is true and correct in all material respects, does
not contain any untrue statement and does not omit any material fact.
VI. AFFIRMATIVE COVENANTS.
Borrower agrees that so long as the Commitment is outstanding
or there remain any obligations of Borrower to be paid or performed under this
Agreement or under the Note, Borrower will comply with the following covenants.
6.1 Payment of Note. Borrower shall punctually pay or cause to
be paid the principal of, interest on and all other amounts payable hereunder
and under the Note in accordance with the terms thereof.
6.2 Financial Statements and Other Reports. Borrower shall
deliver to Bank:
(a)Borrower Statements.
(i)Quarterly Statements. Within forty-five (45) days
after the end of each of the first three (3) fiscal quarters of each
fiscal year of Borrower, balance sheets and statements of income, and
reconciliation of net worth of Borrower showing the financial condition
of Borrower as of the close of such fiscal quarter and the results of
Borrower's operations during such quarter, all of which shall be
certified by the chief financial officer or such other officer of
Borrower approved by Bank and prepared in accordance with GAAP.
(ii)Annual Statements. Within ninety (90) days after
the end of each fiscal year of Borrower, balance sheets and statements
of income, retained earnings and cash flow, showing the financial
condition of Borrower as of the close of such fiscal year and the
results of Borrower's operations during such year, together with a
computation of Borrower's net worth, all the foregoing financial
statements to be audited by independent accountants reasonably
acceptable to Bank and to include the statement of such independent
accountants that such financial statements present fairly the financial
position and results of operations of Borrower, and have been prepared
in accordance with GAAP.
(b)Guarantor Statements.
(i)Quarterly Statements. Within forty-five (45) days
after the end of each of the first three (3) fiscal quarters of each
fiscal year of CHHC, financial statements of CHHC as contained in
CHHC's Form 10-Q quarterly report filed with the Securities and
Exchange Commission, all of which shall be certified by the chief
financial officer or such other officer of CHHC approved by Bank and
prepared in accordance with GAAP.
(ii)Annual Statements. Within ninety (90) days after
the end of each fiscal year of CHHC, financial statements of CHHC as
contained in CHHC's Form 10-K annual report filed with the Securities
and Exchange Commission, all the foregoing financial statements to be
audited by independent certified public accountants reasonably
acceptable to Bank and to include the statement of such independent
accountants that such financial statements present fairly the financial
position and results of operations of CHHC, and have been prepared in
accordance with GAAP.
(c) Registration Statements, etc. Promptly after the
same become publicly available, copies of such registration statements, annual,
periodic and other reports, such as proxy statements and other information, if
any, as shall be filed by Borrower with the Securities and Exchange Commission
pursuant to the requirements of the Securities Act of 1933 or the Securities
Exchange Act of 1934.
(d) Regulatory Notices, etc. Within thirty (30) days
after receipt thereof, copies of all notices, audits, filings, disclosures,
responses, reports, orders, claims, and other information filed with or made by
or from any regulatory authority (federal, state or local) having regulatory
jurisdiction over any part of Borrower's business of soliciting, making,
selling, servicing or otherwise dealing in Mortgage Loans.
(e)Production Report. After the end of each fiscal
quarter, a production report reflecting the Mortgage Loans closed during the
fiscal quarter, which production reports shall be delivered with the financial
statements for such quarter pursuant to Section 6.2(a).
(f)Servicing Report. After the end of each fiscal
quarter, a servicing report reflecting the composition of Borrower's servicing
portfolio, together with information regarding any delinquencies or defaults.
(g)Schedule of Purchase Commitments. If requested by
Bank, weekly on or before the first day of each week, a schedule in form
acceptable to Bank of all purchase commitments issued by Approved Investors
identified to a Mortgage Loan and grouped by type of Mortgage Loan which
qualifies for delivery pursuant to such purchase commitments, listing the name
of the investor, the commitment type (i.e., mandatory, optional, standby, etc.),
the commitment amount which remains available for future deliveries, the yield
requirement or the price and interest rate for which said price is quoted, and
the expiration, delivery or settlement date for each such purchase commitment.
(h)Pipeline Report. At Bank's request, monthly on or
before the tenth day of each month, a pipeline report reflecting loans
originated, loans in process, loans closed, together with information regarding
any delinquencies or defaults.
(i)Officer's Certificates. Together with each
delivery of financial statements pursuant to Section 6.2(a), an Officer's
certificate of Borrower in the form of Exhibit E hereto.
(j)Other Information. From time to time, with
reasonable promptness, such further information regarding the business,
operations, properties or financial condition of Borrower and Mortgage Loans as
Bank may reasonably request.
6.3 Maintenance of Existence; Conduct of Business. Borrower
shall preserve and maintain its corporate existence in good standing and all of
its rights, privileges, licenses and franchises necessary or desirable in the
normal conduct of its business; conduct its business in an orderly and efficient
manner; and make no material and adverse change in the nature or character of
its business or engage in any business which is not directly related to the
business of soliciting, making, selling, servicing or otherwise dealing in
Mortgage Loans.
6.4 Change of Control. One hundred percent (100%) of the
issued and outstanding shares of stock in Borrower shall continue to be owned
directly or indirectly by CHI and one hundred percent (100%) of the issued and
outstanding shares of stock in CHI shall continue to be owned by CHHC, in each
case free and clear of any Liens or encumbrances.
6.5 Sale of Assets; Merger. Borrower shall not, without the
consent of Bank, sell, transfer, lease, lend or otherwise dispose of (whether in
one transaction or in a series of related transactions) all of its assets or any
substantial part of its assets which disposition has or could have a material
adverse effect on Borrower (provided, however, that the foregoing shall not
restrict sales of servicing rights or sales of Mortgage Loans contemplated
hereby); and Borrower will not consolidate with or merge into any other Person
without the consent of Bank, which consent may be granted or withheld in Bank's
reasonable discretion.
6.6 Compliance with Applicable Laws. Borrower shall comply
with the requirements of all applicable laws, rules, regulations and orders of
any governmental authority, a breach of which could materially adversely affect
its business, operations, assets, or financial condition; Borrower shall
maintain its status as an approved FHA/VA/FNMA/FHLMC/GNMA seller, servicer,
lender and/or issuer and all other permits, licenses and approvals necessary or
desirable for Borrower to maintain and conduct the business of Borrower
contemplated hereby, including, without limitation, all such permits, licenses
and approvals necessary to conduct such business in each state in which Borrower
makes or proposes to make Mortgage Loans.
6.7 Inspection of Properties and Books. Borrower shall permit
authorized representatives of Bank, upon request by Bank to Borrower, to discuss
the business and operations of Borrower with its officers and employees, to
discuss the assets and financial condition of Borrower with its officers and
employees, and to examine its books and records and make copies or extracts
thereof, all at such reasonable times as Bank may request.
6.8 Financial Covenants.
(a)Net Worth Ratio. Borrower shall not permit the
ratio of (i) Borrower's Debt to (ii) Borrower's Adjusted Tangible Net Worth to
be greater than 8:1.
(i)"Borrower's Debt" means, without limitation, (A)
any indebtedness of Borrower for borrowed money, (B) all indebtedness of
Borrower evidenced by bonds, debentures, notes, letters of credit, drafts or
similar instruments, (C) all indebtedness of Borrower to pay the deferred
purchase price of property or services received, including accounts payable and
accrued expenses arising in the ordinary course of business, (D) all capitalized
lease obligations of Borrower, (E) all debt of others secured by a lien on any
asset of Borrower, whether or not such debt is assumed by Borrower or guaranteed
by Borrower, (F) all debt of others guaranteed by Borrower, and (G) all other
indebtedness that would appear as a liability upon a balance sheet of Borrower
prepared in accordance with GAAP.
(ii)"Adjusted Tangible Net Worth" means, as of any
date, Borrower's Tangible Net Worth plus one percent (1%) of the outstanding
principal balance of Borrower's primary servicing portfolio.
(iii)"Tangible Net Worth" means, as of any date,
Borrower's net worth as determined in accordance with GAAP, less Intangible
Assets reflected on the balance sheet of Borrower.
(iv)"Intangible Assets" means all unamortized debt
discount and expense, unamortized deferred charges, goodwill, patents, trade
marks, service marks, trade names, copyrights, write-ups of assets over their
carrying value, and all other items which would be treated as intangibles on the
consolidated balance sheet of Borrower in accordance with GAAP.
(b)Minimum Tangible Net Worth. Borrower shall not
permit Borrower's Tangible Net Worth to be less than $4,120,000.00.
Borrower's compliance with the requirements in this Section 6.8 shall be
measured quarterly pursuant to the Officer's Certificates provided under Section
6.2(h).
6.9 Notice. Borrower shall give prompt written notice to Bank
of (a) any action, suit or proceeding instituted by or against Borrower or
Guarantor in any federal or state court or before any commission or other
regulatory body (federal, state or local, domestic or foreign), or any such
proceedings threatened against Borrower or Guarantor, the outcome of which could
have a material adverse effect upon Borrower's or Guarantor's business,
operations, assets or financial condition, (b) the filing, recording or
assessment of any federal, state or local tax lien for delinquent taxes against
Borrower or Guarantor or any of their respective assets, (c) the occurrence of
any Event of Default hereunder or the occurrence of any Unmatured Event of
Default, (d) the receipt by Borrower of notice of any default or "event of
default" under any Approved Purchase Commitment or Approved Bailee Agreement or
the occurrence of any "event of default" or the occurrence of any material
default or violation under any Approved Purchase Commitment or Approved Bailee
Agreement for which applicable cure periods (if any) have expired regardless of
whether notice thereof shall have been given to Borrower by the Approved
Investor; and (e) the occurrence of any material adverse change in the business,
operations, assets or financial condition of Borrower or Guarantor.
6.10 Payment of Debt, Taxes, etc. Borrower shall pay and
perform all obligations of Borrower promptly and in accordance with the terms
thereof and pay and discharge or cause to be paid and discharged promptly all
taxes, assessments and governmental charges or levies imposed upon Borrower or
upon its income, receipts or properties before the same shall become past due,
as well as all lawful claims for labor, materials and supplies or otherwise
which, if unpaid, might become a Lien or charge upon such properties or any part
thereof and which, in each case, may reasonably be expected to result in any
material and adverse change in the business, operations, assets, or financial
condition of Borrower; provided, however, that Borrower shall not be required to
pay taxes, assessments or governmental charges or levies or claims for labor,
materials or supplies for which Borrower shall have obtained an adequate bond or
adequate insurance or which are being contested in good faith and by proper
proceedings which are being reasonably and diligently pursued.
6.11 Payment of Expenses. Borrower hereby authorizes Bank to
pay any reasonable expenses, charges and levies required to be paid hereunder
(other than such expenses, charges and levies as are being contested in good
faith and by proper proceedings in accordance with Section 6.10 hereof),
notwithstanding that Borrower may not have requested Bank to make such payments,
to the extent that if not paid such expenses, charges and levies could, in
Bank's reasonable opinion, have a material and adverse affect on the Collateral
or on the existence, perfection or priority of Bank's security interest therein.
Bank may make such payments notwithstanding the fact that Borrower is in default
under the terms of this Agreement. Such payments shall be added to the
outstanding principal balance of the Note and shall be due and payable on
demand. The authorization hereby granted shall be irrevocable, and no further
direction or authorization from Borrower shall be necessary for Bank to make
such payments.
6.12 Insured Closings. If available, Borrower shall obtain and
maintain in effect at all times an insured closing letter from each title
insurance company from which mortgagee title insurance is procured, indemnifying
and holding Borrower harmless from and against the failure of the agents of such
title insurance companies to comply with the written closing instructions of
Borrower as to the Pledged Mortgages hereunder and will provide Bank with
evidence of the same from time to time upon request. Borrower agrees to
indemnify and hold harmless Bank of, from, for and against any loss, claim, or
damages, including reasonable attorneys' fees and costs, attributable to the
failure of such title insurance company, agent or approved attorney to comply
with the disbursement or instruction letter or letters of Borrower or Bank
relating to such Mortgage Loan.
6.13 Other Loan Obligations. Borrower shall perform all
obligations under the terms of each loan agreement, note, mortgage, security
agreement or debt instrument by which Borrower is bound or to which any of its
property is subject and which may reasonably be expected to result in any
material and adverse change in the business, operations, assets, or financial
condition of Borrower, and will promptly notify Bank in writing of the
cancellation or reduction of any of its other mortgage warehousing lines of
credit or agreements with any other lender.
6.14 Use of Proceeds of Advances. Borrower shall use the
proceeds of each Advance solely for the purpose of financing the origination of
Eligible Mortgage Loans.
6.15 Approved Purchase Commitments. Borrower shall not assign,
transfer, or otherwise convey or pledge any of its rights under the Approved
Purchase Commitments or the Approved Bailee Agreements, except with the express
written consent of Bank, which consent may be granted or withheld in the sole
and absolute discretion of Bank. Borrower shall comply with all of the terms and
conditions of the Approved Purchase Commitments and the Approved Bailee
Agreements and shall not permit any event to occur or condition to exist which
either immediately or with notice or the lapse of time or both would permit any
party to the Approved Purchase Commitments or the Approved Bailee Agreements to
terminate such Agreements or otherwise not to perform any of their respective
obligations thereunder.
6.16 Insurance. Borrower shall maintain a policy of errors and
omissions insurance and a fidelity bond, each in form and amount and with an
insurance company reasonably satisfactory to Bank with due regard to generally
accepted mortgage banking and loan servicing practices. Borrower shall also
maintain insurance with respect to the risk of loss of Collateral Documents
during the transport thereof in form and amount and with an insurance company
reasonably satisfactory to Bank.
6.17 Special Covenants Concerning Collateral.
(a)Ownership; Perfection of Liens. Borrower warrants
and will defend the right, title and interest of Bank in and to the Pledged
Mortgages against the claims and demands of all persons whomsoever and shall
take all action necessary to assure that Bank has and will at all times have a
valid and perfected first priority security interest in each Pledged Mortgage.
(b)Financing Statements; Further Assurances. Borrower
shall execute and deliver to Bank such Uniform Commercial Code financing
statements with respect to the Collateral as Bank may request. Borrower also
shall execute and deliver to Bank such further instruments of sale, pledge or
assignment or transfer, and such powers of attorney exercisable upon the
occurrence and during the continuation of an Event of Default, as required by
Bank, and shall do and perform all matters and things necessary or desirable to
be done or observed, for the purpose of effectively creating, maintaining and
preserving the security and benefits intended to be afforded Bank under this
Agreement. Bank shall have all the rights and remedies of a secured party under
the Uniform Commercial Code of the State of Arizona, or any other applicable
law, in addition to all rights provided for herein.
(c)No Amendments. Borrower shall not amend or modify,
or waive any of the terms and conditions of, or settle or compromise any claim
in respect of, any Pledged Mortgages or Approved Purchase Commitments or any
related rights except upon the written consent of Bank.
(d)No Sale, Assignment or Encumbering. Borrower shall
not sell, assign, transfer or otherwise dispose of, or grant any option with
respect to, or pledge or otherwise encumber (except pursuant to this Agreement),
any of the Collateral or any interest therein other than sales to Approved
Investors pursuant to the Approved Purchase Commitments or as otherwise
permitted hereby. Borrower shall not cause or permit, whether voluntarily or
involuntarily, any lien, encumbrance, security interest, or other assignment to
exist with respect to, or otherwise affect, Borrower's Servicing Rights. As used
herein, "Servicing Rights" shall mean the rights of Borrower to service Mortgage
Loans (including without limitation, the right to collect payments of principal
and interest, receive late charges and other payments, maintain tax and
insurance impound and escrow accounts, and to otherwise administer, monitor, and
act with respect to Mortgage Loans), whether or not such Mortgage Loans are
owned by Borrower, together with all fees, payments, and other amounts received
or receivable with respect to such loan servicing and all proceeds of such loan
servicing.
(e)Servicing. Borrower shall service all Pledged
Mortgages in accordance with the standard requirements of the issuers of
Purchase Commitments identified thereto and all applicable FHA, VA, and private
mortgage insurer requirements.
6.18 Collection Rights. Except as otherwise set forth herein,
and unless any Event of Default has occurred, Borrower shall be entitled to
receive and collect directly all sums payable in respect of the Collateral, in a
manner not inconsistent with the terms of this Agreement; provided, however,
that all amounts payable by an Approved Investor to purchase a Pledged Mortgage
shall be paid directly to Bank by such Approved Investor. Upon the occurrence of
an Event of Default, Bank shall thereafter be entitled to receive and collect
all sums payable in respect of the Collateral pursuant to Section 7.2(b) of this
Agreement.
6.19 Appraisals. Borrower acknowledges that Bank as a
federally regulated institution is required to meet certain regulations
regarding appraisals of loans secured by real estate. Borrower agrees that it
shall be Bank's agent for the purpose of ordering such appraisals and that upon
request, Borrower shall make available to Bank all information regarding such
appraisals, including, without limitation, identification of the appraisers,
copies of all appraisals, copies of all instruction letters regarding such
appraisals, and copies of all other applicable policies and procedures of
Borrower related to obtaining appraisals. In the event Bank shall ever
reasonably determine that appraisals obtained by Borrower are not in compliance
with such regulations or Bank's internal policies, Borrower shall change
Borrower's appraisal policies to Bank's satisfaction.
VII. DEFAULTS; REMEDIES.
7.1 Events of Default. The occurrence of any of the following
conditions or events shall be an event of default ("Event of Default"):
(a)Failure to Pay. Failure of Borrower to pay the
principal of any Advance within fifteen (15) days after the date it is due,
whether at stated maturity, by acceleration, or otherwise; or failure of
Borrower to pay any installment of interest on any Advance within fifteen (15)
days after the date it is due; or failure of Borrower to pay any other amount
due under this Agreement within fifteen (15) days after the date it is due; or
(b)Breach of Representations and Warranties. Any of
Borrower's or Guarantors' representations or warranties made herein or in any
statement or certificate at any time given by Borrower or any Guarantor in
writing pursuant hereto or in connection herewith shall be false or misleading
in any material respect on the date made or renewed; or
(c)Other Loans. Failure of Borrower, any Guarantor or
any Person that controls, is controlled by, or is under common control with,
Borrower to pay amounts due Bank in regard to indebtedness heretofore or
hereafter issued, assumed, guaranteed, contracted for or incurred; or
(d)Other Defaults. Borrower shall default in the
performance of or compliance with any other covenant or other term contained in
this Agreement; or
(e)Adverse Change. The occurrence of any adverse
change in the business, operations, assets or financial condition of Borrower or
any Guarantor deemed material to Bank; or
(f)Insolvency, etc. Borrower or any Guarantor shall
admit in writing its inability to pay its debts as they mature, or make an
assignment for the benefit of creditors; or Borrower or any Guarantor shall
apply for or consent to the appointment of any receiver, trustee or similar
officer for Borrower or any Guarantor or for all or substantially all of its
property; or Borrower or any Guarantor shall institute (by petition,
application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debts, dissolution, liquidation, or
similar proceedings relating to Borrower or any Guarantor under the laws of any
jurisdiction; or
(g)Receivership, etc. A receiver, trustee or similar
officer shall be appointed for Borrower or any Guarantor or for all or
substantially all of its property without the application or consent of Borrower
or any Guarantor and such appointment shall continue undischarged for a period
of sixty (60) days; or any bankruptcy, insolvency, reorganization, arrangements,
readjustment of debt, dissolution, liquidation or similar proceedings shall be
instituted (by petition, application or otherwise) against Borrower or any
Guarantor without its consent, and shall remain undismissed for a period of
sixty (60) days; or
(h)Judgments. Any money judgment, writ or warrant of
attachment, or similar process involving in any case an amount in excess of
$100,000.00 shall be entered or filed against Borrower or any Guarantor or any
of its assets and shall remain undischarged, unvacated, unbonded or unstayed for
a period of thirty (30) days or in any event later than five (5) days prior to
the date of any proposed execution sale thereunder; or
(i)Dissolution. Any order, judgment or decree shall
be entered against Borrower or any Guarantor decreeing the dissolution or split
up of Borrower or any Guarantor and such order shall remain undischarged or
unstayed for a period in excess of twenty (20) days; or
(j)Challenge to Borrower's Obligations. Borrower
shall purport to disavow its obligations hereunder or shall contest the validity
or enforceability hereof; or Bank's security interest on any portion of the
Collateral shall become unenforceable or otherwise impaired; provided that,
subject to Bank's approval, no Event of Default shall occur as a result of such
improvement if all Advances made against such Collateral shall be paid in full
within ten (10) days of the date of such impairment; or
(k)Revocation or Suspension of Licenses. Any license,
approval, or other authorization necessary for Borrower to make the Mortgage
Loans and conduct the other activities contemplated hereby, including, without
limitation, any mortgage banking or other lending license, and any GNMA, FNMA or
FHLMC seller/servicer or other approval shall be suspended or revoked; or
(l)Other Default. An Event of Default shall occur
under any other Loan Document.
7.2 Remedies.
(a)Acceleration. Upon the occurrence of an Event of
Default, at Bank's option, the unpaid principal amount of and accrued interest
on the Note shall become due and payable automatically, without presentment,
demand or other requirements of any kind, all of which are hereby expressly
waived by Borrower.
(b)Other Remedies. Upon the occurrence of an Event of
Default (and in the case of subparagraph (b)(vi) below upon the occurrence of an
Unmatured Event of Default), Bank may also do any of the following:
(i)Enforcement of Security Interest. Foreclose upon
or otherwise enforce its security interest in and the Lien on the Collateral to
secure all payments and performance of obligations owed by Borrower under this
Agreement.
(ii)Notification of Obligors. Notify all obligors and
Approved Investors of the Collateral that the Collateral has been assigned to
Bank and that all payments thereon are to be made directly to Bank or such other
party as may be designated by Bank; settle, compromise, or release, in whole or
in part, any amounts owing on the Collateral, or by any such obligor or Approved
Investor on terms acceptable to Bank; enforce payment and prosecute any action
or proceeding with respect to any and all the Collateral; and where any such
Collateral is in default, foreclose on and enforce security interests in such
Collateral by any available judicial process and sell property acquired as a
result of any such foreclosure.
(iii)Servicing. Act, or contract with a third party
to act, as servicer of each item of Collateral requiring servicing and perform
all obligations required in connection with Purchase Commitments, such third
party's reasonable fees to be paid by Borrower.
(iv)UCC Remedies. Enforce the purchase obligation of
an Approved Investor under the applicable Approved Purchase Commitment, and
exercise all other rights and remedies of a secured creditor under the Uniform
Commercial Code of the State of Arizona, including but not limited to selling
the Collateral at public or private sale. Bank shall give Borrower not less than
ten (10) days' notice of any such public sale or of the date after which private
sale may be held. Borrower agrees that ten (10) days' notice shall be reasonable
notice. At any such sale the Collateral may be sold as an entirety or in
separate parts, as Bank may determine. Bank may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the same may be adjourned. In case of
any sale of all or any part of the Collateral on credit or for future delivery,
the Collateral so sold may be retained by Bank until the selling price is paid
by the purchaser thereof, but Bank shall not incur any liability in case of the
failure of such purchaser to take up and pay for the Collateral so sold and, in
case of any such failure, such Collateral may again be sold upon like notice.
Bank may, however, instead of exercising the power of sale herein conferred upon
it, proceed by a suit or suits at law or in equity to collect all amounts due
hereunder or to foreclose the pledge and sell the Collateral or any portion
thereof under a judgment or decree of a court or courts of competent
jurisdiction, or both. Borrower hereby waives any claims it may have against
Bank arising by reason of the fact that the price at which the Collateral may
have been sold at a private sale was less than the price which might have been
obtained at a public sale, or was less than the aggregate amount of the
indebtedness outstanding hereunder.
(v)Direct Action. Proceed against Borrower on the
Note.
(vi)Suspension of Advances. Cease making any further
Advances.
(vii)Other Commitments. Terminate any commitments
contained in any agreement between Bank and Borrower to make any further loans
or advances.
(viii)Other Acceleration. Declare immediately due and
payable any one or more of all other debts or obligations of Borrower to Bank.
(ix)Other Remedies. Otherwise exercise its rights and
remedies available hereunder or under applicable law.
(x)Rights Under Bailee Agreements. Enforce Bank's
rights pursuant to any Approved Bailee Agreements to require any Approved
Investors to purchase Mortgage Loans.
(xi)Receiver. Obtain the appointment of a receiver of
the business and assets of Borrower.
(c)Waivers. Borrower waives any right to require Bank
to (i) proceed against any Person, (ii) proceed against or exhaust any of the
Collateral or pursue its rights and remedies as against the Collateral in any
particular order, or (iii) pursue any other remedy in its power.
(d)Protection of Lien. Bank may, but shall not be
obligated to, advance any sums or do any act or thing necessary to uphold and
enforce the Lien and priority of, or the security intended to be afforded by,
any Mortgage included in the Collateral, including, without limitation, payment
of delinquent taxes or assessments and insurance premiums, to the extent
permitted by such Mortgage. All advances, charges, costs and expenses, including
reasonable attorneys' fees and disbursements, incurred or paid by Bank in
exercising any right, power or remedy conferred by this Agreement, or in the
enforcement hereof, shall become a part of the principal balance outstanding
under the Note and shall accrue interest at the rate or rates specified in the
Note.
(e)No Waivers. No failure on the part of Bank to
exercise, and no delay in exercising, any right, power or remedy provided
hereunder, at law or in equity shall operate as a waiver thereof; nor shall any
single or partial exercise by Bank of any right, power or remedy provided
hereunder, at law or in equity preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. The remedies herein provided
are cumulative and are not exclusive of any remedies provided at law or in
equity.
7.3 Binding Arbitration. All controversies and claims of any
nature arising directly or indirectly out of any and all loan transactions
between Borrower and Bank and any related agreements, instruments or documents,
shall at the written request of Borrower or Bank be arbitrated pursuant to the
applicable rules of the American Arbitration Association. The arbitration shall
occur in the State of Arizona. Judgment upon any award rendered by the
arbitrator(s) may be entered in any court having jurisdiction. The Federal
Arbitration Act shall apply to the construction and interpretation of this
arbitration agreement.
(a)Arbitration Panel. A single arbitrator shall have
the power to render a maximum award of one hundred thousand dollars. When any
party files a claim in excess of this amount, the arbitration decision shall be
made by the majority vote of three arbitrators. No arbitrator shall have the
power to restrain any act of any party.
(b)Provisional Remedies, Self-Help, and Foreclosure.
No provision of this Section 7.3 shall limit the right of any party to exercise
self-help remedies, to foreclose against any real or personal property
collateral, or to obtain any provisional or ancillary remedies (including but
not limited to injunctive relief or the appointment of a receiver) from a court
of competent jurisdiction. At Bank's option, it may enforce its rights under a
security agreement by private or public sale, a mortgage by judicial
foreclosure, and under a deed of trust either by exercise of power of sale or by
judicial foreclosure. The institution and maintenance of any remedy permitted
above shall not constitute a waiver of the right to submit any controversy or
claim to arbitration. The statute of limitations, estoppel, waiver, laches, and
similar doctrines which would otherwise be applicable in an action brought by a
party shall be applicable in any arbitration proceeding.
7.4 Application of Proceeds. The proceeds of any sale or other
enforcement of Bank's security interest in all or any part of the Collateral
shall be applied by Bank:
First, to the payment of the costs and expenses of such sale
or enforcement, including reasonable compensation to Bank's agents and counsel,
and all expenses, liabilities and advances made or incurred by or on behalf of
Bank in connection therewith;
Second, to the payment of any other amounts due (other than
principal and interest) under the Note or this Agreement;
Third, to the payment of interest accrued and unpaid on the
Note;
Fourth, to the payment of the outstanding principal balance of
the Note; and
Finally, to the payment to Borrower or to its successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
If the proceeds of any such sale are insufficient to cover the costs and
expenses of such sale, as aforesaid, and the payment in full of the Note and all
other amounts due hereunder, Borrower shall remain liable for any deficiency.
7.5 Bank Appointed Attorney-in-Fact. Bank is hereby appointed
the attorney-in-fact of Borrower, effective from and after the occurrence and
during the continuation of an Event of Default, with full power of substitution,
for the purpose of executing any instruments and performing other acts which
Bank may deem necessary or advisable to accomplish the purposes hereof, which
appointment as attorney-in-fact is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, Bank shall have the right and
power to give notices of its security interest in the Collateral to any Person,
in the name of the holder of the Pledged Mortgages, or to receive, endorse and
collect all checks made payable to the order of Borrower representing any
payment on account of the principal of or interest on, or the proceeds of sale
of, any of the Pledged Mortgages and to give full discharge for the same.
7.6 Right of Set-Off. Upon the occurrence of an Event of
Default, Bank shall have the right, at any time and from time to time, without
notice, to set-off and to appropriate or apply any and all deposits of money or
property held by Bank in the name of Borrower (other than accounts which are
held by Borrower in a trust or fiduciary capacity that is reflected on the books
of Bank) or any other indebtedness owing by Bank to Borrower against and on
account of the obligations and liabilities of Borrower under the Note and this
Agreement, irrespective of whether or not Bank shall have made any demand
hereunder and whether or not said obligations and liabilities shall have
matured. Borrower hereby grants to Bank a security interest in all such deposits
or money or property and Bank shall have all rights of a secured party with
respect thereto.
VIII. NOTICES.
All notices, demands, consents, requests and other
communications required or permitted to be given or made hereunder
(collectively, "Notices") shall, except as otherwise expressly provided
hereunder, be in writing and shall be delivered (i) in person, (ii) mailed,
first class, return receipt requested, postage prepaid, addressed to the
respective parties hereto at their respective addresses hereinafter set forth
or, as to any such party, at such other address as may be designated by it in a
notice to the other, or (iii) by telecopier to the respective parties hereto at
their respective telecopier numbers hereinafter set forth or, as to any such
party, at such other telecopier number as may be designated by it in a notice to
the other. All Notices shall be conclusively deemed to have been properly given
or made two (2) Business Days after being duly deposited in the mails, addressed
as set forth below or, in the case of notices delivered personally or by
telecopier, upon actual receipt thereof by the party to whom such notice is
directed:
if to Borrower: CH Mortgage Company
7001 North Scottsdale Road
Suite 2050
Scottsdale, Arizona 85250
Telecopier: (602) 991-1682
if to Bank: Bank One, Arizona, NA
Real Estate Finance Division
Mortgage Finance Department
Post Office Box 29542
Phoenix, Arizona 85038
Attn: Dept. A-581
Telecopier: (602) 221-1372
IX. REIMBURSEMENT OF EXPENSES; INDEMNITY.
Borrower shall:
(a)pay all out-of-pocket costs and expenses of Bank,
including reasonable attorneys' fees, in connection with the negotiation,
documentation, and enforcement of this Agreement, the Note, and other documents
and instruments related hereto and the making and repayment of the Advances and
the payment of interest thereon;
(b)upon demand, pay, and hold Bank and any holder of
the Note harmless of, from, for and against, any and all present and future
stamp, documentary and other similar taxes with respect to the foregoing matters
and save Bank and the holder or holders of the Note harmless from and against
any and all liabilities with respect to or resulting from any delay or omission
to pay such taxes;
(c)upon demand, indemnify, pay and hold harmless Bank
and any of its officers, directors, employees or agents and any subsequent
holder of the Note of, from, for and against any and all liabilities,
obligations losses, damages, penalties, judgments, suits, costs, expenses
(including reasonable attorney's fees) and disbursements of any kind whatsoever
arising out of or relating to this Agreement, including without limitation,
(i)any suit, claim or demand on account of any action
or failure to act by Borrower,
(ii)any suit, claim or demand arising from or
relating to the failure of any Mortgage Loans to be made in full compliance with
all applicable requirements, if any, of the Real Estate Settlement Procedures
Act, the Equal Credit Opportunity Act, the Federal Truth-In-Lending Act, all
other applicable laws and regulations, and/or the applicable Approved Investor
Agreements,
(iii)any other claims, defenses or offsets with
respect to any Mortgage Loans or the failure of any Mortgage Loan to otherwise
comply with the provisions of this agreement, and
(iv)any suit, claim or demand arising out of any
actual or alleged disposal, generation, manufacture, presence, processing,
production, release, storage, transportation, treatment, or use of any and all
nuclear, toxic, radioactive or other hazardous waste on any property encumbered
by any of the Mortgages regardless of whether intentional, negligent, or
accidental.
(all of the above are collectively the "Indemnified Liabilities").
X. MISCELLANEOUS.
10.1 Terms Binding Upon Successors; Survival of
Representations. The terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. All representations, warranties, covenants and
agreements herein contained on the part of Borrower shall survive the making of
any Advance and the execution of the Note, and shall be effective so long as the
Commitment is outstanding or there remains any obligation of Borrower hereunder
or under the Note to be paid or performed.
10.2 Assignment. This Agreement may not be assigned by
Borrower. This Agreement and the Note, along with Bank's security interest in
any or all of the Collateral, may, at any time, be transferred or assigned, in
whole or in part, by Bank, and any assignee thereof may enforce this Agreement,
the Note and such interest. Bank shall use its reasonable efforts to provide
Borrower with notice of any such transfer or assignment; provided, however, that
Bank's failure to provide such notice shall not in any way invalidate such
transfer or assignment or otherwise constitute a breach by Bank of its
obligations pursuant to this Agreement, and any payments made or performance
rendered by Borrower to Bank prior to Borrower's receipt of such notice shall be
deemed to have been duly made or rendered under this Agreement.
10.3 Participation. Borrower agrees that Bank may enter into
agreements with other financial institutions to participate in this credit
accommodation. Borrower agrees to execute all documents and instruments
reasonably requested by Bank in order to facilitate said participation.
10.4 Amendments. This Agreement may not be amended, modified
or supplemented except in a writing signed by the parties hereto.
10.5 Governing Law. This Agreement and the Note shall be
governed and construed by the laws of the State of Arizona.
10.6 Entire Agreement. This Agreement and the documents
referred to in this Agreement represent the entire agreement between, and
reflect the reasonable expectations of, Borrower and Bank with respect to the
subject matter hereof.
10.7 Savings Clause. This Agreement and all of the other
Credit Agreement Documents are intended to be performed in accordance with, and
only to the extent permitted by, all applicable usury laws. If any provision
hereof or of any of the other Credit Agreement Documents or the application
thereof to any person or circumstances shall, for any reason and to any extent,
be invalid or unenforceable, neither the application of such provision to any
other person or circumstance nor the remainder of the instrument in which such
provision is contained shall be affected thereby and shall be enforced to the
greatest extent permitted by law. It is expressly stipulated and agreed to be
the intent of the holder hereof to at all times comply with the usury and other
applicable laws now or hereafter governing the interest payable on the
indebtedness evidenced by the Note. If the applicable law is ever revised,
repealed or judicially interpreted so as to render usurious any amount called
for under the Note, this Agreement, or under any of the other Credit Agreement
Documents, or contracted for, charged, taken, reserved or received with respect
to the indebtedness evidenced by the Note, or if Bank's exercise of the option
to accelerate the maturity of the Note, or if any prepayment by Borrower results
in Borrower having paid any interest in excess of that permitted by law, then it
is the express intent of Borrower and Bank that all excess amounts theretofore
collected by Bank be credited on the principal balance of the Note (or, if the
Note and all other indebtedness arising under or pursuant to the other Credit
Agreement Documents have been paid in full, refunded to Borrower), and the
provisions of the Note and the other Credit Agreement Documents immediately be
deemed reformed and the amounts thereafter collectable hereunder and thereunder
reduced, without the necessity of the execution of any new document, so as to
comply with the then applicable law, but so as to permit the recovery of the
fullest amount otherwise called for hereunder or thereunder. All sums paid, or
agreed to be paid, by Borrower for the use, forbearance, detention, taking,
charging, receiving or reserving of the indebtedness of Borrower to Bank under
the Note or arising under or pursuant to the other Credit Agreement Documents
shall, to the maximum extend permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of such indebtedness
until payment in full so that the rate or amount of interest on account of such
indebtedness does not exceed the usury ceiling from time to time in effect and
applicable to such indebtedness for so long as such indebtedness is outstanding.
To the extent federal law permits Bank to contract for, charge or receive a
greater amount of interest, Bank will rely on federal law, for the purpose of
determining the Maximum Rate. Notwithstanding anything to the contrary contained
herein or in any of the other Credit Agreement Documents, it is not the
intention of Bank to accelerate the maturity of any interest that has not
accrued at the time of such acceleration or to collect unearned interest at the
time of such acceleration.
If the laws of the State of Texas are ever deemed to govern
this Agreement or the Note notwithstanding the parties expressed intent to the
contrary, the parties agree that TEX. REV. CIV. STAT. ANN. art. 5069 Ch. 15
(which regulates certain revolving loan accounts and revolving tri-party
accounts) shall in no event apply to this Agreement or the Note. Further, to the
extent that TEX. REV. CIV. STAT. ANN. art 5069-1.04, as amended, is applicable
to the Note or this Agreement, the "indicated rate ceiling" specified in such
article is the applicable ceiling; provided that, if any law permits greater
interest, the law permitting the greatest interest shall apply.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date set forth above.
BORROWER:
CH MORTGAGE COMPANY, a Colorado
corporation formerly known as American
Western Mortgage Company
By: /s/ Julie E. Collins
-------------------------------------
Name: Julie E. Collins
-----------------------------------
Title: Vice President
----------------------------------
BANK:
BANK ONE, ARIZONA, NA, a national
banking association formerly known as
The Valley National Bank of Arizona
By: /s/ Rhonda R. Williams
-------------------------------------
Name: Rhonda R. Williams
-----------------------------------
Title: Assistant Vice President
----------------------------------
EX-10.4
6
PROMISSORY NOTE
Exhibit 10.4
REPLACEMENT REVOLVING LINE OF CREDIT
PROMISSORY NOTE
Phoenix, Arizona
$25,000,000.00 July 1, 1995
1. PROMISE TO PAY.
For value received, CH MORTGAGE COMPANY, a Colorado corporation
formerly known as American Western Mortgage Company ("Maker"), promises
to pay to the order of BANK ONE, ARIZONA, NA at its office at 241 North
Central Avenue, Phoenix, Arizona 85004, or at such other place as the
holder hereof may from time to time designate in writing, the principal
sum of TWENTY-FIVE MILLION AND NO/100 DOLLARS ($25,000,000.00), or so
much thereof as shall from time to time be disbursed and outstanding
under that certain Amended and Restated Mortgage Warehousing Credit and
Security Agreement (as it may be amended, modified, extended, and
renewed and replaced from time to time, the "Credit Agreement") of even
date herewith between Maker and the payee named above, together with
accrued interest from the date of disbursement on the unpaid principal
at the applicable rate as set forth in Section 4. The payee named above
shall have no obligation to make any Advances hereunder except in
accordance with the Credit Agreement. This note (as it may be amended,
modified, extended, and renewed from time to time, the "Note") is
issued pursuant to, entitled to the benefits of, and referred to as the
"Note" in the Credit Agreement. In the event of any inconsistency
between the provisions of this Note and the provisions of the Credit
Agreement, the Credit Agreement shall control. Capitalized terms used
herein without definition shall have the meanings set forth in the
Credit Agreement.
2. MATURITY DATE.
Absent the occurrence of an Event of Default hereunder or under any of
the Credit Agreement, this Note, and other documents evidencing or
securing the loans contemplated by the Credit Agreement (collectively
the "Credit Agreement Documents"), the unpaid principal balance hereof,
together with all unpaid interest accrued thereon, and all other
amounts payable by Maker under the terms of the Credit Agreement
Documents, shall be due and payable on December 1, 1995 (the "Maturity
Date"). If the Maturity Date should fall (whether by acceleration or
otherwise) on a day that is not a Business Day, payment of the
outstanding principal shall be made on the next succeeding Business Day
and such extension of time shall be included in computing the interest
included in such payment.
3. PREPAYMENT.
PREPAYMENT. Except as to payments due under this paragraph with respect
to payment or conversion of a Libor Advance on a day other than the
last Business Day in the Interest Period for such Libor Advance, Maker
may prepay the outstanding principal balance hereof in whole or in part
at any time prior to the Maturity Date without penalty or premium as
stated in such notice by Maker; provided, however, that if any payment
of all or any portion of a Libor Advance shall be made other than on
the last day of the Interest Period for such Libor Advance for any
reason (including, without limitation, any optional or required
prepayment and any acceleration of the Maturity Date) then, anything in
the Credit Agreement Documents to the contrary notwithstanding, Maker
shall pay to the holder hereof contemporaneously with such prepayment,
a payment equal to any losses, costs, or expenses that the holder
hereof may reasonably incur as a result of such prepayment, including,
without limitation, any loss (including, without limitation, loss of
anticipated profits), cost, or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by the
holder hereof to fund or maintain such Libor Advance. Maker agrees to
also make a payment under the immediately preceding sentence upon each
conversion of a Libor Advance to either a Floating Rate Advance or a
Fixed Rate Advance on a date other than the last Business Day of the
Interest Period for such Libor Advance to be determined as if the
amount so converted had been prepaid on the date of conversion. The
obligations of Maker and the rights of the holder hereof under this
paragraph shall survive payment and performance of the obligations of
Maker and Guarantors under the Credit Agreement Documents and shall
remain in full force and effect without termination. The holder hereof
will furnish to Maker a certificate setting forth in reasonable detail
the basis for the amount of each request by the holder hereof for
payment under this paragraph. The determination by the holder hereof of
amounts due under this paragraph shall be conclusive, absent manifest
error.
4. PAYMENTS.
(a) Absent an Event of Default hereunder or under any of the
Credit Agreement Documents, each Advance made hereunder shall
bear interest from the date advanced at the applicable rate
from time to time ("Interest Rate") as
follows:
(i) Except to the extent that an Advance bears interest
at the Fixed Rate or the Libor Rate, as defined
herein, pursuant to this Note, interest shall accrue
on the unpaid principal of each Advance at the
Floating Rate. Interest at the Floating Rate shall be
computed on the basis of a 360 day year and accrue on
a daily basis for the actual number of days elapsed.
(ii) To the extent Maker shall elect as provided in this
Note and to the extent not otherwise provided in this
Note, interest shall accrue on the unpaid principal
of an Advance at the Fixed Rate. Interest at the
Fixed Rate shall be computed on the basis of a 360
day year and accrue on a daily basis for the actual
number of days elapsed.
(iii) To the extent Maker shall elect as provided in this
Note and to the extent not otherwise provided in this
Note, interest shall accrue on the unpaid principal
of an Advance at the Libor Rate. Interest at the
Libor Rate shall be computed on the basis of a 360
day year and accrue on a daily basis for the actual
number of days elapsed.
As used in this Note:
"Balance Calculation Period" means the period covered by
Maker's monthly account analysis statement prepared by the
payee hereof and used by the payee hereof to determine Maker's
Compensating Balances.
"Balances Deficiency" has the meaning set forth in Section (f)
below.
"Balances Deficiency Fee" has the meaning set forth in Section
(f) below.
"Business Day" means a day of the year on which banks are not
required or authorized to close in Phoenix, Arizona, and, with
respect to a Libor Advance, a day on which dealings are
carried on in the London interbank market.
"Compensating Balances" means the value to the payee hereof
(net of all service charges, all reserve requirements, FDIC
insurance assessments and other costs, fees, expenses and
amounts incurred by the payee hereof on account of such
balances) of Maker's average daily, free, collected,
non-interest bearing compensating balances maintained at Bank
One, Arizona, NA, as determined by the payee hereof and set
forth on Maker's monthly account analysis statement prepared
by the payee hereof. In determining free, collected,
non-interest bearing compensating balances, there shall be
subtracted any uncollected or returned checks, and there shall
be no adjustment for reserve requirements, FDIC insurance
assessments or other costs incurred by the payee hereof on
account of such balances.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors to the Federal
Reserve System, as in effect from time to time.
"Eurodollar Rate Reserve Percentage" for the Interest Period
for each Libor Advance means the reserve percentage applicable
two (2) Business Days 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,
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
Libor Advances is determined) having a term equal to such
Interest Period.
"Fixed Rate" means the rate of three percent (3%) per annum.
"Fixed Rate Advance" means an Advance that bears or is
requested to bear interest at the Fixed Rate.
"Floating Rate" means the rate per annum equal to the sum of
(i) one-quarter of one percent (.25%) per annum, and (ii) the
Prime Rate. The Floating Rate will change on each day that the
Prime Rate changes.
"Floating Rate Advance" means an Advance that bears or that is
requested to bear interest at the Floating Rate.
"Interest Period" means, for each Libor Advance, the period
commencing on the date of such Libor Advance and ending on the
last day of the period selected by Maker pursuant to the
provisions herein 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 Maker pursuant to the provisions herein. The
duration of each Interest Period shall be 30, 60, 90, or 120
days, as selected by Maker (A), for a new Advance, in the
request for a Libor Advance or (B), for an outstanding
Advance, in the request for a Libor Advance to continue
bearing interest at the Libor Rate; provided, however, that:
(i) Interest Periods commencing on the same date shall be
of the same duration;
(ii) 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 shall be
extended to occur on the next succeeding Business
Day, provided that if such extension would cause the
last day of such Interest Period to occur in the next
following calendar month, the last day of such
Interest Period shall occur on the next preceding
Business Day; and
(iii) No Interest Period with respect to any Advance shall
extend beyond the Maturity Date.
"Libor Advance" means an Advance that bears or is requested to
bear interest at the Libor Rate.
"Libor Rate" means the rate per annum equal to the sum of (i)
two and one-quarter percent (2.25%) per annum, and (ii) the
rate per annum obtained by dividing (A) the rate of interest
determined by the holder hereof, based on Telerate System
reports or such other source as may be selected by the holder
hereof, to be the "London Interbank Offered Rate" at which
deposits in United States dollars are offered by major banks
in London, England, one (1) Business Day before the first day
of the respective Interest Period by (B) a percentage equal to
one hundred percent (100%) minus the Eurodollar Rate Reserve
Percentage for the period equal to such Interest Period.
"Prime Rate" means the rate per annum most recently announced
by Bank One, Arizona, NA, or its successors, in Phoenix,
Arizona, as its " prime rate," as in effect from time to time.
The Prime Rate is not necessarily the best or lowest rate
offered by said bank, and said bank may lend to its customers
at rates that are at, above, or below, the Prime Rate.
"Regulatory Change" means any change effective after the date
of this Note 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 the holder hereof, 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.
(b) Each request for an Advance under the Credit Agreement shall,
in addition to complying with the other requirements in the
Credit Agreement,
(i) specify whether the Advance shall be an Advance that
bears interest at the Floating Rate or shall be an
Advance that bears interest at the Libor Rate; and
(ii) if the Advance is to bear interest at the Libor Rate,
(A) specify the Interest Period, (B) be delivered to
the holder hereof at least two (2) Business Days
prior to the date of the requested Advance, (C) be in
a minimum amount of $1,000,000 with integral
multiples of $500,000 in excess thereof, and (D),
when added to the number of previous Advances bearing
interest at the Libor Rate, not cause the aggregate
number of all outstanding Advances bearing interest
at the Libor Rate to exceed four (4). Any Advance not
complying with the foregoing requirements for an
Advance bearing interest at the Libor Rate shall bear
interest at the Floating Rate.
(c) Subject to the provisions of Section (d) below, if Maker
desires that any Advances are to bear interest at the Fixed
Rate, Maker shall deliver notice thereof to the holder at
least one (1) Business Day prior to the first day of the
Balance Calculation Period (i.e., the first day of a calendar
month), which notice shall specify the amount of Advances that
are to bear interest at the Fixed Rate. If Maker elects to
have interest accrue on any Advances at the Fixed Rate, then
the unpaid amount of such Advances shall bear interest from
and including the first day of such Balance Calculation
Period.
(d) If Maker desires that a Libor Advance continue to bear
interest at the Libor Rate after the end of an existing
Interest Period, Maker shall deliver to the holder hereof at
least two (2) Business Days prior to the end of the existing
Interest Period a notice making such election and specifying
the new Interest Period. If Maker does not deliver such notice
within such time, then after the existing Interest Period the
Libor Advance shall become a Floating Rate Advance and shall
bear interest at the Floating Rate.
Maker may on any Business Day, upon written notice to and
received by the holder hereof not later than 12:00 p.m.
(Phoenix, Arizona local time) (i) on the second Business Day,
in the case of any conversion of a Floating Rate Advance or a
Fixed Rate Advance into a Libor Advance and (ii) on the first
Business Day in the case of any other conversion, prior to the
date of the proposed conversion, convert any Advance of one
type into an Advance of the other type; provided, however,
that any conversion of a Libor Advance (A) shall only be made
on the last day of the applicable Interest Period, (B) shall
be made only as to an Advance in a minimum amount of
$1,000,000 with integral multiples of $500,000 in excess
thereof, and (C) shall not result after such requested
conversion in the aggregate number of Libor Advances exceeding
four (4), and further provided that any conversion of a Fixed
Rate Advance shall only be made on the last day of the
applicable Balance Calculation Period. Each such notice of a
conversion shall specify the date of such conversion and the
Advance(s) to be converted.
(e) Notwithstanding any provision of the Credit Agreement
Documents to the contrary, the holder hereof shall be 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 Note, all determinations hereunder shall
be made as if the holder hereof had actually funded and
maintained each Libor 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 Libor Rate for such
Interest Period.
If, due to any Regulatory Change, there shall be any increase
in the cost to the holder hereof of agreeing to make or
making, funding, or maintaining Libor Advances (including,
without limitation, any increase in any applicable reserve
requirement), then Maker shall from time to time, upon demand
by the holder hereof, pay to the holder hereof such amounts as
the holder hereof may reasonably determine to be necessary to
compensate the holder hereof for any additional costs that the
holder hereof reasonably determines are attributable to such
Regulatory Change and the holder hereof will notify the Maker
of any Regulatory Change that will entitle the holder hereof
to compensation pursuant to this paragraph as promptly as
practicable, but in any event within 90 days after the holder
hereof obtains knowledge thereof; provided, however, that if
the holder hereof fails to give such notice within 90 days
after it obtains knowledge of such a Regulatory Change, the
holder hereof shall, with respect to compensation payable in
respect of any costs resulting from such Regulatory Change,
only be entitled to payment for costs incurred from and after
the date that the holder hereof does give such notice. the
holder hereof will furnish to Maker a certificate setting
forth in reasonable detail the basis for the amount of each
request by the holder hereof for compensation under this
paragraph. Determinations by the holder hereof of the amounts
required to compensate the holder hereof shall be conclusive,
absent manifest error. the holder hereof shall be entitled to
compensation in connection with any Regulatory Change only for
costs actually incurred by the holder hereof.
Notwithstanding any provision of the Credit Agreement
Documents, if the holder hereof shall notify Maker that as a
result of a Regulatory Change it is unlawful for the holder
hereof to make Advances at the Libor Rate, or to fund or
maintain Libor Rate Advances, (i) the obligations of the
holder hereof to make Advances at the Libor Rate and to
convert Advances to the Libor Rate shall be suspended until
the holder hereof shall notify Maker that the circumstances
causing such suspension no longer exist, and (ii) in the event
such Regulatory Change makes the maintenance of Advances at
the Libor Rate unlawful, Maker shall forthwith prepay in full
all Libor Rate Advances then outstanding, together with
interest accrued thereon and all amounts in connection with
such prepayment specified in the paragraph in this Note titled
"PREPAYMENT," unless Maker, within five (5) Business Days of
notice from the holder hereof, converts all Libor Rate
Advances then outstanding into Floating Rate Advances or Fixed
Rate Advances pursuant to the conversion procedures in this
Note and pays all amounts in connection with such prepayments
or conversions specified in the paragraph in this Note titled
"PREPAYMENT."
Notwithstanding any other provision of the Credit Agreement
Documents, if prior to the commencement of any Interest
Period, the holder hereof shall determine (i) that United
States dollar deposits in the amount of any Libor Advance to
be outstanding during such Interest Period are not readily
available to the holder hereof in the London interbank market,
or (ii) by reason of circumstances affecting the London
interbank market, adequate and reasonable means do not exist
for ascertaining the Libor Rate for such Interest Period in
the manner prescribed above in the definition of "Libor Rate,"
then the holder hereof shall promptly give notice thereof to
Maker and the obligation of the holder hereof to create,
continue, or effect by conversion any Libor Advance in such
amount and for such Interest Period shall terminate until
United States dollar deposits in such amount and for the
Interest Period shall again be readily available in the London
interbank market and adequate and reasonable means exist for
ascertaining the Libor Rate.
(f) During any Balance Calculation Period where interest is
accruing on any Advances at the Fixed Rate, if the average
daily Compensating Balances maintained by Maker with Bank One,
Arizona, NA are less than an amount equal to the average daily
aggregate unpaid principal balance of all Fixed Rate Advances
during such Balance Calculation Period (such deficiency being
referred to herein as the "Balances Deficiency"), Maker will
pay to the payee hereof a fee (the "Balances Deficiency Fee")
for said Balance Calculation Period on the Balances Deficiency
at a per annum rate equal to the Prime Rate minus two and
three-fourths percent (2.75%) per annum (computed on the basis
of a 360-day year and applied to the actual number of days
elapsed during the Balance Calculation Period), which rate
will be adjusted as of the effective date of each change in
the Prime Rate. Any Balances Deficiency Fee payable hereunder
shall be due and payable monthly after each Balance
Calculation Period within two (2) Business Days after receipt
by Maker from the payee hereof of a statement therefor
containing the calculations made to determine such Balances
Deficiency Fee, which statement shall be conclusive absent
manifest error.
(g) All payments of principal and interest and other amounts due
hereunder shall be made (i) without deduction of any present
and future taxes, levies, imposts, deductions, charges or
withholdings, which amounts shall be paid by Maker, and (ii)
without any other set off. Maker will pay the amounts
necessary such that the gross amount of the principal and
interest and other amounts received by the holder hereof is
not less than that required by this Note.
(h) Interest hereunder shall be payable by Maker to the holder
hereof on the first (1st) day of each and every month during
the term of this Note commencing with the first (1st) day of
the first month following the date hereof. If any payment of
interest to be made by Maker hereunder shall become due on a
day which is not a Business Day, such payment shall be made on
the next succeeding Business Day and such extension of time
shall be included in computing the interest in such payment.
(i) Payments of principal shall be due as provided in the Credit
Agreement.
5. LAWFUL MONEY.
Principal and interest are payable in lawful money of the United States
of America.
6. APPLICATION OF PAYMENTS/LATE CHARGE.
(a) Absent the occurrence of an Event of Default hereunder or
under any of the other Credit Agreement Documents, any
payments received by the holder hereof pursuant to the terms
hereof shall be applied in the manner set forth in the Credit
Agreement or, if not so set forth, in such order as the holder
hereof may, in its sole discretion, elect. Any payments
received by the holder hereof after the occurrence of an Event
of Default hereunder or under any of the Credit Agreement
Documents shall be applied in such order as the holder hereof
may, in its sole discretion, elect.
(b) If any payment of interest is not received by the holder
hereof within fifteen (15) days of the due date thereof, then
in addition to the remedies conferred upon the holder pursuant
to Section 9 hereof and the other Credit Agreement Documents,
a late charge of four percent (4%) of the amount due and
unpaid will be added to the delinquent amount to compensate
the holder hereof for the expense of handling the delinquency
for such payment; provided, however, that the obligation to
pay a late charge shall be subject to the provisions hereof
limiting the charging, collection, and receipt of interest to
the Maximum Rate.
7. SECURITY AND GUARANTY.
This Note is secured by and is entitled to the benefits of the Credit
Agreement. The provisions of the Credit Agreement are incorporated
herein by reference as if set forth in full, and this Note is subject
to all of the covenants and conditions contained in the Credit
Agreement. This Note is guaranteed by the Guaranty.
8. EVENT OF DEFAULT.
The occurrence of any of the following shall be deemed to be an event
of default ("Event of Default") hereunder:
(a) Failure of Maker to make a payment of principal or interest
within fifteen (15) days of the due date thereof or failure of
Maker to make any other payment or perform any obligation
hereunder; or
(b) The occurrence of an Event of Default under any of the other
Credit Agreement Documents.
9. REMEDIES.
Upon the occurrence of an Event of Default, the entire balance of
principal together with all accrued interest thereon, and all other
amounts payable by Maker under the Credit Agreement Documents shall, at
the option of the holder hereof and without demand or notice,
immediately become due and payable. Upon the occurrence of an Event of
Default (and so long as such Event of Default shall continue), the
entire balance of principal hereof, together with all accrued interest
thereon, all other amounts due under the Credit Agreement Documents,
and any judgment for such principal, interest, and other amounts, at
the option of the holder hereof, shall bear interest equal to the
lesser of (i) the Default Rate; or (ii) the Maximum Rate. No delay or
omission on the part of the holder hereof in exercising any right under
this Note or under any of the other Credit Agreement Documents hereof
shall operate as a waiver of such right. The remedies of the holder
hereof, as provided in this Note and in the Credit Agreement or any
other instrument securing this Note, shall be cumulative and
concurrent, and may be pursued singularly, successively or together, at
the sole discretion of the holder hereof, and may be exercised as often
as occasion therefor shall arise.
10. WAIVER.
Maker, endorsers, guarantors, and sureties of this Note hereby waive
diligence, demand for payment, presentment for payment, protest, notice
of nonpayment, notice of protest, notice of intent to accelerate,
notice of acceleration, notice of dishonor, and notice of nonpayment,
and all other notices or demands of any kind and expressly agree that,
without in any way affecting the liability of Maker, endorsers,
guarantors, or sureties, the holder hereof may extend any maturity date
or the time for payment of any installment due hereunder, otherwise
modify the Credit Agreement Documents, accept additional security,
release any Person liable, and release any security or guaranty. Maker,
endorsers, guarantors, and sureties waive, to the full extent permitted
by law, the right to plead any and all statutes of limitations as a
defense.
11. CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
No provision of this Note may be changed, discharged, terminated, or
waived except in a writing signed by the party against whom enforcement
of the change, discharge, termination, or waiver is sought. No failure
on the part of the holder hereof to exercise and no delay by the holder
hereof in exercising any right or remedy under this Note or under the
law shall operate as a waiver thereof.
12. ATTORNEYS' FEES.
If this Note is not paid when due or if any Event of Default occurs,
Maker promises to pay all costs of enforcement and collection and
preparation therefor, including but not limited to, reasonable
attorneys' fees, whether or not any action or proceeding is brought to
enforce the provisions hereof (including, without limitation, all such
costs incurred in connection with any bankruptcy, receivership, or
other court proceedings (whether at the trial or appellate level)).
13. SEVERABILITY.
If any provision of this Note is unenforceable, the enforceability of
the other provisions shall not be affected and they shall remain in
full force and effect.
14. INTEREST RATE LIMITATION.
Maker hereby agrees to pay an effective rate of interest that is the
sum of the interest rate provided for herein, together with any
additional rate of interest resulting from any other charges of
interest or in the nature of interest paid or to be paid in connection
with the Credit Agreement, including without limitation, any fees to be
paid by Maker pursuant to the provisions of the Credit Agreement
Documents; provided, however, that in no event shall the amounts
payable herein exceed the Maximum Rate.
15. NUMBER AND GENDER.
In this Note the singular shall include the plural and the masculine
shall include the feminine and neuter gender, and vice versa.
16. HEADINGS.
Headings at the beginning of each numbered section of this Note are
intended solely for convenience and are not part of this Note.
17. CHOICE OF LAW.
This Note shall be governed by and construed in accordance with the
laws of the State of Arizona, without giving effect to conflict of laws
principles.
18. INTEGRATION.
The Credit Agreement Documents contain the complete understanding and
agreement of the holder hereof and Maker and supersede all prior
representations, warranties, agreements, arrangements, understandings,
and negotiations.
19. BINDING EFFECT.
The Credit Agreement Documents will be binding upon, and inure to the
benefit of, the holder hereof, Maker, and their respective successors
and assigns. Maker may not delegate its obligations under the Credit
Agreement Documents.
20. TIME OF THE ESSENCE.
Time is of the essence with regard to each provision of the Credit
Agreement Documents as to which time is a factor.
21. RELATIONSHIP.
The relationship of the parties hereto is that of borrower and lender
and it is expressly understood and agreed that nothing contained in
this Note or in the Credit Agreement shall be interpreted or construed
to make Maker and Payee partners, joint venturers or participants in
any other legal relationship except for borrower and lender.
22. SAVINGS CLAUSE.
This Note and all of the other Credit Agreement Documents are intended
to be performed in accordance with, and only to the extent permitted
by, all applicable usury laws. If any provision hereof or of any of the
other Credit Agreement Documents or the application thereof to any
person or circumstance shall, for any reason and to any extent, be
invalid or unenforceable, neither the application of such provision to
any other person or circumstance nor the remainder of the instrument in
which such provision is contained shall be affected thereby and shall
be enforced to the greatest extent permitted by law. It is expressly
stipulated and agreed to be the intent of the holder hereof to at all
times comply with the usury and other applicable laws now or hereafter
governing the interest payable on the indebtedness evidenced by this
Note. If the applicable law is ever revised, repealed or judicially
interpreted so as to render usurious any amount called for under this
Note or under any of the other Credit Agreement Documents, or
contracted for, charged, taken, reserved or received with respect to
the indebtedness evidence by this Note, or if the holder's exercise of
the option to accelerate the maturity of this Note, or if any
prepayment by Maker results in Maker having paid any interest in excess
of that permitted by law, then it is the express intent of Maker and
the holder hereof that all excess amount theretofore collected by
Holder be credited on the principal balance of this Note (or, if this
Note and all other indebtedness arising under or pursuant to the other
Credit Agreement Documents have been paid in full, refunded to Maker),
and the provisions of this Note and the other Credit Agreement
Documents immediately be deemed reformed and the amounts thereafter
collectable hereunder and thereunder reduced, without the necessity of
the execution of any new document, so as to comply with the then
applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder or thereunder. All sums paid, or agreed
to be paid, by Maker for the use, forbearance, detention, taking,
charging, receiving or reserving of the indebtedness of Maker to the
holder hereof under this Note or arising under or pursuant to the other
Credit Agreement Documents shall, to the maximum extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout
the full term of such indebtedness until payment in full so that the
rate or amount of interest on account of such indebtedness does not
exceed the usury ceiling from time to time in effect and applicable to
such indebtedness for so long as such indebtedness is outstanding. To
the extent federal law permits the holder hereof to contract for,
charge or receive a greater amount of interest, the holder hereof will
rely on federal law, for the purpose of determining the Maximum Rate.
Notwithstanding anything to the contrary contained herein or in any of
the other Credit Agreement Documents, it is not the intention of the
holder hereof to accelerate the maturity of any interest that has not
accrued at the time of such acceleration or to collect unearned
interest at the time of such acceleration.
If the laws of the State of Texas are ever deemed to govern this Note
notwithstanding the parties' expressed intent to the contrary, the
parties agree that TEX. REV. CIV. STAT. ANN. art 5069 Ch. 15 (which
regulated certain revolving loan accounts and revolving tri-party
accounts) shall in no event apply to this Note. Further, to the extent
that TEX. REV. CIV. STAT. ANN. art 5069-1.04, as amended, is applicable
to this Note, the "indicated rate ceiling" specified in such article is
the applicable ceiling; provided that, if any applicable law permits
greater interest, the law permitting the greatest interest shall apply.
23. NOTICES.
Notices under this Note will be given in the manner set forth in the
Credit Agreement.
24. REPLACEMENT NOTE.
This Note is a replacement of (i) that Promissory Note dated November
27, 1992 in the principal amount of $15,000,000.00 made by Maker and
payable to the holder hereof, as thereafter extended and modified, and
(ii) that Revolving Line of Credit Promissory Note dated May 7, 1994 in
the principal amount of $10,000,000.00 made by Miltex Mortgage of Texas
Limited Partnership, a Texas limited partnership dba Miltex Mortgage
Company, as thereafter extended and modified.
CH MORTGAGE COMPANY, a Colorado
corporation formerly known as
American Western Mortgage Company
By: /s/Julie E. Collins
-------------------------------------
Name: Julie E. Collins
-----------------------------------
Title: Vice President
----------------------------------
"Maker"
EX-10.5.G
7
SIXTH MODIFICATION AGREEMENT
Exhibit 10.5(g)
SIXTH MODIFICATION AGREEMENT
DATE: May 19, 1995
PARTIES: Borrower: CONTINENTAL HOMES HOLDING CORP.,
a Delaware corporation.
Bank: BANK ONE, ARIZONA, NA,
a national banking association.
RECITALS:
A. Bank has extended to Borrower credit ("Loan") in the principal amount of
$10,000,000.00 pursuant to the Loan Agreement, dated February 25, 1993 ("Loan
Agreement"), and evidenced by the Promissory Note, dated February 25, 1993
("Note"). The unpaid principal of the Loan as of the date hereof is
$10,000,000.00.
B. Bank and Borrower have executed and delivered previously the following
agreements ("Modifications") modifying the terms of the Loan, the Note, and/ or
the Loan Agreement: First Modification Agreement, dated February 25, 1994,
Second Modification Agreement, dated March 31, 1994, Third Modification
Agreement, dated November 17, 1994, Fourth Modification Agreement, dated
November 22, 1994, and Fifth Modification Agreement, dated March 14, 1995. (The
Note, the Loan Agreement, any arbitration resolution, any environmental
certification and indemnity agreement, and all other agreements, documents, and
instruments evidencing, securing, or otherwise relating to the Loan, as modified
in the Modifications, are sometimes referred to individually and collectively as
the "Loan Documents". Hereinafter, "Note" and "Loan Agreement" shall mean such
documents as modified in the Modifications.)
C. Borrower has requested that Bank modify the Loan and the Loan Documents
as provided herein. Bank is willing to so modify the Loan and the Loan
Documents, subject to the terms and conditions herein.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
2.1 The Loan Documents are modified as follows:
2.1.1 The definitions of "Fixed Rate" and "Variable Rate" in the
Note are hereby modified in their entirety as follows:
"Fixed Rate" means the rate per annum equal to the sum of (i)
two and one-quarter percent (2.25%) per annum, and (ii) the rate per
annum obtained by dividing (A) the rate of interest determined by Bank,
based on Telerate System reports or such other source as may be
selected by Bank, to be the "London Interbank Offered Rate" at which
deposits in United States dollars are offered by major banks in London,
England, one (1) Business Day before the first day of the respective
Interest Period by (B) a percentage equal to one hundred percent (100%)
minus the Eurodollar Rate Reserve Percentage for the period equal to
such Interest Period.
"Variable Rate" means the rate per annum equal to the sum of
(i) one-quarter of one percent (.25%) per annum, and (ii) the rate per
annum most recently publicly announced by Bank, or its successors, in
Phoenix, Arizona, as its "prime rate," as in effect from time to time.
The Variable Rate will change on each day that the "prime rate"
changes. The "prime rate" is not necessarily the best or lowest rate
offered by Bank, and Bank may lend to its customers at rates that are
at, above, or below its "prime rate."
2.2 Each of the Loan Documents is modified to provide that it shall be a
default or an event of default thereunder if Borrower shall fail to comply with
any of the covenants of Borrower herein or if any representation or warranty by
Borrower herein or by any guarantor in any related Consent and Agreement of
Guarantor(s) is materially incomplete, incorrect, or misleading as of the date
hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents shall
be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or interests
in property granted as security in the Loan Documents shall remain as security
for the Loan and the obligations of Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial condition of
Borrower or any other person whose financial statement has been delivered to
Bank in connection with the Loan from the most recent financial statement
received by Bank.
4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and binding
obligation of Borrower, enforceable against Borrower in accordance with their
terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly authorized by all requisite action
by or on behalf of Borrower. This Agreement has been duly executed and delivered
on behalf of Borrower.
5. BORROWER COVENANTS.
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such additional
agreements, documents, and instruments as reasonably required by Bank to
effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank and
its 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, whether now known or unknown to Borrower, (i) in respect
of the Loan, the Loan Documents, or the actions or omissions of Bank in respect
of the Loan or the Loan Documents and (ii) arising from events occurring prior
to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this Agreement,
Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all amounts,
other than interest and principal, due and payable by Borrower under the Loan
Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses incurred by Bank
in connection with this Agreement (including, without limitation, inside and
outside attorneys' expenses and fees).
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations of
Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) each guarantor(s) of the Loan,
if any, has executed and delivered to Bank a Consent and Agreement of
Guarantor(s), and (iv) if required by Bank, Borrower and any guarantor(s) have
executed and delivered to Bank an arbitration resolution, an environmental
questionnaire, and an environmental certification and indemnity agreement.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
WAIVER.
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Loan Documents as modified herein may be
changed, discharged, supplemented, terminated, or waived except in a writing
signed by the parties thereto.
8. BINDING EFFECT.
The Loan Documents as modified herein shall be binding upon and shall inure to
the benefit of Borrower and Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of Borrower, provided, however, Borrower may not assign any of its
right or delegate any of its obligation under the Loan Documents and any
purported assignment or delegation shall be void.
9. CHOICE OF LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Arizona, without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
DATED as of the date first above stated.
CONTINENTAL HOMES HOLDING CORP.,
a Delaware corporation
By: /s/ Donald R. Loback
--------------------------------
Name: Donald R. Loback
------------------------------
Title: Co-CEO
-----------------------------
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/ Rhonda R. Williams
--------------------------------
Name: Rhonda R. Williams
------------------------------
Title: Assistant VP
-----------------------------
EX-10.7.D
8
THIRD MODIFICATION AGREEMENT
Exhibit 10.7(d)
THIRD MODIFICATION AGREEMENT
DATE: May 19, 1995
PARTIES: Borrower: MILBURN INVESTMENTS, INC.,
a Texas corporation.
Bank: BANK ONE, ARIZONA, NA,
a national banking association.
RECITALS:
A. Bank has extended to Borrower credit ("Loan") in the principal amount of
$25,000,000.00 pursuant to the Amended and Restated Loan Agreement, dated
October 28, 1994 ("Loan Agreement"), and evidenced by the Replacement Promissory
Note, dated October 28, 1994 ("Note"). The unpaid principal of the Loan as of
the date hereof is $21,110,059.41.
B. The Loan is secured by, among other things, various Deeds of Trust,
Assignment of Leases and Rents, Security Agreement, and Financing Statements
("Deeds of Trust"), by Borrower, as trustor, for the benefit of Bank, as
beneficiary, recorded in records of Bell, Travis, and Williamson Counties, Texas
(the agreements, documents, and instruments securing the Loan and the Note are
referred to individually and collectively as the "Security Documents").
C. Bank and Borrower have executed and delivered previously the following
agreements ("Modifications") modifying the terms of the Loan, the Note, and the
Loan Agreement: First Modification Agreement, dated December 8, 1994, and Second
Modification Agreement, dated March 15, 1995. (The Note, the Loan Agreement, any
arbitration resolution, any environmental certification and indemnity agreement,
and all other agreements, documents, and instruments evidencing, securing, or
otherwise relating to the Loan, as modified in the Modifications, are sometimes
referred to individually and collectively as the "Loan Documents". Hereinafter,
"Note" and "Loan Agreement" shall mean such documents as modified in the
Modifications.)
D. Borrower has requested that Bank modify the Loan and the Loan Documents
as provided herein. Bank is willing to so modify the Loan and the Loan
Documents, subject to the terms and conditions herein.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
2.1 The Loan Documents are modified as follows:
2.1.1 The definitions of "Fixed Rate" and "Variable Rate" in the
Note are hereby modified in their entirety as follows:
"Fixed Rate" means the rate per annum equal to the sum of (i)
two and one-quarter percent (2.25%) per annum, and (ii) the rate per
annum obtained by dividing (A) the rate of interest determined by Bank,
based on Telerate System reports or such other source as may be
selected by Bank, to be the "London Interbank Offered Rate" at which
deposits in United States dollars are offered by major banks in London,
England, one (1) Business Day before the first day of the respective
Interest Period by (B) a percentage equal to one hundred percent (100%)
minus the Eurodollar Rate Reserve Percentage for the period equal to
such Interest Period.
"Variable Rate" means the rate per annum equal to the sum of
(i) one-quarter of one percent (.25%) per annum, and (ii) the rate per
annum most recently publicly announced by Bank, or its successors, in
Phoenix, Arizona, as its "prime rate," as in effect from time to time.
The Variable Rate will change on each day that the "prime rate"
changes. The "prime rate" is not necessarily the best or lowest rate
offered by Bank, and Bank may lend to its customers at rates that are
at, above, or below its "prime rate."
2.2 Each of the Loan Documents is modified to provide that it shall be a
default or an event of default thereunder if Borrower shall fail to comply with
any of the covenants of Borrower herein or if any representation or warranty by
Borrower herein or by any guarantor in any related Consent and Agreement of
Guarantor(s) is materially incomplete, incorrect, or misleading as of the date
hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents shall
be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or interests
in property granted as security in the Loan Documents shall remain as security
for the Loan and the obligations of Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial condition of
Borrower or any other person whose financial statement has been delivered to
Bank in connection with the Loan from the most recent financial statement
received by Bank.
4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and binding
obligation of Borrower, enforceable against Borrower in accordance with their
terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly authorized by all requisite action
by or on behalf of Borrower. This Agreement has been duly executed and delivered
on behalf of Borrower.
5. BORROWER COVENANTS.
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such additional
agreements, documents, and instruments as reasonably required by Bank to
effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank and
its 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, whether now known or unknown to Borrower, (i) in respect
of the Loan, the Loan Documents, or the actions or omissions of Bank in respect
of the Loan or the Loan Documents and (ii) arising from events occurring prior
to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this Agreement,
Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all amounts,
other than interest and principal, due and payable by Borrower under the Loan
Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses incurred by Bank
in connection with this Agreement (including, without limitation, inside and
outside attorneys, appraisal, appraisal review, processing, title, filing, and
recording costs, expenses, and fees).
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations of
Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) each guarantor(s) of the Loan,
if any, has executed and delivered to Bank a Consent and Agreement of
Guarantor(s), and (iv) if required by Bank, Borrower and any guarantor(s) have
executed and delivered to Bank an arbitration resolution, an environmental
questionnaire, and an environmental certification and indemnity agreement.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Loan Documents as modified herein may be
changed, discharged, supplemented, terminated, or waived except in a writing
signed by the parties thereto.
8. BINDING EFFECT.
The Loan Documents as modified herein shall be binding upon and shall inure to
the benefit of Borrower and Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of Borrower, provided, however, Borrower may not assign any of its
right or delegate any of its obligation under the Loan Documents and any
purported assignment or delegation shall be void.
9. CHOICE OF LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Arizona, without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
DATED as of the date first above stated.
MILBURN INVESTMENTS, INC.,
a Texas corporation
By: /s/ Donald R. Loback
-------------------------------------
Name: Donald R. Loback
-----------------------------------
Title: President
----------------------------------
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/ Rhonda R. Williams
-------------------------------------
Name: Rhonda R. Williams
-----------------------------------
Title: Assistant VP
----------------------------------
EX-10.7.E
9
FOURTH MODIFICATION AGREEMENT
Exhibit 10.7(e)
FOURTH MODIFICATION AGREEMENT
DATE: July 28, 1995
PARTIES: Borrower: MILBURN INVESTMENTS, INC.,
a Texas corporation.
Bank: BANK ONE, ARIZONA, NA,
a national banking association.
RECITALS:
A. Bank has extended to Borrower credit ("Loan") in the principal amount of
$25,000,000.00 pursuant to the Amended and Restated Loan Agreement, dated
October 28, 1994 ("Loan Agreement"), and evidenced by the Replacement Promissory
Note, dated October 28, 1994 ("Note"). The unpaid principal of the Loan as of
the date hereof is $16,666,407.96.
B. The Loan is secured by, among other things, various Deeds of Trust,
Assignment of Leases and Rents, Security Agreement, and Financing Statements
("Deeds of Trust"), by Borrower, as trustor, for the benefit of Bank, as
beneficiary, recorded in records of Bell, Travis, and Williamson Counties, Texas
(the agreements, documents, and instruments securing the Loan and the Note are
referred to individually and collectively as the "Security Documents").
C. Bank and Borrower have executed and delivered previously the following
agreements ("Modifications") modifying the terms of the Loan, the Note, and the
Loan Agreement: First Modification Agreement, dated December 8, 1994, Second
Modification Agreement, dated March 15, 1995, and Third Modification Agreement,
dated May 19, 1995. (The Note, the Loan Agreement, any arbitration resolution,
any environmental certification and indemnity agreement, and all other
agreements, documents, and instruments evidencing, securing, or otherwise
relating to the Loan, as modified in the Modifications, are sometimes referred
to individually and collectively as the "Loan Documents". Hereinafter, "Note"
and "Loan Agreement" shall mean such documents as modified in the
Modifications.)
D. Borrower has requested that Bank modify the Loan and the Loan
Documents as provided herein. Bank is willing to so modify the Loan and the
Loan Documents, subject to the terms and conditions herein.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
2.1 The Loan Documents are modified as follows:
2.1.1 The Conversion Date of the Loan and the Note is changed from July
28, 1995, to September 26, 1995. On the maturity date Borrower shall pay to Bank
the unpaid principal, accrued and unpaid interest, and all other amounts payable
by Borrower under the Loan Documents as modified herein.
2.2 Each of the Loan Documents is modified to provide that it shall be a
default or an event of default thereunder if Borrower shall fail to comply with
any of the covenants of Borrower herein or if any representation or warranty by
Borrower herein or by any guarantor in any related Consent and Agreement of
Guarantor(s) is materially incomplete, incorrect, or misleading as of the date
hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents shall
be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or interests
in property granted as security in the Loan Documents shall remain as security
for the Loan and the obligations of Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial condition of
Borrower or any other person whose financial statement has been delivered to
Bank in connection with the Loan from the most recent financial statement
received by Bank.
4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and binding
obligation of Borrower, enforceable against Borrower in accordance with their
terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly authorized by all requisite action
by or on behalf of Borrower. This Agreement has been duly executed and delivered
on behalf of Borrower.
5. BORROWER COVENANTS.
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such additional
agreements, documents, and instruments as reasonably required by Bank to
effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank and
its 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, whether now known or unknown to Borrower, (i) in respect
of the Loan, the Loan Documents, or the actions or omissions of Bank in respect
of the Loan or the Loan Documents and (ii) arising from events occurring prior
to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this Agreement,
Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all amounts,
other than interest and principal, due and payable by Borrower under the Loan
Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses incurred by Bank
in connection with this Agreement (including, without limitation, inside and
outside attorneys, appraisal, appraisal review, processing, title, filing, and
recording costs, expenses, and fees).
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations of
Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) each guarantor(s) of the Loan,
if any, has executed and delivered to Bank a Consent and Agreement of
Guarantor(s), and (iv) if required by Bank, Borrower and any guarantor(s) have
executed and delivered to Bank an arbitration resolution, an environmental
questionnaire, and an environmental certification and indemnity agreement.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
WAIVER.
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Loan Documents as modified herein may be
changed, discharged, supplemented, terminated, or waived except in a writing
signed by the parties thereto.
8. BINDING EFFECT.
The Loan Documents as modified herein shall be binding upon and shall inure to
the benefit of Borrower and Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of Borrower, provided, however, Borrower may not assign any of its
right or delegate any of its obligation under the Loan Documents and any
purported assignment or delegation shall be void.
9. CHOICE OF LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Arizona, without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
DATED as of the date first above stated.
MILBURN INVESTMENTS, INC.,
a Texas corporation
By: /s/ Kenda B. Gonzales
-------------------------------------
Name: Kenda B. Gonzales
-----------------------------------
Title: Treasurer
----------------------------------
BORROWER
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/ Rhonda R. Williams
-------------------------------------
Name: Rhonda R. Williams
-----------------------------------
Title: Assistant VP
----------------------------------
BANK
EX-10.9.C
10
SECOND MODIFICATION AGREEMENT
Exhibit 10.9(c)
SECOND MODIFICATION AGREEMENT
DATE: May 19, 1995
PARTIES: Borrower: HEFTLER REALTY CO.,
a Florida corporation.
Bank: BANK ONE, ARIZONA, NA,
a national banking association.
RECITALS:
A. Bank has extended to Borrower credit ("Loan") in the principal amount of
$10,000,000.00 pursuant to the Loan Agreement, dated November 17, 1994 ("Loan
Agreement"), and evidenced by the Promissory Note, dated November 17, 1994
("Note"). The unpaid principal of the Loan as of the date hereof is
$9,797,560.73.
B. The Loan is secured by, among other things, the Deed of Trust,
Assignment of Leases and Rents, Security Agreement, Fixture Filing and Financing
Statement dated November 17, 1994 ("Deed of Trust"), by Borrower, as trustor,
for the benefit of Bank, as beneficiary, recorded on November 17, 1994, in
Instrument No. 94-0820221, records of Maricopa County, Arizona (the agreements,
documents, and instruments securing the Loan and the Note are referred to
individually and collectively as the "Security Documents").
C. Bank and Borrower have executed and delivered previously the following
agreements ("Modifications") modifying the terms of the Loan, the Note, and the
Loan Agreement: First Modification Agreement, dated November 22, 1994. (The
Note, the Loan Agreement, any arbitration resolution, any environmental
certification and indemnity agreement, and all other agreements, documents, and
instruments evidencing, securing, or otherwise relating to the Loan, as modified
in the Modifications, are sometimes referred to individually and collectively as
the "Loan Documents". Hereinafter, "Note" and "Loan Agreement" shall mean such
documents as modified in the Modifications.)
D. Borrower has requested that Bank modify the Loan and the Loan Documents
as provided herein. Bank is willing to so modify the Loan and the Loan
Documents, subject to the terms and conditions herein.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
2.1 The Loan Documents are modified as follows:
2.1.1 The definitions of "Fixed Rate" and "Variable Rate" in the
Note are hereby modified in their entirety as follows:
"Fixed Rate" means the rate per annum equal to the sum of (i)
two and one-quarter percent (2.25%) per annum, and (ii) the rate per
annum obtained by dividing (A) the rate of interest determined by Bank,
based on Telerate System reports or such other source as may be
selected by Bank, to be the "London Interbank Offered Rate" at which
deposits in United States dollars are offered by major banks in London,
England, one (1) Business Day before the first day of the respective
Interest Period by (B) a percentage equal to one hundred percent (100%)
minus the Eurodollar Rate Reserve Percentage for the period equal to
such Interest Period.
"Variable Rate" means the rate per annum equal to the sum of
(i) one-quarter of one percent (.25%) per annum, and (ii) the rate per
annum most recently publicly announced by Bank, or its successors, in
Phoenix, Arizona, as its "prime rate," as in effect from time to time.
The Variable Rate will change on each day that the "prime rate"
changes. The "prime rate" is not necessarily the best or lowest rate
offered by Bank, and Bank may lend to its customers at rates that are
at, above, or below its "prime rate."
2.2 Each of the Loan Documents is modified to provide that it shall be a
default or an event of default thereunder if Borrower shall fail to comply with
any of the covenants of Borrower herein or if any representation or warranty by
Borrower herein or by any guarantor in any related Consent and Agreement of
Guarantor(s) is materially incomplete, incorrect, or misleading as of the date
hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents shall
be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or interests
in property granted as security in the Loan Documents shall remain as security
for the Loan and the obligations of Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial condition of
Borrower or any other person whose financial statement has been delivered to
Bank in connection with the Loan from the most recent financial statement
received by Bank.
4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and binding
obligation of Borrower, enforceable against Borrower in accordance with their
terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly authorized by all requisite action
by or on behalf of Borrower. This Agreement has been duly executed and delivered
on behalf of Borrower.
5. BORROWER COVENANTS.
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such additional
agreements, documents, and instruments as reasonably required by Bank to
effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank and
its 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, whether now known or unknown to Borrower, (i) in respect
of the Loan, the Loan Documents, or the actions or omissions of Bank in respect
of the Loan or the Loan Documents and (ii) arising from events occurring prior
to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this Agreement,
Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all amounts,
other than interest and principal, due and payable by Borrower under the Loan
Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses incurred by Bank
in connection with this Agreement (including, without limitation, inside and
outside attorneys, appraisal, appraisal review, processing, title, filing, and
recording costs, expenses, and fees).
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations of
Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) each guarantor(s) of the Loan,
if any, has executed and delivered to Bank a Consent and Agreement of
Guarantor(s), and (iv) if required by Bank, Borrower and any guarantor(s) have
executed and delivered to Bank an arbitration resolution, an environmental
questionnaire, and an environmental certification and indemnity agreement.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Loan Documents as modified herein may be
changed, discharged, supplemented, terminated, or waived except in a writing
signed by the parties thereto.
8. BINDING EFFECT.
The Loan Documents as modified herein shall be binding upon and shall inure to
the benefit of Borrower and Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of Borrower, provided, however, Borrower may not assign any of its
right or delegate any of its obligation under the Loan Documents and any
purported assignment or delegation shall be void.
9. CHOICE OF LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Arizona, without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
DATED as of the date first above stated.
HEFTLER REALTY CO.,
a Florida corporation
By: /s/ Donald R. Loback
-------------------------------------
Name: Donald R. Loback
-----------------------------------
Title: President
----------------------------------
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/ Rhonda R. Williams
-------------------------------------
Name: Rhonda R. Williams
-----------------------------------
Title: Assistant VP
----------------------------------
EX-10.13.B
11
FIRST MODIFICATION AGREEMENT
Exhibit 10.13(b)
FIRST MODIFICATION AGREEMENT
DATE: January 20, 1995
PARTIES: Borrower: KDB HOMES, INC.,
a Delaware corporation.
Bank: BANK ONE, ARIZONA, NA,
a national banking association.
RECITALS:
A. Bank has extended to Borrower credit ("Loan") in the principal
amount of $10,000,000.00 pursuant to the Loan Agreement, dated November 17, 1994
("Loan Agreement"), and evidenced by the Promissory Note, dated November 17,
1994 ("Note"). The unpaid principal of the Loan as of the date hereof is $0 (the
Note, the Loan Agreement, any arbitration resolution, any environmental
certification and indemnity agreement, and all other agreements, documents, and
instruments evidencing, securing, or otherwise relating to the Loan are
sometimes referred to individually and collectively as the "Loan Documents").
B. Borrower has requested that Bank modify the Loan and the Loan
Documents as provided herein. Bank is willing to so modify the Loan and the Loan
Documents, subject to the terms and conditions herein.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
2.1 The Loan Documents are modified as follows:
2.1.1 Paragraph 13 of the section of the Note entitled "EVENTS
OF DEFAULT" is hereby modified in its entirety to provide as follows:
13. The occurrence of any condition or event that is a default
or is designated as a default, an event of default, or an Event of
Default in any other Loan Document or in any agreement, document, or
instrument relating to any other indebtedness of Borrower, Milburn
Investments, Inc., a Texas corporation, Continental Homes Holding
Corp., a Delaware corporation ("CHHC"), any other Loan Party, American
Western Mortgage Company, a Colorado corporation, Miltex Mortgage of
Texas Limited Partnership, a Texas limited partnership, Heftler Realty
Co., a Florida corporation or CHI Construction Company, an Arizona
corporation, to Bank.
2.1.2 Clauses (iii), (iv) and (v) of the definition of Maximum
Allowed Advances in Section 1 of the Loan Agreement are hereby replaced in their
entirety by the following:
(iii) With respect to each Presold Unit, the lesser of (A)
eighty percent (80%) of the respective Unit Base Appraised Value, or
(B) eighty percent (80%) of the sales price in the respective Purchase
Contract, or (C) ninety percent (90%) of the respective Unit Total
Costs plus fifty percent (50%) of the Lot Cost for the Lot related to
such Unit;
(iv) With respect to each Spec Unit, the lesser of (A)
seventy-five percent (75%) of the respective Unit Base Appraised Value,
or (B) ninety percent (90%) of the respective Unit Total Costs plus
fifty percent (50%) of the Lot Cost for the Lot related to such Unit;
(v) With respect to each Model Unit, the lesser of (A) seventy
percent (70%) of the respective Unit Base Appraised Value, or (B)
ninety percent (90%) of the respective Unit Total Costs plus fifty
percent (50%) of the Lot Cost for the Lot related to such Unit;
2.1.3 The definitions of Presold Adjustment, Model Adjustment, Spec
Adjustment, and Raw Land Adjustment are hereby deleted from Section 2 of the
Loan Agreement, and each other place in the Loan Agreement where such phrases
appear.
2.1.4 Clauses (i), (ii) and (iii) in the definition of Term Adjustment
in Section 2 of the Loan Agreement are hereby modified in their entirety as
follows:
(i) With respect to a Presold Unit remaining in Eligible
Collateral beyond the first nine (9) months of the Presold Unit's Term,
a decrease in the otherwise applicable Maximum Allowed Advance to the
lesser of (A) fifty percent (50%) of the respective Unit Base Appraised
Value, or (B) fifty percent (50%) of the sales price in the respective
Purchase Contract, or (C) fifty percent (50%) of the respective Unit
Total Costs plus fifty percent (50%) of the Lot Cost for the Lot
related to such Unit;
(ii) With respect to a Spec Unit remaining in Eligible
Collateral beyond the first six (6) months of the Spec Unit's Term a
decrease in the otherwise applicable Maximum Allowed Advance to the
lesser of (A) sixty-five percent (65%) of the respective Unit Base
Appraised Value, or (B) sixty-five percent (65%) of the respective Unit
Total Costs plus one fifty percent (50%) of the Lot Cost for the Lot
related to such Unit; and with respect to a Spec Unit remaining in
Eligible Collateral beyond the first nine (9) months of the Spec Unit's
Term a decrease in the otherwise applicable Maximum Allowed Advance to
the lesser of (I) fifty percent (50%) of the respective Unit Base
Appraised Value, or (II) fifty percent (50%) of the respective Unit
Total Costs plus one fifty percent (50%) of the Lot Cost for the Lot
related to such Unit;
(iii) With respect to a Model Unit remaining in Eligible
Collateral beyond the first eighteen (18) months of the Model Unit's
Term a decrease in the otherwise applicable Maximum Allowed Advance to
the lesser of (A) sixty-five percent (65%) of the respective Unit Base
Appraised Value, or (B) sixty-five percent (65%) of the respective Unit
Total Costs plus one fifty percent (50%) of the Lot Cost for the Lot
related to such Unit; and with respect to a Model Unit remaining in
Eligible Collateral beyond the first twenty-one (21) months of the
Model Unit's Term a decrease in the otherwise applicable Maximum
Allowed Advance to the lesser of (I) sixty percent (60%) of the
respective Unit Base Appraised Value, or (II) sixty percent (60%) of
the respective Unit Total Costs plus one fifty percent (50%) of the Lot
Cost for the Lot related to such Unit;
2.1.5 The definition of Unit Total Costs in Section 2 of the
Loan Agreement is hereby modified in its entirety to provided as follows:
"Unit Total Costs" means, with respect to each type of Unit,
the total costs, expenses and fees included in the respective Unit
Budget.
2.2 Each of the Loan Documents is modified to provide that it shall be
a default or an event of default thereunder if Borrower shall fail to comply
with any of the covenants of Borrower herein or if any representation or
warranty by Borrower herein or by any guarantor in any related Consent and
Agreement of Guarantor(s) is materially incomplete, incorrect, or misleading as
of the date hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents
shall be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or interests
in property granted as security in the Loan Documents shall remain as security
for the Loan and the obligations of Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial
condition of Borrower or any other person whose financial statement has been
delivered to Bank in connection with the Loan from the most recent financial
statement received by Bank.
4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and
binding obligation of Borrower, enforceable against Borrower in accordance with
their terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly authorized by all requisite action
by or on behalf of Borrower. This Agreement has been duly executed and delivered
on behalf of Borrower.
5. BORROWER COVENANTS.
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such
additional agreements, documents, and instruments as reasonably required by Bank
to effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank
and its 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, whether now known or unknown to Borrower, (i) in respect
of the Loan, the Loan Documents, or the actions or omissions of Bank in respect
of the Loan or the Loan Documents and (ii) arising from events occurring prior
to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this
Agreement, Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all
amounts, other than interest and principal, due and payable by Borrower under
the Loan Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses
incurred by Bank in connection with this Agreement (including, without
limitation, inside and outside attorneys' expenses and fees).
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations of
Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) each guarantor(s) of the Loan,
if any, has executed and delivered to Bank a Consent and Agreement of
Guarantor(s), and (iv) if required by Bank, Borrower and any guarantor(s) have
executed and delivered to Bank an arbitration resolution, an environmental
questionnaire, and an environmental certification and indemnity agreement.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION,
OR WAIVER.
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Loan Documents as modified herein may be
changed, discharged, supplemented, terminated, or waived except in a writing
signed by the parties thereto.
8. BINDING EFFECT.
The Loan Documents as modified herein shall be binding upon and shall inure to
the benefit of Borrower and Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of Borrower, provided, however, Borrower may not assign any of its
right or delegate any of its obligation under the Loan Documents and any
purported assignment or delegation shall be void.
9. CHOICE OF LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Arizona, without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
DATED as of the date first above stated.
KDB HOMES, INC.,
a Delaware corporation
By: /s/ Kenda B. Gonzales
-------------------------------------
Name: Kenda B. Gonzales
-----------------------------------
Title: Treasurer and Secretary
----------------------------------
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/ Carol Grumley
-------------------------------------
Name: Carol Grumley
-----------------------------------
Title: Vice President
----------------------------------
EX-10.13.C
12
SECOND MODIFICATION AGREEMENT
Exhibit 10.13(c)
SECOND MODIFICATION AGREEMENT
DATE: May 19, 1995
PARTIES: Borrower: KDB HOMES, INC.,
a Delaware corporation.
Bank: BANK ONE, ARIZONA, NA,
a national banking association.
RECITALS:
A. Bank has extended to Borrower credit ("Loan") in the principal amount of
$10,000,000.00 pursuant to the Loan Agreement, dated November 17, 1994 ("Loan
Agreement"), and evidenced by the Promissory Note, dated November 17, 1994
("Note"). The unpaid principal of the Loan as of the date hereof is
$2,500,000.00.
B. The Loan is secured by, among other things, (i) the Mortgage, Assignment
of Leases and Rents, Security Agreement, Fixture Filing and Financing Statement
dated January 20, 1995, by Borrower, as mortgagor, for the benefit of Bank, as
mortgagee, recorded on January 26, 1995, in Docket No. DC9504440, Book 1244,
Page 0132, records of Douglas County, Colorado, (ii) the Mortgage, Assignment of
Leases and Rents, Security Agreement, Fixture Filing and Financing Statement
dated January 20, 1995, by Borrower, as mortgagor, for the benefit of Bank, as
mortgagee, recorded on January 26, 1995, in Reception No. F0009897, records of
Jefferson County, Colorado, and (iii) the Mortgage, Assignment of Leases and
Rents, Security Agreement, Fixture Filing and Financing Statement, by Borrower,
as mortgagor, for the benefit of Bank, as mortgagee, recorded on March 14, 1995,
in Instrument No. 00024419, Book 7887, Page 621, records of Arapahoe County,
Colorado ("Deeds of Trust") (the agreements, documents, and instruments securing
the Loan and the Note are referred to individually and collectively as the
"Security Documents").
C. Bank and Borrower have executed and delivered previously the following
agreements ("Modifications") modifying the terms of the Loan, the Note, and the
Loan Agreement: First Modification Agreement, dated January 20, 1995. (The Note,
the Loan Agreement, any arbitration resolution, any environmental certification
and indemnity agreement, and all other agreements, documents, and instruments
evidencing, securing, or otherwise relating to the Loan, as modified in the
Modifications, are sometimes referred to individually and collectively as the
"Loan Documents". Hereinafter, "Note" and "Loan Agreement" shall mean such
documents as modified in the Modifications.)
D. Borrower has requested that Bank modify the Loan and the Loan Documents
as provided herein. Bank is willing to so modify the Loan and the Loan
Documents, subject to the terms and conditions herein.
AGREEMENT:
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Borrower and Bank agree as follows:
1. ACCURACY OF RECITALS.
Borrower acknowledges the accuracy of the Recitals.
2. MODIFICATION OF LOAN DOCUMENTS.
2.1 The Loan Documents are modified as follows:
2.1.1 The definitions of "Fixed Rate" and "Variable Rate" in the
Note are hereby modified in their entirety as follows:
"Fixed Rate" means the rate per annum equal to the sum of (i)
two and one-quarter percent (2.25%) per annum, and (ii) the rate per
annum obtained by dividing (A) the rate of interest determined by Bank,
based on Telerate System reports or such other source as may be
selected by Bank, to be the "London Interbank Offered Rate" at which
deposits in United States dollars are offered by major banks in London,
England, one (1) Business Day before the first day of the respective
Interest Period by (B) a percentage equal to one hundred percent (100%)
minus the Eurodollar Rate Reserve Percentage for the period equal to
such Interest Period.
"Variable Rate" means the rate per annum equal to the sum of
(i) one-quarter of one percent (.25%) per annum, and (ii) the rate per
annum most recently publicly announced by Bank, or its successors, in
Phoenix, Arizona, as its "prime rate," as in effect from time to time.
The Variable Rate will change on each day that the "prime rate"
changes. The "prime rate" is not necessarily the best or lowest rate
offered by Bank, and Bank may lend to its customers at rates that are
at, above, or below its "prime rate."
2.2 Each of the Loan Documents is modified to provide that it shall be a
default or an event of default thereunder if Borrower shall fail to comply with
any of the covenants of Borrower herein or if any representation or warranty by
Borrower herein or by any guarantor in any related Consent and Agreement of
Guarantor(s) is materially incomplete, incorrect, or misleading as of the date
hereof.
2.3 Each reference in the Loan Documents to any of the Loan Documents shall
be a reference to such document as modified herein.
3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.
The Loan Documents are ratified and affirmed by Borrower and shall remain in
full force and effect as modified herein. Any property or rights to or interests
in property granted as security in the Loan Documents shall remain as security
for the Loan and the obligations of Borrower in the Loan Documents.
4. BORROWER REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Bank:
4.1 No default or event of default under any of the Loan Documents as
modified herein, nor any event, that, with the giving of notice or the passage
of time or both, would be a default or an event of default under the Loan
Documents as modified herein has occurred and is continuing.
4.2 There has been no material adverse change in the financial condition of
Borrower or any other person whose financial statement has been delivered to
Bank in connection with the Loan from the most recent financial statement
received by Bank.
4.3 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.
4.4 Borrower has no claims, counterclaims, defenses, or set-offs with
respect to the Loan or the Loan Documents as modified herein.
4.5 The Loan Documents as modified herein are the legal, valid, and binding
obligation of Borrower, enforceable against Borrower in accordance with their
terms.
4.6 Borrower is validly existing under the laws of the State of its
formation or organization and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this Agreement and the performance of the Loan
Documents as modified herein have been duly authorized by all requisite action
by or on behalf of Borrower. This Agreement has been duly executed and delivered
on behalf of Borrower.
5. BORROWER COVENANTS.
Borrower covenants with Bank:
5.1 Borrower shall execute, deliver, and provide to Bank such additional
agreements, documents, and instruments as reasonably required by Bank to
effectuate the intent of this Agreement.
5.2 Borrower fully, finally, and forever releases and discharges Bank and
its 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, whether now known or unknown to Borrower, (i) in respect
of the Loan, the Loan Documents, or the actions or omissions of Bank in respect
of the Loan or the Loan Documents and (ii) arising from events occurring prior
to the date of this Agreement.
5.3 Contemporaneously with the execution and delivery of this Agreement,
Borrower has paid to Bank:
5.3.1 All accrued and unpaid interest under the Note and all amounts,
other than interest and principal, due and payable by Borrower under the Loan
Documents as of the date hereof.
5.3.2 All the internal and external costs and expenses incurred by Bank
in connection with this Agreement (including, without limitation, inside and
outside attorneys, appraisal, appraisal review, processing, title, filing, and
recording costs, expenses, and fees).
6. EXECUTION AND DELIVERY OF AGREEMENT BY BANK.
Bank shall not be bound by this Agreement until (i) Bank has executed and
delivered this Agreement, (ii) Borrower has performed all of the obligations of
Borrower under this Agreement to be performed contemporaneously with the
execution and delivery of this Agreement, (iii) each guarantor(s) of the Loan,
if any, has executed and delivered to Bank a Consent and Agreement of
Guarantor(s), and (iv) if required by Bank, Borrower and any guarantor(s) have
executed and delivered to Bank an arbitration resolution, an environmental
questionnaire, and an environmental certification and indemnity agreement.
7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER.
The Loan Documents as modified herein contain the complete understanding and
agreement of Borrower and Bank in respect of the Loan and supersede all prior
representations, warranties, agreements, arrangements, understandings, and
negotiations. No provision of the Loan Documents as modified herein may be
changed, discharged, supplemented, terminated, or waived except in a writing
signed by the parties thereto.
8. BINDING EFFECT.
The Loan Documents as modified herein shall be binding upon and shall inure to
the benefit of Borrower and Bank and their successors and assigns and the
executors, legal administrators, personal representatives, heirs, devisees, and
beneficiaries of Borrower, provided, however, Borrower may not assign any of its
right or delegate any of its obligation under the Loan Documents and any
purported assignment or delegation shall be void.
9. CHOICE OF LAW.
This Agreement shall be governed by and construed in accordance with the laws of
the State of Arizona, without giving effect to conflicts of law principles.
10. COUNTERPART EXECUTION.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.
DATED as of the date first above stated.
KDB HOMES, INC.,
a Delaware corporation
By: /s/ Donald R. Loback
-------------------------------------
Name: Donald R. Loback
-----------------------------------
Title: Vice President
----------------------------------
BANK ONE, ARIZONA, NA,
a national banking association
By: /s/ Rhonda R. Williams
-------------------------------------
Name: Rhonda R. Williams
-----------------------------------
Title: Assistant VP
----------------------------------
EX-11
13
COMPUTATION OF EARNINGS
Exhibit 11
CONTINENTAL HOMES HOLDING CORP.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share data)
Years ended May 31,
Fully diluted: 1995 1994
-------- --------
Net income $ 13,821 $ 13,083
Interest expense on convertible
subordinated notes net of income
taxes 1,604 1,604
-------- --------
$ 15,425 $ 14,687
======== ========
Weighted average number of
shares outstanding 6,948 6,203
Conversion of convertible
subordinated notes (42.55 shares
per $1,000 principal amount of
notes) 1,489 1,489
Incremental shares relating to
stock options exercisable 46 105
-------- --------
Weighted average number of shares
outstanding assuming full dilution 8,483 7,797
======== ========
Fully diluted net income per share $ 1.82 $ 1.88
======== ========
EX-13
14
FINANCIALS
FINANCIAL HIGHLIGHTS
(in thousands, except per share and unit backlog data) 1995 1994 1993 1992 1991
Revenues $432,452 $348,620 $207,033 $170,424 $138,615
Gross profit from home sales 75,430 62,153 38,052 29,674 24,148
Net income 13,821 13,083 7,100 6,591 116
Earnings per common share 1.99 2.11 1.38 1.39 .03
Cash dividends per common share .20 .20 .20 .20 .20
Total assets 386,833 305,490 187,525 162,774 142,712
Total debt 232,825 168,319 114,787 101,741 104,381
Stockholders' equity 110,479 98,560 51,550 44,428 28,562
Stockholders' equity per common share $ 15.95 $ 14.15 $ 9.93 $ 8.71 $ 8.13
Units in backlog at end of period 1,493 1,136 900 669 486
Aggregate sales value of backlog $198,126 $147,242 $107,499 $ 76,215 $ 53,180
MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
HOMEBUILDING
The following table sets forth, for the periods indicated, unit
activity, average sales price and revenue from home sales for the Company:
Years ended May 31,
-----------------------------------------
1995 1994 1993
-------- -------- --------
Units delivered 3,202 2,831 1,769
Average sales price $129,518 $120,110 $113,065
Revenue from home sales (000's) $414,718 $340,031 $200,012
Percentage increase from prior year 22.0% 70.0%
Change due to volume 13.1% 60.0%
Change due to average sales price 8.9% 10.0%
The volume increase in fiscal 1995 was attributable to the addition of
the Texas operations during fiscal 1994 and the Miami operations during fiscal
1995 (the Acquisitions). Without Texas and Miami, the Company's unit volume was
8% less during fiscal 1995 compared to fiscal 1994. Significant volume increases
in early fiscal 1994 resulted in the Company selling out of several subdivisions
in Phoenix faster than anticipated. This resulted in fewer homes available for
sale in Phoenix in the third and fourth fiscal quarters of fiscal 1994 compared
to the same periods in fiscal 1993. As a result of the inventory shortage,
deliveries in the early quarters of fiscal 1995 in Phoenix were less than in the
prior year. The increase in volume in fiscal 1994 was attributable to the Texas
operations, improved housing markets in the Phoenix and Denver areas and
increased deliveries in California as a result of the Company's aggressive
marketing in that location. The increase in average sales price in fiscal 1995
was primarily due to deliveries in Phoenix and Denver, where sales prices have
increased as a result of rising costs. The increase in average sales prices in
fiscal 1994 was primarily due to the increased number of deliveries in
California, most of which were in the move-up market.
Revenues from land sales were $10,658,000 in fiscal 1995, $1,095,000 in
fiscal 1994 and $4,113,000 in fiscal 1993.
The following table summarizes information related to the Companys
backlog at the dates indicated:
May 31,
---------------------------------------------------------
1995 1994 1993
Units Dollars Units Dollars Units Dollars
---------------------------------------------------------
(Dollars in thousands)
Phoenix 821 $102,503 659 $ 84,818 786 $ 86,436
Texas 396 43,140 348 38,403 -- --
Denver 98 18,185 100 18,178 79 11,753
Miami 86 12,228 -- -- -- --
California 92 22,070 29 5,843 35 9,310
----- -------- ----- -------- --- --------
1,493 $198,126 1,136 $147,242 900 $107,499
===== ======== ===== ======== === ========
The increase in backlog in fiscal 1995 resulted from improved sales in
Phoenix, Texas and Southern California during the fourth fiscal quarter and the
Company's expansion into the Miami, Florida market. The increase in backlog in
fiscal 1994 in Denver was due to the improved Denver housing market, which the
Company believes resulted primarily from improved economic conditions and lower
mortgage interest rates. As a result of the aforementioned inventory shortage,
the number of units in the backlog in Phoenix at May 31, 1994 was 16% less than
the prior year. The aggregate sales value of new contracts signed increased 25%
during fiscal 1995 as a result of the aforementioned improved sales to
$441,309,000 representing 3,427 homes (including $146,602,000 in Texas and Miami
representing 1,330 homes) as compared with $351,925,000 representing 2,844 homes
(including $101,483,000 in Texas representing 935 homes) for fiscal 1994.
The following table summarizes information related to the cost of home
sales and selling, general and administrative (SG&A) expenses and interest, net
for homebuilding:
Years ended May 31,
----------------------------------------------------
1995 1994 1993
Dollars % Dollars % Dollars %
----------------------------------------------------
(Dollars in thousands)
Revenue from home sales $414,718 100.0% $340,031 100.0% $200,012 100.0%
Cost of home sales 339,288 81.8 277,878 81.7 161,960 81.0
-------- ------ -------- ------ -------- ------
Gross profit 75,430 18.2 62,153 18.3 38,052 19.0
SG&A expenses 46,308 11.2 37,065 10.9 20,836 10.4
-------- ------ -------- ------ -------- ------
Operating income
from homebuilding 29,122 7.0 25,088 7.4 17,216 8.6
Interest, net 4,993 1.2 4,456 1.3 5,498 2.7
-------- ------ -------- ------ -------- ------
Pre-tax profit from
homebuilding $ 24,129 5.8% $ 20,632 6.1% $ 11,718 5.9%
======== ====== ======== ====== ======== ======
Gross profit from home sales was 18.2% in fiscal 1995 compared to 18.3%
and 19.0% in fiscal 1994 and 1993, respectively. In connection with the
Acquisitions, the Company capitalized a portion of the purchase price and
includes such capitalized purchase price in the cost of home sales when the
related units are delivered (purchase accounting adjustments). Gross profit from
home sales, exclusive of the purchase accounting adjustments was 18.6% in fiscal
1995, compared to 18.9% and 19.0% in fiscal 1994 and 1993, respectively. The
decrease in gross profit during fiscal 1995 was primarily the result of sales
incentives and discounts that were offered for a time during the year in the
Austin market. The decline in gross profit margins during fiscal 1994 was a
result of the Company's Southern California market. The Southern California
market has been weak due to difficult economic conditions, concerns about home
values and low consumer confidence. Accordingly, the Company has aggressively
marketed its California homes in older subdivisions by offering sales incentives
and discounts. At May 31, 1995, 11 homes remained to be delivered from these
older subdivisions.
The increase in total SG&A expenses for fiscal 1995 and fiscal 1994 was
primarily due to the addition of the Texas operations during fiscal 1994 and the
Miami operations during fiscal 1995. The 1995 fiscal year included $15,805,000
of SG&A expenses from Texas for the full fiscal year compared to $11,794,000 for
a partial year during fiscal 1994. In addition, the fiscal 1995 period included
$2,227,000 of SG&A expenses related to the Miami operations. Additionally, the
Company experienced higher advertising and selling expense associated with the
opening of new subdivisions, which occurred at a faster rate in fiscal 1995.
Additional increases in total SG&A expenses for fiscal 1994 were due to higher
variable marketing costs (primarily sales commissions and model furniture
amortization) due to the increase in the number of homes delivered, higher
salaries and higher customer service costs. SG&A expenses for each home
delivered were $14,462, $13,092 and $11,778 in fiscal 1995, 1994 and 1993,
respectively. The Company capitalizes certain SG&A expenses for homebuilding and
includes such capitalized SG&A in cost of home sales when the related units are
delivered. Accordingly, total SG&A expenses incurred for homebuilding were
$53,109,000, $42,040,000 and $24,005,000 in fiscal 1995, 1994 and 1993,
respectively.
The Company capitalizes certain interest costs for its homebuilding
operations and includes such capitalized interest in cost of home sales when the
related units are delivered. Accordingly, total interest incurred by the Company
was $19,528,000, $13,378,000 and $11,896,000 in fiscal 1995, 1994 and 1993,
respectively. Interest, net for homebuilding was $4,993,000, $4,456,000 and
$5,498,000 in fiscal 1995, 1994 and 1993, respectively. The increase in interest
during fiscal 1995, both incurred and expensed, was due to higher debt levels
which resulted primarily from the Heftler acquisition.
The Company's pre-tax profit from homebuilding for fiscal 1995 was
$24,129,000 compared to $20,632,000 for the year ended May 31, 1994 and
$11,718,000 for the year ended May 31, 1993. Pre-tax profit increased in fiscal
1995 due primarily to improved results from Denver and Southern California and
the inclusion of Texas results for the full fiscal year, which collectively
contributed an additional $3,411,000 of pre-tax profit in fiscal 1995 compared
to fiscal 1994. The increase in pre-tax profit in fiscal 1994 was primarily due
to greater deliveries in Phoenix and inclusion of the Texas results (which
contributed $4,406,000 of pre-tax profit).
Mortgage banking
The Company's mortgage banking operations are conducted through its
wholly-owned subsidiaries, American Western Mortgage Company (AWMC) in Arizona
and Miltex Management, Inc. (MMI) in Texas. The following table summarizes
operating information for the Company's mortgage banking operations:
Years ended May 31,
------------------------------------------
1995 1994 1993
------------------------------------------
(Dollars in thousands)
Number of loans originated 1,949 2,451 983
Loan origination fees $1,845 $2,186 $ 861
Sale of servicing and marketing
gains 2,744 3,046 1,233
Other revenues 628 459 332
------ ------ ------
Total revenues 5,217 5,691 2,426
General and administrative
expenses 4,724 3,930 1,544
------ ------ ------
Operating income from mortgage
banking 493 1,761 882
Interest, net (199) (233) 14
------ ------ ------
Pre-tax profit from mortgage
banking $ 692 $1,994 $ 868
====== ====== ======
Revenues from mortgage banking operations decreased in fiscal 1995
compared to fiscal 1994 primarily as a result of a decrease in third party
originations in Texas. General and administrative expenses increased in fiscal
1995 compared to fiscal 1994 primarily as a result of the inclusion of the Texas
operations for the full fiscal year. Revenues and general and administrative
expenses from mortgage banking operations increased in fiscal 1994 primarily due
to the Texas operations. Included in fiscal 1994 results are 1,438 loan
originations and $3,259,000 and $917,000 of revenues and operating income,
respectively, from MMI. The Company retains a portion of the servicing on the
loans it originates and sells. At May 31, 1995 and 1994, the servicing portfolio
was approximately $70,000,000.
CONSOLIDATED OPERATIONS
Net income was $13,821,000 ($1.99 per share, $1.82 fully diluted) in
fiscal 1995 compared to $13,083,000 ($2.11 per share, $1.88 fully diluted) and
$7,100,000 ($1.38 per share, $1.30 fully diluted) in fiscal 1994 and 1993,
respectively. The decrease in per share earnings in fiscal 1995 compared to
fiscal 1994 was the result of the Company issuing an additional 1,704,400 shares
in November, 1993.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financing needs depend primarily upon sales volume, asset
turnover, land acquisition and inventory balances. The Company has financed, and
expects to continue to finance, its working capital needs through funds
generated by operations and borrowings. Funds for future land acquisitions and
construction costs are expected to be provided primarily by cash flows from
operations and future borrowings as permitted under the 12% Senior Note
Indenture. At May 31, 1995, the Company had unsecured lines of credit from two
lenders for aggregate borrowings (excluding mortgage warehouse lines) of up to
$20,000,000, guaranteed a $10,000,000 secured line of credit for one of its
subsidiaries and, subject to available collateral, a $5,000,000 revolving
purchase money line. Additionally, the Company assumed $55 million of credit
facilities ($15 million of which are unsecured) in connection with the
Acquisitions. At May 31, 1995, there was $54,729,000 outstanding in the
aggregate under these credit lines. The Company's revolving lines of credit bear
interest at rates ranging from LIBOR plus 2 1/4% to prime plus 1%. The Company
believes that amounts generated from operations and such additional borrowings
will provide funds adequate to finance its homebuilding activities and meet its
debt service requirements. The Company does not have any current commitments for
capital expenditures.
AWMC has a warehouse line of credit for $15,000,000 which is guaranteed
by the Company. In addition, MMI has a warehouse line of credit for $10,000,000.
Pursuant to the warehouse lines of credit, the Company issues drafts to fund its
mortgage loans. The amount represented by a draft is drawn on the warehouse line
of credit when the draft is presented for payment. At May 31, 1995, the amount
outstanding under the warehouse lines of credit and the amount of funding drafts
that had not been presented for payment was $16,072,000. The Company believes
that these lines are sufficient for its mortgage banking operations.
On July 29, 1993 the Company acquired all of the outstanding capital
stock of Milburn for approximately $26.2 million ($20 million in cash and $6.2
million of Series A Preferred Stock). On January 28, 1994, the Company acquired
the operations of Aspen Homes for total cash consideration of $6,982,000. On
November 18, 1994, the Company acquired all of the outstanding capital stock of
Heftler for $28.5 million in cash.
In November 1993, the Company completed a public offering of 1,704,400
shares of common stock at $21.50 per share. The net proceeds of the offering
(approximately $34,228,000) were used to redeem the Series A Preferred Stock and
to reduce temporarily all amounts outstanding under the Companys revolving lines
of credit and mortgage banking warehouse lines of credit.
On March 22, 1994, the Company obtained the consent of the holders of
the majority of the outstanding 12% Senior Notes to certain amendments to the
Indenture, including to permit the sale of an additional $35,000,000 of Senior
Notes. In connection therewith, the Company paid $1,102,020 to the holders of
the outstanding Notes. On March 31, 1994, the Company completed the sale of the
additional Senior Notes at 107% of par.
The Board of Directors authorized on December 22, 1994, the repurchase
from time to time of up to 500,000 shares of its Common Stock. Through May 31,
1995, the Company had purchased 45,000 shares for an aggregate price of
$556,000.
INFLATION AND EFFECTS OF CHANGING PRICES
Real estate and residential housing prices are affected by inflation,
which can cause increases in the prices of land, raw materials and subcontracted
labor. In the past three years, the Company has not experienced any significant
inflationary pressure on land, raw materials or labor. Unless costs are
recovered through higher sales prices, gross profit margins will decrease. As
interest rates increase, construction and financing costs as well as the cost of
borrowing funds also increase, which can result in lower gross profits.
Relatively low interest rates during fiscal 1995 have made the Company's homes
more affordable in each of its markets. High mortgage interest rates make it
more difficult for the Company's customers to qualify for home mortgage loans.
These factors have a much more significant effect on the Company's operations
than does seasonality, in part because homes can be constructed year-round.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP
To Continental Homes Holding Corp.:
We have audited the accompanying consolidated balance sheets of CONTINENTAL
HOMES HOLDING CORP. (a Delaware corporation) and subsidiaries as of May 31, 1995
and 1994, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended May 31,
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Continental Homes Holding Corp.
and subsidiaries as of May 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
May 31, 1995, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Phoenix, Arizona,
June 19, 1995.
CONSOLIDATED BALANCE SHEETS
May 31,
-----------------------
1995 1994
--------- ---------
(In thousands)
ASSETS
HOMEBUILDING
Cash and cash equivalents (Notes A and E) $ 12,848 $ 28,809
Receivables (Note B) 10,108 9,928
Homes, lots and improvements in production
(Notes A, C and E) 291,331 205,369
Property and equipment, net (Note A) 2,456 1,914
Prepaid expenses and other assets 20,516 13,621
Excess of cost over related net assets
acquired (Note A) 13,400 6,743
-------- --------
350,659 266,384
-------- --------
MORTGAGE BANKING
Mortgage loans held for sale (Notes A and D) 17,593 17,570
Mortgage loans held for long-term investment,
net (Notes A and D) 17,783 20,132
Other assets 798 1,404
-------- --------
36,174 39,106
-------- --------
Total assets $386,833 $305,490
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
HOMEBUILDING
Accounts payable and other liabilities $ 39,405 $ 35,179
Notes payable, senior and convertible
subordinated debt (Note E) 198,814 144,048
Deferred income taxes (Notes A and F) 2,048 2,232
-------- --------
240,267 181,459
-------- --------
MORTGAGE BANKING
Notes payable (Note E) 16,072 3,439
Bonds payable (Notes D and E) 17,939 20,832
Other 2,076 1,200
-------- --------
36,087 25,471
-------- --------
Total liabilities 276,354 206,930
-------- --------
Commitments and contingencies (Notes A, E, H and I)
Stockholders' equity (Notes E and G):
Preferred stock, $.01 par value:
Authorized - 2,000,000 shares -
Issued - none -- --
Common stock, $.01 par value:
Authorized - 20,000,000 shares -
Issued - 7,080,900 shares 71 71
Treasury stock, at cost - 156,130 and
118,130 shares (591) (83)
Capital in excess of par value 59,610 59,610
Retained earnings 51,389 38,962
-------- --------
Total stockholders' equity 110,479 98,560
-------- --------
Total liabilities and stockholders' equity $386,833 $305,490
======== ========
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
CONSOLIDATED STATEMENTS OF INCOME
Years ended May 31,
----------------------------------
1995 1994 1993
--------- --------- ---------
(In thousands, except share data)
REVENUES
Home sales $ 414,718 $ 340,031 $ 200,012
Land sales 10,658 1,095 4,113
Mortgage banking and title
operations (Note D) 6,707 6,967 2,426
Other income, net 369 527 482
---------- ---------- ----------
Total revenues 432,452 348,620 207,033
---------- ---------- ----------
COSTS AND EXPENSES
HOMEBUILDING
Cost of home sales 339,288 277,878 161,960
Cost of land sales 10,958 1,499 4,766
Selling, general and administrative
expenses 46,308 37,065 20,836
Interest, net (Notes A and C) 4,993 4,456 5,498
MORTGAGE BANKING AND TITLE OPERATIONS
Selling, general and administrative
expenses 5,639 4,818 1,544
Interest, net (Note A) (199) (233) 14
---------- ---------- ----------
Total costs and expenses 406,987 325,483 194,618
---------- ---------- ----------
Equity in loss of unconsolidated
joint ventures -- -- (332)
---------- ---------- ----------
Income before income taxes 25,465 23,137 12,083
Income taxes (Note F) 11,644 10,054 4,983
---------- ---------- ----------
Net income $ 13,821 $ 13,083 $ 7,100
========== ========== ==========
Earnings per common share (Note A) $ 1.99 $ 2.11 $ 1.38
========== ========== ==========
Earnings per common share assuming
full dilution (Note A) $ 1.82 $ 1.88 $ 1.30
========== ========== ==========
Cash dividends per share $ .20 $ .20 $ .20
========== ========== ==========
Weighted average number of
shares outstanding 6,947,719 6,202,964 5,143,713
========== ========== ==========
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended May 31, 1995, 1994 and 1993
(Dollars in thousands)
Common Stock Capital in
--------------------- Treasury Excess of Retained
Shares Amount Stock Par Value Earnings Total
--------- ------ -------- ---------- -------- --------
Balance May 31, 1992 5,376,500 $ 54 $ (1,179) $ 24,533 $ 21,020 $ 44,428
Net income -- -- -- -- 7,100 7,100
Cash dividends -- -- -- -- (1,026) (1,026)
Exercise of employee
stock options -- -- 548 500 -- 1,048
--------- ------ -------- --------- -------- --------
Balance May 31, 1993 5,376,500 54 (631) 25,033 27,094 51,550
Net income -- -- -- -- 13,083 13,083
Sale of common stock 1,704,400 17 -- 34,211 -- 34,228
Cash dividends -- -- -- -- (1,215) (1,215)
Exercise of employee
stock options -- -- 548 366 -- 914
--------- ------ -------- --------- -------- --------
Balance May 31, 1994 7,080,900 71 (83) 59,610 38,962 98,560
Net income -- -- -- -- 13,821 13,821
Repurchase of common stock -- -- (556) -- -- (556)
Cash dividends -- -- -- -- (1,394) (1,394)
Exercise of employee stock
options -- -- 48 -- -- 48
--------- ------ -------- --------- -------- --------
Balance May 31, 1995 7,080,900 $ 71 $ (591) $ 59,610 $ 51,389 $110,479
========= ====== ======== ========= ======== ========
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended May 31,
-----------------------------------------------
1995 1994 1993
-------- -------- --------
(In thousands)
Cash flows from operating activities:
Net income $ 13,821 $ 13,083 $ 7,100
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 3,050 2,410 1,619
Increase (decrease) in deferred income taxes (1,209) (580) 497
Tax benefit of employee stock options exercised -- 366 500
Decrease (increase) in assets:
Homes, lots and improvements in production (52,973) (28,573) (13,736)
Receivables 2,304 16,748 5,755
Prepaid expenses and other assets (6,987) (2,144) 72
Increase in liabilities:
Accounts payable and other liabilities 1,022 5,415 3,912
-------- -------- --------
Net cash provided (used) by operating activities (40,972) 6,725 5,719
-------- -------- --------
Cash flows from investing activities:
Net additions to property and equipment (1,038) (513) (170)
Cash advanced to unconsolidated joint ventures -- -- (1,225)
Cash paid for Acquisitions, net of cash acquired (18,874) (14,024) --
-------- -------- --------
Net cash used by investing activities (19,912) (14,537) (1,395)
-------- -------- --------
Cash flows from financing activities:
Increase (decrease) in notes payable to financial
institutions 49,852 (29,602) (48,087)
Retirement of 12 3/4% Senior Notes -- -- (16,817)
Retirement of bonds payable (3,027) (10,140) (4,058)
Sale of common stock -- 34,228 --
Redemption of Series A Preferred Stock -- (6,200) --
Issuance of 12% Senior Notes -- 37,450 71,598
Treasury stock acquired (556) -- --
Stock options exercised 48 548 548
Dividends paid (1,394) (1,215) (1,026)
-------- -------- --------
Net cash provided by financing activities 44,923 25,069 2,158
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (15,961) 17,257 6,482
Cash and cash equivalents at beginning of year 28,809 11,552 5,070
-------- -------- --------
Cash and cash equivalents at end of year $ 12,848 $ 28,809 $ 11,552
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest, net of amounts capitalized $ 7,780 $ 7,431 $ 7,205
Income taxes $ 16,539 $ 13,080 $ 4,635
Supplemental schedule of non-cash investing and financing activities:
On July 29, 1993, the Company acquired Milburn Investments, Inc. and
Subsidiaries. Non-cash consideration paid included the issuance of $6.2 million
of Series A Preferred Stock. As a result of the acquisition, the Company
recorded additional assets of $92,660,000 (primarily homes, lots and
improvements in production and mortgage related assets) and liabilities of
$66,590,000 (primarily notes payable to financial institutions and mortgage
related debt). See Note J.
On November 18, 1994, the Company acquired Heftler Realty Co. As a result
of the acquisition, the Company recorded additional assets of $51,116,000
(primarily homes, lots and improvements in production) and liabilities of
$22,616,000 (primarily notes payable to financial institutions). See Note J.
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. ACCOUNTING POLICIES
The following accounting policies, together with those disclosed
elsewhere in the consolidated financial statements, represent the significant
accounting policies followed by Continental Homes Holding Corp. (the "Company")
and its subsidiaries.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and all wholly-owned subsidiaries after elimination of all significant
intercompany balances and transactions.
INCOME TAXES
The Company accounts for income taxes using Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes" ("FAS 109"). Among
other things, FAS 109 requires the liability method and that current and
deferred tax balances be determined based on tax rates and laws enacted as of
the balance sheet date rather than the historical tax rates. See Note F.
CASH AND CASH EQUIVALENTS
Cash equivalents include amounts with initial maturities of less than 90
days. In the normal course of business, the Company receives deposits from its
customers, maintains certain escrow funds and, in connection with its lines of
credit, maintains certain compensating balances (see Note E). Such amounts,
which totaled approximately $2,500,000 and $2,000,000 at May 31, 1995 and 1994,
respectively, are included in cash and cash equivalents.
HOMES, LOTS AND IMPROVEMENTS IN PRODUCTION
Homes, lots, and improvements in production are stated at the lower of
accumulated cost or estimated net realizable value. Interest costs incurred
during construction or development activities related to homes, lots and
improvements in production and certain indirect project costs (employee related
costs) are capitalized and subsequently charged to cost of home sales as the
units associated with such costs are sold. See Note C.
The components of homes, lots and improvements in production are as
follows:
May 31,
--------------------
1995 1994
--------------------
(In thousands)
Homes and lots in production $124,140 $ 88,034
Land and developed lots held for housing 130,823 83,025
Unimproved land held for development or sale 29,825 31,353
Capitalized interest 6,543 2,957
-------- --------
$291,331 $205,369
======== ========
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and consists primarily of
office furniture and equipment. Depreciation expense is provided using the
straight-line method over the estimated useful lives (three to five years).
Depreciation expense was $535,000, $472,000 and $334,000 in 1995, 1994 and 1993,
respectively. The costs of maintenance and repairs are charged to expense as
incurred.
EXCESS OF COST OVER RELATED NET ASSETS ACQUIRED
The excess of cost over related net assets acquired of $18,333,000 is
being amortized over periods ranging from three to twenty years using the
straight-line method. Amortization expense was $1,459,000, $856,000 and $187,000
in 1995, 1994 and 1993, respectively. See Note J.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, receivables and trade
payables approximate fair value because of the short maturity of these financial
instruments. The homebuilding notes payable bear interest at a rate indexed to
LIBOR or the prime rate, therefore, the carrying amounts of the outstanding
borrowings at May 31, 1995 approximate fair value. The fair value of the
Company's senior and subordinated debt is estimated based on quoted market
prices. At May 31, 1995 and 1994, the estimated fair value of the Company's
senior and subordinated debt was $140,750,000 and $143,550,000, respectively.
Mortgage loans held for sale are stated at the lower of cost or market
which approximates the fair value. The mortgage banking notes payable bear
interest at a rate indexed to the prime rate, therefore, the carrying amounts of
the outstanding borrowings at May 31, 1995 and 1994 approximate fair value. The
mortgage loans held for long-term investment are considered held-to-maturity
securities and mature through August 2017. The carrying amounts of mortgage
loans held for long-term investment and mortgage-backed bonds approximate fair
value.
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgment, and therefore, cannot be determined with precision.
Changes in assumptions could significantly affect estimates.
SALES RECOGNITION
The Company recognizes income from home and land sales in accordance
with Statement of Financial Accounting Standards No. 66. The Company includes
the discounts incurred in obtaining permanent financing for its customers in
cost of home sales.
MORTGAGE BANKING FEE RECOGNITION
Loan origination fees are recognized as income in accordance with
Statements of Financial Accounting Standards Nos. 65 and 91.
INTEREST, NET
The summary of the components of interest, net is as follows:
Years ended May 31,
-------------------------------
1995 1994 1993
-------- -------- -------
(In thousands)
Interest expense, homebuilding $ 5,420 $ 4,724 $ 5,862
Interest income, homebuilding (427) (268) (364)
------- ------- -------
$ 4,993 $ 4,456 $ 5,498
======= ======= =======
Interest expense, mortgage banking $ 2,360 $ 2,707 $ 1,343
Interest income, mortgage banking (2,559) (2,940) (1,329)
------- ------- -------
$ (199) $ (233) $ 14
======= ======= =======
EARNINGS PER COMMON SHARE
Earnings per common share has been computed using the weighted average
number of common shares outstanding during the period. Earnings per common share
assuming full dilution has been computed assuming the conversion of the
Convertible Subordinated Notes issued in March 1992.
B. RECEIVABLES
Notes and accounts receivable are as follows:
May 31,
-------------------
1995 1994
------- -------
(In thousands)
Proceeds receivable arising from home sales $ 4,135 $ 4,760
Municipal Utility District receivables 3,457 3,512
Notes receivable on land sales 350 775
Other notes and accounts receivable 2,166 881
------- -------
$10,108 $ 9,928
======= =======
C. INTEREST CAPITALIZATION
The Company follows the practice of capitalizing for its homebuilding
operations certain interest costs incurred on land under development and homes
under construction. Such capitalized interest is included in cost of home sales
when the units are delivered. The Company capitalized interest in the amount of
$14,108,000, $8,654,000 and $6,034,000 and expensed as a component of cost of
home sales $10,687,000, $7,734,000 and $6,236,000 in fiscal 1995, 1994 and 1993,
respectively.
D. CONSOLIDATED MORTGAGE SUBSIDIARIES
The Company's consolidated financial statements include its wholly-owned
mortgage banking and finance subsidiaries. The Company retains a portion of the
servicing on the loans it originates and sells. At May 31, 1995 and 1994, the
servicing portfolio was approximately $70,000,000. Financial data of the
mortgage banking and finance subsidiaries is summarized as follows:
May 31,
-------------------
1995 1994
------- -------
(In thousands)
Current assets, principally mortgage loans held
for sale $28,451 $19,917
Total assets, principally mortgage loans and
mortgage-backed securities 46,792 40,729
Current liabilities, principally notes payable 18,613 10,054
Total liabilities, principally notes and bonds payable 36,552 30,885
Stockholder's equity and partnership capital 10,240 9,844
Years ended May 31,
------------------------------
1995 1994 1993
------ ------ ------
(In thousands)
Total revenues $5,217 $5,691 $2,426
Net interest income (expense) 199 233 (14)
Net income 396 1,176 521
Mortgage loans held for sale are stated at the lower of cost or market
determined in the aggregate. Mortgage loans held for sale consist of:
May 31,
------------------
1995 1994
------- -------
(In thousands)
Single-family first mortgage loans $17,765 $17,918
Market discount (172) (348)
------- -------
$17,593 $17,570
======= =======
Mortgage loans held for long-term investment and the related bonds
payable are the result of the Company's mortgage banking subsidiaries selling a
portion of the mortgages they originated to related financing subsidiaries.
Bonds issued by the Company's financing subsidiaries are secured by GNMA
certificates and first mortgage loans. Payments are made on the bonds on a
periodic basis as a result of, and in amounts related to, corresponding payments
received on the underlying mortgage collateral. All principal and interest on
the collateral is remitted directly to a trustee and is available for payment on
the bonds. Neither the Company nor its mortgage banking subsidiaries have
guaranteed or otherwise are obligated with respect to these bond issues.
E. NOTES, BONDS AND SENIOR AND CONVERTIBLE SUBORDINATED DEBT
HOMEBUILDING
Notes payable, senior and convertible subordinated debt consist of:
May 31,
-------------------
1995 1994
-------- --------
(In thousands)
Notes payable $ 54,729 $ --
12% senior notes, due 1999, net of premium
of $1,430 and $1,753 111,430 111,753
6-7/8% convertible subordinated notes, due 2002,
net of discount of $2,345 and $2,705 32,655 32,295
-------- --------
$198,814 $144,048
======== ========
At May 31, 1995, the Company had available unsecured bank lines of
credit for borrowings (excluding mortgage warehouse lines) of $20,000,000,
guaranteed a $10,000,000 secured line of credit for one of its subsidiaries and,
subject to available collateral, a $5,000,000 revolving purchase money line.
Additionally, the Company assumed $55 million of credit facilities ($15 million
of which are unsecured) in connection with the acquisitions described in Note J.
Interest rates range from LIBOR plus 2-1/4% to prime plus 1%. These lines of
credit mature through November 1996. During fiscal 1995, the weighted average
interest rate on the average month end balance was 9.3% and the year end
weighted average rate was 9.4%. The average month end outstanding balance during
the year was $31,461,000 and the maximum amount outstanding at any month end was
$54,729,000. The Company is required to maintain $750,000 of compensating
balance deposits with lenders, minimum levels of liquidity and tangible net
worth and maximum levels of debt to net worth in conjunction with the unsecured
lines of credit.
In August 1992, the Company issued $75,000,000 principal amount of 12%
Senior Notes due August 1, 1999. The Senior Notes are redeemable in whole or in
part at the option of the Company at any time on or after August 1, 1997, at
redemption prices decreasing from 104%. The Senior Notes are senior unsecured
obligations of the Company.
On March 22, 1994, the Company obtained the consent of the holders of
the majority of the outstanding 12% Senior Notes to certain amendments to the
indenture, including to permit the sale of an additional $35,000,000 of Senior
Notes. On March 31, 1994, the Company completed the sale of the additional
Senior Notes.
The indenture relating to the Company's 12% Senior Notes contains
certain covenants which, among other things, limit the amount of debt which may
be incurred, the making of restricted payments (as defined), including the
payment of dividends, and the ability to create certain liens, enter into
certain transactions with affiliates or merge, consolidate, transfer or sell
substantially all assets. As of May 31, 1995, approximately $39,000,000 was
available for making restricted payments. The indenture requires the Company to
maintain a net worth (as defined) of not less than $20,300,000. In the event of
a change in control, the Company will be required, subject to certain conditions
and limitations, to offer to purchase all Senior Notes then outstanding at a
purchase price equal to 101% of the principal amount of the Senior Notes, plus
accrued and unpaid interest to the date of purchase.
In March 1992, the Company issued $35,000,000 principal amount of 6-7/8%
Convertible Subordinated Notes due March 15, 2002. The Notes are convertible at
a rate of 42.55 shares of Common Stock per $1,000 principal amount of Notes at
any time prior to maturity. The Notes are redeemable in whole or in part at the
option of the Company at any time on or after March 18, 1995, at redemption
prices increasing from 95%. The Notes are subordinated to all senior
indebtedness of the Company.
MORTGAGE BANKING
Mortgage warehousing notes payable enable American Western Mortgage
Company ("AWMC") and Miltex Management, Inc. ("MMI") to perform their loan
origination and warehousing functions. At May 31, 1995, AWMC had a warehouse
line of credit of $15,000,000 which is guaranteed by the Company. In addition,
MMI had a warehouse line of credit of $10,000,000. All such borrowings are
secured by the mortgage loans held for sale, mature on December 1, 1995 and July
25, 1995 and bear interest at prime plus 1/4% and prime plus 1/2%, respectively.
At May 31, 1995, $14,438,000 was outstanding under these lines of credit and
$1,634,000 of funding drafts were issued thereunder. At May 31, 1994, no amounts
were outstanding under these lines of credit and $3,439,000 of funding drafts
were issued thereunder.
Bonds issued by the Company's financing subsidiaries are secured by GNMA
certificates and first mortgage loans and are redeemable by the bondholders or
callable by the issuer under certain circumstances as defined in the indenture
under which the bonds were issued. Such bonds mature through August, 2017, and
have a weighted average interest rate of 9.1%.
F. INCOME TAXES
The Company will file a consolidated Federal income tax return which
will include all subsidiaries. Components of current and deferred income taxes
follow:
Current Deffered Total
------- -------- -------
(In thousands)
Year ended May 31, 1995
Federal $10,126 $ (952) $ 9,174
State and other 2,727 (257) 2,470
------- ------- -------
$12,853 $(1,209) $11,644
======= ======= =======
Year ended May 31, 1994
Federal $ 8,344 $ (455) $ 7,889
State and other 2,290 (125) 2,165
------- ------- -------
$10,634 $ (580) $10,054
======= ======= =======
Year ended May 31, 1993
Federal $ 3,520 $ 390 $ 3,910
State and other 966 107 1,073
------- ------- -------
$ 4,486 $ 497 $ 4,983
======= ======= =======
The effective income tax rate differs from the Federal statutory tax
rate for the following reasons:
Years ended May 31,
-------------------------------
1995 1994 1993
-------- -------- -------
U.S statutory tax rate 35% 35% 34%
State income taxes, net of
Federal tax benefit 6 6 8
Amortization and other, net 5 2 (1)
------- ------- -------
46% 43% 41%
======= ======= =======
The components of the net deferred tax liability are as follows:
May 31,
-------------------
1995 1994
------- -------
(In thousands)
Deferred tax assets:
Inventory basis differences $ 345 $ 642
Other, net 1,424 510
------- -------
1,769 1,152
------- -------
Deferred tax liabilities:
Capitalized interest 2,108 2,108
Receivable basis differences 1,709 1,276
------- -------
3,817 3,384
------- -------
Net deferred tax liability $ 2,048 $ 2,232
======= =======
G. STOCK OPTIONS
The Company has two stock incentive plans (the "Plans"). The 1988 Stock
Incentive Plan was approved by the Board of Directors on July 29, 1988 and the
stockholders on August 26, 1988 and amended by the Board of Directors on July
23, 1992 and the stockholders on August 26, 1992. The 1986 Stock Incentive Plan
was approved by the Board of Directors and the stockholders of the Company on
July 26, 1986. The Plans are intended to provide an incentive to officers and
key employees of the Company and its subsidiaries to remain with the Company.
The Board of Directors has authorized the reservation of 700,000 shares of the
Company's common stock for issuance under the Plans. Options may be granted at a
price equal to the market value on the date of the grant (or 85% of market value
in the case of non-qualified options) and may not be exercised for one year (six
months in the case of non-qualified options) from the date of the grant. Under
the Plans, options must be exercised within 10 years (5 years for a 10% holder)
from the date the option was granted.
The following summarizes the stock option transactions for the two years
ended May 31, 1995:
Number Option
of Shares Price
--------- --------------------
Outstanding at May 31, 1993 234,960 $4.00-$12.87
Granted 42,600 $16.00-$21.375
Cancelled (3,000) $17.875
Exercised (68,925) $4.00-$12.87
---------
Outstanding at May 31, 1994 205,635 $4.00-$21.375
Granted 46,000 $12.125-$14.875
Exercised (7,000) $4.00-$12.50
---------
Outstanding at May 31, 1995 244,635 $4.00-$21.375
=========
Exercisable at May 31, 1995 117,685 $4.00-$21.375
=========
At May 31, 1995, there were 189,995 shares reserved for future grants.
H. CONTINGENCIES
In management's opinion, the Company is not involved in any legal
proceedings which will have a material effect on the Company's financial
position or operating results.
I. COMMITMENTS
Rental expense for the Company was $1,233,000, $914,000 and $495,000 in
1995, 1994 and 1993, respectively. The following is a schedule by year of future
minimum rental payments required under operating leases as of May 31, 1995:
(In thousands)
---------------
Fiscal year ending May 31,
1996 $1,352
1997 693
1998 583
1999 516
2000 493
Thereafter 354
------
Total minimum lease payments $3,991
======
J. ACQUISITION OF MILBURN INVESTMENTS, INC. AND HEFTLER REALTY CO.
On July 29, 1993, the Company completed the acquisition of 100% of the
Common Stock of Milburn Investments, Inc. ("Milburn"), an Austin, Texas
homebuilder, for approximately $26.2 million. The consideration consisted of
approximately $20 million in cash and $6.2 million in Series A Preferred Stock
issued by the Company. On November 4, 1993, the Company redeemed the Series A
Preferred Stock. The acquisition was accounted for by the purchase method with
the results of operations of Milburn included for the ten month period beginning
August 1, 1993. The excess of cost over related net assets acquired is being
amortized over periods ranging from five to ten years using the straight-line
method.
Milburn was the subject of an Internal Revenue Service ("IRS") audit for
periods prior to its acquisition by the Company. In December, 1994, the IRS
completed their examination and the Company paid the resulting tax liability
(including interest) of approximately $4,900,000. Such payment exceeded the tax
liability recorded by the Company at the time Milburn was acquired. The Company
recorded this excess payment of approximately $3,400,000 (including interest) as
an adjustment to the purchase price of Milburn. The Company believes that it may
recover all or a portion of the excess payment from the seller (under the terms
of the acquisition agreement) or other parties.
On November 18, 1994, the Company completed the acquisition of 100% of
the Common Stock of Heftler Realty Co. ("Heftler"), a Miami, Florida
homebuilder, for $28.5 million in cash. The acquisition was accounted for by the
purchase method with the results of operations of Heftler included for the seven
month period beginning November 1, 1994. The excess of cost over related net
assets acquired is being amortized over periods ranging from five to ten years
using the straight-line method.
The following unaudited pro forma combined financial data give effect to
the Milburn and Heftler acquisitions as if they had occurred on the first day of
each period. This pro forma information has been prepared utilizing the
historical consolidated financial statements of the Company, Milburn and
Heftler. The pro forma financial data are provided for comparative purposes only
and do not purport to be indicative of the results which would have been
obtained if the acquisitions had been effected during the periods presented. The
pro forma financial information is based on the purchase method of accounting
and reflects adjustments to record the profit of acquired inventories, amortize
the non-compete agreements and the excess purchase price over the underlying
value of net assets acquired, reflect the additional interest on acquisition
indebtedness assumed and adjust income taxes for the pro forma adjustments.
Years ended May 31,
-------------------
1995 1994
-------- --------
(In thousands)
Total revenues $446,730 $417,023
Net income 13,897 13,723
Earnings per common share 2.00 2.21
Earnings per common share assuming full dilution 1.83 1.97
K. SELECTED UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL INFORMATION
Unaudited quarterly consolidated financial information for the years
ended May 31, 1995 and 1994 is summarized as follows:
Three months ended
-------------------------------------------------------
August 31 November 30 February 28 May 31
---------- ----------- ----------- ----------
(In thousands, except share data)
1995
Revenues $ 107,043 $ 97,942 $ 114,051 $ 113,416
Gross profit from
home sales 19,483 17,143 18,932 19,872
Net income 4,516 3,092 3,073 3,140
Earnings per share:
Primary:
Net income $ .65 $ .44 $ .44 $ .45
Fully diluted:
Net income .58 .41 .41 .42
Weighted average
shares outstanding 6,962,770 6,963,341 6,939,998 6,924,770
1994
Revenues $ 78,390 $ 90,095 $ 74,640 $ 105,495
Gross profit from
home sales 14,259 16,109 13,303 18,482
Net income 3,237 3,227 2,727 3,892
Earnings per share:
Primary:
Net income $ .62 $ .56 $ .39 $ .56
Fully diluted:
Net income .53 .50 .37 .50
Weighted average
shares outstanding 5,194,877 5,711,566 6,953,734 6,962,659
EX-21
15
LIST OF SUBSIDIARIES
Exhibit 21
LIST OF SUBSIDIARIES
1. The Company holds 100% of the outstanding capital stock of:
Continental Homes, Inc. ("CHI") (Delaware)
KDB Homes, Inc. (Delaware)
L & W Investments, Inc. (California)
Rancho Carrillo, Inc. (Delaware)
Continental Homes of Texas, Inc. (Texas)
Miltex Management, Inc. ("MMI") (Texas)
Milburn Investments, Inc. ("MMI") (Texas)
Homeco, Inc. ("HI") (Texas)
Heftler Realty Co. (Florida)
2. CHI holds 100% of the outstanding capital stock of:
CH Mortgage Company ("CHMC") (Colorado)
CHI Construction Company (Arizona)
3. CHMC holds 100% of the outstanding capital stock of:
CHI Finance Corp. (Arizona)
4. MMI holds 1% of the partnership interest of:
Miltex Mortgage of Texas Limited Partnership
Miltex Financial IV General Partnership
5. MII holds 99% of the partnership interest of:
Miltex Mortgage of Texas Limited Partnership
Miltex Financial IV General Partnership
Homeco/Killeen Limited Partnership
6. MII holds 100% of the ourstanding capital stock of:
Travis County Title Company (Texas)
Acheter, Inc. ("Acheter") (Texas)
R.O.S. Corporation (Texas)
7. HI holds 1% of the partnership interest of:
Homeco/Killeen Limited Partnership
8. Acheter holds 100% of the outstanding capital stock of:
Settlement Corporation (Texas)
EX-23
16
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report incorporated by reference in this Form 10-K, into the Company's
previously filed Registration Statements on Forms S-8 (File Numbers 33-65912 and
33-33550).
Arthur Andersen LLP
Phoenix, Arizona,
August 23, 1995.
EX-27
17
ARTICLE 5 FDS FOR YEAR 10-K
5
1,000
U.S. DOLLARS
YEAR
MAY-31-1995
JUN-01-1994
MAY-31-1995
1
12,848
0
45,484
0
291,331
0
2,456
0
386,833
0
232,825
71
0
0
110,408
386,833
414,718
432,452
339,288
0
0
0
4,794
25,465
11,644
13,821
0
0
0
13,821
1.99
1.82