$70,000,000 REVOLVING ACQUISITION AND DEVELOPMENT
LOAN AND TERM LOAN
CONSOLIDATED, AMENDED AND RESTATED
LOAN AGREEMENT
Dated as of July 31, 1997
the Lenders who are or may become a party to this Agreement
(collectively, the "Lender")
and
FIRST UNION NATIONAL BANK OF MARYLAND, as Agent for the
Lender
CONSOLIDATED, AMENDED AND RESTATED LOAN AGREEMENT
THIS CONSOLIDATED, AMENDED AND RESTATED
LOAN AGREEMENT (this "Agreement") is made as of July
31, 1997, by and among those entities comprising the
Borrower (the "Borrower") (as that term is defined in
Section 1 of this Loan Agreement), the Lenders who
are or may become a party to this Agreement (each,
individually, a "Lender" and collectively, the
"Lender"), and FIRST UNION NATIONAL BANK OF MARYLAND,
as a Lender and as Agent for the Lender.
WHEREAS, Washington Homes, Inc., The
Southampton Corporation, Washington Homes, Inc., of
Virginia, Designed Contracts, Inc., Housing Home
Sales, Inc. WH Properties Limited Partnership,
Potomac Knolls A.1 Limited Partnership, Potomac
Knolls A.2 Limited Partnership, Potomac Knolls A.3
Limited Partnership, Potomac Knolls B.1 Limited
Partnership, Potomac Knolls B.2 Limited Partnership,
Potomac Knolls B.3 Limited Partnership, Potomac
Knolls B.4 Limited Partnership, Potomac Knolls B.5
Limited Partnership, Potomac Knolls D.1 Limited
Partnership, Potomac Knolls D.2 Limited Partnership,
Potomac Knolls D.3 Limited Partnership, Potomac
Knolls D.4 Limited Partnership, Potomac Knolls D.5
Limited Partnership, Potomac Knolls E.1 Limited
Partnership, Potomac Knolls E.2 Limited Partnership,
Potomac Knolls E.3 Limited Partnership, Potomac
Knolls E.4 Limited Partnership, and Potomac Knolls
E.5 Limited Partnership entered into a Loan Agreement
with First Union National Bank of Maryland dated as
of January 11, 1994 (the "$15,000,000 Loan
Agreement") and certain related documents, all as
amended, evidencing a revolving loan in a principal
amount not to exceed $15,000,000, a term loan in a
principal amount not to exceed $4,000,000, and a
letter of credit facility in a principal amount not
to exceed $2,000,000 (the "$15,000,000 Facility");
WHEREAS, Washington Homes, Inc.,
Westminster Homes of North Carolina, Inc., The
Southampton Corporation, Washington Homes, Inc., of
Virginia, WH Properties Limited Partnership, Potomac
Knolls A.1 Limited Partnership, Potomac Knolls A.2
Limited Partnership, Potomac Knolls A.3 Limited
Partnership, Potomac Knolls B.1 Limited Partnership,
Potomac Knolls B. 2
Limited Partnership, Potomac Knolls B.3 Limited
Partnership, Potomac Knolls B.4 Limited Partnership,
Potomac Knolls B. 5 Limited Partnership, Potomac
Knolls D.1 Limited Partnership, Potomac Knolls D.2
Limited Partnership, Potomac Knolls D.3 Limited
Partnership, Potomac Knolls D.4 Limited Partnership,
Potomac Knolls D.5 Limited Partnership, Potomac
Knolls E.1 Limited Partnership, Potomac Knolls E.2
Limited Partnership, Potomac Knolls E.3 Limited
Partnership, Potomac Knolls E. 4 Limited Partnership,
and Potomac Knolls E.5 Limited Partnership entered
into a Loan Agreement with First Union National Bank
of Maryland dated as of January 26, 1995 (the
"$10,000,000 Loan Agreement"), and certain related
documents, all as amended, evidencing a revolving
loan in a principal amount not to exceed $10,000,000
(the "$10,000,000 Facility"); and
WHEREAS, Washington Homes, Inc., Washington
Homes, Inc. of Virginia, All Seasons, Inc., Housing
Home Sales, Inc., Designed Contracts, Inc., and
Consultants Corporation entered into a Second Amended
and Restated Credit Agreement with Signet
Bank/Maryland and Bank One West Virginia, dated
September 14, 1994 (the "Signet Credit Agreement"),
and certain related documents (the "Signet
Facility"); and
WHEREAS, Borrower and Lender desire to
modify, amend, restate, consolidate, extend and renew
the $15,000,000 Loan Agreement, the $10,000,000 Loan
Agreement and the Signet Credit Agreement in their
entirety by deleting each document in its entirety
and substituting in its place the terms set forth
below; and
WHEREAS, the entities which comprise
Borrower desire to borrow up to Seventy Million
Dollars ($70,000,000) under a revolving line of
credit and term loan facility (the "Loan"), all under
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the
foregoing, the mutual promises set forth herein, the
execution and delivery by the entities which comprise
Borrower to the Lender of the Loan Documents
(hereinafter defined), and the Lender's acceptance
thereof, and for other good and valuable
consideration, the receipt and adequacy of which are
hereby acknowledged by all parties, the parties
hereto, intending to be legally bound hereby, agree
as follows:
PREAMBLE
I. The recitals set forth herein above are
hereby incorporated herein by this reference with the
same force and effect as if fully hereinafter set
forth.
II. Nothing in the provisions of this Loan
Agreement shall be deemed in any way to affect the
priority of any existing deed of trust or mortgage
securing the $15,000,000 Facility, the $10,000,000
Facility or the Signet Facility (each, a "Facility")
over any other lien, charge, encumbrance, or
conveyance, or to release or change the liability of
any Person who is now or hereafter liable under or on
account of any note, loan agreement, credit agreement
or other document given to evidence the obligations
of any such Person under any such Facility; provided,
however, as of the date hereof, any Person which was
obligated under an existing Facility which is not
also a Borrower shall be and hereby is released from
any further obligation under such existing Facility
effective as of the date hereof.
III. The Persons which comprise Borrower
hereby represent, warrant and agree that, with
respect to each Facility to which such Person is a
party, as of the date hereof, such Facility, as
amended and restated hereby, is in full force and
effect, valid, binding and enforceable in accordance
with its terms (subject to applicable bankruptcy,
insolvency and similar laws, and the application of
equitable principles whether by a court of law or
equity), and that there exists no default by the
Lender thereunder nor any defense to payment of
amounts payable pursuant to the loan documents
evidencing any such Facility.
IV. Neither this Loan Agreement nor
anything contained herein shall be construed as a
substitution or novation of the Persons which
comprise Borrower or the indebtedness to any lender,
which shall remain in full force and effect, as
hereby confirmed.
V. The Persons which comprise Borrower
shall pay all costs and expenses incurred by the
Lender in connection with the execution and delivery
of this Loan Agreement and the Loan Documents,
including without limitation, the reasonable fees and
expenses of the Lender's counsel, the costs of
transfer and recording costs or taxes, and any
mortgage or similar taxes, and, only to the extent
specifically provided for herein, title charges.
VI. The Persons which comprise the
Borrower desire to borrow from the Lender a total
principal amount at any one time not exceeding
Seventy Million Dollars ($70,000,000), consisting of
(a) a Revolving Loan (as hereinafter defined) in an
amount not to exceed Fifty-five Million Dollars
($55,000,000) (except to the extent increased by the
Overline (as hereinafter defined)) for the purpose of
financing the acquisition of residential building
lots in subdivisions approved as provided for herein,
to develop such lots, and to construct, in accordance
with the Plans and Specifications (as hereinafter
defined) , single-family detached homes, and single-
family townhomes and condominium homes on said lots
in certain subdivisions comprising the Project (as
hereinafter defined) and to establish a credit
facility that may from time to time be utilized in
connection with the financing of additional
subdivisions, which financing and subdivisions shall
be approved by the Lender as provided for herein, and
(b) a Term Loan (as hereinafter defined) in an amount
not to exceed $15,000,000 (the proceeds of which
shall be made available to Washington Homes, Inc.,
only) for the purpose of making payments which are to
be come due on October 15, 1998, under the WHI Senior
Notes (as hereinafter defined) and for working
capital purposes. The Lender is prepared to lend
such amounts upon the terms and conditions hereof.
Accordingly, the parties hereto agree as follows:
Section 1 Definitions
Except as otherwise provided, any agreement
referred to below shall mean such agreement as
amended, supplemented or
otherwise modified.
"Affiliate" shall mean, with respect to the
Persons which comprise Borrower, any individual,
corporation, partnership, association, trust, or
other Person directly or indirectly controlling,
controlled by, or under direct or indirect or common
control with the Persons which comprise Borrower.
"Agent" means First Union National Bank of
Maryland in its capacity as Agent hereunder, and any
successor thereto appointed pursuant to 7.1.
"Agent's Office" means the office of the
Agent specified in or determined in accordance with
the provisions of 8.1(c).
"Aggregate Commitment" means the aggregate
amount of the Lender's Commitments hereunder, as such
amount may be reduced or modified at any time or from
time to time pursuant to the terms hereof. On the
Closing Date, the Aggregate Commitment shall be
Seventy Million Dollars ($70,000,000).
"Agreement" shall mean this Loan Agreement.
"Applicable Law" means all applicable
provisions of the constitutions, statutes, laws,
rules, treaties, regulations and orders of all
Governmental Authorities and all orders and decrees
of all courts and arbitrators.
"Application" means an application, in the
form specified by the Issuing Lender from time to
time, requesting the Issuing Lender to issue a Letter
of Credit.
"As Is Value" or "As Is Appraised Value" of
a Lot or Unit shall mean the value as determined by
the most recent appraisal pertaining to such Lot or
Unit, performed by an appraiser approved by the
Lender and prepared in accordance with policies and
procedures for real estate appraisals supporting
extensions of credit by banking institutions subject
to regulation by the Comptroller of the Currency, the
Board of Governors of the Federal Reserve System or
the Federal Deposit Insurance corporation.
"Assignment and Acceptance" shall have the
meaning assigned thereto in 8.10(b). .
"Available Commitment" means, as to any
Lender at any time, an amount equal to the excess, if
any, of (a) such Lender's Commitment over (b) such
Lender's Extensions of Credit, including the issuance
of letters of credit, with respect to the Revolving
Loan, the Term Loan, or the Loan, as the context may
require.
"Base Rate" means, at any time, the Prime
Rate (i) minus 50 basis points for amounts
outstanding under the Pre-Sold Tranche (as defined
below); and (ii) minus 25 basis points for amounts
outstanding under the Unsold Tranche (as defined
below).
Each change in the Base Rate shall take effect
simultaneously with the corresponding change or
changes in the Prime Rate.
"Base Rate Loan" means any Loan bearing
interest at a rate based upon the Base Rate as
provided in Section 2.11.
"Borrower" shall mean, collectively, each
of the following corporations and Maryland limited
partnerships, as Persons which comprise co-
borrowers under the Loan Documents:
Washington Homes, Inc.
Washington Homes, Inc. of
Virginia Designed
Contracts, Inc.
Housing-Home Sales,
Inc.
WH Properties Limited
Partnership
Potomac Knolls A3 Limited
Partnership Potomac Knolls
B1 Limited Partnership
Potomac Knolls B2 Limited
Partnership
Condominium Community (Quail
Run), Inc. Condominium
Community (Largo Town), Inc.
All Seasons, Inc.
Consultants
Corporation
The Southampton
Corporation
Westminster Homes,
Inc.
Westminster Homes
(Charlotte), Inc.
Westminster Homes of
Tennessee, Inc.
All references to the Borrower in the Loan Documents
shall refer to each of the Persons set forth in this definition
and the obligations of the Persons comprising the Borrower shall
be joint and several except as specifically otherwise set forth
herein.
"Borrowing Base Report" or "Report" shall mean the
monthly report from the Borrower to the Lender in the form
attached hereto as Exhibit "G".
"Budget" shall mean a detailed breakdown of all items of
direct and indirect costs associated with the construction of each
Unit, which shall be based upon actual contracts and other costs;
(i) shall not include "soft" costs which are not funded by the
Revolving Loan and (ii) shall be approved by the Lender and the
Compliance Inspector in their sole discretion.
"Business Day" shall mean any day other than one on
which commercial banks are not authorized to conduct business or
are required to be closed in the State of Maryland.
"Closing Date" shall mean the date on which this
Agreement is executed by Borrower and Lender.
"Collateral" shall mean any real property pledged to the
Lender by the Borrower, as security for the Loan and reflected on
the most recent Borrowing Base Report, including the Project,
together with any improvements thereon, and together
with all personal property, contracts, contract deposits, claims,
rights of any kind, and tangible and intangible assets now owned
or hereafter acquired and relating to such real property.
"Commitment" means, as to any Lender, the obligation of
such Lender to make Loans to and issue or participate in Letters
of Credit issued for the account of the Borrower hereunder in an
aggregate principal or face amount at any time outstanding not to
exceed the amount set forth opposite such Lender's name on
Schedule 1 hereto, as the same may be reduced or modified at any
time or from time to time pursuant to the terms hereof.
"Commitment Percentage" means, as to any Lender at any
time, the ratio of (a) the amount of the Commitment of such Lender
to (b) the Aggregate Commitment.
"Completion" shall mean with respect to any Unit the
fulfillment of all of the following conditions: (i) all of the
conditions precedent to any advance under the Loan requested by
Borrower subsequent to the Closing Date shall have been satisfied,
(ii) the Lender shall have received a certificate satisfactory to
the Lender, in its sole discretion, from Borrower, and, if
required by Lender, approved by the Compliance Inspector after
inspection of the relevant Unit, to the effect that the Unit is
complete and is substantially in accordance with the Plans and
Specifications (including completion of all on- and off- site
work, off-site utilities, streets, and public improvements or
satisfactory evidence of bonded assurances (other than from the
Lender) for the completion thereof) and (iii) the Lender shall
have received copies of all permits necessary or desirable for the
use or occupancy of the Unit, in each case issued by the
appropriate governmental authority.
"Compliance Inspector" shall mean an independent
architect or engineer selected and retained by the Lender at the
Lender's expense, in order from time to time as required by
Lender, (i) to conduct inspections of the Project in connection
with requests for advances under the Revolving Loan, (ii) to
determine whether construction is proceeding on schedule in
substantial accordance with the Plans and Specifications, (iii) to
determine whether the necessary work has been completed in order
to justify the advance requested, (iv) to determine whether the
undisbursed portion of the Revolving Loan will be sufficient to
complete the construction substantially in accordance with the
Plans and Specifications and (v) to consult on such other matters
as provided for herein or that the Lender may request in its sole
discretion.
"Consolidated Net Income" shall mean for any period, the
net income (or net loss) as shown on the consolidated income
statement of WHI and its Consolidated Subsidiaries for such period
prepared in accordance with GAAP.
"Consolidated Net Tangible Assets" shall mean the total
assets after deducting goodwill, all as shown in the consolidated
balance sheet of WHI and its Consolidated Subsidiaries all
prepared in accordance with GAAP.
"Consolidated Subsidiary(ies)" shall mean any Person
whose accounts would be consolidated with those of WHI in its
consolidated financial statements in accordance with GAAP.
"Consolidated Tangible Net Worth" shall mean the
shareholders' equity minus goodwill as shown in the consolidated
balance sheet of WHI and its Consolidated Subsidiaries.
"Contract Price" shall mean the sales price payable to
Borrower pursuant to a fully executed, binding and enforceable
sales contract (on Borrower's standard form as approved by Lender,
including any modifications which may be approved by Lender) with
a non-Affiliate third party purchaser.
"Control" shall mean possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of any Borrower, whether through the
ownership of shares, by contract, or otherwise.
"Coverage Ratio" shall mean the ratio of (i) Income
Available for Debt Service to (ii) Interest Expense.
"Current Debt" shall mean revolving credit and any other
debt having an original maturity less than one year from
inception.
"Deeds of Trust" shall mean individually or
collectively, the Maryland Deed of Trust and/or the Virginia Deed
of Trust and/or the North Carolina Deed of Trust and/or the
Tennessee Deed of Trust.
"Default" shall mean the occurrence of any condition,
event, act or omission which, with the giving of notice or passage
of time, or both, would constitute an Event of Default (as defined
in Section 6 hereof).
"Eligible Assignee" means, with respect to any
assignment of the rights, interest and obligations of a Lender
hereunder, a Person that is at the time of such assignment (a) a
commercial bank organized under the laws of the United States or
any state thereof, having combined capital and surplus in excess
of $500,000,000, (b) already a Lender hereunder (whether as an
original party to this Agreement or as the assignee of another
Lender), (c) the successor (whether by transfer of assets, merger
or otherwise) to all or substantially all of the commercial
lending business of the assigning Lender, or (d) any other Person
that has been approved in writing as an Eligible Assignee by the
Borrower and the Agent.
"Eligible Funding Amount" shall mean the following
amounts not to exceed a total Available Commitment of Fifty-five
Million Dollars ($55,000,000), plus the Term Loan when made
available, plus any amount of the Overline advanced to Borrower at
Borrower's request, less the L/C Obligations.
(i) with respect to any Pre-Sold Unit, the lesser of (i)
ninety per cent (90%) of the actual costs incurred by Borrower to
acquire, develop, and construct such Unit to the date of the
Notice of Borrowing ("Actual Costs Incurred") or (ii) eighty
percent (80%) of the Contract Price of such Pre-Sold Unit;
(ii) with respect to any Spec Home, seventy percent (70%) of
the Actual Costs Incurred in a total amount not to exceed
$15,000,000 outstanding at any time; provided, however, Spec Homes
which are unsold one hundred eighty (180) days or more after date
of Completion shall be subject to a maximum funding amount of
thirty-five (35%) of Actual Costs Incurred, and Spec Homes which
are unsold two hundred seventy (270) days or more after the date
of Completion will not be eligible for any funding amount;
(iii) with respect to any Model Home, seventy percent (70%)
of the Actual Costs Incurred, in a total amount not to exceed
$5,000,000 outstanding at any time;
(iv) with respect to any Finished Lot, seventy percent (70%)
of Actual Costs Incurred, in a total amount not to exceed
$15,000,000 outstanding at any time.
(v) with respect to any Land Under Development, a maximum of
forty percent (40%) of Actual Costs Incurred, in a total amount
not to exceed $13,000,000 outstanding at any time.
"Extensions of Credit" means, as to any Lender at any
time, an amount equal to the sum of (a) the aggregate principal
amount of all Loans made by such Lender then outstanding and (b)
such Lender's Commitment Percentage of the L/C Obligations then
outstanding.
"Event of Default" shall mean any event or condition
specified as an Event of Default in Section 6 hereof.
"Finished Lots" shall mean Lots with respect to which
all off-site and on-site infrastructure improvements have been
completed including, without limitation (i) all
utilities being installed to the Lot, and (ii) all
conditions to subdivision approval imposed by the
applicable governmental authorities being satisfied so
that a building permit for a Unit can be obtained. To
the extent that one or more of the requirements have
not been completed, such requirement shall be deemed
to have been completed if such requirement is fully
bonded.
"Fiscal Quarter" shall mean each of the four calendar
periods of three months ending on October 31, January
31, April 30 and July 31.
"Governmental Authority" shall mean any nation,
province, state or political subdivision thereof, and
any government or any Person exercising executive,
legislative, regulatory or administrative functions of
or pertaining to government, and any corporation or
other Person owned or controlled, through stock or
capital ownership or otherwise, by any of the
foregoing.
"Hazardous Materials" shall mean any
substances or materials (a) which are or become
defined as hazardous wastes, hazardous substances,
pollutants, contaminants, chemical substances or
mixtures or toxic substances under any Environmental
Law, (b) which are toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic,
mutagenic or
otherwise harmful to human health or the environment
and are or become regulated by any Governmental
Authority, (c) the presence of which require
investigation or remediation under any Environmental
Law or common law, (d) the, discharge or emission or
release of which requires a permit or license under
any Environmental Law or other Governmental Approval,
(e) which are deemed to constitute a nuisance, a
trespass or pose a health or safety hazard to persons
or neighboring properties, (f) which are materials
consisting of underground or aboveground storage
tanks, whether empty, filled or partially filled with
any substance, or (g) which contain, without
limitation, asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons,
petroleum derived substances or waste, crude oil,
nuclear fuel, natural gas or synthetic gas.
"Hedging Agreement" means any agreement
executed by Borrower with respect to an interest rate
swap, collar, cap, floor or a forward rate agreement
or other agreement regarding the hedging of interest
rate risk exposure executed in connection with hedging
the interest rate exposure of the Borrower under this
Agreement, and any confirming letter executed pursuant
to such hedging agreement, all as amended, restated or
otherwise modified.
"Income Available for Debt Service" shall
mean for any period the sum of (i) Consolidated Net
Income, (ii) income tax expense (benefit), (iii)
Interest Expense, and (iv) amortization and
depreciation expenses for such period.
"Interest Expense" shall mean for any period
the interest expense as shown in the consolidated
income statement of WHI and its Consolidated
Subsidiaries for such period .
"Issuing Lender" means First Union National
Bank of Maryland, in its capacity as issuer of any
Letter of Credit, or any successor thereto.
"Land Under Development" shall mean Lots
within recorded subdivisions or within approved
subdivision plans which are not considered Finished
Lots.
"L/C Commitment" means the lesser of (a)
Seven Million Five Hundred Thousand Dollars
($7,500,000) or (b) the Available Commitment under the
Revolving Loan.
"L/C Facility" means the letter of credit
facility established pursuant to Section 2.2 hereof.
"L/C Obligations" means at any time, an
amount equal to the sum of (a) the aggregate undrawn
and unexpired amount of the then outstanding Letters
of Credit and (b) the aggregate amount of drawings
under Letters of Credit which have not then been
reimbursed pursuant to Section 2.2(e).
"L/C Participants" means the collective
reference to all the Lenders other than the Issuing
Lender.
"Lender" means each Person executing this
Agreement as a Lender set forth on the signature pages
hereto and each Person that hereafter becomes a party
to this Agreement as a Lender pursuant to Section
8.10(b). "Lender" shall also refer
collectively to all of the individual Lenders.
Furthermore, in any instance in which the Borrower is
required by this Agreement to obtain the approval or
consent of Lender, to make any submission to or
request of Lender, or to send any notice to Lender,
"Lender" shall be deemed to mean the Person which is
at that time acting as Agent.
"Lending Office" means, with respect to any
Lender, the office of such Lender administering such
Lender's Commitment Percentage of the Loans.
"Letter of Credit Agreement" shall mean the
Letter of Credit Agreement entered into by and between
the Borrower and the Issuing Lender in connection with
the L/C Facility.
"Letters of Credit" shall have the meaning
assigned thereto in Section 2.2(a).
"LIBOR" means the Libor Market Index Rate as
defined in the Note.
"LIBOR Rate Loan" means any Loan bearing
interest at a rate based upon LIBOR as provided in
Section 2.11.
"Lien" shall mean any mortgage, pledge,
security interest, encumbrance, lien or charge of any
kind (including any agreement to give any of the
foregoing, any conditional sale or other title
retention agreement, and the filing of or agreement to
give any financing statement or other similar form of
public notice regarding encumbrances under the laws of
any jurisdiction).
"Loan" shall mean individually and
collectively, the Revolving Loan (as well as periodic
advances thereunder), the Term Loan, and amounts
outstanding under any Letter of Credit Agreement.
"Loan Documents" shall mean this Loan
Agreement, the Notes, the Deeds of Trust and all other
instruments, documents or certificates delivered to or
in the possession of the Lender evidencing or securing
the Loan.
"Loan Fees" shall mean the fees provided for
in Section 2.7.
"Lot" shall mean any lot, created pursuant
to a duly recorded record plat or within approved
subdivision plans or approved condominium plans in the
jurisdiction in which such lot is located, which is
part of the Collateral.
"Maryland Deed of Trust" shall mean the
Amended and Restated Deed of Trust and Security
Agreement With Assignment of Leases, Rents and
Profits, duly executed in substantially the form
attached as of Exhibit "B" hereto covering the Lots
located in the State of Maryland in respect of which
advances under the
Loan are requested or made.
"Material Adverse Change" means, with
respect to the Borrower or any of its Subsidiaries
taken as a whole, a material adverse change in the
properties, business, operation or condition
(financial or otherwise) of any such Person or the
ability of such Person to perform its obligations
under the Loan Documents, in each case to which it is
a party.
"Material Adverse Effect" means, with
respect to the Borrower or any of its Subsidiaries
taken as a whole, a material adverse effect on the
properties, business, operations or condition
(financial or otherwise) of any such Person or the
ability of such Person to perform its obligations
under the Loan Documents, in each case to which it is
a party.
"Maturity Date" means October 30, 1999 or
such later date to which the Maturity Date may be
extended under Section 2.6 hereof (but, if any such
date shall not be a Business Day, the next Business
Day thereafter), which date shall constitute the last
day of the term of the Revolving Loan, the Term Loan
and the Letter of Credit Facility.
"Maximum Funding" shall have the meaning
ascribed to it in Section 2.1(d) herein.
"Model Home" means any Unit which is not a
Pre-Sold Unit and which is intended to be used as a
sales office to conduct the business of marketing and
selling homes.
"Mortgage" means the Amended and Restated
Mortgage and Security Agreement With Assignment of
Leases, Rents and Profits, duly executed in
substantially the form attached as of Exhibit "C"
hereto covering the Lots located in the Commonwealth
of Pennsylvania in respect of which advances under the
Loan are requested or made.
"North Carolina Deed of Trust" means the
Credit Line Deed of Trust and Security Agreement With
Assignment of Leases, Rents and Profits, duly executed
in substantially the form attached as Exhibit "D"
hereto covering the Lots located in North Carolina in
respect of which advances under the Loan are requested
or made.
"Note" means the promissory note or notes
evidencing the Loan.
"Notice of Borrowing" or "Notice" means a
notice, in form and substance satisfactory to the
Lender setting forth the information specified in
Section 2.1(c)(3) hereof.
"Notice of Prepayment" means the notice
referred to in Section 2.8(e)(1) hereof.
"Obligations" means any and all obligations
(now
existing or hereafter arising) of the Borrower under
the Loan Documents or any Hedge Agreement.
"Operating Companies" means WHI, Washington
Homes of Virginia, Inc., Westminster Homes, Inc.,
Westminster Homes (Charlotte), Inc., and Westminster
Homes of Tennessee, Inc.
"Outstanding Loan Advance" means the sum of
the amount which the Lender has disbursed, from time
to time, under the Loan. In addition, if at any time
the Borrower is required to pay the Lender fees,
interest or any other amount under the terms of any of
the Loan Documents, including without limitation, any
Reimbursement Obligations, and does not pay such
amounts when due, the Lender, in addition to any other
rights or remedies it may have, shall have the right
to include such amounts in the calculation of the
Outstanding Loan Advance until such amounts are paid.
"Overline" means an amount not to exceed
$5,000,000 which shall be made available to Borrower
pursuant to Section 2.3(b) hereof.
"Permitted Liens" means (i) Liens imposed by
law, such as mechanics' liens that (a) arise in the
ordinary course of business and that secure amounts
not yet due and payable, (b) secure amounts due and
payable that are in good faith disputed by the Persons
which comprise Borrower, or (c) arise out of judgments
or awards against the Borrower with respect to which
the Borrower at the time shall currently be
prosecuting an appeal or proceedings for review,
provided that in the case of (b) and (c) above, the
Borrower shall have obtained a bond or stay of
execution satisfactory to the Lender, within ten (10)
days after item (b) or (c) becomes a Lien on all or
any portion of the Project, for the full amount of the
Lien; (ii) Liens for taxes or assessments or other
governmental charges not yet due and payable; (iii)
the UCC-1 financing statements contemplated by the
Deeds of Trust and Mortgage; (iv) the Deeds of Trust
and Mortgage; (v) any Spreader Agreement; (vi)
purchase money liens not to exceed $200,000 in the
aggregate on personal property and (vii) Liens or
other encumbrances set forth on the relevant schedules
of the title insurance policies provided to the Lender
pursuant to Section 5.01(i) hereof and approved by the
Lender in its sole discretion.
"Person" means an individual, corporation,
partnership, association, trust, business trust, joint
venture, joint stock company, pool, syndicate, sole
proprietorship, unincorporated organization,
Governmental Authority or any other form of entity or
group thereof.
"Plans and Specifications" shall mean the
plans and specifications (including the architect's
final drawings) describing any Unit or other
improvements to be constructed within the Collateral
provided by the Borrower to the Lender.
"Post-Default Rate" shall mean, in respect
of any principal of the Loan or any other amount
payable by the Borrower under this Loan Agreement, the
Note or any other Loan Document, if an Event of
Default has occurred and is continuing, or if the
Note is not paid in full when due (whether on demand
or at stated maturity, by acceleration or otherwise),
a rate per annum during the period commencing on the
date of the Event of Default or due date, as
applicable, until such amount is paid in full, equal
to two percent (2%) above any interest rate or rates
then in effect in respect of the principal of the Loan
or any portion thereof.
"Pre-Sold" with respect to any Unit or Lot
shall mean subject to a fully executed, binding and
enforceable sales contract (on Borrower's standard
form as approved by Lender, including any
modifications which may be approved by the Lender)
with a non-Affiliate third-party purchaser.
"Pre-Sold Tranche" shall have the meaning
ascribed to it in Section 2.4(a).
"Prime Rate" means, at any time, the rate of
interest per annum publicly announced from time to
time by First Union National Bank of Maryland as its
prime rate. Each change in the Prime Rate shall be
effective as of the opening of business on the day
such change in the Prime Rate occurs. The parties
hereto acknowledge that the rate announced publicly by
First Union National Bank of Maryland as its Prime
Rate is an index or base rate and shall not
necessarily be its lowest or best rate charged to its
customers or other banks.
"Project" or "Property" shall mean real
property used as Collateral, with improvements
thereon, including Lots and Units, owned by one or
more of the Borrowers and located in subdivisions or
developments described in the Deeds of Trust and
Mortgage as of the Closing Date, as well as additional
subdivisions used as Collateral from time to time,
after approval by the Lender in its sole discretion.
"Reimbursement Obligations" shall mean all
amounts for which the Borrower are obligated to
reimburse the Lender pursuant to Section 2.2(e) hereof
or otherwise under any of the Loan Documents.
"Required Lenders" means, at any date, (i)
at any time when there are no more than two (2)
Lenders (or at any time that there are more than two
(2) lenders, but the requirements of (ii)(b) below are
not satisfied), any combination of holders of at least
seventy-five percent (75%) of the aggregate unpaid
principal amount of the Note, or if no amounts are
outstanding under the Note, any combination of Lenders
whose Commitment Percentages aggregate at least
seventy-five percent (75%) or (ii) at any time when
(a) there are more than two (2) Lenders and (b) no one
Lender has sixty-six and two-thirds percent(66-2/3%)
or more of the Commitment Percentages, any combination
of holders of at least sixty-six and two-thirds
percent (66-2/3%) of the aggregate unpaid principal
amount of the Note, or if no amounts are outstanding
under the Note, any combination of Lenders whose
Commitment Percentages aggregate at least sixty-six
and twothirds percent (66-2/3%); except that, with
respect to waivers or amendments of any financial
covenant set forth in Section 5.10(a) through 5.10(g),
inclusive, the term "Required Lenders" shall
mean, at any date, any combination of holders of at
least seventyfive percent (75%) of the aggregate
unpaid principal amount of
the Note, or if no amounts are outstanding under the
Note, any
combination of Lenders whose Commitment Percentages
aggregate at least seventy-five percent (75%).
"Revolving Loan" shall mean any loan made
by the Lender pursuant to Section 2.1 hereof.
"SDS Group" shall mean Geaton A. DeCesaris,
Sr., Geaton A. DeCesaris, Jr., Paul C. Sukalo, Marco
A. DeCesaris, Joseph A. DeCesaris, Anthony H.
DeCesaris, and the spouses of such individuals.
"Spec Home" shall mean any Unit other than
a Pre-Sold Unit or a Model Home.
"Spreader Agreement" shall mean a spreader
agreement, duly executed by a Borrower, in form and
content acceptable to the Lender in its sole
discretion, which spreads the lien of the Mortgage
and Deeds of Trust to additional property to be added
to the Project and to be included as Collateral.
"Tennessee Deed of Trust" shall mean the
Amended and Restated Deed of Trust and Security
Agreement With Assignment of Leases, Rents and
Profits, duly executed in substantially the form
attached as of Exhibit "E" hereto covering the Lots
located in the State of Tennessee in respect of which
advances under the Loan are requested or made.
"Term" shall mean the period ending on
October 30, 1999, unless such term is extended from
time to time by the Lender, pursuant to the terms
hereof, in which case the "Term" for each such Loan
shall be the period ending on the date to which each
such Loan was extended.
"Term Loan" shall mean the loan made by the
Lender pursuant to Section 2.3 hereof.
"Title Insurance Company" shall mean the
title insurance company or companies selected by the
Borrower and approved by the Lender to provide title
services and insurance, when required, in connection
with the Loan.
"Total Inventory" shall mean all Finished
Lots, work in process and Land Under Development as
shown on the consolidated balance sheet of WHI and
its Consolidated Subsidiaries.
"Total Debt" shall mean all debt shown as
notes and loans payable (or similarly titled) in the
consolidated balance sheet of WHI and its
Consolidated Subsidiaries.
"Unit" shall mean any single family
residential, condominium or townhouse home, including
all appurtenances and other structures constructed
therewith, constructed or to be constructed on a Lot
in accordance with the Plans and Specifications.
"Uniform Customs" the Uniform Customs and
Practice for Documentary Credits (1994 Revision),
International Chamber of Commerce Publication No.
500.
"Unsold" with respect to any Unit or Lot
shall mean any Unit or Lot which is not Pre-Sold.
"Unsold Tranche" shall have the meaning
ascribed to it in the Note.
"Value of Collateral" shall mean the
Contract Price for each Pre-Sold Unit and Pre-Sold
Lot and the As Is Appraised Value for all other Units
and Lots.
"Virginia Deed of Trust" shall mean the
Credit Line Deed of Trust and Security Agreement With
Assignment of Leases, Rents and Profits , duly
executed in substantially the form attached as of
Exhibit "F" hereto covering the Lots located in the
Commonwealth of Virginia in respect of which advances
under the Loan are requested or made.
"WHI" shall mean Washington Homes, Inc., a
Maryland corporation.
"WHI Senior Notes" shall mean,
collectively, certain Senior Notes, Series A, in the
amount of $30,000,000, due October 15, 2000, and a
certain Adjustable Rate Senior Note, Series B, in the
amount of $13,000,000, due October 15, 2000, issued
under that certain Note Agreement dated as of April
15, 1994 entered into by WHI and certain Purchasers
named therein.
Section 1 The Loans
Section 1.1. Revolving Loan.
(a) Revolving Loan Commitment. On the terms and
conditions hereof, from the Closing Date for the
balance of the Term, Lender hereby agrees to make the
Revolving Loan in an aggregate principal amount at
any one time outstanding not to exceed $55,000,000,
plus the amount of the Overline (if advanced at the
request of the Borrower as a part of the Revolving
Loan) in the form of advances, together constituting
the Revolving Loan, disbursed pursuant to a Notice of
Borrowing. Within such limit and the other limits
set forth herein, the Borrower may borrow, repay and
reborrow funds pursuant to the Revolving Loan.
Advances subsequent to the Closing Date shall be
disbursed not more frequently than three (3) times
per calendar month as provided for in Section 2.1(c)
below. The Borrower shall only be entitled to
advances in amounts approved by the Lender in
accordance with this Agreement.
(b) Note. The Revolving Loan (together with the
Term Loan)
shall be evidenced by a promissory note or notes made
by the Borrower (the "Note"), substantially in the
form of Exhibit "A" hereto, payable to the order of
the Lenders and otherwise duly
completed and executed .
(c) Borrowing Base Report and Notice of
Borrowing.
(1) Borrower shall deliver a Borrowing Base
Report to Lender
once each calendar month during the term of the Loan.
Any Borrowing Base Report delivered later than 11:00
a.m. Maryland time shall be deemed to have been
delivered on the next Business Day. Lender shall not
be required to fund any advances to Borrower during
any calendar month until five (5) Business Days after
Lender's receipt of the Borrowing Base Report for
such month.
(2) Each Notice of Borrowing for an advance of
the Revolving
Loan shall (i) be delivered to the Lender's Real
Estate Department not later than 11:00 a.m. Maryland
time, at least two (2) Business Days before the date
upon which an advance under the Revolving Loan is
desired, which date shall be at least five (5)
Business Days after the delivery of the Borrowing
Base Report for such calendar month; (ii) be
irrevocable and constitute a representation by
Borrower, to the best of its knowledge, that, (a) in
respect of any advance for a Unit, the conditions set
forth in Section 2.1(g) hereof have been satisfied by
the Borrower in all material respects or waived in
writing by the Lender, all work and materials for
which payment is requested have been physically
incorporated into the Project free of Liens (except
for Permitted Liens), that all improvements have been
performed or installed in a good and workmanlike
manner, and that the work and materials conform in
all material respects to the Plans and Specifications
and all applicable legal requirements and building
restrictions; and (b) in respect of an advance for
the acquisition of a Lot, the conditions set forth in
Section 2.1(f) hereof have been satisfied by the
Borrower or waived in writing by the Lender; and
(iii) constitute Borrower's certification that the
representations and warranties set forth in Section 4
of this Agreement are true and correct in all
material respects except as otherwise disclosed to
the Lender in writing, Borrower is in compliance with
all covenants contained in Section 5 of this
Agreement and that no Default or Event of Default
exists on the date of the notice and on the date any
advance under the Revolving Loan is made pursuant to
such Notice. Notices received after 11:00 a.m.
Maryland time shall be deemed received on the next
Business Day. The Agent shall promptly notify the
Lenders of each Notice of Borrowing.
(3) Each Notice of Borrowing shall include the
information set forth on the form attached hereto as
Exhibit "M" and shall also include a statement of (i)
the date of such borrowing, which shall be a Business
Day, (ii) the amount of Monthly Funding (as
hereinafter defined) which the Lender is requested to
disburse after receipt of such Notice and (iii)
Borrower's certification that all representations
that are required to be made as a condition of each
advance (X) are true and correct in all material
respects as of the date of the Notice except as
otherwise disclosed to Lender in writing, and, (Y)
unless Borrower notifies the Lender to the contrary
in writing before an advance is made, will continue
to be true and correct in all material respects from
the date of the Notice to the date of the Monthly
Funding which is requested in the Notice. If the
Borrowing Base Report contains all of the foregoing
information, the Borrower may use the updated monthly
Borrowing Base Report, supplemented with additional
forms as required, as the
information required to accompany the Notice of
Borrowing. If Borrower fails to provide any
information required in its Notice of Borrowing, or
fails to provide the backup documentation which the
Borrower is required to provide, the Lender shall
have the right to make conservative assumptions in
calculating the Funding Amount. For example, if
Borrower does not indicate whether a Unit was Pre-
sold, the Lender may assume, for purposes of its
calculations, that the Unit was not Pre-Sold.
(d) Funding Procedure.
Upon receipt of a Notice of Borrowing and
an updated Borrowing Base Report, the Lender will
verify the calculations and will recompute the
figures in the Notice and Report until the Lender is
satisfied, in its sole discretion, that the Notice
and Report comply with the terms of this Loan
Agreement. On the basis of the Notice and Report, as
so modified, the Lender will subtract from the
Eligible Funding Amount the Outstanding Loan Advance
as of the date of such Notice, and, provided that all
other conditions of this Loan Agreement have been
satisfied, the Borrower will be eligible to receive
an amount equal to the difference ("Maximum
Funding"). Not later than 2:00 p.m. (Maryland time)
on the proposed borrowing date, each Lender will make
available to the Agent, for the account of the
Borrower, at the office of the Agent in funds
immediately available to the Agent, such Lender's
Commitment Percentage of the Loans to be made on such
borrowing date. The Borrower hereby irrevocably
authorizes the Agent to disburse the proceeds of each
borrowing requested pursuant to this Section 2.1 in
immediately available funds by crediting or wiring
such proceeds to the deposit account of the Borrower
identified in the most recent Notice of Account
Designation substantially in the form of Exhibit "H"
hereto (a "Notice of Account Designation") delivered
by the Borrower to the Agent or as may be otherwise
agreed upon by the Borrower and the Agent from time
to time. Subject to Section 2.10 hereof, the Agent
shall not be obligated to disburse the portion of the
proceeds of any Loan requested pursuant to this
Section 2.1 to the extent that any Lender has not
made available to the Agent its Commitment Percentage
of such Loan.
(e) Limitation on Advances.
(1) Advances under the Revolving Loan shall be
made only for the purposes of (i) funding the
acquisition of Finished Lots (as determined by the
Lender) and Land Under Development in the Project,
and (ii) funding other Actual Costs Incurred with
respect to the Collateral.
(2) The aggregate principal amount of all
advances under the
Revolving Loan shall not exceed the caps for each
category of Collateral provided for hereinabove.
(3) The aggregate principal amount of all
advances of the
Revolving Loan in respect of all Lots and Units
within the Collateral, shall not exceed the aggregate
Eligible Funding Amount for all Lots and Units within
the Collateral.
Accordingly, no requested advance shall be made if,
after giving effect to such advance, the Outstanding
Loan Advance aggregates an amount in excess of the
Eligible Funding Amount.
(4) At the Lender's option, each subdivision, Lot
and Unit within the Project may be inspected by the
Compliance Inspector, who shall certify that in the
Compliance Inspector's opinion, the Project is being
developed and the Units are being built in compliance
with the terms of this Loan Agreement. Such
inspection is solely for the benefit of the Lender and
may not be relied upon by the Borrower or by any third
party. It is Lender's current intention to cause the
Compliance Inspector to inspect fifty percent (50%) of
all work in progress on a quarterly basis. If
discrepancies are identified in five percent (5%) or
more of the Collateral in two consecutive quarters,
the Lender shall have the right to require monthly
inspections at Borrower's expense for as long as the
Lender deems necessary thereafter. Notwithstanding
any of the above, the Lender reserves the right to
increase or decrease the frequency of inspections at
any time that the Lender deems necessary or
appropriate, in the Lender's sole discretion.
(5) For all portions of the Project which the
Borrower expects to hold title to for more than one
year, title insurance policies will be required as
hereinafter described. For parcels of the Property
which the Borrower expects to sell within one year of
acquisition and provided that the Borrower pays all
payables within forty-five (45) days of the date
rendered and obtains lien waivers from its contractors
in accordance with its current procedures, the
Borrower shall have the option of providing to Lender
a title/lien search report on such parcels in lieu of
a title insurance policy. However, in the event the
Borrower fails to satisfy any of the aforementioned
conditions, Lender retains the right to require such
title insurance coverage as it may reasonably deem
necessary. For any parcel of Property for which title
insurance coverage is required in accordance with the
above, the following shall be required: a title
insurance company acceptable to Lender shall be
prepared to issue unconditionally to Lender at closing
on such parcel of Property an ALTA standard form, full
coverage mortgagee title policy, as evidenced by a
title commitment delivered to Lender. If requested by
Lender, the Borrower shall obtain such re-insurance as
Lender shall reasonably require. The title policy
shall insure each portion of the Property in an amount
equal to the portion of the Loan reasonably allocated
to such portion of the Property by Lender and shall
insure that Lender's lien against the Property is a
valid first priority lien, subject only to such
matters of record as are reasonably acceptable to
Lender. The title policy shall (i) not contain, and
shall affirmatively insure against, any exceptions or
exclusions for filed or unfiled mechanics' or
materialmen's liens; (ii) contain such other
endorsements and affirmative coverages as Lender shall
reasonably require; and (iii) otherwise be in form and
substance satisfactory to Lender. Legible copies of
all easements, covenants and other matters affecting
title to or use of the Property shall be submitted to
Lender. The Borrower hereby covenants and agrees to
take any and all steps, and provide any and all
documents, required by the title company in order to
permit the title company to provide affirmative
mechanics' lien coverage, including, but not limited
to, providing mechanics' lien affidavits, indemnity
agreements, certified financial statements of the
Borrower or their Affiliates and/or conforming or
modifying existing disbursement procedures to those
deemed necessary by the title company. All existing
liens, mortgages, and deeds of trust against the
Property, other than the $10,000,000 Facility, the
$15,000,000 Facility, and the Signet Facility, must be
removed at or before the Closing Date. Prior to the
Closing Date, the Title Insurance Company also shall
perform (i) a UCC search for the state office filings
only on WHI, Washington Homes of Virginia, Inc.,
Westminster homes, Inc., Westminster Homes
(Charlotte), Inc., and Westminster Homes of Tennessee,
Inc.; and (ii) a state search (or in instances in
which a state search is not available, a search of the
county in which the Person has its headquarters) of
all judgment lien, federal and state tax and lis
pendens records with respect to such entities. Such
searches shall be delivered to Lender prior to the
Closing Date, and shall be performed in the
jurisdiction of incorporation of each such Person. To
the extent available, the Title Insurance Company
shall issue an Insured Closing Letter, in the form
acceptable to Lender stating that the proposed closing
attorney is the duly authorized agent for said Title
Insurance Company for the purpose of issuing or
amending a policy to provide or continue title
insurance, recording Loan Documents or a Spreader
Agreement, and otherwise acting as closing agent with
respect to the transactions contemplated herein.
(f) Additional Lots and Subdivisions. In
addition to the requirements set forth above, the
Lender's agreement to make advances under the
Revolving Loan subsequent to the Closing Date is also
conditioned upon satisfaction of the following
conditions and receipt by the Lender of the following
documents, each of which shall be satisfactory in form
and substance to the Lender:
(1) In the case an advance to acquire any Lots
not constituting a part of the Collateral (whether or
not the Lots are in a subdivision, a portion of which
is in the Collateral), a Spreader Agreement will be
executed and recorded among the land records in the
jurisdiction in which such Lots are located, spreading
the lien of the applicable Deed of Trust to such Lots,
and the Borrower shall have complied with any
applicable provisions of Section 2.1(e)(5) relating to
title insurance and Insured Closing Letters.
(2) The Lender may, in its sole discretion, elect
to incorporate into the Collateral, Lots in a
subdivision which currently do not constitute part of
the Collateral ("Proposed Subdivision") provided that
the Borrower submits to Lender the materials itemized
in Exhibit "I" attached (the "New Project
Requirements") and the Lender approves same, such
approval not to be unreasonably withheld.
(g) Conditions to Advances Under the Revolving
Loan for Construction of Units. The obligation of the
Lender to make each advance under the Revolving Loan
for the construction of Units is further subject to
the receipt by the Lender of the following documents,
each of which shall be satisfactory in form and
substance to the Lender:
(1) If required by Lender, a certificate by, the
Inspector approving in all respects any Notice of
Borrowing required under clause (2) of this Section
2.1(g).
(2) A Notice of Borrowing for payment, which
shall set forth each element of the Borrowing Base
Report and the amount sought to be borrowed in respect
of each such element. While any Default shall have
occurred and be continuing, if the Lender reasonably
deems itself insecure that any design professional,
contractor or subcontractor and other persons who may
be entitled to a Lien on the Project is not being paid
when payments are due from the entities which comprise
the Borrower, the Lender may request that the Borrower
provide releases and waivers for work performed and
materials furnished through the date of the
requisition simultaneously with the requested
disbursement and, in such event, the Lender shall not
be required to make any advance hereunder prior to
receipt of such releases and waivers.
(3) In the case of any advance in respect of the
foundation
of any Unit and in any event, when the foundation of
each Unit has been completed, upon request of Lender,
receipt of a "wallcheck" survey made by a surveyor
licensed in the jurisdiction in which the Unit is
located (as applicable) and acceptable to the Lender,
in its sole discretion, which shall show that there
are no encroachments with respect to any building
restriction lines, boundary lines, easements, rights-
of-way, covenants or conditions.
(4) Upon request of Lender, copies of all
permits, licenses
and certificates required to undertake the activity to
be paid for with the proceeds of the requested
advance.
(5) In the case of the first advance in respect
of any new
Collateral, all risk builder's risk insurance
(extended coverage, replacement value form to include
vandalism, malicious mischief and risk of collapse) ,
written only by a company certified by the insurance
agent to be a company with a non-contingent "All or
"A+" rating as reported in the latest A.M. Best
Insurance Report, all in amounts as may be required by
the Lender, and such other insurance with respect to
those portions of the Project that are of an insurable
character as may be required by the Lender; Such
policies shall contain a standard non-contributory
mortgagee clause in favor of the Lender and shall
provide that they may not be materially altered or
cancelled without 30 days' advance written notice to
the Lender.
(h) General Conditions. The obligation of the
Lender to
continue the advance currently outstanding and to make
any future advance constituting the Loan is further
subject to all of the additional conditions precedent:
(1) No Default shall have occurred and be
continuing either
immediately prior to, or in the Lender's reasonable
judgment, would occur immediately after the making of
any advance.
(2) The representations and warranties made by
the Borrower
in each Loan Document shall be true in all material
respects on the date of the proposed advance and
immediately after the proposed advance.
(3) All Loan Fees have been paid in respect of
each advance.
Section 1.1. Letter of Credit Facility.
(a) Letter of Credit Commitment. Subject to the
terms and
conditions hereof, the Issuing Lender, in reliance on
the agreements of the other Lenders set forth in
Section 2.2(d), agrees to issue standby letters of
credit ("Letters of Credit")
for the account of the Borrower on any Business Day
from the Closing Date through but not including the
Maturity Date in such form as may be approved from
time to time by the Issuing Lender; provided, that the
Issuing Lender shall have no obligation to issue any
Letter of Credit if, after giving effect to such
issuance, (a) the L/C Obligations would exceed the L/C
Commitment or (b) the Available Commitment of any
Lender would be less than zero. Accordingly, no
Letter of Credit shall be issued if, after giving
effect to the issuance of such Letter of Credit, the
Maximum Funding Amount is exceeded. Each Letter of
Credit shall (i) be denominated in Dollars, be a
standby letter of credit issued to support obligations
of the Borrower or any of its Subsidiaries, contingent
or otherwise, incurred in the ordinary course of
business in connection with the purchase or
development of the Collateral, the construction
thereon of single family residences, and such other
purposes as may be approved by Lender, (iii) expire on
a date satisfactory to the Issuing Lender, which date
shall be no later than the Maturity Date and (iv) be
subject to the Uniform Customs and, to the extent not
inconsistent therewith, the laws of the State of
Maryland. The Issuing Lender shall not at any time be
obligated to issue any Letter of Credit hereunder if
such issuance would conflict with, or cause the
Issuing Lender or any L/C Participant to exceed any
limits imposed by any Applicable Law. References
herein to "issue" and derivations thereof with respect
to Letters of Credit shall also include extensions or
modifications of any existing Letters of Credit,
unless the context otherwise requires.
(b) Procedure for Issuance of Letters of Credit.
The Borrower may from time to time request that the
Issuing Lender issue a Letter of Credit by delivering
to the Issuing Lender at the Agent's Office an
Application therefor, completed to the satisfaction of
the Issuing Lender, and such other certificates,
documents and other papers and information as the
Issuing Lender may reasonably request. Upon receipt
of any Application, the Issuing Lender shall process
such Application and the certificates, documents and
other papers and information delivered to it in
connection therewith in accordance with its customary
procedures and shall, subject to Section 2.2(a) and
Section 3 and to closing hereof, and to the execution
by the Borrower of the Issuing Lender's then current
standard form Letter of Credit Agreement (a copy of
which is attached hereto as Exhibit "J"), promptly
issue the Letter of Credit requested thereby (but in
no event shall the Issuing Lender be required to issue
any Letter of Credit earlier than three (3) Business
Days after its receipt of the Application therefor and
all such other certificates, documents and other
papers and information relating thereto) by issuing
the original of such Letter of Credit to the
beneficiary thereof or as otherwise may be agreed by
the Issuing Lender and the Borrower. The Issuing
Lender shall furnish to the Borrower a copy of such
Letter of Credit and furnish to each Lender a copy of
such Letter of Credit and the amount of each Lender's
L/C Participation therein, all promptly following the
issuance of such Letter of Credit.
(c) Commissions and Other Charges. There shall
be no commission or other charges payable by the
Borrower in connection with issuance of Letters of
Credit hereunder; provided, however, this provision
shall not be deemed a waiver of any of the terms and
conditions of the Letter of Credit Agreement.
(d) Letter of Credit Participations.
(1) The Issuing Lender irrevocably agrees to
grant and hereby grants to each L/C Participant, and,
to induce the Issuing Lender to issue Letters of
Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and
purchases from the Issuing Lender, on the terms and
conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided
interest equal to such L/C Participant's Commitment
Percentage in the Issuing Lender's obligations and
rights under each Letter of Credit issued hereunder
and the amount of each draft paid by the Issuing
Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with the
Issuing Lender that, if a draft is paid under any
Letter of Credit for which the Issuing Lender is not
reimbursed in full by the Borrower in accordance with
the terms of this Agreement, such L/C Participant
shall pay to the Issuing Lender upon demand at the
Issuing Lender's address for notices specified herein
an amount equal to such L/C Participant's Commitment
Percentage of the amount of such draft, or any part
thereof, which is not so reimbursed.
(2) Upon becoming aware of any amount required
to be paid by any L/C Participant to the Issuing
Lender pursuant to Section 2.2(d)(1) in respect to any
unreimbursed portion of any payment made by the
Issuing Lender under any Letter of Credit, the Issuing
Lender shall notify each L/C Participant of the amount
and due date of such required payment and such L/C
Participant shall pay to the Issuing Lender the amount
specified on the applicable due date. If any such
amount is paid to the Issuing Lender after the date
such payment is due, such L/C Participant shall pay to
the Issuing Lender on demand, in addition to such
amount, the product of (i) such amount, times (ii) the
daily average Federal Funds Rate as determined by the
Agent during the period from and including the date
such payment is due to the date on which such payment
is immediately available to the Issuing Lender, times
(iii) a fraction the numerator of which is the number
of days that elapse during such period and the
denominator of which is 360. A certificate of the
Issuing Lender with respect to any amounts owing under
this Section shall be conclusive in the absence of
manifest error. With respect to payment to the
Issuing Lender of the unreimbursed amounts described
in this Section 2.2(d)(2), if the L/C Participants
receive notice that any such payment is due (A) prior
to 1:00 p.m. (Maryland time) on any Business Day, such
payment shall be due that Business Day, and (B) after
1:00 p.m. (Maryland time) on any Business Day, such
payment shall be due on the following Business Day.
(3) Whenever, at any time after the Issuing
Lender has made payment under any Letter of Credit and
has received from any L/C Participant its Commitment
Percentage of such payment in accordance with this
Section 2.2, the Issuing Lender receives any payment
related to such Letter of Credit (whether directly
from the Borrower or otherwise, or any payment of
interest on account thereof, the Issuing Lender will
distribute to such L/C Participant its pro rata share
thereof; provided, that in the event that any such
payment received by the Issuing Lender shall be
required to be returned by the Issuing Lender, such
L/C Participant shall return to the Issuing Lender the
portion thereof previously distributed by the Issuing
Lender to it.
(e) Reimbursement Obligation of the Borrower.
The Borrower agrees to reimburse the Issuing Lender on
each date on which the
Issuing Lender notifies the Borrower of the date and
amount of a draft paid under any Letter of Credit for
the amount of (a) such draft properly paid and (b) any
taxes, fees, charges or other costs or expenses
incurred by the Issuing Lender in connection with such
payment. Each such payment shall be made to the
Issuing Lender at its address for notices specified
herein in lawful money of the United States and in
immediately available funds. Interest shall be
payable on any and all amounts remaining unpaid by the
Borrower under this Section 2.2(e) from the date such
amounts become payable (whether at stated maturity, by
acceleration or otherwise) until payment in full at
the rate which is provided for in the Letter of Credit
Agreement.
(f) Obligations Absolute. The Borrower's
obligations under this Section 2.2 (including without
limitation the Reimbursement Obligation) shall be
absolute and unconditional under any and all
circumstances and irrespective of any set-off,
counterclaim or defense to payment which the Borrower
may have or have had against the Issuing Lender or any
beneficiary of a Letter of Credit. The Borrower also
agrees with the Issuing Lender that, except as
otherwise provided by applicable law, the Issuing
Lender shall not be responsible for, and the
Borrower's Reimbursement Obligation under Section
2.2(e) shall not be affected by, among other things,
the validity or genuineness of documents or of any
endorsements thereon, even though such documents shall
in fact prove to be invalid, fraudulent or forged, or
any dispute between or among the Borrower and any
beneficiary of any Letter of Credit or any other party
to which such Letter of Credit may be transferred or
any claims whatsoever of a Borrower against any
beneficiary of such Letter of Credit or any such
transferee. The Issuing Lender shall not be liable
for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any
Letter of Credit, except for errors or omissions
caused by the Issuing Lender's gross negligence or
willful misconduct. The Borrower agrees that any
action taken or omitted by the Issuing Lender under or
in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross
negligence or willful misconduct and in accordance
with the standards of care specified in the Uniform
Customs and, to the extent not inconsistent therewith,
the UCC shall be binding on the Borrower and shall not
result in any liability of the Issuing Lender to the
Borrower. The responsibility of the Issuing Lender to
the Borrower in connection with any draft presented
for payment under any Letter of Credit shall, in
addition to any payment obligation expressly provided
for in such Letter of Credit, be limited to
determining that the documents (including each draft)
delivered under such Letter of Credit in connection
with such presentment are in conformity with such
Letter of Credit.
(g) Effect of Application and Letter of Credit
Agreement. To the extent that any provision of any
Application related to any Letter of Credit or the
Letter of Credit Agreement executed in connection
therewith is inconsistent with the provisions of this
Section 2.2, the provisions of this Section 2.2 shall
apply.
Section 1.2. Term Loan and Overline.
(a) The Term Loan shall be in an amount not to
exceed Fifteen Million Dollars ($15,000,000) and shall
be made for the benefit of and shall be the obligation
solely of WHI. Except as
hereinafter provided in Section 2.3(b) below, no
advances shall be made under the Term Loan until
October 1, 1998, and the proceeds of the Term Loan are
to be used for payments due at that time under the WHI
Senior Notes, with the balance, if any, made available
for working capital. Payments of interest only on the
outstanding principal balance shall be due and payable
monthly during the period between funding and the
initial Maturity Date at the rate as follows: During
this period, amounts outstanding under the Term Loan
will be allocated to either the "Pre-Sold Tranche" (as
defined in Section 2.4(a) below) as the same shall be
allocated and reallocated from time to time pursuant
to the Borrowing Base Report and which shall bear
interest as provided in Section 2.4 below, or the
"Unsold Tranche" (as defined in Section 2.4(a)
below), as the same shall be allocated and reallocated
from time to time pursuant to the Borrowing Base
Report and which shall bear interest as provided for
in Section 2.4 below, and will be subject to the
maximum Eligible Funding Amounts provided for with
respect to the Revolving Loan. Accordingly, no
requested advance under the Term Loan shall be made
if, after giving effect to such advance, the
Outstanding Loan Advance aggregates an amount in
excess of the Eligible Funding Amount. In the event
the Term Loan is extended beyond the initial Maturity
Date, payments of principal and interest (based on an
amortization schedule to be determined by Lender in
its sole discretion based on its receipt and analysis
of fiscal year end consolidated financial statements
dated July 31, 1999) shall be due and payable monthly.
(b) Notwithstanding the provisions of Section
2.3(a) above, and only in the event there exists no
uncured default under any of the Loan Documents (as
hereinafter defined), at any time prior to and until
the first principal payment is made on the WHI Senior
Notes, a temporary overline in the maximum amount of
Five Million Dollars ($5,000,000) (the "Overline") may
be reallocated at the election of the Borrower from
the amount available to be funded under the Term Loan
to instead be available to be funded under the
Revolving Loan, to meet seasonal inventory demands.
Once such election is made, the amount of the Overline
will temporarily be deducted from the amount available
to be funded under the Term Loan and will be
temporarily added to the amount available to be funded
under the Revolving Loan. During such temporary
overline period, any portion of the Overline which is
advanced to the Borrower shall be deemed to be
advanced pursuant to the terms governing the Revolving
Loan and shall be subject to repayment terms as set
forth above with respect to the Revolving Loan.
Section 1.3. Interest.
(a) Regular Interest. The Borrower, jointly and
severally, hereby promises to pay to the Lender
monthly, in arrears, on the 15th day of each month
(commencing on the date hereof) and on the date the
Loan is paid in full and the Commitment is terminated,
interest on the unpaid principal amount of the Loan at
the applicable interest rates set forth below. The
Note provides for interest to accrue at two different
rates: the "Pre-Sold Rate" and the "Unsold Rate."
Principal outstanding from time to time
under the Loan will be designated as principal in
either the "PreSold Tranche" or the "Unsold Tranche"
and will bear interest in accordance with the terms of
the Note from and after the actual date advanced at
either the Pre-Sold Rate or the Unsold Rate
based on the allocation of outstanding principal to
each Unit or Lot submitted by the Borrower monthly in
the Borrowing Base
Report as approved by the Lender. The Pre-Sold Rate
is a floating rate which is 155 basis points in
excess of LIBOR. The Unsold Rate is a floating rate
which is 175 basis points in excess of LIBOR. Any
amounts outstanding under the Loan not designated by
the Borrower as being in the Pre-Sold Tranche or the
Unsold Tranche, including, but not limited to,
amounts advanced by Lender to protect the Collateral,
shall bear interest at the Unsold Rate.
(b) Post-Default Interest. Notwithstanding the
provisions
of clause (a) above, each Person comprising the
Borrower, jointly and severally, hereby promises to
pay to the Lender interest at the Post-Default Rate
on the full principal amount outstanding of all Loans
of the Lender, and (to the fullest extent permitted
by law) on any interest or other amount payable by
the Borrower hereunder or under the Note held by the
Lender, (i) for any period during which an Event of
Default under the Loan has occurred and is continuing
and (ii) when any amount payable under the Note is
not paid in full when due (whether on demand or at
stated maturity, by acceleration or otherwise), for
the period commencing on the date such amount is due
until the same is paid in full.
Section 1.4. Principal. Each Borrower, jointly
and severally, hereby promises to pay to the Lender
the entire unpaid principal balance of the Revolving
Loan on the Maturity Date.
WHI hereby promises to the to the Lender the entire
unpaid principal balance of the Term Loan on the
Maturity Date.
Section 1.5. Maturity Date Extension. Upon
receipt of an application from the Borrower for an
extension of the Maturity Date, received by the
Lender at least fourteen months before the Maturity
Date (as the same may be extended from time to time),
the Lender will consider a one-year extension of the
then current Maturity Date which the Lender may grant
or withhold in its sole and unreviewable discretion.
Lender will advise the Borrower of its decision with
respect to renewal no later than October 1 of each
year in which the Borrower has requested an extension
of the then current Maturity Date. In the event the
Lender elects not to extend the then current Maturity
Date for a one year period, Lender will in any event
extend the then current Maturity Date for a period of
six (6) months (the "Six Month Extension"). Provided
that all other conditions of funding have been
satisfied from time to time, from and after the
commencement of the Six Month Extension, the Lender
will be obligated to continue to make funds available
from the Revolving Loan, under the terms hereof only
for those subdivisions constituting part of the
Collateral as of the date of commencement of the Six
Month Extension.. If the Borrower elects to accept
such funds, the Borrower will pay the Annual Loan Fee
provided for in Section 2.7(b).
Section 1.6. Loan Fees
(a) Commitment Fees.
(1) Revolving Loan Commitment Fee. The Borrower
shall pay to the Lender, a Revolving Loan commitment
fee on the Closing Date in an amount equal to 0.45%
of $55,000,000 (the "Revolving Loan Commitment Fee").
The Revolving Loan Commitment Fee shall be payable in
full upon the closing of the Loan.
(2) Overline Commitment Fee. In addition, in the
event that
the Borrower draws down any amount under the
Overline, the Borrower shall also pay to the Lender
on the date that any funds are first advanced from
the Overline (the "Initial Overline Draw Date"), an
Overline commitment fee (the "Overline Commitment
Fee") in an amount equal to the product of (i) 0.45%
times (ii) $5,000,000 times (iii) a fraction, the
numerator of which is the number of days from the
Initial Overline Draw Date to and including October
30, 1998 and the denominator of which is the number
of days from the Closing Date to and including
October 30, 1998.
(b) Annual Loan Fee.
(1) In addition, the Borrower shall pay to Lender
an annual
loan fee (the "Annual Loan Fee") on October 31, 1998,
and annually each year thereafter until the Loan is
paid in full, in the amount of 0.45% of the lesser of
(i) $70,000,000 (ii) any amount to which the Borrower
has elected to reduce the Aggregate Commitment, or
(iii) in the event that Lender has elected not to
extend the Maturity Date after being requested to do
so by Borrower, the maximum amount that the Borrower
and Lender reasonably expect to be outstanding under
the Loan during the six months period next preceding
the Maturity Date. In the event the Borrower elects
to reduce the Aggregate Commitment as of a date other
than October 31 of any year, there will be no pro
rata reduction of the Annual Loan Fee with respect to
such portion of a year.
(2) In the event the Loan is extended for a Six
Month
Extension as provided for in Section 2.6, the
Borrower will pay an Annual Loan Fee for such period,
pro-rated over such six month period and based on the
maximum amount the Borrower and Lender reasonably
expect to be outstanding during such Six Month
Extension.
(c) Agent's and Other Fees. In order to
compensate the
Agent for structuring and syndicating the Loan and
for its obligations hereunder, the Borrower agrees to
pay to the Agent, for its account, the fees set forth
in the separate fee letter agreement executed by the
Borrower and the Agent dated as of the date hereof.
Section 1.7. Prepayments and Other Payments
(a) Certain Payments. The Borrower shall have
the
obligation to prepay the Loan in accordance with the
terms of Section 2.8(b) herein and shall have the
right to prepay the Loan
in whole or in part; however, any prepayment, in
whole or in part, shall not affect the Borrower's
obligation to continue making payments in connection
with any swap agreements (as defined in 11 U.S.C.
101), which will remain in full force and effect
notwithstanding such prepayment, The Borrower shall
have no right to the release of all or any portion of
the Project from the lien of the Deeds of Trust or
Mortgage at any time an Event of Default exists and
is continuing.
(b) Mandatory Prepayments in the Ordinary Course
of the
Borrower's Business. The Borrower shall prepay the
Loan as and when Lots and Units are sold in the
ordinary course of the Borrower's business in
accordance with the provisions of this Section 2.8
and shall receive a partial release of the Mortgage
or Deed of Trust securing such Unit or Lot, in
accordance with the terms of the applicable Mortgage
or Deed of Trust.
(1) Upon the closing of the sale of any Unit,
the Borrower
shall pay the Lender an amount equal to the amount
advanced by the Lender or deemed to have been
advanced under the Loan with respect to such Unit or
Lot ("Advance Amount"). Such Advance Amount shall
include that amount allocated to such Lot or Unit as
shown on the Base Borrowing Report most recently
submitted by the Borrower, including amounts advanced
under the Term Loan. Such amount will be applied to
repayment of the Loan.
(2) Upon the closing of the sale of any Lot or
Unit, the
Borrower shall provide the Lender with a detailed
statement (Form HUD 1 or equivalent) setting forth
the gross proceeds of the sale and all expenses
associated with such sale.
(c) Voluntary Prepayments. The Borrower shall
have the
right to prepay the amount outstanding under the Loan
in whole or in part at any time on any Business Day;
provided that such prepayment is in accordance with
the terms of this Section 2.8(c). If the Borrower
shall prepay the Revolving Loan in part, the Borrower
shall be entitled to have Lots and Units released
from the Lien of the applicable Deed of Trust, upon
payment to the Lender of the amounts specified in
Section 2.8(b) hereof with respect to each such Lot
or Unit to the Lender. Such payment will be applied
or set forth in Section 2.8(d).
(d) Application of Payments. Payments received
by Lender
representing the settlement of a Unit will be applied
as a principal curtailment to the Pre-Sold Tranche.
Any payments received by the Borrower representing
additional principal curtailments will be applied to
the Unsold Tranche. Any payments received as a
result of sales of Lots will be applied as a
principal curtailment to the Unsold Tranche.
(e) Prepayment Procedures.
(1) Each prepayment shall be pursuant to a
notice from the
Borrower to the Lender ("Notice of Prepayment"),
which notice shall be substantially in the form
attached hereto as Exhibit "N" and shall specify the
principal amount to be prepaid and the date of
prepayment (which shall be a Business Day), be
irrevocable, and be effective only if received by the
Lender not later than 1:00 p.m. Maryland time on the
prepayment date.
(2) If no Event of Default exists and is
continuing, any
prepayment made pursuant to the provisions of Section
2.8(b) or Section 2.8(c), as applicable, shall be
applied in accordance
with the provisions of Section 2.8(d). Any
prepayment made while an Event of Default exists and
is continuing shall be applied to accrued and unpaid
fees, late charges, interest, and principal due under
the Loan, in any order and in any manner which the
Lender deems desirable in its sole and absolute
discretion.
Section 1.8. Payments; Computations; Etc.
(a) Manner of Payment. Each payment by the
Borrower on account of the principal of or interest
on the Loans or of any fee, commission or other
amounts (including the Reimbursement Obligation)
payable to the Lenders under this Agreement or the
Note shall be made not later than 1:00 p.m. (Maryland
time) on the date specified for payment under this
Agreement to the Agent at the Agent's Office for the
account of the Lenders (other than as set forth
below) pro rata in accordance with their respective
Commitment Percentages, in Dollars, in immediately
available funds and shall be made without any set-
off, counterclaim or deduction whatsoever. Any
payment received after such time but before 2:00 p.m.
(Maryland time) on such day shall be deemed a payment
on such date for the purposes of the Note, but for
all other purposes shall be deemed to have been made
on the next succeeding Business Day. Any payment
received after 2:00 p.m. (Maryland time) shall be
deemed to have been made on the next succeeding
Business Day for all purposes. Upon receipt by the
Agent of each such payment, the Agent shall
distribute to each Lender at its address for notices
set forth herein its pro rata share of such payment
in accordance with such Lender's Commitment
Percentage and shall wire advice of the amount of
such credit to each Lender. Each payment to the
Agent of Agent's fees or expenses shall be made for
the account of the Agent and any amount payable to
any Lender hereunder shall be paid to the Agent for
the account of the applicable Lender.
(b) Crediting of Payments and Proceeds. In the
event that the Borrower shall fail to pay any of the
Obligations when due and the Obligations have been
accelerated pursuant to Section 6, all payments
received by the Lenders upon the Notes and the other
Obligations and all net proceeds from the enforcement
of the Obligations shall be applied first to all
expenses then due and payable by the Borrower
hereunder, then to all indemnity obligations then due
and payable by the Borrower hereunder, then to all
Agent's fees then due and payable, then to all other
fees and any commissions then due and payable, then
to accrued and unpaid interest on the Note, the
Reimbursement Obligation and (pro rata in accordance
with all such amounts due), then to the principal
amount of the Note and Reimbursement Obligation.
(c) Adjustments. If any Lender (a "Benefited
Lender") shall at any time receive any payment of all
or part of its Extensions of Credit, or interest
thereon, or if any Lender shall at any time receive
any collateral in respect to its Extensions of Credit
(whether voluntarily or involuntarily, by set-off or
otherwise) in a greater proportion than any such
payment to and collateral received by any other
Lender, if any, in respect of such other Lender's
Extensions of Credit, or interest thereon, such
Benefited Lender shall purchase for cash from the
other Lenders such portion of each such other
Lender's Extensions of Credit, or shall provide such
other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be
necessary to cause such Benefited Lender to share the
excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders; provided,
that if all or any portion of such excess payment or
benefits is thereafter recovered from such Benefited
Lender, such purchase shall be rescinded, and the
purchase price and benefits returned to the extent of
such recovery, but without interest. The Borrower
agrees that each
Lender so purchasing a portion of another Lender's
Extensions of Credit may exercise all rights of
payment (including, without limitation, rights of set-
off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
Section 1.9. Nature of Obligations of Lenders
Regarding Extensions of Credit, Assumption by the
Agent. The obligations of the Lenders under this
Agreement to make the Loans and issue or participate
in Letters of Credit are several and are not joint or
joint and several. Unless the Agent shall have
received notice from a Lender prior to a proposed
borrowing date that such Lender will not make
available to the Agent such Lender's ratable portion
of the amount to be borrowed on such date (which
notice shall not release such Lender of its
obligations hereunder), the Agent may assume that
such Lender has made such portion available to the
Agent on the proposed borrowing date in accordance
with Section 2.2(b) and the Agent may, in reliance
upon such assumption, make available to the Borrower
on such date a corresponding amount. If such amount
is made available to the Agent on a date after such
borrowing date, such Lender shall pay to the Agent on
demand an amount, until paid, equal to the product of
(a) the amount of such Lender's Commitment Percentage
of such borrowing, times (b) the daily average
Federal Funds Rate during such period as determined
by the Agent, times (c) a fraction the numerator of
which is the number of days that elapse from and
including such borrowing date to the date on which
such Lender's Commitment Percentage of such borrowing
shall have become immediately available to the Agent
and the denominator of which is 360. A certificate
of the Agent with respect to any amounts owing under
this Section shall be conclusive, absent manifest
error. If such Lender's Commitment Percentage of
such borrowing is not made available to the Agent by
such Lender within three (3) Business Days of such
borrowing date, the Agent shall be entitled to
recover such amount made available by the Agent with
interest thereon at the rate per annum applicable to
Base Rate Loans hereunder, on demand, from the
Borrower. The failure of any Lender to make its
Commitment Percentage of any Loan available shall not
relieve it or any other Lender of its obligation, if
any, hereunder to make its Commitment Percentage of
such Loan available on such borrowing date, but no
Lender shall be responsible for the failure of any
other Lender to make its Commitment Percentage of
such Loan available on the borrowing date.
Section 1.10. Changed Circumstances.
(a) Circumstances Affecting LIBOR Rate
Availability. If with respect to any period during
which the Loan is outstanding the Agent or any Lender
(after consultation with Agent) shall determine that,
by reason of circumstances affecting the foreign
exchange and interbank markets generally, deposits in
eurodollars, in the applicable amounts are not being
quoted via Telerate Page 3750 or offered to the Agent
or such Lender for such period, then the Agent shall
forthwith give notice thereof to the Borrower.
Thereafter, until the Agent notifies the Borrower
that such circumstances no longer exist, the
obligation of the Lenders to make LIBOR Rate Loans
shall be suspended, and the then outstanding
principal amount of each such LIBOR Rate Loans
together with accrued interest thereon, shall be
converted o a Base Rate Loan as of the date of such
notice.
(b) Laws Affecting LIBOR Rate Availability. If,
after the
date hereof, the introduction of, or any change in,
any Applicable Law or any change in the
interpretation or administration thereof by any
Governmental Authority, central bank or comparable
agency charged with the interpretation or
administration thereof, or compliance by any Lender
(or any of their respective Lending Offices) with any
request or directive (whether or not having the force
of law) of any such Authority, central bank or
comparable agency, shall make it unlawful or
impossible for any of the Lenders (or any of their
respective Lending Offices) to honor its obligations
hereunder to make or maintain any LIBOR Rate Loan,
such Lender shall promptly give notice thereof to the
Agent and the Agent shall promptly give notice to the
Borrower and the other Lenders. Thereafter, until
the Agent notifies the Borrower that such
circumstances no longer exist, (i) the obligations of
the Lenders to make LIBOR Rate Loans shall be
suspended and thereafter the Note shall bear interest
on a Base Rate basis, and (ii) if any of the Lenders
may not lawfully continue to maintain a LIBOR Rate
Loan, then the applicable LIBOR Rate Loan shall
immediately be converted to a Base Rate Loan for the
remainder of the term of the Loan.
(c) Increased Costs. If, after the date
hereof, the introduction of, or any change in, any
Applicable Law, or in the interpretation or
administration thereof by any Governmental Authority,
central bank or comparable agency charged with the
interpretation or administration thereof, or
compliance by any of the Lender ' s (or any of their
respective Lending Offices) with any request or
directive (whether or not having the force of law) of
such Governmental Authority, central bank or
comparable agency:
(1) shall subject any of the Lenders (or any of
their respective Lending Offices) to any tax, duty or
other charge with respect to any Note, Letter of
Credit or Application (except such taxes, duties or
charges that are imposed as a result of the financial
condition of the particular Lender, as opposed to
being imposed on lenders generally) or shall change
the basis of taxation of payments to any of the
Lenders (or any of their respective Lending Offices)
of the principal of or interest on any Note, Letter
of Credit or Application or any other amounts due
under this Agreement in respect thereof (except for
changes in the rate of tax on the overall net income
or gross receipts of any of the Lenders or any of
their respective Lending Offices imposed by the
jurisdiction in which such Lender is organized or is
or should be qualified to do business or such Lending
Office is located); or
(2) shall impose, modify or deem applicable
any reserve
(including, without limitation, any imposed by the
Board of Governors of the Federal Reserve System),
special deposit, insurance or capital or similar
requirement against assets of, deposits with or for
the account of, or credit extended by any of the
Lenders (or any of their respective Lending Offices)
or shall impose on any of the Lenders (or any of
their respective Lending Offices) or the foreign
exchange and interbank markets any other condition
affecting any Note; and the result of any of the
foregoing is to increase the costs to any of the
Lenders of maintaining any LIBOR Rate Loan or issuing
or participating in Letters of Credit or to reduce
the yield or amount of any sum received or receivable
by any of the Lenders under this Agreement or under
the Notes in respect of a LIBOR Rate Loan or Letter
of Credit or Application, then such Lender shall
promptly notify the Agent, and the Agent shall
promptly notify the Borrower of such
fact and demand compensation therefor and, within
fifteen (15) days after such notice by the Agent, the
Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender or
Lenders for such increased cost or reduction (except
to the extent such increased cost or reduction is a
consequence of the financial condition of the
particular Lender, as opposed to being imposed on
Lenders generally). The Agent will promptly notify
the Borrower of any event of which it has knowledge
which will entitle such Lender to compensation
pursuant to this Section 2.11(c); provided, that the
Agent shall incur no liability whatsoever to the
Lenders or the Borrower in the event it fails to do
so. The amount of such compensation shall be
determined, in the applicable Lender's sole
discretion, based upon the assumption that such
Lender funded its Commitment Percentage of the LIBOR
Rate Loans in the London interbank market, and using
any reasonable attribution or averaging methods which
such Lender deems appropriate and practical. A
certificate of such Lender setting forth the basis
for determining such amount or amounts necessary to
compensate such Lender shall be forwarded to the
Borrower through the Agent and shall be conclusively
presumed to be correct save for manifest error.
Section 1.11. Indemnity. The Borrower hereby
indemnifies each of the Lenders against any loss or
expense which may arise or be attributable to each
Lender's obtaining, liquidating or employing deposits
or other funds acquired to effect, fund or maintain
any Loan (a) as a consequence of any failure by the
Borrower to make any payment when due of any amount
due hereunder in connection with a LIBOR Rate Loan,
(b) due to any failure of the Borrower to borrow on a
date specified therefor in a Notice of Borrowing or
(c) due to any payment, prepayment of any LIBOR Rate
Loan on a date other than the last day of the
Interest Period therefor. The amount of such loss or
expense shall be determined, in the applicable
Lender's sole discretion, based upon the assumption
that such Lender funded its Commitment Percentage of
the LIBOR Rate Loans in the London interbank market,
and using any reasonable attribution or averaging
methods which such Lender deems appropriate and
practical. A certificate of such Lender setting
forth the basis for determining such amount or
amounts necessary to compensate such Lender shall be
forwarded to the Borrower through the Agent and shall
be conclusively presumed to be correct save for
manifest error.
Section 1.12. Capital Requirements. If either
(a) the introduction of, or any change in, or in the
interpretation of, any Applicable Law or (b)
compliance with any guideline or request from any
central bank or comparable agency or other
Governmental Authority (whether or not having the
force of law but provided such request is made to
lenders generally and not to a particular Lender by
reason of its financial condition), has or would have
the effect of reducing the rate of return on the
capital of, or has affected or would affect the
amount of capital required to be maintained by, any
Lender or any corporation controlling such Lender as
a consequence of, or with reference to the
Commitments and other commitments of this type, below
the rate which the Lender or such other corporation
could have achieved but for such introduction, change
or compliance, then within five (5) Business Days
after written demand by any such Lender, the Borrower
shall pay to such Lender from time to time as
specified by such Lender additional amounts
sufficient to compensate such Lender or other
corporation for such reduction.
A certificate as to such amounts submitted to the
Borrower and the Agent by such Lender, shall, in the
absence of manifest error, be presumed to be correct
and binding for all purposes.
Section 1.13. Taxes.
(a) Payments Free and Clear. Any and all
payments by the Borrower hereunder or under the Notes
or the Letters of Credit shall be made free and clear
of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or
withholding, and all liabilities with respect thereto
excluding, (i) in the case of each Lender and the
Agent, income, gross receipts and franchise taxes
imposed by the jurisdiction under the laws of which
such Lender or the Agent (as the case may be) is
organized or is or should be qualified to do business
or any political subdivision thereof and (ii) in the
case of each Lender, income and franchise taxes
imposed by the jurisdiction of such Lender's Lending
Office or any political subdivision thereof (all such
non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower
shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder or under any
Note or Letter of Credit to any Lender or the Agent,
(A) the sum payable shall be increased as may be
necessary so that after making all required
deductions (including deductions applicable to
additional sums payable under this Section 2.14) such
Lender or the Agent (as the case may be) receives an
amount equal to the amount such party would have
received had no such deductions been made, (B) the
Borrower shall make such deductions, (C) the Borrower
shall pay the full amount deducted to the relevant
taxing authority or other authority in accordance
with applicable law, and (D) the Borrower shall
deliver to the Agent evidence of such payment to the
relevant taxing authority or other authority in the
manner provided in Section 2.13(d).
(b) Stamp and Other Taxes. In addition, the
Borrower shall
pay any present or future stamp, registration,
recordation or documentary taxes or any other similar
fees or charges or excise or property taxes, levies
of the United States or any state or political
subdivision thereof or any applicable foreign
jurisdiction which arise from any payment made
hereunder or from the execution, delivery or
registration of, or otherwise with respect to, this
Agreement, the Loans, the Letters of Credit, the
other Loan Documents, or the perfection of any rights
or security interest in respect thereto (hereinafter
referred to as "Other Taxes").
(c) Indemnity. The Borrower shall indemnify
each Lender
and the Agent for the full amount of Taxes and Other
Taxes (including, without limitation, any Taxes and
Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.14) paid by such Lender
or the Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally
asserted; provided, however, the Borrower shall be
subrogated to the rights of such Lender or Agent with
respect to any claim that such Taxes or Other Taxes
were not correctly or legally asserted. Such
indemnification shall be made within thirty (30) days
from the date such Lender or the Agent (as the case
may be) makes written demand therefor.
(d) Evidence of Payment. Within thirty (30)
days after the
date of any payment of Taxes or Other Taxes required
to be
deducted from any sum payable hereunder as provided
in Section 2.14(a) above, upon request of the
Lender, the Borrower shall furnish to the Agent, at
its address referred to in Section 8.1, the original
or a certified copy of a receipt evidencing payment
thereof or other evidence of payment satisfactory to
the Agent. Upon request of the Agent, the Borrower
shall furnish to the Agent, at its address referred
to in Section 8.1 , evidence of the payment of real
estate taxes relating to the Collateral satisfactory
to the Agent.
(e) Delivery of Tax Forms. Each Lender
organized under the laws of a jurisdiction other than
the United States or any state thereof shall deliver
to the Borrower, with a copy to the Agent, on the
Closing Date or concurrently with the delivery of the
relevant Assignment and Acceptance, as applicable,
(i) two United States Internal Revenue Service Forms
4224 or Forms 1001, as applicable (or successor
forms) properly completed and certifying in each case
that such Lender is entitled to a complete exemption
from withholding or deduction for or on account of
any United States federal income taxes, and (ii) an
Internal Revenue Service Form W-8 or W-9 or successor
applicable form, -as the case may be, to establish an
exemption from United States backup withholding
taxes. Each such Lender further agrees to deliver to
the Borrower, with a copy to the Agent, a Form 1001
or 4224 and Form W-8 or W-9, or successor applicable
forms or manner of certification, as the case may be,
on or before the date that any such form expires or
becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously
delivered by it to the Borrower, certifying in the
case of a Form 1001 or 4224 that such Lender is
entitled to receive payments under this Agreement
without deduction or withholding of any United States
federal income taxes (unless in any such case an
event (including without limitation any change in
treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be
required which renders such forms inapplicable or the
exemption to which such forms relate unavailable and
such Lender notifies the Borrower and the Agent that
it is not entitled to receive payments without
deduction or withholding of United States federal
income taxes) and, in the case of a Form W-8 or W-9,
establishing an exemption from United States backup
withholding tax.
(f) Survival. Without prejudice to the
survival of any other agreement of the Borrower
hereunder, the agreements and obligations of the
Borrower contained in this Section 2.14 shall
survive the payment in full of the Obligations and
the termination of the Commitments.
Section 1.14. Power of Attorney. To facilitate
the administration of the Loan, each Borrower hereby
irrevocably appoints Washington Homes, Inc. as its
true and lawful agent and attorney-in-fact with full
power and authority to execute, deliver and
acknowledge, as appropriate, each Request for Advance
and Certification, Borrowing Base Certificate and all
other Loan Documents or certificates from time to
time deemed necessary or appropriate by Washington
Homes, Inc. or the Agent in connection with the Loan.
This power-of-attorney is coupled with an interest
and cannot be revoked, modified or amended without
the prior written consent of the Agent. Upon request
of the Agent, each Borrower shall execute,
acknowledge and deliver to the Agent a form Power of
Attorney confirming and restating the power-of
attorney granted herein.
Section 2 Conditions to Closing
The obligation of the Lender to provide an
increase in the amount of the Revolving Loan on the
Closing Date is subject to (i) there being no Default
on the Closing Date, and (ii) except as set forth in
that certain letter agreement between Borrower and
Lender of even date herewith confirming the temporary
waiver by Lender of certain closing conditions, the
receipt by (or availability to) the Lender of the
following documents on or before the Closing Date,
each of which shall be satisfactory in form and
substance to the Lender:
(a) The Deeds of Trust and Mortgage, duly
completed and
executed, covering the Lots acquired with the
proceeds of the advances currently outstanding under
the Revolving Loan.
(b) The Note and the Letter of Credit Agreement,
duly
completed and executed.
(c) UCC-l financing statements in connection
with all
security interests granted to the Lender, duly
completed and executed by the appropriate debtors.
(d) A conformed copy of the acquisition or
option contract
for all Lots within subdivisions in the Project with
respect to Lots in the Collateral.
(e) (1) The certificate of limited partnership
of each
partnership entity comprising the Borrower, certified
by the appropriate governmental authority, the
agreement of limited partnership of each limited
partnership, certified by the general partner of each
limited partnership, and evidence of, all action
taken by each limited partnership approving the Loan
Documents to which. it is contemplated to be a party;
and (2) certificate of good standing and certified
articles of incorporation for each corporate entity
comprising the Borrower certified by the appropriate
governmental authority and copies of the by-laws and
duly adopted resolutions of the boards of directors
of such corporations authorizing the transactions
contemplated hereby in form and content approved by
the Lender, in its sole discretion, certified by the
secretary or assistant secretary to each corporate
entity comprising the Borrower.
(f) A signed opinion of counsel to the Borrower
in form and
content satisfactory to the Lender in its sole
discretion.
(g) Proof that the Borrower has obtained
adequate liability,
casualty and worker's compensation insurance, written
only by a company certified by the insurance agent to
be a company with a non-contingent "All or 11A+11
rating as reported in the latest A.M. Best Insurance
Report for a period of not less ten (10) months and
that the Borrower is not in default in paying its
installments of premiums on such policies of
insurance. Such policies of insurance shall be in
amounts as may be required by the Lender and shall
contain a standard non-contributory mortgagee clause
in favor of the Lender and shall provide that they
may not be altered in any material respect or
cancelled without 30 days' advance written notice to
the Lender. The Borrower agrees to obtain other
insurance with respect to those
portions of the Project that are of an insurable
character as may be reasonably required by the
Lender. Acceptance of a binder shall not imply the
Lender's approval of the policy, which policy or
binder shall be delivered to the Lender prior to the
Closing Date.
(h) Proof that the Borrower has complied with
any
requirements for title insurance as provided for in
Section 2.1(e)(5).
(i) To the extent reasonably obtainable, an
insured "Closing
Letter" prepared by the Title Company stating that
the proposed settlement agent is the duly authorized
agent for said title insurance company for purposes
of closing the transactions contemplated herein and
issuing the Title Insurance Policy, and all
amendments thereto that might subsequently be issued
to subject additional property to the lien of the
Deed of Trust, and the said title insurance company
shall indemnify, defend and hold the Lender harmless
from and against any errors and omissions that may
arise out of or occur in connection with such agent's
title services. The record plat for each subdivision
constituting the Project showing buildings, location
of streets, lot lines, setback lines, easements,
encroachments and all other matters affecting each
subdivision constituting the Project prepared by a
licensed surveyor with a surveyor's certification to
the Lender in a form acceptable to Lender.
(j) Evidence that each subdivision constituting
the Project
is not in a flood hazard area designated as such
pursuant to the Flood Disaster Act of 1973, as
amended, or if it is in such an area, evidence of an
appropriate flood insurance policy obtained at the
Borrower's expense and acceptable to the Lender as to
form, substance and coverage. The Lender shall have
also received a flood hazard certification acceptable
to it from a surveyor licensed in the jurisdiction in
which each such subdivision is located.
(k) Copies of any engineering reports relating
to each of
the subdivisions and in the unsubdivided real
property within the Project, prepared for the
Borrower or its contractors, agents, architects or
engineers.
(l) Copies of the consolidated financial
statements of WHI
and its Consolidated Subsidiaries as of a date not
earlier than April 30, 1997, along with a
certification from each Borrower that there has been
no Material Adverse Change in the financial condition
of WHI and its Consolidated Subsidiaries since the
date of the statement.
(m) The Borrowing Base Report.
(n) Two sets of final Plans and Specifications
for the
construction contemplated to be done on each
subdivision constituting the Project approved by the
Lender and by all appropriate governmental
authorities. Such Plans and specifications shall be
assigned to the Lender.
(o) The tax identification or social security
number of each
person comprising the Borrower.
(p) Any document or certification from the
Borrower which
the title company insuring title requires as a
condition to issuing the Title Insurance Policy
described in Section 2.1(e)(5) hereof.
(q) Such other documents as the Lender may have
listed on the Preliminary Check List delivered to the
Borrower prior to Closing or which Lender may
otherwise reasonably request in connection with the
transactions contemplated hereby.
Section 1 Representations and Warranties.
Each Borrower represents and warrants to
the Lender, as of the date hereof and at any time
reaffirmed pursuant to the terms hereof, that:
Section 1.1. Existence, Etc. The Borrower
consists of
limited partnerships and corporations which are: (a)
duly organized and validly existing under the laws of
the state in which they were formed; (b) have all
requisite power , and has all material governmental
licenses, authorizations, consents and approvals
necessary (at the time the representation is made) to
own their respective assets and carry on their
respective businesses as now being conducted and as
contemplated hereby (except any such licenses,
authorizations, consents or approvals as are being
renewed) ; and (c) are qualified to do business in
all jurisdictions in which the nature of the business
conducted by it makes such qualification necessary
and where failure to so qualify would have a
Materially Adverse Effect.
Section 1.2. Financial, Condition. Except as
otherwise
disclosed to the Lender in writing, the consolidated
financial statements of WHI and its Consolidated
Subsidiaries heretofore furnished to the Lender in
connection with the transactions contemplated hereby,
fairly present the financial condition of such
entities as at said dates all in accordance with
generally accepted accounting principles applied on a
consistent basis. Since the dates of said financial
statements there has been no Material Adverse Change
in the financial condition or operations, or the
business taken as a whole, of the entities comprising
the Borrower from that set forth therein.
Section 1.3. Litigation. There are no legal or
arbitral
proceedings or any proceedings by or before any
governmental or regulatory authority or agency now
pending or, to the knowledge of the Borrower ,
threatened against the Borrower in which there is a
reasonable probability of an adverse decision that
could materially and adversely affect the financial
condition or operations, or the business taken as a
whole, of the Borrower.
Section 1.4. No Breach. None of the execution
and delivery
of the Loan Documents, the consummation of the
transactions therein contemplated and compliance with
the terms and provisions thereof will conflict with
or result in a breach of, or require any consent (not
theretofore obtained at the time the representation
is made) under any applicable law or regulation,
or any order, writ, injunction, judgment or decree of
any court or governmental authority or agency, or any
agreement or instrument to which any Borrower is a
party or by which it or any of them is bound or to
which it or any of them is subject, or constitute a
default under any such agreement or instrument, or
result in the creation or imposition of any Lien upon
any of the revenues or assets of any Borrower
pursuant to the terms of any such agreement or
instrument other than the lien created by the Loan
Documents.
Section 1.5. Authority. The Loan Documents,
when executed and delivered, have been duly and
validly executed and delivered by the parties named
therein other than the Lender, and constitute the
legal, valid and binding obligations of the parties
named therein other than the Lender, enforceable in
accordance with their terms except as enforceability
may be limited by bankruptcy, insolvency and other
similar laws affecting creditor's rights generally,
and the application of equitable principles.
Section 1.6. Approval. No authorizations,
approvals or consents of, and no filings or
registrations with (other than the recording of the
Deeds of Trust with the Recorder of Deeds in the
jurisdictions in which the Project is located and the
recording of the Financing Statement referred to in
the Deed of Trust in the chattel and land financing
statement records office of such counties) any
governmental or regulatory authority or agency are
necessary for the execution, delivery or performance
by the Borrower of the Loan Documents or for the
validity or enforceability of any thereof, or for any
of the entities comprising the Borrower to consummate
the transactions contemplated hereby.
Section 1.7. Employee Benefit Plans. None of
the entities comprising the Borrower maintains any
employee defined benefit pension plan subject to the
Employee Retirement Income Security Act of 1974.
Section 1.8. Taxes, Etc. The Borrower, and the
general partner of each of the partnership entities
comprising the Borrower, have filed all United States
federal and state tax returns and all other material
tax returns that are required to be filed by each of
them and has paid all taxes due pursuant to such
returns or pursuant to any assessment received by the
Borrower, except such taxes, the payment of which is
not yet due, or which if due is not yet delinquent or
is being contested in good faith or which has not
been finally determined. The charges, accruals and
reserves on the books of the entities comprising the
Borrower in respect of taxes and other governmental
charges are, in the opinion of the entities
comprising the Borrower adequate in all material
respects.
Section 1.9. Structure and Ownership of the
Borrower. The entities comprising the Borrower are
related to one another as described on Exhibit "K"
hereto.
Section 1.10. Survival. All representations and
warranties made by the Borrower herein or made in any
certificate delivered pursuant hereto shall survive
the making of the Loan hereunder and the execution
and delivery to the Lender of the Notes
evidencing such Loan.
Section 2 Covenants of the Borrower.
Each Borrower agrees that from the date
hereof, until payment in full of the Loan, all
interest thereon and all other amounts payable by the
Borrower under the Loan Documents and all Letters of
Credit:
Section 1.1. Financial Statements, Etc. The
Borrower (for
purposes of this Section 5.1 unless otherwise
specified actions which the Borrower is required to
take will be taken by Washington Homes, Inc. on
behalf of all the entities comprising the Borrower)
shall deliver to the Lender:
(a) within 90 days of the end of each Fiscal
Year, (i) audited consolidated financial statements
of Washington Homes, Inc. and subsidiaries prepared
in accordance with generally accepted accounting
principles, consistently applied and certified by an
independent certified public accountant, to fairly
present the financial condition of the person to
which it relates;
(b) as soon as practicable after the end of each
fiscal year of each Borrower and in any event within
ten (10) days of the due date thereof (as the same
may have been extended), copies of the annual federal
tax returns of such entities;
(c) promptly after any Borrower knows or has
reason to know
that any Default has occurred, a notice of such
Default, describing the same in reasonable detail and
the steps such Person or its affiliates proposes to
take to cure such Default;
(d) monthly, a Borrowing Base Report;
(e) from time to time such other information
regarding the business, affairs or financial
condition of the Borrower as the Lender may
reasonably request; and
(f) within 45 days of the end of each of the
fiscal quarters (other than the final fiscal quarter
of each year) of WHI and its Consolidated
Subsidiaries, internally prepared financial
statements of WHI and its Consolidated Subsidiaries
prepared in accordance with generally accepted
accounting principles consistently applied and
certified by two officers of Washington Homes, Inc.
as complete, true and correct and to fairly present
the financial condition of the Borrower, or in lieu
thereof an SEC Form 10Q report filed quarterly on
behalf of Washington Homes, Inc. with the Securities
and Exchange Commission and presenting substantially
the same information as is required hereby.
The Borrower will furnish to the Lender, at
the time it furnishes each set of financial
statements and other documents pursuant to clauses
(a) and (f) above, a certificate of the Borrower to
the effect that to the best of the Borrower's
knowledge, no Default has occurred and is continuing
(or, if any Default has occurred and is continuing,
describing the same in
reasonable detail and describing the action the
Borrower proposes to take to cure the same).
Section 1.1. Disposition of Assets. The
Operating Companies will not sell or otherwise
transfer (in a single transaction or series of
related transactions) its assets, including the
Project or any contractual or other interest therein,
except the sale of Units (and Lots without Units, to
the extent permitted by the terms of the Loan
Documents in the ordinary course of business and
except for bulk sales, the net proceeds of which are
used solely to acquire substantially similar assets
or to repay corporate debt.
Section 1.2. Existence, Etc. Each Operating
Company shall: (a) preserve and maintain its
existence and all of its material rights and
privileges; (b) comply with the requirements of all
applicable laws, rules, regulations and orders of
governmental or regulatory authorities if failure to
comply with such requirements could materially and
adversely affect the financial condition or
operations, or the business, taken as a whole, of the
Borrower; (c) pay and discharge all taxes,
assessments and governmental charges or levies
imposed on it or its income or profits or any of its
property prior to the date on which penalties attach
thereto, except for any such tax, assessment, charge
or levy the payment of which is being contested in
good faith and by proper proceedings and with
security; (d) not suffer to occur any material
amendment to the organizational documents (which, in
the case of a limited partnership agreement, shall
not include assignment of a limited partnership
interest) without the Lender's consent, which shall
not be unreasonably withheld, and without at least
ten (10 ) days notice to the Lender before such
amendment is made and supplying the Lender with a
copy of the proposed amendment; and (e) keep, or
cause to be kept, insured by financially sound and
reputable insurers all property of a character
usually insured by business entities engaged in the
same or similar businesses similarly situated against
loss or damage of the kinds and in the amounts
customarily insured against by such business and
carry such other insurance as is consistent with the
requirements of the Deeds of Trust and is usually
carried by such businesses.
Section 1.3. Liens. No Operating Company will
create or suffer to be created or to exist any Lien
upon the any part of Project other than the Permitted
Liens. The Operating Companies shall continue to
obtain lien waivers from contractors and
subcontractors in accordance with its normal and
customary procedures in effect on the date hereof.
Section 1.4. Use of the Revolving Loan. The
Borrower shall use the proceeds of the Revolving Loan
only for the purpose of financing the acquisition,
construction and development of the Project
consistent with the Borrowing Base Report. All of
the entities comprising the Borrower other than the
Operating Companies (collectively, the "Non-Operating
Companies") acknowledge that funds advanced to the
Operating Companies directly benefit the Non-
Operating Companies since the Operating Companies
intend to use the proceeds to pay debts on behalf of
the Non-Operating Companies, and all funds advanced
to the Operating Companies on behalf of the Non-
Operating Companies will be deemed to have been
advanced directly to the Non-Operating Companies.
Section 1.5. Access. The Borrower will permit
any