GUARANTY AGREEMENT
between
M.D.C. HOLDINGS, INC.
as guarantor
and
Bank One, Denver, N.A.,
not in its individual capacity
but solely as Trustee, under that Indenture of
Trust, dated as of June 1, 1994,
between it and Superior Metropolitan District No. 1,
acting by and through its Water and Sewer Utilities Enterprise,
as beneficiary
Dated as of June 1, 1994
GUARANTY AGREEMENT, dated as of June 1, 1994 (the "Guaranty
Agreement"), between M.D.C. Holdings, Inc., a corporation organized under the
laws of the State of Delaware (the "Guarantor"), and Bank One, Denver, N.A., not
in its individual capacity but solely as trustee (the "Trustee") under the
Indenture of Trust, dated as of June 1, 1994 (the "Indenture"), between Superior
Metropolitan District No. 1 (the "District"), acting by and through its Water
and Sewer Utilities Enterprise, as grantor, and the Trustee, as trustee.
R E C I T A L S
The District proposes to issue its Water and Sewer Revenue Refunding
and Improvement Bonds, Series 1994, dated as of June 1, 1994, in the aggregate
principal amount of $27,500,000 (the "Bonds") under the Indenture. The Bonds
are being used by the District, by and through its Water and Sewer Utilities
Enterprise, (a) to refund the District's outstanding general obligation bonds
and to refund the District's outstanding water and sewer revenue bonds; (b) to
finance the costs of the acquisition, construction and installation of certain
water collection, storage, treatment, delivery and distribution facilities and
certain sanitary sewer facilities for the District (the "Project"), and (c) to
reimburse Richmond Homes, Inc. I (the "Developer") for certain District
organizational costs and development costs advanced by the Developer to the
District in order to provide water and sewer services to the Rock Creek Ranch
development (the "Ranch") in the Town of Superior, Colorado served by the
District; and (d) to pay for the costs of issuance of the Bonds.
The Developer is a wholly-owned subsidiary of the Guarantor and the
benefits to the Developer derived from the sale of the Bonds as described above
will inure indirectly to the Guarantor. The execution and delivery of this
Guaranty Agreement by the Guarantor is a condition precedent to the purchase of
the Bonds.
GUARANTY
SECTION 1.01. In consideration of the foregoing, the Guarantor hereby
absolutely and unconditionally guarantees, in accordance with the terms hereof,
in favor of the Trustee for the benefit of the registered owners from time to
time of the Bonds (individually, a "Holder," and together, the "Holders"), and,
subject to the limitations set forth below, directly in favor of each Holder,
(a) the full and prompt payment of the principal of the Bonds when and as the
same becomes due, whether at the stated maturity thereof, by call for
redemption, by purchase of the Bonds upon optional tender as provided in the
Indenture, by acceleration or otherwise, and (b) the full and prompt payment of
the premium,
if any, and interest on the Bonds when and as the same becomes due or as part
of the purchase price of the Bonds as provided in the Indenture (collectively,
the "Guaranteed Obligations"). All payments by the Guarantor shall be paid
in lawful money of the United States of America ("U.S. Legal Tender"). The
Guarantor shall make deposits of funds pursuant hereto with the Trustee on the
date specified by the Trustee pursuant to Section 3.14 of the Indenture. Each
and every default in the payment of the Guaranteed Obligations shall give rise
to a separate cause of action hereunder, and separate suits may be brought
hereunder as each cause of action arises, subject, however, to the limitation
that a Holder shall have the right to pursue any remedy hereunder only to the
extent such Holder then has the right to pursue an individual remedy under the
provisions of the Indenture. The Guarantor agrees further to pay in each case
all expenses, charges, costs and fees, including court costs and reasonable
attorneys' fees, paid or incurred by the Trustee or any Holder in realizing
upon any of the payments hereby guaranteed or in enforcing this Guaranty
Agreement, and in each and every case to the same extent as the District shall
be liable for expenses, charges, costs and fees under the Indenture.
SECTION 1.02. The obligations of the Guarantor under this Guaranty
Agreement shall be binding upon it and its successors and assigns, shall be
absolute and unconditional and shall remain in full force and effect until the
entire principal of, and the premium, if any, and interest on, the Bonds and
other amounts payable under the Indenture shall have been paid, or until the
obligations of the Guarantor hereunder shall have been released pursuant to
Section 5.01 or 5.02 hereof, and such obligations shall not be affected,
modified or impaired, upon the happening from time to time of any event,
including without limitation any of the following:
(a) the compromise, settlement, release, discharge or
termination, voluntarily or by operation of law, of any or all of the
obligations, representations, warranties, covenants or agreements of the
District under the Bonds or the Indenture;
(b) the default or failure of the Guarantor fully to perform any
of its obligations, representations, warranties, covenants or agreements
set forth in this Guaranty Agreement;
(c) the waiver of the payment, performance or observance by the
District or the Guarantor of any of their respective obligations,
representations, warranties, covenants or agreements contained in the
Indenture, the Bonds or this Guaranty Agreement;
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(d) the extension of the time for payment of any principal of,
or the premium, if any, or interest on, any Bond or of the time for
performance of any other obligations, representations, warranties,
covenants or agreements under or arising out of the Indenture or this
Guaranty Agreement or the extension or the renewal of any thereof on any
one or more occasions for any length of time;
(e) the modification or amendment (whether material or
otherwise) of any obligation, representation, warranty, covenant or
agreement set forth in the Indenture;
(f) the taking or the omission of any of the actions referred to
in the Indenture and any actions under this Guaranty Agreement;
(g) any failure, omission, delay or lack on the part of the
District or the Trustee to enforce, assert or exercise any right, power or
remedy conferred on the District or the Trustee in this Guaranty Agreement,
the Indenture, any other instrument or contract, including the 1994 Tap
Purchase Agreement between the District and the Developer (the "TPA"), or
any other act or acts on the part of the District, the Developer, the
Trustee or any of the Holders, including any termination, cancellation or
other defense to the fulfillment of the obligations of the Developer
pursuant to the TPA;
(h) the voluntary or involuntary liquidation, dissolution, sale
or other disposition of all or substantially all the assets, marshalling of
assets and liabilities, receivership, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization, arrangement, composition with
creditors or readjustment of, or other similar proceedings affecting the
Guarantor, the District or any of the assets of any of them, or any
allegation or contest of the validity of this Guaranty Agreement in any
such proceeding;
(i) the release or discharge of the Guarantor from the
performance or observance of any obligation, representation, warranty,
covenant or agreement contained in this Guaranty Agreement by operation of
law, except to the extent of such release or discharge;
(j) the failure to give notice to the Guarantor of the
occurrence of an Event of Default (as defined below and in the Indenture)
under the terms and provisions of this Guaranty Agreement or the Indenture;
(k) the damage or destruction of any of the Project by casualty
or the seizure of the Project or any portion thereof by eminent domain, or
any transfer of, defect in or
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failure of the District's title to the Project or any part thereof; or
(l) the termination or modification of any relationship between
the Guarantor and any Subsidiary (as hereinafter defined) of the Guarantor
or between the Guarantor or any such Subsidiary and the District or the
Project; or
(m) any other circumstance, occurrence or condition, whether
similar or dissimilar to any of the foregoing, that might be raised in
avoidance of or in defense against any action to enforce the obligations of
the Guarantor under the provisions hereof, including without limitation,
all defenses available to sureties.
Prior to a release of the obligations of the Guarantor hereunder
pursuant to Section 5.01 or 5.02, the obligations of the Guarantor hereunder
shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of the District is rescinded or must be otherwise
restored by the Trustee or any Holders, whether as a result of any proceedings
in bankruptcy or reorganization or otherwise and whether or not this Guaranty
Agreement has been surrendered to the Guarantor or otherwise cancelled.
SECTION 1.03. No set-off, counterclaim, reduction or diminution of an
obligation, or any defense of any kind or nature that the Guarantor or the
District may have or may come to have against the District, the Trustee or any
Holder shall be available hereunder to the Guarantor; provided that nothing
contained herein shall prohibit the Guarantor from asserting any claim against
the District, the Trustee or any Holder in a separate proceeding, which
proceeding shall in no way delay the prompt performance by the Guarantor of its
obligations hereunder.
SECTION 1.04. The Guarantor agrees that the Trustee or the Holders
may from time to time, without notice or demand and without affecting the
validity or enforceability of this Guaranty Agreement or giving rise to any
limitation, impairment or discharge of the Guarantor's liability hereunder, (i)
renew, extend, accelerate or otherwise change the time, place, manner or other
terms of the Guaranteed Obligations, (ii) settle, compromise, release or
discharge, or accept or refuse substitutions for the Guaranteed Obligations or
any agreement relating thereto, (iii) request and accept other guaranties of the
Guaranteed Obligations and take and hold security for the payment of the
Guaranteed Obligations, (iv) release, refrain from enforcing, exchange,
compromise, subordinate, impair or modify, with or without consideration, any
security for payment of the Guaranteed Obligations or any other guaranties of
the Guaranteed Obligations, (v) enforce and apply any security now or hereafter
held by or for
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the benefit of the Trustee or the Holders in respect of this Guaranty Agreement
or the Guaranteed Obligations and direct the order or manner of sale thereof,
or exercise any other right or remedy that the Trustee or the Holders, or any
of them may have against any such security, as the Trustee (on behalf of the
Holders), in its discretion, may determine pursuant to any applicable security
agreement, including foreclosure on any such security pursuant to one or more
judicial or nonjudicial sales, and (vi) exercise or refrain from exercising
any other rights available to the Trustee, the Holders, or any of them under
the Indenture, at law or in equity.
SECTION 1.05. In the event of a default by the District (a) in the
payment of principal of any Bond when and as the same becomes due, whether at
the stated maturity thereof, by call for redemption, by purchase of the Bonds as
provided in the Indenture, by acceleration or otherwise, (b) in the payment of
any premium or interest on any Bond when and as the same becomes due, or (c) in
payment of any other amounts payable under the Indenture as the same becomes
due, and regardless of the reason for any such default, the Guarantor shall,
upon demand by the Trustee, pay such amount that will, together with the amount,
if any, paid by the District, result in payment of the full amount in default to
the Trustee for the benefit of the Holders. The Trustee, in its sole
discretion, shall have the right to proceed first and directly against the
Guarantor under this Guaranty Agreement without proceeding against or exhausting
any other remedies which it may have and without resorting to any other security
held by the District or the Trustee.
SECTION 1.06. Anything contained in this Guaranty Agreement to the
contrary notwithstanding, except as provided herein with respect to the expenses
incurred in connection with the enforcement hereof and subject to automatic
reinstatement as provided in that last paragraph of Section 1.02 hereof, the
obligations of the Guarantor hereunder shall be satisfied in full and discharged
upon the payment by the Guarantor to the Trustee of an amount equal to the
aggregate principal of, and the premium, if any, and interest on, the Bonds, and
all other amounts due or to become due under the Indenture, less all amounts
theretofore deposited with the Trustee, whether under the Indenture or
otherwise, for the payment thereof.
SECTION 1.07. The Guarantor hereby waives, for the benefit of the
Trustee and the Holders, (a) any right to require the Trustee or the Holders, as
a condition of payment or performance by the Guarantor, to (i) proceed against
any other guarantor of the Guaranteed Obligations or any other person or entity,
(ii) proceed against or exhaust any security held from any other guarantor of
the Guaranteed Obligations or any other person or entity, (iii) proceed against
or have resort to any balance of
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any deposit account or credit on the books of the Trustee or the registered
owners of the Bonds in favor of any other person or entity, or (iv) pursue or
exhaust any other remedy or power against any other person or entity whatsoever;
(b) notices (other than notices required hereunder), demands, presentations,
protests, notices of protest, notices of dishonor and notices of any action or
inaction, including acceptance of this Guaranty Agreement, notices of default
under the Indenture or any agreement or instrument related thereto, and notices
of any of the matters referred to in Section 1.04 hereof and any right to
consent to any thereof; and (c) any defenses or benefits that may be derived
from or afforded by law, whether now in effect or hereafter adopted, that
limit the liability of or exonerate guarantors or sureties. Nothing herein
shall be deemed to affect or limit any rights of the Guarantor to obtain
judgments for damages or equitable remedies for breaches of duty (whether by
contractual obligations or otherwise), if any, by the Trustee or the District;
PROVIDED, HOWEVER, that no actions initiated or taken by or on behalf of
Guarantor or for Guarantor's benefit relating to the collection or enforcement
of any such judgment or equitable remedy shall interrupt, delay, or otherwise
interfere with the due and punctual payment and collection of each and every
amount payable hereunder or pursuant hereto to the Trustee or any Holder even
if, before and/or after the making of such payment and/or collection, the
Trustee, such Holder or the District has an unsatisfied liability to Guarantor
or any other person. Without limiting the generality of the foregoing, it is
agreed that if any lien or security interest granted to, or in favor of, the
Trustee or any Holders shall fail to be perfected, such occurrence shall not
affect the liability of the Guarantor hereunder.
SECTION 1.08. Until the Guaranteed Obligations shall have been
indefeasibly paid in full without the possibility of an automatic reinstatement
as provided herein, the Guarantor agrees that it shall withhold exercise of (a)
any right of subrogation, (b) any right of contribution the Guarantor may have
against any other guarantor of the Guaranteed Obligations, (c) any right to
enforce any remedy which the Trustee or Holders may have against the District,
or (d) any benefit of, and any right to participate in, any security now or
hereafter held by the Trustee. Notwithstanding the foregoing, the Guarantor
shall be permitted to exercise all of its rights as a holder of Exchange Bonds
or Interest Certificates as those terms are defined in the Indenture or its
rights under the Reimbursement Agreement between the Guarantor and the District
(the "Reimbursement Agreement"). The Guarantor further agrees that, to the
extent the waiver of its rights of subrogation and contribution as set forth
herein is found by a court of competent jurisdiction to be void or voidable for
any reason, any rights of subrogation the Guarantor may have against any
collateral or security, and any rights of contribution the Guarantor may have
against any such other guarantor, shall be
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junior and subordinate to any rights the Holders and the Trustee may have to
any such collateral or security and to any right the Trustee and the Holders
have against the District or such other guarantor.
SECTION 1.09. It is not necessary for the Trustee and the Holders to
inquire into the capacity or powers of the Guarantor or the officers, directors
or any agents acting or purporting to act on behalf of the Guarantor.
SECTION 1.10. Subject to Section 1.08 hereof, the Trustee hereby
agrees that the Guarantor shall be fully subrogated to the rights of the owners
of the Bonds under the Indenture with respect to which payments of principal and
interest have been made from payments under the Guaranty and the Guarantor may
enforce the payment of such principal and interest against the District to the
same extent and in the same manner as if the Guarantor were the owner of the
principal or interest with respect to which payments were made, PROVIDED,
HOWEVER, the rights of the Guarantor, as a holder of the Exchange Bonds and
Interest Certificates, shall not be governed by this Section 1.10 but rather by
the applicable terms of the Indenture and its rights under the Reimbursement
Agreement shall be governed thereby.
REPRESENTATIONS AND WARRANTIES OF GUARANTOR
SECTION 2.01. The Guarantor hereby represents and warrants that it is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware, and that it has full power to execute, deliver
and perform its obligations under this Guaranty Agreement and has duly
authorized, executed and delivered this Guaranty Agreement.
SECTION 2.02. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated, and compliance with the
terms of this Agreement will not conflict with or result in a breach of any of
the terms, conditions or provisions of, or constitute a default under, the
articles of incorporation, as amended, or by-laws of the Guarantor, any material
note, indenture, mortgage, deed of trust, or other agreement or instrument to
which the Guarantor is a party or by which it or any of its property is bound,
or any existing law, order, rule, regulation, writ, injunction, or decree of any
government, governmental instrumentality, agency or body, arbitration tribunal
or court, domestic or foreign, having jurisdiction over the Guarantor or its
property. The consent, approval, authorization, or order of any court or
governmental instrumentality, agency or body is not required for the
consummation of the transactions herein contemplated.
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SECTION 2.03. Solely with respect to the Guarantor and any
corporation of which at least a majority of the aggregate voting power of all
classes of voting stock is directly or indirectly beneficially owned by the
Guarantor, any entity other than a corporation of which the Guarantor directly
or indirectly beneficially owns at least a majority of the voting stock of such
entity or of the manager or general partner of such entity, and any entity
(other than political subdivisions or enterprises thereof or governmental
agencies) required to be consolidated for financial accounting purposes in
accordance with generally accepted accounting principles (a "Subsidiary"), the
Preliminary Private Placement Memorandum dated March 11, 1994 ("PPM"), the
Limited Offering Memorandum dated June 8, 1994 ("LOM") and the Revised Limited
Offering Memorandum dated August 3, 1994 ("Revised LOM"), relating to the Bonds,
including all information incorporated therein by reference, as of their
respective dates, and, with respect to the Revised LOM, as of the date of the
issuance of the Bonds, do not include any untrue statement of a material fact,
or omit to state any material fact required to be stated therein, or necessary
to make the statements therein not misleading, except to the extent a statement
in the PPM has been superseded by a statement in the LOM or a statement in the
PPM or LOM has been superseded by a statement in the Revised LOM.
SECTION 2.04. The financial statements of the Guarantor and its
Subsidiaries together with related notes thereto contained in the Guarantor's
Annual Report on Form 10-K for the year ended December 31, 1993, as amended, and
in the Quarterly Report on Form 10-Q for the quarter ended March 31, 1994
included in the PPM, the LOM and the Revised LOM, as the case may be, present
fairly the financial position of the Guarantor and its consolidated Subsidiaries
and the results of their operations and the changes in their financial position
at their respective dates and for the respective periods for which they apply;
and such financial statements have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
concerned except as otherwise stated therein.
COVENANTS OF GUARANTOR
SECTION 3.01. (a) The Guarantor shall not consolidate with or merge
with or into another Person (as defined in the Indenture) or, directly or
indirectly, sell, lease or convey all or substantially all of its assets
(computed on a consolidated basis), whether in a single transaction or a series
of related transactions, to another Person or group of affiliated Persons,
unless (i) the resulting, surviving or transferee entity (the "Surviving
Person") is a corporation or partnership organized under the laws of the United
States, any state thereof or the District of Columbia, and the Surviving Person,
if other than the Guarantor,
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expressly assumes by written instrument all of the obligations of the Guarantor
under this Guaranty Agreement, (ii) no Event of Default shall exist or shall
occur immediately before or after giving effect to such transaction, either
under this Guaranty Agreement or under the Indenture, and (iii) immediately
after giving effect to such transaction, on a PRO FORMA basis, the consolidated
net worth, calculated in accordance with generally accepted accounting
principles as in effect in the United States applied on a basis consistent with
that used in the preparation of the audited financial statements of the
Guarantor for the fiscal year ended December 31, 1993 ("GAAP Net Worth"), of the
Surviving Person (computed on a consolidated basis) is at least equal to
$100,000,000 and either (a) the Consolidated Fixed Charge Coverage Ratio (as
defined in the Indenture, as amended, among M.D.C. Holdings, Inc., the
Guarantors and Pledgors named therein, and First Bank National Association,
as Trustee, dated as of December 15, 1993 and relating to the issuance of
$190,000,000 principal amount of 11 1/8% Senior Notes due 2003, whether or
not it is in effect (the "Senior Notes Indenture")) of the Surviving
Person is at least 1.50 to 1.00; or (b) the ratio of the Indebtedness (as
defined in the Senior Notes Indenture) of the Surviving Person on a consolidated
basis (excluding for purposes of such calculation Indebtedness specifically
permitted to be Incurred pursuant to Section 4.11(A) of the Senior Notes
Indenture, other than with respect to clause (g) thereof) to Consolidated Net
Worth (as defined in the Senior Notes Indenture) of the Surviving Person on a
consolidated basis is less than (x) 3.25 to 1.00 if the transaction occurs prior
to December 31, 1994, (y) 3.375 to 1.00 if the transaction occurs in calendar
year 1995 and (z) 3.50 to 1.00 if the transaction occurs in calendar year 1996
or thereafter. The provisions of clause (iii) above shall not apply to a
transaction or series of related transactions in which the sole participants are
wholly-owned Subsidiaries of the Guarantor and the Guarantor or other wholly-
owned Subsidiaries of the Guarantor. In addition, if the Guarantor sells all of
the capital stock of the Developer, or if the Developer sells all or
substantially all of its interests as the Developer in the Ranch, to any Person
who is, controls, is controlled by, or is under common control with, a Person
who meets the criteria set forth in the immediately following clauses (i) and
(ii) (the Person meeting such criteria is referred to herein as an "Affiliated
Person"): (i) a corporation or partnership organized under the laws of the
United States, any state thereof or the District of Columbia, and (ii)
immediately after giving effect to such transaction, on a PRO FORMA basis, has a
GAAP Net Worth of at least $100,000,000, and has either (a) a Consolidated Fixed
Charge Coverage Ratio (as defined in the Senior Notes Indenture) of at least
1.50 to 1.00, or (b) a ratio of Indebtedness (as defined in the Senior Notes
Indenture) on a consolidated basis (excluding for purposes of such calculation
other Indebtedness specifically permitted to be Incurred pursuant to Section
4.11(A) of the Senior Notes Indenture, other than with respect to clause (g)
thereof) to
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Consolidated Net Worth (as defined in the Senior Notes Indenture) on a
consolidated basis of less than (x) 3.25 to 1.00 if the sale takes place on or
prior to December 31, 1994, (y) 3.375 to 1.00 if the sale takes place in
calendar year 1995 and (z) 3.50 to 1.00 if the sale takes place in calendar year
1996 or thereafter, as established in financial statements audited by a firm of
independent certified public accountants, the Guarantor may assign its
obligations hereunder to such Affiliated Person (which for the purposes of this
Section 3.01 shall be a "Surviving Person") if such Affiliated Person expressly
assumes by written instrument all of the obligations of the Guarantor under this
Guaranty Agreement, PROVIDED, HOWEVER, after such assignment, the Guarantor
shall not reacquire, directly or indirectly, any such capital stock or material
interests unless the obligations of the Guarantor hereunder are reassigned to it
and at the time of such reassignment it meets the criteria set forth in clauses
(i) and (ii) of this sentence. Notwithstanding anything else to the contrary
herein, the Trustee and the Holders shall receive at least ten (10) Business
Days (as defined in the Indenture) before the completion of a transaction
permitted by this Section 3.01(a), (i) an opinion of municipal bond counsel to
the effect that the interest and premium, if any, payable on the Bonds after the
effective date of the transaction, will remain tax-exempt pursuant to Section
103 of the Internal Revenue Code of 1986, as amended, (ii) a certificate of the
Chief Financial Officer of the Surviving Person certifying that the GAAP Net
Worth of the Surviving Person equals or exceeds $100,000,000, and that the
applicable ratio criteria is satisfied (briefly setting forth such calculation),
with a reasonably detailed explanation of any difference between GAAP Net Worth
and the net worth of the Surviving Person as calculated in its most recent
report on Form 10-K or Form 10-Q filed with the Securities and Exchange
Commission (the "SEC") or in an alternative document, if such filings are not
made, meeting the requirements of the last sentence of Section 3.05 hereof and
provided to the Trustee and the Holders with the certificate, and (iii) in a
transaction where the Guarantor is not the Surviving Person, an opinion of
counsel (subject to customary qualifications) to the Surviving Person obligated
under this Guaranty Agreement acceptable to the Trustee, to the effect that the
Surviving Person is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, that it has full power to
execute, deliver and perform its obligations under the written assumption of the
obligations of the Guarantor under this Guaranty Agreement and has duly
authorized, executed and delivered the written assumption of the obligations of
the Guarantor under this Guaranty Agreement that the written assumption of the
obligations of the Guarantor under this Guaranty Agreement is valid, binding and
enforceable against the Surviving Person, and that the execution and delivery of
the written assumption of the obligations of the Guarantor under this Guaranty
Agreement, and the performance thereof, and compliance with the terms of this
Guaranty Agreement will not conflict with or
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result in a breach of any of the terms, conditions or provisions of, or
constitute a default under, the articles of incorporation, as amended, or
by-laws of the Surviving Person, any material note, indenture, mortgage,
deed of trust, or other agreement or instrument to which the Surviving Person
is a party or by which it or any of its property is bound, or any existing law,
order, rule, regulation, writ, injunction, or decree of any government,
governmental instrumentality, agency or body, arbitration tribunal or court,
domestic or foreign, having jurisdiction over the Surviving Person or its
property, and that the consent, approval, authorization, or order of any court
or governmental instrumentality, agency or body is not required for the
performance of the terms of this Guaranty Agreement.
(b) For purposes of clause (a), the sale, lease, conveyance,
assignment, transfer, or other disposition of all or substantially all of the
properties and assets of one or more Subsidiaries of the Guarantor, which
properties and assets, if held by the Guarantor instead of such Subsidiaries,
would constitute all or substantially all of the properties and assets of the
Guarantor, as the case may be, on a consolidated basis, shall be deemed to be
the transfer of all or substantially all of the properties and assets of the
Guarantor.
(c) Upon any consolidation or merger of the Guarantor, or any
transfer of assets by the Guarantor or the Developer in accordance with this
Section 3.01, the Surviving Person shall succeed to, and be substituted for, and
may exercise every right and power of the Guarantor under this Guaranty
Agreement with the same effect as if such Surviving Person had been named as the
Guarantor herein. When a Surviving Person duly assumes in writing all of the
obligations of the Guarantor pursuant hereto, the predecessor shall be released
from such obligations.
(d) The Guarantor, so long as any Bonds remain outstanding, shall not
dissolve its corporate existence (other than in connection with a transaction
permitted by this Section 3.01) nor shall its Board of Directors or shareholders
be asked to vote in any manner upon such a dissolution proposal, unless adequate
provision has been made with respect to the District's obligations to the
Holders pursuant to Article VII of the Indenture.
SECTION 3.02. The Guarantor agrees to provide the certificates of its
Chief Financial Officer described in Section 2.04(b) of the Indenture. The
Guarantor further agrees to cooperate with the District and the Trustee in
connection with the Net Worth Offer (as defined in the Indenture) provided for
in Section 2.04(b) of the Indenture and confirms that the District's obligations
pursuant to such Section of the Indenture are included within the Guaranteed
Obligations unconditionally guaranteed by it hereunder.
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SECTION 3.03. The Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law which would prohibit or forgive the
Guarantor from paying all or any portion of the principal of or interest and
premium, if any, on the Bonds as contemplated herein, wherever enacted, now or
at any time hereafter in force, or which may affect the covenants or the
performance of this Guaranty Agreement; and (to the extent that it may lawfully
do so) the Guarantor hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted. Further,
the Guarantor covenants that it will not cause, either directly or indirectly
(including through a Subsidiary), an Event of Default under the Indenture which
permits acceleration of the Bonds by any willful action or inaction on its part.
SECTION 3.04. (a) The Guarantor shall deliver, or cause to be
delivered, to the Trustee and each Holder within 120 days after the end of its
fiscal year, a certificate signed by the Chief Financial Officer of the
Guarantor (the "Chief Financial Officer's Certificate") stating that a review of
the Guarantor's activities and the activities of its Subsidiaries during the
preceding fiscal year has been made under the supervision of the Chief Financial
Officer with a view to determining whether the Guarantor has kept, observed,
performed and fulfilled its obligations under this Guaranty Agreement and
whether or not the Chief Financial Officer knows of any failure by the Guarantor
or any Subsidiary of the Guarantor to comply with any conditions or covenants in
this Guaranty Agreement or in any other Indebtedness (as defined in the Senior
Notes Indenture) (other than Non-recourse Indebtedness [as defined in the Senior
Notes Indenture] and Indebtedness of the Guarantor's asset management
subsidiaries) setting forth terms pursuant to which money has been borrowed by
the Guarantor or any Subsidiary and that has an outstanding principal amount of
$5,000,000 or more in the aggregate, which has been accelerated and is due and
owing, and, if such signor does know of such a failure to comply, the
certificate shall describe such failure with particularity. The Chief Financial
Officer's Certificate shall have attached to it a copy of that portion of the
written report of the Guarantor's independent certified public accountants
required by Section 4.7(b) of the Senior Notes Indenture or any similar
provision in any subsequent credit document relating to the Guarantor's major
credit facility relating to net worth calculations. The Chief Financial
Officer's Certificate shall also notify the Trustee should the relevant fiscal
year end on any date other than the current fiscal year end date.
(b) The Guarantor shall, so long as any of the Bonds are outstanding
(as defined in the Indenture), deliver to the Trustee, promptly upon becoming
aware of any Event of Default under this
12
Guaranty Agreement, a certificate signed by an officer of the Guarantor
specifying such Event of Default and what action the Guarantor is taking or
proposes to take with respect thereto. The Trustee shall not be deemed to have
knowledge of an Event of Default unless one of its trust officers receives
notice of the Event of Default giving rise thereto from the Guarantor or the
registered owners of at least 25% in aggregate principal amount of the Bonds
then outstanding.
SECTION 3.05. The Guarantor shall deliver to the Trustee and each
Holder within 15 days after it files the same with the SEC, copies of all
reports and information, if any, exclusive of exhibits, which the Guarantor is
required to file with the SEC pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). If the Guarantor is not
subject to the requirements of Section 13 or 15(d) of the Exchange Act (or
otherwise required to file reports pursuant to the immediately preceding
sentence), it shall deliver to the Trustee and to each Holder, within 15 days
after it would have been required to file such information with the SEC were it
required to do so, financial statements, including any notes thereto (and, in
the case of a fiscal year end, an auditors' report by an independent certified
public accounting firm of established national reputation), and a "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
substantially equivalent to that which it would have been required to include in
such quarterly or annual reports, information, documents or other reports if it
had been subject to the requirements of Section 13 or 15(d) of the Exchange Act.
SECTION 3.06. (a) Upon the execution hereof, the Trustee shall,
pursuant to the Indenture, cause to be created a Guaranty Collateral Fund,
consisting of the Basic Guaranty Collateral Account and the Supplemental
Guaranty Collateral Account (as such terms are defined in the Indenture), and
the Guarantor shall cause (i) $6,000,000 to be deposited in a Basic Guaranty
Collateral Account, and (ii) $4,000,000 to be deposited in a Supplemental
Guaranty Collateral Account to be held by the Trustee pursuant to terms set
forth in Section 3.06 of the Indenture. The Guarantor agrees that, if required
pursuant to Section 3.06 of the Indenture, it shall re-deposit funds in the
Supplemental Guaranty Collateral Account in accordance with the provisions of
Section 3.06 of the Indenture.
(b) The terms and provisions of Section 3.06 of the Indenture are
incorporated herein by reference as if such terms and provisions were set forth
herein in their entirety. Capitalized terms used therein have the meanings
ascribed to such terms in the Indenture.
13
The Guarantor shall use its best efforts to cause the lending
institution providing a letter of credit to contractually commit to provide the
Trustee and the Guarantor with written notice of any downgrade of its credit
rating by Moody's Investors Service and Standard & Poor's Corporation to a
rating of less than "A" or of any placement of the lending institution on a
"credit watch" by Moody's Investors Service or Standard & Poor's Corporation
that could precede a downgrading of the lending institution's credit rating. If
the Trustee becomes aware of a downgrading by Moody's Investors Service or
Standard & Poor's Corporation to a credit rating of less than "A", which causes
the Lending Institution not to be rated "A" or better by either rating agency,
the Trustee shall provide written notice to the Guarantor of such event. The
Guarantor and the Trustee agree that they will cooperate with each other and the
District in connection with the substitution of a letter of credit for the
Guaranty Collateral Fund pursuant to this Section 3.06 and Section 3.06 of the
Indenture.
EVENTS OF DEFAULT
SECTION 4.01. "Event of Default," wherever used herein, means any one
of the following events (whatever the reason for such Event of Default and
whether it shall be caused voluntarily or involuntarily or effected, without
limitation, by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or governmental
body):
(1) default in the payment of any amount under this Guaranty
Agreement as and when the same becomes due and payable or failure to
maintain the required amount of funds deposited in the Guaranty Collateral
Fund or a letter of credit in substitution therefor pursuant to Section
3.06 of the Indenture;
(2) default in the observance or performance of, or breach of, any
other covenant, agreement or warranty of the Guarantor contained in this
Guaranty Agreement and continuance of such default or breach for a period
of 45 days after there has been given, by registered or certified mail, to
the Guarantor by the Trustee, or to the Guarantor and the Trustee by
Holders of at least a majority in aggregate principal amount of the
outstanding Bonds, a written notice specifying such default or breach,
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder provided, however, if such default cannot be remedied
within such 45 day period, it shall not constitute an Event of Default if
action to remedy such default is instituted within such 45 day period and
diligently pursued thereafter until the default is corrected as long as
such default is remedied
14
within 90 days after receipt of the Notice of
Default to correct said default or cause said default to be corrected;
(3) a decree, judgment, or order by a court of competent jurisdiction
shall have been entered adjudging the Guarantor as bankrupt or insolvent,
or approving as properly filed a petition in an involuntary case or
proceeding seeking reorganization of the Guarantor or any of its Material
Subsidiaries (as defined in the Senior Notes Indenture) under any
bankruptcy or similar law, or a decree, judgment or order of a court of
competent jurisdiction directing the appointment of a receiver, liquidator,
trustee, or assignee in bankruptcy or insolvency of the Guarantor, any of
its Material Subsidiaries, or of the property of any such Person, or the
winding up or liquidation of the affairs of any such Person, shall have
been entered, and the continuance of any such decree, judgment or order
unstayed and in effect for a period of 45 consecutive days;
(4) the Guarantor shall institute proceedings to be adjudicated a
voluntary bankrupt (including conversion of an involuntary proceeding into
a voluntary proceeding), or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent to the
filing of any such petition, or shall consent to the appointment of a
custodian, receiver, liquidator, trustee, or assignee in bankruptcy or
insolvency of it or any of its assets or property, or shall make a general
assignment for the benefit of creditors, or shall admit in writing its
inability to pay its debts generally as they become due, or shall, within
the meaning of any bankruptcy law, become insolvent, fail generally to pay
its debts as they become due; and
(5) Upon (i) the acceleration of Indebtedness (as defined in the
Senior Notes Indenture) (other than Non-Recourse Indebtedness [as defined
in the Senior Notes Indenture] and Indebtedness of the Guarantor's asset
management subsidiaries) of the Guarantor or its Subsidiaries that has an
outstanding principal amount of $5,000,000 or more in the aggregate to be
immediately due and payable, or any failure to pay any amount in excess of
$5,000,000 pursuant to any guaranty by the Guarantor or any of its
Subsidiaries when such amount is due and payable after any applicable cure
period; and (ii) such acceleration or claim arising from such failure to
pay is not withdrawn or otherwise rescinded (whether due to payment or
otherwise) within a period of fifteen Business Days after such acceleration
or claim.
If the Bonds are accelerated under the Indenture, and the Guarantor notifies the
Trustee in writing within 5 Business Days of such acceleration that it prefers
to purchase such Bonds rather than pay
15
the Trustee such amounts as may be necessary for the full payment of the Bonds
pursuant to the terms of this Guaranty Agreement, the Guarantor, or a designee
of the Guarantor that is a Subsidiary of the Guarantor, may purchase such Bonds
from the Trustee upon the payment to the Trustee of all amounts then due and
payable to the Trustee under this Guaranty Agreement, subject, however, to the
last sentence of Section 3.03 hereof.
SECTION 4.02. If the Guarantor fails to pay any amounts under this
Guaranty Agreement forthwith as required by the terms hereof, the Trustee, in
its own name and as trustee of an express trust in favor of the Holders, may, in
accordance with the terms of the Indenture, institute a judicial proceeding for
the collection of the sums so due and unpaid, may prosecute such proceeding to
judgment or final decree and may enforce the same against the Guarantor and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Guarantor or any other obligor upon the Bonds
wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 4.03. If the Trustee or any Holder has instituted any
proceeding to enforce any right or remedy under this Guaranty Agreement and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every case,
subject to any determination in such proceeding, the Guarantor, the Trustee and
the Holders shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
the Holders shall continue as though no such proceeding had been instituted.
RELEASE OF GUARANTY
SECTION 5.01. This Guaranty Agreement shall terminate and the
obligations of the Guarantor hereunder shall be released if, as of the date of
such release, (i) the Net Operating Income (as defined in the Indenture but
excluding the non-recurring income excluded for the purposes of Section 4.02(b)
of the Indenture as provided in such Section of the Indenture) of the District
for two consecutive fiscal years equals or exceeds in each year one hundred five
percent (105%) of the maximum annual debt service obligation of the District
relating to the Bonds and any Additional Bonds (as
16
defined in the Indenture) for any subsequent calendar year prior to payment
in full of the Bonds and the Additional Bonds, (ii) the District has funded
the Operation and Maintenance Reserve Fund in the amounts required by
Section 3.07 of the Indenture and the then required amount of the Debt Service
Reserve Fund Requirement is on deposit in the Debt Service Reserve Fund in
accordance with Section 3.08 of the Indenture, and (iii) a certificate of the
independent public accountants for the District has been delivered to the
Trustee, which certifies that the Net Operating Income of the District for
the two prior consecutive fiscal years equals or exceeds in each year one
hundred five percent (105%) of the maximum annual debt service obligation of
the District relating to the Bonds and any Additional Bonds for any subsequent
calendar year prior to the payment in full of the Bonds and any Additional
Bonds and that such Operation and Maintenance Reserve Fund and Debt Service
Reserve Fund have been established.
SECTION 5.02. This Guaranty Agreement shall terminate and the
obligations of the Guarantor hereunder shall be released upon the replacement of
this Guaranty Agreement, in accordance with the terms of Section 4.08 of the
Indenture, with an instrument meeting the requirements of the definition of
"Qualified Credit Enhancement" in the Indenture. The Guarantor and the Trustee
agree to cooperate with each other and with the District in connection with such
replacement. The Trustee shall be required to acknowledge the release of this
Guaranty Agreement pursuant to this Section 5.02 only upon compliance with the
terms of Section 4.08 of the Indenture. If the Guarantor determines, in its
sole discretion, to replace this Guaranty Agreement with a Qualified Credit
Enhancement, the Guarantor shall provide the Trustee, the District, the
Developer and the Holders of the Bonds with written notice of such
determination, a copy of the instrument in draft form with which the Guarantor
expects to replace this Guaranty Agreement and a written summary of the material
terms of such instrument. Such replacement shall only be effected upon
compliance with Section 4.08 of the Indenture and the execution of a Supplement
to the Indenture providing for the Qualified Credit Enhancement and such other
documents as may be necessary to assure the benefits of the Qualified Credit
Enhancement to the Trustee and the Holders of the Bonds. The Trustee agrees to
cooperate with the Guarantor to complete the replacement of this Guaranty
Agreement with a Qualified Credit Enhancement, upon Guarantor's written request,
as quickly as may be reasonably practicable.
MISCELLANEOUS
SECTION 6.01. This Guaranty Agreement is solely for the benefit of
the Trustee and the Holders of the Bonds. The Trustee shall be entitled to
enforce performance and observance of this
17
Guaranty Agreement for and on behalf of the Holders, in accordance with the
provisions of the Indenture.
SECTION 6.02. No remedy herein conferred upon or reserved to the
Trustee is intended to be exclusive of any other available remedy or remedies,
but each and every such remedy shall be cumulative and shall be in addition to
every other remedy given under the Indenture or this Guaranty Agreement or now
or hereafter existing at law or equity. No delay or omission to exercise any
right or power accruing upon any default, omission or failure of performance
hereunder shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient. In order to entitle the Trustee to
exercise any remedy reserved to it in this Guaranty Agreement, it shall not be
necessary to give any notice to the Guarantor. In the event any provision
contained in this Guaranty Agreement should be breached by the Guarantor and
thereafter duly waived by the Trustee, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder. No waiver, amendment, release or modification of this Guaranty
Agreement shall be established by conduct, custom or course of dealing.
SECTION 6.03. Wherever possible, each provision of this Guaranty
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any such provision shall be prohibited by or invalid
under applicable law, such provisions shall be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provision of the Guaranty Agreement.
SECTION 6.04. The Guarantor acknowledges that its obligations to pay
the Guaranteed Obligations hereunder are not and cannot be subordinated to the
prior payment of any other debt of the Guarantor.
SECTION 6.05. This Guaranty Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado.
SECTION 6.06. Waivers of Events of Defaults hereunder, amendments to
the terms hereof and direction of the Trustee in connection with matters rising
hereunder by the Holders shall be governed by Sections 8.11, 10.02, 10.04 and
8.03 of the Indenture, respectively, or such other provisions of the Indenture
as may be applicable.
18
IN WITNESS WHEREOF, the Guarantor and the Trustee have caused this
Guaranty Agreement to be executed as of the date first above written.
M.D.C. HOLDINGS, INC.
a Delaware corporation
By: /s/ Paris G. Reece III
---------------------------
Title: Vice President
------------------------
(CORPORATE)
( SEAL )
ATTEST:
/s/ Carol S. Raznick
- - -------------------------
Secretary (Assistant)
BANK ONE, DENVER, N.A.
as Trustee
By: /s/ Charles W. Smedley, Jr.
----------------------------
Title: Vice President
-------------------------
(CORPORATE)
( SEAL )
ATTEST:
/s/ Eugene H. Yoshida
- - ---------------------------
EUGENE H. YOSHIDA
Vice President & Trust Officer
19
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER)
The foregoing instrument was acknowledged beofre me this 4th day
of August, 1994, by Paris G. Reece III, as Vice President, and Carol S.
Raznick, as Assistant Secretary, of M.D.C. Holdings, Inc.
WITNESS my hand and official seal.
My commission expires: July 10, 1995.
(Notary Public) /s/ Steven W. Sackman
( seal ) -------------------------------
Notary Public
410 Seventeenth Street, 22nd Floor
Denver, Colorado 80202-4437
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER)
The foregoing was acknowledged beofre me this 4th day
of August, 1994, by Charles W. Smedly, Jr., as Vice President, and
Eugene H. Yoshida, as Vice President & Trust Officer, of Bank One,
Denver, N.A.
WITNESS my hand and official seal.
My commission expires: July 10, 1995.
(Notary Public) /s/ Steven W. Sackman
( seal ) -------------------------------
Notary Public
410 Seventeenth Street, 22nd Floor
Denver, Colorado 80202-4437