1
EXHIBIT 10.1
[EXECUTION]
REVOLVING CREDIT AGREEMENT
--------------------------
THIS AGREEMENT is made to be effective as of May 3, 2001, by and among
M/I FINANCIAL CORP., an Ohio corporation ("Financial"), M/I SCHOTTENSTEIN HOMES,
INC., an Ohio corporation ("M/I Homes") (Financial and M/I Homes are sometimes
hereinafter referred to collectively as the "Borrowers") and GUARANTY BANK, a
federal savings bank (the "Bank"). The Borrowers and the Bank, in consideration
of the covenants and agreements contained herein, intending to be legally bound,
hereby recite and agree as follows:
RECITALS
--------
A. M/I Homes, Bank One, NA, The Huntington National Bank, National City
Bank, Fleet National Bank, The Fifth Third Bank of Columbus, SunTrust Bank,
Central Florida, N.A., Firstar Bank, N.A., AmSouth Bank, Comerica Bank and PNC
Bank National Association, and Bank One, NA, as agent for the foregoing banks,
are parties to a certain Revolving Credit Loan, Swingline Loan and Standby
Letter of Credit Agreement effective as of August 23, 2000 (together with any
amendments and restatements thereto and any agreement under which the
Indebtedness arising thereunder is refinanced or replaced, the "M/I Homes Loan
Agreement").
B. M/I Homes owns 100% of the issued and outstanding common stock of
Financial.
C. The Borrowers and Bank One, NA are parties to a Revolving Credit
Agreement effective as of June 22, 1998 in the principal amount of $30,000,000
(the "1998 Credit Agreement") which matures on June 20, 2001.
D. The Borrowers and the Bank want to enter into a new credit facility in
the principal amount of Thirty Million and 00/100 Dollars ($30,000,000), which
will pay off and replace the 1998 Credit Agreement in its entirety on the terms
and conditions hereinafter set forth.
AGREEMENT
---------
SECTION 1. DEFINITIONS
-----------
1.1 DEFINED TERMS. As used in the Agreement, the following terms have the
following meanings:
"AGREEMENT" shall mean this Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
2
"APPROVED ORIGINATOR" shall mean any Person listed on Schedule 1 hereto.
"BORROWING DATE" shall mean any Business Day specified pursuant to
subsection 2.3 hereof as a date on which the Borrowers request the Bank to make
a disbursement pursuant to the Loans hereunder.
"BUSINESS DAY" shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in Dallas, Texas are authorized or required by law
to close, except that when used in connection with Eurodollar Rate Loans,
"Business Day" shall mean any Business Day on which dealings in Dollars between
banks may be carried on in London, England and Dallas, Texas.
"CASH EQUIVALENTS" shall mean (a) securities with maturities of 180 days
or less from the date of acquisition issued or fully guaranteed or insured by
the United States Government or any agency thereof, (b) certificates of deposit
and bankers acceptances each issued by the Bank and each with maturities of 180
days or less from the date of acquisition, and (c) commercial paper of a
domestic issuer rated at least A-1 by Standard & Poor's Corporation or P-1 by
Moody's Investors Service, Inc. with a maturity of not more than 180 days.
"CD ENHANCED LOAN" shall mean any Eligible Mortgage Loan which Borrowers
intend to sell to a secondary mortgage lender using a certificate of deposit as
partial security.
"CD ENHANCED LOAN SUBLIMIT" shall mean the amount of $5,000,000.
"CODE" shall mean the Internal Revenue Code of 1986, as amended or
superseded from time to time. Any reference to a specific provision of the Code
shall be construed to include any comparable provision of the Code as hereafter
amended or superseded.
"COMMITMENT" shall mean the Bank's agreement to make the Loans to the
Borrowers pursuant to subsection 2.1 hereof in the amount referred to therein,
which amount shall not exceed at any time the lesser of (a) $30,000,000 or (b)
95% of the aggregate face amount of all Eligible Mortgage Loans in existence at
such time.
"COMMITMENT PERIOD" shall mean the period from and including the date
hereof through and including May 2, 2001,which is 364 days after the date
hereof, or such earlier date as the Commitment shall terminate as provided
herein, subject to any extension of the Commitment Period pursuant to subsection
2.7 of this Agreement.
"COMMONLY CONTROLLED ENTITY" shall mean an entity, whether or not
incorporated, which is under common control with Financial within the meaning of
Section 414(b) or (c) of the Code.
"CONTINGENT OBLIGATION" shall mean as to any Person, any reimbursement
obligations of such Person in respect of drafts that may be drawn under letters
of credit, any reimbursement obligation of such Person in respect of surety
bonds (including reimbursement obligations in respect of construction bonds),
and any obligation of such Person guaranteeing or in effect guaranteeing any
2
3
Indebtedness, leases, dividends or other obligations primarily to pay money
("primary obligations") of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, including without limitation any
obligation of such Person, whether or not contingent, (a) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the purchase or payment of any
such primary obligation, or (ii) to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (c) to purchase property, securities or services primarily for
the purpose of assuring the obligee under any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation, or
(d) otherwise to assure or hold harmless the obligee under such primary
obligation against loss in respect thereof; provided, however, that the term
"Contingent Obligation" shall not include (i) endorsements of instruments for
deposit or collection in the ordinary course of business, (ii) Financial's
guaranty of the obligations of M/I Homes with respect to the M/I Homes Loan
Agreement, and (iii) Mortgage Loan Repurchase Obligations.
"CONTRACTUAL OBLIGATION" shall mean as to any Person, any provision of
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"DEFAULT" shall mean any of the events specified in Section 7 hereof,
whether or not any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.
"EBIT" shall mean for any rolling 12 month period with respect to
Financial, the net income (or deficit) after all charges and reserves
(excluding, however, extraordinary items of gain or loss), but before deduction
of (a) interest expense deducted in computation of net income, and (b) income
taxes, all as determined in accordance with GAAP.
"ELIGIBLE MORTGAGE LOAN" shall mean at any date an original (and not a
rewritten or renewed) Mortgage Loan with respect to which each of the following
statements is accurate and complete (and the Borrowers by including such
Mortgage Loan in any computation of the Borrowing Base shall be deemed to so
represent to the Bank at and as of the date of such computation):
i. Such Mortgage Loan is evidenced by a promissory note from the
Obligor and is secured by a first Mortgage on real property consisting of
a completed or substantially completed single family residence which is
not used for commercial purposes (use by M/I Homes of any single family
residence as a model home shall not be treated as use for commercial
purposes) and which is not a construction loan, or is a Mortgage Loan
with respect to which all of the foregoing statements are true except
that such Mortgage Loan is a Second Mortgage Loan;
ii. Such Mortgage Loan was made by Financial or by an Approved
Originator and purchased by Financial to enable a natural person or
persons either to purchase a home from M/I Homes or another Person that
is substantially completed or to re-finance an existing mortgage loan;
PROVIDED THAT (A) the aggregate amount of Eligible Mortgage Loans
consisting of loans made by Financial for the purchase of homes from any
Person other than
3
4
M/I Homes does not exceed the Other Mortgage Sublimit, (B) the aggregate
amount of Eligible Mortgage Loans used to re-finance existing mortgage
loans does not exceed the ReFi Sublimit; (C) the aggregate amount of
Eligible Mortgage Loans that are CD Enhanced Loans does not exceed the CD
Enhanced Sublimit and (iv) the aggregate amount of Eligible Mortgage
Loans that are Second Mortgage Loans does not exceed the Second Mortgage
Sublimit;
iii. No more than sixty (60) days have elapsed since the date on
which such Mortgage Loan was originated;
iv. Such Mortgage Loan is subject to a Purchase Commitment which
is in full force and effect;
v. Such Mortgage Loan conforms to Fannie Mae, FHA, FHLMC, GNMA or
VA guidelines or conforms to the guidelines of the secondary market
lender which has provided the Purchase Commitment to which such Eligible
Mortgage Loan is subject; provided that the aggregate amount of Eligible
Mortgage Loans which have a Risk Rating of less than A does not exceed
the Subprime Sublimit;
vi. Such Mortgage Loan is a binding and valid obligation of the
Obligor thereon, in full force and effect and enforceable in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar terms affecting creditor's
rights in general and by general principles of equity;
vii. Such Mortgage Loan is free of any default of any party
thereto (including Financial), counterclaims, offsets and defenses,
including the defense of usury, and from any rescission, cancellation or
avoidance, and all right thereof, whether by operation of law or
otherwise;
viii. Such Mortgage Loan is in all respects in accordance with all
Requirements of Law applicable thereto, including, without limitation,
the federal Consumer Credit Protection Act and the regulations
promulgated thereunder and all applicable usury laws and restrictions,
and all notices, disclosures and other statements or information required
by law or regulation to be given, and any other act required by law or
regulation to be performed, in connection with such Mortgage Loan have
been given and performed as required;
ix. All advance payments and other deposits on such Mortgage Loan
have been paid in cash, and no part of said sums has been loaned,
directly or indirectly, by Financial to the Obligor, and, other than as
disclosed to the Bank in writing, there have been no prepayments;
x. Such Mortgage Loan is free and clear of all Liens other than
Liens in favor of the Bank;
4
5
xi. The property covered by such Mortgage Loan is insured against
loss or damage by fire and all other hazards normally included within
standard extended coverage in accordance with the provisions of such
Mortgage Loan with Financial named as a loss payee thereon.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"EUROCURRENCY RESERVE REQUIREMENTS" shall mean, for any day as applied to
a Eurodollar Rate Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such day
(including, without limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board of Governors of the Federal Reserve
System or other Governmental Authority having jurisdiction with respect thereto)
dealing with reserve requirements prescribed for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the Board)
maintained by a member bank of the Federal Reserve System.
"EURODOLLAR BASE RATE" shall mean with respect to each day during each
Interest Period, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on the Bloomberg Eurorate (or, if not available,
any other nationally recognized trading screen reporting on- line trading in
London interbank offered rates) at 10:00 a.m. (Dallas, Texas time) as the London
interbank offered rate for deposits in dollars on the first day of such Interest
Period for a period of one month.
"EURODOLLAR RATE" shall mean with respect to each day during each
Interest Period pertaining to a Eurodollar Rate Loan, a rate per annum
determined for such day in accordance with the following formula (rounded upward
to the nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"EURODOLLAR RATE LOANS" shall mean Loans the rate of interest applicable
to which is the Eurodollar Rate.
"EVENT OF DEFAULT" shall mean any of the events specified in Section 7
hereof, provided that any requirement for the giving of notice, the lapse of
time, or both, has been satisfied.
"FANNIE MAE" shall mean the Federal National Mortgage Association, or any
successor thereto.
"FHA" means the Federal Housing Authority, or any successor thereto.
"FHLMC" means the Federal Home Loan Mortgage Corporation or any successor
thereto.
5
6
"GAAP" shall mean generally accepted accounting principles in the United
States of America as in effect at the time any determination is made or
financial statement is required hereunder as promulgated by the American
Institute of Certified Public Accountants, the Accounting Principles Board, the
Financial Accounting Standards Board or any other body existing from time to
time which is authorized to establish or interpret such principles, applied on a
consistent basis throughout any applicable period, subject to any change
required by a change in GAAP; provided, however, that if any change in generally
accepted accounting principles from those applied in preparing the financial
statements referred to in subsection 3.1 hereof affects the calculation of any
financial covenant contained herein, the Borrowers and the Bank hereby agree to
amend the Agreement to the effect that each such financial covenant is not more
or less restrictive than such covenant as in effect on the date hereof using
generally accepted accounting principles consistent with those reflected in such
financial statements.
"GNMA" means the Government National Mortgage Association or any
successor thereto.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"INDEBTEDNESS" shall mean, as to any Person at a particular time, (a)
indebtedness for borrowed money or for the deferred purchase price of property
or services (including without limitation any such indebtedness which is
non-recourse to the credit of such Person but is secured by assets of such
Person) other than current (due and payable within 12 months or less), unsecured
obligations for operating expense items incurred in the ordinary course of
business, (b) any other indebtedness evidenced by promissory notes or other debt
instruments, (c) obligations under material leases which shall have been or
should be, in accordance with GAAP, recorded as capitalized leases, (d)
indebtedness arising under acceptance facilities, (e) indebtedness arising under
unpaid reimbursement obligations in respect of all drafts actually drawn under
letters of credit issued for the account of such Person, (f) indebtedness
arising under unpaid reimbursement obligations in respect of all payments
actually made under surety bonds (including payments actually made under
construction bonds) and (g) the incurrence of withdrawal liability under Title
IV of ERISA by such Person or a Commonly Controlled Entity to a Multiemployer
Plan.
"INTEREST EXPENSE" shall mean for any rolling 12 month period, with
respect to Financial, the total amount of all charges for the use of funds,
whether captioned interest or otherwise, in a statement of income or operations
of Financial for such rolling 12 month period prepared in accordance with GAAP.
"INTEREST PERIOD" shall mean with respect to any Eurodollar Rate Loan,
the period commencing on the Borrowing Date, the conversion date or the
continuation date with respect to such Eurodollar Rate Loan and ending no less
than five nor more than twenty days thereafter, as selected by the Borrowers.
6
7
"LIABILITIES" shall mean at any date the total of all amounts which would
be properly classified as liabilities in a balance sheet of Financial at such
date prepared in accordance with GAAP, consistently applied, including without
limitation deferred income taxes, deferred compensation of any type and capital
lease obligations, if any.
"LIEN" shall mean any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, charge, encumbrance, lien (statutory or other),
or preference, priority or other security agreement or similar preferential
arrangement of any kind or nature whatsoever (including without limitation any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the
authorized filing by or against a Person of any financing statement as debtor
under the Uniform Commercial Code or comparable law of any jurisdiction). A
restriction, covenant, easement, right of way, or similar encumbrance affecting
any interest in real property owned by either of the Borrowers and which does
not secure an obligation to pay money is not a Lien.
"LOANS" shall mean the revolving credit loans made pursuant to subsection
2.1 hereof.
"MORTGAGE" means a mortgage or deed of trust, on standard forms in form
and substance satisfactory to Lender, securing a mortgage note and granting a
perfected, first priority lien on residential real property consisting of land
and a single-family dwelling thereon which is completed and ready for occupancy.
"MORTGAGE LOAN" means a mortgage loan which is evidenced by a Mortgage
Note and secured by a Mortgage, together with the rights and obligations of a
holder thereof and payments thereon and proceeds therefrom.
"MORTGAGE LOAN REPURCHASE OBLIGATIONS" shall mean those obligations (as
more particularly described in this definition) of Financial under a Purchase
Commitment to repurchase (a) Eligible Mortgage Loans, and (b) first mortgage
loans that are not Eligible Mortgage Loans solely because either (i) the
mortgagor did not purchase from M/I Homes the home subject to such mortgage
loan, or (ii) such mortgage loan is more than 60 days old, as determined by the
date of the note which evidences such loan, at the time of the purchase of the
mortgage loan by a secondary market lender pursuant to a Purchase Commitment;
provided, the obligations to repurchase the mortgage loans described in clauses
(a) through (b) of this definition shall exist only if (A) such mortgage loans
do not meet for any reason, the investor guidelines regarding loan origination,
loan processing or loan closing and regarding underwriting criteria for such
Purchase Commitment, or defects are noted in origination, processing or closing
of Mortgage Loans by investor, (B) Financial or its employees engage in any
fraudulent conduct or misrepresentation, (C) the mortgagor fails to make timely
payment of any of the first, second, third or fourth installments due under such
mortgage loan, and such delinquency remains uncured for a period of more than 30
days or results in a foreclosure action, (D) the mortgagor fails to make timely
payment of two or more monthly installments within six months from the date such
mortgage loan is purchased by such secondary market lender, (E) the mortgagor
engages in fraudulent conduct or misrepresentation, or (F) with respect to
mortgage loans
7
8
issued pursuant to the North Carolina Housing Finance Authority bond programs,
the mortgagor fails to make timely payment of the first installment due under
such mortgage loans.
"OBLIGOR" means the Person or Persons obligated to pay the Indebtedness
which is the subject of a Mortgage Loan.
"OTHER MORTGAGE SUBLIMIT" shall mean the amount of $5,000,000.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"PERSON" shall mean an individual, a partnership (including without
limitation a joint venture), a limited liability company (including without
limitation a joint venture), a corporation (including without limitation a joint
venture), a business trust, a joint stock company, a trust, an unincorporated
association, a joint venture, a Governmental Authority or any other entity of
whatever nature (including without limitation a joint venture).
"PLAN" shall mean any pension plan which is covered by Title IV of ERISA
and in respect of which the Borrowers or a Commonly Controlled Entity is an
"employer" as defined in Section 3(5) of ERISA or an affiliate of an employer as
defined in Section 407(d)(7) of ERISA.
"PRIME RATE" shall mean the rate of interest per annum announced by the
Bank from time to time as its prime rate, with any change thereto effective as
of the opening of business on the day of the change; the Prime Rate is not
necessarily the best interest rate offered by the Bank.
"PRIME RATE LOANS" shall mean loans the rate of interest applicable to
which is based on the Prime Rate.
"PURCHASE COMMITMENT" shall mean a commitment from a secondary market
lender acceptable to the Bank (the names and addresses of secondary market
lenders acceptable to the Bank as of the effective date of this Agreement are
listed in Schedule 2 hereto and Financial shall update the list of secondary
market lenders quarterly as set forth in subsection 5.11 hereof), pursuant to an
agreement with Financial, either with respect to a particular mortgage loan or
with respect to mortgage loans meeting specified criteria, to purchase such
mortgage loan or loans without recourse (except for Mortgage Loan Repurchase
Obligations) for an amount not less than the difference of (a) the face amount
of the note evidencing such mortgage loan(s), minus (b) the sum of (i) the
points agreed upon between Financial and such secondary market lender, and (ii)
the amount of funds (for example, without limitation, escrow funds and
origination fees), other than points, received by Financial at the loan closing
from the mortgagor.
"REFI SUBLIMIT" shall mean the amount of $5,000,000.
"REPORTABLE EVENT" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
8
9
"REQUIREMENT OF LAW" shall mean as to any Person, the Certificate (or
Articles) of Incorporation, By-Laws (or Code of Regulations), Close Corporation
Agreement (where applicable) or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation, or determination,
including without limitation all environmental laws, rules, regulations and
determinations, of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"RESPONSIBLE OFFICER" shall mean as to either of the Borrowers, the
Chairman of the Board, Chief Executive Officer, President, a Senior Executive
Vice President or a Senior Vice President of such Borrower and, with respect to
financial matters, the chief financial officer, treasurer or controller of such
Borrower, in each case acting in his or her capacity as such.
"RISK RATING" means the risk rating of a mortgage loan determined by the
underwriting guidelines of Financial or other applicable standards of a
secondary market lender to which such mortgage loan is to be sold by Borrowers
under a Purchase Commitment, provided that such underwriting guidelines or other
applicable standards comply with industry standards in the sole and commercially
reasonable judgment of the Bank.
"SECOND MORTGAGE LOAN" shall mean a Mortgage Loan secured by a Mortgage
(which creates a second priority lien and not a first priority lien) made in the
ordinary course of Financial's business to a natural person or persons for the
purchase of residential real property made in connection with a specific
financing program to the natural person or persons who have a first Mortgage
Loan from Financial with respect to the same real property.
"SECOND MORTGAGE SUBLIMIT" shall mean the amount of $4,000,000.
"SINGLE EMPLOYER PLAN" shall mean any Plan which is not a Multiemployer
Plan (as such term is defined in ERISA).
"SUBORDINATED LOAN AGREEMENT" shall mean that certain Credit Agreement
dated August 29, 1997 between M/I Homes, Fleet National Bank, as Agent, and
certain other financial institutions, and all amendments and restatements
thereto and any agreement under which the Indebtedness arising thereunder is
refinanced or replaced.
"SUBPRIME SUBLIMIT" shall mean the amount of $5,000,000.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization in which such Person holds an ownership interest,
directly or indirectly (through one or more intermediaries).
"TANGIBLE NET WORTH" shall mean at any date, with respect to Financial,
the total of the capital stock (net of treasury stock, if any), paid in surplus,
general contingency reserves and retained earnings (deficit), in each case
determined in accordance with GAAP, minus the following items
9
10
(without duplication of deductions), if any, appearing on Financial's balance
sheet prepared in accordance with GAAP:
i. The book amount of all deferred charges (including specifically
deferred income taxes);
ii. The book amount of all assets which would be treated as
intangibles under GAAP; and
iii. The amount of any write-up in the book value of any asset
resulting from a revaluation thereof from the book value entered upon
acquisition.
"VA" means the Veterans Administration, or any successor thereto.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in the Agreement shall have the defined
meanings when used in the Note or any certificate or other document made
or delivered pursuant hereto or thereto unless otherwise defined therein.
(b) As used herein, in the Note or in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms
relating to the Borrowers not defined in subsection 1.1, and accounting
terms partly defined in subsection 1.1 to the extent not defined, shall
have the respective meanings given to them under GAAP.
(c) The definition of any document or instrument includes all
schedules, attachments and exhibits thereto and all renewals, extensions,
supplements and amendments thereof; terms otherwise defined herein have
the same meanings throughout the Agreement.
(d) "Hereunder," "herein," "hereto," "the Agreement" and words of
similar import refer to this entire document; "including" is used by way
of illustration and not by way of limitation, unless the context clearly
indicates the contrary; and the singular includes the plural and
conversely.
SECTION 2. AMOUNT AND TERMS OF COMMITMENT
------------------------------
2.1 COMMITMENT. Subject to the terms and conditions of the Agreement, the
Bank agrees to make revolving credit loans (the "Loans") to the Borrowers from
time to time during the Commitment Period in an aggregate principal amount at
any one time outstanding not to exceed the lesser of (a) Thirty Million and
00/100 Dollars ($30,000,000), or (b) ninety-five percent (95%) of the aggregate
face amount of all Eligible Mortgage Loans in existence at such time. During the
Commitment Period and as long as no Event of Default exists, the Borrowers may
use the
10
11
Commitment by borrowing, prepaying the Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof.
Subject to the terms and conditions of this Agreement (including the
limitations on the availability of Eurodollar Rate Loans and including the
termination, of the Commitment as set forth in Section 7 hereof), the Loans may
from time to time be (i) Eurodollar Rate Loans, (ii) Prime Rate Loans, or (iii)
a combination thereof, as determined by the Borrowers, provided that no Loan
shall be made as a Eurodollar Rate Loan after the day that is five days prior to
the last day of the Commitment Period.
2.2 NOTE. The Loans made by the Bank pursuant hereto shall be evidenced
by a promissory note of the Borrowers, substantially in the form of Exhibit A
attached hereto and made a part hereof (the "Note"), payable to the order of the
Bank and evidencing the obligation of the Borrowers to pay the aggregate unpaid
principal amount of the Loans made by the Bank, with interest thereon at a rate
per annum equal to (i) in the case of Prime Rate Loans, the Prime Rate in effect
from time to time and (ii) in the case of Eurodollar Rate Loans if permitted
hereunder at such time, the Eurodollar Rate determined for each such loan plus
one and six tenths percent (1.60%), subject with respect to each of the
aforesaid interest rates to the default interest rate provisions of subsection
2.6(c) hereof. Interest shall be payable in arrears and shall be due on the
fifteenth day of each month for the period ending on the last day of the
immediately preceding calendar month, beginning with June 15, 2001, and
continuing on the 15(th) day of each month thereafter, and on the last day of
the Commitment Period. If not sooner paid, the entire principal amount of the
Loans outstanding and any remaining unpaid interest on the Loans shall be due
and payable on, the last day of the Commitment Period. The Bank is hereby
authorized to record electronically or otherwise the date and amount of each
Loan disbursement made by the Bank and the date and amount of each payment or
prepayment of principal thereof, and any such recordation shall constitute
conclusive evidence, absent manifest error, of the accuracy of the information
so recorded; provided, however, the failure of the Bank to make any such
recordation(s) shall not affect the obligation of the Borrowers to repay
outstanding principal, interest, or any other amount due hereunder or under the
Note in accordance with the terms hereof and thereof. The Note shall (a) be
dated as of the date hereof, (b) be stated to mature on the last day of the
Commitment Period, and (c) bear interest from and including the date thereof on
the unpaid principal amount thereof from time to time outstanding at a rate per
annum equal to (i) in the case of Prime Rate Loans, the Prime Rate in effect
from time to time and (ii) in the case of Eurodollar Rate Loans, the Eurodollar
Rate determined for each such loan plus one and six-tenths percent (1.60%)
subject with respect to each of the aforesaid interest rates to the default
interest rate provisions of subsection 2.6(c) hereof.
2.3 PROCEDURE FOR BORROWING. The Borrowers may borrow under the
Commitment (subject to the limitations on the availability of Eurodollar Rate
Loans) during the Commitment Period, provided the Borrowers shall give the Bank
irrevocable telephonic or written notice (which notice must be received by the
Bank prior to 3:00 P.M., central time for funding to be made that day) on or
before the requested Borrowing Date, specifying (i) the date of the requested
borrowing (which shall be a Business Day), (ii) the amount of the requested
borrowing, (iii) whether the borrowing is to be of a Eurodollar Rate Loan, a
Prime Rate Loan or a combination thereof and (iv) if the
11
12
borrowing is to be entirely or partly of a Eurodollar Rate Loan, the amount of
the Prime Rate Loan, if any, and the amount of the Eurodollar Rate Loan and the
length of the initial Interest Period therefor. Each borrowing pursuant to the
Commitment shall be in the principal amount (a) in the case of Prime Rate Loans,
of $50,000 or any larger amount, and (b) in the case of Eurodollar Rate Loans,
of $500,000 or any larger amount, provided, however, with respect to Prime Rate
Loans and Eurodollar Rate Loans that no borrowing shall exceed the then undrawn
amount of the Commitment. No more than five (5) Eurodollar Loans shall be
outstanding at any time. On the Borrowing Date, the Bank shall make available to
the Borrowers the funds requested, subject to the satisfaction of the terms and
conditions of the Agreement, by crediting the account of Financial on the books
of the Bank at its 8333 Douglas Avenue, Dallas, Texas 75225 office or other
national or state bank or trust company which is organized under the laws of the
United States of America or any state therein, which has capital, surplus and
undivided profits of at least $500,000,000, and whose certificates of deposit
have at least the third highest credit rating given by Moody's Investors
Service, Inc. as directed by Financial with the funds requested. If for any
reason the Bank is unable to make funds available to the Borrowers as aforesaid,
the Bank shall notify the Borrowers immediately. The provisions for conversion
and continuation of the Loans are set forth in subsection 2.9.
2.4 COMMITMENT FEE. The Borrowers agree to pay to the Bank a commitment
fee for the Commitment Period, computed at the rate of one-quarter of one
percent (1/4%) per annum. on the average daily unused amount of the Commitment
of the Bank during the Commitment Period, payable quarterly in arrears and due
on the fifteenth day of each July, October, January and April for the
three-month period ending on the last day of the immediately preceding calendar
month, and on the last day of the Commitment Period, commencing on the first of
such dates to occur after the date hereof.
2.5 TERMINATION OR REDUCTION OF COMMITMENT. (a) The Borrowers shall have
the right, upon not less than five Business Days' written notice to the Bank, to
terminate the Commitment or, from time to time (and so long as no Default
exists), reduce the amount of the Commitment, provided that (i) any such
reduction shall be accompanied by prepayment of the Loans made hereunder,
together with accrued interest on the amount so prepaid to the date of such
prepayment, to the extent, if any, that the amount of such Loans then
outstanding exceeds the amount of the Commitment as then reduced, and (ii) any
such termination of the Commitment shall be accompanied by prepayment in full of
the Loans then outstanding hereunder, together with accrued interest thereon to
the date of such prepayment, the payment of any unpaid commitment fee then
accrued hereunder and, if a Loan is a Eurodollar Rate Loan that is prepaid other
than at the end of the Interest Period applicable thereto, by any amounts
payable pursuant to Subsection 2.13, Indemnity. Any such reduction shall be in
the amount of $1,000,000 or a whole multiple of $100,000 in excess thereof and
shall reduce permanently the amount of the Commitment then in effect.
2.6 COMPUTATION OF INTEREST AND FEES; DEFAULT INTEREST.
(a) Commitment fees on the Commitment and interest in respect of
the Loans shall be calculated on the basis of a 360 day year for the
actual days elapsed. Any change in the interest rate on the Note
resulting from a change in the Prime Rate or the Eurodollar Reserve
12
13
Requirements shall become effective as of the opening of business on the
day on which such change in the Prime Rate or the Eurocurrency Reserve
Requirements shall become effective, without notice to the Borrowers;
however, the Bank shall give the Borrowers prompt notice of all changes
in the Prime Rate or the Eurodollar Reserve Requirements.
(b) Each determination of an interest rate by the Bank pursuant to
the Agreement shall be conclusive and binding on the Borrowers in the
absence of manifest error.
(c) If an Event of Default has occurred and is continuing, the
entire unpaid balance of the Loans shall bear interest at a rate per
annum which is the sum of (i) three percent (3.0%), and (ii) the rate
which would otherwise be applicable thereto, from the date of such non-
payment until paid in full (before, as well as after, judgment).
2.7 EXTENSION OF COMMITMENT PERIOD. At any time during the sixty days
immediately preceding the last day of the Commitment Period, the Borrowers may
request in writing that the Bank extend the Commitment Period for a period not
to exceed 364 days and the Bank in its sole discretion may elect to extend the
Commitment Period for such period by written notice from the Bank to the
Borrowers, which written notice shall include the number of days by which the
Commitment Period shall be extended. Each notice granting an extension shall be
attached to the Note and shall constitute an amendment extending the Commitment
Period and the maturity date of the Note by the number of days specified in the
notice. If the Bank does not elect to extend the Commitment Period, the Bank
shall not be required to give notice to the Borrowers of such election not to
extend. If the Borrowers have not received notice from the Bank as stated herein
that the Bank has elected to extend the Commitment Period by one year, the
Commitment Period shall be deemed NOT to have been extended.
2.8 USE OF PROCEEDS. The proceeds of the initial Loan made hereunder
shall be used by the Borrowers to pay in full the obligations outstanding under
the 1998 Credit Agreement, if any. Upon the Borrowers' irrevocable payment in
full of the obligations outstanding under the 1998 Credit Agreement, the
Borrowers shall cancel the 1998 Credit Agreement and the promissory note related
to the 1998 Credit Agreement. The remaining proceeds of the initial Loan made
hereunder and the proceeds of subsequent Loans made hereunder shall be used by
the Borrowers for lawful purposes in Financial's business.
2.9 CONVERSION AND CONTINUATION OPTIONS.
(a) The Borrowers may elect from time to time to convert
outstanding Loans from Eurodollar Rate Loans to Prime Rate Loans by
giving the Bank at least two Business Days' prior irrevocable notice of
such election, provided that any such conversion of Eurodollar Rate Loans
may only be made on the last day of an Interest Period with respect
thereto. Subject to the limitations on the availability of Eurodollar
Rate Loans, the Borrowers may elect from time to time to convert
outstanding Loans from Prime Rate Loans to a Eurodollar Rate Loan by
giving the Bank telephonic or written notice (the "NOTICE OF CONVERSION")
at least two Business Days prior to the requested date for the
conversion, which Notice of
13
14
Conversion shall specify (i) the date for the conversion, (ii) the
aggregate amount of Prime Rate Loans to be converted and (iii) the length
of the initial Interest Period for such Eurodollar Rate Loan. Each
conversion from Prime Rate Loans to a Eurodollar Rate Loan shall be in
the principal amount of $500,000 or any larger amount. All or any part of
outstanding Eurodollar Rate Loans and Prime Rate Loans may be converted
as provided herein, provided that (i) (unless the Bank otherwise
consents) no Prime Rate Loan may be converted into a Eurodollar Rate Loan
when any Default or Event of Default has occurred and is continuing and
(ii) no Prime Rate Loan may be converted into a Eurodollar Rate Loan
after the date that is five days prior to the last day of the Commitment
Period.
(b) Subject to the limitations on the availability of Eurodollar
Rate Loans, any Eurodollar Rate Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by
the Borrowers giving the Bank telephonic or written notice, at least two
Business Days prior to the last day of the then current Interest Period,
and which notice shall specify (i) the amount of the Eurodollar Rate
Loans to be continued as such and (ii) the length of the Interest Period
for such Eurodollar Rate Loans. All or any part of outstanding Eurodollar
Rate Loans may be continued as provided herein, provided that (i) (unless
the Bank otherwise consents) no Eurodollar Rate Loan may be continued
when any Default or Event of Default has occurred and is continuing and
(ii) no Eurodollar Rate Loan may be continued as a Eurodollar Rate Loan
after the date that is five days prior to the last day of the Commitment
Period.
2.10 INABILITY TO DETERMINE INTEREST RATE. If by reason of circumstances
affecting the relevant market adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate, any Eurodollar Rate Loans requested to be made
shall be made as Prime Rate Loans.
2.11 ILLEGALITY; IMPRACTICABILITY. Notwithstanding any other provision
herein, if the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful, or if compliance
by the Bank with any request or directive (whether or not having the force of
law) from any Governmental Authority occurring after the date hereof shall make
it impracticable for the Bank to make or maintain Eurodollar Rate Loans as
contemplated by this Agreement, the commitment of the Bank hereunder to make
Eurodollar Rate Loans shall forthwith be canceled and, until such time as it
shall no longer be unlawful for the Bank to make or maintain Eurodollar Rate
Loans, the Bank shall then have a commitment only to make a Prime Rate Loan when
a Eurodollar Rate Loan is requested and the Bank's Loans then outstanding as
Eurodollar Rate Loans, if any, shall be converted automatically to Prime Rate
Loans as required by law. If any such conversion of a Eurodollar Rate Loan
occurs on a day which is not the last day of the then current Interest Period
with respect thereto, the Borrowers shall pay to such Bank such amounts, if any,
as may be required pursuant to subsection 2.13, Indemnity.
2.12 REQUIREMENTS OF LAW. If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof applicable to
the Bank or compliance by the Bank with any request or directive (whether or not
having the force of law) from any Governmental Authority, in each case made
subsequent to the date hereof:
14
15
(a) shall (i) subject the Bank to any tax of any kind whatsoever
with respect to any Eurodollar Rate Loans made by it or its obligation to
make Eurodollar Rate Loans or change the basis of taxation of payments to
the Bank in respect thereof, (ii) change any franchise tax or any tax
measured by or imposed upon the overall net income of the Bank or (iii)
change any branch tax or any tax measured by or imposed upon overall
capital or net worth of the Bank;
(b) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans
or other extensions of credit by, or any other acquisition of funds by,
the Bank which is not otherwise included in the determination of the
Eurodollar Rate hereunder; or
(c) shall impose on the Bank any other condition;
and the result of any of the foregoing is to increase the cost to the Bank, by
an amount which the Bank deems to be material, of making Eurodollar Rate Loans
or to reduce any amount receivable hereunder in respect thereof, then the
Borrowers shall promptly pay the Bank, upon its demand, any additional amounts
necessary to compensate the Bank for such increased cost or reduced amount
receivable; in addition, in any such case, the Borrowers may elect to convert
the Eurodollar Rate Loans made by the Bank hereunder to Prime Rate Loans in
which case the Borrowers shall promptly pay to the Bank, upon demand, without
duplication, such amounts, if any, as may be required pursuant to subsection
2.13.
2.13 INDEMNITY. The Borrowers agree to indemnify the Bank and to hold the
Bank harmless from any loss or expense which the Bank may sustain or incur
(other than through the Bank's gross negligence or willful misconduct) as a
consequence of the Borrowers' making a prepayment of a Eurodollar Rate Loan on a
day which is not the last day of an Interest Period with respect thereto
(whether by acceleration, demand or otherwise). Such indemnification may
include, without limitation, an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid for the
period from the date of such prepayment to the last day of the applicable
Interest Period in each case at the applicable rate of interest for such
Eurodollar Rate Loans provided for herein over (ii) the amount of interest (as
reasonably determined by the Bank) which would have accrued to the Bank on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank eurodollar market. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
15
16
SECTION 3. REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Bank to enter into the Agreement and to make the
Loans herein provided for, the Borrowers hereby covenant, represent and warrant,
jointly and severally, to the Bank that on the date hereof:
3.1 FINANCIAL STATEMENTS. Financial has heretofore furnished to the Bank
the balance sheet of Financial as of December 31, 2000, and the related audited
statements of income and retained earnings and of changes in cash flows for the
fiscal year of Financial then ended, certified by Deloitte & Touche, independent
public accountants. Such financial statement fairly presents the financial
condition of Financial as of the date thereof and the results of the operations
of Financial for the period then ended, and from December 31, 2000 to the date
hereof, there has been no material adverse change in such condition.
3.2 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the Borrowers (a)
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (b) has the corporate power and authority to
conduct the business in which it is currently engaged, (c) is qualified as a
foreign corporation under the laws of any jurisdiction where the failure to so
qualify would have a material adverse effect on the business of such Borrower,
and (d) is in compliance with all Requirements of Law, except to the extent that
the failure to comply therewith would not, in the aggregate, have a material
adverse effect on the business, operations, property or financial or other
condition of such Borrower and would not materially adversely affect the ability
of such Borrower to perform its obligations under the Agreement and the Note.
3.3 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Each of the
Borrowers has the corporate power and authority to make, deliver and perform the
Agreement and the Note and to borrow hereunder and has taken all corporate
action necessary to be taken by it to authorize the borrowings on the terms and
conditions of the Agreement and the Note and to authorize the execution,
delivery and performance of the Agreement and the Note. No consent, waiver or
authorization of, or filing with, any Person (including without limitation any
Governmental Authority), is required to be made or obtained by either of the
Borrowers in connection with the borrowings hereunder or the execution,
delivery, performance, validity or enforceability of the Agreement and the Note.
The Agreement has been, and the Note will be, duly executed and delivered on
behalf of each of the Borrowers and the Agreement constitutes, and the Note when
executed and delivered hereunder will constitute, a legal, valid and binding
obligation of each of the Borrowers enforceable against each of the Borrowers in
accordance with its terms, subject to the effect, if any, of bankruptcy,
insolvency, reorganization, arrangement or other similar laws relating to or
affecting the rights of creditors generally and the limitations, if any, imposed
by the general principles of equity and public policy.
3.4 NO LEGAL BAR. The execution, delivery and performance of the
Agreement and the Note, the borrowings hereunder and the use of the proceeds
thereof do not and will not violate any Requirement of Law or Contractual
Obligation of either of the Borrowers and do not and will not result in, or
require, the creation or imposition of any Lien on any of the properties of
either of the
16
17
Borrowers or their respective revenues pursuant to any Requirement of Law or
Contractual Obligation.
3.5 NO MATERIAL LITIGATION. No litigation, investigation or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the best
knowledge of the Borrowers, threatened by or against either of the Borrowers or
against any of their respective properties or revenues (a) with respect to the
Agreement or the Note or any of the transactions contemplated hereby or thereby,
or (b) which could reasonably be expected to have a material adverse effect on
the business, operations, property or financial or other condition of either of
the Borrowers.
3.6 REGULATION U. Neither of the Borrowers is engaged in, nor will either
of them engage in, principally or as one of its important activities, the
business of extending credit for the purpose of "purchasing" or "carrying" any
"margin stock" within the respective meanings of each of the quoted terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds of any Loans
hereunder will be used for "purchasing" or "carrying" "margin stock" as so
defined or for any purpose which violates, or which would be inconsistent with,
the provisions of the Regulations of such Board of Governors. If requested by
the Bank, the Borrowers will furnish to the Bank a statement in conformity with
the requirements of Federal Reserve Form U-1 referred to in said Regulation U to
the foregoing effect.
3.7 INVESTMENT COMPANY ACT. Neither of the Borrowers is an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
3.8 DISCLOSURE. No representations or warranties made by either of the
Borrowers in the Agreement or in any other document furnished from time to time
in connection herewith (as such other documents may be supplemented from time to
time) contains or will contain any untrue statement of a material fact or, omits
or will omit to state any material fact necessary to make the statements herein
or therein not misleading.
3.9 SUBSIDIARY INFORMATION. Financial has no Subsidiaries.
SECTION 4. CONDITIONS PRECEDENT
--------------------
4.1 CONDITIONS TO INITIAL LOAN. The obligation of the Bank to make its
initial disbursement under the Loans on the first Borrowing Date is subject to
the satisfaction of the following conditions precedent on or prior to such date:
(a) NOTE. The Bank shall have received the Note, conforming to the
requirements hereof and duly executed and delivered by a duly authorized
officer of each of the Borrowers.
(b) LEGAL OPINIONS OF COUNSEL TO THE BORROWERS. The Bank shall
have received an executed legal opinion of Paul S. Coppel General Counsel
of M/I Schottenstein Homes, Inc.,
17
18
dated the date hereof and addressed to the Bank, substantially complying
with the requirements of Exhibit B hereto, and otherwise in form and
substance satisfactory to the Bank and covering such other matters
incident to the transactions contemplated hereby as the Bank and its
counsel may reasonably require.
(c) CORPORATE PROCEEDINGS OF THE BORROWERS. The Bank shall have
received a copy of the resolutions (in form and substance satisfactory to
the Bank) of the sole shareholder (M/I Homes) of Financial and of the
Executive Committee of the Board of Directors of M/I Homes authorizing
(i) the execution, delivery and performance of the Agreement, (ii) the
consummation of the transactions contemplated hereby, (iii) the
borrowings herein provided for, and (iv) the execution, delivery and
performance of the Note and the other documents provided for in the
Agreement, all certified by the Secretary or the Assistant Secretary of
each of the Borrowers as of the date hereof. Such certificate shall state
that the resolutions set forth therein have not been amended, modified,
revoked or rescinded as of the date hereof.
(d) INCUMBENCY CERTIFICATE OF THE BORROWERS. The Bank shall have
received a certificate of the Secretary or an Assistant Secretary of each
of the Borrowers, dated the date hereof, as to the incumbency and
signature of the officers of each of the Borrowers executing the
Agreement, the Note and any certificate or other documents to be
delivered pursuant hereto or thereto.
(e) NO PROCEEDINGS OR LITIGATION; NO INJUNCTIVE RELIEF. No action,
suit or proceeding before any arbitrator or any Governmental Authority
shall have been commenced, no investigation by any Governmental Authority
shall have been commenced and no action, suit, proceeding or
investigation by any Governmental Authority shall have been threatened,
against either of the Borrowers or any of the officers or directors of
either of the Borrowers seeking to restrain, prevent or change the
transactions contemplated by the Agreement in whole or in part or
questioning the validity or legality of the transactions contemplated by
the Agreement or seeking damages in connection with such transactions.
(f) CONSENTS, LICENSES, APPROVALS, ETC. The Bank shall have
received true copies (certified to be such by the Borrowers or other
appropriate party) of all consents, licenses and approvals required in
accordance with applicable law in connection with the execution,
delivery, performance, validity and enforceability of the Agreement and
the Note, if the failure to obtain such consents, licenses or approvals,
individually or in the aggregate, would have a material adverse effect on
either of the Borrowers or would adversely affect the validity or
enforceability of any of the foregoing documents, and approvals obtained
shall be in full force and effect and be satisfactory in form and
substance to the Bank.
(g) COMPLIANCE WITH LAW. Neither of the Borrowers shall be in
violation in any material respect of any applicable statute, regulation
or ordinance, including without limitation statutes, regulations or
ordinances relating to environmental matters, of any governmental entity,
or any agency thereof, in any respect materially and adversely affecting
the business, property, assets, operations or condition, financial or
otherwise, of either of the Borrowers.
18
19
(h) NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default
shall have occurred and be continuing hereunder prior to or after giving
effect to the making of the initial disbursement of the Loans hereunder.
(i) NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the financial condition or business or operations of
Financial from the date of Financial's December 31, 2000 audited
financial statements to the first Borrowing Date.
(j) HEDGING POLICY. The Bank shall have received Financial's
policy and procedures with respect to hedging transactions, a copy of
which shall be attached hereto as Exhibit D (the "Hedging Policy"),
certified by a Responsible Officer.
(k) ADDITIONAL MATTERS. All corporate and other proceedings and
all other documents and legal matters in connection with the transactions
contemplated by the Agreement and the Note shall be satisfactory in form
and substance to the Bank and its counsel.
(l) FEE LETTER. The Bank shall have received a fee letter in form
and substance acceptable to the Bank executed by Borrowers.
4.2 CONDITIONS TO ALL LOANS. The obligation of the Bank to make any Loan
hereunder on any date (including without limitation the first Borrowing Date) is
subject to the satisfaction. of the following conditions precedent as of such
date:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by each of the Borrowers in the Agreement and any
representations and warranties made by each of the Borrowers which are
contained in any certificate, document or financial or other statement
furnished at any time under or in connection herewith or therewith, shall
be true and correct in all material respects on and as of the date of
such loan as if made on and as of such date unless stated to relate to a
specific earlier date.
(b) NO DEFAULT OR EVENT OF DEFAULT. No Default or Event of Default
shall have occurred and be continuing on such date or after giving effect
to the Loan to be made on such date.
Each borrowing by the Borrowers under the Agreement shall constitute a
representation and warranty by each of the Borrowers as of the date of such
borrowing that the conditions contained in the foregoing. paragraphs (a) and (b)
of this subsection 4.2 have been satisfied.
19
20
SECTION 5. AFFIRMATIVE COVENANTS
---------------------
The Borrowers hereby agree, jointly and severally, that, from the date
hereof and so long as the Commitment remains in effect, the Note remains
outstanding and unpaid or any other amount is owing to the Bank hereunder,
Financial shall (and, in the case of subsection 5.6(e)hereof, M/I Homes shall
also):
5.1 FINANCIAL STATEMENTS. Furnish to the Bank:
(a) as soon as available, but in any event within 90 days after
the end of each fiscal year of each of Financial and M/I Homes, a copy of
the audited balance sheet of Financial and M/I Homes, respectively, as at
the end of such year and the related audited statements of income and
retained earnings and cash flows for such year, together with the opinion
of independent certified public accountants of nationally recognized
standing, which opinion shall not contain a "going concern" or like
qualification or exception, or qualification arising out of the scope of
the audit or qualification which would affect the computation of
financial covenants contained herein other than a qualification for
consistency due to a change in the application of GAAP with which
Financial's or M/I Homes' independent certified public accountants
concur; and
(b) as soon as available, but in any event not later than 45 days
after the end of each monthly accounting period, the unaudited balance
sheet of each of Financial and M/I Homes as at the end of each such month
and the related unaudited statements of income and retained earnings of
each of Financial and M/I Homes for such month and the portion of the
fiscal year through such date setting forth in each case in comparative
form the figures for the previous year, certified by a Responsible
Officer of Financial or M/I Homes, as applicable, as being fairly stated
in all material respects.
All such financial statements required by this subsection 5.1 shall be complete
and correct in all material respects and prepared in reasonable detail and in
accordance with GAAP (except, in the case of the financial statements referred
to in subparagraph (b), that such financial statements need not contain
footnotes).
5.2 CERTIFICATES; OTHER INFORMATION. Furnish to the Bank:
(a) concurrently with the delivery of each financial statement
referred to in subsection 5.1(a) above and each financial statement
referred to in subsection 5.1(b) above, a summary in form and substance
satisfactory to the Bank of the hedging investments described in
subsection 6.5(vi) hereof, and a certificate of a Responsible Officer of
Financial or M/I Homes, as applicable (in the form of Exhibit C or such
other form as shall be reasonably acceptable to the Bank), stated to have
been made after due examination by such Responsible Officer (i) stating
that, to the best of such officer's knowledge, Financial or M/I Homes
during such period has observed or performed in all material respects all
of its covenants and other agreements, and satisfied every condition,
contained in this Agreement and the Note to be
20
21
observed, performed or satisfied by it, and that such officer has
obtained no knowledge of any Default or Event of Default except as
specified in such certificate, and (ii) showing in detail the
calculations supporting such statement in respect of subsections 5.7,
5.8, 5.9, 6.3 and 6.5;
(b) as soon as available, but in any event not later than 20 days
after the end of each monthly accounting period, a borrowing base
certificate in the form of Exhibit E hereto, certified by a Responsible
Officer of Financial as being accurate in all material respects;
(c) promptly upon receipt thereof, copies of all final reports
submitted to Financial by independent certified public accountants in
connection with each annual, interim or special audit of the books of
Financial made by such accountants, including without limitation any
final comment letter submitted by such accountants to management in
connection with their annual audit; and
(d) promptly, on reasonable notice to Financial, such additional
financial and other information as the Bank may from time to time
reasonably request.
5.3 MAINTENANCE OF EXISTENCE. Preserve, renew and keep in full force and
effect its corporate existence and take all reasonable action to maintain all
rights, privileges, contracts, copyrights, patents, trademarks, trade names and
franchises necessary or desirable in the normal conduct of its business, and
comply with all Contractual Obligations and Requirements of Law, except to the
extent that the failure to take such actions or comply with such Contractual
Obligations and Requirements of Law would not, in the aggregate, have a material
adverse effect on the business, operations, property or financial or other
condition of Financial.
5.4 MAINTENANCE OF PROPERTY, INSURANCE. Keep all property useful in and
necessary to its business in good working order and condition; maintain with
financially sound and reputable insurance companies insurance on all its
property in at least such amounts and against at least such risks (but including
in any event public liability, general liability and business interruption
insurance) as are usually insured against in the same general area by companies
engaged in the same or a similar business; and furnish to the Bank, upon written
request, full information as to the insurance carried.
5.5 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep proper
books of record and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities, subject in the case
of interim statements to year-end audit adjustments; and permit representatives
of the Bank to visit and inspect any of its properties, and examine and make
abstracts from any of its books and records at any reasonable time and as often
as may reasonably be requested, and to discuss the business, operations,
properties and financial and other condition of Financial with officers and
employees of Financial and, if notice thereof is given to the Borrowers prior to
the date of such discussions, with its independent certified public accountants.
The Bank shall keep confidential the information it receives pursuant to
subsection 5.2 hereof and this subsection 5.5, provided that the Bank may
disclose such information to its regulators, auditors and counsel on a need to
know basis, and to any proposed assignee so long as such assignee agrees to the
confidentiality restrictions set
21
22
forth in this section, and the Bank must disclose such information if required
to do so by law (including without limitation by judicial or administrative
process).
5.6 NOTICES. Promptly give notice to the Bank:
(a) of the occurrence of any Default or Event of Default;
(b) of any (i) default under any other Contractual Obligation that
would enable the obligee Of the Contractual Obligation to compel
Financial to immediately pay all amounts owing thereunder or otherwise
accelerate payments thereunder and would have a material adverse effect
on Financial, or (ii) litigation, investigation or proceeding which may
exist at any time between Financial and any Governmental Authority,
which, if adversely determined, would have a material adverse effect on
the business, operations, property or financial or other condition of
Financial;
(c) of any litigation or proceeding affecting Financial (i) (A) in
which the amount involved is $100,000 or more and not covered by
insurance, or (B) which, in the reasonable opinion of a Responsible
Officer of Financial, would, if adversely determined, have a material
adverse effect on Financial, or (ii) in which injunctive or similar
relief is sought and which, in the reasonable opinion of a Responsible
Officer of Financial, would, if adversely determined, have a material
adverse effect on Financial;
(d) of the following events, as soon as possible and in any event
within 30 days after Financial knows or has reason to know thereof: (i)
the occurrence of any Reportable Event with respect to any Plan with
respect to which the PBGC has not waived the 30 day reporting
requirement, or (ii) the institution of proceedings or the taking or
expected taking of any other action by PBGC or Financial or any Commonly
Controlled Entity to terminate or withdraw or partially withdraw from any
Plan under circumstances which could lead to material liability to the
PBGC or, with respect to a Multiemployer Plan, the Reorganization or
Insolvency (as each such term is defined in ERISA) of the Plan and in
addition to such notice, deliver to the Bank whichever of the following
may be applicable: (A) a certificate of a Responsible Officer of
Financial setting forth details as to such Reportable Event and the
action that Financial or such Commonly Controlled Entity proposes to take
with respect thereto, together with a copy of any notice of such
Reportable Event that may be required to be filed with PBGC, or (B) any
notice delivered by PBGC evidencing its intent to institute such
proceedings or any notice to PBGC that such Plan is to be terminated, as
the case may be; and
(e) of a material adverse change in the business, operations,
property or financial or other condition of Financial or M/I Homes.
Each notice pursuant to this subsection 5.6 shall be accompanied by a statement
of the chief executive officer or chief financial officer or other Responsible
Officer of Financial setting forth details of the occurrence referred to therein
and stating what action Financial proposes to take with respect thereto.
22
23
For all purposes of clause (d) of this subsection 5.6, Financial shall be deemed
to have all knowledge or knowledge of all facts attributable to the
administrator of such Plan if such Plan is a Single Employer Plan.
5.7 MAINTENANCE OF TANGIBLE NET WORTH. Maintain at all times its Tangible
Net Worth in an amount equal to at least $3,500,000.
5.8 MAINTENANCE OF LIABILITIES TO TANGIBLE NET WORTH RATIO. Maintain at
all times a ratio of Liabilities to Tangible Net Worth not in excess of 10.0 to
1.0.
5.9 MAINTENANCE OF EBIT TO INTEREST EXPENSE RATIO. Maintain a ratio of
EBIT to Interest Expense, determined as of the end of each monthly accounting
period of each fiscal year and as of the end of each fiscal year, on a rolling
12 month basis (with the period of determination being the 12 month period
ending on the date as of which such determination is made), of not less than
1.50 to 1.0.
5.10 COLLATERAL. Promptly provide to the Bank, at any time and from time
to time as the Bank may request in its sole discretion, a first priority
security interest in all of Financial's then existing or thereafter acquired
Mortgage Loans, all rights to receive payments under or with respect to such
Mortgage Loans, all mortgage notes evidencing such Mortgage Loans, all Mortgages
securing such mortgage notes, all Purchase Commitments relating thereto, and all
proceeds of the foregoing as security for the Borrowers' obligations to the Bank
under this Agreement and the Note and promptly execute and deliver all such
documentation (including without limitation Financial's mortgage notes) as the
Bank shall reasonably request to perfect the Bank's security interest in such
collateral. Beginning on the fifth (5(th)) day after the funding of a Mortgage
Loan, each such mortgage note, and the related mortgage (or a certified copy
thereof) and Purchase Commitment, shall be held by Financial at its address set
forth in Section 8.2, unless they have been delivered to the Bank or to a
secondary market lender.
5.11 SECONDARY MARKET LENDERS. (a) Provide to the Bank on the first
Business Day of each calendar quarter, commencing on July 1, 2001, and
continuing on the first Business Day of each January, April, July and October
thereafter, for the Bank's review and approval, the current list of secondary
market lenders that purchase mortgage loans from Financial, and (b) by the end
of such calendar quarter, remove from the list and cease to sell mortgage loans
to any secondary market lender that is not acceptable to the Bank in the Bank's
sole discretion.
SECTION 6. NEGATIVE COVENANTS
------------------
The Borrowers hereby agree, jointly and severally, that, from the date
hereof and so long as the Commitment remains in effect, the Note remains
outstanding and unpaid or any other amount is owing to the Bank hereunder,
Financial shall not, directly or indirectly:
23
24
6.1 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to exist
any Indebtedness (other than purchases on open account in the ordinary course of
Financial's business) except for (a) Indebtedness evidenced by this Agreement
and the Note, (b) Indebtedness for which Liens are permitted pursuant to
subsection 6.2(g) hereof, provided that the aggregate amount of such
Indebtedness does not exceed the amount of the Liens permitted by subsection
6.2(g), and (c) unsecured Indebtedness of Financial to M/I Homes for loans and
advances from M/I Homes and for property and services provided by M/I Homes.
6.2 LIMITATION ON LIENS. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except:
(a) Liens, if any, in favor of the Bank including without
limitation Liens on mortgage notes receivable;
(b) Liens for taxes and special assessments not yet due or which
are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of
Financial in accordance with GAAP;
(c) Carriers', warehousemen's, materialmen's, mechanics',
repairmen's, or other like Liens arising in the ordinary course of
business which are not overdue for a period of more than 30 days or which
are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto' are maintained on the books of
Financial in accordance with GAAP;
(d) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(e) Liens of landlords, arising solely by operation of law, on
fixtures and moveable property located on premises leased in the ordinary
course of business, provided that the rental payments secured thereby are
not yet due;
(f) Liens arising as a result of a judgment or judgments against
Financial which do not in the aggregate exceed $200,000 at any time
outstanding, which are being diligently contested in good faith, which
are not the subject of any attachment, levy or enforcement proceeding,
and as to which appropriate reserves have been established in accordance
with GAAP;
(g) Liens to secure purchase money obligations and capitalized
leases, provided that the aggregate amount of the obligations secured by
such Liens shall not exceed $250,000 at any time; and
(h) Liens in connection with the purchase and pledge by Financial,
in making first mortgage loans permitted hereunder, of certificates of
deposits to investors purchasing such
24
25
first mortgage loans, in accordance with, and subject to the limitations
set forth in, subsection 6.3 hereof.
6.3 PROHIBITION ON CONTINGENT OBLIGATIONS. Agree to or assume, guarantee,
indorse or otherwise in any way be or become responsible or liable for, directly
or indirectly, any Contingent Obligation, including but not limited to
Contingent Obligations incurred as a result of sales of any notes with recourse
or as a general partner in a partnership; provided, however, that in making
first mortgage loans permitted hereunder, Financial may, in lieu of requiring
down payments from mortgagors, purchase and pledge to investors purchasing such
first mortgage loans certificates of deposit in an aggregate amount not to
exceed $2,500,000.
6.4 PROHIBITION ON FUNDAMENTAL CHANGES. Enter into any transaction of
merger, consolidation, amalgamation or reorganization, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its business or assets, whether now
owned or hereafter acquired, or make any material change in the method by which
it conducts business.
6.5 LIMITATION ON INVESTMENTS. Make or commit to make any advance, loan,
extension of credit or capital contribution to, or purchase of, any stock,
bonds, notes, debentures or other securities of or make any other investment in,
any Person (all such transactions being herein called "investments") except for
(i) Eligible Mortgage Loans, (ii) Cash Equivalents, (iii) Fannie Mae stock to
the extent required for Financial to sell mortgages to Fannie Mae, but the
amount of such investments in Fannie Mae stock shall in no event exceed
$100,000, (iv) investments in the ordinary course of Financial's business in
standard instruments hedging against interest rate risk incurred in the
origination and sale of mortgage loans, in each case matching a hedging
instrument or instruments to specific mortgages or specific groups of mortgages,
but in no event including investments in futures contracts, options contracts or
other derivative investment vehicles acquired as independent investments, and
(v) loans and advances to M/I Homes; provided, however, that nothing in this
subsection 6.5 shall prohibit or otherwise restrict Financial from purchasing
and pledging certificates of deposit in accordance with, and subject to the
limitations set forth in, subsection 6.3 hereof.
6.6 PROHIBITION ON SUBSIDIARIES. Create or form any Subsidiaries.
6.7 PROHIBITION ON CHANGES IN HEDGING POLICY. Amend or modify Financial's
policy or procedures with respect to hedging transactions, in any material
respect, from the Hedging Policy provided to the Bank pursuant to subsection
4.1(j) hereof and attached hereto as Exhibit D.
6.8 INCORPORATION OF COVENANTS FROM M/I HOMES LOAN AGREEMENT. Without
limitation of any thing contained herein, each of the covenants set forth in
Sections 6.11, 612, 6.13, 6.14 and 6.15 of the M/I Homes Loan Agreement, as in
effect on the date hereof, are incorporated herein by this reference and shall
be treated for all purposes as being included in this Agreement; provided that
any modification of any such covenant pursuant to the M/I Homes Loan Agreement
which causes it to be more favorable to Bank shall automatically be incorporated
herein. No other modification of such covenants shall be incorporated herein
unless the Bank agrees thereto in writing. Any violation or
25
26
breach of any such covenant shall be a violation or breach of this Agreement and
the Bank shall have all rights and remedies with respect thereto that are
available hereunder, under the Note and under applicable law.
6.9 PAYMENTS UNDER SUBORDINATED LOAN AGREEMENT. Neither Borrower shall
make any payment under or with respect to the Subordinated Loan Agreement which
is prohibited under Section 10 of the Subordinated Loan Agreement as in effect
on the date hereof.
SECTION 7. DEFAULTS, EVENTS OF DEFAULT
---------------------------
Upon the occurrence of any of the following events:
(1) the Borrowers shall fail to pay any principal of the Note when
due in accordance with the terms thereof or hereof; or
(2) the Borrowers shall fail to pay any interest on the Note, or
any fee, charge, reimbursement or other amount payable hereunder, within three
(3) days after the date when due in accordance with the terms thereof or hereof;
or
(3) any representations or warranty made or deemed made by the
Borrowers herein or which is contained in any certificate, document or financial
or other written statement furnished at any time under or in connection herewith
or therewith shall prove to have been incorrect in any material respect on or as
of the date made or deemed made; or
(4) (a) Financial shall commence any case, proceeding or other
action (i) under any existing or future law of any jurisdiction, domestic or
foreign,. relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (ii) seeking appointment of a
receiver, trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or Financial shall make a general assignment for
the benefit of its creditors; or (b) there shall be commenced against Financial
any case, proceeding or other action of a nature referred to in clause (a) above
which (i) results in the entry of an order for relief or any such adjudication
or appointment, and (ii) remains undismissed, undischarged or unbonded for a
period of 60 days; or (c) there shall be commenced against Financial any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending appeal
within 60 days from the entry thereof; or (d) Financial shall take any action in
furtherance of, or indicating its consent top approval of, or acquiescence in,
any of the acts set forth in clauses (a), (b) or (c) above; or (e) Financial
shall generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
26
27
(5) Financial shall default in (a) the observance or performance
of any covenant or agreement contained in subsection 5.6, 5.10 or subsection 6.7
herein or shall fail to comply with the limitations of subsection 6.5(vi)
herein, (b) the observance or performance of any covenant or agreement contained
in any other provision of Section 6 or in any provision of subsections 5.1, 5.2,
5.7, 5.8, 5.9 and 5.11 herein and such default remains uncured ten days after
the Bank notifies the Borrowers that such default has occurred, or (c) the
observance or performance of any other covenant or agreement contained herein,
which default shall remain unremedied for 30 days after the Borrowers receive
written notice from the Bank that such a default has occurred, which notice
shall specify the nature of the default; or
(6) (a) any Person affiliated with Financial shall engage in any
"prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) involving any Plan, (b) any "accumulated funding deficiency" (as
defined in 'Section 302 of ERISA), whether or not waived, shall exist with
respect to any Plan, (c) a Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed, or a trustee shall be
appointed, to administer or to terminate, any Single Employer Plan, which
Reportable Event or institution of proceedings is, in the opinion of the Bank,
likely to result in the termination of such Plan for purposes of Title IV of
ERISA, and, in the case of a Reportable Event, the continuance of such
Reportable Event remains unremedied for 30 days after notice of such Reportable
Event pursuant to Section 4043(a), (c) or (d) of ERISA is given or, in the case
of institution of proceedings, such proceedings continue for 30 days after
commencement thereof, (d) any Single Employer Plan shall terminate for purposes
of Title IV of ERISA, or (e) any other event or condition shall occur or exist
with respect to a Single Employer Plan, and in each case in clauses (a) through
(e) above, such event or condition, together with all other such events or
conditions, if any, could subject Financial to any tax, penalty or other
liabilities in the aggregate material in relation to the business, operations,
property or financial or other condition of Financial; or
(7) one or more judgments or decrees shall be entered against
Financial involving in the aggregate a liability (not covered by insurance) of
$200,000 or more and all such judgments or decrees in excess of $200,000 shall
not have been vacated, satisfied, discharged, or stayed or bonded pending appeal
within 30 days from the entry thereof; or
(8) M/I Homes shall cease to own directly one hundred percent
(100%) of all of the issued and outstanding stock of Financial; or
(9) any borrowing base certificate required to be furnished to the
Bank in accordance with subsection 5.2(b) hereof indicates that the principal
amount of the Loans then outstanding exceeds the Commitment then permitted
hereunder and, within five calendar days after the delivery of such borrowing
base certificate to the Bank, the Borrowers have not cured this event by (a) the
reduction of the principal amount of the Loans then outstanding to an amount not
in excess of the Commitment then permitted hereunder, or (b) the delivery to the
Bank of a more current borrowing base certificate that demonstrates that the
principal amount of the Loans outstanding as of the date of such borrowing base
certificate is not in excess of the Commitment permitted hereunder at such time;
or
27
28
(10) there is a Default or an Event of Default (as those terms are
defined in the M/I Homes Loan Agreement) under the M/I Homes Loan Agreement or
any one or more of the Notes (as that term is defined in the M/I Homes Loan
Agreement), M/I Homes defaults in the payment or compliance with the terms of
any other Indebtedness or Contractual Obligation or Contingent Obligation and
the Bank in its reasonable discretion deems such default material, or Financial
defaults on its Guaranty of the M/I Homes Loan Agreement; or
(11) the M/I Homes Loan Agreement is terminated, voluntarily or
involuntarily, for any reason or any collateral shall be pledged to secure the
M/I Homes Loan Agreement;
then, and in any such event, (a) if such event is an Event of Default specified
in subsection (4) above, automatically the Commitment, if still outstanding,
shall immediately terminate and the Loans hereunder (with accrued interest
thereon), and all other amounts owing under the Agreement or the Note shall
immediately become due and payable, and (b) if such event is any other Event of
Default and is continuing, either or both of the following actions may be taken:
(i) the Bank may, by notice to the Borrowers, declare the Commitment to be
terminated forthwith, whereupon the Commitment shall immediately terminate; and
(ii) the Bank may, by notice of default to the Borrowers, declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under the
Agreement and the Note to be due and payable forthwith, whereupon the same shall
immediately become due and payable. Except as expressly provided above in this
Section 7, presentment, demand, protest and all other notices of any kind are
hereby expressly waived by the Borrowers.
SECTION 8. MISCELLANEOUS
-------------
8.1 AMENDMENTS AND WAIVERS; ACKNOWLEDGMENTS.
(a) The Bank and the Borrowers may, from time to time, enter into written
amendments, supplements or modifications for the purpose of adding any
provisions to the Agreement or the Note or changing in any manner the rights of
the Bank or the Borrowers hereunder or thereunder, and the Bank may execute and
deliver to the Borrowers a written instrument waiving, on such terms and
conditions as the Bank may specify in such instrument, any of the requirements
of the Agreement or the Note or any Default or Event of Default and its
consequences. Any such waiver and any such amendment, supplement or modification
shall be binding upon the Borrowers, the Bank, and all future holders of the
Note. In the case of any waiver, the Borrowers and the Bank shall be restored to
their former position and rights hereunder and under the outstanding Note, and
any Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default
or Event of Default, or impair any right consequent thereon.
(b) Each of Financial and M/I Homes hereby represents, warrants,
acknowledges and admits that (i) it has been advised by counsel in the
negotiation, execution, and delivery of this Agreement, (ii) it has made an
independent decision to enter into this Agreement, without reliance on any
representation, warranty, covenant or undertaking by Bank, whether written, oral
or implicit, other than as expressly set out in this Agreement, (iii) there are
no representations, warranties, covenants,
28
29
undertakings or agreements by Bank except as expressly set out in this
Agreement, (iv) Lender has no fiduciary duty to any of Financial or M/I Homes
with respect to the transactions contemplated hereby, (v) the relationship
pursuant hereto between Borrowers, on one hand, and Lender, on the other hand,
is and shall be solely that of debtor and creditor respectively, (vi) no
partnership or joint venture exists with respect hereto between the Borrowers
and Lender, (vii) should an Event of Default or Default occur or exist, Lender
will determine in its sole discretion and for its own reasons what remedies and
actions it will or will not exercise or take at that time, (viii) without
limiting any of the foregoing, Borrowers are not relying upon any representation
or covenant by Lender, or any representative thereof, and no such representation
or covenant has been made, that Lender will, at the time of an Event of Default
or Default, or at any other time, waive, negotiate, discuss, or take or refrain
from taking any action permitted hereunder with respect to any such Event of
Default or Default or any other provision hereof and (ix) Lender has relied upon
the truthfulness of the acknowledgments in this section in deciding to execute
and deliver this Agreement.
(c) THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
8.2 NOTICES. All notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing or by telecopy or other
electronic facsimile and, unless otherwise expressly provided herein, shall be
deemed to have been duly given or made when delivered by hand, or when deposited
in the United States Mail, Registered or Certified, Return Receipt Requested,
postage prepaid, or, in the case of telecopy or other electronic facsimile
notice, when receipt thereof is confirmed by sender's electronic facsimile
machine, addressed as follows in the case of the Borrowers and the Bank, or to
such address or other address as may be hereafter notified by the respective
parties hereto and any future holders of the Note:
Financial: M/I Financial Corp.
3 Easton Oval
Columbus, Ohio 43219
Attention: Phillip G. Creek
Facsimile: (614) 418-8080
with a copy to: Paul S. Coppel Esq.
M/I Schottenstein Homes, Inc.
3 Easton Oval
Columbus. Ohio 43219
Facsimile: (614) 418-8030
29
30
M/I Homes: M/I Schottenstein Homes, Inc.
3 Easton Oval
Columbus, Ohio 43219
Attention: Robert H. Schottenstein,
with a copy to: Phillip G. Creek
Facsimile: (614) 418-8080
with a copy to: Paul S. Coppel, Esq.
Facsimile: (614) 418-8030
The Bank: Guaranty Bank
8333 Douglas Avenue
10th Floor
Dallas, Texas 75225
Attention: Randy Reid
Facsimile: (214) 360-1661
8.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay
in exercising, on the part of the Bank, any right, remedy, power or privilege
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of the Agreement and the Note and shall remain in full force and
effect until the Agreement is terminated and all indebtedness created or
evidenced by the Agreement or the Note is paid in full.
8.5 PAYMENT OF EXPENSES; INDEMNITY.
(a) PAYMENT OF EXPENSES. Borrowers will promptly (and in any event,
within 30 days after any invoice or other statement or notice) pay: (i) all
transfer, stamp, mortgage, documentary or other similar taxes, assessments or
charges levied by any governmental or revenue authority in respect of this
Agreement or any other document referred to herein, and (ii) all reasonable
costs and expenses incurred by or on behalf of Lender, including attorneys'
fees, advisors' fees, travel costs and miscellaneous expenses, in connection
with (A) the negotiation, preparation, execution and delivery of this Agreement,
and any and all consents, amendments, waivers or other documents or instruments
relating hereto, (B) the borrowing hereunder and other action reasonably
required in the course of administration hereof, (C) monitoring or confirming
(or preparation or negotiation of any document related to) Borrowers' compliance
with any covenants or conditions contained in this Agreement, or
30
31
(D) the defense or enforcement of this Agreement or the defense of Lender's
exercise of its right hereunder.
(b) INDEMNITY. Borrowers agree to indemnify Lender, upon demand, from and
against any and all liabilities, obligations, claims, losses, damages,
penalties, fines, actions, judgments, suits, settlements, costs, expenses or
disbursements (including reasonable fees of attorneys, accountants, experts and
advisors) of any kind or nature whatsoever (in this section collectively called
"liabilities and costs") which to any extent (in whole or in part) may be
imposed on, incurred by, or asserted against Lender growing out of, resulting
from or in any other way associated with this Agreement and the transactions and
events (including the enforcement or defense thereof) at any time associated
herewith or contemplated herein.
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY LENDER,
provided only that Lender shall not be entitled under this section to receive
indemnification for that portion, if any, of any liabilities and costs which is
proximately caused by its own individual gross negligence or willful misconduct,
as determined in a final judgment. If any Person (including Borrowers or any of
their affiliates) ever alleges such gross negligence or willful misconduct by
Lender, the indemnification provided for in this section shall nonetheless be
paid upon demand, subject to later adjustment or reimbursement, until such time
as a court of competent jurisdiction enters a final judgment as to the extent
and effect of the alleged gross negligence or willful misconduct. As used in
this section the term "Lender" shall refer not only to Lender but also each
director, officer, agent, attorney, employee, representative and affiliate of
Lender.
8.6 OBLIGATIONS JOINT AND SEVERAL. The obligations of the Borrowers under
the Agreement, the Note and any documents related hereto or thereto are joint
and several.
8.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Borrowers, all future holders of the Note and their
respective successors and assigns, except that the Borrowers may not assign or
transfer any of their respective rights or obligations under the Agreement
without the prior written consent of the Bank. Lender may at any time assign all
or a portion of its rights and obligations under this Agreement; provided if at
the time of such an assignment, no Default has occurred and is continuing, such
assignment shall not be made without the prior written consent of Borrowers,
which consent shall not be unreasonably withheld.
8.8 ADJUSTMENTS; SET-OFF. In addition to any rights and remedies of the
Bank provided by law, upon the occurrence of an Event of Default and
acceleration of the obligations owing in connection with the Agreement, the Bank
shall have the right, without prior notice to the Borrowers, any such notice
being expressly waived by the Borrowers to the extent permitted by applicable
law,
31
32
to set off and apply against any indebtedness, whether matured or unmatured, of
either or both of the Borrowers to the Bank, any amount held by or owing from,
the Bank to or for the credit or the account of either or both of the Borrowers
at, or at any time after, the happening of any of the above mentioned events,
and the aforesaid right of set-off may be exercised by the Bank against either
or both of the Borrowers or against any trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, receiver, custodian or
execution, judgment or attachment creditor of either or both of the Borrowers or
against anyone else claiming through or against either or both of the Borrowers
or such trustee in bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver, custodian or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set off shall not have been
exercised by the Bank prior to the making, filing or issuance of or service upon
the Bank of, or of notice of, any such petition, assignment for the benefit of
creditors; appointment or application for the appointment of a receiver; or
issuance of execution, subpoena, order or warrant. The Bank agrees promptly to
notify the Borrowers after any such set off and application made by the Bank,
provided that the failure to give such notice shall not affect the validity of
such set off and application.
8.9 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. BORROWERS AND LENDER
HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY (A) WAIVE, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, THE NOTE OR ANY TRANSACTION
CONTEMPLATED HEREBY AND THEREBY OR ASSOCIATED HEREWITH AND THEREWITH, BEFORE OR
AFTER MATURITY; (B) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY "SPECIAL
DAMAGES", AS DEFINED BELOW; CERTIFIES THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OF LENDER OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS; AND (D) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE NOTE AND THE TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS SECTION. AS USED IN THIS SECTION, "SPECIAL
DAMAGES" INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES
(REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY
PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY HERETO.
8.10 COUNTERPARTS; EFFECTIVE DATE. The Agreement may be executed by one
or more of the parties to the Agreement on any number of separate counterparts,
and all of said counterparts taken together shall be deemed to constitute one
and the same instrument. The Agreement shall become
32
33
effective upon the receipt by the Bank of executed counterparts of the Agreement
by each of the parties hereto.
8.11 GOVERNING LAW; SUBMISSION TO PROCESS. THIS AGREEMENT AND THE NOTE
SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE UNDER THE LAWS OF THE STATE OF
TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF TEXAS AND THE LAWS OF THE UNITED STATES OF AMERICA,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. CHAPTER 346 OF THE TEXAS
FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING CREDIT LOAN ACCOUNTS AND
REVOLVING TRI-PARTY ACCOUNTS) DOES NOT APPLY TO THIS AGREEMENT OR THE NOTE.
EACH OF FINANCIAL AND M/I HOMES HEREBY IRREVOCABLY SUBMITS ITSELF TO THE
NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE
STATE OF TEXAS AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON
IT IN ANY LEGAL PROCEEDING RELATING HERETO OR THE NOTE BY ANY MEANS ALLOWED
UNDER TEXAS OR FEDERAL LAW. THE PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO
ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, THAT ANY PROCEEDING
ARISING OUT OF OR IN ANY WAY RELATED HERETO OR THE NOTE IS BROUGHT IN AN
INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS IMPROPER, AND FURTHER AGREE TO
A TRANSFER OF ANY SUCH PROCEEDING TO A FEDERAL COURT SITTING IN THE STATE OF
TEXAS TO THE EXTENT THAT IT HAS SUBJECT MATTER JURISDICTION, AND OTHERWISE TO A
STATE COURT IN THE COUNTY OF DALLAS, TEXAS. IN FURTHERANCE THEREOF, BORROWERS
AND LENDER EACH HEREBY ACKNOWLEDGE AND AGREE THAT IT WAS NOT INCONVENIENT FOR
THEM TO NEGOTIATE AND RECEIVE FUNDING OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT IN SUCH COUNTY AND THAT IT WILL BE NEITHER INCONVENIENT NOR UNFAIR TO
LITIGATE OR OTHERWISE RESOLVE ANY DISPUTES OR CLAIMS IN A COURT SITTING IN SUCH
COUNTY.
8.12 LIMITATION ON INTEREST. Lender and Borrowers intend to contract in
strict compliance with applicable usury law from time to time in effect. In
furtherance thereof such Persons stipulate and agree that none of the terms and
provisions contained herein or in the Note shall ever be construed to create a
contract to pay, for the use, forbearance or detention of money, interest in
excess of the maximum amount of interest permitted to be charged by applicable
law from time to time in effect. Neither Borrowers nor any present or future
guarantors, endorsers, or other Persons hereafter becoming liable for payment of
any obligation hereunder or under the Note shall ever be liable for unearned
interest thereon or shall ever be required to pay interest thereon in excess of
the maximum amount that may be lawfully charged under applicable law from time
to time in effect, and the provisions of this section shall control over all
other provisions herein or in the Note which may be in conflict or apparent
conflict herewith. Lender expressly disavows any intention to charge or
33
34
collect excessive unearned interest or finance charges in the event the maturity
of any obligation hereunder or under the Note is accelerated. If (a) the
maturity of any obligation hereunder or under the Note is accelerated for any
reason, (b) any obligation hereunder or under the Note is prepaid and as a
result any amounts held to constitute interest are determined to be in excess of
the legal maximum, or (c) Lender or any other holder of any or all of the
obligations hereunder or under the Note shall otherwise collect moneys which are
determined to constitute interest which would otherwise increase the interest on
any or all of the obligations hereunder or under the Note to an amount in excess
of that permitted to be charged by applicable law then in effect, then all sums
determined to constitute interest in excess of such legal limit shall, without
penalty, be promptly applied to reduce the then outstanding principal of the
related obligations hereunder or under the Note or, at Lender's or holder's
option, promptly returned to Borrowers or the other payor thereof upon such
determination. In determining whether or not the interest paid or payable, under
any specific circumstance, exceeds the maximum amount permitted under applicable
law, Lender and Borrowers (and any other payors thereof) shall to the greatest
extent permitted under applicable law, (i) characterize any non-principal
payment as an expense, fee or premium rather than as interest, (ii) exclude
voluntary prepayments and the effects thereof, and (iii) amortize, prorate,
allocate, and spread the total amount of interest throughout the entire
contemplated term of the instruments evidencing the obligations hereunder or
under the Note in accordance with the amounts outstanding from time to time
thereunder and the maximum legal rate of interest from time to time in effect
under applicable law in order to lawfully charge the maximum amount of interest
permitted under applicable law. In the event applicable law provides for an
interest ceiling under Chapter 303 of the Texas Finance Code (the "Texas Finance
Code") as amended, for that day, the ceiling shall be the "weekly ceiling" as
defined in the Texas Finance Code; provided that if any applicable law permits
greater interest, the law permitting the greatest interest shall apply. As used
in this section the term "applicable law" means the laws of the State of Texas
including the laws of the United States of America, as such laws now exist or
may be changed or amended or come into effect in the future.
8.13 RENEWAL AND REPLACEMENT. This Agreement renews and replaces the 1998
Credit Agreement in its entirety.
8.14 HEADINGS. The headings of the Sections and subsections of the
Agreement are inserted for convenience only and shall not be deemed to
constitute a part hereof.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.]
34
35
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers to be
effective as of the day and year first above written.
GUARANTY BANK M/I FINANCIAL CORP.
By: By:
----------------------------- ---------------------------------
Randy Reid Paul S. Rosen
Vice President President
M/I SCHOTTENSTEIN HOMES, INC.
By:
---------------------------------
Robert H. Schottenstein
President and Assistant Secretary