1
EXHIBIT 10.1
REVOLVING CREDIT AGREEMENT
--------------------------
THIS AGREEMENT is made to be effective as of August 8, 1995,
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 BANK ONE, COLUMBUS, N.A., a national banking association (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, the Bank, The Huntington National Bank, NBD
Bank, N.A., National City Bank, Columbus, and Bank as agent for the foregoing
banks are parties to a certain Revolving Credit Loan, Seasonal Loan and Standby
Letter of Credit Agreement dated as of June 8, 1994, as amended by Amendment
No. 1 thereto effective as of September 30, 1994 and by Amendment No. 2 thereto
effective as of February 28, 1995 (together with any amendments and
restatements thereto that may be made subsequent to the date hereof, 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 are parties to a Revolving Credit
Agreement effective as of August 10, 1994, in the principal amount of
$25,000,000 (the "1994 Credit Agreement"), which matures on August 8, 1995.
D. The Borrowers and Bank want to enter into a new credit
facility in the principal amount of Twenty-Five Million and 00/100 Dollars
($25,000,000), which will pay off and replace the 1994 Credit Agreement 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:
2
"AGREEMENT" shall mean this Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"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 Columbus, Ohio are authorized or
required by law to close.
"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.
"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)
$25,000,000, 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 July 19, 1996, or such earlier date as the
Commitment shall terminate as provided herein.
"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
2
3
obligations in respect of construction bonds), and any obligation of such
Person guaranteeing or in effect guaranteeing any 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) indorsements 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 (not a
rewritten or renewed) loan evidenced by a note and secured by a first mortgage
on residential real property which (a) Financial has made to enable a natural
person or persons to purchase a home from M/I Homes or another Person that is
substantially completed, (b) is not more than 60 days old, as determined by the
date of the note which evidences such loan, and (c) is subject, or Financial
reasonably believes is subject, to a Purchase Commitment; provided, however,
that the amount of Eligible Mortgage Loans consisting of loans made by
Financial for the purchase of
3
4
homes from any Person other than M/I Homes shall not, in the aggregate at any
one time outstanding, exceed the amount of $5,000,000.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"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.
"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, Borrowers and 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.
"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
4
5
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 twelve 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 at such date prepared in accordance with GAAP.
"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 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, (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
5
6
purchase of the mortgage loan by a secondary market lender pursuant to a
Purchase Commitment, (c) those second mortgage loans permitted by clause (ii)
of subsection 6.5 hereof, and (d) those first mortgage refinancing loans
permitted by clause (iii) of subsection 6.5 hereof; provided, the obligations
to repurchase the mortgage loans described in clauses (a) through (d) of this
definition shall exist only if (A) such mortgage loans do not meet for any
reason the investor guidelines and underwriting criteria for such Purchase
Commitment, (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 90 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, or (E) the mortgagor engages in
fraudulent conduct or misrepresentation.
"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 Borrower 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.
"PURCHASE COMMITMENT" shall mean a commitment from a secondary
market lender acceptable to Bank (the names and addresses of secondary market
lenders acceptable to Bank as of the effective date of this Agreement have been
delivered to Bank and certified by a Responsible Officer, and Financial
shall update the list of
6
7
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.
"REPORTABLE EVENT" shall mean any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder.
"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, President, an 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.
"SINGLE EMPLOYER PLAN" shall mean any Plan which is not a
Multiemployer Plan (as such term is defined in ERISA).
"SUBSIDIARY" shall mean as to any Person, a corporation of which
shares of stock having ordinary voting power (other than stock having such
power only by reason of the happening of a contingency) to elect a majority of
the board of directors or other managers of such corporation are at the time
owned, or the management of which is otherwise controlled, directly, or
indirectly through one or more intermediaries, or both, by such Person.
"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
7
8
in accordance with GAAP, minus the following items (without duplication of
deductions), if any, appearing on Financial's balance sheet prepared in
accordance with GAAP:
(a) The book amount of all deferred charges (including
specifically deferred income taxes);
(b) The book amount of all assets which would be treated as
intangibles under GAAP, provided, however, that
intangible assets shall include the aggregate amount of
advances, if any, made by Financial to M/I Homes; and
(c) 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.
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.
8
9
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)
Twenty-Five Million and 00/100 Dollars ($25,000,000), 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 Commitment by borrowing, prepaying
the Loans in whole or in part, and reborrowing, all in accordance with the
terms and conditions hereof.
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 the Prime Rate in effect from time to
time, subject to the default interest rate provisions of subsection 2.6(c)
hereof. Interest shall be payable in arrears and shall be due on the last day
of each month, beginning with August 31, 1995, and continuing on the last 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 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 the Prime
Rate in effect from time to time, subject to the default interest rate
provisions of subsection 2.6(c) hereof.
2.3 PROCEDURE FOR BORROWING. The Borrowers may borrow under the
Commitment during the Commitment Period, provided the
9
10
Borrowers shall give the Bank irrevocable telephonic or written notice (which
notice must be received by the Bank prior to 3:00 P.M., Columbus, Ohio 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), and (ii) the amount of the requested borrowing. Each borrowing pursuant
to the Commitment shall be in the principal amount of the lesser of (a) $50,000
or any larger amount, and (b) the then undrawn amount of the Commitment. On
the Borrowing Date, the Bank shall make available to 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 100 East Broad Street, Columbus, Ohio office 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.
2.4 COMMITMENT FEE. The Borrowers agree to pay to the Bank a
commitment fee for the Commitment Period, computed at the rate of 1/4 of 1
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 last day of each September, December, March and June 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, and the payment of any unpaid commitment fee
then accrued hereunder. Any such reduction shall be in the amount of
$1,000,000 or a whole multiple of $100,000 in excess thereof or such greater
amount as may be required for compliance with this subsection 2.5 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
10
11
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
shall become effective as of the opening of business on the day on
which such change in the Prime Rate shall become effective, without
notice to the Borrowers; however, the Bank shall give the
Borrowers prompt notice of all changes in the Prime Rate.
(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 all or a portion of the principal amount of any of
the Loans made hereunder shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), any such overdue
principal amount and, to the extent permitted by applicable law, any
overdue installment of interest on any Loan, shall, without limiting
any other rights of the Bank, bear interest at a rate per annum which
is the sum of (i) one percent (1.0%), 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 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 1994 Credit Agreement. Upon Borrower's irrevocable
payment in full of the obligations outstanding under the 1994 Credit Agreement,
the Bank shall cancel the 1994 Loan Agreement and the promissory note related
to the 1994 Credit Agreement. The remaining proceeds of the initial Loan and
the proceeds of subsequent Loans made hereunder shall be used by Borrowers
for lawful purposes in Financial's business.
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, 1994, 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,
11
12
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, 1994 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 does not and will not violate any Requirement of Law or
Contractual Obligation of either of the Borrowers and does not and will not
result in, or require, the
12
13
creation or imposition of any Lien on any of the properties of either of the
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.
13
14
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 Schottenstein, Zox &
Dunn, counsel to the Borrowers, dated the date hereof and addressed to
the Bank, substantially in the form 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 Bank) of the sole shareholder (M/I Homes) of Financial
and 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
14
15
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.
(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,
1994 audited financial statements to the first Borrowing Date.
15
16
(j) 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.
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.
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:
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 Financial, a copy of the
audited balance sheet of Financial 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
16
17
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
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 Financial as at the end of each such month
and the related unaudited statements of income and retained earnings
of Financial 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 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 (in the form of Exhibit C or such
other form as shall be reasonably acceptable to 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
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 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
17
18
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 D attached hereto and made a
part hereof, 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
18
19
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 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
19
20
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 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. 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 $2,500,000.
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 12.0 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 twelve month basis (with the period of determination being the
twelve month period ending on
20
21
the date as of which such determination is made), of not less than 1.50 to 1.0.
5.10 COLLATERAL. Promptly provide to Bank, at any time and from
time to time as Bank may request in its sole discretion, a first priority
security interest in all of Financial's then existing or thereafter acquired
mortgage notes receivable and all proceeds thereof as security for Borrowers'
obligations to Bank under this Agreement and the Note, and promptly execute and
deliver all such documentation (including without limitation Financial's
mortgage notes receivable) as Bank shall reasonably request to perfect Bank's
security interest in such collateral.
5.11 SECONDARY MARKET LENDERS. (a) Provide to Bank on the
first Business Day of each calendar quarter, commencing on October 2, 1995, and
continuing on the first Business Day of each January, April, July and October
thereafter, for 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 Bank in 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:
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;
21
22
(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; and
(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.
6.3 PROHIBITION OF 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.
6.4 PROHIBITION OF 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
22
23
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) first mortgage loans made in the ordinary course
of Financial's business to natural persons for the purchase of residential real
property, (ii) second mortgage loans made in the ordinary course of Financial's
business to natural persons for the purchase of residential real property,
provided that such second mortgage loans (A) shall be made only in connection
with a specific financing program to natural persons who have a first mortgage
loan from Financial with respect to the same real property, and (B) shall not
exceed $500,000 in aggregate at any one time outstanding, (iii) first mortgage
loans made in the ordinary course of Financial's business to natural persons
for the purpose of re-financing an existing first mortgage loan, provided that
the amount of such re-financing mortgage loans shall not exceed $5,000,000 in
aggregate at any one time outstanding, (iv) investments in Cash Equivalents,
(v) investments in 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, and (vi) 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.
6.6 PROHIBITION ON SUBSIDIARIES. Create or form any Subsidiaries.
6.7 PROHIBITION ON CHANGE IN HEDGING POLICY. Amend or modify
Financial's policy with respect to hedging transactions from the policy
currently in effect, which policy has been delivered to Bank and certified by
a Responsible Officer.
SECTION 7. DEFAULTS, EVENTS OF DEFAULT
---------------------------
Upon the occurrence of any of the following events:
23
24
(1) the Borrowers shall fail to pay any principal of the Note
when due in accordance with the terms thereof; or
(2) Borrowers shall fail to pay any interest on the Note or
any fee, charge, reimbursement or other amount payable hereunder, within three
days after the Bank notifies the Borrowers that such interest, fee or amount
has become due in accordance with the terms thereof or hereof and has not been
paid; 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 to, 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
(5) Financial shall default in (a) the observance or performance
of any covenant or agreement contained in subsection 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
24
25
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 Bank
that such a default has occurred, which notice shall specify the nature of the
default; or
(6) any Person affiliated with Financial shall engage in (a)
any "prohibited transaction" (as defined in Section 406 of ERISA or Section
4975 of the Code) involving any Plan, (b) any "accumulated finding 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 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, the continuance of such proceedings 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
25
26
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
(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 with respect to 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;
then, and in any such event, (a) if such event is an Event of Default specified
in subsection 7(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.
26
27
SECTION 8. MISCELLANEOUS
-------------
8.1 AMENDMENTS AND WAIVERS. 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 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.
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.
41 South High Street
24th Floor
Columbus, Ohio 43215
Attention: Kerrii B. Anderson
Facsimile: (614) 221-0893
with a copy to: Paul S. Coppel, Esq.
M/I Schottenstein Homes, Inc.
41 South High Street
24th Floor
Columbus, Ohio 43215
Facsimile: (614) 221-0893
27
28
M/I Homes: M/I Schottenstein Homes, Inc.
41 South High Street
24th Floor
Columbus, Ohio 43215
Attention: Irving E. Schottenstein,
with a copy to Phillip G. Creek
Facsimile: (614) 221-0893
with a copy to: Paul S. Coppel, Esq.
M/I Schottenstein Homes, Inc.
41 South High Street
24th Floor
Columbus, Ohio 43215
Facsimile: (614) 221-0893
The Bank: Bank One, Columbus, N.A.
100 East Broad Street
7th Floor
Columbus, Ohio 43271
Attention: Thomas D. Igoe
Facsimile: (614) 248-5518
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 AND TAXES. The Borrowers agree, jointly and
severally,
(a) to pay or reimburse the Bank for all of its out-of-pocket
costs and expenses incurred in connection with the development,
preparation and execution of, and any amendment, supplement or
modification to, the Agreement, the Note, and any other documents
prepared in
28
29
connection herewith, and the consummation of the transactions
contemplated hereby and thereby, including without limitation the
reasonable fees and disbursements of counsel to the Bank, and
(b) to pay or reimburse the Bank for all of its costs and
expenses incurred in connection with the enforcement or preservation
of any rights under the Agreement, the Note, and any such other
documents, including without limitation the fees and disbursements of
counsel to the Bank.
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.
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, to set off and apply against any indebtedness, whether matured
or unmatured, of either or both 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 of 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
29
30
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. BORROWERS AND BANK, AFTER CONSULTING OR
HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY
LITIGATION BASED UPON OR ARISING OUT OF THE AGREEMENT, THE NOTE OR ANY RELATED
INSTRUMENT OR AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THE
AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF ANY OF THEM. NEITHER OF THE BORROWERS OR THE BANK SHALL
SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH A
JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT
BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN
MODIFIED IN ANY RESPECT OR RELINQUISHED BY EITHER OF THE BORROWERS OR THE BANK
EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
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 effective
upon the receipt by the Bank of executed counterparts of the Agreement by each
of the parties hereto.
8.11 GOVERNING LAW. The Agreement, the Note and the rights and
obligations of the parties under the Agreement and the Note shall be governed
by, and construed and interpreted in accordance with, the local laws of the
State of Ohio.
8.12 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.
30
31
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
BANK ONE, COLUMBUS, N.A. M/I FINANCIAL CORP.
By___________________________ By____________________________
Title: Senior Vice President Title: President
M/I SCHOTTENSTEIN HOMES, INC.
By____________________________
Title: Chief Executive Officer
and President
31
32
EXHIBIT A
---------
REVOLVING LOAN PROMISSORY NOTE
------------------------------
$25,000,000.00 Columbus, Ohio
August 8, 1995
FOR VALUE RECEIVED, the undersigned ("Borrowers"), jointly and
severally, promise to pay to the order of BANK ONE, COLUMBUS, N.A. ("Bank"), at
its principal office at 100 East Broad Street, Columbus, Ohio 43271, or at
such other place as the holder hereof may, from time to time, in writing
designate, the principal sum of Twenty-Five Million and 00/100 Dollars
($25,000,000.00), or so much thereof as may be disbursed to, or for the benefit
of, the Borrowers in accordance with the terms of a Revolving Credit Agreement
dated as of August 8, 1995 between Borrowers and Bank, as the same may
hereinafter be amended, modified or supplemented from time to time (the "Loan
Agreement") and remains unpaid, together with interest thereon at a rate per
annum equal to the Prime Rate in effect from time to time. Interest shall be
payable in arrears and shall be due on the last day of each month, beginning
with August 31, 1995, and continuing on the last day of each month thereafter
and on the last day of the Commitment Period.
Interest on this Note shall be calculated on the basis of a 360 day
year for the actual days elapsed. Any change in the interest rate resulting
from a change in the Prime Rate shall become effective as of the opening of
business on the day on which such change in the Prime Rate shall become
effective, without notice to the Borrowers. Each determination of an interest
rate by the Bank pursuant to the Loan Agreement shall be conclusive and binding
on the Borrowers in the absence of manifest error.
If all or a portion of the principal amount of any of the obligations
evidenced hereby shall not be paid when due (whether at stated maturity, by
acceleration or otherwise), any such overdue principal amount and, to the
extent permitted by applicable law, any overdue installment of any interest on
any obligation evidenced hereby, shall, without limiting any other rights of
the Bank, bear interest at a rate per annum which is the sum of (i) one percent
(1.0%) and (ii) the rate which would otherwise be applicable hereto, from the
date of such non-payment until paid in full (before, as well as after,
judgment).
33
This revolving loan promissory note is the Note identified in the Loan
Agreement, and said Loan Agreement is hereby incorporated into this Note and
made a part hereof. Capitalized terms used but not defined herein shall have
the meanings set forth in the Loan Agreement.
The Bank's records of the principal, accrued interest and other charges
due hereunder, as well as applicable interest rates and periods are, absent
manifest error, conclusive as to and binding upon all Persons.
The entire unpaid principal balance evidenced by this Note plus any
accrued but unpaid interest thereon and any other indebtedness owing by
Borrowers to Bank under the Loan Agreement shall be paid in full on or before
the last day of the Commitment Period, which, if it does not occur sooner
pursuant to the terms of the Loan Agreement, shall be July 19, 1996.
The indebtedness evidenced hereby may be prepaid in whole or in part
without penalty. All payments and prepayments received by Bank (a) shall, with
respect to scheduled payments, be applied, first, to accrued interest, and
second, to principal; (b) shall, with respect to prepayments be applied to
principal; (c) shall be in lawful money of the United States; and (d) shall be
credited as of the time received by Bank in cash or equivalent or when finally
collected. Pursuant to the terms of the Loan Agreement, repayments of principal
shall be eligible for reborrowing by Borrower. Bank shall not be obligated to
extend any credit after (1) the occurrence of an Event of a Default, which,
under the terms of the Loan Agreement, results in either an automatic
termination of the Commitment or an election to terminate the Commitment, or
(2) the expiration of the term of this Note. Any part of the indebtedness
evidenced by this Note outstanding on the last day of the Commitment Period
shall be repaid on that date.
Upon the occurrence of an Event of Default, the whole or any part of
the unpaid indebtedness evidenced hereby shall, at once or at any time
thereafter, at the option of the holder or holders hereof, become due and
payable without notice or demand therefor, the same being expressly waived. A
failure of the holder hereof to insist upon strict compliance with the terms
hereof or to assert any right hereunder shall not be a waiver of any default
and shall not be deemed to constitute a modification of the terms hereof or to
establish any claim or defense.
Any and all moneys now or at any time hereafter owing to either or both
of the Borrowers from the holder hereof may be paid and applied on this and all
other indebtedness from the undersigned
2
34
to the legal holder hereof at any time such indebtedness becomes due or is
declared due and payable.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right under
this Note. A waiver on any one occasion shall not be construed as a bar to or
waiver of any such right and/or remedy on any future occasion.
All persons now or hereafter liable, primarily or secondarily, for the
payment of the indebtedness evidenced hereby or any part thereof, do hereby
expressly waive presentment for payment, notice of dishonor, protest and notice
of protest, and agree that the time for payment or payments of any part of the
indebtedness evidenced hereby may be extended without releasing or otherwise
affecting their liability hereon.
Borrowers agree, jointly and severally, that the local laws of the
State of Ohio shall govern their respective rights and duties hereunder and the
construction and effect hereof. However, if any provision hereof is or becomes
invalid or unenforceable under any law of mandatory application, it is the
intent of Borrowers, the Bank and all parties primarily or secondarily liable
hereunder, that such provision will be deemed severed and omitted herefrom, the
remaining portions hereof to remain in full force and effect as written.
To the extent that the terms and provisions of this Note are
inconsistent with the terms and provisions of the Loan Agreement, the terms and
provisions of this Note shall control.
As a specifically bargained inducement for the Bank to extend credit
giving rise to the indebtedness evidenced hereby, the Borrowers and Bank agree
that: ANY ACTION, SUIT OR PROCEEDING IN RESPECT OF OR ARISING FROM OR OUT OF
THIS NOTE, ITS MAKING, VALIDITY OR PERFORMANCE, AT THE SOLE OPTION OF THE BANK
OR LEGAL HOLDER HEREOF, SHALL BE PROSECUTED AS TO ALL PARTIES AND THEIR
SUCCESSORS AND ASSIGNS AT COLUMBUS, OHIO. EACH OF THE BORROWERS CONSENTS TO
AND SUBMITS TO THE EXERCISE OF JURISDICTION OVER ITS PERSON BY ANY COURT
SITUATED AT COLUMBUS, OHIO, AND HAVING JURISDICTION OVER THE SUBJECT MATTER.
Each of the Borrowers authorizes any attorney at law to appear in any
court of record in the State of Ohio or any other State or Territory of the
United States, after the indebtedness evidenced hereby, or any part thereof,
becomes due and waive the issuance and service of process and confess judgment
against it in favor of the holder of this Note, for the amount then appearing
due, together with costs of suit and, thereupon, to release all
3
35
errors and waive all rights of appeal and stay of execution, but no such
judgment or judgments against only one of the undersigned shall be a bar
to a subsequent judgment or judgments against either of the undersigned
against whom judgment has not been obtained hereon. The foregoing warrant of
attorney shall survive any judgment; and if any judgment be vacated for any
reason, the holder hereof nevertheless may thereafter use the foregoing warrant
of attorney to obtain an additional judgment or judgments against one or both
of the undersigned. Each of the Borrowers hereby expressly consents to the
confessing attorney's receipt of a legal fee from the holder of this Note for
confessing such judgment(s) against one or both of the undersigned.
IN WITNESS WHEREOF, each of the Borrowers has executed this Note as of
the day and year first above written at Columbus, Franklin County, Ohio.
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT,
OR ANY OTHER CAUSE.
M/I FINANCIAL CORP. M/I SCHOTTENSTEIN HOMES, INC.
By:___________________________ By:__________________________
Its: President Its: Chief Executive Officer
and President
4