1
REVOLVING CREDIT AGREEMENT
--------------------------
THIS AGREEMENT is made to be effective as of July 18, 1997, 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, N.A., a national banking association, formerly known as 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, The
First National Bank of Chicago, National City Bank of Columbus, The First
National Bank of Boston, The Fifth Third Bank of Columbus and the Bank as agent
for the foregoing banks are parties to a certain Second Restated Revolving
Credit Loan and Standby Letter of Credit Agreement effective as of December 30,
1996, as amended by the First Amendment thereto effective as of March 14, 1997
and by the Second Amendment thereto effective as of May 7, 1997 (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 July 19, 1996 in the principal amount of $25,000,000
(the "1996 Credit Agreement"), which matured on June 20, 1997, and which was
extended to July 20, 1997.
D. The Borrowers and 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 1996 Credit Agreement on the
terms and conditions hereinafter set forth.
2
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.
"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, 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 Columbus, Ohio.
"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)
$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 June 25, 1998, or such earlier date as the
Commitment shall terminate as provided
2
3
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 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.
3
4
"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 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.
"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 equal to the rate at which Bank
is offered Dollar deposits, for a one month period, at or about 10:00 A.M.,
Columbus, Ohio time, in the interbank eurodollar market where the eurodollar and
foreign currency and exchange operations in respect of its Eurodollar Rate Loans
are then being conducted.
"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.
4
5
"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 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)
5
6
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 ten nor more than twenty days thereafter, as selected by the
Borrowers.
"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 purchase of the
mortgage loan by a secondary market lender pursuant
6
7
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 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 Bank (the names and addresses of secondary market
lenders acceptable to Bank as of the effective
7
8
date of this Agreement have been delivered to Bank and certified by a
Responsible Officer, 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.
"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 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.
"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
8
9
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 (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.
9
10
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 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
twenty 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 minus one-quarter of one percent (1/4%)
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
three-quarter percent (1.75%), 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 last day of
each month, beginning with August 31, 1997, 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
10
11
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 (i) in the case of Prime
Rate Loans, the Prime Rate in effect from time to time minus one-quarter of one
percent (1/4%) and (ii) in the case of Eurodollar Rate Loans, the Eurodollar
Rate determined for each such loan plus one and three-quarter percent (1.75%)
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., 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), (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 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. 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. 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
11
12
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 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, 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 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 all or a portion of the principal amount of
any of the Loans made hereunder shall not be paid when
12
13
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 EXTENSION OF COMMITMENT PERIOD. At any time during the
sixty days immediately preceding the last day of the Commitment Period, the Bank
in its sole discretion may elect to extend the Commitment Period for a period
not to exceed 360 days 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 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 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 1996 Credit Agreement. Upon Borrowers' irrevocable payment
in full of the obligations outstanding under the 1996 Credit Agreement, the Bank
shall cancel the 1996 Credit Agreement and the promissory note related to the
1996 Credit Agreement. The remaining proceeds of the initial Loan made hereunder
and the proceeds of subsequent Loans made hereunder shall be used by 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
13
14
CONVERSION") at least two Business Days prior to the requested date for the
conversion, which Notice of 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 twenty 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 twenty 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
14
15
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:
(a) shall 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, or change any tax measured by or imposed upon the overall
net income, or franchise taxes, or taxes measured by or imposed upon overall
capital or net worth, or branch taxes (in the case of such capital, net worth or
branch taxes, imposed in lieu of such net income tax), 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 3.1.
15
16
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.
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, 1996, 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, 1996
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
16
17
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 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.
17
18
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.,
dated the date hereof and addressed to the Bank, substantially
in the form of Exhibit B hereto, and
18
19
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 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
19
20
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, 1996 audited financial statements to
the first Borrowing Date.
(j) HEDGING POLICY. The Bank shall have received
Financial's policy with respect to hedging transactions, a
copy of which shall be attached hereto as Exhibit E (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.
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:
20
21
(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 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
21
22
(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 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;
22
23
(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
23
24
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 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
24
25
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 $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 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
25
26
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 1, 1997, 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;
(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
26
27
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 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.
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
27
28
(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, (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, and
(vii) loans and advances to M/I Homes.
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 Hedging Policy
currently in effect.
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
(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,
28
29
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 5.6, 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 Bank that such a default has occurred, which notice
shall specify the nature of the default; or
29
30
(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 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 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
30
31
(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.
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 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
31
32
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.
3 Easton Oval
Columbus, Ohio 43219
Attention: Kerrii B. Anderson
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
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: Bank One, 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
32
33
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 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 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.
33
34
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.
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.
BANK ONE, N.A. M/I FINANCIAL CORP.
By___________________________ By____________________________
Thomas D. Igoe Paul S. Rosen
Title: Senior Vice President Title: President
M/I SCHOTTENSTEIN HOMES, INC.
By____________________________
Robert H. Schottenstein
Title: President and
Assistant Secretary
34