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EXHIBIT 10.22
(614) 480-4228
April 17, 1998
Mr. Douglas G. Borror, Chief Executive Officer
Mr. Jon M. Donnell, Chief Operating Officer
Mr. David S. Borror, Executive Vice President
Mr. Terry E. George, Treasurer
Dominion Homes, Inc.
5501 Frantz Road
Dublin OH 43017-0766
Re: $125,000,000 Senior Unsecured Credit Facility
Gentlemen:
Commitment
You have advised the Huntington National Bank ("Huntington") that Dominion
Homes, Inc. an Ohio corporation (the "Borrower") desires to establish a
$125,000,000 Senior Unsecured Revolving Credit Facility (the "Facility"), the
proceeds of which would be used by the Borrower to: (i) refinance the Borrower's
outstanding loans made under that certain Loan Agreement dated as of September
29, 1997 among the Borrower, the lenders party thereto, Huntington, as issuing
bank, and Huntington as Administrative Agent (the "Existing Loan Agreement");
and (ii) provide working capital, capital expenditure and acquisition financing
for the Borrower and financing for other lawful general corporate purposes
(including those set forth in the attached Annex I). You have asked Huntington
to commit to provide you with financing commitments for the entire amount of the
Facility.
Huntington is pleased to inform you of its commitment to provide the entire
amount of the Facility, as sole Lender, subject to the terms and conditions
described in this letter and Annex I attached hereto, and together with the Fee
Letter referred to below, the "Commitment Letter." Huntington's commitment to
provide the entire amount of the Facility shall be without regard to
Huntington's ability to syndicate the Facility as described below, subject to
all the terms and conditions set forth below.
Conditions Precedent
The commitment of Huntington hereunder is subject to: (i) the preparation,
execution and delivery of mutually-acceptable loan documentation, including a
credit agreement among the Borrower, the Administrative Agent, and Huntington as
lender and issuing bank, incorporating substantially the terms and conditions
outlined in this Commitment Letter; (ii) the absence of a material adverse
change in the business condition, financial or otherwise, operations,
performance, properties or prospects of the Borrower since December 31, 1997;
(iii) the accuracy and completeness of all representations you make to us and
information that you furnish to us and your compliance with the terms of this
Commitment Letter; and (iv) the payment in full of all fees, expenses and other
amounts payable under this Commitment Letter.
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Commitment Termination
The commitment of Huntington set forth in this Commitment Letter will
terminate on May 29, 1998, unless the Facility closes on or before such date.
Prior to such date, this Commitment Letter may be terminated (i) by you at any
time at your option upon payment of all fees, expenses and other amounts payable
under this Commitment Letter or (ii) by the Huntington if any event occurs or if
information has become available that, in its judgment, results or is likely to
result in the failure to satisfy any conditions set forth above.
Syndication
Huntington reserves the right, prior to or after the execution of
definitive documentation with respect to the Facility, to syndicate a portion of
its commitment to one or more other financial institutions reasonably acceptable
to you that will become parties to such definitive documentation pursuant to a
syndication to be managed by Huntington Capital Corp. ("Huntington Capital")
(Huntington and any financial institutions becoming parties to such definitive
documentation being collectively referred to herein as the "Lenders"). You
understand that Huntington Capital intends to commence syndication efforts
promptly and that it may elect to appoint one or more syndication agents (which
may include Huntington) to direct the syndication efforts on its behalf.
Huntington Capital will act as the syndication agent with respect to the
Facility and will manage all aspects of the syndication in consultation with
you, including the timing of all offers to potential Lenders, the acceptance of
commitments, and the determination of the amounts offered and the compensation
provided.
You agree to take all action as Huntington Capital may reasonably request
to assist it in forming a syndicate acceptable to it and you. Your assistance in
forming such a syndicate shall include but not be limited to: (i) making senior
management and representatives of the Company available to participate in
information meetings with potential Lenders at such times and places as
Huntington Capital may reasonably request; (ii) using your best efforts to
ensure that the syndication efforts benefit from your lending relationships; and
(iii) providing Huntington Capital with all information reasonably deemed
necessary by it to successfully complete the syndication.
To ensure an orderly and effective syndication of the Facility, you agree
that until the closing of the syndication transaction (as determined by
Huntington Capital), you will not, and will not permit any of your affiliates
to, syndicate or issue, attempt to syndicate or issue, announce or authorize the
announcement of the syndication or issuance of, or engage in discussions
concerning the syndication or issuance of, any debt facility or debt security
(including any renewals thereof), without the prior written consent of
Huntington Capital.
You agree that Huntington will act as the sole administrative agent for the
Facility and that Huntington Capital will act as sole syndication agent and that
no additional agents, co-agents or arrangers will be appointed, or other titles
conferred, without the consent of Huntington Capital and Huntington.
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Fees
In addition to the fees described below, you agree to pay the fees set
forth in that certain letter between you and us of even date herewith (the "Fee
Letter"). The terms of the Fee Letter are an integral part of the commitment
hereunder and constitute part of this Commitment Letter for all purposes hereof.
Costs, Fees and Expenses
In further consideration of the commitment hereunder, and recognizing that
in connection herewith, the Huntington and Huntington Capital are incurring
costs and expenses, including, without limitation, reasonable fees and
disbursements of counsel and syndication agent, search fees, due diligence, and
syndication (including printing, distribution and bank meetings), costs and
expenses, you hereby agree to pay, or reimburse the Huntington and Huntington
Capital on demand for all such reasonable costs and expenses, whether incurred
before or after the date hereof, regardless of whether any of the transactions
contemplated hereby are consummated. The Borrower shall not be responsible for
any fees, costs or expenses of any Lenders or their counsel (other than
Huntington and its counsel).
Indemnification
You agree to indemnify and hold harmless Huntington, Huntington Capital,
each Lender and each of their affiliates and each of their respective officers,
directors, employees, agents, advisors, attorneys and representatives (each, an
"Indemnified Party") from and against any and all claims, damages, losses,
liabilities and expenses (including, without limitation, reasonable fees and
disbursements of counsel), joint or several, that may be incurred by or asserted
or awarded against any Indemnified Party, in each case arising out of or in
connection with or relating to any investigation, litigation or proceeding or
the preparation of any defense with respect thereto, arising out of or in
connection with or relating to this Commitment Letter or the loan documentation
or the transactions contemplated hereby or thereby or any use made or proposed
to be made with the proceeds of the Facility, whether or not such investigation,
litigation or proceeding is brought by the Borrower, any of its shareholders or
creditors, an Indemnified Party or any other person, or an Indemnified Party is
otherwise a party thereto and whether or not the transactions contemplated
hereby are consummated, except to the extent such claim, damage, loss, liability
or expense is found in a final judgment by a court of competent jurisdiction to
have resulted from such Indemnified Party's gross negligence or willful
misconduct.
You agree that no Indemnified Party shall have any liability (whether
direct or indirect, in contract, tort or otherwise) to the Borrower or any of
its shareholders or creditors for or in connection with the transactions
contemplated hereby, except to the extent such liability is found in a final
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross' negligence or willful misconduct. In no event,
however, shall any Indemnified Party be liable on any theory of liability for
any special, indirect, consequential or punitive damages.
Confidentiality
By accepting delivery of this Commitment Letter, you agree that this
Commitment Letter is for your confidential use only and that neither its
existence nor the terms hereof will be disclosed by you to
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any person other than your officers, directors, employees, accountants,
attorneys and other advisors, and then only on a "need to know" basis in
connection with the transactions contemplated hereby and on a confidential
basis. Notwithstanding the foregoing, following your acceptance of the
provisions hereof and your return of an executed counterpart of this Commitment
Letter to us as provided below, (i) you may make public disclosure of the
existence and amount of Huntington's commitment hereunder and of Huntington's
identity as administrative agent, (ii) you may file a copy of this Commitment
Letter (other than the Fee Letter) in any public record in which it is required
by law to be filed, and (iii) you may make such other public disclosures of the
terms and conditions hereof as you are required by law, in the opinion of your
counsel, to make.
Representations and Warranties
You represent and warrant that (i) all information that has been or will
hereafter be made available to Huntington or any of the Lenders by you or any of
your representatives in connection with the transactions contemplated hereby is
and will be complete and correct in all material respects and (ii) all financial
projections that have been or will be prepared by you and made available to
Huntington and the Lenders have been or will be prepared in good faith based
upon reasonable assumptions. You further agree to supplement the information or
projections from time to time so that the representations and warranties
contained in this paragraph remain correct. In issuing this commitment,
Huntington is relying on the accuracy of the information furnished to it by or
on behalf of the Borrower and without an independent verification thereof.
No Third Party Reliance
The agreements of Huntington hereunder to provide financing under the
Facility are made solely for the benefit of the Borrower and may not be relied
upon or enforced by any other person. Please note that those matters that are
not covered or made clear herein or in Annex I or in the Fee Letter are subject
to the mutual agreement of the parties. The terms and conditions of this
Commitment Letter may be modified only in writing.
Governing Law
This Commitment Letter shall be governed by and construed in accordance
with the laws of the State of Ohio. This Commitment Letter sets forth the entire
agreement of the parties with respect to the matters addressed herein and
supersedes all prior communications, written or oral, with respect hereto,
including without limitation, the proposal letters issued to the Borrower by
Huntington on April 10, 1998. This Commitment Letter may be executed in any
number of counterparts, each of which, when so executed, shall be deemed to be
an original, and all of which taken together shall constitute one and the same
Commitment Letter. Delivery of an executed counterpart of the signature page to
this Commitment Letter by telecopier shall be as effective as delivery of a
manually executed counterpart of this Commitment Letter. The Borrower's
obligations under the above paragraphs with respect to fees, costs and expenses,
and confidentiality, shall survive the expiration and termination of this
Commitment Letter.
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Please indicate your acceptance of the provisions hereof by signing the
enclosed copy of this Commitment Letter and the Fee Letter and returning them
along with a $100,000 nonrefundable fee, to William R. Remias, Assistant Vice
President, The Huntington National Bank (telecopier (614) 480-5791), 41 South
High Street, Columbus, Ohio 43287, on or before 5:00 p.m. (Columbus time), on
April 20, 1998, the time at which the Commitment of Huntington set forth above,
if not so accepted prior thereto, will expire. Upon the closing of the Facility,
the above nonrefundable fee will be credited against the fees set forth in the
Fee Letter. If you elect to deliver this Commitment Letter by telecopier, please
arrange for the executed original to follow by next-day courier.
Very truly yours,
THE HUNTINGTON NATIONAL BANK
By: */s/William R. Remias
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William R. Remias
Title: Assistant Vice President
THE HUNTINGTON CAPITAL CORP., as Syndication
Agent (and not as Lender)
By: */s/Scott L. Moore
---------------------------------
Scott L. Moore
Title: Vice President
Accepted this 17th day of April, 1998 by Dominion Homes, Inc.
By */s/Terry E. George
--------------------------------
Its Treasurer
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EXHIBIT 10.22
ANNEX I
DOMINION HOMES, INC.
SUMMARY OF TERMS AND CONDITIONS
$125,000,000 SENIOR UNSECURED REVOLVING CREDIT FACILITY
This Summary of Terms and Conditions outlines certain terms of the Facility
referred to in the Commitment Letter dated April 16, 1998, addressed to Dominion
Homes, Inc. from The Huntington National Bank and Huntington Capital Corp.(the
"Commitment Letter"). This Summary of Terms and Conditions is part of and
subject to the Commitment Letter.
BORROWER: Dominion Homes, Inc., an Ohio corporation
ADMINISTRATIVE
AGENT: The Huntington National Bank.
SYNDICATION
AGENT: Huntington Capital Corp.
ISSUING BANK: The Huntington National Bank.
LENDERS: Huntington and other financial institutions acceptable
to the Administrative Agent and the Borrower.
CLOSING DATE: On or before May 29, 1998.
THE REVOLVING
LOAN: The Lenders jointly, and not severally, shall make
advances up to $125,000,000 in a senior unsecured
revolving credit facility (the "Revolving Loan")
subject to the terms and conditions of a certain
Credit Agreement to be entered into among the
Borrower, the Administrative Agent and the Lenders
(the "Credit Agreement"), which may limit advances to
availability under a Borrowing Base. Notwithstanding
the respective individual limits of the Revolving Loan
and the Letters of Credit (as defined below), the
maximum principal sum of the Revolving Loan, plus the
aggregate stated value of all letters of credit
outstanding under the Letter of Credit Facility shall
not exceed the lesser of (i) the Borrowing Base, plus
the Acquisition Advance (to the extent applicable only
during the first 3 years) or (ii) $125,000,000.00.
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MATURITY: The Revolving Loan shall be payable five years from
closing (May 31, 2003).
REPAYMENT: Interest shall be payable monthly and at the end of each
interest period. Principal shall be due at maturity.
Prior to maturity, subject to the terms of the Credit
Agreement, the principal of the Revolving Loan may be
readvanced and repaid any number of times.
INTEREST RATES: During the term of the Revolving Loan, the rate of
interest applicable thereto shall, at the Borrower's
option, accrue at one or more of the following rates:
(a) the Prime Commercial Rate plus the applicable margin
set forth below in effect from time to time; or (b) the
current reserve adjusted Eurodollar Rate which deposits
in U.S. Dollars are offered to leading banks in the
London Interbank Market, as reported on Telerate page
3750, and subject to the customary change of
circumstance provisions, for interest periods of one,
two, three or six months, plus the applicable margin set
forth below. The appropriate margin for fixed rates
shall fluctuate based on the Borrower's ratio of EBITDA
to Interest Expense ("Interest Coverage Ratio"). The
Prime Rate margin and the Eurocurrency Rate margin from
time to time will be determined as of the date of the
Administrative Agent's receipt of the Borrower's
financial statements for the previous quarter on the
basis of the Borrower's Interest Coverage Ratio as set
forth below.
Performance Pricing Matrix
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Interest Coverage Ratio Prime Margin Eurodollar Margin Commitment Fee
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Greater than 3.75 to 1.00 0% 1.75% .25%
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Greater than or equal to
3.25 to 1.00, but less than
or equal to 3.75 to 1.00 0% 2.00% .25%
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Greater than or equal to
2.75 to 1.00, but less than
3.25 to 1.00 0% 2.25% .25%
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Less than 2.75 to 1.00 0% 2.50% .375%
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In addition, interest shall accrue on the amount of any
Acquisition Advances under the Revolving Loan at an
interest rate equal to the Eurodollar Rate, plus the
applicable margin set forth in the Performance Pricing
Matrix, plus .5% per annum. "Acquisition Advance" means,
subject to the terms and conditions below, a sum of
permitted advances under the Revolving Loan which may
exceed the Borrowing Base (with a maximum sum of
$10,000,000) attributable to Permitted Acquisitions
consummated by the Borrower, but Acquisition Advances
shall be available only during the first three years
after closing.
INTEREST RATE
PROTECTION: If any of the Eurodollar rates (without the applicable
margins) offered by the Credit Agreement reaches 8.50%
per anum, the Borrower will be required to enter into
or have entered into interest rate contracts (which
may be entered into between the Borrower and any
financial institution) with an aggregate notional
amount equal to 50% of the Revolving Loan outstanding
on such date for a term extending to the maturity date
of the Revolving Loan on terms reasonably satisfactory
to the requisite Lenders.
USE OF PROCEEDS: The Revolving Loan proceeds will be used (a) to refinance
the revolving credit commitments under the Existing Loan
Agreement; (b) for working capital and normal and
customary business purposes of the Borrower; and (c) for
Permitted Acquisitions.
FEES: (a) Unused Fee: See Performance Pricing Matrix for
percent per annum of the difference between (i)
$125,000,000 and (ii) the sum of (a) the daily
principal balance of the Revolving Loan during any
full or partial calendar quarter, plus (b) the daily
aggregate sum of issued and outstanding Letters of
Credit. Such fees shall be payable quarterly in
arrears and shall be shared on a pro rata basis among
the Lenders.
(b) Underwriting Fee: As set forth in the Fee Letter.
LETTERS OF CREDIT: Huntington will make available to the Borrower or to
Approved Joint Ventures standby letters of credit up to
the aggregate maximum stated value outstanding at any one
time not to exceed $20,000,000.00 (the "Letters of
Credit"), subject to the limitations stated in this
letter.
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(a) Expiry Date: None of the Letters of Credit shall have
an expiry date later than the earlier of (i) 24 months
from issuance or (ii) the maturity date of the Revolving
Loan.
(b) Letter of Credit Fees: The fees for issuance of
Letters of Credit shall be the Eurodollar Margin, as set
forth in the Performance Pricing Matrix as a percent per
annum of the stated amount of each Letter of Credit,
payable one-fourth of such fees upon the issuance of each
Letter of Credit, and the remainder of such fees payable
quarterly in arrears: The issuing bank shall retain a fee
equal to 1/8% per annum, and the remaining amount shall
be shared on a pro rata basis by the Lenders. In
addition, the Borrower shall pay to the issuing bank its
normal and customary issuing, servicing, and amendment
fees.
(c) Use of Letters of Credit: The Letters of Credit shall
be used by the Borrower (i) to support bonding
requirements for real estate site improvements in favor
of various municipal entities, (ii) to secure contractual
performance of the Borrower's land development
activities, (iii) to secure the Borrower's performance in
land acquisition activities, and (iv) in connection with
the type of activities described above for Approved Joint
Ventures.
(d) Approved Joint Ventures: The term "Approved Joint
Ventures" shall be defined in the Credit Agreement and
shall be substantially similar to the definition of such
term contained in the Existing Loan Agreement.
BORROWING BASE: The sum of (a) advances under the Revolving Loan plus
(b) the aggregate outstanding stated amounts of the
Letters of Credit shall not exceed the Borrowing Base.
"Borrowing Base" shall mean:
(a) 100% of the Company's Available Cash, plus
(b) 80% of Eligible Accounts Receivable, plus
(c) 75% of Eligible Lumber Inventory, plus
(d) 90% of Eligible Home --Work-in-Process,
plus
(e) the lesser of $15,000,000 or 50% of Eligible Real
Estate Held for Development, plus
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(f) the lesser of $10,000,000 or 50% of Eligible
Investments in Joint Venture, plus
(g) the lesser of $5,850,000 or 90% of the aggregate
sum of Eligible Model Homes, plus
(h) the lesser of $6,000,000 or 90% of Eligible
Speculative Homes, plus
(i) 62.5% of Eligible Developed Lots, plus
(j) 50% of Eligible Lots Under Development.
In addition, subject to the terms set forth herein, the
Borrower may have borrowing availability in the amount of
the Acquisition Advances up to the amount of the
aggregate acquisition purchase price, minus aggregate
additions to the Borrowing Base as a result of the
consummation of any Acquisition or Acquisitions (not to
exceed the aggregate sum of $10,000,000).
The Administrative Agent reserves the right to deduct
from any borrowing availability under the Borrowing Base,
such amounts as necessary to establish reserves for the
basket of "Excess Permitted Nonrecourse Borrowings" set
forth below.
ELIGIBILITY: The term "Eligible" and the components constituting
the Borrowing Base set forth above shall be
substantially the same as in the Existing Loan
Agreement. With respect to the Borrowing Base, only
real property located in the State of Ohio or
contiguous states and joint ventures having Ohio real
property in Ohio or contiguous states shall be
considered for eligibility.
DEFAULT RATE: The default rate on the Revolving Loan and on the failure
to reimburse any draws under the Letters of Credit shall
be two percentage points per annum in excess of the Prime
Commercial Rate.
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CONDITIONS Usual and customary, including without limitation:
PRECEDENT: (1) The Borrower shall provide the Administrative Agent
with certified corporate resolutions of its board
of directors authorizing it to borrow the full
amount of the loans, closing certificates, a good
standing certificate, articles of incorporation,
bylaws, and other corporate documents requested by
the Administrative Agent.
(2) The Borrower shall execute and deliver to the
Administrative Agent and the Lenders, inter alia,
promissory notes, letter of credit reimbursement
agreements, and the Credit Agreement.
(3) The Borrower will pay all costs and expenses
incidental to the Facility, whether or not the
loans are closed, but the Borrower shall not be
responsible for fees, costs or expenses of any
Lenders or their counsel (other than Huntington and
its counsel). Such costs shall include, but not be
limited to, fees and out-of-pocket expenses of the
Administrative Agent, including without limitation
attorneys fees.
(4) The Borrower shall provide to the Administrative
Agent and the Lenders at closing an opinion of its
counsel, acceptable in form and substance to the
Administrative Agent, including such provisions and
addressing such matters as may be requested by the
Administrative Agent.
(5) Except for existing outstanding letters of credit
issued by Huntington for the account of the
Borrower or certain approved joint ventures, full
payment or satisfaction shall be obtained of the
obligations under the Existing Credit Agreement.
(6) No change shall have occurred since December 31,
1997 which has or is reasonably likely to have a
material adverse effect on (a) the business
condition (financial or otherwise), operations,
performance, properties or prospects of the
Borrower, (b) the ability of the Borrower to
perform its obligations under the Loan documents,
or (c) the ability of the Administrative Agent, the
Lenders and issuing banks to enforce such Loan
documents) ("Material Adverse Change").
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(7) There shall exist no action, suit, investigation,
litigation or proceeding pending or threatened in
any court or before any arbitrator or government
instrumentality that, if adversely determined,
could reasonably be expected to result in a
Material Adverse Change.
CONDITIONS
PRECEDENT TO
REVOLVING LOAN
AND LETTERS OF
CREDIT: No default shall have occurred under any of the loan
documents, the representations and warranties of the
Borrower therein shall be true and correct immediately
prior to, and after giving affect to, funding and no
Material Adverse Change shall have occurred.
REPRESENTATIONS
AND WARRANTIES: Usual and customary for financings of this type and
substantially similar to those in the Existing Loan
Agreement.
COVENANTS IN CREDIT
AGREEMENT: Those negative, affirmative and financial covenants
customarily found in Administrative Agent's Credit
Agreements for financings of this type and substantially
similar to those in the Existing Loan Agreement,
including without limitation the following:
(a) The Borrower shall be required to provide
unqualified annual financial statements audited by
independent certified public accountants acceptable
to the Administrative Agent, within 90 days of the
end of its fiscal year;
(b) The Borrower shall deliver the following
information and reports to the Administrative
Agent and the Lenders on a monthly basis within
45 days after the end of each month: (1)
internally prepared financial statements,
including balance sheets and income statements;
(2) Borrowing Base calculation reports; (3)
Compliance Certificates together with financial
ratio calculations certifying compliance with
the Credit Agreement and calculating all
financial ratios; (4) aged listing of accounts
receivable; (5) Land Development Lot
Availability Report detailing completed lots and
lots under development for each subdivision; (6)
listing of model homes including cost to value;
and (7) listing of speculative homes including
cost to value;
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(c) In addition to the foregoing information, the
Borrower shall provide to the Administrative
Agent and the Lenders copies of all filings,
disclosures, or other information filed with the
Securities Exchange Commission, any state
securities commission or other regulatory agency
and all press releases issued by the Borrower,
contemporaneously with the filing, release or
disclosure, as the case may be;
(d) The Borrower shall be required to provide such
other financial information from time to time as
the Administrative Agent or the Lenders may
request;
(e) The Borrower shall provide a negative pledge by
which it shall agree not to cause, permit, agree
or consent to cause or permit in the future any
of its property, whether now owned or hereafter
acquired to be subject to a lien or encumbrance,
except for those liens in connection with
purchase money indebtedness permitted in
paragraph (g) below, nonrecourse obligations to
sellers of real estate, whether acquired
directly or as a result of a Permitted
Acquisition, and other liens mutually agreed to
between Borrower and the Administrative Agent.
In addition, the Borrower shall enter into a
"double negative pledge" by which it shall agree
not to provide a negative pledge to any party
other than the Administrative Agent;
(f) The Borrower shall not replace or change the
position of its Chief Executive Officer or Chief
Operating Officer unless such replacement or change
is not reasonably likely to cause a Material
Adverse Change;
(g) Except for Excess Permitted Nonrecourse
Borrowings, the Borrower shall agree that its
other borrowings, additional debt or capital
lease obligations (as defined by GAAP) shall not
exceed the aggregate principal sum of
$10,000,000 outstanding at any one time. In
addition, the Borrower may incur up to
$5,000,000 of Indebtedness in respect of
nonrecourse obligations to sellers of real
estate ("Excess Permitted Nonrecourse
Borrowings"), provided that all of such Excess
Permitted Nonrecourse Borrowings shall be fully
reserved under the Borrowing Base;
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(h) The Borrower will not guarantee, indorse or
otherwise become surety for Indebtedness of
others in excess of $100,000 outstanding at any
one time, except for (i) Letters of Credit in
connection with Approved Joint Ventures; or up
to $10,000,000 of letters of credit not issued
under the Facility or in connection with seller
financing for Approved Joint Ventures; (ii)
indorsement of negotiable instruments in the
ordinary course of business; and (iii)
partnership liability in connection with joint
ventures or partnerships.
(i) The Borrower shall agree to maintain property and
liability insurance coverage in such amounts and
with such insurers as the Administrative Agent may
deem acceptable;
(j) The Borrower shall agree that its annual payments
for (i) operating lease rentals will not exceed
$2,000,000 in the aggregate, and (ii) model homes
rentals will not exceed $1,000,000 in the
aggregate;
(k) The Borrower may make loans and advances in a
manner substantially similar to those permitted
under Section 8.11 of the Existing Loan
Agreement;
(l) So long as no Event of Default exists under the
Credit Agreement, the Borrower may redeem or
acquire any of its own capital stock (a) having a
value up to $500,000 in any fiscal year; and (b) an
amount equal to the net proceeds from the
simultaneous sale of an equivalent amount of its
capital stock;
(m) The Borrower shall limit its investments to
bonds or other obligations in the United States,
certificates of deposit issued by commercial
banks with minimum capital of $500 million,
commercial paper rated at least A-1 or P-1, and
having maturity dates of not more than one year,
Permitted Acquisitions, those investments
permitted by the Existing Loan Agreement and up
to $2,000,000.00 in Investments in a mortgage
company or companies;
(n) The Borrower shall agree with respect to all
real property owned or leased by it to maintain
agreed upon standards (substantially similar to
the Existing Loan Agreement) with respect to
environmental matters, condemnation or eminent
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domain, boundary line disputes, encroachments,
access limitations, surveys, licenses,
environmental studies, wetland analyses, zoning
(to the extent required), availability of
utilities and other related real estate or
development requirements;
(o) At all times, the Borrower shall maintain a
Tangible Net Worth of the following amounts for
the following periods: from closing through and
including December 30, 1998, not less than
$35,000,000, and from and after December 31,
1998, the sum of $35,000,000, plus 75% of the
Borrower's net income after taxes in each fiscal
year which the Borrower's net income after taxes
is positive, beginning with the fiscal year
ending December 31, 1998, and ending with the
most recently ended fiscal year at the date of
calculation. "Tangible Net Worth" shall mean
Borrower's shareholders' equity, minus the sum
of all the following: (i) the excess of cost
over the value of net assets of purchased
businesses, rights, and other similar
intangibles, (ii) organization expenses, (iii)
intangible assets (to the extent not reflected
in the foregoing), (iv) goodwill, (v) deferred
charges or deferred financing costs, (vi) loans
or advances to and/or accounts or notes
receivable from affiliates, and (vii)
non-compete agreements;
(p) At all times, the Borrower shall maintain an
Interest Coverage Ratio (EBITDA to Interest
Expense) of not less than 2.25 to 1.00. The
Interest Coverage Ratio shall be determined as of
the end of each quarter for the twelve month period
ending on such date.
(q) At all times, the Borrower shall maintain a ratio
of Total Liabilities to Tangible Net Worth of not
greater than 2.75 to 1.00 through December 31,
1999, and 2.50 to 1.00 from and after January 1,
2000;
(r) At all times, the Borrower shall maintain a ratio
of Uncommitted Land Holdings to Tangible Net Worth
of not greater than 2.00 to 1.00 through December
31, 1999, and 1.75 to 1.00 from and after January
1, 2000;
(s) The Borrower shall be permitted to sell or
otherwise dispose of assets in the ordinary course
of business, but shall agree
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not to sell or otherwise dispose any of its
assets, except as permitted in the Existing Loan
Agreement;
(t) The Borrower shall obtain prior approval from the
requisite Lenders for any purchases of unzoned land
that would cause the Borrower to have such land in
excess of $2,500,000 at cost outstanding at any one
time;
(u) Uncommitted land holdings in central Ohio (60 mile
radius from agreed upon point in Franklin County)
shall not exceed $73,000,000 at the end of fiscal
1997, and thereafter increasing by 50% of the
Borrower's net income, not to exceed the sum of
$90,000,000 outstanding at any time;
(v) Other than in markets in which the Borrower has
ongoing construction and a substantial presence
as of December 31, 1997, total investment in
uncommitted land holdings, speculative homes,
model homes, and in Permitted Acquisitions shall
not exceed the aggregate sum of $25,000,000 (the
"Maximum New Market Investment Amount") without
all Lender approval. Notwithstanding the
foregoing, the Borrower may only invest up to
$15,000,000 of such amount in one or more
"start-up" operations involving uncommitted land
holdings, speculative homes and model homes not
associated with an ongoing business acquired by
the Borrower. In addition, the Borrower shall
not build homes or develop real estate in
markets other than Ohio and any state contiguous
to Ohio without requisite Lender approval;
(w) Subject to the Maximum New Market Investment
Amount, acquisitions of other businesses,
corporations or entities up to the aggregate
amount of $25,000,000 shall be permitted,
subject to meeting the requirements of a
"permitted acquisition" agreed to between the
Borrower and the Administrative Agent under the
Credit Agreement in form substantially similar
to Permitted Acquisitions in the Existing Loan
Agreement, or as set forth below;
(x) Model homes inventory shall not exceed $6,500,000
at any time;
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(y) Dividends (in the absence of default) in any fiscal
year shall not exceed 25% of net income after
taxes; provided, however, no default shall occur
after the payment of any dividend;
(z) The Borrower shall not incur a quarterly loss in
any five consecutive quarters; and
(aa) The Administrative Agent shall be appointed as
Administrative Agent to administer the Facility for
the benefit of the Lenders, and such agency shall
contain terms and conditions satisfactory to the
Administrative Agent and the Lenders.
COUNSEL TO
AGENT: Porter, Wright, Morris & Arthur, 41 South High Street,
Suite 31, Columbus, Ohio 43215, Timothy E. Grady,
telephone: (614) 227-2105.
REQUISITE
LENDERS: Lenders holding greater than 66 2/3% of the commitments
under the Facility.
PERMITTED
ACQUISITIONS: Neither the Borrower nor any Subsidiary shall make any
Acquisition without the prior written consent of the
Administrative Agent and the Requisite Lenders except
in connection with a Permitted Acquisition, the
Purchase Price of which, together with the aggregate
Purchase Price of all other Permitted Acquisitions
made after the date hereof does not exceed the sum of
$25,000,000.00, provided, however such Acquisitions,
plus all Investments in Restricted Subsidiaries, plus
purchases of the real and personal property shall not
exceed the Maximum New Market Investment Amount (all
such definitions shall be substantially similar to the
Existing Loan Agreement). "Purchase Price" shall
mean the sum of cash and cash equivalents paid, notes
or other indebtedness given, liabilities assumed, or
the fair market value of property transferred in
connection with any Acquisition. A "Permitted
Acquisition" shall mean an Acquisition by the
Borrower or any Subsidiary, for which the Borrower or
a Restricted Subsidiary satisfies each of the
following conditions to the good faith satisfaction of
the Administrative Agent and the Requisite Lenders:
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(a) such Acquisition is in the homebuilding or
related industry.
(b) such Acquisition is made at a time when, after
giving effect thereto and the related financing
thereof, (i) no Event of Default exists or would
occur based upon a (A) pro forma prospective
calculation for the next twelve (12) month
period and (B) a pro forma historical
calculation (using Adjusted EBITDA, if
applicable) for the most recent twelve (12)
month period of the financial covenants set
forth in the Credit Agreement performed in
accordance with GAAP giving effect to any higher
levels of Indebtedness associated with the
acquired operations, together with interest
thereon to be accrued for such twelve (12) month
periods, and (ii) after giving effect to such
Acquisition, the Borrower and each Subsidiary
would remain solvent pursuant to the warranties
contained in this Agreement.
(c) the acquired business entity shall have had
positive adjusted EBITDA for the previous twelve
(12) months. "Adjusted EBITDA" shall mean such
entity's EBITDA, plus (i) owner's and
affiliate's compensation and other expenses
related to owners and affiliates (if such owner
and affiliate will not remain with business or
if such related expenses will not continue),
plus (ii) any extraordinary losses incurred
during such period as determined by GAAP, minus
any extraordinary gains for such period.
(d) on the date of the closing of the Permitted
Acquisition and after giving effect thereto and
to any advances under the Revolving Loan made to
finance such Permitted Acquisition, (i) no Event
of Default shall have occurred and be continuing
and (ii) all representations and warranties
under this Agreement shall be true and correct
as though made on and as of such date, except to
the extent that any such representation or
warranty expressly relates to an earlier date;
(e) the acquired business entity, if the acquisition
is of capital stock and such entity constitutes
a Subsidiary, obligates itself on the Loans or
the Credit Agreement pursuant to a guaranty or
supplement or other loan documents satisfactory
to the Administrative Agent and otherwise
complies with the requirements of the Credit
Agreement and (ii) executes and
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delivers such documentation as the Administrative
Agent deems appropriate with respect to
intercompany borrowings from the Borrower.
(f) the acquired assets are free and clear of all liens
or encumbrances except as permitted under the
Credit Agreement;
(g) the Borrower delivers written notice to the
Administrative Agent of its intention to make
such Acquisition no less than 45 days prior to
the proposed closing date for such Acquisition
that sets forth, among other things, information
regarding liabilities and obligations with
respect to the environmental matters, labor
matters, or ERISA matters to be incurred by the
Borrower (including, without limitation, the
acquired business entity in the event of an
acquisition of capital stock) as a result of
such Acquisition, any indemnities afforded under
the terms of such acquisition and the scope and
results of any environmental review, labor
review, or ERISA review undertaken by the
Borrower in connection therewith and the results
of any further due diligence required by the
Administrative Agent;
(h) the Borrower shall provide the Administrative Agent
with copies of financial statements of the proposed
acquired business entity;
(i) the Borrower shall not engage in a Hostile
Acquisition. "Hostile Acquisition" shall mean
to acquire, or obtain the right to acquire,
beneficial ownership of 5% of common stock or 5%
of assets then outstanding of any other business
entity pursuant to a tender offer, exchange
offer, or other offer not expressly authorized
in writing by the Board of Directors of such
business entity; and
(j) all assets and/or subsidiaries acquired shall be
subject to the provisions of this Agreement.
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"Acquisition" means any transaction, or any series of related
transactions, by which the Borrower or any of its Subsidiaries
(i) acquires any going business or all or substantially all of
the assets of any firm, corporation or division thereof which
constitutes a going business, whether through purchase of
assets, merger or otherwise, or (ii) directly or indirectly
acquires (in one transaction or in a series of transactions) at
least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election
of directors or a majority (by percentage or voting power) of
the outstanding interests of a partnership or a joint venture
or a majority (by percentage or voting power) of the
outstanding ownership interest of a limited liability company.
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