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Exhibit 10.2
REVOLVING CREDIT AGREEMENT
THIS AGREEMENT is made to be effective as of June 22, 1998, 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, NA, 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, BankBoston, N.A., The Fifth
Third Bank of Columbus, SunTrust Bank, Central Florida, N.A. and the Bank as
agent for the foregoing banks are parties to a certain Third Restated Revolving
Credit Loan, Swingline Loan and Standby Letter of Credit Agreement effective as
of May 27, 1998 (together with any amendments and restatements thereto, 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 the Bank are parties to a Revolving
Credit Agreement effective as of July 18, 1997 in the principal amount of
$30,000,000.00 (the "1997 Credit Agreement"), which matures on June 25, 1998.
D. The Borrowers and the Bank want to enter into a new credit
facility in the principal amount of Thirty Million and 00/100 Dollars
($30,000,000.00), which will pay off and replace the 1997 Credit Agreement on
the terms and conditions hereinafter set forth.
AGREEMENT
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in the Agreement, the following
terms have the following meanings:
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"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)
$30,000,000.00, 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 20, 2001, or such earlier date as the
Commitment shall terminate as provided herein, subject to any extension of the
Commitment Period pursuant to subsection 2.7 of this Agreement.
"Commonly Controlled Entity" shall mean an entity, whether or
not incorporated, which is under common control with Financial within the
meaning of Section 414(b) or (c) of the Code.
"Contingent Obligation" shall mean as to any Person, any
reimbursement obligations of such Person in respect of drafts
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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.
"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 either (i) to purchase a home from M/I Homes or
another Person that is substantially completed or (ii) to re-finance an existing
mortgage loan (provided that the total amount of such re-financing mortgage
loans made by Financial shall not exceed the limit set
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forth in subsection 6.5 hereof), (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
$5,000,000.00.
"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 the
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.
"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.
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"GAAP" shall mean generally accepted accounting principles in
the United States of America as in effect at the time any determination is made
or financial statement is required hereunder as promulgated by the American
Institute of Certified Public Accountants, the Accounting Principles Board, the
Financial Accounting Standards Board or any other body existing from time to
time which is authorized to establish or interpret such principles, applied on a
consistent basis throughout any applicable period, subject to any change
required by a change in GAAP; provided, however, that if any change in generally
accepted accounting principles from those applied in preparing the financial
statements referred to in subsection 3.1 hereof affects the calculation of any
financial covenant contained herein, the Borrowers and the Bank hereby agree to
amend the Agreement to the effect that each such financial covenant is not more
or less restrictive than such covenant as in effect on the date hereof using
generally accepted accounting principles consistent with those reflected in such
financial statements.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Indebtedness" shall mean, as to any Person at a particular
time, (a) indebtedness for borrowed money or for the deferred purchase price of
property or services (including without limitation any such indebtedness which
is non-recourse to the credit of such Person but is secured by assets of such
Person) other than current (due and payable within 12 months or less), unsecured
obligations for operating expense items incurred in the ordinary course of
business, (b) any other indebtedness evidenced by promissory notes or other debt
instruments, (c) obligations under material leases which shall have been or
should be, in accordance with GAAP, recorded as capitalized leases, (d)
indebtedness arising under acceptance facilities, (e) indebtedness arising under
unpaid reimbursement obligations in respect of all drafts actually drawn under
letters of credit issued for the account of such Person,(f) indebtedness arising
under unpaid reimbursement obligations in respect of all payments actually made
under surety bonds (including payments actually made under construction bonds)
and (g) the incurrence of withdrawal liability under Title IV of ERISA by such
Person or a Commonly Controlled Entity to a Multiemployer Plan.
"Interest Expense" shall mean for any rolling 12 month period,
with respect to Financial, the total amount of all charges for the use of funds,
whether captioned interest or otherwise, in
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a statement of income or operations of Financial for such rolling 12 month
period prepared in accordance with GAAP.
"Interest Period" shall mean with respect to any Eurodollar
Rate Loan, the period commencing on the Borrowing Date, the conversion date or
the continuation date with respect to such Eurodollar Rate Loan and ending no
less than five nor more than twenty days thereafter, as selected by the
Borrowers.
"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 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
regarding loan origination, loan processing or loan closing and regarding
underwriting
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criteria for such Purchase Commitment, or defects are noted in origination,
processing or closing of Mortgage Loans by investor, (B) Financial or its
employees engage in any fraudulent conduct or misrepresentation, (C) the
mortgagor fails to make timely payment of any of the first, second, third or
fourth installments due under such mortgage loan, and such delinquency remains
uncured for a period of more than 30 days or results in a foreclosure action,
(D) the mortgagor fails to make timely payment of two or more monthly
installments within six months from the date such mortgage loan is purchased by
such secondary market lender, (E) the mortgagor engages in fraudulent conduct or
misrepresentation, or (F) with respect to mortgage loans issued pursuant to the
North Carolina Housing Finance Authority bond programs, the mortgagor fails to
make timely payment of the first installment due under such mortgage loans.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA.
"Person" shall mean an individual, a partnership (including
without limitation a joint venture), a limited liability company (including
without limitation a joint venture), a corporation (including without limitation
a joint venture), a business trust, a joint stock company, a trust, an
unincorporated association, a joint venture, a Governmental Authority or any
other entity of whatever nature (including without limitation a joint venture).
"Plan" shall mean any pension plan which is covered by Title
IV of ERISA and in respect of which the Borrowers or a Commonly Controlled
Entity is an "employer" as defined in Section 3(5) of ERISA or an affiliate of
an employer as defined in Section 407(d)(7) of ERISA.
"Prime Rate" shall mean the rate of interest per annum
announced by the Bank from time to time as its prime rate, with any change
thereto effective as of the opening of business on the day of the change; the
Prime Rate is not necessarily the best interest rate offered by the Bank.
"Prime Rate Loans" shall mean loans the rate of interest
applicable to which is based on the Prime Rate.
"Purchase Commitment" shall mean a commitment from a secondary
market lender acceptable to the Bank (the names and addresses of secondary
market lenders acceptable to the Bank as of the effective date of this Agreement
have been delivered to the Bank and certified by a Responsible Officer, and
Financial shall update the list of secondary market lenders quarterly as set
forth
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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 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
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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; 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.
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 ($30,000,000.00), 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,
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and reborrowing, all in accordance with the terms and conditions hereof.
Subject to the terms and conditions of this Agreement
(including the limitations on the availability of Eurodollar Rate Loans and
including the termination of the Commitment as set forth in Section 7 hereof),
the Loans may from time to time be (i) Eurodollar Rate Loans, (ii) Prime Rate
Loans, or (iii) a combination thereof, as determined by the Borrowers, provided
that no Loan shall be made as a Eurodollar Rate Loan after the day that is five
days prior to the last day of the Commitment Period.
2.2 Note. The Loans made by the Bank pursuant hereto
shall be evidenced by a promissory note of the Borrowers, substantially in the
form of Exhibit A attached hereto and made a part hereof (the "Note"), payable
to the order of the Bank and evidencing the obligation of the Borrowers to pay
the aggregate unpaid principal amount of the Loans made by the Bank, with
interest thereon at a rate per annum equal to (i) in the case of Prime Rate
Loans, the Prime Rate in effect from time to time minus one-half of one percent
(1/2%) and (ii) in the case of Eurodollar Rate Loans if permitted hereunder at
such time, the Eurodollar Rate determined for each such loan plus one and six
tenths percent (1.60%), subject with respect to each of the aforesaid interest
rates to the default interest rate provisions of subsection 2.6(c) hereof.
Interest shall be payable in arrears and shall be due on the last day of each
month, beginning with July 31, 1998, and continuing on the last day of each
month thereafter, and on the last day of the Commitment Period. If not sooner
paid, the entire principal amount of the Loans outstanding and any remaining
unpaid interest on the Loans shall be due and payable on the last day of the
Commitment Period. The Bank is hereby authorized to record electronically or
otherwise the date and amount of each Loan disbursement made by the Bank and the
date and amount of each payment or prepayment of principal thereof, and any such
recordation shall constitute conclusive evidence, absent manifest error, of the
accuracy of the information so recorded; provided, however, the failure of the
Bank to make any such recordation(s) shall not affect the obligation of the
Borrowers to repay outstanding principal, interest, or any other amount due
hereunder or under the Note in accordance with the terms hereof and thereof. The
Note shall (a) be dated as of the date hereof, (b) be stated to mature on the
last day of the Commitment Period, and (c) bear interest from and including the
date thereof on the unpaid principal amount thereof from time to time
outstanding at a rate per annum equal to (i) in the case of Prime Rate Loans,
the Prime Rate in effect from time to time minus one-half of one percent (1/2%)
and (ii) in the case of Eurodollar Rate Loans, the Eurodollar Rate determined
for each such loan plus one and
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six-tenths percent (1.60%) subject with respect to each of the aforesaid
interest rates to the default interest rate provisions of subsection 2.6(c)
hereof.
2.3 Procedure for Borrowing. The Borrowers may borrow
under the Commitment (subject to the limitations on the availability of
Eurodollar Rate Loans) during the Commitment Period, provided the Borrowers
shall give the Bank irrevocable telephonic or written notice (which notice must
be received by the Bank prior to 3:00 P.M., 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
$50,000.00 or any larger amount, and (b) in the case of Eurodollar Rate Loans,
of $500,000.00 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 the Borrowers the funds requested, subject to the satisfaction of
the terms and conditions of the Agreement, by crediting the account of Financial
on the books of the Bank at its 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 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
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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 $1,000,000.00 or a whole multiple of $100,000.00 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 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
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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 the Borrowers of such election not to
extend. If the Borrowers have not received notice from the Bank as stated herein
that the Bank has elected to extend the Commitment Period by one year, the
Commitment Period shall be deemed not to have been extended.
2.8 Use of Proceeds. The proceeds of the initial Loan
made hereunder shall be used by the Borrowers to pay in full the obligations
outstanding under the 1997 Credit Agreement. Upon the Borrowers' irrevocable
payment in full of the obligations outstanding under the 1997 Credit Agreement,
the Bank shall cancel the 1997 Credit Agreement and the promissory note related
to the 1997 Credit Agreement. The remaining proceeds of the initial Loan made
hereunder and the proceeds of subsequent Loans made hereunder shall be used by
the Borrowers for lawful purposes in Financial's business.
2.9 Conversion and Continuation Options.
(a) The Borrowers may elect from time to time to convert
outstanding Loans from Eurodollar Rate Loans to Prime Rate Loans by giving the
Bank at least two Business Days' prior irrevocable notice of such election,
provided that any such conversion of Eurodollar Rate Loans may only be made on
the last day of an Interest Period with respect thereto. Subject to the
limitations on the availability of Eurodollar Rate Loans, the Borrowers may
elect from time to time to convert outstanding Loans from Prime Rate Loans to a
Eurodollar Rate Loan by giving the Bank telephonic or written notice (the
"Notice of Conversion") at least two Business Days prior to the requested date
for the conversion, which Notice of 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 $500,000.00 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
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Rate Loan may be converted into a Eurodollar Rate Loan after the date that is
five days prior to the last day of the Commitment Period.
(b) Subject to the limitations on the availability of
Eurodollar Rate Loans, any Eurodollar Rate Loans may be continued as such upon
the expiration of the then current Interest Period with respect thereto by the
Borrowers giving the Bank telephonic or written notice, at least two Business
Days prior to the last day of the then current Interest Period, and which notice
shall specify (i) the amount of the Eurodollar Rate Loans to be continued as
such and (ii) the length of the Interest Period for such Eurodollar Rate Loans.
All or any part of outstanding Eurodollar Rate Loans may be continued as
provided herein, provided that (i) (unless the Bank otherwise consents) no
Eurodollar Rate Loan may be continued when any Default or Event of Default has
occurred and is continuing and (ii) no Eurodollar Rate Loan may be continued as
a Eurodollar Rate Loan after the date that is five days prior to the last day of
the Commitment Period.
2.10 Inability to Determine Interest Rate. If by reason of
circumstances affecting the relevant market adequate and reasonable means do not
exist for ascertaining the Eurodollar Rate, any Eurodollar Rate Loans requested
to be made shall be made as Prime Rate Loans.
2.11 Illegality; Impracticability. Notwithstanding any
other provision herein, if the adoption of or any change in any Requirement of
Law or in the interpretation or application thereof shall make it unlawful, or
if compliance by the Bank with any request or directive (whether or not having
the force of law) from any Governmental Authority occurring after the date
hereof shall make it impracticable for the Bank to make or maintain Eurodollar
Rate Loans as contemplated by this Agreement, the commitment of the Bank
hereunder to make Eurodollar Rate Loans shall forthwith be canceled and, until
such time as it shall no longer be unlawful for the Bank to make or maintain
Eurodollar Rate Loans, the Bank shall then have a commitment only to make a
Prime Rate Loan when a Eurodollar Rate Loan is requested and the Bank's Loans
then outstanding as Eurodollar Rate Loans, if any, shall be converted
automatically to Prime Rate Loans as required by law. If any such conversion of
a Eurodollar Rate Loan occurs on a day which is not the last day of the then
current Interest Period with respect thereto, the Borrowers shall pay to such
Bank such amounts, if any, as may be required pursuant to subsection 2.13,
Indemnity.
2.12 Requirements of Law. If the adoption of or any change
in any Requirement of Law or in the interpretation or
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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 (i) subject the Bank to any tax of any kind
whatsoever with respect to any Eurodollar Rate Loans made by it or its
obligation to make Eurodollar Rate Loans or change the basis of taxation of
payments to the Bank in respect thereof, (ii) change any franchise tax or any
tax measured by or imposed upon the overall net income of the Bank or (iii)
change any branch tax or any tax measured by or imposed upon overall capital or
net worth of the Bank;
(b) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or other
extensions of credit by, or any other acquisition of funds by, the Bank which is
not otherwise included in the determination of the Eurodollar Rate hereunder; or
(c) shall impose on the Bank any other condition;
and the result of any of the foregoing is to increase the cost to the Bank, by
an amount which the Bank deems to be material, of making Eurodollar Rate Loans
or to reduce any amount receivable hereunder in respect thereof, then the
Borrowers shall promptly pay the Bank, upon its demand, any additional amounts
necessary to compensate the Bank for such increased cost or reduced amount
receivable; in addition, in any such case, the Borrowers may elect to convert
the Eurodollar Rate Loans made by the Bank hereunder to Prime Rate Loans in
which case the Borrowers shall promptly pay to the Bank, upon demand, without
duplication, such amounts, if any, as may be required pursuant to subsection
2.13.
2.13 Indemnity. The Borrowers agree to indemnify the Bank
and to hold the Bank harmless from any loss or expense which the Bank may
sustain or incur (other than through the Bank's gross negligence or willful
misconduct) as a consequence of the Borrowers' making a prepayment of a
Eurodollar Rate Loan on a day which is not the last day of an Interest Period
with respect thereto (whether by acceleration, demand or otherwise). Such
indemnification may include, without limitation, an amount equal to the excess,
if any, of (i) the amount of interest which would have accrued on the amount so
prepaid for the period from the date of such prepayment to the last day of the
applicable Interest Period in each case at the applicable rate of interest for
such Eurodollar Rate Loans provided for herein over (ii) the amount of interest
(as reasonably determined by the Bank) which
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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, 1997,
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, 1997 to the date hereof, there has been no material adverse change
in such condition.
3.2 Corporate Existence; Compliance with Law. Each of the
Borrowers (a) is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, (b) has the corporate power and
authority to conduct the business in which it is currently engaged, (c) is
qualified as a foreign corporation under the laws of any jurisdiction where the
failure to so qualify would have a material adverse effect on the business of
such Borrower, and (d) is in compliance with all Requirements of Law, except to
the extent that the failure to comply therewith would not, in the aggregate,
have a material adverse effect on the business, operations, property or
financial or other condition of such Borrower and would not materially adversely
affect the ability of such Borrower to perform its obligations under the
Agreement and the Note.
3.3 Corporate Power; Authorization; Enforceable
Obligations. Each of the Borrowers has the corporate power and authority to
make, deliver and perform the Agreement and the Note and to borrow hereunder and
has taken all corporate action necessary to be taken by it to authorize the
borrowings on the terms and conditions of the Agreement and the Note and to
authorize the execution, delivery and performance of the Agreement and the Note.
No consent, waiver or authorization of, or filing with, any Person (including
without limitation any Governmental Authority), is required to be made or
obtained by either of the Borrowers in connection with the borrowings hereunder
or the
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execution, delivery, performance, validity or enforceability of the Agreement
and the Note. The Agreement has been, and the Note will be, duly executed and
delivered on behalf of each of the Borrowers and the Agreement constitutes, and
the Note when executed and delivered hereunder will constitute, a legal, valid
and binding obligation of each of the Borrowers enforceable against each of the
Borrowers in accordance with its terms, subject to the effect, if any, of
bankruptcy, insolvency, reorganization, arrangement or other similar laws
relating to or affecting the rights of creditors generally and the limitations,
if any, imposed by the general principles of equity and public policy.
3.4 No Legal Bar. The execution, delivery and performance
of the Agreement and the Note, the borrowings hereunder and the use of the
proceeds thereof do not and will not violate any Requirement of Law or
Contractual Obligation of either of the Borrowers and do not and will not result
in, or require, the creation or imposition of any Lien on any of the properties
of either of the Borrowers or their respective revenues pursuant to any
Requirement of Law or Contractual Obligation.
3.5 No Material Litigation. No litigation, investigation
or proceeding of or before any arbitrator or Governmental Authority is pending
or, to the best knowledge of the Borrowers, threatened by or against either of
the Borrowers or against any of their respective properties or revenues (a) with
respect to the Agreement or the Note or any of the transactions contemplated
hereby or thereby, or (b) which could reasonably be expected to have a material
adverse effect on the business, operations, property or financial or other
condition of either of the Borrowers.
3.6 Regulation U. Neither of the Borrowers is engaged in,
nor will either of them engage in, principally or as one of its important
activities, the business of extending credit for the purpose of "purchasing" or
"carrying" any "margin stock" within the respective meanings of each of the
quoted terms under Regulation U of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect. No part of the proceeds
of any Loans hereunder will be used for "purchasing" or "carrying" "margin
stock" as so defined or for any purpose which violates, or which would be
inconsistent with, the provisions of the Regulations of such Board of Governors.
If requested by the Bank, the Borrowers will furnish to the Bank a statement in
conformity with the requirements of Federal Reserve Form U-1 referred to in said
Regulation U to the foregoing effect.
3.7 Investment Company Act. Neither of the Borrowers is
an "investment company" or a company "controlled" by an
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"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 otherwise in form and
substance satisfactory to the Bank and covering such other
matters incident to the transactions contemplated hereby as
the Bank and its counsel may reasonably require.
(c) Corporate Proceedings of the Borrowers. The Bank
shall have received a copy of the resolutions (in form and
substance satisfactory to the Bank) of the sole shareholder
(M/I Homes) of Financial and of the Executive Committee of the
Board of Directors of M/I Homes authorizing (i) the execution,
delivery and performance of the Agreement, (ii) the
consummation of the transactions contemplated hereby, (iii)
the borrowings herein provided for, and (iv) the execution,
delivery and performance of the Note and the other documents
provided for in the Agreement, all certified by the Secretary
or the Assistant Secretary of each of the Borrowers as of the
date hereof. Such certificate
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shall state that the resolutions set forth therein have not
been amended, modified, revoked or rescinded as of the date
hereof.
(d) Incumbency Certificate of the Borrowers. The Bank
shall have received a certificate of the Secretary or an
Assistant Secretary of each of the Borrowers, dated the date
hereof, as to the incumbency and signature of the officers of
each of the Borrowers executing the Agreement, the Note and
any certificate or other documents to be delivered pursuant
hereto or thereto.
(e) No Proceedings or Litigation; No Injunctive
Relief. No action, suit or proceeding before any arbitrator or
any Governmental Authority shall have been commenced, no
investigation by any Governmental Authority shall have been
commenced and no action, suit, proceeding or investigation by
any Governmental Authority shall have been threatened, against
either of the Borrowers or any of the officers or directors of
either of the Borrowers seeking to restrain, prevent or change
the transactions contemplated by the Agreement in whole or in
part or questioning the validity or legality of the
transactions contemplated by the Agreement or seeking damages
in connection with such transactions.
(f) Consents, Licenses, Approvals, etc. The Bank
shall have received true copies (certified to be such by the
Borrowers or other appropriate party) of all consents,
licenses and approvals required in accordance with applicable
law in connection with the execution, delivery, performance,
validity and enforceability of the Agreement and the Note, if
the failure to obtain such consents, licenses or approvals,
individually or in the aggregate, would have a material
adverse effect on either of the Borrowers or would adversely
affect the validity or enforceability of any of the foregoing
documents, and approvals obtained shall be in full force and
effect and be satisfactory in form and substance to the Bank.
(g) Compliance with Law. Neither of the Borrowers
shall be in violation in any material respect of any
applicable statute, regulation or ordinance, including without
limitation statutes, regulations or ordinances relating to
environmental matters, of any governmental entity, or any
agency thereof, in any respect materially and adversely
affecting the
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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, 1997 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:
(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.
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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 (and, in the case of subsection 5.6(e)hereof, M/I
Homes shall also):
5.1 Financial Statements. Furnish to the Bank:
(a) as soon as available, but in any event within 90
days after the end of each fiscal year of 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
(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).
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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 the Bank) stated to have been made
after due examination by such Responsible Officer (i) stating
that, to the best of such officer's knowledge, Financial
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;
(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
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necessary or desirable in the normal conduct of its business, and comply with
all Contractual Obligations and Requirements of Law, except to the extent that
the failure to take such actions or comply with such Contractual Obligations and
Requirements of Law would not, in the aggregate, have a material adverse effect
on the business, operations, property or financial or other condition of
Financial.
5.4 Maintenance of Property, Insurance. Keep all property
useful in and necessary to its business in good working order and condition;
maintain with financially sound and reputable insurance companies insurance on
all its property in at least such amounts and against at least such risks (but
including in any event public liability, general liability and business
interruption insurance) as are usually insured against in the same general area
by companies engaged in the same or a similar business; and furnish to the Bank,
upon written request, full information as to the insurance carried.
5.5 Inspection of Property; Books and Records;
Discussions. Keep proper books of record and account in which full, true and
correct entries in conformity with GAAP and all Requirements of Law shall be
made of all dealings and transactions in relation to its business and
activities, subject in the case of interim statements to year-end audit
adjustments; and permit representatives of the Bank to visit and inspect any of
its properties, and examine and make abstracts from any of its books and records
at any reasonable time and as often as may reasonably be requested, and to
discuss the business, operations, properties and financial and other condition
of Financial with officers and employees of Financial and, if notice thereof is
given to the Borrowers prior to the date of such discussions, with its
independent certified public accountants. The Bank shall keep confidential the
information it receives pursuant to subsection 5.2 hereof and this subsection
5.5, provided that the Bank may disclose such information to its regulators,
auditors and counsel on a need to know basis, and 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
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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 $100,000.00
or more and not covered by insurance, or (B) which, in the
reasonable opinion of a Responsible Officer of Financial,
would, if adversely determined, have a material adverse effect
on Financial, or (ii) in which injunctive or similar relief is
sought and which, in the reasonable opinion of a Responsible
Officer of Financial, would, if adversely determined, have a
material adverse effect on Financial;
(d) of the following events, as soon as possible and
in any event within 30 days after Financial knows or has
reason to know thereof: (i) the occurrence of any Reportable
Event with respect to any Plan with respect to which the PBGC
has not waived the 30 day reporting requirement, or (ii) the
institution of proceedings or the taking or expected taking of
any other action by PBGC or Financial or any Commonly
Controlled Entity to terminate or withdraw or partially
withdraw from any Plan under circumstances which could lead to
material liability to the PBGC or, with respect to a
Multiemployer Plan, the Reorganization or Insolvency (as each
such term is defined in ERISA) of the Plan and in addition to
such notice, deliver to the Bank whichever of the following
may be applicable: (A) a certificate of a Responsible Officer
of Financial setting forth details as to such Reportable Event
and the action that Financial or such Commonly Controlled
Entity proposes to take with respect thereto, together with a
copy of any notice of such Reportable Event that may be
required to be filed with PBGC, or (B) any notice delivered by
PBGC evidencing its intent to institute such proceedings or
any notice to PBGC that such Plan is to be terminated, as the
case may be; and
(e) of a material adverse change in the business,
operations, property or financial or other condition of
Financial or M/I Homes.
Each notice pursuant to this subsection 5.6 shall be accompanied by a statement
of the chief executive officer or chief financial
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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 $3,500,000.00.
5.8 Maintenance of Liabilities to Tangible Net Worth
Ratio. Maintain at all times a ratio of Liabilities to Tangible Net Worth not in
excess of 10.0 to 1.0.
5.9 Maintenance of EBIT to Interest Expense Ratio.
Maintain a ratio of EBIT to Interest Expense, determined as of the end of each
monthly accounting period of each fiscal year and as of the end of each fiscal
year, on a rolling 12 month basis (with the period of determination being the 12
month period ending on the date as of which such determination is made), of not
less than 1.50 to 1.0.
5.10 Collateral. Promptly provide to the Bank, at any time
and from time to time as the Bank may request in its sole discretion, a first
priority security interest in all of Financial's then existing or thereafter
acquired mortgage notes receivable and all proceeds thereof as security for the
Borrowers' obligations to the Bank under this Agreement and the Note, and
promptly execute and deliver all such documentation (including without
limitation Financial's mortgage notes receivable) as the Bank shall reasonably
request to perfect the Bank's security interest in such collateral.
5.11 Secondary Market Lenders. (a) Provide to the Bank on
the first Business Day of each calendar quarter, commencing on July 1, 1998, and
continuing on the first Business Day of each January, April, July and October
thereafter, for the Bank's review and approval, the current list of secondary
market lenders that purchase mortgage loans from Financial, and (b) by the end
of such calendar quarter, remove from the list and cease to sell mortgage loans
to any secondary market lender that is not acceptable to the Bank in the Bank's
sole discretion.
SECTION 6. NEGATIVE COVENANTS
The Borrowers hereby agree, jointly and severally, that, from
the date hereof and so long as the Commitment remains
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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 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 $200,000.00 at any time outstanding,
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which are being diligently contested in good faith, which are
not the subject of any attachment, levy or enforcement
proceeding, and as to which appropriate reserves have been
established in accordance with GAAP;
(g) Liens to secure purchase money obligations and
capitalized leases, provided that the aggregate amount of the
obligations secured by such Liens shall not exceed $250,000.00
at any time; and
(h) Liens in connection with the purchase and pledge
by Financial, in making first mortgage loans permitted
hereunder, of certificates of deposits to investors purchasing
such first mortgage loans, in accordance with, and subject to
the limitations set forth in, subsection 6.3 hereof.
6.3 Prohibition on Contingent Obligations. Agree to or
assume, guarantee, indorse or otherwise in any way be or become responsible or
liable for, directly or indirectly, any Contingent Obligation, including but not
limited to Contingent Obligations incurred as a result of sales of any notes
with recourse or as a general partner in a partnership; provided, however, that
in making first mortgage loans permitted hereunder, Financial may, in lieu of
requiring down payments from mortgagors, purchase and pledge to investors
purchasing such first mortgage loans certificates of deposit in an aggregate
amount not to exceed $2,500,000.00.
6.4 Prohibition on Fundamental Changes. Enter into any
transaction of merger, consolidation, amalgamation or reorganization, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, lease, transfer or otherwise dispose of, in one
transaction or a series of transactions, all or any substantial part of its
business or assets, whether now owned or hereafter acquired, or make any
material change in the method by which it conducts business.
6.5 Limitation on Investments. Make or commit to make any
advance, loan, extension of credit or capital contribution to, or purchase of,
any stock, bonds, notes, debentures or other securities of, or make any other
investment in, any Person (all such transactions being herein called
"investments") except for (i) 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
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mortgage loan from Financial with respect to the same real property, and (B)
shall not exceed $4,000,000.00 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
$5,000,000.00 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 $100,000.00, (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; provided,
however, that nothing in this subsection 6.5 shall prohibit or otherwise
restrict Financial from purchasing and pledging certificates of deposit in
accordance with, and subject to the limitations set forth in, subsection 6.3
hereof.
6.6 Prohibition on Subsidiaries. Create or form any
Subsidiaries.
6.7 Prohibition on Change in Hedging Policy. Amend or
modify Financial's policy with respect to hedging transactions from the Hedging
Policy provided to the Bank pursuant to subsection 4.1(j) hereof and attached
hereto as Exhibit E.
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) the Borrowers shall fail to pay any interest on the Note
or any fee, charge, reimbursement or other amount payable hereunder, within
three days after the Bank notifies the Borrowers that such interest, fee or
amount has become due in accordance with the terms thereof or hereof and has not
been paid; or
(3) any representations or warranty made or deemed made by the
Borrowers herein or which is contained in any certificate, document or financial
or other written statement furnished at any time under or in connection herewith
or therewith
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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 the Bank that such a default has occurred, which
notice shall specify the nature of the default; or
(6) (a) any Person affiliated with Financial shall engage in
any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975
of the Code) involving any Plan, (b) any
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"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived, shall exist with respect to any Plan, (c) a Reportable Event
shall occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate, any
Single Employer Plan, which Reportable Event or institution of proceedings is,
in the opinion of the Bank, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, and, in the case of a Reportable Event, the
continuance of such Reportable Event remains unremedied for 30 days after notice
of such Reportable Event pursuant to Section 4043(a), (c) or (d) of ERISA is
given or, in the case of institution of proceedings, such proceedings continue
for 30 days after commencement thereof, (d) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, or (e) any other event or condition
shall occur or exist with respect to a Single Employer Plan, and in each case in
clauses (a) through (e) above, such event or condition, together with all other
such events or conditions, if any, could subject Financial to any tax, penalty
or other liabilities in the aggregate material in relation to the business,
operations, property or financial or other condition of Financial; or
(7) one or more judgments or decrees shall be entered against
Financial involving in the aggregate a liability (not covered by insurance) of
$200,000.00 or more and all such judgments or decrees in excess of $200,000.00
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
(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
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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, or the Bank shall cease to be a Bank (as that
term is defined in the M/I Homes Loan Agreement) under the M/I Homes Loan
Agreement;
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 shall
extend to any subsequent or other Default or Event of Default, or impair any
right consequent thereon.
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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:
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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, NA
100 East Broad Street
7th Floor
Columbus, Ohio 43271
Attention: Thomas D. Igoe
Facsimile: (614) 248-5518
8.3 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Bank, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies, powers
and privileges provided by law.
8.4 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any document, certificate
or statement delivered pursuant hereto or in connection herewith shall survive
the execution and delivery of the Agreement and the Note and shall remain in
full force and effect until the Agreement is terminated and all indebtedness
created or evidenced by the Agreement or the Note is paid in full.
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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 of the Borrowers to the Bank, any amount held by
or owing from the Bank to or for the credit or the account of either or both of
the Borrowers at, or at any time after, the happening of any of the above
mentioned events, and the aforesaid right of set-off may be exercised by the
Bank against either or both of the Borrowers or against any trustee in
bankruptcy, debtor in possession, assignee for the benefit of creditors,
receiver, custodian or execution, judgment or attachment creditor of either or
both of the Borrowers or against anyone else claiming through or against either
or both of the Borrowers or such trustee in bankruptcy, debtor in possession,
assignee for the benefit of creditors, receiver, custodian or
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execution, judgment or attachment creditor, notwithstanding the fact that such
right of set off shall not have been exercised by the Bank prior to the making,
filing or issuance of or service upon the Bank of, or of notice of, any such
petition, assignment for the benefit of creditors; appointment or application
for the appointment of a receiver; or issuance of execution, subpoena, order or
warrant. The Bank agrees promptly to notify the Borrowers after any such set off
and application made by the Bank, provided that the failure to give such notice
shall not affect the validity of such set off and application.
8.9 WAIVER OF JURY TRIAL. THE BORROWERS AND THE 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
NOR 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.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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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, NA 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
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