EIGHTH MODIFICATION AGREEMENT EXHIBIT 10.1
This EIGHTH MODIFICATION AGREEMENT (this "Agreement") is made and
entered into as of May 31, 2002, by and between LEGACY/MONTEREY HOMES L.P., an
Arizona limited partnership, ) HANCOCK-MTH COMMUNITIES, INC., an Arizona
corporation and HANCOCK-MTH BUILDERS, INC., an Arizona corporation, jointly and
severally (collectively, "Borrower"), and GUARANTY BANK, a federal savings bank
("Lender").
W I T N E S S E T H:
WHEREAS, pursuant to a certain Master Loan Agreement (the "Loan
Agreement") dated as of January 31, 1993, between Lender and Borrower, Lender
made a loan (the "Loan") to Borrower, evidenced by a certain Revolving
Promissory Note (the "Note") dated as of January 31, 1993, payable to Lender in
the stated principal amount of SEVENTY-FIVE MILLION AND NO/100 DOLLARS
($75,000,000.00), with interest and principal payable as set forth therein; and
WHEREAS, to secure the Note and Loan, Master Form Deed(s) of Trust
(With Security Agreement and Assignment of Rents and Leases) (hereinafter
collectively referred to as the "Master Deeds of Trust," whether one or more),
which Master Deeds of Trust have been recorded in certain counties in the State
of Texas as more particularly described on Exhibit A attached hereto; and which
Master Deeds of Trust are incorporated by reference pursuant to the terms and
provisions of certain Deeds of Trust Incorporating by Reference a Master Form
Deed of Trust (With Security Agreement and Assignment of Rents and Leases)
(hereafter collectively referred to as the "Supplemental Deeds of Trust,"
whether one or more) recorded in such counties and encumbering certain real and
other property (the "Property") described in such Supplemental Deeds of Trust
(such Master Deeds of Trust and Supplemental Deeds of Trust hereafter
collectively referred to as the "Deeds of Trust," whether one or more); and
WHEREAS, the Deeds of Trust were modified pursuant to a Modification
Agreement (the "First Modification"), and recorded in various counties in Texas,
which First Modification modified certain terms and provisions of the Loan as
set forth therein; and
WHEREAS, the Deeds of Trust were further pursuant to a Second
Modification Agreement (the "Second Modification") dated as of May 19, 1998, and
recorded in various counties in Texas, which Second Modification modified
certain terms and provisions of the Loan as set forth therein; and
WHEREAS, the Deeds of Trust were further pursuant to a Third
Modification Agreement (the "Third Modification") dated as of March 30, 1999,
and recorded in various counties in Texas, which Third Modification modified
certain terms and provisions of the Loan as set forth therein; and
WHEREAS, the Deeds of Trust were further pursuant to a Fourth
Modification Agreement (the "Fourth Modification") dated as of July 31, 1999,
and recorded in various counties in Texas, which Fourth Modification modified
certain terms and provisions of the Loan as set forth therein; and
WHEREAS, the Deeds of Trust were further pursuant to a Fifth
Modification Agreement (the "Fifth Modification") dated March 24, 2000, and
recorded in various counties in Texas, which Fifth Modification modified certain
terms and provisions of the Loan as set forth therein; and
WHEREAS, the Deeds of Trust were further pursuant to a Sixth
Modification Agreement (the "Sixth Modification") dated as of July 31, 2000, and
recorded in various counties in Texas, which Sixth Modification modified certain
terms and provisions of the Loan as set forth therein; and
WHEREAS, the Deeds of Trust were further pursuant to a Seventh
Modification Agreement (the "Seventh Modification") dated as of
_________________, 2001, and recorded in various counties in Texas, which
Seventh Modification modified certain terms and provisions of the Loan as set
forth therein; and
EIGHTH MODIFICATION AGREEMENT -- Page 1
WHEREAS, the Deeds of Trust were further pursuant to a Ratification and
Assumption Agreement (the "Ratification Agreement") dated as of December _____,
2001, and recorded in various counties in Texas, which Ratification Agreement
modified certain terms and provisions of the Loan as set forth therein; and
WHEREAS, the Note and the Loan are guaranteed pursuant to that certain
Guaranty Agreement dated as of June 30, 1997 (the "Guaranty"), executed by
MTH-Texas GP, Inc., an Arizona corporation, MTH-Texas LP, Inc., an Arizona
corporation, and Meritage Corporation, a Maryland corporation ("Guarantor,"
whether one or more); and
WHEREAS, the Loan Agreement, the Note, the First Modification, the
Second Modification, the Third Modification, the Fourth Modification, the Fifth
Modification, the Sixth Modification, the Seventh Modification, the Ratification
Agreement, the Deeds of Trust and all other documents evidencing and/or securing
the Loan are hereinafter collectively called the "Loan Instruments"; and
WHEREAS, Lender, the owner and holder of the Note and the Deeds of
Trust and all rights and titles evidenced thereby, and Borrower, the record
owner of the Property and being liable for the payment of the Note and Loan,
desire to modify the Loan Instruments as herein provided.
NOW, THEREFORE, in consideration of Ten and No/100 Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. The stated maturity date of the Note is hereby extended to and
including May 31, 2003, when the entire unpaid principal balance of the Note,
together with all accrued and unpaid interest shall be due and payable;
provided, however, such date may be extended as set forth in the Loan Agreement.
2. Borrower shall execute and deliver to Lender a letter agreement (in
form and substance satisfactory to Lender in its sole discretion) (the "Letter
Agreement") dated as of the date hereof amending certain other terms and
provisions of the Loan Instruments. (Hereafter, this Agreement and the Letter
Agreement shall be included in the defined term "Loan Instruments.")
3. Borrower and Lender acknowledge and agree that Section 3.2 of the
Deeds of Trust shall be deleted and replaced with the following:
3.2 Notice of Changes: Grantor shall not change (a) the
location of its place of business or its chief executive office if it
has more than one place of business, (b) the location of any of the
Mortgaged Property, (c) Grantor's name or business structure, including
Grantor's state of organization or registration, without in each
instance the prior written consent of Beneficiary, which consent shall
not be unreasonably withheld, delayed or conditioned. Beneficiary's
consent will, however, be conditioned upon, among other things, the
execution and delivery of additional financing statements, security
agreements and other instruments which may be necessary to effectively
evidence or perfect Beneficiary's security interest in the Mortgaged
Property as a result of such changes. Grantor's principal place of
business and its chief executive office as of the date hereof are
located at the address set forth in the initial paragraph of this Deed
of Trust.
4. Borrower and Lender acknowledge and agree that the following shall
be added as new Section 6.17 to the Deeds of Trust:
Section 6.17 Prohibited Person Compliance:
(a) Grantor warrants, represents and covenants that neither
Grantor nor any of its affiliated entities is or will be an entity or
person (i) that is subject to Executive Order 13224 issued on September
24, 2001 ("EO13224"), (ii) whose name appears on the United States
Treasury Department's Office of Foreign Assets Control ("OFAC") most
current list of "Specifically Designated National
EIGHTH MODIFICATION AGREEMENT -- Page 2
and Blocked Persons," (iii) who commits, threatens to commit or
supports "terrorism," as that term is defined in EO13224, or (iv) who
is otherwise affiliated with any entity or person listed above (any and
all parties or persons described in subparts [i] - [iv] above are
herein referred to as a "Prohibited Person").
(b) Grantor covenants and agrees that neither Grantor nor any
of its affiliated entities will conduct any business, nor engage in any
transaction or dealing, with any Prohibited Person, including, but not
limited to, the making or receiving of any contribution of funds,
goods, or services, to or for the benefit of a Prohibited Person.
(c) In addition to any other indemnification provided herein,
Grantor hereby indemnifies and holds Beneficiary harmless from all
liability, damage or expense imposed on or incurred by Beneficiary from
any claims resulting from Grantor conducting any business, or engaging
in any transaction or dealing, with any Prohibited Person (including,
without limitation, the making or receiving of any contribution of
funds, goods or services, to or for the benefit of a Prohibited
Person).
Grantor covenants and agrees to deliver (from time to time) to
Beneficiary any such certification or other evidence as may be
requested by Beneficiary in its sole and absolute discretion,
confirming that (i) Grantor is not a Prohibited Person, and (ii)
Grantor has not engaged in any business, transaction or dealings with a
Prohibited Person, including, but not limited to, the making or
receiving of any contribution of funds, goods, or services, to or for
the benefit of a Prohibited Person.
5. Borrower and Lender acknowledge and agree that Sections 9.1, 9.2,
9.3 and 9.4 of the Deeds of Trust shall be deleted and replaced with the
following:
Section 9.1 Grantor's Warranties. Grantor hereby represents
and warrants that, to the best of Grantor's knowledge, no hazardous
waste (as defined in 42 U.S.C. Section 6901, et seq.) or hazardous
substance (as defined in 42 U.S.C. Section 9601, et seq.), health
hazards (including, without limitation, mold), other prohibited or
harmful materials (together "Hazardous Materials") are now located on
the Mortgaged Property and that neither Grantor nor, to the best of
Grantor's knowledge, any other person has ever caused or permitted any
Hazardous Materials to be placed, held, located or disposed of on,
under or at the Mortgaged Property or any part thereof. To the best of
Grantor's knowledge, no part of the Mortgaged Property has ever been
used as a manufacturing, storage or dump site for Hazardous Materials,
nor is any part of the Mortgaged Property affected by any Hazardous
Materials ("Hazardous Materials Contamination"). To the best of
Grantor's knowledge and belief, no property adjoining the Mortgaged
Property has ever been used as a manufacturing, storage or dump site
for Hazardous Materials nor is any other property adjoining the
Mortgaged Property affected by Hazardous Materials Contamination.
Section 9.2 Grantor's Covenants. Grantor agrees to (a) give
notice to Beneficiary immediately upon Grantor's acquiring knowledge of
the presence of any Hazardous Materials on the Mortgaged Property or of
any Hazardous Materials Contamination with a full description thereof;
(b) promptly comply with any court order or other governmental
requirement requiring the removal, treatment or disposal of such
Hazardous Materials or Hazardous Materials Contamination and provide
Beneficiary with satisfactory evidence of such compliance; and (c)
provide Beneficiary, within thirty (30) days after demand by
Beneficiary, with a bond, letter of credit or similar financial
assurance evidencing to Beneficiary's satisfaction that the necessary
funds are available to pay the cost of removing, treating and disposing
of such Hazardous Materials or Hazardous Materials Contamination and
discharging any assessments which may be established on the Mortgaged
Property as a result thereof.
Section 9.3 Indemnification. Grantor shall defend, indemnify
and hold harmless Beneficiary and Trustee from any and all liabilities
(including strict
EIGHTH MODIFICATION AGREEMENT -- Page 3
liability), actions, demands, penalties, losses, costs or expenses
(including, without limitation, reasonable attorneys' fees and remedial
costs), suits, costs of any settlement or judgment and claims of any
and every kind whatsoever which may now or in the future (whether
before or after the release of this Deed of Trust) be paid, incurred or
suffered by or asserted against, Beneficiary or Trustee by any person
or entity or governmental agency for, with respect to, or as a direct
or indirect result of, the presence on or under, or the escape,
seepage, leakage, spillage, discharge, emission, discharging or release
from the Mortgaged Property of any Hazardous Materials or any Hazardous
Materials Contamination or which arise out of or result from the
environmental condition of the Mortgaged Property or the applicability
of any court order or governmental requirement relating to Hazardous
Materials, regardless of whether or not caused by or within the control
of Beneficiary or Trustee. The representations, covenants and
warranties contained in this Article 9 shall survive the foreclosure,
deed-in-lieu of foreclosure and/or release of this Deed of Trust.
Section 9.4 Beneficiary's Right to Remove Hazardous Materials.
Beneficiary shall have the right (but not the obligation), without in
any way limiting Beneficiary's other rights and remedies under this
Deed of Trust, to enter onto the Mortgaged Property or to take such
other actions as it deems necessary or advisable to clean up, remove,
resolve or minimize the impact of, or otherwise deal with (together
with restoring the Mortgaged Property), any Hazardous Materials or
Hazardous Materials Contamination on the Mortgaged Property following
receipt of any notice from any person or entity asserting the existence
of any Hazardous Materials or Hazardous Materials Contamination
pertaining to the Mortgaged Property. All reasonable costs and expenses
paid or incurred by Beneficiary in the exercise of any such rights
shall be secured by this Deed of Trust and shall be payable by Grantor
to Beneficiary upon demand.
6. Borrower acknowledges and agrees, that as an accommodation to
Borrower, Exhibit A hereto (which exhibit describes the recording information of
the Master Deeds of Trust) shall be attached to this Agreement (and to any and
all other documents which may require the attachment of a description of the
recording information of the Master Deeds of Trust) after Borrower's execution
of same. Accordingly, Borrower hereby authorizes and directs Lender to attach
such Exhibit A to this Agreement.
7. Notwithstanding anything to the contrary in any of the Loan
Instruments, Borrower acknowledges and agrees, that to the extent that Lender is
relying on Chapter 303 of the Texas Finance Code to determine the Maximum Lawful
Rate (hereafter defined) payable on the Note and/or the Related Indebtedness
(hereafter defined) Lender will utilize the weekly ceiling from time to time in
effect as provided in such Chapter 303, as amended. To the extent United States
federal law permits Lender to contract for, charge, take, receive or reserve a
greater amount of interest than under Texas law, Lender will rely on United
States federal law instead of such Chapter 303 for the purpose of determining
the Maximum Lawful Rate. Additionally to the extent permitted by applicable law
now or hereafter in effect, Lender may, at its option and from time to time,
utilize any other method of establishing the Maximum Lawful Rate under such
Chapter 303 or under other applicable law by giving notice, if required, to
Borrower as provided by applicable law now or hereafter in effect. As used
herein, the term "Maximum Lawful Rate" shall mean the maximum lawful rate of
interest which may be contracted for, charged, taken, received or reserved by
Lender in accordance with the applicable laws of the State of Texas (or
applicable United States federal law to the extent that it permits Lender to
contract for, charge, take, receive or reserve a greater amount of interest than
under Texas law), taking into account all Charges (as hereafter defined) made in
connection with the transaction evidenced by the Note and the other Loan
Instruments. As used herein, the term "Charges" shall mean all fees, charges
and/or any other things of value, if any, contracted for, charged, received,
taken or reserved by Lender in connection with the transactions relating to the
Note and the other Loan Instruments, which are treated as interest under
applicable law. As used herein, the term "Related Indebtedness" shall mean any
and all debt paid or payable by Borrower to Lender pursuant to the Loan
Instruments or any other communication or writing by or between Borrower and
Lender related to the transaction or transactions that are the subject mater of
the Loan Instruments, except such debt which has been paid or is payable by
Borrower to Lender.
8. Notwithstanding anything to the contrary contained in the Deeds of
Trust or other
EIGHTH MODIFICATION AGREEMENT -- Page 4
Loan Instruments, with respect to any amendment to the Master Deeds of Trust,
the following terms and provisions shall apply:
With respect to any amendment or modification of the Master Deeds of
Trust now or hereafter executed by Borrower (or any future owner of the
Property if different from Borrower) and duly recorded in the
appropriate official public records, Borrower acknowledges and agrees
that such amendment or modification of the Master Deeds of Trust shall
constitute an amendment or modification to the terms and provisions of
any such Supplemental Deeds of Trust (and shall be incorporated into
any such Supplemental Deeds of Trust and made a part thereof for all
purposes, as though such amendment or modification of the Master Deeds
of Trust specifically referred to such Supplemental Deeds of Trust)
without the necessity of any specific reference in such amendment or
modification to any such Supplemental Deeds of Trust; and no such
amendment or modification of the Master Deeds of Trust shall impair the
obligations of Borrower under any such Supplemental Deeds of Trust or
any other of the Loan Instruments.
9. Borrower hereby expressly promises to pay to the order of Lender,
the principal amount of the Note (as modified and extended) and all accrued and
unpaid interest now or hereafter to become due and payable under the Note, and
Borrower hereby expressly promises to perform all of the obligations of Borrower
under the Loan Instruments (as modified and extended).
10. The liens of the Deeds of Trust are hereby acknowledged by Borrower
to be good, valid and subsisting liens, and such liens are hereby renewed and
extended so as to secure the payment of the Note and Loan (as modified and
extended).
11. Borrower hereby represents and warrants to Lender that (a) Borrower
is the sole legal and beneficial owner of the Property; (b) Borrower has the
full power and authority to make the agreements contained in this Agreement
without joinder or consent of any other party; (c) the execution, delivery and
performance of this Agreement will not contravene or constitute an event which
itself or which with the passing of time or giving of notice or both would
constitute a default under any deed of trust, loan agreement, indenture or other
agreement to which Borrower or Guarantor is a party or by which Borrower or any
of its property is bound; and (d) there exists no default under the Loan
Instruments (as modified). BORROWER HEREBY AGREES TO INDEMNIFY AND HOLD LENDER
HARMLESS AGAINST ANY LOSS, CLAIM, DAMAGE, LIABILITY OR EXPENSE (INCLUDING
WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED AS A RESULT OF ANY REPRESENTATION
OR WARRANTY MADE BY BORROWER HEREIN PROVING TO BE UNTRUE IN ANY MATERIAL
RESPECT.
12. The terms and conditions hereof may not be modified, amended,
altered or otherwise affected except by instrument in writing executed by Lender
and Borrower.
13. All Loan Instruments are hereby amended and modified in a manner
consistent with the modifications, terms and/or provisions contained herein.
Except as expressly modified hereby, the terms and conditions of the Loan
Instruments are and shall remain in full force and effect.
14. Borrower agrees to pay to Lender, contemporaneously with the
execution and delivery hereof, all costs and expenses incurred in connection
with this transaction, title insurance endorsement premiums, reasonable fees of
Lender's counsel and recording fees.
15. Borrower hereby agrees to execute and deliver to Lender such
further documents and instruments evidencing or pertaining to the Loan, as
modified and increased hereby, as may be reasonably requested by Lender from
time to time so as to evidence the terms and conditions hereof.
[The balance of this page is intentionally left blank.]
EIGHTH MODIFICATION AGREEMENT -- Page 5
EXECUTED on the date(s) set forth in the acknowledgment(s) below to be
EFFECTIVE as of the date first above written.
BORROWER:
LEGACY/MONTEREY HOMES L.P.,
an Arizona limited partnership
BY: MTH-TEXAS GP, INC.,
an Arizona corporation,
General Partner
By:
----------------------------
Name:
---------------------
Title:
---------------------
HANCOCK-MTH COMMUNITIES, INC.,
an Arizona corporation
By:
-------------------------------------
Name:
------------------------------
Title:
------------------------------
HANCOCK-MTH BUILDERS, INC.,
an Arizona corporation
By:
-------------------------------------
Name:
------------------------------
Title:
------------------------------
LENDER:
GUARANTY BANK
a federal savings bank
By:
-------------------------------------
Name:
------------------------------
Title:
------------------------------
EIGHTH MODIFICATION AGREEMENT -- Page 6
STATE OF _____________ )
)
COUNTY OF ___________ )
This instrument was ACKNOWLEDGED before me on _________________, 2002,
by _________________________________________, _______________________________ of
MTH-TEXAS GP, INC., an Arizona corporation, as General Partner of
LEGACY/MONTEREY HOMES L.P., an Arizona limited partnership, on behalf of said
limited partnership.
[S E A L] _________________________________
Notary Public
My Commission Expires:
_________________________________
_____________________ Printed Name of Notary Public
STATE OF _____________ )
)
COUNTY OF ___________ )
This instrument was ACKNOWLEDGED before me on _________________, 2002,
by _________________________________________, _______________________________ of
HANCOCK-MTH COMMUNITIES, INC., an Arizona corporation, on behalf of said
corporation.
[S E A L] _________________________________
Notary Public
My Commission Expires:
_________________________________
_____________________ Printed Name of Notary Public
STATE OF _____________ )
)
COUNTY OF ___________ )
This instrument was ACKNOWLEDGED before me on _________________, 2002,
by _________________________________________, _______________________________ of
HANCOCK-MTH BUILDERS, INC., an Arizona corporation, on behalf of said
corporation.
[S E A L] _________________________________
Notary Public
My Commission Expires:
_________________________________
_____________________ Printed Name of Notary Public
EIGHTH MODIFICATION AGREEMENT -- Page 7
STATE OF _____________ )
)
COUNTY OF ___________ )
This instrument was acknowledged before me on the _____ day of
________________, 2002, by _________________________________,
___________________ of GUARANTY BANK, a federal savings bank, on behalf of said
federal savings bank.
_______________________________
Notary Public in and for the
above county and state
My Commission Expires:
_______________________________
_____________________ Printed Name of Notary Public
EIGHTH MODIFICATION AGREEMENT -- Page 8
CONSENT OF GUARANTOR
Each of the undersigned, as a guarantor ("Guarantor," whether one or
more) of the loan (the "Loan"), evidenced by the Note and secured by the Deeds
of Trust described in the foregoing Eighth Modification Agreement (the
"Agreement") to which this Consent is attached, hereby acknowledge and consent
(jointly and severally) to the terms of the Agreement and agree (jointly and
severally) that the execution and delivery of the Agreement will in no way
change or modify Guarantor's respective obligations under their respective
Guaranty (as defined in the Agreement); and each Guarantor acknowledges and
agrees (jointly and severally) that the Indebtedness (as defined in the
respective instruments comprising the Guaranty) includes the Loan, together with
any and all other Indebtedness now or at any time hereafter owing by Guarantor
to Lender; and each Guarantor (jointly and severally) hereby unconditionally and
absolutely guarantees to Lender the payment when due of such Indebtedness, and
hereby acknowledge and agree that their respective Guaranty is in full force and
effect, and that there are no claims, counterclaims, offsets or defenses to
their respective Guaranty; and each Guarantor acknowledges and consents (jointly
and severally) to the terms of any and all prior modifications to the terms of
the Loan (including, without limitation, any and all extensions of the term
thereof and increases in the principal thereof prior to the date hereof, if
any).
EXECUTED on the date(s) set forth in the acknowledgment(s) below to be
EFFECTIVE as of the 31st day of May, 2002.
GUARANTOR:
MERITAGE CORPORATION,
a Maryland corporation
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
MTH-TEXAS GP, INC.,
an Arizona corporation
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
MTH-TEXAS LP, INC.,
an Arizona corporation
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
EIGHTH MODIFICATION AGREEMENT - Page 9
STATE OF _____________ ) (section symbol)
) (section symbol)
COUNTY OF ___________ ) (section symbol)
This instrument was ACKNOWLEDGED before me on _________________, 2002,
by _________________________________________, _______________________________ of
MERITAGE CORPORATION, a Maryland corporation, on behalf of said corporation.
[S E A L] _________________________________
Notary Public
My Commission Expires:
_________________________________
_____________________ Printed Name of Notary Public
STATE OF _____________ ) (section symbol)
) (section symbol)
COUNTY OF ___________ ) (section symbol)
This instrument was ACKNOWLEDGED before me on _________________, 2002,
by _________________________________________, _______________________________ of
MTH-TEXAS GP, INC., an Arizona corporation, on behalf of said corporation.
[S E A L] _________________________________
Notary Public
My Commission Expires:
_________________________________
_____________________ Printed Name of Notary Public
EIGHTH MODIFICATION AGREEMENT - Page 10
As of May 31, 2002
Guaranty Bank
8333 Douglas Avenue
Dallas, Texas 75225
Re: Modification of an existing $75,000,000.00 guidance line from
Guaranty Bank, a federal savings bank ("Lender") to
Legacy/Monterey Homes L.P., an Arizona corporation,
Hancock-MTH Communities, Inc., an Arizona corporation and
Hancock-MTH Builders, Inc., an Arizona corporation, jointly
and severally (collectively "Borrower"); such loan and other
indebtedness being guaranteed by Meritage Corporation, a
Maryland corporation, MTH-Texas GP, Inc., an Arizona
corporation and MTH-Texas LP, Inc., an Arizona corporation
(collectively referred to as "Guarantor")
Gentlemen:
Reference is made to that certain Master Loan Agreement dated as of
January 31, 1993 (and all amendments thereto, if any) (the "Loan Agreement")
between Lender and Borrower governing a $75,000,000.00 loan (as increased) (the
"Loan") for the acquisition and/or refinancing of residential lots located in
certain counties in the States of Texas and Arizona as described therein, and
the construction of single-family residences thereon. Unless otherwise expressly
defined herein, each term used herein with its initial letter capitalized shall
have the meaning given to such term in the Loan Agreement. As used in this
letter agreement, the term "Loan Instruments" shall mean and include (i) the
"Loan Instruments" as defined in the Loan Agreement, (ii) the modification
agreements dated as of even date herewith, executed by and between the parties
hereto, and (iii) this letter agreement and all other documents executed in
conjunction herewith (and all amendments thereto, if any).
Borrower and Lender desire to amend and modify certain terms and
provisions of the Loan and the Loan Instruments as follows:
1. The stated maturity date of the Note is hereby extended to and
including May 31, 2003, when the entire unpaid principal balance of the Note,
together with all accrued and unpaid interest shall be due and payable;
provided, however, such date may be extended as set forth in Paragraph 9 of the
Loan Agreement (as amended hereby).
2. Exhibit A to the Loan Agreement is hereby modified by deleting such
exhibit in its entirety and replacing it with Exhibit A attached hereto.
Guaranty Bank
As of May 31, 2002
Page 2
3. All Loan Instruments hereby are amended and modified in a manner
consistent with the modifications, terms and/or provisions contained herein.
Except as modified hereby, all the terms, provisions and conditions of the Loan
Instruments shall remain in full force and effect.
4. This letter agreement constitutes the "Letter Agreement" referred to
in the Sixth Modification Agreement of even date herewith executed by and
between the parties hereto.
5. The terms and provisions of this letter agreement may not be
modified, amended, altered or otherwise affected except by instrument in writing
executed by Lender and Borrower.
6. Each Guarantor by its execution hereof agree to the amendments and
modifications to the Loan Instruments set forth herein and in the prior
amendments and modifications to the Loan Instruments and agree that all of such
modifications do not and will not waive, release or in any manner modify either
Guarantor's obligations and liabilities under and pursuant to the Guaranty.
(The balance of this page is intentionally left blank.)
Guaranty Bank
As of May 31, 2002
Page 3
If this letter agreement correctly sets forth our understanding of the
subject matter contained herein, please indicate this by executing this letter
agreement in the space furnished below and then return a fully-executed copy to
the undersigned.
Very truly yours,
BORROWER:
LEGACY/MONTEREY HOMES L.P.,
an Arizona limited partnership
BY: MTH-TEXAS GP, INC.,
an Arizona corporation,
General Partner
By:
-------------------------------
Name:
-------------------------
Title:
------------------------
HANCOCK-MTH COMMUNITIES, INC.,
an Arizona corporation
By:
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
HANCOCK-MTH BUILDERS, INC.,
an Arizona corporation
By:
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
Guaranty Bank
As of May 31, 2002
Page 4
GUARANTOR:
MERITAGE CORPORATION,
a Maryland corporation
By:
-----------------------------------
Name:
-----------------------------
Title:
----------------------------
MTH-TEXAS GP, INC.,
an Arizona corporation,
By:
----------------------------------------
Name:
-----------------------------
Title:
----------------------------
MTH-TEXAS LP, INC.,
an Arizona corporation
By:
---------------------------------------
Name:
-----------------------------
Title:
----------------------------
Guaranty Bank
As of May 31, 2002
Page 5
ACCEPTED AND AGREED TO:
LENDER:
GUARANTY BANK,
a federal savings bank
By:
----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
EXHIBIT A
TO LOAN AGREEMENT
1. Introductory Paragraph. RESIDENCE AND INVENTORY LOT LIMITATIONS. At any
given time, Residences and Inventory Lots financed under the Loan shall
be limited to the following numbers, unless modified by Lender in
writing:
Total Residences: Nine Hundred Fifty (950).
Specs: One Hundred Sixty (160).
Models: Seventy (70).
Inventory Lots: One Thousand Four Hundred (1,400).
Borrower may increase the number of Specs allowed above by the same
number by which Borrower is short of Models allowed above. Borrower
covenants and agrees not to allow, and is prohibited from allowing, any
more than fifteen (15) Specs, four (4) Models or two hundred (200)
Inventory Lots to exist in any Approved Subdivision (as hereinafter
defined).
The outstanding aggregate amount of the Loan Allocations for all Specs
and Models at any time shall never exceed $31,250,000.00.
The outstanding aggregate amount of the Loan Allocations for all
Inventory Lots at any time shall never exceed $22,500,000.00.
The term "Specs" means a Residence which is not a Model and is not
Under Contract.
The term "Model" means a Residence specifically utilized for the
purposes of marketing other residential products.
The term "Under Contract" shall mean Residences under written contract
to sell to bona fide third parties unrelated to Borrower, having no
contingency or any other conditions not reasonably susceptible to being
satisfied, providing for earnest money deposits of at least $2,000.00,
and for which Lender has received preliminary loan approval from a bona
fide residential permanent lender.
The term "Inventory Residence" means any Residence which is not a
Model.
2. Introductory Paragraph. APPROVED SUBDIVISIONS. The following
subdivisions and any additional subdivisions approved in writing by
Lender (the "Approved Subdivisions") are approved by Lender for the
Residences and Inventory Lots:
Subdivision County
----------- ------
Auburn Ridge - Pinelakes Harris
Bethany Ridge Collin
Candle Meadow Dallas
Canyon Gate at The Brazos Fort Bend
Canyon Gate at Cinco Ranch Fort Bend
Cypress Mills Harris
Cypress Point Denton
Parks at Deer Creek Tarrant
El Dorado Heights Collin
Forest Creek Williamson
Forest Oaks Denton
Hillcrest Estates Collin
Indian Pointe Estates Dallas
Lakeside Village Estates Dallas
Legend Bend Denton
Legend Crest Collin
McCreary Estates Tarrant
Parkwood Hills Tarrant
EXHIBIT A, Page 1
Pine Lakes Harris
Plum Creek Hays
Ryan Ranch Denton
Springbrook Glen Williamson
Spring Meadow Collin
Stone Gate Tarrant
Stone Meadow Tarrant
Village at Western Oaks Travis
Westchester Square Dallas
Westwood Shores Dallas
Wimbledon Champions Harris
Winding Hollow Dallas
Windy Hills Farm Collin
3. Introductory Paragraph. APPROVED PRICE RANGE. The Residences shall be
in the $70,000.00 to $400,000.00 price range; provided, however,
Residences in any Approved Subdivision in the Austin, Texas
metropolitan area may have a $70,000.00 to $900,000.00 price range.
4. Paragraph 1(c). GUARANTOR. Guarantor of the Loan shall be: Meritage
Corporation, a Maryland corporation; MTH-Texas G.P., Inc., an Arizona
corporation; and MTH-Texas L.P., Inc., an Arizona corporation.
5. Paragraph 2(h). LOAN FINANCE CHARGE. None.
6. Paragraph 2(k) and 6(g). INSPECTION FEE. An inspection fee of $30.00
per Residence shall be paid to Lender on the day the Mortgage
pertaining to such Residence is recorded in the Real Property Records.
7. Paragraph 4(c). LOAN RATIOS. With respect to Residences Under Contract,
the Loan Allocation shall not exceed the lesser of (1) one hundred
percent (100%) of the direct costs of a Property, as determined by
Lender or, (2) eighty percent (80%) of the lowest of the values as
provided in Paragraph 4(c) (i), (ii) and (iii) of this Loan Agreement.
With respect to Specs, Models and Inventory Lots, the Loan Allocation
shall not exceed the lesser of (1) one hundred percent (100%) of the
direct costs of a Property, as determined by Lender or, (2)
seventy-five percent (75%) of the lowest of the values as provided in
Paragraph 4(c) (i), (ii) and (iii) of this Loan Agreement.
8. Paragraph 6(q). OTHER ENTITIES. The Mortgages shall additionally secure
all other indebtedness now or hereafter owed by the following entities
to Lender: None.
9. Paragraph 6(s). REQUIRED RELEASES. Borrower shall cause: (a) Inventory
Residences to be released from a Mortgage nine (9) months from the day
such Mortgage is recorded in the Real Property Records, (b) Models to
be released from a Mortgage twenty-four (24) months from the day such
Mortgage is recorded in the Real Property Records, and (c) Inventory
Lots to be released from a Mortgage twelve (12) months from the day
such Mortgage is recorded in the Real Property Records; provided,
however, if no default then exists under any Loan Instruments, Lender
may, at its option, extend the Required Release Date for periods of six
(6) months (the "Extended Release Date"); provided, such Extended
Release Date shall in no event go beyond the Stated Maturity Date (as
hereinafter defined) or the Extended Maturity Date (as hereinafter
defined), if applicable.
10. Paragraph 7. REQUIRED PRINCIPAL REDUCTIONS. Prior to the date that
Lender gives Borrower the notice described in Paragraph 4(f) above, the
following shall apply: in the event a Property has been granted an
Extended Release Date (as provided in Paragraph 9 of this Exhibit A)
and a Mortgage remains covering such Property beyond the following
periods from the date such Mortgage is recorded, then Borrower shall
make a principal payment of the Note in an amount equal to ten percent
(10%) of the Loan Allocation with respect to such Property (and the
Loan Allocation for such Property shall be reduced by the same amount),
as determined by Lender:
EXHIBIT A, - Page 2
Inventory Residences: Fifteen (15) months.
Models: Twenty-four (24) months.
Inventory Lots: Twelve (12) months.
From and after the date that Lender gives Borrower the notice described
in Paragraph 4(f) of the Loan Agreement, the following shall apply: in
the event a Property has been granted an Extended Release Date, as
provided in Paragraph 9 of this Exhibit A, Borrower shall make a
principal payment on the Note of ten percent (10%) of that portion of
the Loan advanced by Lender for such Property, within the following
periods from the date a Mortgage covering such Property is recorded in
the Real Property Records:
Inventory Residences: Fifteen (15) months.
Models: Twenty-four (24) months.
Inventory Lots: Twelve (12) months.
11. Paragraph 9. MATURITY AND EXTENSION. The maturity date of the Note
shall be the later of the maturity date as provided in the Note (May
31, 2003) (the "Stated Maturity Date"), or nine (9) months after the
recording in the Real Property Records of the last Mortgage (the
"Extended Maturity Date") approved by Lender and recorded prior to the
expiration of the Stated Maturity Date. After the Stated Maturity Date,
no additional Mortgage shall be recorded.
12. Paragraph 10. ADDITIONAL DEFAULTS. In addition to the events of default
stipulated in the Loan Instruments, it shall be a default under this
Loan Agreement if Borrower fails to comply with any of the following:
None.
13. Paragraph 11. ADDITIONAL LOAN COVENANTS. Borrower shall fully perform
and satisfy the following "Additional Loan Covenants":
(a) The aggregate net worth of Borrower (determined in accordance
with generally accepted accounting principles, consistently
applied) shall not fall below $50,000,000.00.
(b) The ratio of total liabilities to equity (as determined by
Lender) shall not exceed 3.0 to 1.0.
(c) John Landon shall at all times retain management control of
Borrower.
(d) In no event shall Meritage Corporation, a Maryland
corporation, be in default under any secured indebtedness.
If Borrower or Guarantor (if applicable to Guarantor) breaches any of
the Additional Loan Covenants then, at Lender's election, no additional
Mortgages shall be recorded in the Real Property Records; provided,
however, that a breach of any Additional Loan Covenants shall not be
considered a default under the Loan Instruments.
14. Paragraph 16(d). RELEASE PRICE. The partial release price shall be a
cash amount equal to the Loan Allocation for the Property multiplied by
the Stage (expressed as a percentage) of the Property, all as
determined by Lender; provided, however, if Lender shall have given
Borrower the notice described in Paragraph 4(f) of the Loan Agreement,
then the partial release price shall be an amount in cash equal to one
hundred and one hundred percent (100%) of the outstanding balance of
the Loan advanced by Lender for the Property.
15. Paragraph 16(e). EXTENSION FEE. If Lender extends the Required Release
Date, as provided in Paragraph 9 of this Exhibit A, Borrower shall pay
to Lender an extension fee of one percent (1%) of that portion of the
Loan advanced by Lender for each such Property times a fraction, the
numerator of which is the number of days the Required Release Date is
extended and the denominator of which is 365.
EXHIBIT A, - Page 3
EXHIBIT A
Description of the Deed(s) of Trust