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EXHIBIT 10.10
LOAN AGREEMENT
THIS LOAN AGREEMENT is entered into as of March 12, 1996 by
XXXXXXX-XXXXXX, INC., a Delaware corporation ("Borrower"), and EAST-WEST BANK, a
California banking corporation ("Lender").
ARTICLE I
DEFINITIONS
"Acquisition Facility" has the meaning set forth in Section 2.1.
"Approved Commercial Property" means either an Initial Deed of Trust
Property or an office, retail or industrial property which has been approved by
Lender pursuant to the applicable terms of Article III.
"Approved Property" means either an Approved Commercial Property or an
Approved Residential Property.
"Approved Residential Property" means either an Initial Stock Pledge
Property or apartments or developments of single-family residences or planned
units which have been approved by Lender pursuant to the applicable terms of
Article III.
"Authorized Representative" means a person designated by the
applicable entity and approved by Lender for the purpose of certifying and
taking all other actions necessary or which Lender may deem desirable under
this Agreement or the other Loan Documents.
"Borrowing Base" means the aggregate of the following: (1) with
respect to each Approved Property owned by Borrower on which Lender has a lien
pursuant to the Deed of Trust, the positive difference between (a) 85% of the
value of each Approved Property as determined by Lender's most recent appraisal
made in accordance with Section 5.13 and (b) the aggregate amount of monetary
liens encumbering such Approved Property (but not including any lien in favor
of Lender) ; and (2) with respect to each Approved Property owned by a Pledged
Corporation, 50% of the shareholders' equity of such Pledged Corporation
outstanding from time to time as calculated in accordance with generally
accepted accounting principles, but in no event may the aggregate amount of
Loans made on the basis of the stock of the Pledged Corporations exceed the
lesser of (A) 50% of the aggregate amount of all Loans outstanding at any time
and (B) $1,800,000. Notwithstanding the foregoing, the amount which may be
included in the Borrowing Base with respect to an Approved Property which was
acquired with the proceeds of a Loan but which became an Approved Property
subsequent to such
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acquisition, shall be limited to (1) if Lender has a lien on such Approved
Property pursuant to the Deed of Trust, the positive difference between (a) 85%
of the value of the Approved Property as determined by Lender's most recent
appraisal made in accordance with Section 5.13 and (b) the sum of (A) the
aggregate amount of monetary liens encumbering such Approved Property (but not
including any lien in favor of Lender) and (B) the amount of the Loan
outstanding which was made to acquire such Approved Property; and (2) if such
Approved Property is owned by a Pledged Corporation, 50% of the shareholders'
equity of such Pledged Corporation outstanding from time to time as calculated
in accordance with generally accepted accounting principles, less the amount of
the Loan outstanding which was made to acquire such Approved Property.
"Commitment Termination Date" means June 1, 1997, as such date may be
extended in accordance with Section 2.8 below.
"Deed of Trust" means individually or collectively, as applicable, (a)
the Deed of Trust, Security Agreement, Assignment of Leases and Rents and
Fixture Filing executed by Borrower, as trustor, for the benefit of Lender, as
beneficiary, entered into concurrently with the execution and delivery of this
Agreement; and (b) any other deed of trust executed pursuant to the terms of
this Agreement from time to time of which Lender is the beneficiary.
"Environmental Indemnity" means the Environmental Indemnity executed
by Borrower and the Guarantors for the benefit of Lender pursuant to this
Agreement.
"Event of Default" has the meaning set forth in Article VI of this
Agreement.
"Guaranty" means the Guaranty executed by the Guarantors guaranteeing
the repayment of the Loans.
"Guarantors" means K-W International and K-W Properties.
"Hazardous Materials" means (i) any chemical, compound, material,
mixture or substance that is now or may later be defined or listed in, or
otherwise classified pursuant to, any Hazardous Materials Law as a "hazardous
substance", "hazardous material", "hazardous waste", "extremely hazardous
waste", "acutely hazardous waste", "radioactive waste", "infectious waste",
"biohazardous waste", "toxic substance", "pollutant", "toxic pollutant",
"contaminant" as well as any formulation not mentioned herein intended to
define, list, or classify substances by reason of deleterious properties such
as ignitability, corrosivity, reactivity, carcinogenicity, toxicity,
reproductive toxicity "EP toxicity," or "TCLP toxicity"; (ii) petroleum,
natural gas, natural gas liquids, liquified natural gas, synthetic gas usable
for fuel (or mixtures of natural gas and such synthetic gas) and ash
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produced by a resource recovery facility utilizing a municipal solid waste
stream, and drilling fluids, produced waters and other wastes associated with
the exploration, development or production of crude oil, natural gas, or
geothermal resources; (iii) "hazardous substance" as defined in Section
25281(f) of the California Health and Safety Code; (iv) "waste" as defined in
Section 13050(d) of the California Water Code (v) asbestos in any form; (vi)
urea formaldehyde foam insulation; (vii) transformers or other equipment which
contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs)
in excess of fifty (50) parts per million; (viii) radon; and (ix) any other
chemical, material, or substance that, because of its quantity, concentration,
or physical or chemical characteristics, exposure to which is limited or
regulated for health and safety reasons by any governmental authority, or which
poses a significant present or potential hazard to human health and safety or
to the environment if released into the workplace or the environment.
"Hazardous Materials Laws" means all present and future federal, state
and local laws, ordinances, regulations, permits, guidance documents, policies,
decrees, orders and any other requirements, whether statutory, regulatory or
contractual, of governmental authorities relating to health, safety, the
environment or the use, handling, disposal or transportation of any Hazardous
Materials (including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Resource Conservation
Recovery Act, the Clean Water Act, the Clean Air Act, and the applicable
provisions of the California Health and Safety Code and the California Water
Code, as each such statute may from time to time be amended, and the rules,
regulations, and guidance documents promulgated pursuant to any such statute).
"Initial Deed of Trust Properties" means the properties set forth
under such heading on Exhibit "A" to this Agreement.
"Initial Properties" means the Initial Deed of Trust Properties and
the Initial Stock Pledge Properties.
"Initial Stock Pledge Properties" means the properties set forth under
such heading on Exhibit "A" to this Agreement.
"K-W International" means Xxxxxxx-Xxxxxx International, a California
corporation, a wholly-owned subsidiary of Borrower.
"K-W Properties" means K-W Properties, a California corporation, a
wholly-owned subsidiary of Borrower.
"Loan Documents" means this Agreement, the Note, the Deed of Trust,
the Environmental Indemnity, the Stock Pledge Agreement, the Guaranty and all
documents, agreements and instruments executed or otherwise delivered for the
purpose of evidencing or securing the
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Loans, whether delivered concurrently with the delivery of this Agreement or
later.
"Loan" or "Loans" means, respectively, a single advance or the
aggregate amount of advances of credit made by Lender to Borrower under this
Agreement.
"Loan Request" means a request for a disbursement of the Loan in the
form of Exhibit "B" to this Agreement.
"Note" means the Promissory Note in the principal amount of $6,000,000
made by Borrower, as maker, and payable to the order of Lender, as payee, which
evidences the Loans.
"Payment Date" has the meaning set forth in Section 2.2.
"Permits" means all permits, licenses, operating authorizations,
certificates, variances, waivers, approvals or other authorizations of any kind
issued or granted by any governmental authority which are required in
connection with (a) the lawful and proper operation and maintenance of the
Approved Properties; and (b) any existing use of the Approved Properties.
"Permitted Encumbrances" has the meaning set forth in Section 4.8.
"Pledged Corporation" means an affiliate or a subsidiary of Borrower
which owns an Approved Property and whose shares have been pledged to Lender
pursuant to the Stock Pledge Agreement.
"Potential Event of Default" means an event which, with the giving of
notice or the lapse of time, or both, would become an Event of Default.
"Prime Rate" means the variable rate of interest established by Bank
of America from time to time as its "prime rate" or "reference rate." Each
change in the Prime Rate shall be effective as of the opening of business on
the date announced as the effective date of any change in the Prime Rate. If
Bank of America shall discontinue stating or publishing its "prime" or
"reference" rate, Lender shall select a comparable rate in its place.
"Property Laws" means (a) all zoning, building, environmental and
other laws, ordinances, rules, regulations, and restrictions of any
governmental authority, including, without limitation, the Americans with
Disabilities Act to the extent applicable, the Subdivision Map Act and those
relating to the presence of asbestos and/or hazardous wastes, (b) any building
permits or any conditions, easements, rights-of -way, covenants, restrictions
of record or any recorded or unrecorded agreement affecting or concerning the
Approved Properties, including, without limitation, planned development
permits, condominium declarations and any owner
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participation, development or regulatory agreements with any governmental
authority and (c) requirements of insurance companies or similar organizations,
affecting the operation and use of the Approved Properties or consummation of
the transactions contemplated by the Loan Documents.
"Release Collateral" has the meaning set forth in Section 2.7.
"Release Date" has the meaning set forth in Section 2.7.
"Sale" or "Sold" means, with respect to the whole or any part of an
applicable property or any interest of Borrower or a Pledged Corporation in the
same, (a) any direct or indirect sale, conveyance, assignment, transfer,
exchange or other disposition of such property or interest; (b) any contract
sale or installment sale of such property or interest; or (c) any long-term
ground lease of such property or interest.
"Stock Pledge Agreement" means individually or collectively, as
applicable, (a) the Stock Pledge Agreement executed by K-W Properties
concurrently with the execution and delivery of this Agreement pledging the
stock of certain subsidiaries of K-W Properties; and (b) any other stock pledge
agreement executed pursuant to the terms of this Agreement from time to time of
which Lender is the secured party.
"Tangible Net Worth" means total shareholder equity (as defined by
generally accepted accounting principles), less (a) all intangible assets,
including, without limitation, goodwill, and (b) all notes or accounts
receivable from any affiliate of Borrower or any officer of Borrower or any of
Borrower's affiliates.
"Title Policies" means the title insurance policy required to be
delivered pursuant to Section 3. 5 (c) (i) and any subsequent title insurance
policy delivered to Lender in connection with Lender's lien under the Deed of
Trust on an Approved Property.
"Working Capital Facility" has the meaning set forth in Section 2.1.
ARTICLE II
LOANS
2.1 The Loans. Lender agrees, on the terms and conditions set
forth in this Agreement, to make Loans available to Borrower from the date of
this Agreement to the Commitment Termination Date and to maintain any such
Loans outstanding on the Commitment Termination Date until they are required to
be repaid pursuant to Section 2.3 below. The aggregate amount of Loans
outstanding at any time shall not exceed the lesser of (a) the amount of
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$6,000,000 and (b) the Borrowing Base. An amount of the Loans not greater than
$1,000,000 may be used only for the working capital needs of K- W International
(the "Working Capital Facility"). An amount of the Loans not greater than
$5,000,000 may be used only for the acquisition of interests in real property
by Borrower or an affiliate of Borrower (the "Acquisition Facility"). Borrower
and Lender intend the Loans to be revolving and as such, until the Commitment
Termination Date and otherwise within the limits set forth in this Agreement,
Borrower may borrow, repay and reborrow the Loans. After the Commitment
Termination Date, Borrower will not have the right to borrow, and Lender will
not make, any new Loans, but will maintain any Loans outstanding on the
Commitment Termination Date until such Loans are required to be repaid pursuant
to Section 2.3 below.
2.2 Interest and Fees.
(a) The aggregate amount of Loans outstanding from time
to time shall bear interest at the rate which is the sum of the Prime Rate and
one percent per annum. On (i) the first day of the month following the month
in which any Loan is disbursed and on the first day of each month after such
date and (ii) with respect to the principal amount so due, on the date on which
any principal amount is due under this Agreement (each a "Payment Date") ,
Borrower shall pay to Lender the amount of interest which shall have accrued
during the calendar month (or portion of such calendar month, as applicable)
immediately preceding such Payment Date.
(b) Borrower shall on the date of this Agreement pay
Lender a loan fee in the amount of $45,000.
(c) Interest payable under this Agreement shall be
calculated on the basis of a 360-day year and the actual number of days
elapsed.
2.3 Principal Repayment.
(a) Borrower shall repay the principal amount of the
Loans as follows:
(i) unless the maturity date of the Working
Capital Facility is extended as provided in Section 2.8 below, the entire
principal amount of the Working Capital Facility shall be due and payable,
together with all accrued but unpaid interest thereon, on or before June 1,
1997.
(ii) the principal amount of each Loan made as a
part of the Acquisition Facility shall be due and payable, together with all
accrued but unpaid interest thereon, as follows:
(A) with respect to any Loan made to
acquire any commercial property, irrespective of whether such commercial
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property is an Approved Commercial Property, on or before the date which is 18
months from the date on which such Loan was made; and
(B) with respect to any Loan made to
acquire any residential property, irrespective of whether such residential
property is an Approved Residential Property, on or before the date which is 12
months from the date on which such Loan was made.
(b) Borrower shall prepay the principal amount of each
Loan made pursuant to the Acquisition Facility, together with all accrued but
unpaid interest thereon, (i) with respect to each commercial property acquired
with such Loan, irrespective of whether such commercial property is an Approved
Commercial Property, upon the Sale of such commercial property; and (ii) with
respect to each residential property acquired with such Loan, irrespective of
whether such residential property is an Approved Residential Property, (A) the
Sale of such residential property if such property is sold in one unit or (B)
on the date of the Sale of each unit of such residential property in an amount
to be agreed upon for such unit by Lender and Borrower upon the making of the
Loan for such residential property if less than the entire residential property
is Sold. The amounts to be repaid upon the sale of units of the Initial Stock
Pledge Properties are set forth on Exhibit "C" to this Agreement.
(c) To the extent not already payable in accordance with
this Section 2.3 (or payable earlier in accordance with the Loan Documents) ,
all principal, accrued but unpaid interest and any other amounts outstanding
under the Loan Documents shall be due and payable in full on the date of the
maturity of the last Loan outstanding under this Agreement.
(d) If at any time (i) the aggregate principal amount of
all Loans outstanding exceeds the lesser of $6,000,000 or the Borrowing Base,
(ii) the aggregate amount of Loans outstanding under the Working Capital
Facility exceeds $1,000,000, (iii) the aggregate amount of Loans outstanding
under the Acquisition Facility exceeds $5,000,000 or (iv) the aggregate amount
of Loans made with respect to the stock of the Pledged Corporations exceeds the
lesser of 50% of the aggregate amount of all Loans outstanding or $1,800,000,
then Borrower shall immediately prepay the Loans (together with accrued
interest on the amount prepaid) in the amount of such excess.
(e) Borrower may prepay any portion of the Loans on any
Payment Date. So long as no Event of Default or Potential Event of Default has
occurred and is continuing, Borrower may designate the Loan or Loans to which
any prepayment is to be applied.
2.4 Manner of Payment. All payments received by Lender later than
1:00 p.m. (Los Angeles time) shall be considered received on the following
business day. Receipt of a check for any payments in
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and of itself shall not constitute payment. Subject to Section 2.3 (e), Lender
may apply any payments made pursuant to the terms of this Agreement and the
other Loan Documents in such order as it shall determine in its sole and
absolute discretion.
2.5 Evidence of Debt.
(a) Borrower's indebtedness resulting from all Loans made
from time to time shall be evidenced by the Note.
(b) The books and accounts of Lender shall be conclusive
evidence, absent manifest error, of the amounts of all Loans, repayments,
interest, fees and other charges advanced, due, outstanding or paid pursuant to
this Agreement.
2.6 Overdue Payments. Except as otherwise expressly provided in
this Agreement, any amount payable under this Agreement or any other Loan
Document which is not paid when due (whether as a result of maturity,
acceleration or otherwise) shall bear interest, payable on demand, at a rate
equal to the sum of the Prime Rate plus five percent per annum.
2.7 Release of Liens. At the request of Borrower, on any Release
Date, Lender shall release liens securing the Loans on specified collateral
("Release Collateral") subject to and upon compliance with all of the following
terms and conditions:
(a) no Event of Default or Potential Event of Default
shall have occurred and be continuing;
(b) Borrower shall have given to Lender at least 10 days'
prior written notice of its desire to effect the release of specified Release
Collateral, which notice shall designate (i) the Release Collateral and (ii) a
date (the "Release Date"), not less than 10 nor more than 30 days after the
date of such notice, as the date upon which the release is to be effected;
(c) Lender is satisfied the amount of the Loans
outstanding immediately following the proposed release and any accompanying
payment will not be greater than the lesser of (i) $6,000,000 and (ii) the
amount of the Borrowing Base; and
(d) on or prior to the Release Date, Borrower shall have
complied with such requirements as Lender may reasonably establish in
connection with the release of the Release Collateral, including: (i) if Lender
so requires, furnishing to Lender endorsements to one or more of its Title
Policies, which endorsements shall insure that the insurance provided by the
Title Policies so endorsed shall not be impaired by the release of such Release
Collateral; and (ii) payment to Lender of all of its costs and expenses,
including any legal, recording and title fees incurred in connection with the
release.
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2.8 Extension of Commitment Termination Date and Maturity of
Working Capital Facility. Lender agrees to extend the Commitment Termination
Date and the maturity date of the Working Capital Facility as set forth in
Section 2.3(a)(i) above, subject to Lender's receipt, not later than May 1,
1997, of written notice from Borrower requesting such extension to a date not
later than June 1, 1998 subject, however, to satisfaction of all of the
following conditions not later than June 1, 1997 (the "Extension Date"):
(a) all covenants and obligations of Borrower and the
Guarantors under this Agreement or any of the other Loan Documents shall have
been performed and all representations and warranties contained in this
Agreement shall be true as of the Extension Date;
(b) no Event of Default or Potential Event of Default
shall have occurred and be continuing;
(c) Lender shall have determined to its satisfaction that
no material adverse change has occurred in the (i) net operating income or
sales, as applicable, of the Approved Properties; (ii) physical and economic
condition of the Approved Properties; or (iii) business, financial condition
and management of Borrower, the Guarantors or the Pledged Corporations;
(d) Borrower shall have executed and delivered to Lender
an amendment to this Agreement or other documents satisfactory to Lender
evidencing such extension;
(e) Borrower shall have delivered to Lender such other
documents and assurances as Lender shall require, including, without
limitation, if requested by Lender, an endorsement to the Title Policies, at
Borrower's expense, assuring Lender that the extension will not affect the
priority of Lender's lien on any Approved Properties encumbered by the Deed of
Trust;
(f) Borrower shall have paid to Lender an extension fee
in the amount to be determined by Lender; and all of Lender's costs and
expenses, including any legal, recording and title fees incurred in connection
with the extension; and
(g) between the date of this Agreement and the Extension
Date, either (i) no Loan shall have ever been made under the Working Capital
Facility; or (ii) all Loans made under the working Capital Facility shall have
been repaid and no amounts shall be outstanding under the Working Capital
Facility for a period of not less than 30 consecutive days.
ARTICLE III
LOAN ADVANCES, APPROVALS AND CONDITIONS TO LENDING
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3.1 Requests for Loans. A request for a Loan shall be in writing
in the form of the Loan Request attached as Exhibit "B" to this Agreement.
Borrower shall not request a Loan more than once per week. Borrower shall not
request a Loan sooner than 45 days before the Loan is to be made if such Loan
is to be the initial Loan relating to a property which is proposed to be an
Approved Property, and not sooner than 10 days before the Loan is to be made if
no property is required to be considered for approval as an Approved Property
in connection with such Loan.
3.2 Lender Evaluation. In order to determine if a property is an
Approved Property, Lender shall perform its customary underwriting procedures
for making loans secured by real property, including, without limitation:
(a) an audit of the revenues, expenses, net operating
income and other financial performance of the property;
(b) a review of the occupancy, tenants and leases of the
property;
(c) a review of appraisal, engineering and environmental
inspections and reports, including the physical nature and attributes of the
property, the construction and state of repair and appearance and any potential
environmental problems;
(d) a market analysis, including review of the location
of the property, and all matters relating to continued economic viability of
such property and existing or potential competition;
(e) a review of Borrower's management and improvement
plans for the property; and
(f) legal due diligence, including review of the state of
title as disclosed by preliminary reports and related documents.
Borrower agrees to cooperate with Lender and to furnish to Lender at Borrower's
expense all documents and reports and information which Lender may require in
order to conduct and complete its evaluation of each property proposed by
Borrower to be an Approved Property.
3.3 Approval or Disapproval.
(a) Lender will (subject to Borrower's submission of the
materials and other information required by this Agreement and Borrower's
continued full cooperation in connection with Lender's evaluation) perform and
conclude its evaluation of a property within 30 days after receipt of a Loan
Request (the "Evaluation Period"). The approval or disapproval of any property
shall be within Lender's sole and absolute discretion and is subject, among
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other things, to compliance by Borrower with the provisions of this Agreement
and review and approval by Lender's Senior Loan Committee. If Lender shall not
have approved a property as an Approved Property before the expiration of the
Evaluation Period, such property shall be deemed not approved.
(b) Notwithstanding any other provision of this
Agreement:
(i) no property may be an Approved Commercial
Property if it requires construction or otherwise does not have a valid
certificate of occupancy or similar occupancy permit or if such property is of
a specialized or single-purpose nature and not readily adaptable to general
office, retail or industrial uses;
(ii) no property may be an Approved Residential
Property if it requires construction or otherwise does not have a valid
certificate of occupancy or similar occupancy permit, except that Lender may
approve planned-unit or tract-housing properties involving the sale of units
whose construction is not less than 90% complete if Borrower submits a
completion plan satisfactory to Lender; and
(iii) Lender will not approve a property to be an
Approved Property if the priority of Lender's lien on such property pursuant to
the Deed of Trust is to be other than first or second.
(c) If Lender shall have approved a property as an
Approved Property but Borrower shall not have qualified (including satisfaction
of all conditions precedent) for disbursement of, and shall not have
consummated disbursement of, the initial Loan for such Approved Property within
120 days after Lender has notified Borrower that such property has become an
Approved Property, then, at Lender's election, such property shall cease to be
an Approved Property until Lender shall have conducted such re-evaluations and
re-audits of such property on a current basis, as Lender may require and shall
have re-approved such property as an Approved Property as provided above
(Lender retaining the right, upon such re-evaluation and re-audit, not to
re-approve such property). Regardless of whether Borrower thereafter requests
any further Loans, the approval by Lender of any Loan requested by Borrower
shall obligate Borrower to promptly and diligently fulfill any conditions to
such Loan that were not fulfilled or waived by Lender at the time such Loan was
made.
3.4 Approved Properties. Following Lender's underwriting review
and approval by Lender's Senior Loan Committee, Lender shall notify Borrower of
the conditions precedent to a property's becoming an Approved Property and the
disbursement of a Loan or Loans with respect to such property.
3.5 Conditions to Initial Loan. Lender's obligation to make
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the initial Loan shall be subject to the satisfaction of the conditions
precedent set forth in this Section 3.5 not later than March 31, 1996.
(a) Loan Documents. Lender shall have received the
following originally executed Loan Documents, in form and substance
satisfactory to Lender:
(i) this Agreement, the Note, the Deed of Trust,
the Environmental Indemnity, the Stock Pledge Agreement together with the
applicable original shares of each Pledged Corporation and stock powers
endorsed in blank and the Guaranty; and
(ii) one or more UCC-1 financing statements.
(b) Borrower and Guarantors. Lender shall have received
the following concerning Borrower and each Guarantor, in form and substance
satisfactory to Lender: (i) a copy of each such person's bylaws certified to be
true and complete by such person's Authorized Representative; (ii) a copy of
each such person's articles of incorporation and any amendments, certified by
the California Secretary of State; (iii) a recent good-standing certificate
regarding each such person issued by the California Secretary of State; (iv) a
certificate of each such person's Authorized Representative, including a copy
of resolutions, indicating that each such person is authorized to execute and
deliver the Loan Documents to which such person is a party and to perform its
obligations under such Loan Documents; (v) a certificate with respect to the
incumbency and signature of each such person's Authorized Representative; and
(vi) such other documents as Lender shall reasonably request with respect to
any such person's existence and authorization.
(c) The Initial Properties. Lender shall have received
the following concerning the Initial Deed of Trust Properties and Initial Stock
Pledge Properties, as applicable, in form and substance satisfactory to Lender:
(i) (A) an ALTA Extended Coverage Policy of Title
Insurance with such endorsements as Lender may require, issued by a title
insurer approved by Lender, insuring the Deed of Trust to be a second-priority
lien on the Initial Deed of Trust Properties, in an insured amount acceptable
to Lender, free and clear of all liens, encumbrances, conditions, restrictions
and other exceptions to title except for Permitted Encumbrances, and otherwise
in form and content satisfactory to Lender; and (B) copies of the current
owner's policies of title insurance insuring each Pledged Corporation's
ownership of its Initial Stock Pledge Property;
(ii) a recent "as built" survey of each of the
Initial Properties prepared and certified to Lender pursuant to ALTA and ACSM
standards by a surveyor or engineer satisfactory to
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Lender and in any event depicting dimensions, building and other details
required by Lender or which may be necessary to insure that there are no
encroachments (on or off such Initial Deed of Trust Property) , building code
or zoning violations or other physical violations of Property Laws affecting
any such Initial Deed of Trust Property or other physical defects affecting
marketability or insurability of any Initial Deed of Trust Property;
(iii) appraisals satisfactory to Lender by Lender's
appraiser or another appraiser approved by Lender showing the current value of
the Initial Properties;
(iv) recent environmental audit reports prepared
by a consultant acceptable to Lender showing the absence of Hazardous Materials
on or about the Initial Properties;
(v) evidence that the Initial Properties comply
with all Property Laws and Borrower has obtained all Permits necessary for the
ownership, maintenance and operation of the Initial Properties, including,
without limitation, a valid certificate of occupancy for each Initial Deed of
Trust Property;
(vi) evidence that the insurance required by
Section 2.11 of the Deed of Trust is in effect and that insurance from
insurers, in amounts and of kinds satisfactory to Lender is in effect with
respect to the Initial Stock Pledge Properties;
(vii) if requested by Lender, with respect to each
of the Initial Deed of Trust Properties, copies of the all of the leases of
space; a current rent roll; operating statements showing the revenues, expenses
and net operating income for the shorter of three years or the period of
Borrower's ownership; any projections requested by Lender; and a budget for
capital expenditures;
(viii) with respect to each of the Initial Stock
Pledge Properties, a sales plan, including sales materials, prices and
anticipated absorption, for the units in such Initial Stock Pledge Property;
any projections requested by Lender; and a budget for capital expenditures;
(ix) evidence that the Initial Properties do not
lie within flood hazard areas;
(x) an engineering or inspection report from an
engineer or inspector satisfactory to Lender of the structural and mechanical
details and other physical attributes of the improvements of the Initial
Properties;
(xi) evidence that no litigation, investigation or
like matter is pending or threatened by or before any court, regulatory agency
or investigative body contesting or seeking to limit, affect or impair any
Permit or which might otherwise have a
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material adverse affect on any Initial Property or Borrower's or any Pledged
Corporation's ability to own or operate any Initial Property;
(xii) copies of all of the loan documents relating
to financing secured by a lien on any Initial Property;
(xiii) with respect to each Pledged Corporation, the
articles of incorporation, bylaws and a recent good-standing certificate; and
such financial statements of a recent date as Lender shall request.
(d) Other Conditions Precedent. Lender shall have
received the following, in form and substance satisfactory to Lender:
(i) the results of a search of the California
Secretary of State's UCC records concerning Borrower and the Guarantors;
(ii) such financial statements of Borrower and the
Guarantors and Borrower's affiliates as Lender shall require;
(iii) an opinion of counsel to Borrower and the
Guarantors satisfactory to Lender concerning the existence and power of
Borrower and the Guarantors, the due authorization, execution, delivery and
enforceability of the Loan Documents and such other matters as Lender shall
require;
(iv) a loan fee in the amount of $45,000 and the
payment of all of Lender's costs of closing the Loan, including, without
limitation, appraisal, legal, title, recording, inspection, investigation,
escrow and filing costs; and
(v) such other documents, agreements,
certificates and assurances as Lender shall require.
3.6 Conditions to All Loans. Lender's obligation to make any Loan
(including the initial Loan) is subject to all of the following conditions
precedent:
(a) Lender shall not have previously made a Loan in the
week in which Borrower is proposing a Loan to be made;
(b) the Loan shall be in an amount not less than $100,000
;
(c) the Loan, when aggregated with all outstanding Loans,
shall not exceed the amount set forth in Section 2.1 above;
(d) there shall exist no Event of Default or Potential
Event of Default;
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(e) Lender is satisfied that no material adverse change
in the business or financial condition or management of Borrower, the
Guarantors, any Pledged Corporation or any Approved Property has occurred;
(f) no Approved Property has suffered any material damage
by fire or other casualty and no condemnation, adverse zoning or usage change
proceedings have been commenced or threatened;
(g) all of the representations and warranties given by
Borrower and the Guarantors in the Loan Documents shall be deemed to have been
made on each date that a Loan is made and such representations and warranties
shall be true on such date; and
(h) no law, regulation, ordinance, moratorium, injunctive
proceeding, restriction or similar matter has been enacted, adopted or
threatened by any federal, state or local government or any board, authority,
commission, agency or department asserting jurisdiction over the subject matter
if the result of such law, regulation, ordinance, moratorium, injunctive
proceeding, restriction or like matter would have the effect, in Lenders's
reasonable judgment, of materially and adversely affecting the expected
benefits to be gained by Borrower or any Pledged Corporation, as applicable, in
connection with any Approved Property or by Lender in connection with the Loans
for any reason, including, without limitation, Borrower's or any Pledged
Corporation's being prohibited or delayed in converting any Approved Properties
to uses other than their present use or otherwise.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Borrower makes the representations and warranties set forth in this
Article IV to Lender.
4.1 Existence. Borrower is a corporation duly organized, validly
existing and in good standing under the laws of Delaware. Each Guarantor and
each Pledged Corporation is a corporation duly organized, validly existing and
in good standing under the laws of California.
4.2 Power. Borrower and each of the Guarantors has all necessary
corporate power to enter into the Loan Documents to which each is a party and
perform its obligations under such Loan Documents.
4.3 Enforceability of Loan Documents. The Loan Documents to which
Borrower is a party have been duly executed and delivered by
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Borrower and are the legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms. The
Guaranty and Environmental Indemnity have been duly executed and delivered by
the Guarantors and are the legal, valid and binding obligations of the
Guarantors, enforceable against the Guarantors in accordance with their
respective terms. The Stock Pledge Agreement has been duly executed and
delivered by K-W Properties and is the legal, valid and binding obligation of
K-W Properties, enforceable against K-W Properties in accordance with its terms.
4.4 Approvals. (a) Borrower, the Guarantors and the Pledged
Corporations have obtained all material approvals, licenses, exemptions and
other authorizations from, and has accomplished all material filings,
registrations and qualifications with, all applicable governmental authorities
that are necessary for the transaction of their business; (b) Borrower and each
Pledged Corporation have obtained all Permits necessary to the ownership,
occupation, operation and maintenance of the Approved Properties; and (c) no
authorization or approval or other action by, and no notice to or filing with
any governmental authority or regulatory body is required for the due
execution, delivery and performance by Borrower or the Guarantors of the Loan
Documents to which it is any of them is a party.
4.5 No Conflict. Borrower's execution and delivery of, and its
performance of its obligations under, the Loan Documents to which it is a party
do not and will not conflict with (a) any (i) contractual or legal restriction
or obligation, or (ii) court or regulatory order, binding on or affecting
Borrower, or (b) any restriction contained in any of Borrower's constituent or
governing documents.
4.6 Pending Litigation or Other Proceedings. There is no pending
or, to the knowledge of Borrower, threatened action, proceeding or
investigation before any court, governmental agency or arbitrator against or
affecting Borrower, any Guarantor, any Pledged Corporation, any Approved
Property or any of Borrower's other assets which, if decided adversely to
Borrower, would materially and adversely affect the financial condition of
Borrower, such Guarantor, such Pledged Corporation or of any of Borrower's
assets, including, without limitation, any Approved Property, or would
materially and adversely affect the present or future ability of Borrower to
perform its obligations under the Loan Documents to which it is a party.
4.7 Solvency. None of Borrower, any Guarantor or any Pledged
Corporation is insolvent and none of them will be rendered insolvent by the
transactions contemplated by the Loan Documents. After giving effect to such
transactions, none of Borrower, any Guarantor or any Pledged Corporation will
be left with an unreasonably small amount of capital with which to engage in
its
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business or undertakings, nor will Borrower, any Guarantor or any Pledged
Corporation have intended to incur, or believe that it has incurred, debts
beyond its ability to pay such debts as they mature.
4.8 No Liens. There are no material liens or encumbrances upon or
with respect to any Approved Property except the liens of property taxes and
assessments which are not yet due and payable and the liens and encumbrances
shown, in the case of Approved Properties owned by Borrower, on the Title
Policies, or in the case of Approved Properties owned by Pledged Corporations,
on the Pledged Corporations' owners' policies of title insurance (the
"Permitted Encumbrances").
4.9 Title. Borrower and the Pledged Corporations, as applicable,
have good, marketable-and indefeasible title to the Approved Properties which
they purport to own, free and clear of all material encumbrances except the
Permitted Encumbrances. The Deed of Trust, when properly recorded in the
Official Records of the county where the relevant Approved Property is located,
together with the Uniform Commercial Code financing statement executed by
Borrower in connection with the security interest granted pursuant to the Deed
of Trust, when properly filed with the California Secretary of State, will
create, respectively, (a) a valid, perfected second-priority lien on the "Real
Property" (as defined in the Deed of Trust), subject only to Permitted
Encumbrances, and (b) a valid, perfected second-priority security interest in
the "Personal Property" (as defined in the Deed of Trust) to the extent such a
lien may be perfected by such a filing, subject only to Permitted Encumbrances.
The Deed of Trust, as it may be modified from time to time in connection with
the encumbrance of additional Approved Properties, or any other deed of trust
delivered pursuant to this Agreement in connection with the encumbrance of
additional Approved Properties, when properly recorded in the Official Records
of the county where such additional Approved Property is located, together with
any Uniform Commercial Code financing statements executed by Borrower in
connection with the delivery of such modification or additional deed of trust,
when properly filed with the California Secretary of State, will create,
respectively, (a) a valid and perfected lien on the real property encumbered by
the Deed of Trust, as modified, or such additional deed of trust, of the
priority shown in the Title Policy or any endorsement delivered in connection
with such modification or additional deed of trust, subject only to Permitted
Encumbrances, and (b) a valid and perfected security interest in the personal
property encumbered by the Deed of Trust, as modified, or such additional deed
of trust, of the same priority as the lien on the related real property to the
extent such a lien may be perfected by such a filing, subject only to
Permitted Encumbrances. Except for any Permitted Encumbrance or any lien which
has been "insured around" to the satisfaction of Lender, there are no liens or
claims for work, labor or materials affecting any Approved
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Property. The Permitted Encumbrances do not materially adversely impair
Borrower's or the relevant Pledged Corporation's, as applicable, current use
and operation of any of any Approved Property or otherwise materially adversely
impair Borrower's ability to perform any of its obligations under the Loan
Documents.
4.10 Taxes.
(a) Borrower, the Guarantors and the Pledged Corporations
have filed all required federal, state and local tax returns. Borrower, the
Guarantors and the Pledged Corporations have paid all federal, state and local
taxes due (including any interest and penalties) other than taxes being
promptly and actively contested in good faith and by appropriate proceedings.
Borrower, the Guarantors and the Pledged Corporations have established and are
maintaining adequate reserves for tax liabilities (including contested
liabilities) in accordance with generally accepted accounting principles.
(b) Borrower and the Pledged Corporations have paid and
discharged all installments for the payment of "Impositions" (as defined in the
Deed of Trust) due to date, and all other material taxes, levies, maintenance
charges, utilities charges or any other governmental or private assessment or
charge, imposed against, affecting or relating to the each Approved Property
other than those which have not become due, together with any fine, penalty,
interest or cost for non-payment pursuant to such returns or pursuant to any
assessments received by it.
4.11 Laws.
(a) Borrower, the Guarantors and the Pledged Corporations
are in material compliance with all laws, regulations and court orders
applicable to them and their business, including all state and federal
securities laws.
(b) Each Approved Property complies in all material
respects with all Property Laws affecting such Approved Property. Neither
Borrower nor any Pledged Corporation has received any written notification or
threat of any actions or proceedings regarding the noncompliance or
nonconformity of any Approved Property with Property Laws or Permits, nor are
Borrower or any Pledged Corporation otherwise aware of any such pending actions
or proceedings.
4.12 Liability for Hazardous Materials. Except as disclosed in the
documents set forth on Exhibit "D" to this Agreement, neither Borrower nor any
Pledged Corporation has any liability, contingent or otherwise, under any
Hazardous Materials Law or with respect to any activity involving Hazardous
Materials on or about any Approved Property.
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4.13 Hazardous Materials Activity. Except as disclosed in the
documents set forth on Exhibit "D" to this Agreement, there exists no activity
involving Hazardous Materials on or about any Approved Property in violation of
any Hazardous Materials Law and Borrower or any Pledged Corporation has not
caused or, to the knowledge of Borrower, permitted to occur any condition which
may cause a release of any Hazardous Materials in violation of any Hazardous
Materials Law on or about any Approved Property. Borrower is not aware of any
occurrence or condition on any real property adjoining or in the vicinity of
any Approved Property that could cause such Approved Property to be classified
as "border-zone property" under the provisions of California Health and Safety
Code, Sections 25220 et seq. or any related regulation, or to be otherwise
subject to any restrictions on the ownership, occupancy, transferability or use
of such Approved Property under any Hazardous Materials Laws.
4.14 Hazardous Materials Laws. Except as disclosed in the
documents set forth on Exhibit I'D" to this Agreement, none of Borrower, any
Pledged Corporation or, to the knowledge of Borrower, any other party, has been
or is involved in operations at any Approved Property which could reasonably be
expected to lead to (a) the imposition of liability on Borrower or the
applicable Pledged Corporation under any Hazardous Materials Law, or on any
subsequent or former owner of such Approved Property, or (b) the creation of a
lien on such Approved Property under any Hazardous Material Law. Neither
Borrower nor any Pledged Corporation has permitted any tenant or occupant of
any Approved Property to engage in any activity that could reasonably be
expected to impose a claim or liability under any Hazardous Material Law on
such tenant or occupant, on Borrower, any Pledged Corporation or on any other
subsequent or former owner of such Approved Property.
4.15 No Option or Other Rights. No option to purchase, right of
first refusal or similar right exists with respect to any Approved Property.
4.16 Insurance. Borrower has complied with all of the requirements
of Section 2.11 of the Deed of Trust with respect to insurance. The Approved
Properties owned by the Pledged Corporations are insured in substantial
compliance with the terms of Section 2.11 of the Deed of Trust.
4.17 Encroachments. None of the improvements located on any
Approved Property encroach upon the property of any other person nor lie
outside of the boundaries and building restriction lines of such Approved
Property and no improvement located on property adjoining such Approved
Property lies within the boundaries of or in any way encroaches upon such
Approved Property.
4.18 Independent Unit. (a) Each Approved Property is an independent
unit which does not rely on any drainage, sewer,
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access, parking, structural or other facilities located on any property not
included in such Approved Property or on public or utility easements for the
fulfillment of any zoning, building code or other requirement of any
governmental authority that has jurisdiction over such Approved Property; (b)
Borrower, directly or indirectly, has the right to use all amenities,
easements, public or private utilities, parking, access routes or other items
necessary or currently used for the operation of each Approved Property; (c)
all public utilities are available at the boundaries of each Approved Property
in sufficient quantities to support the ordinary use of such Approved Property;
and (d) each Approved Property is either (i) contiguous to or (ii) benefits
from an irrevocable unsubordinated easement permitting access from such
Approved Property to a physically open, dedicated public street, and has all
necessary permits for ingress and egress. No building or other improvement not
located on any Approved Property relies on any part of such Approved Property
to fulfill any zoning requirements, building code or other governmental or
municipal requirements for structural support or to furnish to such building or
improvement any essential building systems or utilities.
4.19 No Contractual Defaults. There are no material defaults by
Borrower or any Pledged Corporation or, to Borrower's knowledge, by any former
owner or any other person under any material contract to which Borrower or any
Pledged Corporation is a party relating to any Approved Property, including,
without limitation, any management, rental, service, supply, security,
maintenance or similar contract. None of Borrower or any Pledged Corporation
or, to Borrower's knowledge, any former owner has received notice or has any
knowledge of any existing circumstances in respect of which it could receive
any notice of default or breach in respect of any material contracts affecting
or concerning any Approved Property.
4.20 Non-Foreign Person. Section 1445 of the Internal Revenue Code
provides that a transferee of a United States real property interest must
withhold tax if the transferor is a foreign person. To inform Lender that the
withholding of tax is not required upon the disposition of a United States real
property interest by Borrower, Borrower certifies the following:
(a) Borrower is not a non-resident alien, a foreign
corporation, foreign partnership, foreign trust, or foreign estate (as those
terms are defined in the Internal Revenue Code and Income Tax Regulations);
(b) Borrower's United States taxpayer identification
number is 00-0000000; and
(c) Borrower's office address is 000 Xxxxxxxx Xxxx.,
Xxxxx 000, Xxxxx Xxxxxx, Xxxxxxxxxx 00000.
Borrower understands that Lender may disclose this certification to
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the Internal Revenue Service and that any false statement contained in this
certification could be punished by fine, imprisonment, or both.
4.21 Financial Position. The financial statements and all
financial data delivered to Lender relating to Borrower, the Guarantors, the
Pledged Corporations and the Approved Properties are true, correct and complete
in all material respects. Such financial statements fairly present the
financial position of the parties or properties who are their subjects as of
the dates indicated. No material adverse change has occurred in such financial
position since the date of such financial statements, and, except for the
Loans, Borrower has incurred no indebtedness since the date of any such
statements.
4.22 Disclosure. None of Borrower's representations or warranties
contained in this Agreement or any other document, certificate or written
statement furnished to Lender by or on behalf of Borrower, any Guarantor or any
Pledged Corporation contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained in
this Agreement or in such other document, certificate or written statement
(when taken in their entirety) not misleading. There is no fact known to
Borrower which materially or adversely affects the business, operations, assets
or condition (financial or otherwise) of Borrower, any Guarantor, any Pledged
Corporation or any Approved Property which has not been disclosed in this
Agreement or in another written statement delivered to Lender by Borrower.
4.23 ERISA. Borrower has not incurred any material accumulated
funding deficiency within the meaning of ERISA, and has not incurred any
material liability to the Pension Benefit Guaranty Company ("PBGC") in
connection with any employee benefit plan subject to the provisions of ERISA or
other class of benefit that PBGC has elected to insure.
ARTICLE V
COVENANTS
While any obligation of Borrower under the Loan Documents remains
outstanding, Borrower shall comply with the following covenants.
5.1 Organization and Status of Borrower. Borrower shall, and
shall cause each of its subsidiaries to, maintain its corporate existence and
all licenses and permits relating thereto in good standing in every
jurisdiction in which the nature of its business makes qualification necessary
or where failure to qualify would have a material adverse effect on its
financial condition or the performance of its obligations under the Loan
Documents.
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5.2 Compliance with Laws. Borrower shall, and shall cause each of
its subsidiaries to, remain in compliance in all material respects with all
laws and requirements applicable to its business, including all applicable
federal and state securities laws, and obtain all authorizations, consents,
approvals, orders, licenses, exemptions from, and accomplish all filings or
registrations or qualifications with, any governmental agency that are
necessary for the transaction of its business.
5.3 Compliance with Requirements. Borrower shall, and shall cause
each Pledged Corporation to, comply with all Property Laws affecting or
relating to any Approved Property, and obtain and maintain all necessary
Permits with respect to each of the Approved Properties.
5.4 Governmental Approvals. Borrower shall deliver to Lender from
time to time at Lender's request, in form and substance satisfactory to Lender,
evidence that Borrower and each Pledged Corporation has complied with all
applicable laws, ordinances, regulations and other requirements of any
governmental agency relating to the Approved Properties, including, without
limitation, all Permits and Property Laws, and that all consents and approvals
of any governmental agency required as of the date of such request have been
regularly and finally received with respect to any Approved Property.
5.5 Books and Records. Borrower shall, and shall cause each of
its subsidiaries to, maintain full and complete books of account and other
records reflecting the results of its operations and the operations of each
Approved Property, in accordance with generally accepted accounting principles
applied on a consistent basis, and permit Lender and its agents, at all
reasonable times and from time to time, to inspect and copy any such books and
records.
5.6 Maintenance of Approved Parcels. Borrower shall, and shall
cause each Pledged Corporation to, maintain each of the Approved Properties in
good condition and repair; take precautions against the occurrence of damage
thereto; and not permit any waste with respect to any Approved Property.
5.7 Notice of Certain Matters. Borrower shall give notice to
Lender, promptly upon learning thereof, of each of the following:
(a) any litigation or claim of any kind affecting or
relating to any Approved Property and involving an amount in excess of $50,000;
and any litigation or claim of any kind that might subject Borrower to
liability in excess of $100,000, whether covered by insurance or not;
(b) any material dispute between Borrower or any Pledged
Corporation and any governmental agency relating to any Approved Property;
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(c) any threat or commencement of proceedings in
condemnation or eminent domain relating to any Approved Property;
(d) any trade name hereafter used by Borrower or any
change in Borrower's principal place of business;
(e) the occurrence of any Event of Default or Potential
Event of Default and Borrower's plans for curing same;
(f) the existence of any lien or encumbrance other than a
Permitted Encumbrance on any Approved Property;
(g) the existence of any "reportable event" as defined in
ERISA; and
(h) any other event or condition causing a material
adverse change in the financial condition of Borrower, any Guarantor or any
Pledged Corporation.
5.8 Leases. Upon Lender's request, Borrower shall promptly
deliver to Lender copies of any lease of all or any portion of any Approved
Property now or later executed.
5.9 Further Assurances. Borrower shall execute and acknowledge
(or cause to be executed and acknowledged) and deliver to Lender all documents,
and take all actions, required by Lender from time to time to confirm the
rights created or now or hereafter intended to be created under the Loan
Documents and the transactions contemplated thereunder, to maintain, protect,
perfect and further the validity, priority and enforceability of the Loan
Documents and all liens on any Approved Property or other collateral for
Borrower's obligations under the Loan Documents, to subject to the Loan
Documents any property intended by the terms of any Loan Document to be covered
by such Loan Documents.
5.10 Taxes. Borrower shall, and shall cause each of its
subsidiaries to, pay and discharge all taxes, assessments and governmental
charges or levies imposed on it, on its income or profits or on any of its
property prior to the date on which penalties attach thereto.
5.11 Net Worth. Borrower's Tangible Net Worth at December 31, 1995
shall not be less than $8,200,000. Borrower shall maintain a Tangible Net
Worth in each calendar quarter thereafter of not less than $9,500,000.
5.12 Information.
(a) Borrower shall deliver the following information to
Lender:
(i) as soon as available and in any event not later
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than 90 days following the end of each fiscal year of Borrower, a consolidated
and consolidating balance sheet of Borrower as of the end of such year and
consolidated and consolidating statements of income, shareholders' equity and
cash flow of Borrower for such year, setting forth in each case in comparative
form corresponding consolidated and consolidating figures from the preceding
fiscal year and certified in accordance with generally accepted accounting
principles by independent certified public accountants satisfactory to Lender,
together with Borrower's report to the Securities and Exchange Commission on
Form 1OK;
(ii) as soon as available and in any event within
60 days after the end of each of the first three quarters of each fiscal year
of Borrower, a consolidated and consolidating balance sheet of Borrower as of
the end of such quarter and the related consolidated and consolidating
statement of income of Borrower for such quarter and the portion of Borrower's
fiscal year ended at the end of such quarter, setting forth in each case in
comparative form the figures for the corresponding portion of Borrower's
previous fiscal year, all certified (subject to normal year-end adjustments) as
to fairness of presentation and preparation in accordance with generally
accepted accounting principles by the chief financial officer of Borrower,
together with Borrower's report to the Securities and Exchange Commission on
Form 10Q;
(iii) simultaneously with delivery of each set of
financial statements referred to in Sections 5.12(a) (i) and (ii) above, a
certificate of the chief financial officer of Borrower stating whether there
exists on the date of such certificate any Event of Default or Potential Event
of Default, setting forth the details thereof and the action that Borrower is
taking or proposes to take with respect thereto;
(iv) as soon as available and in any event within
30 days after the end of each calendar quarter, (i) an operating statement for
each Approved Commercial Property, showing revenues, operating expenses and net
operating income for each such property for such quarter and that portion of
the calendar year ended at the end of such quarter, setting forth in
comparative form the figures for the corresponding portion of the previous
calendar year; and (ii) a rent roll for each Approved Commercial Property as of
the end of such quarter, in each case together with a certificate signed by
Borrower's chief financial officer stating that such statements and rent rolls
fairly present the information required;
(v) as soon as available and in any event within
30 days after the end of each calendar month, (A) with respect to each Approved
Residential Property in which units are being sold, a report concerning the
sales of units during such month; and (B) a report of the existence and amounts
of outstanding liens against the Approved Properties as of the end of such
month; and
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(vi) such other information concerning Borrower,
the Guarantors, the Pledged Corporations and the Approved Properties, as Lender
shall reasonably request.
(b) If Borrower fails to furnish promptly any information
or report required by Section 5.12 (a) above or any other person fails to
furnish promptly any information or report required by any other provision of
any of the Loan Documents, or if Lender reasonably determines such reports to
be unacceptable, Lender may elect (in addition to exercising any other right or
remedy it has under the Loan Documents) to make an audit of all the books and
records of Borrower, the Guarantors and the Pledged Corporations and to prepare
the information or report which Borrower failed to deliver. Such audit shall
be performed and such information or report shall be prepared by an independent
firm of certified public accountants to be selected by Lender. Borrower shall
pay all expenses of the audit and other related services.
5.13 Appraisals. Borrower, upon reasonable notice and during
regular business hours, shall make the Approved Properties it owns, and shall
cause the Pledged Corporations to make the Approved Properties owned by the
Pledged Corporations, available to Lender and Lender's agents for inspection
and appraisal from time to time. Borrower shall pay for the cost of one such
appraisal of each Approved Property annually.
5.14 Escrow. Borrower shall, and shall cause its subsidiaries and
affiliates to, exercise its good faith efforts to use Lender's escrow services
department for all sales of, or units in, its properties when such use would be
reasonably convenient to the parties to the escrow.
ARTICLE VI
EVENTS OF DEFAULT
6.1 Events of Default. The occurrence of any of the following
shall be an "Event of Default":
(a) Borrower's failure to pay when due any installment of
principal or interest under this Agreement or any other sum required to be
paid by the terms of any Loan Document;
(b) Borrower's failure to observe or perform its
obligations under Section 2.5(a) of the Deed of Trust or to maintain the
insurance required to be maintained under Section 2.11 of the Deed of Trust,
the occurrence of any "Transfer" (as defined in the Deed of Trust) in violation
of Section 2.14 of the Deed of Trust or the failure of Borrower to cooperate in
making any Approved Property available for inspections or "Tests and Studies"
(as defined in the Deed of Trust) in violation of the provisions of
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Section 2.16 of the Deed of Trust or available for appraisals in violation of
Section 5.13 above;
(c) the failure of Borrower, within 30 days following
written notice from Lender, to observe or perform any covenant or other
agreement contained in any Loan Document (other than the covenants or
agreements referred to above in Sections 6.1(a) and (b)); provided, however,
that the notice and 30-day grace period set forth above shall be applicable
only to a failure to observe or perform any covenant or other agreement which
is reasonably susceptible of being cured; provided further, that should
Borrower be unable to cure its failure within such 30-day period despite
beginning to cure such failure promptly after receipt of notice and prosecuting
such attempt diligently during such 30-day period, the cure period shall be
extended an additional 30 days so long as Borrower continues diligently to
prosecute the cure during such additional period;
(d) any written representation, warranty or financial
statement given by Borrower or any Guarantor shall have been untrue in any
material respect when given;
(e) the occurrence of a default under any of the Loan
Documents and the failure of any such default to be cured during the permitted
time, if any, for such cure;
(f) Borrower, any Guarantor or any Pledged Corporation
shall be unable or shall admit in writing its inability to pay its debts when
due, or shall make an assignment for the benefit of creditors; or any of them
shall apply for or consent to the appointment of any receiver, trustee or
similar officer for such person or for all or any substantial part of such
person's property; or any of them shall institute (by petition, application,
answer, consent or otherwise) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debts, dissolution, liquidation, or similar
proceedings relating to such person under the laws of any jurisdiction;
(g) if a receiver, trustee or similar officer shall be
appointed for Borrower, any Guarantor or any Pledged Corporation, or for all or
any substantial part of any such person's property without the application or
consent of such person, and such appointment shall continue undischarged for a
period of 60 days (whether or not consecutive); or any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution, liquidation or
similar proceedings shall be instituted (by petition, application or otherwise)
against any such person and shall remain undismissed for a period of 60 days
(whether or not consecutive);
(h) any Approved Property or all or any material part of
the assets of Borrower, any Guarantor or any Pledged Corporation
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shall become subject to attachment, execution or judicial seizure (whether by
enforcement of money judgment, by writ or warrant of attachment, or by any
other process) in an amount greater than $25,000;
(i) Borrower or any Pledged Corporation, as applicable,
shall be in default in the payment of any indebtedness or the performance of
any other obligation secured by a lien on any Approved Property and such
default is not cured within the time, if any, specified for such a cure in any
applicable agreement; and
(j) any of the Loan Documents shall cease to be a valid,
binding and enforceable obligation of the person purported to be bound; or the
lien of the Deed of Trust or any Loan Document securing any of Borrower's
obligations shall cease to be a valid, enforceable and perfected lien on the
property it purports to encumber of the priority intended by Lender at the time
such property was encumbered; or Borrower shall assert such cessation or
failure in writing.
7.2 Remedies upon Default. Upon the occurrence of any Event of
Default, Lender may, at its option, do any of the following:
(a) terminate its obligation to make any Loans;
(b) declare the principal of all amounts owing under the
Loan Documents, together with all accrued interest thereon and all other
amounts owing in connection therewith, to be immediately due and payable,
regardless of any other specified maturity or due date, without notice of
default, presentment or demand for payment, notice or demand of any kind, and
without the necessity of prior recourse to any security; provided, that any
Event of Default with respect to Borrower described in Sections 7.1(f) or (g)
shall automatically, without declaration or other action on Lender's part,
cause all such amounts to be immediately due and payable without notice or
demand;
(c) if the Event of Default may be cured by the payment
of money, Lender may (but shall not be obligated) to make such payment from its
own funds; provided, that the making of such payment by Lender shall not be
deemed to cure such Event of Default, and that the same shall not be cured
unless and until Borrower reimburses Lender for such payment. If Lender
advances its own funds for such purposes, the funds advanced shall be
considered advances under the Note and shall be secured by the applicable Loan
Documents, notwithstanding that such advances may cause the total amount
advanced under this Agreement to exceed the aggregate face amount of the Note
or the amount committed to be advanced pursuant to this Agreement; and
(d) exercise any of its rights under the Loan Documents,
including the right to foreclose on any security, and exercise any
27
28
other rights with respect to any security, whether under the Loan Documents or
as provided by law, all in such order and in such manner as Lender in its sole
discretion may determine.
7.3 Cumulative Remedies; No Waiver. Lender's remedies under the
Loan Documents are cumulative and shall be in addition to all rights and
remedies provided by law or in equity from time to time. The exercise by
Lender of any right or remedy shall not constitute a cure or waiver of any
default, nor invalidate any notice of default or any act done pursuant to any
such notice, nor prejudice Lender in the exercise of any other right or remedy.
No waiver by Lender of any default shall be implied from any omission by Lender
to take action on account of such default if such default persists or is
repeated. No express waiver by Lender of any default shall affect any default
other than the default expressly waived, and any such express waiver shall be
operative only for the time and to the extent of any Loan Document shall be
construed as a waiver of any subsequent breach of the same covenant, term or
condition. Lender's consent to or approval of any act by Borrower requiring
further consent or approval shall not be deemed to waive or render unnecessary
Lender's consent to or approval of any subsequent act.
ARTICLE VIII
MISCELLANEOUS
8.1 Notices. Any notice, demand or request required under this
Agreement shall be given in writing at the addresses set forth below by
personal service; telecopy; overnight courier; or registered or certified,
first class mail, return receipt requested.
If to Borrower:
Xxxxxxx-Xxxxxx, Inc.
000 Xxxxxxxx Xxxx., Xxxxx 000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. XxXxxxxx
Fax No.: (000) 000-0000
If to Lender:
East-West Bank
000 Xxxxxxxxxx Xxxxx
Xxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxx or Xxxxxxxx Xxxx
Fax No.: (000) 000-0000
Such addresses may be changed by notice to the other parties given in the same
manner as required above. Any notice, demand or request shall be deemed
received as follows: (i) if sent by personal service, at the time such personal
service is effected;
28
29
(ii) if sent by telecopy, upon the sender's receipt of a confirmation
report generated by the sender's telecopier indicating receipt by the
recipient's telecopier; (iii) if sent by overnight courier, on the business day
immediately following deposit with the overnight courier; and (iv) if sent by
mail, 48 hours following deposit in the mail.
8.2 Governing Law. All questions with respect to the construction
of this Agreement and the rights and liabilities of the parties to this
Agreement shall be governed by the laws of the State of California.
8.3 Binding on Successors. This Agreement shall inure to the
benefit of, and shall be binding upon, the successors and assigns of each of
the parties to this Agreement.
8.4 Attorneys' Fees.
(a) Borrower shall reimburse Lender for all reasonable
attorneys' fees, costs and expenses, incurred by Lender in connection with the
enforcement of Lender's rights under this Agreement and each of the other Loan
Documents, including, without limitation, reasonable attorneys' fees, costs and
expenses for trial, appellate proceedings, out-of-court negotiations, workouts
and settlements or for enforcement of rights under any state or federal
statute, including, without limitation, reasonable attorneys' fees, costs and
expenses incurred to protect Lender's security and attorneys' fees, costs and
expenses incurred in bankruptcy and insolvency proceedings such as (but not
limited to) seeking relief from stay in a bankruptcy proceeding. The term
"expenses" means any expenses incurred by Lender in connection with any of the
out-of-court, or state, federal or bankruptcy proceedings referred to above,
including, without limitation, the fees and expenses of any appraisers,
consultants and expert witnesses retained or consulted by Lender in connection
with any such proceeding.
(b) Lender shall also be entitled to its attorneys' fees,
costs and expenses incurred in any post-judgment proceedings to collect and
enforce the judgment. This provision is separate and several and shall survive
the merger of this Agreement into any judgment on this Agreement.
8.5 Counterparts. This Agreement may be executed in any number of
original counterparts, each of which shall be deemed an original, but all of
which when taken together shall constitute one instrument. The original
signature page of any counterpart may be detached from such counterpart and
attached to any other counterpart identical to such counterpart (except having
additional signature pages executed by other parties to this Agreement) without
impairing the legal effect of any such signature(s).
29
30
8.6 Entire Agreement. This Agreement and the other Loan Documents
constitute the entire agreement and understanding between the parties in
respect of the subject matter of this Agreement and supersede all prior
agreements and understandings with respect to such subject matter, whether oral
or written.
8.7 Waivers. Waiver by Lender of any term, covenant or condition
under this Agreement or the Loan Documents, or of any default by Borrower under
this Agreement or the Loan Documents, or any failure by Lender to insist upon
strict performance by Borrower of any term, covenant or condition contained in
this Agreement or the Loan Documents, shall be effective or binding on Lender
only if made in writing by Lender; no such wavier shall be implied from any
omission by Lender to take action with respect to any such term, covenant,
condition or default. No express written waiver by Lender of any term,
covenant, condition or default shall affect any other term, covenant, condition
or default or cover any other time period than the application of any such
term, covenant or condition to the matter as to which a waiver has been given
or the default or time period specified in such express waiver. This Agreement
may be amended only by an instrument in writing signed by the parties to this
Agreement.
8.8 Severability. If any part of this Agreement is declared
invalid for any reason, such shall not affect the validity of the rest of the
Agreement. The other parts of this Agreement shall remain in effect as if this
Agreement had been executed without the invalid part. The parties declare that
they intend and desire that the remaining parts of this Agreement continue to
be effective without any part or parts that have been declared invalid.
8.9 Relationship; Indemnity; No Third Parties Beneficiaries.
(a) The relationship of Borrower and Lender under the
Loan Documents is, and shall at all times remain, solely that of borrower and
lender; and Lender neither undertakes nor assumes any responsibility or duty to
Borrower or to any third party with respect to any Approved Property.
Notwithstanding any other provision of the Loan Documents: (i) Lender is not,
and shall not be construed as, a partner, joint venturer, alter-ego, manager,
controlling person or other business associate or participant of any kind of
Borrower and Lender does not intend ever to assume such status; (ii) Lender's
activities in connection with the Loan Documents shall not be "outside the
scope of the activities of a lender of money" within the meaning of California
Civil Code Section 3434, as amended or recodified from time to time, and
Lender does not intend ever to assume any responsibility to any person for the
quality, suitability, safety or condition of any Approved Property; and (iii)
Lender shall not be deemed responsible for or a participant in any acts,
omissions or decisions of Borrower. Lender shall not be directly or indirectly
liable or responsible for any loss, claim, cause of action, liability,
indebtedness, damage or
30
31
injury of any kind or character to any person or property arising from the
occupancy or use of, any Approved Property, whether caused by or arising from:
(i) any defect in any building, structure, grading, fill, landscaping or other
improvements on any Approved Property or in any on-site or off-site
improvement or other facility therein or thereon; (ii) any act or omission of
Borrower or any of Borrower's agents, employees, independent contractors,
licensees or invitees; (iii) any accident on or about any Approved Property or
any f ire, flood or other casualty or hazard thereon unless such event shall
occur after Lender has completed a foreclosure on an Approved Property and
neither Borrower nor any affiliate of Borrower is the then owner, either legal
or beneficial, of such Approved Property and no act or omission of Borrower
shall in any way be related to such event; (iv) the failure of Borrower, any of
Borrower's licensees, employees, invitees, agents, independent contractors or
other representatives to maintain any Approved Property in a safe condition;
and (v) any nuisance made or suffered on any part of any Approved Property
unless such event shall occur after Lender has completed a foreclosure on such
Approved Property and neither Borrower nor any affiliate of Borrower is the
then owner, either legal or beneficial, of such Approved Property and no act or
omission of Borrower shall in any way be related to such event.
(b) Borrower indemnifies and agrees to hold Lender
harmless from any damages resulting from any construction of the relationship
of the parties to this Agreement other than as set forth above due to the
actions, admissions or statements of Borrower. Lender is under no obligation
to supervise, inspect or inform Borrower or any third party of any aspect of
the work of construction or any other matter referred to in this Agreement.
Any inspection or review made by Lender is made for the purpose of determining
whether or not the obligations of Borrower under this Agreement are being
properly discharged; and neither Borrower nor any third party shall be entitled
to rely upon any such inspection or review.
(c) This Agreement is made and entered into for the sole
protection and benefit of Lender and Borrower. All conditions of the
obligations of Lender to make advances under this Agreement are imposed solely
and exclusively for the benefit of Lender and may be freely modified by Lender
with the concurrence of Borrower or waived by Lender in whole or in part at any
time if in its sole discretion it deems it advisable to do so. No person other
than Borrower shall have standing to require Lender to make any Loan advances
or to be a beneficiary of this Agreement or of any of the advances to be made
under this Agreement.
8.10 Expenses. Borrower shall pay promptly all costs, charges, and
expenses incurred by Lender in connection with the Loan, including, without
limitation, commitment fees, loan fees, service charges, title charges, tax and
lien service charges, costs
31
32
of inspection, costs of consulting engineers, recording fees, processing fees,
appraisal fees, attorneys' fees, real property taxes and assessments and
insurance premiums, and any fees in consideration of Lender's commitment to
provide the Loan.
EAST-WEST BANK, a California banking
corporation
By: /s/XXXXXX XXXX
--------------------------------
Xxxxxx Xxxx, Senior Vice
President
XXXXXXX-XXXXXX, INC., a Delaware
corporation
BY: /s/XXXXXXX X. XXXXXXXX
--------------------------------
Xxxxxxx X. XxXxxxxx, President
32
33
SCHEDULE OF EXHIBITS
Exhibit A Initial Deed of Trust and Initial Stock Pledge Properties
Exhibit B Form of Loan Request
Exhibit C Unit Repayment Amounts for Initial Stock Pledge Properties
Exhibit D List of Documents Disclosing Soil Contamination at 0000 Xxxxxxxx Xxxx.
34
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT is entered into as of April
24, 1996 by XXXXXXX-XXXXXX, INC. , a Delaware corporation ("Borrower") , and
EAST-WEST BANK, a California banking corporation ("Lender").
RECITALS
A. Borrower and Lender entered into the Loan Agreement dated as
of March 12, 1996 (the "Loan Agreement") in which Lender agreed to make a loan
to Borrower of up to $6, 000, 000. The Loan Agreement was amended by a letter
agreement between Borrower and Lender dated March 29, 1996.
B. Borrower and Lender desire to amend the Loan Agreement
further.
AGREEMENT
1. Amendment. The Loan Agreement is amended by deleting the
"and" at the end of Section 7. 1 (i) , replacing the period at the end of
Section 7.1(j) with "; and" and adding the following as Section 7.1(k):
(k) an "Event of Default" (as defined in the Deed of Trust dated
as of April 24, 1996 between Borrower and Lender) shall have occurred
and be continuing.
2. Full Force. Other than as set forth above, all provisions of
the Loan Agreement remain unmodified and in full force and effect.
EAST-WEST BANK, a California banking
corporation
By: /s/XXXXXX XXXX
-------------------------------------
Xxxxxx Xxxx, Senior Vice
President
XXXXXXX-XXXXXX, INC., a Delaware
corporation
By: /s/XXXXXXX X. XXXXXXXX
--------------------------------------
Xxxxxxx X. XxXxxxxx, President
35
THIRD AMENDMENT TO LOAN DOCUMENTS
AND CONFIRMATION OF GUARANTY
THIS THIRD AMENDMENT TO LOAN DOCUMENTS is entered into as of October
___, 1996 by XXXXXXX-XXXXXX, INC., a Delaware corporation ("Borrower"),
XXXXXXX-XXXXXX INTERNATIONAL, a California corporation ("KWI") , K-W
PROPERTIES, a California corporation ("KWP," and together with KWI, the
"Guarantors") , and EAST-WEST BANK, a California banking corporation
("Lender").
RECITALS
A. Borrower and Lender entered into a Loan Agreement dated as of
March 12, 1996 in which Lender agreed to provide a credit facility in the
amount of $6,000,000 to Borrower for working capital and acquisition purposes
(as modified as provided in the next sentence, the "Loan Agreement") . The Loan
Agreement was amended by the letter agreement between Borrower and Lender dated
March 29, 1996, and the Second Amendment to Loan Agreement dated April 24, 1996
between Borrower and Lender. All terms used in this Amendment without being
defined are have the meanings given them in the Loan Agreement.
B. The Loans are evidenced by the Note. The performance of
Borrower's obligations under the Loan Agreement and Note is secured by the Deed
of Trust which was recorded on March 27, 1996 as Instrument No. 96-480603 in
the Official Records of Los Angeles County. The Deed of Trust currently
encumbers three properties located in Los Angeles County.
C. Borrower and Lender desire to enter into this Amendment to
increase the amount of Loans available to Borrower under the Loan Documents and
to make other modifications to the Loan Documents, all on the terms and
conditions set forth in this Amendment.
AMENDMENT
1. Amendment to Loan Agreement. The Loan Agreement is amended as
follows:
(a) On the effective date of this Amendment, Lender shall
release the lien of the Stock Pledge Agreement on all "Collateral" (as defined
in the Stock Pledge Agreement) , Lender shall no longer accept stock in Pledged
Corporations as collateral security for the Loans and the Borrowing Base shall
include only collateral encumbered pursuant to the Deed of Trust. Accordingly,
the terms "Initial Stock Pledge Properties," "Pledged Corporation" and "Stock
Pledge Agreement" are deleted from the Loan Agreement.
(b) The definition of "Borrowing Base" is deleted and
restated as follows:
36
"Borrowing Base" means the positive difference between (a) 85%
of the value of each Approved Property as determined by Lender's most
recent appraisal made in accordance with Section 5.13 and (b) the
aggregate amount of monetary liens encumbering such Approved Property
(but not including any lien in favor of Lender) ; provided, however,
that the amount which may be included in the Borrowing Base with
respect to an Approved Property which was acquired with the proceeds
of a Loan but which became an Approved Property subsequent to such
acquisition, shall be limited to the positive difference between (a)
85% of the value of the Approved Property as determined by Lender's
most recent appraisal made in accordance with Section 5.13 and (b) the
sum of (A) the aggregate amount of monetary liens encumbering such
Approved Property (but not including any lien in favor of Lender) and
(B) the amount of the Loan outstanding which was made to acquire such
Approved Property.
(c) The amount "$6,000,000" stated in clause (a) of
Section 2.1, Section 2.3(d) (i) and in Section 2.7(c) shall be "$8,000,000" and
the amount "$5,000,000" stated in the third sentence of Section 2.1 and in
Section 2.3(d) (iii) shall be "$7,000,000."
(d) The third sentence of Section 2.1 is deleted and
restated as follows: "An amount of the Loans not greater than $7,000,000 may be
used only for the acquisition of interests in real property by Borrower or an
affiliate of Borrower or for such other purposes as Lender shall approve at the
time of making a Loan (the 'Acquisition Facility')."
(e) A subsection (C) shall be added to Section 2.3(a)
(ii) as follows: "with respect to any Loan not included within subsections 2.3
(a) (ii) (A) or (B) above, at such time as Lender shall specify at the time of
making the Loan."
2. Amendment to Note. The principal amount of the Note is
$8,000,000.
3. Confirmation of Guaranty. Guarantors acknowledge that they
have reviewed the Loan Documents, as amended by this Amendment and the
Amendment to Deed of Trust of this date between Borrower and Lender and they
are aware that the amount available to be borrowed by Borrower under the Loan
Agreement is being increased from $6,000,000 to $8,000,000. Guarantors agree
to guaranty the increased amount in accordance with the terms of the Guaranty,
that the waivers, acknowledgements and other agreements are applicable to such
increased amount and that the Guaranty remains in full force and effect,
enforceable against Guarantors in accordance with its terms.
4. Full Force and Effect. Borrower represents that it has no
rights of setoff relating to or defenses against payment of the
37
Loans in accordance with the terms of the Loan Agreement and, except as
provided in this Amendment, the Loan Documents remain unmodified and in full
force and effect.
5. Entire Agreement. This Amendment constitutes the entire
agreement and understanding among the parties with respect to the subject
matter of such amendment and supersedes all prior agreements and understandings
with respect to such subject matter, whether oral or written.
EAST-WEST BANK, a California banking
corporation
By: /s/XXXXXX XXXX
-------------------------------------------
Xxxxxx Xxxx, Senior Vice
President
XXXXXXX-XXXXXX, INC., a Delaware
corporation
By: /s/XXXXXXX X. XXXXXXXX
-------------------------------------------
Xxxxxxx X. XxXxxxxx, President
XXXXXXX-XXXXXX INTERNATIONAL, a
California corporation
By: /s/XXXXXXX X. XXXXXXXX
-------------------------------------------
Xxxxxxx X. XxXxxxxx
President
K-W PROPERTIES, a California
corporation
By: /s/XXXXXXX X. XXXXXXXX
-------------------------------------------
Xxxxxxx X. XxXxxxxx
Vice President
38
FOURTH AMENDMENT TO LOAN DOCUMENTS
AND CONFIRMATION OF GUARANTY
THIS FOURTH AMENDMENT TO LOAN DOCUMENTS is entered into as of November
___, 1996 by XXXXXXX-XXXXXX, INC., a Delaware corporation ("Borrower"),
XXXXXXX-XXXXXX INTERNATIONAL, a California corporation ("KWI"), K-W PROPERTIES,
a California corporation ("KWP," and together with KWI, the "Guarantors"), and
EAST-WEST BANK, a California banking corporation ("Lender").
RECITALS
A. Borrower and Lender entered into a Loan Agreement dated as of
March 12, 1996 in which Lender agreed to provide a credit facility in the
amount of $6,000,000 to Borrower for working capital and acquisition purposes
(as modified as provided in the next sentence, the "Loan Agreement"). The Loan
Agreement was amended by the letter agreement between Borrower and Lender dated
March 29, 1996, the Second Amendment to Loan Agreement dated April 24, 1996
between Borrower and Lender and the Third Amendment to Loan Documents and
Confirmation of Guaranty dated as of October ___, 1996. All terms used in this
Amendment without being defined have the meanings given them in the Loan
Agreement.
B. The Loans are evidenced by the Note. The performance of
Borrower's obligations under the Loan Agreement and Note is secured by the Deed
of Trust, which was recorded on March 27, 1996 as Instrument No. 96-480603 in
the Official Records of Los Angeles County. The Deed of Trust currently
encumbers three properties located in Los Angeles County.
C. Borrower and Lender desire to enter into this Amendment to
increase the amount of Loans available to Borrower under the Loan Documents and
to make other modifications to the Loan Documents, all on the terms and
conditions set forth in this Amendment.
AMENDMENT
1. Amendment to Loan Agreement. The Loan Agreement is amended as
follows:
(a) The amount "$8,000,000" stated in clause (a) of
Section 2.1, Section 2.3(d)(i) and in Section 2.7(c) shall be "$8,500,000" and
the amount "$7,000,000" stated in the third sentence of Section 2.1 and in
Section 2.3(d)(iii) shall be "$7,500,000."
(b) The third sentence of Section 2.1 is deleted and
restated as follows: "An amount of the Loans not greater than $7,500,000 may be
used only for the acquisition of interests in real property by Borrower or an
affiliate of Borrower or for such
-1-
39
other purposes as Lender shall approve at the time of making a Loan (the
'Acquisition Facility')."
2. Amendment to Note. The principal amount of the Note is
$8,500,000.
3. Confirmation of Guaranty. Guarantors acknowledge that they
have reviewed the Loan Documents, as amended by this Amendment and the
Amendment to Deed of Trust of this date between Borrower and Lender and they
are aware that the amount available to be borrowed by Borrower under the Loan
Agreement is being increased from $8,000,000 to $8,500,000. Guarantors agree
to guaranty the increased amount in accordance with the terms of the Guaranty,
that the waivers, acknowledgements and other agreements are applicable to such
increased amount and that the Guaranty remains in full force and effect,
enforceable against Guarantors in accordance with its terms.
4. Negative Pledge. Borrower acknowledges that the aggregate
amount of Loans currently outstanding exceeds the Borrowing Base and that
Lender is in the process of taking a lien on property located in Hawaii owned
by Borrower's affiliate, Vista Waikoloa Group (the "Hawaii Property"), as well
as two office properties located at 0000 Xxxxxxxx Xxxx. and 0000 00xx Xxxxxx in
Santa Xxxxxx (the Hawaii Property and such office properties, collectively, the
"Property"). Borrower agrees, except in the ordinary course of selling units
in the Vista Waikoloa Property, not to transfer, sell, encumber, lease, pledge,
mortgage or permit a lien to exist on any of the Property. Borrower further
agrees on November 30, 1996 to repay the Loans in accordance with Section
2.3(d)(i) of the Loan Agreement if on such date the aggregate amount of Loans
outstanding exceeds the Borrowing Base.
5. Other Amendments. All of the other Loan Documents are
modified as necessary to reflect the modifications to the Loan Agreement and
Note. All references in any of the Loan Documents to "Loan Agreement," "Note,"
or otherwise shall be to the Note and Loan Agreement as modified hereby,
including to the Loan Agreement and Note in their increased principal amount.
6. Full Force and Effect. Borrower represents that it has no
rights of setoff relating to or defenses against payment of the Loans in
accordance with the terms of the Loan Agreement and, except as provided in this
Amendment, the Loan Documents remain unmodified and in full force and effect.
7. Entire Agreement. This Amendment constitutes the entire
agreement and understanding among the parties with respect to the subject
matter of such amendment and supersedes all prior
-2-
40
agreements and understandings with respect to such subject matter, whether oral
or written.
EAST-WEST BANK, a California banking
corporation
By: /s/XXXXXX XXXX
-------------------------------------------
Xxxxxx Xxxx, Senior Vice
President
XXXXXXX-XXXXXX, INC., a Delaware
corporation
By: /s/XXXXXXX X. XXXXXXXX
-------------------------------------------
Xxxxxxx X. XxXxxxxx, President
XXXXXXX-XXXXXX INTERNATIONAL, a
California corporation
By: /s/XXXXXXX X. XXXXXXXX
-------------------------------------------
Xxxxxxx X. XxXxxxxx, President
K-W PROPERTIES, a California
corporation
By: /s/Xxxxxxx X. XxXxxxxx
--------------------------------------------
Xxxxxxx X. XxXxxxxx
Vice President
-3-
41
FIFTH AMENDMENT TO LOAN DOCUMENTS
AND CONFIRMATION OF GUARANTY
THIS FIFTH AMENDMENT TO LOAN DOCUMENTS is entered into as of January
30, 1997 by XXXXXXX-XXXXXX, INC., a Delaware corporation ("Borrower"),
XXXXXXX-XXXXXX INTERNATIONAL, a California corporation ("KWI"), K-W PROPERTIES,
a California corporation ("KWP," and together with KWI, the "Guarantors"), and
EAST-WEST BANK, a California banking corporation ("Lender").
RECITALS
A. Borrower and Lender entered into a Loan Agreement dated as of
March 12, 1996 in which Lender agreed to provide a credit facility in the
amount of $6,000,000 to Borrower for working capital and acquisition purposes
(as modified as provided in the next sentence, the "Loan Agreement"). The Loan
Agreement was amended by the letter agreement between Borrower and Lender dated
March 29, 1996, the Second Amendment to Loan Agreement dated April 24, 1996
between Borrower and Lender, the Third Amendment to Loan Documents and
Confirmation of Guaranty dated as of October 1, 1996 and the Fourth Amendment
to Loan Documents and Confirmation of Guaranty dated as of November 5, 1996.
All terms used in this Amendment without being defined have the meanings given
them in the Loan Agreement.
B. The Loans are evidenced by the Note. The performance of
Borrower's obligations under the Loan Agreement and Note is secured by the Deed
of Trust, which was recorded on March 27, 1996 as Instrument No. 96-480603 in
the Official Records of Los Angeles County. The Deed of Trust currently
encumbers two properties located in Los Angeles County.
C. Borrower and Lender desire to enter into this Amendment to
increase the amount of Loans available to Borrower under the Loan Documents and
to make other modifications to the Loan Documents, all on the terms and
conditions set forth in this Amendment.
AMENDMENT
1. Amendment to Loan Agreement. The aggregate amount of credit
available under the Loan Agreement and Note shall increase from the present
$8,500,000 to $10,000,000 as follows: the amount of the Working Capital
Facility shall increase from its present $1,000,000 to $2,000,000 and shall be
an unsecured loan such that the Borrowing Base shall have no relevance to the
amount of the Working Capital Facility available to the Borrower; and the
Acquisition Facility shall be increased from its present $7,500,000 to
$8,000,000. The availability of the Acquisition Facility shall continue to be
subject to the amount of the Borrowing Base and all of the other existing terms
of the Loan
-1-
42
Agreement, as amended below. In furtherance of the foregoing, the Loan
Agreement is specifically amended as follows:
(a) The first four sentences of Section 2.1 are deleted
and restated as follows:
"Lender agrees, on the terms and conditions set forth in this
Agreement, to make Loans available to Borrower from the date of this
Agreement to the Commitment Termination Date and to maintain any such
Loans outstanding on the Commitment Termination Date until they are
required to be repaid pursuant to Section 2.3 below. The aggregate
amount of Loans outstanding at any time shall not exceed $10,000,000.
An amount of the Loans not greater than $2,000,000 may be used only
for the working capital needs of K-W International (the 'Working
Capital Facility'). An amount of the Loans not greater than the
lesser of (a) $8,000,000 and (b) the Borrowing Base may be used only
for the acquisition of interests in real property by Borrower or an
affiliate of Borrower (the 'Acquisition Facility')."
(b) Section 2.3(d) is deleted and restated as follows:
"If at any time (i) the aggregate principal amount of all Loans
outstanding exceeds the amount of $10,000,000, (ii) the aggregate
amount of Loans outstanding under the Working Capital Facility exceeds
$2,000,000, or (iii) the aggregate amount of Loans outstanding under
the Acquisition Facility exceeds the lesser of $8,000,000 and the
Borrowing Base, then Borrower shall immediately prepay the Loans
(together with all interest accrued on the amount prepaid) in the
amount of such excess."
(c) Section 2.7(c) is deleted and restated as follows:
"Lender is satisfied that the aggregate amount of Loans outstanding
under the Acquisition Facility immediately following the proposed
release and any accompanying payment will not be greater than the
lesser of (i) $8,000,000 and (ii) the amount of the Borrowing Base;
and"
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43
(d) The provisions of Article III shall continue to apply
to Borrower's application for a Loan and Lender's disbursement of such a Loan
from the Acquisition Facility. Lender will make a Loan under the Working
Capital Facility within three business days of Borrower's delivery of a written
request for such Loan and a certification that upon Lender's making such Loan
(i) no more than $2,000,000 will be outstanding under the Working Capital
Facility and (ii) no Potential Event of Default or Event of Default has
occurred and is continuing or would occur by reason of Lender's making such
Loan. Section 3.6 will remain applicable to all Loans made under bot the
Working Capital Facility and the Acquisition Facility.
(e) The following is added as Section 5.15:
"Borrower shall not, and shall not permit its subsidiaries to, create,
incur or suffer to exist any unsecured 'Indebtedness' (as defined
below) other than amounts owing to Lender under the Working Capital
Facility. 'Indebtedness' means (a) all indebtedness for borrowed
money or for the deferred purchase price of property or services, and
(b) all obligations of Borrower or any of its subsidiaries directly or
indirectly to guarantee any unsecured Indebtedness, invest in any
person or entity for the purpose of assuring the payment of any
unsecured Indebtedness of that person or otherwise assure a creditor
of the payment of any unsecured Indebtedness of any person or entity."
2. Amendment to Note.
(a) The principal amount of the Note is $10,000,000.
(b) The first sentence of Section 2 of the Note is
deleted and restated as follows:
"Repayment of that portion of this Note which evidences 'Loans'
outstanding under the 'Acquisition Facility' (as both are defined in
the Loan Agreement) is secured by a Deed of Trust, Security Agreement,
Assignement of Leases and Rents and Fixture Filing (the 'Deed of
Trust') of this date executed by Maker for the benefit of Payee
encumbering certain real property, and by other security evidenced by
agreements, financing statements, instruments and documents executed
concurrently with this Note or from
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44
time to time after this date executed and
delivered by or on behalf of Maker to Payee."
3. Working Capital Facility Cleanup. Borrower acknowledges that
Section 2.8(g) of the Loan Agreement provides that one of the conditions to
Lender's agreement to extend the term of the Working Capital Facility, which
matures on June 1, 1997, is that before the Extension Date all Loans made under
the Working Capital Facility shall have been repaid and no amounts shall be
outstanding under the Working Capital Facility for a period of not less than 30
consecutive days.
4. Confirmation of Guaranty. Guarantors acknowledge that they
have reviewed and consent to the terms of the Loan Documents, as amended by
this Amendment and the Third Modification of Deed of Trust and Loan Documents
of this date between Borrower and Lender and they are aware that the amount
available to be borrowed by Borrower under the Loan Agreement is being
increased to $10,000,000. Guarantors agree to guaranty the increased amount in
accordance with the terms of the Guaranty, that the waivers, acknowledgements
and other agreements are applicable to such increased amount and that the
Guaranty remains in full force and effect, enforceable against Guarantors in
accordance with its terms.
5. Other Amendments. All of the other Loan Documents are
modified as necessary to reflect the modifications to the Loan Agreement and
Note. All references in any of the Loan Documents to "Loan Agreement," "Note,"
or otherwise shall be to the Note and Loan Agreement as modified hereby,
including to the Loan Agreement and Note in their increased principal amount.
6. Full Force and Effect. Borrower represents that it has no
rights of setoff relating to or defenses against payment of the Loans in
accordance with the terms of the Loan Agreement and, except as provided in this
Amendment, the Loan Documents remain unmodified and in full force and effect.
7. Entire Agreement. This Amendment constitutes the entire
agreement and understanding among the parties with respect to the subject
matter of such amendment and supersedes all prior agreements and understandings
with respect to such subject matter, whether oral or written.
8. Loan Fee and Expenses. In consideration of the increased
amount of credit made available under the Loan Agreement by Lender and Lender's
modification of the Loan Documents by this Amendment, Borrower shall pay to
Lender a loan and modification fee in the amount of $10,000. Such fee has been
earned in full by Lender, shall not be applied to the principal amount of any
Loans outstanding and is nonrefundable. Borrower further agrees, on Lender's
demand, to pay all costs and expenses incurred by Lender in connection with
this Amendment and the investigation and approval of any assets proposed by
Borrower to
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be Approved Properties, whether or not Lender grants such approval, including
without limitation, the fees and related costs of Lender's legal counsel, the
cost of obtaining increased amounts of title insurance and any endorsements to
the Title Policies necessitated or deemed desirable by Lender in connection
with this Amendment or Lender's acceptance of any additional Approved
Properties and all appraisal, title, recording, inspection, engineering and
related costs. Borrower authorizes Lender, if Lender so elects, to pay the
amount of such fee and such costs to itself by making a Loan under the Loan
Agreement for such amounts.
EAST-WEST BANK, a California banking
corporation
By: /s/XXXXXX XXXX, SENIOR VICE
----------------------------------------------
Xxxxxx Xxxx, Senior Vice
President
XXXXXXX-XXXXXX, INC., a Delaware
corporation
By: /s/XXXXXXX X. XXXXXXXX
----------------------------------------------
Xxxxxxx X. XxXxxxxx, President
XXXXXXX-XXXXXX INTERNATIONAL, a
California corporation
By: /s/XXXXXXX X. XXXXXXXX
----------------------------------------------
Xxxxxxx X. XxXxxxxx, President
K-W PROPERTIES, a California
corporation
By: /s/XXXXXXX X. XXXXXXXX
----------------------------------------------
Xxxxxxx X. XxXxxxxx
Vice President
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46
SIXTH AMENDMENT TO LOAN DOCUMENTS
AND CONFIRMATION OF GUARANTY
THIS SIXTH AMENDMENT TO LOAN DOCUMENTS AND CONFIRMATION OF GUARANTY is
entered into as of February 3, 1997 by XXXXXXX-XXXXXX, INC., a Delaware
corporation ("Borrower"), XXXXXXX-XXXXXX INTERNATIONAL, a California
corporation ("KWI"), K-W PROPERTIES, a California corporation ("KWP"), and
WESTBOROUGH COURT GROUP, INC., a California corporation ("WCG," and together
with KWI and KWP, the "Guarantors"), and EAST-WEST BANK, a California banking
corporation ("Lender").
RECITALS
A. Borrower and Lender entered into a Loan Agreement dated as of
March 12, 1996 in which Lender agreed to provide a credit facility in the
amount of $6,000,000 to Borrower for working capital and acquisition purposes
(as modified as provided in the next sentence, the "Loan Agreement"). The Loan
Agreement was amended by the letter agreement between Borrower and Lender dated
March 29, 1996, the Second Amendment to Loan Agreement dated April 24, 1996
between Borrower and Lender, the Third Amendment to Loan Documents and
Confirmation of Guaranty dated as of October 1, 1996, the Fourth Amendment to
Loan Documents and Confirmation of Guaranty dated as of November 5, 1996 and
the Fifth Amendment to Loan Documents and Confirmation of Guaranty dated as of
January 30, 1997. All terms used in this Amendment without being defined have
the meanings given them in the Loan Agreement.
B. The Loans are evidenced by the Note. The performance of
Borrower's obligations under the Loan Agreement and Note is secured by the Deed
of Trust, which was recorded on March 27, 1996 as Instrument No. 96-480603 in
the Official Records of Los Angeles County. The Deed of Trust currently
encumbers two properties located in Los Angeles County.
C. Borrower and Lender desire to enter into this Amendment to
modify certain terms of the Loan Agreement.
AMENDMENT
1. Calculation of Borrowing Base. Lender may, from time to time
in its absolute discretion, agree to include in the Borrowing Base collateral
security other than Approved Properties. The terms upon which Lender accepts
such collateral security and the amount which it contributes to the Borrowing
Base shall be subject to agreement between Lender and Borrower at the time such
collateral security is accepted by Lender. As of the date of this Sixth
Amendment, Lender is accepting the following collateral security upon the
following terms:
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47
(a) Concurrently with Borrower's execution and delivery
of this Amendment, KWP is executing and delivering a Stock Pledge Agreement to
pledge all of the issued and outstanding stock of Wilshire & 7th Properties,
Inc. ("W7PI"), Monarch Investors, Inc. ("MII") and K- W Hilltop, Inc. ("KWHI").
Also concurrently, W7PI is executing and delivering a Security Agreement
encumbering its limited liability company interest in Downtown Properties, LLC;
MII is executing and delivering a Security Agreement encumbering its limited
liability company interest in Ski Monarch, LLC; and KWHI is executing and
delivering a Security Agreement encumbering its limited liability company
interest in Hilltop Colony, LLC. For each limited liability company referred
to above, these security interests shall contribute to the Borrowing Base the
amount which is the product of (i) the percentage interest in such limited
liability company of the corporate member granting a security interest in such
limited liability company times (ii) 50% of the positive amount, if any,
derived by subtracting the liabilities of each such limited liability company
from the appraised value of the real property assets owned by such limited
liability company as determined by Lender from time to time.
(b) Also concurrently with Borrower's execution and
delivery of this Amendment, Vista Waikoloa Group, Inc. ("VWGI") is executing
and delivering a Security Agreement encumbering its right to receive certain
proceeds. Such security interest shall contribute to the Borrowing Base 85% of
the positive amount, if any, derived by subtracting the liabilities of VWGI
from the appraised value of the real property assets owned by VWGI as
determined by Lender from time to time.
(c) WCGI has executed and delivered a security Agreement
granting to Lender a security interest in a secured promissory note. Such
security interest shall contribute to the Borrowing Base 50% of the principal
amount of such promissory note outstanding from time to time.
2. Unsecured Debt. Borrower acknowledges that the amounts
outstanding under the Note which represent Loans under the Working Capital
Facility are unsecured debt of Borrower and, notwithstanding the Note's
evidencing both secured and unsecured debt, the enforcement of such unsecured
debt is not subject to the restrictions of California's antideficiency or
one-action laws, including, without limitation, Code of Civil Procedure
Sections 580a, 580b, 580d or 726.
3. Confirmation of Guaranty. Guarantors acknowledge that they
have reviewed and consent to the terms of the Loan Documents, as amended by all
amendments thereto, including as amended by this Sixth Amendment, and they are
aware that the amount available to be borrowed by Borrower under the Loan
Agreement has been increased to $10,000,000. Guarantors agree to guaranty the
increased amount in accordance with the terms of the Guaranty, that the
waivers, acknowledgements and other agreements
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48
are applicable to such increased amount and that the Guaranty remains in full
force and effect, enforceable against Guarantors in accordance with its terms.
4. Other Amendments. All of the other Loan Documents are
modified as necessary to reflect the modifications to the Loan Agreement. All
references in any of the Loan Documents to "Loan Agreement" shall be to the
Loan Agreement as modified hereby.
5. Full Force and Effect. Borrower represents that it has no
rights of setoff relating to or defenses against payment of the Loans in
accordance with the terms of the Loan Agreement and, except as provided in this
Amendment, the Loan Documents remain unmodified and in full force and effect.
6. Entire Agreement. This Amendment constitutes the entire
agreement and understanding among the parties with respect to the subject
matter of such amendment and supersedes all prior agreements and understandings
with respect to such subject matter, whether oral or written.
7. Loan Fee and Expenses. Borrower agrees, on Lender's demand, to
pay all reasonable costs and expenses incurred by Lender in connection with
this Amendment, the additional security being provided to Lender concurrently
with this Amendment, investigation and approval of any assets proposed by
Borrower to be Approved Properties, whether or not Lender grants such approval,
including without limitation, the fees and related costs of Lender's legal
counsel, the cost of obtaining increased amounts of title insurance and any
endorsements to the Title Policies necessitated or deemed desirable by Lender
in connection with this Amendment or Lender's acceptance of any additional
Approved Properties and all appraisal, title, recording, inspection,
engineering and related costs. Borrower authorizes Lender, if Lender so
elects, to pay the amount of such fee and such costs to itself by making a Loan
under the Loan Agreement for such amounts.
EAST-WEST BANK, a California
banking corporation
By: /s/XXXXXX XXXX
----------------------------------------------
Xxxxxx Xxxx, Senior Vice
President
(Signatures continued on next page)
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49
(Signatures continued from next page)
XXXXXXX-XXXXXX, INC., a Delaware
corporation
By: /s/XXXXXXX X. XXXXXXXX
------------------------------------------------
Xxxxxxx X. XxXxxxxx, President
XXXXXXX-XXXXXX INTERNATIONAL, a
California corporation
By: /s/XXXXXXX X. XXXXXXXX
------------------------------------------------
Xxxxxxx X. XxXxxxxx, President
K-W PROPERTIES, a California
corporation
By: /s/XXXXXXX X. XXXXXXXX
------------------------------------------------
Xxxxxxx X. XxXxxxxx
Vice President
WESTBOROUGH COURT GROUP, INC., a
California corporation
By: /s/XXXXXXX X. XXXXXXXX
------------------------------------------------
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