SECOND AMENDMENT TO LOAN DOCUMENTS
THIS SECOND AMENDMENT TO LOAN DOCUMENTS ("Amendment"), dated April 29,
1998, and effective as of April 29, 1998, is made by and among (i) XXXXXXX
HOMES, INC., a Delaware corporation (the "Company"); (ii) XXXXXXX HOMES OF
CALIFORNIA, INC., a California corporation, XXXXXXX HOMES OF OREGON, INC., an
Oregon corporation, XXXXXXX HOMES OF WASHINGTON, INC., a Washington corporation,
MELODY HOMES, INC., a Delaware corporation, XXXXXXX REALTY/MAUI, INC., a Hawaii
corporation, XXXXXXX REALTY/OAHU, INC., a Hawaii corporation, LOKELANI
CONSTRUCTION CORPORATION, a Delaware corporation, and MELODY MORTGAGE CO., a
Colorado corporation (collectively referred to as the "Guarantors", and
individually referred to as a "Guarantor"), (iii) SHLR OF WASHINGTON, INC., a
Washington corporation (the "Additional Guarantor"), (iv) the banks from time to
time party to this Agreement (collectively referred to as the "Banks", and
individually referred to as a "Bank"), (v) FIRST HAWAIIAN BANK, a Hawaii
corporation, as administrative and co-syndication agent for the Banks (the
"Administrative Agent"), and (vi) BANK OF AMERICA NT&SA, a national banking
association, as documentation and co-syndication agent for the Banks (the
"Documentation Agent", the Administrative Agent and the Documentation Agent are
collectively referred to as the "Agents").
W I T N E S S E T H T H A T:
WHEREAS, the Company, the Banks and the Administrative Agent entered into
that certain Credit Agreement dated as of March 29, 1996 (the "Original Credit
Agreement"), relating to the establishment of a revolving credit facility (the
"Credit Facility") in the principal amount of US$110,000,000.00 (the "Original
Commitment") made available to the Company by the Banks; and
WHEREAS, in connection therewith, the Company, the Banks and the
Administrative Agent executed certain Loan Documents (as defined in the Original
Credit Agreement); and
WHEREAS, the Company, the Banks and the Administrative Agent entered into
that certain Supplement No. 1 to Credit Agreement effective as of January 8,
1997 (the "Supplement"), relating to the use of certain proceeds of Advances (as
defined in the Original Credit Agreement) during the Waiver Period (as defined
in the Supplement); and
WHEREAS, the Company, the Guarantors, the Banks and the Agents entered
into that certain Amended and Restated Credit Agreement dated March 27, 1997
(the "Amended Credit Agreement"), which amended the terms of the Original Credit
Agreement by, among other things, increasing the Original Commitment to US
$137,600,000.00; and
WHEREAS, the Company, the Guarantors and the Additional Guarantor have
requested the Banks and the Agents to further amend the terms of the Amended
Credit Agreement to (i) consent to the Company's issuance of "Senior Notes", as
defined herein, which will be PARI PASSU with the Credit Facility; (ii) to
change the status of the Guarantors from that as "co-borrowers" to "guarantors"
of the Credit Facility, and (iii) to amend other provisions contained therein;
and
WHEREAS, the Banks and the Agents are willing to comply with such
request, upon and subject to the terms and conditions hereinafter set forth; and
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the Company, the Guarantors, the Additional
Guarantor, the Banks and the Agents hereby agree as follows:
1. DEFINITIONS. All capitalized terms used herein, unless otherwise
defined herein, shall have the same meanings as those ascribed to them in the
Amended Credit Agreement.
2. REPRESENTATIONS AND WARRANTIES. As an essential inducement to the
Banks and the Agents to execute this Amendment, the Company, the Guarantors and
the Additional Guarantor hereby repeat, reaffirm and incorporate herein by
reference all of the representations and warranties contained in Section 5 of
the Amended Credit Agreement.
3. AMENDMENT OF LOAN DOCUMENTS. The Loan Documents are hereby
amended as follows:
(a) All references in the Loan Documents to "Borrower" or
"Borrowers" shall mean Xxxxxxx Homes, Inc., a Delaware corporation.
(b) The following definitions shall be included in the Amended
Credit Agreement:
"GUARANTOR" or "GUARANTORS" means, singularly or
collectively, XXXXXXX HOMES OF CALIFORNIA, INC., a California
corporation, XXXXXXX HOMES OF OREGON, INC., an Oregon corporation,
XXXXXXX HOMES OF WASHINGTON, INC., a Washington corporation,
MELODY HOMES, INC., a Delaware corporation, XXXXXXX REALTY/MAUI,
INC., a Hawaii corporation, XXXXXXX REALTY/OAHU, INC., a Hawaii
corporation, LOKELANI CONSTRUCTION CORPORATION, a Delaware
corporation, MELODY MORTGAGE CO., a Colorado corporation and SHLR
OF WASHINGTON, INC., a Washington corporation.
"GUARANTY" means an agreement in form and substance
satisfactory to the Banks and the Agents, duly executed by the
Guarantors, jointly and severally guaranteeing the due and
punctual payment of the Note, and the observance and performance
of the Borrower's obligations under the Loan Documents.
"SENIOR NOTES" means the 9.00% Senior Notes due 2008, in
the principal amount of US$100,000,000 issued by the Borrower
pursuant to that certain Offering Memorandum dated April 30, 1998.
(c) The following definitions in the Amended Credit Agreement
are amended as follows:
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"COMPLETED UNSOLD HOMES" means all condominium units and
one-to-four family residences (including Model Homes) in the
Authorized States owned by the Borrower or its Subsidiaries as
part of their respective real estate development business, for
which construction has been "completed" less than 180 days before
such date, but for which there is in existence no written Contract
for Sale. Construction will be considered "completed" for a
condominium unit when the temporary certificate of occupancy for
such unit has been issued; construction will be considered
"completed" for a one-to-four family residence when all electrical
and plumbing fixtures have been installed and utility services in
connection therewith have been connected. Notwithstanding the
foregoing, Model Homes will continue to be considered Completed
Unsold Homes until the date which is 180 days after the last
production unit in the particular real estate project (for which
such Model Home is used as a model) has been sold.
"CONTRACT FOR SALE" means a sale and purchase agreement
between the Borrower or its Subsidiaries and an unrelated third
party purchaser, who has made an xxxxxxx money deposit of not less
than $250.00 and who has been pre-qualified by the Borrower, its
Subsidiaries or an institutional lender; PROVIDED, that such
agreement shall not contain any contingency clause, conditioning
such purchaser's obligation upon the sale of such purchaser's
property.
"CONTRACTED HOMES" means all condominium units and
one-to-four family residences (including Model Homes) in the
Authorized States owned by the Borrower or its Subsidiaries as
part of their respective real estate development business, on
which a building permit has been issued and construction has
begun, and for which the Borrower or its Subsidiaries has entered
into a written Contract for Sale.
"CONTROLLED GROUP" means the Borrower, its Subsidiaries and
all Persons (whether or not incorporated) under common control or
treated as a single employer with the Borrower and its
Subsidiaries pursuant to Section 414(b), (c), (m) or (o) of the
Code.
"ENTITLED LAND" means all land in the Authorized States
owned by the Borrower or its Subsidiaries as part of their
respective real estate development business, which does have
residential zoning and the provision of potable water, sewage and
other utilities available to the boundary of such land.
"ISSUANCE" means the issuance of a Letter of Credit
hereunder at the request of the Borrower and for the account of
the Borrower or its Subsidiaries, pursuant to Section 2.05.
"ISSUING BANK" means any Bank or any Affiliate of any Bank,
other than the Administrative Agent, which issues a Letter of
Credit hereunder at the request of the Borrower and for the
account of the Borrower or its Subsidiaries, in accordance with a
requirement by the beneficiary of such Letter of Credit, and
pursuant to Section 2.05.
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"LAND UNDER DEVELOPMENT" means all land in the Authorized
States owned by the Borrower or its Subsidiaries as part of their
respective real estate development business, on which grading or
construction of on-site infrastructure improvements has begun, and
for which all necessary zoning and large-lot subdivision approvals
have been obtained and are in full force and effect, but for which
construction of the residential improvements thereon has not
begun.
"LETTERS OF CREDIT" means standby letters of credit issued
by the Administrative Agent or the Issuing Bank, at the request of
the Borrower and for the account of the Borrower or its
Subsidiaries, pursuant to the terms and conditions set forth in
Article II of this Agreement.
"LOAN DOCUMENTS" means this Agreement, the Note, the
Guaranty, and all documents delivered to the Administrative Agent
in connection herewith or therewith.
"MATERIAL ADVERSE EFFECT" means (a) a material impairment
of the ability of the Borrower or its Subsidiaries on a
consolidated basis to perform under any Loan Document and avoid
any Event of Default; or (b) a material adverse effect upon the
legality, validity, binding effect or enforceability of any Loan
Document.
"MODEL HOMES" means all condominium units and one-to-four
family residences in the Authorized States owned by the Borrower
or its Subsidiaries as part of their respective real estate
development business, which are used as models or sales offices to
market a particular real estate development project.
"PERMITTED INDEBTEDNESS" means:
(i) the Country Club Village Loan Facility, and the
Country Club Village Subordinate Mortgage;
(ii) the existing Indebtedness and obligations of the
Company as a joint venture partner in Iao Partners (including any
Indebtedness of Iao Partners for which there is recourse to the
Company); PROVIDED, HOWEVER, that the Company shall be permitted,
after March 31, 1997, (A) to incur additional Indebtedness as a
joint venture partner of Iao Partners, (B) to make additional net
investments in Iao Partners, and (C) to make additional net
advances to Iao Partners, in amounts which shall not exceed
$5,000,000.00, in the aggregate, for all such indebtedness,
investments and advances described in (A), (B) and (C) above;
(iii) the existing Subordinated Debt of the Company
(including the Company's existing subordinated convertible
debentures) in the amount of $57,500,000.00;
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(iv) Indebtedness, not to exceed $5,000,000 in the
aggregate, created or arising under a conditional sale or other
title retention agreement, or incurred as purchase money
financing, with respect to property acquired by any Borrower;
provided that the rights and remedies of the seller under such
agreement in the event of default are limited to repossession or
sale of such property;
(v) Indebtedness to the extent incurred upon the
indorsement of an instrument in order to negotiate the same, and
for taxes, assessments, governmental charges, or levies to the
extent that payment thereof shall not at the time be required to
be made;
(vi) Indebtedness and Guaranty Obligations (except for
indemnification of sureties issuing bonds in connection with the
Borrowers' real estate development businesses), not to exceed
$5,000,000 in the aggregate, incurred in the ordinary course of
the Borrowers' real estate development businesses;
(vii) Premium Payments;
(viii) Guaranty Obligations (a) incurred in respect of
indemnification of sureties for the issuance of bonds in
connection with the Borrowers' real estate development businesses
and (b) associated with the acquisition of Melody Homes, Inc. and
Melody Mortgage Co. by the Company;
(ix) the Senior Notes and any guaranties thereof by any
Guarantor;
(x) the Guaranty; and
(xi) Indebtedness in respect of the Aggregate Commitment
hereunder.
"PERMITTED INVESTMENT" means (a) the creation of or
investment in a wholly-owned Subsidiary of the Borrower which is
used exclusively as an exchange vehicle to facilitate a like-kind
exchange under Section 1031 of the Code; (b) the investment by the
Borrower or its Subsidiary in any other Subsidiary of the
Borrower; (c) loan receivables from sales incentive programs, not
to exceed $10,000,000.00; and (d) any one of the following dollar
denominated investments, maturing within one year from the date of
acquisition, selected by the Company:
(i) marketable direct obligations issued or
unconditionally guaranteed by the United States government or
issued by any agency thereof and backed by the full faith and
credit of the United States;
(ii) marketable direct obligations issued by any
state of the United States or any political subdivision of any
such state or any public instrumentality thereof and, at the time
of acquisition, having the highest credit rating obtainable from
either Standard & Poor's Ratings Group, a division of XxXxxx-Xxxx,
Inc. ("S&P") or Xxxxx'x Investors Service, Inc. ("Moody's");
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(iii) commercial paper or corporate promissory
notes bearing at the time of acquisition the highest credit rating
either of S&P or Moody's issued by United States, Australian,
Canadian, European or Japanese bank holding companies or
industrial or financial companies (other than an Affiliate of the
Company);
(iv) certificates of deposit issued by and bankers
acceptances of and interest bearing deposits with any Bank, or any
commercial bank having capital and surplus of at least
$500,000,000 or the equivalent and which issues (or the parent of
which issues) commercial paper or other short term securities
bearing the highest credit rating obtainable from either S&P or
Moody's; and
(v) money market funds organized under the laws
of the United States or any state thereof that invest solely in
any of the foregoing investments permitted under clauses (i),
(ii), (iii) and (iv).
"REAL ESTATE INDEBTEDNESS" means the total amount of: (1)
the Aggregate Commitment; (2) the existing Subordinated Debt of
the Company (including the Company's existing subordinated
convertible debentures) in the amount of $57,500,000.00; (3) the
Senior Notes; and (4) other indebtedness, as may be permitted by
the Banks, in connection with the development of any Real Estate
Development Assets.
"SUBORDINATED DEBT" means Indebtedness of the Borrower or
its Subsidiaries (including subordinated debentures and
subordinated convertible debentures) to another lender or creditor
who has expressly agreed by virtue of documents or instruments
acceptable to the Majority Banks, that the Indebtedness of such
entity to such lender or creditor is subordinated to the
Obligations of the Borrower hereunder, and that such lender or
creditor will not demand or assert payment of any portion of such
lender's or creditor's Indebtedness until the Obligations of the
Borrower hereunder have been paid in full.
"UNENCUMBERED" when used to describe real property owned by
the Borrower or any of its Subsidiaries, means property which is
not subject to any lien, whether the same is recorded, unrecorded,
springing, resulting from a court judgment or arbitration award,
or otherwise; PROVIDED, (i) that the filing of an application for
mechanic's or materialman's lien on such real property under
Chapter 507, Hawaii Revised Statutes, or such similar statutes
under California, Oregon, Washington and Colorado law, shall not
prevent such property from being Unencumbered, as long as the
Borrower or its Subsidiaries are diligently defending or causing
another party in interest to defend such application; (ii) that
the attachment of any such lien to any such property shall not
prevent such property from being Unencumbered, as long as the
Borrower or its Subsidiaries have filed a bond, sufficient to
discharge such lien, with the clerk of the applicable court, as
provided in Section 507-43, Hawaii Revised Statutes, or such
similar statutes under California, Oregon, Washington and Colorado
law; and (iii) that the recording of any lien by the obligee of
any Premium Payment against
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property for which a Premium Payment is required and has not been paid,
shall not prevent such property from being Unencumbered, as long as the
Borrower or its Subsidiaries have filed a bond, in form and substance
satisfactory to the Majority Banks, in an amount equal to no less than
125% of the claimed amount of the lien.
"UNENTITLED LAND" means all land in the Authorized States
owned by the Borrower or its Subsidiaries as part of their
respective real estate development business, that does not have
residential zoning, or that does have residential zoning but does
not have the provision of potable water, sewage, or other
utilities available to the boundary of such land.
"UNIMPROVED LAND" means all Entitled Land in the Authorized
States owned by the Borrower or its Subsidiaries as part of their
respective real estate development business, on which no
construction of on-site infrastructure improvements has begun.
"UNSOLD HOMES UNDER CONSTRUCTION" means all condominium
units and one-to-four family residences (including Model Homes) in
the Authorized States owned by the Borrower or its Subsidiaries as
part of their respective real estate development business, for
which building permits have been issued and construction has
commenced (and not been abandoned), but not completed, and for
which there is no written contract of sale with an unrelated third
party purchaser. Construction will be considered to have
"commenced" when the slab or foundation for the condominium
building or one-to-four family residence has been completed.
(d) The sixth and seventh sentences of Section 2.02
("Determination of Borrowing Base; Restrictions on Advances, Swing-Line Advances
and Letters of Credit") are amended as follows:
"The aggregate amount of all Advances and Swing-Line Advances
outstanding hereunder, and all Letters of Credit issued and
outstanding hereunder, shall not exceed the Borrowing Base, as
determined by the Administrative Agent for any succeeding month,
less the outstanding principal amount of the Senior Notes, and
shall in no event exceed the amount of the Aggregate Commitment.
In the event the Borrowing Base, for any month, as determined by
the Administrative Agent hereunder, less the principal amount of
the Senior Notes, is less than the aggregate amount of all
outstanding Advances and Swing-Line Advances and all issued and
outstanding Letters of Credit at the date of such determination,
the Borrower shall, within fifteen (15) Business Days of the
receipt of notification by the Administrative Agent, repay
Advances or Swing-Line Advances and/or repay or cash collateralize
issued and outstanding Letters of Credit, in such amounts as may
be necessary to reduce the aggregate amount of all outstanding
Advances and Swing-Line Advances and all issued and outstanding
Letters of Credit, to the amount of the newly-determined Borrowing
Base, less the principal amount of the Senior Notes."
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(e) The last sentence of Section 2.05(d) is amended as
follows: "The Letters of Credit shall be issued to support performance
requirements and obligations of the Borrower or its Subsidiaries in
connection with their real estate development businesses in the Authorized
States (including any required deposits for like-kind exchanges under Section
1031 of the Code), and to support capital and performance requirements and
obligations of the Captive Insurance Subsidiary, and not in contravention of
any provision of this Agreement or any Requirement of Law."
(f) The first sentence of Section 2.08(b) ("Mandatory
Prepayments") shall be amended as follows: "If the Borrower or any of its
Subsidiaries sells (other than a sale to the Borrower or any other Subsidiary)
any portion of any property or assets of the Borrower or any of its Subsidiaries
for $10,000,000.00 or more, or if the Borrower or any of its Subsidiaries sells,
in a single transaction, all or substantially all of the property or assets of
the Borrower or of any of its Subsidiaries, the Borrower shall use 100% of the
proceeds of such sale (the "Sale Proceeds") to prepay any Advances, subject to
Section 3.04."
(g) Section 4.02(b) ("Continuation of Representations and
Warranties") shall be amended as follows: "The representations and warranties
made by the Borrower herein, and by the Guarantors in the Guaranty, shall be
true and correct on and as of such date, with the same effect as if made on and
as of such date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and correct
as of such earlier date);".
(h) Section 6.02 ("Certificates; Other Information") shall be
amended as follows:
6.02 CERTIFICATES; OTHER INFORMATION The Borrower shall
furnish to the Administrative Agent, with sufficient copies for
each Bank:
(a) not later than forty-five (45) days after the
end of each Quarter, a certificate of a Responsible Officer of the
Borrower, in the form of EXHIBIT F-1 stating that, to the best of
such officer's knowledge, the Borrower and its Subsidiaries during
such period, have observed and performed all of their covenants
and other agreements, and satisfied every condition contained in
this Agreement to be observed, performed or satisfied by the
Borrower and its Subsidiaries and that such officer has obtained
no knowledge of any Default or Event of Default except as
specified in such certificate, which, where a Default or Event of
Default is specified, shall set forth the details of the
occurrence referred to therein, state what action the Borrower or
its Subsidiaries propose to take with respect thereto and at what
time, and describe with particularity any and all applicable
clauses or provisions of this Agreement which have been breached
or violated, together with a calculation of (i) the percentage of
common stock in the Company owned by Xxxxx X. Xxxxxxx as of the
end of such Quarter, (ii) the minimum Consolidated Tangible Net
Worth of the Borrower and its Subsidiaries as of the end of such
Quarter, (iii) the Consolidated Net Earnings for the Borrower and
its Subsidiaries during such Quarter, (iv) the amount of and net
proceeds received from any Equity Offering (other than the
exercise of an
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employee stock option) or conversion of a subordinated convertible
debenture consummated or effected during such Quarter, (v) Real Estate
Development Assets, Real Estate Indebtedness, and the Development Ratio
for the Borrower and its Subsidiaries as of the end of such Quarter, (vi)
the Fixed Charges Ratio for the Borrower and its Subsidiaries as of the
end of such Quarter, and (vii) the Capitalized Interest for the Borrower
and its Subsidiaries as of the end of such Quarter, showing, for each
item (i) through (vii) above, the comparison between such Quarter and
previous Quarters (beginning with the Quarter ending December 31, 1996).
(b) not later than forty-five (45) days after the
end of each Quarter a certificate of a Responsible Officer of the
Borrower, in the form of EXHIBIT F-2 for each project in which the
Borrower or any of its Subsidiaries has an investment, relating to
the status of all Unentitled Land (location, purchase price,
number of lots and entitlement schedule), Unimproved Land
(location, number of lots and development schedule), and Land
Under Development (location and status of development), as of the
end of the previous Quarter.
(c) not later than fifteen (15) days after the
end of each month, provided, however, that if the end of such
month is also the end of a Quarter, then not later than
twenty-five (25) days after the end of such month, a certificate
of a Responsible Officer of the Borrower, in the form of EXHIBIT
F-3 for each project in which the Borrower or any of its
Subsidiaries has an investment, relating to the status of all
Unsold Homes Under Construction (location and number of homes),
Completed Unsold Homes (location and number of homes), Completed
Unsold Homes Over 180 Days (location and number of homes), and
Contracted Homes (location, number of homes and status of sales),
as of the end of the previous month.
(d) not later than fifteen (15) days after the
end of each month, provided, however, that if the end of such
month is also the end of a Quarter, then not later than
twenty-five (25) days after the end of such month, a Borrowing
Base Certificate of a Responsible Officer of the Borrower, in the
form of EXHIBIT F-4, containing a detailed listing and a summary
of all Real Estate Development Assets, as of the end of the
previous month.
(e) not later than forty-five (45) days after the
end of each Quarter, a Leverage Ratio Certificate of a Responsible
Office of the Borrower, in the form of EXHIBIT F-5, containing a
calculation of the total Indebtedness of the Borrower and its
Subsidiaries, and the Consolidated Tangible Net Worth of the
Borrower and its Subsidiaries, as of the end of the previous
Quarter, based on balance sheet information prepared in accordance
with GAAP.
(f) as soon as available, but not later than
ninety (90) days after the end of each fiscal year, a projected
consolidated balance sheet of the Borrower and its Subsidiaries
for the next two (2) fiscal years, prepared on a Quarterly basis,
and the related projected consolidated statements of income,
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shareholders' equity and cash flows for such fiscal years, setting forth
in each case in comparative form the figures for the previous fiscal year
(whether such figures for such previous fiscal year were actual or
projected).
(g) promptly, such additional business,
financial, corporate affairs and other information as the
Administrative Agent, at the request of any Bank, may from time to
time reasonably request.
(i) Section 6.12 shall be amended and entitled as follows:
6.12 SUBSIDIARIES. Each Subsidiary of the Borrower shall
unconditionally and jointly and severally guarantee the
obligations of the Borrower under the Loan Documents pursuant to
the Guaranty. The guarantee obligations of each Guarantor will be
a Permitted Indebtedness and senior to all Subordinated Debt, but
PARI PASSU with any guaranties of such Subsidiary provided in
support of the Senior Notes. To the extent that the Borrower or
its Subsidiaries are permitted under this Agreement to incorporate
or otherwise form new Subsidiaries, the Borrower agrees that such
new Subsidiary shall be added as a Guarantor under this Agreement
and the Guaranty, and shall execute such Guaranty; provided,
however, that the Captive Insurance Subsidiary shall not be
subject to this section.
(j) Section 7.02 ("Leverage Ratio) shall be amended as follows:
7.02 LEVERAGE RATIO.
(a) The Borrower shall not, and shall not permit its
Subsidiaries to, allow the Leverage Ratio, measured as of the end
of each Quarter ending March 31, 1997, June 30, 1997, September
30, 1997, December 31, 1997 and March 31, 1998, to exceed 1.50 to
1.
(b) The Borrower shall not, and shall not permit its
Subsidiaries to, allow the Leverage Ratio, measured as of the end
of each Quarter ending June 30, 1998, September 30, 1998, December
31, 1998, March 31, 1999, and June 30, 1999, to exceed 1.35 to 1.
(k) Section 7.03 ("Development Ratio") shall be amended as
follows:
7.03 DEVELOPMENT RATIO. The Borrower shall not, and
shall not permit its Subsidiaries to, allow the Development Ratio,
measured as of the end of each Quarter, to be less than 1.50 to 1.
(l) Section 7.04 ("Fixed Charges Ratio") shall be amended as
follows:
7.04 FIXED CHARGES RATIO. The Borrower shall not, and
shall not permit its Subsidiaries to, allow the Fixed Charges
Ratio, measured as of the end of each Quarter on a rolling four
(4) Quarters basis, to be less than 1.00 to 1 in each
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Quarter of 1997, 1.25 to 1 in the first two Quarters of 1998, 1.50 to 1
in the last two Quarters of 1998 and 1.75 to 1 in the first two Quarters
of 1999. In addition, the Borrower shall not, and shall not permit its
Subsidiaries to, allow the Fixed Charges Ratio, measured as of the end of
each Quarter on a quarter only basis, to be less than 1.50 to 1 for the
last two Quarters of 1997.
(m) Section 7.07 ("Additional Investments and Acquisitions")
shall be amended as follows:
7.07 ADDITIONAL INVESTMENTS AND ACQUISITIONS. The
Borrower shall not, and shall not permit any of its Subsidiaries
to, except as provided below, directly or indirectly, invest in,
purchase or acquire any interest in real property (fee or
leasehold) or any stocks, bonds, notes, debentures or other
securities of or acquire by purchase or otherwise all or
substantially all of the business or assets, or stock, partnership
interests or other evidence of ownership (beneficial or otherwise)
or make any other investment in, any corporation, association,
partnership, organization or individual; or directly or
indirectly, make or commit to make any loan, advance, guaranty or
extension of credit to any corporation, association, partnership,
organization or individual; or directly or indirectly, assume,
endorse, be or become liable for, or guarantee directly or
indirectly any debt or obligation of any corporation, association,
partnership, organization or individual; PROVIDED HOWEVER, that
notwithstanding the foregoing, the Borrower and its Subsidiaries
may (a) make other real estate investments or acquisitions, the
total capital commitment for which shall not exceed the following
designated amounts for a single project (multiple phases of a
project are considered in the aggregate and not as separate
projects), and not in contravention of any provision of this
Agreement or any Requirement of Law: (i) $25,000,000 for projects
in Washington, Oregon and Northern California, and (ii)
$75,000,000 for projects in Colorado and Hawaii (provided further,
that all existing agreements for real estate acquisitions shall be
excluded from this provision); (b) make other investments in an
amount which shall not exceed $2,000,000 in a Captive Insurance
Subsidiary; (c) make any other Permitted Investment, without the
necessity of obtaining the consent of the Majority Banks; and (d)
make such guaranties as may be necessary in support of the Senior
Notes. If the Borrower wishes to obtain the consent of the
Majority Banks for any proposed deviation from the above, the
Borrower shall furnish to the Administrative Agent, and the
Administrative Agent shall forward to the Banks: (i) a copy of all
contracts to be entered into by the Borrower or its Subsidiaries
with respect to the proposed transaction, (ii) a pro forma budget
and cash flow projection for the proposed transaction, (iii)
supporting market studies and projections as deemed necessary by
the Majority Banks, and (iv) supporting appraisals and/or market
evaluations, if required by the Majority Banks. The
Administrative Agent shall advise the Borrower of the decision by
the Majority Banks within thirty (30) days after the receipt by
the Administrative Agent of all of the required items described
above.
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(n) Section 7.08 ("Inventory Restrictions") shall be amended as
follows:
7.08 INVENTORY RESTRICTIONS.
(a) The Borrower shall not, and shall not permit
any of its Subsidiaries to, acquire or obtain any interest in, or
contract to acquire or obtain any interest in, any Unentitled
Land.
(b) The Borrower shall not, and shall any permit
any of its Subsidiaries to, allow their inventory of Completed
Unsold Homes to exceed the applicable levels set forth in SCHEDULE
2 attached hereto.
(c) The Borrower shall not, and shall not permit
any of its Subsidiaries to, allow its inventory of Unimproved Land
to exceed 35% of the GAAP consolidated net book value of "Real
Estate Inventories" in the consolidated financial statements of
the Company and its Subsidiaries, the balance of which is included
in the Borrowing Base calculation, as of the end of each month.
(o) Section 7.09 ("Negative Pledge") shall be amended as
follows:
7.09 NEGATIVE PLEDGE. The Borrower and/or any of its
Subsidiaries shall not create, incur, assume, or suffer to exist
any lien, encumbrance, mortgage, security interest, pledge, or
charge of any kind (including. without limitation, any negative
pledge, or any "secret", "springing", or other unrecorded lien)
upon any of their property or assets of any character, whether now
owned or hereafter acquired, or transfer any of such property or
assets for the purpose of subjecting the same to the payment of
any indebtedness or performance of any other obligation, or
acquire or have an option to acquire any property or assets upon
conditional sale or other title retention agreement, device or
arrangement; provided, however, that the Borrower and its
Subsidiaries may create or incur or suffer to be created or
incurred or to exist: (i) liens for taxes or assessments for
governmental charges or levies if payment thereof shall not at the
time be required to be made; (ii) liens in respect of pledges and
deposits under workers' compensation laws or similar legislation,
and in respect of pledges or deposits in connection with appeal or
similar bonds incidental to the conduct of litigation; (iii) liens
incidental to the conduct of the business of the Borrower and its
Subsidiaries not incurred in connection with the borrowing of
money or the obtaining of advances or credit and which do not in
the aggregate materially detract from the value of their assets or
property; (iv) mechanics' and materialmen's liens which have
attached pursuant to Chapter 507, Hawaii Revised Statutes, as long
as the Borrower or its Subsidiaries have filed a bond, sufficient
to discharge such lien, with the clerk of the applicable circuit
court, as provided in Section 507-43, Hawaii Revised Statutes; and
(v) liens specifically allowed with respect to "Permitted
Indebtedness". This negative pledge shall not apply to any
portion of the Borrower's or any of its Subsidiaries' property or
assets transferred, assigned or conveyed upon due consideration to
a "Third Party
-12-
Purchaser". As used herein, the term "Third Party Purchaser" shall mean
any individual, partnership, corporation, business trust, joint stock
company, trust, unincorporated association, joint venture or governmental
authority, other than the Borrower or any of its Subsidiaries, Waiakoa
Estates Subdivision Joint Venture, Iao Partners, Xxxxx X. Xxxxxxx, Xxxxxx
X. Xxxxx, Xxxxxx X. Goth, Xxxxxxx X. Xxxxx, Xxxxx X. Xxxxxx, Xxxxxxx X.
Xxxxxxxx, Xxxx X. Xxxxx, Xxxxx Xxxxx or Xxx Xxxxx.
(p) Section 7.10 ("No High-Rise Construction") shall be amended
as follows:
7.10 NO HIGH-RISE CONSTRUCTION. None of the Borrower or
any of its Subsidiaries shall engage in any development of a
residential or commercial building having more than four (4)
stories, other than Country Club Village.
(q) Section 7.11 ("Capitalized Interest") shall be amended as
follows:
7.11 CAPITALIZED INTEREST. The Borrower shall not, and
shall not permit its Subsidiaries to, allow the Capitalized
Interest, measured as of the end of each Quarter, to exceed 8% of
the value of Real Estate Development Assets.
(r) Section 7.12 ("Transfer of Assets to Captive Insurance
Subsidiary") shall be amended as follows:
7.12 TRANSFER OF ASSETS TO CAPTIVE INSURANCE SUBSIDIARY.
Except as may be permitted in Section 7.07, the Borrower or any of
its Subsidiaries shall not transfer any assets or property to the
Captive Insurance Subsidiary.
(s) Section 8.01(e) ("Event of Default - Cross-Default") shall
be amended by adding a new subsection (iv) as follows: "or (iv) fails to make
any payment in respect of or perform or observe in any material respect any
other condition or covenant of the Senior Notes, if the effect is an event of
default under the Senior Notes;".
(t) Section 8.01(f) ("Event of Default - Insolvency; Voluntary
Proceedings") shall be amended as follows:
(f) INSOLVENCY; VOLUNTARY PROCEEDINGS. The Borrower
or any of its Subsidiaries (i) ceases or fails to be Solvent, or
generally fails to pay, or admits in writing its inability to pay,
its debts as they become due, subject to applicable grace periods,
if any, whether at stated maturity or otherwise; (ii) voluntarily
ceases to conduct its business in the ordinary course, except, in
connection with a merger or acquisition of substantially all of
the assets of such Subsidiary by the Company or another Subsidiary
of the Company; (iii) commences any Insolvency Proceeding with
respect to itself; or (iv) takes any action to effectuate or
authorize any of the foregoing; or
(u) Section 8.01(g) ("Event of Default - Involuntary
Proceedings") shall be amended as follows:
-13-
(g) INVOLUNTARY PROCEEDINGS. (i) Any involuntary
Insolvency Proceeding is commenced or filed against the Borrower
or any of its Subsidiaries, or any writ, judgment, warrant of
attachment, execution or similar process, is issued or levied
against a substantial part of such party's properties, and any
such proceeding or petition shall not be dismissed, or such writ,
judgment, warrant of attachment, execution or similar process
shall not be released, vacated or fully bonded within 60 days
after commencement, filing or levy; (ii) the Borrower or any of
its Subsidiaries admits the material allegations of a petition
against it in any Insolvency Proceeding, or an order for relief
(or similar order under non-U.S. law) is ordered in any Insolvency
Proceeding; or (iii) the Borrower or any of its Subsidiaries
acquiesces in the appointment of a receiver, trustee, custodian,
conservator, liquidator, mortgagee in possession (or agent
therefor), or other similar Person for itself or a substantial
portion of its property or business; or
(v) Section 8.01(i) ("Event of Default - Monetary Judgments")
shall be amended as follows:
(i) MONETARY JUDGMENTS. One or more
non-interlocutory judgments, orders or decrees shall be entered
against the Borrower or any of its Subsidiaries involving in the
aggregate (existing at any one time for such entity) a liability
(not fully covered by independent third-party insurance) as to any
single or related series of transactions, incidents or conditions,
of $5,000,000 or more, and the same shall remain unsatisfied,
unvacated, unbonded or unstayed pending appeal for a period of 60
days after the entry thereof; or
(w) Section 8.01(j) ("Event of Default - Non-Monetary
Judgments") shall be amended as follows:
(j) NON-MONETARY JUDGMENTS. Any non-monetary
judgment, order or decree shall be rendered against the Borrower
or any of its Subsidiaries which does or would reasonably be
expected to have a Material Adverse Effect, and there shall be any
period of 10 consecutive days during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
4. DELIVERY OF RELATED DOCUMENTS. The Company, the Guarantors and
the Additional Guarantor shall deliver to the Administrative Agent on or before
April 29, 1998 the following documents, all of which shall be in form and
substance satisfactory to the Banks and the Agents:
(a) The Guaranty executed by the Guarantors and the Additional
Guarantor;
(b) Properly certified resolutions of the respective Boards of
Directors of the Borrower, the Guarantors and the Additional Guarantor duly
authorizing the execution and delivery of this Second Amendment by such party.
-14-
(c) An opinion from counsel to the Borrower stating that after
the execution and delivery of this Amendment by the Borrower, the Loan Documents
will continue to be enforceable in accordance with their terms and will continue
to constitute the valid and legally binding obligations of the Borrower.
(d) An opinion from counsel to the Guarantors and the
Additional Guarantor stating that after the execution and delivery of this
Amendment and the Guaranty by the Guarantors and the Additional Guarantor, the
Loan Documents, including the Guaranty, will continue to be enforceable in
accordance with their terms and the Guaranty will constitute the valid and
legally binding obligations of the Guarantors and the Additional Guarantor.
5. CONFORMANCE. The Loan Documents are hereby amended to conform
with this Amendment, but in all other respects such provisions are to be and
continue in full force and effect.
6. CONTINUANCE OF SECURITY. The performance of the obligations of
the Company under the Loan Documents, as herein amended, shall be fully secured
by and entitled to the benefits of the Guaranty and the other Loan Documents,
and any modifications, extensions, renewals or replacements thereof.
7. NO OFFSETS. As of the date hereof, the Company has no claims,
defenses or offsets against the Banks or the Agents, or against the Company's
obligations under the "Loan Documents", as herein amended, whether in connection
with the negotiations for or closing of the Loan, of this Amendment, or
otherwise, and if any such claims, defenses or offsets exist, they are hereby
irrevocably waived and released. As of the date hereof, the Guarantors and the
Additional Guarantor have no claims, defenses or offsets against the Banks or
the Agents, or against the Guarantors' and the Additional Guarantor's
obligations under the Guaranty, whether in connection with the negotiations for
or closing of the Credit Facility, of this Amendment, or otherwise, and if any
such claims, defenses or offsets exist, they are hereby irrevocably waived and
released.
8. NO WAIVER. This Amendment is made on the express condition that
nothing herein contained shall in any way be construed as affecting, impairing
or waiving any rights of the Banks or the Agents under any of the Loan
Documents, as herein amended.
9. ENTIRE AGREEMENT. This Amendment incorporates all of the
agreements between the parties relating to the amendment of the Loan Documents
and supersedes all other prior or concurrent oral or written letters, agreements
or understandings relating to such amendment.
10. HEADINGS. The headings of paragraphs and subparagraphs herein are
inserted only for convenience and reference, and shall in no way define, limit
or describe the scope or intent of any provisions of this Amendment.
11. GOVERNING LAW; SEVERABILITY. This Amendment is executed and
delivered, and shall be construed and enforced, in accordance with and governed
by the laws of the State of Hawaii. If any provision of this Amendment is held
to be invalid or unenforceable, the validity or enforceability of the other
provisions of this Amendment shall remain unaffected.
-15-
12. SUBMISSION TO JURISDICTION. The Company, the Guarantors and the
Additional Guarantor hereby irrevocably and unconditionally submit, but only for
the purposes of any action or proceeding which the Banks and/or the Agents may
bring to enforce any of the Loan Documents, as amended herein, to the
jurisdiction of the courts of the State of Hawaii and the United States District
Court for the District of Hawaii. Such submission to such jurisdiction shall
not prevent the Banks and the Agents from commencing any such action or
proceeding in any other court having jurisdiction.
13. COUNTERPARTS. This Amendment may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument, and in making proof of this
Amendment, it shall not be necessary to produce or account for more than one
such counterpart.
14. EXPENSES. The Company shall pay all expenses incurred by the
Administrative Agent in negotiations for and documentation of this Amendment and
the satisfaction of the conditions thereof, including, but not limited to, fees
and expenses of legal counsel for the Administrative Agent, and any other costs
incurred by the Administrative Agent in connection with any of the matters
described in this Amendment.
15. BINDING EFFECT. This Amendment shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Company shall not assign this Amendment or any of
the rights, duties or obligations of the Company hereunder without the prior
written consent of the Banks and the Agents.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment the
day and year first above written.
XXXXXXX HOMES, INC.
By /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President of Finance
and Chief Accounting Officer
"Borrower"
XXXXXXX HOMES OF CALIFORNIA, INC.
By /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President of Finance
and Chief Accounting Officer
XXXXXXX HOMES OF OREGON, INC.
By /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President of Finance
and Chief Accounting Officer
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XXXXXXX HOMES OF WASHINGTON, INC.
By /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President of Finance
and Chief Accounting Officer
MELODY HOMES, INC.
By /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President of Finance
and Chief Accounting Officer
XXXXXXX REALTY/MAUI, INC.
By /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President of Finance
and Chief Accounting Officer
XXXXXXX REALTY/OAHU, INC.
By /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President of Finance
and Chief Accounting Officer
LOKELANI CONSTRUCTION CORPORATION
By /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President of Finance
and Chief Accounting Officer
MELODY MORTGAGE CO.
By /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President of Finance
and Chief Accounting Officer
"Guarantors"
SHLR OF WASHINGTON, INC.
By /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President of Finance
and Chief Accounting Officer
"Additional Guarantor"
-17-
FIRST HAWAIIAN BANK
By /s/ Xxxxx Xxxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxxx
Title: REAL ESTATE LOAN OFFICER
"Administrative Agent"
BANK OF AMERICA NT&SA
By /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President
"Documentation Agent"
FIRST HAWAIIAN BANK
By /s/ Xxxxx Xxxxxxxxx
----------------------------------
Name: Xxxxx Xxxxxxxxx
Title: REAL ESTATE LOAN OFFICER
BANK OF AMERICA NT&SA
By /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: CORPORATE BANKING OFFICER
BANK BOSTON, N.A.
By /s/ Xxxxxxxx Xxxxxxx
----------------------------------
Name: Xxxxxxxx Xxxxxxx
Title: VICE PRESIDENT
BANK OF HAWAII
By /s/ Xxxxx X. Xxxxx
----------------------------------
Name: Xxxxx X. Xxxxx
Title: Vice President
-18-
BANK ONE, ARIZONA, NA
By /s/ Xxxxx X. Xxxxxx, Xx.
----------------------------------
Name: Xxxxx X. Xxxxxx, Xx.
Title: ASSISTANT VICE PRESIDENT
"Banks"
-19-
