1
EXHIBIT 10.130
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
BY AND BETWEEN
BLUEGREEN CORPORATION
AND
FOOTHILL CAPITAL CORPORATION
DATED AS OF SEPTEMBER 23, 1997
-------------------------------------------------------------
TABLE OF CONTENTS
-----------------
PAGE
----
1. DEFINITIONS AND CONSTRUCTION. 2
1.1 DEFINITIONS 2
1.2 ACCOUNTING TERMS 13
1.3 CODE 13
1.4 CONSTRUCTION 13
1.5 SCHEDULES AND EXHIBITS. 13
2. LOAN AND TERMS OF PAYMENT. 14
2
2.1 ADVANCES AGAINST PLEDGED A NOTES 14
2.2 LAND INVENTORY ADVANCES 15
2.3 ADVANCES AGAINST PLEDGED B NOTES; TERM LOAN 16
2.4 INTEREST: RATES, PAYMENTS, AND CALCULATIONS 17
2.5 CREDITING PAYMENTS; APPLICATION OF COLLECTIONS 19
2.6 STATEMENTS OF OBLIGATIONS 19
2.7 FEES 20
3. CONDITIONS; TERM OF AGREEMENT 20
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE 20
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. 20
3.3 CONDITIONS PRECEDENT TO LAND INVENTORY ADVANCES. 22
3.4 CONDITIONS PRECEDENT TO A LINE AND B LINE ADVANCES. 22
3.5 TERM 22
3.6 EFFECT OF TERMINATION 22
3.7 EARLY TERMINATION BY BORROWER 23
3.8 TERMINATION UPON EVENT OF DEFAULT 23
4. CREATION OF SECURITY INTEREST 23
4.1 GRANT OF SECURITY INTEREST 23
4.2 NEGOTIABLE COLLATERAL 23
4.3 MAINTENANCE OF PORTFOLIO COLLATERAL; COLLECTION ON
ACQUIRED NOTES AND PLEDGED NOTES 24
4.4 COMPROMISE OR SETTLEMENTS WITH RESPECT TO PLEDGED NOTES;
REPURCHASE OF PLEDGED NOTES 24
4.5 EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT TO DEFAULTS
UNDER PLEDGED NOTES 25
4.6 DISTRIBUTIONS OF LOCKBOX SUMS 25
4.7 RELEASE OF PORTIONS OF REAL PROPERTY COLLATERAL 26
4.8 RELEASE OF SECURITY INTERESTS IN THE PLEDGED NOTES;
RELEASE OF SECURITY WHEN ADVANCES ARE EQUAL TO ZERO 27
4.9 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED 28
4.10 POWER OF ATTORNEY 28
4.11 RIGHT TO INSPECT 29
5. REPRESENTATIONS AND WARRANTIES. 29
5.1 NO PRIOR ENCUMBRANCES 29
5.2 BONA FIDE OBLIGATION 29
5.3 NO DEFENSES OR SETOFFS 29
5.4 ENFORCEABLE AGREEMENTS 29
5.5 CORRECT LEGAL DESCRIPTION 29
5.6 CORRECT LOAN TERMS 29
5.7 COMPLIANCE WITH LAWS 30
5.8 AUTHORITY TO ASSIGN 30
3
5.9 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN 30
5.10 DUE ORGANIZATION AND QUALIFICATION 30
5.11 DUE AUTHORIZATION; NO CONFLICT 30
5.12 LITIGATION 30
5.13 NO MATERIAL ADVERSE CHANGE IN FINANCIAL CONDITION 31
5.14 SOLVENCY 31
5.15 EMPLOYEE BENEFITS 31
5.16 ENVIRONMENTAL CONDITION 32
5.17 RELIANCE BY FOOTHILL; CUMULATIVE 32
5.18 GOOD STANDING 32
6. AFFIRMATIVE COVENANTS. 33
6.1 ACCOUNTING SYSTEM 33
6.2 SCHEDULES OF PLEDGED NOTES 33
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES 33
6.4 TAX RETURNS 34
6.5 GUARANTOR REPORTS 35
6.6 TAXES 35
6.7 INSURANCE 35
6.8 FINANCIAL COVENANTS 37
6.9 NO SETOFFS OR COUNTERCLAIMS 37
6.10 COMPLIANCE WITH LAWS 37
6.11 EMPLOYEE BENEFITS 37
6.12 ENVIRONMENTAL CONDITION 38
6.13 SALE OF PORTIONS OF THE REAL PROPERTY 40
7. NEGATIVE COVENANTS 41
7.1 INTENTIONALLY DELETED 41
7.2 LIENS 41
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES 41
7.4 EXTRAORDINARY TRANSACTIONS AND DISPOSAL OF ASSETS 41
7.5 CHANGE NAME 41
7.6 INTENTIONALLY DELETED 41
7.7 RESTRUCTURE 42
7.8 INTENTIONALLY DELETED 42
7.9 CHANGE OF CONTROL 42
7.10 DISTRIBUTIONS 42
7.11 ACCOUNTING METHODS 42
7.12 INVESTMENTS 42
7.13 TRANSACTIONS WITH AFFILIATES 42
7.14 SUSPENSION 42
7.15 INTENTIONALLY DELETED 43
7.16 USE OF PROCEEDS. 43
7.17 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE 43
4
7.18 USE OF FOOTHILL'S NAME 43
8. EVENTS OF DEFAULT. 43
9. FOOTHILL'S RIGHTS AND REMEDIES. 46
9.1 RIGHTS AND REMEDIES 46
9.2 REMEDIES CUMULATIVE 48
9.3 FORECLOSURE NOT A DISCHARGE 48
10. TAXES AND EXPENSES REGARDING THE COLLATERAL 49
11. WAIVERS; INDEMNIFICATION 49
11.1 DEMAND; PROTEST; ETC. 49
11.2 FOOTHILL'S LIABILITY FOR COLLATERAL 49
11.3 INDEMNIFICATION 49
12. NOTICES 50
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. 51
14. DESTRUCTION OF BORROWER'S DOCUMENTS 51
15. GENERAL PROVISIONS 52
15.1 EFFECTIVENESS 52
15.2 SUCCESSORS AND ASSIGNS 52
15.3 SECTION HEADINGS 52
15.4 INTERPRETATION 52
15.5 SEVERABILITY OF PROVISIONS 53
15.6 AMENDMENTS IN WRITING 53
15.7 COUNTERPARTS; TELEFACSIMILE EXECUTION 53
15.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS 53
15.10 INTEGRATION 54
SCHEDULES
---------
SCHEDULE P-1 PERMITTED LIENS
SCHEDULE PN-A PLEDGED A NOTES STANDARDS
SCHEDULE PN-B PLEDGED B NOTES STANDARDS
SCHEDULE R-1 REAL PROPERTY
SCHEDULE 5.9 LITIGATION
5
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, IS ENTERED
INTO AS OF SEPTEMBER ___, 1997, BETWEEN FOOTHILL CAPITAL CORPORATION, A
CALIFORNIA CORPORATION ("FOOTHILL"), WITH A PLACE OF BUSINESS LOCATED AT
00000 XXXXX XXXXXX XXXXXXXXX, XXXXX 0000, XXX XXXXXXX, XXXXXXXXXX
00000-0000, AND BLUEGREEN CORPORATION, F/K/A XXXXXX CORPORATION, A
MASSACHUSETTS
CORPORATION, WITH ITS CHIEF EXECUTIVE OFFICE LOCATED AT 0000 XXXX XXXXXX
XXXX, XXXXX 000, XXXX XXXXX, XXXXXXX 00000 ("BORROWER"), AND IS MADE WITH
REFERENCE TO THE FOLLOWING FACTS:
W I T N E S S E T H:
WHEREAS, ON OR ABOUT OCTOBER 29, 1993, FOOTHILL AND
BORROWER ENTERED INTO THAT CERTAIN LOAN AND SECURITY AGREEMENT WHICH
PROVIDED FOR BORROWINGS FROM TIME TO TIME BY BLUEGREEN AND PLEDGES OF
VARIOUS SECURITY INTERESTS TO SECURE THE REPAYMENTS OF SUCH BORROWINGS, ALL
ON THE TERMS AND CONDITIONS SET FORTH THEREIN; AND
WHEREAS, ON OR ABOUT DECEMBER 23, 1993, BORROWER AND
FOOTHILL ENTERED INTO THAT CERTAIN FIRST AMENDMENT TO LOAN AGREEMENT; AND
WHEREAS, ON OR ABOUT FEBRUARY 16, 1995, BORROWER AND
FOOTHILL ENTERED INTO THAT CERTAIN AMENDMENT NO. TWO TO THE LOAN AND
SECURITY AGREEMENT: XXXXXX CORPORATION; AND
WHEREAS, ON OR ABOUT MARCH 28, 1995, BORROWER AND FOOTHILL
ENTERED INTO THAT CERTAIN AMENDMENT NO. THREE TO THE LOAN AND SECURITY
AGREEMENT: XXXXXX CORPORATION; AND
WHEREAS, ON OR ABOUT AUGUST 21, 1995, BORROWER AND
FOOTHILL ENTERED INTO THAT CERTAIN "REVISED" AMENDMENT NO. THREE TO THE LOAN
AND SECURITY AGREEMENT: XXXXXX CORPORATION; AND
WHEREAS, ON OR ABOUT JUNE 15, 1995, BORROWER AND FOOTHILL
ENTERED INTO THAT CERTAIN AMENDMENT NO. FOUR TO THE LOAN AND SECURITY
AGREEMENT: XXXXXX CORPORATION ("FOURTH AMENDMENT"); AND
WHEREAS, ON OR ABOUT JUNE 26, 1995 BORROWER, BLUEGREEN
CORPORATION OF THE ROCKIES ("BLUEGREEN/ROCKIES"), AND FOOTHILL ENTERED INTO
THAT CERTAIN FOURTH [SIC] AMENDMENT TO LOAN AND SECURITY AGREEMENT ("FIFTH
AMENDMENT"); AND
6
WHEREAS, ON OR ABOUT MARCH 8, 1996 BORROWER,
BLUEGREEN/ROCKIES AND FOOTHILL ENTERED INTO THAT CERTAIN SIXTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT ("SIXTH AMENDMENT") AND
WHEREAS, ON OR ABOUT MARCH 24, 1997 BORROWER,
BLUEGREEN/ROCKIES AND FOOTHILL ENTERED INTO THAT CERTAIN SEVENTH AMENDMENT
TO LOAN AND SECURITY AGREEMENT ("SEVENTH AMENDMENT"; THE LOAN AGREEMENT, AS
AMENDED BY THE FIRST AMENDMENT, THE SECOND AMENDMENT, THE THIRD AMENDMENT,
THE FOURTH AMENDMENT, THE FIFTH AMENDMENT, THE SIXTH AMENDMENT, AND THE
SEVENTH AMENDMENT, IS HEREAFTER REFERRED TO AS THE "LOAN AGREEMENT"); AND
WHEREAS, BORROWER, BLUEGREEN/ROCKIES, AND FOOTHILL DESIRE
TO AMEND AND RESTATE THE LOAN AGREEMENT IN ITS ENTIRETY, ON THE TERMS AND
CONDITIONS SPECIFICALLY SET FORTH HEREIN.
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE
RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES HERETO AGREE AS
FOLLOWS:
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. AS USED IN THIS AGREEMENT, THE
FOLLOWING TERMS SHALL HAVE THE FOLLOWING DEFINITIONS:
"ACT" MEANS ALL PRESENT AND FUTURE LAWS, REGULATIONS,
STATUTES, COMMON LAW, RULES, ORDINANCES, CODES, LICENSES, PERMITS, ORDERS,
APPROVALS, PLANS, AUTHORIZATIONS, CONCESSIONS, FRANCHISES, AND SIMILAR ITEMS
OF ANY FEDERAL, STATE OR LOCAL GOVERNMENT, INSTRUMENTALITY OR BODY, AS THE
SAME MAY BE AMENDED, MODIFIED OR SUPPLEMENTED FROM TIME TO TIME RELATED TO
HAZARDOUS MATERIALS.
"ADJUSTED TANGIBLE NET WORTH" MEANS TANGIBLE NET WORTH
PLUS SUBORDINATED DEBT.
"AFFILIATE" MEANS, AS APPLIED TO ANY PERSON, ANY OTHER
PERSON DIRECTLY OR INDIRECTLY CONTROLLING, CONTROLLED BY, OR UNDER COMMON
CONTROL WITH, THAT PERSON. FOR PURPOSES OF THIS DEFINITION, "CONTROL" AS
APPLIED TO ANY PERSON MEANS THE POSSESSION, DIRECTLY OR INDIRECTLY, OF THE
POWER TO DIRECT OR CAUSE THE DIRECTION OF THE MANAGEMENT AND POLICIES OF
THAT PERSON, WHETHER THROUGH THE OWNERSHIP OF VOTING SECURITIES, BY
CONTRACT, OR OTHERWISE.
"AGREEMENT" MEANS THIS LOAN AND SECURITY AGREEMENT AND
ANY EXTENSIONS, RIDERS, SUPPLEMENTS, NOTES, AMENDMENTS, OR MODIFICATIONS TO
OR IN CONNECTION WITH THIS LOAN AND SECURITY AGREEMENT.
"AUTHORIZED OFFICER" MEANS ANY OFFICER OF BORROWER.
7
"A LINE ADVANCES" HAS THE MEANING SET FORTH IN SECTION
2.1 HEREOF.
"A LINE BORROWING BASE" MEANS AN AMOUNT EQUAL TO THE
SUM OF NINETY PERCENT (90%) OF THE UNPAID PRINCIPAL BALANCE, AT THE TIME OF
THE ADVANCE WITH RESPECT TO PLEDGED A NOTES, DISCOUNTED TO THIRTEEN PERCENT
(13%), AT THE TIME OF THE ADVANCE WITH RESPECT TO FIXED RATE NOTES.
"BANKRUPTCY CODE" MEANS THE UNITED STATES BANKRUPTCY
CODE (11 U.S.C. SS. 101 ET SEQ.), AS AMENDED, AND ANY SUCCESSOR STATUTE.
"B LINE ADVANCES" HAS THE MEANING SET FORTH IN SECTION
2.3 HEREOF.
"B LINE BORROWING BASE" MEANS AN AMOUNT EQUAL TO THE
SUM OF SIXTY PERCENT (60%) OF THE UNPAID PRINCIPAL BALANCE, AT THE TIME OF
THE ADVANCE WITH RESPECT TO PLEDGED B NOTES, DISCOUNTED TO THIRTEEN PERCENT
(13%), AT THE TIME OF THE ADVANCE WITH RESPECT TO FIXED RATE NOTES.
"BORROWER" HAS THE MEANING SET FORTH IN THE PREAMBLE TO
THIS AGREEMENT.
"BORROWER'S BOOKS" MEANS ALL OF BORROWER'S BOOKS AND
RECORDS RELATING TO THE COLLATERAL (OTHER THAN BORROWER'S BOOKS) INCLUDING:
LEDGERS; RECORDS INDICATING, SUMMARIZING, OR EVIDENCING BORROWER'S
PROPERTIES OR ASSETS RELATING TO THE COLLATERAL; ALL INFORMATION RELATING TO
BORROWER'S BUSINESS OPERATIONS OR FINANCIAL CONDITION RELATING TO THE
COLLATERAL; AND ALL COMPUTER PROGRAMS, DISC OR TAPE FILES, PRINTOUTS, RUNS,
OR OTHER COMPUTER PREPARED INFORMATION RELATING TO THE COLLATERAL.
"BUSINESS DAY" MEANS ANY DAY WHICH IS NOT A SATURDAY,
SUNDAY, OR OTHER DAY ON WHICH NATIONAL BANKS ARE AUTHORIZED OR REQUIRED TO
CLOSE.
"CHANGE OF CONTROL" SHALL BE DEEMED TO HAVE OCCURRED AT
SUCH TIME AS A "PERSON" OR "GROUP" (WITHIN THE MEANING OF SECTIONS 13(D) AND
14(D)(2) OF THE SECURITIES EXCHANGE ACT OF 1934) BECOMES THE "BENEFICIAL
OWNER" (AS DEFINED IN RULE 13D-3 UNDER THE SECURITIES EXCHANGE ACT OF 1934),
DIRECTLY OR INDIRECTLY, OF MORE THAN 35% OF THE TOTAL VOTING POWER OF ALL
CLASSES OF STOCK THEN OUTSTANDING OF BORROWER NORMALLY ENTITLED TO VOTE IN
THE ELECTION OF DIRECTORS.
"CODE" MEANS THE CALIFORNIA UNIFORM COMMERCIAL CODE.
"COLLATERAL" MEANS EACH OF THE FOLLOWING: THE PLEDGED
NOTES; THE REAL PROPERTY; THE COLLECTED FUNDS; BORROWER'S BOOKS; ANY MONEY,
OR OTHER ASSETS OF BORROWER WHICH NOW OR HEREAFTER COME INTO THE POSSESSION,
CUSTODY, OR CONTROL OF FOOTHILL (UNLESS THE SAME SHALL COME INTO THE
POSSESSION OF FOOTHILL BY MISTAKE OR INADVERTENCE); AND THE PROCEEDS AND
PRODUCTS, WHETHER TANGIBLE OR INTANGIBLE, OF ANY OF
8
THE FOREGOING INCLUDING PROCEEDS OF INSURANCE COVERING ANY OR ALL OF THE
COLLATERAL, AND ANY AND ALL MONEY, DEPOSIT ACCOUNTS, OR OTHER TANGIBLE OR
INTANGIBLE PROPERTY RESULTING FROM THE SALE, EXCHANGE, COLLECTION, OR OTHER
DISPOSITION OF ANY OF THE FOREGOING, OR ANY PORTION THEREOF OR INTEREST
THEREIN, AND THE PROCEEDS THEREOF.
"COLLECTED FUNDS" MEANS THE DIRECT WITHDRAWAL DEPOSITS
MADE BY COLLECTING BANK AND FORWARDED TO THE LOCK BOX BANKS AS PAYMENTS ON
SOME OF THE PLEDGED NOTES.
"COLLECTING BANK" MEANS [FLEET] ______________________
, OR SUCH SUCCESSOR INSTITUTION APPROVED BY FOOTHILL.
"COMPLIANCE CERTIFICATE" HAS THE MEANING SET FORTH IN
SECTION 6.3.
"CUSTODIAL AGREEMENT" MEANS ANY CUSTODIAL AGREEMENT
ENTERED INTO BETWEEN CUSTODIAN, ON THE ONE HAND, AND FOOTHILL, ON THE OTHER
HAND, (THE FORM OF WHICH IS ACCEPTABLE TO BORROWER) RESPECTING THE AGREEMENT
OF SUCH INSTITUTION TO ACT AS CUSTODIAN AND BAILEE ON BEHALF OF FOOTHILL
RESPECTING SOME OR ALL OF THE COLLATERAL.
"CUSTODIAN" MEANS THE FINANCIAL OR OTHER INSTITUTION
ACTING AS FOOTHILL'S CUSTODIAN RESPECTING SOME OR ALL OF THE COLLATERAL,
WHOSE IDENTITY IS REASONABLY ACCEPTABLE TO BORROWER.
"DAILY BALANCE" MEANS THE AMOUNT OF AN OBLIGATION OWED
AT THE END OF A GIVEN DAY.
"EARLY TERMINATION FEE" HAS THE MEANING SET FORTH IN
SECTION 3.7.
"EFFECTIVE DATE" MEANS THE DATE SET FORTH ON THE FIRST
PAGE OF THIS AGREEMENT.
"ERISA" MEANS THE EMPLOYEE RETIREMENT INCOME SECURITY
ACT OF 1974, AS AMENDED FROM TIME TO TIME, OR ANY PREDECESSOR, SUCCESSOR, OR
SUPERSEDING LAWS OF THE UNITED STATES OF AMERICA, TOGETHER WITH ALL
REGULATIONS PROMULGATED THEREUNDER.
"ERISA AFFILIATE" MEANS ANY TRADE OR BUSINESS (WHETHER
OR NOT INCORPORATED) WHICH, WITHIN THE MEANING OF SECTION 414 OF THE IRC,
IS: (I) UNDER COMMON CONTROL WITH BORROWER; (II) TREATED, TOGETHER WITH
BORROWER, AS A SINGLE EMPLOYER; (III) TREATED AS A MEMBER OF AN AFFILIATED
SERVICE GROUP OF WHICH BORROWER IS ALSO TREATED AS A MEMBER; OR (IV) IS
OTHERWISE AGGREGATED WITH THE BORROWER FOR PURPOSES OF THE EMPLOYEE BENEFITS
REQUIREMENTS LISTED IN IRC SECTION 414(M)(4).
"ERISA EVENT" SHALL MEAN ANY ONE OR MORE OF THE
FOLLOWING: (I) A REPORTABLE EVENT WITH RESPECT TO A QUALIFIED PLAN OR A
MULTIEMPLOYER PLAN; (II) A
9
PROHIBITED TRANSACTION WITH RESPECT TO ANY PLAN; (III) A COMPLETE OR PARTIAL
WITHDRAWAL BY BORROWER OR ANY ERISA AFFILIATE FROM A MULTIEMPLOYER PLAN;
(IV) THE COMPLETE OR PARTIAL WITHDRAWAL OF BORROWER OR AN ERISA AFFILIATE
FROM A QUALIFIED PLAN DURING A PLAN YEAR IN WHICH IT WAS, OR WAS TREATED AS,
A "SUBSTANTIAL EMPLOYER" AS DEFINED IN SECTION 4001(A)(2) OF ERISA; (V) A
FAILURE TO MAKE FULL PAYMENT WHEN DUE OF ALL AMOUNTS WHICH, UNDER THE
PROVISIONS OF ANY PLAN OR APPLICABLE LAW, BORROWER OR ANY ERISA AFFILIATE IS
REQUIRED TO MAKE; (VI) THE FILING OF A NOTICE OF INTENT TO TERMINATE, OR THE
TREATMENT OF A PLAN AMENDMENT AS A TERMINATION, UNDER SECTIONS 4041 OR 4041A
OF ERISA; (VII) AN EVENT OR CONDITION WHICH MIGHT REASONABLY BE EXPECTED TO
CONSTITUTE GROUNDS UNDER SECTION 4042 OF ERISA FOR THE TERMINATION OF, OR
THE APPOINTMENT OF A TRUSTEE TO ADMINISTER, ANY QUALIFIED PLAN OR
MULTIEMPLOYER PLAN; (VIII) THE IMPOSITION OF ANY LIABILITY UNDER TITLE IV OF
ERISA, OTHER THAN PBGC PREMIUMS DUE BUT NOT DELINQUENT UNDER SECTION 4007 OF
ERISA, UPON BORROWER OR ANY ERISA AFFILIATE; AND (IX) A VIOLATION OF THE
APPLICABLE REQUIREMENTS OF SECTIONS 404 OR 405 OF ERISA, OR THE EXCLUSIVE
BENEFIT RULE UNDER SECTION 403(C) OF ERISA, BY ANY FIDUCIARY OR DISQUALIFIED
PERSON WITH RESPECT TO ANY PLAN FOR WHICH BORROWER OR ANY ERISA AFFILIATE
MAY BE DIRECTLY OR INDIRECTLY LIABLE.
"EVENT OF DEFAULT" HAS THE MEANING SET FORTH IN
SECTION 8.
"FEIN" MEANS FEDERAL EMPLOYER IDENTIFICATION NUMBER.
"FOOTHILL" HAS THE MEANING SET FORTH IN THE PREAMBLE TO
THIS AGREEMENT.
"FOOTHILL EXPENSES" MEANS ALL: COSTS OR EXPENSES
(INCLUDING TAXES, PHOTOCOPYING, NOTARIZATION, TELECOMMUNICATION AND
INSURANCE PREMIUMS) REQUIRED TO BE PAID BY BORROWER UNDER ANY OF THE LOAN
DOCUMENTS THAT ARE PAID OR ADVANCED BY FOOTHILL; DOCUMENTATION, FILING,
RECORDING, PUBLICATION, REAL ESTATE SURVEY, ENVIRONMENTAL AUDIT, LOCK-BOX,
FEES INCURRED PURSUANT TO THE CUSTODIAL AGREEMENT, SEARCH FEES, AND
APPRAISAL FEES RESPECTING THE REAL PROPERTY, (OR PROPERTY PROPOSED BY
BORROWER TO BECOME REAL PROPERTY) AND THE PROPERTIES SUBJECT TO THE NOTE
MORTGAGES, WHICH ARE ASSESSED, PAID, OR INCURRED BY FOOTHILL IN CONNECTION
WITH FOOTHILL'S TRANSACTIONS WITH BORROWER; REASONABLE COSTS AND EXPENSES
INCURRED BY FOOTHILL IN THE DISBURSEMENT OF FUNDS TO BORROWER (BY WIRE
TRANSFER OR OTHERWISE); REASONABLE CHARGES PAID OR INCURRED BY FOOTHILL
RESULTING FROM THE DISHONOR OF CHECKS; REASONABLE COSTS AND EXPENSES PAID OR
INCURRED BY FOOTHILL TO CORRECT ANY DEFAULT OR ENFORCE ANY PROVISION OF THE
LOAN DOCUMENTS, OR IN GAINING POSSESSION OF, MAINTAINING, HANDLING,
PRESERVING, STORING, SHIPPING, SELLING, PREPARING FOR SALE, OR ADVERTISING
TO SELL THE COLLATERAL, OR ANY PORTION THEREOF, IRRESPECTIVE OF WHETHER A
SALE IS CONSUMMATED; COSTS AND EXPENSES PAID OR INCURRED BY FOOTHILL IN
EXAMINING BORROWER'S BOOKS; REASONABLE COSTS AND EXPENSES OF THIRD PARTY
CLAIMS OR ANY OTHER SUIT PAID OR INCURRED BY FOOTHILL IN ENFORCING OR
DEFENDING THE LOAN DOCUMENTS; AND FOOTHILL'S REASONABLE ATTORNEYS FEES AND
EXPENSES INCURRED IN ADVISING, STRUCTURING, DRAFTING, REVIEWING,
ADMINISTERING, AMENDING, TERMINATING, ENFORCING, DEFENDING, OR CONCERNING
THE LOAN DOCUMENTS, IRRESPECTIVE OF
10
WHETHER SUIT IS BROUGHT, (INCLUDING ATTORNEYS FEES AND EXPENSES INCURRED IN
CONNECTION WITH A "WORKOUT," A "RESTRUCTURING," OR AN INSOLVENCY PROCEEDING
CONCERNING BORROWER OR ANY GUARANTOR OF THE OBLIGATIONS).
"GAAP" MEANS GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
AS IN EFFECT FROM TIME TO TIME IN THE UNITED STATES, CONSISTENTLY APPLIED.
"HAZARDOUS MATERIALS" MEANS:
(A) THOSE SUBSTANCES AS DEFINED AS "HAZARDOUS
SUBSTANCES," "HAZARDOUS MATERIALS," "TOXIC SUBSTANCES," OR "SOLID WASTE" IN
CERCLA, RCRA, AND THE HAZARDOUS MATERIALS TRANSPORTATION ACT, 49 U.S.C.
SECTION 1801 ET SEQ., AND IN THE REGULATIONS PROMULGATED PURSUANT THERETO;
(B) THOSE SUBSTANCES DESIGNATED AS A "HAZARDOUS
SUBSTANCE" UNDER OR PURSUANT TO THE FEDERAL WATER POLLUTION CONTROL ACT, 33
U.S.C. SS.1257 ET SEQ., OR DEFINED AS A "HAZARDOUS WASTE" UNDER OR PURSUANT
TO THE RESOURCE CONSERVATION AND RECOVERY ACT, 42 U.S.C. SS.6901 ET SEQ. AND
IN THE REGULATIONS PROMULGATED PURSUANT THERETO;
(C) THOSE SUBSTANCES LISTED IN THE UNITED STATES
DEPARTMENT OF TRANSPORTATION TABLE (40 CFR 172.101 AND AMENDMENTS THERETO)
OR BY THE ENVIRONMENTAL PROTECTION AGENCY (OR ANY SUCCESSOR AGENCY) AS
HAZARDOUS SUBSTANCES (40 CFR PART 302 AND AMENDMENTS THERETO); AND
(D) SUCH OTHER SUBSTANCES, MATERIALS AND WASTES WHICH
ARE REGULATED OR WHICH ARE CLASSIFIED AS HAZARDOUS OR TOXIC UNDER ANY ACT.
"INDEBTEDNESS" SHALL MEAN: (A) ALL OBLIGATIONS OF
BORROWER FOR BORROWED MONEY; (B) ALL OBLIGATIONS OF BORROWER EVIDENCED BY
BONDS, DEBENTURES, NOTES, OR OTHER SIMILAR INSTRUMENTS AND ALL REIMBURSEMENT
OR OTHER OBLIGATIONS OF BORROWER IN RESPECT OF LETTERS OF CREDIT, LETTER OF
CREDIT GUARANTIES, BANKERS ACCEPTANCES, INTEREST RATE SWAPS, CONTROLLED
DISBURSEMENT ACCOUNTS, OR OTHER FINANCIAL PRODUCTS; (C) ALL OBLIGATIONS
UNDER CAPITALIZED LEASES; (D) ALL OBLIGATIONS OR LIABILITIES OF OTHERS
SECURED BY A LIEN OR SECURITY INTEREST ON ANY PROPERTY OR ASSET OF BORROWER,
IRRESPECTIVE OF WHETHER SUCH OBLIGATION OR LIABILITY IS ASSUMED; AND (E) ANY
OBLIGATION OF BORROWER GUARANTEEING OR INTENDED TO GUARANTEE (WHETHER
GUARANTEED, ENDORSED, CO-MADE, DISCOUNTED, OR SOLD WITH RECOURSE TO
BORROWER) ANY INDEBTEDNESS, LEASE, DIVIDEND, LETTER OF CREDIT, OR OTHER
OBLIGATION OF ANY OTHER PERSON.
"INDEMNIFIED PERSONS" MEANS FOOTHILL AND ITS PARENTS,
SUBSIDIARIES AND AFFILIATES, ATTORNEYS AND EACH OF THEIR OFFICERS,
DIRECTORS, AGENTS, EMPLOYEES, TRUSTEES, RECEIVERS, EXECUTORS AND
ADMINISTRATORS, AND THE HEIRS, SUCCESSORS AND ASSIGNS OF ALL OF THE
FOREGOING.
11
"INITIAL CLOSING DATE" MEANS OCTOBER 29, 1993.
"INSOLVENCY PROCEEDING" MEANS ANY PROCEEDING COMMENCED
BY OR AGAINST ANY PERSON UNDER ANY PROVISION OF THE BANKRUPTCY CODE OR UNDER
ANY OTHER BANKRUPTCY OR INSOLVENCY LAW, INCLUDING ASSIGNMENTS FOR THE
BENEFIT OF CREDITORS, FORMAL OR INFORMAL MORATORIA, COMPOSITIONS, EXTENSIONS
GENERALLY WITH ITS CREDITORS, OR PROCEEDINGS SEEKING REORGANIZATION,
ARRANGEMENT, OR OTHER SIMILAR RELIEF.
"IRC" MEANS THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, AND THE REGULATIONS THEREUNDER.
"LAND INVENTORY ADVANCES" HAS THE MEANING SET FORTH IN
SECTION 2.2 HEREOF.
"LAND INVENTORY BORROWING BASE" MEANS AN AMOUNT EQUAL
TO THE LESSER OF (A) EIGHT MILLION DOLLARS ($8,000,000.00), (B) SEVENTY-FIVE
PERCENT (75%) OF THE SUM OF ACQUISITION COSTS OF REAL PROPERTY PLUS
SIXTY-FIVE PERCENT (65%) OF BORROWER'S ACTUAL COSTS OF IMPROVEMENTS TO BE
ERECTED THEREON, OR (C) FOOTHILL'S IN-HOUSE APPRAISAL OF THE REAL PROPERTY.
THE FOREGOING PROVISION OF (B) NOTWITHSTANDING, THE COMPUTATION OF THE LAND
INVENTORY BORROWING BASE SHALL BE FURTHER LIMITED FOR EACH SUCH SUBSECTION
BY A PROJECT TO PROJECT LIMITATION OF SEVENTY PERCENT (70%) OF THE ORDERLY
LIQUIDATION VALUE OF EACH PROJECT.
"LOAN DOCUMENTS" MEANS THIS AGREEMENT, THE PLEDGE
AGREEMENT, THE LOCK BOX AGREEMENTS, THE MORTGAGES, THE TERM NOTE, THE C-TERM
NOTE, ANY OTHER NOTE OR NOTES EXECUTED BY BORROWER AND PAYABLE TO FOOTHILL,
AND ANY OTHER AGREEMENT ENTERED INTO IN CONNECTION WITH THIS AGREEMENT.
"LOCK BOX" SHALL HAVE THE MEANING PROVIDED IN THE
RESPECTIVE LOCK BOX AGREEMENTS.
"LOCK BOX AGREEMENTS" MEANS THOSE CERTAIN LOCKBOX
OPERATING PROCEDURAL AGREEMENTS AND DEPOSITORY ACCOUNT AGREEMENTS, IN FORM
AND SUBSTANCE SATISFACTORY TO BORROWER AND FOOTHILL, EACH OF WHICH IS AMONG
BORROWER, FOOTHILL, AND ONE OF THE LOCK BOX BANKS.
"LOCK BOX BANKS" MEANS BANKERS TRUST COMPANY.
"LOSSES" SHALL MEAN (I) ANY AND ALL LOSSES,
LIABILITIES, CONTINGENT LIABILITIES, DAMAGES, OBLIGATIONS, CLAIMS,
CONTINGENT CLAIMS, ACTIONS, SUITS, PROCEEDINGS, DISBURSEMENTS, PENALTIES,
REASONABLE COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE
ATTORNEYS' FEES AND COSTS OF COUNSEL RETAINED BY FOOTHILL TO MONITOR THE
PROCEEDINGS AND ACTIONS OF BORROWER IN SATISFYING ITS OBLIGATIONS
HEREUNDER); AND (II) ANY AND ALL LOSSES, LIABILITIES, CONTINGENT
LIABILITIES, DAMAGES, OBLIGATIONS, CLAIMS, CONTINGENT
12
CLAIMS, ACTIONS, SUITS, PROCEEDINGS, DISBURSEMENTS, PENALTIES, REASONABLE
COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS'
FEES AND COSTS OF COUNSEL RETAINED BY FOOTHILL TO MONITOR THE PROCEEDINGS
AND ACTIONS OF BORROWER IN ANY AND ALL MATTERS RELATING TO HAZARDOUS
MATERIALS AFFECTING THE REAL PROPERTY, THE PROPERTY SUBJECT TO THE NOTE
MORTGAGES AND ANY PROPERTY IN THE VICINITY CONTAMINATED BY RELEASES OF
HAZARDOUS MATERIALS FROM SUCH PROPERTY); AND COSTS OF COUNSEL RETAINED BY
FOOTHILL TO ADVISE AND REPRESENT FOOTHILL WITH RESPECT TO MATTERS RELATED
HERETO, INCLUDING, WITHOUT LIMITATION, FEES INCURRED PURSUANT TO 11 U.S.C.)
AND ALL OTHER REASONABLE PROFESSIONAL OR CONSULTANTS' FEES AND EXPENSES,
WHETHER OR NOT AN ACTION OR PROCEEDING IS COMMENCED OR THREATENED.
"MAXIMUM AMOUNT" MEANS THE SUM OF TWENTY MILLION
DOLLARS ($20,000,000).
"MORTGAGES" MEANS ONE OR MORE MORTGAGES, DEEDS OF
TRUST, OR DEEDS TO SECURE DEBT, EXECUTED BY BORROWER IN FAVOR OF FOOTHILL,
THE FORM AND SUBSTANCE OF WHICH SHALL BE SATISFACTORY TO FOOTHILL, THAT
ENCUMBER THE REAL PROPERTY AND THE RELATED IMPROVEMENTS THERETO.
"MULTIEMPLOYER PLAN" SHALL MEAN A MULTIEMPLOYER PLAN AS
DEFINED IN SECTIONS 3(37) OR 4001(A)(3) OF ERISA OR SECTION 414 OF THE IRC
IN WHICH EMPLOYEES OF BORROWER OR AN ERISA AFFILIATE PARTICIPATE OR TO WHICH
BORROWER OR ANY ERISA AFFILIATE CONTRIBUTE OR ARE REQUIRED TO CONTRIBUTE.
"NOTE MORTGAGE(S)" MEANS THOSE CERTAIN DEEDS OF TRUST,
MORTGAGES OR SECURITY INTERESTS ENCUMBERING CERTAIN REAL PROPERTY, WHICH
SERVES AS COLLATERAL FOR THE REPAYMENT OF THE PLEDGED A NOTES AND THE
PLEDGED B NOTES.
"OBLIGATIONS" MEANS ALL LOANS, ADVANCES, DEBTS,
PRINCIPAL, INTEREST (INCLUDING ANY INTEREST THAT, BUT FOR THE PROVISIONS OF
THE BANKRUPTCY CODE, WOULD HAVE ACCRUED), PREMIUMS, LIABILITIES (INCLUDING
ALL AMOUNTS CHARGED TO BORROWER'S LOAN ACCOUNT PURSUANT TO ANY AGREEMENT
AUTHORIZING FOOTHILL TO CHARGE BORROWER'S LOAN ACCOUNT), OBLIGATIONS, FEES
(INCLUDING EARLY TERMINATION FEE), LEASE PAYMENTS, GUARANTIES, COVENANTS,
AND DUTIES OWING BY BORROWER TO FOOTHILL OF ANY KIND AND DESCRIPTION
(WHETHER PURSUANT TO OR EVIDENCED BY THE LOAN DOCUMENTS, BY ANY NOTE OR
OTHER INSTRUMENT (INCLUDING THE TERM NOTE), OR PURSUANT TO ANY OTHER
AGREEMENT BETWEEN FOOTHILL AND BORROWER, AND IRRESPECTIVE OF WHETHER FOR THE
PAYMENT OF MONEY), WHETHER DIRECT OR INDIRECT, ABSOLUTE OR CONTINGENT, DUE
OR TO BECOME DUE, NOW EXISTING OR HEREAFTER ARISING, AND INCLUDING ALL
INTEREST NOT PAID WHEN DUE AND ALL FOOTHILL EXPENSES THAT BORROWER IS
REQUIRED TO PAY OR REIMBURSE BY THE LOAN DOCUMENTS, BY LAW, OR OTHERWISE.
"ORDERLY LIQUIDATION VALUE" MEANS THE VALUE WHICH
FOOTHILL IN ITS BUSINESS JUDGMENT ASCRIBES TO EACH ITEM OF REAL PROPERTY
COLLATERAL, OR POTENTIAL REAL PROPERTY COLLATERAL, AND WHICH INCLUDES, AMONG
OTHER FACTORS, (I) THE PROJECTED
13
LIQUIDATION RECOVERY FOR EACH ITEM OF REAL PROPERTY COLLATERAL COMPUTED AS
IF BUILT OUT IN ACCORDANCE WITH THE LOWER OF (X) THE ESTIMATED VALUE BASED
ON THE HIGHEST AND BEST USE OF SUCH ITEM OF REAL PROPERTY COLLATERAL; OR (Y)
THE ESTIMATED VALUE BASED ON THE ACTUAL INTENDED IMPROVEMENTS TO BE
CONSTRUCTED ON SUCH PROPERTY, (II) ANY ENVIRONMENTAL CONDITIONS ASSOCIATED
WITH THE REAL PROPERTY COLLATERAL, AND (III) THE SIZE OF EACH INDIVIDUAL
ITEM OF REAL PROPERTY COLLATERAL RELATIVE TO THE TOTAL COLLATERAL.
"PARTICIPANT" MEANS ANY PERSON, OTHER THAN FOOTHILL,
THAT HAS COMMITTED TO PROVIDE A PORTION OF THE FINANCING CONTEMPLATED
HEREIN.
"PBGC" MEANS THE PENSION BENEFIT GUARANTY CORPORATION
AS DEFINED IN TITLE IV OF ERISA, OR ANY SUCCESSOR THERETO.
"PERMITTED LIENS" MEANS: (A) LIENS AND SECURITY
INTERESTS HELD BY FOOTHILL; (B) LIENS RELATING TO THE COLLATERAL FOR UNPAID
TAXES THAT ARE NOT YET DUE AND PAYABLE; (C) LIENS AND SECURITY INTERESTS SET
FORTH ON SCHEDULE P-1 ATTACHED HERETO; (D) PURCHASE MONEY SECURITY INTERESTS
FOR PERSONAL PROPERTY, AND FOR LAND AND IMPROVEMENTS ACQUIRED, AND LIENS OF
LESSORS UNDER CAPITALIZED LEASES TO THE EXTENT THAT THE ACQUISITION OR LEASE
OF THE UNDERLYING ASSET WAS PERMITTED UNDER SECTION 7.10, AND SO LONG AS THE
SECURITY INTEREST OR LIEN ONLY SECURES THE PURCHASE PRICE OF THE ASSET; (E)
EASEMENTS, RIGHTS OF WAY, RESERVATIONS, COVENANTS, CONDITIONS, RESTRICTIONS,
ZONING VARIANCES, AND OTHER SIMILAR ENCUMBRANCES THAT DO NOT MATERIALLY
INTERFERE WITH THE USE OR VALUE OF THE PROPERTY SUBJECT THERETO; (F)
OBLIGATIONS AND DUTIES AS LESSEE UNDER ANY LEASE EXISTING ON THE DATE OF
THIS AGREEMENT; (G) MECHANICS', MATERIALMEN'S, WAREHOUSEMEN'S, OR SIMILAR
LIENS; AND (H) EXCEPTIONS LISTED IN THE TITLE INSURANCE OR COMMITMENT
THEREFOR TO BE DELIVERED BY BORROWER HEREUNDER IN RESPECT OF THE REAL
PROPERTY, (I) NON CONSENSUAL LIENS ON PROPERTY OTHER THAN THE REAL PROPERTY,
AND (J) REFINANCINGS (AT THE SAME PRINCIPAL BALANCE) OF ALL OF THE ABOVE.
"PERSON" MEANS AND INCLUDES NATURAL PERSONS,
CORPORATIONS, LIMITED PARTNERSHIPS, GENERAL PARTNERSHIPS, JOINT VENTURES,
TRUSTS, LAND TRUSTS, BUSINESS TRUSTS, OR OTHER ORGANIZATIONS, IRRESPECTIVE
OF WHETHER THEY ARE LEGAL ENTITIES, AND GOVERNMENTS AND AGENCIES AND
POLITICAL SUBDIVISIONS THEREOF.
"PLAN" MEANS AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN
SECTION 3(3) OF ERISA) WHICH BORROWER OR ANY ERISA AFFILIATE SPONSORS OR
MAINTAINS OR TO WHICH BORROWER OR ANY ERISA AFFILIATE MAKES, IS MAKING, OR
IS OBLIGATED TO MAKE CONTRIBUTIONS, INCLUDING ANY MULTIEMPLOYER PLAN OR
QUALIFIED PLAN.
"PLEDGE AGREEMENT" MEANS THAT CERTAIN PLEDGE AND
SECURITY AGREEMENT ENTERED INTO BETWEEN BORROWER AND FOOTHILL WHICH
EVIDENCES THE PLEDGE OF THE PLEDGED NOTES.
14
"PLEDGED A NOTES" MEANS A NOTE OR NOTES WHICH CONFORMS
TO THE STANDARDS SET FORTH IN SCHEDULE PN-A ATTACHED HERETO AND INCORPORATED
BY REFERENCE HEREBY, AND WHICH IS PLEDGED TO SECURE ADVANCES UNDER THE A
LINE ADVANCES.
"PLEDGED B NOTES" MEANS A NOTE OR NOTES WHICH CONFORMS
TO THE STANDARDS SET FORTH IN SCHEDULE PN-B ATTACHED HERETO AND INCORPORATED
BY REFERENCE HEREBY, AND WHICH IS PLEDGED TO SECURE ADVANCES UNDER THE B
LINE ADVANCES.
"PLEDGED NOTE(S)" MEANS COLLECTIVELY THE PLEDGED A
NOTES AND THE PLEDGED B NOTES.
"PROHIBITED TRANSACTION" MEANS ANY TRANSACTION
DESCRIBED IN SECTION 406 OF ERISA WHICH IS NOT EXEMPT BY REASON OF SECTION
408 OF ERISA, AND ANY TRANSACTION DESCRIBED IN SECTION 4975(C) OF THE IRC
WHICH IS NOT EXEMPT BY REASON OF SECTION 4975(C) OF THE IRC.
"REAL PROPERTY" MEANS (I) THE PARCEL OR PARCELS OF REAL
PROPERTY AND THE RELATED IMPROVEMENTS THERETO IDENTIFIED ON SCHEDULE R-1,
AND; (II) ANY PARCELS OF REAL PROPERTY HEREAFTER OFFERED BY BORROWER AND
ACCEPTED BY FOOTHILL TO SERVE AS COLLATERAL FOR THE OBLIGATIONS AND THE
COMPUTATION OF THE LAND INVENTORY BORROWING BASE; AND (III) ALL PARCELS OF
REAL PROPERTY ACQUIRED IN WHOLE OR IN PART WITH LAND INVENTORY ADVANCES.
"QUALIFIED PLAN" MEANS A PENSION PLAN (AS DEFINED IN
SECTION 3(2) OF ERISA) INTENDED TO BE TAX-QUALIFIED UNDER SECTION 401(A) OF
THE IRC WHICH BORROWER OR ANY ERISA AFFILIATE SPONSORS, MAINTAINS, OR TO
WHICH ANY SUCH PERSON MAKES, IS MAKING, OR IS OBLIGATED TO MAKE,
CONTRIBUTIONS, OR, IN THE CASE OF A MULTIPLE-EMPLOYER PLAN (AS DESCRIBED IN
SECTION 4064(A) OF ERISA), HAS MADE CONTRIBUTIONS AT ANY TIME DURING THE
IMMEDIATELY PRECEDING PERIOD COVERING AT LEAST FIVE (5) PLAN YEARS, BUT
EXCLUDING ANY MULTIEMPLOYER PLAN.
"REFERENCE RATE" MEANS THE VARIABLE RATE OF INTEREST,
PER ANNUM, MOST RECENTLY ANNOUNCED BY NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, OR ANY SUCCESSOR INSTITUTION, AS ITS "BASE RATE," "PRIME RATE"
OR "REFERENCE RATE," AS THE CASE MAY BE, IRRESPECTIVE OF WHETHER SUCH
ANNOUNCED RATE IS THE BEST RATE AVAILABLE FROM SUCH FINANCIAL INSTITUTION.
"RELEASE PRICE" MEANS AN AMOUNT SET BY FOOTHILL IN ITS
REASONABLE BUSINESS JUDGEMENT FOR THE RELEASE OF EACH LOT PLEDGED AS
COLLATERAL, WHICH SUCH AMOUNT IS DETERMINED AND POSSIBLY RE-DETERMINED
QUARTERLY AND/OR FOLLOWING AN APPRAISAL OF THE PROJECT, ON A PROJECT BY
PROJECT BASIS, OF WHICH EACH SUCH LOT IS A COMPONENT.
"REMEDIATE" AND "REMEDIATION" SHALL INCLUDE, BUT NOT BE
LIMITED TO, THE INVESTIGATION OF THE ENVIRONMENTAL CONDITION OF THE REAL
PROPERTY AND PROPERTY SUBJECT TO THE NOTE MORTGAGES, THE PREPARATION OF ANY
FEASIBILITY STUDIES, REPORTS OR REMEDIAL
15
PLANS, AND THE PERFORMANCE OF ANY CLEANUP, ABATEMENT, REMOVAL, REMEDIATION,
CONTAINMENT, OPERATION, MAINTENANCE, MONITORING OR RESTORATION WORK, WHETHER
ON OR OFF OF THE REAL PROPERTY AND PROPERTY SUBJECT TO THE NOTE MORTGAGES.
"REPORTABLE EVENT" SHALL MEAN ANY EVENT DESCRIBED IN
SECTION 4043 (OTHER THAN SUBSECTIONS (B)(7) AND (B)(9)) OF ERISA.
"SOLVENT" MEANS, WITH RESPECT TO ANY PERSON ON A
PARTICULAR DATE, THAT ON SUCH DATE (A) AT FAIR VALUATIONS, ALL OF THE
PROPERTIES AND ASSETS OF SUCH PERSON ARE GREATER THAN THE SUM OF THE DEBTS,
INCLUDING CONTINGENT LIABILITIES, OF SUCH PERSON, (B) THE PRESENT FAIR
SALABLE VALUE OF THE PROPERTIES AND ASSETS OF SUCH PERSON IS NOT LESS THAN
THE AMOUNT THAT WILL BE REQUIRED TO PAY THE PROBABLE LIABILITY OF SUCH
PERSON ON ITS DEBTS AS THEY BECOME ABSOLUTE AND MATURED, (C) SUCH PERSON IS
ABLE TO REALIZE UPON ITS PROPERTIES AND ASSETS AND PAY ITS DEBTS AND OTHER
LIABILITIES, CONTINGENT OBLIGATIONS AND OTHER COMMITMENTS AS THEY MATURE IN
THE NORMAL COURSE OF BUSINESS, (D) SUCH PERSON DOES NOT INTEND TO, AND DOES
NOT BELIEVE THAT IT WILL, INCUR DEBTS BEYOND SUCH PERSON'S ABILITY TO PAY AS
SUCH DEBTS MATURE, AND (E) SUCH PERSON IS NOT ENGAGED IN BUSINESS OR A
TRANSACTION, AND IS NOT ABOUT TO ENGAGE IN BUSINESS OR A TRANSACTION, FOR
WHICH SUCH PERSON'S PROPERTIES AND ASSETS WOULD CONSTITUTE UNREASONABLY
SMALL CAPITAL AFTER GIVING DUE CONSIDERATION TO THE PREVAILING PRACTICES IN
THE INDUSTRY IN WHICH SUCH PERSON IS ENGAGED. IN COMPUTING THE AMOUNT OF
CONTINGENT LIABILITIES AT ANY TIME, IT IS INTENDED THAT SUCH LIABILITIES
WILL BE COMPUTED AT THE AMOUNT THAT, IN LIGHT OF ALL THE FACTS AND
CIRCUMSTANCES EXISTING AT SUCH TIME, REPRESENTS THE AMOUNT THAT REASONABLY
CAN BE EXPECTED TO BECOME AN ACTUAL OR MATURED LIABILITY.
"TANGIBLE NET WORTH" MEANS, AS OF THE DATE ANY
DETERMINATION THEREOF IS TO BE MADE, NET WORTH LESS GOODWILL, ALL IN
ACCORDANCE WITH GAAP.
"TERM NOTE" HAS THE MEANING SET FORTH IN SECTION 2.3
HEREOF.
"UNFUNDED BENEFIT LIABILITY" MEANS THE EXCESS OF A
PLAN'S BENEFIT LIABILITIES (AS DEFINED IN SECTION 4001(A)(16) OF ERISA) OVER
THE CURRENT VALUE OF SUCH PLAN'S ASSETS, DETERMINED IN ACCORDANCE WITH THE
ASSUMPTIONS USED BY THE PLAN'S ACTUARIES FOR FUNDING THE PLAN PURSUANT TO
SECTION 412 OF THE IRC FOR THE APPLICABLE PLAN YEAR.
"VOIDABLE TRANSFER" HAS THE MEANING SET FORTH IN
SECTION 15.8.
"WORKING CAPITAL" MEANS THE RESULT OF SUBTRACTING
CONSOLIDATED CURRENT LIABILITIES FROM CONSOLIDATED CURRENT ASSETS.
1.2 ACCOUNTING TERMS. ALL ACCOUNTING TERMS NOT
SPECIFICALLY DEFINED HEREIN SHALL BE CONSTRUED IN ACCORDANCE WITH GAAP. WHEN
USED HEREIN, THE TERM "FINANCIAL STATEMENTS" SHALL INCLUDE THE NOTES AND
SCHEDULES THERETO. WHENEVER THE TERM
16
"BORROWER" IS USED IN RESPECT OF A FINANCIAL COVENANT OR A RELATED
DEFINITION, IT SHALL BE UNDERSTOOD TO MEAN BORROWER ON A CONSOLIDATED BASIS
UNLESS THE CONTEXT CLEARLY REQUIRES OTHERWISE.
1.3 CODE. ANY TERMS USED IN THIS AGREEMENT WHICH ARE
DEFINED IN THE CODE SHALL BE CONSTRUED AND DEFINED AS SET FORTH IN THE CODE
UNLESS OTHERWISE DEFINED HEREIN.
1.4 CONSTRUCTION. UNLESS THE CONTEXT OF THIS AGREEMENT
CLEARLY REQUIRES OTHERWISE, REFERENCES TO THE PLURAL INCLUDE THE SINGULAR,
REFERENCES TO THE SINGULAR INCLUDE THE PLURAL, THE TERM "INCLUDING" IS NOT
LIMITING, AND THE TERM "OR" HAS, EXCEPT WHERE OTHERWISE INDICATED, THE
INCLUSIVE MEANING REPRESENTED BY THE PHRASE "AND/OR." THE WORDS "HEREOF,"
"HEREIN," "HEREBY," "HEREUNDER," AND SIMILAR TERMS IN THIS AGREEMENT REFER
TO THIS AGREEMENT AS A WHOLE AND NOT TO ANY PARTICULAR PROVISION OF THIS
AGREEMENT. SECTION, SUBSECTION, CLAUSE, SCHEDULE, AND EXHIBIT REFERENCES ARE
TO THIS AGREEMENT UNLESS OTHERWISE SPECIFIED. ANY REFERENCE IN THIS
AGREEMENT OR IN THE LOAN DOCUMENTS TO THIS AGREEMENT OR ANY OF THE LOAN
DOCUMENTS SHALL INCLUDE ALL ALTERATIONS, AMENDMENTS, CHANGES, EXTENSIONS,
MODIFICATIONS, RENEWALS, REPLACEMENTS, SUBSTITUTIONS, AND SUPPLEMENTS,
THERETO AND THEREOF, AS APPLICABLE.
1.5 SCHEDULES AND EXHIBITS. ALL OF THE SCHEDULES AND
EXHIBITS ATTACHED TO THIS AGREEMENT SHALL BE DEEMED INCORPORATED HEREIN BY
REFERENCE.
2. LOAN AND TERMS OF PAYMENT.
2.1 ADVANCES AGAINST PLEDGED A NOTES.
(A) IN ADDITION TO THE LAND INVENTORY
ADVANCES SET FORTH IN SECTION 2.2 HEREOF, AND THE TERM LOAN AND B LINE
ADVANCES SET FORTH IN SECTION 2.3 HEREOF, SUBJECT TO THE TERMS AND
CONDITIONS OF THIS AGREEMENT, AND FURTHER FOR A PERIOD THROUGH AND INCLUDING
SEPTEMBER ___, 2000 ONLY, AND FURTHER PROVIDED BORROWER IS NOT IN DEFAULT
HEREUNDER (SUBJECT TO GRACE PERIODS, IF ANY), INCLUDING, SPECIFICALLY,
SECTION 6.13 HEREOF, FOOTHILL AGREES TO MAKE ADVANCES TO BORROWER UPON THE
PLEDGE TO FOOTHILL OF THE PLEDGED A NOTES ("A LINE ADVANCES") IN AN AMOUNT
NOT TO EXCEED THE A LINE BORROWING BASE.
(B) ANYTHING TO THE CONTRARY IN SUBSECTION
(A) ABOVE NOTWITH STANDING, FOOTHILL MAY REDUCE ITS ADVANCE RATES WITHOUT
DECLARING AN EVENT OF DEFAULT IF IT DETERMINES, IN ITS REASONABLE
DISCRETION, THAT THERE IS A MATERIAL IMPAIRMENT OF THE PROSPECT OF REPAYMENT
OF ANY OR ALL OR ANY PORTION OF ITS OBLIGATIONS, OR A MATERIAL IMPAIRMENT OF
THE VALUE OR PRIORITY OF FOOTHILL'S SECURITY INTERESTS IN THE COLLATERAL.
17
(C) FOOTHILL SHALL HAVE NO OBLIGATION TO
MAKE A LINE ADVANCES TO THE EXTENT THAT TOTAL LENDING TO BORROWER WOULD
EXCEED THE MAXIMUM AMOUNT.
(D) BORROWER AGREES TO ESTABLISH AND
MAINTAIN A DESIGNATED DEPOSIT ACCOUNT FOR THE PURPOSE OF RECEIVING THE
PROCEEDS OF THE ADVANCES MADE BY FOOTHILL HEREUNDER. UNLESS OTHERWISE AGREED
TO IN WRITING BY FOOTHILL AND BORROWER, ANY ADVANCE REQUESTED BY BORROWER
AND MADE BY FOOTHILL HEREUNDER SHALL BE MADE TO SUCH DESIGNATED DEPOSIT
ACCOUNT.
(E) A LINE ADVANCES MADE PURSUANT TO THIS
SECTION 2.1 SHALL NOT BE MADE MORE FREQUENTLY THAN MONTHLY, OR IN AMOUNTS
LESS THAN $100,000 PER ADVANCE.
(F) ON EACH ANNUAL ANNIVERSARY DATE,
BORROWER MAY REQUEST THAT FOOTHILL MAKE AN ADDITIONAL ADVANCE AGAINST THE
THEN PLEDGED A NOTES IN AN AMOUNT SUCH THAT THE AGGREGATE OF THE A LINE
ADVANCES EQUALS NINETY PERCENT (90%) OF THE OUTSTANDING PRINCIPAL BALANCES
OF THE PLEDGED A NOTES (DISCOUNTED TO THIRTEEN (13) PERCENT FOR FIXED RATE
NOTES). FOOTHILL WILL AGREE TO SUCH REQUEST UNLESS IT, ACTING IN GOOD FAITH
AND EXERCISING ITS REASONABLE JUDGMENT, BELIEVES THAT THERE IS A MATERIAL
RISK OF THE IMPAIRMENT OF THE PROSPECT OF REPAYMENT OF ANY OR ALL OF ANY
PORTION OF BORROWER'S OBLIGATIONS. IN SUCH AN EVENT, BORROWER MAY TERMINATE
THIS AGREEMENT WITHOUT THE IMPOSITION OF AN EARLY TERMINATION FEE.
2.2 LAND INVENTORY ADVANCES.
(A) IN ADDITION TO THE ADVANCES SET FORTH IN
SECTIONS 2.1 AND 2.3 HEREOF, SUBJECT TO THE TERMS AND CONDITIONS OF THIS
AGREEMENT, AND FOR A PERIOD THROUGH AND INCLUDING SEPTEMBER ___, 2000 ONLY,
AND FURTHER PROVIDED BORROWER IS NOT IN DEFAULT HEREUNDER (SUBJECT TO GRACE
PERIODS, IF ANY), INCLUDING, SPECIFICALLY, SECTION 6.13 HEREOF, FOOTHILL
AGREES TO MAKE ADVANCES TO BORROWER IN AN AMOUNT NOT TO EXCEED THE LAND
INVENTORY BORROWING BASE ("LAND INVENTORY ADVANCES") TO ENABLE IT TO BUY AND
DEVELOP LAND FOR SUBSEQUENT RESALE TO THE PUBLIC. LAND INVENTORY ADVANCES
SHALL BE USED FOR THIS AND FOR NO OTHER PURPOSE. ALL SUCH ACQUIRED ASSETS
SHALL BECOME COLLATERAL.
(B) ANYTHING TO THE CONTRARY IN SUBSECTION
(A) ABOVE NOTWITHSTANDING, FOOTHILL MAY REDUCE ITS ADVANCE RATES IF IT
DETERMINES, IN ITS REASONABLE DISCRETION, THAT THERE IS A MATERIAL
IMPAIRMENT OF THE PROSPECT OF REPAYMENT OF ALL OR ANY PORTION OF THE
OBLIGATIONS OR A MATERIAL IMPAIRMENT OF THE VALUE OR PRIORITY OF FOOTHILL'S
SECURITY INTEREST IN THE COLLATERAL.
(C) ANYTHING TO THE CONTRARY IN SUBSECTIONS
(A) & (B) ABOVE NOTWITHSTANDING, FOOTHILL MAY REDUCE ITS ADVANCE RATES IF IT
DETERMINES, IN ITS SOLE AND
18
ABSOLUTE DISCRETION, THAT WHEN EACH PROJECT IS VIEWED INDIVIDUALLY ON A
PROJECT BY PROJECT BASIS, THAT THERE IS AN OVEREXPOSURE OF ADVANCES AGAINST
ANY SUCH PROJECT.
(D) FOOTHILL SHALL HAVE NO OBLIGATION TO
MAKE LAND INVENTORY ADVANCES TO THE EXTENT THAT TOTAL LENDING TO BORROWER
WOULD EXCEED THE MAXIMUM AMOUNT.
(E) BORROWER AGREES TO ESTABLISH AND
MAINTAIN A DESIGNATED DEPOSIT ACCOUNT FOR THE PURPOSE OF RECEIVING THE
PROCEEDS OF THE ADVANCES MADE BY FOOTHILL HEREUNDER. UNLESS OTHERWISE AGREED
TO IN WRITING BY FOOTHILL AND BORROWER, ANY ADVANCE REQUESTED BY BORROWER
AND MADE BY FOOTHILL HEREUNDER SHALL BE MADE TO SUCH DESIGNATED DEPOSIT
ACCOUNT.
(F) LAND INVENTORY ADVANCES MADE PURSUANT TO
THIS SECTION 2.2 SHALL NOT BE MADE MORE FREQUENTLY THAN MONTHLY OR IN
AMOUNTS LESS THAN $100,000 PER ADVANCE.
2.3 ADVANCES AGAINST PLEDGED B NOTES; TERM LOAN.
(A) IN ADDITION TO THE A LINE ADVANCES SET
FORTH IN SECTION 2.1 HEREOF AND THE LAND INVENTORY ADVANCES SET FORTH IN
SECTION 2.2 HEREOF, SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT,
AND FOR A PERIOD THROUGH AND INCLUDING SEPTEMBER ___, 2000 ONLY, AND FURTHER
PROVIDED BORROWER IS NOT IN DEFAULT HEREUNDER (SUBJECT TO GRACE PERIODS, IF
ANY), INCLUDING, SPECIFICALLY, SECTION 6.13 HEREOF, FOOTHILL AGREES TO MAKE
ADVANCES TO BORROWER UPON THE PLEDGE TO FOOTHILL OF THE PLEDGED B NOTES ("B
LINE ADVANCES") IN AN AMOUNT NOT TO EXCEED THE LESSER OF (I) FIVE MILLION
DOLLARS ($5,000,000); OR (II) THE B LINE BORROWING BASE.
(B) ANYTHING TO THE CONTRARY IN SUBSECTION
(A) ABOVE NOTWITH STANDING, FOOTHILL MAY REDUCE ITS ADVANCE RATES WITHOUT
DECLARING AN EVENT OF DEFAULT IF IT DETERMINES, IN ITS REASONABLE
DISCRETION, THAT THERE IS A MATERIAL IMPAIRMENT OF THE PROSPECT OF REPAYMENT
OF ANY OR ALL OR ANY PORTION OF ITS OBLIGATIONS, OR A MATERIAL IMPAIRMENT OF
THE VALUE OR PRIORITY OF FOOTHILL'S SECURITY INTERESTS IN THE COLLATERAL.
(C) FOOTHILL SHALL HAVE NO OBLIGATION TO
MAKE B LINE ADVANCES TO THE EXTENT THAT TOTAL LENDING TO BORROWER WOULD
EXCEED THE MAXIMUM AMOUNT.
(D) BORROWER AGREES TO ESTABLISH AND
MAINTAIN A DESIGNATED DEPOSIT ACCOUNT FOR THE PURPOSE OF RECEIVING THE
PROCEEDS OF THE ADVANCES MADE BY FOOTHILL HEREUNDER. UNLESS OTHERWISE AGREED
TO IN WRITING BY FOOTHILL AND BORROWER, ANY ADVANCE REQUESTED BY BORROWER
AND MADE BY FOOTHILL HEREUNDER SHALL BE MADE TO SUCH DESIGNATED DEPOSIT
ACCOUNT.
19
(E) B LINE ADVANCES MADE PURSUANT TO THIS
SECTION 2.1 SHALL NOT BE MADE MORE FREQUENTLY THAN MONTHLY, OR IN AMOUNTS
LESS THAN $100,000 PER ADVANCE.
(F) ON EACH ANNUAL ANNIVERSARY DATE,
BORROWER MAY REQUEST THAT FOOTHILL MAKE AN ADDITIONAL ADVANCE AGAINST THE
THEN PLEDGED B NOTES IN AN AMOUNT SUCH THAT THE AGGREGATE OF THE B LINE
ADVANCES EQUALS SIXTY PERCENT (60%) OF THE OUTSTANDING PRINCIPAL BALANCES OF
THE PLEDGED B NOTES (DISCOUNTED TO THIRTEEN (13) PERCENT FOR FIXED RATE
NOTES). FOOTHILL WILL AGREE TO SUCH REQUEST UNLESS IT, ACTING IN GOOD FAITH
AND EXERCISING ITS REASONABLE JUDGMENT, BELIEVES THAT THERE IS A MATERIAL
RISK OF THE IMPAIRMENT OF THE PROSPECT OF REPAYMENT OF ANY OR ALL OF ANY
PORTION OF BORROWER'S OBLIGATIONS. IN SUCH AN EVENT, BORROWER MAY TERMINATE
THIS AGREEMENT WITHOUT THE IMPOSITION OF AN EARLY TERMINATION FEE.
(G) FOOTHILL HAS ALREADY MADE A LOAN TO
BORROWER IN THE ORIGINAL PRINCIPAL AMOUNT OF SIX HUNDRED EIGHTY THOUSAND
DOLLARS ($680,000), WHICH WAS EVIDENCED BY AND REPAYABLE IN ACCORDANCE WITH
THE TERMS AND CONDITIONS OF A PROMISSORY NOTE DATED AS OF MARCH 24, 1997,
EXECUTED BY BORROWER IN FAVOR OF FOOTHILL. ALL AMOUNTS EVIDENCED BY THE
MARCH 24, 1997 NOTE CONSTITUTE B-LINE ADVANCES AND OBLIGATIONS.
2.4 INTEREST: RATES, PAYMENTS, AND CALCULATIONS.
(A) INTEREST RATE. ALL OBLIGATIONS (OTHER
THAN OBLIGATIONS INCURRED PURSUANT TO SECTION 2.2 ABOVE) SHALL BEAR
INTEREST, ON THE ACTUAL DAILY BALANCE, COMPUTED AS FOLLOWS: (I) SHOULD THE
AVERAGE MONTHLY OUTSTANDING LOAN BALANCE ON ADVANCES MADE PURSUANT TO
SECTION 2.1 ABOVE EQUAL OR EXCEED $5,000,000 FOR ANY MONTH, THEN THE
INTEREST RATE CHARGED ON ALL OBLIGATIONS (OTHER THAN OBLIGATIONS INCURRED
PURSUANT TO SECTION 2.2 ABOVE) FOR SUCH MONTH SHALL BE COMPUTED AT A RATE
EQUAL TO ONE-HALF (1/2) PERCENTAGE POINT ABOVE THE REFERENCE RATE; (II)
SHOULD THE AVERAGE MONTHLY OUTSTANDING LOAN BALANCE ON ADVANCES MADE
PURSUANT TO SECTION 2.1 BE LESS THAN $5,000,000 FOR ANY MONTH, THEN THE
INTEREST RATE CHARGED ON ALL OBLIGATIONS (OTHER THAN OBLIGATIONS INCURRED
PURSUANT TO SECTION 2.2 ABOVE) FOR SUCH MONTH SHALL BE COMPUTED AT A RATE
EQUAL TO ONE (1) PERCENTAGE POINT ABOVE THE REFERENCE RATE. THE OBLIGATIONS
ARISING OUT OF LAND INVENTORY ADVANCES SET FORTH IN SECTION 2.2 SHALL BEAR
INTEREST ON THE AVERAGE DAILY BALANCE, AT A RATE OF ONE AND ONE-HALF (1 1/2)
PERCENTAGE POINTS ABOVE THE REFERENCE RATE.
(B) DEFAULT RATE. ALL OBLIGATIONS SHALL BEAR
INTEREST, FROM AND AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN
EVENT OF DEFAULT AT A RATE EQUAL TO FOUR AND ONE-HALF (4-1/2) PERCENTAGE
POINTS ABOVE THE REFERENCE RATE.
(C) MINIMUM INTEREST. IN NO EVENT SHALL THE
RATE OF INTEREST CHARGEABLE HEREUNDER BE LESS THAN SEVEN PERCENT (7%) PER
ANNUM. IN ADDITION THERETO, THE AMOUNT OF INTEREST ACCRUED AND PAYABLE TO
FOOTHILL ON THE A LINE ADVANCES SHALL BE
20
NO LESS THAN TWENTY FIVE THOUSAND DOLLARS PER MONTH; PROVIDED, HOWEVER, THAT
IF BORROWER SEEKS TO CAUSE ALL OF THE PLEDGED NOTES TO BE RELEASED IN
ACCORDANCE WITH THE PROVISION OF SECTION 4.8 HEREOF, THERE SHALL BE NO
MONTHLY MINIMUM INTEREST PAYMENTS AS SET FORTH IN THIS SENTENCE FOR THE TWO
MONTHS IMMEDIATELY FOLLOWING SUCH RELEASE, WITH A FIVE THOUSAND DOLLAR PER
MONTH MINIMUM FOR THE THIRD MONTH FOLLOWING RELEASE, A TEN THOUSAND DOLLAR
PER MONTH MINIMUM FOR THE FOURTH MONTH FOLLOWING RELEASE, A FIFTEEN THOUSAND
DOLLAR PER MONTH MINIMUM FOR THE FIFTH MONTH FOLLOWING RELEASE, A TWENTY
THOUSAND DOLLAR PER MONTH MINIMUM FOR THE SIXTH MONTH FOLLOWING RELEASE, AND
A TWENTY FIVE THOUSAND DOLLAR PER MONTH MINIMUM FOR EVERY MONTH THEREAFTER.
TO THE EXTENT THAT INTEREST ACCRUED HEREUNDER AT THE RATE SET FORTH HEREIN
(INCLUDING THE MINIMUM INTEREST RATE) WOULD YIELD LESS THAN THE FOREGOING
MINIMUM AMOUNT, THE INTEREST RATE CHARGEABLE HEREUNDER FOR THE PERIOD IN
QUESTION AUTOMATICALLY SHALL BE DEEMED INCREASED TO THAT RATE THAT WOULD
RESULT IN THE MINIMUM AMOUNT OF INTEREST BEING ACCRUED AND PAYABLE
HEREUNDER.
(D) PAYMENTS. INTEREST HEREUNDER SHALL BE
DUE AND PAYABLE ON THE FIRST DAY OF EACH MONTH DURING THE TERM HEREOF.
BORROWER HEREBY AUTHORIZES FOOTHILL, AT ITS OPTION, WITHOUT PRIOR NOTICE TO
BORROWER, TO CHARGE SUCH INTEREST, ALL FOOTHILL EXPENSES (AS AND WHEN
INCURRED), AND ALL INSTALLMENTS OR OTHER PAYMENTS DUE UNDER THE TERM NOTE OR
ANY OTHER NOTE OR OTHER LOAN DOCUMENT TO BORROWER'S LOAN ACCOUNT, WHICH
AMOUNTS SHALL THEREAFTER ACCRUE INTEREST AT THE RATE THEN APPLICABLE
HEREUNDER. ANY INTEREST NOT PAID WHEN DUE SHALL BE COMPOUNDED BY BECOMING A
PART OF THE OBLIGATIONS, AND SUCH INTEREST SHALL THEREAFTER ACCRUE INTEREST
AT THE RATE THEN APPLICABLE HEREUNDER.
(E) COMPUTATION. THE REFERENCE RATE AS OF
THIS DATE IS EIGHT AND ONE-HALF PERCENT (8 1/2%) PER ANNUM. IN THE EVENT THE
REFERENCE RATE IS CHANGED FROM TIME TO TIME HEREAFTER, THE APPLICABLE RATE
OF INTEREST HEREUNDER AUTOMATICALLY AND IMMEDIATELY SHALL BE INCREASED OR
DECREASED BY AN AMOUNT EQUAL TO SUCH CHANGE IN THE REFERENCE RATE. THE RATES
OF INTEREST CHARGED HEREUNDER SHALL BE BASED UPON THE AVERAGE REFERENCE RATE
IN EFFECT DURING THE MONTH. ALL INTEREST AND FEES CHARGEABLE UNDER THE LOAN
DOCUMENTS SHALL BE COMPUTED ON THE BASIS OF A THREE HUNDRED SIXTY (360) DAY
YEAR FOR THE ACTUAL NUMBER OF DAYS ELAPSED.
(F) INTENT TO LIMIT CHARGES TO MAXIMUM
LAWFUL RATE. IN NO EVENT SHALL THE INTEREST RATE OR RATES PAYABLE UNDER THIS
AGREEMENT OR THE TERM NOTE, PLUS ANY OTHER AMOUNTS PAID IN CONNECTION
HEREWITH, EXCEED THE HIGHEST RATE PERMISSIBLE UNDER ANY LAW THAT A COURT OF
COMPETENT JURISDICTION SHALL, IN A FINAL DETERMINATION, DEEM APPLICABLE.
BORROWER AND FOOTHILL, IN EXECUTING THIS AGREEMENT AND THE TERM NOTE INTEND
TO LEGALLY AGREE UPON THE RATE OR RATES OF INTEREST AND MANNER OF PAYMENT
STATED WITHIN IT; PROVIDED, HOWEVER, THAT, ANYTHING CONTAINED HEREIN OR IN
THE TERM NOTE TO THE CONTRARY NOTWITHSTANDING, IF SAID RATE OR RATES OF
INTEREST OR MANNER OF PAYMENT EXCEEDS THE MAXIMUM ALLOWABLE UNDER APPLICABLE
LAW, THEN, IPSO FACTO AS OF THE DATE OF THIS AGREEMENT AND THE TERM NOTE,
BORROWER IS AND SHALL BE LIABLE ONLY FOR THE PAYMENT OF
21
SUCH MAXIMUM AS ALLOWED BY LAW, AND PAYMENT RECEIVED FROM BORROWER IN EXCESS
OF SUCH LEGAL MAXIMUM, WHENEVER RECEIVED, SHALL BE APPLIED TO REDUCE THE
PRINCIPAL BALANCE OF THE OBLIGATIONS TO THE EXTENT OF SUCH EXCESS.
2.5 CREDITING PAYMENTS; APPLICATION OF
COLLECTIONS. THE RECEIPT OF ANY WIRE TRANSFER OF FUNDS, CHECK, OR OTHER ITEM
OF PAYMENT BY FOOTHILL (WHETHER FROM TRANSFERS TO FOOTHILL BY THE LOCK BOX
BANKS PURSUANT TO THE LOCK BOX AGREEMENTS OR OTHERWISE) IMMEDIATELY SHALL BE
APPLIED TO PROVISIONALLY REDUCE THE OBLIGATIONS, BUT SHALL NOT BE CONSIDERED
A PAYMENT ON ACCOUNT UNLESS SUCH WIRE TRANSFER IS OF IMMEDIATELY AVAILABLE
FUNDS AND IS MADE TO THE APPROPRIATE DEPOSIT ACCOUNT OF FOOTHILL OR UNLESS
AND UNTIL SUCH CHECK OR OTHER ITEM OF PAYMENT IS HONORED WHEN PRESENTED FOR
PAYMENT. FOOTHILL SHALL BE ENTITLED TO CHARGE BORROWER FOR THREE (3)
BUSINESS DAYS OF `CLEARANCE' AT THE APPLICABLE RATE SET FORTH IN SECTIONS
2.4(A) AND 2.4(B) (APPLICABLE TO ADVANCES UNDER SECTION 2.1) ON ALL CHECKS,
OR OTHER ITEMS OF NON IMMEDIATELY AVAILABLE FUNDS (WHICH DOES NOT INCLUDE
WIRE TRANSFERS OF IMMEDIATELY AVAILABLE FUNDS) THAT ARE RECEIVED BY FOOTHILL
(REGARDLESS OF WHETHER FORWARDED BY THE LOCK BOX BANKS TO FOOTHILL, WHETHER
PROVISIONALLY APPLIED TO REDUCE THE OBLIGATIONS, OR OTHERWISE). THIS
ACROSS-THE-BOARD THREE (3) BUSINESS DAY CLEARANCE CHARGE ON ALL RECEIPTS IS
ACKNOWLEDGED BY THE PARTIES TO CONSTITUTE AN INTEGRAL ASPECT OF THE PRICING
OF FOOTHILL'S FACILITY TO BORROWER, AND SHALL APPLY IRRESPECTIVE OF THE
CHARACTERIZATION OF WHETHER RECEIPTS ARE OWNED BY BORROWER OR FOOTHILL, AND
IRRESPECTIVE OF THE LEVEL OF BORROWER'S OBLIGATIONS TO FOOTHILL. SHOULD ANY
CHECK OR ITEM OF PAYMENT NOT BE HONORED WHEN PRESENTED FOR PAYMENT, THEN
BORROWER SHALL BE DEEMED NOT TO HAVE MADE SUCH PAYMENT, AND INTEREST SHALL
BE RECALCULATED ACCORDINGLY. ANYTHING TO THE CONTRARY CONTAINED HEREIN
NOTWITHSTANDING, ANY WIRE TRANSFER, CHECK, OR OTHER ITEM OF PAYMENT SHALL BE
DEEMED RECEIVED BY FOOTHILL ONLY IF IT IS RECEIVED INTO FOOTHILL'S OPERATING
ACCOUNT (AS SUCH ACCOUNT IS IDENTIFIED IN THE LOCK BOX AGREEMENTS) ON OR
BEFORE 11:00 A.M. LOS ANGELES TIME. IF ANY WIRE TRANSFER, CHECK, OR OTHER
ITEM OF PAYMENT IS RECEIVED INTO FOOTHILL'S OPERATING ACCOUNT (AS SUCH
ACCOUNT IS IDENTIFIED IN THE LOCK BOX AGREEMENTS) AFTER 11:00 A.M. LOS
ANGELES TIME IT SHALL BE DEEMED TO HAVE BEEN RECEIVED BY FOOTHILL AS OF THE
OPENING OF BUSINESS ON THE IMMEDIATELY FOLLOWING BUSINESS DAY.
2.6 STATEMENTS OF OBLIGATIONS. FOOTHILL SHALL
RENDER STATEMENTS TO BORROWER OF THE OBLIGATIONS, INCLUDING PRINCIPAL,
INTEREST, FEES, AND INCLUDING AN ITEMIZATION OF ALL CHARGES AND EXPENSES
CONSTITUTING FOOTHILL EXPENSES OWING, AND SUCH STATEMENTS SHALL BE
CONCLUSIVELY PRESUMED TO BE CORRECT AND ACCURATE AND CONSTITUTE AN ACCOUNT
STATED BETWEEN BORROWER AND FOOTHILL UNLESS, WITHIN THIRTY (30) DAYS AFTER
RECEIPT THEREOF BY BORROWER, BORROWER SHALL DELIVER TO FOOTHILL BY
REGISTERED OR CERTIFIED MAIL AT ITS ADDRESS SPECIFIED IN SECTION 12, WRITTEN
OBJECTION THERETO DESCRIBING THE ERROR OR ERRORS CONTAINED IN ANY SUCH
STATEMENTS.
2.7 FEES. BORROWER SHALL PAY TO FOOTHILL THE
FOLLOWING FEES:
22
(A) CLOSING FEE. A ONE TIME CLOSING FEE OF
FIFTY THOUSAND DOLLARS ($50,000) WHICH IS EARNED, IN FULL, ON THE EFFECTIVE
DATE AND IS DUE AND PAYABLE BY BORROWER TO FOOTHILL IN CONNECTION WITH THIS
AGREEMENT ON THE EFFECTIVE DATE;
(B) LAND INVENTORY FINANCING FEE. ON EACH
AND EVERY LAND INVENTORY ADVANCE MADE PURSUANT TO SECTION 2.2 HEREOF,
BORROWER SHALL PAY TO FOOTHILL A FEE IN AN AMOUNT EQUAL TO ONE PERCENT (1%)
OF THE TOTAL OF EACH SUCH ADVANCE.
(C) FINANCIAL EXAMINATION, DOCUMENTATION,
AND APPRAISAL FEES. FOOTHILL'S CUSTOMARY FEE OF SIX HUNDRED DOLLARS ($600)
PER DAY PER EXAMINER, PLUS OUT-OF-POCKET EXPENSES FOR EACH FINANCIAL
ANALYSIS AND EXAMINATION OF BORROWER PERFORMED BY FOOTHILL OR ITS AGENTS;
FOOTHILL'S CUSTOMARY APPRAISAL FEE OF SEVEN HUNDRED FIFTY DOLLARS ($750) PER
DAY PER APPRAISER, PLUS OUT-OF-POCKET EXPENSES FOR EACH APPRAISAL OF THE
COLLATERAL PERFORMED BY FOOTHILL OR ITS AGENTS; AND, ON OCTOBER 29, 1997,
AND ON EACH SUBSEQUENT ANNIVERSARY OF THE EFFECTIVE DATE THEREAFTER,
FOOTHILL'S CUSTOMARY FEE OF ONE THOUSAND DOLLARS ($1,000) FOR ITS LOAN
DOCUMENTATION REVIEW; AND
(D) SERVICING FEE. ON THE FIRST DAY OF EACH
MONTH FOLLOWING THE EFFECTIVE DATE DURING THE TERM OF THIS AGREEMENT, AND
THEREAFTER SO LONG AS ANY OBLIGATIONS ARE OUTSTANDING, A SERVICING FEE IN AN
AMOUNT EQUAL TO TWO THOUSAND DOLLARS ($2,000) PER MONTH.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. THE
CONDITIONS PRECEDENT TO THE INITIAL ADVANCE FUNDED IN 1993 WERE EITHER
SATISFIED OR WAIVED.
3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. THE
FOLLOWING SHALL BE CONDITIONS PRECEDENT TO ALL ADVANCES HEREUNDER:
(A) FOOTHILL SHALL HAVE RECEIVED AN
ACKNOWLEDGEMENT LETTER IN FORM SATISFACTORY TO IT EXECUTED BY COLLECTING
BANK IN WHICH COLLECTING BANK ACKNOWLEDGES, INTER ALIA, (I) THAT IT HOLDS
THE COLLECTED FUNDS SUBJECT TO THE SECURITY INTEREST OF FOOTHILL AND (II)
WILL FORWARD ALL COLLECTED FUNDS TO FOOTHILL UNTIL SUCH TIME AS FOOTHILL
DIRECTS OTHERWISE;
(B) FOOTHILL SHALL HAVE RECEIVED ENVIRONMENTAL
SURVEYS OF SPECIFICITY AND CONTENT ACCEPTABLE TO FOOTHILL IN ITS SOLE AND
ABSOLUTE DISCRETION (UNLESS WAIVED BY FOOTHILL ON A CASE BY CASE BASIS);
(C) FOR THOSE PLEDGED NOTES GENERATED BY
AFFILIATES OF BORROWER, FOOTHILL SHALL HAVE RECEIVED A STATEMENT OF
INTERCOMPANY INDEBTEDNESS, CERTIFIED BY THE CHIEF FINANCIAL OFFICER OF
BORROWER, IN FORM AND CONTENT SATISFACTORY TO FOOTHILL, SETTING FORTH THE
RESPECTIVE DEBTS OWING BETWEEN BORROWER AND SUCH NOTE GENERATOR;
23
(D) THE REPRESENTATIONS AND WARRANTIES
CONTAINED IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRUE AND
CORRECT IN ALL RESPECTS ON AND AS OF THE DATE OF SUCH ADVANCE, AS THOUGH
MADE ON AND AS OF SUCH DATE (EXCEPT TO THE EXTENT THAT SUCH REPRESENTATIONS
AND WARRANTIES RELATE SOLELY TO AN EARLIER DATE);
(E) NO EVENT OF DEFAULT OR EVENT WHICH WITH
THE GIVING OF NOTICE OR PASSAGE OF TIME WOULD CONSTITUTE AN EVENT OF DEFAULT
SHALL HAVE OCCURRED AND BE CONTINUING ON THE DATE OF SUCH ADVANCE, NOR SHALL
EITHER RESULT FROM THE MAKING OF THE ADVANCE;
(F) NO INJUNCTION, WRIT, RESTRAINING ORDER, OR
OTHER ORDER OF ANY NATURE PROHIBITING, DIRECTLY OR INDIRECTLY, THE MAKING OF
SUCH ADVANCE SHALL HAVE BEEN ISSUED BY ANY GOVERNMENTAL AUTHORITY AGAINST
BORROWER, FOOTHILL, OR ANY OF THEIR AFFILIATES;
(G) AT THE REQUEST OF FOOTHILL, FOOTHILL SHALL
HAVE RECEIVED AN OPINION OF BORROWER'S COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO FOOTHILL IN ITS SOLE DISCRETION; AND
(H) ALL OTHER DOCUMENTS AND LEGAL MATTERS IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT SHALL HAVE
BEEN DELIVERED OR EXECUTED OR RECORDED AND SHALL BE IN FORM AND SUBSTANCE
SATISFACTORY TO FOOTHILL AND ITS COUNSEL.
3.3 CONDITIONS PRECEDENT TO LAND INVENTORY
ADVANCES. THE FOLLOWING SHALL BE ADDITIONAL CONDITIONS PRECEDENT TO ALL LAND
INVENTORY ADVANCES HEREUNDER:
(A) FOOTHILL SHALL HAVE RECEIVED EACH OF THE
MORTGAGES, DULY EXECUTED, AND EACH SHALL HAVE BEEN RECORDED IN THE
APPROPRIATE COUNTY RECORDING OFFICE WITH A STAMPED, CONFORMED COPY DELIVERED
TO FOOTHILL; AND
(B) FOOTHILL SHALL HAVE RECEIVED AN
IRREVOCABLE COMMITMENT TO ISSUE AN ALTA 1970 FORM LENDERS POLICY OF TITLE
INSURANCE, OR ITS LOCAL EQUIVALENT, IN FORM AND CONTENT ACCEPTABLE TO
FOOTHILL, IN ITS SOLE AND ABSOLUTE DISCRETION.
3.4 CONDITIONS PRECEDENT TO A LINE AND B LINE
ADVANCES. THE FOLLOWING SHALL BE ADDITIONAL CONDITIONS PRECEDENT TO ALL A
LINE AND B LINE ADVANCES HEREUNDER:
(A) FOOTHILL SHALL HAVE RECEIVED THE
ORIGINALS OF THE PLEDGED A NOTES AND/OR THE PLEDGED B NOTES, PROPERLY
ENDORSED TO FOOTHILL OR ITS AGENT;
(B) FOOTHILL SHALL HAVE RECEIVED THE
ORIGINALS (EXCEPT FOR ASSIGNMENTS OF THE NOTE MORTGAGES, FOR WHICH FOOTHILL
SHALL RECEIVE A COPY) OF ALL SECURITY WHICH SERVES AS SECURITY FOR THE
REPAYMENT OF THE PLEDGED A NOTES AND/OR THE PLEDGED
24
B NOTES, INCLUDING THE NOTE MORTGAGES AND POLICIES OF TITLE INSURANCE
INSURING SAME, PROPERLY ASSIGNED TO FOOTHILL OR ITS AGENT; AND
(C) THE STANDARDS FOR PLEDGED A NOTES SET
FORTH IN SCHEDULE PN-A HEREIN SHALL BE FULLY COMPLIED WITH AND THE STANDARDS
FOR PLEDGED B NOTES SET FORTH IN SCHEDULE PN-B HEREIN SHALL BE FULLY
COMPLIED WITH.
3.5 TERM. THIS AGREEMENT SHALL BECOME EFFECTIVE
UPON THE EXECUTION AND DELIVERY HEREOF BY BORROWER AND FOOTHILL AND SHALL
CONTINUE IN FULL FORCE AND EFFECT FOR A TERM ENDING ON THE DATE THAT IS FIVE
(5) YEARS FROM THE EFFECTIVE DATE. THE FOREGOING NOTWITHSTANDING, FOOTHILL
SHALL HAVE THE RIGHT TO TERMINATE ITS OBLIGATIONS UNDER THIS AGREEMENT
IMMEDIATELY AND WITHOUT NOTICE UPON THE OCCURRENCE AND DURING THE
CONTINUATION OF AN EVENT OF DEFAULT.
3.6 EFFECT OF TERMINATION. ON THE DATE OF
TERMINATION, ALL OBLIGATIONS IMMEDIATELY SHALL BECOME DUE AND PAYABLE
WITHOUT NOTICE OR DEMAND. NO TERMINATION OF THIS AGREEMENT, HOWEVER, SHALL
RELIEVE OR DISCHARGE BORROWER OF BORROWER'S DUTIES, OBLIGATIONS, OR
COVENANTS HEREUNDER, AND FOOTHILL'S CONTINUING SECURITY INTERESTS IN THE
COLLATERAL SHALL REMAIN IN EFFECT UNTIL ALL OBLIGATIONS HAVE BEEN FULLY AND
FINALLY DISCHARGED AND FOOTHILL'S OBLIGATION TO PROVIDE ADVANCES HEREUNDER
IS TERMINATED.
3.7 EARLY TERMINATION BY BORROWER. BORROWER HAS
THE OPTION, AT ANY TIME UPON NINETY (90) DAYS PRIOR WRITTEN NOTICE TO
FOOTHILL, TO TERMINATE THIS AGREEMENT BY PAYING TO FOOTHILL, IN CASH, THE
OBLIGATIONS TOGETHER WITH A PREMIUM ("EARLY TERMINATION FEE") EQUAL TO THE
GREATER OF (A) THE TOTAL INTEREST OWED DURING THE PRIOR SIX MONTH PERIOD OR
(B) ONE HUNDRED TWENTY FIVE THOUSAND DOLLARS ($125,000).
3.8 TERMINATION UPON EVENT OF DEFAULT. IF FOOTHILL
TERMINATES THIS AGREEMENT UPON THE OCCURRENCE OF AN EVENT OF DEFAULT, IN
VIEW OF THE IMPRACTICABILITY AND EXTREME DIFFICULTY OF ASCERTAINING ACTUAL
DAMAGES AND BY MUTUAL AGREEMENT OF THE PARTIES AS TO A REASONABLE
CALCULATION OF FOOTHILL'S LOST PROFITS AS A RESULT THEREOF, BORROWER SHALL
PAY TO FOOTHILL UPON THE EFFECTIVE DATE OF SUCH TERMINATION, A PREMIUM IN AN
AMOUNT EQUAL TO THE EARLY TERMINATION FEE. THE EARLY TERMINATION FEE SHALL
BE PRESUMED TO BE THE AMOUNT OF DAMAGES SUSTAINED BY FOOTHILL AS THE RESULT
OF THE EARLY TERMINATION AND BORROWER AGREES THAT IT IS REASONABLE UNDER THE
CIRCUMSTANCES CURRENTLY EXISTING. THE EARLY TERMINATION FEE SHALL BE DEEMED
INCLUDED IN THE OBLIGATIONS.
4. CREATION OF SECURITY INTEREST.
4.1 GRANT OF SECURITY INTEREST. BORROWER HEREBY
GRANTS TO FOOTHILL A CONTINUING SECURITY INTEREST IN ALL COLLATERAL IN ORDER
TO SECURE PROMPT REPAYMENT OF ANY AND ALL OBLIGATIONS AND IN ORDER TO SECURE
PROMPT PERFORMANCE BY BORROWER OF EACH OF ITS COVENANTS AND DUTIES UNDER THE
LOAN DOCUMENTS. FOOTHILL'S SECURITY INTERESTS IN
25
THE COLLATERAL SHALL ATTACH TO ALL COLLATERAL WITHOUT FURTHER ACT ON THE
PART OF FOOTHILL OR BORROWER. ANYTHING CONTAINED IN THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT TO THE CONTRARY NOTWITHSTANDING, AND OTHER THAN SALES OF
INVENTORY TO BUYERS IN THE ORDINARY COURSE OF BUSINESS, BORROWER HAS NO
AUTHORITY, EXPRESS OR IMPLIED, TO DISPOSE OF ANY ITEM OR PORTION OF THE
COLLATERAL.
4.2 NEGOTIABLE COLLATERAL. IN THE EVENT THAT ANY
COLLATERAL, INCLUDING PROCEEDS, IS EVIDENCED BY OR CONSISTS OF NEGOTIABLE
COLLATERAL, BORROWER SHALL, IMMEDIATELY UPON THE REQUEST OF FOOTHILL,
ENDORSE AND ASSIGN SUCH NEGOTIABLE COLLATERAL TO FOOTHILL AND DELIVER
PHYSICAL POSSESSION OF SUCH NEGOTIABLE COLLATERAL TO FOOTHILL.
4.3 MAINTENANCE OF PORTFOLIO COLLATERAL;
COLLECTION ON ACQUIRED NOTES AND PLEDGED NOTES.
(A) BORROWER WILL, AT FOOTHILL'S INSTRUCTION,
CAUSE TO BE DELIVERED PROMPTLY TO FOOTHILL OR AT FOOTHILL'S DIRECTION TO
CUSTODIAN: EACH OF THE ORIGINAL PLEDGED NOTES PROPERLY ENDORSED (BY ALLONGE
OR OTHERWISE) BY BORROWER, OR BORROWER'S SELLER DIRECTLY, IN FAVOR OF
FOOTHILL OR FOOTHILL'S NOMINEE, EACH ORIGINAL NOTE MORTGAGE TOGETHER WITH AN
ASSIGNMENT OF THE MORTGAGEE'S INTEREST IN EACH SUCH NOTE MORTGAGE FROM
BORROWER, OR BORROWER'S SELLER DIRECTLY, TO FOOTHILL, IN RECORDABLE FORM; A
COPY OF EACH EXISTING TITLE POLICY, ASSIGNED AND/OR ENDORSED, AS
APPROPRIATE, TO FOOTHILL, AND, WHEN THE PRINCIPAL BALANCE ON ANY PLEDGED
NOTE IS $50,000 OR GREATER, A CLTA FORM 104 ENDORSEMENT; TOGETHER WITH ANY
OTHER CHATTEL PAPER OR INSTRUMENTS EVIDENCING OR CONSTITUTING A PART OF THE
COLLATERAL. ALL ALLONGES, ENDORSEMENTS, AND ASSIGNMENTS SHALL BE IN A FORM
SATISFACTORY TO FOOTHILL.
(B) FOOTHILL HAS ESTABLISHED A LOCK BOX WITH
CUSTODIAN OR OTHER FINANCIAL INSTITUTION ACCEPTABLE TO FOOTHILL AND
BORROWER, FOR RECEIPT OF PAYMENTS ON THE PLEDGED NOTES. MAKERS OF THE
PLEDGED NOTES WHOSE PAYMENTS ARE NOT MADE BY DIRECT WITHDRAWAL THROUGH
COLLECTING BANK SHALL BE IMMEDIATELY INSTRUCTED IN WRITING BY BORROWER IN
FORM ACCEPTABLE TO FOOTHILL TO REMIT ALL PAYMENTS UNDER THE PLEDGED NOTES
DIRECTLY INTO THE LOCK BOX FOR COLLECTION BY FOOTHILL.
(C) BORROWER SHALL SERVICE ALL OF THE PLEDGED
NOTES IN ACCORDANCE WITH ALL APPLICABLE LAWS AND REGULATIONS AND SHALL
CONDUCT ITSELF IN ACCORDANCE WITH THE HIGHEST ETHICAL AND INDUSTRY PRACTICES
FOR THE SERVICING OF SIMILAR TYPES OF NOTES AND SHALL DEPOSIT INTO THE LOCK
BOX ALL COLLECTIONS IT MAY RECEIVE ON SUCH PLEDGED NOTES, AND ANY AMOUNTS
RECEIVED BY BORROWER FROM THE SALE OF THE COLLATERAL, AND ANY AMOUNTS
RECEIVED IN SETTLEMENT OF ANY OF THE PLEDGED NOTES OR IN RESPECT OF ANY NOTE
MORTGAGE OR ANY TITLE POLICY.
(D) FOOTHILL SHALL APPLY ALL COLLECTIONS AS
AND WHEN RECEIVED FROM THE LOCK BOX ACCOUNT IN ACCORDANCE WITH SECTION 4.6
HEREOF. ALL COSTS AND EXPENSES
26
OF THE CUSTODIAN OR ANY THIRD PARTY HOLDING THE COLLATERAL OR ARISING IN
CONNECTION WITH THE LOCK BOX SHALL BE FOOTHILL EXPENSES.
4.4 COMPROMISE OR SETTLEMENTS WITH RESPECT TO
PLEDGED NOTES; REPURCHASE OF PLEDGED NOTES. PRIOR TO AN EVENT OF DEFAULT,
AND WITH FOOTHILL'S PRIOR WRITTEN CONSENT, BORROWER SHALL BE ABLE TO ADJUST,
MODIFY, FORECLOSE UPON, REPOSSESS AND OR TAKE OTHER ACTIONS IT DEEMS
NECESSARY TO ADEQUATELY MONITOR THE PLEDGED NOTES IN ORDER TO PRESERVE OR
REALIZE THE MAXIMUM POSSIBLE RECOVERY FOR EACH SUCH PLEDGED NOTE.
IN THE EVENT ANY PLEDGED NOTE BECOMES MORE THAN
SIXTY (60) DAYS DELINQUENT OF THE DUE DATE (EXCLUSIVE OF GRACE PERIODS
CONTAINED IN SUCH NOTES), OR SHOULD IT CEASE TO COMPLY WITH THE STANDARDS
SET FORTH IN SCHEDULE PN-A HEREOF, BORROWER SHALL IMMEDIATELY (I) TENDER TO
FOOTHILL NINETY PERCENT (90%) OF THE THEN OUTSTANDING PRINCIPAL BALANCE OF
SUCH NOTE(S); OR (II) TENDER TO FOOTHILL REPLACEMENT NOTE OR NOTES WITH
OUTSTANDING PRINCIPAL BALANCES AT LEAST EQUAL TO THAT OF THE DEFAULTED NOTE.
UPON RECEIPT OF EITHER THE MONEY OR REPLACEMENT NOTES, FOOTHILL SHALL RETURN
TO BORROWER THE COMPLETE NOTE FILES FOR NOTES WHICH HAD BEEN IN DEFAULT,
WITH APPROPRIATE RELEASES.
4.5 EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT
TO DEFAULTS UNDER PLEDGED NOTES. IN ADDITION TO OTHER PROVISIONS CONTAINED
HEREIN, ALL NOTICES OF DEFAULT TO BE SENT TO THE MAKERS OF THE PLEDGED
NOTES, SHALL BE SENT IN THE NAME OF BORROWER, UNLESS OTHERWISE REQUIRED BY
LAW. ALL FORECLOSURE PROCEEDINGS ARE TO BE CONDUCTED IN THE NAME OF
BORROWER, UNLESS OTHERWISE REQUIRED BY LAW. ANY NOTICES OR PROCEEDINGS
BROUGHT IN THE NAME OF FOOTHILL SHALL HAVE A NOTATION THAT SUCH PROCEEDINGS
OR ACTIONS ARE BROUGHT IN FOOTHILL'S CAPACITY AS A SECURED PARTY.
SHOULD BORROWER WITH FOOTHILL'S PRIOR WRITTEN
CONSENT FORECLOSE ON ANY OF THE COLLATERAL WHICH SERVES AS SECURITY FOR THE
PLEDGED NOTES, IN CONSIDERATION FOR FOOTHILL CONSENTING TO SUCH TRANSFER,
BORROWER SHALL EXECUTE A PROMISSORY NOTE IN FAVOR OF FOOTHILL, TO BE SECURED
BY THE TRANSFERRED COLLATERAL, IN AN AMOUNT EQUAL TO THE HIGHER OF THE
OUTSTANDING BALANCE OWING ON THE PLEDGED NOTE FOR WHICH THE TRANSFERRED
COLLATERAL WAS SECURITY, OR FAIR MARKET VALUE OF THE COLLATERAL TRANSFERRED.
4.6 DISTRIBUTIONS OF LOCKBOX SUMS. LOCKBOX
PAYMENTS SHALL BE APPLIED AGAINST THE PRINCIPAL BALANCE ON EACH APPROPRIATE
LINE AS AND WHEN RECEIVED, SUBJECT TO THE PROVISIONS OF SECTION 2.5, IF
APPLICABLE. AT THE END OF EACH MONTH, THE AMOUNT RECEIVED BY FOOTHILL FROM
THE LOCKBOX ACCOUNT SHALL BE PAID BY FOOTHILL AGAINST THE FOLLOWING ITEMS OF
INDEBTEDNESS, IN THE ORDER SET FORTH:
(I) PAYMENT OF FOOTHILL EXPENSES; THEN, THE
BALANCE, IF ANY, TO;
(II) WITH RESPECT TO PAYMENTS RECEIVED ON THE
PLEDGED NOTES,
27
(1) TO PAYMENT OF INTEREST ON THE A
LINE ADVANCES AND THE B LINE
ADVANCES, THEN, THE BALANCE, IF
ANY, TO;
(2) TO THE REDUCTION OF PRINCIPAL ON
THE A LINE ADVANCES AND THE
B-LINE ADVANCES, THEN THE
BALANCE, IF ANY, TO
(3) PAY OFF OTHER OBLIGATIONS IN THE
MANNER DECIDED BY FOOTHILL;
(III) WITH RESPECT TO PAYMENTS RECEIVED ON THE
SALE OF COLLATERAL GRANTED TO FOOTHILL PURSUANT TO SECTION 2.2 HEREOF,
(1) TO PAYMENT OF INTEREST ON THE
LAND INVENTORY ADVANCES, THEN, THE
BALANCE, IF ANY, TO;
(2) TO THE REDUCTION OF PRINCIPAL
ON THE LAND INVENTORY ADVANCES, THEN
THE BALANCE, IF ANY, TO
(3) PAY OFF OTHER OBLIGATIONS IN
THE MANNER DECIDED BY FOOTHILL;
4.7 RELEASE OF PORTIONS OF REAL PROPERTY
COLLATERAL. PROVIDED THERE SHALL NOT HAVE OCCURRED AN EVENT OF DEFAULT,
FOOTHILL SHALL, FROM TIME TO TIME, PROVIDED BORROWER HAS FIRST FULFILLED AND
SATISFIED THE TERMS AND CONDITIONS ON ITS PART TO BE FULFILLED PURSUANT TO
THE TERMS OF THIS AGREEMENT AND THIS SECTION 4.7, PROVIDE FOR AND PROMPTLY
WITHIN TEN (10) BUSINESS DAYS AFTER REQUEST THEREFOR (BUT SHALL ENDEAVOR TO
DO SO MORE QUICKLY IF BORROWER REQUESTS A SHORTER TIME), DELIVER TO ESCROW
OR TO A TITLE COMPANY, A PARTIAL RECONVEYANCE OF A PORTION OF THE REAL
PROPERTY, PROVIDED ALL THE FOLLOWING CONDITIONS ARE MET:
(I) SUCH LOT SHALL BE SOLD AT A PRICE ACCEPTABLE
TO BORROWER AND FOOTHILL ACTING IN GOOD FAITH;
(II) THE SALE SHALL OCCUR ON TERMS AND CONDITIONS
SUFFICIENT THAT FOOTHILL SHALL RECEIVE IN CASH FIFTY FIVE PERCENT (55%) OF
THE SALES PRICE BUT IN NO EVENT LESS THAN THE RELEASE PRICE) AS
CONSIDERATION FOR SUCH PARTIAL RECONVEYANCE (BUT IN NO EVENT AN AMOUNT LESS
THAN THE RELEASE PRICE SET FOR EACH SUCH LOT SOUGHT TO BE RELEASED);
28
(III) SUCH PARTIAL RECONVEYANCE SHALL NOT CREATE A
VIOLATION OF LAW AS TO THE REMAINDER OF THE PROJECT WHICH IS SUBJECT TO THE
MORTGAGE (INCLUDING ALL SUBDIVISION LAWS);
(IV) PRIOR TO OR AT THE TIME OF THE REQUEST FOR
SUCH PARTIAL RECONVEYANCE, BORROWER SHALL HAVE DELIVERED TO FOOTHILL A PRO
FORMA SETTLEMENT SHEET SHOWING THE SELLING PRICE OF THE LOT SOUGHT TO BE
RELEASED, THE RELEASE PAYMENT, AND SUCH OTHER INFORMATION AS FOOTHILL SHALL
REQUIRE;
(V) A DESCRIPTION SUFFICIENT TO SHOW THE LOCATION
OF THE LOT TO BE RELEASED WITH RESPECT TO THE BALANCE OF THE PROPERTY NOT
RELEASED;
(VI) AS APPLICABLE, ISSUANCE OF SUCH TITLE
ENDORSEMENTS AS FOOTHILL MAY REASONABLY REQUIRE TO ESTABLISH THE CONTINUING
PRIORITY OF THE LIEN OF THE MORTGAGES; AND
(VII) IF APPLICABLE IN FOOTHILL'S JUDGEMENT,
EXECUTION OF AN IRREVOCABLE INSTRUCTION TO THE ESCROW OR TITLE COMPANY
DIRECTING THAT THEY ARE ONLY AUTHORIZED TO RECORD THE RELEASE OF THE
RECONVEYANCE UPON PAYMENT OF THE RELEASE PRICE SET FORTH HEREIN.
4.8 RELEASE OF SECURITY INTERESTS IN THE PLEDGED
NOTES; RELEASE OF SECURITY WHEN ADVANCES ARE EQUAL TO ZERO.
(A) PROVIDED THERE SHALL NOT HAVE OCCURRED AN
EVENT OF DEFAULT, AND PROVIDED FURTHER THAT BORROWER SHALL PAY IN FULL ALL
INTEREST AND PRINCIPAL OWING ON THE A LINE ADVANCES AT THE TIME OF RELEASE,
BORROWER SHALL HAVE THE RIGHT TO CAUSE TO BE RELEASED FROM FOOTHILL'S LIEN
ALL (BUT NOT PART OF) THE PLEDGED A NOTES PROVIDED SUCH RELEASE IS TO ENABLE
BORROWER TO SECURITIZE THE PLEDGED A NOTES BY THE ISSUANCE OF NOTE BACKED
SECURITIES OR COMMERCIAL PAPER. THE EARLY TERMINATION FEE PROVIDED FOR IN
SECTION 3.7 HEREOF, SHALL NOT BE PAYABLE, HOWEVER THE MINIMUM INTEREST
PAYMENT SHALL STILL BE PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF SECTION
2.4(C).
(B) PROVIDED THERE SHALL NOT HAVE OCCURRED AN
EVENT OF DEFAULT, AND PROVIDED FURTHER THAT BORROWER SHALL PAY IN FULL ALL
INTEREST AND PRINCIPAL OWING ON THE B LINE ADVANCES AT THE TIME OF RELEASE,
BORROWER SHALL HAVE THE RIGHT TO CAUSE TO BE RELEASED FROM FOOTHILL'S LIEN
ALL (BUT NOT PART OF) THE PLEDGED B NOTES PROVIDED SUCH RELEASE IS TO ENABLE
BORROWER TO SECURITIZE THE PLEDGED B NOTES BY THE ISSUANCE OF NOTE BACKED
SECURITIES OR COMMERCIAL PAPER. THE EARLY TERMINATION FEE PROVIDED FOR IN
SECTION 3.7 HEREOF, SHALL NOT BE PAYABLE, HOWEVER THE MINIMUM INTEREST
PAYMENT SHALL STILL BE PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF SECTION
2.4(C).
4.9 DELIVERY OF ADDITIONAL DOCUMENTATION
REQUIRED. AT ANY TIME UPON THE REQUEST OF FOOTHILL, BORROWER SHALL EXECUTE
AND DELIVER TO FOOTHILL ALL FINANCING
29
STATEMENTS, CONTINUATION FINANCING STATEMENTS, FIXTURE FILINGS, SECURITY
AGREEMENTS, CHATTEL MORTGAGES, PLEDGES, ASSIGNMENTS, AFFIDAVITS, REPORTS,
NOTICES, SCHEDULES OF ACCOUNTS, LETTERS OF AUTHORITY, AND ALL OTHER
DOCUMENTS THAT FOOTHILL MAY REASONABLY REQUEST, IN FORM SATISFACTORY TO
FOOTHILL, TO PERFECT AND CONTINUE PERFECTED FOOTHILL'S SECURITY INTERESTS IN
THE COLLATERAL AND IN ORDER TO FULLY CONSUMMATE ALL OF THE TRANSACTIONS
CONTEMPLATED HEREBY AND UNDER THE OTHER LOAN DOCUMENTS.
4.10 POWER OF ATTORNEY. BORROWER HEREBY
IRREVOCABLY MAKES, CONSTITUTES, AND APPOINTS FOOTHILL (AND ANY OF FOOTHILL'S
OFFICERS, EMPLOYEES, OR AGENTS DESIGNATED BY FOOTHILL) AS BORROWER'S TRUE
AND LAWFUL ATTORNEY, WITH POWER TO: (A) IF BORROWER REFUSES TO, OR FAILS
TIMELY TO EXECUTE AND DELIVER ANY OF THE DOCUMENTS DESCRIBED IN SECTION 4.4,
SIGN THE NAME OF BORROWER ON ANY OF THE DOCUMENTS DESCRIBED IN SECTION 4.4;
(B) AT ANY TIME THAT AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING, OR
FOOTHILL ACTING IN GOOD XXXXX XXXXX ITSELF INSECURE (IN ACCORDANCE WITH
SECTION 1208 OF THE CODE), SIGN BORROWER'S NAME ON ANY DOCUMENT RELATING TO
ANY PLEDGED NOTE AND NOTICES TO MAKERS OF PLEDGED NOTES; (C) SEND REQUESTS
FOR VERIFICATION OF PLEDGED NOTES; (D) ENDORSE BORROWER'S NAME ON ANY
CHECKS, NOTICES, ACCEPTANCES, MONEY ORDERS, DRAFTS, OR OTHER ITEM OF PAYMENT
OR SECURITY THAT RELATE TO THE PLEDGED NOTES, WHICH SUCH SUMS SHALL BE
APPLIED AGAINST THE OBLIGATIONS; (E) INTENTIONALLY DELETED; (F) AT ANY TIME
THAT AN EVENT OF DEFAULT HAS OCCURRED AND IS CONTINUING OR FOOTHILL ACTING
IN GOOD XXXXX XXXXX ITSELF INSECURE (IN ACCORDANCE WITH SECTION 1208 OF THE
CODE), MAKE, SETTLE, AND ADJUST ALL CLAIMS UNDER BORROWER'S POLICIES OF
INSURANCE AND MAKE ALL DETERMINATIONS AND DECISIONS WITH RESPECT TO SUCH
POLICIES OF INSURANCE; AND (G) AT ANY TIME THAT AN EVENT OF DEFAULT HAS
OCCURRED AND IS CONTINUING OR FOOTHILL ACTING IN GOOD XXXXX XXXXX ITSELF
INSECURE (IN ACCORDANCE WITH SECTION 1208 OF THE CODE), SETTLE AND ADJUST
DISPUTES AND CLAIMS RESPECTING THE ACCOUNTS DIRECTLY WITH ACCOUNT DEBTORS,
FOR AMOUNTS AND UPON TERMS WHICH FOOTHILL DETERMINES TO BE REASONABLE, AND
FOOTHILL MAY CAUSE TO BE EXECUTED AND DELIVERED ANY DOCUMENTS AND RELEASES
WHICH FOOTHILL DETERMINES TO BE NECESSARY. THE APPOINTMENT OF FOOTHILL AS
BORROWER'S ATTORNEY, AND EACH AND EVERY ONE OF FOOTHILL'S RIGHTS AND POWERS,
BEING COUPLED WITH AN INTEREST, IS IRREVOCABLE UNTIL ALL OF THE OBLIGATIONS
HAVE BEEN FULLY AND FINALLY REPAID AND PERFORMED AND FOOTHILL'S OBLIGATION
TO EXTEND CREDIT HEREUNDER IS TERMINATED.
4.11 RIGHT TO INSPECT. FOOTHILL (THROUGH ANY OF
ITS OFFICERS, EMPLOYEES, OR AGENTS) SHALL HAVE THE RIGHT, FROM TIME TO TIME
HEREAFTER TO INSPECT BORROWER'S BOOKS AND TO CHECK, TEST, AND APPRAISE THE
COLLATERAL IN ORDER TO VERIFY BORROWER'S FINANCIAL CONDITION OR THE AMOUNT,
QUALITY, VALUE, CONDITION OF, OR ANY OTHER MATTER RELATING TO, THE
COLLATERAL.
5. REPRESENTATIONS AND WARRANTIES.
-------------------------------
BORROWER REPRESENTS AND WARRANTS TO FOOTHILL AS
FOLLOWS:
30
5.1 NO PRIOR ENCUMBRANCES. BORROWER HAS GOOD AND
INDEFEASIBLE TITLE TO THE COLLATERAL, FREE AND CLEAR OF LIENS, CLAIMS,
SECURITY INTERESTS, OR ENCUMBRANCES, EXCEPT FOR PERMITTED LIENS.
5.2 BONA FIDE OBLIGATION. EACH PLEDGED NOTE IS A
BONA FIDE, GOOD, VALID, AND SUBSISTING OBLIGATION OF THE ACCOUNT DEBTOR
THEREUNDER, AND BORROWER DOES NOT KNOW OF ANY FACT WHICH IMPAIRS OR WILL
IMPAIR THE VALIDITY OF ANY SUCH PLEDGED NOTE.
5.3 NO DEFENSES OR SETOFFS. EACH PLEDGED NOTE AND
EACH NOTE MORTGAGE WILL BE FREE OF ANY CLAIM FOR CREDIT, DEDUCTION,
DISCOUNT, ALLOWANCE, DEFENSE (INCLUDING THE DEFENSE OF USURY), DISPUTE,
COUNTER-CLAIM, OR SETOFF.
5.4 ENFORCEABLE AGREEMENTS. EACH PLEDGED NOTE AND
NOTE MORTGAGE IS ENFORCEABLE ACCORDING TO ITS TERMS AGAINST EACH NAMED
ACCOUNT DEBTOR THEREON OR TRUSTOR THEREUNDER, SUBJECT TO APPLICABLE
BANKRUPTCY LAWS AS THE SAME MAY APPLY TO ANY MAKER OF A PLEDGED NOTE WHO IS
SUBJECT TO A BANKRUPTCY PROCEEDING, AND COMPLIES WITH ALL APPLICABLE
FEDERAL, STATE, AND LOCAL LAWS, REGULATIONS, AND REQUIREMENTS.
5.5 CORRECT LEGAL DESCRIPTION. EACH NOTE MORTGAGE
CORRECTLY SETS FORTH THE LEGAL DESCRIPTION OF THE SUBJECT REAL PROPERTY.
5.6 CORRECT LOAN TERMS. EACH PLEDGED NOTE
CORRECTLY SETS FORTH THE LOAN TERMS BETWEEN BORROWER AND THE ACCOUNT DEBTOR
THEREUNDER, INCLUDING, WITHOUT LIMITATION, THE INTEREST RATE APPLICABLE
THERETO.
5.7 COMPLIANCE WITH LAWS. TO THE BEST OF
BORROWER'S KNOWLEDGE, ALL STATE AND FEDERAL LAWS (INCLUDING ANY APPLICABLE
USURY AND/OR TRUTH-IN-LENDING STATUTES) HAVE BEEN COMPLIED WITH IN
CONJUNCTION WITH THE COLLATERAL, THE NON-COMPLIANCE WITH WHICH WOULD HAVE AN
ADVERSE IMPACT ON THE VALUE, ENFORCEABILITY, OR COLLECTIBILITY OF THE
COLLATERAL.
5.8 AUTHORITY TO ASSIGN. AT THE TIME OF THE
ASSIGNMENT OF ANY PLEDGED NOTE AND NOTE MORTGAGE TO FOOTHILL BY BORROWER,
BORROWER SHALL HAVE SUCH TITLE THERETO AS IT ACQUIRED THE SAME FROM THE
MAKER THEREOF, AND FULL RIGHT AND AUTHORITY TO PLEDGE AND ASSIGN THE SAME.
5.9 LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN. THE
CHIEF EXECUTIVE OFFICE OF BORROWER IS LOCATED AT THE ADDRESS INDICATED IN
THE PREAMBLE TO THIS AGREEMENT.
BORROWER.
5.10 DUE ORGANIZATION AND QUALIFICATION. BORROWER
IS DULY ORGANIZED AND EXISTING AND IN GOOD STANDING UNDER THE LAWS OF THE
STATE OF ITS INCORPORATION AND QUALIFIED AND LICENSED TO DO BUSINESS IN, AND
IN GOOD STANDING IN, ANY STATE WHERE THE FAILURE TO BE SO LICENSED OR
QUALIFIED COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL
31
ADVERSE EFFECT ON THE BUSINESS, OPERATIONS, CONDITION (FINANCIAL OR
OTHERWISE), FINANCES, OR PROSPECTS OF BORROWER OR ON THE VALUE OF THE
COLLATERAL TO FOOTHILL.
5.11 DUE AUTHORIZATION; NO CONFLICT. THE
EXECUTION, DELIVERY, AND PERFORMANCE OF THE LOAN DOCUMENTS ARE WITHIN
BORROWER'S CORPORATE POWERS, HAVE BEEN DULY AUTHORIZED, AND ARE NOT IN
CONFLICT WITH NOR CONSTITUTE A BREACH OF ANY PROVISION CONTAINED IN
BORROWER'S ARTICLES OR CERTIFICATE OF INCORPORATION, OR BY-LAWS, NOR WILL
THEY CONSTITUTE AN EVENT OF DEFAULT UNDER ANY MATERIAL AGREEMENT TO WHICH
BORROWER IS A PARTY OR BY WHICH ITS PROPERTIES OR ASSETS MAY BE BOUND.
5.12 LITIGATION. THERE ARE NO ACTIONS OR
PROCEEDINGS PENDING BY OR AGAINST BORROWER BEFORE ANY COURT OR
ADMINISTRATIVE AGENCY AND BORROWER DOES NOT HAVE KNOWLEDGE OR BELIEF OF ANY
PENDING, THREATENED, OR IMMINENT LITIGATION, GOVERNMENTAL INVESTIGATIONS, OR
CLAIMS, COMPLAINTS, ACTIONS, OR PROSECUTIONS INVOLVING BORROWER OR ANY
GUARANTOR OF THE OBLIGATIONS, EXCEPT FOR ONGOING COLLECTION MATTERS IN WHICH
BORROWER IS THE PLAINTIFF, MATTERS DISCLOSED ON SCHEDULE 5.12, AND MATTERS
ARISING AFTER THE DATE HEREOF THAT, IF DECIDED ADVERSELY TO BORROWER, WOULD
MATERIALLY IMPAIR THE PROSPECT OF REPAYMENT OF THE OBLIGATIONS OR MATERIALLY
IMPAIR THE VALUE OR PRIORITY OF FOOTHILL'S SECURITY INTERESTS IN THE
COLLATERAL.
5.13 NO MATERIAL ADVERSE CHANGE IN FINANCIAL
CONDITION. ALL FINANCIAL STATEMENTS RELATING TO BORROWER OR ANY GUARANTOR OF
THE OBLIGATIONS THAT HAVE BEEN DELIVERED BY BORROWER TO FOOTHILL HAVE BEEN
PREPARED IN ACCORDANCE WITH GAAP AND FAIRLY PRESENT BORROWER'S (OR SUCH
GUARANTOR'S, AS APPLICABLE) FINANCIAL CONDITION AS OF THE DATE THEREOF AND
BORROWER'S RESULTS OF OPERATIONS FOR THE PERIOD THEN ENDED. THERE HAS NOT
BEEN A MATERIAL ADVERSE CHANGE IN THE FINANCIAL CONDITION OF BORROWER (OR
SUCH GUARANTOR, AS APPLICABLE) SINCE THE DATE OF THE LATEST FINANCIAL
STATEMENTS SUBMITTED TO FOOTHILL ON OR BEFORE THE EFFECTIVE DATE.
5.14 SOLVENCY. BORROWER IS SOLVENT. NO TRANSFER OF
PROPERTY IS BEING MADE BY BORROWER AND NO OBLIGATION IS BEING INCURRED BY
BORROWER IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS WITH THE INTENT TO HINDER, DELAY, OR DEFRAUD
EITHER PRESENT OR FUTURE CREDITORS OF BORROWER.
5.15 EMPLOYEE BENEFITS. EACH PLAN IS COMPLIANCE IN
ALL MATERIAL RESPECTS WITH THE APPLICABLE PROVISIONS OF ERISA AND THE IRC.
EACH QUALIFIED PLAN AND MULTIEMPLOYER PLAN HAS BEEN DETERMINED BY THE
INTERNAL REVENUE SERVICE TO QUALIFY UNDER SECTION 401 OF THE IRC, AND THE
TRUSTS CREATED THEREUNDER HAVE BEEN DETERMINED TO BE EXEMPT FROM TAX UNDER
SECTION 501 OF THE IRC, AND, TO THE BEST KNOWLEDGE OF BORROWER, NOTHING HAS
OCCURRED THAT WOULD CAUSE THE LOSS OF SUCH QUALIFICATION OR TAX-EXEMPT
STATUS. THERE ARE NO OUTSTANDING LIABILITIES UNDER TITLE IV OF ERISA WITH
RESPECT TO ANY PLAN MAINTAINED OR SPONSORED BY BORROWER OR ANY ERISA
AFFILIATE, NOR WITH RESPECT TO ANY PLAN TO WHICH BORROWER OR ANY ERISA
AFFILIATE CONTRIBUTES OR IS OBLIGATED TO CONTRIBUTE WHICH COULD REASONABLY
BE EXPECTED TO HAVE A MATERIAL ADVERSE
32
EFFECT ON THE FINANCIAL CONDITION OF BORROWER. NO PLAN SUBJECT TO TITLE IV
OF ERISA HAS ANY UNFUNDED BENEFIT LIABILITY WHICH COULD REASONABLY BE
EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT ON THE FINANCIAL CONDITION OF
BORROWER. NEITHER BORROWER NOR ANY ERISA AFFILIATE HAS TRANSFERRED ANY
UNFUNDED BENEFIT LIABILITY TO A PERSON OTHER THAN BORROWER OR AN ERISA
AFFILIATE OR HAS OTHERWISE ENGAGED IN A TRANSACTION THAT COULD BE SUBJECT TO
SECTIONS 4069 OR 4212(C) OF ERISA WHICH COULD REASONABLY BE EXPECTED TO HAVE
A MATERIAL ADVERSE EFFECT ON THE FINANCIAL CONDITION OF BORROWER. NEITHER
BORROWER NOR ANY ERISA AFFILIATE HAS INCURRED NOR REASONABLY EXPECTS TO
INCUR (X) ANY LIABILITY (AND NO EVENT HAS OCCURRED WHICH, WITH THE GIVING OF
NOTICE UNDER SECTION 4219 OF ERISA, WOULD RESULT IN SUCH LIABILITY) UNDER
SECTIONS 4201 OR 4243 OF ERISA WITH RESPECT TO A MULTIEMPLOYER PLAN, OR (Y)
ANY LIABILITY UNDER TITLE IV OF ERISA (OTHER THAN PREMIUMS DUE BUT NOT
DELINQUENT UNDER SECTION 4007 OF ERISA) WITH RESPECT TO A PLAN, WHICH COULD,
IN EITHER EVENT, REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT ON
THE FINANCIAL CONDITION OF BORROWER. NO APPLICATION FOR A FUNDING WAIVER OR
AN EXTENSION OF ANY AMORTIZATION PERIOD PURSUANT TO SECTION 412 OF THE IRC
HAS BEEN MADE WITH RESPECT TO ANY PLAN. NO ERISA EVENT HAS OCCURRED OR IS
REASONABLY EXPECTED TO OCCUR WITH RESPECT TO ANY PLAN WHICH COULD REASONABLY
BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT ON THE FINANCIAL CONDITION OF
BORROWER. BORROWER AND EACH ERISA AFFILIATE HAVE COMPLIED IN ALL MATERIAL
RESPECTS WITH THE NOTICE AND CONTINUATION COVERAGE REQUIREMENTS OF SECTION
4980B OF THE IRC.
5.16 ENVIRONMENTAL CONDITION.
(A) BORROWER HAS NOT USED HAZARDOUS MATERIALS
AT OR AFFECTING THE REAL PROPERTY IN ANY MANNER WHICH VIOLATES ANY ACT
GOVERNING THE USE, STORAGE, TREATMENT, TRANSPORTATION, MANUFACTURING,
REFINEMENT, HANDLING, PRODUCTION, OR DISPOSAL OF HAZARDOUS MATERIALS.
(B) TO THE BEST OF BORROWER'S KNOWLEDGE, NO
PRIOR OWNER, OCCUPANT OR OPERATOR OF THE REAL PROPERTY HAS USED HAZARDOUS
MATERIALS AT OR AFFECTING THE REAL PROPERTY IN ANY MANNER WHICH VIOLATES ANY
ACT GOVERNING THE USE, STORAGE, TREATMENT, TRANSPORTATION, MANUFACTURING,
REFINEMENT, HANDLING, PRODUCTION OR DISPOSAL OF HAZARDOUS MATERIALS.
5.17 RELIANCE BY FOOTHILL; CUMULATIVE. EACH
WARRANTY AND REPRESENTATION CONTAINED IN THIS AGREEMENT AUTOMATICALLY SHALL
BE DEEMED REPEATED WITH EACH ADVANCE AND SHALL BE CONCLUSIVELY PRESUMED TO
HAVE BEEN RELIED ON BY FOOTHILL REGARDLESS OF ANY INVESTIGATION MADE OR
INFORMATION POSSESSED BY FOOTHILL. THE WARRANTIES AND REPRESENTATIONS SET
FORTH HEREIN SHALL BE CUMULATIVE AND IN ADDITION TO ANY AND ALL OTHER
WARRANTIES AND REPRESENTATIONS THAT BORROWER NOW OR HEREAFTER SHALL GIVE, OR
CAUSE TO BE GIVEN, TO FOOTHILL.
33
5.18 GOOD STANDING. BORROWER IS IN GOOD STANDING
IN EACH JURISDICTION WHERE THE CONDUCT OF ITS BUSINESS OR THE OWNERSHIP OR
OPERATION OF ITS PROPERTIES AND ASSETS MAKES QUALIFICATION NECESSARY.
5.19 INTER-COMPANY INDEBTEDNESS. THE INTERCOMPANY
INDEBTEDNESS REPORTS SUBMITTED TO FOOTHILL FROM TIME TO TIME WILL BE
ACCURATE, COMPLETE, AND TRUE IN ALL RESPECTS, AND THE FIGURES DISCLOSED
THEREIN ARE NOT, AT THE TIME OF SUBMISSION, SUBJECT TO ANY OFFSET OR
DEDUCTION OF ANY KIND WHATSOEVER.
6. AFFIRMATIVE COVENANTS.
BORROWER COVENANTS AND AGREES THAT, SO LONG AS ANY
CREDIT HEREUNDER SHALL BE AVAILABLE AND UNTIL FULL AND FINAL PAYMENT OF THE
OBLIGATIONS, AND UNLESS FOOTHILL SHALL OTHERWISE CONSENT IN WRITING,
BORROWER SHALL DO ALL OF THE FOLLOWING:
6.1 ACCOUNTING SYSTEM. BORROWER SHALL MAINTAIN A
STANDARD AND MODERN SYSTEM OF ACCOUNTING IN ACCORDANCE WITH GAAP WITH LEDGER
AND ACCOUNT CARDS OR COMPUTER TAPES, DISCS, PRINTOUTS, AND RECORDS
PERTAINING TO THE COLLATERAL WHICH CONTAIN INFORMATION AS FROM TIME TO TIME
MAY BE REQUESTED BY FOOTHILL. BORROWER ALSO SHALL KEEP PROPER BOOKS OF
ACCOUNT SHOWING ALL SALES, CLAIMS, AND ALLOWANCES ON ITS INVENTORY.
6.2 SCHEDULES OF PLEDGED NOTES. WITH SUCH
REGULARITY AS FOOTHILL SHALL REQUIRE, BORROWER SHALL PROVIDE FOOTHILL WITH
SCHEDULES DESCRIBING ALL PLEDGED NOTES. FOOTHILL'S FAILURE TO REQUEST SUCH
SCHEDULES OR BORROWER'S FAILURE TO EXECUTE AND DELIVER SUCH SCHEDULES SHALL
NOT AFFECT OR LIMIT FOOTHILL'S SECURITY INTERESTS OR OTHER RIGHTS IN AND TO
THE PLEDGED NOTES.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
BORROWER AGREES TO DELIVER TO FOOTHILL: (A) AS SOON AS AVAILABLE, BUT IN ANY
EVENT WITHIN THIRTY (30) DAYS AFTER THE END OF EACH MONTH DURING EACH OF
BORROWER'S FISCAL YEARS, A COMPANY PREPARED BALANCE SHEET AND INCOME
STATEMENT COVERING BORROWER'S OPERATIONS DURING SUCH PERIOD; (B) QUARTERLY
CASH FLOW STATEMENTS AS SOON AS AVAILABLE, BUT IN ANY EVENT WITHIN
FORTY-FIVE (45) DAYS AFTER THE END OF BORROWER'S FISCAL QUARTERS; AND (C) AS
SOON AS AVAILABLE, BUT IN ANY EVENT WITHIN ONE HUNDRED AND TWENTY (120) DAYS
AFTER THE END OF EACH OF BORROWER'S FISCAL YEARS, FINANCIAL STATEMENTS OF
BORROWER FOR EACH SUCH FISCAL YEAR, CERTIFIED WITHOUT ANY QUALIFICATIONS, BY
BORROWER'S ACCOUNTANTS TO HAVE BEEN PREPARED IN ACCORDANCE WITH GAAP,
TOGETHER WITH A CERTIFICATE ADDRESSED TO FOOTHILL FROM BORROWER'S CFO
STATING THAT THE CFO DOES NOT HAVE KNOWLEDGE OF THE EXISTENCE OF ANY EVENT
OR CONDITION CONSTITUTING AN EVENT OF DEFAULT, OR THAT WOULD, WITH THE
PASSAGE OF TIME OR THE GIVING OF NOTICE, CONSTITUTE AN EVENT OF DEFAULT.
SUCH CERTIFIED FINANCIAL STATEMENTS SHALL INCLUDE A BALANCE SHEET, PROFIT
AND LOSS STATEMENT, AND CASH FLOW STATEMENT. BORROWER SHALL HAVE ISSUED
WRITTEN INSTRUCTIONS TO ITS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
AUTHORIZING THEM TO COMMUNICATE WITH FOOTHILL AND TO RELEASE TO
34
FOOTHILL WHATEVER FINANCIAL INFORMATION CONCERNING BORROWER THAT FOOTHILL
MAY REQUEST. BORROWER AGREES TO DELIVER FINANCIAL STATEMENTS PREPARED ON A
CONSOLIDATED BASIS FOR IT AND ITS SUBSIDIARIES AND AFFILIATES.
TOGETHER WITH THE ABOVE, BORROWER ALSO SHALL
DELIVER TO FOOTHILL BORROWER'S FORM 10-Q QUARTERLY REPORTS, FORM 10-K ANNUAL
REPORTS, AND FORM 8-K CURRENT REPORTS, AND ANY OTHER FILINGS MADE BY
BORROWER WITH THE SECURITIES AND EXCHANGE COMMISSION, IF ANY, AS SOON AS THE
SAME ARE FILED, OR ANY OTHER INFORMATION THAT IS PROVIDED BY BORROWER TO ITS
SHAREHOLDERS, AND ANY OTHER REPORT REASONABLY REQUESTED BY FOOTHILL RELATING
TO THE COLLATERAL AND FINANCIAL CONDITION OF BORROWER.
EACH MONTH, TOGETHER WITH THE FINANCIAL STATEMENTS
PROVIDED PURSUANT TO SECTION 6.3(A), BORROWER SHALL DELIVER TO FOOTHILL A
CERTIFICATE ("COMPLIANCE CERTIFICATE") SIGNED BY ITS CHIEF FINANCIAL OFFICER
TO THE EFFECT THAT: (I) ALL REPORTS, STATEMENTS, OR COMPUTER PREPARED
INFORMATION OF ANY KIND OR NATURE DELIVERED OR CAUSED TO BE DELIVERED TO
FOOTHILL HEREUNDER HAVE BEEN PREPARED IN ACCORDANCE WITH GAAP AND FAIRLY
PRESENT THE FINANCIAL CONDITION OF BORROWER; (II) BORROWER IS IN TIMELY
COMPLIANCE WITH ALL OF ITS COVENANTS AND AGREEMENTS HEREUNDER; (III) THE
REPRESENTATIONS AND WARRANTIES OF BORROWER CONTAINED IN THIS AGREEMENT AND
THE OTHER LOAN DOCUMENTS ARE TRUE AND CORRECT IN ALL MATERIAL RESPECTS ON
AND AS OF THE DATE OF SUCH CERTIFICATE, AS THOUGH MADE ON AND AS OF SUCH
DATE (EXCEPT TO THE EXTENT THAT SUCH REPRESENTATIONS AND WARRANTIES RELATE
SOLELY TO AN EARLIER DATE); AND (IV) ON THE DATE OF DELIVERY OF SUCH
CERTIFICATE TO FOOTHILL THERE DOES NOT EXIST ANY CONDITION OR EVENT THAT
CONSTITUTES AN EVENT OF DEFAULT (OR, IN EACH CASE, TO THE EXTENT OF ANY
NON-COMPLIANCE, DESCRIBING SUCH NON-COMPLIANCE AS TO WHICH HE OR SHE MAY
HAVE KNOWLEDGE AND WHAT ACTION BORROWER HAS TAKEN, IS TAKING, OR PROPOSES TO
TAKE WITH RESPECT THERETO).
BORROWER HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS
ALL AUDITORS, ACCOUNTANTS, OR OTHER THIRD PARTIES TO DELIVER TO FOOTHILL,
FOLLOWING AN EVENT OF DEFAULT, AT BORROWER'S EXPENSE, COPIES OF BORROWER'S
FINANCIAL STATEMENTS, PAPERS RELATED THERETO, AND OTHER ACCOUNTING RECORDS
OF ANY NATURE IN THEIR POSSESSION, AND TO DISCLOSE TO FOOTHILL ANY
INFORMATION THEY MAY HAVE REGARDING BORROWER'S BUSINESS AFFAIRS AND
FINANCIAL CONDITIONS. SUCH PARTIES MAY ABSOLUTELY RELY UPON A SIGNED
STATEMENT BY FOOTHILL THAT AN EVENT OF DEFAULT HAS OCCURRED.
6.4 TAX RETURNS. BORROWER AGREES TO DELIVER TO FOOTHILL COPIES
OF EACH OF BORROWER'S FUTURE FEDERAL INCOME TAX RETURNS, AND ANY AMENDMENTS
THERETO, WITHIN THIRTY (30) DAYS OF FOOTHILL'S REASONABLE REQUEST OF SAME.
6.5 GUARANTOR REPORTS. BORROWER AGREES TO CAUSE ANY GUARANTOR,
IF ANY, OF THE OBLIGATIONS TO DELIVER ITS ANNUAL FINANCIAL STATEMENTS AT THE
TIME WHEN BORROWER PROVIDES ITS AUDITED FINANCIAL STATEMENTS TO FOOTHILL AND
COPIES OF ALL FEDERAL INCOME TAX RETURNS AS SOON AS THE SAME ARE AVAILABLE
AND IN ANY EVENT NO LATER THAN THIRTY (30) DAYS AFTER THE SAME ARE REQUIRED
TO BE FILED BY LAW.
35
6.6 TAXES. ALL ASSESSMENTS AND TAXES, WHETHER
REAL, PERSONAL, OR OTHERWISE, DUE OR PAYABLE BY, OR IMPOSED, LEVIED, OR
ASSESSED AGAINST BORROWER OR ANY OF ITS PROPERTY HAVE BEEN PAID, AND SHALL
HEREAFTER BE PAID IN FULL, BEFORE DELINQUENCY OR BEFORE THE EXPIRATION OF
ANY EXTENSION PERIOD. BORROWER SHALL MAKE DUE AND TIMELY PAYMENT OR DEPOSIT
OF ALL FEDERAL, STATE, AND LOCAL TAXES, ASSESSMENTS, OR CONTRIBUTIONS
REQUIRED OF IT BY LAW, AND WILL EXECUTE AND DELIVER TO FOOTHILL, ON DEMAND,
APPROPRIATE CERTIFICATES ATTESTING TO THE PAYMENT THEREOF OR DEPOSIT WITH
RESPECT THERETO. BORROWER WILL MAKE TIMELY PAYMENT OR DEPOSIT OF ALL TAX
PAYMENTS AND WITHHOLDING TAXES REQUIRED OF IT BY APPLICABLE LAWS, INCLUDING
THOSE LAWS CONCERNING F.I.C.A., F.U.T.A., STATE DISABILITY, AND LOCAL,
STATE, AND FEDERAL INCOME TAXES, AND WILL, UPON REQUEST, FURNISH FOOTHILL
WITH PROOF SATISFACTORY TO FOOTHILL INDICATING THAT BORROWER HAS MADE SUCH
PAYMENTS OR DEPOSITS.
6.7 INSURANCE.
(A) BORROWER, AT ITS EXPENSE, SHALL KEEP THE
COLLATERAL (EXCLUSIVE OF THE REAL PROPERTY) INSURED AGAINST LOSS OR DAMAGE
BY FIRE, THEFT, EXPLOSION, SPRINKLERS, AND ALL OTHER HAZARDS AND RISKS, AND
IN SUCH AMOUNTS, AS ARE ORDINARILY INSURED AGAINST BY OTHER OWNERS IN
SIMILAR BUSINESSES. BORROWER ALSO SHALL MAINTAIN PUBLIC LIABILITY, AND
PROPERTY DAMAGE INSURANCE, AS WELL AS INSURANCE AGAINST LARCENY,
EMBEZZLEMENT, AND CRIMINAL MISAPPROPRIATION.
(B) BORROWER WILL OBTAIN AND MAINTAIN (I)
INSURANCE OF THE TYPE NECESSARY TO INSURE THE IMPROVEMENTS AND CHATTELS (AS
DEFINED IN THE MORTGAGES), FOR THE FULL REPLACEMENT COST THEREOF, AGAINST
ANY LOSS BY FIRE, LIGHTING, WINDSTORM, HAIL, EXPLOSION, AIRCRAFT, SMOKE
DAMAGE, VEHICLE DAMAGE, EARTHQUAKES, ELEVATOR COLLISION, AND OTHER RISKS
FROM TIME TO TIME INCLUDED UNDER "EXTENDED COVERAGE" POLICIES, IN SUCH
AMOUNTS AS FOOTHILL MAY REQUIRE, BUT IN ANY EVENT IN AMOUNTS SUFFICIENT TO
PREVENT BORROWER FROM BECOMING A CO-INSURER UNDER SUCH POLICES, (II)
COMBINED SINGLE LIMIT BODILY INJURY AND PROPERTY DAMAGES INSURANCE AGAINST
ANY LOSS, LIABILITY OR DAMAGES ON, ABOUT OR RELATING TO THE PREMISES, IN AN
AMOUNT OF NOT LESS THAN TEN MILLION DOLLARS ($10,000,000); AND (III) SUCH
OTHER RISK AS FOOTHILL MAY REQUIRE. REPLACEMENT COSTS, AT FOOTHILL'S OPTION,
BE REDETERMINED BY AN INSURANCE APPRAISER, SATISFACTORY TO FOOTHILL, NOT
MORE FREQUENTLY THAN ONCE EVERY TWELVE MONTHS AT BORROWER'S COST.
(C) ALL INSURANCE REQUIRED HEREIN SHALL BE
WRITTEN BY COMPANIES OF RECOGNIZED FINANCIAL STANDING, SATISFACTORY TO
FOOTHILL. SUCH INSURANCE SHALL BE IN FORM SATISFACTORY TO FOOTHILL, SHALL
WITH RESPECT TO HAZARD INSURANCE AND SUCH OTHER INSURANCE AS FOOTHILL SHALL
SPECIFY, NAME AS THE LOSS PAYEE THEREUNDER BORROWER AND FOOTHILL, AS THEIR
INTERESTS MAY APPEAR, AND SHALL CONTAIN A CALIFORNIA FORM 000XXX (XX)
MORTGAGEE ENDORSEMENT, OR ITS LOCAL EQUIVALENT. EVERY POLICY OF INSURANCE
REFERRED TO IN THIS SECTION SHALL CONTAIN AN AGREEMENT BY THE INSURER THAT
IT WILL NOT CANCEL SUCH POLICY EXCEPT AFTER THIRTY (30) DAYS' PRIOR WRITTEN
NOTICE TO FOOTHILL AND THAT ANY LOSS PAYABLE THEREUNDER SHALL BE PAYABLE
NOTWITHSTANDING ANY ACT OR NEGLIGENCE OF BORROWER OR
36
FOOTHILL WHICH MIGHT, ABSENCE SUCH AGREEMENT, RESULT IN A FORFEITURE OF ALL
OR A PART OF SUCH INSURANCE PAYMENT AND NOTWITHSTANDING (I) OCCUPANCY OR USE
OF THE REAL PROPERTY FOR PURPOSES MORE HAZARDOUS THAN PERMITTED BY THE TERMS
OF SUCH POLICY, (II) ANY FORECLOSURE OR OTHER ACTION OR PROCEEDING TAKEN BY
FOOTHILL PURSUANT TO THE MORTGAGES UPON THE HAPPENING OF AN EVENT OF
DEFAULT, OR (III) ANY CHANGE IN TITLE OR OWNERSHIP OF THE REAL PROPERTY.
(D) ORIGINAL POLICIES OR CERTIFICATES THEREOF
SATISFACTORY TO FOOTHILL EVIDENCING SUCH INSURANCE SHALL BE DELIVERED TO
FOOTHILL AT LEAST THIRTY (30) DAYS PRIOR TO THE EXPIRATION OF THE EXISTING
OR PRECEDING POLICIES. BORROWER SHALL GIVE FOOTHILL PROMPT NOTICE OF ANY
LOSS COVERED BY SUCH INSURANCE AND FOOTHILL SHALL HAVE THE RIGHT TO JOIN
BORROWER IN ADJUSTING ANY LOSS. IF THERE SHALL HAVE OCCURRED AN EVENT OF
DEFAULT, FOOTHILL SHALL HAVE THE EXCLUSIVE RIGHT TO ADJUST ALL LOSS PAYABLE
UNDER ANY SUCH INSURANCE POLICIES WITHOUT ANY LIABILITY TO BORROWER
WHATSOEVER IN RESPECT OF SUCH ADJUSTMENTS. ANY MONIES RECEIVED AS PAYMENT
FOR ANY LOSS OF COLLATERAL UNDER SUCH INSURANCE SHALL BE PAID OVER TO
FOOTHILL TO BE APPLIED AT THE OPTION OF FOOTHILL EITHER TO THE PREPAYMENT OF
THE OBLIGATIONS WITHOUT PREMIUM, IN SUCH ORDER OR MANNER AS FOOTHILL MAY
ELECT, OR SHALL BE DISBURSED TO BORROWER UNDER STAGE PAYMENT TERMS
SATISFACTORY TO FOOTHILL FOR APPLICATION TO THE COST OF REPAIRS,
REPLACEMENTS OR RESTORATIONS. ALL RESTORATIONS SHALL BE EFFECTED WITH
REASONABLE PROMPTNESS AND SHALL BE OF A VALUE AT LEAST EQUAL TO THE VALUE OF
THE ITEMS OR PROPERTY TO DESTROYED PRIOR TO SUCH DAMAGE OR DESTRUCTION. UPON
THE OCCURRENCE OF AN EVENT OF DEFAULT, ALL PREPAID PREMIUMS SHALL BE THE
SOLE AND ABSOLUTE PROPERTY OF FOOTHILL TO BE APPLIED BY FOOTHILL TO THE
PAYMENT OF THE OBLIGATIONS IN SUCH ORDER OR FORM AS FOOTHILL SHALL ELECT.
(E) BORROWER SHALL NOT TAKE OUT SEPARATE
INSURANCE CONCURRENT IN FORM OR CONTRIBUTING IN THE EVENT OF LOSS WITH THAT
REQUIRED TO BE MAINTAINED UNDER THIS SECTION 6.7, UNLESS FOOTHILL IS
INCLUDED THEREON AS NAMED INSURED WITH THE LOSS PAYABLE TO FOOTHILL UNDER A
STANDARD CALIFORNIA 438BFU (NS) MORTGAGEE ENDORSEMENT, OR ITS LOCAL
EQUIVALENT. BORROWER SHALL IMMEDIATELY NOTIFY FOOTHILL WHENEVER SUCH
SEPARATE INSURANCE IS TAKEN OUT, SPECIFYING THE INSURER THEREUNDER AND FULL
PARTICULARS AS TO THE POLICIES EVIDENCING THE SAME, AND ORIGINALS OF SUCH
POLICIES SHALL IMMEDIATELY THEREAFTER BE PROVIDED TO FOOTHILL.
6.8 FINANCIAL COVENANTS. BORROWER SHALL MAINTAIN:
(A) TANGIBLE NET WORTH. TANGIBLE NET WORTH OF
AT LEAST FIFTY MILLION DOLLARS ($50,000,000), MEASURED ON A FISCAL
QUARTER-END BASIS; AND
(B) TOTAL LIABILITIES TO TANGIBLE NET WORTH
RATIO. A RATIO OF BORROWER'S TOTAL LIABILITIES DIVIDED BY TANGIBLE NET WORTH
OF NOT MORE THAN THREE TO ONE (3:1.0), MEASURED ON A FISCAL QUARTER-END
BASIS;
(C) TOTAL ADJUSTED LIABILITIES TO ADJUSTED
TANGIBLE NET WORTH RATIO. A RATIO OF BORROWER'S TOTAL LIABILITIES LESS
SUBORDINATED DEBT DIVIDED BY
37
ADJUSTED TANGIBLE NET WORTH OF NOT MORE THAN TWO POINT ZERO TO ONE
(2.0:1.0), MEASURED ON A FISCAL QUARTER-END BASIS.
6.9 NO SETOFFS OR COUNTERCLAIMS. ALL PAYMENTS
HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS MADE BY OR ON BEHALF OF
BORROWER SHALL BE MADE WITHOUT SETOFF OR COUNTERCLAIM AND FREE AND CLEAR OF,
AND WITHOUT DEDUCTION OR WITHHOLDING FOR OR ON ACCOUNT OF, ANY FEDERAL,
STATE, OR LOCAL TAXES.
6.10 COMPLIANCE WITH LAWS. BORROWER SHALL USE ITS
BEST EFFORTS TO COMPLY WITH THE REQUIREMENTS OF ALL APPLICABLE LAWS, RULES,
REGULATIONS, AND ORDERS OF ANY GOVERNMENTAL AUTHORITY, INCLUDING THE FAIR
LABOR STANDARDS ACT AND THE AMERICANS WITH DISABILITIES ACT.
6.11 EMPLOYEE BENEFITS.
(A) BORROWER SHALL DELIVER TO FOOTHILL A
WRITTEN STATEMENT BY THE CHIEF FINANCIAL OFFICER OF BORROWER SPECIFYING THE
NATURE OF ANY OF THE FOLLOWING EVENTS AND THE ACTIONS WHICH BORROWER
PROPOSES TO TAKE WITH RESPECT THERETO PROMPTLY, AND IN ANY EVENT WITHIN TEN
(10) DAYS OF BECOMING AWARE OF ANY OF THEM, AND WHEN KNOWN, ANY ACTION TAKEN
OR THREATENED BY THE INTERNAL REVENUE SERVICE, PBGC, DEPARTMENT OF LABOR, OR
OTHER PARTY WITH RESPECT THERETO: (I) AN ERISA EVENT WITH RESPECT TO ANY
PLAN; (II) THE INCURRENCE OF AN OBLIGATION TO PAY ADDITIONAL PREMIUM TO THE
PBGC UNDER SECTION 4006(A)(3)(E) OF ERISA WITH RESPECT TO ANY PLAN; AND
(III) ANY LIEN ON THE ASSETS OF BORROWER ARISING IN CONNECTION WITH ANY
PLAN.
(B) BORROWER SHALL ALSO PROMPTLY FURNISH TO
FOOTHILL COPIES PREPARED OR RECEIVED BY BORROWER OR AN ERISA AFFILIATE OF:
(I) AT THE REQUEST OF FOOTHILL, EACH ANNUAL REPORT (INTERNAL REVENUE SERVICE
FORM 5500 SERIES) AND ALL ACCOMPANYING SCHEDULES, ACTUARIAL REPORTS,
FINANCIAL INFORMATION CONCERNING THE FINANCIAL STATUS OF EACH PLAN, AND
SCHEDULES SHOWING THE AMOUNTS CONTRIBUTED TO EACH PLAN BY OR ON BEHALF OF
BORROWER OR ITS ERISA AFFILIATES FOR THE MOST RECENT THREE (3) PLAN YEARS;
(II) ALL NOTICES OF INTENT TO TERMINATE OR TO HAVE A TRUSTEE APPOINTED TO
ADMINISTER ANY PLAN; (III) ALL WRITTEN DEMANDS BY THE PBGC UNDER SUBTITLE D
OF TITLE IV OF ERISA; (IV) ALL NOTICES REQUIRED TO BE SENT TO EMPLOYEES OR
TO THE PBGC UNDER SECTION 302 OF ERISA OR SECTION 412 OF THE IRC; (V) ALL
WRITTEN NOTICES RECEIVED WITH RESPECT TO A MULTIEMPLOYER PLAN CONCERNING (X)
THE IMPOSITION OR AMOUNT OF WITHDRAWAL LIABILITY PURSUANT TO SECTION 4202 OF
ERISA, (Y) A TERMINATION DESCRIBED IN SECTION 4041A OF ERISA, OR (Z) A
REORGANIZATION OR INSOLVENCY DESCRIBED IN SUBTITLE E OF TITLE IV OF ERISA;
(VI) THE ADOPTION OF ANY NEW PLAN THAT IS SUBJECT TO TITLE IV OF ERISA OR
SECTION 412 OF THE IRC BY BORROWER OR ANY ERISA AFFILIATE; (VII) THE
ADOPTION OF ANY AMENDMENT TO ANY PLAN THAT IS SUBJECT TO TITLE IV OF ERISA
OR SECTION 412 OF THE IRC, IF SUCH AMENDMENT RESULTS IN A MATERIAL INCREASE
IN BENEFITS OR UNFUNDED BENEFIT LIABILITY; OR (VIII) THE COMMENCEMENT OF
CONTRIBUTIONS BY BORROWER OR ANY ERISA AFFILIATE TO ANY PLAN THAT IS SUBJECT
TO TITLE IV OF ERISA OR SECTION 412 OF THE IRC.
38
6.12 ENVIRONMENTAL CONDITION.
(A) BORROWER SHALL KEEP OR CAUSE THE REAL
PROPERTY TO BE KEPT FREE OF HAZARDOUS MATERIALS AND NOT CAUSE OR PERMIT THE
REAL PROPERTY TO BE USED TO GENERATE, MANUFACTURER, REFINE, TRANSPORT,
TREAT, STORE, HANDLE, DISPOSE, PRODUCE OR PROCESS HAZARDOUS MATERIALS EXCEPT
IN COMPLIANCE WITH ALL APPLICABLE ACTS.
(B) BORROWER SHALL ENSURE COMPLIANCE BY ALL
OPERATORS AND OCCUPANTS OF THE REAL PROPERTY WITH ALL APPLICABLE ACTS AND
WILL ENSURE THAT ALL SUCH OPERATORS AND OCCUPANTS OBTAIN AND COMPLY WITH ANY
AND ALL REQUIRED APPROVALS, REGISTRATIONS OR PERMITS.
(C) UPON THE REASONABLE REQUEST OF FOOTHILL,
BORROWER SHALL CONDUCT AND COMPLETE ALL INVESTIGATIONS, STUDIES, SAMPLINGS
AND TESTINGS RELATIVE TO HAZARDOUS MATERIALS AT OR AFFECTING THE REAL
PROPERTY. UPON THE WRITTEN REQUEST OF FOOTHILL FROM TIME TO TIME, BORROWER
SHALL PROVIDE FOOTHILL AT BORROWER'S SOLE COST AND EXPENSE AND WITHOUT ANY
LIABILITY TO FOOTHILL, WITH AN ENVIRONMENTAL SITE ASSESSMENT OR AN
ENVIRONMENTAL AUDIT REPORT, OR AN UPDATE OF SUCH ASSESSMENT OR REPORT, BY AN
ENVIRONMENTAL ENGINEERING FIRM ACCEPTABLE TO FOOTHILL, ALL IN SCOPE, FORM
AND CONTENT SATISFACTORY TO FOOTHILL, TO ASSESS WITH A REASONABLE DEGREE OF
CERTAINTY THE PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS AND THE POTENTIAL
COST IN CONNECTION WITH THE REMEDIATION OF ANY HAZARDOUS MATERIALS AT OR
RELATED TO THE REAL PROPERTY. UPON DEMAND OF FOOTHILL, AND AT BORROWER'S
SOLE COST AND EXPENSE, BORROWER SHALL PROMPTLY TAKE ALL ACTIONS TO REMEDIATE
THE REAL PROPERTY WHICH ARE REQUIRED BY FEDERAL, STATE OR LOCAL GOVERNMENTAL
AGENCY OR POLITICAL SUBDIVISION OR WHICH ARE REASONABLY NECESSARY TO
MITIGATE A SPILL OR A VIOLATION OF ANY ACT OR TO ALLOW FULL ECONOMIC USE OF
THE REAL PROPERTY. BORROWER SHALL TAKE ALL ACTIONS NECESSARY TO REMOVE ALL
HAZARDOUS MATERIALS FROM THE REAL PROPERTY NOTWITHSTANDING ANY LESSOR
STANDARD OF REMEDIATION ALLOWABLE UNDER ANY ACT. ALL SUCH WORK SHALL BE
PERFORMED BY ONE OR MORE CONTRACTOR SELECTED BY BORROWER AND APPROVED IN
ADVANCE AND IN WRITING BY FOOTHILL. BORROWER SHALL PROCEED CONTINUOUSLY AND
DILIGENTLY WITH SUCH INVESTIGATORY AND REMEDIAL ACTIONS, PROVIDED THAT IN
ALL CASES, SUCH ACTIONS SHALL BE IN ACCORDANCE WITH ALL APPLICABLE
REQUIREMENTS OF ALL ACTS. ANY SUCH ACTIONS SHALL BE PERFORMED IN A GOOD,
SAFE AND XXXXXXX LIKE MANNER AND SHALL MINIMIZE ANY IMPACT ON THE BUSINESS
OR OCCUPATION AT OR NEAR THE REAL PROPERTY. BORROWER SHALL PAY ALL COSTS IN
CONNECTION WITH SUCH INVESTIGATORY AND REMEDIAL ACTIVITIES, INCLUDING BUT
NOT LIMITED TO ALL POWER AND UTILITY COSTS, AND ANY AND ALL TAXES OR FEES
THAT MAY BE APPLICABLE TO SUCH ACTIVITIES. BORROWER SHALL PROMPTLY PROVIDE
TO FOOTHILL COPIES OF TESTING RESULTS AND REPORTS THAT ARE GENERATED IN
COMPLIANCE WITH THE ABOVE ACTIVITIES. PROMPTLY UPON COMPLETION OF SUCH
INVESTIGATION AND REMEDIATION, BORROWER SHALL PERMANENTLY SEAL OR CAP ALL
MONITORING XXXXX AND TEST HOLES TO INDUSTRIAL STANDARDS AND COMPLIANCE WITH
ALL ACTS, REMOVE ALL ASSOCIATED EQUIPMENT, AND RESTORE THE REAL PROPERTY TO
THE CONDITION EXISTING PRIOR TO THE COMMENCEMENT OF REMEDIATION, WHICH SHALL
INCLUDE, WITHOUT LIMITATION, THE REPAIR OF ANY SURFACE DAMAGE, INCLUDING
PAVING CAUSED BY SUCH INVESTIGATION OR REMEDIATION HEREUNDER. WITHIN TEN
39
DAYS OF DEMAND THEREFOR, BORROWER SHALL PROVIDE FOOTHILL WITH A BOND, LETTER
OF CREDIT OR SIMILAR FINANCIAL INSURANCE EVIDENCING THAT THE NECESSARY FUNDS
ARE AVAILABLE FOR THE OBLIGATIONS ESTABLISHED BY THIS SUBPARAGRAPH.
(D) SHOULD ANY PROPERTY SUBJECT TO THE NOTE
MORTGAGES VIOLATE THE PROVISIONS OF SECTIONS 6.12(A) AND (B), BORROWER SHALL
IMMEDIATELY REDEEM THE PLEDGED NOTE(S) FOR WHICH THE PROPERTY IS SECURITY AT
NINETY (90) PERCENT OF ITS OUTSTANDING PRINCIPAL BALANCE.
(E) THE OBLIGATIONS OF BORROWER AND THE
RIGHTS OF FOOTHILL WITH RESPECT TO HAZARDOUS MATERIALS ARE IN ADDITION TO
AND NOT IN SUBSTITUTION OF THE OBLIGATIONS OF BORROWER AND THE RIGHTS OF
FOOTHILL UNDER ALL APPLICABLE, FEDERAL, STATE AND LOCAL LAWS, REGULATIONS
AND ORDINANCES RELATING TO HEALTH AND SAFETY, AND PROTECTION OF THE
ENVIRONMENT. THE OBLIGATIONS OF BORROWER AND THE RIGHTS OF FOOTHILL,
NOTWITHSTANDING ANYTHING CONTAINED HEREIN OR IN ANY OTHER DOCUMENT OR
AGREEMENT WHICH MAY BE CONSTRUED TO THE CONTRARY, (I) SHALL NOT BE SUBJECT
TO ANY ANTIDEFICIENCY LAWS OR PROTECTIONS, IF ANY, (II) SHALL SURVIVE (A) A
NON-JUDICIAL SALE, JUDICIAL SALE OR DEED OR OTHER TRANSACTION IN LIEU OF
SUCH SALE HEREUNDER, AND (B) THE REPAYMENT OF THE OBLIGATIONS. IN THE EVENT
BORROWER DOES NOT TIMELY PERFORM ANY OF ITS OBLIGATIONS WITH RESPECT TO
HAZARDOUS MATERIALS, FOOTHILL MAY PERFORM SUCH OBLIGATIONS, BUT IS NOT
OBLIGATED TO, AT THE EXPENSE OF BORROWER AND SUCH EXPENSE SHALL BE ADDED TO
THE OBLIGATIONS.
6.13 SALE OF PORTIONS OF THE REAL PROPERTY. AT THE
END OF EACH OF BORROWER'S FISCAL QUARTERS (FOR THE SIX MONTH PERIOD
PRECEDING SAME), BORROWER SHALL HAVE SOLD TO QUALIFIED BUYERS SUFFICIENT
LOTS FOR EACH INDIVIDUAL PROJECT WITHIN THE REAL PROPERTY, SUCH THAT THE
PROCEEDS DURING THE PRECEDING SIX MONTH PERIOD WOULD, WHEN EXTENDED OVER A
THREE YEAR PERIOD, PAY OFF THE "PRO RATA SHARE" OF ALL LAND INVENTORY
ADVANCES. AS USED IN THIS SECTION 6.13, "PRO RATA SHARE" MEANS A SUM
ATTRIBUTABLE TO EACH INDIVIDUAL PROJECT WHICH COMPRISES THE REAL PROPERTY
WHICH IS COMPUTED BY MULTIPLYING ALL REAL PROPERTY BY A FRACTION, THE
NUMERATOR OF WHICH IS THE VALUE OF EACH PROJECT (COMPUTED IN ACCORDANCE WITH
THE LAND INVENTORY BORROWING BASE FORMULA) AND THE DENOMINATOR OF WHICH IS
THE AGGREGATE VALUE OF THE REAL PROPERTY (COMPUTED IN ACCORDANCE WITH THE
LAND INVENTORY BORROWING BASE FORMULA).
6.14 ASSIGNMENTS OF NOTE MORTGAGES.
(A) WITHIN THIRTY (30) DAYS OF FOOTHILL'S
RECEIPT OF PLEDGED NOTES, BORROWER SHALL PROVIDE FOOTHILL WITH CONFORMED
COPIES OF ALL ASSIGNMENTS OF NOTE MORTGAGES, REFLECTING THE FILING AND
RECORDING INFORMATION THEREON.
(B) WITHIN SIXTY (60) DAYS OF FOOTHILL'S
RECEIPT OF PLEDGED NOTES, BORROWER SHALL DELIVER TO FOOTHILL THE ORIGINAL
POLICIES OF TITLE INSURANCE INSURING THE NOTE MORTGAGES FOR THE PLEDGED
NOTES, AND, WHEN THE PRINCIPAL BALANCE ON ANY
40
PLEDGED NOTE IS $50,000 OR GREATER, A CLTA FORM 104 ENDORSEMENT, IN FORM AND
SUBSTANCE SATISFACTORY TO FOOTHILL.
7. NEGATIVE COVENANTS.
BORROWER COVENANTS AND AGREES THAT, SO LONG AS ANY
CREDIT HEREUNDER SHALL BE AVAILABLE AND UNTIL FULL AND FINAL PAYMENT OF THE
OBLIGATIONS, BORROWER WILL NOT DO ANY OF THE FOLLOWING WITHOUT FOOTHILL'S
PRIOR WRITTEN CONSENT:
7.1 INTENTIONALLY DELETED.
7.2 LIENS. CREATE, INCUR, ASSUME, OR PERMIT TO
EXIST, DIRECTLY OR INDIRECTLY, ANY LIEN ON OR WITH RESPECT TO ANY OF THE
COLLATERAL, WHETHER NOW OWNED OR HEREAFTER ACQUIRED, OR ANY INCOME OR
PROFITS THEREFROM, EXCEPT FOR PERMITTED LIENS.
7.3 RESTRICTIONS ON FUNDAMENTAL CHANGES. OTHER
THAN IN THE ORDINARY COURSE OF BORROWER'S BUSINESS, ENTER INTO ANY
ACQUISITION, MERGER, CONSOLIDATION, REORGANIZATION, OR RECAPITALIZATION, OR
RECLASSIFY ITS CAPITAL STOCK, OR LIQUIDATE, WIND UP, OR DISSOLVE ITSELF (OR
SUFFER ANY LIQUIDATION OR DISSOLUTION), OR CONVEY, SELL, ASSIGN, LEASE,
TRANSFER, OR OTHERWISE DISPOSE OF, IN ONE TRANSACTION OR A SERIES OF
TRANSACTIONS, ALL OR ANY SUBSTANTIAL PART OF ITS BUSINESS, PROPERTY, OR
ASSETS, WHETHER NOW OWNED OR HEREAFTER ACQUIRED, OR ACQUIRE BY PURCHASE OR
OTHERWISE ALL OR SUBSTANTIALLY ALL OF THE PROPERTIES, ASSETS, STOCK, OR
OTHER EVIDENCE OF BENEFICIAL OWNERSHIP OF ANY PERSON.
7.4 EXTRAORDINARY TRANSACTIONS AND DISPOSAL OF
ASSETS. ENTER INTO ANY TRANSACTION NOT IN THE ORDINARY AND USUAL COURSE OF
BORROWER'S BUSINESS, INCLUDING THE SALE, LEASE, OR OTHER DISPOSITION OF,
MOVING, RELOCATION, OR TRANSFER, WHETHER BY SALE OR OTHERWISE, OF ANY OF
BORROWER'S PROPERTIES, ASSETS.
7.5 CHANGE NAME. WITHOUT THIRTY (30) DAYS PRIOR
WRITTEN NOTICE TO FOOTHILL, CHANGE BORROWER'S NAME, FEIN, BUSINESS
STRUCTURE, OR IDENTITY, OR ADD ANY NEW FICTITIOUS NAME.
7.6 INTENTIONALLY DELETED.
7.7 RESTRUCTURE. WITHOUT THIRTY (30) DAYS PRIOR
WRITTEN NOTICE TO FOOTHILL, MAKE ANY CHANGE IN BORROWER'S FINANCIAL
STRUCTURE, THE PRINCIPAL NATURE OF BORROWER'S BUSINESS OPERATIONS, OR THE
DATE OF ITS FISCAL YEAR.
7.8 INTENTIONALLY DELETED.
7.9 CHANGE OF CONTROL. CAUSE, PERMIT, OR SUFFER,
DIRECTLY OR INDIRECTLY, ANY CHANGE OF CONTROL.
41
7.10 DISTRIBUTIONS. MAKE ANY DISTRIBUTION OR
DECLARE OR PAY ANY DIVIDENDS (IN CASH OR IN STOCK) ON, OR PURCHASE, ACQUIRE,
REDEEM, OR RETIRE ANY OF BORROWER'S CAPITAL STOCK, OF ANY CLASS, WHETHER NOW
OR HEREAFTER OUTSTANDING, IN ANNUAL AMOUNTS IN EXCESS OF FIFTY (50) PERCENT
OF THE THEN CURRENT EARNINGS.
7.11 ACCOUNTING METHODS. MODIFY OR CHANGE ITS
METHOD OF ACCOUNTING OR ENTER INTO, MODIFY, OR TERMINATE ANY AGREEMENT
CURRENTLY EXISTING, OR AT ANY TIME HEREAFTER ENTERED INTO WITH ANY THIRD
PARTY ACCOUNTING FIRM OR SERVICE BUREAU FOR THE PREPARATION OR STORAGE OF
BORROWER'S ACCOUNTING RECORDS WITHOUT SAID ACCOUNTING FIRM OR SERVICE BUREAU
AGREEING TO PROVIDE FOOTHILL INFORMATION REGARDING THE COLLATERAL OR
BORROWER'S FINANCIAL CONDITION. BORROWER WAIVES THE RIGHT TO ASSERT A
CONFIDENTIAL RELATIONSHIP, IF ANY, IT MAY HAVE WITH ANY ACCOUNTING FIRM OR
SERVICE BUREAU IN CONNECTION WITH ANY INFORMATION REQUESTED BY FOOTHILL
PURSUANT TO OR IN ACCORDANCE WITH THIS AGREEMENT, AND AGREES THAT FOOTHILL
MAY CONTACT DIRECTLY ANY SUCH ACCOUNTING FIRM OR SERVICE BUREAU IN ORDER TO
OBTAIN SUCH INFORMATION.
7.12 INVESTMENTS. EXCEPT IN THE ORDINARY COURSE OF
BORROWER'S BUSINESS, DIRECTLY OR INDIRECTLY MAKE OR ACQUIRE ANY BENEFICIAL
INTEREST IN (INCLUDING STOCK, PARTNERSHIP INTEREST, OR OTHER SECURITIES OF),
OR MAKE ANY LOAN, ADVANCE, OR CAPITAL CONTRIBUTION TO, ANY PERSON.
7.13 TRANSACTIONS WITH AFFILIATES. DIRECTLY OR
INDIRECTLY ENTER INTO OR PERMIT TO EXIST ANY MATERIAL TRANSACTION WITH ANY
AFFILIATE OF BORROWER EXCEPT FOR TRANSACTIONS THAT ARE IN THE ORDINARY
COURSE OF BORROWER'S BUSINESS, UPON FAIR AND REASONABLE TERMS, THAT ARE
FULLY DISCLOSED TO FOOTHILL, AND THAT ARE NO LESS FAVORABLE TO BORROWER THAN
WOULD BE OBTAINED IN ARM'S LENGTH TRANSACTION WITH A NON-AFFILIATE.
7.14 SUSPENSION. SUSPEND OR GO OUT OF A
SUBSTANTIAL PORTION OF ITS BUSINESS.
7.15 INTENTIONALLY DELETED.
7.16 USE OF PROCEEDS. USE THE PROCEEDS OF THE
ADVANCES MADE HEREUNDER FOR ANY PURPOSE OTHER THAN: (A) TO PAY TRANSACTIONAL
COSTS, FEES AND EXPENSES INCURRED IN CONNECTION WITH THIS AGREEMENT; AND (B)
THEREAFTER, CONSISTENT WITH THE TERMS AND CONDITIONS HEREOF, FOR ITS LAWFUL
AND PERMITTED CORPORATE PURPOSES.
7.17 CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE.
BORROWER WILL NOT, WITHOUT THIRTY (30) DAYS PRIOR WRITTEN NOTIFICATION TO
FOOTHILL, RELOCATE ITS CHIEF EXECUTIVE OFFICE TO A NEW LOCATION AND SO LONG
AS, AT THE TIME OF SUCH WRITTEN NOTIFICATION, BORROWER PROVIDES ANY
FINANCING STATEMENTS OR FIXTURE FILINGS NECESSARY TO PERFECT AND CONTINUE
PERFECTED FOOTHILL'S SECURITY INTERESTS AND ALSO PROVIDES TO FOOTHILL A
LANDLORD'S WAIVER IN FORM AND SUBSTANCE SATISFACTORY TO FOOTHILL.
42
7.18 USE OF FOOTHILL'S NAME. USE FOOTHILL'S NAME
OR THE NAME OF ANY PERSON, FIRM, CORPORATION OR OTHER ENTITY CONTROLLING,
CONTROLLED BY, OR UNDER COMMON CONTROL WITH FOOTHILL IN CONNECTION WITH ANY
OF BORROWER'S ACTIVITIES, EXCEPT AS SUCH MAY BE REQUIRED BY APPLICABLE LAW
OR REGULATION OF ANY GOVERNMENT OR BODY.
8. EVENTS OF DEFAULT.
ANY ONE OR MORE OF THE FOLLOWING EVENTS SHALL
CONSTITUTE AN EVENT OF DEFAULT (EACH, AN "EVENT OF DEFAULT") UNDER THIS
AGREEMENT:
8.1 IF BORROWER FAILS TO PAY WITHIN FIVE (5)
BUSINESS DAYS WHEN DUE AND PAYABLE OR WHEN DECLARED DUE AND PAYABLE, ANY
PORTION OF THE OBLIGATIONS (WHETHER OF PRINCIPAL, INTEREST (INCLUDING ANY
INTEREST WHICH, BUT FOR THE PROVISIONS OF THE BANKRUPTCY CODE, WOULD HAVE
ACCRUED ON SUCH AMOUNTS), FEES AND CHARGES DUE FOOTHILL, REIMBURSEMENT OF
FOOTHILL EXPENSES, OR OTHER AMOUNTS CONSTITUTING OBLIGATIONS);
8.2 IF BORROWER FAILS OR NEGLECTS TO PERFORM,
KEEP, OR OBSERVE ANY TERM, PROVISION, CONDITION, COVENANT, OR AGREEMENT
CONTAINED IN THIS AGREEMENT, IN ANY OF THE LOAN DOCUMENTS, OR IN ANY OTHER
PRESENT OR FUTURE AGREEMENT BETWEEN BORROWER AND FOOTHILL AND THE SAME SHALL
CONTINUE FOR A PERIOD OF FIFTEEN (15) DAYS;
8.3 IF BORROWER FAILS OR NEGLECTS TO PERFORM, KEEP
OR OBSERVE ANY TERMS, PROVISIONS, CONDITIONS, OR AGREEMENTS CONTAINED IN THE
MORTGAGES AND THE SAME SHALL CONTINUE FOR A PERIOD OF FIFTEEN (15) DAYS;
8.4 IF THERE IS A MATERIAL IMPAIRMENT OF THE
PROSPECT OF REPAYMENT OF ANY PORTION OF THE OBLIGATIONS OWING TO FOOTHILL OR
A MATERIAL IMPAIRMENT OF THE VALUE OR PRIORITY OF FOOTHILL'S SECURITY
INTERESTS IN THE COLLATERAL;
8.5 IF ANY MATERIAL PORTION OF BORROWER'S
PROPERTIES OR ASSETS IS ATTACHED, SEIZED, SUBJECTED TO A WRIT OR DISTRESS
WARRANT, OR IS LEVIED UPON, OR COMES INTO THE POSSESSION OF ANY THIRD PERSON
AND ANY SUCH ACTION IS NOT SATISFACTORILY STAYED, VACATED OR SET ASIDE
WITHIN SIXTY (60) DAYS OF SUCH ACTION;
8.6 IF AN INSOLVENCY PROCEEDING IS COMMENCED BY
BORROWER;
8.7 IF AN INSOLVENCY PROCEEDING IS COMMENCED
AGAINST BORROWER AND ANY OF THE FOLLOWING EVENTS OCCUR: (A) BORROWER
CONSENTS TO THE INSTITUTION OF THE INSOLVENCY PROCEEDING AGAINST IT; (B) THE
PETITION COMMENCING THE INSOLVENCY PROCEEDING IS NOT TIMELY CONTROVERTED;
(C) THE PETITION COMMENCING THE INSOLVENCY PROCEEDING IS NOT DISMISSED
WITHIN SIXTY (60) CALENDAR DAYS OF THE DATE OF THE FILING THEREOF; PROVIDED,
HOWEVER, THAT, DURING THE PENDENCY OF SUCH PERIOD, FOOTHILL SHALL BE
RELIEVED OF ITS OBLIGA TION TO MAKE ADDITIONAL ADVANCES HEREUNDER; (D) AN
INTERIM TRUSTEE IS APPOINTED TO TAKE POSSESSION OF ALL OR A SUBSTANTIAL
PORTION OF THE PROPERTIES OR ASSETS OF, OR TO OPERATE ALL OR ANY SUBSTANTIAL
PORTION OF THE BUSINESS OF, BORROWERAND SUCH APPOINTMENT IS NOT
43
VACATED WITHIN SIXTY (60) DAYS AFTER SUCH APPOINTMENT; OR (E) AN ORDER FOR
RELIEF SHALL HAVE BEEN ISSUED OR ENTERED THEREIN;
8.8 IF BORROWER IS ENJOINED, RESTRAINED, OR IN ANY
WAY PREVENTED BY COURT ORDER FROM CONTINUING TO CONDUCT ALL OR ANY MATERIAL
PART OF ITS BUSINESS AFFAIRS;
8.9 IF A NOTICE OF LIEN, LEVY, OR ASSESSMENT IS
FILED OF RECORD WITH RESPECT TO ANY OF BORROWER'S PROPERTIES OR ASSETS BY
THE UNITED STATES GOVERNMENT, OR ANY DEPARTMENT, AGENCY, OR INSTRUMENTALITY
THEREOF, OR BY ANY STATE, COUNTY, MUNICIPAL, OR GOVERNMENTAL AGENCY, OR IF
ANY TAXES OR DEBTS OWING AT ANY TIME HEREAFTER TO ANY ONE OR MORE OF SUCH
ENTITIES BECOMES A LIEN, WHETHER XXXXXX OR OTHERWISE, UPON ANY OF BORROWER'S
PROPERTIES OR ASSETS; PROVIDED, THE SAME IS NOT PAID ON THE PAYMENT DATE
THEREOF OR BONDED AGAINST AND DILIGENTLY CONTESTED IN GOOD FAITH BY
APPROPRIATE PROCEEDINGS;
8.10 IF A JUDGMENT OR OTHER CLAIM BECOMES A LIEN
OR ENCUMBRANCE UPON ANY MATERIAL PORTION OF BORROWER'S PROPERTIES OR ASSETS;
PROVIDED, THE SAME IS NOT PAID ON THE PAYMENT DATE THEREOF OR BONDED AGAINST
AND DILIGENTLY CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS;
8.11 IF THERE IS A DEFAULT IN ANY AGREEMENT
CONCERNING MORE THAN FIVE HUNDRED THOUSAND DOLLARS ($500,000) TO WHICH
BORROWER IS A PARTY WITH ONE OR MORE THIRD PERSONS RESULTING IN A RIGHT BY
SUCH THIRD PERSONS, TO ACCELERATE THE MATURITY OF BORROWER'S OBLIGATIONS
THEREUNDER AND THE SAME IS NOT WAIVED WITHIN FIFTEEN (15) DAYS OF THE
EXPIRATION OF APPLICABLE CURE PERIODS, IF ANY;
8.12 IF BORROWER MAKES ANY MATERIAL PAYMENT ON
ACCOUNT OF INDEBTEDNESS THAT HAS BEEN CONTRACTUALLY SUBORDINATED IN RIGHT OF
PAYMENT TO THE PAYMENT OF THE OBLIGATIONS, EXCEPT TO THE EXTENT SUCH PAYMENT
IS PERMITTED BY THE TERMS OF THE SUBORDINATION PROVISIONS APPLICABLE TO SUCH
INDEBTEDNESS;
8.13 IF ANY MATERIAL MISSTATEMENT OR
MISREPRESENTATION EXISTS NOW OR HEREAFTER IN ANY WARRANTY, REPRESENTATION,
STATEMENT, OR REPORT MADE TO FOOTHILL BY BORROWER OR ANY OFFICER, EMPLOYEE,
AGENT, OR DIRECTOR OF BORROWER, OR IF ANY SUCH WARRANTY OR REPRESENTATION IS
WITHDRAWN;
8.14 IF THE OBLIGATION OF ANY GUARANTOR OR OTHER
THIRD PERSON UNDER ANY LOAN DOCUMENT IS LIMITED IN ANY MATERIAL RESPECT OR
TERMINATED BY OPERATION OF LAW, OR TERMINATED OR PURPORTED TO BE TERMINATED
BY THE GUARANTOR OR OTHER THIRD PERSON THEREUNDER, OR ANY SUCH GUARANTOR OR
OTHER THIRD PERSON BECOMES THE SUBJECT OF AN INSOLVENCY PROCEEDING AND THE
PETITION COMMENCING THE SAME IS NOT DISMISSED WITHIN SIXTY (60) DAYS OF ITS
FILING; OR
44
8.15 (A) WITH RESPECT TO ANY PLAN, THE OCCURRENCE
OF ANY OF THE FOLLOWING WHICH COULD REASONABLY BE EXPECTED TO HAVE A
MATERIAL ADVERSE EFFECT ON THE FINANCIAL CONDITION OF BORROWER: (I) THE
VIOLATION OF ANY OF THE PROVISIONS OF ERISA; (II) THE LOSS BY A PLAN
INTENDED TO BE A QUALIFIED PLAN OF ITS QUALIFICATION UNDER SECTION 401(A) OF
THE IRC; (III) THE INCURRENCE OF LIABILITY UNDER TITLE IV OF ERISA; (IV) A
FAILURE TO MAKE FULL PAYMENT WHEN DUE OF ALL AMOUNTS WHICH, UNDER THE
PROVISIONS OF ANY PLAN OR APPLICABLE LAW, BORROWER OR ANY ERISA AFFILIATE IS
REQUIRED TO MAKE; (V) THE FILING OF A NOTICE OF INTENT TO TERMINATE A PLAN
UNDER SECTIONS 4041 OR 4041A OF ERISA; (VI) A COMPLETE OR PARTIAL WITHDRAWAL
OF BORROWER OR AN ERISA AFFILIATE FROM ANY PLAN; (VII) THE RECEIPT OF A
NOTICE BY THE PLAN ADMINISTRATOR OF A PLAN THAT THE PBGC HAS INSTITUTED
PROCEEDINGS TO TERMINATE SUCH PLAN OR APPOINT A TRUSTEE TO ADMINISTER SUCH
PLAN; (VIII) A COMMENCEMENT OR INCREASE OF CONTRIBUTIONS TO, OR THE ADOPTION
OF OR THE AMENDMENT OF, A PLAN; AND (IX) THE ASSESSMENT AGAINST BORROWER OR
ANY ERISA AFFILIATE OF A TAX UNDER SECTION 4980B OF THE IRC.
(B) THE UNFUNDED BENEFIT LIABILITY OF ALL OF
THE PLANS OF BORROWER AND ITS ERISA AFFILIATES SHALL, IN THE AGGREGATE,
EXCEED $15,000.
8.16 (A) IF THERE SHALL OCCUR DURING ANY
CONSECUTIVE TWELVE MONTH PERIOD, ONE OR MORE UNINSURED LOSSES, THEFTS,
DAMAGE OR DESTRUCTION OF THE REAL PROPERTY, OR ANY PART THEREOF, HAVING AN
AGGREGATE VALUE IN EXCESS OF THREE MILLION DOLLARS ($3,000,000); OR
(B) IF AN EVENT OF DEFAULT SHALL OCCUR UNDER ANY
MORTGAGE ON THE REAL PROPERTY, IF ANY.
DURING ANY PERIOD IN WHICH THERE IS A DEFAULT
(INCLUDING DURING THE GRACE PERIODS SET FORTH ABOVE), FOOTHILL SHALL HAVE NO
OBLIGATION TO ADVANCE FUNDS TO BORROWER UNTIL SUCH TIME AS ALL DEFAULTS ARE
CURED.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 RIGHTS AND REMEDIES. IN ADDITION TO THE
REMEDIES SET FORTH IN THE MORTGAGE, UPON THE OCCURRENCE AND DURING THE
CONTINUANCE OF AN EVENT OF DEFAULT FOOTHILL MAY, AT ITS ELECTION, WITHOUT
NOTICE OF ITS ELECTION AND WITHOUT DEMAND, DO ANY ONE OR MORE OF THE
FOLLOWING, ALL OF WHICH ARE AUTHORIZED BY BORROWER:
(A) DECLARE ALL OBLIGATIONS, WHETHER
EVIDENCED BY THIS AGREEMENT, BY ANY OF THE OTHER LOAN DOCUMENTS, OR
OTHERWISE, IMMEDIATELY DUE AND PAYABLE;
(B) CEASE ADVANCING MONEY OR EXTENDING CREDIT
TO OR FOR THE BENEFIT OF BORROWER UNDER THIS AGREEMENT, UNDER ANY OF THE
LOAN DOCUMENTS, OR UNDER ANY OTHER AGREEMENT BETWEEN BORROWER AND FOOTHILL;
45
(C) TERMINATE THIS AGREEMENT AND ANY OF THE
OTHER LOAN DOCUMENTS AS TO ANY FUTURE LIABILITY OR OBLIGATION OF FOOTHILL,
BUT WITHOUT AFFECTING FOOTHILL'S RIGHTS AND SECURITY INTERESTS IN THE
COLLATERAL AND WITHOUT AFFECTING THE OBLIGATIONS;
(D) WITHOUT NOTICE TO OR DEMAND UPON BORROWER
OR ANY GUARANTOR, MAKE SUCH PAYMENTS AND DO SUCH ACTS AS FOOTHILL CONSIDERS
NECESSARY OR REASONABLE TO PROTECT ITS SECURITY INTERESTS IN THE COLLATERAL.
BORROWER AUTHORIZES FOOTHILL TO PAY, PURCHASE, CONTEST, OR COMPROMISE ANY
ENCUMBRANCE, CHARGE, OR LIEN THAT IN FOOTHILL'S DETERMINATION APPEARS TO
CONFLICT WITH ITS SECURITY INTERESTS AND TO PAY ALL EXPENSES INCURRED IN
CONNECTION THEREWITH;
(E) WITHOUT NOTICE TO BORROWER (SUCH NOTICE
BEING EXPRESSLY WAIVED), AND WITHOUT CONSTITUTING A RETENTION OF ANY
COLLATERAL IN SATISFACTION OF AN OBLIGATION (WITHIN THE MEANING OF SECTION
9505 OF THE CODE), SET OFF AND APPLY TO THE OBLIGATIONS ANY AND ALL (I)
BALANCES AND DEPOSITS OF BORROWER HELD BY FOOTHILL, EXCEPT THOSE SENT AND
RECEIVED IN ERROR (INCLUDING ANY AMOUNTS RECEIVED IN THE LOCK BOXES), OR
(II) INDEBTEDNESS AT ANY TIME OWING TO OR FOR THE CREDIT OR THE ACCOUNT OF
BORROWER HELD BY FOOTHILL;
(F) HOLD, AS CASH COLLATERAL, ANY AND ALL
BALANCES AND DEPOSITS OF BORROWER HELD BY FOOTHILL, EXCEPT THAT SENT AND
RECEIVED IN ERROR, AND ANY AMOUNTS RECEIVED IN THE LOCK BOXES, TO SECURE THE
FULL AND FINAL REPAYMENT OF ALL OF THE OBLIGATIONS;
(G) SHIP, RECLAIM, RECOVER, STORE, FINISH,
MAINTAIN, REPAIR, PREPARE FOR SALE, ADVERTISE FOR SALE, AND SELL (IN THE
MANNER PROVIDED FOR HEREIN) THE COLLATERAL. FOOTHILL IS HEREBY GRANTED A
LICENSE OR OTHER RIGHT TO USE, WITHOUT CHARGE, BORROWER'S LABELS, PATENTS,
COPYRIGHTS, RIGHTS OF USE OF ANY NAME, TRADE SECRETS, TRADE NAMES,
TRADEMARKS, SERVICE MARKS, AND ADVERTISING MATTER, OR ANY PROPERTY OF A
SIMILAR NATURE, AS IT PERTAINS TO THE COLLATERAL, IN COMPLETING PRODUCTION
OF, ADVERTISING FOR SALE, AND SELLING ANY COLLATERAL AND BORROWER'S RIGHTS
UNDER ALL LICENSES AND ALL FRANCHISE AGREEMENTS SHALL INURE TO FOOTHILL'S
BENEFIT;
(H) SELL THE COLLATERAL AT EITHER A PUBLIC OR
PRIVATE SALE, OR BOTH, BY WAY OF ONE OR MORE CONTRACTS OR TRANSACTIONS, FOR
CASH OR ON TERMS, IN SUCH MANNER AND AT SUCH PLACES (INCLUDING BORROWER'S
PREMISES) AS FOOTHILL DETERMINES IS COMMERCIALLY REASONABLE. IT IS NOT
NECESSARY THAT THE COLLATERAL BE PRESENT AT ANY SUCH SALE;
(I) FOOTHILL SHALL GIVE NOTICE OF THE
DISPOSITION OF THE COLLATERAL AS FOLLOWS:
46
(1) FOOTHILL SHALL GIVE BORROWER AND EACH
HOLDER OF A SECURITY INTEREST IN THE COLLATERAL WHO HAS FILED WITH FOOTHILL
A WRITTEN REQUEST FOR NOTICE, A NOTICE IN WRITING OF THE TIME AND PLACE OF
PUBLIC SALE, OR, IF THE SALE IS A PRIVATE SALE OR SOME OTHER DISPOSITION
OTHER THAN A PUBLIC SALE IS TO BE MADE OF THE COLLATERAL, THEN THE TIME ON
OR AFTER WHICH THE PRIVATE SALE OR OTHER DISPOSITION IS TO BE MADE;
(2) THE NOTICE SHALL BE PERSONALLY
DELIVERED OR MAILED, POSTAGE PREPAID, TO BORROWER AS PROVIDED IN SECTION 12,
AT LEAST TEN (10) BUSINESS DAYS BEFORE THE DATE FIXED FOR THE SALE, OR AT
LEAST TEN (10) BUSINESS DAYS BEFORE THE DATE ON OR AFTER WHICH THE PRIVATE
SALE OR OTHER DISPOSITION IS TO BE MADE; NO NOTICE NEEDS TO BE GIVEN PRIOR
TO THE DISPOSITION OF ANY PORTION OF THE COLLATERAL THAT IS PERISHABLE OR
THREATENS TO DECLINE SPEEDILY IN VALUE OR THAT IS OF A TYPE CUSTOMARILY SOLD
ON A RECOGNIZED MARKET. NOTICE TO PERSONS OTHER THAN BORROWER CLAIMING AN
INTEREST IN THE COLLATERAL SHALL BE SENT TO SUCH ADDRESSES AS THEY HAVE
FURNISHED TO FOOTHILL;
(3) IF THE SALE IS TO BE A PUBLIC SALE,
FOOTHILL ALSO SHALL GIVE NOTICE OF THE TIME AND PLACE BY PUBLISHING A NOTICE
ONE TIME AT LEAST TEN (10) BUSINESS DAYS BEFORE THE DATE OF THE SALE IN A
NEWSPAPER OF GENERAL CIRCULATION IN THE COUNTY IN WHICH THE SALE IS TO BE
HELD;
(J) FOOTHILL MAY CREDIT BID AND PURCHASE AT ANY
PUBLIC SALE;
AND
(K) ANY DEFICIENCY THAT EXISTS AFTER DISPOSITION
OF THE COLLATERAL AS PROVIDED ABOVE WILL BE PAID IMMEDIATELY BY BORROWER.
ANY EXCESS WILL BE RETURNED, WITHOUT INTEREST AND SUBJECT TO THE RIGHTS OF
THIRD PERSONS, BY FOOTHILL TO BORROWER.
9.2 REMEDIES CUMULATIVE. FOOTHILL'S RIGHTS AND
REMEDIES UNDER THIS AGREEMENT, THE LOAN DOCUMENTS, AND ALL OTHER AGREEMENTS
SHALL BE CUMULATIVE. FOOTHILL SHALL HAVE ALL OTHER RIGHTS AND REMEDIES NOT
INCONSISTENT HEREWITH AS PROVIDED UNDER THE CODE, BY LAW, OR IN EQUITY. NO
EXERCISE BY FOOTHILL OF ONE RIGHT OR REMEDY SHALL BE DEEMED AN ELECTION, AND
NO WAIVER BY FOOTHILL OF ANY EVENT OF DEFAULT SHALL BE DEEMED A CONTINUING
WAIVER. NO DELAY BY FOOTHILL SHALL CONSTITUTE A WAIVER, ELECTION, OR
ACQUIESCENCE BY IT.
9.3 FORECLOSURE NOT A DISCHARGE. FORECLOSURE SHALL NOT
OPERATE AS A DISCHARGE TO BORROWER'S OBLIGATIONS TO FOOTHILL AS TO HAZARDOUS
MATERIALS AND THE INDEMNITY PROVISIONS IN SECTION 11 HEREOF; AND IN THE
EVENT BORROWER TENDERS A DEED IN LIEU OF FORECLOSURE FOR ALL OR PART OF THE
REAL PROPERTY, BORROWER SHALL DELIVER SUCH PROPERTY TO FOOTHILL (OR ITS
DESIGNEE) FREE OF ANY AND ALL HAZARDOUS MATERIALS. THE INDEMNITY PROVISIONS
IN SECTION 11 HEREOF SHALL NOT BE DISCHARGED OR AFFECTED IN ANY WAY BY
FORECLOSURE OR BY FOOTHILL'S ACCEPTANCE OF A DEED IN LIEU THEREOF, AND THE
SAME SHALL CONTINUE FOR A PERIOD EQUAL TO THE LONGEST LIVING CHILD BORN IN
LOS ANGELES COUNTY ON JANUARY 1, 1993, PLUS TWENTY-ONE (21) YEARS.
47
10. TAXES AND EXPENSES REGARDING THE COLLATERAL.
IF BORROWER FAILS TO PAY ANY MONIES (WHETHER
TAXES, RENTS, ASSESSMENTS, INSURANCE PREMIUMS, OR OTHERWISE) DUE TO THIRD
PERSONS, OR FAILS TO MAKE ANY DEPOSITS OR FURNISH ANY REQUIRED PROOF OF
PAYMENT OR DEPOSIT, ALL AS REQUIRED UNDER THE TERMS OF THIS AGREEMENT, THEN,
TO THE EXTENT THAT FOOTHILL DETERMINES THAT SUCH FAILURE BY BORROWER COULD
HAVE A MATERIAL ADVERSE EFFECT ON FOOTHILL'S INTERESTS IN THE COLLATERAL, IN
ITS DISCRETION AND WITHOUT PRIOR NOTICE TO BORROWER, FOOTHILL MAY DO ANY OR
ALL OF THE FOLLOWING: (A) MAKE PAYMENT OF THE SAME OR ANY PART THEREOF; (B)
SET UP SUCH RESERVES IN BORROWER'S LOAN ACCOUNT AS FOOTHILL DEEMS NECESSARY
TO PROTECT FOOTHILL FROM THE EXPOSURE CREATED BY SUCH FAILURE; OR (C) OBTAIN
AND MAINTAIN INSURANCE POLICIES OF THE TYPE DESCRIBED IN SECTION 6.7, AND
TAKE ANY ACTION WITH RESPECT TO SUCH POLICIES AS FOOTHILL DEEMS PRUDENT. ANY
SUCH AMOUNTS PAID BY FOOTHILL SHALL CONSTITUTE FOOTHILL EXPENSES. ANY SUCH
PAYMENTS MADE BY FOOTHILL SHALL NOT CONSTITUTE AN AGREEMENT BY FOOTHILL TO
MAKE SIMILAR PAYMENTS IN THE FUTURE OR A WAIVER BY FOOTHILL OF ANY EVENT OF
DEFAULT UNDER THIS AGREEMENT. FOOTHILL NEED NOT INQUIRE AS TO, OR CONTEST
THE VALIDITY OF, ANY SUCH EXPENSE, TAX, SECURITY INTEREST, ENCUMBRANCE, OR
LIEN AND THE RECEIPT OF THE USUAL OFFICIAL NOTICE FOR THE PAYMENT THEREOF
SHALL BE CONCLUSIVE EVIDENCE THAT THE SAME WAS VALIDLY DUE AND OWING.
11. WAIVERS; INDEMNIFICATION.
11.1 DEMAND; PROTEST; ETC. BORROWER WAIVES DEMAND,
PROTEST, NOTICE OF PROTEST, NOTICE OF DEFAULT OR DISHONOR, NOTICE OF PAYMENT
AND NONPAYMENT, NOTICE OF ANY DEFAULT, NONPAYMENT AT MATURITY, RELEASE,
COMPROMISE, SETTLEMENT, EXTENSION, OR RENEWAL OF ACCOUNTS, DOCUMENTS,
INSTRUMENTS, CHATTEL PAPER, AND GUARANTEES AT ANY TIME HELD BY FOOTHILL ON
WHICH BORROWER MAY IN ANY WAY BE LIABLE.
11.2 FOOTHILL'S LIABILITY FOR COLLATERAL. SO LONG
AS FOOTHILL COMPLIES WITH ITS OBLIGATIONS, IF ANY, UNDER SECTION 9207 OF THE
CODE, FOOTHILL SHALL NOT IN ANY WAY OR MANNER BE LIABLE OR RESPONSIBLE FOR:
(A) THE SAFEKEEPING OF THE COLLATERAL HELD BY CUSTODIAN; OR (B) ANY ACT OR
DEFAULT OF ANY CARRIER, WAREHOUSEMAN, BAILEE, FORWARDING AGENCY, OR OTHER
PERSON. ALL RISK OF LOSS, DAMAGE, OR DESTRUCTION OF THE COLLATERAL, OTHER
THAN THOSE CAUSED BY FOOTHILL'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT,
SHALL BE BORNE BY BORROWER.
11.3 INDEMNIFICATION. BORROWER AGREES TO DEFEND,
INDEMNIFY, SAVE, AND HOLD ANY INDEMNIFIED PERSON HARMLESS (UNLESS THE SAME
RESULTS FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED
PERSON) AGAINST: (A) ALL OBLIGATIONS, DEMANDS, CLAIMS, AND LIABILITIES
CLAIMED OR ASSERTED BY ANY OTHER PERSON ARISING OUT OF OR RELATING TO THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND
(B) ALL LOSSES, AND (C) ALL LOSSES (INCLUDING ATTORNEYS' FEES) SUFFERED OR
INCURRED BY ANY INDEMNIFIED PERSON, WHETHER AS A HOLDER OF SECURITY
INTERESTS IN REAL PROPERTY, AS MORTGAGEE IN POSSESSION, OR AS SUCCESSOR IN
INTEREST TO BORROWER AS OWNER OF THE REAL
48
PROPERTY BY VIRTUE OF FORECLOSURE OR ACCEPTANCE OF A DEED OR OTHER
TRANSACTION IN LIEU OF FORECLOSURE, OR AFTER PARTIAL OR TOTAL RECONVEYANCE
OF THE MORTGAGE, ARISING FROM, IN RESPECT OF, AS A CONSEQUENCE OF (WHETHER
FORESEEABLE OR UNFORESEEABLE) OR IN CONNECTION WITH ANY SPILL OR WITH THE
PRESENT USE, STORAGE, DISPOSAL, GENERATION, TRANSPORTATION OR TREATMENT OF
ANY HAZARDOUS MATERIALS AT, UNDER OR RELATED TO THE REAL PROPERTY WHETHER OR
NOT ORIGINATING OR EMANATING FROM THE REAL PROPERTY. THIS PROVISION SHALL
SURVIVE THE TERMINATION OF THIS AGREEMENT.
12. NOTICES.
UNLESS OTHERWISE PROVIDED IN THIS AGREEMENT, ALL
NOTICES OR DEMANDS BY ANY PARTY RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT SHALL BE IN WRITING AND (EXCEPT FOR FINANCIAL STATEMENTS AND OTHER
INFORMATIONAL DOCUMENTS WHICH MAY BE SENT BY FIRST-CLASS MAIL, POSTAGE
PREPAID) SHALL BE PERSONALLY DELIVERED OR SENT BY REGISTERED OR CERTIFIED
MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, OR BY PREPAID TELEX, TWX,
TELEFACSIMILE, OR TELEGRAM (WITH MESSENGER DELIVERY SPECIFIED) TO BORROWER
OR TO FOOTHILL, AS THE CASE MAY BE, AT ITS ADDRESS SET FORTH BELOW:
IF TO BORROWER: BLUEGREEN CORPORATION
0000 XXXX XXXXXX XXXX
XXXXX 000
XXXX XXXXX, XXXXXXX 00000
ATTN.: XXXX XXXXXX
IF TO FOOTHILL: FOOTHILL CAPITAL CORPORATION
00000 XXXXX XXXXXX XXXXXXXXX
XXXXX 0000
XXX XXXXXXX, XXXXXXXXXX 00000-0000
ATTN.: BUSINESS FINANCE DIVISION
MANAGER
THE PARTIES HERETO MAY CHANGE THE ADDRESS AT WHICH
THEY ARE TO RECEIVE NOTICES HEREUNDER, BY NOTICE IN WRITING IN THE FOREGOING
MANNER GIVEN TO THE OTHER. ALL NOTICES OR DEMANDS SENT IN ACCORDANCE WITH
THIS SECTION 12, OTHER THAN NOTICES BY FOOTHILL IN CONNECTION WITH SECTIONS
9504 OR 9505 OF THE CODE, SHALL BE DEEMED RECEIVED ON THE EARLIER OF THE
DATE OF ACTUAL RECEIPT OR THREE (3) DAYS AFTER THE DEPOSIT THEREOF IN THE
MAIL. BORROWER ACKNOWLEDGES AND AGREES THAT NOTICES SENT BY FOOTHILL IN
CONNECTION WITH SECTIONS 9504 OR 9505 OF THE CODE SHALL BE DEEMED SENT WHEN
DEPOSITED IN THE MAIL OR TRANSMITTED BY TELEFACSIMILE OR OTHER SIMILAR
METHOD SET FORTH ABOVE.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES
49
HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED HERETO SHALL
BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF CALIFORNIA. THE PARTIES AGREE THAT ALL ACTIONS OR
PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY
OTHER COURT IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS
AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY.
EACH OF BORROWER AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER
APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN
ACCORDANCE WITH THIS SECTION 13. BORROWER AND FOOTHILL HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER AND FOOTHILL
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED
AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
ALL DOCUMENTS, SCHEDULES, INVOICES, AGINGS, OR
OTHER PAPERS DELIVERED TO FOOTHILL MAY BE DESTROYED OR OTHERWISE DISPOSED OF
BY FOOTHILL FOUR (4) MONTHS AFTER THEY ARE DELIVERED TO OR RECEIVED BY
FOOTHILL, UNLESS BORROWER REQUESTS, IN WRITING, THE RETURN OF SAID
DOCUMENTS, SCHEDULES, OR OTHER PAPERS AND MAKES ARRANGEMENTS, AT BORROWER'S
EXPENSE, FOR THEIR RETURN. THE FOREGOING NOTWITHSTANDING, FOOTHILL SHALL NOT
DESTROY ANY OF THE PLEDGED NOTES. UPON SATISFACTION OF THE OBLIGATIONS,
FOOTHILL SHALL RETURN TO BORROWER ALL OF THE COLLATERAL THEN IN ITS OR
CUSTODIAN'S POSSESSION.
15. GENERAL PROVISIONS.
15.1 EFFECTIVENESS. THIS AGREEMENT SHALL BE
BINDING AND DEEMED EFFECTIVE WHEN EXECUTED BY BORROWER AND FOOTHILL.
15.2 SUCCESSORS AND ASSIGNS. THIS AGREEMENT SHALL
BIND AND INURE TO THE BENEFIT OF THE RESPECTIVE SUCCESSORS AND ASSIGNS OF
EACH OF THE PARTIES; PROVIDED, HOWEVER, THAT BORROWER MAY NOT ASSIGN THIS
AGREEMENT OR ANY RIGHTS OR DUTIES HEREUNDER
50
WITHOUT FOOTHILL'S PRIOR WRITTEN CONSENT AND ANY PROHIBITED ASSIGNMENT SHALL
BE ABSOLUTELY VOID. NO CONSENT TO AN ASSIGNMENT BY FOOTHILL SHALL RELEASE
BORROWER FROM ITS OBLIGATIONS. FOOTHILL MAY ASSIGN THIS AGREEMENT AND ITS
RIGHTS AND DUTIES HEREUNDER AND NO CONSENT OR APPROVAL BY BORROWER IS
REQUIRED IN CONNECTION WITH ANY SUCH ASSIGNMENT; PROVIDED, HOWEVER, THAT
FOOTHILL SHALL BE RESPONSIBLE FOR ANY COSTS ASSOCIATED THEREWITH. FOOTHILL
RESERVES THE RIGHT TO SELL, ASSIGN, TRANSFER, NEGOTIATE, OR GRANT
PARTICIPATIONS IN ALL OR ANY PART OF, OR ANY INTEREST IN FOOTHILL'S RIGHTS
AND BENEFITS HEREUNDER. IN CONNECTION WITH ANY SUCH ASSIGNMENT OR
PARTICIPATION, FOOTHILL MAY DISCLOSE ALL DOCUMENTS AND INFORMATION WHICH
FOOTHILL NOW OR HEREAFTER MAY HAVE RELATING TO BORROWER OR BORROWER'S
BUSINESS. TO THE EXTENT THAT FOOTHILL ASSIGNS ITS RIGHTS AND OBLIGATIONS
HEREUNDER TO A THIRD PERSON, FOOTHILL SHALL THEREAFTER BE RELEASED FROM SUCH
ASSIGNED OBLIGATIONS TO BORROWER AND SUCH ASSIGNMENT SHALL EFFECT A NOVATION
BETWEEN BORROWER AND SUCH THIRD PERSON. SHOULD FOOTHILL ASSIGN ALL OF ITS
RIGHTS AND OBLIGATIONS HEREUNDER TO A THIRD PARTY, THEN FOOTHILL SHALL
REFUND A PRORATED PORTION OF THE CLOSING FEE SET FORTH IN SECTION 2.7(A),
PRORATED ON THE BASIS OF THE NUMBER OF DAYS REMAINING UNTIL THE SCHEDULED
END OF THIS AGREEMENT AS THE NUMERATOR AND THE TOTAL NUMBER OF DAYS FROM THE
EFFECTIVE DATE TO THE SCHEDULED END OF THIS AGREEMENT BEING THE DENOMINATOR,
WITH SUCH FRACTION BEING THE PORTION OF THE CLOSING FEE REFUNDED.
15.3 SECTION HEADINGS. HEADINGS AND NUMBERS HAVE
BEEN SET FORTH HEREIN FOR CONVENIENCE ONLY. UNLESS THE CONTRARY IS COMPELLED
BY THE CONTEXT, EVERYTHING CONTAINED IN EACH SECTION APPLIES EQUALLY TO THIS
ENTIRE AGREEMENT.
15.4 INTERPRETATION. NEITHER THIS AGREEMENT NOR
ANY UNCERTAINTY OR AMBIGUITY HEREIN SHALL BE CONSTRUED OR RESOLVED AGAINST
FOOTHILL OR BORROWER, WHETHER UNDER ANY RULE OF CONSTRUCTION OR OTHERWISE.
ON THE CONTRARY, THIS AGREEMENT HAS BEEN REVIEWED BY ALL PARTIES AND SHALL
BE CONSTRUED AND INTERPRETED ACCORDING TO THE ORDINARY MEANING OF THE WORDS
USED SO AS TO FAIRLY ACCOMPLISH THE PURPOSES AND INTENTIONS OF ALL PARTIES
HERETO.
15.5 SEVERABILITY OF PROVISIONS. EACH PROVISION OF
THIS AGREEMENT SHALL BE SEVERABLE FROM EVERY OTHER PROVISION OF THIS
AGREEMENT FOR THE PURPOSE OF DETERMINING THE LEGAL ENFORCEABILITY OF ANY
SPECIFIC PROVISION.
15.6 AMENDMENTS IN WRITING. THIS AGREEMENT CANNOT
BE CHANGED OR TERMINATED ORALLY. ALL PRIOR AGREEMENTS, UNDERSTANDINGS,
REPRESENTATIONS, WARRANTIES, AND NEGOTIATIONS, IF ANY, ARE MERGED INTO THIS
AGREEMENT.
15.7 COUNTERPARTS; TELEFACSIMILE EXECUTION. THIS
AGREEMENT MAY BE EXECUTED IN ANY NUMBER OF COUNTERPARTS AND BY DIFFERENT
PARTIES ON SEPARATE COUNTERPARTS, EACH OF WHICH, WHEN EXECUTED AND
DELIVERED, SHALL BE DEEMED TO BE AN ORIGINAL, AND ALL OF WHICH, WHEN TAKEN
TOGETHER, SHALL CONSTITUTE BUT ONE AND THE SAME AGREEMENT. DELIVERY OF AN
EXECUTED COUNTERPART OF THIS AGREEMENT BY TELEFACSIMILE SHALL BE EQUALLY AS
EFFECTIVE AS DELIVERY OF A MANUALLY EXECUTED COUNTERPART OF THIS AGREEMENT.
ANY PARTY DELIVERING AN EXECUTED COUNTERPART OF THIS AGREEMENT BY
TELEFACSIMILE ALSO
51
SHALL DELIVER A MANUALLY EXECUTED COUNTERPART OF THIS AGREEMENT BUT THE
FAILURE TO DELIVER A MANUALLY EXECUTED COUNTERPART SHALL NOT AFFECT THE
VALIDITY, ENFORCEABILITY, AND BINDING EFFECT OF THIS AGREEMENT.
15.8 REVIVAL AND REINSTATEMENT OF OBLIGATIONS. IF
THE INCURRENCE OR PAYMENT OF THE OBLIGATIONS BY BORROWER OR ANY GUARANTOR OF
THE OBLIGATIONS OR THE TRANSFER BY EITHER OR BOTH OF SUCH PARTIES TO
FOOTHILL OF ANY PROPERTY OF EITHER OR BOTH OF SUCH PARTIES SHOULD FOR ANY
REASON SUBSEQUENTLY BE DECLARED TO BE VOID OR VOIDABLE UNDER ANY STATE OR
FEDERAL LAW RELATING TO CREDITORS' RIGHTS, INCLUDING PROVISIONS OF THE
BANKRUPTCY CODE RELATING TO FRAUDULENT CONVEYANCES, PREFERENCES, AND OTHER
VOIDABLE OR RECOVERABLE PAYMENTS OF MONEY OR TRANSFERS OF PROPERTY
(COLLECTIVELY, A "VOIDABLE TRANSFER"), AND IF FOOTHILL IS REQUIRED TO REPAY
OR RESTORE, IN WHOLE OR IN PART, ANY SUCH VOIDABLE TRANSFER, OR ELECTS TO DO
SO UPON THE REASONABLE ADVICE OF ITS COUNSEL, THEN, AS TO ANY SUCH VOIDABLE
TRANSFER, OR THE AMOUNT THEREOF THAT FOOTHILL IS REQUIRED OR ELECTS TO REPAY
OR RESTORE, AND AS TO ALL REASONABLE COSTS, EXPENSES, AND ATTORNEYS FEES OF
FOOTHILL RELATED THERETO, THE LIABILITY OF BORROWER OR SUCH GUARANTOR
AUTOMATICALLY SHALL BE REVIVED, REINSTATED, AND RESTORED AND SHALL EXIST AS
THOUGH SUCH VOIDABLE TRANSFER HAD NEVER BEEN MADE.
15.9 TITLE POLICY ENDORSEMENTS. THE PROVISIONS OF
SECTIONS 4.3(A) AND 6.14(B) NOTWITHSTANDING, BORROWER SHALL HAVE THE RIGHT,
ON A PROJECT BY PROJECT BASIS, TO CHOOSE THE FOLLOWING ALTERNATIVE TO
PROVIDING THE CLTA FORM 104 ENDORSEMENTS CALLED FOR THEREIN. BORROWER MUST
MAKE SUCH ELECTION PRIOR TO ANY SINGLE RELEASE FOR SUCH PROJECT.
IN LIEU OF PROVIDING THE CLTA FORM 104 ENDORSEMENT
CONCURRENTLY WITH THE RELEASE, BORROWER MAY ELECT INSTEAD TO PROVIDE
CONTINUING QUARTERLY EVIDENCE, IN FORM AND SUBSTANCE SATISFACTORY TO
FOOTHILL, OF THE CONTINUED VALIDITY AND PRIORITY OF FOOTHILL'S LIEN ON THE
REMAINING PARCELS WITH SUCH PROJECT. THE FAILURE TO PROVIDE SUCH EVIDENCE,
OR SHOULD THERE BE AN IMPAIRMENT OF LIEN, SHALL CONSTITUTE AN EVENT OF
DEFAULT HEREUNDER.
15.10 INTEGRATION. THIS AGREEMENT, TOGETHER WITH
THE OTHER LOAN DOCUMENTS, REFLECTS THE ENTIRE UNDERSTANDING OF THE PARTIES
WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY AND SHALL NOT BE
CONTRADICTED OR QUALIFIED BY ANY OTHER AGREEMENT, ORAL OR WRITTEN, WHETHER
BEFORE OR AFTER THE DATE HEREOF.
52
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE CAUSED THIS
AGREEMENT TO BE EXECUTED IN LOS ANGELES, CALIFORNIA.
"FOOTHILL"
OTHILL CAPITAL CORPORATION,
A CALIFORNIA CORPORATION
BY
-------------------------------------------
TITLE:
------------------------------------
"BORROWER"
BLUEGREEN CORPORATION, F/K/A XXXXXX
CORPORATION, A MASSACHUSETTS CORPORATION
BY
-------------------------------------------
TITLE:
------------------------------------
53
SCHEDULE P-1
PERMITTED LIENS
54
SCHEDULE PN-A
-------------
PLEDGED A NOTES STANDARDS
1. FOOTHILL HAS A VALID, DIRECT AND PERFECTED FIRST
LIEN/SECURITY INTERESTS IN THE NOTE AND SECURITY THEREFORE AND AS A VALID
AND PERFECTED FIRST PRIORITY RIGHT TO PAYMENTS ARISING THEREUNDER.
2. THE MAKER OF SUCH A NOTE IS NOT A DIRECTOR, OFFICER,
THEIR AGENTS, EMPLOYEES OR CREDITORS, OR ANY RELATIVE OR AFFILIATE OF
BORROWER OR THE FOREGOING.
3. BORROWER HAS RECEIVED FROM THE PURCHASER A MINIMUM CASH
DOWN PAYMENT OF 10% OF THE TOTAL SALES PRICE, NO PART OF WHICH, TO
BORROWER'S KNOWLEDGE, HAD BEEN ADVANCED OR LOANED TO SUCH PURCHASER OR
BORROWER, DIRECTLY OR INDIRECTLY AND THE AVERAGE DOWN PAYMENT OF THE ENTIRE
PORTFOLIO OF PLEDGED NOTES MUST BE AT LEAST 20%.
4. THE NOTES MUST PROVIDE FOR CONSECUTIVE BI-WEEKLY OR
MONTHLY INSTALLMENTS OF PRINCIPAL AND INTEREST IN U.S. FUNDS OVER A TERM NOT
EXCEEDING ONE HUNDRED EIGHTY (180) MONTHS FROM THE DATE OF ITS EXECUTION;
PROVIDED, HOWEVER, THE AVERAGE REMAINING TERM OF THE ENTIRE PORTFOLIO OF
PLEDGED NOTES IS NO GREATER THAN ONE HUNDRED TWENTY MONTHS (120).
5. THE PLEDGED NOTES MUST PROVIDE FOR AN INTEREST RATE OF
AT LEAST EIGHT PERCENT (8%) PER ANNUM, IF FIXED, OR REFERENCE RATE PLUS TWO
PERCENT (2%) IF VARIABLE, PROVIDED, HOWEVER, THAT THE BLENDED RATE OF
INTEREST FOR THE ENTIRE PORTFOLIO OF PLEDGED NOTES SHALL NOT BE LESS THAN
THE REFERENCE RATE PLUS ONE POINT FIVE (1.5%).
6. NOTES GENERATED BY PURCHASERS OF REAL PROPERTY IN NEW
YORK, CONNECTICUT, RHODE ISLAND, VERMONT, NEW HAMPSHIRE, PENNSYLVANIA OR
MAINE WHICH PROVIDE FOR AN INTEREST RATE DURING THE FIRST TWO YEARS OF PRIME
PLUS TWO HUNDRED (200) BASIS POINTS, AND INTEREST THEREAFTER OF AT LEAST
PRIME PLUS THREE HUNDRED AND FORTY (340) BASIS POINTS WILL BE ACCEPTABLE, IF
ALL OTHER STANDARDS ARE MET.
7. FOOTHILL, IN ITS SOLE AND ABSOLUTE DISCRETION, MAY,
FROM TIME TO TIME, REQUIRE THAT THE INSTRUMENT IS AT LEAST THIRTY DAYS AGED
FROM THE DATE OF ITS EXECUTION, AND AT LEAST ONE MONTHLY INSTALLMENT PAYMENT
HAS BEEN MADE.
8. THE MAKER OF THE PLEDGED NOTE IS ACCEPTABLE TO FOOTHILL
FOR CREDIT PURPOSES IN ITS SOLE JUDGMENT; HAS OR WILL ACQUIRE MARKETABLE
TITLE TO A PURCHASE PARCEL FROM BORROWER; AND HAS NOT PURCHASED MORE THAN
FOUR PARCELS IN ANY PROJECT.
55
9. NO NOTE WILL BE DELINQUENT MORE THAN THIRTY-ONE (31)
DAYS PAST ITS DUE DATE AT THE TIME OF THE ADVANCE.
10. THE NOTE AND THE MORTGAGE SECURING THE SAME ARE
SATISFACTORY TO FOOTHILL AND VALIDLY ENFORCEABLE IN ACCORDANCE WITH THEIR
TERMS; UPON THE OBLIGORS DEFAULT UNDER THE INSTRUMENT, SUBJECT ONLY TO
NOTICE IN A REASONABLE GRACE PERIOD, PAYMENT OF THE BALANCE OF THE
INDEBTEDNESS OWING UNDER THE NOTE MAY BE IMMEDIATELY ACCELERATED AND THE
LIEN OF THE MORTGAGE SECURING THE SAME MAY BE FORECLOSED; THE NOTE MORTGAGE
HAS BEEN RECORDED IN THE APPROPRIATE REAL ESTATE RECORDS WHERE THE PURCHASED
PARCEL IS LOCATED; AND THE LIEN OF THE PURCHASE MORTGAGE IS SUBJECT ONLY TO
PERMITTED ENCUMBRANCES AND COVENANTS, CONDITIONS, AND RESTRICTIONS, RIGHTS
OF WAY AND OTHER MATTERS OF PUBLIC RECORD ACCEPTABLE TO LENDER IN THEIR SOLE
JUDGMENT.
11. ALL LOT SITE IMPROVEMENTS, IF ANY, WHICH HAVE BEEN
COVENANTED TO BE PROVIDED TO THE MAKER OF THE NOTE SHALL HAVE BEEN PROVIDED,
COMPLETED, OR BONDED.
12. THE NOTE IN THE APPLICABLE SALES TRANSACTION COMPLIED
WITH ALL APPLICABLE LAWS AND THE PURCHASER DOES NOT HAVE ANY RIGHT OF
RESCISSION OR SETOFF, OR THE LIKE.
13. THE PLEDGED NOTES MUST BE FROM A DIVERSE GROUP OF
PROPERTIES AND FROM A DIVERSE GEOGRAPHIC AREA. AT LEAST 90% OF THE
PURCHASERS OR THE MAKERS OF THE NOTES MUST BE CITIZENS OF THE UNITED STATES
OR OF CANADA.
14. ALL PLEDGED NOTES MUST BE PAYABLE IN UNITED STATES
LEGAL TENDER.
15. NO SINGLE PLEDGED NOTE CAN BE OF A PRINCIPAL AMOUNT
SUCH THAT THE ADVANCE MADE ON SUCH NOTE WOULD EXCEED ONE MILLION DOLLARS
($1,000,000).
16. NO SINGLE PLEDGED NOTE CAN BE OF A PRINCIPAL AMOUNT
SUCH THAT THE ADVANCE MADE ON SUCH NOTE EQUALS OR EXCEEDS FIFTY PERCENT
(50%) OF THE OUTSTANDING A LINE ADVANCES AND B LINE ADVANCES THEN
OUTSTANDING, WITHOUT TAKING INTO EFFECT THE PROPOSED ADVANCE ON SUCH NOTE.
17. POLICIES OF TITLE INSURANCE, IN FORM REASONABLY
SATISFACTORY TO FOOTHILL, SHALL BE DELIVERED TO FOOTHILL WITHIN SIXTY (60)
DAYS OF DELIVERY OF EACH NOTE MORTGAGE.
18. FOR NOTES GENERATED BY AFFILIATES OF BORROWER,
FOOTHILL SHALL BE SATISFIED WITH THE ASSIGNMENT DOCUMENTS TRANSFERRING SUCH
NOTE TO BORROWER, AND THE CERTIFICATE SET FORTH IN SECTION 3.2(C) HEREOF.
56
SCHEDULE PN-B
-------------
PLEDGED B NOTES STANDARDS
1. FOOTHILL HAS A VALID, DIRECT AND PERFECTED FIRST
LIEN/SECURITY INTERESTS IN THE NOTE AND SECURITY THEREFORE AND AS A VALID
AND PERFECTED FIRST PRIORITY RIGHT TO PAYMENTS ARISING THEREUNDER.
2. THE MAKER OF SUCH A NOTE IS NOT A DIRECTOR, OFFICER,
THEIR AGENTS, EMPLOYEES OR CREDITORS, OR ANY RELATIVE OR AFFILIATE OF
BORROWER OR THE FOREGOING.
3. BORROWER HAS RECEIVED FROM THE PURCHASER A MINIMUM CASH
DOWN PAYMENT OF 10% OF THE TOTAL SALES PRICE, NO PART OF WHICH, TO
BORROWER'S KNOWLEDGE, HAD BEEN ADVANCED OR LOANED TO SUCH PURCHASER OR
BORROWER, DIRECTLY OR INDIRECTLY AND THE AVERAGE DOWN PAYMENT OF THE ENTIRE
PORTFOLIO OF PLEDGED NOTES MUST BE AT LEAST 20%.
4. THE PLEDGED NOTES MUST PROVIDE FOR AN INTEREST RATE OF
AT LEAST EIGHT PERCENT (8%) PER ANNUM, IF FIXED, OR REFERENCE RATE PLUS TWO
PERCENT (2%) IF VARIABLE, PROVIDED, HOWEVER, THAT THE BLENDED RATE OF
INTEREST FOR THE ENTIRE PORTFOLIO OF PLEDGED NOTES SHALL NOT BE LESS THAN
THE REFERENCE RATE PLUS ONE POINT FIVE PERCENT (1.5%).
5. NOTES GENERATED BY PURCHASERS OF REAL PROPERTY IN NEW
YORK, CONNECTICUT, RHODE ISLAND, VERMONT, NEW HAMPSHIRE, PENNSYLVANIA OR
MAINE WHICH PROVIDE FOR AN INTEREST RATE DURING THE FIRST TWO YEARS OF PRIME
PLUS TWO HUNDRED (200) BASIS POINTS, AND INTEREST THEREAFTER OF AT LEAST
PRIME PLUS THREE HUNDRED AND FORTY (340) BASIS POINTS WILL BE ACCEPTABLE, IF
ALL OTHER STANDARDS ARE MET.
6. FOOTHILL, IN ITS SOLE AND ABSOLUTE DISCRETION, MAY,
FROM TIME TO TIME, REQUIRE THAT THE INSTRUMENT IS AT LEAST THIRTY DAYS AGED
FROM THE DATE OF ITS EXECUTION, AND AT LEAST ONE MONTHLY INSTALLMENT PAYMENT
HAS BEEN MADE.
7. THE MAKER OF THE PLEDGED NOTE IS ACCEPTABLE TO FOOTHILL
FOR CREDIT PURPOSES IN ITS SOLE JUDGMENT; HAS OR WILL ACQUIRE MARKETABLE
TITLE TO A PURCHASE PARCEL FROM BORROWER; AND HAS NOT PURCHASED MORE THAN
FOUR PARCELS IN ANY PROJECT.
8. NO NOTE WILL BE DELINQUENT MORE THAN THIRTY-ONE (31)
DAYS PAST ITS DUE DATE AT THE TIME OF THE ADVANCE.
9. THE NOTE AND THE MORTGAGE SECURING THE SAME ARE
SATISFACTORY TO FOOTHILL AND VALIDLY ENFORCEABLE IN ACCORDANCE WITH THEIR
TERMS; UPON THE OBLIGORS DEFAULT UNDER THE INSTRUMENT, SUBJECT ONLY TO
NOTICE IN A REASONABLE GRACE PERIOD, PAYMENT OF THE BALANCE OF THE
INDEBTEDNESS OWING UNDER THE NOTE MAY BE IMMEDIATELY ACCELERATED AND
57
THE LIEN OF THE MORTGAGE SECURING THE SAME MAY BE FORECLOSED; THE NOTE
MORTGAGE HAS BEEN RECORDED IN THE APPROPRIATE REAL ESTATE RECORDS WHERE THE
PURCHASED PARCEL IS LOCATED; AND THE LIEN OF THE PURCHASE MORTGAGE IS
SUBJECT ONLY TO PERMITTED ENCUMBRANCES AND COVENANTS, CONDITIONS, AND
RESTRICTIONS, RIGHTS OF WAY AND OTHER MATTERS OF PUBLIC RECORD ACCEPTABLE TO
LENDER IN THEIR SOLE JUDGMENT.
10. ALL LOT SITE IMPROVEMENTS, IF ANY, WHICH HAVE BEEN
COVENANTED TO BE PROVIDED TO THE MAKER OF THE NOTE SHALL HAVE BEEN PROVIDED,
COMPLETED, OR BONDED.
11. THE NOTE IN THE APPLICABLE SALES TRANSACTION COMPLIED
WITH ALL APPLICABLE LAWS AND THE PURCHASER DOES NOT HAVE ANY RIGHT OF
RESCISSION OR SETOFF, OR THE LIKE.
12. THE PLEDGED NOTES MUST BE FROM A DIVERSE GROUP OF
PROPERTIES AND FROM A DIVERSE GEOGRAPHIC AREA. AT LEAST 90% OF THE
PURCHASERS OR THE MAKERS OF THE NOTES MUST BE CITIZENS OF THE UNITED STATES
OR OF CANADA.
13. ALL PLEDGED NOTES MUST BE PAYABLE IN UNITED STATES
LEGAL TENDER.
14. NO SINGLE PLEDGED NOTE CAN BE OF A PRINCIPAL AMOUNT
SUCH THAT THE ADVANCE MADE ON SUCH NOTE WOULD EXCEED ONE MILLION DOLLARS
($1,000,000).
15. NO SINGLE PLEDGED NOTE CAN BE OF A PRINCIPAL AMOUNT
SUCH THAT THE ADVANCE MADE ON SUCH NOTE EQUALS OR EXCEEDS FIFTY PERCENT
(50%) OF THE OUTSTANDING B LINE ADVANCES AND A LINE ADVANCES THEN
OUTSTANDING, WITHOUT TAKING INTO EFFECT THE PROPOSED ADVANCE ON SUCH NOTE.
16. POLICIES OF TITLE INSURANCE, IN FORM REASONABLY
SATISFACTORY TO FOOTHILL, SHALL BE DELIVERED TO FOOTHILL WITHIN SIXTY (60)
DAYS OF DELIVERY OF EACH NOTE MORTGAGE.
17. FOR NOTES GENERATED BY AFFILIATES OF BORROWER,
FOOTHILL SHALL BE SATISFIED WITH THE ASSIGNMENT DOCUMENTS TRANSFERRING SUCH
NOTE TO BORROWER, AND THE CERTIFICATE SET FORTH IN SECTION 3.2(C) HEREOF.
58
SCHEDULE R-1
------------
REAL PROPERTY SECURITY LEGAL DESCRIPTIONS
59
SCHEDULE 5.12
-------------
EXISTING OR THREATENED LITIGATION
