EXHIBIT 10.25
Published CUSIP Number: ________________
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TERM LOAN AGREEMENT
Dated as of April 12, 2006
among
KB HOME
as Borrower
THE BANKS PARTY HERETO
CITICORP NORTH AMERICA, INC.
as Administrative Agent
CITIGROUP GLOBAL MARKETS INC. and
CALYON NEW YORK BRANCH
as Joint Lead Arrangers and Joint Book Managers
and
CALYON NEW YORK BRANCH
as Syndication Agent
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS......................................... 1
1.1 Defined Terms................................................... 1
1.2 Accounting Terms................................................ 26
1.3 Rounding........................................................ 27
1.4 Other Interpretive Provisions................................... 27
1.5 Exhibits and Schedules.......................................... 28
1.6 References to "Borrower and its Subsidiaries"................... 28
1.7 Time of Day..................................................... 28
ARTICLE II
LOANS.................................................................... 28
2.1 Loans-General................................................... 28
2.2 Borrowing Base.................................................. 29
ARTICLE III
PAYMENTS AND FEES........................................................ 30
3.1 Principal and Interest.......................................... 30
3.2 Other Fees...................................................... 32
3.3 Capital Adequacy................................................ 32
3.4 Eurodollar Fees and Costs....................................... 33
3.5 Late Payments/Default Interest.................................. 35
3.6 Computation of Interest and Fees................................ 35
3.7 Holidays........................................................ 35
3.8 Payment Free of Taxes........................................... 35
3.9 Funding Sources................................................. 37
3.10 Failure to Charge or Making of Payment Not Subsequent Waiver.... 38
3.11 Time and Place of Payments; Evidence of Payments; Application
of Payments..................................................... 38
3.12 Administrative Agent's Right to Assume Payments Will be Made.... 38
3.13 Survivability................................................... 39
3.14 Bank Calculation Certificate.................................... 39
3.15 Designation of a Different Lending Office....................... 39
ARTICLE IV
REPRESENTATIONS AND WARRANTIES........................................... 39
4.1 Existence and Qualification; Power; Compliance with Law......... 39
4.2 Authority; Compliance with Other Instruments and Government
Regulations..................................................... 40
4.3 No Governmental Approvals Required.............................. 40
4.4 Subsidiaries.................................................... 40
4.5 Financial Statements............................................ 41
4.6 No Other Liabilities; No Material Adverse Effect................ 41
4.7 Title to Assets................................................. 41
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4.8 Intangible Assets............................................... 42
4.9 Existing Indebtedness and Contingent Guaranty Obligations....... 42
4.10 Governmental Regulation......................................... 42
4.11 Litigation...................................................... 42
4.12 Binding Obligations............................................. 42
4.13 No Default...................................................... 43
4.14 Pension Plans................................................... 43
4.15 Tax Liability................................................... 43
4.16 Regulation U.................................................... 43
4.17 Environmental Matters........................................... 43
4.18 Disclosure...................................................... 43
4.19 Projections..................................................... 43
4.20 ERISA Compliance................................................ 43
4.21 Solvency........................................................ 44
4.22 Tax Shelter Regulations......................................... 44
ARTICLE V
AFFIRMATIVE COVENANTS (OTHER THAN INFORMATION AND REPORTING
REQUIREMENTS)............................................................ 44
5.1 Payment of Taxes and Other Potential Liens...................... 44
5.2 Preservation of Existence....................................... 45
5.3 Maintenance of Properties....................................... 45
5.4 Maintenance of Insurance........................................ 45
5.5 Compliance with Laws............................................ 45
5.6 Inspection Rights............................................... 45
5.7 Keeping of Records and Books of Account......................... 46
5.8 Use of Proceeds................................................. 46
5.9 Subsidiary Guaranty............................................. 46
ARTICLE VI
NEGATIVE COVENANTS....................................................... 46
6.1 Payment or Prepayment of Subordinated Obligations............... 46
6.2 [Intentionally Omitted]......................................... 46
6.3 Mergers and Sale of Assets...................................... 47
6.4 Investments and Acquisitions.................................... 47
6.5 ERISA Compliance................................................ 48
6.6 Change in Business.............................................. 48
6.7 Liens and Negative Pledges...................................... 48
6.8 Transactions with Affiliates.................................... 50
6.9 Consolidated Tangible Net Worth................................. 50
6.10 Consolidated Leverage Ratio..................................... 50
6.11 Consolidated Interest Coverage Ratio............................ 50
6.12 Distributions................................................... 50
6.13 Amendments...................................................... 50
6.14 [Intentionally Omitted]......................................... 51
6.15 Inventory....................................................... 51
6.16 Investment in Subsidiaries and Joint Ventures................... 51
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6.17 Senior Indebtedness Not to Exceed Borrowing Base................ 51
6.18 Maximum Speculative Units....................................... 51
6.19 Regulation U.................................................... 51
ARTICLE VII
INFORMATION AND REPORTING REQUIREMENTS................................... 51
7.1 Financial and Business Information of Borrower and Its
Subsidiaries.................................................... 51
7.2 Compliance Certificate.......................................... 54
ARTICLE VIII
CONDITIONS TO MAKING LOANS............................................... 55
8.1 Conditions to Making Loans...................................... 55
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES UPON EVENTS OF DEFAULT.................... 56
9.1 Events of Default............................................... 56
9.2 Remedies Upon Event of Default.................................. 58
ARTICLE X
THE ADMINISTRATIVE AGENT................................................. 59
10.1 Appointment and Authorization................................... 59
10.2 Delegation of Duties............................................ 60
10.3 Liability of Administrative Agent............................... 60
10.4 Reliance by Administrative Agent................................ 60
10.5 Notice of Default............................................... 61
10.6 Credit Decision; Disclosure of Information by Administrative
Agent........................................................... 61
10.7 Indemnification of Administrative Agent......................... 62
10.8 Administrative Agent in its Individual Capacity................. 62
10.9 Successor Administrative Agent.................................. 62
10.10 Administrative Agent May File Proofs of Claim................... 63
10.11 Guaranty Matters................................................ 64
10.12 Other Agents; Arrangers and Managers............................ 64
10.13 Defaulting Banks................................................ 64
10.14 No Obligations of Borrower...................................... 65
ARTICLE XI
MISCELLANEOUS............................................................ 65
11.1 Cumulative Remedies; No Waiver.................................. 65
11.2 Amendments; Consents............................................ 66
11.3 Costs, Expenses and Taxes....................................... 66
11.4 Nature of Banks' Obligations.................................... 67
11.5 Survival of Representations and Warranties...................... 67
11.6 Notices and Other Communications; Facsimile Copies.............. 68
11.7 Execution in Counterparts; Facsimile Delivery................... 69
11.8 Successors and Assigns.......................................... 70
11.9 Sharing of Setoffs.............................................. 72
11.10 Indemnification by the Borrower................................. 72
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11.11 Nonliability of Banks........................................... 73
11.12 Confidentiality................................................. 73
11.13 No Third Parties Benefited...................................... 74
11.14 Other Dealings.................................................. 75
11.15 Right of Setoff - Deposit Accounts.............................. 75
11.16 Further Assurances.............................................. 75
11.17 Integration..................................................... 75
11.18 Governing Law................................................... 75
11.19 Severability of Provisions...................................... 76
11.20 Headings........................................................ 76
11.21 Conflict in Loan Documents...................................... 76
11.22 Waiver of Right to Trial by Jury................................ 76
11.23 Purported Oral Amendments....................................... 76
11.24 Payments Set Aside.............................................. 76
11.25 Hazardous Materials Indemnity................................... 77
11.26 USA PATRIOT Act Notice.......................................... 77
11.27 Replacement of Banks............................................ 77
Exhibits
A - Assignment and Assumption
B - Borrowing Base Certificate
C - Compliance Certificate
D - Conversion or Continuation Notice
E - Note
F-1 - Opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
F-2 - Opinion of In-House Counsel
F-3 - Opinion of Nevada Counsel
F-4 - Opinion of Arizona Counsel
F-5 - Opinion of Texas Counsel
F-6 - Opinion of Colorado Counsel
G - Subsidiary Guaranty
Schedules
1.1 Pro Rata Shares
4.4 Subsidiaries
4.7 Existing Liens and Rights of Others
4.9 Existing Indebtedness and Contingent Obligations
6.4 Investments
11.6 Notices
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TERM LOAN AGREEMENT
Dated as of April 12, 2006
This Term Loan Agreement (as it may from time to time be supplemented,
modified, amended, renewed, extended or supplanted, this "Agreement"), dated as
of April 12, 2006, is entered into by and among KB HOME, a Delaware corporation
("Borrower"), each financial institution set forth on the signature pages of
this Agreement or which from time to time becomes party hereto (collectively,
the "Banks" and individually, a "Bank"), Citicorp North America, Inc., as
Administrative Agent, Citigroup Global Markets Inc. and Calyon New York Branch,
as Joint Lead Arrangers and Joint Book Managers, and Calyon New York Branch as
Syndication Agent.
RECITALS
WHEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto covenant and agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the meanings set forth below:
"Acquisition" means any transaction, or any series of related transactions,
consummated after the Closing Date, by which Borrower or any of its Subsidiaries
directly or indirectly (a) acquires any ongoing business or all or substantially
all of the assets of any firm, corporation, partnership or limited liability
company, joint venture or other business entity or division thereof, whether
through purchase of assets, merger or otherwise, (b) acquires control of
securities of a corporation representing 50% or more of the ordinary voting
power for the election of directors or (c) acquires control of a 50% or more
ownership interest in any firm, corporation, partnership, limited liability
company, joint venture or other business entity.
"Administrative Agent" means Citicorp North America, Inc. in its capacity
as administrative agent under this Agreement and the other Loan Documents, or
any successor administrative agent.
"Administrative Agent's Account" means (a) the account of the
Administrative Agent maintained by the Administrative Agent at Citibank, N.A. at
its office at ▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
Bank Loan Syndications Department (▇▇▇▇▇▇▇ ▇▇▇▇), Account Number ▇▇▇▇▇▇▇▇, ABA
021-00-0089, Account Name - Agency/Medium Term Finance, Reference - KB Home or
(b) such other account of the Administrative Agent as is designated in writing
from time to time by the Administrative Agent to the Borrower for such purpose.
"Administrative Agent's Office" means the Administrative Agent's address
set forth on Schedule 11.6, or such other address as the Administrative Agent
may, from time to time, notify the Borrower and the Banks.
"Administrative Questionnaire" means an Administrative Questionnaire in a
form supplied by the Administrative Agent to the Banks.
"Affiliate" means, with respect to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (including its
correlative meanings, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise); provided
that, in any event, any Person which owns directly or indirectly 10% or more of
the securities having ordinary voting power for the election of directors or
other governing body of a corporation that has more than 100 record holders of
such securities or 10% or more of the partnership or other ownership interests
of any other Person that has more than 100 record holders of such interests will
be deemed to control such corporation or other Person.
"Agent Parties" has the meaning set forth in Section 11.6(c).
"Agent-Related Persons" means the Administrative Agent, together with its
Affiliates (including Citicorp North America, Inc. in its capacity as the
Administrative Agent and CGMI in its capacity as an Arranger), and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Agreement" has the meaning set forth in the first paragraph hereof.
"Applicable Base Rate Spread" means the applicable per annum percentage set
forth in the definition of "Applicable Rates".
"Applicable Eurodollar Rate Spread" means the applicable per annum
percentage set forth in the definition of "Applicable Rates".
"Applicable Pricing Level" means, for any day, the Applicable Pricing Level
that is determined in accordance with Borrower's Debt Rating and Consolidated
Leverage Ratio, as appropriate, on such date as follows:
Applicable
Pricing Level Debt Ratings Consolidated Leverage Ratio
------------- ------------ ---------------------------
I BBB/Baa2 or better < or =0.75:1
II BBB-/Baa3 >0.75:1 but < or =1.00:1
III BB+/Ba1 >1.00:1 but < or =1.25:1
IV BB/Ba2 >1.25:1 but < or =1.75:1
V BB-/Ba3 or worse or no rating >1.75:1
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Borrower must, pursuant to Section 7.1(j), provide the Administrative Agent
with notice of each change in the Applicable Pricing Level that is due to any
change in a Debt Rating. Any change in the Applicable Pricing Level resulting
from a change in the Consolidated Leverage Ratio shall be effective as of the
first Business Day immediately following the date a Compliance Certificate is
delivered pursuant to Section 7.2; provided, however, that if a Compliance
Certificate is not delivered on or prior to a date required by Section 7.2, and
if the Compliance Certificate indicates that the Applicable Pricing Level of
Borrower will increase (i.e., becomes less favorable to Borrower), the date of
increase in the Applicable Pricing Level will be deemed to be the date upon
which such Compliance Certificate was due under Section 7.2, not the date upon
which such Compliance Certificate was delivered.
In the event that there is a difference in the Applicable Pricing Levels
determined by the Debt Ratings and the Consolidated Leverage Ratio,
respectively, the lower of such Applicable Pricing Levels shall apply (with the
Applicable Pricing Level I being the lowest and the Applicable Pricing Level V
being the highest), unless there is a difference in the Applicable Pricing
Levels (as indicated by the Debt Ratings and the Consolidated Leverage Ratio) of
more than one level, in which case, the Applicable Pricing Level that is one
level lower than the Applicable Pricing Level of the higher Applicable Pricing
Level shall apply.
"Applicable Rates" means, as of any date of determination, the following
percentages per annum, based upon the Applicable Pricing Level on that date:
Applicable Applicable Base Applicable Eurodollar
Pricing Level Rate Spread Rate Spread
------------- --------------- ---------------------
I 0.000% 0.500%
II 0.000% 0.625%
III 0.000% 0.750%
IV 0.000% 1.000%
V 0.375% 1.375%
"Arrangers" means CGMI and Calyon, in their capacity as joint lead
arrangers and joint book managers.
"Assignee Group" means two or more Eligible Assignees that are Affiliates
of one another.
"Assignment and Assumption" means an assignment and assumption
substantially in the form of Exhibit A.
"Associate" shall have the meaning ascribed to such term in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act, as in effect on the
date hereof.
"Attorney Costs" means and includes all reasonable fees, expenses and
disbursements of any law firm or other external counsel.
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"Authorizations" has the meaning set forth for that term in Section 4.1.
"Bank" means each financial institution whose name is set forth in the
signature pages of this Agreement and each lender which may hereafter become a
party to this Agreement pursuant to Section 11.8.
"Base Rate" means for any day a fluctuating rate per annum equal to the
higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest
in effect for such day as publicly announced from time to time by Citibank, N.A.
in New York, New York, as its "prime rate." Any change in such rate announced by
Citibank, N.A. in New York, New York, shall take effect at the opening of
business on the day specified in the public announcement of such change.
"Base Rate Loan" means a Loan that bears interest at a rate based on the
Base Rate.
"Borrower" means KB Home, a Delaware corporation, and its successors and
permitted assigns.
"Borrower Materials" has the meaning set forth in Section 7.1.
"Borrowing Base" has the meaning set forth in Section 2.3(b).
"Borrowing Base Certificate" means a written calculation of the Borrowing
Base, substantially in the form of Exhibit B signed, on behalf of Borrower by a
Senior Officer of Borrower.
"Borrowing Base Subsidiary" means (a) any Guarantor Subsidiary and (b) any
direct or indirect wholly-owned Domestic Subsidiary of Borrower or any Guarantor
Subsidiary.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks are authorized to close under the Laws of, or are in fact
closed in, the state of New York, the state where the Administrative Agent's
Office is located and, if such day relates to any Eurodollar Rate Loan, means
any such day on which dealings in Dollar deposits are conducted by and between
banks in the London interbank eurodollar market.
"Calyon" means Calyon New York Branch.
"Capital Lease" means, with respect to any Person, a lease of any Property
by that Person as lessee that is, or should be in accordance with Financial
Accounting Standards Board Statement No. 13, recorded as a "capital lease" on a
balance sheet of that Person prepared in accordance with Generally Accepted
Accounting Principles consistently applied.
"Cash" means all monetary items (including currency, coin and bank demand
deposits) that are treated as cash under Generally Accepted Accounting
Principles consistently applied.
"Cash Equivalents" means, with respect to any Person, that Person's
Investments in:
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(a) Government Securities due within one year of the making of the
Investment;
(b) readily marketable direct obligations of any State of the United States
of America or any political subdivision of any such State or any public agency
or instrumentality thereof given on the date of such Investment a credit rating
of at least Aa3 by ▇▇▇▇▇'▇ or AA- by S&P, in each case due within one year from
the making of the Investment;
(c) certificates of deposit issued by, deposits in, deposits in the London
interbank eurodollar market made through, bankers' acceptances of, and
repurchase agreements covering Government Securities executed by, (i) any Bank
or (ii) any bank or savings and loan association doing business in and
incorporated under the Laws of the United States of America, any state thereof
or the District of Columbia and having on the date of such Investment combined
capital, surplus and undivided profits of at least $500,000,000 and which
carries on the date of such Investment a credit rating of P-1 or higher by
▇▇▇▇▇'▇ or A-1 or higher by S&P, in each case due within one year after the date
of the making of the Investment;
(d) certificates of deposit issued by, bank deposits in, deposits in the
London interbank eurodollar market made through, bankers' acceptances of, and
repurchase agreements covering Government Securities executed by any branch or
office located in the United States of America of a bank incorporated under the
Laws of any jurisdiction outside the United States of America having on the date
of such Investment combined capital, surplus and undivided profits of at least
$500,000,000 and which carries on the date of such Investment a credit rating of
P-1 or higher by ▇▇▇▇▇'▇ or A-1 or higher by S&P, in each case due within one
year after the date of the making of the Investment;
(e) readily marketable commercial paper or other debt securities of (i) any
Bank that is a Bank as of the Closing Date, (ii) corporations, commercial banks
or financial institutions doing business in and incorporated under the Laws of
the United States of America or any state thereof or the District of Columbia or
(iii) a holding company for a bank described in clause (c) or (d) above, given
on the date of such Investment a credit rating of P-1 or higher by ▇▇▇▇▇'▇, of
A-1 or higher by S&P, or F-1 or higher by Fitch, in each case due within one
year of the making of the Investment;
(f) repurchase agreements covering Government Securities executed by a
broker or dealer registered under Section 15(b) of the Exchange Act, having on
the date of the Investment capital of at least $50,000,000, due within 90 days
after the date of the making of the Investment; provided, that the maker of the
Investment receives written confirmation of the transfer to it of record
ownership of the Government Securities on the books of a "primary dealer" in
such government Securities or on the books of such registered broker or dealer,
as soon as practicable after the making of the Investment;
(g) "money market preferred stock" issued by a corporation incorporated
under the Laws of the United States of America or any State thereof (i) given on
the date of such Investment a credit rating of at least Aa3 by ▇▇▇▇▇'▇ and AA-
by S&P, in each case having an investment period not exceeding 50 days or (ii)
to the extent that investors therein have the benefit of a standby letter of
credit issued by a Bank or a bank described in clauses (c) or (d) above;
provided, that (y) the amount of all such Investments issued by the same issuer
does
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not exceed $20,000,000 and (z) the aggregate amount of all such Investments does
not exceed $50,000,000;
(h) a readily redeemable "money market mutual fund" sponsored by a bank
described in clause (c) or (d) hereof, or a registered broker or dealer
described in clause (f) hereof, that has and maintains an investment policy
limiting its investments primarily to instruments of the types described in
clauses (a) through (g) hereof and given on the date of such Investment a credit
rating of at least Aa3 by ▇▇▇▇▇'▇ and AA- by S&P; and (i) corporate notes or
bonds having an original term to maturity of not more than one year issued by a
corporation incorporated under the Laws of the United States of America or any
state thereof, or a participation interest therein; provided, that (i)
commercial paper issued by such corporation is given on the date of such
Investment a credit rating of at least Aa3 by ▇▇▇▇▇'▇ and AA- by S&P, (ii) the
amount of all such Investments issued by the same issuer does not exceed
$20,000,000 and (iii) the aggregate amount of all such Investments does not
exceed $50,000,000.
"CGMI" means Citigroup Global Markets Inc. and its successors.
"Change in Control" means, and shall be deemed to have occurred at such
time as any of the following events shall occur:
(a) there shall be consummated any consolidation or merger of Borrower in
which Borrower is not the continuing or surviving corporation or pursuant to
which the Borrower's Voting Stock would be converted into Cash, securities or
other property, other than a merger or consolidation of Borrower where the
Borrower is not the continuing or surviving corporation and in which the holders
of Borrower's Voting Stock immediately prior to the merger have at least 50%
ownership, directly or indirectly, of the Voting Stock of the surviving
corporation immediately after such merger or consolidation; or
(b) there is a report filed by any person, including its Affiliates and
Associates, on Schedule 13D or 14D-1 (or any successor schedule, form or report)
pursuant to the Exchange Act, disclosing that such person (for the purposes of
the definition of Change in Control only, the term "person" is used as defined
in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or any successor
provision to either of the foregoing) has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of 50% or more of the voting
power of Borrower's Voting Stock then outstanding; provided, however, that a
person shall not be deemed beneficial owner of, or to own beneficially (1) any
Securities tendered pursuant to a tender or exchange offer made by or on behalf
of such person or any of such person's Affiliates or Associates until such
tendered Securities are accepted for purchase or exchange thereunder, or (2) any
Securities if such beneficial ownership (a) arises solely as a result of a
revocable proxy delivered in response to a proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and regulations under
the Exchange Act, and (b) is not also then reportable on Schedule 13D (or any
successor schedule) under the Exchange Act; or
(c) a "Change in Control" (or analogous term) as defined in one or more
indentures or agreements governing any Subordinated Obligations occur and at
least $50,000,000 of Subordinated Obligations thereupon become due and payable
by Borrower or its Subsidiaries.
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Notwithstanding the foregoing, a Change in Control shall not be deemed to
have occurred if at any time Borrower, any Subsidiary of Borrower, any employee
stock ownership plan or any other employee benefit plan, including any Pension
Plan of Borrower or any Subsidiary of Borrower, or any person holding Borrower's
Voting Stock for or pursuant to the terms of such employee benefit plan, files
or becomes obligated to file a report under or in response to Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or report) under the Exchange
Act disclosing beneficial ownership by it of shares of Borrower's Voting Stock,
whether in excess of 50% or otherwise.
"Change in Law" means the occurrence, after the date of this Agreement, of
any of the following:
(a) the adoption or taking effect of any law, rule, regulation or treaty;
(b) any change in any law, rule, regulation or treaty or in the
administration, interpretation or application thereof by any Governmental
Agency; or
(c) the making or issuance of any request, guideline or directive (whether
or not having the force of law) by any Governmental Agency.
"Closing Date" means the date of this Agreement.
"CNAI" means Citicorp North America, Inc., a Delaware corporation.
"Code" means the Internal Revenue Code of 1986, as amended or replaced and
as in effect from time to time.
"Commission" means the Securities and Exchange Commission and any successor
commission.
"Compliance Certificate" means a compliance certificate in the form of
Exhibit C signed, on behalf of Borrower, by a Senior Officer of Borrower.
"Consolidated Adjusted EBITDA" means, for any period, Consolidated EBITDA
for such period plus (a) the amount of capitalized interest that was included in
cost of sales in determining Consolidated Net Income for such period plus (b)
all non-Cash Net Realizable Value Adjustments made during such period.
"Consolidated EBITDA" means, for any period, the sum of (a) Consolidated
Net Income for such period, plus (b) any extraordinary loss reflected in such
Consolidated Net Income, minus (c) any extraordinary gain reflected in such
Consolidated Net Income, plus (d) Consolidated Interest Expense for such period,
plus (e) the aggregate amount of federal, state and foreign income taxes payable
by Borrower and its Consolidated Subsidiaries for such period, plus (f)
depreciation, amortization and all other non-cash expenses of Borrower and its
Consolidated Subsidiaries for such period, in each case as determined in
accordance with Generally Accepted Accounting Principles consistently applied,
plus (g) any Distributions made in Cash by KB France to Borrower during such
period, and in the case of items (d), (e) and (f), only to the extent deducted
in the determination of Consolidated Net Income for such period.
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"Consolidated FIN 46 Subsidiaries" means entities that would not be GAAP
Subsidiaries but for the issuance of the pronouncement entitled Financial
Interpretation Number 46 ("FIN 46")
"Consolidated Interest Coverage Ratio" means, as of any date of
determination, the ratio of (a) Consolidated Adjusted EBITDA for the 12 month
period ending on such date to (b) the sum of (i) Consolidated Interest Expense
for the 12 month period ending on such date plus (ii) all dividends (other than
dividends paid in the same class of stock) paid on any preferred stock of
Borrower during the 12 month period ending on such date.
"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest, fees, charges and related expenses paid or payable to a lender by
Borrower and its Consolidated Subsidiaries on a consolidated basis in connection
with borrowed money (including any capitalized interest and accretion of
original issue discount on long-term debt) and the interest portion of any
capitalized lease payments.
"Consolidated Leverage Ratio" means, as of any date of determination, the
ratio of (a) Consolidated Total Indebtedness on that date to (b) Consolidated
Tangible Net Worth on that date.
"Consolidated Net Income" means, for any period, the net income of Borrower
and its Consolidated Subsidiaries on a consolidated basis determined in
accordance with Generally Accepted Accounting Principles consistently applied.
"Consolidated Subsidiaries" means, with respect to Borrower, Borrower's
GAAP Subsidiaries (other than KB France and Borrower's Consolidated FIN 46
Subsidiaries).
"Consolidated Tangible Net Worth" means, as of any date of determination,
the Shareholders' Equity of Borrower and its GAAP Subsidiaries on a consolidated
basis on that date minus the Intangible Assets of Borrower and its GAAP
Subsidiaries on a consolidated basis on that date minus any non-cash gain (or
plus any non-cash loss, as applicable) resulting from any marked to market
adjustments made directly to Consolidated Tangible Net Worth as a result of
fluctuations in the value of foreign currency instruments owned by Borrower or
any of its GAAP Subsidiaries as mandated under FAS 133.
"Consolidated Total Indebtedness" means, as of any date of determination,
all Indebtedness and Contingent Guaranty Obligations of Borrower and its
Consolidated Subsidiaries on a consolidated basis on that date (without
duplication for any guaranty by Borrower of a Consolidated Subsidiary's
Indebtedness or any guaranty by a Consolidated Subsidiary of either Borrower's
or another Consolidated Subsidiary's Indebtedness or otherwise) minus (a) all
Indebtedness and Contingent Guaranty Obligations of Financial Subsidiaries on a
consolidated basis (but only to the extent that such Financial Subsidiaries are
also Consolidated Subsidiaries and there is no recourse to Borrower or any other
Consolidated Subsidiary) on that date minus (b) all Indebtedness and Contingent
Guaranty Obligations of Foreign Subsidiaries of the Borrower on a consolidated
basis (but only to the extent that such Foreign Subsidiaries of the Borrower are
also Consolidated Subsidiaries and there is no recourse to Borrower or any other
Consolidated Subsidiary or any of their respective Property) on that date minus
(c) the amount, if
8
any, by which the aggregate Cash and Cash Equivalents of Borrower and its
Consolidated Subsidiaries (other than the Financial Subsidiaries and Foreign
Subsidiaries) on a consolidated basis on that date are in excess of $15,000,000
(but not to exceed $300,000,000).
"Construction Costs" means, as of any date of determination, all costs
actually incurred by Borrower or any Borrowing Base Subsidiary with respect to
the construction of Units on Developed Lots, including land basis.
"Contingent Guaranty Obligation" means, as to any Person, any (a) direct or
indirect guarantee of Indebtedness of, or other obligation performable by, any
other Person (other than a performance obligation undertaken in the ordinary and
usual course of business or obligations with respect to letters of credit),
including any endorsement (other than for collection or deposit in the ordinary
course of business), co-making or sale with recourse of the obligations of any
other Person or (b) assurance given to an obligee with respect to the
performance of an obligation (other than a performance obligation undertaken in
the ordinary and usual course of business) by, or the financial condition of,
any other Person, whether direct, indirect or contingent, including any purchase
or repurchase agreement covering such obligation or any collateral security
therefor, any agreement to provide funds (by means of loans, capital
contributions or otherwise) to such other Person, any agreement to support the
solvency or level of any balance sheet item of such other Person, any
"keep-well", "take-or-pay", "through put" or other arrangement of whatever
nature having the effect of assuring or holding harmless any obligee against
loss with respect to any obligation of such other Person, or the LTV Maintenance
Exposure resulting from any LTV Maintenance Agreement; provided, however, that
notwithstanding the foregoing, no such guarantee or assurance shall constitute a
Contingent Guarantee Obligation of a Person, if such Person's obligations
thereunder constitute limited exclusions from the otherwise non-recourse nature
of such other Person's Indebtedness or other obligations, except and until the
acts, conduct or events triggering recourse to such Person have occurred. The
amount of any Contingent Guaranty Obligation shall be deemed to be an amount
equal to the stated or determinable amount of the related primary obligation
(unless the Contingent Guaranty Obligation is limited by its terms to a lesser
amount, in which case to the extent of such amount) or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by the Person in good faith; provided, however, that if any Person is
liable severally but not jointly and severally with one or more other obligors
under any Contingent Guaranty Obligation, the amount of such Contingent Guaranty
Obligation shall be the product of (x) the amount determined as set forth above
and (y) the maximum percentage of the aggregate liability under such Contingent
Guaranty Obligation with respect to which such Person is severally liable.
"Contractual Obligation" means, as to any Person, any provision of any
outstanding Securities issued by that Person or of any material agreement,
instrument or undertaking to which that Person is a party or by which it or any
of its Property is bound, other than, in the case of Borrower and its
Subsidiaries, any of the Loan Documents.
"Conversion or Continuation Notice" means a notice of (a) a conversion of
Loans from one Type to the other or (b) a continuation of Eurodollar Rate Loans,
which may be given by telephone and, if in writing, shall be substantially in
the form of Exhibit D.
9
"Debt Rating" means, as of any date of determination, the rating as
determined by the Rating Agencies (collectively, the "Debt Ratings") of the
Borrower's non-credit-enhanced, senior unsecured long-term debt; provided that
if a Debt Rating is issued by each of the Rating Agencies, then the two highest
of such Debt Ratings shall apply (with the Debt Rating for Applicable Pricing
Level I being the highest and the Debt Rating for Applicable Pricing Level V
being the lowest), unless there is a split in Debt Ratings of more than one
level, in which case the Applicable Pricing Level that is one level higher than
the Applicable Pricing Level of the lower Debt Rating shall apply.
"Debtor Relief Laws" means the Bankruptcy Code of the United States of
America, as amended from time to time, and all other applicable liquidation,
conservatorship, insolvency, reorganization, or similar debtor relief Laws from
time to time in effect affecting the rights of creditors generally.
"Default" means any event that, with the giving of any notice or passage of
time, or both, would be an Event of Default.
"Default Rate" has the meaning set forth for that term in Section 3.5.
"Defaulting Bank" has the meaning set forth for that term in Section 10.13.
"Developed Lots" means, as of any date of determination, subdivision lots
located in the United States that are wholly-owned by Borrower or its Borrowing
Base Subsidiaries, unencumbered by any Lien or Liens (other than Permitted
Encumbrances), and that are subject to a recorded plat or subdivision map, in
substantial compliance with all applicable Laws and available for the
construction thereon of foundations for Units.
"Distribution" means, with respect to any shares of capital stock or any
warrant or right to acquire shares of capital stock or any other equity security
issued by a Person, (a) the retirement, redemption, purchase, or other
acquisition for value (other than for capital stock of the same type of such
Person) by such Person of any such security, (b) the declaration or payment by
such Person of any dividend in Cash or in Property (other than in capital stock
of the same type of such Person) on or with respect to any such security, and
(c) any Investment by such Person in any holder of 5% or more of the capital
stock (or other equity securities) of such Person, if a purpose of such
Investment is to avoid the characterization of the transaction between such
Person and such holder as a Distribution under clause (a) or (b) above. In
addition, to the extent any loan or advance by Borrower to one of its
Subsidiaries is deemed to be an "Investment" for purposes of this Agreement,
then any principal payment made by such Subsidiary in respect of such loan or
advance shall be considered a Distribution for purposes of Section 6.12.
"Dollars" means the national currency of the United States of America.
"Domestic Subsidiary" means, with respect to any Person and as of any date
of determination, a Subsidiary of such Person (a) that is organized under the
Laws of the United States of America or any state thereof and (b) the majority
of the assets of which (as reflected on a balance sheet of such Subsidiary
prepared in accordance with Generally Accepted Accounting Principles
consistently applied) is located in the United States of America; provided that
10
▇▇▇▇▇▇▇ and Broad International, Inc., a California corporation, shall in no
event be considered a Domestic Subsidiary of Borrower.
"Domestic Unimproved Land" means, as of any date of determination, real
Property located in the United States of America that is: (a) owned by Borrower
or any of its Subsidiaries if on that date there has been expended by Borrower
or any of its Subsidiaries less than 50% of the costs reasonably estimated by
Borrower (in accordance with its past practices as of the Closing Date) to
develop such real Property into Developed Lots; or (b) owned by Persons other
than Borrower or any of its Subsidiaries but which, if owned by Borrower or any
of its Subsidiaries on that date, would have satisfied the requirement set forth
in clause (a) and if on that date Borrower or any of its Subsidiaries holds an
option to purchase such real Property for which it has paid an amount equal to
33% or more of the purchase price provided for in such option to purchase,
provided, that in the event an option to purchase land covers more than one
parcel, phase or lot, any deposit paid by Borrower or any of its Subsidiaries
shall be allocated to each parcel, phase or lot pro rata in accordance with the
purchase price of the parcels, phases or lots. The "book value" with respect to
Domestic Unimproved Land referred to in Section 6.15 shall be calculated as if
the option to purchase had been exercised as of the date of determination, and
otherwise in accordance with Generally Accepted Accounting Principles,
consistently applied.
"Eligible Assignee" means: (a) a Bank; (b) an Affiliate of a Bank; and (c)
any other Person (other than a natural person) approved by the Administrative
Agent (such approval not to be unreasonably withheld or delayed); provided that
notwithstanding the foregoing, "Eligible Assignee" shall not include the
Borrower or any of the Borrower's Affiliates or Subsidiaries.
"ERISA" means, at any date, the Employee Retirement Income Security Act of
1974 and the regulations thereunder, all as the same shall be in effect at such
date.
"ERISA Affiliate" means, with respect to any Person, any other Person (or
any trade or business, whether or not incorporated) that is under common control
with that Person within the meaning of Section 414 of the Code.
"ERISA Event" means: (a) a Reportable Event with respect to a Pension Plan;
(b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Sections 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which constitutes grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than for PBGC
premiums due but not delinquent under Section 4007 of ERISA, upon the Borrower
or any ERISA Affiliate.
11
"Escrow Receivables" means, as of any date of determination, the amounts
due to Borrower or any Borrowing Base Subsidiary and held at an escrow or title
company following the sale and conveyance of title of a Model Home or Unit to a
buyer (including an escrow or title company that is a Subsidiary of the
Borrower) to the extent that such amounts are free and clear of all Liens and
Rights of Others and are not subject to any restriction pursuant to any
Contractual Obligations.
"Eurodollar Rate" means for any Interest Period, with respect to any
Eurodollar Rate Loan:
(a) the rate per annum equal to the rate determined by the
Administrative Agent to be the offered rate that appears on Telerate Page
3750 (or any successor thereto) as the London interbank offered rate for
deposits in Dollars (for delivery on the first day of such Interest Period)
with a term equivalent to such Interest Period, determined as of
approximately 11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period, or
(b) if the rate referenced in the preceding clause (a) does not appear
on such page or service or such page or service shall not be available, the
rate per annum equal to the rate determined by the Administrative Agent to
be the offered rate on such other page or other service that displays an
average British Bankers Association Interest Settlement Rate for deposits
in Dollars (for delivery on the first day of such Interest Period) with a
term equivalent to such Interest Period, determined as of approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period, or
(c) if the rates referenced in the preceding clauses (a) and (b) are
not available, the rate per annum determined by the Administrative Agent as
the rate of interest at which deposits in Dollars for delivery on the first
day of such Interest Period in same day funds in the approximate amount of
the outstanding Loans made by Citicorp North America, Inc. and with a term
equivalent to such Interest Period would be offered by Citibank N.A.'s
London Branch to major banks in the London interbank eurodollar market at
their request at approximately 4:00 p.m. (London time) two Business Days
prior to the first day of such Interest Period.
The rate determined as set forth above shall be rounded upward, if necessary, to
the nearest 1/100 of 1%.
"Eurodollar Rate Loan" means a Loan that bears interest at a rate based on
the Eurodollar Rate.
"Event of Default" has the meaning provided in Section 9.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Taxes" means, with respect to the Administrative Agent, any Bank
or any other recipient of any payment to be made by or on account of any
obligation of the Borrower hereunder,
12
(a) taxes imposed on or measured by its overall net income (however
denominated), and franchise taxes imposed on it (in lieu of net income taxes),
by the jurisdiction (or any political subdivision thereof) under the laws of
which such recipient is organized or in which its principal office is located
or, in the case of any Bank, in which its applicable Lending Office is located,
(b) any branch profits taxes imposed by the United States or any similar
tax imposed by any other jurisdiction in which the Borrower is located and
(c) in the case of a Foreign Bank (other than an assignee pursuant to a
request by the Borrower under Section 11.27), any withholding tax that is
imposed on amounts payable to such Foreign Bank at the time such Foreign Bank
becomes a party hereto (or designates a new Lending Office) or is attributable
to such Foreign Bank's failure or inability (other than as a result of a Change
in Law) to comply with Section 3.8(e), except to the extent that such Foreign
Bank (or its assignor, if any) was entitled, at the time of designation of a new
Lending Office (or assignment), to receive additional amounts from the Borrower
with respect to such withholding tax pursuant to Section 3.8(a).
"Exposure" means for any Bank, as of any date of determination, the product
obtained by multiplying that Bank's then effective Pro Rata Share by the
aggregate Outstanding Amount.
"Facility Amount" means $400,000,000.
"Federal Funds Rate" means, for any day, the rate per annum equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank on the Business Day next
succeeding such day; provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate (rounded upward,
if necessary, to a whole multiple of 1/100 of 1%) charged to Citibank, N.A. on
such day on such transactions as determined by the Administrative Agent.
"Financial Letter of Credit" means any letter of credit issued by an issuer
for the account of the Borrower or a Subsidiary that represents an irrevocable
obligation on the part of the issuer:
(a) to repay money borrowed by or advanced to the Borrower or a Subsidiary;
or
(b) to make payment on account of any indebtedness undertaken by the
Borrower or a Subsidiary, in the event that the Borrower or Subsidiary fails to
fulfill its financial obligations to the beneficiary.
"Financial Subsidiary" means (a) the Mortgage Company and its Subsidiaries,
so long as such entities continue to engage in the mortgage banking business,
(b) any Subsidiary of Borrower that is organized and operates solely to issue
(i) collateralized mortgage obligations or
13
(ii) other similar asset-backed obligations, and (c) any other Subsidiary of
Borrower that (i) is engaged primarily in the business of origination,
marketing, and servicing of residential mortgage loans, the sale of servicing
rights, or the financing of long term residential mortgage loans, (ii) holds not
less than 95% of its total assets in the form of Cash, Cash Equivalents, notes
and mortgages receivable, Cash held by a trustee for the benefit of such
Subsidiary or other financial instruments and (iii) is the subject of an
Officer's Certificate of Borrower delivered to the Administrative Agent stating
that such Subsidiary is a Financial Subsidiary within the meaning hereof. As of
the Closing Date, the Financial Subsidiaries are Westview Company, KB Home Title
Services Inc., KB Home Insurance Agency Inc., KB Home Insurance Agency of Texas
Holdings Inc., Homesafe Company and San Antonio Title Co.
"Fiscal Quarter" means each of the fiscal quarters of Borrower ending on
each February 28 (or 29, if a leap year), May 31, August 31 and November 30, or
as otherwise changed by the Borrower upon advance written notice to the
Administrative Agent, but subject to the requirements of Section 1.2.
"Fiscal Year" means each of the fiscal years of Borrower ending on each
November 30 or as otherwise changed by the Borrower upon advance written notice
to the Administrative Agent, but subject to the requirements of Section 1.2.
"Fitch" means Fitch Ratings, or any successor thereto.
"Foreign Bank" means any Bank that is organized under the laws of a
jurisdiction other than that in which the Borrower is resident for tax purposes.
For purposes of this definition, the United States, each State thereof and the
District of Columbia shall be deemed to constitute a single jurisdiction.
"Foreign Subsidiary" means, with respect to any Person, a Subsidiary of
that Person which is not a Domestic Subsidiary and with respect to Borrower,
includes ▇▇▇▇▇▇▇ and Broad International, Inc., a California corporation.
"GAAP Subsidiaries" means, with respect to Borrower, all entities whose
financial statements are consolidated with the consolidated financial statements
of Borrower under Generally Accepted Accounting Principles.
"GAAP Value" means, with respect to any property or asset, the book value
for such property or asset determined in accordance with Generally Accepted
Accounting Principles consistently applied.
"Generally Accepted Accounting Principles" means, as of any date of
determination, accounting principles set forth as "generally accepted" in then
currently effective statements of the Auditing Standards Board of the American
Institute of Certified Public Accountants, or, if such statements are not then
in effect, accounting principles that are then approved by a significant segment
of the accounting profession in the United States of America. The term
"consistently applied," as used in connection therewith, means that the
accounting principles applied to financial statements of a Person as of any date
or for any period are consistent in all material respects (subject to Section
1.2) to those applied to financial statements of that Person as of recent prior
dates and for recent prior periods.
14
"Government Securities" means (a) readily marketable direct full faith and
credit obligations of the United States of America or obligations
unconditionally guaranteed by the full faith and credit of the United States of
America and (b) obligations of an agency or instrumentality of, or corporation
owned, controlled or sponsored by, the United States of America that are
generally considered in the securities industry to be implicit obligations of
the United States of America.
"Governmental Agency" means (a) any federal, state, county or municipal
government, or political subdivision thereof, (b) any governmental or
quasi-governmental agency, authority, board, bureau, commission, department,
instrumentality, or public body, (c) any court or administrative tribunal, or
(d) any arbitration tribunal or other non-governmental authority to whose
jurisdiction a Person has consented, in each case whether of the United States
of America or any other nation.
"Guarantor Subsidiary" means (a) any Domestic Subsidiary which is a
Consolidated Subsidiary and a Significant Subsidiary, other than (i) any
Financial Subsidiary and (ii) KB Orlando until such time as it becomes a
Guarantor Subsidiary pursuant to Section 5.9 and (b) any other Domestic
Subsidiary, other than any Financial Subsidiary, that is designated in writing
by Borrower as a Guarantor Subsidiary.
"Hazardous Materials" means substances defined as "hazardous substances"
pursuant to the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. Section 9601 et seq., or as "hazardous", "toxic" or
"pollutant" substances or as "solid waste" pursuant to the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901, et seq., or as "friable asbestos"
pursuant to the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq. or
any other applicable Hazardous Materials Law, in each case as such Laws are
amended from time to time.
"Hazardous Materials Laws" means all Laws governing the treatment,
transportation or disposal of Hazardous Materials applicable to any real
Property of Borrower or its Subsidiaries.
"Indebtedness" means, with respect to any Person, without duplication, (a)
all indebtedness of such Person for borrowed money, (b) that portion of the
obligations of such Person under Capital Leases which should properly be
recorded as a liability on a balance sheet of that Person prepared in accordance
with Generally Accepted Accounting Principles consistently applied, (c) any
obligation of such Person that is evidenced by a promissory note or other
instrument representing an extension of credit to such Person, whether or not
for borrowed money, (d) any obligation of such Person for the deferred purchase
price of Property or services (other than trade or other accounts payable in the
ordinary course of business in accordance with customary industry terms), (e)
any obligation of the types referred to in clauses (a) through (d) above that is
secured by a Lien (other than a Permitted Encumbrance) on assets of such Person,
whether or not that Person has assumed such obligation or whether or not such
obligation is non-recourse to the credit of such Person, but only to the extent
of the fair market value of the assets so subject to the Lien if such obligation
is non-recourse, (f) obligations of such Person arising under acceptance
facilities or under facilities for the discount of accounts receivable of such
Person, (g) any obligation of such Person under Financial Letters of Credit
issued for the
15
account of such Person, and (h) net obligations of such Person under any Swap
Contract. The amount of any net obligation under any Swap Contract on any date
shall be deemed to be the Swap Termination Value thereof as of such date.
"Indemnified Liabilities" has the meaning set forth in Section 11.10.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
"Indemnitees" has the meaning set forth in Section 11.10.
"Information" has the meaning set forth in Section 11.12.
"Intangible Assets" means assets that are considered intangible assets
under Generally Accepted Accounting Principles consistently applied, including
(a) customer lists, goodwill, computer software, unamortized deferred charges,
unamortized debt discount, capitalized research and development costs and other
intangible assets and (b) any write-up in book value of any asset subsequent to
its acquisition, but excluding any existing write-up in book value of any asset
acquired by Borrower or any of its Subsidiaries prior to October 3, 2000, as
such write-up may decrease (but not increase) from time to time.
"Interest Period" means, as to each Eurodollar Rate Loan, (a) for the
period from the Closing Date to but excluding July 11, 2006, a period of 1 or 2
weeks, as designated by the Borrower and (b) for the period from and including
July 11, 2006 until the Maturity Date, a period of 1, 2, 3 or 6 months, as
designated by Borrower, or, subject to the consent of the Administrative Agent,
in its reasonable discretion, a period of 1, 2 or 3 weeks, as designated by the
Borrower; provided that (x) the first day of each Interest Period must be a
Business Day, (y) any Interest Period that would otherwise end on a day that is
not a Business Day shall be extended to the next succeeding Business Day, unless
such Business Day falls in the next calendar month, in which case the Interest
Period shall end on the next preceding Business Day, and (z) no Interest Period
may extend beyond the Maturity Date.
"Investment" means, with respect to any Person, any investment by that
Person, whether by means of purchase or other acquisition of capital stock or
other Securities of any other Person or by means of loan, advance, capital
contribution, or other debt or equity participation or interest in any other
Person, including any partnership or joint venture interest in any other Person;
provided that an Investment of a Person shall not include any trade or account
receivable arising in the ordinary course of the business of such Person,
whether or not evidenced by a note or other writing. The amount of any
Investment shall be the amount actually invested, less any return of capital,
without adjustment for subsequent increases or decreases in the market value of
such Investment.
"Investment Grade Credit Rating" means, as of any date of determination,
that at least 2 Rating Agencies have as of that date issued credit ratings for
Borrower's non-credit-enhanced long-term senior unsecured debt of (a) at least
BBB- in the case of S&P, (b) at least Baa3 in the case of ▇▇▇▇▇'▇ and (c) at
least BBB- in the case of Fitch.
"IRS" means the United States Internal Revenue Service.
16
"Joint Venture" means any Person, other than a Subsidiary, (a) in which
Borrower or any Subsidiary of Borrower holds an equity Investment which entitles
Borrower or such Subsidiary to more than 10% of (i) the ordinary voting power
for the election of the board of directors or other governing body of such
Person or (ii) the partnership, membership or other ownership interest in such
Person, and (b) which has at least one holder of its equity interests that is
not an Affiliate of Borrower or any Subsidiary of Borrower. Notwithstanding the
foregoing, for the purposes of Section 6.16, the term "Joint Venture" will not
include any equity Investment in any Person if the dollar amount of that
investment is less than $1,000,000, computed in accordance with Generally
Accepted Accounting Principles consistently applied, but only to the extent that
the aggregate dollar amount of such equity Investments is less than $25,000,000.
"KB Orlando" means KB Home Orlando LLC, a Delaware limited liability
company.
"KB France" means ▇▇▇▇▇▇▇ & Broad S.A., a French Societe Anonyme.
"Land Parcels" means parcels of land located in the United States
wholly-owned by Borrower or any Borrowing Base Subsidiary that are unencumbered
by any Lien or Liens (other than Permitted Encumbrances).
"Laws" means, collectively, all foreign, federal, state and local statutes,
treaties, codes, ordinances, rules, regulations and controlling precedents of
any Governmental Agency.
"Lending Office" means, as to any Bank, the office or offices of such Bank
set forth on Schedule 11.6, or such other office or offices as a Bank may from
time to time notify the Borrower and the Administrative Agent.
"Lien" means any mortgage, deed of trust, pledge, hypothecation, assignment
for security, security interest, encumbrance, lien or charge of any kind,
whether voluntarily incurred or arising by operation of Law or otherwise,
affecting any Property, including any agreement to grant any of the foregoing
(other than an agreement which gives to a Person the right to become equally and
ratably secured with any other Person to whom a Lien is granted on any item of
Property) any conditional sale or other title retention agreement, any lease in
the nature of a security interest, or the filing of or agreement to give any
financing statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a security interest) under the Uniform
Commercial Code or comparable Law of any jurisdiction with respect to any
Property.
"Loans" means the loans made by the Banks hereunder on the Closing Date.
"Loan Documents" means, collectively, this Agreement, the Notes, the
Subsidiary Guaranty, any Conversion or Continuation Notice, any Compliance
Certificate, any Borrowing Base Certificate and any other instruments, documents
or agreements of any type or nature hereafter executed and delivered by Borrower
or any of its Subsidiaries or Affiliates to the Administrative Agent or any
other Bank in any way relating to or in furtherance of this Agreement, in each
case either as originally executed or as the same may from time to time be
supplemented, modified, amended, restated, extended or supplanted.
"Loan Parties" means, collectively, the Borrower and each Guarantor
Subsidiary.
17
"Lots Under Development" means, as of any date of determination, Land
Parcels that are being developed into Developed Lots or that are scheduled for
the commencement of development into Developed Lots within 6 calendar months
after the date of determination.
"LTV Maintenance Agreement" means a guaranty or other agreement entered
into by the Borrower or any of its Consolidated Subsidiaries, for the benefit of
the holder of any secured Indebtedness of a Person that is not the Borrower or
any of its Consolidated Subsidiaries, to maintain a specified loan-to-value
ratio with respect to real Property that secures such Indebtedness.
"LTV Maintenance Exposure" means, with respect to any LTV Maintenance
Agreement, the amount equal to (a) the amount of the Indebtedness with respect
to which the LTV Maintenance Agreement is delivered exceeds (b) the product of
(i) the book value of the real Property securing such Indebtedness (or such
lesser value as is provided in or determined under the agreements governing such
Indebtedness) and (ii) a percentage equal to the loan-to-value ratio (stated as
a fraction) that the Borrower or any of its Consolidated Subsidiaries agrees to
maintain under the applicable LTV Maintenance Agreement; provided that if the
Borrower or one of its Consolidated Subsidiaries is liable severally but not
jointly and severally with one or more other obligors under the LTV Maintenance
Agreement, the amount of the Contingent Guaranty Obligation in respect of such
LTV Maintenance Agreement for the Borrower or such Consolidated Subsidiary shall
be the product of (x) the amount determined as set forth above and (y) the
maximum percentage of the aggregate liability under such LTV Maintenance
Agreement with respect to which the Borrower or such Consolidated Subsidiary is
severally liable; provided further, that if the LTV Maintenance Exposure with
respect to a LTV Maintenance Agreement is less than zero, the LTV Maintenance
Exposure for that LTV Maintenance Agreement shall be deemed to be zero.
"Material Adverse Effect" means any circumstance or event, or any set of
circumstances or events which, individually or when aggregated with any other
circumstances or events, (a) has or is reasonably likely to have any material
adverse effect upon the validity or enforceability of any Loan Document, (b) is
or is reasonably likely to be material and adverse to the condition (financial
or otherwise) or operations of Borrower and its Subsidiaries, taken as a whole,
or (c) materially impairs or is reasonably likely to materially impair the
ability of Borrower and its Subsidiaries, taken as a whole, to perform the
Obligations.
"Material Amount of Assets" means, as of any date of determination, more
than 15% of the consolidated total assets of Borrower and its Subsidiaries as of
such date (other than assets of, or Investments in, Financial Subsidiaries, KB
France or Borrower's Consolidated FIN 46 Subsidiaries).
"Maturity Date" means April 11, 2011.
"Model Homes" means housing Units which have been completed, furnished and
landscaped and are used in the marketing efforts with respect to a residential
home community.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc. and any successor thereto.
18
"Mortgage Company" means KB Home Mortgage Company, an Illinois corporation
and a wholly owned Financial Subsidiary of Borrower.
"Multiemployer Plan" means any employee benefit plan of a type described in
Section 4001(a)(3) of ERISA.
"Net Realizable Value Adjustment" means the adjustment required pursuant to
Generally Accepted Accounting Principles consistently applied (including FAS 121
issued by the Financial Accounting Standards Board) to reflect a decrease in the
book value of assets below their historical costs.
"Non-Recourse Indebtedness" means Indebtedness incurred in connection with
the purchase or improvement of Property (a) that is secured solely by the
Property purchased or improved, (b) with respect to which the holder of such
Indebtedness has recourse only to such Property, and (c) that is otherwise
non-recourse (whether by contract or under applicable Law) to any Person.
"Note" means each promissory note made by Borrower to a Bank evidencing the
Loans made by such Bank under that Bank's Pro Rata Share of the Facility Amount,
substantially in the form of Exhibit E, either as originally executed or as the
same may from time to time be supplemented, modified, amended, renewed, extended
or supplanted.
"Obligations" means all present and future obligations of every kind or
nature of Borrower or any Party at any time and from time to time owed to the
Administrative Agent or the Banks or any one or more of them under any one or
more of the Loan Documents, whether due or to become due, matured or unmatured,
liquidated or unliquidated, or contingent or noncontingent, including
obligations of performance as well as obligations of payment, and including
interest that accrues to the extent permitted by applicable Law after the
commencement of any proceeding under any Debtor Relief Law by or against
Borrower.
"Officer's Certificate" means, when used with reference to any Person, a
certificate signed by a Senior Officer of such Person.
"Opinions of Counsel" means the favorable written legal opinions of (a)
▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, special counsel to Borrower and (b) ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, Deputy General Counsel of Borrower, (c) ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Nevada
counsel to KB Home Nevada Inc., (d) ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, P.C., Arizona counsel to KB
Home Phoenix Inc., (e) ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, Texas counsel to KB Home Lone
Star LP and (f) ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, P.C., Colorado counsel to KB Home Colorado
Inc. substantially in the form of Exhibits ▇-▇, ▇-▇, ▇-▇, ▇-▇, F-5 and F-6
respectively, together with copies of all factual certificates and legal
opinions upon which such counsel has relied.
"Other Taxes" means all present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies arising from any
payment made hereunder or under any other Loan Document or from the execution,
delivery or enforcement of, or otherwise with respect to, this Agreement or any
other Loan Document.
19
"Outstanding Amount" means, with respect to the Loans on any date, the
aggregate outstanding principal amount thereof after giving effect to any
prepayments or repayments of the Loans occurring on such date.
"Participant" has the meaning set forth in Section 11.8(d).
"Party" means any Person other than the Banks or the Administrative Agent
which now or hereafter is a party to any of the Loan Documents.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
thereto established under ERISA.
"Pension Plan" means any "employee pension benefit plan" (as such term is
defined in ERISA) which is subject to Title IV of ERISA and which is maintained
for employees of Borrower or any of its ERISA Affiliates.
"Permitted Encumbrances" means:
(a) inchoate Liens incident to construction or maintenance of real
property; or Liens incident to construction or maintenance of real property now
or hereafter filed of record for which adequate reserves have been set aside if
required by, and in accordance with, Generally Accepted Accounting Principles
and which are being contested in good faith by appropriate proceedings and have
not proceeded to judgment, provided that, by reason of nonpayment of the
obligations secured by such Liens, no material property is subject to a material
risk of loss or forfeiture;
(b) Liens for taxes and assessments on real property which are not yet past
due; or Liens for taxes and assessments on real property for which adequate
reserves have been set aside if required by, and in accordance with, Generally
Accepted Accounting Principles and are being contested in good faith by
appropriate proceedings and have not proceeded to judgment, provided that, by
reason of nonpayment of the obligations secured by such Liens, no material
property is subject to a material risk of loss or forfeiture;
(c) minor defects and irregularities in title to any real property which in
the aggregate do not materially impair the fair market value or use of the real
property for the purposes for which it is or may reasonably be expected to be
held;
(d) easements, exceptions, reservations, or other agreements for the
purpose of pipelines, conduits, cables, wire communication lines, power lines
and substations, streets, trails, walkways, drainage, irrigation, water,
utilities, and sewerage purposes, dikes, canals, ditches, the removal of oil,
gas, coal, or other minerals, and other like purposes affecting real property,
facilities, or equipment which in the aggregate do not materially burden or
impair the fair market value or use of such property for the purposes for which
it is or may reasonably be expected to be held;
(e) easements, exceptions, reservations, or other agreements for the
purpose of facilitating the joint or common use of property affecting real
property which in the aggregate do
20
not materially burden or impair the fair market value or use of such property
for the purposes for which it is or may reasonably be expected to be held;
(f) rights reserved to or vested in any Governmental Agency to control or
regulate the use of any real property;
(g) any obligations or duties affecting any real property to any
Governmental Agency with respect to any right, power, franchise, grant, license,
or permit;
(h) present or future zoning laws and ordinances or other laws and
ordinances restricting the occupancy, use, or enjoyment of real property;
(i) statutory Liens, including warehouseman's liens, other than those
described in clauses (a) or (b) above, arising in the ordinary course of
business with respect to obligations which are not delinquent or are being
contested in good faith, provided that, if delinquent, adequate reserves have
been set aside with respect thereto and, by reason of nonpayment, no material
property is subject to a material risk of loss or forfeiture;
(j) covenants, conditions, and restrictions affecting the use of real
property which in the aggregate do not materially impair the fair market value
or use of the real property for the purposes for which it is or may reasonably
be expected to be held;
(k) rights of tenants under leases and rental agreements covering real
property entered into in the ordinary course of business of the Person owning
such real property;
(l) Liens consisting of pledges or deposits to secure obligations under
workers' compensation laws or similar legislation, including Liens of judgments
thereunder which are not currently dischargeable;
(m) Liens consisting of pledges or deposits of property to secure
performance in connection with operating leases made in the ordinary course of
business to which the Borrower or a Subsidiary is a party as lessee, provided
the aggregate value of all such pledges and deposits in connection with any such
lease does not at any time exceed 25% of the annual fixed rentals payable under
such lease;
(n) Liens consisting of deposits of property to secure statutory
obligations of the Borrower or a Subsidiary of Borrower in the ordinary course
of its business; and
(o) Liens consisting of deposits of property to secure (or in lieu of)
surety, appeal or customs bonds in proceedings to which Borrower or a Subsidiary
of Borrower is a party in the ordinary course of its business.
"Permitted Right of Others" means a Right of Others consisting of (a) an
interest (other than a legal or equitable co-ownership interest, an option or
right to acquire a legal or equitable co-ownership interest and any interest of
a ground lessor under a ground lease), that does not materially impair the value
or use of property for the purposes for which it is or may reasonably be
expected to be held, (b) an option or right to acquire a Lien that would be a
Permitted Encumbrance or (c) the reversionary interest of a landlord under a
lease of Property.
21
"Person" means an individual, trustee, corporation, general partnership,
limited partnership, limited liability company, joint stock company, trust,
estate, unincorporated organization, union, tribe, business association or firm,
joint venture, Governmental Agency, or other entity.
"Plan" means any "employee benefit plan" (as such term is defined in
Section 3(3) of ERISA) established by the Borrower or, with respect to any such
plan that is subject to Section 412 of the Code or Title IV of ERISA, any ERISA
Affiliate.
"Platform" has the meaning set forth in Section 7.1.
"Pro Rata Share" of a Bank, as it pertains to the Loans, means the
applicable percentage set forth opposite the name of that Bank on Schedule 1.1
to this Agreement, as such Schedule 1.1 may change from time to time in
accordance with the terms of this Agreement or in accordance with any effective
Assignment and Assumption.
"Profit and Participation Agreement" means an agreement, secured by a deed
of trust, mortgage, or other lien against a purchased Property, with respect to
which the purchaser of any Property agrees to pay the seller of such Property a
profit, price, or premium participation in such Property.
"Projections" means the financial projections of Borrower delivered to the
Administrative Agent on April 11, 2006.
"Property" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"Public Lender" has the meaning set forth in Section 7.1.
"Qualified Issuer" means a commercial bank, savings bank, savings and loan
association or similar financial institution which, (a) has total assets of
$5,000,000,000 or more, (b) is "well capitalized" within the meaning of such
term under the Federal Depository Institutions Control Act, (c) is engaged in
the business of lending money and extending credit under credit facilities
substantially similar to those extended under this Agreement and (d) is
operationally and procedurally able to meet the obligations of a Bank hereunder
to the same degree as a commercial bank.
"Quarterly Payment Date" means June 30, 2006, and each September 30,
December 31, June 30 and March 31 thereafter through and including the Maturity
Date.
"Rating Agencies" means S&P, ▇▇▇▇▇'▇ and Fitch.
"Register" has the meaning set forth in Section 11.8(c).
"Regulation D" means Regulation D, as at any time amended, of the Board of
Governors of the Federal Reserve System or any other regulation in substance
substituted therefor.
22
"Related Parties" means, with respect to any Person, such Person's
Affiliates and the partners, directors, officers, employees, agents and advisors
of such Person and of such Person's Affiliates.
"Reportable Event" means any of the events set forth in Section 4043(c) of
ERISA, other than events for which the 30 day notice period has been waived.
"Required Banks" means, as of any date of determination, Banks having more
than 50% of the Outstanding Amount; provided that the portion of the Outstanding
Amount held or deemed held by any Defaulting Bank shall be excluded for purposes
of making a determination of Required Banks.
"Requirement of Law" means, as to any Person, any Law or any judgment,
award, decree, writ or determination of, or any consent or similar agreement
with, a Governmental Agency, in each case applicable to or binding upon such
Person or any of its Property or to which such Person or any of its Property is
subject.
"Responsible Official" means (a) when used with reference to a Person other
than an individual, any corporate officer of such Person, general partner of
such Person, corporate officer of a corporate general partner of such Person, or
corporate officer of a corporate general partner of a partnership that is a
general partner of such Person, or any other responsible official thereof duly
acting on behalf thereof, and (b) when used with reference to a Person who is an
individual, such Person. Any document or certificate hereunder that is signed or
executed by a Responsible Official of a Person shall be conclusively presumed to
have been authorized by all necessary corporate, partnership or other action on
the part of that Person.
"Right of Others" means, with respect to any Property in which a Person has
an interest, (a) any legal or equitable claim or other interest (other than a
Lien) in or with respect to that Property held by any other Person, and (b) any
option or right held by any other Person to acquire any such claim or other
interest (including a Lien).
"S&P" means Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., and any successor thereto.
"Securities" means any capital stock, share, voting trust certificate,
bonds, debentures, notes or other evidences of indebtedness, limited partnership
interests, or any warrant, option or other right to purchase or acquire any of
the foregoing.
"Senior Indebtedness" means, as of any date of determination, the aggregate
amount of Indebtedness for borrowed money, and the aggregate amount of
obligations under Financial Letters of Credit, of Borrower and Borrowing Base
Subsidiaries that is not Subordinated Obligations and that is not Non-Recourse
Indebtedness.
"Senior Officer" means the (a) chief executive officer, (b) chief operating
officer, (c) chief financial officer, (d) vice president and controller, (e)
vice president, treasury, or (f) treasurer, in each case whatever the title
nomenclature may be, of the Person designated.
23
"Shareholders' Equity" means, as of any date of determination,
shareholders' equity as of that date determined in accordance with Generally
Accepted Accounting Principles consistently applied; provided that there shall
be excluded from Shareholders' Equity any amount attributable to capital stock
that is, directly or indirectly, required to be redeemed or repurchased by the
issuer thereof prior to the date which is one year after the Maturity Date or
upon the occurrence of specified events or at the election of the holder
thereof.
"Significant Subsidiary" means, as of the Closing Date, those Subsidiaries
of Borrower identified as such in Schedule 4.4 and, as of any other date of
determination, any Subsidiary of Borrower (other than a Joint Venture) with
respect to which any of the following conditions is met:
(a) the aggregate book value of all Investments of Borrower and its
Subsidiaries in such Subsidiary exceeds 5% of the consolidated total assets
(other than assets of Financial Subsidiaries) of Borrower and its Subsidiaries
as of such date; or
(b) the proportionate share of Borrower and its Subsidiaries in the total
assets of such Subsidiary (after intercompany eliminations) exceeds 5% of the
consolidated total assets (other than assets of Financial Subsidiaries) of
Borrower and its Subsidiaries as of such date; or
(c) the equity of Borrower and its Subsidiaries in the net income of such
Subsidiary (before income taxes, extraordinary items and cumulative effect of a
change in accounting principles) as of the end of the most recently ended fiscal
year of such Subsidiary exceeds the greater of (i) an amount equal to 5% of the
consolidated net income (other than net income of Financial Subsidiaries) of
Borrower and its Subsidiaries (computed as aforesaid) as of the end of the most
recent Fiscal Year ended prior to such date or (ii) $10,000,000.
"Solvent" means, as to any Person, that such Person (a) owns Property whose
fair saleable value is greater than the amount required to pay all of such
Person's indebtedness and other obligations (including contingent debts), (b) is
able to pay all of its indebtedness and other obligations as such indebtedness
and other obligations mature and (c) has capital sufficient to carry on its
business and transactions and all business and transactions in which it is about
to engage.
"Speculative Units" means Developed Lots having fully or partially
constructed Units thereon (including, at a minimum, a completed foundation for
any such Unit) that are not subject to bona fide contracts for the sale of such
Units to a third party, excluding Developed Lots containing Units used as Model
Homes.
"Subordinated Notes" means (i) Borrower's 8 5/8% Senior Subordinated Notes
due 2008, (ii) Borrower's 7 3/4% Senior Subordinated Notes due 2010 and (iii)
Borrower's 9 1/2% Senior Subordinated Notes due 2011.
"Subordinated Obligations" means, collectively, all obligations of Borrower
or any of its Subsidiaries that (a) do not provide for any scheduled redemption
on or before 30 days after the Maturity Date, (b) are expressly subordinated to
the Obligations by a written instrument containing subordination and related
provisions (including interest payment blockage, standstill and related
provisions) not materially less favorable to the Banks in any respect whatsoever
from
24
those applicable to Borrower's Subordinated Notes (or such other subordination
and related provisions as may be approved in writing by the Required Banks), (c)
are subject to financial covenants not materially more burdensome to Borrower
taken as a whole than those applicable to the Subordinated Notes, except such
covenants as may be approved in writing by the Required Banks and (d) are
subject to other covenants (other than the covenant to pay interest) and events
of default which in the aggregate are not materially more burdensome to Borrower
than those applicable to the Subordinated Notes, except such covenants or events
of default as may be approved in writing by the Required Banks.
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, joint venture or other business entity whether
now existing or hereafter organized or acquired: (a) in the case of a
corporation or limited liability company, of which securities having a majority
of the ordinary voting power for the election of the board of directors (other
than securities having such power only by reason of the happening of a
contingency) are at the time owned by such Person or one or more Subsidiaries of
such Person; or (b) in the case of a partnership, joint venture or other
business entity, in which such Person or a Subsidiary of such Person is a
general partner.
"Subsidiary Guaranty" means the guaranty of the Indebtedness of Borrower
under this Agreement executed by each Guarantor Subsidiary of Borrower
substantially in the form of Exhibit G, either as originally executed or as the
same may from time to time be supplemented, modified, amended, renewed, extended
or supplanted.
"Swap Contract" means (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps,
commodity options, forward commodity contracts, equity or equity index swaps or
options, bond or bond price or bond index swaps or options or forward bond or
forward bond price or forward bond index transactions, interest rate options,
forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap
transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement, and (b) any and all transactions
of any kind, and the related confirmations, which are subject to the terms and
conditions of, or governed by, any form of master agreement published by the
International Swaps and Derivatives Association, Inc., any International Foreign
Exchange Master Agreement, or any other master agreement (any such master
agreement, together with any related schedules, a "Master Agreement"), including
any such obligations or liabilities under any Master Agreement.
"Swap Termination Value" means, in respect of any one or more Swap
Contracts, after taking into account the effect of any legally enforceable
netting agreement relating to such Swap Contracts, (a) for any date on or after
the date such Swap Contracts have been closed out and termination value(s)
determined in accordance therewith, such termination value(s), and (b) for any
date prior to the date referenced in clause (a), the amount(s) determined as the
▇▇▇▇-to market value(s) for such Swap Contracts, as determined based upon one or
more mid-market or other readily available quotations provided by any recognized
dealer in such Swap Contracts (which may include a Bank or any Affiliate of a
Bank).
25
"Taxes" means all present or future taxes, levies, imposts, duties,
deductions, withholdings, assessments, fees or other charges imposed by any
Governmental Agency, including any interest, additions to tax or penalties
applicable thereto.
"Termination Event" means (a) a "reportable event" as defined in Section
4043 of ERISA (other than a "reportable event" that is not subject to the
provision for 30 day notice to the PBGC), (b) the withdrawal of Borrower or any
of its ERISA Affiliates from a Pension Plan during any plan year in which it was
a "substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the
filing of a notice of intent to terminate a Pension Plan or the treatment of an
amendment to a Pension Plan as a termination thereof pursuant to Section 4041 of
ERISA, other than pursuant to Section 4041(b) of ERISA, (d) the institution of
proceedings to terminate a Pension Plan by the PBGC or (e) any other event or
condition which might reasonably be expected to constitute grounds under ERISA
for the termination of, or the appointment of a trustee to administer, any
Pension Plan.
"to the best knowledge of" means, when modifying a representation, warranty
or other statement of any Person, that such representation, warranty or
statement is a representation, warranty or statement that (a) the Person making
it has no actual knowledge of the inaccuracy of the matters therein stated and
(b) assuming the exercise by the Person making it of reasonable due diligence
under the circumstances (in accordance with the standard of what a reasonable
Person would have done under similar circumstances), the Person making it would
have no actual knowledge of the inaccuracy of the matters therein stated. Where
the Person making the representation, warranty or statement is not a natural
Person, the aforesaid actual or constructive knowledge shall be that of any
Senior Officer of that Person.
"Type" means, with respect to a Loan, its character as a Base Rate Loan or
a Eurodollar Rate Loan.
"Unit" means a residential housing unit available for sale located in the
United States.
"Unrestricted Cash" means, as of any date of determination, the Cash and
Cash Equivalents of Borrower and its Borrowing Base Subsidiaries to the extent
that such Cash and Cash Equivalents are free and clear of all Liens and Rights
of Others and are not subject to any restriction pursuant to any Contractual
Obligations.
"Voting Stock" means, with respect to any Person, the capital stock of such
Person having general voting power under ordinary circumstances to elect at
least a majority of the board of directors, managers or trustees of such Person
(irrespective of whether or not at the time capital stock of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency).
1.2 Accounting Terms. All accounting terms not specifically defined in this
Agreement shall be construed in conformity with, and all financial data required
to be submitted by this Agreement shall be prepared in conformity with,
Generally Accepted Accounting Principles consistently applied, except as
otherwise specifically prescribed herein. In the event that Generally Accepted
Accounting Principles change during the term of this Agreement such that the
financial covenants contained in Sections 6.9, 6.10, 6.11, 6.15 or 6.16 would
then be
26
calculated in a different manner or with different components or would render
the same not meaningful criteria for evaluating Borrower's financial condition,
(a) Borrower and the Banks agree to amend this Agreement in such respects as are
necessary to conform those covenants as criteria for evaluating Borrower's
financial condition to substantially the same criteria as were effective prior
to such change in Generally Accepted Accounting Principles and (b) Borrower
shall be deemed to be in compliance with the financial covenants contained in
such Sections during the 90 day period following such change in Generally
Accepted Accounting Principles if and to the extent that Borrower would have
been in compliance therewith under Generally Accepted Accounting Principles as
in effect immediately prior to such change. In the event that the Borrower
changes its Fiscal Year during the term of this Agreement, Borrower and the
Banks agree to amend this Agreement and the other Loan Documents in such
respects as are necessary to conform the definitions, the financial covenants,
the reporting requirements and the other provisions thereof to fairly reflect
such change in the Borrower's Fiscal Year.
1.3 Rounding. Any financial ratios required to be maintained by Borrower
pursuant to this Agreement shall be calculated by dividing the appropriate
component by the other component, carrying the result to one place more than the
number of places by which such ratio is expressed in this Agreement and rounding
the result up or down to the nearest number (with a round-up if there is no
nearest number) to the number of places by which such ratio is expressed in this
Agreement.
1.4 Other Interpretive Provisions. With reference to this Agreement and
each other Loan Document, unless otherwise specified herein or in such other
Loan Document:
(a) The meanings of defined terms are equally applicable to the singular
and plural forms of the defined terms.
(b) Any definition of or reference to any agreement, instrument or other
document shall be construed as referring to such agreement, instrument or other
document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein or in any other Loan Document).
(c) The words "herein," "hereto," "hereof" and "hereunder" and words of
similar import when used in any Loan Document shall refer to such Loan Document
as a whole and not to any particular provision thereof.
(d) Article, Section, Exhibit and Schedule references are to the Loan
Document in which such reference appears.
(e) Any reference to any law shall include all statutory and regulatory
provisions consolidating, amending, replacing or interpreting such law and any
reference to any law or regulation shall, unless otherwise specified, refer to
such law or regulation as amended, modified or supplemented from time to time.
(f) The term "including" is by way of example and not limitation.
(g) The term "or" is not exclusive.
27
(h) The term "documents" includes any and all instruments, documents,
agreements, certificates, notices, reports, financial statements and other
writings, however evidenced, whether in physical or electronic form.
(i) In the computation of periods of time from a specified date to a later
specified date, the word "from" means "from and including;" the words "to" and
"until" each mean "to but excluding;" and the word "through" means "to and
including."
(j) Section headings herein and in the other Loan Documents are included
for convenience of reference only and shall not affect the interpretation of
this Agreement or any other Loan Document.
1.5 Exhibits and Schedules. All Exhibits and Schedules to this Agreement,
either as originally existing or as the same may from time to time be
supplemented, modified, or amended, are incorporated herein by reference. A
matter disclosed on any Schedule shall be deemed disclosed on all Schedules.
1.6 References to "Borrower and its Subsidiaries". Any reference herein to
"Borrower and its Subsidiaries" or the like shall refer solely to Borrower
during such times, if any, as Borrower shall have no Subsidiaries.
1.7 Time of Day. Unless otherwise specified, all references herein to times
of day shall be references to Central time (daylight or standard, as
applicable).
ARTICLE II
LOANS
2.1 Loans.
(a) Subject to the terms and conditions set forth in this Agreement, each
Bank severally agrees to make Loans to Borrower on the Closing Date in an
aggregate amount equal to its Pro Rata Share of the Facility Amount. The Loans
are not revolving commitments and Borrower shall have no right to re-borrow any
amounts repaid hereunder. Borrower acknowledges and agrees that the full amount
of the Loans in the amount of $400,000,000 has been disbursed to or on behalf of
Borrower as of the Closing Date. The borrowing of the Loans on the Closing Date
shall be a single Eurodollar Rate Loan with a 2 week Interest Period.
2.2 Conversions and Continuation of Loans.
(a) Each conversion of Loans from one Type to the other, and each
continuation of Eurodollar Rate Loans shall be made upon Borrower's irrevocable
notice to Administrative Agent, which may be given by telephone. Each such
notice must be received by Administrative Agent not later than 11:00 a.m., Los
Angeles time (i) three (3) Business Days prior to the requested date of any
conversion to or continuation of Eurodollar Rate Loans or of any conversion of
Eurodollar Rate Loans to Base Rate Loans, and (ii) on the Business Day of the
requested date of any continuation of Base Rate Loans. Each telephonic notice by
Borrower pursuant to this Section 2.2(a) must be confirmed promptly by delivery
to the Administrative Agent of a written Conversion or Continuation Notice,
appropriately completed and signed by a
28
Responsible Official of Borrower. Each conversion to or continuation of
Eurodollar Rate Loans shall be in a principal amount of $50,000,000 or a whole
multiple of $10,000,000 in excess thereof. Each conversion to Base Rate Loans
shall be in a principal amount of $25,000,000 or a whole multiple of $5,000,000
in excess thereof. Each Conversion or Continuation Notice (whether telephonic or
written) shall specify (i) whether Borrower is requesting a conversion of Loans
from one Type to the other or a continuation of Eurodollar Rate Loans, (ii) the
requested date of the conversion or continuation, as the case may be (which
shall be a Business Day), (iii) the principal amount to be converted or
continued, (iv) the Type of Loan to which existing Loans are to be converted,
and (v) if applicable, the duration of the Interest Period with respect thereto.
If Borrower fails to give a timely notice requesting a conversion or
continuation, then the applicable Loans shall be continued as, or converted to,
(x) 2 week Eurodollar Rate Loans during the period from the Closing Date to but
excluding July 11, 2006 (such period, the "Initial Interest Rate Period") or (y)
1 month Eurodollar Rate Loans during the period from and including July 11, 2006
until the Maturity Date (such period, the "Subsequent Interest Rate Period").
Any such automatic continuation or conversion to 2 week Eurodollar Rate Loans or
1 month Eurodollar Rate Loans, as applicable, shall be effective as of the last
day of the Interest Period then in effect with respect to the applicable
Eurodollar Rate Loans. If Borrower requests a conversion to or continuation of
Eurodollar Rate Loans in any such Conversion or Continuation Notice, but fails
to specify the Interest Period, it will be deemed to have specified an Interest
Period of (x) 2 weeks during the Initial Interest Rate Period or (y) 1 month
during the Subsequent Interest Rate Period.
(b) If no timely notice of a conversion or continuation is provided by
Borrower, Administrative Agent shall notify each Bank of the details of any
automatic conversion to Eurodollar Rate Loans.
(c) Except as otherwise provided herein, a Eurodollar Rate Loan may be
continued or converted only on the last day of an Interest Period for such
Eurodollar Rate Loan. During the existence of a Default, no Loans may be
converted to or continued as Eurodollar Rate Loans without the consent of the
Required Banks.
(d) Administrative Agent shall promptly notify Borrower and the Banks of
the interest rate applicable to any Interest Period for Eurodollar Rate Loans
upon determination of such interest rate. At any time that Base Rate Loans are
outstanding, Administrative Agent shall notify Borrower and the Banks of any
change in Citibank, N.A.'s prime rate used in determining the Base Rate promptly
following the public announcement of such change.
(e) After giving effect to the conversions of Loans from one Type to the
other and all continuations of Loans as the same Type, there shall not be more
than five (5) Interest Periods in effect at any one time with respect to
Eurodollar Rate Loans.
2.3 Borrowing Base.
(a) Reporting of Borrowing Base. Within 50 days after the end of each
Fiscal Quarter (other than the fourth Fiscal Quarter of any Fiscal Year), 90
days after the end of each Fiscal Year, and within 30 days after Borrower loses
an Investment Grade Credit Rating, the Borrower shall provide the Administrative
Agent with a Borrowing Base Certificate in a form
29
satisfactory to the Administrative Agent showing the Borrower's calculations of
the components of the Borrowing Base as of the end of the last Fiscal Quarter
and such data supporting such calculations per Exhibit B or in another form as
the Administrative Agent may reasonably require; provided that Borrower shall
have no obligation to provide a Borrowing Base Certificate to the Administrative
Agent at any time at which Borrower holds an Investment Grade Credit Rating. Any
change in the Borrowing Base shall be effective upon receipt of a Borrowing Base
Certificate.
(b) Amount of Borrowing Base. As used in this Agreement, the term
"Borrowing Base" means a Dollar amount equal to the sum of the following:
(i) Escrow Receivables. 90% of the aggregate GAAP Value of Escrow
Receivables; plus
(ii) Developed Lots. 65% of the aggregate GAAP Value of Developed
Lots; plus
(iii) Lots Under Development. 65% of the aggregate GAAP Value of Lots
Under Development; plus
(iv) Construction Costs. 85% of the aggregate GAAP Value of
Construction Costs; plus
(v) Unrestricted Cash. 100% of Unrestricted Cash in excess of
$15,000,000;
provided, however, that the aggregate of the amounts set forth in clauses (ii)
and (iii) shall be less than 50% of the Borrowing Base.
ARTICLE III
PAYMENTS AND FEES
3.1 Principal and Interest.
(a) Interest shall be payable on the outstanding daily unpaid principal
amount of the Loans from the Closing Date until payment in full and shall accrue
and be payable at the rates set forth herein, to the extent permitted by
applicable Laws, before and after default, before and after maturity, before and
after any judgment, and before and after the commencement of any proceeding
under any Debtor Relief Law, with interest on overdue interest to bear interest
at the Default Rate.
(b) Interest accrued on each Base Rate Loan shall be due and payable on
each Quarterly Payment Date. Except as otherwise provided in Section 3.5, unpaid
principal amount of the Base Rate Loans shall bear interest at a fluctuating
rate per annum equal to the sum of the Base Rate plus the Applicable Base Rate
Spread.
(c) Interest accrued on each Eurodollar Rate Loan shall be due and payable
on the last day of the applicable Interest Period; provided, however, if any
Interest Period for a
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Eurodollar Rate Loan exceeds three (3) months, interest accrued on such
Eurodollar Rate Loan shall be due and payable on the respective dates that fall
every three (3) months after the beginning of such Interest Period. Except as
otherwise provided in Section 3.5, the unpaid principal amount of any Eurodollar
Rate Loan shall bear interest at a rate per annum equal to the sum of the
Eurodollar Rate for that Eurodollar Rate Loan plus the Applicable Eurodollar
Rate Spread.
(d) If not sooner paid, the principal Indebtedness evidenced by the Notes
shall be payable in Cash on the Maturity Date.
(e) The Notes may, at any time and from time to time, voluntarily be
prepaid at the election of Borrower in whole or in part without premium or
penalty; provided that: (i) any partial prepayment shall be in integral
multiples of $1,000,000, (ii) any partial prepayment shall be in an amount not
less than $1,000,000 on a Base Rate Loan and not less than $5,000,000 on a
Eurodollar Rate Loan, (iii) the Administrative Agent must have received written
notice (or telephonic notice confirmed promptly in writing) of any prepayment at
least 3 Business Days before the date of prepayment in the case of a Eurodollar
Rate Loan and by 10:00 a.m., Los Angeles time, on the date of prepayment in the
case of a Base Rate Loan, (iv) each prepayment of principal, except for partial
prepayment of Base Rate Loans, shall be accompanied by prepayment of interest
accrued to the date of payment on the amount of principal paid and (v) in the
case of any prepayment of a Eurodollar Rate Loan, Borrower shall promptly upon
demand reimburse each Bank for any loss or cost directly or indirectly resulting
from the prepayment, determined as set forth in Section 3.4.
(f) Change in Control.
(i) If a Change in Control shall have occurred, at the option of the
Required Banks, Borrower shall repay in Cash the entire principal
Indebtedness evidenced by the Notes, together with interest thereon and all
other amounts due in connection with the Notes and this Agreement (the
"Change in Control Repayment"), on the date that is no more than 27
Business Days after the occurrence of the Change in Control (the "Change in
Control Payment Date"), subject to receipt by Borrower of a Change in
Control Payment Notice as set forth in Section 3.1(f)(iii).
(ii) Within 15 Business Days after the occurrence of a Change in
Control, Borrower shall provide written notice of the Change in Control to
the Administrative Agent and each Bank. The notice shall state:
(A) the events causing a Change in Control and the date of such
Change in Control;
(B) the date by which the Change in Control Payment Notice (as
defined in Section 3.1(f)(iii)) must be given; and
(C) the Change in Control Payment Date.
(iii) At the direction of the Required Banks, the Administrative Agent
shall, on behalf of the Banks, exercise the rights specified in Section
3.1(f)(i) by delivery of
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a written notice (a "Change in Control Payment Notice") to Borrower at any
time prior to or on the Change in Control Payment Date, stating that the
Notes shall be prepaid on the Change in Control Payment Date. On the Change
in Control Payment Date, Borrower shall make the Change in Control
Repayment to the Administrative Agent for the benefit of the Banks.
3.2 Other Fees. Borrower shall pay to the Administrative Agent and the
Arrangers such other fees in such amounts and at such times as heretofore set
forth in letter agreements to which Borrower is a party.
3.3 Capital Adequacy.
(a) If any Bank (an "Affected Bank") determines that compliance with any
Law or regulation or with any guideline or request from any central bank or
other Governmental Agency (whether or not having the force of Law) enacted or
issued after the Closing Date relating to the capital adequacy of banks or
corporations in control of banks has or would have the effect of reducing the
rate of return on the capital of such Affected Bank or any corporation
controlling such Affected Bank as a consequence of, or with reference to, such
Affected Bank's Pro Rata Share of the Loans below the rate which the Bank or
such other corporation could have achieved but for such compliance (taking into
account the policies of such Bank or corporation with regard to capital
adequacy), then Borrower shall from time to time, upon demand by such Affected
Bank in accordance with this Section 3.3 (with a copy of such demand to the
Administrative Agent), within 15 days after demand pay to such Affected Bank
additional amounts sufficient to compensate such Affected Bank or other
corporation for such reduction.
(b) An Affected Bank may not seek compensation under Section 3.3(a) unless
the demand for such compensation is delivered to Borrower within 6 months
following the date of enactment or issuance of the Law, regulation, guideline or
request giving rise to such demand for compensation.
(c) A certificate as to any amounts for which an Affected Bank is seeking
compensation under Section 3.3(a), submitted to Borrower and the Administrative
Agent by such Affected Bank, shall be conclusive and binding for all purposes,
absent manifest error. Each Affected Bank shall calculate such amounts in a
manner which is consistent with the manner in which it makes calculations for
comparable claims with respect to similarly situated borrowers from such
Affected Bank, will not allocate to Borrower a proportionately greater amount of
such compensation than it allocates to each of its other commitments to lend or
other loans with respect to which it is entitled to demand comparable
compensation, and will not include amounts already factored into the rates of
interest or fees already provided for herein. Each Bank agrees promptly to
notify Borrower and the Administrative Agent of any circumstances that would
cause Borrower to pay additional amounts pursuant to this Section, provided that
the failure to give such notice shall not affect Borrower's obligation to pay
such additional amounts hereunder.
(d) Without limiting its obligation to reimburse an Affected Bank for
compensation theretofore claimed by an Affected Bank pursuant to Section 3.3(a),
Borrower may, within 60 days following any demand by an Affected Bank, request
that one or more Persons that are Eligible Assignees and that are acceptable to
Borrower and approved by the
32
Administrative Agent (which approval shall not be unreasonably withheld)
purchase all (but not part) of the Affected Bank's then outstanding Loans and
its Note. If one or more such Banks or banks so agree in writing (each, an
"Assuming Bank" and collectively, the "Assuming Banks"), the Affected Bank shall
assign its Loans to the Assuming Bank or Assuming Banks in accordance with
Section 11.8. On the date of any such assignment, the Affected Bank which is
being so replaced shall cease to be a "Bank" for all purposes of this Agreement
and shall receive (x) from the Assuming Bank or Assuming Banks the principal
amount of its Loans then outstanding and (y) from Borrower all interest and fees
accrued and then unpaid with respect to such Loans, together with any other
amounts accrued or then payable to such Bank by Borrower.
3.4 Eurodollar Fees and Costs.
(a) Increased Costs Generally. If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit,
compulsory loan, insurance charge or similar requirement against assets of,
deposits with or for the account of, or credit extended or participated in
by, any Bank;
(ii) subject any Bank to any tax of any kind whatsoever with respect
to this Agreement, any Eurodollar Rate Loans made by it, or change the
basis of taxation of payments to such Bank in respect thereof (except for
Indemnified Taxes or Other Taxes covered by Section 3.8 and the imposition
of, or any change in the rate of, any Excluded Tax payable by such Bank);
or
(iii) impose on any Bank or the London interbank market any other
condition, cost or expense affecting this Agreement or any Eurodollar Rate
Loans made by such Bank;
and the result of any of the foregoing would be to increase the cost to such
Bank of making or maintaining any Eurodollar Rate Loan (or of maintaining its
obligation to make any such Eurodollar Rate Loan), or to increase the cost to
such Bank, or to reduce the amount of any sum received or receivable by such
Bank hereunder (whether of principal, interest or any other amount) then, upon
request of such Bank, the Borrower will pay to such Bank such additional amount
or amounts as will compensate such Bank for such additional costs incurred or
reduction suffered.
(b) Capital Requirements. If any Bank determines that any Change in Law
affecting such Bank or any Lending Office of such Bank or such Bank's holding
company, if any, regarding capital requirements has or would have the effect of
reducing the rate of return on such Bank's capital or on the capital of such
Bank's holding company, if any, as a consequence of this Agreement, or the Loans
made by such Bank to a level below that which such Bank or such Bank's holding
company could have achieved but for such Change in Law (taking into
consideration such Bank's policies and the policies of such Bank's holding
company with respect to capital adequacy), then from time to time the Borrower
will pay to such Bank such additional amount or amounts as will compensate such
Bank or such Bank's holding company for any such reduction suffered.
33
(c) Certificates for Reimbursement. A certificate of a Bank setting forth
the amount or amounts necessary to compensate such Bank or its holding company,
as the case may be, as specified in Section 3.4(a) or Section 3.4(b) and
delivered to the Borrower shall be conclusive absent manifest error. The
Borrower shall pay such Bank the amount shown as due on any such certificate
within 10 days after receipt thereof.
(d) Delay in Requests. Failure or delay on the part of any Bank to demand
compensation pursuant to the foregoing provisions of this Section shall not
constitute a waiver of such Bank's right to demand such compensation, provided
that the Borrower shall not be required to compensate a Bank pursuant to the
foregoing provisions of this Section for any increased costs incurred or
reductions suffered more than 6 months prior to the date that such Bank notifies
the Borrower of the Change in Law giving rise to such increased costs or
reductions and of such Bank's intention to claim compensation therefor (except
that, if the Change in Law giving rise to such increased costs or reductions is
retroactive, then the 6-month period referred to above shall be extended to
include the period of retroactive effect thereof).
(e) Unavailability. If, with respect to any proposed Eurodollar Rate Loan:
(i) the Administrative Agent reasonably determines that, by reason of
circumstances affecting the London interbank eurodollar market generally
that are beyond the reasonable control of the Banks, deposits in dollars
(in the applicable amounts) are not being offered to each of the Banks in
the London interbank eurodollar market for the applicable Interest Period;
or
(ii) the Required Banks advise the Administrative Agent that the
Eurodollar Rate as determined by the Administrative Agent will not
adequately and fairly reflect the cost to such Banks of making the
applicable Eurodollar Rate Loans;
then the Administrative Agent forthwith shall give notice thereof to Borrower
and the Banks, whereupon until the Administrative Agent notifies Borrower that
the circumstances giving rise to such suspension no longer exist, the obligation
of the Banks to convert or continue after the current Interest Period(s) any
Eurodollar Rate Loans shall be suspended. If at the time of such notice there is
then pending a Conversion or Continuation Notice that specifies a Eurodollar
Rate Loan, such Conversion or Continuation Notice shall be deemed to specify a
Base Rate Loan.
(f) Compensation for Losses. Upon demand of any Bank (with a copy to the
Administrative Agent) from time to time, the Borrower shall promptly compensate
such Bank for and hold such Bank harmless from any loss, cost or expense
incurred by it as a result of:
(i) any continuation, conversion, payment or prepayment of any Loan
other than a Base Rate Loan on a day other than the last day of the
Interest Period for such Loan (whether voluntary, mandatory, automatic, by
reason of acceleration, or otherwise);
(ii) any failure by the Borrower to prepay, continue or convert any
Loan other than a Base Rate Loan on the date or in the amount notified by
the Borrower; or
34
(iii) any assignment of a Eurodollar Rate Loan on a day other than the
last day of the Interest Period therefor as a result of a request by the
Borrower pursuant to Section 11.27;
including any loss, cost or expense arising from the liquidation or reemployment
of funds obtained by it to maintain such Loan or from fees payable to terminate
the deposits from which such funds were obtained. The Borrower shall also pay
any customary administrative fees charged by such Bank in connection with the
foregoing. For purposes of calculating amounts payable by the Borrower to the
Banks under this Section 3.4, each Bank shall be deemed to have funded each
Eurodollar Rate Loan made by it at the Eurodollar Rate by a matching deposit or
other borrowing in the London interbank eurodollar market for a comparable
amount and for a comparable period, whether or not such Eurodollar Rate Loan was
in fact so funded.
3.5 Late Payments/Default Interest. If any installment of principal or
interest under the Notes or any other amount payable to the Banks under any Loan
Document is not paid when due, it shall thereafter bear interest at a
fluctuating interest rate per annum at all times equal to the sum of the Base
Rate plus the Applicable Base Rate Spread plus 2% (the "Default Rate"), provided
however that, subject to the following sentence, principal, interest or other
amounts due with respect to Eurodollar Rate Loans shall bear interest at a
fluctuating rate per annum at all times equal to the sum of the Eurodollar Rate
plus the Applicable Eurodollar Rate Spread plus 2%; in each case, to the extent
permitted by applicable Law, until paid in full (whether before or after
judgment). Upon and during the continuance of any Event of Default, the
Indebtedness evidenced by the Notes shall, at the election of the Required Banks
and upon notice to Borrower (and in lieu of interest provided for in the
preceding sentence), bear interest at a fluctuating interest rate per annum at
all times equal to the Default Rate, to the extent permitted by applicable Law,
until no Event of Default exists (whether before or after judgment).
Notwithstanding the preceding sentence, after the occurrence of any Event of
Default under Sections 6.7, 6.10 or 6.16, the Indebtedness evidenced by the
Notes may not bear interest at the increased rate provided for in the preceding
sentence until such Event of Default has continued for at least 15 days, in the
case of Section 6.7, or 30 days, in the case of Sections 6.10 or 6.16.
3.6 Computation of Interest and Fees. All computations of interest for Base
Rate Loans when the Base Rate is determined by Citibank, N.A.'s "prime rate"
shall be calculated on the basis of a year of 365 or 366 days, as the case may
be, and actual days elapsed. All other computations of interest and fees
hereunder shall be calculated on the basis of a year of 360 days and paid for
the actual number of days elapsed (including the first day and excluding the
last day), which results in greater interest than if a year of 365 days were
used.
3.7 Holidays. If any payment to be made by the Borrower shall come due on a
day other than a Business Day, payment shall be made on the next following
Business Day, and such extension of time shall be reflected in computing
interest or fees, as the case may be.
3.8 Payment Free of Taxes.
(a) Payments Free of Taxes. Any and all payments by or on account of any
obligation of the Borrower hereunder or under any other Loan Document shall be
made free and clear of and without reduction or withholding for any Indemnified
Taxes or Other Taxes,
35
provided that if the Borrower shall be required by applicable law to deduct any
Indemnified Taxes (including any Other Taxes) from such payments, then
(i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to
additional sums payable under this Section) the Administrative Agent or any
Bank, as the case may be, receives an amount equal to the sum it would have
received had no such deductions been made,
(ii) the Borrower shall make such deductions, and
(iii) the Borrower shall timely pay the full amount deducted to the
relevant Governmental Agency in accordance with applicable law.
(b) Payment of Other Taxes by the Borrower. Without limiting the provisions
of Section 3.8(a) above, the Borrower shall timely pay any Other Taxes to the
relevant Governmental Agency in accordance with applicable law.
(c) Indemnification by the Borrower. The Borrower shall indemnify the
Administrative Agent and each Bank, within 10 days after demand therefor, for
the full amount of any Indemnified Taxes or Other Taxes (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section) paid by the Administrative Agent or such Bank, as the case
may be, and any penalties, interest and reasonable expenses arising therefrom or
with respect thereto, whether or not such Indemnified Taxes or Other Taxes were
correctly or legally imposed or asserted by the relevant Governmental Agency. A
certificate as to the amount of such payment or liability delivered to the
Borrower by a Bank (with a copy to the Administrative Agent), or by the
Administrative Agent on its own behalf or on behalf of a Bank shall be
conclusive absent manifest error.
(d) Evidence of Payments. As soon as practicable after any payment of
Indemnified Taxes or Other Taxes by the Borrower to a Governmental Agency, the
Borrower shall deliver to the Administrative Agent the original or a certified
copy of a receipt issued by such Governmental Agency evidencing such payment, a
copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.
(e) Status of Banks. Any Foreign Bank that is entitled to an exemption from
or reduction of withholding tax under the law of the jurisdiction in which the
Borrower is resident for tax purposes, or any treaty to which such jurisdiction
is a party, with respect to payments hereunder or under any other Loan Document
shall deliver to the Borrower (with a copy to the Administrative Agent), at the
time or times prescribed by applicable law or reasonably requested by the
Borrower or the Administrative Agent, such properly completed and executed
documentation prescribed by applicable law as will permit such payments to be
made without withholding or at a reduced rate of withholding. In addition, any
Bank, if requested by the Borrower or the Administrative Agent, shall deliver
such other documentation prescribed by applicable law or reasonably requested by
the Borrower or the Administrative Agent as will enable the Borrower or the
Administrative Agent to determine whether or not such Bank is subject to backup
withholding or information reporting requirements. Without limiting the
36
generality of the foregoing, in the event that the Borrower is resident for tax
purposes in the United States, any Foreign Bank shall deliver to the Borrower
and the Administrative Agent (in such number of copies as shall be requested by
the recipient) on or prior to the date on which such Foreign Bank becomes a Bank
under this Agreement (and from time to time thereafter upon the request of the
Borrower or the Administrative Agent, but only if such Foreign Bank is legally
entitled to do so), whichever of the following is applicable:
(i) duly completed copies of Internal Revenue Service Form W-8BEN
claiming eligibility for benefits of an income tax treaty to which the
United States is a party,
(ii) duly completed copies of Internal Revenue Service Form W-8ECI,
(iii) in the case of a Foreign Bank claiming the benefits of the
exemption for portfolio interest under section 881(c) of the Code, (x) a
certificate to the effect that such Foreign Bank is not (A) a "bank" within
the meaning of section 881(c)(3)(A) of the Code, (B) a "10 percent
shareholder" of the Borrower within the meaning of section 881(c)(3)(B) of
the Code, or (C) a "controlled foreign corporation" described in section
881(c)(3)(C) of the Code and (y) duly completed copies of Internal Revenue
Service Form W-8BEN, or
(iv) any other form prescribed by applicable law as a basis for
claiming exemption from or a reduction in United States Federal withholding
tax duly completed together with such supplementary documentation as may be
prescribed by applicable law to permit the Borrower to determine the
withholding or deduction required to be made.
(f) Treatment of Certain Refunds. If the Administrative Agent or any Bank
determines, in its sole discretion, that it has received a refund of any Taxes
or Other Taxes as to which it has been indemnified by the Borrower or with
respect to which the Borrower has paid additional amounts pursuant to this
Section, it shall pay to the Borrower an amount equal to such refund (but only
to the extent of indemnity payments made, or additional amounts paid, by the
Borrower under this Section with respect to the Taxes or Other Taxes giving rise
to such refund), net of all out-of-pocket expenses of the Administrative Agent
or such Bank, as the case may be, and without interest (other than any interest
paid by the relevant Governmental Agency with respect to such refund), provided
that the Borrower, upon the request of the Administrative Agent or such Bank,
agrees to repay the amount paid over to the Borrower (plus any penalties,
interest or other charges imposed by the relevant Governmental Agency) to the
Administrative Agent or such Bank in the event the Administrative Agent or such
Bank is required to repay such refund to such Governmental Agency. This Section
3.8 (f) shall not be construed to require the Administrative Agent or any Bank
to make available its tax returns (or any other information relating to its
taxes that it deems confidential) to the Borrower or any other Person.
3.9 Funding Sources. Nothing in this Agreement shall be deemed to obligate
any Bank to obtain the funds for its share of any Loan in any particular place
or manner or to constitute a representation by any Bank that it has obtained or
will obtain the funds for its share of any Loan in any particular place or
manner.
37
3.10 Failure to Charge or Making of Payment Not Subsequent Waiver. Any
decision by any Bank not to require payment of any fee or costs, or to reduce
the amount of the payment required for any fee or costs, or to calculate any fee
or any cost in any particular manner, shall not limit or be deemed a waiver of
any Bank's right to require full payment of any fee or costs, or to calculate
any fee or any costs in any other manner. Any decision by Borrower to pay any
fee or costs shall not limit or be deemed a waiver of any right of Borrower to
protest or dispute the payment amount of such fee or costs.
3.11 Time and Place of Payments; Evidence of Payments; Application of
Payments. All payments to be made by the Borrower shall be made without
conditions or deduction for any counterclaim, defense, recoupment or setoff. The
amount of each payment hereunder, under the Notes or under any Loan Document
shall be made to the Administrative Agent at the Administrative Agent's Account,
for the account of each of the Banks or the Administrative Agent, as the case
may be, in lawful money of the United States of America without deduction,
offset or counterclaim and in immediately available funds on the day of payment
(which must be a Business Day). All payments of principal received after 10:00
a.m., Los Angeles time, on any Business Day, shall be deemed received on the
next succeeding Business Day for purposes of calculating interest thereon. The
amount of all payments received by the Administrative Agent for the account of a
Bank shall be promptly paid by the Administrative Agent to that Bank in
immediately available funds. Each Bank shall keep a record of the Loans made by
it and payments of principal with respect to each Note, and such record shall be
presumptive evidence of the principal amount owing under such Note; provided
that failure to keep such record shall in no way affect the Obligations of
Borrower. Prior to the Maturity Date or an acceleration of the maturity of the
Loans, payments under the Loan Documents shall be applied first to amounts owing
under the Loan Documents other than the principal amount of and accrued interest
on the Loans, second to accrued interest on the Loans and third, to the
principal amount of the Loans. Following the Maturity Date or an acceleration of
the maturity of the Loans, payments and recoveries under the Loan Documents
shall be applied in a manner designated in Section 9.2(d). All payments with
respect to principal and interest shall be applied ratably in accordance with
the Pro Rata Shares.
3.12 Administrative Agent's Right to Assume Payments Will be Made. Unless
the Borrower has notified the Administrative Agent, prior to the date any
payment is required to be made by it to the Administrative Agent hereunder, that
the Borrower will not make such payment, the Administrative Agent may assume
that the Borrower has timely made such payment and may (but shall not be so
required to), in reliance thereon, make available a corresponding amount to the
Person entitled thereto. If and to the extent that such payment was not in fact
made to the Administrative Agent in immediately available funds, then each Bank
shall forthwith on demand repay to the Administrative Agent the portion of such
assumed payment that was made available to such Bank in immediately available
funds, together with interest thereon in respect of each day from and including
the date such amount was made available by the Administrative Agent to such Bank
to the date such amount is repaid to the Administrative Agent in immediately
available funds at the Federal Funds Rate from time to time in effect. If such
Bank does not pay such amount forthwith upon the Administrative Agent's demand
therefor, the Administrative Agent may make a demand therefor upon the Borrower,
and the Borrower shall pay such amount to the Administrative Agent, together
with interest thereon for the period from the date such amount was made
available by the
38
Administrative Agent to such Bank to the date such amount is recovered by the
Administrative Agent at a rate per annum equal to the rate of interest
applicable to the applicable Loans. A notice of the Administrative Agent to any
Bank or the Borrower with respect to any amount owing under this Section 3.12
shall be conclusive, absent manifest error.
3.13 Survivability. All of Borrower's obligations under this Article III
shall survive repayment of all Obligations hereunder.
3.14 Bank Calculation Certificate. Any request for compensation pursuant to
Section 3.3 or 3.4 shall be accompanied by a statement of an officer of the Bank
requesting such compensation and describing the methodology used by such Bank in
calculating the amount of such compensation, which methodology (i) may consist
of any reasonable averaging and attribution methods and (ii) in the case of
Section 3.3 hereof shall be consistent with the methodology used by such Bank in
making similar calculations in respect of loans or commitments to other
borrowers.
3.15 Designation of a Different Lending Office. If any Bank requests
compensation under Sections 3.4(a) through 3.4(e), or the Borrower is required
to pay any additional amount to any Bank or any Governmental Agency for the
account of any Bank pursuant to Section 3.8, then such Bank shall use reasonable
efforts to designate a different Lending Office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of such Bank, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Sections 3.4(a) through 3.4(e) or Section 3.8, as the case may be, in the
future, and (ii) in each case, would not subject such Bank to any unreimbursed
cost or expense and would not otherwise be disadvantageous to such Bank. The
Borrower hereby agrees to pay all reasonable costs and expenses incurred by any
Bank in connection with any such designation or assignment.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to the Banks that:
4.1 Existence and Qualification; Power; Compliance with Law. Borrower is a
corporation duly organized, validly existing and in good standing under the Laws
of the State of Delaware, and its certificate of incorporation does not provide
for the termination of its existence. Borrower is duly qualified or registered
to transact business as a foreign corporation in the State of California, and in
each other jurisdiction in which the conduct of its business or the ownership of
its properties makes such qualification or registration necessary, except where
the failure so to qualify or register would not constitute a Material Adverse
Effect. Borrower has all requisite corporate power and authority to conduct its
business, to own and lease its Properties and to execute, deliver and perform
all of its obligations under the Loan Documents. All outstanding shares of
capital stock of Borrower are duly authorized, validly issued, fully paid,
non-assessable, and were issued in compliance with all applicable state and
federal securities Laws, except where the failure to so comply would not
constitute a Material Adverse Effect. Borrower is in substantial compliance with
all Laws and other legal requirements applicable to its business and has
obtained all authorizations, consents, approvals, orders, licenses and permits
39
(collectively, "Authorizations") from, and has accomplished all filings,
registrations and qualifications with, or obtained exemptions from any of the
foregoing from, any Governmental Agency that are necessary for the transaction
of its business, except where the failure so to obtain Authorizations, comply,
file, register, qualify or obtain exemptions does not constitute a Material
Adverse Effect.
4.2 Authority; Compliance with Other Instruments and Government
Regulations. The execution, delivery, and performance by Borrower, and by each
Guarantor Subsidiary of Borrower, of the Loan Documents to which it is a Party,
have been duly authorized by all necessary corporate or partnership action, and
do not:
(a) require any consent or approval not heretofore obtained of any
stockholder, partner, security holder, or creditor of such Party;
(b) violate or conflict with any provision of such Party's charter,
certificate or articles of incorporation, bylaws, certificate or articles of
organization, operating agreement, partnership agreement or other organizational
or governing documents of such Party;
(c) result in or require the creation or imposition of any Lien or Right of
Others upon or with respect to any Property now owned or leased or hereafter
acquired by such Party;
(d) constitute a "transfer of an interest" or an "obligation incurred" that
is avoidable by a trustee under Section 548 of the Bankruptcy Code of 1978, as
amended, or constitute a "fraudulent transfer" or "fraudulent obligation" within
the meaning of the Uniform Fraudulent Transfer Act as enacted in any
jurisdiction or any analogous Law;
(e) violate any Requirement of Law applicable to such Party; or
(f) result in a breach of or constitute a default under, or cause or permit
the acceleration of any obligation owed under, any indenture or loan or credit
agreement or any other Contractual Obligation to which such Party or any of its
Property is bound or affected with respect to any obligation or obligations
aggregating $50,000,000 or more; and neither Borrower nor any Guarantor
Subsidiary of Borrower is in violation of, or default under, any Requirement of
Law or Contractual Obligation, or any indenture, loan or credit agreement
described in this Section 4.2(f) in any respect that would constitute a Material
Adverse Effect.
4.3 No Governmental Approvals Required. Except such as have heretofore been
obtained, no authorization, consent, approval, order, license or permit from, or
filing, registration, or qualification with, or exemption from any of the
foregoing from, any Governmental Agency is or will be required to authorize or
permit the execution, delivery and performance by Borrower or any Guarantor
Subsidiary of Borrower of the Loan Documents to which it is a Party.
4.4 Subsidiaries.
(a) Schedule 4.4 correctly sets forth the names, the form of legal entity
and jurisdictions of organization of all Subsidiaries of Borrower as of the
Closing Date and identifies each such Subsidiary that is a Consolidated
Subsidiary, a Significant Subsidiary, a Guarantor
40
Subsidiary, a Foreign Subsidiary and a Financial Subsidiary. As of the Closing
Date, unless otherwise indicated in Schedule 4.4, all of the outstanding shares
of capital stock, or all of the units of equity interest, as the case may be, of
each Subsidiary indicated thereon are owned of record and beneficially by
Borrower or one of such Subsidiaries, and all such shares or equity interests so
owned were issued in compliance with all state and federal securities Laws and
are duly authorized, validly issued, fully paid and non-assessable (other than
with respect to required capital contributions to any joint venture in
accordance with customary terms and provisions of the related joint venture
agreement), except where the failure to so comply would not constitute a
Material Adverse Effect, and are free and clear of all Liens and Rights of
Others, except for Permitted Encumbrances and Permitted Rights of Others.
(b) Each Significant Subsidiary that is a Consolidated Subsidiary is duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, is duly qualified to do business as a foreign
organization and is in good standing as such in each jurisdiction in which the
conduct of its business or the ownership or leasing of its Properties makes such
qualification necessary (except where the failure to be so duly qualified and in
good standing does not constitute a Material Adverse Effect) and has all
requisite power and authority to conduct its business, to own and lease its
Properties and to execute, deliver and perform the Loan Documents to which it is
a Party.
(c) Each Significant Subsidiary that is a Consolidated Subsidiary is in
substantial compliance with all Laws and other requirements applicable to its
business and has obtained all Authorizations from, and each such Significant
Subsidiary has accomplished all filings, registrations, and qualifications with,
or obtained exemptions from any of the foregoing from, any Governmental Agency
that are necessary for the transaction of its business, except where the failure
so to obtain Authorizations, comply, file, register, qualify or obtain
exemptions does not constitute a Material Adverse Effect.
4.5 Financial Statements. Borrower has furnished to each Bank the audited
consolidated financial statements of Borrower and its GAAP Subsidiaries as at
November 30, 2005 and for the Fiscal Year then ended. Such audited financial
statements are in accordance with the books and records of Borrower and its GAAP
Subsidiaries, were prepared in accordance with Generally Accepted Accounting
Principles consistently applied and fairly present in accordance with Generally
Accepted Accounting Principles consistently applied the consolidated financial
condition and results of operations of Borrower and its GAAP Subsidiaries as at
the date and for the period covered thereby.
4.6 No Other Liabilities; No Material Adverse Effect. Borrower and its
Consolidated Subsidiaries do not have any material liability or material
contingent liability required by GAAP to be reflected or disclosed in the
financial statements or in the notes to the financial statements described in
Section 4.5, other than as reflected or disclosed and liabilities and contingent
liabilities arising in the ordinary course of business subsequent to November
30, 2005. From November 30, 2005 to the Closing Date, no event or circumstance
has occurred that constitutes a Material Adverse Effect with respect to Borrower
and its Subsidiaries.
4.7 Title to Assets.
41
(a) Borrower and its Consolidated Subsidiaries have good and valid title to
all of the assets reflected in the financial statements described in Section 4.5
as owned by them or any of them (other than assets disposed of in the ordinary
course of business), free and clear of all Liens and Rights of Others other than
(i) those reflected or disclosed in the notes to the financial statements
described in Section 4.5, (ii) Liens or Rights of Others not required under
Generally Accepted Accounting Principles consistently applied to be so reflected
or disclosed, (iii) Liens permitted pursuant to Section 6.7, (iv) Permitted
Rights of Others, and (v) such existing Liens or Rights of Others as are
described on Schedule 4.7 hereto.
(b) The Borrower and its Borrowing Base Subsidiaries have good record and
marketable title in fee simple to all Developed Lots, Lots Under Development and
Units being constructed on Developed Lots included in the Borrowing Base (as set
forth in the Borrowing Base Certificate delivered by Borrower to the
Administrative Agent pursuant to Section 8.1(a)(vii)), except for defects in
title that do not interfere in any material respect with its ability to conduct
its business as currently conducted or to utilize such properties for their
intended purposes.
4.8 Intangible Assets. Borrower and its Guarantor Subsidiaries own, or
possess the right to use, all trademarks, trade names, copyrights, patents,
patent rights, licenses and other intangible assets that are necessary in the
conduct of their businesses as operated, and no such intangible asset, to the
best knowledge of Borrower, conflicts with the valid trademark, trade name,
copyright, patent, patent right or intangible asset of any other Person to the
extent that such conflict would constitute a Material Adverse Effect.
4.9 Existing Indebtedness and Contingent Guaranty Obligations. As of
February 28, 2006, except as set forth in Schedule 4.9 or in the financial
statements described in Section 4.5, neither Borrower nor any of its
Consolidated Subsidiaries has (a) any Indebtedness owed to any Person or (b)
outstanding any Contingent Guaranty Obligation with respect to obligations of
another Person that is not a Subsidiary of Borrower.
4.10 Governmental Regulation. Neither Borrower nor any of the Guarantor
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935 or the Investment Company Act of 1940.
4.11 Litigation. There are no actions, suits, or proceedings pending or, to
the best knowledge of Borrower, threatened against or affecting Borrower or any
of its Subsidiaries or any Property of any of them before any Governmental
Agency which would constitute a Material Adverse Effect. To the best knowledge
of the Borrower, there are no investigations by any Governmental Agency pending
or threatened against or affecting Borrower or any of its Subsidiaries or any
Property of any of them which would constitute a Material Adverse Effect.
4.12 Binding Obligations. Each of the Loan Documents to which Borrower or
any Guarantor Subsidiary of Borrower is a Party has been duly authorized,
executed and delivered and constitutes the legal, valid and binding obligation
of Borrower or the Guarantor Subsidiary, as the case may be, enforceable against
Borrower or the Guarantor Subsidiary, as the case may be, in accordance with its
terms, except as enforcement may be limited by Debtor Relief Laws or
42
by equitable principles relating to the granting of specific performance and
other equitable remedies as a matter of judicial discretion.
4.13 No Default. No event has occurred and is continuing that is a Default
or an Event of Default.
4.14 Pension Plans. All contributions required to be made under any Pension
Plan maintained by Borrower or any of its ERISA Affiliates (or to which Borrower
or any ERISA Affiliate contributes or is required to contribute) have been made
or accrued in the most recent balance sheet of Borrower and its Consolidated
Subsidiaries.
4.15 Tax Liability. Borrower and its Consolidated Subsidiaries have filed
all tax returns which are required to be filed, and have paid, or made provision
for the payment of, all taxes which have become due pursuant to said returns or
pursuant to any assessment received by Borrower or any Consolidated Subsidiary,
except (a) such taxes, if any, as are being contested in good faith by
appropriate proceedings (and with respect to which Borrower or its Consolidated
Subsidiary has established adequate reserves for the payment of the same to the
extent required by, and in accordance with, Generally Accepted Accounting
Principles), and (b) such taxes the failure of which to pay will not constitute
a Material Adverse Effect.
4.16 Regulation U. Neither the Borrower nor any of its Subsidiaries is
engaged (or will engage), principally or as one of its important activities, in
the business of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal Reserve System), or
extending credit for the purpose of purchasing or carrying margin stock.
4.17 Environmental Matters. To the best knowledge of Borrower, Borrower and
its Consolidated Subsidiaries are in substantial compliance with all applicable
Laws relating to environmental protection where the failure to comply would
constitute a Material Adverse Effect. To the best knowledge of Borrower, neither
Borrower nor any of its Consolidated Subsidiaries has received any notice from
any Governmental Agency respecting the alleged violation by Borrower or any
Consolidated Subsidiary of such Laws which would constitute a Material Adverse
Effect and which has not been or is not being corrected.
4.18 Disclosure. The information provided by Borrower to the Banks in
connection with this Agreement or any Loan, taken as a whole, has not contained
any untrue statement of a material fact and has not omitted a material fact
necessary to make the statements contained therein, taken as a whole, not
misleading under the totality of the circumstances existing at the date such
information was provided and in the context in which it was provided.
4.19 Projections. As of the Closing Date, the assumptions upon which the
Projections are based are reasonable and consistent with each other assumption
and with all facts known to Borrower and that the Projections are reasonably
based on those assumptions. Nothing in this Section 4.19 shall be construed as a
representation or warranty as of any date other than the Closing Date or that
the Projections will in fact be achieved by Borrower.
4.20 ERISA Compliance.
43
(a) Each Plan is in compliance in all material respects with the applicable
provisions of ERISA, the Code and other Federal or state Laws. Each Plan that is
intended to qualify under Section 401(a) of the Code has received a favorable
determination letter from the IRS or an application for such a letter is
currently being processed by the IRS with respect thereto and, to the best
knowledge of the Borrower, nothing has occurred which would prevent, or cause
the loss of, such qualification. Neither the Borrower nor any ERISA Affiliate
sponsors, or has sponsored within the past 10 years, a defined benefit pension
plan, or is a participant, or has participated within the past 10 years, in a
Multiemployer Plan.
(b) There are no pending or, to the best knowledge of the Borrower,
threatened claims, actions or lawsuits, or action by any Governmental Agency,
with respect to any Plan that could be reasonably be expected to have a Material
Adverse Effect. There has been no prohibited transaction or violation of the
fiduciary responsibility rules with respect to any Plan that has resulted or
could reasonably be expected to result in a Material Adverse Effect. No ERISA
Event has occurred or is reasonably expected to occur.
4.21 Solvency. The Borrower and each Guarantor Subsidiary is and will be,
after giving effect to the making of the Loans, Solvent.
4.22 Tax Shelter Regulations. The Borrower does not intend to treat the
Loans as being a "reportable transaction" (within the meaning of Treasury
Regulation Section 1.6011-4). In the event the Borrower determines to take any
action inconsistent with such intention, it will promptly notify the
Administrative Agent thereof. Accordingly, if the Borrower so notifies the
Administrative Agent, the Borrower acknowledges that one or more of the Banks
may treat its Loans as part of a transaction that is subject to Treasury
Regulation Section 301.6112-1, and such Bank or Banks, as applicable, will
maintain the lists and other records required by such Treasury Regulation.
ARTICLE V
AFFIRMATIVE COVENANTS
(OTHER THAN INFORMATION AND REPORTING REQUIREMENTS)
As long as any Loan remains unpaid, or any other Obligation remains unpaid,
Borrower shall, and shall cause each of its Consolidated Subsidiaries to, unless
the Administrative Agent (with the approval of the Required Banks) otherwise
consents in writing:
5.1 Payment of Taxes and Other Potential Liens. Pay and discharge promptly,
all taxes, assessments, and governmental charges or levies imposed upon Borrower
or any of its Consolidated Subsidiaries, upon their respective Property or any
part thereof, upon their respective income or profits or any part thereof,
except any tax, assessment, charge, or levy that is not yet past due, or is
being contested in good faith by appropriate proceedings, as long as Borrower or
its Consolidated Subsidiary has established and maintains adequate reserves for
the payment of the same to the extent required by, and in accordance with,
Generally Accepted Accounting Principles and by reason of such nonpayment no
material Property of Borrower or its Significant Subsidiaries is subject to a
risk of loss or forfeiture.
44
5.2 Preservation of Existence. Preserve and maintain their respective
existence, licenses, rights, franchises, and privileges in the jurisdiction of
their formation and all authorizations, consents, approvals, orders, licenses,
permits, or exemptions from, or registrations with, any Governmental Agency that
are necessary for the transaction of their respective business, and qualify and
remain qualified to transact business in each jurisdiction in which such
qualification is necessary in view of their respective business or the ownership
or leasing of their respective Properties; provided that (a) the failure to
preserve and maintain any particular right, franchise, privilege, authorization,
consent, approval, order, license, permit, exemption, or registration, or to
qualify or remain qualified in any jurisdiction, that does not constitute a
Material Adverse Effect will not constitute a violation of this covenant, and
(b) nothing in this Section 5.2 shall prevent any consolidation or merger or
disposition of assets permitted by Section 6.3 or shall prevent the termination
of the business or existence (corporate or otherwise) of any Subsidiary of
Borrower which in the reasonable judgment of the management of Borrower is no
longer necessary or desirable.
5.3 Maintenance of Properties. Maintain, preserve and protect all of their
respective real Properties in good order and condition, subject to wear and tear
in the ordinary course of business and damage caused by the natural elements,
and not permit any waste of their respective real Properties, except that the
failure to so maintain, preserve or protect any particular real Property, or the
permitting of waste on any particular real Property, where such failure or waste
with respect to all real Properties of Borrower and its Subsidiaries, in the
aggregate, would not constitute a Material Adverse Effect.
5.4 Maintenance of Insurance. Maintain insurance with responsible insurance
companies in such amounts and against such risks as in Borrower's reasonable
business judgment is adequate in light of Borrower's and its Consolidated
Subsidiaries' size, business, assets and location of operations.
5.5 Compliance with Laws. Comply with all Requirements of Laws
noncompliance with which would constitute a Material Adverse Effect, except that
Borrower and its Consolidated Subsidiaries need not comply with a Requirement of
Law then being contested by any of them in good faith by appropriate procedures,
so long as such contest (or a bond or surety posted in connection therewith)
operates as a stay of enforcement of any material penalty that would otherwise
apply as a result of such failure to comply.
5.6 Inspection Rights. At any time during regular business hours and as
often as reasonably requested (and, in any event, upon 24 hours' prior notice),
permit any Bank or any appropriately designated employee, agent or
representative thereof at the expense of such Bank (unless a Default or an Event
of Default has occurred and is continuing) to examine, audit and make copies and
abstracts from the records and books of account of, and to visit and inspect the
Properties of Borrower and its Consolidated Subsidiaries, and to discuss the
affairs, finances and accounts of Borrower and such Subsidiaries with any of
their officers or employees; provided that none of the foregoing unreasonably
interferes with the normal business operations of Borrower or any of such
Subsidiaries and that the Banks shall engage in any such inspections on a
cooperative basis, if there has been no Default or Event of Default.
45
5.7 Keeping of Records and Books of Account. Keep adequate records and
books of account fairly reflecting all financial transactions in conformity with
Generally Accepted Accounting Principles applied on a consistent basis (except
for changes concurred with by Borrower's independent certified public
accountants) and all applicable requirements of any Governmental Agency having
jurisdiction over Borrower or any of its Consolidated Subsidiaries.
5.8 Use of Proceeds. Use the proceeds of all Loans solely to repay existing
Indebtedness of the Borrower and to pay fees and expenses in connection with the
transactions contemplated by the Loan Documents and not in contravention of any
Law or of any Loan Document.
5.9 Subsidiary Guaranty. Cause each of its Guarantor Subsidiaries hereafter
formed, acquired or qualifying as a Guarantor Subsidiary, to (a) execute and
deliver to the Administrative Agent promptly following such formation,
acquisition or qualification a joinder of the Subsidiary Guaranty or such other
document as the Administrative Agent shall deem appropriate, and (b) deliver to
the Administrative Agent documents of the types referred to in clause (iv) of
Section 8.1(a) and, if requested by the Administrative Agent, favorable opinions
of counsel to such Guarantor Subsidiary (which shall cover, among other things,
the legality, validity, binding effect and enforceability of the documentation
referred to in clause (a)), all in form, content and scope reasonably
satisfactory to the Administrative Agent; provided, however, that KB Orlando
shall not be required to execute a joinder of the Subsidiary Guaranty until such
time (and on such date) that it becomes a guarantor of Borrower's obligations
under the Borrower's Revolving Loan Agreement dated as of November 22, 2005 (as
amended from time to time).
ARTICLE VI
NEGATIVE COVENANTS
As long as any Loan remains unpaid or any other Obligation remains unpaid,
Borrower shall not, and shall not permit any of its Consolidated Subsidiaries
to, unless the Administrative Agent (with the approval of the Required Banks)
otherwise consents in writing:
6.1 Payment or Prepayment of Subordinated Obligations.
(a) Make any payment with respect to any Subordinated Obligation in
violation of the provisions in the instruments governing such Subordinated
Obligation; or
(b) if a Default or Event of Default then exists or would result therefrom:
(i) make an optional or unscheduled payment or prepayment of any
principal (including an optional or unscheduled sinking fund payment),
interest or any other amount with respect to any Subordinated Obligation;
or
(ii) make a purchase or redemption of any Subordinated Obligation.
6.2 [Intentionally Omitted].
46
6.3 Mergers and Sale of Assets. Merge or consolidate with or into any
Person, or sell a Material Amount of Assets to any Person, except, subject to
Section 6.6:
(a) a merger of Borrower into a wholly-owned Subsidiary of Borrower that
has nominal assets and liabilities, the primary purpose of which is to effect
the reincorporation of Borrower in another state;
(b) mergers or consolidations of a Subsidiary of Borrower into Borrower
(with Borrower as the surviving corporation) or into any other Subsidiary of
Borrower, provided that (i) the reduction in the proportionate share of Borrower
and its Subsidiaries in the total assets of such resulting Subsidiary (after
intercompany eliminations) does not constitute a Material Amount of Assets and
(ii) immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing;
(c) mergers, consolidations, liquidations, or sales of all or substantially
all of the assets of a Subsidiary; provided that (i) any such transaction does
not involve a transfer by Borrower or its Consolidated Subsidiaries of a
Material Amount of Assets and (ii) immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing; or
(d) a merger or consolidation of Borrower with another Person if (i) no
Change in Control results therefrom, (ii) Borrower does not transfer a Material
Amount of Assets to one or more Persons in connection with the merger or
consolidation and (iii) immediately after giving effect to such merger, no
Default or Event of Default shall have occurred and be continuing.
6.4 Investments and Acquisitions. Make any Acquisition, or enter into an
agreement to make any Acquisition, or make or suffer to exist any Investment,
other than:
(a) Investments in Cash or Cash Equivalents;
(b) advances to officers, directors and employees of Borrower or its
Subsidiaries for travel, entertainment, housing expenses, relocation, stock
option plans, or otherwise in connection with their employment or the business
of Borrower or any of its Subsidiaries;
(c) Investments of Borrower in any of its wholly-owned Subsidiaries and
Investments of any Subsidiary of Borrower in Borrower or any of Borrower's
wholly-owned Subsidiaries;
(d) Acquisitions of or Investments in Persons engaged primarily in the same
businesses as Borrower and its Subsidiaries, or in a business reasonably related
to such businesses, including electronic commerce and similar activities related
to real estate;
(e) Acquisitions of or Investments in the Borrower's own capital stock;
(f) Acquisitions of or Investments in Persons engaged primarily in
businesses other than those permitted by Sections 6.4(d), provided that the
aggregate cost of all such Acquisitions and Investments made in any fiscal year
does not exceed $100,000,000;
47
(g) Investments in Subsidiaries in existence on the Closing Date or as
otherwise disclosed on Schedule 6.4;
(h) Investments received in connection with the settlement of a bona fide
dispute with another Person;
(i) Investments consisting of readily marketable securities actively traded
on a public exchange, provided that (i) the aggregate amount of any such
Investments at any one time does not exceed $100,000,000 and (ii) subject to
Section 6.16 hereof, the Borrower's Investment in KB France shall be permitted
for all purposes hereunder and shall not be subject to the limitation set forth
in clause (i) of this Section 6.4(i); and
(j) Investments consisting of the extension of credit to suppliers in the
ordinary course of business and any Investments received in satisfaction or
partial satisfaction thereof, provided that the aggregate amount of any such
Investments at any one time does not exceed $50,000,000; but in all events,
subject to the restrictions of Section 6.16.
6.5 ERISA Compliance. Permit any Pension Plan maintained by Borrower or any
of its ERISA Affiliates (or to which Borrower or any ERISA Affiliate contributes
or is required to contribute), other than a Multiemployer Plan, to incur any
material "accumulated funding deficiency," as such term is defined in Section
302 of ERISA, unless waived, or permit any Pension Plan maintained by any of
them to suffer a Termination Event or incur withdrawal liability under any
Multiemployer Plan if any of such events would result in a liability of Borrower
or any ERISA affiliate exceeding in the aggregate $50,000,000.
6.6 Change in Business. Engage in any business other than the businesses as
now conducted by Borrower or its Subsidiaries, and any business reasonably
related to such businesses, other than:
(a) businesses in which Borrower and its Subsidiaries have invested no more
than $50,000,000 in any Fiscal Year; and
(b) as permitted pursuant to Section 6.4(f).
6.7 Liens and Negative Pledges. Create, incur, assume, or suffer to exist,
any Lien of any nature upon or with respect to any of their respective
Properties, whether now owned or hereafter acquired, or enter or suffer to exist
any Contractual Obligation wherein Borrower or any of its Consolidated
Subsidiaries agrees not to grant any Lien on any of their Properties, except:
(a) Liens and Contractual Obligations existing on the date hereof and
described in Schedule 4.7, provided that the obligations secured by such Liens
are not increased and that no such Lien extends to any Property of Borrower or
any Consolidated Subsidiary other than the Property subject to such Lien on the
Closing Date;
(b) Liens on Property of any Financial Subsidiary or Foreign Subsidiary
securing Indebtedness of that Financial Subsidiary or Foreign Subsidiary;
48
(c) Liens on Property securing Indebtedness of Borrower or any of its
Subsidiaries, provided that the aggregate Indebtedness (other than Indebtedness
described in clause (b) above and clause (q) below) secured by all such Liens
shall at no time exceed $200,000,000;
(d) Liens that may exist from time to time under the Loan Documents;
(e) Liens consisting of a Capital Lease covering personal Property;
(f) Permitted Encumbrances;
(g) attachment, judgment and other similar Liens arising in connection
with court proceedings; provided that the execution or enforcement of such Lien
is effectively stayed and the claims secured thereby do not in the aggregate
exceed $50,000,000 and are being contested in good faith by appropriate
proceedings timely commenced and diligently prosecuted;
(h) Liens existing on any asset of any Person at the time such Person
becomes a Subsidiary and not created in contemplation of such event;
(i) Liens on any asset of any Person existing at the time such Person
is merged or consolidated with or into Borrower or any of its Subsidiaries and
not created in contemplation of such event;
(j) Liens existing on any asset prior to the acquisition thereof by
Borrower or any of its Subsidiaries and not created in contemplation of such
acquisition;
(k) Liens arising out of the refinancing, extension, renewal or
refunding of any Indebtedness secured by any Lien permitted by any of the
foregoing clauses of this Section, provided that such Indebtedness is not
increased and is not secured by additional assets;
(l) Liens arising in the ordinary course of business which (i) do not
secure Indebtedness, (ii) do not secure any obligation in an amount exceeding
$10,000,000 individually, or $50,000,000 in the aggregate, and (iii) do not in
the aggregate materially detract from the value of the assets covered by such
Liens or materially impair the use thereof in the operation of Borrower's
business;
(m) Liens not otherwise permitted by the foregoing clauses of this
Section which secure Indebtedness not exceeding $10,000,000 in the aggregate;
(n) assessment district or similar Liens in connection with municipal
financings;
(o) a Contractual Obligation wherein Borrower or any of its
Subsidiaries agrees to grant any Lien on any of their Properties, if such
Contractual Obligation provides for the grant of a Lien on a pari passu basis in
favor of the Administrative Agent for the benefit of the Banks with respect to
the Obligations and in favor of the holders of such other Senior Indebtedness,
if any, as the Borrower designates (and Borrower shall, as soon as reasonably
possible, provide to the Banks a copy of any such Contractual Obligation);
(p) Liens on Property of a Joint Venture;
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(q) Liens on Property of the Borrower or any of its Subsidiaries that
secure Non-Recourse Indebtedness to the seller of such Property incurred by the
Borrower or any of its Subsidiaries upon acquisition of such Property; and
(r) Liens on Property that secure any obligation of the Borrower or any of
its Subsidiaries under any Profit and Participation Agreement.
For purposes of compliance with this Section: (x) in the event that any Lien
meets the criteria set forth in more than one of clauses (a) through (r) of this
Section, Borrower, in its sole discretion, may classify or reclassify such Lien
in any manner that complies with this Section and such Lien shall be treated as
having been permitted pursuant to only one of the clauses of this Section; and
(y) any Indebtedness secured by a Lien may be divided and classified among more
than one of the clauses of this Section.
6.8 Transactions with Affiliates. Enter into any transaction of any kind
with any Affiliate of Borrower other than (a) a transaction that results in
Subordinated Obligations, (b) a transaction between or among Borrower and its
wholly-owned Subsidiaries, (c) a transaction that has been authorized by the
board of directors of Borrower with the favorable vote of a majority of the
directors who have no financial or other interest in the transaction or by the
vote of a majority of the outstanding shares of capital stock of Borrower, (d) a
transaction entered into on terms and under conditions not less favorable to
Borrower or any of its Subsidiaries than could be obtained from a Person that is
not an Affiliate of Borrower, (e) salary, bonus, employee stock options and
other compensation arrangements and indemnification arrangements with directors
or officers or (f) transactions permitted by Sections 6.4 or 6.16.
6.9 Consolidated Tangible Net Worth. Permit Consolidated Tangible Net Worth
to be, at the end of any Fiscal Quarter, less than an amount equal to (a)
$1,731,507,000, plus (b) an amount equal to 50% of aggregate of the cumulative
Consolidated Net Income for each Fiscal Quarter contained in the fiscal period
commencing on September 1, 2005 and ending as of the last day of such Fiscal
Quarter (provided that there shall be no reduction hereunder in the event of a
consolidated net loss in any such Fiscal Quarter), plus (c) an amount equal to
50% of the cumulative net proceeds received by Borrower from the issuance of its
capital stock subsequent to August 31, 2005.
6.10 Consolidated Leverage Ratio. Permit the Consolidated Leverage Ratio to
be, at the end of any Fiscal Quarter, greater than 2.00 to 1.00.
6.11 Consolidated Interest Coverage Ratio. Permit the Consolidated Interest
Coverage Ratio to be, at the end of any Fiscal Quarter, less than 2.00 to 1.00.
6.12 Distributions. Make any Distribution (other than a Distribution made
to Borrower or to a Guarantor Subsidiary) if an Event of Default then exists or
if an Event of Default or Default would result therefrom.
6.13 Amendments. Amend, waive or terminate any provision in any instrument
or agreement governing Subordinated Obligations unless such amendment, waiver or
termination would not be materially adverse to the interests of the Banks under
this Agreement.
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6.14 [Intentionally Omitted].
6.15 Inventory. Permit, as of the end of any Fiscal Quarter at which the
Borrower does not hold an Investment Grade Credit Rating, the book value of
Domestic Unimproved Land to exceed an amount equal to 100% of Consolidated
Tangible Net Worth.
6.16 Investment in Subsidiaries and Joint Ventures. Permit, as of the last
day of any Fiscal Quarter, Borrower's equity interest, computed in accordance
with Generally Accepted Accounting Principles consistently applied, in all
Subsidiaries of Borrower (other than Guarantor Subsidiaries), Financial
Subsidiaries, Foreign Subsidiaries, all Joint Ventures and all other entities
with financial statements not consolidated with those of Borrower under
Generally Accepted Accounting Principles consistently applied to exceed 35% of
Consolidated Tangible Net Worth; provided, however, that Borrower's equity
interest in KB France on the Closing Date will be excluded for purposes of this
Section 6.16. For purposes of this Section 6.16, any increase in Borrower's
equity interest in KB France after the Closing Date will be included only if
such increase arises from further investment by Borrower in KB France, and then
only to the extent of such further investment.
6.17 Senior Indebtedness Not to Exceed Borrowing Base. Permit, at any time
at which the Borrower does not hold an Investment Grade Credit Rating, the
Senior Indebtedness at such time to exceed the Borrowing Base (as set forth in
the then most recent Borrowing Base Certificate delivered hereunder by Borrower
to the Administrative Agent).
6.18 Maximum Speculative Units. Permit, at any time at which the Borrower
does not hold an Investment Grade Credit Rating, the total number of Speculative
Units to exceed 40% of the number of Units that were sold and conveyed to buyers
during the previous 4 Fiscal Quarters.
6.19 Regulation U. Permit, any Loan hereunder to be used, whether directly
or indirectly, and whether immediately, incidentally or ultimately, to purchase
or carry margin stock or to extend credit to others for the purpose of
purchasing or carrying margin stock or to refund indebtedness originally
incurred for such purpose.
ARTICLE VII
INFORMATION AND REPORTING REQUIREMENTS
7.1 Financial and Business Information of Borrower and Its Subsidiaries. As
long as any Loan remains unpaid or any other Obligation remains unpaid, Borrower
shall, unless the Administrative Agent (with the approval of the Required Banks)
otherwise consents in writing, deliver to the Administrative Agent and each of
the Banks (except as otherwise provided below) at its own expense:
(a) As soon as reasonably possible, and in any event within 50 days after
the close of each Fiscal Quarter of Borrower (other than the fourth Fiscal
Quarter), (i) the consolidated and consolidating balance sheet of Borrower and
its GAAP Subsidiaries as of the end of such Fiscal Quarter, setting forth in
comparative form the corresponding figures for the corresponding Fiscal Quarter
of the preceding Fiscal Year, if available, and (ii) the consolidated and
consolidating statements of profit and loss and the consolidated statements of
cash flows of Borrower and its
51
GAAP Subsidiaries for such Fiscal Quarter and for the portion of the Fiscal Year
ended with such Fiscal Quarter, setting forth in comparative form the
corresponding periods of the preceding Fiscal Year. Such consolidated and
consolidating balance sheets and statements shall be prepared in reasonable
detail in accordance with Generally Accepted Accounting Principles consistently
applied (other than those which require footnote disclosure of certain matters),
and shall be certified by the principal financial officer of Borrower, subject
to normal year-end accruals and audit adjustments;
(b) As soon as reasonably possible, and in any event within 90 days after
the close of each Fiscal Year of Borrower, (i) the consolidated and
consolidating (in accordance with past practices of Borrower) balance sheets of
Borrower and its GAAP Subsidiaries as at the end of such Fiscal Year, setting
forth in comparative form the corresponding figures at the end of the preceding
Fiscal Year and (ii) the consolidated and consolidating (in accordance with past
practices of Borrower) statements of profit and loss and the consolidated
statements of cash flows of Borrower and its GAAP Subsidiaries for such Fiscal
Year, setting forth in comparative form the corresponding figures for the
previous Fiscal Year. Such consolidated and consolidating balance sheet and
statements shall be prepared in reasonable detail in accordance with Generally
Accepted Accounting Principles consistently applied. Such consolidated balance
sheet and statements shall be accompanied by a report and opinion of Ernst &
Young LLP or other independent certified public accountants of recognized
national standing selected by Borrower, which report and opinion shall state
that the examination of such consolidated financial statements by such
accountants was made in accordance with generally accepted auditing standards
and that such consolidated financial statements fairly present the financial
condition, results of operations and of cash flows of Borrower and its GAAP
Subsidiaries subject to no exceptions as to scope of audit and subject to no
other exceptions or qualifications (other than changes in accounting principles
in which the auditors concur) unless such other exceptions or qualifications are
approved by the Required Banks in their reasonable discretion. Such accountants'
report and opinion shall be accompanied by a certificate stating that, in
conducting the audit examination of books and records necessary for the
certification of such financial statements, such accountants have obtained no
knowledge of any Default or Event of Default hereunder or, if in the opinion of
such accountants, any such Default or Event of Default shall exist, stating the
nature and status of such event, and setting forth the applicable calculations
under Sections 6.9, 6.10, 6.11, 6.15 (without requiring any physical count of
inventory), 6.16, 6.17 and 6.18 as of the date of the balance sheet. Such
consolidating balance sheet and statements shall be certified by a Responsible
Official of Borrower;
(c) Promptly after the receipt thereof by Borrower, copies of any audit or
management reports submitted to it by independent accountants in connection with
any audit or interim audit submitted to the board of directors of Borrower or
any of its Consolidated Subsidiaries;
(d) Promptly after the same are available, copies of each annual report,
proxy or financial statement or other report or communication sent to its
stockholders, and copies of all annual, regular, periodic and special reports
and registration statements which Borrower may file or be required to file with
the Commission or any similar or corresponding Governmental Agency or with any
securities exchange; provided that so long as the Borrower is subject to
informational requirements of the Exchange Act and, in accordance therewith,
files reports and
52
other information with the Commission which are readily available to the public
on "▇▇▇▇▇", the Administrative Agent and the Banks shall be deemed to have been
furnished the foregoing reports, proxies and statements and the Administrative
Agent and each Bank may electronically access such reports, proxies and
statements by means of the Commission's homepage on the internet, on "▇▇▇▇▇" or
at Borrower's homepage on the internet at ▇▇▇.▇▇▇▇▇▇.▇▇▇;
(e) Promptly upon a Senior Officer of Borrower becoming aware, and in any
event within 10 Business Days after becoming aware, of the occurrence of any (i)
"reportable event" (as such term is defined in Section 4043 of ERISA) other than
any such event as to which the PBGC has by regulation waived the requirement of
30 days' notice or (ii) "prohibited transaction" (as such term is defined in
Section 406 of ERISA or Section 4975 of the Code) in connection with any Pension
Plan, other than a Multiemployer Plan, or any trust created thereunder, a
written notice specifying the nature thereof, what action Borrower and any of
its Consolidated Subsidiaries is taking or proposes to take with respect
thereto, and, when known, any action taken by the IRS with respect thereto;
(f) Promptly upon a Senior Officer of Borrower becoming aware, and in any
event within 5 Business Days after becoming aware, of the existence of a Default
or an Event of Default, a written notice specifying the nature and period of
existence thereof and what action Borrower is taking or proposes to take with
respect thereto;
(g) Promptly upon a Senior Officer of Borrower becoming aware, and in any
event within 5 Business Days after becoming aware, that the holder of any
evidence of Indebtedness (in a principal amount in excess of $50,000,000) of
Borrower or any of its Consolidated Subsidiaries has given notice or taken any
other action with respect to a default or event of default, a written notice
specifying the notice given or action taken by such holder and the nature of
such default or event of default and what action Borrower or its Consolidated
Subsidiary is taking or proposes to take with respect thereto;
(h) Promptly upon a Senior Officer of Borrower becoming aware, and in any
event within 5 Business Days after becoming aware, of the existence of any
pending or threatened litigation or any investigation by any Governmental Agency
that would constitute a Material Adverse Effect (provided, that no failure of a
Senior Officer to provide notice of any such event shall be the sole basis for
any Default or Event of Default hereunder);
(i) As soon as reasonably possible, and in any event prior to the date that
is 60 days after the commencement of each Fiscal Year, deliver to the
Administrative Agent the business plan of Borrower and its Consolidated
Subsidiaries for that Fiscal Year, together with projections (in substantially
the same format as the Projections) covering the next 2 Fiscal Years;
(j) Promptly following obtaining knowledge thereof by a Senior Officer of
Borrower, written notice to the Administrative Agent of (i) the inception or
cessation of the Investment Grade Credit Rating or (ii) any announcement by the
Rating Agencies of any change or possible change in a Debt Rating; and
(k) Such other data and information as from time to time may be reasonably
requested by any of the Banks.
53
The Borrower hereby acknowledges that (i) the Administrative Agent, the
Arrangers or both will make available to the Banks materials or information
provided by or on behalf of the Borrower hereunder (collectively, "Borrower
Materials") by posting the Borrower Materials on IntraLinks or another similar
electronic system (the "Platform") and (ii) certain of the Banks may be
"public-side" Banks (i.e., Banks that do not wish to receive material non-public
information with respect to the Borrower or its securities) (each, a "Public
Lender"). The Borrower hereby agrees that so long as the Borrower is the issuer
of any outstanding debt or equity securities that are registered or issued
pursuant to a private offering or is actively contemplating issuing any such
securities:
(A) all Borrower Materials that are to be made available to Public
Lenders shall be clearly and conspicuously marked "PUBLIC" which,
at a minimum, shall mean that the word "PUBLIC" shall appear
prominently on the first page thereof;
(B) by marking Borrower Materials "PUBLIC," the Borrower shall be
deemed to have authorized the Administrative Agent, the Arrangers
and the Banks to treat such Borrower Materials as not containing
any material nonpublic information with respect to the Borrower
or its securities for purposes of United States Federal and state
securities laws (provided, however, that to the extent such
Borrower Materials constitute Information, they shall be treated
as set forth in Section 11.12);
(C) all Borrower Materials marked "PUBLIC" are permitted to be made
available through a portion of the Platform designated "Public
Investor"; and
(D) the Administrative Agent and the Arrangers shall be entitled to
treat any Borrower Materials that are not marked "PUBLIC" as
being suitable only for posting on a portion of the Platform not
designated "Public Investor."
Notwithstanding the foregoing, the Borrower shall be under no obligation to ▇▇▇▇
any Borrower Materials "PUBLIC."
7.2 Compliance Certificate. Concurrently with the delivery of the financial
statements described in Section 7.1(a) and (b), Borrower shall deliver to the
Administrative Agent and the Banks, at Borrower's sole expense, a Compliance
Certificate dated as of the last day of the Fiscal Quarter or Fiscal Year, as
the case may be:
(a) setting forth computations showing, in detail reasonably satisfactory
to the Administrative Agent, whether Borrower and its Consolidated Subsidiaries
were in compliance with their obligations to the Banks pursuant to Sections 6.9,
6.10, 6.11, 6.15, 6.16, 6.17 and 6.18;
(b) certifying a sales report by geographical region, in the form attached
to the Compliance Certificate, setting forth the number of homes or other units
sold and delivered during such period and in backlog at the end of such period;
54
(c) certifying an inventory report for such period in the form attached to
the Compliance Certificate, summarizing such inventory by type and geographical
region;
(d) reporting any change, as of the last day of such Fiscal Quarter, in the
listing of Subsidiaries set forth in Schedule 4.4 (as the same may have been
revised by previous Compliance Certificates), including changes in Guarantor
Subsidiaries;
(e) either
(i) stating that to the best knowledge of the certifying officer as of
the date of such certificate there is no Default or Event of Default, or
(ii) if there is a Default or Event of Default as of the date of such
certificate, specifying all such Defaults or Events of Default and their
nature and status; and
(f) stating, to the best knowledge of the certifying officer, whether any
event or circumstance constituting a Material Adverse Effect (other than a
Material Adverse Effect which is not particular to the Borrower and which is
generally known) has occurred since the date of the most recent Compliance
Certificate delivered under this Section and, if so, describing such Material
Adverse Effect in reasonable detail. No failure of the certifying officer to
describe the existence of an event or circumstance constituting a Material
Adverse Effect shall be the sole basis for any Default or Event of Default
hereunder.
ARTICLE VIII
CONDITIONS TO MAKING LOANS
8.1 Conditions to Making Loans. The obligation of each Bank to make its
Loan hereunder is subject to the following conditions precedent, each of which
shall be satisfied prior to the making of the Loans on the Closing Date (unless
all of the Banks, in their sole and absolute discretion, shall agree otherwise):
(a) The Administrative Agent shall have received all of the following, each
dated as of the Closing Date (unless otherwise specified or unless the
Administrative Agent otherwise agrees) and all in form and substance
satisfactory to the Administrative Agent and each of the Banks:
(i) executed counterparts of this Agreement, sufficient in number for
distribution to the Banks and Borrower;
(ii) a Note executed by Borrower in favor of each Bank, each in a
principal amount equal to that Bank's Pro Rata Share of the Facility
Amount;
(iii) the Subsidiary Guaranty executed by each Subsidiary which is a
Guarantor Subsidiary as of the Closing Date;
(iv) with respect to Borrower and each Subsidiary which is a Guarantor
Subsidiary as of the Closing Date, such documentation as the Administrative
Agent may reasonably require to establish the due organization, valid
existence and good
55
standing of Borrower and each such Subsidiary, its qualification to engage
in business in each jurisdiction in which it is required to be so
qualified, its authority to execute, deliver and perform any Loan Documents
to which it is a Party, and the identity, authority and capacity of each
Responsible Official thereof authorized to act on its behalf, including
certified copies of articles of incorporation and amendments thereto,
bylaws and amendments thereto, certificates of good standing or
qualification to engage in business, tax clearance certificates,
certificates of corporate resolutions, incumbency certificates, and the
like;
(v) the Opinions of Counsel;
(vi) an Officer's Certificate of Borrower affirming, to the best
knowledge of the certifying Senior Officer, that the conditions set forth
in Sections 8.1(c) and 8.1(d) have been satisfied;
(vii) a Borrowing Base Certificate calculated as of the last day of
the Fiscal Quarter ending on February 28, 2006, showing the Borrower to be
in compliance with Section 6.17 after giving effect to the Loans made on
the Closing Date;
(viii) the financial statements described in Section 4.5;
(ix) a Compliance Certificate calculated as of the last day of the
Fiscal Quarter ending on February 28, 2006; and
(x) evidence satisfactory to the Administrative Agent that the
proceeds of the Loans (after payment of fees and expenses in connection
with the transactions contemplated by the Loan Documents) have been applied
to repay existing Indebtedness of the Borrower;
(xi) such other assurances, certificates, documents, consents or
opinions relevant hereto as the Administrative Agent may reasonably
require.
(b) All fees then payable under the letter agreements referred to in
Section 3.2 shall have been paid.
(c) The representations and warranties of Borrower contained in Article IV
shall be true and correct in all material respects on and as of the Closing
Date.
(d) Borrower and its Consolidated Subsidiaries and any other Parties shall
be in compliance with all the terms and provisions of the Loan Documents, and at
and after giving effect to the Loans made on the Closing Date, no Default or
Event of Default shall have occurred and be continuing.
ARTICLE IX
EVENTS OF DEFAULT AND REMEDIES UPON EVENTS OF DEFAULT
9.1 Events of Default. There will be a default hereunder if any one or more
of the following events ("Events of Default") occurs and is continuing, whatever
the reason therefor:
56
(a) failure to pay any installment of principal on any of the Notes on the
date when due; or
(b) failure to pay any installment of interest on any of the Notes, or to
pay any fee or other amounts due the Administrative Agent or any Bank hereunder,
within 5 Business Days after the date when due; or
(c) any failure to comply with Sections 6.1, 6.3, 6.4 (with respect to
Acquisitions), 6.7, 6.10, 6.11, 6.17 or 7.1(f); or
(d) any failure to comply with Sections 2.3(a), 5.8, 5.9, 6.4 (with respect
to Investments), 6.8, 6.9, 6.15, 6.16 or 6.18 that remains unremedied for a
period of 15 calendar days after notice by the Administrative Agent of such
Default or 20 calendar days after a Senior Officer becomes aware of such
Default, whichever occurs first; or
(e) Borrower or any other Party fails to perform or observe any other term,
covenant, or agreement contained in any Loan Document on its part to be
performed or observed within 30 calendar days after notice by the Administrative
Agent of such Default; or
(f) any representation or warranty in any Loan Document or in any
certificate, agreement, instrument, or other document made or deemed made or
delivered, on or after the Closing Date, pursuant to or in connection with any
Loan Document proves to have been incorrect when made in any respect material to
the ability of Borrower to duly and punctually perform all of the Obligations;
or
(g) Borrower or any of its Significant Subsidiaries which is also a
Consolidated Subsidiary (i) fails to pay the principal, or any principal
installment, of any present or future Indebtedness (other than Non-Recourse
Indebtedness, or any guaranty of present or future Indebtedness (other than
Non-Recourse Indebtedness)) on its part to be paid, when due (or within any
stated grace period), whether at the stated maturity, upon acceleration, by
reason of required prepayment or otherwise in excess of $50,000,000 in the
aggregate or (ii) fails to perform or observe any other material term, covenant,
or agreement on its part to be performed or observed, or suffers to exist any
condition, in connection with any present or future Indebtedness (other than
Non-Recourse Indebtedness, or any guaranty of present or future Indebtedness
(other than Non-Recourse Indebtedness)), in excess of $50,000,000 in the
aggregate, if as a result of such failure or such condition any holder or
holders thereof (or an agent or trustee on its or their behalf) has the right to
declare it due before the date on which it otherwise would become due or has the
right to cause a demand such that such Indebtedness be repurchased, prepaid,
defeased or redeemed; or
(h) any Loan Document, at any time after its execution and delivery and for
any reason other than the agreement of all the Banks or satisfaction in full of
all the Obligations, ceases to be in full force and effect or is declared by a
court of competent jurisdiction to be null and void, invalid, or unenforceable
in any respect which is, in the reasonable opinion of the Required Banks,
materially adverse to the interest of the Banks; or
(i) a final judgment (or judgments) against Borrower or any of its
Significant Subsidiaries which is also a Consolidated Subsidiary is entered for
the payment of money in
57
excess of $50,000,000 in the aggregate over the amount of any insurance proceeds
reasonably expected to be received and remains unsatisfied without procurement
of a stay of execution within 30 calendar days after the issuance of any writ of
execution or similar legal process or the date of entry of judgment, whichever
is earlier, or in any event at least 5 calendar days prior to the sale of any
assets pursuant to such legal process; or
(j) Borrower or any Significant Subsidiary of Borrower which is also a
Consolidated Subsidiary institutes or consents to any proceeding under a Debtor
Relief Law relating to it or to all or any part of its Property, or fails
generally, or admits in writing its inability, to pay its debts as they mature,
or makes a general assignment for the benefit of creditors; or applies for or
consents to the appointment of any receiver, trustee, custodian, conservator,
liquidator, rehabilitator, or similar officer for it or for all or any part of
its property; or any receiver, trustee, custodian, conservator, liquidator,
rehabilitator, or similar officer is appointed without the application or
consent of that Person and the appointment continues undischarged or unstayed
for 60 calendar days; or any proceeding under any Debtor Relief Law relating to
any such Person or to all or any part of its Property is instituted without the
consent of that Person, and continues undismissed or unstayed for 60 calendar
days; or
(k) the occurrence of a Termination Event with respect to any Pension Plan
if the aggregate liability of Borrower and its ERISA Affiliates under ERISA as a
result thereof exceeds $50,000,000; or the complete or partial withdrawal by
Borrower or any of its ERISA Affiliates from any Multiemployer Plan if the
aggregate liability of Borrower and its ERISA Affiliates as a result thereof
exceeds $50,000,000; or
(l) any determination is made by a court of competent jurisdiction that
payment of principal or interest or both is due to the holder of any
Subordinated Obligations which would not be permitted by Section 6.1 or that any
Subordinated Obligation is not subordinated in accordance with its terms to the
Obligations.
9.2 Remedies Upon Event of Default. Without limiting any other rights or
remedies of the Administrative Agent or the Banks provided for elsewhere in this
Agreement or the Loan Documents, or by applicable Law or in equity, or
otherwise:
(a) Upon the occurrence of any Event of Default, and so long as any such
Event of Default shall be continuing (other than an Event of Default described
in Section 9.1(j) with respect to Borrower or a Guarantor Subsidiary), the
Required Banks may request the Administrative Agent to, and the Administrative
Agent thereupon shall, declare the unpaid principal of all Obligations due to
the Banks hereunder and under the Notes, all interest accrued and unpaid
thereon, and all other amounts payable to the Banks under the Loan Documents to
be forthwith due and payable, whereupon the same shall become and be forthwith
due and payable, without protest, presentment, notice of dishonor, demand, or
further notice of any kind, all of which are expressly waived by Borrower;
provided that the Administrative Agent shall notify Borrower (by telecopy and,
if practicable, by telephone) substantially concurrently with any such
acceleration (but the failure of Borrower to receive such notice shall not
affect such acceleration).
58
(b) Upon the occurrence of any Event of Default described in Section 9.1(j)
with respect to Borrower or a Guarantor Subsidiary the unpaid principal of all
Obligations due to the Banks hereunder and under the Notes and all interest
accrued and unpaid on such Obligations, and all other amounts payable under the
Loan Documents shall be forthwith due and payable, without protest, presentment,
notice of dishonor, demand, or further notice of any kind, all of which are
expressly waived by Borrower.
(c) Upon the occurrence of an Event of Default, the Banks and the
Administrative Agent, or any of them, may proceed to protect, exercise, and
enforce their rights and remedies under the Loan Documents against Borrower or
any other Party and such other rights and remedies as are provided by Law or
equity, without notice to or demand upon Borrower (which are expressly waived by
Borrower) except to the extent required by applicable Laws. The order and manner
in which the rights and remedies of the Banks under the Loan Documents and
otherwise are exercised shall be determined by the Required Banks.
(d) All payments received by the Administrative Agent and the Banks, or any
of them, after the acceleration of the maturity of the Loans or after the
Maturity Date shall be applied first to the costs and expenses (including
Attorney Costs) of the Administrative Agent, acting as Administrative Agent, and
of the Banks and thereafter paid pro rata to the Banks in the same proportion
that the aggregate of the unpaid principal amount owing on the Obligations of
Borrower to each Bank, plus accrued and unpaid interest thereon, bears to the
aggregate of the unpaid principal amount owing on all the Obligations, plus
accrued and unpaid interest thereon. Regardless of how each Bank may treat the
payments for the purpose of its own accounting, for the purpose of computing
Borrower's Obligations, the payments shall be applied first, to the costs and
expenses of the Administrative Agent, acting as Administrative Agent, and the
Banks as set forth above; second, to the payment of accrued and unpaid fees
hereunder and interest on all Obligations to the Banks, to and including the
date of such application (ratably according to the accrued and unpaid interest
on the Loans); third, to the ratable payment of the unpaid principal of all
Obligations to the Banks; and fourth, to the payment of all other amounts then
owing to the Administrative Agent or the Banks under the Loan Documents. No
application of the payments will cure any Event of Default or prevent
acceleration, or continued acceleration, of amounts payable under the Loan
Documents or prevent the exercise, or continued exercise, of rights or remedies
of the Banks hereunder or under applicable Law unless all amounts then due
(whether by acceleration or otherwise) have been paid in full.
ARTICLE X
THE ADMINISTRATIVE AGENT
10.1 Appointment and Authorization. Each Bank hereby irrevocably appoints,
designates and authorizes the Administrative Agent to take such action on its
behalf under the provisions of this Agreement and each other Loan Document and
to exercise such powers and perform such duties as are expressly delegated to it
by the terms of this Agreement or any other Loan Document, together with such
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary contained elsewhere herein or in any other Loan Document, the
Administrative Agent shall not have any duties or responsibilities, except those
expressly set forth herein, nor shall the Administrative Agent have or be deemed
to have any fiduciary relationship with any Bank or participant, and no implied
covenants, functions,
59
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent. Without limiting the generality of the foregoing sentence,
the use of the term "agent" herein and in the other Loan Documents with
reference to the Administrative Agent is not intended to connote any fiduciary
or other implied (or express) obligations arising under agency doctrine of any
applicable Law. Instead, such term is used merely as a matter of market custom,
and is intended to create or reflect only an administrative relationship between
independent contracting parties.
10.2 Delegation of Duties. The Administrative Agent may execute any of its
duties under this Agreement or any other Loan Document by or through agents,
employees or attorneys-in-fact and shall be entitled to advice of counsel and
other consultants or experts concerning all matters pertaining to such duties.
The Administrative Agent shall not be responsible for the negligence or
misconduct of any agent or attorney-in-fact that it selects in the absence of
gross negligence or willful misconduct.
10.3 Liability of Administrative Agent. No Agent-Related Person shall (a)
be liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct
in connection with its duties expressly set forth herein, and with respect to
the Borrower, except for any failure to comply with Section 11.12), or (b) be
responsible in any manner to any Bank or participant for any recital, statement,
representation or warranty made by any Party or any officer thereof, contained
herein or in any other Loan Document, or in any certificate, report, statement
or other document referred to or provided for in, or received by the
Administrative Agent under or in connection with, this Agreement or any other
Loan Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Loan Document, or for any failure of
any Party or any other party to any Loan Document to perform its obligations
hereunder or thereunder. No Agent-Related Person shall be under any obligation
to any Bank or participant to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement or any other Loan Document, or to inspect the properties, books or
records of any Party or any Affiliate thereof.
10.4 Reliance by Administrative Agent.
(a) The Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, communication, signature, resolution,
representation, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex or telephone message, electronic mail message, statement or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons, and upon advice
and statements of legal counsel (including counsel to any Party), independent
accountants and other experts selected by the Administrative Agent. The
Administrative Agent shall be fully justified in failing or refusing to take any
action under any Loan Document unless it shall first receive such advice or
concurrence of the Required Banks as it deems appropriate and, if it so
requests, it shall first be indemnified to its satisfaction by the Banks against
any and all liability and expense which may be incurred by it by reason of
taking or continuing to take any such action. The Administrative Agent shall in
all cases be fully protected in acting, or in refraining from acting, under this
Agreement or any other Loan Document in accordance with a request or consent of
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the Required Banks (or such greater number of Banks as may be expressly required
hereby in any instance) and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Banks.
(b) For purposes of determining compliance with the conditions specified in
Section 8.1, each Bank that has signed this Agreement shall be deemed to have
consented to, approved or accepted or to be satisfied with, each document or
other matter required thereunder to be consented to or approved by or acceptable
or satisfactory to a Bank unless the Administrative Agent shall have received
notice from such Bank prior to the proposed Closing Date specifying its
objection thereto.
10.5 Notice of Default. The Administrative Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default,
except with respect to defaults in the payment of principal, interest and fees
required to be paid to the Administrative Agent for the account of the Banks,
unless the Administrative Agent shall have received written notice from a Bank
or the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default." The
Administrative Agent will promptly notify the Banks of its receipt of any such
notice. The Administrative Agent shall take such action with respect to such
Default or Event of Default as may be directed by the Required Banks in
accordance with Article IX; provided, however, that unless and until the
Administrative Agent has received any such direction, the Administrative Agent
may (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default or Event of Default as it shall deem
advisable or in the best interest of the Banks.
10.6 Credit Decision; Disclosure of Information by Administrative Agent.
Each Bank acknowledges that no Agent-Related Person has made any representation
or warranty to it, and that no act by the Administrative Agent hereafter taken,
including any consent to and acceptance of any assignment or review of the
affairs of any Party or any Affiliate thereof, shall be deemed to constitute any
representation or warranty by any Agent-Related Person to any Bank as to any
matter, including whether Agent-Related Persons have disclosed material
information in their possession. Each Bank represents to the Administrative
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Parties and their respective Subsidiaries, and all applicable bank or other
regulatory Laws relating to the transactions contemplated hereby, and made its
own decision to enter into this Agreement and to extend credit to the Borrower
hereunder. Each Bank also represents that it will, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents, and to make such investigations as
it deems necessary to inform itself as to the business, prospects, operations,
property, financial and other condition and creditworthiness of the Borrower and
the other Parties. Except for notices, reports and other documents expressly
required to be furnished to the Banks by the Administrative Agent herein, the
Administrative Agent shall not have any duty or responsibility to provide any
Bank with any credit or other information concerning the business, prospects,
operations,
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property, financial and other condition or creditworthiness of any of the
Parties or any of their respective Affiliates which may come into the possession
of any Agent-Related Person.
10.7 Indemnification of Administrative Agent. Whether or not the
transactions contemplated hereby are consummated, the Banks shall, ratably in
accordance with their respective Pro Rata Shares, indemnify upon demand each
Agent-Related Person (to the extent not reimbursed by or on behalf of any Party
and without limiting the obligation of any Party to do so), and hold harmless
each Agent-Related Person from and against any and all Indemnified Liabilities
incurred by it; provided, however, that no Bank shall be liable for the payment
to any Agent-Related Person of any portion of such Indemnified Liabilities to
the extent determined in a final, nonappealable judgment by a court of competent
jurisdiction to have resulted from such Agent-Related Person's own gross
negligence or willful misconduct; provided, however, that no action taken in
accordance with the directions of the Required Banks (or greater number, if so
required) shall be deemed to constitute gross negligence or willful misconduct
for purposes of this Section. Without limitation of the foregoing, each Bank
shall reimburse the Administrative Agent upon demand for its ratable share of
any costs or out-of-pocket expenses (including Attorney Costs) incurred by the
Administrative Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement, any other Loan Document, or
any document contemplated by or referred to herein, to the extent that the
Administrative Agent is not reimbursed for such expenses by or on behalf of the
Borrower. The undertaking in this Section shall survive the payment of all
Obligations and the resignation of the Administrative Agent.
10.8 Administrative Agent in its Individual Capacity. The Administrative
Agent and its Affiliates may make loans to, issue letters of credit for the
account of, accept deposits from, acquire equity interests in and generally
engage in any kind of banking, trust, financial advisory, underwriting or other
business with each of the Parties and their respective Affiliates as though the
Administrative Agent were not the Administrative Agent hereunder and without
notice to or consent of the Banks. The Banks acknowledge that, pursuant to such
activities, the Administrative Agent or its Affiliates may receive information
regarding any Party or its Affiliates (including information that may be subject
to confidentiality obligations in favor of such Party or such Affiliate) and
acknowledge that the Administrative Agent shall be under no obligation to
provide such information to them. With respect to its Loans, the Administrative
Agent shall have the same rights and powers under this Agreement as any other
Bank and may exercise such rights and powers as though it were not the
Administrative Agent, and the terms "Bank" and "Banks" include the
Administrative Agent in its individual capacity.
10.9 Successor Administrative Agent. The Administrative Agent may resign as
Administrative Agent upon 60 days' notice to the Banks. If the Administrative
Agent resigns under this Agreement, the Required Banks shall appoint from among
the Banks a successor administrative agent for the Banks, which successor
administrative agent shall be consented to by the Borrower at all times other
than during the existence of an Event of Default (which consent of the Borrower
shall not be unreasonably withheld or delayed). If no successor administrative
agent is appointed 15 days prior to the effective date of the resignation of the
Administrative Agent, the Administrative Agent may appoint, after consulting
with the Banks and the Borrower, a successor administrative agent from among the
Banks. Upon the acceptance
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of its appointment as successor administrative agent hereunder, the Person
acting as such successor administrative agent shall succeed to all the rights,
powers and duties of the retiring Administrative Agent and the term
"Administrative Agent" shall mean such successor administrative agent and the
retiring Administrative Agent's appointment, powers and duties as Administrative
Agent shall be terminated. After any retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this Article X and Sections
11.3 and 11.10 shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Administrative Agent under this Agreement. If no
successor administrative agent has accepted appointment as Administrative Agent
by the date which is 60 days following a retiring Administrative Agent's notice
of resignation, the retiring Administrative Agent's resignation shall
nevertheless thereupon become effective and the Banks shall perform all of the
duties of the Administrative Agent hereunder until such time, if any, as the
Required Banks appoint a successor agent as provided for above. In addition,
upon a good faith, written allegation by the Required Banks that the
Administrative Agent has committed an act of gross negligence or willful
misconduct, which written allegation sets forth the specifics of such alleged
gross negligence or willful misconduct, the Required Banks may remove the
Administrative Agent by giving written notice to the Administrative Agent to
that effect to be effective on such date as the Required Banks designate,
provided however that no such removal shall be effective until Required Banks
have appointed a Bank, and such Bank has accepted its appointment as, successor
administrative agent, which successor administrative agent shall be consented to
by the Borrower at all times other than during the existence of an Event of
Default (which consent of the Borrower shall not be unreasonably withheld or
delayed).
10.10 Administrative Agent May File Proofs of Claim. In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to any Party, the Administrative Agent (irrespective of
whether the principal of any Loan or other Obligation shall then be due and
payable as herein expressed or by declaration or otherwise and irrespective of
whether the Administrative Agent shall have made any demand on the Borrower)
shall be entitled and empowered, by intervention in such proceeding or otherwise
(a) to file and prove a claim for the whole amount of the principal and
interest owing and unpaid in respect of the Loans and all other Obligations that
are owing and unpaid and to file such other documents as may be necessary or
advisable in order to have the claims of the Banks and the Administrative Agent
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Banks and the Administrative Agent and their respective
agents and counsel and all other amounts due the Banks and the Administrative
Agent under Section 11.3) allowed in such judicial proceeding; and
(b) to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Bank to make such payments to the Administrative Agent and, in the event
that the Administrative Agent shall consent to the making of such payments
directly to the Banks, to pay to the Administrative Agent any amount due for the
reasonable compensation, expenses, disbursements and advances of the
Administrative Agent
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and its agents and counsel, and any other amounts due the Administrative Agent
under Sections 3.2 and 11.3.
Nothing contained herein shall be deemed to authorize the Administrative Agent
to authorize or consent to or accept or adopt on behalf of any Bank any plan of
reorganization, arrangement, adjustment or composition affecting the Obligations
or the rights of any Bank or to authorize the Administrative Agent to vote in
respect of the claim of any Bank in any such proceeding.
10.11 Guaranty Matters. The Banks irrevocably authorize the Administrative
Agent, at its option and in its discretion, to release any Guarantor Subsidiary
from its obligations under the Subsidiary Guaranty if such Person ceases to be a
Subsidiary as a result of a transaction permitted hereunder. Upon request by the
Administrative Agent at any time, the Required Banks will confirm in writing the
Administrative Agent's authority to release any Guarantor Subsidiary from its
obligations under the Subsidiary Guaranty pursuant to this Section 10.11.
10.12 Other Agents; Arrangers and Managers. None of the Banks or other
Persons identified on the facing page or signature pages of this Agreement as a
"syndication agent," "joint book manager," or "joint lead arranger," shall have
any right, power, obligation, liability, responsibility or duty under this
Agreement or any of the other Loan Documents other than, in the case of such
Banks, those applicable to all Banks as such. Without limiting the foregoing,
none of the Banks or other Persons so identified shall have or be deemed to have
any fiduciary relationship with any Bank. Each Bank acknowledges that it has not
relied, and will not rely, on any of the Banks or other Persons so identified in
deciding to enter into this Agreement or in taking or not taking action
hereunder.
10.13 Defaulting Banks. If for any reason any Bank wrongfully (in violation
of this Agreement) fails or refuses to timely make its Loans required of it, or
otherwise defaults on any of its material obligations under this Agreement, and
fails to cure its default within 5 Business Days of receiving notice of its
failure to perform (such Bank being a "Defaulting Bank"), then in addition to
the rights and remedies that may be available to the Administrative Agent and
the Banks at law or in equity, the Defaulting Bank's right to participate in the
Loan and the Agreement will be suspended during the pendency of the Defaulting
Bank's uncured default, and (without limiting the foregoing) the Administrative
Agent may (or at the direction of the Required Banks, shall) withhold from the
Defaulting Bank any interest payments, fees, principal payments or other sums
otherwise payable to such Defaulting Bank under the Loan Documents until such
default of such Defaulting Bank has been cured. Each non-defaulting Bank will
have the right, but not the obligation, in its sole discretion, to acquire at
par a proportionate share (based on the ratio of its Pro Rata Share of the Loans
to the aggregate amount of the Pro Rata Shares of the Loans of all of the
non-defaulting Banks that elect to acquire a share of the Defaulting Bank's
share in the outstanding principal balance of the Loans. The Defaulting Bank
will pay and protect, defend and indemnify the Administrative Agent and each of
the other Banks against, and hold the Administrative Agent, and each of the
other Banks harmless from, all claims, actions, proceedings, liabilities,
damages, losses, and expenses (including Attorney Costs, and interest at the
Base Rate plus 2.0% per annum for the funds advanced by the Administrative Agent
or any Banks on account of the Defaulting Bank) they may sustain or incur by
reason of or in consequence of the Defaulting Bank's failure or refusal to
perform its
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obligations under the Loan Documents. The Administrative Agent may set off
against payments due to the Defaulting Bank for the claims of the Administrative
Agent and the other Banks against the Defaulting Bank. The exercise of these
remedies will not reduce, diminish or liquidate the Defaulting Bank's Pro Rata
Share of the Loans (except to the extent that part or all of such Pro Rata Share
of the Loans is acquired by the other Banks as specified above) or its
obligations to share losses and reimbursement for costs, liabilities and
expenses under this Agreement. This indemnification will survive the payment and
satisfaction of all of the Borrower's obligations and liabilities to the Banks.
The foregoing provisions of this Section 10.13 are solely for the benefit of the
Administrative Agent and the Banks, and may not be enforced or relied upon by
the Borrower.
10.14 No Obligations of Borrower. Nothing contained in this Article X shall
be deemed to impose upon Borrower any obligation in respect of the due and
punctual performance by the Administrative Agent of its obligations to the Banks
under any provision of this Agreement, and Borrower shall have no liability to
the Administrative Agent or any of the Banks in respect of any failure by the
Administrative Agent or any Bank to perform any of its obligations to the
Administrative Agent or the Banks under this Agreement. Without limiting the
generality of the foregoing, where any provision of this Agreement relating to
the payment of any amounts due and owing under the Loan Documents provides that
such payments shall be made by Borrower to the Administrative Agent for the
account of the Banks, Borrower's obligations to the Banks in respect of such
payments shall be deemed to be satisfied upon the making of such payments to the
Administrative Agent in the manner provided by this Agreement.
10.15 Trust Indenture Act. In the event that CNAI or any of its Affiliates
shall be or become an indenture trustee under the Trust Indenture Act of 1939
(as amended, the "Trust Indenture Act") in respect of any securities issued or
guaranteed by any Loan Party, the parties hereto acknowledge and agree that any
payment or property received in satisfaction of or in respect of any Obligation
of such Loan Party hereunder or under any other Loan Document by or on behalf of
CNAI in its capacity as the Administrative Agent and which is applied in
accordance with the Loan Documents shall be deemed to be exempt from the
requirements of Section 311 of the Trust Indenture Act pursuant to Section
311(b)(3) of the Trust Indenture Act.
ARTICLE XI
MISCELLANEOUS
11.1 Cumulative Remedies; No Waiver. The rights, powers, and remedies of
the Administrative Agent or any Bank provided herein or in any Note or other
Loan Document are cumulative and not exclusive of any right, power, or remedy
provided by law or equity. No failure or delay on the part of the Administrative
Agent or any Bank in exercising any right, power, or remedy may be, or may be
deemed to be, a waiver thereof; nor may any single or partial exercise of any
right, power, or remedy preclude any other or further exercise of any other
right, power, or remedy. The terms and conditions of Section 8.1 hereof are
inserted for the sole benefit of the Banks and the Administrative Agent may
(with the approval of the Required Banks) waive them in whole or in part with or
without terms or conditions.
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11.2 Amendments; Consents. No amendment or waiver of any provision of this
Agreement or any other Loan Document, and no consent to any departure by
Borrower or any other Party therefrom, may in any event be effective unless in
writing signed by the Administrative Agent with the approval of the Required
Banks and Borrower, and then only in the specific instance and for the specific
purpose given; and without the approval in writing of all of the affected Banks,
no amendment, waiver or consent may be effective:
(a) to amend or modify the principal of, or the amount of principal or
principal prepayments payable on any Obligation, to increase the Exposure of any
Bank without the consent of that Bank, to decrease the rate of any interest or
fee payable to any Bank without the consent of that Bank, or to reduce or waive
any interest or other amount payable to any Bank without the consent of that
Bank;
(b) to postpone any date fixed for any payment of principal of, prepayment
of principal of, or any installment of interest on, any Obligation owing to a
Bank or any installment of any fee owing to a Bank, or to extend the Maturity
Date;
(c) to amend or modify the provisions of the definitions in Section 1.1 of
"Required Banks" or of Sections 11.2, 11.9, 11.10, or 11.11, or any provision
providing for the ratable or pro rata treatment of the Banks;
(d) release any Guarantor Subsidiary from liability under the Subsidiary
Guaranty (except as provided below); or
(e) to amend or modify any provision of this Agreement or the Loan
Documents that expressly requires the consent or approval of all the Banks.
Any amendment, waiver or consent pursuant to this Section 11.2 shall apply
equally to, and shall be binding upon, all the Banks and the Administrative
Agent. Any amendment, waiver or consent pursuant to this Section 11.2 that
permits the sale or other transfer of the capital stock of (or all or
substantially all of the assets of) a Guarantor Subsidiary shall automatically
release the Guarantor Subsidiary effective concurrently with such sale or other
transfer.
11.3 Costs, Expenses and Taxes. Borrower shall pay within 30 days after
demand (which demand shall be accompanied by an invoice in reasonable detail)
the reasonable actual out-of-pocket costs and expenses of the Administrative
Agent, CGMI and Calyon in connection with (a) the negotiation, preparation,
execution, delivery, arrangement, syndication and closing of the Loan Documents,
(b) administration of the Loan Documents and (c) any amendment, waiver or
modification of the Loan Documents. Borrower shall pay within 30 days after
demand the reasonable actual out-of-pocket costs and expenses of the
Administrative Agent and each of the Banks in connection with the enforcement of
any Loan Documents following the occurrence of a Default or an Event of Default,
including in connection with any refinancing, restructuring, reorganization
(including a bankruptcy reorganization, if such payment is approved by the
bankruptcy court or any similar proceeding). The costs and expenses referred to
in the first sentence above (for which Borrower shall be liable solely with
respect to costs and expenses of the Administrative Agent, CGMI and Calyon) and
the second sentence above (which shall apply to costs and expenses of the
Administrative Agent and the Banks) shall include filing fees,
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recording fees, title insurance fees, appraisal fees, search fees, and other
out-of-pocket expenses and Attorney Costs of the Administrative Agent, CGMI,
Calyon or any of the Banks, as the case may be, or independent public
accountants and other outside experts retained by the Administrative Agent
(provided that (i) Borrower shall not be liable under this Section 11.3 for fees
and expenses of more than one firm of independent public accountants, or more
than one expert with respect to a specific subject matter, at any one time and
(ii) with respect to the costs and expenses referred to in the second sentence
above (pertaining to enforcement matters), Borrower shall not be liable for the
fees and expenses of more than one firm of outside legal counsel retained to
represent the Administrative Agent and the Banks, but if any of such parties
does not consent to such joint representation, Borrower shall be liable for the
fees and expenses of not more than one firm of outside legal counsel retained to
represent the Administrative Agent and also for not more than one additional
firm of outside legal counsel retained to otherwise represent one or more of the
Banks). Nothing herein shall obligate Borrower to pay any costs and expenses in
connection with an assignment of or participation in a Bank's Pro Rata Share of
the Loans. Borrower shall pay any and all documentary and transfer taxes,
assessments or charges made by any Governmental Agency and all reasonable actual
costs, expenses, fees, and charges of Persons (other than the Administrative
Agent, the Arrangers or the Banks) payable or determined to be payable in
connection with the execution, delivery, filing or recording of this Agreement,
any other Loan Document, or any other instrument or writing to be delivered
hereunder or thereunder, and shall reimburse, hold harmless, and indemnify the
Administrative Agent, each Arranger, each Bank and each Participant from and
against any and all loss, liability, or legal or other expense with respect to
or resulting from any delay in paying or failure to pay any such tax, cost,
expense, fee, or charge or that any of them may suffer or incur by reason of the
failure of Borrower to perform any of its Obligations. Any amount payable to the
Administrative Agent, any Arranger, any Bank or any Participant under this
Section 11.3 shall bear interest from the date which is 30 days after Borrower's
receipt of demand (together with reasonable supporting documentation) for
payment at the rate equal to Base Rate plus the Applicable Margin.
11.4 Nature of Banks' Obligations. Nothing contained in this Agreement or
any other Loan Document and no action taken by the Administrative Agent or the
Banks or any of them pursuant hereto or thereto may, or may be deemed to, make
the Banks a partnership, an association, a joint venture, or other entity,
either among themselves or with Borrower. The obligations of the Banks hereunder
to make Loans are several and not joint or joint and several. The failure of any
Bank to make its Loan on the Closing Date shall not relieve any other Bank of
its corresponding obligation to do so on such date, and no Bank shall be
responsible for the failure of any other Bank to so make its Loan on the Closing
Date.
11.5 Survival of Representations and Warranties. All representations and
warranties made hereunder and in any other Loan Document or other document
delivered pursuant hereto or thereto or in connection herewith or therewith
shall survive the execution and delivery hereof and thereof. Such
representations and warranties have been or will be relied upon by the
Administrative Agent and each Bank, regardless of any investigation made by the
Administrative Agent or any Bank or on their behalf and notwithstanding that the
Administrative Agent or any Bank may have had notice or knowledge of any Default
at the time of the making of any Loan, and shall continue in full force and
effect as long as any Loan or any other Obligation hereunder shall remain unpaid
or unsatisfied.
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11.6 Notices and Other Communications; Facsimile Copies.
(a) Notices Generally. Except in the case of notices and other
communications expressly permitted to be given by telephone (and except as
provided in Section 11.6(b) below), all notices and other communications
provided for herein shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
telecopier as follows, and all notices and other communications expressly
permitted hereunder to be given by telephone shall be made to the applicable
telephone number, set forth on Schedule 11.6. All such notices and other
communications shall be deemed to be given or made upon the earlier to occur of
(x) actual receipt by the relevant party hereto and (y) (A) if sent by hand or
overnight courier service, when signed for by or on behalf of the relevant party
hereto, (B) if mailed by certified or registered mail, 4 Business Days after
deposit in the mails, postage prepaid or (C) if sent by telecopier, when sent
(except that, if not given during normal business hours for the recipient, shall
be deemed to have been given at the opening of business on the next business day
for the recipient). Notices delivered through electronic communications to the
extent provided in Section 11.6(b) below, shall be effective as provided in
Section 11.6(b).
(b) Electronic Communications. Notices and other communications to the
Banks hereunder may be delivered or furnished by electronic communication
(including e mail and Internet or intranet websites) pursuant to procedures
approved by the Administrative Agent, provided that the foregoing shall not
apply to notices to any Bank pursuant to Article II if such Bank has notified
the Administrative Agent that it is incapable of receiving notices under such
Article by electronic communication. The Administrative Agent or the Borrower
may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it,
provided that approval of such procedures may be limited to particular notices
or communications. Unless the Administrative Agent otherwise prescribes,
(i) notices and other communications sent to an e-mail address shall
be deemed received upon the sender's receipt of an acknowledgement from the
intended recipient (such as by the "return receipt requested" function, as
available, return e-mail or other written acknowledgement), provided that
if such notice or other communication is not sent during the normal
business hours of the recipient, such notice or communication shall be
deemed to have been sent at the opening of business on the next business
day for the recipient, and
(ii) notices or communications posted to an Internet or intranet
website shall be deemed received upon the deemed receipt by the intended
recipient at its e-mail address as described in the foregoing clause (i) of
notification that such notice or communication is available and identifying
the website address therefor.
(c) The Platform. THE PLATFORM IS PROVIDED "AS IS" AND "AS AVAILABLE." THE
AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF
THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM
LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS. NO WARRANTY OF
ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY
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OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD
PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT
PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM. In no event
shall the Administrative Agent or any of its Related Parties (collectively, the
"Agent Parties") have any liability to the Borrower, any Bank or any other
Person for losses, claims, damages, liabilities or expenses of any kind (whether
in tort, contract or otherwise) arising out of the Borrower's or the
Administrative Agent's transmission of Borrower Materials through the Internet,
except to the extent that such losses, claims, damages, liabilities or expenses
are determined by a court of competent jurisdiction by a final and nonappealable
judgment to have resulted from the gross negligence or willful misconduct of
such Agent Party; provided, however, that in no event shall any Agent Party have
any liability to the Borrower, any Bank or any other Person for indirect,
special, incidental, consequential or punitive damages (as opposed to direct or
actual damages).
(d) Change of Address, Etc. Each of the Borrower and the Administrative
Agent may change its address, telecopier or telephone number for notices and
other communications hereunder by notice to the other parties hereto. Each other
Bank may change its address, telecopier or telephone number for notices and
other communications hereunder by notice to the Borrower and the Administrative
Agent. In addition, each Bank agrees to notify the Administrative Agent from
time to time to ensure that the Administrative Agent has on record
(i) an effective address, contact name, telephone number, telecopier
number and electronic mail address to which notices and other
communications may be sent and
(ii) accurate wire instructions for such Bank.
(e) Reliance by Administrative Agent and Banks. The Administrative Agent
and the Banks shall be entitled to rely and act upon any notices purportedly
given by or on behalf of the Borrower even if
(i) such notices were not made in a manner specified herein, were
incomplete or were not preceded or followed by any other form of notice
specified herein, or
(ii) the terms thereof, as understood by the recipient, varied from
any confirmation thereof.
The Borrower shall indemnify each Agent-Related Person and each Bank from all
losses, costs, expenses and liabilities resulting from the reliance by such
Person on each notice purportedly given by or on behalf of the Borrower. All
telephonic notices to and other telephonic communications with the
Administrative Agent may be recorded by the Administrative Agent, and each of
the parties hereto hereby consents to such recording.
11.7 Execution in Counterparts; Facsimile Delivery. This Agreement and any
other Loan Document to which Borrower is a Party may be executed in any number
of counterparts and any party hereto or thereto may execute any counterpart,
each of which when executed and delivered will be deemed to be an original and
all of which counterparts of this
69
Agreement or any other Loan Document, as the case may be, taken together will be
deemed to be but one and the same instrument. Such counterparts may be sent by
telecopy, with the original counterparts to follow by mail or courier. The
execution of this Agreement or any other Loan Document by any party hereto or
thereto will not become effective until executed counterparts hereof or thereof
(or other evidence of execution satisfactory to the Administrative Agent and
Borrower) have been delivered to the Administrative Agent and Borrower. The
parties hereto agree and acknowledge that delivery of any signature by facsimile
shall constitute execution by such signatory.
11.8 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that the Borrower may not assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
each Bank and no Bank may assign or otherwise transfer any of its rights or
obligations hereunder except (i) to an Eligible Assignee in accordance with the
provisions of Section 11.8(b), (ii) by way of participation in accordance with
the provisions of Section 11.8(d), (iii) by way of pledge or assignment of a
security interest subject to the restrictions of Section 11.8(f) or (iv) in
accordance with Section 11.27 (and any other attempted assignment or transfer by
any party hereto shall be null and void). Nothing in this Agreement, expressed
or implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby, Participants
to the extent provided in Section 11.8(d) and, to the extent expressly
contemplated hereby, the Indemnitees) any legal or equitable right, remedy or
claim under or by reason of this Agreement.
(b) Any Bank may at any time assign to one or more Eligible Assignees all
or a portion of its rights and obligations under this Agreement (including all
or a portion of its Loans at the time owing to it); provided that (i) except in
the case of an assignment of the entire remaining amount of the assigning Bank's
Loans at the time owing to it or in the case of an assignment to a Bank or an
Affiliate of a Bank, the aggregate amount of the principal outstanding balance
of the Loans of the assigning Bank subject to each such assignment, determined
as of the date the Assignment and Assumption with respect to such assignment is
delivered to the Administrative Agent or, if "Trade Date" is specified in the
Assignment and Assumption, as of the Trade Date, shall not be less than
$1,000,000 and shall be an integral multiple of $500,000; provided, however,
that concurrent assignments to members of an Assignee Group and concurrent
assignments from members of an Assignee Group to a single Eligible Assignee (or
to an Eligible Assignee and members of its Assignee Group) will be treated as a
single assignment for purposes of determining whether such minimum amount has
been met; (ii) each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Bank's rights and obligations under this
Agreement with respect to the Loans; (iii) any assignment to an Eligible
Assignee other than a Bank or an Affiliate of a Bank shall be subject to the
prior written consent of the Administrative Agent, not to be unreasonably
withheld or delayed; (iv) the parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and Assumption, together with
a processing and recordation fee in the amount of $3,500, and the Eligible
Assignee, if it shall not be a Bank, shall deliver to the Administrative Agent
an Administrative Questionnaire; and (v) any assignment to an Eligible Assignee
other than a Bank or an Affiliate of a Bank shall be made in consultation with
the Borrower, but such
70
consultation with the Borrower shall not be required if a Default or an Event of
Default has then occurred and is continuing. Subject to acceptance and recording
thereof by the Administrative Agent pursuant to Section 11.8(c), from and after
the effective date specified in each Assignment and Assumption, the Eligible
Assignee thereunder shall be a party to this Agreement and, to the extent of the
interest assigned by such Assignment and Assumption, have the rights and
obligations of a Bank under this Agreement, and the assigning Bank thereunder
shall, to the extent of the interest assigned by such Assignment and Assumption,
be released from its obligations under this Agreement (and, in the case of an
Assignment and Assumption covering all of the assigning Bank's rights and
obligations under this Agreement, such Bank shall cease to be a party hereto but
shall continue to be entitled to the benefits of Sections 3.3, 3.4, 3.8, 11.3,
11.6(e) and 11.10 with respect to facts and circumstances occurring prior to the
effective date of such assignment). Upon request, the Borrower shall execute and
deliver a Note to the assignee Bank. Any assignment or transfer by a Bank of
rights or obligations under this Agreement that does not comply with this
Section 11.8(b) shall be treated for purposes of this Agreement as a sale by
such Bank of a participation in such rights and obligations in accordance with
Section 11.8(d). Any costs and expenses incurred in connection with an
assignment hereunder (including a processing and recordation fee set forth in
Schedule 11.8) shall be paid by the Eligible Assignee (except as otherwise
provided in Section 11.27).
(c) The Administrative Agent, acting solely for this purpose as an agent of
the Borrower, shall maintain at the Administrative Agent's Office a copy of each
Assignment and Assumption delivered to it and a register for the recordation of
the names and addresses of the Banks, and principal amounts of the Loans and
other Obligations owing to each Bank pursuant to the terms hereof from time to
time (the "Register"). The entries in the Register shall be conclusive absent
manifest error, and the Borrower, the Administrative Agent and the Banks may
treat each Person whose name is recorded in the Register pursuant to the terms
hereof as a Bank hereunder for all purposes of this Agreement, notwithstanding
notice to the contrary. The Register shall be available for inspection by the
Borrower and any Bank, at any reasonable time and from time to time upon
reasonable prior notice.
(d) Any Bank may at any time, without the consent of, or notice to, the
Borrower or the Administrative Agent, sell participations to any Person (other
than a natural person or the Borrower or any of the Borrower's Affiliates or
Subsidiaries) (each, a "Participant") in all or a portion of such Bank's rights
or obligations under this Agreement (including all or a portion of the Loans
owing to it); provided that (i) such Bank's obligations under this Agreement
otherwise shall remain unchanged, (ii) such Bank shall remain solely responsible
to the other parties hereto for the performance of such obligations and (iii)
the Borrower, the Administrative Agent and the other Banks shall continue to
deal solely and directly with such Bank in connection with such Bank's rights
and obligations under this Agreement. Any agreement or instrument pursuant to
which a Bank sells such a participation shall provide that such Bank shall
retain the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided further,
that such agreement or instrument may provide that such Bank will not, without
the consent of the Participant, agree to any amendment, waiver or other
modification described in Sections 11.2(a), 11.2(b) or 11.2(d) that directly
affects such Participant; provided further, that any Bank selling a
participation shall endeavor promptly to give Borrower notice following any such
sale, but the failure to give such notice will not give rise to any liability on
the part of such Bank or otherwise affect the validity of any such sale.
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Subject to clause (e) of this Section, the Borrower agrees that each Participant
shall be entitled to the benefits of Sections 3.3, 3.4 and 3.8 to the same
extent as if it were a Bank and had acquired its interest by assignment pursuant
to Section 11.8(b). To the extent permitted by law, each Participant also shall
be entitled to the benefits of Section 11.15 as though it were a Bank, provided
such Participant agrees to be subject to Section 11.9 as though it were a Bank.
(e) A Participant shall not be entitled to receive any greater payment
under Sections 3.3, 3.4 and 3.8 than the applicable Bank would have been
entitled to receive with respect to the participation sold to such Participant.
(f) Any Bank may at any time pledge or assign a security interest in all or
any portion of its rights under this Agreement (including under its Note, if
any) to secure obligations of such Bank, including any pledge or assignment to
secure obligations to a Federal Reserve Bank; provided that no such pledge or
assignment shall release such Bank from any of its obligations hereunder or
substitute any such pledgee or assignee for such Bank as a party hereto.
11.9 Sharing of Setoffs. Each Bank severally agrees that if it, through the
exercise of the right of setoff, banker's lien, or counterclaim against Borrower
or otherwise, receives payment of the Obligations due it hereunder and under the
Notes that is ratably more than that to which it is entitled hereunder pursuant
to Section 3.11 or 9.2(d), then: (a) the Bank exercising the right of setoff,
banker's lien, or counterclaim or otherwise receiving such payment shall
purchase, and shall be deemed to have simultaneously purchased, from the other
Bank a participation in the Obligations held by the other Bank and shall pay to
the other Bank a purchase price in an amount so that the share of the
Obligations held by each Bank after the exercise of the right of setoff,
banker's lien, or counterclaim or receipt of payment shall be in the same
proportion that existed prior to the exercise of the right of setoff, banker's
lien, or counterclaim or receipt of payment, and (b) such other adjustments and
purchases of participations shall be made from time to time as shall be
equitable to ensure that all of the Banks share any payment obtained in respect
of the Obligations ratably in accordance with the provisions of Section 3.11 and
9.2(d), provided that, if all or any portion of a disproportionate payment
obtained as a result of the exercise of the right of setoff, banker's lien,
counterclaim or otherwise is thereafter recovered from the purchasing Bank by
Borrower or any Person claiming through or succeeding to the rights of Borrower,
the purchase of a participation shall be rescinded and the purchase price
thereof shall be restored to the extent of the recovery, but without interest.
Each Bank that purchases a participation in the Obligations pursuant to this
Section shall from and after the purchase have the right to give all notices,
requests, demands, directions and other communications under this Agreement with
respect to the portion of the Obligations purchased to the same extent as though
the purchasing Bank were the original owner of the Obligations purchased.
Borrower expressly consents to the foregoing arrangements and agrees that, to
the extent permitted by Law, any Bank holding a participation in an Obligation
so purchased may exercise any and all rights of setoff, banker's lien or
counterclaim with respect to the participation as fully as if the Bank were the
original owner of the Obligation purchased.
11.10 Indemnification by the Borrower. The Borrower shall indemnify and
hold harmless each Agent-Related Person, the Arrangers, each Bank and their
respective Affiliates, directors, officers, employees, counsel, agents and
attorneys-in-fact (collectively the "Indemnitees") from and against any and all
liabilities, obligations, losses, damages (including
72
punitive and exemplary damages), penalties, claims, demands, actions, judgments,
suits, costs, expenses and disbursements (including Attorney Costs) of any kind
or nature whatsoever which may at any time be imposed on, incurred by or
asserted against any such Indemnitee in any way relating to or arising out of or
in connection with (a) the execution, delivery, enforcement, performance or
administration of any Loan Document or any other agreement, letter or instrument
delivered in connection with the transactions contemplated thereby or the
consummation of the transactions contemplated thereby, (b) any Loan or the use
or proposed use of the proceeds therefrom or (c) any actual or prospective
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory (including any investigation
of, preparation for, or defense of any pending or threatened claim,
investigation, litigation or proceeding) and regardless of whether any
Indemnitee is a party thereto (all the foregoing, collectively, the "Indemnified
Liabilities"); provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such liabilities, obligations, losses, damages,
penalties, claims, demands, actions, judgments, suits, costs, expenses or
disbursements are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the (x) gross negligence or willful
misconduct of such Indemnitee or (y) for any failure to comply with Section
11.12 by such Indemnitee. No Indemnitee shall be liable for any damages arising
from the use by others of any information or other materials obtained through
IntraLinks or other similar information transmission systems in connection with
this Agreement, nor shall any Indemnitee have any liability for any indirect or
consequential damages relating to this Agreement or any other Loan Document or
arising out of its activities in connection herewith or therewith (whether
before or after the Closing Date). All amounts due under this Section 11.10
shall be payable within 10 Business Days after demand therefor. The agreements
in this Section 11.10 shall survive the resignation of the Administrative Agent,
the replacement of any Bank and the repayment, satisfaction or discharge of all
the other Obligations.
11.11 Nonliability of Banks. The relationship between Borrower and the
Banks is, and shall at all times remain, solely that of borrower and lenders,
and the Banks and the Administrative Agent neither undertake nor assume any
responsibility or duty to Borrower to review, inspect, supervise, pass judgment
upon, or inform Borrower of any matter in connection with any phase of
Borrower's business, operations, or condition, financial or otherwise. Borrower
shall rely entirely upon its own judgment with respect to such matters, and any
review, inspection, supervision, exercise of judgment, or information supplied
to Borrower by any Bank, the Administrative Agent or any Arranger in connection
with any such matter is for the protection of the Banks, the Administrative
Agent and the Arrangers, and neither Borrower nor any third party is entitled to
rely thereon.
11.12 Confidentiality. Each of the Administrative Agent and each Bank
agrees to maintain the confidentiality of the Information (as defined below),
except that Information may be disclosed
(a) to its Affiliates and to its and its Affiliates' respective partners,
directors, officers, employees, agents, advisors and representatives only for
the purposes of administration or enforcement of this Agreement (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential),
73
(b) to the extent requested by any regulatory authority purporting to have
jurisdiction over it (including any self-regulatory authority, such as the
National Association of Insurance Commissioners),
(c) to the extent required by applicable laws or regulations or by any
subpoena or similar legal process,
(d) to any other party hereto,
(e) in connection with the exercise of any remedies hereunder or under any
other Loan Document or any action or proceeding relating to this Agreement or
any other Loan Document or the enforcement of rights hereunder or thereunder,
(f) subject to an agreement containing a standard of confidentiality
substantially the same as that in this Section, to (i) any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Borrower and its obligations,
(g) with the consent of the Borrower or
(h) to the extent such Information (i) becomes publicly available other
than as a result of a breach of this Section or (ii) becomes available to the
Administrative Agent, any Bank or any of their respective Affiliates on a
nonconfidential basis from a source other than the Borrower.
For purposes of this Section 11.12, "Information" means all information received
from the Borrower or any Subsidiary relating to the Borrower or any Subsidiary
or any of their respective businesses, other than any such information that is
available to the Administrative Agent, any Arranger or any Bank on a
nonconfidential basis prior to disclosure by the Borrower or any Subsidiary,
provided that, in the case of information received from the Borrower or any
Subsidiary after the date hereof, such information is clearly identified at the
time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information. Each of the
Administrative Agent and each Bank acknowledges that (x) the Information may
include material non-public information concerning the Borrower or a Subsidiary,
as the case may be, (y) it has developed compliance procedures regarding the use
of material non-public information and (z) it will handle such material
non-public information in accordance with applicable Law, including Federal and
state securities Laws.
11.13 No Third Parties Benefited. This Agreement is made for the purpose of
defining and setting forth certain obligations, rights and duties of Borrower,
the Administrative Agent and the Banks in connection with the Loans, and is made
for the sole benefit of Borrower, the Administrative Agent and the Banks, and
the Administrative Agent's and the Banks' successors and assigns. Except as
provided in Sections 11.8 and 11.10, no other Person shall have any rights of
any nature hereunder or by reason hereof.
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11.14 Other Dealings. Any Bank may, without liability to account to the
other Banks, accept deposits from, lend money or provide credit facilities to
and generally engage in any kind of banking or other business with Borrower and
its Subsidiaries.
11.15 Right of Setoff - Deposit Accounts. Upon the occurrence of an Event
of Default and the acceleration of maturity of the principal indebtedness under
any of the Notes pursuant to Section 9.2, Borrower hereby specifically
authorizes each Bank in which Borrower maintains a deposit account (whether a
general or special deposit account, other than trust accounts) or a certificate
of deposit to setoff any Obligations owed to the Banks against such deposit
account or certificate of deposit without prior notice to Borrower (which notice
is hereby waived) whether or not such deposit account or certificate of deposit
has then matured. Nothing in this Section shall limit or restrict the exercise
by a Bank of any right to setoff or banker's lien under applicable Law, subject
to the approval of the Required Banks.
11.16 Further Assurances. Borrower shall, at its expense and without
expense to the Banks or the Administrative Agent, do, execute, and deliver such
further acts and documents as any Bank or the Administrative Agent from time to
time reasonably requires for the assuring and confirming unto the Banks or the
Administrative Agent the rights hereby created or intended now or hereafter so
to be, or for carrying out the intention or facilitating the performance of the
terms of any Loan Document; provided that this Section 11.16 is not intended to
create any affirmative obligation on the part of Borrower to provide collateral
security, additional guarantors or other credit enhancement with respect to the
Obligations.
11.17 Integration. This Agreement, together with the other Loan Documents,
comprises the complete and integrated agreement of the parties on the subject
matter hereof and supersedes all prior agreements, written or oral (including
the mandate letter and the summary of terms relating to this Agreement), on the
subject matter hereof except as provided in Section 3.2 hereof or otherwise
expressly provided herein to the contrary. The Loan Documents were drafted with
the joint participation of Borrower and the Banks and shall be construed neither
against nor in favor of either, but rather in accordance with the fair meaning
thereof.
11.18 Governing Law.
(a) This Agreement shall be governed by, and construed in accordance with,
the law of the state of California applicable to agreements made and to be
performed entirely within such state; provided that the parties hereto shall
retain all rights arising under federal law.
(b) Any legal action or proceeding with respect to this Agreement or any
other Loan Document may be brought in the Superior Court of the State of
California for the County of Los Angeles or the United States District Court for
the Central District of California, and by execution and delivery of this
Agreement, the Borrower, the Administrative Agent and each Bank consents, for
itself and in respect of its property, to the non-exclusive jurisdiction of
those courts. The Borrower, the Administrative Agent and each Bank irrevocably
waives any objection, including any objection to the laying of venue or based on
the grounds of forum non conveniens, which it may now or hereafter have to the
bringing of any action or proceeding in such jurisdiction in respect of any Loan
Document or other document related thereto. The
75
Borrower, the Administrative Agent and each Bank waives personal service of any
summons, complaint or other process, which may be made by any other means
permitted by California law.
11.19 Severability of Provisions. Any provision in any Loan Document that
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
11.20 Headings. Article and section headings in this Agreement and the
other Loan Documents are included for convenience of reference only and are not
part of this Agreement or the other Loan Documents for any other purpose.
11.21 Conflict in Loan Documents. To the extent there is any actual
irreconcilable conflict between the provisions of this Agreement and any other
Loan Document, the provisions of this Agreement shall prevail.
11.22 Waiver of Right to Trial by Jury. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR
ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT
OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
11.23 Purported Oral Amendments. BORROWER EXPRESSLY ACKNOWLEDGES THAT THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY ONLY BE AMENDED OR MODIFIED, OR THE
PROVISIONS HEREOF OR THEREOF WAIVED OR SUPPLEMENTED, BY AN INSTRUMENT IN WRITING
THAT COMPLIES WITH SECTION 11.2. BORROWER AGREES THAT IT WILL NOT RELY ON ANY
COURSE OF DEALING, COURSE OF PERFORMANCE, OR ORAL OR WRITTEN STATEMENTS BY ANY
REPRESENTATIVE OF ANY AGENT OR ANY BANK THAT DOES NOT COMPLY WITH SECTION 11.2
TO EFFECT AN AMENDMENT, MODIFICATION, WAIVER OR SUPPLEMENT TO THE AGREEMENT OR
THE OTHER LOAN DOCUMENTS.
11.24 Payments Set Aside. To the extent that any payment by or on behalf of
the Borrower is made to the Administrative Agent or any Bank, or the
Administrative Agent or any Bank exercises its right of set-off, and such
payment or the proceeds of such set-off or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
76
(including pursuant to any settlement entered into by the Administrative Agent
or such Bank in its discretion) to be repaid to a trustee, receiver or any other
party, in connection with any proceeding under any Debtor Relief Law or
otherwise, then (a) to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied shall be revived and continued in
full force and effect as if such payment had not been made or such set-off had
not occurred, and (b) each Bank severally agrees to pay to the Administrative
Agent upon demand its applicable share of any amount so recovered from or repaid
by the Administrative Agent, plus interest thereon from the date of such demand
to the date such payment is made at a rate per annum equal to the Federal Funds
Rate from time to time in effect.
11.25 Hazardous Materials Indemnity. Without limiting any other indemnity
provided for in the Loan Documents, Borrower agrees to indemnify the Indemnitees
from any claim, liability, loss, cost or expense (including Attorney Costs)
directly or indirectly arising out of the use, generation, manufacture,
production, storage, release, threatened release, discharge, disposal or
presence of any Hazardous Materials if such Hazardous Materials are on, under,
about or relate to Borrower's Property or operations, so long as such claim,
liability, loss, cost or expense arises out of or relates to a Loan, the use of
proceeds of any Loans, any transaction contemplated pursuant to this Agreement,
or any relationship or alleged relationship of any Indemnitee to Borrower
related to this Agreement.
11.26 USA PATRIOT Act Notice. Each Bank that is subject to the Act (as
hereinafter defined) and the Administrative Agent (for itself and not on behalf
of any Bank) hereby notifies the Borrower that pursuant to the requirements of
the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26,
2001)) (the "Act"), it is required to obtain, verify and record information that
identifies the Borrower, which information includes the name and address of the
Borrower and other information that will allow such Bank or the Administrative
Agent, as applicable, to identify the Borrower in accordance with the Act. The
Borrower hereby agrees to provide any such information that is reasonably
requested by any Bank or the Administrative Agent.
11.27 Replacement of Banks. If (a) any Bank requests compensation under
Section 3.3 or Sections 3.4(a) through 3.4(e), (b) the Borrower is required to
pay any additional amount pursuant to Section 3.8, (c) any Bank is a Defaulting
Bank or (d) any other circumstance exists hereunder that gives the Borrower the
right to replace a Bank as a party hereto, then the Borrower may, at its sole
expense and effort, upon notice to such Bank and the Administrative Agent,
require such Bank to assign and delegate, without recourse (in accordance with
and subject to the restrictions contained in, and consents required by, Section
11.8), and such Bank shall assign within 5 Business Days after the date of such
notice, all of its interests, rights and obligations under this Agreement and
the related Loan Documents to an Eligible Assignee that shall assume such
obligations (which assignee may be another Bank, if a Bank accepts such
assignment), provided that:
(a) the Borrower shall have paid to the Administrative Agent the assignment
fee specified in Section 11.8(b);
(b) such Bank shall have received payment of an amount equal to the
outstanding principal of its Loans, accrued interest thereon, accrued fees and
all other amounts payable to it
77
hereunder and under the other Loan Documents (including any amounts under
Section 3.4(f) from the assignee (to the extent of such outstanding principal
and accrued interest and fees) or the Borrower (in the case of all other
amounts) and including all amounts due to such Bank under Sections 3.3, 3.8,
11.3, 11.6(e) and 11.10, but subject to the provisions of clause (c) below);
(c) in the case of any such assignment resulting from a claim for
compensation under Sections 3.4(a) through 3.4(f) or payments required to be
made pursuant to Section 3.8, such assignment will result in a reduction in such
compensation or payments thereafter; and
(d) such assignment does not conflict with applicable Laws.
A Bank shall not be required to make any such assignment or delegation if, prior
thereto, as a result of a waiver by such Bank or otherwise, the circumstances
entitling the Borrower to require such assignment and delegation cease to apply.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
KB HOME, a Delaware Corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
CITICORP NORTH AMERICA, INC.,
as Administrative Agent and a Bank
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
CITIGROUP GLOBAL MARKETS INC., as Joint
Lead Arranger and Joint Book Manager
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
CALYON NEW YORK BRANCH, as Joint Lead
Arranger, Joint Book Manager and a Bank
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
EXECUTION COPY
SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY ("Guaranty") dated as of April 12, 2006, is made
by each of the undersigned guarantors and each other person who may become a
guarantor pursuant to Section 19 hereof (each a "Guarantor" and, collectively,
the "Guarantors") in favor of Citicorp North America, Inc., as the
Administrative Agent ("Administrative Agent"), under the Loan Agreement referred
to below, and the Banks that are party to the Loan Agreement from time to time
(each a "Bank" and collectively the "Banks") (the Administrative Agent and the
Banks are referred to herein collectively as the "Lender Parties" and each
individually as a "Lender Party"), with reference to the following facts:
RECITALS
A. Pursuant to that certain Term Loan Agreement dated as of April 12,
2006, by and among KB Home, a Delaware corporation (the "Borrower"), the Banks
and the Administrative Agent (as amended, extended, renewed, supplemented, or
otherwise modified from time to time, the "Loan Agreement"), the Banks are
making a term loan to Borrower. Terms defined in the Loan Agreement and not
otherwise defined in this Guaranty shall have the meanings given to those terms
in the Loan Agreement and such definitions are incorporated by reference herein
in full.
B. As a condition to the making of such term loan, each Guarantor is
required to enter into this Guaranty and to guaranty the Guarantied Obligations
(as hereinafter defined), subject to the limitations set forth herein.
C. Each Guarantor expects to realize direct and indirect benefits from the
making of the aforementioned term loan to Borrower, as the result of financial
or business support which will be provided to such Guarantor by Borrower.
AGREEMENT
NOW, THEREFORE, in order to induce the Banks to make the aforementioned
term loan, and for other good and valuable consideration, the receipt and
adequacy of which hereby are acknowledged, each Guarantor hereby represents,
warrants, covenants, agrees and guaranties, on a joint and several basis, as
follows:
1. Guaranty. Each Guarantor hereby absolutely and unconditionally
guarantees, as a guarantee of payment and not merely as a guarantee of
collection, prompt payment when due, whether at stated maturity, upon
acceleration or otherwise, and at all times thereafter, of any and all existing
and future indebtedness and liabilities of every kind, nature and character,
direct or indirect, absolute or contingent, liquidated or unliquidated,
voluntary or involuntary, of the Borrower to Lender Parties arising under the
Loan Agreement and the Loan Documents (collectively, the "Guaranteed
Obligations"). The Lender Parties' books and records showing the amount of the
Guaranteed Obligations shall be admissible in evidence in any action or
proceeding, and shall be binding upon the Guarantors and conclusive for the
purpose of establishing the amount of the Guaranteed Obligations, absent
manifest error. This Guaranty shall not be affected by the validity, regularity
or enforceability of the Guaranteed Obligations or any instrument or agreement
evidencing any Guaranteed Obligations, or any question as to the authenticity of
such instrument or agreement, or by the existence, validity, enforceability,
perfection, or extent of any collateral therefor, or by any fact or circumstance
relating to the Guaranteed Obligations which might otherwise constitute a
defense to the obligations of any Guarantor under this Guaranty, other than
payment in full by the Borrower or any other Person. The obligations of each
Guarantor hereunder shall be limited to an aggregate amount equal to the largest
amount that would not render its obligations hereunder subject to avoidance
under Section 548 of the Bankruptcy Code (Title 11, United States Code) or any
comparable provisions of any applicable state law.
2. No Setoff or Deductions; Taxes. Each Guarantor represents and warrants
that it is incorporated or formed under the laws of a state of the United States
of America and is a resident in the United States of America. All payments by
each Guarantor hereunder shall be paid in full, without setoff or counterclaim
or any deduction or withholding whatsoever, including, without limitation, for
any and all present and future taxes. If any Guarantor must make a payment under
this Guaranty, such Guarantor represents and warrants that it will make the
payment from one of its U.S. resident offices to the Lender Parties so that no
withholding tax is imposed on the payment. If notwithstanding the foregoing, a
Guarantor makes a payment under this Guaranty to which withholding tax applies,
or any taxes (other than taxes on net income (a) imposed by the country or any
subdivision of the country in which a Lender Party's principal office or actual
lending office is located and (b) measured by the United States taxable income
the Lender Parties would have received if all payments under or in respect of
this Guaranty were exempt from taxes levied by such Guarantor's country) are at
any time imposed on any payments under or in respect of this Guaranty including,
but not limited to, payments made pursuant to this Section 2, such Guarantor
shall pay all such taxes to the relevant authority in accordance with applicable
law such that the Lender Parties receive the sum they would have received had no
such deduction or withholding been made and shall also pay to the Lender
Parties, on demand, all additional amounts which the Lender Parties specify as
necessary to preserve the after-tax yield the Lender Parties would have received
if such taxes had not been imposed. The Guarantors shall promptly provide the
Lender Parties with an original receipt or certified copy issued by the relevant
authority evidencing the payment of any such amount required to be deducted or
withheld.
3. No Termination. This Guaranty is a continuing and irrevocable guaranty
of all Guaranteed Obligations now or hereafter existing and shall remain in full
force and effect until all of the Guaranteed Obligations are paid in full. At
the Administrative Agent's option, all payments under this Guaranty shall be
made to an office of the Administrative Agent located in the United States and
in U.S. Dollars.
4. Waiver of Notices. Each Guarantor waives notice of the acceptance of
this Guaranty and of the extension or continuation of the Guaranteed Obligations
or any part thereof. Each Guarantor further waives presentment, protest, notice,
dishonor or default, demand for payment and any other notices to which such
Guarantor might otherwise be entitled.
5. Subrogation. The Guarantors shall exercise no right of subrogation,
contribution or similar rights against the Borrower or any other Guarantor with
respect to any payments on the Guaranteed Obligations made to the Lender Parties
under this Guaranty until all of the Guaranteed Obligations are paid in full. If
any amounts are paid to a Guarantor in violation of the foregoing limitation,
then such amounts shall be held in trust for the benefit of the Lender Parties
and shall forthwith be paid to the Lender Parties to reduce the amount of the
Guaranteed Obligations, whether matured or unmatured.
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6. Waiver of Suretyship Defenses. Each Guarantor agrees that the Lender
Parties may, at any time and from time to time, and without notice to such
Guarantor, make any agreement with the Borrower or with any other person or
entity liable on any of the Guaranteed Obligations or providing collateral as
security for the Guaranteed Obligations, for the extension, renewal, payment,
compromise, discharge or release of the Guaranteed Obligations or any collateral
(in whole or in part), or for any modification or amendment of the terms thereof
or of any instrument or agreement evidencing the Guaranteed Obligations or the
provision of collateral, all without in any way impairing, releasing,
discharging or otherwise affecting the obligations of such Guarantor under this
Guaranty. Each Guarantor waives any defense arising by reason of any disability
or other defense of the Borrower or any other Guarantor, or the cessation from
any cause whatsoever of the liability of the Borrower (other than payment in
full of the Guaranteed Obligations), or any claim that such Guarantor's
obligations exceed or are more burdensome than those of the Borrower and waives
the benefit of any statute of limitations affecting the liability of such
Guarantor hereunder. Each Guarantor waives any right to enforce any remedy which
any Lender Party now has or may hereafter have against the Borrower and waives
any benefit of and any right to participate in any security now or hereafter
held by any Lender Party until all of the Guaranteed Obligations are paid in
full and any commitments of the Banks and facilities provided by the Banks with
respect to the Guaranteed Obligations are terminated. Further, each Guarantor
consents to the Lender Parties' taking of, or failure to take, any action which
might in any manner or to any extent vary the risks of the Guarantors under this
Guaranty or which, but for this provision, might operate as a discharge of any
Guarantor. Each Guarantor waives any rights and defenses that are or may become
available to such Guarantor by reason of Sections 2787 to 2855 inclusive, of the
California Civil Code.
7. Exhaustion of Other Remedies Not Required. The obligations of each
Guarantor hereunder are those of primary obligor, and not merely as surety, and
are independent of the Guaranteed Obligations. Each Guarantor waives diligence
by the Lender Parties and action on delinquency in respect of the Guaranteed
Obligations or any part thereof, including, without limitation any provisions of
law requiring the Lender Parties to exhaust any right or remedy or to take any
action against the Borrower, any other guarantor or any other person, entity or
property before enforcing this Guaranty against such Guarantor.
8. Reinstatement. Notwithstanding anything in this Guaranty to the
contrary, this Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any portion of the Guaranteed
Obligations is revoked, terminated, rescinded or reduced or must otherwise be
restored or returned upon the insolvency, bankruptcy or reorganization of the
Borrower or any other person or entity or otherwise, as if such payment had not
been made and whether or not the Lender Parties are in possession of or have
released this Guaranty and regardless of any prior revocation, rescission,
termination or reduction.
9. Subordination. While an Event of Default has occurred and is
continuing, each Guarantor hereby subordinates the payment of all obligations
and indebtedness of the Borrower owing to such Guarantor, whether now existing
or hereafter arising, including but not limited to any obligation of the
Borrower to the Guarantor as subrogee of the Lender Parties or resulting from
such Guarantor's performance under this Guaranty, until such time as all
Guaranteed Obligations have been paid in full. If the Lender Parties so request,
any such obligation or indebtedness of the Borrower to the Guarantor shall be
enforced and performance received by the Guarantors as trustee for the Lender
Parties and the proceeds thereof shall be paid over to the Lender Parties on
account of the Guaranteed Obligations, but without reducing or affecting in any
manner the liability of the Guarantors under this Guaranty.
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10. Information. While an Event of Default has occurred and is continuing,
each Guarantor shall furnish promptly to the Lender Parties any and all
financial or other information regarding such Guarantor or its property as the
Lender Parties may reasonably request in writing.
11. Stay of Acceleration. In the event that acceleration of the time for
payment of any of the Guaranteed Obligations is stayed, upon the insolvency,
bankruptcy or reorganization of the Borrower or any other person or entity, or
otherwise, all such amounts shall nonetheless be payable by the Guarantors
immediately upon demand by the Lender Parties.
12. Expenses. The Guarantors shall pay, within 30 days after demand, all
the reasonable out-of-pocket expenses (including reasonable attorneys' fees and
expenses and costs disbursements of any law firm or other external counsel) in
any way relating to the enforcement or protection of the Lender Parties' rights
under this Guaranty, including any incurred in the preservation, protection or
enforcement of any rights of the Lender Parties in any case commenced by or
against any Guarantor under the Bankruptcy Code (Title 11, United States Code)
or any similar or successor statute, subject to the limitations set forth in
Section 11.3 of the Loan Agreement (which limitations shall be applied as if
such expenses were payable by the Borrower thereunder). The obligations of the
Guarantors under the preceding sentence shall survive termination of this
Guaranty.
13. Amendments. No provision of this Guaranty may be waived, amended,
supplemented or modified, except by a written instrument executed by the
Administrative Agent, the Required Banks under Section 11.2 of the Loan
Agreement and the Guarantors.
14. No Waiver; Enforceability. No failure by the Lender Parties to
exercise, and no delay in exercising, any right, remedy or power hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy or power hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law or in equity. The
unenforceability or invalidity of any provision of this Guaranty shall not
affect the enforceability or validity of any other provision herein. Subject to
the terms hereof and of the Loan Agreement, any right, remedy, power or
privilege of the Lender Parties hereunder may be exercised by the Administrative
Agent or the Required Banks.
15. Assignment; Governing Laws; Jurisdiction. This Guaranty shall (a) bind
each Guarantor and its successors and assigns, provided that no Guarantor may
assign its rights or obligations under this Guaranty without the prior written
consent of the Lender Parties (and any attempted assignment without such consent
shall be void), (b) inure to the benefit of the Lender Parties and their
respective successors and assigns and the Lender Parties may, subject to the
terms of the Loan Agreement but without notice to the Guarantors and without
affecting the Guarantors' obligations hereunder, assign or sell participations
in the Guaranteed Obligations and this Guaranty, in whole or in part, and (c) be
governed by the internal laws of the State of California. Each Guarantor
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hereby irrevocably (i) submits to the non-exclusive jurisdiction of any United
States Federal or State court sitting in Los Angeles, California in any action
or proceeding arising out of or relating to this Guaranty, and (ii) waives to
the fullest extent permitted by law any defense asserting an inconvenient forum
in connection therewith. Service of process by the Lender Parties in connection
with such action or proceeding shall be binding on a Guarantor if sent to such
Guarantor by registered or certified mail at its address specified below. Each
Guarantor agrees that the Lender Parties may, subject to Section 11.12 of the
Loan Agreement, disclose to any prospective purchaser and any purchaser of all
or part of the Guaranteed Obligations any and all information in the Lender
Parties' possession concerning the Guarantors.
16. Condition of the Borrower. Each Guarantor acknowledges and agrees that
it has the sole responsibility for, and has adequate means of, obtaining from
the Borrower such information concerning the financial condition, business and
operations of the Borrower as such Guarantor requires, and that the Lender
Parties have no duty, and such Guarantor is not relying on the Lender Parties at
any time, to disclose to such Guarantor any information relating to the
business, operations or financial condition of the Borrower.
17. Setoff. After demand upon the Guarantors for payment under this
Guaranty, each Guarantor hereby specifically authorizes each Bank (subject to
the approval of the Required Banks) in which such Guarantor maintains a deposit
account (whether a general or special deposit account, other than trust
accounts) or a certificate of deposit to setoff any Guaranteed Obligations owed
to the Banks against such deposit account or certificate of deposit without
prior notice to any Guarantor (which notice is hereby waived) whether or not
such deposit account or certificate of deposit has then matured. Nothing in this
shall limit or restrict the exercise by a Bank of any right to setoff or
banker's lien under applicable Law, subject to the approval of the Required
Banks.
18. Other Guarantees. Unless otherwise agreed by the Lender Parties and
the Guarantors in writing, this Guaranty is not intended to supersede or
otherwise affect any other guaranty now or hereafter given by the Guarantors for
the benefit of the Lender Parties or any term or provision thereof.
19. Additional Guarantors. Any other Person may become a Guarantor
hereunder and become bound by the terms and conditions of this Guaranty by
executing and delivering to the Administrative Agent an Instrument of Joinder
substantially in the form attached hereto as Exhibit "A".
20. Representations and Warranties. Each Guarantor represents and warrants
that (i) it is duly organized and in good standing under the laws of the
jurisdiction of its organization and has the requisite corporate or limited
partnership, as applicable, power to make and perform this Guaranty, and all
necessary corporate or limited partnership, as applicable, authority for the
making and performance of this Guaranty by such Guarantor has been obtained;
(ii) this Guaranty constitutes its legal, valid and binding obligation
enforceable in accordance with its terms, except as enforcement may be limited
by Debtor Relief Laws or by equitable principles relating to the granting of
specific performance and other equitable remedies as a matter of judicial
discretion; (iii) the making and performance of this Guaranty does not and will
not violate the provisions
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of any applicable material law, regulation or order, does not and will not
require any consent under, any material agreement, instrument, or document to
which it is a party or by which it or any of its property may be bound or
affected and does not and will not (when aggregated with any defaults and
breaches of the Borrower and other Guarantors) result in the breach of or
constitute a default under, any material agreement, instrument, or document to
which it is a party or by which it or any of its property may be bound or
affected with respect to any obligation or obligations aggregating $50,000,000
or more; (iv) all material consents, approvals, licenses and authorizations of,
and filings and registrations with, any governmental authority required under
applicable law and regulations for the making and performance of this Guaranty
have been obtained or made and are in full force and effect; and (v) by virtue
of its relationship with the Borrower, the execution, delivery and performance
of this Guaranty is for the direct benefit of such Guarantor and it has received
adequate consideration for this Guaranty.
21. WAIVER OF JURY TRIAL; FINAL AGREEMENT. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
ARISING OUT OF OR RELATING TO THIS GUARANTY. THIS GUARANTY REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signature Pages Follow]
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Executed as of the date first written above.
GUARANTORS:
KB HOME PHOENIX INC., an Arizona
corporation
By:
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President and Treasurer
KB HOME COASTAL INC., a California
corporation
By:
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President and Treasurer
KB HOME NORTH BAY INC., a California
corporation
By:
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President and Treasurer
KB HOME SOUTH BAY INC., a California
corporation
By:
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President and Treasurer
KB HOME GREATER LOS ANGELES INC., a
California corporation
By:
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President and Treasurer
KB HOME COLORADO INC., a Colorado
corporation
By:
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President and Treasurer
[Signature Page - Subsidiary Guaranty]
KB HOME NEVADA INC., a Nevada
corporation
By:
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President and Treasurer
KB HOME LONE STAR LP, a Texas limited
partnership
By: KBSA, Inc., a Texas corporation,
Its general partner
By:
----------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President and Treasurer
[Signature Page - Subsidiary Guaranty]
EXHIBIT A
INSTRUMENT OF JOINDER
THIS INSTRUMENT OF JOINDER ("Joinder") is executed as of ________________,
by __________________________________________________________________________, a
____________________ ("Joining Party"), and delivered to the Administrative
Agent pursuant to the Subsidiary Guaranty dated as of April 12, 2006 (the
"Guaranty"). Terms used but not defined in this Joinder shall have the meanings
defined for those terms in the Guaranty.
RECITALS
A. The Guaranty was made by the Guarantors in favor of the Banks that are
parties to that certain Term Loan Agreement, dated as of April 12, 2006 (the
"Loan Agreement") among KB Home, a Delaware corporation, as Borrower, the Banks
signatory thereto, and Citicorp North America, Inc., as Administrative Agent.
B. Joining Party has become a Significant Subsidiary (as defined in the
Loan Agreement) or has been designated by Borrower as a Guarantor Subsidiary (as
defined in the Loan Agreement), and as such is required pursuant to Section 5.9
of the Loan Agreement to become a Guarantor.
C. Joining Party expects to realize direct and indirect benefits as a
result of the term loan made to Borrower pursuant to the Loan Agreement, and as
a result of becoming a party to the Guaranty.
NOW THEREFORE, Joining Party agrees as follows:
AGREEMENT
1. By this Joinder, Joining Party becomes a "Guarantor" under and pursuant
to Section 19 of the Guaranty. Joining Party agrees that, upon its execution
hereof, it will become a Guarantor under the Guaranty with respect to all
Indebtedness of Borrower heretofore or hereafter incurred under the Loan
Agreement, and will be bound by all terms, conditions, and duties applicable to
a Guarantor under the Guaranty.
2. The effective date of this Joinder is _______________.
"Joining Party"
------------------------------------
a
----------------------------------
By:
-----------------------------
-----------------------------
Printed Name and Title
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ACKNOWLEDGED:
CITICORP NORTH AMERICA, INC., as Administrative Agent
By:
-----------------------------------
-----------------------------------
Printed Name and Title
KB HOME, a Delaware corporation
By:
-----------------------------------
-----------------------------------
Printed Name and Title
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